SHARE PURCHASE AGREEMENT
between
2017146 Ontario Limited
- and -
XXXXXX INTERNATIONAL CORP.
in respect of the shares of
PULSE MICROSYSTEMS LTD.
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION........................................................................................1
1.1 Defined Terms........................................................................................1
1.2 Best of Knowledge....................................................................................5
1.3 Schedules............................................................................................5
1.4 Currency.............................................................................................6
1.5 Choice of Law and Attornment.........................................................................6
1.6 Interpretation Not Affected by Headings or Party Drafting............................................6
1.7 Number and Gender....................................................................................6
1.8 Time of Essence......................................................................................6
ARTICLE 2 - PURCHASE AND SALE.....................................................................................6
2.1 Purchased Shares.....................................................................................6
2.2 Payment of Purchase Price............................................................................7
2.3 Adjustments to Purchase Price........................................................................7
2.4 Determination of Net Book Value......................................................................7
2.5 Access to Business Records...........................................................................9
2.6 Payment of Adjustment Amounts.......................................................................10
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES.......................................................................11
3.1 Representations and Warranties of the Vendor........................................................11
3.2 Representations and Warranties of the Purchaser.....................................................14
ARTICLE 4 - SURVIVAL AND LIMITATIONS OF REPRESENTATIONS
AND WARRANTIES....................................................................................17
4.1 Survival of Warranties by the Vendor................................................................17
4.2 Survival of Warranties by the Purchaser.............................................................17
ARTICLE 5 - CONDITIONS...........................................................................................17
5.1 Conditions to the Obligations of the Purchaser......................................................17
5.2 Conditions to the Obligations of the Vendor.........................................................19
ARTICLE 6 - POST-CLOSING COVENANTS...............................................................................21
6.1 Post-Closing Covenants by the Vendor................................................................21
6.2 Post Closing Covenants by the Purchaser.............................................................21
6.3 Vendor/Purchaser Employee Obligations...............................................................22
6.4 Pre-Closing Governmental Charges....................................................................22
ARTICLE 7 - CLOSING..............................................................................................23
7.1 Closing Arrangements................................................................................23
7.2 Documents to be Delivered...........................................................................23
ARTICLE 8 - INDEMNIFICATION......................................................................................23
8.1 Indemnity by the Vendor.............................................................................23
8.2 Indemnification By the Purchaser and Corporation....................................................24
8.3 Notice to Third Party Claims........................................................................24
8.4 Rights are Exclusive................................................................................25
ARTICLE 9 - GENERAL PROVISIONS...................................................................................25
9.1 Further Assurances..................................................................................25
9.2 Remedies Cumulative.................................................................................25
9.3 Notices.............................................................................................25
9.4 Counterparts........................................................................................26
9.5 Expenses of Parties.................................................................................26
9.6 Brokerage and Finder's Fees.........................................................................26
9.7 Assignment..........................................................................................27
9.8 Successors and Assigns..............................................................................27
9.9 Entire Agreement....................................................................................27
9.10 Waiver27
9.11 Amendments..........................................................................................28
9.12 Enforceability......................................................................................28
SCHEDULES
Schedule 1.1(c) - Assumption Agreement
Schedule 1.1(l) - Collateral and Guarantee Agreement
Schedule 1.1(s) - Financial Statement
Schedule 1.1(v) - Inter-Company Accounts
Schedule 1.1(x) - Management and Stockholders' Agreement
Schedule 1.1(hh) - Secured Promissory Note
Schedule 1.1(ii) - Software License and Distribution Agreement
Schedule 1.1(oo) - Warrant Agreement
Schedule 5.1(2) - Consents.
Schedule 5.1(10) - Outstanding Bank or Other Guarantees and Obligations
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 31st day of October, 0000
X X X X X X X:
2017146 ONTARIO LIMITED, an Ontario corporation (the "Purchaser");
- and -
XXXXXX INTERNATIONAL CORP., a Delaware corporation, (the "Vendor");
RECITES THAT:
1. The Vendor is the registered and beneficial owner of all of the issued and
outstanding shares (the "Purchased Shares") in the capital of Pulse
Microsystems Ltd. (the " Corporation"); and
2. The Purchaser wishes to purchase, and the Vendor wishes to sell, the
Purchased Shares on the terms and conditions herein contained;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, it is agreed between the parties
hereto as follows:
ARTICLE 1 - INTERPRETATION
1.1 Defined Terms
In this Agreement and in the Schedules hereto, unless there is something in
the subject matter or context inconsistent therewith, the following terms and
expressions will have the following meanings:
(a) "Affiliate" of any person means another person which, directly or
indirectly, is controlled by, controls or is under direct or indirect
common control with such person;
(b) "arm's length" will have the meaning ascribed to such term under the
Income Tax Act (Canada);
(c) "Assumption Agreement" means the debt assignment and assumption
agreement among the Vendor, the Purchaser and the Corporation under
which the Purchaser shall be assigned and assume all of the
Inter-Company Accounts, in the form of agreement as attached as
Schedule 1.1(c) hereto.
(d) "Business" means the business carried on by the Corporation which
primarily involves the development and distribution of embroidery
software, including research and development activities relating
thereto and the distribution of products to North American and
international Customers;
(e) "Business Day" means any day other than a day which is a Saturday, a
Sunday or a statutory holiday in Toronto, Ontario;
(f) "Business Records" has the meaning ascribed thereto in section 2.5
hereof;
(g) "Canadian GAAP" means the accounting principles so described and
promulgated by the Canadian Institute of Chartered Accountants which
are applicable as at the date on which any calculation made hereunder
is to be effective or as at the date of any financial statements
referred to herein, as the case may be;
(h) "Closing" means the completion of the purchase and sale of the
Purchased Shares as provided herein;
(i) "Closing Balance Sheet" has the meaning ascribed thereto in section
2.4 hereof;
(j) "Closing Date" means October 31, 2002;
(k) "Closing Time" means 5:00 p.m. in Xxxxxxx, Xxxxxxx, on the Closing
Date or such other time on the Closing Date as the parties hereto may
agree upon;
(l) "Collateral and Guarantee Agreement" means the collateral and
guarantee agreement to be entered into on the Closing Date by the
Corporation, the Purchaser and the Vendor in the form of the agreement
attached hereto as Schedule 1.1(l),
(m) "Condition" of the Corporation means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs or
financial position of the Corporation;
(n) "Control" means, with respect to any Corporation, the ownership,
directly or through ownership of other persons, of more than 50% of
all of the voting rights attached to all of the voting shares of such
Corporation, exclusive of shares that are voting only in certain
events, unless such events have occurred and are continuing, and, in
the case of any other person, ownership directly or indirectly or
through ownership of other persons, of more than 50% of the beneficial
interest and voting entitlement (if any) therein, and "controlled" and
similar expressions shall have the corresponding meanings;
