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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date earliest event reported)
August 11, 2000
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VALUE HOLDINGS, INC.
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(exact name of registrant as specified in it charter)
FLORIDA
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(State or other jurisdiction of incorporation)
0-15076 59-2388734
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(Commission File Number) (IRS Employer
Identification Number)
2307 DOUGLAS ROAD, SUITE 400, MIAMI, FL 33145
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(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code:(305) 868-3946
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N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition of Assets
On August 11, 2000 Network Forest Products, a subsidiary of
Value Holdings, Inc. Purchased all of the assets of Cutler Forest
Products and 100% of the shares of Seabright Wood Fabricators,
located in Mississauga, Ontario. Cutler and Seabright had common
ownership with each other.
Consideration for the transaction was $15,954,817 Canadian
Dollars.
$3,902,579 Canadian Dollars of the purchase price was allocated to
the satisfaction of outstanding debts consisting primarily of a
line of credit with Toronto-Dominion Bank. The purchase price was
provided by Network Forest Products credit facility with GMAC
Credit Corporation (formerly BNY Financial Corporation -- Canada)
which was increased from $40 million Canadian Dollars to $58
million Canadian Dollars.
Cutler Forest Products primary business is the wholesale
supply of sheet and cut to size composite wood products including
melamine, particle board, medium density fiberboard and hardwood
plywood. Cutler provides both wood and materials for their customer
s manufacturing operations, and also provides both fully and
partially manufactured product. Cutler will box, bar code and
package as specified by the customer or ship product in bulk for
refinishing and final assembly. Cutler also distributes a laminate
called Nevamar. They are one of two distributors of this product in
Ontario.
Seabright is a component manufacturer. Virtually of Seabright
s sales are to Cutler.
Together Cutler s and Seabright s business encompasses the
following areas:
(i) The wholesale distribution of sheet and cut-to-size
composite wood products;
(ii) manufacturing of subcomponents for other wood
manufacturers;
(iii) manufacturing of finished products
(a) kitchen cupboards
(b) bathroom vanities and
(c) shredder boxes
(iv) distrbution of Nevamar; and
(v) a supplier to major building material retailers
Cutler has approximately 1,500 customers with its four
customers accounting for 20% of sales. Cutler s four largest
customers are: Home Depot,. Ontario Store Fixtures, Revy Home
Centres (Lansing) and Ace Hardware.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Audited Financial Statements for the businesses acquired will be filed
within 60 days.
(c) 10.02 Asset Purchase Agreement dated February 11, 2000 between
Value Holdings, 1392298 Ontario Limited, Cutler Forest Products
Treefield Holdings Limited, A Corporation Incorporated Under The
Laws Of The Province Of Ontario ("Treefield");Divadale Holdings
Limited, Ruislip Holdings Inc., T.M.&C. Holdings Ltd., Victor
Drevnig, Keith Withers, Peter Engel, and Richard Drevnig
10.03 Share Purchase Agreement dated February 11, 2000 between
Value Holdings, Inc., 1392298 Ontario Limited, Cutler Forest
Products, Fred Cain, Treefield Holdings Limited, Divadale Holdings
Limited, Ruislip Holdings Inc., T.M.&C. Holdings Ltd., Victor
Drevnig, Keith Withers, Peter Engel, and Richard Drevnig.
10.04 Amending Agreement dated August 10, 2000 between Value
Holdings, Inc., 1392298 Ontario Limited, Cutler Forest Products,
Fred Cain, Treefield Holdings Limited, Divadale Holdings Limited,
Ruislip Holdings Inc., T.M.&C. Holdings Ltd., Victor Drevnig, Keith
Withers, Peter Engel, and Richard Drevnig
SIGNATURES
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 hereunto duly authorized.
VALUE HOLDINGS, INC,
By /s/ Robert Ziner
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Robert Ziner
President
Date: August 18, 2000
Exhibit 10.02 Asset Purchase Agreement
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 11th day of February, 2000
AMONG:
VALUE HOLDINGS, INC., a corporation incorporated under the
laws of the State of Florida ( Value );
and -
1392298 ONTARIO LIMITED, a corporation incorporated under the
laws of the Province of Ontario (the Purchaser );
and -
CUTLER FOREST PRODUCTS, a partnership under the laws of the
Province of Ontario (the Vendor );
and -
TREEFIELD HOLDINGS LIMITED, a corporation incorporated under
the laws of the Province of Ontario ( Treefield );
and -
DIVADALE HOLDINGS LIMITED, a corporation incorporated under
the laws of the Province of Ontario ( Divadale );
and -
RUISLIP HOLDINGS INC., a corporation incorporated under the
laws of the Province of Ontario ( Ruislip );
and -
T.M.&C. HOLDINGS LTD., a corporation incorporated under the
laws of the Province of Ontario ( T.M.&C. );
and -
VICTOR DREVNIG of the City of Toronto in the Province of
Ontario ( V. Drevnig );
and -
KEITH WITHERS of the Town of Halton Hills in the Province of
Ontario ( Withers );
and -
PETER ENGEL of the City of Guelph in the Province of
Ontario ( Engel );
and -
RICHARD DREVNIG of the City of Toronto in the Province of
Ontario ( R. Drevnig ).
RECITES THAT:
The Vendor carries on business as a wholesaler of wood products;
The Purchaser is a wholly-owned subsidiary of Value; and
The Vendor wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Vendor, the undertaking and all of the
assets of such business, as a going concern, on the terms and
subject to the conditions set out in this Agreement.
NOW THEREFORE in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
ARTICLE
INTERPRETATION
Defined Terms
In addition to the words and phrases defined elsewhere in this
Agreement, as used in this Agreement, in any Schedule hereto, in
any amendment hereof, in any documents to be executed and delivered
pursuant to this Agreement and in any documents executed and
delivered in connection with the completion of the transactions
contemplated hereby, unless the context otherwise requires, the
following words and phrases shall have the following meanings,
respectively:
Accounts Receivable means all accounts receivable (including
those from instalment sales), trade accounts, notes receivable and
other book debts due or accruing due to the Vendor in connection
with the Business and the full benefit of all securities, if any,
for such accounts, notes or debts;
Affiliate has the meaning ascribed to such term in the
Ontario Act;
Arm s length has the meaning ascribed to such term in the Tax
Act;
Associate has the meaning ascribed to such term in the
Ontario Act;
Assumed Contracts means all Contracts, agreements, orders,
commitments and other engagements by or with third parties relating
to the Business which are included in the Purchased Assets
including, without limitation, the Customer Contracts and the
Equipment Leases;
Assumed Liabilities means the liabilities of the Vendor
relating to the Business as at the Effective Time which are to be
assumed by the Purchaser as more particularly set out in the
Closing Statement;
Audited Financial Statements means the audited consolidated
financial statements of the Vendor and the Subsidiary as at and for
the fiscal year ended December 31, 1999, consisting of a
consolidated balance sheet, a consolidated statement of income, a
consolidated statement of partners equity, and a consolidated
statement of cash flow, together with the notes thereto and the
report of the auditors thereon;
Business means the business of the Vendor which primarily
involves the operation of a wholesale wood products business
carried on by the Vendor principally from the Leased Premises;
Business Day means any day other than a day which is a
Saturday, Sunday or statutory holiday in the City of Toronto;
CFP Credit Line means the line of credit facility in the
maximum amount of $3,500,000 established in favor of the Vendor
with The Toronto-Dominion Bank (Kipling and Rexdale branch), under
the terms of the related credit facility agreement, a copy of which
is set out in Schedule 1.1(j);
CFP Loan means the loan payable by the Vendor to Joseph
Clement which is described in the loan statement attached as
Schedule 1.1(k);
Closing Date means May 31, 2000, or such other date as the
Vendor and Purchaser may agree upon in writing;
Closing Statement means the statement referred to in Section
3.8;
Closing Time means 2:00 p.m. (Toronto time) on the Closing
Date or such other time on the Closing Date as is mutually
acceptable to the Vendor and the Purchaser;
Condition of the Business means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs
and financial position of the Business;
Contaminate means any substance or material that is
prohibited, controlled or regulated under any Environmental Laws;
Contract means any agreement, indenture, contract, lease,
deed of trust, license, option, instrument or other commitment,
whether written or oral;
Control means, with respect to any corporation, the ownership
of more than 50% of the voting shares of that corporation,
including any shares which are voting only upon the occurrence of
a contingency where such contingency has occurred and is
continuing;
Customer Contracts means any and all Contracts entered into
between the Vendor and one or more third parties which are in
effect as at the date of this Agreement relating to the sale or
provision of goods by the Vendor to such third parties in
connection with the Business, including unfilled orders,
commitments and other engagements by or with such third parties,
all of which are listed in Schedule 1.1(s);
Deemed Loans means the deemed loans by the Partners to the
Vendor established in accordance with Section 9.6;
Deposit means the $100,000 deposit made by Value and held by
the Vendor s Solicitors on the terms set out in Section 3.3;
Effective Date means May 31, 2000;
Effective Time means 5:00 p.m. (Toronto time) on the
Effective Date;
Employment Contracts means the employment agreements to be
entered into between the Purchaser and each of the Partner
Principals effective the Effective Time in the form of the
employment agreements attached hereto as Schedule 1.1(x);
Encumbrances means mortgages, charges, pledges, security
interests, liens, encumbrances, actions, claims, demands,
restrictions and equities of any nature whatsoever or howsoever
arising and any rights or privileges capable of becoming any of the
foregoing;
Environmental Laws means all common, civil, federal,
provincial, territorial, regional, municipal or local laws
applicable in the Province of Ontario which relate to protection of
the environment, health and safety, or Hazardous Substances
contained in statutes or regulations or in policies, guidelines,
orders, directives or notices which have the force of law or
permits, approvals or court or other tribunal orders having
jurisdiction in the Province of Ontario over the Vendor, its assets
and the Business;
Equipment Leases means the personal property leases relating
to equipment and vehicles leased by the Vendor in relation to the
Business, complete copies of which are attached hereto as Schedule
1.1(aa);
Excluded Assets has the meaning ascribed thereto in Section
2.2;
Generally accepted accounting principles means the accounting
principles so described and promulgated by the Canadian Institute
of Chartered Accountants which are applicable as at the date on
which any calculation made hereunder is to be effective or as at
the date of any financial statements referred to herein, as the
case may be;
Governmental Authority means any federal, state, provincial,
regional or municipal government, in Canada or elsewhere, and any
person, agency, board, commission or authority of competent
jurisdiction, in Canada or elsewhere, exercising executive,
legislative, judicial, regulatory or administrative functions of,
or pertaining to, government;
Hazardous Substances means any Contaminate or pollutant or
any substance that when released to the natural environment is
likely to cause at some immediate or future time, material harm or
degradation to the natural environment or material risk to human
health and, without restricting the generality of the foregoing,
Hazardous Substances includes any pollutant, Contaminate, hazardous
waste or dangerous goods as defined by the Environmental Laws;
Intellectual Property has the meaning ascribed thereto in
subsection 2.1(h);
Interim Period means the period between the date of execution
of this Agreement and the Closing Time;
Inventories means all inventories of the Vendor of and
pertaining to the Business, including, without limiting the
generality of the foregoing, all finished goods, work in progress,
raw materials, and all other materials and supplies on hand to be
used or consumed in the production of products by the Business;
Leases means:
(a) the real property lease, together with all
amendments thereto, between the Vendor and the landlord there under
for the premises of the Vendor located at 5380 Maingate Drive,
Mississauga, Ontario, L4W 1R8, a complete copy of which is attached
hereto as Schedule 1.1(ii)(a); and
(b) the real property lease, together with all
amendments thereto, between the Vendor (as guarantor) and the
landlord there under for the premises of the Vendor located at 1265
Aerowood Drive, Mississauga, Ontario, a complete copy of which is
attached hereto as Schedule 1.1(ii)(a);
Leased Premises means the premises leased by the Vendor under
the Leases;
Letter of Intent means the letter of intent among Value, the
Vendor and Fred Cain dated August 11, 1999 and accepted on August
18, 1999, as amended by letters of the Vendor s Solicitors dated
September 29, 1999 and November 1, 1999 and by a letter agreement
dated December 17, 1999 between the Purchaser s Solicitors and the
Vendor s Solicitors on behalf of their respective clients, relating
to the transactions contemplated hereby and by the Share Purchase
Agreement;
Liabilities means all costs, expenses, charges, debts,
liabilities, claims, demands, Taxes and obligations, whether
primary or secondary, direct or indirect, fixed, contingent,
absolute or otherwise, including, without limitation, those arising
under any law, rule or regulation of any Governmental Authority,
any award of any arbitrator, court or other tribunal and any
Contract, arrangement, lease, commitment or undertaking;
New Leases means the new real property leases for the Leased
Premises to be executed and delivered at the Closing Time (but
effective as at the Effective Time) which shall include the terms
set out in Schedule 1.1(mm);
Ontario Act means the Business Corporations Act (Ontario), as
amended from time to time;
Parties means, collectively, Value, the Purchaser, the Vendor,
the Partners and the Partner Principals, and Party means any one
of them;
Partners means, collectively, all of the partners of the
Vendor, namely Treefield, Divadale, Ruislip and T.M.&C., and
Partner means any one of them;
Partner Principals means, collectively, V. Drevnig, Withers,
Engel and R. Drevnig, and Partner Principal means any one of them;
Partnership Agreement means the Contract which constitutes
the partnership agreement, as amended from time to time and to the
extent such agreement is in writing or under oral agreement,
forming the Vendor;
Permits means all permits, licenses, certificates, approvals,
authorizations, registrations or the like attainable from or
required by any Governmental Authority which are material and are
required under applicable law necessary for the conduct of the
Business or the utilization by the Vendor of the Purchased Assets;
Person means any individual, partnership, limited
partnership, corporation, joint venture, association, joint stock
company, trust, unincorporated organization or a government or an
agency thereof;
Prepaid Expenses means all prepaid expenses of or pertaining
to the Purchased Assets and the Business;
Prime Bank Rate means the commercial lending rate of interest,
expressed as an annual rate, which The Toronto-Dominion Bank quotes
in Toronto as the reference rate of interest (commonly known as
prime) for the purpose of determining the rate of interest that it
charges to its commercial customers for loans in Canadian funds;
Purchase Price has the meaning ascribed thereto in Section
3.1;
Purchased Assets has the meaning ascribed thereto in Section
2.1;
Purchaser s Solicitors means Aird & Berlis;
Release includes release, discharge, add, deposit, emit,
spill, leak, pump, pour, empty, inject, escape, leach, migrate,
disburse, dispose or dump;
Seabright means Seabright Wood Fabricators Limited, a
corporation incorporated under the laws of the Province of Ontario
which is an Affiliate of the Vendor;
Subsidiary means 655265 Ontario Limited, a wholly-owned
subsidiary of the Vendor;
Specified Amount has the meaning ascribed thereto in Section
3.1;
Share Purchase Agreement means the agreement dated the date
hereof among all of the Parties and Fred Cain relating to the
proposed purchase by the Purchaser of all of the issued and
outstanding shares in the capital stock of Seabright;
Tax Act means the Income Tax Act (Canada), as amended from time to
time;
Taxes means all taxes, assessments or other governmental
charges or imposts (including domestic or foreign, federal,
provincial, state or local income, withholding, sales use,
transfer, intangible, recordation, documentary, stamp, excise,
capital, business, goods or services, property, value added,
payroll or other taxes or customs duties, unemployment or workers
compensation premiums) and any interest or penalties on such taxes,
assessments, charges or imposts or in respect of such taxes,
assessments, charges or imposts;
Unaudited Financial Statements means, collectively, the
consolidated balance sheet of the Vendor as at December 31, 1998
and the consolidated statements of partners equity, income and
changes in financial position for the year then ended, together
with the review engagement report thereon and the notes thereto,
and the balance sheet and statement of income of the Vendor for the
nine-month period ended September 30, 1999, copies of which
statements are attached hereto as Schedule 1.1(ggg);
Value Shares means common shares in the capital stock of
Value;
Vendor Group means, collectively, the Vendor, the Partners,
the Partner Principals and their respective Associates and
Affiliates;
Vendor s Solicitors means Fogler, Rubinoff LLP; and
Warranty Claim means a claim made by any of the Parties based
on or with respect to the inaccuracy or non-performance or
non-fulfillment or breach of any representation, warranty or
covenant made by another Party contained in this Agreement or
contained in any document or certificate given in order or carry
out the transactions contemplated hereby.
Currency
Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in lawful money of Canada.
To the Best of Knowledge
To the best of the knowledge or to the knowledge means a
statement of the declarant s knowledge of the facts or
circumstances to which such phrase relates after having made
diligent enquiries and investigations in connection with such facts
and circumstances of all persons who could reasonably be expected
to have knowledge with respect thereto.
Choice of Law and Attorneys
This Agreement shall be governed by and constructed in
accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein. The Parties agree that, subject to the
arbitration provisions set forth in Article 14, the courts of such
province will have exclusive jurisdiction to determine all disputes
and claims arising between the Parties.
Gender and Number
Any reference in this Agreement to gender shall include all
genders and words used herein importing the singular number shall
include the plural and vice versa.
