Barreau

The Law Society of du Haut-Canada

Upper Canada I

The Annotated
Share-Purchase Agreement
A. Paul Mahaffy, C.S.
Bennett Best Burn LLP

Jordan Dolgin
Dolgin Professional Corporation

David Street
Lerners LLP

April 16, 2013

(3rTIru
I I Continuing
Professional
Development
 Annotated Version

SHARE PURCHASE AGREEMENT

BETWEEN

[NAME OF PURCHASER CORPORATION]

and

[NAME OF VENDOR CORPORATION]

and

[NAME OF PRINCIPAL SHAREHOLDER OF VENDOR]

Prepared by A. Paul Mahaffy, Jordan E. Dolgin and David R. Street

(Based upon an annotated agreement originally prepared by A. Paul Mahaffy,

Frank Herbert and Paul D. Wickens, and subsequently revised by
A. Paul Mahaffy, Jordan E. Dolgin and David R. Street)
 TABLE OF CONTENTS

Article 1 INTERPRETATION 2

1.1 Definitions 2

1.2 Best Knowledge 8

1.3 Currency 8

1.4 Governing Law 8

1.5 Interpretation Not Affected by Headings 9

1.6 Number and Gender 9

1.7 Time of Essence 9

1.8 Severability 9

1.9 Accounting Terms 9

1.10 Calculation of Time Periods 10

1.11 Statutory Instruments 10

1.12 Incorporation of Schedules 10

Article 2 PURCHASE AND SALE 11

2.1 Purchased Shares 11

2.2 Purchase Price 11

2.3 Payment of Purchase Price 11

2.4 Final Determination of Purchase Price 13

2.5 Withholding Where Vendor is Non-Resident 15

Article 3 REPRESENTATIONS AND WARRANTIES 16

3.1 Representations and Warranties of the Vendor and the Shareholder 16

3.1 (1 ) Incorporation and Existence of the Corporation........................................................... 18

3.1(2) Incorporation and Existence of the Vendor 18

3.1(3) Corporate Power 18

3.1 (4) Qualification................................................................................................................. 19

3.1 (5) Subsidiaries 19

3.1 (6) Authorized and Issued Capital 19

3.1(7) Options 19

3.1 (8) Title to Purchased Shares 20

3.1 (9) Dividends and Distributions 20

3.1 (10) Corporate Records 20

3.1 (11) Validity of Agreement 20

3.1(12)No Violation 21

3.1 (13) Shareholders' Agreements 22

3.1(14) Private Issuer 22

3. 1(15)Regulatory and Contractual Consents 23

3. 1(16)Financial Statements 25

3. 1(17)Records 25

3.1(18)No Material Adverse Change 26

3.1(19)Absence of Undisclosed Liabilities 26

3.1 (20) Consents 26

3. 1(21) Compliance with Laws 27

3. 1(22) Conduct of Business in Ordinary Course 27

3. 1(23) Location of Tangible Personal Property 27

3. 1(24) Condition of Assets 27

3.1 (25) Title to Personal and Other Property 27

3.1 (26) Litigation 27

3. 1(27) Capital Expenditures 28

3.1 (28) Inventories 28

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 3. 1(29) Accounts Receivable 28

3. 1(30) Material Contracts 29

3.1(31)Insurance 30

3.1(32)Bank Accounts and Powers of Attorney 31

3.1(33)Brokers 31

3. 1(34) Competition Act 31

3. 1(35) Customers and Suppliers 31

3.1(36)Tax Matters 32

3.1(37)Real Properties and Leased Premises 34

3. 1(38) Environmental Matters 37

3. 1(39) Labour and Employee Matters 39

3.1 (40) Product Warranties 41

3.1 (41) Intellectual Property 41

3. 1(42) Privacy Matters 41

3.2 Representations and Warranties of the Purchaser 42

3.2(1) Incorporation and Existence 42

3.2(2) Validity of Agreement 42

3.2(3) No Violation 42

3.2(4) Competition Act 43

3.2(5) Investment Canada Act 43

3.2(6) Brokers 43

3.2(7) Consents 43

3.3 Survival of Covenants, Representations and Warranties of the Vendor and

Shareholder 43

3.4 Survival of Covenants, Representations and Warranties of the Purchaser 45

Article 4 COVENANTS 45

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 4.1 Conduct During Interim Period 45

4.1 (1) Conduct Business in the Ordinary Course 46

4.1 (2) Continue Insurance 46

4.1(3) Regulatory Consents 46

4.1(4) Contractual Consents 47

4.1(5) Preserve Goodwill 47

4.1 (6) Discharge Liabilities 47

4.1(7) Corporate Action 47

4.1 (8) Exclusive Dealing 47

4.2 Access to Information 48

4.3 Satisfaction of Closing Conditions 49

4.4 Delivery of Records 49

Article 5 CONDITIONS OF CLOSING 49

5.1 Conditions for the Benefit of the Purchaser 50

5.1(1) Representations, Warranties and Covenants 50

5.1(2) No Material Adverse Change 50

5.1(3) No Action to RestrainINo Adverse Law 51

5.1(4) Consents 51

5.1 (5) Deliveries 52

5.2 Waiver or Termination by the Purchaser 54

5.3 Conditions for the Benefit of the Vendor and Shareholder 55

5.3(1) Representations, Warranties and Covenants 55

5.4 Waiver or Termination by the Vendor and Shareholder 56

5.5 Conditions Precedent 56

5.5(1) No Legal Action 56

IV
 5.5(2) Investment Canada Act 56

5.5(3) Competition Act 57

5.6 Survival following Termination 57

Article 6 CLOSING ARRANGEMENTS 58

6.1 Place of Closing 58

6.2 Deliveries at the Closing 58

Article 7 INDEMNIFICATION 58

7.1 Indemnification by the Vendor and the Shareholder 59

7.2 Indemnification by the Purchaser 60

7.3 Notice of Claim 61

7.4 Procedure for Indemnification 61

7.4(1) Direct Claims 61

7.4(2) Third Party Claims 62

7.5 General Indemnification Rules 63

Article 8 GENERAL 66

8.1 Confidentiality 66

8.2 Notices 67

8.3 Public Announcements and Disclosure 68

8.4 Assignment by Purchaser 69

8.5 Best Efforts 69

8.6 Expenses 69

8.7 Further Assurances 70

8.8 Entire Agreement 70

8.9 Waiver, Amendment 71

8.10 Rights Cumulative 71

v
8.11 Counterparts 71

VI
 SHARE PURCHASE AGREEMENT

THIS AGREEMENT made as of the • day of., 20.,

BETWEEN:

[Name of purchaser corporation],

a • corporation
(the "Purchaser")

and

[Name of vendor corporation],

a • corporation
(the "Vendor")

and

[Name of principal shareholder of Vendor]

of the • of. in the Province of •
(the "Shareholder")

Annotation: Like many share purchase agreements, this Agreement does not include the
Corporation as a Party. It assumes that the Vendor is able, and in Section 4.1 requires the
Vendor, to cause the Corporation to perform certain covenants during the Interim Period.
There may be times, however, when the Corporation should be made a Party in order to
evidence its consent not only to the share transfers, but also to any covenants and other
agreements it may make with either the Vendor or the Purchaser to facilitate the Transactions,
especially if the Vendor doesn't control the Corporation. If the Transactions fail to close, the
Purchaser may then have recourse against both the Vendor and the Corporation.

Including the Shareholder ofthe Vendor as a Party is a matter ofnegotiation and depends to a
large extent upon whether the Purchaser insists that the Shareholder be jointly and severally
liable with the Vendor for some or all of the representations, covenants and indemnities
contained in the Agreement.

A person may be bound by only a few, selected provisions of the Agreement, such as the
confidentiality or exclusivity provisions, or have its liability restricted to only a few
representations. Another person may guarantee only certain financial obligations. However
restricted the role any person may play in the Transactions, such person should be made a
Party to the Agreement to ensure its cooperation in getting the Transactions closed.

It's preferable, especially when the Interim Period is expected to be lengthy, that each of the
parties to the other documents required for Closing sign the Agreement as a Party wherever
possible. This helps not only to determine early on the identity ofany other party who might be
substituted for an original Party at the last minute before Closing, but also increases the
likelihood that the other parties will produce the required documents bearing their respective
signatures on Closing.

Some substitute parties may not be known when the Agreement is executed. It is not unusual
for a Purchaser to insist on a right to assign its interest in the Agreement to a substitute party
in order to achieve the most tax-effective structure, and the tax planning may take
considerable time to complete. The substitute may be an existing member of the Purchaser's
corporate group, or a special purpose entity to be incorporated by the Purchaser for the
acquisition. It is also not unusualfor a Vendor to incorporate a new company to hold only the
assets and liabilities desired by the Purchaser and then proceed to sell the shares ofsuch new
company to the Purchaser after the assets and liabilities have been transferred and assumed.
Either way, the original Party should continue to be directly liable on, or at least guarantee,
the covenants and indemnities contained in the Agreement notwithstanding the Agreement's
subsequent assignment to, and assumption by, a substitute party.

A. The Vendor is the registered and beneficial owner of. issued and outstanding • shares and
• issued and outstanding • shares in the capital of the Corporation.

B. The Purchaser wishes to purchase, and the Vendor wishes to sell, • issued and outstanding
• shares and. issued and outstanding • shares in the capital of the Corporation on the terms and
conditions in this Agreement.

C. The Shareholder controls the Vendor.

The Parties agree as follows:

ARTICLE 1
INTERPRETATION

1.1 Definitions

In this Agreement and in the schedules, the following terms and expressions have the following
meanIngs:

(a) "Agreement" means this share purchase agreement and all instruments amending
it; "hereof', "hereto" and "hereunder" and similar expressions mean and refer to
this Agreement and not to any particular Article, Section, or other subdivision;
"Article", "Section" or other subdivisions of this Agreement followed by a
number means and refers to the specified Article, Section or other subdivision of
this Agreement;

(b) "assessment" shall include a reassessment or additional assessment and the term
"assessed" shall be interpreted in the same manner;

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 (c) "Audited Financial Statements" means the audited consolidated financial
statements of the Corporation for the fiscal year ended ., consisting of a balance
sheet, an income statement, a statement of changes in financial position and a
statement of retained earnings together with the accompanying notes and the
opinion of the Corporation's auditors thereon, a copy of which is attached as
Schedule 3.1(16);

Annotation: The financial statements included in this definition are those referred to in the
General Regulation made under the Business Corporations Act (Ontario) as the annual
financial statements to be delivered to shareholders under clause 154(1)(a) of that Act.
However, the Purchaser may be prepared to base its purchase decision on information
acquired through other sources and decide it doesn't need to review a full set of audited
annual financial statements for the Corporation's most recent fiscal year before signing the
Agreement, especially if it is the Corporation's normal practice to forego an annual audit.
While the Purchaser may agree to rely upon only unaudited annual financial statements
before signing, it may be less inclined to accept unaudited Closing Date Financial Statements
which are used to facilitate the determination ofany post-Closing adjustments made pursuant
to Section 2.4. This Agreement provides that both the Corporation's latest annual financial
statements and the Closing Date Financial Statements are to be audited.

(d) "Audited Statements Date" means the date of the balance sheet included in the
Audited Financial Statements;

(e) "Business" means the business carried on by the Corporation and the Subsidiaries
which primarily involves. and all operations related thereto;

(f) "Business Day" means any day other than a Saturday, a Sunday or a statutory
holiday in the Province of Ontario or any other day on which the principal
chartered banks located in the City of • are not open for business during normal
banking hours;

(g) "Claim" has the meaning ascribed in Section 7.3;

(h) "Closing" means the completion of the Transactions pursuant to this Agreement
at the Closing Time;

(i) "Closing Date" means. or such other date as the Parties may agree upon;

U) "Closing Date Financial Statements" means the balance sheet of the Corporation
at the Closing Time and the income statement for the • month period then ended
to be prepared in accordance with Section 2.4;

Annotation: Instead ofchoosing the Closing Date as the date ofthe final financial statements
upon which the various adjustments to the Purchase Price will be determined in accordance
with the provisions of section 2.4, the Parties and their accountants may prefer to use an
effective date which is more convenient or tax effective. They may choose a date which falls at
the end of the Corporation's standard billing cycle or coincides with its regular inventory
count, or a date by which beneficial ownership must be transferred for tax purposes. If such a

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date is chosen, a definition of "Effective Date" should be added to the Agreement, and the
"Closing Date Financial Statements" should be renamed "Effective Date Financial
Statements". If the Effective Date will precede the Closing Date by a considerable period of
time, the Purchaser may wish to impose upon the Vendor during this period the kinds of
controls imposed during the Interim Period. This period will become the Interim Period if the
Effective Date and the date ofthe Agreement are the same date, as is often the case.

(k) "Closing Time" means • in the City of. on the Closing Date or such other time
on the Closing Date as the Parties may agree upon as the time at which the
Closing shall take place;

(1) "Closing Time Year" means the taxation year of the Corporation or a Subsidiary
ending at the Closing Time;

(m) "Consent" means a license, permit, approval, consent, certificate, registration or

authorization (including, without limitation, those made or issued by a Regulatory
Authority, in respect of a Contract, or otherwise);

(n) "Contract" means any agreement, understanding, indenture, contract, lease, deed
of trust, license, option, instrument or other commitment, whether written of oral;

(0) "Corporation" means .;

(p) "Deposit" has the meaning ascribed in Section 2.3(1);

(q) "Employee Plans" has the meaning ascribed in Section 3.1(39)(a);

(r) "Encumbrances" means mortgages, charges, pledges, security interests, liens,

encumbrances, actions, claims, demands and equities of any nature whatsoever or
howsoever arising and any rights or privileges capable of becoming any of the
foregoing;

(s) "Environmental Consents" has the meaning ascribed in Section 3.1 (38)(a)(ii);

(t) "Environmental Laws" has the meaning ascribed in Section 3.1 (38)(a)(i);

(u) "GAAP" means the generally accepted accounting principles so described and
promulgated by the Canadian Institute of Chartered Accountants which are
applicable on the date on which any calculation is to be effective or at the date of
any financial statements referred to herein, as the case may be;

Annotation: As mentioned in the annotation dealing with Section 1.9, if the Parties agree that
international financial reporting standards or IFRS should be used instead of GAAP, this
definition should be replaced by the following: "IFRS" means the International Financial
Reporting Standards set by the International Accounting Standards Board which are

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applicable on the date on which any calculation is to be effective or at the date ofany financial
statements referred to herein, as the case may be".

(v) "Hazardous Substance" has the meaning ascribed in Section 3. 1(38)(a)(iii);

(w) "Indemnified Party" has the meaning ascribed in Section 7.3;

(x) "Indemnifying Party" has the meaning ascribed in Section 7.3;

(y) "Intellectual Property" has the meaning ascribed in Section 3.1 (41);

(z) "Interim Financial Statements" means the unaudited consolidated financial

statements of the Corporation for the • month period ended • consisting of a
balance sheet and an income statement, a copy of which is attached as Schedule
3.1(16);

Annotation: Depending on the length of time which has elapsed since the date of the
Corporation's most recent audited annualfinancial statements, the Purchaser may insist on at
least being given an unaudited interim balance sheet and income statement for such period
before signing the Agreement. As the Purchaser may be particularly concerned about the
accounts receivable, this Agreement provides a representation in Section 3.1(29) for accounts
receivable which specifically refers to the amounts recorded on the Interim Financial
Statements.

(aa) "Interim Period" means the period from and including the date of this Agreement
to and including the Closing Date;

(bb) "ITA" means the Income Tax Act (Canada);

(cc) "Law" or "Laws" means all requirements imposed by statutes, regulations, rules,
ordinances, by-laws, decrees, codes, policies, judgments, orders, rulings,
decisions, approvals, notices, permits, guidelines or directives of any Regulatory
Authority;

(dd) "Leased Premises" means the premises leased or subleased by the Corporation or
any Subsidiary under the Leases;

(ee) "Leases" means the leases, subleases, agreements to lease and tenancy agreements
under which the Corporation or any Subsidiary leases or subleases any real
property as lessee or sublessee, as listed in Schedule 3.1 (37)(c);

(ft) "Lessee" has the meaning ascribed in Section 3.1(37)(c);

(gg) "Net Worth" of the Corporation as determined from any balance sheet means the
amount by which the aggregate value of all of the assets of the Corporation as

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 shown on such balance sheet exceeds the aggregate value of all of the liabilities
relating to the Corporation as shown on such balance sheet;

Annotation: As also discussed in the annotation below for Section 2.4, the Parties may decide
to refer to changes in something other than the Corporation's "net worth" when determining
the adjustments. They may prefer to use changes in the Corporation's "working capital"
(often defined to be the Corporation's current assets minus current liabilities) or
"shareholders' equity" (often defined to be the Corporation's stated capital, retained earnings
or accumulated deficit, and contributed surplus) as indicated on the Closing Date Financial
Statements when compared with such items on the Audited Financial Statements. Or they may
prefer to use changes in the Corporation's "EBITDA" (often defined to be the Corporation's
earnings before interest, taxes, depreciation and amortization) for the period between the
Audited Statements Date and the Closing Date when compared with a prescribed threshold. If
one ofthese alternatives is chosen, then the applicable definition should be inserted in place of
the definition of "Net Worth".

(hh) "NI 45-106" means National Instrument 45-106 Prospectus and Registration
Exemptions adopted by the Ontario Securities Commission;

(ii) "Parties" means the Vendor, the Purchaser, the Shareholder and any other person
that may become a party to this Agreement and Party means anyone of them;

OJ) "Permitted Encumbrances" means:

(i) liens for Taxes, assessments and governmental charges due and being
contested in good faith and diligently by appropriate proceedings (and for
the payment of which adequate provision has been made);

(ii) servitudes, easements, restrictions, rights of parties in possession, zoning

restrictions, encroachments, reservations, rights-of-way and other similar
rights in real property or any interest therein, provided the same are not of
such nature as to materially adversely affect the validity of title to or the
value, marketability or use of the property subject thereto by the
Corporation or any Subsidiary;

(iii) liens for Taxes either not due and payable or due but for which notice of
assessment has not been given;

(iv) undetermined or inchoate liens, charges and privileges incidental to

current construction or current operations and Encumbrances claimed or
held by any Regulatory Authority that have not at the time been filed or
registered against the title to the asset or served upon the Corporation or
any Subsidiary pursuant to law or that relate to obligations not due or
delinquent;

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 (v) assignments of insurance provided to landlords (or their mortgagees)
pursuant to the terms of any Lease and liens or rights reserved in any
Lease for rent or for compliance with the terms of such Lease;

(vi) security given in the ordinary course of the Business to any Regulatory
Authority in connection with the operations of the Business, other than
security for borrowed money;

(vii) the reservations in any original grants from the Crown of any real property
or interest therein and statutory exceptions to title that do not materially
detract from the value of the real property concerned or materially impair
its use in the operation of the Business; and

(viii) the Encumbrances described in Schedule 1.10j);

(kk) "person" includes any individual, corporation, partnership, firm, joint venture,
syndicate, association, trust, government, governmental agency and any other
form of entity or organization;

(11) "Purchase Price" has the meaning ascribed in Section 2.2;

(mm) "Purchased Shares" means. issued and outstanding [class] shares in the capital
of the Corporation being sold by the Vendor and purchased by the Purchaser;

(nn) "Real Properties" means the real properties owned by the Corporation and the
Subsidiaries, which are described in Schedule 3.1 (37)(a);

( 00) "Records" means all technical, business and financial records relating to the
Business, including, without limitation, customer lists, operating data, files,
financial books, correspondence, credit information, research materials, contract
documents, title documents, leases, surveys, records of past sales, supplier lists,
employee documents, inventory data, accounts receivable data, financial
statements and any other similar records in any form whatsoever (including
written, printed, electronic or computer printout form);

(pp) "Regulatory Authority" means any government, regulatory or administrative

authority, agency, commission, utility or board (federal, provincial, municipal or
local, domestic or foreign) having jurisdiction in the relevant circumstances and
any person acting under the authority of any of the foregoing and any judicial,
administrative or arbitral court, authority, tribunal or commission having
jurisdiction in the relevant circumstances;

(qq) "Release" has the meaning ascribed in Section 3. 1(38)(a)(iv);

(rr) "Securities Act" means the Securities Act (Ontario);

(ss) "Subsidiaries" means e;

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 (tt) "Tax" and "Taxes" have the meaning ascribed in Section 3. 1(36)(a)(i);

(uu) "Tax Return" has the meaning ascribed in Section 3. 1(36)(a)(ii); and

(vv) "Transactions" means the purchase and sale of the Purchased Shares and all other
transactions contemplated by this Agreement.

1.2 Best Knowledge

Any reference herein to "the best knowledge" of the Vendor and/or the Shareholder will be
deemed to mean the actual knowledge of the • of the Vendor and/or the Shareholder, together
with the knowledge which they would have had if they had conducted a diligent inquiry into the
relevant subject matter.

Annotation: As stated in more detail in the introductory annotation to Article 3, this

Agreement does not include "best knowledge" qualifications to any of the representations set
out. However, if the Parties agree that some of the representations should be qualified by the
phrase "to the best knowledge ofthe Vendor and the Shareholder", this definition should then
be inserted. If some of the representations are to be qualified by the phrase "to the best
knowledge ofthe Purchaser", a similar definition relating to the Purchaser should be inserted.

While there may be little debate amongst the Parties that the best of their knowledge should
include their actual knowledge, there may be considerable debate over whether a Party should
be under a duty to diligently inquire into the matters involved. The Shareholder or any of the
other Parties may strongly object to this standard of diligence being imposed upon them in
connection with any representation they are expected to give if they are not actively involved in
the Business and if such standard would require them to make inquiries which would be
prohibitively time consuming and expensive in what may be a relatively short period allowed
before the Closing.

This definition provides for the insertion ofspecific officer titles, such as the president or the
chieffinancial officer, or the names of specific individuals, whose knowledge will be deemed
to be the knowledge ofthe corporate Party involved.

