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Exhibit 10.18
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SHAREHOLDERS OF SAPLING CORPORATION ARE ADVISED TO SEEK INDEPENDENT LEGAL ADVICE
CONCERNING THEIR RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT. SEE SECTION 8.17
OF THIS AGREEMENT.
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SHARE PURCHASE AGREEMENT
This Agreement dated as of April 14, 1999 is made
B E T W E E N
HYPERION SOLUTIONS CORPORATION,
a corporation incorporated under the laws of the
State of Delaware
and
HSC ACQUISITION CO.,
an unlimited liability corporation incorporated
under the laws of the province of Nova Scotia
and
THE SHAREHOLDERS OF SAPLING CORPORATION
RECITALS
WHEREAS Sapling Corporation ("SAPLING") is a corporation
incorporated under the laws of the province of Ontario with authorized share
capital consisting of an unlimited number of common shares and an unlimited
number of non-voting redeemable preference shares of which Five Million, Seven
Hundred and Fifty-Three Thousand, Four Hundred and Fifty-One (5,753,451) common
shares will be issued and outstanding as fully-paid and non-assessable as at the
Closing Time (defined below);
AND WHEREAS the Shareholders (defined below) collectively own
all of the issued and outstanding common shares of Sapling (the "SHARES");
AND WHEREAS Parentco (defined below) has caused the
incorporation of the Purchaser (defined below) for the purpose of purchasing the
Shares from the Shareholders;
AND WHEREAS the Shareholders have agreed to sell and the
Purchaser (defined below) has agreed to purchase the Shares from the
Shareholders on the terms and conditions set forth in this agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
of the mutual covenants, agreements, representations and warranties of the
parties hereinafter
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contained and other good and valuable consideration (the receipt and sufficiency
of which are hereby acknowledged by each party), the parties agree as follows:
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ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the
meanings set out below unless the context requires otherwise:
"AFFILIATE" has the meaning ascribed thereto under the OBCA.
"AGREEMENT" means this Agreement, including the Exhibits and the
Schedules to this Agreement, as it or they may be amended or
supplemented from time to time, and the expressions "HEREOF", "HEREIN",
"HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this
Agreement and not to any particular Section or other portion of this
Agreement.
"ANNUAL EARN-OUT CONSIDERATION" has the meaning given in
Section 2.4(1).
"APPLICABLE EMPLOYEE BENEFIT LAWS" has the meaning given in
Section 5.1(38).
"APPLICABLE LAW" means, with respect to any Person, property,
transaction, event or other matter, any law, rule, statute, regulation,
order, judgment, decree, treaty or other requirement having the force
of law (collectively, the "LAW") relating or applicable to such Person,
property, transaction, event or other matter. Applicable Law also
includes, where appropriate, any interpretation of the Law (or any part
thereof) by any Person having jurisdiction over it, or charged with its
administration or interpretation.
"ARBITRATION" has the meaning given in Section 8.15.
"ARBITRATION ACT" has the meaning given in Section 8.15.
"ASSETS" means all the properties, assets, interests and rights of the
Corporation as constituted at the Closing Date including the following:
(a) all rights and interests of the Corporation to and in the
Leased Premises and under the Premises Leases, including
prepaid rents, security deposits and options to renew or
purchase, rights of first refusal under the Premises Leases
and all leasehold improvements owned by the Corporation and
forming part of the Leased Premises;
(b) the Personal Property;
(c) the Inventories;
(d) the Receivables;
(e) all rights and interests of the Corporation under or pursuant
to all warranties, representations and guarantees, express,
implied or otherwise, of or made by suppliers or others in
favour of the Corporation in connection with the Assets;
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(f) the Intellectual Property;
(g) the Contracts;
(h) the Licences and Permits;
(i) the Books and Records;
(j) all prepaid charges, deposits, sums and fees paid by the
Corporation before the Closing Time;
(k) all rights and interests of the Corporation in all goodwill of
the Corporation including the present telephone numbers,
internet domain addresses and other communications numbers and
addresses of the Corporation;
(l) all of the issued and outstanding shares of the Subsidiaries;
and
(m) all proceeds of any or all of the foregoing.
"ASSOCIATE" has the meaning ascribed thereto under the OBCA.
"AUDITORS" means PricewaterhouseCoopers LLP or such other firm of
public accountants other than the Reviewing Accountants designated by
the Purchaser from time to time.
"B & E ESCROW AGREEMENT" means an agreement substantially in the form
of Exhibit N and acceptable to Xxxxxx & Xxxxxx.
"BACKLOG" means any order for the licensing of Software Products that,
as at the end of a period for which revenue is to be determined, would
meet all conditions for recognition of software license fees by
Parentco on a consolidated basis in accordance with US GAAP except for
the condition that the Software Products be shipped.
"BCG ESCROW AGREEMENT" means an agreement substantially in the form of
Exhibit N and acceptable to Blake, Xxxxxxx & Xxxxxxx to which Blake,
Xxxxxxx & Xxxxxxx, the Purchaser, Parentco and the Non-Resident
Shareholders are party.
"BOOKS AND RECORDS" means all rights and interests of the Corporation
in all books, records, files and papers of the Corporation including
drawings, engineering information, computer programs (including source
code), software programs, manuals and data, sales and advertising
materials, sales and purchases correspondence, trade association files,
research and development records, lists of present and former customers
and suppliers, personnel, employment and other records, and the minute
and share certificate books of the Corporation, and all copies and
recordings of the foregoing.
"BREACHING SHAREHOLDER" has the meaning given in Section 4.2.
"BUSINESS" means the business carried on by the Corporation which
primarily involves the design, development and marketing of software
for business modelling, activity-based costing/activity-based
management and performance management, as well as related training,
technical support and solutions expertise.
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"BUSINESS DAY" means any day except Saturday, Sunday or any day on
which banks are generally not open for business in the City of Toronto.
"CANADIAN DOLLARS" or "CDN. $" means the lawful currency of Canada.
"CANADIAN GAAP" means those accounting principles which are recognized
as being generally accepted in Canada from time to time as set out in
the handbook published by the Canadian Institute of Chartered
Accountants, consistently applied.
"CANADIAN GAAS" means those auditing standards which are recognized as
being generally accepted in Canada from time to time as set out in the
handbook published by the Canadian Institute of Chartered Accountants,
consistently applied.
"CHANNEL SALES PROGRAMS" means arrangements for the licensing or
sub-licensing of a software product of a Person by another Person that
is not a Non-Arm's Length Party in relation to the first-mentioned
Person, such as a value-added reseller or distributor, and that is
commonly referred to as a "channel distributor".
"CLAIM" has the meaning given in Section 6.1.
"CLOSING" means the completion of the purchase and sale of the Shares
in accordance with the provisions of this Agreement.
"CLOSING AGREEMENTS" means the B & E Escrow Agreement, the BCG Escrow
Agreement, the Non-Competition Agreement and Intellectual Property
Assignments, the IP Assignments, and the releases referred to in
Section 3.2(14).
"CLOSING DATE" means April 21, 1999 or such earlier or later date as
may be agreed upon in writing by the Purchaser, Parentco and the
Shareholder Committee on behalf of the Shareholders.
"CLOSING STATEMENT" has the meaning given in Section 2.7(1).
"CLOSING STATEMENT ADJUSTMENTS" has the meaning given in
Section 2.7(1).
"CLOSING TIME" means the time of closing on the Closing Date provided
for in Section 3.1.
"COMMON SHAREHOLDERS' RIGHTS" has the meaning given in Section 2.13.
"CONFIDENTIAL INFORMATION" has the meaning given in Section 7.3(4)
"CONSENTS AND APPROVALS" means all consents and approvals of the
Corporation and the Shareholders required to be obtained in connection
with the execution and delivery of this Agreement and the completion of
the transactions contemplated by this Agreement, as described in
Schedule 5.1(30).
"CONTRACTS" means all rights and interests of the Corporation in all
pending and/or executory contracts, agreements, leases and
arrangements, whether written or oral, to which the Corporation is a
party or by which the Corporation or the Assets or the Business is
bound including the Material Contracts and the Leases.
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"CORPORATION" means Sapling Corporation and each of its Subsidiaries
collectively.
"DEBENTURES" has the meaning given in Section 4.1.
"DIRECT CLAIM" has the meaning given in Section 6.3.
"DIRECT SALES" means the licensing of a software product by the direct
sales force of a Person.
"DIRECTOR" means a director of the Corporation; and "DIRECTORS" means
every Director.
"DISPUTE" means any dispute arising out of or in relation to this
Agreement between any two or more Parties, one of which is the
Purchaser or Parentco, excluding a dispute that involves or is
reasonably likely to involve a Person other than a Party and excluding
any dispute in respect of the Closing Statement or a Software Revenue
Statement.
"EARN-OUT THRESHOLD" has the meaning given in Section 2.4.
"EARN-OUT YEAR" has the meaning given in Section 2.4(1).
"EMPLOYEE" means an individual who is employed by the Corporation; and
"EMPLOYEES" means every Employee.
"EMPLOYEE CERTIFICATE" has the meaning given in Section 5.1(36).
"EMPLOYEE PLANS" has the meaning given in Section 5.1(38).
"ENTERPRISE MARKET" means the market for software products consisting
of any Person, including any division or Affiliate thereof, which in
aggregate has annual revenues, if based in North America of $300
million or more and, if based outside North America, of such dollar
amounts less than $300 million as established from time to time by
Parentco or an Affiliate of Parentco.
"ENVIRONMENTAL LAWS" means Applicable Law in respect of the natural
environment, public or occupational health or safety, and the
manufacture, importation, handling, transportation, storage, disposal
and treatment of Hazardous Substances.
"ENVIRONMENTAL PERMITS" means all permits, certificates, approvals,
consents, registrations and licences issued or required by any
Environmental Laws or any court or governmental authority and relating
to or required for the ownership and/or operation of the Business
and/or the Assets.
"ESTIMATED CLOSING STATEMENT" has the meaning given in Section 2.6.
"ESTIMATED REDUCTION" has the meaning given in Section 2.6.
"EXCHANGE RATE" means the spot rate of exchange for a currency,
expressed in US Dollars, based on the rate of exchange published in The
Wall Street Journal on the relevant date of determination.
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"FINANCIAL STATEMENTS" has the meaning given in Section 5.1(14).
"FUNDING OF SHAREHOLDERS' RIGHTS" has the meaning given in
Section 2.13.
"HAZARDOUS SUBSTANCE" means any solid, liquid, gas, odour, heat, sound,
vibration, radiation or combination of them that may impair the natural
environment, injure or damage property or plant or animal life or harm
or impair the health of any individual.
"INCLUDING" means "including without limitation", and "INCLUDES" means
"includes without limitation".
"INDEMNIFIED PARTY" means a Person whom the Shareholders or the
Purchaser, as the case may be, has agreed to indemnify under Article 6.
"INDEMNIFYING PARTY" means, in relation to an Indemnified Party, the
Party to this Agreement that has agreed to indemnify that Indemnified
Party under Article 6.
"INITIATING PARTY" has the meaning given in Section 8.15.
"INTELLECTUAL PROPERTY" shall mean all rights of the Corporation in and
to inventions (whether or not patentable), ideas, formulae, software
(in source and object code form), including the Software Products,
process engineering, art works, schematic drawings, processes, product
plans, logos, trademarks, trademark applications, service marks,
copyrights, trade names, trade secrets, know-how, technical
information, patents, patent applications, databases, employee lists
and customer files.
"INTERIM PERIOD" means the period from the date of this Agreement to
the Closing.
"INVENTORIES" means all inventories of stock-in-trade and merchandise
including materials, supplies, work-in-progress, finished goods,
tooling, service parts and purchased finished goods owned by the
Corporation.
"INVESTORS" means Telesystem Software Ventures Limited Partnership and
Stonebridge.
"IP ASSIGNMENT" means an agreement in the form of Exhibit N.
"JANUARY CREDIT FACILITY" has the meaning given in Section 4.1.
"LEASED PREMISES" means all real property that is leased or occupied by
the Corporation under the Premises Leases.
"LEASES" means Personal Property Leases and Premises Leases.
"LICENCES AND PERMITS" means all licences, permits, filings,
authorizations, approvals or indicia of authority issued to the
Corporation including the Environmental Permits.
"LIEN" means any encumbrance, lien, charge, hypothec, pledge, mortgage,
title retention agreement, security interest of any nature, adverse
claim, exception, reservation, easement, right of occupation, any
matter capable of registration against title, option, right of
pre-emption, privilege or any contract to create any of the foregoing.
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"MATERIAL ADVERSE CHANGE" means a change in the business, operations or
capital of the Corporation which has had or could reasonably be
expected to have a material adverse effect on the business, financial
condition or results of operations of the Corporation or the value of
the Shares.
"MATERIAL CONTRACT" means an agreement (whether oral or written) to
which the Corporation is a party or by which the Corporation or any of
the Assets or the Business is bound including all amendments thereto,
except (i) the Leases and (ii) any agreement which involves or may
reasonably be expected to involve the payment to or by the Corporation
of less than $25,000 over the term of the agreement and which is not
otherwise material to the operation of the Business.
"MATERIAL PERSONAL PROPERTY LEASES" has the meaning given in
Section 5.1(19).
"MINORITY RESOLUTION" has the meaning given in Section 2.13.
"MODULE" means any software that links to or works with, and shares
resources such as libraries or subroutines with, any other software,
but the source code for which is not integrated with the source code of
such other software on a line by line basis.
"NON-ARM'S LENGTH PARTY" has the meaning ascribed thereto under the
Income Tax Act (Canada), and all regulations thereunder, as amended
from time to time.
"NON-COMPETITION AGREEMENT AND INTELLECTUAL PROPERTY ASSIGNMENT" means
an agreement in the form of Exhibit E1 in the case of the Investors and
Exhibit E2 in the case of Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxxx.
"NON-RESIDENT SHAREHOLDER" has the meaning given in Section 2.10(1).
"NON-RESIDENT'S PURCHASE PRICE" has the meaning given in
Section 2.10(1).
"NOTICES" means the notices required to be given by the Corporation and
Shareholders to any Person under Applicable Law or pursuant to any
Material Contract to which the Corporation is a party or by which the
Corporation is bound or which is applicable in connection with the
execution and delivery of this Agreement or the completion of the
transactions contemplated by this Agreement by the Corporation and
Shareholders, as set out in Schedule 5.1(31).
"OBCA" means the Business Corporations Act (Ontario), as amended from
time to time.
"OBJECTION NOTICE" has the meaning given in Section 2.9.
"OFFICER" means an officer of the Corporation; and "OFFICERS" means
every Officer.
"OPTION" means any agreement, any option, right or privilege (whether
pre-emptive or contractual) capable of becoming an agreement, or any
security, option, warrant, conversion right, subscription right or
exchange right of any kind, whether written or oral.
"PARENTCO" means Hyperion Solutions Corporation.
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"PARTY" means a party to this Agreement and any reference to a Party
includes its successors and permitted assigns; and "PARTIES" means
every Party.
"PERMITTED LIENS" means:
(a) Liens for Taxes if such Taxes are not due and payable;
(b) mechanics', construction, carriers', workers', repairers',
storers' or other similar liens (inchoate or otherwise) which
individually or in the aggregate are not material, arising or
incurred in the ordinary course of business which have not
been filed, recorded or registered in accordance with
Applicable Law or of which notice has not been given to the
Corporation; and
(c) the charges, security interests and other liens listed in
Schedule 1.1(1).
"PERSON" is to be broadly interpreted and includes an individual, a
corporation, a partnership, a trust, an unincorporated organization,
the government of a country or any political subdivision thereof or any
agency or department of any such government, and the executors,
administrators or other legal representatives of an individual in such
capacity.
"PERSONAL PROPERTY" means all machinery, equipment, furniture, motor
vehicles and other chattels owned or leased by the Corporation
(including those in possession of third parties).
"PERSONAL PROPERTY LEASES" means all chattel leases, equipment leases,
rental agreements, conditional sales contracts and other similar
agreements in respect of Personal Property entered into by the
Corporation, including all amendments thereto.
"PREMISES LEASES" means all the leases, agreements to lease, subleases,
licence agreements and occupancy or other agreements, including all
amendments thereto, as described in Schedule 5.1(18).
"PRIME RATE" means the prime rate of interest per annum quoted by Bank
of Montreal from time to time as its reference rate of interest for
Canadian dollar demand loans made to its commercial customers in Canada
and which Bank of Montreal refers to as its "prime rate", as such rate
may be changed from time to time.
"PURCHASE PRICE" has the meaning given in Section 2.2.
"PURCHASE PRICE INCREASE" has the meaning given in Section 2.7(1)(ii).
"PURCHASE PRICE REDUCTION" has the meaning given in Section 2.7(1)(i).
"PURCHASER" means HSC Acquisition Co.
"PURCHASER'S SOLICITORS" means Blake, Xxxxxxx & Xxxxxxx and Xxxxxxxxx
Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP.
"RECEIVABLES" means all accounts receivable, bills receivable, trade
accounts, book debts and insurance claims of the Corporation on a
consolidated basis together with any unpaid interest
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accrued on such items and any security or collateral for such items,
including recoverable deposits.
"RELATED TO THE BUSINESS" means, directly or indirectly, used in,
arising from or relating in any manner to the Business.
"RELEASE" includes an actual or potential discharge, deposit, spill,
leak, pumping, pouring, emission, emptying, injection, escape,
leaching, seepage or disposal of a Hazardous Substance which is or may
be in breach of any Environmental Laws.
"REMITTANCE DATE" has the meaning given in Section 2.10(2).
"REPRESENTATIVES" has the meaning given in Section 7.3(4).
"RESPONDING PARTY" has the meaning given in Section 8.15(2).
"REVENUE" has the meaning given in the definition of the term "Software
Revenue".
"REVIEWING ACCOUNTANTS" means any firm of chartered accountants having
qualification to practice in both Canada and the United States as the
Purchaser and the Shareholders delivering an Objection Notice, acting
reasonably, mutually agree to and excluding each of
PricewaterhouseCoopers LLP and Ernst & Young and any related or
successor firm.
"SAPLING" means Sapling Corporation and any successor corporation
resulting from a merger, arrangement, amalgamation, business
combination, continuance or similar transaction to which Sapling is a
party.
"SECTION 116 CERTIFICATE" has the meaning given in Section 2.10(1).
"SHAREHOLDERS AGREEMENT" has the meaning given in Section 4.1.
"SHARES" means all the issued and outstanding shares in the capital of
Sapling as constituted at the Closing Time.
"SHAREHOLDER COMMITTEE" has the meaning given in Section 2.13.
"SHAREHOLDERS" means the Persons whose names and shareholdings are
listed in Schedule 1.1(2).
"SHAREHOLDERS AGREEMENT" means the Amended and Restated Shareholders'
Agreement dated as of October 15, 1998 between, inter alia, the
Corporation and each of the Investors, including any amendments
thereto;
"SHAREHOLDERS' SOLICITORS" means in the case of Xxxxx Xxxxxxxx,
Integrated Business Modelling Corp., Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx,
Xxxxx Xxxxxxxx and Xxxxxx Xxxxxx, Xxxxxx & Xxxxxx, and in the case of
the Investors, Xxxxxx Xxxx & Ledgett.
"SOFTWARE PRODUCTS" means:
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(i) all existing software as at the Closing Date owned or
controlled or created by or for the Corporation, or
licensed pursuant to licenses in favour of the
Corporation and referred to in Schedule 5.1(23),
including software for business modelling,
activity-based costing/activity-based management and
performance management and including the computer
software applications currently known as "NetProphet"
and "NetScore"; and
(ii) all prior and future versions thereof and
corrections, updates, enhancements, reissuances and
modifications thereto and all source code and other
materials relating thereto, whether developed before
or after the Closing Date.
