<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): September 14, 1999
IT STAFFING LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ontario 1-14813 N/A
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of organization) Identification No.)
55 University Avenue
Toronto, Ontario, Canada M5J2H7
- --------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (416) 364-8800
Not Applicable
-----------------------------------------------------------
(Former name or former address; if changed since last report)
<PAGE>
ITEM 5. ACQUISITION OR DISTRIBUTION OF ASSETS
(a) On September 15, 1999, IT Staffing Ltd. ("IT") acquired all of the
capital Stock of Cad Cam Inc. ("CAD") and its subsidiaries, (collectively
referred to as "CAD") for an aggregate purchase price of $6,000,000 payable as
follows: at closing (i) $2,000,000 in cash; (ii) a $1,000,000 promissory note;
(iii) common stock of IT having a value of $500,000. On January 20, 2000, (i)
$1,000,000 in cash; and (ii) a $500,000 promissory note. On January 20, 2001,
common stock having a value of $1,000,000. The transaction was negotiated on an
arms-length basis. The seller was Roger Walters who had no affiliation with IT
or any of its officers or directors. IT utilized a portion of the proceeds of
its recent initial public offering to consummate the acquisition.
(b) The purchase included all of the equipment utilized in CAD=s
business which business was a staffing business specializing in the information
technology industry. IT intends to utilize such equipment for the same purpose.
ITEM 7. EXHIBITS
99.1 Press Release dated September 21, 1999
99.2 Share Purchase Agreement dated as of January 1, 1999 by and between IT
Staffing Ltd., CAD CAM, Inc. and Roger Walters of IT.
99.5 All financial information required by Article 11 of Regulation S-X will
be filed within 60 days of the date of this 8-K.
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
IT STAFFING LTD.
By: /s/ Declan French
--------------------------------
Declan French
President
September 30, 1999
3
<PAGE>
FOR IMMEDIATE RELEASE
IT STAFFING LTD. FINALIZES ACQUISITION OF CAD CAM INC., A LEADING ENGINEERING
SERVICES AND RECRUITING FIRM
STRATEGIC ACQUISITION ALLOWS IT STAFFING TO DEVELOP BRANDED DISTRIBUTION
CHANNEL OF ENGINEERING AND IT RECRUITING SERVICES ACROSS NORTH AMERICA
TORONTO, ONTARIO - SEPTEMBER 21, 1999 - IT Staffing Ltd., (NASDAQ: ITST, BSE:
ITI), a leader in IT recruiting and consulting services, today announced the
acquisition of CAD CAM Inc., an engineering services company specializing in the
manufacturing, automotive and public sector markets.
The deal, worth $6 million (US), will be paid out in a combination of shares and
cash. The acquisition of CAD CAM Inc. brings additional annual revenue of
approximately $22 million to IT Staffing.
"This acquisition is a key part of our strategic plan to develop a branded
distribution channel of recruiting services across the United States," said
Declan French, President and Chief Executive Officer, IT Staffing Ltd. "We aim
to build on CAD CAM's current success in engineering by adding our IT services,
and to efficiently manage this integration with our powerful Global Tool Set."
IT Staffing's proprietary Global Tool Set (GTS) is a comprehensive Web-based
system used by all company employees in their recruitment, account management,
administrative, and communications tasks. It incorporates all of the company's
best practices into one streamlined program, resulting in increased employee
productivity.
"With IT Staffing's browser-driven Global Tool Set being rolled-out to all CAD
CAM offices, our two companies will be fully integrated very quickly," said CAD
CAM President and CEO Roger Walters. "This is great news for CAD CAM clients.
Almost immediately we'll be able to offer them a complete range of quality IT
recruiting services in addition to the engineering staffing we currently
provide."
As a result of the acquisition, CAD CAM Inc. is now a wholly owned subsidiary of
IT Staffing. Roger Walters, President and CEO, CAD CAM Inc., will remain as CEO
and Chairman of CAD CAM and will be elected as an Executive Vice President and
board member of IT Staffing. Thomas Shoup, COO, CAD CAM Inc, will become
President and COO of CAD CAM.
The combined company will have approximately 550 employees in 17 offices
throughout North America. The acquisition establishes IT Staffing's presence in
Atlanta, Charleston, Indianapolis, Tampa, Cincinnati, Dayton, Detroit, Rochester
and Columbus.
<PAGE>
ABOUT IT STAFFING LTD
IT Staffing Ltd. (NASDAQ: ITST; BSE: ITI) offers customized IT consulting and
permanent placement services to organizations around the world. With corporate
headquarters in Toronto, Canada, IT Staffing also has offices in Ottawa, New
York City, Boston, Tampa, and Palm Springs. Clients include high profile
software development, financial, banking, telecommunications, government and IT
companies.
Further information about the company, its products and services, and its
partners and customers can be found at WWW.ITSTAFF.COM.
ABOUT CAD CAM INC.
CAD CAM Inc., founded in 1977 as a computer aided design based engineering
services company, today offers services in contract placement, design
engineering, technical publications, CAD Services, facilities Services and CAD
CAM Integrated Systems. Supporting a staff of 375 employees and consultants in
nine offices across the United States, CAD CAM Inc, has established an
impressive list of Fortune 500 clients including Ford Motor Company, Xerox,
General Motors and Lucent Technologies. Further information about the company
can be found at WWW.CADCAMINC.COM.
THIS PRESS RELEASE CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS REGARDING IT
STAFFING LTD., ITS BUSINESS PROSPECTS AND RESULTS OF OPERATIONS THAT ARE SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES POSED BY MANY FACTORS AND EVENTS THAT COULD
CAUSE IT STAFFING'S ACTUAL BUSINESS, PROSPECTS AND RESULTS OF OPERATIONS TO
DIFFER MATERIALLY FROM THOSE THAT MAY BE ANTICIPATED BY SUCH FORWARD-LOOKING
STATEMENTS. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS
DISCLOSURES MADE BY IT STAFFING IN THIS NEWS RELEASE AND OTHER REPORTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ATTEMPT TO ADVISE INTERESTED
PARTIES OF THE RISKS AND FACTORS THAT MAY AFFECT IT STAFFING'S BUSINESS.
###
FOR MORE INFORMATION PLEASE CONTACT:
Stephanie Thomas
High Road Communications
416-368-8348
[email protected]
Declan French
President and CEO, IT Staffing Ltd.
416-364-8800
[email protected]
Tom Shoup
President and COO, CAD CAM Inc.
937-643-4100
[email protected]
<PAGE>
Exhibit 99.2
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SHARE PURCHASE AGREEMENT
Made as of January 1, 1999
Between
IT STAFFING LTD.
as Purchaser
and
CAD CAM, INC.
as Corporation
and
ROGER W. WALTERS
as Vendor
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MCMILLAN BINCH
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BARRISTERS & SOLICITORS
<PAGE>
TABLE OF CONTENTS
RECITALS.......................................................................1
Section 1 --INTERPRETATION.....................................................1
1.1 Definitions....................................................1
(1) Accounting Period......................................1
(2) Affiliate..............................................1
(3) Agreement..............................................1
(4) Annual Financial Statements............................2
(5) Applicable Law.........................................2
(6) Benefit Plans..........................................2
(7) Business...............................................2
(8) Business Day...........................................2
(9) Capital Lease..........................................2
(10) Capital Lease Obligation...............................2
(11) Closing Balance Sheet..................................2
(12) Closing Date...........................................3
(13) Closing Financial Statements...........................3
(14) Corporation............................................3
(15) Encumbrance............................................3
(16) Fair Market Value......................................3
(17) Final Instalment Date..................................3
(18) GAAP...................................................3
(19) Good Standing..........................................3
(20) Governmental Authority.................................3
(21) Indebtedness of a Person...............................3
(22) Interim Period.........................................4
(23) ITS SEC Documents......................................4
(24) ITS Shares.............................................4
(25) Leases.................................................4
(26) Leased Premises........................................4
(27) Non-Competition Covenant...............................4
(28) Notice.................................................4
(29) Ordinary Course of Business............................4
(30) Person.................................................4
(31) Purchase...............................................4
(32) Purchase Price.........................................4
(33) Purchased Shares.......................................5
(34) Second Instalment Date.................................5
(35) Statement Date.........................................5
(36) Subsidiaries...........................................5
(37) Tax or Taxes...........................................5
(38) Vendor's Account.......................................5
1.2 Headings and References........................................5
1.3 Extended Meanings..............................................5
(i)
<PAGE>
1.4 Currency.......................................................5
1.5 Best of Knowledge..............................................5
1.6 Schedules......................................................5
Section 2 --PURCHASE AND SALE..................................................6
2.1 Purchase and Sale..............................................6
2.2 Payment........................................................6
2.3 Issuance of ITS Shares.........................................7
2.4 Adjustment of Purchase Price...................................8
(1) Reduction..............................................8
Section 3 --REPRESENTATIONS AND WARRANTIES OF THE VENDOR.......................8
3.1 Corporate Matters..............................................8
(1) Status and Capacity of Corporation.....................8
(2) Authority..............................................8
(3) Enforceability.........................................8
(4) Residence..............................................8
(5) Investments............................................9
(6) Corporate Records......................................9
(7) Transfer Taxes.........................................9
(8) Shareholders'Agreements, etc...........................9
(9) Licences and Permits...................................9
(10) Operations and Assets..................................9
3.2 Share Capital and Dividends and Shares.........................9
(1) Authorized and Issued Share Capital....................9
(2) Title to Shares.......................................10
(3) No Other Purchase Agreements..........................10
(4) Dividends.............................................10
(5) Contractual and Regulatory Approvals..................10
3.3 Financial Matters.............................................11
(1) Books and Records.....................................11
(2) Financial Statements..................................11
(3) Liabilities of the Corporation........................11
(4) Product Guarantees, Warranties and Discounts..........12
(5) Accounts Receivable...................................12
(6) Debt Obligations......................................12
(7) Absence of Certain Changes or Events..................13
(8) Tax Matters...........................................14
(9) Bank Accounts and Authorizations......................15
(10) Insurance.............................................15
(11) Capital Expenditures..................................15
(12) Non-Arm's Length Matters..............................16
3.4 Property of Corporation.......................................16
(1) Title to Assets.......................................16
(2) Real Properties.......................................16
(3) Leases and Leased Premises............................16
(4) Status of Property....................................17
(5) Personal Property.....................................17
(6) Work Orders and Deficiencies..........................17
(ii)
<PAGE>
(7) Plants, Facilities and Equipment......................18
(8) [Intentionally deleted]...............................18
(9) Intellectual Property.................................18
(10) Licences, Agency and Distribution Agreements..........19
3.5 Conduct of Business...........................................19
(1) No Material Adverse Change............................19
(2) Ordinary Course.......................................20
(3) Suppliers.............................................20
(4) Customers.............................................20
(5) Necessary Assets......................................20
(6) Restrictions on Doing Business........................20
(7) Contracts.............................................20
3.6 Employment Matters............................................21
(1) Employees.............................................21
(2) Remuneration..........................................21
(3) Labour Matters and Employee Contracts.................21
(4) Employee Legislation..................................21
(5) Benefit Plans.........................................21
(6) Disclosure............................................22
(7) Contributions.........................................22
(8) ERISA.................................................22
3.7 General Matters...............................................22
(1) Compliance with Constating Documents,
Agreements and Laws.................................22
(2) Compliance with Laws..................................22
(3) Litigation............................................23
(4) Copies of Documents...................................23
(5) Disclosure............................................23
Section 4 --REPRESENTATIONS AND WARRANTIES OF the PURCHASER...................23
4.1 Organization..................................................23
4.2 ITS Shares....................................................24