1.3 Currency

Unless otherwise indicated, all references to dollar amounts in this Agreement are expressed in
Canadian currency.

1.4 Governing Law

This Agreement shall be governed by and construed and interpreted in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein. The Parties hereby
irrevocably attorn to the non-exclusive jurisdiction of the courts of Ontario with respect to any
matter arising under or related to this Agreement.

Annotation: Although Ontario law is selected as governing this Agreement, this Section is
often debated. Far from being an innocuous boilerplate provision, the law chosen to govern

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the Transactions can have substantial cost significance to the Party whose own local law is not
chosen. Although the law chosen is often the law ofthe place where the Business is primarily
conducted, a Purchaser located in a foreign jurisdiction may want to use documents (and the
law firm) it has used in previous deals in its own home jurisdiction and with which it is
already comfortable. In addition to the Parties having to customize the Purchaser's documents
to reflect the specific laws applicable to various parts ofthe Business, the Vendor will be faced
with the cost ofretaining counsel in the Purchaser's home jurisdiction to assist with document
reviews and rendering of a legal opinion regarding the enforceability ofthe documents under
the laws ofthe Purchaser's homejurisdiction.

The choice offorum provision gives rise to the same cost issues, especially if the Purchaser's
forum is chosen as the exclusive (which may be of questionable enforceability) or non-
exclusive jurisdiction to handle disputes arising in connection with the Agreement. If any of
the Parties is or will be located outside of the chosen jurisdiction, it may be preferable to
appoint an agentfor service on behalfofsuch Party.

1.5 Interpretation Not Affected by Headings

The division of this Agreement into articles and sections and the insertion of headings are for
convenience of reference only and shall not affect the construction or interpretation of this
Agreement.

1.6 Number and Gender

In this Agreement, unless the context otherwise requires, any reference to gender shall include
both genders and words importing the singular number shall include the plural and vice-versa.

1.7 Time of Essence

Time shall be of the essence of every provision of this Agreement.

1.8 Severability

Each of the provisions contained in this Agreement is distinct and severable and a declaration of
invalidity or unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other provision.

1.9 Accounting Terms

All accounting terms not specifically defined in this Agreement shall be construed in accordance
withGAAP.

Annotation: The Parties may generally agree that all accounting terms used in the Agreement
and all financial statements for the Corporation, including the Closing Date Financial
Statements, should be interpreted or prepared in accordance with GAAP. However, they may
decide that certain deviations from or exceptions to GAAP may be appropriate for the
Transactions. They may set out in a separate schedule to the Agreement certain assets and
liabilities, or certain revenues and expenses, which deserve special treatment in the

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preparation of the Closing Date Financial Statements. Consequently, the provisions of
Sections 2.4(1) and 3.1(16)(a) in this Agreement will have to be amended to refer to any
exceptions. If the Parties agree that international financial reporting standards or IFRS
should be used instead of GAAP, this Section and the various references to GAAP in Section
3.1 will have to be amended accordingly and the definition ofGAAP replaced with a definition
ofIFRS.

1.10 Calculation of Time Periods

Where a time period is expressed to begin or end at, on or with a specified day, or to continue to
or until a specified day, the time period includes that day. Where a time period is expressed to
begin after or to be from a specified day, the time period does not include that day. Where
anything is to be done within a time period expressed after, from or before a specified day, the
time period does not include that day. If the last day of a time period is not a Business Day, the
time period shall end on the next Business Day.

1.11 Statutory Instruments

Unless otherwise specifically provided in this Agreement, any reference in this Agreement to any
Law shall be construed as a reference to such Law as amended or re-enacted from time to time or
as a reference to any successor thereto.

1.12 Incorporation of Schedules

The following are the schedules attached to and incorporated by reference into this Agreement:

Schedule 1.10j) Permitted Encumbrances

Schedule 2.3(2)
Schedule 2.3(4)A
Schedule 2.3(4)B
Schedule 3.1(4)
Schedule 3.1 (5)
Schedule 3.1 (15)
Schedule 3.1 (16)
Schedule 3.1 (16)
Schedule 3.1(19)
Schedule 3.1 (20)
Schedule 3.1 (26)
Schedule 3.1(30)
Schedule 3.1 (31 )
Schedule 3.1(32)
Schedule 3.1 (35)
Schedule 3.1 (36)
Schedule 3.1 (37)(a)
Schedule 3.1 (37)(b)
Schedule 3.1 (37)(c)
Form of Escrow Agreement
Form of Promissory Note
Form of Pledge Agreement
Jurisdictions in which Corporation Conducts Business
Subsidiaries, etc.
Regulatory and Contractual Consents
Audited Financial Statements
Interim Financial Statements
Undisclosed Liabilities
Consents
Litigation
Material Contracts
Insurance
Bank Accounts and Powers of Attorney
Customers and Suppliers
Taxes
Real Properties Owned
Real Properties Leased
Leases

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Schedule 3.1(38)
Schedule 3.1(39)
Schedule 3.1 (40)
Schedule 3.1(41)
Schedule 5.1 (5)(a)
Schedule 5.1 (5)(b)
Schedule 5.1 (5)(e)
Schedule 7.4(1)
Environmental Matters
Labour and Employee Matters
Product Warranties
Intellectual Property
Opinion of Counsel to Vendor, Shareholder and Corporation
Non-Competition Agreements
Release
Arbitration Rules

ARTICLE 2
PURCHASE AND SALE

2.1 Purchased Shares

On the terms and subject to the fulfilment of the conditions of this Agreement, the Vendor agrees
to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the
Vendor, at the Closing Time all of the Purchased Shares.

2.2 Purchase Price

The aggregate purchase price (the "Purchase Price") payable by the Purchaser to the Vendor for
the Purchased Shares shall be $-, subject to adjustment in accordance with Section 2.4.

2.3 Payment of Purchase Price

The Purchase Price shall be paid and satisfied, subject to adjustment in accordance with Section
2.4 and subject to any withholding permitted pursuant to Section 2.5, as follows:

(1) Concurrently with the execution of this Agreement, the Purchaser will pay to • in trust,
by certified cheque or bank draft or other means of immediately available funds, the sum of $.
(the "Deposit") as a deposit. The Deposit will be deposited in an interest-bearing account of a
Canadian chartered bank or trust company in the City of. in the name of. and will be dealt
with in accordance with the following provisions.

(a) If the Transactions are completed at the Closing Time, the Deposit plus all interest
earned thereon will be released from trust to the Vendor and applied toward
satisfaction of the Purchase Price.

(b) If the Transactions are not completed for any reason at the Closing Time, other
than the failure of the Purchaser to satisfy its obligations (which have not been
waived in writing) set out in Section 4.3, the Deposit plus all interest earned
thereon will be released from trust and returned to the Purchaser.

(c) If the Transactions are not completed at the Closing Time due to the failure of the
Purchaser to satisfy its obligations (which have not been waived in writing) set
out in Section 4.3, then the Deposit plus all interest thereon will be released from
trust and forfeited and paid to the Vendor.

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 (d) The release from trust and payment of the Deposit to either Party in accordance
with this Section 2.3(1) shall not prejudice the enforcement of any rights either
Party may otherwise have under this Agreement.

(2) At the Closing Time, the Purchaser will pay to -, in trust, by certified cheque, bank draft
or other means of immediately available funds, the sum of $-, to be held on the terms and
subject to the conditions of an escrow agreement in the form of the draft agreement attached as
Schedule 2.3(2).

(3) At the Closing Time, the Purchaser will pay to the Vendor, by certified cheque, bank
draft or other means of immediately available funds, $•.

(4) The balance of the Purchase Price will be paid in two equal instalments due on - and -
respectively, which obligation shall be evidenced by delivery at the Closing Time of a
promissory note of the Purchaser in favour of the Vendor in the form set out in Schedule
2.3(4)A, payment of which note shall be secured by the execution and delivery at the Closing
Time of a pledge agreement in respect of the Purchased Shares in the form of the agreement
annexed as Schedule 2.3(4)B.

Annotation: Whether the Purchase Price is to be paid in one lump sum or in a number of
instalments, whether security for the unpaid instalments is to be given, whether the Purchase
Price is to be allocated amongst various Vendors if there are multiple Vendors, or whether
payment ofthe instalments is conditional upon a certain level ofpost-Closing earnings ofthe
Business, all need to be set out if applicable to the Transactions. This Agreement provides for
a deposit to be paid on signing which is to be held in an interest-bearing bank account, usually
in the name of the Vendor's lawyer. It also provides for the payment on Closing of one
amount to an escrow agent, to be held pursuant to a separate escrow agreement entered into
between the Parties and the escrow agent, and for the payment on Closing ofanother amount
to the Vendor. It also provides for payment ofthe balance to be made in two later instalments
under a promissory note which is secured by a pledge ofthe Purchased Shares.

The requirementfor a deposit is often the subject ofmuch debate and is related to Section 8.6
dealing with the responsibility for expenses incurred by the Parties in proceeding to close the
Transactions. The process for buying and selling a business generally involves considerable
time and professional fees being spent by the Parties during the due diligence and document
preparation stages without any assurance that the deal will actually close. While Section 8.6
states that each Party will be responsible for its own fees and expenses, the Parties incur not
only out-of-pocket expenses but, more significantly, an "opportunity cost" of pursuing the
Transactions instead of using their resources to best carry on the day-to-day Business or to
pursue alternative business opportunities which could prove to be even more financially
beneficial.

Therefore, in negotiating the Agreement if the subject has not already been addressed in an
earlier letter of intent, each Party often explores the possibility of recovering its investment
from the other Party should that other Party prevent the Transactions from closing. Although
there are a number ofpossible mechanisms to enable a Party to recover its investment from
the other, this Agreement provides only for a fixed sum deposit to be provided by the

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Purchaser to the Vendor, which is either to be applied on Closing to the Purchase Price
owing, or to be forfeited by the Purchaser should the Purchaser fail to close.

Depending on the respective bargaining power ofthe Parties, the Purchaser might be required
to pay the Vendor's professional fees and other expenses incurred in respect of the
Transactions, up to a prescribed amount, in the event the Purchaser fails to close.
Alternatively, the Vendor might be required to pay the Purchaser's fees and expenses, again
up to a stated maximum amount, should the Vendor fail to close. These obligations of one
Party to pay the fees and expenses incurred by the other are sometimes called "break fees".
The Party entitled to be reimbursed runs the risk ofbeing unable to collectfrom the other.

While the placing in escrow of a certain portion ofthe Purchase Price may be requested by a
Purchaser to provide a dedicated fund against which Claims for indemnification may
generally be made, some of the Purchase Price might also be placed in escrow to be used to
satisfy a liability which is not quantifiable at the Closing Date, such as the amount needed to
effectively remediate a polluted Real Property or the amount to be remitted to the Canada
Revenue Agency in the absence of a certificate issued under section 116 of the ITA. As an
alternative to placing funds in escrow, the Agreement may provide the Purchaser with a right
to set-offany Claims for indemnification against any amounts due under the promissory note.

As an alternative to, or in addition to, securing payment of the promissory note with a pledge
of the Purchased Shares from the Purchaser, the Vendor may request a guarantee from the
controlling shareholder of the Purchaser (which might in turn be secured by a general
security agreement covering that shareholder's assets) or a letter of credit from a financial
institution. If a bank is providing purchase financing, a pledge of the Purchased Shares in
favour ofthe Vendor to secure the promissory note may not be possible, and the Vendor will in
all likelihood not only have to subordinate its security position to the security taken by the
bank but also postpone its rights to payment under the promissory note if the Purchaser goes
into default with the bank. Furthermore, a pledge of the Purchased Shares may prove to be
inadequate security if and when the Purchaser defaults under the promissory note, given that
the Purchased Shares at that time may have considerably less value than at Closing and the
Vendor may step back into the role of running the Business which has deteriorated
significantly.

2.4 Final Determination of Purchase Price

(1) Within 90 days following the Closing Date, the Closing Date Financial Statements
prepared in accordance with GAAP applied on a basis consistent with the preparation of the
Audited Financial Statements shall be delivered by the Vendor to the Purchaser together with a
favourable report thereon by the Vendor's auditors. The Purchaser shall provide access, upon
every reasonable request, to the Vendor and its auditors, to all working papers and accounting
books and records relating to the Business and the appropriate personnel to verify the accuracy,
presentation and other matters relating to the preparation of the Closing Date Financial
Statements and the Vendor and the Purchaser shall otherwise fully cooperate with each other in
the preparation of the Closing Date Financial Statements. The Vendor and the Purchaser shall

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each bear the fees and expenses of their respective auditors in preparing or reviewing the Closing
Date Financial Statements.

(2) The Purchaser shall be entitled to review the preparation of the Closing Date Financial
Statements and the Purchaser's auditors shall be entitled to have access to and to receive copies
of the working papers for the Closing Date Financial Statements prior to their issue. The Closing
Date Financial Statements shall be final and binding upon the Parties, absent manifest error,
unless the Purchaser notifies the Vendor in writing that it disputes any amounts shown therein
within 10 Business Days after receipt by the Purchaser of the Closing Date Financial Statements.

(3) If the Purchaser disputes any amount shown in the Closing Date Financial Statements, the
Parties will work expeditiously and in good faith in an attempt to resolve such disputes within a
further period of 20 Business Days after the date of notification by the Purchaser to the Vendor
of such disputes, failing resolution of which such disputes shall be submitted for determination to
an independent national firm of chartered accountants mutually agreed to by the Vendor and the
Purchaser (and, failing such agreement between the Vendor and the Purchaser within a further
period of 5 Business Days, such independent national firm of chartered accountants shall be
selected by two such national firms, one nominated by each of the Vendor and the Purchaser).
The determination of such third firm of chartered accountants shall be final and binding upon the
Parties and not subject to appeal. The third firm of chartered accountants shall be deemed to be
acting as experts and not as arbitrators. The costs and expenses of such third firm of chartered
accountants shall be borne equally by the Vendor and the Purchaser. The Vendor and the
Purchaser shall each bear their own costs in presenting their cases to such third firm of chartered
accountants.

(4) Within 2 Business Days following the later of (a) the 10 Business Day period referred to
in Section 2.4(2) or (b) the resolution of any dispute in accordance with Section 2.4(3), the
Purchaser shall pay to the Vendor by bank draft, certified cheque or other means of immediately
available funds, the amount by which the Net Worth, as determined from the balance sheet
forming part of the Closing Date Financial Statements, exceeds the Net Worth as determined
from the balance sheet forming part of the Interim Financial Statements and the Vendor shall pay
to the Purchaser, by certified cheque, bank draft or other means of immediately available funds,
the amount of such difference, if negative.

Annotation: As mentioned in the annotation dealing with Section 1.1 (gg), the Parties may
decide to adjust the Purchase Price based upon any differences between the Net Worth ofthe
Corporation recorded on the Audited Financial Statements and the Net Worth recorded on the
Closing Date Financial Statements. If the Net Worth goes up, the Purchaser pays the amount
ofthe increase to the Vendor, and ifthe Net Worth goes down, the Vendor pays the amount of
the decrease to the Purchaser. Depending upon the size of the adjustment expected and the
time limits set for its calculation and payment, the Parties may agree that interest accruing
from the Closing Date should also be payable on any adjustment amount.

Responsibility for the preparation of the Closing Date Financial Statements is often debated.
This Agreement places on the Vendor the obligation and expense of producing them. The
Purchaser and its auditors have the right to review what the Vendor and its auditors produce.
Sometimes, the Purchaser may insist that its auditors perform the audit, with the costs being

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included as a downward adjustment to the Purchase Price.

Instead of adjustments to the Purchase Price being paid by draft or cheque, they might be
satisfied by using a portion of the escrow amount, or by adjusting the amounts of the
promissory note deliveredfor the remaining instalments.

Depending on the chosen performance measure and instead of adjusting the Purchase Price
by reference to the balance sheet in the Closing Date Financial Statements, reference may be
made to the income statement in the Closing Date Financial Statements by using EBITA,
revenue or gross margin.

Should the Parties agree to adjust the Purchase Price by reference to the Corporation's
income statements for one or more fiscal periods following the Closing Time Year, they are
agreeing to what is often called an "earnout". Earnout provisions typically operate over a
three to five year period after the Closing, and provide that the Purchase Price initially agreed
upon will be increased, depending upon the future success of the Corporation. They can be
structured in a number of different ways. The earnout payment, for example, can be a
percentage of the amount by which the earnings of the Business for a year exceed the
earnings for a base year, such as the Closing Time Year. Alternatively, it can be designed to
recognize only the growth in earnings in excess of a benchmark earnings amount that
increases yearly during the earnout period. Finally, it can be based on the cumulative
earnings ofthe Business for the entire earnoutperiod.

In contrast to using an earnout which increases the initial Purchase Price set, the Parties may
instead use a "reverse earnout" which decreases the initial Purchase Price if the Business
fails to achieve certain performance conditions. In these circumstances, the Purchaser
ordinarily attempts to defer making full payment of the Purchase Price until the reverse
earnout performance conditions have been satisfied. If they are not, the amount of the
Purchase Price which remains outstanding is reduced. Ifthe Purchaser has paid the Purchase
Price in cash on Closing, the Purchaser would then be entitled to receive an adjusting
paymentfrom the Vendor.

The Purchaser is much more likely to prefer an earnout over a reverse earnout, since initially
paying what the Purchaser considers to be a high price subject to a contingent reduction is
less attractive than paying a low price subject to a contingent increase. The Vendor, on the
other hand, usually prefers a reverse earnout. The form of the earnout and the percentage it
represents of the total Purchase Price will be influenced not only by the relative bargaining
power of the Parties when negotiating the Agreement but also by the extent to which the
Vendor will continue to be involved in the Business and have some control over its earnings
after the Closing.

While amounts paid under an earnout can be fully taxed as amounts "dependent on the use of
or production from property" under paragraph 12(1)(g) of the ITA, the Canada Revenue
Agency permits use of the cost recovery method to treat such amounts as capital gains
pursuant to IT-426R. If the Vendor is a Canadian resident and the earnout doesn't last longer
than 5 years, the Vendor can reduce its adjusted cost base of the Purchased Shares when the

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amounts payable under the earnout are determinable, and once its cost base is reduced to zero,
any amounts subsequently determinable are then treated as capital gains.

2.5 Withholding Where Vendor is Non-Resident

If the Vendor is a non-resident of Canada and fails to deliver to the Purchaser at or before the
Closing Time a certificate issued pursuant to Section 116 of the ITA in respect of the sale of the
Purchased Shares containing a certificate limit for the Vendor at least equal to the Purchase
Price, the Purchaser shall be entitled to withhold from the cash portion of the Purchase Price
payable at the Closing Time the amount required to be withheld pursuant to Section 116 of the
ITA.

Annotation: The withholding obligations under section 116 of the ITA apply when a Vendor
who is not a resident of Canada disposes oftaxable Canadian property. While the definition of
taxable Canadian property in section 248(1) of the ITA previously included a share of the
capital stock ofa corporation that is not listed on a prescribed stock exchange, such a share is
now excluded from the definition unless at any time during the 60 month period which ends
on the sale of the share more than 50% of the value of the share was derived directly or
indirectly from one or more of (i) real property situated in Canada, (ii) Canadian resource
property, or (iii) timber resource property. If the Purchased Shares are not taxable Canadian
property under the amended definition, the notification requirements, tax liability and filing
obligations imposed under section 116 will not apply.

However, if the Purchased Shares fall within the amended definition, the failure of the
Vendor to obtain a section 116 clearance certificate for Closing has certain implications for
the Purchaser. In the absence ofa section 116 clearance certificate, the Purchaser is liable to
pay to the Canada Revenue Agency under subsections 116(5) and (5.1) of the ITA, on behalf
of the Vendor, tax equal to 25 percent (subject to tax treaties) of the Purchaser's cost of the
Purchased Shares within 30 days after the month in which the Closing takes place. However,
these subsections don't impose liability on the Purchaser if the Purchaser, after making
reasonable inquiries, has no reason to believe that the Vendor is not resident in Canada. This
due diligence standard is usually satisfied by requiring the Vendor to provide a representation
that the Vendor is not a non-resident (and a representation to this effect is given in Section
3.1(36)(i) ofthis Agreement).

If the Vendor is a non-resident, and given the significant tax consequences to the Purchaser,
the Purchaser will generally withhold on Closing sufficient funds from the Purchase Price in
the absence of a section 116 certificate to ensure that the Purchaser can remit the requisite
amount of withholding to the Canada Revenue Agency. Even though the Parties may agree
upon an earnout or other arrangement for the payment of the Purchase Price in instalments,
it may be necessary to provide that the portion ofthe Purchase Price to be paid at the Closing
Time is at least equal to the amount which is required to be withheld and remitted.

If the Purchased Shares fall within the amended definition but the Vendor resides in a
jurisdiction that has a tax treaty with Canada and the Vendor's sale ofthe Purchased Shares
is not subject to Canadian tax by reason of that treaty, no section 116 certificate will be
required ofthe Vendor.

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 ARTICLE 3
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Vendor and the Shareholder

Annotation: The Vendor's representations and warranties are the Vendor's and the
Shareholder's description of the Corporation, the Vendor and the Business. The technical
distinction between representations and warranties - representations are statements ofpast or
existing facts while warranties are promises that existing or future facts are or will be true - is
no longer relevant in modern practice. For simplicity these annotations use the term
representations.

The Vendor's representations serve several purposes. First, they provide the Purchaser with
disclosure about the Corporation and the Business. The representations, and the exceptions to
them disclosed in the representations themselves or in schedules to the Agreement, should
provide the Purchaser with detailed information about the Corporation and the Business
which will be relevant to the Purchaser's willingness to complete the Transactions and the
price which it is prepared to pay. Second, they may provide a means of escape from the
Transactions if the Agreement provides, as does this Agreement in Section 5.1(1), that the
obligation of the Purchaser to complete the Transactions is subject to the condition that the
representations are true and accurate at the Closing Time. Third, the effect ofa representation
is to allocate some or all of the risk in relation to a particular matter or liability between the
Vendor and the Purchaser. A Purchaser which discovers a breach of a representation after
Closing may have a right to indemnification under Article 7.

