STOCK PURCHASE AGREEMENT
Agreement (the "Agreement") made as of the 3rd day of July, 1996 by and
among Lifeline Systems (Canada), Inc., an Ontario corporation with its principal
office at ___________, Ontario (the "Buyer"), and CareTel, Inc., an Ontario
corporation with its principal office at 00 Xxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxx
Xxxx, Xxxxxxx X0X 0X0 (the "Company"), and the Stockholders listed on Schedule 1
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attached hereto (individually, a "Stockholder" and collectively, the
"Stockholders"), who own all of the issued and outstanding capital stock of the
Company.
Preliminary Statement
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1. Each of the Stockholders owns the number of the issued and outstanding
Class A Shares and Common Shares of the Company set forth opposite his name on
Schedule 1 attached hereto, which shares in the aggregate represent all of the
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issued and outstanding shares of capital stock of the Company (other than 2,100
Common Shares held by the Buyer). For purposes of this Agreement, all
references to "Shares" shall mean all of the Class A Shares and Common Shares of
the Company.
2. The Buyer desires to purchase, and the Stockholders desire to sell, the
Shares for the consideration set forth below, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares.
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1.01 Purchase of the Shares from the Stockholders. Subject to and
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upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each Stockholder
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from each Stockholder, all the Shares owned
by such Stockholder, as set forth opposite such Stockholder's name on Schedule 1
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attached hereto. At the Closing each Stockholder shall deliver to the Buyer
certificates evidencing the Shares owned by such Stockholder duly endorsed in
blank or with stock powers duly executed by such Stockholder, or Declaration of
Loss and Indemnities in favor of the Company in respect of any lost share
certificates, in the form of Exhibit 1 attached hereto.
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1.02 Further Assurances. At any time and from time to time after the
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Closing, at the Buyer's request and without further consideration, each of the
Stockholders shall promptly execute and deliver such instruments of sale,
transfer,
conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, more effectively to transfer, convey
and assign to the Buyer, and to confirm the Buyer's title to, all of the Shares
owned by such Stockholder, to assist the Buyer in exercising all rights with
respect to the Company and to carry out the purpose and intent of this
Agreement.
1.03 Purchase Price for the Shares.
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(a) The purchase price to be paid by the Buyer for the Shares
shall be an amount (the "Cash Purchase Price") equal to One Million Three
Hundred and Eighty-Five Thousand Canadian Dollars (Cdn $1,385,000), less
$600,5421.18, representing the amount of all outstanding shareholders'
debentures, bank indebtedness and all other indebtedness of the Company for
borrowed money, including all prepayment penalties and accrued interest, if any,
payable as a result of the payment in full of such debentures, bank or other
indebtedness at the Closing (collectively, but specifically excluding the
liability (approximately $40,000) in respect of the marketing services fee
payable to Extendicare (Canada) Inc., the "Indebtedness"). The Cash Purchase
Price shall be payable in the manner described in paragraphs (b) and (c) of this
Subsection 1.03.
(b) At the Closing, the Buyer shall deliver to Silver, Xxxxx,
Sosnovitch, in trust for the Stockholders, an amount equal to the Cash Purchase
Price, less $9,083.51, representing twenty-five percent (25%) of the face amount
of the Closing Receivables (as defined below), in cash, by cashier's or
certified check, or by wire transfer of immediately available funds to an
account designated by the Stockholders' Representative, for distribution to the
Stockholders by Silver, Xxxxx, Sosnovitch in the amounts set forth opposite each
such Stockholder's name on Schedule 1 attached hereto. The amount of cash paid
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by the Buyer at the Closing shall be further reduced by the Cdn $75,000 deposit
paid by the Buyer, which shall be applied against the Cash Purchase Price. For
the purposes hereof, "Closing Receivables" shall mean the accounts receivable of
the Company as of the Closing Date, as certified in writing to the Buyer by
Xxxxxxx Xxxxxxxx, on behalf of the Stockholders.
(c) Following the Closing, the Stockholders shall be entitled to
additional payments of the Cash Purchase Price solely in accordance with the
provisions of this paragraph. Any collections on account of the Closing
Receivables shall be for the account of the Company until the Company has
collected, on account thereof, an amount equal to seventy-five percent (75%) of
the aggregate amount of the Closing Receivables. Thereafter, any collections on
the Closing Receivables shall be for the account of the Stockholders, and shall
be paid to the Stockholders' Representative for distribution to the Stockholders
by the Stockholders' Representative on or before the
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15th day of the calendar month following the calendar month in which such amount
is received by the Company.
The Company shall have no obligation to make any efforts to collect any of the
Accounts Receivable. In the event that any payment received by the Company is
remitted by a customer which is indebted under both a Closing Receivable and an
account receivable arising out of the sale of inventory or services in the
ordinary course of business after the Closing Date (a "New Receivable"), such
payments shall first be applied to the Closing Receivable due from such customer
and the balance remaining after payment in full of all Closing Receivables due
from such customer shall be applied to the New Receivable; provided, however,
that (i) with respect to any Closing Receivable being contested or disputed by
the payor thereof, no portion of the amount in dispute shall be deemed to have
been collected by the Company in respect of the Closing Receivable due from such
customer (unless otherwise directed by such customer) until all amounts owed by
such customer to the Company for New Receivables have been paid or such dispute
has been resolved, whichever occurs first, and (ii) the foregoing priorities
shall not apply to sums received by the Company which are specifically
identified by the customer as being tendered in payment of a New Receivable.
(d) Any balance (or overdraft) in the Company's bank account as
of June 30, 1996, after reconciliation to the bank statement, shall be for the
benefit of (or the obligation of) the Sellers, and payment shall be made by the
Company to the Stockholders' Representative, or by the Sellers (jointly and
severally) to the Company, as the case may be, within five (5) days of
reconciliation. Any cash generated by the Company after June 30, 1996 shall be
for the benefit of the Company, and shall not be distributed to the Sellers.
1.04 Stockholders' Representative.
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(a) In order to efficiently administer (i) the waiver of any
condition to the obligations of the Stockholders to consummate the transactions
contemplated hereby, and (ii) the defense and/or settlement of any claims for
which the Stockholders may be required to indemnify the Buyer or the Company
pursuant to Section 7 hereof, the Stockholders hereby designate Xxxxxxx Xxxxxxxx
as their representative (the "Stockholders' Representative").
(b) The Stockholders hereby authorize the Stockholders'
Representative (i) to take all action necessary in connection with the waiver of
any condition to the obligations of the Stockholders to consummate the
transactions contemplated hereby, or the defense and/or settlement of any claims
for which the Stockholders may be required to indemnify the Buyer or the Company
pursuant to
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Section 7 hereof, (ii) to give and receive all notices required to
be given under the Agreement, and (iii) to take any and all additional action as
is contemplated to be taken by or on behalf of the Stockholders by the terms of
this Agreement.
