EXHIBIT 10.27
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 1st day of September, 2000.
B E T W E E N:
MAGIC LANTERN COMMUNICATIONS LTD., a corporation incorporated
pursuant to the laws of the Province of Ontario
(the "Buyer")
- and -
XXXXXXX XXXXX ENTERPRISES, INC., a corporation incorporated pursuant
to the laws of the State of Illinois
(the "Seller")
- and -
XXXXXXX XXXXX of the State of Illinois
(the "Covenantor")
WHEREAS:
A. The Seller carries on the business of sales, licensing and distribution of
educational video, CD ROM, and related printed materials worldwide,
including broadcast sales and licenses thereof (the "Business").
B. The Seller has agreed to sell the Business, as a going concern, to the
Buyer, and the Buyer has agreed to buy the Business including all of the
assets belonging to the Seller which are used in connection with the
Business except as otherwise specified, and together with the goodwill of
the Business, as a going concern, from the Seller, upon and subject to the
terms and conditions set out in this Agreement.
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NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements contained in this Agreement, the parties covenant and
agree with each other as follows:
ARTICLE 1 INTERPRETATION
1.01 Definitions. In addition to any other defined terms contained in this
Agreement, the following words and phrases have the following meanings:
"Assets" means all the assets, interests, undertakings, rights and properties of
the Seller in connection with the Business of every kind and description, real
or personal, tangible or intangible and wherever they are located as of the date
of this Agreement including, without limitation but subject to Section 2.01 and
the other exclusions listed in the attached Schedule "A":
(1) all machinery, equipment, furniture, furnishings and accessories,
spare parts, manuals and supplies of all kinds as set out in
Schedule "A";
(2) all inventory, including all Betacam SP, 3/4" or 1" master and
sub-master videotapes (whether in NTSC, PAL or SECAM format),
promotional materials associated therewith, and work in process of
the Seller in connection with the Business and a list of such master
and sub-master videotapes is attached as Schedule "B";
(3) the full benefit of all contracts, engagements or commitments,
whether written or oral, including, without limitation, all
distribution agreements, license agreements of the Seller in
connection with the Business to the extent that the same are
assignable to Buyer as listed in Schedule "F";
(4) all registered or unregistered trade marks, trade names, including
the trade names "XXXXXXX XXXXX ENTERPRISES" and "RWE", copyrights,
designs, inventions, patents, patent applications, patent rights,
licences, telephone numbers, customer lists, agents lists,
sublicences, franchises, trade secrets, processes, technology and
other industrial and intangibles including, without limitation, all
restrictive agreements or negative covenant agreements the Seller
may be a party to in connection with the Business;
(5) the goodwill of the Business including, without limitation, the
exclusive right in the Field to use the name "XXXXXXX XXXXX
ENTERPRISES" or "RWE", or any variation thereof, as part of the name
of, or in connection with the business carried on or to be carried
on by, the Buyer; and
(6) all other property, assets and rights, real or personal, tangible or
intangible, owned by the Seller in connection with the Business or
to which it is entitled, provided that there shall be specifically
excluded from the Assets the following:
(7) cash on hand or in banks or other depositories;
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(8) income and corporate taxes recoverable or refundable;
(9) any governmental rebates or refunds due or which may become due to
the Seller pursuant to any federal, state or provincial sales,
customs or excise tax legislation; and
(10) all accounts receivable (i) invoiced by Seller by August 31, 2000
and (ii) reported to Seller by Seller's customers by August 31, 2000
but not then invoiced.
"Business" means the business presently carried on by the Seller consisting of
the sales, licensing and distribution of educational media worldwide, including
broadcast sales and licenses, outside Canada and the United States of America;
"Business Day" means a day that is not a Saturday, a Sunday or a statutory
holiday;
"Buyer's Counsel" means Xxxxxxxx Xxxxx Sosnovitch LLP, or such other firm of
lawyers as may be designated by the Buyer;
"Closing Date" means the 1st day of September, 2000, or such other date as the
parties agree to in writing;
"Encumbrances" means any claim, lien, security interest, right, privilege,
restriction, demand or other encumbrance whatsoever affecting the property in
question, or any right capable of becoming such an encumbrance;
"Field" means the sales, licensing and distribution of educational media
worldwide but not including Canada or the fifty (50) states of the United
States.
"Interim Period" means the period of time between the date of this Agreement and
the Time of Closing;
"Prime Rate" means the commercial lending rate of interest, expressed as an
annual rate, which the Citigroup quotes in New York as the reference rate of
interest (commonly known as "prime") for the purpose of determining the rate of
interest that it charges to its commercial customers for loans in United States
funds;
"Seller's Counsel" means BusinessCounsel or such other firm of lawyers as may be
designated by the Seller;
"Purchase Price" means the consideration, as set out in this Agreement, payable
by the Buyer to the Seller for the Assets;
"Time of Closing" means 2:00 p.m. (CST) on the Closing Date or such other time
on the Closing Date at
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which the transaction is completed in Chicago, Illinois, or such other
arrangements as the parties may mutually agree upon.
1.02 United States Dollars. All dollar amounts referred to in this Agreement are
in United States currency unless otherwise provided.
1.03 Extended Meanings. In this Agreement, where the context requires, the
singular number includes the plural and vice versa, the masculine gender
includes the feminine and neuter genders and vice versa and the word "person" is
not limited to an individual but includes any entity recognized by law.
1.04 Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set out in this Agreement. No supplement,
modification, waiver or termination of this Agreement shall be binding, unless
executed in writing by the party or parties to be bound thereby.
1.05 Headings. All headings are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents thereof.
1.06 Accounting Terms. All accounting terms not specifically defined in this
Agreement are to be construed in accordance with generally accepted accounting
principles in the United States, consistently applied.
1.07 Schedules. The Schedules attached this Agreements are incorporated in and
form part of this Agreement.
1.08 Recitals. Each of the parties acknowledges that the recitals of this
Agreement, so far as they relate to such party, are true and correct in
substance and in fact.
ARTICLE 2 PURCHASE AND SALE OF ASSETS
2.01 Purchase and Sale. Based upon the warranties, representations and
covenants, and subject to the terms and conditions, set out in this Agreement,
the Buyer agrees to purchase the Assets from the Seller and the Seller agrees to
sell the Assets to the Buyer. Buyer understands and agrees that the video series
entitled "Eastern Tradition" and its derivative products that Covenantor is
writing, producing and marketing are specifically excluded from the Assets.
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2.02 Purchase Price. The Purchase Price payable by the Buyer to the Seller for
the Assets shall be Two Hundred Thousand Dollars ($200,000.00), subject to
upward adjustment as provided for in section 2.03 of this Agreement.
