Exhibit 10.16
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of September 19th, 1996 among each of the
stockholders of Xxxxxx Industrial Software Inc., an Alberta corporation (the
"Company"), all of whom are listed on the Stockholders List attached hereto as
EXHIBIT A (collectively "Sellers" and individually a "Seller") 697621 Alberta
Ltd. an Alberta corporation ("TCP"), and Total Control Products, Inc., an
Illinois corporation ("Parent").
R E C I T A L S
A. Sellers own all of the outstanding First Preferred Shares ("First
Preferred Shares") and Common Shares ("Common Shares") of the Company. For
purposes of this Agreement, the First Preferred Shares and the Common Shares are
collectively referred to herein as the "Shares".
B. TCP desires to purchase all the outstanding First Preferred Shares and
certain of the outstanding Common Shares from Sellers and Sellers desire to sell
such Shares to TCP, on the terms and subject to the conditions herein contained.
C. All references herein to the Company, Parent or TCP shall include
their respective successors and assigns.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES; CLOSING AND MANNER OF PAYMENT
1.1 AGREEMENT TO PURCHASE AND SELL SHARES. Effective as of the date
hereof, TCP hereby purchases from Sellers, and Sellers hereby sell to TCP, all
of the outstanding First Preferred Shares and 685,000 Common Shares ("Common
Shares"), free and clear of all options, proxies, voting trusts, voting
agreements, judgments, pledges, charges, escrows, rights of first refusal or
first offer, mortgages, indentures, claims, transfer restrictions, liens,
equities, encumbrances, security interests and other encumbrances of every kind
and nature whatsoever, whether arising by agreement, operation of law or
otherwise (collectively, "Claims"). Each Seller shall sell to TCP all of the
First Preferred Shares owned by him or her and the number of Common Shares set
forth opposite his or her name on EXHIBIT A attached hereto.
1.2 PURCHASE PRICE. The purchase price for each First Preferred Share
shall be equal to $9.18385 per share for an aggregate purchase price equal to
$1,421,660 (the "Preferred Purchase Price"). The aggregate purchase price for
the Common Shares shall be equal to $5,968,157 (the "Common Purchase Price").
For purposes of this Agreement, the Preferred Purchase Price and the Common
Purchase Price are collectively referred to herein as the "Purchase Price".
Each Seller shall receive that portion of the Purchase Price as is equal to the
following: (a) the number of First Preferred Shares being sold by such Seller
pursuant to this Agreement multiplied by $9.18385; plus (b) the amount set forth
opposite his or her name on EXHIBIT A attached hereto.
1.3 MANNER OF PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
or satisfied at the Closing (as herein defined) by a wire transfer of
immediately available funds to such bank account or accounts as Sellers shall
designate by written notice delivered to TCP on or prior to the date hereof;
provided, however, that payment of $2,200,000 of the Purchase Price otherwise
payable to Xxxx Xxxxxx shall be deferred and such deferred amount shall be
evidenced by the delivery of a promissory note in form attached hereto as
EXHIBIT B (the "Seller Note"). If TCP shall so pay Purchase Price, including
the delivery of the Seller Note, TCP shall have no responsibility for the
disbursement thereof from said account or accounts to Sellers.
1.4. ADDITIONAL PAYOUT.
(a) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "AFFILIATE" means, with respect to a particular person, any person
or entity which Controls that person, which that person Controls, or which is
under common control with that person. For purposes of this Agreement, any
affiliate of TCP, Parent or the Company shall specifically not include Digital
Electronics Corporation ("Digital").
(ii) "CONTROL" means the power, direct or indirect, to direct or
cause the direction of the management and policies of a person or entity through
voting securities, contract or otherwise.
(iii) "DISPOSITION" shall mean, with respect to any Product, a sale,
transfer, assignment, exclusive licence or sublicense or any other disposition
of such Product and, with respect to a Subsidiary, the sale of shares of the
Subsidiary effecting a transfer of Control of such Subsidiary or the sale, lease
or exchange of all of substantially all of the assets of such Subsidiary.
(iv) "DISPOSITION AMOUNT" shall mean 100% of the gross proceeds of any
Disposition of a Product or Subsidiary.
(v) "FIRST EARNOUT PERIOD" shall mean the 12 month period beginning on
the first day of the month immediately following the date of this Agreement and
the term "SECOND EARNOUT PERIOD" shall mean the 12 month period immediately
following the First Earnout Period and the term "EARNOUT PERIODS" shall mean the
First Earnout Period and the Second Earnout Period collectively.
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(vi) "PRODUCT" means any product or any product line owned or held by
the Company or its Subsidiaries on the date hereof and at any time during the
Earnout Periods.
(vii) "NET REVENUES" shall mean the actual consolidated revenues of
the Company and its Subsidiaries (net of returns, allowances and discounts)
during each of the Earnout Periods as determined in accordance with Canadian
generally accepted accounting principles ("CANADIAN GAAP") applied on a
consistent basis during each of the Earnout Periods, as adjusted pursuant to the
table set forth in EXHIBIT C attached hereto. Notwithstanding the foregoing and
for greater certainty, no revenue item shall be included twice in the
calculation of Net Revenues and the calculation of Net Revenues shall not
include any Goods and Services Tax or any other sales or taxes collected on
behalf of any taxing authority.
(viii) "RESELL" and "RESOLD" shall include a sale, transfer,
assignment, lease, licence or sublicense.
(b) CONTINGENT CONSIDERATION. (i) If Net Revenues during the First Earnout
Period exceed eight million dollars ($8,000,000), the Company shall pay to
Sellers an aggregate amount equal to one million dollars ($1,000,000); (ii) to
the extent that Net Revenues during the First Earnout Period exceed nine million
two hundred thousand dollars ($9,200,000), the Company shall pay to Sellers an
aggregate amount equal to fifty percent (50%) of such excess; provided, however,
that the payment pursuant to this Section 1.4(b)(ii) shall not exceed three
million dollars ($3,000,000); (iii) if Net Revenues during the Second Earnout
Period exceed eight million dollars ($8,000,000), the Company shall pay to
Sellers an aggregate amount equal to one million dollars ($1,000,000); and (iv)
to the extent that Net Revenues during the Second Earnout Period exceed ten
million six hundred thousand dollars ($10,600,000), the Company shall pay to
Sellers an aggregate amount equal to fifty percent (50%) of such excess;
provided, however, that the payment pursuant to this Section 1.4(b)(iv) shall
not exceed three million dollars ($3,000,000) (collectively, the "Contingent
Consideration"). For purposes of this Agreement, any Contingent Consideration
paid to Sellers shall be deemed additional Common Purchase Price.
(c) PAYMENT OF CONTINGENT CONSIDERATION. As soon as practicable after the
end of each Earnout Period, but in any event, no later than 90 days after the
end of each Earnout Period, TCP will determine the final aggregate amount of Net
Revenues for such preceding Earnout Period and shall deliver to Sellers a
special audit report detailing the calculation of the Net Revenues for such
Earnout Period (the "Contingent Notice"), together with a certified cheque
payable to each of the Sellers in an amount equal to such Seller's portion of
the Contingent Consideration for such Earnout Period as set forth on EXHIBIT A
attached hereto. The Contingent Notice shall be prepared by TCP and shall be
audited by Xxxxxx Xxxxxxxx, LLP (the "ACCOUNTANTS"). Any Seller may, within
twenty (20) days after receipt of the Contingent Notice, deliver to TCP and each
other Seller, written notice (the "Dispute Notice") identifying any dispute that
such Seller may have with respect to the calculation of Net Revenues for such
Earnout Period. If a Dispute Notice is not delivered by any Seller to TCP
within such twenty day period, the calculation of Net Revenues as set forth in
the Contingent Notice shall be final and binding on the parties hereto,
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excepting fraud and wilful misconduct by TCP or any of its officers, directors
or agents. Within twenty (20) days following TCP's receipt of a Dispute Notice,
TCP and the disputing Seller(s) shall in good faith attempt to agree upon the
Contingent Consideration, if any, for such Earnout Period. If TCP and the
disputing Seller(s) cannot agree to the amount of the Contingent Consideration,
if any, for such Earnout Period, they shall jointly submit their dispute to the
Edmonton office of Ernst & Young (the "Arbiter") for final determination, whose
determination shall be made within ninety (90) days of the date the dispute is
submitted to the Arbiter. The fees and expenses of the Arbiter shall be shared
equally between TCP and the disputing Seller(s); provided, however, that the
Arbiter shall have the discretion to award the payment of its fees and each
party's costs and expenses, including, without limitation, reasonable attorneys
fees, if the Arbiter determines that a party to the proceeding acted
unreasonably in disputing the amount of the Contingent Consideration. The
Arbiter's determination as to the amount of Contingent Consideration for such
Earnout Period shall be final and binding on the parties hereto. The remainder
of the Contingent Consideration, if any, or the amount of Contingent
Consideration to be refunded to the Company, if any, shall be paid by the
Company to Sellers (in proportion to each of their respective percentage
interests in the Contingent Consideration as set forth on EXHIBIT A attached
hereto) or by Sellers (severally in proportion to each of their respective
interests in the Contingent Consideration and not jointly), to the Company, as
the case may be, upon the final determination of the Contingent Consideration,
with interest at the prime rate of interest as announced from time to time by
American National Bank and Trust Company of Chicago. In connection with the
determination of the Contingent Consideration by the Arbiter, TCP shall give the
Sellers, their agents and the Arbiter, as applicable, reasonable access to the
portion of the books and records of TCP, the Company and their respective
Subsidiaries which are relevant to the calculation of the Contingent
Consideration during normal business hours upon reasonable advance notice during
the period from the delivery of the Contingent Notice to the final determination
of the amount of the Contingent Consideration for such Earnout Period.
1.5. DOLLAR FIGURES. Unless otherwise expressly noted herein, all dollar
figures contained herein shall be deemed references to U.S. Dollars. Any
required conversion of Canadian Dollars into U.S. Dollars shall be made as of
the date the calculation is made based upon the exchange rates set forth in the
Wall Street Journal on the date immediately preceding the date the calculation
is made.