(c) In the event that the Stockholders' Representative dies,
becomes unable to perform his responsibilities hereunder or resigns from such
position, Stockholders holding, prior to the Closing, a majority of the Shares
as set forth on Schedule 1 attached hereto shall select another representative
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to fill such vacancy and such substituted representative shall be deemed to be
the Stockholders' Representative for all purposes of this Agreement.
(d) All decisions and actions by the Stockholders'
Representative, including, without limitation, any agreement between the
Stockholders' Representative and the Buyer relating to the defense or settlement
of any claims for which the Stockholders may be required to indemnify the Buyer
and/or the Company pursuant to Section 7 hereof, shall be binding upon all of
the Stockholders, and no Stockholder shall have the right to object, dissent,
protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
(i) the Buyer shall be able to rely conclusively on the instructions and
decisions of the Stockholders' Representative as to the settlement of any claims
for indemnification by the Buyer or the Company pursuant to Section 7 hereof or
any other actions required to be taken by the Stockholders' Representative
hereunder, and no party hereunder shall have any cause of action against the
Buyer for any action taken by the Buyer in reliance upon the instructions or
decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders and
no Stockholder shall have any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by the
Stockholders' Representative under this Agreement, except for fraud or willful
breach of this Agreement by the Stockholders' Representative;
(iii) the provisions of this Subsection 1.04 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Stockholder may have in
connection with the transactions contemplated by this Agreement;
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(iv) remedies available at law for any breach of the provisions of this
Subsection 1.04 are inadequate; therefore, the Buyer and the Company shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving damages if either the Buyer or the Company brings an action to enforce
the provisions of this Subsection 1.04; and
(v) the provisions of this Subsection 1.04 shall be binding upon the
executors, heirs, legal representatives and successors of each Stockholder, and
any references in this Agreement to a Stockholder or the Stockholders shall mean
and include the successors to the Stockholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
(f) All fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders.
1.05 Closing. The Closing shall take place at the offices of Silver,
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Xxxxx, Sosnovitch at 2:00 p.m., Toronto Time, on July 3, 1996 or at such other
place, time or date as may be mutually agreed upon in writing by the parties.
The transfer of the Shares by the Stockholders to the Buyer shall be deemed to
occur at the time of Closing.
1.06 Payment of Indebtedness. At the Closing, the Buyer shall
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contribute or loan to the Company an amount equal to the Indebtedness, and the
company shall repay the Indebtedness in full.
2. Representations of the Stockholders Regarding the Shares.
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Each Stockholder severally represents and warrants to the Buyer as
follows:
(a) Such Stockholder has good and marketable title to the Shares
which are to be transferred to the Buyer by such Stockholder pursuant hereto,
free and clear of any and all covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options and adverse claims or rights
whatsoever, except as disclosed on Schedule 1 hereto. Schedule 1 attached
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hereto sets forth a true and correct description of all Shares owned by such
Stockholder.
(b) Such Stockholder has the full right, power and authority to
enter into this Agreement and to transfer, convey and sell to the Buyer at the
Closing the Shares to be sold by such Stockholder hereunder and, upon
consummation of the purchase contemplated hereby, the Buyer will acquire from
such Stockholder good and marketable title to such Shares, free and clear of all
covenants, conditions, restrictions,
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voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever.
(c) Such Stockholder is not a party to, subject to or bound by
any agreement or other restriction or any judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body which would prevent
the execution or delivery of this Agreement by such Stockholder or the transfer,
conveyance and sale of the Shares to be sold by such Stockholder to the Buyer
pursuant to the terms hereof.
(d) Except as set forth in Section 9 hereof, no broker or finder
has acted for such Stockholder in connection with this Agreement or the
transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder's fee or other commissions in respect of such transactions
based upon agreements, arrangements or understandings made by or on behalf of
such Stockholder.
3. Representations of Xxxxxxx Xxxxxxxx and the Company Regarding the
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Company.
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Each of Xxxxxxx Xxxxxxxx ("Xxxxxxxx") and the Company, jointly and
severally, represent and warrant to the Buyer that:
3.01 Organization. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of Ontario, and has all
requisite power and authority (corporate and other) to own its properties, to
carry on its business as now being conducted, to executed and deliver this
Agreement and the agreements contemplated herein, and to consummate the
transactions contemplated hereby and thereby. To Wechsler's knowledge, the
Company is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification. Certified copies of the Articles of
Incorporation and Bylaws of the Company, as amended to date, have been
previously delivered to the Buyer, are complete and correct, and no amendments
have been made thereto or have been authorized since the date thereof.
3.02 Capitalization of the Company.
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The Company's issued and outstanding capital stock consists of
6,468.75 Class A Shares and 8,531.25 Common Shares, which (other than 2,100
Common Shares held by the Buyer) are held of record and beneficially by the
Stockholders as set forth on Schedule 1. All such issued and outstanding
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Shares have been and on the Closing Date will be duly and validly issued and
are, or will be on such date, fully paid and non-assessable. Except as set forth
in Schedule 1 attached hereto, there are not, and on the Closing Date there will
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not be, outstanding (i) any options, warrants or other
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rights to purchase from the Company any capital stock of the Company; (ii) any
securities convertible into or exchangeable for shares of such stock; or (iii)
any other commitments of any kind for the issuance of additional shares of
capital stock or options, warrants or other securities of the Company.
3.03 Subsidiaries. The Company has no equity interest in any
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corporation, partnership, joint venture or any other entity.
3.04 Authorization. The execution and delivery by the Company of this
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Agreement and the agreements provided for herein, and the consummation by the
Company of all transactions contemplated hereunder and thereunder by the
Company, have been duly authorized by all requisite corporate action. This
Agreement has been duly executed by the Company and the Stockholders. This
Agreement and all other agreements and obligations entered into and undertaken
in connection with the transactions contemplated hereby to which the Company or
any of the Stockholders is a party constitute the valid and legally binding
obligations of the Company and the Stockholders, enforceable against them in
accordance with their respective terms. The execution, delivery and performance
by the Company and the Stockholders of this Agreement and the agreements
provided for herein, and the consummation by the Company and the Stockholders of
the transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Company or any of the
Stockholders; (b) violate the provisions of the Articles of Incorporation or
Bylaws of the Company; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator; or (d) conflict with or result in the
breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of the Company pursuant to,
any indenture, mortgage, deed of trust or other instrument or agreement to which
the Company is a party or by which the Company or any of its properties is or
may be bound. Schedule 3.04 attached hereto sets forth a true, correct and
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complete list of all consents and approvals of third parties that are required
in connection with the consummation by the Company of the transactions
contemplated by this Agreement.
