ASSET PURCHASE AGREEMENT September 26, 2007

WOW WEE LIMITED

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WOW WEE GROUP COMPANY

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WOWWEE MARKETING, INC.

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OPTIMAL GROUP INC.

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POWER ASSETS PACIFIC LTD.

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RICHARD YANOFSKY

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PETER YANOFSKY

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DAVID GOLDHAR

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ERIC LAU TUNG CHING

 

 

 

 

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THIS ASSET PURCHASE AGREEMENT is made this 26th day of September, 2007

BETWEEN:

WOW WEE LIMITED , a corporation incorporated under the laws of Hong Kong, the registered office of which is at Unit 301 A-C, Energy Plaza, 92 Granville Road, Tsimshatsui East, Kowloon, Hong Kong (“ WW Limited ”),

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WOW WEE GROUP COMPANY , a company governed by the laws of Nova Scotia (“ WW Group ”),

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WOWWEE MARKETING, INC. , a corporation governed by the laws of California (“ WW Marketing ” and, collectively with WW Limited and WW Group, the “ Vendor ”),

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OPTIMAL GROUP INC. , a corporation governed by the laws of Canada, (“ Optimal ”),

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POWER ASSETS PACIFIC LTD. , a corporation governed by the laws of the British Virgin Islands, (“ PAP ”),

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RICHARD YANOFSKY , an individual residing at 31 Glenmore Road, Hampstead, Quebec, Canada H3X 3N2, (“ Richard Yanofsky ”),

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PETER YANOFSKY , an individual residing at 1467 La Jolla Ranch Road, La Jolla, California, U.S.A. 92037, (“ Peter Yanofsky ”),

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DAVID GOLDHAR , an individual residing at 55 Thombank Road, Thornhill, Ontario, Canada L4J LA1, (“ Goldhar ”),

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ERIC LAU TUNG CHING , an individual residing at Flat C, 12 ^th floor, No. 8 Stubbs Road, Shiu Fai Terrace, Hong Kong, (“ Lau ”, and collectively with PAP, Richard Yanofsky, Peter Yanofsky and Goldhar, the “Guarantors” ).

 

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RECITALS:

THEREFORE the Parties agree as follows:

ARTICLE 1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

 

Whenever used in this Agreement the following words and terms have the meanings set out below:

“Accounts Payable” means amounts relating to the Business owing to any Person as of the Closing Time, which are incurred in connection with the purchase of goods or services in the ordinary course of business and in accordance with the terms of this Agreement;

“Accounts Receivable” means accounts receivable, bills receivable, trade accounts, book debts and insurance claims and other amounts due or deemed to be due to the Vendor, including refunds and rebates receivable but excluding the Shareholder Loans and the Excluded Receivables;

“Accredited Investor” has the meaning given in Section 4.50;

 

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“Affiliate” of any Person means, at the time such determination is being made, any other Person controlling, controlled by or under common control with such first Person, in each case, whether directly or indirectly, and “ control ” and any derivation thereof means the possession, directly or indirectly, of the power to direct the management and policiesof a Person whether through the ownership of voting securities or otherwise;

“Agreement” means this Asset Purchase Agreement, including all schedules, and all amendments or restatements, as permitted, and references to “Article” or “Section” mean the specified Article or Section of this Agreement;

“Appurtenances” means privileges, rights, easements and appurtenances both at law and equity belonging to or for the benefit of Real Property, including means of access between Real Property and a public way, rights in respect of or for any other uses upon which the present use is dependent (such as pipelines, cables, railway sidings) and rights existing in and to any streets, alleys, passages and other rights-of-way;

“arm’s length” has the meaning that it has for purposes of the Income Tax Act (Canada);

“Assumed Contracts” means the Contracts listed on Schedule 1.1(A);

“Assumed Employee Obligations” means the obligations assumed by the Purchaser pursuant to Section 9.4;

“Assumed Liabilities” means, collectively, the WW Group Liabilities, WW Limited Liabilities and WW Marketing Liabilities;

“Balance Sheet” means the balance sheet of WW Limited as at December 31, 2006, of WW Group as at December 31, 2006 or of WW Marketing as at May 31, 2007, as the case may be, forming part of the Financial Statements;

“Banking Facilities” means any loan, line of credit, letter of credit or other Contract pursuant to which a financial institution has provided credit to the Vendor;

“BAR Statements” has the meaning given in Section 9.13(a);