Notwithstanding any of the foregoing, Software Products shall exclude:
(i) all Modules (other than those for which the primary
functionality is activity-based
costing/activity-based management or performance
management) that link to or work with any of the
foregoing that are owned or controlled or created by
or for, or licensed in favour of, Parentco or any
Affiliate of Parentco (other than the Corporation and
its successors), including all prior versions thereof
and corrections, updates, enhancements, reissuances
and modifications thereto and all source code and
other materials relating thereto, and in each case
whether developed or acquired by Parentco or any
other Person (other than the Corporation and its
successors), other than any Module that constitutes a
Web-based delivery mechanism for NetProphet or
NetScore developed after the Closing Date; and
(ii) all existing and future software owned or controlled
or created by or for, or licensed in favour of
Parentco or any Affiliate of Parentco (other than the
Corporation and its successors) and any software
substantially based thereon, and in each case
including all prior versions thereof and corrections,
updates, enhancements, reissuances and modifications
thereto and all source code and other materials
relating thereto, and in each case whether developed
or acquired by Parentco or any other Person (other
than the Corporation and its successors).
"SOFTWARE REVENUE" means for the Earn-out Year or the Stub Period, as
the case may be, subject to the terms of this provision, all software
license fees and other revenue recognized by Parentco on a consolidated
basis in accordance with US GAAP generated from the licensing and other
exploitation of the Software Products ("REVENUE"), and without limiting
the generality of the foregoing shall include: (i) a share of all
software license fees attributable to Software Products with respect to
licenses of applications bundled with, or multi-product sales
including, the Software Products, in each case allocated in accordance
with US GAAP; (ii) to the extent that any Revenue recognized by
Parentco on a consolidated basis as a result of licensing or other
exploitation of the Software Products to Non-Arm's Length Parties is
less than the amount of the Revenue that would have been charged by
Parentco to a Person other than a Non-Arm's Length Party, the amount of
such deficiency; (iii) any amount deemed to be "Software Revenue" in
accordance with Section 2.8(1); and (iv) an amount equal to the
software license fees that would have been recognized by Parentco on a
consolidated basis in accordance with US GAAP as a result of the
shipment of
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any Backlog. To the extent that Revenue recognized by Parentco on a
consolidated basis in accordance with US GAAP for Software Products is
less than the following thresholds:
(i) $35,000 in the case of any such revenue generated after the
Closing Date by Direct Sales by Parentco or any Affiliate
thereof of the first multi-user single server configuration of
NetScore or NetProphet or any correction, update, enhancement,
reissuance or modification thereto to any Person including a
division or Affiliate thereof;
(ii) $15,000 in the case of revenue generated after the Closing
Date by Direct Sales by Parentco or any Affiliate thereof of
any subsequent configuration of a product referred to in
clause (i) to the same Person including a division or
Affiliate thereof; and
(iii) $10,000 in the case of any revenue generated after the Closing
Date by the license or other disposition of a single user
configuration of NetScore or NetProphet or any correction,
update, enhancement, reissuance or modification thereto,
then Software Revenue shall in each case include the amount necessary
to increase such revenue recognized by Parentco to the applicable
threshold amount referred to above. Notwithstanding any of the
foregoing, Software Revenue shall exclude any revenue recognized by the
Corporation prior to Closing or any revenue attributed to the provision
of services or maintenance revenue, and shall be net of any payments
made or accrued by Parentco on a consolidated basis to any Person,
other than employees of Parentco or employees of any Affiliate of
Parentco in respect of sales or product royalties, commissions or other
similar compensation.
"SOFTWARE REVENUE STATEMENTS" means the statements delivered in
accordance with Sections 2.7(2) and 2.7(3).
"SRED TAX CREDIT" means the amount in respect of the refundable
scientific research and experimental development tax credits claimed or
to be claimed in respect of any fiscal period or taxation year ending
on or prior to the Closing Date by the Corporation under the Income Tax
Act (Canada) and reflected in the Closing Statement.
"STATEMENT OF DISPUTE" has the meaning given in Section 8.15(2).
"STONEBRIDGE" means CIBC Trust and Merchant Bank (Barbados) Limited in
its capacity as trustee of The Stonebridge Domestic Trust.
"STUB PERIOD" means the period commencing on the Closing Date and
terminating on June 30, 1999.
"STUB PERIOD SOFTWARE REVENUE SHORTFALL" means the excess, if any, of
the Stub Period Software Revenue Target over the Software Revenue for
the Stub Period.
"STUB PERIOD SOFTWARE REVENUE TARGET" means the product of (i)
$1,127,610; and (ii) a fraction, the numerator of which is the number
of days in the Stub Period and the denominator of which is 91.
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"SUBSIDIARIES" means the corporations listed in Schedule 5.1(11) other
than Sapling.
"TAXES OR TAX" means any and all taxes, charges, fees, levies, imposts
and other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, alternative, net worth,
transfer, profits, withholding, payroll, employer health, excise,
franchise, real property and personal property taxes, and any other
taxes, customs duties, fees, assessments or similar charges in the
nature of a tax including Canada Pension Plan and provincial pension
plan contributions, unemployment insurance payments and workers'
compensation premiums, together with any instalments with respect
thereto, and any interest, fines and penalties imposed by any
governmental authority (including federal, state, provincial, municipal
and foreign governmental authorities), and whether disputed or not.
Taxes shall also mean any liability for the payment of any amounts of
the type described in the preceding sentence as a result of any express
or implied obligation to indemnify any other person.
"TELSOFT" has the meaning given in Section 4.3.
"THIRD PARTY" has the meaning given in Section 6.5.
"THIRD PARTY CLAIM" has the meaning given in Section 6.3.
"US DOLLARS" or "$" means the lawful currency of the United States of
America.
"US GAAP" means those accounting principles which are recognized as
being generally accepted in the United States of America from time to
time, consistently applied and, for the purposes of this Agreement,
shall mean that the currency of display is US Dollars.
"WITHHELD AMOUNT" has the meaning given in Section 2.10(2).
"YEAR 2000 COMPLIANT" has the meaning given in Section 5.1(26).
1.2 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into
Articles and Sections, the insertion of headings, and the provision of any table
of contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words
importing the singular include the plural and vice versa and words importing
gender include all genders.
1.4 BUSINESS DAYS. If any payment is required to be made or other action is
required to be taken pursuant to this Agreement on a day which is not a Business
Day, then such payment or action shall be made or taken on the next Business
Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. Except as otherwise expressly
provided in this Agreement:
(1) all dollar amounts referred to in this Agreement are stated
in US Dollars;
(2) any payment contemplated by this Agreement shall be made by
cash, certified cheque or any other method that provides
immediately available funds; and
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(3) except in the case of any payment due on the Closing Date, any
payment due on a particular day must be received and available
not later than 2:00 p.m. (Toronto time) on the due date and
any payment made after that time shall be deemed to have been
made and received on the next Business Day.
1.6 CALCULATION OF INTEREST. In calculating interest payable under this
Agreement for any period of time, the first day of such period shall be included
and the last day of such period shall be excluded.
1.7 STATUTE REFERENCES. Any reference in this Agreement to any statute or
any section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.8 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections, Exhibits or Schedules are to Sections,
Exhibits or Schedules of this Agreement. The Exhibits and Schedules to this
Agreement are as follows:
EXHIBITS
A Share Transfer Form
B Shareholder's Bring-Down Certificate
C Shareholder's Corporate Certificate
C1 Investor's Certificate
D Corporation's Corporate Certificate
E1 Non-Competition Agreement and Intellectual Property Assignment
E2 Non-Competition Agreement and Intellectual Property Assignment
F Shareholder's Solicitors' Opinion
G Resignation of Director/Officer
H Shareholder's Release
I Conditional Release
J Bring-Down Certificate of Purchaser and Parentco
K Corporate Certificate of Purchaser and Parentco
L Purchaser's Solicitors' Opinion
M IP Assignment
N B & E Escrow Agreement
SCHEDULES
1.1(1) Permitted Liens
1.1(2) Shareholders
2.7(1) Closing Statement Adjustments
2.14 Option Agreements
5.1(3) Debentures and Options
5.1(7) Litigation
5.1(11) Authorized Capital and Other Capital
5.1(14) Financial Statements
5.1(15) Assets
5.1(17) Personal Property
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5.1(18) Premises Leases
5.1(19) Personal Property Leases
5.1(20) Material Contracts
5.1(23) Intellectual Property
5.1(25) Employees and Developers
5.1(27) Licences and Permits
5.1(29) Bank Accounts and Safety Deposit Boxes
5.1(30) Consents and Approvals
5.1(31) Notices
5.1(34) Insurance
5.1(35) Environmental Matters
5.1(36) Employees
5.1(37) Collective Agreements
5.1(38) Employee Plans
5.1(39) Customers and Suppliers
5.1(42) Intercompany Services
5.1(48) Absence of Certain Changes or Events
---------------------
ARTICLE 2
PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE AND SELL. At the Closing Time, subject to the
terms and conditions of this Agreement, the Shareholders shall sell to the
Purchaser, and the Purchaser shall purchase from the Shareholders, the Shares.
2.2 AMOUNT OF PURCHASE PRICE. The purchase price payable by the Purchaser
to the Shareholders for the Shares (the "PURCHASE PRICE") shall be equal to the
sum of:
(1) subject to Section 2.7(1), Fifteen Million US Dollars
($15,000,000);
(2) the Annual Earn-out Consideration, which earn-out
consideration is intended to represent the value of a portion
of the underlying goodwill which the Parties have been unable
to quantify prior to the date hereof; and
(3) the amount of any payments made by the Purchaser to the
Shareholders under Section 2.11,
less the aggregate amount of deductions and payments made under Section 2.11(3).
2.3 PAYMENT OF PURCHASE PRICE.
(1) Subject to Sections 2.3(2) and (3) and Section 2.10, the
Purchase Price shall be paid and satisfied as follows:
(i) subject to Section 2.6, Section 2.7 and Section 2.12,
an amount equal to Fifteen Million US Dollars
($15,000,000) shall be paid at the Closing;
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(ii) subject to Section 2.11(3), an amount equal to the
Annual Earn-out Consideration, if any, shall be paid
to the Shareholders in accordance with Section
2.4(1); and
(iii) an amount equal to any payments required to be made
by the Purchaser to the Shareholders under Section
2.11, in accordance with such Section.
in each case with each Shareholder receiving a portion thereof
based on the percentage of Shares beneficially owned by such
Shareholder as at the Closing Time as set forth opposite the
Shareholder's name in Schedule 1.1(2).
(2) Subject to Section 2.3(3), each of the Shareholders hereby
irrevocably directs the Purchaser to make all payments on
account of the Purchase Price or otherwise to be made by the
Purchaser to the Shareholders hereunder to Xxxxxx & Xxxxxx on
behalf of the Shareholders, to be disbursed to the
Shareholders by Xxxxxx & Elliot in proportion to the
percentage beneficial ownership interest in the Shares as at
the Closing Time as set forth opposite the Shareholder's name
in Schedule 1.1(2) against delivery of a receipt for such
payment executed by or on behalf of the Shareholder.
(3) In the event that the transactions contemplated by this
Agreement are not completed by the Purchaser with any
Breaching Shareholder in accordance with Section 4.2, all
payments to be made pursuant to Section 2.3 or Section 2.4 or
any other payment required to be made hereunder by the
Purchaser to Xxxxxx & Xxxxxx on behalf of the Shareholder or
the Shareholders shall be reduced by a percentage equal to the
percentage of Shares beneficially owned by the Breaching
Shareholder as at the Closing Time as set forth opposite the
Breaching Shareholder's name in Schedule 1.1(2). The full
amount of any such reduction shall be for the account of the
Breaching Shareholder and no payment shall be made by Xxxxxx &
Elliot to such Breaching Shareholder until such time and in
accordance with such written notice as may be delivered by the
Purchaser and the Breaching Shareholder to Xxxxxx & Xxxxxx
authorizing payments hereunder to the Breaching Shareholder
together with payment to Xxxxxx & Elliot by the Purchaser of
the amount referred to in such notice.
2.4 PAYMENT OF EARN-OUT CONSIDERATION.
(1) Subject to adjustment pursuant to Section 2.8 and Section 2.9
and any set-off pursuant to Section 6.9, the Purchaser shall
pay to the Shareholders an amount on February 29, 2000 equal
to 41.18% of Software Revenue in excess of the Stub Period
Software Revenue Shortfall up to an amount equal to the sum of
$17,000,000 and the amount of the Stub Period Software Revenue
Shortfall (the "EARN-OUT THRESHOLD") for the period from July
1, 1999 to December 31, 1999.
(2) Subject to adjustment pursuant to Section 2.8 and Section 2.9,
the provisions as to payment in Section 2.11(3) and any
set-off pursuant to Section 6.9, the Purchaser shall pay to
the Shareholders the Annual Earn-out Consideration (defined
below) on August 31, 2000 less an amount equal to the
aggregate amount paid pursuant to Section 2.4(1). "ANNUAL
EARN-OUT CONSIDERATION" means the aggregate of (i) an amount
equal to 41.18% of Software Revenue in excess of the Stub
Period Software
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Revenue Shortfall up to the Earn-out Threshold for the one (1)
year period ending June 30, 2000 (the "EARN-OUT YEAR") and
(ii) an amount equal to 20% of Software Revenue in excess of
the Earn-out Threshold for the Earn-out Year.
2.5 SALES AND MARKETING.
(1) Subject to Section 2.5(2), after the Closing Time Parentco and
the Purchaser shall have complete and full discretion on
pricing policy and sales and marketing investments in respect
of the Business, including as they relate to exploitation of
the Software Products, and each Shareholder acknowledges that
any proposed pricing policy or sales and marketing investments
in respect of the Business communicated by or on behalf of the
Purchaser to any Shareholder or its representative prior to
the Closing Time is subject to change at any time at the
Purchaser's sole discretion based on its assessment from time
to time of all factors deemed relevant by it including the
state of the Business and the market for, or competitive
position of, the Software Products.
(2) During the period commencing on the Closing Date and ending on
June 30, 2000, Parentco and the Purchaser agree to cause the
Corporation or its successor to:
(i) establish on the Closing Date and maintain for the
period ending June 30, 2000, sales commissions plans
for the Direct Sales of the Software Products at a
percentage of revenue that is no less than the sales
commissions plans as a percentage of revenue
established from time to time by Parentco for the
Direct Sales of the Hyperion Pillar and Hyperion
Enterprise products, subject to exceptions for
special compensation incentives established
periodically out of the normal course of business in
respect of the Hyperion Pillar or the Hyperion
Enterprise products;
(ii) undertake on the Closing Date and maintain for the
period ending June 30, 2000, Channel Sales Programs
for the Software Products on terms that are in the
aggregate not less economically favourable to the
Corporation than the terms for Channel Sales Programs
undertaken by Parentco for Hyperion Pillar and
Hyperion Enterprise undertaken by Parentco are for
Parentco; and
(iii) establish on the Closing Date and maintain for the
period ending June 30, 2000, pricing guidelines
similar to the pricing guidelines for the Software
Products for markets other than the Enterprise Market
on a basis that is substantially similar to the
pricing for such markets established from time to
time by Parentco for Hyperion Pillar and Hyperion
Enterprise,
and during such period, Parentco agrees that a standalone list
price for the Software Products will be maintained on the
price list of Parentco and any of its Affiliates to the extent
that an Affiliate undertakes the sale of Software Products.
(3) At the time of delivery of the Software Revenue Statements to
the Shareholders pursuant to Section 2.7, Parentco agrees to
deliver to the Shareholders a certificate of one or more
officers of Parentco and an Affiliate of Parentco having an
overall responsibility for the marketing of the Software
Products certifying that Parentco and
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the Purchaser have caused the Corporation or its successor to
take the actions referred to in Section 2.5(2).
2.6 ESTIMATED CLOSING STATEMENT. The Shareholders shall provide the
Purchaser, at least five Business Days before the Closing Date, with an
estimated consolidated balance sheet of the Corporation as at the Closing Time,
prepared in accordance with Canadian GAAP using Canadian dollars as the currency
of display and subject to reflecting the adjustments, reserves, information and
accounting principles set forth in Schedule 2.7(1) (the "ESTIMATED CLOSING
STATEMENT"). The amount of payment in respect of the Purchase Price payable
pursuant to Section 2.3(1) shall be reduced by the excess, if any, of the total
liabilities over the total assets, in each case as reflected in the Estimated
Closing Statement and converted to US Dollars using the Exchange Rate in effect
on the Business Day preceding the Closing Date (the "ESTIMATED REDUCTION").
2.7 PREPARATION AND DELIVERY OF STATEMENTS.
(1) The Purchaser shall cause the Auditors to review, at the
expense of the Purchaser, the consolidated balance sheet of
the Corporation as at the Closing Time, prepared in accordance
with Canadian GAAP using Canadian Dollars as the currency of
display, and shall cause the Corporation to deliver the
results of such review to the Purchaser and the Shareholders,
no later than July 31, 1999, subject to reflecting the
adjustments, reserves, information and accounting principles
set forth in Schedule 2.7(1) (the "CLOSING STATEMENT"),
together with the report of the Auditors thereon prepared in
accordance with Canadian GAAS. Subject to Section 2.9, the
amount of the Purchase Price shall be:
(i) reduced by the excess, if any, of the total
liabilities over the total assets, in each case as
reflected in the Closing Statement (the "PURCHASE
PRICE REDUCTION"); and
(ii) increased by the excess, if any, of the total assets
over the total liabilities, in each case as reflected
in the Closing Statement (the "PURCHASE PRICE
INCREASE"),
in each case converted to US Dollars using the Exchange Rate
in effect on the Business Day preceding the Closing Date, and
the amount of any reduction in the Purchase Price determined
in accordance with clause (i) above shall be satisfied
through the set-off by the Purchaser of such amount against
the Annual Earn-out Consideration, if any, and shall
otherwise be payable to the Purchaser by the Shareholders,
subject to adjustment pursuant to Section 2.9, on August 31,
2000, pro rata to each Shareholder's percentage beneficial
ownership interest in the Shares as at the Closing Time as
set forth opposite the Shareholder's name in Schedule 1.1(2),
and the amount of any increase in the Purchase Price
determined in accordance with clause (ii) above shall be paid
and satisfied through a payment of such amount by the
Purchaser to the Shareholders within 30 days after the
delivery by the Purchaser to the Shareholders of the Closing
Statement, subject to the payment provisions in Section
2.11(3). The foregoing payments shall be adjusted to reflect
any Estimated Reduction as follows:
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(A) If the Estimated Reduction is less than the
Purchase Price Reduction, the excess of the
Purchase Price Reduction over the Estimated
Reduction shall be satisfied by set-off or
paid by the Shareholders to the Purchaser,
subject to adjustment pursuant to Section
2.9, on August 31, 2000, in accordance with
the foregoing.
(B) If the Estimated Reduction is greater than
the Purchase Price Reduction, the excess of
the Estimated Reduction over the Purchase
Price Reduction shall be paid by the
Purchaser to the Shareholders in accordance
with the foregoing.
(C) If there is a Purchase Price Increase, an
amount equal to the sum of the Purchase
Price Increase and the Estimated Reduction
shall be paid by the Purchaser to the
Shareholders in accordance with the
foregoing.
(2) The Purchaser shall cause the Auditors to review, in
connection with the Auditors audit of Parentco's consolidated
financial statements, at the expense of the Corporation, the
Software Revenue for the Stub Period, and shall cause the
Corporation to deliver to the Purchaser and the Shareholders,
no later than August 31, 1999, a statement setting forth the
Software Revenue for the Stub Period, together with the report
of the Auditors thereon prepared in accordance with US GAAP.
(3) The Purchaser shall cause the Auditors to review, in
connection with the Auditors audit of Parentco's consolidated
financial statements, at the expense of the Corporation, the
aggregate Software Revenue for the period from July 1, 1999 to
December 31, 1999 and for the Earn-out Year, and shall cause
the Corporation to deliver to the Purchaser and the
Shareholders, no later than February 14, 2000 and August 16,
2000, a statement setting forth the Software Revenue for each
of such periods respectively, together with the report of the
Auditors thereon prepared in accordance with US GAAP.