3.05 Financial Statements.
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(a) The Company has previously delivered to the Buyer the
unaudited balance sheet of the Company as of March 31, 1996 (the "Current
Balance Sheet") and the related statements of income, shareholders' equity,
retained earnings and changes in financial condition of the Company for the
fiscal year then ended (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied consistently with
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past practices and have been certified by the Company's chief financial officer.
The date of the Current Balance Sheet is hereinafter referred to as the "Balance
Sheet Date."
(b) Except as set forth on Schedule 3.05, the Financial
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Statements fairly present, as of the date thereof, the financial condition,
retained earnings, assets and liabilities of the Company and the results of
operations of the Company's business for the period indicated. With respect to
contracts and commitments for the sale of goods or the provision of services by
the Company, the Financial Statements contain and reflect adequate reserves,
which are consistent with previous reserves taken, for all reasonable
anticipated material losses and costs and expenses. The amounts shown as accrued
for current and deferred income and other taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, provincial and
local income taxes, interest, penalties, assessments or deficiencies applicable
to the Company, whether disputed or not, for the applicable period then ended
and periods prior thereto.
3.06 Absence of Undisclosed Liabilities. Except as and to the
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extent (a) reflected and reserved against in the Current Balance Sheet, (b) set
forth on Schedule 3.06 attached hereto, or (c) incurred in the ordinary course
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of business after the date of the Current Balance Sheet and not material in
amount, either individually or in the aggregate, the Company has no liability or
obligation, secured or unsecured, whether accrued, absolute or contingent, which
is material to the condition (financial or otherwise) of the assets, properties,
business or prospects of the Company. The Indebtedness is owed to the persons
listed on Schedule 3.06, in the amounts set forth opposite each such person's
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name listed on Schedule 3.06.
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3.07 Litigation. Except as set forth on Schedule 3.07 attached
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hereto (a) there is no action, suit or proceeding to which the Company is a
party (either as a plaintiff or defendant) pending or, to the best knowledge of
Wechsler, threatened before any court or governmental agency, authority, body or
arbitrator and, to the best knowledge of Wechsler, there is no basis for any
such action, suit or proceeding; (b) neither the Company, nor any officer,
director or employee of the Company, has been permanently or temporarily
enjoined by any order, judgment or decree of any court or any governmental
agency, authority or body from engaging in or continuing any conduct or practice
in connection with the business, assets, or properties of the Company; and (c)
there is not in existence on the date hereof any order, judgment or decree of
any court, tribunal or agency enjoining or requiring the Company to take any
action of any kind with respect to its business, assets or properties.
3.08 Insurance. Schedule 3.08 attached hereto sets forth a true,
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correct and complete list of all fire, theft, casualty, general liability,
workers compensation, business interruption, environmental impairment, product
liability, automobile and
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other insurance policies maintained by the Company and of all life insurance
policies maintained on the lives of any of their employees (collectively, the
"Insurance Policies") and all claims made under such Insurance Policies since
January 1, 1990. The Insurance Policies are in full force and effect and are in
amounts of a nature which, to the best of Wechsler's knowledge and belief, are
adequate and customary for the Company's business. All premiums due on the
Insurance Policies or renewals thereof have been paid, and there is no default
under the Insurance Policies. Except as set forth on Schedule 3.08, the Company
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has no outstanding claims or any dispute with any insurance carrier
regarding claims, settlement or premiums and the Company has not failed to give
any notice or present any claim under any Insurance Policy in due and timely
fashion.
3.09 Personal Property. Schedule 3.09 attached hereto sets forth (i)
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a true, correct and complete list of all items of tangible personal property
owned by the Company as of the date hereof; or not owned by the Company but in
the possession of or used or useful in the business of the Company
(collectively, the "Personal Property"). Except as disclosed in Schedule 3.09:
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(a) the Company will, upon the payment of the Indebtedness, have
good and marketable title to each item of Personal Property free and clear of
all liens, leases, encumbrances, claims under bailment and storage agreement,
equities, conditional sales contracts, security interests, charges and
restrictions, except for liens, if any, for personal property taxes not due; and
(b) the Personal Property is in good operating condition and
repair, normal wear and tear excepted, is currently used by the Company in the
ordinary course of its business and normal maintenance has been consistently
performed with respect to the Personal Property.
3.10 Intangible Property.
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Schedule 3.10 attached hereto sets forth: (i) a true, correct
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and complete list of all items of intangible property owned by, or used or
useful in connection with the business of, the Company, including, but not
limited to, trade secrets, know-how, any other confidential information of the
Company; United States, Canadian and foreign patents, trade names, trademarks,
trade name and trademark registrations; copyrights and copyright registrations,
and applications for any of the foregoing (the "Intangible Property"); and (ii)
a true, correct and complete list of all licenses or similar agreements or
arrangements to which the Company is a party, either as licensee or licensor,
with respect to the Intangible Property. Except as otherwise disclosed in
Schedule 3.10:
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(a) to Wechsler's knowledge, the Company is the sole and
exclusive owner of all right, title and interest in and to the Intangible
Property and all designs, permits, labels and packages used on or in connection
therewith, free and clear of all liens, security interests, charges,
encumbrances, equities or other adverse claims;
(b) to Wechsler's knowledge, the Company has the right and
authority to use, and to continue to use after the Closing, the Intangible
Property in connection with the conduct of its business in the manner presently
conducted, and such use or continuing use does not and will not conflict with,
infringe upon or violate any rights of any other person, corporation or entity;
(c) there are no outstanding, nor to the best knowledge of
Wechsler, any threatened disputes or other disagreements with respect to any
licenses or similar agreements or arrangements described in Schedule 3.10 or
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with respect to infringement by a third party of any of the Intangible Property;
(d) no officer, director, stockholder or employee of the Company,
nor any spouse, child or other relative or affiliate thereof, owns directly or
indirectly, in whole or in part, any of the Intangible Property; and
(e) Neither the Company nor Wechsler has any knowledge that any
third party is infringing, or will threaten to infringe, upon or otherwise
violate any of the Intangible Property in which the Company has ownership
rights.
