1
Exhibit 2.3
SECURE NETWORKS INC.
SHARE PURCHASE AGREEMENT
AMONG
XXXXXX XXXX, XXXX FAMILY 1998 TRUST, XXXXXXX XXX, TAM FAMILY 1998 TRUST, XXX
XXXX XXX, XXX XXXX XXX FAMILY 1998 TRUST, XXXXXXXXXXX XXXXXX, XXXXXX FAMILY 1998
TRUST, XXXXXX XXXXX, HUGER FAMILY 1998 TRUST, XXXXXX XXXXXXXXXX, XXXXXXXXXX
FAMILY 1998 TRUST, XXXXXXXX XXXXXXX, XXXXXX XXXXXX, XXXXXXX XXXXXXX, PRL
RESOURCES INC.
(COLLECTIVELY, THE VENDORS)
AND
FSA COMBINATION CORPORATION
(THE PURCHASER)
AND
SECURE NETWORKS INC.
(THE CORPORATION)
AND
NETWORKS ASSOCIATES, INC.
(THE PARENT)
AND
GREATER BAY TRUST COMPANY
(THE ESCROW AGENT)
MADE AS OF MAY 7,1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions ........................................................... 3
1.2 Expanded Meanings ..................................................... 9
1.3 Amendment of Agreement ................................................10
1.4 Waiver ................................................................10
1.5 Applicable Law ........................................................10
1.6 Currency ..............................................................10
1.7 Headings and Table of Contents ........................................10
1.8 Severability ..........................................................10
1.9 Time of Essence .......................................................10
1.10 Knowledge .............................................................10
1.11 Schedules .............................................................10
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
2.1 Purchase and Sale of Purchased Shares..................................11
2.2 Purchase Price.........................................................11
2.3 Payment of Purchase Price .............................................11
2.4 Escrow Arrangements....................................................12
2.5 Adjustments to Purchase Price. ........................................17
2.6 Section 116 Certificate................................................17
2.7 Break Fee..............................................................18
2.8 Vendors' Legal and Accounting Expenses.................................18
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS, THE TRUSTEES
AND THE CORPORATION
3.1 Basis of Representations...............................................18
3.2 Representations and Warranties Relating to the Individual Vendors......19
3.3 Representations and Warranties Relating to the Corporate Vendor........22
3.4 Representations and Warranties Relating to the Trusts..................23
3.5 Representations and Warranties Relating to the Corporation.............26
3.6 Non-Waiver.............................................................40
3.7 Nature and Survival of Representations and Warranties .................41
3.8 Limitation on Remedies for Breach of Vendors' and Corporation's
Covenants, Representations and Warranties..............................41
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT
4.1 Basis of Representations...............................................41
4.2 Representations and Warranties of Purchaser............................42
4.3 Representations and Warranties of Parent...............................43
4.4 Non-Waiver.............................................................44
4.5 Nature and Survival of Representations and Warranties..................44
ARTICLE 5
COVENANTS OF THE VENDORS, THE CORPORATION,
AND THE PURCHASER
5.1 Covenants of the Vendors...............................................45
5.2 Purchaser's and Parent's Covenants.....................................49
5.3 Articon Agreement......................................................50
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ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATIONS UNDER THIS AGREEMENT
6.1 Purchaser's Conditions......................................................50
6.2 Vendors' Conditions.........................................................52
6.3 Rights of Purchaser.........................................................54
6.4 Rights of Vendors...........................................................54
6.5 Rights of Termination.......................................................54
6.6 Reimbursement of Costs for Continuance......................................54
ARTICLE 7
EMPLOYMENT MATTERS
7.1 Employment Agreements.......................................................55
7.2 Other Employees.............................................................55
ARTICLE 8
CLOSING
8.1 Place of Closing............................................................55
8.2 Deliveries by Vendor........................................................55
8.3 Deliveries of Purchaser at Closing..........................................56
8.4 Closing Escrow..............................................................57
ARTICLE 9
SOLICITATION OF EMPLOYEES AND INJUNCTIVE RELIEF
9.1 Solicitation of Employees...................................................57
9.2 Injunctive Relief...........................................................57
ARTICLE 10
INDEMNIFICATION
10.1 Vendor Indemnification .....................................................57
10.2 Purchaser Indemnification...................................................58
10.3 Notice of Claim.............................................................58
10.4 Direct Claims...............................................................58
10.6 Limitation..................................................................59
ARTICLE 11
CONFIDENTIALITY AND NON-COMPETITION
11.1 Confidentiality ............................................................59
11.2 Non-Competition ............................................................59
11.3 Survival ...................................................................60
ARTICLE 12
GENERAL
12.1 Notices ....................................................................60
12.2 Arbitration Procedure ......................................................61
12.3 Audit and Inspection .......................................................62
12.4 Enurement ..................................................................62
12.5 Further Assurances .........................................................62
12.6 Expenses ...................................................................62
12.7 Counterparts ...............................................................63
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SCHEDULES
Schedule 1.1 - Financial Statements;
Schedule 3.2(e) - Purchase Agreements;
Schedule 3.4(g) - Trust Beneficiaries;
Schedule 3.5(p) - Corporation Changes;
Schedule 3.5(w) - Employee Information;
Schedule 3.5(y) - Material Agreements, Other Contracts and
Agreements;
Schedule 3.5(aa) - Bank Accounts;
Schedule 3.5(bb) - Directors and Officers;
Schedule 3.5(ff)(i) - Intellectual Property;
Schedule 3.5(ff)(iv) - I.P., Tools and Other I.P. Rights;
Schedule 3.5(ff)(x) - Employee and Contractor Moral Rights Waivers;
Schedule 3.5(ff)(xvii) - Sources Code Disclosure;
Schedule 3.5(ff)(xix) - Wares and Services;
Schedule 3.5(hh) - Non-Arm's Length Transactions;
Schedule 3.5(mm) - Litigation and Related Matters;
Schedule 5.1 (k) - General Release;
Schedule 5.1 (m) - Affiliate Agreement;
Schedule 5.1 (n)(i) - Registration Rights Agreement;
Schedule 5.1 (n)(ii) - Investors Representation Certificate;
Schedule 12.2 - Arbitration Procedure.
