EXHIBIT 10.8
Investment in
XXXX COMMUNICATIONS LTD.
By
WORKING VENTURES CANADIAN FUND INC
XXXX XXXXXXX XXXXXXX BROAD
Barristers & Solicitors
1900 - 000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
(000) 000-0000
INDEX
BOOK ONE
--------
1. Share Purchase Agreement with Working Ventures Canadian Fund Inc. as
Purchaser Schedules attached;
BOOK TWO
--------
2. Certificate of Officer of Xxxx Communications Ltd. - Resolutions with
respect Working Ventures Transaction attached
3. Certificate of Officer of Rowecom Inc. with all relevant corporate document
attached
4. Unanimous Shareholder's Agreement with respect to Rowecom Inc.
5. Unanimous Shareholder's Agreement with respect to Xxxx Communications Ltd.
6. Marketing Intangible License Agreement
7. Technology License Agreement
8. Marketing Intangible Development Agreement
9. Security Agreement
10. Trademark Collateral Security and Pledge Agreement
11. Memorandum of Grant of Security Interest in Copyrights
12. Summary of Distribution of Proceeds
13. Certificate of Merger
14. Agreement and Plan of Merger
ROWECOM LLC
("RoweCom")
AND
XXXX COMMUNICATIONS LTD.
(the "Corporation")
AND
WORKING VENTURES CANADIAN FUND INC.
(the "Purchaser")
--------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
--------------------------------------------------------------------------------
DATED APRIL 1, 1997
SHARE PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I
INTERPRETATION
1.1 Defined Terms...................................................
1.2 Gender and Number...............................................
1.3 Headings, Etc...................................................
1.4 Currency........................................................
1.5 Severability....................................................
1.6 Entire Agreement................................................
1.7 Amendments......................................................
1.8 Waiver..........................................................
1.9 Governing Law...................................................
1.10 Inclusion.......................................................
1.11 Accounting Terms................................................
1.12 Incorporation of Schedules......................................
ARTICLE 2
PURCHASED SHARES
2.1 Purchase and Sale...............................................
2.2 Receipt.........................................................
2.3 Additional Purchased Shares.....................................
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CORPORATION AND OF ROWECOM
3.1 Representations and Warranties of the Corporation
and of RoweCom..................................................
3.2 Covenants of the Corporation and RoweCom........................
3.3 Conduct of Business prior to....................................
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Representations and Warranties of the Purchaser.................
ARTICLE 5
CONDITIONS OF CLOSING
5.1 Conditions for the Benefit of the Purchaser.....................
ARTICLE 6
MISCELLANEOUS
6.1 Notices.........................................................
6.2 Time of the Essence ............................................
6.3 Brokers.........................................................
6.4 Third Party Beneficiaries ......................................
6.5 Expenses........................................................
6.6 Enurement ......................................................
6.7 Counterparts....................................................
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 1/st/ day of April, 1997.
BETWEEN:
ROWECOM LLC, a limited liability company organized and existing under
the laws of the State of Delaware
(hereinafter referred to as "RoweCom")
OF THE FIRST PART,
XXXX COMMUNICATIONS LTD., a corporation incorporated under the laws of
the Province of Ontario
(hereinafter referred to as the "Corporation")
OF THE SECOND PART,
- and -
WORKING VENTURES CANADIAN FUND INC., a corporation incorporated under
the laws of Canada
(hereinafter referred to as the "Purchaser")
OF THE THIRD PART.
WHEREAS:
A. The Corporation has agreed to issue to the Purchaser and the
Purchaser, in reliance upon the representations and warranties of the
Corporation and of RoweCom contained herein, has agreed to take up and
subscribe for 402,892 Preferred Shares in the capital of the
Corporation (the "Initial Purchased Shares").
B. Concurrently with the execution hereof, RoweCom and its members are
providing an undertaking to the Purchaser to, among other things,
convert RoweCom into a corporation organized and existing under the
laws of the State of Delaware ("RoweCom Inc.").
-2-
C. The Corporation has agreed to issue to the Purchaser and the
Purchaser, in reliance upon the representations and warranties of the
Corporation and of RoweCom contained herein and subject to certain
conditions contain herein, has agreed to subscribe for an additional
1,208,676 Preferred Shares in the capital of the Corporation (the
"Additional Purchased Shares").
X. XxxxXxx has agreed to sell to the Purchaser and the Purchaser, in
reliance upon the representations and warranties of the Corporation
and of RoweCom contained herein, has agreed to purchase from RoweCom.
an option to exchange the Initial Purchased Shares and the Additional
Purchased Shares for 1,611,568 common shares in the capital of RoweCom
Inc. (the "Exchange Option") (together with the Initial Purchased
Shares and the Additional Purchased Shares, the "Purchased Shares").
E. Subsequent to the conversion of RoweCom into RoweCom Inc. and the
subscription by the Purchaser for the Additional Purchased Shares, the
Purchaser, RoweCom Inc. and its shareholders will enter into a
unanimous shareholders' agreement substantially in the form of
Schedule 22 attached hereto (the "RoweCom Shareholders' Agreement").
F. Concurrently with the execution hereof, the Purchaser, the
Corporation, RoweCom and Xxxxx Xxxxx are entering into a unanimous
shareholders agreement (the "Unanimous Shareholders' Agreement").
NOW THEREFORE, in consideration of the premises and the mutual
agreements contained in this Agreement and other valuable consideration (the
receipt and adequacy of this consideration by each of the Parties are
acknowledged), the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS. As used in this Agreement including the recitals
hereto, the following terms have the following meanings:
"ACCOUNTS PAYABLE" means all accounts payable and accrued liabilities
owed by either of the Corporation and RoweCom in connection with the Business;
-3-
"ACCOUNTS RECEIVABLE" means all accounts receivable, notes receivable
and other debts due or accruing due to either of the Corporation and RoweCom, in
connection with the Business;
"ADDITIONAL PURCHASED SHARES" has the meaning ascribed thereto in the
recitals;
"AGREEMENT" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; "HEREOF", "HERETO" AND
"HEREUNDER" and similar expressions mean and refer to this Agreement and not to
any particular Article, Section, Subsection or other subdivision; "ARTICLE",
"SECTION", "SUBSECTION" or other subdivision of this Agreement followed by a
number means and refers to the specified Article, Section, Subsection or other
subdivision of this Agreement;
"ANCILLARY AGREEMENTS" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement including, without
limitation, the Unanimous Shareholders' Agreement, the RoweCom Shareholders'
Agreement, and the Undertaking; and "Ancillary Agreement" means any one of such
agreements, certificates or, other instruments;
"ASSETS" means all property and assets of each of the Corporation and
RoweCom of every kind and wheresoever situate;
"AUTHORIZATION" means, with respect to any Person, any authorization,
order, permit, approval, grant, license, consent, right, franchise, privilege,
certificate, judgment, writ, injunction, award, determination, direction,
decree, or by-law, rule or regulation of any Governmental Entity, whether or not
having the force of law, having jurisdiction over such Person;
"BENEFIT PLANS" means all employee benefit plans relating to the
employees of each of the Corporation and RoweCom, including profit sharing,
pension and other deferred compensation arrangements, phantom stock option,
stock option, employee stock purchase, bonus, retirement, health or insurance
plans (oral or written);
"BOOKS AND RECORDS" means all technical, business and financial and
accounting records, financial books and records of account, books, data,
reports, files, lists, drawings, plans, logs, briefs, customer and supplier
lists, deeds, certificates, contracts, surveys, title opinions or any other
documentation and information in any form whatsoever (including
-4-
written, printed, electronic or computer printout form) relating to the
Business;
