Exhibit 10.52
XXXXXXXXXX.XXX LTD.
- and -
XXXXXX XXXXXXX
- and -
XXXXXX XXXXXXXX
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SHARE PURCHASE AGREEMENT
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XXXXXXX XXXXX & XXXXXXXXX
Scotia Plaza, Suite 2100
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
THIS SHARE PURCHASE AGREEMENT is made as of the 6/th/ day of January, 2000 with
an effective date of December 1, 1999.
AMONG:
XXXXXX XXXXXXX of the City of Los Angeles, in the State of California,
("Xxxxxxx")
- and -
XXXXXXXXXX.XXX LTD. a corporation incorporated pursuant to the laws of
the Province of Ontario
(the "Purchaser")
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XXXXXX XXXXXXXX of the City of Los Angeles, in the State of California,
("Xxxxxxxx")
RECITALS:
A. Cheap Seats, Inc. (the "Corporation") and the Purchaser executed a letter
of intent (the "LOI") pursuant to which, among other things, the Purchaser
agreed to purchase from Xxxxxxx his interest in 100% of the issued and
oustanding shares in the capital of the Corporation and from Xxxxxxxx his
interest in 100% of the issued and outstanding shares in the capital of the
Corporation (such two interests to aggregate 100%) and the parties hereto are
therefore desirous of entering into this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained and for other good and valuable consideration
(the receipt and adequacy whereof is hereby acknowledged) the parties hereto
agree as follows:
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ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
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1.1 Definitions - Whenever used in this Agreement, unless there is something
inconsistent in the subject matter or context, the following words and terms
shall have the meanings set out below:
"Act" means the Ontario Business Corporations Act as in effect on the date
hereof.
"Accounts Receivable" means any and all accounts receivable, bills
receivable, trade accounts, book debts and insurance claims of the
Corporation and recorded as receivable in the Books and Records of the
Corporation and any other amount due to the Corporation including any
refunds and rebates and the benefit of all security (including cash
deposits), guarantees and other collateral held by the Corporation.
"Accrued Liabilities" means any and all accrued liabilities of the
Corporation incurred in the ordinary course of business, including accruals
for vacation pay, customer rebates and allowances for product returns.
"Affiliate" has the meaning ascribed thereto in the Act.
"Agreement" means this Share Purchase Agreement, including all schedules
and all instruments supplementing, amending or confirming this Agreement
and references to "Article" or "Section" mean and refer to the specified
Article or section of this Agreement.
"arm's length" means arm's length as defined in the Tax Act.
"Associate" has the meaning ascribed thereto in the Act.
"Balance Sheets" means the consolidated balance sheet of the Corporation as
at November 30, 1999 forming part of the Financial Statements for the last
completed fiscal year for the Corporation.
"Benefit Plans" means all plans, arrangements, agreements, programs,
policies or practices, whether oral or written, formal or informal,
registered or unregistered, funded or unfunded, which the Corporation is a
party to or bound by or under which the Corporation has any liability or
contingent liability, relating to:
(a) retirement savings or pensions, including without limitation, any
defined benefit pension plan, defined contribution pension plan, group
registered retirement savings plan or supplemental pension or
retirement plan; or
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(b) any bonus, profit sharing, deferred compensation, incentive
compensation, hospitalization, health, dental, disability,
unemployment insurance, vacation pay, severance pay or other benefit
plan with respect to any of the Employees or former Employees of the
Corporation, individuals working on contract with them or other
individuals providing services to them of a kind normally provided by
employees and all statutory plans with which the Corporation is
required to comply.
"Xxxxxxx" means Xxxxxx Xxxxxxx.
"Books and Records" means all books and records of the Corporation,
including without limitation, all data and information stored on computer-
related media.
"Business" means the business currently and heretofore carried on by the
Corporation operating in the areas of telemarketing and sale of travel
tickets.
"Business Day" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located in the City of Los Angeles, California
and Toronto, Ontario are open for business during normal banking hours.
"Claims" means any claim, demand, action, suit, litigation, arbitration,
investigation, proceeding, cause of action, damage, loss, cost, liability
or expense, including without limitation, reasonable professional fees and
all costs incurred in investigating or pursuing any of the foregoing or any
proceeding relating to any of the foregoing.
"Closing" means the completion of the sale to and purchase by the Purchaser
of the Purchased Shares under this Agreement.
"Closing Date" means the 6/th/ day of January, 2000 or such other date as
the Parties may agree in writing as the date upon which Closing shall take
place.
"Closing Time" means 10:00 a.m. Pacific Standard time on the Closing Date
or such other time on such date as the Parties may agree in writing as the
time at which Closing shall take place.
"Collective Agreements" means the collective agreements by which the
Corporation is bound and all related documents including all benefit
agreements, letters of understanding, letters of intent and other written
communications with bargaining agents for the Employees which impose any
obligations upon the Corporation or which set out the understanding of the
parties with respect to the meaning of any provisions of such collective
agreements.
"Contracts" means all contracts, indentures, mortgages, obligations,
instruments, licences, leases, agreements, commitments, entitlements and
engagements of the Corporation whether written or oral and includes all
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quotations, orders or tenders for contracts which remain open for
acceptance and any manufacturers' or suppliers' warranty, guarantee or
commitment (express or implied).
"control" has the meaning ascribed thereto in the Act.
"Corporation" has the meaning ascribed thereto in the preambles to this
Agreement.
"Effective Date" means December 1, 1999.
"Employees" means all persons employed by the Corporation.
"Employment Agreements" means collectively the employment agreements to be
signed on Closing by the Corporation and Xxxxxxx and by the Corporation and
Xxxxxxxx.
"Encumbrance" means any and all mortgages, pledges, liens, charges,
security interests, adverse claims, demands, voting trusts, proxies and
encumbrances of whatsoever nature and howsoever incurred.
"Environment" means the environment or natural environment as defined in
any Environmental Law and includes without limitation, air, surface, water,
ground water, land surface, soil, subsurface strata, a sewer system and the
environment in the workplace.
"Environmental Approvals" means all permits, certificates, licences,
authorizations, consents, instructions, registrations, directions or
approvals issued or required by Governmental Authorities pursuant to
Environmental Laws with respect to the operation of the Corporation or
their respective assets and includes without limitation, any sewer
surcharge agreement.
"Environmental Laws" means all Laws relating in full or in part, to the
protection of the Environment, product liability and employee and public
health and safety and includes without limitation, Environmental Laws
relating to the storage, generation, use, handling, manufacture,
processing, labelling, advertising, sale, display, transportation,
treatment, Release and disposal of Hazardous Substances.
"Equipment Contracts" means all motor vehicle leases, equipment leases,
conditional sales contracts, title retention agreements and other similar
agreements relating to equipment used by the Corporation.
"Financial Statements" means the consolidated balance sheet of the
Corporation as at November 30, 1999 and the accompanying statement of
earnings, retained earnings and statement of cash flow and the notice
thereof for the period then ended, copies of which are attached as Schedule
4.14.
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"Fixed Assets" means the fixed assets, machinery, equipment, fixtures,
furniture, furnishings, vehicles, material handling equipment, implements,
parts, tools, jigs, discs, moulds, patterns and tooling, spare parts owned
or used or held by the Corporation, including without limitation, those in
storage or in transit and other tangible property and facilities used by
the Corporation whether located in or on the premises of the Corporation or
elsewhere, including the assets listed and described in Schedule 4.21.
"Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown
corporation or court or other law, rule or regulation-making entity having
or purporting to have jurisdiction on behalf of any nation or province or
state or other subdivision thereof or any municipality, district or other
subdivision thereof.
"Governmental Authorization" means all authorizations, approvals, orders,
consents or filings, including Environmental Approvals, licences or permits
issued to the Corporation by any Governmental Authorities.
"Hazardous Substance" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance, dangerous
substance or dangerous good as defined, judicially interpreted or
identified in any Environmental Law.
"Intellectual Property" means all patents, copyrights, trade-marks, trade-
names, industrial designs, proprietary information, trade secrets and all
other intellectual property owned by, licensed to or used by the
Corporation, including applications and registrations for any of the
foregoing and renewals, divisions, extensions and reissues, where
applicable, pertaining thereto.
"Inventories" means all inventories of every kind and nature and
wheresoever situate owned by the Corporation including without limitation,
all inventories of raw materials, work-in progress, finished goods,
operating supplies, packaging materials, travel credits and media credits.
"Laws" means all applicable laws, by-laws, rules, regulations, orders,
ordinances, protocols, codes, guidelines, policies, notices, directions and
judgments or other requirements of any Governmental Authority.
"LOI" has the meaning ascribed thereto in Recital A.