1.6. CLOSING. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx Xxxxx,
000-0xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx at 10:00 a.m. on the date hereof. At
the Closing, the Sellers shall deliver to TCP certificates evidencing all of
the outstanding First Preferred Shares and certificates representing 685,000
Common Shares duly endorsed in blank, or accompanied by valid stock powers
duly executed in blank, in proper form for transfer. The parties shall also
deliver such other documents (including articles of incorporation, incumbency
certificates, good standing certificates, opinions, certificates of
independent legal advice, lien searches and resignations) as are reasonably
required or requested in order to effectuate the consummation of the
transaction contemplated hereby. All documents to be delivered by a party
shall be in form and substance reasonably satisfactory to the other party and
its counsel.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF TCP. TCP and Parent jointly and
severally represent and warrant to Sellers as follows:
(a) ORGANIZATION. TCP is a corporation duly incorporated and organized,
validly existing and in good standing, under the laws of the Alberta, Canada.
TCP has full corporate power and authority to carry on its business as such
business is now being conducted. Parent is a corporation duly incorporated and
organized, validly existing and in good standing, under the laws of the State of
Illinois. Parent has full corporate power and authority to carry on its
business as such business is now being conducted.
(b) POWER, AUTHORITY AND ENFORCEABILITY. TCP and Parent have full
corporate power and authority to enter into and perform this Agreement and all
agreements to be executed and delivered by TCP and Parent in connection herewith
to the extent each is a party thereto (collectively, "TCP's Ancillary
Documents"). The execution and delivery by TCP and Parent of this Agreement and
TCP's Ancillary Documents to the extent each is a party thereto and the
performance by TCP and Parent of their respective obligations hereunder and
thereunder have been duly authorized and approved by all requisite corporate
action. This Agreement is, and when executed and delivered, TCP's Ancillary
Documents will be, the legal, valid and binding obligations of TCP and Parent to
the extent each is a party thereto enforceable against TCP and Parent in
accordance with their respective terms to the extent each is a party thereto.
This Agreement has been, and when executed and delivered TCP's Ancillary
Documents will be, duly executed and delivered by a duly authorized officer of
TCP and Parent to the extent each is a party thereto.
(c) CONSENTS. No consent, authorization, order or approval of, or filing
or registration with, any government, any political subdivision, agency, and any
entity, exercising executive, legislative, judicial, regulatory or
administrative functions of government (each, a "Government Authority") is
required for or in connection with the consummation by TCP and Parent of the
transaction contemplated by this Agreement or by TCP's Ancillary Documents, with
the exception of the filing of a notice under the terms of the Investment Canada
Act.
(d) NO VIOLATION. Neither the execution and delivery of this Agreement or
TCP's Ancillary Documents by TCP or Parent, nor the consummation by TCP or
Parent of the transaction contemplated hereby or thereby, will conflict with or
result in a breach of any of the terms, conditions or provisions of TCP's or
Parent's Articles of Incorporation or by-laws, or of any statute or
administrative regulation, or of any order, writ, injunction, judgment or decree
of any court or governmental authority or of any arbitration award or agreement
binding on TCP or Parent.
(e) NO DEFAULT. Neither TCP nor Parent is a party to any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by TCP or Parent according to the terms of this
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Agreement will be a default or an event of acceleration, or grounds for
termination, or whereby timely performance by TCP or Parent according to the
terms of this Agreement may be prohibited, prevented or delayed.
(f) BROKERAGE FEES. Except for payments due to Blitzer & Associates,
neither TCP, Parent nor any of their respective Affiliates has dealt with any
person or entity who is or may be entitled to a broker's commission, finder's
fee, investment banker's fee or similar payment for arranging the transaction
contemplated hereby or introducing the parties to each other.
2.2 REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and
severally, represent and warrant to TCP that, except as set forth in the
schedule delivered by Sellers to TCP concurrently herewith and identified as the
"Disclosure Schedule":
(a) DEFINITIONS. For purposes of this Section 2.2, (i) the term
"Subsidiary" shall mean any corporation or other organization, whether
incorporated or unincorporated, of which at least fifty percent (50%) of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such person or by any one or more of its
subsidiaries.
(b) ORGANIZATION (i) Each of the Company and its Subsidiaries (each of
which is listed in the Disclosure Schedule), (A) is a corporation or other legal
entity duly incorporated and organized, validly existing and in good standing
under the laws of its jurisdiction of organization and such other jurisdiction
into which it has been continued or in which it has qualified as a foreign or
extra provincial corporation; (B) has all requisite power and authority to own
or lease, and operate its properties and assets, and to carry on its business as
now conducted and as proposed to be conducted; (C) is duly qualified or licensed
to do business and is in good standing in all jurisdictions in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed; and (D) has obtained all licenses, permits, franchises
and other governmental authorizations necessary to the ownership or operation of
its properties or the conduct of its business.
(ii) All of the issued and outstanding shares of capital stock of the
Company's Subsidiaries are duly authorized, have been validly issued, and are
fully paid and nonassessable and, except as set forth in the Disclosure
Schedule, are legally and beneficially, directly or indirectly wholly-owned by
the Company free and clear of Claims. The following information for each
Subsidiary of the Company is listed in the Disclosure Schedule, if applicable:
(i) its name and jurisdiction of incorporation or organization; (ii) the
location of its chief executive office; (iii) a summary of its lines of business
and products; (iv) its authorized capital stock; (v) the number of issued and
outstanding shares of capital stock; and (v) the record owner or owners of such
shares of capital stock.
(iii) The Company has no subsidiaries (other than its Subsidiaries),
and does not own any legal or beneficial, direct or indirect, interest in any
corporation, joint venture, partnership, association or other entity. Since
January 1, 1990, neither the Company nor any of its Subsidiaries have (i)
disposed of the capital stock or assets of any ongoing business (or portion
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thereof) outside of the ordinary course of business, or (ii) purchased the
business and/or assets of another person, firm or corporation (whether by
purchase of stock, assets, merger or otherwise).
(c) POWER, AUTHORITY AND ENFORCEABILITY. The Company has full power and
authority to enter into and perform this Agreement and all agreements executed
and delivered by the Company in connection herewith (collectively, "Sellers'
Ancillary Documents"). The execution and delivery by the Company of Sellers'
Ancillary Documents and the performance by the Company of its obligations
thereunder have been duly authorized and approved by the Board of Directors of
the Company. The Agreement is, and when executed and delivered, Sellers'
Ancillary Documents will be, the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms. When executed, Sellers' Ancillary Documents will be duly executed and
delivered by a duly authorized officer of the Company to the extent the Company
is a party thereto.
(d) NO CONSENT. No consent, authorization, order or approval of, or
filing or registration with any Governmental Authority is required for or in
connection with the consummation by the Company of the transaction contemplated
by this Agreement or by Sellers' Ancillary Documents.
(e) NO VIOLATION. Neither the execution and delivery of this Agreement or
Sellers' Ancillary Documents by the Company, nor the consummation by the Company
of the transaction contemplated hereby or thereby, will conflict with or result
in a breach of any of the terms, conditions or provisions of the Company's
Articles of Incorporation or by-laws, or of any statute or administrative
regulation, or of any order, writ, injunction, judgment or decree of any court
or governmental authority or of any arbitration award to which the Company is a
party or by which the Company is bound.
(f) ORGANIZATIONAL DOCUMENTS. True and complete copies of the constating
documents and all amendments thereto, the by-laws as amended and currently in
force, all stock records, and all corporate minute books and records of the
Company and each of its Subsidiaries have been furnished for inspection to TCP.
Said stock records accurately reflect all stock transactions and the current
stock ownership of the Company and each of its Subsidiaries. The corporate
minute books and records of the Company and each of its Subsidiaries contain
true and complete copies of all resolutions properly adopted by the shareholders
and/or the board of directors of the Company and each of its Subsidiaries and
any other action formally taken by them respectively as such.
(g) CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of: (i) an unlimited number of First Preferred Shares, of which
one hundred fifty-four thousand eight hundred (154,800) shares are issued and
outstanding; and (ii) an unlimited number of Common Shares, of which one million
(1,000,000) shares are issued and outstanding. There are no shares of capital
stock of the Company of any other class authorized, issued or outstanding. All
of the issued and outstanding First Preferred Shares and Common Shares have been
validly issued, are fully paid and nonassessable, and are owned beneficially and
of record by Sellers. The Sellers own the numbers of First Preferred Shares and
Common Shares set forth opposite their respective names on EXHIBIT A, free and
clear of all Claims. There are no outstanding subscriptions, options, warrants,
rights (including preemptive rights), calls, convertible securities
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or other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company or obligating the
Company to issue any securities of any kind.
(h) BOOKS AND RECORDS. The Company's and each of its Subsidiaries' books,
accounts and records are, and have been, maintained in the Company's and each of
its Subsidiaries' usual, regular and ordinary manner, in accordance with
Canadian GAAP consistently applied, and all transactions to which the Company
and each of its Subsidiaries is or has been a party are properly reflected
therein.
(i) FINANCIAL STATEMENTS. The Disclosure Schedule contains true and
complete copies of the audited consolidated balance sheets, statements of
income, retained earnings, cash flows and notes to financial statements
(together with any supplementary information thereto) of the Company and its
Subsidiaries as of and for the years ended March 31, 1994, 1995 and 1996. The
financial statements described in the preceding sentence are hereinafter
referred to as the "Financial Statements". The Disclosure Schedule also
contains true and complete copies of the unaudited consolidated balance sheet
and statements of income, retained earnings and cash flows of the Company and
its Subsidiaries as of and for the three month period ended June 30, 1996. The
financial statements described in the preceding sentence are referred to herein
as the "Interim Financial Statements". The Financial Statements and the Interim
Financial Statements present accurately and completely the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and the consolidated results of operations and cash flows of the Company and its
Subsidiaries for the periods covered by said statements, all in accordance with
GAAP consistently applied.