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT is made as of the 7th day of May, 1998
among:
XXXXXX XXXX, an individual residing in the Province of Alberta ("XXXX")
and
XXXXXX XXXX AND XXXXXXX XXX AND XXXXX XXXX, as trustees of the XXXX
FAMILY 1998 TRUST, established pursuant to a trust deed dated March 23,
1998, (the "XXXX TRUST")
and
XXXXXXX XXX, an individual residing in the Province of Alberta
("X. XXX")
and
XXXXXXX XXX AND XXXXXX XXXX AND XXXXXXXXXXX XXXXXX, as trustees of the
TAM FAMILY 1998 TRUST, established pursuant to a trust deed dated
March 23, 1998, (the "X. XXX TRUST")
and
XXX XXXX TAM, an individual residing in the Province of Alberta ("X.X.
XXXX")
and
XXX XXXX TAM AND XXXXXXX XXX AND MU XXXX XX, as trustees of the XXX XXXX
TAM FAMILY 1998 TRUST, established pursuant to a trust deed dated March
23, 1998, (the "X. XXX TRUST")
and
XXXXXXXXXXX XXXXXX, an individual residing in the Province of Alberta
("Xxxxxx")
and
XXXXXXXXXXX XXXXXX AND XXXXXXX XXX AND XXXXXXXXXXX XXXX, as trustees of
the XXXXXX FAMILY 1998 TRUST, established pursuant to a trust deed dated
March 23, 1998, (the "XXXXXX TRUST")
and
XXXXXX XXXXX, an individual residing in the Province of Alberta
("HUGER") and
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XXXXXX XXXXX and XXXXXX XXXXXXXXXX and XXXX XXXXXXX, as trustees of the
HUGER FAMILY 1998 TRUST, established pursuant to a trust deed dated
March 23, 1998, (the "HUGER TRUST")
and
XXXXXX XXXXXXXXXX, an individual residing in the Province of Alberta
("XXXXXXXXXX")
and
XXXXXX XXXXXXXXXX and XXXXXX XXXXX and XXXXXX XXXX, as trustees of the
XXXXXXXXXX FAMILY 1998 TRUST, established pursuant to a trust deed dated
March 23, 1998, (the "XXXXXXXXXX TRUST")
and
XXXXXXXX XXXXXXX, an individual residing in the Province of Alberta
("XXXXXXX")
and
XXXXXX XXXXXX, an individual residing in the State of Illinois
("XXXXXX")
and
XXXXXXX XXXXXXX, an individual residing in the State of Hawaii
("XXXXXXX")
and
PRL RESOURCES INC., a body corporate incorporated under the laws of the
Province of Alberta ("PRL")
(collectively referred to herein as the "VENDORS")
and
FSA COMBINATION CORPORATION, a corporation incorporated under the laws
of the State of Delaware (the "PURCHASER")
and
SECURE NETWORKS INC., a corporation incorporated under the laws of the
Province of Alberta (the "CORPORATION")
and
NETWORKS ASSOCIATES, INC., a corporation incorporated under the laws of
the State of Delaware (the "PARENT").
and
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GREATER BAY TRUST COMPANY, a trust company having offices in Palo Alto,
California (the "ESCROW AGENT").
WHEREAS the Vendors are the owners of the Purchased Shares;
AND WHEREAS the Vendors have agreed to sell and transfer, and the
Purchaser has agreed to purchase, the Purchased Shares in exchange for common
shares of the Parent upon the terms and conditions hereinafter set forth;
AND WHEREAS a portion of the common shares of the Parent to be issued in
connection with the purchase and sale contemplated by this Agreement are to be
deposited into escrow with the Escrow Agent;
AND WHEREAS for accounting purposes, it is intended that the purchase
and sale contemplated by this Agreement be accounted for as a pooling of
interests under United States generally accepted accounting principles and the
Vendors and the Corporation have agreed to use their best efforts to cause the
purchase and sale to be so accounted for;
AND WHEREAS the Parent has joined in the execution of this Agreement for
the purpose of making certain covenants, representations and warranties;
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as set forth
below.
ARTICLE I
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following words and phrases shall have
the meanings set out below and grammatical variations of such terms shall have
corresponding meanings.
"ABCA" means the Business Corporations Act (Alberta), as amended from time to
time.
"ACCOUNTS RECEIVABLE" means all accounts receivable of, and book debts and other
debts due to, the Corporation that exist at the Effective Time.
"AFFILIATE" shall have the meaning ascribed thereto in the ABCA.
"AGREEMENT" means this share purchase agreement, as amended from time to time.
"ARBITRATOR" shall have the meaning ascribed thereto in subsection 2(a) of
Schedule 12.2.
"ARTICON" shall have the meaning ascribed thereto in Section 5.3.
"ARTICON AGREEMENT" shall have the meaning ascribed thereto in Section 5.3.
"ASSETS" means all the property and assets owned by the Corporation.
"ASSOCIATE" shall have the meaning ascribed thereto in the ABCA.
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"BALLISTA SOFTWARE" means the software program called "Ballista".
"BANKING AGREEMENTS" means the agreements as set forth in Schedule 3.5(y), or as
contemplated by such agreements.