"Material Contract" means; (a) the Equipment Contracts, Real Property
Leases and Benefit Plans; (b) any other Contract involving aggregate annual
payments to or by the Corporation in excess of $25,000; (c) any commitment
to or by the Corporation that may reasonably extend beyond one year which
does not terminate or cannot be terminated without penalty on less than
three months'
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notice; and (d) any Contract which is outside the ordinary course of
business of the Corporation.
"Non-Arm's Length Person" means a Person who is not at arm's length to the
Party in question.
"Notice" has the meaning ascribed thereto in section 10.3.
"Other Amounts" has the meaning ascribed thereto in section 9.1A.
"Parties" means the Vendors and the Purchaser and "Party" means any one of
them.
"Permitted Encumbrances" means those encumbrances listed in Schedule 4.11.
"Person" means any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, Governmental Authority and a natural
person in such person's capacity as trustee, executor, administrator or
other legal representative.
"Purchased Shares" has the meaning ascribed thereto in section 2.1(a).
"Purchaser" means Xxxxxxxxxx.xxx Ltd.
"Real Property" means collectively, those office premises located at 19,351
Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx and 0000 Xxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxx.
"Real Property Leases" means those leases, subleases, agreements to lease,
tenancy agreements, rights of occupation, licences and other agreements
relating to the Real Property.
"Release" has the meaning prescribed in any Environmental Law and includes
without limitation, any release, spill, leak, pumping, pouring, emission,
emptying, discharge, injection, escape, leaching, disposal, dumping,
deposit, spraying, burial, abandonment, incineration, seepage or placement.
"Remedial Order" means any administrative complaint, direction, order or
sanction issued, filed or imposed by any Governmental Authority pursuant to
any Environmental Laws and includes without limitation, any order requiring
any remediation or clean-up of any Hazardous Substance or requiring that
any Release or any other activity be reduced, modified or eliminated.
"Tax Act" means the Internal Revenue Code.
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"Tax Returns" means and includes without limitation, all returns, reports,
declarations, elections, notices, filings, information returns and
statements filed in respect of Taxes payable by any Party.
"Taxes" means and includes without limitation, all taxes, duties, fees,
premiums, assessments, imposts, levies and other charges of any kind
whatsoever imposed by any Governmental Authority, together with all
interest, penalties, fines, additions to tax or other additional amounts
imposed in respect thereof, including without limitation, those levied on
or measured by or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use, value-added,
excise, stamp, withholding, business, franchising, property, payroll,
employment, health, social services, education and social security taxes,
all surtaxes, all customs duties and import and export taxes, all license,
franchise and registration fees and all employment insurance, health
insurance and United States and other government pension plan premiums.
"Third Party Claim" has the meaning ascribed thereto in section 9.4.
"Transaction" means the transaction of purchase and sale contemplated by
this Agreement.
"Travelbyus Shares" has the meaning ascribed thereto in section 2.1.
"TSE" means The Toronto Stock Exchange.
"Vendors" means collectively Xxxxxxx and Xxxxxxxx.
1.2 Certain Rules of Interpretation - In this Agreement and the Schedules:
(a) Time - time is of the essence in the performance of the Parties'
respective obligations.
(b) Currency - unless otherwise specified, all references to money amounts
are to United States currency.
(c) Headings - the descriptive headings of Articles and sections are
inserted solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of such Articles or
sections.
(d) Singular, etc. - the use of words in the singular or plural or with a
particular gender shall not limit the scope or exclude the application
of any provision of this Agreement to such person or persons or
circumstances as the context otherwise permits.
(e) Consent - whenever a provision of this Agreement requires an approval
or consent by a Party and notification of such approval or consent is
not
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delivered within the applicable time limit, unless otherwise
specified, the Party whose consent or approval is required shall be
conclusively deemed to have withheld its approval or consent.
(f) Calculation of Time - unless otherwise specified, time periods within
or following which any payment is to be made or act is to be done
shall be calculated by excluding the day on which the period commences
and by including the day on which the period ends and by extending the
period to the next Business Day following if the last day of the
period is not a Business Day.
(g) Business Day - whenever any payment is to be made or action to be
taken under this Agreement is required to be made or taken on a day
other than a Business Day, such payment shall be made or action shall
be taken on the next Business Day following such day.
1.3 Knowledge - In this Agreement, any reference to the knowledge of a Party
shall mean to the best of the knowledge, information and belief of the Party
after reviewing all relevant records and making due inquiries.
1.4 Entire Agreement - This Agreement together with the other agreements and
documents to be delivered pursuant to this Agreement constitute the entire
agreement among the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties (including without limitation, the LOI)
and there are no warranties, representations or other agreements among the
Parties in connection with the Transaction except as specifically set forth in
this Agreement and any document delivered pursuant to this Agreement. No
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the Parties to be bound thereby.
1.5 Applicable Law and Attornment - This Agreement shall be construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as an Ontario contract.
1.6 Accounting Principles - In this Agreement all references to generally
accepted accounting principles means to principles recommended, from time to
time, by the American Institute of Certified Public Accountants and all
accounting terms not otherwise defined in this Agreement have the meanings
assigned thereto in accordance with United States generally accepted accounting
principles.
1.7 Tender - Any tender of documents or money under this Agreement may be made
upon the Parties or their respective counsel and money may be tendered by
official bank draft drawn upon a bank or by negotiable cheque payable in United
States funds and certified by a bank or trust company or with the consent of the
Party entitled to payment by wire transfer of immediately available funds to the
account specified by that Party.
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1.8 Disclosure - The Parties acknowledge that any information, matter,
circumstance, agreement, document or other thing disclosed in any Schedule to
this Agreement shall be deemed to be disclosed in every other Schedule for
purposes of the representations and warranties of the Parties.
1.9 Schedules - The Schedules to this Agreement as listed below are an integral
part of this Agreement:
Schedule Description
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Schedule 2.1(b) Breakdown of Travelbyus Share Issuances
Schedule 3.3 September 30, 1999 ARC Revenue
Schedule 4.4 Non-Arm's Length Indebtedness
Schedule 4.8 Registrations of the Corporation
Schedule 4.10 Capitalization of the Corporation
Schedule 4.14 Financial Statements
Schedule 4.16 Tax Matters of the Corporation
Schedule 4.20 Material Suppliers and Customers of the Corporation
Schedule 4.21 Fixed Assets of the Corporation
Schedule 4.24 Governmental Authorizations of the Corporation
Schedule 4.26 Intellectual Property of the Corporation
Schedule 4.27 Equipment Contracts of the Corporation
Schedule 4.28 Real Property Leases of the Corporation
Schedule 4.29 Third Person Consents
Schedule 4.31 Employees of the Corporation
Schedule 4.33 Benefit Plans of the Corporation
Schedule 4.34 Insurance of the Corporation
Schedule 4.35 Material Contracts of the Corporation
Schedule 4.42 Bank Accounts of the Corporation
Schedule 7.10 Amount of Retained Working Capital
ARTICLE 2
ACQUISITION TRANSACTION
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2.1 Purchase and Sale of the Purchased Shares - Subject to the terms and
conditions herein, the Parties shall effect the following transactions:
(a) at the Closing Time, the Vendors shall sell, transfer and assign to
the Purchaser and the Purchaser shall purchase and accept the
assignment of 100% of the issued and outstanding shares of the
Corporation, free and clear of any and all Encumbrances (the
"Purchased Shares");
(b) at the Closing Time, Travelbyus shall issue to the Vendors
US$5,000,000 worth of common shares in the capital of Travelbyus,
based on an issue
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price equal to US$1.00 per share, aggregating 5,000,000 common shares
in the numbers and to the entities as set out on Schedule 2.1(b) (the
"Travelbyus Shares");
(c) on or before January 15, 2000 the Purchaser shall deliver to the
Vendors jointly, the sum of US$5,000,000 less the US$25,000 deposit
previously advanced by the Purchaser, plus any amounts, if any,
payable pursuant to the provisions of section 7.10 hereof.
(d) at the Closing Time, the Vendors shall transfer and deliver to the
Purchaser share certificates representing the Purchased Shares duly
endorsed in blank for transfer or accompanied by irrevocable security
transfer powers of attorney duly executed in blank together with a new
share certificate representing the Purchased Shares registered in the
name of the Purchaser; and
(e) at the Closing Time, Travelbyus shall deliver to the Vendors a share
certificate representing the Travelbyus Shares registered in the name
of the Vendors.
2.2 Place of Closing - The Closing shall take place at the Closing
Time at the offices of Xxxxxxx Xxxxx & Xxxxxxxxx, Barristers and Solicitors, 00
Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx X0X 0X0 or at such other place as
may be agreed upon by the Vendors and the Purchaser.
ARTICLE 3
PURCHASE PRICE AND PAYMENT
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3.1 Purchase Price - The aggregate purchase price for the Purchased
Shares (the "Purchase Price") shall be US$10,000,000, plus the amount of any
payments made by the Purchaser to the Vendors pursuant to the provisions of
section 3.3 hereof and section 7.10 hereof.