3.11 Leases. Schedule 3.11 attached hereto sets forth (a) a true,
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correct and complete list as of the date hereof of all leases of real property,
to which the Company is a party (collectively, the "Leases"). True, correct and
complete copies of all Leases and all amendments, modifications and supplemental
agreements thereto have previously been delivered by the Stockholders or the
Company to the Buyer. The Leases are in full force and effect and are binding
and enforceable against each of the parties thereto in accordance with their
respective terms. No party to any Lease has sent written notice to the other
claiming that such party is in default thereunder and that such default remains
uncured. Except as set forth on Schedule 3.11 no construction, alteration or
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other leasehold improvement work with respect to any of the Leases remains to be
paid for or to be performed by the Company. The Financial Statements contain
adequate reserves to provide for the restoration of the property subject to the
Leases at the end of the respective Lease terms, to the extent required by the
Leases.
3.12 Real Estate. The Company owns no real property.
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3.13 Inventory. The inventory of the Company as of the date hereof
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(the "Inventory") is not materially different in quality or amount than the
inventory of the Company reflected on the Current Balance Sheet. The Inventory
consists of items of a quality and quantity which are usable or saleable without
discount in the ordinary course of the business conducted by the Company. The
value of all items of obsolete materials and of materials of below standard
quality have been written down to realizable market value and the values at
which such inventory is carried reflect the normal Inventory valuation policy of
the Company of stating Inventory at the lower of cost or market value in
accordance with generally accepted accounting principles.
3.14 Accounts Receivable. Schedule 3.14 attached hereto sets forth a
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true, correct and complete list of the accounts and notes receivable of the
Company (the "Accounts Receivable"), including the aging thereof as of the date
hereof. All Accounts Receivable arose out of the sales of inventory or services
in the ordinary course of business and are collectible in the face value thereof
in the ordinary course of business using normal collection procedure, net of the
reserve for doubtful accounts set forth thereon, which reserve is adequate and
was calculated in accordance with generally accepted accounting principles
consistently applied.
3.15 Tax Matters.
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(a) Except as set forth on Schedule 3.15 attached hereto:
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(i) Within the times and in the manner prescribed by law, the Company
has filed all federal, provincial and local tax returns and all tax returns for
foreign countries, provinces and other governing bodies having jurisdiction to
levy taxes upon them which are required to be filed;
(ii) The Company has paid all taxes, interest, penalties, assessments and
deficiencies which have become due or which have been claimed to be due,
including without limitation income, franchise, real estate, sales, value added
and withholding taxes and other employee benefits, taxes and imports;
(iii) To the best knowledge of Wechsler, all tax returns filed by the
Company for the taxable years ending March 31, 1993 through March 31, 1996
constitute complete and accurate representations of the respective tax
liabilities of the Company for such years and accurately set forth all items (to
the extent required to be included or reflected in such returns) relevant to
their future tax liabilities, including the tax bases of their properties and
assets;
(iv) The Company has not waived or extended any applicable statute of
limitations relating to the assessment of federal, provincial, local or foreign
taxes; and
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(v) No examinations of the federal, provincial, local or foreign tax
returns of the Company is currently in progress nor, to the best knowledge of
Wechsler, threatened and no deficiencies have been assessed against the Company
as a result of any audit by any taxing authority and no such deficiency has been
proposed or threatened.
(b) Schedule 3.15 attached hereto sets forth those taxable years
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for which the tax returns of the Company have been reviewed or audited by any
taxing authorities and those tax years for which said tax returns have received
clearances or other indications of approval from applicable taxing authorities.
To the best knowledge of Wechsler, no issue or issues have been raised in
connection with any prior or pending review or audit of said tax returns which
Wechsler reasonably believes may be expected to be raised in the future by such
taxing authorities in connection with the audit or review of the tax returns of
the Company.
3.16 Books and Records. The general ledgers and books of
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account of the Company and all tax returns filed by the Company are in all
material respects complete and correct and to the best of Wechsler's knowledge
have been maintained in accordance with good business practice and in accordance
with all applicable procedures required by laws and regulations.
3.17 Contracts and Commitments.
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(a) Schedule 3.17 attached hereto contains a true, complete
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and correct list and description of all material agreements or contracts
(written or oral) entered into by the Company (the "Contracts"). In addition,
Schedule 3.17 contains a true, complete and correct list of all agreements of
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the Company to provide services to any person not in the area of personal
emergency response monitoring services.
(b) Except as set forth on Schedule 3.17:
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(i) each Contract is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and the Company
does not have any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
(ii) the Company has fulfilled all material obligations required pursuant
to the Contracts to have been performed by the Company on its part prior to the
date hereof, and the Company has no reason to believe that it will not be able
to fulfill, when due, all of its obligations under the Contracts which remain to
be performed after the date hereof;
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(iii) to the best of Wechsler's knowledge, the Company is not in breach of
or default under any Contract, and no event has occurred which with the passage
of time or giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto;
(iv) to the best knowledge of Wechsler, there is no existing breach or
default by any other party to any Contract, and no event has occurred which with
the passage of time or giving of notice or both would constitute a default by
such other party, result in a loss of rights or result in the creation of any
lien, charge or encumbrance thereunder or pursuant thereto;
(v) there are not and, since the Company's inception have not been, any
claims of a non-routine nature relating to the Company by customers of the
Company and under any warranties, whether express or implied;
(vi) the Company is not restricted by any Contract from carrying on its
business anywhere in the world.
3.18 Compliance with Agreements and Laws. To the best of
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Wechsler's knowledge, the Company has all requisite material licenses, permits
and certificates, including environmental, health and safety permits, from
governmental authorities necessary to conduct its business and own and operate
its assets (collectively, the "Permits"). Schedule 3.18 attached hereto sets
-------------
forth a true, correct and complete list of all such Permits. The Company has not
violated, and on the date hereof does not violate, in any material respect, any
laws, regulations or orders, the enforcement of which would have a material
adverse effect on the results of operations, condition (financial or otherwise),
assets, properties, business or prospects of the Company or the reputation of
the Buyer.
3.19 Employee Relations.
------------------
(a) To the best of Wechsler's knowledge, the Company is in
compliance with all laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practice, and there are no arrears in the payment of wages or
social security taxes.
(b) Except as set forth on Schedule 3.19 attached hereto, the
-------------
Company has no continuing obligation for health, life, medical
insurance or other similar fringe benefits to any former employee of the
Company.
-13-
(c) Schedule 3.19 sets forth a true, correct and complete list of
-------------
the current payroll of the Company, including the job descriptions
and salary or wage rates of each of its employees, showing separately for each
such person who received an annual salary in excess of $25,000 the maximum
amounts paid or payable as salary and, if in excess of $1,000, bonus payments
for the fiscal year ended March 31, 1996.
(d) For purposes of this Subsection 3.19, the term "employee"
shall be construed to include sales agents and other independent contractors who
spend a majority of their working time on the business of the Company.