"BUSINESS" means the business currently and heretofore carried on by the
Corporation, including without limitation, the business of providing security
auditing software and computer security research and consulting, including,
without limitation, the development, improvement and licensing of the Ballista
Software, a network security scanner, and conducting in-depth research into the
security of software systems deployed on the Internet.
"BUSINESS DAY" means any day other than a day which is a Saturday, a Sunday or a
statutory holiday in the Province of Alberta.
"CANADIAN GAAP" means the generally accepted accounting principles and practices
in Canada, including without limiting the foregoing, the principles set forth in
the CICA Handbook published by the Canadian Institute of Chartered Accountants
or any successor institute and which are applicable on the effective date as at
which a calculation is required to be made in accordance therewith.
"CLAIM" shall have the meaning ascribed thereto in Section 10.3.
"CLOSING" means the completion of the purchase and sale of the Purchased Shares
as herein provided.
"CLOSING DATE BALANCE SHEET" means the balance sheet of the Corporation as at
the Time of Closing prepared in accordance with U.S. GAAP on a basis consistent
with previous years.
"COMMON SHARES" means all of the issued and outstanding class A common voting
shares in the capital of Corporation.
"COMPANY AFFILIATE" shall have the meaning ascribed thereto in Subsection
5.1(m)(i).
"COMPANY INTELLECTUAL PROPERTY" means any Intellectual Property of the
Corporation as set forth in Schedule 3.5(ff)(i).
"CONFIDENTIAL INFORMATION" means the confidential information and trade secrets
of the Corporation and third parties to which the Corporation is under an
obligation of confidence including, without limitation:
(a) all formulas, patterns, compilations, programmes, methods,
techniques, processes, knowhow and information contained or
embodied in the Ballista Software, including any updates of the
same and further including, without limitation, any of the
foregoing confidential information which is not generally known
in the software business, has economic value from not being
generally known and is subject to reasonable efforts of the
Corporation to keep secret and confidential;
(b) confidential matters of a business nature or of a technical
nature relating to the development or marketing of the Ballista
Software and related to the Business and the Corporation
including, without limitation:
(i) customers, suppliers, product licensing prices,
marketing research,
(ii) product research and development,
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(iii) inventions, (whether patentable or not); and
(c) confidential matters of a financial nature relating to the
development or marketing of the Ballista Software and related to
the Business and the Corporation including, without limitation,
business plans, corporate financing, accounting and financing
statements, and books and records.
"DIRECT CLAIM" shall have the meaning ascribed thereto in Section 10.3.
"DISPUTE" shall have the meaning ascribed thereto in Section 12.2.
"DRAG ALONG AGREEMENT" means that Shareholder Agreement dated as of April 2,
1998 among the Individual Vendors, PRL and certain of the Trustees on behalf of
the Trusts.
"EFFECTIVE TIME" means 12:01 a.m. on the date of Closing.
"EMPLOYMENT AGREEMENTS" shall have the meaning ascribed thereto in Section 7. 1.
"ENCUMBRANCE" 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
agreement, indenture, contract, lease, deed of trust, licence, option,
instrument or other commitment, whether written or oral, to create any of the
foregoing.
"ESCROW" means the escrow of the Escrow Shares in the Escrow Fund for the Escrow
Period as set forth in this Agreement.
"ESCROW FUND" shall have the meaning ascribed thereto in Subsection 2.4(a).
"ESCROW PERIOD" means the period commencing on the date of the Closing and
ending at 5:30 p.m. (Calgary time) on the date that is the first anniversary of
the date of Closing or, if such first anniversary date is not a Business Day,
then the next subsequent Business Day after such first anniversary date.
"ESCROW SHARES" means the aggregate of 10% of each Vendor's proportionate share
as determined in accordance with Section 2.3, of the Issued NAI Shares.
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended.
"FEE EVENT" shall have the meaning ascribed thereto in Section 2.7.
"FINANCIAL STATEMENTS" means the following financial statements provided to the
Purchaser:
(a) the unaudited Balance Sheet and Statement of Income for the
Corporation as at April 30, 1998; and
(b) unaudited Balance Sheets and Statements of Income for the
Corporation for the fiscal periods ended February 28, 1998,
December 31, 1997 and December 31, 1996.
copies of which are set forth in Schedule 1.1.
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"INDEMNIFIED PARTY" shall have the meaning ascribed thereto in Section 10.3.
"INDEMNIFYING PARTY" shall have the meaning ascribed thereto in Section 10.3.
"INDIVIDUAL VENDORS" means, individually or collectively, as the context may
require, Xxxx, X. Xxx, X.X. Xxx, Bailey, Huger, Friedrichs, Wilkins, Xxxxxx and
Xxxxxxx.
"INTELLECTUAL PROPERTY" means any or all of the following and all rights in,
arising out of, or associated with:
(a) all Canada, United States and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof;
(b) all trade secrets and proprietary information, including trade
secrets and proprietary information that are inventions (whether
patentable or not), invention disclosures, improvements, know
how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing;
(c) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout
the world;
(d) all industrial designs and any registrations and applications
therefor throughout the world;
(e) all trade names, logos, common law trademarks and service marks;
trademark and service xxxx, registrations and applications
therefor and all goodwill associated therewith throughout the
world;
(f) all media on which any of the foregoing is recorded, all Web
addresses, sites and domain names;
(g) any similar, corresponding or equivalent rights to any of the
foregoing; and
(h) all documentation related to any of the foregoing.
"ISSUED NAI SHARES" shall have the meaning ascribed thereto in Subsection
2.3(a).
"KEY EMPLOYEES" shall have the meaning ascribed thereto in Section 7.1.
"MATERIAL AGREEMENTS" means the agreements as set forth in Schedule 3.5(y).
"NAI SHARES" means common shares in the capital of the Parent.