 

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“Benefit Plans” means plans, arrangements, agreements, programs, policies, practices or undertakings, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, registered or unregistered to which the Vendor is a party or bound or in which the Employees participate or under which the Vendor has, or will have, any liability or contingent liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to any of its Employees or former employees of the Business, directors or officers, individuals working on contract with the Vendor relating to the Business or other individuals providing services to the Vendor relating to the Business of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such persons), excluding Statutory Plans;

“Books and Records” means books and records of the Vendor or any of their Affiliates relating to the Business or the Purchased Assets, including financial, corporate, operations and sales books, records, books of account, sales and purchase records, lists of suppliers and customers, formulae, business reports, plans and projections and all other documents, surveys, plans, bank passbooks and statements, files, records, assessments, correspondence, and other data and information, financial or otherwise including all data, information and databases stored on computer-related or other electronic media;

“Business” means the business conducted by the Vendor, being the conceptualization, design, development, marketing and distribution of consumer robotic toys and other electronic products;

“Business Day” means any day, other than a Saturday or Sunday, on which major banks in Montreal, Québec are generally open for commercial banking business during normal banking hours;

“Canadian GAAP” means Canadian generally accepted accounting principles as defined by the Accounting Standards Board of the Canadian Institute of Chartered Accountants in the Handbook of the Canadian Institute of Chartered Accountants as they exist on the date of this Agreement;

 

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“Cansub” means a corporation to be incorporated by Optimal prior to the Closing in order to purchase the WW Group Assets;

“Cash Balance” means all cash on hand or in deposit accountsand money market securities owned by the Vendor;

“Claims” includes claims, demands, complaints, grievances, actions, applications, suits, causes of action, Orders, charges, investigations, indictments, prosecutions, information or other similar processes, assessments or reassessments, judgments, arbitral awards, writs of execution, debts, liabilities, expenses, costs, fines, penalties, damages or losses, contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or equitable, including loss of value, professional fees, including the reasonable fees and disbursements of legal counsel on a full indemnity basis, and all costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing;

“Closing” means the completion of the sale to and purchase by the Purchaser of the Purchased Assets under this Agreement;

“Closing Date” means the date that is the Business Day next following the final day of the 30-day notice period for the notice of transfer of a business pursuant to the Transfer of Businesses (Protection of Creditors) Ordinance (Hong Kong) or such other date as the Purchaser and the Vendor may agree in writing as the date upon which the Closing shall take place, provided that the Closing Date shall be no later than January 1, 2008;

“Closing Time” means 10:00 a.m. (Montreal time) on the Closing Date;

“Collective Agreements” means any collective agreements (including expired collective agreements which have not been renewed) and related documents, including benefit agreements, letters of understanding, letters of intent and other written communications (including arbitration awards) with a Union relating to Employees by which the Vendor is bound or which impose any obligations upon the Vendor or set out the understanding of the parties or an interpretation with respect to the meaning of any provisions of such collective agreements;

 

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“Contracts” means contracts, licences, leases, agreements, obligations, promises, undertakings, understandings, arrangements, documents, commitments, entitlements or engagements to which the Vendor is a party or by which the Vendor is bound or under which the Vendor has, or will have, any liability or contingent liability (in each case, whether written or oral, express or implied) relating to the Business or the Purchased Assets and includes quotations, orders, proposals or tenders which remain open for acceptance and warranties and guarantees;

“Current Liabilities” means Accounts Payable for which payment would ordinarily be expected to be made within one year of the Closing Date;

“ Current Optimal Director ” means any member of the board of directors of Optimal elected at or continuing in office after the 2007 annual and special meeting of shareholders of Optimal, any successor of a Current Optimal Director who has been approved by a majority of the Current Optimal Directors then on the board of directors of Optimal, and any other person who has been approved by a majority of the Current Optimal Directors then on the board of directors of Optimal;

“Employees” means, collectively the WW Limited Employees, the WW Marketing Employees and the WW Group Employees;

“Employment Contracts” means Contracts, other than Benefit Plans, whether oral or written, relating to an Employee, including any official communication or established practice relating to an Employee which imposes any obligation on the Vendor;

“Employment Offers” has the meaning given in Section 9.4(a);