(o) "Corporation" means Pulse Microsystems Ltd., an Ontario corporation;
(p) "Encumbrances" means mortgages, charges, pledges, security interests,
liens, encumbrances, actions, claims, demands and equities of any
nature whatsoever or howsoever arising and any rights or privileges
capable of becoming any of the foregoing;
(q) "Escrow Agent" means DSI Technology Escrow Services, Inc., as escrow
agent pursuant to the Escrow Agreement;
(r) "Escrow Agreement" means the source code escrow agreement, implemented
at the expense of the Vendor and the Purchaser equally, to be entered
into as soon as practicable after the Closing Date between the
Purchaser, the Vendor, the Corporation and the Escrow Agent and to be
in form and content acceptable to the Purchaser and the Vendor, acting
reasonably;
(s) "Financial Statement" means the unaudited balance sheet of the
Corporation as at September 30, 2002, a copy of which is attached as
Schedule 1.1(s) hereto;
(t) "Governmental Authority" means any federal, state, provincial,
regional or municipal government, in Canada or elsewhere, and any
person, agency, board, commission or authority of competent
jurisdiction, in Canada or elsewhere, exercising executive,
legislative, judicial, regulatory or administrative functions of, or
pertaining to, government;
(u) "Independent Accounting Firm" has the meaning ascribed thereto in
section 2.4 hereof;
(v) "Inter-Company Accounts" means, collectively, the amounts owing by the
Vendor to the Corporation up to the Closing Time comprising accounts
receivable and loan receivable by the Corporation, which amounts are
more particularly set out in Schedule 1.1(v) hereto and which are
subject to adjustment in the manner provided in section 2.3 hereof;
(w) "Liabilities" means all costs, expenses, charges, debts, liabilities,
claims, demands, Taxes and obligations, oral or written, whether
primary or secondary, direct or indirect, fixed, contingent, absolute
or otherwise, including, without limitation, those arising under any
law, rule or regulation of any Governmental Authority, any award of
any arbitrator, court or other tribunal and any contract, arrangement,
lease, commitment or undertaking;
(x) "Management and Stockholders' Agreement" means the management and
stockholders' agreement entered into on the Closing Date among the
Principals, The GK Family Trust, The Tas and Xxxxx Xxxxxx Family
Trust, the Purchaser, the Corporation and the Vendor in the form of
agreement attached hereto as Schedule 1.1(x) hereto;
(y) "Person" means and includes any individual, corporation, partnership,
firm, joint venture, syndicate, association, trust, government,
governmental agency or board or commission or authority, and any other
form of entity or organization;
(z) "Preliminary Statements" has the meaning ascribed thereto in section
2.4 hereof;
(aa) "Price Dispute Notice" has the meaning ascribed thereto in section 2.4
hereof;
(bb) "Principals" means, collectively, Xxxxx Xxxxxxxx and Xxxxxxxxxx
Xxxxxx;
(cc) "Purchase Price" means the sum of $4,976,655, subject to adjustment in
the manner provided in section 2.3 hereof, which is the amount payable
by the Purchaser to the Vendor for the Purchased Shares as provided
herein;
(dd) "Purchased Shares" means 20 common shares in the capital of the
Corporation, constituting all of the issued and outstanding shares of
the Corporation, being sold by the Vendor and purchased by the
Purchaser hereunder;
(ee) "Release Date" shall have the meaning ascribed thereto in section
6.1(2) hereof;
(ff) "Review Period" has the meaning ascribed thereto in section 2.4
hereof;
(gg) "s.116 Certificate" means a certificate issued pursuant to the
provisions of section 116 of the Income Tax Act (Canada) with a
certificate limit equal to at least the Purchase Price, in form and
substance satisfactory to the Purchaser's solicitors, acting
reasonably;
(hh) "Secured Promissory Note" means the secured promissory note dated as
of the Closing Date in the principal amount of $500,000 to be made by
the Purchaser in favour of the Vendor in the form of the secured
promissory note attached as Schedule 1.1(hh) hereto;
(ii) "Software Licence and Distribution Agreement" means the software and
services supply agreement to be entered into on Closing between the
Vendor and the Corporation in the form of the draft software and
services supply agreement attached as Schedule 1.1(ii) hereto;
(jj) "Taxes" means all taxes, assessments or other governmental charges or
imposts (including, without limitation, domestic or foreign, federal,
provincial, state or local income, withholding, sales use, transfer,
intangible, recordation, documentary, stamp, excise, capital,
business, goods or services, property, value added, payroll or other
taxes or customs duties, unemployment or workers compensation
premiums) and any interest or penalties on such taxes, assessments,
charges or imposts or in respect of such taxes, assessments, charges
or imposts;
(kk) "Territory" means the world;
(ll) "Transaction Documents" means this Agreement, the Warrant Agreement,
the Escrow Agreement, the Secured Promissory Note, the Collateral and
Guarantee Agreement, the Assumption Agreement, the Software License
and Distribution Agreement, the Management and Stockholders' Agreement
and any other document entered into or delivered in connection with
the transactions contemplated by this Agreement;
(mm) "U.S. GAAP" means generally acceptable accounting principles which are
applicable in the United States of America as at the date on which any
calculation made hereunder is to be effective or as at the date of any
financial statements referred to herein, as the case may be;
(nn) "Vendor's Auditor" means BDO Xxxxxxx, LLP; and
(oo) "Warrant Agreement" means the warrant agreement to be entered into on
the Closing Date between the Vendor and the Purchaser in the form of
the warrant agreement attached as Schedule 1.1(oo) hereto; and
(pp) "Warranty Claim" means a claim made by either the Purchaser or the
Vendor based on or with respect to the inaccuracy or non-performance
or non-fulfilment or breach of any representation or warranty made by
the other party contained in this Agreement or contained in any
document or certificate given in order to carry out the transactions
contemplated hereby.
1.2 Best of Knowledge
Any reference herein to "the best of the knowledge" of any (i) individual
will be deemed to mean the actual knowledge of such party and the knowledge
which he or she would have had if such party had conducted a diligent inquiry
into the relevant subject matter, and (ii) corporation will be deemed to mean
the actual knowledge of the Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer, Chief Operating Officer, General Counsel or
any Vice President of such corporation.
1.3 Schedules
The Schedules listed in the Table of Contents to this Agreement which do
not constitute separate agreements executed and delivered by the relevant
parties at the Closing Time, namely Schedules 1.1(s), 1.1(v), 5.1(2) and
5.1(10), are incorporated into this Agreement by reference and are deemed to be
part hereof.
1.4 Currency
Unless otherwise indicated, all dollar amounts referred to in this
agreement are in lawful currency of the United States of America.
1.5 Choice of Law and Attornment
This agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
1.6 Interpretation Not Affected by Headings or Party Drafting
The division of this Agreement into articles, sections, paragraphs,
subsections and clauses and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The terms "this Agreement", "hereof", "herein", "hereunder" and
similar expressions refer to this Agreement and the Schedules hereto and not to
any particular article, section, paragraph, clause or other portion hereof and
include any agreement or instrument supplementary or ancillary hereto. Each
party hereto acknowledges that it and its legal counsel have reviewed and
participated in settling the terms of this Agreement, and the parties hereby
agree that any rule of construction to the effect that any ambiguity is to be
resolved against the drafting party shall not be applicable in the
interpretation of this Agreement.
1.7 Number and Gender
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith,
(a) words in the singular number include the plural and such words shall
be construed as if the plural had been used,
(b) words in the plural include the singular and such words shall be
construed as if the singular had been used, and
(c) words importing the use of any gender shall include all genders where
the context or party referred to so requires, and the rest of the
sentence shall be construed as if the necessary grammatical and
terminological changes had been made.
1.8 Time of Essence
Time shall be of the essence hereof.
ARTICLE 2 - PURCHASE AND SALE
2.1 Purchased Shares
On the terms and subject to the fulfilment of the conditions hereof, the
Vendor hereby agrees to sell, assign and transfer to the Purchaser, and the
Purchaser hereby agrees to purchase and accept from the Vendor, the Purchased
Shares, free and clear of all Encumbrances, for a price payable by the Purchaser
to the Vendor equal to the Purchase Price.
2.2 Payment of Purchase Price
The Purchase Price will be paid as follows:
(1) at the Closing Time, the Purchaser will execute and deliver to the
Vendor the Secured Promissory Note;
(2) at the Closing Time, the Purchaser will execute and deliver to the
Vendor and the Corporation the Assumption Agreement relating to the
assumption by the Purchaser of the Inter-Company Accounts owing by the
Vendor to the Corporation; and
(3) at the Closing Time, the Purchaser will pay to the Vendor the balance
of the Purchase Price in the amount of $530,482, by certified cheque,
bank draft or other source of immediately available funds.