(4) The Purchaser shall cause the Corporation or its successor to
provide access to the Shareholder Committee or its
representatives and the Reviewing Accountants to Parentco's
consolidated books and records to the extent relevant for the
purpose of reviewing, Software Revenue and related sales
commissions in respect of Software Products, the Closing
Statement and the Software Revenue Statements and the
preparation of such statements, together with the Purchaser's
calculations of any amounts set forth in such statements and,
subject to execution of a non-disclosure agreement in the form
prescribed by the Auditors, shall cause the Auditors to
provide access to the working papers of the Auditors used in
the preparation of its report in respect of such statements.
2.8 EARN-OUT ADJUSTMENTS.
(1) In the event of the sale of 50% or more of the outstanding
securities of the Corporation or its successor or the
Purchaser, or the sale, lease, license, exchange or other
disposition of all or a significant portion of the assets of
the Corporation or its
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successor including the Software Products or any part thereof
outside the ordinary course of business as conducted by the
Corporation or its successor from time to time or a
transaction relating to the co-development or co-marketing of
products of or for the Corporation or its successor pursuant
to a partnership, joint venture, strategic alliance or
otherwise (a "JOINT VENTURE"), and excluding any transaction
involving only a wholly-owned Affiliate of the Purchaser, an
amount determined in accordance with the following shall be
deemed to constitute Software Revenue in the period in which
such transaction is closed:
(i) if such transaction is other than a Joint Venture and
is closed in the period from the Closing Date and
terminating on September 30, 1999, the net present
value, calculated using a discount rate equal to the
Prime Rate as at the date of closing of such
transaction, of the total consideration to Parentco
on a consolidated basis from such transaction as
recognized by Parentco on a consolidated basis in
accordance with US GAAP;
(ii) if such transaction is other than a Joint Venture and
is closed in the period from October 1, 1999 and
terminating on June 30, 2000, an amount equal to the
product of:
(A) the net present value, calculated using a
discount rate equal to the Prime Rate as at
the date of closing of such transaction of
the total consideration to Parentco on a
consolidated basis from such transaction as
recognized by Parentco on a consolidated
basis in accordance with US GAAP
and
(B) a fraction, the numerator of which is the
number of days from the date of closing of
such transaction to June 30, 2000 and the
denominator of which is 273, and
(iii) if such transaction is a Joint Venture, the net
present value, calculated using a discount rate equal
to the Prime Rate as at the date of closing of such
transaction, of the consideration received by the
Corporation or its successor from the other parties
to the Joint Venture in respect of Software Products
licensed or otherwise provided to such parties to the
extent such consideration does not constitute
Software Revenue.
(2) In the event that a Person, in the period from the date of
this Agreement to June 30, 2000 acquires, individually or
acting jointly and in concert with other Persons, a number of
voting securities of Parentco to which are attached in
aggregate in excess of 50% of the number of votes attaching to
all voting securities of Parentco outstanding at such time,
the Purchaser agrees that Annual Earn-out Consideration for
the period from the later of (i) the date of such acquisition
and (ii) June 30, 1999 to June 30, 2000 shall be deemed to be
not less than the product of
(A) $7 million
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and
(B) a fraction, the numerator of which is the
number of days from the later of (i) the
date of such acquisition and (ii) June 30,
1999 to June 30, 2000 and the denominator of
which is 366.
2.9 OBJECTION TO STATEMENTS. In the event that the Shareholder Committee
objects in good faith to the Closing Statement, the Software Revenue Statement
delivered in accordance with Section 2.7(2) or the Software Revenue Statement
for the Earn-out Year delivered in accordance with Section 2.7(3), the
Shareholders shall so advise the Purchaser by delivery to the Purchaser of a
written notice executed by such Shareholders (the "OBJECTION NOTICE") within 20
Business Days after the later of (i) delivery to the last of the Shareholders
who are members of the Shareholder Committee of such statement, and (ii) the
date that the Shareholder Committee had reasonable access to the relevant
information supporting such statement in accordance with Section 2.7(4). The
Objection Notice shall set out the reasons for the Shareholders' objection as
well as the amount under dispute and reasonable details to the extent available
of the calculation of such amount. In the event that the Parties agree on a
resolution of the dispute set out in the Objection Notice, the Parties shall
confirm the resolution in writing and shall thereafter be bound by such
resolution and any adjustment to the Purchase Price required in accordance with
Section 2.7(1) and Section 2.4 or any resulting payments shall be made within 10
Business Days of such resolution. In the event that the Parties are unable to
settle any dispute set out in the Objection Notice within 30 days after the
delivery by the Shareholders to the Purchaser of the Objection Notice, the
dispute shall forthwith, and in any event within 45 days after the delivery by
the Shareholders to the Purchaser of the Objection Notice, be referred to the
Reviewing Accountants. The Reviewing Accountants shall finally settle the
dispute between the Parties and no recourse may thereafter be had with regard to
the referred dispute to any court or tribunal. In making a determination, the
Reviewing Accountants shall act as experts and not as arbitrators. If the
settlement of any dispute results in an adjustment to the Purchase Price in
favour of the Shareholders of an aggregate amount that is less than the greater
of (i) $25,000 and (ii) all costs of the Reviewing Accountants in respect of
that dispute, then all costs of the Reviewing Accountants in respect of that
dispute shall be borne by the Shareholders and shall be deducted by the
Purchaser from any amount payable to the Shareholders pursuant to the Closing
Statement or any of the Software Revenue Statements and remitted to the
Reviewing Accountant in satisfaction of the amount owing in respect of such
costs or, to the extent no such amount is payable, shall be payable by the
Shareholders to the Reviewing Accountants; in all other circumstances the costs
of the Reviewing Accountants in respect of that dispute shall be borne by the
Purchaser.
2.10 SECTION 116 OF THE INCOME TAX ACT (CANADA)
(1) Each of Stonebridge, Xxxxx Xxxxxxxxx, Xxxxxx Xxxx, and Xxxxx
Xxxxx, none of which is a resident of Canada for purposes of
the Income Tax Act (Canada) (a "NON-RESIDENT SHAREHOLDER"),
shall on or before the Closing Date, deliver to the Purchaser
a certificate issued by the Minister of National Revenue of
Canada pursuant to subsection 116(2) of the Income Tax Act
(Canada) (a "SECTION 116 CERTIFICATE") in respect of the
proposed disposition by the Non-Resident Shareholder of the
Shares owned by the Non-Resident Shareholder. The Section 116
Certificate delivered by a Non-Resident Shareholder shall
specify a "certificate limit" in an amount no less than the
Purchase Price attributable to the Shares owned by such
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Non-Resident Shareholder (the "NON-RESIDENT'S PURCHASE
PRICE"). The Section 116 Certificate shall be deemed not to
have been delivered in respect of any payment or part thereof
on account of the Non-Resident's Purchase Price if, in the
opinion of Blake, Xxxxxxx & Xxxxxxx, acting reasonably, it
does not exonerate the Purchaser from liability under Section
116 of the Income Tax Act (Canada) in respect of such payment
or part thereof on account of the Non-Resident's Purchase
Price.
(2) In the event that the Section 116 Certificate required under
Section 2.9(1) has not been delivered by a Non-Resident
Shareholder to the Purchaser on or before the Closing Date, or
in the event that a Section 116 Certificate that is delivered
by a Non-Resident Shareholder does not specify a "certificate
limit" that is no less than the Non-Resident's Purchase Price,
the Purchaser shall withhold from the Non-Resident's Purchase
Price an amount equal to 33 1/3% of the Non-Resident's
Purchase Price, or, if a Section 116 Certificate has been
delivered by the Non-Resident Shareholder, an amount equal to
33 1/3% of the Non-Resident's Purchase Price less the
certificate limit specified in the Section 116 Certificate
(the "WITHHELD AMOUNT"). The Withheld Amount shall be
deposited by Blake, Xxxxxxx & Xxxxxxx pursuant to an
irrevocable direction of the Purchaser in an interest bearing
trust account at a bank located in Ontario to be held for the
benefit of the Non-Resident Shareholder to be disposed of as
set out herein. The Withheld Amount shall be remitted by
Blake, Xxxxxxx & Xxxxxxx to the Receiver General of Canada on
the day that the Withheld Amount is required to be so remitted
pursuant to subsection 116(5) of the Income Tax Act (Canada)
(the "REMITTANCE DATE"). All interest earned on the Withheld
Amount shall be for the account of the Non-Resident
Shareholder and the full amount of such interest less any
applicable taxes of any nature whatsoever applicable to such
interest shall be paid by Blake, Xxxxxxx & Xxxxxxx to the
Non-Resident Shareholder on the Remittance Date.
(3) Notwithstanding the foregoing, if a Non-Resident Shareholder
delivers a Section 116 Certificate to Blake, Xxxxxxx & Xxxxxxx
at any time after the Closing Date and prior to the day that
is two Business Days before the Remittance Date that in the
opinion of Blake, Xxxxxxx & Xxxxxxx exonerates the Purchaser
from liability under Section 116 of the Income Tax Act
(Canada) in respect of any payment on account of the
Non-Resident's Purchase Price in the amount of the
"certificate limit" specified in the Section 116 Certificate,
Blake, Xxxxxxx & Xxxxxxx shall pay to the Non-Resident
Shareholder on account of the Non-Resident's Purchase Price an
amount equal to the amount, if any, by which
(a) the aggregate of
(i) the Withheld Amount
and
(ii) the amount, if any, by which
(A) the amount of interest received by
Blake, Xxxxxxx & Xxxxxxx on the
Withheld Xxxxxx
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xxxxxxx
(X) the amount of any tax payable by
the Purchaser in respect of any
interest on the Withheld Amount or
which the Purchaser is required or
entitled to withhold or deduct in
respect of such interest
exceeds
(b) 33 1/3% of the amount, if any, by which
(i) the Non-Resident's Purchase Price
exceeds
(ii) the "certificate limit" specified in the
Section 116 Certificate.
(4) In the event that a Non-Resident's Purchase Price is
subsequently adjusted upward so that it exceeds the
certificate limit of a Section 116 Certificate delivered by
the Non-Resident Shareholder, the Non-Resident Shareholder
shall deliver a revised Section 116 Certificate or the
Purchaser will withhold 33 1/3% of the amount payable in
respect of such adjustment and the provisions of this Section
shall apply to such withheld amount, MUTATIS MUTANDIS.
2.11 RECEIVABLES.
(1) During the period of two years after the Closing Date, the
Purchaser agrees to cause the Corporation or its successor to
use its commercially reasonable efforts to collect the
Receivables reflected in the Closing Statement provided that
such efforts shall not require a discount or other
disadvantageous terms to be provided to the Person owing the
Receivable to the Corporation in connection with exploitation
of the Software Products after the Closing Date on a basis
that is outside the ordinary course of the business conducted
by the Corporation or its successor from time to time.
(2) During the period of two years after the Closing Date, if:
(i) the Corporation or its successor receives payment in
respect of Receivables reflected on the Closing
Statement; and
(ii) the Purchaser, pursuant to Section 2.11(3), receives
the benefit of one or more deductions from any amount
payable to Shareholders pursuant to Section 2.4 or
Section 2.7 or one or more payments from
Shareholders,
that in aggregate exceed the amount of Receivables net of
reserves as set out in the Closing Statement, the amount of
such excess, less any amounts previously paid pursuant to this
Section 2.11(2), shall be paid on a quarterly basis by the
Purchaser to the Shareholders in proportion to the percentage
beneficial ownership in the Shares as at the Closing Time set
forth opposite the Shareholder's name in Schedule 1.1(2).
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Notwithstanding the foregoing, no Shareholder shall have any
claim or entitlement in respect of any Receivable for which
the Corporation or its successor receives payment more than
two years after the Closing Date.
(3) Notwithstanding any other provision of this Agreement and in
satisfaction of any breach of the representation and warranty
of the Shareholders in Section 5.1(21), in the event that the
aggregate amount of Receivables reflected in the Closing
Statement collected by the Corporation or its successor in the
period of 90 days after the Closing Date is less than the
amount of Receivables net of reserves set forth in the Closing
Statement then the Purchaser shall have the option with
respect to each such Receivable that has not been collected by
the Corporation or its successor, exercisable from time to
time during the period of two years after the Closing Date,
to:
(i) have the Corporation or its successor assign all of
the right, title and interest of the Corporation or
its successor in and to such Receivable to the
Shareholders in consideration for payment of $1.00
from the Shareholders to the Corporation or its
successor, and the Purchaser shall deduct 100% of the
amount of the full face value of such Receivable as
at the Closing Date from any amount payable to the
Shareholders pursuant to Section 2.4 or Section 2.7
or, to the extent no such amount is payable, to
receive payment of such amount from the Shareholders;
or
(ii) deduct 50% of the amount of the full face value of
such Receivable as at the Closing Date from any
amount payable to the Shareholders pursuant to
Section 2.4 or Section 2.7 or, to the extent no such
amount is payable, to receive payment of such amount
from the Shareholders, and the Corporation or its
successor shall, subject to the provisions of this
Section 2.11, retain all of its right, title and
interest in and to such Receivable.
(4) Upon the later of (i) the date that is 180 days after the
Closing Date and (ii) the date that the Corporation or its
successor receives the payment of Receivables plus the benefit
of one or more deductions from any amount payable to
Shareholders pursuant to Section 2.4 or Section 2.7 or
payments from Shareholders in respect of Receivables reflected
on the Closing Statement that in aggregate equal the amount of
Receivables net of reserves set forth in the Closing
Statement, the Purchaser shall, with respect to each
Receivable reflected on the Closing Statement that has not
been collected by the Corporation or its successor during that
period, either:
(i) cause all of the right, title and interest of the
Corporation or its successor in and to such
Receivable to be assigned to the Shareholders; or
(ii) pay 100% of the amount of the full face value of such
Receivable as at the Closing Date to the
Shareholders, following which the Corporation or its
successor shall retain all of its right, title and
interest in and to such Receivable.
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(5) In the event that the Corporation or its successor receives,
after the Closing Date, one or more cash payments in respect
of the claims made or to be made under the Income Tax Act
(Canada) for refundable scientific research and experimental
development tax credits in respect of any fiscal period or
taxation year ending on or prior to the Closing Date that in
the aggregate exceed the amount of the SRED Tax Credit, the
amount of such excess shall be paid by the Purchaser to the
Shareholders in proportion to the percentage beneficial
ownership in the Shares as at the Closing Time set forth
opposite the Shareholder's name in Schedule 1.1(2). The
Purchaser agrees to cause the Corporation or its successors to
use its commercially reasonable efforts to collect the benefit
of such scientific research and experimental development tax
credits, to provide the Shareholders with reasonable access to
its books and records to the extent relevant for the purpose
of reviewing the status of the claims for such scientific
research and experimental development tax credits and,
provided that the Corporation or its successors are provided
with reasonably satisfactory security for any incremental
costs, to permit the Shareholders, acting reasonably, to
participate in the efforts of the Corporation or its
successors to collect the benefit of such scientific research
and experimental development tax credits. Notwithstanding any
other provision of this Agreement, once the SRED Tax Credit
has been determined on the finalized Closing Statement, there
shall be no further claim or adjustment against the
Shareholders in respect of the SRED Tax Credit and
notwithstanding that the same may not be collectible in its
full amount, or subsequently determined to be a lesser amount.
2.12 PAYMENT OF ADVISOR'S FEES. Each of the Shareholders hereby irrevocably
directs the Purchaser to deduct from the payment on account of the Purchase
Price to be made pursuant to Section 2.3(1) an amount equal to the aggregate
amount of the invoices delivered to the Purchaser on the Business Day preceding
the Closing Date for services provided by the Shareholders' Solicitors and Ernst
& Young in connection with the transactions contemplated by this Agreement, as
approved and directed by the Shareholder Committee, and to make payment of such
amounts to the Shareholders' Solicitors and Ernst & Young in satisfaction of
such invoices.
2.13 SHAREHOLDER CONSENT . In the event that the Shareholders must exercise,
or have an opportunity to exercise, one or more common rights, remedies, or
elections under this Agreement (the "COMMON SHAREHOLDERS' Rights"), each such
Common Shareholder's Right may be exercised on behalf of all Shareholders by a
committee of the Shareholders (the "SHAREHOLDER COMMITTEE") consisting of one
nominee of The Stonebridge Domestic Trust (presently, Xx. Xxxxx xxx
Xxxxxxxxxxxx), one nominee of Telesystem Software Ventures Limited Partnership
(presently, Mr. Xxxxxx Xxxxxx), and one nominee of the Non-Investor Shareholders
selected by a written instrument signed by Non-Investor Shareholders with
beneficial ownership as of the Closing Time of a majority of the Shares held by
all Non-Investor Shareholders as at such time as determined by reference to
Schedule 1.1(2) (a "MINORITY RESOLUTION") (presently, Xx. Xxxxxx Xxxxxx). Any
determination in respect of the Common Shareholders' Rights by the Shareholder
Committee made in accordance with this section shall be binding upon all
Shareholders and shall be conclusively and finally determined by all Parties by
exclusive reference to any instrument executed by the Shareholder Committee in
accordance with this Section 2.13 and delivered to Parentco or the Purchaser or
any third party, as appropriate, on behalf of the Shareholder Committee and the
Shareholders without further inquiry or investigation. Each of the Shareholders
hereby irrevocably appoints, which appointment is a power coupled with an
interest, each member of the Shareholder Committee, from
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time to time, as that Shareholder's duly authorized attorney, to do or cause to
be done all such further acts or things as may be necessary to further that
Shareholder's interest in the Common Shareholders' Rights in accordance with
this Section 2.13 and each Shareholder hereby undertakes to ratify all such
actions so taken. In addition:
(a) The members of the Shareholder Committee shall
determine their own procedures for meetings and
decisions subject always to the requirements that:
the members shall not receive compensation (other
than reimbursement of out-of-pocket expenses properly
incurred) for their services on the Shareholder
Committee unless such compensation is approved by a
Minority Resolution; all reasonable efforts shall be
made to accommodate the attendance (in person or by
phone) of all three members at all meetings of the
Shareholder Committee and subject to the urgency of
the deliberations required; the Shareholder Committee
shall not institute a lawsuit on behalf of the
Shareholders until such time as the proceeding is
approved by at least two members of the Shareholder
Committee and by Minority Resolution; a quorum for
all meetings must include at least two of the three
members, and that at least two members must support
all decisions of the Shareholder Committee;
(b) In the event that the prosecution of any Common
Shareholders' Right requires further expenditures of
money, the Shareholder Committee shall determine on a
commercially reasonable basis the terms and
conditions for funding the said process that are
commensurate with the risk taken by the funding
shareholders, which terms and conditions may, but
need not, include borrowing from one or more of the
Shareholders (the "FUNDING OF SHAREHOLDERS' RIGHTS").
The Shareholder Committee shall give all Shareholders
a pre-emptive right to participate in the Funding of
Shareholders' Rights in accordance with each
Shareholder's percentage beneficial ownership in the
Shares and provided that it does so, no Shareholder
shall be entitled to question the commercial
reasonableness of the terms and conditions of the
particular Funding of Shareholders' Rights;
(c) Reimbursement of any Funding of Shareholders' Rights
shall be a first claim against the proceeds achieved
from the exercise of those rights and shall be
deducted therefrom prior to the distribution of net
proceeds to the Shareholders in accordance with their
pro rata participation. Subject to the foregoing:
(i) the Shareholder Committee shall not have
any power to bind or obligate any
Shareholder to funding a pro rata share of
any Funding of Shareholders' Rights without
the written consent of each Shareholder to
be so bound; and
(ii) the Funding of Shareholders' Rights shall
be a first charge against only the proceeds
reasonably achieved from the exercise of
those rights, and shall not be deducted
from monies otherwise payable to the
Shareholders under this Agreement that are
unrelated to and are not dependent upon the
exercise of the particular Common
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Shareholder's Right for which the subject
Funding of Shareholders' Rights is
required.