Interpretation Not Affected by Headings or Party Drafting
The division of this Agreement into articles, sections,
paragraphs, subparagraphs and clauses shall not affect the
construction or interpretation of this Agreement. The terms this
Agreement , hereof, herein, hereunder and similar expression refer
to this Agreement and the Schedules hereto and not to any
particular article, section, paragraph, subparagraph, clause or
other portion hereof and include any agreement or instrument
supplementary or ancillary hereto. Each Party acknowledges that
such Party and its or his legal counsel have reviewed and
participated in settling the terms of this Agreement, and the
Parties agree that any rule of construction to the effect that any
ambiguity is to be resolved against the drafting Party shall not be
applicable in the interpretation of this Agreement.
Schedules
The following are the Schedules attached to and incorporated
in this Agreement by reference and deemed to be a part hereof:
Description of Schedule Schedule No.
CFP Credit Line 1.1(j)
CFP Loan 1.1(k)
Customer Contracts 1.1(s)
Employment Contracts 1.1(x)
Equipment Leases 1.1(aa)
Leases 1.1(ii)
New Leases 1.1(mm)
Unaudited Financial Statements 1.1(ggg)
Machinery, Equipment (non-leased)
And Other Personal Property 2.1(a)
Vehicles 2.1(c)
Licenses and Permits 2.1(g)
Excluded Personal Assets 2.2(c)
Allocation of Purchase Price 3.4
Bank Accounts 4.9
Intellectual Property 4.12
Insurance 4.18
Employees 4.28
Encumbrances and Other Liabilities 4.34
Customers and Suppliers 4.36
Rebates and Allowances 4.42
ARTICLE
AGREEMENT TO PURCHASE THE PURCHASED ASSETS
Agreement to Purchase
Subject to the terms and conditions hereof, the Vendor agrees
to transfer, sell, assign, grant and convey to the Purchaser, and
the Purchaser agrees to purchase from the Vendor, as at and from
the Effective Time, all of the property and assets then owned by
the Vendor and used in connection with or otherwise relating to the
Business, of every kind and description and wherever situate
(collectively, the Purchased Assets) but excluding, for greater
certainty, the Excluded Assets, and, without limiting the
generality of the foregoing, the Purchased Assets shall include the
following:
Machinery and equipment. All machinery, equipment, tools,
supplies, furniture, furnishings, chattels and accessories of all
kinds used in connection with the Business including, without
limitation, computer hardware and software and those assets more
particularly described in Schedule 2.1(a);
Inventories. All Inventories owned by the Vendor;
Vehicles. All motor vehicles including, without limitation,
those more particularly described in Schedule 2.1(c);
Unfilled orders. The full benefit of all unfilled orders
received by the Vendor in connection with the Business which are in
existence as at the Effective Time;
Forward commitments. The full benefit of all forward
commitments by or to the Vendor for inventories, supplies,
equipment or services for use in connection with the Business
(whether or not there are any Contracts in writing with respect
thereto) which are in existence as at the Effective Time;
Contracts. The full benefit of all Contracts which are in
existence as at the Effective Time to which the Vendor is entitled
in connection with or related in any way to the carrying on by it
of the Business and not otherwise specifically referred to in this
Section including, without limitation, the Equipment Leases, the
Leases and any other rights under leases of personal property, the
Customer Contracts and all orders or Contracts for the provision of
goods or services, whether as a buyer or seller, and distribution
and agency agreements;
Licenses and permits. All licenses, Permits, approvals,
consents, negotiations, certificates and other authorizations
including, without limitation, those more particularly described in
Schedule 2.1(g);
Intellectual Property. All rights to and interest in: (A) all
trade-marks including the goodwill attaching to such trade-marks
related to the Business; (B) all trade names, brand names, brands
and slogans related to the Business; (C) all inventions, patents,
patent rights and patent applications (including all reissues,
divisions, continuations and extensions of any patent or patent
application) related to the Business; (D) all copyrights,
registrations and applications for copyrights (and all future
income from such copyrights) related to the Business; (E) all
rights and interests in and to designs, know-how, manufacturing,
engineering and other drawings and manuals, technology, blueprints,
patterns, dies, research and development reports, technical
information, technical assistance, engineering data, design and
engineering specifications, and similar materials recording or
evidencing expertise related to the Business; (F) all rights to
damages and profits by reason of the infringement of any of the
intellectual property listed in items (A) to (E); and (G) all other
intellectual and industrial property rights throughout the world
related to the Business (collectively, the Intellectual Property);
Books and Records. Subject to the terms hereof, all books,
records, files and papers related to the Business, including,
without limitation, drawings, engineering information, manuals and
data, sales and advertising materials, customer lists, personnel
and employment and other records (other than any personal records
of the Partners and the Partner Principals);
Accounts Receivable. The Accounts Receivable;
Claims. All claims, refunds, causes of action, causes in
action, rights of recovery and rights of set-off of every kind and
nature, except those relating to the Excluded Assets;
Leasehold Improvements. All leasehold improvements on the
Leased Premises;
Prepaid Expenses. The Prepaid Expenses;
Cash. All cash on hand;
Goodwill. All of the goodwill of the Business together with
the exclusive right to the Purchaser to represent itself as
carrying on such Business in continuation of and in succession to
the Vendor and the right to use any words indicating that such
Business is so carried on, including the exclusive right to use the
name Cutler Forest Products, or any variation thereof, as part of
the name of or in connection with the Business or any part thereof
carried on or to be carried on by the Purchaser, and also including
all restrictive agreements and negative covenant agreements which
the Vendor may have with its employees, past or present, the right
of the Vendor to the telephone and facsimile number or numbers
listed in the name of the Vendor and/or any trade name used by the
Vendor in such Business, any Internet identifications in respect of
the Business, customer lists and all other books and records
relating to the Business including, without limiting the generality
of the foregoing, Inventory records, Accounts Receivable records,
records pertaining to customers requirements, customer literature,
advertising material, marketing and cost records, manufacturing
data, manufacturing and production records, employee manuals,
measurement of the work force records, personnel records, supply
records, all materials relating to manufacturing planning and
correspondence files (together with, in the case of any such
information that is stored electronically, the media on which the
same is stored);
Indemnities. The full benefit of all indemnities, warranties
and agreements relating to or received by the Vendor in connection
with the acquisition or modification of any of the Purchased
Assets;
Insurance Benefits. Any benefits payable to the Vendor under
all insurance policies relating to the Business or the Purchased
Assets in respect of claims based on occurrences prior to the
Effective Time;
Warranty Rights and Maintenance Contracts. The full benefit
of all warranties and warranty rights (expressed and implied)
against manufacturers or sellers which apply to any of the
Purchased Assets and all maintenance Contracts on machinery,
equipment and the other Purchased Assets, subject to the Purchaser
s review and acceptance of such Contracts prior to the Closing
Date;
Shares of Subsidiary. All of the issued and outstanding
shares in the capital stock of the Subsidiary; and
Other property and assets. All other property and assets
owned by the Vendor or to which it is entitled and used in
connection with the Business carried on by it.
Excluded Assets
Notwithstanding the provisions of Section 2.1, there shall be
specifically excluded from the Purchased Assets the following
(collectively, the Excluded Assets):
All Contracts of employment with employees of the Vendor;
The rights of the Vendor relating to this Agreement and the
Share Purchase Agreement;
The personal assets of the Partners and the Partner Principals
set out in Schedule 2.2(c);
A policy of life insurance held by the Vendor on V. Drevnig,
which policy was issued by Hartford Insurance Co. as Policy No.
0127052;
A policy of life insurance held by the Vendor on Fred Cain,
which policy was issued by Canadian General Life Assurance Co. as
Policy No. 0435153;
A policy of life insurance held by the Vendor on Engel, which
policy was issued by Canadian General Life Assurance Co. as Policy
No. 0435156;
A policy of life insurance held by the Vendor on Withers,
which policy was issued by Canadian General Life Assurance Co. as
Policy No. 0435162;
A policy of life insurance held by the Vendor on R. Drevnig,
which policy was issued by Canadian General Life Assurance Co. as
Policy No. 0435154; and
All of the shares in the capital stock of Seabright which are
owned by the Vendor.
ARTICLE
CALCULATION AND PAYMENT OF THE PURCHASE PRICE
Purchase Price
The purchase price (the Purchase Price) for the Purchased
Assets shall be equal to the aggregate of the following amounts:
the remainder obtained when $7,500,000 is reduced by the
Specified Amount and, for the purposes hereof, Specified Amount
means the amount (if any) by which:
$3,024,636
exceeds
the net asset value of the Purchased Assets (i.e., the
total asset value of the Purchased Assets minus the Assumed
Liabilities) determined in accordance with generally accepted
accounting principles, consistently applied, as at the Effective
Time;
provided that, for greater certainty, if the net asset value of the
Purchased Assets (i.e., the total asset value of the Purchased
Assets minus the Assumed Liabilities) determined in accordance with
generally accepted accounting principles, consistently applied, as
at the Effective Time is equal to or greater than the amount
specified in paragraph 3.1(a)(i), the Specified Amount shall be
zero; and
that number of Value Shares which is equal to the quotient
obtained when the sum of $375,000 is divided by the Value Shares
Closing Price and, for the purposes hereof, Value Shares Closing
Price means $0.435.
Payment of Purchase Price
At the Closing Time, the Purchaser shall, in addition to any
other payments which may be required to be made by it at that time
pursuant to this Agreement, pay the cash portion of the Purchase
Price specified in subsection 3.1(a) to or to the order of the
Vendor by certified cheque, bank draft or other form of immediately
available funds, and Value shall issue and deliver to or to the
order of the Vendor a share certificate or share certificates
representing the number of Value Shares set out in subsection
3.1(b).
Deposit
The Parties acknowledge that Value has paid the Deposit as a
deposit for application against cash portion of the Purchase Price.
The Deposit shall continue to be held in trust by the Vendor s
Solicitors in an interest bearing account and will be dealt with,
on the direction of the Vendor, in accordance with the following
provisions:
if the purchase and sale of the Purchased Assets is completed
at the Closing Time, the Deposit plus all interest earned thereon
will be released from trust and applied towards satisfaction of
the cash portion of the Purchase Price specified in subsection
3.1(a);
if the purchase and sale of the Purchased Assets is not
completed for any reason, other than the failure of the Purchaser
or Value to satisfy any of the conditions set out in Section 8.3
which are within the reasonable control of the Purchaser and Value,
the Deposit plus all interest earned thereon will be released
forthwith from trust and returned to Value; or
if the purchase and sale of the Purchased Assets is not
completed due to the failure of the Purchaser or Value to satisfy
any of the conditions set out in Section 8.3 which are within the
reasonable control of the Purchaser and Value, then the Deposit
plus all interest earned thereon will be released from trust and
forfeited and paid to the Vendor in full satisfaction of all
damages, losses, costs and expenses incurred by the Parties other
than the Purchaser and Value, and of any other remedy or claim
against the Purchaser or Value as a result of the sale of the
Purchased Assets not being completed.
Allocation of Purchase Price
The Vendor and the Purchaser agree that the Purchase Price
shall be allocated among the Purchased Assets in accordance with
Schedule 3.4 and that each of them will execute such elections
and/or agreements as may be required pursuant to the Tax Act, the
Corporations Tax Act (Ontario) (or similar applicable legislation
in other jurisdictions) or any other statute or regulation which
may require the same. In addition, the Vendor and the Purchaser
agree to prepare and file their respective tax returns in a manner
consistent with the allocations set out in Schedule 3.4. If any
Party fails to file its tax returns as aforesaid, it shall
indemnify and save harmless the others of them in respect of any
additional tax, interest, penalty and legal and/or accounting costs
paid or incurred by the other of them as a result of the failure of
the former Party to file as aforesaid.
The Vendor and the Purchaser will jointly execute in
prescribed form and each of them will file promptly following the
Closing Date an election under Section 22 of the Tax Act with
respect to the Accounts Receivable forming part of the Purchased
Assets. Such election will designate the portion of the Purchase
Price allocated to the Accounts Receivable pursuant to Schedule 3.4
as the consideration paid therefor by the Purchaser.
Liabilities Assumed
In addition to the payment by the Purchaser of the Purchase
Price, the CFP Loan and the Deemed Loans at the Closing Time, as
further consideration for the consummation of the transactions
contemplated by this Agreement, but subject to the provisions of
Section 3.6, the Parties agree that the Purchaser shall assume and
agree to thereafter pay when due and discharge all Liabilities of
the Vendor in relation to the Business including, without
limitation, those Liabilities related to the Business which were in
existence as at the Effective Time and those Liabilities related to
the Business arising subsequent to the Effective Time together with
the following (all of such aforementioned and following Liabilities
being collectively referred to as the Assumed Liabilities):
all unfilled orders of the Business in existence as at the
Effective Time (but excluding, at the option of the Purchaser,
those entered into by the Vendor during the Interim Period in
breach of the covenants of the Vendor contained herein);
all forward commitments of the Business as at the Closing Time
(but excluding, at the option of the Purchaser, those entered into
by the Vendor during the Interim Period in breach of the covenants
of the Vendor contained herein);
all obligations under the Employee Plans referred to in
subsection 4.28(c) arising subsequent to the Effective Time in
relation to those employees of the Business who accepted the offer
of employment made by the Purchaser as provided for in subsection
9.1(a);
all of the obligations of the Vendor to its employees earned
with respect to services provided by such employees from and after
the Effective Time; provided that, for greater certainty, all
amounts payable to employees of the Vendor who do not accept
employment with the Purchaser shall be strictly for the account of
the Vendor;
all of the obligations and Liabilities of the Vendor pursuant
to:
the Material Contracts referred to in Section 4.23
hereof; and
all of the Contracts to which the Vendor is a party and
which relate to the operations of the Business or in respect of
which the Vendor has rights and obligations and which relate to the
operations of the Business, provided such Contracts have been
entered into by the Vendor in the ordinary course of business, if
either (A) existing at the date of this Agreement but not
specifically referred to in Section 4.23 because they are not
material, or (B) entered into during the Interim Period in
accordance with (or not in contravention of, as the case may be)
the covenants of the Vendor contained herein or with the consent of
the Purchaser; and
the aggregate, without duplication, of (i) all accounts
payable of the Business as at the Effective Time; and (ii) all bank
indebtedness of the Vendor as at the Effective Time including the
CFP Credit Line to a maximum amount (including accrued interest) of
$3,500,000.
Liabilities Not Assumed
Except as provided for in Section 3.5, the Purchaser shall not
be deemed by anything contained in this Agreement or otherwise to
have assumed any Contracts, Liabilities or obligations of the
Business or the Vendor, whether fixed or contingent, known or
unknown, which unassumed Contracts, Liabilities and obligations
(the Excluded Liabilities ) shall be and continue to be
Liabilities and obligations of the Vendor, who agrees to indemnify
the Purchaser and hold it harmless with respect to such Excluded
Liabilities. The Excluded Liabilities include, but are not limited
to:
any Liability of the Vendor relating to the operation of the
Business or otherwise arising prior to the Effective Time (except
as otherwise provided for in Section 3.5) or thereafter if arising
as a result of the breach by the Vendor of the provisions of this
Agreement, including but not limited to Liability for any income
tax, real or personal property tax, franchise tax, payroll tax and
any other Taxes whatsoever of the Vendor; and
all Liabilities to employees of the Business, past or present,
up to the Effective Time relating to their employment with the
Vendor or resulting from termination of their employment by the
Vendor, including, without limitation, any Liabilities relating to
salary or pension and/or benefit plans.
G.S.T.
The Vendor represents and warrants that it is a registrant
under Part IX of the Excise Tax Act (the ETA) and that its G.S.T.
registration number is R122418320 and agrees to make with the
Purchaser the joint election contemplated by subsection 167(1) of
the ETA, in order that no G.S.T. is payable by the Purchaser nor
required to be remitted by the Vendor in respect of the
transactions contemplated by this Agreement.
The Purchaser represents and warrants that prior to the
Closing Date it will be a registrant under Part IX of the ETA and
agrees to make with the Vendor the joint election contemplated by
subsection 167(1) of the ETA in order that no G.S.T. is payable by
the Purchaser nor required to be remitted by the Vendor in respect
of the transactions contemplated by this Agreement.
Preparation and Delivery of Closing Statement
At or prior to the Closing Time, the Vendor shall prepare and
deliver to the Purchaser a statement (the Closing Statement )
setting forth, in reasonable detail, the following:
an estimate of the net asset value of the Purchased Assets as
at the close of business on April 30, 2000 (i.e., the total asset
value of the Purchased Assets minus the total amount of the Assumed
Liabilities) determined in accordance with generally accepted
accounting principles, consistently applied;
an estimate of the amount of the net earnings of the Business
for the period commencing January 1, 1999 and ending at the close
of business on April 30, 2000, such net earnings to be determined
for such period in accordance with generally accepted accounting
principles, consistently applied, before deduction for all
depreciation and amortization expenses (and such estimated amount
of the net earnings of the Business is referred to in this
Agreement as the Net Earnings Amount );
a detailed list of the Assumed Liabilities as at the close of
business on April 30, 2000; and
a list of the Accounts Receivable as at the close of business
on April 30, 2000 which are included in the Purchased Assets.
The Parties agree that all payments to be made to the Vendor
by the Purchaser and Value, respectively, at the Closing Time
pursuant to this Agreement shall be based on the amounts set forth
in the Closing Statement. The Parties further agree that the
amounts set forth in the Closing Statement shall be subject to
adjustment and updating to the Effective Time as provided for in
Section 9.7 hereof.
ARTICLE
REPRESENTATIONS AND WARRANTIES
OF THE VENDOR, THE PARTNERS AND THE PARTNER PRINCIPALS
Each of the Vendor, the Partners and the Partner Principals,
jointly and severally, represents and warrants to the Purchaser as
follows and acknowledges that the Purchaser is relying upon such
representations and warranties in connection with the purchase by
the Purchaser from the Vendor of the Purchased Assets.
Formation
The Vendor is a general partnership formed and subsisting
under the laws of the Province of Ontario and has all requisite
power and authority as a single entity to own or lease its
property, to carry on the Business as now being conducted by it, to
enter into this Agreement and to perform its obligations hereunder.
The Vendor is duly qualified to do business in each jurisdiction in
which the nature of the Business carried on by it or the property
and assets owned or leased by it makes such qualification necessary
and is in good standing in every such jurisdiction. The only
provincial jurisdictions in which the Vendor carries on the
Business are the Provinces of Ontario, British Columbia and Quebec
(the latter two provinces as to sales of products of the Business
only through sales agents located in such latter two provinces).
Authorization
The execution and delivery of this Agreement and all of the
transactions and actions (required of the Vendor) contemplated
hereby have been duly authorized by all necessary action by the
Vendor under the Partnership Agreement, and constitute a legal,
valid and binding obligation of the Vendor and the Partners
enforceable against it and them by the Purchaser in accordance with
its terms. This Agreement has been duly executed and delivered by
all of the Parties other than the Purchaser and Value.
No Other Agreements to Purchase
No person, other than the Purchaser and Value pursuant to this
Agreement, has any written or oral agreement or option or any right
or privilege (whether by law, pre-emptive or contractual) capable
of becoming an agreement or option for the purchase from the Vendor
of any of the Purchased Assets, other than pursuant to purchase
orders accepted by the Vendor in the ordinary course of the
Business.
No Violation
None of the carrying on of the Business, the execution and
delivery of this Agreement by the Vendor nor the observance and
performance of the terms and provisions of this Agreement on the
part of the Vendor to be observed and performed by it, constitutes
a violation of applicable law or a violation or a breach of the
Partnership Agreement or any provision of any Contract or other
instrument to which any of the Vendor Group is a party or by which
any of them is bound, or of any order, writ, injunction, decree,
statute, rule, by-law, constating documents or regulation
applicable to any of the Vendor Group, or constitutes a default (or
would with the passage of time or the giving of notice, or both,
constitute a default) under any Contract or other instrument to
which any of the Vendor Group is a party or by which any of them is
bound.
Sufficiency and Condition of Purchased Assets
Except as disclosed in this Agreement or any Schedule hereto,
the Purchased Assets owned or leased by the Vendor are sufficient
for the Vendor to carry on the Business. All of the Purchased
Assets owned and used by the Vendor in connection with the Business
are in good operating condition and in a state of good repair and
maintenance, fully operational and free of defect, except for
reasonable wear and tear having regard to their age and usage.
With the exception of Inventory in transit and work-in-process in
the hands of outside sub-contractors, all of the tangible assets of
the Vendors are situate on the Leased Premises. The Vendor does
not lease any of its equipment except as disclosed in Section 4.7.
Title to Personal and Other Property
Except as disclosed in Schedule 4.34 and except for the
interests of the lessors under the Equipment Leases and the Leases,
the Vendor owns the Purchased Assets with good and marketable title
thereto free and clear of any and all Encumbrances whatsoever and
of any rights or privileges capable of becoming Encumbrances, and
the Vendor is entitled to sell, transfer and assign good and
marketable title to the Purchased Assets to the Purchaser, free and
clear of any such Encumbrances, rights and privileges.
Equipment Leases
Schedule 1.1(aa) describes all leases of equipment and
vehicles used in or relating to the Business. Complete and correct
copies of the Equipment Leases form part of Schedule 1.1(aa). The
Vendor is entitled to all rights and benefits as lessee under the
Equipment Leases, and the Vendor has not sublet, assigned, licensed
or otherwise conveyed any rights in the Equipment Leases or in the
property leased thereunder to any other person. All payments and
other obligations required to be paid and performed by the Vendor
to the date hereof under the Equipment Leases have been paid and
performed; the Vendor is not in default of any of its obligations
under the Equipment Leases; and, to the actual knowledge of the
Vendor, the Partners and the Partner Principals, and without
independent investigation or inquiry, none of the lessors nor any
other parties to the Equipment Leases is in default of any of its
respective obligations under the Equipment Leases. The Vendor is
entitled to assign all of its right and interest under the
Equipment Leases and in and to the property leased thereunder to
the Purchaser subject to obtaining the consents of the respective
lessors under the Equipment Leases. Subject to obtaining such
consents, the terms and conditions of the Equipment Leases will not
be affected by, nor will any of such leases be in default as a
result of, the completion of the transactions contemplated hereby.
Partnerships, Joint Ventures or Subsidiaries
The Vendor as an entity is not a partner or participant in any
partnership, joint venture, profit sharing arrangement or other
form of business combination, other than with respect to its
relationship with Seabright. The only subsidiary of the Vendor is
the Subsidiary, which company is incorporated and validly
subsisting under the laws of the Province of Ontario, all of the
shares of which are held by the Vendor, and which has no assets or
Liabilities which are or could be material to the Business and the
operation thereof other than amounts owing by the Vendor to the
Subsidiary which amounts will be repaid by the Vendor prior to the
Effective Time.
Deposit Accounts and Safe Deposit Boxes of the Vendor
The name and address of each bank, trust company or similar
institution in which the Vendor has one or more accounts or one or
more safety deposit boxes, the number of each such account and
safety deposit box and the names of all persons authorized to draw
thereon or to have access thereto are as set out in Schedule 4.9.
Leases
The Leases are the only leases under which the Vendor leases
any real property relating to the Business. A complete and correct
copy of each of the Leases, together with all amendments thereto,
is attached as Schedule 1.1(ii). The Vendor is entitled to all
rights and the benefits as lessee under the Leases and the Vendor
has not sublet, assigned, licensed or otherwise conveyed any rights
in the Leased Premises or the Leases to any other person. All
rental and other payments and other obligations required to be paid
and performed by the Vendor to the date hereof pursuant to the
Leases have been duly paid and performed; the Vendor is not in
default of any of its obligations under the Leases; and the
landlord (or any other party) to the Leases is not in default of
any of its obligations under the Leases. Except for any legal
non-conforming uses (if any), the use by the Vendor of the Leased
Premises is not in breach of any building, zoning or other statute,
by-law, ordinance, regulation, covenant, restriction or official
plan. The Vendor has adequate rights of ingress to and egress from
the Leased Premises for the operation of the Business in the
ordinary course.
Leased Premises
To the knowledge of the Vendor, the Partners and the Partner
Principals, there are no structural defects or weaknesses in the
buildings and improvements on the Leased Premises including,
without limitation, in any of the structural elements thereof or in
any of the mechanical, electrical, or HVAC or sprinkler systems
therein.
The buildings and all other improvements, fixtures and
structures located on the Leased Premises (including all walls,
roofs, floors, subfloors, foundations, partitions and ceilings) and
the pavement, sidewalks, driveways and parking areas situate upon
the Leased Premises are in good working order and sound condition
and in a good state of repair and maintenance, reasonable wear and
tear only excepted, and free from all structural defects,
weaknesses and leakages, and the elevators, if any, and equipment
and all plumbing, drainage, electrical systems and all wiring and
mechanical equipment (including all heating, ventilating and
air-conditioning equipment and related accessories and
installations) are in good working order and repair, reasonable
wear and tear only excepted.
All hydro, water, sewer, gas, electric, telephone, drainage
and other utility equipment, facilities and services and all
mechanical systems, in each case as required by law and/or
necessary for the proper operation of the Leased Premises as it is
now being operated, are installed and connected pursuant to valid
permits, and are adequate to service the Leased Premises.
All buildings, fixtures, structures and other improvements
upon the Leased Premises and the purposes for which they are
currently used by the Vendor comply in all respects with all
relevant governmental laws, by-laws, ordinances, requirements,
rules and regulations (including municipal and provincial fire
regulations and pollution control regulations) and with Fire
Underwriters regulations.
The Vendor has not received any notice from any insurance
carrier of defects or inadequacies in the Leased Premises which, if
not corrected, could result in termination of insurance coverage or
an increase in the cost thereof, and there are no such defects or
inadequacies.
There has not been received by the Vendor, or to the knowledge
of the Vendor, the Partners and the Partner Principals by anyone on
behalf of the Vendor, any notice with respect to any by-law change
affecting the Leased Premises nor any notice relating to any
threatened or pending condemnation or expropriation of the Leased
Premises from any Governmental Authority, and, to the knowledge of
the Vendor, the Partners and the Partner Principals, there are no
pending or threatened requests, applications or proceedings to
alter or restrict the zoning or other use restrictions applicable
to the Leased Premises or changes or events which might curtail or
interfere with the use of such premises.
Intellectual Property
The Vendor is entitled to use, without payment of any royalty
or other fee (except as noted in Schedule 4.12), all Intellectual
Property now used by it in the course of carrying on the Business.
Schedule 4.12 contains a complete and accurate list of all such
Intellectual Property, together with full registration and other
particulars thereof, including any fees payable in connection
therewith. To the knowledge of the Vendor, the Partners and the
Partner Principals: (a) the use of the Intellectual Property used
by the Vendor in connection with the Business has never been called
into question or challenged; and (b) the Vendor is not infringing
upon any industrial or intellectual property rights of any other
person. The Vendor has not granted any right, title or interest in
and to the Intellectual Property used by it in connection with the
Business to any other person. The Vendor has not received any
notice (written or oral) that, and is not otherwise aware that, any
person claims that the conduct of the Business infringes upon the
industrial or intellectual property rights of any person.
No Litigation
There are no actions, suits or proceedings pending or
threatened against or affecting the Vendor or the Business at law
or in equity or before any Governmental Authority.
Books and Records
The books of account and financial records of the Vendor have
been kept in accordance with generally accepted accounting
principles and procedures on a basis consistent with those of
preceding accounting periods and fairly and correctly set out and
disclose in all material respects the current financial position of
the Vendor and all transactions of the Vendor have been accurately
recorded in such books and records. All vacation pay, bonuses,
commissions and other emoluments relating to each of the employees
of the Business have been accrued to date in such books.
Unaudited Financial Statements
The Unaudited Financial Statements
have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with those of
preceding fiscal periods;
present fully, accurately and correctly in all material
respects the assets, liabilities and financial condition of the
Vendor as at the relevant dates and the results of its operations
and the changes in its financial position for the relevant periods;
are in accordance with the books and records of the Vendor:
contain and reflect all necessary adjustments for an accurate
presentation of the results of operations and the financial
condition of the Business for the periods covered thereby; and
contain and reflect adequate provision or allowance for all
reasonably anticipated liabilities, expenses and losses.
Unfilled Orders
All unfilled orders of the Business, whether or not there are
any Contracts in writing with respect thereto, have been accepted
by the Vendor in the ordinary course of the Business and upon terms
and conditions consistent with the Vendor s usual past practices.
Forward Commitments
All forward commitments by or to the Vendor for Inventories,
supplies, equipment or services, whether or not there are any
Contracts in writing with respect thereto, which are in existence
have been entered into by the Vendor in the ordinary course of the
operation of its Business and upon terms and conditions consistent
with its usual past practices. There are no material forward
commitments for Inventories, supplies, equipment or services.
Insurance
All of the Purchased Assets are insured for the full
replacement value thereof subject to applicable deductibles. All
such policies insure the Purchased Assets against loss or damage by
all insurable risks and hazards (other than theft). Subject to any
interest therein of lenders to the Vendor, the proceeds of such
policies are and shall continue during the Interim Period to be
fully payable to the Vendor. All premiums in connection with such
policies are fully paid. Annexed hereto as Schedule 4.18 is a true
and complete schedule setting forth all insurance policies
(specifying the insurer, the amount of the coverage, the type of
insurance, the amount of deductible, if any, the policy number and
any pending claims thereunder) maintained by the Vendor on the
Purchased Assets and true and complete copies of the most recent
inspection reports, if any, received from insurance underwriters as
to the condition of the Purchased Assets. The Vendor is not in
default with respect to any of the provisions contained in any such
insurance policy and has not failed to give any notice or present
any claim under any such insurance policy in a due and timely
fashion. There have been no material claims under any such
insurance policy with respect to the Business during the past 12
months.
No Adverse Changes
Since April 30, 1999 there has been no material adverse change
in the affairs, business, prospects, liabilities, assets,
operations or condition of the Business, financial or otherwise,
including without limitation, changes arising as a result of any
legislative or regulatory change, any revocation, renunciation or
repudiation of all or any part of any Contract, license or right to
do business, fire, explosion, accident, casualty, labor trouble or
act of God.
Business Carried on in Ordinary Course
Since December 31, 1998 the Vendor has carried on the Business
in the ordinary course and has not done any act or suffered
anything to be done which would in any way materially diminish the
value of the Purchased Assets or the Business, (excepting however,
such diminishment, if any, as would result in an adjustment under
subsection 3.1(a)). Without limiting the generality of the
foregoing, since December 31, 1998 the Vendor has:
continued to pay, satisfy and discharge its obligations and
liabilities in the ordinary course of business;
not disposed of any of the Inventories, other than in the
ordinary course of business;
not sold or transferred any tangible assets (other than
inventory sold in the ordinary course) or cancelled or released any
debts or claims, except in each case, in the ordinary course of
business or not exceeding $10,000 in any single transaction or
$100,000 in the aggregate;
not sold, leased, mortgaged, pledged or otherwise encumbered
or disposed of any of the assets or properties of or relating to
the Business, except in the ordinary course of business;
not purchased or agreed to purchase, nor leased or agreed to
lease, nor acquired or agreed to acquire any material items or
amounts of additional assets or property, except for purchases of
materials and supplies for use in the ordinary and usual conduct of
the course of the Business;
not suffered any material damage, destruction or loss, whether
or not covered by insurance;
not sold, assigned, transferred, encumbered or granted any
rights with respect to copyright, trademarks, trade names,
licenses, franchises or other intangible assets;
not incurred any Liability whatsoever, absolute or contingent,
secured or unsecured, other than current Liabilities in the
ordinary course of the Business and those set out in Schedule 4.34,
and not entered into any transaction or into any Contract
whatsoever, other than in the ordinary course of the Business; or
except in the case of certain obligations of Seabright, not
assured, guaranteed or otherwise become liable for the obligations
of any other person.
Capital Expenditures
No material capital expenditures or leasehold improvements
have been made in connection with the Business since December 31,
1998 and none are planned.
No Expropriation
No part of the Purchased Assets has been taken or expropriated
by any Governmental Authority; no notice or proceeding in respect
thereof been given or commenced nor is the Vendor actually aware of
any intent or proposal to give any such notice or continuance under
any such proceeding.
Material Contracts
Except as disclosed in Sections 4.7 and 4.10 and Schedule
1.1(s), the Vendor is not a party to, bound by, or entitled to
rights or bound by obligations under, any material Contracts,
undertakings, commitments, letters of intent, understandings,
licenses, instruments, arrangements, leases or other documents
(oral or written) (all of the aforesaid being hereinafter called
Material Contracts ) or any amendments, modifications or
supplements thereto which in any way affect the Business (other
than those entered into in the ordinary course of business which
involve a cost, expenditure or Liability of less than $5,000 for
each such Material Contract and which are terminable by the Vendor
on not more than 30 days notice without financial or other
Liability). There are no Material Contracts pursuant to which the
Vendor has granted a right to use any personal property comprising
part of the Purchased Assets to any other person. The Vendor is
not in default in any material respect of any material obligation
under any Material Contract to which it is a party or by which it
is bound. There exists no state of facts, conditions, events or
circumstances which, after notice or lapse of time or both, would
constitute a material default of any material obligation under any
Material Contracts by the Vendor or by any other party thereto, and
all Material Contracts are now in good standing and in full force
and effect and the Vendor is entitled to all of its benefits
thereunder. The Vendor has not made any assignment of its rights
under the Material Contracts. True and complete copies of all
written Material Contracts listed in Schedule 1.1(s) and an
accurate summary description of all the material terms of all oral
Material Contracts listed therein have been provided to the
Purchaser. None of the written Material Contracts have been
amended or modified except pursuant to a written document, complete
and accurate copies of which are set out in Schedule 1.1(s). Each
written Material Contract has been validly executed and delivered
by the Vendor and the Vendor is entitled to all of the benefits
under each Material Contract.
Compliance with Laws; Government Authorization
The Vendor has complied in all material respects with all
material laws, statutes, ordinances, regulations, rules, by-laws,
judgments, decrees or orders applicable to the Business or the
Purchased Assets. Schedule 2.1(g) sets out a complete and accurate
list of all licenses, Permits, approvals, consents, certificates,
registrations and authorizations (whether governmental, regulatory
or otherwise) (the Licenses ) held by or granted to the Vendor,
and there are no other material licenses, Permits, approvals,
consents, certificates, registrations or authorizations necessary
to carry on the Business or to own or lease any of the Purchased
Assets. Each License is valid, subsisting and in good standing and
the Vendor is not in material default or material breach of any
License and, to the knowledge of the Vendor, the Partners and the
Partner Principals, no proceeding is pending or threatened to
revoke or limit any License. The Vendor has provided a true and
complete copy of each License and all amendments thereto to the
Purchaser.
