<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 30, 1996
----------------------------
NSA INTERNATIONAL, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 0--19487 62-1387102
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4260 East Raines Road, Memphis, Tennessee 38118
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 366-9288
--------------------------
Not Applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1996, the Registrant sold substantially all of
the assets of its wholly owned subsidiary, National Safety Associates Ltd., an
Ontario corporation ("NSA Canada"), to National Safety Associates of Canada
Inc. ("Buyer"), an Ontario corporation owned by Roger Pearsall, a
vice-president of the Registrant, Jacques Blondeau, a consultant to the
Registrant, G. Paul Stewart, President of NSA Canada, and Douglas Arscott, an
employee of a subsidiary of the Registrant,. Messrs. Pearsall, Blondeau and
Arscott will be passive investors in the Buyer and will continue to perform
services for the Registrant or its subsidiaries to the same extent performed
prior to the transaction.
The purchase price for substantially all of the assets of NSA Canada
was $740,945.42 (U.S.). The assets of NSA Canada were sold at the approximate
book value of the assets. Due to the Company's existing relationship with
the Purchasers, the Board of Directors retained an unrelated third party
expert to evaluate the fairness of the transaction to the Company. The
fairness opinion provides that the purchase price is fair to the Registrant
and its shareholders. The purchase price for the NSA Canada assets consists of
the delivery and payment in accordance with the terms of the Buyer's promissory
note in the principal amount of $740,495.42 which is due and payable over a
five and a half year period. The note is secured by the fixed assets of the
Buyer.
Additionally, as a condition of the sale, the Registrant entered into
a distribution contract with the Buyer which provides that the Buyer will
continue to purchase products from the Registrant for resale in Canada.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
None.
ITEM 5. OTHER EVENTS.
None.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
None.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A copy Asset Purchase Agreement described in Item 2 is
attached hereto as Exhibit A.
ITEM 8. CHANGE IN FISCAL YEAR.
None.
- 1 -
<PAGE> 3
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 thereunto duly authorized.
NSA INTERNATIONAL, INC.
Date: April 30, 1996 By: /s/ A. Jay Martin
-----------------------------------------
A. Jay Martin, President
Date: April 30, 1996 By: /s/ William R. Hagel
-----------------------------------------
William R. Hagel, Chief Financial Officer
- 2 -
<PAGE> 4
Exhibit A to Form 8-K
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NATIONAL SAFETY ASSOCIATES LTD.
AND
NATIONAL SAFETY ASSOCIATES OF CANADA INC.
April 30, 1996
<PAGE> 5
TABLE OF CONTENTS
(This Table of Contents is not a part of the Agreement and is only for
convenience of reference.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
3. Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 -
4. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 -
5. Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6 -
6. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
SCHEDULE 1(a) Acquired Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(a)-1
SCHEDULE 1(b) Acquired Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(b)-1
SCHEDULE 1(c) Acquired Utility Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(c)-1
SCHEDULE 1(d) Acquired Prepaid Items and Security Deposits . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(d)-1
SCHEDULE 1(e) Distributor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(e)-1
SCHEDULE 1(f) Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 1(f)-1
SCHEDULE 6(a) Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule 6(a)-1
EXHIBIT 2(c) Form of Buyer Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2(c)-1
EXHIBIT 2(f) Allocation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2(f)-1
EXHIBIT 5(a)(iii) Form of Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(a)(iii)-1
EXHIBIT 5(a)(v) Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(a)(v)-1
EXHIBIT 5(a)(vi) Assignment and Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(a)(vi)-1
EXHIBIT 5(a)(viii) Non-Competition & Non-Solicitation Agreement . . . . . . . . . . . . . . . . . . . . . . . 5(a)(viii)1
EXHIBIT 5(b)(i) Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(b)(i)-1
</TABLE>
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of the 30th day of
April, 1996, by and between NATIONAL SAFETY ASSOCIATES LTD., an Ontario
corporation (the "Seller") and NATIONAL SAFETY ASSOCIATES OF CANADA INC., an
Ontario corporation (the "Buyer"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
W I T N E S S E T H:
WHEREAS, the Seller owns and operates a multi-level distributorship
organization based in Ontario, Canada and desires to sell certain of the assets
and assign certain of the liabilities of such business; and
WHEREAS, the Buyer is willing to purchase certain of the assets and
assume certain of the liabilities of such business;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and promises herein contained, and for the other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
"Acquired Assets" means all of the right, title, and interest, if any,
that the Seller possesses and has the right to transfer in and to all of its
assets, excluding the Excluded Assets, but including (a) the equipment,
furniture, fixtures, vehicles, leasehold improvements, and other depreciable or
amortizable assets of Seller, listed on SCHEDULE 1(A); (b) the inventory listed
on SCHEDULE 1(B); (c) the utility deposits listed on SCHEDULE 1(C); (d) the
prepaid items and security deposits listed on SCHEDULE 1(D); (e) the
Distributor contracts listed on SCHEDULE 1(E) (f) goodwill, (g) customer lists,
and (h) the right to hold itself out as successor in interest to the Seller.
"Affiliate" has the meaning set forth in the Business Corporations Act
(Ontario).
"Agreed Inventory Value" has the meaning set forth in Section 2(j)
below.
"Assumed Liabilities" means (a) all obligations and liabilities of the
Seller under any agreements, contracts, leases, licenses, and other
arrangements referred to in the definition of Acquired Assets either (i) to
furnish goods, services or other benefits to another party after the Closing
Date or (ii) to pay for goods, services or other benefits that another party
will furnish to it after the Closing Date and (b) all obligations and
liabilities expressly assumed by Buyer pursuant to this Agreement.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in Section 2(c) below.
"Cash" means cash and cash equivalents calculated in accordance with
GAAP applied on a consistent basis.
"Closing" has the meaning set forth in Section 2(e) below.
"Closing Date" has the meaning set forth in Section 2(e) below.
"Code" means the Income Tax Act (Canada).
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Excluded Assets" means (a) the assets of the Seller listed on
SCHEDULE 1(F), (b) the corporate charter, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer
<PAGE> 7
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation, (c) any Cash on hand
or Cash in any bank(s) as of the Closing Date, (d) all accounts receivable of
the Seller, and (e) any of the rights of the Seller under this Agreement or any
related documents (or under any side agreement between the Seller on the one
hand and the Buyer on the other hand entered into on or after the date of this
Agreement).
"GAAP" means generally accepted accounting principles as in effect
from time to time as set out in the Handbook of the Canadian Institute of
Chartered Accountants.
"Income Tax" means any federal, provincial, local, or foreign income
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Inventory" has the meaning set forth in Section 2(j) below.
"Knowledge" means the actual knowledge of the officers of Seller,
excluding G. Paul Stewart and Jacques Blondeau, without independent
investigation.
"Lease" means that certain Lease Agreement by and between the Seller
and M & R Holdings, a joint venture of Swindon Investments Limited, Windley
Limited, Overbank Limited and Ellendale Investments Limited for the Lease of
the premises located at 2785 Skymark Avenue, Unit 15, Mississauga, Ontario L4W
4Y3 CANADA.
"Lessor" means M & R Holdings, a joint venture of Swindon Investments
Limited, Windley Limited, Overbank Limited and Ellendale Investments Limited.
"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due).
"Negative Adjustment Amount" has the meaning set forth in Section 2(j)
below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Positive Adjustment Amount" has the meaning set forth in Section 2(j)
below.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Seller" has the meaning set forth in the preface above.
"Shareholder" shall mean NSA International, Inc., a Tennessee
corporation.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, at the
Closing, all of the Acquired Assets for the consideration specified in this
Section 2.
<PAGE> 8
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities on the Closing Date. The Buyer will not
assume or have any responsibility, however, with respect to any other
obligation or liability of the Seller not included within the definition of
Assumed Liabilities.
(c) Purchase Price. Subject to the Purchase Price Adjustment set
forth in SECTION 2(J) below, the purchase price for the Acquired Assets shall
be Six Hundred Seventy Four Thousand Seven Hundred Thirty Two United States
Dollars ($674,732 U.S.), plus the assumption of the Assumed Liabilities (the
"Purchase Price") which shall be comprised of the following payments and
obligations (i) the Buyer's assumption of all of the Assumed Liabilities and
(ii) the Buyer's delivery to the Seller and payment in accordance with the
terms of the promissory note (the "Buyer Note") in substantially the form
attached hereto as EXHIBIT 2(C). In order to determine the value of the
Assumed Liabilities in U.S. dollars, the Parties shall utilize the exchange
ratio set forth in the Toronto Globe and Mail on the Closing Date.
(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Messrs.
Miller Thomson, 60 Columbia Way, Suite 600, Markham, Canada L3R 0C9, commencing
at 5:00 p.m. local time on April 30, 1996.
(e) Deliveries at the Closing. At the Closing, (i) the Buyer will
deliver to the Seller the various certificates, instruments, and documents
referred to in Section 5(a) below; and (ii) the Seller will deliver to the
Buyer the various certificates, instruments, and documents referred to in
Section 5(b) below.
(f) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
Purchase Price Allocation Agreement in substantially the form attached hereto
as EXHIBIT 2(F).
(g) Proration. The following proration relating to the Acquired
Assets will be made as of the Closing, with the Seller liable to the extent
such items relate to any time period up to the Closing Date and the Buyer
liable to the extent such items relate to any time period occurring on and
after the Closing Date. To the extent possible, the net amount of all such
prorations will be settled and paid at the Closing.
(i) goods and services tax, retail sales tax, GST, PST, other
provincial sales taxes and assessments, and other taxes, if any, on or
with respect to the Acquired Assets.
(ii) rents, additional rents, taxes and other items payable
by the Seller under any lease, license, permit, contract or other
agreement or arrangement to be assigned to or assumed by Buyer.
(iii) the amount of rents, taxes, and charges for sewer,
water, fuel, telephone, electricity, and other utilities; provided
that if practicable, meter readings shall be taken on the Closing Date
and the respective obligations of the parties determined in accordance
with such readings.
(h) Taxes and Expenses. The Buyer shall be liable for and shall pay
all federal and provincial sales taxes and all other taxes, duties or other
like charges properly payable upon and in connection with the conveyance and
transfer of the Acquired Assets by the Seller to the Buyer except any
outstanding claims for transfer tax, federal and provincial sales taxes and all
other taxes which are due or have accrued on or before the Closing Date.
(i) GST Election. The Seller and the Buyer shall jointly elect
pursuant to the provisions of subsection 167(1) of the Excise Tax Act (Canada)
by completing at or prior to the Closing Date all prescribed forms and related
documents in such manner as is prescribed so that, for purposes of the Excise
Tax Act (Canada), no goods and services tax (herein referred to as "GST") is
payable in respect of the purchase and sale of the Acquired Assets. The Seller
agrees that, after the Closing Date, it will file the joint election in the
manner and within the time limits prescribed under the Excise Tax Act (Canada)
and will provide the Buyer with written confirmation of such filing.
<PAGE> 9
(j) Adjustment to Purchase Price. The Parties acknowledge and
agree that as of the Closing Date, the value of the inventory to be transferred
to the Buyer by the Seller has an estimated value of Five Hundred Thousand U.S.
