EXHIBIT 10.45
PURCHASE AGREEMENT
BETWEEN
DATA BUSINESS FORMS LIMITED
AND
XXXX X. XXXXXXX
AND
408446 ALBERTA INC.
AND
SUNDOG PRINTING LIMITED
made effective as of March 1, 1999
TABLE OF CONTENTS
PAGE NO.
ARTICLE 1 INTERPRETATION
1.1 Definitions............................................................................2
1.2 Headings...............................................................................7
1.3 Extended Meanings......................................................................7
1.4 Currency...............................................................................7
1.5 Accounting Principles..................................................................7
1.6 Schedules..............................................................................8
1.7 Best of Knowledge......................................................................9
ARTICLE 2 DISCLOSURE
2.1 Disclosure.............................................................................9
ARTICLE 3 PURCHASE AND SALE OF THE SHARES AND ASSIGNMENT OF THE SHAREHOLDERS' LOANS
3.1 Purchase and Sale of Shares............................................................9
3.2 Assignment of Shareholders' Loans.....................................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.1 Vendors' Representations and Warranties...............................................11
4.2 Xxxxxxx'x Representations and Warranties..............................................38
ARTICLE 5 PURCHASERS REPRESENTATIONS AND WARRANTIES
5.1 Purchasers Representations............................................................41
ARTICLE 6 COVENANTS
6.1 Taxes.................................................................................42
6.2 Accounts Receivable...................................................................43
6.3 Related Party Agreements..............................................................43
6.4 Cooperation...........................................................................43
6.5 Access to Information; Confidentiality; Public Disclosure.............................44
6.6 Conduct of Business Pending Closing...................................................45
6.7 Prohibited Activities.................................................................45
6.8 Exclusivity...........................................................................47
6.9 Notification of Certain Matters.......................................................48
ARTICLE 7 CONDITIONS
7.1 Conditions for the Benefit of the Purchaser...........................................48
7.2 Conditions for the Benefit of the Vendor, the Company and 408446......................50
7.3 Conditions for the Benefit of the Vendor, Purchaser,
Company and 40844.....................................................................51
ARTICLE 8 INDEMNIFICATION
8.1 General Indemnification by the Vendor.................................................52
8.2 Limitation and Expiration.............................................................53
8.3 Indemnification Procedures............................................................54
8.4 General Indemnification by the Purchaser..............................................56
8.5 Survival of Representations, Warranties and Covenants.................................56
8.6 Remedies Cumulative...................................................................56
8.7 Right to Set Off......................................................................57
ARTICLE 9 NON-COMPETITION
9.1 Prohibited Activities.................................................................57
9.2 Confidentiality.......................................................................58
9.3 Damages...............................................................................58
9.4 Reasonable Restraint..................................................................59
9.5 Severability; Reformation.............................................................59
9.6 Independent Covenant..................................................................59
9.7 Materiality...........................................................................59
ARTICLE 10 CLOSING
10.1 Closing...............................................................................60
10.2 Deliveries at Funding Time............................................................60
10.3 Purchaser Post-Closing Obligations....................................................61
10.4 Xxxxxxx Contract......................................................................62
ARTICLE 11 GENERAL
11.1 Termination...........................................................................62
11.2 Effect of Termination.................................................................63
11.3 Successors and Assigns................................................................63
11.4 Entire Agreement; Amendment; Waiver...................................................63
11.5 Counterparts..........................................................................63
11.6 Brokers and Agents....................................................................64
11.7 Expenses..............................................................................64
11.8 Specific Performance; Remedies........................................................64
11.9 Notices...............................................................................64
11.10 Governing Law.........................................................................66
11.11 Severability..........................................................................67
11.12 Absence of Third Party Beneficiary Rights.............................................67
11.13 Mutual Drafting.......................................................................67
11.14 Further Representations...............................................................67
11.15 Further Assurances....................................................................68
PURCHASE AGREEMENT
THIS AGREEMENT made as of the 1st day of March, 1999.
BETWEEN:
DATA BUSINESS FORMS LIMITED, a Corporation governed by
the laws of Ontario (hereinafter referred to as the
"Purchaser")
OF THE FIRST PART
- and -
XXXX X. XXXXXXX, an individual residing in the City of
Calgary, in the Province of Alberta (hereinafter referred to
as the "Vendor" or "Xxxxxxx")
OF THE SECOND PART
- and -
SUNDOG PRINTING LIMITED, a corporation governed by the laws
of Alberta (hereinafter referred to as the "Company")
OF THE THIRD PART
- and -
000000 XXXXXXX INC., a corporation governed by the laws of
Alberta (hereinafter referred to as "408446")
OF THE FOURTH PART
WHEREAS the Vendor is the beneficial and registered owner of
all of the 408446 Shares;
AND WHEREAS the Vendor is the beneficial and registered owner
of 29 Class A common shares in the capital of the Company;
AND WHEREAS 408446 is the beneficial and registered owner of
160 Class A common shares in the capital of the Company;
AND WHEREAS, at the Funding Time, the sole assets held by
408446 will be common shares in the capital of the Company;
AND WHEREAS 408446, Vendor and 517244 in the aggregate own all
of the issued and outstanding shares of the Company;
AND WHEREAS Xxxxxxx desires to sell his shareholder loans, his
common shares in the capital of the Company and the 408446 Shares to the
Purchaser and pursuant to the "Remenda Agreement", Xxx Xxxxxxx, the sole
shareholder of 517244, desires to sell all of his shares in 517244 and his
shareholder loans and the Purchaser desires to purchase same such that the
Purchaser becomes the sole direct and indirect shareholder of the Company;
NOW THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including any recitals and schedules
hereto, unless something in the subject matter or context is inconsistent
therewith:
(a) "408446" means 000000 Xxxxxxx Inc., a body corporate
incorporated under the laws of the Province of Alberta;
(b) "517244" means 000000 Xxxxxxx Ltd, a body corporate
incorporated under the laws of the Province of Alberta;
(c) "1999 Bonus" has the meaning set forth in Section 7.3(d)
hereof;
(d) "408446 Shares" means 106 Class A Common Shares in the capital
of 408446 owned by Xxxxxxx;
(e) "408446 Shareholder Loan" means the amount of $563,912
advanced by Vendor to 408446 by way of a shareholder's loan
and remaining unpaid as at the Funding Time;
(f) "Account Receivable" has the meaning set forth in Section
4.1(p);
(g) "Affiliates" has the meaning set forth in the BUSINESS
CORPORATIONS ACT (Alberta) or the BUSINESS CORPORATIONS ACT
(Ontario), as the case may be;
(h) "Agreement" means this agreement and all amendments made
hereto by written agreement between the Vendor, 408446,
Company and the Purchaser;
(i) "Balance Sheet Date" means July 31, 1998;
(j) "Benefit Plan" has the meaning set out in Section
4.1(aa)(i)(A);
(k) "Closing" means the consummation of the transactions
contemplated by this Agreement.
(l) "Company" means Sundog Printing Limited, a body corporate
incorporated under the laws of the Province of Alberta;
(m) "Company Financial Statements" has the meaning set out in
Section 4.1(l) hereof;
(n) "Confidential Information" has the meaning set out in Section
9.2 hereof;
(o) "Copyright" means any Canadian or foreign copyright owned by
the Company as of the date of this Agreement, including any
registration of copyrights, in Canada or in any foreign
county, as well as any application for a Canadian or foreign
copyright registration made by the Company;
(p) "Effective Date" means March 1, 1999;
(q) "ETA" shall mean Part IX of the EXCISE TAX ACT (Canada), as
now in effect;
(r) "Funding Date" means March 31, 1999 or such other date as may
be agreed to between the Vendor and the Purchaser;
(s) "Funding Time" means 4:00 p.m. (Calgary Time) on the Funding
Date;
(t) "Governmental Authority" has the meaning set out in Section
4.1(y)(i)(F) hereof;
(u) "Xxxxxxx" or "Vendor" means Xxxx X. Xxxxxxx, an individual
residing in the City of Calgary, in the Province of Alberta;
(v) "Xxxxxxx Employment Contract" means that certain employment
contract entered into between the Company and Xxxxxxx as set
forth and described in Schedule 1.1(t) hereof;
(w) "Xxxxxxx Insurance" means the policies set forth in
Schedule 1.1(u) insofar as they relate to Xxxxxxx;
(x) "Xxxxxxx Shares" means 29 Class A Common Voting Shares in
the capital of the Company owned by Xxxxxxx;
(y) "Income Statement" has the meaning set out in Section 4.1(l)
hereof;
(z) "Income Tax Act" means the INCOME TAX ACT (Canada), as
amended;
(aa) "Indemnified Party" has the meaning set out in Section 8.1
hereof;
(bb) "Indemnifying Party" has the meaning set out in Section 8.3
hereof;
(cc) "Xxxxxxx Employment Contract" means that certain employment
contract entered into between the Company and Xxxxxx Xxxxxxx
as set forth and described in Schedule 4.1(aa) hereof;
(dd) "Xxxxxxx Pension Obligation" means the obligation of the
Company to fund and to pay an amount of $290,827 to Xxxxxx
Xxxxxxx'x registered defined benefit pension plan;
(ee) "Xxxxxxx Xxxxxxxxx Obligation" means the obligation of the
Company to pay to Xxxxxxx a retirement allowance and severance
payment, as set forth in Schedule 4.1(aa);
(ff) "Landlords" means the landlords under the N.E. Lease and the
Parking Lot Lease;
(gg) "Leased Premises" means the N.E. Warehouse Property, the
Parking Lot and the Sundog Premises;
(hh) "Leases" means, collectively, the N.E. Lease, the Parking Lot
Lease and the Sundog Leases;
(ii) "Lien" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or otherwise), charge, preference, priority or
other security agreement, option, warrant, attachment, right
of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than
restrictions imposed by securities laws), or preferential
arrangement of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional
sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the
PERSONAL PROPERTY SECURITY ACT (Alberta) or comparable law of
any jurisdiction);
(jj) "Xxxx" means all right, title and interest in and to any
Canadian or foreign trademarks, service marks and trade names
now held by the Company, including any registration or
application for registration of any trademarks and services
marks in Canada or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress
(including logos, designs, company names, business names,
fictitious names and other business identifiers) used by the
Company in Canada or any foreign country;
(kk) "Material Contracts" has the meaning set out in Section
4.1(u)(ii) hereof;
(ll) "NASDAQ National Market" means the United States National
Market automated quotation system of the National
Association of Securities Dealers, Inc.;
(mm) "N.E. Lease" means that lease relating to that portion of N.E.
Warehouse Property, dated November 26, 1996 between Xxxxx
Holdings Limited and Sundog Printing Limited, as amended by a
lease amending agreement dated on or about March 1st, 1997
between Xxxxx Holdings Limited and Sundog Printing Limited
respecting premises located on lands municipally described as
0000 - 00xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx, leased to the
Company;
(nn) "N.E. Warehouse Property" means those lands and buildings
located in the City of Calgary, in the Province of Alberta
legally described as: Plan 7410187, Block 6, Lot 7, Excepting
thereout all mines and minerals;
(oo) "Parking Lot" means that portion of those lands located in the
City of Calgary, in the Province of Alberta legally described
as Plan 9412695, Block 45, Lot 3, Excepting thereout all mines
and minerals, leased to the Company;
(pp) "Parking Lot Lease" means that lease relating to the Parking
Lot dated December 22, 1997 between Xxxxxxx Xxxxxxxxxxx as
agent for Xxxxxx Xxxxxxxxxxx and Xxxxx Xxxxxxxxxxx and Sundog
Printing Limited respecting lands municipally described as
0000 - 0xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx;
(qq) "Patent" means any Canadian or foreign patent to which the
Company has title as of the date of this Agreement, as well
as any application for a Canadian or foreign patent made by
the Company.
(rr) "Person" has the meaning set out in Section 4.1(y)(i)(H)
hereof;
(ss) "Preferred Shares" means the preferred shares held by the
Company in 387177 Alberta Ltd., 000000 Xxxxxxx Inc. and X.
Xxxxxxx Investments Ltd. as more particularly set forth in
Schedule 1.1(pp) hereof;
(tt) "Purchase Price" means the aggregate amount payable to the
Vendor pursuant to Section 3.1 hereof;
(uu) "Purchaser" means Data Business Forms Limited;
(vv) "Purchased Interests" means the Shares and the Shareholders'
Loans;
(ww) "Related Party Agreements" has the meaning set out in Section
4.1(u)(ii) hereof;
(xx) "Related Party Debt" means the indebtedness of the Company, in
the aggregate amount of $146,204 to the parties and in the
amounts set forth in Schedule 1.1(xx) hereof;
(yy) "Remenda" means Xxx Xxxxxxx, an individual residing in the
City of Calgary in the Province of Alberta, the sole
shareholder of 517244;
(zz) "Remenda Agreement" means that agreement of even date
whereunder inter alia Remenda sells all of the shares Remenda
owns in 517244 to the Purchaser;
(aaa) "Shareholders" means Xxxxxxx and 408446 and "Shareholder"
means any one of them;
(bbb) "Shareholders' Loans" means the Sundog Shareholder Loan and
the 408446 Shareholder Loan;
(ccc) "Shares" means, collectively, the Xxxxxxx Shares and the
408446 Shares;
(ddd) "Significant Customers" has the meaning set out in Section
4.1(u)(i) hereof;
(eee) "Significant Suppliers" has the meaning set out in Section
4.1(u)(i) hereof;
(fff) "Subsidiaries" has the meaning set forth in the BUSINESS
CORPORATIONS ACT (Alberta) or the BUSINESS CORPORATIONS ACT
(Ontario), as the case may be;
(ggg) "Sundog Leases" means, collectively, the lease between the
Company and 387177 Alberta Inc. and 000000 Xxxxxxx Inc. with
respect to the lands municipally described as 0000 - 0xx
Xxxxxx X.X., Xxxxxxx, Xxxxxxx and the lease between the
Company and 566657 Alberta Ltd. with respect to the lands
municipally described as 0000 - 0xx Xxxxxx X.X., Xxxxxxx,
Xxxxxxx;
(hhh) "Sundog Shareholder Loan" means the amount of $1,682,454
advanced by Vendor to the Company by way of a shareholder's
loan and remaining unpaid as at the Funding Time;
(iii) "Sundog Premises" means the premises of the Company located
at 0000 - 0 Xxxxxx X.X., and 0000 - 0 Xxxxxx X.X., Xxxxxxx,
Xxxxxxx;
(jjj) "Tax" shall mean all governmental taxes, levies, duties,
assessments, reassessments and other charges of any nature
whatsoever, whether direct or indirect, including, but not
limited to, income tax, profit tax, gross receipts tax,
corporation tax, sales and use tax, wage tax, payroll tax,
employer health tax, workers' compensation levy, capital tax,
stamp duty, real and personal property tax, land transfer tax,
customs or excise duty, excise tax, turnover or value added
tax on goods sold or services rendered, withholding tax,
social security and unemployment insurance charges and
retirement contributions, and any interest, fines, additions
to tax and penalties thereon;
(kkk) "Tax Return" shall mean any return (including any information
return, report, statement, schedule, notice, form, estimate,
or declaration of estimated tax) relating to or required to be
filed with any governmental entity in connection with the
determination, assessment, collection or payment of any Tax;
(mmm) "Third Party Claim" has the meaning set out in Section
8.3(b)(i);
(nnn) "Third Party Consents" has the meaning set out in Section
4.1(u)(iv);
(ooo) "TPI Receivable" means the amount of $963,600 owing by The
Pacific Institute to the Company as of January 31, 1999;
(ppp) "Vendor" means Xxxx X. Xxxxxxx;
(qqq) "Vendor's Portion" means 75%, being the percentage of common
shares of the Company directly or indirectly held by the
Vendor; and
(rrr) "Year 2000 Compliant and Ready" means that the computer
systems and the presses used in the Company's operations
contain the functionality need for the December 31, 1999
"millennium" date change.
1.2 HEADINGS
The division of this Agreement into Articles and Sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 EXTENDED MEANINGS
In this Agreement words importing the singular number only
shall include the plural and VICE versa, words importing the masculine gender
shall include the feminine and neuter genders and VICE VERSA and words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.4 CURRENCY
All references to currency herein are to lawful money of
Canada.