3.20 Employee Benefit Plans.
-----------------------
(a) Employee Plans. Schedule 3.20 attached hereto contains a
-------------- -------------
true, correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and other similar plans, programs and agreements,
whether reduced to writing or not, relating to the Company's employees (the
"Employee Plans") and, except as set forth on Schedule 3.20 attached hereto, the
-------------
Company has no obligations relating to employee benefits, contingent
or otherwise, past or present, under applicable law or the terms of any Employee
Plan.
(b) Compliance. To the best of Wechsler's knowledge, with
----------
respect to all Employee Plans, the Company and its affiliates are in compliance
with the requirements prescribed by any and all statutes, orders or governmental
rules or regulations currently in effect, applicable to such Employee Plans.
3.21 Absence of Certain Changes or Events.
------------------------------------
(a) Except as set forth on Schedule 3.21 attached hereto, since
-------------
the Balance Sheet Date, the Company has not entered into any transaction (other
than this Agreement) which is not in the usual and ordinary course of business,
and, without limiting the generality of the foregoing, the Company has not:
(i) incurred any material obligation or liability for borrowed money;
(ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than current liabilities reflected in the Current
Balance Sheet;
(iii) mortgaged, pledged or subjected to lien, charge or other encumbrance
any of its properties or assets;
-14-
(iv) sold or purchased, assigned or transferred any of its tangible
assets or cancelled any debts or claims, except for inventory sold and raw
materials purchased in the ordinary course of business;
(v) made any material amendment to or termination of any Contract or
done any act or omitted to do any act which would cause the breach of any
Contract;
(vi) suffered any losses of personal or real property, whether insured or
uninsured, and whether or not in the control of the Company, in excess of Cdn
$10,000 in the aggregate, or waived any rights of any value;
(vii) authorized any declaration or payment of dividends by the Company,
or paid any such dividends, or authorized any transfer of assets of any kind
whatsoever by the Company to any of its stockholders with respect to any shares
of their capital stock;
(viii) authorized or issued recall notices for any of its products or
initiated any safety investigations;
(ix) received notice of any litigation, warranty claim or products
liability claims;
(x) made any material change in the terms, status or funding condition
of any Employee Plan, as defined in Subsection 3.20 hereof;
(xi) engaged any new employee for a salary in excess of Cdn $50,000 per
annum;
(xii) made, or committed to make, any changes in the compensation payable
to any officer, director, employee or agent of the Company, or any bonus payment
or similar arrangements made to or with any of such officers, directors,
employees or agents;
(xiii) incurred any capital expenditure in excess of Cdn $10,000 in any
instance or Cdn $50,000 in the aggregate;
(xiv) made any material alteration in the accounting practices of the
Company; or
(xv) suffered any material adverse change in the consolidated results of
operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Company.
-15-
(b) The Company has no knowledge of any existing or threatened
occurrence, event or development which, as far as can be reasonably foreseen,
could have a material adverse effect on the business, properties, assets,
condition (financial or otherwise) or prospects of the Company.
3.22 Customers; Subscribers. Schedule 3.22 attached hereto sets
---------------------- -------------
forth a true, correct and complete list of the names and addresses of each
customer of the Company as of June 11, 1996. Schedule 3.22 sets forth the total
-------------
number of subscribers of the Company on the date hereof who pay the
Company's normal monthly monitoring rate ("paying subscribers"), which number of
paying subscribers is not fewer than 2,400.
3.23 Warranty and Product Liability Claims. Schedule 3.23 attached
------------------------------------- -------------
hereto contains a true, correct and complete list of all warranty and product
liability claims of a material nature made against the Company from the date of
the Company's inception through the date hereof, the current status of all such
claims and the costs of all actions taken in satisfaction of such claims.
3.24 Prepayments and Deposits. The aggregate amount of prepayments
------------------------
and deposits which have been received by the Company as of the date hereof from
customers for products to be shipped after the Closing Date does not exceed
$10,000 and for services to be performed after the Closing Date does not exceed
$25,000.
3.25 Indebtedness to and from Officers, Directors and Stockholders.
-------------------------------------------------------------
Except as set forth on Schedule 3.25 attached hereto, the Company is not
-------------
indebted, directly or indirectly, to any person who is an officer, director or
stockholder of any of the foregoing entities or any affiliate of any such person
in any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, all of which have been reflected on the
Financial Statements, and no such officer, director, stockholder or affiliate is
indebted to the Company except for advances made to employees of the Company in
the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
3.26 Banking Facilities. Schedule 3.26 attached hereto sets forth a
------------------ -------------
true, correct and complete list of:
(a) each bank, savings and loan or similar financial institution
in which the Company has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box facility, together with
a
-16-
description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
3.27 Powers of Attorney and Suretyships. Except as set forth on
----------------------------------
Schedule 3.27 attached hereto, the Company has no general or special powers of
-------------
attorney outstanding (whether as grantor or grantee thereof) or has any
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
3.28 Conflicts of Interest. Except as set forth on Schedule 3.28
--------------------- -------------
attached hereto, no officer, director or Stockholder of the Company nor, to the
best knowledge of Wechsler, any affiliate of the Company, now has or within the
last three (3) years had, either directly or indirectly:
(a) an equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity which
furnishes or sells or during such period furnished or sold services or products
to the Company, or purchases or during such period purchased from the Company
any goods or services, or otherwise does nor during such period did business
with the Company; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Company is or was a party or under which the Company is
or was obligated or bound or to which its properties may be or may have been
subject other than stock options and other contracts, commitments or agreements
between the Company and such persons in their capacities as employees, officers
or directors of the Company.
3.29 Regulatory Approvals. All consents, approvals, authorizations or
--------------------
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company and which are necessary for the execution
and delivery by the Stockholders and the Company of this Agreement or any
documents to be executed and delivered by the Stockholders or the Company in
connection herewith are set forth on Schedule 3.29 attached hereto and have
-------------
been, or prior to the Closing Date will be, obtained and satisfied.
3.30 Disclosure. The information concerning the Company set forth
----------
in this Agreement, the Exhibits and Schedules attached hereto and any document,
statement or certificate furnished or to be furnished to the Buyer pursuant
hereto, does not and will not contain any untrue statement of a material fact or
omit to state a
-17-
material fact required to be stated herein or therein or necessary to make the
statements and facts contained herein or therein, in light of the circumstances
in which they are made, not false or misleading. The Stockholders and the
Company have disclosed to the Buyer all material facts pertaining to the
transactions contemplated by this Agreement and the Exhibits hereto.
4. Representations of the Buyer.
----------------------------
The Buyer represents and warrants to each Stockholder as follows:
4.01 Organization. The Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of Ontario, and Buyer has the power
and authority to carry on its business as presently being conducted.
4.02 Authorization. The Board of Directors of Buyer has duly
-------------
authorized the execution and delivery of this Agreement and the other
agreements, documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation by Buyer of the transactions contemplated
hereby and thereby. No further corporate or other proceedings on the part of
Buyer are necessary to authorize this Agreement or the other agreements,
documents and instruments to be executed and delivered by Buyer pursuant hereto
or the transactions contemplated hereby or thereby.
4.03 Valid and Binding Agreement. Buyer has the necessary power and
---------------------------
authority to enter into this Agreement and the other agreements, documents and
instruments to be executed and delivered by Buyer pursuant hereto, and to carry
out the transactions contemplated hereby and thereby. When fully executed and
delivered, this Agreement and each of the other agreements, documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute valid and binding agreements of Buyer, enforceable against Buyer in
accordance with their terms.
4.04 No Violation. Neither the execution and delivery of this
------------
Agreement or the other agreements, documents and instruments to be executed and
delivered by Buyer pursuant hereto nor the consummation by Buyer of the
transactions contemplated hereby or thereby (a) will violate any provision of
the Articles of Incorporation or By-Laws of Buyer, each as currently in effect,
or (b) will violate or conflict with any applicable statute, law, ordinance,
rule, regulation, order, judgment or decree.
4.05 Consents; Filings. No registration or filing with, or consent,
-----------------
approval, permit, authorization or action by, any third party (including,
without limitation, any governmental agency, instrumentality, commission,
authority, board or
-18-
body or other person or entity) is required in connection with the execution and
delivery of Buyer of this Agreement or the other agreements, documents and
instruments to be executed and delivered by Buyer pursuant hereto or the
consummation by Buyer of the transactions contemplated hereby or thereby.
4.06 Brokers. Buyer is not obligated to pay, nor has Buyer retained
-------
any broker or finder or other person who is entitled to, any broker's or
finder's fee or any other commission or financial advisory fee based on any
agreement or understanding made by Buyer in connection with the transactions
contemplated hereby.
5. Conditions to Obligations of the Buyer.
--------------------------------------
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer.
5.01 Compliance with Covenants and Obligations. The Stockholders and
-----------------------------------------
the Company shall have performed and complied with all terms, conditions,
covenants, obligations, agreements and restrictions required by this Agreement
to be performed or complied with by each of them prior to or at the Closing
Date.
5.02 Governmental Approvals. All governmental agencies, department,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Stockholders or the Company of the transactions
contemplated by this Agreement and the operation of the business of the Company
by the Buyer shall have consented to, authorized, permitted or approved such
transactions.
5.03 Consent of Lenders, Lessors and Other Third Parties. The
---------------------------------------------------
Stockholders and the Company shall have received all requisite consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Stockholders and the Company to consummate
the transactions contemplated by this Agreement.
5.04 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own the Shares or to own or operate the business of
the Company after the Closing.
-19-
5.05 Opinion of Counsel. The Buyer shall have received an opinion of
------------------
Silver Xxxxx Sosnovitch, counsel to the Stockholders and the Company dated as of
the Closing Date, in form acceptable to the Buyer.
5.06 Update. No material adverse change in the business, prospects,
------
operations or condition of the Company or its assets shall have occurred since
March 31, 1996.
5.07 Employment Contracts. On or prior to the Closing Date, the Buyer
--------------------
shall have executed the employment agreement with Xxxxxxx Xxxxxxxx in form
acceptable to Wechsler and the Buyer.
5.08 Subscriber Base. As of the Closing Date, the Company shall have
---------------
not fewer than 2,400 paying subscribers.
5.09 Closing Deliveries. The Buyer shall have received at or prior
------------------
to the Closing such documents, instruments or certificates as the Buyer may
reasonably request including, without limitation:
(a) the stock certificates representing the Shares duly endorsed
in accordance with Subsection 1.01 of this Agreement or Declarations of Loss and
Indemnities in favor of the company with respect to any lost certificates
(provided that the stock certificates for Ro-Bud Realty Limited shall be
delivered to the Buyer not later than July 10, 1996);
(b) such certificates of the Company's officers and of the
Stockholders and such other documents evidencing satisfaction of the conditions
specified in this Section 5 as the Buyer shall reasonably request;
(c) a certificate of status from the Province of Ontario as to
the legal existence of the Company in Ontario;
(d) certificates of the Secretary of the Company attesting to the
incumbency of the Company's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Subsection 3.01;
(e) where required by the applicable Lease, estoppel certificates
from each lessor from whom the Company leases real or personal property
consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no outstanding
claims against the Company under such Lease;
-20-
(f) appropriate PPSA discharge statements releasing any and all
liens on the assets of the Company (other than security interests registered in
the name of Extendicare Health Services, Inc. in respect of the Extendicare
liability referenced in Section 1.03(a), which will survive the Closing, and
security interests registered in the names of the Toronto-Dominion Bank and the
Business Development Bank of Canada, which will be discharged following the
payment of the Indebtedness).
(g) certificates of appropriate governmental officials in each
province in which the Company is required to qualify to do business as a foreign
corporation as to the due qualification of the Company in each such
jurisdiction;
(h) written resignations of all Company officers and all members
of the Company's Board of Directors;
(i) the original corporate minute books of the Company and all
corporate seals; and
(j) a receipt executed by and the Stockholders' Representative.
6. Conditions to Obligations of the Stockholders.
---------------------------------------------
The obligations of the Stockholders under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholders' Representative, who shall have the power and authority to bind all
of the Stockholders:
6.01 Compliance with Covenants and Obligations. The Buyer shall have
-----------------------------------------
performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
6.02 Corporate Proceedings. All corporate and other proceedings
---------------------
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
6.03 Governmental Approvals. All governmental agencies, departments,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
-21-
6.04 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Stockholders to transfer the Shares.
6.05 Closing Deliveries. The Stockholders shall have received at or
------------------
prior to the Closing such documents, instruments or certificates as the
Stockholder's Representative may reasonably request including, without
limitation:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 6
as the Stockholders' Representative shall reasonably request;
(b) a certificate of status from the Province of Ontario as to
the legal existence of the Buyer in Ontario;
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the Articles of Incorporation and By-
Laws of the Company;
(d) payment of the portion of the Cash Purchase Price required to
be paid at the Closing; and
(e) a receipt executed by the Buyer.