Consents and Approval
Except as may be required pursuant to any presently existing
banking and loan arrangements with The Toronto-Dominion Bank, there
is no requirement to make any filing with, give any notice to or to
obtain any license, Permit, certificate, registration,
authorization, consent or approval of any Governmental Authority as
a condition to the lawful consummation of the transactions
contemplated by this Agreement, except for the filings,
notifications, licenses, Permits, certificates, registrations,
consents and approvals that relate solely to the identity or
jurisdiction of the Purchaser or Value, the nature of any business
carried on by the Purchaser or Value or to the issuance of Value
Shares as part of the Purchase Price. Except as may be required
pursuant to any presently existing banking and loan arrangements
with The Toronto-Dominion Bank, there is no requirement under any
Contract relating to the Business or the Purchased Assets to which
the Vendor is a party or by which it is bound to give any notice
to, or to obtain the consent or approval of, any party to such
Contract relating to the consummation of the transactions
contemplated by this Agreement except for the notifications,
consents and approvals described in Sections 4.7 and 4.10.
Non-Arm s Length Transactions
Other than the rights of the landlord under the Leases and
those rights to be granted to the landlord under the New Leases,
none of the Vendor Group, other than the Vendor:
owns, directly or indirectly, in whole or in part, any
property that the Vendor uses in the operation of the Business
forming a part of the Purchased Assets, which is to be conveyed to
the Purchaser pursuant to this Agreement; or
has any cause of action or other claim whatsoever against, or
owes any amount to, the Vendor in connection with the Business,
except for any Liabilities disclosed and consented to by the
Purchaser under the terms of this Agreement and claims in the
ordinary and normal course of the Business, such as for accrued
vacation pay and accrued benefits under the Employee Plans (as
hereinafter defined).
Environmental
The Vendor and the Business, its facilities and properties are
currently in material compliance with all Environmental Laws and
Permits. Further, the Vendor has not received any notice of
non-compliance which has not been fully complied with or satisfied.
The Vendor has obtained all Permits required under
Environmental Laws for the operation of the Business as it is
presently being conducted. All such Permits are valid and in full
force and effect.
The Vendor has not used the Leased Premises or permitted them
to be used, to generate, manufacture, refine, treat, transport,
store, handle, Release, transfer, produce or process Contaminants
except in compliance with all Environmental Laws and Permits
relating thereto.
The Vendor has not caused or permitted the Release of any
Contaminants on the Leased Premises in violation of any
Environmental Law or Permit which has not been remedied in
accordance with applicable law.
The Vendor has not received a notice that has not been fully
resolved that the Vendor is a party potentially responsible to
commence clean-up or remedial action or to prepare studies, action
plans or clean-up strategies in respect of the environmental
condition of its Business facilities or properties. The Vendor has
not received any request for information in connection with any
inquiry or investigation by any Governmental Authority concerning
environmental matters that have not been fully resolved.
The Vendor has not received any notice or other written
communication that the Leased Premises are located within an
environmentally sensitive area as determined and made public by any
Governmental Authority.
Employee Compensation
Schedule 4.28 hereto contains a complete list and description
of:
all Contracts or arrangements for the employment of any
officer, employee, agent or consultant of the Vendor;
a complete list of all employees of the Vendor, their salaries
and wage rates (including salary increases to take effect after the
Closing Date), their positions and responsibilities, and their
length of service and particulars of any Contracts, arrangements or
understandings, written or oral, with them; and
all bonus, deferred compensation, profit sharing, equity
option, equity purchase, hospitalization insurance, vacation policy
or other plans or arrangements providing employee benefits or
incentives (other than mandatory government plans) ( Employee Plans
).
All of the plans and arrangements referred to in this Section
are in good standing and the Vendor has made all payments required
to be made by it in connection therewith. The total cost to the
Vendor for the 1998 calendar year of the medical and group health
plan maintained by it for its employees is set out in Schedule
4.28. The Vendor has no severance plans or other plans providing
pension or other benefits for retired employees. A copy of all
employment information provided to the Vendor s employees is
attached as part of Schedule 4.28. No salary increases have been
committed to by the Vendor except as disclosed in Schedule 4.28.
All of the plans and arrangements listed and described in Schedule
4.28 have been operated by the Vendor in material compliance with
all applicable laws and regulations. There are no vacation pay
accruals except in respect of the period subsequent to December 31,
1998.
The Vendor has deducted and paid to the appropriate
Governmental Authority all payroll source deductions as required,
including, without limitation, workers compensation, employment
insurance, Canada Pension Plan and income tax.
Except as described in Schedule 4.28:
all contributions to, and payments from, each Employee
Plan that may have been required to be made in accordance with the
terms of any such Employee Plan and, where applicable, the laws of
the jurisdictions that govern such Employee Plan, have been made in
a timely manner;
all material reports, returns and similar documents
(including applications for approval of contributions) with respect
to any Employee Plan required to be filed with any government
agency or distributed to any Employee Plan participant have been
duly filed in a timely manner or distributed;
there are no pending investigations by any Governmental
Authority involving or relating to any Employee Plan, no threatened
or pending claims (except for claims for benefits payable in the
normal operation of the Employee Plans), suits or proceedings
against any Employee Plan or asserting any rights or claims to
benefits under any Employee Plan that could give rise to a
liability nor, to the knowledge of the Vendor, the Partners and the
Partner Principals, are there any facts that could give rise to any
liability in the event of such investigation, claim, suit or
proceeding;
no notice has been received by the Vendor of any
complaints or other proceedings of any kind involving the Vendor
or, to the knowledge of the Vendor, the Partners and the Partner
Principals, any employees of the Vendor before any pension board or
committee relating to any Employee Plan or to the Business or the
Purchased Assets; and
the assets of each Employee Plan are at least equal to
the Liabilities of such Employee Plan based on the actuarial
assumptions used in the most recent valuation performed by the
actuary for such Employee Plan, and the Purchaser will not incur
any liability with respect to any Employee Plan as a result of the
transactions contemplated by this Agreement for any period prior to
the Effective Time.
Collective Agreements
The Vendor has not made any agreements with any labor union or
employee association with respect to any future agreements, nor, to
the best of the knowledge of the Vendor, the Partners and the
Partner Principals, are there any current attempts to organize or
establish any labor union or employee association relating to the
Business.
There is neither pending against the Vendor, nor to the best
of the knowledge of the Vendor, the Partners and the Partner
Principals, threatened, any labor dispute, strike or work stoppage
which affects or which may affect the Business. To the best of
their knowledge, neither the Vendor nor any of its employees or
agents has, within the 24 month period prior to the date hereof,
committed any material breach of any applicable labor or employment
laws, and there is not now pending, or to the best of the knowledge
of the Vendor, the Partners and the Partner Principals, threatened,
any charge or complaint against any of them by any labor board or
body, or any representative thereof. There are no negotiations,
demands or proposals pending, or to the best of the knowledge of
the Vendor, the Partners and the Partner Principals, threatened,
which concern matters covered by the agreements referred to in this
Section 4.29, or which might otherwise be covered by a collective
bargaining agreement or union contract with respect to the
Business.
No Other Arrangements With Employees
No member of the Vendor Group has entered into any association
or made any arrangements with the employees of the Vendor which
would have the effect of depriving the Purchaser of the continued
services of any such employees following the Closing Date.
Employees
The Vendor, in the conduct of its affairs, has complied, in
all material respects, with all applicable laws and regulations
relating to the employment of labor, including, without limitation,
those related to payments, hours, collective bargaining,
discrimination, employment, pay equity, pension and welfare benefit
plans, withholding taxes, and pension plan contributions, and is
not in arrears in making any payments or liable for any penalties
for failure to comply with any of the foregoing. Without
limitation, (i) no notice has been received by the Vendor of any
complaint filed by any of its employees claiming that the Vendor
has violated any such legislation, (ii) there are no outstanding
orders or charges against the Vendor under any applicable health
and safety legislation in the Province of Ontario and (iii) all
levies, assessments and penalties made against the Vendor pursuant
to any workers compensation legislation have been paid by the
Vendor and the Vendor is not being reassessed under any such
legislation.
Solvency
None of the Vendor Group is insolvent, nor have any of them
committed any act of bankruptcy, proposed a compromise or
arrangement to any of their respective creditors generally, had any
petition for a receiving order in bankruptcy filed against it,
taken any proceeding with respect to a compromise or arrangement,
taken any proceeding to have itself declared bankrupt or wound-up,
taken any proceeding to have a receiver appointed of any part of
its assets, had any encumbrances take possession of any of its
property, or had any execution or distress become enforceable or
become levied upon any of its property.
Tax Matters
For purposes of this Agreement, the term Governmental Charges
means and includes all taxes, customs duties, rates, levies,
assessments, reassessments and other charges, together with all
penalties, interest and fines with respect thereto, payable to any
Governmental Authority.
The Vendor has paid all Governmental Charges which are due and
payable by it on or before the date hereof. There are no actions,
suits, proceedings, investigations, enquiries or claims now pending
or made or, to the best of the knowledge of the Vendor, the
Partners and the Partner Principals, threatened against the Vendor
in respect of Governmental Charges. The Vendor has withheld from
each amount paid or credited to any person the amount of
Governmental Charges required to be withheld therefrom and has
remitted such Governmental Charges to the proper tax or other
receiving authorities within the time required under applicable
legislation.
Liabilities
Except as disclosed in Schedule 4.34 hereto or in the
Unaudited Financial Statements, the Vendor has not been and is not
now subject to any material Liabilities or obligations, direct,
indirect or contingent, other than those disclosed in this
Agreement and those arising in the ordinary course of business
(none of which are materially adverse) since December 31, 1998.
Without limiting the generality of any representation or warranty
contained in this Agreement, to the best of the knowledge of the
Vendor, the Partners and the Partner Principals, there are no facts
or circumstances which might reasonably serve as the basis for, or
give rise to, any material Liabilities or obligations on the part
of the Vendor which are not disclosed in this Agreement, other than
those arising in the ordinary course of business (none of which are
materially adverse).
No Broker
None of the Vendor Group has retained any broker, finder or
other person who has or would have any valid claim against the
Purchaser or Value for a commission, finder s fee or brokerage fee
in connection with this Agreement or the consummation of the
transactions contemplated hereby.
Customer and Supplier Relations
There has not been any material adverse change in relations
with clients or suppliers of the Business since December 31, 1998
or as a result of the transactions contemplated by this Agreement
and, to the knowledge of the Vendor, the Partners and the Partner
Principals, no such change is anticipated. Schedule 4.36 sets forth
a complete list of all customers of the Business as at the date
hereof and contains an accurate list of the addresses and telephone
numbers of such customers. Unless therein otherwise noted and
subject to the allowance for doubtful Accounts Receivable referred
to in Section 4.37, each of such customers pays its account in a
timely fashion and has been active in terms of revenue generation
during the immediately preceding 12 months. Schedule 4.36 also
sets forth a complete list of all suppliers of the Business as at
the date hereof and contains an accurate list of the addresses and
telephone numbers of such suppliers. None of the Vendor, the
Partners nor the Partner Principals has any knowledge of any facts
which could be reasonably be expected to result in the loss of any
customers, sources of revenue or significant suppliers of the
Business which would be material to the Condition of the Business.
Accounts Receivable
All Accounts Receivable have been bona fide created in the
ordinary course of business and the provision for doubtful accounts
established in connection therewith is reasonable and, subject to
such allowance, the Accounts Receivable are collectible in full.
The Accounts Receivable are free of Encumbrances and rights of set
off whatsoever other than as set out in Schedule 4.42 other than
for Encumbrances held by The Toronto-Dominion Bank under presently
existing banking and loan arrangements.
Inventories
Other than clerical, office or other non-material Inventories
used directly in the operation of the Business, the Inventories of
the Business are usable and saleable in the ordinary course and are
in a quantity consistent with the past practices of the Business.
Computer Systems
The Vendor s computer systems, including but not limited to,
mainframes, mini-computers, personal computers and special purpose
systems are fully operational and have adequate documentation
describing, among other things, the operation of the hardware,
required maintenance, daily/weekly/monthly/quarterly/annual run
books or other operational procedures, all operating systems,
applications and utilities. The documentation matches the
implementation of the hardware and software in use as of the date
thereof. The Vendor is in material compliance with all legal
obligations with respect to all software used by it and has license
to use all software currently used by it which it does not own.
The Vendor does not have any custom or other software not generally
available to the public.
All hardware and software constituting part of the Purchased
Assets shall be able to accurately receive, provide and process
date/time data (including calculating, comparing, and sequencing)
from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000, and leap year calculations, and will
not malfunction, cease to function, or provide invalid or incorrect
results as a result of such date/time data, to the extent that
other hardware and software, used in combination with the hardware
and software constituting part of the Purchased Assets, properly
exchanges date/time data with it.
Residency
Neither the Vendor nor any of the Partners is a non-resident
of Canada within the meaning of the Tax Act.
Promotions
None of the product promotions which the Vendor has planned
but has not yet implemented will be terminable by any party thereto
other than the Vendor as a result of the completion of the
transaction of purchase and sale contemplated herein.
Rebates and Allowances
All allowances and rebates due to the Vendor are set out in
Schedule 4.42, will not be revoked or otherwise affected as a
result of the closing of the transaction of purchase and sale
contemplated hereby, have been bona fide created in the ordinary
course of business, and are collectible in full. Such allowances
and rebates are free of any rights of set off whatsoever.
Adequate reserves have been established by the Vendor for
volume rebates and above and beyond obligations payable by the
Vendor.
Equipment
Schedule 2.1(a) contains a materially complete and materially
accurate list as at the date hereof of all machinery, equipment,
tools, furniture, furnishings (whether or not fixtures), and
accessories of all kinds used in connection with the Business.
Schedule 2.1(a) contains a materially complete and materially
accurate list as at the date hereof of all motor vehicles,
including trucks and trailers, owned by the Vendor or used in the
Business setting out the year of make, vehicle description and the
employee for whom the vehicle is provided.
ARTICLE
REPRESENTATIONS AND WARRANTIES
OF VALUE AND THE PURCHASER
Each of the Purchaser and Value, jointly and severally,
represents and warrants to the Vendor, the Partners and the Partner
Principals as follows and acknowledges that the Vendor, the
Partners and the Partner Principals are relying upon such
representations and warranties in connection with the sale by the
Vendor to the Purchaser of the Purchased Assets.
Incorporation
Each of Value and the Purchaser is a corporation incorporated
and subsisting under the laws of its respective jurisdiction of
incorporation and has all requisite power and authority to own and
lease its property, to carry on its business as now being conducted
by it, to enter into this Agreement and to perform its obligations
hereunder. Each of Value and the Purchaser is duly qualified to do
business in each jurisdiction in which the nature of the respective
business carried on by it or the property and assets owned and
leased by it makes such qualification necessary and is in good
standing in every such jurisdiction.
Authorization
The execution and delivery of this Agreement and all of the
transactions and actions (required of Value and the Purchaser)
contemplated hereby have been duly authorized by all necessary
corporate action by Value and the Purchaser, and constitute a
legal, valid and binding obligation of Value and the Purchaser
enforceable against each of them by the Vendor in accordance with
its terms. This Agreement has been duly executed and delivered by
each of Value and the Purchaser.
No Violation
None of the execution and delivery of this Agreement by each
of Value and the Purchaser nor the observance and performance of
the terms and provisions of this Agreement on the part of each of
them to be observed and performed, constitutes a violation of
applicable law or a violation or breach of their respective
constating documents or any provision of any Contracts or other
instrument to which either Value or the Purchaser is a party or by
which either of them is bound, or of any order, writ, injunction,
decree, statute, rule, by-law or regulation applicable to either
Value or the Purchaser, or constitutes a default (or would with the
passage of time or the giving of notice, or both, constitute a
default) under any Contract or other instrument to which either
Value or the Purchaser is a party or by which either of them is
bound.
Solvency
Neither Value nor the Purchaser is insolvent, nor has either
of them committed any act of bankruptcy, proposed a compromise or
arrangement to any of their respective creditors generally, had any
petition for a receiving order in bankruptcy filed against it,
taken any proceeding with respect to a compromise or arrangement,
taken any proceeding to have itself declared bankrupt or wound up,
taken any proceeding to have a receiver appointed of any part of
its assets, had any encumbrances take possession of any of its
property, or had any execution or distress become enforceable or
become levied upon any of its property.
Securities Legislation Compliance
Value is not in default of any requirement of the securities
legislation (including, without limitation, any act, regulation,
policy, or rule) applicable to it in any jurisdiction respecting
its securities or its filing or disclosure obligation in respect
thereof. No material change, as such term is defined under
applicable securities legislation, relating to Value has occurred
with respect to which the requisite material change report has not
been filed.
No Broker
Neither Value nor the Purchaser has retained any broker,
finder or other person who has or would have any valid claim
against any of the Vendor Group for a commission, finder s fee or
brokerage fee in connection with this Agreement or the consummation
of the transactions contemplated hereby.
Value Shares
As at the Closing Time, the Value Shares to be issued to or to
the order of the Vendor as part of the Purchase Price pursuant to
Article 3, will be validly issued as fully paid and non-assessable
shares in the capital of Value under a validly issued certificate
or certificates complying with corporate and securities legislation
and regulatory authority applicable to Value, and the issuance of
such shares shall be effected in compliance with all securities
legislation and other regulatory authority applicable to Value.
Pursuant to such securities legislation, such shares will be
subject to certain resale restrictions under such securities
legislation for a period of one year from the date of issuance.
No Litigation
There are no actions, suits or proceedings pending or
threatened against or affecting either Value or the Purchaser at
law or in equity before any Governmental Authority.