"NASDAQ" means the National Association Securities Dealers Automated Quotation
System.
"OFFICER'S CERTIFICATE" shall have the meaning ascribed thereto in Subsection
2.4(e).
"PARENT SEC REPORTS" shall have the meaning ascribed thereto in Section 4.3(g).
"PERSON" means any individual, corporation, body corporate, partnership, joint
venture, association, trust, governmental or regulatory authority, or other
legal entity.
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"PREFERRED SHARES" means all of the issued and outstanding class B preferred
shares in the capital of the Corporation.
"PREMISES" means the premises at which the Business is operated by the
Corporation, being 330, 0000 0xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx.
"PRINCIPAL SHAREHOLDERS" means Xxxx, Xxxxx and Xxxxxxxxxx.
"PRL DEBENTURE" means that convertible debenture granted by the Corporation to
PRL, dated March 16, 1998.
"PROPORTIONATE ESCROW INTEREST" means, for a Vendor, the portion of the
aggregate number of Escrow Shares contributed by such Vendor to the Escrow Fund.
"PURCHASE PRICE" shall have the meaning ascribed thereto in Section 2.2.
"PURCHASED SHARES" means all of the Shares as follows:
(a) the 226,866 Preferred Shares owned beneficially and of record by
Xxxx;
(b) the 226,866 Common Shares owned beneficially and of record by
the Xxxx Trust;
(c) the 100,000 Preferred Shares owned beneficially and of record by
X. Xxx;
(d) the 100,000 Common Shares owned beneficially and of record by
the X. Xxx Trust;
(e) the 126,866 Preferred Shares owned beneficially and of record by
X.X. Xxx;
(f) the 126,866 Common Shares owned beneficially and of record by
the X. Xxx Trust;
(g) the 226,866 Preferred Shares owned beneficially and of record by
Xxxxxx;
(h) the 226,866 Common Shares owned beneficially and of record by
the Xxxxxx Trust;
(i) the 180,000 Preferred Shares owned beneficially and of record by
Huger;
(j) the 180,000 Common Shares owned beneficially and of record by
the Huger Trust;
(k) the 95,000 Preferred Shares owned beneficially and of record by
Xxxxxxxxxx;
(l) the 95,000 Common Shares owned beneficially and of record by the
Xxxxxxxxxx Trust;
(m) the 20,000 Common Shares and 20,000 Preferred Shares owned
beneficially and of record by Xxxxxxx;
(n) the 20,000 Common Shares and 20,000 Preferred Shares owned
beneficially and of record by Xxxxxx;
(o) the 10,000 Common Shares and 10,000 Preferred Shares owned
beneficially and of record by Xxxxxxx; and
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(p) the 111,733 Common Shares and 111,733 Preferred Shares owned
beneficially and of record by PRL.
"PURCHASER'S GROUP" means, after the Time of Closing, the Purchaser, the
Corporation and any Affiliate of the Purchaser or the Corporation.
"RECORDS" means, collectively:
(a) all written, machine readable or electronically stored
information and data including, without limiting the generality
of the foregoing, all books, records, agreements, reports,
plans, drawings, papers, accounting and other documents which
relate to:
(i) the creation, acquisition, or ownership by the Vendors
of the Purchased Shares,
(ii) the acquisition, construction, ownership or operation of
the Assets by the Corporation,
(iii) the conduct of the Business,
(iv) all customer lists relating to the Business, and
(v) the Corporation's title to the Assets; and
(b) all minute books, accounting books and records, tax returns and
records and other books, records, agreements, papers, returns,
assessments, reassessments and documents, whether written,
machine readable or electronically stored, which relate to any
or all of the incorporation, existence or the business or
activities of the Corporation and any or all of the activities
of the Vendors and the Corporation in relation thereto.
"REGISTERED INTELLECTUAL PROPERTY" means all Canadian, United States,
international and foreign:
(a) patents, patent applications (including provisional
applications);
(b) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or
applications related to trademarks;
(c) registered copyrights and applications for copyright
registration; and
(d) any other Company Intellectual Property that is the subject of
an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state,
government or other public legal authority.
"RELATED CONTRACTS" shall have the meaning ascribed thereto in Section 12.2.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the United States Securities Act of 1933, as amended.
"SHAREHOLDER LOANS" means, collectively those amounts owing by the Corporation
to the Vendors as at the date of Closing as follows:
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(a) to Xxxx, the amount of $60,717,72;
(b) to X. Xxx, the amount of $17,114.04; and
(c) to Xxxxxx, the amount of $25,640.55.
"SHARES" means all of the issued and outstanding shares of every class in the
capital of the Corporation.
"TANGIBLE NET WORTH" means the aggregate of all tangible Assets (net of all
reserves and excluding all intangible Assets, including without limitation, all
goodwill and capitalized software) set forth in the Closing Date Balance Sheet,
less all liabilities of any kind (including, without limitation, accounts
payable, royalties payable, warranty reserves, accrued bonuses, accrued
vacation, employee expense obligations, deferred revenue, litigation reserves,
amounts due to related parties, and debt and other liabilities, and excluding
the PRL Debenture) set forth in the Closing Date Balance Sheet determined in
accordance with U.S. GAAP.
"TAX ACT" means the Income Tax Act (Canada).
"THIRD PARTY CLAIM" shall have the meaning ascribed thereto in Section 10.3.
"TIME OF CLOSING" means 10:00 a.m. Calgary time on May 15, 1998 or such other
time and date following satisfaction of the conditions of the Purchaser and the
Vendors as provided in Article 6 as the parties may agree.