2.3 Adjustments to Purchase Price
(1) For the purposes hereof, the term "Net Book Value" means the net book
value of the Corporation on the Closing Date, expressed in dollars and
determined in accordance with the provisions of section 2.4 hereof.
(2) The Purchase Price payable by the Purchaser to the Vendor in respect
of the Purchased Shares shall be:
(a) increased by the amount, if any, by which the Net Book Value
exceeds $4,976,655; or
(b) decreased by the amount, if any, by which the Net Book Value is
less than $4,976,655.
2.4 Determination of Net Book Value
(1) The Net Book Value (as defined in section 2.3(1) above) of the
Corporation shall be determined initially by the Vendor in accordance
with U.S. GAAP (applied on a consistent basis (including policies,
methodologies and practices) with the Financial Statement and the
Vendor's Auditor shall, within 45 days following the Closing Date, be
provided by the Vendor with a balance sheet (the "Closing Balance
Sheet") for the Corporation as at the close of business on the Closing
Date, together with a detailed calculation of such Net Book Value
based thereon (such balance sheet, balance sheet calculations and any
notes thereto being herein collectively referred to as the
"Preliminary Statements"). The Purchaser shall, and shall cause the
Corporation to, provide all necessary assistance, financial
information and access to the Corporation's books and records as may
be reasonably required by the Vendor in order for it to complete the
Closing Balance Sheet within such time period. The Vendor's Auditor
shall perform a limited review procedure of the Preliminary Statements
and make such changes thereto as in its view, acting reasonably, are
appropriate to the Preliminary Statements in order that they be in
accordance with U.S. GAAP applied on a consistent basis with the
Financial Statement. Each of the Purchaser and the Vendor and their
respective representatives shall have full access to all records and
information which are or may be relevant to the determination of the
Net Book Value and shall be entitled to make copies of any such
records and information. Each of the Purchaser and the Vendor and
their respective representatives shall have access to and be entitled
to communicate with the Vendor's Auditor concerning any issue or
matter relevant to the determination of the Net Book Value; provided
that each of the Purchaser and the Vendor shall be kept informed of
any such communication and the Vendor's Auditor shall be instructed to
promptly advise the Purchaser and the Vendor of all such
communications. The Vendor's Auditor shall provide copies of the
"Final Statements" (which term as used herein shall mean the
Preliminary Statements as they may have been changed and supplemented
by the Vendor's Auditor) to the Purchaser and the Vendor promptly
following the completion of its review of the Preliminary Statements,
together with its report that the calculation of the Net Book Value
included therein has been performed in accordance with this Agreement.
The Purchaser and the Vendor shall bear equally all fees, costs,
disbursements and other expenses of the Vendor's Auditor associated
with the performance of its function pursuant to this Section 2.4(1).
(2) Following the delivery of the Final Statements to the Purchaser and
the Vendor, each of the Purchaser and the Vendor shall have the period
(the "Review Period") of the next 15 consecutive days to review the
Final Statements. At any time in the Review Period either the
Purchaser or the Vendor may give written notice (the "Price Dispute
Notice") to the other that such party disagrees with the calculation
of the Net Book Value as set out in the Final Statements. If a Price
Dispute Notice is given as aforesaid in the Review Period, then the
provisions of section 2.4(3) shall apply and otherwise the Net Book
Value as shown in the Final Statements shall be conclusive as to the
amount thereof.
(3) If either the Purchaser or the Vendor gives a Price Dispute Notice to
the other of them during the Review Period pursuant to section 2.4(2)
above, then the following provisions of this section shall apply:
(a) within 10 days following the expiration of the Review Period, the
Purchaser and the Vendor shall jointly select and retain an
independent firm of chartered accountants of national standing
and reputation in the United States (the "Independent Accounting
Firm") for the purposes of resolving all remaining unresolved
issues with respect to the calculation of the Net Book Value. In
the event that the Purchaser and the Vendor are unable to agree
upon the firm to be selected as the Independent Accounting Firm
within such 5-day period, then the Independent Accounting Firm
shall be selected by an Ontario court of competent jurisdiction
or as it directs on application by either the Purchaser or the
Vendor on notice to the other of them and the retention of the
Independent Accounting Firm shall be made within 5 days
thereafter;
(b) within 10 days following the retaining of the Independent
Accounting Firm, each of the Purchaser and the Vendor, through
their respective representatives, shall present to the
Independent Accounting Firm the issue or issues that must be
resolved with respect to the calculation of the Net Book Value
and their respective submissions with respect to such issue or
issues;
(c) the Purchaser and the Vendor shall use their best efforts to
cause the Independent Accounting Firm to render its decision as
soon as is reasonably practicable, including without limitation,
prompt compliance with all reasonable requests by the Independent
Accounting Firm for information, papers, books, records and
similar documents; provided that the Purchaser and the Vendor
agree that the Independent Accounting Firm shall act as
arbitrator only;
(d) the decisions of the Independent Accounting Firm as to those
issues presented to it shall be final and binding on all parties
to this Agreement. If the Independent Accounting Firm makes
decisions with respect to each of the issues presented to it
(disregarding any such issue upon which the Purchaser and the
Vendor have agreed to a resolution prior to the Independent
Accounting Firm communicating its final decisions to the
Purchaser and the Vendor), the Net Book Value shall be deemed to
be an amount equal to the amount of the Net Book Value as shown
in the Final Statements, subject to and as amended to reflect any
changes thereto agreed upon by the Purchaser and the Vendor and
all changes required to reflect all decisions of the Independent
Accounting Firm as to all issues presented to it, other than as
to any of those issues presented to it upon which the Purchaser
and the Vendor shall have agreed to a resolution prior to the
Independent Accounting Firm communicating its final decisions to
the Purchaser and the Vendor; and
(e) the Purchaser and the Vendor shall bear equally all fees, costs,
disbursements and other expenses of the Independent Accounting
Firm associated with the performance of its functions pursuant to
this section 2.4(3).
2.5 Access to Business Records
Without charge to any of the parties hereto or any of their respective
representatives or the Independent Accounting Firm, the Purchaser and the Vendor
shall:
(1) give the other of them and their respective representatives and the
Independent Accounting Firm, if any is retained, access during the
usual business hours of the Corporation or the Vendor, as the case may
be, to all such records and documents (which are in the care, custody
or control of the Corporation, the Purchaser or the Vendor, as the
case may be) as any of them may reasonably request in connection with
any review or consideration of the Final Statements or the calculation
of the Net Book Value (such records and documents being hereinafter in
this section, collectively, referred to as the "Business Records");
(2) permit the other of them and their respective representatives and the
Independent Accounting Firm to take extracts from, and make copies of,
any of the Business Records; and
(3) make reasonable space available at any premises of the Corporation or
the Vendor, as the case may be, to enable the relevant party or its
representatives and the Independent Accounting Firm or any of them to
carry out any review or consideration of the Final Statements or the
calculation of the Net Book Value.
2.6 Payment of Adjustment Amounts
(1) If the Net Book Value is finally determined to be an amount less than
$4,976,655, as determined in accordance with the provisions of section
2.4 above, the Vendor agrees to pay to the Purchaser the amount of any
such deficiency, subject to subsection 2.6(3), within 30 days of the
date of such determination by certified cheque, bank draft or other
source of immediately available funds.