“Encumbrances” means pledges, liens, charges, debentures, guarantees, pre-emptive rights, security interests, leases, title retention agreements, mortgages, hypothecs, restrictions, development or similar agreements, easements, rights-of-way, title defects, options or adverse claims or encumbrances of any kind or character whatsoever;

 

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“Environment” means the environment or natural environment as defined in any Environmental Laws and includes air, surface water, ground water, land surface, soil, subsurface strata, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource, any sewer system and the environment in the workplace;

“Environmental Approvals” means permits, certificates, licences, authorizations, consents, agreements, instructions, directions, registrations or approvals issued, granted, conferred or required by a Governmental Authority pursuant to an Environmental Law relating to the Business or the Purchased Assets;

“Environmental Laws” means Laws relating to the Environment, product liability, or public health or safety, and includes Laws relating to the storage, generation, use, handling, manufacture, processing, labelling, advertising, sale, display, transportation, treatment, reuse, recycling, Release and disposal of Hazardous Substances;

“Equipment Contracts” means Contracts relating to Tangible Personal Property and includes motor vehicle leases, equipment leases, leases of computer hardware and computer systems, conditional sales contracts, title retention agreements and other similar agreements;

“Excluded Assets” means:

 

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“Excluded Liabilities” means any liability, debt or obligation of the Vendor, present or future, direct or indirect, known or unknown, absolute or contingent and whether or not relating to the Business that is not an Assumed Liability, and including, for certainty, those liabilities, debts and obligations of the Vendor listed on Schedule 1.1(D);

“Excluded Receivables” means the accounts receivable listed on Schedule 1.1(C);

“Financial Statements” means:

copies of each of which are attached as Schedule 4.11;

“GAAP” means:

 

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“Goodwill” means the goodwill of the Business and relating to the Purchased Assets, and information and documents relevant thereto, including lists of customers and suppliers, credit information, telephone and facsimile numbers, research materials, research and development files and the exclusive right of the Purchaser to represent itself as carrying on the Business in succession to the Vendor and to all rights in respect of the name “Wow Wee” and any variations of such name;

“Governmental Authorities” means (i) any international, supranational, multinational, national, federal, provincial, state, municipal, special administrative, local or other government, (ii) any subdivision, department, court, commission, board, tribunal, bureau, agency or authority of any government, or (iii) any quasi-governmental or private body exercising any regulatory, rule-making, expropriation, taxing or other governmental or quasi-governmental authority, including any stock exchange:

“Governmental Authorizations” means authorizations, approvals, including any Environmental Approvals, franchises, Orders, certificates, consents, directives, notices, licences, permits, variances, registrations or other rights issued to or required by the Vendor relating to the Business or any of the Purchased Assets by or from any Governmental Authority;

“Guarantee” has the meaning given in Section 7.16;

 

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“Hazardous Substances” means pollutants, contaminants, wastes of any nature, hazardous substances, hazardous materials, toxic substances, prohibited substances, dangerous substances or dangerous goods as defined, judicially interpreted or identified in any Environmental Laws including asbestos, asbestos containing materials, mould, microbial organisms or substances related thereto;

“HKSub” means a corporation to be incorporated by Optimal prior to the Closing in order to purchase the WW Limited Assets;

“Hong Kong” means The Hong Kong Special Administrative Region of the People’s Republic of China;

“Improvements” means plants, buildings, structures, fixtures, erections and improvements located on, over, under or upon the Real Property or included in Purchased Assets and mechanical, electrical, plumbing, heating and air-conditioning systems relating to the Real Property, including any of the foregoing under construction;

“Indemnified Party” has the meaning given in Section 10.3;

“Indemnifying Party” has the meaning given in Section 10.3;

“Information Technology” means computer hardware, software in source code and object code form (including documentation, interfaces and development tools), websites for the Business, databases, telecommunications equipment and facilities and other information technology systems owned, used or held by the Vendor for use in or relating to the Business;

“Insolvent” means, with respect to any of WW Limited, WW Group or WW Marketing, being deemed insolvent or unable to pay its debts under any Law or that the sum of the debts and other probable liabilities of such company exceeds the fair saleable value of such company’s assets;

“Intellectual Property” means intellectual property rights, whether registered or not, owned, used or held by the Vendor for use in or relating to the Business, including:

 

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“Inventories” means items that are held by the Vendor, or other Persons on a consignment basis, for sale, license, rental, lease or other distribution in the ordinary course of business, or are being produced for sale, or are to be consumed, directly or indirectly, in the production of goods or services to be available for sale, of every kind and nature and wheresoever situate relating to the Business, including inventories of raw materials, work-in-progress, finished goods and by-products, operating supplies and packaging materials;