(d) Subject to the foregoing, the Shareholder Committee
shall provide reasonable reports to the Shareholders,
shall provide access to relevant information and
documents upon the request and at the expense of any
Shareholder, and in all cases shall account to each
of the Shareholders for each Shareholders' pro rata
share in the net proceeds achieved, if any, from the
exercise of each Common Shareholder Right in
accordance with that Shareholder's beneficial
interest in the Shares being sold to the Purchaser
hereunder;
(e) Acceptance by the Shareholder Committee and by each
member thereof of their duties and obligations under
this Section 2.13 is subject to the following terms
and conditions which the Parties hereby agree shall
govern and control with respect to each such person's
rights, duties, liabilities and immunities in their
capacity as a member of the Shareholder Committee:
(i) the members of the Shareholder Committee
shall be protected in acting upon any
written notice, request, waiver, consent,
receipt, statutory declaration or other
paper or document furnished to them not
only as to its due execution (if
applicable) and the validity and
effectiveness of its provisions, but also
as to the truth and acceptability of any
information therein contained, which the
Shareholder Committee, in good faith,
believes to be genuine and what it purports
to be;
(ii) except for acts of gross negligence or
misconduct, the members of the Shareholder
Committee shall not be liable for any acts
done, or steps taken, or steps omitted by
them in good faith, nor for any mistake of
fact or law;
(iii) the Shareholder Committee may consult with
and obtain professional advice from legal
counsel and others in the event of any
question as to any of the provisions hereof
or in respect of the Common Shareholders'
Rights or their duties hereunder, and they
shall incur no liability and shall be fully
protected in acting in good faith in
accordance with the opinion and
instructions of such counsel and the costs
of such services shall be paid out of the
Funding of Shareholders' Rights;
(iv) the exercise of each and every one of the
Common Shareholders' Rights by the
Shareholder Committee shall be determined
in the sole discretion of the Shareholder
Committee and, without limiting the
generality of the foregoing, the
Shareholder Committee may resolve to
decline on behalf of the Shareholders to
exercise any particular Common
Shareholder's Right, or resolve to exercise
any Common Shareholder's Right on a basis
determined by the Shareholder Committee; or
to refer the decision on any Common
27
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Shareholder Right to the Shareholders
collectively by written notice to the
Shareholders; and
(v) the members of the Shareholder Committee
shall have no duties or obligations under
this Section 2.13 except those which are
expressly set forth herein and they shall
not be bound by any notice of claim or
demand with respect thereto, or any waiver,
modification, amendment, termination or
recession of this section unless the same
is received by them in writing and if their
duties hereunder are affected, unless they
shall have given their prior written
consent thereto.
2.14 EXERCISE OF INVESTOR OPTIONS. Each Shareholder acknowledges that the
Corporation granted options to the Investors to acquire an aggregate of 375,000
common shares in the capital of the Corporation on the terms and conditions set
forth in the Option Agreements attached as Schedule 2.14. Each Shareholder
acknowledges and agrees that the options under such Option Agreements shall be
exercisable as a result of the transactions contemplated by this Agreement by
agreement of the Corporation with each of the Investors in accordance with the
provisions of such Option Agreements to permit the Investors to exercise the
options granted thereunder, to acquire such shares, and that the Purchaser has
agreed that such shares will constitute Shares for the purposes of this
Agreement and will be purchased by the Purchaser from the Investors pursuant to
this Agreement.
---------------------
ARTICLE 3
CLOSING ARRANGEMENTS
3.1 CLOSING. The Closing shall take place at 10:00 a.m. on the Closing Date
at the offices of Blake, Xxxxxxx & Xxxxxxx, or at such other time on the Closing
Date or such other place as may be agreed to in writing by the Shareholders and
the Purchaser.
3.2 CLOSING DELIVERIES OF SHAREHOLDERS. At the Closing, each of the
Shareholders severally agrees with the Purchaser that the following documents
are delivered to the Purchaser:
(1) the certificates representing the Shares of the Shareholder,
duly endorsed in blank for transfer (and the Shareholders
shall cause the transfers of the Shares to be duly entered in
the registers of the Corporation at Closing);
(2) an assignment by the Shareholder of the Shares in the form of
Exhibit A, duly executed by the Shareholder;
(3) a certificate of the Shareholder (or if the Shareholder is not
an individual, a certificate of the President or other senior
officer of the Shareholders), dated as of the Closing Date in
the form of Exhibit B;
(4) a certificate of a senior officer of each corporate
Shareholder in the form of Exhibit C and, in the case of the
Investors, a certificate in the form of Exhibit C.1;
(5) a certificate of a senior officer of the Corporation in the
form of Exhibit D;
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(6) [intentionally deleted]
(7) in the case of the Investors, a Non-Competition Agreement and
Intellectual Property Assignment duly executed in the form of
Exhibit E1 and in the case of Xxxxx Xxxxxxxx and Xxxxxx
Xxxxxx, a Non-Competition Agreement and Intellectual Property
Assignment duly executed in the form of Exhibit E;
(8) an IP Assignment in the form of Exhibit M executed by
TECHinspirations Inc., and each of the Shareholders other than
the Investors, Xxxxx Xxxxxxxx and Xxxxxx Xxxxxx;
(9) a counterpart of the B & E Escrow Agreement executed by the
Shareholder and Xxxxxx & Elliot;
(10) a counterpart of the BCG Escrow Agreement executed by the
Shareholder;
(11) an employment agreement in form reasonably satisfactory to the
Purchaser executed by each of Xxxxx Xxxxxxxx and Xxxxx
Xxxxxxxxx and the Corporation;
(12) an opinion of the Shareholders' Solicitors addressed to the
Purchaser and the Purchaser's Solicitors substantially in the
form of Exhibit F;
(13) the written resignation and a release of all claims against
the Corporation of each Director and Officer in the form of
Exhibit G;
(14) a release of claims against the Corporation, including any
claims in respect of any obligations of the Corporation to the
Shareholder or pursuant to any Option in respect of securities
of the Corporation, in the form of Exhibit H, duly executed by
the Shareholder;
(15) the Employee Certificate; and
(16) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Shareholders
to complete the transactions provided for in this Agreement.
3.3 PURCHASER'S CLOSING DELIVERIES. At the Closing, the Purchaser shall
deliver or cause to be delivered to the Shareholders the following documents and
payments:
(1) a certificate of the President or other senior officer of each
of the Purchaser and Parentco dated as of the Closing Date in
the form of Exhibit J;
(2) a certificate of a senior officer of each of the Purchaser and
Parentco in the form of Exhibit K;
(3) the payments referred to in Sections 2.3(1);
(4) an irrevocable direction of the Purchaser to the Corporation
to enter into an amendment to the employment agreement dated
March 1, 1997 with Xxxxx Xxxxxxxx and an employment agreement
with Xxxxx Xxxxxxxxx, in each case on terms no less
29
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favourable in aggregate than those proposed to such
individuals by the Purchaser prior to the date hereof and in
form reasonably satisfactory to the Purchaser;
(5) an opinion of the Purchaser's Solicitors addressed to the
Shareholders substantially in the form of Exhibit L; and
(6) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Shareholders
to complete the transactions provided for in this Agreement.
3.4 EMPLOYEE RELEASES. Each of the Shareholders severally agrees with the
Purchaser to cause the Corporation to use its best efforts to settle all claims
in respect of Options in respect of securities of the Corporation against the
Corporation by, and to deliver on or prior to the Closing to the Purchaser a
release in respect thereof executed by, each of Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx
Xxxxxxx and Xxxxxxx Xxxxxx in the form of Exhibit I, subject to such
modifications as are acceptable to the Purchaser, acting reasonably.
---------------------
ARTICLE 4
CONDITIONS OF CLOSING
4.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to complete
the purchase and sale of the Shares pursuant to this Agreement unless, at or
before the Closing Time, each of the following conditions has been satisfied, it
being understood that the following conditions are included for the exclusive
benefit of the Purchaser and may be waived, in whole or in part, in writing by
the Purchaser at any time; and each of the Shareholders severally agrees with
the Purchaser to take all such actions, steps and proceedings as are
commercially reasonable and within its control as may be necessary to ensure
that the following conditions are fulfilled at or before the Closing Time:
(1) Representations and Warranties of Shareholders. The
representations and warranties of the Shareholders in Section
5.1 shall be true and correct at the Closing.
(2) Shareholder Compliance. Each Shareholder shall have performed
and complied with all of the terms and conditions of this
Agreement on its part to be performed or complied with at or
before Closing and shall have executed and delivered or caused
to have been executed and delivered to the Purchaser at the
Closing all the documents contemplated in Section 3.2 or
elsewhere in this Agreement.
(3) Material Adverse Change. During the Interim Period, there
shall have been no Material Adverse Change.
(4) No Litigation. There shall be no litigation or proceedings:
(a) pending or threatened against any of the Parties or
against any of their respective Affiliates or any of
their respective directors or officers, for the
purpose of enjoining, preventing or restraining the
completion of the transactions contemplated by this
Agreement; or
30
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(b) pending or threatened against the Corporation, any of
the Parties, or against any of their respective
Affiliates or any of their respective directors or
officers, which if determined adversely to such
Person could adversely affect the right of the
Purchaser to acquire or retain the Shares or result
in a Material Adverse Change.
(5) Debentureholder Matters. Evidence of the conversion of the
Convertible Secured Debentures dated as of October 15, 1998
and December 4, 1998 entered into by the Corporation with each
of the Investors (the "DEBENTURES") in accordance with their
terms, the right of the Corporation to make payment of all
interest accrued under the Debentures as at the Closing Time
without penalty, the discharge of the Debentures and all
security under the Debentures and the termination of all
related agreements;
(6) January Loan. Amendment of the terms of the credit facility
evidenced by the letter agreement dated as of January 25, 1999
between the Investors and the Corporation, together with the
Credit Agreement dated January 18, 1999 between National Bank
of Canada and the Corporation (collectively, the "JANUARY
CREDIT FACILITY"), permitting the repayment without penalty of
all obligations thereunder and the discharge of all security
thereunder upon receipt of such payment, and the termination
of all related credit agreements;
(7) CIBC Discharge. Receipt of Discharge of Canadian Imperial Bank
of Commerce in favour of the Corporation of all obligations
and security therefor executed in favour of the Corporation by
Canadian Imperial Bank of Commerce; and
(8) Consulting Services Agreement. Receipt of the release and
consent of TECHinspirations Inc. to termination at Closing and
without penalty, of the Consulting Services Agreement dated as
of July 16, 1998 between the Corporation and TECHinspirations
Inc.
4.2 CONDITION NOT FULFILLED. If any condition in Section 4.1 has not been
fulfilled at or before the Closing Time, then the Purchaser in its sole
discretion may, without limiting any rights or remedies available to the
Purchaser at law or in equity, either:
(1) terminate this Agreement by notice to the Shareholders, in
which event each of Parentco and the Purchaser shall be
released from all of its respective obligations under this
Agreement; or
(2) waive compliance with any such condition without prejudice to
its right of termination in the event of non-fulfilment of any
other condition;
provided that any such waiver may be granted by the Purchaser absolutely, or
upon the Parties renegotiating certain terms of the Agreement and further
provided that, in the case of each Shareholder, unless the Purchaser can show
that the condition or conditions for the non-fulfilment of which the Purchaser
has terminated this Agreement was as a result of the Shareholder not taking all
such actions, steps and proceedings as are commercially reasonable and within
its control as may be necessary to ensure that such condition was fulfilled at
or before the Closing Time, then the Shareholder shall be released from its
obligations under this Agreement. In the event that any condition in Section 4.1
has not been fulfilled at or before the Closing Time as a result of any action
31
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or failure to take action by a Shareholder (a "BREACHING SHAREHOLDER"), the
Purchaser shall have the right, but shall not be obligated, to purchase all of
the Shares held by each of the Shareholders other than any such Breaching
Shareholder in accordance with the terms of this Agreement without limiting any
rights or remedies available to the Purchaser at law or in equity under this
Agreement or otherwise against or in respect of any Breaching Shareholder.
4.3 CONDITIONS OF THE SHAREHOLDERS. The Shareholders shall not be obliged
to complete the transactions contemplated by this Agreement unless, at or before
the Closing Time, each of the following conditions has been satisfied, it being
understood that the following conditions are included for the exclusive benefit
of the Shareholders, and may be waived by the Shareholders, in whole or in part,
in writing by the Shareholders at any time; and the Purchaser agrees with the
Shareholders to take all such actions, steps and proceedings as are commercially
reasonable and within the Purchaser's control as may be necessary to ensure that
the following conditions are fulfilled at or before the Closing Time:
(1) Representations and Warranties. The representations and
warranties of the Purchaser in Section 5.2 shall be true and
correct at the Closing.
(2) Purchaser's Compliance. The Purchaser shall have performed and
complied with all of the terms and conditions in this
Agreement on its part to be performed or complied with at or
before the Closing Time and shall have executed and delivered
or caused to have been executed and delivered to the
Shareholders at the Closing Time all the documents and
payments contemplated in Section 3.3 or elsewhere in this
Agreement.
(3) No Litigation. There shall be no litigation or proceedings:
(a) pending or threatened against any of the Parties or
against any of their respective Affiliates or any of
their respective directors or officers, for the
purpose of enjoining, preventing or restraining the
completion of the transactions contemplated by this
Agreement; or
(b) pending or threatened against the Corporation, any of
the Parties, or against any of their respective
Affiliates or any of their respective directors or
officers, which if determined adversely to such
Person could adversely affect the right of the
Purchaser to acquire or retain the Shares.
(4) Accrued Liabilities. Tendering of payment by the Purchaser on
behalf of the Corporation to Xxxxxx Xxxx Ledgett on behalf of
the Investors and TECHinspirations Inc. of all accrued
interest under the Debentures and the amounts outstanding to
the Closing Date under the Consulting Services Agreement dated
as of July 16, 1998 between the Corporation and
TECHinspirations Inc., as applicable, in each case as at the
Closing Time as accrued for in the Estimated Closing
Statement. The amount of such payment shall constitute a debt
owing by the Corporation to the Purchaser.
(5) January Loan. Tendering of payment by the Purchaser on behalf
of the Corporation to Xxxxxx Xxxx Xxxxxxx (X) on behalf of
Stonebridge of the amount of principal and interest owing to
Stonebridge by the Corporation and (Y) on behalf of Telesystem
Software Ventures Limited Partnership ("Telsoft") of any
additional amounts owing
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to Telsoft by the Corporation, in each case under the January
Credit Facility as at the Closing Time as reflected in the
Estimated Closing Statement and delivery to Xxxxxx Xxxx
Ledgett on behalf of Telsoft of a release of National Bank of
Canada in respect of all security in favour of National Bank
of Canada for the January Credit Facility established by
Telesystem Software Ventures Limited Partnership. The amount
of such payment shall constitute a debt owing by the
Corporation to the Purchaser.
4.4 CONDITION NOT FULFILLED. If any condition in Section 4.3 shall not have
been fulfilled at or before the Closing Time, then the Shareholders in its sole
discretion may, without limiting any rights or remedies available to the
Shareholders at law or in equity (except to the extent so limited by Section
2.3), either:
(1) terminate this Agreement by notice to the Purchaser, in which
event the Shareholders shall be released from all obligations
under this Agreement; or
(2) waive compliance with any such condition without prejudice to
its right of termination in the event of non-fulfilment of any
other condition, provided that unless the Shareholders can
show that the condition or conditions for the non-fulfilment
of which the Shareholders have terminated this Agreement are
reasonably capable of being performed by the Purchaser, then
Parentco and the Purchaser shall be released from its
obligations under this Agreement.
---------------------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. As a material
inducement to the Purchaser's entering into this Agreement and completing the
transactions contemplated by this Agreement and acknowledging that the Purchaser
is entering into this Agreement in reliance upon the representations and
warranties of the Shareholders set out in this Section 5.1, each of the
Shareholders severally but not jointly represents and warrants to the Purchaser
as follows:
(1) Ownership of Shares. The Shareholder (except Stonebridge) is
or at the Closing Time will be the sole beneficial owner of
and has or will have at the Closing Time good and marketable
title to and in the case of Stonebridge will convey good and
marketable title in, in each case the number of Shares set
forth opposite the Shareholder's name in Schedule 1.1(2), free
and clear of any lien, claim, security interest or other
encumbrance, including, without limitation, any escrow
arrangements or other restrictions on transfer, except such
restrictions as shall have been satisfied by the Closing Time.
(2) Authorization to Sell Shares. The Shareholder has or will have
at the Closing Time full legal right, power and authorization
to sell, assign, transfer and deliver the Shares set forth
opposite the Shareholder's name in Schedule 1.1(2),
Shareholder's Shares in the manner provided in this Agreement
and upon delivery of and payment for such Shares hereunder,
the Purchaser will acquire good and marketable title to such
Shares, free and clear of any lien, claim, security interest,
or other encumbrance.
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(3) No Restrictions on Sale of Share; Outstanding Securities. As
at the date hereof and as at the Closing Time, no Person,
except for the Purchaser, has or will have any Option in
respect of any of the Shares set forth opposite the
Shareholder's name in Schedule 1.1(2) other than as provided
for in the Shareholders Agreement. Except for the Debentures
and the Options listed in Schedule 5.1(3) and other than as
provided for in the Shareholders Agreement, no Options in
respect of any securities of the Corporation are outstanding.
(4) Residence of Shareholder. The Shareholder (if not Stonebridge,
Xxxxx Xxxxxxxxx, Xxxxxx Xxxx or Xxxxx Xxxxx) is not a
non-resident of Canada for purposes of Section 116 of the
Income Tax Act (Canada).
(5) Binding Obligation of Shareholder. This Agreement, any Closing
Agreement to which the Shareholder is party and any agreement,
document, or instrument made or delivered pursuant to this
Agreement or such Closing Agreement has been duly authorized
(if a corporation), executed and delivered by the Shareholder
and constitutes a valid and binding obligation of the
Shareholder enforceable against such Shareholder in accordance
with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting the rights of creditors
generally and except as limited by the application of
equitable principles when equitable remedies are sought, and
by the fact that rights to indemnity, contribution and waiver,
and the ability to sever unenforceable terms, may be limited
by applicable law.
(6) Absence of Conflicting Agreements. The execution and delivery
of this Agreement, any Closing Agreement to which the
Shareholder is party and any agreement, document, or
instrument made or delivered pursuant to this Agreement or
such Closing Agreement by the Shareholder, the sale of such
Shareholder's Shares pursuant to this Agreement and the
consummation of the transactions contemplated in this
Agreement do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under (whether after notice or lapse of
time or both), any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the
Shareholder is a party or by which the Shareholder is or may
be bound or to which any of the Shareholder's property or
assets is subject, other than such agreements which terminate
simultaneously with the Closing, which breach or violation or
the consequences thereof would, alone or to the knowledge of
the Shareholder in the aggregate, be material, nor does or
will such action conflict with or violate any statute, law,
rule, regulation, ruling, judgment, injunction, order or
decree applicable to the Shareholder or to any property or
assets of the Shareholder.
(7) Litigation. Subject to Schedule 5.1(7), there is no action,
suit, proceeding, claim, application, complaint or
investigation in any court or before any arbitrator or before
or by any regulatory body or governmental or non-governmental
body pending or, to the knowledge of the Shareholder,
threatened by or against the Corporation or the Shareholder
Related to the Business or affecting the Business or the
operations or capital of the Corporation or the transactions
contemplated by this Agreement, and there is no factual or
legal basis which could give rise to any such action, suit,
proceeding, claim, application, complaint or investigation.