3.2 Satisfaction of Purchase Price - The Purchaser shall pay and
satisfy the Purchase Price payable for the Purchased Shares as set out in
subsections 2.1(b) and (c).
3.3 Performance Increase - The Purchaser does hereby agree to
increase the Purchase Price payable for the Purchased Shares, by making payments
to the Vendors over a three year period, based on the following formula:
US$1,000,000 (in the aggregate) shall be paid to the Vendors for each
US$10,000,000 increase in ARC Revenue as compared to the ARC revenue of the
Corporation for its fiscal year ended September 30, 1999, as set out in Schedule
3.3 as may be adjusted by the auditors of the Purchaser, such increase to be
computed by independent auditors, in accordance with GAAP. For the purposes of
this section "ARC Revenue" shall be
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defined as gross sales of the Corporation minus purchases and/or sales generated
by the Purchaser and its subsidiaries, but inclusive of purchases and/or sales
generated by subsidiaries of the Purchaser with relationships with the
Corporation that existed prior to Closing, namely, the following subsidiaries:
Mr. Cheap's Travel Ltd. and Gotham Media Group, Ltd. as set out in Schedule 3.3.
Payments under this section 3.3 shall be made by the Purchaser to the Vendors on
an annual basis for the fiscal periods on each of September 30, 2000, September
30, 2001 and September 30, 2002, within 30 days of receipt by the Purchaser of
its annual audited financial statements for the applicable year end and in the
aggregate, payments under this section 3.3 shall not exceed US$4,000,000 over a
three year period.
ARTICLE 4
A. REPRESENTATIONS AND WARRANTIES CONCERNING THE VENDORS
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The Vendors jointly and severally represent and warrant to the Purchaser as
follows as at each of the Effective Date and the Closing Date and acknowledge
that the Purchaser is relying on their representations and warranties in
entering into this Agreement:
4.1 Right to Sell - They are the sole registered and beneficial owners of their
respective Purchased Shares with good and marketable title thereto free and
clear of all Encumbrances. They have the exclusive right to sell, transfer and
assign their respective Purchased Shares to the Purchaser as provided in this
Agreement. Their Purchased Shares are not subject to the terms of any
shareholders' agreement, voting trust or voting agreement.
4.2 Enforceability of Obligations - This Agreement has been executed and
delivered by them and constitutes a valid and binding obligation enforceable
against them in accordance with its terms, save and except that the enforcement
thereof may be limited by applicable bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditors' rights and except
that equitable remedies such as specific performance and injunction, are
available only in the discretion of a court of competent jurisdiction.
4.3 Absence of Conflicting Agreements - They are not a party to, bound or
affected by or subject to any Contract or Law which would be violated,
contravened, breached by or under which default would occur or an Encumbrance
would be created as a result of the execution, delivery and performance of this
Agreement or any other agreement to be entered into under the terms of this
Agreement.
4.4 Non-Arm's Length Transactions - Neither they nor any Person not dealing at
arm's length with them:
(a) owns, directly or indirectly, any interest in or is an employee,
consultant to or agent of, an entity which is a competitor, lessor,
lessee, customer or supplier of the Corporation;
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(b) owns, directly or indirectly, any interest in any property or asset of
the Corporation;
(c) is a party to any Contract with the Corporation, save and except as
contemplated by the Employment Agreements or Schedule 4.4; or
(d) has any indebtedness, liability or obligation to the Corporation.
Save and except as provided in Schedule 4.4, the Corporation is not indebted or
otherwise obligated to the Vendors or any Person not dealing at arm's length
with the Vendors.
4.5 Residence of the Vendors - The Vendors are each residents of the United
States of America.
4.6 No Litigation - There are no outstanding Claims at law or in equity or
before any Governmental Authority pending or to the knowledge of the Vendors,
proposed or threatened, which would prevent the Vendors from completing the
Transaction.
4.7 Brokers - The Vendors have not entered into any Contract that would entitle
any Person to a Claim against the Purchaser or the Corporation for any broker's
commission, finder's fee, agent's fee, fee for financial intermediary services
or any like payment in respect of the Transaction.
4.8 Incorporation and Registration - The Corporation is a corporation duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has all necessary corporate power, authority and capacity to
own its property and assets and to carry on its business as currently conducted.
Neither the nature of its business nor the location or character of the property
owned or leased by the Corporation requires it to be registered, licensed or
otherwise qualified as a foreign corporation in any jurisdiction save and except
as provided in Schedule 4.8.
4.9 Subsidiaries - The Corporation does not own or have any interest in any
securities of any other corporation.
4.10 Capitalization - The authorized capital and the issued capital of the
Corporation is as set forth in Schedule 4.10. All of the outstanding shares in
the capital of the Corporation have been duly and validly issued and are
outstanding as fully paid and non-assessable shares of the Corporation. No
options, warrants or other rights to purchase shares or other securities of the
Corporation and no securities or obligations convertible into or exchangeable
for shares or other securities of the Corporation have been authorized or agreed
to be issued or are outstanding.
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4.11 Title to Assets - The Corporation is the sole beneficial and (where its
interests are registrable) the sole registered owner of its assets and interests
in assets, real and personal, with good and valid title thereto, free and clear
of all Encumbrances. All of the material assets of the Corporation are situated
in State of California.
4.12 Absence of Conflicting Agreements - The Corporation is not a party to,
bound or affected by or subject to any Contract or Law which would be violated,
contravened, breached by or under which default would occur or an Encumbrance
would be created as a result of the execution, delivery and performance of this
Agreement or any other agreement to be entered into under the terms of this
Agreement.
4.13 Regulatory Approvals - No Governmental Authorization is required on the
part of the Vendors or the Corporation in connection with the execution,
delivery and performance of this Agreement or any other agreements to be entered
into under the terms of this Agreement.
4.14 Financial Statements - The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles and
present fairly:
(i) all of the assets, liabilities and financial position of the
Corporation as at the dates indicated; and
(ii) the sales, earnings, results of operation and changes in
financial position of the Corporation for all of the dates
indicated.
4.15 Absence of Undisclosed Liabilities - Since the date of the Balance Sheet,
the Corporation has not incurred any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) which continue to be outstanding
other than those which have been incurred in the ordinary course of business,
none of which is materially adverse. The Corporation does not have any
liability, obligation to or agreement with any Person not dealing at arm's
length with the Corporation.
4.16 Absence of Changes or Unusual Transactions - Other than as set out in
Schedule 4.16, since the date of the Balance Sheet, the Corporation has carried
on Business and conducted operations and affairs only in the ordinary and normal
course consistent with past practice and there has not been:
(a) any material change in the financial condition, operations or
prospects of the Corporation other than changes in the ordinary
course of business, none of which has been materially adverse;
(b) any damage, destruction, loss, labour trouble or other event,
development or condition of any character (whether or not covered by
insurance) materially and adversely affecting the business, assets,
properties or future prospects of the Corporation;
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(c) any transfer, assignment, sale or other disposition of any of the
assets shown or reflected in the Balance Sheet or cancellation of any
debts or entitlements except in each case in the ordinary course of
business;
(d) any assumption of any obligation or liability (fixed or contingent),
except unsecured current obligations and liabilities incurred in the
ordinary course of business;
(e) any discharge or satisfaction of any Encumbrance or payment of any
obligation or liability (fixed or contingent) other than liabilities
included in the Balance Sheet and liabilities incurred since the date
of the Balance Sheet in the ordinary course of business;
(f) any operating loss or any extraordinary loss, waiver or omission to
take any action in respect of any rights of substantial value or
entering into any commitment or transaction not in the ordinary
course of business where such loss, rights, commitment or transaction
is or would be material in relation to the Corporation;
(g) any grant of any bonuses, whether monetary or otherwise or the making
or announcement of any general wage or salary increase in respect of
Employees or change in the terms of employment of any Employee except
in the ordinary course of business, consistent with past practice;
(h) the hiring or dismissal of any Employee;
(i) any Encumbrance on any of the assets or property of the Corporation
whether tangible or intangible;
(j) directly or indirectly, any declaration or payment of any dividend or
declaration or making of any other payments or distributions on or in
respect of any of the shares of the Corporation or directly or
indirectly the purchase or other acquisition of any of the shares of
the Corporation; or
(k) the authorization, agreement or other commitment to do any of the
foregoing.
4.17 Reserves and Accruals - The reserves and Accrued Liabilities of the
Corporation disclosed on or reflected in the Financial Statements and the Books
and Records of the Corporation, are sufficient in all respects to provide for
the liabilities in respect of which they have been established and have been
established in accordance with generally accepted accounting principles.
4.18 No Joint Venture Interests, etc. - The Corporation is not a partner,
beneficiary, trustee, co-tenant, joint venturer or otherwise a participant in
any partnership, trust, joint venture, co-tenancy or other similar jointly owned
business undertaking and the
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Corporation does not have any other significant investment interests in any
business owned or controlled by any third Person.