The extent ofthe Vendor's representations will depend upon the relative bargaining strengths
of the Parties. In an auction, where two or more potential Purchasers are competing, the
balance ofpower may shift to the Vendor. If the Vendor is motivated by the desire to sell a
money-losing or non-core business, and the Purchaser is aware of that motivation, the
Purchaser may have the power to insist on more extensive representations.

In some transactions the identity of the Purchaser will affect the scope of the Vendor's
representations. If the Purchaser is familiar with the Business (because, for example, it is or
was a member of management or is a direct competitor ofthe Business and is knowledgeable
about it), the Purchaser may be willing to accept fewer or more heavily qualified
representations.

Representations can be qualified by (i) disclosing exceptions to them; (ii) limiting them to the
knowledge ofthe Vendor; or (iii) limiting them by reference to materiality.

The Vendor can qualify a representation by disclosing exceptions to it in schedules to the

Agreement or in the text ofthe representation itself. Where disclosure is in the schedules, the
Purchaser must review the schedules carefully before signing. Schedules must be reviewed by
appropriate persons. For example, schedules with technical disclosure should be reviewed by
the Purchaser's technical expert, and schedules with financial disclosure should be reviewed
by the Purchaser's financial and accounting experts. From the Purchaser's perspective, the
disclosure in schedules should be specific rather than general or vague. A Vendor with

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relatively strong bargaining power may negotiate the right to update various disclosure
schedules during the Interim Period and thereby allocate the risk of any Interim Period
exposure to the Purchaser.

The Purchaser will also want the Agreement to expressly provide that the Vendor's
representations are not qualified or affected by the Purchaser's due diligence. That is, even if
the Purchaser discovers facts in its due diligence that if true would mean that a representation
is incorrect, the Vendor will not escape liability, subject of course to the applicable limitation
periods. This Agreement includes language in the introductory paragraph ofSection 3.3 and
in Section 4.2 to so protect the Purchaser. The Vendor may try to negotiate the removal of
these provisions on the basis that it would be unfair to withholdfrom it knowledge ofa breach
of representation with a view to making a Claim following Closing. This issue is further
discussed in the annotations following Section 7.5.

As noted in the annotation to Section 1.2, the Vendor may qualify a representation by limiting
it to facts of which it is aware. Knowledge qualifications have the effect of limiting the
Vendor's risk and shifting to the Purchaser the burden ofproving that the Vendor knew ofthe
breach of representation. Generally, the Purchaser should accept knowledge qualifications
only in limited circumstances and in respect ofcertain types ofrepresentations. It might accept
a knowledge qualification for matters which are, arguably, beyond the knowledge of the
Vendor's management, such as threatened litigation (Section 3.1(26)). The Purchaser may
properly resist knowledge qualifiers with respect to representations on matters where the
Vendor or its counselor other advisors are in a position to confirm the truth of the
representations. Further, the Purchaser may, even where the Vendor can reasonably argue
that it does not know or cannot discover the facts, take the position that, as between the
Vendor and the Purchaser, the risks relating to unknown matters should be borne by the
Vendor.

The third way to qualify a representation is to make it subject to a materiality threshold. For
example, the representation in Section 3.1(17) (Records) states that the Records "contain full
and accurate records of all material matters relating to the Business." Although the
Agreement does not do so, the Parties may attempt to provide more certainty by defining
materiality by reference to a monetary test. For example, a "material" Contract might be a
Contract which provides for the supply in any twelve month period ofgoods or services having
a value of $100,000. While a definition of material with reference to a specific monetary
amount is more objective, the Agreement requires careful drafting to ensure that the
representation is meaningful. Consider the case where the Business has many small and few
large customers. The Business could be in breach of many of its Contracts, but none of them
would individually be considered material because none of them has a value greater than
$100,000. The representation should therefore, from the Purchaser's point ofview, be drafted
broadly enough to capture breaches ofContracts which would be, in the aggregate, material to
the Business. In some cases the indemnification provisions of a purchase agreement provide
that the Purchaser's right to indemnity for breaches of representations will only arise if
damages exceed a specified threshold, or "floor", level. See in this regard Section 7.5(2). In
other words, until the Vendor's liability for breaches of representations exceeds a specified
monetary amount, the Vendor will not be liable to indemnify the Purchaser for these
liabilities. Where such a threshold applies to the indemnity, it may be inappropriate to include

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materiality qualifications in the representations. Materiality qualifications combined with a
"floor" for indemnities will permit the maker of the representation to avoid liability for non-
material breaches even though such breaches in the aggregate exceed the "floor" amount. For
further discussion ofthis topic, see the annotation to Section 7.5(2).

The Vendor and the Shareholder hereby jointly and severally make the following representations
and warranties to the Purchaser and acknowledge that the Purchaser is relying on such
representations and warranties in entering into this Agreement and completing the Transactions:

(1 ) Incorporation and Existence of the Corporation The Corporation is a corporation

incorporated and existing under the laws of •.

(2) Incorporation and Existence of the Vendor The Vendor is a corporation incorporated and
existing under the laws of •.

(3) Corporate Power The Corporation and each Subsidiary has the corporate power and
authority to own or lease its property and to carry on the Business as now being conducted by it.

Annotation: This representation is limited to corporate power and authority, meaning that
the applicable corporations have the power and authority under the applicable corporation
acts, and their respective articles and by-laws, to carry on the Business. It does not extend to
laws generally, which are covered by other representations.

(4) Oualification The Corporation and each Subsidiary is duly qualified, licensed or
registered to carry on business and is in good standing in the jurisdictions listed in Schedule
3.1(4). The jurisdictions listed in Schedule 3.1(4) include all jurisdictions in which the nature of
the Business or the property owned or leased by the Corporation and the Subsidiaries makes such
qualification necessary or where the Corporation or any of its Subsidiaries owns or leases any
material properties or assets or conducts any material business.

Annotation: This representation elicits important information about where the Business is
carried on and may lead to further due diligence by the Purchaser, including corporate,
personalproperty security, litigation and similar searches in those jurisdictions.

(5) Subsidiaries The Corporation does not own nor has it agreed to acquire, directly or
indirectly, (i) any of the outstanding shares or securities convertible into shares of any other
corporation, or (ii) any participating interest in any person other than the Subsidiaries or as set
out in Schedule 3.1(5). Each Subsidiary is a corporation incorporated and subsisting under the
laws of its jurisdiction of incorporation. The respective jurisdictions of incorporation, the names
of each officer and each director for each Subsidiary, the number of shares in the capital of each
such Subsidiary issued, or agreed to be issued, and the class thereof, are set out in Schedule
3.1(5). All such issued shares (and no more) have been duly and validly allotted and issued and
are outstanding as fully paid and non-assessable shares in the capital of the respective
Subsidiaries and the Corporation is the registered and beneficial owner of all such shares with
good and marketable title free and clear of all Encumbrances.

Annotation: This representation will give the Purchaser specific information about the
corporate structure ofthe Business.

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(6) Authorized and Issued Capital The authorized capital of the Corporation consists of •
number of • shares and • number of • shares, of which (i) at the date of this Agreement, •
[class] shares and • [class] shares (and no more) have been duly issued and are outstanding as
fully paid and non-assessable, and (ii) at the Closing Time, • [class] shares and. [class] shares
(and no more) shall have been duly issued and shall be outstanding as fully paid and non-
assessable.

(7) Options Except for the Purchaser's right in this Agreement, no person has any option,
warrant, right, call, commitment, conversion right, right of exchange or other agreement or any
right or privilege (whether by law, pre-emptive or contractual) capable of becoming an option,
warrant, right, call, commitment, conversion right, right of exchange or other agreement for (a)
the purchase from the Vendor of any of the Purchased Shares or for the purchase from the
Corporation of any shares of the Subsidiaries; (b) the purchase, subscription, allotment or
issuance of any unissued shares or securities of the Corporation or the Subsidiaries; or (c) other
than in the ordinary course of the Business, the purchase or other acquisition from the
Corporation or any Subsidiary of any of its undertaking, property or assets.

(8) Title to Purchased Shares The Purchased Shares are owned by the Vendor as the
registered and beneficial owner with good and marketable title, free and clear of all
Encumbrances.

(9) Dividends and Distributions Since the Audited Statements Date, the Corporation has not,
directly or indirectly, declared or paid any dividends or declared or made any other distribution
on any of its shares of any class and has not, directly or indirectly, redeemed, purchased or
otherwise acquired any of its outstanding shares of any class or agreed to do so.

Annotation: This representation assures the Purchaser that the Vendor has not removed
cash or other assets from the Corporation via dividend or share redemption since the Audited
Statements Date. Further, the requirement in Section 5.1(1) that the representations be true at
Closing means that any dividend or share redemption after signing and before Closing will be
caught by this representation. Where the Vendor is expressly (or impliedly) permitted to
distribute the Corporation's cash prior to Closing to repay shareholder loans and/or remove
all or part of the Corporation's retained earnings, this representation needs to be qualified
accordingly.

(10) Corporate Records The corporate records of the Corporation and the Subsidiaries are
complete and accurate and all corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable Laws and with the articles and by-laws of
the Corporation and the Subsidiaries, respectively, and without limiting the generality of the
foregoing, (a) the minute books contain complete and accurate minutes of all meetings of the
directors and shareholders of the Corporation and the Subsidiaries held since their respective
dates of incorporation, and all such meetings were duly called and held; (b) the minute books
contain all written resolutions passed by the directors and shareholders of the Corporation and
the Subsidiaries and all such resolutions were duly passed; (c) the share certificate books,
registers of shareholders and registers of securities transfers of the Corporation and the
Subsidiaries are complete and accurate, and all transfers of securities have been duly completed
and approved and any exigible tax payable in connection with the transfer of any securities of the

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Corporation and the Subsidiaries has been duly paid; and (d) the registers of directors and
officers are complete and accurate and all former and present directors and officers of the
Corporation and the Subsidiaries were duly elected or appointed as the case may be.

(11) Validity of Agreement

(a) The Vendor has all necessary corporate power to own the Purchased Shares and
to enter into and perform its obligations under this Agreement, and each of the
Vendor and the Corporation have all necessary corporate power to enter into and
perform their respective obligations under any other agreements or instruments to
be delivered or given by it pursuant to this Agreement.

(b) The Vendor's execution and delivery of, and performance of its obligations under,
this Agreement and the consummation of the Transactions have been duly
authorized by all necessary corporate action on the part of each of the Vendor and
the Corporation, respectively.

(c) This Agreement or any other agreements entered into pursuant to this Agreement
to which either of the Corporation or the Vendor is a party constitute legal, valid
and binding obligations of each of the Corporation or the Vendor, as the case may
be, enforceable against each of them in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable remedies may
be granted only in the discretion of a court of competent jurisdiction.

(12) No Violation The execution and delivery of this Agreement by the Vendor, the
consummation of the Transactions and the fulfilment by the Vendor of the terms, conditions and
provisions hereof will not (with or without the giving of notice or lapse of time, or both):

(a) contravene or violate or result in a breach or a default under or give rise to a right
of termination, amendment or cancellation or the acceleration of any obligations
of the Vendor, the Corporation or any Subsidiary under:

(i) any applicable Law;

(ii) any judgment, order, writ, injunction or decree of any Regulatory

Authority having jurisdiction over the Vendor, the Corporation or any
Subsidiary;

(iii) the articles, by-laws or any resolutions of the board of directors or

shareholders of the Vendor, the Corporation or any Subsidiary;

(iv) any Consent held by the Vendor, the Corporation or any Subsidiary or
necessary to the ownership of the Purchased Shares or the operation of the
Business; or

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 (v) the provisions of any Contract to which the Vendor, the Corporation or
any Subsidiary is a party or by which any of them is, or any of their
properties or assets are, bound; or

(b) result in the creation or imposition of any Encumbrance on any of the Purchased
Shares or any of the property or assets of the Corporation or the Subsidiaries.

Annotation: This representation provides the Purchaser with assurance that the
Transactions will not violate any applicable Law or Contract held by the Business. This
representation does not deal with legal, regulatory or contractual matters generally, which are
dealt with under other representations. Rather it focuses on the specific violations or defaults
which would result from the completion of the Transactions. In this Agreement,
"Transactions" is defined to mean not only the purchase and sale of the Purchased Shares,
but also "all other transactions contemplated by this Agreement". This representation
therefore covers all ofthe documents to be delivered and all actions to be taken before or after
Closing in connection with the Agreement. This representation applies to the Vendor as well
as the Corporation and the Subsidiaries and addresses the concern of the Purchaser that a
violation ofor default under any Laws or Contracts applicable to the Vendor might result in a
challenge to the Transactions by a thirdparty.

The phrase "with or without the giving of notice or lapse of time, or both" means that the
Vendor must disclose certain matters even though they are not yet technically violations or
defaults.

The defined terms of "Law", "Regulatory Authority", "Consent" and "Contract" used in this
Agreement, including this representation, are very broad. "Law" for example, is defined to
include not only statutes and regulations but also, among other things, rules, ordinances, by-
laws, codes, policies, and orders of any Regulatory Authority. The term "Regulatory
Authority" includes not only a governmental authority, but includes an administrative
authority, agency, commission, utility or board (domestic or foreign). It also includes any
federal, administrative or arbitral court. "Consent" includes licenses, permits and approvals
(and so on) made or issued by a Regulatory Authority or otherwise.

Section 3.1(12)(a)(v) deals with the possible effects of the Transactions on Contracts. This
representation covers not only Contracts to which the Vendor, the Corporation or a Subsidiary
is party, but Contracts by which any ofthem or their assets are bound. This would include, for
example, a contractual covenant which runs with the Real Properties.

Generally, the transfer of shares of a corporation will not contravene a typical non-
assignment clause. However, some Contracts contain change of control provisions which
would be triggered by such a transfer. This representation covers that circumstance.

(13) Shareholders' Agreements There are no shareholders' agreements, pooling agreements,

voting trusts or other similar agreements with respect to the ownership or voting of any of the
shares of the Corporation or any Subsidiary.

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(14) Private Issuer The Corporation is a private issuer as that term is defined in NI 45-106 and
the sale of the Purchased Shares by the Vendor to the Purchaser will be made in compliance with
the Securities Act.

Annotation: Pursuant to the Securities Act, the sale ofpreviously issued shares (i.e. shares
not being issued from treasury) of a corporation from the holdings of a person (or
combination of persons) (a "Control Person''), who holds a sufficient number of shares to
affect materially the control ofthe corporation, is a "distribution" and therefore subject to the
registration and prospectus requirements of the Securities Act. The purchase and sale of the
Purchased Shares contemplated by this Agreement is therefore a "distribution". The
Securities Act and NI 45-106 provide for a number ofexemptions from those requirements.

One of those exemptions is contained in Section 2.4 of NI 45-106, which provides that the
prospectus requirements do not apply to a trade in the shares of a "private issuer" provided
certain other additional requirements set out in Section 2.4 are met. NI 45-106 defines a
"private issuer" to be an issuer (i) that is not a reporting issuer or investment fund, (ii) whose
securities are subject to restrictions on transfer contained in the issuer's constating documents
or security holders' agreements, (iii) whose outstanding securities are beneficially owned by
not more than 50 persons, exclusive of certain persons, including current and former
employees and (iv) who has distributed securities only to those persons listed under Section
2.4(2) of NI 45-106. A similar exemption from the registration requirements is contained in
Section 3.4 ofNI 45-106 (although it is not available to market intermediaries). Generally, to
rely upon the "private issuer" exemption, no commission/fee may be paid to any director,
officer, founder or Control Person ofthe private issuer in connection with a trade under such
exemption. Furthermore, the Purchaser must qualify as one of the persons listed under
Section 2.4(2) ofNI 45-106. In Ontario, no formal trade report need be filed or filing fee paid
to any securities regulatory authority in connection with any exempt "private issuer"
distribution.

In addition to the foregoing, this representation is of value to a Purchaser to the extent it

intends to effect any "distributions" under Ontario securities laws post-Closing and would
normally elect to rely upon the "private issuer" registration and prospectus exemption in
connection with such distributions.

(15) Regulatory and Contractual Consents There is no requirement to make any filing with,
give any notice to or obtain any Consent from any Regulatory Authority as a condition to the
lawful consummation of the Transactions, except for:

(a) the filings, notifications and Consents described in Schedule 3.1(15);

(b) the application of the Competition Act (Canada);

(c) the application of the Investment Canada Act (Canada); and

(d) [any other legislative or regulatory requirements specific to the Transactions].

There is no requirement under any Contract relating to the Business or to which the Vendor, the
Corporation or any Subsidiary is a party or by which any of them are bound to make any filing

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with, give any notice to, or to obtain the Consent of, any party to such Contract relating to the
Transactions except for the filings, notifications or Consents described in Schedule 3.1(15).

Annotation: Among other things, this representation refers to the Competition Act and the
Investment Canada Act.

The Competition Act contains a regime for mergers. The term "merger" includes the
acquisition, by purchase ofshares, ofcontrol over or a significant interest in the business ofa
competitor, supplier, customer or other person. Where, on application by the Commissioner of
Competition, the Competition Tribunal finds that a merger or proposed merger prevents or
lessens, or is likely to prevent or lessen, competition substantially, it may order, in the case ofa
completed merger, the disposal ofthe shares, or in the case of a proposed merger, the merger
not proceed or part ofthe merger not be proceeded with. The Competition Act allows a party to
a proposed merger to apply for a binding advance ruling from the Commissioner of
Competition.

The Competition Act requires that persons proposing a transaction which exceeds certain
thresholds notify the Commissioner of Competition in advance of completion of the
transaction. The first threshold is that the parties to the transaction, together with their
affiliates, must have assets in Canada or annual gross revenues from sales in, from or into
Canada that exceed $400 million. The second threshold (applicable to the acquisition of
shares of a corporation carrying on an operating business) is that the value of the assets in
Canada of the acquired corporation or the annual gross revenues from sales in or from
Canada generated from those assets would exceed $80 million, and the acquirer is, in respect
ofa private corporation, acquiring at least a 35% interest (or if the acquirer held 35% prior to
the transaction, a 50% interest). Once the parties give notice, the parties must waitfor a period
of30 days before completing the transaction unless the Commissioner initiates a second stage
review that extends the review period until 30 days following compliance with a "supplemental
information request"for additional information.

The Investment Canada Act applies to, among other things, the acquisition of an existing
business in Canada by non-Canadians. All transactions by non-Canadians must be reported to
Industry Canada. However, only certain transactions will be reviewable. An investment is
reviewable if the asset value of the Canadian business being acquired exceeds the following
thresholds:

(i) if the investor is a non-Canadian and is not a WTO member (i.e. from a country which
is not a member ofthe World Trade Organization), any investment over $5 millionfor a direct
acquisition and over $50 million for an indirect acquisition. An indirect acquisition where the
asset value is $5 million or more but less than $50 million is also reviewable where the
Canadian assets acquired represent more than 50 per cent ofthe asset value of all businesses
acquired in the transaction;

(ii) if the investor or vendor (excluding Canadians) is a WTO member, any direct
investment in excess of $344 million (in 2013) is reviewable. An indirect acquisition by a WTO
investor is not reviewable. Even for WTO investors, the limits in paragraph (i) apply if the
Canadian business is a cultural business.

1 - 24
If the acquisition falls below these thresholds, the investor must give notice to Industry
Canada prior to the investment or within 30 days ofclosing.

Notwithstanding these limits, any investment which is usually only notifiable and which falls
within a specific business category listed in Schedule IV of the Regulations Respecting
Investment in Canada may be reviewed in certain circumstances. Categories listed in Schedule
IV include the publication, distribution or sale of books, magazines and newspapers and
similar activities related to film or video products, music recordings andprint music.

For reviewable transactions the investor must submit an application to Industry Canada prior
to closing. Within 45 days of receipt of the application, the Minister must notify the investor
that it is (i) satisfied the investment is likely to be of net benefit to Canada; (ii) unable to
complete the review and it requires a further 30 days (or longer if agreed to by the investor) to
complete the review; or (iii) not satisfied that the investment is likely to be of net benefit to
Canada. There are a number offactors which the Minister may take into account in making a
determination, including economic activity, Canadian participation, competition and
compatibility with government policies.

(16) Financial Statements The Audited Financial Statements, the Interim Financial
Statements and the Closing Date Financial Statements:

(a) have been prepared and, in the case of the Closing Date Financial Statements, will
be prepared, in accordance with GAAP on a basis consistent with that of prior
fiscal periods;

(b) are, and in the case of the Closing Date Financial Statements will be, complete
and accurate; and

(c) present, and in the case of the Closing Date Financial Statements will present,
fairly the assets, liabilities (whether accrued, absolute, contingent or otherwise)
and financial condition of the Corporation and the Subsidiaries on a consolidated
basis at their respective balance sheet dates, and the consolidated results of
operations of the Corporation and the Subsidiaries.

Annotation: A representation with respect to financial statements is a key part of the

Purchaser's evaluation of the Business. The Closing Date Financial Statements are used to
finally determine the Purchase Price pursuant to Section 2.4 of the Agreement. The Vendor
may object to the statement in the representation that the financial statements are "complete
and accurate" as that goes beyond the assurances provided by accountants. The Vendor may
also object that it is inappropriate to make the statement that the Interim Financial Statements
and the Closing Date Financial Statements are presented fairly in accordance with GAAP
because these statements do not include year-end adjustments or notes and may seek to qualify
the representation in this respect. If the financial statements are not audited but merely
prepared on a Notice to Reader compilation basis (such that no GAAP analysis or review is
undertaken by the applicable accountant)), the GAAP representations should be qualified to
the Vendor's knowledge or possibly not given at all.