(j) LIABILITIES. Neither the Company nor any of its Subsidiaries has any
material obligation or liability of any nature whatsoever (direct or indirect,
matured or unmatured, absolute, accrued, contingent or otherwise), whether or
not required by Canadian GAAP consistently applied to be provided or reserved
against on a balance sheet (all the foregoing herein collectively being referred
to as the "Liabilities") except for: (i) Liabilities expressly provided for or
reserved against in the Financial Statements or the Interim Financial
Statements; (ii) Liabilities which have been incurred by the Company or any of
its Subsidiaries subsequent to June 30, 1996 in the ordinary course of the
Company's or any of its Subsidiaries' businesses and consistent with past
practice; (iii) Liabilities under the executory portion of any written purchase
order, sales order, lease, agreement or commitment of any kind by which the
Company or any of its Subsidiaries is bound and which was entered into in the
ordinary course of the Company's or any of its Subsidiaries' business and
consistent with past practice; and (iv) Liabilities under the executory portion
of Permits (as herein defined), Environmental Permits (as herein defined),
licenses and governmental directives and agreements issued to, or entered into
by, the Company or any of its Subsidiaries in the ordinary course of business.
None of the Liabilities described in subparagraphs (i) through (iv) of this
paragraph (j) relates to or has arisen out of a breach of contract, breach of
warranty, tort or infringement by or against the Company or any of its
Subsidiaries or any claim or lawsuit involving the Company or any of its
Subsidiaries.
(k) TITLE TO ASSETS. The Company and each of its Subsidiaries have good
and marketable title to their respective assets, free and clear of any liens,
claims, encumbrances and security
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interests, except for liens imposed by statute securing the payment of taxes
which are not due at the relevant time. No unreleased mortgage, trust deed,
chattel mortgage, security agreement, financing statement or other instrument
encumbering any of the Company's or any of its Subsidiaries' assets has been
recorded, filed, executed or delivered. There is no agreement, option or
other right or privilege outstanding in favor of any person for the purchase
from the Company or any of its Subsidiaries of the business or any of the
assets of the Company or any of its Subsidiaries out of the ordinary course
of business.
(l) INSURANCE. The Disclosure Schedule contains a true and correct list
and description (including coverages, deductibles and expiration dates) of all
insurance policies and bonds which are owned by the Company or any of its
Subsidiaries or which name the Company or any of its Subsidiaries as an insured
(or loss payee), including, without limitation, those which pertain to the
Company's assets, employees or operations. All such insurance policies and
bonds are in full force and effect with all premiums due thereof paid and the
Company or any of its Subsidiaries has not received notice of cancellation of
any such insurance policies or bonds.
(m) BANK INFORMATION. The Disclosure Schedule contains a list showing:
(i) the name of each bank, safe deposit company or other financial institution
in which the Company or any of its Subsidiaries has an account, lock box or safe
deposit box; (ii) the names of all persons authorized to draw thereon or to have
access thereto and the names of all persons and entities, if any, holding powers
of attorney from the Company or any of its Subsidiaries; and (iii) all
instruments or agreements to which the Company or any of its Subsidiaries is a
party as an endorser, surety or guarantor, other than checks endorsed for
collection or deposit in the ordinary course of business.
(n)(i) TAXES. As used in this Agreement, the following terms shall have
the following meanings: (A) the term "Taxes" means all federal, provincial,
local, foreign and other net income, gross income, gross receipts, sales, use,
value-added, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes; (B) the term "Returns"
means all returns, declarations, reports, elections, statements and other
documents required to be filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns; (C) the term "Code" means the Income Tax Act
(Canada). All citations to the Code, or to any regulations promulgated
thereunder, shall include any amendments or any substitutes or successor
provisions thereto.
(ii) As of the date hereof, there have been properly completed and
filed on a timely basis and in correct form all Returns required to be
filed by the Company or any of its Subsidiaries. As of the time of filing,
the foregoing Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status, tax pool balances or
other matters of the Company or any of its Subsidiaries or any other
information required to be shown thereon. An extension of time within
which to file any Return which has not been filed has not been requested or
granted.
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(iii) With respect to all amounts in respect of Taxes imposed upon the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries is or could be liable to any taxing authority with respect to
all taxable periods or portions of periods ending on or before the date
hereof, all applicable tax laws have been fully complied with, and all
amounts required to be paid by the Company or any of its Subsidiaries to
any taxing authority on or before the date hereof, have been paid.
(iv) To the knowledge of each Seller, no issues have been raised (and
are currently pending) by any taxing authority in connection with any of
the Returns. Neither the Company nor any of its Subsidiaries has entered
into any agreement or other arrangement or executed any waiver providing
for any extension of time within which (A) to file any Return covering any
Taxes for which the Company or any of its Subsidiaries is or may be liable;
(B) the Company or any of its Subsidiaries is required to pay or remit any
Taxes or amounts on account of Taxes; or (C) any taxing authority may
assess or collect Taxes for which the Company or any of its Subsidiaries is
or may be liable. The Disclosure Schedule sets forth (A) the taxable years
of the Company and each of its Subsidiaries as to which the respective
statutes of limitations with respect to Taxes have not expired, and (B)
with respect to such taxable years sets forth those years for which
examinations have been completed, those years for which examinations are
presently being conducted, those years for which examinations have not been
initiated, and those years for which required Returns have not yet been
filed. All assessments made or threatened as a result of any examinations
have been fully paid, or are fully reflected as a liability in the
Financial Statements and the Interim Financial Statements, or are being
contested and an adequate reserve therefor has been established and is
fully reflected as a liability in the Financial Statements and the Interim
Financial Statements.
(v) The Canadian federal and provincial income and capital tax
liabilities of the Company and each of its Subsidiaries have been assessed
by the relevant taxing authority and notices of assessment have been issued
to the Company or its Subsidiaries by the relevant taxing authority for all
taxation years ending prior to [March 31, 1996].
(vi) To Sellers' knowledge, there are no assessments, actions, suits,
proceedings, investigations, audits or claims now pending or threatened
against the Company or any of its Subsidiaries in respect of any Taxes and
there are no matters under discussion with any taxing authority relating to
Taxes or assessments.
(vii) The Company and each of its Subsidiaries has duly and timely
withheld from any amount paid or credited by it to or for the account or
benefit of any Person, including any of its employees, officers and
directors and any non-resident Person, the amount of all Taxes and other
deductions required by any applicable law, rules or regulations to be
withheld from any such amount and has duly and timely remitted the same to
the appropriate taxing or other governmental authority or agency.
(viii) Neither the Company nor any of its Subsidiaries has sold or
acquired any assets or services for less than fair market value to or from
any Person with whom it does not deal at arm's length within the meaning of
the INCOME TAX ACT (Canada).
10
(ix) The Sellers are not non-residents of Canada within the meaning
of the INCOME TAX ACT (Canada).
(o) AFFILIATE TRANSACTIONS. The Disclosure Schedule sets forth every
business relationship (other than normal employment relationships) between the
Company or any of its Subsidiaries, on the one hand, and any of the Company's or
any of its Subsidiaries' respective officers, directors, employees or
shareholders or members of their families (or any entity in which any of them
has a material financial interest, directly or indirectly), on the other hand
(each, a "Related Party"). None of said parties (other than the Company or any
of its Subsidiaries) owns any assets which are used in the Company's or any of
its Subsidiaries' businesses, or is engaged in any business which competes with
the Company's or any of its Subsidiaries' businesses.
(p) INTERIM TRANSACTIONS. Since March 31, 1996, neither the Company nor
any of its Subsidiaries has:
(a) sold, assigned, leased, exchanged, transferred or otherwise
disposed of any of its assets or property, except for sales of inventory
and cash applied in the payment of its liabilities, in the usual and
ordinary course of business consistent with the Company's or any of its
Subsidiaries' past practices;
(b) suffered any theft, casualty, damage, destruction or loss, or
interruption in use, of any asset or property (whether or not covered by
insurance), on account of fire, flood, riot, strike or other hazard or Act
of God;
(c) made or suffered any material change in the conduct or nature of
any aspect of its business;
(d) waived any right or compromised any debt or claim arising out of
the conduct of, or with respect to, its business;
(e) made (or committed to make) capital expenditures in an amount
which exceeds $10,000 for any item or $50,000 in the aggregate;
(f) made any change in accounting methods or principles;
(g) discharged any liability except in the usual and ordinary course
of business in accordance with past practices, or prepaid any liability;
(h) borrowed any money or issued any bonds, debentures, notes or
other corporate securities, including without limitation, those evidencing
borrowed money;
(i) increased the compensation payable to any employee, except for
normal increases in the ordinary course of business consistent with past
practices;
(j) hired or terminated any employee who has an annual salary in
excess of $40,000;
11
(k) issued or sold any securities or rights to acquire securities of
any class;
(l) paid, declared or set aside any dividend or other distribution on
its securities of any class or purchased, exchanged or redeemed any of its
securities of any class;
(m) entered into any transaction with any Related Party; or
(n) without limitation by the enumeration of any of the foregoing,
entered into any transaction other than in the usual and ordinary course of
business in accordance with past practices (the foregoing representation
and warranty shall not be deemed to be breached by virtue of the entry by
Sellers into this Agreement or their consummation of the transaction
contemplated hereby).
(q) MATERIAL ADVERSE CHANGE. Since March 31, 1996, neither the Company
nor any of its Subsidiaries has suffered or been threatened with any material
adverse change in the business, operations, assets, liabilities, financial
condition or prospects of the Company or any of its Subsidiaries, including,
without limiting the generality of the foregoing, the existence or threat of a
labor dispute, or any material adverse change in, or loss of, any relationship
between the Company or any of its Subsidiaries and any of their respective
customers, suppliers or key employees.
(r) CONTRACTS. The Disclosure Schedule correctly and completely lists all
contracts, leases, and agreements to which the Company or any of its
Subsidiaries is a party and which relates to the conduct of the Company's or any
of its Subsidiaries' businesses and either (a) requires the payment or receipt
of an annual amount in excess of $25,000; or (b) relates to employment and
employment related agreements, covenants not to compete, confidentiality
agreements, collective bargaining agreements or agreements with trade unions or
associations, loan agreements, notes, security agreements or sales
representative, distribution, franchise, advertising and similar agreements.