No Adverse Changes
Since their respective dates of incorporation, there have been
no material adverse changes in the respective affairs, businesses,
prospects, liabilities, assets, operations or condition, financial
or otherwise (including without limitation, as a result of any
legislative or regulatory change, any revocation, renunciation or
repudiation of all or any part of any Contract, license or right to
do business, fire, explosion, accident, casualty, labor trouble or
act of God) of Value and the Purchaser.
Business Carried on in the Ordinary Course
Since their respective dates of incorporation, Value and the
Purchaser have carried on their respective businesses and
operations in the ordinary course and have not done any act or
suffered anything to be done which would in any way materially
diminish their respective affairs, businesses, prospects,
liabilities, assets, operations or condition, financial or
otherwise.
Compliance with Laws; Government Authorization
Since their respective dates of incorporation, Value and the
Purchaser have complied in all material respects with all material
laws, statutes, ordinances, regulations, by-laws, judgments,
decrees or orders applicable to them, respectively. Each of Value
and the Purchaser holds all licenses, Permits, approvals, consents,
certificates, registrations and authorizations (whether
governmental, regulatory or otherwise) necessary for the conduct of
its business and operations and each of such licenses, Permits,
approvals, consents, certificates, registrations and authorizations
is valid, subsisting and in good standing and neither of Value or
the Purchaser is in material default or material breach thereof
and, to the knowledge of Value and the Purchaser, no proceeding is
pending or threatened to revoke or limit any of such licenses,
permits, approvals, consents, certificates, registrations and
authorizations.
ARTICLE
SURVIVAL AND LIMITATIONS OF
REPRESENTATIONS AND WARRANTIES
Survival of Warranties of the Vendor, the Partners and the
Partner Principals
The representations and warranties made by the Vendor, the
Partners and the Partner Principals and contained in this
Agreement, or contained in any document or certificate given in
order to carry out the transactions contemplated hereby, will
survive the closing of the purchase of the Purchased Assets
provided for herein, and notwithstanding such closing or any
investigation made by or on behalf of the Purchaser or Value or any
other person or any knowledge of the Purchaser or Value or any
other person, shall continue in full force and effect for the
benefit of the Purchaser and Value, subject to the following
provisions of this section:
except as provided in subparagraphs (b) and (c) of this section, no
Warranty Claim may be made or brought by the Purchaser or Value
after the date which is the second anniversary of the Closing Date;
any Warranty Claim which is based upon or relates to the Tax
liability of the Vendor for a particular taxation period may be
made or brought by the Purchaser or Value at any time prior to the
expiration of the period (if any) during which an assessment,
reassessment or other form of recognized document assessing
liability for tax, interest or penalties in respect of such
taxation period under applicable tax legislation could be issued,
assuming that the Vendor does not file any waiver or similar
document extending such period as otherwise determined; and
any Warranty Claim which is based upon or relates to the title to
any of the Purchased Assets or which is based upon intentional
misrepresentation or fraud by the Vendor, the Partners or the
Partner Principals may be made or brought by the Purchaser or Value
at any time.
Survival of Warranties of Value and the Purchaser
The representations and warranties made by Value and the
Purchaser and contained in this Agreement, or contained in any
document or certificate given in order to carry out the
transactions contemplated hereby, will survive the completion of
the purchase and sale of the Purchased Assets provided for herein
and, notwithstanding such closing or any investigation made by or
on behalf of the Vendor, the Partners, the Partner Principals or
any other person or any knowledge of the Vendor, the Partners, the
Partner Principals or any other person, shall continue in full
force and effect for the benefit of the Vendor, the Partners and
the Partner Principals, subject to the following provisions of this
section:
except as provided in subparagraph (b) of this section, no
Warranty Claim may be made or brought by the Vendor, the Partners
and the Partner Principals after the date which is the second
anniversary of the Closing Date; and
any Warranty Claim which is based upon intentional
misrepresentation or fraud by Value or the Purchaser may be made or
brought by the Vendor, the Partners and the Partner Principals at
any time.
ARTICLE
COVENANTS OF THE VENDOR, THE PARTNERS
AND THE PARTNER PRINCIPALS
Interim Period
The Vendor hereby agrees that during the Interim Period the
Vendor will, and the Partners and the Partner Principals hereby
jointly and severally agree that during the Interim Period they
will cause the Vendor to:
carry on the Business in the ordinary course and use its best
efforts to preserve the Purchased Assets, the Business and the
clients, customers and suppliers connected therewith;
give to the Purchaser and Value, the Purchaser s Solicitors and
other representatives of the Purchaser full access during normal
business hours to all locations where the Business is carried on or
where the Purchased Assets are located (including, without
limitation, permitting representatives of the Purchaser and Value
to physically inspect the building located on the Leased Premises)
and to the properties, books, Contracts, commitments and records of
the Vendor pertaining to the Business and reasonable access to the
Vendor s employees and instruct and authorize the Vendor s
Solicitors and the accountants of the Vendor to cooperate fully
with the Purchaser, Value and their representatives in this regard;
keep in full force and effect the insurance policies described in
Schedule 4.18;
furnish the Purchaser and Value with all information concerning the
affairs of the Business as the Purchaser and Value may reasonably
request, including prompt notification of any material event
occurring with respect to the Business, and permit the Purchaser
and Value to observe all operations of the Business;
provide the Purchaser and Value, by no later than the 20th day
following each month-end during the Interim Period, with a
management-generated financial statement (unaudited) consisting of
a balance sheet, an income and expense statement, as well as
inventory, accounts receivable, payables and work in progress
reports, relating to the Business for each calendar month ending
during the Interim Period;
continue to direct and assist the auditors retained by the
Vendor and Seabright (subject to Section 15.5) to prepare the
Audited Financial Statements;
do all things and cause all things to be done to ensure that all of
the representations and warranties of the Vendor, the Partners and
the Partner Principals contained in this Agreement remain true and
correct throughout the Interim Period as if such representations
and warranties were continuously made throughout such period, and
promptly advise Value of any facts that come to the attention of
any of them which would cause any of their representations and
warranties set out herein to be untrue in any respect;
not (i) enter into or modify any Contracts, commitments or
transactions pertaining to the Business, nor (ii) incur any
indebtedness, obligations or liability or make any payment in
respect thereof except, in each case, unless otherwise herein
provided, in the ordinary course of the Business;
maintain the books and records of the Business and the Purchased
Assets, and in particular the amount of inventories held in stock,
in accordance with past business practices;
not acquire or agree to acquire additional Purchased Assets (except
inventories and supplies purchased in the ordinary course of
Business and on normal industry terms) and except as herein
otherwise provided, not sell, agree to sell or otherwise dispose of
any of the Purchased Assets (other than items of inventories sold
in the ordinary course of the Business);
not increase the wages or salaries or any other form of
remuneration, direct or indirect, of any of the employees of the
Business, except for increases made pursuant to the normal salary
and wage practices of the Vendor (which practices are not written
or governed by any formal policies) and such increases which are
approved by Value;
not create or assume any Encumbrance with respect to any of the
Purchased Assets, whether now owned or hereafter acquired, and pay,
satisfy and discharge its obligations and liabilities in the
ordinary course of the Business;
to the extent required under the respective terms thereof, obtain
all necessary consents and approvals pursuant to the terms of any
leases, Contracts, product warranties or rights which form a
material part of the Purchased Assets so as to obtain for the
Purchaser the full benefit thereof and cause all conditions in this
Agreement over which it has control to be satisfied;
prepare and deliver to Value the Closing Statement prior to the
Closing Date;
assist the Purchaser in retaining the services of the employees of
the Business to whom the Purchaser will offer employment pursuant
to Section 9.1; and
promptly advise the Purchaser in writing of any adverse change in
the Condition, financial or otherwise, of the Business and/or the
Purchased Assets which may come to the knowledge of the Vendor, the
Partners or the Partner Principals.
Closing Time
The Vendor, the Partners and the Partner Principals, jointly
and severally, agree that, at the Closing Time, the Vendor will:
deliver to the Purchaser evidence satisfactory to the Purchaser s
Solicitors that all necessary partnership, corporate and other
authorizations authorizing and approving the Agreement and the
transactions contemplated hereby have been obtained;
deliver to the Purchaser in registrable form (as applicable),
satisfactory to the Purchaser s Solicitors, acting reasonably, all
necessary, conveyances, assurances, transfers, assignments and
consents and any other documents, necessary or reasonably required
in the reasonable opinion of the Purchaser s Solicitors, to
transfer effectively to the Purchaser good and marketable title to
the Purchased Assets free and clear of all Encumbrances of any
nature or kind whatsoever (except those in respect of the Assumed
Liabilities), including, without limiting the generality of the
foregoing, with respect to any Contracts, leases (other than the
Leases) or rights affecting the Purchased Assets to which the
Vendor is a party at the Effective Time and which the Purchaser is
required to assume in accordance with this Agreement, such
unconditional written consents to the assignment thereof as are
necessary in the reasonable opinion of the Purchaser s Solicitors
to assign such Contracts, leases (other than the Leases) or rights
together with written acknowledgements from the other party to such
Contracts, leases (other than the Leases) or rights in a form
satisfactory to the Purchaser s Solicitors acknowledging that such
Contracts, leases (other than the Leases) or rights are in good
standing and that all amounts due and payable by the Vendor
thereunder have been paid in full to the Effective Date;
deliver possession of the Purchased Assets to the Purchaser;
deliver or cause to be delivered the Employment Contracts, duly
executed by the respective Partner Principals thereunder;
deliver to the Purchaser all books, records, documents, files and
other data relating to the Business (other than the personal
records of the Partners and the Partner Principals);
deliver to the Purchaser and Value the Closing Statement;
deliver a copy of the New Leases contemplated by subsection
11.1(k) executed by the landlord thereunder; and
provide the Purchaser and Value with the opinion of the Vendor s
Solicitors as to such matters as the Purchaser s Solicitors may
reasonably request.
Post-Closing
The Vendor, the Partners and the Partner Principals, jointly
and severally, agree that, subsequent to the Closing Date, the
Vendor will:
take all steps reasonably required by the Purchaser to assist the
Purchaser in retaining the goodwill of the Business, including, if
requested by the Purchaser, introducing the Purchaser to the
customers and suppliers of the Business and writing letters to such
customers and suppliers and not otherwise doing any act or thing
which will have the effect of diminishing such goodwill; and
at the request of the Purchaser, cooperate with the Purchaser to
assist it in collecting all Accounts Receivable relating to the
period following the Effective Time and to hold any payments
received by it in respect of such Accounts Receivable in trust for
the benefit of the Purchaser and to forthwith remit any such
payments to the Purchaser.
ARTICLE
COVENANTS OF THE PURCHASER AND VALUE
Interim Period
During the Interim Period Value and the Purchaser, jointly and
severally, will:
do all things and cause all things to be done to ensure that
all of the representations and warranties of Value and the
Purchaser contained in this Agreement remain true and correct
throughout the Interim Period as if such representations and
warranties were continuously made throughout such period, and
promptly advise the Vendor of any facts that come to the attention
of Value or the Purchaser which would cause any of their
representations and warranties as set out herein to be untrue in
any respect;
take such steps as may be required to amend the employee stock
option and share incentive plan of Value in order to accommodate
the issuances of bonus Value Shares contemplated under the
Employment Contracts;
provide any review or other input in connection with the
preparation by the Vendor of the Closing Statement and, by the
auditors retained for such purpose, of the Audited Financial
Statements; and
promptly give and not unreasonably withhold the consent of the
Purchaser where required under the terms of this Agreement in
connection with the conduct of the Business during the Interim
Period.
Confidentiality
Value and the Purchaser agree that in the event that the
transactions contemplated hereby are not completed, the Purchaser
and Value will keep confidential all information obtained by them
and their representatives, respectively, relating to the Business,
except such information which is generally available to the public
other than as a result of disclosure by the Purchaser or Value, or
is made available to the Purchaser or Value on a non-confidential
basis from a source other than the Vendor, V. Drevnig or their
representatives. Value and the Purchaser further agree that such
information may only be disclosed to those directors, officers and
employees of Value and the Purchaser, and to only those of their
advisors, representatives and financial institutions (and their
representatives) who need such information for the purposes of
evaluating the transactions contemplated hereby, and that they will
advise each person to whom such disclosure is made of the
confidential nature of such information and shall accordingly
direct each such person to treat confidentially such information so
disclosed.
Closing Time
At the Closing Time Value and the Purchaser will:
deliver to the Vendor evidence satisfactory to the Vendor s
Solicitors that all necessary corporate authorizations authorizing
and approving the transactions contemplated hereby have been
obtained;
deliver the Employment Contracts duly executed by the
Purchaser;
deliver the payment and Value Shares comprising the Purchase
Price to or to the order of the Vendor;
repay in full both the CFP Loan and the Deemed Loans (if any);
deliver a copy of the New Leases executed by the Purchaser and
entered into under subsection 11.1(k);
provide the Vendor with the opinion of the Purchaser s Solicitors
as to such matters as the Vendor s Solicitors may reasonably
request; and
execute or cause to be executed all assignments and documents
delivered pursuant to this Agreement at the Closing Time which
require execution by the Purchaser or Value.
Post-Closing
The Purchaser agrees that, subsequent to the Closing Date, the
Purchaser shall preserve the books, documents, records, files and
other data relating to the Business which were delivered by the
Vendor to the Purchaser at the Closing Time for a period of at
least seven years from the Closing Date and will allow the Vendor,
the Partners and the Partner Principals and their respective
authorized representatives to have access thereto at all reasonable
times in connection with the affairs of the Vendor relating to its
tax matters and to make copies thereof and extracts therefrom. The
Purchaser shall use its reasonable best efforts to maintain and
preserve such books, documents, records, files and other data, and
shall at least exercise the same degree of care with respect
thereto as it does in connection with its other business records;
provided that the Purchaser shall not be responsible or liable to
the Vendor for or as a result of any loss or destruction of or
damage to such books, documents, records, files and other data so
long as the Purchaser exercises its best efforts as aforesaid.
ARTICLE
ADDITIONAL COVENANTS OF THE PARTIES
Employees
Offer of Employment. The Vendor shall terminate the
employment of all of its employees at or before the Closing Time,
such termination to be effective as at the Effective Time. The
Purchaser agrees to make an offer of employment in writing, as at
the Closing Time with effect as at and from the Effective Time to
each of the employees of the Vendor upon substantially the same
terms and conditions as to benefits and remuneration as are
presently provided to them by the Vendor. The Purchaser s
obligations in this connection are solely to make an offer of
employment as of such time to each and every such employee. The
Purchaser is not obligated to any employee who refuses the offer so
made. The Vendor shall render all reasonable assistance to
encourage employees to accept the Purchaser s offers of employment
in accordance with their terms.
Settlement of Vendor. On or before the Closing Date, the Vendor
shall:
pay to each of those employees who shall have accepted an
offer of employment from the Purchaser (the Transferred
Employees) all salaries, commissions, bonuses, and other amounts
that may become payable to or receivable by such Transferred
Employees for all periods prior to the Effective Time, including
accumulated vacation pay credits in respect of their employment in
connection with the Business or any predecessor of the Business,
but only to the extent that any of the foregoing are not included
in the Assumed Liabilities;
pay to each of the employees who do not accept the Purchaser
s offer of employment, all salaries, commissions, bonuses and other
amounts that may become payable to or in respect of or receivable
by such employees for all periods prior to the Effective Time,
including termination allowances and accumulated vacation pay
credits in respect of their employment in connection with the
Business or any predecessor of the Business; and
settle or otherwise satisfy all obligations with respect
to worker s compensation and health and safety assessments with
respect to the employees of the Business which are outstanding as
at the Effective Time.
Benefit Plans. The Vendor shall retain responsibility for and
satisfy its outstanding obligations as at the Effective Time with
respect to all benefits, including, without limitation, any profit
sharing, deferred compensation, stock compensation, stock purchase,
hospitalization insurance, medical, dental, legal, disability and
similar benefits provided by it (collectively, Benefits ) in
respect of its employees in accordance with the terms of such
Benefits and all applicable federal, provincial or local law
existing and in effect on the Effective Date having jurisdiction
over such Benefits, but only to the extent that any of the
foregoing are not included in the Assumed Liabilities.
Transfer and Assignment of Assets
Non-Transferable and Non-Assignable Assets. To the extent
that any of the Purchased Assets to be sold, assigned, transferred,
delivered or conveyed to the Purchaser hereunder, or any claim,
right or benefit arising thereunder or resulting therefrom (such
Purchased Assets, claims, rights and benefits being, collectively,
the Rights ) is not capable of being sold, assigned, transferred
or conveyed without the approval, consent or waiver of any third
person (including any Governmental Authority), or if such sale,
assignment, transfer, delivery or conveyance or attempted
assignment, transfer, delivery or conveyance would constitute a
breach of any obligation or a violation of any law, decree, order,
regulation or other governmental edict, except as expressly
otherwise provided herein, this Agreement shall not constitute a
sale, assignment, transfer, delivery or conveyance thereof, or an
attempted assignment, transfer, delivery or conveyance thereof.