(2) If the Net Book Value is finally determined to be an amount greater
than $4,976,655, as determined in accordance with the provisions of
section 2.4 above, the Purchaser agrees to pay to the Vendor the
amount of any such excess, subject to subsection 2.6(3), within 30
days of the date of such determination by certified cheque, bank draft
or other source of immediately available funds; provided that, in the
event that such excess adjustment amount results in a Purchase Price
that exceeds the purchase price amount set out in the s.116
Certificate, the Purchaser and the Vendor acknowledge and agree that
the Purchaser shall be required to withhold and remit the required
amount of withholding tax in accordance with Canadian tax laws unless
the Vendor is able to provide the Purchaser before the date of such
remittance with an amended s.116 Certificate to reflect the increased
Purchase Price.
(3) No such adjustment payment shall be made unless the Net Book Value is
finally determined to be an amount that is more than or less than
$4,976,655 by a sum which is not less than $50,000, in which case such
adjustment payment will be made in an amount equal to the difference
between $4,976,655 and the Net Book Value as it is finally determined,
subject to a maximum adjustment payment of $250,000.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Vendor
The Vendor represents and warrants to the Purchaser as follows, and
confirms that the Purchaser is relying upon the accuracy of each of such
representations and warranties in connection with the purchase of the Purchased
Shares and the completion of the other transactions hereunder:
(1) Authority and Binding Obligation. The Vendor has good right and
absolute authority to enter into the Transaction Documents to which it
is a party and to sell, assign and transfer the Purchased Shares to
the Purchaser in the manner contemplated herein, free and clear of
Encumbrances, and to perform all of its obligations under the
Transaction Documents. The Transaction Documents to which the Vendor
is a party and the transactions contemplated thereby have been duly
authorized by the Vendor and constitute legal, valid and binding
obligations of the Vendor enforceable against it in accordance with
their respective terms (subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in
effect with respect to creditors' rights). Each of the Transaction
Documents to which the Vendor is a party has been duly executed and
delivered by the Vendor.
(2) No Other Purchase Agreements. The only shares issued by the
Corporation are the Purchased Shares and no person other than the
Purchaser has any agreement, contract, option, understanding or
commitment, or any right or privilege (whether by law, pre-emptive or
contractual) capable of becoming an agreement, contract, option,
warrant or commitment, including convertible securities, warrants or
convertible obligations of any nature, for
(a) to the best of the Vendor's knowledge, the purchase,
subscription, allotment or issuance of, or conversion into, any
of the unissued shares in the capital of the Corporation or any
securities of the Corporation, or
(b) the purchase from the Vendor of any of the Purchased Shares, or
(c) the purchase or other acquisition from the Corporation of any of
its undertaking, property or assets, other than in the ordinary
course of the Business.
(3) Contractual and Regulatory Approvals.
-------------------------------------
(a) Except as provided in this Agreement, the Vendor is not under any
obligation, contractual or otherwise, to request or obtain the
consent of any person, and no permits, licences, certifications,
authorizations or approvals of, or notifications to, any person
are required to be obtained by it in connection with the
execution, delivery or performance by the Vendor of any of the
Transaction Agreements to which it is a party or the completion
of any of the transactions contemplated thereby.
(b) Generally, none of the execution and delivery of any of the
Transaction Agreements to which it is a party by the Vendor nor
the observance and performance of the terms and provisions of
such agreements on the part of the Vendor to be observed and
performed, constitutes a violation of applicable law or a
violation or breach of any of the constating documents of the
Vendor or any provision of any contracts or other instruments to
which the Vendor is a party or by which it is bound, or of any
order, writ, injunction, decree, statute, rule, by-law or
regulation applicable to the Vendor, or constitutes a default (or
would with the passage of time or the giving of notice, or both,
constitute a default) under any contract or other instrument to
which the Vendor is a party or by which it is bound.
(4) No Adverse Changes or Undisclosed Facts. Other than as disclosed in
this Agreement, in the books and records of the Corporation located at
its Business premises or at the Vendor's business premises, or
otherwise known to the Principals or the Purchaser, to the best of the
knowledge of the Vendor,
(a) there are no actions, suits, claims or proceedings by any person
whatsoever pending or threatened against or affecting the
Corporation or the Business at law or in equity or before any
Governmental Authority;
(b) there has been no material adverse change of the affairs,
business prospects, liabilities, assets, operations or Condition
of the Business, financial or otherwise, since the date of the
Financial Statement; and
(c) there are no facts or circumstances which might reasonably serve
as a basis for, or give rise to, any material undisclosed
liabilities or obligations on the part of the Corporation, other
than those arising in the ordinary course of business (none of
which is materially adverse).
(5) Solvency. The Vendor is not insolvent nor has it committed an act of
bankruptcy, proposed a comprise or arrangement to any of its creditors
generally, had any petition for a receiving order in bankruptcy filed
against it, taken any proceeding with respect to a compromise or
arrangement, taken any proceeding to have it declared bankrupt or
wound-up, taken any proceeding to have a receiver appointed of any
part its assets, had any encumbrancer take possession of any of its
property, or had any execution or distress become enforceable or
become levied upon any of its property.
(6) Non-Arm's Length Transactions. None of the Vendor nor any Affiliate
(other than the Corporation), officer, director or employee of the
Vendor owns, directly or indirectly, in whole or in part, any property
that the Corporation uses in the operation of the Business.
(7) Inter-Company Accounts. Schedule 1.1(v) provides a complete and
accurate statement of all amounts owing up to the Closing Time by the
Vendor or any Affiliate of it to the Corporation.
(8) Vendor Financial Statement. The Financial Statement
(a) has been prepared in accordance with U.S. GAAP applied on a basis
consistent with those of preceding fiscal periods;
(b) presents fully, accurately and correctly in all material respects
the assets, liabilities and financial condition of the
Corporation as at such date to the extent required by U.S. GAAP;
and
(c) is in accordance with the books and records relating to the
Corporation kept by the Vendor at its business premises.
(9) Tax Matters.
------------
(a) For purposes of this Agreement, the term "Governmental Charges"
means and includes all Taxes, customs duties, rates, levies,
assessments, reassessments and other charges, together with all
penalties, interest and fines with respect thereto, payable to
any Governmental Authority.
(b) To the best of the Vendor's knowledge, solely in respect of
Governmental Charges payable to any Governmental Authority in the
United States of America:
(i) the Corporation has paid all Governmental Charges which are
due and payable by it on or before the date hereof, except
Governmental Charges, the validity or amount of which is
being contested in good faith by appropriate proceedings and
with respect to which appropriate reserves have been set
aside on the books of the Corporation;
(ii) there are no actions, suits, proceedings, investigations,
enquiries or claims now pending or made or threatened
against the Corporation in respect of Governmental Charges;
and
(iii)the Corporation has withheld from each amount paid or
credited to any person the amount of Governmental Charges
required to be withheld therefrom and has remitted such
Governmental Charges to the proper tax or other receiving
authorities within the time required under applicable
legislation.
(10) Liabilities. To the best of the Vendor's knowledge, the books and
records relating to the Corporation which are kept by the Vendor on
its business premises do not indicate that the Corporation has been or
is now subject to any Liabilities required to be disclosed under U.S.
GAAP other than those disclosed in the Financial Statement, this
Agreement or arising in the ordinary course of business.
(11) Residency. The Vendor is a non-resident of Canada within the meaning
of the Income Tax Act (Canada).
(12) Title to Purchased Shares. The Vendor is the owner of and has good and
marketable title to the Purchased Shares, free and clear of all
Encumbrances.