4.3 No Defaults...................................................24
4.4 Litigation....................................................24
4.5 Authority.....................................................24
Section 5 --INTERIM PERIOD....................................................24
5.1 Interim Period................................................24
Section 6 --ACCESS AND CONFIDENTIALITY........................................24
6.1 Access........................................................24
6.2 Confidentiality...............................................25
Section 7 --CONDITIONS........................................................25
7.1 General.......................................................25
(1) Verification..........................................25
(2) Vendor's Obligations..................................25
(3) Adverse Proceedings...................................25
(4) Material Adverse Change...............................25
(5) Status of Leases and Contracts........................25
(6) Concurrent Transactions...............................26
(iii)
<PAGE>
(7) Aircraft Lease........................................26
(8) Indebtedness of Shareholders, Directors etc...........26
(9) Resignations..........................................25
(10) Life Insurance........................................26
(11) Evidence..............................................26
(12) Corporate Action......................................26
(13) Approvals, Consents, etc..............................27
(14) Approval of Counsel and Opinions......................27
Section 8 --NON-COMPETITION AND EMPLOYMENT AGREEMENT..........................27
Section 9 --SURVIVAL AND INDEMNITY............................................27
9.1 Survival......................................................27
9.2 General Indemnity.............................................27
9.3 Notice and Participation......................................27
Section 10 --CLOSING..........................................................28
Section 11 --ARBITRATION......................................................28
11.1 Scope.........................................................28
11.2 Appointment of Arbitrators....................................28
11.3 Powers of Arbitrator..........................................28
11.4 Arbitration Procedure.........................................28
11.5 Awards and Appeal.............................................28
11.6 Costs of Arbitration..........................................28
11.7 Rules.........................................................29
11.8 Condition Precedent...........................................29
Section 12 --MISCELLANEOUS....................................................29
11.8 Condition Precedent...........................................29
12.2 Further Assurances............................................29
12.3 No Disclosure.................................................29
12.4 Notice........................................................29
12.5 Time..........................................................30
12.6 Governing Law.................................................30
12.7 Entire Agreement..............................................30
12.8 Severability..................................................30
12.9 Assignment and Enurement......................................30
12.10 Counterparts and Facsimile....................................31
Schedule 1.1(4) -Annual Financial Statements for Fiscal Year ended
December 31, 1998
Schedule 2.2(1)(b) -Form of Promissory Note
Schedule 3.1(5) -Equity Investments and Subsidiaries of Corporation
Schedule 3.2(5) -Contractual and Regulatory Approvals
Schedule 3.5(7)-Material Contracts, Leases and Agreements
Schedule 3.3(4) -Guarantees, Warranties and Discounts
Schedule 3.3(5) -Letters of Credit, bonds or Other Financial Security
Arrangements
Schedule 3.3(7) -Absence of Certain Changes or Events
(iv)
<PAGE>
Schedule 3.3(10) -Tax Matters
Schedule 3.3(9) -Bank Accounts and Authorizations
Schedule 3.3(10) -Insurance
Schedule 3.3(12) -Non-Arm's Length Interests
Schedule 3.4(1)(d) -Encumbrances
Schedule 3.4(3)(a) -Leased Premises
Schedule 3.4(5) -Personal Property Leases and Conditional Sales Agreement
Schedule 3.4(9)(a) -Intellectual Property
Schedule 3.4(10) -Licences, Agency and Distribution Agreements
Schedule 3.5(3) -Suppliers
Schedule 3.5(4) -Customers
Schedule 3.5(7) -Contracts
Schedule 3.6(1) -Employees
Schedule 3.6(3) -Labour Matters and Employment Contracts
Schedule 3.6(5) -Benefit Plans
Schedule 3.7(1)(b) -Required Consents
Schedule 3.7(3) -Pending Litigation
Schedule 7.1(14) -Vendor's Counsel Opinion
Schedule 8 -Employment Agreement
Schedule 3.1(10) -Operations and Assets
Schedule 2.4(1) -???
Schedule 3.3(11) -Capital Expenditures
(v)
<PAGE>
SHARE PURCHASE AGREEMENT
This Agreement is made as of January 1, 1999 , between
IT STAFFING LTD. , a corporation formed under the laws of
Ontario,
and
CAD CAM, INC., a corporation formed under the laws of Ohio,
and
ROGER W. WALTERS,
RECITALS
A. The Vendor is the registered and beneficial owner of the Purchased Shares.
B. The Purchaser wishes to purchase and the Vendor wishes to sell the Purchased
Shares on the terms and conditions of this Agreement.
FOR VALUE RECEIVED, the parties agree as follows:
SECTION 1 -- INTERPRETATION
1.1 DEFINITIONS. In this Agreement:
(1) ACCOUNTING PERIOD means each of the quarters into which each fiscal year of
the Corporation is divided.
(2) AFFILIATE means any Person that directly or indirectly controls, is
controlled by, or is under common control with, another Person and for greater
certainty includes, without limitation, a Subsidiary or an Affiliated Person (as
that term is defined in the INVESTMENT COMPANY ACT OF 1940. For the purposes of
this definition, a Person "controls" another Person if that Person directly or
indirectly possesses the power to direct or cause the direction of the
management and policies of that other Person, whether through the ownership of
securities, by contract or by any other means and "controlled by" and "under
common control with" have corresponding meanings.
(3) AGREEMENT means this agreement including any recitals and Schedules to this
agreement, as amended, supplemented or restated from time to time.
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(4) ANNUAL FINANCIAL STATEMENTS means the unaudited consolidated financial
statements of the Corporation for a fiscal year consisting of a balance sheet,
statement of profit and loss, statement of retained earnings and deficit and
statement of changes in financial position for the period then ended, together
with the notes thereto, as reported on by the Corporation's CPA; a copy of the
Annual Financial Statements of the Corporation for the fiscal year ended
December 31, 1998 are attached hereto as Schedule 1.1(4) .
(5) APPLICABLE LAW, in respect of any Person, property, transaction or event,
means all present laws, statutes, regulations, treaties, judgments and decrees
applicable to that Person, property, transaction or event and, having authority
over that Person, property, transaction or event.
(6) BENEFIT PLANS has the meaning given to it in Section 3.6(5).
(7) BUSINESS means the business of providing: (a) contract placement services
for project engineers, designers, detailers, software engineers, computer aided
design ("CAD") technicians, technical writers and technical illustrators in
certain specialized areas, such as, product design tooling, telecommunications,
programming and robotics; (b) CAD-based engineering and design solutions,
including documentation, in certain areas, such as, product design, tool and
die, gage and fixture, special machinery and material handling systems; (c)
turnkey technical publication services to clients in a wide variety of
industries; (d) CAD-based engineering services on a very broad range of hardware
and software platforms, including, solid and three dimensional modeling,
detailing and drafting, scanning and vectorization and file conversion; (e)
technical services to the architectural, engineering, construction and facility
management market, including, field measurement and documentation of facility
and utility system "as-built" conditions, CAD development of existing paper
drawings, plant layout and assembly line documentation; and (f) value-added
reselling of CAD-based software and equipment, including computers, scanners and
plotters, as now conducted by the Corporation.
(8) BUSINESS DAY means a day on which banks are open for business in Toronto,
Ontario and Dayton, Ohio but does not include a Saturday, Sunday and any other
day which is a legal holiday in any such city.
(9) CAPITAL LEASE means any lease of any property (whether real, personal or
mixed) by any Person as lessee that, in accordance with GAAP, either would be
required to be classified and accounted for as a capital lease on a balance
sheet of such Person or otherwise be disclosed as such in a note to such balance
sheet.
(10) CAPITAL LEASE OBLIGATION means, as of any date, (i) the amount of the
obligation of the lessee under a Capital Lease that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed as such in a note to such balance sheet, and (ii) the
present value of any obligations arising in connection with a sale and lease
back transaction to the extent that such obligations are not Capital Lease
Obligations in accordance with clause (i) of this definition.
(11) CLOSING BALANCE SHEET means the balance sheet of the Corporation contained
in the Closing Financial Statements.
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(12) CLOSING DATE means September 13, 1999.
(13) CLOSING FINANCIAL STATEMENTS means the unaudited consolidated financial
statements of the Corporation as at and for the fiscal period ended June 30,
1999, consisting of a balance sheet, statement of profit and loss, statement of
retained earnings and deficit and statement of changes in financial position for
the period then ended, together with the notes thereto, as reported on by the
Corporation's Chief Financial Officer.
(14) CORPORATION means CAD CAM, Inc., a corporation subsisting under the laws of
Ohio.
(15) ENCUMBRANCE means any charge, mortgage, lien, pledge, claim, restriction,
security interest or other encumbrance whether created or arising by agreement,
statute or otherwise at law, attaching to property, interests or rights and
shall be construed in the widest possible terms and principles known under the
law applicable to such property, interests or rights and whether or not they
constitute specific or floating charges as those terms are understood under the
laws of the Province of Ontario.
(16) FAIR MARKET VALUE of an ITS Share means, on the date of determination (the
"Valuation Date"), the average of the last sale price or, failing any sale, the
average of the closing bid and asked prices, on each of the ten trading days
next preceding the Valuation Date, according to the official price quotations of
the Nasdaq SmallCap Market, each determination to be conclusive.
(17) FINAL INSTALMENT DATE means 15 Business Days from December 31, 2000.
(18) GAAP shall mean generally accepted accounting principles in the United
States of America as in effect on the Initial Closing Date, consistently
applied.
(19) GOOD STANDING, when used in reference to a corporation, denotes that such
corporation has not been discontinued or dissolved under the laws of its
incorporating jurisdiction, that no steps or proceedings have been taken to
authorize or require such discontinuance or dissolution and that such
corporation has submitted to the relevant authority all notices or returns of
corporate information and all other filings required by Applicable Law to be
submitted to such authority.
(20) GOVERNMENTAL AUTHORITY means any domestic or foreign government, including
any federal, provincial, state, territorial or municipal government, and any
government agency, tribunal, commission or other authority exercising or
purporting to exercise executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, government.
(21) INDEBTEDNESS OF A PERSON means:
(a) any obligation, contingent and other, which is required to be
classified in accordance with GAAP upon such Person's balance
sheet as a liability;
(b) any obligation secured by any Encumbrance existing on property
owned or acquired by such Person subject to such Encumbrance
whether or not the obligation secured thereby shall have been
assumed;
<PAGE>
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(c) any debt or liability of such Person representing the deferred
acquisition cost of property or assets created or arising
under any conditional sale agreement or other title retention
agreement even though the rights and remedies of the seller
under such agreement in the event of default are limited to
repossession or sale of property or assets covered thereby;
(d) any liabilities, contingent, unmatured and otherwise, under
indemnities given in respect of any bankers' acceptance,
letter of credit or letter of guarantee;
(e) any Capital Lease Obligation by which such Person is bound;
and
(f) any guarantee.
(22) INTERIM PERIOD means the period from and including the date of this
Agreement to and including the Closing Date.
(23) ITS SEC DOCUMENTS means those public documents filed with Securities
Exchange Commission pursuant to Applicable Laws.
(24) ITS SHARES means those common shares in the capital of the Purchaser listed
on the Nasdaq SmallCap Market and Boston Stock Exchange to be issued by the
Purchaser bearing a SECURITIES EXCHANGE ACT, 1933 legend which will cease to be
effective upon listing of the shares as required in Section 2.3 but subject to
any hold requirements under Section 2.3(c) and subscribed to by the Vendor as
part of the Purchase Price for the Purchased Shares.
(25) LEASES has the meaning given to it in Section 3.4(3)(a).
(26) LEASED PREMISES has the meaning given to it in Section 3.4(3)(b).
(27) NON-COMPETITION COVENANT has the meaning given to it in Section 8.
(28) NOTICE means any notice, approval, demand, direction, consent, designation,
request, document, instrument, certificate or other communication required or
permitted to be given under this Agreement.
(29) ORDINARY COURSE OF BUSINESS means the ordinary and usual course of the
routine daily affairs of the Business.
(30) PERSON means any natural person, sole proprietorship, partnership,
corporation, trust, joint venture, any Governmental Authority or any
incorporated or unincorporated entity or association of any nature.
(31) PURCHASE means the transaction of purchase and sale of the Purchased Shares
contemplated by this Agreement.
(32) PURCHASE PRICE has the meaning given to it in Section 2.1.
<PAGE>
-5-
(33) PURCHASED SHARES means all the issued and outstanding shares in the capital
of the Corporation outstanding as at the opening of business on the Closing
Date.
(34) SECOND INSTALMENT DATE means 15 Business Days from December 31, 1999.
(35) STATEMENT DATE means the date the Annual Financial Statements of the
Corporation for fiscal year ended 1998 is dated, which for greater certainty is
December 31.
(36) SUBSIDIARIES means the subsidiaries of the Corporation listed on Schedule
3.1(5).
(37) TAX OR TAXES includes all present and future taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings, dues and other charges
of any nature imposed by any Governmental Authority, including income, capital
(including large corporations), withholding, consumption, sales, use, transfer,
goods and services or other value-added, excise, customs, anti-dumping,
countervail, net worth, stamp, registration, franchise, payroll, employment,
health, education, business, school, property, local improvement, development,
education development and occupation taxes, surtaxes, duties, levies, imposts,
rates, fees, assessments, withholdings, dues and charges, together with all
fines, interest, penalties on or in respect of, or in lieu of or for
non-collection of, those taxes, surtaxes, duties, levies, imposts, rates, fees,
assessments, withholdings, dues and other charges.
(38) VENDOR'S ACCOUNT means the bank account in the name of Roger W. Walters,
number 0166006957, at Community First Bank, 228 Meeting Street, Charleston,
S.C., 29401-3163, ABA 053202350, or such other account as may be designated by
the Vendor.
1.2 HEADINGS AND REFERENCES. The division of this Agreement into sections and
subsections 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 section, subsection or other portion
hereof and include any agreement supplemental hereto. Unless something in the
subject matter or context is inconsistent therewith, references herein to
"Sections" are to sections, subsections and further subdivisions of sections of
this Agreement.
1.3 EXTENDED MEANINGS. Unless otherwise specified, words importing the singular
include the plural and vice versa and words importing gender include all
genders. The term "including" means "including without limitation".
1.4 CURRENCY. All references to currency or dollar amounts in this Agreement are
to lawful currency of United States of America.
1.5 BEST OF KNOWLEDGE. Any statement in this Agreement expressed to be made to
"the best of the Vendor's knowledge" and any other references to the knowledge
of the Vendor shall be understood to be made on the basis of the Vendor's actual
knowledge, after diligent inquiry, of the relevant subject matter or on the
basis of such knowledge of the relevant subject matter as the Vendor would have
had if it had conducted such diligent inquiry.
1.6 SCHEDULES. The following are the schedules annexed to this Agreement and
incorporated by reference and deemed to be part hereof (the "SCHEDULES"):
<PAGE>
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Schedule 1.1(4) - Annual Financial Statements
Schedule 2.2(1)(b) - Form of Promissory Note
Schedule 3.1(5) - Equity Investments and Subsidiaries of Corporation
Schedule 3.1(8) - Shareholder Agreements
Schedule 3.1(10) - Operations and Assets
Schedule 3.2(5) - Contractual and Regulatory Approvals
Schedule 3.3(4) - Material Contracts, Leases and Agreements
Schedule 3.3(4) - Guarantees, Warranties and Discounts
Schedule 3.3(5) - Letters of Credit, Bonds or Other Financing
Security Arrangements
Schedule 3.3(7) - Absence of Certain Changes or Events
Schedule 3.3 - Tax Matters(10)
Schedule 3.3(9) - Bank Accounts and Authorizations
Schedule 3.3(10) - Insurance
Schedule 3.3(12) - Non-Arm's Length Interests
Schedule 3.3(15) - Amounts Receivables)(10)
Schedule 3.4(1)(d) - Encumbrances
Schedule 3.4(3)(a) - Leased Premises
Schedule 3.4(5) - Personal Property Leases and Conditional Sales Agreements
Schedule 3.4(9)(a) - Intellectual Property
Schedule 3.4(10) - Licences, Agency and Distribution Agreements
Schedule 3.5(3) - Suppliers
Schedule 3.5(7) - Contracts
Schedule 3.6(1) - Employees
Schedule 3.6(3) - Labour Matters and Employee Contracts
Schedule 3.6(5) - Benefit Plans
Schedule 3.7(1)(b) - Required Consents
Schedule 3.7(3) - Pending Litigation
Schedule 7.1(14) - Opinion of Vendor's Counsel
Schedule 8 - Employment Agreement(10)
SECTION 2 -- PURCHASE AND SALE
2.1 PURCHASE AND SALE. The Vendor shall sell and the Purchaser shall purchase
all but not part of the Purchased Shares upon and subject to the terms and
conditions of this Agreement for a purchase price (the "PURCHASE PRICE") equal
to $6,000,000, as adjusted in accordance with Section 2.4
2.2 PAYMENT. THE PURCHASE PRICE SHALL BE PAID AND SATISFIED BY THE PURCHASER IN
THREE INSTALMENTS:
(1) The Purchaser shall pay to the Vendor on the Closing Date a first instalment
of the Purchase Price (the "FIRST INSTALMENT") as follows:
(a) $2,000,000 by wire transfer in immediately available funds to
the Vendor's Account;
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(b) as to a further $1,000,000 of the Purchase Price, by delivery
to the Vendor of a promissory note payable to the order of the
Vendor substantially in the form of Schedule 2.2(1)(b) , which
promissory note shall be delivered by the Purchaser and
accepted by the Vendor as evidence of and as security for the
unpaid balance of $1,000,000 and not in satisfaction of the
that portion of the Purchase Price which is represented by the
principal amount of the promissory note; and
(c) subject to Section 2.3, by issuing ITS Shares in the name of
the Vendor with a Fair Market Value of $500,000;
(2) The Purchaser shall pay to the Vendor on the Second Instalment Date a second
instalment of the Purchase Price, as adjusted in accordance with Section 2.4,
(the "SECOND INSTALMENT") as follows:
(a) as to $1,000,000 of the Purchase Price, by wire transfer in
immediately available funds to the Vendor's Account; and
(b) as to a further $500,000 of the Purchase Price, by delivery to
the Vendor of a promissory note payable to the order of the
Vendor substantially in the form of Schedule 2.2(1)(b) which
promissory note shall be delivered by the Purchaser and
accepted by the Vendor as evidence of and as security for the
unpaid balance of $500,000 and not in satisfaction of the that
portion of the Purchase Price which is represented by the
principal amount of the promissory note;
(3) The Purchaser shall pay to the Vendor on the Final Instalment Date a final
instalment, as adjusted in accordance with Section 2.4, (the "FINAL INSTALMENT")
as follows:
(a) subject to Section 2.3, by issuing ITS Shares in the name of
the Vendor with a Fair Market Value of $1,000,000;
2.3 ISSUANCE OF ITS SHARES. The parties hereby agree that any ITS Shares to be
issued by the Purchaser to the Vendor as part of the Purchase Price pursuant to
the terms of this Agreement, are subject to the following terms and conditions:
(a) with respect to those ITS Shares issued in connection with the
First Instalment, the Purchaser shall register such issued ITS
Shares with the Securities Exchange Commission and use its
best efforts to register such shares for listing on NASDAQ
within thirty (30) days of the Closing Date;
(b) with respect to those ITS Shares issued in connection with the
Final Instalment, the Purchaser shall register such issued ITS
Shares with the Securities Exchange Commission and use its
best efforts register such shares for listing on NASDAQ within
thirty (30) days of the Final Instalment Date;
(c) with respect to those ITS Shares issued to the Vendor in
connection with the First Instalment and the Final Instalment,
the Vendor shall not sell, transfer, or otherwise dispose of
such ITS Shares for a period of twelve (12) months commencing
from the date such ITS Shares were issued (the "HOLD PERIOD");
and
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for greater certainty, the Hold Period for those ITS Shares
issued in connection with the First Instalment shall commence
on the Closing Date, and the Hold Period for those ITS Shares
issued in connection with the Final Instalment shall commence
on the Final Instalment Date. The Vendor may sell, transfer or
dispose of its ITS Shares if (a) the Hold Period applicable to
those ITS Shares has expired, and (b) such sale, transfer of
disposition does not contravene any Applicable Law.
2.4 ADJUSTMENT OF PURCHASE PRICE.
(1) REDUCTION. Schedule 2.4-A is a list of receivables of the Corporation as at
December 31, 1998 and an allowance for bad debt experience in respect thereof.
Schedule 2.4-B is a list of receivables of the Corporation as at June 30, 1999
and an allowance for bad debt experience in respect thereof. With respect to the
receivables referred to therein, if the Corporation's aggregate write-offs are
greater than the aggregate allowances provided for, then the Purchaser, in its
sole discretion, may reduce on the final Instalment Date the amounts owing under
Sections 2.2(1)(b), 2.2(2)(b) and 2.2(3)(a), or any one or more of them, by an
amount equal to the difference between the write-offs and allowance.
(2) ASSIGNMENT. The parties agree that with respect to the adjustment for
receivables referred to in Section 2.4(1), if a reduction in the amount owing
was made then such bad debts and accounts shall be assigned with all right,
title and benefit to the Vendor on the Final Instalment Date.
SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as stated below and
acknowledges that the Purchaser is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
3.1 CORPORATE MATTERS.
(1) STATUS AND CAPACITY OF CORPORATION. The Corporation and its Subsidiaries are
each duly incorporated, organized, validly existing and in Good Standing under
the laws of its jurisdiction of incorporation, and each of them has the
corporate power and capacity and is duly qualified to own or lease its property
and to carry on its business as now conducted in each jurisdiction in which it
owns or leases property or carries on business.
(2) AUTHORITY. The Vendor has full authority to enter into this Agreement.
(3) ENFORCEABILITY. This Agreement has been duly and validly executed and
delivered by the Vendor and is a valid and legally binding obligation of the
Vendor enforceable against the Vendor in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency and other laws affecting creditors'
rights generally and to general principles of equity.
(4) RESIDENCE. The Vendor is a non-resident of Canada within the meaning of the
INCOME TAX ACT (Canada).
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(5) INVESTMENTS. Except as disclosed in Schedule 3.1(5) , the Corporation does
not own, directly or indirectly, any shares or other equity securities of any
corporation or any equity or ownership interest in any business or Person. The
Corporation is not subject to any obligation or requirement to provide funds to
or make any investment in any business or Person by way of loan, capital
contribution or otherwise.
(6) CORPORATE RECORDS. The corporate records and minute books of the
Corporation, and each Subsidiary, all of which have been provided to the
Purchaser, contain complete and accurate minutes of all meetings of and
corporate actions or written resolutions of the directors, committees of
directors and shareholders of the Corporation and its Subsidiaries, including
all Code of Regulations and resolutions passed by the directors, committees of
directors and shareholders of the Corporation and its Subsidiaries, since their
formation. All actions taken by shareholders and directors have been by
unanimous written consent and the annual meeting minutes included ratification
of prior events and actions which may or may not have been properly authorized
at the time the actions were taken. The share certificate books, register of
shareholders, register of transfers and similar corporate records of the
Corporation and each Subsidiary are complete, accurate and current.
(7) TRANSFER TAXES. All security transfer Taxes or similar Taxes payable in
connection with the transfer of any securities of the Corporation have been duly
paid.
(8) SHAREHOLDERS' AGREEMENTS, ETC. There are no shareholders' agreements,
pooling agreements, voting trusts or other similar agreements with respect to
the ownership or voting of any of the shares of the Corporation.
(9) LICENCES AND PERMITS. In the best knowledge of the Vendor, the Corporation
and each of its Subsidiaries holds all licences, permits and authorizations
requisite for, and has complied with all Applicable Laws applicable to, the
conduct of the Business.
(10) OPERATIONS AND ASSETS. Attached as Schedule 3.1(10) is a list of each
jurisdiction in which operations of the Corporation and its Subsidiaries are
carried on and a brief description of the nature of such operations and each
jurisdiction in which tangible assets owned or used by the Corporation and its
Subsidiaries are located.
3.2 SHARE CAPITAL AND DIVIDENDS AND SHARES.
(1) AUTHORIZED AND ISSUED SHARE CAPITAL. The authorized capital of the
Corporation consists of 750 common shares, of which 100 have been duly issued
and 80 are outstanding as fully paid and non-assessable shares in the capital of
the Corporation. No shares or other securities of the Corporation have been
issued in violation of any Applicable Law, the articles of incorporation, its
Code of Regulations or other constating documents of the Corporation or the
terms of any shareholders' agreement or any agreement to which the Corporation
is a party or by which it is bound. Other than the Purchased Shares, the
Corporation has not issued or authorized the issue of any other shares or
rights, including, without limitation, shares of any class, whether preferred or
otherwise, or any options, including employee stock options or warrants.
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(2) TITLE TO SHARES. The Vendor legally and beneficially owns and controls all
of the Purchased Shares with a good and marketable title thereto free of any
Encumbrances, adverse claims or claims of others.
(3) NO OTHER PURCHASE AGREEMENTS. Other than existing Encumbrances, no Person
has any agreement, option, understanding or commitment, or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, option or commitment, including a right of conversion or exchange
attached to convertible securities, warrants or convertible obligations of any
nature, for:
(a) the purchase, subscription, allotment or issuance of, or
conversion into, any of the unissued shares in the capital of
the Corporation or any securities of the Corporation or in any
of the unissued shares in the capital of the Corporation's
Subsidiaries or any securities of any Subsidiary of the
Corporation;
(b) the purchase or other acquisition from the Vendor of any of
the Purchased Shares; or
(c) the purchase or other acquisition from the Corporation, or any
of its Subsidiaries, of any of their undertakings, property or
assets, other than in the Ordinary Course of Business.
(4) DIVIDENDS. Since the Statement Date, the Corporation has not, directly or
indirectly, authorized, declared or paid any dividends or declared or made any
other distribution or return of capital in respect of any of its shares of any
class and has not, directly or indirectly, redeemed, purchased or otherwise
acquired any of its shares of any class or agreed to do so.
(5) CONTRACTUAL AND REGULATORY APPROVALS. Except as specified in Schedule 3.2(5)
, neither the Corporation nor the Vendor is under any obligation, contractual or
otherwise, to request or obtain the consent or approval of any Person, and no
permits, licenses, certifications, authorizations or approvals of, or
notifications to, any Governmental Authority are required to be obtained by the
Corporation or the Vendor:
(a) by virtue of or in connection with the execution, delivery or
performance by the Vendor or the Corporation of this Agreement
or the completion of any of the transactions contemplated
herein;
(b) to avoid the loss of any licence, permit or other
authorization or the violation, breach or termination of, or
any default under, or the creation of any Encumbrance under
the terms of, any Applicable Law; or
(c) in order that the authority and ability of the Corporation to
carry on the Business in the ordinary course and in the same
manner as presently conducted remains in good standing and in
full force and effect as of and following the Purchase.
Complete and correct copies of any agreements under which the Corporation or the
Vendor is obligated to request or obtain any such consent or approval have been
provided to the Purchaser.
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3.3 FINANCIAL MATTERS.
(1) BOOKS AND RECORDS. All material financial transactions of the Corporation
have been properly recorded in its books and records, which have been maintained
in accordance with GAAP and all other applicable legal and accounting
requirements and good business practice. Such books and records:
(a) reflect the basis for the financial condition and the
revenues, expenses and results of operations of the
Corporation shown in the Annual Financial Statements for its
fiscal year ended December 31, 1998 and the Closing Financial
Statements; and
(b) together with all disclosures made in this Agreement, present
fairly the financial condition and the revenues, expenses and
results of the operations of the Corporation as of and to the
date hereof.
No information, records, systems, controls or data pertaining to or required for
the operation or administration of the Corporation or the Business are recorded,
stored, maintained by, or are otherwise dependent upon, any computerized or
other system, program or device that is not exclusively owned and controlled by
the Corporation; and on the Closing Date the Corporation will have originals or
copies of all such records, systems, controls or data in its possession or
control, including where applicable, copies of all computer software and
documentation relating thereto.
(2) FINANCIAL STATEMENTS. The Annual Financial Statements for fiscal year ended
December 31, 1998 and the Closing Financial Statements have been prepared in
accordance with GAAP applied on a basis consistent with financial statements of
previous years and present fairly the assets, liabilities (whether accrued,
absolute, contingent or otherwise) and financial condition of the Corporation as
at the Statement Date and the Closing Financial Statement Date, respectively.
The financial position of the Corporation is now at least as good as that shown
by or reflected in the Closing Financial Statements.
(3) LIABILITIES OF THE CORPORATION. To the best knowledge of the Vendor, there
are no liabilities (contingent or otherwise) of the Corporation of any kind
whatsoever, and there is no basis for any assertion against the Corporation of
any liabilities of any kind, other than:
(a) the liabilities disclosed, reflected in or provided for in the
Annual Financial Statements for fiscal year ended December 31,
1998 or the Closing Financial Statements;
(b) liabilities incurred since the Statement Date which were
incurred in the Ordinary Course of Business and, in the
aggregate, are not materially adverse to the Business; and
(c) other liabilities disclosed in this Agreement.
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(4) PRODUCT GUARANTEES, WARRANTIES AND DISCOUNTS. Except as described in
Schedule 3.3(4):
(a) the Corporation has not given any guarantee or warranty in
respect of any of the products sold or the services provided
by it, except warranties made in the Ordinary Course of
Business, and except for warranties implied by, or contract
and performance standards imposed by, Applicable Law;
(b) during each of the three fiscal years of the Corporation ended
immediately preceding the date hereof, no claim has been made
against the Corporation for breach of warranty or contract
requirement or negligence or for a price adjustment or other
concession in respect of any defect in or failure to perform
or deliver any product, service or work which had, in any such
year, an aggregate cost exceeding $100,000;
(c) there are no repair contracts or maintenance obligations of
the Corporation in favour of the customers or users of
products of the Business, except obligations incurred in the
Ordinary Course of Business and in accordance with the
Corporation's standard terms, a copy of which has been
provided to the Purchaser; and
(d) the Corporation is not now subject to any agreement or
commitment, and the Corporation has not, within three years
prior to the date hereof, entered into any agreement with or
made any commitment to any customer of the Business which
would require the Corporation to repurchase any products sold
to such customers or to adjust any price or grant any refund,
discount or other concession to such customer.
(5) ACCOUNTS RECEIVABLE. Except as disclosed in Schedule 3.3(5), all accounts
receivable, book debts and other debts owing to the Corporation reflected in the
Closing Financial Statements and all accounts receivable of the Corporation
arising since the date of the Closing Financial Statements arose from
transactions in the Ordinary Course of Business and are good, valid, enforceable
and fully collectable at the aggregate recorded amounts thereof subject to a
reasonable allowance, consistent with past practice, for doubtful accounts as
reflected in the Closing Financial Statements or as previously disclosed in
writing to the Purchaser. To the best of knowledge of the Vendor, except as
disclosed, no other customers have asserted any defence, set-off or
counterclaim.
(6) DEBT OBLIGATIONS. Except as disclosed in the Annual Financial Statements for
fiscal year ended December 31, 1998 and the Closing Financial Statements, the
Corporation does not have outstanding any bonds, debentures, mortgages,
promissory notes or other Indebtedness maturing more than one year after the
date of creation or issue, is not under any obligation to create or issue any
bonds, debentures, mortgages, promissory notes or other Indebtedness maturing
more than one year after the date of creation or issue, and is not a party to or
bound by any agreement of guarantee, indemnification, assumption or endorsement
or any other like commitment of the obligations, liabilities (contingent or
otherwise) or Indebtedness of any Person.
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(7) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Schedule
3.3(7), since the Statement Date, the Corporation has not:
(a) incurred any obligation or liability (fixed or contingent) or
Indebtedness, except normal trade or business obligations
incurred in the Ordinary Course of Business none of which is
materially adverse in the Corporation;
(b) paid or satisfied any obligations or liability (fixed or
contingent), except:
(i) current liabilities included in the Annual Financial
Statements for fiscal year ended December 31, 1998;
(ii) current liabilities incurred since the Statement Date
in the Ordinary Course of Business; and
(iii) scheduled payments pursuant to obligations under loan
agreements or other contracts or commitments
described in this Agreement;
(c) created any Encumbrance upon any of its properties or assets,
except as described in this Agreement or in the Schedules
hereto;
(d) sold, assigned, transferred, leased or otherwise disposed of
any of its properties or assets, except in the Ordinary Course
of Business;
(e) purchased, leased or otherwise acquired any properties or
assets, except in the Ordinary Course of Business;
(f) waived, cancelled or written off any rights, claims, accounts
receivable or any amounts payable to the Corporation, except
in the Ordinary Course of Business and as disclosed in
Schedule 3.3(7)(f);
(g) entered into any transaction, contract, agreement or
commitment, except in the Ordinary Course of Business;
(h) terminated, discontinued, closed or disposed of any plant,
facility or business operation;
(i) had a supplier terminate, or communicate to the Corporation
the intention or threat to terminate, its relationship with
the Corporation, or the intention to reduce substantially the
quantity of products or services it sells to the Corporation,
except in the case of suppliers whose sales to the Corporation
are not, in the aggregate, material to the Business or the
financial condition of the Corporation;
(j) had any customer terminate, or communicate to the Corporation
the intention or threat to terminate, its relationship with
the Corporation, or the intention to reduce substantially the
quantity of products or services it purchases from the
Corporation, or its dissatisfaction with the products or
services sold by the Corporation, except in the case of
customers whose purchases from the
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Corporation are not, in the aggregate, material to the
Business or the financial condition of the Corporation;
(k) made any material change in the method of billing customers or
the credit terms made available by the Corporation to its
customers;
(l) made any material change with respect to any method of
management, operation or accounting in respect of the
Business;
(m) suffered any damage, destruction or loss (whether or not
covered by insurance) which has materially adversely affected
or could materially adversely affect the Business or the
financial condition of the Corporation;
(n) Schedule 3.3(7)(n) contains the prior and current compensation
of all employees of the Corporation, except contract
employees, who have received raises since December 31, 1998.
To the extent the compensation of contract employees has
changed since December 31, 1998, the Corporation has, to the
extent permitted, passed such increases through to customers
to whom such employees provide services under the terms of the
contract for services.
(o) suffered any extraordinary loss relating to the Business;
(p) made or incurred any material change in, or become aware of
any event or condition which is likely to result in a material
change in, the Business or Condition of the Corporation or its
relationships with its customers, suppliers or employees; or
(q) authorized, agreed or otherwise become committed to do any of
the foregoing.
(8) TAX MATTERS.
(a) The Corporation has duly and on a timely basis prepared and
filed all tax returns and other documents required to be filed
by it in respect of all Taxes, and such returns and documents
are complete and correct. Complete and correct copies of all
such returns and other documents filed in respect of the three
fiscal years of the Corporation ending prior to the date
hereof have been provided to the Purchaser.
(b) The Corporation has paid, collected and remitted all Taxes
which are due and payable, collectible or remittable, as
applicable, by it on or before the date hereof. Adequate
provision has been made in the Annual Financial Statements for
fiscal year ended December 31, 1998 and Closing Financial
Statements for all Taxes for the periods covered by the Annual
Financial Statements and Closing Financial Statements,
respectively. The Corporation has no liability for Taxes other
than those provided for in the Annual Financial Statements for
fiscal year ended December 31,1998 and those arising in the
Ordinary Course of Business since the Statement Date. No
representation is made regarding the adequacy of the
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deferred tax liability which will result when the Corporation
changes its tax reporting method from cash to accrual.
(c) US Federal and state income tax assessments have been issued
to the Corporation covering all past periods up to and
including the fiscal year ended December 31, 1998. There are
no actions, suits, proceedings, investigations, enquiries or
claims now pending or made or, to the best of the Vendor's
knowledge, threatened against the Corporation in respect of
Taxes.
(d) There are no agreements, waivers or other arrangements
providing for any extension of time with respect to the filing
of any Tax return or other document or the payment of any
Taxes by the Corporation or the period for any assessment or
reassessment of Taxes. Only the fiscal years of the
Corporation subsequent to fiscal year ended December 31, 1995
remain open for reassessment for additional Taxes.
(e) The Corporation has withheld from each amount paid or credited
to any Person the amount of Taxes required to be withheld
therefrom and has remitted such Taxes to the proper Tax or
other Governmental Authorities within the time required under
Applicable Law.
(9) BANK ACCOUNTS AND AUTHORIZATIONS. Attached as Schedule 3.3(9) is a list of
all safe deposit boxes and bank accounts of the Corporation and the names of all
Persons having access or signing authority and of all powers of attorney given
by the Corporation.
(10) INSURANCE. Attached as Schedule 3.3(10) is a list of all insurance policies
(including the name of the insurer, policy number, type of insurance, expiry
date and details of pending claims) maintained by the Corporation in respect of
its assets, business operations, directors, officers and employees and its
Subsidiaries and their assets, business operations, directors, officer and
employees. All such insurance policies are valid and enforceable and in full
force and effect, are underwritten by unaffiliated and reputable insurers, are
sufficient for all applicable requirements of law and provide insurance,
including liability and product liability insurance, in such amounts and against
such risks as is customary for corporations engaged in businesses similar to
that carried on by the Corporation and its Subsidiaries to protect the
employees, properties, assets, Business and operations of the Corporation and
its Subsidiaries. The Corporation is not in default with respect to the payment
of any premium or compliance with any of the provisions contained in any such
insurance policy and has not failed to give any notice or present any claim
within the appropriate time therefor. To the best of the Vendor's knowledge,
there are no circumstances under which the Corporation would be required to or,
in order to maintain its coverage, should give any notice to the insurers under
any such insurance policy which has not been given. The Corporation has not
received notice from any of the insurers regarding cancellation of such
insurance policy. The Corporation has not received notice from any of its
insurers denying any claims.
(11) CAPITAL EXPENDITURES. Except as disclosed in Schedule 3.3(11) , the
Corporation is not committed to make any capital expenditures, nor have any
capital expenditures been authorized
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or made by the Corporation at any time since the Statement Date, except for
capital expenditures made in the Ordinary Course of Business which, in the
aggregate, do not exceed $25,000.
(12) NON-ARM'S LENGTH MATTERS. Except as disclosed in Schedule 3.3(12), the
Corporation is not a party to or bound by any agreement with, is not indebted
to, and no amount is owing to the Corporation by, the Vendor or any of the
Vendor's Affiliates or any officers, former officers, directors, former
directors, shareholders, former shareholders, employees (except for oral
employment agreements with employees) or former employees of the Corporation or
any Person not dealing at arm's length with any of the foregoing within the
meaning of the INCOME TAX ACT (Canada). Since the Statement Date, the
Corporation has not made or authorized any payments to the Vendor or any of the
Vendor's Affiliates, or any officers, former officers, directors, former
directors, shareholders, former shareholders, employees or former employees of
the Corporation or to any Person not dealing at arm's length with any of the
foregoing within the meaning of the INCOME TAX ACT (CANADA) except for salaries
and other employment compensation payable to employees of the Corporation in the
Ordinary Course of Business and at the regular rates payable to them.
3.4 PROPERTY OF CORPORATION.
(1) TITLE TO ASSETS. The Corporation and its Subsidiaries are the owners of and
have good and marketable title to all of their respective properties and assets,
including all properties and assets reflected in the Annual Financial Statements
for fiscal year ended December 31, 1998 and all properties and assets acquired
by the Corporation and its Subsidiaries as applicable, after the Statement Date,
are free and clear of all Encumbrances, except for:
(a) the properties and assets disposed of, utilized or consumed by
the Corporation since the Statement Date in the Ordinary
Course of Business;
(b) the Encumbrances disclosed or reflected in the Annual
Financial Statements for fiscal year ended December 31, 1998
or the Closing Financial Statements;
(c) liens for Taxes not yet due and payable; and
(d) the Encumbrances described in Schedule 3.4(1)(d) .
No other Person owns any assets which are being used in the Business, except for
the Leased Premises and the personal property described in Schedule 3.4(5)
leased by the Corporation. There are no agreements or commitments to purchase
property or assets by the Corporation, other than in the Ordinary Course of
Business.
(2) REAL PROPERTIES. The Corporation does not have any right, title or interest
in any real property except for the Corporation's leasehold interests in the
Leased Premises.
(3) LEASES AND LEASED PREMISES.
(a) Schedule 3.4(3)(a) describes all leases or agreements to lease
under which the Corporation leases any real or immovable
property (collectively, the "LEASES".) Complete and correct
copies of the Leases have been provided to the Purchaser.
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(b) The Corporation is exclusively entitled to all rights and
benefits as lessee under the Leases, and the Corporation has
not sublet, assigned, licensed or otherwise conveyed any
rights in the premises subject to the Leases (the "LEASED
PREMISES") or in the Leases to any other Person.
(c) All rental and other payments and other obligations required
to be paid and performed by the Corporation pursuant to the
Leases have been duly paid and performed. The Corporation is
not in default of any of its obligations under the Leases and,
to the best of the Vendor's knowledge, none of the landlords
or other parties to the Leases are in default of any of their
obligations under the Leases.
(d) The terms and conditions of the Leases will not be affected
by, nor will any of the Leases be in default as a result of,
the completion of the Purchase.
(4) STATUS OF PROPERTY. To the best knowledge of the Vendor, the use by the
Corporation of the Leased Premises is not in breach of any building, zoning or
other statute, by-law, ordinance, regulation, covenant, restriction or official
plan, and the Corporation has adequate rights of ingress and egress for the
operation of the Business in the ordinary course and, specifically:
(a) no alteration, repair, improvement or other work that has not
been completed has been ordered, directed or requested in
writing by any competent Governmental Authority to be done in
respect of, the Leased Premises or any of the plumbing,
heating, elevating, water, drainage or electrical systems,
fixtures or works;
(b) all accounts for work and services performed and materials
furnished in respect of or the Leased Premises at the request
of the Corporation have been paid and no Person is entitled to
claim a lien under the CONSTRUCTION LIEN ACT (Ontario) and
similar applicable legislation in any other province of Canada
or state within the United States of America against, the
Leased Premises or any part thereof, other than for current
accounts in respect of which the due date has not yet passed;
(c) there is nothing owing by the Corporation in respect of the
Leased Premises to any municipal corporation, or to any other
corporation or commission owning or operating a public utility
for water, gas, electrical power or energy, steam or hot
water, or for the use thereof, other than current accounts in
respect of which the due date has not yet passed; and
(d) no part of the Leased Premises has been taken or expropriated
by any Governmental Authority nor has any notice or proceeding
in respect thereof been given or commenced.
(5) PERSONAL PROPERTY. The Corporation is not the lessee of any personal or
movable property and is not a party to any conditional sale or other title
retention agreement except as disclosed in Schedule 3.4(5) .
(6) WORK ORDERS AND DEFICIENCIES. To the best knowledge of the Vendor, there are
no outstanding work orders, non-compliance orders, deficiency notices or other
such notices relative to the Leased Premises, the other properties and assets of
the Corporation or the Business which
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have been issued by any police or fire department, sanitation, environment,
labour, health or other Governmental Authorities. There are no matters under
discussion with any such department or authority relating to work orders,
non-compliance orders, deficiency notices or other such notices. The Business is
not being operated in a manner which is in contravention of any statute,
regulation, rule, code, standard, policy or other Applicable Law.
(7) PLANTS, FACILITIES AND EQUIPMENT. To the best knowledge of the Vendor, the
Leased Premises being used by the Corporation are without any substantial
impairment to usability from structural defects, operating problems with
building systems or other matters relating to the physical condition and all
equipment including computer equipment, furniture and furnishings used in the
Business are in good working order, fully operational and free of any defect,
except for normal operating difficulties, wear and tear and obsolence.
(8) [INTENTIONALLY DELETED]
(9) INTELLECTUAL PROPERTY
(a) Schedule 3.4(9)(a) lists and contains a description of:
(i) all patents, patent applications and registrations,
inventions, trade marks, trade names, trade mark
applications and registrations, trade name
registrations, service marks, designs, copyrights,
copyright applications and registrations, and
industrial designs, domestic or foreign, owned or
used by the Corporation or relating to the Business;
(ii) all trade secrets, know-how, inventions and other
intellectual property owned or used by the
Corporation or relating to the Business; and
(iii) with respect to all computer systems and applications
software, including without limitation all
documentation relating thereto and the latest
revisions of all related object and source codes
therefor to the extent in the possession and control
of the Corporation, owned, licensed or used by the
Corporation or relating to the Business Vendor will
cooperate with the Purchaser in the preparation by
the Corporation of a list thereof;
(collectively, the "INTELLECTUAL PROPERTY").
(b) The Corporation has good and valid title to all Intellectual
Property currently used or in the possession of the
Corporation, free and clear of any and all Encumbrances,
except in the case of any Intellectual Property licensed to
the Corporation as disclosed in Schedule 3.4(9). Complete and
correct copies of all agreements whereby any rights in any of
the Intellectual Property have been granted or licensed to the
Corporation have been provided to the Purchaser. All such
agreements are in good standing and in full force and effect.
No royalty or other fee is required to be paid by the
Corporation to any other Person in respect of the use of any
of the Intellectual Property except as provided in such
agreements delivered to the Purchaser. Except as indicated in
Schedule 3.4(9)(a), the Corporation has the exclusive right to
use all of the Intellectual Property and
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has not granted any license or other rights to any other
Person in respect of the Intellectual Property. Complete and
correct copies of all agreements whereby any rights in any of
the Intellectual Property have been granted or licensed by the
Corporation to any other Person have been provided to the
Purchaser.
(c) Except as disclosed in Schedule 3.4(9)(a), there are no
restrictions on the ability of the Corporation or any
successor to or assignee from the Corporation to use and
exploit all rights in the Intellectual Property. All
statements contained in all applications for registration of
the Intellectual Property were true and correct as of the date
of such applications. Each of the trade marks and trade names
included in the Intellectual Property is in use. None of the
rights of the Corporation in the Intellectual Property will be
impaired or affected in any way by the transactions
contemplated by this Agreement.
(d) To the best knowledge of the Vendor, the conduct of the
Business and the use of the Intellectual Property does not
infringe, and the Corporation has not received any notice,
complaint, threat or claim alleging infringement of, any
patent, trade mark, trade name, copyright, industrial design,
trade secret or other Intellectual Property or proprietary
right of any other Person, and the conduct of the Business
does not include any activity which may constitute passing
off.
(e) Nothing has come to the attention of the Vendor to the effect
that there is pending or threatened any claim or litigation
against the Corporation contesting the right of the
Corporation to use or sell any product, licence, patent,
process, method, substance, part or material. No third party
has any right to disclosure or use of any proprietary
technology or rights of the Corporation, present or future.
(10) LICENCES, AGENCY AND DISTRIBUTION AGREEMENTS. Schedule 3.4(10) lists all
agreements to which the Corporation is a party or by which it is bound under
which the right to manufacture, use or market any product, service, technology,
information, data, computer hardware or software or other property has been
granted, licensed or otherwise provided to the Corporation or by the Corporation
to any other Person, or under which the Corporation has been appointed or any
Person has been appointed by the Corporation as an agent, distributor, licensee
or franchisee for any of the foregoing. Complete and correct copies of all of
the agreements listed in Schedule 3.4(10) have been provided to the Purchaser.
None of the agreements listed in Schedule 3.4(10) grant to any Person any
authority to incur any liability or obligation or to enter into any agreement of
behalf of the Corporation.
3.5 CONDUCT OF BUSINESS.
(1) NO MATERIAL ADVERSE CHANGE. Since the Statement Date, there has not been any
material change in the affairs, prospects, operations, assets or financial
condition of the Business or of the Corporation other than changes in the
Ordinary Course of Business, none of which has been materially adverse; nor any
damage, destruction or loss or other event, development or condition of any
character (whether or not covered by insurance) materially and adversely
affecting the business, assets or properties of the Business or of the
Corporation, except as otherwise disclosed in the Schedules hereto.
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(2) ORDINARY COURSE. The Business has been carried on in a manner consistent
with the Ordinary Course of Business since the Statement Date, and will be
carried on in a manner consistent with the Ordinary Course of Business after the
date of this Agreement and up to the Closing Date.
(3) SUPPLIERS. Schedule 3.5(3) contains a list of the largest suppliers (by
dollar volume) of materials to the Corporation during the twelve-month period
ended December 31, 1998, indicating the existing contractual arrangements with
each such supplier.
(4) CUSTOMERS. The Vendor has previously delivered to the Purchaser a true and
complete list of all customers of the Business as of the date hereof. The
Corporation is the sole and exclusive owner of, and has the unrestricted right
to use, such customer list. Except as disclosed in Schedule 3.5(4), neither the
customer list nor any information relating to the customers of the Business
have, within three years prior to the date of this Agreement, been made
available to any Person other than the Purchaser. To the best knowledge of the
Vendor, and except as otherwise disclosed in Schedule 3.3(7) there are no facts
which could reasonably be expected to result in the loss of any customers or
sources of revenue of the Business which, in the aggregate, would be material to
the Business or the financial condition of the Corporation. No indication has
been received that any significant customer or number of customers will or may
cease to deal with the Corporation as a result of the sale of the Purchased
Shares or for any other reason.
(5) NECESSARY ASSETS. The assets owned or leased by the Corporation excluding
consideration of software, are adequate for the conduct of the Business as
usually conducted and include all proprietary rights, trade secrets and other
property and assets, tangible and intangible, applicable to or used in
connection with the Business.
(6) RESTRICTIONS ON DOING BUSINESS. The Corporation is not a party to or bound
by any agreement or commitment which would restrict or limit its rights to carry
on or compete in any business or activity or to solicit business from any Person
or in any geographical area or otherwise to conduct the Business as currently
conducted and as proposed to be conducted. The Corporation is not subject to any
legislation or any judgment, order or requirement of any court or Governmental
Authority which is not of general application to Persons carrying on a business
similar to the Business. To the best of the Vendor's knowledge, there are no
facts or circumstances which could materially adversely affect the ability of
the Corporation to continue to operate the Business as presently conducted
following the completion of the Purchase.
(7) CONTRACTS. The Corporation is a party to the written contracts, leases and
agreements described in Schedule 3.5(7) and is not a party to or bound by any
contract or commitment, written or oral, which has more than six (6) months to
run, involves a price or consideration of more than $25,000 in the aggregate,
which could materially and adversely affect the business, affairs or prospects,
financial or other, of the Corporation or those which can be terminated by the
Corporation without payment or damages, penalty or other amount by giving not
more than 60 days notice except, as disclosed in Schedule 3.5(7). The
Corporation is not required to provide any bonding or other financial security
arrangements in connection with any transactions with its customers or suppliers
in the Ordinary Course of Business. The Corporation is in good standing and is
entitled to all benefits under all contracts to which it is a party and none of
them is dependent upon the guarantee of or any security provided by a third
party. To the best of the
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Vendor's knowledge, there exists no state of facts which after notice or lapse
of time or both would constitute a default or breach thereunder and none of the
other parties to such contracts is in material default thereunder.
3.6 EMPLOYMENT MATTERS.
(1) EMPLOYEES. Schedule 3.6(1) states the name, job title, duration of
employment and rate of remuneration of, and the nature of services performed by,
each employee of the Corporation and indicates the names of those who have
stated that they will resign or retire as a result of the transaction
contemplated by this Agreement.
(2) REMUNERATION. Since the Statement Date, no payments have been made or
authorized to directors, officers or employees, except at regular rates of
remuneration.
(3) LABOUR MATTERS AND EMPLOYEE CONTRACTS. The Corporation is not a party to or
bound by any collective agreement is not currently conducting negotiations with
any labour union or employee association. Except as disclosed in Schedule 3.6(3)
the Corporation is not a party to any written employment agreement and there is
no agreement for the employment of any employee which cannot be terminated on
reasonable notice and without penalty. There is no agreement or practice
relating to the payment of any management, consulting, service or other fee or
any bonus, pension, share of profits or retirement allowance, or any insurance,
health or other employee benefit, except as disclosed in Schedule 3.6(3). There
are no existing or, to the best of the Vendor's knowledge, threatened labour
strikes, labour disputes, grievances, or controversies affecting the Corporation
or the Business.
(4) EMPLOYEE LEGISLATION. Except as disclosed in Schedule 3.7(2), to the best
knowledge of the Vendor, the Corporation has complied with all Applicable Laws
rules, regulations and orders applicable to it relating to employment, including
those relating to wages, hours, collective bargaining, occupational health and
safety, workers' hazardous materials, employment standards, pay equity and
workers' compensation. There are no outstanding charges or complaints against
the Corporation relating to unfair labour practices or discrimination or under
any legislation relating to employees. The Corporation has paid in full all
amounts owing under the WORKPLACE SAFETY AND INSURANCE ACT (Ontario) or
comparable provincial legislation or state legislation. There are no charges or
orders requiring the Corporation to comply outstanding under the OCCUPATIONAL
HEALTH AND SAFETY ACT (Ontario) or comparable legislation.
(5) BENEFIT PLANS. Schedule 3.6(5) lists all of the Corporation's deferred
profit sharing, group insurance, dental insurance, disability, death benefit,
health and welfare, hospitalization, vacation, vacation pay, unemployment,
pension, retirement and other employee benefit, plans, agreements, policies,
practices and other similar arrangements currently applicable to the current
and/or past officers, employees, agents and/or independent contractors (the
"BENEFIT PLANS").
(6) DISCLOSURE. The Vendor has delivered to the Purchaser true and complete
copies of the written texts of the Benefit Plans and of the funding agreements
therefor. The Vendor has not made, or acquiesced in the making of, any
amendments to such documents. The Corporation has performed its obligations
(including fiduciary, funding, investment and administration obligations) in
connection with the Benefit Plans or the funding agreements therefor. There are
<PAGE>
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no outstanding disputes concerning the assets held pursuant to any such funding
agreement. Where required, the Benefit Plans are duly registered under the
Applicable Laws in the appropriate jurisdictions. All reports and disclosures
relating to the Benefit Plans required by this Agreement, or by any Applicable
Law, to be filed or distributed on or before the execution of this Agreement
have been filed or distributed. No promises of benefit improvements under the
Benefit Plans have been made except as may be required, or are reasonably
anticipated to be required, by Applicable Law or collective agreement.
(7) CONTRIBUTIONS. Except as disclosed in Schedule 3.7(2), all contributions or
premiums required to be made by the Corporation to the Benefit Plans have been
made in a timely fashion in accordance with the terms of the Benefit Plans and
Applicable Law. All employee contributions to the Benefit Plans required to be
made by way of authorized payroll deduction have been properly withheld by the
Corporation and fully paid into the Benefit Plans. There have been no improper
withdrawals, or applications of, the assets of the Benefit Plans. There are no
taxes owing in respect of the Benefit Plans.
(8) ERISA. Except as disclosed in Schedule 3.7(2), to the best knowledge of the
Vendor, the Corporation and its Subsidiaries have complied in all material
respects with all Applicable Laws (including, but not limited to, the EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, as amended, and regulations relating to
employment matters including, but not limited to, those relating to wages,
hours, discrimination and payment of social security and similar taxes.
3.7 GENERAL MATTERS.
(1) COMPLIANCE WITH CONSTATING DOCUMENTS, AGREEMENTS AND LAWS. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Vendor and the Corporation, and the
completion of the Purchase, will not constitute or result in a violation or
breach of or default under, or cause the acceleration of any obligations of the
Corporation under:
(a) any term or provision of any of the articles, its Code of
Regulations or other constating documents of the Corporation;
(b) subject to obtaining the contractual consents referred to in
Schedule 3.7(1)(b) , the terms of any agreement (written or
oral), indenture, instrument or understanding or other
obligation or restriction to which the Corporation or the
Vendor is a party or by which either of them is bound, or
(c) subject to obtaining the regulatory consents referred to in
Schedule 3.2(5), any term or provision of any of licenses or
permits referred to in Section 3.1(8), any order of any court
or Governmental Authority or regulatory body or any Applicable
Law of any jurisdiction in which the Business is carried on.
(2) COMPLIANCE WITH LAWS. Except as otherwise disclosed in Schedule 3.7(2)
hereto, the Corporation in carrying on the Business is not in violation of any
Applicable Law relating to, without limitation, its operations, products,
manufacturing processes, advertising, sales or employment practices, wages and
hours, product safety or civil rights, which violation could reasonably be
expected to have a material adverse effect on its Business.
<PAGE>
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(3) LITIGATION. Except for the matters referred to in Schedule 3.7(3) , there
are no actions, suits or proceedings, judicial or administrative (whether or not
purportedly on behalf of the Corporation or the Vendor) pending or, to the best
of the Vendor's knowledge, threatened, by or against or affecting the
Corporation, at law or in equity, or before or by any court or any federal,
provincial, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which might result
in any material adverse change in the business, affairs or prospects of the
Corporation, financial or other or which might adversely affect the ability of
the Vendor to enter into this Agreement or to consummate the Purchase. Except
for the matters referred to in Schedule 3.7(3), there are no grounds on which
any such action, suit or proceeding might be commenced with any reasonable
likelihood of success. Without restricting the generality of the foregoing, no
significant product liability claims have been asserted or made, and continue to
be outstanding, against the Corporation alleging any defect in the design,
manufacture or materials of any of the products of the Business.
(4) COPIES OF DOCUMENTS. True and complete copies of all contracts, leases,
collective agreements, pension plans, benefit plans, policies of insurance and
other documents identified in any schedule to this Agreement have been delivered
to the Purchaser.
(5) DISCLOSURE. The representations and warranties of the Vendor contained in
this Agreement and in any certificate or other material delivered under this
Agreement are accurate and complete, do not contain any untrue statement of a
material fact or, considered in the context in which presented, omit to state a
material fact necessary in order to make the statements and information
contained herein or therein not misleading. Without restricting the generality
of the foregoing, there are no facts known to the Vendor which should be
disclosed to the Purchaser in order to make any of the representations and
warranties contained in this Agreement not misleading or which may have a
materially adverse affect on the Business or its operations, and no facts are
known to the Vendor which may materially adversely affect the Business or would
operate to prevent the Purchaser from using the assets of the Business to
operate the Business in the manner in which the Corporation has operated the
Business prior to the date of this Agreement.
SECTION 4 -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as stated below and
acknowledges that the Vendor is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
4.1 ORGANIZATION. Purchaser is a corporation, duly organized, validly existing
and in good standing under the laws of Ontario and has full power and authority
to carry on its business as and where such business is operated. Purchaser has
full power to carry out the transactions provided for in this Agreement. All
necessary corporate action required to be taken by Purchaser relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement has been duly and validly taken, and
this Agreement constitutes the legal, valid and binding and enforceable
obligation of Purchaser. To the best knowledge of the Purchaser, no consent,
approval or agreement or any person, party,
<PAGE>
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court, governmental authority, or entity is required to be obtained by Purchaser
in connection with the execution and performance by Purchaser of this Agreement.
4.2 ITS SHARES. All corporate action necessary for the issuance by Purchaser of
the ITS Shares has been taken and the ITS Shares, when issued pursuant to this
Agreement, will be duly and validly authorized and issued, fully paid and non
assessable.
4.3 NO DEFAULTS. Purchaser is not in violation of any term of its certificate of
incorporation or its Code of Regulations, and Purchaser is not in violation of
any judgment, decree or order, applicable to it. The execution and delivery of
this Agreement by Purchaser and the consummation of the transactions
contemplated by this Agreement will not result in any such violation or a
violation of Purchaser's certificate of incorporation or its Code of Regulations
or any Applicable Law or be in conflict with, constitute a default under or
result in a violation of (or give rise to any right of termination, cancellation
or acceleration under) any Contract, to which Purchaser is a party, or
Applicable Laws applicable to Purchaser.
4.4 LITIGATION. Except as set forth is the ITS SEC Documents, there are no
material claims, actions, suits, proceedings, inquiries, labor disputes or
investigations (whether or not purportedly on behalf of the Company) pending or,
to Purchaser's best knowledge, threatened against Purchaser or any of its
assets, at law or in equity or by or before any Governmental Authority or in
arbitration or mediation.
4.5 AUTHORITY. Purchaser has full power and authority to execute this Agreement
and consummate the transactions contemplated by this Agreement, and this
Agreement constitutes, when executed and delivered by Purchaser, the legal,
valid, binding and enforceable obligations of Purchaser. All action required to
be taken by Purchaser in order for it to consummate the transaction contemplated
by this Agreement have been taken. Purchaser and Purchaser's assets are not
subject to, nor is Purchaser in default with respect to, any Order, Claim or
governmental restriction that could materially and adversely affect its
financial condition, business, assets, or prospects or that would interfere with
the transactions contemplated by this Agreement. Purchaser is not insolvent, and
Purchaser is not subject to any disability or impairment which would affect its
ability to perform the terms of this Agreement. Neither the execution of this
Agreement not the performance of their respective terms will render Purchaser
insolvent.
SECTION 5 -- INTERIM PERIOD
5.1 INTERIM PERIOD. The parties hereto were introduced and began their
negotiations in late July, 1999. This Agreement has been given a January 1, 1999
effective date since the Purchaser intends to consolidate the operating results
of the Corporation and its Subsidiaries with the Purchaser's as of January 1,
1999. The conduct of the Corporation's business during the Interim Period did
not cause the representations and warranties of Vendor under Section 3 of this
Agreement to be materially inaccurate or misleading.
SECTION 6 -- ACCESS AND CONFIDENTIALITY
6.1 ACCESS. The Purchaser and its auditors, counsel and other representatives
shall be afforded immediate and continuous access at all reasonable times to all
premises of, corporate,
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financial and other books and records of, and all policies of insurance,
contracts, leases, deeds and other documents in the possession or control of,
the Corporation to enable the Purchaser to investigate the affairs of the
Corporation, and the Vendor shall furnish to the Purchaser or its
representatives such information with respect to the Corporation and its affairs
as the Purchaser may reasonably request but no such investigation shall
prejudice the rights of the Purchaser under this Agreement.
6.2 CONFIDENTIALITY. Notwithstanding anything contained in this Agreement, if
the Purchase is not completed for any reason, the Purchaser shall hold in strict
confidence, and shall not disclose to any Person or use any confidential
information obtained by the Purchaser with respect to the Corporation and its
affairs. Upon completion of the Purchase, the Vendor shall hold in strict
confidence and shall not disclose to any Person (other than the Purchaser) or
use any confidential information of the Corporation.
SECTION 7 -- CONDITIONS
7.1 GENERAL. The obligations of the Purchaser under this Agreement are subject
to the conditions stated below which are for the exclusive benefit of the
Purchaser and all or any of which may be waived by the Purchaser. The Vendor
shall cause each of the conditions to be fulfilled or performed at or before the
time specified for closing to the extent within the control of the Vendor. If
any condition is not satisfied on or before the Closing Date, the Purchaser may
terminate this Agreement by Notice to the Vendor without prejudice to any other
rights or remedies of the Purchaser.
(1) VERIFICATION. All representations and warranties contained in this Agreement
shall be true as of the Closing Date with the same effect as though made on and
as of that date and the Vendor shall have delivered to the Purchaser evidence
satisfactory to the Purchaser to the foregoing effect dated the Closing Date,
but the acceptance of such evidence and the closing of the transaction hereby
contemplated shall not be a waiver of such representations and warranties.
(2) VENDOR'S OBLIGATIONS. The Vendor shall have performed each of its
obligations under this Agreement to the extent required to be performed on or
before the Closing Date.
(3) ADVERSE PROCEEDINGS. No action or proceeding shall be pending or threatened
which could reasonably be expected to impair or prohibit the completion of the
Purchase.
(4) MATERIAL ADVERSE CHANGE. No damage to or destruction of a material part of
the property, plant or equipment of the Corporation shall have occurred and no
change shall have occurred in the operations, condition, affairs or prospects of
the Corporation, financial or other, other than changes in the ordinary and
usual course of business which, in the reasonable business judgment of the
Purchaser, are not expected to be materially adverse to the Corporation.
(5) STATUS OF LEASES AND CONTRACTS The Vendor shall have delivered to the
Purchaser consent to the change in ownership effected by the Purchase of the
Purchased Shares that may be required by the terms of such Leases or by the
terms of any contract listed on Schedule 3.7(1)(b).
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(6) CONCURRENT TRANSACTIONS. Concurrently with the completion of the Purchase,
the parties shall have executed and delivered and have completed the
transactions contemplated by the following:
(a) Employment Agreement between the Vendor and the Corporation
with non-competition covenant;
(b) Guarantee given by the Corporation of the Purchaser's
obligations to the Vendor under certain Promissory Notes to be
issued by the Purchaser to the Vendor as part of the Purchase
Price;
(c) other agreements, as necessary.
(7) AIRCRAFT LEASE Evidence satisfactory to the Purchaser that the Aircraft
Lease Agreement dated November 22, 1997 between CAD CAM, Inc., as lessee, and
Premier Leasing, as lessor, has been terminated and that all liabilities,
expenses, indemnities and costs, including insurance costs, have been
terminated, paid in full, adjusted, or reduced accordingly.
(8) INDEBTEDNESS OF SHAREHOLDERS, DIRECTORS ETC. Satisfactory evidence to the
Purchaser that all Indebtedness to the Corporation of the Vendor for advances or
other amounts have been or will be paid pursuant to terms negotiated by the
parties prior to closing.
(9) RESIGNATIONS. The Vendor shall have delivered to the Purchaser resignations
of all of the officers and directors of the Corporation as of the Closing Date.
Vendor will enter into an Employment Agreement with Purchaser which will provide
that Vendor will be Chairman and Chief Executive Officer of the Corporation
during the period of his employment and Purchaser will use its best efforts to
ensure that the Vendor will serve as a director on the board of directors of the
Purchaser until three years from the Closing Date.
(10) LIFE INSURANCE. The Corporation has a collateral interest in certain life
insurance policies owned by the Vendor, and three other officers of the
Corporation, namely, Scott Walters, Ken Stephenson and Tom Shoup (the
"POLICYHOLDERS"). The Vendor Policyholder may not borrow against their interest
in the life insurance policies without the prior written consent of Purchaser.
(11) EVIDENCE. Satisfactory to the Purchaser that all guarantees granted by the
Corporation, and security therefor, in respect of obligations owed by an
Affiliate to a third party will have been released and discharged, including,
without limitation, a guarantee granted by the Corporation to The Provident Bank
dated July 9, 1996, guaranteeing Premier Leasing Co.'s obligations to The
Provident Bank in the amount of $485,919.62.
(12) CORPORATE ACTION. All appropriate action of the directors, shareholders and
officers of the Corporation shall have been taken and all requisite consents,
approvals and resignations shall have been obtained to transfer the Purchased
Shares to the Purchaser and to constitute a board of directors consisting of
nominees of the Purchaser.
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(13) APPROVALS, CONSENTS, ETC. Any approval, consent, ruling, exemption or
authorization that may be necessary or appropriate in respect of the
transactions contemplated hereby shall have been received and shall be absolute
or on terms reasonably acceptable to the Purchaser.
(14) APPROVAL OF COUNSEL AND OPINIONS. The status of the Corporation, its title
to its assets, all documents delivered hereunder, and the form and legality of
all corporate action and all other matters which in the reasonable opinion of
counsel for the Purchaser are material shall be subject to the approval of such
counsel, who may rely to such extent and with respect to such matters as such
counsel consider appropriate on the opinion of counsel for the Vendor, and
counsel for the Vendor shall have delivered to the Purchaser such legal opinions
as the Purchaser may reasonably request for the purposes of the foregoing
including an opinion in the form and content of Schedule 7.1(14) .
SECTION 8 -- NON-COMPETITION AND EMPLOYMENT AGREEMENT
The Vendor shall execute and deliver to the Purchaser on the Closing
Date an amended employee agreement and a covenant substantially in the form of
Schedule 8 (the "EMPLOYMENT AGREEMENT")
SECTION 9 -- SURVIVAL AND INDEMNITY
9.1 SURVIVAL. The representations, warranties and obligations contained in this
Agreement or in any document delivered hereunder shall survive the closing of
the transaction contemplated by this Agreement for a period of one (1) year from
the Closing Date. No claim may be asserted for breach of any representation or
warranty occurring after the expiration of one (1) year period.
9.2 GENERAL INDEMNITY. The Vendor shall fully indemnify the Purchaser and the
Corporation for one (1) year from the Closing Date against all loss, liability
and expense arising out of any misrepresentation or breach of warranty or
obligation by the Vendor under this agreement to the extent such loss, liability
and expense exceeds $25,000 in the aggregate.
Such indemnity shall include, without limitation, reasonable legal fees and
expenses in connection with any action or proceeding against the Corporation or
the Purchaser. If the amount required to satisfy any claim disclosed or provided
for shall exceed the amount so disclosed or provided for, the excess shall be
considered to be a separate liability in respect of which no disclosure or
provision has been made. The liability of the Vendor under this Section 9.2 with
regard to any representation or warranty shall not extend to any claim asserted
after one (1) year.
9.3 NOTICE AND PARTICIPATION. The Purchaser shall give the Vendor prompt Notice
of any loss, liability or expense for which the Vendor may be liable under
Section 9.2 and the Vendor shall be entitled, at its expense, to participate in
any negotiations, to assume the defence of any action or proceeding and to
settle for monetary damages any claim in respect of which indemnification is
sought under this Section. The Vendor shall not settle or compromise any such
claim without the prior written consent of the Purchaser, which consent shall
not be unreasonably withheld.
<PAGE>
-28-
SECTION 10 -- CLOSING
The closing of the Purchase shall take place at the offices of McMillan Binch,
Barristers & Solicitors, 38th Floor, Royal Bank Plaza, South Tower, 200 Bay
Street, Toronto, Ontario, at [11:00 a.m.] on the Closing Date, at which time the
Vendor shall deliver to the Purchaser certificates for the Purchased Shares duly
endorsed in blank for transfer together with reasonable evidence of the due
compliance by the Vendor with all of the conditions contained in Section 7 and
such other documents as counsel for the Purchaser reasonably may consider
necessary or appropriate against payment of the Purchase Price by the Purchaser
to the Vendor.
SECTION 11 -- ARBITRATION
11.1 SCOPE. Any dispute between the parties, whether arising before or after the
Closing, relating to this Agreement (including any dispute as to whether an
issue is arbitrable) shall be referred to arbitration under the ARBITRATION ACT,
1991 (Ontario) on and subject to the terms and conditions of this Section 11.
11.2 APPOINTMENT OF ARBITRATORS. A party desiring arbitration hereunder shall
give a Notice of arbitration to the other party containing a concise description
of the matter submitted for arbitration. Within 10 days after a party gives a
Notice of arbitration, the parties shall jointly appoint a single arbitrator
("Arbitrator"), who shall be a retired judge of the Ontario Court (General
Division) or of any court of a province of Canada having jurisdiction comparable
to or higher than that of such court (the "Court"). If the parties fail to
appoint an Arbitrator within such time, an Arbitrator shall be designated by a
judge of the Court upon application by either party.
11.3 POWERS OF ARBITRATOR. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
11.4 ARBITRATION PROCEDURE. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 Business Days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrators shall be final and binding upon the parties in respect of all
matters relating to the arbitration, the conduct of the parties during the
proceedings, and the final determination of the issues in the arbitration.
11.5 AWARDS AND APPEAL. There shall be no appeal from the determination of the
Arbitrator to the Court under the ARBITRATION ACT, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
11.6 COSTS OF ARBITRATION. The costs of any arbitration hereunder shall be borne
by the parties in the manner specified by the Arbitrator in his determination.
<PAGE>
-29-
11.7 RULES. Insofar as they do not conflict with this Section 11, the Rules for
the Conduct of Arbitration of the Arbitrators' Institute of Canada Inc. (the
"Rules") in effect at the date of commencement of any arbitration held hereunder
shall be applicable to the arbitration, and the Arbitrators shall have
jurisdiction to take such action and make such orders as are contemplated in the
Rules.
11.8 CONDITION PRECEDENT. Submission to arbitration under this Section 11 shall
be a condition precedent to bringing any action with respect to this Agreement.
SECTION 12 -- MISCELLANEOUS
12.1 FEES AND EXPENSES. Purchaser hereby agrees that it shall be liable for and
pay all legal and accounting fees and expenses incurred by the Vendor in
connection with the purchase and sale of the shares of the Corporation up to and
including the Closing Date and any required post-closing matters in connection
with the Transaction (the "Transaction") provided, however, that Purchaser shall
not pay any introduction fees, commissions or brokerage fees on or for the
account of the Vendor.
12.2 FURTHER ASSURANCES. Each party shall from time to time promptly execute and
deliver all further documents and take all further action reasonably necessary
or appropriate to give effect to the provisions of this Agreement.
12.3 NO DISCLOSURE. Prior to completion of the Purchase on the Closing Date, no
disclosure with respect to the transaction contemplated by this Agreement shall
be made by either party to suppliers, customers or employees of the Corporation
or others without the prior approval of the other party (such approval not to be
unreasonably withheld).
12.4 NOTICE. Unless otherwise specified, each Notice to a party must be given in
writing and delivered personally or by courier, sent by prepaid registered mail
or transmitted by fax to the party as follows:
If to the Vendor:
Name: Roger W. Walters
Address: 119 Bufflehead Drive
Kiawah Island, SC 29455
Attention: Roger W. Walters
Fax No: (843) 768-9058
If to the Purchaser:
Name: IT Staffing Ltd.
Address: 55 University Avenue, Suite 505
Toronto, ON M5J 2H7
<PAGE>
-30-
Attention: Declan French
Fax No: (416) 364-2424
or to any other address, fax number or Person that the party designates. Any
Notice, if delivered personally or by courier, will be deemed to have been given
when actually received, if transmitted by fax before 3:00 p.m. on a Business
Day, will be deemed to have been given on that Business Day, and if transmitted
by fax after 3:00 p.m. on a Business Day, will be deemed to have been given on
the Business Day after the date of the transmission.
12.5 TIME. Time shall be of the essence of this Agreement.
12.6 GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
12.7 ENTIRE AGREEMENT. This Agreement and the attached Schedules constitute the
entire agreement between the parties with respect to the subject matter and
supersede all prior negotiations and understandings. No provision may be amended
or waived except in writing.
12.8 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable shall not affect any other provision and shall be deemed to be
severable.
12.9 ASSIGNMENT AND ENUREMENT. No party may assign this Agreement without the
prior written consent of the other parties. This Agreement enures to the benefit
of and binds the parties and their respective heirs, executors, administrators,
personal and legal representatives, successors and permitted assigns.
<PAGE>
-31-
12.10 COUNTERPARTS AND FACSIMILE. This Agreement and any amendment, supplement,
restatement or termination of any provision of this Agreement may be executed
and delivered in any number of counterparts, each of which when executed and
delivered is an original but all of which taken together constitute one and the
same instrument. A party's transmission by facsimile of a copy of this Agreement
duly executed by that party shall constitute effective delivery by that party of
an executed copy of this Agreement to the party receiving the transmission. A
party that has delivered this Agreement by facsimile shall forthwith deliver an
originally executed copy to the other party or parties.
The parties have executed this Agreement.
IT STAFFING LTD.
By:
--------------------------------
Name: Declan French
Title: President and CEO
CAD CAM, INC.
By:
--------------------------------
Name: Roger W. Walters
Title: President and CEO
ROGER W. WALTERS
------------------------------------
<PAGE>
SCHEDULE 1.1(4) - ANNUAL FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED DECEMBER 31,
1998
<PAGE>
SCHEDULE 2.2(1)(B) - FORM OF PROMISSORY NOTE
PROMISSORY NOTE
$- September , 1999
FOR VALUE RECEIVED, IT STAFFING LTD., an Ontario corporation (the "Purchaser"),
HEREBY PROMISES TO PAY to the order of ROGER W. WALTERS (together with his
heirs, executors, administrators, personal and legal representatives and
permitted assigns, the "Holder"), at such place as the Holder may designate, in
lawful money of the United States of America, the principal amount of o DOLLARS
($o), in consecutive equal quarterly instalments commencing o, 1999 based on an
20-Quarter amortization with a balloon payment of all amounts outstanding under
the Note on the Maturity Date, together with interest payable at Prime Rate plus
.5% per year, payable in arrears. For purposes of this Note:
(a) "MATURITY DATE" means o, 2004.
(b) "PRIME RATE" means, at any date, the annual rate of interest
announced from time to time by The Toronto-Dominion Bank, as
being its reference rate in effect on such date for
determining interest rates on Canadian dollar denominated
commercial loans made by it in Canada (that is, prime rate).
(c) "QUARTER" or "QUARTERLY" means a period of three months.
(d) "NOTE" shall mean this Promissory Note as originally executed
or if later amended, modified, supplemented or replaced, then,
as so amended, modified, supplemented or replaced.
1. PAYMENTS. This Note may be prepaid at any time in whole or in part from
time to time without penalty or premium. The principal of this Note is
payable in US Dollars and in same day funds, without abatement,
reduction, deduction, counterclaim recoupment, defence or set-off, to
the Holder.
2. WAIVER. Except as otherwise provided for in this Note, and to the
fullest extent permitted by applicable law, the Purchaser waives: (a)
presentment, notice, demand and protest, and notice of presentment,
dishonour, intent to accelerate, acceleration, protest, default,
nonpayment, maturity, release, compromise, settlement, extension or
renewal of this Note at any time held by the Holder on which the
Purchaser may in any way be liable, and hereby ratifies and confirms
whatever the Holder may do in this regard; (b) all rights to notice and
a hearing prior to the Holder's taking possession or control of, or to
the Holder's replevy, attachment or levy upon, any property, real or
personal, tangible or intangible of the Purchaser or any bond or
security which might be required by any court prior to allowing the
Holder to exercise any of its remedies; and (c) the benefit of all
valuation, appraisal and exemption laws. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver of such power, right
<PAGE>
or privilege, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
3. LOST OR DESTROYED NOTE. Upon receipt by the Purchaser of evidence
reasonably satisfactory to the Purchaser of the loss, theft,
destruction or mutilation of this Note, and in the case of any such
loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Purchaser or, in case of any such mutilation, upon
surrender and cancellation of this Note, the Purchaser will issue a
replacement Note of like tenor in lieu of this Note.
4. SEVERABILITY. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited
by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this
Note.
5. CONVERSION. If, for the purpose of obtaining judgment in any court,
determining the amount outstanding under this agreement or for any
other purpose, it is necessary to convert an amount in one currency
(the "Original Currency") into another currency (the "Second
Currency"), the Equivalent Amount of the Second Currency shall be used.
If the conversion relates to a judgment, the conversion shall be
performed as of the date one day preceding that on which payment
pursuant to such judgment is made. For all other purposes, the
conversion shall be performed as of the date and time of determination.
For the purposes of this Note, "EQUIVALENT AMOUNT" means, with respect
to any given amount of any currency, the amount of any other currency
required to purchase that amount of the first currency through The
Toronto-Dominion Bank in Toronto in accordance with such bank's usual
procedures
6. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein (without giving effect to its conflicts of
law rules).
7. SUCCESSORS AND ASSIGNS. This Note shall be binding upon the Purchaser
and its successors, and shall enure to the benefit of the Holder and
its successors and assigns.
IT STAFFING LTD.
By:
----------------------------
Name:
Title:
<PAGE>
SCHEDULE 3.1(5) - EQUITY INVESTMENTS AND SUBSIDIARIES OF CORPORATION
<PAGE>
SCHEDULE 3.2(5) - CONTRACTUAL AND REGULATORY APPROVALS
<PAGE>
SCHEDULE 3.5(7)- MATERIAL CONTRACTS, LEASES AND AGREEMENTS
<PAGE>
SCHEDULE 3.3(4) - GUARANTEES, WARRANTIES AND DISCOUNTS
<PAGE>
SCHEDULE 3.3(5) - LETTERS OF CREDIT, BONDS OR OTHER FINANCIAL
SECURITY ARRANGEMENTS
<PAGE>
SCHEDULE 3.3(7) - ABSENCE OF CERTAIN CHANGES OR EVENTS
<PAGE>
SCHEDULE 3.3(10) - TAX MATTERS
<PAGE>
SCHEDULE 3.3(9) - BANK ACCOUNTS AND AUTHORIZATIONS
<PAGE>
SCHEDULE 3.3(10) - INSURANCE
<PAGE>
SCHEDULE 3.3(12) - NON-ARM'S LENGTH INTERESTS
<PAGE>
SCHEDULE 3.4(1)(D) - ENCUMBRANCES
<PAGE>
SCHEDULE 3.4(3)(A) - LEASED PREMISES
<PAGE>
SCHEDULE 3.4(5) - PERSONAL PROPERTY LEASES AND CONDITIONAL SALES AGREEMENT
<PAGE>
SCHEDULE 3.4(9)(A) - INTELLECTUAL PROPERTY
<PAGE>
SCHEDULE 3.4(10) - LICENCES, AGENCY AND DISTRIBUTION AGREEMENTS
<PAGE>
SCHEDULE 3.5(3) - SUPPLIERS
<PAGE>
SCHEDULE 3.5(4) - CUSTOMERS
<PAGE>
SCHEDULE 3.5(7) - CONTRACTS
<PAGE>
SCHEDULE 3.6(1) - EMPLOYEES
<PAGE>
SCHEDULE 3.6(3) - LABOUR MATTERS AND EMPLOYMENT CONTRACTS
<PAGE>
SCHEDULE 3.6(5) - BENEFIT PLANS
<PAGE>
SCHEDULE 3.7(1)(B) - REQUIRED CONSENTS
<PAGE>
SCHEDULE 3.7(3) - PENDING LITIGATION
<PAGE>
SCHEDULE 7.1(14) - VENDOR'S COUNSEL OPINION
<PAGE>
SCHEDULE 8 - EMPLOYMENT AGREEMENT
<PAGE>
SCHEDULE 3.1(10) - OPERATIONS AND ASSETS
<PAGE>
SCHEDULE 2.4(1) - ???
<PAGE>
SCHEDULE 3.3(11) - CAPITAL EXPENDITURES