Until all such Purchased Assets are properly and fully transferred
or assigned to the Purchaser, the Vendor shall maintain its
existence and hold the Rights in trust for the Purchaser. In order
that the full value of the Rights may be realized for the benefit
of the Purchaser, the Vendor shall, at the request and under the
direction of the Purchaser, in the name of the Vendor or otherwise
as the Purchaser may specify, take all such action and do or cause
to be done all such things as are, in the reasonable opinion of the
Purchaser, necessary or proper in order that the obligations of the
Vendor thereunder may be performed in such manner that the value of
such Rights is preserved and enures to the benefit of the
Purchaser, and that the collection of any monies due and payable
and to become due and payable to the Purchaser in and under the
Rights are received by the Purchaser; and the Vendor shall promptly
pay over to the Purchaser all monies collected by or paid to the
Vendor in respect of every such Right.
Consents. The Vendor shall use its reasonable best efforts to
obtain, where required, consents of all requisite parties to the
transfer and assignment by the Vendor to the Purchaser of the
Rights, including, without limitation, all consents and approvals.
The Vendor shall pay the cost of obtaining such consents. In the
event any party will not so consent to such transfer and assignment
of a Right or change of control, the Vendor shall: (i) maintain its
existence and hold the Rights in trust for the Purchaser; (ii)
carry out and comply with the terms and provisions of the Rights as
agent for the Purchaser for such Purchaser s benefit and cooperate
with the Purchaser in any reasonable and lawful arrangements
designed to provide the benefits of such Rights to the Purchaser;
and (iii) enforce, at the request of the Purchaser, any rights of
the Vendor arising from such Rights against any third person,
including the right to elect to terminate any such Rights in
accordance with the terms thereof upon the written direction of the
Purchaser.
Non-Solicitation
None of the Vendor, the Partners, nor the Partner Principals
shall, during the Interim Period, take any action, directly or
indirectly, to solicit indications of interest or offers for the
sale of the Business (by sale of interest, sale of assets, sale of
shares, merger or otherwise), or any part thereof, to anyone other
than the Purchaser, to furnish information to others in that
connection, or otherwise enter into discussions with any person
with respect thereto.
Transactional Taxes
The Purchaser shall be responsible for all sales, goods and
services, use, transfer, conveyance, bulk transfer, excise, value
added, stamp, documentary and other governmental Taxes, duties,
charges, fees, imposts and assessments, and all interest and
penalties thereon, imposed at any time by any taxing authority with
respect to this Agreement, the transfer, assignment, conveyance or
delivery of the Purchased Assets or the consummation of the
transactions contemplated hereby.
CFP Loan
At the Closing Time the Purchaser will repay to Mr. Joseph
Clement the amount owing to him under the CFP Loan, together with
interest thereon at the rate per annum shown in Schedule 1.1(k)
accruing from December 31, 1998 to the Closing Date; provided that,
the aggregate amount of the CFP Loan together with interest thereon
to be repaid by the Purchaser shall not exceed the amount thereof
as at December 31, 1998 as set forth in the Unaudited Financial
Statements plus the interest accrued thereon since December 31,
1998 at the rate which was in effect on December 31, 1998.
Earnings Draw Down
Immediately prior to the Closing Date, the Vendor shall be
entitled to draw down from the CFP Credit Line an amount equal to
the Net Earnings Amount of the Business as set out in the Closing
Statement for the purpose of distributing such amount to the
Partners. In the event that there are insufficient funds available
under the CFP Credit Line to provide payment in full of such Net
Earnings Amount to the Vendor, the unpaid balance thereof shall be
deemed to be, in the aggregate, loans made by each of the Partners
to the Vendor, on a pro rata basis in accordance with their
respective partnership interests (the Deemed Loans ). The Deemed
Loans will be repaid (subject to Section 9.7) by the Purchaser at
the Closing Time and, for the purposes of the payment thereof, such
loans will be set out in reasonable detail on a loan schedule which
will be in form acceptable to the Purchaser, acting reasonably.
Earnings Distribution Adjustment
The Purchaser shall cause to be prepared and delivered to the
Vendor by no later than the date which is 60 days following the
Effective Date a statement (the Final Closing Statement ) setting
forth in reasonable detail a summary calculation of the following:
the net asset value of the Purchased Assets as at the
Effective Time (i.e., the total asset value of the Purchased Assets
minus the total amount of the Assumed Liabilities) determined in
accordance with generally accepted accounting principles,
consistently applied; and
the net earnings of the Business for the period
commencing January 1, 1999 and ending at the Effective Time, such
net earnings to be determined for such period in accordance with
generally accepted accounting principles, consistently applied,
before deduction for all depreciation and amortization expenses.
The Final Closing Statement shall be accompanied by a certificate
signed by a senior officer of the Purchaser confirming that, to the
best of such person s knowledge, such Final Closing Statement has
been accurately and properly prepared in the manner required by
this Agreement.
The Vendor shall have the period of 30 days (the Review
Period ) following the date of its receipt of the Final Closing
Statement in order to review such statement. If the Vendor shall
have any objection to any part of the Final Closing Statement, the
Vendor shall set out the substance of such objection in writing
with reasonable particularity in a notice (the Objection Notice )
to be provided to the Purchaser on or prior to the expiration of
the Review Period.
If an Objection Notice shall have been delivered prior to the
expiration of the Review Period then:
if the Purchaser and the Vendor are, by mutual agreement,
able to resolve the objections set forth therein within seven days
following the receipt or deemed receipt by the Purchaser of the
Objection Notice, the Purchaser and the Vendor shall be deemed to
have agreed to the Final Closing Statement so delivered as modified
to the extent necessary to give effect to such mutual agreement
(clerical errors and omissions and fraud only excepted); or
if the Purchaser and the Vendor are unable to mutually
agree to the resolution of the objections set forth therein within
seven days following the receipt or deemed receipt by the Purchaser
of the Objection Notice, the Purchaser and the Vendor shall, by
mutual agreement, promptly select a firm of independent chartered
accountants to resolve such disagreement. If agreement cannot be
reached as to such firm of accountants within 10 days following the
date of delivery of the Objection Notice to the Purchaser, such
firm shall be selected by lot drawn from amongst the names of three
public accounting firms in Canada submitted by each of the
Purchaser and the Vendor, each of which firms must be independent
to all of the Parties. The firm of accountants so selected shall
render a decision with respect to all matters in dispute as are
particularized in the Objection Notice. The decision of such firm
of accountants shall be given to the Purchaser and to the Vendor as
soon as possible and shall be conclusive and binding upon all of
the Parties, save and except for clerical errors and omissions and
fraud. The Purchaser, on the one hand, and the Vendor, on the other
hand, shall each be responsible and shall pay 50% of all fees and
disbursements charged by such firm of accountants in connection
with the settlement of all matters raised in the Objection Notice
which has been given in accordance with the provisions of this
Section 9.7. Each of the Parties agrees to act reasonably in trying
to resolve any disagreements which may arise in connection with the
matters specified in this Section 9.7, all with a view to
minimizing the costs which are to be incurred in order to resolve
any such disagreements.
Any part of the Final Closing Statement which is not objected
to in the manner provided for in subsection 9.7(b) on or prior to
the expiration of the Review Period shall be conclusive and binding
upon the Parties, save and except for clerical errors and omissions
and fraud.
Within three days following the settlement of the Final
Closing Statement as provided above, either the Purchaser or the
Vendor, as the case may be, shall be entitled to deliver a written
notice (the Adjustment Notice ) to the other of them in the event
that it is determined that:
the amount drawn down by the Vendor under Section 9.6
pursuant to the estimate of the Net Earnings Amount set out in the
Closing Statement was understated, resulting in an adjustment
amount being payable by the Purchaser to the Vendor;
the amount drawn down by the Vendor under Section 9.6
pursuant to the estimate of the Net Earnings Amount set out in the
Closing Statement was overstated, resulting in an adjustment amount
being payable by the Vendor to the Purchaser;
the amount reflected in the Closing Statement as the net
asset value of the Purchased Assets as at the close of business on
April 30, 2000 was overstated, the effect of which is that a
downward adjustment is required to be made to the Purchase Price
based on a re-calculation of the same in accordance with the
formula set forth in subsection 3.1(a) resulting in an adjustment
amount being payable by the Vendor to the Purchaser; or
the amount reflected in the Closing Statement as the net
asset value of the Purchased Assets as at the close of business on
April 30, 2000 was understated, the effect of which is that an
upward adjustment is required to be made to the Purchase Price
based on a re-calculation of the same in accordance with the
formula set forth in subsection 3.1(a) resulting in an adjustment
amount being payable by the Purchaser to the Vendor;
then the Purchaser or the Vendor, as the case may be, who is
required to make such payment as set out in the Adjustment
Statement shall make such payment, without interest, by way of
certified cheque, bank draft or other form of immediately available
funds to the other of them within three days after its receipt of
the Adjustment Notice.
ARTICLE
RISK OF LOSS
Vendor s Risk
During the Interim Period, the Purchased Assets shall be held
by the Vendor at the Vendor s risk. If at or prior to the Closing
Time, all or any part of the Purchased Assets are destroyed or
damaged by fire or any other casualty or are expropriated or
otherwise seized by Governmental Authority or other lawful
authority, the Vendor shall immediately advise the Purchaser and
Value thereof in writing and the Purchaser shall have the option,
exercisable by notice in writing:
to complete the transactions contemplated hereby without
reduction of the Purchase Price, in which event all proceeds of
insurance or compensation for appropriation, expropriation or
seizure shall be payable to the Purchaser and all right and claim
of the Vendor to any such amounts not paid by the Closing Date
shall be assigned to the Purchaser; or
to refuse to complete the transactions contemplated hereby by
notice to the Vendor or the Vendor s Solicitors, and in such event
all Parties shall be released from all obligations hereunder.
Extension
If such destruction, damage, expropriation or other seizure
occurs within 72 hours of the Closing Time, then the Closing Date
and Closing Time shall be extended to coincide with the date and
time 72 hours after the notice referred to in Section 10.1 has been
given.
ARTICLE
CONDITIONS AT CLOSING
Conditions of Closing in Favor of the Purchaser and Value
The purchase and sale of the Purchased Assets contemplated
hereby are subject to the following terms and conditions precedent,
each of which is separate, which are for the exclusive benefit of
the Purchaser and Value and are to be fulfilled or performed at or
prior to the Closing Time:
Representations and Warranties. The representations and
warranties of the Vendor, the Partners and the Partner Principals
contained in this Agreement shall be true and correct at the
Closing Time, with the same force and effect as if such
representations and warranties are made as of such time, and the
Purchaser and Value shall have received a certificate from the
Vendor, the Partners and the Partner Principals confirming the
truth and correctness in all material respects of such
representations and warranties;
Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendor at or
before the Closing Time shall have been complied with or performed
in all respects;
Consents. The Vendor shall have been given or obtained the
notices, consents and approvals required hereunder, in each case in
form and substance satisfactory to the Purchaser, acting
reasonably;
Retail Sales Act. The Purchaser shall have received a
certificate the date of the Closing Date issued by the Ministry of
Revenue of Ontario under Section 4 of the Retail Sales Act
(Ontario) stating that all provincial sales taxes collectible or
payable by the Vendor have been paid or that the Vendor has entered
into an arrangement satisfactory to such Minister for the payment
of such taxes or for securing their payment;
Clearance Certificate. The Purchaser shall have received a
Clearance Certificate issued pursuant to the Workplace Safety
Insurance Act (Ontario) in connection with the Business;
No Action or Proceeding. No legal or regulatory action or
proceeding shall be pending or threatened by any person to enjoin,
restrict or prohibit the purchase and sale of the Purchased Assets
contemplated hereby, or which would otherwise have, or could
potentially have, a material adverse effect on the Business or any
of the Purchased Assets;
No Material Adverse Change. No material adverse change in the
condition, financial or otherwise, or prospects of the Business
shall have occurred from the date hereof to the Closing Time;
Legal Matters. All actions, proceedings, legal opinions,
instruments, consents and documents required to implement this
Agreement, or instrumental thereto, and all legal matters relating
to the purchase of the Purchased Assets, including title of the
Vendor to the Purchased Assets, shall have been approved as to form
and legality by the Purchaser s Solicitors, acting reasonably, and
shall have been delivered or taken, as the case may be;
Audited Financial Statements. The Audited Financial Statements
shall have been issued and reported upon by the firm of auditors
retained to prepare such statements, and such statements shall not
have disclosed any adverse information not previously known or
disclosed to Value or the Purchaser as a result of their due
diligence inquiries which might be reasonably expected to diminish
Value s or the Purchaser s appreciation of the worth or
profitability of the Business and/or the Purchased Assets;
Releases. Each of the Vendor and the Partners will execute
and deliver on or before the Closing Time releases of all claims
against the Business, in form reasonably satisfactory to the
Purchaser, other than with respect to this Agreement or any
continuing agreement executed and delivered under the terms of this
Agreement;
New Leases. The landlord thereunder shall have entered into
the New Leases in respect of the Leased Premises containing those
terms and conditions set out in Schedule 1.1(mm) and which will
otherwise be in form reasonably satisfactory to the Purchaser and
the landlord thereunder.
Unsatisfied Conditions For the Benefit of the Purchaser and
Value
In case of any of the foregoing conditions declared to be for
the benefit of the Purchaser and Value shall not be satisfied at
the Closing Time, the Purchaser and Value may:
Ability to refuse to close. Refuse to complete the
transactions contemplated hereby by delivering notice to the Vendor
or the Vendor s Solicitors, and in such event Value and the
Purchaser shall be released from all obligations hereunder other
than those related to the Deposit under section 3.3 hereof, it
being expressly understood and agreed that Value and the Purchaser
may rely, notwithstanding such refusal, upon the warranties,
representations, covenants and conditions contained in this
Agreement; or
Ability to close. Complete the transactions contemplated
hereby, it being expressly understood and agreed that Value and the
Purchaser may not rely, notwithstanding such completion, upon any
warranties, representations, covenants and conditions contained in
this Agreement relating specifically to such unfulfilled condition
of which Value or the Purchaser was aware at the Closing Time.
Provided that any of the foregoing conditions may be waived in
whole or in part by the Purchaser and Value without prejudice to
their rights of rescission in the event of the non-fulfillment,
non-performance or breach of any other condition, representation or
warranty, any such waiver prior to the Closing Time to be binding
on Value and the Purchaser only if the same is in writing.
Conditions of Closing in Favor of Vendor
The purchase and sale of the Purchased Assets contemplated
herein is subject to the following terms and conditions which are
for the exclusive benefit of the Vendor and are to be fulfilled or
performed at or prior to the Closing Time:
Representations and Warranties. The representations and
warranties of Value and the Purchaser contained in this Agreement
shall be true and correct in all material respects at the Closing
Time, with the same force and effect as if such representations and
warranties are made at and as of such time, and the Vendor shall
have received a certificate of Value and the Purchaser as to the
truth and correctness in all material respects of such
representations and warranties;
Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by Value and the
Purchaser at or before the Closing Time shall have been complied
with or performed;
No Action or Proceeding. No legal or regulatory action or
proceedings shall be pending or threatened by any person to enjoin,
restrict or prohibit the purchase of the Purchased Assets by the
Purchaser and Value contemplated hereby, or which would otherwise
have, or could potentially have, a material adverse effect on the
business of Value;
New Leases. The Purchaser shall have entered into the New
Leases in respect of the Leased Premises containing those terms and
conditions provided for in Schedule 1.1(mm) and which will
otherwise be in form reasonably satisfactory to the Purchaser and
the landlord thereunder;
No Action or Proceeding. No legal or regulatory action or
proceeding shall be pending or threatened by any person to enjoin,
restrict or prohibit the purchase and sale of the Purchased Assets
contemplated hereby, or which would otherwise have, or could
potentially have, a material adverse effect on the Business or any
of the Purchased Assets;
No Material Adverse Change. No material adverse change in the
condition, financial or otherwise, or prospects of the business of
Value or the Purchaser shall have occurred from the date hereof to
the Closing Time; and
Legal Matters. All actions, proceedings, legal opinions,
instruments, consents and documents required to implement this
Agreement, or instrumental thereto, and all legal matters relating
to the purchase of the Purchased Assets shall have been approved as
to form and legality by the Vendor s Solicitors, acting reasonably,
and shall have been delivered or taken, as the case may be.
Unsatisfied Conditions for the Benefit of the Vendor
In case any of the foregoing conditions declared to be for the
benefit of the Vendor shall not be satisfied at the Closing Time,
the Vendor may:
Ability to refuse to close. Refuse to complete the
transactions contemplated herein by delivering notice to the
Purchaser or the Purchaser s Solicitors, and in such event the
Vendor, the Partners and the Partner Principals shall be released
from all obligations hereunder other than those relating to the
Deposit under section 3.3 hereof, it being expressly understood and
agreed that they may rely, notwithstanding such refusal, upon the
warranties, representations, covenants and conditions contained in
this Agreement; or
Ability to close. Complete the transactions contemplated
hereby, it being expressly understood and agreed that following
such completion, the Vendor may not rely, notwithstanding such
completion, upon any warranties, representations, covenants and
conditions contained in this Agreement relating specifically to
such unfulfilled condition of which the Vendor was aware at the
Closing Time;
provided that any of the said conditions may be waived in whole or
in part by the Vendor without prejudice to its rights of rescission
in the event of the non-fulfillment and/or non-performance of any
other condition or conditions, any such waiver prior to the Closing
Time to be binding on the Vendor only if the same is in writing.
Conditions of Closing in favor of all Parties
The obligations of all Parties to complete the transactions
contemplated hereby shall be subject to the satisfaction of, or
compliance with, at or prior to the Closing Time of each of the
following, each of which is a true condition precedent and may not
be waived:
Share Purchase Agreement. Contemporaneously with the completion of
the transactions contemplated by this Agreement, at the Closing
Time the transactions contemplated by the Share Purchase Agreement
shall be completed in accordance with the terms thereof; and
Regulatory approval. No stock exchange, securities administrator
or other regulatory authority having jurisdiction over Value shall
have objected to any of the transactions contemplated hereby.
ARTICLE
INDEMNITY
Indemnification by the Vendor, the Partners and the Partner
Principals
The Vendor, the Partners and the Partner Principals, jointly
and severally, agree to indemnify and save harmless Value and the
Purchaser, as their interests may appear, from and against any and
all costs, expenses, losses, damages or liabilities (including,
without limitation, reasonable solicitors fees, interest and
penalties) incurred by them with respect to or in connection with:
any loss or damage suffered by Value or the Purchaser as a
result of any breach of, non-compliance with, or untruth of any of
the warranties, representations or covenants of the other Parties
contained in this Agreement, in any Schedule hereto, in any
documents to be executed and delivered pursuant to this Agreement
or in any documents executed and delivered in connection with the
completion of the transactions contemplated hereby, including,
without limiting the generality of the foregoing, all costs and
expenses (including legal fees incurred in connection with any such
loss or damage and in connection with any claim under this
Article); and
any of the Excluded Liabilities.
Indemnification By Value and the Purchaser
Value and the Purchaser, jointly and severally, covenant and
agree to indemnify and save harmless the Vendor, the Partners and
the Partner Principals from and against:
any loss or damage suffered by the Vendor, the Partners and
the Partner Principals, respectively, as a result of any breach of,
non-compliance with, or untruth of any of the warranties,
representations or covenants of Value or the Purchaser contained in
this Agreement, in any Schedule hereto, in any documents to be
executed and delivered pursuant to this Agreement or in any
documents executed and delivered in connection with the completion
of the transactions contemplated hereby, including, without
limiting the generality of the foregoing, all costs and expenses
(including legal fees incurred in connection with any such loss or
damage and in connection with any claim under this Article); and
any of the Assumed Liabilities.
Bulk Sales Indemnity
The Vendor, the Partners and the Partner Principals, jointly
and severally, agree to indemnify and save harmless Value and the
Purchaser, as their interests may appear, from and against any
costs, expenses, losses, damages or liabilities incurred by either
of them which may arise under or in connection with the Bulk Sales
Act (Ontario) as a result of the non-payment by the Vendor of any
Liability of the Vendor required to be paid by it as provided for
in this Agreement or for which the Vendor shall continue to be
liable under the terms of this Agreement.
Value and the Purchaser, jointly and severally, agree to
indemnify and save harmless the Vendor, the Partners and the
Partner Principals, as their interests may appear, from and against
any and costs, expenses, losses, damages or liabilities incurred by
any of them which may arise under or in connection with the Bulk
Sales Act (Ontario) as a result of the non-payment by the Purchaser
of any of the Assumed Liabilities and any other Liability to be
paid by the Purchaser as provided for in this Agreement or for
which the Purchaser shall continue to be liable under the terms of
this Agreement.
Notice of Third Party Claims
Any person entitled to indemnification hereunder (the
Claimant ) shall give written notice to the person from whom
indemnification is claimed (the Indemnifier ), as soon as
reasonably possible, of any claims asserted by third parties for
which the Indemnifier may be liable pursuant to the provisions of
this Article 12 and shall provide reasonable particulars thereof.
The Indemnifier shall be entitled (but not required), at its
sole expense, to participate in or to assume the defense of any
suit or the conduct of any proceeding brought to enforce such claim
or proceeding, provided that it so notifies the Claimant hereunder
within five days of receipt or deemed receipt of such notice and
furnishes to the Claimant hereunder such security or other
assurances as such party may reasonably request in connection
therewith and provided further that such dispute is prosecuted or
negotiations conducted by the Indemnifier in good faith and with
due diligence. In such event, the Claimant shall cooperate and
shall be entitled to participate with the Indemnifier in
maintaining such defense; provided, however, that any defense so
assumed shall be conducted through legal counsel acceptable to the
Claimant, acting reasonably, and that no settlement or admission of
liability may be made by the Indemnifier or the Claimant without
the prior written consent of the other. Provided further, that in
the event that the Claimant shall be unable to obtain timely advice
from the Indemnifier with respect to any such matter relating to
any such negotiations, the Claimant shall be entitled, at the
expense of the Indemnifier, to deal with same in such manner as it,
in the reasonable exercise of its judgment, deems appropriate.
If the Indemnifier does not elect to participate in or assume
the defense of such claim, the reasonable fees, costs and expenses
of the counsel for the Claimant shall be paid by the Indemnifier.
If the Indemnifier does elect to participate in or assume the
defense of such claim, the Claimant shall have the right to retain
other counsel to act on its behalf; provided that the fees and
disbursements of such other counsel shall be paid by the Claimant
unless:
the Indemnifier and the Claimant shall have mutually agreed to
the retention of the other counsel at the cost and expense of
either of them; or
the representation of such parties by the same counsel would,
in the reasonable opinion of the Claimant, be inappropriate due to
the differing acts of, or potential differing interests between
them or potential differing legal defenses, in which case such fees
and disbursements shall be paid by the Indemnifier.
Interest
Any payment required to be made pursuant to this Article 12 if
not paid when due shall bear interest from the due date to the time
of payment at the Prime Bank Rate plus two percentage points
calculated daily and compounded semi-annually, both before and
after judgment. For these purposes, the Prime Bank Rate shall be
determined on the due date and on each Business Day thereafter, to
apply during the period until the next such determination.
Right of Set-Off
If any Party becomes liable to any other Party in respect of
the indemnity contained in this Article, such Indemnified Party
shall be entitled to set off the amount of such liability against
any amounts owing or shares deliverable by it hereunder in such
order and priority as such indemnified Party in its sole discretion
may determine.
Rights are Supplemental
The rights and benefits provided in this Article are
supplemental to any other rights, actions or causes of action which
may arise pursuant to any other Section of this Agreement.
ARTICLE
EFFECTIVE DATE AND TRANSFER OF POSSESSION
Business Operated on the Purchaser s Account
Subject to compliance with the terms and conditions of this
Agreement, the transfer of and title to the Purchased Assets shall
be deemed to take effect as of the Effective Time. Notwithstanding
the foregoing, if the Closing Date and the Effective Date are not
the same date, from and after the Effective Date until the Closing
Date, the Business shall be managed and operated by the Vendor in
the ordinary course of the Business and in compliance with the
provisions of this Agreement on behalf of and for the account of
the Purchaser and the Vendor shall account to the Purchaser for all
revenues, receipts, monies, profits, benefits and advantages
derived from the management and operation of the Business from the
Effective Date until the Closing Date. As at the commencement of
business on the day following the Effective Date, the Vendor shall
set up and utilize a new set of financial books and records and
shall record therein all transactions relating to the Business
after the Effective Date. At the Closing Time, each Party shall
account to the other with respect to the operations of the Business
during the period of time from the Effective Date to the Closing
Date as determined by making reference to the aforesaid new set of
financial books and records of the Business.
Payments Received after the Effective Date
The Parties agree that all payments received by the Parties or
the Purchaser after the Effective Date and before the Closing Date
from any person who is indebted to the Vendor in respect of any
Accounts Receivable in existence as at the Effective Date, shall,
if the debtor in question designates such payments as being in
payment of a particular invoice, be applied to that invoice, no
matter who receives the said payment. In circumstances where the
debtor is indebted to both the Vendor and the Purchaser, any such
payment which is not so designated shall be applied to all
receivables from such debtor in the order in which such receivables
arose, no matter who receives the said payment; provided that if
the customer in question disputes the payment of any particular
invoice, any such payment shall not be applied thereto.
Closing of Agreement
If the purchase and sale of the Purchased Assets provided for
herein is not completed, then the Vendor shall not account to the
Purchaser for the revenues, receipts, monies, profits, benefits and
advantages derived by or accruing from the Business from and after
the Effective Time as referred to in Section 13.1 and the Purchaser
shall not be liable to the Vendor for any losses, Liabilities,
duties, obligations, debts or Contracts of the Business incurred
from and after the Effective Date.
ARTICLE
ARBITRATION
Dispute Resolution
If any controversy, dispute, claim, question or difference (a
Dispute ) arises with respect to this Agreement or its performance,
enforcement, breach, termination or validity, the Parties will use
their best efforts to settle the Dispute as expeditiously as
possible. To this end, they will consult and negotiate with each
other, in good faith and understanding their mutual interests, to
reach a just and equitable solution satisfactory to all of the
Parties.
Arbitration Procedure
If the Parties do not reach a resolution pursuant to Section
14.1 within a period of five Business Days following the first
notice of the Dispute by any Party to another, then upon written
notice by any Party to the other, the Dispute will be finally
settled by arbitration in accordance with the provisions of the
Arbitration Act (Ontario), as amended, based upon the following:
the arbitration tribunal will consist of one arbitrator
appointed by mutual agreement of the Parties, or in the event of
failure to agree within five Business Days following delivery of
the written notice to arbitrate, any Party may apply to a judge of
the Ontario Superior Court of Justice to appoint an arbitrator. The
arbitrator will be qualified by education and training to pass upon
the particular matter to be decided;
the arbitrator will be instructed that time is of the essence
in the arbitration proceeding and, in any event, the arbitration
award must be made within seven Business Days of the submission of
the Dispute to arbitration;
after written notice is given to refer any Dispute to
arbitration, the Parties will meet within two Business Days of
delivery of such notice and will negotiate in good faith any
changes to these arbitration provisions or the rules of arbitration
which are herein adopted, in an effort to expedite the process and
otherwise ensure that the process is appropriate given the nature
of the Dispute and the values at risk;
the arbitration will take place at a location mutually
agreeable to the Parties or, failing any agreement on such
location, in the City of Toronto;
the arbitration award will be given in writing and will be
final and binding on the Parties, not subject to any appeal, and
will deal with the question of costs of arbitration and all related
matters;
judgment upon any award may be entered in any court having
jurisdiction or application may be made to the court for a judicial
recognition of the award or an order of enforcement, as the case
may be; and
any Dispute referred to arbitration (including the scope of
the Agreement to arbitrate, any statute of limitations, set-off
claims, conflict of laws rules, tort claims and interest claims)
will be governed by the substantive law of the Province of Ontario.
ARTICLE
GENERAL CONTRACT PROVISIONS
Termination of Letter of Intent
Effective the date hereof, the Parties who are party to the
Letter of Intent agree that the Letter of Intent insofar as it
relates to the transaction contemplated by this Agreement is
terminated and that none of the parties thereunder shall have any
further rights or obligations under the Letter of Intent insofar as
it relates to the transaction contemplated by this Agreement, as
all of their respective rights and obligations in connection with
the purchase and sale of the Purchased Assets shall be hereafter
set out in this Agreement.
Closing Arrangements
The closing of the transaction contemplated herein shall take
place at the Closing Time, on the Closing Date, at the offices of
Aird & Berlis, Suite 1800, 181 Bay Street, Toronto, Ontario, or at
such other place or places as may be agreed to in writing by the
parties hereto.
Notices
All notices, requests, demands or other communications by the
terms hereof required or permitted to be given by one Party to
another shall be given in writing by personal delivery or by
telefax, addressed to such other Party or delivered to such other
Party as follows:
to Value or the Purchaser: 65 Passmore Avenue
Agincourt, Ontario
M1S 3C6
Attention: Mr. Robert Ziner
Telecopier No.: (416) 297-0598
with a copy to: Aird & Berlis
BCE Place, Suite 1800
181 Bay Street West
Toronto, Ontario
M5J 2T9
Attention: Thomas A. Fenton or
Stephen K. Young
Telecopier No.: (416) 863-1515
to the Vendor, the c/o 5380 Maingate Drive
Partners or the Mississauga, Ontario
Partner Principals L4W 1R8
Attention: Mr. Victor Drevnig
Telecopier No.: (905) 238-1269
with a copy to: Fogler, Rubinoff
Suite 4400
Royal Trust Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1G8
Attention: Martin R. Kaplan or John
G. Temesvary
Telecopier No.: (416) 941-8852
or at such other address as may be given by either of them to the
others in writing from time to time and such notices, requests,
demands or other communications shall be deemed to have been
received when delivered or on the date of transmission if prior to
5:00 p.m. (local time).
Further Assurances
The Parties agree to execute and deliver such additional
conveyances, transfers, assignments and other assurances as may be
required to transfer the Purchased Assets to the Purchaser, and to
sign such other papers, cause such meetings to be held, resolutions
passed and by-laws enacted, exercise their vote and influence, do
and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to
give full effect to this Agreement and every part hereof.
Legal and Accounting Fees
Save and except as otherwise provided herein, each Party shall
be responsible for its own legal and audit fees and other charges
incurred in connection with the purchase and sale of the Purchased
Assets, the completion of the transactions contemplated hereby and
any post-closing matters in connection with the transactions
contemplated hereby; provided that, prior to the Closing Date,
Value shall pay to the Vendor the reasonable costs incurred by the
Vendor in connection with the preparation of the Audited Financial
Statements solely to the extent that such costs exceed the expenses
collectively incurred by the Vendor and Seabright for the
respective review engagements completed by their respective
accountants in connection with the financial statements of such
entities as at December 31, 1998.
Time of Essence
Time shall be of the essence of this Agreement and of every
part hereof and no extension or variation of this Agreement shall
operate as a waiver of this provision.
Entire Agreement
This Agreement shall constitute the entire agreement between
the Parties with respect to all of the matters herein and this
Agreement shall not be amended except by a memorandum in writing
signed by all of the Parties and any amendment hereof shall be null
and void and shall not be binding upon any Party which has not
given its consent as aforesaid.
Agreement Not Assignable
No Party may assign this Agreement or any part hereof without
the prior written consent of the other Parties. Subject to the
foregoing, this Agreement shall enure to the benefit of and be
binding upon the Parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
Unenforceability of Warranties, Representations or Covenants
In the event that any of the warranties, representations or
covenants or any portion of them contained in this Agreement are
unenforceable or are declared invalid for any reason whatsoever,
such unenforceability or invalidity shall not affect the
enforceability or the validity of the remaining terms or portions
of this Agreement, and such unenforceability or invalid warranty,
representation or covenant or portion thereof shall be severable
from the remainder of this Agreement to the extent allowable by law
or a court of competent jurisdiction.
No Public Announcements
No public announcements shall be released or disclosure made
concerning the transactions contemplated hereby by any of the
Parties without the consent of the others of them; provided that
Value shall be entitled to make all announcements, without any
consent of the Vendor but after making best efforts to give prior
notice to the Vendor, necessary to enable it to comply with the
rules of regulatory bodies having jurisdiction. Any Party required
by law or any regulatory body to file copies of this Agreement or
agreements contemplated hereby shall do so only after having duly
requested confidential treatment thereof pursuant to any procedure
that may be available therefor.
Waivers
The terms, covenants, representations, warranties and
conditions of this Agreement may be waived only by a written
instrument executed by the Party waiving compliance. The failure
by any Party to insist upon strict performance of a covenant
hereunder or of any obligation hereunder, irrespective of the
length of time for which such failure continues, shall not be a
waiver of such Party s right to demand strict compliance in the
future. No consent or waiver, express or implied, of any right
under this Agreement or of any breach or default in the performance
of any obligation of this Agreement or of any breach or default in
the performance of any obligation of this Agreement shall
constitute or be deemed a consent or waiver of any other right or
to or of any other breach or default in the performance of the same
or any other obligation thereunder.
Counterparts
This Agreement may be executed in several counterparts, each
of which so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same agreement
and notwithstanding their date of execution shall be deemed to be
executed on the date first written above.
Joint and Several
All of the respective obligations of the Purchaser and Value
hereunder shall be joint and several obligations of both of them.
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement as of the day first written above.
SIGNED, SEALED AND DELIVERED ) VALUE HOLDINGS, INC.
in the presence of: )
)
) Per:
____________________________
)
)
)
) 1392298 ONTARIO LIMITED
)
)
) Per:
____________________________
)
)
)
) CUTLER FOREST PRODUCTS
)
)
) Per:
____________________________
)
) TREEFIELD HOLDINGS LIMITED
)
)
) Per:
____________________________
)
) DIVADALE HOLDINGS LIMITED
)
)
) Per:
____________________________
)
) RUISLIP HOLDINGS INC.
)
)
) Per:
____________________________
)
) T.M.&C. HOLDINGS LTD.