"BUSINESS" means, collectively, the Corporation's Business and the
RoweCom Business;
"BUSINESS DAY" means any day other than Saturday, Sunday or a day on
which chartered banks are closed for business in Toronto, Ontario;
"CLAIM" means any claim or liability of any nature whatsoever,
including any demand, obligation, liability, debt, cause of action, suit,
proceeding, judgment, award, assessment or reassessment;
"CLOSING" means the completion of the transaction of purchase and sale
of the Additional Purchased Shares as contemplated in this Agreement;
"CLOSING DATE" means, with respect to the Closing, any time prior to
April 30, 1997 or such other time as may be specified by the Purchaser;
COMMON SHARES" means the common shares in the capital of the
Corporation;
"CONSENTS" means the consents of contracting parties to any Contract
or Lease to the change in control of the Corporation contemplated in this
Agreement, and "CONSENT" means any one of such Consents;
"CONTRACTS" means all contracts to which the Corporation or RoweCom is
a party including all contracts, leases of personal property, licenses,
undertakings, engagements or commitments of any nature, written or oral, to
which either the Corporation or RoweCom is entitled in connection with its
Business including, without limitation, unfilled purchase orders received by
either the Corporation or RoweCom, forward commitments by either the Corporation
or RoweCom for supplies or materials entered into the ordinary course of the
Business, all restrictive agreements and negative covenant agreements which
either the Corporation or RoweCom may have with its employees, past or present
and the Contracts listed in Schedule 4;
"CORPORATE RECORDS" means the corporate records of each of the
Corporation and RoweCom, including (i) all articles or similar constating
documents, operating agreements, by-laws, any unanimous shareholders agreements
and any amendments thereto; (ii) all minutes of meetings and resolutions of
shareholders, directors and any committee thereof; and (iii) the
-5-
share certificate books, register of shareholders, register of transfers and
register of directors;
"CORPORATION'S BUSINESS" means the business presently and heretofore
carried on by the Corporation, consisting of the provision of secure electronic
commerce products and services;
"ENCUMBRANCES" means any mortgage, lien, pledge, assignment, charge,
security interest, title retention agreement, hypothec, levy, execution,
seizure, attachment, garnishment, right of distress or other claim in respect of
property of any nature or kind whatsoever howsoever arising (whether consensual,
statutory or arising by operation of law or other-wise) and includes
arrangements known as sale and lease-back, sale and buy-back and sale with an
option to buy-back;
"ENVIRONMENTAL LAWS" means all applicable federal, provincial, state,
municipal or local laws, statutes, regulations or ordinances relating to the
environment, occupational safety, health, product liability and transportation;
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time;
"EXCHANGE OPTION" has the meaning ascribed thereto in the recitals;
"FINANCIAL STATEMENTS" means, collectively, the balance sheets for
each of the Corporation and RoweCom for the fiscal year ending December 31,
1995, and the accompanying statements of income, retained earnings and changes
in financial position for the year then ended and all notes thereto as reported
upon in draft form by Xxxxxxx & Xxxxxxx, Chartered Accountants and the unaudited
balance sheets, and accompanying statements of income and changes in financial
position for each of the Corporation and RoweCom for the fiscal year ended
December 31, 1996;
"GAAP" means at any time, generally accepted accounting principles
from time to time approved by, in the case of the Corporation, the Canadian
Institute of Chartered Accountants, or any successor institute, and in the case
of RoweCom, the Financial Accounting Standards Board or any successor institute,
applicable as at the date on which a given calculation is made or required to be
made in accordance with generally accepted accounting principles;
-6-
"GOVERNMENTAL ENTITY" means (i) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency or instrumentality, domestic or
foreign; (ii) any subdivision, agent, commission, board, or authority of any of
the foregoing; or (iii) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the foregoing;
"HAZARDOUS SUBSTANCE" means any substance which is or is deemed to be,
alone or in any combination, hazardous, hazardous waste, toxic, radioactive, a
pollutant, a deleterious substance, a contaminant or a source of pollution or
contamination under any Environmental Law, whether or not such substance is
defined as hazardous under the Environmental Law;
"INITIAL PURCHASED SHARES" has the meaning ascribed thereto in the
recitals;
"INTELLECTUAL PROPERTIES" means all right, title, interest and benefit
of each of the Corporation and RoweCom in and to any registered or unregistered
worldwide trademarks, trade or brand names, service marks, copyrights, copyright
applications, designs, inventions, patents, patent applications, patent rights,
licenses, sub-licenses, franchises, formulas, processes, know-how, technology,
computer rights and other intellectual or industrial property of the Corporation
or of RoweCom or pertaining to the Business, including the property listed in
Schedule 6;
"INTERIM FINANCIAL STATEMENTS" means, collectively, the unaudited
balance sheets of the Corporation and of RoweCom as at January 31, 1997 and the
accompanying statement of income for the one month period then ended;
"LAWS" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral. or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions of the
foregoing, including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which such word
is used; and "Law"' means any one of them;
"LEASED PROPERTIES" means the real properties forming the subject
matter of the Leases at the municipal addresses listed in Schedule 5;
-7-
"LEASES" means the leases and subleases of real property to which
either the Corporation or RoweCom is a party, as listed and described in
Schedule 5;
"LOSS" means any loss whatsoever, including expenses, costs, damages,
penalties, fines, charges, claims, demands, liabilities, interest and any and
all legal fees and disbursements;
"OPERATING AGREEMENT" means the Limited Liability Operating Agreement
for RoweCom dated June 1, 1996;
"OWNED PROPERTIES" means, collectively, the land and premises listed
on Schedule 3 and the buildings and fixtures thereon;
"PARTIES" means the Purchaser, the Corporation, RoweCom and any other
person who may become a party to this Agreement; and "PARTY" means any one of
them;
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for taxes, assessments
or governmental charges or levies not yet due and delinquent; (ii) easements,
rights-of-way or other minor imperfections of title which do not, individually
or in the aggregate, materially detract from the value of or impair the use or
marketability of any real property; (iii) restrictions on the transfer of shares
imposed by the articles of the Corporation or the Operation Agreement of RoweCom
and (iv) Encumbrances disclosed in Schedule 12;
"PERSON" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or Governmental
Entity, and pronouns have a similarly extended meaning;
"PREFERRED SHARES" means the Class A Preferred Shares in the capital
of the Corporation;
"PURCHASED SHARES" means, collectively, the Initial Purchased Shares,
the Additional Purchased Shares and the Exchange Option;
"ROWECOM BUSINESS" means the business presently and heretofore carried
on by RoweCom consisting of the provision of secure electronic commerce products
and services;
"ROWECOM INC." means the successor corporation to RoweCom resulting
from its conversion into a corporation organized and existing under the laws of
the State of Delaware;
-8-
"ROWECOM SHAREHOLDERS' AGREEMENT" has the meaning ascribed thereto in
the recitals;
"SHAREHOLDER LOANS" means any indebtedness owing by RoweCom or the
Corporation, directly or indirectly to any of their shareholders, or to a person
controlled individually or in concert by their shareholders;
"SUBSIDIARY" means a corporation controlled by the Corporation or by
RoweCom, as the term "control" is defined in the Business Corporations Act
(Ontario) as in effect at the date hereof and without reference to any
amendments thereto after the date hereof;
"TIME OF CLOSING" means 10:00 a.m. (Toronto time) on the Closing Date
or such later time as the Closing may occur;
"UNANIMOUS SHAREHOLDERS' AGREEMENT" means the unanimous shareholders'
agreement of even date herewith among the Corporation and its shareholders;
"UNDERTAKING" means the undertaking of RoweCom and certain others to
the Purchaser of even date herewith; and
"US$" means United States dollars.