1.5 ACCOUNTING PRINCIPLES
Except as otherwise expressly provided herein or in the
Schedules or agreed between by the parties hereto in writing, all accounting
terms used in this Agreement shall be interpreted, and all financial statements,
Schedules, certificates and reports as to financial matters required to be
delivered hereunder shall be prepared, in accordance with Canadian GAAP
consistently applied
1.6 SCHEDULES
The following are the Schedules annexed hereto and
incorporated by reference and deemed to be part hereof:
Schedule 1.1(t) - Xxxxxxx Employment Contract
Schedule 1.1(u) - Xxxxxxx Insurance
Schedule 1.1(pp) - Preferred Share
Schedule 1.1(xx) - Related Party Debt
Schedule 3.1(a)(iii) - First Earn-Out
Schedule 3.1(a)(v) - Second Earn-Out
Schedule 3.2(a) - Form of Assignment of 408446
Shareholder Loan
Schedule 4.1(h)(iii) - Promissory Notes
Schedule 4.1(k)(ii) - Add-backs
Schedule 4.1(k)(iv) Related Party Debt since July 31, 1998
Schedule 4.1(l) - Company Financial Statements
Schedule 4.1(m)(iii) - Plans
Schedule 4.1(o) - Bank Accounts, Powers of Attorney
Schedule 4.1(p) Accounts Receivable
Schedule 4.1(r) - Leases of Real Property
Schedule 4.1(s)(i) - Personal Property
Schedule 4.1(s)(ii) - Liens on Personal Property
Schedule 4.1(t)(i) - Trade Marks and Trade Names
Schedule 4.1(t)(ii) - Patents and Copyrights
Schedule 4.1(t)(iii) - Other Rights
Schedule 4.1(t)(iv) - Third Party Rights
Schedule 4.1(u)(i) - Significant Customers and Suppliers
Schedule 4.1(u)(ii) - Material Contracts
Schedule 4.1(u)(iii) - Reductions and Cancellations
Schedule 4.1(u)(iv) - Third Party Consents
Schedule 4.1(u)(v) - Related Party Commitments
Schedule 4.1(u)(vi) - Exception to Acceleration
Schedule 4.1(x) - Insurance Policies
Schedule 4.1(y)(ii) - Environmental Matters
Schedule 4.1(z) - Employees/Compliance
Schedule 4.1(z)(viii) - Employee List
Schedule 4.1(aa) - Employee Benefit Plans
Schedule 4.1(bb) - Tax Exceptions
Schedule 4.1(cc)(iii) - Litigation
Schedule 4.1(ee) - Changes
Schedule 4.1(gg) - Predecessor Status
Schedule 4.1(jj) - Year 2000 Compliance
Schedule 7.1(i) - Lease of Sundog Premises
Schedule 8.2(d) - Indemnity Schedule
1.7 BEST OF KNOWLEDGE
Any reference herein to "the best of the knowledge" of the
Vendor and the Shareholders or words of similar import shall mean the actual
knowledge of the Vendor and the Shareholders or in the case of 408446 shall mean
the actual knowledge of the Shareholder, directors and officers of 408446. Any
reference herein to "knowledge of the Company" or "Company's knowledge", or
words of similar import means the actual knowledge of the Vendor, Shareholders,
directors and officers of the Company.
ARTICLE 2
DISCLOSURE
2.1 DISCLOSURE
Certain matters may be disclosed on a Schedule hereto that are
not strictly required to be disclosed thereon pursuant to the terms of this
Agreement. Such disclosure is for information purposes only, and should not
constitute an indication or admission of the materiality thereof or create a
standard for disclosure. The Vendor, Company and 408446 shall not be liable for
a breach of any representation or warranty that might result from the failure to
disclose any item on any one Schedule if such item has been disclosed on any
other Schedule hereto in such a manner that a review of such other Schedule
would put Purchaser on notice that such item exists.
ARTICLE 3
PURCHASE AND SALE OF THE SHARES
AND ASSIGNMENT OF THE SHAREHOLDERS' LOANS
3.1 PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, at the
Funding Time and effective as of the Effective Date, the Vendor will sell to
Purchaser, and Purchaser will purchase from the Vendor, the Shares, for the
Purchase Price.
(a) The Purchase Price for the Shares shall be comprised of and shall
be paid and satisfied by:
(i) $2,749,376 payable by cheque to the Vendor at the
Funding Time inclusive of interest at a rate of
6.75% per annum calculated from the Effective Time
up to and including the Funding Date;
(ii) the delivery to the Vendor of a demand promissory
note from the Purchaser in the amount of $820,056.
Such demand promissory note shall be paid in full
immediately following the Funding Time by payment
in cash by the Purchaser in an amount equal to the
Vendor's Portion of the TPI Receivable or by an
assignment of the Vendor's Portion of the TPI
Receivable to the Vendor or any combination
thereof, together with an assignment of the Xxxxxxx
Insurance;
(iii) a payment of the Vendor's Portion of the amount
calculated pursuant to Schedule 3.1(a)(iii) to the
Vendor on March 15, 2000;
(iv) $750,000 to the Vendor on April 28, 2000; and
(v) a payment on July 31, 2001 of the amounts, if any:
(A) equal to the Vendor's Portion, of the
amount calculated pursuant to Schedule
3.1(a)(v) hereof less $1,000,000, which
payment to the Vendor shall not exceed the
sum of $750,000; and
(B) equal to the entire amount calculated
pursuant to Schedule 3.1(a)(v) hereof less
the sum of $2,000,000;
3.2 ASSIGNMENT OF SHAREHOLDERS' LOANS
(a) In consideration of payment to the Vendor in the amount of
$563,912 at the Funding Time, the Vendor shall execute and
deliver an assignment in the form of the assignment set out on
Schedule 3.2(a) hereof assigning to the Purchaser all of
Vendor's right, title and interest in and to the 408446
Shareholder Loan.
(b) In consideration of payment to the Vendor in the amount of
$1,682,454 at the Funding Time, the Vendor shall execute and
deliver an assignment in the form of the assignment set out on
Schedule 3.2(b) hereof assigning to the Purchaser all of
Vendor's right, title and interest in and to the Sundog
Shareholder Loan.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 VENDORS' REPRESENTATIONS AND WARRANTIES
The Vendor, the Company and 408446, represent and warrant to
the Purchaser that:
(a) CORPORATE STANDING The Company is a corporation duly
incorporated and subsisting under the laws of Alberta as a
private company as that term is defined in the SECURITIES ACT
(Alberta) with the corporate power to own its assets and to
carry on its business and has made all necessary filings under
all applicable corporate, securities and taxation laws or any
other laws to which the Company is subject.
(b) CORPORATE RECORDS The corporate records and minute book of the
Company are complete and true and correct in all material
respects and the minute book contains copies of minutes of all
meetings of the directors, committees of directors and
shareholders of the Company and of all written resolutions of
such directors, committees and shareholders.
(c) AUTHORIZATION; VALIDITY The Company has the full legal right,
corporate power and authority to enter into this Agreement and
the transactions contemplated hereby and to perform its
obligations pursuant to the terms of this Agreement. Each of
the Vendor and 408446 has the full legal right and authority
to enter into this Agreement and the transactions contemplated
hereby and to perform its respective obligations pursuant to
the terms of this Agreement. The execution and delivery of
this Agreement by the Vendor, the Company and 408446 and the
performance by the Vendor, the Company and 408446 of the
transactions contemplated herein have been duly and validly
authorized by the Board of Directors of the Company and 408446
and this Agreement has been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid
and binding obligation of the Vendor, the Company and 408446,
enforceable in accordance with its terms subject to
limitations with respect to enforcement imposed by law in
connection with bankruptcy or other laws generally affecting
creditors' rights, and to the extent that equitable remedies,
such as specific performance and injunction, are in the
discretion of the court from which they are sought.
(d) EXECUTION AND DELIVERY The execution, delivery and performance
of this Agreement, the consummation of the transactions
contemplated hereby, and the fulfillment of the terms hereof
will not:
(i) conflict with, or result in a breach or violation
of, any of the constating documents or by-laws of
the Company;
(ii) conflict with, or result in a default (or would
constitute a default but for any requirement of
notice or lapse of time or both) under any
document, agreement or other instrument to which
the Vendor, the Company or any Shareholder is a
party or by which the Vendor, the Company or any
Shareholder is bound, or result in the creation or
imposition of any Lien on any of the Company's
properties pursuant to (A) any law or regulation
to which the Vendor, the Company or any
Shareholder or any of their respective property
is subject, or (B) any judgment, order or decree
to which the Vendor, the Company or any Shareholder
is bound or any of their respective property is
subject;
(iii) result in termination or any impairment of any
permit, license, franchise, contractual right or
other authorization of the Company; or
(iv) violate any law, order, judgment, rule, regulation,
decree or ordinance to which the Vendor, the
Company or any Shareholder is subject or by which
the Vendor, the Company or any Shareholder is bound
provided however, that no representation and
warranty is being provided with respect to
compliance by the Purchaser with the INVESTMENT
CANADA ACT.
(e) AUTHORIZED CAPITAL The authorized capital of the Company
consists of an unlimited number of Class A Common Voting
Shares, Class B Non-Voting Preferred Redeemable Shares, Class
C Non-Voting Preferred Redeemable Convertible Shares, and
Class D Non-voting Preferred Redeemable Convertible Shares, of
which 252 Class A Common Voting Shares are issued and
outstanding as of the date hereof, of which the following are
validly issued and outstanding:
SHARES BENEFICIAL & REGISTERED OWNER
160 Class A Common Voting 000000 Xxxxxxx Inc.
63 Class A Common Voting 517244 Alberta Limited
29 Class A Common Voting Xxxx X. Xxxxxxx
All of the issued and outstanding shares in the capital of the
Company have been duly authorized and validly issued and are
fully paid and non-assessable. The Shares are owned of record
and beneficially by the Shareholders and 517244 in the amounts
set forth above, free and clear of all Liens. All of the
issued and outstanding shares in the capital of the Company
were offered, issued, sold and delivered by the Company in
compliance with all applicable laws concerning the issuance of
securities. Further, none of such shares was issued in
violation of any preemptive rights. There are no voting
agreements or voting trusts with respect to any of the shares.
(f) ENTITLEMENTS No option, warrant, call, subscription right,
conversion right or other contract or commitment of any kind
exists, of any character, written or oral, which may obligate
the Company to issue or sell any shares in the capital of the
Company. The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its
shares or any interests therein or to pay any dividend or make
any distribution in respect thereof.
(g) SHAREHOLDERS' LOANS The total amount of the Sundog
Shareholder Loan is $1,682,454 and the total amount of the
408446 Shareholder Loan is $563,912.
(h) SUBSIDIARIES AND DEBT INTERESTS
(i) The Company has no Subsidiaries or Affiliates;
(ii) Except for the Preferred Shares, the Company does
not presently own, of record or beneficially, or
control, directly or indirectly, any shares,
securities convertible into shares or any other
equity interest in any corporation, limited
liability company, association or other business
entity, nor is the Company, directly or indirectly,
a participant in any joint venture, partnership or
other non-corporate entity; and
(iii) Except as set forth on Schedule 4.1(h)(iii), there
are no promissory notes that have been issued to,
or are held by, the Company.
(i) COMPLETE COPIES OF MATERIALS The Company has delivered to
Purchaser at the Sundog Premises true and complete copies of
each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or
that has been requested by Purchaser.
(j) ABSENCE OF CLAIMS AGAINST COMPANY Except for the Shareholders'
Loans, the 1999 Bonus, benefits and wages due to Xxxx X.
Xxxxxxx in his capacity as an employee in the ordinary course
of business, and the performance of this Agreement by the
Company, neither 408446 nor the Vendor has any claims against
the Company.
(k) FINANCIAL CONDITIONS
(i) The Company's revenue for the fiscal year ended
July 31, 1998 was not less than $25,000,000;
(ii) The earnings of the Company before interest and
taxes and bonuses, adjusted to reflect the
add-backs set forth on Schedule 4.1(k)(ii) for the
fiscal year ended July 31, 1998 are not less than
$2,600,000;
(iii) The sum of the Company's total outstanding interest
bearing indebtedness to banks, and all other
financial institutions and creditors (in each case
including the current portions of such
indebtedness, but excluding any amounts referred to
in Section 7.3(d) hereof and Section 7.3(d) of the
Remenda Agreement, and any amounts payable to the
Vendor, 408446, Remenda and 517244, and their
Affiliates, any income taxes payable from the
Balance Sheet Date on earnings, operating leases,
trade payables and other accounts payable incurred
in the ordinary course of the Company's business
consistent with past practice) as of the Funding
Date will not be more than $3,550,000; and
(iv) Except as set forth on Schedule 4.1(k)(iv) no
related party debts other than as set forth herein
or contemplated hereby have been incurred or paid
since July 31, 1998.
(l) FINANCIAL STATEMENTS Schedule 4.1(l) includes true, complete
and correct copies of the Company's audited balance sheet
("Balance Sheet") as of the Balance Sheet Date, and income
statement (the "Income Statement") as at and for the year
ended July 31, 1998 and the Company's internally generated,
unaudited balance sheet and income statement as of and for the
seven months ended February 28, 1999 (collectively, the
"Company Financial Statements").
(i) The Company Financial Statements are materially in
accordance with the books and accounts of the
Company as at the Balance Sheet Date;
(ii) The Company Financial Statements have been prepared
in accordance with GAAP consistently applied;
(iii) The Balance Sheet presents fairly the financial
condition of the Company as of the date indicated
thereon and the Income Statement presents fairly
the results of its operations for the period
indicated thereon;
(iv) Since the dates of the Company Financial
Statements, there have been no material changes in
the Company's accounting policies;
(v) The financial position of the Company as at the
Effective Date will be at least as good as the
financial position of the Company as at the Balance
Sheet Date; and
(vi) Subject to Schedule 4.1(cc)(iii), the Company
Financial Statements fairly present all of the
assets and liabilities of the Company as at the
Balance Sheet Date and the Effective Date
including, without limitation, all contingent
liabilities of the Company as at the Balance Sheet
Date.
(m) LIABILITIES AND OBLIGATIONS
(i) Except as disclosed on Schedule 4.1(u)(v), the
Company is not liable for or subject to any
liabilities except for:
(A) those liabilities reflected on the Balance
Sheet and not previously paid or
discharged;
(B) those liabilities arising in the ordinary
course of its business consistent with past
practice under any contract, commitment or
agreement specifically disclosed on any
Schedule to this Agreement or not required
to be disclosed thereon because of the term
or amount involved or otherwise;
(C) the lease of the Sundog Premises; and
(D) those liabilities incurred since the
Balance Sheet Date in the ordinary course
of business consistent with past practice,
which liabilities are not, individually or
in the aggregate, material.
(ii) The Company has delivered to Purchaser, in the case
of those liabilities which are not fixed or are
contested, a reasonable estimate of the maximum
amount which may be payable;
(iii) Schedule 4.1(m)(iii) sets forth a summary
description of all plans or projects involving the
opening of new operations, expansion of any
existing operations or the acquisition of any real
property or existing business, to which management
of the Company has made any material expenditure in
the two-year period prior to the Effective Date,
which if pursued by the Company would require
additional material expenditures of capital; and
(iv) For purposes of this Section 4.1(m), the term
"liabilities" shall include, without limitation,
any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or
responsibility, either accrued, absolute,
contingent, mature, unmature or otherwise and
whether fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured.
Schedule 4.1(s)(ii) insofar as it relates to the
leases contains a complete list of all
interest-bearing indebtedness of the Company not
disclosed on the Company Financial Statements.
(n) BOOKS AND RECORDS The Company has made and kept books and
records and accounts, which, in reasonable detail, accurately
and fairly reflect the activities of the Company. The Company
has not engaged in any transaction, maintained any bank
account, or used any corporate funds except for transactions,
bank accounts, and funds which have been and are reflected in
its normally maintained books and records.
(o) BANK ACCOUNTS; POWERS OF ATTORNEY Schedule 4.1(o) sets forth
a complete and accurate list as of the Funding Date, of:
(i) the name of each financial institution at which the
Company has any account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account;
(iv) the name of each person authorized to draw thereon
or have access thereto; and
(v) the name of each person, corporation, firm or other
entity holding a general or special power of
attorney from the Company and a description of the
terms of such power.