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(17) Records The Records have been duly maintained in accordance with all applicable legal
requirements and contain full and accurate records of all material matters relating to the
Business. All material financial transactions relating to the Business have been accurately
recorded in the Records in accordance with GAAP. No Records are in the possession of,
recorded, stored, maintained by, or otherwise dependent on, any other person.

(18) No Material Adverse Change Since the Audited Statements Date, no material adverse
change has occurred in any of the assets, business, financial condition, earnings, results of
operations or prospects of the Corporation or any Subsidiary nor has any other event, condition,
or state of facts occurred or arisen which might have a material adverse effect on the assets,
business, financial condition, earnings, results of operations or prospects of the Corporation and
the Subsidiaries on a consolidated basis.

Annotation: The first part of this representation relates to material adverse changes which
have occurred in respect of any of the assets, business, financial condition and so on of the
Corporation or any Subsidiary. The Vendor may object that this is overly broad and should be
modified to capture matters which are materially adverse to the Business as a whole. This
argument would be consistent with the second part of the representation which relates to
events or facts which might have a material adverse effect on the assets, business or financial
condition ofthe Corporation and the Subsidiaries on a consolidated basis.

(19) Absence of Undisclosed Liabilities Except to the extent reflected or reserved against in
the balance sheet (including the notes thereto) forming part of the Audited Financial Statements
or incurred subsequent to the date thereof and disclosed in Schedule 3.1(19) and except in
respect of normal trade payables arising in the ordinary course of the Business, the Corporation
and the Subsidiaries do not have any outstanding indebtedness or any liabilities (whether
accrued, absolute, contingent or otherwise) nor any outstanding commitments or obligations of
any kind exceeding $•.

(20) Consents The Corporation and the Subsidiaries have conducted the Business in
compliance with, and hold all Consents necessary for the lawful operation of the Business,
pursuant to all applicable Laws, all of which Consents are listed on Schedule 3.1 (20) and all of
which are valid and subsisting and in good standing with no violations as of the date of this
Agreement. All such Consents are renewable by their terms or in the ordinary course of the
Business without the need for the Corporation or any Subsidiary to comply with any special
qualification or procedures or to pay any amounts other than routine filing fees. The Vendor has
provided a true and complete copy of each Consent and all amendments thereto to the Purchaser.

Annotation: The term "Consents" is defined broadly to include licenses, permits and
approvals made or issued by a Regulatory Authority or otherwise. This representation will be
particularly important where the Business is subject to extensive regulation. This
representation gives the Purchaser comfort that not only are the Consents valid and in good
standing, but that they can be routinely renewed. Where Consents are important to the
Purchaser, this representation should be supplemented by a thorough due diligence
investigation of the Consents, their terms, conditions and expiry dates and the requirements
(including fees) for renewal.

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(21 ) Compliance with Laws The Corporation and each of the Subsidiaries has complied, and
the Business is now being conducted in compliance, with all Laws applicable to the Business, the
Corporation or the Subsidiaries.

Annotation: This representation speaks to both present and historical compliance with Laws.
The Vendor may wish to amend this representation so that it refers to compliance since a
certain date based on the argument that non-compliance prior to that date certain is not
relevant. It may also argue, if it has not owned the Business for an extended period, that non-
compliance prior to the relevant date is beyond its knowledge. The Parties should consider
carefully the potential consequences of making disclosure in the Agreement or schedules of
actual or potential violations of Laws as these documents may become available to third
parties or Regulatory Authorities. A Vendor with relatively stronger bargaining power may be
able to negotiate a materiality qualifier to this representation.

(22) Conduct of Business in Ordinary Course Since the Audited Statements Date the Business
has been carried on in the ordinary course consistent with past practice. The Business is the only
business operation carried on by the Corporation or the Subsidiaries, and the property and assets
owned or leased by the Corporation and the Subsidiaries are sufficient to carry on the Business at
the Closing Date.

(23) Location of Tangible Personal Property With the exception of inventory in transit, all the
tangible assets of the Corporation and the Subsidiaries are situate at the locations set out in
Schedules 3.1(37)(a) and 3.1(37)(c).

(24) Condition of Assets All material tangible personal property used by the Corporation and
the Subsidiaries in or in connection with the Business or any part thereof is in good operating
condition, repair and proper working order, having regard to its use and age, except only for
reasonable wear and tear.

(25) Title to Personal and Other Property The property and assets of the Corporation and the
Subsidiaries (other than the Real Properties) are owned by the Corporation or the Subsidiaries, as
the case may be, as the beneficial owner with a good and marketable title, free and clear of all
Encumbrances other than the Permitted Encumbrances.

(26) Litigation Except as disclosed in Schedule 3.1 (26), there are no actions, suits or
proceedings, judicial or administrative, (whether or not purportedly on behalf of the Corporation
or a Subsidiary) pending or threatened, by or against or affecting the Corporation or any
Subsidiary, at law or in equity, or before or by any Regulatory Authority. Except for the matters
referred to in Schedule 3.1 (26), there are no grounds on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of success. Except as disclosed
in Schedule 3.1 (26), there is not presently outstanding against the Corporation or any Subsidiary
any judgment, injunction or other order of any Regulatory Authority.

Annotation: The Vendor may request that this representation as it relates to threatened
litigation be modified by reference to the Vendor's knowledge. See the general annotations
with respect to Section 3.1. The Purchaser should carefully examine with counsel any
disclosed litigation to determine, if possible, the likely outcome and potential liability of the

1 - 27
Corporation. As part of its due diligence, the Purchaser should also determine whether any
potential liability of the Corporation is covered by the Corporation's insurance and, if so,
confirm that it will continue to have the benefit ofthat insurance following Closing.

(27) Capital Expenditures None of the Corporation or the Subsidiaries is committed to make
any capital expenditures, nor have any capital expenditures been authorized by the Corporation
or the Subsidiaries at any time since the Audited Statements Date, except for capital expenditures
made in the ordinary course of the Business which, in the aggregate, do not exceed $•.

(28) Inventories The inventories of the Corporation and the Subsidiaries do not include any
material items that are slow moving, below standard quality or of a quality or quantity not
useable or saleable in the ordinary course of the Business, the value of which has not been
written down on its books of account to net realizable market value. The inventory levels of the
Corporation and the Subsidiaries have been maintained at such amounts as are required for the
operation of the Business as previously conducted and as proposed to be conducted, and such
inventory levels are adequate for the Business.

(29) Accounts Receivable The accounts receivable due or accruing to the Corporation or the
Subsidiaries reflected in the Interim Financial Statements and all accounts receivable of the
Corporation and the Subsidiaries arising since the date of the Interim Financial Statements arose
from bona fide transactions in the ordinary course of the Business and are valid, enforceable and
fully collectible accounts (subject to a reasonable allowance, consistent with past practice, for
doubtful accounts as reflected in the Interim Financial Statements in accordance with GAAP or
as previously disclosed in writing to the Purchaser). Such accounts receivable are not subject to
any defence, set-off or counterclaim.

Annotation: This representation includes the assurance that the accounts receivable are
collectible, subject to a reasonable allowance consistent with past practice for doubtful
accounts. In some circumstances the Purchaser will want this representation to provide that
the accounts receivable will be fully collected, subject to a reserve, by a date certain. There are
other ways in which the Purchaser can get comfort that it can collect the accounts receivable.
The Purchaser could require that the Vendor repurchase from the Corporation any accounts
receivable uncollected by a specified date, net of appropriate reserves. This may raise a
concern with the Purchaser because the Vendor will then be attempting to collect accounts
receivable from the Corporation's customers. Another alternative would be for the Purchaser/
Corporation to covenant to collect the accounts on behalf of the Vendor, which would retain
title to them. The problem with this is it involves the additional complications of a sale of
assets by the Corporation to the Vendor as part of the Closing. Clearly, the simplest
mechanism is for the Purchaser to be able to apply the value of uncollected accounts against
any holdback or instalment promissory notes. A receivables "collectibility" representation (as
opposed to a receivables "bona fide" representation) essentially operates as a "back-door"
Purchase Price adjustment. Hence, depending upon the nature of any Purchase Price
adjustments, care should be taken to ensure this representation does not result in any "double
counting". Moreover, a Vendor with relatively stronger bargaining power may resist a
receivables "collectibility" representation altogether on the basis that control over their
collection shifts entirely to the Purchaser following Closing.

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(30) Material Contracts The contracts listed in Schedule 3.1 (30) constitute all the material
Contracts of the Corporation and the Subsidiaries. Without limiting the generality of the
foregoing, and except as otherwise set out in Schedules 1.10j) and 3.1 (30), none of the
Corporation or the Subsidiaries is a party to or bound by any:

(a) distributor, sales, advertising, agency or manufacturer's representative Contract;

(b) collective bargaining agreement or other Contract with any labour union;

(c) continuing Contract for the purchase of materials, supplies, equipment or services
involving more than $. in respect of any such Contract;

(d) employment or consulting Contract or any other Contract with any officer,
employee or consultant other than oral Contracts of indefinite hire terminable by
the employer without cause on reasonable notice;

(e) profit sharing, bonus, stock option, pension, retirement, disability, stock purchase,
medical, dental, hospitalization, insurance or similar plan or agreement providing
benefits to any current or former director, officer, employee or consultant;

(f) trust indenture, mortgage, promissory note, loan agreement, guarantee or other
Contract for the borrowing of money, the provision of financial assistance of any
kind or a leasing transaction of a type required to be capitalized in accordance
with GAAP, or any Contract creating an Encumbrance relating thereto;

(g) commitment for charitable contributions;

(h) Contract for capital expenditures in excess of $. in the aggregate;

(i) Contract for the sale of any assets, other than sales of inventory to customers in
the ordinary course of the Business;

0) Contract pursuant to which the Corporation or any Subsidiary is a lessor of any

machinery, equipment, motor vehicles, office furniture, fixtures or other personal
property material to the Business;

(k) confidentiality, secrecy or non-disclosure Contract (whether the Corporation or a

Subsidiary is a beneficiary or obligor thereunder) relating to any proprietary or
confidential information or any non-competition or similar Contract;

(1) license, franchise or other Contract that relates in whole or in part to any
Intellectual Property;

(m) agreement of guarantee, support, indemnification, assumption or endorsement of,

or any other similar commitment with respect to, the obligations, liabilities
(whether accrued, absolute, contingent or otherwise) or indebtedness of, or any
agreement to provide financial assistance of any kind to, any other person (except
for cheques endorsed for collection);

1 - 29
 (n) Contract that expires, or may expire if the same is not renewed or extended at the
option of any person other than the Corporation or a Subsidiary, more than one
year after the date of this Agreement;

(0) Contract with any officer, director, employee, shareholder or any other person not
dealing at arm's length with the Corporation or any Subsidiary (within the
meaning of the ITA) except for Contracts of employment; or

(p) Contract entered into by the Corporation or any Subsidiary other than in the
ordinary course of the Business.

The Corporation and the Subsidiaries have performed all of their obligations required to be
performed by them and are entitled to all of the benefits under any Contract relating to the
Business to which any of them is a party or by which any of them is bound. The Contracts listed
in Schedule 3.1(30) are all in full force and effect unamended and no default exists on the part of
any of the parties thereto. None of the Corporation or the Subsidiaries is in default or in breach
of any Contract to which it is a party and there exists no condition, event or act which, with the
giving of notice or lapse of time or both would constitute such a default or breach and all such
Contracts are in good standing and in full force and effect unamended and either the Corporation
or the applicable Subsidiary is entitled to all benefits thereunder. The Vendor has provided to the
Purchaser a true and complete copy of each Contract listed in Schedule 3.1(30) and all
amendments.

Annotation: In addition to requiring the disclosure of material Contracts, this representation

requires the disclosure of specific types of Contracts. Although this may result in some
overlap, the listing ofspecific types of Contracts gives the Purchaser additional comfort that it
has been made aware of important commitments of the Business. The term "material" is not
defined in the Agreement and therefore may be subject to dispute. Parties wishing more
certainty could define materiality by reference to a monetary amount. See the introductory
annotation to Section 3.1. The definition of "Contracts" is broad and includes, for example,
oral agreements and commitments.

(31 ) Insurance The Corporation has all of its and the Subsidiaries' property and assets insured
against loss or damage by all insurable hazards or risks on a replacement cost basis and such
insurance coverage will be continued in full force and effect to and including the Closing Time.
Schedule 3.1(31) sets out all insurance policies (specifying the insurer, the amount of the
coverage, the type of insurance, the policy number and any claims) maintained by the
Corporation on its and the Subsidiaries' property and assets or personnel as of the date of this
Agreement and true and complete copies of the most recent inspection reports, if any, received
from insurance underwriters or others as to the condition of the property and assets of the
Corporation and the Subsidiaries. None of the Corporation or the Subsidiaries is in default with
respect to any of the provisions contained in any such insurance policy, nor has failed to give any
notice or present any claim under any such insurance policy in a timely fashion, and none of the
Corporation or the Subsidiaries has received notice from any insurer denying any claim. The
Vendor has provided to the Purchaser a true copy of each insurance policy referred to in
Schedule 3.1 (31) and all amendments.

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(32) Bank Accounts and Powers of Attorney Schedule 3.1(32) is a correct and complete list
showing (i) the name of each bank, trust company or similar institution in which the Corporation
or a Subsidiary has an account or safe deposit box, the number or designation of each such
account and safe deposit box and the names of all persons authorized to draw thereon or to have
access thereto; and (ii) the names of any persons holding powers of attorney from the
Corporation or a Subsidiary and a summary of the terms.

(33) Brokers None of the Vendor, the Shareholder, the Corporation or the Subsidiaries has
engaged any broker or other agent in connection with the Transactions and, accordingly, there is
no commission, fee or other remuneration payable to any broker or agent who purports or may
purport to act or have acted for the Vendor, the Shareholder, the Corporation or the Subsidiaries.

(34) Competition Act The Vendor and its affiliates have assets in Canada with an aggregate
value of $-, and annual gross revenues from sales in, from or into Canada with an aggregate
value of $-, as determined in accordance with the Competition Act (Canada).

Annotation: See the annotation with respect to Section 3.1(15) for a discussion of the
requirements of the Competition Act. This representation will assist the Parties to determine
whether the pre-notification thresholds have been met. Because the threshold set out in
Section 109 ofthe Competition Act relates to the aggregate assets and revenues ofthe Parties
and their affiliates, both the Purchaser and the Vendor make representations in this
Agreement with respect to those matters as they relate to their respective corporate group. The
Purchaser's representation is set out in Section 3.2(4).

(35) Customers and Suppliers Schedule 3.1 (35) sets out the major customers and suppliers of
the Corporation (being those customers and suppliers of the Corporation and the Subsidiaries
each accounting for more than .% of sales of or to the Corporation and the Subsidiaries on a
consolidated basis, for the period • to .) and there has been no termination or cancellation of,
and no modification or change in, the Corporation's or any Subsidiary's business relationship
with any major customer, supplier or group of major customers or suppliers since •. The benefits
of all relationships with the major customers or suppliers of the Corporation or the Subsidiaries
will continue after the Closing Date in substantially the same manner as prior to the date of this
Agreement.

Annotation: The importance ofthis representation will depend on whether the Business has
key customers or suppliers. This representation will not be relevant to a Purchaser if the
Business has no large customers and it has immediately available alternative sources of
supply.

The Vendor may resist making the statement in the last sentence ofthis representation on the
basis that it cannot look into the future, especially with respect to matters involving third
parties. A compromise might be to qualify this representation by reference to the Vendor's and
the Corporation's knowledge. See the introductory annotation to Section 3.1.

1 - 31
(36) Tax Matters

Annotation: Consideration will need to be given to whether it is appropriate to have

representations as to the tax consequences of any reorganization or other transactions
happening prior to or concurrently with Closing. With respect to the representation as to the
Vendor's residency status, other provisions are necessary to deal with the need to obtain
section 116 certificates pursuant to the ITA in the case of a non-resident Vendor. See Section
2.5 of the Agreement. From the Purchaser's perspective, these representations should be
reviewed by all other persons, such as accountants, conducting tax due diligence for the
Purchaser, to ascertain whether any clarification or adaptation is appropriate.

(a) For purposes of this Section 3.1(36), the following definitions shall apply:

(i) "Tax" and "Taxes" shall mean any or all Canadian federal, provincial,
local or foreign (i.e. non-Canadian) income, gross receipts, real property
gains, goods and services, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum, or
other taxes, levies, governmental charges or assessments of any kind
whatsoever, including, without limitation, any estimated tax payments,
interest, penalties or other additions, whether or not disputed.

(ii) "Tax Return" shall mean any return, declaration, report, estimate,
information return or statement, or claim for refund relating to, or required
to be filed in connection with any Taxes, including information returns or
reports with respect to withholding at source or payments to third parties,
and any schedules or attachments or amendments of any of the foregoing.

(b) The Corporation and each Subsidiary have filed on a timely basis all Tax Returns
required to be filed. All such Tax Returns are complete and accurate in all
respects. All Taxes due from or payable by the Corporation and each Subsidiary
for periods (or portions thereof) ending on or prior to the date of this Agreement
and the Closing Date, as applicable, have been paid or will be provided for in the
Closing Date Financial Statements. All instalments or other payments on account
of Taxes that relate to periods for which Tax Returns are not yet due have been
paid on a timely basis. None of the Corporation or the Subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax Return.
Schedule 3.1(36) contains a complete and accurate summary of all Canadian
federal or provincial income tax assessments that have been issued to the
Corporation and each Subsidiary covering all past periods up to and including the
fiscal years ended on or before the Closing Date that remain open for
reassessment. All amounts disclosed on Schedule 3.1(36) have been paid or
settled in full. Schedule 3.1 (36) contains a complete and accurate summary of all
fiscal periods that remain open for assessment of additional Taxes. Assessments
for all other applicable Canadian federal or provincial Taxes of the Corporation

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 and each Subsidiary that are levied by way of assessment have been issued and
any amounts owing thereunder have been paid, and only the time periods
described in Schedule 3.1 (36) remain open for reassessment of additional Taxes.
There are no actions, objections, appeals, suits or other proceedings or claims in
progress, pending or threatened by or against the Corporation or any Subsidiary in
respect of any Taxes, and in particular there are no currently outstanding
assessments or written enquiries which have been issued or raised by any
Regulatory Authority relating to any such Taxes. No claim has ever been made by
a Regulatory Authority of any jurisdiction where the Corporation or any
Subsidiary does not file Tax Returns that the Corporation or such Subsidiary, as
the case may be, is or may be subject to taxation by that jurisdiction. There are no
Encumbrances pending on or with respect to any of the assets of the Corporation
or any Subsidiary that arose in connection with any failure (or alleged failure) to
pay any Tax.

(c) The Corporation and each Subsidiary have withheld, collected and paid to the
proper Regulatory Authorities all Taxes required to have been withheld, collected
and paid in connection with (i) amounts paid, credited or owing to any employee,
independent or dependent contractor, creditor, shareholder, non-resident of
Canada or other third party, and (ii) goods and services received from or provided
to any person.

(d) No steps are being taken by any Regulatory Authority to assess any additional
Taxes against the Corporation or any Subsidiary for any period for which Tax
Returns have been filed and there are no actual or pending investigations of the
Corporation or any Subsidiary relating to Taxes. The Purchaser has been provided
with correct and complete copies of all Tax Returns of the Corporation and each
Subsidiary, together with any notices of assessment, examination reports or
statements of deficiencies assessed against or agreed to by any of the Corporation
or any Subsidiary, for all taxable periods for which the statute of limitations has
not yet closed and any correspondence relating thereto.

(e) None of the Corporation or the Subsidiaries has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to an
assessment or deficiency.

(f) At the Closing Time, the unpaid Taxes of the Corporation and each Subsidiary
attributable to all periods (or portions thereof) ending on or prior to the Closing
Date will not exceed the reserve for Tax liability set forth in the Closing Date
Financial Statements.

(g) None of the Corporation or the Subsidiaries (i) is a party to any Tax allocation or
sharing agreement, (ii) has been a member of an affiliated, combined or unitary
group filing a combined, unitary, or other return for Canadian federal, provincial,
local or foreign (i.e. non-Canadian) Tax purposes reflecting the income, assets, or
activities of affiliated companies, or (iii) has any liability for the Taxes of any
person or entity other than the Corporation or the Subsidiaries under any

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 prOVISIon of Canadian federal, provincial, state, local or foreign (i.e. non-
Canadian) law, or as a transferee or successor, or by Contract, or otherwise.

(h) None of the Corporation or the Subsidiaries is a party to any joint venture,
partnership or other arrangement or Contract that could be treated as a partnership
for Tax purposes.

(i) The Vendor is not a non-resident person within the meaning of the ITA.

U) The Tax basis of the assets of the Corporation and the Subsidiaries by category,
including the classification of such assets as being depreciable or amortizable as
reflected in their respective Tax Returns and related working papers, is true and
correct.

(k) There are no circumstances existing at or prior to the Closing Date which could,
in themselves, result in the application of any of Sections 80 to 80.03 of the ITA
or any equivalent provincial provisions to the Corporation or any Subsidiary;
none of the Corporation or the Subsidiaries has made (and none will, at or prior to
the Closing Time, make) any election pursuant to Section 80.04 of the ITA or
any equivalent provincial provision in which it is an eligible transferee; none of
the Corporation or the Subsidiaries has filed, or will file in respect of its Closing
Time Year an agreement pursuant to Section 191.3 of the ITA or any equivalent
provincial provision; and none of the Corporation or the Subsidiaries has claimed
and none will in their returns for the Closing Time Year claim any reserve under
any of Sections 40(1)(a)(iii) or 20(1)(n) of the ITA or any equivalent provincial
provision of any amount that could be included in its income for any period
ending after the Closing Date in respect of any such reserve.