1.2 GENDER AND NUMBER. Any reference in this Agreement to gender shall
include all genders, and words importing the singular number only shall include
the plural and vice versa.
1.3 HEADINGS, ETC. The provision of a Table of Contents, the division of
this Agreement into Articles, Sections, Subsections and other subdivisions and
the insertion of headings are for convenience of reference only and shall not
affect or be utilized in the construction or interpretation of this Agreement.
1.4 CURRENCY. All references in this Agreement or any Ancillary Agreement
to dollars, unless otherwise specifically indicated, are expressed in Canadian
currency.
1.5 SEVERABILITY. Any Article, Section, Subsection or other subdivision of
this Agreement or any Ancillary Agreement or any other provision of this
Agreement or any Ancillary Agreement which is, or becomes, illegal, invalid or
unenforceable shall be severed from this Agreement and
-9-
any Ancillary Agreement and be ineffective to the extent of such illegality,
invalidity or unenforceability and shall not affect or impair the remaining
provisions hereof or thereof.
1.6 ENTIRE AGREEMENT. This Agreement together with the Ancillary
Agreements constitutes the entire agreement between the Parties pertaining to
the subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties. Except as
set forth in the Unanimous Shareholders' Agreement, there are no representation,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connection with the subject matter of this
Agreement, except as specifically set forth herein and therein. If there is any
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.
1.7 AMENDMENTS. This Agreement and any Ancillary Agreement may be amended,
modified or supplemented only by a written agreement signed by all of the
parties to such agreement.
1.8 WAIVER. No waiver of any of the provisions of this Agreement or any
Ancillary Agreement shall be deemed to constitute a waiver of any other
provision (whether or not similar), nor shall such waiver constitute a waiver or
continuing waiver unless otherwise expressly provided in writing duly executed
by the party to be bound thereby.
1.9 GOVERNING LAW. This Agreement shall be governed by the laws of the
Province of Ontario and the federal laws of Canada applicable therein.
1.10 INCLUSION. Where the word "including" or "includes" is used in this
Agreement it means "including (or includes) without limitation".
1.11 ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
1.12 INCORPORATION OF SCHEDULES. The following are the schedules attached
to and incorporated in this Agreement:
FINANCIAL SCHEDULES
Schedule 1 - Financial Statements as at December 31, 1995 and December 31,
1996
-10-
Schedule 2 - Interim Financial Statements as at January 31, 1997
ASSET SCHEDULES
Schedule 3 - Owned Properties
Schedule 4 - Contracts
Schedule 5 - Leases and Leased Properties
Schedule 6 - Intellectual Property Rights
DISCLOSURE SCHEDULES
Schedule 7 - Jurisdictions in which Business Carried On
Schedule 8 - Environmental Compliance
Schedule 9 - Authorizations
Schedule 10 - Collective Agreements
Schedule 11 - Insurance Policies
Schedule 12 - Permitted Encumbrances
Schedule 13 - Benefit Plans
Schedule 14 - Employee Matters and Designated Employees
Schedule 15 - Shareholder Loans
Schedule 16 - Options
Schedule 17 - Litigation
Schedule 18 - Cumulative Tax Losses
Schedule 19 - Accounts Payable and Accrued Liabilities
Schedule 20 - Source and Use of Funds
Schedule 21 - Ownership of RoweCom Shares
-11-
SCHEDULES OF FORMS
Schedule 22 - Form of RoweCom Shareholders' Agreement
Schedule 23 - Form of Registration Rights Agreement
ARTICLE 2
PURCHASED SHARES
2.1 PURCHASE AND SALE. Subject to the terms and conditions hereof, the
Purchaser hereby subscribes for and takes up the Initial Purchased Shares and
the Corporation hereby issues the Initial Purchased Shares for an aggregate
subscription price of US$1,000,000, the receipt of which is hereby acknowledged
by the Corporation. Subject to the terms and conditions hereof, RoweCom hereby
sells and the Purchaser hereby purchases the Exchange Option (the terms of which
are contained in the RoweCom Shareholders' Agreement) for a purchase price of
US$1.00, the receipt of which is hereby acknowledged by XxxxXxx.
2.2 RECEIPT. The Purchaser hereby acknowledges receipt of the Initial
Purchased Shares and of the Exchange Option.
2.3 ADDITIONAL PURCHASED SHARES. Subject to the terms and conditions
hereof, the Corporation agrees to issue and the Purchaser agrees to subscribe
for the Additional Purchased Shares on the Closing Date. The subscription price
payable by the Purchaser to the Corporation for the Additional Purchased Shares
shall be $US3,000,000.
ARTICLE 3
REPRESENTATIONS9 WARRANTIES AND COVENANTS
OF THE CORPORATION AND OF ROWECOM
3.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND of RoweCom.
Each of the Corporation and RoweCom represents and warrants as follows to the
Purchaser and acknowledges and confirms that the Purchaser is relying upon such
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares:
-12-
CORPORATE MATTERS RELATING TO THE CORPORATION AND ROWECOM
---------------------------------------------------------
(a) Due Incorporation and Existence. The Corporation is a corporation
----------------------
incorporated and existing under the laws of the Province of Ontario. The
Corporation is a "private company" within the meaning of the Securities Act
(Ontario). RoweCom is a limited liability company organized and existing under
the laws of the State of Delaware.
(b) Corporate Power. Each of the Corporation and RoweCom has the requisite
---------------
power to own its property and to carry on its business as now being conducted by
it.
(c) Extra-Territorial Qualification. The Corporation is duly qualified,
---------------------------------
licensed or registered to carry on business in the Province of Ontario and as an
extra-provincial corporation in the jurisdictions listed in Schedule 7. RoweCom
is duly qualified, licensed or registered to carry on business in the State of
Massachusetts and in the jurisdictions listed in Schedule 7. The jurisdictions
listed in Schedule 7 include all jurisdictions in which the nature of the Assets
or its Business make such qualifications necessary or where failure to be so
qualified would have a material adverse effect on the affairs, assets,
liabilities, business or prospects, operations or conditions of either the
Corporation or RoweCom or their respective Business, financial or otherwise, or
where either the Corporation or RoweCom owns or leases any material properties
or assets or conducts any material business.
(d) Authorized Capital. The authorized capital of the Corporation consists of
--------------------
an unlimited number of Common Shares and an unlimited number of Preferred Shares
of which at the date hereof, and after giving effect to the issue of the Initial
Purchased Shares, 402,893 Common Shares (and no more) and 402,892 Preferred
Shares (and no more) have been duly issued and are outstanding as fully paid and
non-assessable and legally and beneficially owned as set forth in the Unanimous
Shareholders' Agreement. The authorized capital of RoweCom consists of an
unlimited number of common shares and an unlimited number of preferred shares of
which 4,423,836 common shares and no preferred shares have been duly issued and
are outstanding as fully paid and non-assessable and legally and beneficially
owned as set forth in Schedule 21.
(e) Options, etc. Except for the Purchaser's right hereunder, and under the
------------
Exchange Option with respect to the conversion of the Purchased Shares into
common shares of RoweCom, and except as disclosed in Schedule 16 hereto, no
Person has any option, warrant, right, call, commitment, conversion right, right
of exchange or other agreement or any right or privilege (whether by law, pre-
emptive or contractual) capable of becoming an option, warrant,
-13-
right, call, commitment, conversion right, right of exchange or other agreement
(i) for the purchase from the Corporation of any of the Purchased Shares; or
(ii) for the purchase, subscription, allotment or issuance of any of the
unissued shares in the capital of the Corporation or of RoweCom or of any
securities of the Corporation or of RoweCom.
