EXHIBIT 10.14
ASSET PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 30, 2003
among
OPTIMAL SERVICES GROUP INC.
(the "Purchaser")
and
RBA INC.
(the "Seller")
and
XXXXXXX XXXXXX
(the "Shareholder")
and to which intervenes
OPTIMAL ROBOTICS CORP.
("Optimal Robotics")
TABLE OF CONTENTS
Page
Article 1 PURCHASE AND SALE...................................................23
1.1 Acquired Assets......................................................23
1.2 Excluded Assets......................................................23
1.3 Assumption of Liabilities............................................23
1.4 Excluded Liabilities.................................................23
1.5 Effective Date.......................................................23
1.6 Considerations and Payment...........................................23
1.7 Consents and Releases................................................23
1.8 Accounts Receivable Elections........................................23
1.9 GST and QST Elections................................................23
1.10 Assets belonging to Affiliates....................................23
Article 2 Closing.............................................................23
2.1 Closing..............................................................23
2.2 Schedules............................................................23
Article 3 Representations and Warranties by the Seller........................23
3.1 Organization, Existence and Authority of the Seller..................23
3.2 Immovable Property Leases............................................23
3.3 Intellectual Property................................................23
3.4 Litigation...........................................................23
3.5 Contracts............................................................23
3.6 Employees............................................................23
3.7 Employee Plans.......................................................23
3.8 Inventory............................................................23
3.9 Accounts Receivable..................................................23
3.10 Financial Statements..............................................23
3.11 Condition of and Title to Assets..................................23
3.12 Absence of Certain Changes or Events..............................23
3.13 Governmental Permits..............................................23
3.14 Compliance with Laws..............................................23
3.15 No Options, etc...................................................23
3.16 Books and Records.................................................23
3.17 No Liabilities....................................................23
3.18 Environmental Matters.............................................23
3.19 Residence of the Seller...........................................23
3.20 Suppliers and Customers...........................................23
3.21 Product Liability and Product Warranty............................23
3.22 Worker's Compensation Matters.....................................23
3.23 Receivables.......................................................23
3.24 Payables..........................................................23
3.25 Notices...........................................................23
3.26 Taxes.............................................................23
3.27 Movable Property and Vehicles.....................................23
3.28 Insurance.........................................................23
3.29 Full Disclosure...................................................23
Article 4 Representations and Warranties by the Purchaser
AND OPTIMAL ROBOTICS................................................23
4.1 Organization, Existence and Authority of the Purchaser...............23
4.2 Organization, Existence and Authority of Optimal Robotics............23
4.3 Litigation...........................................................23
Article 5 Covenants of the PARTIES............................................23
5.1 Conduct of Business..................................................23
5.2 No Encumbrances......................................................23
5.3 Access...............................................................23
5.4 Consents and Estoppel Certificate....................................23
5.5 Additional Agreements................................................23
5.6 Notice of Untrue Representation or Warranty..........................23
5.7 Unearned Revenues....................................................23
5.8 Confidentiality......................................................23
5.9 Cooperation in the Defence of Claims.................................23
5.10 Covenant to Satisfy Closing Conditions............................23
5.11 Montcap Guarantee.................................................23
Article 6 Employees...........................................................23
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6.1 Employees............................................................23
6.2 Terminated Employees.................................................23
6.3 Employee Plans.......................................................23
6.4 No Third Party Beneficiaries.........................................23
Article 7 Termination of Agreement............................................23
7.1 Termination by the Purchaser.........................................23
7.2 Termination by the Seller............................................23
7.3 Other Termination Rights.............................................23
7.4 Effect of Termination................................................23
Article 8 Conditions to the Closing...........................................23
8.1 Conditions to Obligations of the Purchaser...........................23
8.2 Conditions to Obligations of the Seller..............................23
Article 9 Survival; Indemnification...........................................23
9.1 Survival; Remedy for Breach..........................................23
9.2 Indemnification by the Seller........................................23
9.3 Indemnification by the Purchaser.....................................23
9.4 Extension of Indemnities.............................................23
9.5 Taxes................................................................23
9.6 Limitations..........................................................23
Article 10 Notices............................................................23
10.1 Notices...........................................................23
Article 11 Certain Definitions................................................23
11.1 Definitions.......................................................23
Article 12 Miscellaneous......................................................23
12.1 Brokers...........................................................23
12.2 Expenses..........................................................23
12.3 Announcements.....................................................23
12.4 Successors and Assigns............................................23
12.5 Schedules and Exhibits............................................23
12.6 Entire Agreement; Amendment.......................................23
12.7 Counterparts......................................................23
12.8 Agreement to Take Necessary and Desirable Actions.................23
12.9 Headings..........................................................23
12.10 Governing Law.....................................................23
12.11 Severability......................................................23
12.12 Jurisdiction; Consent to Service of Process.......................23
12.13 Waiver............................................................23
12.14 Guarantee of the Shareholder......................................23
12.15 Conditions of the Guarantee.......................................23
12.16 Language..........................................................23
Article 13 severance paymentS and other matters...............................23
13.1 Severance Payments................................................23
13.2 Moneris Indemnity.................................................23
EXHIBITS DESCRIPTION
Exhibit A -- Form of Employment Agreement
Exhibit B -- Form of Opinion of Seller's Counsel
Exhibit C -- Form of Opinion of Purchaser's Counsel
Exhibit D -- Form of Holdback Disbursement Agreement
Exhibit E -- Form of Non-Compete Covenant
Exhibit F -- Form of Assignment of the Fiducie RBA/RBA Trust
Exhibit G -- Form of Termination Agreement
SCHEDULES DESCRIPTION
Schedule 1.1(b) -- Inventory
Schedule 1.1(c) -- Equipment
Schedule 1.1(e) -- Proprietary Computer Software Systems
Schedule 1.1(f) -- Vehicles
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Schedule 1.2(b) -- Excluded Contracts
Schedule 1.2(d) -- Excluded Receivables
Schedule 1.2(f) -- Third Party Software Systems
Schedule 1.3(a) -- Capital Leases
Schedule 1.3(b) -- Accrued Liabilities
Schedule 1.3(d) -- Contracts where the Seller has been paid in advance
Schedule 1.3(e) -- Incomplete Purchase Orders/Requests
Schedule 1.6(c) -- Copy of Moneris letter dated August 25, 2003
Schedule 1.7 -- Required Consents and Releases
Schedule 3.1(b) -- Bankruptcy or Reorganization Proceedings
Schedule 3.1(c) -- Other Consents
Schedule 3.2 -- Immovable Property Leases
Schedule 3.3 -- Intellectual Property
Schedule 3.4 -- Litigation
Schedule 3.5 -- Material Contracts
Schedule 3.6 -- Employee Matters
Schedule 3.7 -- Employee Plans
Schedule 3.10(a) -- Acquired Business Balance Sheet
Schedule 3.10(b) -- Financial Statements
Schedule 3.11 -- Assets Held by Non-Arm's Length Persons
Schedule 3.13 -- Required Permits
Schedule 3.18 -- Environmental Matters
Schedule 3.20 -- Suppliers and Customers
Schedule 3.21 -- Product Liability
Schedule 3.22 -- Workers' Compensation Matters
Schedule 3.23 -- Receivables
Schedule 3.24 -- Payables
Schedule 3.25 -- Notices
Schedule 3.26 -- Taxes
Schedule 3.28 -- Insurance Policies
Schedule 6.1 -- Employees
Schedule 6.2 -- Terminated Employees
Schedule 11.1(z) -- Permitted Liens
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") dated as of September 30, 2003.
AMONG: OPTIMAL SERVICES GROUP INC., a Canadian corporation
(the "Purchaser")
AND: RBA INC., a Canadian corporation
(the "Seller")
AND: XXXXXXX XXXXXX, a businessman
(the "Shareholder")
AND TO WHICH INTERVENES: OPTIMAL ROBOTICS CORP., a Canadian corporation
("Optimal Robotics")
W I T N E S S E T H
WHEREAS the Seller provides multivendor hardware maintenance outsourcing
services across Canada, including (i) Interac/Credit Cards system maintenance
outsourcing services and (ii) computer maintenance services (the "Acquired
Business"); and
WHEREAS the parties desire to enter into this Agreement pursuant to which the
Seller will convey to the Purchaser and the Purchaser will acquire from the
Seller the business, assets, properties and intellectual property constituting
the Acquired Business in exchange for the consideration hereinafter specified;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Acquired Assets
Except as otherwise specifically provided for herein, at the Closing, and
with effect as of 6:00 p.m. (the "Effective Time") on the Closing Date,
the Seller shall sell, transfer, convey and assign to the Purchaser and
the Purchaser shall purchase, accept and acquire all of the Seller's
right, title and interest in and to all of the business, assets,
properties and intellectual property of the Seller, other than the
Excluded Assets (as defined below), wheresoever situate (whether within
the Province of Quebec or otherwise), (collectively, the "Assets")
including, without limitation, the following:
(a) the full benefit of all contracts, including leases of movable
property and equipment, licence agreements, undertakings and
commitments of any nature, written or oral, to which the Seller is
entitled or is a party (the "Contracts"), including, without
limitation: (i) all outstanding proposals for maintenance or repair
services submitted by the Seller to any of its customers, (ii) all
unfilled purchase orders/requests or commitments for services
received by the Seller, (iii) all restrictive agreements and
negative covenant agreements that the Seller may have with its
employees, past and present, and (iv) the Material Contracts ;
(b) all inventories, finished goods, materials and supplies, spare
parts, work-in-progress and maintenance items of the Seller,
including, without limitation, those items listed in Schedule 1.1(b)
(collectively, the "Inventory");
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(c) all movable property and equipment and interests therein of the
Seller, including, but not limited to, all furniture, furnishings,
prototypes, fixtures, computers, office equipment (including word
processing, accounting, communication and reproduction equipment),
tools, test equipment and training equipment including, without
limitation, the movable property and equipment listed in Schedule
1.1(c) (collectively, the "Movable Property");
(d) all tangible records, files, documents, correspondence and other
data however embodied (including, without limitation, on computer
disks and tapes and photographic negatives) including, without
limitation, business reports, plans and projections, customer and
supplier lists, promotional or marketing materials, referral
sources, books of account, tax records, account service histories
and dispatch data, vendor lists, service manuals, service plans,
parts lists, operator manuals, customer manuals, engineering changes
(including engineering change notices), computer programs and
software, purchase, sales and services correspondence, budgets,
employee files, all customer and supplier information and files,
research and development records, consents, approvals,
authorizations, records and correspondence that relate to Permits,
"how to" specifications, installation procedures, maintenance
analysis procedures and repair manuals (collectively, the "Books and
Records"), except for those records, files and other data which the
Seller is unable to sell, transfer, convey or assign to the
Purchaser pursuant to applicable Law; the Purchaser hereby
authorizes the Seller to keep one archival copy of the Books and
Records to be used by the Seller solely in the event of any dispute
regarding the Assets, the Acquired Business or this Agreement, or in
connection with the discussion, defense or settlement of any claim
or potential claim by or against the Seller, its shareholders or
directors including, without limitation, any tax audit or
assessment, and the Purchaser undertakes to grant reasonable access
to the Seller at any time following the Closing Date to the IBM
AS/400 equipment and back-up systems to read, process and copy any
such Books and Records which by their nature cannot be read,
processed or copied otherwise, it being understood that the Seller
shall not use such Books and Records for any other purpose,
including, without limitation, to compete with the Acquired Business
or to solicit clients of the Acquired Business; the Purchaser,
acting reasonably, at any time following the Closing Date will have
access to the Seller's legal files related to the Assets and the
Acquired Business (except for the Shareholder's personal files, the
Seller's corporate records and all files related to the negotiation
and sale of the Acquired Business), on a need-to-know basis, which
are currently located at the offices of the three (3) law firms
Xxxxxxxxxx Xxxxxxxx Xxxxx Xxxxxx, Xxxxxxxxxx and Le Corre et
Associes, upon reasonable notice and at the Purchaser's costs, and
the Seller undertakes to grant all necessary consent or
authorization to facilitate such access;
(e) all copies of and any rights to proprietary computer software
systems including, without limitation, those listed in Schedule
1.1(e);
(f) all trailers, trucks, material handling equipment, cars and other
vehicles owned or leased by the Seller, including, without
limitation, those listed and described in Schedule 1.1(f)
(collectively, the "Vehicles") as well as all assignable warranties
related to the Vehicles;
(g) all accounts receivable, trade accounts notes receivable, book debts
and other debts due or accruing due to the Seller (collectively, the
"Receivables") and the full benefit of all security for any of the
Receivables;
(h) all prepaid expenses and security deposits of the Seller, except as
otherwise expressly excluded in this Agreement;
(i) all right, title and interest of the Seller in and to the Immovable
Property Leases (including, without limitation, any security
deposits and any options to renew or purchase related thereto), the
premises subject to such Immovable Property Leases and the leasehold
improvements pertaining thereto;
(j) all Permits owned, held or used by the Seller, to the extent
transferable, including, without limitation, the Permits listed in
Schedule 3.13;
(k) any and all (i) trademarks, trade names, business names, brand
names, service marks, computer software, computer programs,
copyrights, designs, trade secrets, inventions, patents, franchises,
formulae, processes, know-how, technology and related goodwill, (ii)
applications, registrations, issued patents, continuations in part,
divisional applications or analogous rights or licence rights
therefor, and (iii) other intellectual or industrial property,
including, without limitation, the intellectual property described
in Schedule 3.3, in each case, owned or used by the Seller
(collectively, the "Intellectual Property");
(l) the goodwill of the Seller, including, without limitation, the
exclusive right to the Purchaser to (i) represent itself as carrying
on the Acquired Business in continuation of and in succession to the
Seller, and (ii) use any words indicating that the Acquired Business
is so carried on, including all of the Seller's right, title
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and interest in and to the name "RBA", together with the rights, if
any, to telephone and facsimile numbers and internet domain names
owned or used by the Seller;
(m) all claims of the Seller against third parties, whether known or
unknown, xxxxxx or inchoate, contingent or otherwise;
(n) all artwork, signs, facia, merchandising units, exhibits and
packaging;
(o) all proceeds of any or all of the foregoing; and
(p) all other property, assets and rights, movable or immovable,
tangible or intangible, owned by the Seller.