Dollars ($500,000.00 U.S.). On May 1, 1996, the Parties will jointly conduct a
physical count of all inventory which is included in the definition of Acquired
Assets (the "Inventory"). Upon conclusion of the physical count of the
inventory, by agreement, the Parties shall determine the value (in U.S.
dollars) of the Inventory (the "Agreed Inventory Value"). If the Agreed
Inventory Value exceeds Five Hundred Thousand U.S. Dollars ($500,00.00 U.S.)
the Purchase Price shall be increased, dollar for dollar, by the amount by
which the Agreed Inventory Value exceeds Five Hundred Thousand U.S. Dollars
($500,000.00 U.S.) (the "Positive Adjustment Amount"). Alternatively, if the
Agreed Inventory Value is less than Five Hundred Thousand U.S. Dollars
($500,00.00 U.S.) the Purchase Price shall be decreased, dollar for dollar, by
the amount by which the Agreed Inventory Value is less than Five Hundred
Thousand U.S. Dollars ($500,000.00 U.S.) (the "Negative Adjustment Amount").
Upon determination of either the Positive Adjustment Amount or the Negative
Adjustment Amount, which shall occur no later than May 4, 1996, the principal
balance of the Buyer Note shall be adjusted either (i) upward by the amount of
the Positive Adjustment Amount or (ii) downward by the amount of the Negative
Adjustment Amount. Upon determination of the new principal balance of the
Buyer Note, the Buyer shall execute a new note containing the adjusted
principal amount which shall supersede and replace the Buyer Note.
3. Representations and Warranties of the Seller. Certain
shareholders or officers of the Buyer were members of the senior management of
the Seller or its Affiliates and are familiar with and have knowledge of all of
the operations and assets of the Seller. Accordingly, the Seller's
representations and warranties do not encompass any information which is known
or should be known by the aforementioned individuals. Subject to the preceding
sentence, the Seller represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3), except as set forth in the disclosure
schedule accompanying this Agreement and initialed by the Parties (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 3.
(a) Organization of the Seller. The Seller is a corporation duly
organized and validly existing under the laws of the Province of Ontario,
Canada.
(b) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the board of
directors of the Seller and the Stockholder have duly authorized the execution,
delivery, and performance of this Agreement by the Seller. This Agreement
constitutes the valid and legally binding obligation of the Seller, enforceable
in accordance with its terms and conditions, subject to general equity
principles and to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws from time to time in effect affecting creditors' rights
generally.
(c) Noncontravention. To the Knowledge of the Seller, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which the
Seller is subject or any provision of the charter or bylaws of the Seller or
(ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which the Seller
is a party or by which it is bound or to which any of its assets is subject,
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice or obtain
consent, or Security Interest would not have a material adverse effect on any
of the Acquired Assets, the financial condition of the Seller or on the ability
of the Parties to consummate the transactions contemplated by this Agreement;
provided, however, that the parties acknowledge that the assignment of the
Lease shall require the consent of Lessor.
(d) Brokers' Fees. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
<PAGE> 10
(e) Title to Property and Assets. The Seller has good and marketable
title to all of the Acquired Assets subject to no mortgage, pledge, lien,
security interest, lease, charge, encumbrance or conditional sale except for
liens for taxes not yet due and payable.
(f) Litigation. To the Knowledge of the Seller, Section 3(f) of the
Disclosure Schedule sets forth each instance in which Seller is (i) subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party to any action, suit, proceeding, hearing, or investigation of, in or
before any court or quasi-judicial or administrative agency of any federal,
provincial, local, or foreign jurisdiction.
(g) Material Contracts. To the Knowledge of the Seller Section 3(g)
of the Disclosure Schedule lists all written contracts and other written
agreements to which the Seller is a party (if such contracts or agreements are
Acquired Assets or Assumed Liabilities) the performance of which will involve
consideration in excess of $10,000 per annum (other than the Distributor
Agreements which are listed in SCHEDULE 1(E) and the Lease).
(h) Intellectual Property. To the Knowledge of the Seller, it has
not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any intellectual property rights of third parties and the Seller
has never received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that the Seller must license or refrain from using any intellectual
property rights of any third party).
(i) Insurance. Section 3(i) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any of the Seller has been
a party, a named insured, or otherwise the beneficiary of coverage at any time
within the past five (5) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage; and
(iv) the scope and amount of coverage;
(l) Other Transfer Instruments. Following the Closing, at the
request of the Buyer, the Seller shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate (A)
to vest in the Buyer all of the Seller's title to the Acquired Assets, and (B)
to transfer to the Buyer all of the Seller's rights to licenses and permits
necessary for the operation of the Acquired Assets.
4. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
4), except as set forth in the Disclosure Schedule. The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized and validly existing under the laws of Province of Ontario, Canada.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any
<PAGE> 11
provision of its charter or bylaws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject. Except as disclosed in SECTION 4(C) of the
Disclosure Schedule,the Buyer does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 6 hereof).
(d) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(e) Business Premises. The Buyer has examined the business premises
and has inspected the physical condition of all the Acquired Assets. The Buyer
covenants that it will accept the conveyance of the Acquired Assets, As Is, in
their present state and condition, subject to reasonable use to the Closing.
(f) Information. Principals of the Buyer have actively participated
in the management of the Seller and are familiar with all aspects of the
business operations and assets of the Seller, including material supplier,
vendor, and other agreements and have had full access to all property, records,
contracts, and documents of or relating to the business of the Seller.
5. Deliveries at Closing.
(a) Documents to be Delivered by the Buyer. At the Closing, the
Buyer shall deliver the following instruments and documents to Seller:
(i) the Buyer Note in the form attached hereto as EXHIBIT
2(C) in the principal amount of Six Hundred Seventy Four Thousand
Seven Hundred Thirty Two United States Dollars ($674,732 U.S.);
provided, however, that such principal amount is subject to adjustment
pursuant to the terms of Section 2(j) above;
(ii) certified resolutions of the Buyer's board of directors
and shareholders, in a form satisfactory to the Seller's counsel
authorizing the execution and performance of the Agreement and all
other actions to be taken by the Buyer hereunder;
(iii) the Security Agreement in the form attached hereto as
EXHIBIT 5(A)(III) and accompanying PPSA (Ontario) Financing Statements
securing the obligations of the Buyer under the terms of the Buyer
Note;
(iv) an opinion of Buyer's counsel in a form reasonably
satisfactory to Seller's counsel regarding the validity of the
transactions contemplated hereby;
(v) an executed Distribution Agreement between the Buyer and
NSA International, Inc. in the form attached hereto as EXHIBIT
5(A)(V);
(vi) an Assignment and Assumption Agreement with respect to
the Assumed Liabilities, in the form attached hereto as EXHIBIT
5(A)(VI);
(vii) The Non-Competition and Non-Solicitation Agreement in
substantially the form attached hereto as EXHIBIT 5(A)(VII).
(viii) such other documents as Seller may reasonably request
to effect the transactions contemplated by this Agreement, including
documents required in order to allow the Buyer to register its
corporate name in each province in Canada..
(b) Documents to be Delivered by Seller. At the Closing, the Seller
shall deliver the following instruments and documents to the Buyer:
<PAGE> 12
(i) a Bill of Sale regarding the tangible personal property
in the form attached hereto as EXHIBIT 5(B)(I) ;
(ii) certified resolutions of the Seller's board of directors
and Shareholder, in a form satisfactory to the Buyer's counsel
authorizing the execution and performance of the Agreement and all
other actions to be taken by the Seller hereunder;
(iii) all documents referred to in Section 5(a) which require
execution by the Seller; and
(iv) Evidence satisfactory to the Seller and its counsel that
the Buyer has at least $300,000.00 U.S. of working capital at the
Closing.
(v) such other documents as the Buyer may reasonably request
to effect the transactions contemplated by this Agreement.
6. Employees.
(a) Affected Employees. "Affected Employees" shall mean all
employees of the Seller, a list of whom is attached hereto as SCHEDULE 6(A), on
the Closing Date. Effective at 12:01 a.m. Toronto time on the date immediately
following the Closing Date, all Affected Employees shall be discharged by the
Seller and shall be offered employment by the Buyer on terms at least as
favorable as those offered by the Seller.
(b) Responsibilities. The Seller agrees to satisfy, or cause its
insurance carriers to satisfy, all claims for medical, health and hospital
benefits, whether insured or otherwise under the Seller's benefit plans,
brought by, or in respect of, Affected Employees and former employees of the
Seller for events occurring prior to the Closing Date, in accordance with the
terms and conditions of such benefit plans without interruption as a result of
the employment by the Buyer of any such employees after the Closing Date. The
Buyer shall be responsible for any claims arising as a result of events
occurring on or after the Closing Date and for any worker's compensation
claims, whenever such claim occurred.
(c) Payroll and Payroll Taxes. The Seller agrees to close its last
pay period on the Closing Date and to pay to the federal, provincial and city
governments those amounts respectively withheld or required to be withheld or
paid relating to payroll taxes, Ontario health tax, unemployment insurance
premiums, Canadian pension plan premiums, workers compensation assessments and
payments and all other withholding taxes for periods ending prior to the
Closing Date. The Buyer shall be responsible for all payroll and payroll tax
obligations, Ontario health tax, unemployment insurance premiums, Canadian
pension plan premiums, workers compensation assessments and payments and all
other withholding taxes accruing after the Closing Date for Affected Employees.
7. Miscellaneous.
(a) Survival of Representations and Warranties. The representations
and warranties of the Parties contained in this Agreement shall survive for a
period of one (1) year following the Closing hereunder.
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Party.
<PAGE> 13
(e) Relationship between the Parties. This Agreement shall not
create the relationship of principal and agent between the Parties. The Buyer
shall have no authority to make any commitment on behalf of the Seller and the
Seller shall have no authority to make any commitment on behalf of the Buyer.
The Buyer represents and warrants that it shall not act or represent itself to
be an agent for the Seller, nor to create or attempt to create any obligation
or liability on behalf of the Seller. The Seller warrants that it shall not
act as or represent itself to be an agent for the Buyer, nor create or attempt
to create any obligation on behalf of the Buyer.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
<TABLE>
<S> <C>
If to the Seller: Copy to:
Charles R. Evans G. Robert Morris, Esq.
NSA Canada, Ltd. Baker, Donelson, Bearman & Caldwell
c/o NSA International, Inc. 165 Madison Ave., Suite 2000
4260 East Raines Road Memphis, Tennessee 38103
Memphis, TN 38118
If to the Buyer: Copy to:
Paul Stewart Judson Whiteside
2785 Skymark Avenue, Unit 15 Miller Thomson
Mississauga, Ontario L4W 4Y3 60 Columbia Way, Suite 600
CANADA Markham, Ontario L3R 0C9
CANADA
</TABLE>
Any party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth
above, using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, facsimile, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it is actually received by
the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder or to be
delivered by giving the other party notice in the manner herein set forth.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. The Seller may consent to any such amendment at any time
prior to the Closing with the prior authorization of its board of directors;
provided, however, that any amendment effected after the Stockholder has
approved this Agreement will be subject to any restrictions or actions required
by applicable law. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
<PAGE> 14
(k) Expenses. The Buyer and the Seller will bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal,
provincial, local, or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. The Parties agree and acknowledge that the Exhibits and
Schedules will be prepared jointly by the Parties.
(n) Condition of the Acquired Assets. THE ACQUIRED ASSETS SHALL BE
DELIVERED TO THE BUYER "AS IS" AND EXCEPT AS SPECIFICALLY SET FORTH HEREIN THE
SELLER MAKES NO WARRANTIES, GUARANTIES, OR REPRESENTATIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE WITH RESPECT TO THE ACQUIRED
ASSETS, AND THE SELLER SHALL HAVE NO LIABILITY OR OBLIGATION RESULTING FROM ANY
SUCH REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE.