All contracts, leases and other instruments referred to in this paragraph (r)
are in full force and binding upon the parties thereto. No default by the
Company or any of its Subsidiaries has occurred thereunder and, to the best of
the Sellers' knowledge, no default by the other contracting parties has occurred
thereunder. No event, occurrence or condition exists which, with the lapse of
time, the giving of notice, or both, or the happening of any further event or
condition, would become a default by the Company or any of its Subsidiaries
thereunder.
(s) NO DEFAULTS. Neither the Company, any of its Subsidiaries nor any
Seller is a party to, or bound by, any unexpired, undischarged or unsatisfied
written or oral contract, agreement, indenture, mortgage, debenture, note or
other instrument under the terms of which performance by the Company, any of its
Subsidiaries or Sellers according to the terms of this Agreement will be a
default or an event of acceleration, or grounds for termination, or whereby
timely performance by Sellers of this Agreement may be prohibited, prevented or
delayed.
(t) PERMITS. The Disclosure Schedule contains a true and correct copy of
every license, permit, registration and governmental approval, agreement and
consent applied for, pending by, issued or given to the Company or any of its
Subsidiaries, and every agreement with governmental
12
authorities (federal, provincial, local or foreign) entered into by the
Company or any of its Subsidiaries, which is in effect or has been applied
for or is pending (the "Permits"). Such Permits constitute all licenses,
permits, registrations, approvals and agreements and consents which are
required in order for the Company or any of its Subsidiaries to conduct its
business as presently conducted.
(u) PENSION AND BENEFIT PLANS (i) The Disclosure Schedule sets forth all
the employee benefits, welfare, bonus, profit sharing, deferred compensation,
stock option, stock purchase or stock compensation, retirement, hospitalization
insurance, medical and dental insurance, disability insurance or similar plans
or practices relating to the employees of the Company or any of its Subsidiaries
(the "plans") which as of the date hereof are currently maintained or
contributed to, or at any time within the last five (5) calendar years were
maintained or contributed to by the Company or any of its Subsidiaries, or in
which any employee or former employee of the Company or any of its Subsidiaries
is or was eligible to participate and with respect to the Company or any of its
Subsidiaries has any actual or potential liability.
(ii) Sellers have furnished to TCP true, correct and complete copies
of (A) the plan documents of each plan and all amendments thereto; (B) the
most current summary plan description of each plan (and any summary of
material modifications thereto); (C) all related trust agreements,
insurance contracts and other funding agreements (and all amendments
thereto) which implements the plans; (D) the two most recent actuarial
valuations prepared for each plan, that is a defined benefit pension plan,
or contains defined benefit component; (E) the two most recent financial
statements prepared for each plan with respect to which a financial
statement is required to be prepared or has been prepared; (F) the two most
recent annual returns for each plan with respect to which an annual return
is required to be prepared and filed; (G) all material written employee
communications with respect to each plan; (H) proof of registered status of
each plan; (I) all professional opinions (whether or not internally
prepared) with respect to the plans; (J) all material internal memoranda
concerning the plans; and (K) copies of material correspondence with all
regulatory authorities with respect to each plan.
(iii) The plans have been established, qualified, invested and
administered in all respects, in accordance with all applicable laws and in
accordance with all understandings between the Company or any of its
Subsidiaries and the employees of the Company or any of its Subsidiaries
and are in good standing under all applicable laws and no events have
occurred which could jeopardize such status.
(iv) All obligations (including, without limitation, fiduciary and
funding obligations and payment of any taxes, penalties or fees payable
under applicable laws) required to be performed in connection with the
plans pursuant to their terms and applicable laws have been performed and
there are no outstanding defaults or violations by any party thereto.
(v) None of the plans, nor any related trusts or other funding media
thereunder, is subject to any pending investigation, examination or other
proceeding, action or claim initiated by any governmental agency or
instrumentality, or by any other party (other than
13
routine claims for benefits), and there exists no state of facts which
after notice or lapse of time or both, could reasonably be expected to
give rise to any such proceeding, action or claim or affect the
registration of any of the plans. Further, should any matter arise which
could affect the registration of any of the plans, the Company or one of
its Subsidiaries will, in a timely fashion, take or cause to be taken
all steps required to ensure that registration does not affect it.
(vi) There are no outstanding liabilities under the plans for taxes,
penalties or fees under any applicable laws.
(vii) The plans are duly registered where required by applicable
laws.
(viii) All contributions or premiums required to be made by the
Company and each of its Subsidiaries under the terms of the plans or by
applicable laws have been made in a timely fashion in accordance with the
terms of the plans and applicable laws and neither the Company nor its
Subsidiaries have any liability (other than liabilities accruing after the
date hereof) with respect to any of the plans. Contributions and premiums
are to be paid on an accrual basis for the period up to closing, even
though they are not otherwise required to be made until a later date in
respect of the period that includes closing.
(ix) Each of the plans is fully funded or fully insured or both on an
ongoing and solvency basis in accordance with the actuarial method and
assumptions set out in the most recent actuarial valuation prepared for
each plan and in accordance with the applicable laws and generally accepted
actuarial practice.
(x) No amendments have been made to the plans and no improvements to
the plans have been promised in writing except such amendments which may be
necessary to implement the transactions contemplated hereby. No material
changes or events which the Company or any of its Subsidiaries is aware to
have occurred which have a material affect on the financial or actuarial
statements in respect of the plans required to be provided to TCP under
this Agreement. There have been no improper applications, withdrawals or
transfers of assets by the Company or any of its Subsidiaries from or under
the plans or the funds relating thereto.
(xi) The assets of the plans are properly invested and no facts or
circumstances exist which could adversely affect the tax-exempt status of
the funds held thereunder, or subject such funds to any tax penalties under
applicable laws and no taxes are exigible thereon. None of the plans
enjoy any special tax status under the INCOME TAX ACT (Canada), or under
other applicable legislation, nor have any advance tax rulings been sought
or received in respect of any plan.
(xii) Neither the Company nor any of its Subsidiaries nor their agents
have not breached any fiduciary obligations with respect to the
administration of the plans or the funds relating thereto.
14
(v) EMPLOYEES. With respect to employees of the Company or any of its
Subsidiaries: (i) there are no pending or threatened unfair labor practice
charges or employee grievance charges or outstanding orders under applicable
federal or provincial Occupational Health and Safety legislation; (ii) there is
no request for (or current) union representation, labor strike, dispute,
slowdown or stoppage pending or threatened against or directly affecting the
Company or any of its Subsidiaries; (iii) no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending and no
claims therefor exist; (iv) the employment of each of the Company's or any of
its Subsidiaries' employees is terminable at will without cost to the Company or
any of its Subsidiaries except for payments of accrued salaries or wages and
vacation pay, subject to such notice requirements or financial payments in lieu
thereof pursuant to applicable law and other obligations required by applicable
law; (v) no employee or former employee has any right to be rehired by the
Company or any of its Subsidiaries prior to the Company's or any of its
Subsidiaries' hiring a person not previously employed by the Company or any of
its Subsidiaries; and (vi) a true and complete list of all employees who are
employed by the Company or any of its Subsidiaries as of July 31, 1996 has been
described in a confidential memo delivered to Parent and said list correctly
reflects their salaries, wages, other compensation, dates of employment and
positions. The Company and each of its Subsidiaries is up to date in making
employment insurance payments required by the Employment Insurance Act (Canada),
payments required by the Pension Benefits Standards Act, 1985 (Canada),
withholding payments required by the Income Tax Act (Canada), and workers
compensation payments required pursuant to any relevant Workers Compensation
Legislation including without limitation the Workers Compensation Act (Alberta),
and payments to any other pension or insurance programs to which the Company or
any of its Subsidiaries may be a party, including the payment of any union or
association dues or fees.
(w) LITIGATION. There is no litigation or proceeding, in law or in
equity, and there are no proceedings or governmental investigations known to
Sellers before any commission or other administrative authority, pending or, to
the best of Sellers' knowledge, threatened against the Company or any of its
Subsidiaries, or any of their respective officers, directors or Affiliates, with
respect to or affecting the Company's or any of its Subsidiaries' assets,
operations, business, products, sales practices or financial condition, or
related to the consummation of the transaction contemplated hereby.
(x) WARRANTIES. Neither the Company nor any of its Subsidiaries has made
any oral or written warranties with respect to the quality or absence of defects
of its products or services which it has sold or performed which are in force as
of the date hereof except as are described in the Disclosure Schedule. There
are no material claims pending, anticipated or threatened against the Company or
any of its Subsidiaries with respect to the quality of or absence of defects in
such products or services.
(y) ARBITRATION AWARDS. Neither the Company nor any of its Subsidiaries
is a party to, or bound by, any decree, order or arbitration award (or agreement
entered into in any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to or affecting the properties, assets,
personnel or business activities of the Company or any of its Subsidiaries.
15
(z) COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries has
been and is now conducting its business in the ordinary course and neither the
Company nor any of its Subsidiaries is in violation of, or delinquent in respect
to, any decree, order or arbitration award or law, statute, or regulation of or
agreement with, or Permit from, any federal, provincial or local governmental
authority (or to which the property, assets, personnel or business activities of
the Company or any of its Subsidiaries is subject or to which it, itself, is
subject), including, without limitation, federal, provincial or local laws,
statutes and regulations relating to equal employment opportunities, fair
employment practices, unfair labor practices, terms of employment, occupational
health and safety, wages and hours, discrimination, and zoning ordinances and
building codes. Copies of all notices of violation of any of the foregoing
which the Company or any of its Subsidiaries has received within the past three
years are attached to the Disclosure Schedule.
(aa) ENVIRONMENTAL LAWS. The Company, each of its Subsidiaries and their
respective assets and businesses are in compliance with all Environmental Laws
(as herein defined) and Environmental Permits (as herein defined) and there are
no Hazardous Materials (as herein defined) located on, in, or under any or
Leased Premises and no conviction has occurred and no penalties have been
assessed under any Environmental Laws. A copy of any notice, demand, request
for information, summons, order, citation, inquiry or complaint which the
Company or any of its Subsidiaries has received in the past five years of any
alleged violation of any Environmental Law or Environmental Permit is contained
in the Disclosure Schedule, and all violations alleged in said notices have been
corrected. The Company and each of its Subsidiaries possesses all Environmental
Permits which are required for the operation of their respective businesses and
all Environmental Permits are in full force and effect and the Company and each
of its Subsidiaries is in compliance with the terms and conditions thereof.