2.03 Purchase Price Adjustment. The Purchase Price payable by the Buyer to the
Seller for the Assets may be adjusted to up to a total of Three Hundred Thousand
Dollars ($300,000) in one or two annual increments of $50,000 conditional on the
terms set out below and payable as follows:
(a) If Gross Revenues for the Business exceed Five Hundred Thousand Dollars
($500,000.00) for the twelve (12) calendar month period commencing on the
1st day of September, 2000 and ending on the 31st day of August, 2001, the
Purchase Price herein shall be increased to Two Hundred Fifty Thousand
Dollars ($250,000.00) and the Buyer shall pay to the Seller the increase
of Fifty Thousand Dollars ($50,000) as a lump sum payment within sixty
(60) Business Days after the end of such period.
(b) If Gross Revenues for the Business exceed Six Hundred Thousand Dollars
($600,000.00) for the second period of twelve (12) calendar months after
the Closing Date (commencing 1st day of September 2001 and ending on the
31st day of August, 2002), the Purchase Price herein shall be further
increased by Fifty Thousand Dollars ($50,000.00) and the Buyer shall pay
to the Seller the increase of Fifty Thousand Dollars ($50,000) as a lump
sum payment within sixty (60) Business Days after the end of such second
period.
For the purposes of this section "Gross Revenue" means the total amount of all
sales and other income from whatsoever source derived from the Business,
calculated on an annual basis in accordance with generally accepted accounting
principles, consistently applied and as applied immediately prior to the
purchase herein, and specifically will not include any portion of any sales
revenue properly held back as agent's fees or from any sales revenue for
invoices rendered by the Seller before the Time of Closing. All sales and other
income derived by Buyer and other entities controlled by Buyer from the sale and
distribution of educational media outside Canada and the fifty (50) states of
the United States and booked by Buyer or any such other entity after the Time of
Closing shall be deemed to be Gross Revenue. The following shall not be included
in calculating Gross Revenue:
(1) the amount of any tax imposed by any national, federal, provincial, state,
municipal or other governmental authority on sales and collected from
customers, provided that the amount of any such tax is shown separately
and in fact paid by the Franchisee to the appropriate governmental
authority; and
(2) an exchange of merchandise or refund made to any customer of the Business,
provided that the amount paid for the merchandise or refund was originally
included in calculating Gross Revenue.
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For the purposes of this section "controlled" means the possession of the power
to direct or cause the direction of management and policies of the entity,
whether through the ownership of voting rights, by contract or otherwise. Buyer
shall make and certify to Seller reports of Gross Revenues, showing full details
of the source and revenues received, to Seller and Covenantor within thirty (30)
days after the close of the first and second anniversaries of the Closing Date,
and shall keep and maintain records of Gross Revenue for three (3) years after
the Closing Date.
2.04 Payment Exchange Rate. In the case of Gross Revenues not paid in United
States Dollars, the rate of exchange to be used in computing the amount of
currency equivalent in United States Dollars shall be made at a rate of exchange
equal to the exchange rate in United States Dollars of the Buyer's bank applied
to such funds when such funds are deposited therewith by the Buyer.
2.05 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Assets as follows:
(a) as to the goodwill of the Business, the sum of $1.00;
(b) as to the remaining assets forming part of the Assets, the balance of the
Purchase Price.
2.06 Tax Reporting. The Buyer and the Seller agree to prepare and file their
respective tax returns in a manner consistent with the foregoing allocations.
Each of the Buyer and the Seller (the "non-reporting Party") agrees to indemnify
and save harmless the other in respect of any additional tax, interest, penalty
and legal and/or accounting costs paid or incurred as a result of the failure of
the Non-reporting Party to file its tax return in such manner.
2.07 Payment of Purchase Price. Subject to section 2.03, the Purchase Price
shall be paid and satisfied as follows:
(a) the Buyer shall pay to the Seller, or as the Seller directs in writing, on
the Closing Date by certified cheque, bank draft or wire transfer at
Seller's option and Buyer's expense, the sum of One Hundred Thousand
Dollars ($100,000.00);
(b) the balance of the Purchase Price (the "Balance") shall be paid by the
Buyer to the Seller, or as the Seller directs in writing, by certified
cheque, bank draft or wire transfer at Seller's option and Buyer's
expense, as follows:
(i) the sum of Twenty-Five Thousand Dollars ($25,000.00) on February 28,
2001;
(ii) the sum of Twenty-Five Thousand Dollars ($25,000.00) on August 31,
2001;
(iii) the sum of Twenty-Five Thousand Dollars ($25,000.00) on February 28,
2002; and
(iv) the sum of Twenty-Five Thousand Dollars ($25,000.00) on August 31,
2002.
2.08 Promissory Notes. As a condition of closing, Buyer shall deliver to Seller
a promissory note for each of the Section 2.07(i) through (iv) payments, such
promissory notes to be in form and substance as attached as Schedule "E" to this
Agreement. Such promissory notes shall be legalized by the appropriate
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authorities in Canada and the United States of America.
2.09 Income Tax Withholding. If laws, rules or regulations require withholding
of income taxes or other rates imposed upon payments to Seller set forth in this
Article 2, Buyer shall make such withholding payments as required and subtract
such withholding payments from such payments to Seller. Buyer shall submit
appropriate proof of payment of the withholding rates to Seller within a
reasonable period of time. Buyer shall use efforts consistent with its usual
business practices to minimize the extent of any withholding taxes imposed under
the provisions of the current or any future double taxation treaties or
agreements between Canada and the United States of America, and the parties
shall cooperate with each other with respect thereto, with the appropriate party
under the circumstances providing the documentation required under such treaty
or agreement to claim benefits thereunder.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Seller and the Covenantor. The Seller
and the Covenantor jointly and severally represent and warrant to the Buyer as
follows and acknowledge that the Buyer is relying upon such representations and
warranties in connection with the purchase by the Buyer of the Assets:
(a) Schedules. The Schedules contain complete and accurate information
regarding those matters to which such Schedules pertain.
(b) Corporate Existence. The Seller is duly incorporated, organized and
validly existing under the laws of the State of Illinois. The Seller has
the corporate power and authority and does now possess, and has since the
incorporation of the Seller possessed, all governmental and other permits,
licences and other authorizations required to own or lease the properties
owned or leased by it in connection with the Business, and to carry on the
Business as it was carried on at the applicable time.
(c) Authority. This Agreement, when executed and delivered by the parties,
will constitute a valid and binding agreement of the Seller in accordance
with its terms. None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
compliance with or fulfilment of the terms and provisions of this
Agreement, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under the Seller's
articles of incorporation or by-laws, any instrument, agreement, mortgage,
judgment, order, award, decree or other restriction to which it is a party
or by which it is bound or any regulatory provisions affecting it. The
Seller has full power and authority to sell, assign, transfer and deliver
the Assets to the Buyer pursuant to this Agreement and to do and perform
all acts and things required to be done by it under this Agreement.
(d) Options and Calls. There are no outstanding agreements, calls,
commitments, options, or other rights or privileges, to acquire any of the
Assets other than in the ordinary course of business.
(e) Availability of Assets. Except as specified in Section 2.01 the Assets
constitute all of the assets
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which are now being used, and which are necessary, in the conduct of the
Business. The Assets are in good operating condition and repair,
reasonable wear and tear excepted.