4.19 Absence of Guarantees - The Corporation has not given or agreed to give
and is not a party to or bound by any guarantee or indemnity in respect of
indebtedness or other obligations of any Person or any other commitment by which
the Corporation is, or is contingently, responsible for such indebtedness or
other obligations.
4.20 Major Suppliers and Customers - Schedule 4.20 sets forth a comprehensive
listing of each material supplier of goods and services to, and each material
customer of, the Corporation. To the knowledge of the Vendors, no material
supplier or customer has any intention of changing its relationship or the terms
upon which it conducts business with the Corporation as a result of the
Transaction.
4.21 Condition of Assets - The Fixed Assets are in good condition, repair and
proper working order, having regard to their use and age and such assets have
been properly and regularly maintained, reasonable wear and tear excepted. The
Fixed Assets listed in Schedule 4.21 are all of the Fixed Assets used to earn
income on the Financial Statements.
4.22 Inventories - All Inventories are valued on the books of the Corporation
at the lower of out of pocket cost or net recoverable value.
4.23 Collectibility of Accounts Receivable - The Accounts Receivable are bona
fide, good and collectible at the aggregate recorded amounts within 120 days of
the Closing Date, except to the extent of any reserves provided for such
accounts in the Books and Records of the Corporation, which reserves have been
established in accordance with generally accepted accounting principles and are
adequate. The Accounts Receivable are not subject to any defence, counterclaim
or set off.
4.24 Business in Compliance with Law - The operations of the Corporation have
been and are now being conducted in compliance with all applicable Laws of each
jurisdiction in which the Corporation carries on or has carried on business and
the Corporation has not received notice of any alleged breach of any such Laws.
The Governmental Authorizations set forth in Schedule 4.24 are all
authorizations required by the Corporation to carry on Business in compliance
with applicable Laws. Such Governmental Authorizations are in full force and
effect in accordance with their terms, there have been no violations thereof and
no proceedings are pending or to the knowledge of the Vendors, threatened, which
could result in their revocation or limitation.
4.25 Restrictive Covenants - The Corporation is not a party to and is not bound
or affected by any commitment, agreement or document containing any covenant
expressly limiting the freedom of the Corporation to compete in any line of
business anywhere in the world, transfer or move any of its assets or operations
or which materially or adversely affects the business practices, operations or
conditions of the
-16-
Corporation or the continued operation of Business after Closing on
substantially the same basis as the Business is presently carried on.
4.26 Intellectual Property - Schedule 4.26 sets forth a complete list and brief
description of all Intellectual Property which has been registered or for which
applications for registration have been filed, including the name of the
registered and beneficial owner of such registrations and applications. The
Corporation has the exclusive right to use and is the exclusive owner of all
right, title and interest in and to the Intellectual Property (with no breaks in
the chain of title and free and clear of any Encumbrance of any kind whatsoever
save and except for the Permitted Encumbrances). The Intellectual Property which
is not owned by the Corporation is being used by the Corporation only with the
consent of or license from the rightful owner thereof and all such licenses are
in full force and effect. All such licenses are listed in Schedule 4.26. The
Intellectual Property is in full force and effect and has not been used or
enforced or failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Intellectual
Property. The Vendors have no knowledge of any claim of adverse ownership,
invalidity or other opposition to or conflict with any of the Intellectual
Property nor of any pending or threatened Claim of any nature or kind against
the Corporation relating to the Intellectual Property. The Vendors have no
knowledge that the Corporation, any activity in which the Corporation is engaged
or any product which the Corporation uses or sells or any process, method,
packaging, advertising or material that the Corporation employs in the marketing
or sale of any such product or the use of any of the Intellectual Property
breaches, violates, infringes or interferes with any intellectual property
rights of any third Person or requires payment for the use of any patent,
trade-name, trade secret, trade-xxxx, copyright or other intellectual property
right or technology of another. The Intellectual Property is complete to the
extent and under the conditions stated in this Agreement to enable the
Corporation to carry on Business. Schedule 4.26 sets forth a complete and
correct list and brief description of all Claims, conflicts, breaches,
violations, infringements and interferences of the Intellectual Property of
which the Vendors are aware as well as a complete and correct list and brief
description of all judgments, covenants not to xxx, permits, grants, licenses
and other agreements and arrangements relating to any of the Intellectual
Property which bind, obligate or otherwise restrict the Corporation.
4.27 Equipment Contracts - Schedule 4.27 sets forth a complete list of all
Equipment Contracts together with a description of the equipment and vehicles to
which the Equipment Contracts relate. All of the Equipment Contracts are in full
force and effect and no default exists on the part of the Corporation or to the
knowledge of the Vendors, on the part of any of the other parties thereto. The
entire interest of the Corporation under each of the Equipment Contracts is held
by the Corporation free and clear of any Encumbrances, other than Permitted
Encumbrances and all payments due under the Equipment Contracts have been duly
and punctually paid.
4.28 Real Property - Save and except as set forth in Schedule 4.28 there are no
contracts or other documents registered or unregistered affecting or relating to
title of the Real Property. There are no agreements, undertakings or other
documents,
-17-
registered or unregistered, which affect or relate to the title to, or ownership
of the Real Property except for the Permitted Encumbrances. Except as disclosed
or provided for in this Agreement, no Person has any right to purchase the Real
Property or sublease or otherwise assume or obtain any of the Corporation's
rights with respect to the Real Property and no Person other than the
Corporation is using or has any right to use, as tenant, subtenant, licensee or
otherwise or is in possession or occupancy of, any part of the Real Property.
The Corporation has not granted any option, right of first refusal or other
contractual rights with respect to the Real Property. The Corporation has not
entered into any agreement to sell, transfer, encumber, or otherwise dispose of
or impair its right, title and interest in and to the Real Property. The
Corporation has not received any notification of and the Vendors have no
knowledge of, any outstanding or incomplete work orders, notices of violation or
deficiency notices requiring or recommending work or repairs in respect of any
of the buildings, improvements or other structures constructed on the Real
Property and the premises subject to the Real Property Leases or any
installations therein or of any current non-compliance with applicable statutes
and regulations or building and zoning by-laws and regulations, fire codes or
health and safety regulations. All accounts for work and services performed or
materials placed or furnished upon or in respect of the construction and
completion of any of the buildings, improvements or other structures constructed
on the Real Property and in all premises subject to the Real Property Leases
have been fully paid and no one is entitled to claim a lien under any
construction lien legislation in any applicable jurisdiction for such work
performed by or on behalf of the Corporation and the Vendors have no knowledge
of any proposed or pending change to any zoning affecting the Real Property. The
Vendors have no knowledge of any expropriation or condemnation or similar
proceeding pending or threatened against the Real Property. There are no matters
affecting the right, title and interest of the Corporation in and to the Real
Property, which in the aggregate or individually, would materially and adversely
affect the ability of the Corporation to carry on Business upon the Real
Property.
4.29 Real Property Leases - Schedule 4.29 sets forth a complete list of the
Real Property Leases. Each of the Real Property Leases is in full force and
effect and is enforceable against the landlord thereunder. All interests held by
the Corporation as lessee under the Real Property Leases are free and clear of
all Encumbrances of any nature and kind whatsoever, save and except for the
Permitted Encumbrances. There are no consents necessary as a result of the
completion of the Transaction save and except as set forth in Schedule 4.29. All
payments required to be made by the Corporation pursuant to the Real Property
Leases have been duly paid and the Corporation is not otherwise in default in
meeting its obligations under any of the Real Property Leases. The Vendors have
no knowledge that any of the landlords under each of the Real Property Leases
are in default in meeting any of the material obligations under their respective
Real Property Leases. Except as detailed on Schedule 4.29, the Corporation has
no option, right of first refusal or other contractual right relating to the
Real Property. To the knowledge of the Vendors no event exists which, but for
the lapse of time or the giving of notice, or both, would constitute a default
under any such option, right of first refusal or other contractual right and to
the knowledge of the Vendors no Person is claiming any such material default or
taking any action purportedly based upon any default. To the knowledge of the
Vendors no event exists
-18-
which, but for the passing of time or the giving of notice, or both, would
constitute a default by either party to any of the Real Property Leases and no
party to any Real Property Lease is claiming any such default or taking any
action purportedly based upon any such default. The Corporation has not waived
or omitted to take any action in respect of any substantial rights under any of
the Real Property Leases.