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(8) Consents and Approvals. Under Applicable Law, no consent,
approval, authorization, order, registration or qualification
of or with any court or governmental agency or body is
required for the sale of the Shares to be sold by the
Shareholder as contemplated by this Agreement or the
consummation by the Shareholder of the transactions
contemplated in this Agreement or to permit the Corporation to
carry on the Business after the Closing as the Business is
currently being carried on by the Corporation, other than as
may be required, and as have or will have been obtained prior
to Closing, and other than any such consent, approval,
authorization, order, registration or qualification imposed
upon the Purchaser, Parentco and their respective Affiliates.
(9) Shareholder Taxes. The Shareholder will pay all Taxes properly
payable by the Shareholder, if any, on the transfer or sale by
the Shareholder of such Shareholder's Shares to the Purchaser.
(10) [Intentionally Deleted]
(11) Organization of the Corporation. The information set out in
Schedule 5.1(11) concerning the name and jurisdiction of
incorporation, the authorized, issued and outstanding shares
and the directors and officers of the Corporation and each
Subsidiary is true and complete in all material respects and
will be true and complete at the Closing Time. The Corporation
is incorporated and validly subsisting under the laws of its
jurisdiction of incorporation. The Corporation is licensed or
qualified to do business under the laws of the jurisdictions
specified in Schedule 5.1(11) and neither the character nor
the location of the properties owned by the Corporation nor
the nature of the business conducted by it requires licensing
or qualification under the laws of any other jurisdiction. The
Corporation has full corporate power to carry on its business
and to own and operate its assets, properties and business as
now carried on and owned and operated.
(12) Corporate Records. The minute books of the Corporation contain
true, correct and complete copies of its articles, its
by-laws, the minutes of every meeting of its board of
directors and every committee thereof and of its shareholders
and every written resolution of its directors and
shareholders. The share certificate book, register of
shareholders, register of transfers and register of directors
and officers of the Corporation are complete and accurate in
all material respects.
(13) Bankruptcy. The Corporation is not an insolvent person within
the meaning of the Bankruptcy and Insolvency Act (Canada) or
any comparable legislation to which it is subject nor has it
made an assignment in favour of its creditors nor a proposal
in bankruptcy to its creditors or any class thereof nor had
any petition for a receiving order presented in respect of it.
The Corporation has not initiated proceedings with respect to
a compromise or arrangement with its creditors or for its
winding up, liquidation or dissolution. No receiver has been
appointed in respect of the Corporation or any of the Assets
and no execution or distress has been levied upon any of the
Assets.
(14) Financial Statements. The annual audited consolidated
financial statements of the Corporation for the fiscal year
ended February 28, 1998 and, to the knowledge of the
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Shareholder and without the benefit of review by the
Corporation's auditors, the annual unaudited consolidated
financial statements of the Corporation for the fiscal year
ended February 28, 1999, which are annexed as Schedule 5.1(14)
(collectively, the "FINANCIAL STATEMENTS"), have been prepared
in accordance with Canadian GAAP except as set forth in
Schedule 5.1(14) and, in the case of the Financial Statements
for the year ended February 28, 1999, for usual year-end
adjustments and the absence of notes. The balance sheets
contained in such Financial Statements fairly present the
consolidated financial position of the Corporation as of their
respective dates and the statements of earnings and retained
earnings contained in the Financial Statements fairly present
the consolidated results of operations for the periods
indicated.
(15) Title to Assets. The Corporation has good and marketable title
to all the Assets other than the Intellectual Property, free
and clear of any and all Liens, subject to Permitted Liens and
the Leases. The Assets are sufficient to permit the continued
operation of the Business in substantially the same manner as
conducted in the year ended on the date of this Agreement.
Schedule 5.1(15) sets out a complete and accurate list of all
locations where the Assets are situate. There is no agreement,
option or other right or privilege outstanding in favour of
any Person for the purchase from the Corporation of the
Business or of any of the Assets out of the ordinary course of
business.
(16) Real Property. With the exception of leasehold improvements
located at the Leased Premises, the Corporation does not own
any real property or any buildings or other improvements
located on any real property.
(17) Personal Property. Schedule 5.1(17) lists each item of
Personal Property which had a book value in the accounting
records of the Corporation, determined in accordance with
Canadian GAAP at the date of the Corporation's most recently
completed financial year, of more than Cdn.$10,000 or is
otherwise material to the Business. All Personal Property
constituting fixed assets reflected in the Closing Statement
is in good operating condition and repair having regard to its
book value as reflected in the Closing Statement, ordinary
wear and tear excepted.
(18) Leased Premises. Schedule 5.1(18) lists all the Premises
Leases. Each Premises Lease is in full force and effect,
unamended by oral or written agreement, and the Corporation is
entitled to the full benefit and advantage of such Premises
Lease in accordance with the terms thereof. Each Premises
Lease is in good standing and there has not been any default
by the Corporation or, to the knowledge of the Shareholder,
any other party under any Premises Lease nor is there any
dispute between the Corporation and any landlord under any of
the Premises Leases. None of the Premises Leases has been
assigned by the Corporation in favour of any Person. The
current uses of the Leased Premises comply with Applicable
Law.
(19) Personal Property Leases. Schedule 5.1(19) lists all the
Personal Property Leases which involve or may reasonably be
expected to involve the payment by the Corporation of more
than $25,000 over the term of the Personal Property Lease
(collectively, the "MATERIAL PERSONAL PROPERTY LEASES") and
identifies the ones which cannot be terminated by the
Corporation without liability at any time upon less than 30
days' notice. Each Material Personal Property Lease is in full
force and
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effect and has not been amended, and the Corporation is
entitled to the full benefit and advantage of each Material
Personal Property Lease in accordance with its terms. Each
Material Personal Property Lease is in good standing and there
has not been any material default by the Corporation or, to
the knowledge of the Shareholder, any other party under any
Material Personal Property Lease, nor any dispute between the
Corporation and any other party under any Material Personal
Property Lease.
(20) Material Contracts. Schedule 5.1(20), Schedule 5.1(36) and the
Employee Certificate list all the Material Contracts. The
Corporation is not in default under any Material Contract and
there has not occurred any event which, with the lapse of time
or giving of notice or both, would constitute a default under
any Material Contract by the Corporation or any other party to
the Material Contract. Each Material Contract is in full force
and effect, unamended by written or oral agreement, and the
Corporation is entitled to the full benefit and advantage of
each Material Contract in accordance with its terms. The
Corporation has not received any notice of a default by the
Corporation or a dispute between the Corporation and any other
party in respect of any Material Contract.
(21) Receivables. The Receivables net of reserves to be reflected
in the Closing Statement are valid obligations which arose in
the ordinary course of business and will be collectible net of
such reserves in the period of 90 days after the Closing Date
at their full face value as at the Closing Date. None of the
Receivables is due from a Non-Arm's Length Party of the
Corporation or the Shareholder.
(22) Inventories. The Inventories to be reflected in the Closing
Statement will consist of items that are current and of good
and merchantable quality and not subject to any write-down or
write-off. The portion of the Inventories consisting of
finished products to be reflected in the Closing Statement
will be saleable in the ordinary course of business at normal
prices. The portion of the Inventories consisting of raw
materials and work-in-progress to be reflected in the Closing
Statement will be of a quality useable in the production of
finished products.
(23) Intellectual Property.
(a) Schedule 5.1(23) describes the releases of the
NetProphet and NetScore software applications and
specifications, all internet website domains, domain
names, business names and trade names related to the
Business and related trademark, copyright and patent
registrations comprising part of the Intellectual
Property. Without limiting the generality of the
foregoing, Schedule 5.1(23) lists and describes all
software systems and applications related to the
Business. All the registrations and applications for
registration of the Intellectual Property listed in
Schedule 5.1(23) are subsisting in good standing and
are recorded in the name of the Corporation. No
application for registration of any of the
Intellectual Property has been rejected;
(b) The Corporation has the exclusive right to use
(subject to licenses in favour of customers entered
into by the Corporation in the ordinary course of
business), sell, license and dispose of, and has the
right to bring actions for infringement of, the
Intellectual Property. The Intellectual Property
includes all patent
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rights, copyrights, trade secrets, information, and
other proprietary rights and processes necessary to
conduct the business of the Corporation as currently
conducted;
(c) Subject to the rights of licensors pursuant to
licenses referred to in Schedule 5.1(23) and to the
rights of customers pursuant to licenses entered into
by the Corporation in the ordinary course of
business, and to Permitted Liens, the Corporation is
the sole owner of the Intellectual Property and is
entitled to the exclusive and uninterrupted use of
the Intellectual Property without payment of any
royalty or other fees other than in respect of
Hyperion software products and commercially available
software listed in Schedule 5.1(23). The Corporation
has diligently protected its legal rights to the
extent commercially reasonable to the ownership of
the Intellectual Property other than trade secrets
and source code. Other than the Excel Spreadsheet
Add-On delivered with NetProphet III and NetScore III
which is in password protected source code form, all
copies of any software forming a part of the Software
Products have been distributed solely in object code
form with notice containing the notations "(C)" or
"(c)" and "copyright [year of publication] Sapling
Corporation". Except for disclosures to the Purchaser
and Parentco and to authorized Persons involved in
development in each case pursuant to appropriate
non-disclosure agreements, and except for disclosure
of password protected source code as referred to
above, there has been no disclosure of the Software
Products other than through the licensing of object
code versions of the Software Products. Each
authorized copy of the Software Products object code
is the subject of a valid and existing licence
agreement in the form attached in Schedule 5.1(23)(a)
or substantially in the form of Schedule 5.1(23)(b).
The Corporation has not permitted or licensed any
Person to use any of the Intellectual Property except
pursuant to licenses and otherwise as disclosed in
Schedule 5.1(23). All such licences referred to in
Schedule 5.1(23) are in full force and effect and
neither the Corporation nor, to the Shareholder's
knowledge, the other party is in default of its
obligations thereunder. Except for disclosure to the
Purchaser and Parentco and except for disclosure to
authorized Persons involved in development and except
for off-site secure storage, in each case pursuant to
appropriate non-disclosure agreements, the source
code for the Software Products has not been delivered
or disclosed or made available to any Person, the
Corporation has not agreed to or undertaken to or in
any way promised to provide such source code to any
Person other than the Purchaser, and such source code
is currently stored, and has never been removed from,
the premises of the Corporation. The Corporation has
not disclosed any trade secrets of the Corporation to
any Person except pursuant to appropriate
non-disclosure agreements.
(d) Schedule 5.1(23) lists current litigation relating to
the Intellectual Property;
(e) Schedule 5.1(25) sets forth the name of any Person
involved in the development of the Software Products
and, except as indicated in Schedule 5.1(25), each
such Person was so involved during the course of
employment by the Corporation for the primary purpose
of developing software for the
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Corporation. Except as set forth in Schedule 5.1(23),
no shareholder, officer, director, employee or former
employee of the Corporation or any other Person has
any right, title or interest in any of the
Intellectual Property, no Person has been involved in
the development of the Software Products and each
such Person has entered into non-disclosure
agreements pursuant to which they have agreed to
maintain the confidentiality of confidential
Intellectual Property and, except in the case of
Xxxxxxxx Xxxxxxx, Xxxx Naryznai, Xxxx Xxxxxxxxxx,
Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxx and Xxxxxxx XxXxxxx
have assigned all rights they may have in the
Intellectual Property to the Corporation and have
waived any moral rights they may have for the benefit
of the Corporation and anyone claiming through the
Corporation;
(f) All of the Corporation's permissions and licences to
use the industrial or intellectual property of other
Persons are disclosed in Schedule 5.1(23). Except as
disclosed in Schedule 5.1(23), the Software Products
neither contain nor embody nor use nor require any
third party software, including development tools and
utilities, and the Software Products contain all
software necessary for the continued maintenance and
use of the Software Products. With the exception of
the agreements with Platinum Technologies Inc. and
POET Software Corporation, all such permissions and
licenses referred to in Schedule 5.1(23) are in full
force and effect and neither the Corporation nor, to
the Shareholder's knowledge, the other party is in
default of its obligations thereunder;
(g) No Person has challenged the validity of any
registrations for the Intellectual Property or the
Corporation's rights to any of the Intellectual
Property;
(h) Neither the manufacture, marketing, license, sale or
use of any product currently manufactured, marketed,
licensed, sold or used by the Corporation violates
any license or agreement of the Corporation with any
Person or infringes upon the industrial or
intellectual property rights of any other Person,
whether common law or statutory, including rights
relating to defamation, rights of privacy or
publicity and contractual rights. Neither the use of
the Intellectual Property nor the conduct of the
Business has infringed or currently infringes upon
the industrial or intellectual property rights of any
other Person or other than in respect of Hyperion
software products and commercially available software
listed in Schedule 5.1(23) requires the payment of
any royalty, honoraria, fees or other payments to any
other Person;
(i) To the Shareholder's knowledge, no other Person has
infringed the Corporation's rights to the
Intellectual Property;
(j) There is no governmental prohibition or restriction
on the use of the Intellectual Property other than
generally applicable U.S. government trade
restrictions;
(k) The computer software comprising NetProphet and
NetScore is in good operating condition and functions
in accordance with the specifications
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specified in the relevant software design
documentation in all material respects and is free
from errors and design and operating defects; save
and except as experienced within generally applicable
customer expectations and within generally acceptable
industry experience for well developed software and,
with respect to future experience with the said
software as installed, at frequency and severity
levels no greater than experienced by the Corporation
with respect to such software to the date hereof. All
source code for NetProphet and NetScore is written
entirely in the programming environment specified in
Schedule 5.1(23), and is sufficiently documented in
the source code to enable a software developer
reasonably skilled in such environment to understand,
modify, compile and otherwise utilize all aspects of
the related software without reference to other
sources of information. The source code for the
Software Products contains all information and
software required to compile and run the Software
Products in the application environment specified in
Schedule 5.1(23) without additional hardware,
software or other materials whatsoever;
(l) Other than a 40 bit encryption routine for password
protection in NetScore, the Software Products do not
contain or otherwise make use of any encryption,
enciphering or other similar technology, have any
encryption capability or perform any encryption
function.
(24) No Disabling Mechanism. No portion of the Software Products
contain or will contain any disabling mechanism or protection
feature designed to prevent its use, computer virus, worm,
software lock, drop dead device, Trojan-horse routine, trap
door, time bomb or any other codes or instructions that may be
used to access, modify, delete, damage or disable any of the
Software Products or any computer system on which any of the
Software Products is installed or in connection with which
they may operate.
(25) Employees and Developers. Schedule 5.1(25) lists, for each
software application comprising part of the Software Products,
under separate headings, the full names of (i) all the
employees of the Corporation, (ii) all contractors of the
Corporation and (iii) all other Persons, in each case involved
in developing such Software Products together with, beside
each name, the full residential address of each such Person.
(26) Year 2000 Compliance. All of the Corporation's Software
Products (including products currently under development),
other than versions of NetProphet prior to NetProphet II
version 5, record, store, process and calculate and present
calendar year dates in a four digit format and the Software
Products do not default to an assumed date beginning with
"19--" rather than "20--" without providing the end user of
the Software Product with either a notice or choice, and the
Software Products can record, store, process and calculate and
present calendar dates falling on and after January 1, 2000,
and calculate any information dependent on or relating to such
dates in the same manner and with the same functionality, data
integrity and performance as the products record, store,
process, calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on
or relating to such dates (collectively "YEAR 2000
COMPLIANT"). All of the Corporation's material products will
lose no functionality with respect to the introduction of
records
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containing dates falling on or after January 1, 2000. All of
the Corporation's internal computer systems, including its
accounting systems, are Year 2000 Compliant in all material
respects. To the knowledge of the Shareholders, there has been
no action, suit, proceeding, claim (including warranty claim)
instituted in any court or pending or, to the knowledge of the
Shareholder, threatened by or against the Corporation in
respect of any products of the Corporation including the
Software Products that is based on such products not being
Year 2000 Compliant.
(27) Licences and Permits. Schedule 5.1(27) lists all the Licences
and Permits and identifies the ones that by their terms are
rendered invalid as a result of a change of control of the
Corporation. All the Licences and Permits are in full force
and effect, the Corporation is not in violation of any term or
provision or requirement of any such Licences and Permits, and
no Person has threatened to revoke, amend or impose any
condition in respect of, or commenced proceedings to revoke,
amend or impose conditions in respect of, any Licence or
Permit.
(28) Undisclosed Liabilities. The Corporation does not have any
liabilities, obligations, indebtedness or commitments, whether
accrued, absolute, contingent or otherwise, which will not be
disclosed in the Closing Statement or referred to or disclosed
herein (and for the purposes hereof, the Corporation's
obligations under the Material Contracts and the Leases have
been disclosed herein), other than liabilities, obligations
and indebtedness (i) in respect of obligations to Employees
for severance and payment in lieu of notice upon termination
under common law or statute; (ii) incurred in the normal
course of business and in accordance with the usual business
practices of the Corporation and which do not exceed $25,000
in the aggregate other than pursuant to Contracts referred to
in clause (iii); and (iii) Contracts entered into in the
ordinary course of business by the Corporation in accordance
with usual business practices of the Corporation with
customers of and suppliers to the Corporation.
(29) Safety Deposit Boxes/Powers of Attorney. Schedule 5.1(29)
lists:
(a) the name of each bank, trust company and other
financial institution in which the Corporation holds
accounts or safety deposit boxes and the names of
every Person authorized to draw thereon or to have
access thereto; and
(b) the name of each Person holding a general or special
power of attorney from the Corporation and a summary
of the terms thereof.
(30) Consents and Approvals. Except for the Consents and Approvals,
no consent or approval of any Person is required in connection
with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement
or to permit the Corporation to carry on the Business after
the Closing as the Business is currently carried on by the
Corporation provided that the Shareholder makes no
representation or warranty concerning any consent or approval
required to be obtained by the Purchaser, Parentco or their
respective Affiliates in such connection.
(31) Notices. Except for the Notices, no notice is required to be
delivered to any Person in connection with the execution and
delivery of this Agreement and the completion of
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the transactions contemplated by this Agreement or to permit
the Corporation to carry on the Business after the Closing as
the Business is currently carried on by the Corporation
provided that the Shareholder makes no representation or
warranty concerning any notice required to be delivered by the
Purchaser, Parentco or their respective Affiliates in such
connection.
(32) No Conflict for Corporation . The execution, delivery and
performance of this Agreement by the Parties and the
completion (with any required Consents and Approvals and
Notices) of the transactions contemplated by this Agreement do
not and will not result in or constitute any of the following:
(a) a default, breach or violation or an event that, with
notice or lapse of time or both, would be a default,
breach or violation of any of the terms, conditions
or provisions of the articles or by-laws of the
Corporation or any contract;
(b) an event which, pursuant to the terms of any Contract
or Licence or Permit, causes any right or interest of
the Corporation to come to an end or be amended in
any way that is detrimental to the Business or
entitles any other Person to terminate or amend any
such right or interest; or
(c) the creation or imposition of any Lien on any Asset.
(33) [Intentionally Deleted] .
(34) Insurance. Particulars of the policies of insurance maintained
by the Corporation at the date of this Agreement are set out
in Schedule 5.1(34). All such policies are in full force and
effect and the Corporation is not in default, whether as to
the payment of premiums or otherwise, under the terms of such
policies.
(35) Environmental Matters.
(a) The Business and the Assets as carried on or used by
the Corporation have been carried on and used and are
currently carried on and used in compliance with all
Environmental Laws.
(b) The Corporation is not, and has not been, subject to
any proceedings alleging the violation of any
Environmental Law or to determine whether any
remedial action is needed to respond to a Release or
the presence of a Hazardous Substance on the Leased
Premises.
(c) The Corporation requires no Environmental Permits.
(d) All Hazardous Substances used in connection with the
Business at the Leased Premises and disposed of,
treated or stored by the Corporation have been
disposed of, treated and stored in compliance with
all Environmental Laws.