3.2 Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Vendor as follows, and confirm
that the Vendor is relying upon the accuracy of each of such representations and
warranties in connection with the sale of the Purchased Shares and the
completion of the other transactions hereunder:
(1) Incorporation. The Purchaser is a corporation incorporated and
subsisting under the laws of the Province of Ontario and has all
requisite power and authority to own and lease its property, to carry
on its business as now being conducted by it, to enter into each
Transaction Document and to perform its obligations thereunder. The
Purchaser is duly qualified to conduct its business and is in good
standing or is subsisting in all jurisdictions in which it is required
by virtue of the conduct of its business or the consummation of the
transactions contemplated by this Agreement. All of the issued and
outstanding shares in the capital of the Purchaser are directly or
indirectly held by, or held by persons effectively Controlled by, the
Principals.
(2) Capitalization.
--------------
(a) As of the date of this Agreement, prior to the authorization or
issuance of the shares issuable upon exercise of any warrant
issuable pursuant to the Warrant Agreement, the authorized
capital stock of the Purchaser consists of unlimited numbers, in
each case, of Special Voting Shares, Class A Common Shares and
Common Shares, of which 80 Special Voting Shares, 80 Class A
Shares and no Common Shares are presently outstanding, in each
case as validly issued, fully paid and non-assessable shares in
the capital of the Corporation. There are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into (whether by law, pre-emptive or contractual),
shares of any class of capital stock of the Purchaser or any of
its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Purchaser or any of its subsidiaries is
or may become bound (other than the Warrant Agreement ) relating
to the issuance, repurchase or transfer of any shares of capital
stock or options, warrants or rights to purchase or acquire any
shares of capital stock of the Purchaser or any of its
subsidiaries or relating to the voting of any shares of capital
stock of the Purchaser or any of its subsidiaries.
(b) A true and complete list of the holders of record of all issued
and outstanding capital stock of the Purchaser is as follows:
Name of Shareholder Number and Class of Shares
------------------- --------------------------
Xxxxx Xxxxxxxx 40 Special Voting Shares
Xxxxxxxxxx Xxxxxx 40 Special Voting Shares
The GK Family Trust 40 Class A Shares
The Tas and Xxxxx Xxxxxx 40 Class A Shares
Family Trust
The Purchaser has no subsidiaries, other than, upon completion of the
transactions contemplated by this Agreement, the Corporation. After
such completion the Purchaser will own 20 common shares in the capital
thereof, constituting all of the issued and outstanding shares of the
Corporation.
(3) Authority and Binding Obligation. The Purchaser has good right and
absolute authority to enter into the Transaction Documents to which it
is a party and to purchase the Purchased Shares from the Vendor in the
manner contemplated herein and to perform all of its obligations under
the Transaction Documents. The Transaction Documents to which the
Purchaser is a party and the transactions contemplated thereby have
been duly authorized by the Purchaser and constitute legal, valid and
binding obligations of the Purchaser enforceable against it in
accordance with their respective terms (subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws now or
hereafter in effect with respect to creditors' rights). Each of the
Transaction Documents to which the Purchaser is a party has been duly
executed and delivered by the Purchaser.
(4) No Violation. None of the execution and delivery of any Transaction
Document by the Purchaser nor the observance and performance of the
terms and provisions of the Transaction Documents on the part of the
Purchaser to be observed and performed, constitutes a violation of
applicable law or a violation or breach of the constating documents of
the Purchaser or any provision of any contracts or other instrument to
which the Purchaser is a party or by which any of them is bound, or of
any order, writ, injunction, decree, statute, rule, by-law or
regulation applicable to the Purchaser , or constitutes a default (or
would with the passage of time or the giving of notice, or both,
constitute a default) under any contract or other instrument to which
the Purchaser is a party or by which it is bound.
(5) Contractual and Regulatory Approvals. Other than as disclosed in this
Agreement, neither the Purchaser nor the Corporation is under any
obligation, contractual or otherwise, to request or obtain the consent
of any person, and no permits, licenses, certifications,
authorizations or approvals of, or notifications to, any person are
required to be obtained by it:
(a) in connection with the completion of any of the transactions
completed hereby, or
(b) in order that the authority or ability of the Corporation to
carry on the Business in the ordinary course and in the same
manner as presently conducted remains in good standing and in
full force and effect as of and following the closing of the
transactions contemplated hereby.
(6) Corporation Books and Records. The books of account and financial
records of the Corporation which are kept on the Business premises of
the Corporation have been kept in accordance with Canadian GAAP and
procedures on a basis consistent with those of preceding accounting
periods and fairly, accurately and correctly set out and disclose in
all material respects the current financial position of the
Corporation and all transactions of the Corporation have been
accurately recorded in such books and records; provided that, the
Purchaser makes no representation and warranty hereunder in respect of
any adjustments to such books and records made by the Vendor.
(7) Tax Matters. To the best of the Purchaser's knowledge, solely in
respect of Governmental Charges payable to any Governmental Authority
in Canada:
(a) the Corporation has paid all Governmental Charges which are due
and payable by it on or before the date hereof, except
Governmental Charges, the validity or amount of which is being
contested in good faith by appropriate proceedings and with
respect to which appropriate reserves have been set aside on the
books of the Corporation;
(b) there are no actions, suits, proceedings, investigations,
enquiries or claims now pending or made or threatened against the
Corporation in respect of Governmental Charges; and
(c) the Corporation has withheld from each amount paid or credited to
any person the amount of Governmental Charges required to be
withheld therefrom and has remitted such Governmental Charges to
the proper tax or other receiving authorities within the time
required under applicable legislation.
(8) Solvency. The Purchaser is not insolvent, nor has it committed any act
of bankruptcy, proposed a compromise or arrangement to any of its
creditors generally, had any petition for a receiving order in
bankruptcy filed against it, taken any proceeding with respect to a
compromise or arrangement, taken any proceeding to have itself
declared bankrupt or wound up, taken any proceeding to have a receiver
appointed of any part of its assets, had any encumbrancer take
possession of any of its property, or had any execution or distress
become enforceable or become levied upon any of its property.
(9) Full Disclosure. To the best knowledge of the Purchaser, all material
facts relating to the historical business, operations, financial
condition, assets and Liabilities of the Corporation have been
truthfully disclosed in all material respects to Vendor in this
Agreement, including the Schedules hereto, except where the failure to
so disclose would not reasonably be expected to be relevant to the
Vendor in connection with the consummation of the transactions
contemplated by this Agreement.
ARTICLE 4 - SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES
4.1 Survival of Warranties by the Vendor
The representations and warranties made by the Vendor and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the closing of the
purchase of the Purchased Shares provided for herein and, notwithstanding such
closing, shall continue in full force and effect for the benefit of the
Purchaser; provided that no Warranty Claim may be made or brought by the
Purchaser after the date which is 2 years following the Closing Date.
After the expiration of the period of time referred to above, the Vendor
will be released from all obligations and liabilities in respect of the
representations and warranties made by the Vendor and contained in this
Agreement or in any document or certificate given in order to carry out the
transactions contemplated hereby, except with respect to any Warranty Claims
made by the Purchaser in writing prior to the expiration of such period.
4.2 Survival of Warranties by the Purchaser
The representations and warranties made by the Purchaser and contained in
this Agreement or contained in any document or certificate given in order to
carry out the transactions contemplated hereby will survive the closing of the
purchase and sale of the Purchased Shares provided for herein and,
notwithstanding such closing, shall continue in full force and effect for the
benefit of the Vendor; provided that no Warranty Claim may be made or brought by
the Vendor after the date which is 2 years following the Closing Date.
After the expiration of the period of time referred to above in this
section, the Purchaser will be released from all obligations and liabilities in
respect of the representations and warranties made by it in this Agreement or in
any document or certificate given in order to carry out the transactions
contemplated hereby, except with respect to any Warranty Claims made by the
Vendor in writing prior to the expiration of such period.