(f) Dividends and Distributions. Since the date of the Financial Statements
---------------------------
neither the Corporation nor RoweCom has, directly or indirectly, declared or
paid any dividends or declared or made any other distribution on any of its
shares of any class and has not, directly or indirectly, redeemed, purchased or
otherwise acquired any of its shares of any class or agreed to do so.
(g) Subsidiaries. The Corporation has no Subsidiaries or agreements of any
------------
nature to acquire any Subsidiary or acquire or lease any other business
operations. RoweCom has no Subsidiaries and has no agreements of any nature to
acquire any Subsidiary or acquire or lease any other business operations.
(h) Corporate Records.
------------------
(i) The Corporate. Records of the Corporation are complete and accurate
and all corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable Laws and with the
articles and by-laws of the Corporation, and without limiting the
generality of the foregoing, (i) the minute books contain complete and
accurate minutes of all meetings of the directors and shareholders of
the Corporation held since the incorporation of the Corporation, and
all such meetings were duly called and held; (ii) the minute books
contain all written resolutions passed by the directors and
shareholders of the Corporation-and all such resolutions were duly
passed; (iii) the share certificate books, register of shareholders
and register of transfers of the Corporation are complete and accurate
and, all, such transfers have been duly completed and approved and any
exigible tax payable in connection with the transfer of any securities
of the Corporation has been duly paid; and (iv) the registers of
directors and officers are complete and accurate and all former and
present directors and officers of the Corporation were duly elected or
appointed, as the case may be.
(ii) The Corporate Records of RoweCom. are complete and accurate and all
corporate proceedings and actions reflected therein have
-14-
been conducted or taken in compliance with all applicable Laws and
with the Operating Agreement, and without limiting the generality of
the foregoing: (i) the minute books contain complete and accurate
minutes of all meetings of the directors and shareholders of RoweCom
held since the incorporation of RoweCom, and all such meetings were
duly called and held; (ii) the minute books contain all written
resolutions passed by the directors and shareholders of RoweCom and
all such resolutions were duly passed; (iii) the share certificate
books, register of shareholders and register of transfers of RoweCom
are complete and accurate, and all such transfers have been duly
completed and approved and any exigible tax payable in connection with
the transfer of any securities of RoweCom has been duly paid; and (iv)
the registers of directors and officers are complete and accurate and
all former and present directors and officers of RoweCom were duly
elected or appointed, as the case may be.
(i) Validity of Agreement. Each of the Corporation and RoweCom has all
---------------------
necessary corporate power to enter into and perform its obligations under this
Agreement and the Ancillary Agreements to which it is a party. The execution,
and delivery and performance by each of the Corporation and RoweCom of this
Agreement and the Ancillary Agreements to which each is a party and the
consummation of the transactions contemplated thereby:
(i) have been duly authorized by all necessary corporate action on the
part of the Corporation and of RoweCom; and
(ii) do not (or would not with the giving of notice, the lapse of time or
the happening of any other event or condition) result in a violation
or a breach of, or a default under or give rise to a right of
termination, greater rights or increased costs, amendment or
cancellation or the acceleration of any obligation under (A) any
charter or by-law instruments of the Corporation or of RoweCom; (B)
any contracts or instruments to which either of the Corporation or
RoweCom is a party or by which either of them is bound; or (C) any
Laws applicable to either of the Corporation or RoweCom.
Each of this Agreement and any Ancillary Agreement to which either the
Corporation or RoweCom is a party constitutes legal, valid and binding
obligations of the Corporation or of RoweCom enforceable against each of them in
accordance with its terms, subject only to the following qualifications:
-15-
(i) an order of specific performance and an injunction are discretionary
remedies and, in particular, may not be available where damages are
considered an adequate remedy; and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally
affecting the enforceability of creditors' rights.
(j) Restrictive Documents. Neither the Corporation nor RoweCom is subject to,,
---------------------
or a party to, any charter or by-law restriction, any Law, any Claim, any
contract or instrument, any Encumbrance or any other restriction of any kind or
character which would prevent the consummation of the transactions contemplated
by this Agreement or any Ancillary Agreement or compliance by the Corporation or
of RoweCom with the terms, conditions and provisions hereof or thereof or the
continued operation of the Business by the Corporation or of RoweCom after the
date hereof on substantially the same basis as heretofore operated or which
would restrict the ability of the Purchaser to acquire any of the Purchased
Shares, in each case except for:
(i) the necessity of obtaining the Consents; and
(ii) the necessity of passing the appropriate resolutions of the directors
and shareholders of the Corporation to permit the transfer of the
Purchased Shares.
MATTERS RELATING TO THE ASSETS
------------------------------
(k) Title to the Assets. Each of the Corporation and RoweCom has good title to
--------------------
all of its Assets and good and marketable title in fee simple to its Owned
Properties. Each of the Corporation and RoweCom has legal and beneficial
ownership of its Assets free and clear of all Encumbrances, except for Permitted
Encumbrances. Each of the Corporation and RoweCom has a valid leasehold title to
all of its Leases.
(l) No Options, etc. No Person has any written or oral agreement, option,
---------------
understanding or commitment, or any right or privilege capable of becoming such
for the purchase from the Corporation or of RoweCom of any of the Assets, other
than pursuant to purchase orders accepted by the Corporation or RoweCom in the
ordinary course of their Business.
(m) Accounts Receivable. All Accounts Receivable are bona fide, and, subject to
-------------------
an allowance for doubtful accounts taken in accordance with GAAP, collectible
without set-off or counterclaim.
-16-
(n) Real Property.
-------------
(i) Neither the Corporation nor RoweCom is the owner of, or under any
agreement or option to own, any real property or any interest therein,
other than the Leases; and
(ii) All of the buildings and fixtures on the Owned Properties and the
Leased Properties (A) were constructed in accordance with all
applicable laws and with all Authorizations validly issued pursuant
thereto; (B) are in good operating condition and in a state of good
maintenance and repair; and (C) are adequate and suitable for the
purposes for which they are presently being used; and with respect to
each.(and to the Owned Properties and the Leased Properties), the
owner has adequate rights of ingress and egress for the operation of
the Business in the ordinary course. None of the Owned Properties, the
I-eased Properties or the buildings and fixtures thereon, nor the use,
operation or maintenance thereof for the purpose of carrying on the
Business, violates in any material respect, any restrictive covenant
or any provision of any Law or encroaches on any property owned by any
other Person. No condemnation or expropriation proceeding is pending
or, to the best knowledge of each of the Corporation and RoweCom,
threatened which would preclude or impair the use of any such property
or any part thereof for the purposes for which it is currently used.
There are no outstanding work orders with respect to any of the Assets
from or required by any municipality, police department, fire
department, sanitation, health or safety authorities or from any other
Person and there are no matters under discussion with or by the
Corporation or RoweCom relating to work orders.
(o) Leases. Each Lease is in good standing, creates a good and valid leasehold
estate in the Leased Properties thereby demised and is in full force and effect
without amendment thereto, except as disclosed in Schedule 5. With respect to
each Lease, (i) all rents and additional rents due to the date hereof have been
paid, (ii) neither the lessor, to the best of the knowledge of the Corporation
or RoweCom, nor the lessee is in default thereunder, (iii) no waiver, indulgence
or postponement of the lessee's obligations thereunder has been granted by the
lessor, (iv) there exists no event of default or event, occurrence, condition or
act (including the purchase of the Purchased Shares hereunder) which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default under such Lease, (v) neither the Corporation
nor XxxxXxx has violated any of the terms or conditions under any such Lease in
any material respect, and (vi) to
-17-
the best knowledge of the Corporation and of RoweCom, all of the covenants to be
performed by any other party under any such Lease have been fully performed.