7. Indemnification.
---------------
7.01 Indemnification by Wechsler and the Company.
-------------------------------------------
(I) Wechsler hereby indemnifies and holds harmless the Buyer and the
Company, from and against all claims damages, losses, liabilities, costs and
expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions), net of insurance recoveries (collectively, the "Losses") in
connection with each and all of the following (a "Breach of Warranty");
(a) any material misrepresentation or breach of any
representation or warranty made by Wechsler or the Company in this Agreement;
-22-
(b) any material breach of any covenant, agreement or obligation
of Wechsler or the Company contained in Section 8 below or any other agreement,
instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate
or schedule furnished by Wechsler or the Company pursuant to this Agreement or
in connection with the transactions contemplated by this Agreement;
(d) any understanding of the Closing Receivables for purposes of
Section 1.03 above;
(e) any tax liabilities or tax obligations of the Company arising
on account of the period prior to the Closing Date; and
(f) any claims against, or liabilities or obligations of, the
Company with respect to obligations under Employee Plans arising on account of
the period prior to the Closing Date, or any claims by a Stockholder relating to
the nature or amount of the consideration paid for the Shares.
*Provided that notwithstanding anything to the contrary herein, this indemnity
shall not apply to any matters covered by the indemnities given in Section
7.01(II) by the stockholders other than Wechsler.
(II) Indemnification by the Stockholders. Each of the Stockholders
hereby severally (and not jointly) indemnifies and holds harmless the Buyer and
the Company from and against all losses in connection with each and all of the
following:
(a) any misrepresentation or breach of any representation or
warranty made by such Stockholder in this Agreement;
(b) any breach of any covenant, agreement or obligation of such
Stockholder contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate
or schedule furnished by such Stockholder pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
7.02 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under this Section 7, the Buyer or the Company, as the case may
be, seeking indemnification (the "Indemnified Party"), shall properly notify
Wechsler (in the case of indemnification under Section 7.01(I) above) or the
indemnifying
-23-
Stockholder (in the case of indemnification under Section 7.01(II) above (in
either case, as applicable, the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Subsection 7.03
of this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Indemnifying Party as provided
in Subsection 7.03.
7.03 Defense by the Indemnifying Party. In connection with any claim
---------------------------------
which may give rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party, the
Indemnifying Party, at his or its sole cost and expense, may, upon written
notice to the Indemnified Party, assume the defense of any such claim or legal
proceeding if the Indemnifying Party acknowledges to the Indemnified Party in
writing his or its obligation to indemnify the Indemnified Party with respect to
all elements of such claim. If the Indemnifying Party assumes the defense of any
such claim or legal proceeding, the Indemnifying Party shall select counsel
reasonably acceptable to the Indemnified Party to conduct the defense of such
claims or legal proceedings and at the sole cost and expense of the Indemnifying
Party shall take all steps necessary in the defense or settlement thereof. The
Indemnifying Party shall not consent to a settlement of, or the entry of any
judgment arising from, any such claim or legal proceedings, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom within 30 days after
the date such claim is made: (a) the Indemnified Party may defend against such
claim or litigation in such manner as it may deem appropriate, including, but
not limited to, settling such claim or litigation, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense. If the Indemnifying Party thereafter seeks to question the manner in
which the Indemnified Party defended such third party claim or the amount or
nature of any such settlement, the Indemnifying Party shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settlement such third party claim in a reasonably prudent manner.
-24-
7.04 Payment of Indemnification Obligation. Each of the Stockholders
-------------------------------------
hereby agrees that any claim for indemnification by the Buyer, or the Company
(if the Closing occurs), under this Section 7 or under any other provision of
this Agreement may, at the option of the Buyer or the Company, as the case may
be, be offset against any amount owed to the Stockholders on account of the
collection of the Closing Receivables or pursuant to Section 1.03(d). All
indemnification by any Indemnifying Party hereunder (to the extent not satisfied
in the manner specified in the preceding sentence), and any indemnification by
the Company if the Closing does not occur, shall be effected by payment of cash
or delivery of a cashier's or certified check in the amount of the
indemnification liability.
7.05 Survival of Representations; Claims for Indemnification. All
-------------------------------------------------------
representations and warranties made by Wechsler and the Company in Article 3 of
this Agreement, or in any instrument or document furnished in connection with
this Agreement or the transactions contemplated hereby (other than Section 3.01,
3.02, 3.04 and 3.15, which shall survive until the expiration of all applicable
statutes of limitations), shall survive the Closing and any investigation at any
time made by or on behalf of the Indemnified Party for a period of two years
after the Closing Date. All representations and warranties made by the
Stockholders in Article 2 of this Agreement shall survive until the expiration
of all applicable statute of limitations.
7.06 Notwithstanding anything contained herein to the contrary, other
than in connection with a breach of Section 1.03(d): (i) no Stockholder shall be
liable hereunder for any amount greater than the gross proceeds received by him,
her or it on account of the sale by such person of shares of stock of the
Company to the Buyer, whether pursuant to this Agreement or any other agreement
with the Company; and (ii) Wechsler shall not be liable for any claim under
Section 7.01(I) until the aggregate Losses arising thereunder exceed $20,000, in
which case Wechsler shall be liable for all such Losses, and not just those
exceeding $20,000.
8. Post-Closing Agreements.
-----------------------
The Stockholders agree that from and after the Closing Date:
8.01 Proprietary Information.
-----------------------
(a) Each of the Stockholders and each of their Affiliates shall
hold in confidence and shall use their best efforts to have all officers,
directors and personnel who continue after the Closing to be employed by any
such Stockholder or any Affiliate thereof to hold in confidence all knowledge
and information of a secret or confidential nature with respect to the business
of the Company and not to disclose, publish or make use of the same without the
consent of the Buyer, except to the extent
-25-
that such information shall have become public knowledge other than by breach of
this Agreement by the Stockholders or their Affiliates. For purpose of this
Agreement, an "Affiliate" of a person means a party which is controlling,
controlled by, or under common control with, such person.
(b) If (i) the employment of an officer, director or other
employee of a Stockholder or any Affiliate thereof, to whom secret or
confidential knowledge or information concerning the business of the Company has
been disclosed, is terminated and (ii) such individual is subject to an
obligation to maintain such knowledge or information in confidence after such
termination, the Stockholders shall, upon request by the Buyer, take all
reasonable steps at their expense to enforce such confidentiality obligation in
the event of an actual or threatened breach thereof. Any legal counsel retained
by any such Stockholder in connection with any such enforcement or attempted
enforcement shall be selected by such Stockholder, but shall be subject to the
approval of the Buyer, which approval shall not be unreasonably withheld.
(c) Each Stockholder agrees that the remedy at law for any breach
of this Subsection 8 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Subsection 8.01.