ARTICLE 5 - CONDITIONS
5.1 Conditions to the Obligations of the Purchaser
Notwithstanding anything herein contained, the obligation of the Purchaser
to complete the transactions provided for herein is subject to the fulfilment of
the following conditions at or prior to the Closing Time.
(1) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been
made, and no action or proceeding shall be pending or threatened
which, in the reasonable opinion of counsel to the Purchaser, is
likely to result in an order, decision or ruling,
(a) to disallow, enjoin, prohibit or impose any limitations or
conditions on the purchase and sale of the Purchased Shares
contemplated hereby or the right of the Purchaser to own the
Purchased Shares; or
(b) to impose any limitations or conditions which may have an adverse
affect on the Business as carried on as of the date hereof or the
Condition of the Corporation.
(2) Consents. All consents required to be obtained in order to carry out
the transactions contemplated hereby in compliance with all laws and
material agreements binding upon the parties hereto are set forth on
Schedule 5.1(2) hereto and shall have been obtained including, without
limitation, the consent of the landlord of the Business premises of
the Corporation and any consent required by any lender to the Vendor.
(3) All of the Issued and Outstanding Shares. The Purchased Shares shall
constitute all of the issued and outstanding shares in the capital of
the Corporation, and there shall not, at the Closing Time, be any
outstanding understanding or commitment (other than as contemplated by
this Agreement), or any right or privilege (whether by law,
pre-emptive or contractual right) capable of becoming an agreement,
option or commitment, including convertible securities, warrants or
convertible obligations of any nature, for the purchase, subscription,
allotment or issuance, or conversion into, any of the issued shares in
the capital of the Corporation or any securities of the Corporation.
(4) Transfer of Purchased Shares. At the Closing, the Vendor shall cause
all necessary steps and corporate proceedings to be taken in order to
permit the Purchased Shares to be duly and regularly transferred to
the Purchaser and the Vendor shall deliver to the Purchaser a
certificate for such Purchased Shares duly registered in the name of
the Purchaser.
(5) Resignation of Officers and Directors. At or before the Closing, the
Vendor will cause each person who is a director or officer of the
Corporation, to submit his or her written resignation as a director or
officer to the Corporation which will be effective at the Closing
Time.
(6) Management and Stockholders' Agreement. At the Closing, the Vendor
will execute and deliver to the Corporation the Management and
Stockholders' Agreement.
(7) Inter-Company Accounts. At the Closing, the Vendor, the Purchaser and
the Corporation shall have entered into the Assumption Agreement under
which the Purchaser shall assume and be assigned all liability for the
full amount of the Inter-Company Accounts.
(8) s. 116 Certificate. At the Closing, of the Vendor will deliver to the
Purchaser the s. 116 Certificate.
(9) Software Licence and Distribution Agreement. At the Closing, the
Vendor will execute and deliver to the Corporation the Software
Licence and Distribution Agreement in the form of the draft Software
and Services Supply Agreement attached as Schedule 1.1(ii) hereto.
(10) Outstanding Bank or Other Guarantees and Obligations. At or prior to
Closing, the Vendor shall have provided evidence reasonably
satisfactory to the Purchaser that all guarantees and other
obligations entered into by the Corporation for the benefit or the
Vendor, which are fully and completely disclosed in Schedule 5.1(10)
hereto, have been fully released and discharged. Such evidence shall
include a release agreement in favour of the Corporation and the
Vendor from PNC Bank, National Association ("PNC") as Agent for the
Lenders described in the Credit Agreement (as such term is defined in
Schedule 5.1(10)) providing for the following: (a) the consent by PNC
(on behalf of such Lenders) to the purchase and sale of the Purchased
Shares under the terms of this Agreement, and (b) the irrevocable,
absolute and unconditional release of all encumbrances on the
Purchased Shares and on any and all real, personal, tangible or
intangible property of the Corporation held by and in favour of PNC
(on behalf of such Lenders).
(11) Vendor Officer's Certificate. At the Closing, the Vendor shall deliver
to the Purchaser a certificate, duly executed and delivered by an
officer of the Vendor, certifying (a) as to the articles of
incorporation and by-laws of the Vendor, (b) as to the approval of the
Board of Directors of the Vendor to this Agreement and the
transactions contemplated hereby, and (c) as to the incumbency and
specimen signatures of certain officers of the Vendor.
(12) Design Distribution Agreement. At or prior to Closing, the Corporation
and the Vendor shall settle and enter into a form of non-exclusive
distribution agreement setting out the current continuing agreement
between such parties in respect of the granting by the Vendor to the
Corporation of certain non-exclusive rights to sell, distribute and
use designs previously developed by the Vendor known as the "Building
Blocks" designs, such distribution agreement to be in form and content
mutually acceptable to the Vendor and the Purchaser.
5.2 Conditions to the Obligations of the Vendor
Notwithstanding anything herein contained, the obligation of the Vendor to
complete the transactions provided for herein will be subject to the fulfilment
of the following conditions at or prior to the Closing Time.
(1) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been
made, and no action or proceeding shall be pending or threatened
which, in the reasonable opinion of counsel to the Vendor, is likely
to result in an order, decision or ruling, to disallow, enjoin or
prohibit the purchase and sale of the Purchased Shares contemplated
hereby.
(2) S.116 Certificate. The Vendor will have received the S.116 Certificate
from Canada Customs and Revenue Agency.
(3) Consents. All consents required to be obtained in order to carry out
the transactions contemplated hereby in compliance with all laws and
agreements binding upon the parties hereto shall have been obtained.
(4) Warrant Agreement. At the Closing, the Purchaser and the Corporation
shall execute and deliver to the Vendor the Warrant Agreement.
(5) Inter-Company Accounts. At the Closing, the Vendor, the Purchaser and
the Corporation shall have entered into the Assumption Agreement under
which the Purchaser shall assume and be assigned all liability for the
full amount of the Inter-Company Accounts.
(6) Payment for Purchased Shares. At the Closing, the Purchaser shall pay
and satisfy the Purchase Price in the manner contemplated by section
2.2 hereof.
(7) Purchaser Officer's Certificate. At the Closing, the Purchaser shall
deliver to the Vendor a certificate, duly executed and delivered by an
officer of the Purchaser, certifying (a) as to the articles of
incorporation and by-laws of the Purchaser, (b) as to the approval of
the Board of Directors of the Purchaser to this Agreement and the
transactions contemplated hereby, and (c) as to the incumbency and
specimen signatures of certain officers of the Purchaser.
(8) Collateral and Guarantee Agreement. At the Closing, the Purchaser and
the Corporation shall execute and deliver to the Vendor the Collateral
and Guarantee Agreement.
(9) Software Licence and Distribution Agreement. At the Closing, the
Corporation will execute and deliver to the Vendor the Software
Licence and Distribution Agreement.
(10) Resignation of Vendor Officers and Director. At the Closing, each of
the Principals shall deliver their respective written resignations as
officers and as a director of the Vendor.
(11) Management and Stockholders' Agreement. At the Closing the Principals,
the Purchaser, the Corporation, The GK Family Trust and The Tas and
Xxxxx Xxxxxx Family Trust shall execute and deliver to the Vendor the
Management and Stockholders' Agreement.
ARTICLE 6 - POST-CLOSING COVENANTS
6.1 Post-Closing Covenants by the Vendor
The Vendor agrees with the Purchaser that it will do or cause to be done
the following:
(1) Change of Control Tax Return. The Vendor agrees that the Purchaser
shall be entitled to prepare and file the tax return for the
Corporation in respect of the fiscal year ending as of the Closing
Date and the Vendor shall co-operate fully with the Purchaser in
connection with the preparation of such tax return, provided that,
prior to filing such tax return, it shall be reviewed by the Vendor
and its financial advisors and the Vendor's approval shall be obtained
in respect of the filing thereof, such consent not to be unreasonably
withheld.