4.30 Environmental Matters - All operations of the Corporation conducted on the
Real Property, or any other property now or formerly under the Corporation's
charge, management or control have been and are now, in compliance with all
Environmental Laws. All Environmental Approvals required to be held by the
Corporation have been obtained, are valid and in full force and effect, have
been and are being complied with and there have been and are no proceedings
commenced or to the knowledge of the Vendors threatened to revoke or amend any
Environmental Approvals. Neither the Corporation nor any of its operations has
been or is now the subject of any Remedial Order nor do the Vendors have any
knowledge of any investigation or evaluation commenced as to whether any such
Remedial Order is necessary nor has any threat of any such Remedial Order been
made nor do the Vendors have knowledge of any circumstances which could result
in the issuance of any such Remedial Order. The Corporation has not ever been
prosecuted for or convicted of any offence under Environmental Laws nor has the
Corporation been found liable in any proceeding to pay any fine or judgment to
any Person as a result of any Release or threatened Release of any Hazardous
Substance into the Environment or the breach of any Environmental Law and to the
knowledge of the Vendors, there is no basis for any such proceeding.
4.31 Employment Matters - Schedule 4.31 sets forth a complete list of all
Employees together with the titles and material terms of employment, including
current wages, salaries or hourly rate of pay of and bonus (whether monetary or
otherwise) paid (including the date of payment if paid since November 30, 1999)
or payable to each Employee, the date upon which such wage, salary, rate or
bonus became effective and the date upon which each such Employee was first
hired by the Corporation. Except as disclosed in Schedule 4.31 no Employee is on
long-term disability leave, extended absence or is receiving workers'
compensation. Save and except as contemplated by the Employment Agreements and
as set out in Schedule 4.4 there are no written contracts of employment entered
into with any Employees or any oral contracts of employment which are not
terminable on the giving of reasonable notice in accordance with applicable law.
Except as set out in Schedule 4.31, there are no employment policies or plans
including policies or plans regarding incentive compensation, stock options,
severance pay or other terms or conditions of employment or terms or conditions
upon which Employees may be terminated which are binding upon the Corporation.
The Corporation has been and is being operated in full compliance with all Laws
relating to employees, including employment standards, occupational health and
safety, pay equity and employment equity. There have been no complaints under
such Laws against the Corporation. There are no complaints nor to the knowledge
of the Vendors, are there any threatened complaints, against the Corporation
before any employment standards branch or tribunal or human rights tribunal. To
the knowledge of the Vendors nothing has occurred which might lead to a
complaint against the Corporation, under any human rights legislation or
employment standards legislation.
-19-
There are no outstanding decisions or settlements or pending settlements under
employment standards legislation which place any obligation upon the
Corporation, to do or refrain from doing any act. The Corporation has not been
subject to any experience rating surcharge over the past five years. All amounts
owing in respect of salary, wages, bonus or benefits including any vacation pay,
have been paid or accrued for on the Books and Records of the Corporation. No
Employee has a claim for overtime or time off in lieu of overtime which has not
been accrued on the Books and Records of the Corporation.
4.32 No Collective Agreements - The Corporation is not a party, either
directly or by operation of law, to any collective agreement, letters of
understanding, letters of intent or other written communication with any trade
union or association which may qualify as a trade union, which would cover any
of its Employees or any independent contractors of the Corporation. There are no
outstanding labour tribunal proceedings of any kind, including any proceedings
which could result in certification of a trade union as bargaining agent for
Employees or independent contractors of the Corporation and there have not been
any such proceedings within the last two years. There are no threatened or
apparent union organizing activities involving the Employees or independent
contractor of the Corporation. There is no strike or lock-out occurring or
threatened which affects or would affect the Corporation. The Corporation has no
unresolved grievances or pending arbitration cases outstanding. The Corporation
has no serious labour problems that might materially affect the value of the
Corporation or that might lead to an interruption of its Business.
4.33 Benefit Plans - Schedule 4.33 sets forth a complete list of all Benefit
Plans. Current and complete copies of all written Benefit Plans or where oral,
written summaries of the material terms thereof, have been provided or made
available to the Purchaser together with current and complete copies of all
documents relating to the Benefit Plans, including without limitation, as
applicable; (i) all documents establishing, creating or amending any Benefit
Plan; (ii) all trust agreements, funding agreements, insurance contracts and
investment management agreements; (iii) all financial statements and accounting
statements and reports, and investment reports for each of the last three years
and where actuarial reports are prepared in relation to a Benefit Plan, the two
most recent actuarial reports in relation to each such Benefit Plan; (iv) all
reports, returns, filings and material correspondence with any applicable
regulatory authority in the last three years; and (v) all booklets, summaries or
manuals prepared for or circulated to, and written communications of a general
nature to Employees concerning any Benefit Plan. Each Benefit Plan is, and has
been, established, registered, qualified and administered and invested in
compliance with; (i) the terms thereof; and (ii) all applicable Laws. The
Corporation has not received, in the last three years, notice from any Person
questioning or challenging such compliance and the Vendors have no knowledge of
any such notice from any Person questioning or challenging such compliance
beyond the last three years. All obligations under the Benefit Plans (whether
pursuant to the terms thereof or applicable Laws) have been satisfied and there
are no outstanding defaults or violations thereunder by the Corporation nor do
the Vendors have any knowledge of any default or violation by any other party to
any Benefit Plan. There have been no amendments, modifications or
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restatements of any Benefit Plan made or any improvements in benefits promised
under the Benefit Plans that have not been disclosed to the Purchaser. All
contributions or premiums required to be paid to or in respect of each Benefit
Plan have been paid in a timely fashion in accordance with the terms thereof and
all applicable Laws. No Taxes, penalties or fees are owing or exigible under any
Benefit Plan. There is no Claim pending or threatened involving any Benefit Plan
or its assets and no facts exist which could reasonably be expected to give rise
to any such Claim. No event has occurred respecting any Benefit Plan which would
entitle any Person (without the consent of the Corporation) to wind-up or
terminate any Benefit Plan, in whole or in part, or which could reasonably be
expected to adversely affect the tax status thereof or require any penalty taxes
to be paid under any applicable laws. There are no going concern unfunded
actuarial liabilities, past service unfunded liabilities or solvency
deficiencies respecting any of the Benefit Plans. No material changes have
occurred in respect of any Benefit Plan since the date of the most recent
financial or accounting report issued in connection with any Benefit Plan which
could reasonably be expected to adversely affect the report (including rendering
it misleading in any material respect). All employer contribution or premium
holidays that have been taken under any Benefit Plan have been permitted by the
terms of the relevant Benefit Plan and have been in accordance with applicable
Laws. There have been no improper withdrawals or transfers of assets from any
Benefit Plan. All employee data necessary to administer each Benefit Plan is in
the possession of the Corporation and is complete, correct and in a form which
is sufficient for the proper administration of the Benefit Plans and none of the
Benefit Plans provide benefits to retired Employees or to the beneficiaries or
dependants of retired Employees. None of the Benefit Plans require or permit a
retroactive increase in premiums or payments and the level of insurance
reserves, if any, under any insured Benefit Plan is reasonable and sufficient to
provide for all incurred but unreported claims. The consummation of the
Transaction shall not constitute an event under any Benefit Plan that shall or
may result; (i) in any acceleration of, or vesting of, or increase in benefits
with respect to any Employee or former Employee; or (ii) in any acceleration of
or increase in the funding requirements of any Benefit Plan.
4.34 Insurance - The Corporation maintains such policies of insurance, issued
by responsible insurers, as are appropriate to its operations, property and
assets, in such amounts and against such risks as are customarily carried and
insured against by owners of comparable businesses, properties and assets. All
such policies of insurance are in full force and effect and the Corporation is
not in default as to the payment of premiums or otherwise under the terms of any
such policy. Schedule 4.34 sets forth a complete list of all policies of
insurance which the Corporation maintains and the particulars of such policies
including the name of the insurer, the risk insured against, the amount of
coverage and the amount of any deductible.
4.35 Contracts - Except for the Material Contracts listed in Schedule 4.35, the
Corporation is not a party to or bound by any Material Contract. The Material
Contracts listed in Schedule 4.35 are all in full force and effect, unamended
and no default exists under such Material Contracts on the part of any of the
parties to such Contracts. Except as noted on Schedule 4.35 none of the Material
Contracts include provisions requiring consent to a change of control of the
Corporation. Current and complete
-21-
copies of the Material Contracts have been delivered to the Purchaser. There are
no current or pending negotiations with respect to the renewal, repudiation or
amendment of any such agreement, plan or policy.
4.36 Litigation - Other than as previously disclosed to the Purchaser, there is
no Claim, including appeals and applications for review, in progress, or, to the
knowledge of the Vendors, pending or threatened against or relating to the
Corporation before any court, Governmental Authority, commission, board, bureau,
agency or arbitration panel.
