DATED: NOVEMBER 30, 2001
MCSI CANADA INC.
- AND -
3835359 CANADA INC.
- AND -
MCSI, INC.
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ASSET PURCHASE AGREEMENT
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FRASER XXXXXX CASGRAIN LLP
P.O. Box 100
One First Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
TABLE OF CONTENTS
Article 1
INTERPRETATION
1.1 Definitions..........................................................................2
1.2 Gender and Number....................................................................7
1.3 Currency.............................................................................7
1.4 Headings.............................................................................7
1.5 Knowledge of Vendor..................................................................7
1.6 Knowledge of the Purchaser...........................................................7
Article 2
SCHEDULES
2.1 Description of Schedules.............................................................7
Article 3
AGREEMENT OF PURCHASE AND SALE
3.1 Property and Assets to be Purchased and Sold.........................................8
3.2 Excluded Assets.....................................................................10
Article 4
PURCHASE PRICE
4.1 Purchase Price......................................................................10
4.2 Closing Estimate of Purchase Price..................................................11
4.3 Allocation of Purchase Price and Tax Elections......................................11
4.4 Transfer Taxes......................................................................11
4.5 Adjustments.........................................................................11
4.6 Final Determination of Purchase Price...............................................12
4.7 Inventories and Excluded Inventories................................................14
4.8 Accounts Receivable and Non-Trade Receivables.......................................14
4.9 Returns, Refunds, etc...............................................................15
4.10 Access to Records, Co-operation of Purchasers, etc..................................15
4.11 Duocom Cohabitation.................................................................16
Article 5
LIABILITIES
5.1 Assumption of Liabilities...........................................................16
Article 6
PAYMENT OF PURCHASE PRICE
6.1 Payment of the Purchase Price.......................................................17
ii.
Article 7
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
7.1 Representations and Warranties of the Vendor........................................18
7.2 No Other Representations and Warranties.............................................23
Article 8
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
8.1 Representations and Warranties of the Purchaser.....................................23
Article 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 Survival of Representations and Warranties of the Vendor............................24
9.2 Survival of Representations and Warranties of the Purchaser.........................24
Article 10
COVENANTS OF THE VENDOR
10.1 Covenants of the Vendor.............................................................25
Article 11
COVENANTS OF THE PURCHASER
11.1 Covenants of the Purchaser..........................................................27
Article 12
EMPLOYEE MATTERS
12.1 Employees and Transferred Employees.................................................28
Article 13
BULK SALES LEGISLATION
13.1 Bulk Sales Compliance...............................................................29
Article 14
PURCHASER'S CONDITIONS OF CLOSING
14.1 Conditions for the Benefit of the Purchaser.........................................30
14.2 Non-Fulfilment of Conditions, etc. for the Benefit of the Purchaser.................31
Article 15
VENDOR'S CONDITIONS OF CLOSING
15.1 Conditions for the Benefit of the Vendor............................................32
15.2 Non-Fulfilment of Conditions etc. for the Benefit of the Vendor....................33
iii.
Article 16
CLOSING ARRANGEMENTS
16.1 Date, Time and Place of Closing.....................................................34
16.2 Closing Arrangements................................................................34
Article 17
INDEMNIFICATION
17.1 Indemnification by Vendor...........................................................35
17.2 Indemnification by Purchaser........................................................36
17.3 Procedure for Indemnification.......................................................37
17.4 Subsequent Recovery.................................................................38
17.5 Insurance...........................................................................38
17.6 Details of Claims...................................................................38
17.7 De Minimis/Limitation...............................................................38
Article 18
MCSi GUARANTEE
18.1 MCSi Guarantee......................................................................39
Article 19
MISCELLANEOUS
19.1 Brokerage, Commissions, etc.........................................................39
19.2 Further Assurances..................................................................40
19.3 Assignment of Contracts.............................................................40
19.4 Announcements.......................................................................40
19.5 Notices.............................................................................40
19.6 Time of the Essence.................................................................42
19.7 Costs and Expenses..................................................................42
19.8 Applicable Law......................................................................42
19.9 Entire Agreement....................................................................42
19.10 Severability........................................................................42
19.11 Effect of Closing...................................................................43
19.12 Counterparts........................................................................43
19.13 Assignment..........................................................................43
19.14 Parties in Interest.................................................................44
19.15 Third Parties.......................................................................44
THIS AGREEMENT dated the 30th day of November, 0000
X X X X X X X :
MCSi CANADA INC., a corporation continued under
the laws of the Province of
Ontario
(hereinafter called the "VENDOR")
OF THE FIRST PART
- and -
3835359 CANADA INC. a corporation incorporated
under the laws of Canada
(hereinafter called the "PURCHASER")
OF THE SECOND PART
- and -
MCSI, INC., a corporation incorporated under the
laws of the State of Maryland, U.S.A.
(hereinafter called the "MCSi")
OF THE THIRD PART
WHEREAS the Vendor carries on in Canada an office products
business consisting of the sale and distribution of computer consumables,
peripherals, data storage products, accessories, paper products and office
furniture to business users (hereinafter called the "BUSINESS");
AND WHEREAS the Purchaser desires to purchase and the Vendor
desires to sell the property and assets of the Business for the purchase price
and upon the terms and conditions hereinafter set forth;
AND WHEREAS MCSi is the sole shareholder of the Vendor.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the covenants, agreements and payments hereinafter set forth, the parties hereto
agree as follows:
2.
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
Whenever used in this Agreement, unless there is something in the
subject matter or context inconsistent therewith, the following words and
phrases shall have the respective meanings ascribed to them as follows:
"ABITIBI" has the meaning ascribed thereto in Section 10.1.11.
"ACCOUNTING FIRM" has the meaning ascribed thereto in Section 4.6(c).
"ACCOUNTS RECEIVABLE" means the trade accounts receivable due to the Vendor as
at the Effective Time as reflected on the Closing Date Balance Sheet.
"ADJUSTMENT PAYMENT" shall have the meaning ascribed thereto in Section 4.6(e).
"AFFILIATE" has the meaning ascribed thereto in the CANADA BUSINESS CORPORATIONS
ACT.
"AGREEMENT" means this
asset purchase agreement and any instrument amending this
Agreement as referred to in Section 19.9; "hereof", "hereto", "hereunder" and
similar expressions mean and refer to this Agreement and not to a particular
article or section; and the expression "Article" or "Section" followed by a
number means and refers to the specified article or section of this Agreement.
"APPRAISED FAIR MARKET VALUE OF THE PRINTING ASSETS" means the fair market value
of the equipment and other fixed assets used by the Business in its paper
printing business (a list of such assets being attached as Schedule 17) as such
is determined on the appraisal of such assets that is being provided to the
Purchaser's bank in connection with the Purchase Financing.
"ASSUMED LIABILITIES" means the liabilities and obligations to be assumed by the
Purchaser as described in Section 5.1.
"AZERTY/UNITED" means the Azerty/United Canada Division of United Stationers
Supply Co.
"AZERTY/UNITED LOGISTICS AGREEMENT" means collectively the Logistics Information
Technology Agreement dated July 5, 2000 between Azerty/United, the Vendor and
MCSi as amended and supplemented by the Warehousing/Fulfillment/Logistics
Agreement dated April 2, 2001 among the Vendor, United and MCSi and the
Amendment dated April 2, 2001 entered into between United, the Vendor and MCSi.
"B2B COMPONENT" means the online ordering and customized e-commerce solutions
owned or licensed by the Vendor and/or MCSi, as the case may be, and which are
made available to customers of the Business via the Website(s).
"BULK SALES LEGISLATION" means the BULK SALES ACT (
Ontario) and the
corresponding laws and regulations of any other jurisdiction, domestic or
foreign.
3.
"BUSINESS" has the meaning described in the preamble hereto.
"BUSINESS DAY" means a day other than a Saturday, Sunday or any other day on
which the principal chartered banks located at the City of Toronto are not open
for business during normal banking hours.
"CANON CLAIM" means the action described in item 2 of Schedule 11 hereto.
"CLOSING" means the completion of the transactions herein contemplated,
including the sale to and purchase by the Purchaser of the Purchased Assets
hereunder as herein contemplated.
"CLOSING DATE" means December 31, 2001 or such earlier or later date as may be
agreed upon.
"CLOSING DATE BALANCE SHEET" means the balance sheet of the Vendor to be
prepared, and as agreed upon by the Vendor and the Purchaser, in accordance with
Section 4.6.
"DEBT INSTRUMENT" means any bond, debenture, promissory note or other instrument
evidencing indebtedness for borrowed money or other liability.
"EFFECTIVE TIME" means immediately following the close of business on the
Closing Date.
"EMPLOYEE ACCOUNTS RECEIVABLE" means the amounts due from employees of the
Business as reflected in the Closing Date Balance Sheet, including without
limitation in respect of loans made by the Vendor to employees of the Business
for the purchase of computers.
"EMPLOYEE BENEFITS" means:
(a) salaries, wages, bonuses, vacation entitlements,
commissions, fees, stock option plans, stock purchase plans,
incentive plans, deferred compensation plans, profit-sharing
plans and other similar benefits, plans or arrangements;
(b) insurance, health, welfare, disability, pension, retirement,
travel, hospitalization, medical, dental, legal, counselling
and other similar benefits, plans or arrangements; and
(c) agreements or arrangements with any labour union or employee
association, written or oral employment agreements or
arrangements and agreements or arrangements for the
retention of the services of independent contractors,
consultants or advisors.
"ENCUMBRANCE" means any mortgage, charge, easement, encroachment, lien, adverse
claim, assignment by way of security, security interest, servitude, pledge,
hypothecation, conditional sale agreement, security agreement, title retention
agreement, financing statement or other encumbrance.
"ENVIRONMENTAL REMEDIATION" means the remediation project which is being managed
by or under the direction of Abitibi-Consolidated Inc. to remediate the historic
leakage of toluene at
4.
the leased premises of the Vendor located at 00 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx
in compliance with Environmental Laws in effect on December 1, 1998, the date
the Vendor acquired the Business.
"ESTIMATED NET BOOK VALUE OF THE BUSINESS" means the estimated net book value of
the Business as at Closing as shown on the balance sheet of the Business to be
agreed to by the Vendor and Purchaser under Section 4.2 and attached hereto as
Schedule 2, and subject to any adjustment thereto as provided for in Section
4.1(b).
"EXCLUDED ASSETS" means the property and assets referred to in Section 3.2.
"EXCLUDED INVENTORIES" means the Non-Epson Projector Products and those
inventories which have been fully reserved on the books of the Vendor and which
the Vendor has designated as being excluded from the assets to be purchased by
the Purchaser hereunder as provided for in Section 4.7(b).
"FINANCIAL STATEMENTS" means the internal unaudited financial statements of the
Business for the period ended October 31, 2001 prepared by management of the
Vendor, a copy of which is annexed hereto as Schedule 1.
"GAAP" means those accounting principles which are recognized as being generally
accepted in Canada from time to time as recommended in the Handbook published by
the Canadian Institute of Chartered Accountants.
"GST" means taxes, interest, penalties and fines imposed under Part IX of the
EXCISE TAX ACT (Canada) and the regulations made thereunder (collectively the
"GST LEGISLATION").
"INCOME TAX ACT (CANADA)" means, collectively, the INCOME TAX ACT (Canada) and
the INCOME TAX REGULATIONS, all as amended to date.
"INTELLECTUAL PROPERTY" means any patents, inventions (whether patented or not),
trademarks or service marks, trade or business names, domain names, software
(including without limitation the INTERACT and SALES TOOL software), literary or
artistic content in the Websites and in any catalogues or promotional material,
other works in which copyright subsists, trade secrets and confidential
information, and other intellectual property that is owned or used by the Vendor
in conducting the Business, all registrations or applications for registration
in respect thereof, and all the Vendor's rights in respect of any infringement
thereof (whether occurring before or after the Closing Date), other than any
rights with respect thereto that are included in the Excluded Assets or to the
extent contemplated by the B2B Component.
"INVENTORIES" means all inventories of every kind and nature and wheresoever
situate owned by the Vendor in respect of the Business, except for Excluded
Inventories.