(2) Non-Solicitation. The Vendor agrees with the Purchaser and the
Corporation that at all times until the October 31, 2005 (the "Release
Date") it will not, and it will not allow any of its Affiliates to,
without the prior written consent of the Purchaser and the
Corporation, directly or indirectly, recruit, solicit, employ or
otherwise retain any person who is employed or retained by the
Corporation as at the date hereof or was employed or otherwise
retained by the Corporation at any time during the 12 months prior to
the date hereof, except as provided for in this Agreement or in
respect of any former employees of the Corporation whose employment
has been previously involuntarily terminated by it.
(3) Loan of Test Machine. The Vendor and the Corporation will enter into a
form of equipment loan and bailment agreement in respect of a
specified single-head test machine approved by the Vendor for use by
the Corporation on its Business premises, such agreement to be in form
and content reasonably acceptable to the Vendor and the Purchaser.
6.2 Post Closing Covenants by the Purchaser
(a) The Purchaser Agrees with the Vendor that it will do or cause to be
done the following until the later to occur of (i) payment in full under the
Secured Promissory Note, (ii) exercise in full of all warrants issued pursuant
to the Warrant Agreement or the termination of the Warrant Agreement in
accordance with its terms, or (iii) the Vendor and its Affiliates failing to own
more than 1% of the outstanding voting shares of the Purchaser on a fully
diluted basis:
(1) Conduct of the Business. The Purchaser will not enter into the
ownership, active management, development, construction or operation
of any business other than the ownership, management, financing or
operation of the Corporation. The Purchaser will cause the Corporation
not to enter into the ownership, active management, development,
construction or operation of any business other than those that are or
are directly related to the software industry.
(2) Compliance with Laws. The Purchaser and each of its Affiliates will
use their respective best efforts to comply in all material respects
with all applicable statutes, rules, regulations and orders of all
Governmental Authorities with respect to the conduct of its business
and the ownership of its assets.
(b) Non-Solicitation. The Purchaser agrees with the Vendor that at all
times until the Release Date it will not, and it will not allow any of its
Affiliates to, without the prior written consent of the Vendor, directly or
indirectly, recruit, solicit, employ or otherwise retain any person who is
employed or retained by the Vendor as at the date hereof or was employed or
otherwise retained by the Vendor at any time during the 12 months prior to the
date hereof, except as provided for in this Agreement or in respect of any
former employees of the Vendor whose employment has been previously
involuntarily terminated by it.
(c) Escrow Agreement. As soon as practicable following the Closing Date,
the Corporation, the Purchaser and the Escrow Agent shall execute and deliver to
the Vendor the Escrow Agreement.
(d) Amendment to Articles. As soon as practicable, but in any event not
later than 30 days, after the Closing Date, the Purchaser shall amend the
articles of incorporation of the Purchaser to remove all restrictions whatsoever
on the transfer of shares of any class of the Purchaser, and upon the completion
of the issuance and filing of such articles of amendment, shall provide a copy
thereof to the Vendor and its counsel. Until such time as none of the Vendor nor
any Affiliate thereof beneficially owns any Warrants or Warrant Shares (as such
terms are defined in the Warrant Agreement), without the prior written consent
of Vendor the Purchaser shall not amend its articles of incorporation to create
in any manner whatsoever a restriction on the transfer of any of the shares in
the capital of the Purchaser.
6.3 Vendor/Purchaser Employee Obligations
Subsequent to the Closing Time, the Vendor and/or Purchaser shall assume or
continue the following obligations with respect to certain employees of the
Business:
(a) the Vendor will maintain and continue total payment and other
responsibilities and obligations with respect to Xxxxx Xxxx who shall
continue solely as an employee of the Vendor; and
(b) the Purchaser shall cause the Corporation to fully employ Xxxxxx
Xxxxxxx and Xxxx Carabenciov as its employees working within the
Business; the Vendor will provide payroll services with respect to
such employees and shall directly pay their respective salary and
benefits, provided that the Purchaser shall cause the Corporation to
promptly reimburse the Vendor in full for all such salary and such
benefits; the Vendor will only provide such services, salary and
benefits for a period of six months from the date hereof.
6.4 Pre-Closing Governmental Charges
The Vendor and the Purchaser agree that all Governmental Charges in respect
of the Business activities of the Corporation for the period up to the close of
business on the Closing Date shall be for the sole account of the Vendor.
Accordingly, the Vendor agrees that upon receipt of written notice thereof from
the Purchaser or the Corporation, the Vendor shall promptly pay the full amount
of any such unpaid Governmental Charges to the Corporation. The Vendor further
confirms its agreement that it shall indemnify and save harmless the Corporation
from any such Governmental Charges which may arise subsequent to the Closing
Date in respect of the Business activities of the Corporation up to the close of
business on the Closing Date.
The Purchaser agrees that in the event that any assessment or reassessment
process in respect of any such unpaid Governmental Charges results in an
abatement to Governmental Charges actually paid by the Corporation in respect of
the Business activities of the Corporation for the period up to the close of
business on the Closing Date, the Purchaser shall promptly pay the amount of
such abatement to the Vendor upon the final determination of the abatement
amount.
ARTICLE 7 - CLOSING
7.1 Closing Arrangements
Subject to the terms and conditions hereof, the transactions contemplated
herein shall be closed commencing at the Closing Time at the offices of Xxxx &
Berlis LLP at BCE Place, 000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0,
or at such other place or places as may be mutually agreed upon by the Vendor
and the Purchaser.
7.2 Documents to be Delivered
At or before the Closing, the Vendor shall execute, or cause to be
executed, and shall deliver, or cause to be delivered, to the Purchaser, as
applicable, all agreements, documents, instruments and records which are to be
delivered by the Vendor pursuant to the provisions of this Agreement, and the
Purchaser shall execute, or cause to be executed, and shall deliver, or cause to
be delivered, to the Vendor all cheques or bank drafts and all agreements,
documents and instruments which the Purchaser or the Corporation, as applicable,
are to deliver or to cause to be delivered pursuant to the provisions of this
Agreement.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnity by the Vendor
The Vendor agrees to indemnify and save harmless the Purchaser, the
Corporation and their respective Affiliates, employees, representatives, agents,
officers and directors, from and against any and all costs, expenses, losses,
damages or liabilities (including, without limitation, reasonable solicitors'
fees, interest and penalties, but excluding any punitive, exemplary, special or
consequential damages) incurred by any of them with respect to or in connection
with any loss or damage suffered by any of them as a result of any breach of,
non-compliance with, or untruth of any of the warranties, representations or
covenants of the Vendor contained in this Agreement, in any Schedule hereto, in
any documents to be executed and delivered pursuant to this Agreement or in any
documents executed and delivered in connection with the completion of the
transactions contemplated hereby, including, without limiting the generality of
the foregoing, all costs and expenses (including reasonable legal fees incurred
in connection with any such loss or damage and in connection with any claim
under this Article; provided that any claim made with respect thereto must be
timely for purposes of Section 4 of this Agreement).
8.2 Indemnification By the Purchaser and Corporation
The Purchaser and the Corporation, jointly and severally, agree to
indemnify and save harmless the Vendor, its Affiliates and the employees,
representatives, agents, officers and directors of the Vendor and its Affiliates
from and against any and all costs, expenses, losses, damages or liabilities
(including, without limitation, reasonable solicitors' fees, interest and
penalties, but excluding any positive, exemplary, special or consequential
damages) incurred by any of them with respect to or in connection with any loss
or damage suffered by any of them as a result of any breach of, non-compliance
with, or untruth of any of the warranties, representations or covenants of the
Purchaser, the Corporation or the Principals contained in this Agreement, in any
Schedule hereto, in any documents to be executed and delivered pursuant to this
Agreement or in any documents executed and delivered in connection with the
completion of the transactions contemplated hereby, including, without limiting
the generality of the foregoing, all costs and expenses (including reasonable
legal fees incurred in connection with any such loss or damage and in connection
with any claim under this Article); provided that any claim made with respect
thereto must be timely for purposes of Section 4 of this Agreement.
8.3 Notice to Third Party Claims
Any person entitled to indemnification hereunder (the "Claimant") shall
give written notice to the person from whom indemnification is claimed (the
"Indemnifier"), as soon as reasonably possible, of any claims asserted by third
parties for which the Indemnifier may be liable pursuant to the provisions of
this Article 8 and shall provide reasonable particulars thereof. The failure of
a Claimant to so notify an Indemnifier will not release the Indemnifier of any
liability it may have to the Claimant except to the extent that the Indemnifier
demonstrates its defence of the relevant claim is prejudiced thereby.
The Indemnifier shall be entitled (but not required), at its sole expense,
to participate in or to assume the defence of any suit or the conduct of any
proceeding brought to enforce such claim or proceeding, provided that it so
notifies the Claimant hereunder within 10 Business Days of receipt or deemed
receipt of such notice and provided further that such dispute is prosecuted or
negotiations conducted by the Indemnifier in good faith and with due diligence.
In such event, the Claimant shall cooperate and shall be entitled to participate
with the Indemnifier in maintaining such defence; provided that no settlement
(unless the Indemnifier pays in full and such settlement includes a full release
of the Claimant) may be made by the Indemnifier or the Claimant without the
prior written consent of the other, which consent shall not be unreasonably
withheld. Provided further, that in the event that the Claimant shall be unable
to obtain timely advice from the Indemnifier with respect to any such matter
relating to any such negotiations, the Claimant shall be entitled, at the
expense of the Indemnifier, to deal with same in such manner as it, in the
reasonable exercise of its judgment, deems appropriate.
If the Indemnifier does not elect to participate in or assume the defence
of such claim, the reasonable fees, costs and expenses of the counsel for the
Claimant shall be paid by the Indemnifier. If the Indemnifier does elect to
participate in or assume the defence of such claim, the Claimant shall have the
right to retain other counsel to act on its behalf; provided that the fees and
disbursements of such other counsel shall be paid by the Claimant except to the
extent the representation of such parties by the same counsel would, in the
reasonable opinion of counsel to the Indemnifier, be inappropriate due to the
differing acts of, or potential differing interests between, them or potential
differing legal defences, in which case such fees and disbursements shall be
paid by the Indemnifier.
8.4 Rights are Exclusive
Except for the rights provided in this Agreement, the parties hereto hereby
waive any claim or cause of action pursuant to common or statutory law or
otherwise against each other regarding obligations and liabilities of any nature
whatsoever relating to the representations and warranties set out in Article 3
hereof.
ARTICLE 9 - GENERAL PROVISIONS
9.1 Further Assurances
Each of the Vendor and the Purchaser agrees that at any time and from time
to time after the Closing Date it will, upon the request of the other of them,
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered all such further acts, deeds, assignments, transfers, conveyances,
assumptions, documents and assurances as may be required for fully carrying out
and performing of all the terms of this Agreement.
9.2 Remedies Cumulative
The rights and remedies of the parties under this Agreement are to the
extent provided exclusive and otherwise cumulative and in addition to and not in
substitution for any rights or remedies provided by law. Any single or partial
exercise by any party hereto of any right or remedy for default or breach of any
term, covenant or condition of this Agreement does not waive, alter, affect or
prejudice any other right or remedy to which such party may be lawfully entitled
for the same default or breach.
9.3 Notices
All notices, requests, demands or other communications by the terms hereof
required or permitted to be given by one party to another shall be given in
writing by personal delivery or by telefax confirmed by personal delivery no
later than the next Business Day, addressed to such other party or delivered to
such other party as follows:
to the Vendor: Xxxxxx International Corp.
000 Xxxxxxxx Xxxx.
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxx
Telecopier No: 631.952.0665
with a copy to: Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No: 212.859.8587
(a) to the Principals
or the Purchaser: Pulse Microsystems Ltd.
0000 Xxxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telecopier No: 905.821.7331
with a copy to: Xxxx & Berlis LLP
BCE Place, Suite 1800
000 Xxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxxx
Telecopier No.: 416.863.1515
or at such other address as may be given by any of them to the others in writing
from time to time and such notices, requests, demands or other communications
shall be deemed to have been received when delivered or on the date of
transmission if prior to 5:00 p.m. (local time).
9.4 Counterparts
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together shall
constitute but one and the same instrument.
9.5 Expenses of Parties
Each of the parties hereto (a) shall bear all expenses incurred by it or
him in connection with this Agreement including, without limitation, the charges
of their respective counsel, accountants and financial advisors, and (b)
acknowledges that the Corporation shall bear none of the Purchaser's expenses
incurred prior to the Closing.
9.6 Brokerage and Finder's Fees
The Vendor indemnifies the Purchaser and the Corporation and holds each of
them harmless in respect of any claim for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereby which is
caused by actions of the Vendor or any of its Affiliates. The Purchaser
indemnifies the Vendor and holds it harmless in respect of any claim for
brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby which is caused by actions of the Purchaser.
9.7 Assignment
The rights of the Vendor hereunder shall not be assignable without the
prior written consent of the Purchaser (which consent shall not be unreasonably
withheld). The rights of the Purchaser hereunder shall not be assignable without
the written consent of the Vendor (which consent shall not be unreasonably
withheld).
9.8 Successors and Assigns
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective legal personal representatives, successors
and permitted assigns. Nothing herein, unless express, is intended to confer
upon any person, other than the parties hereto and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
9.9 Entire Agreement
This Agreement and the Schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements, term
sheets (including the October 15, 2002 term sheet) representations, warranties,
promises, arrangements and understandings, whether oral or written, express or
implied, with respect to the subject matter hereof. None of the parties hereto
shall be bound or charged with any oral or written agreements, representations,
warranties, statements, promises, information, arrangements or understandings
not specifically set forth or referred to in this Agreement or in the Schedules,
documents and instruments to be delivered on or before the Closing Date pursuant
to this Agreement. The parties hereto further acknowledge and agree that, in
entering into this Agreement and in delivering the Schedules, documents and
instruments to be delivered on or before the Closing Date, they have not in any
way relied, and will not in any way rely, upon any oral or written agreements,
representations, warranties, statements, promises, information, arrangements or
understandings, express or implied, not specifically set forth or referred to in
this Agreement or in such Schedules, documents or instruments.
9.10 Waiver
Any party hereto which is entitled to the benefits of this Agreement may,
and has the right to, waive any term or condition hereof at any time on or prior
to the Closing Time; provided, however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.
9.11 Amendments
No modification or amendment to this Agreement may be made unless agreed to
by the parties hereto in writing.
9.12 Enforceability
If any provision of this Agreement which is prohibited or found to be
unenforceable, either in whole or in part, in any jurisdiction, then the
unenforceable portion shall be terminated and as to such jurisdiction
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the day and year first above written.
2017146 ONTARIO LIMITED
Per:_________________________________
Authorized Signatory
XXXXXX INTERNATIONAL CORP.
Per:_________________________________
Authorized Signatory