"TRUSTEES" means, individually or collectively, as the context may require:
(a) Xxxxxx Xxxx, Xxxxxxx Xxx, and Xxxxx Xxxx, as trustees of the
Xxxx Trust;
(b) Xxxxxxx Xxx, Xxxxxx Xxxx and Xxxxxxxxxxx Xxxxxx, as trustees of
the X. Xxx Trust;
(c) Xxx Xxxx Xxx, Xxxxxxx Xxx and Mu Xxxx Xx, as trustees of the
X. Xxx Trust;
(d) Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxx and Xxxxxxxxxxx Xxxx, as
trustees of the Xxxxxx Trust;
(e) Xxxxxx Xxxxx, Xxxxxx Xxxxxxxxxx and Xxxx Xxxxxxx, as trustees of
the Huger Trust;
(f) Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxx and Xxxxxx Xxxx, as trustees of
the Xxxxxxxxxx Trust.
"TRUSTS" means, individually, or collectively, as the context may require, the
Xxxx Trust, the X. Xxx Trust, the X. Xxx Trust, the Xxxxxx Trust, the Huger
Trust and the Xxxxxxxxxx Trust.
"U.S. GAAP" means the generally accepted accounting principles and practices in
the United States which are applicable on the effective date as at which a
calculation is required to be made in accordance therewith.
"VENDORS' AGENT" shall have the meaning ascribed thereto in Subsection 2.4(i).
"YEAR 2000 COMPLIANT" shall have the meaning ascribed thereto in Subsection
3.5(ff)(xii).
1.2 EXPANDED MEANINGS. Unless the context otherwise necessarily requires:
(a) words used herein importing the singular number only shall
include the plural and vice versa, and words importing the use
of any gender shall include all genders;
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(b) the terms "in writing" or "written" include printing,
typewriting, or any electronic means of communication by which
words are capable of being visually reproduced at a distant
point of reception, including by telecopier;
(c) references to the "parties" herein shall mean the parties to
this Agreement; and
(d) references herein to any agreement or instrument, including this
Agreement, shall be deemed to be references to the agreement or
instrument as varied, amended, modified, supplemented or
replaced from time to time, and any specific references herein
to any legislation or enactment shall be deemed to be references
to such legislation or enactment as the same may be amended or
replaced from time to time.
1.3 AMENDMENT OF AGREEMENT. No supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby.
1.4 WAIVER. No waiver of any of the provisions of this Agreement shall be valid
unless in writing and no such waiver shall constitute nor be deemed to
constitute a waiver of any other provisions (whether or not similar) nor shall
such waiver constitute a continuing waiver unless otherwise expressly provided.
1.5 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Alberta and the federal laws of
Canada applicable therein and the parties hereby irrevocably submit to the
jurisdiction of the courts of the Province of Alberta for all matters arising
out of or in correction with this Agreement or any of the transactions
contemplated hereby.
1.6 CURRENCY. Unless otherwise indicated, all dollar amounts in this Agreement
are expressed in United States funds.
1.7 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into
Articles, Sections, Subsections, Schedules and other subdivisions and the
insertion of headings, is for convenience of reference only and shall not affect
or be utilized in the construction or interpretation hereof. Unless otherwise
stated, all references herein to Articles, Sections, Subsections and Schedules
are to those in or to this Agreement.
1.8 SEVERABILITY. Any Article, Section, Subsection, Schedule or other
subdivision or any other provision of this Agreement which is, is deemed to be,
or becomes void, illegal, invalid or unenforceable shall he severable herefrom
and ineffective to the extent of such voidability, illegality, invalidity or
unenforceability, and shall not invalidate, affect or impair the remaining
provisions hereof, which provisions shall be severable from any void, illegal,
invalid or unenforceable Article, Section, Subsection, Schedule or other
subdivision or provision hereof.
1.9 TIME OF ESSENCE. Time shall be of the essence in this Agreement.
1.10 KNOWLEDGE. Any reference herein to "the best of the knowledge" of any of
the parties will be deemed to mean the actual knowledge of such party and the
knowledge such party would have had after due and reasonable investigation.
1.11 SCHEDULES. The following is a list of the Schedules attached to and forming
part of this Agreement:
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SCHEDULES
Schedule 1.1 - Financial Statements;
Schedule 3.2(e) - Purchase Agreements;
Schedule 3.4(g) - Trust Beneficiaries;
Schedule 3.5(p) - Corporation Changes;
Schedule 3.5(w) - Employees;
Schedule 3.5(y) - Material Agreements, Other Contracts and Agreements;
Schedule 3.5(aa) - Bank Accounts;
Schedule 3.5(bb) - Directors and Officers;
Schedule 3.5(ff)(i) - Intellectual Property;
Schedule 3.5(ff)(iv) - I.P., Tools and Other I.P. Rights;
Schedule 3.5(ff)(x) - Employee and Contractor Moral Rights Waivers;
Schedule 3.5(ff)(xvii) - Sources Code Disclosure;
Schedule 3.5(ff)(xix) - Wares and Services;
Schedule 3.5(hh) - Non-Arm's Length Transactions;
Schedule 5.1(k) - General Release;
Schedule 3.5(mm) - Litigation and Related Matters;
Schedule 5.1(m) - Affiliate Agreement;
Schedule 5.1 (n)(i) - Registration Rights Agreement;
Schedule 5.1(n)(ii) - Investors Representation Certificate; and
Schedule 12.2 - Arbitration Procedure.
The parties agree that the Schedules are hereby incorporated into this Agreement
by reference and shall form part hereof. In the event of a conflict between a
Schedule or Schedules, on the one hand, and this Agreement, on the other hand,
the provisions of this Agreement shall take precedence.
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
2.1 PURCHASE AND SALE OF PURCHASED SHARES. On and subject to the terms and
conditions of this Agreement, at the Time of Closing and with effect at the
Effective Time, the Vendors shall sell and convey to the Purchaser and the
Purchaser shall purchase from the Vendors the Purchased Shares, all of which
shall be free and clear of all Encumbrances of any kind whatsoever at the Time
of Closing, for an amount equal to the Purchase Price.