(p) ACCOUNTS AND NOTES RECEIVABLE At the Funding Time, the Company
will deliver to Buyer a complete and accurate list, as of a
date not more than two (2) business days prior to the Funding
Date, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to
employees and the Shareholders) which includes an aging of all
accounts and notes receivables showing amounts due in thirty
(30) day aging increments the Accounts Receivable. All
Accounts Receivable represent valid obligations arising from
sales actually made or services actually performed in the
ordinary course of business. The Accounts Receivable are
current and collectible net of any respective reserves shown
on the Company's books and records (which reserves are
adequate and calculated consistent with past practice).
Subject to such reserves, each of the Accounts Receivable will
be collected in full, without any set-off, within one hundred
and twenty (120) days after the day on which it first became
due and payable other than those set forth in Schedule 4.1(p).
There is no contest, claim, or right of set-off, other than
rebates and returns in the ordinary course of business, under
any contract with any obligor of an Account Receivable
relating to the amount or validity of such Account Receivable.
(q) PERMITS The Company owns or holds all material permits and
other governmental authorizations, including without
limitation permits, licenses necessary for the continued
operation of its business as it is currently being conducted
(the "Permits"). The Permits are valid, and the Company has
not received any notice that any governmental authority
intends to modify, cancel, terminate or fail to renew any
Permit. No present or former officer director, shareholder, or
employee of the Company or any affiliate thereof, or any other
person, firm, corporation or other entity, owns or has any
proprietary, financial or other interest (direct or indirect)
in any Permits. The Company has conducted and is conducting
its business in material compliance with the requirements,
standards, criteria and conditions set forth in the Permits
and other applicable orders, approvals, rules and regulations
and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in
a default under, or a breach or violation of, or adversely
affect the rights and benefits afforded to the Company, by any
Permit.
(r) REAL PROPERTY
(i) The Company does not own or have any right, title
or interest in any real property except for the
Leases.
(ii) Except as set forth in Schedule 4.1(r) and
4.1(y)(ii):
(A) All of the Leases are valid and in full
force and effect. The Company has
delivered to the Purchaser true and
complete copies of all of the Leases, all
amendments, renewals, extensions,
modifications or supplements thereto, and
all material correspondence pursuant to
which any party to any of the Leases
declared a default thereunder or provided
notice of the exercise of any option
granted to such party under such Lease.
The Leases and the Company's interests
thereunder are free of all Liens. The
Company has paid all amounts payable to
the landlords under the Leases;
(B) None of the Leases requires the consent or
approval of any party thereto in
connection with the consummation of the
transactions contemplated hereby;
(C) All accounts for work and services
performed or materials placed or furnished
by or on behalf of the Vendor or the
Company upon or in respect of construction
in each of the Leased Premises has been
fully paid by closing and no person will
be entitled to claim a lien under the
BUILDERS' LIEN ACT (Alberta) for work
performed by or on behalf of the Vendor or
the Company;
(D) the Vendor or the Company have not
received any notice of any proceedings by
any Governmental Authority having
jurisdiction advising of any deficiency or
non-compliance with any building
restriction, zoning by-law, fire code, or
any other regulation relating to any of
the Leased Premises, nor is the Vendor or
the Company aware of any such deficiency
or non-compliance;
(E) to the best of the Vendor's or the
Company's knowledge, all obligations,
conditions and requirements under all
development permits required to be
obtained by the Company have been met and
satisfied and development completion
permits required to be obtained by the
Company evidencing the same have been
obtained from The City of Calgary;
(F) neither the Vendor nor the Company have
received any notice of a proposal to
expropriate any part of the Leased
Premises;
(G) each of the N.E. Lease and the Parking Lot
Lease have been adopted and assumed by and
are binding upon the current registered
owners of the lands on which the N.E.
Warehouse Property and the Parking Lot are
located;
(H) to the best of the Vendor's or the
Company's knowledge, there are no
structural defects, material
non-structural defects or material
deficiencies in any of the buildings on
the Leased Premises, and the Leased
Premises are presently in compliance with
all statutory provisions;
(I) to the best of the Vendor's or the
Company's knowledge, there are no
outstanding work orders or deficiency
notices against the Vendor or the Company
in respect of the Leased Premises, or
other orders relating to any of the Leased
Premises from or required by any police or
fire department, sanitation or health
authorities or from any other federal,
provincial or municipal authority and any
matters under discussion with any such
departments or authorities relating to
work or other orders;
(J) notice has not been received by the Vendor
or the Company from any authority having
jurisdiction advising of any default or
non-compliance with any lawful requirement
or standard of workmanship in the
construction of the improvements on the
Leased Premises placed thereon by the
Vendor or the Company, or in respect of
the plumbing, heating, ventilating, air
conditioning, electrical or other
mechanical systems therein;
(K) the Vendor or the Company have not
received from any of their insurers which
carries on their behalf insurance on the
Leased Premises any written notice of any
defect or inadequacy in connection with
Leased Premises or its maintenance or
operation that would affect the
insurability of the Leased Premises that
has not been cited;
(L) the Vendor or the Company have not
intentionally withheld any material
information relating to adverse facts or
adverse material in connection with the
Leased Premises or the Leases;
(M) except for the use of premises by
Xxxxxxxx-Xxxxxxxxx, neither the Vendor nor
the Company have granted leases, offers to
lease, options with respect to leases,
licenses, agreements to lease, renewals of
leases, assignments and subleases thereof
or other tenancy agreements or other
agreements granting any right of
occupation, possession or use with respect
to the Leased Premises or buildings
located thereon;
(N) no written notice has been received by the
Vendor or the Company which remains
outstanding from any governmental or
quasi-governmental authority relating to
any defect in the construction of the
buildings or any other improvements on the
Leased Premises, or relating to any work
order, deficiency or non-compliance with
any building restrictions, building codes,
zoning by-laws, fire codes, environmental
laws, or other regulations, laws,
statutes, ordinances or rules, in each
case in respect of the Leased Premises and
the buildings and improvements thereon;
and
(O) each of the Leased Premises are fully
serviced by all required utilities
including electricity, natural gas, water
and sewer.
(s) PERSONAL PROPERTY
(i) Schedule 4.1(s)(i) sets forth a complete and
accurate list of all material personal property
included on the Balance Sheet and all other personal
property owned or leased by the Company and all
trade fixtures and leasehold improvements owned by
both as of the Balance Sheet Date and acquired since
the Balance Sheet Date, including in each case a
list of all leases for material equipment, and an
indication as to which assets are currently owned,
or were formerly owned, by any Shareholder or
business or personal affiliates of any Shareholder
or of the Company. True, complete and correct copies
of the leases for material equipment will be
delivered to Purchaser at the Sundog Premises;
(ii) The Company currently owns or leases all personal
property and other assets necessary to conduct the
business and operations of the Company as they are
currently being conducted, free and clear of all
Liens except for such Liens as are set forth on
Schedule 4.1(s)(ii); and
(iii) All of the material, machinery and equipment of the
Company, including those listed on Schedule
4.1(s)(i), are in good working order and condition,
ordinary wear and tear excepted. All personal
property leases set forth on Schedule 4.1(s)(i) are
in full force and effect and constitute valid and
binding agreements of the Company, and the Company
is not in breach of any of their terms. All fixed
assets used by the Company that are material to the
operation of its business are either owned by the
Company or leased under an agreement listed on
Schedule 4.1(s)(i) or 4.1(s)(ii).
(t) INTELLECTUAL PROPERTY
(i) The Company is the true and lawful owner of, or is
licensed or otherwise possesses legally enforceable
rights to use, the registered and unregistered Marks
listed on Schedule 4.1(t)(i). Such schedule lists
all of the Marks registered in Canada or in any
foreign country, and all of the unregistered Marks,
that the Company now owns or uses in connection with
its business. Except with respect to those Marks
shown as licensed on Schedule 4.1(t)(i), the Company
owns all of the registered and unregistered
trademarks, service marks, and trade names that it
uses. The Marks listed on Schedule 4.1(t)(i) will
not cease to be valid rights of the Company by
reason of the execution, delivery and performance of
this Agreement or the consummation of the
transactions contemplated hereby;
(ii) The Company is the true and lawful owner of, or is
licensed or otherwise possesses legally enforceable
rights to use, all rights in the Patents listed on
Schedule 4.1(t)(ii) and in the Copyrights listed on
Schedule 4.1(t)(ii). Such Patents and Copyrights
constitute all of the Patents and Copyrights that
the Company now owns or is licensed to use. The
Company owns or is licensed to practice under all
patents and copyright registrations that the
Company now owns or uses in connection with its
business;
(iii) The Company is the true and lawful owner of, or is
licensed or otherwise possesses legally enforceable
rights to use, all rights in the trade secrets,
franchises, or similar rights (collectively, "Other
Rights") listed on Schedule 4.1(t)(iii). Those
Other Rights constitute all of the Other Rights
that the Company now owns or is licensed to use.
The Company owns or is licensed to practice under
all trade secrets, franchises or similar rights
that it owns, uses or practices under;
(iv) The Marks, Patents, Copyrights, and Other Rights
listed on Schedules 4.1(t)(i), 4.1(t)(ii),
4.1(t)(ii), and 4.1(t)(iii) are referred to
collectively herein as the "Intellectual Property."
The Intellectual Property owned by the Company is
referred to herein collectively as the "Company
Intellectual Property." All other Intellectual
Property is referred to herein collectively as the
"Third Party Intellectual Property." Except as
indicated on Schedule 4.1(t)(iv), the Company has no
obligations to compensate any person for the use of
any Intellectual Property nor has the Company
granted to any person any license, option or other
rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties
or not; and
(v) The Company is not, nor will it be as a result of
the execution and delivery of this Agreement or the
performance of its obligations hereunder, in
violation of any Third Party Intellectual Property
license, sublicense or agreement described in
Schedule 4.1(t)(i), 4.1(t)(ii), 4.1(t)(iii) or
4.1(t)(iv). No claims with respect to the Company
Intellectual Property or Third Party Intellectual
Property are currently pending or, to the knowledge
of the Company, are threatened by any person, nor,
to the Vendor's or Company's knowledge, do any
grounds for any claims exist: (A) to the effect that
the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed
for use, sale or license by the Company infringes on
any copyright, patent, trademark, service xxxx or
trade secret; (B) against the use by the Company of
any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or
computer software programs and applications used in
the Company's business as currently conducted by the
Company; (C) challenging the ownership, validity or
effectiveness of any of the Company Intellectual
Property or other trade secret material to the
Company; or (D) challenging the Company's license or
legally enforceable right to use of the Third Party
Intellectual Property. To the Vendor's or Company's
knowledge, there is no unauthorized use,
infringement or misappropriation of any of the
Company Intellectual Property by any third party.
Neither the Vendor or the Company (i) has been sued
or charged in writing as a defendant in any claim,
suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents,
trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or
notified by any third party that the Company may be
engaged in such infringement or (ii) has knowledge
of any infringement liability with respect to, or
infringement by, the Company of any trade secret,
patent, trademark, service xxxx, or copyright of
another.
(u) SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS
(i) Schedule 4.1(u)(i) sets forth a complete and
accurate list of all Significant Customers and
Significant Suppliers. For purposes of this
Agreement, "Significant Customers" are the twenty
(20) customers that have effected the most
purchases, in dollar terms, from the Company during
each of the past four (4) fiscal quarters, and
"Significant Suppliers" are the twenty (20)
suppliers who supplied the largest amount by dollar
volume of products or services to the Company
during the twelve (12) months ending on the Balance
Sheet Date;
(ii) Schedule 4.1(u)(ii) contains a complete and accurate
list of all contracts, commitments, leases,
instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or
by which it or its properties are bound (including
without limitation contracts with Significant
Customers, joint venture or partnership agreements,
contracts with any labor organizations, employment
agreements, consulting agreements, loan agreements,
indemnity or guaranty agreements, bonds, mortgages,
options to purchase land, liens, pledges or other
security agreements) to which the Company and any
affiliate of the Company or any officer, director or
Shareholder of the Company are parties ("Related
Party Agreements"); that may give rise to
obligations or liabilities exceeding, during the
current term thereof, $110,000 or that may generate
revenues or income exceeding, during the current
term thereof, $110,000 (collectively with the
Related Party Agreements, the "Material Contracts"
for the purposes of this Section 4.1 (u)). The
Company has delivered to the Purchaser at the Sundog
Premises true, complete and correct copies of the
Material Contracts;
(iii) Except to the extent set forth on Schedule
4.1(u)(iii), (A) none of the Company's Significant
Customers has canceled or substantially reduced or,
to the knowledge of the Vendor or the Company, is
currently attempting or threatening to cancel or
substantially reduce, any purchases from the
Company, (B) none of the Company's Significant
Suppliers has canceled or substantially reduced or,
to the knowledge of the Vendor or the Company, is
currently attempting to cancel or substantially
reduce, the supply of products or services to the
Company, and (C) the Company has complied with all
of its commitments and obligations and is not in
default under any of the Material Contracts, and no
notice of default has been received with respect to
any thereof and (D) there are no Material Contracts
that were not negotiated at arms length. The Company
has not received any material customer complaints
concerning its products and/or services, nor has it
had any of its products returned by a purchaser
thereof except for normal warranty returns
consistent with past history and those returns that
would not result in a reversal of any material
revenue;
(iv) Each Material Contract is valid and binding on the
Company and is in full force and effect and is not
subject to any default thereunder by any party
obligated to the Company pursuant thereto. The
Company has obtained all necessary consents, waivers
and approvals of parties to any Material Contracts
that are required in connection with any of the
transactions contemplated hereby, or are required by
any Governmental Authority or other third party or
are advisable in order that any such Material
Contract remain in effect without modification after
the transactions contemplated by this Agreement and
without giving rise to any right to termination,
cancellation or acceleration or loss of any right or
benefit except as disclosed in Schedule 4.1(u)(iv);
(v) The approximate outstanding balances on all loans
or credit agreements either (A) between the Company
and any person in which any of the Shareholders
owns a material interest, or (B) guaranteed by the
Company for the benefit of any person in which any
of the Shareholders owns a material interest, are
set forth in Schedule 4.1(u)(v).; and
(vi) The pledge, hypothecation or mortgage of all or
substantially all of the Company's assets
(including, without limitation, a pledge of the
Company's contract rights under any Material
Contract) will not, except as set forth on Schedule
4.1(u)(vi), (A) result in the breach or violation
of, (B) constitute a default under, (C) create a
right of termination under, or (D) result in the
creation or imposition of (or the obligation to
create or impose) any lien upon any of the assets of
the Company (other than a lien created pursuant to
the pledge, hypothecation or mortgage described at
the start of this Article 4.1(u)(vi)) pursuant to
any of the terms and provisions of, any Material
Contract to which the Company is a party or by which
the property of the Company is bound.
(v) GOVERNMENT CONTRACTS The Company is not a party to any
government contracts relative to the provisions of its
services.
(w) INVENTORY The inventory of the Company consists of raw
materials and supplies, manufactured and purchased parts,
goods in process and finished goods, all of which is
merchantable and fit for the purposes for which it was
procured or manufactured, and none of which is slow-moving,
obsolete, damaged, or defective, as adjusted for the passage
of time through the Funding Date in accordance with the past
custom and practice of the Company.
(x) INSURANCE Schedules 4.1(x), 4.1(aa) and 1.1(u) set forth a
complete and accurate list, as of the Balance Sheet Date, of
all insurance policies carried by the Company and all
insurance claims or workmen's compensation claims received for
the past two (2) policy years. The Company has delivered to
Purchaser at the Sundog Premises true, complete and correct
copies of all current insurance policies, all of which are in
full force and effect. All premiums payable under all such
policies set forth in Schedule 4.1(x) have been paid and the
Company is otherwise in full compliance with the terms of such
policies. Such policies of insurance are of the type and in
amounts customarily carried by persons conducting businesses
similar to that of the Company. To the knowledge of the
Company, there have been no threatened terminations of, or
material premium increases with respect to, any of such
policies.