1.2 Excluded Assets
Notwithstanding the foregoing, the Assets to be purchased and sold
pursuant to this Agreement shall not include any of the following
(collectively, the "Excluded Assets"):
(a) all cash, marketable securities, bank balances, money in possession
of banks and other depositaries (other than security deposits held
by suppliers), term or time deposits and similar cash items owned or
held by or for the account of the Seller as of the Closing Date
including, without limitation, that certain sum of money paid prior
to the date hereof by the Seller to La Societe des Loteries Video du
Quebec (the "SLVQ") as a deposit (the "SLVQ Deposit"; the amount of
the SLVQ Deposit together with the amount of all such cash or
similar cash items being sometimes hereinafter referred to
collectively as the "Cash Amount"). The parties agree that the SLVQ
Deposit shall not be withdrawn from SLVQ and that an equivalent sum
of money in the amount of two hundred thousand dollars ($200,000)
shall be paid at Closing by the Purchaser to the Seller. The Parties
will execute on the Closing Date an assignment agreement providing
for the assignment of the SLVQ Deposit to the Purchaser and such
assignment shall be properly notified to SLVQ (the "SLVQ Assignment
Agreement"). In the event that the Purchaser performs its
obligations pursuant to the service agreement with SLVQ under the
licence issued by SLVQ to the Seller (the "Seller's Licence") until
the SLVQ issues a licence to the Purchaser, the Purchaser undertakes
to assume all obligations under the Seller's Licence to the complete
exculpation of the Seller, and the Purchaser shall indemnify, defend
and hold harmless the Seller for any Damages incurred or suffered by
the Seller arising out of or resulting from the Purchaser's
performance or non-performance under the Seller's Licence.
(b) any interest of the Seller in the contracts listed in Schedule
1.2(b), related to the lease, rental or use of immovable property or
fixtures other than with respect to the premises subject to the
Immovable Property Leases;
(c) any interest of the Seller in insurance policies;
(d) any amounts received or recovered with respect to any dispute,
litigation, action or proceeding listed in Schedule 1.2(d);
(e) income tax refunds and other tax refunds receivable by the Seller;
(f) any rights to the third party proprietary computer software systems
listed in Schedule 1.2(f), to the extent only that the consent of
the licensors or lessors thereof is required to transfer or assign
the Seller's interest in such systems to the Purchaser and such
consent is refused by the licensor or lessor. The Seller shall use
its best efforts, but shall not be required to pay any licence or
transfer fees or otherwise expend any funds, to obtain the consents
of the licensors or lessors thereof to such transfer or assignment;
(g) those assets of the Seller, not expressly included within the
Assets, in regard to which there is a corresponding obligation,
other than an Assumed Liability, that has not been fully paid or
otherwise performed by the Seller as of the Effective Time; and
(h) the minute books, corporate seal and corporate records of the
Seller.
1.3 Assumption of Liabilities
Except as otherwise specifically provided herein, the Purchaser shall, as
of the Effective Time on the Closing Date, assume and thereafter pay,
perform or discharge when due, to the complete exculpation of the Seller,
or
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reimburse the Seller for any payments made on the Purchaser's behalf with
respect to (collectively, the "Assumed Liabilities"):
(a) the obligations of the Seller accruing as and from the Effective
Time on the Closing Date under the capital leases listed in Schedule
1.3(a) (the "Capital Leases");
(b) all trade and other accounts payable and all accrued liabilities
relating to the Acquired Business that are outstanding as at the
close of business on the Closing Date and which are listed on
Schedule 1.3(b) (for the period up to August 31, 2003) or on the
Closing Balance Sheet (collectively, the "Accrued Liabilities");
(c) all trade and other accounts payable relating to the Acquired
Business that accrue as and from the Effective Time on the Closing
Date;
(d) the Seller's obligations accruing as and from the Effective Time on
Closing Date under the Contracts (including those Contracts in
respect of which the Seller has been paid in advance for the
services to be provided thereunder, a list of which Contracts for
which payments have been received on or prior to August 31, 2003 is
attached hereto as Schedule 1.3(d)) and the Immovable Property
Leases;
(e) the Seller's obligation to complete all purchase orders/requests for
services entered into in the ordinary course of the operations of
the Acquired Business (a list of uncompleted purchase
orders/requests involving payments in excess of CDN$150,000 each and
dated on or earlier than August 31, 2003 is attached as Schedule
1.3(e)) to the extent unfilled on the Closing Date, except for those
purchase orders/requests for service which are cancelled (without
any obligation surviving) by the Purchaser after the Closing Date;
(f) the Seller's obligation to pay the Settlement Amount;
(g) the Seller's obligation to pay the commission, in the amount of
$406,113.29 (including GST of $24,500.00, QST of $28,087.50 and out
of pocket expenses of $3,525.79), owing to CIBC in connection with
the transactions herein contemplated;
(h) the indebtedness owing by the Seller to Montcap Financial
Corporation pursuant to the agreement dated April 2, 2003. The
amount of such indebtedness as at the close of business on September
30, 2003 is two million five hundred sixty-three thousand thirty-six
Canadian Dollars and fifty-four cents (CDN$2,563,036.54) inclusive
of the Montcap Fee, legal fees and miscellaneous charges to be
included in the final statement to be delivered by Montcap Financial
Corporation;
(i) the obligation of the Seller to pay the Montcap Fee;
(j) any liability or claim arising out of the ownership of the Assets or
the operation of the Acquired Business accruing as and from the
Effective Time on the Closing Date, including without limitation,
any claim for injury to any employee, to the extent that the
occurrence alleged to give rise to such liability is subsequent to
the Effective Time on the Closing Date;
(k) any liabilities of the Seller accruing from or being determined by
reference to any period prior to, as at and subsequent to the
Effective Time on the Closing Date relating to the employment of
those of the employees of the Seller who shall have continued their
employment with the Purchaser as contemplated under Section 6.1
including, without limitation, any liabilities to said employees (i)
for salary, wages, accumulated overtime, severance payment or other
separation benefits, bonuses, vacation pay, accumulated vacation
time and other compensation and (ii) arising out of the Employee
Plans such liabilities accruing from or being determined by
reference to any period prior to, as at and subsequent to the
Closing Date;
(l) any liabilities of the Purchaser for or relating to any Taxes
relating to the Acquired Business or the Assets accrued or incurred
after the Effective Time on the Closing Date;
(m) any obligation or liability under Contract which is not assignable
to the Purchaser (or which is assignable to the Purchaser but only
with the consent of a third party and such consent is not obtained)
and with respect to which the Purchaser receives all or
substantially all of the benefits of the Seller thereunder; and
(n) any other liabilities incurred by the Seller with respect to the
Acquired Business expressly assumed by the Purchaser under this
Agreement.
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1.4 Excluded Liabilities
Except for Assumed Liabilities, the Purchaser shall not, and does not
assume, agree to perform or discharge, indemnify the Seller against or
otherwise have any responsibility for any liabilities, costs, expenses,
claims against or losses of the Seller (collectively the "Excluded
Liabilities"), including, without limitation, the following:
(a) any liabilities of the Seller for or relating to any Taxes relating
to the Acquired Business or the Assets, which are accrued or
incurred before the Effective Time on the Closing Date;
(b) any liability of the Seller not disclosed on the Closing Balance
Sheet pertaining to any employee of the Seller not listed in
Schedule 6.1 or Schedule 6.2, or the termination of his or her
employment;
(c) except as otherwise provided in Section 1.3, with respect to any
litigation, action or proceeding, whether or not now pending or
threatened, to the extent based on events occurring or a state of
facts existing on or prior to the Effective Time on the Closing
Date, whether or not the Seller has been notified of any existing or
potential claims with respect to products used or services rendered
by the Seller prior to the Closing;
(d) any current liability which accrued prior to the Effective Time on
the Closing Date and not disclosed on Schedule 1.3(b) or on the
Closing Balance Sheet;
(e) where a current liability which accrued prior to the Effective Time
on the Closing Date is disclosed on the Closing Balance Sheet but
the actual amount of such liability exceeds the amount disclosed,
the amount in excess of the amount so disclosed;
(f) any obligations or liabilities of the Seller arising out of any
immovable property leases listed in Schedule 1.2(b);
(g) whether or not disclosed by Seller, any retention bonus or sale of
business bonus (golden parachute), if any, payable to any employee
of Seller as a result of the consummation of the transactions
contemplated herein;
(h) any obligation or liability under Contract which is not assignable
to the Purchaser (or which is assignable to the Purchaser but only
with the consent of a third party and such consent is not obtained)
and with respect to which the Purchaser does not receive all or
substantially all of the benefits of the Seller in accordance with
Section 5.5(b), provided that the Seller and the Purchaser shall
cooperate in order that the Purchaser receives such benefits or, in
the event that the Purchaser does not receive such benefits, the
Purchaser undertakes to use reasonable commercial efforts to assist
the Seller, at the Seller's costs, with its obligations under such
contracts; and
(i) any liability arising out of the Factoring Services Agreement dated
as of April 2, 2003 between Montcap Financial Corporation and the
Seller other than the obligations expressly assumed by the Purchaser
pursuant to the Termination Agreement.
1.5 Effective Date
It is understood and agreed that the Purchaser is acquiring the Assets and
assuming the Assumed Liabilities as of the Effective Time on the Closing
Date.
1.6 Considerations and Payment
(a) The purchase price for the Assets (the "Purchase Price") shall be
the sum of (a) four million seven hundred thousand Canadian Dollars
(CDN$4,700,000), less the Cash Amount (which the parties estimate to
be seven hundred thousand Canadian Dollars (CDN$700,000) as at the
Closing Date) and subject to the Post-Closing Adjustment as provided
in Section 1.6(d) below (the "Cash Consideration"), (b) the amount
of the Assumed Liabilities; (c) the amount of two hundred thousand
Canadian Dollars (CDN$200,000) in consideration for the SLVQ Deposit
(the "SLVQ Payment"); and (d) the Severance Payments (as defined
below in Article 13). Payment of the Purchase Price shall be
effected, as to the Cash Consideration, the SLVQ Deposit and the
estimated Severance Payments in the amount of eight hundred
ninety-eight thousand eight hundred fourteen Canadian Dollars and
forty-seven cents (CDN$898,814.47), by the payment of same in
accordance with the provisions of Section 1.6(b) and, as to the
Assumed Liabilities, by the assumption and payment of same by the
Purchaser.
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(b) On the Closing Date, the Purchaser will deliver (i) to the Seller, a
bank draft or a certified cheque in the amount of three million four
hundred thousand Canadian Dollars (CDN$3,400,000), on account of the
Cash Consideration and the SLVQ Payment; (ii) to Xxxxxx Xxxxxx
Xxxxxx Xxxxx Xxxxxxxxx (the "Agent"), a bank draft or a certified
cheque in the amount of one million Canadian Dollars (CDN$1,000,000)
(the "Holdback Amount"), on account of the Cash Consideration, such
Holdback Amount to be dealt with in accordance with the provisions
contained in Section 1.6(f); and (iii) to the Agent, a bank draft or
a certified cheque in the amount of eight hundred ninety-eight
thousand eight hundred fourteen Canadian Dollars and forty-seven
cents (CDN$898,814.47), on account of the estimated Severance
Payments, to be dispersed by the Agent to the individuals to whom
the Seller and the Purchaser have jointly agreed the Severance
Payments shall be payable. As set forth in Section 1.6(c), a
procedure has been established for the purpose of preparing the
Closing Balance Sheet and establishing any Post-Closing Adjustment
to determine the final Purchase Price.
(c) Not more than fifty-five (55) days after the Closing Date, the
Seller shall deliver to the Purchaser an unaudited closing balance
sheet (the "Closing Balance Sheet") of the Acquired Business as at
the Effective Time on the Closing Date, which Closing Balance Sheet
shall be prepared on a basis that is consistent with prior periods,
including, without limitation, on a basis consistent with the
Financial Statements. The Purchaser and its representatives, acting
reasonably, shall be permitted full access to observe at all times
during normal business hours the preparation of the Closing Balance
Sheet and to ask questions to the Seller and its representatives.
Purchaser agrees to provide the Seller and the Seller's accountants,
at no cost to the Purchaser, full access to the books and records of
the Purchaser (relating to the Acquired Business and the Assets)
only during normal business hours to the extent reasonably requested
by the Seller for purposes of preparing the Closing Balance Sheet.
Seller agrees to provide Purchaser and Purchaser's accountants, at
no cost to Seller, full access to its books and records after the
Closing Date to the extent reasonably requested by the Purchaser for
purposes of reviewing the Closing Balance Sheet. Unless the
Purchaser notifies the Seller in writing on or prior to the later of
(i) the sixtieth (60th) day after the Closing Date, and (ii) the
fifth (5th) business day after the delivery of the Closing Balance
Sheet by the Seller to the Purchaser (the "Notice Deadline") that it
disagrees with the Closing Balance Sheet (the "Purchaser's Notice"),
the Closing Balance Sheet shall be deemed to constitute the Final
Closing Balance Sheet (as hereinafter defined in this Section
1.6(c)) and shall be conclusive and binding on the Seller and the
Purchaser. The Purchaser's Notice shall clearly identify the item(s)
disputed by the Purchaser with the value proposed for such item(s).
If the Purchaser so notifies the Seller in writing on or prior to
the Notice Deadline, the Seller and the Purchaser shall attempt to
resolve their differences with respect to the disputed item(s)
within five (5) days after the Seller's receipt of the Purchaser's
Notice (such period hereinafter referred to as the "Five Day
Period"). Any such dispute not resolved by the Seller and the
Purchaser within the Five Day Period will be submitted forthwith to
the President of the Order of Chartered Accountants (Quebec) (or, in
his absence or refusal to act, any chartered accountant selected by
the said President) (the "Arbitrator") for resolution. The
Arbitrator shall make a determination on the disputes so submitted
as well as such modifications, if any, to the Closing Balance Sheet
as reflect such determination, within seven (7) business days
following the expiry of the Five Day Period and the same shall be
conclusive and binding upon the parties and may not be appealed. The
Arbitrator shall have no right to make any determination with
respect to the undisputed portions or items of the Closing Balance
Sheet, and no such determination with respect to the undisputed
portions or items of the Closing Balance Sheet shall be binding on
the Purchaser or the Seller. For each item in dispute, if the
Arbitrator's determination does not differ from the Seller's
determination in the Closing Balance Sheet by more than twenty-five
thousand Canadian Dollars (CDN$25,000) to the Purchaser's advantage,
then no modification shall be made to the Closing Balance Sheet for
such item, unless the aggregate amount of such modifications exceeds
one hundred thousand Canadian Dollars (CDN$100,000), in which
circumstance each of such items shall be adjusted in accordance with
the Arbitrator's determination. The dollar amount of any disputed
item shall not, however, be in excess of, nor less than, the
greatest or lowest value, respectively, claimed for that particular
item in the Closing Balance Sheet prepared by the Seller, in the
case of the Seller, or in the Purchaser's Notice, in the case of the
Purchaser. In the event that the net aggregate amount of all
adjustments to the Closing Balance Sheet made by the Arbitrator to
the Purchaser's advantage is less than or equal to one hundred
thousand Canadian Dollars (CDN$100,000), the costs of the Arbitrator
shall be borne solely by the Purchaser. In the event that the net
aggregate amount of all adjustments to the Closing Balance Sheet
made by the Arbitrator to the Purchaser's advantage is greater than
one hundred thousand Canadian Dollars (CDN$100,000) and less than or
equal to two hundred and fifty thousand Canadian Dollars
($CDN$250,000), the costs of the Arbitrator shall be borne equally
by the Purchaser and the Seller. In the event that the net aggregate
amount of all adjustments to the Closing Balance Sheet made by the
Arbitrator to the Purchaser's advantage is greater than two hundred
and fifty thousand Canadian Dollars (CDN$250,000), the costs of the
Arbitrator shall be borne solely by the Seller. The Closing Balance
Sheet as finally determined pursuant to the procedures set forth in
this Section 1.6(c) is hereinafter referred to as the "Final Closing
Balance Sheet".
(d) Notwithstanding any other provision hereof to the contrary, the
amount to be included in the Closing Balance Sheet on account of the
Settlement Amount shall be understated by three hundred thousand
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Canadian Dollars (CDN$300,000), to account for the fact that the
Cash Consideration has been reduced by the same amount pursuant to
the agreement of the parties that the Seller shall support three
hundred thousand Canadian Dollars (CDN$300,000) on account of the
Settlement Amount. In addition, the Closing Balance Sheet shall
include, as a separate line item liability, five-sixths (5/6) of the
amount, if any, by which the October Moneris Inventory Discrepancy
exceeds the one million three hundred sixty-two thousand eighty-one
Canadian Dollars (CDN$1,362,081) claim of Moneris as set forth in
the letter dated August 25, 2003, a copy of which is attached hereto
as Schedule 1.6(c).
(e) Further to the determination of the Final Closing Balance Sheet, the
Purchase Price shall be adjusted as follows:
(i) the Purchase Price shall be reduced on a dollar for dollar
basis by the amount, if any, by which the shareholders'
deficit appearing on the Final Closing Balance Sheet exceeds
the amount of three hundred thousand Canadian dollars
(CDN$300,000); or
(ii) the Purchase Price shall be increased on a dollar for dollar
basis by the amount, if any, by which the shareholders'
deficit appearing on the Final Closing Balance Sheet is less
than the amount of three hundred thousand Canadian dollars
(CDN$300,000);
(iii) the Purchase Price shall be reduced on a dollar for dollar
basis by the amount, if any, by which the Cash Amount
appearing on the Final Closing Balance Sheet exceeds seven
hundred thousand Canadian dollars (CDN$700,000); or
(iv) the Purchase Price shall be increased on a dollar for dollar
basis by the amount, if any, by which the Cash Amount
appearing on the Final Closing Balance Sheet is less than
seven hundred thousand Canadian dollars (CDN$700,000);
the net aggregate adjustment pursuant to the foregoing clauses of
this Section 1.6(d) being called the "Post Closing Adjustment".
(f) In the event of an increase in the Purchase Price, in accordance
with the foregoing, the amount by which the Post-Closing Adjustment
exceeds the Holdback Amount shall be paid by the Purchaser to a
single account designated by the Seller, in immediately available
funds, within three (3) business days following the determination of
the Final Closing Balance Sheet (the "Payment Period"), and the
Agent shall remit the Holdback Amount to the Seller within the
Payment Period.
In the event of a reduction in the Purchase Price, in accordance
with the foregoing:
(i) if the amount of the Post-Closing Adjustment is less than the
Holdback Amount, then the Agent shall remit, within the
Payment Period, that portion of the Holdback Amount as shall
be equal to the Post-Closing Adjustment to the Purchaser and
the balance of the Holdback Amount, if any, to the Seller; or
(ii) if the amount of the Post-Closing Adjustment is greater than
the Holdback Amount, then the Agent shall remit, within the
Payment Period, the Holdback amount to the Purchaser and the
Seller shall pay to the Purchaser, within the Payment Period,
the amount by which the Post-Closing Adjustment exceeds the
Holdback Amount.
(g) Any amount paid by the Purchaser in respect of Severance Payments in
excess of the amount estimated therefor in Section 1.6(b) shall be
considered to form part of the Purchase Price.
(h) The Seller has remitted, concurrently herewith, the Holdback Amount
to the Agent in order to secure the payment of the Post-Closing
Adjustment and such Holdback Amount shall be dealt with in
accordance with the terms of the Holdback Disbursement Agreement
(the "Holdback Agreement") to be entered into on the Closing Date
among the parties hereto and the Agent, which terms shall comply
with the provisions of this Agreement, in the form attached hereto
as Exhibit D.
(i) The Seller has remitted to the Agent, concurrently herewith, the
estimated Severance Payments pursuant to Section 1.6(b) to be dealt
with in accordance with the terms of the Holdback Agreement, except
for unsettled Severance Payments which shall be settled in
accordance with the provisions of Article 13.
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1.7 Consents and Releases
The Purchaser acknowledges that the Seller is a party to various Contracts
with customers and Immovable Property Leases which, by their terms,
require the Seller to seek and obtain certain consents and releases prior
to their assignment to the Purchaser as contemplated in this Agreement.
Schedule 1.7 attached hereto lists those of such consents and releases
which the Purchaser requires the obtainment by the Seller as a condition
of the Closing. The Seller shall use its best efforts to secure such
consents and releases prior to Closing. In addition to its obligations as
set forth in Sections 5.4 and 5.5(b) hereof, in the event that the Seller
is unable to secure any of such consents and releases prior to Closing,
the Seller covenants and agrees, after the Closing to assist the Purchaser
in obtaining such consents and releases, together with any other consents
and releases that the Purchaser may reasonably request of the Seller, and
the Seller agrees to execute such documents as the Purchaser may
reasonably request in connection therewith.
1.8 Accounts Receivable Elections
The Seller and the Purchaser shall jointly execute elections with respect
to the Receivables under Section 22 of the ITA and Section 184 of the QTA
on the forms prescribed for such purposes and shall designate therein the
value of the Receivables as set forth in the Final Closing Balance Sheet.
The Seller and the Purchaser shall file such election forms, along with
any documentation necessary or desirable to give effect to such elections,
with the Canada Customs and Revenue Agency and the Ministere du Revenu du
Quebec within the prescribed delays.
1.9 GST and QST Elections
The Seller and Purchaser shall jointly execute elections under Section 167
of the ETA and Section 75 of the QSTA on the forms prescribed for such
purposes, along with any documentation necessary, in order to effect the
sale of the Assets by the Seller to the Purchaser without payment of any
federal goods and services tax ("GST") and Quebec sales tax ("QST"). The
Purchaser shall file the election forms referred to hereinabove with the
Canada Customs and Revenue Agency and the Ministere du Revenu du Quebec,
respectively, together with the Purchaser's GST and QST returns for the
Purchaser's GST and QST reporting period during which the transactions of
purchase and sale contemplated herein are consummated.
1.10 Assets belonging to Affiliates
To the extent that any asset owed by an Affiliate of the Seller or by a
shareholder of the Seller or by any Person not at Arm's Length with such
shareholder or the Seller is essential for the conduct of the Acquired
Business or the use or operation of any of the Assets and would if owned
by the Seller be considered to form part of the Assets, the Seller shall
cause such Affiliate, Person or shareholder to convey and transfer such
asset to the Purchaser, or the Seller for conveyance to the Purchaser at
Closing.
ARTICLE 2
CLOSING
2.1 Closing
(a) The closing of the purchase and sale of the Assets hereunder (the
"Closing") shall take place at the offices of Xxxxxx Xxxxxxx at 6:00
p.m. on September 30, 2003, or at such other time and place as the
parties hereto may agree (the time and date of the Closing being
hereinafter called the "Closing Date").
(b) At the Closing, the Seller shall deliver to the Purchaser in form
and substance reasonably satisfactory to the Purchaser:
(i) certified copies of (A) the resolutions of the board of
directors of the Seller authorizing the Seller to execute
and deliver this Agreement and consummate the transactions
contemplated hereby, (B) a special resolution or minutes of
a special meeting of the shareholders of the Seller
authorizing the Seller to consummate the transactions
contemplated hereby, approved by the requisite majority of
all the shareholders voting as a group and approved by the
requisite majority of the holders of Class A shares and
Class C shares each voting separately as a class, and (C) a
list of the officers of the Seller authorized to sign
agreements together with their specimen signatures;
(ii) an employment agreement, substantially in the form attached
hereto as Exhibit A, duly executed by the Shareholder (the
"Employment Agreement");
(iii) the Holdback Agreement, duly executed by the Seller and the
Agent;
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(iv) the SLVQ Assignment Agreement, duly executed by the Seller;
(v) evidence satisfactory to the Purchaser of the release and
discharge of all Encumbrances (other than Permitted Liens)
on the Assets;
(vi) a copy of the settlement agreement relating to the
settlement of the Moneris Claim;
(vii) all documents required to amend the corporate name of the
Seller to remove all references to "RBA", "Xxxxxxx Xxxxxx
Associates", etc., and to cease the carrying on by the
Seller of business thereunder, together with proof that all
necessary proceedings of the Seller and its shareholders,
corporate or otherwise, have been taken to approve such
amendment and cessation;
(viii) a legal opinion of Xxxxxxxxxx Xxxxxxxx Xxxxx Xxxxxx, as
counsel for the Seller, dated as of the Closing Date,
substantially in the form of Exhibit B hereto;
(ix) the consents and releases with respect to the Contracts and
Immovable Property Leases listed in Schedule 1.7;
(x) all necessary deeds, conveyances, assurances, transfers and
assignments and any other instruments necessary or
reasonably required by the Purchaser to transfer the Assets
to the Purchaser with a good and marketable title, free and
clear of all Encumbrances other than Permitted Liens;
(xi) possession of the Assets to the Purchaser;
(xii) assignment of any Permits to the extent permissible by Law;
(xiii) a certificate of status, compliance, good standing or like
certificate with respect to the Seller issued by the
appropriate Government Body dated not earlier than September
19, 2003 for the Provinces of Quebec, Ontario (evidence of
registration), Alberta and, on a best efforts basis, British
Columbia;
(xiv) domain name transfer agreements and trademark assignment
agreements duly executed by the Seller in form and substance
satisfactory to the Purchaser acting reasonably;
(xv) a non-compete covenant, the form of which is attached hereto
as Exhibit E, duly executed by the Seller and the
Shareholder;
(xvi) an assignment agreement relating to the Fiducie RBA/RBA
Trust (which was settled on January 30, 1998) in the form
attached hereto as Exhibit F duly executed by the Seller and
the Shareholder in his capacity as trustee thereof; and
(xvii) the Termination Agreement in the form attached hereto as
Exhibit G, duly executed by Montcap Financial Corporation
and the Seller.
(c) At the Closing, the Purchaser will deliver to the Seller in form and
substance reasonably satisfactory to the Seller:
(i) certified copies of (A) the resolutions of the board of
directors of the Purchaser authorizing the Purchaser to
execute and deliver this Agreement and all other documents
ancillary thereto and to consummate the transactions
contemplated hereby and (B) a list of the officers of the
Purchaser authorized to sign agreements together with their
specimen signatures;
(ii) all appropriate documents for the assumption of liabilities
by the Purchaser pursuant to the terms of Section 1.3;
(iii) the Employment Agreement, duly executed by the Purchaser;
(iv) the Holdback Agreement, duly executed by the Purchaser;
(v) the SLVQ Assignment Agreement, duly executed by the
Purchaser;
(vi) the Termination Agreement, duly executed by the Purchaser;
and
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(vii) a legal opinion of Xxxxxx Blaikie, as counsel for the
Purchaser, dated as of the Closing Date, substantially in
the form of Exhibit C hereto.
2.2 Schedules
Unless otherwise expressly indicated herein, all Schedules shall be
delivered concurrently with the execution of this Agreement and shall,
with respect to Schedules to be delivered by the Seller, be in form and
substance satisfactory to the Purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES BY THE SELLER
The Seller represents and warrants to the Purchaser that at the time of the
execution of this Agreement and at the time of Closing:
3.1 Organization, Existence and Authority of the Seller
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its
incorporation, has the corporate power to execute, deliver and
perform this Agreement and all other agreements contemplated hereby
and thereby (collectively the "Transaction Documents"), to own,
lease and operate its property and to carry on its business as it is
now conducted. The Seller is duly licensed, registered or qualified
to carry on business and is in good standing in the Provinces of
Quebec, Ontario and Alberta.
(b) Since January 1, 2003, no act or proceeding has been filed by or, to
the Seller's knowledge, against the Seller in connection with the
distribution, liquidation, winding up, bankruptcy or reorganization
of Seller, other than as disclosed in Schedule 3.1(b) hereof.
(c) Except as otherwise disclosed in Section 1.7 or in Schedule 3.1(c),
the execution, delivery and performance of the Transaction Documents
by the Seller and by the Shareholder and the consummation of the
transactions contemplated hereby and thereby do not (or would not
with the giving of notice, the lapse of time or the happening of any
other event or condition) result in or require to the Seller's
knowledge the creation of any Encumbrance, other than the Permitted
Liens, upon the Assets or result in a breach or a violation of, or
conflict with any of the terms or provisions of the Seller's
articles of incorporation, constating documents or by-laws, or
result in the material breach, termination or acceleration of any
debt or obligation under any Contract or under Immovable Property
Lease or result in a breach of, or cause the termination or
revocation of, any Permit held by the Seller and necessary to the
ownership of the Assets or the operation of the Acquired Business,
the whole subject to the Purchaser's acknowledgement in Section 1.7.
(d) The Seller has taken all action required by Law, its articles of
incorporation, its by-laws or otherwise to authorize the execution,
delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby.
(e) The Transaction Documents have been duly executed and delivered by
the Seller and constitute a legal, valid and binding obligation of
the Seller and the Shareholder, enforceable against each of them in
accordance with their respective terms, subject as to the
enforceability thereof to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the
enforceability of creditors' rights generally, and (ii) the
discretion that a court may exercise in the granting of equitable
remedies such as specific performance and injunction.
(f) There is no requirement, on the part of the Seller or the
Shareholder, to make any filing with, give any notice to, or obtain
any Permit from, any Governmental Body as a condition to the lawful
completion of the transactions contemplated by any of the
Transaction Documents.
(g) All necessary corporate action on the part of the Seller's
shareholders has been taken to authorize the execution of the
Transaction Documents by the Seller and the performance of its
obligations thereunder.
3.2 Immovable Property Leases
The Seller does not own any immovable property. Schedule 3.2 attached
hereto lists all of the immovable property leases used as a part of the
Acquired Business (the "Immovable Property Leases"). Except for taxes
exigible (but not yet due) in respect of the Immovable Property Leases for
the current year, which taxes are
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disclosed in Schedule 1.3(b) and form part of the Assumed Liabilities, all
rent, additional rent and other amounts required to be paid by the Seller
prior to the Closing Date pursuant to the Immovable Property Leases have
been duly paid to date and the Seller is not otherwise in default in
meeting any of its material obligations under any of the Immovable
Property Leases other than as disclosed in Schedule 3.2. None of the
lessors under the Immovable Property Leases is in default in meeting any
of its material obligations under any of such Immovable Property Leases.
Schedule 3.2 contains, in respect of each Immovable Property Lease, the
amount of any security deposit or prepaid rent, a description of the
leased premises (the "Leased Premises"), the lessor, the term of the
Immovable Property Lease, the rent under the Immovable Property Lease, any
rights of renewal and any restrictions on assignment. Each such Immovable
Property Lease is in full force and effect, unamended by oral and written
agreement other than as disclosed in Schedule 3.2, and Seller is entitled
to the full benefit and advantage of such Immovable Property Leases in
compliance with the terms thereof. To the knowledge of the Seller, there
exists no default or event of default or event, occurrence, condition or
act (including the purchase of the Assets by the Purchaser hereunder)
which, with the giving of notice, the lapse of time or the happening of
any other event or condition, would become a material default or event of
default under any Immovable Property Lease, other than any requirements to
obtain the consents and releases under such Immovable Property Leases.
True, correct and complete copies of all Immovable Property Leases have
been delivered to the Purchaser. To the knowledge of the Seller, the
Seller has not received any notice of violation of any applicable Law or
of any covenant, restriction or servitude affecting any of the Leased
Premises or with respect to the use or occupancy of any of the Leased
Premises given by any Governmental Body having jurisdiction over any of
the Leased Premises or by any other Person entitled to enforce the same,
which violation has not been remedied to the satisfaction of the Person
giving the same. To the Seller's knowledge, there are no existing
expropriation proceedings that would result in the taking of all or any
part of any of the Leased Premises or that would adversely affect the
current use of any of the Leased Premises. To the Seller's knowledge, any
leasehold improvements pertaining to any of the Leased Premises have been
constructed in a good and workmanlike manner in compliance with applicable
Law, and to the Seller's knowledge all amounts for labour and materials
relating to the construction and repair of such leasehold improvements
have been paid in full. The Seller has not received any notice of proposed
local improvement charges or special levies. To the Seller's knowledge,
other than as disclosed in Schedule 3.2, the buildings and fixtures
located on each of the Leased Premises, including heating, ventilation,
mechanical, electrical, sewer, sprinkler and air conditioning systems,
roof, foundation and floors, have been properly maintained except for
normal wear and tear, to the extent of Seller's responsibility to do so
under the applicable Immovable Property Lease, in accordance with
applicable Law and are in good operating condition, are substantially fit
for the purposes for which they are being utilized, and are not in need of
any material repair or replacement which is the Seller's responsibility.
3.3 Intellectual Property
Schedule 3.3 attached hereto sets forth a complete list and description of
all Intellectual Property owned by the Seller. Schedule 3.3 attached
hereto also sets forth a complete list and description of all Intellectual
Property licensed by the Seller and used in connection with the Acquired
Business. The Seller has provided the Purchaser with a true and complete
copy of all Contracts that comprise or relate to the Intellectual
Property.
Except as indicated in Schedule 3.3:
(a) the Seller is the beneficial owner of the Intellectual Property,
free and clear of all Encumbrances, other than Permitted Liens;
(b) no Person has been granted any interest in or right to use all or
any portion of the Intellectual Property;
(c) the Seller is not aware of a claim by any other Person of any
infringement or breach of its industrial or intellectual property
rights by the Seller, nor has the Seller received any notice that
the conduct of the Acquired Business, including the use of the
Intellectual Property, infringes upon or breaches any industrial or
intellectual property rights of any other Person;
(d) the Seller has no knowledge of any material infringement or
violation of any of its rights in the Intellectual Property;
(e) to the knowledge of the Seller, the conduct of the Acquired Business
including the use by the Seller of the Proprietary Computer Software
Systems listed in Schedule 1.1(e) does not infringe upon the
patents, trademarks, licences, trade names, business names,
copyright or other industrial or intellectual property rights,
domestic or foreign, of any other Person and Seller is not in
material breach of any third party software system licences listed
in Schedule 1.2(f);
(f) Each registered Intellectual Property listed in Schedule 3.3 is duly
recorded in the name of the Seller and Seller has the right to hold
and use such registered Intellectual Property without making payment
to others
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(other than maintenance fees or similar fees payable to the
registration authorities) or granting rights to others in exchange,
unless otherwise indicated in Schedule 3.3;
(g) Other than as disclosed in Schedule 3.3, Seller has not used (nor
permitted any other Person to use) any Intellectual Property listed
in Schedule 3.3 and owned by the Seller in any manner which would,
to the Seller's knowledge, diminish, dilute or adversely affect the
right, title or interest of the Seller in and to such Intellectual
Property or which would, to the Seller's knowledge, diminish, dilute
or adversely affect the protection granted under applicable Law to
the Seller in respect of such Intellectual Property;
(h) no settlement agreements and, to the knowledge of the Seller, no
judgments limit or restrict any rights of the Seller in and to any
Intellectual Property;
(i) subject to the Purchaser's acknowledgement in Section 1.7, to the
knowledge of the Seller, no condition exists which with notice or
lapse of time or both would constitute a material default by the
Seller under any third party software system licence or agreement
listed in Schedule 1.2(f) (the "IP License Agreements"); and
(j) to the knowledge of the Seller, the consummation of the transactions
contemplated hereby will not result in the loss or impairment of any
rights of the Seller to own or use any of the Intellectual Property
and cannot reasonably be expected to give rise to a right of any
party to any IP License Agreement to cancel, modify, amend,
accelerate or terminate any such IP License Agreement, nor will such
consummation require the consent of any third party in respect of
any Intellectual Property.
3.4 Litigation
Except as described in Schedule 3.4 and for the Moneris Claim, there are
no (i) actions, suits or proceedings, at law or in equity, by any Person,
which involves a claim or has a value of more than twenty-five thousand
Canadian Dollars (CDN$25,000) individually or which taken together with
others has an aggregate value in excess of one hundred thousand Canadian
Dollars (CDN$100,000) or (ii) arbitrations, grievances or proceedings by
or before (or to the knowledge of the Seller any investigation by) any
Governmental Body, pending, or, to the knowledge of the Seller, threatened
against or affecting the Seller, the Acquired Business or any of the
Assets and, to the Seller's knowledge, there is no factual basis which
could reasonably be expected to give rise to any such action, suit,
arbitration, grievance or proceeding. The Seller is not subject to any
legally binding judgment, order or decree entered in any lawsuit or
proceeding nor has the Seller settled any claim prior to being prosecuted
in respect of it other than the Moneris Claim. Except as disclosed in
Schedule 3.4, the Seller is not the plaintiff or complainant in any
action, suit or proceeding arising out of or connected with the Assets or
the Acquired Business involving a claim or having a value, individually,
of more than twenty-five thousand Canadian Dollars (CDN$25,000). Except as
disclosed in Schedule 3.4, since June 1, 2002, there has been, to the
Seller's knowledge, no action, suit or proceeding against the Seller which
is currently outstanding.
3.5 Contracts
(a) Schedule 3.5 attached hereto sets forth a complete and accurate list
of the following Contracts, which relate to or affect the operations
of the Acquired Business or by which any of the Assets or any
purchasers thereof may be bound (collectively, the "Material
Contracts"):
(i) all contracts or commitments for capital expenditures or the
acquisition of assets providing for payments in excess of
CDN$25,000 each;
(ii) all contracts relating to the rental or use of equipment,
other movable property or fixtures involving payment of
fixed or contingent annual rentals or sums in excess of
CDN$25,000 each;
(iii) to the extent applicable to the operations of the Acquired
Business, all contracts seeking to limit the freedom of the
purchaser of any of the Assets or the Acquired Business or
any part thereof, of the Seller or of any officer, director,
employee or agent of the Seller to use the Assets or to
engage in or to compete in any line of business or with any
Person or in any area or to use or disclose any information
in its possession or restrict the right generally to sell to
any current or potential customer of the Seller;
(iv) all contracts or agreements for the purchase of any
materials or supplies or services, except for any individual
contract or agreement involving payments of less than
CDN$50,000 each per annum and incurred in the ordinary
course of business;
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(v) any contract, agreement or purchase order for the sale of
products or furnishing of services, except for (a) any
individual contract or agreement made in the ordinary course
of business involving payments of less than CDN$50,000 each
per annum, (b) individual purchase orders/requests of less
than CDN$150,000 each, and (c) incomplete purchase
orders/requests, contracts or agreements dated after August
31, 2003 involving payments of less than CDN$100,000;
(vi) all joint venture or limited partnership agreements;
(vii) all loan agreements, notes, mortgages, hypothecs,
indentures, security agreements or guarantees of the
obligations of any Person or Affiliate;
(viii) any contract entered into outside of the ordinary course of
business involving payments in excess of CDN$25,000 each or
CDN$100,000 in the aggregate;
(ix) all contracts with any sales representatives, manufacturer
representatives, or distributors who perform services in
connections with the Acquired Business involving payments in
excess of CDN$25,000 each or CDN$100,000 in the aggregate;
(x) To the Seller's knowledge, all contracts with any Person not
at Arm's Length to any shareholder of the Seller or with any
Affiliate of the Seller;
(xi) all guaranteed sales, consignment or volume rebate contracts
involving payment in excess of CDN $25,000 each or
CDN$100,000 in the aggregate dated earlier than September 1,
2003; and
(xii) all settlement or compromise agreements.
(b) The Seller has performed all of the material obligations required to
be performed by it and is entitled to all benefits under, and is not
alleged to be in material default of, any Material Contract. Each of
the Material Contracts is in full force and effect, unamended, and,
to the knowledge of the Seller, there exists no default or event of
default or event, occurrence, condition or act (including, without
limitation, the purchase of the Assets by the Purchaser hereunder)
which, with the giving of notice, the lapse of time or the happening
of any other event or condition, would become a material default or
event of default under any Material Contract, other than any
requirements to obtain the consents and releases for the Contracts
set forth in Schedule 1.7 and Schedule 3.1(c). True, correct and
complete copies of all Material Contracts have been delivered to the
Purchaser.
3.6 Employees
Except as set forth in Schedule 3.6, with respect to the Acquired Business
and employees of the Seller:
(a) the Seller has been and is in material compliance with all Laws
respecting employment and employment practices including any
provisions thereof relating to health and safety, terms and
conditions of employment, pay equity and wages and hours of work;
(b) the Seller has not and is not engaged in any unfair labour practice
and no unfair labour practice complaint, grievance or arbitration
proceeding is pending or, to the knowledge of the Seller, threatened
against the Seller;
(c) none of the operations of the Seller is subject to a collective
bargaining agreement, none of the employees of the Seller is
represented by a labour union or other labour organization, no
collective bargaining agreement is currently being negotiated by the
Seller and, to the Seller's knowledge, there are no organizing
activities pending with respect to any of the employees of the
Seller;
(d) currently there is no labour strike, dispute, work slowdown or
stoppage pending or involving or, to the knowledge of the Seller,
threatened against the Seller;
(e) all amounts due or accruing due for all salary, wages, bonuses,
commissions, vacation with pay, pension benefits or other employee
benefits or compensation are reflected in the Books and Records, in
accordance with the Seller's accounting practices and applicable
Law;
(f) Schedule 3.6 contains a correct and complete list of all employees
of the Seller currently employed (the "Employees"), whether active
at work or not, their salaries, bonus arrangements, special
benefits, fringe benefits, positions, ages, status as full-time or
part-time employees and length of service. Except as
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disclosed in Schedule 1.3(b) or Schedule 3.6, all such Employees
have received all remuneration and bonuses to which they were
entitled to receive payments prior to the Closing Date in the course
of their employment with the Seller. Schedule 3.6 also sets forth a
true, correct and complete list of the following:
(i) separately by location, the names, dates of birth, dates of
hire, job titles and current salary or wage rates of all
Employees, including any Employee on leave or other absence
who has or may have a statutory, contractual or other right
to return to work or a right to be reinstated in a job with
the Seller, together with a summary of all bonus, incentive
compensation or other additional compensation or similar
benefits paid or payable to such Employees for the 2002
calendar year;
(ii) all arrangements, written or oral, which compel the
employment of any Employee by the Seller; and
(iii) separately by location, the names, job titles and current
salary or wage rates of all independent contractors,
consultants, and dealers who principally perform services
for the Seller;
(g) Except as set forth on Schedule 3.6, (i) to the knowledge of the
Seller, there have been no union organizing efforts conducted within
the last two (2) years; (ii) during the two (2) years prior to the
date of this Agreement there has not been, any strike, work
stoppage, work slowdown or other material labour dispute with
respect to Employees or affecting the Assets; (iii) there is no
charge or complaint of discrimination, which is pending with any
Governmental Body or, to the Seller's knowledge, threatened against
the Seller relating to any of the Employees and there are no
administrative charges or court complaints pending or, to the
Seller's knowledge, threatened against the Seller under any
applicable statute including Quebec's Labour Code or Act Respecting
Labour Standards, or before the Commission des Normes du Travail or
any provincial, municipal or federal court or agency or labour
relations board or any other Governmental Body empowered to
administer labour relations concerning alleged employment
discrimination or any other matters relating to the employment of
labour; (iv) there is no commitment or agreement to increase wages
or modify the terms and conditions of employment of any Employee;
(v) the Seller is not currently engaged in any labour negotiation
affecting any Employee; and (vi) the Seller is not a party to any
application, complaint or other proceeding under any statute
regarding collective bargaining with respect to any Employee;
(h) Except as disclosed in Schedule 3.6, no Employee has given notice of
his or her intent to terminate employment with the Seller;
(i) Except as disclosed in Schedule 3.6, there are no written employment
contracts or oral employment contracts (other than contracts which
can be terminated by the Seller for any reason whatsoever upon prior
notice of not greater than thirty (30) days) in place between the
Seller and any Employee; and
(j) Except as disclosed in Schedule 3.6, since January 1, 2002 the
Seller has not paid or agreed to pay any bonus, fee, distribution,
remuneration or other compensation, nor provided or agreed to
provide any other benefit to any Employee other than in the ordinary
course of the Business in accordance with the Seller's compensation
levels and practices in effect on that date.
3.7 Employee Plans
(a) Schedule 3.7 lists and describes all the employee benefit, fringe
benefit, supplemental employment benefit, bonus, incentive, profit
sharing, termination, change of control, pension (including any
"pension plan" as defined in Section 6 of Quebec's Supplementary
Pension Plans Act), retirement, stock option, stock purchase, stock
appreciation, health, welfare, medical, dental, disability, life
insurance and similar plans, programs, arrangements or practices
relating to the current or former employees, officers or directors
of the Seller maintained, sponsored or funded by the Seller, whether
written or oral, funded or unfunded, insured or self-insured,
registered or unregistered (the "Employee Plans"). The Seller has
furnished to the Purchaser true, correct and complete copies of all
the Employee Plans as amended as of the date hereof.
(b) Except as disclosed in Schedule 3.7 and to the Seller's knowledge,
the Employee Plans are in material compliance with all applicable
Laws, regulations and government taxation or funding requirements
and have since the date of commencement of such Employee Plans been
in material compliance with all applicable Laws, regulations and
government taxation or funding requirements. To the Seller's
knowledge and except as disclosed in Schedule 3.7, there has been no
material failure to comply with any applicable Law, regulation or
requirement or any other circumstance which might reasonably be
expected to result in the loss of tax approval or qualification of
any of the Employee Plans.