(e) There are no proceedings in which it is alleged that
the Corporation is responsible for a clean-up or
remediation of lands adjacent to or in the vicinity
of the Leased Premises contaminated with Hazardous
Substances
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emanating from the Leased Premises and arising from
the operation of the Business or for any other
remedial or corrective action under an Environmental
Law.
(f) The Corporation has maintained all environmental and
operating documents and records in the manner and for
the time periods required by any Environmental Law
and have never conducted an environmental audit of
the Business and Assets. For purposes of this
Section, an environmental audit includes any
evaluation, assessment, review or study performed at
the request of or on behalf of the Corporation, a
prospective purchaser of the Business or the Assets,
a court or governmental authority.
(g) The Corporation has not installed or caused to be
installed any underground storage tanks located on
the Leased Premises.
(36) Employment Arrangements. A list certified by Xxxxx Xxxxxxxx
and Xxxxx Xxxxxxxx on behalf of the Corporation and without
personal liability except in their capacity as a Shareholder
under this Agreement and circulated to the Shareholders'
Solicitors and the Purchaser (the "EMPLOYEE CERTIFICATE") and
Schedule 5.1(36) list all the Employees as of the date of this
Agreement and the age, position, status and length of service
of each of them, respectively. Except as set out in the
Employee Certificate, Schedule 5.1(7), Schedule 5.1 (36) and
Schedule 5.1(38), the Corporation is not a party to or bound
by any contracts with any Employee or former employee or
obligated under any requirements of Applicable Law to make any
severance or termination payable to any Employee or former
employee of the Corporation, including:
(a) any contracts for the employment of any Employee or
statutory requirement for re-employment of any
Employee other than in respect of Xxxxx Xxxxxxxxx and
Xxxx Xxxxxx; or
(b) any bonus, deferred compensation, profit sharing,
pension, retirement, hospitalization insurance (other
than mandatory public plans) or other plans or
arrangements providing employee benefits, except for
the plans providing employee benefits described in
Schedule 5.1(38).
(37) Collective Agreements. Except as set out in Schedule 5.1(37)
and other than the current dispute with Xxxxx Xxxxx, Xxxxx
Xxxxxxx and Xxxxxxx Xxxxxx:
(a) the Corporation is not a party to any collective
bargaining agreement, contract or legally binding
commitment to any trade union or employee
organization or group in respect of or affecting
Employees;
(b) the Corporation is not currently engaged in any
labour negotiation;
(c) the Corporation is not a party to any application,
complaint or other proceeding under any statute;
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(d) the Corporation has not engaged in any unfair labour
practice and the Corporation is not aware of any
pending or threatened complaint regarding any alleged
unfair labour practices;
(e) there is no strike, labour dispute, work slow down or
stoppage pending or threatened against the
Corporation;
(f) there is no grievance or arbitration proceeding
arising out of or under any collective bargaining
agreement which is pending or threatened against the
Corporation;
(g) the Corporation has not experienced any material work
stoppage; and
(h) the Corporation is not the subject of any union
organization effort.
(38) Employee Plans.
(a) Other than plans required to be maintained by all
employers in respect of their employees in any
relevant jurisdiction, Schedule 5.1(38) lists all the
employee benefit, health, welfare, supplemental
unemployment benefit, bonus, pension, profit sharing,
deferred compensation, stock compensation, stock
purchase, retirement, hospitalization insurance,
medical, dental, legal, disability and similar plans
or arrangements or practices relating to the
Employees or former Employees which are currently
maintained or were maintained at any time in the last
four calendar years (the "EMPLOYEE PLANS").
(b) All of the Employee Plans are and have been
established, registered, qualified, invested and
administered in all respects in accordance with all
laws, regulations, orders or other legislative,
administrative or judicial promulgations applicable
to the Employee Plans ("APPLICABLE EMPLOYEE BENEFIT
LAWS").
(c) All financial obligations regarding the Employee
Plans have been satisfied or will be accrued for and
reflected in the Closing Statement, there are no
outstanding defaults or violations by the Corporation
or, to the knowledge of the Shareholder, any other
party to any Employee Plan and no Taxes, penalties or
fees are owing or eligible under any of the Employee
Plans, except those Taxes, penalties and fees will be
accrued for in the Closing Statement.
(d) No Employee Plan, nor any related trust or other
funding medium thereunder, is subject to any pending
investigation, examination or other proceeding,
action or claim initiated by any governmental agency
or instrumentality, or by any other party (other than
routine claims for benefits), and there exists no
state of facts which after notice or lapse of time or
both could reasonably be expected to give rise to any
such investigation, examination or other proceeding,
action or claim or to affect the registration of any
Employee Plan required to be registered.
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(e) All contributions or premiums required to be made by
the Corporation under the terms of each Employee Plan
or by Applicable Employee Benefit Laws have been made
in a timely fashion in accordance with Applicable
Employee Benefit Laws and the terms of the Employee
Plans, and the Corporation will not have any
financial obligations with respect to any of the
Employee Plans except as accrued for in the Closing
Statement.
(f) Except in the ordinary course of business, no
amendments have been made to any Employee Plan and no
improvements to any Employee Plan have been promised.
No amendments or improvements to an Employee Plan
will be made or promised by the Corporation before
the Closing Time.
(g) There have been no improper withdrawals, applications
or transfers of assets from any Employee Plan or the
trusts or other funding media relating thereto, and
neither the Corporation nor any of its agents has
been in breach of any fiduciary obligation with
respect to the administration of the Employee Plans
or the trusts or other funding media relating
thereto.
(h) The Shareholders have furnished or made available to
the Purchaser true, correct and complete copies of
all the Employee Plans as amended as of the date
hereof together with all material documentation
related thereto including funding agreements,
actuarial reports, funding and financial information
returns and statements, all professional opinions
(whether or not internally prepared) with respect to
each Employee Plan, copies of material correspondence
with all regulatory authorities with respect to each
Employee Plan and existing plan summaries, booklets
and personnel manuals.
(i) The Corporation has no pension plan or other funded
Employee Plan.
(j) None of the Employee Plans are registered under
Applicable Employee Benefit Laws, nor have any
advance tax rulings been sought or received in
respect of the Employee Plans.
(k) All employee data necessary to administer each
Employee Plan has been provided or made available by
the Corporation to the Purchaser and such data is
true and correct in all material respects.
(l) No insurance policy or any other contract or
agreement affecting any Employee Plan requires or
permits a retroactive increase in premiums or
payments due thereunder. The level of insurance
reserves under each insured Employee Plan is
reasonable and sufficient to provide for all incurred
but unreported claims.
(m) Except as disclosed in Schedule 5.1(38), none of the
Employee Plans provides benefits to retired employees
or to the beneficiaries or dependants of retired
employees.
(n) Except as disclosed in Schedule 5.1(38) or in the
Financial Statements, the Corporation has not during
the period commencing March 1, 1998 accrued or
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paid any bonus, fee, distribution, remuneration or
other compensation to any Employee (other than
salaries, wages, bonuses, benefits (including Option
entitlements) paid or payable to Employees in the
ordinary course of business in accordance with
current compensation levels and practices as set out
in the Employee Certificate, Schedule 5.1(36) and
Schedule 5.1(38)).
(39) Customers and Suppliers. Schedule 5.1(39) lists the ten
largest customers and the ten largest suppliers of the
Corporation (or such additional customers or suppliers of the
Corporation which are sufficient to constitute ten per cent or
more of total sales or purchases, as the case may be) for the
12 month period ending February 28, 1999 determined by
reference to payments to and from such parties, and the
aggregate amount which each such customer was invoiced and
each such supplier was paid during such period. With the
exception of termination by the Corporation of its
relationship with Quadstar International, the Shareholder is
not aware of, nor has it received notice of, any intention on
the part of any such customer or supplier to cease doing
business with the Corporation or to modify or change in any
material manner any existing arrangement with the Corporation
for the purchase or supply of any products or services. There
are no unresolved disputes with any such supplier, shipper or
customer.
(40) Product Warranties. There are no claims against the
Corporation on account of product warranties or with respect
to the production or sale of defective or inferior products
and, to the knowledge of the Shareholder, there is no factual
or legal basis for any such claim.
(41) Affiliated Transactions. The Corporation is not liable in
respect of advances, loans, guarantees to or on behalf of any
Shareholder, officer, director, Employee or Affiliate of the
Corporation or any other Person who is a Non-Arm's Length
Party to the Corporation except those which are to be repaid,
discharged or released prior to the Closing Time in accordance
with the terms of this Agreement.
(42) Intercompany Services. Except as disclosed in this Agreement,
there are no Material Contracts and, to the knowledge of the
Shareholder, no Contracts, in each case between the
Corporation and any Person who is a Non-Arm's Length Party to
the Corporation or the Shareholder.
(43) Tax Filings. The Corporation has prepared and filed on time
with all appropriate governmental bodies all tax returns,
declarations, remittances, information returns, reports and
other documents of every nature required to be filed by or on
behalf of the Corporation in respect of any Taxes or in
respect of any other provision in any domestic or foreign
federal, provincial, municipal, state, territorial or other
taxing statute for all fiscal periods ending prior to the date
hereof, other than the federal and provincial tax returns for
the one year ended February 28, 1998 which shall be delivered
to the Purchaser at least five Business Days prior to the
Closing Date. All such returns, declarations, remittances,
information returns, reports and other documents, including
the federal and provincial tax returns for the one year ended
February 28, 1998, are correct and complete in all material
respects, and no material fact has been omitted therefrom. No
extension of time in which to file any such returns,
declarations, remittances, information returns, reports or
other documents is
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in effect. All Taxes shown on all such returns, or on any
assessments or reassessments in respect of any such returns
have been paid in full.
(44) Taxes Paid. The Corporation has paid in full all Taxes
required to be paid on or prior to the date hereof and will
make adequate provision in the Closing Statement in accordance
with Canadian GAAP for the payment of all Taxes in respect of
all fiscal periods ending prior to the Closing Time.
(45) Reassessments of Taxes. There are no reassessments of the
Corporation's Taxes that have been issued and are outstanding
and there are no outstanding issues which have been raised and
communicated to the Corporation by any governmental body for
any taxation year in respect of which a Tax return of the
Corporation has been audited. Other than in respect of the
SRED Tax Credit, there are no unresolved challenges, disputes
or questions between the Corporation and any governmental body
in respect of Taxes or of any returns, filings or other
reports filed under any statute providing for Taxes. The
Corporation is not negotiating any draft assessment or
reassessment with any governmental body. The Shareholder is
not aware of any contingent liabilities for Taxes or any
grounds for an assessment or reassessment of the Corporation
other than as disclosed in the Financial Statements or to be
disclosed in the Closing Statement and other than those Taxes
or grounds for assessment or reassessment arising in the
ordinary course of business. Neither the Corporation nor the
Shareholder has received any indication from any governmental
body that an assessment or reassessment of the Corporation is
proposed in respect of any Taxes, regardless of its merits.
The Corporation has not executed or filed with any
governmental body any agreement or waiver extending the period
for assessment, reassessment or collection of any Taxes.
(46) Withholdings and Remittances. The Corporation has withheld
from each payment made to any of its present or former
employees, officers and directors, and to all persons who are
non-residents of Canada for the purposes of the Income Tax Act
(Canada) all amounts required by law to be withheld, and
furthermore, has remitted such withheld amounts within the
prescribed periods to the appropriate governmental body. The
Corporation has remitted or will make adequate provision in
the Closing Statement for the remittance of all Canada Pension
Plan contributions, provincial pension plan contributions,
unemployment insurance premiums, employer health taxes and
other Taxes payable by it in respect of its employees and has
remitted or will make adequate provision in the Closing
Statement for the remittance of such amounts to the proper
governmental body within the time required under the
applicable legislation. The Corporation has charged, collected
and remitted on a timely basis all Taxes as required under
applicable legislation on any sale, supply or delivery
whatsoever, made by the Corporation.
(47) [Intentionally deleted.]
(48) Absence of Certain Changes or Events. Except as disclosed in
Schedule 5.1(48), since February 28, 1999, the Corporation has
not:
(a) suffered any Material Adverse Change;
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(b) amended its articles;
(c) except as contemplated by this Agreement, declared or
made any payment of any dividend or other
distribution in respect of its shares and has not
redeemed, purchased or otherwise acquired any shares;
(d) except as contemplated by this Agreement, issued or
sold any Shares or other securities of the
Corporation or any Option in respect of any
securities of the Corporation;
(e) sold, assigned, transferred, mortgaged, pledged or
otherwise encumbered any of the Assets, except sales
of Inventories in the normal course of its Business;
(f) changed any accounting or costing systems or methods
in any material respect;
(g) except as contemplated by this Agreement, suffered
any extraordinary loss or cancelled, other than in
the ordinary course of business, or waived any debt,
claim or other right;
(h) except as contemplated by this Agreement, entered
into any Material Contract or any other transaction
that was not in any material respect consistent with
the terms of Contracts entered into by the
Corporation in the normal course of its Business; or
(i) terminated, cancelled or modified in any material
respect or received notice or a request for
termination, cancellation or modification in any
material respect of any Material Contract.
(49) Brokerage Fees. The Shareholder has not entered into any
agreement which would entitle any Person to any valid claim
against the Corporation, the Purchaser or Parentco for a
broker's commission, finder's fee or any like payment in
respect of the purchase and sale of the Shares or any other
matters contemplated by this Agreement.
(50) Full Disclosure. No representation or warranty made by the
Shareholder in this Agreement, and no statement made in any
schedule, exhibit, certificate or other document furnished
pursuant to this Agreement, contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to
state any material fact necessary to make such representation
or warranty or any such statement not misleading. The
Shareholder does not know any fact which, if known to the
Purchaser might reasonably be expected to either materially
diminish the Purchaser's evaluation of the value of the Shares
or the value of the Business or deter the Purchaser from
consummating the transactions contemplated herein on the terms
of this Agreement.
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5.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Shareholders as follows:
(1) Incorporation and Power. The Purchaser is a corporation duly
incorporated under the laws of the jurisdiction of its incorporation
and is duly organized, validly subsisting and in good standing under
such laws.
(2) Due Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and all other
agreements and instruments to be executed by it as contemplated by
this Agreement and to carry out its obligations under this Agreement
and such other agreements and instruments. The execution and delivery
of this Agreement and such other agreements and instruments and the
completion of the transactions contemplated by this Agreement and such
other agreements and instruments have been duly authorized by all
necessary corporate action on the part of the Purchaser.
(3) Enforceability of Obligations. This Agreement constitutes a valid and
binding obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms subject, however, to limitations on
enforcement imposed by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally and to the extent that
equitable remedies such as specific performance and injunctions are
only available in the discretion of the court from which they are
sought.
(4) Brokerage Fees. The Purchaser has not entered into any agreement which
would entitle any Person to any valid claim against the Shareholders
for a broker's commission, finder's fee or any like payment in respect
of the purchase and sale of the Shares or any other matters
contemplated by this Agreement.
5.3 REPRESENTATIONS AND WARRANTIES OF PARENTCO. Parentco represents and
warrants to the Shareholders as follows:
(1) Incorporation and Power. Parentco is a corporation duly incorporated
under the laws of Delaware and is duly organized, validly subsisting
and in good standing under such laws and the shares of common stock of
Parentco are listed on Nasdaq.
(2) Due Authorization. Parentco has all necessary corporate power,
authority and capacity to enter into this Agreement and all other
agreements and instruments to be executed by it as contemplated by
this Agreement and to carry out its obligations under this Agreement
and such other agreements and instruments. The execution and delivery
of this Agreement and such other agreements and instruments and the
completion of the transactions contemplated by this Agreement and such
other agreements and instruments have been duly authorized by all
necessary corporate action on the part of Parentco.
(3) Enforceability of Obligations. This Agreement constitutes a valid and
binding obligation of Parentco enforceable against Parentco in
accordance with its terms subject, however, to limitations on
enforcement imposed by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally and to the extent that
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equitable remedies such as specific performance and injunctions are
only available in the discretion of the court from which they are
sought.
(4) Brokerage Fees. Parentco has not entered into any agreement which
would entitle any Person to any valid claim against the Shareholders
for a broker's commission, finder's fee or any like payment in respect
of the purchase and sale of the Shares or any other matters
contemplated by this Agreement.
5.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(1) The representations and warranties of the Shareholders contained in
Section 5.1, in any Closing Agreement or any other agreement,
certificate or instrument delivered pursuant to this Agreement shall
survive the Closing for a period of two years from the Closing Date
except in the case of any representation and warranty relating to any
Tax matter which shall survive the Closing for a period of one year
after the limitation periods for reassessment or appeal under the
applicable taxing statute have expired, and notwithstanding the
Closing and any inspection or inquiries made by or on behalf of the
Purchaser, shall continue in full force and effect for the benefit of
the Purchaser for such time period, after which time the Shareholders
shall be released from all obligations in respect of such
representations and warranties except with respect to any Claims
asserted by the Purchaser in writing (setting out in reasonable detail
the nature of the Claim and the approximate amount of such Claim)
before the expiration of such period, provided that there shall be no
time limit on the representations and warranties of the Shareholders
set out in Section 5.1 which relate to the incorporation of the
Corporation, the due authorization of this Agreement by the
Shareholders, the enforceability of the Shareholders' obligations
under this Agreement, or to the title of any Shareholder to any Shares
or on any representation involving fraud or fraudulent
misrepresentations.
(2) The representations and warranties of the Purchaser contained in
Section 5.2 and of Parentco in Section 5.3, in any Closing Agreement
or any other agreement, certificate or instrument delivered pursuant
to this Agreement shall survive the Closing for a period of two years
from the Closing Date, and notwithstanding the Closing, shall continue
in full force and effect for the benefit of the Shareholders for such
time period, after which time the Purchaser or Parentco shall be
released from all obligations in respect of such representations and
warranties except with respect to any Claims asserted by the
Shareholder Committee in writing (setting out in reasonable detail the
nature of the Claim and the appropriate amount thereof) before the
expiration of such period, provided that there shall be no time limit
on the representations and warranties of the Purchaser set out in
Section 5.2 or of Parentco set out in Section 5.3 which relate to the
incorporation of the Purchaser or Parentco respectively, the due
authorization of this Agreement by the Purchaser or Parentco
respectively and the enforceability of the Purchaser's or Parentco's
respectively obligations under this Agreement or on any representation
involving fraud or fraudulent misrepresentations.
5.5 PARENTCO SUPPORT. Parentco represents and warrants that the Purchaser,
including for purposes of this Section 5.5 any permitted assignee of the
Purchaser, is and at all relevant times shall be a wholly-owned direct or
indirect subsidiary of Parentco. Parentco hereby covenants with
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each of the Shareholders to take such actions as may be necessary to cause the
Purchaser or any permitted assignee of the Purchaser at all times to perform and
discharge its obligations under this Agreement and under any agreement, document
or instrument made or delivered pursuant to this Agreement; and if the Purchaser
or any permitted assignee of the Purchaser shall at any time fail to do so,
Parentco shall, or shall cause an Affiliate of Parentco to, perform and
discharge such obligations. The foregoing covenants and obligations of Parentco
are absolute, unconditional present and continuing covenants and obligations of
a primary covenantor and are in no way conditional or contingent upon any event
or circumstance, action or omission which might in any way discharge a guarantor
or surety, provided that Parentco shall be entitled to the benefit of all
rights, defences and remedies of the Purchaser under this Agreement.