(y) ENVIRONMENTAL MATTERS
(i) For the purposes of this section:
(A) "Environmental Authorization" means all
licenses, permits, grants or other
authorizations issued under or pursuant to
any Environmental Laws pertaining to or
relating in any way to the Company, or any
of its assets, obligations or
undertakings;
(B) "Environmental Investigation" includes,
but is not limited to, any oral or written
notice received by the Company from any
Governmental Authority relating to any
actual or alleged Release by the Company
of any Hazardous Substance;
(C) Environmental Laws" means all provisions
relating to the environment that are now
in effect under the common law or any
applicable federal, provincial, municipal
or local laws, statutes, by laws,
regulations, rules, orders (including
court orders), judgments, decrees,
ordinances, directives and the terms and
conditions of the Environmental
Authorizations;
(D) "Hazardous Substance" means a substance or
mixture of substances that exhibits
characteristics of flammability, toxicity,
corrosivity or reactivity, including,
without limitation, any contaminants,
pollutants, noise, dangerous substances,
liquid waste, industrial waste, hauled
liquid waste, toxic substances, hazardous
waste, hazardous materials, hazardous
chemicals and hazardous substances as
defined in, regulated by or controlled
pursuant to any Environmental Law now in
effect;
(E) "Environmental Claims" means any and all
administrative, regulatory or judicial
actions, suits, demands, claims, liens,
notices of non-compliance or violation,
investigations, inspections, inquiries or
proceedings relating in any way to any
Environmental Laws or any permit or
approval issued under any Environmental
Laws including, without limitation:
(a) any claim by a Governmental
Authority for enforcement,
clean-up, removal, response,
remedial or other actions or
damages pursuant to any
Environmental Laws; and
(b) any claim by a Person seeking
damages, contribution,
indemnification, cost recovery,
compensation or injunctive or other
relief resulting from or relating
to Regulated Substances, including
any Release thereof, or arising
from actual, alleged or threatened
injury to human health or safety
(arising from environmental
matters) or to the environment;
(F) the term "Governmental Authority" means
any federal, provincial, state, regional,
municipal or local government or any
department, agency, board, tribunal or
authority thereof or other political
subdivision thereof and any individual or
group exercising executive, legislative,
judicial, regulatory or administrative
functions of, or pertaining to, government
or the operation thereof;
(G) the term "Release" means any release,
spill, emission, leak, pumping, injection,
deposit, disposal, discharge, dispersal,
leaching or migration of Hazardous
Substances into the environment including,
without limitation, the movement of
Hazardous Substances through ambient air,
soil, surface water, ground water,
wetlands, land or sub-surface strata; and
(H) the term "Person" means an individual,
corporation, partnership, trust or other
legal entity and includes any Governmental
Authority.
(ii) Except as set forth on Schedule 4.1(y)(ii): (A)
there are no outstanding orders, notices (whether
written or oral) or similar requirements relating
to the Company issued by any Governmental Authority
with respect to any Environmental Laws, (B) there
are no matters under discussion with any Person
relating to such orders, notices or similar
requirements and (C) the Company is not the subject
of, nor to the Company's knowledge, being
threatened to be the subject of, any Environmental
Investigation or Environmental Claim brought under
any federal, provincial or local Environmental Law
or any third party claim relating to environmental
conditions on or off the properties owned, leased
operated or otherwise occupied by the Company.
(iii) Except as set forth on Schedule 4.1(y)(ii), the
business conducted by the Company has been and now
is operated in full compliance with all
Environmental Laws, and to the knowledge of the
Company, there are no facts or circumstances which
are likely to give rise to any non-compliance with
any Environmental Law or any Environmental Claim.
(iv) Except as set forth on Schedule 4.1(y)(ii), (A) no
Environmental Authorizations are required to carry
on the business of the Company and the Company has
not received any notice (whether oral or written)
from any Governmental Authority that any
Environmental Authorizations are required to carry
on the business of the Company; (B) the Company and
the Vendor have not placed any underground storage
tanks and Hazardous Substances and to the best of
the Vendor's and Company's knowledge there are no
underground storage tanks and no Hazardous
Substances are present in, on or under the lands
underlying the Sundog Premises (Schedule 4.1(y)(ii)
identifies all underground and aboveground storage
tanks, and the capacity, age and contents of such
tanks, located on real property owned or leased by
the Company), (C) the Company has not transported,
stored, used, manufactured, disposed of, Released,
or exposed its employees or others to any Hazardous
Substance in violation of any Environmental Law in
effect on or before the Funding Date, nor has the
Company manufactured, disposed of, transported,
stored, used Released, or sold, any product
containing a Hazardous Substance in violation of
any Environmental Law;
(v) Except as set forth on Schedule 4.1(y)(ii), the
Company has not ever been prosecuted or convicted
of an offense for non-compliance with any
Environmental Law, nor has it or, to the best of
the Company's knowledge have any of its directors,
officers, employees or agents been fined or
otherwise subjected to any administrative
proceeding or the subject of any Environmental
Investigation, alleged or confirmed as a breach of
any Environmental Law, in relation to either of the
business of the Company or the conduct thereof by
or on behalf of the Company;
(vi) Except as set forth on Schedule 4.1(y)(ii), (A) the
Company has not received any notice of any
Environmental Investigation or Environmental Claim
from any Person, including any notice under or
pursuant to any Environmental Law, nor to the
Company's knowledge are there any facts or
circumstances which could give rise to any such
notice, that the Company is a potentially
responsible or liable party for any environmental
contamination; and (B) the Company has not received
any notice of any conditions on or off the
properties owned, leased, operated or otherwise
occupied by the Company which could give rise to
any liabilities, known or unknown, under any
Environmental Law or as the result of any
Environmental Claim; and
(vii) Except as set forth on Schedule 4.1(y)(ii), (A) the
Company has not disposed of or arranged (by
contract, agreement or otherwise) for the disposal
of any Hazardous Substance that was generated,
stored or used by the Company at any offsite
location that has been or is listed or proposed for
inclusion on any list promulgated by any
Governmental Authority for the purpose of
identifying sites which pose a danger to health and
safety, and (B) there have been no environmental
studies, assessments, reports or analyses made or
prepared in the last five (5) years relating to the
facilities of the Company.
(z) LABOR AND EMPLOYMENT MATTERS Except as set forth in Schedule
4.1 (z), with respect to employees of and service providers to
the Company:
(i) the Company is and has been in compliance in all
material respects with all applicable laws
respecting employment and employment practices,
terms and conditions of employment and wages and
hours, including without limitation any such laws
respecting employment discrimination, workers'
compensation, family and medical leave, and
occupational health and safety requirements, and
has not and is not engaged in any unfair labor
practice;
(ii) there is not now, nor within the past three (3)
years has there been, any unfair labor practice
complaint against the Company pending or, to the
Vendor's or the Company's knowledge, threatened,
before the Alberta Labor Relations Board or any
other government entity;
(iii) there is not now, nor within the past three (3)
years has there been, any Labour strike, slowdown
or stoppage actually pending or, to the Vendor's or
the Company's knowledge, threatened, against or
directly affecting the Company;
(iv) to the Vendor's or the Company's knowledge, no
labor representation organization effort exists nor
has there been any such activity within the past
three (3) years;
(v) no grievance or arbitration proceeding arising out
of or under collective bargaining agreements is
pending and, to the Vendor's or the Company's
knowledge, no claims therefor exist or have been
threatened;
(vi) the employees of the Company are not and have never
been represented by any labor union, and no
collective bargaining agreement is binding and in
force against the Company or currently being
negotiated by the Company;
(vii) to the Vendor's or the Company's knowledge, no
trade union, council of trade unions, employee
bargaining agency or affiliated bargaining agent:
(A) holds bargaining rights with respect to
any of the Company's employees by way of
certification, interim certification,
voluntary recognition, designation or
successor rights, or
(B) has applied to be certified as the
bargaining agent of any of the Company's
employees;
(viii) to the Vendor's or the Company's knowledge, no
executive or key employee or any group of employees
has plans to terminate his, her or their employment
with the Company, the Company has not terminated,
laid-off or dismissed (whether actually or
constructively) any employees of the Company during
the four (4) weeks prior to the Funding Date;
(ix) the Company does not have any written employment
agreement with any person whomsoever except such
agreements as are listed in Schedule 4.1(z)(viii),
which Schedule sets forth a complete and accurate
list, as of March 15, 1999, of all employees of the
Company, their respective positions, dates of hire
with the Company (or any predecessors in interest
thereof), current salaries, benefits and other
remunerations and dates of last salary increases,
and indicates which employees are parties to a
written or oral agreement of employment (including
confidentiality and non-competition agreements);
(x) there have been no claims or allegations brought
against the Company or any officer, director,
Shareholder or employee of the Company or any other
Person with whom an employee may have dealings
through his or her employment by the Company, with
respect to employment, employment practices or
terms or conditions of employment, including,
without limiting the generality of the foregoing,
claims alleging sexual harassment or
discrimination;
(xi) all liabilities due and payable on or before the
Funding Date with respect to present or former
employees of the Company have been paid or shall be
paid in full on or before the Funding Date,
including premiums contributions, remittance and
assessments for unemployment insurance, Canada
Pension Plan, income tax, workers compensation and
any other related legislation, accrued wages,
Taxes, salaries, commissions and Benefit Plan
payments;
(xii) all vacation pay, bonuses, commission and other
emoluments relating to the employees of the Company
are accurately reflected in all respects and have
been accrued in the financial records of the
Company; and
(xiii) the Company has not entered into any agreement with
any of its employees with respect to termination of
their employment, and the Company has no obligation
to reinstate any employees or former employees.
(aa) EMPLOYEE BENEFIT PLANS
(i) Except as disclosed in Schedule 4.1(aa), the Company
is not bound by or a party to:
(A) any benefit plan including, without
limiting the generality of the foregoing,
any pension plan, retirement savings plan,
retirement compensation arrangement, salary
deferral arrangement, health care plan or
deferred profit sharing plan, or any
benefit arrangement, obligation, custom, or
practice, whether or not legally
enforceable, to provide benefits, other
than salary, as compensation for services
rendered, to present or former directors,
employees, agents, or independent
contractors including, without limiting the
generality of the foregoing, employment
agreements, severance agreements, executive
compensation arrangements, incentive
programs or arrangements, sick leave,
vacation pay, severance pay policies, plant
closing benefits, salary continuation for
disability, consulting, or other
compensation arrangements, workers'
compensation, retirement, deferred
compensation, bonus, stock option or
purchase, hospitalization, medical
insurance, life insurance, tuition
reimbursement or scholarship programs, any
plans providing benefits or payments in the
event of a change of control, change in
ownership, or sale of a substantial portion
(including all or substantially all) of the
assets of any business or portion thereof,
in each case with respect to any present or
former employees, directors, or agents
maintained by or on behalf of the Company
or any of its Subsidiaries for any of their
employees (each, a "Benefit Plan");
(B) any liability for any unfunded obligation
for any benefit or compensation for
employees including, without limiting the
generality of the foregoing, any profit
sharing plans; or
(C) any liability for any contingent obligation
which will become an obligation upon the
Closing including, without limiting the
generality of the foregoing, any retirement
allowance or retirement compensation
arrangement.
(ii) Subject to Schedule 4.1 (aa), all Benefit Plans
listed in Schedule 4.1(aa) have been duly registered
where required by, and are in good standing under,
all applicable legislation including, without
limiting the generality of the foregoing, the INCOME
TAX ACT and the EMPLOYMENT PENSION PLANS ACT
(Alberta), as amended, and all required employer
contributions under each Benefit Plan have been made
and the applicable funds have been funded in
accordance with the terms of such Benefit Plan and no
past service funding liabilities exist thereunder;
(iii) With respect to each Benefit Plan, true, correct, and
complete copies of all the following documents, to
the extent applicable, have been delivered to
Purchaser or its designee at the Sundog Premises:
(A) all documents constituting the Benefit
Plans, including but not limited to, trust
agreements, insurance policies, service
agreements, and formal and informal
amendments thereto;
(B) the most recent summary plan description;
(C) the most recent written descriptions for all
non-written agreements relating to any such
plan or arrangement;
(D) all annual reports submitted within the two
(2) years preceding the Funding Date.
(E) all notices of non-compliance that were
given within the two (2) years preceding the
Funding Date by any Governmental Authority
with respect to any Benefit Plan; and
(F) employee manuals or handbooks containing
personnel or employee relations policies.
(iv) Subject to Schedule 4.1 (aa), there are no pending
claims or lawsuits by, against, or relating to any
Benefit Plan that would, if successful, result in
liability of the Company, and no claims or lawsuits
have been asserted, instituted or, to the knowledge
of the Vendor or the Company, threatened by,
against, or relating to any Benefit Plan, against
the assets of any trust or other funding
arrangement under any Benefit Plan, by or against
the Company with respect to any Benefit Plan, or by
or against the plan administrator or any fiduciary
of any Benefit Plan, and to the Vendors or the
Company's knowledge there are no facts that could
form the basis for any such claim or lawsuit; and
(v) No Benefit Plan contains any provision or is
subject to any law that would prohibit the
transactions contemplated by this Agreement or that
would give rise to any vesting of benefits,
severance, termination, or other payments or
liabilities as a result of the transactions
contemplated by this Agreement.
(bb) TAXES Except as set forth in Schedule 4.1(bb):
(i) The Company has filed or caused to be filed on a
timely basis with the appropriate federal,
provincial or municipal Governmental Authority all
Tax Returns required to be filed on or before the
Funding Date; all such Tax Returns, as filed, are
true, complete and correct in all respects and
fully disclose the income tax, expenses, deductions
and credits to the extent permitted by law; none of
such Tax Returns has been amended; all Taxes due
and payable or remittable with respect to the
periods reflected on such Tax Returns, all
assessments and reassessments and all tax
installments and other remittances required to be
made on or prior to the Funding Date have been or
will be fully paid prior to the Funding Date; there
are no pending assessments or reassessments in
respect of a preceding taxation year or other
taxable period or any audits or investigations in
progress, pending or threatened (either in writing
or verbally, formally or informally), by any
Governmental Authority against the Company or any
of its assets with respect to any Taxes; there are
no agreements, waivers or other arrangements
providing for an extension of time with respect to
the filing, assessment or reassessment of any Taxes
payable by the Company; there are no agreements
with any federal, provincial or municipal taxing
authority that may affect the subsequent Tax
liabilities of the Company; the reserves and
provisions for Taxes on the books of the Company
are adequate for all Taxes which have been or may
in the future be assessed or reassessed against the
Company with respect to the appropriate periods
then ended and all periods prior thereto;
(ii) The Company (A) has withheld for each payment made
to each of its present and former employees,
officers and directors and to any non-resident of
Canada the amount of any Taxes and other deductions
required to be withheld therefrom, (B) has paid the
same to the proper Government Authority within the
time periods required under any applicable
legislation, and (C) has complied with all
information reporting and backup withholding
requirements, including maintenance of required
records with respect thereto, in connection with
amounts paid to any employee, independent
contractor, creditor, or other third party;
(iii) The income tax liabilities of the Company have been
assessed for all taxation years up to and including
the taxation year ended July 31, 1998; true and
complete copies of the federal and provincial Tax
Returns for the Company for each of the fiscal
years ended July 31, 1998, 1997, 1996 and 1995 and
copies of all assessments and reassessments
relating to such taxation years have been delivered
to Purchaser or its representatives;
(iv) The income tax liabilities of Sundog Digital
Printing Limited have been assessed for the
taxation years ended July 31, 1996 and July 31,
1995; true and complete copies of the federal and
provincial Tax Returns for Sundog Digital Printing
Limited for each of the fiscal years ended July 31,
1996 and 1995 and copies of all assessments and
reassessments relating to such taxation years have
been delivered to the Purchaser or its
representatives;
(v) No amount in respect of any outlay or expense that
is deductible for the purposes of computing the
income of the Company for the purposes of the
Income Tax Act has been owing by the Company for
longer than two (2) years to any person or entity
with whom the Company was not dealing at arm's
length (for the purposes of the Income Tax Act) at
the time that outlay or expense was incurred;
(vi) The Company has not, either directly or indirectly,
transferred property to or acquired property from
any person or entity with whom it was not dealing
at arm's length (for the purposes of the Income Tax
Act) for consideration other than consideration
equal to the fair market value of the property at
the time of the disposition or acquisition thereof;
(vii) The Company has not claimed a deduction with
respect to an outlay or expense which Revenue
Canada may disallow in the circumstances;
(viii) All amounts of consideration paid or agreed to be
paid by the Company with respect to the acquisition
from, the use or reproduction of property of, or
services rendered by, a non-resident of Canada not
dealing at arm's length with the Company for the
purposes of and within the meaning of the Income
Tax Act have been no greater than would be
considered reasonable in the circumstances where
such non-resident would be dealing at arm's length
with such entity;
(ix) All amounts of consideration paid or agreed to be
paid to the Company with respect to the acquisition
by, the use or reproduction of property by, loan
to, or services rendered to, a non-resident of
Canada with whom the Company was not dealing at
arm's length for the purposes of and within the
meaning of the Income Tax Act have been equal to at
least an amount which would be considered
reasonable in circumstances where such non-resident
would be dealing at arm's length with such entity;
(x) There are no circumstances which exist and would
result in, or which have existed and resulted in,
any of sections 80 to and including section 80.04
of the Income Tax Act applying to the Company;
(xi) The Company has not been a party to an election
made under section 83 nor has the Company been a
party to an election under section 85 of the Income
Tax Act;
(xii) The Company is a registrant for the purposes of the
ETA; the Company is not a financial institution
within the meaning of the ETA;
(xiii) The Company has not made any elections under the
ETA;
(xiv) All applicable retail sales tax was paid by the
Company on the initial acquisition of its tangible
personal property;
(xv) During the three years prior to the Funding Date,
except as set forth in Schedule 4.1(bb), the
Company (A) has not ever done business in, or
currently does not do business in, the United
States of America, and (B) has not ever filed, or
has no obligation to file, any Tax Return in the
United States of America;
(xvi) The amount of the Company's liability for unpaid
Taxes as of the Balance Sheet Date did not exceed
the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) shown
on the Balance Sheet, and the amount of the
Company's liability for unpaid Taxes for all
periods or portions thereof ending or deemed to
have ended on or before the Effective Date will not
exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes)
as such accruals are reflected on the books and
records of the Company made as of the Effective
Date;
(xvii) The Company has filed all reports and has created
and/or retained all records required with respect
to its ownership by and transactions with related
parties. Each related person required to maintain
records with respect to transactions between the
Company and related persons has maintained such
records. All documents that are required to be
created and/or preserved by related persons with
respect to transactions with the Company were
created and are maintained as required by law;
(xviii) The Company currently utilizes the accrual method
of accounting for income tax purposes and such
method of accounting has not changed in the past
five (5) years;
(xix) No deficiencies exist or have been asserted (either
in writing or verbally, formally or informally) or
are expected to be asserted with respect to Taxes
of the Company and the Company has not received
notice (either in writing or verbally, formally or
informally) and does not expect to receive notice
that it has not filed a Tax Return or paid Taxes
required to be filed or paid by it; the Company is
not a party to any action or proceeding for
assessment or collection of Taxes, and no such
event has been asserted or threatened (either in
writing or verbally, formally or informally)
against the Company or any of its assets;
(xx) There are (and as of immediately following the
Funding Date there will be) no Liens on the assets
of the Company relating to or attributable to
Taxes;
(xxi) To the Company's knowledge, there is no basis for
the assertion of any claim relating or attributable
to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company or
otherwise have an adverse effect on the Company or
its business;
(xxii) None of the Company's assets are leased from or to
a Tax exempt entity under the Income Tax Act (or
comparable laws of any jurisdiction);
(xxiii) There are no contracts, agreements, plans or
arrangements, including but not limited to the
provisions of this Agreement, covering any employee
or former employee of the Company that,
individually or collectively, could give rise to
the payment of any amount (or portion thereof) that
would not be deductible pursuant to Sections 9, 18,
20 or 68 of the Income Tax Act (or comparable laws
of any jurisdiction);
(xxiv) The Company is not nor has it ever been, a party to
a Tax indemnity agreement, and the Company has not
assumed the Tax liability of any other Person under
contract;
(xxv) The Company's Tax basis in their assets for
purposes of determining their future amortization,
depreciation and other income tax deductions is
accurately reflected on the Company's books and
records;
(xxvi) The Company has no net operating losses or other
Tax attributes presently subject to limitation
under Section 111 of the Income Tax Act (or
comparable laws of any jurisdiction); and
(xxvii) The Company has filed or caused to be filed, within
the time and manner provided by the Income Tax Act,
any necessary tax elections, pursuant thereto that
relate to the amount of taxable income reported in
any tax returns filed for taxation years ending on
or before the Effective Date.