"LEASED PROPERTY" means all the right, title and interest of the Vendor in and
to the subject matter of the Leases.
"LEASES" means the leases if real property entered into by the Vendor identified
in Schedule 4.
5.
"LEGAL PROCEEDING" means any litigation, action, suit, investigation, hearing,
claim, complaint, grievance, arbitration proceeding or other proceeding and
includes any appeal or review and any application for same.
"NET BOOK VALUE OF THE BUSINESS" means:
(a) the book value of the Purchased Assets (subject to Section
4.1(b)) as at the Effective Time as shown on the Closing
Date Balance Sheet, less
(b) the book value of the liabilities of the Business as at the
Effective Time as shown on the Closing Date Balance Sheet,
and for the purposes hereof book value shall be determined in accordance with
GAAP, consistently applied unless otherwise agreed by the Vendor and the
Purchaser.
"1998 PURCHASE AGREEMENT" means the
asset purchase agreement dated November 17,
1998 between Abitibi, the Vendor and Miami Computer Supply Corporation (a
corporate predecessor of MCSi).
"NON-EPSON PROJECTOR PRODUCTS" means any portable stand-alone, desk-top
projectors that are included in the inventory of the Business at the Effective
Time which were not supplied by Epson Canada Inc., or its Affiliates.
"NON-TRADE RECEIVABLES" means any receivables of the Business or that are
otherwise due to the Vendor in respect of the Business, and are not included on
the Closing Date Balance Sheet as Accounts Receivable, and without limitation to
the foregoing shall include those Non-Trade Receivables described in Section
4.8(b).
"ORDERLY LIQUIDATION VALUE OF THE PRINTING ASSETS" means the amount that is
determined to be the orderly liquidation value of the printing assets of the
business in the appraisal referred to in the definition of Appraised Fair Market
Value of the Printing Assets.
"ORDINARY COURSE", when used in relation to the conduct by the Vendor of the
Business, means any transaction which constitutes an ordinary day-to-day
business activity, conducted in a commercially reasonable and businesslike
manner, having no unusual or special features, and being such as a Person of
similar nature and size and engaged in a similar business might reasonably be
expected to carry out from time to time.
"PERSON" means any individual, corporation, firm, partnership, sole
proprietorship, syndicate, joint venture, trustee, trust and any unincorporated
organization or association, any Tribunal; and pronouns have a similar extended
meaning.
"PERSONAL PROPERTY LEASES" means the leases of personal property entered into by
the Vendor as Lessee identified in Schedule 5.
"PROMISSORY NOTE" means the promissory note referred to in Section 6.1(a).
"PURCHASED ASSETS" means the property and assets described in Section 3.1.
6.
"PURCHASE FINANCING" means the financing that is to be provided by the
Purchaser's bank to assist in the financing of the purchase of the Purchase
Assets hereunder.
"PURCHASE PRICE" means the purchase price payable by the Purchaser to the Vendor
for the Purchased Assets as provided for in Article 4.
"QST" means sales tax payable under the QST Act.
"QST ACT" means an Act respect the Quebec Sales Tax.
"TAXES" means all taxes payable under any applicable Tax Legislation, including,
without limitation, income taxes, excise taxes, sales taxes, goods and services
taxes, transfer taxes, property and municipal and school taxes, capital taxes,
import and customs, duties and other governmental charges and assessments, and
includes additions by way of penalties, interest, fines and other amounts with
respect thereto.
"TAX LEGISLATION" means, collectively, the INCOME TAX ACT (Canada) and the
INCOME TAX Regulations, all as amended to date, and the statute law, rules,
regulations, interpretation bulletins and releases, orders and decrees of any
other jurisdiction, domestic or foreign which may impose a tax of any kind.
"TAX RETURNS" means all tax returns required to be filed under the provisions of
any applicable Tax Legislation and any tax forms required to be filed, whether
in connection with a Tax Return or not, under any provisions of any applicable
Tax Legislation.
"TIME OF CLOSING" means 10:00 a.m. Toronto time on the Closing Date or such
other time on the Closing Date as the parties may agree as the time at which the
Closing shall take place.
"TRANSFERRED EMPLOYEES" means all those employees who are employed by the Vendor
in the Business on the Closing Date and who become employees of the Purchaser
pursuant to the terms of this Agreement.
"TRIBUNAL" means:
(a) any court (including a court of equity);
(b) any federal, provincial, state, county, municipal or other
government or governmental department, ministry, commission,
board, bureau, agency or instrumentality;
(c) any securities commission, stock exchange or other
regulatory or self-regulatory body;
(d) any board of trade, chamber of commerce or other business or
professional organization or association;
(e) any arbitrator or arbitration tribunal; and
7.
(f) any other tribunal;
whether domestic or foreign.
"VENDOR OBJECTION" has the meaning ascribed thereto in Section 4.6(b).
"WEBSITES" means websites and, subject to Section 10.1.8, including all
Intellectual Property forming part thereof, now residing at "xxxxxxxxxx.xx",
"xxxxxxxxxx.xxx", xxxxxxx.xx", "xxxxxxxxxx.xxx" and "xxxxxxxxxx.xxx".
1.2 GENDER AND NUMBER
In this Agreement words importing a specific gender include all
genders and words importing the singular include the plural and vice versa.
1.3 CURRENCY
Unless otherwise indicated all dollar amounts referred to in this
Agreement, including the symbol $, refer to lawful money of Canada.
1.4 HEADINGS
The division of this Agreement into Articles and Sections and the
use of a table of contents and headings are for convenience of reference only
and shall not affect the interpretation of this Agreement.
1.5 KNOWLEDGE OF VENDOR
In this Agreement, and any documents delivered pursuant hereto,
any reference to the knowledge of the Vendor, or a similar expression, means the
actual knowledge of the Vendor after reasonable enquiry (but without personal
liability) of the President, the Chief Financial Officer, the Secretary and
Treasurer and the Vice-Presidents of the Vendor.
1.6 KNOWLEDGE OF THE PURCHASER
In this Agreement, and any documents delivered pursuant hereto,
any reference to the knowledge of the Purchaser, or a similar expression, means
the actual knowledge of the Purchaser after reasonable enquiry (but without
personal liability) of Xxxx Xxxxxxxxx and the other corporate officers of the
Purchaser.
ARTICLE 2
SCHEDULES
2.1 DESCRIPTION OF SCHEDULES
The following are the Schedules attached to and incorporated in
this Agreement by reference and deemed to be a part hereof:
Schedule 1 - Financial Statements as at October 31, 2001
8.
Schedule 2 - Estimated Net Book Value of the Business
[TO BE COMPLETED POST-SIGNING]
Schedule 3 - [INTENTIONALLY DELETED]
Schedule 4 - Leases
Schedule 5 - Personal Property Leases
Schedule 6 - Machinery, Equipment, etc.
Schedule 7 - Trucks, Cars, Vehicles, etc.
Schedule 8 - Agreements, Contracts, Commitments, etc.
Schedule 9 - Employees, Employee Benefits, etc.
Schedule 10 - Intellectual Property
Schedule 10A - MCSi Trade-marks, etc.
Schedule 11 - Legal Proceedings
Schedule 12 - Form of Non-Competition Agreement
[TO BE FINALIZED POST-SIGNING]
Schedule 13 - Form of Promissory Note
[TO BE FINALIZED POST-SIGNING]
Schedule 14 - [INTENTIONALLY DELETED]
Schedule 15 - Legal Opinion of Vendor's Counsel
[TO FOLLOW POST-SIGNING]
Schedule 16 - Legal Opinion of Purchaser's Counsel
[TO FOLLOW POST-SIGNING]
Schedule 17 - Printing Assets
Schedule 18 - Encumbrances
Schedule 19 - Refunds, Returns, etc.
Schedule 20 - General Terms of B2B Agreement
ARTICLE 3
AGREEMENT OF PURCHASE AND SALE
3.1 PROPERTY AND ASSETS TO BE PURCHASED AND SOLD
Subject to the terms and conditions hereof, the Vendor agrees to
sell, assign and transfer to the Purchaser and the Purchaser agrees to purchase
as, at and from the Effective Time the following property and assets of the
Business:
(a) all machinery, equipment (including, without limitation,
fork-lift trucks office equipment and computer equipment),
furnishings and accessories and supplies of all kinds owned
by the Vendor in connection with the Business located in or
on the Leased Property, including without limitation those
items set forth and described in Schedule 6;
(b) all trucks, cars and other vehicles owned by the Vendor in
connection with the Business set forth and described in
Schedule 7;
(c) all Inventories;
(d) the Accounts Receivable and the Employee Accounts
Receivables;
9.
(e) the full benefit of all unfilled orders received by the
Vendor relating to the Business and all right, title and
interest of the Vendor in, to and under all agreements,
contracts, licences (including, without limitation, third
party software licenses) and commitments relating
exclusively to the Business, including without limitation
those set forth and described in Schedule 8;
(f) all the right, title, benefit and interest of the Vendor in
and to the Intellectual Property of the Vendor including
without limitation the Intellectual Property identified on
Schedule 10;
(g) the goodwill of the Business, together with the exclusive
right of the Purchaser to represent itself as carrying on
the Business in continuation of and in succession to the
Vendor under the names "Axidata" and "Compu-Redi/Tenex" and
the right to use any words indicating that the Business is
so carried on;
(h) the Leases and the Personal Property Leases;
(i) all lists of customers of the Business in the possession of
the Vendor showing, to the extent known by the Vendor, the
names, addresses, phone numbers, e-mail addresses and
contact persons for each customer of the Business;
(j) all books, records, files and other documentation and
written materials relating exclusively to the Business and
all information and materials in the possession or control
of the Vendor in written or electronic form in a database or
otherwise to the extent it relates to the Business, except
to the extent such information is proprietary to the Vendor
or the Vendor needs to retain a particular book, record,
file, document or other written or electronic material for
its own purposes or those of its Affiliates, where the
Vendor shall be entitled to retain the original thereof and,
deliver to the Purchaser a copy thereof or provide the
Purchaser reasonable access thereto and if such access
requires a separation or extraction of such information or
materials by the Vendor, such separation or extraction will
be done in a reasonably timely manner and the Purchaser will
bear the cost thereof;
(k) all rights of the Vendor in all the phone and fax numbers
and domain names used in the Business;
(l) the Websites;
(m) any rights of the Vendor in the ownership of a membership in
the Devil's Pulpit Golf Club;
(n) any and all other assets and property of the Business not
specifically identified in Section 3.2 hereof.
10.
except to the extent that any of the foregoing are or relate
to Excluded Assets.
3.2 EXCLUDED ASSETS
There shall be excluded from the purchase and sale of property
and assets herein contemplated the following:
(a) any rights to or interest in the names or trade-marks "MCSi"
or "MCSi Canada", and any other registered or unregistered
trade-marks owned by MCSi, including without limitation
those shown on Schedule 10A or similar names or trade-marks,
including the right to the domain names "xxxxxxxxxx.xx" and
"xxxxxxxxxx.xxx", "xxxxxxx.xx", "xxxxxxxxxx.xxx",
"xxxxxxxxxx.xxx" or any other domain names using "MCSi" as
part thereof;
(b) cash on hand or in banks or other depositories;
(c) term or time deposits and similar cash items of, owned or
held by or for the account of the Vendor;
(d) refundable and creditable Taxes and interest thereon
refundable to the Vendor, including without limitation any
GST or QST credits or refunds;
(e) all receivables of the Business from Affiliates of the
Vendor or otherwise not included in the Accounts Receivable
and the Employee Accounts Receivable, including without
limitation the Non-Trade Receivables;
(f) the Excluded Inventories; and
(g) all books, records, files or other documentation and written
materials to the extent relating to any Excluded Assets.
ARTICLE 4
PURCHASE PRICE
4.1 PURCHASE PRICE
(a) Subject to sub-section (b) below, the Purchase Price payable
by the Purchaser to the Vendor for the Purchased Assets
shall be the aggregate of (i) the book value of the
Purchased Assets as at the Effective Time as shown on the
Closing Date Balance Sheet and (ii) $1,000,000.