(f) Title to Assets. The Seller is the legal and beneficial owner of all of
the Assets owned by Seller having good and marketable legal and beneficial
title thereto, free and clear of all Encumbrances.
(g) Inventories. Seller has disclosed the locations of all inventories
comprising part of the Assets and has given Buyer full access to inspect
such inventories.
(h) Distribution and License Agreements. All distribution agreements and
license agreements to which the Seller is subject:
(i) are in full force and effect and in good standing and constitute a
legal, valid and binding obligation of the respective parties thereto; and
(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement provided that the other party
to any such agreements that require consent to assignment gives such
consent. The Seller agrees to provide such assistance, at his expense, as
may be reasonably requested by the Buyer to obtain such consents from
other third parties, and for greater certainty, the Seller shall not
receive any payment pursuant to Subsection 5.01(j) hereof for such
assistance.
(i) Proprietary Rights. Except as disclosed in the attached Schedule "C", the
Seller owns or possesses adequate licenses or other rights to the sole and
exclusive use of all copyrights, uncopyrighted works, registered and
unregistered trade marks, certification marks, trade names, industrial
designs, patents, patent applications, unpatented inventions, trade
secrets, know-how and other proprietary rights necessary to conduct the
Business as now conducted (collectively, the "Proprietary Rights"). The
Proprietary Rights are free and clear of all Encumbrances.
(j) No Finder. The Seller is not obliged to pay any finder's fee or any type
of commission in connection with the transactions contemplated by this
Agreement.
(k) No Defaults under Agreements; No Violation of Laws. The Seller has not
received notice of, and has no knowledge of, the existence of any default
or event of default or the occurrence of any event which with notice or
lapse of time, or both, would constitute a default, and which is
continuing, under the terms or provisions, express or implied, of any
agreement to which any of the Assets or the conduct of the Business are
subject. The Seller has not received notice of, and has no knowledge of, a
violation of any applicable federal, state, provincial or municipal law,
ordinance, regulation, order or requirement relating to the Assets or the
conduct of the Business which may have a material adverse effect on the
Assets or the conduct of the Business including, without limitation, laws
relating to industrial hygiene, occupational safety or environmental
conditions on, under or about properties utilized by the Seller in
connection with the Business. The Seller is conducting the Business in
compliance with all applicable laws, regulations, by-laws and ordinances
of each jurisdiction in which the Business is carried on.
(l) Litigation. .Except as disclosed in Schedule C, no claim, action, suit,
proceeding, litigation, arbitration or investigation has been commenced or
threatened against the Seller, the Assets or the Business (including the
properties of others used in the conduct of the Business), or the
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transactions contemplated by this Agreement, and no basis therefor is
known to the Seller. None of the Seller, the Assets, or the conduct of the
Business is subject to any continuing injunction, judgment or other order
of any court, arbitrator or governmental agency. The Seller is not in
default under any order, licence, regulation, or demand of any federal,
state, provincial, municipal or other governmental agency or regulatory
body or with respect to any order, writ, injunction or decree of any
court.
(m) Intentionally deleted.
(n) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement, the
Seller has:
(i) prepared and filed with the appropriate governmental authorities
all tax returns required to be filed by it in connection with the
Business under all applicable laws or regulations, which returns, if
any, were prepared in conformity with such applicable laws and
regulations and properly reflect, and do not in any manner
understate, the taxable income and the liability for taxes of the
Seller in connection with the Business in the relevant taxation
year;
(ii) paid all taxes, assessments, reassessments, penalties, interest
and fines, if any; and
(iii) made sufficient provision in the financial statements for all
accrued but unpaid taxes, interest and penalties, if any, whether or
not disputed, for all relevant periods.
The U.S. Income Tax Return Form 1120S for the Seller for the fiscal years
1998 and 1999 attached as Schedule "D".
(o) No Employment Agreements; No Union or Collective Bargaining Agreements.
The Seller is not a party to any employment agreement or any agreement
with any independent contractor in connection with the Business. The
Seller is not a party to or bound by any collective bargaining agreement
and has not conducted negotiations with respect to any such future
agreement. No employees of the Seller are represented by any trade union
or association which might qualify as a trade union and there are no
applications in progress or threatened which could result in the
certification of a bargaining agent for the employees of the Seller. There
has been no strike, grievance, dispute, representation, arbitration,
proceedings or other labour trouble against the Seller and there is no
such action or proceeding in progress or threatened against the Seller,
and the Seller does not know of any basis therefor. The Seller has not
received notice of, and has no knowledge of, non-compliance with any laws
concerning occupational safety, employment practices, terms and conditions
of employment, wages and hours, and unfair labour practices, the
enforcement of which would have a material adverse effect on the conduct
of the Business.
(p) Insolvency. The Seller is not insolvent, nor has it committed an act of
bankruptcy, proposed a compromise or arrangement of its creditors
generally, had any petition or receiving order in bankruptcy filed against
it, taken any proceedings with respect to a compromise or arrangement or
to have a receiver appointed over any part of its assets, had an
encumbrancer take possession of any of its property, or had an execution
or distress become enforceable or levied upon any of
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its property.
(q) Full Disclosure. The Seller has delivered to the Buyer true and current
copies or, if not available, photocopies of all agreements, documents and
other instruments listed in the Schedules to this Agreement. To the best
of its knowledge and belief the information furnished to the Buyer by the
Seller in connection with this Agreement and the transactions contemplated
by this Agreement does not contain any untrue statement of a material fact
and does not omit to state any material fact necessary to make the
statements made, in the context in which made, not false or misleading.
There is no fact or contingency which the Seller has not disclosed to the
Buyer in writing which:
(i) might have a material adverse effect on the Assets, the conduct
of the Business or the condition (financial or otherwise) or
prospects of the Business; or
(ii) could reasonably be expected to be material to an intending
purchaser of the Assets.
3.02 DISCLAIMER. SELLER AND COVENANTOR SPECIFICALLY DISCLAIM ANY WARRANTIES OR
CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, BUT NOT LIMITED
TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FREEDOM
FROM INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS OR ARISING FROM A
COURSE OF DEALING, USAGE OR MADE PRACTICES, IN ALL CASES WITH RESPECT TO THE
ASSETS AND THE BUSINESS.
3.03 Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller as follows and acknowledges that the Seller is relying
upon such representations and warranties in connection with the sale by the
Seller of the Assets:
(a) Corporate Existence. The Buyer is duly incorporated, organized and validly
existing under the laws of the Province of Ontario;
(b) Authority. This Agreement, when executed and delivered by the parties,
will constitute a valid and binding agreement of the Buyer in accordance
with its terms. None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
compliance with or fulfilment of the terms and provisions of this
Agreement, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under the Buyer's
incorporation documents or bylaws, any instrument, agreement, mortgage,
judgment, order, award, decree or other restriction to which it is a party
or by which it is bound or any regulatory provisions affecting it. The
Buyer has full power and authority to purchase the Assets from the Seller
pursuant to this Agreement and to do and perform all acts and things
required to be done by it under this Agreement.
(c) Investment Canada. The Buyer is not a non-Canadian within the meaning of
the Investment Canada Act (Canada).
(d) Insolvency. The Buyer is not insolvent, has not committed an act of
bankruptcy, proposed a
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compromise or arrangement of its creditors generally, had any petition or
receiving order in bankruptcy filed against it, taken any proceedings with
respect to a compromise or arrangement or to have a receiver appointed
over any part of its assets, had an encumbrancer take possession of any of
its property, or had an execution or distress become enforceable or levied
upon any of its property.
(e) Inventories. The Buyer has been given full opportunity to inspect the
inventories comprising part of the Assets and hereby accepts such
inventories as is where is.
(f) No Finder. The Buyer is not obliged to pay any finder's fee or any type of
commission in connection with the transactions contemplated by this
Agreement.
(g) Governmental Notifications. The Buyer shall comply with the provisions of
15CFR Part 806 Direct Investment Surveys with regard to filing such
reports and/or exemption claims as may be required of Buyer as a "Foreign
Person" as defined in such regulations.
ARTICLE 4 - COVENANTS
4.01 Covenants of the Seller During Interim Period. The Seller hereby covenants
that, during the Interim Period, it shall:
(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Assets, the Business and the clients, customers
and suppliers associated with the Business;
(b) give the Buyer, the Buyer's Counsel, and other representatives of the
Buyer, full access during normal business hours to the properties, books,
contracts, commitments and records of the Seller in connection with the
Business;
(c) furnish the Buyer with all material information concerning the Business as
the Buyer may reasonably request;
(d) permit the Buyer and its representatives to observe all operations of the
Business and to meet with such members of the management of the Business
as the Buyer may designate for such purposes as the Buyer may deem to be
appropriate;
(e) do all things and cause all things to be done to ensure that all the
warranties and representations of the Buyer contained in this Agreement
remain true and correct throughout the Interim Period as if such
representations and warranties were continuously made throughout such
period;
(f) not acquire or agree to acquire additional assets in connection with the
Business, except in the ordinary course of business, without the prior
written approval of the Buyer;
(g) not enter into any contracts or any forward commitments for inventories or
supplies in connection with the Business, in writing or otherwise, other
than contracts or commitments made in the ordinary course of business,
without the prior written approval of the Buyer;
(h) not incur any other indebtedness, obligations or liabilities of the
Business out of the ordinary course of business without the prior written
approval of the Buyer;
(i) not sell, agree to sell or otherwise dispose of any of the Assets (other
than items of inventory and operating supplies sold or consumed, as the
case may be, in the ordinary course of business);
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(j) pay, satisfy and discharge its obligations and liabilities in connection
with the Business in the ordinary course of business;
(k) not incur any capital expenditures in connection with the Business or the
Assets except in the ordinary course of business without the prior written
approval of the Buyer;
(l) retain the services of Xxxxx Xxxxxxxxxx whose employment is being
continued as contemplated in this Agreement;]
(m) assist Buyer to obtain at Buyer's expense all necessary consents and
approvals in connection with the transfer of the Assets required pursuant
to the terms of any leases, contracts or rights of the Seller upon or in
connection with any of the Assets; and
(n) promptly advise the Buyer in writing of any material adverse change in the
condition, financial or otherwise, of the Business.
4.02 Covenants of the Buyer During Interim Period. The Buyer hereby covenants
that, during the Interim Period, it shall:
(a) do all things and cause all things to be done to ensure that all the
warranties and representations of the Buyer contained in this Agreement
remain true and correct throughout the Interim Period as if such
representations and warranties were continuously made throughout such
period; and
(b) treat in confidence all documents, materials and other information and
findings which it or any of its authorized representatives, the Buyer's
Accountants or the Buyer's Counsel has obtained concerning the Seller
and/or the Business during the Interim Period in the course of its
investigations.
4.03 Covenants on Closing.
(a) The Seller covenants that at the Time of Closing it will satisfy, or cause
to be satisfied, all conditions precedent to the obligations of the Buyer
set out in Section 5.01 of this Agreement.
(b) The Buyer covenants that at the Time of Closing it will satisfy, or cause
to be satisfied, all conditions precedent to the obligations of the Seller
set out in this Agreement.
4.04 Post-Closing Covenants.
(a) Subject to other provisions of this Agreement, the Seller covenants that
the Buyer may have from time to time and at all times subsequent to the
Time of Closing peacefully and quietly have, hold, possess and enjoy the
Assets and every part thereof to and for its own use and benefit without
any manner of hindrance, interruption, molestation, claim or demand
whatsoever of, from or by the Vendors or any person whomsoever and with
good and marketable title thereto, free and clear and absolutely released
and discharged from and against all former and other bargains, sales,
gifts, grants, mortgages, pledges, security interest, adverse claims,
liens, charges and encumbrances of any nature or kind whatsoever.
(b) The Seller agrees that, subsequent to the Time of Closing and at the
request and expense of Buyer, it will:
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(i) execute and deliver such additional conveyances, transfers and
other assurances as, in the opinion of the Buyer's Counsel, are
reasonably required to carry out the intent of this Agreement and to
transfer the Assets to the Buyer;
(ii) take all steps reasonably required by the Buyer to assist the
Buyer in retaining the goodwill of the Business, including, if
requested by the Buyer, introducing the Buyer or the Buyer's
representatives to customers and suppliers of the Business; and
(iii) perform all of its obligations to be performed under this
Agreement after the Time of Closing.
(c) The Buyer agrees that, subsequent to the Time of Closing, it will:
(i) at the request and expense of the Seller, execute and deliver
such additional conveyances, transfers and other assurances as, in
the opinion of the Seller's Counsel, are reasonably required to
carry out the intent of this Agreement; and
(ii) perform all of its obligations to be performed under this
Agreement after the Time of Closing, including, without limitation,
satisfying the outstanding Balance as and when it becomes due and
payable.
4.05 Post-Closing Dispute Assistance. The Seller agrees that if there is any
dispute with respect to the Business arising out of events which occurred prior
to the Time of Closing, it will cooperate with the Buyer, at no cost to the
Buyer except for reasonable expenses for travel in connection with such
assistance, which shall be paid by the Buyer, in the resolution of such dispute,
including, without limitation, making appearances in any litigation which may
result therefrom; provided, however, that the Seller's agreement to cooperate
pursuant to this section shall not be deemed an acceptance by the Seller of any
liability arising from such dispute.
4.06 Covenants Concerning Confidentiality
(a) The Buyer acknowledges that in order to facilitate the completion of the
purchase of the Assets, it will be afforded access to and be entrusted
with information (in this subsection the "Confidential Information")
concerning the Seller and the Business that is not a matter of public
record and has not been disclosed to any person who does not owe a duty of
nondisclosure to the Seller pursuant to a written or oral agreement, at
common law or under the terms of applicable legislation. The Buyer also
acknowledges that the Confidential Information is proprietary and
confidential and disclosure thereof to competitors of the Seller and/or
the Business or to the general public would be detrimental to the best
interests of the Seller and could cause a great deal of damage to the
Business. The Buyer therefore agrees that it will not, except for the
benefit of and with the written consent of the Seller, its successors or
assigns, prior to the completion of its purchase of the Assets or at any
time, if the purchase of the Assets pursuant to this Agreement is not
completed for any reason whatsoever,:
(i) disclose or divulge any Confidential Information to any person,
unless that person is also bound by a duty of confidentiality with
respect thereto; or
14
(ii) use, directly or indirectly, any Confidential Information for
any purpose other than to complete its due diligence in connection
with the purchase of the Assets, or disclose or use for any purpose
other than that set out above, knowledge of the private affairs of
the Seller or the Business,
unless the Buyer can establish beyond any reasonable doubt that the
Confidential Information:
(iii) was previously known to the Buyer, as evidenced by written
records, which the Buyer can prove predate this Agreement; or
(iv) hereafter, and prior to disclosure or use as set out above,
becomes generally known to the public through no act or omission of
the Buyer.
(b) The Seller and the Covenantor each acknowledge that in order to facilitate
the completion of the purchase of the Assets, they may be afforded access
to and be entrusted with information (in this section the "Confidential
Information") concerning the Buyer that is not a matter of public record
and has not been disclosed to any person who does not owe a duty of
non-disclosure to the Buyer pursuant to a written or oral agreement, at
common law or under the terms of applicable legislation. The Seller and
the Covenantor also acknowledge that the Confidential Information is
proprietary and confidential and disclosure thereof to competitors of the
Buyer or to the general public would be detrimental to the best interests
of the Buyer and could cause a great deal of damage to the business of the
Buyer. The Seller and the Covenantor therefore each agree that it will
not, except for the benefit of and with the written consent of the Buyer,
its successors or assigns, at any time:
(i) disclose or divulge any Confidential Information to any person,
unless that person is also bound by a duty of confidentiality; or
(ii) use, directly or indirectly, any Confidential Information for
any purpose other than to complete their due diligence in connection
with the sale of the Assets and the performance of this Agreement,
or disclose or use for any purpose other than that set out above,
knowledge of the private affairs of the Buyer,
unless the Seller or the Covenantor, as the case may be, can establish
beyond any reasonable doubt that the Confidential Information:
(iii) was previously known to the Seller or the Covenantor, as the
case may be, as evidenced by written records, which the Seller or
the Covenantor, as the case may be, can prove predate this
Agreement; or
(iv) hereafter, and prior to disclosure or use as set out above,
becomes generally known to the public through no act or omission of
the Seller or the Covenantor, as the case may be.
(c) The Buyer, the Seller and the Covenantor each agree that no public or
internal announcement of the transactions provided for in this Agreement
will be made without the prior approval of the Buyer and the Seller,
provided that each of the Buyer and the Seller agrees not to unreasonably
withhold or delay its approval of or to any announcements or filings
required to be made by the other by law, or to obtain or transfer any
licences or consents required by the Buyer or the Seller
15
in order to complete the transactions provided for in this Agreement.
4.07 Employees. The Seller agrees to give the required notice of termination or
to pay remuneration in lieu thereof to all of the employees of the
Business, such that termination is concurrent with the Closing Date. The
Seller also agrees to pay all remuneration due to the employees of the
Business together with vacation pay and all other amounts owing.
4.08 Delivery of Assets: At any time within thirty (30) days after the Closing
Date, Buyer shall take possession of the tangible Assets and move them
from Seller's place of business.
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
5.01 Conditions Precedent. The obligations of the Buyer under this Agreement are
subject to the fulfilment, at or before the Time of Closing, of the following
conditions. All of the following conditions have been included for the sole
benefit of the Buyer and each is a condition of the closing of the transactions
provided for in this Agreement. Any of the following conditions may be waived by
the Buyer, in whole or in part, at or at any time prior to the Time of Closing,
provided that no such waiver shall constitute a waiver by the Buyer of any of
its other rights or remedies in connection with any other condition or
conditions, and any waiver will only be binding upon the Buyer if made by the
Buyer in writing:
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Seller and the Covenantor contained
in this Agreement are true and correct in all respects at the Time of
Closing with the same effect as though such representations and warranties
had been made at and as of such time and there has been compliance by each
of the Seller and the Covenantor with, and no breach by either of the
Seller or the Covenantor of, any of their covenants in this Agreement.
(b) No Changes in Operations. During the Interim Period, there has been no
material adverse change in the Assets or in the Business or in the
affairs, liabilities, or condition (financial or otherwise), or prospects
of the Business, or other event or development which would affect the
decision of a prudent purchaser in similar circumstances to complete the
purchase of the Assets, and there has been no material adverse legislative
or regulatory change affecting the Business.
(c) Officer's Declaration. The Buyer shall have received a officer's
certificate of a senior executive officer of the Seller and of the
Covenantor that:
(i) all representations and warranties of the Seller and the
Covenantor contained in this Agreement are true and correct at the
Time of Closing as though then made;
(ii) there has been compliance with each of the covenants and
obligations on the part of the Seller and the Covenantor required to
be complied with at or before the Time of Closing;
(iii) the sale of the Assets has been authorized by all necessary
actions including, if
16
the Assets constitute all or substantially all of the property of
the Seller, all necessary shareholders' authorizations; and
(iv) such person has no knowledge of any action, suit or proceeding
by any governmental body or authority, or by any private third
party, seeking to restrain the transactions contemplated by this
Agreement or its consummation, which has been threatened or
instituted against the Seller and remains pending at the Time of
Closing.
(d) Restraint of Transactions. No order of any court of competent jurisdiction
is effective restraining the transactions contemplated by this Agreement.
(e) Intentionally deleted.
(f) Opinion Letter of Seller's Counsel. The Buyer and the Buyer's Counsel have
received from the Seller's Counsel an opinion, dated the Closing Date, in
the form to be mutually agreed upon by the Buyer's Counsel and the
Seller's Counsel acting reasonably, confirming the corporate existence of
the Seller and its authority to complete the transactions contemplated by
this Agreement.
(g) Transfer of Trade Name. The Seller shall have taken all necessary steps to
transfer to the Buyer all registered or unregistered trade marks, trade
names, including the trade names "XXXXXXX XXXXX ENTERPRISES" and "RWE".
(h) Non-Solicitation and Non-Competition. The Seller and the Covenantor have
delivered to the Buyer a non-competition agreement, in the form as agreed
upon by the Seller's Counsel and the Buyer's Counsel, whereby the
Covenantor shall agree during the period commencing on the Closing Date
and ending four (4) years therefrom not to:
(i) solicit, induce, or in any manner whatsoever carry on or be
engaged in or concerned with or advise any employee, agent, supplier
or customer of the Business to terminate or reduce its employment or
business, as the case may be, with the Buyer, or
(ii) directly or indirectly, whether as principal, shareholder
(except of publicly traded securities), director, officer, manager,
employee, consultant, lender, guarantor, representative or agent or
in any other capacity be involved in any business or otherwise
engage in a business anywhere in the world which is directly or
indirectly competitive with the Business, namely sales, licensing
and distribution of educational video, CD ROM, and related printed
materials including broadcast sales and licenses. Notwithstanding
the foregoing, this restrictive covenant does not apply to the
distribution of non-educational media by the Covenantor nor does it
apply to any educational products produced by him.
(i) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Seller to the Buyer pursuant to
this Agreement, the Seller has delivered to the Buyer, at or before the
Time of Closing, the following:
(i) a xxxx of sale;
(ii) a general assignment of the contracts listed in the attached
Schedule A to which the Seller is a party in connection with the
Business which is required by this Agreement.
17
(j) Employment Arrangements. The Buyer shall have made, at or before the Time
of Closing, employment arrangements with those employees of the Business
which it wishes to employ in connection with the Business on terms
satisfactory to the Buyer. The Covenantor agrees to make himself available
to the Buyer if requested for a minimum period of two (2) years after the
Closing Date for the purposes of introducing the Buyer to agents,
suppliers, and other third parties in connection with a transition of the
Business to the Buyer and assisting Buyer to grow the Business. During
such two (2) year period the Buyer shall use and pay for Covenantor's
services for a minimum of fifty (50) days, but not more than two hundred
(200) days, during the first year after the Closing Date and twenty-five
(25) days, but not more than one hundred (100) days, during the second
year after the Closing Date. The Buyer shall compensate the Covenantor for
such time spent at the per diem rate of Four Hundred Dollars ($400.00) per
day.
5.02 Result of Failure to Satisfy Condition Precedent. If any of the foregoing
conditions precedent to the obligations of the Buyer have not been satisfied at
the Time of Closing, and have not be waived by the Buyer at, or at any time
prior to, the Time of Closing, the Buyer may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Seller or the Seller's Counsel and, in such
event, all parties shall be released from their obligations under this
Agreement except the obligations of such party to maintain the
confidentiality of Confidential Information obtained in the course of the
negotiation of this Agreement and the due diligence leading up to the Time
of Closing; or
(b) complete the transactions provided for in this Agreement, provided that
the Purchase Price shall have been reduced by such amount as the Buyer and
the Seller have mutually agreed adequately compensates the Buyer for the
damages it may suffer as a result of the non-satisfaction of the condition
precedent in question, provided that it is expressly understood and agreed
that following such completion the Buyer may not rely on the warranties,
representations or covenants relating to any unsatisfied condition in
connection with which there has been an abatement in the Purchase Price,
and further provided that if the Buyer and the Seller do not agree upon
the amount of the abatement to the Purchase Price, the Buyer will be
deemed to have elected not to complete the transaction.
18
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
6.01 Conditions Precedent. The obligations of the Seller under this Agreement
are subject to the fulfilment, at or before the Time of Closing, of the
following conditions. All of the following conditions have been included for the
sole benefit of the Seller and each is a condition of the closing of the
transactions provided for in this Agreement. Any of the following conditions may
be waived by the Seller, in whole or in part, at or at any time prior to the
Time of Closing, provided that no such waiver shall constitute a waiver by the
Seller of any of its other rights or remedies in connection with any other
condition or conditions, and any waiver will only be binding upon the Seller if
made by the Seller in writing:
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Buyer contained in this Agreement
are true and correct in all respects at the Time of Closing with the same
effect as though such representations and warranties had been made at and
as of such time and there has been compliance by the Buyer with, and no
breach by the Buyer of, any of its covenants in this Agreement.
(b) Officer's Declaration. The Seller shall have received a officer's
certificate of a senior executive officer of the Buyer that:
(i) all representations and warranties of the Buyer contained in this
Agreement are true and correct at the Time of Closing as though then
made;
(ii) there has been compliance with each of the covenants and obligations
on the part of the Buyer required to be complied with at or before
the Time of Closing;
(iii) the purchase of the Assets has been authorized by all necessary
actions; and
(iv) such person has no knowledge of any action, suit or proceeding by
any governmental body or authority, or by any private third party,
seeking to restrain the transactions contemplated by this Agreement
or its consummation which has been threatened or instituted against
the Buyer and remains pending at the Time of Closing.
(c) Restraint of Transactions. No order of any court of competent jurisdiction
is effective restraining the transactions contemplated by this Agreement.
(d) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Buyer to the Seller pursuant to
this Agreement, the Buyer has delivered to the Seller, at or before the
Time of Closing, the following:
(i) the first $100,000 instalment of the Purchase Price;
(ii) the promissory notes for each instalment of the Balance.
6.02 Result of Failure to Satisfy Condition Precedent. If any of the foregoing
conditions precedent to the obligations of the Seller have not been
satisfied at the Time of Closing, and have not been waived by the Seller
at, or at any time prior to, the Time of Closing, the Seller may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Buyer or the Buyer's Counsel and, in such
event, all parties shall be released from their
19
obligations under this Agreement except the obligations of such party to
maintain the confidentiality of Confidential Information obtained in the
course of the negotiation of this Agreement and the due diligence leading
up to the Time of Closing, or
(b) complete the transactions provided for in this Agreement, provided that
the Purchase Price shall have been increased by such amount as the Buyer
and the Seller have mutually agreed adequately compensates the Seller for
the damages it may suffer as a result of the non-satisfaction of the
condition precedent in question, provided that it is expressly understood
and agreed that following such completion the Seller may not rely on the
warranties, representations or covenants relating to any unsatisfied
condition in connection with which there has been an increase in the
Purchase Price, and further provided that if the Buyer and the Seller do
not agree upon the amount of the increase to the Purchase Price, the
Seller will be deemed to have elected not to complete the transaction.
ARTICLE 7 - RISK OF LOSS
7.01 Risk of Loss. If, at or before the Time of Closing, all or any substantial
part of the Assets are destroyed or damaged by fire, or any other casualty, or
are expropriated or otherwise seized by governmental or other lawful authority,
the Seller shall immediately advise the Buyer in writing and the Buyer shall
have the option, exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, provided that
the Purchase Price shall be reduced by an amount equal to the fair market
value of the assets destroyed, damaged, expropriated or seized; or
(b) to refuse to complete the transaction contemplated herein by notice to the
Seller and, in such event, all parties hereto shall be released from all
obligations hereunder except the obligations of such party to maintain the
confidentiality of Confidential Information obtained in the course of the
negotiation of this Agreement and the due diligence leading up to the Time
of Closing and except the obligation of the Seller to return to the Buyer
the Deposit, together with interest thereon.
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.01 Survival of the Seller's and the Covenantor's Representations, Warranties
and Covenants. The representations, warranties and covenants of the Seller and
the Covenantor contained in this Agreement shall, unless otherwise expressly
provided in this Agreement, survive the closing of the transactions provided for
in this Agreement and, notwithstanding such closing and notwithstanding any
investigations made by or on behalf of the Buyer, shall continue in full force
and effect for a period of three (3) years after the Time of Closing.
20
8.02 Survival of the Buyer's Representations, Warranties and Covenants. The
representations, warranties and covenants of the Buyer contained in this
Agreement shall survive the closing of the transactions provided for in this
Agreement and, notwithstanding such closing and notwithstanding any
investigations made by or on behalf of the Seller, shall, unless otherwise
expressly provided in this Agreement, continue in full force and effect for a
period of three (3) years after the Time of Closing.
ARTICLE 9 INDEMNIFICATION
9.01 Scope of Indemnification - Seller. In the event that the transactions
provided for in this Agreement are completed and it is subsequently determined
that the Buyer or any agent, employee, affiliate, successor or nominee of the
Buyer, or any of the officers, directors, shareholders, subsidiaries,
affiliates, employees and agents of any of the aforesaid (collectively the
"Indemnified Parties") has or is subject to any loss, damage, liability,
deficiency, claim, cost, recovery, expense (including interest penalty and
reasonable legal fees), assessment or reassessment (collectively the "Claims")
arising from (i) the incorrectness, failure, non-compliance or other breach of
any representation, warranty or covenant made by the Seller or the Covenantor
prior to the Time of Closing or (ii) if any of the employees of the Business are
employed by the Buyer subsequent to the Closing Date, all wages, salaries,
bonuses, severance pay, termination pay, vacation pay, pension and other similar
entitlements relating to any period prior to the Closing Date., then, unless
otherwise expressly provided in this Agreement, the Seller and the Covenantor,
jointly and severally, to the extent that the Indemnified Parties did not
contribute to the Claims, agree to indemnify and save harmless the Indemnified
Parties for the amount of such Claims up to and not to exceed the amount of the
Purchase Price. Any claim against the Seller and the Covenantor under this
section shall be in writing and shall be made within the applicable limitation
period provided at law in respect of such claim. In no event shall Seller or
Covenantor have any liability for or responsibility to an Indemnitee for any
loss of profits, incidental or consequential damages based upon this Agreement
or such party's performance hereunder.
9.01A The Buyer and the Seller waive compliance with provisions of any
applicable bulk sales laws for the protection of creditors, and the Seller
agrees to indemnify and hold the Buyer harmless from, and to reimburse the Buyer
for, any loss, cost expense, liability or damage (including reasonable counsel
fees, disbursements and expenses) which the Buyer suffers or incurs by virtue of
non-compliance with such laws.
9.02 Scope of Indemnification - Buyer. In the event that the transactions
provided for in this Agreement are completed and it is subsequently determined
that the Seller or any agent, employee, affiliate, successor or nominee of the
Seller, or any of the officers, directors, shareholders, subsidiaries,
affiliates, employees and agents of any of the aforesaid (collectively the
"Indemnified Parties") has or is subject to any loss, damage, liability,
deficiency, claim, cost, recovery, expense (including interest
21
penalty and reasonable legal fees), assessment or reassessment (collectively the
"Claims") arising from (i) the incorrectness, failure, non-compliance or other
breach of any representation, warranty or covenant made by the Buyer prior to
the Time of Closing or (ii) if any of the employees of the Business are employed
by the Buyer subsequent to the Closing Date, all wages, salaries, bonuses,
severance pay, termination pay, vacation pay, pension and other similar
entitlements relating to any period after the Closing Date., then, unless
otherwise expressly provided in this Agreement, the Buyer, to the extent that
the Indemnified Parties did not contribute to the Claims, agrees to indemnify
and save harmless the Indemnified Parties for the amount of such Claims up to
and not to exceed the amount of the Purchase Price. Any claim against the Buyer
under this section shall be in writing and shall be made within the applicable
limitation period provided at law in respect of such claim. In no event shall
Buyer has any liability for or responsibility to an Indemnitee for any loss of
profits, incidental or consequential damages based upon this Agreement or such
party's performance hereunder.
9.03 Notice to Indemnifying Party. The Indemnified Parties shall forthwith
notify the Buyer or the Seller and the Covenantor, as appropriate, of any
liability or claim for which it/they may be liable hereunder promptly after the
Indemnified Parties receive notice thereof and a representative appointed by the
notified party(ies) shall have the right to participate in any negotiations with
respect thereto. The notified party(ies) shall at all times have the right, at
their joint sole expense, to dispute and contest any liability to, or claim
asserted by, any person other than the Indemnified Parties for which the
notified party(ies) may be liable hereunder. The Indemnified Parties shall fully
co-operate with the notified party(ies) and their counsel in any proceedings
with respect to any such liability.
9.04 Events Prior to Closing. In the event the transactions provided for in this
Agreement are completed and it is subsequently determined that and one or more
of the Indemnified Parties has or is subject to any Claims which arise, result
from or relate to, any circumstance in relation to the Business attributable to
events prior to the Time of Closing, unless otherwise expressly provided in this
Agreement, other than any circumstance disclosed in this Agreement, then the
Seller and the Covenantor, jointly and severally, agree to indemnify and save
harmless the Indemnified Parties under Section 9.01, to the extent that the
Indemnified Parties did not contribute to the Claims on demand for the amount of
such Claim. Any claim against the Seller or the Covenantor under this subsection
shall be in writing and shall be made within the applicable limitation period
provided at law in respect of such claim.
9.05 Events After Closing. In the event the transactions provided for in this
Agreement are completed and it is subsequently determined that and one or more
of the Indemnified Parties has or is subject to any Claims which arise, result
from or relate to, any circumstance in relation to the Business attributable to
events after the Time of Closing, unless otherwise expressly provided in this
Agreement, other than any circumstance disclosed in this Agreement, then the
Buyer agrees to indemnify and save harmless the Indemnified Parties under
Section 9.02, to the extent that the Indemnified Parties did not contribute to
the Claims on demand for the amount of such Claim. Any claim against the Seller
or the Covenantor
22
under this subsection shall be in writing and shall be made within the
applicable limitation period provided at law in respect of such claim.
9.04 Litigation. The Seller and the Covenantor hereby, jointly and severally,
irrevocably and unconditionally, agree to indemnify and save harmless each of
the Indemnified Parties from and against any and all Claims incurred in
connection with the pending and threatened litigation disclosed in Schedule C.
The Seller and the Covenantor agree to defend diligently such litigation through
counsel to be agreed upon by Buyer and Seller, and to advise and keep the Buyer
informed of all material developments relating thereto and that they will not
settle or otherwise compromise any such action without the consent of the Buyer
if such compromise or settlement would result in a liability to any Indemnified
Party under this section.
9.05 Payment by the Buyer. In the event that one or both of the Seller and the
Covenantor fails to make any uncontested payment required to be made under this
Article, then the Buyer shall be entitled to notify the Seller that it intends
to make such payment out of the amount payable to the Seller in respect of the
Balance and, not less than ten (10) days after such notice is given, the Buyer
shall be entitled to make such payment out of such amount payable to the Seller
and any such payment by the Buyer shall reduce the Balance. In the event that
none of the Purchase Price remains payable to the Seller from the Buyer at such
time, the Buyer shall be entitled to make such payment and to set off the amount
of such payment against any other amount which may be or become due from the
Buyer to the Seller, however arising, notwithstanding that such indebtedness
might have arisen from a different transaction. If Seller and/or Covenantor
contest any such payment, Buyer shall not make such payment by reducing the
Balance unless the Buyer has obtained an uncontested and incontestable judgment
against the Seller for the amount of the payment.
9.06 Survival of Indemnities. The terms of this Article 9 shall survive the
Closing Date or termination of this Agreement for whatever reason
ARTICLE 10 - AUDIT RIGHTS
10.1 Audits: Upon the written request of Seller and/or Covenantor and not more
than once in each Calendar Year, within three (3) years after the Closing Date,
Buyer shall permit an independent certified public accounting firm selected by
Seller and/or Covenantor and reasonably acceptable to Buyer, to have access
during normal business hours to such of the records of Buyer and its affiliates
as may be reasonably necessary to verify the accuracy of the reports and
payments Section 2.03 above. The accounting firm shall disclose to Seller and/or
Covenantor only whether the reports are correct or incorrect and the specific
details concerning any discrepancies, and such firm shall not otherwise disclose
Buyer's Confidential Information to them. No other information shall be provided
to them.
23
10.02 Costs of Audit. Seller and/or Covenantor shall bear the full cost of such
audit, unless such audit reveals an underpayment by Buyer of more than five
percent (5%) of the payment actually due to Seller for the audited period. In
such case, Buyer shall bear the full cost of such audit and shall pay any
additional payments due to Seller plus interest at 4% over the Prime Rate from
the date originally due until paid within thirty (30) days of the date on which
the accounting firm's written report is delivered to Buyer. The terms of this
Article 10 shall survive the Closing Date or termination of this Agreement for
whatever reason.
ARTICLE 11 - GENERAL CONTRACT PROVISIONS
11.01 Notices. All notices, requests, demands or other communications required
or desired to be given or made by one party to another shall be given in writing
by personal delivery or prepaid registered mail or by facsimile transmission or
other means of instantaneous transmission in regular commercial usage at such
time, verified by a transmission report, as follows:
to the Seller: Xxxxxxx Xxxxx Enterprises, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxx of America
Attn: Xxxxxxx Xxxxx
with a copy to: BusinessCounsel
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Xxxxxx of America
Attn: Xxxxxxx X. Xxxx
to the Buyer: Magic Lantern Communications Ltd.
00 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx
Attention: Xxxx Xxxxxxxx
with a copy to: Xxxxxxxx Xxxxx Sosnovitch LLP
Barristers and Solicitors
0 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
00
X0X 0X0
Attention: Xxxxx Xxxxxxxxx
to the Covenantor: Xxxxxxx Xxxxx.
0000 Xxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxx of America
with a copy to: BusinessCounsel
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Xxxxxx of America
Attn: Xxxxxxx X. Xxxx
or at such other address as may be given by any of them to the others. Any
notice or other communication so given or made shall be conclusively deemed to
have been given and received when delivered personally, if delivered personally,
provided that if it is delivered on a day which is not a Business Day then the
notice or communication shall be deemed to have been given and received on the
next Business Day following such date, or on the fifth (5th) Business Day
following the date of mailing, if mailed by prepaid registered mail, except in
the event of disruption of mail services in which event any notice shall be
delivered personally.
11.02 Expense s. The expenses incurred by each of the parties in connection with
the negotiation of this Agreement and the completion of the transactions
provided for in this Agreement, including, except as otherwise provided in this
Agreement, the fees of their respective accountants and solicitors in connection
with such transactions, shall be borne by such party.
11.03 Time of the Essence. Time is of the essence of this Agreement and every
part of this Agreement and no extension or variation of this Agreement shall
operate as a waiver of this provision.
11.04 Governing Law. This Agreement and any of the agreements required to be
executed pursuant to the provisions of this Agreement shall be construed in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Illinois and of the United States of America applicable thereto.
The parties submit to the jurisdiction of the courts of: (1) the Province of
Ontario if the Seller initiates any legal action against the Buyer arising out
of this Agreement, excepting any action based on the Buyer's alleged default of
a Promissory Note delivered to the Seller under sections 2.08 and 6.01(d); or
(2) the State of Illinois if the Buyer initiates any legal action against the
Seller arising out of this Agreement.
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11.05 Severability. If any of the provisions contained in this Agreement are,
for any reason, held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained in this Agreement unless the deletion of such provision or provisions
would result in such a material change as to cause the completion of the
transactions contemplated in this Agreement to be unreasonable.
11.06 Further Assurances. The parties covenant and agree to execute such further
and other documents and undertake such other actions as may be reasonably
required to give effect to the terms and intent of the transactions contemplated
in this Agreement.
11.07 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties and delivered to each of the other parties.
11.08 Enurement. This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective heirs, administrators, executors,
successors and permitted assigns, provided that the rights of any party hereto
may not be assigned without the prior written consent of all other parties
hereto.
11.09 Time Periods. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date which is the reference day in calculating such period shall be
excluded.
11.10 Entire Agreement. The parties acknowledge and agree that this Agreement
constitutes their entire agreement and understanding relating to the subject
matter of this Agreement. As such, the Agreement supersedes all previous
communications, proposals, representations and agreements, whether oral or
written, relating to the subject matter of this Agreement. This Agreement may
not be amended, supplemented, or otherwise modified except by an instrument in
writing signed by both parties.
IN WITNESS WHEREOF the parties hereto have executed this Agreement, by the
fixation hereto of their corporate seals, attested to by the hand of their duly
authorized signing officer or by the setting hereunto of his hand and seal, as
the case may be, as of the date first above written.
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
............................. )
_______________________(Seal)
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Witness XXXXXXX XXXXX
XXXXXXX XXXXX ENTERPRISES, INC.
Per: /s/ Xxxxxxx Xxxxx c/s
-----------------
Xxxxxxx Xxxxx
I have authority to bind the corporation.
MAGIC LANTERN COMMUNICATIONS LTD.
Per: /s/ Xxxxxxx Xxxxxxxx c/s
--------------------
Xxxxxxx Xxxxxxxx
I have authority to bind the corporation.
27
SCHEDULE "A" - LIST OF ASSETS
28
SCHEDULE "B" - LIST OF MASTER VIDEOTAPES
29
SCHEDULE "C" - DISCLOSURES
30
SCHEDULE "D" - U.S. INCOME TAX RETURNS
31
SCHEDULE "E" - PROMISSORY NOTE
32
SCHEDULE "F" - LIST OF AGREEMENTS