(cc) CONFORMITY WITH LAW; LITIGATION
(i) The Company has not violated any law or regulation
or any order of any court or federal, provincial,
municipal or other governmental department,
commission, board, bureau, agency or
instrumentality having jurisdiction over it;
(ii) No Shareholder has, at any time: (i) committed any
criminal act (except for minor traffic violations);
(ii) engaged in acts of fraud, dishonesty, gross
negligence or moral turpitude; (iii) filed for
personal bankruptcy; or (iv) been an officer,
director, manager, trustee or controlling
shareholder of a company that made an assignment in
bankruptcy; and
(iii) Except as set forth on Schedule 4.1(cc)(iii), there
are no claims, actions, suits or proceedings,
pending or, to the knowledge of the Vendor or the
Company, threatened or commenced against or
affecting the Vendor or the Company at law or in
equity, or before or by any federal, provincial,
municipal or other governmental department,
commission, board, bureau, agency or
instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received.
There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered
by a court or administrative agency or by
arbitration) against the Vendor or the Company or
against any of its properties or business.
(dd) Intentionally left blank.
(ee) ABSENCE OF CHANGES Since the Balance Sheet Date, the Company
has conducted its business in the ordinary course and, except
as contemplated herein or as set forth on Schedule 4.1(ee) or
disclosed herein, there has not been:
(i) any change, by itself or together with other
changes, that has materially adversely affected, or
is likely to materially adversely affect, the
business, operations, affairs, prospects,
properties, assets, profits or condition (financial
or otherwise) of the Company;
(ii) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the
properties or business of the Company;
(iii) any change in the authorized capital of the Company
or in its outstanding securities or any change in
its ownership interests or any grant of any
options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the shares, or any
direct or indirect redemption, purchase or other
acquisition of any of the shares of the Company;
(v) any increase in the compensation, bonus, sales
commissions or fee arrangements payable or to
become payable by the Company to any of its
officers, directors, Shareholders, employees,
consultants or agents, except for ordinary and
customary bonuses and salary increases for
employees in accordance with past practice, nor has
the Company entered into or amended any Employee
Benefit Plan, employment, severance or other
agreement relating to compensation or fringe
benefits;
(vi) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any
character, materially adversely affecting the
business or future prospects of the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights
of the Company to any person, including without
limitation the shareholders and their Affiliates;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the
Company, including without limitation any
indebtedness or obligation of the Shareholders and
their Affiliates, provided that the Company may
negotiate and adjust bills in the course of good
faith disputes with customers in a manner
consistent with past practice;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any
interest in any of the assets, property or rights
of the Company or requiring consent of any party to
the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan
or arrangement to purchase or acquire, any
property, rights or assets outside of the ordinary
course of business of the Company;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any breach, amendment or termination of any
material contract, agreement, license, permit or
other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary
course of business;
(xiv) any capital commitment by the Company, either
individually or in the aggregate, exceeding
$110,000;
(xv) any change in accounting methods or practices
(including any change in depreciation or
amortization policies or rates) by the Company or
the revaluation by the Company of any of its
assets;
(xvi) any creation or assumption by the Company of any
mortgage, pledge, security interest or lien or
other encumbrance on any asset (other than liens
arising under existing lease financing arrangements
which are not material and liens for Taxes not yet
due and payable);
(xvii) any entry into, amendment of, relinquishment,
termination or non- renewal by the Company of any
contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by
the Company in excess of $110,000;
(xviii) any loan by the Company to any Person, incurring by
the Company of any indebtedness, guaranteeing by
the Company of any indebtedness, issuance or sale
of any debt securities of the Company or
guaranteeing of any debt securities of others; or
(xix) negotiation or agreement by the Company or any
officer or employee thereof to do any of the things
described in the preceding clauses (i) through
(xix) (other than negotiations with Purchaser and
its representatives regarding the transactions
contemplated by this Agreement).
(ff) DISCLOSURE All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports,
statements and other writings furnished to Purchaser pursuant
hereto or in connection with this Agreement or the
transactions contemplated hereby, are and will be complete and
accurate in all material respects. No representation or
warranty by the Vendor, the Company or 408446 contained in
this Agreement, in the Schedules attached hereto or in any
certificate furnished or to be furnished by the Vendor, the
Company or 408446 to Purchaser in connection herewith or
pursuant hereto contains or will contain any untrue statement
of a material fact or omits or will omit to state any material
fact necessary in order to make any statement contained herein
or therein not misleading. There is no fact known to the
Vendor, the Company or 408446 that has specific application to
the Vendor, the Company and 408446 (other than general
economic or industry conditions) and that materially adversely
affects or, as far as the Vendor, 408446 and the Company can
reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of
operations of the Company that has not been set forth in this
Agreement or any Schedule hereto.
(gg) PREDECESSOR STATUS; Schedule 4.1(gg) sets forth a listing of
all legal names, trade names, fictitious names or other names
(including, without limitation, any names of divisions or
operations) of the Company and all of its predecessor
companies during the five-year period immediately preceding
the Closing, including without limitation the names of any
entities from whom the Company has acquired material assets.
During the five (5) year period immediately preceding the
Closing, the Company has operated only under the names set
forth on Schedule 4.1(gg) in the jurisdiction or jurisdictions
set forth on Schedule 4.1(gg) and has not been a subsidiary or
division of another corporation or a part of an acquisition
which was later rescinded.
(hh) LOCATION OF CHIEF EXECUTIVE OFFICES The Company's chief
executive offices are located at 0000 - 0 Xxxxxx X.X.,
Xxxxxxx, Xxxxxxx.
(ii) LOCATION OF EQUIPMENT AND INVENTORY All inventory and
equipment held on the date hereof by the Company is located at
either the Sundog Premises or at 0000 - 00xx Xxxxxx X.X.,
Xxxxxxx or at the premises of Coast Paper in Calgary. For
purposes of this section, (a) the term "inventory" shall mean
any inventory of whatever nature owned by the Company as of
the date hereof, and, in any event, shall include, but shall
not be limited to, all merchandise, inventory and goods
wherever located, together with all goods, supplies,
incidentals, packaging materials and any other items used or
usable in manufacturing, processing, packaging or shipping the
same; in all stages of production -- from raw materials
through work-in-process to finished goods; and (b) the term
"equipment" shall mean any equipment of any nature owned by
the Company as of the date hereof, and, in any event, shall
include, but shall not be limited to, all machinery,
equipment, furnishings, fixtures and vehicles owned by the
Company as of the date hereof, wherever located, together with
all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
(jj) YEAR 2000 COMPLIANCE The Company is currently undergoing a
Year 2000 compliance review but has not yet completed same. As
such, the Company may not be Year 2000 Compliant and Ready. To
the best of the knowledge of the Vendor, the Company and
408446 no customer, supplier of the Company or party with whom
the Company has business dealings has notified the Company
that they are not or may not be Year 2000 Complaint and Ready.
Schedule 4.1(jj) appends various reports on Year 2000
Compliance and a Company internal memorandum in regard to Year
2000 Compliance.
4.2 XXXXXXX'X REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser that:
(a) 408446 is a corporation duly amalgamated, organized and
subsisting under the laws of Alberta as a private company as
that term is defined in the SECURITIES ACT (Alberta) with the
corporate power to own its assets and to carry on its business
and has made all necessary filings under all applicable
corporate, securities and taxation laws or any other laws to
which 408446 is subject;
(b) the authorized capital of 408446 consists of 25,000 Class A
Common Shares, 25,000 Class B Common Shares and unlimited
number of C Preferred Shares which as of the Funding Date
there is issued and outstanding the following as fully-paid
and non-assessable:
SHARES BENEFICIAL AND REGISTERED OWNER
------ -------------------------------
106 Class A Common Shares Vendor
(c) The Vendor is the beneficial and registered owner of the
shares referred to in Section 3.2(b) above and the Xxxxxxx
Shares which, at the Funding Date, will be free and clear of
all Liens and any other rights of others;
(d) The Vendor has good and sufficient power, authority, and right
to enter into and deliver this Agreement and as at the Funding
Date to transfer the legal and beneficial title and ownership
of the 408446 Shares and the Xxxxxxx Shares to the Purchaser
free and clear of all Liens and any other rights of others;
(e) there is no contract, option or any other right of another
binding upon or which at any time in the future may become
binding upon:
(i) The Vendor to sell, transfer, assign, pledge,
charge, mortgage or in any other way dispose of or
encumber any of the 408446 Shares or the Xxxxxxx
Shares other than pursuant to the provisions of
this Agreement, or
(ii) to allot or issue any of the unissued shares of
408446 or to create any additional class of shares.
(f) neither the entering into nor the delivery of this Agreement
nor the completion of the transactions contemplated hereby by
the Vendor or by 408446 will result in the violation of:
(i) any of the provisions of the constating documents
or by-laws of 408446,
(ii) any agreement or other instrument to which 408446
is a party or by which 408446, is bound, or
(iii) any applicable law, rule or regulation.
(g) at the Funding Time, the sole asset of 408446 will be 160
Class A Common Voting Shares in the capital of the Company
registered in its name and 408446 will be the owner of such
assets with a good and marketable title, free and clear of all
Liens and any other rights of others;
(h) as at the Funding Date, there will be no outstanding
liabilities against 408446 other than the 408446 Shareholders
Loan;
(i) 408446 is not a party to any contract or contractual
commitment other than those agreements entered into in
accordance with the terms of this Agreement;
(j) 408446 is not a party to or bound by any guarantee,
indemnification, surety or similar obligation other than
guarantees granted on behalf of the Company;
(k) 408446 is not a party to any lease or agreement in the nature
of a lease for real property, whether as lessor or lessee;
(l) as of the Funding Date, and except for the shares it holds in
the Company, 408446 will not have any Subsidiaries or
agreements, options or commitments to acquire any shares or
securities of any corporation or to acquire or lease any
business operations, real property or assets;
(m) there are no actions, suits or proceedings (whether or not
purportedly on behalf of 408446) pending or threatened against
or adversely affecting, or which could adversely affect,
408446 or any of its assets before or by any federal,
provincial, municipal or other governmental court, department,
commission, board, bureau, agency or instrumentality, domestic
or foreign, whether or not insured, and which might involve
the possibility of any judgment or liability against 408446;
(n) 408446 is conducting its business in compliance with all
applicable laws, rules, regulations, notices, approvals and
orders of Canada and of the Province of Alberta and all
municipalities thereof in which its business is carried on, is
not in material breach of any such laws, rules, regulations,
notices, approvals or orders and is duly licensed, registered
or qualified, and duly possesses all material permits, in the
Province of Alberta and all municipalities thereof in which
408446 carries on its business to enable its business to be
carried on as now conducted and its assets to be owned, leased
and operated, and all such licences, registrations,
qualifications and permits are valid and subsisting and in
good standing and none of the same contains or is subject to
any term, provision, condition or limitation which has or may
have a material adverse effect on the operation of its
business or which may materially adversely change or terminate
such licence, registration, qualification or permit by virtue
of the completion of the transactions contemplated hereby; and
(o) 408446 does not have any liability, obligation or commitment
for the payment of income taxes, corporation capital taxes or
any other taxes or duties of whatever nature or kind or
interest or penalties with respect thereto, except such as are
disclosed in the 408446 financial statements or such taxes or
duties not yet due as have arisen since the date of last
408446 financial statements in the usual and ordinary course
of business and for which adequate provision in the accounts
of 408446 has been made. 408446 is not in arrears with respect
to any required withholdings, remittances or instalment
payments of any tax or duty of any kind and has not filed any
waiver for a taxation year under the Income Tax Act or any
other legislation imposing tax on it. 408446 has, at the
prescribed times, filed all tax returns, information returns
and schedules thereto required to be filed by it in all
applicable jurisdictions. All such tax returns properly
reflect, and do not in any respect understate, the taxable
income or the liability for taxes of 408446 in a relevant
taxation year or calendar year. Without limiting the
generality of the foregoing, 408446 is in compliance with all
registration, timely reporting, and remittance obligations in
respect of all provincial and federal sales tax legislation
and the goods and services tax. There are no actions, suits,
or other proceedings or investigations or claims in progress,
pending or threatened against 408446 in respect of any taxes,
governmental charges, or assessments and, in particular, there
are no currently outstanding reassessments or written
enquiries that have been issued or raised by any governmental
authority relating to any such taxes, governmental charges and
assessments. To the knowledge of the Vendor and 408446, there
is no basis for any adverse reassessment by any taxing
authority for any year remaining open for reassessment.