(b) If the Appraised Fair Market Value of the Printing Assets is
less than the book value of such assets as shown on the
Closing Date Balance Sheet, the Purchase Price shall be
reduced by the difference between such book value and the
Appraised Fair Market Value of the Printing Assets.
11.
4.2 CLOSING ESTIMATE OF PURCHASE PRICE
On or before the fifth Business Day prior to Closing, the Vendor
and the Purchaser will in good faith prepare an updated balance sheet to reflect
the Estimated Net Book Value of the Business to be attached hereto as Schedule 2
and such balance sheet will be used for the purpose of the payments to be made
on Closing as provided for in Section 6.1 and will become the basis for the
Estimated Net Book Value of the Business. The payment on account of the Purchase
Price on Closing will be made in the manner described in Section 6.1 and will be
based on the book value of the Purchased Assets (subject to Section 4.1(b)) as
shown on the above-mentioned balance sheet and will be adjusted after the
Closing in accordance with Section 4.6.
4.3 ALLOCATION OF PURCHASE PRICE AND TAX ELECTIONS
The Purchase Price (including the value of the Assumed
Liabilities) shall be allocated among the Purchased Assets as agreed in good
faith between the Purchaser and the Vendor, failing which the Vendor and the
Purchaser acknowledge that such allocation will generally follow the amounts and
line items to be shown on the Closing Date Balance Sheet. The Vendor and the
Purchaser shall execute and file an election as to the Accounts Receivables to
the extent permitted under Section 22 of the INCOME TAX ACT (Canada) or any
equivalent election in any other jurisdiction, using as the consideration paid
therefor the amount thereof as shown on the final and binding Closing Date
Balance Sheet. In addition, the Vendor and Purchaser shall execute and file
their respective Tax Returns in a manner consistent with the aforesaid
allocations and election. If either party fails to file its Tax Returns as
aforesaid, such party shall indemnify and save harmless the other party in
respect of any additional Tax, and legal and/or accounting costs paid or
incurred by the other party as a result of the failure to file as aforesaid.
4.4 TRANSFER TAXES
The Purchaser shall be liable for and shall pay, either to the
Vendor at Closing or directly to the government authority, as required, all
federal and provincial sales taxes and all other Taxes or other like charges
properly payable upon and in connection with the transfer of the Purchased
Assets to the Purchaser, including, but not limited to GST and QST but excluding
any income taxes payable by the Vendor as a result of the completion of the
transactions herein contemplated. The Vendor and Purchaser shall jointly elect
under Section 167(1) of the GST Legislation and Section 75 of the QST Act
following the prescribed form and including the prescribed information, with
respect to the purchase and sale of the Purchased Assets pursuant to the
provisions of this Agreement. Such joint elections shall be filed in compliance
with the requirements of the GST Legislation and the QST Act.
4.5 ADJUSTMENTS
Water, rental, gas, hydro rates, insurance premiums, realty
taxes, municipal taxes, fuel, common area maintenance reimbursements, prepaid
security deposits and other such matters as are customarily adjusted, and other
usual and similar prepaid expenses and accrued liabilities relating to the
Leased Property shall be adjusted without duplication as between the
12.
Vendor and the Purchaser as at the Effective Time. The Purchaser agrees that on
Closing it will replace any Letters of Credit provided by the Vendor in respect
of the Leases so that any Letters of Credit provided by the Vendor may be
cancelled.
4.6 FINAL DETERMINATION OF PURCHASE PRICE
(a) Within thirty (30) days after the Closing Date, the
Purchaser shall prepare (in cooperation with representatives
of the Vendor if reasonably requested by the Vendor) and
deliver to the Vendor a balance sheet (the "CLOSING DATE
BALANCE SHEET") showing the Net Book Value of the Business
as at the Effective Time. The Purchaser will prepare the
Closing Date Balance Sheet in accordance with, and on a
consistent basis with, the accounting policies used in the
preparation of the Financial Statements and the balance
sheet set out in Schedule 2 to show the Estimated Net Book
Value of the Business using the same line items as shown on
the such balance sheet, including for greater certainty,
Employee Accounts Receivables, Accrued Vacation Pay and
Accrued Commissions and Bonus for Transferred Employees but
not to include any such matter for employees who do not
become Transferred Employees. For the avoidance of doubt,
the Closing Date Balance Sheet will not include any Excluded
Assets or liabilities of the Vendor not forming part of the
Assumed Liabilities.
(b) The Closing Date Balance Sheet shall, thirty (30) days after
receipt thereof by the Vendor, be binding and conclusive
upon, and deemed accepted by, the Vendor unless the Vendor
shall have notified the Purchaser in writing within such
thirty (30) days of any objection thereto (the "VENDOR
OBJECTION"). The Vendor Objection shall set forth a specific
description of the basis of the Vendor Objection and the
nature of adjustments to the Closing Date Balance Sheet that
the Vendor believes should be made. Any items not
specifically disputed during the said thirty (30) day period
shall be deemed to have been accepted by the Vendor.
(c) The Purchaser shall then have fifteen (15) days to notify
the Vendor that the Purchaser objects to Vendor Objection,
failing which the Purchaser shall be deemed to accept same.
If the parties hereto are unable to resolve any dispute
within thirty (30) days following the Purchaser's receipt of
the Vendor Objection, they shall refer the remaining
differences to Deloitte & Touche, or such other firm of
accountants acceptable to the Purchaser and the Vendor, each
acting reasonably, (the "ACCOUNTING FIRM") for decision,
which decision shall be final and binding on the parties.
The procedure and schedule under which any dispute shall be
submitted to the Accounting Firm shall be as follows:
(i) within thirty-five (35) days following the Vendor
Objection under paragraph (b) of this Section 4.6
above, the Vendor shall submit any unresolved
elements of its objection to the Accounting Firm in
writing (with a copy to the Purchaser), supported by
any
13.
documents and/or affidavits upon which it relies.
Failure to do so without reasonable cause shall
constitute a withdrawal by the Vendor of the Vendor
Objection with respect to any unresolved element to
which such failure relates;
(ii) within fifteen (15) days following the Vendor's
submission of the unresolved elements of the Vendor
Objection as specified in clause (i) above, the
Purchaser shall submit its response to the Accounting
Firm in writing (with a copy to the Vendor),
supported by any documents and/or affidavits upon
which it relies. Failure to do so without reasonable
cause shall constitute an acceptance by the Purchaser
of the Vendor's submission on any unresolved element
to which such failure relates;
(iii) the Accounting Firm shall deliver its written
determination within twenty (20) days following its
receipt of the information provided for in clauses
(i) and (ii) above, or such longer period of time as
the Accounting Firm reasonably determines is
necessary but not to exceed an additional twenty (20)
days without the prior consent of the Vendor and the
Purchaser. The Purchaser and the Vendor shall make
readily available to the Accounting Firm all relevant
books and records and any work papers (including
those of the parties' respective accountants)
relating to the respective submissions and all other
items reasonably requested by the Accounting Firm;
and
(iv) the expenses relating to the engagement of the
Accounting Firm shall be borne equally by the Vendor
and the Purchaser.
(d) The Closing Date Balance Sheet shall become final and
binding on the parties upon the earliest of:
(i) if no Vendor Objection has been given, the expiration
of the period within which the Vendor must make its
objection pursuant to paragraph (b) of this Section
4.6 hereof;
(ii) agreement in writing by the Vendor and the Purchaser
that the Closing Date Balance Sheet, together with
any modifications thereto agreed by the Vendor and
the Purchaser, shall be final and binding; and
(iii) the date on which the Accounting Firm shall issue its
written determination with respect to any dispute
relating to the Closing Date Balance Sheet.
The Closing Date Balance Sheet, as submitted by the
Purchaser if no Vendor Objection has been given, or as
adjusted pursuant to any agreement between the parties or as
determined pursuant to the decision of
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the Accounting Firm, when final and binding on all parties
shall be used to determine the Net Book Value of the
Business.
(e) Within five (5) Business Days following the determination of
Net Book Value of the Business, an adjustment payment
payable pursuant to this paragraph (e) of this Section 4.6
(the "ADJUSTMENT PAYMENT") shall be paid by wire transfer,
in immediately available funds, to a bank account designated
by the Vendor or the Purchaser, as the case may be. The
Adjustment Payment shall be the difference between the Net
Book Value of the Business and the Estimated Net Book Value
of the Business. The Adjustment Payment shall, as
applicable, be payable by the Purchaser to the Vendor to the
extent that the Net Book Value of the Business is greater
than the Estimated Net Book Value of the Business and by the
Vendor to the Purchaser to the extent that the Net Book
Value of the Business is less than the Estimated Net Book
Valued the Business.
4.7 INVENTORIES AND EXCLUDED INVENTORIES
(a) The parties hereto acknowledge that the Inventories have been or are
in the process of being counted as at December 1, 2001 by representatives of the
Vendor and for the purposes of the Closing Date Balance Sheet shall be valued
based on the results of such count and rolled forward from December 1, 2001 to
the Effective Time based on the perpetual records of the Business. If there
shall be a dispute as to the value of the Inventories to be purchased under this
Agreement which the parties are unable to resolve, the dispute shall be
submitted to the Accounting Firm referred to in Section 4.6 for decision, which
decision shall be final and binding on the parties. For the purposes of
determining the value of the Inventories, the Inventories shall be valued at the
lower of cost and market value consistent with GAAP.
(b) The Vendor will as soon as reasonably practicable after the
completion of the inventory count referred to in (a) above, identify by SKU the
inventory that will be fully reserved for the purposes of the Closing Date
Balance Sheet and not be reflected in the value of the inventories thereon. At
any time thereafter but prior to the Effective Time, the Vendor will be entitled
to designate by SKU such inventory that is not to be included in the Inventories
and sold to the Purchaser hereunder (together with the Non-Epson Projector
Products, the "EXCLUDED INVENTORIES"). The Excluded Inventories will after
Closing be shipped to such location or locations as the Vendor may decide The
Purchaser agrees that, if requested by the Vendor it will store such Excluded
Inventories for a reasonable period of time (not to exceed 90 days) and will use
its employees and other resources to ship the Excluded Inventories. The Vendor
will be responsible for freight costs with respect thereto. If any of the
Excluded Inventories remain at the Purchaser's premises after 90 days, these
will be removed by the Vendor at its expense or the Purchaser shall allow the
Excluded Inventories to be stored at the Purchaser's premises at commercial
rates.
4.8 ACCOUNTS RECEIVABLE AND NON-TRADE RECEIVABLES
(a) For the purposes of inclusion in the Closing Date Balance
Sheet, the Accounts Receivable shall be the face value
thereof as recorded on the
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books and records of the Business as at the Effective Time,
less a reasonable allowance for doubtful accounts.
(b) The Purchaser and the Vendor agree that the following
receivables shall not form part of the Accounts Receivable
for the purposes of the Closing Date Balance Sheet and,
after Closing, the Vendor will be entitled to all payments
or other proceeds received in respect thereof:
(i) the receivables that are due or become due from Canon
Canada Inc. that are the subject of the Canon Claim;
(ii) the amounts that are due or become due from
Azerty/United that are the subject matter of item 3
of Schedule 11; and
(iii) other receivables with respect to such things as
freight claims, deposit on contracts, insurance
claims, vendor co-op payment, vendor rebates, vendor
price-protection, vendor special tender costs, demo
programs, duty claims and any other receivable
recorded as "other" on the Financial Statements.
(c) The Purchaser agrees that after Closing it will take all
steps that are reasonably required to assist the Vendor in
the collection of the Non-Trade Receivables and that it will
account to the Vendor for any payment received with respect
thereto or credits on account thereof that are extended to
the parties who have the obligation to pay such receivables.
The Purchaser will keep the Vendor fully informed of the
progress with respect to such receivables, including any
payments received or credits given with respect thereto and
provide to the Vendor access to any records that pertain
thereto that may be reasonably requested by the Vendor.