 

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“Laws” means applicable laws (including common law and civil law), statutes, by-laws, rules, regulations, Orders, ordinances, protocols, codes, guidelines, treaties, policies, notices, directions, decrees, judgements, awards or requirements, in each case of any Governmental Authority;

“Leased Real Property” means lands and/or premises which are used by the Vendor relating to the Business and which are leased, subleased, licensed to or otherwise occupied by the Vendor and the interest of the Vendor in Improvements and Appurtenances;

“Legacy Benefit Plan Members” means persons who are not Employees, former employees of the Business, directors or officers, individuals working on contract with the Vendor relating to the Business or other individuals providing services to the Vendor relating to the Business of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such persons);

“Market Price” means the average of the daily closing sale prices per share of the Optimal Shares on each of the 20 consecutive trading days through and including the trading day immediately preceding the date of determination. The closing sale price per share of the Optimal Shares shall be the closing board lot sale price as reported by the NASDAQ Stock Market;

“Material Adverse Effect” means any fact, event, change, effect or circumstance that individually or in the aggregate, is materially adverse to, or could reasonably be expected to have a material adverse effect on, the financial condition, assets, business, results of operations or prospects of the Business;

“Material Contracts” means Contracts (i) involving aggregate payments to or by the Vendor in excess of $100,000, (ii) involving rights or obligations that may reasonably extend beyond twelve months and which do not terminate or cannot be terminated by the Vendor without penalty on less than 30 days notice, (iii) which are outside the ordinary course of the Business, (iv) which restrict in any way the Business or activities of the Vendor relating to the Business or (v) which are otherwise material to the Business;

 

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“MPF Scheme” means a mandatory provident scheme within the meaning given to that term under the Mandatory Provident Fund Schemes Ordinance under the laws of Hong Kong in which the Vendor has participated for the benefit of the Employees or other statutorily required provident scheme under any Law applicable to the Vendor for the benefit of any Employee;

“Notice” has the meaning given in Section 11.3;

“Open Source Software” means any software that is available as free software, publicly available software, open source software or under any other public licensing or distribution models that are made available on conditions which may restrict certain uses or impose certain requirements in connection with sublicensing or distribution, including a requirement that the software and software derived from it, be distributed in source code format, be redistributed at no charge, or require attribution for the use of such source code;

“Optimal Change of Control” means the occurrence of any of:

“Optimal Material Adverse Effect” means any fact, event, change, effect or circumstance affecting Optimal that has a material adverse effect on the ability of the Purchaser to operate the Business following Closing in substantially the same manner as operated by Vendor prior to the date hereof, other than any fact, event, change, effect or circumstance (a) known to Vendor at the date hereof or (b) resulting from or arising as a result of a breach of a representation, warranty or covenant of Vendor contained herein;

 

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“Optimal Shares” means the Class “A” shares in the capital of Optimal;

“Orders” means orders, injunctions, judgments, administrative complaints, decrees, rulings, awards, assessments, directions, instructions, penalties or sanctions issued, filed or imposed by any Governmental Authority or arbitrator and includes Remedial Orders;

“ORSO Scheme” means an occupational retirement scheme registered as a registered scheme under section 18 of the Occupational Retirement Schemes Ordinance of the Laws of Hong Kong, in which the Vendor has operated, contributed or participated for the benefit of any Employees;

“Owned Real Property” means real property used in or reasonably required for the Business, owned or purported to be owned in fee simple or pursuant to a government lease or government grant by the Vendor, and real property used in or reasonably required for the Business, other than Leased Real Property, in which the Vendor has an interest, including all Improvements and Appurtenances;

“Parties” means the Vendor, the Purchaser and the Guarantors collectively, and “Party” means any one of them;

“Pension Plans” means Benefit Plans providing pensions, superannuation benefits or retirement savings, including pension plans, top-up pensions and supplemental pensions;

“Pension Plan Unfunded Liability” means an unfunded liability in respect of any Pension Plan, including a going concern unfunded liability, a solvency deficiency or wind-up deficiency;

“Permitted Encumbrances” means the Encumbrances listed in Schedule 4.19;

“Person” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, Governmental Authority, and where the context requires any of the foregoing when they are acting as trustee, executor, administrator or other legal representative;

 

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“Personal Information” means information in the possession or under control of the Vendor about an identifiable individual;

“PRC” or “The People’s Republic of China” means the People’s Republic of China excluding Hong Kong, The Macau Special Administrative Region and Taiwan;

“Prepaid Expenses and Deposits” means expenses of Vendor which have been paid in advance of the date on which the related goods or services are to be delivered or performed;

“Product” means any product directly or indirectly manufactured, marketed or sold by the Vendor (including, without limitation, any product manufactured, marketed or sold to wholesalers, distributors, retailers or end-user customers) at any time prior to or on the Closing Date;

“Proprietary Software” means software owned by the Vendor and used in the conduct of its Business or embedded in the Products manufactured, marketed or distributed by the Vendor;

“Purchased Assets” means:

“Purchase Price” has the meaning given in Section 3.1;

“Purchaser” means, collectively, Optimal and HKSub, Cansub and USSub;

“Purchaser Indemnified Parties” has the meaning given in Section 10.1;

“Real Property” means Owned Real Property and Leased Real Property;

“Real Property Leases” means Contracts, including tenancy agreements or licenses, pursuant to which the Vendor uses or occupies the Leased Real Property, including all rights to related Improvements and Appurtenances;

 

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“Regulation D” has the meaning given in Section 4.50;

“Release” has the meaning prescribed in any Environmental Law and includes any release, intermittent or gradual release, spill, leak, pumping, addition, pouring, emission, emptying, discharge, injection, escape, leaching, disposal, dumping, deposit, spraying, burial, abandonment, incineration, seepage, placement or introduction, whether accidental or intentional;

“Remedial Orders” means Orders issued, filed, imposed or threatened by any Governmental Authority pursuant to any Environmental Laws and include Orders requiring investigation, the cessation of any use or activities, assessment or remediation of any site or Hazardous Substance, or requiring that any Release or any other activity be reduced, modified or eliminated or requiring any form of payment or co-operation be provided to any Governmental Authority;

“Restricted Right” means any Contract or Governmental Authorization which by its terms requires consent or approval of the other party or parties thereto or the issuer for completion of the transactions contemplated by this Agreement or in respect of which the completion of the transactions contemplated by this Agreement will increase the obligations or decrease the rights or entitlements of the Vendor or the Purchaser relating to the Business under such Contract or Governmental Authorization;

“Shareholder Loans” means the loans receivable by WW Limited from the Guarantors, any of their Affiliates or any entity controlled by a Guarantor that are listed on Schedule 1.1(E);

“Statutory Plans” means statutory benefit plans which the Vendor is required to participate in or comply with, including plans administered pursuant to applicable health, tax, workplace safety insurance and employment insurance legislation and without any limitation to the foregoing, including any statutorily required employee compensation insurance, ORSO Schemes and MPF Schemes;

 

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“Tangible Personal Property” means machinery, equipment, furniture, furnishings, office equipment, computer hardware, supplies, components, materials, vehicles, material handling equipment, implements, parts, tools, jigs, dies, moulds, patterns, tooling and spare parts and tangible assets (other than Real Property and Inventory) owned or used or held by the Vendor for use in or relating to the Business, including: (a) any of the foregoing which are in storage or in transit; (b) other tangible personal property of the Vendor used in or relating to the Business whether located in or on the Real Property or elsewhere; (c) any of the foregoing which may be attached to Real Property but are not Improvements; and (d) the assets listed in Schedule 1.1(F);

“Tax Returns” includes returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by Law in respect of Taxes;

“Taxes” includes taxes, duties, fees, premiums, assessments, imposts, levies and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, stamp, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all licence, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions;

“Technical Information” means know-how and related technical knowledge owned, used or held by the Vendor for use in or relating to the Business, including:

 

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“Technology” means Intellectual Property, Technical Information, Information Technology and Proprietary Software;

“Termination Without Cause” means, in the case of Richard Yanofsky, termination in accordance with section 10.1(d) of the employment agreement to be entered into between Richard Yanofsky and Cansub at Closing and, in the case of Peter Yanofsky, termination in accordance with section 10.1(d) of the employment agreement to be entered into between Peter Yanofsky and USSub at Closing;

“Union” means an organization of employees formed for purposes that include the regulation of relations between employees and employers and includes a provincial, territorial, national or international union, a certified council of unions, a designated or certified employee bargaining agency, and any organization which has been declared a union pursuant to applicable labour relations legislation or which may qualify as a union;

 

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“U.S. Compatible Foreign Workplace Standards” means, without limitation, the following labour standards: (i) full compliance with the applicable laws, rules and regulations of the country where the facility is located; (ii) payment to workers of at least the minimum wage prescribed by applicable local law; (iii) limitation of working hours and overtime to a level consistent with humane and productive working conditions; (iv) no use of prison, indentured, bonded or involuntary labour; (v) no use of workers who are younger than the compulsory age to be in school or the minimum legal working age in the country; (vi) provision to all workers of a safe and healthy work environment; (vii) employment of workers on the basis of ability to do the job and not on the basis of other personal characteristics or beliefs; (viii) no use of corporal punishment or any other form of physical or psychological coercion against workers; (ix) recognition and respect of the lawful exercise of workers' rights to free association; and (x) full compliance with applicable environmental laws and regulations;

“U.S. GAAP” means United States generally accepted accounting principles as they exist on the date of this Agreement;

“U.S. Securities Act” has the meaning given in Section 4.50;

“USSub” means a corporation to be incorporated by Optimal prior to the Closing in order to purchase the WW Marketing Assets;

“Vendor Indemnified Parties” has the meaning given in Section 10.2;

“Warrants” means the warrants to purchase, at an exercise price equal to the Market Price as of the date of this Agreement, 820,000 Optimal Shares, to be issued to WW Limited by Optimal in partial consideration of the portion of the Purchase Price payable by HKSub to WW Limitedon the Closing Date in accordance with Sections 3.1 and 3.2;

“WW Group Assets” means all of WW Group’s right, title and interest in, to and under, or relating to, the assets, property and undertaking, owned or used or held by WW Group for use in, or relating to the Business, including the right, title and interest of WW Group in the following properties, assets and rights:

 

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other than any right, title or interest of WW Group in the Excluded Assets;

“WW Group Employees” means individuals currently actively employed by WW Group, on a full-time, part-time or temporary basis, relating to the Business;

 

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“WW Group Liabilities” means the Current Liabilities of WW Group, plus the liabilities and obligations of WW Group relating to the Business accrued, due on, or accruing due subsequent to the Closing Date under the Assumed Contracts, the Governmental Authorizations and the sales allowances and other obligations or liabilities of WW Group to be assumed by the Purchaser listed on Schedule 1.1(G) but excluding, in each case, liabilities to WW Limited or WW Marketing, or their respective directors, officers, former directors or officers, shareholders or employees, or the directors, officers, former directors or officers, shareholders or employees of WW Group (with the exception of Assumed Employee Obligations) and any liability resulting from a default of WW Group;

“WW Limited Assets” means all of WW Limited’s right, title and interest in, to and under, or relating to, the assets, property and undertaking, owned or used or held by WW Limited for use in, or relating to the Business, including the right, title and interest of WW Limited in the following properties, assets and rights:

 

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other than any right, title or interest of WW Limited in the Excluded Assets;

“WW Limited Employees” means individuals currently actively employed by WW Limited, on a full-time, part-time or temporary basis, relating to the Business;

“WW Limited Liabilities” means the Current Liabilities of WW Limited and the Banking Facilities, plus the liabilities and obligations of WW Limited relating to the Business accrued, due on, or accruing due subsequent to the Closing Date under the Assumed Contracts, the Governmental Authorizations and the sales allowances and other obligations or liabilities of WW Limited to be assumed by the Purchaser listed on Schedule 1.1(G) but excluding, in each case, liabilities to WW Group or WW Marketing, or their respective directors, officers, former directors or officers, shareholders or employees, or the directors, officers, former directors or officers, shareholders or employees of WW Limited (with the exception of Assumed Employee Obligations) and any liability resulting from a default of WW Limited;

“WW Marketing Assets” means all of WW Marketing’s right, title and interest in, to and under, or relating to, the assets, property and undertaking, owned or used or held by WW Marketing for use in, or relating to the Business, including the right, title and interest of WW Marketing in the following properties, assets and rights:

 

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other than any right, title or interest of WW Marketing in the Excluded Assets;

“WW Marketing Liabilities” means the Current Liabilities of WW Marketing, plus the liabilities and obligations of WW Marketing relating to the Business accrued, due on, or accruing due subsequent to the Closing Date under the Assumed Contracts, the Governmental Authorizations and the sales allowances and other obligations or liabilities of WW Marketing to be assumed by the Purchaser listed on Schedule 1.1(G) but excluding, in each case, liabilities to WW Limited or WW Group, or their respective directors, officers, former directors or officers, shareholders or employees, or the directors, officers, former directors or officers, shareholders or employees of WW Marketing (with the exception of Assumed Employee Obligations) and any liability resulting from a default of WW Marketing; and

“WW Marketing Employees” means individuals currently actively employed by WW Marketing, on a full-time, part-time or temporary basis, relating to the Business.

 

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In this Agreement:

 

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Any reference to the knowledge of the Vendor means to the knowledge, information and belief of Peter Yanofsky, Richard Yanofsky, Eric Lau and David Goldhar after reviewing all relevant records and making due inquiries regarding the relevant matter of all relevant officers, directors and employees of the Vendor, including specifically, with respect to Technology, Davin Sufer.

 

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This Agreement and the agreements and other documents required to be delivered pursuant to this Agreement, constitute the entire agreement between the Parties and set out all the covenants, promises, warranties, representations, conditions and agreements between the Parties in connection with the subject matter of this Agreement and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, pre-contractual or otherwise, including the letter of intent, dated April 25, 2007, between the Purchaser, WW Group, PAP, Richard Yanofsky, Peter Yanofsky, Goldhar and Lau. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, whether oral or written, pre-contractual or otherwise, express, implied or collateral between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement and any document required to be delivered pursuant to this Agreement.

 

The schedules to this Agreement, listed below, are an integral part of this Agreement:

 

 

 

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ARTICLE 2

PURCHASE AND SALE

 

Subject to the provisions of this Agreement, at the Closing Time, the Parties agree that:

 

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Subject to the provisions of this Agreement, at the Closing Time, the Parties agree that:

 

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Subject to the provisions of this Agreement, at the Closing Time, the Parties agree that:

 

 

The Closing shall take place at the Closing Time at the offices of Osler, Hoskin & Harcourt LLP located at Suite 2100, 1000 De La Gauchetière Street West, Montreal, Québec, or at such other place as may be agreed upon by the Vendor and the Purchaser.

 

Except for the Assumed Liabilities, the Purchaser shall not assume and shall not be responsible for any of the Excluded Liabilities.

 

 

 

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ARTICLE 3

PURCHASE PRICE

 

The amount payable by the Purchaser for the Purchased Assets (the “ Purchase Price ”) shall be as follows:

 

 

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The Purchaser shall satisfy the Purchase Price at the Closing Time as follows:

 

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The Purchase Price shall be allocated in accordance with the provisions of Schedule 3.3. The Vendor and the Purchaser shall report the purchase and sale of the Purchased Assets in any Tax Returns in accordance with the provisions of Schedule 3.3.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE VENDOR

WW Limited, WW Group and WW Marketing solidarily represent and warrant to the Purchaser the matters set out below and acknowledge that Purchaser is relying on the representations and warranties in connection with the Purchaser's purchase of the Purchased Assets.

 

WW Limited is a corporation duly incorporated and validly existing under the laws of Hong Kong and has all necessary corporate power, authority and capacity to enter into this Agreement, to carry out its obligations under this Agreement, to own its respective assets and to carry on the Business as presently conducted. PAP is a corporation duly incorporated under the laws of the British Virgin Islands and has all necessary corporate power, authority and capacity to enter into this Agreement and to carry out its obligations under this Agreement. There is no outstanding petition, process or order for the winding up of, no receivership of the whole or any part of the undertaking or assets of, no petition, process or order for the winding up of and no application or order for the de-registration of either WW Limited or PAP.

 

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WW Marketing is a corporation validly existing and in good standing under the laws of California and has all necessary corporate power, authority and capacity to enter into this Agreement, to carry out its obligations under this Agreement, to own its assets and to carry on the Business as presently conducted. All of the issued and outstanding shares of capital stock of WW Marketing are validly issued, fully paid and non-assessable and are owned by WW Limited, free and clear of all options, warrants, rights of first refusal, pre-emptive rights, claims, charges and restrictions or other Encumbrances.

 

WW Group is a company validly existing under the laws of Nova Scotia and has all necessary corporate power, authority and capacity to enter into this Agreement, to carry out its obligations under this Agreement, to own its respective assets and to carry on the Business as presently conducted.

 

Neither the nature of the Business nor the location or character of the assets owned or leased by the Vendor relating to the Business requires the Vendor to be registered, licensed or otherwise qualified as an extra-provincial or foreign corporation in any jurisdiction other than Hong Kong where WW Limited is duly registered, licensed or otherwise qualified for such purpose and California where WW Marketing is duly registered, licensed or otherwise qualified for such purpose.

 

 

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Except for the interest of WW Limited in WW Marketing, the Vendor does not own, or have any interest in, any shares of, or interest in, any corporation or entity which carries on, in whole or in part, the Business or any business similar to, competitive with or ancillary to the Business.

 

The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Vendor. This Agreement constitutes, and each other agreement to be executed by the Vendor in connection with the Closing will constitute, once executed and delivered, a valid and binding obligation of the Vendor enforceable against it in accordance with its terms, subject to any limitation under applicable Laws relating to (a) bankruptcy, winding-up, insolvency, arrangement, fraudulent preference and conveyance, assignment and preference and other Laws of general application affecting the enforcement of creditors' rights, and (b) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.

 

Except for the Restricted Rights which are listed on Schedule 4.8, the Vendor is not a party to, bound or affected by or subject to any:

 

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that would be violated, breached by, or under which default would occur or an Encumbrance would, or with notice or the passage of time would, be created, or in respect of which the obligations of the Vendor or the Purchaser relating to the Business will increase or the rights or entitlements of the Vendor or the Purchaser relating to the Business will decrease, as a result of the execution and delivery of, or the performance of obligations under, this Agreement or any other agreement to be entered into under the terms of this Agreement. There has been no sale, assignment, subletting, licensing or granting of any rights in or other disposition of or in respect of any of the Purchased Assets or any part thereof or any granting of any Contract or right capable of becoming an agreement or option for the purchase, assignment, subletting, licensing or granting of any rights in or other disposition of any of the Purchased Assets or any part thereof other than pursuant to the provisions of, or as disclosed in, this Agreement or pursuant to purchase orders accepted by the Vendor in the ordinary course of business.

 

Except as disclosed in Schedule 4.9, no approval, Order, consent of or filing with any Governmental Authority is required on the part of the Vendor, in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be delivered under this Agreement or the performance of the obligations of the Vendor under this Agreement or any other documents and agreements to be delivered under this Agreement.

 

The Business is not engaged in any of the activities described in section 14.1(5) of the Investment Canada Act (Canada).

 

The Financial Statements have been prepared in accordance with GAAP applied on a basis consistent with that of preceding periods, are complete and accurate and:

 

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The Vendor has not incurred any liabilities or obligations (whether accrued, absolute, contingent or otherwise), which continue to be outstanding, except (a) as disclosed in the Financial Statements, (b) which have been incurred in the ordinary course of business or (c) as disclosed on Schedule 4.12.

 

Other than as disclosed on Schedule 4.13, since the date of the Balance Sheet:

 

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Other than as disclosed in Schedule 4.14, no director or officer, former director or officer, shareholder or Employee of, or any other Person not dealing at arm’s length with the Vendor is engaged in any transaction or arrangement with or is a party to a Contract with, or has any indebtedness, liability or obligation to, the Vendor relating to the Business or the Purchased Assets except for employment arrangements with Employees, the terms of which are disclosed in Schedule 4.33.

 

The Vendor is not a party to any strategic alliance or co-operative agreement relating to the Business and the Vendor is not a partner, beneficiary, trustee, co-tenant, joint-venturer or otherwise a participant in any partnership, trust, joint venture, co-tenancy or similar jointly owned business undertaking and the Vendor does not have any significant investment interests in any business owned or controlled by any third party which carries on in whole or in part the Business or any business similar to, competitive with or ancillary to the Business and the Vendor has not entered into any memorandum of understanding, letter of intent or any other agreement with respect to the foregoing.

 

The Vendor has not given or agreed to give, nor is the Vendor a party to or bound by, any guarantee, surety or indemnity in respect of indebtedness, or other obligations, of any Person, or other commitment by which the Vendor is, or is contingently, responsible for such indebtedness or other obligations and pursuant to which any of the assets or property of the Business or any of the Purchased Assets are liable or subject to seizure, sale or other legal process upon the enforcement of such guarantee, surety, indemnity or commitment o