2.2 PURCHASE PRICE. Subject to any adjustments made pursuant to this Agreement,
the purchase price (the "PURCHASE PRICE") payable by the Purchaser to the
Vendors for the Purchased Shares shall be the sum of $25,000,000.
2.3 PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price shall be satisfied by the issuance by the
Parent to the Purchaser of 378,000 NAI Shares (the "ISSUED NAI
SHARES") and the transfer and delivery by the Purchaser to the
Vendors of 90% of the Issued NAI Shares and the deposit of the
Escrow Shares with the Escrow Agent in accordance with Section
2.4.
(b) The Issued NAI Shares shall be allocated amongst the Vendors in
the following proportions:
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(i) 1.62% to Xxxx;
(ii) 18.68% to the Xxxx Trust;
(iii) 0.72% to X. Xxx;
(iv) 8.23% to the X. Xxx Trust;
(v) 0.91% to X.X. Xxx;
(vi) 10.45% to the X. Xxx Trust;
(vii) 1.62% to Xxxxxx;
(viii) 18.68% to the Xxxxxx Trust;
(ix) 1.29% to Huger;
(x) 14.82% to the Huger Trust;
(xi) 0.68% to Xxxxxxxxxx;
(xii) 7.82% to the Xxxxxxxxxx Trust;
(xiii) 1.79% to Xxxxxxx;
(xiv) 1.79% to Xxxxxx;
(xv) 0.90% to Xxxxxxx; and
(xvi) 10.00% to PRL.
(c) If, on or before the Time of Closing, the NAI Shares as
presently constituted shall be changed into or exchanged for a
different number or kind of shares or other securities of NAI or
of another corporation, whether by reason of conversion,
consolidation, amalgamation, merger, recapitalization,
reclassification, split, reverse split, combination of shares or
otherwise, then there shall be substituted for or added to the
Issued NAI Shares the number or kind of shares or other
securities into which each Issued NAI Share shall be so changed,
exchanged or entitled, as the case may be.
2.4 ESCROW ARRANGEMENTS.
(a) ESCROW FUND - At the Effective Time, without any act of any
Vendor, the Escrow Shares will be deposited into an escrow
account with the Escrow Agent, such deposit to constitute an
escrow fund (the "ESCROW FUND"). The Escrow Fund is to be
governed by the terms set forth herein and maintained at the
Corporation's sole cost and expense.
(b) COMPENSATION - The Escrow Fund shall be available to compensate
the Purchaser and its affiliates for any claim, loss, expense,
liability or other damage (including without limitation legal
fees on a solicitor and his own client basis) to the extent of
the amount of such claim, loss, expense, liability or other
damage (collectively "LOSSES") that the
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Purchaser or any of its affiliates has incurred (or reasonably
anticipates incurring in the case of an extension of the Escrow
Period pursuant to the provisions of Subsection 2.4(c)) by
reason of the breach by:
(i) the Corporation of any representation, warranty,
covenant or agreement of the Corporation contained
herein in which event claims for Losses incurred as a
result shall be satisfied out of the Escrow Fund as a
whole; or
(ii) any or all of the Vendors of any representation,
warranty, covenant or agreement of any or all of the
Vendors contained herein; provided, however, that claims
for Losses incurred as a result of a breach by a Vendor
shall be satisfied solely out of such Vendor's
Proportionate Escrow Interest.
(c) TERMINATION AND DISTRIBUTION OF ESCROW FUNDS - Upon completion
of the Escrow Period, the Escrow shall terminate; provided,
however, that such portion of the Escrow Fund, which, in the
reasonable judgment of the Purchaser, subject to the objection
of a Vendor and the subsequent arbitration of the matter
pursuant to the provisions of Section 12.2, is necessary to
satisfy any unsatisfied Losses specified in any Officer's
Certificate theretofore delivered to the Escrow Agent prior to
termination of the Escrow, shall remain in the Escrow (and the
Escrow only with respect to such claim shall remain in
existence) until such claims have been resolved. On the later of
the completion of the Escrow Period and the date upon which such
claims have been resolved, the Escrow Agent shall deliver to the
appropriate Vendors the remaining portion of the Escrow Fund not
required to satisfy such claims. In the event that Escrow Funds
are being held to satisfy an anticipated claim and no action,
suit, or proceeding has been threatened with respect to such
anticipated claim on or before the date which is 24 months after
the Time of Closing, then the extended Escrow Period shall end
and the remaining portion of the Escrow Fund shall be delivered
by the Escrow Agent to the Vendors. Deliveries of Escrow Shares
to Vendors pursuant to the provisions of this Subsection 2.4(c)
shall be made according to each Vendor's Proportionate Escrow
Interest as certified to the Escrow Agent by the Vendors' Agent.
(d) PROTECTION OF ESCROW FUND - The Escrow Agent shall:
(i) hold and safeguard the Escrow Fund during its existence;
(ii) treat the Escrow Fund as a trust fund in accordance with
the terms of this Agreement and not as the property of
the Purchaser; and
(iii) hold and dispose of the Escrow Fund only in accordance
with the terms hereof.