)
)
) Per:
____________________________
)
)
__________________________________ )
__________________________________
Witness ) Victor Drevnig
)
)
__________________________________ )
__________________________________
Witness ) Keith Withers
)
)
__________________________________ )
__________________________________
Witness ) Peter Engel
)
)
__________________________________ )
__________________________________
Witness ) Richard Drevnig
)
10.03 Share Purchase Agreement
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 11th day of February, 2000
AMONG:
VALUE HOLDINGS, INC., a corporation incorporated under the
laws of the State of Florida ( Value );
and -
1392298 ONTARIO LIMITED, a corporation incorporated under the
laws of the Province of Ontario (the Purchaser );
and -
CUTLER FOREST PRODUCTS, a partnership under the laws of the
Province of Ontario (the Cutler );
and -
FRED CAIN of the City of Vaughan in the Province of Ontario (
Cain )
and -
TREEFIELD HOLDINGS LIMITED, a corporation incorporated under
the laws of the Province of Ontario ( Treefield );
and -
DIVADALE HOLDINGS LIMITED, a corporation incorporated under
the laws of the Province of Ontario ( Divadale );
and -
RUISLIP HOLDINGS INC., a corporation incorporated under the
laws of the Province of Ontario ( Ruislip );
and -
T.M.&C. HOLDINGS LTD., a corporation incorporated under the
laws of the Province of Ontario (T.M.&C.);
and -
VICTOR DREVNIG of the City of Toronto in the Province of
Ontario ( V. Drevnig );
and -
KEITH WITHERS of the Town of Halton Hills in the Province of
Ontario ( Withers );
and -
PETER ENGEL of the City of Guelph in the Province of Ontario
( Engel );
and -
RICHARD DREVNIG of the City of Toronto in the Province of
Ontario ( R. Drevnig );
RECITES THAT:
Seabright Wood Fabricators Limited (the Company ) carries on
business as a wood products component manufacturing operation;
All of the issued and outstanding voting securities in the capital
of the Company are owned by Cutler and Cain;
The Purchaser is a wholly-owned subsidiary of Value; and
Cutler and Cain wish to sell, transfer and assign to the Purchaser,
and the Purchaser wishes to purchase from Cutler and Cain, all of
the issued and outstanding voting securities in the capital of the
Company, on the terms and subject to the conditions set out in this
Agreement.
NOW THEREFORE in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
ARTICLE
INTERPRETATION
Defined Terms
In addition to the words and phrases defined elsewhere in this
Agreement, as used in this Agreement, in any Schedule hereto, in
any amendment hereof, in any documents to be executed and delivered
pursuant to this Agreement and in any documents executed and
delivered in connection with the completion of the transactions
contemplated hereby, unless the context otherwise requires, the
following words and phrases shall have the following meanings,
respectively:
Accounts Receivable means all accounts receivable (including
those from installment sales), trade accounts, notes receivable and
other book debts due or accruing due to the Company and the full
benefit of all securities, if any, for such accounts, notes or
debts;
Affiliate has the meaning ascribed to such term in the
Ontario Act;
Arm s length has the meaning ascribed to such term in the Tax
Act;
Asset Purchase Agreement means the asset purchase agreement
dated the date hereof among the Parties (other than Cain) providing
for the purchase by the Purchaser of substantially all of the
assets of Cutler;
Associate has the meaning ascribed to such term in the
Ontario Act;
Audited Financial Statements means the audited consolidated
financial statements of the Company and Cutler as at and for the
fiscal year ended December 31, 1999, consisting of a balance sheet,
statement of income and retained earnings and statement of cash
flow, together with the notes thereto and the opinion of the
auditors on such financial statements;
Business means the component wood products manufacturing
business carried on by the Company principally from the Business
Premises;
Business Day means any day other than a day which is a
Saturday, Sunday or statutory holiday in the City of Toronto;
Business Premises means the portion of the premises
municipally known as 5380 Maingate Drive, Mississauga, Ontario, L4W
1R8 occupied by the Company for the purposes of its carrying on the
Business therefrom;
Class D Shares means the 181,500 Class D Shares in the capital
of the Company presently issued and outstanding and registered, as
to 60,500 Class D Shares each, in the names of Cain, V. Drevnig and
Joseph Clement;
Closing Date means May 31, 2000, or such other date as the
Shareholders and the Purchaser may agree upon in writing;
Closing Time means 2:00 p.m. (Toronto time) on the Closing
Date or such other time on the Closing Date mutually acceptable to
the Shareholders and the Purchaser;
Common Shares means the common shares in the capital of the
Company;
Company means Seabright Wood Fabricators Limited;
Condition of the Business means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs
and financial position of the Business;
Contaminate means any substance or material that is
prohibited, controlled or regulated under any Environmental Laws;
Contract means any agreement, indenture, contract, lease,
deed of trust, license, option, instrument or other commitment,
whether written or oral;
Control means, with respect to any corporation, the ownership
of more than 50% of the voting shares of that corporation,
including any shares which are voting only upon the occurrence of
a contingency where such contingency has occurred and is
continuing;
Effective Date means May 31, 2000;
Effective Time means 5:00 p.m. (Toronto time) on the
Effective Date;
Employment Contract means the employment agreement to be
entered into between the Purchaser and Cain effective the Effective
Time in the form of the employment agreement attached hereto as
Schedule 1.1(u);
Encumbrances means mortgages, charges, pledges, security
interests, liens, encumbrances, actions, claims, demands,
restrictions and equities of any nature whatsoever or howsoever
arising and any rights or privileges capable of becoming any of the
foregoing;
Environmental Laws means all common, civil, federal,
provincial, territorial, regional, municipal or local laws
applicable in the Province of Ontario which relate to protection of
the environment, health and safety, or Hazardous Substances
contained in statutes or regulations or in policies, guidelines,
orders, directives or notices which have the force of law or
permits, approvals or court or other tribunal orders having
jurisdiction in the Province of Ontario over the Company, its
assets and the Business;
Equipment Leases means the personal property leases relating
to equipment and vehicles leased by the Company, complete copies of
which are attached hereto as Schedule 1.1(x);
Generally accepted accounting principles means the accounting
principles so described and promulgated by the Canadian Institute
of Chartered Accountants which are applicable as at the date on
which any calculation made hereunder is to be effective or as at
the date of any financial statements referred to herein, as the
case may be;
Governmental Authority means any federal, state, provincial,
regional or municipal government, in Canada or elsewhere, and any
person, agency, board, commission or authority of competent
jurisdiction, in Canada or elsewhere, exercising executive,
legislative, judicial, regulatory or administrative functions of,
or pertaining to, government;
Hazardous Substances means any Contaminate or pollutant or
any substance that when released to the natural environment is
likely to cause at some immediate or future time, material harm or
degradation to the natural environment or material risk to human
health and, without restricting the generality of the foregoing,
Hazardous Substances includes any pollutant, Contaminate, hazardous
waste or dangerous goods as defined by the Environmental Laws;
Interim Period means the period between the date of
execution of this Agreement and the Closing Time;
Inventories means all inventories of the Company including,
without limiting the generality of the foregoing, all finished
goods, work in progress, raw materials, and all other materials and
supplies on hand to be used or consumed in the production of
products;
Letter of Intent means the letter of intent among Value and
the Shareholders dated August 11, 1999 and accepted on August 18,
1999, as amended by letters of the Shareholders Solicitors dated
September 29, 1999 and November 1, 1999 and by a letter agreement
dated December 17, 1999 between the Purchaser s Solicitors and the
Shareholders Solicitors on behalf of their respective clients
relating to the transactions contemplated hereby and by the Asset
Purchase Agreement;
Liabilities means all costs, expenses, charges, debts,
liabilities, claims, demands, Taxes and obligations, whether
primary or secondary, direct or indirect, fixed, contingent,
absolute or otherwise, including, without limitation, those arising
under any law, rule or regulation of any Governmental Authority,
any award of any arbitrator, court or other tribunal and any
Contract, arrangement, lease, commitment or undertaking;
Licences has the meaning ascribed thereto in Section 3.4(c);
Ontario Act means the Business Corporations Act (Ontario), as
amended from time to time;
Parties means, collectively, Value, the Purchaser, the
Shareholders, the Partners and the Partners Principals, and Party
means any one of them;
Partners means, collectively, all of the partners of Cutler,
namely Treefield, Divadale, Ruislip and T.M.&C., and Partner means
any one of them;
Partner Principals means, collectively, V. Drevnig, Withers,
Engel and R. Drevnig, and Partner Principal means any one of them;
Partnership Agreement means the Contract which constitutes the
partnership agreement, as amended from time to time and to the
extent such agreement is in writing or under oral agreement,
forming Cutler;
Permits means all permits, licenses, certificates, approvals,
authorizations, registrations or the like attainable from or
required by any Governmental Authority which are material and are
required under applicable law necessary for the conduct of the
Business or the utilization by the Company of its assets;
Person means any individual, partnership, limited
partnership, corporation, joint venture, association, joint stock
company, trust, unincorporated organization or a government or an
agency thereof;
Prime Bank Rate means the commercial lending rate of interest,
expressed as an annual rate, which The Toronto-Dominion Bank quotes
in Toronto as the reference rate of interest (commonly known as
prime) for the purpose of determining the rate of interest that it
charges to its commercial customers for loans in Canadian funds;
Purchase Price has the meaning ascribed thereto in Section
2.2;
Purchased Shares means the 1,800 issued and outstanding Common
Shares registered, as to 900 Common Shares each, in the names of
each of the Shareholders;
Purchaser s Solicitors means Aird & Berlis;
Release includes release, discharge, add, deposit, emit,
spill, leak, pump, pour, empty, inject, escape, leach, migrate,
disburse, dispose or dump;
Shareholders means, collectively, Cutler and Cain, and
Shareholder means either one of them;
Shareholders Solicitors means Fogler, Rubinoff LLP;
Tax Act means the Income Tax Act (Canada), as amended from
time to time;
Taxes means all taxes, assessments or other governmental
charges or imposts (including domestic or foreign, federal,
provincial, state or local income, withholding, sales use,
transfer, intangible, recordation, documentary, stamp, excise,
capital, business, goods or services, property, value added,
payroll or other taxes or customs duties, unemployment or workers
compensation premiums) and any interest or penalties on such taxes,
assessments, charges or imposts or in respect of such taxes,
assessments, charges or imposts;
Unaudited Financial Statements means, collectively, the
balance sheet of the Company as at December 31, 1998 and the
statement of income for the year then ended, together with the
review engagement report thereon and the notes thereto, and the
balance sheet and statement of income of the Company for the
nine-month period ended September 30, 1999, copies of which
statements are attached hereto as Schedule 1.1(ww);
Value Shares means common shares in the capital stock of
Value;
Vendor Group means, collectively, the Shareholders, the
Partners, the Partner Principals and their respective Associates
and Affiliates; and
Warranty Claim means a claim made by any of the Parties based
on or with respect to the inaccuracy or non-performance or
non-fulfillment or breach of any representation, warranty or
covenant made by another Party contained in this Agreement or
contained in any document or certificate given in order or carry
out the transactions contemplated hereby.
Currency
Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in lawful money of Canada.
To the Best of the Knowledge
To the best of the knowledge or to the knowledge means a
statement of the declarant s knowledge of the facts or
circumstances to which such phrase relates after having made
diligent enquiries and investigations in connection with such facts
and circumstances of all persons who could reasonably be expected
to have knowledge with respect thereto.
Choice of Law and Attorneys
This Agreement shall be governed by and constructed in
accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein. The Parties agree that, subject to
arbitration provisions set forth in Article 12, the courts of such
province will have exclusive jurisdiction to determine all disputes
and claims arising between the Parties.
Gender and Number
Any reference in this Agreement to gender shall include all
genders and words used herein importing the singular number shall
include the plural and vice versa.
Interpretation Not Affected by Headings or Party Drafting
The division of this Agreement into articles, sections,
paragraphs, subparagraphs and clauses shall not affect the
construction or interpretation of this Agreement. The terms this
Agreement, hereof, herein, hereunder and similar expressions refer
to this Agreement and the Schedules hereto and not to any
particular article, section, paragraph, subparagraph, clause or
other portion hereof and include any agreement or instrument
supplementary or ancillary hereto. Each Party acknowledges that
such Party and its or his legal counsel have reviewed and
participated in settling the terms of this Agreement, and the
Parties agree that any rule of construction to the effect that any
ambiguity is to be resolved against the drafting Party shall not be
applicable in the interpretation of this Agreement.
Schedules
The following are the Schedules attached to and incorporated
in this Agreement by reference and deemed to be a part hereof.
Description of Schedule Schedule No.
Employment Contract 1.1(u)
Equipment Leases 1.1(x)
Unaudited Financial Statements 1.1(ww)
Constating Documents 3.4(b)
Licenses and Permits 3.4(c)
Bank Accounts 3.12
Company Encumbrances
And Other Liabilities 3.14
Intellectual Property 3.17
Insurance 3.23
Capital Expenditures 3.26
Material Contracts 3.28
Employees 3.33
Supplier Relations 3.41
Machinery, Equipment (non-leased)
And Other Personal Property 3.46
ARTICLE
AGREEMENT TO PURCHASE THE PURCHASED SHARES
Agreement to Purchase
On the terms and subject to the fulfillment of the conditions
contained in this Agreement, the Shareholders shall sell, assign
and transfer to the Purchaser effective as at the Effective Time,
free and clear of any Encumbrances, and the Purchaser shall
purchase and accept from the Shareholders, the Purchased Shares.
Purchase Price
The purchase price (the Purchase Price) for the Purchased
Shares shall be equal to the aggregate of the following amounts:
$2,500,000; and
that number of Value Shares which is equal to the quotient
obtained when the sum of $125,000 is divided by the Value Shares
Closing Price and, for the purposes hereof, Value Shares Closing
Price means $0.435.
Payment of Purchase Price
At the Closing Time:
the Purchaser shall pay the portion of the Purchase Price
referred to in subsection 2.2(a) hereof by certified cheque, bank
draft or other form of immediately available funds as follows:
to Cutler, the sum of $1,250,000; and
to Cain, the sum of 1,250,000; and
Value shall issue and deliver the Value Shares referred to in
subsection 2.2(b) hereof as follows:
a share certificate representing 50% of such Value Shares
registered in the name of Cutler shall be delivered to Cutler; and
a share certificate representing 50% of such Value Shares
registered in the name of Cain shall be delivered to Cain.
ARTICLE
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS, THE PARTNERS AND THE PARTNER PRINCIPALS
Each of the Shareholders, the Partners and the Partner
Principals, jointly and severally, represents and warrants to the
Purchaser as follows and acknowledges that the Purchaser is relying
upon such representations and warranties in connection with the
purchase by the Purchaser from the Shareholders of the Purchased
Shares.
Authority and Binding Obligation
Each of the Shareholders has good right and absolute authority
to enter into this Agreement and to sell, assign and transfer the
Purchased Shares to the Purchaser in the manner contemplated herein
and to perform all of its obligations under this Agreement. The
Company and its shareholders and board of directors have taken all
necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the
transfer of the Purchased Shares by the Shareholders to the
Purchaser in accordance with this Agreement.
Cutler is a general partnership formed and subsisting under
the laws of the Province of Ontario and has all requisite power and
authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement
and all of the transactions and actions (required of Cutler)
contemplated hereby have been duly authorized by all necessary
action by Cutler under the Partnership Agreement. This Agreement
constitutes a legal, valid and binding obligation of the
Shareholders and the Partners enforceable against them by the
Purchaser in accordance with its terms. This Agreement has been
duly executed and delivered by all of the Parties other than Value
and the Purchaser.
No Other Purchase Agreements
No person (other than the Purchaser pursuant to this
Agreement) has any Contract, option, understanding or commitment,
or any right or privilege (whether by law, pre-emptive or
contractual) capable of becoming a Contract, option or commitment,
including convertible securities, warrants or convertible
obligations of any nature, for
the purchase, subscription, allotment or issuance of, or conversion
into, any of the unissued shares in the capital of the Company or
any securities of the Company, or
the purchase from the Shareholders of any of the Purchased
Shares, or
the purchase or other acquisition from the Company of any of its
undertaking, property or assets, other than in the ordinary course
of the Business.
Contractual and Regulatory Approvals
Except as specified in Schedule 3.30 hereto, none of the
Vendor Group is under any obligation, contractual or otherwise, to
request or obtain the consent of any person, and no Permits,
licenses, certifications, authorizations or approvals of, or
notifications to, any Governmental Authority are required to be
obtained by any of them.
in connection with the execution, delivery or performance by the
Parties, other than Value and the Purchaser, of this Agreement or
the completion of any of the transactions contemplated hereby; or
to avoid the loss of any Permit, License, certification or
other authorization; or
in order that the authority or ability of the Company 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 closing of the transactions
contemplated hereby.
)
)Per:
) Robert Ziner, President
)
)
)1392298 ONTARIO LIMITED
)
)
)Per:
) Robert Ziner, President
)
)
)CUTLER FOREST PRODUCTS
)
)
)Per:
) Victor Drevnig, Authorized
Signatory
)
)
)TREEFIELD HOLDINGS LIMITED
)
)
)Per:
) Victor Drevnig, President
)
)
)DIVADALE HOLDINGS LIMITED
)
)
)Per:
) Richard Drevnig, President
)
)
)RUISLIP HOLDINGS INC.
)
)
)Per:
) Keith Withers, President
)
)
)T.M. AND C. HOLDINGS LTD.
)
)
)Per:
) Peter Engel, President
)
)
)
(seal)
Witness ) VICTOR DREVNIG
)
)
)
(seal)
Witness ) KEITH WITHERS
)
)
)
(seal)
Witness ) PETER ENGEL
)
)
)
(seal)
Witness ) RICHARD DREVNIG
)
)
)
(seal)
Witness ) FRED CAIN
CONSENT
Each of the undersigned (namely, Fogler, Rubinoff LLP and Aird &
Berlis) hereby consent to the termination of the Escrow Agreement
as provided for in subsection 3.1(c) of the above Amending
Agreement and hereby agree that such Escrow Agreement shall be of
no further force or effect whatsoever.
DATED effective as of the 10th day of August, 2000.
FOGLER, RUBINOFF LLP AIRD & BERLIS
Per: Per:
Authorized Signatory Authorized Signatory