Each of the Leased Properties is in a state of good maintenance and repair,
normal wear and tear excepted, and is adequate and suitable for the purposes for
which it is presently being used. True, correct and complete copies of the
Leases have been provided to the Purchaser. Schedule 5 contains a true, correct
and complete list of all of the Leases, together with a brief and accurate
description of each Lease, including a description of the leased premises, the
term of the Lease, the rental payments under the Lease (specifying any breakdown
of base rent and additional rents), any rights of renewal and the term thereof,
and any restrictions on assignment.
(p) No Breach of Contracts. Each of the Contracts listed in Schedule 4 is in
----------------------
full force and effect, unamended, and there exists no default or event of
default or event, occurrence, condition or act (including the purchase of the
Purchased Shares hereunder) which, with the giving of notice, the lapse of time
or the happening of any other event or condition, would become a default or
event of default thereunder, except for the necessity of obtaining the Consents,
which Consents are listed in Schedule 4. Neither the Corporation nor RoweCom has
violated or breached, in any material respect, any of the terms or conditions of
any Contract, and to the best of the knowledge of the Corporation and of
RoweCom, all the covenants to be performed by any other party thereto have been
fully performed. True, correct and complete copies of all Contracts listed in
Schedule 4 have been delivered to the Purchaser.
(q) Intellectual Property Rights. The Intellectual Properties used in whole or
----------------------------
in part in, or required for the carrying on of, the Business in the manner
heretofore carried on are set out in Schedule 6 and are owned by, or validly
licensed to, the Corporation or to RoweCom as indicated in Schedule 6. Except as
otherwise expressly stated in Schedule 6, the Corporation (i) has the exclusive
right to use such Intellectual Properties, (ii) is the owner of record of such
Intellectual Properties, and (iii) has not conveyed, assigned or encumbered any
of them. All registrations and filings necessary to preserve the rights of the
Corporation and of RoweCom in the Intellectual Properties have been made and are
in good standing. To the best of the knowledge of each of the Corporation and
RoweCom, the conduct of the Business does not infringe upon the intellectual
properties of any other Person.
(r) Condition of Equipment. All tangible personal property forming part of the
----------------------
Assets, including furniture, and office and computer equipment, whether owned or
leased, are in good operating condition and are in a state of good repair and
maintenance having regard to the age and use thereof, reasonable wear and tear
and obsolescence excepted.
-18-
FINANCIAL MATTERS
-----------------
(s) Financial Statements. The Financial Statements and the Interim Financial
--------------------
Statements have been prepared in accordance with GAAP applied on a basis
consistent with those of previous fiscal years and present fairly:
(i) the Assets, liabilities, (whether accrued, absolute, contingent or
otherwise) and financial position. of each of the Corporation and
RoweCom as at the respective dates of the relevant statements; and
(ii) the sales and earnings of each of the Corporation and RoweCom during
the periods covered thereby.
The financial statements to be provided to the Purchaser pursuant to Section
3.2(2) shall contain no material variances from the financial information
previously provided to the Purchaser.
As at the date hereof, there are no liabilities, absolute or contingent of the
Corporation and RoweCom save and except for liabilities set forth in the Interim
Financial Statements, liabilities set forth in the Contracts listed in Schedule
4 or in Contracts which, by the terms of Section 3.1 (ab) are not required to be
disclosed, liabilities incurred in the ordinary course since the date of the
Interim Financial Statements and liabilities set forth in the Accounts Payable
and Accrued Liabilities listed in Schedule 19.
True, correct and complete copies of the Financial Statements and the Interim
Financial Statements are attached as Schedule 1 and Schedule 2.
(t) Accounts Payable and Accrued Liabilities. The aggregate amount of Accounts
----------------------------------------
Payable for each of the Corporation-and RoweCom as of February 28, 1997 does not
exceed the amount set out in Schedule 19.
(u) Taxes. Each of RoweCom and the Corporation has filed or caused to be filed,
within the times and within the manner prescribed by Law, all federal,
provincial, local, state and foreign tax returns and tax reports which are
required to be filed by or with respect to each of them. The information
contained in such returns and reports is correct and complete and such returns
and reports reflect accurately all liability for taxes of the Corporation for
the periods covered thereby. All federal, provincial, local, state and foreign
income, profits, franchise, sales, use, occupancy, excise and other taxes and
assessments (including interest and penalties) that are or may become payable by
or due from each of the Corporation and RoweCom have been fully
-19-
paid or fully disclosed and fully provided for in the Books and Records, the
Financial Statements and the Interim Financial Statements. The federal income
tax liability of each of the Corporation and of RoweCom has been assessed for
all fiscal years to and including its fiscal year ended December 31, 1995. No
examination of any tax return of either of the Corporation and RoweCom is
currently in progress, there are no outstanding agreements or waivers extending
the statutory period providing for an extension of time with respect to the
assessment or re-assessment of tax or the filing of any tax return by, or any
payment of any tax by either of the Corporation and RoweCom, and there are no
Claims now threatened or pending against either of the Corporation and RoweCom
in respect of taxes or any matters under discussion with any Governmental Entity
relating to taxes. Each of the Corporation and RoweCom has withheld from each
payment made by it the amount of all taxes and other deductions required to be
withheld therefrom and has paid the same to the proper taxing or other authority
within the time prescribed under any applicable Law. The cumulative tax losses
set forth on Schedule 18 are true, correct and complete for the Corporation as
at the date hereof.
PARTICULAR MATTERS RELATING TO THE CORPORATION'S BUSINESS
---------------------------------------------------------
(v) Eligibility.
-----------
(i) The Corporation is a taxable Canadian corporation within the
meaning of the Income Tax Act (Canada);
(ii) the Corporation carries on no business other than the
Corporation's Business;
(iii) the Corporation has been in active business (as such term is
defined in the Income Tax Act (Canada) for at least two years or,
where the Corporation has been carrying on business for less than
two years, throughout such shorter period of time;
(iv) at least 50% of the Corporation's full-time employees are employed
in Ontario;
(v) at least 50% of the wages and salaries paid by the Corporation are
paid to employees whose ordinary place of employment is a
permanent establishment of the Corporation located in Ontario;
(vi) not less than 90% of the fair market value of the property of the
Corporation is attributable to property used in the Corporation's
Business;
-20-
(vii) the Corporation and all corporations related to it (as the term
"related" is defined in the Income Tax Act (Canada)) have 500 or
fewer employees; and
(viii) the carrying value of the total assets (determined in accordance
with GAAP on a consolidated or combined basis, where applicable)
of the Corporation and all corporations related to it (determined
in accordance with the Income Tax Act (Canada)) together with the
amount of the aggregate subscription price for the Purchased
Shares does not exce ed $50,000,000.
(w) Sufficiency of Assets. The Assets include all rights and property
---------------------
necessary to the conduct of the Business by the Corporation and RoweCom
substantially in the manner presently carried on by each of them.
(x) No Material Adverse Change. Since the date of the Financial Statements
--------------------------
there has been no change in the affairs, assets, liabilities, business,
prospects, operations or conditions of any of the Corporation or RoweCom or the
Business, financial or otherwise, whether arising as a result of any legislative
or regulatory change, revocation of any license or right to do business, fire,
explosion, accident, casualty, labour trouble, flood, drought, riot, storm,
condemnation, act of God, public force or otherwise, which has materially
adversely affected or which will materially adversely affect any of the
Corporation, RoweCom or the Business, except for general economic conditions
affecting Canada, the United States or the industry in which the Corporation,
RoweCom or the Business operates.
(y) Compliance with Laws. Each of the Corporation and RoweCom is conducting its
--------------------
Business in compliance with all applicable Laws of each jurisdiction in which
its Business is carried on, except for acts of non-compliance which in the
aggregate are not material.