8.02 No Solicitation or Hiring of Former Employees. Except as
---------------------------------------------
provided by law, for a period of six years after the Closing Date, no
Stockholder nor any Affiliate (as defined in Section 8.01 above) thereof shall
(a) solicit any person who was an employee of the Company on the date hereof or
the Closing Date to terminate his employment with the Buyer or any Affiliate
thereof or while employed by the Buyer or any Affiliate of the Buyer, to provide
services to such Stockholder or Affiliate thereof, or (b) hire any person who
was an employee of the Company on the date hereof or on the Closing Date and,
within three months before such hiring, was an employee of the Buyer or any
Affiliate thereof.
8.03 Non-Competition Agreement.
-------------------------
(a) For a period of six years after the Closing Date, no
Stockholder nor any Affiliate thereof shall, directly or indirectly, as an
individual proprietor, partner, stockholder, officer, employee, director, joint
venturer, investor, lender, or in any other capacity whatsoever (other than as
the holder of not more than one percent (1%) of the total outstanding stock of a
publicly held company), except as an officer or employee of the Company,
develop, manufacture, market or sell any product or service which competes with
the present business of the Company, Lifeline Systems, Inc. or the Buyer, which
is the business of selling, renting, installing,
-26-
monitoring and servicing personal and medical emergency response services and
systems, in the United States or Canada or any other country in which the
Company conducted its business during the two years prior to the Closing Date.
It is acknowledged that this covenant is not intended to restrict those
Stockholders who, as of the date hereof, provide consulting services to health
care institutions and/or community service organizations which may also be
provided personal emergency response services in a manner which is incidental to
such institution's or organization's main activities, from continuing to provide
such consulting services.
(b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Subsection 8.03 are
reasonable. In the event that any court of competent jurisdiction determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The Stockholders agree that damages are an inadequate
remedy for any breach of this provision and that the Buyer shall, whether or not
it is pursuing any potential remedies at law, be entitled to equitable relief in
the form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
9. Brokers; For the Stockholders and the Company. Each of the
---------------------------------------------
Stockholders and the Company represent and warrant that no person, firm or
corporation has acted in the capacity of broker or finder on its behalf to bring
about the negotiation of this Agreement. The Stockholders jointly and severally
agree to indemnify and hold harmless the Buyer against any claims or liabilities
asserted against it by any person acting or claiming to act as a broker or
finder on behalf of the Stockholders or the Company.
10. Brokers; For the Buyer. The Buyer agrees to pay all fees, expenses and
----------------------
compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Buyer agrees to indemnify and hold harmless the Stockholders
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Buyer.
11. Notices.
-------
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Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by telex, facsimile
transmission, Federal Express, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may have
given notice:
To the Buyer:
Lifeline Systems (Canada), Inc.
c/o Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
Lifeline Systems, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX XXX 00000
(Fax) 000-000-0000
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX XXX 00000
(Fax) 000-000-0000
To the Stockholders:
c/o Xxxxxxx Xxxxxxxx
c/o Lifeline Systems (Canada), Inc.
00 Xxxxxx Xxxxxx Xxxx
Xxxxx Xxxx Xxxxxxx
XX 0X0
Xxxxxx
(Fax) 000-000-0000
With a copy to:
Xxxxxxx X. Silver
Silver Xxxxx Sosnovitch
BCE Place
Bay Wellington Tower
181 Bay Street
9th Floor, X.X. Xxx 000
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
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(Fax) 000-000-0000
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, or on the
date of transmission if sent by facsimile transmission during regular business
hours (or the next business day if sent by facsimile after regular business
hours), or (b) three business days after being sent, if sent by registered or
certified mail.
12. Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Stockholders and the Company, on the other hand,
may not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that the Buyer may assign this
Agreement, and its rights and obligations hereunder, to a subsidiary or
Affiliate of the Buyer. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer, the Stockholders or the Company
from any obligation or liability under this Agreement.
13. Entire Agreement; Amendments; Attachments.
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer, by the consent of its Board of Directors or
officers authorized by such Board, and the Stockholders holding a majority of
the Shares (who shall have the authority to bind all of the Stockholders) may
amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and such majority of the Stockholders.
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
14. Severability.
------------
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceably, without affecting
in any way the remaining
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provisions hereof in such jurisdiction or rendering that or any other provision
of this Agreement invalid, illegal or unenforceable in any other jurisdiction.
15. Investigation of the Parties.
----------------------------
All representations and warranties contained herein which are made to
the best knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.
16. Expenses.
--------
Except as otherwise expressly provided herein, the Buyer, on the one
hand, and the Stockholders, jointly and severally, on the other hand, will pay
all fees and expenses (including, without limitation, legal and accounting fees
and expenses) incurred by them in connection with the transactions contemplated
hereby. In no event will any of the fees or expresses incurred in connection
with this transaction by the Stockholders or the Stockholders' Representative,
including, without limitation, the fees and expenses of counsel to the
Stockholders, be billed to or paid by the Company. Each Stockholder shall be
responsible for payment of all sales or transfer taxes arising out of the
conveyance of the Shares owned by such Stockholder.
17. Legal Fees.
----------
In the event that legal proceedings are commenced by the Buyer against
the Stockholders (or the Company, if the transactions contemplated hereby are
not consummated), or by the Stockholders against the Buyer, in connection with
this Agreement or the transactions contemplated hereby, the party or parties
which do not prevail in such proceedings shall pay the reasonable attorneys'
fees and other costs and expenses, including investigation costs, incurred by
the prevailing party in such proceedings.
18. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario, Canada.
19. Section Headings.
----------------
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
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20. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) BUYER
ATTEST: Lifeline Systems (Canada, Inc.
By:________________________________
Title:
Secretary
(Corporate Seal) COMPANY:
ATTEST: CareTel, Inc.
By:_______________________________
Secretary Title:
XXXXXXX FINE, in Trust
___________________________________
Address: __________________________
___________________________________
XXXXXX X. XXXXX
___________________________________
Address: __________________________
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___________________________________
RO-BUD REALTY LIMITED, in Trust
__________________________________
Address: __________________________
___________________________________
WISHES INVESTMENTS LIMITED
___________________________________
Address: __________________________
___________________________________
XXXX XXXXXXX
__________________________________
Address: __________________________
___________________________________
XXX XXXX & ASSOCIATES LIMITED
___________________________________
Address: __________________________
___________________________________
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XXXX XXXXXX INC.
___________________________________
Address: __________________________
___________________________________
XXXXXX X. XXXXXX LTD.
___________________________________
Address: __________________________
___________________________________
XXXXXXX XXX LTD.
___________________________________
Address: __________________________
___________________________________
XXXXXXX XXXXXXXX
___________________________________
Address: __________________________
___________________________________
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