Copies of all Environmental Permits issued to the Company or any of its
Subsidiaries are contained in the Disclosure Schedule. As used in this
Agreement, (i) "Environmental Laws" means all federal, provincial and local
laws, statutes, regulations, ordinances, rules, regulations, by-laws and
policies, or other legislation of any kind, and any judicial or administrative
interpretation thereof, including, without limitation, all court or
administrative orders, decrees, judgements and arbitration awards, and the
common law, which pertain to environmental matters, health, safety or natural
resources or contamination of any type whatsoever; (ii) "Environmental Permits"
means licenses, permits, registrations, governmental approvals, agreements and
consents which are required under or are issued pursuant to Environmental Laws;
and (iii) "Hazardous Materials" means any toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise a
hazardous substance or any other chemicals, materials or substances otherwise
regulated, controlled or limited by any Environmental Law or for which a
standard is set by any Environmental Law or which are present in concentrations
or at locations that present a threat to human health or the environment.
(bb) REAL ESTATE. Neither the Company nor any of its Subsidiaries owns
any real estate. Neither the Company nor any of its Subsidiaries leases any
real estate other than the premises identified in the Disclosure Schedule as
being so leased (the "Leased Premises"). The Leased Premises are leased to the
Company or one of its Subsidiaries pursuant to written leases, true, correct and
complete copies of which are attached to the Disclosure Schedule. No material
expenditures are required to be made for the repair or maintenance of any
improvements on the
16
Leased Premises. Neither the Company nor any of its Subsidiaries is in
default under any agreement relating to the Leased Premises nor is any
other party thereto in default thereunder. All options in favor of the
Company or any of its Subsidiaries to purchase any of the Leased
Premises, if any, are in full force and effect. The use, occupancy and
operation of the Leased Premises by the Company or any of its
Subsidiaries complies with all applicable laws, regulations, codes,
ordinances and statutes.
(cc) EQUIPMENT. The furniture, fixtures, vehicles, machinery, shelving,
racks, equipment, tools, dies, molds, jigs, fixtures and other tangible personal
property (other than inventory), including, without limitation, all physical
property located in all Computer Programs (as defined herein), owned or leased
by the Company or any of its Subsidiaries and used in any of their respective
operations (collectively, the "Equipment") constitutes all tangible personal
property necessary in order for the Company and each of its Subsidiaries to
conduct their respective businesses as they have been conducted in the past.
All Equipment is in good operating condition and repair (ordinary wear and tear
excepted). The Disclosure Schedule contains a complete list of all leased
Equipment.
(dd) ACCOUNTS RECEIVABLE. None of the account or trade receivables which
are reflected on the Financial Statements or the Interim Financial Statements
are subject to any counterclaim or set off. All of such account or trade
receivables arose out of bona fide, arms length transactions for the sale of
goods or performance of services.
(ee) INVENTORY. All of the Company's and each of its Subsidiaries'
inventory which is held for sale or resale, consists of items of a quantity and
quality useable and saleable in the normal course of business. The Company's
and each of its Subsidiaries' inventory is free from defects in materials and/or
workmanship.
(ff) INTELLECTUAL PROPERTY DEFINITIONS. (i) For purposes of this
Agreement, the following terms shall have the following meanings: (A) "Computer
Programs" shall mean all of the computer programs, computer systems, modules and
any related data and materials (whether in source code, object code or other
form) distributed by the Company or any of its Subsidiaries to others; (B)
"Intellectual Property" shall means all forms of industrial or intellectual
property and technology, including patents, inventions, whether made, conceived
or reduced to practice, all Trademarks, including the name "Xxxxxx", designs,
processes, know-how, technology, formulae, customer lists, all trade secrets,
proprietary information and copyrights, now used in or necessary for the conduct
of the Company's or any of its Subsidiaries' businesses or developed, licenced
or acquired in connection with the Company's or any of its Subsidiaries'
businesses, including, without limiting the generality of the foregoing, all
rights or right to claim or make application, whether in equity or at law or
otherwise, under the laws of copyright, moral rights, neighboring rights,
patent, industrial design, design patent, mask work, integrated circuit
topography, trademark, confidential information or any other industrial or
intellectual property law; (C) "Technology" shall mean all of the intangible
property and assets of the Company or any of its Subsidiaries including all
ongoing business, accrued work in progress, all of the relationships of the
Company or any of its Subsidiaries with actual, perspective or potential
licensees or customers for any of the Computer Programs, technology or
consulting services of the Company or any of its Subsidiaries; and (D)
"Trademarks" shall mean all trademarks, service marks, or design marks,
17
whether registered or not, slogans, trade names, trade dress and like
devices or means used to distinguish the products or services of the
Company or any of its Subsidiaries.
(gg) INTELLECTUAL PROPERTY REPRESENTATIONS. To the best knowledge,
information and belief of Sellers: (i) all of the Intellectual Property is valid
and subsisting and enforceable against any third party; (ii) the Trademarks have
all been used without interruption in the U.S.A. and Canada by the Company or
any of its Subsidiaries, and all Trademarks which are registered or are the
subject of an application for registration are used solely as registered or
applied for, as applicable; (iii) no other party has been permitted to use or
granted a license to use any of the Intellectual Property of the Company or any
of its Subsidiaries; (iv) the Company or any of its Subsidiaries is the sole
legal and beneficial owner of and is entitled to use the Intellectual Property
without payment of any royalty or other fees; (v) no proceedings have been
instituted or threatened that challenge the right of the Company or any of its
Subsidiaries to own, use or license others to use any of the Intellectual
Property or to distribute Computer Programs to others; (vi) no: (A) process,
method or algorithm used, practiced, performed, sold or licensed to any party;
(B) product, device or apparatus made, used, produced, sold or licensed to any
party; or (C) service provided by Company or any of its Subsidiaries or on their
behalf; nor the conduct of the Company's or any of its Subsidiaries' respective
businesses, infringe any patent, trademark, trade name, trade secret, know-how,
industrial design, design patent, utility model, integrated circuit topography,
mask work, copyright, moral rights, neighboring right or other industrial or
intellectual property or other right owned or used by another nor is the subject
of any pending or threatened legal, administrative or regulatory proceedings or
outstanding court order; (vii) neither the Company nor any of its Subsidiaries
has any pending or potential claim, demand or allegation charging any party with
violation of its rights with respect to the Intellectual Property, Computer
Programs or Technology nor does the Company or any of its Subsidiaries know of
any such claim; (viii) there is no patent or patent application nor
investigation by any person that would adversely affect the Company's or any of
its Subsidiaries' respective businesses or any product, apparatus, method,
process or design of the Company or any of its Subsidiaries; (ix) there is no
government restriction or any limitation, domestic or foreign, on the manner in
which any of the Intellectual Property may be used or licensed; (x) the Company
and each of its Subsidiaries has promptly identified any invention made,
conceived or reduced to practice and has promptly filed applicable patent
applications for protection of any such invention any has, until such filing of
the first patent application has occurred, kept the invention strictly secret
and not permitted any disclosure, public use nor publication of the elements of
the invention nor other means by which the elements of the invention may become
available to the public; (xi) all of the Technology and Computer Programs were
created by employees of the Company or any of its Subsidiaries working within
the scope of the employment; (xii) in each case of development of Computer
Programs and Technology set out in the Disclosure Schedule, the Company or its
Subsidiaries has obtained either a duly executed assignment of all copyright,
trademarks, obligations of confidence, property rights or any other right, title
or interest in and to such Computer Programs and Technology as may have been
developed or had such individual duly execute an employment agreement with the
Company or any of its Subsidiaries which employment agreement shall, in addition
to its other terms, transfer all such copyright, trademarks, obligations of
confidence, property rights and any other right, title or interest in such prior
developed Computer Programs and Technology or any part thereof to the Company or
any of its Subsidiaries; (xiii) none of the Intellectual Property rights nor
Computer Programs of the Company or any of its Subsidiaries
18
violates or infringes any rights of others and neither the Company nor
any of its Subsidiaries has received any notice of any claim or threat
of such a violation or infringement; (xiv) neither Sellers, nor any
shareholder, officer, director or employee or former employee of the
Company or any of its Subsidiaries or any third party has disclosed any
confidential information of the Company or any of its Subsidiaries
except in the ordinary course of business of the Company or any of its
Subsidiaries or with the authority of the Company or any of its
Subsidiaries; (xv) the Company and each of its Subsidiaries has obtained
waivers of moral rights from any authors of any Computer Programs of the
Company or any of its Subsidiaries such that the Company or its
Subsidiaries may enjoy uninterrupted use, sale, distribution,
modification, alteration and attribution of or for each such Computer
Program; and (xvi) the Company and each of its Subsidiaries has obtained
assignments or waivers of all applicable neighboring rights from any
authors of any Computer Programs of the Company or any of its
Subsidiaries such that the Company or its Subsidiaries may enjoy
uninterrupted use, sale, distribution, reproduction, modification,
alteration, public display, publication and attribution of or for each
such Computer Program.