(o) Attorney's Fees. If any legal action or arbitration or other
proceeding is brought for the enforcement of this Agreement or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the prevailing party or parties shall be
entitled to recover reasonable attorney's fees and other costs incurred in such
action or proceeding, in addition to any other relief to which it or they may
be entitled.
(p) Bulk Transfer Laws. The Buyer acknowledges that the Seller will
not comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
(q) Governing Law. This Agreement (with the exception of the
Distribution Agreement) shall be governed by and construed in accordance with
the domestic laws of the Province of Ontario without giving effect to any
choice or conflict of law provision or rule (whether of the Province of Ontario
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Province of Ontario.
<PAGE> 15
* * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
NATIONAL SAFETY ASSOCIATES OF CANADA INC.
By:/s/ William R. Hagel
-----------------------------------------
Title: Secretary-Treasurer
-----------------------------------------
SELLER:
NATIONAL SAFETY ASSOCIATES LTD.
By: /s/ G. Paul Stewart
-----------------------------------------
Title: President
-----------------------------------------
<PAGE> 16
AMENDED AND RESTATED NON-NEGOTIABLE PROMISSORY NOTE
$740,495.42 U.S. Markham, Ontario, Canada
April 30, 1996
FOR VALUE RECEIVED, the undersigned, NATIONAL SAFETY ASSOCIATES OF
CANADA INC., an Ontario corporation (the "Maker"), promises to pay to the order
of NATIONAL SAFETY ASSOCIATES LTD., an Ontario corporation (the "Lender"), the
principal sum of Seven Hundred Forty Thousand Four Hundred Ninety-Five and
42/100 U.S. DOLLARS ($740,495.42 U.S.), together with interest from May 1, 1996
until maturity, upon disbursed and unpaid principal balances, at the rate
hereinafter specified, said principal and interest being payable as follows:
<TABLE>
<CAPTION>
Date of Payment Interest Payment Principal Payment Balance
--------------- ---------------- ----------------- -------
<S> <C> <C> <C>
December 31, 1996 $40,727.25 - 0 - $740,495.42
December 31, 1997 $61,090.87 $100,000.00 $640,495.42
December 31, 1998 $52,840.87 $100,000.00 $540,495.42
December 31, 1999 $44,590.87 $150,000.00 $390,495.42
December 31, 2000 $32,215.87 $200,000.00 $190,495.42
December 31, 2001 $15,715.87 $190,495.42 - 0 -
</TABLE>
This Note expressly replaces and supercedes the Non-Negotiable
Promissory Note between the parties in the principal amount of $674,732 U.S.
dated of even date herewith (the "Prior Note"). The Prior Note shall be deemed
cancelled, shall be of no further effect, and is null and void.
Subject to the limitations hereinafter set forth, the disbursed and
unpaid principal balances of the indebtedness hereby evidenced shall bear
interest prior to maturity at the fixed rate of eight and one quarter percent
(8.25%) per annum. Maker shall have the right to prepay the principal and
interest on this note without penalty.
Any amounts not paid when due hereunder (whether by acceleration or
otherwise) shall bear interest after maturity at the lesser of (a) twelve
percent (12%) per annum or (b) the maximum effective contract rate which may be
charged by the Lender under applicable law from time to time in effect.
In the event that the foregoing provisions should be construed by a
court of competent jurisdiction not to constitute a valid, enforceable
designation of a rate of interest or method of determining same, the
indebtedness hereby evidenced shall bear interest at the maximum effective
contract rate which may be charged by the Lender under applicable law from time
to time in effect.
This Note is non-negotiable, however, it may be assigned to any entity
which is an Affiliate of Lender, as such term is defined by the Ontario
Business Corporations Act.
This Note is secured by Security Agreement ("Security Agreement") of
even date herewith covering certain of Maker's assets received by Maker
pursuant to the terms of an Asset Purchase Agreement dated of even date
herewith between the Maker and Lender.
All installments of interest, and the principal hereof, are payable by
Maker's corporate check at 4260 East Raines Road, Memphis, Tennessee 38118, or
at such other place as the holder may designate in writing, in lawful money of
the United States of America, which shall be legal tender in payment of all
debts and dues, public and private, at the time of payment.
<PAGE> 17
If the Maker shall fail to make the payment of principal and any
installment of interest, as above provided, and such failure shall continue
unremedied for a period of five (5) days following written notice thereof, or
upon the occurrence of any Event of Default, as that term is defined in the
Security Agreement, or upon the dissolution of the Maker and (if there is a
cure period applicable thereto) such default is not cured within such
applicable cure period, then and in any such event, the entire unpaid principal
balance of the indebtedness evidenced hereby, together with all interest then
accrued, shall, at the absolute option of the holder hereof, at once become due
and payable, without demand or notice, the same being hereby expressly waived.
If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, the Maker shall pay on demand all costs of collection and
litigation (including court costs), together with a reasonable attorney's fee
if Lender is successful in the litigation.
The Maker and any endorsers or guarantors hereof waive protest,
demand, presentment, and notice of dishonor, and agree that this Note may be
extended, in whole or in part, without limit as to the number of such
extensions or the period or periods thereof, with notice to them and without
affecting their liability thereon.
It is the intention of the Lender and the Maker to comply strictly
with applicable usury laws; and, accordingly, in no event and upon no
contingency shall the holder hereof ever be entitled to receive, collect, or
apply as interest any interest, fees, charges or other payments equivalent to
interest, in excess of the maximum effective contract rate which the Lender may
lawfully charge under applicable statutes and laws from time to time in effect;
and in the event that the holder hereof ever receives, collects, or applies as
interest any such excess, such amount which, but for this provision, would be
excessive interest, shall be applied to the reduction of the principal amount
of the indebtedness hereby evidenced; and if the principal amount of the
indebtedness evidenced hereby, all lawful interest thereon and all lawful fees
and charges in connection therewith, are paid in full, any remaining excess
shall forthwith be paid to the Maker, or other party lawfully entitled thereto.
All interest paid or agreed to be paid by the Maker shall, to the maximum
extent permitted under applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal so
that the interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. Any provision hereof, or of any other
agreement between the holder hereof and the Maker, that operates to bind,
obligate, or compel the Maker to pay interest in excess of such maximum
effective contract rate shall be construed to require the payment of the
maximum rate only. The provisions of this paragraph shall be given precedence
over any other provision contained herein or in any other agreement between the
holder hereof and the Maker that is in conflict with the provisions of this
paragraph.
This Note shall be governed and construed according to the statutes
and laws of the Province of Ontario and the federal laws of Canada applicable
therein from time to time in effect.
NATIONAL SAFETY ASSOCIATES OF CANADA INC.
By:/s/ G. Paul Stewart
------------------------------------------
Title: President
---------------------------------------
<PAGE> 18
EXHIBIT 5(A)(V)
DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is entered into this the 30th day of
April, 1996, by and between NSA INTERNATIONAL, INC., a Tennessee corporation
("NSAI") having an office at 4260 East Raines Road, Memphis, Tennessee, USA
38118, and NATIONAL SAFETY ASSOCIATES OF CANADA INC.an Ontario corporation
("Distributor") having an office at 2785 Skymark Avenue, Unit 15, Mississauga,
Ontario L4W 4Y3, CANADA.
W I T N E S S E T H:
WHEREAS, NSAI owns the right to the international distribution of
various types of water filters and other water treatment systems, air filters,
an in-home carbonation appliance, certain nutritional products, and other
related products;
WHEREAS, Distributor desires to obtain the exclusive right to sell and
distribute within a specified geographic area such products marketed by NSAI
upon the terms and conditions herein set forth; and
WHEREAS, Distributor desires, in connection with marketing of such
products, to obtain from NSAI access to NSAI's computer system and computer
consultants familiar with NSAI's computer hardware and software used in
connection with the distribution and sale of such products;
NOW, THEREFORE, for good and valuable consideration, it is mutually
agreed as follows:
1. Definitions
1.1 The term "Confidential Information" means any and all
information, including Technical Information, that is not generally known to
the public or by NSAI's competitors which is valuable to NSAI or gives it an
advantage over its competitors, including, by way of example only, information
relating to: (a) NSAI's operational procedures, methods, processes and
techniques, (b) any ideas, inventions, discoveries, improvements, services,
products, formulas, apparatus, equipment, cost data, research or development
relating to the Products (as hereinafter defined) or otherwise relating to
NSAI's business, including information relating to NSAI's computer software
system; or (c) the prices, users, suppliers or customers of NSAI's products or
services.
1.2 The term "Distribute" means to promote and sell Products only
within the Territory. The terms "distributor" and "distribution" shall be
interpreted to comply fully with this definition.
1.3 The term "Exclusive" when used in reference to an appointment in
respect of the distribution of Products, means that during the term of this
Agreement, NSAI may not appoint a third party to Distribute, and itself retains
no right to Distribute within the Territory.
1.4 The term "New Products" shall have the meaning set forth in
SECTION 2.4.
1.5 The term "New Product Notice" shall have the meaning set forth in
SECTION 2.4.
1.6 The term "Products" as used herein, shall include each of the
following: (a) those products specifically listed on EXHIBIT A hereto, and as
amended from time to time, and any and all improvements to such products which
may occur or be developed during the term of this Agreement, whether developed
by NSAI or Distributor; (b) any and all products which embody or employ any of
NSAI's Technical Information; (c) the materials and component parts of the
products identified in subparagraphs (a) and (b); (d) the by-
<PAGE> 19
products of any such products, materials, or component parts, whether or not
such by-products are used or are usable in any other products; (e) all products
which are manufactured, assembled or sold or otherwise disposed of by
Distributor as a direct or indirect result of NSAI's providing Distributor with
Confidential Information or Technical Information.
1.7 The term "Technical Information" means any information, whether
confidential or otherwise, which is applicable to or useful in the
demonstration, testing, inspection, use, operation, maintenance or repair of
Products, including, by way of example only, engineering drawings, electrical,
electronic or other schematics, specifications, equipment and parts lists, test
procedures, and operating, maintenance and repair procedures and instructions.
1.8 The term "Territory" means the country of Canada.
1.9 The term "Total Gross Sales" means Distributor's receipts from
the sale of all goods and services, excluding sales of sales aids, including
Products and New Products, net of returns and allowances in the ordinary course
of business and less sales or value added tax incurred in connection with such
sales. Total Gross Sales shall be determined on a month to month basis.
2. Exclusive Distributorship.
2.1 Appointment. Subject to the terms of this Agreement, NSAI hereby
appoints Distributor as its exclusive distributor with the right to appoint
subdistributors of the Products within the Territory; provided, however, that
this Agreement may be terminated or the exclusiveness of this appointment may
be withdrawn by NSAI upon notice to Distributor in the event Distributor fails
to comply with the terms and provisions of this Agreement. The right granted
to Distributor herein is non-transferrable in whole or in part. Distributor
hereby accepts the appointment as NSAI's exclusive distributor of the Products
within the Territory and agrees to use its best efforts to sell the Products in
accordance herewith only within the Territory.
2.2 Distributor's Compensation. Distributor's sole compensation
hereunder shall consist of the difference between Distributor's purchase price
paid to NSAI for the Products and the selling price received by Distributor
from its purchasers.
2.3 Method of Distribution. Prior to the date of this Agreement,
Distributor has furnished to NSAI a Plan of Distribution, which details the
method by which Distributor intends to market and sell the Products. The Plan
of Distribution is attached hereto as EXHIBIT B. At least thirty (30) days
prior to making any modifications to the Plan of Distribution, Distributor
shall notify NSAI of the proposed modification to the Plan of Distribution (a
"Proposed Modification"). Before any Proposed Modification shall become
effective, NSAI shall have given its written consent to such Proposed
Modification, which consent may be withheld in NSAI's sole and absolute
discretion. Any modification to the Plan of Distribution without the consent
of NSAI or the failure of Distributor to follow the Plan of Distribution as set
forth on EXHIBIT B (as modified in accordance with this SECTION 2.3) shall be a
breach of this Agreement.
2.4 Distribution of Other Products. In the event Distributor desires
to sell products other than the Products ("New Products") which are not sold to
Distributor by NSAI, Distributor shall notify NSAI of its desire to sell such
products ("New Product Notice"). The New Product Notice will contain design
and product specifications and all price, manufacturing, delivery, and other
material terms regarding the New Products. NSAI shall have a period of sixty
(60) days from the date NSAI receives the New Product Notice to determine, in
its sole and absolute discretion, whether Distributor may sell the New
Products. In the event NSAI determines that Distributor may sell the New
Products, NSAI may require Distributor to affix the NSA logo to the New
Products prior to the sale of such New Products or condition Distributor's
ability to sell such New Products upon such New Products being sold bearing
NSAI's trademarks.
<PAGE> 20
3. Purchase and Sale of Products. NSAI shall sell and Distributor
shall buy the Products, on a purchase order by purchase order basis, in such
quantities and on such dates as Distributor shall determine, but all sales shall
be subject to the following:
3.1 Purchase Price. The purchase price of the Products shall be set
forth on EXHIBIT A. The prices set forth on EXHIBIT A shall remain constant
during the initial two (2) years of this Agreement; thereafter, they shall be
subject to change annually; provided, however, that any increase of the
purchase price of Products shall be limited to the increase in NSAI's actual
cost for Products.
3.2 Payment. Sales from NSAI to Distributor on an open account,
payable within thirty (30) days of the invoice date. NSAI shall invoice
Distributor on the last business day of each month for Products shipped during
the month. In the event the account is not paid in full when due, NSAI shall
charge interest on all amounts due at a rate of eighteen percent (18%) per
annum and have the right to terminate this Agreement.
3.3 Minimum Purchase Requirements. As a condition to the granting of
rights herein contained, Distributor agrees to purchase the minimum value of
the Products as follows (each year being measured from the anniversary date of
this Agreement):
<TABLE>
<S> <C>
First Year . . . . . . . . . . . . . . . . . . . . . . . U.S. $750,000
Second Year . . . . . . . . . . . . . . . . . . . . . . U.S. $750,000
Third Year . . . . . . . . . . . . . . . . . . . . . . . U.S. $750,000
Fourth and thereafter . . . . . . 110% of the previous year's minimum
</TABLE>
Exercise by NSAI of its rights of termination in the event Distributor
fails to meet the above minimums will not involve payment of any consequential
damages by Distributor to NSAI as a result of Distributor's failure to meet the
above minimum. In considering the exercise of this termination right, NSAI
agrees to take reasonable extenuating circumstances into account.
3.4 Delivery/Passage of Title. All Products purchased by Distributor
shall be delivered F.C.A. INCOTERMS 1990 at NSAI's Memphis, Tennessee dock.
Upon delivery to the carrier, title to the goods and risk of loss shall pass
from NSAI to Distributor. Upon delivery to Distributor's warehouse,
Distributor shall have a reasonable time to inspect the Products delivered.
NSAI shall not be liable for any claims unless they are made promptly after
receipt of the Products and due opportunity has been given for inspection by
NSAI's representatives.
4. Disclaimer of Warranties. Distributor acknowledges that the only
warranty given by NSAI is a warranty to repair or replace any Products
determined by NSAI to be defective, following proper notice and inspection under
SECTION 3.4 hereof. EXCEPT AS SET FORTH IN THIS PARAGRAPH, NSAI HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, RELATED TO THE PRODUCTS,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE
AND MERCHANTABILITY.
5. Exploitation of Rights by Distributor.
5.1 Best Efforts. Distributor shall at all times diligently use its
best efforts (a) to fully exploit the rights and licenses granted to it by
NSAI; (b) to achieve and maintain the maximum sales volume and distribution of
the Products; (c) otherwise to develop and satisfy fully the market for the
Products in each province within the Territory, without regard to whether
Distributor has met the minimum sales requirement; and (d) to refrain from any
activity which may adversely affect these objectives.
<PAGE> 21
5.2 Reversion. In the event that Distributor fails to satisfactorily
develop the market in any province within the Territory as determined by NSAI,
in its reasonable discretion, then at any time three (3) years after the date
hereof, NSAI may, at its option, upon written notice, terminate Distributor's
rights hereunder with respect to any such province, whereupon the definition of
"Territory" will be deemed modified to exclude such province.
5.3 Facilities and Staff. Distributor shall establish and maintain
facilities and hire, train, and maintain a staff sufficient to enable
Distributor to perform its obligations under this Agreement. Such facilities
and staff shall be consistent with promoting the reputation of, and confidence
in, the Products. Distributor shall consult with and give due regard to the
advice of NSAI concerning distribution strategy and policy, and NSAI shall
supply Distributor with such Technical Information or other Confidential
Information, as in NSAI's sole discretion, is reasonably necessary to enable
Distributor to perform its obligations under this Agreement.
5.4 Product Brochures and Advertising. Distributor shall prepare and
distribute, at its own expense, such advertising material, sales literature,
catalogues, and other printed promotional material, and conduct such
promotional activity as may be necessary to perform its obligations under this
Agreement. NSAI shall supply samples, existing product brochures and other
NSAI literature to Distributor, in an amount deemed reasonable in the sole
discretion of NSAI. NSAI shall provide all such materials in English and
Distributor shall be responsible for any and all costs associated with accurate
translation, where required. Prior to their distribution or use, Distributor
will supply NSAI with copies, translated into English, of all brochures,
packaging, advertising or other literature prepared by or for Distributor
relating to the Products or Distributors business involving the Products. At
the request of NSAI, Distributor will make changes in its advertising and
promotional materials in the event that NSAI determines, in its reasonable
judgment, that such materials do not accurately portray the features or
performance characteristics of the Products or otherwise are in violation of
the terms of this Agreement.
5.5 Non-Competition. Distributor specifically agrees (a) to refrain
from directly or indirectly manufacturing, assembling, or selling products or
services, under its own brand name or otherwise, inside or outside the
Territory, which are deemed to be competitive with Products or NSAI's other
products and business, and (b) to abide by the decision of NSAI on this issue
of being competitive with Products by either withdrawing the allegedly
competitive products from Distributor's lines or labeling such products to
conform with NSAI's instructions, whichever NSAI may request. The fact that
NSAI may permit Distributor to market certain competitive products temporarily
under Distributor's own brand shall not be construed as a waiver of NSAI's
right to enforce at any time the provisions of this SECTION 5.5.
5.6 Product Procedures. Distributor agrees to comply fully and
exactly with all Product procedures, including, but not limited to, handling,
storage, training, and installation procedures specified to Distributor by NSAI
at the time of purchase. It shall be a material breach of this Agreement if
Distributor fails to follow any such procedure.
6. Fees. Pursuant to the terms of this Agreement, Distributor agrees
to pay to NSAI the fees detailed below and provide NSAI with access to all books
and records of Distributor reasonably requested by NSAI which would allow NSAI
to determine the amount of fees owed to NSAI:
6.1 Computer Usage and Management Fees. In exchange for the Computer
Consulting Services and limited access to NSAI's mainframe computer system as
described in SECTION 7, Distributor agrees to pay NSAI as a Computer Usage and
Management Fee an amount equal to two percent (2%) of the Total Gross Sales.
The Computer Usage and Management Fee shall be paid on the last business day of
each month, directly to a banking institution selected by NSAI by wire
transfer, based upon the Total Gross Sales for the immediately preceding month.
Failure to pay the Computer Usage and Management Fee as herein called for will,
at the option of NSAI, result in termination of this Agreement. Computer Usage
and Management Fees not paid when due shall bear interest from the due date
until paid at a rate of eighteen percent (18%) per annum. If
<PAGE> 22
Distributor is delinquent in the payment of all or a portion of the Computer
Usage and Management Fee owed to NSAI, NSAI may take such steps as it deems
appropriate to collect the delinquent fees including collection against letters
of credit, delay of shipments, or treatment as a Breach of this Agreement. In
the event Distributor is required to withhold any amount for payment to
applicable taxing authorities, Distributor shall be entitled to do so.
6.2 Royalty Fees. In exchange for the ability to utilize NSAI's
name, logo, and sell the Products, Distributor agrees to pay NSAI as a Royalty
Fee an amount equal to three percent (3%) of the Total Gross Sales. The
Royalty Fee shall be paid on the last business day of each month, directly to a
banking institution selected by NSAI by wire transfer, based upon the Total
Gross Sales for the immediately preceding month. Failure to pay the Royalty
Fee as herein called for will, at the option of NSAI, result in termination of
this Agreement. Royalty Fees not paid when due shall bear interest from the
due date until paid at the maximum rate allowable by applicable law. If
Distributor is delinquent in the payment of all or a portion of the Royalty
Fees owed to NSAI, NSAI may take such steps as it deems appropriate to collect
the delinquent fees including collection against letters of credit, delay of
shipments, or treatment as a Breach of this Agreement. In the event
Distributor is required to withhold any amount for payment to applicable taxing
authorities, Distributor shall be entitled to do so.
6.3 Books and Records. Distributor agrees to maintain complete books
and records and to make the same available to NSAI for inspection. Distributor
agrees to submit to NSAI periodic reports and financial statements at the
times, in the form and containing such information as may be prescribed from
time to time by NSAI. If required by NSAI in its sole discretion, such
financial statements shall be based upon an audit performed by Distributor's
chartered accountant and prepared and certified in accordance with generally
accepted accounting principles as in effect from time to time as set out in the
Handbook of the Canadian Institute of Chartered Accountants. NSAI reserves the
right to enter Distributor's premises and inspect such books and records and to
have such books and records audited. Distributor shall pay any amounts
determined by such audit to be due to NSAI, plus interest thereon at a rate of
eighteen percent (18%) per annum.
6.4 Intercompany Reconciliations. Within three (3) days after the
last business day of each month, NSAI shall cause its computer system to run a
reconciliation report detailing payouts made by each party to distributors and
dealers of the other party. The net amount shown on such reconciliation report
shall be paid by the appropriate party to the other party, or, at the option of
both parties, be settled through offsets of amounts owed to either party.
<PAGE> 23
7. Computer Consulting Services and Computer Usage.
7.1 Computer Consulting Services. NSAI agrees to make its computer
personnel available to Distributor for consultation regarding the selection and
purchase of computer hardware and software to be used by Distributor in
connection with fulfilling its obligations hereunder, subject only to NSAI's
requirements for such personnel for the needs of its own business. Such
consultation shall occur in writing, by phone, or in person at NSAI's
facilities. If it is necessary for such services to be provided by outside
consultants who are not NSAI employees, then Distributor shall be responsible
for payment of all fees and expenses of such outside consultant, provided,
however, that NSAI shall not engage any such outside consultant without the
prior approval of Distributor. If such services are provided at Distributor's
site, subject to Distributor's request and upon NSAI's express approval in the
case of its own employees, then all travel expenses (including meals and
lodging) of such consulting personnel shall be borne by Distributor.
7.2 Computer Usage. NSAI will make available to Distributor limited
access to NSAI's mainframe computer and programs therein contained which will
allow Distributor to operate its business pursuant to the Plan of Distribution
attached hereto as EXHIBIT B. NSAI may limit Distributor's access to the
mainframe computer in any manner deemed necessary by NSAI to protect any
Confidential Information, Technical Information, or other information contained
on the mainframe computer system. Any attempt by Distributor to gain access to
the mainframe in excess of the access specifically granted by NSAI will be a
breach of this Agreement. Upon termination of this Agreement, Distributor
shall not be entitled to any information stored on or programs located on
NSAI's mainframe computer. Distributor expressly acknowledges that all
programming and information on NSAI's mainframe are the sole and exclusive
property of NSAI.
8. Confidentiality and Non-Disclosures. Distributor acknowledges
that, in the course of fulfilling its obligations hereunder, it has or will
receive or obtain Confidential Information and Technical Information of NSAI,
and that such information is proprietary and valuable to NSAI. Therefore,
Distributor will make such information available only to those of its employees
who need to know in order to fulfill Distributor's obligations hereunder and
shall not communicate or divulge to, nor use for the benefit of, any other
person, firm or corporation any of the Technical Information or Confidential
Information communicated to Distributor pursuant to this Agreement or
otherwise. Distributor shall obligate its officers, directors, management
personnel, and employees to maintain the secrecy of such Technical Information
and Confidential Information. Distributor shall not, without the prior written
consent of NSAI, authorize or direct the release of any information to any third
party relating to the nature, terms, and conditions of this Agreement.
Distributor shall use its best efforts to safeguard the Technical Information
and Confidential Information from unauthorized disclosure. Distributor shall be
responsible for any breach of the requirements of this paragraph by anyone to
whom Distributor discloses the Technical Information or Confidential
Information. The obligations of Distributor contained in this paragraph are
independent, and the existence of any claim or cause of action of Distributor
against NSAI, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by NSAI of the obligations of
Distributor under this paragraph. Distributor's obligations under this
paragraph shall survive any termination or expiration of this Agreement.
9. Non-Solicitation. Distributor agrees, during the term hereof and
for a period of two (2) years after any expiration or termination hereof, not to
directly or indirectly offer to employ or employ any employees of NSAI while
they are in the employ of the NSAI, and not to offer to employ or employ any
former employee of NSAI for a period of two (2) years after they have left the
employ of the NSAI. The obligations of Distributor contained in this paragraph
are independent, and the existence of any claim or cause of action of
Distributor against NSAI, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by NSAI of the obligations of
Distributor under this paragraph. Distributor's obligations under this paragraph
shall survive any termination or expiration of this Agreement.
<PAGE> 24
10. Injunction and Damages. Distributor acknowledges that any breach
or imminent breach by Distributor of any covenant, term or provision of this
Agreement may cause irreparable injury and harm to NSAI, and that remedies at
law for the breach or imminent breach may be inadequate. Accordingly, in the
event of a breach hereof by Distributor, or in the event that NSAI, in good
faith and upon reasonable cause, determines that a breach hereof appears
imminent, NSAI shall be entitled to obtain specific performance, temporary and
permanent injunctive relief and such other relief to which it may be entitled
at law or in equity without the necessity of posting bond or of proving actual
damage. NSAI shall be entitled to recover all reasonable costs and attorneys'
fees incurred by it in the event it is successful in obtaining any such relief.
In the event that NSAI is unsuccessful in obtaining any relief under this
paragraph, then NSAI shall reimburse Distributor or its reasonable costs and
attorneys' fees incurred in defense of such action.
11. Regulatory and Governmental Approval. Distributor hereby agrees
that it shall be responsible and liable for procuring all necessary regulatory
or other government approvals regarding the use or sales of the Products within
the Territory and all costs associated therewith including, without limitation,
any required approval of the Plan of Distribution set forth on EXHIBIT B.
Distributor hereby agrees to indemnify and hold NSAI harmless for any and all
costs, including but not limited to fines, penalties, and attorney's fees, or
judgments, that result from any action by any individual, entity, government or
other regulatory body within the Territory. Distributor agrees to forward to
NSAI copies of all regulatory approvals and to keep NSAI advised as to the
status of pending approvals. Any regulatory approvals sought by Distributor
shall bear the name of NSAI.
12. Intellectual Property Rights.
12.1 Ownership. Distributor acknowledges NSAI's exclusive ownership
of the trademarks affixed to and the patents embodied in the Products and will
do nothing at any time, during or after the term of this Agreement, which could
adversely affect their validity or enforceability, including any modification or
obliteration of the trademark or patent markings on the Products as sold. This
Agreement shall not give Distributor any right to use the NSA name and marks, or
any other trademarks of NSAI, except as specifically authorized by NSAI.
Promptly following termination of this Agreement for any reason, Distributor
agrees to discontinue use of the NSAI name and marks, and any other NSAI names
and trademarks and to remove, or dispose of, as Distributor shall direct, any
signs or other indicia relating NSAI to the sale of the Products and any use of
NSAI's name and trademarks. Following termination of this Agreement, Distributor
shall not be permitted to use the NSA name or marks or any other NSAI name or
trademark in connection with any product. Distributor shall not have any right
to register in the Territory or elsewhere, any trademarks identical with or
similar to NSAI's trademarks. All use of NSAI's trade name or trademarks by
Distributor, in connection with the selling, installation and service of the
Products or the operation of its business, under this Agreement shall be subject
to NSAI's control and shall inure to the benefit of NSAI.
12.2 Company Name. The trade name "NSA" is being used as part of
Distributor's name only with the specific permission of NSAI, and immediately
upon any termination of this Agreement, Distributor will cease use of the
designation "NSA" in its name, and will proceed to change its name, both in
trade and with all appropriate and necessary government officials, to one not
including the designation "NSA," or the name "National Safety Associates" or any
confusingly similar name or designation.
12.3 Defense of Rights. If necessary, Distributor shall, at NSAI's
request, assist NSAI in taking any action which may be necessary in order to
safeguard and defend NSAI's right of ownership in its trademarks or patents. In
particular, Distributor shall observe the market for designations which may
infringe NSAI's rights in and to its patents or trademarks and inform NSAI of
its observations. Distributor shall (a) be vigilant in detecting any possible
infringements of any of NSAI's patents or trademarks by third parties; (b)
inform NSAI promptly of any such event; and (c) collaborate wholeheartedly with
NSAI in proceeding against such infringers, to the extent requested by NSAI.
<PAGE> 25
12.4 Infringement. NSAI makes no warranty or representation as to
whether the distribution and sale of Products by Distributor infringes the
patents, trademarks or other proprietary rights of any third party. In the
event that any infringements are alleged by third parties, NSAI agrees to
investigate the situation fully in collaboration with Distributor, and the
parties agree to cooperate in taking appropriate action to alleviate said
infringement and to resolve any claims. Distributor agrees that it will not
take any steps or institute any action to suppress an infringement or to expunge
any trademark registration without prior written authorization from NSAI.
12.5 Limited License; Inventions. This Agreement grants a limited
license to Distributor to the trademarks, patents or technology by NSAI used in
connection with or embodied in the Products only for the term of this Agreement
and for the purposes herein contained. Any and all improvements, modifications,
inventions or discoveries by Distributor or its employees, relating to the
Products, as a result of Distributor's access to the Technical Information and
Confidential Information, or otherwise arising as a result of this Agreement
shall be the sole and exclusive property of NSAI. In furtherance of the
foregoing, Distributor hereby assigns, and agrees to assign, all such
improvements, modifications, inventions and discoveries to NSAI, and further
authorizes NSAI as its attorney-in-fact to execute all such documents as NSAI
may determine are necessary or desirable to confirm the foregoing assignment
and/or NSAI's ownership rights to such improvements, modifications, inventions
or discoveries.
13. Indemnity. Distributor shall indemnify and defend NSAI against
and hold NSAI harmless from any and all claims (including without limitation,
product liability claims), suits, damages, judgments, or losses, including
reasonable attorney's fees and other expenses incurred in investigation and
defense, which arise out of the distribution, marketing and/or sale or other
disposition by Distributor of Products, or out of any unauthorized use of any
trademark, patent, process, idea, method or device by Distributor, or otherwise
as the result of any act or omission of Distributor or its dealers,
subdistributors or purchasers, whether based upon breach of contract,
negligence, tort, strict liability or otherwise. Distributor shall provide to
NSAI proof of product liability insurance coverage, which shall name NSAI as an
additional insured, in an amount of not less then $___________ per occurrence,
$_______________ in the aggregate.
14. Damages. Neither party shall by reason of the termination or
non-renewal of this Agreement, in whole or in part, be liable to the other for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales, or on account of expenditures, investments,
leases, property improvements or commitments in connection with the business or
good will of the other party, or otherwise.
15. Notice of Claims. Distributor shall immediately, upon notice of
a claim of any kind involving any Product, provide notice of the claim to NSAI.
Such notice shall provide a detailed description of the facts and circumstances
giving rise to such claim.
16. Term. Subject to prior termination in accordance herewith, this
Agreement shall have a term of three (3) years, but shall be renewable for
successive one (1) year periods, if so agreed upon in writing by authorized
representatives of both parties at least ninety (90) days prior to then end of
the initial or any renewal term. NSAI shall consent to each renewal provided
that (i) Distributor is current in all payments required under this Agreement
and (ii) is currently in compliance with all of the terms, conditions and
provisions of this Agreement.
17. Termination. This Agreement will terminate, except as otherwise
set forth below, upon notice to Distributor in the event of any of the
following:
(a) Distributor fails to meet the minimum purchase requirements set
forth herein;
<PAGE> 26
(b) Distributor ships any Products outside the Territory, or if
Distributor ships or sells the Products to any entity or person whom
Distributor knows or should know will or is likely to sell,
distribute, or otherwise dispose of such Products outside the
Territory;
(c) Distributor becomes insolvent or if bankruptcy or similar
proceedings are instituted against Distributor, and such termination
will take effect on the day after such event takes place, without it
being necessary for NSAI to give notice to Distributor;
(d) In the event of any breach by Distributor of its obligations
hereunder or any breach by Distributor of any of its agreements,
representations, warranties, covenants or obligations contained in any
agreement between Distributor and NSAI or any of its affiliates, as
such term is defined in the Business Corporations Act (Ontario);
(e) Upon any change of ownership, control, or geographic location of
Distributor to which NSAI has not consented in advance.
18. Effect of Termination. Upon any termination or expiration of
this Agreement, or at anytime upon the request of NSAI, Distributor shall, at
Distributor's expense, return to NSAI all documents and other copies of any
Technical Information and Confidential Information in its possession or under
its control. Upon the termination of this Agreement, Distributor shall have a
period of ninety (90) days to dispose of its remaining inventory of Products
within the Territory in accord with the terms of this Agreement. After such
ninety (90) day period, Distributor may only sell such remaining inventory to
NSAI which shall be purchased at Distributors cost. In the event of a
bankruptcy or similar proceeding involving Distributor, Distributor shall
forfeit any and all rights to and in all Products in Distributor's possession.
NSAI and/or NSA shall have the right to retrieve the Products upon payment of
the shipping fees and expenses and the return of the amount paid for the
Products, less any amounts owed to NSAI by Distributor.
19. Relationship Between the Parties. This Agreement shall not
create the relationship of principal and agent between the parties.
Distributor shall have no authority to make any commitment on behalf of NSAI,
and NSAI shall have no authority to make any commitment on behalf of
Distributor. Distributor warrants that it shall not act as or represent itself
to be an agent for NSAI, nor create or attempt to create any obligation or
liability on behalf of NSAI. NSAI warrants that it shall not act as or
represent itself to be an agent for Distributor, nor create or attempt to
create any obligation on behalf of Distributor.
20. Appointment of Agents. Distributor may appoint authorized
subdistributors, dealers or agents to Distribute within the Territory in such
numbers and at such locations as may be approved by NSAI, which approval shall
not be unreasonably withheld. Distributor shall be responsible for the
performance of its subdistributors, dealers or agents and nothing in this
Agreement shall create the relationship of principal and agent or distributor
between NSAI and any such subdistributor, dealer or agent.
21. Compliance with Foreign Laws. Distributor will comply with all
applicable laws and regulations during the course of performance of this
Agreement and related activities. Should registration of this Agreement with
governmental authorities be required under the laws of any country in the
Territory, Distributor shall comply with such registration requirements and
provide proof of such compliance to NSAI.
22. Compliance with Foreign Corrupt Practices Act. Distributor
represents and agrees that it has not offered, given, promised to give or
authorized giving, and will not offer, give, promise to give or authorize
giving, directly or indirectly, any money or anything else of value to any
governmental official, political party, political official or candidate for
political office in connection with its activities hereunder.
23. Counterparts; English Version. This Agreement shall be executed
in duplicate but shall not be binding upon NSAI until a copy, signed by
Distributor, is executed by NSAI. This Agreement is entered into
<PAGE> 27
in the English language. Should a translation of this Agreement into any other
language be required or desired for any reason, it is understood that in all
matters involving the interpretation of this Agreement, the English text shall
govern.
24. Force Majeure. No liability shall result from the delay in
performance or non-performance (other than the obligation to pay for Products
shipped) caused by force majeure or circumstances beyond the reasonable control
of the party affected, including, but not limited to, Acts of God, fire, flood,
war, embargo, any United States or foreign government regulation, direction or
request, accident, labor trouble, or shortage of, or inability to obtain
material, equipment or transport.
25. Notice. Any notice required or permitted herein may be hand
delivered, faxed, telexed, cabled or mailed, properly addressed to the party to
be notified at the address set forth above or at the last known address given
by such party to the other party, and shall be deemed delivered when so
transmitted.
26. Governing Law; Jurisdiction and Venue. This Agreement and all
transactions contemplated by this Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Tennessee
without regard to principles of conflicts of laws. The parties acknowledge
that a substantial portion of negotiations, anticipated performance and
execution of this Agreement occurred or shall occur in Shelby County, Tennessee
and that, therefore, each of the parties irrevocably and unconditionally (a)
agrees that any suit, action or legal proceeding arising out of or relating to
this Agreement shall be brought in the courts of record of the State of
Tennessee in Shelby County or the federal district court serving Shelby County,
Tennessee; (b) consents to the jurisdiction of each such court in any suit,
action or proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such party by mail,
at the address provided in this Agreement, or in such other manner as may be
provided under applicable laws or court rules of said state.
27. Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable under
applicable law, such invalidity, illegality or unenforceability shall be
limited to such provisions and the remainder of this Agreement shall be valid
and binding upon NSAI and Distributor.
28. Headings. The headings contained in this Agreement are for
convenience only and shall not be deemed to affect in any way the language of
the provisions to which they refer.
29. Exhibits. The Exhibits referred to herein are expressly
incorporated into this Agreement by this reference.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the date first
written above.
NATIONAL SAFETY ASSOCIATES OF CANADA INC.
By: /s/ G. Paul Stewart
----------------------------------------
Its: President
---------------------------------------
NSA INTERNATIONAL, INC.
By: /s/ William R. Hagel
----------------------------------------
Its: Chief Financial Officer - Secretary
---------------------------------------
<PAGE> 28
EXHIBIT A TO DISTRIBUTION AGREEMENT
<TABLE>
<CAPTION>
Price in
Item U.S. Dollars
- ---- ------------
<S> <C>
10P $ 14.00
144DW $ 38.00
25I $ 16.00
50C $ 40.00
100S $ 46.00
210SP $ 85.00
210 SPR $ 32.00
150 SH $ 51.00
600A $ 30.00
600A Filter $ 8.50
692A $ 45.00
692A Filter $ 8.50
1200A $ 40.00
1200A Filter $ 8.50
7100A/B $ 160.00
7100A Filter $ 8.50
7100 HEPA $ 25.00
Juice Plus+ capsules $ 38.00
Juice Plus+ chewables $ 17.00
Juice Plus+ Lite $ 25.00
Juice Plus+ Bars Ch. $ 32.00
Juice Plus+ Bars Apple $ 32.00
Personal Alarm $ 35.00
Surestop $ 25.00
Door View $ 25.00
Cycle Alarm $ 11.00
Auto Alarm $ 37.50
</TABLE>
All prices stated above are in U.S. Dollars F.C.A., Incoterms 1990 at
NSAI's dock, Memphis, Tennessee.
<PAGE> 29
EXHIBIT B TO DISTRIBUTION AGREEMENT
Plan of Distribution
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR RETAIL PROFIT
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase NSA Suggested Preferred Preferred
Volume Credit Wholesale Retail Retail Customer Customer
Model (Description) (PVC) Price Price Profit Price Profit
- ------------------------------------------------------------------------------------------------------------------------------------
Juice Plus(TM)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capsules (4 Sets) $144 (80%) $180 $239 $ 59 $199 $19
Capsules (2-Pack) 36 (80%) 45 30.75 14.75 49.75 4.75
Lite vanilla (6 Cans) 100.50(80%) 126 174 48 144 18
Lite Chocolate (6 Cans) 100.50(80%) 126 174 48 144 18
Lite Combo (3 Van./3 Choc.) 100.50(80%) 126 174 48 144 18
Lite Vanilla (2 Cans) 33.50(80%) 42 58 16 48 6
Lite Chocolate (2 Cans) 33.50(80%) 42 58 16 48 6
Lite 2-Pack (Van./Choc.) 33.50(80%) 42 58 16 48 6
Chewables (4 Sets) 80 (80%) 100 129 29 114 14
Chewables (2-Pack) 20 (80%) 25 32.50 7.25 29.50 3.50
- ------------------------------------------------------------------------------------------------------------------------------------
Water Systems
- ------------------------------------------------------------------------------------------------------------------------------------
10P (Portable) 48 (80%) 60 74 14 65 5
25I (Ice maker) 60 (80%) 75 99 24 90 15
30C (Countertop) 144 (80%) 180 239 59 199 19
100S (Under sink) 175 (80%) 220 289 59 255 35
144DW (Speciality Countertop) 152 (80%) 190 249 59 215 25
150SH (Shower) 192 (80%) 240 350 110 N/A N/A
300H (Whole House) 324 (80%) 540 749 209 N/A N/A
300HR (Replace, Cylinder) 150.50(70%) 215 340 25 N/A N/A
9000HM (Heavy Metal) 210 (70%) 300 399 99 N/A N/A
???? High Density
Replace, Filter 72 (80%) 90 120 30 N/A N/A
200SP (Sparkling Water System) 227.50(70%) 325 375 50 N/A N/A
2005P Essence (4) 12.50(50%) 25 25 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Air Systems
- ------------------------------------------------------------------------------------------------------------------------------------
1200A (Personal) 150 (80%) 200 249 49 225 25
1200AF (Replace, Filter Combo) 35 (80%) 45 45 N/A 45 N/A
7100A/7100B (Stationary Room) 342 (80%) 570 695 125 615 45
7100AF (EC-1270 Replace, Filter) 35 (80%) 45 45 N/A 45 N/A
7100HF (HEPA Replace, Filter) 106 (80%) 135 135 N/A 155 N/A
600A (Auto) 120 (80%) 150 199 49 175 25
600AF (Replace, Filter) 24 (80%) 30 30 N/A 30 N/A
692AH (Heat) 150 (80%) 225 295 70 255 40
692AF (Replace, Filter) 35 (80%) 45 45 N/A 45 N/A
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CUMULATIVE PVC QUALIFICATIONS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIRECT DISTRIBUTOR SR. DIRECT DISTRIBUTOR SALES COORDINATOR
Group PVC $2,000 $6,000 $12,000
Personal PVC $1,000
Lines with a Direct Distributor in Each 0 2 2
Note: PVC generated to attain each level counts towards the next level.
- ---------------------------------------------------------------------------------------------------------------------
COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------
DIRECT DISTRIBUTOR SR. DIRECT DISTRIBUTOR SALES COORDINATOR
Commission* 6% DDC 6% DDC 6% DDC
8% DDC 8% DDC
8% SCC
Performance Bonus** 5% PB 5% PB 5% PB
Promote-Out Bonus** 4% POB
*Must have S200 PVC in monthly Distributor PVC to Qualify
**Pending qualification as described in Definitions.
- ---------------------------------------------------------------------------------------------------------------------
QUALIFYING NATIONAL MARKETING DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
Qualification
a) $60,000 in "payline" downline PVC during any two consecutive calendar months,
(and)
b) Five (5) downline "legs" with a Sales Coordinator in each.
NOTE: Qualification (b) must be met within two months after qualification (a). (Example: $80,000 PVC in
January/February...must have five "legs" with Sales Coordinators by the end of April)
(also)
Qualifying NMD status will not be recognized until all qualification standards have been met.
Compensation & Benefits
* 5th Generation Performance Bonus - After your qualifying month as a Qualifying NMD, you are eligible
to receive an additional Performance Bonus equal to 5% of all PVC through the fifth generation of bonus
qualifiers or qualified positions. The qualification to receive this bonus will be exactly the same as set
forth in definition #11.
* Qualifying National Marketing Director Business Incentive Bonus - Business Incentive Bonus as
described and according to qualification and requalification standards set forth in NBA's Qualifying
National Marketing Director Program.
- ---------------------------------------------------------------------------------------------------------------------
NATIONAL MARKETING DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
Qualification
a) Six (6) months as Qualifying NMD.
b) $300,000 in "payline" downline PVC during a six-month period.
NOTE: The PVC requirements must be met within any six consecutive months after the Qualifying NMD's
qualifying month. Consequently, PVC used to qualify as a Qualifying NMD may not be used for NMD
qualification.
Benefits
* NMD Benefits Package
* Business Incentive Bonus, and other benefits, as described and according to qualification and
requalification standards set forth in NSA's National Marketing Director Program.
</TABLE>
<PAGE> 31
- -------------------------------------------------------------------------------
DEFINITIONS
- -------------------------------------------------------------------------------
1. WHOLESALE PRICE - The distributor cost of all products offered by NSA.
2. PURCHASE VOLUME CREDIT - The percentage of wholesale price that
applies for commissions, bonuses and promotions.
3. PREFERRED CUSTOMER PRICE - The priced offered to a customer who has
committed to consuming Juice Plus(TM) for 120 days.
4. PERSONAL PVC - The purchase volume credit under your distributor number
only. $1,000 must be completed on a cumulative basis, by any distributor
who is requesting promotion.
5. DISTRIBUTOR PVC - The purchase volume credit of products purchased from NSA
under your distributor number and sponsored Dealers' numbers during a PVC
month. This is the volume upon which you are paid Direct Distributor
Commission.
6. QUALIFYING MONTH - The calendar month you qualify as a Direct Distributor,
Senior Direct Distributor, Sales Coordinator, etc.
7. EFFECTIVE MONTH - The first calendar month following the qualifying month.
You become eligible to draw the benefits of your newly qualified position
beginning with the effective month, not in your qualifying month.
8. PAYLINE - Downline purchase volume credit on which a Direct Distributor
receives Performance Bonus during any given month.
9. BONUS QUALIFIER - A Direct Distributor with a minimum of $2,000 Distributor
PVC during a calendar month or as described in #11 below.
10. LINE (SOMETIMES REFERRED TO AS "LEG") - A part of your total downline that
starts with someone personally sponsored by you, and continuing below that
sponsorship. Each person personally sponsored by you starts a new and
separate line.
11. PERFORMANCE BONUS - Subject to qualification, you may receive a Performance
Bonus equal to 5% of PVC through four (4) generations of downline bonus
qualifiers or qualified positions in each lien. The first generation is
completed by your first downline bonus qualifier. However, you will be
paid on all non-qualifying volume between you and your first generation.
The only volume you will not receive 5% Performance Bonus on is your
Distributor PVC, and PVC done below your 4th (or 5th) generation, in
each leg.
Qualification for Performance Bonus -
A Direct Distributor may qualify to receive monthly Performance Bonus
by:
- Having a minimum of $2,000 in Distributor PVC including prior month
"excess" PVC), or
- Having two (2) lines with a bonus qualifier in each, and $1,000 in
Distributor PVC (including prior month "excess" PVC), or
- Having three (3) lines with a bonus qualifier in each, in which case
there is NO Distributor PVC requirement excess PVC
NOTE See minimum pass through definition.
12. EXCESS PVC - Monthly purchase volume credit in excess of the amount
required to qualify for a month's Performance Bonus, or Promote-Out Bonus.
This excess may be used toward the following month's qualification next
month ???
13. SALES COORDINATION "OPEN" DOWNLINE - All Dealers, Direct Distributors and
Senior Direct Distributors in the downline structure of a Sales
Coordinator that are not under another downline Sales Coordinator. (This
includes the Sales Coordinator's own distributor position.)
14. SALES COORDINATOR PROMOTE-OUT - The first Sales Coordinator to qualify
within each of your downline "legs".
15. PROMOTE-OUT BONUS (POB) - Subject to qualification, you may receive a
Promote-Out Bonus equal to 4% or "open" downline PVC of the first qualified
Sales Coordinator or POS qualified position below you.
Qualification for Promote-Out Bonus
- Having a minimum of $3,000 in "open" downline PVC (including prior
month "excess" PVC), or
- Having two (2) lines with a qualified Sales Coordinator in each, and
$1,000 in your "open" downline (including prior month "excess" PVC),
or
- Having three (3) lines with a qualified Sales Coordinator in each, in
which case there is NO PVC requirement with your
Excess PVC
NOTE See minimum pass through definition.
16. QUALIFIED POSITION - A Direct Distributor or Sales Coordinator who
qualifies for a Performance Bonus or a Promote-Out Bonus as described in
#11 and #15 above.
17. MINIMUM PASS THROUGH (MPT) - When Direct Distributors or Sales Coordinators
qualify for Performance Bonus or Promote-Out Bonus with less than $2,000
PVC (distributor) or $3,000 PVC (coordinator), they are required to pass
a minimum bonus to the upline qualifiers in each case. This bonus would
be equal to 5% (Performance Bonus) or 4% (Promote-Out Bonus) of the
difference between their actual distributor or coordinator "open" PVC, and
the $2,000 or $3,000 PVC requirement, whichever applies.
18. DIRECT DISTRIBUTOR COMMISSION - Commission paid to Direct Distributors and
above on the volume they have done personally, as well as the volume done
by all of their Dealers, who are not under another Direct Distributor.
19. SENIOR DIRECT DISTRIBUTOR COMMISSION - Commission paid to Senior Direct
Distributors and above on the volume they have done personally as well as
the volume done by all Dealers and Direct Distributors, who are not under
another Senior Direct Distributor.
20. SALES COORDINATOR COMMISSION - Commission paid to Sales Coordinators and
above on the volume they have done personally, as well as the volume done
by all Dealers, Direct Distributors and Senior Direct Distributors, who
are not under another Sales Coordinator.
21. PVC MONTH - This is the "business month" used by NSA which starts on the
first day of a calendar month, and extends into the second or third week
of the following month. In other words, from the first day of the second
month, until the day designated as the "cutoff" day, a distributor has the
option of leaving an order in the current calendar month or moving it back
to the previous month. If you want to back date your order, you must
specify this when placing the order.
[Recycle Logo]
<PAGE> 32
<TABLE>
<S> <C>
[NSA LOGO] NATIONAL SAFETY ASSOCIATES LTD. [LOGO] QST Registration GST Registration
2785 Skymark Avenue, Unit 15 No. 1003634724 No. R103836623
Mississauga, ON, Canada L4W 4Y3
(905) 624-6365 Fax (905) 624-4824
NSA INDEPENDENT DISTRIBUTOR APPLICATION
This application form, when processed by National Safety Associates Ltd. (NSA), together with the Rules of Operation for an NSA
Distributor contained herein, the provisions for Distributor compensation contained in the Profit and Incentive brochure form No.
2955710, and related documents, all of which are incorporated herein, constitutes the agreement between the applicant and NSA, and
no other promises, offers, representations, agreements or understandings of any kind shall be binding upon NSA. NSA reserves the
right to amend the NSA Sales Program and Rules of Operation for an NSA Distributor from time to time as it deems appropriate.
PLEASE TYPE OR PRINT Manitoba residents see amendment I following. Quebec residents see amendment II attached.
- ------------------------------------------------------------------------------------------------------------------------------------
NAME [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] SOCIAL INSURANCE NO. [ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ]
LAST FIRST
SPOUSE'S NAME [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
LAST FIRST
NSA BUSINESS NAME[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
(if applicable only)
ADDRESS [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
APT. NO. P.O. BOX NO.
CITY [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] PROVINCE [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] POSTAL CODE [ ][ ][ ][ ][ ][ ]
TELEPHONE NO. RESIDENCE ([ ][ ][ ]) [ ][ ][ ]-[ ][ ][ ][ ] BUSINESS ([ ][ ][ ]) [ ][ ][ ]-[ ][ ][ ][ ] [ ][ ][ ][ ]
Area Area Ext No.
FACSIMILE NO. ([ ][ ][ ]) [ ][ ][ ]-[ ][ ][ ][ ]
Area
NAME OF SPONSOR [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] NSA IDENTIFICATION NO. [ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ]
LANGUAGE PREFERENCE: ENGLISH [ ] FRENCH [ ] CURRENCY PREFERENCE: CANADIAN [ ] FOREIGN [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT ACKNOWLEDGEMENT
I hereby acknowledge that I have read this application, front and back, and that I understand there is no requirement beyond the
filing of this application and payment of a $40.00 cost ($42.60 for Quebec residents) to become an NSA Distributor, and that any
purchase of product inventory, sales aids, literature, etc., is strictly voluntary. I also acknowledge that the information that
appears on this application is correct. I agree to abide by the Rules of Operation for an NSA Distributor as currently published
and as amended and updated from time to time in official NSA literature. I agree to indemnify and hold NSA harmless against any
claims, costs, damages, losses, liabilities or expenses (including lawyer fees) arising from or connected with, directly or
indirectly, my breach of this Agreement or other conduct by me, my agent or employee. I acknowledge that if I breach this contract,
NSA shall have the right to terminate my position and shall be entitled to damages and injunctive relief prohibiting any further
violation of this contract. By signing this Agreement I give permission to NSA to use my personal S.I.N. for file identification.
I hereby agree to be sponsored by the individual whose signature appears below my signature.
Distributor Applicant X___________________________________________________________________________________ Date [ ][ ][ ][ ][ ][ ]
M D Y
As the Sponsor, I certify that I have presented the NSA Sales Program to the applicant in its entirety without material omission or
distortion and that all representations made in the course of recruiting this applicant have complied with the applicable Rules of
Operation for an NSA Distributor. I agree to personally indemnify, defend and hold NSA harmless against any claims, costs, or
liability resulting from my breach of this provision, including the payment of reasonable lawyer fees to defend such claims.
Sponsor X_________________________________________________________________________________________________ Date [ ][ ][ ][ ][ ][ ]
M D Y
The payment of $40.00 ($42.60 for Quebec residents) for my application as an NSA Distributor will be paid by one of the following
methods. Funds are payable to National Safety Associates Ltd. The payment type is as indicated:
Cheque [ ] Money Order [ ] Visa [ ] MasterCard [ ]
I hereby irrevocably authorize you to charge my credit card being:
Visa or MasterCard No. [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] Exp. Date [ ][ ][ ][ ]
Cardholder's Signature X____________________________________________________ Printed__________________________________________
the amount of $40.00 ($42.60 for Quebec residents) for my application as an NSA Distributor.
</TABLE>
<PAGE> 33
OMITTED SCHEDULES
The following Schedules to the Asset Purchase Agreement by and between
National Safety Associates Limited and National Safety Associates of Canada
Inc. are omitted from the Current Report on Form 8-K pursuant to Rule 229.600
[Item 601(b)(2)]. Registrant hereby agrees to furnish supplementally a copy of
any omitted schedule to the Securities and Exchange Commission upon request.
Disclosure Schedule
Acquired Tangible Personal Property Listing
Inventory Listing
Acquired Utility Deposit Listing
Acquired Prepaid Items and Security Deposits Listing
Acquired Distributor Contract Listing
Excluded Asset Listing
Affected Employee Listing
Purchase Price Allocation Agreement
Security Agreement
Assignment and Assumption Agreement
Non-Competition and Non-Solicitation Agreement
Bill of Sale
Landlord's Consent to Assignment
Assignment of Trademarks between National Safety Associates, Ltd. and
Registrant
Assignment of Lease Agreement
<PAGE> 1
EXHIBIT 10.1
LICENSE AGREEMENT
THIS AGREEMENT is made as of the 30th day of April, 1996.
BETWEEN:
NSA INTERNATIONAL, INC., a body corporate duly incorporated
pursuant to the laws of Tennessee, one of the United States
of America, and having its head office and principal place
of business at 4260 East Raines Road, Memphis, Tennessee,
USA 38115
(herein referred to as the "Licensor")
OF THE FIRST PART
-and-
NATIONAL SAFETY ASSOCIATES OF CANADA INC., a
corporation duly incorporated pursuant to the laws of
Ontario and having its head office and principal office and
place of business at 2785 Skymark Avenue, Mississauga,
Ontario, Canada L4W 4Y3
(herein referred to as the "Licensee")
OF THE SECOND PART
WHEREAS:
A. The Licensor is owner of the Trade-marks, as defined herein, in
Canada, and has carried on, directly or indirectly, the distribution
of the Products, as defined herein, in Canada.
B. The Licensee wishes to continue to distribute the Products and use the
Trade-marks in Canada, and has appointed the Licensee as the
distributor of the Products pursuant to the Distribution Agreement, as
defined herein, and the Licensor is willing to license the Licensee to
use the Trade-marks in Canada, on the terms and conditions set out in
this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of
the sum of $10.00, the mutual promises, covenants and
<PAGE> 2
Page 2
conditions set out in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS
Wherever used in this Agreement, the following words, phrases and
expressions, unless there is something in the context inconsistent
therewith, will have the following meanings:
(a) "Agreement" means this Agreement including, without limitation,
any schedules which shall be attached to and are hereby deemed to
form a part of this Agreement;
(b) "Confidential Information" means any and all information,
including, without limitation, Technical Information, that is not
generally known to the public or by the Licensor's competitors
which is valuable to the Licensor or gives it an advantage over
its competitors, including, by way of example only, information
relating to:
(i) the Licensor's operational procedures, methods,
processes and techniques;
(ii) any ideas, inventions, discoveries, improvements,
services, products, formulae, apparatus, equipment,
cost data, research or development relating to the
Products (as hereinafter defined) or otherwise relating
to the Licensor's business including, without
limitation, information relating to the Licensor's
computer software system; or
(iii) the prices, users, suppliers or customers of the
Licensor's products or services;
(c) "Distribution Agreement" means the distribution agreement between
the Licensee and the Licensor as of the date hereof;
(d) "Products" includes each of the following:
<PAGE> 3
Page 3
(i) those products specifically listed in Schedule "B"
hereto, and as amended from time to time, and any and
all improvements to such products which may occur or be
developed during the term of this Agreement, whether
developed by the Licensor or the Licensee;
(ii) any and all products which embody or employ any of the
Licensor's Technical Information;
(iii) the materials and component parts of the products
identified in subparagraphs (i) and (ii) hereof;
(iv) the by-products of any such products, materials or
component parts, whether or not such by-products are
used or usable in any other products; and
(v) all products which are manufactured, assembled, sold or
otherwise disposed of by the Licensor as a direct or
indirect result of the Licensor's providing the
Licensee with Confidential Information or Technical
Information;
(e) "Technical Information" means any information, whether
confidential or otherwise, which is applicable to or useful in
the demonstration, testing, inspection, use, operation,
maintenance or repair of the Products including, by way of
example only, engineering drawings, electrical, electronics or
other schematics, specifications, equipment and parts lists,
test procedures and operating, maintenance and repair procedures
and instruction;
(f) "Territory" means Canada and each and every province and
territory thereof; and
(g) "Trade-marks" means the trade-marks set out in Schedule "A"
hereto.
<PAGE> 4
Page 4
ARTICLE 2
GRANT OF LICENSE
2.1 LICENSE GRANT
The Licensor hereby grants to the Licensee a limited, non-transferable,
exclusive license to use the Trade-marks in association with the
advertisement, promotion and sale and other distribution of the Products in
the Territory, subject to the terms and conditions of this
Agreement.
2.2 EXCLUSIVE RIGHTS
The Licensor agrees that it shall not sell Products under the NSA trade
name or trade-mark or any other trade name or trade-mark to any other
person, firm or body corporate in the Territory during the term of this
Agreement.
ARTICLE 3
ACKNOWLEDGEMENT OF RIGHTS
3.1 ACKNOWLEDGEMENT
The Licensee acknowledges and agrees that the Trade-marks are the property
of the Licensor and agrees that it will not, directly or indirectly, do or
cause to be done any act which may in any way jeopardize or adversely
affect the title of the Licensor in the Trade-marks or the validity of any
registration or pending application therefor, or any rights of the Licensor
in the Trade-marks, and the Licensee agrees that it will, without charge to
the Licensor, do all things and execute all documents that may at any time
be necessary or desirable to ensure the title of the Licensor in the
Trade-marks or the validity of any registration or pending application
therefor.
<PAGE> 5
Page 5
ARTICLE 4
USE OF TRADE-MARKS
4.1 PERMITTED USE
The Licensee shall use the Trade-marks only in advertising, pamphlets,
brochures and other promotional materials (herein collectively referred to
as the "Material") and in the sale, lease or other distribution of
Products.
4.2 CONDITION OF USE
The Licensee shall, when using the Trade-marks, indicate clearly that they
are the Trade-marks of the Licensor and they are being used by the
Licensee with permission of the Licensor and shall further comply with all
reasonable guidelines on trade-mark use issued from time to time by the
Licensor. The Licensee undertakes to strictly comply with all laws and
regulations pertaining to trade-marks and marking, advertising, marketing,
packaging and labelling in force from time to time in the Territory.
4.3 CONFUSING MARKS
The Licensee shall not use any words, symbols, logos, marks, names or
designs in connection with the Trade-marks, except with the prior written
consent of the Licensor. Any such consent by the Licensor shall be deemed
to require the Licensee to indicate clearly that the Trade-marks are
trade-marks of the Licensor and used with its permission, and that the
other words, symbols, logos, marks, names or designs are trade-marks of
their respective owner or owners.
4.4 CORPORATE NAME
Immediately upon the expiration or sooner termination of this
Agreement, the Licensee may no longer use the Trade-marks National Safety
Associates or NSA in its corporate name and shall forthwith take all
necessary corporate steps (including, without limitation, the filing of
articles of amendment) to change its corporate name accordingly. Subject
to section 10.3 hereof, the Licensee may use the business name and trading
style of NSA or NSA Canada if, at the same time, it clearly indicates its
corporate name. If required by law to register the business name and
trading style of NSA or NSA Canada in any jurisdiction in the Territory,
the Licensee shall, at its own expense, take such steps as are necessary,
and shall on any application identify the Licensor as the owner of the
Trade-marks, NSA and NSA Canada. The Licensee specifically acknowledges
that it shall not, during the term of this Agreement or thereafter, use
any trade-mark or any part thereof in its
<PAGE> 6
Page 6
corporate name or any business name or trading style other than as provided
in this section.
ARTICLE 5
STANDARDS
5.1 STANDARDS
The Licensee shall advertise and promote the Products and carry out all
obligations regarding the Products pursuant to the Distribution Agreement
in strict compliance with all laws and regulations, in force from time to
time in the Territory and shall further meet the higher of:
(a) the standard of quality previously established in the Territory
by National Safety Associates Ltd.; and
(b) standards of quality specified in writing by the Licensor in the
Distribution Agreement.
ARTICLE 6
INSPECTION
6.1 INSPECTION
The Licensee shall permit the Licensor or its authorized representatives
and agents to inspect any aspect of the Licensee's use of the Trade-marks
in association with the Products at the premises of Licensee at all
reasonable times.
<PAGE> 7
Page 7
ARTICLE 7
ROYALTIES
7.1 ROYALTY FREE
Except as otherwise provided in the Distribution Agreement, the Licensee
shall not be required to pay to the Licensor any royalty on sales of all or
any part of the Products.
ARTICLE 8
INFRINGEMENT
8.1 INFRINGEMENT
The Licensee shall promptly notify the Licensor of any and all
infringements or other misuse of the Trade-marks which comes to its
attention. The Licensor may, in its own discretion, take such action as it
deems appropriate to prevent such infringement, and the Licensee shall
provide reasonable assistance to the Licensor in respect of such action.
Nothing in this Agreement in any way modifies the rights and obligations of
the parties respecting the protection of trade-marks, trade names or
copyrights as sent out in the Distribution Agreement.
8.2 PROTECTION OF TRADE-MARK RIGHTS
The Licensor shall, at its own cost and expense, protect and defend its
ownership of the Trade-marks against all claims, liens, legal processes of
creditors and misappropriations by third parties and keep the same free and
clear from all such claims, liens, processes and misappropriations.
Notwithstanding the above, the Licensee may, in its sole discretion,
participate in any such protection or defence in any capacity it feels is
appropriate.
8.3 NO WARRANTY
The Licensor does not warrant that the Trade-marks do not infringe upon the
trade-mark or other rights of any third party.
<PAGE> 8
Page 8
ARTICLE 9
INDEMNITY
9.1 INDEMNITY
The Licensee shall indemnify and hold harmless the Licensor from and
against any and all liability, loss, damage, cost or expense (including,
without limitation, court costs, litigation expenses and legal fees)
arising out of a breach of any term or condition of the license contained
in this Agreement.
ARTICLE 10
TERM AND TERMINATION
10.1 TERM
The term of this Agreement will take effect on the date of this Agreement
and will terminate upon the termination of the Distribution Agreement
unless sooner terminated pursuant to the terms of this Agreement.
10.2 TERMINATION UPON DEFAULT
The Licensor will be entitled to terminate this Agreement immediately upon
the occurrence of any of the following events:
(a) the Licensee defaults in observing or performing any of its
obligations hereunder and fails to correct the default within 60
days after receiving a written demand from the Licensor to
correct the default; or
(b) if the Licensee commits an act of bankruptcy, makes an assignment
for the benefit of creditors, if a receiver or receiver manager
is appointed for the Licensee or over any of the assets, if any
proceeding in bankruptcy, receivership, winding-up or liquidation
is initiated in respect of the Licensee, or if the Licensee
ceases to carry on business.
<PAGE> 9
Page 9
10.3 OBLIGATION UPON TERMINATION
Upon termination of the Agreement, the Licensee will immediately apply to
cancel all business name and trading style registrations for NSA and NSA
Canada and provide the Licensor with proof of all such applications.
ARTICLE 11
GENERAL PROVISIONS
11.1 FORCE MAJEURE
Each of the parties hereto shall be excused from any act, omission or
obligation to perform hereunder when such failure or default is caused by
an Act of God, fire, strikes, war, riot, insurrection, boycott, acts of
public authorities, delays or defaults caused by public carriers, inability
to obtain raw or other materials or other causes, whether similar or
dissimilar, beyond its reasonable control.
11.2 ASSIGNMENT
The Licensee will not assign, sub-license or grant any interest in the
Trade-marks or the use of same or any of its rights under this Agreement to
any person or entity without first obtaining the written consent of the
Licensor.
11.3 APPLICABLE LAW
This Agreement will be governed by and construed in accordance with the
local domestic laws of the Province of Ontario and the federal laws of
Canada applicable therein, and the parties hereby irrevocably submit and
attorn to the non-exclusive jurisdiction of the courts of the Province of
Ontario.
11.4 NOTICES
All notices and other communications that the parties give each other in
connection with this Agreement will be in writing and will be delivered or
sent by facsimile transmission and, if delivered, will be sent to the
address of the recipient as set forth on the first page of this Agreement,
or to such other address as may hereafter be specified by notice given in
accordance with the provisions of this section.
<PAGE> 10
Page 10
Any notice given hereunder will be deemed to be received, if delivered, on
the date of actual delivery or, if sent by facsimile transmission, upon
transmission and confirmation of receipt of transmission.
11.5 BINDING EFFECT
Subject to section 11.2 hereof, this Agreement will be binding upon and
will ensure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.6 RELATIONSHIP
Neither party hereto shall have any authority to create or assume in the
other party's name or on its behalf any obligation, express or implied, or
to act or purport to act as the other party's agent or legally empowered
representative for any purpose whatsoever. Neither party shall be liable
to any third party in any way for any engagement, obligation, commitment,
contract, representation or transaction or for any negligent act or
omission to act of the other party except as expressly provided for in this
Agreement.
11.7 ENTIRE AGREEMENT
This Agreement, including all schedules attached hereto, constitutes the
entire understanding between the parties hereto and supersedes and cancels
any and all previous contracts or agreements between the parties relating
to the Trade-marks. This Agreement may not be altered, amended or modified
except by a written instrument executed by a duly authorized officer of
each party hereto. This Agreement shall become binding only after the
same is executed by a duly authorized officer of each party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day, month and year first above written.
NSA INTERNATIONAL, INC.
Per: /s/ Stan C. Tack c/s
---------------------------
Name: Stan C. Tack
---------------------------
Title: Asst. Treas.
---------------------------
<PAGE> 11
Page 11
NATIONAL SAFETY ASSOCIATES OF
CANADA INC.
Per: /s/ G. Paul Stewart c/s
---------------------------
Name: G. Paul Stewart
---------------------------
Title: President
---------------------------
<PAGE> 12
SCHEDULE "A"
(LIST OF TRADE-MARKS)
===========================================================================
APPLICATION REGISTRATION DESCRIPTION EXPIRY DATE
NUMBER NUMBER
---------------------------------------------------------------------------
619,775 362 360 NSA November 3,
2004
---------------------------------------------------------------------------
698,246 430 598 NSA July 22, 2009
===========================================================================