(d) The parties hereto also acknowledge and agree that any
amount payable to Canon Canada Inc. which is the subject of
the Canon Claim and any amounts payable to Azerty/United in
respect of the matter referred to in (b)(ii) above will not
be included in the payables of the Business that are to be
assumed by the Purchaser and that such payables will not be
reflected as liabilities in the Closing Date Balance Sheet.
4.9 RETURNS, REFUNDS, etc.
The Vendor and the Purchaser hereby agree that all returns,
refunds, rejected goods etc. will be dealt with as between the Vendor and the
Purchaser as set out in Schedule 19 hereto.
4.10 ACCESS TO RECORDS, CO-OPERATION OF PURCHASERS, etc.
The Purchaser agrees that, for the purposes of Sections 4.6, 4.7,
4.8 and 4.9 hereof, the Vendor shall at all reasonable times and on reasonable
notice to the Purchaser have access to the accounts and records of the Business,
and will receive the full co-operation of the
16.
Purchaser and its officers and employees, so that the Vendor may satisfy itself
as to the amount of the Net Book Value of the Business and those other matters
referred to in those Sections. The Purchaser will provide to the Vendor such
assistance as the Vendor or its representatives may reasonably require in
connection with the proceedings relating to the Canon Claim (and any other Legal
Proceedings that may have involved or are within the knowledge of the Purchaser
or its officers or employees). Such assistance may without limitation include
making available any officers or employees of the Purchaser for interviews,
discovery, acting as a witness, cross-examination or attending trial for such
proceedings. The Purchaser shall be reimbursed for reasonable out-of-pocket
costs reasonably incurred by the Purchaser for the above, including a reasonable
amount to compensate the Purchaser if its officers or employees are required to
be absent from their duties with the Purchaser for an extended period. The
Vendor will indemnify the Purchaser and hold the Purchaser harmless from any
claim that Canon Canada Inc. may make against the Purchaser in respect of the
subject matter of the Canon Claim or any claim made by the other parties to
those matters described in Schedule 11 in respect of the subject matter thereof.
4.11 DUOCOM COHABITATION
The Purchaser and the Vendor agree (and MCSi agrees on behalf of
Duocom, its wholly-owned subsidiary) that each of them will, if requested by the
other, allow the Purchaser as assignee of the Vendor and Duocom to continue the
present arrangements whereby either the Vendor sub-lets space from Duocom, or
Duocom sub-lets space from the Vendor as indicated on Schedule 4. Either the
Purchaser or Duocom may give notice to the other of them to terminate those
arrangements, such notice to be no less than 90 days unless agreed otherwise by
the Purchaser and Duocom. The terms of such arrangements will be negotiated in
good faith by the Purchaser and Duocom.
ARTICLE 5
LIABILITIES
5.1 ASSUMPTION OF LIABILITIES
The Purchaser shall, from and after the Closing Date:
(a) assume, perform and fulfill all accounts payable of the
Business reflected in the Closing Date Balance Sheet;
(b) assume, perform and fulfil to the extent required thereunder
all obligations of the Vendor under the unfilled orders and
each of the agreements, contracts, licences and commitments
referred to in clause (e) of Section 3.1 and under the
Leases and the Personal Property Leases and any forward
commitments by the Vendor for supplies or materials entered
into in the ordinary course of the Business for use in the
Business;
(c) pay, satisfy, discharge, perform and fulfil all debts and
liabilities incurred in connection with the conduct of the
Business after the Effective Time;
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(d) assume all obligations relating to the Transferred Employees
in accordance with and subject to Section 12.1 hereof; and
(e) assume all obligations of the Vendor under the paper supply
agreement referred to in Section 15.1.6 and the
Azerty/United Agreement.
Except for those matters set out above and as otherwise provided
for in this Agreement or in any other agreement to be entered into by the
Purchaser pursuant hereto, the Purchaser shall not be liable for any other
liabilities of the Business for the period prior to the Effective Time.
ARTICLE 6
PAYMENT OF PURCHASE PRICE
6.1 PAYMENT OF THE PURCHASE PRICE
The payment on account of the Purchase Price to be made on
Closing, shall be payable as follows:
(a) as to $4,000,000 by the delivery to the Vendor of a
promissory note (the "PROMISSORY NOTE") containing
substantially the principle terms set out in the form
attached hereto as Schedule 13;
(b) as to 80% of the difference between the Orderly Liquidation
Value of the Printing Assets and the Appraised Fair Market
Value of the Printing Assets by the addition of such amount
to the principal amount of the Promissory Note referred to
in (a) above. Prior to Closing, the Purchaser shall provide
the Vendor with a copy of the appraisal provided to its
bank, failing which, no addition shall be made to the
principal amount of the Promissory Note as provided for
above and any amount that would otherwise be added to the
Promissory note will be included in the payment under
paragraph (d) below; and
(c) as to an amount equal to the Assumed Liabilities to be
assumed by the Purchaser as provided in Section 5.1 (such
amount being the amount shown as the book value of the
liabilities of the Business on the balance sheet to be
attached as Schedule 2 showing the Estimated Net Book Value
of the Business as the same is agreed to by the Purchaser
and the Vendor, as provided for in Section 4.2), by the
assumption thereof by the Purchaser; and
(d) as to the balance, by certified cheque or bank draft payable
at par in Toronto (or, at the option of the Vendor, by wire
transfer) to the Vendor or as it may in writing direct.
18.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
7.1 REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor hereby represents and warrants to the Purchaser as
follows and acknowledges that the Purchaser is relying on such representations
and warranties in connection with the transactions herein contemplated:
7.1.1 Incorporation, Organization and Qualification of the Vendor
The Vendor is a corporation duly incorporated or continued and
subsisting under the laws of Canada. No proceedings have been instituted or are
pending for the dissolution or liquidation of the Vendor. The Vendor has the
necessary corporate power, authority and capacity to own or lease the Purchased
Assets and to carry on the Business as now being conducted by it and is
qualified to carry on the Purchased Business under the laws of
Ontario, Quebec,
Manitoba, Alberta and British Columbia, being the only jurisdictions in which
the nature of the Business as carried on by the Vendor or the Purchased Assets
owned or leased by it makes such qualification necessary, or where failure to be
so qualified would not have a material adverse effect on the Business.
7.1.2 Due Authorization of Agreement
The Vendor has the necessary corporate power, authority and
capacity to enter into this Agreement, to sell the Purchased Assets to the
Purchaser as herein contemplated and to perform its other obligations hereunder.
The execution and delivery of this Agreement and the completion of the
transactions herein contemplated have been duly and validly authorized by all
necessary corporate action on behalf of the Vendor and this Agreement has been
duly and validly executed and delivered by the Vendor and is a valid and binding
obligation of the Vendor enforceable against the Vendor in accordance with its
terms.
7.1.3 Conflicting Instruments
The entering into of this Agreement by the Vendor, the
performance by the Vendor of its obligations hereunder and the completion of the
transactions herein contemplated do not and will not conflict with or result in
the breach or violation of any of the terms and provisions of (i) the constating
documents or by-laws of the Vendor, (ii) subject to obtaining any consent,
approval, permit or acknowledgement which may be required thereunder in
connection with the completion of the transactions herein contemplated, any
licence or registration or any agreement, contract or commitment which the
Vendor is a party to or bound by or subject to, or (iii) any law or regulation,
domestic or foreign, or any judgment, decree, injunction, ruling, order or award
of any Tribunal.
7.1.4 Options
Other than the Purchaser under this Agreement (or as otherwise
disclosed in this Agreement), has any agreement or option or any right capable
of becoming an agreement or
19.
option for the purchase from the Vendor of or any part of the Purchased Assets,
other than pursuant to purchase orders accepted by the Vendor in the ordinary
course of the Business.
7.1.5 Title to Purchased Assets
At the Time of Closing, the Vendor will be the owner of the
Purchased Assets free of any Encumbrance (except for (i) the Encumbrances
identified on Schedule 18 which are not to be released at Closing as shown
thereon and (ii) the interest of the lessors under the Leases or the Personal
Property Leases), and the Vendor will be exclusively entitled to possess and
dispose of the same.
7.1.6 Accuracy of Books and Records
To the Vendor's knowledge, the books and records, accounting,
financial or otherwise, of the Vendor relating to the Business fairly and
correctly set out and disclose in all material respects the financial position
of the Business as at the date hereof and all material financial transactions of
the Vendor relating to the Business have been accurately recorded in such books
and records.
7.1.7 Financial Statements
The Financial Statements have been prepared in accordance with
GAAP insofar as such principles are applicable to preparation of divisional
statements and consistent with the policies and practices used for previous
periods and present fairly:
(a) all of the assets, liabilities and the financial condition
of the Business as at October 31, 2001; and
(b) the revenues, earnings and results of operations of the
Business for the month period ended on the October 31, 2001.
The Estimated Net Book Value of the Business has been prepared in
accordance with, and on a consistent basis with, the accounting policies used in
the preparation of the Financial Statements.
7.1.8 Business Carried on in Ordinary Course
To the Vendor's knowledge, since October 31, 2001, the Business
has been carried on in the ordinary course, and the Vendor has not, since
October 31, 2001, sold or otherwise disposed of any of its property or assets
relating to the Business except in the ordinary course.
7.1.9 Employment and Employee Benefit Matters
(a) Except as set forth and described in Schedule 9, the Vendor
is not:
20.
(i) a party to or bound by or subject to any agreement or
arrangement with respect to Employee Benefits
relating to employees of the Business;
(ii) a party to or bound by or subject to any agreement or
arrangement with any labour union or employee
association relating to employees of the Business
and, to the knowledge of the Vendor, has made no
commitment to or conducted any negotiation or
discussion with any labour union or employee
association with respect to any future agreement or
arrangement relating to employees of the Business;
and
(iii) required to recognize any labour union or employee
association representing employees of the Business or
any agent having bargaining rights for employees of
the Business and, to the knowledge of the Vendor,
there is no current attempt to organize or establish
any labour union or employee association with respect
to employees of the Business;
(b) The Business has a total of 139 full-time and 10 part-time
employees, of which 8 are on leave of absence. The names of
such individuals, their date of hire with the Vendor or, to
the knowledge of the Vendor, a predecessor of the Vendor to
the Business, their employment positions with the Vendor and
the Employee Benefits to which they are entitled are set
forth and described in Schedule 9.
(c) Except for the Group RRSP identified in item 17 on Schedule
9 hereto, the Vendor does not have any pension or retirement
plan for the employees of the Business.
7.1.10 Material Contacts
The Vendor is not a party to or bound by or subject to any
material agreement, contract or commitment, written or oral, of any nature or
kind relating to the Business except for:
(a) forward commitments by the Vendor for supplies or materials
entered into in the ordinary course of the Business for use
in the Business;
(b) the Personal Property Leases;
(c) the Leases;
(d) employment and other agreements or commitments and benefit
plans identified on Schedule 9; and
(e) those other agreements, contracts, licences or commitments
disclosed in Schedule 8 or in any other Schedule hereto.
21.
For the purpose hereof, material contract, agreement or commitment means any
contract, agreement or commitment that has more than three months to run or
under which the obligations of the Vendor exceed $50,000 individually.
7.1.11 Status of Agreements
Each of the Leases and the Personal Property Leases and each of
the agreements, contracts, licences and commitments which the Vendor is a party
to or bound by or subject to relating to the Business referred to in clause (e)
of Section 3.1 is valid and subsisting and in good standing, there is no default
thereunder by the Vendor or, to the knowledge of the Vendor, any other party
thereto, and, to the best of the knowledge of the Vendor, there are no facts
which, after notice or lapse of time or both, would constitute such a default.
The Vendor is entitled to all rights and benefits under each of such agreements,
contracts, licences and commitments.
7.1.12 [INTENTIONALLY DELETED]
7.1.13 Environmental Matters
(a) The Vendor is not in violation of, and has not violated, in
connection with the operations of the Business any
applicable federal, provincial, municipal or local laws,
regulations, orders, policies or guidelines, permits,
licences, certificates or approvals, domestic or foreign, of
any governmental authorities ("ENVIRONMENTAL LAWS") relating
to the protection of the environment, occupational health
and safety, or the manufacturing, processing, distribution,
use, treatment, storage, disposal, discharge, packaging,
transport, handling, containment, clean-up or other
remediation or corrective action of any pollutants,
contaminants, chemicals or industrial, toxic or hazardous
wastes or substances ("HAZARDOUS SUBSTANCES").
