SHARE PURCHASE AGREEMENT
BETWEEN
0000-0000 XXXXXX INC.
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MR. PHILIP STANIMIR
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000000 XXXXXX INC.
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VICTORIA PRECISION INC.
Dated as of: June 16, 1999.
TABLE OF CONTENTS
ARTICLE I-INTERPRETATION
1.1 Defined Terms .............................................. 1
1.2 Currency ................................................... 5
1.3 Sections and Headings ...................................... 5
1.4 Number, Gender and Persons ................................. 6
1.5 Accounting Principles ...................................... 6
1.6 Entire Agreement ........................................... 6
1.7 Time of Essence ............................................ 6
1.8 Applicable Law ............................................. 6
1.9 Severability ............................................... 6
1.10 Successors and Assigns ..................................... 6
1.11 Amendments and Waivers ..................................... 6
1.12 Schedules .................................................. 7
ARTICLE II-PURCHASE AND SALE OF PURCHASED SHARES
2.1 Purchase and Sale .......................................... 7
2.2 Purchase Price ............................................. 8
ARTICLE III-REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND
CORPORATION
3.1 Organization ............................................... 8
3.2 Authorization .............................................. 9
3.3 No Other Agreements to Purchase ............................ 9
3.4 Authorized and Issued Capital .............................. 9
3.5 Options .................................................... 9
3.6 Ownership of Purchased Shares .............................. 9
3.7 Subsidiaries ............................................... 10
3.8 No Violation ............................................... 10
3.9 Business of the Corporation ................................ 11
3.10 Title to Movable Property .................................. 11
3.11 Immovable Property Matters ................................. 11
3.12 Immovable Property Matters ................................. 11
3.13 Leased Property ............................................ 13
3.14 Inventories ................................................ 13
3.15 Accounts Receivable ........................................ 13
3.16 Intellectual Property ...................................... 13
3.17 Insurance .................................................. 14
3.18 No Expropriation ........................................... 14
3.19 Agreements and Commitments ................................. 14
3.20 Compliance with Laws; Governmental Authorization ........... 16
3.22 Audited Financial Statements ............................... 17
3.23 Books and Records; Undisclosed Liabilities ................. 17
3.24 Absence of Changes ......................................... 18
3.25 Taxes ...................................................... 19
3.26 Litigation ................................................. 21
3.27 Residency .................................................. 21
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3.28 GST and Quebec Sales Tax Registration ...................... 21
3.29 Accounts and Attorneys ..................................... 21
3.30 Directors and Officers ..................................... 21
3.31 Dividends .................................................. 21
3.32 Non-Arm's Length Transactions .............................. 22
3.33 Environmental .............................................. 22
3.34 Employee Plans ............................................. 23
3.35 Collective Labour Agreements ............................... 24
3.36 Employees .................................................. 25
3.37 Employee Accruals .......................................... 25
3.38 Customers and Suppliers; Payables .......................... 25
3.39 Product Warranties ......................................... 26
3.40 No Predecessors ............................................ 26
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Organization ............................................... 26
4.2 No Violation ............................................... 26
4.3 Authorization .............................................. 27
4.4 Consents and Approvals ..................................... 27
ARTICLE V-SURVIVAL OF REPRESENTATIONS AND WARRANTS
5.1 Survival of Representations and Warranties of
the Vendor and the Corporation ............................. 27
5.2 Expiration of the Representations and Warranties
of the Purchaser ........................................... 28
ARTICLE VI-COVENANTS
6.1 Access to the Corporation .................................. 28
6.2 Delivery of Books and Records .............................. 30
6.3 Use of Name ................................................ 30
6.4 Conduct Prior to Closing ................................... 30
6.5 Delivery of Documents ...................................... 31
6.6 Delivery of 141982's and Corporation's Corporate
and Closing Documentation .................................. 32
6.7 Delivery of Purchaser's Closing Documentation .............. 32
ARTICLE VII-CONDITIONS OF CLOSING
7.1 Conditions of Closing in Favor of the Purchaser ............ 32
Representations and Warranties
Covenants
Contractual Consents
No Action or Proceeding
Legal Matters
Non-Competition Agreement
Legal Opinion
Directors and Officers
Release by Vendor, Directors and Officers
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Financing
Net Income and Shareholders Equity
Title Opinion and Survey
Inspection Report
Environmental Report
Disclosure Schedules
7.2 Conditions of Closing in Favor of the Vendor ............... 35
Representations and Warranties
Covenants
No Action or Proceeding
Legal Matters
Legal Opinion
Employment Agreement
Direction for Payment
Indemnification
ARTICLE VIII-CLOSING ARRANGEMENTS
8.1 Place of Closing ........................................... 36
8.2 Transfer and Payment ....................................... 36
8.3 Further Assurances ......................................... 37
8.4 Closing Financial Statements ............................... 37
8.5 Repayment of Shareholder Advance ........................... 37
ARTICLE IX-INDEMNIFICATION
9.1 Indemnification by Vendor .................................. 37
9.2 Indemnification by the Purchaser ........................... 38
9.3 Notice of Claim ............................................ 39
9.4 Direct Claims .............................................. 39
9.5 Third Party Claims ......................................... 39
9.6 Settlement of Third Party Claims ........................... 40
9.7 Co-operation ............................................... 40
9.8 Exclusivity ................................................ 41
ARTICLE X-MISCELLANEOUS
10.1 Confidentiality of Information ............................. 41
10.2 Notices .................................................... 41
10.3 Commissions ................................................ 42
10.4 Consultation ............................................... 43
10.5 Disclosure ................................................. 43
10.7 Assignment by Purchaser .................................... 43
10.8 Best Efforts ............................................... 43
10.9 Counterparts ............................................... 43
10.10 Limitations and Disclaimer ................................. 44
10.11 Language ................................................... 44
10.12 Execution by Fax ........................................... 44
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement made as of June __, 1999, between:
141982 Canada Inc., a corporation incorporated under the laws of Canada
("141982") and Mr. Philip Stanimir ("Stanimir") (141982 and Stanimir
are hereinafter jointly referred to as the "Vendor");
- and -
0000-0000 Xxxxxx Inc., a corporation incorporated under the laws of the
Province of Quebec (hereinafter called the "Purchaser");
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Victoria Precision Inc., a corporation incorporated under the laws of
the Province of Quebec (hereinafter called the "Corporation").
This Agreement witnesses that in consideration of the respective covenants,
agreements, representations, warranties and indemnities contained herein and for
other good and valuable consideration (the receipt and sufficiency of which are
acknowledged by each party), the parties covenant and agree as follows:
ARTICLE I-INTERPRETATION
1.1 DEFINED TERMS. For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings
specified or referred to below and grammatical variations of those terms shall
have corresponding meanings:
(a) "Act" means the Canada Business Corporations Act as in
effect on the date hereof;
(b) "Affiliate" has the meaning attributed to that term in the
Act;
(c) "Agreement" means this Share Purchase Agreement and all amendments
hereto made by written agreement between the parties hereto; "herein"
and similar expressions mean and refer to this Agreement and not to any
particular Article, section, subsection or Schedule of this Agreement;
(d) "Associate" has the meaning attributed to that term in the
Act;
(e) "Audited Financial Statements" means the audited consolidated financial
statements of the Corporation as at
and for the fiscal year ended July 31, 1998, with comparative figures
for July 31, 1997, including the notes thereto and the report of the
Corporation's auditors thereon, a copy of which has been delivered and
is annexed hereto as Schedule 1.1(e);
(f) "Business" means the business currently and heretofore carried on by
the Corporation consisting of manufacturing, selling and distributing
bicycles and tricycles, and bicycle parts and accessories, and of tools
and dies;
(g) "Business Day" means any day (other than a Saturday or a Sunday) on
which the main branch of Royal Bank of Canada in Montreal, Quebec, is
open for business;
(h) "Claim" means any claim, proceeding or other matter for which the
Indemnifying Party has agreed to indemnify the Indemnified Party
pursuant to this Agreement;
(i) "Closing Balance Sheet" means an unaudited consolidated balance sheet
for the Corporation as of the close of business on the Closing Date;
(j) "Closing Cash Flow Statement" means an unaudited consolidated statement
of cash flows for the Corporation for the period from July 31, 1998, to
the Closing Date;
(k) "Closing Certificates" means the certificates to be delivered pursuant
to subsection 7.1(a);
(l) "Closing Date" means June __, 1999, or any other date as may be
mutually agreed upon by the Vendor and the Purchaser;
(m) "Closing Financial Statements" means the Closing Balance Sheet, the
Closing Income Statement and the Closing Cash Flow Statement;
(n) "Closing Income Statement" means an unaudited consolidated income
statement for the Corporation for the period from July 31, 1998, to the
Closing Date;
(o) "Common Shares" means the common shares in the capital of the
Corporation;
(p) "Contract" means any agreement, indenture, contract, lease, deed of
trust, license, option, instrument or other commitment, whether written
or oral;
(q) "Direct Claim" means a Claim that is not a Third Party Claim;
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(r) "Employee Plans" means each retirement, pension, bonus, stock purchase,
profit sharing, stock option, deferred compensation, severance or
termination pay, insurance, medical, hospital, dental, vision care,
drug, sick leave, disability, salary continuation, legal benefits,
unemployment benefits, vacation, incentive or other compensation plan
or arrangement or other employee benefit that is maintained or
otherwise contributed to, or required to be contributed to, by the
Corporation for the benefit of employees or former employees of the
Corporation;
(s) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, reservation, easement, right of occupation,
any matter capable of registration against title, option, right of
pre-emption, privilege or any Contract to create any of the foregoing;
(t) "Environmental Laws" means any federal, provincial, state, municipal
and local laws, statutes, ordinances, by-laws, regulations, and orders,
as well as legally binding directives, policies, guidelines, manuals
and decisions relating to protection of the environment enacted,
issued, published or rendered by any federal, provincial, state,
municipal or local government, government agency, ministry, department
or administrative or regulatory agency, minister, deputy, governor,
council, administrator, court, administrative court, tribunal, board,
committee, commission or other person or entity who by law or
regulation is or purports to be empowered to make a determination of
the foregoing, including but not limited to what constitutes a
Hazardous Substance or how a person is to protect the environment,
occupational health and safety, or engage in the manufacture,
processing, distribution, label, use, treatment, storage, disposal,
discharge, transport or handling of any Hazardous Substances;
(u) "Environmental Permits" means any Licenses under Environmental Laws
required for the operation of the Business;
(v) "ETA" means the Excise Tax Act (Canada), as amended from time to time;
(w) "GST" means any and all taxes payable under PART IX of the ETA or under
any provincial legislation similar to Part IX of the ETA;
(x) "Hazardous Material" means hazardous material or hazardous waste within
the meaning of the Environmental Quality Act (Quebec) and the
regulations thereunder;
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(y) "Hazardous Substances" means any substance, pollutant, contaminant,
solid, liquid or gaseous matter, chemical, industrial, toxic or
hazardous waste or substance, petroleum or petroleum derived substance,
micro-organism, radiation, ray, energy, vibration, sound, organic or
inorganic matter, or transient reaction intermediate, which alone or in
combination is considered hazardous, hazardous waste, toxic or
pollutant, a deleterious substance, a contaminant or source of
pollution or contamination under applicable Environmental Laws
(including without limitation asbestos, PCB's and chlorinated
solvents);
(z) "Immovable Property" means all immovable property owned by the
Corporation;
(aa) "Indemnified Party" means the party entitled to indemnity pursuant to
this Agreement;
(bb) "Indemnifying Party" means the party obligated to provide indemnity
pursuant to this Agreement;
(cc) "Intellectual Property" means trade marks, trade names, business names,
patents, inventions, know-how, technology, copyrights, service marks,
brand names, industrial designs and any other industrial or
intellectual property owned or used by the Corporation in carrying on
the Business and any applications or registrations of the foregoing,
and any goodwill connected therewith, including, without limitation,
all licenses, marketing agreements, and all like rights used by or
granted to the Corporation in connection with the Business and any
right to register or otherwise apply for the protection on any of the
foregoing;
(dd) "Laws" means laws, statutes, ordinances, by-laws, regulations and
rules;
(ee) "Leased Property" means all immovable property leased by the
Corporation;
(dd) "Leases" means the leases pursuant to which the Corporation has leased
the Leased Property;
(ee) "Liabilities" means liabilities or obligations (direct or indirect,
contingent or absolute, matured or unmatured) of any nature whatsoever,
whether contractual, extra- contractual or statutory;
(ff) "Licenses" means all governmental and regulatory licenses, permits,
approvals, consents, certificates, registrations and authorizations;
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(gg) "Losses" in respect of any matter, means all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including, without limitation, all reasonable legal and other
professional fees and disbursements), interest, penalties and amounts
paid in settlement, arising directly or indirectly as a consequence of
that matter;
(hh) "Preferred Shares" means the preferred shares in the capital of the
Corporation;
(ii) "Purchase Price" means purchase price payable by the Purchaser to the
Vendor for the Purchased Shares;
(jj) "Purchased Shares" means all but not less than all the issued and
outstanding Common Shares and Preferred Shares;
(kk) "Release" means any spill, leak, discharge, disposal, dumping, pumping,
pouring, emptying, igniting, injection, leaching, or allowing to escape
of any Hazardous Substance;
(ll) "Shareholder Advance" means the advance made by 141982 to the
Corporation in the principal amount of $5,350,000, plus a portion,
equal to $200,000, of the interest accrued thereon;
(mm) "Tax Act" means the Income Tax Act (Canada) as amended from time to
time;
(nn) "Third Party" means the person asserting a Third Party Claim;
(oo) "Third Party Claim" means a Claim that arises as a result of a claim by
a person against the Indemnified Party;
(pp) "Time of Closing" means the time at which all of the closing conditions
provided for in this Agreement have been met or waived and the Parties
are prepared to close pursuant to this Agreement; and
(qq) "Time of Effective Closing" means 11:59 p.m. Eastern Standard Time on
the Closing Date.
1.2 CURRENCY. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are expressed in Canadian funds.
1.3 SECTIONS AND HEADINGS. The division of this Agreement into sections and the
use of headings are for convenience of reference only and shall not affect the
interpretation of this Agreement. Unless otherwise indicated, any reference in
this Agreement to a section or a Schedule refers to the specified section of or
Schedule to this Agreement.
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1.4 NUMBER, GENDER AND PERSONS. In this Agreement, words suggesting the singular
number only shall also include the plural and vice versa, words suggesting
gender shall include all genders and words suggesting persons shall include
individuals, corporations, partnerships, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entities.
1.5 ACCOUNTING PRINCIPLES. Any reference in this Agreement to generally accepted
accounting principles refers to generally accepted accounting principles as
approved from time to time by the Canadian Institute of Chartered Accountants or
any successor institute.
1.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties concerning the subject matter hereof and supersedes any prior
agreements, understandings, negotiations and discussions, whether written or
oral. There are no conditions, covenants, agreements, representations,
warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as provided herein.
1.7 TIME OF ESSENCE. Time shall be of the essence of this Agreement.
1.8 APPLICABLE LAW. This Agreement shall be construed, interpreted and enforced
in accordance with, and the respective rights and obligations of the parties
shall be governed by, the laws of the Province of Quebec and the federal laws of
Canada applicable therein.
1.9 SEVERABILITY. If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
that determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.
1.10 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of and
shall be binding on and enforceable by the parties and their respective
successors and permitted assigns. Subject to section 10.7, no party may assign
any of its rights or obligations hereunder without the prior written consent of
the other parties.
1.11 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Agreement shall be binding on any party unless consented to in writing by that
party. No waiver of any provision of this Agreement shall constitute a waiver of
any other provision, nor shall any waiver constitute a continuing waiver unless
otherwise expressly provided.
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1.12 SCHEDULES. The following Schedules are, or as the case may be upon
acceptance by the Purchase under Section 7.1(o) shall be, attached to and form
part of this Agreement:
Schedule 1.1(e) - Audited Financial Statements
Schedule 3.4 - Authorized and Issued Capital
Schedule 3.8 - No Violation
Schedule 3.10 - Movable Property
Schedule 3.11 - Immovable and Leased Property
Schedule 3.12 - Immovable Property Matters
Schedule 3.13 - Leases
Schedule 3.14 - Inventory
Schedule 3.15 - Accounts Receivable
Schedule 3.16 - Intellectual Property
Schedule 3.17 - Insurance Policies
Schedule 3.19 - Material Contracts and Consents
Schedule 3.20 - Licenses and Permits
Schedule 3.22 - Financial Statement Exceptions
Schedule 3.23 - Undisclosed Liabilities
Schedule 3.24 - Material Changes
Schedule 3.25 - Taxes
Schedule 3.26 - Litigation
Schedule 3.29 - Accounts and Attorneys
Schedule 3.30 - Directors and Officers
Schedule 3.31 - Dividends
Schedule 3.32 - Non-Arms Length Transactions
Schedule 3.33 - Environmental Matters
Schedule 3.34 - Employee Plans
Schedule 3.35 - Collective Bargaining
Schedule 3.36 - Employees
Schedule 3.38(a) - Major Customers
Schedule 3.38(b) - Accounts Payable
Schedule 3.39 - Product Warranties
Schedule 3.40 - Mergers
Schedule 7.1(k) - Budget for FYE July 31, 1999
Schedule 7.2(g) - Direction for Payment
Schedule 8.5 - Escrow Letter
If a matter required to be disclosed in a schedule is adequately disclosed in
one schedule, that disclosure need not be repeated in another schedule, provided
that all of the information required to be disclosed in all of the sections of
this Agreement has been provided with respect to the matter disclosed. To the
extent possible, disclosures shall be cross-referenced for clarity.
ARTICLE II-PURCHASE AND SALE OF PURCHASED SHARES
2.1 PURCHASE AND SALE. Subject to the terms and conditions hereof, the Vendor
covenants and agrees to sell, assign and
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transfer to the Purchaser and the Purchaser covenants and agrees to purchase
from the Vendor the Purchased Shares.
2.2 PURCHASE PRICE. The Purchase Price shall be the sum of $2,000,000, which
shall be payable as follows:
(a) $700,000 by wire transfer of immediately available funds to or to the
order of the Vendor at the Time of Closing, with the currency of that
payment to be selected by the Vendor, and notice of that selection
given to Purchaser no less than five (5) Business Days before Closing,
and the currency conversion, if any, to be calculated using the average
of the exchange rates published in the Wall Street Journal on the 30
Business Days immediately prior to the last day for giving notice under
this section.
(b) $1,300,000 in the form of the Promissory Note payable in two
installments of $650,000 each, the first installment due six (6) months
following the Closing Date, and the second installment due twelve (12)
months following the Closing Date. The Promissory Note shall bear
interest at the rate of six percent (6%) per annum, to be personally
guarantied by Xxxxx Xxxx and VP Sports, Inc. (the "Guaranty"). The
Promissory Note shall provide that in the event that the Purchaser or
the Corporation completes an equity offering following the Closing with
respect to the Corporation of $2,500,000 or more, then any of the
balance remaining due on the Promissory Note shall become payable.
Subject to the foregoing, the Promissory Note and the Guaranty shall be
in form and substance satisfactory to the parties thereto, acting
reasonably.
ARTICLE III-REPRESENTATIONS AND WARRANTIES OF VENDOR AND THE CORPORATION
The Vendor and the Corporation represent and warrant to the Purchaser as follows
and acknowledge that the Purchaser is relying on these representations and
warranties in connection with its purchase of the Purchased Shares:
3.1 ORGANIZATION. 141982 is a corporation duly incorporated and organized and
validly subsisting under the laws of Canada and has the corporate power to own
or lease its property, to own the Purchased Shares, to enter into this Agreement
and to perform its obligations hereunder. The Corporation is duly incorporated
and organized and validly subsisting under the laws of the Province of Quebec
and has the corporate power to own or lease its property, to carry on the
Business as it is now being conducted by the Corporation, to enter into this
Agreement and to perform its obligations hereunder. The Corporation is duly
qualified as a corporation to do business in each jurisdiction in which the
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nature of the Business or the property and assets owned or leased by it makes
that qualification necessary to avoid any material disadvantage or liability.
3.2 AUTHORIZATION. This Agreement has been duly authorized, executed and
delivered by each of the Vendor and the Corporation and is a legal, valid and
binding obligation of each of the Vendor and the Corporation, enforceable
against the Vendor or the Corporation, as the case may be, by the Purchaser in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency and other laws affecting the rights of creditors generally and except
that specific performance may be granted only in the discretion of a court of
competent jurisdiction.
3.3 NO OTHER AGREEMENTS TO PURCHASE. No person other than the Purchaser has any
written or oral agreement or option or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option for the
purchase or acquisition from the Vendor of any of the Purchased Shares.
3.4 AUTHORIZED AND ISSUED CAPITAL. The authorized capital of the Corporation
consists of an unlimited number of Common Shares, of which 60 Common Shares (and
no more) have been duly issued and are outstanding as fully paid and
non-assessable, and an unlimited number of Preferred Shares issuable in series,
of which 1,839 Series 1 Preferred Shares, 14,200 Series 4 Preferred Shares, and
3,826 Series 5 Preferred Shares (and no more) have been duly issued and are
outstanding as fully paid and non-assessable. Prior to the Closing, the Vendor
shall complete the transactions outlined in Schedule 3.4 so that immediately
prior to the Closing the issued and outstanding share capital of the Corporation
shall consist of the number of Common Shares set forth on Schedule 3.4, all of
which shall have been duly issued and are outstanding as fully paid and
non-assessable. All of the Common Shares and Preferred Shares have been issued
in full compliance with all applicable laws and regulations, and the constating
documents of the Corporation. There are no other shares, classes of shares,
warrants, options, securities, conversion rights, subscription rights, exchange
rights or other rights of any nature issued or outstanding other than those
owned by the Vendor identified above.
3.5 OPTIONS. No person, firm or corporation has any agreement or option or any
right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription, allotment or issuance
of any unissued shares or other securities of the Corporation.
3.6 OWNERSHIP OF PURCHASED SHARES. 141982 is the registered and true owner of
all of the Purchased Shares, except for 1,839
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Series 1 Preferred Shares of which Stanimir is the registered and true owner,
and of which, immediately prior to the Closing 1411982 will be the registered
and true owner, in each case with good and valid title thereto, free and clear
of all Encumbrances and, without limiting the generality of the foregoing, none
of the Purchased Shares is subject to any voting trust, shareholder agreement or
voting agreement. Upon completion of the transactions contemplated by this
Agreement, all of the Purchased Shares will be owned by the Purchaser as the
registered and true owner, with good and valid title thereto (except for any
subsequent ranking Encumbrances that may be granted by the Purchaser).
3.7 SUBSIDIARIES. Except for Victoria Precision Ontario Inc., the Corporation
does not own and does not have any agreements of any nature to acquire, directly
or indirectly, any shares in the capital of or other equity or proprietary
interests in any person, firm or corporation, and the Corporation does not have
any agreements to acquire or lease any other business operations.
3.8 NO VIOLATION. Except as set forth in Schedule 3.8, the execution and
delivery of this Agreement by the Vendor and the Corporation and the closing of
the transaction provided for in this Agreement will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any
obligation of the Vendor or the Corporation under:
(1) any Contract to which the Vendor or the Corporation is a party
or by which any of them is, or either of their properties are,
bound;
(2) any provision of the constating documents, by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of the 141982 or the Corporation;
(3) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over the
Vendor or the Corporation;
(4) any License held by the Vendor or the Corporation or necessary
to the ownership of the Purchased Shares or the operation of
the Business; or
(5) any applicable Law; or
(b) the creation or imposition of any Encumbrance on any of the Purchased
Shares or any of the property or assets of the Corporation.
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3.9 BUSINESS OF THE CORPORATION. The Business is the only business operation
carried on by the Corporation. During the two years preceding the date of this
Agreement, there has not been any significant interruption of operations (being
an interruption of more than one day) of the Business. With the exception of
inventory in transit, all the tangible assets of the Corporation are situated at
the locations set out in Schedule 3.11.
3.10 TITLE TO MOVABLE PROPERTY. Except as set forth in Schedule 3.10, the
movable property and other assets of the Corporation (excluding the Immovable
Property, the Leased Property and the Intellectual Property) are owned by the
Corporation as the only owner thereof with a good, valid and marketable title
thereto, free and clear of all Encumbrances.
3.11 LOCATION OF IMMOVABLE PROPERTY. Schedule 3.11 sets forth a municipal
address of all the Immovable Property and Leased Property. The Corporation does
not own or lease and has not agreed to acquire or lease any real property or
interest in immovable property other than the Immovable Property and the Leased
Property. Nothing in this Section 3.11 shall be deemed to be a representation or
warranty as to matters with respect to which the Purchaser is to satisfy itself
under Section 7.1(l) of this Agreement.
3.12 IMMOVABLE PROPERTY MATTERS. Except as disclosed in Schedule 3.12, with
respect to the Immovable Property:
(a) no notice has been received by either the Vendor or the Corporation
that asserts that the buildings, structures, improvements or
appurtenances (or any equipment therein) on the Immovable Property and
Leased Property, or the operation or maintenance thereof, or any
provision of any federal, provincial or municipal Law;
(b) no notice had been received by either the Vendor or the Corporation
asserting that the Immovable Property, the Leased Property, the current
uses thereof and the conduct of the Business currently does not comply
in all material respects with all Laws including, without limitation,
those dealing with zoning, parking, access, loading facilities,
landscaped areas, building construction, fire and public health and
safety laws;
(c) no alteration, repair, improvement or other work has been ordered,
directed or requested in writing to be done or performed to or in
respect of the Immovable Property, the Leased Property or to any of the
plumbing, heating, elevating, water, drainage or electrical systems,
fixtures or works by any municipal, provincial or other competent
authority, or any insurance company providing insurance to the
Corporation, which alteration, repair, improvement or
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other work has not been completed, and neither the Vendor nor the
Corporation knows of any written notification having been given to it
of any outstanding work being ordered, directed or requested, other
than those that have been complied with;
(d) all accounts for work and services performed and materials placed or
furnished upon or in respect of the Immovable Property or the Leased
Property at the request or with the permission of the Corporation have
been fully paid and satisfied, and no person is entitled to claim a
prior claim or lien under the Civil Code of Quebec or similar
legislation in other provinces of Canada against the Immovable
Property, the Leased Property or any part thereof, other than current
accounts for which the payment due date has not yet passed;
(e) there is nothing owing in respect of the Immovable Property or the
Leased Property by the Corporation to any municipal corporation or to
any other corporation or commission owning or operating a public
utility for water, gas, electrical power or energy, steam or hot water,
or for the use thereof, other than current accounts for which the
payment due date has not yet passed;
(f) no notice has been given by any federal, provincial, municipal or other
competent authority regarding the taking or expropriation (or any
proceeding for the taking or expropriation) of any part of the
Immovable Property or the Leased Property;
(g) none of the Immovable Property or the Leased Property is currently
undergoing any alteration or renovation nor is any alteration or
renovation contemplated by the Vendor or Corporation; and
(h) there are no outstanding levies, charges or fees assessed against the
Immovable Property or the Leased Property by any public authority
(include development or improvement levies, charges or fees) other than
current accounts for which the payment due date has not yet passed.
(i) all amounts payable to the City of Montreal, in its capacity as
emphyteutic lessor, pursuant to the two emphyteutic leases relating to
that portion of the Immovable Property have been paid as of the date
hereof, and the Corporation is not in default of any of its other
obligations under the emphyteutic leases.
3.13 LEASED PROPERTY. Schedule 3.13 sets out the parties to each of the Leases,
their date of execution and expiry data, any options to renew, the locations of
the leased lands and premises
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and the rent payable thereunder. Except as described in Schedule 3.13, the
Corporation occupies the Leased Property and has the exclusive right to occupy
and use the Leased Property, each of the Leases is in good standing and in full
force and effect without amendment thereto, and neither the Corporation nor any
other party thereto is in breach of any material covenants, conditions or
obligations contained therein. The Vendor has provided a true copy of each Lease
to the Purchaser.
3.14 INVENTORIES. Except as disclosed in Schedule 3.14, the inventories of the
Corporation do not include any items that are slow moving, obsolete, damaged or
defective, the value of which will not have been written down on its books of
account to the lesser of replacement cost or net realizable market value as
reflected in the Audited Financial Statements. The inventory levels of the
Corporation have been maintained at the amounts as are required for the
operation of the Business as previously conducted, and the inventory levels are
adequate for the conduct of the Business as it is currently forecast by Vendor
and the Corporation in their business judgment to proceed for this fiscal year,
but no representation or warranty is given with respect to the levels being
adequate for the purposes of the Purchaser in its conduct of the Business
following the Closing.
3.15 ACCOUNTS RECEIVABLE. All accounts receivable, book debts and other debts
due or accruing to the Corporation are bona fide and good and, subject to an
allowance for doubtful accounts that will be reflected on the books of the
Corporation and the Audited Financial Statements, in accordance with generally
accepted accounting principles, are collectible without setoff or counterclaim
in the ordinary course of business. Schedule 3.15, supplied on June 16, 1999,
contains a complete and accurate aged list of all accounts receivable as of June
15, 1999, and there are no accounts on which any invoice has been re-dated, or
the time for payment extended by agreement.
3.16 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.16 is a complete and
accurate list of all Intellectual Property. Schedule 3.16 also includes complete
and accurate particulars of all registrations or applications for registration
of the Intellectual Property. Except as disclosed in Schedule 3.16, the
Corporation is entitled to use, either as owner or as licensee, as the case may
be, the Intellectual Property, free and clear of any Encumbrances, and is not a
party to or bound by any Contract or other obligation whatsoever that limits or
impairs its ability to sell, transfer, assign or convey, or that otherwise
affects, the Intellectual Property. Except as disclosed in Schedule 3.16, no
person has been granted any interest in or right to use any portion of the
Intellectual Property. Neither the Vendor nor the Corporation is aware of a
claim of any infringement or breach of any industrial or intellectual property
rights of any other person by the Corporation. The Vendor and the Corporation
have
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not received any notice that the conduct of the Business, including the use of
the Intellectual Property, infringes upon or breaches any industrial or
intellectual property rights of any other person. Neither the Vendor nor the
Corporation has any knowledge of any infringement or violation of the rights of
the Corporation in the Intellectual Property. Neither the Vendor nor the
Corporation is aware of any facts that casts doubt on the validity or
enforceability of any of the Intellectual Property, or of any order or agreement
limiting the use of the Intellectual Property. The Vendor has provided to the
Purchaser a true and complete copy of all Contracts and amendments thereto,
registrations, patent and certificates that comprise or relate to the
Intellectual Property.
3.17 INSURANCE. Unless otherwise specified in Schedule 3.17, the Corporation's
insurance coverage will be continued in full force and effect to and including
the Time of Closing. Schedule 3.17 sets out all insurance policies (specifying
the insurer, the type of insurance, the policy number, the amount of the
coverage, the amount of any self-insured retention or deductible, and any
pending claims thereunder) maintained by the Corporation on its property,
assets, business or personnel as of the date hereof. Vendor has provided to
Purchaser true and complete copies of the all inspection reports, loss runs,
claims listings or claim reports, if any, received from or made to insurance
underwriters or others as to the condition of the property and assets of the
Corporation, or claims made against the Corporation or its insurers, within the
last 5 years. The Corporation is not in material default with respect to any of
the provisions contained in any of its insurance policies and has not failed to
give any notice or present any claim under any insurance policy in a due and
timely fashion. The Vendor has provided to the Purchaser a true copy of each
insurance policy referred to in Schedule 3.17. At no time in the last 5 years
has the Corporation been denied any insurance coverage or had insurance coverage
terminated, or been advised that its insurance rates would be substantially
increased, or been required to make material alterations to its properties or
business as a condition of retaining insurance coverage. None of the
Corporations's insurance policies are subject to retro-active premium
adjustments.
3.18 NO EXPROPRIATION. No movable property or asset of the Corporation has been
taken or expropriated by any federal, provincial, state, municipal or other
authority nor has any notice or proceeding in respect thereof been given or
commenced nor is the Vendor or the Corporation aware of any intent or proposal
to give any notice or commence any such proceeding.
3.19 AGREEMENTS AND COMMITMENTS. Except as described in the Schedule 3.19 to
this Agreement, the Corporation is not a party to or bound by any Contract
relating to the property, assets,
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Business or operations of the Corporation, including, without limiting the
generality of the foregoing:
(a) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
(b) any collective bargaining agreement or other Contract with any labour
union;
(c) any continuing Contract obligating the Corporation to purchase
materials, supplies, equipment or services (i) involving more than
$10,000 in respect of each Contract, or (ii) which extends beyond June
1998;
(d) any employment or consulting Contract or any other written Contract
with any officer, employee or consultant other than those terminable by
the employer without cause on reasonable notice (less than 35 days) and
without payment of severance, commissions or similar compensation;
(e) any profit sharing, bonus, stock option, pension, retirement,
disability, stock purchase, medical, dental, hospitalization, insurance
or similar plan or agreement providing benefits to any current or
former director, officer, employee or consultant;
(f) any trust indenture, mortgage, promissory note, loan agreement,
guarantee or other Contract for the borrowing of money, the assumption
of debt, or a leasing transaction of the type required to be
capitalized in accordance with generally accepted accounting
principles;
(g) any commitment for charitable contributions;
(h) any Contract for capital expenditure in excess of $10,000 in the
aggregate;
(i) any Contract for the sale of any assets, other than sales of inventory
to customers in the ordinary course of the Business;
(j) any Contract pursuant to which the Corporation is a lessor of any
machinery, equipment, motor vehicle, office furniture, fixture or other
movable property;
(k) any confidentiality, secrecy or non-disclosure Contract (whether the
Corporation is a beneficiary or obliger thereunder) relating to any
proprietary or confidential information or any non-competition or
similar Contract;
(l) any license, franchise or other Contract or agreement that relates in
whole or in part to any Intellectual Property;
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(m) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any other similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other person (except for cheques
endorsed for collection in the ordinary course of business);
(n) any Contract that expires, or may expire if the same is not renewed or
extended at the option of any person other than the Corporation, more
than one year after the date of this Agreement;
(o) any Contract entered into by the Corporation other than in the ordinary
course of business;
(p) any Contract between the Corporation and the Vendor, or any Affiliate
of the Vendor; or
(q) any Contract which has a material effect on the properties, assets,
financial condition, results of operations or business prospects of the
Corporation.
The Corporation has performed all of the obligations required to be performed by
it and is entitled to all benefits under, and is not in material default or
alleged to be in material default in respect of, any Contract relating to the
property, assets, Business or operations of the Corporation, to which it is a
party or by which it is bound. All Contracts are in good standing and in full
force and effect, and no event, condition or occurrence exists that, after
notice or lapse of time or both, would constitute a material default under any
of the foregoing Contracts. The Vendor has provided to the Purchaser a true and
complete copy of each Contract listed or described on the Schedules and all
amendments thereto. There is no requirement under any Contract relating to the
Business or the Corporation to which the Vendor or the Corporation is a party or
by which it is bound, requiring the Vendor or the Corporation to give any notice
to, or to obtain the consent or approval of, any party to any Contract, relating
to either the consummation of the transactions contemplated by this Agreement or
effecting the Corporation's ability to continue to conduct the Business as it
was previously conducted, except for notifications, consents and approvals
described in Schedule 3.19 in the portion of that schedule entitled "Required
Consents." Notwithstanding the foregoing, this Section does not apply to
agreements regarding title to the Immovable Property.
3.20 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATION. The Corporation has
carried on its Business in compliance in all material respects with all
applicable Laws, judgments, decrees or orders. Schedule 3.20 sets out a complete
and accurate list of all Licenses held by or granted to the Corporation, and
there are
-16-
no other Licenses necessary to carry on the Business or to own or lease any of
the property or assets utilized by the Corporation in the Business. Each License
is valid, subsisting and in good standing and the Corporation is not in default
or breach of any term, condition or requirement (including but not limited to
any reporting and labeling requirements) of any License and, to the knowledge of
the Vendor and the Corporation, no proceeding is pending or threatened to revoke
or limit any License. The Vendor has provided a true and complete copy of each
License and all amendments thereto to the Purchaser. There is no requirement to
make any filing with, give any notice to or obtain any License as a condition to
the lawful consummation of the transactions contemplated by this Agreement. All
of the products sold by the Corporation comply in all material respects with all
applicable safety standards, labeling requirements and any other legal
requirements for products of that type in each of the markets or jurisdictions
in which those products have been and are sold by the Corporation.
Notwithstanding the foregoing, no representation or warranty is given as to
compliance by the Corporation, the Business or its assets with (i) Environmental
Laws (except as expressly set forth in Section 3.33), and (ii) Laws relating to
the Immovable Property (except as expressly set forth in Section 3.12), (iii)
the Investment Canada Act (Canada), (iv) the Competition Act (Canada) or (v) any
U.S. anti-trust laws.
3.21 Intentionally omitted
3.22 AUDITED FINANCIAL STATEMENTS. Except as disclosed in Schedule 3.22, the
Audited Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods,
will be correct and complete and will present fairly the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and financial condition of
the Corporation as of the respective dates of the Audited Financial Statements
and the sales, earnings and results of operations, and cash flows of the
Corporation for the respective periods covered by the Audited Financial
Statements.
3.23 BOOKS AND RECORDS; UNDISCLOSED LIABILITIES. The books and records of the
Corporation fairly and correctly set out and disclose in accordance with
generally accepted accounting principles the financial position of the
Corporation as at the date thereof and all financial transactions of the
Corporation have been accurately recorded in those books and records. The
Corporation does not have any Liabilities, except (a) as reflected, reserved
against or given effect to in the Audited Financial Statements; (b) as disclosed
in Schedule 3.23; or (c) Liabilities incurred in the ordinary course of business
since July 31, 1998, which will not individually or in the aggregate be
materially adverse to, or result in a material increase in the
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current or long term liabilities or obligations of the Corporation. To the
knowledge of the Vendor and the Corporation, there is no basis for assertion
against the Corporation of any Liabilities except for Liabilities described in
clauses (a) through (c) of this Section. Notwithstanding the foregoing, the
Vendor and the Corporation are not responsible for Liabilities of the
Corporation under this Section 3.23 unless that Liability arises from the breach
of a representation or warranty made by the Vendor or the Corporation under any
other section of Article III of this Agreement.
3.24 ABSENCE OF CHANGES. Except as disclosed in Schedule 3.24, since July 31,
1998, the Corporation has carried on the Business and conducted its operations
and affairs only in the ordinary and normal course consistent with past practice
and there has not been:
(a) any material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, operations, earnings, business or
prospects of the Corporation;
(b) any damage, destruction or loss (whether or not covered by insurance)
affecting the property or assets of the Corporation;
(c) any obligation or liability (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) incurred by the
Corporation, other than those incurred in the ordinary and normal
course of business, consistent with past practice;
(d) any payment, discharge or satisfaction of any Encumbrance, liability or
obligation of the Corporation (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) other than payment of
accounts payable and tax liabilities incurred in the ordinary course of
business consistent with past practice;
(e) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of the capital of the
Corporation or any direct or indirect redemption, purchase or other
acquisition of any capital shares;
(f) any issuance or sale by the Corporation, or any Contract entered into
by the Corporation or Vendor, for the issuance or sale by the
Corporation, of any shares in the capital of or securities convertible
into or exercisable for shares in the capital of the Corporation;
(g) any labour trouble adversely affecting the Corporation;
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(h) any license, sale, assignment, transfer, disposition, pledge, mortgage
or granting of a security interest or other Encumbrance on or over any
property or assets of the Corporation, other than sales of inventory to
customers in the ordinary and normal course of the Business;
(i) any write-down of the value of any inventory or any write-off as
uncollectible of any accounts or notes receivable or any portion
thereof of the Corporation in amounts exceeding $10,000 in each
instance or $50,000 in the aggregate;
(j) any cancellation of any debts or claims or any amendment, termination
or waiver of any rights of value to the Corporation in amounts
exceeding $10,000 in each instance or $50,000 in the aggregate;
(k) any general increase in the compensation of employees of the
Corporation (including, without limitation, any increase pursuant to
any Employee Plan or commitment), or any increase in any compensation
or bonus payable to any officer, employee, consultant or agent (having
an annual salary or remuneration in excess of $25,000 or the execution
of any employment contract with any officer or employee (having an
annual salary or remuneration in excess of $25,000) or the making of
any loan to, or engagement in any transaction with, any employee,
officer or director of the Corporation;
(l) any capital expenditures or commitments of the Corporation in excess of
$10,000 in the aggregate;
(m) any forward purchase commitments in excess of the requirements of the
Corporation for normal operating inventories or at prices higher than
the market prices;
(n) any forward sales commitments other than in the ordinary and normal
course of the Business or any failure to satisfy any accepted order for
goods or services;
(o) any change in the accounting or tax methods or practices followed by
the Corporation;
(p) any change adopted by the Corporation in its depreciation or
amortization policies or rates; or
(q) any change in the credit terms offered to customers of, or by supplies
to, the Corporation, other than in the ordinary course of business.
3.25 TAXES. The Corporation has duly filed on a timely basis all tax returns,
elections and reports required to be filed by it,
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and those tax returns, elections and reports are true complete and correct. The
Corporation has paid all taxes assessments, reassessments, governmental charges,
penalties, interest and fines due and payable by it in a timely manner, and no
reassessments, governmental charges, penalties, interest or fines are currently
owed which have not yet come due. The Corporation has made adequate provision
for taxes payable by it for the current period and any previous period for which
tax returns are not yet required to be filed. Except as set forth in Schedule
3.25, there are no audits, actions, assessments, suits, proceedings,
investigations or claims pending or, to the knowledge of the Corporation and the
Vendor, threatened against, the Corporation in respect of taxes, governmental
charges or assessments, nor are there any material matters under discussion with
any governmental authority relating to taxes, governmental charges or
assessments asserted by any governmental authority. The Corporation is not party
to any agreement or undertaking with respect to taxes including without
limitation undertakings with respect to deferrals of land transfer tax or with
respect to debt forgiveness under the Tax Act.
The Canadian federal income tax liability of the Corporation has been assessed
by Revenue Canada for all fiscal years up to and including the fiscal year end
July 31, 1996, and there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing of any tax return
by, or payment of any tax, governmental charge or deficiency against, the
Corporation. The Vendor has provided to the Purchaser a true copy of all tax
returns filed by the Corporation in respect of the five last completed fiscal
years of the Corporation. The Corporation has not been and is not currently
required to file any returns, elections or designations with any taxation
authority located in any jurisdiction outside Canada or outside the provinces of
Quebec and Ontario.
The Corporation has withheld from each payment made to any of its past or
present employees, officers or directors, and to any non-resident of Canada, the
amount of all taxes and other deductions required to be withheld therefrom,
including without limitation, all employee and employer portions for Workers'
Compensation, Canada Pension Plan and Unemployment Insurance and has paid the
same to the proper tax or other receiving officers within the time required
under any applicable legislation. The Corporation has remitted to the
appropriate tax authority when required by law to do so all amounts collected by
it on account of sales taxes including GST.
Neither the Corporation nor any subsidiary has acquired property from a
non-arm's length person as that term is defined in the Tax Act in circumstances
which would cause the Corporation or the subsidiary to become liable for any
taxes of the transferor.
-20-
3.26 LITIGATION. Except as described in Schedule 3.26, there are no actions,
suits, claims, governmental investigations, or proceedings (whether or not
purportedly against or on behalf of the Corporation) pending or, to the
knowledge of the Vendor or the Corporation, after due inquiry, threatened
against or affecting, the Corporation or the Vendor, or before or by any
federal, provincial, municipal or other governmental department, court,
commission, board, bureau, agency or instrumentality, domestic or foreign, or by
or before an arbitrator or arbitration board. Neither the Vendor nor the
Corporation is aware of any ground on which any action, suit or proceeding might
be commenced with any reasonable likelihood of success. Schedule 3.26 also sets
forth all judgments, consents, settlements, decrees, injunctions, or any other
judicial or administrative requirements outstanding against the Corporation or
Vendor, or by which they or their assets or business are bound. Except as
described in Schedule 3.26, none of the actions, suits, claims, investigations
or proceedings will have material adverse effect upon the properties, assets,
business or prospects of the Corporation.
3.27 RESIDENCY. The Vendor is a resident of Canada for the purposes of the Tax
Act.
3.28 GST AND QUEBEC SALES TAX REGISTRATION. The Corporation is a registrant for
purposes of the ETA whose registration number is 121015796RT and for the
purposes of An Act Respecting the Quebec Sales Tax (Quebec) whose registration
number is 1003359154TQ0001.
3.29 ACCOUNTS AND ATTORNEYS. Schedule 3.29 sets forth a true and complete list
showing:
(a) the name of each bank, trust company or similar institution in which
the Corporation has accounts or safe deposit boxes, the number or
designation of each account and safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto;
(b) the name of each person, firm, corporation or business organization
holding a general or special power of attorney from the Corporation and
a summary of the terms thereof; and
(c) the name of each person, firm, corporation or business organization
which has acted as an attorney or legal counsel on behalf of the
Corporation within the last 10 years.
3.30 DIRECTORS AND OFFICERS. Schedule 3.30 sets forth the names and titles of
all of the officers and directors of the Corporation.
3.31 DIVIDENDS. Except as disclosed in Schedule 3.31, since July 31, 1997, the
Corporation has not, directly or indirectly, declared or paid any dividends or
declared or made any other
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distribution on any of its shares of any class and has not, directly or
indirectly, redeemed, purchased or otherwise acquired any of its outstanding
shares of any class or agreed to do so, either directly or at the option of
another.
3.32 NON-ARM'S LENGTH TRANSACTIONS. Except as disclosed in Schedule 3.32, the
Corporation has not since July 31, 1997, made any payment or loan to, or
borrowed any moneys from or is otherwise indebted to, any officer, director,
employee, shareholder or any other person not dealing at arm's length with the
Corporation (within the meaning of the Tax Act), and except for usual employee
reimbursements and compensation paid in the ordinary and normal course of the
Business. The Corporation is not a party to any Contract with any officer,
director, employee, shareholder or any other person not dealing at arm's length
with the Corporation (within the meaning of the Tax Act). No officer, director
or shareholder of the Corporation and no entity that is an Affiliate or
Associate of one or more of those individuals:
(a) owns, directly or indirectly, any interest in (except for shares
representing less than one-quarter of one per cent of the outstanding
shares of any class or series of any publicly traded company), or is an
officer, director, employee or consultant of, any person which is, or
is engaged in business as, (i) a competitor of the Business or the
Corporation, or (ii) a lessor, lessee, supplier, distributor, sales
agent or customer of the Business or the Corporation;
(b) owns, directly or indirectly, in whole or in part, or has any interest
in, any property that the Corporation uses in the operation of the
Business; or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, the Corporation in connection with the Business, except for
any liabilities reflected in the Audited Financial Statements and
claims in the ordinary and normal course of Business, such as for
accrued vacation pay and accrued benefits under the Employee Plans.
3.33 ENVIRONMENTAL. To the knowledge of the Vendor and the Corporation, except
as described in Schedule 3.33:
(a) The Corporation has not received notice that it is potentially
responsible for any federal, provincial, municipal or local clean-up
site or corrective action under any Environmental Laws. The Corporation
has not received any request for information in connection with any
federal, provincial, municipal or local inquiries as to disposal sites
for Hazardous Substances.
-22-
(b) The Corporation has never received any notice of, nor been prosecuted
for an offense alleging non-compliance with any Environmental Laws, and
neither the Vendor nor the Corporation has settled any allegation of
noncompliance with Environmental Laws short of prosecution. There are
no orders or directions of any competent authority of which the
Corporation or Vendor has notice relating to environmental matters or
Environmental Laws requiring any remedial activity, work, repairs,
construction or capital expenditures for the Business or any property
of the Corporation.
(c) The Corporation has not received any notice that it is required to
obtained any Environmental Permits which it has not obtained. The
Corporation has not received any notice of any material violation of
any of its Environmental Permit, and no proceeding is pending or
threatened, to revoke or limit any Environmental Permit.
(d) Schedule 3.33 identifies all of the locations where Hazardous Material
used in whole or in part by the Corporation have been or are being
stored or disposed of (in those instances when the Hazardous Material
was stored or disposed of by the Corporation) at any time in the past 5
years, and all persons who have transported (off-site), stored or
disposed of any Hazardous Material for the Corporation in the past 5
years.
(e) The Vendor and the Corporation have delivered to the Purchaser true and
complete copies of all environmental audits, evaluations, studies,
assessments or tests in the possession or custody, or subject to the
control of the Vendor or Corporation, relating to the Vendor, the
Corporation or any Immovable Property or Leased Property.
(f) The Corporation has not permitted or caused the material Release of any
Hazardous Substances used in whole or in part by the Corporation or
resulting from the Business except in compliance with all Environmental
Laws, and the Corporation has made any required report regarding any
Release of a Hazardous Substance unless the Release or failure to
report would not create material liability on the part of the
Corporation.
(g) There are not now and to the knowledge of the Vendor and the
Corporation there never have been any underground or above ground
storage or disposal tanks on the Immovable Property.
3.34 EMPLOYEE PLANS. Schedule 3.34 identifies all Employee Plans and a true and
complete copy of each Employee Plan has been furnished to the Purchaser. Each
Employee Plan has been maintained in compliance with its terms and with the
requirements
-23-
prescribed by any and all statutes, orders, rules and regulations that are
applicable to each Employee Plan. The Vendor has delivered to the Purchaser the
actuarial valuations, if any, prepared for each Employee Plan during the past 5
years. Except as described in Schedule 3.34:
(a) all contributions to, and payments from, each Employee Plan that may
have been required to be made in accordance with the terms of that
Employee Plan, or with the recommendation of the actuary for that
Employee Plan, and, where applicable, the laws of the jurisdictions
that govern that Employee Plan, have been made in a timely manner;
(b) all material reports, returns and similar documents (including
applications for approval of contributions) for any Employee Plan
required to be filed with any governmental agency or distributed to any
Employee Plan participant have been duly filed or distributed on a
timely basis;
(c) there are no pending investigations by any governmental or regulatory
agency or authority involving or relating to an Employee Plan, no
threatened or pending claims (except for claims for benefits payable in
the normal operation of the Employee Plans), suits or proceedings
against any Employee Plan or asserting any rights or claims to benefits
under any Employee Plan that could give rise to a liability nor, to the
knowledge of the Vendor and the Corporation, are there any facts that
could give rise to any liability in the event of an investigation,
claim, suit or proceeding;
(d) no notice has been received by the Vendor or the Corporation of any
complaints or other proceedings of any kind involving the Corporation
or, to the Vendor's or the Corporation's knowledge, any of the
employees of the Corporation before any pension board or committee
relating to any Employee Plan or to the Corporation; and
(e) the assets of each Employee Plan are at least equal to the liabilities
of that Employee Plan based on the actuarial assumptions utilized in
the most recent valuation performed by a qualified actuary for that
Employee Plan, and neither the Purchaser nor any of its Associates or
Affiliates (other than the Corporation) will incur any liability for
any Employee Plan as a result of the transactions contemplated by this
Agreement.
3.35 COLLECTIVE LABOUR AGREEMENTS. Except as described in Schedule 3.35, the
Corporation has not made any Contracts with any labour union or employee
association nor made commitments to or conducted negotiations with any labour
union or employee association concerning any future agreements and, except as
set out in Schedule 3.35, neither the Vendor nor the Corporation is
-24-
aware of any current attempts to organize or establish any labour union or
employee association with respect to any employees of the Corporation, nor is
there any certification of any union with regard to a bargaining unit.
3.36 EMPLOYEES. Schedule 3.36 contains a complete and accurate list of the names
of all individuals who are employees of the Corporation specifying:
(a) with respect to the unionized employees, the position or job
classification of the employee, the employee's rate of hourly pay,
whether or not the employee is absent for any reason such as lay off,
leave of absence or workers' compensation; and
(b) with respect to salaried employees, the length of service, age, title,
rate of salary and commission structure for each employee.
Except as disclosed in Schedule 3.36, no notice has been received by the
Corporation of any complaint filed by any of the employees against the
Corporation claiming that the Corporation has violated the Labour Standards Act
(Quebec) or the Charter of Human Rights and Freedoms (Quebec) (or any other
applicable employee or human rights or similar legislation in the other
jurisdictions in which the Business is conducted or the Corporation operates),
or of any complaints or proceedings of any kind involving the Corporation or, to
the Vendor's and the Corporation's knowledge, after due inquiry, any of the
employees of the Corporation before any labour relations board, except as
disclosed in Schedule 3.36. Except as disclosed in Schedule 3.36, there are no
outstanding orders or charges against the Corporation under an Act respecting
Occupational Health and Safety (Quebec) (or any applicable health and safety
legislation In the other jurisdictions in which the Business is conducted).
Except as disclosed in Schedule 3.36, all levies, assessments and penalties made
against the Corporation pursuant to an Act respecting Industrial Accidents and
Occupational Diseases (Quebec) (and any applicable workers' compensation
legislation in the other jurisdictions in which the Business is conducted) have
been paid by the Corporation and the Corporation has not been reassessed under
any workers' compensation laws during the past 5 years.
3.37 EMPLOYEE ACCRUALS. All accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, Canada Pension Plan premiums, accrued
wages, salaries and commissions and employee benefit plan payments have been
reflected in the books and records of the Corporation.
3.38 CUSTOMERS AND SUPPLIERS; PAYABLES. Schedule 3.38(a) sets out the major
customers of the Corporation (being the 25 largest
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customers of the Corporation by sales for the period August 1, 1998, to June 15,
1999), and there has been no termination or cancellation of, and no modification
or adverse change in, the Corporation's business relationship with any major
customer or group of major customers. All of the accounts payable which are
shown on the Audited Financial Statements, and any accounts payable which arose
since July 31, 1998 ("Payables"), are, and as of the Closing Date will be, (i)
due and payable in the ordinary course of business to persons who are not
Affiliates of Vendor or the Corporation, (ii) current as of July 31, 1998, and
as of the Closing Date will be current, and in amounts consistent with past
practices of the Corporation in paying its trade creditors, and (iii) in
compliance with applicable trade creditor payment terms for payment by the
Corporation without penalty or interest. Schedule 3.38(b), to be supplied by
June 16, 1999, includes an aged list of unpaid Payables as of June 15, 1999, and
not more than $100,000 of the Payables reflected on that list has been
outstanding for in excess of ninety (90) days from their respective due dates.
3.39 PRODUCT WARRANTIES. Schedule 3.39 is a complete list of all express,
written warranties given to purchasers of products supplied by the Corporation.
Schedule 3.39 sets for the warranty expense for the past three years.
3.40 NO PREDECESSORS. Except as described in Schedule 3.40, no corporation has
been merged with the Corporation, by amalgamation, dissolution, arrangement or
otherwise, in a manner that the Corporation is or may become liable for any
liabilities (contingent or otherwise) of any kind whatsoever of corporation.
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows and acknowledges
and confirms that the Vendor is relying on these representations and warranties
in connection with the sale by the Vendor of the Purchased Shares:
4.1 ORGANIZATION. The Purchaser is a corporation validly subsisting under the
laws of the Province of Quebec and it has the corporate power to enter into and
perform its obligations pursuant to this Agreement.
4.2 NO VIOLATION. The execution and delivery of this Agreement by the Purchaser
and the consummation of the transactions provided for herein will not result in
the violation of, or constitute a default under, or conflict with or cause the
acceleration of any obligation of the Purchaser under:
(a) any Contract to which the Purchaser is a party or by which it is bound;
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(b) any provision of the constating documents or by-laws or resolutions of
the board of directors (or any committee thereof) or shareholders of
the Purchaser;
(c) any judgment, decree, order or award of any court, governmental body or
arbitrator having jurisdiction over the Purchaser; or
(d) any applicable Law.
4.3 AUTHORIZATION. This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser by the Vendor in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other laws affecting the enforcement of rights of creditors generally and except
that specific performance may only be granted in the discretion of a court of
competent jurisdiction.
4.4 CONSENTS AND APPROVALS. Except for the post-closing filing required with
Investment Canada, there is no requirement for the Purchaser to make any filing
with, give any notice to or obtain any license, permit, certificate,
registration, authorization, consent or approval of, any government or
regulatory authority as a condition to the lawful consummation of the
transactions contemplated by this Agreement.
ARTICLE V-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND THE
CORPORATION. To the extent that they have not been fully performed at or prior
to the Time of Closing, the covenants, representations and warranties of the
Vendor and the Corporation contained in this Agreement and any agreement,
instrument, certificate or other document executed or delivered pursuant hereto
shall survive the closing of the transactions contemplated hereby and shall
continue for the benefit of the Purchaser for the applicable limitation or
prescription period notwithstanding the Closing, or any investigation made by or
on behalf of the Purchaser, or any knowledge of the Purchaser, except that:
(a) the representations and warranties set out in sections 3.1, 3.2, 3.3,
3.4, 3.5 and 3.6 (and the corresponding representations and warranties
set out in the Closing Certificates shall survive and continue in full
force and effect without limitation of time (subject to any statutory
limitations or prescription periods);
(b) the representations and warranties set out in section 3.25 (and the
corresponding representations and warranties set out in the Closing
Certificates) shall survive the closing
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of the transactions contemplated hereby and continue in full force and
effect until, but not beyond, the expiration of the period, if any,
during which an assessment, reassessment or other form of recognized
document assessing liability for tax, interest or penalties under
applicable tax legislation with respect to any taxation year to which
any representations and warranties extend could be issued under the tax
law to the Corporation, provided the Corporation did not file any
waiver or other document extending that period; and
(c) the representations and warranties set out in sections 3.7 to 3.24,
3.26 to 3.40 (and the corresponding representations and warranties set
out in the Closing Certificates) shall survive the closing of the
transactions contemplated hereby and continue in full force and effect
until the third anniversary of the Closing Date.
5.2 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
representations and warranties of the Purchaser contained in this Agreement or
in any document, certificate or undertaking given pursuant hereto shall survive
the closing of the transactions contemplated hereby and shall continue for the
benefit of the Vendor until the third anniversary of the Closing Date
notwithstanding the Closing, or any investigation made by or on behalf of the
Vendor, or any knowledge of the Vendor.
ARTICLE VI-COVENANTS
6.1 ACCESS TO THE CORPORATION. The Vendor shall forthwith make available to the
Purchaser and its authorized representatives and, if requested by the Purchaser,
provide a copy (to the extent practical) to the Purchaser of, all title
documents, Contracts, financial statements, minute books, share certificate
books, share registers, plans, reports, licenses, orders, permits, books of
account, accounting records, constating documents and all other documents,
information or data relating to the Corporation and the Business in its
possession, or subject to its direction.
Subject to the prior consent of the Vendor, which shall not unreasonably be
withheld, and to Vendor's reasonable supervision as to timing and avoiding
interference with the ongoing conduct of the Business, and with Vendor's
observation (at Vendor's option), the Vendor and the Corporation shall afford
the Purchaser and its authorized representatives, consultants and professionals
reasonable opportunity to:
(a) have full access to the Business and the property, assets,
undertakings, records and documents of the Corporation so as to (i)
review any aspect of the financial and business records of the
Corporation, (ii) make any physical review of the assets of the
Business as may be necessary to enable the
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confirmation of the values carried on the respective balance sheets of
the Corporation for those assets, to the reasonable satisfaction of the
Purchaser, and (iii) make any other survey, review, search or
investigation of the business, resources and obligations of the
Corporation as the Purchaser may determine to be necessary in its
reasonable discretion;
(b) conduct the inquiries, inspections, examinations, interviews and
testing concerning environmental matters at any locations of the
Business as the Purchaser may determine, in sole reasonable discretion
of Purchaser's environmental consultant, as may be required to satisfy
the Purchaser concerning environmental matters;
(c) fully inspect, examine and test the buildings and equipment of the
Corporation in order to determine the condition thereof and compliance
with applicable laws, rules, regulations and codes;
(d) make any survey, inspection or measurements necessary for the
preparation or updating of a certificate of location and land survey;
At the reasonable request of the Purchaser, the Vendor shall execute or cause to
be executed those consents, authorizations and directions as may be necessary to
permit any inspection of the Business and any property of the Corporation or to
enable the Purchaser or its authorized representatives to obtain full access to
all files and records relating to the Corporation and any of the assets of the
Corporation maintained by governmental or other public authorities.
At the Purchaser's request, but subject to maintaining the confidentiality of
the transactions contemplated by this Agreement until the closing hereunder has
occurred, the Vendor shall co-operate with the Purchaser in arranging any
meetings that the Purchaser should reasonably request with (which meetings shall
be done in a manner reasonably calculated to avoid harm to the Business):
(a) employees of the Corporation;
(b) customers, suppliers, distributors or others who have or have had a
business relationship with the Corporation; and
(c) auditors, solicitors or any other persons engaged or previously engaged
to provide services to the Corporation who have knowledge of matters
relating to the Corporation and the Business.
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The exercise of any rights of inspection by or on behalf of the Purchaser under
this section 6.1 shall not alter or otherwise affect the representations and
warranties of the Vendor and the Corporation hereunder, which shall continue in
full force and effect as provided in section 5.1. Failure by the Vendor to
timely permit reasonable access and cooperation provided for in this section
shall be cause for the Purchaser to terminate this Agreement without liability
on the part of either party, provided that the Purchaser shall be required to
repair any damage to the Immovable Property and equipment of the Corporation
caused by any inspection or testing pursuant to the Agreement.
6.2 DELIVERY OF BOOKS AND RECORDS. At the Time of Closing there shall be
delivered to the Purchaser, by the Vendor, all of the books and records of and
relating to the Corporation and the Business in its possession, or subject to
its control, including those in possession of agents, accountants or attorneys.
The Purchaser agrees that it will preserve the books and records so delivered to
it for a period of six years from the Closing Date, or for any longer period
that may be required by any applicable law, and will permit the Vendor or its
authorized representatives reasonable access thereto in connection with the
affairs of the Vendor relating to its matters, but the Purchaser shall not be
responsible or liable to the Vendor for or as a result of any accidental loss or
destruction of or damage to any books or records.
6.3 USE OF NAME. The Vendor agrees that from and after the Closing Date neither
the Vendor nor any of its Associates or Affiliates will use the names Victoria
Precision, Leader or Minelli or any part thereof or any similar words.
6.4 CONDUCT PRIOR TO CLOSING. Without in any way limiting any other obligations
of the Vendor and the Corporation hereunder, during the period from the date
hereof to the Time of Closing:
(a) CONDUCT BUSINESS IN THE ORDINARY COURSE. The Vendor shall cause the
Corporation to conduct, and the Corporation shall conduct, the Business
and the operations and affairs of the Corporation only in the ordinary
and normal course of business consistent with past practice, provided
that the Vendor shall not enter into any Contracts with respect to the
Corporation for a capital expenditure in excess of $50,000, or any
other Contract obligating the Corporation for more than $250,000,
without the consent of the Purchaser, which consent shall not be
unreasonably withheld;
(b) CONTINUE INSURANCE. The Vendor shall cause the Corporation to continue,
and the Corporation shall continue, to maintain in full force and
effect all policies of insurance or renewals thereof now in effect,
shall take out, at the expense of the Purchaser, any additional
insurance as may be
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reasonably requested by the Purchaser and shall give all notices and
present all claims under all policies of insurance in a due and timely
fashion;
(c) CONTRACTUAL CONSENTS. The Vendor shall use its commercially reasonable
best efforts to give or obtain or cause the Corporation to give or
obtain, and the Corporation shall use its best efforts to obtain, the
notices, consents and approvals described in Schedule 3.19, provided
that the failure to obtain the consent of (i) La Compagnie
d'Assurance-vie Manufacturers under the Deed of Loan referred to in
Schedule 3.19 and (ii) the Royal Bank of Canada under the Letter
Agreement referred to in Schedule 3.19 shall not be a condition to
Closing;
(d) PRESERVE BUSINESS. The Vendor shall use its commercially reasonable
best efforts to preserve, and cause the Corporation to preserve intact,
and the Corporation shall use its best efforts to preserve intact, the
Business and the property, assets, operations and affairs of the
Corporation and to carry on the Business and the affairs of the
Corporation as currently conducted, and to promote and preserve for the
Purchaser the goodwill of suppliers, customers and others having
business relations with the Corporation;
(e) DISCHARGE LIABILITIES. The Vendor shall cause the Corporation to pay
and discharge, and the Corporation shall pay and discharge, the
liabilities of the Corporation in the ordinary course of business in
accordance and consistent with the previous practice of the
Corporation, except those contested in good faith by the Corporation;
(f) CORPORATE ACTION. The Vendor shall use its best efforts to take and
cause the Corporation to take, and the Corporation shall use its best
efforts to take, all necessary corporate action, steps and proceedings
to approve or authorize, validly and effectively, the execution and
delivery of this Agreement and the other agreements and documents
contemplated hereby and to complete the transfer of the Purchased
Shares to the Purchaser and to cause all necessary meetings of
directors and shareholders of the Vendor and the Corporation to be held
for that purpose; and
(g) BEST EFFORTS. The Vendor shall use its commercially reasonable best
efforts to satisfy the conditions contained in subsections 7.1(a) and
7.1(b).
6.5 DELIVERY OF DOCUMENTS. The Vendor shall deliver to the Purchaser all
necessary transfers, assignments and other documentation reasonably required to
transfer the Purchased Shares to the Purchaser with a good and valid title, free
and
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clear of all Encumbrances, except for the Pledge and any Encumbrances that may
be granted by the Purchaser.
6.6 DELIVERY OF 141982'S AND CORPORATION'S CORPORATE AND CLOSING DOCUMENTATION.
The Vendor shall deliver to the Purchaser a certificate of compliance with
respect to 141982 and a certificate of attestation with respect to the
Corporation, and copies, certified by a senior officer of the Vendor and the
Corporation, respectively, dated as of the Closing Date, of the constating
documents and by-laws of each of 141982 and the Corporation and of the
resolutions of each of 141982 and the Corporation authorizing the execution,
delivery and performance by 141982 and the Corporation of this Agreement and any
documents to be provided by either of them pursuant to the provisions of this
Agreement. The Vendor shall also execute and deliver or cause to be executed and
delivered to the Purchaser copies of any other documents relevant to the closing
of the transaction contemplated hereby as the Purchaser, acting reasonably, may
request.
6.7 DELIVERY OF PURCHASER'S CLOSING DOCUMENTATION. The Purchaser shall deliver
to the Vendor a certificate of good standing and copies, certified by a senior
officer of the Purchaser, dated as of the Closing Date, of its certificate of
incorporation and by-laws and of the resolution authorizing the execution,
delivery and performance by the Purchaser of this Agreement and any documents to
be provided by it pursuant to the provisions of this Agreement. The Purchaser
shall also execute and deliver or cause to be executed and delivered copies of
any other documents relevant to the closing of the transaction contemplated
hereby as the Vendor, acting reasonably, may request.
ARTICLE VII-CONDITIONS OF CLOSING
7.1 CONDITIONS OF CLOSING IN FAVOR OF THE PURCHASER. The sale and purchase of
the Purchased Shares is subject to the follows terms and conditions for the
exclusive benefit of the Purchaser, to be fulfilled or performed at or prior to
the Time of Closing, or as otherwise specified herein:
(a) REPRESENTATIONS AND WARRANTIES. Subject to the completion of the
Schedules under this Agreement by the Vendor and acceptance of those
Schedules by the Purchaser, the representations and warranties of the
Vendor and the Corporation contained in this Agreement shall be true
and correct at the Time of Closing, with the same force and effect as
if those representations and warranties were made at and as of the time
of Closing, and certificates of the President of 141982 and of the
President of the Corporation dated the Closing Date to that effect
shall be delivered to
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the Purchaser, those certificates to be in form and substance
satisfactory to the Purchaser, acting reasonably;
(b) COVENANTS. All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Vendor and the Corporation at
or before the Time of Closing shall have been complied with or
performed and certificates of the President of 141982 and the President
of the Corporation dated the Closing Date to that effect shall have
been delivered to the Purchaser, those certificates to be in form and
substance satisfactory to the Purchaser, acting reasonably;
(c) CONTRACTUAL CONSENTS. Subject to the proviso contained in Section
6.4(c) regarding the two loans, the Vendor shall have given or obtained
the notices, consents and approvals described in Schedule 3.19, in each
case in form and substance satisfactory to the Purchaser, acting
reasonably;
(d) NO ACTION OR PROCEEDING. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Shares contemplated
hereby;
(e) LEGAL MATTERS. All actions, proceedings, instruments and documents
required to implement this Agreement or instrumental thereto, and all
legal matters relating to the purchase of the Purchased Shares,
including title of the Vendor to the Purchased Shares, shall have been
approved as to form and legality by Xxxx & Xxxxxxx and Canadian counsel
for the Purchaser, acting reasonably;
(f) NON-COMPETITION AGREEMENT. The Vendor shall have executed and delivered
to the Purchaser a non-competition agreement, reasonably satisfactory
in form and substance to the parties thereto;
(g) LEGAL OPINION. The Vendor shall delivered to the Purchaser a favorable
opinion of McMaster Gervais, counsel to the Vendor, reasonably
satisfactory in form and substance to the parties;
(h) DIRECTORS AND OFFICERS. Any directors and officers of the Corporation
which the Purchaser may specify shall have resigned in favor of
nominees of the Purchaser effective as of the Time of Closing;
(i) RELEASE BY VENDOR, DIRECTORS AND OFFICERS. The Vendor and any directors
and officers of the Corporation which the Purchaser may specify shall
have executed and delivered, at the Time of Closing, releases in favor
of the Corporation and the Purchaser, reasonably satisfactory in form
and
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substance to the parties, and Michael Stanimir shall have executed and
delivered an employment agreement mutually satisfactory to the parties
thereto;
(j) FINANCING. The Purchaser shall have obtained the approval and advance
of financing for the transaction in amounts, on terms, and subject to
the conditions set forth in the letter from ABN AMRO Bank Canada (the
"Bank") dated February 3, 1999;
(k) NET INCOME AND SHAREHOLDERS EQUITY. The monthly Financial Statements
for the most recent month ended at least fifteen (15) days prior to the
Closing, to be delivered prior to the Closing, shall reflect financial
results as good as or better than those projected for the comparable
period in the Budget for the Fiscal Year ended July 31, 1999,
previously provided to the Purchaser and attached hereto as Schedule
7.1(k);
(l) TITLE OPINION AND SURVEY. The Purchaser shall have received a title
opinion as to the title of the Corporation to the Immovable Property
and an updated certificate of location and survey, with respect to
which the Purchaser shall be satisfied, acting reasonably;
(m) INSPECTION REPORT. The Purchaser shall have received an inspection
report as to the condition of the buildings (including structural
integrity and condition, compliance with zoning laws, municipal codes,
usage restrictions) and equipment (regarding the condition thereof) of
the Corporation, with respect to which the Purchaser shall be
satisfied, acting reasonably;
(n) ENVIRONMENTAL REPORT. The Purchaser shall have received an
environmental inspection report regarding the condition of the
Immovable Property and compliance with Environmental Laws, with respect
to which the Purchaser shall be satisfied, acting reasonably; and
(o) DISCLOSURE SCHEDULES. The Vendor shall supply to Purchaser updated
Schedules 3.15 and 3.38 as at June 15, 1999, and the Purchaser shall
have accepted the Schedules.
On or before June ___, 1999, Purchaser shall notify Vendor as to whether or not
the Financial Statements, reports and Schedules called for in Subsections (k),
(l) and (o) are satisfactory to the Purchaser. If any of the conditions
contained in this section 7.1 shall not be performed or fulfilled at or prior to
the Time of Closing as provided for in this Agreement, the Purchaser may (i)
waive compliance in writing with a condition or part of a condition, in which
event the Vendor shall incur no liability with respect to its non-compliance
with the condition
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or part of the condition waived, or (ii) terminate this Agreement by notice to
the Vendor. Upon the effectiveness of the notice, the obligations of the Vendor
and the Purchaser under this Agreement shall terminate without liability to
either party, other than with respect to the obligations contained in sections
10.1, 10.3, 10.4 and 10.5 of this Agreement, provided that if there is a breach
of representation or warranty in Article III by the Vendor which breach results
from an act or omission of the Vendor over which the Vendor has control, the
Purchaser may also bring an action against the Vendor for damages suffered by
the Purchaser for the non-performance or non-fulfillment of the relevant
condition.
7.2 CONDITIONS OF CLOSING IN FAVOR OF THE VENDOR. The purchase and sale of the
Purchased Shares is subject to the following terms and conditions for the
exclusive benefit of the Vendor, to be fulfilled or performed at or prior to the
Time of Closing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser contained in this Agreement shall be true and correct at
the Time of Closing, with the same force and effect as if the
representations and warranties were made at and as of the Time of
Closing, and a certificate of the President of the Purchaser dated the
Closing Date to the effect shall have been delivered to the Vendor,
that certificate to be in form and substance satisfactory to the
Vendor, acting reasonably;
(b) COVENANTS. All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Purchaser at or before the Time
of Closing shall have been complied with or performed and a certificate
of the President of the Purchaser dated the Closing Date to that effect
shall have been delivered to the Vendor, that certificate to be in form
and substance satisfactory to the Vendor, acting reasonably;
(c) NO ACTION OR PROCEEDING. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Shares contemplated
hereby;
(d) LEGAL MATTERS. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, shall
have been approved as to form and legality by McMaster Gervais, counsel
for the Vendor, acting reasonably;
(e) LEGAL OPINION. The Purchaser shall have delivered to the Vendor a
favorable opinion of the Quebec counsel to the Purchaser, reasonably
satisfactory in form and substance to the parties; and
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(f) EMPLOYMENT AGREEMENT. The Purchaser and Stanimir shall have executed
and delivered an employment agreement, reasonably satisfactory in form
and substance to the parties, pursuant to which Stanimir will be
employed by the Corporation and be paid $100,000 per year for his
services.
(g) DIRECTION FOR PAYMENT. The Purchaser shall have delivered and the Bank
shall have acknowledged the Direction for Payment attached hereto as
Schedule 7.2(g) providing for the repayment of the Shareholder Advance.
(h) INDEMNIFICATION. Xxxxx Xxxx shall have delivered an Indemnification
Agreement, mutually satisfactory to the parties hereto, acting
reasonably, of Stanimir and Gerald Stanimir with respect to any
personal liability which they may incur under the loan agreement with
Manulife referred to in Schedule 3.19, under section (f), item 1.
If any of the conditions contained in this section 7.2 shall not be performed or
fulfilled at or prior to the Time of Closing as provided for in this Agreement,
the Vendor may (i) waive compliance in writing with a condition or part of a
condition, in which event the Purchaser shall incur no liability with respect to
its non-compliance with the condition or part of the condition waived, or (ii)
terminate this Agreement by notice to the Purchaser. Upon the effectiveness of
the notice, the obligations of the Vendor and the Purchaser under this Agreement
shall terminate without liability to either party, other than with respect to
the obligations contained in sections 10.1, 10.3, 10.4 and 10.5 of this
Agreement, provided that if there is a breach of covenant, representation or
warranty in Article IV by the Purchaser which breach results from an act or
omission of the Purchaser over which the Purchaser has control, the Vendor may
also bring an action against the Purchaser for damages suffered by the Vendor
for the non-performance or non-fulfillment of the relevant condition.
ARTICLE VIII-CLOSING ARRANGEMENTS AND POST-CLOSING
8.1 PLACE OF CLOSING. The closing shall be at a location to be selected by the
parties.
8.2 TRANSFER AND PAYMENT. At the Time of Closing, upon fulfillment of all the
conditions set out in Article VII that have not been waived in writing by the
Purchaser or the Vendor, the Vendor shall deliver to the Purchaser certificates
representing all the Purchased Shares, duly endorsed in blank for transfer, with
all applicable security transfer taxes paid, and will cause transfers of the
Purchased Shares to be duly and regularly recorded in the name of the Purchaser,
or its nominee(s), and will cause a meeting of the board of directors of
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the Corporation to be held, at which the directors and officers of the
Corporation specified by the Purchaser will resign in favor of nominees of the
Purchaser whereupon, subject to all other terms and conditions hereof being
complied with, payment of the Purchase Price shall be made and satisfied in the
manner provided in Article II. The closing shall be effective as of the Time of
Effective Closing.
8.3 FURTHER ASSURANCES. Each party to this Agreement covenants and agrees that,
from time to time subsequent to the Closing Date, it will, at the request of the
other party, execute and deliver all documents, including, without limitation,
all additional conveyances, transfers, consents and other assurances and do all
other acts and things as any other party hereto, acting reasonably, may from
time to time request be executed or done in order to better evidence or perfect
or effectuate any provision of this Agreement or of any agreement or other
document executed pursuant to this Agreement or any of the respective
obligations intended to be created hereby or thereby.
8.4 CLOSING FINANCIAL STATEMENTS. As soon as practicable and in any event not
later than 90 calendar days following the Closing Date, the Vendor and Purchaser
shall cooperate to prepare the Closing Balance Sheet, the Closing Income
Statement, and the Closing Cash Flow Statement. The Closing Financial Statements
shall be prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the Audited Financial Statements and shall
present fairly the consolidated financial position of the Corporation as at the
Closing Date and the consolidated sales, earnings and results of operations, and
cash flows for the period between July 31, 1998, and the Closing Date.
8.5 REPAYMENT OF SHAREHOLDER ADVANCE. The Shareholder Advance shall be repaid
immediately following the Closing, upon disbursement of funds by the Bank
pursuant to the Direction of Payment attached as Schedule 7.2(g). Until the
Shareholder Advance is repaid, McMaster Gervais as escrow agent pursuant to the
terms of the Escrow Letter attached as Schedule 8.5 shall hold in escrow all of
the documents and funds to be delivered at the Closing. In the event that the
Shareholder Advance is not repaid within ten (10) days following the Closing,
the purchase and sale provided for in this Agreement shall be null and void, and
the documents and funds deposited in the escrow shall be returned pursuant to
the terms of the Escrow Letter.
ARTICLE IX-INDEMNIFICATION
9.1 INDEMNIFICATION BY THE VENDOR. The Vendor agrees to indemnify and save
harmless the Purchaser from all Losses
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suffered or incurred by the Purchaser as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Vendor or the Corporation of, or any inaccuracy of,
any representation or warranty of the Vendor or the Corporation made to
the Purchaser contained in this Agreement or in those agreements or
certificates delivered pursuant to this Agreement; and
(b) any breach or non-performance by the Vendor or the Corporation of any
covenant to be performed by it made to the Purchaser that is contained
in this Agreement or in those agreements or certificates delivered
pursuant to this Agreement.
The Vendor shall not be required to indemnify or save harmless the Purchaser for
any of the foregoing unless the Purchaser shall have provided notice to the
Vendor in accordance with section 9.3 (i) on or prior to the expiration of the
applicable time period related to that representation and warranty set out in
section 5.1, or (ii) in the case of a breach of a covenant (other than those in
Section 6.3 or Article X) not otherwise addressed by section 5.1, prior to the
third anniversary of the Closing Date. The Vendor shall not be liable to
indemnify Purchaser for any Losses until the aggregate amount of all Losses for
which indemnity may be sought exceeds $100,000, but thereafter shall be liable
for all Losses in excess of that $100,000 for which indemnity is provided for in
this Agreement. The Vendor shall not be liable to indemnify the Purchaser after
the Vendor has indemnified the Purchaser in the amount of the purchase price for
the Purchased Shares plus the Shareholder Advance.
9.2 INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to indemnify and save
harmless the Vendor from all Losses suffered or incurred by the Vendor as a
result of or arising directly or indirectly out of or in connection with:
(a) any breach by the Purchaser of or any inaccuracy of any representation
or warranty of the Purchaser made to the Vendor contained in this
Agreement or in those agreements, certificates or other documents
delivered pursuant to this Agreement; and
(b) any breach or non-performance by the Purchaser of any covenant to be
performed by it made to the Vendor that is contained in this Agreement
or in those agreements, certificates or other documents delivered
pursuant to this Agreement.