(z) Environmental Disclosure.
-------------------------
(i) Each of the Corporation and RoweCom has at all times received,
handled, generated, used, stored, deposited, labelled, handled,
treated, documented, transported and disposed of any Hazardous
Substances in compliance with all applicable Environmental Laws,
approvals or Authorizations, except as set forth in Schedule 8.
(ii) None of the Owned Properties or Leased Properties has ever been used
by any Person as a landfill site, a waste disposal site
-21-
or as a location for the disposal of Hazardous Substance or waste
and has ever had urea formaldehyde foam insulation, asbestos, PCB
waste, radioactive substances or aboveground or underground storage
vessels, active or abandoned, located thereon.
(iii) Neither the Corporation nor RoweCom has been required by any
Governmental Entity to:
(A) alter its properties in a material way in order to be in
compliance with Environmental Laws;
(B) remove any material from any of the Leased Properties; or
(C) perform any remedial studies, investigations, closure,
decommissioning, rehabilitation, restoration and post-remedial
studies, investigations or monitoring on about or in connection
with any of the Leased Properties.
(iv) The Assets of the Corporation and of RoweCom are capable of being
operated at maximum production levels in accordance with
Environmental Laws.
(aa) Authorizations. Each of the Corporation and RoweCom owns, holds, possesses
----------------
or lawfully uses in the operation of the Business all Authorizations which are
in any manner necessary for it to conduct the Business as presently or
previously conducted or for the ownership and use of the Assets, free and clear
of all Encumbrances and in compliance with all Laws applicable thereto. All such
Authorizations are listed and described in Schedule 9 and neither the
Corporation nor RoweCom is in default, nor has it received any notice of any
Claim in default, with respect to any such Authorizations. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need for the Corporation or RoweCom to comply with any
special qualification or procedures or to pay any amounts other than routine
filing fees. None of such Authorizations will be adversely affected by the
consummation of the transactions contemplated hereby, except as set forth in
Schedule 9. Neither the Corporation or RoweCom nor any affiliate of the
Corporation or of RoweCom owns or has any proprietary, financial or other
interests (direct or indirect) in any Authorization which the Corporation or
RoweCom in owns, possesses or uses in the operation of the Business as now or
previously conducted.
-22-
(ab) Material Contracts. Schedule 4 contains a list of all Contracts of the
------------------
Corporation and of RoweCom which involve the expenditure of more than $25,000 or
which have a term left to run of more than 2 years (the "Material Contracts").
Except for the Benefit Plans set forth in Schedule 13, Leases and the Contracts
set forth in Schedule 4, neither the Corporation nor RoweCom is a party to or
bound by:
(i) any Benefit Plans or any collective agreements;
(ii) any agreement or commitment relating to the borrowing of money;
(iii) any guarantee or other contingent liability in respect of any
indebtedness or other liability or obligation of any other Person
(other than the endorsement of negotiable instruments for collection
in the ordinary course of the Business);
(iv) any contract or commitment limiting the freedom of the Corporation or
of RoweCom to engage in any line of business or to compete with any
other Person;
(v) any licensing or other contract or commitment relating to
Intellectual Properties used by either the Corporation or of RoweCom
in the conduct of its Business;
(vi) any agreement or commitment not entered into in the ordinary course
of the Business; and
(vii) any agreement or arrangement with any Person with whom the
Corporation (or their present or former directors, officers and
employees) does not deal at arm's length within the meaning of the
Income Tax Act (Canada).
(ac) Employees.
----------
(i) Each of the Corporation and RoweCom is in compliance with all Laws
respecting employment and employment practices, terms and conditions
of employment, pay equity and wages and hours and has not and is not
engaged in any unfair labour practice;
(ii) No unfair labour practice, complaint or grievance against either the
Corporation or RoweCom is pending or, to the best of the knowledge of
the Corporation and RoweCom, threatened before
-23-
any labour relations board or similar Governmental Entity with
respect to the Business;
(iii) There is no labour strike, dispute, slowdown or stoppage actually
pending or involving or, to the best of the knowledge of the
Corporation and of RoweCom, threatened against either of the
Corporation or RoweCom with respect to its Business;
(iv) No union representation question exists respecting the employees of
either the Corporation or RoweCom in connection with its Business and
no collective bargaining agreement is in place or currently being
negotiated by the Corporation or by XxxxXxx except as disclosed in
Schedule 10;
(v) No grievance which might have an adverse effect upon either of the
Corporation or RoweCom or the conduct of its Business exists, no
arbitration proceeding arising out of or under any collective
agreement is pending, and no claim therefor has been asserted;
(vi) No notice has been received by the Corporation of any complaint which
has not been resolved filed by any of its employees claiming that the
Corporation has violated the Employment Standards Act (Ontario) or
the Human Rights Code (Ontario) (or any applicable employee or human
rights or similar legislation in the other jurisdictions in which the
Corporation operates), or of any complaints or proceedings which have
not. been resolved of any kind involving the Corporation or, to the
Corporation's knowledge, after due inquiry, any of the employees of
the Corporation before any labour relations board. There are no
outstanding orders or charges against the Corporation under the
Occupational Health and Safety Act (Ontario) (or any applicable
health and safety legislation in the other jurisdictions in which the
Corporation carries on business). All levies, assessments and
penalties made against the Corporation pursuant to the Workers'
Compensation Act (Ontario) (and any applicable workers' compensation
legislation in the other jurisdictions in which the Corporation
carries on business) have been paid by the Corporation and the
Corporation has not been reassessed under any such legislation except
such as has been resolved;
(vii) Schedule 14 contains a complete list of all permanent and full time
employees of each of the Corporation and RoweCom, their salaries and
wage rates, bonus arrangements, benefits, positions
-24-
and length of service. Schedule 14 provides a correct and complete
list showing all amounts due or accrued due for all salary, wages, -
bonuses, commissions, vacation with pay, pension benefits or other
employee benefits relating to all employees;
(viii) No employee of the Corporation or of RoweCom has any agreement as to
length of notice required to terminate his or her employment, other
than such as results by law from the employment of an employee
without agreement as to such notice or as to length of employment;
(ix) All vacation pay (including all banked vacation pay), bonuses,
commissions and other employee benefit payments are reflected and
have been accrued in the Books and Records of each of the
Corporation and of RoweCom;
(x) The aggregate amount of salaries, pensions, bonuses, or other
remuneration of any nature paid or payable by each of the
Corporation and RoweCom to or for its present or former officers,
directors, shareholders, employees or Persons not dealing at arm's
length (as such term is defined in the Income Tax Act (Canada)) with
them during the year ended on the date of the Financial Statements,
are as set out in Schedule 14, and since that date, such payments
have been made at no greater rates;
(xi) The only benefit plans existing in respect of the employees of the
Corporation and of RoweCom are the Benefit Plans disclosed on
Schedule 13. True, correct and complete copies of all written
Benefit Plans and related documentation have been provided to the
Purchaser and any oral or written Benefit Plans are accurately
described on Schedule 13. The Benefit Plans are duly registered
where required by, and are in good standing under, all applicable
Laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the
respective fund or funds established under the Benefit Plans are
funded in accordance with applicable Laws, and no past service
funding liabilities exist thereunder;
(xii) None of the Benefit Plans, nor any trust created thereunder, nor any
trustee or administrator thereof, has engaged in any "prohibited
transaction" as defined in Section 406 of ERISA., or
-25-
Section 4975 of the Internal Revenue Code. The 401k Plan is (i)
"qualified" within the meaning of Section 401(a) of the Internal
Revenue Code; (ii) no facts or circumstances exist which would
adversely affect the qualified status of the 401k Plan; and (iii)
the trust established pursuant to the 401k Plan is tax exempt under
section 501(a) of the Internal Revenue Code. No matter relating to
any of the Benefit Plans is pending before any court or government
agency. Each of the Benefit Plans which is group health plans, as
defined in Section 4980(B) of the Internal Revenue Code, is in
compliance with the requirements of Internal Revenue Code Section
4980(B) and Part 6 of Subtitle B of Title I of ERISA; and
(xiii) No payments have been made or authorized since the date of the
Financial Statements by either the Corporation or RoweCom to its
officers, directors, former directors, shareholders or employees or
to any Person not dealing at arm's length (as such term is defined
in the Income Tax Act (Canada)) with any of the foregoing, except in
the ordinary course of the Business and at the regular rates payable
to them of salary, pension, bonuses, rents or other remuneration of
any nature.
