SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended
June 30, 1997 Commission File Number 0-4431
AUTO-GRAPHICS, INC.
(exact name of registrant as specified in its charter)
California 95-2105641
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3201 Temple Avenue, Pomona, California 91768
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (909) 595-7204
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Total Shares Outstanding: Common Stock: 1,093,678
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Statement of Income
For Six Months Ended June 30
1997 1996
Net sales $3,876,328 $4,545,446
Costs and expenses:
Cost of sales 2,201,367 2,721,675
Selling, general & administrative 1,380,007 1,556,520
Interest/other 106,280 109,496
Total costs and expenses 3,687,654 4,387,691
Income from operations 188,674 157,755
Provision for taxes based on income 85,000 73,000
Net income/(loss) $ 103,674 $ 84,755
Net income/(loss) per share $ .09 $ .08
Shares outstanding 1,093,678 1,109,678
See Notes to Unaudited Condensed Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Condensed Statement of Income
For Three Months Ended June 30
1997 1996
Net sales $2,081,960 $2,278,345
Costs and expenses:
Cost of sales 1,230,603 1,420,366
Selling, general & administrative 701,444 730,486
Interest/other 50,091 49,532
Total costs and expenses 1,982,138 2,200,384
Income from operations 99,822 77,961
Provision for taxes based on income 46,000 36,000
Net income $ 53,822 $ 41,961
Net income per share $ .05 $ .04
Shares outstanding 1,093,678 1,109,678
See Notes to Unaudited Condensed Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Balance Sheets
June 30, 1997 and December 31, 1996
ASSETS 1997 1996
Current assets: (Audited)
Cash $ 60,649 $ 364,094
Accounts receivable, less allowance
for doubtful accounts ($38,000 in
1997 and 1996) 1,441,648 1,882,305
Unbilled production costs 310,220 94,143
Finished goods inventory 18,890 28,939
Other current assets 279,157 188,440
Total current assets 2,110,564 2,557,921
Equipment and leasehold improvements,
at cost 10,030,910 9,589,699
Less accumulated depreciation 5,570,459 5,164,177
Net equipment and leasehold
improvements 4,460,451 4,425,522
Other assets 195,944 148,507
Total Assets $ 6,766,959 $ 7,131,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes Payable $ 225,000 $ --
Accounts payable 199,045 330,056
Deferred income 270,169 444,388
Accrued payroll and related
liabilities 178,901 191,290
Other accrued liabilities 105,992 127,037
Current portion of long-term debt 655,000 655,000
Total current liabilities 1,634,107 1,747,771
Long-term debt, less current portion 1,795,881 2,100,881
Deferred taxes based on income 664,939 664,939
Total liabilities 4,094,927 4,513,591
Stockholders' equity:
Common stock, $.10 par value,
4,000,000 shares authorized,
1,093,678 shares issued and
outstanding in 1997, and
1,109,278 shares issued and
outstanding in 1996 109,368 110,928
Capital in excess of par value 1,135,999 1,138,651
Retained earnings 1,426,665 1,368,780
Total stockholders' equity 2,672,032 2,618,359
Total Equity and Liabilities $ 6,766,959 $ 7,131,950
See Notes to Unaudited Condensed Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Statements of
Cash Flows
For the Six Months Ended June 30
Increase (Decrease) in Cash
1997 1996
Cash flows from operating activities:
Net income $ 103,674 $ 84,755
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 406,282 500,780
Deferred taxes -- --
Changes in operating assets
and liabilities:
Accounts receivable 440,657 285,087
Unbilled production costs (216,077) (26,802)
Finished goods inventory 10,049 14,438
Other current assets (90,717) (32,309)
Other assets (47,437) (197,871)
Accounts payable (131,011) (262,294)
Deferred income (174,219) (354,409)
Accrued payroll and
related liabilities (12,389) (3,398)
Other accrued liabilities 3,054 (10,893)
Interest and income taxes
payable (24,100) 63,716
Net cash provided by
operating activities 267,766 60,800
Cash flows from investing activities:
Capital expenditures (441,211) (587,159)
Cash flows from financing activities:
Borrowings under long-term debt -- 550,000
Principal payments under debt
agreements (305,000) (255,000)
Net borrowings (payments)under
line-of-credit agreement 225,000 350,000
Repurchase of capital stock (50,000) (59,650)
Net cash provided by (used in)
financing activities (130,000) 585,350
Net increase in cash (303,445) 58,991
Cash at beginning of year 364,094 106,518
Cash at end of year $ 60,649 $ 165,509
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 123,394 $ 126,971
Income taxes 109,100 9,285
See Notes to Unaudited Condensed Financial Statements.
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Notes to
Unaudited Condensed Financial Statements
June 30, 1997
NOTE 1. The unaudited condensed financial statements included herein have
been prepared by Registrant and include all normal and recurring
adjustments which are, in the opinion of Management, necessary for a
fair presentation of the financial position at June 30, 1997, the
results of operations and the statement of cash flows for the three
months ended June 30, 1997 and 1996 pursuant to the rules and
regulations of the Securities and Exchange Commission.
The results of operations for the subject periods are not
necessarily indicative of the results for the entire year.
This Quarterly Report on Form 10-Q is qualified in its entirety by
the information included in the Company's Annual Report to the SEC
on Form 10-K for the period ending December 31, 1996 including,
without limitation, the financial statements included therein.
NOTE 2. The Company entered into a stock repurchase agreement with a former
employee and officer of the Company, Douglas K. Bisch, whereby the
Company agreed to purchase and retire, over a seven-year period,
156,000 of 171,000 shares of Company stock owned by Mr. Bisch. In
January 1997, the Company purchased and retired the third block of
15,600 shares.
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
December 31, 1996 to June 30, 1997
Liquidity and capital resources. Working capital decreased $333,700
due to a decrease in the Company's accounts receivable. Long-term debt was
reduced by $305,000. Actual capital expenditures were $441,000. The average
collection period for accounts receivable improved from 67 days at December
31, 1996 to 62 days at June 30, 1997.
The Company has a revolving credit facility under which borrowings
are secured by accounts receivable, whereby the Company may borrow against its
eligible accounts receivable up to a maximum of $1,250,000 ($1,025,000
available at June 30, 1997) with interest equal to the bank's prime rate.
Management believes that the current line of credit, which is renewed annually
in June, will again be renewed in 1998, and is sufficient to handle cyclical
working capital needs. There are no compensating balance requirements,
commitment fees or note guarantors. This agreement contains the same loan
covenants as the capital line of credit.
The Company also has a capital line of credit facility providing for
maximum borrowings of $3,000,000 ($604,000 available at June 30, 1997), with
interest equal to the bank's prime rate, for the purchase of equipment and
financing of internal software development costs. The capital line of credit
is renewed annually in June and management believes that the current line of
credit will be renewed in 1998. Among other requirements, the capital line of
credit note payable requires the Company to maintain minimum financial
covenant ratios, and prohibits the payment of cash dividends. There are no
commitment fees, compensatory balance requirements or note guarantors.
In June 1995, the Company entered into a stock repurchase agreement with a
former director of the Company, whereby the Company agreed to purchase and
retire, in 1995, 115,000 of 141,000 shares of Company stock owned by the
stockholder. The total transaction cost of $230,000 will be paid in four
annual installments beginning in 1995 plus interest of 5.5% per annum ($65,000
paid in June 1995, $55,000 paid in June 1996 and 1997, and $55,000 to be paid
in June 1998).
The Company's capital resources may be used to support working capital
requirements, capital investment and possible acquisitions of businesses,
products or technologies complementary to the Company's current business. The
Company believes that current cash reserves and cash flow from operations are
sufficient to fund its operations in 1997. However, during this period or
thereafter, the Company may require additional financing. There can be no
assurance that such additional financing will be available on terms favorable
to the Company, or at all.
</PAGE>
<PAGE>
RESULTS OF OPERATIONS
First Six Months 1997 as Compared to First Six Months 1996
Net sales decreased $669,000 or 15% to $3,876,000. Timing differences in the
delivery of CD-ROM catalogs, combined with a 51% decrease in equipment
sales, were the primary reasons behind the reduction in revenues for the
first six months of 1997.
Cost of sales decreased $520,000 or 19%. Significant factors in cost of
sales include changes in operating costs generally attributable to
variable costs fluctuating with product mix.
Selling, general and administrative expenses decreased $176,500 or 11%.
As a percentage of sales, these expenses increased from 34% in 1996
to 36% in 1997.
Interest expense/other decreased $3,200 or 3%.
Income from operations increased $31,000 or 20% to $189,000 in 1997.
Net income increased $19,000 to $104,000 net profit in 1997, up 23% from
an $85,000 net profit in 1996.
Net income per share improved from $0.08 per share in 1996 to $0.09 per
share in 1997, an increase of 13%.
Second Quarter 1997 as Compared to Second Quarter 1996
Net sales decreased $196,000 or 9% to $2,082,000.
Cost of sales decreased $190,000 or 13%. Significant factors in cost of
sales include changes in operating costs generally attributable to
variable costs fluctuating with product mix.
Selling, general and administrative expenses decreased $29,000 or 4%. As
a percent of sales these expenses increased 2% from 32% in 1996
to 34% in 1997.
Interest expense/other was $50,000 in 1997, unchanged from 1996.
Income from operations increased 28% or $22,000 to $100,000 in 1997.
Net income increased $12,000 to $54,000 in 1997, up 29% from $42,000 in
1996.
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
a. The Company filed Form 8-K on April 29, 1997 covering exhibits
to the Form 10-K report for the year ended December 31, 1996.
These exhibits were separated from the 10-K prior to the filing
thereof and were subsequently refiled during the period covered
by this report.
b. The Company filed Form 8-K on July 15, 1997 covering the
Company's acquisition of the assets of the Library Information
Systems division of ISM Information Systems Management Manitoba
Corporation, a subsidiary of IBM Canada, Ltd. as of July 1,
1997.
c. Exhibits: A copy of the Asset Purchase Agreement between A-G
Canada, Ltd., a wholly owned subsidiary of Auto-Graphics, Inc.
and ISM Information Systems Management Manitoba Corporation, a
subsidiary of IBM Canada, Ltd. dated June 30, 1997.
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.
AUTO-GRAPHICS, INC.
Date 8/14/97 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 8/14/97 ss/ Daniel E. Luebben
Daniel E. Luebben, Chief Financial Officer
and Secretary
</PAGE>
[ARTICLE] 5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of the 19th day of June, 1997.
BETWEEN:
ISM INFORMATION SYSTEMS MANAGEMENT MANITOBA CORPORATION, a corporation
organized and existing under the laws of the Province of Manitoba,
(hereinafter referred to as the "Vendor"),
OF THE FIRST PART,
- and -
A-G CANADA LTD., a corporation organized and existing under the laws of the
Province of Ontario,
(hereinafter referred to as the "Purchaser"),
OF THE SECOND PART.
WHEREAS, on the terms and subject to the conditions hereinafter set
forth, the Purchaser wishes to purchase from the Vendor and the Vendor wishes
to sell, assign and transfer to the Purchaser, the Purchased Assets, as
hereinafter defined;
NOW THEREFORE in consideration of the respective covenants, agreements,
representations, warranties and indemnities of the Vendor and Purchaser herein
contained and for other good and valuable consideration (the receipt and
sufficiency of which are acknowledged by each), the Vendor and Purchaser agree
as follows:
ARTICLE I
INTERPRETATION
1.1 Defined Terms: For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings set
out below and grammatical variations of such terms shall have corresponding
meanings:
(a) "Affiliate" has the meaning given to that term in the Business
Corporations Act (Ontario);
(b) "Agreement" means this Agreement together with all amendments made
pursuant to the provisions hereof;
(c) "Assumed Liabilities" is defined in section 4.1;
(d) "Assumed Quantifiable Liabilities" means the liabilities of the
Purchased Businesses as at the Closing Date which are of the nature set out in
the Closing Balance Sheet Accounts, including without limitation, liabilities
in respect of deferred or unearned revenue (which are identified in the
Interim Balance Sheet Accounts by the line items "Deposits - Customer" and
"Deferred Revenue") and accrued and unpaid vacation pay (which is identified
in the Interim Balance Sheet Accounts by the line item "Accrued Vacation
Pay");
(e) "AVISO Business" means the business currently carried on by the Vendor
consisting of the business of providing an interlibrary loan management
system;
(f) "Balance Sheet Accounts" means the internally prepared, pro forma,
unaudited balance sheet accounts of the Purchased Businesses prepared by the
Vendor;
(g) "Base Price" is defined in section 3.1;
(h) "Bibliographic Services Business" means the business currently carried
on by the Vendor consisting of the business of providing on-line bibliographic
services;
(i) "Business Day" means any day (other than a Saturday or a Sunday) on
which the main branch of The Toronto-Dominion Bank in Toronto, Ontario, is
open for business;
(j) "Claim" is defined in section 11.3;
(k) "Closing Balance Sheet Accounts" is defined in subsection 3.5(a);
(l) "Closing Date" means June 30, 1997 or such other date as the Vendor and
the Purchaser may agree in writing;
(m) "Collective Agreement" means the collective agreement dated July 1, 1993
and signed December 23, 1993 (as amended and renewed) between ISM Library
Information Services Ltd. (which corporation was subsequently amalgamated with
a corporation with the same name as the Vendor to form the Vendor) and the
Canadian Union of Public Employees and its Local 1230 related to the Purchased
Businesses;
(n) "Computer Software" is defined in subsection 2.1(e);
(o) "Contracts and Commitments" is defined in subsection 2.1(d);
(p) "Database" is defined in subsection 2.1(f);
(q) "Employees" means those persons listed on Schedule 1.1(q);
(r) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature, adverse
claim, exception, reservation, easement, right of occupation, any matter
capable of registration against title, option, right of pre-emption, privilege
or any contract or agreement to create any of the foregoing;
(s) "Estimated Assumed Quantifiable Liabilities" is defined in subsection
3.3(b);
(t) "Estimated Price" is defined in subsection 3.3(a);
(u) "ETA" means Part IX of the Excise Tax Act (Canada);
(v) "Excluded Assets" is defined in section 2.2;
(w) "GST" means all taxes payable under the ETA or under any provincial
legislation similar to the ETA, and any reference to a specific provision of
the ETA or any such provincial legislation shall refer to any successor
provision thereto of like or similar effect;
(x) "Indemnified Party" is defined in section 11.3;
(y) "Indemnifying Party" is defined in section 11.3;
(z) "Interim Balance Sheet Accounts" means the Balance Sheet Accounts
prepared as at May 31, 1997, a copy of which is annexed hereto as Schedule
1.1(z);
(aa) "Leased Premises" is defined in subsection 2.1(a);
(bb) "Library Technical Services Business" means the business currently
carried on by the Vendor, through its wholly-owned Subsidiary, Manitoba
Investments, consisting of the business of providing a complete range of
derived and original cataloguing, both for current cataloguing and for special
projects, supplied from a wide range of vendors or from the client libraries;
(cc) "Losses" means, in respect of any matter, all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and expenses
(including, without limitation, all reasonable legal and other professional
fees and disbursements, interest, penalties and amounts paid in settlement)
arising directly as a consequence of such matter;
(dd) "Manitoba Investments" means ISM Investments (Manitoba) Inc., a wholly-
owned Subsidiary of the Vendor;
(ee) "NLC" means the National Library of Canada;
(ff) "NLC Letter of Intent" means the letter of intent dated April 22, 1997
between the Purchaser and the NLC relating, inter alia, to the acquisition by
the NLC of the SRL Files;
(gg) "Offer to Lease" is defined in subsection 2.1(a);
(hh) "Outsourcing Agreement" is defined in section 8.12;
(ii) "Permitted Encumbrances" means:
(i) liens for taxes either not due and payable or due but for which notice
of assessment has not been given;
(ii) Encumbrances in respect of any leased real property which were created
or granted by the landlord, or otherwise, existing as at the time of lease;
(iii) undetermined or inchoate liens, charges and privileges incidental to
current construction or current operations and statutory liens, charges,
adverse claims, security interests or encumbrances of any nature whatsoever
claimed or held by any governmental authority that have not at the time been
filed or registered against the title to the asset or served upon the Vendor
pursuant to law or that relate to obligations not due or delinquent;
(iv) assignments of insurance provided to landlords (or their mortgagees)
pursuant to the terms of any lease, and liens or rights reserved in any lease
for rent or for compliance with the terms of such lease;
(v) security given in the ordinary course of the Purchased Businesses to any
public utility, municipality or government or to any statutory or public
authority in connection with the operations of the Purchased Businesses, other
than security for borrowed money;
(vi) Encumbrances created under equipment leases, conditional sales
agreements or other agreements, contracts, leases or commitments (other than
any of the foregoing securing an obligation to repay indebtedness for borrowed
money), entered into in the ordinary and normal course of business to secure
the unpaid portion of any purchase monies in respect of any equipment or other
chattels included in the Purchased Assets;
(vii) Encumbrances disclosed in the Balance Sheet Accounts; and
(viii) the Encumbrances described in Schedule 1.1(hh);
(jj) "Purchase Price" is defined in section 3.1;
(kk) "Purchased Assets" is defined in section 2.1;
(ll) "Purchased Businesses" means, collectively, the AVISO Business and the
Bibliographic Services Business;
(mm) "Purchaser's Benefit Plans" is defined in subsection 8.7(f);
(nn) "Purchaser's Retirement Plan" is defined in subsection 8.7(a);
(oo) "SRL Files" means the individual file records of the selected
retrospective libraries that the NLC desires to acquire as contemplated by the
NLC Letter of Intent and which the Vendor is requiring the purchaser of the
Database to agree to sell to the NLC as contemplated by section 8.8;
(pp) "Subscription Pricing Agreement" means the agreement dated January 2,
1997 between Manitoba Investments and the Vendor containing the terms and
conditions upon which the Vendor provides services to Manitoba Investments in
connection with Manitoba Investment's outsourcing agreements for services of
the Library Technical Services Business, a copy of which is attached hereto as
Schedule 1.1(pp);
(qq) "Subsidiary" has the meaning given to that term in the Business
Corporations Act (Ontario);
(rr) "Tax Act" means the Income Tax Act (Canada);
(ss) "Threshold" is defined in section 11.6;
(tt) "Time of Closing" means 10:00 a.m. (Toronto time) on the Closing Date,
or such other time on the Closing Date as the Vendor and the Purchaser may
mutually determine;
(uu) "Transferred Employees" is defined in subsection 8.6(a);
(vv) "Vendor's Benefit Plans" is defined in section 5.15;
(ww) "Vendor's GRRSP" is defined in section 5.15;
(xx) "Vendor's Pension Plans" is defined in section 5.15;
(yy) "Vendor's RPP" is defined in section 5.15.
1.2 Currency: Unless otherwise indicated, all dollar amounts in this
Agreement are expressed in Canadian funds.
1.3 Sections and Headings: The division of this Agreement into Articles,
sections and subsections and the insertion of headings are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Unless otherwise indicated, any reference in this Agreement to an Article,
section, subsection or Schedule refers to the specified Article, section or
subsection of or Schedule to this Agreement.
1.4 Number, Gender and Persons: In this Agreement, words importing the
singular number only shall include the plural and vice versa, words importing
gender shall include all genders and words importing persons shall include
individuals, corporations, partnerships, joint ventures, associations, trusts,
unincorporated organizations and all other forms of business organizations,
governments, regulatory or governmental agencies, commissions, departments and
instrumentalities.
1.5 Accounting Principles: Any reference in this Agreement to generally
accepted accounting principles refers to generally accepted accounting
principles that have been established in Canada, including those approved from
time to time by the Canadian Institute of Chartered Accountants or any
successor body.
1.6 Calculation of Time Periods: When calculating the period of time within
which or following when any act is to be done or step taken pursuant to this
Agreement, the date which is the reference date in calculating such period
shall be excluded. If the last day of such period is not a Business Day, the
period in question shall end on the next Business Day.
1.7 Amendments to Laws, etc.: Any references herein to any law, by-law,
rule, regulation, order or act of any government, governmental body of other
regulatory body shall be construed as a reference thereto as amended or re-
enacted from time to time or as a reference to any successor thereto.
1.8 Rules of Construction: The Vendor and the Purchaser acknowledge that
their respective legal counsel have reviewed and participated in settling the
terms of this Agreement, and that any rule of construction to the effect that
any ambiguity is to be resolved against the drafting party shall not be
applicable in the interpretation of this Agreement.
1.9 Schedules and Exhibits: The following Schedules are attached to and form
part of this Agreement:
Schedule 1.1(q) - Employees
Schedule 1.1(z) - Interim Balance Sheet Accounts
Schedule 1.1(hh)- Listed Permitted Encumbrances
Schedule 1.1(pp)- Subscription Pricing Agreement
Schedule 2.1(b) - Furniture and Equipment
Schedule 2.1(d) - Material Contracts and Commitments
Schedule 2.1(e) - Material Computer Software
Schedule 2.1(g) - Material Trade Marks and Business Names
Schedule 2.2(f) - Specified Excluded Assets
Schedule 2.3 - Specified Contracts and Commitments
Schedule 2.4 - Form of Sublease of Part of Leased Premises
Schedule 3.7 - Allocation of Purchase Price
Schedule 5.12 - Legal Proceedings
Schedule 5.15 - Pension and Benefit Plans
Schedule 5.17 - Collective Agreements
Schedule 8.9 - Specific Transition Matters
Schedule 8.12 - Outsourcing Equipment
Schedule 9.1(c) - Purchaser's Conditional Consents
Schedule 9.1(d) - Form of Outsourcing Agreement
Schedule 9.2(f) - Form of Guarantee and Indemnity
1.10 Knowledge: In this Agreement, the term "knowledge" when used in
connection with the Vendor or the Purchaser means actual knowledge of such
party concerning the matter in connection with which such term is used and
does not include knowledge that may be implied or imputed with respect to such
party.
1.11 Inconsistencies: In the event of any inconsistency between the terms of
this Agreement and the terms of any letter or agreement signed by the parties
that relates to a consent to assignment requested from any third party to any
Contract and Commitment, the terms of this Agreement shall prevail. In the
event of any inconsistency between the terms of this Agreement and the terms
of any Schedule hereto, the terms of this Agreement shall prevail.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchased Assets: Subject to the terms and conditions hereof, the Vendor
shall sell, assign and transfer to the Purchaser and the Purchaser shall
purchase from the Vendor, effective as of the close of business on the Closing
Date, all of the property, assets and rights of the Vendor (other than the
Excluded Assets) used exclusively or predominantly in connection with the
operation of the Purchased Businesses, whether tangible or intangible and
which, in the case of tangible assets, are located at the Leased Premises,
namely, the following (collectively, the "Purchased Assets"):
(a) Lease of Real Property: Subject to section 2.4 hereof, the rights of
the Vendor under and pursuant to that certain letter from the Vendor to Oxford
Property Group Inc. dated March 20, 1997 agreed to by Oxford Property Group
Inc. on March 20, 1997, consisting of the Vendor's offer to lease (the "Offer
to Lease") the premises known as Suite 909, comprising approximately 5,059
square feet of space, in the building known as The Mutual Group Centre, Centre
Tower, municipal address 3300 Bloor Street West, Centre Tower, Etobicoke,
Ontario (the "Leased Premises"), together with all leasehold improvements
relating thereto, provided that, at or before the Time of Closing (i) the
Vendor and the Purchaser shall have obtained the consent of Oxford Property
Group Inc. to the assignment by the Vendor to the Purchaser of the Offer to
Lease, and (ii) Oxford Property Group Inc. shall have agreed to release the
Vendor from its covenants pursuant to the Offer to Lease effective as of the
assignment thereof to the Purchaser;
(b) Furniture and Equipment: The furniture, fixtures, equipment and other
fixed assets located at the Leased Premises that are owned by the Vendor and
used exclusively or predominantly in connection with the operation of the
Purchased Businesses including, without limitation, the furniture and
equipment described in Schedule 2.1(b) - Furniture and Equipment;
(c) Prepaid Expenses and Deposits: The prepaid expenses and deposits made
by the Vendor in connection with the Purchased Businesses;
(d) Contracts and Commitments: The rights of the Vendor under all contracts,
instruments, agreements, licences and other arrangements relating exclusively
or predominantly to the operations of the Purchased Businesses, including
without limitation the Subscription Pricing Agreement, to the extent such
agreement applies to services which the Purchaser will provide pursuant to
subsection 8.10(a), and all customer contracts, distribution agreements,
agreements with suppliers (including, without limitation, suppliers of data
relating to the Bibliographic Services Business and licences and agreements
relating to the Computer Software) and forward commitments for goods or
services, service contracts and warranty performance agreements, equipment
rental agreements and all unfilled orders received by the Vendor in connection
with the operations of the Purchased Businesses (all such contracts,
instruments, agreements, licenses and other arrangements referred to in this
subsection 2.1(d) together with the contracts, agreements, licences and leases
of personal property described in Schedule 2.1(d) - Material Contracts and
Commitments are hereinafter collectively called the "Contracts and
Commitments");
(e) Computer Software: The computer software products, and all of the
Vendor's rights, including copyrights (except as hereinafter provided), in and
to the computer software products, to the extent assignable, which are owned
by or licensed to the Vendor and used exclusively or predominantly in
connection with the operations of the Purchased Businesses and all rights
under any such licences (the "Computer Software"), including, without
limitation, the computer software listed in Schedule 2.1(e) - Material
Computer Software, provided that:
(i) in the case of any copyright that is owned by the Vendor in respect of
the Asian language thesaurus relating to the Japan - CATSS software
(collectively, in this paragraph called the "CJK Software" and "CJK
Database"), the Purchaser agrees to grant to the Vendor at the Time of Closing
a non-exclusive licence to use, copy, reproduce, sublicense, access,
configure, execute, load, process, run, utilize, modify and translate the CJK
Software and CJK Database, and to authorize third parties to do any of the
foregoing, throughout the world for the term of the copyright in the CJK
Software. The Purchaser agrees that the Vendor may retain a copy of the CJK
Software and CJK Database source code in machine-readable form for this
purpose;
(ii) the Vendor will not be responsible to convert or translate any protocol;
(iii) except as otherwise set forth on Schedule 2.1(e) - Material Computer
Software, such software will not include any source code in respect thereof,
nor will such software include any IBM utilities (other than the Vendor's
rights under any licenses relating to any such IBM utilities in connection
with the operation of the Purchased Businesses); and
(iv) to the extent that any Computer Software is required by the Vendor in
connection with the provision of services by the Vendor to the Purchaser
pursuant to the Outsourcing Agreement, the transfer of the Vendor's right,
title and interest in and to such Computer Software, to the extent assignable,
shall, notwithstanding section 10.1, automatically occur at such time as the
Outsourcing Agreement expires or otherwise terminates. Notwithstanding this
paragraph 2.1(e)(iv), the Vendor shall provide the Purchaser with a copy of
any Computer Software that is owned by the Vendor and, to the extent
identified on Schedule 2.1(e) as in the possession of the Vendor, its source
code, upon request following the Time of Closing.
(f) Bibliographic Database: Subject to section 8.8 and all rights and
information contained therein, the bibliographic database (the "Database")
used by the Vendor in connection with the operation of the Bibliographic
Services Business containing approximately 57.5 million records. At the Time
of Closing, the Vendor will make available to the Purchaser at the Vendor's
offices in Winnipeg, Manitoba, magnetic tapes comprising the third generation
back-up of the Database (approximately three weeks old) in the format in which
the Database records currently exist. The Vendor will arrange for such
magnetic tapes to be transported, via a courier service of the Vendor's
choice, to the Purchaser at the Vendor's expense provided that all risk of
loss or damage during transportation shall be the responsibility of the
Purchaser. If the Purchaser desires to arrange for a different mode of
transportation of such magnetic tapes, the cost of such transportation shall
be borne by the Purchaser;
(g) Trade Names and Marks: The right for the Purchaser to represent itself
as carrying on the Purchased Businesses in succession to the Vendor and, to
the extent assignable, the trade or brand names, business names, trade marks,
trade mark registrations and applications used exclusively or predominantly in
connection with the operation of the Purchased Businesses, together with all
rights under any licences and other agreements or instruments relating to any
of the foregoing, including, without limitation, the trade marks, and business
names listed in Schedule 2.1(g) - Material Trade Marks and Business Names; and
(h) Books and Records: The books and records of the Purchased Businesses to
the extent they relate to the Purchased Assets and the Purchased Businesses
and the Employees (other than those required by law to be retained by the
Vendor, copies of which will be made available to the Purchaser), including,
without limitation, all customer lists, sales records, price lists and
catalogues, sales literature, advertising material, personnel records and
other records.
2.2 Excluded Assets: The Purchased Assets shall not include any of the
following property and assets (collectively, the "Excluded Assets"):
(a) Cash: All cash on hand or in banks or other depositories;
(b) Accounts Receivable: All accounts receivable, book debts and other
debts due or accruing due to the Vendor, including without limitation, any
indebtedness of any of the Vendor's Affiliates to the Vendor;
(c) Income Taxes: All income tax instalments paid by the Vendor and the
right to receive any refund of income taxes paid by the Vendor;
(d) Assets Relating to Other Businesses: All of the property, assets and
rights of the Vendor that relate exclusively or predominantly to the operation
by the Vendor, or any Subsidiary thereof, of any business other than the
Purchased Businesses including, without limitation, all shares, securities and
other investments of the Vendor in any Subsidiary or other entity;
(e) Pension and Benefit Plans: All rights of the Vendor under the Vendor's
Pension Plans and the Vendor's Benefit Plans and any contracts or agreements
relating thereto; and
(f) Specified Excluded Assets: The property and assets described in
Schedule 2.2(f) - Specified Excluded Assets.
2.3 Non-assignable Contracts: If any rights, benefits or remedies (in this
section 2.3 collectively called the "Rights") under any of the Contracts and
Commitments listed in Schedule 2.3 - Specified Contracts and Commitments are
not assignable by the Vendor to the Purchaser without the consent of the other
party thereto (in this section 2.3 called the "Third Party") and such consent
is not obtained, then, unless the Purchaser exercises its rights under
subsection 9.1(c) hereof, or unless the Vendor exercises its rights under
subsection 9.2(d) hereof, the following covenants and agreements shall apply
in respect of such Contracts and Commitments until the end of the period
commencing as at the Time of Closing and ending on the earlier of the expiry
or other termination of each such Contract and Commitment or December 31, 1997
(unless the parties mutually agree otherwise in respect of any such Contract
and Commitment):
(a) the Vendor will hold the Rights for the benefit of the Purchaser;
(b) the Vendor will, at the request and expense and under the direction of
the Purchaser, in the name of the Vendor or otherwise as the Purchaser shall
specify, take all such actions and do all such things as shall, in the opinion
of the Purchaser, be necessary or desirable in order that the obligations of
the Vendor under such assumed Contracts and Commitments may be performed in a
manner such that the value of the Rights shall be preserved and shall enure to
the benefit of the Purchaser and such that all moneys receivable under the
assumed Contracts and Commitments may be received by the Purchaser;
(c) the Vendor will promptly pay over to the Purchaser all such moneys
collected by the Vendor in respect of such assumed Contracts and Commitments;
(d) to the extent permitted by the Third Party and provided, in the
Purchaser's opinion, it would not be prejudicial to the Purchaser's rights to
do so, the Purchaser will perform the obligations under such assumed Contracts
and Commitments on behalf of the Vendor, and will indemnify the Vendor against
all liabilities, costs and expenses (including reasonable costs of the defence
thereof) incurred by the Vendor in performing such obligations; and
(e) the Purchaser will continue to use all reasonable commercial efforts
following the Time of Closing to obtain the consent of the Third Party to the
assignment to the Purchaser of each such Contract and Commitment and, upon
each such consent to assignment having been obtained, such Contract and
Commitment shall be automatically assigned to the Purchaser.
2.4 Sublease of Leased Premises: The Purchaser shall, effective as at the
Time of Closing, enter into a sublease with Manitoba Investments whereby the
Purchaser shall sublease to Manitoba Investments, on a cost recovery basis,
the portion of the Leased Premises that is used by or otherwise allocable to
the operation of the Library Technical Services Business, which sublease shall
be in the form set out in Schedule 2.4 - Form of Sublease of Part of Leased
Premises.
2.5 Delivery of Purchased Assets: Except as otherwise set forth in this
Agreement, the Purchased Assets shall be delivered by the Vendor to the
Purchaser as at the Time of Closing. For greater certainty, title to and
ownership of the Database shall pass to the Purchaser at the Time of Closing
in the format in which it currently exists on the Tandem computer hardware
referred to in Schedule A to the Outsourcing Agreement at the offices of the
Vendor in Winnipeg, Manitoba and delivery of the Database shall be and be
deemed to be effected in conjunction with the execution and delivery of a form
of general conveyance by the Vendor in favour of the Purchaser at the Time of
Closing. The Purchaser acknowledges that, under the Outsourcing Agreement,
the Vendor will provide certain services to the Purchaser in connection with
the Purchaser's operation of the Purchased Businesses after the Time of
Closing and the Vendor's obligations under such agreement are solely as a
provider of such services in accordance with the terms of the Outsourcing
Agreement. Without limiting the generality of the foregoing, the Purchaser
shall be responsible for the extraction of the various individual records from
the Database into any format other than the format in which such records
current exist in the Database and the only responsibility that the Vendor
shall have in respect of the Database or any individual records contained
therein shall be those responsibilities of the Vendor set forth in the
Outsourcing Agreement.
2.6 Designation of Affiliate: The Purchaser may designate an Affiliate of
the Purchaser to be the purchaser of the Database, such designation to be made
at least seven days prior to the Closing Date, provided that the Vendor, the
Purchaser and such designee shall enter into an agreement in writing amending
the terms of this Agreement as the same relate to the acquisition by such
designee of the Database and provided further that the Vendor shall have the
right to make such changes as the Vendor requires to the form of the guarantee
and indemnity set forth in Schedule 9.2(f) - Form of Guarantee and Indemnity
arising out of such designation.
ARTICLE III
PURCHASE PRICE
3.1 Base Price and Purchase Price: The aggregate base purchase price for
the Purchased Assets will be $1,250,000 and, provided that each Employee
identified in Schedule 1.1(q) - Employees becomes an employee of the Purchaser
at the Time of Closing, such aggregate base purchase price shall be reduced to
$1,150,000 (the "Base Price"). The aggregate purchase price payable by the
Purchaser to the Vendor for the Purchased Assets (the "Purchase Price") shall
be the Base Price adjusted in accordance with section 3.2.
3.2 Adjustments to the Base Price: The Base Price shall be adjusted by
adding thereto an amount equal to the aggregate of:
(a) the amount of all prepaid expenses, security deposits and other assets
as at the Time of Closing forming part of the Purchased Assets that are
"current assets" determined in accordance with generally accepted accounting
principles identified on the Closing Balance Sheet Accounts; and
(b) the portion of the Vendor's expenditures identified on the Closing
Balance Sheet Accounts (less depreciation) in respect of leasehold
improvements relating to the Leased Premises that are allocable to the
Purchased Businesses based on usage (square footage).
3.3 Determination of Estimated Price and Estimated Assumed Quantifiable
Liabilities: Not fewer than three Business Days prior to the Closing Date,
the Vendor shall deliver to the Purchaser a statement containing:
(a) the Vendor's estimate of the Purchase Price (the "Estimated Price")
which shall be prepared in accordance with section 3.2 based upon the Interim
Balance Sheet Accounts; and
(b) the Vendor's estimate of the Assumed Quantifiable Liabilities (the
"Estimated Assumed Quantifiable Liabilities") which shall be based upon the
Interim Balance Sheet Accounts.
3.4 Payments at Time of Closing: At the Time of Closing the Purchaser shall
pay and satisfy the Estimated Price as follows:
(a) as to an amount equal to the Estimated Assumed Quantifiable Liabilities,
by the assumption thereof; and
(b) as to the balance (being the Estimated Price less the Estimated Assumed
Quantifiable Liabilities), in cash or by certified cheque or wire transfer
payable to or to the order of the Vendor at the Time of Closing.
3.5 Final Determination of Purchase Price:
(a) Closing Balance Sheet: Within 30 days following the Closing Date, the
Vendor shall deliver to the Purchaser Balance Sheet Accounts (the "Closing
Balance Sheet Accounts") of the Purchased Businesses as at the close of
business on the Closing Date. For the purpose of preparing the Closing
Balance Sheet Accounts, the Purchaser agrees to grant the Vendor's authorized
representatives reasonable access to relevant records, facilities and
personnel of the Purchased Businesses after the Time of Closing.
(b) Review of Closing Balance Sheet Accounts: The Purchaser shall have a
period of 30 days from the date it receives the Closing Balance Sheet Accounts
in which to review the same. For the purpose of such review, the Vendor shall
permit the Purchaser and its authorized representatives to examine all working
papers, schedules and other documentation used or prepared by the Vendor in
connection with its preparation of the Closing Balance Sheet Accounts or
otherwise relating thereto. If no objection to the Closing Balance Sheet
Accounts is given to the Vendor by the Purchaser within such 30-day period,
the Closing Balance Sheet Accounts shall be deemed to have been approved as of
the last day of such 30-day period.
(c) Dispute Resolution by Vendor and Purchaser: If the Purchaser disputes
any of the items on the Closing Balance Sheet Accounts, the Purchaser shall,
within such 30-day period, give written notice thereof to the Vendor, which
notice shall set out in reasonable detail the nature of the matters in
dispute, and the Vendor and the Purchaser shall attempt to resolve the matters
in dispute within 15 days from the date the Purchaser gives such notice to the
Vendor. If the Vendor and the Purchaser cannot resolve all matters in dispute
by agreement within such 15-day period, all unresolved matters shall be
escalated to William J. Kliss, who is an officer of the Purchaser, and Paul
McErlean, who is an officer of the Vendor and who is also the Vice-President,
Finance of the Vendor's parent company, for resolution. If all matters in
dispute are resolved by the Vendor and the Purchaser or are resolved
specifically by William J. Kliss and Paul McErlean, the Closing Balance Sheet
Accounts shall be modified to the extent required to give effect to such
resolution and shall be deemed to have been approved as of the date of such
resolution.
(d) Modification of Closing Balance Sheet Accounts: Upon any modification of
the Closing Balance Sheet Accounts in accordance with this section 3.5, all
references in this Agreement to the Closing Balance Sheet Accounts shall refer
to the Closing Balance Sheet Accounts as so modified.
3.6 Adjustment Payments: Within five Business Days after the Closing
Balance Sheet Accounts are deemed to have been approved in accordance with
section 3.5:
(a) Payment of Amount Underpaid: If the amount of the Purchase Price less
the amount of the Assumed Quantifiable Liabilities determined based upon the
Closing Balance Sheet Accounts as approved in accordance with section 3.5 is
greater than the amount of the Estimated Price less the amount of the
Estimated Assumed Quantifiable Liabilities paid by the Purchaser to the Vendor
at the Time of Closing, the Purchaser shall pay to the Vendor an amount equal
to such difference, by certified cheque or banker's draft to or to the order
of the Vendor; and
(b) Refund of Overpayment: If the amount of the Purchase Price less the
amount of the Assumed Quantifiable Liabilities determined based upon the
Closing Balance Sheet Accounts as approved in accordance with section 3.5 is
less than the amount of the Estimated Price less the amount of the Estimated
Assumed Quantifiable Liabilities paid by the Purchaser to the Vendor at the
Time of Closing, the Vendor shall pay to the Purchaser an amount equal to such
difference, by certified cheque or banker's draft to or to the order of the
Purchaser.
3.7 Allocation of Purchase Price: The Vendor and the Purchaser shall
allocate the Purchase Price, as it may be finally determined pursuant to
section 3.5, among the Purchased Assets in accordance with Schedule 3.7 -
Allocation of Purchase Price and to report the sale and purchase of the
Purchased Assets for all federal, provincial and local tax purposes in a
manner consistent with such allocation.
3.8 Transfer Taxes: The Purchaser shall be liable for and shall pay all
federal and provincial sales taxes (including any retail sales taxes) and all
other like taxes, duties, fees or other like charges of any jurisdiction
properly payable in connection with the transfer of the Purchased Assets by
the Vendor to the Purchaser.
3.9 Taxes Payable: At the Time of Closing, the Purchaser shall pay to the
Vendor, or to whom the Vendor may direct, by wire transfer, certified cheque
or other immediately available funds, the amounts set forth in Schedule 3.7 -
Allocation of the Purchase Price in respect of the GST and provincial sales
taxes exigible in connection with the transaction contemplated hereby (in this
section 3.9 called the "Taxes Payable"). The Taxes Payable shall be remitted
by the Vendor in accordance with the ETA, the Retail Sales Tax Act (Ontario)
and the Retail Sales Tax Act (Manitoba).The Taxes Payable shall be adjusted,
to the extent necessary, based upon the Closing Balance Sheet Accounts, and
any adjustment payment in respect thereof shall be made and, if necessary,
remitted to the appropriate taxing authority, by the party responsible
therefor at the time the purchase price adjustment payments are made pursuant
to section 3.6.
ARTICLE IV
ASSUMPTION OF LIABILITIES
4.1 Assumption of Certain Liabilities by the Purchaser: Subject to the
provisions of this Agreement and the Schedules hereto, the Purchaser shall
assume, pay, satisfy, discharge, perform and fulfil, from and after the Time
of Closing, all obligations and liabilities of the Vendor existing as at the
Time of Closing (the "Assumed Liabilities") under or in respect of:
(a) the Contracts and Commitments;
(b) the Offer to Lease;
(c) the Assumed Quantifiable Liabilities;
(d) all contracts of employment, whether express, implied, written or oral,
made between the Vendor and the Transferred Employees only to the extent
expressly set out in this Agreement or the Schedules hereto; and
(e) the obligations of the Purchased Businesses under the Collective
Agreement (which obligations, for greater certainty, are represented in
section 5.17).
4.2 Liabilities Specifically Excluded: For greater certainty Assumed
Liabilities do not include:
(a) subject to section 8.7, any liabilities in respect of Employees for
salary, pension, benefits (except for vacation pay), bonuses or profit sharing
entitlements payable to the Employees relating to any period prior to the Time
of Closing; or
(b) any liabilities of the Vendor for the Purchased Businesses in respect of
any non-compliance with the Collective Agreement that relate to any period
prior to the Time of Closing.
4.3 Liabilities Not Assumed: Except as contemplated by section 4.1, the
Purchaser shall not assume or be liable to pay, satisfy, discharge, perform or
fulfil any debts, liabilities or obligations of the Vendor of or in connection
with the conduct of the operations of the Purchased Businesses.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying on such representations and
warranties in connection with its purchase of the Purchased Assets:
5.1 Organization: The Vendor is a corporation duly incorporated and
organized and validly existing under the laws of the Province of Manitoba and
has the corporate power to own or lease its property, to carry on the
operations of the Purchased Businesses as now being conducted by it and to
enter into this Agreement and to perform its obligations hereunder.
5.2 Authorization: This Agreement has been duly authorized, executed and
delivered by the Vendor and is a legal, valid and binding obligation of the
Vendor, enforceable against the Vendor by the Purchaser in accordance with its
terms except as such enforcement may be limited by bankruptcy, insolvency and
other laws affecting the rights of creditors generally and except that
equitable remedies may only be granted in the discretion of a court of
competent jurisdiction.
5.3 No Other Agreements to Purchase or Options: No person other than the
Purchaser and, in connection with the Database, the NLC has any written or
oral agreement or option or any right or privilege (whether by law, pre-
emptive or contractual) capable of becoming an agreement or option for the
purchase or acquisition out of the ordinary course of business from the Vendor
of any of the Purchased Assets, provided that, for greater certainty, any
purchase or acquisition in the ordinary course of business as the same relates
to the Database means only purchases or acquisitions made in accordance with
the restrictions (if any) imposed upon such customers', distributor's or
supplier's usage of or access to the Database pursuant to the Contracts and
Commitments between the Vendor and its customers, distributors and suppliers.
5.4 No Violation: The execution and delivery of this Agreement by the
Vendor and the consummation of the transactions herein provided for will not
result in the violation of, or constitute a material default under, or
conflict with or cause the acceleration of any material obligation of the
Vendor under:
(a) any agreement, instrument, contract, lease, licence or other obligation
to which the Vendor is a party or by which it is bound (other than any
Contract and Commitment in respect of which any notice, consent or approval is
required to be given to or obtained from the other contracting party thereto
in connection with the transactions contemplated hereby and which has not been
given or obtained at the Time of Closing);
(b) any provision of the constating documents or by-laws or resolutions of
the board of directors (or any committee thereof) or shareholders of the
Vendor;
(c) any judgment, decree, order or award of any court, governmental body or
arbitrator having jurisdiction over the Vendor; or
(d) any applicable law, statute, ordinance, regulation or rule.
5.5 Sufficiency of Purchased Assets: If the Purchased Assets included the
Excluded Assets and the full benefit of all of the Contracts and Commitments
that are not assignable or in respect of which the Vendor has received notice
of termination thereof from the other party thereto, the Purchased Assets
would constitute all of the material property, assets and rights used by the
Vendor in connection with its operation of the Purchased Businesses
immediately prior to the Time of Closing.
5.6 Title to Purchased Assets: The Purchased Assets are owned by the Vendor
as the beneficial owner thereof with a good and marketable title thereto, free
and clear of all Encumbrances other than the Permitted Encumbrances.
5.7 Trade Names and Trade Marks; Computer Software: Schedule 2.1(g) -
Material Trade Marks and Business Names contains a list of all of the trade or
brand names, business names, trade marks, trade mark registrations and
applications used exclusively or predominantly in connection with the
operations of the Purchased Businesses and that are material to such
operations, and indicates the status thereof. Schedule 2.1(e) - Material
Computer Software contains a list of all of the computer software used
exclusively or predominantly in connection with the operations of the
Purchased Businesses and that are material to such operations. To the best of
the Vendor's knowledge, the Purchased Assets and the use thereof do not
infringe any patent, copyright, trade mark or other right of ownership or use
of any third person or entity. To the Vendor's knowledge, there is no state
of facts which casts doubt on the validity or enforceability of the Vendor's
ownership rights in any of the Computer Software that is owned by the Vendor.
5.8 Insurance: The Vendor has the Purchased Assets insured against loss or
damage and such insurance coverage will be continued in full force and effect
to and including the Time of Closing. The Vendor is not in material default,
whether as to the payment of premiums or otherwise, under the terms of any
such policy.
5.9 Contracts and Commitments: Except as described in Schedule 2.1(d) -
Material Contracts and Commitments and Schedule 5.15 - Pension and Benefit
Plans, the Vendor is not a party to or bound by any contract, instrument,
agreement, lease, license or obligation in connection with the operations of
the Purchased Businesses that is material to such operations. The Purchaser
acknowledges and agrees that the Vendor does not represent or warrant that any
consent of any third party that may be required in connection with the
assignment to the Purchaser of any Contract and Commitment is obtainable from
such third party, nor can the Vendor represent or warrant that any Contracts
and Commitments will be renewed beyond the expiry thereof, or that any third
party thereto will continue to use the services of, or supply, the Purchased
Businesses. Without limiting the generality of the foregoing, in respect of
the distribution agreement with OCLC Online Computer Library Centre,
Incorporated, the Vendor has received notice of termination thereof. Except
as set out in Schedule 2.3 - Specified Contracts and Commitments, each of the
Contracts and Commitments listed in Schedule 2.3 - Specified Contracts and
Commitments is in full force and effect and no material default on the part of
the Vendor exists in respect thereof and, to the best of the Vendor's
knowledge, no event exists (other than the proposed assignment thereof to the
Purchaser pursuant to this Agreement) which, but for the lapse of time, the
giving of notice, or both, would entitle the other contracting party to
terminate any of such Contracts and Commitments. To the best of the Vendor's
knowledge, there is no material default under any of the Contracts and
Commitments listed in Schedule 2.3 - Specified Contracts and Commitments on
the part of the other contracting party.
5.10 Interim Balance Sheet Accounts: The Interim Balance Sheet Accounts have
been prepared in accordance with generally accepted accounting principles
(except that there are no notes thereto prepared in accordance with generally
accepted accounting principles) applied on a basis consistent with prior
periods, are correct and complete, and present fairly the assets and
liabilities of the Purchased Businesses as at the date thereof.
5.11 Closing Balance Sheet Accounts: When prepared, the Closing Balance
Sheet Accounts will be prepared in accordance with generally accepted
accounting principles (except that there will be no notes thereto prepared in
accordance with generally accepted accounting principles) applied on a basis
consistent with those used in the preparation of the Interim Balance Sheet
Accounts and will present fairly the Purchased Assets and Assumed Quantifiable
Liabilities as at the close of business on the Closing Date.
5.12 Litigation: Except as described in Schedule 5.12 - Legal Proceedings,
there are no actions, suits or proceedings pending or, to the best of the
knowledge of the Vendor, threatened against or affecting the Purchased
Businesses or the Purchased Assets at law or in equity or before or by any
federal, provincial, municipal or other governmental department, court,
commission, board, tribunal, bureau, agency or instrumentality, domestic or
foreign, or before or by an arbitrator or arbitration board.
5.13 Residency: The Vendor is not a non-resident of Canada for the purposes
of the Tax Act.
5.14 GST and PST Registrations: The Vendor is a registrant for purposes of:
(a) the ETA whose registration number is R121426753RT; and
(b) the Retail Sales Tax Act (Ontario) whose Vendor Permit number is 6578-
2844, the Retail Sales Tax Act (Manitoba) whose Vendor Permit number is
555333-4 and the Retail Sales Tax Act (Quebec) whose Vendor Permit number is
1017847844.
5.15 Pension and Benefit Plans: Schedule 5.15 - Pension and Benefit Plans
identifies the Registered Pension Plan (the "Vendor's RPP") provided to the
Employees by the Vendor immediately prior to the Time of Closing and the Group
Registered Retirement Savings Plan (the "Vendor's GRRSP") provided to certain
of the Employees immediately prior to the Closing (collectively, the Vendor's
RPP and the Vendor's GRRSP herein referred to as the "Vendor's Pension Plans")
and, other than government sponsored or administered plans, there are no
retirement, supplementary retirement or pension plans maintained, sponsored,
contributed to or required to be contributed to, by or on behalf of the Vendor
and applicable to any of the Employees, their spouses, dependants or
beneficiaries, other than the Vendor's Pension Plans. Schedule 5.15 - Pension
and Benefit Plans also identifies each plan, arrangement or agreement relating
to insurance, medical, hospital, health, dental, vision care, drug,
disability, educational assistance, sick leave or pay, legal benefits,
dependant care, unemployment benefits, pregnancy and parental benefits,
vacation, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, incentive or other
compensation or other similar benefit plans or arrangements (the "Vendor's
Benefit Plans") maintained or sponsored by the Vendor and provided to the
Employees, their spouses, dependants or beneficiaries, by the Vendor
immediately prior to the Time of Closing. True and complete copies of the
Vendor's RPP and the Vendor's Benefit Plans have been furnished to the
Purchaser.
5.16 Employees: Schedule 1.1(q) - Employees contains a complete and accurate
list of the names of all individuals who are employees or personnel of the
Vendor employed or engaged in connection with the operations of the Purchased
Businesses as of the date of this Agreement specifying in respect of each such
individual:
(a) years of service, base salary, annual incentive and any other monetary
compensation in respect of the 1997 fiscal period; and
(b) annual pension contribution (expressed as a percentage of pensionable
earnings) and whether the individual is a member of the Vendor's RRP and/or
the Vendor's GRRSP.
5.17 Labour Matters: All collective bargaining agreements relating to the
operations of the Purchased Businesses are identified in Schedule 5.17 -
Collective Agreements. Except as disclosed in Schedule 5.17 - Collective
Agreements:
(a) the Vendor is not a party to or bound by any collective bargaining or
similar agreement with any labour organization applicable to the Purchased
Businesses;
(b) there is no labour strike, dispute, slowdown, work stoppage, unresolved
material labour union grievance or labour arbitration proceeding pending or,
to the knowledge of the Vendor, threatened against the Vendor; and
(c) to the knowledge of the Vendor, there are no current union organizing
activities among the Employees.
5.18 Consents and Approvals: There is no requirement for the Vendor to make
any filing with, give any notice to or obtain any licence, permit,
certificate, registration, authorization, consent or approval of, any
government or regulatory authority as a condition to the lawful consummation
of the transactions contemplated by this Agreement, except pursuant to
applicable bulk sales legislation and except that the Vendor is required to
obtain certificates from the Minister under applicable retail sales tax
legislation in the provinces of Ontario and Manitoba.
5.19 Copies of Database: The Vendor has not sold or otherwise distributed or
provided a copy of all or any material portion of the Database to any person
out of the ordinary course of business, except that, for greater certainty,
portions of the Database in the form of customer files have been provided to
OCLC Online Computer Library Centre, Incorporated, in connection with the
distribution agreement dated July 1, 1993 between the Vendor and OCLC Online
Computer Library Centre, Incorporated.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows and
acknowledges and confirms that the Vendor is relying on such representations
and warranties in connection with its sale of the Purchased Assets:
6.1 Organization: The Purchaser is a corporation duly incorporated and
organized and validly subsisting under the laws of the Province of Ontario and
has the corporate power to enter into this Agreement and to perform its
obligations hereunder.
6.2 Authorization: This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser by the Vendor in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency
and other laws affecting the rights of creditors generally and except that
equitable remedies may only be granted in the discretion of a court of
competent jurisdiction.
6.3 No Violation: The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions herein provided for will
not result in the violation of, or constitute a material default under, or
conflict with or cause the acceleration of any material obligation of the
Purchaser under:
(a) any agreement, instrument, contract, lease, licence or other obligation
to which the Purchaser is a party or by which it is bound;
(b) any provision of the constating documents or by-laws or resolutions of
the board of directors (or any committee thereof) or shareholders of the
Purchaser;
(c) any judgment, decree, order or award of any court, governmental body or
arbitrator having jurisdiction over the Purchaser; or
(d) any applicable law, statute, ordinance, regulation or rule.
6.4 Consents and Approvals: There is no requirement for the Purchaser to
make any filing with, give any notice to or obtain any licence, permit,
certificate, registration, authorization, consent or approval of, any
government or regulatory authority as a condition to the lawful consummation
of the transactions contemplated by this Agreement.
6.5 Investment Canada: The Purchaser is a "non-Canadian" within the meaning
of the Investment Canada Act (Canada).
6.6 GST and PST Registrations: The Purchaser is a registrant for purposes
of:
(a) the ETA whose registration number is 889317939; and
(b) the Retail Sales Tax Act (Ontario) whose Vendor's Permit number is
99036479.
ARTICLE VII
SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
7.1 Survival of Representations and Warranties of the Vendor: The
representations and warranties of the Vendor contained in this Agreement and
any agreement, instrument, certificate or other document executed and
delivered pursuant hereto shall survive the closing of the transactions
contemplated hereby and notwithstanding the Closing or, subject to subsection
8.4(b), any investigations made by the Purchaser or its representatives, shall
continue in full force and effect for the benefit of the Purchaser until the
first anniversary of the Closing Date, provided, however, that:
(a) the representations and warranties contained in sections 5.1, 5.2, 5.3,
5.6, 5.13 and 5.14 and the corresponding representations and warranties set
out in certificates to be delivered pursuant to subsection 9.1(a) shall
survive and continue in full force and effect without limitation of time; and
(b) a claim for any breach of any other representations and warranties
contained in this Agreement or in any agreement, instrument, certificate or
other document executed or delivered pursuant hereto involving fraud or
fraudulent misrepresentation may be made at any time following the Closing
Date, subject only to applicable limitation periods imposed by law.
7.2 Survival of the Representations and Warranties of the Purchaser: The
representations and warranties of the Purchaser contained in this Agreement or
in any document, certificate or undertaking given pursuant hereto shall
survive the closing of the transactions contemplated hereby and
notwithstanding the Closing, shall continue in full force and effect for the
benefit of the Vendor until the first anniversary of the Closing Date,
provided, however, that the representations and warranties contained in
sections 6.1, 6.2, 6.4, 6.5 and 6.6 and the corresponding representations and
warranties set out in the certificates to be delivered pursuant to subsection
9.2(a) shall survive and continue in full force and effect without limitation
of time.
7.3 Survival of Covenants: The covenants of each of the Vendor and the
Purchaser set forth in this Agreement shall survive the completion of the
transactions herein contemplated and notwithstanding such completion, shall
continue in full force and effect for the benefit of the others in accordance
with the terms thereof.
ARTICLE VIII
COVENANTS
8.1 Delivery of Books and Records: At the Time of Closing, the Vendor
shall deliver to the Purchaser all the books and records described in
subsection 2.1(h) to the extent the same relate to the Purchased Businesses
and the Purchased Assets. The Purchaser agrees that it will preserve the
books and records so delivered to it for a period of seven years from the
Closing Date, and will permit the Vendor or its authorized representatives
reasonable access thereto in connection with the affairs of the Vendor.
8.2 Conduct of Purchased Businesses Prior to Closing: During the period
from the date hereof to the Time of Closing:
(a) Conduct Business in the Ordinary Course: The Vendor shall conduct the
Purchased Businesses only in the ordinary and normal course consistent with
past practice and the Vendor shall not change or enhance or promise to change
or enhance the Vendor's Pension Plans or the Vendor's Benefit Plans except as
required by law or as set out on Schedule 1.1(q) - Employees or Schedule 5.15
- - Pension and Benefit Plans. The Vendor shall not permit any Encumbrance to
be registered against any of the Purchased Assets other than any Encumbrances
created in the ordinary course of business that are Permitted Encumbrances;
(b) Continue Insurance: The Vendor shall continue to maintain in full force
and effect all policies of insurance or renewals thereof now in effect;
(c) Contractual Consents: The Vendor will cooperate with the Purchaser in
an effort to assist the Purchaser in obtaining any consents to assignment that
are required in connection with any Contracts and Commitments, provided that
the Vendor will not be responsible to incur any out-of-pocket costs in
connection therewith. The Purchaser shall give the Vendor the opportunity to
review and approve each form of request for consent to assignment that the
Purchaser proposes to deliver to third parties to any Contracts and
Commitments;
(e) Customer Contracts: The Vendor, acting reasonably, shall not take any
action that would have the effect of impeding or frustrating any existing
contractual arrangements with customers of the Purchased Businesses that are
to be assigned to the Purchaser;
(f) Vendor's Corporate Action: The Vendor shall use all reasonable efforts
to take or cause to be taken all necessary corporate action, steps and
proceedings to approve or authorize validly and effectively the transfer of
the Purchased Assets and the Purchased Businesses to the Purchaser and the
execution and delivery of this Agreement and the other agreements and
documents contemplated hereby and to cause all necessary meetings of directors
and shareholders of the Vendor to be held for such purpose; and
(g) Database: Subject to section 8.8 and subject to the operation by the
Vendor of the Purchased Businesses in the ordinary course of business in
accordance with its rights and obligations pursuant to the Contracts and
Commitments, the Vendor shall not sell or otherwise distribute or provide
access to all or any portion of the Database or, subject to paragraph
2.1(e)(i), the Computer Software to any person other than the Purchaser.
8.3 Delivery of Closing Documentation of the Vendor: At the Time of
Closing, the Vendor shall deliver to the Purchaser:
(a) all necessary deeds, conveyances, bills of sale, assurances, transfers,
assignments and any other documentation necessary or reasonably required to
transfer the Purchased Assets and the Purchased Businesses to the Purchaser
with a good and marketable title, free and clear of all Encumbrances, except
for Permitted Encumbrances;
(b) a certificate issued by the Minister of Revenue of Ontario under
subsection 6(1) of the Retail Sales Tax Act (Ontario), a certificate issued by
the Minister of Revenue under subsection 8(1) of the Retail Sales Tax Act
(Manitoba) and a letter from the Quebec provincial taxing authorities in
respect of payments and remittances of sales taxes pursuant to the Retail
Sales Tax Act (Quebec); and
(c) all such other documents relevant to the closing of the transaction
contemplated hereby as the Purchaser, acting reasonably, may request, or as
may be listed in an agreed upon form of closing agenda or documents list
prepared for the Time of Closing.
8.4 Delivery of Closing Documentation of the Purchaser: At the Time of
Closing, the Purchaser shall deliver to the Vendor:
(a) all such documents relevant to the closing of the transaction
contemplated hereby as the Vendor, acting reasonably, may request, or as may
be listed in an agreed upon form of closing agenda or documents list prepared
for the Time of Closing; and
(b) a certificate of a senior officer of the Purchaser, in form satisfactory
to the Vendor, acting reasonably, stating that, as at the Time of Closing, the
Purchaser has no knowledge of any breach by the Vendor of any representation
or warranty of the Vendor contained in this Agreement as a result of the
Purchaser's and its representatives' "due diligence" investigations in respect
of the Purchased Assets and the Purchased Businesses.
8.5 Purchaser's Corporate Action: The Purchaser shall use all reasonable
efforts to take or cause to be taken all necessary corporate action, steps and
proceedings to approve or authorize validly and effectively the execution and
delivery of this Agreement and the other agreements and documents contemplated
hereby and to cause all necessary meetings of directors and shareholders of
the Purchaser to be held for such purpose.
8.6 Representations and Covenants Relating to Employees:
(a) The Purchaser represents and warrants to the Vendor that it has offered
employment to all of the Employees effective as at the Time of Closing
conditional upon the completion of the transaction contemplated hereby on
identical salary terms and on other terms and conditions (including without
limitation non-pension benefits and, subject to section 8.7, pension benefits)
no less favourable in the aggregate than they currently enjoy. The Purchaser
shall employ all Employees who have accepted such offers of employment and who
become employees of the Purchaser (the "Transferred Employees") on such terms
effective as at the Time of Closing and shall recognize for the purposes of
benefit and severance obligations, but not for the purposes of pension
benefits (except as set out in section 8.7), the length of service with the
Vendor (and any predecessor employers), to the extent such service is
currently recognized by the Vendor. The Purchaser represents and warrants
that it has provided to the Vendor a true form of the offer of employment made
by the Purchaser to the Employees and the Vendor acknowledges that it has
reviewed and approved the forms of offer of employment made by the Purchaser
to the Employees. The Purchaser represents and warrants to the Vendor that
each Employee listed on Schedule 1.1(q) - Employees has accepted the
Purchaser's offer of employment;
(b) The Purchaser shall indemnify the Vendor from and against any Losses
suffered or incurred by the Vendor arising out of the termination
(constructive or otherwise) of employment by the Purchaser of any Transferred
Employee within the period of 24 months following the Closing Date;
(c) The Purchaser shall not solicit or employ Gordon A. Sharp for a period
of at least one year following the Closing Date;
(d) The Purchaser shall have no responsibility, obligation and/or liability
to any person and/or to the Vendor with respect to any employee of the
Purchased Businesses to whom the Purchaser is not obligated to make an offer
of employment, and the Vendor shall indemnify and hold harmless the Purchaser
in respect of any Losses arising out of any claims made against the Purchaser
by any such person to whom the Purchaser is not obligated to make such an
offer; and
(e) Within 30 days after the Closing Date, the Vendor shall pay to each
Transferred Employee an amount equal to the portion of the bonus or profit
sharing entitlement of such Employee for the 1997 fiscal period (pro-rated to
the Closing Date) to be calculated on the assumption that the Purchased
Businesses will have performed to the targets set forth in the finalized
business plans for such fiscal year.
8.7 Pension and Benefit Arrangements:
(a) As soon as practicable after the Time of Closing, the Purchaser shall
establish a registered pension plan or other retirement savings arrangement
such as a Group Registered Retirement Savings Plan (the "Purchaser's
Retirement Plan") effective as at the Time of Closing, to provide pension and
other benefits for each Transferred Employee which are no less favourable in
the aggregate than the total pension and other benefits provided to each
Transferred Employee under the Vendor's RPP and, where applicable, the
Vendor's GRRSP;
(b) The Vendor shall retain responsibility for and satisfy its obligations
with respect to all pension and other benefits which will have accrued to the
Transferred Employees up to the Time of Closing in accordance with the terms
of the Vendor's Pension Plans and applicable federal and provincial rules,
regulations and legislation applicable to the Vendor's Pension Plans;
(c) Effective as of the Time of Closing, the Transferred Employees shall
cease to actively participate in, and accrue benefits under, the Vendor's
Pension Plans and shall commence participation in the Purchaser's Retirement
Plan. The Purchaser shall recognize the period of service recognized under
the Vendor's Pension Plans for the purposes of eligibility and vesting of
benefits under the Purchaser's Retirement Plan;
(d) The Purchaser shall be responsible for all pension and other benefits of
the Transferred Employees which accrue under the Purchaser's Retirement Plan
for service with the Purchaser from and after the Time of Closing;
(e) The Vendor shall retain responsibility for and satisfy its obligations
to the Transferred Employees for all claims made or for benefits accrued up to
the Time of Closing in accordance with the terms of the Vendor's Benefit Plans
and for those claims made on and after the Time of Closing which continue to
be covered by the terms of the Vendor's Benefit Plans as such terms existed
prior to the Time of Closing;
(f) Effective as of the Time of Closing, the Transferred Employees shall
cease to actively participate in, and accrue benefits under, the Vendor's
Benefit Plans and shall commence participation in benefit plans which shall be
established by the Purchaser effective as at the Time of Closing to provide
benefits to each Transferred Employee which are no less favourable in the
aggregate than the total benefits provided to each Transferred Employee by the
Vendor immediately prior to the Time of Closing under the Vendor's Benefit
Plans (the "Purchaser's Benefit Plans"). The Purchaser shall recognize the
period of service recognized under the Vendor's Benefit Plans for the purposes
of eligibility and vesting of the benefits under the Purchaser's Benefit Plans
and the Purchaser shall waive all waiting periods and other pre-conditions to
eligibility under the Purchaser's Benefit Plans for the Transferred Employees;
(g) The Purchaser shall be responsible for all benefits of the Transferred
Employees for claims made or for benefits which accrue under the Purchaser's
Benefit Plans from and after the Time of Closing which are not covered under
the terms of the Vendor's Benefit Plans as they existed immediately prior to
the Time of Closing;
(h) The Purchaser shall indemnify the Vendor from and against any Losses
that the Vendor may incur in connection with or arising out of any actions or
alleged actions taken by the Purchaser at any time with respect to the
Purchaser's Retirement Plan or the Purchaser's Benefit Plans (including
without limitation claims made by the Transferred Employees arising out of the
failure by the Purchaser to establish the Purchaser's Retirement Plan and/or
the Purchaser's Benefit Plans with the level of benefits as provided herein),
or with respect to the operation and administration thereof, or arising out of
any benefit claims and liabilities under the Purchaser's Retirement Plan or
the Purchaser's Benefit Plans in respect of the Transferred Employees; and
(i) The Vendor shall indemnify the Purchaser from and against any Losses
that the Purchaser may incur in connection with or arising out of any actions
or alleged actions taken by the Vendor at any time with respect to the
Vendor's Pension Plans and the Vendor's Benefit Plans or with respect to the
operation and administration thereof, or arising out of any benefit claims or
liabilities under the Vendor's Pension Plans or the Vendor's Benefit Plans in
respect of the Transferred Employees.
8.8 Sale of SRL Files to the NLC:
(a) The Purchaser shall continue to negotiate in good faith with the NLC
(provided that the NLC is willing to continue to participate in such
negotiations) in an effort to conclude, as soon as practicable following the
Time of Closing, a binding agreement of purchase and sale relating to the
acquisition by the NLC from the Purchaser of the SRL Files. At such time as a
binding agreement of purchase and sale between the Purchaser and the NLC is
entered into, the Purchaser shall, acting in good faith, make all reasonable
efforts to conclude the transaction of purchase and sale contemplated thereby
including, without limitation, by taking all steps reasonably necessary to
satisfy or fulfil all conditions precedent to the closing of such transaction
on the part of the Purchaser to be performed;
(b) Notwithstanding the closing of the transaction between the Vendor and
the Purchaser contemplated hereby, the Vendor shall retain all rights to the
Database necessary to enable it, in the event that a binding agreement of
purchase and sale relating to the acquisition by the NLC from the Purchaser of
the SRL Files has not been entered into within the period of six months
following the Closing Date, to complete a transaction of purchase and sale
with the NLC on terms satisfactory to the Vendor, acting reasonably, and the
NLC including, without limitation, the right to a copy of the SRL Files. If
any such transaction between the Vendor and the NLC is completed, any proceeds
payable to the Vendor in respect thereof (less the Vendor's reasonable
expenses associated therewith) shall be paid over to the Purchaser, and any
residual rights or title (if any) to the Database remaining with the Vendor
following the completion of any such transaction with the NLC shall be
automatically transferred to the Purchaser; provided that, in the event that
no binding agreement of purchase and sale relating to any transaction between
the Vendor and the NLC has been entered into within the period of one year
following the Closing Date, all such rights to the Database retained by the
Vendor shall be automatically transferred to the Purchaser;
(c) The Vendor shall use all reasonable commercial efforts to ensure that a
transaction of purchase and sale between the Vendor and the NLC shall be
substantially on the terms contained in the NLC Letter of Intent and, to the
extent that any such transaction of purchase and sale contemplates any terms
or conditions which are substantially different than those contained in the
NLC Letter of Intent, the Vendor shall consult with the Purchaser and keep the
Purchaser informed in connection with the negotiation and finalization
thereof, provided that, except as hereinafter provided, the Vendor shall have
the right of final determination in connection with the terms and conditions
of any such transaction of purchase and sale between the Vendor and the NLC.
Notwithstanding the foregoing, any such transaction of purchase and sale
between the Vendor and the NLC shall, in substance, prohibit the use by NLC of
all or any portion of the SRL Files for the purpose of any competition by the
NLC with the Purchaser, and shall prohibit the distribution by the NLC of all
or any portion of the SRL Files to any person for the purpose of any
competition by any such person with the Purchaser, unless the Purchaser,
acting reasonably, otherwise agrees, in writing, to a variation in respect of
such restrictions; and
(d) Notwithstanding the foregoing, at such time as the Purchaser provides
the Vendor with evidence satisfactory to it, acting reasonably, that a binding
agreement of purchase and sale between the Purchaser and the NLC relating to
the acquisition by the NLC of the SRL Files has been entered into, or that the
NLC no longer desires to acquire the SRL Files, the Vendor shall promptly
transfer to the Purchaser all rights to the Database retained by the Vendor
pursuant to this section 8.8.
8.9 Covenants Relating to Orderly Transition:
(a) Transition of Contracts and Commitments: Each of the Vendor and the
Purchaser agrees to provide such co-operation as is reasonably necessary, both
before and after the Time of Closing, in order to ensure an orderly transition
of all Contracts and Commitments that are assigned to the Purchaser at the
Time of Closing. The Purchaser agrees to provide, on a timely basis, to all
third parties to any Contracts and Commitments, all notices and other
information as may be required pursuant to the terms of any such Contracts and
Commitments in connection with the sale of the Purchased Businesses and the
transfer of the Purchased Assets, and the Vendor agrees to provide such co-
operation as is reasonably necessary in connection therewith;
(b) Specific Transition Matters: In addition, the parties agree that, in
respect of the distribution agreement dated July 1, 1993 between the Vendor
and OCLC Online Computer Library Centre, Incorporated, in respect of which
consent to assignment is required and OCLC Online Computer Library Centre,
Incorporated has indicated will not be granted, the parties shall cooperate to
ensure an orderly termination of such contract having regard to matters under
the control of each of them following the Time of Closing. Without limiting
the generality of the foregoing, the parties agree that the
transition/termination arrangements set out in Schedule 8.9 - Specific
Transition Matters shall apply in respect of such contract;
(c) Billing Systems; Accounts Receivable/Payable: The Vendor and the
Purchaser agree to cooperate with a view to ensuring a smooth transition of
billing systems relating to the Contracts and Commitments. In the case of any
amounts that are received or collected by or that fall under the control of
one party and which are accounts receivable or other entitlements that are the
property of or properly due to the other party in accordance with the terms of
this Agreement, the party receiving, collecting or having control of the same
shall promptly pay over such amounts to the party to whom such amounts belong
or are due. Similarly, in the case of any invoices or demands for payment
that are received by one party and which are the responsibility of the other
party in accordance with the terms hereof, the party receiving such invoice or
demand shall promptly forward the same to the party who bears the
responsibility therefor. In the event that any amounts are paid by one party
that are the responsibility of the other party in accordance with the terms
hereof, the party paying such amounts shall be entitled to prompt
reimbursement from the other party. Within the period of 90 days following
the Time of Closing, representatives of the parties shall meet or correspond
for the purpose of jointly preparing a reconciliation of all accounts
receivable, entitlements, accounts payable and obligations received,
collected, paid or otherwise dealt with by each party in accordance with this
subsection 8.9(c) and the parties shall meet or correspond thereafter to
perform such further reconciliations as may be necessary. In the event of any
dispute between the parties concerning their respective rights or obligations
with respect to any such reconciliation, the dispute shall be escalated to
William J. Kliss, on behalf of the Purchaser, and Paul McErlean, on behalf of
the Vendor, for resolution;
(d) The Vendor agrees to provide such information as is reasonably necessary
in order to enable the Purchaser or Auto-Graphics, Inc. to satisfy its
obligations in respect of any regulatory filings required to be completed by
the Purchaser or Auto-Graphics, Inc. in connection with the acquisition of the
Purchased Businesses including, without limitation, the Report Form 8-K
required to be filed with the United States Securities and Exchange
Commission; and
(e) The Vendor shall not be obligated to incur any out-of-pocket expenses in
connection with any co-operation, assistance or information that is provided
by the Vendor pursuant to this Section 8.9.
8.10 Subcontractor Arrangements and "Preferred Vendor" Status: In connection
with the provision of outsourcing services by the Vendor through the Library
Technical Services Business:
(a) the Purchaser shall, following the Time of Closing, continue to provide
the services currently provided to the Library Technical Services Business
pursuant to the Subscription Pricing Agreement in connection with the Library
Technical Services Business' existing outsourcing agreements with the
Universities of Alberta and Manitoba up to the expiry or other termination of
such outsourcing agreements, on the same terms and conditions as such services
are currently provided by the Purchased Businesses pursuant to the
Subscription Pricing Agreement, as a subcontractor to the Library Technical
Services Business; and
(b) the Vendor agrees to use the services of the Purchased Businesses after
the Time of Closing as a preferred but not exclusive vendor/subcontractor in
connection with such existing outsourcing agreements and future outsourcing
agreements (if any) until the earlier of the date on which such services are
no longer required by the Library Technical Services Business and the date
which is the second anniversary of the Closing Date, so long as (i) the
customer has not requested a change or attempted to terminate the arrangement,
(ii) neither the Purchaser nor Auto-Graphics, Inc. is in material breach of
any of its contractual arrangements with the Vendor or any Affiliate thereof,
and (iii) the Purchaser otherwise meets the Vendor's subcontracting criteria
from time to time including, without limitation, with respect to pricing,
customer service and standards of quality.
8.11 Right of First Refusal: Subject to the completion of the transaction
contemplated thereby, in the event that at any time prior to the second
anniversary of the Closing Date, the Vendor decides to cease carrying on the
Library Technical Services Business and none of the Vendor's Affiliates
desires to carry on such business and, as a result, the Vendor desires to sell
or cause to be sold all or a portion of the Library Technical Services
Business (whether by way of an asset or share sale transaction) to an arm's
length third party (as that term is construed pursuant to the Tax Act):
(a) The Vendor will deliver a notice in writing (in this section 8.11 called
a "Sale Notice") to the Purchaser whereby the Vendor will offer to sell or
cause to be sold all or such portion of the Library Technical Services
Business to the Purchaser at the price and subject to the terms and conditions
(including closing arrangements) set forth in the Sale Notice (such price,
terms and conditions being hereinafter in this section 8.11 collectively
referred to as the "Sale Terms"). The Purchaser will have the right,
exercisable by giving notice (in this section 8.11 called the "Acceptance
Notice") to the Vendor within 30 days after its receipt of the Sale Notice (in
this section 8.11 called the "Acceptance Period") to agree to purchase the
assets and assume the liabilities or purchase the shares, as the case may be,
described in the Sale Notice in accordance with the Sale Terms. In the event
that no Acceptance Notice is received from the Purchaser within the Acceptance
Period, the offer to the Purchaser will be deemed to have been refused;
(b) Upon delivery by the Purchaser of an Acceptance Notice within the
Acceptance Period, the Vendor will be bound to sell, or cause to be sold, and
the Purchaser will be bound to purchase the assets and assume the liabilities,
or purchase the shares, as the case may be, described in the Sale Notice in
accordance with the Sale Terms and the provisions hereof;
(c) If, following delivery by the Vendor to the Purchaser of a Sale Notice,
the offer contained in the Sale Notice remains unaccepted by the Purchaser
without amendment to any of its material terms at the expiry of the Acceptance
Period, the Vendor may sell or cause to be sold all or such portion of the
Library Technical Services Business that was the subject of the Sale Notice to
any person (in this section 8.11 called the "Third Party") at a price no less
than the price set forth in the Sale Notice and on other terms not more
favourable to the Third Party than the Sale Terms. If no sale is completed by
the Vendor within 180 days following the expiration of the Acceptance Period,
the Vendor shall be required, before selling or causing to be sold all or any
portion of the Library Technical Services Business, again to offer the whole
or such portion of the Library Technical Services Business to the Purchaser in
accordance with the same process provided in this section 8.11 and such
process shall be repeated so often as the Vendor desires to sell or cause to
be sold all or any portion the Library Technical Services Business on or prior
to the second anniversary date of the Closing Date; and
(d) A Sale Notice, an Acceptance Notice and any other notice to be given by
any party to another party in connection with this section 8.11 shall be made
and be deemed to have been made in the manner provided by section 12.2.
8.12 Outsourcing Equipment: The Vendor agrees to assign to the Purchaser,
as soon as practicable following the expiry of the outsourcing agreement (the
"Outsourcing Agreement") to be entered into between the Purchaser and the
Vendor at the Time of Closing in the form of agreement set forth in Schedule
9.1(d) - Form of Outsourcing Agreement, those items of the equipment listed in
Schedule 8.12 - Outsourcing Equipment in respect of which the Purchaser has
notified the Vendor in writing at least 30 days prior to such expiry of the
Outsourcing Agreement of its desire to receive assignment thereof, provided
that:
(a) the Purchaser shall be required to pay all applicable federal and
provincial sales taxes (including any retail sales taxes) and all other like
taxes, duties, fees or other like charges properly payable in connection with
the transfer of any such equipment by the Vendor to the Purchaser and further
provided that all other fees, costs and expenses relating to the assignment to
the Purchaser of any such equipment including, without limitation, in
connection with the preparation and execution of any documentation evidencing
such assignment and the transportation and preparation for transportation of
such equipment from the Vendor's location to the Purchaser's location shall be
borne by the Purchaser; and
(b) the Vendor shall not be obligated to assign any such equipment to the
Purchaser until such time as the Vendor no longer requires the use thereof in
connection the exercise by the Vendor of any of its rights set forth in
section 8.8.
8.13 No Retention of Database: At such time as the Vendor's rights set forth
in section 8.8 relating to the Database have expired or at the time of expiry
of the Outsourcing Agreement, whichever is last to occur, the Vendor shall
destroy or erase all and every portion of the Database files or copies thereof
in the possession of the Vendor not otherwise provided to the Purchaser, and a
certificate (the "Certificate") of a senior officer of the Vendor to that
effect shall be delivered to the Purchaser, such certificate to be in form
satisfactory to the Purchaser, acting reasonably, provided that the foregoing
obligation shall not apply in respect of any records contained in the Database
in respect of which the Vendor has received notice of any claim by any third
party against the Vendor relating to contractual arrangements between the
Vendor and any such third party requiring the Vendor to maintain any such
records for the benefit of such third party, or any such claim is otherwise
pending or threatened. Upon all such actual, pending and threatened claims
being resolved, abandoned or otherwise terminated, all such remaining records
shall be destroyed or erased and the Certificate to that effect shall be
delivered to the Purchaser.
ARTICLE IX
CONDITIONS OF CLOSING
9.1 Conditions of Closing in Favour of the Purchaser: The sale and purchase
of the Purchased Assets is subject to the following terms and conditions for
the exclusive benefit of the Purchaser, to be performed or fulfilled at or
prior to the Time of Closing:
(a) Representations and Warranties: The representations and warranties of
the Vendor contained in this Agreement shall be true and correct in all
material respects at the Time of Closing with the same force and effect as if
such representations and warranties were made at and as of such time, and a
certificate of a senior officer of the Vendor, dated the Closing Date, to that
effect shall have been delivered to the Purchaser, such certificate to be in
form and substance satisfactory to the Purchaser, acting reasonably;
(b) Covenants: All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Vendor at or before the Time of
Closing shall have been complied with or performed in all material respects,
and a certificate of a senior officer of the Vendor, dated the Closing Date,
to that effect shall have been delivered to the Purchaser, such certificate to
be in form and substance satisfactory to the Purchaser, acting reasonably;
(c) Contractual Consents: The Purchaser shall have obtained the consents
and approvals described in Schedule 9.1(c) - Purchaser's Conditional Consents,
in each case in form and substance satisfactory to the Purchaser, acting
reasonably;
(d) Outsourcing Agreement: The Vendor shall have executed and delivered to
the Purchaser an agreement relating to the provision by the Vendor to the
Purchaser of outsourcing services in connection with the Purchaser's operation
of the Purchased Businesses after the Time of Closing substantially in the
form of agreement set forth in Schedule 9.1(d) - Form of Outsourcing
Agreement, subject to such changes thereto as the parties may agree to, each
acting reasonably;
(e) No Action or Proceeding: No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or prohibit
the purchase and sale of the Purchased Assets or the Purchased Businesses
contemplated hereby or that would materially adversely affect the Purchased
Assets or the Purchased Businesses; and
(f) Legal Matters: All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, and all legal
matters relating to the purchase of the Purchased Assets, including title of
the Vendor to the Purchased Assets, shall have been approved as to form and
legality by Messrs. Davies, Ward & Beck, counsel for the Purchaser, acting
reasonably.
If any of the conditions contained in this section 9.1 shall not be performed
or fulfilled at or prior to the Time of Closing to the satisfaction of the
Purchaser, acting reasonably, the Purchaser may, by notice to the Vendor,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this Agreement, other than the obligations contained in sections 12.1,
12.3 and 12.4. Any such condition may be waived in whole or in part by the
Purchaser, without prejudice to its rights or remedies in the event of the
nonfulfillment of any other condition or conditions.
9.2 Conditions of Closing in Favour of the Vendor: The sale and purchase of
the Purchased Assets is subject to the following terms and conditions for the
exclusive benefit of the Vendor, to be performed or fulfilled at or prior to
the Time of Closing:
(a) Representations and Warranties: The representations and warranties of
the Purchaser contained in this Agreement shall be true and correct in all
material respects at the Time of Closing with the same force and effect as if
such representations and warranties were made at and as of such time, and a
certificate of a senior officer of the Purchaser, dated the Closing Date, to
that effect shall have been delivered to the Vendor, such certificate to be in
form and substance satisfactory to the Vendor, acting reasonably;
(b) Covenants: All of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Purchaser at or before the Time of
Closing shall have been complied with or performed in all material respects,
and a certificate of a senior officer of the Purchaser, dated the Closing
Date, to that effect shall have been delivered to the Vendor, such certificate
to be in form and substance satisfactory to the Vendor, acting reasonably;
(c) Sublease Agreement: The Purchaser shall have executed and delivered to
Manitoba Investments a sublease in respect of part of the Leased Premises in
the form of agreement set out in Schedule 2.4 - Form of Sublease of Part of
Leased Premises;
(d) Consents: All such consents and approvals from third parties in respect
of the assignment to the Purchaser of those Contracts and Commitments
identified with an asterisk in Schedule 2.3 - Specified Contracts and
Commitments shall have been obtained on terms satisfactory to the Vendor,
acting reasonably;
(e) Outsourcing Agreement: The Purchaser shall have executed and delivered
to the Vendor an agreement relating to the provision by the Vendor to the
Purchaser of outsourcing services in connection with the Purchaser's operation
of the Purchased Businesses after the Time of Closing substantially in the
form of agreement set forth in Schedule 9.1(d) - Form of Outsourcing
Agreement, subject to such changes thereto as the parties may agree to, each
acting reasonably;
(f) Guarantee and Indemnity from Auto-Graphics, Inc.: Auto-Graphics, Inc.
shall have executed and delivered to the Vendor a guarantee and indemnity of
all of the Purchaser's obligations to the Vendor contemplated hereby which
shall, subject to section 2.6, be in the form set forth in Schedule 9.2(f) -
Form of Guarantee and Indemnity;
(g) No Action or Proceeding: No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or prohibit
the purchase and sale of the Purchased Assets or the Purchased Businesses
contemplated hereby or that would materially adversely affect the Purchased
Assets or the Purchased Businesses;
(h) Legal Matters: All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto, and all legal
matters relating to the sale of the Purchased Assets, including title of the
Vendor to the Purchased Assets, shall have been approved as to form and
legality by Messrs. Lang Michener, counsel for the Vendor, acting reasonably;
and
(i) Consents re Outsourcing: The Vendor shall have obtained all consents
and approvals, on terms satisfactory to the Vendor, acting reasonably, from
all third party software licensors that are required in order for the Vendor
to provide services to the Purchaser pursuant to the Outsourcing Agreement.
If any of the conditions contained in this section 9.2 shall not be performed
or fulfilled at or prior to the Time of Closing to the satisfaction of the
Vendor acting reasonably, the Vendor may, by notice to the Purchaser,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this Agreement, other than the obligations contained in sections 12.1,
12.3 and 12.4. Any such condition may be waived in whole or in part by the
Vendor without prejudice to its rights or remedies in the event of the
nonfulfillment of any other condition or conditions.
ARTICLE X
CLOSING DATE AND TRANSFER OF POSSESSION; BULK SALES WAIVER
10.1 Transfer: Subject to the terms and conditions hereof and, except as
otherwise provided in this Agreement, the transfer of possession and right to
use of the Purchased Assets shall be deemed to take effect as at the close of
business on the Closing Date and the Purchaser shall be entitled to all
revenues, proceeds, receipts, monies, profits, benefits and advantages derived
by or accruing from the Purchased Businesses during the period after the
Closing Date and the Purchaser shall be responsible for all obligations,
liabilities, debts and expenses whatsoever incurred in connection with the
Purchased Businesses during the period after the Closing Date.
10.2 Place of Closing: The closing shall take place at the Time of Closing
at the offices of Messrs. Lang Michener, counsel for the Vendor, at Suite
2500, BCE Place, Bay Wellington Tower, Toronto, Ontario.
10.3 Further Assurances: From time to time subsequent to the Closing Date,
each of the Vendor and the Purchaser covenants that it will at all times after
the Closing Date, at the expense of the requesting party, promptly execute and
deliver all such documents, including, without limitation, all such additional
conveyances, transfers, consents and other assurances and do all such other
acts and things as the other, acting reasonably, may from time to time request
be executed or done in order to better evidence or perfect or effectuate any
provision of this Agreement or of any agreement or other document executed
pursuant to this Agreement or any of the respective obligations intended to be
created hereby or thereby.
10.4 Risk of Loss: From the date hereof up to the Time of Closing, the
Purchased Assets shall be and remain at the risk of the Vendor. If, prior to
the Time of Closing, all or any part of the Purchased Assets that are
necessary to carry on the Purchased Businesses as currently conducted are
destroyed or damaged by fire or any other casualty or shall be appropriated,
expropriated or seized by governmental or other lawful authority, unless the
Purchaser terminates its obligations under this Agreement as contemplated by
section 9.1, the Purchaser shall complete the purchase without reduction of
the Purchase Price, in which event all proceeds of insurance or compensation
for expropriation or seizure shall be paid to the Purchaser at the Time of
Closing and all right and claim of the Vendor to any such amounts not paid by
the Closing Date shall be assigned at the Time of Closing to the Purchaser.
10.5 Bulk Sales Waiver: The Purchaser hereby waives compliance by the Vendor
with the requirements of all applicable bulk sales legislation in connection
with the purchase and sale of the Purchased Assets contemplated by this
Agreement.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Vendor: In addition to the other indemnities in
favour of the Purchaser contained herein, the Vendor covenants and agrees to
indemnify and hold harmless the Purchaser from all Losses suffered or incurred
by the Purchaser as a result of or arising directly out of or in connection
with:
(a) any breach by the Vendor of or any inaccuracy of any representation or
warranty of the Vendor contained in this Agreement or in any Schedule hereto
(other than the Outsourcing Agreement, under which agreement the rights and
remedies of the parties are solely as contained therein) or in any agreement,
certificate or other document delivered pursuant hereto (provided that the
Vendor shall not be required to indemnify or hold harmless the Purchaser in
respect of any breach or inaccuracy of any representation or warranty unless
the Purchaser shall have provided notice to the Vendor in accordance with
section 11.3 on or prior to the expiration of the applicable time period
related to such representation and warranty as set out in section 7.1);
(b) any breach or non-performance by the Vendor of any covenant to be
performed by it that is contained in this Agreement or in any agreement,
certificate or other document delivered pursuant hereto;
(c) non-compliance by the Vendor with the requirements of all applicable
bulk sales legislation;
(d) any non-compliance by the Vendor at any time prior to the Time of
Closing with the terms of the Collective Agreement; and
(e) the Vendor's operation of the Purchased Businesses prior to the Time of
Closing (other than Assumed Liabilities).
11.2 Indemnification by the Purchaser: In addition to the other indemnities
in favour of the Vendor contained herein, the Purchaser covenants and agrees
to indemnify and hold harmless the Vendor from all Losses suffered or incurred
by the Vendor as a result of or arising directly out of or in connection with:
(a) any breach by the Purchaser of or any inaccuracy of any representation
or warranty contained in this Agreement or in any Schedule hereto (other than
the Outsourcing Agreement, under which agreement the rights and remedies of
the parties are solely as contained therein) or in any agreement, instrument,
certificate or other document delivered pursuant hereto (provided that the
Purchaser shall not be required to indemnify or hold harmless the Vendor in
respect of any breach or inaccuracy of any representation or warranty unless
the Vendor shall have provided notice to the Purchaser in accordance with
section 11.3 on or prior to the expiration of the applicable time period
related to such representation and warranty as set out in section 7.2);
(b) any breach or non-performance by the Purchaser of any covenant to be
performed by it that is contained in this Agreement or in any agreement,
certificate or other document delivered pursuant hereto; and
(c) the Purchaser's obligation to indemnify the Vendor in respect of the
operations of the Purchased Businesses after the Time of Closing including,
without limitation, any failure by the Purchaser to pay, satisfy, discharge,
perform or fulfil any of the Assumed Liabilities.
11.3 Notice of Claim: In the event that either the Vendor or the Purchaser
(the "Indemnified Party") shall become aware of any claim, proceeding or other
matter (a "Claim") in respect of which the other (the "Indemnifying Party")
has agreed to indemnify the Indemnified Party pursuant to this Agreement, the
Indemnified Party shall promptly give written notice thereof to the
Indemnifying Party. Such notice shall specify with reasonable particularity
(to the extent that the information is available) the factual basis for the
Claim and the amount of the Claim, if known. If, through the fault of the
Indemnified Party, the Indemnifying Party does not receive notice of any Claim
in time to effectively contest the determination of any liability susceptible
of being contested, the Indemnifying Party shall be entitled to set off
against the amount claimed by the Indemnified Party the amount of any Losses
incurred by the Indemnifying Party resulting from the Indemnified Party's
failure to give such notice on a timely basis.
11.4 Third Party Claims: In the event that any legal proceedings are
instituted or any claim or demand is asserted by any third party in respect of
which the Indemnified Party may have a Claim against the Indemnifying Party,
the Indemnified Party shall give or cause to be given to the Indemnifying
Party written notice thereof and the Indemnifying Party shall have the right,
at its option and expense, to be present at the defence of such proceedings,
claim or demand, but not to control the defence, negotiation or settlement
thereof, which control shall at all times rest with the Indemnified Party,
unless the Indemnifying Party irrevocably acknowledges full and complete
responsibility for indemnification of the Indemnified Party, in which case the
Indemnifying Party may assume such control through counsel of its choice,
provided, however, that no settlement may be entered into by the Indemnifying
Party without the Indemnified Party's written consent (which shall not be
unreasonably withheld). The parties agree to cooperate fully with each other
in connection with the defence, negotiation or settlement of any such third
party legal proceeding, claim or demand including keeping each other fully
advised with respect thereto and supplying copies of all relevant
documentation as it becomes available.
11.5 Exclusivity: The provisions of this Article XI shall apply to any Claim
for breach of any covenant, representation, warranty or other provision of
this Agreement or any agreement, certificate or other document delivered
pursuant hereto or any Claim for indemnification hereunder with the intent
that all such Claims shall be subject to the limitations and other provisions
contained in this Article XI.
11.6 Threshold: Except as hereinafter provided, neither the Purchaser nor
the Vendor shall be entitled to obtain any recovery or reimbursement in
respect of any claims for breach or non-performance of any covenants,
representations or warranties hereunder, until the aggregate of all such
claims exceeds $25,000 (the "Threshold"), and then only to the extent of such
excess. Notwithstanding the foregoing, the Threshold shall not apply in the
case of:
(a) any claim by the Purchaser in respect of any breach by the Vendor of its
representation and warranty contained in section 5.6 hereof relating to title
to the Purchased Assets;
(b) any claim by the Purchaser in respect of the Vendor's covenant to
indemnify the Purchaser contained in subsection 11.1(d) in respect of any non-
compliance by the Vendor prior to the Time of Closing with the terms of the
Collective Agreement;
(c) any claim by the Vendor in respect of any failure by the Purchaser to
pay, satisfy, discharge, perform or fulfil any of the Assumed Liabilities; and
(d) any claim by the Vendor in respect of any breach by the Purchaser of any
of its representations, warranties, covenants and obligations contained in
section 8.6 relating to the Employees and section 8.7 relating to pension and
benefit arrangements,
nor shall the amount of any claims in respect of any such matters be applied
or included with other claims to determine whether the Threshold as it relates
to the Vendor or the Purchaser, as the case may be, has been reached.
11.7 Limitations. Notwithstanding section 11.6:
(a) the maximum aggregate liability of the Vendor to the Purchaser hereunder
in respect of all claims for breach or non-performance of any covenants,
representations or warranties of the Vendor contained herein shall not exceed
the Purchase Price; and
(b) the maximum aggregate liability of the Purchaser in respect of any
claims by the Vendor relating to any failure of the Purchaser to pay, satisfy,
discharge, perform or fulfil any of the Assumed Quantifiable Liabilities shall
not exceed the sum of the Assumed Quantifiable Liabilities.
ARTICLE XII
MISCELLANEOUS
12.1 Confidentiality of Information: In the event that the transactions
contemplated herein are not consummated for any reason, and except as
otherwise authorized by the Vendor in writing, neither the Purchaser nor its
representatives, agents or employees will disclose to third parties, directly
or indirectly, or use any confidential information or confidential data
relating to the Vendor, the Purchased Assets or the Purchased Businesses
discovered by the Purchaser or its representatives as a result of the Vendor
making available to the Purchaser and its representatives the information
requested by them in connection with the transactions contemplated herein.
All such confidential information and any notations made relating thereto or
copies made in respect thereof (including any of the foregoing that are
electronically stored) by the Purchaser or such representatives, agents or
employees shall be returned to the Vendor, upon demand, or shall be destroyed
or erased, and the Purchaser shall provide to the Vendor, upon demand, a
certificate of a senior officer of the Purchaser attesting to the fact that
all such confidential information and notations and copies thereof have so
been returned, destroyed or erased, as the case may be.
12.2 Notices:
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered in person, transmitted by
telecopy or similar means of recorded electronic communication or sent by
registered mail, charges prepaid, addressed as follows:
(i) if to the Vendor:
400 Ellice Avenue,
Winnipeg, Manitoba, R3B 3M3
Attention: Director, Finance and Administration
Telecopier No.: (204) 942-2736
with a copy to:
IBM Canada Ltd.
3600 Steeles Avenue East
Markham, Ontario, L3R 9Z7
Attention: Director, Business Development
Telecopier No.: (905) 316-6955
(ii) if to the Purchaser:
3300 Bloor Street West, Suite 909,
Etobicoke, Ontario M8X 2X3
Attention: William J. Kliss, Chief Operating Officer
Telecopier No.: (416) 236-7380
with a copy to:
Davies, Ward & Beck
4400 - 1 First Canadian Place
Toronto, Ontario M5X 1B1
Attention: Edward C. Hannah
Telecopier No.: (416) 863-0871
and a copy to:
Robert H. Bretz, A Professional Corporation
520 Washington Blvd., #428
Marina Del Rey, California 90292
Attention: Robert H. Bretz
Telecopier No.: (310) 578-5443
(b) Any such notice or other communication shall be deemed to have been
given and received on the day on which it was delivered or transmitted (or, if
such day is not a Business Day, or if it was delivered or transmitted after
normal business hours on such day, on the next following Business Day) or, if
mailed, on the fifth Business Day following the date of mailing; provided,
however, that if at the time of mailing or within five Business Days
thereafter there is or occurs a labour dispute or other event that might
reasonably be expected to disrupt the delivery of documents by mail, any
notice or other communication hereunder shall be delivered or transmitted by
means of recorded electronic communication as aforesaid.
(c) The Vendor and the Purchaser may at any time change its address for
service from time to time by giving notice to the other in accordance with
this section 12.2.
12.3 Public Announcements: The Vendor and the Purchaser shall consult with
each other before issuing any press release or making any other public
announcement with respect to this Agreement or the transactions contemplated
hereby, and, except as required by any applicable law or regulatory
requirement, neither of them shall issue any such press release or make any
such public announcement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed.
12.4 Disclosure: Prior to any public announcement of the transaction
contemplated hereby pursuant to section 12.3, neither the Vendor nor the
Purchaser shall disclose this Agreement or any aspects of such transaction
except to its board of directors, its senior management, its legal,
accounting, financial or other professional advisors, any financial
institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be
required by any applicable law or any regulatory authority or stock exchange
having jurisdiction.
12.5 Successors and Assigns: This Agreement shall enure to the benefit of
and shall be binding on and enforceable by the Vendor and the Purchaser and
their respective successors, permitted assigns and, in the case of the
Purchaser, its permitted designee. Subject to the following, neither the
Vendor nor the Purchaser may assign any of its rights or obligations hereunder
without the prior written consent of the other. The Vendor acknowledges that
the Purchaser may designate an Affiliate of the Purchaser to be the purchaser
of the Database in accordance with section 2.6.
12.6 Counterparts: This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
12.7 Entire Agreement: This Agreement constitutes the entire agreement among
the Vendor and the Purchaser with respect to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether written or oral including, without limitation, the letter of intent
dated April 23, 1997 between the Vendor, the Purchaser and Auto-Graphics, Inc.
and accepted by the Purchaser and Auto-Graphics, Inc. on April 25, 1997, as
amended. The Purchaser acknowledges that it has been given the opportunity to
complete a full "due diligence" investigation concerning the condition of the
Purchased Businesses and the Purchased Assets and, accordingly, except as
herein specifically provided (all of which is subject to the delivery by the
Purchaser of the certificate referred to in subsection 8.4(b) and the
execution and delivery of the guarantee and indemnity referred to in
subsection 9.2(f)), the Purchased Assets are being acquired by the Purchaser
on an "as is" basis and there are no other conditions, covenants, agreements,
representations, warranties or other provisions, express or implied,
collateral, statutory or otherwise, on the part of the Vendor relating to the
subject matter hereof.
12.8 Time of Essence: Time shall be of the essence of this Agreement.
12.9 Applicable Law: This Agreement shall be construed, interpreted and
enforced in accordance with, and the respective rights and obligations shall
be governed by, the laws of the Province of Ontario and the federal laws of
Canada applicable therein, and each of the Vendor and the Purchaser
irrevocably and unconditionally submits to the non-exclusive jurisdiction of
the courts of such province and all courts competent to hear appeals
therefrom.
12.10 Severability: If any provision of this Agreement is determined to be
invalid or unenforceable by an arbitrator or a court of competent jurisdiction
from which no further appeal lies or is taken, that provision shall be deemed
to be severed herefrom, and the remaining provisions of this Agreement shall
not be affected thereby and shall remain valid and enforceable.
12.11 Amendments and Waivers: No amendment or waiver of any provision of this
Agreement shall be binding on the Vendor or the Purchaser unless consented to
in writing. No waiver of any provision of this Agreement shall constitute a
waiver of any other provision, nor shall any waiver constitute a continuing
waiver unless otherwise provided.
12.12 Schedules - Disclosure: Certain matters may be disclosed on a Schedule
hereto that are not strictly required to be disclosed thereon pursuant to the
terms of this Agreement. Such disclosure is for information purposes only,
and shall not constitute an indication or admission of the materiality
thereof, or create a standard for disclosure. The Vendor shall not be liable
for a breach of any representation, warranty or covenant that might result
from the failure to disclose any item or matter on any one Schedule hereto if
such item or matter has been disclosed on any other Schedule hereto in such a
manner that a review of such other Schedule would put the Purchaser on notice
that such item or matter exists.
12.13 No Third Party Beneficiaries: This Agreement does not and is not
intended to create any rights in favour of or that may be enforced by non-
parties to this Agreement (other than a permitted designee in accordance with
section 2.6), including without limitation the Employees and Transferred
Employees.
12.14 Commissions, Etc.: The Vendor, on the one hand, and the Purchaser, on
the other hand, represent and warrant to the other that none of them has
retained any broker, agent or other intermediary in connection with the
transaction contemplated by this Agreement.
12.15 Expenses: All legal, tax and accounting expenses incurred in connection
with the transaction of purchase and sale contemplated hereby by or on behalf
of the Purchaser are for the account of the Purchaser and all legal, tax and
accounting expenses incurred in connection with the transaction of purchase
and sale contemplated hereby by or on behalf of the Vendor are for the account
of the Vendor.
IN WITNESS WHEREOF this Agreement has been duly executed by the Vendor
and the Purchaser as of the date hereinabove first written.
ISM INFORMATION SYSTEMS MANAGEMENT
MANITOBA CORPORATION
Per: ss/Normand Bourassa
Normand Bourassa, President
A-G CANADA LTD.
Per: ss/William J. Kliss
William J. Kliss, Chief Operating Officer
Page 47
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] JUN-30-1997
[CASH] 60649
[SECURITIES] 0
[RECEIVABLES] 1479648
[ALLOWANCES] 38000
[INVENTORY] 329110
[CURRENT-ASSETS] 2110564
[PP&E] 10030910
[DEPRECIATION] 5570459
[TOTAL-ASSETS] 6766959
[CURRENT-LIABILITIES] 1634107
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 109368
[OTHER-SE] 2562664
[TOTAL-LIABILITY-AND-EQUITY] 6766959
[SALES] 3876328
[TOTAL-REVENUES] 3893442
[CGS] 3876328
[TOTAL-COSTS] 3687654
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 123394
[INCOME-PRETAX] 188675
[INCOME-TAX] 85000
[INCOME-CONTINUING] 103675
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 103675
[EPS-PRIMARY] .09
[EPS-DILUTED] .09
</TABLE>