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ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY BY THE SHAREHOLDERS. Each of the Shareholders shall
severally indemnify and hold the Purchaser, its directors, officers, employees,
agents, representatives and the Purchaser's Affiliates and their respective
directors, officers, employees, agents and representatives harmless in respect
of any claim, demand, action, cause of action, damage, loss, cost, liability or
expense (hereinafter referred to as a "CLAIM") which may be made or brought
against an Indemnified Party or which it may suffer or incur directly or
indirectly as a result of, in respect of or arising out of:
(1) subject to Section 5.4(1), any incorrectness in or breach of any
representation or warranty of the Shareholder contained in this
Agreement, any Closing Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement;
(2) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Shareholder under this Agreement, any Closing
Agreement or under any other agreement, certificate or instrument
executed and delivered pursuant to this Agreement; or
(3) any Claim made or brought against Parentco, the Purchaser, the
Corporation or the Corporation's successors or their respective
directors, officers, employees, agents, representatives and Affiliates
by:
(i) Xxx Xxxxxx or his Associates as a result of, in respect of or
arising out of any matter existing prior to the Closing Time,
excluding any Claim for a finder's fee in respect of licensing of
Software Products after the Closing Date resulting in license
fees being recognized by Parentco on a consolidated basis in
accordance with the usual business practice of the Corporation;
(ii) Xxx Xxxxx or his Associates as a result of, in respect of or
arising out of any matter referred to in Section 1 of Schedule
5.1(7);
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(iii) any of Xxxxx Xxxxx, Xxxxx Xxxxxxx and Xxxxxxx Xxxxxx or any of
their respective Associates as a result of, in respect of or
arising out of any matter referred to in Section 3 of Schedule
5.1(7); and
(iv) any of Xxxxxxxx Xxxxxxx, Inna Naryznai, Xxxx Xxxxxxxxxx, Xxxxxxx
Xxxxxxx, Xxxxxxxx Xxxxx and Xxxxxxx XxXxxxx or any of their
respective Associates as a result of, in respect of or arising
out of any right, title or interest in, or moral rights in
respect of, in each case in existence at the Closing Time, the
Software Products.
6.2 INDEMNITY BY THE PURCHASER.
(1) The Purchaser shall indemnify and hold the Shareholders, their
directors, officers, employees, agents and representatives, as the
case may be, and the Shareholders' Affiliates and their respective
directors, officers and employees, as the case may be, harmless in
respect of any Claim which may be made or brought against an
Indemnified Party or which it may suffer or incur directly or
indirectly as a result of, in respect of or arising out of:
(a) subject to Section 5.4(2), any incorrectness in or breach of any
representation or warranty of the Purchaser contained in this
Agreement, any Closing Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement; or
(b) any breach or non-fulfilment of any covenant or agreement on the
part of the Purchaser under this Agreement, any Closing Agreement
or under any other agreement, certificate or instrument executed
and delivered pursuant to this Agreement.
(2) Parentco shall indemnify and hold the Shareholders, their directors,
officers, employees, agents, representatives, as the case may be, and
the Shareholders' Affiliates and their respective directors, officers
and employees, as the case may be, harmless in respect of any Claim
which may be made or brought against an Indemnified Party or which it
may suffer or incur directly or indirectly as a result of, in respect
of or arising out of:
(a) subject to Section 5.4(3), any incorrectness in or breach of any
representation or warranty of Parentco contained in this
Agreement, any Closing Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement; or
(b) any breach or non-fulfilment of any covenant or agreement on the
part of Parentco under this Agreement, any Closing Agreement or
under any other agreement, certificate or instrument executed and
delivered pursuant to this Agreement.
6.3 NOTICE OF CLAIM. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to either of Section
6.2 or 6.1, as the case may be, the Indemnified Party shall promptly give
written notice of the Claim to the Indemnifying Party. Such
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notice shall specify whether the Claim arises as a result of a claim by a Person
against the Indemnified Party (a "THIRD PARTY CLAIM") or whether the Claim does
not so arise (a "DIRECT CLAIM"), and shall also specify with reasonable
particularity (to the extent that the information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does not
receive notice of any Claim in time to effectively contest the determination of
any liability susceptible of being contested, then the liability of the
Indemnifying Party to the Indemnified Party under this Article shall be reduced
by the amount of any losses incurred by the Indemnifying Party resulting from
the Indemnified Party's failure to give such notice on a timely basis.
6.4 DIRECT CLAIMS. In the case of a Direct Claim, the Indemnifying Party
shall have 60 days from receipt of notice of the Claim within which to make such
investigation of the Claim as the Indemnifying Party considers necessary or
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or before the expiration of such 60 day period (or any mutually agreed
upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim.
6.5 THIRD PARTY CLAIMS. In the case of a Third Party Claim, the
Indemnifying Party shall have the right, at its expense, to participate in or
assume control of the negotiation, settlement or defence of the Claim. If the
Indemnifying Party elects to assume such control, the Indemnifying Party shall
reimburse the Indemnified Party for all of the Indemnified Party's out-of-pocket
expenses incurred as a result of such participation or assumption. The
Indemnified Party shall have the right to participate in the negotiation,
settlement or defence of such Third Party Claim and to retain counsel to act on
its behalf, provided that the fees and disbursements of such counsel shall be
paid by the Indemnified Party unless the Indemnifying Party consents to the
retention of such counsel at its expense or unless the named parties to any
action or proceeding include both the Indemnifying Party and the Indemnified
Party and a representation of both the Indemnifying Party and the Indemnified
Party by the same counsel would be inappropriate due to the actual or potential
differing interests between them (such as the availability of different
defences). The Indemnified Party shall cooperate with the Indemnifying Party so
as to permit the Indemnifying Party to conduct such negotiation, settlement and
defence and for this purpose shall preserve all relevant documents in relation
to the Third Party Claim, allow the Indemnifying Party access on reasonable
notice to inspect and take copies of all such documents and require its
personnel to provide such statements as the Indemnifying Party may reasonably
require and to attend and give evidence at any trial or hearing in respect of
the Third Party Claim. If, having elected to assume control of the negotiation,
settlement or defence of the Third Party Claim, the Indemnifying Party
thereafter fails to conduct such negotiation, settlement or defence with
reasonable diligence, then the Indemnified Party shall be entitled to assume
such control and the Indemnifying Party shall be bound by the results obtained
by the Indemnified Party with respect to such Third Party Claim. If any Third
Party Claim is of a nature such that (i) the Indemnified Party is required by
Applicable Law or the order of any court, tribunal or regulatory body having
jurisdiction, or (ii) it is necessary in the reasonable view of the
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Indemnified Party acting in good faith and in a manner consistent with
reasonable commercial practices, in respect of (A) a Third Party Claim by a
customer relating to products or services supplied by the Business or (B) a
Third Party Claim relating to any Contract which is necessary to the ongoing
operations of the Business or any material part thereof in order to avoid
material damage to the relationship between the Indemnified Party and any of its
major customers or to preserve the rights of the Indemnified Party under such an
essential Contract, to make a payment to any person (a "THIRD PARTY") with
respect to the Third Party Claim before the completion of settlement
negotiations or related legal proceedings, as the case may be, then the
Indemnified Party may make such payment provided that it is made in a manner
that does not constitute an admission of liability and that preserves all
defences to the Third Party Claim and the Indemnifying Party shall, promptly
after demand by the Indemnified Party, reimburse the Indemnified Party for such
payment. If the amount of any liability of the Indemnified Party under the Third
Party Claim in respect of which such a payment was made, as finally determined,
is less than the amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, promptly after receipt of the
difference from the Third Party, pay the amount of such difference to the
Indemnifying Party.
6.6 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to
assume control of the defence of any Third Party Claim, the Indemnified Party
shall have the exclusive right to contest, settle or pay the amount claimed.
Whether or not the Indemnifying Party assumes control of the negotiation,
settlement or defence of any Third Party Claim, the Indemnifying Party shall not
settle any Third Party Claim without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that the liability of the Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason
within a reasonable time after the request therefor.
6.7 INTEREST ON CLAIMS. The amount of any Claim submitted under
Section 6.1 or Section 6.2 as damages or by way of indemnification shall bear
interest from and including the date any Indemnified Party is required to make
payment in respect thereof at the Prime Rate calculated from and including such
date to but excluding the date reimbursement of such Claim by the Indemnifying
Party is made, and the amount of such interest shall be deemed to be part of
such Claim.
6.8 TAX ADJUSTMENTS. The amount of any Claim submitted under Section 6.1
or 6.2 as damages or by way of indemnification shall be determined on an
after-Tax basis, and without limiting the generality of the foregoing shall:
(a) be net of the net present value of any Tax benefits to the
Indemnified Party resulting from the Claim, calculated using a
discount rate equal to the Prime Rate on the Business Day
immediately preceding the date of payment of the Claim; and
(b) include the amount necessary to hold the Indemnified Party
harmless after Tax.
6.9 SET-OFF. The Purchaser shall be entitled to set-off the amount of any
Claim submitted under Section 6.1 against any other amounts payable by the
Purchaser to the Shareholders whether under this Agreement or otherwise,
provided that the amount of any set-off made by the Purchaser shall be based
upon a commercially reasonable assessment of the merits of the Claim in
consideration of advice of counsel; any uncertainties existing in respect of the
Claim, including
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uncertainty as to the amount of the Claim, at the time set-off is to be made;
and the risk to the Purchaser associated with collecting amounts payable to the
Purchaser by each of the relevant Shareholders in the event of a disposition of
the Claim in favour of the Purchaser. To the extent that the Purchaser sets-off
any amount in respect of a Claim against an Indemnifying Party in accordance
with the foregoing, and the amount set-off exceeds the amount finally determined
by judicial process or arbitration, to be payable to the Purchaser by the
Indemnifying Party, the Purchaser shall make a payment in an amount equal to
such excess less any payment determined to be payable by the Purchaser to the
Indemnifying Party by judicial process or arbitration in respect of a claim by
the Indemnifying Party in respect of the monies set-off.
6.10 OTHER REMEDIES. The indemnification provisions set forth in this
Part are in addition to, and not in derogation of, any statutory, equitable, or
common law remedy any Party may have for any misrepresentation, breach of
warranty or non-fulfilment of or failure to perform any covenant or agreement.
6.11 SPECIFIC PERFORMANCE. Each of the Parties hereto acknowledges and
understands that breach or threatened breach by any other Party or
non-performance or threatened non-performance of certain of the covenants
contained herein may not be compensable in damages. Accordingly, each of the
Parties agrees and accepts that the other Party may, in addition to any other
remedy for relief, enforce the performance of any covenant in this Agreement
(including the obligation to convey the Shares) or the performance of any action
that is necessary to enforce this or the Closing Agreements by injunction or
specific performance upon application to a court of competent jurisdiction
without proof of actual damage to such Party or notwithstanding that damages may
be readily quantifiable and each of the Parties agrees not to plead sufficiency
of damages as a defence in any proceeding for such injunctive relief brought by
the other Party.
6.12 MINIMUM CLAIM. No Party shall have any entitlement to
indemnification pursuant to Sections 6.1 or 6.2 or relating to any breach of any
of the representations and warranties contained in Sections 5.1 or 5.2 unless
and until the accumulated aggregate amount of Claims of such Party against all
other Parties exceeds Cdn.$100,000 following which all such accumulated Claims
and all further Claims of such Party shall be recoverable as provided in this
Agreement.
6.13 LIMITATION OF LIABILITY. No Shareholder shall have liability
under this Agreement, the Closing Agreements or any other agreement, certificate
or instrument delivered pursuant to this Agreement or the Closing Agreements
pursuant to the indemnification provisions set forth in this Article 6 or
pursuant to any other remedy of the Purchaser, including any remedies specified
in Section 6.10, in excess of the amount received by the Shareholder on account
of the Purchase Price. To the extent that any two or more Shareholders have the
same liability in respect of a Claim arising out of the same incorrectness in or
breach of any representation or warranty or breach or non-fulfilment of any
covenant or agreement under this Agreement, any Closing Agreement or under any
other agreement, certificate, or instrument executed and delivered pursuant to
this Agreement, each Shareholder's liability shall be limited to its pro rata
portion of such Shareholders' aggregate liability equal to the fraction, the
numerator of which is the percentage of Shares beneficially owned by the
Shareholder at the Closing Date as set forth opposite the Shareholder's name in
Schedule 1.1(2) and the denominator of which is the aggregate percentage of
Shares beneficially owned by each such Shareholder at the Closing Date as set
forth opposite each such Shareholder's name in Schedule 1.1(2). Notwithstanding
that any covenant or agreement of the Shareholders hereunder is expressed as a
covenant or agreement of all Shareholders, in a situation where the covenant is
personal to a particular Shareholder, the liability for the covenant is that
Shareholder's alone. Notwithstanding the
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foregoing, such limitations shall not apply in any circumstance in which the
Shareholder has undertaken fraud or fraudulently or intentionally breached any
warranty or covenant hereunder or made any fraudulent or intentional
misrepresentation.
6.14 TAX LOSSES. Notwithstanding any other provision in this
Agreement, no representation and warranty is made by any Shareholder in respect
of: (i) Tax losses of the Corporation incurred at any time after February 28,
1998; (ii) the availability of such losses for reduction of Tax liabilities of
the Corporation; or (iii) any failure to recognize expenditures that would have
created such Tax losses.
6.15 INSURANCE. In the event that the Corporation or its successor
receives a payment pursuant to a policy of insurance in force as at or prior to
the Closing Date in respect of the subject matter of a Claim, the Purchaser
agrees to cause the Corporation or its successor to make payment to each
Shareholder against which the Claim was made of an amount up to the amount
received pursuant to such insurance policy pro rata to such Shareholder's
percentage beneficial ownership interest in the Shares as at the Closing Date as
set forth in Schedule 1.1(2), and not exceeding the aggregate amount received by
the Purchaser from such Shareholders, less an amount equal to the net present
value, calculated using a discount rate equal to the Prime Rate as at the date
of receipt of such payment pursuant to such insurance policy, of the increase in
premiums under such insurance policy or any replacement insurance policy
reasonably estimated by the Purchaser to be attributable to the claim having
been made under such insurance policy.
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ARTICLE 7
INTERIM PERIOD
7.1 INVESTIGATION. Until the Closing, the Purchaser and its
representatives and advisers shall be permitted to make such investigations,
inspections, surveys or tests of the properties and assets of the Corporation,
its predecessor companies and its Affiliates and of their respective financial
and legal condition as the Purchaser deems necessary or desirable to familiarize
itself with such properties, assets and other matters. Without limiting the
generality of the foregoing, the Purchaser shall, during normal business hours,
be permitted complete access to all documents relating to information scheduled
or required to be disclosed under this Agreement, to the Books and Records, the
data processing system of the Corporation, the Contracts, the Leased Premises,
the Employees, records regarding suppliers, customers and regulators and
environmental reports, surveys, inspection reports and all other reports
prepared by advisers of the Corporation, its predecessor companies and its
Affiliates (and the Shareholders shall provide photocopies to the Purchaser of
all such written information and documents as may be reasonably requested by the
Purchaser). Any such investigations, inspections, surveys or tests shall not,
however, affect or mitigate the representations and warranties of the
Shareholders under this Agreement which shall continue in full force and effect
as provided under this Agreement.
7.2 AUTHORIZATIONS. The Shareholders shall cause the Corporation to
execute and deliver any authorizations required to permit the investigations,
inspections, surveys or tests described in Section 7.1.
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7.3 CONFIDENTIALITY.
(1) Each Shareholder shall (and shall cause each of its Representatives
(as defined below) to) hold in strictest confidence and not use in any
manner, other than as expressly contemplated by this Agreement, any
Confidential Information (as defined below) of the Purchaser.
(2) Section 7.3(1) shall not apply to the disclosure of any Confidential
Information where such disclosure is required by Applicable Law. In
that case, the Shareholder (or whose Shareholder's Representative is
required to disclose) shall, as soon as possible in the circumstances,
notify the Purchaser of the requirement. Upon receiving such
notification, the Purchaser may take any reasonable action to
challenge the requirement, and the Shareholder shall (or shall cause
the applicable Representative to), at the expense of the Purchaser,
assist the Purchaser, in taking such reasonable action.
(3) Following the termination of this Agreement in accordance with the
provisions of either of Sections 4.1 or 4.2, each Shareholder shall
(and shall cause each of its Representatives to) promptly, upon a
request from the Purchaser, return to the Purchaser all copies of any
tangible items (other than this Agreement), if any, which are or which
contain Confidential Information of the Purchaser; provided that if a
Shareholder or its Representatives have prepared summaries or analyses
containing or concerning any Confidential Information, then such
Shareholder may, instead of returning the summaries or analyses,
destroy them and provide a certificate to that effect to the
Purchaser.
(4) For the purposes of this Section 7.3:
"CONFIDENTIAL INFORMATION" means all information relating to the
Business which,
(i) at the time is of a confidential nature (whether or not
specifically identified as confidential) and is known or
should be known by the Shareholder or its Representatives
as being confidential, and
(ii) has been or is from time to time made known to or is
otherwise learned by a Shareholder or any of its
Representatives as a result of the matters provided for in
this Agreement,
including the following information:
(iii) the terms of this Agreement; and
(iv) the Purchaser's marketing and sales plans and its business
records,
but not including any information that at such time:
(v) has become generally available to the public other than as
a result of a disclosure by a Shareholder or any of its
Representatives;
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(vi) was available to a Shareholder or its Representatives on a
non-confidential basis before the date of this Agreement; or
(vii) becomes available to a Shareholder or its Representatives
on a non-confidential basis from a Person other than
Purchaser or any of its Representatives who is not, to the
knowledge of a Purchaser or its Representatives, otherwise
bound by confidentiality obligations to the Purchaser in
respect of such information or otherwise prohibited from
transmitting the information to a Shareholder or its
Representatives; and
"REPRESENTATIVES" with respect to any party means its Affiliates and
its and their respective directors, officers, employees, agents and
other representatives and advisers.
(5) Notwithstanding any other provision of this Section 7.3, the
Shareholders shall be entitled to provide a copy of this Agreement to
Revenue Canada or any other taxation authority if requested by that
authority.
7.4 RISK OF LOSS. Until the Closing, the Shareholders shall cause the
Corporation to maintain in force all the policies of property damage insurance
under which any of the Assets is insured. If before the Closing any of the
Assets is lost, damaged or destroyed and the loss, damage or destruction
constitutes a Material Adverse Change, then:
(1) the Purchaser may terminate this Agreement in accordance with the
provisions of Section 4.2; or
(2) the Purchaser may require the Shareholders to reduce the Purchase
Price by the amount of the replacement cost of the Assets which were
lost, damaged or destroyed less the amount of any proceeds of
insurance payable as a result of the occurrence.
7.5 ACTION DURING INTERIM PERIOD. During the Interim Period, the
Shareholders shall cause the Corporation:
(1) not to make or agree to make any material change in the compensation
of any Director, Officer or Employee and not to pay or agree to pay or
set aside any bonus, profit sharing, retirement, insurance, death,
severance or fringe benefit or other extra-ordinary or indirect
compensation to, for or on behalf of any Director, Officer or Employee
except as contemplated by this Agreement;
(2) not to sell, assign, transfer, mortgage, pledge or otherwise encumber
any of the Assets, except for sales of Inventories in the normal
course of its Business;
(3) not to enter into any Material Contract or any other transaction that
is not in any material respect consistent with the terms of Contracts
entered into by the Corporation in the normal course of its Business;
(4) not to issue any Shares or other securities of the Corporation or any
Option in respect of any securities of the Corporation except as
contemplated by this Agreement;
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(5) not to declare or cause to be paid any dividend or make any other form
of distribution or payment on the Shares or any other securities of
the Corporation except as contemplated by this Agreement;
(6) not to default in the performance of any term or condition of any
Material Contract or Licenses and Permits;
(7) not to cancel or amend any policy of insurance which relates to the
Corporation or any of the Assets, except with the prior written
consent of the Purchaser;
(8) to maintain relations with the suppliers, customers and landlords of
the Corporation in accordance with past custom and practice;
(9) to pay before delinquency all Taxes and other obligations which become
due and payable by the Corporation;
(10) generally, to carry on the Business in the normal course; and
(11) not to, without the consent of the Purchaser, (i) make any material
Tax election other than in the ordinary course of business and
consistent with past practice, (ii) change any material Tax election,
(iii) adopt any Tax accounting method other than in the ordinary
course of business and consistent with past practice, (iv) change any
Tax accounting method, (v) file any Tax return (other than any
estimated tax returns, immaterial information returns, payroll tax
returns, sales or value-added tax returns) or amendment to a Tax
return, (vi) enter into any closing agreement, settle any Tax claim or
assessment or consent to any Tax claim or assessment, provided that
Purchaser shall not unreasonably withhold or delay approval of any of
the foregoing actions.