4.37 Tax Matters - The Corporation has filed on a timely basis (within the time
and manner required by law) all federal and state income tax returns and
election forms and the tax returns of any other jurisdiction required to be
filed and all such returns and forms have been completed accurately and
correctly in all respects. As of the Closing Date, the Corporation will have
paid all Taxes, (including for greater certainty and without limitation, all
federal, state and local taxes, assessments and reassessments or other imposts
in respect of their respective income, business, assets or property) and all
interest and penalties thereon with respect to the Corporation, for all previous
years and all required quarterly instalments due for the current fiscal year
have been paid for which tax returns are not yet required to be filed. As of the
Closing Date, the Corporation will have provided adequate reserves for all Taxes
for the periods covered by, and such reserves are reflected in the Financial
Statements. There are no agreements, waivers or other arrangements providing for
an extension of time with respect to the filing of any Tax return by, or payment
of any Tax, governmental charge or deficiency by the Corporation nor are there
any actions, suits, proceedings, investigations or claims now threatened or
pending against the Corporation in respect of, or discussions under way with any
governmental authority relating to, any such Tax or governmental charge or
deficiency.
The Corporation has not:
(i) acquired or had the use of any property from a Person with whom it
was not dealing at arm's length other than at fair market value;
(ii) disposed of any property to a Person with whom they were not dealing
at arm's length for proceeds less than the fair market value thereof;
and
(iii) discontinued carrying on any business in respect of which non-capital
losses were incurred, and any non-capital losses which the
Corporation has are not losses from property or business investment
losses.
There are no contingent tax liabilities nor any grounds which would prompt a
reassessment. The schedules attached to the corporate income tax returns by the
Corporation for its taxation years reflect and disclose all transactions to
which the Corporation was a party as required by applicable revenue laws and all
of the transactions to which the Corporation was a party are reflected or
disclosed in such financial statements and schedules and the corporate income
tax returns and schedules have been duly and accurately completed as required by
such Act.
-22-
4.38 Books and Records - All Books and Records of the Corporation have been
delivered or made available to the Purchaser. The Books and Records of the
Corporation fairly and correctly set out and disclose in all material respects
the financial position of the Corporation and all financial transactions of the
Corporation have been accurately recorded in the Books and Records of the
Corporation.
4.39 Corporate Records and Minute Books - The corporate records and minute
books of the Corporation have been delivered or made available to the Purchaser.
The articles and by-laws of the Corporation are in full force and effect and no
amendments have been made to the same. The minute books, including the articles
and by-laws of the Corporation include complete and accurate minutes of all
meetings of the directors or shareholders of the Corporation, as applicable,
held to date or resolutions passed by the directors or shareholders on consent,
since the date of incorporation of the Corporation. The share certificate book,
register of shareholders, register of transfers and register of directors of the
Corporation, are complete and accurate.
4.40 Trade Allowances - No customers of the Corporation are entitled to or
customarily receive discounts, allowances, volume rebates or similar reductions
in price or other trade terms arising from any agreements or understandings
(whether written or oral) with or concessions granted to any customer.
4.41 Location of the Assets - All of the assets of the Corporation are located
on the Real Property.
4.42 Bank Accounts, etc. - Schedule 4.42 sets forth a complete list of every
financial institution in which the Corporation maintains any depository account,
trust account or safety deposit box and the names of all Persons authorized to
draw on or who have access to such accounts or safety deposit box.
4.43 Judgments and Executions and Insolvency Proceedings - Other than as
previously disclosed to the Purchaser, there are no judgments or executions
against the Corporation which are outstanding and unsatisfied. The Corporation
has not made any assignment for the benefit of creditors nor has any receiving
order been made against the Corporation under the provisions of any applicable
bankruptcy or insolvency legislation nor has any petition for such an order been
served upon the Corporation.
4.44 Non-Arm's Length Transactions- Since November 30, 1999, the Corporation
has not made any payment or loan to or borrowed any money from and is not
otherwise indebted to, any officer, director, Employee, shareholder or any other
Person not dealing at arm's length with the Corporation except as disclosed in
the Financial Statements and except for usual Employee reimbursements and
compensation paid in the ordinary and normal course of the Business. The
Corporation is not a party to any Contract with any officer, director, Employee,
shareholder or any other Person not dealing at arm's length with the
Corporation. No officer, director or shareholder of the Corporation and no
entity which is an Affiliate or Associate of one or more of such individuals;
(i) owns, directly or indirectly, any interest in (except for shares
representing
-23-
less than one percent of the outstanding shares of any class or series of any
publicly traded company) or is an officer, director, employee or consultant of,
any Person which is, or is engaged in business as, a competitor of the Business
or the Corporation or a lessor, lessee, supplier, distributor, sales agent or
customer of the Business or the Corporation; (ii) owns, directly or indirectly,
in whole or in part, any property that the Corporation uses in the operation of
the Business; or (iii) has any Claim whatsoever against or owes any amount to
the Corporation in connection with the Business, except for any liabilities
reflected in the Financial Statements and claims in the ordinary and normal
course of business such as for accrued vacation pay and accrued benefits for
Employees.
4.45 Year 2000 Readiness - To the knowledge of the Vendors the software
currently utilized by the Corporation in its operation and the software
developed by or on behalf of the Corporation and supplied to clients of the
Corporation; (i) will function without error or interruption related to Date
Data, specifically including errors or interruptions from functions which may
involve Date Data from more than one century; (ii) the software currently
utilized for the operation by the Business requires that all Date Data (whether
received from user, systems applications or other sources) include an indication
of century in each instance. All date output and results, in any form, shall
include an indication of century in each instance; and (iii) will recognize the
year 2000 as a leap year. When used in this paragraph, the term "Date Data"
shall mean any data or input which includes an indication of or reference to
date. To the knowledge of the Vendors, the software currently utilized by the
Corporation in its operation and developed by or on behalf of the Corporation
and or otherwise supplied to clients of the Corporation does not contain any
routines or devices introduced by the Corporation or to the knowledge of the
Vendors introduced by any other person or in any other manner that could
interfere with their use (including without limitation, time locks, keys or
bombs) or interfere with, delete or corrupt data (commonly known as "viruses").
4.46 Full Disclosure - The Vendors have made available to the Purchaser all
information including the financial, marketing, sales and operational
information on a historic basis relating to each of the Corporation which would
be material to a purchaser of the Purchased Shares. All information, which has
been provided to the Purchaser is true and correct in all material respects and
no material fact or facts have been omitted therefrom which would make such
information misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to the Vendors as follows as at each of
the Effective Date and the Closing Date and acknowledges that the Vendors are
relying on the representations and warranties by the Purchaser in entering into
this Agreement:
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5.1 Incorporation and Registration - The Purchaser is a corporation duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has all necessary corporate power, authority and capacity to
own its property and assets, to carry on its business as presently conducted and
to execute, deliver and perform its obligations under this Agreement.
5.2 Enforceability of Obligations - This Agreement has been executed and
delivered by the Purchaser and constitutes a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, save
and except that the enforcement hereof may be limited by applicable bankruptcy,
insolvency and other laws of general application affecting the enforcement of
creditors' rights and except that equitable remedies, such as specific
performance and injunction are available only in the discretion of a court of
competent jurisdiction.
5.3 Absence of Conflicting Agreements - The Purchaser is not a party to, bound
or affected by or subject to any Contract or Law which would be violated,
contravened, breached by or under which default would occur or an Encumbrance
would be created as a result of the execution, delivery and performance of this
Agreement or any other agreement to be entered into under the terms of this
Agreement.
5.4 No Litigation - There are no outstanding Claims at law or in equity or
before any Governmental Authority pending or to the knowledge of the Purchaser,
proposed or threatened, which would prevent the Purchaser from completing the
Transaction.
5.5 Travelbyus Shares - The Travelbyus Shares form part of a class of shares
that are listed and posted for trading on the TSE and upon issuance will be duly
and validly issued and outstanding as fully paid and non-assessable common
shares without nominal or par value.
5.6 Regulatory Approvals - Save and except for the approval of the TSE, no
Governmental Authorization is required on the part of the Purchaser in
connection with the execution, delivery and performance of this Agreement or any
other agreements to be entered into under the terms of this Agreement.
5.7 Reporting Issuer Status - The Purchaser is a "reporting issuer" within the
meaning of the Securities Act (Alberta), (British Columbia), (Manitoba),
(Ontario) and (Quebec) and is not in default of any requirement of applicable
Laws and no material change relating to the Purchaser has occurred with respect
to which the requisite material change report has not been filed and no such
disclosure has been made on a confidential basis. No securities commission or
similar regulatory authority has issued any order preventing or suspending
trading in any securities of the Purchaser or prohibiting the issue and sale of
the common shares in the capital of the Purchaser and to the knowledge of the
Purchaser no such proceedings for such purposes are pending or threatened.
5.8 Fully Disclosed Information - The information and statements with respect
to the Purchaser set forth in all information filed with the securities
commissions of the
-25-
provinces of Alberta, British Columbia, Manitoba, Ontario and Quebec and the TSE
is in compliance or intended compliance with applicable Laws, were true, correct
and complete and did not contain any misrepresentations as of the date of such
information or statement.