ARTICLE 5
PURCHASER'S REPRESENTATIONS AND WARRANTIES
5.1 PURCHASER'S REPRESENTATIONS
The Purchaser represents and warrants to the Vendor that:
(a) CORPORATE STANDING The Purchaser is a corporation duly
organized, validly existing and in good standing under the
laws of the Province of Ontario, and is duly authorized and
qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now
conducted.
(b) AUTHORIZATION; VALIDITY OF OBLIGATIONS The representative of
the Purchaser executing this Agreement has all requisite
corporate power and authority to enter into and bind the
Purchaser to the terms of this Agreement. The Purchaser has
the full legal right, power and corporate authority to enter
into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by the Purchaser
and the performance by the Purchaser of the transactions
contemplated herein has been duly and validly authorized by
the Board of Directors of the Purchaser and this Agreement has
been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding
obligation of the Purchaser enforceable in accordance with its
terms; and
(c) NO CONFLICTS The execution, delivery and performance of this
Agreement, the consummation of the transactions herein
contemplated hereby and the fulfillment of the terms hereof
will not:
(i) conflict with, or result in a breach or violation
of the constating documents or by-laws of the
Purchaser;
(ii) conflict with, or result in a default (or would
constitute a default but for a requirement of
notice or lapse of time or both) under any
document, agreement or other instrument to which
the Purchaser is a party, or result in the creation
or imposition of any Lien on any of the Purchaser's
properties pursuant to (A) any law or regulation to
which the Purchaser or any of its property is
subject, or (B) any judgment, order or decree to
which the Purchaser is bound or any of its property
is subject;
(iii) result in termination or any impairment of any
material permit, license, franchise, contractual
right or other authorization of the Purchaser;
(iv) violate any law, order, judgment, rule, regulation,
decree or ordinance to which the Purchaser is
subject, or by which the Purchaser is bound
including, without limitation, the Investment
Canada Act.
ARTICLE 6
COVENANTS
6.1 TAXES
The following provisions shall govern the allocation of
responsibility as between the Company and 408446, on the one hand, and the
Vendor, on the other, for certain tax matters following the Effective Date:
(a) The Vendor shall prepare or cause to be prepared and file or
cause to be filed, within the time and in the manner provided
by law, all Tax Returns of the Company and 408446 for all
fiscal periods ending on or deemed to have ended on or before
the Effective Date that are due after the Effective Date. The
Vendor shall pay to the Company and 408446 on or before the
date of such Tax Returns the amount of all Taxes shown as due
on such Tax Returns to the extent that such Taxes are not
reflected in the current liability accruals for Taxes
(excluding reserves for deferred Taxes) shown on the books and
records of the Company and 408446 as of the Effective Date.
Such Returns shall be prepared and filed in accordance with
applicable law and in a manner consistent with past practices
and shall be subject to review and approval by Purchaser. To
the extent reasonably requested by the Vendor or required by
law, Purchaser shall participate in the filing of any Tax
Returns filed pursuant to this paragraph;
(b) The Purchaser, the Company, and 408446 on one hand, and the
Vendor on the other hand, shall (A) cooperate fully, as
reasonably requested, in connection with the preparation and
filing of Tax Returns pursuant to this Section 6.1 and any
audit, litigation or other proceeding with respect to Taxes;
(B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters
pertinent to the Company and 408446 for all periods ending
prior to or including the Effective Date; and (C) preserve
information, records or documents relating to Tax matters
pertinent to the Company and 408446 that is in their
possession or under their control until the expiration of any
applicable statue of limitations or extensions thereof;
(c) The Vendor shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes and fees applicable
to the Vendor arising from or relating to the transactions
contemplated by this Agreement, and the Vendor shall, file all
necessary Tax Returns and other documentation with respect to
all such transfers, documentary, sales, use stamp,
registration, and other Taxes and fees. If required by
applicable law the Purchaser and the Company will join in the
execution of any such Tax Returns and other documentation;
(d) The Purchaser does not assume and shall not be liable for any
Taxes under the Income Tax Act or any other Taxes whatsoever
which may be or become payable by the Vendor and 408446
including, without limiting the generality of the foregoing,
any Taxes resulting from or arising as a consequence of this
Agreement;
(e) The Vendor shall prepare or cause to be prepared and file or
cause to be filed, within the time and manner provided by the
Income Tax Act, the elections pursuant to Section 16.1
thereof, that relate to the August 26, 1998 financing
transaction entered into with the Bank of Nova Scotia; and
(f) The Company shall be responsible for the expense of filing its
Tax Return resulting from the transactions contemplated by
this Agreement.
6.2 ACCOUNTS RECEIVABLE
In the event that all Accounts Receivable as at the Funding
Date are not collected in full (subject to and net of reserves specified in
Section 4.1(p)) within one hundred and twenty (120) days after the Closing then,
at the request of the Company or Purchaser, the Vendor shall pay the Company an
amount equal to the Vendor's Portion of the Accounts Receivable not so
collected, and upon receipt of such payment the Company shall assign to the
Vendor, all rights with respect to the uncollected Accounts Receivable giving
rise to the payment and shall also thereafter promptly remit to Vendor any
excess collections received by it with respect to such assigned Accounts
Receivable. Subsequent to the Funding Time the Purchaser shall cause the Company
to use all commercially reasonable efforts to collect the Accounts Receivable.
6.3 RELATED PARTY AGREEMENTS
The Vendor, the Company and/or 408446, as the case may be,
shall terminate any Related Party Agreements, which Purchaser requests the
Vending the Company or 408446 to terminate, whether before or after the Funding
Time, with the exception of the leases of the Sundog Premises.
6.4 COOPERATION
(a) The Company, Vendor, 408446 and Purchaser shall each deliver
or cause to be delivered to the other on the Funding Date, and
at such other times and places as shall be reasonably agreed
to, such instruments as the other may commercially reasonably
request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief
financial officer of the Company and 408446 shall execute any
documentation reasonably required by Purchaser's independent
public accountants (in connection with such accountant's audit
of the Company and 408446) or the NASDAQ National Market;
(b) The Vendor, the Company and 408446 shall cooperate and use
their commercially reasonable efforts to have the current
officers, directors and employees of the Company and 408446
cooperate with the Purchaser on and after the Funding Date in
furnishing information, evidence, testimony and other
assistance in connection with any filing obligations, actions,
proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the
Funding Date;
(c) Each party hereto shall cooperate in obtaining all consents
and approvals required under this Agreement to effect the
transactions contemplated hereby; and
(d) The Company, the Vendor, 408446 and the Purchaser shall file
all notices and other information and documents required under
the INVESTMENT CANADA ACT as promptly as practicable after the
date hereof.
6.5 ACCESS TO INFORMATION; CONFIDENTIALITY; PUBLIC DISCLOSURE
(a) Between the date of this Agreement and the Funding Date, the
Vendor will afford to the officers and authorized
representatives of the Purchaser access to (A) all of the
sites, properties, books and records of the Company and 408446
and (B) such additional financial and operating data and other
information as to the business and properties of the Company
and 408446 as the Purchaser may from time to time reasonably
request, including without limitation, access upon reasonable
request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry;
(b) The Purchaser recognizes and acknowledges that it had in the
past, currently has, and in the future may possibly have,
access to certain confidential information of the Company,
such as lists of customers, operational policies, and pricing
and cost policies that are valuable, special and unique assets
of the Company's business. The Purchaser agrees that, unless
there is a Closing, it will not disclose confidential
information with respect to the Company to any person, for any
purpose or reason whatsoever, except to authorized
representatives of the Company and to counsel and other
advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section
6.5(b), unless:
(A) such information becomes known to the public
generally through no fault of the Purchaser;
(B) disclosure is required by law or the order
of any governmental authority under color of
law; or
(C) the disclosing party reasonably believes
that such disclosure is required in
connection with the defense of a lawsuit
against the disclosing party;
provided, that prior to disclosing any information pursuant to
clause (A), (B) or (C) above, the Purchaser shall give prior
written notice thereof to the Company and provide the Company
with the opportunity to contest such disclosure and shall
cooperate with efforts to prevent such disclosure; and
(c) Prior to the Funding Date, neither the Vendor, the Company nor
408446 shall make any disclosure (whether or not in response
to an inquiry) of the subject matter of this Agreement unless
such disclosure is previously approved by the Purchaser in
writing. The Purchaser agrees to keep the Vendor, the Company
and 408446 apprised in advance of any disclosure of the
subject matter of this Agreement by the Purchaser prior to the
Funding Date.
6.6 CONDUCT OF BUSINESS PENDING CLOSING
Between the Effective Date and the Funding Date, the Company
and 517244 will (except as requested or agreed by Purchaser or except as
contemplated by the terms hereof):
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of
management, operation or accounting;
(b) maintain its properties and facilities, including those held
under the Leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present
officers and key employees and maintain its relationships with
suppliers, vendors, customers, creditors and others having
business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar
governmental authorities;
(g) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all
officers, directors, employees, agents, representatives and
independent contractors, except for ordinary and customary
bonuses and salary increases for employees in accordance with
past practice or as contemplated herein.
6.7 PROHIBITED ACTIVITIES
Between the Effective Date and the Funding Date, the Company
and 408446 will not, without the prior written consent of Purchaser, not to be
unreasonably withheld unless the same is contemplated by the terms hereof:
(a) make any change in their respective articles of incorporation
or bylaws, or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of
any kind, or authorize or propose any change in its equity
capitalization, or issue or authorize the issuance of any debt
securities;
(c) declare or pay any dividend, or make any distribution (whether
in cash, stock or property) in respect of its stock whether
now or hereafter outstanding, or split, combine or reclassify
any of its shares or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution
for shares of its shares, or purchase, redeem or otherwise
acquire or retire for value any shares;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or
guarantee any indebtedness, except in the ordinary course of
business and consistent with past practice in an amount in
excess of $110,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any
officer, director, shareholder, employee, agent,
representative or independent contractor, except for ordinary
and customary bonus and salary increases, make any bonus or
management fee payment to any such person; make any loans or
advances; adopt or amend any plan or benefit arrangement; or
grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or
hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose
of any property or equipment except in the ordinary course of
business consistent with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or
otherwise) any business or the start-up of any new business,
or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Company;
(i) amalgamate or consolidate or agree to amalgamate or
consolidate with or into any other corporation;
(j) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills in the course
of good faith disputes with customers in a manner consistent
with past practice;
(k) commit a breach of or amend or terminate any material
agreement, permit, license or other right;
(l) enter into any other transaction:
(i) that is not negotiated at arm's length with a third
party not affiliated with the Company or any
officer, director or Shareholder; or
(ii) outside the ordinary course of business consistent
with past practice; or
(iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of
business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax
election, adopt any tax accounting method other than in the
ordinary course of business and consistent with past practice,
change any tax accounting method, file any Tax Return (other
than any estimated tax returns, payroll tax returns or sales
tax returns) or any amendment to a Tax Return, enter into any
closing agreement, settle any tax claim or assessment, or
consent to any tax claim or assessment, without the prior
written consent of Purchaser; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 6.7(a) through (o) above, or any
action which would make any of the representations and
warranties of the Vendor, Company and 408446 contained in this
Agreement untrue or result in any of the conditions set forth
in Article 7 not being satisfied.
6.8 EXCLUSIVITY
None of the Vendor, the Company, 408446 or any agent, officer,
director or any representative of the Vendor, the Company or 408446 or the
Vendor will, during the period commencing on the date of this Agreement and
prior to the earlier to occur of the Funding Time or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(a) solicit, encourage or initiate the submission of proposals or
offers from any Person for;
(b) engage in any discussions pertaining to; or
(c) furnish any information to any person other than Purchaser
relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
In addition to the foregoing, if any one of the Vendor, the
Company or 408446 receives any unsolicited offer or proposal, or has actual
knowledge of any unsolicited offer or proposal, relating to any of the above,
the Vendor, the Company or 408446 shall immediately notify Purchaser thereof,
including the identity of the party making such offer or proposal and the
specific terms of such offer or proposal.
6.9 NOTIFICATION OF CERTAIN MATTERS
Each party hereto shall give prompt notice to the other
parties hereto of:
(a) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue
or inaccurate in any material respect at or prior to the
Funding Time; and
(b) any material failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by such party hereunder.
The delivery of any notice pursuant to this Section 6.9 shall
not, without the express written consent of the other parties be deemed to (x)
modify the representations or warranties hereunder of the party delivering such
notice, (y) modify the conditions set forth in Articles 7 and 8, or (z) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
ARTICLE 7
CONDITIONS
7.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, on or
before the Funding Date, of the following conditions and deliveries:
(a) All of the representations and warranties of the Vendor, the
Company and 408446 contained in this Agreement shall be true,
correct and complete on and as of the Funding Date with the
same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied
with, performed or satisfied by the Vendor, the Company and
408446 on or before the Funding Date shall have been duly
complied with, performed or satisfied; and a certificate to
the foregoing effects dated the Funding Date and signed on
behalf of the Vendor, the Company and 408446 and shall have
been delivered to Purchaser;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or
provision challenging Purchaser's proposed acquisition of the
Shares, or limiting or restricting Purchaser's conduct or
operation of the business of the Company (or its own business)
following the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental
Authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending;
(c) There shall be no action, suit, claim or proceeding of any
nature pending or threatened against Purchaser or the Vendor,
the Company or 408446 their respective properties or any of
their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the Company.
A certificate in respect of the Vendor, the Company and 408446
to the foregoing effect dated the Funding Date and signed on
behalf of the Vendor, the Company and 408446 shall have been
delivered to Purchaser;
(d) There shall have been no material adverse changes in the
business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or
condition (financial or otherwise) of the Company, taken as a
whole, since the Balance Sheet Date except those that affect
the industry generally; and Purchaser shall have received a
certificate signed by the Vendor, the Company and 408446 dated
the Funding Date to such effect;
(e) The Purchaser shall have received (i) a copy of the articles
of incorporation of the Company and 408446 certified by an
appropriate authority in the jurisdiction of its incorporation
and (ii) a copy of the bylaws of the Company and 408446
certified by a duly authorized officer of the Company, and
such documents shall be in form and substance reasonably
acceptable to the Purchaser;
(f) Purchaser shall have received from the Company completed
interim financial statements for the period ending on February
28, 1999 in a form reasonably satisfactory to Purchaser;
(g) The Purchaser shall have received a certificate (the "Closing
Financial Certificate"), dated as of the Funding Date, signed
on behalf of the Company and by the Vendor, setting forth:
(i) the revenue of the Company for the fiscal year
ended July 31, 1998 and the period ended February
28, 1999;
(ii) the earnings of the Company before interest and
taxes and bonuses, adjusted to reflect the add-back
of certain non-recurring costs, for the fiscal year
ended July 31, 1998 and the period ended February
28, 1999;
(iii) The sum of the Company's total outstanding interest
bearing indebtedness to banks, and all other
financial institutions and creditors (in each case
including the current portions of such
indebtedness, but excluding any amounts payable
pursuant to Section 3.1(b) hereof and Section
3.1(b) of the Remenda Agreement, and any amounts
payable to the Vendor, Remenda and 517244, and
their Affiliates, any income taxes payable from the
Balance Sheet Date on earnings, operating leases,
trade payables and other accounts payable incurred
in the ordinary course of the Company's business
consistent with past practice) as of the Funding
Date.
(h) Vendor shall have entered into an employment agreement with
the Purchaser in the form set forth in Schedule 1.1(t) hereof
prior to the Funding Time;
(i) the Company shall have entered into a lease with the
registered owner(s) of the Sundog Premises on the terms set
forth in Schedule 7.1(i) hereof prior to or contemporaneous
with the Funding Time and each of such leases shall be
registered by way of caveat against the certificates of title
to the Sundog Premises and in the event that any mortgage,
encumbrance or financial charge exists, then the holder of
each such mortgage, encumbrance or financial charge shall have
executed and delivered to the Company a non-disturbance
agreement in form and content acceptable to the Purchaser;
(j) Remenda shall have signed the Remenda Agreement; and
(k) The Vendor, the Company and 408446 shall have made all
deliveries as are called for by this Agreement. The Purchaser
shall be fully satisfied in its sole discretion with the
results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such
deliveries, and its review of, and other due diligence
investigations with respect to, the business, operations,
affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or
otherwise) of the Company.