(e) CLAIM UPON ESCROW FUND - Upon receipt by the Escrow Agent of a
certificate signed by any officer of the Purchaser (an
"OFFICER'S CERTIFICATE"):
(i) stating that the Purchaser or any of its affiliates has
paid or properly accrued or reasonably anticipates that
it will have to pay or accrue Losses; and
(ii) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each
such item was paid or properly accrued, or the basis for
such anticipated liability, and either the nature of the
misrepresentation, breach of warranty or claim or the
litigation matter to which such item is related,
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Page 14 of 67
the Escrow Agent shall, subject to the provisions of
Section 12.2, deliver to the Purchaser out of the Escrow
Fund, as promptly as practicable, that number of Escrow
Shares (rounded up to the nearest whole number of
shares) held in the Escrow Fund equal to such Losses. In
determining the number of Escrow Shares to be paid out
by the Escrow Agent pursuant to this Section 2.4, such
shares shall be valued by the Escrow Agent at the
average closing price of the NAI Shares on NASDAQ as at
the date of Closing. Upon request by the Escrow Agent, a
duly authorized officer of the Parent shall deliver a
certificate to the Escrow Agent as to that closing price
of the NAI Shares.
(f) DEDUCTIBLE - The Purchaser shall not be entitled to receive any
disbursement from the Escrow Fund with respect to any Losses
arising in respect of any individual occurrence or circumstance
unless:
(i) the aggregate amount of all Losses shall exceed $25,000;
or
(ii) the Losses arising from any such individual occurrence
or circumstance shall exceed $10,000.
(g) OBJECTIONS TO CLAIM - At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such
certificate shall be delivered to the Vendors' Agent and for a
period of 15 Business Days after receipt of such Officer's
Certificate by the Vendors' Agent, the Escrow Agent shall make
no delivery to the Purchaser of any Escrow Shares out of the
Escrow Fund pursuant to the provisions of Subsection 2.4(e)
unless the Escrow Agent shall have received written
authorization from the Vendors' Agent to make such delivery.
After the expiration of such 15 Business Day period, the Escrow
Agent shall make delivery of the applicable number of Escrow
Shares (rounded up to the nearest whole number of shares) from
the Escrow Fund in accordance with the provisions of Subsection
2.4(e); provided that no such payment or delivery may be made if
the Vendors' Agent shall object in a written statement to the
claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the
expiration of such 15 Business Day period.
(h) RESOLUTION OF CONFLICTS: ARBITRATION -
(i) In case the Vendors' Agent shall make a written
objection as provided in Subsection 2.4(g) to any claim
or claims made in any Officer's Certificate, the
Vendors' Agent and the Purchaser shall attempt in good
faith to agree upon the rights of the respective parties
with respect to each of such claims. If the Vendors'
Agent and the Purchaser should so agree, then a
memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and distribute
Escrow Shares from the Escrow Fund in accordance with
the terms thereof; and
(ii) if no agreement as set forth in Subsection 2.4(h)(i) can
be reached after good faith negotiation, then either the
Purchaser or the Vendors' Agent may demand arbitration
of the matter (in accordance with the provisions of
Section 12.2) unless the amount of the damage or loss is
at issue in pending litigation with a third party, in
which event such arbitration shall not be commenced
until such amount is ascertained upon the conclusion of
such litigation or both parties agree to
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arbitration. The decision of the Arbitrator to the
validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the
parties to this Agreement and the Escrow Agent shall be
entitled to act in accordance with such decision and
make or withhold payments or deliveries out of the
Escrow Fund in accordance therewith.
(i) VENDORS' AGENT: POWER OF ATTORNEY -
(i) Effective at the Effective Time, and without further act
of any Vendor, Xxxx is hereby appointed by each of the
Vendors as agent and attorney-in-fact (the "VENDORS'
AGENT") for each Vendor on whose behalf any Escrow
Shares were deposited into the Escrow Fund, for and on
behalf of the Vendors, to:
(1) give and receive notices and communications;
(2) authorize delivery to the Purchaser of Escrow
Shares from the Escrow Fund in satisfaction of
claims by the Purchaser;
(3) object to such deliveries;
(4) agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and
comply with orders of courts and awards of
arbitrators with respect to such claims; and
(5) take all actions necessary or appropriate in the
judgment of the Vendors' Agent for the
accomplishment of the foregoing.
Such agency may be changed by the Vendors from time to
time upon not less than 30 days prior express written
notice to the Purchaser; provided that the Vendors'
Agent may not be removed unless holders of a two-thirds
interest in the Escrow Fund agree to such removal and to
the identity, and with the consent, of the substituted
agent. No bond shall be required of the Vendors' Agent,
and the Vendors' Agent shall not receive compensation
for his services. Notices or communications to or from
the Vendors' Agent shall constitute notice to or from
each of the Vendors.
(ii) The Vendors' Agent shall not be liable for any act done
or omitted hereunder as the Vendors' Agent while acting
in good faith and in the exercise of reasonable
judgment. Each Vendor on whose behalf Escrow Shares were
contributed to the Escrow Fund shall jointly and
severally indemnify the Vendors' Agent and hold the
Vendors' Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on
the part of the Vendors' Agent and arising out of or in
connection with the acceptance or administration of the
Vendors' Agent's duties hereunder, including without
limitation the reasonable fees and expenses of any legal
counsel (on a solicitor and his own client basis)
retained by the Vendors' Agent.
(j) ACTIONS OF THE VENDORS' AGENT - A decision, act, consent or
instruction of the Vendors' Agent shall constitute a decision of
all the Vendors for whom a portion of the Escrow Shares
otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each of such
Vendors, and the Escrow Agent and the
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Purchaser may rely upon any such decision, act, consent or
instruction of the Vendors' Agent as being the decision, act,
consent or instruction of each and every such Vendor. The Escrow
Agent and the Purchaser are hereby relieved from any liability
to any Person for any acts done by them in accordance with such
decision, act, consent or instruction of the Vendors' Agent.
(k) THIRD PARTY CLAIMS - The Purchaser shall have the right in its
sole discretion to settle any Third Party Claim; provided,
however that the Purchaser shall in good faith consult with the
Vendors' Agent prior to settling any Third Party Claim.