Without limiting the generality of the foregoing, except as
disclosed in Schedule 3.7:
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(i) all material obligations of the Seller regarding the
Employee Plans have been satisfied and, to the Seller's
knowledge, no Taxes, penalties or fees are owing or exigible
under any of the Employee Plans;
(ii) to the Seller's knowledge, no Employee Plan, nor any related
trust or other funding medium thereunder, is subject to any
pending investigation, examination or other proceeding,
action or claim initiated by any governmental agency or
instrumentality and there exists no state of facts which
after notice or lapse of time or both could reasonably be
expected to give rise to any such investigation, examination
or other proceeding, action or claim or to affect the
registration of any Employee Plan required to be registered;
(iii) all contributions or premiums required to be made by the
Seller under the terms of each Employee Plan or by
applicable Laws have been made as of the Closing Date;
(iv) to the Seller's knowledge, there have been no improper
withdrawals, applications or transfers of assets from any
Employee Plan or the trusts or other funding media relating
thereto;
(v) to the Seller's knowledge, no insurance policy or any other
contract or agreement affecting any Employee Plan requires
or permits a retroactive increase in premiums or payments
due thereunder;
(vi) to the Seller's knowledge, none of the Employee Plans enjoys
any special tax status under applicable Law nor has any
advance tax ruling been sought or received by the Seller in
respect of any of the Employee Plans;
(vii) no amendments or improvements to an Employee Plan have been
made or, to the Seller's knowledge, promised, since January
1, 2003;
(viii) none of the Employee Plans provides benefits to retired
employees or to the beneficiaries or dependants of retired
employees
(ix) the Seller has not taken any "contribution holidays" from or
with respect to the Employee Plan and has not used any
portion of any surplus existing at any time under any
Employee Plan for its own benefit; and
(x) as of the Closing Date, there are no pending claims and, to
the Seller's knowledge, no injury, facts, events or
conditions which could give rise to a material claim against
the Seller under any Employee Plan.
(c) Except for the recent modification to the car allowance plan of the
Seller, which modification has been disclosed to the Purchaser prior
to the date hereof, no commitment to improve or otherwise amend any
Employee Plan has been made.
(d) All employee data necessary to administer any Employee Plan has been
provided by the Seller to the Purchaser and is true and correct as
of the date of this Agreement.
3.8 Inventory
The Purchaser recognizes that a significant portion of the Inventory
consists of spare parts, used or repairable components and maintenance
items of all kinds and of all conditions. Subject to the above limitation
and to the applicable notes in the Financial Statements and except to the
extent of any reserve to be set forth on the Closing Balance Sheet, the
Inventory is reasonable in quantity for the operations of the Acquired
Business.
3.9 Accounts Receivable
The Receivables of the Seller to be reflected on the Closing Balance
Sheet, as well as the accounts receivable that have been assigned by
Montcap Financial Corporation to the Purchaser pursuant to an agreement
dated the date hereof among the Purchaser, the Seller and Montcap
Financial Corporation, arose from bona fide transactions in the ordinary
course of business. The Seller represents and warrants that such
Receivables have been determined in a manner consistent with the Seller's
past practice and GAAP.
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3.10 Financial Statements
(a) Attached hereto as Schedule 3.10(a) is an unaudited balance sheet
for the Acquired Business as at June 30, 2003 (the "Acquired
Business Balance Sheet"). Except for any adjustments which would
have resulted from an audit conducted by independent public
accountants, the Acquired Business Balance Sheet was prepared in
accordance with GAAP applied on a consistent basis, and presents
fairly the financial position of the Acquired Business as at June
30, 2003.
(b) The Financial Statements have been prepared in accordance with GAAP
applied on a basis consistent with those of previous fiscal years
and each presents fairly (i) the assets, liabilities (whether
accrued, absolute, contingent or otherwise) and the financial
position of the Seller as at the respective dates of the relevant
statements and (ii) the sales and earnings of the Seller during the
periods covered by the Financial Statements. A true, correct and
complete copy of the Financial Statements is attached as Schedule
3.10(b).
3.11 Condition of and Title to Assets
(a) The Seller has legal ownership of, and good and marketable title to,
the Assets free and clear of all Encumbrances except for Permitted
Liens. At the Closing, Seller will transfer to the Purchaser and
Purchaser will be vested with good and valid title to the Assets
free and clear of any and all Encumbrances other than Permitted
Liens. No other Person owns any property and assets which are being
used in the Acquired Business except for the premises subject to the
Immovable Property Leases and the movable property leased by the
Seller pursuant to any Contracts.
(b) The buildings, plants, structures, vehicles, equipment and other
tangible movable property of the Seller which are Assets are, except
for the elevator located in the head office of the Seller (the cost
of repair of which shall be estimated for the purpose of recording
the appropriate liability on the Closing Balance Sheet) structurally
sound, in good operating condition and repair having regard to their
use and age and are adequate and suitable for the uses to which they
are being put. None of such buildings, plants, structures, vehicles,
equipment or other property are in need of maintenance or repairs
except for ordinary routine maintenance and repairs that are not
material in nature or cost.
(c) Except as set forth in Schedule 3.11, no asset owed by an Affiliate
of the Seller or by a shareholder of the Seller or by any Person not
at Arm's Length with such shareholder or the Seller is essential for
the conduct of the Acquired Business or the use or operation of any
of the Assets and would if owned by the Seller be considered to form
part of the Assets.
3.12 Absence of Certain Changes or Events
(a) Except as set forth in notes 9(b), 13 and 20 in the Financial
Statements, the Acquired Business or the Seller with respect to the
Acquired Business has not since January 1, 2003 other than as
disclosed in any Schedules herewith:
(i) waived or released any rights of value, or modified any
Contract reflected on any Schedule to this Agreement, except
to the extent disclosed on any Schedule;
(ii) introduced any material change with respect to the operation
of its business, including, but not limited to, changes with
respect to the level of usable and saleable inventory
maintained by the Acquired Business (other than routine
changes in inventory levels that occur in the course of the
operation of the Acquired Business through no action of the
Seller intended specifically to affect inventory levels) or
any change in practices with respect to the repair or
utilization of repairable inventories;
(iii) suffered any casualty, loss or damage (whether or not
covered by insurance) which affects the ability of the
Seller to conduct the operations of the Acquired Business;
(iv) except for the Moneris Claim, compromised or settled any
litigation, proceeding or other governmental action;
(v) voluntarily or, to the Seller's knowledge, involuntarily
sold, abandoned, surrendered or disposed of any material
properties or assets relating to the Acquired Business;
(vi) made any capital contributions to, or investments in or
acquired any other Person or any other business, including
by merger or consolidation;
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(vii) incurred any indebtedness for borrowed money or evidenced by
notes, bonds, debentures or similar instruments or entered
into any operating leases, other than in the ordinary course
of business and disclosed on the Closing Balance Sheet;
(viii) become obligated under any guarantee, standby letter of
credit, mortgage, security document or similar documents
securing any liability in respect of any third Person,
except for Permitted Liens, other than in the ordinary
course of business and disclosed on the Closing Balance
Sheet;
(ix) made any material change in any of the accounting methods
and practices of the Acquired Business, except as required
by changes in applicable accounting principles;
(x) made any material change in the rate, form or amount of
compensation or remuneration payable or to become payable to
any of its Employees;
(xi) granted to any customer any special allowance or discount,
or changed its pricing, credit or payment policies;
(xii) suffered any material cessation or interruption of services;
(xiii) cancelled or reduced any of its insurance coverage; or
(xiv) authorized, agreed or otherwise committed, whether or not in
writing, to do any of the foregoing.
(b) Since January 1, 2003, there has not been any material adverse
change in the affairs, prospects, financial condition or results of
operations of the Seller, any of the Assets or the Acquired Business
and, to the knowledge of the Seller, no event has occurred or
circumstance exists which may result in such a material adverse
change.
3.13 Governmental Permits
The Seller owns, holds, possesses or lawfully uses in the operation of the
Acquired Business all Permits which are necessary or required to conduct
the operations of the Acquired Business as presently conducted and own and
operate the Assets. All such Permits are listed in Schedule 3.13. Each
Permit is valid, subsisting and in good standing and the Seller is not in
material default or material breach of any Permit. All Permits are
assignable to the Purchaser and renewable by their terms or in the
ordinary course of business without the need for the Seller or the
Purchaser to comply with any special rules or procedures. Seller has not
received notice of any event, inquiry, investigation or proceeding
threatening the validity of any such Permits.
3.14 Compliance with Laws
The Seller is conducting and has always conducted the Acquired Business in
compliance with all applicable Laws of each jurisdiction in which the
Acquired Business is carried on, other than acts of non-compliance which,
in the aggregate, are not material.
The Seller hereby discloses to the Purchaser that the use of certain
computer software by the Acquired Business might have been made in breach
of certain applicable Laws, the Acquired Business not having been granted
the right to make use of same by its owner. However, the Seller confirms
that such breach does not have any material adverse effect on the Acquired
Business. The cost of regularizing the use of such software shall be set
up as a liability on the Closing Balance Sheet.
3.15 No Options, etc.
Except for the Purchaser under this Agreement, no Person has any written
or oral agreement, option, understanding or commitment, or any right or
privilege capable of becoming such for the purchase from the Seller of any
of the Assets, other than Inventory sold in the ordinary course of
business.
3.16 Books and Records
All accounting and financial Books and Records have been properly and
accurately kept and completed in accordance with applicable Laws and sound
business practices in all material respects.
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3.17 No Liabilities
To the knowledge of the Seller, there are no liabilities, whether or not
accrued and whether or not determined or determinable, in respect of which
the Purchaser may become liable on or after consummation of the
transactions contemplated by this Agreement other than the Assumed
Liabilities.
3.18 Environmental Matters
Except as disclosed in Schedule 3.18 attached hereto:
(a) The Seller has not received any written notices or written complaint
since June 1, 2002 for any violation of any laws relating to
pollution or the protection of the environment (the "Environmental
Laws"), including, without limitation, environmental laws relating
to: (i) treatment, storage, disposal, generation and transportation
of pollutants or contaminants, toxic or hazardous substances, or
solid or hazardous waste regulated under Environmental Laws
("Hazardous Materials"); (ii) air, water and noise pollution; (iii)
ground water contamination; (iv) the release or threatened release
into the environment of Hazardous Materials; (v) the protection of
wildlife, marine sanctuaries and wetlands; (vi) the protection of
natural resources; (vii) storage tanks, vessels and related
equipment; (viii) abandoned or discarded barrels, containers and
other closed receptacles; (ix) health and safety or employees and
other persons; and (x) otherwise relating to the manufacture,
processing, use, distribution, treatment, storage, disposal,
transportation or handling of Hazardous Materials.
(b) There are no written notices and written complaints which the Seller
has received in the last three (3) years of any violation of the
Environmental Laws.
(c) The Seller has obtained and continues to possess all Permits,
approvals or other authorizations under the Environmental Laws which
are material to the operation of its business as now conducted and
has filed such timely and complete renewal applications as may be
required for such business prior to the Closing.
(d) There are no proceedings, nor to the Seller's knowledge, are there
any circumstances or material facts which could, if true, give rise
to any proceedings in which it is alleged that the Seller is
potentially responsible for a federal, provincial, municipal or
local clean-up or remediation of lands contaminated with Hazardous
Materials.
3.19 Residence of the Seller
The Seller is not a non-resident of Canada within the meaning of the ITA.
3.20 Suppliers and Customers
Schedule 3.20 sets forth the ten largest suppliers and ten largest
customers of the Seller based on aggregate value of products and services
purchased or supplied, as the case may be, for the annual period ended
December 31, 2002 and for the period between January 1, 2003 and September
25, 2003. Except as disclosed in Schedule 3.20, since January 1, 2003, to
the Seller's knowledge, none of the ten largest suppliers or ten largest
customers of the Acquired Business has ceased, or given notice to the
Seller to cease, to supply or purchase products and services from the
Acquired Business. Except as set forth in Schedule 3.20, neither the
Seller nor the Shareholder has any direct or indirect interest in any
supplier or customer of the Seller.
3.21 Product Liability and Product Warranty
Except as disclosed on Schedule 3.21:
(a) Since June 1, 2002, the Seller has not received any statements,
citations or decisions or orders by any Governmental Body stating
that any product manufactured, sold, designed, marketed or
distributed at any time by the Seller, is defective or unsafe or
fails to meet any standards promulgated by any such Governmental
Body.
(b) There are no existing or, to Seller's knowledge, threatened material
product liability or other similar material claims against the
Seller for products or services which are defective.
(c) To the knowledge of Seller, all products sold, serviced or
distributed by the Seller since June 1, 2002 have been in
conformance with all material contractual commitments and all
express or implied warranties of the Seller.
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(d) To the knowledge of Seller, no product sold, serviced or distributed
by the Seller prior to the Closing Date is subject to any guarantee
or warranty other than the Seller's or the purchasing customer's
standard terms and conditions of sale and the legal warranties, if
any, in the applicable jurisdictions.
3.22 Worker's Compensation Matters
(a) Schedule 3.22 is a list of all claims over $10,000 for worker's
compensation made in writing to the Seller by any employees of the
Seller (including dependants and spouses, if applicable) since June
1, 2002.
(b) The Seller has paid all assessments pursuant to worker's
compensation legislation levied by any Governmental Body and, to the
Seller's knowledge, the Seller has no liability for, and there is
not pending any state of facts known to the Seller which may result
in the levying of, a special assessment or a penalty charge of any
nature with respect to the period prior to Closing. The Seller has
filed on a timely basis all payroll statements and other returns and
statements required to be filed pursuant to applicable worker's
compensation legislation. To the Seller's knowledge, the Seller is
not liable to indemnify any of its employees or any Governmental
Body in respect of compensation and/or health care payable to its
employees pursuant to applicable worker's compensation legislation.
The Seller has notified the relevant Governmental Body, within the
time periods specified by applicable Law, of all occurrences of
accidents known to the Seller for which notification is required by
applicable Law and has provided requisite details thereof.
3.23 Receivables
Schedule 3.23 is a list of all Receivables by debtor, due date or ageing,
and dollar amount, as of June 30, 2003.
3.24 Payables
Schedule 3.24 lists all Accrued Liabilities by creditor, due date or
ageing, and dollar amount as of June 30, 2003. To the Seller's knowledge,
the amounts of Accrued Liabilities on the Seller's Books and Records are
not understated.
3.25 Notices
Except for the notices listed in Schedule 3.25, no notice is required to
be delivered to any Person by the Seller in connection with the execution
and delivery of this Agreement and the completion of the transactions
contemplated by this Agreement.
3.26 Taxes
Except as set forth on Schedule 3.26:
(a) The Seller has paid or caused to be paid, or will pay or cause to be
paid on a timely basis, all Taxes required to be paid with respect
to periods ended before the Closing Date.
(b) All deductions at source and other withholdings required to be
withheld or paid prior to the Closing Date have been duly paid to
the proper Governmental Body or properly set aside in accounts for
such purpose or included in the Closing Balance Sheet. Without
limiting the generality of the foregoing, the Seller has fulfilled
all requirements under the ITA, the Canada Pension Plan, the
Employment Insurance Act (Canada) and any applicable provincial
legislation for withholding of amounts from Employees and has
remitted all amounts withheld to the appropriate authorities within
the prescribed times.
3.27 Movable Property and Vehicles
All Movable Property and Vehicles are in good operating condition for the
purposes for which they are presently used.
3.28 Insurance
Schedule 3.28 contains a correct and complete list and description
(including policy numbers) of all insurance policies owned by the Seller.
Except as disclosed in Schedule 3.28, the Seller has not received any
written or oral notice of cancellation or intent to cancel or increase
premiums with respect to any current insurance policy nor, to the
knowledge of the Seller, is there any basis for any such action.
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3.29 Full Disclosure
The Seller has granted to the Purchaser's representatives prior to the
Closing Date full access to all documents concerning the Acquiring
Business and the business methods of the Seller. To the Seller's
knowledge, none of the foregoing representations and warranties and no
document furnished by or on behalf of the Seller to Purchaser in
connection with the negotiation of the transactions contemplated by this
Agreement contain any intentional untrue statement of a material fact or
omit to state any material fact necessary to make any such statement or
representation not misleading to a prospective purchaser of the Assets
seeking full information as to the Seller and its properties, business and
affairs.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES BY THE PURCHASER AND
OPTIMAL ROBOTICS
The Purchaser represents and warrants to the Seller that at the time of the
execution of this Agreement and at the time of Closing:
4.1 Organization, Existence and Authority of the Purchaser
(a) The Purchaser is a corporation duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its
incorporation, and has the corporate power to execute, deliver and
perform this Agreement. Optimal Robotics owns all of the outstanding
and issued securities of the Purchaser.
(b) The execution, delivery and performance by the Purchaser of the
Transaction Documents and the consummation of the transactions
contemplated hereby will not violate any provision of the articles
of incorporation or by-laws of the Purchaser.
(c) The Purchaser has taken all action required by Law, its articles of
incorporation and its by-laws or otherwise to authorize the
execution, delivery and performance of the Transaction Documents by
the Purchaser and the consummation of the transactions contemplated
hereby.
(d) The Transaction Documents constitute a legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance
with their respective terms, subject as to the enforceability
thereof to (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting the enforceability of
creditors' rights generally, and (ii) the discretion that a court
may exercise in the granting of equitable remedies such as specific
performance and injunction.
4.2 Organization, Existence and Authority of Optimal Robotics
(a) Optimal Robotics is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its
incorporation, and has the corporate power to execute, deliver and
perform this Agreement. Optimal Robotics owns all of the outstanding
and issued securities of the Purchaser.
(b) The execution, delivery and performance by Optimal Robotics of the
Transaction Documents and the consummation of the transactions
contemplated hereby will not violate any provision of the articles
of incorporation or by-laws of Optimal Robotics.
(c) Optimal Robotics has taken all action required by Law, its articles
of incorporation and its by-laws or otherwise to authorize the
execution, delivery and performance of the Transaction Documents by
Optimal Robotics and the consummation of the transactions
contemplated hereby.
(d) The Transaction Documents constitute a legal, valid and binding
obligation of Optimal Robotics, enforceable against it in accordance
with their respective terms, subject as to the enforceability
thereof to (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting the enforceability of
creditors' rights generally, and (ii) the discretion that a court
may exercise in the granting of equitable remedies such as specific
performance and injunction.
4.3 Litigation
There are no (i) actions, suits or proceedings, at law or in equity, by
any Person, or (ii) proceedings by or before any Governmental Body,
pending, or, to the knowledge of the Purchaser or Optimal Robotics,
threatened against the Purchaser or Optimal Robotics which could affect
the consummation of the transactions contemplated hereby.
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ARTICLE 5
COVENANTS OF THE PARTIES
5.1 Conduct of Business
During the period from the date hereof until the Closing Date, except as
may otherwise be expressly provided for in this Agreement or with the
prior written consent of the Purchaser, such consent not to be
unreasonably withheld, the Seller shall:
(a) carry on the Acquired Business in the ordinary course to preserve
the Assets and the clients, customers and suppliers connected
therewith;
(b) do all things and cause all things within its control to be done to
ensure that all of the representations and warranties contained in
Article 3 hereof remain true and correct in all material respects
throughout the said period as if such representations and warranties
were continuously made throughout such period;
(c) keep in full force and effect proper insurance coverage;
(d) not enter into any contracts, commitments or transactions, unless
otherwise herein provided, except in the ordinary course of business
consistent with past business practice;
(e) not incur any indebtedness, obligations or liability or make any
payment in respect thereof, unless otherwise herein provided, except
in the ordinary course of business consistent with past business
practice;
(f) not acquire or agree to acquire additional assets, except
inventories and supplies purchased in the ordinary course of
business consistent with past business practice;
(g) not increase the salaries or any other form of remuneration, direct
or indirect, of any of the Employees;
(h) not sell, agree to sell or otherwise dispose of any of its assets,
other than in the ordinary course of business consistent with past
business practice;
(i) pay, satisfy and discharge its obligations and liabilities in the
ordinary course of business consistent with past business practice;
(j) maintain the amount and type of Inventories held in stock by it, in
a manner consistent with past business practice;
(k) promptly advise the Purchaser in writing of any material adverse
change in condition, financial or otherwise of the Seller;
(l) provide the Purchaser with all information reasonably required to
enable the Purchaser to prepare and file all notices and
applications required to be filed for the purposes of obtaining any
regulatory consent, if any, which is required in connection with the
transactions contemplated herein;
(m) not recapitalize or take any other steps which may have a
fundamental effect upon the financial position of the Acquired
Business; and
(n) provide its written consent to any relevant Governmental Body to the
release to the Purchaser information concerning the Acquired
Business and the Assets;
5.2 No Encumbrances
During the period from the date hereof until the Closing Date, the Seller
shall not create or cause or permit to exist any Encumbrances, other than
Permitted Liens, on any of the Assets otherwise than in the ordinary
course of business, except as may be permitted by this Agreement or with
the written consent of the Purchaser.
5.3 Access
Prior to the Closing Date, the Seller shall afford to the Purchaser and
its representatives full access to (i) the premises, offices, warehouses
and properties of the Seller that relate to the Acquired Business, (ii)
the Assets and, in particular, the Books and Records retained by the
Seller, and (iii) senior personnel of the Seller in order
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that the Purchaser may have the opportunity of making such investigations
as it shall desire to make of the affairs of the Acquired Business;
provided that such investigations or requests for information shall be
made in such a manner as not to interfere unreasonably with the Seller's
normal business operations. The Seller shall also introduce the
Purchaser's representatives to representatives of the Seller's principal
customer accounts, for the purpose, inter alia, of discussing the
provision of services to such customers by the Purchaser, as successor to
the Seller. The list of such customers shall be agreed upon by the
Purchaser and the Seller, acting reasonably.
5.4 Consents and Estoppel Certificate
The Seller shall use its best efforts to obtain estoppel certificates from
the applicable landlord in respect of each of the Immovable Property
Leases listed in Schedule 1.7 and to obtain the consents and releases
listed in Schedule 1.7, each to be in form and substance satisfactory to
the Purchaser, acting reasonably. In no circumstance shall the Purchaser
or the Seller be obligated to pay any money to any Person or to offer or
grant other financial or other accommodations to any Person in connection
with the obtaining of the consents and releases listed in Schedule 1.7.
5.5 Additional Agreements
(a) The Seller, at the request of the Purchaser, at or after the
Closing, will promptly execute and deliver, or cause to be executed
and delivered, to the Purchaser such assignments, bills of sale,
consents and other such instruments in addition to those otherwise
required by this Agreement, in form and substance reasonably
satisfactory to the Purchaser, as the Purchaser may reasonably deem
necessary to carry out or implement any term of this Agreement.
(b) Without limiting the obligation of the Seller as set forth in
Section 5.4 or the rights of the Purchaser as set forth in Section
8.1, to the extent that any of the Contracts and Immovable Property
Leases for which assignment to the Purchaser is provided herein are
not assignable without the consent of another party, this Agreement
shall not constitute an assignment or an attempted assignment
thereof if such assignment or attempted assignment would constitute
a breach thereof. If any such consent shall not be obtained by the
Closing Date, the Seller agrees to cooperate with the Purchaser in
any reasonable arrangement designed to provide for the Purchaser
with all or substantially all of the benefits of the Seller under
any such Contract or Immovable Property Lease. The Seller hereby
authorizes the Purchaser, at the Purchaser's expense, to perform all
of the Seller's obligations after the Closing Date pursuant to any
such Contract or Immovable Property Lease. The Seller hereby grants
to the Purchaser an appropriate power of attorney to act in the name
of the Seller with respect to such Contracts and Immovable Property
Leases for the Purchaser's own account and the Seller agrees to
remit promptly to the Purchaser all collections received by the
Seller in respect thereof.
(c) In the event that at Closing there exists on any of the Assets any
Encumbrance which is not a Permitted Lien (or which is indicated on
Schedule 11.1(z) as an Encumbrance to be discharged post-closing)
and for which the Seller has not obtained the appropriate discharge
and release or confirmation of intent to discharge and release from
the secured creditor of such Encumbrance, the Seller covenants and
agrees to assist the Purchaser to obtain each such discharge and
release, and the Seller agrees to execute such documents as the
Purchaser may reasonably request in connection therewith. The
foregoing shall not be construed as a waiver of the rights of the
Purchaser as set forth in Article 7 hereof.
5.6 Notice of Untrue Representation or Warranty
The Seller shall promptly notify the Purchaser and the Purchaser shall
promptly notify the Seller, upon any representation or warranty made by it
or him contained in this Agreement becoming untrue or incorrect during the
period from the date hereof to the Closing Date. Any such notification
shall set out particulars of the untrue or incorrect representation or
warranty and details of any actions being taken by the Seller or the
Purchaser, as the case may be, to rectify that state of affairs.
5.7 Unearned Revenues
The Seller shall promptly pay to the Purchaser any amounts received by the
Seller (other than amounts received by the Seller in connection with any
of the assets referred to in Section 1.2) and relating to services to be
performed by the Purchaser after the Closing Date with respect to any
customer or account or relating to time periods subsequent to the
Effective Time on the Closing Date.
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5.8 Confidentiality
In the event of termination of this Agreement, the Purchaser will use all
reasonable efforts to cause to be delivered to the Seller, and will retain
no copies of, all documents, work papers and other materials obtained by
the Purchaser or on its behalf from the Seller (collectively, the
"Information"), whether so obtained before or after the execution hereof,
and neither the Purchaser nor any Affiliate thereof will itself use or
intentionally disclose, directly or indirectly, any Information so
obtained, or otherwise obtained from the Seller hereunder or in connection
herewith, and will use all reasonable efforts to have all Information kept
confidential and not used in any way detrimental to the Seller; provided,
however, that (a) the Purchaser may use and disclose any Information which
has been publicly disclosed (other than by the Purchaser or any Affiliate
thereof in breach of its obligations under this Section 5.8) or has
rightfully come into the possession of the Purchaser or any Affiliate
thereof (other than from the Seller or the Shareholder) or was known to
the Purchaser on a non-confidential basis before its disclosure to the
Purchaser by the Seller or the Shareholder, (b) to the extent that the
Purchaser or any Affiliate thereof may be required by Law to disclose any
of Information, the Purchaser or such Affiliate may disclose Information
if they shall have used all reasonable efforts, and shall have afforded
the Seller the opportunity, to obtain an appropriate protective order, or
other satisfactory assurance of confidential treatment, for the
Information required to be so disclosed, and (c) the Purchaser may keep
one archival copy of the Information, solely for evidentiary purposes in
the event of any dispute regarding this Agreement or the Information, to
be kept in the files of Optimal Robotic's General Counsel.
5.9 Cooperation in the Defence of Claims
At the request of the Seller and at the Seller's cost, the Purchaser shall
cooperate in all reasonable respects with the Seller or its insurance
carriers in the investigation and defence by the Seller of any liability
or claim retained by the Seller hereunder. Such cooperation shall include,
but not be limited to, producing records and/or witnesses.
5.10 Covenant to Satisfy Closing Conditions
(a) The Seller agrees to take all such actions as are within its power
to control and use its best efforts to cause other actions to be
taken which are not within its power to control, so as to ensure
compliance with all of the conditions set forth in Section 8.1
including, without limitation, ensuring that there has been no
breach of any representations and warranties.
(b) The Purchaser agrees to take all such actions as are within its
power to control and use its best efforts to cause other actions to
be taken which are not within its power to control, so as to ensure
compliance with all of the conditions set forth in Section 8.2
including, without limitation, ensuring that there has been no
breach of any representations and warranties.
5.11 Montcap Guarantee
The Purchaser shall employ best efforts to cause the release and discharge
of the Shareholder from his guarantee of the Montcap Fee (the "Montcap
Guarantee"), provided that the Shareholder shall be responsible for and
shall acquit any legal fees that accrue in connection with the obtaining
of such release and discharge. To the extent that the Shareholder is not
released and discharged from the Montcap Guarantee, the Purchaser shall
indemnify and save harmless the Shareholder from any and all
responsibility and related costs (including legal fees) thereunder.
ARTICLE 6
EMPLOYEES
6.1 Employees
Subject to the Closing, the Purchaser agrees to continue the employment of
the Employees listed in Schedule 6.1 as per the Effective Time on the
Closing Date on comparable but not less favourable terms and conditions of
employment in the aggregate as the Seller employs them on such date;
provided, however, that nothing in this Section 6.1 shall be construed so
as to limit the right of the Purchaser following the Closing Date to make
changes to such terms and conditions to the extent determined by the
Purchaser to be appropriate following its assessment thereof. If any
employees listed on Schedule 6.1 chooses not to continue their employment
with the Purchaser, it is understood and agreed that these employees will
be offered Severance Payments including, without limitation, payment in
lieu of notice by the Seller, in accordance with the provisions of Section
6.2. The Purchaser shall be responsible for the payment of such Severance
Payments.
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6.2 Terminated Employees
Effective prior to the Closing, the employment of the employees listed in
Schedule 6.2 shall be terminated by the Seller. It is understood and
agreed that the Purchaser will indemnify, as contemplated in and by
Article 13, the Seller for all Severance Payments including, without
limitation, payment in lieu of notice related to such terminations.
The Purchaser also specifically undertakes to indemnify the Seller for any
reasonable costs, honoraries, expenses or other amounts disbursed by the
Seller further to any legal recourse or proceeding of any nature
whatsoever filed or undertaken by any of the employees terminated.
6.3 Employee Plans
The Employee Plans shall be transferred by the Seller to the Purchaser
and, notwithstanding the delays caused by the obligation to obtain the
approval of any governmental agency or other instrumentality for the
transfer of certain Employee Plans, the Purchaser acknowledges and agrees
that the Purchaser shall assume all of the Seller's obligations under any
Employee Plans accruing from the Effective Time on the Closing Date, to
the complete exoneration of the Seller.
The Purchaser also undertakes to execute all documents reasonably required
by the Seller and to fully collaborate with the Seller or any governmental
entity or other instrumentality in order to ensure the transfer of the
Employee Plans. The Purchaser also acknowledges and agrees that it will
take all the necessary measures to ensure that any Employee Plan that must
be replaced or covered by another contract or agreement shall take full
effect from the Effective Time on the Closing Date.