7.2 CONDITIONS FOR THE BENEFIT OF THE VENDOR, THE COMPANY AND
408446
The obligation of the Vendor, the Company and 408446 to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or before the Funding Time, of the following
conditions and deliveries:
(a) All of the representations and warranties of Purchaser
contained in this Agreement shall be true, correct and
complete on and as of the Funding Time with the same effect as
though such representations and warranties had been made as of
such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or
satisfied by Purchaser on or before the Funding Date shall
have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Funding Date
and signed by any officer of the Purchaser shall have been
delivered to the Vendor, the Company and 408446;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or
provision challenging Purchaser's proposed acquisition of the
Shares, or limiting or restricting Purchaser's conduct or
operation of the business of the Company (or its own business)
following the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending; and a certificate to the
foregoing effects dated the Funding Date and signed by any
officer of the Purchaser shall have been delivered to the
Vendor, the Company and 408446;
(c) All necessary material consents of, and filings with, any
governmental authority or agency or third party relating to
the consummation by the Purchaser of the transactions
contemplated herein, shall have been obtained and made;
(d) The Company or Purchaser shall have entered into an employment
agreement with Vendor in the form set forth in Schedule 1.1(t)
hereof prior to or contemporaneously with the Funding Time;
and
(e) Remenda shall have entered into the Remenda Agreement.
7.3 CONDITIONS FOR BENEFIT OF PURCHASER, VENDOR, COMPANY AND
408446
The obligation of the Purchaser, the Vendor, the Company and
408446 to consummate the transactions contemplated by this Agreement are subject
to the satisfaction or waiver, at or before the Funding Time, of the following
conditions and deliveries to be completed immediately prior to the Funding Time:
(a) the Company shall sell to Vendor, and Vendor will purchase
from the Company, the Preferred Shares for the sum of
$375,000;
(b) the Company shall pay out the Related Party Debt in its
entirety;
(c) the Company shall remit the Xxxxxxx Pension Obligation to such
entity as shall be designated by Xxxxxx Xxxxxxx. Concurrently
therewith, Xxxxxx Xxxxxxx shall unconditionally release the
Company for all claims in relation to the Xxxxxxx Pension
Obligation and enter into an amendment of the Xxxxxxx
Employment Contract acknowledging deferral of payment of the
Xxxxxxx Severance Obligation to June 30, 1999 and providing
for an assignment to Xxxxxx Xxxxxxx of the life insurance on
his life held by the Company;
(d) the Company shall declare, as evidenced by a written
resolution of the board of directors of the Company that a
bonus net of withholdings has been credited to the Sundog
Shareholder Loan account in the net amount of $408,715 (the
"1999 Bonus"). The Company shall make all remittances,
including any remittances required under the Income Tax Act,
to be made in connection with the payment of the 1999 Bonus;
and
(e) Xxxxxxx shall release the Company from that certain employment
agreement dated December 22, 1989 between Xxxxxxx and the
Company.
ARTICLE 8
INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION BY THE VENDOR
The Vendor as to the Vendor's Portion, covenants and agrees to
indemnify, defend, protect and hold harmless the Purchaser and the Company and
their respective officers, directors, employees, shareholders, assigns,
successors and Affiliates (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings
(including informal proceedings), investigations, audits,
demands, assessments, adjustments, judgments, settlement
payments, deficiencies, penalties, fines, interest (including
interest from the date of such damages) and costs and expenses
(including without limitation reasonable legal fees and
disbursements of every kind, nature and description)
(collectively, "Damages") suffered, sustained, incurred or
paid by the Indemnified Parties in connection with, resulting
from or arising out of:
(i) any breach of any representation or warranty of the
Vendor, 408446 or the Company set forth in this
Agreement or any Schedule or certificate, delivered
by or on behalf of any of the Vendor, 408446 or the
Company in connection herewith;
(ii) any nonfulfillment of any covenant or agreement by
the Vendor or, prior to the Funding Date, the
Company or 408446, under this Agreement. or
(iii) the business, operations or assets of the Company
or 408446 prior to the Funding Time or the actions
or omissions of the Company's or 408446's
directors, officers, shareholders, employees or
agents prior to the Funding Time, other than
Damages arising from matters expressly disclosed in
the Company Financial Statements, this Agreement or
the Schedules to this Agreement
(iv) any additional assessment, Tax or penalties payable
as a result of the assignment of the Xxxxxxx
Insurance and any other assignment of any employee
insurance in accordance with this Agreement; and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 8.1.
8.2 LIMITATION AND EXPIRATION
Notwithstanding the above:
(a) there shall be no liability for indemnification under Section
8.1 unless, and solely to the extent that, the aggregate
amount of Damages exceeds $110,000 (the "Indemnification
Threshold"); provided, however, that the Indemnification
Threshold shall not apply to (i) Damages arising out of any
breaches of the covenants of the Vendor, 408446 or the Company
set forth in this Agreement or representations and warranties
made in Sections 4.1(e) (Authorized Capital), 4.1(f)
(Entitlements), 4.1(u) (Significant Customers; Material
Contracts and Commitments), 4.1(aa) (Employee Benefit Plans),
4.1(bb) (Taxes), or 4.1(cc) (Conformity with Law; Litigation);
(b) the aggregate amount of the Vendor's liability under this
Article 8 shall not exceed the Purchase Price, provided
however, that the Vendor's liability for Damages arising out
of any breaches of the representations made in Sections
4.1(y), 4.1(aa) or 4.1(bb) or Damages described in Section 8.1
(a)(ii) or (iv) shall not be subject to such limitation and
shall not count toward the limitation described in the first
clause of this Section 8.2(b);
(c) the indemnification obligations under this Article 8, or under
any certificate or writing furnished in connection herewith,
shall terminate at the date that is the later of clause (i) or
(ii) of this Section 8.2(c):
(i) (A) except as to representations, warranties,
and covenants specified in clause (i)(B)
of this Section 8.2(c), the third
anniversary of the Funding Date;
(B) with respect to representations and
warranties contained in Sections 4.1(y),
4.1(aa), 4.1(bb) and the indemnification
set forth in Section 8.1(a)(ii)(iii)
or (iv), on (A) the date that is six (6)
months after the expiration of the
longest applicable limitation period
contained in the applicable federal or
provincial statute (including extensions
thereof), or (B) if there is no
applicable federal or provincial statute,
(x) five (5) years after the Funding Date
if the Claim (as defined below) is related
to the cost of investigating, containing,
removing or remediating a release of
Hazardous Substances (as defined above)
into the environment, or (y) five (5) years
after the Funding Date for any other Claim
covered by clause (i)(B) of this Section
8.2(c); or
(ii) The final resolution of claims or demands pending
as of the dates described in clause (i) of this
Section 8.2(c) (such claims referred to as "Pending
Claims").
(d) For greater certainty the Vendor shall, in accordance with the
provisions of this Article 8, indemnify the Purchaser and the
Company in respect of those matters set out in that schedule
delivered at the Funding Time by the Purchaser to the Vendor
which letter is attached hereto as Schedule 8.2(d). The Vendor
acknowledges that Schedule 8.2(d) shall in no way constitute
any amendment, waiver, modification or abridgement of any of
the Purchasers rights under this Article 8.
8.3 INDEMNIFICATION PROCEDURES
All claims or demands for indemnification under this Article 8
("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against
any party obligated to provide indemnification pursuant to
Section 8.1 hereof (the "Indemnifying Party") which does not
involve a Claim being asserted against or sought to be
collected by a third party, the Indemnified Party shall within
thirty (30) days of having actual knowledge of such Claim
(failing which the Indemnified Party shall be deemed to waive
its right to indemnification in respect of such Claim) notify
the Vendor of such Claim, specifying the nature of such Claim
and the amount or the estimated amount thereof to the extent
then feasible (the "Claim Notice"). If the Vendor does not
notify the Indemnified Party within thirty (30) days after the
date of delivery of the Claim Notice that the Indemnifying
Party disputes such Claim, with a detailed statement of the
basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in
accordance with this Section 8.3(a), the Indemnified Party
shall respond in a written statement to the objection within
thirty (30) days and, for sixty (60) days thereafter, attempt
in good faith to agree upon the rights of the respective
parties with respect to each of such Claims (and, if the
parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties).
(b) (i) In the event that any Claim for which the
Indemnifying Party would be liable to an
Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party
Claim"), the Indemnified Party shall deliver a
Claim Notice to the Vendor within thirty (30) days
of having actual knowledge of such Third Party
Claim (failing which the Indemnified Party shall be
deemed to waive its right to Indemnification in
respect of such Claim). The Vendor shall have
thirty (30) days from the date of delivery of the
Claim Notice to notify the Indemnified Party (A)
whether the Indemnifying Party disputes liability
to the Indemnified Party hereunder with respect to
the Third Party Claim, and, if so, the basis for
such a dispute, and (B) if such party does not
dispute liability, whether or not the Indemnifying
Party desires, at the sole cost and expense of the
Indemnifying Party, to defend against the Third
Party Claim, provided that the Indemnified Party is
hereby authorized (but not obligated) to file any
motion, answer or other pleading and to take any
other action which the Indemnified Party shall deem
necessary or appropriate to protect the Indemnified
Party's interests.
(ii) In the event that the Vendor timely notifies the
Indemnified Party that the Indemnifying Party does
not dispute the Indemnifying Party's obligation to
indemnify with respect to the Third Party Claim,
the Indemnifying Party shall defend the Indemnified
Party against such Third Party Claim by appropriate
proceedings, provided that, unless the Indemnified
Party otherwise agrees in writing, the Indemnifying
Party may not settle any Third Party Claim (in
whole or in part) if such settlement does not
include a complete and unconditional release of the
Indemnified Party. If the Indemnified Party desires
to participate in, but not control, any such
defense or settlement the Indemnified Party may do
so at its sole cost and expense. If the
Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim,
whether by failure of such party to give the
Indemnified Party timely notice as provided herein
or otherwise, then the Indemnified Party, without
waiving any rights against such party, may settle
or defend against such Third Party Claim in the
Indemnified Party's sole discretion and the
Indemnified Party shall be entitled to recover from
the Indemnifying Party the amount of any settlement
or judgment and, on an ongoing basis, all
indemnifiable costs and expenses of the Indemnified
Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given
in writing to the Vendor any Third Party Claim
seeks material prospective relief which could have
an adverse effect on any Indemnified Party or the
Company or any subsidiary, the Indemnified Party
shall have the right to control or assume (as the
case may be) the defense of any such Third Party
Claim and the amount of any judgment or settlement
and the reasonable costs and expenses of defense
shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If
the Indemnified Party elects to exercise such
right, the Indemnifying Party shall have the right
to participate in, but not control, the defense of
such Third Party Claim at the sole cost and expense
of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim, and an Indemnified Party may make a
Claim hereunder, for potential or contingent Damages provided
the Claim Notice sets forth the specific basis for any such
potential or contingent claim or demand to the extent then
feasible and the Indemnified Party has reasonable grounds to
believe that such Claim may be made.
(d) Subject to the provisions of Section 8.2, the Indemnified
Party's failure to give notice as required by this Section 8.3
of any actual, threatened or possible claim or demand which
may give rise to a right of indemnification hereunder shall
not relieve the Indemnified Party unless the failure to give
such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining
the amount of any indemnification obligation under this
Article 8, provided that no Indemnified Party shall be
obligated to continue pursuing any payment pursuant to the
terms of any insurance policy.
8.4 GENERAL INDEMNIFICATION BY THE PURCHASER
The Purchaser covenants and agrees to indemnify, defend,
protect and hold harmless the Vendor from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the
Vendor in connection with, resulting from or arising out of,
directly or indirectly:
(i) any breach of any representation or warranty of the
Purchaser set forth in this Agreement;
(ii) any nonfulfillment of any covenant or agreement by
the Purchaser, or after the Funding Date, the
Company, under this Agreement, excluding any such
non-fulfillment caused by the Vendor;
(iii) the business, operations or assets of the Company
subsequent to the Funding Date or the actions or
omissions of the Company's directors, officers,
shareholders, employees or agents subsequent to the
Funding Date, excluding Damages caused by or
actions or omissions of the Vendor; or
(iv) guarantees or indemnities or the sureties provided
by Vendor or his Affiliates for the benefit of the
Company as set forth in Schedule 8.4(a)(iv).
(b) the indemnification obligation under this Section 8.4 shall
terminate on the third anniversary of the Funding Date.
8.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants made by the
Vendor, the Company, 408446 and the Purchaser in or pursuant to this Agreement
or in any document delivered pursuant hereto shall be deemed to have been made
on the date of this Agreement (except as otherwise provided herein) and, if a
Closing occurs, as of the Funding Date. The representations of the Vendor, the
Company and 408446 will survive the Closing and will remain in effect until, and
will expire upon, the termination of the indemnification obligations as provided
in Section 8.2. The representations and warranties of the Purchaser will survive
Closing and will remain in effect until, and will expire upon the third
anniversary of the Funding Date.
8.6 REMEDIES CUMULATIVE
The remedies set forth in this Article 8 are cumulative and
shall not be construed to restrict or otherwise affect any other remedies that
may be available to the Indemnified Parties under any other agreement or
pursuant to statutory or common law.
8.7 RIGHT TO SET OFF
Subject to complying with the procedures set forth in Section
11.10, Purchaser shall have the right, but not the obligation, to set off, in
whole or in part, against the portion of the Purchase Price payable pursuant to
Sections 3.1(a)(iii), 3.1(a)(iv) or 3.1(a)(v) hereof, amounts finally determined
under Section 8.3 to be owed to the Purchaser by the Vendor, 408446 or the
Company or any Indemnifying Party under this Article 8.
8.8 CLAIMS
The Vendor's Liability to an Indemnified Party pursuant to
Section 8.1 shall be limited to the Vendor's Portion. Similarly, the Parties
acknowledge that in relation to any other action or claim whatsoever under and
pursuant to this Agreement whether in relation to a breach of the representation
or warranties, the covenants or otherwise, the Vendor's Liability shall be
limited to the Vendor's Portion and the Purchaser shall deliver notice to the
Vendor of such other claim within thirty days of having actual knowledge of such
claim failing which the Purchaser shall be deemed to have waived such claim.
ARTICLE 9
NON - COMPETITION
9.1 PROHIBITED ACTIVITIES
The Vendor acknowledges that he has developed relationships on
behalf of and acquired proprietary and confidential information about the
Company, including, but not limited to, its customers, vendors, prices, sales
strategies and other information, some of which may be regarded and treated by
the Company and the Purchaser as trade secrets. In order to protect the
Company's and/or the Purchaser's critical interest in these relationships and
information, the Vendor covenants that he will not, for a period of four (4)
years following the Funding Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, partnership, corporation, or business of whatever nature:
(a) engage, as an officer, director, shareholder, owner, partner,
member, joint venturer, or in a managerial capacity, whether
as an employee, independent contractor, consultant or adviser,
or as a sales representative, in any business selling any
products or services in direct competition with the Company,
within 50 miles of any locations where the Company both has an
office and conducts business ("Territory"). As used in this
subsection, "competition" shall mean engaging, directly or
indirectly, for himself or any other person or entity, in (i)
any facet of the business of the Company in which the Vendor
was engaged in prior to the Funding Date or (ii) any facet of
the business of the Company about which the Vendor acquired
proprietary or confidential information during the course of
his ownership of the Shares;
(b) hire or join with in a competitive business capacity, any
employee of the Company within the Territory;
(c) solicit or accept business which competes with the business of
the Company from any person who is, on the Funding Date, or
that has been, within one (1) year prior to the Funding Date,
a customer of the Company; or
(d) acquire or enter into any agreement to acquire any prospective
acquisition candidate that was, to the knowledge of the
Vendor, either called upon by the Company as a prospective
acquisition candidate or was the subject of an acquisition
analysis by the Company within 3 years prior to the Funding
Date. The Vendor, to the extent lacking the knowledge
described in the preceding sentence, shall immediately cease
all contact with such prospective acquisition candidate upon
being informed that the Company had called upon such candidate
or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit the Vendor from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over- the-counter.
