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STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXXX, INC.,
XXXXXX CANADA, INC., AS PURCHASER,
AND
XXXXXXX XXXXX, XXXXXXXXX XXXXXXX (XXXXX) AND 0000-0000 XXXXXX INC., AS SELLERS
OF THE CAPITAL STOCK OF
BI-OP LABORATORIES INC.
DATED AS OF JANUARY 13, 2003
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PREAMBLE..........................................................................................................1
ARTICLE I.........................................................................................................1
DEFINITIONS.......................................................................................................1
1.1 Definitions..............................................................................................1
1.2 Interpretation...........................................................................................8
ARTICLE II........................................................................................................8
PURCHASE OF SECURITIES; CONSIDERATION.............................................................................8
2.1 Purchase of Securities...................................................................................8
2.2 Consideration............................................................................................8
2.3 Certain Closing Adjustments and Covenants................................................................9
2.4 Section 338(g) Election.................................................................................10
2.5 Legending of Securities.................................................................................10
ARTICLE III......................................................................................................12
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND THE PURCHASER.......................................................12
3.1 Organization; Standing and Power........................................................................12
3.2 Authorization; Enforceability...........................................................................13
3.3 No Violation or Conflict................................................................................13
3.4 Consent of Governmental Authorities.....................................................................14
3.5 Brokers.................................................................................................14
ARTICLE IV.......................................................................................................15
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY....................................................15
4.1 Organization............................................................................................15
4.2 Authorization; Enforceability...........................................................................15
4.3 No Violation or Conflict................................................................................15
4.4 Consents of Governmental Authorities and Others.........................................................16
4.5 Conduct of Business.....................................................................................16
4.6 Litigation; Disputes....................................................................................17
4.7 Brokers.................................................................................................17
4.8 Compliance..............................................................................................17
4.9 Charter, Bylaws and Corporate Records...................................................................17
4.10 Capitalization of the Company...........................................................................18
4.11 Rights, Warrants, Options...............................................................................18
4.12 Financial Statements....................................................................................18
4.13 Absence of Undisclosed Liabilities......................................................................19
4.14 Title to Securities.....................................................................................19
4.15 Title to and Condition of Personal Property.............................................................19
4.16 Real Property...........................................................................................19
4.17 Insurance...............................................................................................21
4.18 Governmental Authorizations.............................................................................21
4.19 Intellectual Property Rights............................................................................22
4.20 Major Customers and Suppliers; Supplies.................................................................24
4.21 Related Parties.........................................................................................25
4.22 List of Accounts and Proxies............................................................................25
4.23 Employee Policies, Manuals, etc.........................................................................25
4.24 Labor Relations.........................................................................................25
4.25 Employment Agreements and Employee Benefit Plans........................................................26
4.26 Tax Matters.............................................................................................27
4.27 Material Agreements.....................................................................................30
4.28 Guaranties..............................................................................................31
4.29 Products................................................................................................31
4.30 Environmental and Safety Matters........................................................................32
4.31 Accounts Receivable, Notes Receivable...................................................................33
4.32 Accounts and Notes Payable..............................................................................34
4.33 Inventory Valuation.....................................................................................34
4.34 No Material Adverse Change..............................................................................34
4.35 Absence of Certain Business Practices...................................................................34
4.36 Insolvency..............................................................................................35
4.37 Review of Forms.........................................................................................35
4.38 Investment Representations..............................................................................35
4.39 Disclosure..............................................................................................36
ARTICLE V........................................................................................................36
INDEMNIFICATION; RELEASES, ETC...................................................................................36
5.1 Survival of the Representations and Warranties..........................................................36
5.2 Investigation...........................................................................................36
5.3 Indemnification Generally...............................................................................36
5.4 General Releases........................................................................................40
ARTICLE VI.......................................................................................................42
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CLOSING; DELIVERIES..............................................................................................42
6.1 Closing; Effective Date.................................................................................42
6.2 Closing Date Deliveries by the Sellers and the Company..................................................42
6.3 Closing Date Deliveries by Xxxxxx and the Purchaser.....................................................43
6.4 Closing Date Deliveries by Xxxxxx and/or the Purchaser to the Escrow Agent..............................44
ARTICLE VII......................................................................................................44
COVENANTS AND OTHER AGREEMENTS...................................................................................44
7.1 Non-competition.........................................................................................44
7.2 General Confidentiality.................................................................................45
7.3 Continuing Obligations; Equitable Remedies..............................................................46
7.4 Collection of Receivables...............................................................................47
ARTICLE VIII.....................................................................................................48
MISCELLANEOUS....................................................................................................48
8.1 Notices.................................................................................................48
8.2 Entire Agreement........................................................................................49
8.3 Binding Effect..........................................................................................49
8.4 Assignment..............................................................................................49
8.5 Waiver and Amendment....................................................................................49
8.6 No Third Party Beneficiary..............................................................................50
8.7 Severability............................................................................................50
8.8 Expenses................................................................................................50
8.9 Headings................................................................................................50
8.10 Counterparts............................................................................................50
8.11 Time of the Essence.....................................................................................50
8.12 Injunctive Relief.......................................................................................50
8.13 Remedies Cumulative.....................................................................................51
8.14 Governing Law...........................................................................................51
8.15 Jurisdiction and Venue..................................................................................51
8.16 Participation of Parties................................................................................51
8.17 Further Assurances......................................................................................51
8.18 Publicity...............................................................................................51
TABLE OF EXHIBITS
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of January 13, 2003,
by and among XXXXXX, INC., a Delaware corporation ("Xxxxxx"), XXXXXX CANADA,
INC., a corporation existing under the laws of the Province of New Brunswick and
a wholly-owned subsidiary of Xxxxxx (the "Purchaser"), XXXXXXX XXXXX, an
individual ("Xxxxx"), XXXXXXXXX XXXXXXX (XXXXX), an individual ("Xxxxxxxxx"),
and 0000-0000 XXXXXX INC., a corporation existing under the laws of the Province
of Quebec ("9117", and together with Xxxxx and Xxxxxxxxx, the "Sellers"), and
BI-OP LABORATORIES INC., a corporation existing under the laws of the Province
of Quebec (the "Company").
PREAMBLE
WHEREAS, the Sellers own all the outstanding capital stock of the Company;
WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser
desires to acquire, on the terms and subject to the conditions set forth in this
Agreement, all of the issued and outstanding capital stock of the Company;
NOW, THEREFORE, in consideration of the premises and the respective mutual
covenants, representations and warranties herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to terms defined elsewhere in this Agreement,
the following terms when used in this Agreement shall have the meanings
indicated below and shall be equally applicable to both the singular and the
plural:
"Affiliate" shall mean with respect to a specified Person, any other Person
which directly or indirectly controls, is controlled by, or is under common
control with such Person.
"After-Tax Basis" shall mean grossing up of an indemnification payment
under this Agreement for a Tax cost, if any, to the person receiving such
payment arising from the receipt or accrual thereof, and in the case of
indemnification payments under this Agreement, reduced by the Tax benefit, if
any, for the Person making such payment resulting from its or a Company's or a
Company Subsidiary's incurring the damages, loss, liability, or expense giving
rise to such payment or the payment of any Taxes indemnified hereunder.
"Agreement" shall mean this Stock Purchase Agreement, together with all
exhibits and schedules referred to herein.
"Applicable Law" shall mean, with respect to any Person, any international,
national, federal, regional, provincial, state or local treaty, statute, law,
code, ordinance, rule, administrative action, regulation, order, writ,
injunction, judgment, decree or other requirement
of any Governmental Authority and any requirements imposed by common law, civil
law or case law, applicable to such Person or any of its properties, assets,
officers, directors, employees, consultants or agents (in connection with their
activities on behalf of such Person or any of its Affiliates). Applicable Law
includes, without limitation, the national, regional, state, provincial, and
local laws and by-laws (including matters related to local zoning and building),
Environmental and Safety Requirements in Canada (whether federal, provincial,
municipal or local) and in the United States of America (whether federal, state,
or local).
"Average Closing Price" shall mean the average closing price of the Xxxxxx
Common Stock on the NASDAQ Small Cap Market for a ten (10) consecutive trading
day period ending January 8, 2003 as expressed in Canadian dollars based upon
the conversion rate published in the Wall Street Journal on such date which the
parties hereto confirm is $5.575626.
"Cash at Closing" shall have the meaning set forth in Section 2.2(a).
"Claims" shall have the meaning set forth in Section 5.4.
"Closing" shall have the meaning set forth in Section 6.1.
"Closing Date" shall mean the date that the Closing takes place.
"Closing Date Balance Sheet" shall have the meaning set forth in Section
2.3(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor law.
"Confidentiality and Non-Competition Agreements" shall have the meaning set
forth in Section 6.2(k).
"Company" shall have the meaning set forth in the preamble hereof.
"Competitive Business" shall have the meaning set forth in Section 7.1.
"Consideration Shares" shall have the meaning set forth in Section 2.2(b).
"Determining Accountants" shall have the meaning set forth in Section
2.3(c).
"Employment Agreement" shall have the meaning set forth in Section 6.5(i).
"Employee Plan" shall mean all the employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, profit sharing,
termination, change of control, pension, retirement, stock option, stock
purchase, stock appreciation, health, welfare, medical, dental, disability, life
insurance, workers compensation and similar plans, programs, arrangements or
practices relating to the current or former employees, officers or directors of
Company maintained, sponsored or funded by the Company, whether written or oral,
funded or unfounded,
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insured or self-insured, registered or unregistered, other than government
sponsored pension, employment insurance and workers compensation plans.
"Encumbrance" shall mean any claim, lien, charge, security interest,
pledge, mortgage, hypothecation, assignment or any other restriction or
encumbrance of any kind or nature.
"Environmental Lien" shall have the meaning set forth in Section 4.30(a).
"Environmental and Safety Requirements" shall have the meaning set forth in
Section 4.30(a).
"Escrow Agent" shall mean the party to the Escrow Agreement who is to act
as escrow agent thereunder, including all successor escrow agents as provided in
the Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement, dated of even date
herewith, between Xxxxxx, the Purchaser, the Sellers, and Xxxx Xxxxxxx, P.C., as
Escrow Agent, substantially in the form attached hereto as Exhibit 1.
"Escrow Amount" shall mean, collectively, the Escrowed Cash, interest
accrued thereon and the Consideration Shares.
"Escrow Release Date" shall have the meaning set forth in Section 2.3(c).
"Escrowed Cash" shall have the meaning set forth in Section 2.2(b).
"Excess Tangible Net Worth" shall have the meaning set forth in Section
2.3(c).
"Exchange Act" shall mean the United States Exchange Act of 1934, as
amended.
"Financial Statements" shall mean the audited balance sheet and the audited
statements of income, cash flows and retained earnings of the Company as of and
for the fiscal years ended May 31, 2002, and the unaudited balance sheet and
unaudited statements of income, cash flows and retained earnings of the Company
as of and for the fiscal years ended May 31, 2001 and 2000, including the notes
thereto and the reports thereon of the Sellers' independent auditors, and the
interim balance sheet and statements of income, cash flows and retained earnings
for the six month periods ended November 30, 2001 and 2002 each prepared in
accordance with GAAP, consistently applied with prior periods.
"GAAP" shall mean Canadian generally accepted accounting principles.
"Governmental Authority" shall mean any domestic, international, national,
territorial, regional, state, provincial, or local governmental authority,
quasi-governmental authority, instrumentality, court, commission or tribunal or
any regulatory, administrative or other agency, or any political or other
subdivision, department, ministry or branch of any of the foregoing or any
arbitrator or mediator.
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"Governmental Authorizations" shall have the meaning given such term in
Section 4.18.
"Guaranty" shall mean, as to any Person, all liabilities or obligations of
such Person, with respect to any indebtedness or other obligations of any other
person, which have been guaranteed, directly or indirectly, in any manner by
such Person, through an agreement, contingent or otherwise, to purchase such
indebtedness or obligation, or to purchase or sell property or services,
primarily for the purpose of enabling the debtor to make payment of such
indebtedness or obligation or to guarantee the payment to the owner of such
indebtedness or obligation against loss, or to supply funds to or in any manner
invest in the debtor, or otherwise.
"Indemnified Party" shall have the meaning set forth in Section 5.3(c).
"Indemnifying Party" shall have the meaning set forth in Section 5.3(c).
"Insurance Organizations" shall have the meaning set forth in Section
4.16(d).
"Intellectual Property" shall mean any United States, foreign,
international and state patents and patent applications, and continuations,
reissues, divisions, or disclosures relating thereto, industrial design
registrations, inventions, certificates of invention and utility models
(collectively, "Patents"); trademarks, service marks, and trademark or service
xxxx registrations and applications, trade names, trade dress, fictitious names,
assumed names, logos, slogans, and general intangibles of like nature, together
with all goodwill related to the foregoing (collectively, "Trademarks");
Internet domain names; copyrights, copyright registrations, renewals and
applications for copyright registrations, and mask works, mask work
registrations and applications for mask work registrations (collectively,
"Copyrights"); Software, technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models,
concepts and methodologies (collectively, "Trade Secrets"); rights of privacy
and publicity, including but not limited to, the names, likenesses, voices and
biographical information of real persons, and all license agreements and other
agreements granting rights relating to any of the foregoing.
"Investments" shall mean, with respect to any Person, all advances, loans
or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships or
joint ventures (whether by capital contribution or otherwise) or other similar
arrangement (whether written or oral) with any Person, including but not limited
to arrangements in which (i) the Person shares profits and losses, (ii) any such
other Person has the right to obligate or bind the Person to any third party, or
(iii) the Person may be wholly or partially liable for the debts or obligations
of such partnership, joint venture or other arrangement.
"ITA" shall mean the Income Tax Act (Canada).
"knowledge", whether capitalized or lower case, when used with respect to
(i) the Company and each of the Sellers, shall mean the knowledge of Xxxxx,
after due inquiry, and (ii)
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Xxxxxx or the Purchaser, shall mean the knowledge of their respective executive
officers, after due inquiry.
"Xxxxxx" shall have the meaning set forth in the preamble hereof.
"Xxxxxx Ancillary Agreements" shall mean the Escrow Agreement and the
certificates delivered by Xxxxxx at the Closing.
"Xxxxxx Common Stock" shall mean the common stock, par value $0.02 per
share, of Xxxxxx.
"Leased Property" shall have the meaning set forth in Section 4.16(a).
"Leases" shall have the meaning set forth in Section 4.16(a).
"Liabilities" shall have the meaning set forth in Section 4.13.
"Litigation" shall have the meaning set forth in Section 4.6.
"Lock-up Agreement" shall have the meaning set forth in Section 6.2(h).
"Losses" shall have the meaning set forth in Section 5.3(a).
"Material Agreements" shall have the meaning set forth in Section 4.27(a).
"Material Adverse Change" shall mean any material adverse change in the
condition (financial or otherwise), results of operations, assets, liabilities,
properties, business, or prospects of the Company or on the Company's
relationship with any Person, employee, customer, or supplier.
"Material Adverse Effect" shall mean any change, event or condition of any
character which has had or could have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities,
properties, business or prospects of the Company or on the Company's
relationship with any Person, employee, customer or supplier.
"Owned Property" shall have the meaning set forth in Section 4.16(a).
"Person" whether or not capitalized, shall mean any natural person,
corporation, unincorporated organization, partnership, limited liability
company, association, joint stock company, joint venture, trust or government,
or any agency or political subdivision of any government or any other entity.
"Product" shall have the meaning set forth in Section 4.29.
5
"Purchaser Ancillary Agreements" shall mean the Escrow Agreement, the
Employment Agreement, the Confidentiality and Non-Competition Agreements, and
the certificates delivered by the Purchaser at the Closing.
"Purchaser Indemnified Parties" shall have the meaning set forth in Section
5.3(a).
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Purchaser" shall have the meaning set forth in the preamble hereof.
"QSA" shall mean the Securities Act (Quebec), as amended.
"Real Property" shall have the meaning set forth in Section 4.16(a).
"Real Property Permits" shall have the meaning set forth in Section
4.16(d).
"Related Party" shall have the meaning set forth in Section 4.21.
"Release" shall mean any emission, spill, seepage, leak, migration, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
deposit, spraying, burial, abandonment, incineration, placement, introduction or
release.
"Reorganizations" shall mean any and all reorganizations executed by the
Sellers, Bi-Op, Inc., Gestion Xxxxxxx Xxxxx, Inc., the Company and/or any other
Person, as the case may be, prior to the date hereof, the most recent of which
is described in detail on Schedule 1.1 hereto.
"Review Period" shall have the meaning set forth in Section 2.3(b).
"SEC" shall mean the Securities and Exchange Commission of the United
States.
"Securities" shall have the meaning set forth in Section 4.10.
"Sellers" shall have the meaning set forth in the preamble hereof.
"Sellers' Ancillary Agreements" shall mean the Escrow Agreement, the
Confidentiality and Non-Competition Agreements, the Lock-Up Agreement, and the
certificates delivered by the Sellers at the Closing.
"Software" shall mean any and all (i) computer programs, including any and
all software implementations of algorithms, models and methodologies, whether in
source code or object code form, (ii) databases, compilations, and any other
electronic data files, including any and all collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts, technical and
functional specifications, and other work product used to design, plan,
organize, develop, test, troubleshoot and maintain any of the foregoing, (iv)
without limitation to the foregoing, the software technology supporting any
functionality contained on the Sellers'
6
Internet site(s), and (v) all documentation, including technical, end-user,
training and troubleshooting manuals and materials, relating to any of the
foregoing.
"Subsidiary" of any Person shall mean any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of at least fifty percent (50%), or which may be controlled, directly
or indirectly, by such Person.
"Tangible Net Worth" shall mean the value, determined in accordance with
GAAP, consistently applied, of (i) the Company's aggregate tangible assets,
including the Company's cash and cash equivalents, accounts receivable, real
estate, inventory, equipment, and pre-paid expenses, less (ii) the Company's
aggregate liabilities, each determined in accordance with GAAP consistently
applied with past practice.
"Tangible Net Worth Deficit" shall have the meaning set forth in Section
2.3(d)
"Tangible Property" shall mean all interests owned or claimed by the
Company (including options) in or to the plant, machinery, equipment, furniture,
leasehold improvements, fixtures, vehicles, structures, any related capitalized
items and other tangible property used in the business of the Company.
"Tax" or collectively "Taxes" shall mean means (A) any and all federal,
provincial, municipal, local and foreign taxes, assessments, reassessments and
other governmental charges, duties, impositions and liabilities including Canada
Pension Plan and Provincial Pension Plan contributions and unemployment
insurance contributions and employment insurance contributions and xxxxxxx'x
compensation and deductions at source, including taxes based upon or measured by
gross receipts, income, profits, sales, capital use and occupation, goods and
services, and value added, ad valorem, transfer, franchise, withholding, customs
duties, payroll, recapture, employment, excise and property taxes, together with
all interest, penalties, fines and additions imposed with respect to such
amounts and (B) any liability for the payment of any amounts of the type
described in clause (A) as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations under any
agreements or arrangements with any other Person with respect to such amounts
and including any liability for taxes of a predecessor entity.
"Tax Authority" means, with respect to any Tax, the Governmental Authority
that imposes such Tax, and the agency (if any) charged with the collection of
such Tax for such Governmental Authority.
"Tax Election" shall have the meaning set forth in Section 2.4.
"Tax Group" shall have the meaning set forth in Section 4.26.
"Tax Return" means any return, report or similar statement required to be
filed with respect to any Taxes (including any attached schedules), including,
any information return, claim for refund, amended return or declaration of
estimated Tax.
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"Tri-Logic Software" means the clinic management software developed and
owned by Xxxxx and Xxxxxxx Xxxxxxxxx ("Xxxxxxxxx") known as Tri-Logic that
supports and facilitates organization of a clinic's daily activities.
1.2 Interpretation. For purposes of this Agreement, (i) the words
"include," "includes" and "including" shall be deemed to be followed by the
words "without limitation", (ii) the words "herein", "hereof", "hereby",
"hereto" and "hereunder" refer to this Agreement as a whole, including the
Exhibits and Schedules, and (iii) the use of any gender shall be construed to
include all other genders, unless the context clearly indicates that less than
all the genders is intended. References herein to Articles, Sections, Exhibits
and Schedules mean the Articles and Sections of, and the Exhibits and Schedules
attached to, this Agreement.
1.3 Reference to Dollars. All references in this Agreement or any Purchaser
Ancillary Agreements or Seller Ancillary Agreements to dollars, unless otherwise
specifically indicated, are expressed in Canadian currency.
ARTICLE II
PURCHASE OF SECURITIES; CONSIDERATION
2.1 Purchase of Securities. Subject to the terms and conditions set forth
herein, on the Closing Date, the Sellers shall sell to Purchaser, and Purchaser
shall purchase from the Sellers, all of the Sellers' right, title and interest
in and to the Securities, which collectively constitute one hundred percent
(100%) of the issued and outstanding capital stock of the Company. At the
Closing, the Sellers shall deliver to Purchaser all of the certificates
representing the Securities together with stock powers separate from the
certificates duly executed by the Sellers in blank and sufficient to convey to
Purchaser good and marketable title to all of the Securities free and clear of
any and all Encumbrances and together with all accrued benefits and rights
attaching thereto.
2.2 Consideration. Subject to adjustment as set forth in Section 2.3, the
aggregate purchase price for the Securities shall be Two Million Four Hundred
Fifty Thousand Dollars ($2,450,000) (the "Purchase Price"), allocated between
the Sellers as set forth in Schedule 2.2 attached hereto and payable by
Purchaser to the Sellers as follows:
(a) $1,600,000 shall be payable in cash by wire transfer of
immediately available funds at the Closing (the "Cash at Closing") in the
proportions indicated in column B of Schedule 2.2;
(b) $250,000 (the "Escrowed Cash") shall be deposited by the
Purchaser with the Escrow Agent on the Closing Date, which amount shall be held
in an interest bearing account and distributed pursuant to the terms and
provisions hereof and the Escrow Agreement and in the proportions indicated at
column C of Schedule 2.2; and
8
(c) A number of shares of Xxxxxx Common Stock, having a value
based on the Average Closing Price, equal to $600,000 (the "Consideration
Shares") shall be issued by Xxxxxx in favor of the Sellers in the proportions
indicated at column D of Schedule 2.2 accordance with Schedule 2.2 attached
hereto and deposited with the Escrow Agent on the Closing Date, which amount
shall be held and distributed pursuant to the terms and provisions hereof and
the Escrow Agreement.
2.3 Certain Closing Adjustments and Covenants. (a) For purposes of
calculating the Tangible Net Worth, the Company's auditor or accountant shall
conduct, at the cost and expense of Xxxxxx and the Purchaser, a post-closing
audit of the Company promptly after the Closing and within 45 days following the
Closing Date, such auditor or accountant shall deliver to the Purchaser a
balance sheet of the Company as of December 31, 2002, prepared in accordance
with GAAP applied on a basis consistent with the Company's audited financial
statements for the year ended May 31, 2002 (the "Closing Date Balance Sheet").
The Purchaser and their accountants shall be afforded access to the workpapers
of the Company and its auditor or accountant used in connection with the
preparation of the Closing Date Balance Sheet. The Closing Date Balance Sheet
shall become final and binding upon the parties unless, within fifteen (15) days
following delivery to the Purchaser (such fifteen (15) day period hereinafter
referred to as the "Review Period"), notice is given by the Purchaser to each of
the Sellers of the Purchaser's dispute of the Closing Date Balance Sheet,
setting forth in reasonable detail the Purchaser's basis for such objection. If
notice of dispute is timely given by the Purchaser, the parties shall work
together in good faith to resolve such dispute. The parties hereto acknowledge
that the Sellers have operated the Company for the benefit of the Purchaser
since December 31, 2002, solely in the ordinary course of business consistent
with prior practice and any material transactions and agreements shall have been
approved by the Purchaser; provided, however, that this shall have no effect on
the closing adjustments set forth in this Section 2.3.
(b) If the parties are unable to reach agreement within 30
days after notice of dispute has been received by the Purchaser, the dispute
shall be referred for resolution to KPMG Peat Marwick, LLP in Montreal, Quebec
(the "Determining Accountants") as promptly as practicable. The Determining
Accountants will make a determination as to each item in dispute, which
determination will be (i) in writing, (ii) furnished to Xxxxxx, the Purchaser,
and the Sellers as promptly as practicable after the items in dispute have been
referred to the Determining Accountants, (iii) made in accordance with this
Agreement, and (iv) conclusive and binding upon each party hereto. Each of
Purchaser and the Sellers will use reasonable efforts to cause the Determining
Accountants to render their decision as soon as reasonably practicable,
including by promptly complying with all reasonable requests by the Determining
Accountants for information, books, records and similar items.
(c) In the event that the Company's Tangible Net Worth as set
forth on the Closing Date Balance Sheet is less than $1,000,000 (the "Tangible
Net Worth Deficit"), the Purchase Price will be reduced dollar for dollar in an
amount equal to the Tangible Net Worth Deficit by deducting an amount equal to
the Tangible Net Worth Deficit first from the Escrowed Cash and then from
Consideration Shares (valued at the Average Closing Price) within ten (10) days
following the end of the Review Period, or in the event such matter has been
referred to the Determining Accountants, within ten (10) days following the date
upon which the written
9
determination of the Determining Accountants becomes final and binding upon the
parties, or at such other time as the Purchaser and the Sellers may mutually
agree in writing (the "Escrow Release Date"). If the Tangible Net Worth Deficit
shall exceed the Escrow Amount, the amount of such excess shall be a liability
of the Sellers to Purchaser and shall be paid by the Sellers to the Purchaser by
certified or cashier's check within ten (10) days following the end of the
Review Period, or in the event such matter has been referred to the Determining
Accountants, within ten (10) days following the date upon which the written
determination of the Determining Accountants becomes final and binding upon the
parties, or at such other time as the Purchaser and the Sellers may mutually
agree in writing. In the event the Company's Tangible Net Worth as set forth on
the Closing Date Balance Sheet is greater than $1,000,000 (the "Excess Tangible
Net Worth"), the Sellers shall give written notice thereof to the Purchaser and
the cash portion of the Purchase Price shall be increased dollar for dollar in
an amount equal to the Excess Tangible Net Worth. The amount of the Excess
Tangible Net Worth, if any, shall be allocated to the Class A Shares and paid to
9117 and the amount of Escrowed Cash, if any after adjustment in the case of a
Tangible Net Worth Deficit, shall be paid to the Sellers in the proportions
indicated at column C of Schedule 2.2, and each of the Xxxxx, Xxxxxxxxx and 9117
expressly agree to such allocation. The amount of the Excess Tangible Net Worth
shall be paid by the Purchaser to the Sellers by wire transfer of immediately
available funds within ten (10) days following the end of the Review Period, or
in the event such matter has been referred to the Determining Accountants,
within ten (10) days following the date upon which the written determination of
the Determining Accountants becomes final and binding upon the parties, or at
such other time as the Purchaser and the Sellers may mutually agree in writing.
The fees and expenses of each party's respective accountants shall be borne by
such party. The fees and expenses of the Determining Accountants incurred in
connection with its review and determination shall be borne one-half by the
Purchaser and one-half by the Sellers.
2.4 Transfer Restrictions; Certain Covenants Regarding the Consideration
Shares. (a) The Consideration Shares shall be subject to the transfer
restrictions set forth in the Escrow Agreement and Lock-Up Agreement
(collectively, the "Agreements"). In addition to any transfer restrictions
contained in the Agreements, the Consideration Shares have not been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold within the United Stated or to, or for the
account or benefit of, U.S. persons, unless the Consideration Shares are
registered under the Securities Act or pursuant to an exemption from or in
transactions not subject to the registration requirements of the Securities Act
and accompanied by an opinion of counsel reasonably satisfactory to Xxxxxx that
registration under the Securities Act is not required. Hedging transactions
involving the consideration Shares may not be conducted by Sellers unless in
compliance with the Securities Act. The Consideration Shares are being placed
outside the United States to non U.S. Persons in "offshore transactions" in
reliance on Regulation S under the Securities Act. The terms "United States" and
"U.S. Person" have the respective meanings given to those terms in Regulation S
under the Securities Act.
(b) Upon the original issuance thereof, and until such time as the
same is no longer required under applicable requirements of the Securities Act
or applicable state securities laws and accompanied by an opinion of counsel
reasonably satisfactory to Xxxxxx that registration under the Securities Act is
not required, each certificate representing the
10
Consideration Shares, as well as all certificates issued in exchange for or in
substitution of the Consideration Shares, shall bear a legend to the following
effect:
"THE TRANSFER OF THE SECURITIES EVIDENCED HEREBY IS RESTRICTED BY THE
TERMS OF AN ESCROW AGREEMENT AND A LOCK-UP AGREEMENT (COLLECTIVELY, THE
"AGREEMENTS") BETWEEN THE REGISTERED HOLDER HEREOF AND THE ISSUER
HEREOF. A COPY OF THE AGREEMENTS IS ON FILE AT THE PRINCIPAL OFFICES OF
THE ISSUER. IN ADDITION, THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, (THE "SECURITIES ACT") AND MAY BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED ONLY PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (PROVIDED BY RULE
144 THEREUNDER OR OTHERWISE, INCLUDING AN OFFER, SALE, OR TRANSFER
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE UNITED
STATES SECURITIES LAWS), IF ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER THE
SECURITIES ACT IS NOT REQUIRED. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.
(c) Each of the Sellers hereby agrees that:
(i) the Consideration Shares have not been and will
not be registered under the Securities Act, such securities are "restricted
securities" as defined in Rule 144 under the Securities Act, and the
Consideration Shares may not be offered or sold within the United States or to,
or for the account of or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act, Rule 144 under the Securities Act, if
applicable, or pursuant to another exemption from the registration requirements
of the Securities Act;
(ii) he, she or it is purchasing the Consideration
Shares for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account or person is a non-U.S.
person and is aware that the issuance of the Consideration Shares is being made
in reliance on Regulation S under the Securities Act;
(iii) he, she or it acknowledges that the
Consideration Shares have not been registered under the Securities Act and may
not be offered or sold except as provided in the legend above;
11
(iv) he, she or it acknowledges that the foregoing
restrictions apply to holders of a beneficial interest in the Consideration
Shares as well as to holders of the Consideration Shares; and
(v) he, she or it shall not engage in any hedging
transaction involving the Consideration Shares unless in compliance with the
Securities Act.
(d) Xxxxxx hereby agrees that:
(i) it shall take all steps necessary to cause the
Consideration Shares to be quoted on the NASDAQ Small Cap market, or such other
exchange as the Xxxxxx Common Stock shall be listed or quoted at such time no
later than the time such shares are sold or transferred in a transaction exempt
from registration under the Securities Act pursuant to Rule 144 promulgated
thereunder.
(ii) As long as any Seller owns Consideration
Shares, it shall use commercially reasonable efforts to timely file with the SEC
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by Xxxxxx pursuant to Section 13(a) or
15(d) of the Exchange Act.
(iii) it shall pay the reasonable fees of counsel
incurred for legal opinions reasonably requested by Sellers with respect to the
sale or other transfer of the Consideration Shares by the Sellers under Rule 144
or Regulation S of the Securities Act or otherwise required under any successor
provisions thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND THE PURCHASER
In order to induce the Sellers to enter into this Agreement and the
Sellers' Ancillary Agreements and to consummate the transactions contemplated
hereby, Xxxxxx and the Purchaser, jointly and severally, make the
representations and warranties set forth below to the Sellers.
3.1 Organization, Standing and Power; Conduct of Business. (a) Xxxxxx
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the Province of New
Brunswick.
(b) To the knowledge of Xxxxxx and the Purchaser, Xxxxxx and
the Purchaser have conducted and are presently conducting their business in
compliance in all material respects with all material Applicable Law and hold
all material licenses, permits, approvals consents, certificates, registrations
and authorizations (whether governmental, regulatory or otherwise) (the
"Licenses") necessary to own or lease and operate its properties and to conduct
its business as presently conducted, and the Licenses are valid and in full
force and effect, except where such absence or deficiency of any such Licenses
would not have a Material Adverse Effect.
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3.2 Authorization; Enforceability. (a) Each of Xxxxxx and the Purchaser
has all requisite right, corporate power, and corporate authority to execute,
deliver, and perform this Agreement, the Xxxxxx Ancillary Agreements, and the
Purchaser Ancillary Agreements, as the case may be, and to consummate the
transactions contemplated hereby and thereby including, without limitation, the
issuance of the Consideration Shares. This Agreement, the Xxxxxx Ancillary
Agreements and the Purchaser Agreements have been duly authorized by each of
Xxxxxx and the Purchaser, do not require any further authorization or consent of
Xxxxxx or the Purchaser, and have been duly executed and delivered by Xxxxxx and
the Purchaser, as the case may be, and constitute the legal, valid and binding
obligations of Xxxxxx and Purchaser, as the case may be, enforceable in
accordance with their terms, except to the extent that their enforcement is
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.
(b) Subject to payment therefor in accordance with the terms
of this Agreement, the Consideration Shares delivered to the Sellers on the
Closing Date have been duly authorized by all necessary corporate action on the
part of Xxxxxx and are validly issued and fully paid and non assessable shares
of Xxxxxx Common Stock.
(c) No direct selling efforts, as such term is defined in Rule
902(c) of Regulation S adopted under the Securities Act have been made in the
United States by Xxxxxx, a distributor, any of their affiliates, or any person
acting on behalf of any of them in connection with the issuance and delivery of
the Consideration Shares.
(d) To the knowledge of Xxxxxx, no order ceasing or suspending
trading in any securities of Xxxxxx or prohibiting the issuance and/or sale of
the Consideration Shares is in effect and no proceedings for such purpose are
pending or threatened.
3.3 No Violation or Conflict. (a) The execution, delivery and performance
of this Agreement, the Xxxxxx Ancillary Agreements and the Purchaser Ancillary
Agreements and the consummation by Xxxxxx and Purchaser of the transactions
contemplated hereby and thereby, including, without limitation, issuance of the
Consideration Shares: (i) do not violate or conflict with any Applicable Law,
except where such violation or conflict would not have a Material Adverse
Effect, (ii) do not violate or conflict with any provision of Xxxxxx'x or the
Purchaser's certificate of incorporation or bylaws; and (iii) do not, with or
without the passage of time or the giving of notice, (x) result in the breach
of, constitute a default, or give rise to a right of termination, cancellation,
or acceleration of performance or loss of benefit or other adverse reaction
under, or in any way affect the continuation, validity, or effectiveness of any
agreement, understanding, or instrument to which Xxxxxx or the Purchaser is a
party or by which Xxxxxx or the Purchaser or their respective properties may be
bound or affected or (y) result in the creation of any Encumbrance upon any
property or assets of Xxxxxx or the Purchaser pursuant to any agreement,
understanding, or instrument to which Xxxxxx or the Purchaser is a party or by
which Xxxxxx or the Purchaser or their respective properties may be bound or
affected.
(b) Except as set forth on Schedule 3.3, the consummation of
the transactions contemplated by this Agreement, the Xxxxxx Ancillary
Agreements, and the Purchaser Ancillary
13
Agreements will not require the notification of or consent, approval, or
authorization of any third party, other than a notification or consent which is
not required to be obtained until after the date hereof. Each of the consents,
approvals, and authorizations listed on Schedule 3.3 has been obtained and are
valid, unconditional, and in full force and effect as of the date hereof, except
as set forth on Schedule 3.3.
3.4 Consent of Governmental Authorities. No consent, approval or
authorization of, or registration, qualification or filing with any Governmental
Authority is required to be made by Xxxxxx or the Purchaser in connection with
the execution, delivery or performance by Xxxxxx and Purchaser of this
Agreement, the Xxxxxx Ancillary Agreements, or the Purchaser Ancillary
Agreements, or the consummation by Xxxxxx and Purchaser of the transactions
contemplated hereby, other than pursuant to the Competition Act (Canada), the
Investment Canada Act and as required by the Securities Act or applicable
provincial or state law with respect to the issuance of the Consideration
Shares.
3.5 Brokers. Except for Lloyds Capital, Inc., Xxxxxx and Purchaser have not
employed any financial advisor, broker or finder. Xxxxxx and the Purchaser shall
be solely responsible for all fees, commissions, and expenses of Lloyds Capital,
Inc. incurred by Xxxxxx and the Purchaser in connection with the transactions
contemplated by this Agreement.
3.6 Distribution and Resale of Consideration Shares. (a) The Purchaser and
Xxxxxx have filed an application with La Commission des valeurs mobilieres du
Quebec ("CVMQ") requesting an exemption pursuant to Section 263 of the QSA and
have obtained such exemption in the form attached hereto as Schedule 3.6 (the
"Exemption").
(b) All approvals, exemptions, consents, orders and
authorizations of the CVMQ required under the securities laws of the Province of
Quebec have been obtained in order to permit the issuance by Xxxxxx of the
Consideration Shares to 9117 and Xxxxxxxxx in compliance with the securities
laws of the Province of Quebec.
(c) The resale or transfer of the Consideration Shares by 9117
and Xxxxxxxxx will be exempt from the requirement to prepare and file a
prospectus in the Province of Quebec, provided that the resale or transfer of
the Consideration Shares by 9117 and Xxxxxxxxx is made: (i) in accordance with
an exemption from the prospectus requirement; (ii) through an exchange or
organized market outside of Canada; or (iii) to a person or company located
outside of Canada.
3.7 Exchange Act Filings. To the knowledge of Xxxxxx and the Purchaser, the
information and statements contained in all reports required to be filed by
Xxxxxx with the SEC since January 1, 2001 pursuant to Section 13(a) or 15(d) of
the Exchange Act are true and correct in all material respects and contained no
untrue statement of a material fact or omit to state a material fact that was
necessary to be stated in order for the statement not to be misleading in the
circumstances in which it was made, the whole as of the respective dates of such
information and statements.
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
In order to induce Xxxxxx and the Purchaser to enter into this
Agreement, the Xxxxxx Ancillary Agreements, and the Purchaser Ancillary
Agreements and to consummate the transactions contemplated hereby, the Sellers,
jointly and severally, make the representations and warranties set forth below
to Xxxxxx and the Purchaser. For purposes of this Article IV, all references to
the Company shall, unless the context clearly indicates otherwise, be deemed to
include the Company and each of its Subsidiaries.
4.1 Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of Quebec. The Company is
duly qualified, licensed or registered to transact business as a foreign
corporation in all jurisdictions and countries where it owns or leases
properties or conducts its business. Each jurisdiction in which the Company is
so qualified, licensed or registered is listed on Schedule 4.1(a) hereto. The
Company has the requisite right, power, and authority (i) to own or lease and
operate its properties and (ii) to conduct its business as presently conducted.
(b) The Company does not, directly or indirectly, (a)
own, of record or beneficially, any outstanding voting securities or other
equity or ownership interests in any corporation, partnership, limited liability
company, joint venture or other entity, (b) control any corporation,
partnership, limited liability company, joint venture or other entity, or (c)
have any Investments.
4.2 Authorization; Enforceability. The Sellers have the capacity to
execute, deliver, and perform this Agreement and the Sellers' Ancillary
Agreements, and to consummate the transactions contemplated hereby. Each of the
Sellers is a resident of, or organized under the laws of, the Province of
Quebec. The Company has all requisite right, corporate power and corporate
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the Sellers' Ancillary
Agreements have been and will be duly authorized by the Sellers and the Company,
do not require any further authorization or consent of the Sellers or the
Company, and have been and will be duly executed and delivered and constitute
the legal, valid and binding obligations of the Sellers and the Company,
enforceable in accordance with their respective terms, except to the extent that
their enforcement is limited by bankruptcy, insolvency, reorganization or other
laws relating to or affecting the enforcement of creditors' rights generally and
by general principles of equity.
4.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement and the Sellers' Ancillary Agreements by the Sellers and the
Company and the consummation by the Sellers and the Company of the transactions
contemplated hereby: (a) do not violate or conflict with any Applicable Law,
except where such violation or conflict of any non-material Applicable Law would
not have a Material Adverse Effect, or any provision of the Company's or 9117's
certificate of incorporation or by-laws; and (b) except as set forth on
15
Schedule 4.3 hereto, do not, with or without the passage of time or the giving
of notice, result in the breach of, or constitute a default, give rise to a
right of termination, cancellation, or acceleration of performance or loss of
benefit or require any consent under, or result in the creation of any
Encumbrance upon any property or assets of the Sellers or the Company pursuant
to any instrument or agreement to which the Sellers or the Company is a party or
by which the Sellers or the Company or their respective properties may be bound
or affected, except where such termination, cancellation, or acceleration of
performance or loss of benefit would not have a Material Adverse Effect.
4.4 Consents of Governmental Authorities and Others. Except as required
by the Competition Act (Canada) and the Investment Canada Act, no consent,
approval or authorization of, or registration, qualification or filing with any
international, provincial, federal, state or local Governmental Authority, or
any other Person, is required to be made by the Sellers or the Company in
connection with the execution, delivery or performance of this Agreement by the
Sellers or the Company or the consummation by the Sellers or the Company of the
transactions contemplated, except where the absence of such consent, approval,
authorization, registration, qualification, or filing would not have a Material
Adverse Effect.
4.5 Conduct of Business. Since May 31, 2002, the Company has conducted
its businesses in the ordinary and usual course consistent with past practices
and there has not occurred any change that would result in a Material Adverse
Effect in the condition (financial or otherwise), results of operations,
properties, assets, liabilities, business or prospects of the Company. Without
limiting the generality of the foregoing, except for the Reorganizations and as
disclosed on Schedule 4.5, since May 31, 2002, the Company has not: (a) amended
its certificate of incorporation or bylaws; (b) issued, sold or authorized for
issuance or sale, shares of any class of its securities (including, but not
limited to, by way of stock split or dividend) or any subscriptions, options,
warrants, rights or convertible securities or entered into any agreements or
commitments of any character obligating it to issue, sell, redeem, purchase, or
register any such securities; (c) redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its capital stock or any option, warrant
or other right to purchase or acquire any such shares; (d) declared or paid any
dividend or other distribution (whether in cash, stock or other property) with
respect to its capital stock; (e) sustained any operating loss or reduction in
Tangible Net Worth; (f) suffered any damage, destruction or loss, whether or not
covered by insurance, which has had or could have a Material Adverse Effect; (g)
sold, leased, or disposed of any material assets or property of the Company; (h)
granted or made any mortgage or pledge or subjected itself or any of its
properties or assets to any Encumbrance, except liens for Taxes not currently
due; (i) made or committed to make any capital expenditures in excess of
$10,000; (j) become subject to any Guaranty; (k) changed any accounting method
used by the Company; (l) granted any increase in the compensation payable or to
become payable to shareholders, directors, officers, employees, agents and
consultants (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment); (m) entered into any agreement
which would be a Material Agreement, or amended or terminated any existing
Material Agreement or received notice of any such amendment or termination; (n)
experienced any strike, work stoppage or slowdown; (o) received notice of any
adverse change in its relationship with any financial institution, customer or
supplier with which it currently does business, and neither the Sellers nor the
Company is aware of any circumstance that could lead
16
to such a change; (p) make any capital contributions; or (q) entered into any
agreement to do any of the foregoing.
4.6 Litigation; Disputes. Except as set forth on Schedule 4.6, there
are no actions, suits, investigations, claims or proceedings ("Litigation")
pending or, to the knowledge of the Sellers or the Company, threatened before
any Governmental Authority, (a) affecting the Sellers or the Company (as
plaintiff or defendant) or (b) against the Sellers relating to the Securities or
the transactions contemplated by this Agreement, and there exist no facts or
circumstances creating any reasonable basis for the institution of any such
action, suit, investigation, claim or proceeding described above. Schedule 4.6
sets forth a complete and accurate list and description of any Litigation
commenced against the Company in the last five (5) years. No dispute or claim
exists between the Company and any of its customers, suppliers, or distributors.
4.7 Brokers. Neither the Sellers nor the Company has employed any
financial advisor, broker or finder, and neither of them has incurred or will
incur any other broker's, finder's, investment banking or similar fees,
commissions or expenses in connection with the transactions contemplated by this
Agreement. The Sellers shall be solely responsible for all fees, commissions,
and expenses of any such Person incurred in connection with the transactions
contemplated by this Agreement.
4.8 Compliance. Except for any non-compliance that would not have a
Material Adverse Effect, the Company and its operations are in compliance with
all Applicable Law including, but not limited to, those relating to (a) the
development, manufacture, distribution, marketing and sale of its products and
services, (b) employment and labor matters, including any provisions thereof
relating to wages, hours, work, vacation pay, holidays, overtime, notice,
termination and severance pay obligations, human rights, occupational health and
safety, workers compensation and collective bargaining, (c) building, zoning and
land use, (d) Environmental and Safety Requirements, and (e) the bidding for
contracts by and the conduct of business by federal or state contractors.
Neither the Sellers nor the Company is subject to any judicial, governmental or
administrative order, judgment or decree. No inspections of the Company's
business and properties has been performed by any Person pursuant to Applicable
Law during the past five (5) years. Neither the Sellers nor the Company has
received notice of any violation (or any investigation, inspection, audit, or
other proceeding by any Governmental Authority involving an allegation of any
violation) of any Applicable Law, and to the knowledge of the Sellers and the
Company, no investigation, inspection, audit, or other proceeding by any
Governmental Authority involving an allegation of violation of any Applicable
Law is threatened or contemplated.
4.9 Charter, Bylaws and Corporate Records. A true, correct and complete
copy of (a) the certificate of incorporation of 9117 and the Company, as amended
and in effect on the date hereof, (b) the deed of dissolution of Bi-Op, Inc.,
(c) the bylaws of 9117 and the Company, as amended and in effect on the date
hereof, (d) the list of shareholders of, or other Persons that have an interest
in, 9117, and (e) the stock ledgers and stock transfer records of the Company
has previously been provided to the Purchaser. The minute books of the Company
has previously been provided to the Purchaser. Except for omissions that would
not have a Material Adverse Effect, such minute books contain complete and
accurate records of all meetings and other
17
corporate actions of the board of directors, committees of the board of
directors, incorporators and shareholders of the Company from the date of its
incorporation to the date hereof. All such meetings were duly called and held,
and a quorum was present and acting throughout each such meeting. Such stock
ledgers and stock transfer records reflect all issuances and registrations of
transfer of all shares of capital stock of the Company, and certificates
representing all canceled shares of capital stock have been returned to the
stock ledger, except as to which the Company has received a lost certificate
affidavit from the registered owner (or their lawful representative) of the
shares evidenced thereby.
4.10 Capitalization of the Company. The authorized capital stock the
Company consists of an unlimited number of Class A, Class B, Class C, Class D,
Class E, Class F, and Class G Shares, each without par value, of which 196 Class
A Shares, 1,000 Class B Shares, and 804 Class D Shares are issued and
outstanding as follows:
SHAREHOLDER NUMBER AND CLASS OF SECURITIES
----------- ------------------------------
Xxxxx 1,000 Class B Shares
9117 196 Class A Shares
Xxxxxxxxx 804 Class D Shares
(such outstanding stock, the "Securities"). All of the Securities have been duly
authorized, are validly issued and outstanding, and are fully paid and
nonassessable. No securities issued by the Company from the date of its
incorporation to the date hereof were issued in violation of any statutory or
common law preemptive rights. Except for the dividends declared and paid in the
course of the Reorganizations as disclosed on Schedule 4.10, there are no
dividends which have accrued or been declared but are unpaid on the Securities.
All permits or authorizations required to be obtained from or registrations
required to be effected with any Person in connection with any and all issuances
of securities of the Company from the date of its incorporation to the date
hereof have been obtained or effected, and all securities of the Company have
been issued and are held in accordance with the provisions of all applicable
federal, state and provincial securities or other laws.
4.11 Rights, Warrants, Options. There are no outstanding (a) securities
or instruments convertible into or exercisable for any of the capital stock or
other equity interests of the Company; (b) options, warrants, subscriptions or
other rights to acquire capital stock or other equity interests of the Company;
or (c) commitments, agreements or understandings of any kind, including employee
benefit arrangements, relating to the issuance or repurchase by the Company of
any capital stock or other equity interests of the Company.
4.12 Financial Statements. Attached hereto as Schedule 4.12 are true
and complete copies of the Financial Statements. The Financial Statements (a)
are correct and complete in all material respects and have been prepared in
accordance with the books of account and records of the Company; (b) fairly
present, and are true, correct and complete statements in all material respects
of the Company's financial condition and the results of its operations and cash
flows at the dates and for the periods specified in those statements; and (c)
have been prepared in accordance with GAAP consistently applied during all
periods presented.
18
4.13 Absence of Undisclosed Liabilities. The Company does not have any
direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, known or unknown, fixed or unfixed, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise, including liabilities on account of Taxes, other
governmental charges or lawsuits brought, whether or not of a kind required by
GAAP to be set forth on a financial statement, ("Liabilities"), which were not
fully and adequately reflected on the Financial Statements. There are no
circumstances, conditions, events or arrangements which may hereafter give rise
to any Liabilities of the Company except in the ordinary course of business.
4.14 Title to Securities. Each Seller is the record and beneficial
owner of, and has good and marketable title to, the Securities listed opposite
such Seller's name on Schedule 2.2, and, such Securities are owned free and
clear of any liens, encumbrances, pledges, security interests and claims
whatsoever, including claims or rights under any voting trust agreements,
shareholder agreements or other agreements. The Securities constitute all of the
issued and outstanding capital stock of the Company. At the Closing, the Sellers
will transfer and convey, and Purchaser will acquire, good and marketable title
to the Securities, free and clear of all Encumbrances. Following the transfer of
the Securities to Purchaser, the Company will posses ownership of the entire
business necessary to operate the Company as an on-going concern, including as
such business is presently being conducted and there will be no assets of the
Sellers not owned by the Company which are necessary or useful to conduct the
business of the Company as presently conducted.
4.15 Title to and Condition of Personal Property. Schedule 4.15 sets
forth a list through November 30, 2002 of all Tangible Property of the Company
purchased after December 31, 1993 with a value equal to or greater than $5,000,
and all inventory of the Company. Since November 30, 2002, the Tangible Property
and inventory has not changed in any material respect. The aggregate value of
all Tangible Property purchase by the Company on or before December 31, 1993 is
less than $5,000. The Company has good and marketable title to, or in the case
of leased property, has a valid leasehold interest in, each item of Tangible
Property, free and clear of any options or Encumbrances, except as set forth in
Schedule 4.15 hereto or specifically identified as such in the Financial
Statements. Except as set forth in Schedule 4.15, all Tangible Property owned by
the Company or used by the Company on the date hereof (with a replacement value
in excess of $250) in the operation of its business is in good operating
condition and in a good state of maintenance and repair, subject to normal wear
and tear, is adequate for the business conducted by the Company, and is
inspected, maintained, and operated in conformity with all Applicable Law,
except where such non-compliance would not have a Material Adverse Effect.