(ad) Insurance. Each of the Corporation and RoweCom maintains insurance
---------
policies with responsible insurers as are appropriate to the Business and Assets
in such amounts and against such risks as are customarily carried and insured
against by prudent owners of comparable businesses and assets. All such policies
of insurance coverage are in full force and effect. Neither the Corporation nor
RoweCom is in default with respect to any of the provisions contained in any
such insurance policy and has not failed to give any notice or present any claim
under any such insurance policy in due and timely fashion. A summary of such
policies is contained in Schedule 11.
(ae) Litigation. Other than as set forth in Schedule 17 there is no action, suit
----------
or proceeding, at law or in equity, by any Person, nor any arbitration,
administrative or other proceeding by or before (or to the best of the knowledge
of the Corporation and of RoweCom any investigation by) any Governmental Entity
pending, or, to the best of the knowledge of the Corporation and of RoweCom,
threatened against or affecting either of the Corporation or RoweCom or any of
its properties or rights or any of the Assets, and neither the Corporation nor
RoweCom knows of any valid basis for any such action, suit, proceeding,
arbitration or investigation. Neither the Corporation nor RoweCom is subject to
any judgment, order or decree entered in any lawsuit or proceeding.
-26-
(af) Shareholder Loans. Schedule 15 contains a true, correct and complete list
-----------------
of all Shareholder Loans including the amount owing and the terms applicable
thereto.
(ag) No Insolvency Proceedings. Neither the Corporation nor XxxxXxx has made
-------------------------
any assignment for the benefit of its creditors nor has any receiving order been
made against it under the Bankruptcy and Insolvency Act (Canada) or similar laws
of any other jurisdiction, nor has any petition for such an order been served
upon it, nor has it attempted to take the benefit of any legislation with
respect to financially distressed debtors, nor, after giving effect to this
financing, is an insolvent person within the meaning of the Bankruptcy and
Insolvency Act (Canada) or under any applicable bankruptcy legislation.
(ah) Full Disclosure. None of this Agreement or any Ancillary Agreement or any
---------------
certificate or statement in writing which has been supplied by or on behalf of
the Corporation or RoweCom or by any of the directors, officers or employees of
the Corporation or, of RoweCom in connection with the transactions contemplated
hereby contains any untrue statement of a material fact, or omits any statement
of a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Corporation or to RoweCom
which materially and adversely affects the affairs, businesses, prospects,
operations or conditions of the Corporation or of RoweCom, financial or
otherwise, or the Business or the Assets, which has not been set forth in this
Agreement.
(ai) Conduct of Business. Since the date of the Financial Statements the
-------------------
Business has been carried on in the ordinary course and neither the Corporation
nor XxxxXxx has, other than disclosed in writing to the Purchaser:
(i) incurred any liability, obligation or expenditure of any nature
(whether accrued, absolute, contingent or otherwise) or committed to -
make or perform any capital expenditures or maintenance or repair
projects, except for (x) liabilities, obligations or expenditures
incurred or made in the ordinary course of the Business or deferred
income taxes or income tax credits; and (y) capital expenditures or
maintenance or repair projects that do not exceed $25,000 on a per
item basis;
(ii) made any bonus or profit sharing distribution or payment of any kind;
-27-
(iii) drawn down on any operating line, increased its indebtedness for
borrowed money or made any loan to any Person;
(iv) written off as uncollectible any notes or Accounts Receivable
exceeding $25,000 in the aggregate;
(v) cancelled or waived any claims or rights of the Corporation or of
RoweCom having a value greater than $25,000;
(vi) granted any increase in the rate of wages, salaries, bonuses or
other remuneration to any executive or other employee;
(vii) entered into any transaction with a Person not dealing at arm's
length;
(viii) made any change in any method of accounting or auditing practice;
(ix) amended the articles or by-laws of either the Corporation or of
RoweCom; or
(x) agreed, whether or not in writing, to do any of the foregoing.
3.2 COVENANTS OF THE CORPORATION AND ROWECOM.
(1) The Corporation hereby covenants that in addition to the
restrictions contained in the Unanimous Shareholders' Agreement, it will not use
and does not intend to use the proceeds received from the Purchaser as the
Subscription Price for the purpose of investment in land (except land that is
incidental and ancillary to the Corporation's Business).
(2) Each of the Corporation and/or RoweCom shall provide the audited
consolidated and unconsolidated financial statements for the year ended December
31, 1996 and final audited consolidated financial statements for the year ended
December 31, 1995 to the Purchaser no later than April 30, 1997.
(3) The Corporation shall use funds received from the Purchaser in
satisfaction of the Subscription Price substantially in the manner set forth in
Schedule 20.
3.3 CONDUCT OF BUSINESS PRIOR TO CLOSING. Prior to the Closing Date,
each of the Corporation and RoweCom will conduct the Business in the ordinary
course thereof unless the Corporation or RoweCom, as the case may
-28-
be, has been given the prior written consent of the Purchaser to do otherwise.
Without limiting the generality of the foregoing:
(a) Each of the Corporation and RoweCom will continue to maintain and
service the Assets used in the conduct of the Business in the same manner as has
been its consistent past practice.
(b) Each of the Corporation and RoweCom shall use its best efforts to keep
available the services of the present employees and agents of the Business and
to maintain the relations and goodwill with the suppliers, customers,
distributors and any others having business relations with the Business.
(c) Each of the Corporation and RoweCom shall use its best efforts to
conduct the Business in such a manner that on the Closing Date the
representations and warranties of the Corporation and of RoweCom contained in
this Agreement shall be true, correct and complete as if such representations
and warranties were made on and as of such date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants as follows to the Corporation and acknowledges and
confirms that the Corporation is relying on such representations and warranties
in connection with the sale by the Corporation of the Purchased Shares:
(a) Due Incorporation and Existence. The Purchaser is a corporation
-------------------------------
incorporated and existing under the laws of Canada.
(b) Validity of Agreement. The Purchaser has all necessary corporate power to
---------------------
enter into and to perform its obligations under this Agreement and the Ancillary
Agreements to which it is a party. The execution, delivery and performance by
the Purchaser of this Agreement and the Ancillary Agreements to which it is a
party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of the Purchaser.
This Agreement and the Ancillary Agreements to which it is a party constitute
legal, valid and binding obligations of the Purchaser enforceable against it in
accordance with their respective terms.
-29-
(c) Restrictive Documents. The Purchaser is not subject to, or a party to, any
---------------------
charter or by-law restriction, any Law, any Claim, any contract or instrument,
any Encumbrance or any other restriction of any kind or character which would
prevent consummation of the transactions contemplated by this Agreement.
ARTICLE 5
CONDITIONS OF CLOSING
5.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER. The purchase and sale of the
Additional Purchased Shares is subject to the following conditions to be
fulfilled or performed at or prior to the Closing Date, which conditions are for
the exclusive benefit of the Purchaser and may be waived in whole or in part by
the Purchaser in its sole discretion:
(a) Truth of Representations and Warranties of the each of XxxxXxx and the
----------------------------------------------------------------------
Corporation. The representations and warranties of each of RoweCom and the
-----------
Corporation contained in this Agreement or in any Ancillary Agreement shall be
true and correct as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of such date, and
each of RoweCom and the Corporation shall also have executed and delivered a
certificate of a senior officer to that effect. The receipt of such evidence and
the Closing shall not be a waiver of the representations and warranties of each
of RoweCom and the Corporation which are made in this Agreement. Upon the
delivery of such certificates, the representations and warranties of each of
RoweCom and the Corporation in Article 3 shall be deemed to have been made on
and as of the Closing Date with the same force and effect as if made on and as
of such date.
(b) Performance of Covenants by each of RoweCom and the Corporation. RoweCom
---------------------------------------------------------------
and the Corporation shall have fulfilled or complied with all covenants
contained in Section 3.2 to be performed or caused to be performed by them at or
prior to the Time of Closing.
(c) Issuance of Shares to RoweCom Inc. The Corporation shall have issued to
---------------------------------
RoweCom Inc. and RoweCom Inc. shall have subscribed for and taken up 1,208,676
Common Shares for an aggregate subscription price of $1.00.
(d) Conversion of RoweCom into a Corporation. RoweCom shall have converted
----------------------------------------
into a corporation organized and existing under the laws of the State of
Delaware in a manner satisfactory to the Purchaser.
-30-
(e) Unanimous Shareholders' Agreement. RoweCom Inc. and its shareholders shall
---------------------------------
have entered the RoweCom Shareholders' Agreement with the Purchaser
substantially in the form attached hereto as Schedule 22.
(f) Registration Rights Agreement. RoweCom Inc. shall have entered into a
-----------------------------
registration rights agreement with the Purchaser substantially in the form
attached hereto as Schedule 23.
(g) Conversion of Loans. The loans of, (or other monies advanced by) each of
-----------
Xxxxxxxxx Xxxxxxx, Xxxxxx Xxxxx and Xxxxxxx Xxxxxx to RoweCom shall have been
converted to preferred shares in the capital of RoweCom Inc. on terms
satisfactory to the Purchaser.
(h) Deliveries. The Corporation shall have delivered or caused to be delivered
----------
to the Purchaser the following in form and substance satisfactory to the
Purchaser:
(i) share certificates representing the Additional Purchased Shares duly
made out in the name of the Purchaser, together with evidence
satisfactory to the Purchaser that the Purchaser has been duly
entered upon the books of the Corporation as the holder of the
Additional Purchased Shares;
(ii) certified copies of (i) the charter documents and extracts from the
by-laws of the Corporation relating to the execution of documents;
(ii) all resolutions of the shareholders, the board of directors or
any duly authorized committee thereof, of the Corporation approving
the entering into of this Agreement and the completion of all
transactions contemplated hereunder; and (iii) all other instruments
evidencing necessary corporate action of the Corporation and of
Authorizations, if any, with respect to such matters;
(iii) certificates of the Secretary or an Assistant Secretary of the
Corporation certifying the names and true signatures of its officers
authorized to sign this Agreement and the other instruments to be
delivered hereunder;
(iv) a certificate of status, compliance, good standing or like
certificate with respect to the Corporation issued by appropriate
government officials of the jurisdiction of its incorporation and of
each jurisdiction in which the Corporation carries on business as
listed in Schedule 7;
-31-
the certificates referred to in subsection 5.1(a);
(vi) an opinion of counsel to the Corporation and such other documents as
the Purchaser may request substantially in the form as those delivered
to the Purchaser concurrently with the execution of this Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 NOTICES. Any notice, direction or other instrument required or
permitted to be given hereunder shall be in writing and given by delivering or
sending it by telecopy or other similar form of communication addressed:
(a) to the Purchaser at:
Working Ventures Canadian Fund Inc.
000 Xxxx Xxxxxx, Xxxx 000
Xxxxxx, Xxxxxxx
X0X XX0
Attention: Xx. Xxxx Xxxxxxx
Xxxxxxxxxx: (000) 000-0000
- and -
Working Ventures Canadian Fund Inc.
000 Xxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X XX0
Attention: Mr. X. Xxxxx Xxxxxxxx
Telecopier: (000) 000-0000
(b) to the Corporation at:
Xxxx Communications Ltd.
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
-32-
Attn: Dr. Xxxxxxx Xxxx, Xx. Xxxxx Xxxxxxxxx
Telecopier: (000) 000-0000
(c) to RoweCom at:
RoweCom LLC
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX
X.X.X. 00000
Attn: Dr. Xxxxxxx Xxxx, Xx. Xxxxx Xxxxxxxxx
Xxxxxxxxxx: (000) 000-0000
Any such notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given, if sent by telecopier or other similar
form of telecommunications on the next Business Day following such transmission
or, if delivered, to have been received on the date of such delivery. Any Party
may change its address for service from time to time by notice given in
accordance with the foregoing and any subsequent notice shall be sent to the
Party at its changed address.
6.2 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
6.3 Brokers. It is understood and agreed that no broker, agent or other
intermediary acted for the Corporation in connection with the sale of the
Purchased Shares and the Corporation shall indemnify and save harmless the
Purchaser from and against any Claims whatsoever for any commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or have acted for the Corporation.
6.4 THIRD PARTY BENEFICIARIES. Each Party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person, other than the Parties hereto, and no Person, other than
the Parties hereto, shall be entitled to rely on the provisions hereof in any
action, suit, proceeding, hearing or other forum.
6.5 Expenses. Except as otherwise expressly provided herein, all out of pocket
costs and expenses (including the fees and disbursements of legal counsel and
the accounting herein engaged by the Purchaser in connection with its due
diligence) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Corporation.
-33-
6.6 ENUREMENT. This Agreement shall enure to the benefit of and be
binding upon the Parties, their successors and any permitted assigns.
6.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the Parties as
of the date first above written.
XXXX COMMUNICATIONS LTD.
Per:____________________________________
Xxxxxxx Xxxx
President
WORKING VENTURES CANADIAN
FUND INC.
Per:____________________________________
Xxxxx Xxxxxxxx
ROWECOM LLC
Per:____________________________________
Xxxxxxx Xxxx
President
Per:____________________________________
Xxxxxxx Xxxx
Xxx Xxxx Communication, Inc.
Investment in
XXXX COMMUNICATIONS LTD.
By
WORKING VENTURES CANADIAN FUND INC
XXXX XXXXXXX XXXXXXX BROAD
Barristers & Solicitors
1900 - 000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
(000) 000-0000
INDEX
BOOK ONE
--------
1. Share Purchase Agreement with Working Ventures Canadian Fund Inc. as
Purchaser Schedules attached;
BOOK TWO
--------
2. Certificate of Officer of Xxxx Communications Ltd. - Resolutions with
respect Working Ventures Transaction attached
3. Certificate of Officer of RoweCom Inc. with all relevant corporate document
attached
4. Unanimous Shareholder's Agreement with respect to RoweCom Inc.
5. Unanimous Shareholder's Agreement with respect to Xxxx Communications Ltd.
6. Marketing Intangible License Agreement
7. Technology License Agreement
8. Marketing Intangible Development Agreement
9. Security Agreement
10. Trademark Collateral Security and Pledge Agreement
11. Memorandum of Grant of Security Interest in Copyrights
12. Summary of Distribution of Proceeds
13. Certificate of Merger
14. Agreement and Plan of Merger