6.4 No Third Party Beneficiaries
This Agreement and any agreement entered into pursuant to this Agreement
shall not be for the benefit of, or create any right or cause of action in
or on behalf of, any Person (including any of the Employees) other than
the parties to this Agreement, and no Person (including any of the
Employees), other than the parties to this Agreement, shall be entitled to
rely on the provisions hereof or any agreement entered into pursuant
hereto in any action, proceeding, hearing or other forum.
ARTICLE 7
TERMINATION OF AGREEMENT
7.1 Termination by the Purchaser
The Purchaser may terminate this Agreement by notice in writing to the
Seller (a) if any of the conditions set forth in Section 8.1 have not been
fulfilled or waived at or prior to Closing, or (b) if any obligation or
covenant of the Seller or the Shareholder to be performed at or prior to
Closing has not been observed or performed by such time. In the event of
termination by the Purchaser as aforesaid, the Purchaser shall be released
from all obligations hereunder, save and except for its obligations under
Sections 5.8, 12.1, 12.2 and 12.3, which shall survive. If the Purchaser
waives compliance with any of the conditions, obligations or covenants
contained in this Agreement, the waiver will be without prejudice to any
of its rights of termination in the event of non-fulfillment,
non-observance or non-performance of any other condition, obligation or
covenant in whole or in part.
7.2 Termination by the Seller
The Seller may terminate this Agreement by notice in writing to the
Purchaser (a) if any of the conditions set forth in Section 8.2 have not
been fulfilled or waived at or prior to Closing, or (b) if any obligation
or covenant of the Purchaser to be performed at or prior to Closing has
not been observed or performed by such time. In the event of termination
by the Seller as aforesaid, the Seller and the Shareholder shall be
released from all obligations hereunder save and except for their
obligations under Sections 5.8, 12.1, 12.2 and 12.3, as the case may be,
which shall survive. If the Seller waives compliance with any of the
conditions, obligations or covenants contained in this Agreement, the
waiver will be without prejudice to any of its rights of termination in
the event of non-fulfillment, non-observance or non-performance of any
other condition, obligation or covenant in whole or in part.
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7.3 Other Termination Rights
This Agreement may, by notice in writing given prior to or on the Closing
Date, be terminated by the Purchaser or the Seller:
(i) by mutual consent of the Seller and the Purchaser; or
(ii) if any action, suit, or proceeding shall have been
instituted or any final order shall have been rendered by
any Governmental Body with respect to the transactions
contemplated hereby which reasonably may prohibit the
transactions contemplated hereby or materially affect the
Purchaser's operation of the Acquired Business or ownership
or quiet enjoyment of the Assets;
and in such event, each party hereto shall be released from all
obligations hereunder, save and except for their respective obligations
under Sections 5.8, 12.1, 12.2 and 12.3, which shall survive.
7.4 Effect of Termination
Each party's right of termination under this Article 7 is in addition to
any other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies.
ARTICLE 8
CONDITIONS TO THE CLOSING
8.1 Conditions to Obligations of the Purchaser
Unless waived in writing by the Purchaser, the obligations of the
Purchaser to consummate the transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Performance
Each of the acts, covenants and undertakings of the Seller and
the Shareholder to be complied with or performed at or before
the Closing pursuant hereto shall have been duly complied with
or performed.
(b) Representations and Warranties
The representations and warranties of the Seller contained in
this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect
as if made on and as of such date.
(c) No Litigation
No action, proceeding or order of any court or administrative
agency (other than those disclosed in this Agreement or in any
Schedule hereto) shall be pending or threatened in any
jurisdiction (i) which has or will have the effect of
materially restricting or materially prohibiting (A) any of
the transactions contemplated by this Agreement, (B) the
Purchaser from exercising full dominion and control over the
Assets, or (C) the right of the Purchaser to conduct the
Acquired Business after Closing on substantially the same
terms as heretofore operated, or (ii) which requires or seeks
to require any divestiture, rescission, separate holding or
any other remedy affecting the Purchaser or any of its
businesses or assets as a result of the transactions
contemplated herein.
(d) Approvals and Consents
The Purchaser shall have (i) duly and validly obtained all
Permits of all Governmental Bodies required in connection with
this Agreement and the consummation of the transactions
contemplated hereby, and (ii) received all of the consents and
releases listed in Schedule 1.7.
(e) Closing Deliveries
The Purchaser shall have received the closing deliveries set
forth in Section 2.1(b).
(f) No Material Change
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No material adverse change shall have occurred, since the date
of execution of this Agreement, in the business, operation,
properties or prospects of the Acquired Business or the
Assets.
8.2 Conditions to Obligations of the Seller
Unless waived in writing by the Seller, the obligations of the Seller to
consummate the transactions contemplated by this Agreement are subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) Performance
Each of the acts, covenants and undertakings of the Purchaser
to be complied with or performed at or before the Closing
pursuant hereto shall have been duly complied with or
performed.
(b) Representations and Warranties
The representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect
as if made on and as of such date.
(c) No Litigation
No action, proceeding or order of any court or administrative
agency (other than those disclosed in this Agreement or in any
Schedule hereto) shall be pending or threatened in any
jurisdiction (i) which has or will have the effect of
materially restricting or materially prohibiting (A) any of
the transactions contemplated hereby, (B) the Seller from
transferring the Assets to the Purchaser, or (C) the right of
the Purchaser to conduct the Acquired Business after Closing
on substantially the same basis as heretofore operated, or
(ii) which requires any divestiture, rescission, separate
holding or any other remedy affecting the Seller or any of its
businesses or assets as a result of the transactions
contemplated herein.
(d) Closing Deliveries
The Seller shall have received the closing deliveries set
forth in Section 2.1(c).
ARTICLE 9
SURVIVAL; INDEMNIFICATION
9.1 Survival; Remedy for Breach
All representations, warranties, covenants and agreements of the parties
hereto contained herein and in any Schedule attached and certificate
delivered pursuant hereto or in connection herewith shall survive the
Closing to the extent set forth in this Article 9. After the Closing,
except for those indemnifications specifically set forth in Section 5.5,
which shall survive the Closing forever until fulfilled and which shall
not be limited by this Article 9, the sole and exclusive remedy of the
Purchaser for any breach or inaccuracy of any representation, warranty,
covenant or agreement by the Seller or the Shareholder shall be the
indemnities contained in Section 9.2, which indemnities shall survive the
Closing. After the Closing, the sole and exclusive remedy of the Seller
for any breach or inaccuracy of any representation, warranty, covenant or
agreement by the Purchaser shall be the indemnities contained in Section
9.3, which indemnities shall survive the Closing.
9.2 Indemnification by the Seller
(a) The Seller shall indemnify, defend and save the Purchaser harmless
of and from any and all damage, loss, liability, claim, deficiency,
cost or expense (including, without limitation, reasonable expenses
of investigation and attorneys' fees and expenses in connection with
any action, suit or proceeding brought against the Purchaser)
(collectively, "Damages") incurred or suffered by the Purchaser
arising out of or resulting, directly or indirectly, from any
misrepresentation by or breach of any representation, warranty,
covenant, agreement term or condition by the Seller contained herein
or in any Transaction Documents.
(b) Except as to any Damages:
(i) arising out of or resulting from any liability excluded
pursuant to Section 1.4 hereof; or
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(ii) arising out of or resulting from the representations and
warranties set forth in Sections 3.1 and 3.11(a) (and the
corresponding representations and warranties set out in the
certificate to be delivered pursuant to Section 2.1(b)(ii)),
which shall survive and continue in full force and effect
without limitation of time,
the Purchaser must assert in writing any claim for indemnification under this
Section 9.2 within twenty-four (24) months of the Closing Date.
(c) A claim for any breach by the Seller of any of the representations
and warranties contained in this Agreement involving fraud or
fraudulent misrepresentation may be made at any time subject only to
applicable time periods imposed by applicable Law.
(d) The Purchaser agrees to give prompt notice to the Seller of the
assertion of any claim, or the commencement of any suit, action or
proceeding, in respect of which indemnity may be sought hereunder.
The delay in or failure to give such notice, however, shall relieve
the Seller of its obligations hereunder only to the extent that the
Seller has been prejudiced by such delay or failure. The Seller
shall have the right to control, and at the request of the Purchaser
shall assume, the defence of any such suit, action or proceeding at
its own expense.
(e) The Seller shall not be liable under this Section 9.2 for any
settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder.
(f) The Seller shall not compromise or settle or cause a compromise or
settlement of any claim, litigation or proceeding in respect of
which indemnity may be sought hereunder which would require the
Purchaser to admit any liability or pay any amount without the prior
written consent of the Purchaser, which consent shall be at the
Purchaser's sole discretion.
9.3 Indemnification by the Purchaser
(a) The Purchaser shall indemnify, defend and save the Seller harmless
of and from any and all Damages incurred or suffered by the Seller
arising out of or resulting, directly or indirectly, from any
liability pertaining, directly or indirectly, to any assumed
liability pursuant to Section 1.3 hereof or from any
misrepresentation by or breach of any representation, warranty,
covenant, agreement term or condition by the Purchaser contained
herein.
(b) Except as to any Damages arising out of or resulting from any
liability assumed pursuant to Section 1.3 hereof or pursuant to
Article 13 relating to the Severance Payments, which provisions
shall survive until they are fulfilled, the Seller must assert in
writing any claim for indemnification under this Section 9.3 within
twenty-four (24) months of the Closing Date.
(c) The Seller agrees to give prompt notice to the Purchaser of the
assertion of any claim, or the commencement of any action or
proceeding, in respect of which indemnity may be sought hereunder.
The delay in or failure to give such notice, however, shall relieve
the Purchaser of its obligations hereunder only to the extent that
the Purchaser has been prejudiced by such delay or failure. The
Purchaser shall have the right to, and shall at the request of the
Seller, assume the defence of any such suit, action or proceeding at
its own expense.
(d) The Purchaser shall not be liable under this Section 9.3 for any
settlement or compromise effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought
hereunder.
(e) The Purchaser shall not compromise or settle or cause a compromise
or settlement of any claim, litigation or proceeding in respect of
which indemnity may be sought hereunder which would require the
Seller to admit any liability or pay any amount without the prior
written consent of the Seller, which consent shall be at the
Seller's sole discretion.
9.4 Extension of Indemnities
Notwithstanding Sections 9.1, 9.2 and 9.3, any representation, warranty,
covenant, agreement, term or condition in respect of which indemnity may
be sought under Section 9.2 or 9.3 shall survive the time at which it
would otherwise terminate pursuant to such Sections, if notice of the
inaccuracy or breach thereof giving rise to such indemnity shall have been
given to the party against whom such indemnity may be sought prior to such
time.
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9.5 Taxes
The amount of any Damages shall be calculated taking into account any
off-setting tax benefits or any tax deductions actually enjoyed by the
payee of said Damages, without any obligation on the part of the payee to
take advantage, in whole or in part, of any such benefits or deductions,
the parties agreeing that each party hereto shall have sole and absolute
discretion in planning it's tax position.
9.6 Limitations
(a) Notwithstanding any provisions hereof, the aggregate liability of
the Seller and the Purchaser under this Agreement shall be limited
to an amount equal to the amount by which the Purchase Price exceeds
the amount of the Assets according to the Final Closing Balance
Sheet;
(b) The Seller shall have no liability with respect to Damages until the
total of all Damages exceeds one million Canadian Dollars
(CDN$1,000,000), at which point the Seller shall be obliged to
indemnify the Purchaser from and against all Damages, it being
understood that the Seller shall under no circumstance be liable for
the Assumed Liabilities and that the Purchaser shall under no
circumstance be liable for the Excluded Liabilities.
ARTICLE 10
NOTICES
10.1 Notices
All notices or other communications required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by facsimile
or other means of electronic communication, by nationally recognized
private courier, or by prepaid first-class mail. Notices or other
communications delivered by prepaid first-class mail at any time other
than during a general discontinuance of postal service due to strike,
lockout or otherwise, shall be deemed given three (3) business days after
the post-marked date thereof. Notices or other communications delivered by
facsimile or other means of electronic communication, shall be deemed
received on the first business day following the sending; provided,
however, that a notice delivered by facsimile or other means of electronic
communication shall only be effective if such notice is also delivered by
hand, or deposited in the mail, postage prepaid, registered or certified
mail, on or before two (2) business days after its delivery by facsimile
or other means of electronic communication. Notices or other
communications delivered by hand shall be deemed to have been received at
the time it is delivered to the applicable address noted below either to
the individual designated below or to an individual at such address having
apparent authority to accept deliveries on behalf of the addressee.
All notices and other communications shall be addressed as follows:
(a) If to the Purchaser:
OPTIMAL SERVICES GROUP INC.
0000 xx xx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX X0X 0X0
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxx
Xxxxxx Blaikie LLP
Suite 2500
0000 Xxxx-Xxxxxxxx Xxxx. Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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(b) If to the Seller:
RBA INC.
600 de La Gauchetiere St. W.
Suite 2400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xx. Xxxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxxxxxx Xxxxxxxx Xxxxx Xxxxxx
600 de La Gauchetiere St. W.
Suite 2400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xx. Xxxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(c) If to the Shareholder:
XXXXXXX XXXXXX
365, Rang L'Annonciation
Xxx, Xxxxxx
X0X 0X0
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxxxxxx Xxxxxxxx Xxxxx Xxxxxx
600 de La Gauchetiere St. W.
Suite 2400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xx. Xxxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
ARTICLE 11
CERTAIN DEFINITIONS
11.1 Definitions
For purposes of this Agreement, the following terms shall have the
respective meanings as set forth in this Article XI.
(a) "Acquired Business" shall have the meaning attributed thereto in the
preamble hereof.
(b) "Acquired Business Balance Sheet" shall have the meaning attributed
thereto in Section 3.10.
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(c) "Affiliate" shall have the meaning set forth in the Canada Business
Corporations Act, as amended from time to time.
(d) "Arm's Length" shall have the meaning attributed to such term in the
ITA and the jurisprudence related thereto.
(e) "Assets" shall have the meaning attributed thereto in Section 1.1.
(f) "Books and Records" shall have the meaning attributed thereto in
Section 1.1(d).
(g) "Closing" shall have the meaning attributed thereto in Section 2.1.
(h) "Closing Date" shall have the meaning attributed thereto in Section
2.1.
(i) "Contracts" shall have the meaning attributed thereto in Section
1.1(a).
(j) "Employee Plans" shall have the meaning attributed thereto in
Section 3.7.
(k) "Employment Agreement" shall have the meaning attributed thereto in
Section 2.1(b)(iii).
(l) "ETA" shall mean the Excise Tax Act (Canada) as amended from time to
time, including regulations thereunder.
(m) "Encumbrance(s)" shall mean all mortgages, claims, hypothecs,
charges, liens, encumbrances, easements, restrictions, options,
pledges, calls, commitments, security interests, conditional sales
agreements, title retention agreements, leases, and other
restrictions of any kind and nature.
(n) "Financial Statements" means the consolidated balance sheet of the
Seller with respect to the Acquired Business as at December 31, 2002
and the accompanying consolidated statements of operations and
retained earnings and cash flows for the year then ended and all
notes thereto as reported upon by KPMG, LLP, Chartered Accountants.
(o) "GAAP" shall mean at any time, accounting principles generally
accepted in Canada including those set out in the Handbook of the
Canadian Institute of Chartered Accountants, at the relevant time
applied on a consistent basis.
(p) "Governmental Body" shall mean (i) any multinational, federal,
provincial, state, municipal, local or other governmental or public
department, central bank, court, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) any subdivision or
authority of any of the foregoing, or (iii) any quasi-governmental
or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the above.
(q) "Immovable Property Leases" shall have the meaning attributed
thereto in Section 3.2.
(r) "Intellectual Property" shall have the meaning attributed thereto in
Section 1.1(k).
(s) "ITA" shall mean the Income Tax Act (Canada) as amended from time to
time, including regulations thereunder.
(t) "Laws" shall mean any and all applicable laws including all
statutes, codes, ordinances, decrees, rules, regulations, municipal
by-laws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, decisions, ruling or
awards, policies, guidelines and general principles of common and
civil law and equity, legally binding on the Person referred to in
the context in which the word is used.
(u) "Material Contracts" shall have the meaning attributed thereto in
Section 3.5.
(v) "Montcap Fee" shall mean the facility fee, in the amount of one
hundred seventeen thousand six hundred ninety-seven Canadian Dollars
and seventy-five cents (CDN$117,697.75), payable by the Seller to
Montcap Financial Corporation pursuant to the Factoring Services
Agreement dated as of April 2, 2003 between the Seller and Montcap
Financial Corporation;
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(w) "Moneris Claim" shall mean the equipment inventory discrepancy claim
by Moneris Solutions Corporation against the Seller.
(x) "Moneris Inventory Discrepancy" shall mean the amount of the
equipment inventory discrepancy claim by Moneris Solutions
Corporation following the October 30, 2003 scheduled count of the
Moneris equipment inventory, without giving effect to the Moneris
Settlement.
(y) "Permits" shall mean, with respect to any Person, any order, permit,
consent, approval, waiver, licence or similar authorization of or
registration with any Governmental Body having jurisdiction over the
Person.
(z) "Permitted Liens" shall mean (i) Encumbrances for current taxes not
yet due and payable; and (ii) the Encumbrances listed on Schedule
11.1(z); and (iii) such other Encumbrances with respect to Assumed
Liabilities which are not substantial in amount and do not
materially detract from the value or the use of any subject Assets
to which they attach.
(aa) "Person" shall mean a natural person, partnership, limited liability
partnership, corporation, joint stock company, trust, unincorporated
association, joint venture or other entity or Governmental Body, and
pronouns have a similarly extended meaning.
(bb) "Post-Closing Adjustment" shall have the meaning attributed thereto
in Section 1.6(d).
(cc) "Purchase Price" shall have the meaning ascribed thereto in Section
1.6(a).
(dd) "QSTA" shall mean An Act respecting the Quebec sales tax act, as
amended from time to time, including regulations thereunder.
(ee) "QTA" shall mean the Taxation Act (Quebec) as amended from time to
time, including regulations thereunder.
(ff) "Settlement Amount" shall mean the amount for which the Moneris
Claim has been settled by the Seller prior to the Closing Date,
namely $632,000.
(gg) "Severance Payments" shall have the meaning ascribed thereto in
Article 13.
(hh) "SLVQ Deposit" shall have the meaning ascribed thereto in Section
1.2(a).
(ii) "Tax" or "Taxes" shall mean any and all federal, state, provincial,
municipal, local and foreign taxes, assessments and other
governmental charges, duties, fees, levies, contributions, imports,
impositions and liabilities including Canada Pension Plan and Quebec
Pension Plan contributions, unemployment and employment insurance
contributions, xxxxxxx'x compensation contributions, contributions
to the Fonds des services de sante (Quebec), deductions at source,
taxes based upon or measured by gross receipts, gross income, net
income, profits, sales capital, paid-up capital, use or occupation
sales taxes, taxes on services, goods and services taxes, value
added taxes, ad valorem taxes, transfer taxes, franchise taxes,
withholding taxes, customs duties, payroll taxes, antidumping
duties, excise taxes and property taxes, together with any
instalments with respect thereto, and any or all interest,
penalties, fines and additions imposed levied or assessed by any
Governmental Body, and whether or not disputed, with respect to such
amounts.
(jj) "Tax Returns" shall mean all federal, state, provincial, local and
foreign tax returns, declarations, statements, reports, schedules,
forms and information returns and any amendments thereto required to
be filed by Law with a Governmental Body.
(kk) "Termination Agreement" means the agreement among the Seller, the
Purchaser and Montcap Financial Corporation relating to the
termination of the Factoring Services Agreement dated April 2, 2003
between the Seller and Montcap Financial Corporation.
(ll) "The Seller's knowledge" or "to the knowledge of the Seller" shall
mean the best knowledge and belief of any of the Seller's director
or officers or of the Shareholder.
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ARTICLE 12
MISCELLANEOUS
12.1 Brokers
The Purchaser represents to the Seller that it has not employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee from the
Purchaser or any commission upon consummation of the transactions
contemplated hereby. The Seller represents to the Purchaser that the
Seller has retained CIBC Mid-Market Investment Banking as an investment
advisor and broker for the sale of the Acquired Business but has not
employed any other Person in such connection who might be so entitled to
any such fee from the Seller or any such commission. The Seller shall be
solely responsible to pay the fee of its investment advisor and broker.
12.2 Expenses
Except as otherwise provided herein, all costs and expenses (including the
fees and disbursements of legal counsel, investment advisors and
accountants) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
12.3 Announcements
At all times prior to Closing, any press release or public statement or
announcement (a "Public Statement") with respect to the transaction
contemplated in this Agreement shall be made only with the prior written
consent and joint approval of the Seller and the Purchaser unless such
Public Statement is required by Law or by any stock exchange, in which
case the party required to make the Public Statement shall use its best
efforts to obtain the approval of the other party as to the form, nature
and extent of the disclosure. After the Closing, any Public Statement by
the Seller or the Shareholder shall be made only with the prior written
consent and approval of the Purchaser unless the Public Statement is
required by Law or by any stock exchange, in which case the Seller or the
Shareholder shall use its or his best efforts to obtain the approval of
the Purchaser as to the form, nature and extent of the disclosure.
12.4 Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, that
neither this Agreement nor any of the rights or obligations hereunder may
be assigned by any party without the prior written consent of the other
parties hereto. Any attempted assignment in violation of the foregoing
shall be null and void.
12.5 Schedules and Exhibits
Any Schedule or Exhibit which is not attached hereto at the time that the
Purchaser executes this Agreement may be subsequently attached hereto or
incorporated herein if such Schedule or Exhibit is acceptable to the
Purchaser. The Schedules and Exhibits attached to this Agreement shall,
for all purposes of this Agreement, form an integral part hereof.
12.6 Entire Agreement; Amendment
This Agreement, along with the instruments and documents to be delivered
at the Closing, embody the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties including, without limitation, the letter of
intent dated as of August 4, 2003 addressed by the Purchaser to the Seller
and accepted by the Seller on August 4, 2003. There are no
representations, warranties, covenants, conditions or other agreements,
express or implied, collateral, statutory or otherwise, between the
parties in connection with the subject matter of this Agreement, except as
specifically set forth herein and therein and the Seller, the Shareholder
and the Purchaser have not relied and are not relying on any other
information, discussion or understanding in entering into and completing
the transactions contemplated by this Agreement. This Agreement may be
amended, and any provision hereof waived, but only in writing signed by
all the parties hereto.
12.7 Counterparts
This Agreement may be executed in one or more counterparts (including
counterparts by facsimile) all of which shall together constitute one and
the same instrument.
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12.8 Agreement to Take Necessary and Desirable Actions
The Seller, the Shareholder and the Purchaser each agrees to execute and
deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be necessary in order to consummate
or implement expeditiously the transactions contemplated by this
Agreement.
12.9 Headings
The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.10 Governing Law
This Agreement shall in all respects be governed by and construed in
accordance with the Laws of the Province of Quebec and the federal Laws of
Canada applicable therein, without regard to the conflict of laws
principles of such Province. The United Nation Convention on the Sale of
Goods shall not apply to the transactions contemplated in and by this
Agreement.
12.11 Severability
If any provision of this Agreement shall be determined by any court of
competent jurisdiction to be illegal, invalid or unenforceable, that
provision will be severed from this Agreement and the remaining provisions
shall remain in full force and effect.
12.12 Jurisdiction; Consent to Service of Process
(a) Each of the Purchaser, the Seller and the Shareholder hereby
irrevocably and unconditionally submits, for itself/himself and
its/his property, to the exclusive jurisdiction of any Quebec court
or federal court of Canada sitting in the Province of Quebec, and
any appellate court from any such court, in any suit, action or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each hereby
irrevocably and unconditionally agrees that all claims in respect of
any such suit, action or proceeding may be heard and determined in
such Quebec court or, to the extent permitted by Law, in such
federal court. Each of the Purchaser, the Seller and the Shareholder
agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law.
(b) Each of the Purchaser, the Seller and the Shareholder hereby
irrevocably and unconditionally waives, to the fullest extent it/he
may legally and effectively do so, any objection which it/he may now
or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any
Quebec court or federal court sitting in the Province of Quebec.
Each of the Purchaser, the Seller and the Shareholder hereby
irrevocably waives, to the fullest extent permitted by Law, the
defence of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court.
(c) Each of the Purchaser, the Seller and the Shareholder irrevocably
consents to service of process in the manner provided for in Section
10.1. Nothing in this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by
Law.
12.13 Waiver
No waiver of any of the provisions of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar), nor
shall such waiver be binding unless executed in writing by the party to be
bound by the waiver. No failure on the part of the Seller or the Purchaser
to exercise, and no delay in exercising any right under this Agreement
shall operate as a waiver of such right, nor shall any single or partial
exercise of any such right preclude any other or further exercise of such
right or the exercise of any other right.
12.14 Guarantee of the Shareholder
For valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Shareholder hereby guarantees the performance
(the "Guarantee") by the Seller of its obligations under Section 9.2(a)
provided, however, that the liability of the Guarantee of the Shareholder
with respect to any Damages shall be limited to an amount equal to 57% of
such Damages and to an aggregate liability of $2,850,000. For greater
certainty, the Shareholder confirms that it waives the benefits of
division and discussion.
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12.15 Conditions of the Guarantee
Subject to the provisions of Section 12.14 above,
(a) The liability of the Shareholder in respect of the Guarantee shall
not be affected by any change or changes in the name, corporate
existence or structure of the Seller (whether by way of
reconstruction, consolidation, amalgamation, merger, transfer, sale,
lease or otherwise).
(b) The liability of the Shareholder hereunder shall not be released,
discharged, limited or in any way affected by anything done,
suffered or permitted by the Purchaser in connection with any duties
or liabilities of the Seller to the Purchaser. Without limiting the
generality of the foregoing and without releasing, discharging,
limiting or otherwise affecting in whole or in part the
Shareholder's liability hereunder, without obtaining the consent of
or giving notice to the Shareholder, the Purchaser may:
(i) grant time, renewals, extensions, indulgences, releases and
discharges to the Seller;
(ii) accept compromises from the Seller; and
(iii) otherwise deal with the Seller and all other Persons and
securities as the Purchaser may see fit, acting reasonably.
(c) Any account settled or stated in writing by or between the Purchaser
and the Seller shall be accepted by the Shareholder as conclusive
evidence, absent manifest mathematical error, that the balance or
amount thereby appearing due by the Seller to the Purchaser is so
due.
(d) The Shareholder irrevocably waives any objection, including any
objection to the laying of venue or based on the grounds of forum
non conveniens, which it may now or hereafter have to the bringing
of any action or proceeding in such jurisdiction in respect of this
agreement. The Shareholder waives personal service of any summons,
complaint or other process, which may be made by any other means
permitted by the laws of the Province of Quebec and the laws of
Canada, as applicable.
12.16 Language
The parties hereto acknowledge that they have required that the present
Agreement, as well as all documents, notices and legal proceedings
executed, given or instituted pursuant hereto or relating directly or
indirectly hereto, be drawn up in English. Les parties reconnaissent avoir
exige la redaction en anglais de la presente convention, ainsi que de tous
documents, avis et procedures judiciaires executes, donnes ou intentes,
directement ou indirectement, a la suite de ou relativement a la presente
convention.
ARTICLE 13
SEVERANCE PAYMENTS AND OTHER MATTERS
13.1 Severance Payments
The Purchaser shall pay, perform or discharge when due, to the complete
exculpation of the Seller, or reimburse the Seller for any payments made
with respect to any obligations or liabilities of the Seller relating to
the termination of those of the employees of the Seller (A) who shall not
have agreed to continue their employment with the Purchaser as
contemplated under Section 6.1 and (B) listed in Schedule 6.2 including,
without limitation, any liabilities to such employees (a) for salary,
wages, accumulated overtime, severance payment, obligations or other
separation benefits, bonuses, commissions, vacation pay, accumulated
vacation time and other compensation, (b) arising out of the Employee
Plans and (c) any claim made by any employee listed in Schedule 6.1 or
Schedule 6.2 in connection with the termination of his/her employment with
the Seller or the fact that their employment would not continue with the
Purchaser including any fees, honoraries, expenses or any other costs
related to any legal recourse of any nature whatsoever filed or undertaken
by any of the employees listed in Schedule 6.1 or Schedule 6.2
(collectively, the "Severance Payments").
13.2 Moneris Indemnity
The Purchaser shall indemnify, defend and save the Seller harmless of and
from any and all Damages incurred or suffered by the Seller arising out of
or resulting, directly or indirectly, from the failure of the Purchaser to
pay any portion of the three hundred and thirty-three thousand Canadian
Dollars (CDN$332,000) due to Moneris Solutions Corporation pursuant to the
agreement entered into among the Seller, the Purchaser and Moneris
Solutions Corporation dated as of the date hereof.
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Rest of Page Deliberately Left Blank.
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IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of
the parties hereto as of the day and year first above written.
OPTIMAL SERVICES GROUP INC.
Per: /s/ Xxxx Xxxxxxxx
----------------------
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
RBA INC.
Per: /s/ Xxxxxxx Xxxxxx
----------------------
Name: Xxxxxxx Xxxxxx
Title: President
/s/ Xxxxxxx Xxxxxx
---------------------------
XXXXXXX XXXXXX
INTERVENTION
Optimal Robotics Corp. intervenes to this Agreement to declare having taken
cognizance of its provisions and to recognize and agree to be bound by the terms
and conditions of the Agreement solidarily with the Purchaser, and hereby waives
the benefits of division and discussion for greater certainty.
OPTIMAL ROBOTICS CORP.
Per: /s/ Xxxx Xxxxxxxx
----------------------
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