Except as set forth on Schedule 4.15, there are no assets owned by any third
party which are used in the operation of the business of the Company, as
presently conducted or proposed to be conducted.
4.16 Real Property. (a) The Company does not own any fee simple
interest in real property other than as set forth on Schedule 4.16. The Company
does not lease or sublease (as lessee or sublessee) any real property other than
as set forth on Schedule 4.16. Schedule 4.16 sets forth the municipal address
and proper legal description of each parcel of real property owned by the
Company (the "Owned Property") or leased or subleased (as lessee or sublessee)
19
by the Company (the "Leased Property" and, together with the Owned Property, the
"Real Property"). Attached hereto as Schedule 4.16 are true and complete copies
of all of the lease and sublease agreements and all other instruments granting
such leasehold interests, rights, options, or other interests, as amended to
date (the "Leases") relating to the Leased Property. The Leases are valid,
binding and in full force and effect and have been properly registered in the
appropriate land registry office. All rent and other sums and charges payable
under the Leases are current, no notice of default or termination under any of
the Leases is outstanding, no termination event or condition or uncured default
on the part of the Company or on the part of the landlord or sublandlord, as the
case may be, thereunder, exists under the Leases, and no event has occurred and
no condition exists which, with the giving of notice or the lapse of time or
both, would constitute such a default or termination event or condition. In the
event that any of the Leases is a sublease, the relevant Company, as sublessee
or sublessor, as the case may be, has obtained the required consent of the prime
landlord to such sublease, and such prime lease is in full force and effect,
there are no outstanding uncured notices of default or termination, and no right
of the Company in any such sublease conflicts with such prime lease. There are
no subleases, licenses or other agreements granting to any person other than the
relevant Company any right to the possession, use, occupancy or enjoyment of the
premises demised by the Leases. All of the premises are used in the conduct of
the Company's business.
(b) The Company has good and marketable title in fee simple or
otherwise to the Owned Property and good and marketable leasehold title to the
Leased Property and to all plants, buildings, and improvements thereon, free and
clear of any Encumbrances, imperfections of title, encroachments, easements,
rights-of-way, squatters' rights, covenants, conditions, or restrictions. The
Company enjoys a peaceful and undisturbed possession of the Real Property. No
Person other than the Company has any right to use or occupy any part of the
Real Property.
(c) All improvements located on the Real Property are in a
state of good maintenance and repair, considering normal wear and use, and in a
condition adequate and suitable for the effective conduct therein of the
business conducted and proposed to be conducted by the Company. The heating,
ventilation, air conditioning, plumbing and electrical systems at the Real
Property are in good working order and repair, considering normal wear and use,
on the Closing Date. The Company has not experienced any material interruption
in such services provided to any of the premises located on the Real Property
within the last year. No landlord under the Leases has any plans to make any
material alterations to any of the Leased Property, the construction of which
would interfere with the use of any portion of the Leased Property. No landlord
under the Leases has any plans to make any material alterations to any of the
buildings in which Leased Property is located, the costs of which alterations
would be borne in any part by a tenant under the applicable Lease.
(d) All permits, licenses, franchises, approvals and
authorizations (collectively, the "Real Property Permits") of all Governmental
Authorities having jurisdiction over each Real Property and from all insurance
companies and fire rating and other similar boards and organizations
(collectively, the "Insurance Organizations"), required or appropriate are set
forth on Schedule 4.16 and have been issued to the Company to enable each Real
Property to be lawfully occupied and used for all of the purposes for which they
are currently occupied and used, have been lawfully issued and are, as of the
date hereof, in full force and effect, except to
20
the extent that any failure thereof will not have a Material Adverse Effect.
Neither the Sellers nor the Company has received or been informed by a third
party of the receipt by it of any notice from any Governmental Authority having
jurisdiction over any Real Property or from any Insurance Organization
threatening a suspension, revocation, modification or cancellation of any Real
Property Permit or of any insurance policies, and there is no basis for the
issuance of any such notice or the taking of any such action. There is no action
required by the Sellers or the Company in order for all Real Property Permits
and liability and casualty insurance policies required under any of the Leases
to remain Real Property Permits and insurance policies of Purchaser.
(e) Neither the Sellers nor the Company has received any
notice nor have they any knowledge of any pending, threatened or contemplated
condemnation or eminent domain proceeding with respect to or affecting any Real
Property or any part thereof.
(f) There are no liabilities (other than rent and other sums
and charges regularly payable) associated with any of the Leases, including any
liability under any Environmental and Safety Requirements, which are or which
may become payable by Purchaser.
4.17 Insurance. Schedule 4.17 sets forth a true and complete list of
all insurance policies providing insurance coverage of any nature to the
Company. The Company has previously provided the Purchaser with true and
complete copies of all of such insurance policies, as amended to the date
hereof. Such policies provide adequate and customary coverage for the business
in which the Company is engaged and are sufficient for compliance by the Company
with all requirements of law and all material agreements to which the Company is
a party or by which any of the assets of the Company are bound. All of such
policies are in full force and effect and are valid and enforceable in
accordance with their terms, and the Company has complied with all terms and
conditions of such policies, including premium payments. None of the insurance
carriers has indicated to either of the Sellers or the Company an intention to
cancel, or alter the coverage under, any such policy. The Company does not have
any claim pending against any of the insurance carriers under any of such
policies and there has been no actual or alleged occurrence of any kind which
may give rise to any such claim and has not made any claims under any policy at
any time since January 1, 1999, except as set forth in Schedule 4.17. All
applications for such policies are accurate in all respects.
4.18 Governmental Authorizations. Schedule 4.18 lists all
authorizations, consents, approvals, certificates of authorization,
registrations, franchises, licenses, waivers, permits and similar authorizations
required under Applicable Law or regulation for the operation of the business of
the Company as presently operated (the "Governmental Authorizations"), except
for those, the absence of which would not have a Material Adverse Effect. All
the Governmental Authorizations have been duly issued or obtained and are in
full force and effect, and the Sellers and the Company are in compliance with
the terms and conditions of all the Governmental Authorizations, except for
those, the absence of which would not have a Material Adverse Effect. No fact,
condition, or violation exists which could cause the Governmental Authorizations
not be renewed by the appropriate Governmental Authorities in the ordinary
course or which could cause the revocation, termination, suspension, or
impairment of any Governmental Authorization. None of the execution, delivery,
or performance of this Agreement
21
or the Sellers' Ancillary Agreements shall adversely affect the status of any of
the Governmental Authorizations. The execution, delivery and performance by the
Sellers of this Agreement and the Sellers' Ancillary Agreements shall not
adversely affect the status of any of the Governmental Authorizations.
4.19 Intellectual Property Rights.
(a) Schedule 4.19 sets forth a complete and accurate list
(showing in each case the registered owner, title, xxxx or name, applicable
jurisdiction, application number, registration number and date of filing or
registration, if any) of all Canadian, United States, international and state
(i) Patents and patent applications, (ii) Trademark registrations and
applications, (iii) unregistered Trademarks, trade names and assumed or
fictitious names under which the Company is conducting business or has in the
last five (5) years conducted business, (iv) Internet domain names, and (v)
Copyright registrations and applications, owned by, licensed to or used by the
Company.
(b) Schedule 4.19 sets forth a complete and accurate list and
description of all agreements, licenses, contracts or sublicenses pursuant to
which the Company uses or grants others the right to use any Copyrights,
Trademarks, trade names, assumed names, domain names, Patents, inventions, trade
secrets, Software (excluding mass market software licensed to the Company that
is available in consumer retail stores or otherwise commercially available and
subject to "shrink-wrap" or "click-through" license agreements) or other
Intellectual Property.
(c) Schedule 4.19 sets forth a complete and accurate list and
description of all Software owned by, licensed to or used by the Company
(excluding mass market software licensed to the Company that is available in
consumer retail stores or otherwise commercially available and subject to
"shrink-wrap" or "click-through" license agreements). All of the Intellectual
Property and Software set forth on Schedule 4.19 shall be denominated herein as
the "Company's Intellectual Property".
(d) The Company owns or has the valid right to use all
Intellectual Property currently used or contemplated or necessary to be used in
connection with the business of the Company.
(e) Except as set forth on Schedule 4.19, the Company either:
(i) owns the entire right, title and interest in and to the Company's
Intellectual Property, free and clear of all Encumbrances or (ii) has the
perpetual, royalty-free right to use the same. Except as set forth on Schedule
4.19, the Company is the record owner of all applications and registrations
listed on Schedule 4.19. Notwithstanding the foregoing, Xxxxxx acknowledges that
Bi-Op is not the owner of, and does not have a perpetual, royalty free-right to
use, the Tri-Logic Software.
(f) Except as set forth on Schedule 4.19: (i) all of the
registrations or applications set forth on Schedule 4.19 are valid and
subsisting, in full force and effect, all without challenge of any kind, and
have not been canceled, expired, or abandoned; (ii) there is no pending or, to
the Company's knowledge, threatened opposition, interference or cancellation
proceeding before any court or registration authority in any jurisdiction
against the items set
22
forth on Schedule 4.19 or any other Intellectual Property, directly or
indirectly, used , licensed or owned by the Company; (iii) the Company's
Intellectual Property has not been canceled or abandoned and is valid and
enforceable; (iv) the Company has the sole and exclusive right to bring actions
for infringement, misappropriation, dilution, violation or unauthorized use of
the Company's Intellectual Property. Correct and complete copies of
registrations and applications for all registered Copyrights, Patents and
Trademarks identified on Schedule 4.19 as being owned by the Company have
heretofore been given to Purchaser.
(g) Except as set forth on Schedule 4.19, there are no
agreements, settlements, injunctions, forbearances to xxx, consents, judgments,
or orders or similar obligations to which the Company is a party or is otherwise
bound, which (i) restrict the Company's rights to use any Intellectual Property,
(ii) restrict the business in order to accommodate a third party's Intellectual
Property rights or (iii) permit third parties to use any Intellectual Property
which would otherwise infringe any Company Intellectual Property. Other than as
set forth on Schedule 4.19, the Company has not licensed or sublicensed its
rights in any Intellectual Property and no royalties, honoraria or other fees
are payable by the Company for the use of or right to use any Intellectual
Property in connection with the business as currently conducted or contemplated
to be conducted, except pursuant to the License Agreements set forth on Schedule
4.19.
(h) The license agreements, permits and other agreements under
which the Company has rights to the Company Intellectual Property are valid and
binding obligations of the Company and all other parties thereto, enforceable in
accordance with their terms, and there exists no event or condition, which will
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default by the Company, under any such license
agreement or other agreement relating to Company's Intellectual Property.
(i) The Company takes reasonable measures to protect the
confidentiality of its Trade Secrets. Except as set forth in Schedule 4.19, no
Trade Secret of the Company has been improperly disclosed or authorized to be
disclosed to any third party, which disclosure would result in a forfeiture of
such Trade Secret.
(j) The conduct of the business of the Company as currently
conducted and planned to be conducted does not infringe, misappropriate, violate
or dilute any Intellectual Property rights owned or controlled by any third
party (either directly or indirectly such as through contributory infringement
or inducement to infringe) and is not libelous, slanderous, defamatory,
violative in any way of any publicity, privacy, or other rights, or obscene.
There are no claims or suits pending or, to the Seller's or the Company's
knowledge, threatened, and the Company has not received any notice of a third
party claim or suit, (i) alleging that the Company's activities or the conduct
of the business infringes or constitutes the unauthorized use of the
Intellectual Property rights of any third party, violates the rights of
publicity or privacy of any third party or is defamatory or otherwise violates a
personal right, or (ii) challenging the ownership, use, validity or
enforceability of any Company Intellectual Property.
(k) No third party (i) is misappropriating, infringing,
diluting, or otherwise violating any of the Company's Intellectual Property or
rights of publicity or privacy or (ii) is
23
taking or has taken any action that is defamatory of the Company, and no such
claims are pending against a third party by the Company.
(l) The consummation of the transactions contemplated hereby
and the Sellers' Ancillary Agreements will not result in the loss or impairment
of the Company's right to own or use any of the Company's Intellectual Property
or require the consent of any Governmental Authority or third party in respect
of any such Intellectual Property.
(m) After the deliveries provided for in this Agreement have
occurred, neither the Company nor any current or former officer, director or
employee of the Company will retain any rights of ownership or use with respect
to the Company's Intellectual Property. All Company Intellectual Property was
either (i) developed by an employee of the Company within the scope of
employment of the employee and pursuant to a binding invention assignment
agreement, (ii) developed by a third-party under a binding work for hire and
assignment agreement, or (iii) developed by a third party and transferred and
assigned to the Company under a binding transfer and assignment agreement.
(n) Except as set forth on Schedule 4.19, (i) the Software or
Intellectual Property identified on Schedule 4.19 is not subject to any
transfer, assignment, change of control, site, equipment or other operational
limitations; (ii) the Company has copies of all releases or separate versions of
the Software identified on Schedule 4.19 as being owned by the Company so that
same may become the subject of registration in the United States Copyright
Office; (iii) for any Software identified on Schedule 4.19 as being owned by the
Company, the Company has copies of all source code, system documentation,
statements of principles of operation and schematics, as well as any pertinent
commentary, explanation, program, workbenches, tools and higher level language
used for the development, implementation and use thereof, so that a trained
computer programmer could develop, maintain, support, compile and use all
releases or separate versions of the same; and (iv) the Software does not
contain any viruses, bugs, time locks, trojan horses, back doors or other means
by which they may be disabled or remotely accessed, and the Software operates in
all material respects with the relevant specifications without error or material
defect.
4.20 Major Customers and Suppliers; Supplies. Schedule 4.20 sets forth
a list of the twenty (20) largest customers (measured by dollar volume) of the
Company and the ten (10) largest suppliers of significant goods or services to
the Company for the fiscal year ended May 31, 2002. Schedule 4.20 identifies
those suppliers of significant goods or services with respect to which
alternative sources of supply are not readily available on comparable terms and
conditions. Except as indicated on Schedule 4.20, all supplies and services
necessary for the conduct of the business of the Company, as presently
conducted, may be obtained from alternate sources on terms and conditions
comparable to those presently available to the Company, and no facts,
circumstances or conditions exist which create a reasonable basis for believing
that the Company will be unable to continue to procure the supplies and services
necessary to conduct its business on substantially the same terms and conditions
as such supplies and services are currently procured. Except for PAL Health
Technology Inc., which advised the Company in June 2002 that it will no longer
do business with the Company, there has not been and, to the knowledge of the
Sellers, will not be any change which will have a Material Adverse Effect in
24
the relations of the Company with their respective customers, suppliers,
contractors, licensors and lessors, as a result of the announcement or
consummation of the transactions contemplated by this Agreement and none of the
Company's major customers or suppliers is contemplating terminating its
relationship with the Company. No major customer or supplier has experienced any
type of work stoppage or other material adverse circumstances or conditions that
may jeopardize or adversely affect any Company's future relationship with any
major customer or supplier. Except for disputes or controversies that would not
result in a Material Adverse Effect, there are no pending disputes or
controversies between any major customer or supplier of the Company, nor are
there any facts which in the future would impair the relationship of the Company
with its major customers or suppliers.
4.21 Related Parties. Neither the Sellers nor the Company, nor any
current or former (within the past five (5) years) director, officer,
shareholder, or employee of the Sellers or the Company, or any of their family
members (individually a "Related Party" and collectively the "Related Parties"),
or any Affiliate of the Sellers or the Company or any Related Party: (a) owns,
directly or indirectly, any interest in any person which is a competitor of the
Company, or of a supplier or customer of the Company; (b) owns, directly or
indirectly, in whole or in part, any property, asset or right, real, personal or
mixed, tangible or intangible (including, but not limited to, any of the
intangible property) which is utilized in the operation of the business of the
Company; (c) has an interest in or is, directly or indirectly, a party to any
contract, Material Agreement or other agreement, lease or arrangement pertaining
or relating to the Company, except for employment, consulting or other personal
service agreements that may be in effect; or (d) has any cause of action or
other claim whatsoever against, or owes any amount to, the Company.
4.22 List of Accounts and Proxies. Set forth on Schedule 4.22 is: (a)
the name and address of each bank or other institution in which the Company
maintains an account (cash, securities or other) or safe deposit box; (b) the
name and phone number of the Company's contact person at such bank or
institution; (c) the account number of the relevant account and a description of
the type of account; (d) the name of each person authorized by the Company to
effect transactions therewith or to have access to any safe deposit box or
vault; and (e) all proxies, powers of attorney or other like instruments to act
on behalf of the Company in matters concerning its business or affairs.
4.23 Employee Policies, Manuals, etc. Schedule 4.23 contains the names,
titles, job descriptions, years of service and annual salary, bonuses,
commissions, benefits and other compensation of all shareholders, officers,
directors, agents, consultants and employees of the Company (including
compensation paid or payable by the Company under any Employee Plan). Schedule
4.23 sets forth a list of all employee policies, employee manuals or other
written statements of rules or policies as to working conditions, vacation and
sick leave applicable to such persons.
4.24 Labor Relations. (a) There is no lock-out, strike, sympathy
strike, sit-down, slow-down, stay-in, sick-out, walk-out, picketing, work
stoppage, retarding of work, boycott or any other interference with the Company'
business or the operation or conduct of the business of any of its affiliated
companies or its subsidiaries (all of the foregoing referred to as "work
25
interference"), and neither the Sellers nor the Company has any knowledge of any
current, pending or threatened work interference nor has there been any work
interference in the past. There are no facts or circumstances which might give
rise to any work interference. The Company and its Affiliates and subsidiaries
are not in breach of any provision of any collective bargaining agreement, and
no such claims have been made or are pending or exist that might give rise to
any work interference. The Company and its Affiliates and subsidiaries are not
in breach of any court, arbitration, or administrative decision or order which
might result in any work interference or give rise to a claim that a work
interference is protected by, or does not violate, any law or provision of any
collective bargaining agreement and there any facts or circumstances, which
might result in the foregoing.
(b) There are no unfair labor practices, representation or
other proceedings claimed, pending or threatened before any Governmental
Authority and there are no facts or circumstances which might give rise to such
unfair labor practice, representation or other proceeding.
(c) There are no filed, pending or threatened injunctions
against the Company which would have the effect of constituting a work
interference and no facts or circumstances exist which might give rise to any
such injunction and no such claim has been made or is pending.
4.25 Employment Agreements and Employee Plans.
(a) Schedule 4.25 lists and describes all Employee Plans.
Company has furnished to Purchaser true, correct and complete copies of all the
Employee Plans as amended as of the date hereof, together with all related
documentation including, without limitation, funding and investment management
agreements, summary plan descriptions and all material correspondence with all
Governmental Authorities or other relevant Persons; each Employee Plan is, and
has been, established, registered (where required), administered and invested in
material compliance with the terms of such Employee Plan and all Applicable Law.
(b) Subject to the rights of the employees of the Company in
the event of an amendment or termination of any Employee Plan, the Company may
unilaterally amend or terminate, in whole or in part, each Employee Plan and
take contribution holidays under or withdraw surplus from each Employee Plan,
subject only to approvals required by Applicable Law.
(c) All contributions or premiums required to be paid by
Company under the terms of each Employee Plan or by Applicable Law have been
made in a timely fashion in accordance with such Applicable Law and the terms of
the Employee Plans. Company does not have any liability (other than liabilities
accruing after the Closing Date) with respect to any of the Employee Plans.
Contributions or premiums for the period up to the Closing Date have been paid
by Company even though not otherwise required to be paid until a later date.
(d) No commitments to improve or otherwise amend any Employee
Plan have been made except as required by Applicable Law and none of the
Employee Plans provide for
26
benefit increases or the acceleration of, or an increase in, funding obligations
that are contingent upon or will be triggered by entering into this Agreement or
the completion of the transactions contemplated herein.
(e) Intentionally left blank.
(f) All employee data necessary to administer the Employee
Plans has been provided by Company to Purchaser and is true and correct as of
the date of this Agreement and Company will notify Purchaser of any changes
thereto prior to the Closing Date.
(g) None of the Employee Plans (other than pension plans)
provide benefits to retired employees or to the beneficiaries or dependants of
retired employees.
(h) The Company is in full and complete compliance with all
present and past collective bargaining agreements, memoranda of agreement, side
letters, court, administrative, arbitration, ADR, or mediation decisions or
awards, wage or benefit schedules and all other documents which reflect or
pertain to understandings or practices communicated or agreed upon between the
Company and any union representatives.
(i) There are no claims or grievances filed, pending or
threatened pertaining to present or past collective bargaining agreements,
memoranda of agreement, side letters, court, administration, arbitration, ADR or
mediation decisions or awards, wage or benefit schedules or any other documents.
(j) Except as set forth on Schedule 4.25(j), there are no
complaints, charges, claims, allegations or grievances pending or to the
knowledge of the Sellers or the Company threatened which reflects or pertains
to: (i) any federal, state, provincial or local labor, employment (including
wage or hour, work, vacations, vacation pay, overtime, notice, termination and
severance pay obligations, human rights and occupational health and safety)
workers compensation, disability or unemployment law, regulation or ordinance;
(ii) any claim for wrongful discharge, constructive dismissal, or any litigation
relating to employment, discrimination or termination of employment of any
employee or former employee of the Company or relating to any failure to hire a
candidate for employment, breach of employment contract or employment related
tort (iii) any employment agreement, restrictive convent, non-competitive
agreement or employee confidentiality agreement.
(k) There is no order pursuant to any Applicable Law requiring
the taking of any action or the refraining from taking of any action in respect
to any employee or former employee of the Company or any of its Affiliates or
Subsidiaries.
(l) The Company does not have, and has not had, any registered
pension plan and is not part of a controlled group contributing to any
registered pension plan, except for the "Registered Retirement Savings Plan" as
described on Schedule 4.25.
4.26 Tax Matters. (a) Computation, Preparation and Payment. Company has
correctly computed all Taxes, prepared and duly and timely filed all federal,
state, provincial,
27
municipal, local and foreign returns, estimates, information statements,
elections, designations, reports and any other related filings ("Tax Returns"),
required to be filed by it, has timely paid all Taxes which are or may become
due and payable and has made adequate provision in the Financial Statements for
the period ended May 31, 2002. Company has made adequate and timely installments
of Taxes required to be made.
(b) Accrued Taxes. Since May 31, 2002, Company has only
incurred liabilities for Taxes in the ordinary course of business.
(c) Status of Assessments. All Tax returns of Company up to
and including the fiscal year ended May 31, 2002 have been assessed, and there
are no outstanding waivers of any limitation periods or agreements providing for
an extension of time for the filing of any Tax Return or the payment of any Tax
by Company or any outstanding objections to any assessment or reassessment of
Taxes. Any deficiencies proposed as a result of such assessments or
reassessments of the Tax returns have been paid and settled, other than any
accrued tax liabilities set forth on the Closing Date Balance Sheet.
(d) Contingent Tax Liabilities. There are no contingent Tax
liabilities or any grounds that could prompt an assessment, except for Tax
liabilities incurred in the normal course of business since June 1, 2002, or
reassessment of Company including, but without limitation, aggressive treatment
of income, expenses, deductions, credits or other amounts in the filing of
earlier or current Tax returns, reports, elections, designations or any other
related filings, nor has Company received any indication from any taxation
authorities that an assessment or reassessment of Tax is proposed.
(e) Withholdings. Company has withheld from each payment made
to any of its past and present shareholders, directors, officers, employees and
agents the amount of all Taxes and other deductions required to be withheld and
has paid such amounts when due, in the form required under the appropriate
legislation, or made adequate provision for the payment of such amounts to the
proper receiving authorities. The amount of Tax withheld but not remitted by
Company will be retained in their respective accounts and will be remitted by
them to the appropriate authorities when due.
(f) Collection and Remittance. Company has collected from each
receipt from any of the past and present customers (or other Persons paying
amounts to Company) the amount of all Taxes (including goods and services tax
and provincial sales taxes) required to be collected and has paid and remitted
such Taxes when due, in the form required under the appropriate legislation or
made adequate provision for the payment of such amounts to the proper receiving
authorities. The amount of Tax collected but not remitted by Company will be
retained in their respective accounts and remitted by them to the appropriate
authorities when due.
(g) Assessments. As of the date hereof, the Company is not
and, to the knowledge of Sellers, will not in the future be subject to, any
assessments, reassessment, levies, penalties or interest with respect to Taxes
which will result in any liability on its part in respect of any period ending
on or prior to the Closing Date.
28
(h) Jurisdictions of Taxation. Company has not been and is not
currently required to file any returns, reports, elections, designations or
other filings with any taxation authority located in any jurisdiction outside
Canada or in any provincial jurisdiction outside the province of Quebec.
(i) Related Party Transactions. Company has not, and has never
been deemed to have for purposes of the ITA, acquired or had the use of property
for proceeds greater than the fair market value thereof from, or disposed of
property for proceeds less than the fair market value thereof to, or received or
performed services for other than the fair market value from or to, or paid or
received interest or any other amount other than at a fair market value rate to
or from, any Person, firm or company with whom it does not deal at arm's length
within the meaning of the ITA.
(j) Forgiveness of Debt. Company has not at any time benefited
from a forgiveness of debt or entered into any transaction or arrangement
(including conversion of debt into shares of their share capital) which could
have resulted in the application of section 80 and following of the ITA.
(k) Research and Development Tax Credits and Expenditures. All
refund of taxes or credits claimed with respect to research and development
("R&D Credit or Refunds") were claimed by Company in accordance with the
provisions of the ITA and the relevant provincial legislation and Company has
satisfied at all relevant times the relevant criteria and conditions entitling
it to such R&D Credit or Refunds. All expenses claimed as research and
development expenses by Company qualified as such. All refunds received or
receivable by Company in any financial year were claimed in accordance with the
ITA and any applicable provincial legislation and Company satisfied at all times
the relevant criteria and conditions entitling it to claim such refunds.
(l) Tax Returns. Company has made available to Purchaser or
its legal counsel, copies of all foreign, federal, state, provincial, municipal
and local income and all state and local sales and use Tax Returns for Company
filed for all periods terminating after May 31, 2002.
(m) Deductibility. As of the Closing, there will not be any
contract, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by Company as an expense under Applicable Law other than
reimbursements of a reasonable amount of entertainment expenses and other
non-deductible expenses that are commonly paid by similarly situated businesses
in reasonable amounts.
(n) Tax Basis. Company's tax basis in its assets (and the
undepreciated capital cost of such assets) for purposes of determining future
amortization, depreciation and other Federal or Provincial income Tax deductions
is accurately reflected on Company's Tax Returns and records.
29
(o) Paid-up Capital. The paid-up capital for Tax purposes of
each of the Securities is no less than its stated capital for corporate
purposes.
(p) Residency. Each of the Sellers is not a non-resident of
Canada within the meaning of the ITA.
(q) Reorganizations. The Reorganizations were effected on a
tax-free basis and in accordance with Applicable Law. There are no and will not
in the future be any liabilities for Taxes or otherwise to the Company, the
Purchaser and their Affiliates arising, resulting from or directly or indirectly
attributable to the Reorganizations.
4.27 Material Agreements.
(a) Schedule 4.27 sets forth a list and a brief description of
all material written and oral contracts or agreements relating to the Company
(except with respect to the Leases, which are set forth on Schedule 4.16, which
is hereby incorporated by reference into Schedule 4.27 and made a part thereof),
including any: (i) contract or series of contracts resulting in a commitment or
potential commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential receipt, involving in
excess of Twenty Five Thousand Dollars ($25,000) in any instance, or series of
related contracts that in the aggregate give rise to rights or obligations
exceeding such amount; (ii) indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the borrowing or
lending of money or encumbrance of assets involving more than Twenty Five
Thousand Dollars ($25,000) in each instance; (iii) agreement which restricts the
Company from engaging in any line of business or from competing with any other
Person; (iv) warranties made with respect to products manufactured, packaged,
distributed or sold by the Company; (v) any partnership, shareholder, joint
venture, or similar agreement or arrangement to which the Company is a party;
(vi) employment, service, agency, consulting, termination, severance and
collective bargaining agreements, and any amendments or modifications thereof
and union recognition agreements entered into by the Company with or for any and
all of its present and past shareholders, directors, officers, employees,
consultants and agents; (vii) contracts with suppliers and distributors; (viii)
any agreements, contracts, license or sublicense agreements, assignments, or
understandings with respect to Intellectual Property owned or used by the
Seller; or (ix) any other contract, agreement, instrument, arrangement or
commitment that is material to the condition (financial or otherwise), results
of operation, assets, properties, liabilities, business or prospects of the
Company (collectively, and together with the Leases, Company Plans and all other
agreements required to be disclosed on any schedule to this Agreement, the
"Material Agreements"). The Company has previously furnished to Purchaser true,
complete and correct copies of all written agreements, as amended, required to
be listed on Schedule 4.27.
(b) Except as set out in the contracts and agreements referred
to in Section 4.27(a), there are no shareholders, directors, officers,
employees, consultants or agents of the Company who are entitled to a specified
notice of termination or fixed term of employment or who cannot be dismissed
upon such notice as is required by Applicable Law. Other than as disclosed in
Schedule 4.27, neither the Company nor any of its Affiliates or Subsidiaries is
a
30
party to any collective bargaining agreement or to negotiations for any such
agreement or subject to any application for certification or threatened or
apparent union organizing campaigns in respect of any employees of the Company
or of its Affiliates or Subsidiaries (not covered under an existing collective
bargaining agreement or relationship).
(c) Except as set forth on Schedule 4.27, none of the Material
Agreements was entered into outside the ordinary course of business of the
Company contains any unusual, onerous or burdensome provisions that will impair
or adversely effect the operations of the Company or is reasonably likely to be
performed at a material loss.
(d) The Material Agreements are each in full force and effect
and are the valid and legally binding obligations of the Company and the other
parties thereto, enforceable in accordance with their respective terms, subject
only to bankruptcy, insolvency or similar laws affecting the rights of creditors
generally and to general equitable principles. Neither the Sellers nor the
Company has received notice of default by the Company under any of the Material
Agreements, including any contract or agreement relating to borrowed money to
which the Company is a party or by or to which it or its assets are bound or
subject, and no event has occurred which, with the passage of time or the giving
of notice or both, would constitute a default by the Company thereunder. Neither
the Company nor any of the other parties to any of the Material Agreements is in
default thereunder, nor has an event occurred which, with the passage of time or
the giving of notice or both would constitute a default by such other party
thereunder. Neither the Sellers nor the Company has received notice of the
pending or threatened cancellation, revocation or termination of any of the
Material Agreements, including, any agreements relating to borrowed money to
which the Company is a party or by or to which it or its assets are bound or
subject, nor are any of them aware of any facts or circumstances which could
lead to any such cancellation, revocation or termination.
(e) Except as otherwise indicated on Schedule 4.27, the
consummation of the transactions contemplated hereby will not cause a breach or
a default under, accelerate any obligations under, give rise to any right of
termination, loss of benefit or other adverse action under, or in any way affect
the continuation, validity and effectiveness of any of the Material Agreements.
All Material Agreements will be in full force and effect and valid and binding,
subject to applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally, on the parties
thereto immediately after the Closing. Except as set forth on Schedule 4.27, the
consummation of the transactions contemplated hereby will not require the
notification or consent of any third party to any Material Agreement.
4.28 Guaranties. Except as set forth on Schedule 4.28, the Company is
not a party to any Guaranty, and no Person is a party to any Guaranty for the
benefit of the Company.
4.29 Products.
(a) There exists no set of facts (i) which could furnish a
basis for the recall, withdrawal or suspension of any product, Governmental
Authorization, approval or consent of any Governmental Authority with respect to
any product distributed or sold by the Company (a "Product"), (ii) which could
furnish a basis for the recall, withdrawal or suspension by order of
31
any state, federal, provincial or foreign court of law of any Product, or (iii)
which could have a Material Adverse Effect on the continued operation of any
facility of the Company or which could otherwise cause the Company to recall,
withdraw or suspend any such Product from the market or to change the marketing
classification of any such Product. To the knowledge of the Sellers and the
Company, there are no defects in the designs, specifications, or process with
respect to any Product sold or otherwise distributed that will give rise to any
Losses or that will cause such Products to not be useable as intended or
marketed.
(b) The Company has neither received nor sent any
correspondence, and no correspondence has been sent on behalf of the Company,
during the past five (5) years from or to any Governmental Authority.
4.30 Environmental and Safety Matters.
(a) For purposes of this Agreement, the term "Environment"
shall mean all components of the earth, including, without limitation, air (and
all layers of the atmosphere), land (and all surface and subsurface soil,
underground spaces and cavities and all land submerged under water) and water
(and all surface and underground water), organic and inorganic matter and living
organisms, and the interacting natural systems that include components referred
to above in this definition; "Environmental and Safety Requirements" shall mean
any and all applicable statutes, regulations, ordinances, by-laws, codes and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law and civil law in Canada (whether federal, provincial, municipal, or
local) and in the United States of America (whether federal, state or local), in
each case concerning pertaining to the Environment, health and safety matters or
conditions, transportation of Hazardous Substances, Hazardous Substances,
pollution or protection of the Environment, including, without limitation: (i)
on-site or off-site contamination; (ii) public health and safety; (iii)
occupational health and safety; (iv) chemical substances or products; (v) the
presence, use, production, generation, handling, transport, treatment, storage,
distribution, labeling, testing, processing, manufacture, packaging, sale,
recycling, disposal, destruction, incineration, burial, advertising, display,
handling, and Release into the Environment, pollutants, contaminants, chemicals
or other industrial, toxic or radioactive substances or Hazardous Substances;
and (vi) any preventive measures, remedial action and notifications in
connection with the foregoing; "Environmental Lien" shall mean any lien, whether
recorded or unrecorded, in favor of any Governmental Authority, relating to any
liability of the Company, or the Sellers with respect to the Company, arising
under any Environmental and Safety Requirements; and "Hazardous Substances"
shall mean any substance, whether waste, liquid, gaseous or solid matter, fuel,
micro-organism, ray, odor, radiation, energy, vector, plasma and organic or
inorganic matter, which is or is deemed to be, alone or in any combination,
hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a
contaminant or a source of pollution or contamination under any Applicable Law,
including without limitation pesticides, petroleum products or byproducts,
asbestos, polychlorinated biphenyls or noise.
(b) Except as set forth on Schedule 4.30, the Company has
complied with and is currently in compliance with all Environmental and Safety
Requirements except for any non-
32
compliance which would not have a Material Adverse Effect, and neither the
Sellers nor the Company has received any oral or written notice, report,
citation, order, complaint, penalty or information regarding any Liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) or any
corrective, investigatory or remedial obligations arising under Environmental
and Safety Requirements which relate to the Company or any of its properties or
facilities. Without limiting the generality of the foregoing, the Company has
obtained and complied with, and is currently in compliance with, all permits,
licenses, certificates of authorization, registrations and other authorizations
(collectively, "Environmental Permits") that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of its properties or
facilities or the operation of its business as it is presently being conducted,
as it has been conducted in the past and except for any non-compliance which
would not have an Material Adverse Effect. A list of all such Environmental
Permits of the Company is set forth on Schedule 4.30 attached hereto.
(c) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on the
Company or otherwise for site investigation or cleanup, or notification to or
consent of any Governmental Authority or Regulatory Entities or third parties
under any Environmental and Safety Requirements (including any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) The Company has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or Released any substance
(including any Hazardous Substance), or owned, occupied or operated any facility
or property, so as to give rise to Liabilities of the Company for clean-up
costs, remedial work, personal injury claims, natural resource damages or
attorneys fees pursuant to any Environmental and Safety Requirements. Without
limiting the generality of the foregoing, no facts, events or conditions
relating to the past or present properties, facilities or operations of the
Company prevent, hinder or limit continued compliance with Environmental and
Safety Requirements, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental and Safety Requirements or give rise to
any other Liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements (including those
Liabilities relating to onsite or offsite Releases or threatened Releases or of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage).
(e) The Company has not either expressly or by operation of
law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental and Safety
Requirements.
(f) No Environmental Lien has attached to any Real Property.
4.31 Accounts Receivable, Notes Receivable. All accounts and notes
receivable of the Company have arisen in the ordinary course of business,
represent valid obligations to the Company for sales made, services performed or
other charges, are not subject to claims or set-off, or other defenses or
counter-claims, and, subject only to consistently recorded reserves for bad
debts (which has been recorded on the Financial Statements and books and records
of the Company in accordance with GAAP on a consistent basis in a manner
consistent with past
33
practice), have been collected or are collectible in the aggregate recorded
amounts thereof in accordance with their terms. All items which are required by
GAAP to be reflected as accounts and notes receivable on the Financial
Statements and on the books and records of the Company are so reflected and have
been recorded in accordance with GAAP on a consistent basis in a manner
consistent with past practice. The Company has properly perfected in accordance
with Applicable Law, to the extent applicable, enforceable interests (or title)
in such accounts and notes receivable or other security interests related to
such receivables.
4.32 Accounts and Notes Payable. Schedule 4.32 sets forth a true and
correct aged list of all accounts and notes payable of the Company as of the end
of the month prior to the date hereof in excess of $1,000 to any one payee. All
such accounts and notes payable have arisen in the ordinary course of business
and represent valid indebtedness of the Company. All items which are required by
GAAP to be reflected as accounts and notes payable on the Financial Statements
and on the books and records of the Company are so reflected and have been
recorded in accordance with GAAP on a consistent basis in a manner consistent
with past practice.
4.33 Inventory Valuation. The raw materials, work in process, spare
parts, and other inventory of the Company as set forth on the Financial
Statements was, and the raw materials, work in process, spare parts, and other
inventory of the Company currently is, in usable or salable condition in the
ordinary course of business at the amounts carried on the Financial Statements
and currently on the books and records of the Company, respectively. The raw
materials, work in process, spare parts, and other inventory are not obsolete or
excessive and are of at least the standard quality for such items; are suitable
for the manufacture and distribution of Company's Products of standard quality
for such products; and are not in excess of the normal purchasing patterns of
the Company. There is no adverse condition affecting the supply of materials
available to the Company. The amounts of the inventories reflected on the
Financial Statements and on the books and records of the Company have been
determined in accordance with GAAP consistently applied.
4.34 No Material Adverse Change. Except for PAL Health Technology Inc.,
which advised the Company in June 2002 that it will no longer do business with
the Company, since May 31, 2002, there has been no Material Adverse Change with
respect to the Company, whether or not covered by insurance.
4.35 Absence of Certain Business Practices. None of the Sellers, the
Company, their related parties or any Affiliates or any other Person acting on
behalf of or associated with the Company or any individual related to any of the
foregoing Persons, acting alone or together, has with respect to the business or
activities of the Company: (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other Person with whom the
Company has done business directly or indirectly; or (b) directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
trading company, shipping company, governmental employee or other Person who is
or may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which (i) may
subject
34
the Company to any damage or any penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, may have had a Material
Adverse Effect on the assets, business or, operations of the Company as
reflected in the Financial Statements or (iii) if not continued in the future,
may have a Material Adverse Effect the assets, business or operations of the
Company or subject the Company to suit or penalty in any private or governmental
litigation or proceeding.
4.36 Insolvency. The Sellers are able to pay their debts as they mature
and the transfer of the Securities by the Sellers to the Purchaser in accordance
with the terms of this Agreement shall not constitute a voidable preference or
transfer in fraud of any creditor under applicable federal or state insolvency
law.
4.37 Review of Forms. The Sellers have (1) received and carefully
reviewed the Xxxxxx 10-K and Xxxxxx'x Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed by Xxxxxx with the SEC since January 1, 2001 and (2)
had the opportunity to ask questions and receive answers from Xxxxxx concerning
such forms and the documents incorporated by reference therein and to obtain any
documents relating to Xxxxxx which are on file with the SEC and available for
inspection by the public. The Sellers are aware of the risks inherent in an
investment in Xxxxxx and specifically the risks of an investment in the Xxxxxx
Common Stock. In addition, the Sellers are aware and acknowledge that there can
be no assurance of the future viability or profitability of Xxxxxx, nor can
there be any assurance relating to the current or future price of the Xxxxxx
Common Stock, as quoted on the NASDAQ Small Cap Market, or market conditions
generally.
4.38 Investment Representations. The Sellers are acquiring the
Consideration Shares for their own account and will not sell, transfer, or
otherwise dispose of (including pursuant to a liquidating dividend or otherwise)
any of the Consideration Shares or any interest therein, without registration
under the Securities Act and applicable state "blue sky" laws, except in a
transaction which in the opinion of counsel reasonably acceptable to Xxxxxx is
exempt therefrom. Each of the Sellers is an "accredited investor" as that term
is defined in rules promulgated under the Securities Act. The Sellers have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risk of an investment in the Xxxxxx Common Stock and
has obtained, in its judgment, sufficient information from Xxxxxx to evaluate
the merits and risks of an investment in the Xxxxxx Common Stock.. The Sellers
have been provided the opportunity to obtain information and documents
concerning Xxxxxx and the Xxxxxx Common Stock, and has been given the
opportunity to ask questions of, and receive answers from, the directors and
officers of Xxxxxx concerning Xxxxxx and the Xxxxxx Common Stock and other
matters pertaining to this investment. The Sellers are acquiring the
Consideration Shares for their own account, for investment purposes only, and
not with a view to or for the resale, distribution or fractionalization thereof.
The Sellers acknowledge that the offer of the Xxxxxx Common Stock will not be
reviewed by any governmental agency and is being sold to the Sellers in reliance
upon exemption from the Securities Act. The Sellers acknowledge that
certificates representing the Consideration Shares will bear the legend set
forth in Section 2.4.
4.39 Resale of Consideration Shares. The Sellers will resell the
Consideration Shares only pursuant to registration under the Securities Act or
pursuant to an available exemption from
35
registration, including in accordance with the provisions of Regulation S
adopted under the Securities Act, and agrees not to engage in hedging
transaction with regard to the Consideration Shares unless in compliance with
the Securities Act;
4.40 Disclosure. No representation or warranty of the Sellers or the
Company contained in this Agreement, and no statement, report, or certificate
furnished by or on behalf of the Sellers or the Company to Xxxxxx and/or the
Purchaser or its agents pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading or omits or will omit to state a
material fact necessary in order to provide a prospective purchaser of the
Securities with full and proper information as to the business, financial
condition, assets, results of operation or prospects of the Company and the
value of its properties or the ownership or operation of the Company. There is
no fact known to either of the Sellers or the Company, or which reasonably
should be known to either of the Sellers or the Company, which the Sellers or
the Company has not disclosed to Xxxxxx and Purchaser in writing with respect to
the transactions contemplated hereby.
ARTICLE V
INDEMNIFICATION; RELEASES, ETC.
5.1 Survival of the Representations and Warranties. The representations
and warranties of Xxxxxx, the Purchaser, and the Sellers set forth in this
Agreement, the Sellers' Ancillary Agreements, the Purchaser Ancillary Agreement,
and the Xxxxxx Ancillary Agreements shall survive the Closing Date for a period
of two (2) years; provided that the representations and warranties set forth in
Sections 4.14, 4.26 and 4.30 shall survive the Closing and remain in effect
until the expiration of the applicable statute of limitations.
5.2 Investigation. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit, list or other document delivered pursuant
hereto, shall be deemed to be representations and warranties for purposes of
this Agreement.
5.3 Indemnification Generally.
(a) By the Sellers. The Sellers, agree, jointly and severally,
to be responsible for, pay, indemnify and hold harmless Xxxxxx and the
Purchaser, and, following the Closing, the Company, and their respective
shareholders, directors, officers, employees, consultants and agents (the
"Purchaser Indemnified Parties") from, against and in respect of, the full
amount of any and all liabilities, damages, claims, deficiencies, fines,
assessments, losses, Taxes, penalties, interest, costs and expenses, including
reasonable fees and disbursements of counsel (collectively, "Losses") arising
from, in connection with, or incident to: (i) any breach, or inaccuracy of any
of the representations or warranties of the Sellers contained in this Agreement
36
or in any of the Sellers' Ancillary Agreements, (ii) any breach of Sellers of
any covenants or agreements contained in this Agreement or in any of the
Sellers' Ancillary Agreements, (iii) any failure by the Sellers to perform any
obligations contained in this Agreement or in any of the Sellers' Ancillary
Agreements; (iv) any liability resulting from any litigation involving the
Company, if no accrual for such liability was taken into account in the
preparation of the Closing Date Balance Sheet or if an accrual for such
liability was taken into account in the preparation of the Closing Date Balance
Sheet, to the extent such liability exceeds the accrual for such liability set
forth on the Closing Date Balance Sheet, regardless of whether or not such
litigation was disclosed by the Sellers on Schedule 4.6; (v) any and all Taxes
and related penalties, interest or other charges for any unaccrued or unreported
Tax liabilities with respect to the Sellers or the Company for all periods prior
to or including the Closing Date; and (vi) except for those claims or
liabilities specifically identified, disclosed and excluded or otherwise limited
herein, any and all claims or liabilities arising out of, relating to, resulting
from or caused (whether in whole or in part) by any transaction, event,
condition, occurrence or situation in any way relating to the Company, the
Sellers or the conduct of the business of the Company arising or occurring on or
prior to the Closing Date without regard to whether such claim exists on the
Closing Date or arises at any time thereafter.
(b) By Xxxxxx and the Purchaser. Xxxxxx and the Purchaser
agree, jointly and severally, to be responsible for, pay and indemnify and hold
harmless the Sellers, and their respective directors, officers, employees and
agents ("Seller Indemnified Parties") from, against and in respect of, the full
amount of any and all Losses arising from, in connection with, or incident to
(i) any breach or inaccuracy of any of the representations or warranties of
Xxxxxx or the Purchaser contained in this Agreement, any of the Xxxxxx Ancillary
Agreements or the Purchaser Ancillary Agreements; (ii) any breach of Xxxxxx or
the Purchaser of any covenants or agreements contained in this Agreement, any of
the Xxxxxx Ancillary Agreements or the Purchaser Ancillary Agreements; (iii) any
failure by Xxxxxx or the Purchaser to perform any obligations contained in this
Agreement, any of the Xxxxxx Ancillary Agreements or the Purchaser Ancillary
Agreements; and (iv) any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses incidental to any of the foregoing.
(c) Indemnity Procedure. A party or parties hereto agreeing to
be responsible for or to indemnify against any matter pursuant to this Agreement
is referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party".
(i) An Indemnified Party under this Agreement shall,
with respect to claims for Losses asserted against such party by any third
party, give written notice to the Indemnifying Party of any liability which
might give rise to a claim for indemnity under this Agreement, to the extent
reasonably possible, but not later than ten (10) days prior to, with respect to
claims for Losses arising after the date hereof, the date any answer or
responsive pleading is due, and with respect to other matters for which the
Indemnified Party may seek indemnification, give prompt written notice to the
Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however that any failure to give such notice will not waive
any rights of the Indemnified Party, except to the extent the rights of the
Indemnifying Party are materially prejudiced; and provided, further that the
Indemnified Party shall have no obligation to give notice to the Indemnifying
Party of any liability which might
37
give rise to a claim for indemnity if the facts or circumstances relating to or
giving rise to such liability are disclosed on a schedule hereto.
(ii) Subject to Section 5.3(c)(iii), the Indemnified
Party shall have the right to conduct and control, through counsel of its
choosing, the defense, compromise or settlement of any third Person claim,
action or suit against such Indemnified Party as to which indemnification will
be sought by any Indemnified Party from any Indemnifying Party hereunder, and in
any such case the Indemnifying Party shall cooperate in connection therewith and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Indemnified Party in connection therewith; provided,
that the Indemnifying Party may participate, through counsel chosen by it and at
its own expense, in the defense of any such claim, action or suit as to which
the Indemnified Party has so elected to conduct and control the defense thereof;
and provided, further, that the Indemnified Party shall not, without the written
consent of the Indemnifying Party (which written consent shall not be
unreasonably withheld), pay, compromise or settle any such claim, action or
suit, except that no such consent shall be required if, following a written
request from the Indemnified Party, the Indemnifying Party shall fail, within 14
days after the making of such request, to acknowledge and agree in writing that,
if such claim, action or suit shall be adversely determined, such Indemnifying
Party has an obligation to provide indemnification hereunder to such Indemnified
Party. Notwithstanding the foregoing, the Indemnified Party shall have the right
to pay, settle or compromise any such claim, action or suit without such
consent, provided, that in such event the Indemnified Party shall waive any
right to indemnity therefor hereunder unless such consent is unreasonably
withheld.
(iii) If any third Person claim, action or suit
against any Indemnified Party is (x) solely for money damages or (y) if either
of the Sellers is the Indemnifying Party and such claim, action, or suit will
not have a Material Adverse Effect, then with respect to each of (x) and (y)
above the Indemnifying Party shall have the right to conduct and control,
through counsel of its choosing, the defense, compromise or settlement of any
such third Person claim, action or suit against such Indemnified Party as to
which indemnification will be sought by any Indemnified Party from any
Indemnifying Party hereunder if the Indemnifying Party has acknowledged and
agreed in writing that, if the same is adversely determined, the Indemnifying
Party has an obligation to provide indemnification to the Indemnified Party in
respect thereof, and in any such case the Indemnified Party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnifying Party in connection
therewith; provided, that the Indemnified Party may participate, through counsel
chosen by it and at its own expense, in the defense of any such claim, action or
suit as to which the Indemnifying Party has so elected to conduct and control
the defense thereof. Notwithstanding the foregoing, the Indemnified Party shall
have the right to pay, settle or compromise any such claim, action or suit,
provided that in such event the Indemnified Party shall waive any right to
indemnity therefor hereunder unless the Indemnified Party shall have sought the
consent of the Indemnifying Party to such payment, settlement or compromise and
such consent was unreasonably withheld, in which event no claim for indemnity
therefor hereunder shall be waived.
38
(iv) With regard to any and all claims for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of (the "Final Determination"): (i)
the entry of a judgment against the Indemnified Party and the expiration of any
applicable appeal period, or if earlier, five (5) days prior to the date that
the judgment creditor has the right to execute the judgment; (ii) the entry of
an unappealable judgment or final appellate decision against the Indemnified
Party; or (iii) a settlement of the claim. Notwithstanding the foregoing,
provided that there is no good faith dispute as to the applicability of
indemnification, the reasonable legal fees and expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party if such legal fees and expenses are a liability of the Indemnifying Party.
(d) Limitations on Indemnification. (i) Anything in this
Agreement to the contrary notwithstanding, no indemnification payment shall be
made to the Purchaser Indemnified Parties until the amounts which the Purchaser
Indemnified Parties would otherwise be entitled to receive as indemnification
under this Agreement aggregate at least $100,000, at which time the Purchaser
Indemnified Parties shall be indemnified dollar for dollar to the extent any
liability with respect to such matters exists. The indemnification provisions
set forth in Section 5.3(a)(i) (with respect to a breach of Sections 4.14, 4.26
and 4.30), 5.3(a)(ii) (with respect to a breach of Sections 7.1, 7.2 and 7.4),
5.3(a)(iii), 5.3(a)(iv), and 5.3(a)(v), or a claim based upon "fraud" (as
hereinafter defined) shall not be subject to the limitations set forth in this
Section 5.3(d)(i) and shall be indemnified to the Purchaser Indemnified Parties
dollar for dollar to the extent any liability with respect to such matters
exists. Anything in this Agreement to the contrary notwithstanding, no
indemnification payment shall be made to the Seller Indemnified Parties until
the amounts which the Seller Indemnified Parties would otherwise be entitled to
receive as indemnification under this Agreement aggregate at least $100,000, at
which time the Seller Indemnified Parties shall be indemnified dollar for dollar
to the extent any liability with respect to such matters exists. Notwithstanding
the foregoing, the Seller Indemnified Parties shall be indemnified dollar for
dollar with respect to any liability arising out of Xxxxxx'x breach of Sections
2.4(d) and 3.6 hereof, and also Section 3.7 hereof solely to the extent that
Xxxxxx'x breach of Section 3.7 causes Xxxxxx to not be in compliance with the
requirements of Rule 144(c) promulgated under the Securities Act.
(ii) The maximum aggregate liability of the Sellers
for any claim arising from or relating to this Agreement or the transactions
contemplated hereby, whether asserted as breach of contract, tort, violation of
statute or otherwise, irrespective of the theory or basis of such claim, shall
not exceed $2,450,000, provided, that the limitation set forth in this sentence
shall not apply to (1) any breach by Sellers of the representations, warranties
or covenants contained in Sections 4.6, 4.14, 4.26, 4.30, 7.1 or 7.2 of this
Agreement, (2) the indemnification provisions set forth in Sections 5.3(a)(ii),
5.3(a)(iii) and 5.3(a)(v) or (3) the commission of "fraud" by the Sellers or the
Company with respect to any matters pertaining to this Agreement and the
consummation of the transactions contemplated hereby. The maximum aggregate
liability of Xxxxxx and the Purchaser for any claim arising from or relating to
this Agreement or the transactions contemplated hereby, whether asserted as
breach of contract, tort, violation of statute or otherwise, irrespective of the
theory or basis of such claim, shall not exceed $2,450,000; provided, that the
limitation set forth in this sentence shall not apply to the
39
commission of "fraud" by Xxxxxx or the Purchaser with respect to any matters
pertaining to this Agreement and the consummation of the transactions
contemplated hereby. For purposes of this Section 5.3(d), the term "fraud" shall
include any willful, grossly negligent or intentional misrepresentation or the
making of any untrue statement of a material fact or the omission to state a
material fact necessary in order to make the statement made, in light of the
circumstances under which they were made, not misleading if the person making
such untrue statement of a material fact or omitting to state such material fact
had actual knowledge that such statement or omission was untrue when made or
omitted.
5.4 General Releases. Except for any obligation of Xxxxxx and
Purchasers under this Agreement and the Purchaser Ancillary Agreements, as
additional consideration for the sale of the Securities pursuant to this
Agreement, the Sellers, on behalf of themselves, their Subsidiaries, Affiliates,
officers, directors, employees, consultants, and agents hereby unconditionally
and irrevocably release and forever discharges, effective as of the Closing
Date, the Company, the Company's Subsidiaries, and the officers, directors,
employees and agents of the Company and their Subsidiaries, from any and all
rights, claims, demands, judgments, obligations, liabilities and damages,
whether accrued or unaccrued, asserted or unasserted, and whether known or
unknown ("Claims"), relating to the Company or its Subsidiaries which ever
existed or now exist, by reason of any tort, breach of contract, violation of
law or other act or failure to act which shall have occurred at or prior to the
Closing Date, or in relation to any other liabilities of the Company to the
Sellers. The Sellers expressly intend that the foregoing release shall be
effective regardless of whether the basis for any claim or right hereby released
shall have been known or anticipated by the Sellers.
5.5 Tax Covenants.
(a) The Sellers shall be responsible for, and shall pay or
cause to be paid, and shall indemnify and hold the Company, Xxxxxx, the
Purchaser, and their Affiliates and successors (the "Purchaser Tax Indemnified
Parties") harmless from and against any and all Taxes on an After-Tax Basis that
may be imposed on or assessed against them or any one of them on account of
Taxes imposed upon the Company or its assets (i) with respect to all taxable
periods ended on or prior to the Closing Date, if and to the extent, but only to
the extent, that the liability for such Taxes exceeds the liabilities or
accruals taken into account in the preparation of the Closing Date Balance Sheet
for Taxes relating to such periods; (ii) with respect to any Person other than
the Company arising under Reg. Section 1.1502-6 (or any similar provision or
state, local, or foreign law), or as a transferee or successor or by contract or
otherwise; (iii) with respect to any and all Taxes allocated to Sellers pursuant
to Section 5.5(c) hereof; (iv) with respect to any Taxes incurred by or imposed
upon the Company, Xxxxxx, or the Purchaser in connection with the transactions
contemplated hereby; (v) with respect to Tax liabilities of the Sellers arising
after the Closing Date, or (vi) arising from any misrepresentation or breach of
warranty contained in Section 4.27 hereof. The Seller shall also pay or cause to
be paid and shall indemnify and hold harmless the Purchaser Tax Indemnified
Parties from and against all Losses, damages and reasonable third party costs
and expenses (including reasonable attorney, accountant and expert witness fees
and disbursements) ("Related Costs") incurred in connection with the Taxes for
which the Sellers indemnify the Purchaser Tax Indemnified Parties pursuant to
this Section 5.5(a) (or any asserted deficiency, claim demand, assessment or
reassessment,
40
including the defense or settlement thereof) or the enforcement of this Section
5.5(a). Any payment required to made by the Sellers pursuant to this Section
5.5(a) shall be made within 30 days after written notice from the Purchaser.
(b) The Purchaser shall be responsible for, and shall pay or
cause to be paid, and shall indemnify and hold the Sellers harmless from and
against, any and all Taxes that may be imposed on or assessed against the
Sellers on account of Taxes imposed on the Company or its assets (i) with
respect to taxable periods of the Company beginning after the Closing Date, and
(ii) any and all Taxes allocated to the Purchaser pursuant to Section 5.5(c)
hereof. The Purchaser shall also pay or cause to be paid and shall indemnify and
hold harmless the Sellers from and against all Related Costs of the Sellers
incurred in connection with the Taxes for which the Purchaser indemnifies the
Sellers pursuant to this Section 5.5(b) (or any asserted deficiency, claim,
demand, assessment or reassessment, including the defense or settlement thereof)
or the enforcement of this Section 5.5(b). Any payment required to be made by
the Purchaser pursuant to this Section 5.5(b) shall be made within 30 days of
written notice from the Sellers.
(c) The Sellers shall be responsible for filing or causing to
be filed all Tax Returns required to be filed by or on behalf of the Company on
or before the Closing Date, which Tax Returns shall be filed within 75 days
after the Closing Date. The Sellers shall provide to the Purchaser, for review
and approval, a copy of each such Tax Return at least three (3) weeks prior to
the end of such 75 day period. The Purchaser's approval shall not be
unreasonably withheld, and in no event shall this section operate to cause any
such return to be filed after the due date (including any extension thereof) for
the filing of such return. The Purchaser shall be responsible for filing or
causing to be filed all Tax Returns required to be filed by or on behalf of the
Company after the Closing Date (other than Tax Returns for periods ending on or
before the Closing Date but not due until after the Closing Date.
(d) The Sellers and the Purchaser shall cooperate fully with
each other and make available to each other in a timely fashion such Tax data
and other information and personnel as may be reasonably required for the
payment of any estimated Taxes and the preparation of any Tax Returns required
to be prepared hereunder. The Sellers and the Purchaser shall make available to
the other, as reasonably requested, all information, records or documents in
their possession relating to Tax liabilities of the Company and the Company
Subsidiaries for all taxable periods thereof ending on, before or including the
Closing Date and shall preserve all such information, records and documents
until the expiration of any applicable Tax statute of limitations or extensions
thereof; provided, however, that if a proceeding has been instituted for which
the information, records or documents are required prior to the expiration of
the applicable statute of limitations, then such information, records or
documents shall be retained until there is a final determination with respect to
such proceeding.
(e) The Purchaser and the Sellers shall promptly notify each
other in writing upon receipt by the Purchaser or the Sellers, as the case may
be, of any notice of any Tax audits of or assessments or reassessments against
the Company for taxable periods ending on or before the Closing Date. The
failure of one party promptly to notify the other party of any such audit or
assessment or reassessment shall not forfeit the right to indemnity except to
the extent that a party is materially prejudiced as a result. The Purchaser
shall have the sole right to represent the
41
Company's interests in any Tax proceeding relating to such Tax audits or
assessments or reassessments and to employ counsel of its choice at its expense.
The Purchaser, on the one hand, and the Sellers, on the other, each agree to
cooperate fully with the other and its or their respective counsel in the
defense against or compromise of any claim in any Tax proceeding.
(f) All obligations under this Section 5.5 shall survive the
Closing hereunder and continue until 10 days following the expiration of the
statute of limitations on assessment or reassessment of the relevant Tax.
Notwithstanding the foregoing, any claim for indemnification hereunder shall
survive such termination date if, prior to the termination date, the party
making the claim shall have advised the other party in writing of facts that may
constitute or give rise to an alleged claim for indemnification, specifying in
reasonable detail the basis under this Agreement for such claim.
ARTICLE VI
CLOSING; DELIVERIES
6.1 Closing; Effective Date. Subject to the terms and conditions set
forth herein, the closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxx Xxxxxxx, P.C., 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on January 13, 2003, or on
such other date and at such other place as may be agreed to by the parties. All
proceedings to be taken and all documents to be executed at the Closing shall be
deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
6.2 Closing Date Deliveries by the Sellers and the Company. At the
Closing, the Sellers and the Company shall deliver the following documents to
Purchaser:
(a) the certificates representing the Securities, together
with stock powers duly executed in blank;
(b) certificates, dated the Closing Date, of the respective
Secretaries of 9117 and the Company, setting forth the authorizing resolutions
adopted by the Sellers' and the Company's Boards of Directors approving this
Agreement and the Sellers' Ancillary Agreements and the documents and
transactions contemplated hereby and thereby;
(c) the written resignations of each of the directors and
officers of the Company, as may be requested by Purchaser, effective upon
Closing;
(d) the minute books of the Company, including corporate
seals, unissued stock certificates, stock registers, certificates of
incorporation, bylaws and corporate minutes, and other formation and
organizational documents, certified by the Secretaries of the Company and the
Sellers;
42
(e) certificates issued by the Secretary of State or other
similar appropriate governmental department, as to the good standing of the
Company in its jurisdiction of incorporation and certifying its certificate of
incorporation, as amended to date;
(f) the Escrow Agreement, duly executed by each of the
Sellers;
(g) an Employment Agreement between Xxxxx and the Purchaser,
substantially in the form attached hereto as Exhibit 2, duly executed by Xxxxx
(the "Employment Agreement");
(h) Lock-Up Agreement in favor of Xxxxxx, substantially in the
form attached hereto as Exhibit 3, duly executed by the Sellers (the "Lock-Up
Agreement"); and
(i) the favorable legal opinion of XxXxxxxx Xxxxxxxx, legal
counsel to the Sellers and the Company, dated the Closing Date, addressed to
Xxxxxx and the Purchaser, in a form reasonably satisfactory to Xxxxxx and the
Purchaser.
6.3 Closing Date Deliveries by Xxxxxx and the Purchaser. At Closing,
Xxxxxx and the Purchaser shall deliver the following documents and funds to the
Sellers:
(a) a wire transfer of funds (provided that the Sellers shall,
at least one business day prior to Closing, have furnished appropriate wire
instructions) to the Sellers in the aggregate amount of the Cash at Closing;
(b) a certificate, dated the Closing Date, of the Secretary of
each of Xxxxxx and the Purchaser, setting forth the authorizing resolutions
adopted by Xxxxxx'x and the Purchaser's Board of Directors approving the terms
and conditions of this Agreement, the Xxxxxx Ancillary Agreements, and the
Purchase Ancillary Agreements and the documents and transactions contemplated
hereby and thereby;
(c) a certificate of the Secretary of State of the State of
Delaware, as of a recent date, as to the good standing of Xxxxxx, and Langer's
certificate of incorporation;
(d) a certificate issued by the appropriate governmental
department, as to the good standing of the Purchaser in its jurisdiction of
incorporation, and the Purchaser's certificate of incorporation;
(e) the Escrow Agreement, duly executed by each of Xxxxxx and
the Purchaser;
(f) the Employment Agreement, duly executed by the Purchaser;
(g) the favorable legal opinion of Xxxx Xxxxxxx, P.C., legal
counsel to Xxxxxx and the Purchaser, dated the Closing Date, addressed to the
Sellers, in a form reasonably satisfactory to the Sellers;
43
(h) the favorable legal opinion of Stikeman Elliott, Canadian
legal counsel to Xxxxxx and the Purchaser, dated the Closing Date, addressed to
the Sellers, in a form reasonably satisfactory to the Sellers;
(i) the Exemption; and
(j) a certificate, duly signed on behalf of Xxxxxx, certifying
that no order ceasing or suspending trading in any securities of Xxxxxx or
prohibiting the issuance and/or sale of the Consideration Shares is in effect
and no proceedings for such purchase are, to the knowledge of Xxxxxx,
threatened.
6.4 Closing Date Deliveries by Xxxxxx and/or the Purchaser to the
Escrow Agent. At Closing, Xxxxxx and the Purchaser shall deliver the Escrowed
Cash and the Consideration Shares to the Escrow Agent.
ARTICLE VII
COVENANTS AND OTHER AGREEMENTS
7.1 Non-competition. For purposes of this Section 7.1, all references
to Xxxxxx, the Purchaser, or the Company shall be deemed to include all of the
Affiliates, Subsidiaries, successors and assigns of Xxxxxx, the Purchaser, or
the Company, as the case may be, and all references to the Sellers shall be
deemed to include the Seller and their affiliate, successors and assigns. The
Sellers acknowledge that in order to assure Xxxxxx and the Purchaser that Xxxxxx
and the Purchaser will retain the value of the Company as a "going concern," the
Sellers agree, on the terms set forth in this Section 7.1, not to utilize their
special knowledge of the business of the Company and their relationships with
customers, suppliers and others to compete with Xxxxxx, the Purchaser, or the
company, subject to the terms hereafter set forth. For the Restricted Period (as
defined below), the Sellers and their Affiliates shall not engage or have an
interest in any Competitive Business, anywhere in (i) the United States of
America or its territories and possessions, including, but not limited to,
Puerto Rico, (ii) Canada, (iii) Europe, (iv) Japan, or (v) any other geographic
area where Xxxxxx, the Purchaser, or the Company does business or in which any
of Xxxxxx'x, the Purchaser's or the Company's products are marketed, as
principal, officer, agent, employee, director, partner or stockholder (except as
an owner of two percent (2%) or less of the stock of any company listed on a
national securities exchange or traded in the over-the-counter market), or
through the investment of capital, lending of money or property, rendering of
services or capital, or otherwise, in any Competitive Business. In addition,
during the Restricted Period, the Sellers and their Affiliates shall not, and
shall not permit any of their employees, agents or others then under their
control to, directly or indirectly, on behalf of the Sellers or their
Affiliates, or any other Person, (i) accept Competitive Business from, or
solicit the Competitive Business of any Person who is, or who had been at any
time during the three (3) years prior to such solicitation, a customer or
supplier of any of Xxxxxx, the Purchaser, the Company, or their respective
Subsidiaries or any successor to the business of Xxxxxx, the Purchaser, the
Company, or their Subsidiaries, (ii) accept Competitive Business from, or
solicit the Competitive Business of any Person who, at any time during the two
(2) years prior to such
44
solicitation, had discussions with Xxxxxx, the Purchaser, the Company, or any of
their respective Subsidiaries regarding becoming a customer of any of such
companies, or (iii) recruit or otherwise solicit or induce any person who is an
employee or consultant of, or otherwise engaged by, Xxxxxx, the Purchaser, the
Company, or their Subsidiaries, or any successor to the business of Xxxxxx, the
Purchaser, the Company, or their Subsidiaries to terminate his or her employment
or other relationship with Xxxxxx, the Purchaser, the Company or their
Subsidiaries, or such successor, or hire any person who has left the employ of
Xxxxxx, the Purchaser, the Company, or their Subsidiaries, or any such successor
during the two (2) years preceding such solicitation. The Sellers and their
Affiliates shall not at any time, directly or indirectly, use or purport to
authorize any Person to use any name, xxxx, copyright, logo, trade dress or
other identifying words or images which are the same as or similar to those used
currently or in the past by Xxxxxx, the Purchaser, the Company, or their
Subsidiaries in connection with any product or service, whether or not such use
would be in a Competitive Business. The Sellers acknowledge that compliance with
the restrictions set forth in this Section 7.1 will not prevent any of them from
earning a livelihood. As used herein, the "Restricted Period" shall mean the
period ending on the fifth anniversary of the Closing Date. As used herein, the
phrase "Competitive Business" means any business, other than the development,
distribution and sale of the Tri-Logic Software, competitive with business
engaged in by Xxxxxx, the Purchaser, or the Company as of the date hereof and at
any time during the Restricted Period.
7.2 General Confidentiality. For purposes of this Section 7.2, all
references to Xxxxxx, the Purchaser, or the Company shall be deemed to include
all of the Affiliates, Subsidiaries, successors and assigns of Xxxxxx, the
Purchaser, or the Company, as the case may be, and all references to the Sellers
shall be deemed to include the Seller and their Affiliates, successors and
assigns. The Sellers acknowledge that the intangible property and all other
confidential or proprietary information with respect to the business and
operations of the Company are, after the Closing Date, valuable, special and
unique assets of Xxxxxx and the Purchaser. The Sellers shall not, at any time
after the Closing Date, disclose, directly or indirectly, to any Person, or use
or purport to authorize any Person to use any confidential or proprietary
information with respect to the Company, whether or not for their own benefit,
without the prior written consent of Xxxxxx and the Purchaser, including (i)
trade secrets, designs, formulae, drawings, intangible property, diagrams,
techniques, research and development, specifications, data, know-how, formats,
marketing plans, business plans, budgets, strategies, forecasts and client data;
(ii) information relating to the products developed by Xxxxxx, the Purchaser, or
the Company, (iii) the names of Xxxxxx'x, the Purchaser's, and the Company's
customers and contacts, Xxxxxx'x, the Purchaser's, and the Company's marketing
strategies, the names of their vendors and suppliers, the cost of materials and
labor, the prices obtained for services sold (including the methods used in
price determination, manufacturing and sales costs), lists or other written
records used in the business of Xxxxxx, the Purchaser, or the Company,
compensation paid to employees and consultants and other terms of employment,
production operation techniques or any other confidential information of, about
or pertaining to the business of Xxxxxx, the Purchaser, and the Company, and any
other information and material relating to any customer, vendor, licensor,
licensee, or other party transacting business with Xxxxxx, the Purchaser, or the
Company, (iv) all tangible material that embodies any confidential and
proprietary information as well as all records, files, memoranda, reports, price
lists, drawings, plans, sketches and other written and graphic records,
documents, equipment, and the
45
like, relating to the business of Xxxxxx, the Purchaser, or the Company, and (v)
any other confidential information or trade secrets relating to the business or
affairs of Xxxxxx or the Purchaser which the Sellers may acquire or develop in
connection with or as a result of their performance of the terms and conditions
of this Agreement. Notwithstanding anything to the contrary set forth in this
Section 7.2, confidential and proprietary information shall not include (i)
information that is known to the public or which may become known to the public
without any fault of the Sellers or in violation of any confidentiality
restrictions imposed upon the Sellers, (ii) information that is required to be
disclosed pursuant to subpoena or court order to the extent that such
information is disclosed in compliance therewith, (iii) information that is
required to be disclosed by Applicable Law or to any Governmental Authority to
the extent that such information is disclosed in compliance therewith, (iv)
information that is disclosed by the Sellers to their respective attorneys and
accountants in connection with the enforcement of this Agreement to the extent
that such attorneys and accountants are bound by the restrictions of the type
set forth in this Section 7.2, or (v) the Tri-Logic Software and the
Intellectual Property owned by Xxxxx and Xxxxxxxxx related thereto. The Sellers
acknowledge that Xxxxxx and the Purchaser would not enter into this Agreement
without the assurance that all such confidential and proprietary information
will be used for the exclusive benefit of Xxxxxx and the Purchaser.
7.3 Continuing Obligations; Equitable Remedies. The restrictions set
forth in Sections 7.1 and 7.2 are considered by the parties to be reasonable for
the purposes of protecting the value of the business and goodwill of the
Purchaser and the Company. The Sellers acknowledge that Xxxxxx and the Purchaser
would be irreparably harmed and that monetary damages would not provide an
adequate remedy to Purchaser or Xxxxxx in the event the covenants contained in
Sections 7.1 and 7.2 were not complied with in accordance with their terms.
Accordingly, the Sellers agree that any breach or threatened breach by any of
them of any provision of Sections 7.1 or 7.2 shall entitle Purchaser and Xxxxxx
to injunctive and other equitable relief to secure the enforcement of these
provisions, in addition to any other remedies (including damages) which may be
available to Purchaser. If the Sellers breach the covenant set forth in Section
7.1, the running of the non-compete period described therein shall be tolled for
so long as such breach continues. It is the desire and intent of the parties
that the provisions of Sections 7.1 and 7.2 be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought. If any provisions of Section 7.1 relating to the time
period, scope of activities or geographic area of restrictions is declared by a
court of competent jurisdiction to exceed the maximum permissible time period,
scope of activities or geographic area, as the case may be, the time period,
scope of activities or geographic area shall be reduced to the maximum which
such court deems enforceable. If any provisions of Section 7.1 or 7.2 other than
those described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties. In addition, if
any party brings an action to enforce Sections 7.1 or 7.2 hereof or to obtain
damages for a breach thereof, the prevailing party in such action shall be
entitled to recover from the non-prevailing party all attorney's fees and
expenses incurred by the prevailing party in such action.
46
7.4 Collection of Receivables.
(a) The Sellers hereby guarantee the collection of 100% of the
Company's accounts receivable included in the calculation of Closing Date
Balance Sheet (the "Closing Date Receivables"), not later than 90 days after the
Closing Date (the "AR Deadline"). If any amount of the Closing Date Receivables
is not collected as of the AR Deadline, the Purchaser shall give notice thereof
to the Seller, and the Seller shall promptly reimburse the Purchaser for the
amount thereof. The Company's accounts receivable shall be collected in such
manner after the Closing Date as the Purchaser deems appropriate, and payments
from the account debtors shall be applied in such manner as the Purchaser shall
determine. The Sellers agree that, from and after the Closing Date, the Company
shall have the right and authority to collect for its own account the Closing
Date Receivables in accordance with the procedures and policies of the Purchaser
applicable under the circumstances, but the Company shall have no obligation to
resort to legal action or other third party collection methods.
(b) Any amounts received from the account debtor of a Closing
Date Receivable shall be applied as the Company may determine, except for
amounts which the account debtor has directed to be applied to a particular
debt.
(c) To the extent that any Closing Date Receivable remains
outstanding upon expiration of the AR Deadline, the Company may, at the
Purchaser's discretion, continue to attempt to collect such Closing Date
Receivable, or may give notice of the non-collectability of such Closing Date
Receivable to the Sellers, and the Sellers shall have the opportunity, during
the ten-day period following the date of such notice, to consult with and advise
the Purchaser and the Company with respect to the manner in which such Closing
Date Receivable may be collected, it being understood by the parties hereto that
the Purchaser and the Company shall have the sole right, but not the obligation,
to implement any such collection methods and that the Sellers shall not contact
any account debtors in respect of such collection without the express written
consent of the Purchaser in each instance. Upon the expiration of such ten-day
period, the Purchaser shall have the right, in its sole discretion, to continue
to pursue collection thereof; provided, however, that the Purchaser may at any
time thereafter exercise its right of indemnification under Section 5.3;
provided, however, that if Xxxxxx or the Purchaser seek indemnification under
the terms of this Agreement or otherwise and is awarded damages, Xxxxxx or the
Purchaser, as the case may be, shall only be entitled to receive the greater of
the amount of damages awarded or the amount of receivables owing, but not both.
(d) Upon receipt of payment of the uncollected Closing Date
Receivables from the Sellers, Purchaser shall cause the Company to assign to the
Sellers such uncollected Closing Date Receivables, and the Sellers shall have
the right to pursue the collection of outstanding Closing Date Receivables for
their own account within a reasonable time before the applicable statute of
limitation for the collection of such funds has run; provided, that the Sellers
shall confer with the Purchaser at least 10 days prior to taking legal action
and, during such 10 day period or any time thereafter, the Purchaser, in its
sole discretion, may elect to cause the Company to take back any outstanding
Closing Date Receivable assigned to the Seller pursuant to this subsection (v),
and the Sellers shall assign such outstanding Closing Date Receivable to the
Purchaser. If the Purchaser elects to cause the Company to take back any such
uncollected
47
Closing Date Receivable, the Purchaser shall reimburse the amount, if any, paid
to it by the Sellers on account of the uncollectability of such Closing Date
Receivable.
(e) The Sellers agree to use their best efforts not to injure
any customer relationships of the Company, Xxxxxx, or the Purchaser in
collecting the Receivables.
7.5 Tri-Logic Software License. Xxxxx and Xxxxxxxxx hereby grant to the
Purchaser and the Company a two (2) year, fully paid, exclusive, worldwide
license to use the Tri-Logic Software including any and all updates and
enhancements thereto. Xxxxx and Xxxxxxxxx represent and warrant that they own
all right, title and interest in and to the Tri-Logic Software or otherwise have
the right to grant to the Purchaser and the Company the license they purport to
grant herein, and that the Purchaser and the Company may utilize the Tri-Logic
Software without violating the Intellectual Property or contractual rights of
any third party. In the event the Tr-Logic Software does not function in
accordance with its specifications, Xxxxx and Xxxxxxxxx will make commercially
reasonable efforts to cause such software to comply with its specifications.
7.6 Cost of Audits. The cost of the audit of the Company's financial
statements for fiscal years ended May 31, 2002 and 2001 in accordance with
United States generally accepted accounting principles and unaudited financial
statements prepared in accordance with United States generally accepted
accounting principles in the interim periods ended August 31, 2002 and 2001,
including the fees and disbursements of Sainson Balir Deloitte & Touche and
Boucher, Champagne, Xxxxxxxx and Xxxxxxxx shall be paid as follows: (i) the
Company shall pay the first $50,000 of the cost, and (ii) Xxxxxx shall pay any
amount owed in excess of $50,000.
ARTICLE VIII
GUARANTEES
8.1 Guarantees. Xxxxxx guarantees the payment by the Purchaser to the
Sellers of any amount owing to the Sellers by the Purchaser under this Agreement
and the Purchaser Ancillary Agreements and the performance by the Purchaser of
all of its obligations under this Agreement and the Purchaser Ancillary
Agreements.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice, demand, claim or other communication under
this Agreement shall be in writing and shall be sent by certified mail, return
receipt requested, postage prepaid; telegraph; cable; or overnight courier to
the following addresses (or to such other address as a party to receive such
notice shall specify to the other parties hereto in accordance with the
provisions of this section):
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If to Xxxxxx or Purchaser: If to the Sellers:
000 Xxxxxxx Xx. 00, xxx Xxxxxxxxxxxx
Xxxx Xxxx, XX 00000 Saint-Xxxxxxx-Borromee (Quebec)
Attn.: Chief Executive Officer J6E 7G9
with a copy to: with a copy to:
Xxxx Xxxxxxx, P.C. XxXxxxxx Xxxxxxxx, LLP
1350 Avenue of the Americas The Windsor
26th Floor 0000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000 Montreal (Quebec)
Attn.: Xxxxxx X. Xxxxxxxx, Xxx. X0X 0X0
Xxxx.: Me Xxxxxx X. Saint-Xxxxx
All such notices and communications shall be deemed effective as follows: if
mailed, on the third business day following deposit in the mail; if sent by
telegraph, or cable, when delivered to the telegraph or cable company, as the
case may be, or if by overnight courier, on the day following delivery to the
courier; provided that if such day is not a business day, such notice or
communication shall be deemed effective on the next succeeding business day.
9.2 Entire Agreement. This Agreement contains every obligation and
understanding between the parties relating to the subject matter hereof and
merges all prior discussions, negotiations and agreements, including the letter
of intent dated May 15, 2002 from Xxxxxx to the Company and Xxxxx, between them,
and none of the parties shall be bound by any conditions, definitions,
understandings, warranties or representations other than as expressly provided
or referred to herein.
9.3 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs,
personal representatives, legal representatives, and permitted assigns.
9.4 Assignment. This Agreement may not be assigned by any party without
the written consent of the other party; provided, that Xxxxxx and the Purchaser
may assign this Agreement to a corporation, partnership, or limited liability
company of which either Xxxxxx or the Purchaser maintains majority control.
9.5 Waiver and Amendment. Any representation, warranty, covenant, term
or condition of this Agreement which may legally be waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof
(including the period during which any condition is to be satisfied or any
obligation performed) may be amended by the parties thereto at any time. Any
such waiver, extension or amendment shall be evidenced by an instrument in
writing executed on behalf of the appropriate party by its President or any Vice
President or other person, who has been authorized by its Board of Directors to
execute waivers, extensions or amendments on its behalf. No waiver by any party
hereto, whether express or implied, of its rights under any provision of this
Agreement shall constitute a waiver of such party's rights under such provisions
at any other time or a waiver of such party's rights under any other provision
of this Agreement.
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No failure by any party thereof to take any action against any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
9.6 No Third Party Beneficiary. Except for the provisions of Section
5.4, nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
9.7 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written. It is the desire
and intent of the parties that the provisions of this Agreement be enforced to
the fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement is sought. If any provision of this Agreement
relating to a time period or scope of activities is declared by a court of
competent jurisdiction to exceed the maximum permissible time period or scope of
activities, as the case may be, the time period or scope of activities shall be
reduced to the maximum which such court deems enforceable.
9.8 Expenses. Each party agrees to pay, without right of reimbursement
from the other party, the costs incurred by it incident to the performance of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby, including costs incident to the preparation of this
Agreement, and the fees and disbursements of counsel, accountants and
consultants employed by such party in connection herewith. No expenses of the
Sellers relating to the transactions contemplated hereby shall be paid by the
Company, but all such fees shall be paid directly by the Sellers.
9.9 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.11 Time of the Essence. Wherever time is specified for the doing or
performance of any act or the payment of any funds, time shall be considered of
the essence.
9.12 Injunctive Relief. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including injunctive relief, specific performance or other equitable
remedies in addition to all other remedies provided hereunder or available to
the parties hereto at law or in equity.
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9.13 Remedies Cumulative. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
9.14 Governing Law. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of New York
without reference to the choice of law principles thereof.
9.15 Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the courts of New York County, New York. The parties
to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by
virtue of a failure to perform an act required to be performed in the State of
New York and irrevocably and expressly agree to submit to the jurisdiction of
the courts of the State of New York for the purpose of resolving any disputes
among the parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in New York County, New
York, and further irrevocably waive any claim that any suit, action or
proceeding brought in New York County, New York has been brought in an
inconvenient forum. The parties hereto agree to service of process by certified
or registered United States mail, postage prepaid, addressed to the party in
question.
9.16 Participation of Parties. The parties hereto acknowledge that this
Agreement and all matters contemplated herein, have been negotiated among all
parties hereto and their respective legal counsel and that all such parties have
participated in the drafting and preparation of this Agreement from the
commencement of negotiations at all times through the execution hereof.
9.17 Further Assurances. The parties hereto shall deliver any and all
other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including all necessary stock powers and such other
instruments of transfer as may be necessary or desirable to transfer ownership
of the Securities.
9.18 Publicity. No public announcement or other publicity regarding
this Agreement or the transactions contemplated hereby shall be made prior to or
after the date hereof without the prior written consent of Xxxxxx and the
Purchaser as to form, content, timing and manner of distribution.
Notwithstanding the foregoing, nothing in this Agreement shall preclude any
party or its affiliates from making any public announcement or filing pursuant
to any federal or state securities laws or stock exchange rules.
9.19 Language. The parties have requested that this Agreement and all
related documents be drafted in the English language. Les parties ont demande
que cette convention et tous documents s'y afferents soient rediges en langue
anglaise.
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
BI-OP LABORATORIES INC. XXXXXX CANADA, INC.
By:___________________________ By:___________________________
Name: __________________ Name: __________________
Title: __________________ Title: __________________
0000-0000 XXXXXX INC. XXXXXX, INC.
By:___________________________ By:___________________________
Name: __________________ Name: __________________
Title: __________________ Title: __________________
------------------------------
XXXXXXX XXXXX
------------------------------
XXXXXXXXX XXXXXXX
------------------------------
XXXXXXX XXXXXXXXX, solely for the
purpose of being bound by the terms
and conditions of Section 7.5 hereof.