(b) The Vendor has not used or permitted to be used, except in
compliance with all Environmental Laws, any of its
properties or facilities used in connection with the
Business to generate, manufacture, process, distribute, use,
treat, store, dispose of, transport or handle any Hazardous
Substance.
(c) Except as disclosed in Schedule 12, and with respect to
those matters related to the Environmental Remediation, the
Vendor has not caused or permitted, nor to the knowledge of
the Vendor has there been, any, release, emission, spill or
discharge, in any manner whatsoever, of any Hazardous
Substance on, in, around, from or in connection with any of
the properties or assets used in the Business. Except as
disclosed in Schedule 12, all Hazardous Substances and all
other wastes and other materials and substances used in
whole or in part by the Vendor or resulting from the
Business have been disposed of, treated and stored by the
Vendor in compliance with all Environmental Laws.
(d) There are no orders, rulings or directives issued, pending
or to the Vendor's knowledge threatened against the Vendor
under or pursuant to
22.
any Environmental Laws requiring any work, repairs,
construction or capital expenditures with respect to the
operation of the Business.
7.1.14 Intellectual Property
Except as disclosed in Schedule 10, the use of the Intellectual
Property by the Vendor in conducting the Business and the conduct of the
Business by the Vendor do not in any material respect infringe upon or breach
any intellectual property rights of any other Person and the Vendor is not aware
of any infringement or violation by any other Person of the rights of the Vendor
to the Intellectual Property.
7.1.15 Legal Proceedings
Except as set forth and described in Schedule 11, there is no
Legal Proceeding (whether or not purportedly on behalf of the Vendor) in
progress or pending or, to the knowledge of the Vendor, threatened against or
affecting the Vendor relating to the Business or the Purchased Assets at law or
in equity or before or by any Tribunal, which Legal Proceeding involves the
possibility of any judgment or other liability of the Vendor not fully covered
by insurance. To the knowledge of the Vendor, except as set forth and described
in Schedule 11, there are no grounds on which any such Legal Proceeding might be
commenced with any reasonable likelihood of success. The Vendor has not received
notice of any judgment, decree, injunction, ruling, order or award of any
Tribunal outstanding against or affecting the Vendor relating to the Business or
the Purchased Assets.
7.1.16 Compliance with Applicable Laws
The Vendor has conducted and is conducting the Business in
compliance in all material respects will all applicable laws, rules and
regulations of each jurisdiction, domestic or foreign, in which the Business is
carried on, is not in breach of any of such laws, rules or regulations, except
for non-compliance or breaches which in the aggregate are not material.
7.1.17 Residence of Vendor; GST Status
The Vendor is not a non-resident of Canada within the meaning of
the INCOME TAX ACT (Canada). The Vendor is registered for purposes of the GST
Legislation and will provide its registration number to the Purchaser prior to
Closing.
7.1.18 Assets, etc. of Vendor and Affiliates
The Vendor, together with its Affiliates, do not have assets in
Canada or annual gross revenues from sales in, from or into Canada which exceed
$300 million.
7.1.19 Disclosure
The representations and warranties of the Vendor included in this
Agreement and in any agreement, certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this Agreement are true and
correct and do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained in such
23.
representations and warranties not misleading to a prospective purchaser of the
Purchased Assets.
7.2 NO OTHER REPRESENTATIONS AND WARRANTIES
Except for the representations and warranties set forth in this
Article 7, the Vendor makes no further representations or warranties to the
Purchaser, whether express or implied, statutory or otherwise, with respect to
the Purchased Assets or the Business.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
8.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Vendor as
follows and acknowledges that the Vendor is relying on such representations and
warranties in connection with the transactions herein contemplated:
8.1.1 Incorporation, Organization and Authority of the Purchaser Due
Authorization of Agreement and Enforceability of Obligations
The Purchaser is a corporation duly incorporated or continued and
subsisting under the laws of Canada and has the necessary corporate power,
authority and capacity to enter into this Agreement, to purchase the Purchased
Assets from the Vendor as herein contemplated and to perform its other
obligations hereunder. The execution and delivery of this Agreement and the
completion of the transactions herein contemplated have been duly and validly
authorized by all necessary corporate action on behalf of the Purchaser and this
Agreement has been duly and validly executed and delivered by the Purchaser and
is a valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms.
8.1.2 Conflicting Instruments, etc.
The entering into of this Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and the completion of
the transactions herein contemplated do not and will not conflict with or result
in the breach or violation of any of the terms and provisions of (i) the
constating documents or by-laws of the Purchaser, (ii) any licence or
registration or any agreement, contract or commitment which the Purchaser is a
party to or bound by or subject to, or (iii) any law or regulation, domestic or
foreign, or any judgment, decree, injunction, ruling, order or award of any
Tribunal.
8.1.3 Knowledge of Matters
The Purchaser has no knowledge that any representation or
warranty made by the Vendor contained in this Agreement or in any agreement,
certificate, affidavit, statutory declaration or other document delivered or
given pursuant to this Agreement is false or inaccurate in any material respect.
24.
8.1.4 GST Status
The Purchaser will prior to Closing be registered for purposes of
the GST Legislation and will prior to Closing provide its registration number to
the Vendor.
8.1.5 Assets etc, of Purchaser and Affiliates
The Purchaser, together with its Affiliates, do not have assets
in Canada or any gross revenues from sales in, from or into Canada that exceed
$50 million.
8.1.6 Investment Canada Act
The Purchaser is not a non-Canadian within the meaning of the
INVESTMENT CANADA ACT (Canada).
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The representations and warranties of the Vendor contained in
this Agreement and in any agreement, certificate, affidavit, statutory
declaration or other document delivered or given pursuant to this Agreement
shall survive the Closing and, notwithstanding such Closing or any investigation
made by or on behalf of the Purchaser with respect thereto, shall continue in
full force and effect for the benefit of the Purchaser; provided, however, that
no claim in respect thereof shall be valid unless it is made within two (2)
years from the Closing Date and in accordance with the provisions set forth in
Article 17 and, upon the expiry of such limitation period referred to above, the
Vendor shall have no further liability to the Purchaser with respect to any of
such representations and warranties, except in respect of claims which have
theretofore been made in accordance with the provisions set forth above.
Notwithstanding the foregoing, the Vendor shall not be liable for any breach of
its representations and warranties hereunder if the Purchaser had knowledge at
the Effective Time of the matter constituting such breach.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The representations and warranties of the Purchaser contained in
this Agreement or in any agreement, certificate, affidavit, statutory
declaration or other document delivered or given pursuant to this Agreement
shall survive the Closing and, notwithstanding such Closing or any investigation
made by or on behalf of the Vendor with respect thereto, shall continue in full
force and effect for the benefit of the Vendor; provided, however, that no claim
in respect thereof shall be valid unless it is made within a period of two (2)
year from the Closing Date and in accordance with the provisions set forth in
Article 17 and, upon the expiry of such limitation period, the Purchaser shall
have no further liability to the Vendor with respect to any of such
representations or warranties, except in respect of claims which have
theretofore been made in accordance with the provisions set forth above.
25.
ARTICLE 10
COVENANTS OF THE VENDOR
10.1 COVENANTS OF THE VENDOR
The Vendor hereby covenants and agrees with the Purchaser as
follows:
10.1.1 Consents, etc.
Commencing forthwith after the date hereof the Vendor shall use
commercially reasonable efforts to obtain at or prior to the Time of Closing all
necessary and material consents, approvals, permits and acknowledgements which
may be required in connection with the completion of the transactions herein
contemplated.
10.1.2 Conduct of the Business
(a) Between the date hereof and the Time of Closing the Vendor
shall:
(i) cause the Business to be carried on in the ordinary
course;
(ii) use commercially reasonable best efforts to preserve
the Business and the goodwill of suppliers, customers
and others having relations with the Business; and
(iii) use commercially reasonable best efforts to retain
the services of the present employees of Business.
10.1.3 Delivery of Non-Competition Agreement
The Vendor shall execute and deliver to the Purchaser at the Time
of Closing a non-competition agreement substantially containing the general
terms of the agreement annexed hereto as Schedule 12.
10.1.4 Section 6 (RETAIL SALES TAX ACT (
Ontario)) Certificate
Forthwith upon the execution of this Agreement the Vendor shall
apply for and, when received, deliver to the Purchaser a certificate issued by
the Minister of Revenue pursuant to Section 6 of the Retail Sales Tax Act
(
Ontario), which certificate(s) shall indicate that the Vendor has paid all
taxes collectable or payable under the said Act in respect of the Business up to
the Closing Date or has entered into an arrangement satisfactory to the said
Minister for the payment of such taxes.
10.1.5 Arrangement re: Cheques, Payments, etc.
The Vendor shall make arrangements at the Time of Closing,
satisfactory to the Purchaser, to ensure that all cheques or other payments
received by the Vendor from and after the Time of Closing which relate to the
Accounts Receivable shall be endorsed over without recourse and delivered to the
Purchaser.
26.
10.1.6 Arrangement re: Domain Names, Telephone and Fax Numbers, etc.
The Vendor will use commercially reasonable efforts to transfer
to the Purchaser the rights in the domain name(s), telephone and fax numbers
identified in Section 3.1(k). The Vendor, MCSi and the Purchaser will also in
good faith take reasonable steps and enter into agreements (including if
necessary with any Affiliate of MCSi) so that, subject to the agreement referred
to in Section 10.1.8, the Purchaser is the owner, or has the perpetual right to
use the intellectual property comprising the Websites.
10.1.7 Arrangements with Azerty/United
The Vendor will use reasonable commercial efforts so that at the
Effective Time, the remaining rights and obligations of the Vendor under the
Azerty/United Logistics Agreement will be assigned and assumed by the Purchaser.
The Vendor and the Purchaser agree that Azerty/United will confirm in writing
that the moving of the Vendor's inventory and the transition of certain
distribution operations to the Brampton Warehouse of Azerty/United as provided
for in the Azerty/United Logistics Agreement is not to take place, failing
which, except for the payment of the fees of the Purchaser as provided for in
Section 19.7, the Vendor and the Purchaser shall have no other obligations to
each other hereunder.
10.1.8 Arrangements re: B2B website, etc.
At Closing, MCSi will enter into an agreement with the Purchaser
with respect to the B2B Component of the Websites generally upon the terms set
out in Schedule 20 hereto.
10.1.9 Transitional Use of MCSi Name
The Vendor agrees that, for a period of 120 days following
Closing, the Purchaser will be entitled to continue to sell existing products
using the name "MCSi," and "MCSi Canada". The Vendor and the Purchaser will
enter into an agreement with respect to such use (which may include a license to
the Purchaser to use such name) on such terms reasonably required by the Vendor.
Such arrangements will also provide for the removal of reference to "MSCi" and
"MCSi Canada" from the Websites and the cleansing of the Websites of such
references for the purpose of selling product and any other proper purpose for
the operation of the Business.
10.1.10 Investigations, etc.
Between the date hereof and Closing, the Vendor shall permit the
Purchaser and its advisors and representatives of its bankers to make such
investigations of the Business and the Purchased Assets as the Purchaser
reasonably deems necessary or desirable for the purpose of the Purchase
Financing; provided that such investigations shall be carried out without undue
interference with the operations of the Business and the Vendor shall co-operate
fully in facilitating such investigations and shall furnish copies, at the
Purchaser's cost, of all such documents and materials relating to such matters
as may be reasonably requested by or on behalf of the Purchaser or its banker
for such purpose. The Purchaser shall take reasonable steps to ensure that any
material provided to its bankers shall be kept confidential.
27.