(37) Real Properties and Leased Premises

Annotation: The representation in Section 3.1 (37)(b) that the Corporation or a Subsidiary is
the absolute beneficial owner of each of the Real Properties forces the Vendor to fully
disclose, as an exception to this representation, any ownership structure in which a bare
nominee holds registered title for an otherwise undisclosed beneficial owner. If the Vendor
makes a disclosure ofthis nature, the Purchaser should ensure that it obtains and reviews any
trust declaration or trust agreement between the bare nominee and the beneficial owner. The
provisions of such a trust declaration or agreement may be relevant to the Purchaser's
consideration of whether all necessary Consents to the Transactions have been obtained. In
addition, the Purchaser may wish to ensure that representations and indemnities which
survive Closing are obtained from any beneficial owner as well as from such beneficial
owner's nominee.

The Vendor will seek to include in many of the representations contained in Section 3.1(37)
the qualification that they are made to the best of the Vendor's knowledge. In particular,
where the representation is made with respect to both Real Properties and Leased Premises,
the Vendor may take the position that it is not reasonable to expect a tenant occupying only a
portion of a building to have complete knowledge about such things as whether the building

1 - 34
complies with zoning setbacks or whether there are any structural defects in the building.
However, where the Vendor is a long-term tenant of all or substantially all of a building, it
may be reasonable to require it to make the same unqualified representations as the building's
owner would be expected to make. It may be useful for the Purchaser and the Vendor to agree
to separately identify those buildings with substantial leases as "Major Leased Premises". The
Vendor may then agree to provide unqualified representations with respect to Major Leased
Premises if the Purchaser agrees to accept qualified representations with respect to all other
Leased Premises.

(a) Schedule 3.1(37)(a) lists all Real Properties owned in whole or in part by the
Corporation or any Subsidiary and sets forth the legal descriptions. There are no
Contracts to sell, transfer or otherwise dispose of any of the Real Properties, or to
purchase or acquire any real properties other than the Real Properties, or which
would restrict the ability of the Corporation or any Subsidiary, as applicable, to
transfer any of the Real Properties.

(b) The Corporation or a Subsidiary is the absolute beneficial owner of, and has good
and marketable title in fee simple to each of the Real Properties, free and clear of
any and all Encumbrances, except for the Permitted Encumbrances. Complete and
correct copies of all documents creating those Permitted Encumbrances which
affect the Real Properties have been provided to the Purchaser. Except as
otherwise disclosed in Schedule 3.1 (37)(b), none of the Real Properties is leased
or licenced, in whole or in part, to any other person.

(c) Schedule 3.1 (37)(c) describes all Leases under which the Corporation or any
Subsidiary leases or subleases any real property as lessee or sublessee (hereinafter
in this Section 3.1(37) referred to as the "Lessee"). Other than the Leases, none of
the Corporation or the Subsidiaries is a party to or is bound, as Lessee, by any
lease, sublease, license or other instrument relating to real property. Complete and
correct copies of the Leases have been provided to the Purchaser. The Leases are
in full force and effect, unamended. The Lessee under each Lease is exclusively
entitled to all rights and benefits as Lessee under such Lease, and no Lessee has
sublet, assigned, licensed or otherwise conveyed any rights in any of the Leased
Premises or in any of the Leases to any other person.

(d) All rental and other payments and other obligations required to be paid and
performed by the Lessee pursuant to each of the Leases have been duly paid and
performed. The Lessee is not in default of any of its obligations under any of the
Leases and none of the landlords or other parties to the Leases are in default of
any of their obligations under any of the Leases. No waiver, indulgence or
postponement of the Lessee's obligations under any of the Leases has been
granted by the landlord thereunder. There exists no event of default under any
Lease or event, occurrence, condition or act which, with the giving of notice, the
lapse of time or the happening of any other event or condition, would become a
default under the Lease. None of the terms and conditions of any of the Leases
will be affected by, nor will any of the Leases be in default as a result of, the
completion of the Transactions, and all Consents of landlords or other parties to

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 the Leases required in order to complete the Transactions have been obtained, or
will have been obtained by the Closing Time, and are, or once obtained will be, in
full force and effect.

(e) The use by the Corporation or any Subsidiary, as applicable, of each of the Real
Properties and Leased Premises is not in breach of any Laws, including any
building, zoning or other statutes or any official plan, or any covenants,
restrictions, rights or easements, affecting such Real Property or Leased Premises.
All buildings, structures and improvements situated on any of the Real Properties,
and those situated on any of the Leased Premises, are located wholly within the
boundaries of such Real Property or Leased Premises, as applicable, and comply
with all Laws, covenants, restrictions, rights and easements affecting the same.
There are no outstanding work orders, non-compliance orders, deficiency notices
or other such notices relative to any of the Real Properties or Leased Premises. No
part of any of the Real Properties or Leased Premises has been condemned, taken
or expropriated by any Regulatory Authority, nor has any notice or proceeding in
respect thereof been given, commenced or threatened. Each of the Real
Properties and Leased Premises is fully serviced by utilities having adequate
capacities for the normal operations of the Business. Each of the Real Properties
and Leased Premises has adequate rights of access to and from public streets or
highways for the normal operations of the Business and there is no fact or
circumstance which could result in the termination or restriction of such access.
There is no defect or condition affecting any of the Real Properties or Leased
Premises (or the soil or subsoil thereof) or any adjoining property which would
impair the current use of such Real Property or Leased Premises.

(f) No amounts including, without limitation, municipal property Taxes, local

improvement Taxes, levies or assessments, are owing by the Corporation or any
Subsidiary in respect of any of the Real Properties or the Leased Premises to any
Regulatory Authority or public utility, other than current accounts which are not
in arrears. There are no outstanding appeals on assessments which have been
issued or raised by any Regulatory Authority or by the Corporation or any
Subsidiary concerning any realty, business or other Taxes with respect to any of
the Real Properties or Leased Premises. All amounts for labour or materials
supplied to or on behalf of the Corporation or any Subsidiary relating to the
construction, alteration or repair of or on any of the Real Properties or Leased
Premises have been paid in full and no one has filed or has a right to file any
construction, builders', mechanics' or similar liens.

(g) The buildings and structures comprising the Real Properties and the Leased
Premises are free of any structural defect. The heating, ventilating, plumbing,
drainage, electrical and air conditioning systems and all other systems used in any
of the Real Properties or the Leased Premises are in good working order, fully
operational and free of any defect, except for normal wear and tear.

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(38) Environmental Matters

Annotation: The defined term "Environmental Laws" includes Laws related to areas other
than strictly environmental matters, and includes, for example, health and safety laws. This
representation confirms compliance with all ofthose Laws.

The statement in Section 3.1 (38)(h) with respect to responsibility for any clean-up or
corrective action captures the Vendor's and Corporation's and any Subsidiary's potential
liability with respect to properties or businesses they no longer own or operate and to liabilities
which they may have under agreement or by operation oflaw. The Vendor may wish to qualify
this representation by reference to its knowledge. The Purchaser may resist this on the basis
that as between it and the Vendor, the risk ofsuch liability should be borne by the Vendor.

In cases of industrial or commercial properties or businesses giving rise to specific

environmental concerns, independent environmental due diligence investigations may be
advisable to supplement this representation.

(a) For the purposes of this Agreement, the following terms and expressions shall
have the following meanings:

(i) "Environmental Laws" means all Laws applicable to the environment,

occupational health and safety, product safety, product liability and public
safety.

(ii) "Environmental Consents" includes all Consents issued by or issuable by

any Regulatory Authority under Environmental Laws.

(iii) "Hazardous Substance" means, any material or substance that may impair
the quality of the environment or which under Environmental Laws is
deemed to be "hazardous", a "pollutant", "toxic", "deleterious", caustic",
"dangerous", a "waste", a "hazardous material", a "source of
contamination" or analogous substance including, without limitation,
petroleum and petroleum products, asbestos, polychlorinated biphenyls,
and flammable and radioactive materials.

(iv) "Release" means any release, spill, leak, emISSIon, discharge, leach,
dumping, migration, pumping, pouring, emitting, emptying, injecting,
spraying, burying, abandoning, incinerating, seeping, escape, disposal or
similar or analogous act as defined in any Environmental Laws.

(b) Except as disclosed in Schedule 3.1 (38), the Corporation and the Subsidiaries, the
operation of the Business and the assets owned or used by the Corporation and the
Subsidiaries have been and are in compliance with all Environmental Laws,
including all Environmental Consents.

(c) Except as disclosed in Schedule 3.1(38): (i) the Corporation and the Subsidiaries
have not been charged with or convicted of any offence for non-compliance with
Environmental Laws, or been fined or otherwise sentenced or settled any

1 - 37
 prosecution short of conviction; and (ii) there are no notices of judgment or
commencement of proceedings of any nature and the Corporation and the
Subsidiaries have never been investigated relating to any breach or alleged breach
of Environmental Laws.

(d) The Corporation and the Subsidiaries have obtained all Environmental Consents
necessary to conduct the Business and to own, use and operate their respective
properties and assets. All such Environmental Consents are listed in Schedule
3.1(38) and complete and correct copies have been provided to the Purchaser.

(e) Except as disclosed in Schedule 3.1 (38), there are no Hazardous Substances
located on or in or under the surface of any Real Properties or Leased Premises of
the Corporation or any Subsidiary, and no Release of any Hazardous Substances
has occurred on, in or from any Real Properties or Leased Premises or has
resulted from the operation of the Business and the conduct of activities thereon.

(f) Except as disclosed in Schedule 3.1 (38), none of the Corporation or the
Subsidiaries has used any of its Real Properties or Leased Premises to produce,
generate, manufacture, treat, store, handle, transport or dispose of any Hazardous
Substances except in compliance with Environmental Laws.

(g) Except as disclosed in Schedule 3.1 (38), there are no underground or above-
ground storage tanks or associated piping or appurtenances (active or abandoned),
or urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls or
radioactive substances located on or in or under the surface of any of the Real
Properties or Leased Premises or other assets used thereon.

(h) Except as disclosed in Schedule 3.1(38), none of the Corporation or any

Subsidiary is, and there is no basis upon which the Corporation or any Subsidiary
could become, responsible for any clean-up or corrective action under any
Environmental Laws. The Corporation has provided the Purchaser with copies of
any environmental audits, site assessments and studies (including all drafts
thereof) concerning any of the Real Properties and Leased Premises, or that are in
any way related to the Business, that it has ever conducted or that are in its
possession or control.

(39) Labour and Employee Matters

(a) Schedule 3.1 (39) identifies each retirement, pension, bonus, stock purchase, profit
sharing, stock option, deferred compensation, severance or termination pay,
insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary
continuation, legal benefits, unemployment benefits, vacation, incentive or other
compensation plan or arrangement or other employee benefit plan that is
maintained or otherwise contributed to, or required to be contributed to, by the
Corporation or the Subsidiaries for the benefit of employees or former employees
of the Corporation or the Subsidiaries (the "Employee Plans") and a true and
complete copy of each Employee Plan has been furnished to the Purchaser. Each

1 - 38
 Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all Laws that are applicable to such Employee
Plan. The Vendor has delivered to the Purchaser the actuarial valuations, if any,
prepared for each Employee Plan during the past. years. Except as described in
Schedule 3.1(39):

(i) all contributions to and payments from each Employee Plan that may have
been required to be made in accordance with the terms of any such
Employee Plan, or with the recommendation of the actuary for such
Employee Plan, and, where applicable, with the Laws that govern such
Employee Plan, have been made in a timely manner;

(ii) all material reports, returns and similar documents (including applications
for approval of contributions) with respect to any Employee Plan required
to be filed with any Regulatory Authority or distributed to any Employee
Plan participant have been duly filed on a timely basis or distributed;

(iii) there are no pending investigations by any Regulatory Authority involving

or relating to an Employee Plan, threatened or pending claims (except for
claims for benefits payable in the normal operation of the Employee
Plans), suits or proceedings against the Corporation or any Subsidiary in
respect of any Employee Plan or assertions of any rights or claims to
benefits under any Employee Plan that could give rise to a liability nor are
there any facts that could give rise to any liability in the event of such
investigation, claim, suit or proceeding;

(iv) no notice has been received by the Corporation or any Subsidiary of any
complaints or other proceedings of any kind involving the Corporation or
any Subsidiary or any of the employees of the Corporation or any
Subsidiary before any pension board or committee relating to any
Employee Plan or to the Corporation or any Subsidiary; and

(v) the assets of each Employee Plan are at least equal to the liabilities of such
Employee Plans based on the actuarial assumptions utilized in the most
recent valuation performed by the actuary for such Employee Plan, and
neither the Purchaser nor any of its associates or affiliates (other than the
Corporation) will incur any liability with respect to any Employee Plan as
a result of the Transactions.

(b) Except as described in Schedule 3.1(39), none of the Corporation or any

Subsidiaries has made any Contract with any labour union or employee
association nor made commitments to or conducted negotiations with any labour
union or employee association with respect to any future agreements and, except
as set out in Schedule 3.1(39), there are no current attempts to organize or
establish any labour union or employee association with respect to any employees
of the Corporation or any Subsidiary, nor is there any certification of any such
union with regard to a bargaining unit. There are no grievances against the

1 - 39
 Corporation or any Subsidiary for which the Corporation or any Subsidiary has
received written notice under any collective agreement.

(c) Schedule 3.1(39) contains a complete and accurate list of the names of all
individuals who are employees of the Corporation or any Subsidiary specifying:

(i) with respect to the unionized employees, the rate of hourly pay, whether or
not such employee is absent for any reason such as lay-off, leave of
absence or workers' compensation; and

(ii) with respect to salaried employees, the length of service, age, title, rate of
salary and commission or bonus structure for each such employee.

No notice has been received by the Corporation or any Subsidiary of any

complaint filed by any of the employees against the Corporation or any
Subsidiary claiming that the Corporation or any Subsidiary has violated any Laws
applicable to employee or human rights, or of any complaints or proceedings of
any kind involving the Corporation or any Subsidiary or any of the employees of
the Corporation or any Subsidiary before any labour relations board, except as
disclosed in Schedule 3.1(39). All levies, assessments and penalties made against
the Corporation or any Subsidiary pursuant to any Laws applicable to workers'
compensation have been paid by the Corporation or any Subsidiary and neither
the Corporation nor any Subsidiary has been assessed under any such legislation
during the past. years.

(d) All accruals for unpaid vacation pay, premiums for employment insurance, health
premiums, Canada Pension Plan premiums, accrued wages, salaries and
commissions and employee benefit plan payments have been reflected in the
Records.

(40) Product Warranties Schedule 3.1(40) is a complete and accurate list of all express,
written warranties given to purchasers of products supplied by the Corporation or any
Subsidiary.

(41 ) Intellectual Property Schedule 3.1 (41) is a complete and accurate list of all (a) domestic
and foreign patents, trade-marks, trade names, copyrights, industrial designs, business names,
certification marks, service marks, distinguishing guises, business styles and other industrial or
intellectual property, whether or not registered, that are owned by or licensed to the Corporation
or any of the Subsidiaries, and all applications in respect thereof; (b) all trade secrets, know-how,
inventions, formulas, processes and technology pertaining to the Business; and (c) all computer
systems and application software, including all related documentation and the latest revisions of
all related object and source codes, owned or used by the Corporation or any Subsidiary,
(collectively the "Intellectual Property"), including particulars of any registration, details of all
applications for registration and, where unregistered, the date of first use. Either the Corporation
or a Subsidiary is the sole owner of the Intellectual Property except in the case of Intellectual
Property licensed to the Corporation or a Subsidiary. Complete and correct copies of all
Contracts whereby any rights in respect of Intellectual Property have been granted or licensed to

1 - 40
the Corporation or any Subsidiary have been provided to the Purchaser. Except as disclosed in
Schedule 3.1 (41), the Corporation or a Subsidiary has the exclusive right to use all of the
Intellectual Property and has not granted any licence or other rights to any other person in respect
of the Intellectual Property. The Intellectual Property is free and clear of any Encumbrances
other than the Permitted Encumbrances. The Intellectual Property comprises all patents, trade-
marks, trade names, copyrights, industrial designs, business names, certification numbers,
inventions, know-how, service marks, formulae, processes, technology, trade-secrets, computer
systems and application software and other industrial or intellectual property necessary to
conduct the Business. None of the Corporation or the Subsidiaries has used or enforced, or failed
to use or enforce, any of the Intellectual Property in any manner which could limit its validity or
result in its invalidity. Except as disclosed in Schedule 3.1 (41), there has been no infringement or
violation of the Corporation's or any Subsidiary's rights in and to the Intellectual Property or any
trade secrets or confidential information, nor any claim of adverse ownership, invalidity or other
opposition to or conflict with any of the Intellectual Property. None of the Corporation or the
Subsidiaries is or has engaged in any activity that violates or infringes any intellectual property
rights of any other person.

(42) Privacy Matters The Corporation and the Subsidiaries have conducted and are
conducting the Business in compliance with all Laws applicable to privacy and the protection of
personal information.

Annotation: Laws with respect to privacy and the protection of personal information are
wide in scope and may be difficult to comply with in all respects. The Vendor and its counsel
must therefore consider carefully whether this representation should be qualified, or given at
all. In those cases where "personal information" is disclosed by the Vendor to the Purchaser
in possible contravention of applicable privacy laws and solely to accommodate the
Purchaser's formal due diligence requests, it may be appropriate for this representation to be
qualified in this regard.

3.2 Representations and Warranties of the Purchaser

Annotation: These representations by the Purchaser are much less extensive than those
given by the Vendor. To the extent representations are made, they are parallel to those made
by the Vendor and Shareholder. The Vendor is concerned primarily with the corporate status,
power and authority of the Purchaser and a limited number of other matters. To the extent
that a significantpart ofthe Purchase Price is not paid at Closing, the Vendor will legitimately
be entitled to further assurances with respect to the Purchaser's financial capability and debt
structure. Further, if the Vendor is to receive shares in satisfaction, or partial satisfaction, of
the Purchase Price (and will therefore become, in effect, an investor in the Purchaser), it may
wish to ask for much more extensive representations which would more closely parallel those
given by it to the Purchaser or, where the Purchaser is a public company in any jurisdiction,
representations confirming that the Purchaser's existing public disclosure file contains no
misrepresentations, etc.

The Purchaser hereby makes the following representations and warranties to the Vendor and
acknowledges that the Vendor is relying on such representations and warranties in entering into
this Agreement and completing the Transactions:

1 - 41
(1 ) Incorporation and Existence The Purchaser is a corporation incorporated and existing
under the laws of - .

(2) Validity of Agreement

(a) The Purchaser has all necessary corporate power to own the Purchased Shares.
The Purchaser has all necessary corporate power to enter into and perform its
obligations under this Agreement and any other agreements or instruments to be
delivered or given by it pursuant to this Agreement.

(b) The execution, delivery and performance by the Purchaser of this Agreement and
the consummation of the Transactions have been duly authorized by all necessary
corporate action on the part of the Purchaser.

(c) This Agreement or any other agreements entered into pursuant to this Agreement
to which the Purchaser is a party constitute legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency and other laws affecting the rights of creditors generally and except
that equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.

(3) No Violation The execution and delivery of this Agreement by the Purchaser, the
consummation of the Transactions and the fulfilment by the Purchaser of the terms, conditions
and provisions hereof will not (with or without the giving of notice or lapse of time, or both):

(a) contravene or violate or result in a breach or a default under or give rise to a right
of termination, amendment or cancellation or the acceleration of any obligations
of the Purchaser, under:

(i) any applicable Law;

(ii) any judgment, order, writ, injunction or decree of any Regulatory

Authority having jurisdiction over the Purchaser;

(iii) the articles, by-laws or any resolutions of the board of directors or

shareholders of the Purchaser;

(iv) any Consent held by the Purchaser; or

(v) the provisions of any Contract to which the Purchaser is a party or by

which it is, or any of its properties or assets are, bound.

(4) Competition Act The Purchaser and its affiliates have assets in Canada with an aggregate
value of $-, and gross revenues from sales in, from and into Canada with an aggregate value of
$-, as determined in accordance with the Competition Act (Canada).

1 - 42
(5) Investment Canada Act The Purchaser is not a "non-Canadian" within the meaning of
the Investment Canada Act (Canada).

Annotation: If the Purchaser is a "non-Canadian", the Parties must consider the

implications ofthe Investment Canada Act. See the annotation to Section 3.1 (15).

(6) Brokers The Purchaser has not engaged any broker or other agent in connection with the
Transactions and, accordingly, there is no commission, fee or other remuneration payable to any
broker or agent who purports or may purport to have acted for the Purchaser.

(7) Consents There is no requirement for the Purchaser to make any filing with, give any
notice to or obtain any Consent from any Regulatory Authority as a condition to the lawful
consummation of the Transactions.

3.3 Survival of Covenants, Representations and Warranties of the Vendor and Shareholder

To the extent that they have not been fully performed at or prior to the Closing Time, and unless
otherwise provided, the covenants, representations and warranties of the Vendor and the
Shareholder contained in this Agreement and any agreement, instrument, certificate or other
document executed or delivered pursuant to this Agreement shall survive the Closing and shall
continue for the benefit of the Purchaser for a period of • years notwithstanding such Closing,
nor any investigation made by or on behalf of the Purchaser or any knowledge of the Purchaser,
except that:

(1) the representations and warranties set out in Sections 3.1(1) to and including 3.1(8), and
in Section 3.1 (11 ), and the corresponding representations and warranties set out in the
certificates to be delivered pursuant to Section 5.1(1), shall survive the Closing and continue in
full force and effect without limitation of time;

(2) the representations and warranties set out in Section 3.1(36) and the corresponding
representations and warranties set out in the certificates to be delivered pursuant to
Section 5.1 (1) shall survive the Closing and continue in full force and effect until, but not
beyond, the expiration of the period, if any, during which an assessment or other form of
recognized document assessing liability for Tax, interest or penalties under Laws applicable to
Tax in respect of any taxation year to which such representations and warranties extend could be
issued under such Laws to the Corporation or any Subsidiary, including any additional period
resulting from the Corporation or such Subsidiary filing a waiver or other document extending
such period prior to the Closing;

(3) a claim for breach of any such representation or warranty, to be effective, must be
asserted in writing on or prior to the applicable expiration time set out in this Section 3.3,
provided that a claim for any breach of any of the representations and warranties contained in
this Agreement or in any agreement, instrument, certificate or other document executed or
delivered pursuant to this Agreement involving fraud or fraudulent misrepresentations may be
made at any time following the Closing Date, subject only to applicable limitation periods
imposed by Law; and

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(4) no claim for any breach of any of the covenants, representations and warranties contained
in this Agreement or in any agreement, instrument, certificate or other document executed or
delivered pursuant to this Agreement may be made after the applicable expiration time set out in
this Section 3.3 notwithstanding that such breach was not objectively discoverable.

Annotation: Determining survival periods is a matter of risk allocation and will reflect the
circumstances of the Transactions, the relative bargaining strength of the Parties and the
subject matter ofthe particular representation or covenant. The Purchaser will prefer to have
indefinite recourse to the Vendor and the Shareholder. The Vendor will want certainty with
respect to when its liabilities will end. Regardless, the Parties and their counsel need to
consider how their agreements on these issues will be affected by Ontario's Limitations Act,
2002. Business agreements between parties who are not "consumers" (as defined in the
Ontario Consumer Protection Act, 2002) may vary or exclude a basic limitation period, and
may vary an ultimate limitation period provided that it may be suspended or extended only if
the relevant claim has been discovered.

Section 3.3(1) provides that the representations with respect to fundamental matters, including
corporate existence, authority and qualification, share capital, title and enforceability survive
indefinitely. Section 3.3(2) provides that the representations with respect to tax matters survive
until the expiry ofany assessmentperiod.

The survival period for the covenants and all representations is addressed in the introductory
paragraph to Section 3.3. Typically this period ranges from six months to two years. The
Purchaser may take the view that these representations should survive at least until the
completion of the Corporation's next audit, which would be fourteen to eighteen months
following Closing.

3.4 Survival of Covenants, Representations and Warranties of the Purchaser

To the extent that they have not been fully performed at or prior to the Closing Time, and unless
otherwise provided, the covenants, representations and warranties of the Purchaser contained in
this Agreement and in any agreement, instrument, certificate or other document delivered
pursuant to this Agreement shall survive the Closing and shall continue for the benefit of the
Vendor and the Shareholder for a period of • years notwithstanding such Closing, nor any
investigation made by or on behalf of the Vendor or the Shareholder or any knowledge of the
Vendor or the Shareholder, except that:

(1) the representations and warranties set out in Sections 3.2(1) and 3.2(2), and the
corresponding representations and warranties set out in the certificates to be delivered pursuant
to Section 5.3(1), shall survive the Closing and shall continue in full force and effect without
limitation of time;

(2) a claim for breach of any such representation or warranty, to be effective, must be
asserted in writing on or prior to the applicable expiration time set out in this Section 3.4,
provided that a claim for any breach of any of the representations and warranties contained in
this Agreement or in any agreement, instrument, certificate or other document executed or
delivered pursuant to this Agreement involving fraud or fraudulent misrepresentations may be

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made at any time following the Closing Date, subject only to applicable limitation periods
imposed by Law; and

(3) no claim for any breach of any of the covenants, representations and warranties contained
in this Agreement or in any agreement, instrument, certificate or other document executed or
delivered pursuant to this Agreement may be made after the applicable expiration time set out in
this Section 3.4 notwithstanding that such breach was not objectively discoverable.

ARTICLE 4
COVENANTS

Annotation: Article 4 contains covenants by the Parties, but primarily the Vendor, to take or
refrain from taking certain actions during the Interim Period and, in the case of Section 4.4
dealing with records retention, after Closing. Compliance by each of the Parties with their
covenants is a condition ofClosing. The condition may be waived by the Party in whose favour
the covenant was made. Alternatively, the non-breaching Party may use the failure to satisfy
the condition to terminate the Agreement and not complete the Transactions. Further, subject
to Sections 3.3 and 3.4, the failure of a Party to comply with its covenants may give rise to
liability to the non-breaching Party pursuant to the indemnification provisions ofArticle 7.

4.1 Conduct During Interim Period

During the Interim Period, without in any way limiting any other obligations of the Vendor and
the Shareholder in this Agreement:

(1 ) Conduct Business in the Ordinary Course The Vendor shall cause the Corporation to
conduct the Business and the operations and affairs of the Corporation and the Subsidiaries only
in the ordinary course of the Business consistent with past practice, and the Vendor shall ensure
that none of the Corporation or the Subsidiaries shall, without the prior written consent of the
Purchaser, enter into any transaction or refrain from doing any action that would constitute a
breach of any representation, warranty, covenant or other obligation of the Vendor or the
Shareholder contained herein, and provided further that, without limiting the generality of the
foregoing, the Vendor shall cause the Corporation to ensure that none of the Corporation or the
Subsidiaries:

(i) amends its articles, by-laws, constating documents or other organizational

documents;

(ii) amalgamates, merges or consolidates with, or acquires all or substantially

all the shares or assets of any person;

(iii) transfers, leases, licenses, sells or otherwise disposes of any of its assets
except for inventory, or permits any Encumbrance to attach to or affect
any of its assets, other than in the ordinary course of the Business
consistent with past practice; or

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 (iv) does any act or thing of the kind described in Sections 3.1 (9), 3.1 (27), or
3.1 (33) or enters into any Contract of the kind described in Sections
3.1(7),3.1(13),3.1(30), 3.1(36)(h), 3.1(37)(a), or 3.1(37)(c).

Annotation: Section 4.1(1) gives the Purchaser some assurance that the Vendor will not take
any action or refrain from taking any action which would, in effect, adversely affect the value
of the Business prior to Closing. The matters referred to in Section 4.1(1)(i) to (iv) are
examples ofprohibited actions which the Purchaser may wish to supplement if it has specific
concerns about the management ofthe Business during the Interim Period.

(2) Continue Insurance The Vendor shall cause the Corporation and each Subsidiary to
continue to maintain in full force and effect all policies of insurance or renewals now in effect,
and shall take out, at the expense of the Purchaser, such additional insurance as may be
reasonably requested by the Purchaser, and shall give all notices and present all claims under all
policies of insurance in a timely fashion.

(3) Regulatory Consents The Vendor shall use its best efforts to make, give or obtain or
cause the Corporation or any relevant Subsidiary to make, give or obtain, as applicable, at or
prior to the Closing Time, with, to or from all appropriate Regulatory Authorities, the filings,
notifications and Consents described in Schedule 3.1(15).

Annotation: The critical point in Sections 4.1(3) and 4.1(4) is that the obligation of the
Vendor is qualified, not absolute. It must use its best efforts to obtain the Consents. If it fails
to obtain a Consent, the Purchaser may, if the Consent is necessary to the Closing of the
Transactions or relates to a material Contract, terminate the Agreement and not complete the
Transactions. See Section 5.1(4) and the related annotation. Provided that the Vendor has
used its best efforts to obtain the Consents, the Purchaser will have no claim against the
Vendor for breach ofcontract.

The term "best efforts" is not easily defined but clearly requires the Vendor to make goodfaith
attempts to obtain the Consents. While it requires the Vendor to use the internal resources it
has available, it does not require the Vendor to make a material expenditure offunds. See
Section 8.5. If material expenditures or external resources are required, the Purchaser will
want to ensure that the covenant specifically requires the Vendor to make those expenditures
and obtain those resources. The Vendor will obviously resist any requirement to incur
significant and/ or undetermined additional costs. In any case, it is in both Parties' interest
that this issue be thoroughly canvassed prior to execution ofthe Agreement. See Sections 8.5,
8.6 and related annotations for further discussion ofthese topics.

(4) Contractual Consents The Vendor shall use its best efforts to make, give or obtain or
cause the Corporation or any relevant Subsidiary to make, give or obtain, as applicable, at or
prior to the Closing Time the filings, notifications and Consents described in Schedule 3.1 (15) in
respect of Contracts, on such terms as are acceptable to the Purchaser, acting reasonably.

(5) Preserve Goodwill The Vendor shall use its best efforts to preserve intact, and cause the
Corporation to preserve intact, the Business and the property, assets, operations and affairs of the
Corporation and the Subsidiaries and to carryon the Business and the affairs of the Corporation

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and the Subsidiaries as currently conducted, and to promote and preserve for the Purchaser the
goodwill of suppliers, customers and others having business relations with the Corporation or the
Subsidiaries.

(6) Discharge Liabilities The Vendor shall cause the Corporation and each Subsidiary to pay
and discharge the liabilities of the Corporation and the Subsidiaries in the ordinary course of the
Business in accordance and consistent with the past practice of the Corporation and the
Subsidiaries, except those contested in good faith by the Corporation or the Subsidiaries.

(7) Corporate Action The Shareholder and the Vendor shall take and cause the Corporation
to take all necessary corporate action, steps and proceedings to approve or authorize, validly and
effectively, the execution and delivery of this Agreement and the other agreements and
documents contemplated by this Agreement and to complete the transfer of the Purchased Shares
to the Purchaser free and clear of all Encumbrances except for the Permitted Encumbrances and
to cause all necessary meetings of directors and shareholders of the Vendor and the Corporation
to be held for such purpose.

(8) Exclusive Dealing Neither the Vendor nor the Shareholder shall take any action, directly
or indirectly, to encourage, initiate or engage in discussions or negotiations with, or provide any
information to any person, other than the Purchaser, concerning any purchase of any shares in
the capital of the Corporation, the material assets of the Corporation or any Subsidiary, a
controlling interest in the Vendor or the Corporation or any merger, sale of substantial assets or
similar transaction involving the Corporation, any Subsidiary or the Business, and the Vendor
shall ensure that the Corporation does not take any such action.

Annotation: This "no-shop" provision gives the Purchaser assurance that the Vendor will not
attempt to back out ofthe Agreement in favour ofanother transaction, which mayor may not
involve the Purchased Shares. As a matter ofcontract law, this covenant is unnecessary. The
Agreement (without regard to this covenant) requires the Vendor, subject to the terms and
conditions of the Agreement, to sell the Purchased Shares to the Purchaser and prohibits the
Corporation from selling material assets prior to Closing. If the Vendor fails to comply with
its obligations in the Agreement, the Purchaser will have an action for breach of contract.
Nonetheless, the Purchaser may obtain additional comfortfrom such a covenant with the view
that it will prevent the Vendor from pursuing an alternative transaction and later finding a
pretextfor termination ofthe Agreement.

4.2 Access to Information

The Vendor shall at all times during the Interim Period make available to the Purchaser and its
representatives and advisers for examination all Records and corporate records of the
Corporation and the Subsidiaries in its possession or under its control, including environmental
and health and safety reports. The Vendor shall at all times during the Interim Period give the
Purchaser and its representatives and advisers access to the premises of the Corporation and the
Subsidiaries during normal business hours and upon reasonable notice, in order to make such
investigations as the Purchaser shall deem necessary or advisable, including for purposes of
conducting any environmental audits, environmental site assessments (including soil and
groundwater testing) or other investigations. The Vendor shall give such persons all means

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necessary to effect such examinations and investigations and shall cause its agents, employees,
officers and directors to use their best efforts to aid such persons in such examinations and
investigations. The Vendor authorizes and consents to the release by any Regulatory Authority
having jurisdiction of any information, and shall sign any documents or forms of consent
incidental thereto. The exercise of any rights of access, inspection or examination by or on behalf
of the Purchaser shall not affect or mitigate the Vendor's covenants, representations and
warranties in this Agreement. The Vendor shall provide the Purchaser and its representatives and
advisers at all times during the Interim Period with an opportunity to meet with the auditors and
any employees, advisers or personnel of the Corporation or any Subsidiary.

Annotation: Section 4.2 gives the Purchaser the right to continue its due diligence up to
Closing. The Purchaser's rights are very broad. The Vendor may argue that they are overly so
and will disrupt the Vendor's conduct of the Business during the Interim Period. If the
Vendor is in a position of strength, the Vendor may try to require the Purchaser's due
diligence to terminate on a date certain prior to Closing. This Agreement does not give the
Purchaser a due diligence "out". The Purchaser cannot rely on this Section, or any other
Section, to terminate the Agreement and decline to close the Transactions if it discovers facts
about the Business which make the acquisition less attractive unless those facts would
constitute breaches of representations or covenants which are not remedied by the Vendor
prior to Closing. Nonetheless, the Vendor will want certainty as early as possible that the
Purchaser is not going to find a reason or excuse to walk from the Transactions. See the
annotation following Section 5.1(5) (g) for further discussion ofthe due diligence out.

The Vendor will want to consider carefully whether it wishes to allow the Purchaser to contact
applicable Regulatory Authorities. Again, this may be disruptive to the Business and, if the
Transactions do not for any reason close, may affect relations with those authorities. It may
also result in the loss of confidentiality with respect to the Transactions. The same concerns
apply to contact by the Purchaser with the employees of the Business. See also Section 8.3
and the related annotation in this regard.

The express statement in Section 4.2 that the Purchaser's due diligence will not affect the
Vendor's representations and covenants means that if, prior to Closing, the Purchaser
discovers a fact which will constitute a breach ofa representation or covenant, it can choose to
close and then sue the Vendor for damages resulting from the breach. The Purchaser's
knowledge of the breach prior to Closing will not insulate the Vendor from liability.
Nevertheless, the date on which the Purchaser "discovered" the breach pursuant to the terms
ofOntario's Limitations Act, 2002 will always be an important issue in these circumstances. A
Vendor in a strong bargaining position may require that the Purchaser make disclosure ofall
breaches or potential breaches as soon as they are discovered in order to give the Vendor an
opportunity to cure them and avoid the Purchaser walking from the Transactions or closing
and seeking indemnity for damages. See also in this regard Sections 3.3, 3.4, 7.5 and the
related annotations.

4.3 Satisfaction of Closing Conditions

The Vendor and the Shareholder jointly and severally agree to use their best efforts to ensure that
the conditions set forth in Section 5.1, and the Purchaser agrees to use its best efforts to ensure that

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the conditions set forth in Section 5.3, are fulfilled at or prior to the Closing Time. Each of the
Parties agrees to use its best efforts to ensure that the conditions set forth in Section 5.5 are
fulfilled at or prior to the Closing Time.

4.4 Delivery of Records

At the Closing Time, the Vendor shall deliver to the Purchaser all the Records and corporate
records of the Corporation and the Subsidiaries. The Purchaser agrees that it will preserve such
records so delivered to it for a period of six years from the Closing Date, or for such longer
period as is required by any applicable Law, and will permit the Vendor or its authorized
representatives reasonable access thereto in connection with the affairs of the Vendor, but the
Purchaser shall not be responsible or liable to the Vendor for or as a result of any accidental loss
or destruction of or damage to any such records.

ARTICLES
CONDITIONS OF CLOSING

Annotation: Sections 5.1 and 5.3 create "walk rights" in favour ofthe Purchaser and Vendor,
respectively. In other words, each of the Purchaser and Vendor has the right, which it may
waive if it so chooses, to terminate the Agreement and not complete the Transactions if one of
the conditions in its favour specified in those Sections is not satisfied. These rights need to be
contrasted with Section 5.5 which results in automatic termination of the Agreement if the
conditions specified therein are not satisfied. For obvious reasons, the conditions precedent in
Section 5.5 cannot be waived unilaterally.

Understandably, the accuracy of the representations and compliance with the covenants set
out in this Agreement constitute important conditions precedent for both the Purchaser and
Vendor. Frequently, conditions of Closing are used in order to compliment and/or supplement
the representations and covenants in the Agreement.

5.1 Conditions for the Benefit of the Purchaser

The obligation of the Purchaser to complete the Transactions will be subject to the fulfilment of the
following conditions at or prior to the Closing Time:

(1) Representations, Warranties and Covenants The representations and warranties of the
Vendor and the Shareholder made in or pursuant to this Agreement shall be true and accurate at
the Closing Time with the same force and effect as though such representations and warranties
had been made as of the Closing Time. The Vendor and the Shareholder shall have complied
with all covenants and agreements in this Agreement to be performed or caused to be performed
by them at or prior to the Closing Time. In addition, the Vendor and the Shareholder shall have
delivered to the Purchaser a certificate confirming the foregoing. The receipt of such certificate
and the completion of the Transactions shall not be deemed to constitute a waiver of any of the
representations, warranties or covenants of the Vendor and the Shareholder contained in this
Agreement. Such representations, warranties and covenants shall continue in full force and effect
as provided in Section 3.3.

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Annotation: The Purchaser may wish to include a provision in this Section or Section 5.2
explicitly stating its right to sue the Vendor and/or Shareholder for damages if a condition is
not satisfied due to the breach of a covenant or representation by the Vendor or Shareholder.
Such a provision would confirm the existence of an additional remedy, which exists at law
absent an exclusive remedies provision in the Agreement. Since this Agreement contains an
exclusive remedies provision in section 7.5(8), providing for such an additional remedy in this
Section would require a corresponding amendment to Section 7.5(8). On the other hand, the
Purchaser may be satisfied with its express indemnity right under Section 7.1(4).

(2) No Material Adverse Change Except as has been specifically permitted In this
Agreement, since the date of this Agreement there shall not have been:

(a) any material adverse change in any of the assets, business, financial condition,
earnings, results of operations or prospects of the Corporation or any of the
Subsidiaries that has, or threatens to have, a material adverse effect on the assets,
business, financial condition, earnings, results of operations or prospects of the
Corporation on a consolidated basis or which might materially adversely affect
the ability of the Corporation or any Subsidiary to carry on the Business after the
Closing substantially as such Business is being conducted upon the date of this
Agreement; or

(b) 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 on the assets, business, financial condition, earnings, results of
operations or prospects of the Corporation on a consolidated basis.

Annotation: In Sections 5.1(2) and 5.1(3), the Purchaser may wish to include language
stating that any material adverse effect shall in each case be "in the Purchaser's opinion".
The Purchaser's objective clearly in inserting this language would be to make the test
subjective and bring it within the Purchaser's discretion. The Vendor will usually resist
changes ofthis type on the basis that the test should be more objective. The relative bargaining
power of the Parties will determine this issue and frequently the Parties will agree to a
compromise position providing that the Purchaser must act reasonably in forming its
opinions.

(3) No Action to Restrain/No Adverse Law No Law shall have been made, and no action or
proceeding shall be pending or threatened, which is likely to result in an order, decision or ruling
imposing any limitations or conditions which may have a material adverse effect on the
Transactions, the right of the Purchaser to own the Purchased Shares, or the assets, business,
financial condition, earnings, results of operations or prospects of the Corporation on a
consolidated basis.

Annotation: The Vendor will seek to narrow this "walk right" in several respects. For
example, the Vendor may feel that it is inequitable that the Purchaser be entitled to walk away
from the Agreement in respect ofLaws or proceedings which existed at the time the Purchaser
entered into the Agreement. Hence, the Vendor will look to include language limiting the
scope of this provision to Laws and proceedings which arise "since the date of this

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Agreement". Further, the Vendor will have trouble accepting that "threatened litigation"
should be a basis for the Purchaser to terminate. Such threatened litigation could be meritless,
frivolous or orchestrated by the Purchaser. Likewise, the Vendor will strongly oppose any
attempt by the Purchaser to expand this Section to capture "proposed laws". The definition of
"Law" in this Agreement does not extend to proposed laws.

(4) Consents All filings, notifications and Consents with, to or from Regulatory Authorities
and third parties, including the parties to the material Contracts listed on Schedule 3.1 (30) and
the lessors of the Leased Premises listed on Schedule 3.1 (37)(c), required to permit the change of
ownership of the Purchased Shares contemplated hereby without resulting in the violation of or a
default under or any termination, amendment or acceleration of any obligation under any licence,
permit, lease, or material Contract affecting the Business or otherwise adversely affecting the
Business, the Corporation or any Subsidiary, shall have been made, given or obtained on terms
acceptable to the Purchaser acting reasonably.

Annotation: A Vendor with leverage (for example, in an auction situation) can insist on a
definitive list of Consents which must be obtained in order for the Transactions to close.
However, more commonly, the Purchaser will insist on including more general language to
the effect that all Consents necessary or material to the Business must be tabled. Such a
position is reasonable, but the Vendor must be satisfied that the language does not give the
Purchaser an excuse not to close if a trivial Consent is not obtained.

A Purchaser with superior bargaining power may wish to negotiate the inclusion of Consents
which apply to itself. For example, the Purchaser may want to make completion of the
Transactions conditional on it obtaining satisfactory financing or the Consent of one of its
lenders.

(5) Deliveries The Vendor shall have delivered to the Purchaser the following in form and
substance satisfactory to the Purchaser:

(a) a favourable opinion of counsel to the Vendor, the Shareholder and the
Corporation substantially in the form set forth in Schedule 5.1 (5)(a);

Annotation: The opinion to be delivered by counsel to the Vendor et al pursuant to

Section 5.1(5)(a) can be addressed in several different ways. If the Parties have sufficient time
and wish to avoid the possibility of a dispute later on, they may elect to attach a draft form of
opinion as a schedule and indicate that the Vendor's counsel will deliver an opinion
"substantially in the form set out in Schedule .". Alternatively, the Parties frequently are
comfortable just listing the major issues to be addressed in the opinion and including "basket
language" to the effect that the opinion also will cover matters incidental to the foregoing and
such other matters typically addressed in a transaction of the type contemplated by the
Agreement. Finally, the Purchaser may simply wish to say that the opinion shall be in form
and substance satisfactory to it.

An interesting issue arises should counsel to the Vendor issue an opinion which is qualified in
an unusual manner. The seriousness of the qualification will usually determine whether or
not the Purchaser has a right to terminate the Agreement. If serious, the qualification will

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enable the Purchaser to say the form of opinion is not satisfactory to it. But what if the
qualification is minor and represents only a slight deviation from the form of opinion that
might be attached to the Agreement? If the opinion fails to conform in a material respect, the
Purchaser will likely have a right to terminate the Agreement on the basis that one or more
representations and/or conditions are not satisfied.

Ifmaterial agreements are to be delivered by Parties other than the Vendor and Shareholder,
the Purchaser may wish to request opinions from counsel to such Parties.

(b) non-competition agreements duly executed by the Vendor, the Shareholder and.
substantially in the form of the agreement attached as Schedule 5.1 (5)(b);

If more than one non-competition agreement is being delivered pursuant to Section 5.1(5) (b),
the Parties would be prudent to note any differences in duration and/or geographic scope
between such agreements. If the duration of any non-competition agreement extends beyond
the survival period which applies generally under Section 3.3 to all covenants and
representations of the Vendor and the Shareholder contained in the Agreement and all
documents delivered under the Agreement, the non-competition agreement should specifically
state its duration applies notwithstanding the general survival period for covenants in the
Agreement. A similar "notwithstanding" provision should be inserted in any other agreements
delivered under the Agreement, including consulting agreements and new premises leases,
which contain covenants remaining in effect beyond the general survival period. If a non-
competition agreement is to be delivered, or if the Agreement otherwise contains non-
competition covenants, the Parties need to consider draft paragraph 56.4(3)(c) ofthe ITA and
provide for making andfiling the election prescribed thereunder.

(c) employment agreements duly executed by • on terms and conditions satisfactory

to the Purchaser;

This condition can be a source of serious disagreement and uncertainty if the form of each
employment agreement is not attached to the Agreement. Often the form cannot be settled in
advance and employees may be difficult or self-interested at such times.

(d) duly executed resignations effective as at the Closing Time of each director and
officer of the Corporation specified by the Purchaser;

With respect to resignations to be delivered under this Section and releases to be delivered
under Section 5.1(5) (e), the Vendor should consider whether there are any which will be
problematic to obtain for whatever reason. With the Purchaser's consent, these could be
expressly excludedfrom the obligation, or included only on a "best efforts" basis.

(e) releases from each of the Vendor, the Shareholder and each of the individuals
specified in Section 5.1 (5)(d) of all claims they may have against the Corporation

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 or any of the Subsidiaries substantially in the terms of the release attached as
Schedule 5.1 (5)(e);

(f) all Records and all corporate records of the Corporation and the Subsidiaries and
other documents referred to in this Agreement or any Schedule; and

(g) all documentation and other evidence reasonably requested by the Purchaser in
order to establish the due authorization and consummation of the Transactions,
including the taking of all corporate proceedings by the boards of directors and
shareholders of the Vendor and the Corporation required to effectively carry out
the obligations of the Vendor and the Corporation pursuant to this Agreement.

Depending on the circumstances of the Transactions, it may be essential that the Purchaser
receive certain key agreements or reports ofprofessionals in respect of environmental, tax or
financial matters. If the Purchaser is aware ofdocumentation or evidence which it requires in
order to feel comfortable about Closing, it should specifically list such materials, rather than
trying to rely on the "basket language" in Section 5.1(5)(g). Heavy reliance by the Purchaser
on this Section may result in difficult issues arising at or before Closing.

Conversely, the Vendor should be careful about agreeing to table deliverables which are vague
and/or subjective in nature. For example, the Purchaser may want comfort satisfactory to it
that a material customer will continue to do business with the Corporation following
completion of the Transactions. What does this really mean and what can the Vendor
reasonably expect to deliver?

The Purchaser often wishes to make it a condition of Closing that it has completed and is
satisfied with the results of its due diligence. The Vendor will frequently oppose the inclusion
ofa due diligence out, on the basis that it is too subjective and vague. Such a condition has not
been included in this Agreement on the basis that it perhaps tips the scales too much in favour
of the Purchaser. The Purchaser should be able to adequately protect itself by expanding on
any specific due diligence concerns which it may have and adjusting the other conditions of
Closing to address such due diligence concerns. A Purchaser in a superior bargaining
position will often succeed in securing such an out.

5.2 Waiver or Termination by the Purchaser

The conditions contained in Section 5.1 are inserted for the exclusive benefit of the Purchaser
and may be waived in whole or in part by the Purchaser at any time without prejudice to any of
its rights of termination in the event of non-performance of any other condition in whole or in
part. If any of the conditions contained in Section 5.1 are not fulfilled or complied with by the
time provided for, the Purchaser may, at or prior to the Closing Time, terminate this Agreement
by notice in writing after such time required to the Vendor and the Shareholder. In such event the
Purchaser shall be released from all obligations in this Agreement (except as set out in Section
5.6) and, unless the condition or conditions which have not been fulfilled are reasonably capable
of being fulfilled or caused to be fulfilled by the Vendor, the Shareholder or the Corporation,

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then the Vendor and the Shareholder shall also be released from all obligations in this Agreement
(except as set out in Section 5.6).

Annotation: It should be noted in respect of Sections 5.2 and 5.4 that fault of a Party
associated with non-fulfillment ofa condition is not relevant to the rights ofthe Purchaser or
Vendor, as applicable, to terminate the Agreement. These rights are without qualification.
They are not subject to any materiality test. Tests ofmateriality and reasonableness, ifany, are
already factored into the representations, covenants and conditions ofClosing.

Each ofSections 5.2 and 5.4 allow the beneficiary of a condition to terminate this Agreement
before the Closing Time ifit is a relative certainty that a specified condition cannot be fulfilled
at any future time. More specifically, the words "at or prior to the Closing Time" are intended
to permit immediate termination of the Agreement, without the relevant Party having to wait
until the Closing Time in such circumstances. For example, ifit is a condition of Closing that
the Purchaser enter into an employment agreement with a key employee of the Corporation
and the key employee dies between the date of the Agreement and the Closing Time, the
condition is incapable ofbeing satisfied.

An interesting issue which often is negotiated relates to whether any cure rights should be
permitted with respect to a condition, such as the accuracy of a representation, which may
become unfulfilled between the date of signing the Agreement and the Closing Time. The
Purchaser may argue that no such cure right should be allowed as it has purchased the
"truth" of the Vendor's representations. On the other hand, the Vendor may argue that it
should be allowed to cure an unfulfilled condition prior to the Closing Time provided that the
cure is effected within a set time period following notice from the Purchaser and provided the
Purchaser is not otherwise prejudiced. The latter argument, being more equitable, generally
prevails.

5.3 Conditions for the Benefit of the Vendor and Shareholder

The obligations of the Vendor and the Shareholder to complete the Transactions will be subject
to the fulfilment of the following conditions at or prior to the Closing Time:

(1) Representations, Warranties and Covenants The representations and warranties of the
Purchaser made in or pursuant to this Agreement shall be true and accurate at the Closing Time
with the same force and effect as though such representations and warranties had been made as
of the Closing Time. The Purchaser shall have complied with all covenants and agreements in
this Agreement to be performed or caused to be performed by it at or prior to the Closing Time.
In addition, the Purchaser shall have delivered to the Vendor and the Shareholder a certificate
confirming the foregoing. The receipt of such certificate and the completion of the Transactions
shall not be deemed to constitute a waiver of any of the representations, warranties or covenants
of the Purchaser contained in this Agreement. Such representations, warranties and covenants
shall continue in full force and effect as provided in Section 3.4.

Annotation: Apart from the condition relating to the accuracy of representations and the
performance of covenants in Section 5.3(1), conditions are generally few and far between in

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favour of the Vendor and Shareholder. Examples of additional conditions in favour of the
Vendor might be a legal opinion ofPurchaser's counsel, a release ofguarantees provided by
the Vendor and/or Shareholder, repayment of shareholder loans or an assignment of life
insurance on the life ofthe Shareholder ifthe life insurance is owned by the Corporation. To
the extent any additional conditions are permitted by the Purchaser, it will endeavour to make
sure they are as narrowly drafted as possible. It is quite reasonable for the Vendor to require
an opinion from the Purchaser's counsel, especially in circumstances where there are
continuing obligations of the Purchaser relating to indemnities, price adjustments and
holdback amounts.

The delivery of Consents in respect of material Contracts is not generally an acceptable

condition in favour of the Vendor, unless of course the Vendor and/or Shareholder has in
some way guaranteed obligations in respect ofthe material Contracts in question.
5.4 Waiver or Termination by the Vendor and Shareholder

The conditions contained in Section 5.3 are inserted for the exclusive benefit of the Vendor and
the Shareholder and may be waived in whole or in part by the Vendor and the Shareholder at any
time without prejudice to any of their rights of termination in the event of non-performance of
any other condition in whole or in part. If any of the conditions contained in Section 5.3 are not
fulfilled or complied with by the time provided for, the Vendor may, on behalf of itself and the
Shareholder, at or prior to the Closing Time, terminate this Agreement by notice in writing after
such time to the Purchaser. In such event the Vendor and the Shareholder shall be released from
all obligations in this Agreement (except as set out in Section 5.6) and, unless the condition or
conditions which have not been fulfilled are reasonably capable of being fulfilled or caused to be
fulfilled by the Purchaser or the Corporation, then the Purchaser shall also be released from all
obligations in this Agreement (except as set out in Section 5.6).

Annotation: See the annotation to Section 5.2.

5.5 Conditions Precedent

The purchase and sale of the Purchased Shares is subject to the following conditions to be
fulfilled at or prior to the Closing Time, which conditions are true conditions precedent to the
completion of the Transactions:

(1) No Legal Action No action or proceeding shall be pending or threatened by any person
to enjoin, restrict or prohibit any of the Transactions or the right of the Corporation and the
Subsidiaries to conduct the Business after Closing on substantially the same basis as heretofore
conducted.

Annotation: If legal proceedings have been commenced to prevent the Transactions from
being completed, or which will materially restrict the right of the Corporation to carry on the
Business or otherwise result in dramatic adverse changes to the Business, the Parties will
usually want to be able to walk away and have the Agreement automatically terminate. The
Parties do not want to become embroiled in nasty, lengthy litigation which may be harmful to
them and the Corporation. Likewise, the Purchaser does not want to be forced to purchase the

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Business ifit may be materially adversely affected by the legal proceedings, a situation which
would in turn likely result in the Purchaser suing the Vendor for damages.

The Parties may want to allow exceptions to this general rule, such as litigation which both
Parties consider to be frivolous or without merit. Further, the Parties may reject the notion
that "threatened" litigation ofthis nature alone should result in automatic termination.

(2) Investment Canada Act Investment Canada shall have provided a receipt to the Purchaser
pursuant to the Investment Canada Act or the Purchaser shall have received evidence satisfactory
to it indicating that the acquisition of the Purchased Shares by the Purchaser is not a reviewable
investment under the Investment Canada Act and such receipt or other evidence shall be in full
force and effect at the Closing Time.

Annotation: Certain Transactions cannot proceed by law if Consents from certain Regulatory
Authorities are not obtained. As such Consents go to the root of the Transactions, they are
listed as "true conditions precedent" which cannot be waived by the Parties, except in the
unlikely event that the Parties unanimously agree otherwise. Investment Canada Act and
Competition Act Consents are the most commonly cited true conditions precedent. However,
depending on the nature of the Parties and the Corporation, the receipt of other Consents
from other persons may be appropriate for inclusion (e.g. Office of the Superintendent of
Financial Institutions, Hart Scott Rodino administrators or one or more securities regulators).

If the Purchaser's representation in Section 3.2(5) is included, then clearly the Investment
Canada Act condition precedent in Section 5.5(2) will be unnecessary. Similarly, if the assets
and revenues of the Vendor and the Purchaser as disclosed in 3.1(34) for the Vendor and
3.2(4) for the Purchaser are below the threshold levels for pre-notification, the Competition
Act condition precedent in Section 5.5(3) may be unnecessary.

(3) Competition Act The Vendor and the Purchaser each have filed all notices and
information required under Part IX of the Competition Act (Canada), satisfied any request for
additional information and the applicable waiting periods and any extensions shall have expired
without the threat of restraint or challenge, or the Parties shall have received an Advance Ruling
Certificate pursuant to the Competition Act (Canada) setting out that the Commissioner of
Competition under such Act is satisfied he would not have sufficient grounds on which to apply
for an order in respect of the Transactions.

If any conditions precedent shall not have been fulfilled at or prior to the Closing Time, this
Agreement shall be terminated and the Parties shall be released from all obligations under this
Agreement, except as set out in Section 5.6.

Annotation: In addition to the other events oftermination, the Purchaser and the Vendor may
wish to also specify that the Agreement may be terminated on their mutual written consent.
Frequently, the Parties do not consider it necessary to include such a provision as it basically
amounts to a written amendment which the Parties can effect any time in any case.
Nevertheless, it may be prudent to include such a provision where there are third party

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beneficiaries of the Transactions (e.g. key employees, minority shareholders, customers or
suppliers) who may have a lot at stake. See the annotation at 5.5 (2) also.

5.6 Survival following Termination

In the event of termination of this Agreement at or prior to the Closing Time pursuant to Sections
5.2, 5.4 or 5.5, the provisions of Articles 1, 7 and 8 and Sections 2.3(1), 5.2, 5.4 or 5.5 shall
survive such termination indefinitely. Upon such termination, the Purchaser shall promptly
deliver to the Vendor all copies of all Records and corporate records of the Corporation and the
Subsidiaries and other written material obtained by the Purchaser from the Vendor, the
Shareholder, the Corporation or any Subsidiary in connection with this Agreement.

Annotation: Sections 5.2, 5.4, 5.5 and 5.6 deal with the effect of termination as between the
Parties and not the remedies of the Parties where there is fault on the part of one or more of
them. In respect ofremedies, the Parties should look to Article 7 dealing with indemnification
and, if they decide to delete Section 7.5(8), their rights at law outside ofthe Agreement.

An alternative approach to listing specific provisions would be to use general language such
as "... all provisions which either expressly or by their nature are intended to survive shall
survive untilfully performed or for such lesser period as may be setforth in this Agreement. "

ARTICLE 6
CLOSING ARRANGEMENTS

6.1 Place of Closing

The Closing shall take place at the Closing Time at the offices of •.

6.2 Deliveries at the Closing

At the Closing Time, upon fulfillment of all the conditions set out in Article 5 that have not been
waived in writing by the Purchaser, the Vendor or the Shareholder, as applicable, the Vendor
shall deliver to the Purchaser certificates evidencing all the Purchased Shares, duly endorsed in
blank for transfer, the Vendor and the Shareholder shall deliver such documents as are required
or contemplated to be delivered by the Vendor, the Shareholder or Vendor's counsel pursuant to
this Agreement, the relevant portions of the Purchase Price shall be paid or delivered in the
manner provided in Section 2.3, and the Purchaser shall deliver such documents as are required
or contemplated to be delivered by the Purchaser or Purchaser's counsel pursuant to this
Agreement.

Annotation: Although this Section may require that the signatures on the share certificates or
transfer forms be guaranteed by a bank or trust company, "insurance" of this nature is
considered to be unnecessary in most Transactions.

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 ARTICLE 7
INDEMNIFICATION

Annotation: These Sections dealing with indemnification are among the most intensely
negotiated in the Agreement. The Purchaser wants protection relating to the representations
and other continuing covenants of the Vendor. On the other hand, the Vendor wants no
continuing responsibilities for the Business which it no longer owns.

This negotiation can result in a wide variety of outcomes, depending on the relevant
bargaining power and levels ofsophistication of the Parties. Some Vendors will agree to give
open-ended indemnification rights if selling an "unwanted" business to the only interested
Purchaser. Much more frequently, each Party will want to put a ceiling on its total potential
liabilities under the Agreement. Further, the Parties will sometimes agree to a fixed amount or
formula in respect ofcertain classes ofliability.

As an indemnification covenant is only as valuable as the person who is giving it, the
Indemnified Party needs to consider whether the indemnity should be buttressed by collateral
provisions. For example, the Purchaser may believe it advisable to request a guarantee from
an affiliate of the Vendor and/or Shareholder or include substantial holdbacks from the
Purchase Price. Similarly, ifthe Vendor feels sufficiently insecure about payment of deferred
portions of the Purchase Price in the form of holdbacks or earnouts, it may request that the
Purchaser provide security for those continuing obligations.

Where there is more than one Vendor, the Vendors may wish to bear different levels of
liability, depending on whether they hold a controlling position or not, or are active or passive
shareholders of the Corporation. This allocation of liability can be dealt with in the
Agreement, or the Vendors can agree to be jointly and severally liable in the Agreement and
then separately agree to reallocate responsibility among themselves.

7.1 Indemnification by the Vendor and the Shareholder

Subject to Section 3.3, the Vendor and the Shareholder shall, jointly and severally, indemnify
and save the Purchaser harmless for and from:

(1) all debts and liabilities of the Corporation and the Subsidiaries, including liabilities for
any Taxes, existing at the Closing Time and not disclosed on or included in the Audited
Financial Statements or Interim Financial Statements, except liabilities accruing or incurred
subsequent to the Audited Statements Date in the ordinary course of the Business, consistent
with past practice and except liabilities disclosed in this Agreement or any Schedule;

(2) all contingent liabilities which the Corporation or any Subsidiary becomes obligated to
pay and which exist at the Closing Time whether or not disclosed or reflected in the Audited
Financial Statements or Interim Financial Statements, and whether or not the Vendor, the
Corporation, a Subsidiary or the Shareholder or any of them have notice thereof or of the facts or
circumstances which give rise thereto;

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(3) any assessment for Taxes for any period up to the Closing Date for which no adequate
reserve has been provided and disclosed in the Audited Financial Statements or Interim Financial
Statements;

(4) any loss, damages or deficiencies suffered by the Purchaser or by the Corporation or any
Subsidiary as a result of any breach of representation, warranty or covenant on the part of the
Vendor or the Shareholder contained in this Agreement or in any certificate or document
delivered pursuant to or contemplated by this Agreement;

(5) any warranty, damage or similar claim made against the Corporation or any Subsidiary
for or arising from defects in any goods, materials, service or workmanship, in each case
provided by the Corporation or such Subsidiary on or prior to the Closing Date for which the
Corporation or any Subsidiary is or is alleged to be liable; and

(6) all claims, demands, costs and expenses, including legal fees, in respect of the foregoing.

Annotation: The Purchaser may wish to expand the group ofpersons to be indemnified by the
Vendor and the Shareholder such that it includes the Corporation, the Purchaser's other
affiliates, and officers, directors or other representatives ofany ofthe foregoing.

Depending on the circumstances of the Transactions and the Business, the Purchaser may
feel it necessary to include specific indemnity provisions relating to specific risks. These might
include: (i) an unknowable environmental risk; (ii) a possible/probable change ofLaw; (iii)
the outcome ofa disclosed law suit; or (iv) the loss ofa major customer ofthe Business.

Sections 7.1(4) and 7.2(1) must be read with Section 7.5(1). The scope ofSections 7.1(4) and
7.2(1) is quite broad. In each case, the Indemnifying Party is responsible for damages
resulting from breaches of representations and covenants not only contained in the
Agreement, but also in any certificate or document delivered pursuant to or contemplated by
the Agreement. Depending on a Party's circumstances, it may want to leave this language as is
and argue that it extends to all documents, including documents reviewed during the due
diligence process. Alternatively, a Party may wish to specify that this indemnity right is
restricted to documents delivered at the Closing.

As mentioned above, if environmental risk is a "hot" topic in the context of the particular
Transactions, the Purchaser may wish to include a separate provision addressing only
indemnification for environmental matters. Among other things, such provision wouldprovide
for the handling ofenvironmental claims and control over clean-up situations. Environmental
liability often merits special attention because the degree of risk is usually unknown, any
environmental problem can be hugely disruptive to the Business and claims can come from
government agencies or third parties who are not bound by the Agreement. Further, whereas
many types of liability tend to decrease over time, environmental liabilities almost never do.
Another reason why the Parties may elect to include a separate provision dealing with
environmental indemnification may be the fact that the Vendor does not feel comfortable
giving a representation about which it does not have sufficient knowledge in the
circumstances.

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Alternatively, the Parties may elect to forego including a separate environmental
indemnification and may deal with environmental liabilities by way ofa price reduction or an
increase in any escrow amount or holdback.

7.2 Indemnification by the Purchaser

Subject to Section 3.4, the Purchaser shall indemnify and save the Vendor and Shareholder
harmless for and from:

(1) any loss, damages or deficiencies suffered by the Vendor as a result of any breach of
representation, warranty or covenant on the part of the Purchaser contained in this Agreement or
in any certificate or document delivered pursuant to or contemplated by this Agreement; and

(2) all claims, demands, costs and expenses, including legal fees, in respect of the foregoing.

Annotation: Counsel to the Purchaser will frequently not include a provision analogous to
Section 7.2 in its first draft of the Agreement. If the Vendor is in a weak bargaining position
and if the Purchaser has no surviving obligations or covenants of a material nature, this
approach may be acceptable. However, sophisticated Vendors with experienced counsel will
insist on the inclusion ofsuch a provision in almost all circumstances.

7.3 Notice of Claim

A Party entitled to and seeking indemnification pursuant to the terms of this Agreement (the
"Indemnified Party") shall promptly give written notice to the Party or Parties, as applicable,
responsible for indemnifying the Indemnified Party (the "Indemnifying Party") of any claim for
indemnification pursuant to Sections 7.1 or 7.2 (a "Claim", which term shall include more than
one Claim). Such notice shall specify whether the Claim arises as a result of a claim by a person
against the Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise (a
"Direct Claim"), and shall also specify with reasonable particularity (to the extent that the
information is available):

(1 ) the factual basis for the Claim; and

(2) the amount of the Claim, or, if any amount is not then determinable, an approximate and
reasonable estimate of the likely amount of the Claim.

Annotation: The Parties may wish to address the circumstance where the Indemnified Party
does not give "prompt" notice to the Indemnifying Party of the existence of a Claim.
Commonly, the Parties will resolve that such failure will not relieve the Indemnifying Party
unless the delay has prejudiced such Party.

7.4 Procedure for Indemnification

(1) Direct Claims With respect to Direct Claims, following receipt of notice from the
Indemnified Party of a Claim, the Indemnifying Party shall have 30 days to make such
investigation of the Claim as the Indemnifying Party considers necessary or desirable. For the

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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 such Claim,
the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon
amount of the Claim.

If the Indemnified Party and the Indemnifying Party do not agree within such period (or any
mutually agreed upon extension), the Indemnified Party and the Indemnifying Party agree that
the dispute shall be submitted to arbitration pursuant to the Arbitration Act, 1991 (Ontario).
Such dispute shall not be made the subject matter of an action in a court by either the
Indemnified Party or the Indemnifying Party unless the dispute has first been submitted to
arbitration and finally determined in accordance with the provisions of Schedule 7.4(1). Any
such action commenced thereafter shall only be for judgment in accordance with the decision of
the arbitrators and the costs incidental to the action. In any such action the decision of the
arbitrators shall be conclusively deemed to determine the rights and liabilities as between the
Parties to the arbitration in respect of the matter in dispute.

Annotation: Arbitration provisions are not appropriate for all clients and/or all Transactions.
If technical disputes are anticipated, the Parties may wish to restrict the scope of an
arbitration provision to such disputes and specify the types ofexperts who should be involved.
Further, if it is critical that the Parties not be suing each other due to ongoing business
relationships between them, an arbitration clause may be suitable.

However, a Party in a position ofsuperior bargaining strength (e.g. with significant resources
or a substantial purchase price holdback in hand) will usually have no appetite for arbitration
clauses. Such a Party will favour taking its chances with possible litigation or a
non-arbitrated, informal private settlement process. Some clients oppose arbitration on
principle, based on unpleasant past experiences.

Competing factors which each Party should consider are the high cost oflitigation, whether a
slow resolution process is problematic and how important it is to keep the dispute confidential.
Ontario's Limitations Act, 2002 clearly impacts the operation ofarbitration provisions and the
Parties and their counsel should consider the effect ofSection 11 ofthat Act in particular.

(2) Third Party Claims With respect to any Third Party Claim, the Indemnifying Party shall
have the right, at its own expense, to participate in or assume control of the negotiation,
settlement or defence of such Third Party Claim and, in such event, the Indemnifying Party shall
reimburse the Indemnified Party for all the Indemnified Party's out-of-pocket expenses incurred
as a result of such participation or assumption. If the Indemnifying Party elects to assume such
control, the Indemnified Party shall cooperate with the Indemnifying Party, shall have the right
to participate in the negotiation, settlement or defence of such Third Party Claim at its own
expense and shall have the right to disagree on reasonable grounds with the selection and
retention of counsel, in which case counsel satisfactory to the Indemnifying Party and the
Indemnified Party shall be retained by the Indemnifying Party. If the Indemnifying Party, having
elected to assume such control, thereafter fails to defend any such Third Party Claim within a

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reasonable time, the Indemnified Party shall be entitled to assume such control and the
Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect
to such Third Party Claim.

Annotation: When a Third Party Claim arises, the Indemnifying Party (usually, the Vendor)
will frequently want a significant role in the defence of such Claim. The Indemnified Party
may agree to cede control subject to certain limitations and qualifications. For instance, the
Indemnified Party may not want the Indemnifying Party to have carriage of Claims involving
tax and environmental matters. Further, the Indemnified Party may want to prevent the
Indemnifying Party from assuming control where (i) a conflict of interest would appear to
exist; (ii) the Indemnified Party has concerns about the financial capacity ofthe Indemnifying
Party to properly conduct the defence; or (iii) the Indemnified Party has concerns about the
counsel chosen by the Indemnifying Party.

Finally, the Purchaser, as Indemnified Party, may want to prevent the Vendor from assuming
carriage ofa defence if the Vendor may at the same time dispute the fact that the proceedings
represent an indemnifiable Claim.

7.5 General Indemnification Rules

The obligations of the Indemnifying Party to indemnify the Indemnified Party in respect of
Claims shall also be subject to the following:

Annotation: This Section deals with a wide array ofprovisions concerning the operation of
the indemnity obligations, including the duration of the obligations, threshold levels which
must be satisfied before the obligations arise and means by which a Party can collect on its
indemnity entitlement.

The Purchaser will sometimes insert a provision stating that its rights to indemnification are
not affected by its knowledge ofa breach ofthe Agreementprior to Closing. A provision ofthis
nature may be helpful in avoiding a lengthy factual debate between the Parties and prevent the
Vendor from alleging that the Purchaser had knowledge in respect ofthe relevant matter each
time a Claim is raised. Such a provision will produce strong debate, and will generally be
much broader than the brief related provisions found in Section 4.2 and in the introductory
paragraphs to Sections 3.3 and 3.4. The Purchaser may argue that provisions of this nature
are appropriate in view of the fact that the Purchaser has bought the Vendor's promise as to
the truth of the representations and can sue on it if it so wishes. The Purchaser will be
concerned that if it does not include such a provision, the Vendor will argue that the
Purchaser, seized with such knowledge, has waived its right to sue or has not relied on the
wording ofthe relevant provision.

There are many issues which are not dealt with in Article 7 and which may be ofsignificance
to the Parties in the particular circumstances. The Purchaser, as Indemnified Party, may feel
that it is appropriate that an Indemnified Party be entitled to interest from the date on which it
incurs or pays any indemnifiable expense. A provision such as this may be useful in deterring
an Indemnifying Party from frivolously disputing its obligations or delaying payment.

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If there are escrow amounts, earnout amounts or holdbacks, the Purchaser may want to be
able to set off against these amounts the amount of its Claims. Any set-off mechanics which
are included in the Agreement will need to be dovetailed with related documentation such as
promissory notes and any escrow agreement.

Set-off is an important tool for an Indemnified Party which may otherwise have difficulty
enforcing the indemnities. Consider, for example, the situation of a Purchaser who is
attempting to collect from multiple Vendors or a non-resident Vendor. Obviously, a holdback
gives a Purchaser more leverage than an escrow arrangement, as escrow arrangements
involve third parties, whereas a holdback is completely within the Purchaser's control.
Alternatively, a Purchaser may consider taking security for the Vendor's indemnity
obligations in the form of a letter of credit or security interest on collateral of the Vendor. A
Vendor will want to limit the set-offrights ofthe Purchaser to situations where the dispute has
been definitively resolved. On the other hand, the Purchaser will want to be able to exercise its
rights ofset-offwhen it in goodfaith believes that it has a Claim.

Rights of set-off exist at common law. However, they can be fraught with difficulty and
accordingly, it is best to include express rights ofset-off.

(1) Any Claim arising as a result of a breach of a representation or warranty shall be made
not later than the date on which, pursuant to Sections 3.3 and 3.4, such representation and
warranty terminated;

Annotation: The timing for post-Closing Purchase Price instalment payments or escrow
releases needs to be dovetailed with deadlines for making Claims in order that any set-off
rights will be available.

(2) The Indemnifying Party's obligation to indemnify the Indemnified Party shall only apply
to the extent that the Claims in respect of which the Indemnifying Party has given an indemnity,
in the aggregate, exceed $e (and shall only apply in respect of such excess) but are less than $e,
provided that such obligation to indemnify shall only apply in respect of an individual Claim
which exceeds $e and any individual Claim below such threshold shall be disregarded by the
Indemnifying Party;

Annotation: This provision creates both a "floor" and a "ceiling" for indemnification. The
floor operates like a deductible in an insurance context and its prime purpose is to avoid
Claims for and disputes over minor amounts. A Purchaser with leverage, or one which is more
aggressive, will seek to recover all damages, not just damages in excess of the floor amount,
once the floor is reached. Sometimes, the Parties will negotiate different floors for different
types ofliabilities.

Concerning the ceiling or "cap", an experienced Vendor will try to limit its obligations to the
total amount of the Purchase Price. The Vendor will argue that it should not be in a worse
position than if it continued to own the Corporation and operate the Business. A Purchaser
may accept this argument, but will want to exclude from the cap certain items (e.g. tax and
environmental matters), or establish separate caps for different heads ofliability.

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With respect to both caps and floors, the Parties may wish to specify that they don't apply in
respect of breaches of representations of which the Indemnifying Party had knowledge or in
respect ofits wilfulfailure to perform covenants.

(3) 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 of the Indemnified Party 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 the amount of such difference to the Indemnifying
Party;

(4) Except in the circumstance contemplated by Section 7.5(5), 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 negotiate, settle, compromise or pay any Third Party
Claim except with the prior written consent of the Indemnifying Party (which consent shall not
be unreasonably withheld);

(5) The Indemnified Party shall not permit any right of appeal in respect of any Third Party
Claim to terminate without giving the Indemnifying Party notice and an opportunity to contest
such Third Party Claim;

(6) The Indemnified Party and the Indemnifying Party shall cooperate fully with each other
with respect to Third Party Claims and shall keep each other fully advised with respect thereto
(including supplying copies of all relevant documentation promptly as it becomes available); and

(7) Notwithstanding Section 7.4(2), the Indemnifying Party shall not settle any Third Party
Claim or conduct any related legal or administrative proceeding in a manner which would, in the
opinion of the Indemnified Party, acting reasonably, have a material adverse impact on the
Indemnified Party.

(8) The provisions of this Article 7 shall constitute the sole remedy available to a Party
against another Party with respect to any and all breaches of any agreement, covenant,
representation or warranty made by such other Party in this Agreement.

Annotation: This section specifies that the indemnity rights under Article 7 represent the
exclusive remedies of the Parties, a position generally preferred by a Vendor. Certain
complications may arise under the indemnity language which usually extends to documents
delivered with the Agreement, which documents may contain additional separate remedies.
The Purchaser will usually want to avoid an exclusive remedies provision in order to preserve
its remedies outside of the Agreement relating to, among other things, breach of contract,

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fraud and certain statutory rights. In fact, the Purchaser may well insist that an express
provision be included stating that the Purchaser's remedies are not limited to those set out in
Article 7.

(9) The amount of any Claim due under this Agreement shall be reduced by:

(a) the amount of any insurance or other reimbursement received by the Indemnified
Party in relation to the breach or other event giving rise to the Claim; and

(b) the amount expected to be recovered under any counterclaims against third
parties in relation to the breach or other event giving rise to the Claim.

ARTICLE 8
GENERAL

Annotation: This Article typically contains provisions of a general nature relating to

continuing covenants, rights and certain points ofinterpretation.

It is also a suitable location to insert a post-Closing covenant that does not easily fit into any
other Article. For example, it may be that the Vendor and its affiliates use names which are
similar to or include words which are similar to the names ofor used by the Corporation or its
subsidiaries. In this circumstance, it would be appropriate for the Purchaser to require the
Vendor and its affiliates to change such names and agree to no longer use such names or
words within a certain number of days from the Closing Time. Likewise, for non-reviewable,
notifiable transactions under the Investment Canada Act, the Vendor may require the
Purchaser to covenant to file the notice of acquisition required by that Act within 30 days of
Closing.

A general arbitration of disputes clause has not been included in this Article. See the
annotation at Section 7.4. The Parties may wish to resort to arbitration for specific purposes,
but otherwise generally prefer to avoid broad arbitration provisions.

8.1 Confidentiality

The Purchaser covenants and agrees that, except as otherwise authorized by the Vendor, neither
the Purchaser nor its representatives, agents or employees will disclose to third parties, directly
or indirectly, any confidential information or confidential data relating to the Vendor, any
Subsidiary, the Corporation or the Business discovered or received by the Purchaser or its
representatives, agents or employees as a result of the Vendor and the Corporation making
available to the Purchaser and its representatives, agents or employees the information requested
by them in connection with the Transactions.

Annotation: The entire agreement provision (see Section 8.8) causes all prior agreements
between the Parties to be superseded. Hence, any confidentiality agreement or legally binding
confidentiality provision in a letter of intent or term sheet between the Parties technically
provides no further protection. Nevertheless, confidentiality will continue to be a concern for

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the Parties once the Agreement is signed, regardless of whether the Transactions close.
Pursuant to Section 5.6, this Section, among others, survives termination ofthe Agreement.

Section 8.1 is a relatively "bare-bones" provision and less sophisticated than many
confidentiality provisions which one typically finds in confidentiality agreements. There are
many issues which it does not address. However, it will be satisfactory in most instances as the
Parties will have hopefully reached a higher level oftrust, having largely completed their due
diligence.

Frequently, the Parties will want to be specific about what constitutes "confidential
information". The Vendor will want it to encompass all information provided to the Purchaser
or to which the Purchaser has had access in connection with the Transactions. At the other
extreme, the Purchaser will want it to be limited to information which has been "stamped
confidential". The Parties may also wish to spell out certain specific exceptions to what
otherwise might constitute confidential information. These exceptions might include (i)
information already in the public domain; (ii) information disclosed for purposes ofobtaining
Consents required for Closing; or (iii) information required to be disclosed in connection with
legal proceedings.

8.2 Notices

Annotation: Occasionally, one will see notice provisions which also allow for notice by way of
e-mail. This makes sense due to the prevalence ofthis means of communication and the ease
with which attachments and scanned documents can be included. However, such provisions
need to be carefully crafted and may not be appropriate for notice in respect ofcertain classes
ofissues.

If there is a large group of Vendors, the Purchaser may want to insist that such Vendors
appoint an agent for all notice purposes, such that the Purchaser only need deliver notice to
the appointed agent. Conversely, the Purchaser will want to know that its receipt of a notice
from the agent will bind all such Vendors.

(1) Any notice or other communication required or permitted to be given hereunder shall be
in writing and shall be delivered in person, transmitted by facsimile or similar means of recorded
electronic communication or sent by registered mail, charges prepaid, addressed as follows:

(a) if to the Vendor:

•
Attention: •
Fax No.: •

(b) if to the Purchaser:

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 •
Attention: •
Fax No.: •
(c) if to the Shareholder:

•
Attention: •
Fax No.: •
(d) if to the Corporation:

•
Attention: •
Fax No.: •
(2) Any such notice or other communication shall be deemed to have been given and
received on the day on which it was delivered or transmitted (or, if such day is not a Business
Day, on the next following Business Day) or, ifmailed, on the third Business Day following the
date of mailing; provided, however, that if at the time of mailing or within three Business Days
thereafter there is or occurs a labour dispute or other event that might reasonably be expected to
disrupt the delivery of documents by mail, any notice or other communication hereunder shall be
delivered or transmitted by means of recorded electronic communication as described.

(3) Any Party may at any time change its address for service from time to time by giving
notice to the other Parties in accordance with this Section 8.2.

8.3 Public Announcements and Disclosure

The Parties shall consult with each other before issuing any press release or making any other
public announcement with respect to this Agreement or the Transactions and, except as required
by any applicable Law or stock exchange having jurisdiction, no Party shall issue any such press
release or make any such public announcement without the prior written consent of the others,
which consent shall not be unreasonably withheld or delayed. Prior to any such press release or
public announcement, none of the Parties shall disclose this Agreement or any aspect of the
Transactions except to its board of directors, its senior management, its legal, accounting,
financial or other professional advisors, any financial institution contacted by it with respect to
any financing required in connection with the Transactions and counsel to such institution, or as
may be required by any applicable Law or stock exchange having jurisdiction.

Annotation: Section 8.3 allows public disclosure without consultation with, or the consent of,
the other Parties when such disclosure is required by applicable Law or a stock exchange.
Sometimes, the Parties will attempt to place some limits on this exception by requiring the
Party obligated to disclose to use its best efforts, without contravening applicable Law, to
consult with the other Parties prior to making such disclosure.

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The Parties may wish to get into specifics of how employees, customers and suppliers will be
informed of certain matters or otherwise communicated with. Disclosure to these persons will
usually be subject to mutual consultation of the Purchaser and the Vendor. The Purchaser
may also insist on being present during the disclosure to these persons. Often, the Parties are
comfortable addressing these sorts of details outside of the Agreement and will not feel it
necessary to include a specific provision covering them.

8.4 Assignment by Purchaser

The Purchaser may assign its rights under this Agreement in whole or in part to any other person;
provided, however, that any such assignment shall not relieve the Purchaser from any of its
obligations hereunder. Neither the Vendor nor the Shareholder may assign its rights under this
Agreement.

Annotation: A Vendor with sufficient leverage may require the Purchaser to obtain the
Vendor's prior written consent to any assignment of the Purchaser's rights or obligations
under the Agreement. In this circumstance, the Vendor may also require that the assignee
deliver a document confirming that such assignee will perform all obligations under the
Agreement.

A Vendor may have legitimate reasons for wanting to limit the Purchaser's rights of
assignment. For example, if the Purchaser's assignee turns out to be a non-resident, tax,
Investment Canada Act and enforcement issues will likely ensue. Also, the Vendor may wish
to prevent assignment to a "shell" corporation with only nominal assets with which to satisfy
its obligations, or simply wish to deal with "the devil it knows rather than the one it does nof'.

It should be understood that in the absence of express provisions limiting assignment, the
Parties' rights are generally freely assignable at common law.

8.5 Best Efforts

The Parties acknowledge and agree that, for all purposes of this Agreement, an obligation on the
part of any Party to use its "best efforts" to obtain any waiver, Consent or other document shall
not require such Party to make any payment to any person for the purpose of procuring the same,
other than payments for amounts due and payable to such person, payments for incidental
expenses incurred by such person and payments required by any applicable law or regulation.

8.6 Expenses

Unless otherwise provided, each of the Vendor, the Shareholder and the Purchaser shall be
responsible for the expenses (including fees and expenses of legal advisers, accountants and
other professional advisers) incurred by them, respectively, in connection with the negotiation
and settlement of this Agreement and the completion of the Transactions. In the event of
termination of this Agreement, the obligation of each Party to pay its own expenses will be
subject to any rights of such Party arising from a breach of this Agreement by another Party.

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Annotation: As the negotiations evolve, the Parties should consider how certain "big ticket"
costs will be allocated. The wording in this Section may not be helpful in determining some of
these issues, so that exceptions to the rule should be spelled out. For instance, the fee payable
to the Competition Bureau's Merger Notification Unitfor its review offilings and applications
is $50,000. Environmental audit inquiries, which the Purchaser may insist on, can likewise be
very expensive.

The allocation ofresponsibility for these costs will reflect the relative bargaining power ofthe
Parties. For example, the fee payable to the Competition Bureau is frequently split, but other
allocations do occur depending on the relative leverage ofthe Parties.

The Purchaser may wish to clarify that the Vendor and the Shareholder must pay their
expenses with their own money and not that ofthe Corporation. The Vendor may push back to
some extent on this issue and may legitimately argue that some expenses be incurred by the
Corporation. As a compromise, the Parties frequently agree on a cap for expenses to be
absorbed by the Corporation.

The last sentence ofSection 8.6 makes it clear that a judgment for damages due to breach of
the Agreement overrides the general terms ofSection 8.6 to the extent ofa conflict.

8.7 Further Assurances

Each of the Parties shall promptly do, make, execute, deliver, or cause to be done, made,
executed or delivered, all such further acts, documents and things as the other Parties may
reasonably require from time to time after Closing at the expense of the requesting Party for the
purpose of giving effect to this Agreement and shall use reasonable efforts and take all such steps
as may be reasonably within its power to implement to their full extent the provisions of this
Agreement.

Annotation: Section 8. 7 serves two purposes. It helps ensure that each Party will assist in
accomplishing certain collateral matters after Closing (often related to non-critical Consents
and discharges) and will not be obstructionist with a view to extracting additional
consideration. It also addresses ancillary matters that can only be handled post-Closing and
which cannot be treated as conditions precedent.

It is prudent to only rely on the further assurances provision in respect offairly minor post-
Closing matters. For more material issues, such as environmental clean-ups, the provision by
the Vendor of any services on a short-term basis, the discharge of liens and the payment of
third party debts, the Parties should include separate covenants which are tied into relevant
escrow and holdback provisions.

8.8 Entire Agreement

This Agreement, including all Schedules, constitutes the entire agreement between the Parties
with respect to the subject matter and supersedes all prior agreements, understandings,

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negotiations and discussions, whether written or oral, including the term sheet between the
Parties dated •. There are no conditions, covenants, agreements, representations, warranties or
other provisions, express or implied, collateral, statutory or otherwise, relating to the subject
matter except provided in this Agreement. No reliance is placed by any Party on any warranty,
representation, opinion, advice or assertion of fact made by any Party or its directors, officers,
employees or agents, to any other Party or its directors, officers, employees or agents, except to
the extent that it has been reduced to writing and included in this Agreement.

Annotation: Both the entire agreement provision and the waiver and amendment provision
may not be enforceable in all circumstances. Opinions in respect of purchase agreements
typically qualify the enforceability of provisions such as these. There has been some
interesting Ontario case law which further buttresses the view that these opinion
qualifications are necessary. See for example Shelanu v. Print Three Franchising Corp.
(2003) 64 O.R. (3d) 533 and Gutierrez v. Tropic International Ltd., (2002) 63 O.R. (3d) 63
(Ontario Court ofAppeal).

8.9 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement

shall be binding unless executed in writing by the Party to be bound. No waiver of any provision
of this Agreement shall constitute a waiver of any other provision, nor shall any waiver of any
provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

Annotation: See annotation at 8.8

8.10 Rights Cumulative

The rights and remedies of the Parties are cumulative and not alternative.

8.11 Counterparts

This Agreement may be executed in any number of counterparts, and/or by facsimile or e-mail
transmission of Adobe Acrobat files, each of which shall constitute an original and all of which,
taken together, shall constitute one and the same instrument. Any Party executing this
Agreement by fax or PDF file shall, immediately following a request by any other Party, provide
an originally executed counterpart of this Agreement provided, however, that any failure to so
provide shall not constitute a breach of this Agreement except to the extent that such electronic
execution is not otherwise permitted under the Electronic Commerce Act, 2000 (Ontario).

Annotation: A counterparts provision can be particularly helpful where there is a large group
of Vendors.

IN WITNESS WHEREOF this Agreement has been executed by the Parties.

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[NAME OF PURCHASER
CORPORATION]

Per: _

[NAME OF VENDOR CORPORATION]

Per: _

[NAME OF PRINCIPAL
SHAREHOLDER OF THE VENDOR]

Per: _

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