The Purchaser shall not be required to indemnify or save harmless the Vendor for
any of the foregoing unless the Vendor shall have provided notice to the
Purchaser in accordance with section 9.3
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(i) on or prior to the expiration of the applicable time period related to that
representation and warranty set out in section 5.2, or (ii) in the case of a
breach of a covenant (other than those in Article X) not otherwise addressed by
section 5.2, prior to the third anniversary of the Closing Date. The Purchaser
shall not be liable to indemnify the Vendor for any Losses until the aggregate
amount of all Losses for which indemnity may be sought exceeds $100,000, but
thereafter shall be liable for all Losses in excess of that $100,000 for which
indemnity is provided for in this Agreement. The Purchaser shall not be liable
to indemnify the Vendor after the Purchaser has indemnified the Vendor in the
amount of the purchase price for the Purchased Shares plus the Shareholder
Advance.
9.3 NOTICE OF CLAIM. In the event that the Indemnified Party shall become aware
of any Claim for which the Indemnifying Party agreed to indemnify the
Indemnified Party pursuant to this Agreement, the Indemnified Party shall
promptly give written notice of the Claim to the Indemnifying Party. That notice
shall specify whether the Claim is a Third Party Claim or a Direct Claim, and
shall also specify with reasonable particularity (to the extent that the
information is available) the factual basis for the Claim and the amount of the
Claim, if known. If, through the fault of the Indemnified Party, the
Indemnifying Party does not receive notice of any Claim in time to contest
effectively the determination of any liability susceptible of being contested,
the Indemnifying Party shall be entitled to set off against the amount claimed
by the Indemnified Party the amount of any Losses incurred by the Indemnifying
Party resulting from the Indemnified Party's failure to give notice on a timely
basis.
9.4 DIRECT CLAIMS. With respect to any Direct Claim, following receipt of notice
from the Indemnified Party of the Claim, the Indemnifying Party shall have 60
days to make any investigation of the Claim which it considers to be necessary
or desirable. For the purpose of this investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with any other information
as the Indemnifying Party may reasonably request. If both parties agree at or
prior to the expiration of that 60 day period (or any mutually agreed upon
extension thereof) to the validity and amount of the Claim, the Indemnifying
Party shall immediately pay to the Indemnified Party the full agreed upon amount
of the Claim, failing which the matter shall be referred to binding arbitration
in a manner the parties may agree or shall be determined by a court of competent
jurisdiction.
9.5 THIRD PARTY CLAIMS. With respect to any Third Party Claim, the Indemnifying
Party shall have the right, at its expense, to participate in or assume control
of the negotiation, settlement or defense of the Claim and, in that case, the
Indemnifying Party
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shall reimburse the Indemnified Party for all the Indemnified Party's
out-of-pocket expenses as a result of that participation or assumption. If the
Indemnifying Party elects to assume control, the Indemnified Party shall have
the right to participate in the negotiation, settlement or defense of the Third
Party Claim and to retain counsel to act on its behalf, provided that the fees
and disbursements of that counsel shall be paid by the Indemnified Party, unless
the Indemnifying Party consents to the retention of that counsel. If the
Indemnifying Party, having elected to assume that control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party
shall be entitled to assume control, and the Indemnifying Party shall be bound
by the results obtained by the Indemnified Party with resect to such Third Party
Claim. If the Indemnifying Party fails or refuses to defend a Third Party Claim
at its own expense, then the Indemnified Party shall be entitled to recover, all
reasonable costs and expenses of defending that Third Party Claim, including
reasonable attorneys fees and expenses. If any Third Party Claim is of a nature
where the Indemnified Party is required by applicable law to make a payment to
any Third Party with respect to the Third Party Claim before the completion of
settlement negotiations or related legal proceedings, the Indemnified Party may
make that payment and the Indemnifying Party shall, forthwith after demand by
the Indemnified Party, reimburse the Indemnified Party for that payment. If the
amount of any liability of the Indemnified Party under the Third Party Claim for
which payment was made, as finally determined, is less than the amount that was
paid by the Indemnifying Party to the Indemnified Party, the Indemnified Party
shall, forthwith after receipt of the difference from the Third Party, pay the
amount of that difference to the Indemnifying Party.
9.6 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to assume
control of the defense of any Third Party Claim, the Indemnified Party shall
have the exclusive right to contest, settle or pay the amount claimed. Whether
or not the Indemnifying Party assumes control of the negotiation, settlement or
defense of any Third Party Claim, the Indemnifying Party shall not settle any
Third Party Claim without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed; provided, however, that
the liability of the Indemnifying Party shall be limited to the proposed
settlement amount if the Indemnified Party's consent is not obtained for any
reason.
9.7 CO-OPERATION. The Indemnified Party and the Indemnifying Party shall
co-operate fully with each other with respect to Third Party Claims, and shall
keep each other fully advised with respect thereto (including supplying copies
of all relevant documentation promptly as it becomes available).
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9.8 EXCLUSIVITY. The provisions of this Article IX shall apply to any Claim for
breach of any covenant, representation, warranty or other provision of this
Agreement or any agreement, certificate or other document delivered pursuant
hereto (other than a claim for specific performance or injunctive relief) with
the intent that all Claims shall be subject to the limitations and other
provisions contained in this Article IX.
ARTICLE X-MISCELLANEOUS
10.1 CONFIDENTIALITY OF INFORMATION. Both the Vendor and the Purchaser shall
maintain the confidentiality of any information received from the other in
connection with the transactions contemplated by this Agreement, whether
received before or after the date of this Agreement. If the transactions
contemplated herein are not consummated, each shall return to the other any
confidential schedules, documents or other written information obtained from the
other in connection with this Agreement whether received before or after the
date of this Agreement and the Purchaser agrees that, except as otherwise
authorized by the Vendor, neither the Purchaser nor its representatives, agents
or employees will disclose to third parties any confidential information or
confidential data relating to the Corporation or the Business discovered by the
Purchaser or its representatives as a result of the Vendor and the Corporation
making available to the Purchaser and its representatives the information
requested by them in connection with the transactions contemplated herein. This
section shall not prohibit any of the parties from making use of any information
in order to enforce this Agreement in proper proceedings, nor from providing the
necessary information to their respective attorneys, accountants, consultants,
lenders and equity financing participants (who agree to keep that information
confidential as well).
10.2 NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered in person,
transmitted by telecopy or similar means of recorded electronic communication,
sent by reputable overnight delivery service or sent by registered mail, charges
prepaid, addressed as follows:
If to the Vendor:
Mr. Philip Stanimir and 141982 Canada Inc.
000 Xxxx Xxxx
Xxx Xxxxxx, Xxxxxx X0X 0X0
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With a copy to:
Mr. Michael Bantey
McMaster Gervais
1000 de La Xxxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
Telecopier No.: (000) 000-0000
If to the Purchaser:
Mr. Xxxxx Xxxx
Equitex, Inc.
0000 XXX Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxx
00 Xxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Any notice or other communication shall be considered to have been given and
received on the day on which it was delivered personally or transmitted by
telecopier (or, if that day is not a Business Day, on the next following
Business Day) or, if by overnight delivery, on the Business day after it is
sent, or if mailed, on the fourth Business Day following the date of mailing;
provided, however, that if at the time of mailing or within four Business Days
thereafter there is or occurs a labour dispute or other event that might
reasonably be expected to disrupt the delivery of documents by mail, any notice
or other communication hereunder shall be delivered or transmitted by means of
recorded electronic communication. Any party may at any time change its address
for notice from time to time by giving notice to the other parties in accordance
with this section 10.2.
10.3 COMMISSIONS. The Vendor agrees to indemnify and save harmless the Purchaser
from and against any Losses suffered or incurred by the Purchaser in respect of
any commission or other remuneration payable or alleged to be payable to any
broker, agent or other intermediary who purports to act or have acted for or on
behalf of the Vendor. The Purchaser agrees to indemnify and save harmless the
Vendor from and against any Losses suffered or incurred by the Vendor in respect
of any commission or other remuneration payable or alleged to be payable to any
broker,
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agent or other intermediary who purports to act or have acted for or on behalf
of the Purchaser.
10.4 CONSULTATION. No public announcement or press release not required by law
or by applicable stock exchange rule concerning the purchase and sale of the
Purchased Shares shall be made by the Vendor, the Corporation or the Purchaser
without the consent and joint approval of the Vendor and the Purchaser. The
parties shall consult with each other before issuing any press release or making
any other public announcement with respect to this Agreement or the transactions
contemplated hereby and, except as required by any applicable law or regulatory
requirement, neither the Vendor nor the Purchaser shall issue any press release
or make any public announcement without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed. Both before and
after the closing, the Purchaser shall not disclose the Purchase Price or the
compensation of any executive or manager of the Corporation without consent of
the Vendor.
10.5 DISCLOSURE. Prior to any public announcement of the transaction
contemplated hereby pursuant to section 10.4, neither party shall disclose this
Agreement or any aspect of the transaction except to its board of directors, its
senior management, its legal, accounting, financial or other professional
advisors, any financial institution contacted by it with respect to any
financing required in connection with this transaction and counsel to the
financial institution, or as may be required by any applicable law or any
regulatory authority or stock exchange having jurisdiction.
10.6 Intentionally omitted.
10.7 ASSIGNMENT BY PURCHASER. The Purchaser may assign its rights under this
Agreement in whole or in part to any other person affiliated with Purchaser
(upon providing notice of that assignment to Vendor; provided, however, that no
assignment shall relieve the Purchaser from any of its obligations hereunder.
10.8 BEST EFFORTS. The parties acknowledge and agree that, for all purposes of
this Agreement, an obligation on the part of any party to use its best efforts
to obtain any waiver, consent, approval, permit, license or other document shall
not require that party to make any payment to any person for the purpose of
procuring the same, other than payments for amounts due and payable to that
person, payments for incidental expenses incurred by that person and payments
required by any applicable law or regulation.
10.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall constitute an original and all
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of which taken together shall constitute one and the same instrument.
10.10 LIMITATION AND DISCLAIMER. Except as otherwise expressly set forth in
Article III of this Agreement, no representation or warranty is given by the
Vendor or the Corporation as the matters with respect to which Purchaser is to
satisfy itself under Sections 7.1(l), 7.1(m), or 7.1(n), nor shall the Vendor or
the Corporation be responsible for the accuracy of, or errors or omissions in,
the reports delivered to the Purchaser under Sections 7.1(l), 7.1(m), or 7.1(n)
unless the Vendor or the Corporation have knowingly supplied false information
to those persons preparing the reports.
10.11 LANGUAGE. The parties hereto state their express wish that this Agreement
be drawn in the English Language. Les parties ont exprime leur volonte expresse
que cette convention soit redigee en anglais.
10.12 EXECUTION BY FAX. The parties to this Agreement shall be entitled to rely
on delivery by fax of an executed copy of this Agreement, which shall create a
legal, valid and binding agreement between the parties to this Agreement in
accordance with the terms of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the parties as of June
16, 1999.
141982 CANADA INC. PHILIP STANIMIR
By:/S/ PHILIP STANIMIR /S/ PHILIP STANIMIR
---------------------------- ----------------------------
Its:
------------------------
VICTORIA PRECISION INC. 0000-0000 XXXXXX INC.
By:/S/ PHILIP STANIMIR /S/ XXXXX XXXXXXXXX
---------------------------- ----------------------------
Its: Its:TREASURER & CEO
------------------------ ------------------------
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