10.1.11 Environmental Remediation
The Purchaser and the Vendor acknowledge that, under the terms of
the 1998 Purchase Agreement, Abitibi-Consolidated Inc. and Axidata Inc. (now
Abitibi-Consolidated Canadian Office Products Holdings Inc. and collectively
with Abitibi-Consolidated Inc. "ABITIBI") accepted full responsibility for the
Environmental Remediation and agreed to indemnify and hold the Vendor harmless
with respect to any liability associated therewith. In the event that the
Purchaser incurs any liability with respect to the Environmental Remediation
after Closing, the Vendor agrees to indemnify and hold the Purchaser harmless
from such liability (including without limitation legal costs) and agrees that
it will claim over against Abitibi for the amount that the Vendor is liable to
indemnify the Purchaser for hereunder. The amount that the Purchaser is entitled
to receive by way of indemnification hereunder shall not exceed the amount that
the Vendor ultimately receives from Abitibi, net of costs and expenses incurred
by the Vendor in pursuing the claim against Abitibi.
10.1.12 Compu-Redi Trade-xxxx/Xxxxxxx.xxx Domain Name
The Vendor agrees to use reasonable commercial efforts to obtain
from Abitibi the assignment to the Vendor of the registrations of the trademark
COMPU-REDI and the "Xxxxxxx.xxx" domain name, such obligation to survive Closing
if not fulfilled by the Effective Time and the Purchaser waives the condition in
Section 14.1.5. All of the rights and interest in the above trade-xxxx and
domain name are included in the Purchased Assets.
ARTICLE 11
COVENANTS OF THE PURCHASER
11.1 COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Vendor as
follows:
11.1.1 Taxes
For a period of six years after Closing the Purchaser shall
furnish or cause to be furnished to the Vendor, upon request, as promptly as
practicable, such information (including access to books and records) and
assistance relating to the Business or the Purchased Assets as is reasonably
necessary for the filing by the Vendor of any Tax Return, for the preparation
for any audit or for the prosecution or defense of any Legal Proceeding or
proposed adjustment relating to Taxes of the Vendor or the Purchaser relating to
the Business or the Purchased Assets.
11.1.2 Maintenance and Access to Records
The Purchaser agrees that it will retain all books and records
and any other documents, information and files relating to the Business or the
Purchased Assets delivered to it by the Vendor and relating to any period ending
on or prior to the Closing Date for a period of at least six years following the
Closing Date. So long as such books and records and such other documents,
information and files are retained by the Purchaser, the Vendor or its
authorized representatives shall have reasonable access thereto in connection
with the affairs of the Vendor,
28.
including without limitation, as may be reasonably required for the purpose of
this Agreement or any other arrangements between the Vendor and the Purchaser.
11.1.3 Delivery of Non-Competition Agreement
The Purchaser shall execute and deliver to the Vendor at the Time
of Closing a non-competition agreement in the form of the unexecuted
non-competition agreement annexed hereto as Schedule 12.
11.1.4 Assistance to Vendor
The Purchaser will provide assistance to and fully co-operate
with the Vendor in obtaining all necessary consents, approvals and
acknowledgements as referred to in Section 10.1.1 and, to the extent agreed to
by the other parties to any contract and agreements to be assumed by the
Purchaser hereunder (including, without limitation, the Leases and the Personal
Property Leases), take reasonable steps to obtain releases from such other
parties of the obligations of the Vendor under such contracts or agreements.
11.1.5 Arrangement with Azerty/United
The Purchaser will use reasonable commercial efforts so that,
effective at the Effective Time, the Purchaser will assume the obligations of
the Vendor under the Azerty/United Logistics Agreement as provided for in, and
subject to the last sentence of, Section 10.1.7.
11.1.6 Arrangement re: Transitional Use of MCSi Name, etc.
The Purchaser agrees to enter into the agreement with the Vendor
relating to the transitional use of the MCSi name as provided for in Section
10.1.9.
11.1.7 Environmental Remediation
The Purchaser agrees to assist and cooperate with the Vendor and
Abitibi in complying with the Vendor's obligation under Section 8.5 of the 1998
Purchase Agreement, provided that the Purchaser is reimbursed for any
out-of-pocket costs associated therewith.
ARTICLE 12
EMPLOYEE MATTERS
12.1 EMPLOYEES AND TRANSFERRED EMPLOYEES
(a) Subject to the Closing taking place as herein contemplated,
the Purchaser shall offer employment, commencing the day
following the Effective Time, to each of the employees of
the Business (which, for the avoidance of doubt, includes
any such employees on disability, maternity, sickness or
other leave of absence), on substantially the same terms and
conditions as to Employee Benefits (recognising that the
Purchaser will not duplicate the Miami Computer Supply
Corporation Stock Option Plan or Employee Stock Purchase
Plan referred to in Schedule 9) as were in effect on the
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Effective Time. Except as set out in (c) below, the
Purchaser shall assume and shall indemnify the Vendor from
and against any and all obligations with respect to the
Transferred Employees arising after the Effective Time and
shall recognize the service of the Transferred Employees for
all purposes including, without limitation, Employee
Benefits, as if they had been employed by the Purchaser
since their individual dates of hire by the Vendor or its
predecessors to the Business. Notwithstanding the foregoing,
the Vendor shall not be relieved of any liability including,
without limitation, liability for severance and termination
costs and for Employee Benefits in respect of any employee
who has not accepted the Purchaser's offer of employment as
aforesaid.
(b) All liabilities and costs in respect of employees of the
Business including premiums for employment insurance, Canada
Pension Plan, Quebec Pension Plan, employer health tax,
applicable statutory hospitalization insurance, workers'
compensation assessments, accrued wages, salaries and
commissions, vacation pay, employee benefit plan payments
and employee bonus and incentive payments will be adjusted
to the Closing Date and (unless any such adjustment form
part of the Assumed Liabilities) shall be for the account of
the Vendor to the extent they relate to the period up to and
including the Closing Date and of the Purchaser, in respect
of the Transferred Employees, to the extent they relate to
the period following the Closing Date.
(c) Notwithstanding the foregoing, the Vendor will be
responsible for one-half of any severance costs, up to a
maximum liability of the Vendor of $250,000 in the
aggregate, that are properly payable as a result of
constructive dismissal within 12 months following the
Closing Date of the employees of the Business who are
parties to the employment agreements identified by an "*" on
Schedule 9 hereto, and provided that such constructive
dismissal is a result of those matters referred to in Item 3
of the second paragraph of those agreements. The Purchaser
agrees that, while reserving its right to re-negotiate the
terms of employment of such employees, it will take
reasonable steps to persuade such employees to remain
employed by the Purchaser for at least one year following
closing.
ARTICLE 13
BULK SALES LEGISLATION
13.1 BULK SALES COMPLIANCE
The parties hereto believe that, assuming compliance with this
Agreement by both the Vendor and the Purchaser, it is both unnecessary for the
protection of the Vendor's creditors and impracticable to comply with the Bulk
Sales Legislation in the various jurisdictions in which the Purchased Assets are
located and the Purchaser therefore hereby waives compliance with the applicable
Bulk Sales Legislation. In the event that any creditor of the Vendor should make
any claim against either the Purchaser or the Purchased Assets which is wholly
or partially based on
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the premise that the sale of the Purchased Assets did not conform in any
particular to the requirements of the Bulk Sales Legislation of any such
jurisdiction, the Vendor agrees to indemnify and save the Purchaser harmless
from and against any claim for principal, interest and costs, including
reasonable legal and accounting fees, whether or not the claim is ultimately
proved to be well founded, except to the extent that the claim relates to an
Assumed Liability.
ARTICLE 14
PURCHASER'S CONDITIONS OF CLOSING
14.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER
The transactions herein contemplated, including the sale and
purchase of the Purchased Assets in accordance with the terms of this Agreement,
are subject to the following conditions, each of which is hereby declared to be
for the exclusive benefit of the Purchaser. Each of such conditions is to be
fulfilled and/or performed at or prior to the Time of Closing. The Vendor agrees
to use commercially reasonable efforts to cause each of such conditions to be
fulfilled and/or performed at or prior to the Time of Closing.
14.1.1 Truth of Representations and Warranties of the Vendor
The representations and warranties of the Vendor contained in
this Agreement and in any agreement, certificate or other document delivered or
given pursuant to this Agreement (including, without limitation, the
representations and warranties set forth in Article 7) shall in all material
respects be true and correct on the date hereof and at the Time of Closing with
the same force and effect as if such representations and warranties had been
made on and as of each of such times. The Vendor shall deliver to the Purchaser
at the Time of Closing a certificate to such effect and to the effect that as of
the Closing Date each of the conditions set forth in this Article 14 have been
complied with.
14.1.2 Performance of Covenants, etc, by the Vendor
The Vendor shall have performed all obligations, covenants and
agreements contained in this Agreement to be performed by the Vendor at or prior
to the Time of Closing including, without limitation, the covenants set forth in
Article 10.
14.1.3 Legal Opinion
A legal opinion of Messrs. Fraser Xxxxxx Casgrain LLP dated the
Closing Date substantially following the form of opinion given by that firm in
respect of the sale of the Azerty business of the Vendor to Azerty/United on
July 5, 2000 shall have been received by the Purchaser at the Time of Closing.
14.1.4 Consents, etc.
There shall have been obtained from all appropriate Persons such
consents, approvals, permits and acknowledgements as may be required in
connection with the completion of the transactions herein with respect to those
Leases, Personal Property Leases, agreements, contracts, licences and
commitments identified on Schedules 4, 5 and 8 hereof as being subject
31.
to "Note 1" of the applicable Schedule or any consents, approvals, permits or
acknowledgments that the Vendor is entitled to under Section 15.1.3.
14.1.5 Compu-Redi and Xxxxxxx.xxx
The registrations for the Canadian trade-xxxx COMPU-REDI and the
domain name "Xxxxxxx.xxx" shall be assigned to the Purchaser.
14.1.6 No Action Taken Restricting Sale
No Legal Proceeding shall have been commenced or shall be pending
or threatened against the Vendor at law or in equity or before or by an Tribunal
which would affect the title of the Vendor to the Purchased Assets or would
enjoin, restrict or prohibit or would have the effect of preventing the
completion of the transactions herein contemplated, including the sale and
purchase of the Purchased Assets in accordance with the terms of this Agreement
or which might adversely affect the ability of the Vendor to enter into this
Agreement or to perform its obligations hereunder.
14.1.7 Purchase Financing
The Purchaser shall have obtained the Purchase Financing to
enable the Purchaser to complete the purchase of the Purchased Assets. Provided
however, if at any time after December 14, 2001 the Vendor receives an
unsolicited offer from a Person acting at arm's length with the Vendor to
acquire the Business or the shares of the Vendor that the Vendor wishes to
accept, the Vendor shall be entitled to give written notice to the Purchaser
that the Purchaser has five (5) days in which to waive this condition. If the
Purchaser does not waive such condition within such five (5) day period, the
Vendor shall be free to accept such offer and, except for the payment of the
fees of the Purchaser as provided for in Section 19.7, the Vendor and the
Purchaser shall have no other obligations to each other hereunder.
14.2 NON-FULFILMENT OF CONDITIONS, etc. FOR THE BENEFIT OF THE
PURCHASER
In the event that any condition, obligation, covenant or
agreement of the Vendor to be fulfilled and/or performed hereunder at or prior
to the Time of Closing, including, without limitation, the conditions set forth
in this Article 14, shall not be fulfilled and/or performed at or prior to the
Time of Closing, the Purchaser may rescind this Agreement by notice to the
Vendor and in such event the Purchaser shall be released from all obligations
hereunder and, unless the Purchaser can show that the one or more conditions,
obligations, covenants or agreements for the non-fulfilment or non-performance
of which the Purchaser has rescinded this Agreement is or are reasonably capable
of being fulfilled and/or performed or caused to be fulfilled and/or performed
by the Vendor, then the Vendor shall also be released from all obligations
hereunder; provided, however, that any of the said conditions, obligations,
covenants or agreements may be waived in whole or in part by the Purchaser
without prejudice to the Purchaser's right of rescission in the event of the
non-fulfilment and/or non-performance of any other condition, obligation,
covenant or agreement, any such waiver to be binding on the Purchaser only if
the same is in writing.
32.
ARTICLE 15
VENDOR'S CONDITIONS OF CLOSING
15.1 CONDITIONS FOR THE BENEFIT OF THE VENDOR
The transactions herein contemplated, including the sale and
purchase of the Purchased Assets in accordance with the terms of this Agreement,
are subject to the following conditions, each of which is hereby declared to be
for the exclusive benefit of the Vendor. Each of such conditions is to be
fulfilled and/or performed at or prior to the Time of Closing. The Purchaser
covenants and agrees to use commercially reasonable efforts to cause each of
such conditions to be fulfilled and/or performed at or prior to the Time of
Closing.
15.1.1 Truth of Representations and Warranties of the Purchaser
The representations and warranties of the Purchaser contained in
this Agreement in any agreement, certificate or other document delivered or
given pursuant to this Agreement (including, without limitation, the
representations and warranties set forth in Article 8) shall be true and correct
in all material respects on the date hereof and at the Time of Closing with the
same force and effect as if such representations and warranties had been made on
and as of each of such times. The Purchaser shall deliver to the Vendor at the
Time of Closing a certificate to that effect and to the effect that as of the
Closing Date each of the conditions set forth in this Article 15 has been
complied with.
15.1.2 Performance of Covenants, etc. by the Purchaser
The Purchaser shall have performed all obligations, covenants and
agreements contained in this Agreement to be performed by it at or prior to the
Time of Closing, including, without limitation, the covenants set forth in
Article 11.
15.1.3 Consents, etc.
There shall have been obtained from all appropriate Persons such
consents, approvals, permits and acknowledgements as may be required in
connection with the completion of the transactions herein contemplated where the
failure to obtain such consent, approval, permit or acknowledgement could expose
the Vendor to material damages.
15.1.4 No Action Taken Restricting Sale
No Legal Proceeding shall have been commenced or shall be pending
or threatened against the Vendor at law or in equity or before or by any
Tribunal which would adversely affect the title of the Vendor to the Purchased
Assets or would enjoin, restrict or prohibit or would have the effect of
preventing the completion of the transactions herein contemplated, including the
sale and purchase of the Purchased Assets in accordance with the terms of this
Agreement or which might adversely affect the ability of the Vendor to enter
into this Agreement and to perform its respective obligations hereunder.
33.
15.1.5 General Security Agreement
On Closing, the Purchaser will deliver to the Vendor, as security
for the payment of the Promissory Note and any other indebtedness or obligations
of the Purchaser to the Vendor, a general security agreement in form and
substance satisfactory to the Vendor, acting reasonably, containing a fixed and
floating charge over all the assets and property of the Purchaser ranking second
only to any security interest of the Purchaser's bank and subject to the same
permitted encumbrances as in such bank's security documents. Such general
security agreement will be in such form as may be reasonably required by the
Vendor and will, without limitation to the generality of the foregoing, contain
the customary terms, conditions and covenants required by an arm's length
lender, including without limitation that the Vendor will be provided with
monthly financial statements of the Purchaser.
15.1.6 Legal Opinion
A legal opinion of Messrs. Xxxxxxx Xxxxx & Xxxxxxxxx LLP dated
the Closing Date substantially following the form to be provided by Fraser
Xxxxxx Casgrain LLP under Section 14.1.3 (but relating to the Purchaser) as
reasonably required by the Vendor shall have been received by the Vendor at the
Time of Closing.
15.1.7 Paper Supply Agreement
The Purchaser shall have either (i) taken an assignment of and
assume all of the obligations of the Vendor under the Paper Supply Agreement
dated July 5, 2000 entered into between the Vendor and Azerty/United, or (ii) if
Azerty/United shall not give its approval to such assignment and assumption,
enter into an agreement with the Vendor whereby the obligations of the Vendor
under such Paper Supply Agreement will be fulfilled under sub-contract by the
Purchaser on identical terms, including financial terms, it being the intent of
the parties hereto that the Vendor shall be able to fulfil its obligations under
with Paper Supply Agreement without incurring any additional or incremental
cost. Provided the Purchaser has taken reasonable commercial steps to enforce
payment, MCSi shall indemnify the Purchaser for any default in payment by
Azerty/United (and any reasonable costs related thereto) under the Paper Supply
Agreement.
15.1.8 Resignations
On Closing, the directors and officers of the Vendor who are or
who become directors, officers or employees of the Purchaser shall resign from
their position as directors and/or officers of the Vendor.
15.2 NON-FULFILMENT OF CONDITIONS ETC. FOR THE BENEFIT OF THE VENDOR
In the event that any condition, obligation, covenant or
agreement of the Purchaser to be fulfilled and/or performed hereunder at or
prior to the Time of Closing, including, without limitation, the conditions set
forth in this Article 15, shall not be fulfilled and/or performed at or prior to
the Time of Closing, the Vendor may rescind this Agreement by notice to the
Purchaser and in such event the Vendor shall be released from all obligations
hereunder and, unless the Vendor can show that the one or more conditions,
obligations,
34.
covenants or agreements for the non-fulfilment or non-performance of which the
Vendor has rescinded this Agreement is or are reasonably capable of being
fulfilled and/or performed or caused to be fulfilled and/or performed by the
Purchaser, then the Purchaser shall also be released from all obligations
hereunder; provided, however, that any of the said conditions, obligations,
covenants or agreement may be waived in whole or in part by the Vendor without
prejudice to its right of rescission in the event of the non-fulfilment and/or
non-performance of any other condition, obligation, covenant or agreement, any
such waiver to be binding upon the Vendor only if the same is in writing.
ARTICLE 16
CLOSING ARRANGEMENTS
16.1 DATE, TIME AND PLACE OF CLOSING
The Closing shall take place at the Time of Closing on the
Closing Date at the offices of Fraser Xxxxxx Casgrain LLP, 42nd Floor, 1 First
Canadian Place, Toronto,
Ontario or at such other time, on such other date
and/or at such other place as may be agreed upon by the parties hereto.
16.2 CLOSING ARRANGEMENTS
At the Time of Closing and subject to the fulfilment of all the
terms and conditions set forth in this Agreement which have not been waived in
writing by the parties hereto, respectively:
16.2.1 Purchase and Sale of Purchased Assets
The Vendor shall sell to the Purchaser the Purchased Assets and
the Purchaser shall purchase the Purchased Assets from the Vendor and assume the
Assumed Liabilities and otherwise pay and satisfy the Purchase Price, all as
herein provided.
16.2.2 Delivery of Closing Documents
The Vendor shall deliver to the Purchaser all deeds, conveyances,
bills of sale, assurances, transfers, assignments and consents (including all
necessary consents, approvals, to the assignment of the Leases, Personal
Property Leases and the contracts, agreements and commitments referred to in
clause (c) of Section 3.1) and any other documents as shall be necessary or
reasonably required to effectively transfer the Purchased Assets to the
Purchaser free of any Encumbrance except as specifically provided in this
Agreement, including the Schedules hereto.
16.2.3 Actual Possession
The Vendor shall deliver actual possession of the Purchased
Assets to the Purchaser.
35.
16.2.4 Payment of Purchase Price
Upon the fulfilment of the foregoing provisions of this Article
16 and subject to all the other terms and conditions contained in this Agreement
being complied with, the Purchaser shall pay and satisfy the Purchase Price in
the manner specified in Article 6.
16.2.5 Tender
Any tender of documents or money may be made on the party or
parties designated to receive such documents or money or their respective legal
counsel.
ARTICLE 17
INDEMNIFICATION
17.1 INDEMNIFICATION BY VENDOR
(a) Subject to Section 17.6, in the event that the transactions
herein contemplated are completed at the Closing, the Vendor
hereby agrees to indemnify and hold the Purchaser harmless
from and against any loss, damage, claim, Legal Proceeding,
deficiency or expense, including all out-of-pocket costs,
and including, without limitation, all reasonable legal and
accounting fees, relating to, arising from or in connection
with the following matters:
(i) any misrepresentation or breach of any warranty,
obligation, covenant or agreement of the Vendor
contained in this Agreement or in any agreement,
certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this
Agreement;
(ii) any assertion against the Purchaser of any claim or
liability relating to the Business which arises from
a liability of the Business or the operation of the
Business by the Vendor and is not part of the Assumed
Liabilities;
(iii) non-compliance with any applicable Bulk Sales
Legislation, except for any loss, damage, claim,
Legal Proceeding, deficiency or expense resulting
from the failure of the Purchaser to pay or discharge
in due course those liabilities of the Purchased
Business to be assumed by the Purchaser as provided
in Section 5.1; and
(iv) any claims (including claims for severance, notice of
termination, breach of contract, constructive
dismissal or damages in connection therewith)
relating to the employment of any of the employees of
the Business or the termination of any of such
employees by the Vendor, arising from facts up to the
Effective Time, provided that
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(A) the Vendor shall not be liable for any claims
relating to Assumed Liabilities; and
(B) except as provided in Section 12.1(c) the Vendor
shall not be liable for any claims which relate
to the termination of employment or constructive
dismissal of any Transferred Employee.
(b) The obligation of the Vendor to indemnify the Purchaser as
set forth in paragraph (a) of this Section 17 with respect
to any misrepresentation or breach of warranty shall be
subject to Section 9.1.
17.2 INDEMNIFICATION BY PURCHASER
(a) Subject to Section 17.6, in the event that the transactions
herein contemplated are completed at the Closing, the
Purchaser agrees to indemnify and hold the Vendor harmless
from and against any loss, damage, claim, Legal Proceeding,
deficiency or expense, including all out-of-pocket costs and
including, without limitation, all reasonable legal and
accounting fees, relating to, arising from or in connection
with the following matters:
(i) any misrepresentation or breach of any warranty,
obligation, covenant or agreement of the Purchaser
contained in this Agreement or in any agreement,
certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this
Agreement;
(ii) the assertion against the Vendor of any claim or
liability relating to the Business which arises from
a liability of the Business to be assumed by the
Purchaser as provided in Section 5.1 or the operation
of the Business after the Effective Time;
(iii) the failure of the Purchaser to discharge those
liabilities of the Business to be assumed by the
Purchaser as provided in Section 5.1; and
(iv) subject to Section 12.1(c), any claims (including
claims for severance, notice of termination, breach
of contract, constructive dismissal or damages in
connection therewith) relating to the employment of
any of the Transferred Employees or the termination
of the employment of any of such employees with
claims arise from facts after the Closing Date,
including the continuation, discontinuation or
provision to any employee of the employment policies,
benefit plans or other benefits previously provided
by the Vendor.
37.
(b) The obligation of the Purchaser to indemnify the Vendor as
set forth in paragraph (a) of this Section 17.2 with respect
to any misrepresentation or breach of warranty shall be
subject to Section 9.2.
17.3 PROCEDURE FOR INDEMNIFICATION
(a) A party claiming indemnification under Sections 17.1 or 17.2
(in this Article 17 an "Indemnitee") shall give notice to
the party against which indemnification is claimed (in this
Article 17 an "Indemnitor") with reasonable promptness upon
becoming aware of the claim or other facts upon which a
claim for indemnification will be based. The notice shall
set forth such information and be accompanied by such
documentation with respect thereto as is then reasonably
available to the Indemnitee.
(b) For the purposes of this Section 17.3 "Third Party Claim"
means any demand which has been made on, or communicated to,
the Vendor or the Purchaser by or on behalf of any Person
other than the Vendor or the Purchaser and which, if
maintained or enforced, might result in a claim for
indemnification under Section 17.1 or Section 17.2 hereof.
(c) Promptly upon receipt by the Indemnitee of notice of any
Third Party Claim in respect of which the Indemnitee
proposes to demand indemnification from the Indemnitor, the
Indemnitee shall forthwith give notice to that effect to the
Indemnitor. The Indemnitor shall then have the right,
exercisable by giving notice to the Indemnitee not later
than 21 days after receipt of the notice described above, to
assume the control of the defence, compromise or settlement
of the Third Party Claim, provided that the Indemnitor shall
first deliver to the Indemnitee written admission of
complete liability for indemnification with respect to any
such claim and its written consent to be joined as a party
to any action or proceeding relating thereto.