5.9 Litigation - There is no Claim, including appeals and applications for
review, in progress or to the knowledge of the Purchaser, pending or threatened
against or relating to the Purchaser before any court, Governmental Authority,
commission, board, bureau, agency or arbitration panel.
-26-
ARTICLE 6
NON-WAIVER; SURVIVAL
--------------------
6.1 Non-Waiver - No investigations made by or on behalf of the Purchaser or the
Vendors at any time shall have the effect of waiving, diminishing the scope of
or otherwise affecting any representation or warranty made by the Vendors or the
Purchaser, as applicable, in or pursuant to this Agreement. No waiver of any
condition or other provision, in whole or in part, shall constitute a waiver of
any other condition or provision (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
6.2 Nature and Survival - All representations, warranties and covenants
contained in this Agreement on the part of each of the Parties shall survive the
Closing, the execution and delivery under this Agreement of any share or
security transfer instruments or other documents of title to any of the
Purchased Shares and/or the Travelbyus Shares, except that:
(i) any claim for intentional misrepresentation or fraud may be brought
at any time;
(ii) the representations and warranties set out in sections 4.1 and 4.11
shall survive and continue in full force and effect without
limitation of time;
(iii) representations and warranties as to environmental matters shall
survive for a period of 10 years from the Closing Date;
(iv) representations and warranties concerning Tax matters shall survive
for a period of 90 days after the relevant authorities shall no
longer be entitled to assess liability for Tax against the
Corporation for any particular taxation year ended on or prior to the
Closing Date; and
(v) all other representations and warranties shall survive for a period
of three years from the Closing Date.
ARTICLE 7
PURCHASER'S CONDITIONS PRECEDENT
--------------------------------
The obligation of the Purchaser to complete the purchase of the Purchased Shares
under this Agreement shall be subject to the satisfaction of or compliance with,
at or before the Closing Time, each of the following conditions precedent (each
of which is acknowledged to be inserted for the exclusive benefit of the
Purchaser and may be waived by the Purchaser in whole or in part):
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7.1 Truth and Accuracy of Vendors' Representations and Warranties at the
Closing Time - All of the Vendors' representations and warranties made in or
pursuant to this Agreement shall be true and correct as at the Closing Time.
7.2 Performance of Obligations - The Vendors shall have performed or complied
with, in all respects, their respective obligations, covenants and agreements
under this Agreement.
7.3 Receipt of Closing Documentation - All documentation relating to the due
authorization and completion of the sale and purchase of the Purchased Shares
under this Agreement and all actions and proceedings taken on or prior to
Closing in connection with the performance by the Vendors of their obligations
under this Agreement, shall be satisfactory to the Purchaser, acting reasonably
and the Purchaser shall have received copies of all such documentation or other
evidence as the Purchaser may reasonably request in order to establish the
consummation of the Transaction and the taking of all corporate proceedings in
connection therewith in compliance with these conditions, in form (as to
certification and otherwise) and substance satisfactory to the Purchaser, acting
reasonably.
7.4 Opinion of Counsel for the Vendors - The Purchaser shall have received an
opinion dated the Closing Date from counsel to the Vendors with respect to the
Corporation on terms and conditions satisfactory to the Purchaser and its
counsel.
7.5 Consents, Authorizations and Registrations - All consents, approvals,
orders and authorizations of any Person or Governmental Authority (or
registrations, declarations, filings or recordings with any such Governmental
Authorities) required in connection with the completion of the Transaction, the
execution of this Agreement, Closing or the performance of any of the terms and
conditions of this Agreement shall have been obtained at or before the Closing
Time.
7.6 No Injunction - There shall be no injunction or restraining order issued
preventing and no pending or threatened Claim, judicial or administrative or
investigation against any Party by any Governmental Authority, for the purpose
of enjoining or preventing the consummation of the Transaction or otherwise
claiming that this Agreement or the consummation thereof is improper or would
give rise to proceedings under any statute or rule of law.
7.7 Employment Agreements - The Employment Agreements shall have been executed
and delivered on mutually acceptable terms and conditions.
7.8 Substantial Damage - No substantial damage by fire or other hazard to the
assets of the Corporation shall have occurred prior to the Closing Time.
7.9 Non-Permitted Encumbrances - Encumbrances on any of the assets or shares of
the Corporation shall have been discharged, save and except for the Permitted
Encumbrances.
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7.10 Working Capital The Purchaser shall receive satisfactory evidence that at
Closing or on or before January 15, 2000, the Corporation shall have retained;
(i) working capital in an amount equal to two months' operating expenses of the
Corporation as determined by the average monthly expenses incurred by the
Corporation for the period between December 1, 1998 to and including November
30, 1999, exclusive of officers' compensation and accompanying payroll taxes
paid to the Vendors; and (ii) any undistributed cash as working capital
including without limitation, cash and the ARC bond notwithstanding that such
amount may exceed two months' of operating expenses provided that any such
excess undistributed cash, over and above the two months' of operating expenses,
shall be repaid by the Purchaser to the Vendors on or before January 15, 2000.
Such amounts are set forth in Schedule 7.10.
If any of the foregoing conditions in this Article have not been fulfilled by
Closing, the Purchaser may terminate this Agreement by notice in writing to the
Vendors, in which event the Purchaser is released from all obligations under
this Agreement and unless the Purchaser can show that the condition relied upon
could reasonably have been performed by the Vendors, the Vendors are also
released from all obligations under this Agreement. The Purchaser may waive
compliance with any condition in whole or in part if it sees fit to do so
without prejudice to its rights of termination in the event of non-fulfilment of
any other condition, in whole or in part, or to its rights to recover damages
for the breach of any representation, warranty, covenant or condition contained
in this Agreement.
ARTICLE 8
VENDORS' CONDITIONS PRECEDENT
-----------------------------
The obligation of the Vendors to complete the sale of the Purchased Shares under
this Agreement shall be subject to the satisfaction of or compliance with, at or
before the Closing Time, each of the following conditions precedent (each of
which is acknowledged to be inserted for the exclusive benefit of the Vendors
and may be waived by the Vendors in whole or in part).
8.1 Truth and Accuracy of Purchaser's Representations and Warranties at Closing
Time - All of the representations and warranties of the Purchaser made in or
pursuant to this Agreement shall be true and correct as at the Closing Time.
8.2 Performance of Obligations - The Purchaser shall have performed or complied
with, in all respects, all its obligations, covenants and agreements under this
Agreement.
8.3 Receipt of Closing Documentation - All documentation relating to the due
authorization and completion of the sale of the Purchased Shares and the
issuance of the Travelbyus Shares under this Agreement and all actions and
proceedings taken on or prior to Closing in connection with the performance by
the Purchaser of its obligations under this Agreement, shall be satisfactory to
the Vendors, acting reasonably and the Vendors shall have received copies of all
such documentation or other evidence as the
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Vendors may reasonably require in order to establish the consummation of the
Transaction and the taking of all corporate proceedings in connection therewith
in compliance with these conditions, in form (as to certification and otherwise)
and substance satisfactory to the Vendors, acting reasonably.
8.4 Consents, Authorizations and Registrations - All consents, approvals,
orders and authorizations of any Person or Governmental Authority (or
registrations, declarations, filings or recordings with any such Governmental
Authorities) required in connection with the completion of the Transaction, the
execution of this Agreement, Closing or the performance of any of the terms and
conditions of this Agreement shall have been obtained at or before the Closing
Time.
8.5 Employment Agreements - The Employment Agreements shall have been executed
and delivered on mutually acceptable terms and conditions.
If any of the foregoing conditions in this Article have not been fulfilled by
Closing, the Vendors may terminate this Agreement by notice in writing to the
Purchaser in which event the Vendors are released from all obligations under
this Agreement and unless the Vendors can show that the condition relied upon
could reasonably have been performed by the Purchaser, the Purchaser is also
released from all obligations under this Agreement. The Vendors may waive
compliance with any condition in whole or in part if they see fit to do so,
without prejudice to their rights of termination in the event of non-fulfilment
of any other condition in whole or in part or to their rights to recover damages
for the breach of any representation, warranty, covenant or condition contained
in this Agreement.
ARTICLE 9
INDEMNIFICATION
---------------
9.1 A. Indemnification by the Vendors - The Vendors agree to jointly and
severally indemnify and save harmless the Purchaser without duplication on an
after-tax basis from and against all Losses suffered or incurred by the
Purchaser as a result of or arising directly or indirectly out of or in
connection with:
(a) any breach by the Vendors of or any inaccuracy of any of the
representations and warranties of the Vendors set out in this Agreement
(provided that the indemnity provided for in this section 9.1A(a) shall
not apply in the case of a breach or inaccuracy of any representation or
warranty unless the Purchaser shall have provided notice to the Vendors
in accordance with this Article 9 on or prior to the expiration of such
representation and warranty as provided in section 6.2);
(b) any breach or non-performance by the Vendors of any covenants to be
performed by the Vendors under this Agreement;
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(c) (i) for any and all Taxes of the Corporation with respect to all
taxation years of each of the Corporation ending on or prior to the
Effective Date; (ii) all Taxes allocated to the Vendors pursuant
hereto; and (iii) any Losses expenses, with respect to all taxation
years of each of the Corporation on or prior to the Effective Date,
arising out of or incidental to the imposition, assessment or
assertion of any such Taxes, including those incurred in connection
with the assertion or defense of any claim or assessment for such
Taxes (collectively, the "Other Amounts"). If, with respect to any
Taxes, the taxation year of the Corporation does not terminate on the
Effective Date, the notional Taxes (whether based on income, capital,
sale, transfer of ownership or provision of property or services or
otherwise) attributable to the taxation year of each of the
Corporation that includes the Effective Date shall be allocated to;
(i) the Vendors for the period up to and including the Effective
Date; and (ii) the Purchaser for the period subsequent to the
Effective Date. For the purposes of the section, Taxes for the period
up to and including the Effective Date shall be determined on the
basis of a closing of the books of each of the Corporation as of the
Effective Date. Any additional Taxes due up to and including the
Effective Date will be paid by the Vendors through an adjustment of
the Purchase Price. The notional tax calculations will be prepared
based on the provisions of the Tax Act and state income tax
legislation in effect at the Effective Date as if each of the
Corporation had a year end on the Effective Date. For greater
certainty and without limitation, each of the Purchaser and the
Vendors shall prepare or cause to be prepared in a manner consistent
with past practice, and file or cause to be filed, all Tax Returns of
each of the Corporation with respect to periods ending on or before
the Effective Date. Tax Returns shall be subject to the review and
approval by the Purchaser. Tax Returns shall be delivered to the
Purchaser at least 30 days prior to the due date for approval.
Whenever any taxing authority sends a notice of an audit, initiates
an examination of the Corporation, or otherwise asserts a claim,
makes an assessment, or disputes the amounts of Taxes for which the
Vendors are or may be liable under this Agreement, the Purchaser
shall promptly inform the Vendors and the Vendors shall have the
right to control, at their own cost and expense any resulting
proceedings and to determine whether and when to settle any such
claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which the Vendors are
liable under this Agreement. For greater certainty and without
limitation, the Purchaser and the Vendors shall provide the other
Party with such assistance as may reasonably be requested by either
of them in connection with the preparation of any Tax Return, any
audit or other examination with the preparation of any Tax Return,
any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for
Taxes, and each will retain and provide the other Party with any
records or information which may be relevant to such Tax Return,
audit or examination, proceedings or determination; and
(d) any liability arising by reason of a breach of the provisions of
section 10.2.
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9.2 Indemnification by the Purchaser - The Purchaser agrees to indemnify and
save harmless the Vendors without duplication on an after-tax basis from and
against all Losses suffered or incurred as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Purchaser of or any inaccuracy of any of the
representations and warranties of the Purchaser set out in this
Agreement provided that the indemnity provided for in this section
9.2(a) shall not apply in the case of a breach or inaccuracy of any
representation or warranty unless the Vendors shall have provided
notice to the Purchaser in accordance with this Article 9 on or prior
to the expiration of such representation and warranty as provided in
section 6.2); and
(b) any breach or non performance by the Purchaser of any covenants to be
performed by the Purchaser under this Agreement.
Notwithstanding the foregoing, it is understood and agreed that in the event the
Corporation receives or becomes entitled to receive a tax refund in respect of
taxation years ending up to and including November 30, 1999, the Vendors shall
be entitled to be paid an amount equal to such tax refund.
9.3 Notification of and Participation in Claims - No claim for indemnification
will arise until notice thereof is given to the Vendors or the Purchaser, as the
case may be. Such notice shall be sent within a reasonable time following the
determination by the Purchaser or the Vendors, as applicable, that a claim for
indemnity exists. If any legal proceedings shall be instituted or any claim or
demand is asserted by any third Person in respect of which the Vendors or the
Purchaser, as applicable, may have an obligation to indemnify the Purchaser, or
the Vendors, as the case may be, the Purchaser or the Vendors, as the case may
be, shall give or cause to be given to the Vendors or the Purchaser, as the case
may be, written notice thereof and such Party shall have the right, at its
option and expense, to be present at the defence of such proceedings, claim or
demand, but not to control the defence, negotiation or settlement thereof, which
control shall at all times rest with the Purchaser or the Vendors, as the case
may be, unless the Vendors or the Purchaser, as the case may be, irrevocably
acknowledges full and complete responsibility for indemnification of the
Purchaser or the Vendors, as the case may be, in which case the Vendors or the
Purchaser, as the case may be, may assume such control through counsel of its
choice provided however that no settlement shall be entered into without the
Purchaser's written consent or the Vendor's written consent, as the case may be,
which shall not be unreasonably withheld. The Parties shall co-operate fully
with each other in connection with the defence, negotiation or settlement of any
such third Person legal proceeding, claim or demand.
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ARTICLE 10
GENERAL
-------
10.1 Public Notices - All public notices to third Persons and all other
publicity concerning the Transaction shall be jointly planned and co-ordinated
by the Vendors and the Purchaser and no Party shall act unilaterally in this
regard without the prior approval of the other Party, such approval not to be
unreasonably withheld, except:
(a) in the case of the Purchaser for communications made in confidence to
Employees of the Corporation affected by the Transaction who shall be
informed of the confidential nature of the Transaction and who agree
to keep such information confidential; or
(b) where required to do so by law or by the applicable regulations or
policies of any regulatory agency of competent jurisdiction or any
stock exchange in circumstances where prior consultation with the
other Party is not practicable.
10.2 Expenses - Each of the Parties shall pay their respective legal,
accounting and other professional advisory fees, costs and expenses incurred in
connection with the purchase and sale of the Purchased Shares and the issuance
of the Travelbyus Shares and the preparation, execution and delivery of this
Agreement and all documents and instruments executed pursuant to this Agreement
and any other costs and expenses incurred by the Party including any fees and
expenses of any broker or investment advisor in connection with the sale of the
Purchased Shares and the issuance of the Travelbyus Shares.
10.3 Notices - Any notice or other writing required or permitted to be given
under this Agreement or for the purposes of this Agreement (in this section
referred to as a "Notice") shall be in writing and shall be sufficiently given
if delivered, or if transmitted by facsimile or other form of recorded
communication tested prior to transmission to such Party:
(a) to Xxxxxx Xxxxxxxx at: 00000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
to Xxxxxx Xxxxxxx at: 00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx XX 00000
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with a copy to: Xxxx, Xxxxxxxx & Xxxxxxxxxx, LLC
Tax & Business Services
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx
00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Fax No.: (000) 000-0000
(b) to the Purchaser at: 204 - 0000 Xxxx Xxxxxx Xxx.
Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxx
Fax No.: (000) 000-0000
with a copy to: Xxxxxxx Xxxxx & Xxxxxxxxx
Scotia Plaza
Suite 2100
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxx
Fax No.: (000) 000-0000
or at such other address as the Party to whom such Notice is to be given shall
have last notified the Party giving the same in the manner provided in this
section. Any Notice delivered to the Party to whom it is addressed as provided
above shall be deemed to have been given and received on the day it is so
delivered at such address, provided that if such day is not a Business Day then
the Notice shall be deemed to have been given and received on the next Business
Day. Any Notice transmitted by facsimile or other form of recorded communication
shall be deemed given and received on the first Business Day after its
transmission.
10.4 Assignment - Neither this Agreement nor any benefits or burdens under this
Agreement shall be assignable by any Party without the prior written consent of
each of the other Parties. Subject to the foregoing, this Agreement shall enure
to the benefit of and be binding upon the Parties and their respective
successors (including any successor by reason of amalgamation of any Party) and
permitted assigns.
10.5 Further Assurances - The Parties shall, with reasonable diligence, do all
such things and provide all such reasonable assurances as may be required to
consummate the Transaction and each Party shall provide such further documents
or instruments required by any other Party as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry out its provisions,
whether before or after the Closing.
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10.6 Counterparts and Facsimile - This Agreement may be executed by the Parties
in separate counterparts and by facsimile each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF the Parties have duly executed this Agreement.
XXXXXXXXXX.XXX LTD.
Per: /s/ Xxxx Xxxxx
--------------
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
/s/ Xxxx Childs ) /s/ Xxxxxx Xxxxxxx
---------------------------- ) ------------------
Witness ) XXXXXX XXXXXXX
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
/s/ Xxxxxxx X. Xxxxxxxxxx ) /s/ Xxxxxx Xxxxxxxx
---------------------------- ) -------------------
Witness ) XXXXXX XXXXXXXX