7.6 EXCLUSIVE DEALINGS. During the Interim Period, the Shareholders shall
not take any action, directly or indirectly, to encourage, initiate or engage in
discussions or negotiations with, or provide any information to, any Person,
other than the Purchaser and its designated and authorized representatives,
concerning any sale, transfer or assignment of the Shares or the Assets
involving the Corporation. The Shareholders shall notify the Purchaser promptly
if any such discussions or negotiations are sought or if any proposal for a
sale, transfer or assignment of the Shares or the Assets is received or being
considered.
7.7 CONSENTS AND APPROVALS, NOTICES. The Shareholders shall cause the
Corporation to use its best efforts to obtain all Consents and Approvals and to
deliver all Notices on or prior to the Closing Time or such earlier time as may
be required by any Material Contract to which the Corporation is a party.
-------------
ARTICLE 8
GENERAL
8.1 EXPENSES. Subject to Section 2.12, each Shareholder shall be
responsible for the Shareholder's own legal, accounting, advisory and other
expenses (including any Taxes imposed on
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such expenses) incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement, including all fees of the
Shareholders' Solicitors, and the transactions contemplated by this Agreement
and for the payment of any broker's commission, finder's fee or like payment
payable by the Shareholder in respect of the purchase and sale of the Shares
pursuant to this Agreement.
8.2 PAYMENT OF TAXES. Except as otherwise provided in this Agreement, the
Purchaser shall pay all Taxes applicable to, or resulting from transactions
contemplated by this Agreement (other than Taxes payable under applicable
legislation by the Shareholders) and any filing or recording fees payable in
connection with the instruments of transfer provided for in this Agreement.
8.3 PUBLIC ANNOUNCEMENTS. The Shareholders shall not, and shall cause the
Corporation not to, make any public announcement regarding this Agreement or the
transactions contemplated by this Agreement unless otherwise consented to in
writing by the Purchaser.
8.4 NOTICES.
(1) Any notice, certificate, consent, determination or other communication
required or permitted to be given or made under this Agreement shall
be in writing and shall be given and made if (i) delivered personally,
(ii) sent by prepaid overnight courier service, or (iii) sent prepaid
by fax or other similar means of electronic communication, in each
case to the applicable address set out below:
(a) if to the Shareholders, to:
Xxxxx Xxxxxxxxx Xxxxx Xxxxxx
00 Xxxxxx Xxxx 251 Xxxxxxx Avenue
London, England Willowdale, Ontario
W4 3BH X0X 0X0
Xxxx Xxxxxx Xxxxxxx Xxxxx
00000 XxXxxxx Xxxx 45 Xxxxxx Drive
Cedar Valley, Ontario Xxxxxxx, Xxxx Xxxxxx
X0X 0X0 B4B 1K1
Xxxxxx Xxxx Xxxx Xxxxx
00 Xxxxxxxxxx Xxxx 00000 XxXxxxx Xxxx
Xxxx Xx. 0 Xxxxx Xxxxxx, Xxxxxxx
Chiswick, England L0G 1E0
X0 0X0
Xxxx Xxxxx Xxxxx XxXxxxx
c/o General Delivery 210-1180 Forestwood Drive
Creemore, Ontario Mississauga, Ontario
L0M 1G0 L5C 1H8
Xxxxx Xxxxxxxx Xxxxxx Xxxxxx
000 Xxxxx Xxxx 000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx, Xxxxxxx X0X 0X0
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Xxxxx Xxxxx Xxxxx Xxxxxxxx &
00000 X. Xxxxxx Xxxxx Integrated Business Process
Xxxxxxxx, XX 00000 Modeling Corp.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxxx Associates Inc. Telsoft Ventures Inc.
00 Xxxxx Xxxx 1000 de La Gauchetiere Street West
Richmond Hill, Ontario 25th Floor
L4C 9E5 Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxx Attention: Xxxxxxxx Xxxxxxxx/Xxxxxx
Xxxxxx
Xxxx Xxxx The Stonebridge Domestic Trust
0000 Xxxxxxxx Xxxxx c/o TECHinspirations Inc.
Xxxxxxxxxxx, Xxxxxxx 0000 No.8 Sideroad, RR #2
L4Z 1E7 Xxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx xxx Xxxxxxx/Xxxxx xxx
Xxxxxxxxxxxx
Gay Gooderham Xxxxxx Xxxxxx
000 Xxxxxxx Xxxx 0000 Xxxxxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxxxxxx, Xxxxxxx
X0X 0X0
Goodwill Family Holdings Inc. Xxxx Xxxxxx
00 Xxxxxxxxx Xxxxxx 000 Xxx Xxxxx Xxxx.
Xxxxx Xxxx, Xxxxxxx X0X 0X0 Xxxxxxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxxxx
Xxxxx Xxxxx Xxxxxx Xxxxxxxxxx
000 Xxxxx Xxxxxx Xxxx 00-000 Xxxxxxxx Road West
Toronto, Ontario M4T 1T3 Xxxxxxxx Xxxx, Xxxxxxx
X0X 0X0
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in each case with copies to:
Xxxxxx & Xxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Tel: 000-000-0000
Fax: 000-000-0000
Attention: Xxx Xxxxx, Esq.
and, if to the Investors, in each case with copies to:
Xxxxxx Xxxx Ledgett
Canada Trust Tower
BCE Place, Suite 2700
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx XxXxxxx, Esq.
(b) if to the Purchaser or Parentco, to:
HSC Acquisition Co.
c/o Hyperion Solutions Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxxx, Senior Vice President and Chief
Financial Officer
with copies to:
HSC Acquisition Co.
c/o Hyperion Solutions Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxxxxx, Vice-President, Finance
and
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
00
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Xxxxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
and
Blake, Xxxxxxx & Xxxxxxx
Xxx 00, Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxx, Esq.
(2) Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if
delivered, or on the day of faxing or sending by other means of
recorded electronic communication, provided that such day in either
event is a Business Day and the communication is so delivered, faxed
or sent before 4:30 p.m. on such day. Otherwise, such communication
shall be deemed to have been given and made and to have been received
on the next following Business Day. Any such communication given or
made in any other manner shall be deemed to have been given or made
and to have been received only upon actual receipt.
(3) Any Party may from time to time change its address under this Section
by notice to the other Party given in the manner provided by this
Section.
8.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
8.6 ENTIRE AGREEMENT. This Agreement (together with the Closing
Agreements, the Confidentiality Agreement dated December 18, 1998 between the
Corporation and Parentco and any other agreement, certificate or instrument
executed and delivered pursuant to this Agreement), constitutes the entire
agreement between the Parties pertaining to the subject matter of this Agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written. There are no conditions, warranties,
representations or other agreements between the Parties in connection with the
subject matter of this Agreement (whether oral or written, express or implied,
statutory or otherwise) except as specifically set out in this Agreement, the
Closing Agreements or the Confidentiality Agreement dated December 18, 1998
between the Corporation and Parentco and any other agreement, certificate or
instrument executed and delivered pursuant to this Agreement.
8.7 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the party to be bound
by the waiver. No waiver shall be inferred from or implied by any failure to act
or delay in acting by a party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other party. The
waiver by a party of any default, breach or non-compliance under this Agreement
shall not operate as a waiver of that party's rights under this Agreement in
respect of any continuing or subsequent default, breach or non-observance
(whether of the same or any other nature).
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8.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
8.9 NON-MERGER. Each party hereby agrees that all provisions of this
Agreement, other than (a) the conditions in Article 4 and (b) the
representations and warranties contained in Article 5 and the related
indemnities in Sections 6.1 and 6.2 hereof (which shall be subject to the
special arrangements provided in such Articles or Sections) shall forever
survive the execution, delivery and performance of this Agreement, Closing and
the execution, delivery and performance of any and all documents delivered in
connection with this Agreement.
8.10 FURTHER ASSURANCES. Each Party shall promptly do, execute, deliver or
cause to be done, executed and delivered all further acts, documents and things
in connection with this Agreement that the other Party may reasonably require
for the purposes of giving effect to this Agreement.
8.11 ATTORNMENT. Each Party agrees (i) that any action or proceeding
relating to this Agreement or any Closing Agreement may (but need not) be
brought in any court of competent jurisdiction in the Province of Ontario, and
for that purpose now irrevocably and unconditionally attorns and submits to the
jurisdiction of such Ontario court; (ii) not to oppose any such Ontario action
or proceeding on the basis of forum non conveniens or for any other reason; and
(iii) not to oppose the enforcement against it in any other jurisdiction of any
judgment or order duly obtained from an Ontario court as contemplated by this
Section. Each of the Parties irrevocably agrees that service of summons and any
other legal process which may be served in any action, suit, proceeding or
Arbitration may be served on the Party at the address of the Party specified or
changed in accordance with Section 8.4. Such service may be made by mailing or
delivering a copy of such process to the applicable Party at such address.
Nothing in this Section will affect the rights of the Parties to serve legal
process in any other manner permitted by law.
8.12 LANGUAGE. The Parties have required that this Agreement and all deeds,
documents and notices relating to this Agreement be drawn up in the English
language. Les parties aux presentes ont exige que le present contrat et tous
autres contrats, documents ou avis afferents aux presentes soient rediges en
langue anglaise.
8.13 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated, in all respects, as an Ontario
contract.
8.14 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of,
and be binding on, the Parties and their respective successors and permitted
assigns provided that, subject to Section 5.4, the Purchaser may assign any or
all of its rights under this Agreement to a wholly-owned direct or indirect
subsidiary of Parentco. Subject to the foregoing, no Party may assign or
transfer, whether absolutely, by way of security or otherwise, all or any part
of its respective rights or obligations under this Agreement without the prior
written consent of the other Parties.
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8.15 ARBITRATION
(1) Each of the Parties agrees to submit any Dispute to formal binding
arbitration in accordance with this Section 8.15.
(2) The arbitration shall be held before a single arbitrator mutually
agreed to by the Parties to the Dispute or otherwise in accordance
with the Arbitration Act (Ontario) (the "ARBITRATION ACT") (the
"ARBITRATION"). Any Party or Parties (collectively the "INITIATING
PARTY") may serve a notice on the other Party or Parties (a
"RESPONDING PARTY") setting out a statement of the Dispute and the
facts relating or giving rise thereto, in reasonable detail, (the
"STATEMENT OF DISPUTE").
(3) Within thirty (30) days after receipt of such notice, each Receiving
Party shall respond to the notice by agreeing or commenting on the
Statement of Dispute, as the case may be.
(4) Save as otherwise provided by this Section 9.03, the Arbitration shall
be governed by the provisions of the "Arbitration Act", provided,
however, that the Arbitration may be administered by any organization
agreed upon by the Parties and that the Parties by agreement, may
choose to be governed by the rules of such administering organization.
The Parties expressly agree that the provisions of the International
Commercial Arbitration Act (Ontario) shall not apply to any
Arbitration between them. The Arbitrator may not amend or disregard
any provision of this Section 8.15 without the consent of the Parties.
(5) Qualified to Act. The Arbitrator selected to act hereunder shall be
qualified by profession or occupation to decide the matter in dispute.
(6) Submission of Written Statements.
(a) Within fifteen (15) Business Days of the appointment of the
Arbitrator, the Initiating Party shall submit written statements
to the Arbitrator setting out in sufficient detail the facts and
any contentions of law on which it relies and the relief the
Initiating Party claims. Each Responding Party shall have ten
(10) Business Days from the date on which the written statement
is received to reply to the written statements submitted by any
other Party setting out in sufficient detail which of the facts
and contentions of law in the written statement of the Initiating
Party it admits or denies, and the grounds and other facts and
contentions of law on which it relies.
(b) Within ten (10) Business Days of receipt of the Receiving Party's
written statements, the Initiating Party may send the Responding
Party a statement of reply.
(c) After submission of all the statements, the Arbitrator may give
directions for documentary production and discovery of each
Party's case, and for further conduct of the Arbitration bearing
in mind the desirability of having cost effective and expeditious
dispute resolution on the merits of the case. In the absence of
agreement between the Parties on production and discovery
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procedures within 30 days of the last day for delivery of the
written statement described in Section 8.15(6)(a), Rules 30, 31,
32, 34 and 35 of the Ontario Rules of Civil Procedure regarding
production and discovery will apply to the Arbitration, excepting
that the Arbitrator shall exercise any powers or fulfil any
duties set out in those Rules that would otherwise (in an action)
be exercised or fulfilled by the court or a judge.
(d) The Arbitrator may, upon application by any Party, modify or
extend any time limit contained in this Section 8.15, including
any time limit in the above Rules.
(7) Confidentiality. Save and except as may be necessary in the course of
the enforcement of an Arbitration award, the Arbitration process and
all Persons participating therein shall be subject to the
confidentiality provisions as set out in Section 7.3. The Arbitrator
and all other Persons (not already bound by the provisions of such
Section 7.3) participating in the Arbitration shall execute an
undertaking to be bound by the confidentiality provisions set out in
such Section 7.3. For greater certainty, the Parties agree that the
Arbitration shall proceed in the event that any other Person refuses
to sign a confidentiality undertaking or agreement.
(8) Meetings and Hearings.
(a) Meetings and hearings of the Arbitration shall take place in
Toronto, Ontario or in such other place as the Parties shall
agree upon in writing and such meetings and hearings shall be
conducted in the English language unless otherwise agreed by such
Parties and the arbitrators. Subject to the foregoing, the
Arbitrator may at any time fix the date, time and place of
meetings and hearings in the Arbitration, and will give all the
Parties adequate notice of these. Subject to any adjournments
which the Arbitrator allows, the final hearing will be continued
on successive Business Days until it is concluded.
(b) All meetings and hearings will be in private unless the Parties
otherwise agree.
(c) Any Party may be represented at any meetings or hearings by legal
counsel.
(d) At the Arbitration, each Party may examine and re-examine its own
witnesses and may cross-examine the other Party's witnesses.
(9) The Decision.
(a) The Arbitrator will make and send a decision in writing to the
Parties within thirty (30) days after the conclusion of all
hearings referred to in Section 8.15(8) unless that time period
is extended for a fixed period by the Arbitrator on written
notice to each Party because of illness or other cause beyond the
Arbitrator's control and, unless the Parties otherwise agree,
will set out reasons for decision in the decision.
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(b) Except as provided in the Arbitration Act and as otherwise
required by Law, the decision of the Arbitrator shall be final
and binding on the Parties and shall not be subject to any appeal
or review procedure, provided that the Arbitrator has proceeded
in accordance with the principles of natural justice.
8.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original or faxed form and the Parties
adopt any signatures received by a receiving fax machine as original signatures
of the Parties; provided, however, that any Party providing its signature in
such manner shall promptly forward to any other Party an original of the signed
copy of this Agreement which was so faxed upon written request of the other
Party.
8.17 INDEPENDENT LEGAL ADVICE. Each Shareholder hereby acknowledges and
agrees that the Shareholder has had full opportunity to seek and receive
independent legal advice with respect to this Agreement, any Closing Agreement
to which the Shareholder is party and any agreement, document, or instrument
made or delivered pursuant to this Agreement or such Closing Agreement and that
if the Shareholder failed to seek or receive such independent legal advice
before signing this Agreement, and any such Closing Agreement and any agreement,
document, or instrument made or delivered pursuant to this Agreement, such
Shareholder shall not rely on such failure as a defence to an argument that this
Agreement and any agreement, document, or instrument made or delivered pursuant
to this Agreement, or any part thereof, is valid or enforceable.
8.18 SHAREHOLDERS AGREEMENT. Each of the Shareholders agrees that,
immediately following the completion of the transactions contemplated to be
completed hereunder on the Closing Date, the Shareholders Agreement shall
terminate and the Shareholder shall have no rights or obligations thereunder.
Pending and subject to the completion of such transactions, each Shareholder
hereby waives any right that the Shareholder may have to acquire any interest in
the Shares or other securities of the Corporation and any other right pursuant
to the Shareholders Agreement arising out of or resulting from the Parties
entering into this Agreement.
8.19 AMEX INDEMNITY. The Purchaser shall indemnify each of Xxxxx Xxxxxxxx
and Xxxxx Xxxxxxxx in respect of any claim made under or pursuant to guarantees
or supporting covenants executed in respect of account 000000000000000 of AMEX
Bank of Canada and account number 000000000000000 of AMEX, and shall cause the
Corporation to arrange for discharge of such guarantees and supporting covenants
following the completion of the transactions contemplated to be completed on the
Closing Date.
8.20 EMPLOYMENT AGREEMENTS. Following the completion of the transactions
contemplated to be completed on the Closing Date, the Purchaser agrees to cause
the Corporation to comply with the direction referred to in Section 3.3(4).
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IN WITNESS WHEREOF the Parties have executed this Agreement.
HSC ACQUISITION CO.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxx
--------------------------------------
Its: Director
---------------------------------------
HYPERION SOLUTIONS CORPORATION
By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxx
--------------------------------------
Its: SVP and CFO
---------------------------------------
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Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx Xxxxxxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx Xxxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxx Xxxx
------------------------------------ --------------------------------------
Witness Xxxxxx Xxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxxx Xxxxx
------------------------------------ --------------------------------------
Witness Xxxxxxx Xxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx Xxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx XxXxxxx
------------------------------------ --------------------------------------
Witness Xxxxx XxXxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx Xxxxxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxxxxx
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Signed, Sealed and Delivered
in the presence of
/s/ Xxxx Xxxxx
------------------------------------ --------------------------------------
Witness Xxxx Xxxxx
Signed, Sealed and Delivered
In the presence of
/s/ Xxxx Xxxxx
------------------------------------ --------------------------------------
Witness Xxxx Xxxxx
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Signed, Sealed and Delivered
In the presence of
/s/ Xxxxx Xxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxx
Signed, Sealed and Delivered
In the presence of
/s/ Xxxx Xxxxxx
------------------------------------ --------------------------------------
Witness Xxxx Xxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxx Xxxxxxxx
------------------------------------ --------------------------------------
Witness Xxxxx Xxxxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxx Xxxxxx
------------------------------------ --------------------------------------
Witness Xxxxxx Xxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxx Xxxxxx
------------------------------------ --------------------------------------
Witness Xxxxxx Xxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxx Xxxx
------------------------------------ --------------------------------------
Witness Xxxxxx Xxxx
Signed, Sealed and Delivered
in the presence of
/s/ Gay Gooderham
------------------------------------ --------------------------------------
Witness Gay Gooderham
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Signed, Sealed and Delivered
in the presence of
/s/ Xxxx Xxxxxx
------------------------------------ --------------------------------------
Witness Xxxx Xxxxxx
Signed, Sealed and Delivered
in the presence of
/s/ Xxxxxx Xxxxxxxxxx
------------------------------------ --------------------------------------
Witness Xxxxxx Xxxxxxxxxx
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GOODWILL FAMILY HOLDINGS INC.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------
Its: President
------------------------------------
INTEGRATED BUSINESS PROCESS
MODELING CORP.
By: /s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
----------------------------------
Its: President
------------------------------------
XXXXXX ASSOCIATES INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
----------------------------------
Its: President
------------------------------------
TELESYSTEM SOFTWARE VENTURES
LIMITED PARTNERSHIP by its General
Partner, TELSOFT VENTURES INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
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Its: President
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CIBC TRUST AND MERCHANT BANK (BARBADOS)
LIMITED IN ITS CAPACITY AS TRUSTEE OF
THE STONEBRIDGE DOMESTIC TRUST AND NOT
IN ANY OTHER CAPACITY AND WITHOUT
PERSONAL LIABILITY
By: /s/ Xxxxxx X. Xxxxxx
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By: /s/ Xxxxxxx X. Xxxxxx
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