(d) Upon the assumption of control by the Indemnitor as
aforesaid, the Indemnitor shall, at its expense, diligently
proceed with the defence, compromise or settlement of the
Third Party Claim at the Indemnitor's sole expense,
including employment of counsel reasonably satisfactory to
the Indemnitee, and in connection therewith, the Indemnitee
shall co-operate fully, but at the expense of the
Indemnitor, to make available to the Indemnitor all
pertinent information and witnesses under the Indemnitee's
control and to make such assignments and take such other
steps as in the opinion of counsel for the Indemnitor are
necessary to enable the Indemnitor to conduct such defence.
(e) The final determination of any such Third Party Claim,
including all related costs and expenses, will be binding
and conclusive upon the parties hereto as to the validity or
invalidity, as the case may be, of such Third Party Claim
against the Indemnitor hereunder.
38.
(f) Should the Indemnitor fail to give notice to the Indemnitee
as provided in (c) hereof, the Indemnitee shall be entitled
to undertake to take the defense of the Third Party Claim
and to make such settlement of the Third Party Claim as in
its reasonable discretion may appear advisable for the
account and at the risk and expense of the Indemnitor, and
such settlement or any other final determination of the
Third Party Claim shall be binding upon the Indemnitor.
Notwithstanding the foregoing, the Indemnitee will, at the
request of the Indemnitor, keep the Indemnitor generally
informed as to the progress of the matter.
17.4 SUBSEQUENT RECOVERY
In the event that the Indemnitee subsequently recovers all or
part of a Third Party Claim from any other Person legally obligated to pay the
same, the Indemnitee shall forthwith repay to the Indemnitor the amounts so
recovered up to an amount not exceeding the amount theretofore paid by the
Indemnitor by way of indemnity. Where the Indemnitee is entitled to recover from
a third party or claim reimbursement of any sum in respect of which it also has
a claim or potential claim against the Indemnitor hereunder, the Indemnitee
shall take commercially reasonable steps to enforce the recovery or
reimbursement against the third party.
17.5 INSURANCE
Where any claim hereunder relates to any matter which is in whole
or in part insured by any insurance policy, the Indemnitee shall make
commercially reasonable efforts that such claim is also made against the
relevant insurer and pursued with all reasonable expedition.
17.6 DETAILS OF CLAIMS
No claim for indemnity hereunder shall be valid unless and until
written notice providing reasonable details of the reasons supporting the claim,
including such information and documentation with respect thereto as is then
reasonably available to the Indemnitee, is given by the Indemnitee to the
Indemnitor at or prior to the expiration of any applicable limitation periods
herein provided for.
17.7 DE MINIMIS/LIMITATION
Notwithstanding any other provision of this Agreement, no party
hereto shall assert against any other party hereto any claim or claims for
indemnity hereunder unless the aggregate amount of the claim or claims asserted
to that date, including the claim or claims then being asserted, is at least
$50,000 and then only to the extent that the amount of the claim or claims
exceeds $50,000. The aggregate maximum amount of any and all payments to be made
by the Vendor under this Article 17, or otherwise under the Agreement, for
claims made by the Purchaser shall be $10,000,000.
ARTICLE 18
MCSi GUARANTEE
39.
18.1 MCSi GUARANTEE
(a) In consideration of the transaction referred to herein and
of other good and valuable consideration, MCSi hereby
irrevocably guarantees to the Purchaser the performance of
all of the Vendor's obligations under this Agreement. The
obligations of MCSi hereunder shall arise if and only to the
extent any payment to the Purchaser by the Vendor under this
Agreement is not made when due or the Vendor fails to
perform any of its other obligations under this Agreement,
in which case, MCSi must either perform or cause the
performance thereof. The Purchaser shall make no claim
hereunder against MCSi unless it is entitled to make such
claim against the Vendor, and then only to the extent that
the Purchaser may claim against the Vendor. The Purchaser
shall not be required to exhaust its remedies or recourses
against the Vendor before it may make a claim against MCSi
hereunder.
(b) In the event that this Agreement shall be terminated,
rejected, disaffirmed or otherwise unenforceable as a result
of bankruptcy, insolvency, reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar proceedings with respect to the Vendor, MCSi's
obligations hereunder shall continue to the same extent as
if the same had not been so terminated, rejected or
disaffirmed or become unenforceable. MSCi shall and does
hereby waive all rights and benefits which might, in whole
or in part, relieve MCSi from the performance of its duties
and obligations by reason of any such proceedings, and MCSi
agrees that it shall be liable for all payments and
obligations guaranteed hereunder, in respect of and without
regard to, any modification, limitation or discharge of the
liability of the Vendor that may result from any such
proceedings.
ARTICLE 19
MISCELLANEOUS
19.1 BROKERAGE, COMMISSIONS, etc
It is understood and agreed that no broker, agent or other
intermediary has acted for the Vendor or the Purchaser in connection with the
transactions herein contemplated. The Vendor hereby agrees to indemnify and save
harmless the Purchaser from and against any claim for commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or to have acted for the Vendor in connection
with the transactions herein contemplated. The Purchaser agrees to indemnify and
save harmless the Vendor from and against any claim for any commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or to have acted for the Purchaser in
connection with the transactions herein contemplated.
40.
19.2 FURTHER ASSURANCES
Each of the parties hereto upon the request of the other party or
parties hereto, whether before or after the Time of Closing, shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or delivered
all such further acts, deeds, documents, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably necessary or desirable to
effect complete consummation of the transactions herein contemplated.
19.3 ASSIGNMENT OF CONTRACTS
To the extent the assignment of any agreement, contract or
commitment, including, without limitation, any lease or other asset to be
assigned to the Purchaser pursuant to the provisions hereof, shall require the
consent, approval, permit or acknowledgement of any Person, this Agreement shall
not constitute a contract to assign the same if an attempted assignment would
constitute a breach thereof. If any of such required consents, approvals,
permits and acknowledgements is not obtained, the Vendor and the Purchaser shall
co-operate with each other in any reasonable arrangement designed to provide the
Purchaser with the benefit of any such agreement, contract or commitment,
including, without limitation, any Lease or other asset, including enforcement
of any and all rights of the Vendor against the other party thereto arising out
of breach or cancellation thereof by such party or otherwise. Nothing contained
herein shall be construed to negate or diminish, as between the Vendor and the
Purchaser, the Vendor's covenants and obligations to transfer and deliver to the
Purchaser the Purchased Assets as provided in this Agreement.
19.4 ANNOUNCEMENTS
Except to the extent required by law, the parties hereto agree
that no disclosure or public announcement with respect to this Agreement or the
transactions herein contemplated shall be made by any party hereto without the
prior written consent of each of the other parties hereto, which consent shall
not be unreasonably withheld. If MCSi is required to publicly disclose this
Agreement or the transactions contemplated herein, unless the time for
disclosure does not permit, it will consult with the Purchaser regarding the
content of any such disclosure and, the Purchaser and MSCi, each acting
reasonably, will agree to the contents of any such disclosure.
19.5 NOTICES
(a) Any notice, direction or other instrument required or
permitted to be given to any party hereto shall be in
writing and shall be sufficiently given if delivered
personally, mailed or transmitted by fax to such party, as
follows:
(i) in the case of the Vendor, at:
c/o MCSi, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxx XXX 00000
41.
Attention: Xxx Xxxxxxx,
Vice-President Finance
Fax No.: (000) 000-0000
with a copy to: Fraser Xxxxxx Casgrain LLP
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxxxxxx Xxxxxx
Fax Number: (000) 000-0000
(ii) in the case of the Purchaser, at:
00 Xxxxxxxxx Xxxx.
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxxxxx,
President
Fax Number: (000) 000-0000
with a copy to: Xxxxxxx Xxxxx and Xxxxxxxxx LLP
Scotia Plaza
0000- 00 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx Xxxxxxxxx
Fax Number: (000) 000-0000
(b) Any such notice, direction or other instrument, if delivered
personally, shall be deemed to have been given and received
on the date on which it was delivered, provided that if such
day is not a Business Day then the notice, direction or
other instrument shall be deemed to have been given and
received on the first Business Day next following such day;
if mailed, shall be deemed to have been given and received
on the fifth day after it was mailed, provided that if such
day is not a Business Day then the notice, direction or
other instrument shall be deemed to have been given and
received on the first Business Day next following such day;
and if transmitted by fax, shall be deemed to have been
given and received on the day of its transmission, provided
that if such day is not a Business Day or if it is
transmitted or received after the end of normal business
hours then the notice, direction or other instrument shall
be deemed to have been given and received on the first
Business Day next following the day of such transmission.
42.
Any party hereto may change its address for service from time to
time by notice given to the other parties hereto in accordance with the
foregoing provisions.
19.6 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
19.7 COSTS AND EXPENSES
All costs and expenses (including, without limitation, the fees
and disbursements of legal counsel) incurred in connection with this Agreement
and the transactions herein contemplated shall be paid by the party incurring
such costs and expenses; provided however that if the Closing does not take
place for reasons other than the failure of the Purchaser to perform its
obligations hereunder, the Vendor will pay any reasonable costs and expenses
incurred by the Purchaser. Such costs and expenses will include any reasonable
commitment fee payable to the Purchaser's bank in connection with the Purchase
Financing, as previously disclosed to the Vendor.
19.8 APPLICABLE LAW
This Agreement shall be performed, construed and enforced in
accordance with, and the rights of the parties hereto shall be governed by, the
laws of the Province of
Ontario and the laws of Canada applicable therein. Any
and all disputes arising under this Agreement, whether as to interpretation,
performance or otherwise, shall be subject to the exclusive jurisdiction of the
Courts of the Province of
Ontario and each of the parties hereto hereby
irrevocably attorns to the jurisdiction of the Courts of such Province.
19.9 ENTIRE AGREEMENT
This Agreement, including the Schedules hereto, constitutes the
entire agreement between the parties hereto with respect to the transactions
herein contemplated and cancels and supersedes any prior understandings,
agreements, negotiations and discussions between the parties hereto with respect
thereto, except as specifically provided or contemplated in this Agreement or in
any agreement, certificate or other document delivered or given pursuant to this
Agreement. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements or understandings, express or implied,
between the parties hereto other than those expressly set forth in this
Agreement or in any such agreement, certificate or other document as aforesaid.
This Agreement may not be amended or modified in any respect except by written
instrument executed by each of the parties hereto.
19.10 SEVERABILITY
If any provision of this Agreement is invalid or unenforceable,
such provision shall be severed and the remainder of this Agreement shall be
unaffected thereby but shall continue to be valid and enforceable to the fullest
extent permitted by law. If any term or provision of this Agreement is held or
deemed to be unenforceable, in whole or in part, by a court of competent
jurisdiction, such term or provision shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unforceable the
remaining terms and
43.
provisions of this Agreement which shall be construed to preserve to the maximum
permissible extent the intent and purposes of this Agreement. Any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such terms or provisions in any other jurisdiction.
19.11 EFFECT OF CLOSING
Any provision of this Agreement which is capable of being
performed after but which has not been performed at or prior to the Time of
Closing and all obligations, covenants and agreements contained in this
Agreement or in any agreement, certificate or other document delivered or given
pursuant to this Agreement, including, without limitation, the indemnities
herein provided for, shall remain in full force and effect notwithstanding
Closing, subject to the limitation periods referred to in Sections 9.1 and 9.2.
19.12 RISK OF LOSS
From the date hereof to the Effective Time, the Business and the
Purchased Assets shall be and remain at the risk of the Vendor.
19.13 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
19.14 ASSIGNMENT
This Agreement may not be assigned by any of the parties hereto
without the prior written consent of the other parties hereto.
44.
19.15 PARTIES IN INTEREST
This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
19.16 THIRD PARTIES
Except as specifically set forth or referred to herein, nothing
herein is intended or shall be construed to confer upon or give to any Person,
other than the parties hereto and their respective successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto.
MCSi CANADA INC.
By
---------------------------------
Name: Xxx X. Xxxxxxx
Title: Secretary and Treasurer
3835359 CANADA INC.
By
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President
MCSi, INC.
By
---------------------------------
Name:
Title:
