BUSINESS LAW Practice Basics 2017

Transcription

1 BUSINESS LAW Practice Basics 2017 chairs Jordan Dolgin Dolgin Professional Corporation A. Paul Mahaffy, C.S. Bennett Best Burn LLP Shevaun McGrath Goodmans LLP April 25, 2017 *CLE A-PUB*

2 DISCLAIMER: This work appears as part of The Law Society of Upper Canada s initiatives in Continuing Professional Development (CPD). It provides information and various opinions to help legal professionals maintain and enhance their competence. It does not, however, represent or embody any official position of, or statement by, the Society, except where specifically indicated; nor does it attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein should be used prudently, as nothing in the work relieves readers of their responsibility to assess the material in light of their own professional experience. No warranty is made with regards to this work. The Society can accept no responsibility for any errors or omissions, and expressly disclaims any such responsibility All Rights Reserved This compilation of collective works is copyrighted by The Law Society of Upper Canada. The individual documents remain the property of the original authors or their assignees. The Law Society of Upper Canada 130 Queen Street West, Toronto, ON M5H 2N6 Phone: or Ext Fax: cpd@lsuc.on.ca Library and Archives Canada Cataloguing in Publication Business Law Practice Basics 2017 ISBN (Hardcopy) ISBN (PDF)

3 BUSINESS LAW Practice Basics 2017 Chairs: Jordan Dolgin Dolgin Professional Corporation A. Paul Mahaffy, C.S. Bennett Best Burn LLP Shevaun McGrath Goodmans LLP April 25, :00 a.m. to 12:30 p.m. Total CPD Hours = 2 h 30 m Substantive + 1 h Professionalism SKU CLE Donald Lamont Learning Centre The Law Society of Upper Canada 130 Queen Street West Toronto, Ontario Agenda 9:00 a.m. 9:10 a.m. Welcome and Opening Remarks A. Paul Mahaffy, C.S., Bennett Best Burn LLP 1

4 9:10 a.m. 9:35 a.m. Meeting with Your Client (25 m ) Darlene Tonelli, Inter Alia Law 9:35 a.m. 10:05 a.m. Due Diligence (5 m ) Shevaun McGrath, Goodmans LLP 10:05 a.m. 10:35 a.m. Letter of Intent A. Paul Mahaffy, C.S., Bennett Best Burn LLP 10:35 a.m. 10:50 a.m. Coffee and Networking Break 10:50 a.m. 11:20 a.m. Purchase and Sale Agreement Jordan Dolgin, Dolgin Professional Corporation 11:20 a.m. 11:50 a.m. Closing the Transaction (5 m ) David Street, Lerners LLP 11:50 a.m. 12:15 p.m. The Changing Role of Solicitors (25 m ) Jordan Dolgin, Dolgin Professional Corporation A. Paul Mahaffy, C.S., Bennett Best Burn LLP Shevaun McGrath, Goodmans LLP David Street, Lerners LLP Darlene Tonelli, Inter Alia Law 12: 15 p.m. 12:30 p.m. Question and Answer Session 12:30 p.m. Program Ends 2

5 BUSINESS LAW Practice Basics 2017 April 25, 2017 SKU CLE Table of Contents TAB 1 Meeting Your Client to 1-4 Darlene Tonelli, Inter Alia Law TAB 2 Due Diligence to 2-42 Shevaun McGrath, Goodmans LLP TAB 3 Letters of Intent to 3-25 A. Paul Mahaffy, C.S., Bennett Best Burn LLP TAB 4 Purchase and Sale Agreement Checklist to 4-11 Jordan Dolgin, Dolgin Professional Corporation TAB 5 Closing The Transaction to 5-32 David Street, Lerners LLP 1

6 TAB 1 BUSINESS LAW Practice Basics 2017 Meeting Your Client Darlene Tonelli Inter Alia Law April 25, 2017

7 Meeting Your Client LSUC Business Practice Basics April 25, 2017 By Darlene Tonelli 1 The following brief outline sets out a basic checklist of key considerations, practice tips and associated resources to assist in making that first meeting with a prospective client a success. These considerations are explained in more detail in the presentation associated with these materials. These suggestions should be viewed solely as a guideline additional considerations will apply for specific practice areas. Both the Law Society of Upper Canada ( LSUC ) and LawPro offer specific resources on this topic, links for which are included in this paper. Part I deals with the goals for the first meeting. Part II deals with meeting your LSUC obligations, and Part III addresses best practices in the case where you (or the client) decide not to work together after the first meeting. I. GOALS FOR THE FIRST MEETING A. Key Considerations & Practice Tips 1. Determine who your client is: - Company shareholder? Board? Officer? Employee? - Individual sophisticated? - Financial status (pre-funding? Funded? Revenue-generating) - Fit personality, client goals, client style 2. Identify the (real) scope of work: - Task as identified by the client - Task as you see it, including: - Red / yellow flags - Specific legal issues raised by the industry the client is in - Potential statutory or compliance issues raised - Specialized expertise required? (tax, privacy, etc.) - Jurisdiction 1 Darlene Tonelli, B.A (Hons), LL.B (Toronto), called to the bar in Ontario (2003). Founder of Inter Alia Law (

8 3. Confirm whether the client is willing / able to pay for the work that you believe needs to be done. - Retainer (if applicable) - Shortcuts requested by client - Signs of client sticker shock - Requests to limit quality/scope to meet budget 4. Determine if you are the right lawyer for this client: - Ability to meet stated deadlines - Competence - Fit (see above) - Approach and proposed time quote satisfies client B. Resources - LawPro PracticePro: - LSUC Rules of Professional Conduct, Chapters 2 & 3: - LSUC guidance on Joint Retainers: - Canadian Bar Association Practice Tools II. MEETING YOUR LSUC OBLIGATIONS A. Key Considerations & Practice Tips 1. Client Identification - Review LSUC By-law 7.1 Part III and develop good internal processes for the collection of the required information. 2. Conflicts - Review LSUC Rule 3, Section 3.4 and develop good internal processes for checking conflicts on each new file (re-checking when new parties become averse in interest during your retainer). - Explain to the client what you consider to be a conflict

9 3. Confidentiality - Review LSUC Rule 3, Section Explain the scope of your confidentiality obligation to the client in the initial meeting. - Ask the client not to provide confidential information before you confirm that you have no conflict. 4. Privilege - It may be appropriate, depending on the type of retainer the client is proposing, to explain how privilege can best be maintained in the solicitor/client relationship in this meeting. 5. Electronic Communications / Privacy - In the initial meeting, secure the client s consent to use electronic communication, including brief discussion of some of the risks, and providing the option of in-person communication only for sensitive topics. 6. Engagement Letter - Memorialize the topics above in your engagement letter with your client, including details on the scope of services, fees, how you will take instructions and anticipated timeline for your responses to their calls/ s. B. Resources LSUC Practice Management Topics: Client Identification and Verification: Conflicts of Interest: Engagement Letters: III. HOW NOT TO RETAIN A CLIENT A. Key Considerations & Practice Tips - Choose clients wisely - Trust your instincts - Can you fulfill your duty to act honourably and with integrity with this client and their file? - If you decide not to proceed, complete a non-engagement letter, preferably one that does not require their signature but in which they are asked to contact you if any of the information in the letter is unclear or inaccurate in their view

10 - Keep good notes on all initial client meetings, including notes on how and why the person was referred to you or found you, and your own reasons on why you will not be moving forward. - File all notes on clients not engaged in a single location rather than by name within your regular filing system. B. Resources LSUC Practice Management Topics: Non-engagement letters: Sample non-engagement letter: IV. CONCLUSION At the end of the day, the clients you choose will shape your work day, your income, your reputation, and your life. Taking the extra time to choose clients who are a good fit for you and your practice is one of the best ways to minimize liability and enhance satisfaction with your professional work. I hope that these tips are helpful to you. For more information, please contact me at Inter Alia Law : Darlene Tonelli: darlene@interalia-law.com LinkedIn: Cell: (416)

11 TAB 2 BUSINESS LAW Practice Basics 2017 Due Diligence Shevaun McGrath Goodmans LLP April 25, 2017

12 goodmans.ca DUE DILIGENCE CHECKLIST FOR ASSET PURCHASE TRANSACTION This Due Diligence Checklist for an Asset Purchase Transaction is a precedent document and should be used solely as a guide. Be sure to read the entire document and be sure that any subject matters identified herein are applicable to the facts and circumstances of the transaction with which you are dealing. This precedent Due Diligence Checklist will not be applicable to all transactions. It is also important that you consider any other issues or facts which may be relevant to your transaction and which may not be covered by this precedent. Be sure to speak with members of other practice areas relevant to your transaction as soon as possible when conducting due diligence on any target corporation or its business or assets. Be especially mindful of the interests of your client, strategic and otherwise, when conducting due diligence. Goodmans LLP 2-1

13 goodmans.ca DUE DILIGENCE CHECKLIST 1 DOCUMENT DELIVERY In connection with the proposed acquisition of [substantially] all of the assets of (the Vendor ) by (the Purchaser ), we have developed the following preliminary due diligence requisition list, in our capacity as counsel to the Purchaser. As we are provided with the requested information and our knowledge with respect to the Purchased Business increases, additional requisitions may become necessary. We also rely on the Vendor and its direct or indirect shareholders and their representatives to bring to our attention all information properly characterized as material, whether or not specifically referenced in this list. If, with regard to any document or information, there is doubt as to its validity or significance, please provide us with a description of the document or information so that we may assist in such determination. We would ask that you advise us of any new information or amendments to existing information if, as and when it becomes available, and provide us with any available additional documentation relating thereto. If possible, it would be appreciated if you could cross-reference your responses and documentation to the item numbers referred to below. Document Previously Provided Provided Herewith To Be Provided Inapplicable 1. Corporate Matters 1.1 Prepare corporate chart showing the ownership structure of the Vendor [and the Subsidiaries], including jurisdiction of incorporation and percentage of ownership. Obtain minute books of the Vendor [and each of its Subsidiaries]. 1.2 Obtain and review certified copies of articles of incorporation or other charter documents of the Vendor [and each of its Subsidiaries], including any predecessor corporations, and all amendments thereto. 1.3 Obtain and review certified copies of the current by-laws of the Vendor [and each of its Subsidiaries], including any predecessor corporations to determine the particular corporate procedures to be followed to accomplish the transaction. 1.4 Prepare a list of jurisdictions in which the Vendor [and each of its Subsidiaries] carry on business, maintain a registered office or hold property. Obtain copies of the current registrations to carry on business in all applicable jurisdictions. 1 ANNOTATION: All confidential information provided by the Vendor to the Purchaser should be clearly identified as such. 2-2

14 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 1.5 Review authorized and issued share capital, organization of the Vendor [and each of its Subsidiaries] and minutes of meetings of the board of directors and shareholders of the Vendor [and each of its Subsidiaries], and the predecessors of each since incorporation. Confirm proper constitution of the current board of directors of the Vendor [and each of its Subsidiaries]. 1.6 Obtain and review any documentation relating to any [material] purchase or sale by, or reorganization of, the Vendor [and each of its Subsidiaries] in the past five years. 1.7 Review the minute books of the Vendor [and each of its Subsidiaries] for the existence of any of the following: (a) shareholder agreements; (b) employee agreements; (c) bonus plans, stock option plans and any other agreements or undertakings relating to securities (including any warrants or options); (d) employee retirement payments and profit-sharing plans; (e) pension plans; (f) fringe benefits plans (e.g. life insurance, medical insurance, etc.); (g) union contracts; (h) any material or long-term commitments; (i) legal problems, regulatory problems and/or litigation; and (j) other operating details of a material or unusual nature. 1.8 Prepare a list of any names, other than current names, under which the Vendor [and (if applicable) each of its Subsidiaries] or their respective predecessors have done business in the past. 2-3

15 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 2. Corporate and Public Searches 2.1 Perform the following corporate and other searches against the Vendor [and each of its Subsidiaries], and each of their predecessors (including related searches in all jurisdictions in which the Vendor [or any of its Subsidiaries] or any of their predecessors carries or carried on business, as the case may be): (a) Securities Act (Ontario): (i) (ii) material change reports and press releases; and insider trading reports; (b) Personal Property Security Act (Ontario); (c) Executions Act (Ontario); (d) Bank Act (Canada); (e) Bankruptcy Act (Canada); and (f) Bulk Sales Act (Ontario). 2.2 Perform searches of the public files of the Vendor [and each of its Subsidiaries], and each of their predecessors, at Ontario Companies Branch and The Toronto Stock Exchange, to the extent applicable. 2.3 Perform Info Globe searches in respect of the Vendor [and each of its Subsidiaries]. 3. Financial Information 3.1 Obtain copies of the financial statements of the Vendor [and each of its Subsidiaries] for the past [five] fiscal years and copies of the quarterly statements for the current fiscal year. 3.2 Obtain copies of any written recommendations, reports or letters to management prepared by or initiated from the auditors/accountants of the Vendor [or any of its Subsidiaries], or their financial officers, with respect to any aspect of their system of accounting, financial reporting, internal financial controls or recordkeeping. 2-4

16 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 3.3 Obtain a list of all accounts payable and accounts receivable of the Vendor [and each of its Subsidiaries] as at [insert appropriate date]. 3.4 Obtain a list and sales figures of [all/the [ten] largest dollar volume] customers and [all/the [ten] largest dollar volume] suppliers for the Vendor [and each of the Subsidiaries]. 3.5 Obtain all information pertaining to any provincial or federal tax audits of the Vendor [or any of its Subsidiaries]. 3.6 Obtain and review copies of any swap or hedging agreements. 3.7 Obtain and review copies of all strategic or business plans and market studies prepared by or for the Vendor [and its Subsidiaries] within the last [three] years. 3.8 With respect to the auditors of the Vendor, consider asking such auditors to address or provide information pertaining to the following: (a) (b) (c) Any recent, proposed or contemplated changes in the accounting policies of the Vendor; The adequacy of the Vendor s internal controls and accounting methods and policies with respect to financial matters, including their internal reporting systems, the recording of sales and expenses and other matters; and The comments and opinions of the auditors with respect to the general fairness of the accounting policies and the presentation of the financial statements of the Vendor [and its Subsidiaries]. 3.9 Obtain all information pertaining to transactions by the Vendor [or any of its Subsidiaries] with any affiliated companies and the method of reflecting these transactions in their financial statements. 2-5

17 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 4. Contracts/Agreements 4.1 Obtain and review all agreements relating to banking, finance and other lines of credit and material short-term or long-term borrowings of the Vendor [and each of its Subsidiaries] (and of any other persons or companies whose obligations have been guaranteed by the Vendor [or any of its Subsidiaries]), including without limitation: (a) Credit or Loan Agreements and the particulars of any security granted in connection therewith; (b) Capitalized leases, whether secured or unsecured; (c) All letters of consent or waivers from any lending institution obtained in the last [three] years in connection with any indebtedness whether or not the debt is presently outstanding; (d) Guarantees, security agreements, mortgages, conditional sales agreements, trust deeds, financing leases, bonds, debentures, promissory notes and indemnities; and (e) Any correspondence with lenders regarding any default, acceleration or termination of any obligation of the Vendor [or any of its Subsidiaries]. 4.2 Obtain and review copies of all contracts with customers to which the Vendor [or any of its Subsidiaries] is a party [where the revenues in any year exceed $ or the term is in excess of [one] year] (including any contracts or commitments for the sale of products or services to any Governmental Authority). Obtain and review any sales agency, distributorship or brokerage agreements. Note any provisions pertaining to assignment or change of control. 4.3 Obtain and review copies of all contracts with suppliers to which the Vendor [or any of its Subsidiaries] is a party [where the costs in any year exceed $ or the term is in excess of [one] year]. 4.4 Obtain and review copies of all documents evidencing the terms and conditions of any [material] acquisition, reorganization, disposition or other major change in the capital, assets or liabilities of the Vendor [or any of its Subsidiaries] in the preceding [three] years. 2-6

18 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 4.5 Obtain and review copies of all documents relating to any proposed [material] acquisition, sale or lease of assets by the Vendor [or any of its Subsidiaries]. 4.6 Obtain and review copies of any [material] equipment leases entered into within the [three] preceding years or proposed to be entered into by the Vendor [or any of its Subsidiaries]. 4.7 Obtain and review copies of all [material] operating agreements or joint venture agreements or contracts creating present or future rights in favour of third parties affecting any [material] assets, operations or future financings of the Vendor [or any of its Subsidiaries], [including all distribution, sales, agency, development, and rights and options agreements.] 4.8 Obtain and review copies of any standard form agreements used by the Vendor [or any of its Subsidiaries]. 4.9 Obtain and review copies of all [material] lease agreements whereby machinery, equipment, vehicles, etc. are leased from or to the Vendor [or any of its Subsidiaries] Obtain and review all non-competition agreements with third parties to which the Vendor [or any of its Subsidiaries] is a Party Obtain and review copies of all other agreements which may be material or of significance to the business or assets of the Vendor [or any of its Subsidiaries] not otherwise identified herein Identify all contracts, agreements and other obligations to which the Vendor is a party that will require the giving of notice to, or the receipt of consent from, a third party in order for the Vendor to assign such contracts, agreements and other obligations [Identify all contracts, agreements and other obligations to which any of the Subsidiaries is a party that will require the giving of notice to, or the receipt of consent from, a third party in order for the Vendor to assign such contracts, agreements and other obligations.] 2-7

19 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 5. Real Property and Environmental Matters 5.1 Obtain and review copies of the title documents for all real property owned by the Vendor [or any of its Subsidiaries], if any, together with the reporting letters and opinions of the solicitors with respect to the acquisition of such real property. Include copies of any encumbrances on such properties and note the following: (a) (b) Street address, legal description and site plan, including existing ingress and egress; Topographical surveys and soil tests, and any other studies of any environmental issues relating to the plant or the plant site; (c) Zoning and building codes and description of current use; and (d) Valuations and tax assessments. 5.2 Obtain and review copies of all documents purporting to create liens, mortgages, security interests, pledges, charges or other encumbrances of a material nature on the real property of the Vendor [and its Subsidiaries]. 5.3 Obtain and review copies of any [material] real property leases entered into by the Vendor [and its Subsidiaries] as tenants and copies of any registrations relating thereto. Note the following: (a) Name of other party, location, description and use; (b) Date, term and termination and renewal rights; (c) Rent per month (including percent rent agreements and other costs); (d) Guarantees and any defaults or breaches; and (e) Assignment and change of control provisions. 5.4 Obtain and review copies of any [material] real property leases entered into by the Vendor [and its Subsidiaries] as landlords and copies of any registrations relating thereto. Note the following: (a) Name of other party, location, description and use; 2-8

20 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable (b) Date, term and termination and renewal rights; (c) Rent per month (including percent rent agreements and other costs); (d) Guarantees and any defaults or breaches; and (e) Assignment and change of control provisions. 5.5 Obtain and review copies of any environmental audits (or similar reports relating to environmental matters), if any, on all real property owned, leased or otherwise occupied or utilized by the Vendor [or any of its Subsidiaries]. 5.6 Obtain and review copies of all agreements, contracts, arrangements and easements relating to the provision of services and utilities in respect of real property owned, leased or otherwise occupied or utilized by the Vendor [or any of its Subsidiaries]. 5.7 Conduct real property searches in all relevant jurisdictions (and determine the extent to which they should also be conducted for leased real property). 5.8 Make inquiries of municipalities and other governmental authorities re: compliance with zoning by-laws, work orders, environmental orders, etc. 5.9 Identify any violations, notices or claims of violation of any law, code, rule, regulation, ordinance, license or permit relating to building, zoning or environmental matters Obtain a detailed description of each of the following environmental and safety matters: (a) (b) (c) All waste material, effluent or atmospheric or other discharge, whether or not regulated, which is or has been generated by the business or operations of the Vendor [and each of its Subsidiaries]; All data in the control or possession of the Vendor [and each of its Subsidiaries] relating to the effect of exposure to the products presently or previously manufactured by the Vendor [and each of its Subsidiaries] or any of their predecessors; Records relating to exposure by employees to any material, effluent or atmospheric or other discharge; 2-9

21 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable (d) (e) (f) (g) Waste disposal practices of the Vendor [and each of its Subsidiaries] and their predecessors, and copies of all agreements relating to such practices; Persons who have conducted environmental assessments of the Vendor [or any of its Subsidiaries], and copies of any preliminary or final reports made by such persons; All documents relating to the indemnification given by previous owners to the Vendor [or any of its Subsidiaries] and subsequent purchasers in respect of any environmental or related matters; and Site history, possible contaminations, environmental audits and clean up. Address UFI, PCB, Asbestos, radon, automobile tires and underground storage tank issues. 6. Personal Property 6.1 Prepare a schedule of all machinery, equipment, vehicles and other tangible personal property owned by the Vendor [and its Subsidiaries] showing date of acquisition, condition, use, etc. 6.2 Prepare a schedule of all machinery, equipment, vehicles and other tangible personal property leased by the Vendor [and its Subsidiaries] showing date of acquisition, condition, use, etc. Obtain and review copies of all such leases and note any provisions pertaining to assignment and/or change of control. 6.3 Prepare a list of security interests, liens and encumbrances on all personal property owned or leased by the Vendor [and its Subsidiaries] in connection with applicable searches in all relevant jurisdictions. 6.4 Prepare a list of inventory of the business of the Vendor [and each of its Subsidiaries] as of the most recent available date and identify obsolete inventory. 6.5 Prepare a schedule of all warehouses owned or operated by the Vendor [and its Subsidiaries] and any other locations where assets of the Vendor [and each of its Subsidiaries] are stored. 2-10

22 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 7. Intellectual Property Prepare a list of any material trade-marks, copyrights, patents or other intellectual property rights used in, or material to, the business and operations of the Vendor [and each of its Subsidiaries] and particulars of any registrations relating thereto. Identify the holder of the intellectual property rights. 7.2 Obtain copies of all registered trade-marks and copyrights and pending trademark or copyright applications owned or on file with the Vendor [or any of its Subsidiaries]. Identify the holder of the intellectual property rights. 7.3 Obtain copies of any intellectual property or license agreements whereby the Vendor [or any of its Subsidiaries] license any intellectual property to or from others (or grant rights to or are granted rights by others) and note any provisions pertaining to assignment and/or change of control. 7.4 Obtain and review copies of all policies of the Vendor [and each of its Subsidiaries] regarding the treatment or disclosure of intellectual property, including all agreements concerning confidentiality and non-disclosure with employees, contractors, visitors or other parties. 7.5 Obtain and review all research and development agreements and design agreements including agreements with independent contractors who participated in the development of any material product and any agreements pursuant to which the Vendor [or any of its Subsidiaries] must provide development services. 7.6 Prepare a schedule of any exclusive rights (product or geographical) granted to or by the Vendor [or any of its Subsidiaries]. 7.7 Obtain all information concerning any claim of trade-mark infringement or other violation of an intellectual property right, or violation of any non-disclosure or non-competition agreement asserted by or against the Vendor [or any of its Subsidiaries] during the past [five] years. 7.8 Conduct any applicable intellectual property searches in all relevant jurisdictions. 2 ANNOTATION: If intellectual property is a significant component of the business being acquired, you may wish to include significantly more detailed intellectual property due diligence requests. 2-11

23 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 8. Governmental Authorizations 8.1 List all licenses, permits, approvals and other authorizations required of any Governmental Authority for the Vendor [and each of its Subsidiaries] to conduct their operations, carry on business or use their assets in accordance with all applicable Laws. 8.2 Summarize all reporting requirements of the Vendor [and each of its Subsidiaries] and review all filings made by them in the past [five] years to any Governmental Authority. 8.3 Review the business and operations of the Vendor [and each of its Subsidiaries] from a competition and antitrust law perspective. Confirm that there are no past or present competition law claims or pending litigation and no proceedings or consent decrees applicable to the Vendor [or any of its Subsidiaries] under any competition or antitrust legislation in any jurisdiction where they carry on business. Identify any agreements, written or oral, with any competitors of the Vendor [or any of its Subsidiaries], including memberships in any industry umbrella, advocacy or lobby group. 8.4 Determine whether the proposed transaction will require any approvals of or notification to any Governmental Authority prior to the Closing, including pursuant to the Bulk Sales Act (Ontario), Investment Canada Act (Canada) or the Competition Act (Canada). 8.5 Obtain information concerning any contributions of the Vendor [or any of its Subsidiaries] to political parties and their lobbying activities, registered or otherwise, if any. 9. Litigation 9.1 Prepare a description (together with a copy of any judgment, decree or order of a court or regulatory body or other Governmental Authority or any settlement of any kind) of all prior material litigation or investigations by which the Vendor [or any of its Subsidiaries] or any of their respective operations or assets continue to or may be affected. 2-12

24 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 9.2 Prepare a description of all other pending or threatened litigation or regulatory proceedings to which any of the Vendor [or any of its Subsidiaries] is or may be a party or by which they or their respective operations or assets are or may be bound together with copies of all pleadings, correspondence or other documents relating to such matters. 9.3 Obtain and review copies of all letters from counsel for the Vendor sent to the auditors/accountants of the Vendor [or any of its Subsidiaries] in the last [three] years with respect to any current, pending or threatened lawsuits or any regulatory actions by or against the Vendor [or any of its Subsidiaries]. 9.4 Assess the possibility of litigation in the following areas: (a) Equal employment opportunities and affirmative action claims; (b) Occupational health and safety matters; (c) Improvement, management, sale or leasing of real property; (d) Product liability and warranty; (e) Personal injury; (f) Intellectual property; (g) Environmental, pollution control or hazardous or toxic substances; and (h) Taxation (including any reassessments). 9.5 Assess the risk of improprieties potentially affecting the Vendor [or any of its Subsidiaries] or their businesses, operations or assets, including: (a) (b) List all procedures established by the Vendor [and each of its Subsidiaries] to safeguard against potential conflicts of interest and improper payments (i.e. kickbacks, bribes, etc.) by its principal directors, officers and employees; and Obtain a summary of purchases from, or loans or sales to, affiliates or controlled or associated persons and investigate prices in relation to market for the last [two] years. 2-13

25 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 9.6 Obtain details with respect to: (a) (b) Any [material] correspondence between the Vendor [or any of its Subsidiaries] and any Governmental Authority during the last [three] years; and Any [material] customer or supplier complaints or disputes in the past [two] years. 10. Employment, Health and Safety Matters Prepare a detailed organizational chart of the directors, officers and senior employees of the Vendor [and each of its Subsidiaries] Obtain and review copies of all existing employment, consultant or noncompetition agreements with key personnel of the Vendor [and each of its Subsidiaries] Obtain and review copies of any union contracts or collective bargaining agreements applicable to the Vendor [and each of its Subsidiaries], if any Obtain copies of any existing bonus, share or stock option, share purchase and other incentive plans, vacation plans or policies and other employee benefit plans, post-retirement health plans, severance plans and a summary of other severance obligations; and any pension, profit-sharing or welfare plans or health, accident, life or other group insurance plans With respect to employee compensation, (a) Identify any change of control arrangements (i.e. golden parachutes); (b) Identify all employee shareholdings; (c) Summarize recent employee compensation history and policies, including salaries, bonuses and perquisites (i.e. cars, expense accounts, memberships); 3 ANNOTATION: Any use, collection or dissemination of personal information should comply with the requirements of applicable privacy legislation. 2-14

26 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable (d) Identify any special arrangements concerning expatriate employees, either living in Canada or abroad; (e) Review compensation policies and administrative issues (i.e. geographic zones, pay plans, transfer policies, promotion policies, merit review and salary increase policies, pay equity and affirmative action plans, etc.); and (f) Identify any unfunded supplemental benefit plans (i.e. death benefits, disability income, etc.) With respect to pension and other benefit plans, (a) (b) (c) (d) (e) List and describe all defined benefit plans and other benefit programs covering employees in all jurisdictions where the Vendor [or any of its Subsidiaries] carries on the business; Summarize all plan descriptions, documents and amendments relating thereto, all funding agreements and investment management agreements, actuarial reports and valuations, collective bargaining agreements, all information returns filed with provincial pension plan commissions (or their equivalent in other jurisdictions), and any Annual Report Form 5500 (for U.S. employees); List all retirees entitled to post-retirement benefits and the funding status of each; List all inactive employees (i.e. Workers Compensation, maternal, paternal or parental leave or disability) including length of inactivity and return date or prognosis; List and describe all pension and other retirement plans and identify registration documents with provincial pension plan commissions (or their equivalent in other jurisdictions), trust documents and group annuity policies, funding status, actuarial reports, funding method and any unfunded pension liabilities, benefits for retired employees and any individual unfunded pension arrangements; and (f) Identify all other unfunded post-retirement benefits. 2-15

27 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 10.7 Review termination and severance pay programs and any employment agreements that contain notice or severance periods. In the absence of a formal termination program, review past policies and practice of the Vendor [and each of its Subsidiaries] with respect to termination and severance Identify the particulars of the indebtedness, if any, of the directors and senior officers and their respective associates and affiliates to the Vendor [or any of its Subsidiaries] Identify the particulars of any agreements between the Vendor [or any of its Subsidiaries] and any of their directors, officers or other insiders or their respective associates and affiliates during the past [three] years Obtain and review copies of all employee separation agreements and noncompetition agreements for the Vendor [and each of its Subsidiaries] Review employee handbooks, manuals and other personnel policies, together with details of any outstanding deferred compensation arrangements, and identify any oral personnel policies Identify any violations, notices or claims of violation of any law, code, rule, regulation, ordinance, license or permit relating to employee occupational health and safety Obtain the names of any persons who have conducted occupational health and safety assessments of the Vendor [or any of its Subsidiaries], and copies of any preliminary or final reports made by such persons Obtain and review the policies of the Vendor [and each of its Subsidiaries] with respect to the treatment of private, personal and confidential information. 11. Tax Matters 11.1 Identify all Tax liabilities of the Vendor [and each of its Subsidiaries] accrued as of the Closing Date but not yet due and payable Identify due and unpaid Taxes, penalties, etc. of the Vendor [and each of its Subsidiaries]. Review all notices from Governmental Authorities with respect to unpaid Taxes and all related correspondence. 2-16

28 goodmans.ca Document Previously Provided Provided Herewith To Be Provided Inapplicable 11.3 Review copies of all federal, provincial, state and local tax returns and property valuations prepared in the last [three] fiscal years. Review copies of all documents in connection with any tax holidays, abatements or preferential treatment Determine the fair market value and tax basis of each material asset to be transferred to the Purchaser[, the tax basis of the U.S. and Canadian Subsidiaries and the earnings and profits of both the U.S. and Canadian Subsidiaries] Identify all transfer Taxes that will have to be paid to any federal, provincial, state or local Governmental Authority arising out of the transfer of the assets of the Vendor. 12. Insurance 12.1 List and provide copies of: (a) (b) All [material] insurance policies (specifying the insurer, amount of coverage, type of insurance, policy number, expiration date, annual premium, pending claims and claims paid), including directors and officers liability policies and bonding policies on employees; and The most recent inspection reports, if any, received from insurance underwriters as to the condition of the assets or the conduct of the operations of the business of the Vendor [and its Subsidiaries] Prepare a schedule showing changes in amounts or types of insurance (by various types of coverage) carried during the past [five] years, together with copies of any available loss history reports for the Vendor [and each of its Subsidiaries] Obtain details of all insurance claims or related claims [over $ in amount] and presently pending or settled during the past [three] years for the Vendor [and each of its Subsidiaries] Obtain details of any involuntary cancellations of policies, reductions of coverage or rejections of applications for insurance during the past [five] years for the Vendor [and each of its Subsidiaries]

29 goodmans.ca Tip Sheet for Doing Due Diligence 1. Why are you doing the diligence? who is the client? what is the nature of the transaction (e.g. share/asset purchase, public offering, financing, etc.)? are there any particular areas of concern (e.g. regulatory, pension/benefit, title confirmation, etc.)? are there areas that the client wants information on specifically, or perhaps areas that the client has already reviewed and does not want time spent on? *Keep the purpose of diligence in mind throughout the entire process! 2. What does the client want from the diligence? only a list of identified issues. full due diligence summary/report. binder of agreement summaries. does the client want a final product at the end of all diligence or a continuous rolling update on issues as they arise in particular areas? If a continuous update is requested, does the client want it done via conference call, memo, , etc.? 3. How will you access the diligence documents? has a non-disclosure or confidentiality agreement been entered into? have you prepared a comprehensive due diligence request list? This is often an effective method to coordinate the process. how are the documents organized? (Is there a data room online or physical? Is there an index? Is there a time limitation for access? Can you take copies?) if the diligence is being conducted on a public company, have you reviewed its public disclosure?

30 goodmans.ca 4. What are the practical preliminary considerations? have you established a materiality threshold with the client to guide the review? what is the overall timeframe, including in terms of initial feedback to the client, as well as preliminary/interim and final reporting to the client? has the diligence been allocated among the client s different advisors (e.g. legal, financial, accounting, actuarial, etc.)? will specialty counsel be required (e.g. real property, environmental, tax, labour, pensions, competition, intellectual property, etc.)? should counsel be retained in other jurisdictions to assist with the diligence? what searches need to be done? (e.g. PPSA, litigation, corporate searches, insolvency, Bank Act, intellectual property, real property, etc.)? What jurisdictions need to be searched? Who is the person to ask to assist with doing these searches? has a client point person been appointed? Clients may prefer to deal with one person for all diligence matters. how will diligence results be communicated to those drafting the transaction documents and closing checklist? 5. How will you conduct the diligence review? keep a list of the documents you have reviewed. keep a list of the documents you have requested and those that remain outstanding. keep a list of any deficiencies in the materials that have been provided and the steps that have been taken to rectify those deficiencies (e.g. agreements provided that are not fully executed, missing schedules, etc.). keep the client regularly updated, including prompt reporting of red flag issues and seeking the client s instructions as the process moves forward. have you defined terms in your summaries? have you proofread your summaries? Do they provide a comprehensive overview (and, more importantly, highlight the material issues for consideration) for someone who has not reviewed the full text of the agreement? where the target entity is public, have you reviewed its public disclosure to confirm that material agreements and transaction documents have been provided for review? will there be a verbal due diligence session? Have you prepared questions and circulated them prior to the session? Goodmans LLP

31 goodmans.ca Date: [ ] Reviewed By: [ ] PROJECT [NAME OF PARTY] File # EMPLOYMENT AGREEMENT SUMMARY 1 Section Name of Document Parties Date Commencement Date Term (including any renewal term) Position Compensation Termination Payment on Termination Stock Option Plan Vacation and Holiday Sick Leave Benefits Conflict of Interest 1 This Employment Agreement Summary form is a precedent document and should be used solely as a guide. This precedent will not be applicable to all transactions. It is also important that you consider any other issues or facts which may be relevant to your transaction and which may not be covered by this precedent. Be especially mindful of the interests of your client, strategic and otherwise, when conducting due diligence. 2-20

32 goodmans.ca Section Non-Competition Confidentiality and Ownership of Proprietary Property Survival and Enforcement of Obligations Change of Control Governing Law Signed (Y/N) All Pages (Y/N) Comments (e.g. deficiencies) Goodmans LLP

33 goodmans.ca Date: [ ] Reviewed By: [ ] PROJECT [NAME OF PARTY] File # DOCUMENT SUMMARY 1 Section Name of Document Parties Date Subject of Document Consideration Term (including any renewal term) Change of Control Restrictions on Assignment Indemnities Required Consents Termination Provisions Summary of Other Major Provisions Governing Law 1 This Summary form is a precedent document and should be used solely as a guide. This precedent will not be applicable to all transactions. It is also important that you consider any other issues or facts which may be relevant to your transaction and which may not be covered by this precedent. Be especially mindful of the interests of your client, strategic and otherwise, when conducting due diligence. 2-22

34 goodmans.ca Section Signed (Y/N) All Pages (Y/N) Comments (e.g. deficiencies) Goodmans LLP

35 goodmans.ca Date: [ ] Reviewed By: [ ] PROJECT [NAME OF PARTY] File # REAL PROPERTY LEASE SUMMARY 1 Section Property Name of Document Landlord Tenant Suite Rentable Area Term Commencement Date Expiry date Renewal options Current Rent Basic Additional Last Month Rent Paid (Y/N) Rental Increase 1 This Real Property Lease Summary form is a precedent document and should be used solely as a guide. This precedent will not be applicable to all transactions. It is also important that you consider any other issues or facts which may be relevant to your transaction and which may not be covered by this precedent. Be especially mindful of the interests of your client, strategic and otherwise, when conducting due diligence. 2-24

36 goodmans.ca Section Right to Lease Additional Space Space Optioned to Other Permitted Use Exclusive Use Termination Provisions (including any penalties for early termination) Right of First Refusal Landlord s Right to Transfer or Mortgage Change of Control (If consent is required, specify contact information) Restrictions on Assignability (If consent is required, specify contact information) Environmental Liability Governing Law Signed (Y/N) All Pages (Y/N) Comments (e.g. deficiencies) Goodmans LLP

37 goodmans.ca DUE DILIGENCE CHECKLIST FOR SHARE PURCHASE TRANSACTION This Due Diligence Checklist for a Share Purchase Transaction is a precedent document and should be used solely as a guide. Be sure to read the entire document and be sure that any subject matters identified herein are applicable to the facts and circumstances of the transaction with which you are dealing. This precedent Due Diligence Checklist will not be applicable to all transactions. It is also important that you consider any other issues or facts which may be relevant to your transaction and which may not be covered by this precedent. Be sure to speak with members of other practice areas relevant to your transaction as soon as possible when conducting due diligence on any target corporation or its business or assets. Be especially mindful of the interests of your client, strategic and otherwise, when conducting due diligence. Goodmans LLP 2-26

38 goodmans.ca DUE DILIGENCE CHECKLIST 1 DOCUMENT DELIVERY In connection with the proposed acquisition of all of the shares of (the Company ) by (the Purchaser ) from (the Vendor ), we have developed the following preliminary due diligence requisition list, in our capacity as counsel to the Purchaser. As we are provided with the requested information and our knowledge with respect to the Company increases, additional requisitions may become necessary. We also rely on the Vendor and its direct or indirect shareholders and their representatives to bring to our attention all information properly characterized as material, whether or not specifically referenced in this list. If, with regard to any document or information, there is doubt as to its validity or significance, please provide us with a description of the document or information so that we may assist in such determination. We would ask that you advise us of any new information or amendments to existing information if, as and when it becomes available, and provide us with any available additional documentation relating thereto. If possible, it would be appreciated if you could cross-reference your responses and documentation to the item numbers referred to below. Document Previously Provided Provided Herewith To Be Provided Inapplicable 1. Corporate Matters 1.1 Prepare corporate chart showing the ownership structure of the Company [and the Subsidiaries], including jurisdiction of incorporation and percentage of ownership. Obtain minute books of the Company [and each of its Subsidiaries]. 1.2 Obtain and review certified copies of articles of incorporation or other charter documents of the Company [and each of its Subsidiaries], including any predecessor corporations, and all amendments thereto. 1.3 Obtain and review certified copies of the current by-laws of the Company [and each of its Subsidiaries], including any predecessor corporations to determine the particular corporate procedures to be followed to accomplish the transaction. 1.4 Prepare a list of jurisdictions in which the Company [and each of its Subsidiaries] carry on business, maintain a registered office or hold property. Obtain copies of the current registrations to carry on business in all applicable jurisdictions. 1 ANNOTATION: All confidential information provided by the Vendor to the Purchaser should be clearly identified as such. 2-27