(hh) COMPUTER PROGRAMS, EQUIPMENT AND TECHNOLOGY: To the best knowledge,
information and belief of Sellers: (i) all rights in the Computer Programs and
the Technology are good, valid, subsisting and enforceable by the Company or
its Subsidiaries and no further rights other than those under third party
licenses are necessary or desirable to use, manufacture, reproduce, market,
distribute, display, adapt, modify, create, derivative works, sell or license
any products, Computer Programs or Technology of Company or any of its
Subsidiaries; (ii) the use, manufacture, reproduction, performance, operation,
marketing, distribution, display, adaptation, modification, creation of
derivative works, sale, licensing or other dealing with any of the products,
Computer Programs or Technology of the Company or any of its Subsidiaries does
not and will not infringe on any rights of any third party; (iii) all of the
Computer Programs distributed by the Company or any of its Subsidiaries have
been developed, tested and installed, and operate substantially in accordance
with Company's or any of its Subsidiaries' specifications and user documentation
therefor; (iv) neither the Company nor any of its Subsidiaries has provided any
end user of any of the Company's or any of its Subsidiaries' Computer Programs
except in circumstances where the use of that Computer Program is subject to the
provisions of the Company's end user license agreement (the "End User License
Agreements") copies of which have been listed in the Disclosure Schedule; (v)
Except as set forth in the End User License Agreements, neither the Company nor
any of its Subsidiaries has any obligation or commitment to develop, implement
or install modifications, corrections, enhancements, improvements or additional
functions of the Computer Programs distributed by the Company or any of its
Subsidiaries; (vi) the Company and each of its Subsidiaries has maintained their
Computer Programs, including, without limitation, all source code relating
thereto, as strictly confidential and a trade secret and has maintained
sufficient contractual and other arrangements to protect the confidentiality
thereof; and (vii) none of the Equipment or Technology, including without
limitation, any of the Computer Programs of the Company or any of its
Subsidiaries, contains any trade secret of a third party, there is and has been
no infringement or claim of infringement of any rights of third parties in or by
the use of such Equipment, Technology, including without limitation, the
Computer Programs of the Company or any of its Subsidiaries, there does not
exist any facts or circumstances which cause any of the rights represented by
the Technology to be unenforceable or which limit or restrict the scope of use,
publication, manufacture, distribution,
19
display, adaptation, modification, creation of derivative works, sale or
licensing of any of the Computer Programs of the Company or any of its
Subsidiaries;
(ii) INTERFERENCE WITH EMPLOYEES. Neither the Company, any of its
Subsidiaries nor any Seller has taken any actions which were calculated to
dissuade, or had the effect of dissuading, any present employees,
representatives or agents of the Company or any of its Subsidiaries from
continuing an association with the Company or any of its Subsidiaries after the
Closing.
(jj) BROKERAGE COMMISSIONS. Neither Sellers, nor any of their Affiliates,
nor the Company or any of its Subsidiaries, have dealt with any person, firm or
corporation who is or may be entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment for arranging the transaction
contemplated hereby or introducing the parties to each other.
(kk) ADDITIONAL DISCLOSURES. The representations and warranties of
Sellers in this Agreement, and all representations, warranties and statements of
Sellers contained in any schedule, financial statement, exhibit, list or
document delivered pursuant hereto or in connection herewith, do not contain any
misstatements of material fact or omit to state a material fact necessary in
order to make the representations, warranties or statements contained herein or
therein not misleading.
(ll) DOCUMENTS. The copies of all documents furnished by the Sellers to
TCP pursuant to or in connection with this Agreement are complete and accurate.
The information contained in the Disclosure Schedule is complete and accurate.
2.3 REPRESENTATIONS AND WARRANTIES OF CAPACITY. Each Seller, severally
and not jointly, represents and warrants to Parent and TCP that with respect to
himself, herself or itself only, (a) such Seller has full power and authority to
enter into and perform this Agreement and all agreements executed and delivered
by such Seller in connection herewith; (b) the Agreement is, and when executed
and delivered, Sellers' Ancillary Documents will be, the legal, valid and
binding obligations of such Seller, as appropriate, enforceable against such
Seller, as appropriate, in accordance with their respective terms; (c) no
consent, authorization, order or approval of, or filing or registration with any
Governmental Authority is required for or in connection with the consummation by
such Seller of the transaction contemplated by this Agreement or by Sellers'
Ancillary Documents; (d) neither the execution and delivery of this Agreement or
Sellers' Ancillary Documents by such Seller, nor the consummation by such Seller
of the transaction contemplated hereby or thereby, will conflict with or result
in a breach of any of the terms, conditions or provisions of any statute or
administrative regulation, or of any order, writ, injunction, judgment or decree
of any court or governmental authority or of any arbitration award to which such
Seller is a party or by which such Seller is bound; and (e) Cindel Holdings
Incorporated ("Cindel") (i) is a corporation duly incorporated and organized,
validly existing and in good standing, under the laws of Ontario, Canada; (ii)
the execution and delivery by Cindel of this Agreement and Seller's Ancillary
Documents to the extent Cindel is a party thereto and the performance by Cindel
of its obligations hereunder and thereunder have been duly authorized and
approved by all requisite corporate action; and (iii) this Agreement has been,
and when executed and delivered Seller's Ancillary Documents will be, duly
executed and delivered by a duly authorized officer of Cindel to the extent it
is a party thereto.
20
ARTICLE 3
POST-CLOSING AGREEMENTS
3.1 POST-CLOSING AGREEMENTS. From and after the Closing, the parties
shall have the respective rights and obligations which are set forth in the
remainder of this Article 3.
3.2 INSPECTION OF RECORDS. Sellers, on the one hand, and TCP, on the
other hand, and their respective Affiliates, shall each retain and make their
respective books and records (including expired insurance policies and work
papers in the possession of their respective accountants) with respect to the
Company and each of its Subsidiaries available for inspection by the other
party, or by its duly accredited representatives, for reasonable business
purposes at all reasonable times during normal business hours, for a seven (7)
year period after the date hereof, with respect to all transactions of the
Company or any of its Subsidiaries occurring prior to and relating to the
Closing, and the historical financial condition, assets, liabilities, operations
and cash flows of the Company or any of its Subsidiaries. As used in this
Section 3.2, the right of inspection includes the right to make extracts or
copies. The representatives of a party inspecting the records of the other
party shall be reasonably satisfactory to the other party.
3.3 USE OF TRADEMARKS. Sellers shall, and shall cause their respective
Affiliates to, not use and shall not license or permit any third party to use,
any name, slogan, logo or trademark which is similar or deceptively similar to
any of the names or trademarks used in connection with the business of the
Company or any of its Subsidiaries.
3.4 HIRING AWAY EMPLOYEES. For a period of two (2) years from the date
hereof, Sellers shall, and shall cause their respective Affiliates to, not hire
or offer to hire any salaried, technical or professional employees,
representatives or agents of the Company or any of its Subsidiaries.
3.5 CONFIDENTIALITY. Each Seller agrees not to communicate or divulge to
any third party, or use for any purpose other than evaluating and carrying out
the transaction contemplated hereby, any Confidential Information regarding the
Company or any of its Subsidiaries, which information was obtained from any of
Sellers, the Company or any of its Subsidiaries. Intending that the term shall
be broadly construed to include anything predictable under applicable law,
"Confidential Information" means all information, and all documents and other
tangible items which record information, which at the time or times concerned is
predictable as a trade secret under applicable law. The preceding portions of
this Section 3.5 shall not apply to information (i) which was in the public
domain or independently received by Sellers from a third party with a right to
disclose such information, or (ii) to the extent that disclosure is required by
law. Each Seller shall advise the Company of any request, including a subpoena
or similar legal inquiry, to disclose any such Confidential Information, so that
the Company can seek appropriate legal relief.
21
3.6 COVENANT NOT TO COMPETE. As an inducement for TCP to enter into this
Agreement, Xxxx Xxxxxx agrees that: (a) from and after the Closing and
continuing for the lesser of two (2) years from the date hereof or the longest
time permitted by applicable law, neither Xxxx Xxxxxx nor any of his Affiliates
shall do any one or more of the following, directly or indirectly: (a) engage or
participate, anywhere in the continental United States or Canada, as an owner,
partner, shareholder, consultant or (without limitation by the specific
enumeration of the foregoing) otherwise in any business which is competitive
with the Company's, TCP's, Parent's, or any of their respective Subsidiaries'
businesses, as conducted on the date hereof or as about to be conducted on the
date hereof (a "Competing Business"); or (b) solicit any customer of the
Company, TCP, Parent or any of their respective Subsidiaries which has been a
customer of the Company, TCP, Parent or any of their respective Subsidiaries
within the past one year, to purchase from any source other than the Company,
TCP, Parent or any of their respective Subsidiaries any product or service which
could be supplied by the Company, TCP, Parent or any of their respective
Subsidiaries. Notwithstanding the foregoing, (i) the ownership by Xxxx Xxxxxx
of up to five percent (5%) of the issued capital stock of any publicly traded
company involved in a Competing Business by itself shall not constitute a
violation of any provision of this Section 3.6; and (ii) actions taken by Xxxx
Xxxxxx pursuant to the terms of the Secured Note shall not constitute a
violation of any provisions of this Section 3.6.
(b) In the event of any breach of paragraph (a) of this Section 3.6, the
time period of the breached covenant shall be extended for the period of such
breach. Xxxx Xxxxxx recognizes that the territorial, time and scope limitations
set forth in this Section 3.6 are reasonable and are required for the protection
of the Company, TCP, Parent and each of their respective Subsidiaries and in the
event that any such territorial, time or scope limitation is deemed to be
unreasonable by a court of competent jurisdiction, the Company and Xxxx Xxxxxx
agree to the reduction of either or any of said territorial, time or scope
limitations to such an area, period or scope as said court shall deem reasonable
under the circumstances.
3.7 FURTHER ASSURANCES. The parties shall execute such further
documents, and perform such further acts, as may be necessary or
desirable to consummate the transactions contemplated by this Agreement
and to otherwise comply with the terms of this Agreement.
3.8 INJUNCTIVE RELIEF. Sellers specifically recognize that any breach of
Sections 3.3, 3.4, 3.5 or 3.6 of this Agreement will cause irreparable injury to
the Company, TCP, Parent and each of their respective Subsidiaries and that
actual damages may be difficult to ascertain, and in any event, may be
inadequate. Accordingly (and without limiting the availability of legal or
equitable, including injunctive, remedies under any other provisions of this
Agreement), each Seller agrees that in the event of any such breach, the Company
and TCP shall be entitled to injunctive relief in addition to such other legal
and equitable remedies that may be available.
3.9 TAX MATTERS. TCP and Parent hereby covenant that after the Closing
they shall cause the Company to duly prepare and file in a timely manner all Tax
Returns required to be filed by it, and pay all Taxes required to be paid by it
for the taxation year ending as a consequence of the Closing or any post-closing
amalgamation.
22
3.10 PARENT GUARANTY. Parent guarantees to the Sellers the due and
punctual payment and performance in full of the obligations of TCP in this
Agreement and in any Ancillary Document (the "Obligations"). The Parent shall
be liable for the Obligations as a primary obligor, not merely as a surety.
This Guarantee is an unconditional, irrevocable and continuing guarantee of all
of the Obligations. The Parent shall indemnify and save the Sellers harmless
from and against all loss, cost, damage, expense, claims and liability which it
may at any time suffer or incur in connection with any failure by TCP to duly
and punctually pay or perform the Obligations. The Sellers shall not be bound
to seek or exhaust their recourse against TCP or any other person before being
entitled to payment under this Guarantee. Parent renounces the benefits of
discussion and division, if applicable.
ARTICLE 4
INDEMNIFICATION
4.1. GENERAL. From and after the Closing, the parties shall
indemnify each other as provided in this Article 4. As used in this
Agreement, the term "Damages" shall mean all liabilities, demands,
claims, actions or causes of action, regulatory, legislative or judicial
proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses, including, without limitation,
reasonable attorneys', accountants', investigators', and experts' fees
and expenses, sustained or incurred in connection with the defense or
investigation of any claim for Damages.
4.2. SELLERS' INDEMNIFICATION OBLIGATIONS. Each of the Sellers shall
indemnify, save and keep TCP, Parent and their respective successors and
permitted assigns (each a "TCP Indemnitee" and collectively the "TCP
Indemnitees") forever harmless against and from all Damages sustained or
incurred by any TCP Indemnitee, as a result of or arising out of or by virtue
of:
(a) any inaccuracy in or breach of any representation and warranty made by
Sellers to TCP in this Agreement or in any Sellers' Ancillary Document;
(b) the breach by any Seller of, or failure of any Seller to comply with,
any of the covenants or obligations under this Agreement or any Sellers'
Ancillary Document to be performed by any Seller (including, without limitation,
their obligations under this Article 4); or
(c) without being limited by paragraphs (a) or (b) of this Section 4.2
(and without regard to the fact that any one or more of the items referred to in
this Section 4.2(c) may be disclosed in the Disclosure Schedule or in any
documents included or referred to therein or may be otherwise known to TCP at
the date of this Agreement or on the date hereof), (i) any action or failure to
act, in whole or in part, on or prior to the date hereof with respect to any
Plan which the Company or any of its Subsidiaries has at any time maintained or
administered or to which the Company or any of its Subsidiaries has at any time
contributed; (ii) the violation of any Environmental Law or the presence of any
Hazardous Materials upon, about or beneath the Leased Premises or any other
property on which the Company's or any of its Subsidiaries' respective
businesses has been conducted in the past or the migration to or from Leased
Premises
23
or any other property on which the Company's or any of its Subsidiaries'
respective businesses has been conducted in the past prior to the date
hereof, or arising in any manner whatsoever out of the violation of any
Environmental Law pertaining to the Leased Premises or any other
property on which the Company's or any of its Subsidiaries' respective
businesses has been conducted in the past and the activities thereon,
whether foreseeable or unforeseeable, provided such violation commenced
prior to the date hereof; (iii) any liability for Taxes owed by the
Company or any of its Subsidiaries (whether or not shown on any Return)
or any liability of the Company or any of its Subsidiaries resulting
from amounts required to have been withheld and paid in connection with
payments by the Company or any of its Subsidiaries to employees,
independent contractors, creditors, shareholders or other third parties
arising in any period ending on or before the date hereof; and (iv) any
Damages incurred by the Company in connection with the matter involving
Xxxxxxxx Automation as disclosed in item 2.2(j) of the Disclosure
Schedule.
4.3. TCP'S AND PARENT'S INDEMNIFICATION COVENANTS. TCP and
Parent, jointly and severally, shall indemnify, save and keep Sellers
and their respective successors and assigns ("Seller Indemnitees"),
forever harmless against and from all Damages sustained or incurred by
any Seller Indemnitee, as a result of or arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and warranty
made by TCP or Parent to Sellers herein or in any TCP's Ancillary Document; or
(b) any breach by TCP or Parent of, or failure by TCP or Parent to
comply with, any of its covenants or obligations under this Agreement or any
TCP's Ancillary Document to be performed by TCP or Parent (including without
limitation its obligations under this Article 4).
4.4. CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the claiming party (the "Indemnified Party") shall
promptly (and in no event more than 120 days after the later to occur of
incurring Damages or discovering the facts giving rise to the claim) notify the
indemnifying parties (the "Indemnifying Parties") of the claim and, when known,
the facts constituting the basis for such claim, provided that the Indemnified
Party's failure to give such notice shall not affect any rights or remedies of
the Indemnified Party hereunder with respect to indemnification for Damages
except to the extent that the Indemnifying Parties are materially prejudiced
thereby. In the event of any claim for indemnification hereunder resulting from
or in connection with any claim or legal proceedings by a third party, the
notice to the Indemnifying Parties shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The Indemnified
Party shall not settle or compromise any claim by a third party for which they
are entitled to indemnification hereunder, without the prior written consent of
the Indemnifying Parties (which shall not be reasonably withheld).
4.5. DEFENSE BY INDEMNIFYING PARTIES. In connection with any claim giving
rise to indemnity hereunder or resulting or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Parties, at their sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
they acknowledge to the Indemnified Party in writing their obligations to
indemnify the Indemnified Party with respect to all elements of such claim and
thereafter diligently conduct the defense thereof. The Indemnified Party shall
be entitled to participate in (but not control) the
24
defense of any such action with their counsel and at their own expense.
If the Indemnifying Parties do not assume or fail to conduct in a
diligent manner the defense of any such claim or litigation resulting
therefrom, (a) the Indemnified Party may defend against such claim or
litigation, in such manner as it may deem appropriate, provided,
however, that the Indemnified Party shall not settle any such claim or
litigation without the prior written consent of the Indemnifying
Parties, which consent shall not be unreasonable withheld, and (b) the
Indemnifying Parties shall be entitled to participate in (but not
control) the defense of such action, with their counsel and at their own
expense. If the Indemnifying Parties thereafter seek to question the
manner in which the Indemnified Party defended such third party claim,
the Indemnifying Parties shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend
such third party claim in a reasonably prudent manner. Each party
agrees to cooperate fully with the other, such cooperation to include,
without limitation, attendance at depositions and the provision of
relevant documents as may be reasonably requested by the Indemnifying
Parties, provided that the Indemnifying Parties will hold the
Indemnified Party harmless from all of their out of pocket expenses,
incurred in connection with such cooperation by the Indemnified Party.
4.6 EXCEPTIONS TO INDEMNIFICATION OBLIGATIONS. Notwithstanding anything
to the contrary contained herein, (a) an Indemnified Party shall not be entitled
to maintain a claim against any Indemnifying Party in respect of any Damage of
any nature suffered or incurred by an Indemnified Party as a result of such
party's own gross negligence or wilful misconduct, or as a result of any
occurrence, matter or thing the occurrence, existence or non-disclosure of which
constitutes a breach of failure of any representation, warranty, covenant or
other obligation of any Indemnified Party hereunder; (b) an Indemnified Party
shall not be entitled to recover any indirect, incidental, consequential or
special damages from any Indemnifying Party; (c) each Indemnified Party shall be
obligated to use reasonable efforts to mitigate any Damages sustained by it in
connection with any matter for which an Indemnifying Party may have liability to
it; (d) except for claims for indemnification for a breach by Xxxx Xxxxxx of
Section 3.6, which may only be asserted against Xxxx Xxxxxx, each Seller shall
only be obligated to indemnify the TCP Indemnitees for a TCP Indemnitee's
aggregate claim for Damages multiplied by such Seller's indemnification
percentage set forth on EXHIBIT D attached hereto (the "Indemnification
Percentage"); (e) an Indemnified Party shall not be entitled to indemnification
pursuant to this Article IV (i) for any claim, or series of related claims, for
Damages which are less than $10,000 in the aggregate; and (ii) for any claim, or
series of related claims, for Damages that are equal to or exceed $10,000 in the
aggregate, until the total amount of Damages incurred by such Indemnified Party
with respect to such claims exceeds $50,000 in the aggregate; provided, however,
that once the aggregate amount of Damages incurred by such Indemnified Party
with respect to such claims exceeds $50,000 in the aggregate, such Indemnified
Party shall be entitled to indemnification from the Indemnifying Parties for all
amounts of Damages incurred with respect to such claims; (f) except in the case
of a matter involving fraud on the part of any Indemnifying Party, all claims
for indemnification pursuant to this Article IV must be asserted in writing and
delivered to the Indemnifying Party on or prior to the two year anniversary from
the date hereof, except for (i) claims for indemnification pursuant to Section
4.2(a) with respect to a breach of Sections 2.2(b), (c), (g) and (k) and Section
2.3 which may be asserted at any time after the date hereof; (ii) claims for
indemnification pursuant to Section 4.3(a) with respect to a breach of Sections
2.1(a) or (b) which may be asserted at any time after the date hereof; and (iii)
claims for indemnification pursuant to Section 4.2(a) with respect to a breach
of Section 2.2(n) or Section 4.2(c)(iii) which
25
may be asserted at any time prior to the expiration of any applicable
statute of limitations (other than claims for Damages relating to sales
and use taxes which may only be asserted for a period of two years from
the date hereof); (g) each Seller's indemnification obligation hereunder
shall be limited to the following: (i) such Seller's Indemnification
Percentage; multiplied by (ii) $7,500,000; (h) the TCP Indemnitees'
indemnification obligation hereunder shall be limited to $6,000,000; and
(i) with respect to claims for Damages by a TCP Indemnitee relating to
sales and use taxes, (i) the $10,000 threshold set forth in subsection
4.6(e)(i) above, shall be deemed to be a $20,000 limitation; and (ii)
the aggregate claims for Damages by a TCP Indemnitee shall be limited to
fifty percent (50%) of such Damages.
4.7. SET-OFF. Upon the final resolution of a claim for indemnification
pursuant to this Article 4, TCP may, at its sole election, set off its right to
receive payment under this Agreement from each Seller, whether for a Seller's
breach or otherwise, against amounts owed by TCP to such Seller pursuant to the
terms of this Agreement and/or the Seller Note, on a dollar for dollar basis,
with any such set off being effective upon the final resolution of such claim
for indemnification.
4.8 EXCLUSIVITY. The provisions of this Article 4 shall apply to any
Claim for breach of any covenant, representation, warranty or other provision of
this Agreement or any Ancillary Document (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 Article 4.
ARTICLE 5
MISCELLANEOUS
51. PUBLICITY. Except as otherwise required by law or applicable stock
exchange rules, press releases concerning this transaction shall be made only
with the prior agreement of Sellers and TCP. Except as otherwise required by
law or applicable stock exchange rules, no such press releases or other
publicity shall state the amount of the consideration payable upon consummation
of the transaction contemplated by this Agreement.
52. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier. Notices delivered by hand by facsimile, or by
nationally recognized private carrier shall be deemed given on the first
business day following receipt; provided, however, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand, or
deposited in the Canadian mail, postage prepaid, registered or certified mail,
on or before two (2) business days after its delivery by facsimile. All notices
shall be addressed as follows:
If to Xxxx Xxxxxx or Xxxxx Xxxxxx:
0000 - 000 Xxxxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
26
with a copy to:
Xxxxxxx Xxxxx
3700, 000 Xxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
If to Xxxxxx Xxxxxx or Cindel Holdings Incorporated:
00 Xxxxxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx
3700, 000 Xxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
If to TCP or Parent:
c/o Total Control Products, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx Xxxx, President
Fax: (000) 000-0000
27
with a copy to:
X'Xxxxxx & Xxxxxx
00 Xxxxx XxXxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 5.2.
5.3. EXPENSES; TRANSFER TAXES. Except as otherwise provided herein, each
party hereto shall bear all costs, fees and expenses incurred by such party in
connection with, relating to or arising out of the negotiation, preparation,
execution, delivery and performance of this Agreement and all agreements
executed and delivered in connection herewith and the consummation of the
transaction contemplated hereby and thereby, including, without limitation,
attorneys', accountants', environmental consultants', brokers' and other
professional fees and expenses ("Costs"); provided, however, that (a) up to
$75,000 of the aggregate Costs incurred by the Sellers and/or the Company in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement, the Amalgamation Agreement, the Support
Agreement, the Share Exchange Agreement and any other agreement executed and
delivered in connection with any of the foregoing shall be paid by the Company;
(b) any Costs in excess of $75,000 incurred by the Company and/or the Sellers in
connection with any of the foregoing shall be the sole responsibility of the
Sellers; and (c) Sellers shall be solely responsible for all amounts owed to
Concord.
5.4. ENTIRE AGREEMENT. This Agreement and the instruments to be delivered
by the parties pursuant to the provisions hereof constitute the entire agreement
between the parties with respect to the subject matter hereof and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. Each Exhibit, Schedule
and the Disclosure Schedule, shall be considered incorporated into this
Agreement. Any amendments, or alternative or supplementary provisions to this
Agreement must be made in writing and duly executed by an authorized
representative or agent of each of the parties hereto.
5.5. SURVIVAL; NON-WAIVER. All representations and warranties shall
survive the Closing regardless of any investigation or lack of investigation by
any of the parties hereto. The failure in any one or more instances of a party
to insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party. A breach of any
representation, warranty or covenant shall not be affected by the fact that a
more general or more specific representation, warranty or covenant was not also
breached.
28
5.6. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all
such counterparts shall constitute but one instrument.
5.7. SEVERABILITY. The invalidity of any provision of this
Agreement or portion of a provision shall not affect the validity of any
other provision of this Agreement or the remaining portion of the
applicable provision.
5.8. APPLICABLE LAW. This Agreement shall be governed by, and
interpreted and enforce in accordance with, the laws of the Province of
Alberta (excluding any conflict of laws, rule or principle which might
refer such interpretation to the laws of another jurisdiction) and the
laws of Canada applicable therein.
5.9. BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their successors
and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer on any person other than the parties hereto, and
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
5.10. ASSIGNABILITY. This Agreement shall not be assignable by
either party without the prior written consent of the other party.
5.11. AMENDMENTS. This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on
behalf of each of the parties hereto.
5.12. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
29
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
697621 ALBERTA LTD.
By:/s/ Xxxxxxxx Xxxx
------------------------------
Title:___________________________
TOTAL CONTROL PRODUCTS, INC.
By: /s/ Xxxxxxxx Xxxx
-----------------------------
Title:___________________________
SELLERS:
/s/ Xxxx X. Xxxxxx
---------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx
CINDEL HOLDINGS INCORPORATED
By: /s/ Xxxxx Xxxxxx
Title:___________________________
30
EXHIBIT A
CURRENT OWNERSHIP
% OF Allocation of
Contingent Cash For Sale
Common Consideration of Common
Shareholder Preferred Shares Common Shares Shares Sold Entitlement Share
----------- ---------------- ------------- ----------- ------------- -------------
Xxxx X. Xxxxxx 153,252 670,000 458,950 67.773505% $1,778,913
Plus Seller
Note
Xxxxx X. Xxxxxx 1,548 80,000 54,800 7.812485% $ 482,241
Xxxxxx X. Xxxxxx -- 234,700 155,950 22.232794% $1,372,363
Cindel Holdings -- 15,300 15,300 2.181221% $ 134,640
Incorporated
31
EXHIBIT "B"
"NET REVENUES" shall be calculated with a view to including all revenue
directly and indirectly derived from the Products and business of the Company
and its subsidiaries and shall specifically include the revenues set out in
the following table without duplication:
PRODUCT(1)
------------------------------------------------------------------------------------------------------------------------
METHOD OF PROCESS OTHER
SALE WINDOW(1) WALTZ(1) PRODUCTS(1),(2) SUPPORT
------------------------------------------------------------------------------------------------------------------------
TIS(3) 100% NR 100% NR 100% NR 100% CSP
------------------------------------------------------------------------------------------------------------------------
TIS Distributors 100% NR 100% NR 100% NR 100% CSP
------------------------------------------------------------------------------------------------------------------------
TCP(4) 24% SULP 24% SULP 24% SULP 40% CSP
Bundled(5)
------------------------------------------------------------------------------------------------------------------------
TCP(4) Unbundled(6)
------------------------------------------------------------------------------------------------------------------------
1st $2.5M/$3M pa(7) 100% NR 100% NR 100% NR 40% NR
------------------------------------------------------------------------------------------------------------------------
After 1st
$2.5M/$3M pa(8) 50% NR 50% NR 100% NR 40% NR
------------------------------------------------------------------------------------------------------------------------
Digital(9) 30% NR 30% NR n/a(10) n/a(11)
w/o CSP(10) w/o CSP(10)
------------------------------------------------------------------------------------------------------------------------
Disposition of a C + L (D DIVIDED BY E)(12) C + L (D DIVIDED BY E)(12) C + L (D DIVIDED BY E)(12) n/a
Product Line or
Subsidiary
------------------------------------------------------------------------------------------------------------------------
TABLE DEFINITIONS
CSP = current and deferred revenues earned as a result of customer support
programs, including maintenance, support and updates.
NR = revenues earned as a result of sale of Products (where "sale" includes
license and resale, but not a disposition), which revenues are net of third
party distributors' discounts and commissions.
SULP = Single Unit List Price as of September 4, 1996
TIS DISTRIBUTOR = a distributor of Products appointed by TIS
w/o CSP = licenses offered without CSP
NOTES
1. All Products include derivate works.
2. "OTHER PRODUCTS" include Products, other than Process Window and Waltz,
offered by TIS on September 4, 1996.
3. TIS = the Company and its Subsidiaries
- 2 -
4. If TCP assumes exclusive control or distribution of a Product or TIS makes
a Disposition to TCP of any Product or of any Subsidiary selling any
Product, then the revenue relating to such Product shall be treated for
the purposes of this table as if TIS had sold the Product through TIS
directly. TCP includes TCP's Affiliates and distributors.
5. "BUNDLED" SALES = software/hardware combined Product sales where the
software Product is installed when shipped.
6. UNBUNDLED = all sales other than Bundled sales.
7. 1ST $2.5M/$3M PA = up to the first $US 2,500,000 in revenue in the First
Earnout Period and up to the first $US 3,000,000 in revenue in the Second
Earnout Period from sales of Process Window and Waltz by TCP, TIS and TIS
Distributors, net of third party distributors' discounts and commissions
by TCP, TIS and TIS Distributors.
8. AFTER 1ST $2.5M/$3M PA = revenue in excess of $US 2,500,000 in the First
Earnout Period and revenue in excess of $3,000,000 in the Second Earnout
Period from sales of Process Window and Waltz by TCP, TIS and TIS
Distributors net of third party distributors' discounts and commissions.
9. Digital includes Digital's Affiliates.
10. Digital will not distribute Other Products.
11. Subject to further agreement.
12. If a Product or Subsidiary is disposed of to an entity other than TCP
during an Earnout Period, the calculation shall be as follows.
C = NR earned in the Earnout Period in which the disposition occurs, to
the date of the Disposition (without duplication of amounts included by
any other calculation).
D = number of days remaining after Disposition in the relevant Earnout
Period.
E = 730
L = amount received as a result of the Disposition;
and, for greater certainty, if a Disposition occurs during the First Earnout
Period the calculation shall be made for each of the Earnout Periods and
revenue applied appropriately, with the effect that for the Second Earnout
Period the amount added to the Net Revenues shall be equal to 50% of the
Disposition Amount.
EXHIBIT C
Seller Indemnification Percentage
------ --------------------------
Xxxx X. Xxxxxx 67.773505%
Xxxxx X. Xxxxxx 7.812485%
Xxxxxx X. Xxxxxx 22.232794%
Cindel Holdings Incorporated 2.181221%
32