9.2 CONFIDENTIALITY
The Vendor acknowledges that he has acquired confidential
information and trade secrets concerning the operation of the Company, the use
or disclosure of which could cause the Company or its affiliates or subsidiaries
substantial loss and damages that could not be readily calculated and for which
no remedy at law would be adequate. Accordingly, the Vendor covenants and agrees
with the Company and Purchaser that he will not at any time, except in
performance of Vendor's obligations to the Company or with the prior written
consent of the Company pursuant to authority granted by a resolution of the
Board of Directors of the Company, directly or indirectly, disclose any secret
or confidential information that he or she may learn or has learned by reason of
his ownership of the Company or his employment by the Company, or any of its
Subsidiaries and Affiliates, or use any such information in a manner detrimental
to the interests of the Company or Purchaser, unless (i) such information
becomes known to the public generally through no fault of any Shareholder, (ii)
disclosure is required by law or the order of any Governmental Authority under
color of law, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, provided, that prior to disclosing any information pursuant to
clause (i), (ii) or (iii) above, the Vendor shall give prior written notice
thereof to Purchaser and provide Purchaser with the opportunity to contest such
disclosure and shall cooperate with efforts to prevent such disclosure. The term
"confidential information" includes, without limitation, information not
previously disclosed to the public or to the trade by the Company's or
Purchaser's management with respect to the Company's or Purchaser's, or any of
their Affiliates' or Subsidiaries', products, facilities, and methods, trade
secrets and other intellectual property, software, source code, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
financial information (including the revenues, costs, or profits associated with
any of the Company's products), business plans, prospects, or opportunities but
shall exclude any information already in the public domain.
9.3 DAMAGES
Because of the difficulty of measuring economic losses to
Purchaser as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Purchaser for which it
would have no other adequate remedy, the Vendor agrees that the foregoing
covenant may be enforced by Purchaser in the event of breach by the Vendor, by
injunctions and restraining orders.
9.4 REASONABLE RESTRAINT
The parties agree that the foregoing covenants in this Article
9 impose a reasonable restraint on the Vendor in light of the activities and
business of the Purchaser on the date of the execution of this Agreement,
assuming the completion of the transactions contemplated hereby.
9.5 SEVERABILITY; REFORMATION
The covenants in this Article 9 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
9.6 INDEPENDENT COVENANT
All of the covenants in this Article 9 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Vendor against the Purchaser,
whether predicated on this Agreement or otherwise, shall not constitute a
defence to the enforcement by the Purchaser of such covenants. The parties
expressly acknowledge that the terms and conditions of this Article 9 are
independent of the terms and conditions of any other agreements including, but
not limited to, any employment agreements entered into in connection with this
Agreement. It is specifically agreed that the period of four (4) years stated at
the beginning of this Article 9 during which the agreements and covenants of the
Vendor made in this Article 9 shall be effective, shall be completed by
excluding from such computation any time during which the Vendor is found by a
court of competent jurisdiction to have been in violation of any provisions of
this Article 9. The covenants contained in this Article 9 shall not be affected
by any breach of any other provision hereof by any party hereto and shall have
no effect if the transactions contemplated by this Agreement are not
consummated.
9.7 MATERIALITY
The Company and the Vendor hereby agree that the covenants set
forth in this Article 9 are a material and substantial part of the transactions
contemplated by this Agreement, supported by adequate consideration.
ARTICLE 10
CLOSING
10.1 CLOSING
(a) The Closing shall take place through the delivery of executed
originals or facsimile counterparts of all documents required
hereunder on such date that all conditions to Closing shall
have been satisfied or waived, or at such other time and date
as the Purchaser and the Vendor may agree, which date is
referred to as the "Funding Date."
(b) The completion of the transactions contemplated herein shall
be carried out pursuant to such reasonable trust conditions as
are agreed upon between the solicitors representing the
Vendor, the Company and 408449 and the Solicitors representing
the Purchaser which shall provide that all closing documents
and funds shall be delivered to the Solicitors representing
the Purchaser and held in escrow and not released until all
parties have delivered all required closing documents and
funds and caveats respecting the Leases have been registered
at the Land Titles Office against the respective certificates
of title to the lands referenced in the Leases, subject only
to the caveats and instruments that were registered against
titles as at the Effective Date.
10.2 DELIVERIES AT FUNDING TIME
At the Funding Time:
(a) the Purchaser shall deliver or cause to be delivered to the
Vendor the following:
(i) funds in the amount of $4,995,742 for the Purchased
Interests;
(ii) demand promissory note in the amount of $820,056;
(iii) releases of the personal guarantees of Vendor and the
corporate guarantees of 408446 and its Affiliates;
(iv) releases of the Vendor by the Company and 408446;
(v) a legal opinion in form reasonably satisfactory to
Vendor's solicitors in relation to the enforceability
of this Agreement and the other agreements delivered
pursuant to the terms hereof;
(vi) an undertaking to pay to the Xxxxxxx Xxxxxxxxx
Obligation and the Xxxxxxx Pension Obligation.
(b) the Vendor shall deliver or cause to be delivered to the
Purchaser the following:
(i) a certificate of each of the Vendor, 408446 and the
Company confirming that the representations set forth
herein by them to are true and correct at the Funding
Date;
(ii) a certified copy of the resolution of the board of
directors of the Company and 408446 approving the
agreement and the transfer of the Xxxxxxx Shares and
408446 Shares from the Vendor to the Purchaser;
(iii) certificates representing the Shares duly endorsed in
blank for transfer;
(iv) The share certificate book, minute book, corporate
seal and all other corporate records and business
records of 408446;
(v) resignations of the existing directors and officers
of 408446;
(vi) a legal opinion in form reasonably satisfactory to
Purchaser's solicitors in relation to the
enforceability of this Agreement and the other
agreements delivered pursuant to the terms hereof;
(c) At the Funding Time, the Vendor, the Shareholders, the Company
and the Purchaser, as the case may be, shall execute and
deliver or cause to be delivered the following:
(i) an assignment of the Shareholders Loans; and
(ii) the Xxxxxxx Employment contract.
10.3 PURCHASER POST CLOSING OBLIGATIONS
Following the Funding Time the Purchaser shall:
(a) appoint new directors for 408446 and the Company and cause a
duly completed Notice of Change of Directors to be filed with
Alberta Corporate Registry and in any other jurisdictions
where 408446 or the Company is registered and such
notification is required to be filed;
(b) designate a new registered office for 408446 and the Company
and cause a duly completed Notice of Change of Address to be
filed with Alberta Corporate Registry;
(c) cause 408446 and the Company to deliver to the former
directors of 408446 and the Company, as the case may be, duly
executed releases in a form reasonably acceptable to the
solicitors for the Vendor;
(d) assign the Xxxxxxx Insurance from the Company to Xxxxxxx or
his nominee; and
(e) assign the TPI Receivable from the Purchaser in favor of the
Vendor.
10.4 XXXXXXX CONTRACT
In due course, following the Funding Time, the Purchaser shall
ensure the payment to Xxxxxx Xxxxxxx of the Xxxxxxx Xxxxxxxxx Obligation by the
Company.
ARTICLE 11
GENERAL
11.1 TERMINATION
This Agreement may be terminated at any time prior to the
Funding Date solely:
(a) by mutual consent of the board of directors of Purchaser
and the board of directors of the Company; or
(b) by the Vendor, the Company and 408446 as a group, on the one
hand, or by Purchaser, on the other hand, if the Closing shall
not have occurred on or before April 15, 1999, provided that
the right to terminate this Agreement under this Section
11.1(b) shall not be available to either party (with the
Vendor, the Company and 408446 deemed to be a single party for
this purpose) whose material misrepresentation, breach of
warranty or failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure
of the closing to occur on or before such date; or
(c) by the Vendor, the Company and 408446 as a group, on the one
hand, or by Purchaser, on the other hand, if there is or has
been a material breach, failure to fulfill or default on the
part of the other party (with the Vendor, the Company and
408446 deemed to be a single party for this purpose) of any of
the representations and warranties contained herein or in the
due and timely performance and satisfaction of any of the
covenants, agreements or conditions contained herein, and the
curing of such default shall not have been made or shall not
reasonably be expected to occur before the Funding Date; or
(d) by the Vendor, the Company and 408446 as a group, on the one
hand, or by Purchaser, on the other hand, if there shall be a
final non-appealable order of a federal or provincial court in
effect preventing consummation of the transactions
contemplated by this Agreement; or there shall be any action
taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement by any governmental entity
which would make the consummation of the transactions
contemplated by this Agreement illegal.
11.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to
Section 11.1, this Agreement shall forthwith become ineffective, and there shall
be no liability or obligation on the part of any party hereto or its officers,
directors or shareholders. Notwithstanding the foregoing sentence, (i) the
provisions of Articles 11 and 8, shall remain in full force and effect and
survive any termination of this Agreement; (ii) each party shall remain liable
for any breach of this Agreement prior to its termination; and (iii) in the
event of termination of this Agreement pursuant to Section 11.1(c) above, then
notwithstanding the provisions of Section 11.7 below, the breaching party (with
the Vendor, 408446 and the Company deemed to be a single party for purposes of
this Article 11), shall be liable to the other party to the extent of the
expenses incurred by such other party in connection with this Agreement and the
transactions contemplated hereby, as well as any damages in accordance with
applicable law.
11.3 SUCCESSORS AND ASSIGNS
This Agreement and the rights of the parties hereunder may not
be assigned (except by operation of law) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of the Purchaser, and
the heirs and legal representatives of the Vendor. Notwithstanding anything in
the foregoing to the contrary, the Purchaser may assign any of its rights or
obligations under this Agreement to any direct or indirect Subsidiary or
Affiliate of the Purchaser in its sole and absolute discretion and without the
consent of the Vendor or the Company or 408446; provided, however that in the
event of such assignment the Purchaser shall continue to be liable to the Vendor
for the payment of the Purchase Price.
11.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER
This Agreement sets forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby. Each of the
Schedules to this Agreement is incorporated herein by this reference and
expressly made a part hereof. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement. This Agreement shall not be
amended or modified except by a written instrument duly executed by each of the
parties hereto. Any extension or waiver by any party of any provision hereto
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
11.5 COUNTERPARTS
This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original, and all of which
counterparts taken together shall constitute but one and the same instrument.
11.6 BROKERS AND AGENTS
Purchaser and the Vendor, the Company and 408446 (as a group)
each represents and warrants to the other that it has not employed any broker or
agent for which the other would be liable in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
11.7 EXPENSES
The Purchaser has and will pay the fees, expenses and
disbursements of the Purchaser and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement. The
Vendor (and not the Company or 408446) have and will pay the fees, expenses and
disbursements of the Vendor, the Company and 408446 and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
11.8 SPECIFIC PERFORMANCE; REMEDIES
Each party hereto acknowledges that the other parties will be
irreparably harmed and that there will be no adequate remedy at law for any
violation by any of them of any of the covenants or agreements contained in this
Agreement, including without limitation, the confidentiality obligations set
forth in Section 9.2 and the non-competition provisions set forth in Section
9.1. It is accordingly agreed that, in addition to any other remedies which may
be available upon the breach of any such covenants or agreements, each party
hereto shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
parties, covenants and agreements contained in this Agreement.
11.9 NOTICES
Any notice, request, claim, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or sent by telefax
(with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to the Purchaser or the Company to:
Workflow Management Inc.
000 Xxxxx Xxxx Xxx
Xxxx Xxxxx, Xx.
XXX 00000
Attn: Xxxxxxx X. Xxxxx
Vice President and General Counsel
(Telefax: (000) 000-0000)
with a required copy to:
XxXxxxxx Xxxxxxxx
#0000, 000 - 0 Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: Xxxx X. Xxxxx
(Telefax: (000) 000-0000)
and to:
Xxxxxxx & Xxxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: T. Xxxxxxx Xxxxxx, Xx., Esq.
(Telefax: (000)000-0000)
If to the Vendor to:
(Telefax: (000) 000-0000)
and to:
the Xxxxxx
X.X. 00
Xxxxxxx, Xxxxxxx
X0X 0X0
and to:
Field Xxxxxxxx Perraton
Suite 1900, 000 - 0 Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx X. Xxxxxxxx, Q.C.
(Telefax: (000) 000-0000)
or to such other address as the person to whom notice is to be
given may have specified in a notice duly given to the sender as provided
herein. Such notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so delivered,
telefaxed, mailed or dispatched and, if given by any other means, shall be
deemed given only when actually received by the addressees.
11.10 GOVERNING LAW
(a) Subject to the provisions of Section 11.10(b) below, this
Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of Alberta and the
federal laws of Canada applicable therein. Any disputes
arising out of, in connection with or with respect to this
Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the
transactions contemplated hereby shall be adjudicated in a
court of competent civil jurisdiction sitting in the City of
Calgary, Alberta and appeal courts therefrom and nowhere else.
Each of the parties hereto hereby irrevocably submits to the
jurisdiction of such court for the purposes of any suit, civil
action or other proceeding arising out of, in connection with
or with respect to this Agreement, the subject matter hereof,
the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby
(collectively, "Suit"). Each of the parties hereto hereby
waives and agrees not to assert by way of motion, as a defense
or otherwise in any such Suit, any claim that it is not
subject to the jurisdiction of the above courts, that such
Suit is brought in an inconvenient forum, or that the venue of
such Suit is improper.
(b) Prior to instituting any formal legal actions in connection
with disputes arising under this Agreement, the Vendor, the
Company, 408446 and the Purchaser (collectively, the
"Parties") shall first attempt to resolve their disputes
informally as follows:
(i) upon written request of a Party, each Party shall
appoint a designated representative whose task it
will be to meet for the purpose of endeavoring to
resolve such dispute, such meetings to be held in
Calgary, Alberta;
(ii) the designated representatives shall meet as often
as the Parties reasonably deem necessary in order
to gather and furnish to the other all information
with respect to the matter in issue which the
Parties believe to be appropriate and germane in
connection with its resolution and the
representatives shall discuss the problem and
negotiate in good faith in an effort to resolve the
dispute without the necessity of any formal
proceeding;
(iii) during the course of negotiations, all reasonable
requests made by one Party to another for
nonprivileged information, reasonably related to
this Agreement, shall be honoured in order that
each of the Parties may be fully advised of the
other's position;
(iv) the specific format for discussion shall be left to
the discretion of the Parties, but may include the
preparation of agreed upon statements of fact or
written statements of position;
(v) formal proceedings for the resolution of a dispute
may not be commenced until the earlier of (A) the
designated representatives concluding in good faith
that amicable resolution through continued
negotiation of the matter does not appear likely or
(B) 30 days after the initial request to negotiate
the dispute;
(vi) the foregoing provisions of this Section 11.10(b)
shall not be construed to prevent a Party from
instituting, and a Party is authorized to
institute, formal proceedings earlier to avoid the
expiration of any applicable limitations period or
to preserve a superior position to creditors. In
addition, (i) nothing in this Section 11.10(b)
shall be construed to limit the rights of the
Purchaser to seek injunctive relief in the event
that the Vendor violates any of the provisions of
Article 9 and (ii) any Party may institute formal
legal proceedings if it makes a good faith
determination that a breach of the terms of this
Agreement by another Party is such that the damages
to such Party resulting from the breach will be so
immediate, so large or severe, and so incapable of
adequate redress after the fact that a temporary
restraining order or other injunctive relief is the
only adequate remedy.
11.11 SEVERABILITY
If any provision of this Agreement or the application thereof
to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 9.5.
11.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS
No provision of this Agreement is intended, nor will any
provision be interpreted, to provide or to create any third party beneficiary
rights or any other rights of any kind in any client, customer, affiliate,
shareholder, employee or partner of any party hereto or any other person or
entity.
11.13 MUTUAL DRAFTING
This Agreement is the mutual product of the parties hereto,
and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the parties, and shall not be construed for
or against any party hereto.
11.14 FURTHER REPRESENTATIONS
Each party to this Agreement acknowledges and represents that
it has been represented by its own legal counsel in connection with the
transactions contemplated by this Agreement, with the opportunity to seek advice
as to its legal rights from such counsel. Each party further represents that it
is being independently advised as to the tax consequences of the transactions
contemplated by this Agreement and is not relying on any representation or
statements made by the other party as to such tax consequences.
11.15 FURTHER ASSURANCES
From time to time subsequent to the Funding Date, the parties
shall execute and deliver or cause the execution and delivery of such additional
documents as may be reasonably required to carry out the intent of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
DATA BUSINESS FORMS LIMITED
By:/s/ Data Business Forms Limited
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
SIGNED, SEALED, AND DELIVERED in the presence of:
/s/ Xxxx X. Xxxxxxx
--------------------------------- ----------------------------------
Witness XXXX X. XXXXXXX
SUNDOG PRINTING LIMITED
By: /s/ Sundog Printing Limited
------------------------------
Name:
Title:
000000 XXXXXXX INC.
By: /s/ 408446 Alberta Inc.
------------------------------
Name:
Title:
