Share Purchase Agreement - Jupiterimages Corp.
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 12th day of November, 2004.
B E T W E E N:
JUPITERIMAGES CORPORATION, a corporation incorporated under
the laws of the State of Arizona (the "PURCHASER")
- and -
THOSE PERSONS LISTED IN SCHEDULE A TO THIS AGREEMENT
(collectively the "VENDORS")
RECITALS:
1. The Vendors are the registered and beneficial owners of all of the issued and
outstanding securities of Hemera Technologies Inc. (the "CORPORATION"); and
2. The Vendors wish to sell to the Purchaser and the Purchaser wishes to
purchase from the Vendors all of the issued and outstanding securities of the
Corporation.
NOW THEREFORE, in consideration of the mutual covenants in this
Agreement and for other consideration (the receipt and sufficiency of which are
acknowledged) the parties agree as follows: ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
For the purpose of this Agreement, those terms defined in Schedule B
shall have the meanings attributed to them in that Schedule.
1.2 TIME OF THE ESSENCE
Time shall be of the essence of each provision of this Agreement.
Any extension, waiver or variation of any provision of this Agreement shall not
be deemed to affect this provision and there shall be no implied waiver of this
provision.
1.3 CALCULATION OF TIME
Unless otherwise specified, time periods within or following which
any payment is to be made or act is to be done shall be calculated by excluding
the day on which the period commences and including the day on which the period
ends. Where the last day of any such time period is not a Business Day, such
time period shall be extended to the next Business Day following the day on
which it would otherwise end.
1.4 BUSINESS DAYS
Whenever any action to be taken or payment to be made
pursuant to this Agreement would otherwise be required to be taken or made on
a day that is not a Business Day, such action shall be taken or such payment
shall be made on the first Business Day following such day. Interest on all
amounts due hereunder shall, however, be calculated for all days on which such
amounts are outstanding, including each day that is not a Business Day.
1.5 CURRENCY
Unless otherwise specified, all references to amounts of money in
this Agreement refer to Canadian currency.
1.6 HEADINGS
The descriptive headings preceding Articles and Sections of this
Agreement are inserted solely for convenience of reference and are not intended
as complete or accurate descriptions of the content of such Articles or
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Sections. The division of this Agreement into Articles and Sections shall not
affect the interpretation of this Agreement.
1.7 PLURALS AND GENDER
Words in the singular include the plural and vice versa and words in
one gender include all genders.
1.8 STATUTORY REFERENCES
Any reference to a statute shall mean the statute in force as at the
date of this Agreement (together with all regulations promulgated thereunder) as
the same may be amended, re-enacted, consolidated or replaced from time to time,
and any successor statute thereto, unless otherwise expressly provided.
1.9 CONSTRUCTION
The words "including", "include", and "includes" shall mean
"including without limitation", "include, without limitation" and
"includes, without limitation", respectively.
1.10 SCHEDULES
The following Schedules are attached to, and form part of this
Agreement:
Schedule A Vendors
Schedule B Definitions
Schedule C Escrow Agreement
Schedule D Representations and Warranties of the Vendors
Schedule E Representations and Warranties of the Purchaser
Schedule F Conditions of the Purchaser
Schedule G Conditions of the Vendors
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
2.1 PURCHASE AND SALE OF PURCHASED SHARES
Subject to the terms and conditions of this Agreement, at the Time
of Closing, each of the Vendors (as beneficial owner) shall sell those of the
Purchased Shares set out opposite his, her or its name on Schedule "A" free and
clear from all Encumbrances, and the Purchaser shall purchase such shares.
2.2 ALLOCATION OF CONSIDERATION
The consideration to be paid by the Purchaser to the Vendors for the
Purchased Shares shall consist of the Cash Payment and the Escrowed Funds (as
such terms are defined in Section 3.3) (collectively, the "PURCHASE PRICE"). The
Purchase Price shall be allocated among the Purchased Shares in accordance with
Schedule "A". Each of the Vendors and Purchaser agree to report the purchase and
sale of the Purchased Shares in any Tax Returns required to be filed in
accordance with the provisions of Schedule "A".
2.3 WAIVER
The Vendors hereby waive all of their rights, past and present,
pursuant to the Shareholders' Agreement (which the Vendors hereby confirm is
terminated and of no further force or effect immediately prior to the Time of
Closing), the Subscription Agreements or under the provisions of any agreement,
arrangement or understanding pursuant to which either of the Vendors or the
Corporation is a party or by which any of them is bound in respect of the
issuance of shares by the Corporation or the transfer of shares by any past or
present shareholder of the Corporation, and hereby covenant with the Purchaser
to release and forever discharge the Purchaser and the Corporation from all
manner of actions, debts, obligations, claims, demands and any other claims
whatsoever under such agreements.
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ARTICLE 3
CLOSING ARRANGEMENTS
3.1 PLACE OF CLOSING
The Closing shall take place at the Time of Closing at the offices
of Goodmans LLP, 250 Yonge Street, Suite 2400, Toronto, Ontario, M5B 2M6 or at
such other place and time as may be agreed upon by the Purchaser and the
Vendors.
3.2 DELIVERY OF CERTIFICATES
The Vendors shall transfer and deliver to the Purchaser at the Time
of Closing share certificates representing the Purchased Shares duly endorsed in
blank for transfer, or accompanied by irrevocable security transfer powers of
attorney duly executed in blank, with such signatures guaranteed to the
satisfaction of the Purchaser. The Vendors shall take such steps as shall be
necessary to cause the Corporation to enter the Purchaser upon the books of the
Corporation as the holder of the Purchased Shares and to issue a share
certificate to the Purchaser representing the Purchased Shares purchased by it.
3.3 PAYMENT OF THE PURCHASE PRICE
The Purchase Price shall be paid and satisfied by the Purchaser as
follows:
(i) at the Time of Closing, the Purchaser shall pay to
Labarge Weinstein LLP, in trust for each of the Vendors
(in accordance with the wire transfer instructions set
out in Exhibit 2 to Schedule "A" or by certified
cheque), the amount specified in Schedule "A" in
immediately available funds, the aggregate of such
amounts being equal to $7,725,000, subject to
adjustment as set forth in Section 3.5(a) (the "CASH
PAYMENT"); and
(ii) at the Time of Closing, the Purchaser shall pay to the
Escrow Agent (in accordance with the wire instructions
set out in Exhibit 3 to Schedule "A") in immediately
available funds an amount equal to $975,000 (the
"ESCROWED FUNDS") to be held and distributed in
accordance with the Escrow Agreement and Section 3.4;
3.4 RELEASE OF ESCROW
(a) $650,000 of the Escrowed Funds shall be released to the
Vendors on July 12, 2005 and $325,000 of the Escrowed Funds
shall be released to the Vendors on May 12, 2006, provided
that if the Purchaser makes a claim or claims for
indemnification pursuant to Article 7 before the date on
which any part of the Escrowed Funds are to be released, the
amount or amounts claimed by the Purchaser shall remain in
escrow if not settled or finally adjudicated by such release
date. The Escrowed Funds shall not be released except in
accordance with the provisions of the Escrow Agreement.
(b) Upon completion of any mutual settlement or a final judgment
of a court of competent jurisdiction pursuant to the terms
of this Agreement, in respect of any claim or claims, the
Purchaser and the Vendors shall direct the Escrow Agent to
deliver to the Purchaser the Escrowed Funds equal to the
amount or amounts agreed upon or awarded to the Purchaser as
a result of any such claim or claims; provided, however,
that during the applicable period of escrow, no such payment
shall be made except after the aggregate of the amounts
ultimately determined to be payable exceed $50,000 and then
all such amounts shall be paid; and for greater certainty,
after the applicable period of escrow, the claims
accumulated, if any, during the period of escrow and within
the applicable time periods referred to in Section 4.4 shall
be paid whether such claims exceed $50,000 or not.
(c) The release from escrow shall not limit the rights or
remedies of the Purchaser under Article 7 to claim any
further amount due to the Purchaser by the Vendors following
the delivery of some or all of the Escrowed Funds.
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3.5 ADJUSTMENT TO CONSIDERATION
(a) The Parties agree that the Purchase Price was determined as
if the net working capital of the Corporation was $1,000,000
at the close of business on the Closing Date (the
"CONSIDERATION NET WORKING CAPITAL"). The Parties agree that
the estimate of net working capital at the close of business
on the Closing Date is $1,044,000 (the "ESTIMATED NET
WORKING CAPITAL"). Accordingly, the Parties agree that the
Purchase Price shall be increased on the Closing Date by
$22,000 (the "UPWARD ADJUSTMENT AMOUNT").
(b) The Parties agree to make a subsequent adjustment to the
Purchase Price on the Adjustment Date (as that term is
defined in Section 6.1) to reflect the actual net working
capital of the Corporation on the Closing Date (the "ACTUAL
NET WORKING CAPITAL"), as shown on the balance sheet to be
prepared in accordance with paragraph 3.5(c) hereof, as
follows:
(i) Subject to paragraph 3.5(b)(ii): (a) if the amount
obtained by subtracting the Consideration Net Working
Capital from the Actual Net Working Capital exceeds the
Upward Adjustment Amount, then the Purchaser shall pay
such excess to the Vendors, allocated as specified in
Schedule "A", within five Business Days of the
Adjustment Date (or such later date when the Actual Net
Working Capital is settled in accordance with Section
3.5(c)); or (b) if the amount obtained by subtracting
the Consideration Net Working Capital from the Actual
Net Working Capital so reflected is less than the
Upward Adjustment Amount, then the Vendors shall pay
(in the proportions as specified in Schedule "A") such
deficiency to the Purchaser within five Business Days
of the Adjustment Date (or such later date when the
Actual Net Working Capital is settled in accordance
with Section 3.5(c)); and
(ii) In the event that the Actual Net Working Capital is
less than the Consideration Net Working Capital, then,
within five Business Days of the Adjustment Date (or
such later date when the Actual Net Working Capital is
settled in accordance with Section 3.5(c)), the Vendors
shall pay (in the proportions as specified in Schedule
"A") to the Purchaser an amount equal to the Upward
Adjustment Amount plus the amount of the difference
between the Actual Net Working Capital and the
Consideration Net Working Capital.
For purposes of this Agreement, "Actual Net Working Capital"
shall mean the current assets of the Corporation on the
Closing Date minus all current liabilities of the
Corporation on the Closing Date, calculated in accordance
with GAAP, applied on a consistent basis.
(c) During the 90 day period after the Closing Date, the
Purchaser will prepare and submit to the Vendors a draft of
the Actual Net Working Capital on the Closing Date, such
amount to be based on a version of the balance sheet of the
Corporation dated as of the Closing Date, prepared by the
Purchaser, setting forth all assets and liabilities of the
Corporation which are required to be reflected thereon in
accordance with GAAP applied on a consistent basis. The
Purchaser shall furnish the Vendors with all information and
explanations which they may reasonably request for the
purpose of reviewing the Purchaser's preparation of Actual
Net Working Capital, during the period in which the draft
statements are being prepared, including access to all
current working accounting files, tax files, permanent
files, and other documents relating to the calculation of
Actual Net Working Capital. In the event of a dispute
between the Parties as to the Actual Net Working Capital,
the Parties will have 30 days to resolve the dispute among
themselves. If the Parties have not resolved such dispute
within such 30-day period, then the Parties shall select an
arbitrator who shall decide the dispute within 30 days after
being selected. The Parties hereto each agree to be bound by
the decision of the arbitrator. The arbitrator must be an
individual who is employed or was formerly employed by a
nationally recognized accounting firm. All costs of the
arbitration shall be split 50/50 between the Purchaser and
the Vendors.
(d) Notwithstanding any of the foregoing, no payment need be
made pursuant to Section 3.5(b) if the excess or deficiency,
as the case may be, is less than $500.00. Any amount payable
pursuant to
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this Section 3.5 shall be satisfied by cheque, bank draft or
wire transfer of immediately available funds to an account
specified by the payee.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS
The Vendors represent and warrant as to those matters set out in
Schedule D.
4.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants as to those matters set out in
Schedule E.
4.3 NON-WAIVER
No investigations made by or on behalf of any Party at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by the other Parties herein or
pursuant hereto. Subject to the foregoing, the Purchaser acknowledges that, as
of the date of this Agreement, neither it nor any of its representatives has any
actual knowledge of any material misrepresentations or material breaches of
representations or warranties, or any material breaches of any covenants by any
of the Vendors.
4.4 NATURE AND SURVIVAL OF VENDORS' REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Vendors contained in this
Agreement or in any document or certificate given pursuant to this Agreement
shall survive the Closing for the benefit of the Purchaser as follows:
(a) as to the representations and warranties contained in sections 1(a),
1(b), 1(c), 1(d), 2(a), 2(b) and 2(c) of Schedule D, indefinitely;
(b) as to Tax matters, until the date following expiration of all periods
allowed for objecting and appealing the determination of any
proceedings relating to any assessment or reassessment of the
Corporation or the Subsidiary, as the case may be, by any Taxing
Authority in respect of any taxation period ending on or prior to the
Closing or in which the Closing occurs unless a bona fide notice of a
claim shall have been made in writing before the expiry of that
period, in which case the representation and warranty to which such
notice applies shall survive in respect of that claim until the final
determination or settlement of the claim; and
(c) as to all other matters, for a period of eighteen months, unless a
bona fide notice of a claim shall have been given in writing before
the expiry of that period, in which case the representation and
warranty to which such notice applies shall survive in respect of that
claim until the final determination or settlement of that claim.
4.5 SURVIVAL OF PURCHASER'S REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Purchaser contained in
this Agreement or any document or certificate given pursuant to this Agreement
shall survive the Closing for the benefit of the Vendors as follows:
(a) as to the representations and warranties contained in paragraphs (a)
and (b) in Schedule E, indefinitely; and
(b) as to all other matters, for a period of eighteen months, unless a
bona fide notice of claim shall have been made in writing before the
expiry of that period, in which case the representation and warranty
to which such notice applies shall survive in respect of that claim
until the final determination or settlement of that claim.
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ARTICLE 5
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PARTIES OF THEIR OBLIGATIONS UNDER THIS AGREEMENT
5.1 CONDITIONS OF THE PURCHASER
The obligation of the Purchaser to complete the purchase of the
Purchased Shares hereunder shall be subject to the satisfaction of, or
compliance with, at or before the Time of Closing, each of the conditions (each
of which is hereby acknowledged to be inserted for the exclusive benefit of the
Purchaser) set out in Schedule F.
5.2 CONDITIONS OF THE VENDORS
The obligation of the Vendors to complete the sale of the Purchased
Shares hereunder shall be subject to the satisfaction of or compliance with, at
or before the Time of Closing, of each of the following conditions (each of
which is hereby acknowledged to be inserted for the exclusive benefit of the
Vendors) set out in Schedule G.
5.3 WAIVER BY PURCHASER
If any of the conditions set forth in Schedule F have not been
fulfilled, performed or satisfied at or prior to the Closing, the Purchaser may,
by written notice to the Vendors terminate all of its obligations hereunder and
the Purchaser shall be released from all its obligations under this Agreement.
Any of such conditions may be waived in whole or in part by the Purchaser by
instrument in writing given to the Vendors without prejudice to any of the
Purchaser's rights of termination in the event of non-performance of any other
condition, obligation or covenant in whole or in part, and without prejudice to
its right to complete the transaction of purchase and sale contemplated by this
Agreement and claim damages for breach of representation, warranty or covenant.
5.4 WAIVER BY VENDOR
If any of the conditions set forth in Schedule G have not been
fulfilled, performed or satisfied at or prior to the Closing, the Vendors may,
by written notice to the Purchaser, terminate all of their obligations hereunder
and the Vendors shall be released from all their obligations under this
Agreement. Any of such conditions may be waived in whole or in part by the
Vendors by instrument in writing given to the Purchaser, without prejudice to
any of the Vendors' rights of termination in the event of non-performance of any
other condition, obligation or covenant in whole or in part, and without
prejudice to their right to complete the transaction of purchase and sale
contemplated by this Agreement and claim damages for breach of representation,
warranty or covenant.
ARTICLE 6
COVENANTS OF THE PARTIES FOLLOWING CLOSING
6.1 POST CLOSING BALANCE SHEET
On the date which is the first Business Day after 90 days after the
Closing Date (the "ADJUSTMENT DATE"), the Parties shall adjust the Purchase
Price in accordance with Section 3.5. Any dispute between the Parties as to this
Section 6.1 shall be resolved in accordance with the procedure set forth in
Section 3.5.
6.2 TRANSITION
Each of the Vendors (other than, for the purposes of clauses 6.2(i)
and 6.2(iii) only, the Caisse de Depot et Placement du Quebec), severally, and
not jointly and severally, agree that during the period commencing on the date
hereof and ending six months following Closing: (i) such Vendor will not take
any action that is designed or intended to have the effect of discouraging any
customer or business associate of the Corporation from maintaining the same
business relationships with the Corporation after the Closing that it maintained
with the Corporation before the Closing; (ii) such Vendor will use reasonable
commercial efforts to refer all customer inquiries relating to the business of
the Corporation to the Purchaser from and after the Closing; and (iii) such
Vendor agrees to use reasonable commercial efforts to assist the Purchaser, at
the Purchaser's request and expense, with the orderly transition of the
operations of the Corporation from the Vendors to the Purchaser (including,
without limitation, recommendations, advice and interaction with customers and
potential customers of the
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Corporation and Governmental or Regulatory Authorities as well as assistance in
the preparation of securities market filings, audit reports and officer
representation letters).
6.3 EMPLOYMENT MATTERS
The Purchaser shall maintain a minimum employment level of ten
Employees (as defined below) based out of the Corporation's Gatineau office for
a period of one year from Closing.
The Disclosure Schedule sets out all of the employees of the
Corporation at Closing (the "EMPLOYEES"). All wages, commissions, bonuses,
vacation pay, severance compensation (to the extent such severance compensation
relates to employees terminated prior to the Time of Closing), payments under
Employee Plans and other remuneration and benefits due to the Employees for the
period prior to the Time of Closing, if not paid by the Corporation at or prior
to Closing, shall be accrued as current liabilities of the Corporation for the
purposes of calculating Actual Net Working Capital, provided however that if
such amounts are not included in the calculation of Actual Net Working Capital
on the Adjustment Date, then the Vendors shall indemnify the Purchaser for any
claims made by the Employees in respect of such amounts in accordance with
Section 7.
All wages, commissions, bonuses, vacation pay, severance
compensation, payments under Employee Plans and other remuneration and benefits
due to Employees terminated on or after the Time of Closing shall be the
responsibility of the Purchaser. Subject to the immediately following paragraph,
the Purchaser shall pay as severance compensation, at a minimum, at least the
equivalent of three weeks of pay per year of employment for each Employee other
than the Corporation's Chief Financial Officer.
For a period of one year from the Closing Date (such period ending
on the "ANNIVERSARY DATE"), the Purchaser shall be responsible for all severance
compensation relating to the period prior to Closing for the Chief Financial
Officer pursuant to his employment agreement with the Corporation dated February
3, 2003 (to a maximum of $154,500, subject to the immediately following
sentence). For the period from the Closing Date until the Anniversary Date, the
Vendors shall be responsible for all severance compensation in excess of
$154,500, except (i) if the Corporation chooses, and is not required, to pay
such excess to the Chief Financial Officer or (ii) if a court, tribunal,
administrative agency, or other similar body determines that there was bad faith
in the manner of termination of the Chief Financial Officer and awards
additional damages based on that finding. From the Anniversary Date, the
Purchaser shall be responsible for all severance compensation relating to the
period prior to Closing for the Chief Financial Officer as required by
applicable employment Laws.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY VENDORS
Subject to Section 7.5, the Vendors covenant and agree with the
Purchaser to indemnify and save harmless the Purchaser from and against any
claim, demand, action, cause of action, damage, loss, cost, liability or expense
(including professional fees and disbursements) (the "LOSSES") which may be made
or brought against the Purchaser, or which it may suffer or incur in respect of,
as a result of, or arising out of:
(a) any nonfulfillment of any covenant or agreement on the part of the
Vendors contained in this Agreement or any document or certificate
given pursuant to this Agreement;
(b) any inaccuracy in or breach of any representation or warranty of the
Vendors contained in this Agreement or any document or certificate
given pursuant to this Agreement;
(c) any debts and liabilities of the Corporation or the Subsidiary for
Taxes existing at the Time of Closing, or any reassessment for Taxes
for any period ending on or before the Closing Date; or
(d) any claim by any former securityholder of the Corporation involving
the transactions contemplated hereby or any prior transaction
involving any securities of the Corporation or any predecessor
corporation.
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7.2 INDEMNIFICATION BY THE PURCHASER
The Purchaser covenants and agrees with the Vendors to indemnify and
save harmless the Vendors, from and against any Losses which may be made or
brought against the Vendors or which it may suffer or incur, directly or
indirectly, in respect of, as a result of, or arising out of:
(a) any nonfulfillment of any covenant or agreement on the part of the
Purchaser under this Agreement or any document or certificate given
pursuant to this Agreement; or
(b) any inaccuracy in or breach of any representation or warranty of the
Purchaser contained in this Agreement or any document or certificate
given pursuant to this Agreement.
7.3 PROCEDURE FOR INDEMNIFICATION
(a) CLAIMS OTHER THAN THIRD PARTY CLAIMS
Following receipt from the Vendors or the Purchaser, as the case may
be (the "INDEMNIFIED PARTY"), of a written notice of a claim for indemnification
which has not arisen in respect of a Third Party Claim (as defined in Section
7.3(b) below), the party who is in receipt of such notice (the "INDEMNIFYING
PARTY") shall have 30 days to make such investigation of the claim as the
Indemnifying Party considers desirable. For the purpose of such investigation,
the Indemnified Party shall make available to the Indemnifying Party the
information relied upon by the Indemnified Party to substantiate the claim. If
the Indemnified Party and the Indemnifying Party agree at or prior to the
expiration of such 30 day period (or any mutually agreed upon extension thereof)
to the validity and amount of the claim, the Indemnifying Party shall
immediately pay to the Indemnified Party the undisputed amount.
(b) THIRD PARTY CLAIMS
The Indemnified Party shall notify the Indemnifying Party in writing
as soon as is reasonably practicable after being informed in writing that facts
exist which may result in a claim originating from a Person other than the
Indemnified Party (a "THIRD PARTY CLAIM") and in respect of which a right of
indemnification given pursuant to Section 7.1 or 7.2 may apply. The Indemnifying
Party shall have the right to elect, by written notice delivered to the
Indemnified Party within 10 days of receipt by the Indemnifying Party of the
notice from the Indemnified Party in respect of the Third Party Claim, at the
sole expense of the Indemnifying Party, to participate in or assume control of
the negotiation, settlement or defence of the Third Party Claim, provided that:
(i) such will be done at all times in a diligent and bona fide
matter;
(ii) the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party in accordance
with the terms contained in this Agreement in respect of
that Third Party Claim; and
(iii) the Indemnifying Party shall pay all reasonable
out-of-pocket expenses incurred by the Indemnified Party as
a result of such participation or assumption.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall co-operate with the Indemnifying Party and its counsel and shall have the
right to participate in the negotiation, settlement or defence of such Third
Party Claim at its own expense. If the Indemnifying Party does not so elect or,
having elected to assume such control, thereafter fails to proceed with the
settlement or defence of any such Third Party Claim, the Indemnified Party shall
be entitled to assume such control. In such case, the Indemnifying Party shall
co-operate where necessary with the Indemnified Party and its counsel in
connection with such Third Party Claim and the Indemnifying Party shall be bound
by the results obtained by the Indemnified Party with respect to such Third
Party Claim.
7.4 ADDITIONAL RULES AND PROCEDURES
The obligation of the parties to indemnify each other
pursuant to this Article 7 shall also be subject to the following:
(a) an Indemnified Party shall only be entitled to make a claim for
indemnification pursuant to Section 7.1 or Section 7.2, as the case
be, if written notice containing reasonable particulars of
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such claim is delivered to the Indemnifying Party within the time
periods provided for in Section 4.4 and Section 4.5, as the case may
be;
(b) if any Third Party Claim is of a nature such that the Indemnified
Party is required by applicable law to make a payment to any Person (a
"THIRD PARTY") with respect to such Third Party Claim before the
completion of settlement negotiations or related legal proceedings,
the Indemnified Party may make such payment and the Indemnifying Party
shall, forthwith after demand by the Indemnified Party, reimburse the
Indemnified Party for any such payment. If the amount of any liability
under the Third Party Claim in respect of which such a payment was
made, as finally determined, is less than the amount which was paid by
the Indemnifying Party to the Indemnified Party, the Indemnified Party
shall, forthwith after receipt of the difference from the Third Party,
pay such difference to the Indemnifying Party;
(c) except in the circumstances contemplated by Section 7.4(b) above, and
whether or not the Indemnifying Party assumes control of the
negotiation, settlement or defence of any Third Party Claim, the
Indemnified Party shall not settle or compromise any Third Party Claim
except with the prior written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld);
(d) the Indemnifying Party and the Indemnified Party shall provide each
other on an ongoing basis with all information which may be relevant
to the other's liability hereunder and shall supply copies of all
relevant documentation promptly as they become available;
(e) any and all claims for indemnification shall be subject to the
limitations set forth in Section 7.5;
(f) The Indemnified Party shall present any insurance claims which cover
all or part of the Losses to its insurer in a due and timely fashion.
No Indemnifying Party shall have any obligation to indemnify any
Indemnified Party under this Section 7 to the extent any net insurance
proceeds ("net insurance proceeds" means insurance proceeds net of all
costs of recovery and net of all Taxes in connection therewith)
received by such Indemnified Party are in respect of and compensate
such Indemnified Party in respect of any of its Losses hereunder. If
any such net insurance proceeds are received by an Indemnified Party
following any payment hereunder of any Losses by an Indemnifying
Party, the Indemnified Party receiving such net insurance proceeds
shall promptly remit same to the Indemnifying Party to the extent of
such payment made hereunder by such Indemnifying Party.
7.5 LIMITATIONS, RIGHTS CUMULATIVE
(a) Subject to Section 3.4 and the terms of the Escrow Agreement, no claim
for indemnification may be made until the value of all such claims
exceeds $50,000 in the aggregate (the "THRESHOLD") and upon the
Threshold being exceeded once, the amount then claimable shall be the
entire amount of claims and not only the amount in excess of the
Threshold; provided, however, that claims based on: (A) an inaccuracy
in or breach of any representation or warranty contained in Sections
1(r) or Section 2 of Schedule D; or (B) fraudulent acts or wilful
misconduct, shall not be subject to the foregoing limitation.
(b) Subject to paragraph 7.5(c), the maximum amount of monetary liability
of any Vendor with regard to the indemnification or any other
obligations of such Vendor contained in this Agreement shall not
exceed that Vendor's portion of the Escrowed Funds as specified in
Schedule "A".
(c) With respect to any claim based on: (A) an inaccuracy in or breach of
any representation or warranty contained in Section 2 of Schedule D;
or (B) fraudulent acts or wilful misconducts of such Vendor, the
maximum amount of monetary liability of such Vendor with regard to the
indemnification or any other obligations of such Vendor contained in
this Agreement shall not exceed such Vendor's portion of the Purchase
Price (being the sum of such Vendor's portion
<PAGE>
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of the Cash Payment and portion of the Escrowed Funds), as specified
in Schedule "A". For the avoidance of doubt, the liability of any
Vendor under any claim referred to in this paragraph 7.5(c) is several
(and not joint and several) and no Vendor shall be responsible for any
inaccuracy or breach by any other Vendor of the representations and
warranties in Section 2 of Schedule D or for the fraudulent acts or
wilful misconduct of any other Vendor.
(d) The maximum amount of liability stipulated in paragraph (b) above
shall apply whether or not some or all of the Escrowed Funds have been
released to the Vendors or paid to the Purchaser in accordance with
the Escrow Agreement, and such release or distribution in accordance
with the Escrow Agreement shall not in any way limit the rights or
remedies of the Purchaser under this Article 7.
(e) Subject in all cases to the limitations set forth in this Section 7.5,
the rights of indemnification contained in this Article 7 are
cumulative and are in addition to every other right or remedy of the
parties contained in this Agreement.
7.6 GST
If the Vendors and the Purchaser acting reasonably determine that
any payment (the "PAYMENT") made pursuant to this Article 7 is subject to GST or
are deemed by the ETA to be inclusive of GST, the Indemnifying Party agrees to
pay to the Indemnified Party in addition to the Payment an amount equal to the
Payment multiplied by the applicable rate of GST.
7.7 VENDORS' REPRESENTATIVE
(a) The Vendors irrevocably make, constitute and appoint both of Marc
Benoit and David Hood as their agents (collectively, the "VENDORS'
REPRESENTATIVE") and authorize and empower them, acting together, to
fulfill the role of Vendors' Representative hereunder. In the event of
the resignation of a Vendors' Representative, the resigning Vendors'
Representative shall appoint a successor either from among the Vendors
or who shall otherwise be acceptable to the Purchaser and who shall
agree in writing to accept such appointment, and the resigning
Vendors' Representative's resignation shall not be effective until
such a successor shall exist. If a Vendors' Representative should die
or become incapacitated, his successor shall be appointed within 30
days of his death or incapacity by a majority in interest of the
Vendors, and such successor either shall be a Vendor or shall
otherwise be acceptable to the Purchaser. The choice of a successor
Vendors' Representative appointed in any manner permitted above shall
be final and binding upon all of the Vendors. The decisions and
actions of any successor Vendors' Representative shall be, for the
purposes set forth in this Section 7.7, those of a Vendors'
Representative as if originally named herein.
(b) Each Vendor has made, constituted and appointed and by the execution
of this Agreement hereby irrevocably makes, constitutes and appoints
the Vendors' Representative as such person's true and lawful attorney
in fact and agent, for such person and in such person's name for the
following limited purposes: (1) to receive all notices and
communications directed to such Vendor in connection with any claim
(other than claims respecting fraud or wilful misconduct of any Vendor
or any inaccuracy in or breach of any representation or warranty
contained in Section 2 of Schedule D) for which there are sufficient
Escrowed Funds to satisfy such claim (an "ESCROW Claim") and to take
any action (or to determine to take no action) with respect thereto as
he may deem appropriate as effectively as such Vendor could act for
himself or herself, including without limitation, the settlement or
compromise of any such Escrow Claim, and (2) to execute and deliver
all instruments and documents of every kind incident to an Escrow
Claim to all intents and purposes and with the same effect as such
Vendor could do personally, and each such Vendor hereby ratifies and
confirms as his or her own act, all that the Vendors' Representative
shall do or cause to be done pursuant to the provisions hereof. This
irrevocable power of attorney is given for consideration and coupled
with an interest. Subject to Section 7.7(f), all notices and
<PAGE>
-11-
communications directed to Vendors under this Agreement shall be given
to the Vendors' Representative.
(c) The death or incapacity of any Vendor shall not terminate the
authority and agency of the Vendors' Representative.
(d) The Vendors hereby agree to indemnify the Vendors' Representative and
to hold him harmless against any loss, liability or expense incurred
without grossly negligent conduct or bad faith on the part of the
Vendors' Representative and arising out of or in connection with his
duties as Vendors' Representative, including the costs and expenses
incurred by such Vendors' Representative in defending against any
claim of liability in connection herewith.
(e) All costs and expenses incurred by the Vendors' Representative in
fulfilling his role under this Agreement shall be paid by the Vendors
pro rata in accordance with the allocation of the Purchase Price as
specified in Schedule "A".
(f) Notwithstanding any of the foregoing, the Vendors' Representative
shall have no authority to receive notices or communications, take any
action on behalf of, or bind any Vendor in connection with: (i) any
claim for which the liability of such Vendor could exceed the Escrowed
Funds held in escrow at such time or otherwise involve the payment of
funds by such Vendor other than funds then held in escrow; or (ii) any
claim respecting fraud or wilful misconduct of any Vendor or any
inaccuracy in or breach of any representation or warranty contained in
Section 2 of Schedule D.
7.8 SERVICE OF PROCESS, CONSENT TO JURISDICTION, ETC.
Each party irrevocably and unconditionally (1) agrees that any suit,
action or other legal proceeding arising out of this Agreement may be brought in
the Courts of Ontario; (2) consents to the jurisdiction of any such court in any
such suit, action or proceeding; and (3) waives any objection which such Vendor
may have to the laying of venue of any such suit, action or proceeding in any
such court.
ARTICLE 8
GENERAL
8.1 PUBLIC NOTICES
All public notices to third parties and all other publicity
concerning the matters contemplated by this Agreement shall be jointly planned
and coordinated by the Parties and no Party shall act unilaterally in this
regard without the prior approval of the other Parties, except to the extent
that the Party making such notice is required to do so by law or by the
applicable regulations or policies of any regulatory agency of competent
jurisdiction. Subject to the foregoing, the Vendors shall keep in strict
confidence any information relating to the Business or the transactions
contemplated herein as well as any information relating to the Purchaser
received in connection with the transactions contemplated by this Agreement.
8.2 USE OF NAME
Except as disclosed in the Disclosure Schedule, none of the Vendors
shall use, directly or indirectly, any of the trade-marks, service marks or
trade names forming part of the Intellectual Property Rights or the trade-mark,
service mark or service name "Hemera" or associate such trade-mark, service mark
or trade name with any of the trade-marks, service marks, trade names, names,
products, assets or businesses, directly or indirectly, owned, managed,
operated, joined in, controlled or financed thereby respectively, in whole or in
part.
8.3 EXPENSES
Each Party to this Agreement shall pay its respective legal,
accounting and other professional advisory fees, costs and expenses incurred in
connection with the negotiation, preparation or execution of this Agreement and
all documents and instruments executed or delivered pursuant to this Agreement,
as well as any other costs and expenses incurred.
<PAGE>
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8.4 FURTHER ASSURANCES
The Parties shall do all such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated by
this Agreement, and each Party shall provide such further documents or
instruments required by any other party as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry out its provisions,
whether before or after Closing.
8.5 ASSIGNMENT AND ENUREMENT
Neither this Agreement nor any benefits or duties accruing under
this Agreement shall be assignable by any Party without the prior written
consent of each of the other Parties, which consent shall not be unreasonably
withheld or delayed. Subject to the foregoing, this Agreement shall enure to the
benefit of and be binding upon the Parties and their respective successors
(including any successor by reason of amalgamation of any Party) and permitted
assigns.
8.6 ENTIRE AGREEMENT
This Agreement, and any document delivered pursuant to this
Agreement, constitutes the entire agreement between the Parties with respect to
the matters herein and supersedes all prior agreements, understandings,
negotiations and discussions relating to the subject matter hereof. There are no
other covenants, agreements, representations, warranties, conditions, whether
direct or collateral, express or implied, that form part of or affect this
Agreement except as otherwise provided in this Agreement. The execution of this
Agreement has not been induced by, nor do any of the Parties rely upon or regard
as material, any representations, promises, agreements or statements not
incorporated into this Agreement including any documents or information in any
due diligence examinations and data reviews. This Agreement shall not be
amended, added to or qualified except by written agreement signed by the
Parties. For greater certainty, the Vendors acknowledge and agree that the
Letter of Understanding dated September 27, 2004 between the Purchaser and the
Corporation has been terminated.
8.7 WAIVER
Except as otherwise expressly set out herein, no waiver of any
provision of this Agreement shall be binding unless it is in writing. No
indulgence or forbearance by a Party shall constitute a waiver of such Party's
right to insist on performance in full and in a timely manner of all covenants
in this Agreement. Waiver of any provision shall not be deemed to waive the same
provision thereafter, or any other provision of this Agreements, at any other
time.
8.8 NOTICES
All notices, requests, demands or other communications required or
permitted to be given by one Party to another under this Agreement shall be
given in writing and delivered by personal delivery or delivery by recognized
commercial courier, sent by facsimile or delivered by registered mail, postage
prepaid, addressed as follows:
For the Purchaser:
JupiterImages Corporation
c/o Jupitermedia Corporation
23 Old Kings Highway South
Darien, CT 06820
Attention: Mitchell Eisenberg
Telecopier: (203) 655-5079
<PAGE>
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with a copy to:
Goodmans LLP
250 Yonge Street, Suite 2400
Toronto, Ontario
M5B 2M6
Attention: Steve Cohen
Telecopier: (416) 979-1234
For the Vendors, to the applicable address as set out in Exhibit 1
to Schedule "A" attached hereto
or at such other address or fax number of which the addressee may from time to
time may notify the addressor. Any notice delivered by personal delivery or by
courier to the Party to whom it is addressed as provided above shall be deemed
to have been given and received on the day it is so delivered at such address.
If such day is not a Business Day, or if the notice is received after 4:00 p.m.
(addressee's local time), then the notice shall be deemed to have been given and
received on the next Business Day. Any notice sent by prepaid registered mail
shall be deemed to have been given and received on the fourth Business Day
following the date of its mailing. Any notice transmitted by facsimile shall be
deemed to have been given and received on the day in which transmission is
confirmed. If such day is not a Business Day or if the facsimile transmission is
received after 4:00 p.m. (addressee's local time), then the notice shall be
deemed to have been given and received on the first Business Day after its
transmission.
8.9 SEVERABILITY
If any provision of this Agreement or portion thereof or the
application thereof to any Person or circumstance shall to any extent be invalid
or unenforceable: (a) the remainder of this Agreement or the application of such
provision or portion thereof to any other Person or circumstance shall not be
affected thereby; and (b) the Parties will negotiate in good faith to amend this
Agreement to implement the intentions set forth herein. Each provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
8.10 EXECUTION BY FACSIMILE
The signature of any of the Parties hereto may be evidenced by a
facsimile copy of this Agreement bearing such signature.
8.11 ENGLISH LANGUAGE
The Parties confirm that it is their wish that this Agreement, as
well as any other documents relating to this Agreement, including notices,
schedules and authorizations, have been and shall be drawn up in the English
language only. Les Parties aux presentes confirment leur volonte que cette
convention, de meme que tous les documents, y compris tous avis et autorisations
s'y rattachant, soient rediges en anglais seulement.
8.12 GOVERNING LAW AND JURISDICTION FOR DISPUTES
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein and shall be treated, in all respects, as an Ontario contract. All of
the Parties to this Agreement irrevocably submit to the non-exclusive
jurisdiction of the courts of the Province of Ontario.
8.13 SURVIVAL
Unless replaced, amended or withdrawn prior to any detrimental
reliance thereon by the Accepting Party (as defined in this paragraph), all
covenants, agreements, indemnities, warranties and representations set forth
herein or in any certificate or other document delivered pursuant to or in
connection with this Agreement by or on behalf of one Party to another Party
(the "ACCEPTING PARTY") shall be deemed to have been relied upon by the
Accepting Party notwithstanding any investigations heretofore or hereafter made
by or on behalf of the Accepting Party or its agents, and shall, unless
expressly provided otherwise, survive in full force and effect and not merge
upon the execution, termination or expiry of this Agreement.
<PAGE>
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8.14 SERVICE
If any party is or becomes a party on which service or legal process
with respect to an action commenced in the Province of Ontario must be served
out of the jurisdiction of the Province of Ontario (an "EX-JURIS PARTY"), the
Ex-Juris Party shall in writing to the other parties designate, appoint and
empower a party or agent within the Province of Ontario to receive for and on
behalf of the Ex-Juris Party service of process in the Province of Ontario in
any legal action or proceeding with respect to this Agreement, which agent shall
undertake to enter an unconditional appearance within 30 days after the date of
such service. A copy of such process served on the agent will be promptly
forwarded by mail by the party initiating such proceeding to the Ex-Juris Party
at the address referred to in the next sentence. Failure of the Ex-Juris Party
to receive such copy shall not affect in any way the service of such process on
the Ex-Juris Party by service upon its agent for service as designated above.
Each party agrees that if it becomes a Ex-Juris Party and it fails to maintain
such a duly appointed agent for service of process, it irrevocably consents to
the service of process out of any Court of the Province of Ontario by mailing
all copies of such process by registered or certified mail, postage pre-paid to
the last address designated for delivery of notice to such Ex-Juris Party under
the terms of Section 8.8, such service to be effective 30 days after the date of
such mailing. The mailing to such Ex-Juris Party at such address shall be deemed
personal service and acceptance of service by such Ex-Juris Party for any action
or proceeding with respect to any matter relating to this Agreement. Service in
accordance with the foregoing provisions shall not preclude any other manner of
service permitted by the laws of the Province of Ontario.
8.15 COUNTERPARTS
This Agreement may be signed in one or more counterparts, each of
which once signed shall be deemed to be an original. All such counterparts
together shall constitute one and the same instrument. Notwithstanding the date
of execution of any counterpart, each counterpart shall be deemed to bear the
effective date first written above.
<PAGE>
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IN WITNESS WHEREOF the parties have hereunto duly executed this
Agreement on the date first written above.
JUPITERIMAGES CORPORATION
Per: /s/ Christopher S. Cardell
-----------------------------------
Christopher S. Cardell
MARC BENOIT, as Vendors' Representative
/s/ Marc Benoit
---------------------------------
DAVID HOOD, as Vendors' Representative
/s/ David Hood
---------------------------------
SIMON GREGOIRE
/s/ Simon Gregoire
---------------------------------
MARC-ANTOINE BENGLIA
/s/ Marc-Antoine Benglia
---------------------------------
DAVID HOOD
/s/ David Hood
---------------------------------
LUC GREGOIRE
/s/ Luc Gregoire
---------------------------------
ANTOINE GREGOIRE
/s/ Antoine Gregoire
---------------------------------
<PAGE>
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SUCCESSION RENE BINET
Per: /s/
-----------------------------------
Authorized Signing Officer
6223656 CANADA INC.
Per: /s/
-----------------------------------
Authorized Signing Officer
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
Per: /s/
-----------------------------------
Authorized Signing Officer
FONDS REGIONAL DE SOLIDARITE OUTAOUAIS,
SOCIETE EN COMMANDITE
Per: /s/
-----------------------------------
Authorized Signing Officer
SGF TECH INC.
Per: /s/
-----------------------------------
Authorized Signing Officer
COREL CORPORATION
Per: /s/
-----------------------------------
Authorized Signing Officer
SOCIETE DE DIVERSIFICATION ECONOMIQUE DE
L'OUTAOUAIS
Per: /s/
-----------------------------------
Authorized Signing Officer
<PAGE>
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SCHEDULE B
DEFINITIONS
"6286119 CONSULTING AGREEMENT" means that services agreement dated
September 21, 2004 between the Corporation and 6286119 Canada Inc.;
"ACTUAL NET WORKING CAPITAL" has the meaning set forth in Section 3.5;
"AFFILIATE" has the meaning given to that term in the CANADA BUSINESS
CORPORATIONS ACT;
"AGREEMENT", "THIS AGREEMENT", "THE AGREEMENT", "HEREOF", "HEREIN",
"HERETO", "HEREBY", "HEREUNDER" and similar expressions mean this
Agreement, including all of its schedules and all instruments
supplementing, amending or confirming this Agreement. All references to
"ARTICLES" or "SECTIONS" refer to the specified Article or Section of this
Agreement;
"ASSETS AND PROPERTIES" with respect to any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, tangible or intangible, choate or inchoate, absolute,
accrued, contingent, fixed or otherwise and wherever situated), including
the goodwill related thereto, operated, owned or leased by or in the
possession of such Person;
"AUDITED BALANCE SHEET" means the audited consolidated balance sheet of the
Corporation as at June 30, 2004, which forms part of the Financial
Statements;
"BUSINESS" means the production, marketing and licensing of digital image
content, via online and boxed retail, and content delivery technology
presently carried on by the Corporation and the Subsidiary;
"BUSINESS DAY" means any day which is not a Saturday, a Sunday or a day
observed as a holiday under the laws applicable in the Province of Ontario
or Quebec, or a day on which the banks are generally not open for business
in Ontario or Quebec;
"CLASS A SHARES" means the Class A Preferred Shares of the Corporation;
"CLOSING" means the completion of the sale to and purchase by the Purchaser
of the Purchased Shares and the completion of all other transactions
contemplated by this Agreement that are to occur at the same time as the
sale and purchase;
"CLOSING DATE" or "DATE OF CLOSING" means November 12, 2004 or such other
date as the Purchaser and the Vendors may agree upon;
"COMMON LAW TRADEMARKS" means all trademarks, trade names, service marks,
business names, domain names, internet protocol addresses and uniform
resource locators, logos, trade dress, distinguishing guises, fictitious
characters and any other source or business identifiers used in association
with any goods or services sold or advertised by the Corporation or
Subsidiary or any of the respective licensees thereof, and all goodwill
associated with the foregoing;
"COMMON SHARES" means the Common Shares of the Corporation;
"CONSENT" means the consent or approval of any party to a Contract with the
Corporation, Subsidiary or Vendors for the completion of the transactions
contemplated by the Agreement, the execution of this Agreement or the
performance of any terms hereof;
"CONSIGNMENT AGREEMENTS" means all agreements or arrangements, whether
orally or in writing, pursuant to which a third party agrees to provide
consignment services to the Corporation or the Subsidiary, as the case may
be;
"CONSULTING AGREEMENTS" means all agreements or arrangements, whether
orally or in writing, pursuant to which a third party agrees to provide
consulting services to the Corporation or the Subsidiary, as the case may
be;
"CONTRACT" means any agreement, contract, indenture, mortgage, lease, deed,
guarantee, indemnity, warranty, licence, option, warrant, instrument or
other commitment, covenant, or obligation, whether written or oral;
"COREl" means Corel Corporation;
"COREL LICENSING AGREEMENT" means that license agreement dated July 17,
2000 among Corel, Corel Corporation Limited and the Corporation;
"COREL PURCHASE AGREEMENT" means that asset purchase agreement dated July
17, 2000 among Corel, Corel Corporation Limited and the Corporation;
"COREL WARRANT" means that warrant dated July 17, 2000 issued by the
Corporation in favour of Corel;
"CORPORATION" means Hemera Technologies Inc., a corporation incorporated
under the laws of Canada;
<PAGE>
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"DEBT" means all long-term debt of the Corporation and the Subsidiary;
"DISTRIBUTORSHIP AGREEMENTS" means all agreements or arrangements, whether
orally or in writing, pursuant to which a third party agrees to act as a
distributor of a product or service of the Business or otherwise act as a
sales agent of the Corporation or the Subsidiary, as the case may be;
"EMPLOYEE BONUS POOL" means the employee bonus pool of an aggregate of
$540,000 to be distributed to Employees upon Closing;
"EMPLOYEE PLANS" means all oral or written plans, arrangements, agreements,
programs, policies, practices or undertakings with respect to some or all
of the current or former directors, officers, employees, independent
contractors or agents of the Corporation or Subsidiary which provide for or
relate to:
(a) bonus, profit sharing or deferred profit sharing, performance
compensation, deferred or incentive compensation, share compensation,
share purchase or share option purchase, share appreciation rights,
phantom stock, employee loans, or any other compensation in addition
to salary ("INCENTIVE PLANS");
(b) retirement or retirement savings, including, without limitation,
registered or unregistered pension plans, pensions, supplemental
pensions, registered retirement savings plans and retirement
compensation arrangements ("PENSION PLANS"); or
(c) insured or self-insured benefits for or relating to income
continuation or other benefits during absence from work (including
short term disability, long term disability and workers compensation),
vacation or vacation pay, sick pay, hospitalization, health, welfare,
legal costs or expenses, medical or dental treatments or expenses,
life insurance, accident, death or survivor's benefits, supplementary
employment insurance, day care, tuition or professional commitments or
expenses or similar employment benefits ("BENEFIT PLANS");
"ENCUMBRANCE" means any encumbrance of any kind whatever and includes a
security interest, mortgage, lien, hypothec, pledge, hypothecation,
assignment, charge, security under Section 426 or Section 427 of the BANK
ACT (Canada), right of first refusal, trust or deemed trust (whether
contractual, statutory or otherwise arising), a voting trust or pooling
agreement with respect to securities, an adverse claim or any other right,
option or claim of others of any kind whatever affecting the assets,
property and undertaking of the Corporation or the Subsidiary or the
Purchased Shares, any covenant or other agreement, restriction or
limitation on the transfer of the Purchased Shares, a deposit by way of
security and an easement, restrictive covenant, agreement or right of way
(registered or unregistered), restriction, encroachment, burden or title
reservation of any kind with respect to Real Property;
"ENVIRONMENTAL LAWS" means all federal, provincial, state, municipal or
local laws, statutes, regulations, by-laws, ordinances, rules, policies,
guidelines, orders, directives and other requirements of any government or
political subdivision, agency or instrumentality or of any court, tribunal
or other similar body, relating to environmental or health matters,
including legislation governing the labelling, use and storage of Hazardous
Substances;
"ENVIRONMENTAL ORDERS" means applicable orders, decisions or the like
rendered by any Governmental or Regulatory Authority under or pursuant to
any Environmental Laws;
"ENVIRONMENTAL PERMITS" means all Licenses issued by any Governmental or
Regulatory Authority and relating to or required for the operation by the
Corporation or the Subsidiary of their Real Property in compliance with all
Environmental Laws or Environmental Orders;
"ESCROW AGENT" means the Canada Trust Company of Canada, a trust company
amalgamated under the laws of Canada, or such other escrow agent who may be
appointed under the Escrow Agreement;
"ESCROW AGREEMENT" means an agreement dated the date hereof between the
Escrow Agent, the Purchaser and the Vendors relating to the escrow of the
Escrowed Funds in the form attached as Schedule C;
"ESCROWED FUNDS" has the meaning set forth in Section 3.3;
"ESTIMATED NET WORKING CAPITAL" has the meaning set forth in Section 3.5;
<PAGE>
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"ETA" means the EXCISE TAX ACT (Canada);
"FINANCIAL STATEMENTS" means the audited consolidated annual financial
statements of the Corporation for the fiscal year ended June 30, 2004 and
all notes thereto together with the report of the Corporation's auditor
thereon and the unaudited consolidated interim financial statements of the
Corporation for the two month period ended August 31, 2004, consisting of a
consolidated statement of operations and deficit, a consolidated balance
sheet and a consolidated statement of cash flows;
"GAAP" means Canadian generally accepted accounting principles applied on a
consistent basis and which are in accordance with recommendations from time
to time of the Canadian Institute of Chartered Accountants (as published in
the CICA handbook) at the date on which such generally accepted accounting
principles are applied;
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, board, bureau, department, instrumentality, arbitrator, agency,
commission, panel, official or other instrumentality of Canada, the United
States or any foreign country or any domestic or foreign province, county,
city or other political subdivision;
"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;
"HAZARDOUS SUBSTANCES" means PCBs, asbestos, urea formaldehyde foam
insulation or any other substance or material that is prohibited,
controlled or regulated under any Environmental Laws;
"HAZARDOUS WASTE" means any contaminants, pollutants, dangerous substances,
including asbestos, liquid waste, special waste, toxic substances,
hazardous or toxic chemicals, hazardous materials or Hazardous Substances
as defined in or pursuant to any Environmental Laws;
"INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual
property rights including all:
(a) licenses or rights to use software, including the Corporation's
license of the "Telescope" software;
(b) patents;
(c) integrated or optical circuit topography rights, including mask works;
(d) trade-marks, trade names, service marks, business names, logos, trade
dress, distinguishing guises, Internet domain names, fictitious
characters and any other source or business identifiers, and all
goodwill associated with the foregoing including Common Law
Trademarks;
(e) copyrights, including all copyrights in software, photos, clipart and
images;
(f) industrial designs, design patents and other
designs;
(g) Proprietary Information; and
(h) all domain names, internet protocol addresses and uniform resource
locators used by the Corporation or the Subsidiary,
and all registrations, applications for registration, reissues, extensions,
renewals, divisions, continuations, continuations-in-part, documentation
and licences relating to the foregoing of the Corporation or the
Subsidiary;
"LAWS" means all laws (including common law), statutes, rules, regulations,
ordinances and other pronouncements having the effect of law, of any
foreign country or any domestic or foreign state, provincial, regional,
county, city, municipal, local or other political subdivision and all rules
having the effect of law of any federal, state or provincial agency or
other organization;
"LICENSING AGREEMENTS" means all agreements or arrangements, whether orally
or in writing, pursuant to which (i) a third party agrees to license to the
Corporation a product or service of the Business, or (ii) the Corporation
agrees to license a product or service to a third party;
<PAGE>
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"MATERIAL ADVERSE EFFECT" means any change, effect, event, occurrence or
state of facts that is, or would reasonably be expected to be, individually
or in the aggregate, materially adverse to the business, assets, results of
operation or financial condition of the Corporation, provided, however,
that none of the following shall constitute or be taken into account in
determining the occurrence of a Material Adverse Effect: any change,
effect, event, occurrence or state of facts (i) in or relating generally to
the Canadian economy, (ii) in or relating to currency exchange rates, (iii)
relating to required changes in GAAP; or (iv) relating to any person with a
business or employment relationship with the Corporation deciding to modify
or to terminate same as a result of the acquisition of the Corporation by
the Purchaser;
"NON-RESIDENT VENDOR" means any Vendor who is either (i) a non-resident of
Canada for the purposes of the Tax Act or (ii) a partnership in respect of
which any partner is a non-resident of Canada for the purposes of the Tax
Act;
"OPTION PLAN" means the stock option plan of the Corporation dated August
31, 2001;
"OPTIONHOLDERS" means all holders of options to acquire Common Shares;
"PARTIES" means, collectively, the Vendors and the Purchaser and "PARTY"
means any of them;
"PENSION AUTHORITIES" means the applicable federal, provincial or foreign
pension regulatory authorities, including Canada Revenue Agency;
"PENSION CONTRACTS" means Pension Plan Terms and all texts and amendments
to all collective bargaining agreements, employment contracts, trust and
funding agreements and insurance contracts;
"PENSION DOCUMENTS" means the text and amendments to all Pension Plans,
trust and funding agreements and amendments, applicable insurance
contracts, actuarial valuations, annual information returns, relevant
employee, former employee and pensioner data, and correspondence with
Pension Authorities;
"PENSION LEGISLATION" means the applicable provincial, federal or foreign
pension benefits legislation and, where applicable, the Tax Act;
"PENSION PLAN TERMS" means the terms and conditions of all Pension Plan
texts and amendments thereto;
"PERMITTED ENCUMBRANCES" has the meaning set forth in Section 1(m) of
Schedule D;
"PERSON" means a natural person, a corporation, company or other body
corporate (with or without share capital), a partnership or limited
partnership, a trust, a trustee, executor, administrator or other legal
personal representative, a syndicate, a joint venture, an unincorporated
association, a Governmental or Regulatory Authority, or any other legal or
business entity however designated or constituted;
"PHOTO-OBJECTS" means photographic images of people, animals, plants and
objects that have been pre-masked, or cut from their original background so
they can be inserted quickly into any project;
"PREDECESSOR" means any owner, occupier or Person with, or who previously
had, charge, management or control of any Real Property;
"PROPRIETARY INFORMATION" means all trade secrets, know-how, and
proprietary or confidential information, including all unpatented
inventions, ideas, concepts, formulas, processes, algorithms, software,
data, technology, design methodologies, design tools, customer lists and
research designs, results and notes used in the Business (as currently
conducted or currently contemplated to be conducted);
"PURCHASED SHARES" means, collectively, the 21,231,906 issued and
outstanding Common Shares and the 5,898,000 issued and outstanding Class A
Shares, representing all of the issued and outstanding shares of the
Corporation;
"PURCHASER" means JupiterImages Corporation, a corporation incorporated
under the laws of the State of Arizona;
"QUARANTINED IMAGES" means the images that have been quarantined by the
Corporation and are listed in the Disclosure Schedule as such;
"RASTER IMAGES" is another name for "bitmaps". A "bitmap" is used in the
electronic storage of images. Bitmap images are made up of pixels (or
"bits") that store colour information, which not only shades an object but
informs its outlines;
"REAL PROPERTY" means any real property, whether owned or leased;
<PAGE>
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"REGISTRATION RIGHTS AGREEMENT" means that registration rights agreement
dated March 1, 2001 among the Corporation, Corel Corporation and SGF Tech
Inc.;
"REGULATORY APPROVALS" means all necessary approvals, permits, sanctions,
rulings, orders or consents from any Governmental or Regulatory Authority
or self-regulatory organization within or outside of Canada or the United
States with respect to the transactions contemplated by this Agreement;
"RELEASE" means a releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping
which is in breach of any Environmental Law or Environmental Order;
"SHAREHOLDERS' AGREEMENT" means that Shareholder's Agreement dated as of
July 17, 2000, as amended on March 1, 2001, among the Corporation and the
Vendors;
"SHARES" means, collectively, the Common Shares and Class A Shares and
includes any shares or securities into which Common Shares and/or Class A
Shares may be converted or exchanged or which result from a consolidation,
subdivision, reclassification or redesignation of the Common Shares or
Class A Shares, any shares or securities which are received as a stock
dividend or distribution payable in shares or securities of the Corporation
and any shares received on the exercise of any option, warrant or other
similar right;
"STOCK PHOTOS" means the photographs that artists use in their designs;
"SUBSCRIPTION AGREEMENTS" means, collectively, the agreements by which any
of the Vendors were issued securities of the Corporation;
"SUBSIDIARY" means Hemera Technologies Corp., a corporation incorporated
under the laws of Delaware;
"SUBSIDIARY SHARES" means the shares of common stock of the Subsidiary;
"TAX" means all taxes, levies, duties, charges, assessments and
reassessments of any nature whatsoever, whether direct or indirect, payable
to any domestic or foreign government (federal, state, provincial,
municipal or otherwise) or to any regulatory authority, agency, commission
or board of any domestic or foreign government, or imposed by any court or
any other law, regulation or rulemaking entity having jurisdiction in
relevant circumstances, including but not limited to income tax, profits
tax, gross receipts tax, corporation tax, sales and use tax, wage tax,
payroll tax, workers' compensation levies, capital tax, stamp duty, real
and personal property tax, land transfer tax, customs or excise duty,
excise tax, turnover or value added tax on goods sold and services
rendered, GST, withholding tax, social security and unemployment insurance
charges and retirement contributions, and any interest, fines, additions to
tax and penalties thereon;
"TAX ACT" means the INCOME TAX ACT (Canada) and the regulations thereto, as
amended from time to time;
"TAX RETURN" means any return, report, information return, election,
designation or other document (including any related or supporting
information) with respect to Taxes;
"TAXING AUTHORITY" means any Governmental or Regulatory Authority having
responsibility for Taxes in any jurisdiction;
"TECHNICAL INFORMATION" means all right, title and interest in and to all
know-how of the Corporation and the Subsidiaries, including:
(a) all information of a scientific, technical or business nature, whether
in oral, written, graphic, machine readable, electronic or physical
form; and
(b) all patterns, plans, designs, research data, research plans, trade
secrets and other proprietary know-how, processes, formulas, drawings,
technology, computer software and related manuals, unpatented blue
prints, flow sheets, equipment and parts lists, instructions, manuals,
records and procedures;
except to the extent that any such information:
(c) is generally available to the public or in the possession of any third
party who is not subject to confidentiality obligations in favour of
the Corporation or Subsidiary, and/or
(d) has been or is independently developed by any third party;
<PAGE>
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"TECHNOLOGY" means the Intellectual Property Rights and the Technical
Information;
"TIME OF CLOSING" means 10:00 a.m. (Toronto time) on the Closing Date or
such other time as the Purchaser and the Vendors may agree upon;
"TRANSACTION DOCUMENTS" means, collectively, this Agreement and all related
agreements to be entered into in connection with the transactions
contemplated hereby;
"U.S. GAAP" means U.S. generally accepted accounting principles applied on
a consistent basis;
"VECTOR IMAGES" mean drawn images that are 100% scalable, meaning they can
be re-sized to fit designs but will not lose their resolution (image
quality); and
"VENDORS" means those Persons listed in Schedule "A".
<PAGE>
SCHEDULE D
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Except as set forth on the disclosure schedule attached as Exhibit l
to this Schedule D (the "DISCLOSURE SCHEDULE") which exceptions shall be deemed
to be part of the representations and warranties made hereunder, the following
representations are true and complete as of the Closing Date, except as
otherwise indicated. The Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections and subsections contained in
this Schedule D, and the disclosures in any section or subsection of the
Disclosure Schedule shall qualify other sections and subsections in this
Schedule D only to the extent it is readily apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsection.
For purposes of these representations and warranties, the
expression, "to the best of the Vendors' Knowledge", "to the Knowledge of the
Vendors" or similar expressions means the actual knowledge of Marc Benoit and
David Hood after due inquiry with Kim Dixon, the Chief Executive Officer and
President of the Corporation, Francois Michaud, the Chief Financial Officer of
the Corporation and Connie Sotiropoulos, the Corporation's contract specialist,
so long as each of Marc Benoit and David Hood has made due inquiry with such
individuals regarding the relevant matter or, if either of Marc Benoit or David
Hood cannot so demonstrate, any reference herein to Knowledge, best Knowledge or
similar expression of the Vendors shall mean the actual and constructive
knowledge that Marc Benoit and David Hood would have had after making due
inquiry regarding the relevant matter. In addition, for purposes of these
representations and warranties (other than those in Sections 1(a), (b), (c), (e)
and (r)) the term "the Corporation" shall include the Subsidiary of the
Corporation, unless otherwise noted herein.
1. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE VENDORS
The Vendors jointly and severally represent to the Purchaser that
the following representations are true and complete as of the Closing Date,
except as otherwise indicated.
(A) ORGANIZATION, GOOD STANDING, CORPORATE POWER AND QUALIFICATION
Each of the Corporation and the Subsidiary is a corporation
duly incorporated and organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and
authority to carry on its business as presently conducted
and as proposed to be conducted. Each of the Corporation and
the Subsidiary is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure
to so qualify would have a Material Adverse Effect.
(B) CAPITALIZATION
(i) Except as described in the Disclosure Schedule, there
are no outstanding options, warrants, rights (including
conversion or pre-emptive rights and rights of first
refusal or similar rights) or agreements, orally or in
writing, to purchase or acquire from either the
Corporation or the Subsidiary any shares, or any
securities convertible into or exchangeable for Shares
or Subsidiary Shares, as the case may be.
(ii) Except as described in the Disclosure Schedule, there
is no Contract, including without limitation, no
option, warrant, right of conversion, exchange or
exercise or any other right of any other Person binding
upon or which at any time in the future may become
binding upon either the Corporation or the Subsidiary
to, directly or indirectly, allot or issue any Shares
or Subsidiary Shares, as the case may be, or other
securities or to create any shares or other securities
or to allot, issue or create any security convertible,
exchangeable or exercisable for Shares or Subsidiary
Shares, as the case may be, or other securities in the
capital of the Corporation or the Subsidiary.
(iii) Except as described in the Disclosure Schedule,
neither the Corporation nor the Subsidiary has any
obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its Shares or
Subsidiary Shares, as the case may be, other securities
or any interest therein or to pay any dividend or to
make any other distribution in respect thereof, and all
declared dividends have been paid in full.
(C) SUBSIDIARIES
(i) The Corporation does not currently own or control,
directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, limited
liability corporation, association, or other business
entity, other than the Subsidiary. The Corporation is
not a participant in any joint venture, partnership or
similar arrangement.
<PAGE>
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(ii) The Subsidiary does not currently own or control,
directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, limited
liability corporation, association, or other business
entity. The Subsidiary is not a participant in any
joint venture, partnership or similar arrangement. The
Subsidiary does not carry on any active business, holds
no assets, and has no obligations, absolute or
contingent.
(iii) The Corporation is not affiliated with, nor otherwise
related to, either of Hemera Holdings Limited, Hemera
Inc. or Hemera Services Inc.
(D) AUTHORIZATION
(i) All corporate action required to be taken by the
Corporation's board of directors in order to authorize
the Corporation to enter into the Transaction Documents
and to transfer the Purchased Shares at the Closing has
been taken. All action on the part of the officers of
the Corporation necessary for the execution and
delivery of the Transaction Documents, the performance
of all obligations of the Corporation under the
Transaction Documents to be performed as of the
Closing, and the delivery of the Purchased Shares has
been taken. The Transaction Documents, when executed
and delivered by the Corporation, shall constitute
valid and legally binding obligations of the
Corporation, enforceable against the Corporation in
accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or
other Laws of general application relating to or
affecting the enforcement of creditors' rights
generally, or (ii) as limited by laws relating to the
availability of specific performance, injunctive relief
or other equitable remedies; or (iii) as limited by the
LIMITATIONS ACT, 2002 (Ontario).
(ii) All corporate action required to be taken by the
Subsidiary's officers and board of directors of the
Subsidiary necessary for the execution and delivery of
the Transaction Documents and the performance of all
obligations of the Subsidiary under the Transaction
Documents to be performed as of the Closing has been
taken. The Transaction Documents, when executed and
delivered by the Subsidiary, shall constitute valid and
legally binding obligations of the Subsidiary,
enforceable against the Subsidiary in accordance with
their respective terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other Laws of
general application relating to or affecting the
enforcement of creditors' rights generally, or (ii) as
limited by laws relating to the availability of
specific performance, injunctive relief or other
equitable remedies.
(E) GOVERNMENTAL CONSENTS AND FILINGS
No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or
filing with, any federal, provincial, state or local
Governmental or Regulatory Authority is required on the part
of the Corporation or the Vendors in connection with the
consummation of the transactions contemplated by this
Agreement or any other Transaction Document.
(F) LITIGATION
There is no claim, action, suit, proceeding, arbitration,
complaint, charge or investigation pending or, to the
Knowledge of the Vendors, currently threatened (i) against
the Corporation; or (ii) against any shareholder, officer or
director of the Corporation or, to the Knowledge of the
Vendors, any employee of the Corporation that has had or
would have a Material Adverse Effect or that questions the
validity of the Transaction Documents or the right of the
Corporation or the Vendors to enter into them or to
consummate the transactions contemplated by the Transaction
Documents. The Corporation is not a party or is not named as
subject to the provisions of any order, writ, injunction,
judgement or decree of any court or government agency or
instrumentality. None of the officers or directors of the
Corporation is a party or is named as subject to the
provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality
which has had or would have a Material Adverse Effect or
that questions the validity of the Transaction Documents or
the right of the Corporation or the Vendors to enter into
them or to consummate the transactions contemplated by the
Transaction Documents. There is no action, suit, proceeding
or investigation by the Corporation pending or which the
Corporation intends to initiate. The foregoing includes,
without limitation, actions, suits, proceedings or
<PAGE>
-25-
investigations pending or threatened in writing (or any
basis therefor known to the Corporation or the Vendors)
involving the prior employment of any of the Corporation's
employees, their services provided in connection with the
Business, or information or techniques allegedly proprietary
to any of their former employers, or their obligations under
any agreements with prior employers.
(G) INTELLECTUAL PROPERTY
(i) The Disclosure Schedule contains a true and complete
list of all Intellectual Property Rights that have been
registered, or for which applications for registration
have been filed, in any jurisdiction.
(ii) The Corporation is the exclusive owner of the
Technology and all right, title and interest in and to
the Technology, free and clear of all Encumbrances
(other than the Permitted Encumbrances), and none of
the Vendors have any Knowledge of any claim of adverse
ownership in any Technology.
(iii) The Intellectual Property Rights are in full force and
effect and have not been used or enforced or failed to
be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of
any of the Intellectual Property Rights, the loss of
which would have a Material Adverse Effect. All
registrations and filings necessary to preserve the
rights of the Corporation in and to the Intellectual
Property Rights have been made except where the failure
to so register and/or file would not have a Material
Adverse Effect.
(iv) The Technology is sufficient to enable the Corporation
to carry on, in all material respects, the Business.
(v) Except as described in the Disclosure Schedule, to the
Knowledge of the Vendors, there is no:
(A) claim of adverse ownership or invalidity or other
opposition to or conflict with any of the
Technology nor any pending or threatened suit,
proceeding, claim, demand, action or investigation
of any nature or kind against the Corporation
relating to the Technology; and
(B) claim that any products developed, manufactured,
produced, used or sold by the Corporation or any
process, method, packaging, advertising, or
material that the Corporation employs in the
development, manufacture, marketing, or sale of
any such product, or the use of any of the
Technology breaches, violates, infringes or
interferes with any rights of any Person or
requires payment for the use of any intellectual
property right, know-how or technology of another
Person.
(vi) The Disclosure Schedule sets forth a complete and
correct list and brief description of all judgments,
covenants not to sue, permits, grants, franchises,
licenses to use and other agreements and arrangements
relating to any of the Technology owned or used by the
Corporation that bind, obligate or otherwise restrict
the Corporation.
(vii) Neither the Corporation nor any of the Vendors has any
Knowledge of any infringements of, or passing-off
related to, the Technology by third parties.
(viii) The Corporation has taken commercially reasonable
precautions and made commercially reasonable efforts to
protect the Corporation's trade secrets and secure the
confidentiality of its customer lists and other
proprietary information. The Corporation has not
disclosed its customer lists to any Person other than
the Purchaser and its authorized agents.
(ix) All licenses and distribution rights granted by the
Corporation to third parties limit the right of such
third parties to sub-license the product of such
licenses or distribution rights to end-users (except
for licenses or distribution rights granted with
respect to finished products sold without modification
or without the Corporation losing any Intellectual
Property Rights in such product) and, except as
described in the Disclosure Schedule, no such licenses
or distribution rights grant an exclusive right to such
license or distribution right.
(H) COMPLIANCE WITH OTHER INSTRUMENTS
(a) Neither the Corporation nor the Subsidiary is in violation or
default (i) of any provisions of its constating documents or
by-laws, (ii) of any instrument, judgment, order, writ or
decree, (iii) under any note, indenture or mortgage, or (iv)
under any lease, agreement, Contract or purchase
<PAGE>
-26-
order to which it is a party or by which it is bound, or, of
any provision of federal, state or provincial statute, rule or
regulation applicable to the Corporation or the Subsidiary, as
the case may be, the violation of which would have a Material
Adverse Effect. The execution, delivery and performance of the
Transaction Documents and the consummation of the transactions
contemplated by the Transaction Documents will not result in
any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, either (i)
a default under any such provision, instrument, judgment,
order, writ, decree, Contract or agreement or (ii) an event
which results in the creation of any Encumbrance upon any
assets of the Corporation or the Subsidiary, as the case may
be, or the suspension, revocation, forfeiture, or non renewal
of any material permit or license applicable to the Corporation
or the Subsidiary, as the case may be, which would have a
Material Adverse Effect. To the Knowledge of the Vendors,
except as set forth in the Disclosure Schedule, no Consent is
required to be obtained by the Vendors or the Corporation, or
any of them, prior to the consummation of the transactions
contemplated hereby.
(I) AGREEMENTS; ACTIONS
(i) The Corporation has not (i) declared or paid any
dividends, or authorized or made any distribution upon
or with respect to any class or series of its Shares,
(ii) incurred any indebtedness for money borrowed
except as described in the Financial Statements and the
Disclosure Schedule, (iii) made any loans or advances
to any Person, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of
business.
(ii) The Corporation is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(J) MATERIAL CONTRACTS
(i) The Disclosure Schedule sets forth a list of all
Consulting Agreements to which the Corporation is a
party or by which the Corporation is bound. Each of the
Consulting Agreements referred to in the Disclosure
Schedule, is in full force and effect unamended, and
constitutes valid and legally binding obligations of
the parties thereto, enforceable in accordance with
their terms except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other Laws of general
application relating to or affecting the enforcement of
creditors' rights generally, (B) as limited by Laws
relating to the availability of specific performance,
injunctive relief or other equitable remedies; or (C)
as limited by the LIMITATIONS ACT, 2002 (Ontario). No
default by the Corporation or, to the Knowledge of the
Vendors, by any other Person, exists in respect thereof
and, to the Knowledge of the Vendors, no event,
occurrence, condition or act exists that, with the
giving of notice, the lapse of time or the happening of
any other event or condition, would become a material
default in respect thereof or give rise to a right of
termination, in each case on the part of any of the
parties thereto, and the Corporation is entitled to all
benefits thereunder;
(ii) The Disclosure Schedule sets forth a list of all
Distributorship Agreements to which the Corporation is
a party or by which the Corporation is bound. Each of
the Distributorship Agreements referred to in the
Disclosure Schedule is in full force and effect
unamended, and constitutes valid and legally binding
obligations of the parties thereto, enforceable in
accordance with their terms except (A) as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other Laws of
general application relating to or affecting the
enforcement of creditors' rights generally, (B) as
limited by Laws relating to the availability of
specific performance, injunctive relief or other
equitable remedies; or (C) as limited by the
LIMITATIONS ACT, 2002 (Ontario). No default by the
Corporation or, to the Knowledge of the Vendors, by any
other Person, exists in respect thereof and, to the
Knowledge of the Vendors, no event, occurrence,
condition or act exists that, with the giving of
notice, the lapse of time or the happening of any other
event or condition, would become a material default in
respect thereof or give rise to a right of termination,
in each case on the part of any of the parties thereto,
and the Corporation is entitled to all benefits
thereunder.
<PAGE>
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(iii) The Disclosure Schedule sets forth a list of all
Consignment Agreements to which the Corporation is a
party or by which the Corporation is bound. Each of the
Consignment Agreements referred to in the Disclosure
Schedule is in full force and effect unamended, and
constitutes valid and legally binding obligations of
the parties thereto, enforceable in accordance with
their terms except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other Laws of general
application relating to or affecting the enforcement of
creditors' rights generally, (B) as limited by Laws
relating to the availability of specific performance,
injunctive relief or other equitable remedies; or (C)
as limited by the LIMITATIONS ACT, 2002 (Ontario). No
default by the Corporation or, to the Knowledge of the
Vendors, by any other Person, exists in respect thereof
and, to the Knowledge of the Vendors, no event,
occurrence, condition or act exists that, with the
giving of notice, the lapse of time or the happening of
any other event or condition, would become a material
default in respect thereof or give rise to a right of
termination, in each case on the part of any of the
parties thereto, and the Corporation is entitled to all
benefits thereunder.
(iv) The Disclosure Schedule sets forth a list of all
Licensing Agreements to which the Corporation is a
party or by which the Corporation is bound. Each of the
Licensing Agreements referred to in the Disclosure
Schedule is in full force and effect unamended, and
constitutes valid and binding obligations of the
parties thereto, enforceable in accordance with their
terms except (A) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent
conveyance or other Laws of general application
relating to or affecting the enforcement of creditors'
rights generally, (B) as limited by Laws relating to
the availability of specific performance, injunctive
relief or other equitable remedies; or (C) as limited
by the LIMITATIONS ACT, 2002 (Ontario). No default by
the Corporation or, to the Knowledge of the Vendors, by
any other Person, exists in respect thereof and, to the
Knowledge of the Vendors, no event, occurrence,
condition or act exists that, with the giving of
notice, the lapse of time or the happening of any other
event or condition, would become a material default in
respect thereof or give rise to a right of termination,
in each case on the part of any of the parties thereto,
and the Corporation is entitled to all benefits
thereunder. Other than pursuant to the Licensing
Agreements, the Corporation is not a party to, or bound
by, any Contract that involve obligations (contingent
or otherwise) of, or payments by, the Corporation as
consideration for any license granted to or by the
Corporation.
(v) Except for the Transaction Documents, the Consulting
Agreements, the Distributorship Agreements, the
Consignment Agreements the Licensing Agreements and as
disclosed in the Disclosure Schedule, there are no
agreements, understandings, instruments, Contracts or
proposed transactions to which the Corporation is a
party or by which it is bound that involve (i)
obligations (contingent or otherwise) of, or payments
to, the Corporation in excess of $35,000 in any
calendar year, (ii) the license of any patent,
copyright, trade secret or other proprietary right to
or from the Corporation, (iii) the grant of rights to
develop, manufacture, produce, assemble, license,
market, or sell its products to any other person or
affect the Corporation's exclusive right to develop,
manufacture, produce, assemble, distribute, market or
sell its products, or (iv) indemnification by the
Corporation with respect to infringements of
proprietary rights (collectively, the "OTHER MATERIAL
CONTRACTS").
(vi) To the Knowledge of the Vendors, no party to a
Consulting Agreement, Distributorship Agreement,
Consignment Agreement, Licensing Agreement or Other
Material Contract with the Corporation has any
intention to change its relationship or any material
terms upon which it will conduct business with the
Corporation that would have a Material Adverse Effect.
There has been no material interruption to or material
discontinuation in any material arrangements or
material relationships reflected in the Consulting
Agreements, Distributorship Agreements, Consignment
Agreements, Licensing Agreements and Other Material
Contracts disclosed in the Disclosure Schedule.
<PAGE>
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(K) CONFLICTS OF INTEREST
(i) Other than (i) contracts of employment, (ii) the
Shareholders' Agreement, and (iii) the other Contracts
listed in the Disclosure Schedule, there are no
agreements or proposed transactions between the
Corporation and any of its shareholders, officers,
directors, or employees or any Affiliate thereof.
(ii) The Corporation is not indebted, directly or
indirectly, to any of its directors, officers or
employees or to their respective spouses or children or
to any Affiliate of any of the foregoing. None of the
Corporation's directors, officers or employees, or any
members of their immediate families, or any Affiliate
of the foregoing (i) are, directly or indirectly,
indebted to the Corporation or (ii) have any direct or
indirect ownership interest in any firm or corporation
with which the Corporation is affiliated or with which
the Corporation has a business relationship, or any
firm or corporation which competes with the
Corporation, except that directors, officers, employees
or shareholders may own stock in (but not exceeding two
percent of the outstanding capital stock of) publicly
traded companies that may compete with the Corporation.
Except as disclosed in the Disclosure Schedule (i) none
of the Corporation's shareholders, directors, officers
or employees or any members of their immediate families
or any Affiliate of any of the foregoing are, directly
or indirectly, interested in any Contract with the
Corporation; and (ii) none of the shareholders,
directors or officers of the Corporation or any members
of their immediate families, has any material
commercial, industrial, banking, consulting, legal,
accounting, charitable or familial relationship with
any of the Corporation's major business relationship
partners, service providers, joint venture partners,
licensees or competitors.
(L) RIGHTS OF REGISTRATION AND VOTING RIGHTS
Except as set forth in the Disclosure Schedule, the Corporation
is not under any obligation to register any of its currently
outstanding securities or any securities issuable upon exercise
or conversion of its currently outstanding securities.
(M) ABSENCE OF LIENS
The property and assets that the Corporation owns are free and
clear of all Encumbrances, except for statutory liens for the
payment of current taxes that are not yet delinquent and
Encumbrances that arise in the ordinary course of business and
do not materially impair the Corporation's ownership or use of
such property or assets and the other encumbrances, all of
which are listed in the Disclosure Schedule (collectively,
"PERMITTED ENCUMBRANCES"). All Encumbrances are disclosed in
the Disclosure Schedule. With respect to the property and
assets it leases, the Corporation is in compliance with such
leases and holds a valid leasehold interest, free of any
Encumbrances other than Permitted Encumbrances.
(N) CHANGES
Since August 31, 2004, to the Knowledge of the Vendors, there
has not been:
(i) any change in the assets, liabilities, financial
condition or operating results of the Corporation,
except changes in the ordinary course of business that
have not caused, in the aggregate, a Material Adverse
Effect;
(ii) any damage, destruction or loss, whether or not covered
by insurance, that would have a Material Adverse
Effect;
(iii) any waiver or compromise by the Corporation of a
valuable right or of a material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim, or
Encumbrance or payment of any obligation by the
Corporation, except in the ordinary course of business
and the satisfaction or discharge of which would not
have a Material Adverse Effect;
(v) any material change to a Contract or agreement by which
the Corporation or any of its assets is bound or
subject, other than changes which have not caused, in
the aggregate, a Material Adverse Effect;
(vi) except for the Employee Bonus Pool and as disclosed in
the Disclosure Schedule, any material change in any
compensation arrangement or agreement with any
employee, officer, director or securityholder;
(vii) any resignation or termination of employment of any
officer of the Corporation;
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(viii) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Corporation, with respect
to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that
arise in the ordinary course of business and do not
materially impair the Corporation's ownership or use of
such property or assets;
(ix) any loans or guarantees made by the Corporation to or
for the benefit of its employees, officers or
directors, or any members of their immediate families,
other than travel advances and other advances made in
the ordinary course of its business;
(x) any declaration, setting aside or payment or other
distribution in respect of any of the Shares or
Subsidiary Shares, or any direct or indirect
redemption, purchase, or other acquisition of any of
such Shares or Subsidiary Shares, as the case may be,
by the Corporation;
(xi) any sale, assignment or transfer of any Intellectual
Property Rights that could reasonably be expected to
result in a Material Adverse Effect; (xii) receipt of
notice that there has been a loss of, or material order
cancellation by, any major supplier, distributor,
consignor, licensor or licensee of the Corporation that
has resulted in a Material Adverse Effect;
(xiii) any other event or condition of any character, other
than events affecting the economy or the Corporation's
industry generally, that could reasonably be expected
to result in a Material Adverse Effect; or
(xiv) any arrangement or commitment by the Corporation to do
any of the things described in Section 1(n).
(O) EMPLOYEE MATTERS
(i) The Disclosure Schedule sets forth a complete and
accurate list of all employees, consultants and
independent contractors of the Corporation, their
respective positions, current salaries, bonus
entitlements, benefits and other remuneration, dates of
last salary increases, and dates of hire with the
Corporation, and whether or not contributions are made
for the employees under any Employee Plan and
indicating whether such employee is on short-term
disability or long-term disability, pregnancy or
parental leave, temporary lay-off or workers'
compensation. The Disclosure Schedule also indicates
which employees are parties to a written or oral
agreement of employment.
(ii) Except as disclosed in the Disclosure Schedule, there
is no consulting or contractual agreement or
arrangement with the Corporation which could be
construed as an employment relationship.
(iii) Except as disclosed in the Disclosure Schedule, the
Corporation is not a party to any agreements with past
or present employees, consultants or independent
contractors. The Corporation has no obligation to
re-instate any employees.
(iv) Each of the Corporation's employees, consultants and
independent contractors have signed and delivered to
the Corporation, and are bound by, the Corporation's
standard terms of employment, a copy of which is set
out in the Disclosure Schedule.
(v) To the best of the Vendors' knowledge, except as
disclosed, no facts have arisen which could result in
any employee claiming for short-term or long-term
disability benefits or employment injury benefits.
(vi) To the Vendors' knowledge, none of the Corporation's or
Subsidiary's employees is obligated under any Contract
(including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment,
decree or order of any court, tribunal or
administrative agency, that would materially interfere
with such employee's ability to promote the interests
of the Corporation or Subsidiary, or to work for the
Corporation or Subsidiary, as the case may be, or that
would conflict with the Business except such
interference or conflict that has not had a Material
Adverse Effect. Neither the execution nor delivery of
the Transaction Documents, nor the carrying on of the
Business by the employees of the Corporation or
Subsidiary, nor the conduct of the Business as now
conducted and as presently proposed to be conducted,
will, to the Vendors' knowledge, conflict with or
result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any
Contract, covenant or instrument under
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which any such employee is now obligated, other than
such violations that would not have a Material Adverse
Effect.
(vii) Neither the Corporation nor the Subsidiary is
delinquent in payments to any of its employees,
consultants or independent contractors for any wages,
salaries, commissions, bonuses or other direct
compensation for any service performed for it to the
date hereof or amounts required to be reimbursed to
such employees, consultants or independent contractors
and all such amounts have been properly accrued in the
books and records of the Corporation or Subsidiary, as
the case may be, and are properly reflected in the
Financial Statements. To the Knowledge of the Vendors,
the Corporation and Subsidiary have complied in all
material respects with all applicable equal employment
opportunity Laws, including the PAY EQUITY ACT (Quebec)
and with other Laws related to employment, including
those related to wages, hours, worker classification,
collective bargaining, employment injury and the
payment and withholding of taxes and other sums as
required by law, except where non compliance with any
applicable Law would not result in a Material Adverse
Effect. Each of the Corporation and Subsidiary has
withheld and paid to the appropriate Governmental or
Regulatory Authority, or is holding for payment not yet
due to such Governmental or Regulatory Authority, all
amounts required to be withheld from employees of the
Corporation or the Subsidiary, as the case may be, and
is not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any
of the foregoing.
(viii) To the Vendors' Knowledge, neither the Corporation
nor the Subsidiary have a present intention to
terminate the employment of any of Employee. The
employment of each employee of the Corporation and
Subsidiary is terminable upon notice, or severance in
lieu of notice, by the Corporation. Except as disclosed
in the Disclosure Schedule or required by Law, upon
termination of the employment of any such employees, no
severance or other payments will become due. Neither
the Corporation nor the Subsidiary has a policy,
practice, plan or program of paying severance pay or
any form of severance compensation in connection with
the termination of employment services. Neither the
Corporation nor the Subsidiary is indebted to any
employee for severance or other payments in connection
with the termination of employment services.
(ix) Neither the Corporation nor the Subsidiary has made any
representations regarding equity incentives to any
officer, employee, director or consultant, except as
set forth in the Option Plan.
(x) Except as described in the Disclosure Schedule, each
former employee whose employment was terminated by the
Corporation or Subsidiary has entered into an agreement
with the Corporation or Subsidiary, as the case may be,
providing for the full release of any claims against
the Corporation, the Subsidiary or any related party
arising out of such employment.
(xi) Neither the Corporation nor the Subsidiary is bound by
or subject to (and none of its assets or properties is
bound by or subject to) any express or implied
Contract, commitment or arrangement with any labour
union, and no labour union has, to the knowledge of the
Vendors, requested or sought to represent any of the
employees, representatives or agents of the Corporation
or the Subsidiary. There is no strike or other labour
dispute involving the Corporation or Subsidiary
pending, or to the Vendors' knowledge, threatened,
which could have a Material Adverse Effect, nor is the
Corporation or Subsidiary aware of any labour
organization activity involving its employees.
(xii) During the previous five years, the Corporation and
Subsidiary have not been, and, to the Vendors'
knowledge, none of its officers have been (a) subject
to voluntary or involuntary petition under bankruptcy
or insolvency Laws or the appointment of a receiver,
fiscal agent or similar officer by a court for its/his
business or property; (b) convicted in a criminal
proceeding or named as a subject of a pending criminal
proceeding (excluding traffic violations and other
minor offences); (c) subject to any order, judgment, or
decree (not subsequently reversed, suspended or
vacated) of any court of competent jurisdiction
permanently or temporarily enjoining it/him from
<PAGE>
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engaging, or otherwise imposing limits or conditions on
his engagement in any securities, investment advisory,
banking, insurance, or other type of business or acting
as an officer or director of a public corporation; or
(d) found by a court of competent jurisdiction in a
civil action or by any securities commission to have
violated any securities, commodities, or unfair trade
practices law, which such judgment or finding has not
been subsequently reversed, suspended or vacated.
(xiii) There are no outstanding, pending, or, to the
knowledge of the Vendors, threatened or anticipated
assessments, actions, causes of action, claims,
complaints, demands, orders, prosecutions or suits
against the Corporation or its directors, officers or
agents pursuant to or under any Contract, applicable
statutes, rules, regulations, orders or laws, including
Canada Pension Plan, employment insurance, Tax,
employer health tax, employment standards, labour
relations, occupational health and safety, human
rights, workers' compensation and pay equity laws.
(P) EMPLOYEE PLANS
(i) The Disclosure Schedule lists and accurately and
completely describes all Employee Plans to which the
Corporation or Subsidiary is party, bound by or in
respect of which either has any contingent or actual
liability. The Corporation has delivered to the
Purchaser true, correct and complete copies of all the
Employee Plans as amended as of the date hereof,
together with all related material documentation,
including plan texts, plan summaries, correspondence to
and from regulatory authorities, funding documents and
insurance Contracts.
(ii) To the Knowledge of the Vendors, all of the Employee
Plans are and have been established, registered,
qualified, funded, invested, contributed to and
administered in accordance with their terms and all
applicable laws, rules and regulations.
(iii) No Employee Plan, as listed in the Disclosure
Schedule, has been amended or improved and no
commitment to amend or improve any Employee Plan has
been made.
(iv) Except as disclosed in the Disclosure Schedule, no
Employee Plan provides benefits to employees on or
after retirement or termination of employment or to the
beneficiaries or dependants of such persons.
(v) No Employee Plan provides for a retroactive charge or
increase in premiums.
(vi) All benefits under all Employee Plans are either fully
insured or accrued and fully and accurately reflected
in the books and records of the Corporation or the
Subsidiary, as the case may be.
(vii) Except as disclosed in the Disclosure Schedule, no
Person other than current or former employees of the
Corporation or Subsidiary is entitled to participate in
any Employee Plan.
(Q) PENSION AND BENEFIT MATTERS
(i) The Corporation does not have, and never has had, a
Pension Plan or any commitment to implement a Pension
Plan.
(ii) All required contributions or premiums required to be
paid by the Corporation, directly or indirectly, on its
own behalf or on behalf of the Corporation's employees,
to the registered retirement savings plan established
by the Fonds regional de solidarite (FTQ) Outaouais
(the "FTQ PLAN") have been fully paid to the date
hereof in a timely fashion in accordance with the
applicable Pension Legislation and Pension Contracts.
No unfunded liability, solvency deficiency, unpaid
special payment or experience deficiency, whether due
or not, exists with respect to the FTQ Plan. As of the
date hereof, the Corporation has no obligation to pay
any contributions or premiums, whether directly or
indirectly, on its own behalf or on behalf of the
Corporation's employees, with respect to the FTQ Plan.
(R) TAXES
Except as disclosed in the Disclosure Schedule:
(i) Each of the Corporation and the Subsidiary has duly and
timely filed in proper form all Tax Returns required to
be filed by it due on or before the date hereof in all
applicable jurisdictions. No tax liability is owing
under each of the aforementioned outstanding Tax
Returns. All such Tax Returns are true, correct and
complete in all material respects, and do not, in any
material respect, understate the taxable income or
liability for Taxes of the
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Corporation and the Subsidiary, as the case may be,
for the periods covered by such returns. No Tax Return
has been amended.
(ii) The tax liability of the Corporation and the Subsidiary
for previous taxation periods ending before the date
hereof is as indicated in their respective Tax Returns.
All Taxes, including all assessments, reassessments,
governmental charges, penalties, interest and fines
assessed to be owing by the Corporation or the
Subsidiary and all instalments of Taxes required to
have been paid by the Corporation or the Subsidiary
have been paid. Reserves and provisions for Taxes
accrued but not yet due on or before the Closing Date
as reflected in the Financial Statements are adequate
as of the date of the Financial Statements, in
accordance with GAAP, in the case of the Corporation,
and U.S. GAAP, in the case of the Subsidiary. To the
Knowledge of the Vendors, no deficiencies for Taxes
have been proposed, asserted or assessed against the
Corporation or the Subsidiary that are not adequately
reserved against.
(iii) Except as disclosed in the Disclosure Schedule,
correct and complete copies of all Tax Returns,
including schedules thereto, filed by the Corporation
or the Subsidiary since and including the 2001 taxation
year, and all written communications relating thereto
have been provided to the Purchaser.
(iv) The Corporation and Subsidiary have properly withheld
and collected all Taxes required to be withheld and
collected by them and, if required, properly remitted
such Taxes on a timely basis and in the form required.
(v) The Tax Returns of the Corporation and the Subsidiary
have been assessed by the relevant Taxing Authority for
all fiscal periods up to and including the fiscal
period ending June 30, 2003.
(vi) There is no unresolved assessment, reassessment,
action, suit, proceeding, audit, investigation or claim
in progress, pending or, to the Knowledge of the
Vendors, threatened with respect to Taxes of the
Corporation or the Subsidiary and, in particular, to
the Knowledge of the Vendors, there are no currently
outstanding reassessment or written enquiries which
have been issued to, or raised in respect of, the
Corporation or the Subsidiary relating to any Taxes.
(vii) To the Knowledge of the Vendors, no claim has ever
been made by or is expected from any Taxing Authority
in a jurisdiction in which the Corporation or
Subsidiary does not file Tax Returns that the
Corporation or Subsidiary, as the case may be, is or
may be subject to taxation in that jurisdiction.
(viii) No election, consent for extension, nor any waiver
that extends any applicable statute of limitations
relating to the determination of a Tax liability of the
Corporation or Subsidiary has been filed or entered
into and is still effective.
(ix) There are no Encumbrances for Taxes (other than any
statutory trust for Taxes if such Taxes are not due and
payable) on the assets of the Corporation or the
Subsidiary.
(x) All withholdings and remittances for taxes have been
properly made as required to the date hereof.
(xi) Neither the Corporation nor the Subsidiary is a party
to, bound by, or has any obligation under, any tax
sharing agreement, tax indemnification agreement or
similar contract or arrangement.
(xii) There has never been a change of control of the
Corporation or the Subsidiary for the purposes of the
Tax Act.
(xiii) To the Knowledge of the Vendors, there has never been
a disagreement between the Corporation or the
Subsidiary and its respective auditors in which the
failure to agree would have a Material Adverse Effect.
(xiv) Neither the Corporation or the Subsidiary, nor any
corporation to which the Corporation or Subsidiary is
related (for the purposes of the Tax Act) is a
corporation whose principal business is (i) the lending
of money to persons with whom such corporation is
dealing at arm's length (for the purposes of the Tax
Act); (ii) the purchasing of debt obligations issued to
such persons; or (iii) a combination thereof.
<PAGE>
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(xv) The Corporation is a registrant for the purposes of the
ETA having registration number 881618367, and is not a
financial institution within the meaning of the ETA.
The Corporation has not made any elections under the
ETA.
(xvi) For the purposes of the Tax Act, the paid-up capital
of the Corporation's Common Shares is not less than
$17,972,702 and the paid-up capital of the
Corporation's Class A Shares is not less than US
$7,500,000.
(S) SRED CLAIMS
(i) As of the date hereof, the Corporation is a
Canadian-controlled private corporation within the
meaning of the Tax Act.
(ii) All federal and provincial scientific research and
experimental development investment tax credit ("SRED")
claims by the Corporation were prepared by, or on
behalf of, the Corporation.
(iii) The Corporation's sred claims are completely and
accurately disclosed in the Disclosure Schedule. No
sred investment tax credit claimed by the Corporation
has been refused by tax authorities. The description of
work provided in the sred claim is a reasonable and
accurate estimation of the actual work of the
Corporation.
(iv) No credits similar or comparable to sred claims have
been claimed by the Corporation in the United States or
any other jurisdiction.
(T) INSURANCE
The Disclosure Schedule provides a complete list of the
Corporation's insurance policies currently in effect. Such
insurance policies are in full force and effect and the
Corporation is not in default with respect to the payment of
any premium or compliance with any of the provisions contained
in any such insurance policy. To the Knowledge of the Vendors,
there are no circumstances under which the Corporation would be
required to or, in order to maintain its coverage, should give
any notice to the insurers under any such insurance policies
which has not been given. The Corporation has not received
notice from any of the insurers regarding cancellation of such
insurance policies. The Corporation has not failed to present
any claim under any such insurance policy in a due and timely
fashion. The Corporation has not received notice from any of
the insurers denying any claims.
(U) PERMITS
The Disclosure Schedule provides a complete list of all of the
Corporation's franchises, permits, licenses and any similar
authority necessary for the conduct of the Business, the lack
of which could reasonably be expected to have a Material
Adverse Effect. To the Knowledge of the Vendors, the
Corporation is not in default in any material respect under any
of such franchises, permits, licenses or other similar
authority.
(V) CORPORATE DOCUMENTS
The constating documents and by-laws of the Corporation and
Subsidiary are in the forms provided to the Purchaser. The copy
of the minute books of the Corporation and Subsidiary provided
to the Purchaser contains minutes of all meetings of directors
and securityholders and all actions by written consent without
a meeting by the directors and securityholders since the date
of incorporation and accurately reflects all actions by the
directors (and any committee of directors) and securityholders
with respect to all transactions referred to in such minutes.
(W) COMPLIANCE WITH LAW
The Corporation holds all material licenses, permits and
authorizations necessary for the lawful operation of the
Business pursuant to all Laws in respect of any part of the
Business. The Corporation is and, to the Knowledge of the
Vendors, has been conducting the Business in compliance in all
material respects with all Laws applicable to the Business,
other than such non-compliance as would not result in a
Material Adverse Effect. The Corporation is not in material
violation of any Laws concerning the Business (other than such
violations that have not resulted in a Material Adverse Effect)
and to the Knowledge of the Vendors, there is not nor has there
been any investigation, inquiry or proceeding by any
Governmental or Regulatory Authority in connection with any
such material violation.
(X) PRIVACY MATTERS
To the Knowledge of the Vendors, the Corporation has conducted
and is conducting the Business in material compliance with all
applicable privacy legislation, including AN ACT RESPECTING THE
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PROTECTION OF PERSONAL INFORMATION IN THE PRIVATE SECTOR
(Quebec), other than such non-compliance that have not resulted
in a Material Adverse Effect.
(Y) FINANCIAL STATEMENTS
True, correct and complete copies of the Financial Statements
are attached as Exhibit B to this Schedule D. Such Financial
Statements (a) are in accordance with the books and records of
the Corporation, (b) present fairly in all material respects
the financial condition of the Corporation and the results of
operations for the periods then ended, and (c) have been
prepared in accordance with GAAP.
(Z) ABSENCE OF UNDISCLOSED LIABILITIES
Except to the extent reflected or reserved against in the
Financial Statements (including the notes thereto) or incurred
subsequent to the date thereof and disclosed in the Disclosure
Schedule and except as incurred in the ordinary and normal
course of business, the Corporation does not have any
outstanding indebtedness or any material liabilities (whether
accrued, absolute, contingent or otherwise) nor any outstanding
material commitments or material obligations of any kind
whether or not such obligations or commitments are presently
considered liabilities of the Corporation under GAAP. At the
Time of Closing, the Debt shall not be greater than $250,000.
(AA) ACCOUNTS RECEIVABLE
The accounts receivable reflected on the Audited Balance Sheet
and all accounts receivable arising after June 30, 2004 which
have not been paid or otherwise settled or written off are bona
fide and other than those accounts receivable which are
doubtful accounts and in respect of which a reasonable
allowance, consistent with past practice, has been made, are,
to the Knowledge of the Vendors, collectible, and are not
contingent on the performance of any conditions precedent or
subject to any set-off, claim for refund or counterclaim, in
each case other than as reflected in the Financial Statements.
(BB) CAPITAL EXPENDITURES
The Corporation has not agreed or committed to one or more
capital expenditures exceeding, in the aggregate, $25,000 that
is not reflected in the Financial Statements.
(CC) BOOKS OF ACCOUNT
The books and records of the Corporation present fairly and
disclose the financial position of the Corporation as at the
relevant dates and all material financial transactions of the
Corporation have been accurately recorded, in all material
respects, in such books and records.
(DD) ABSENCE OF QUESTIONABLE PAYMENTS
To the Knowledge of the Vendors, none of the Corporation or any
director, officer, agent, employee or other Person acting on
behalf of the Corporation has used any corporate or other funds
for unlawful contributions, payments, gifts or entertainment,
or made any unlawful expenditures relating to political
activity to government officials or others or established or
maintained any unlawful or unrecorded funds in connection with
the Business. To the Knowledge of the Vendors, none of the
Corporation or any current director, officer, agent, employee
or other Person acting on behalf of the Corporation has
accepted or received any unlawful contributions, payments,
gifts or expenditures in connection with the Business.
(EE) AGREEMENTS RESTRICTING BUSINESS
Except as disclosed in the Disclosure Schedule, the Corporation
is not a party to any agreement or arrangement that restricts
the freedom of the Corporation to carry on the Business,
including any contract or agreement that contains covenants by
the Corporation not to compete in any line of business with any
other Person.
(FF) TITLE TO ASSETS
Except as disclosed in the Audited Balance Sheet or the
Disclosure Schedule, the Corporation has good and marketable
title to all of their assets, property and undertaking, real
and personal, including those reflected on the Audited Balance
Sheet or acquired since the date of the Audited Balance Sheet
(except as since transferred, sold or otherwise disposed of in
the ordinary and normal course of business), free and clear of
all Encumbrances other than Permitted Encumbrances.
(GG) LEASES OF PERSONAL PROPERTY
(i) The Disclosure Schedule sets forth a true and complete
list of all equipment or other personal property and
fixtures in the possession or custody of the
Corporation that, as of
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the date hereof, is leased or held under licence or
similar arrangement and a summary (including material
terms) of the leases, licenses, agreements or other
documentation relating thereto. Except as set forth in
the Disclosure Schedule, all interests held by the
Corporation under such leases, licenses, agreements or
other arrangements are free and clear of any and all
Encumbrances.
(ii) All leases entered into by the Corporation are in good
standing and in full force and effect without
amendment, and the Corporation is entitled to the
benefit of all such leases, licenses or similar
arrangements to which it is a party.
(iii) All amounts presently owing under the leases, licenses
or similar arrangements to which the Corporation is a
party, have been paid.
(iv) The Corporation has complied with all of its
obligations under the leases, licenses or similar
arrangements to which it is a party, and the
Corporation is not in default or breach or has received
a notice of default or breach of its obligations under
such leases or subleases.
(HH) LEASES OF REAL PROPERTY
(i) Other than the leases and subleases disclosed in the
Disclosure Schedule, the Corporation is not a party to
or bound by any lease, sublease, license or other
instrument relating to real property, and the
Corporation has not entered into any other instrument
relating to Real Property. All interests held by the
Corporation under such leases or subleases are free and
clear of any and all Encumbrances.
(ii) All leases or subleases entered into by the Corporation
are in good standing and in full force and effect
without amendment, and the Corporation is entitled to
the benefit of all such leases or subleases to which it
is a party.
(iii) All amounts of rent and other amounts presently owing
under the leases or subleases to which the Corporation
is a party, have been paid.
(iv) The Corporation has complied in all material respects
with all of its material obligations under the leases
or subleases to which it is a party, and the
Corporation is not in default or breach or has received
a notice of default or breach of its material
obligations under such leases or subleases.
(II) REAL PROPERTY
The Corporation does not own any Real Property and, except for
the leases disclosed in the Disclosure Schedule, the
Corporation does not own any interest in Real Property. To the
Knowledge of the Vendors, (i) there is no material violation by
the Corporation of any health, safety, zoning, subdivision or
building statute, ordinance or restriction, or any restrictive
covenant, affecting the Real Property; and (ii) no present use
of any Real Property constitutes a non-conforming use.
(JJ) ENVIRONMENTAL MATTERS
(i) To the Knowledge of the Vendors, the Business has been
and is being carried on and the respective processes
and undertakings of the Corporation have been and are
being conducted in compliance with all applicable
Environmental Laws and Environmental Orders. The
Vendors do not know, or have reasonable grounds to
know, of any fact that could give rise to a notice of
non-compliance with any Environmental Laws or
Environmental Orders.
(ii) The Corporation holds no Environmental Permits and none
are required for the operation of the Business as it is
presently being conducted and as it is anticipated it
will be conducted hereafter. All such Environmental
Permits are valid and in full force and effect and no
violations thereof have been experienced, noted or
recorded and no proceedings are pending or, to the
Knowledge of the Vendors, threatened to revoke or limit
any of the Environmental Permits.
(iii) The Vendors do not have knowledge of the Corporation
or any Predecessor having caused or permitted the
Release of any Hazardous Substances on or off-site from
the Real Property or any other place or places where
the Corporation conducts the Business and all Hazardous
Substances disposed of, treated or stored by the
Corporation or any Predecessors have been disposed of,
treated and stored in compliance with all Environmental
Laws.
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(iv) The Corporation has never been convicted of an offence
for non-compliance with any Environmental Law or been
fined or otherwise sentenced or settled any prosecution
in respect of any Environmental Law in connection with
the Business.
(v) The Corporation has maintained and continues to
maintain environmental records relating to the Business
in the manner and for the time periods required by
Environmental Laws. The Corporation has not conducted
any environmental audit of the Business.
(KK) BUSINESS OF THE CORPORATION
The only business of the Corporation is the Business. The
Assets and Properties of the Corporation are sufficient to
carry on the Business as presently conducted. All such physical
assets are in good operating condition and in a state of good
maintenance and repair free from defects and fit for the
purpose for which they are intended, except for usual wear and
tear.
(LL) COMPETITION ACT
The Corporation, together with its affiliates (as defined in
the COMPETITION ACT (Canada)), does not have assets in Canada
with an aggregate value that exceeds $50,000,000, nor does it
have gross revenues from sales in, from or into Canada with an
aggregate value that exceeds $50,000,000, as shown on the
Financial Statements of the Corporation and its affiliates that
were prepared in accordance with GAAP normally used by each of
them.
(MM) INVESTMENT CANADA
The Business neither constitutes a "cultural business" nor
involves the provision of "financial services" or
"transportation services", all within the meaning of the
Investment Canada Act. The value of the assets of the Business
for purposes of the Investment Canada Act is less than
$237,000,000.
(NN) PHOTO LIBRARY
The Corporation's image library consists of at least 326,938
Vector images, 249,051 Raster Images, 179,240 Photo-Objects and
95,942 Stock photos (collectively, the "PHOTO IMAGES"). The
Disclosure Schedule sets forth the ownership of the content of
such Photo Images.
(OO) QUARANTINED IMAGES
The Disclosure Schedule lists all Quarantined Images. Except
for paragraph (pp) hereof, notwithstanding any other provision
of this Agreement, none of the foregoing representations and
warranties shall apply to the Quarantined Images and the
Quarantined Images are specifically excluded from each and
every representation and warranty of the Vendors herein. Except
for paragraph (pp) hereof, the Vendors make no representation
or warranty, express or implied, relating to the Quarantined
Images.
(PP) COREL CONSENTS
The Disclosure Schedule sets forth the license agreements that
were not assigned to the Corporation pursuant to the Corel
Purchase Agreement because consents to such assignments were
not obtained. The products licensed under such license
agreements, if any, have been held in quarantine by the
Corporation from the time that such products were transferred
to the Corporation, and the Corporation has never published,
distributed, transmitted, licensed, sub-licensed to any third
party or otherwise used such products.
(QQ) DISCLOSURE
The Vendors have made available to the Purchaser all the
information reasonably available to the Corporation that the
Purchaser has requested for deciding whether to acquire the
Purchased Shares. No representation or warranty of the Vendor
contained in this Agreement, as qualified by the Disclosure
Schedule, and no certificate furnished or to be furnished to
the Purchaser at the Closing contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were
made. There is no fact about the Business which the Vendors
have not disclosed to the Purchaser or its counsel and of which
the Vendors are aware which has or could reasonably have a
Material Adverse Effect.
2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Each Vendor severally, and not jointly and severally, represents to the
Purchaser in respect of such Vendor (and no other Vendor) that the following
representations are true and complete as of the Closing Date, except as
otherwise indicated.
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(A) ORGANIZATION AND GOOD STANDING
Each Vendor (other than a Vendor that is an individual) is an
entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization.
(B) AUTHORIZATION
All corporate action required to be taken by each of the
Vendor's board of directors (other than a Vendor that is an
individual) in order to authorize the Vendor to enter into the
Transaction Documents and to transfer the Purchased Shares at
the Closing has been taken. All action on the part of the
officers of the Vendor necessary for the execution and delivery
of the Transaction Documents, the performance of all
obligations of the Corporation under the Transaction Documents
to be performed as of the Closing, and the transfer and
delivery of the Purchased Shares has been taken. The
Transaction Documents, when executed and delivered by the
Vendor, shall constitute valid and legally binding obligations
of the Vendor, enforceable against the Vendor in accordance
with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other Laws of general application relating to or
affecting the enforcement of creditors' rights generally, or
(ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable
remedies.
(C) CAPITALIZATION
(i) The authorized capital of the Corporation consists of
an unlimited number of Common Shares and an unlimited
number of Class A Shares, of which 21,231,906 Common
Shares and 5,898,000 Class A Shares are issued and
outstanding. All of the outstanding Shares have been
duly authorized, are fully paid and non-assessable and
were issued in compliance with (i) all applicable
securities laws, (ii) the articles, by-laws, constating
documents or any resolutions of any of the Vendors or
the Corporation or any amendments thereto or
restatements thereof, or (iii) the provisions of any
agreement, arrangement or understanding pursuant to
which any of the Vendors or the Corporation is a party
or by which any of them is bound. A corporate structure
chart of the Corporation is disclosed in the Disclosure
Schedule.
(ii) The authorized capital of the Subsidiary consists of
1,000 Subsidiary Shares, of which one Subsidiary Share
is issued and outstanding. The outstanding Subsidiary
Share has been duly authorized, is fully paid and
non-assessable and was issued in compliance with (i)
all applicable securities laws, (ii) the articles,
by-laws, constating documents or any resolutions of any
of the Vendors, the Corporation or the Subsidiary or
any amendments thereto or restatements thereof, or
(iii) the provisions of any agreement, arrangement or
understanding pursuant to which any of the Vendors, the
Corporation or the Subsidiary is a party or by which
any of them is bound. The Corporation is the registered
and beneficial owner of the outstanding Subsidiary
Share.
(iii) The registered and beneficial owners of all the issued
and outstanding Shares of the Corporation are disclosed
in the Disclosure Schedule.
(iv) Each Vendor has good and valid title to the Purchased
Shares listed opposite such Vendor's name in the
Disclosure Schedule, free and clear of all
Encumbrances. There is no contract, option or other
right of another binding upon or that at any time in
the future may become binding upon any of the Vendors
to sell, transfer, assign, pledge, charge, mortgage or
ain any other way dispose of or encumber any of the
Purchased Shares, any of the shares of the Corporation
other than pursuant to this Agreement. Other than the
Purchased Shares listed on of the Disclosure Schedule,
such Vendor has no other equity interests or rights to
acquire equity interests in the Company.
(D) NON-RESIDENT VENDOR
No Vendor is a Non-Resident Vendor.
(E) BROKERS AND FINDERS FEES
All negotiations relating to this Agreement have been carried
out by such Vendor directly without the intervention of any
Person who may be entitled to any brokerage fee or other
commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. To the
Knowledge of each of the Vendors, no brokerage fee or other
commission is payable by the Corporation in respect of the
execution of this Agreement or the consummation of the
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transactions contemplated hereby. Other than as set forth in
the Disclosure Schedule, no director, officer, shareholder,
employee, consultant or independent contractor of the
Corporation is entitled to, or has been paid, a fee, bonus or
charge whatsoever as consideration for the completion of the
transactions contemplated by this Agreement.
SCHEDULE F
CONDITIONS OF THE PURCHASER
(A) REPRESENTATIONS AND WARRANTIES
All representations and warranties of the Vendors made pursuant to this
Agreement shall be true and correct with the same force and effect as if made at
and as of the Time of Closing, and the Vendors shall have delivered to the
Purchaser at the Time of Closing a certificate dated the Closing Date to such
effect. The receipt of such certificate and the closing of the transaction of
purchase and sale provided for in this Agreement shall not be nor deemed to be a
waiver of the representations and warranties of the Vendors contained in this
Agreement, which representations and warranties shall continue in full force and
effect for the benefit of the Purchaser as provided in Article 4.
(B) PERFORMANCE OF OBLIGATIONS
The Vendors shall have performed or complied with, in all respects, all of
their obligations, covenants and agreements in this Agreement which are to be
performed or complied with by the Vendors at or prior to the Time of Closing,
and the Vendors shall have delivered to the Purchaser at the Time of Closing a
certificate dated the Closing Date to such effect.
(C) RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion of the
purchase and sale of the Purchased Shares and all actions and proceedings taken
on or prior to the Closing Date in connection with the performance by the
Vendors of their obligations, covenants and agreements under this Agreement
shall be
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satisfactory to the Purchaser and its counsel, acting reasonably, and
the Purchaser shall have received copies of all such documentation or other
evidence as it may reasonably request in order to establish the consummation of
the transactions contemplated hereby and the taking of all corporate proceedings
in connection therewith in compliance with these conditions, in form and
substance satisfactory to the Purchaser and its counsel, acting reasonably.
(D) VENDORS' CLOSING OPINION
The Purchaser shall have received an opinion dated as of the Closing Date
from counsel for the Vendors in such form and as to such matters as the
Purchaser or its counsel may reasonably request.
(E) APPROVALS AND CONSENTS
All Consents and Regulatory Approvals and all consents of third parties,
and compliance with any conditions thereof, required in connection with the
completion of any of the transactions contemplated by this Agreement, the
execution of this Agreement, the Closing or the performance of any of the terms
and conditions hereof shall have been obtained and complied with on or before
the Time of Closing.
(F) APPROVALS
The acquisition of all of the Purchased Shares pursuant to this Agreement
shall have been approved by the Corporation's board of directors and
shareholders.
(G) NO ACTION TO RESTRAIN
No action or proceeding shall be pending or threatened by any Governmental
or Regulatory Authority or any other Person (including a party hereto) to
restrain or prohibit the completion of the transactions contemplated by this
Agreement or to prevent or restrain the Corporation from carrying on the
Business as presently carried on.
(H) NO MATERIAL ADVERSE CHANGE
Except as has been specified in this Agreement, since the date of this
Agreement there shall not have been:
(i) any material adverse change in any of the assets, business, financial
condition, results of operation or prospects of the Corporation nor
shall any other event, condition or state of facts have occurred or
arisen that has, or threatens to have, a Material Adverse Effect of or
which might materially adversely effect the ability of the Corporation
to carry on the Business after the Closing substantially as such
business is being conducted upon the date hereof; or
(ii) any damage, destruction or loss, or other event, development or
condition of any character (whether or not covered by insurance) which
would have a Material Adverse Effect.
(I) DIRECTORS AND OFFICERS
Other than the President and Chief Executive Officer, all directors and
officers of the Corporation and the Subsidiary specified by the Purchaser shall
have resigned and shall have executed a form of release satisfactory to the
Purchaser and its counsel.
(J) OPTIONS AND WARRANTS
The Purchaser shall have received acknowledgements signed by each of the
Optionholders acknowledging that all options held by such Optionholder have been
terminated.
(K) TERMINATION OF CERTAIN AGREEMENTS
The Shareholders' Agreement, the Registration Rights Agreement and the
6286119 Consulting Agreement shall have been terminated.
(L) COREL MATTERS
Corel shall have delivered or cause to be delivered, in a form satisfactory
to the Purchaser, an acknowledgement and waiver of Corel's rights (i) under the
Corel Warrant, and (ii) to the co-branded studio site pursuant to the Corel
License Agreement.
(M) ENCUMBRANCES
The Vendors shall have delivered or cause to be delivered to the Purchaser
evidence satisfactory to the Purchaser of the release or termination of the
Encumbrances (other than Permitted Encumbrances) set forth in the Disclosure
Schedule.
(N) MINUTE BOOKS
The Vendors shall have delivered or cause to be delivered to the Purchaser
evidence satisfactory to the Purchaser of the correction of deficiencies
contained in the Corporation's minute book.
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SCHEDULE G
CONDITIONS OF THE VENDORS
(A) REPRESENTATIONS AND WARRANTIES
All representations and warranties that the Purchaser made pursuant to this
Agreement shall be true and correct with the same force and effect as if made at
and as of the Time of Closing, and the Purchaser shall have delivered to the
Vendor at the Time of Closing its certificate dated the Closing Date, duly
executed by a senior officer of the Purchaser acceptable to the Vendors, to such
effect. The receipt of such certificate and the Closing of the transaction of
purchase and sale provided for in this Agreement shall not be nor be deemed to
be a waiver of the representations and warranties of the Purchaser contained in
this Agreement, which representations and warranties shall continue in full
force and effect for the benefit of the Vendors as provided in Article 4.
(B) PERFORMANCE OF AGREEMENT
The Purchaser shall have performed or complied with, in all respects all of
its obligations, covenants and agreements in this Agreement which are to be
performed or complied with by the Purchaser at or prior to the Time of Closing
and shall have delivered to the Vendors at the time of Closing its certificate
dated the Closing Date, duly executed by a senior officer of the Purchaser
acceptable to the Vendors, to such effect.
(C) RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion of the
purchase and sale of the Purchased Shares and all actions and proceedings taken
on or prior to the Closing Date in connection with the performance by the
Purchaser of its obligations under this Agreement shall be satisfactory to the
Vendors and their counsel, acting reasonably, and the Vendors shall have
received copies of all such documentation or other evidence as they may
reasonably request in order to establish the consummation of the transactions
contemplated hereby and the taking of all corporate proceedings in connection
therewith in compliance with these conditions, in form and substance
satisfactory to the Vendors and their counsel, acting reasonably.