Notwithstanding the foregoing provisions of this Subsection
2.4(k), any such settlement of a third party claim shall not be
determinative of any disagreement or dispute by the Vendors
relating to the Third Party Claim, or any conflict among the
parties to this Agreement. All such disagreements, disputes and
conflicts, if not resolved by the parties, are to be resolved by
arbitration pursuant to Section 12.2.
(l) ESCROW AGENT'S DUTIES -
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth
herein, and as set forth in any additional written
escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an
officer of the Purchaser and the Vendors' Agent, and may
rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be
liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the
parties or by any other Person, excepting only orders or
process of any courts of law or any decision of the
Arbitrator pursuant to the provisions of Section 12.2,
and is hereby expressly authorized to comply with and
obey orders, judgment or decrees of any court or any
such decision of the Arbitrator. In case the Escrow
Agent obeys or complies with any such order, judgment or
decree of any court, or any such decision of the
Arbitrator, the Escrow Agent shall not be liable to any
of the parties or to any other Person by reason of such
compliance, notwithstanding any such order, judgment,
decree or decision being subsequently reversed,
modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the
parties executing or delivering or purporting to execute
or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration
of any rights, any statute of limitations with respect
to this Agreement or any documents deposited with the
Escrow Agent.
(v) The Escrow Agent may resign at any time upon giving at
least 30 days written notice to the Purchaser and the
Vendors' Agent pursuant to this Agreement;
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provided, however, that no such resignation shall become
effective until the appointment of a successor escrow
agent which shall be accomplished as follows:
(1) the Purchaser and the Vendors' Agent shall use
their best efforts to mutually agree upon a
successor agent within 30 days after receiving
such notice;
(2) if the Purchaser and the Vendors' Agent fail to
agree upon a successor escrow agent within such
time, then the Arbitrator shall have the right
to appoint a successor escrow agent;
(3) the successor escrow agent selected in the
preceding manner shall execute and deliver an
instrument accepting such appointment and it
shall thereupon be deemed the Escrow Agent
hereunder and it shall, without further acts, be
vested with all the estates, properties, rights,
powers, and duties of the predecessor Escrow
Agent as if originally named as Escrow Agent;
and
(4) thereafter, the predecessor Escrow Agent shall
be discharged for any further duties and
liabilities under this Agreement.
2.5 ADJUSTMENTS TO PURCHASE PRICE.
(a) As soon as possible following the Closing but in any event no
more than 30 days after the Time of Closing, the Corporation
shall cause the Closing Date Balance Sheet to be prepared and
delivered to the Purchaser.
(b) If the Tangible Net Worth, as determined by the Closing Date
Balance Sheet, is less than $20,000, then the Purchase Price
will be reduced by the difference between $20,000 and such
Tangible Net Worth amount and the Vendors shall pay to the
Purchaser within 60 days of the delivery of the Closing Date
Balance Sheet, such difference by the delivery out of Escrow to
the Purchaser pursuant to the provisions of Section 2.4 that
number of Escrow Shares equal to such difference.
(c) At any time within 60 days following the delivery of the Closing
Date Balance Sheet by the Corporation to the Purchaser, the
Vendors' Agent, the Purchaser or the Corporation may dispute
(pursuant to the provisions of Section 12.2) any amounts
reflected therein. If no such dispute is referred to arbitration
with such 60 day period, then the Closing Date Balance Sheet
shall be thereupon deemed to be final and conclusive for the
purposes of this Agreement.
2.6 SECTION 116 CERTIFICATE. If either of Xxxxxxx or Xxxxxx fails to deliver to
the Purchaser at or before the Time of Closing a certificate issued pursuant to
Section 116 of the Tax Act in respect of the sale of the Purchased Shares being
sold by that Vendor, containing a certificate limited for that Vendor at least
equal to the Purchase Price payable to such Vendor in respect of his Purchased
Shares, then the number of NAI Shares to be delivered to that Vendor hereunder
may be reduced by a number of NAI Shares (rounded up to the nearest whole number
of shares) equal to the amount of tax for which the Purchaser may be liable as
determined solely by the Purchaser's counsel as provided in Section 116 of the
Tax Act with respect to that Vendor, divided by the closing price of the NAI
Shares on NASDAQ on the day before the date of Closing, with such NAI Shares to
be delivered to the Escrow Agent and to be released to that Vendor upon delivery
to the Purchaser of the Section 116 certificate by that Vendor.
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2.7 BREAK FEE. If, at any time after the execution of this Agreement and prior
to June 30, 1998.
(a) any Person or Persons other than the Purchaser or its Affiliates
acquires:
(i) more than 50% of the outstanding Shares,
(ii) any of the Company's Intellectual Property, other than
in the ordinary course of the Business, or
(b) any Person or Persons other than the Vendors or the Purchaser or
its Affiliates acquires the power to elect any of the directors
of the Corporation; or
(c) the Corporation completes a merger, amalgamation, consolidation,
business combination or similar transaction with any Person or
Persons other than the Purchaser or its Affiliates,
(any one of such events being a "FEE EVENT"), then the Vendors and the
Corporation shall be jointly and severally obligated to pay to the Purchaser a
fee in the amount of $1,250,000 within 10 Business Days of the Fee Event.
2.8 VENDORS' LEGAL AND ACCOUNTING EXPENSES. In the event of Closing, the
Corporation shall pay on behalf of the Vendors all of the reasonable fees and
expenses of Code Xxxxxx Xxxxxxxx, the Vendors' counsel, the Vendor's United
States counsel, and the Vendors' accountants, up to a maximum amount of
$100,000. In the event such payments by the Corporation should cause the
Tangible Net Worth to fall below $20,000, then the Corporation's obligation to
pay such fees and expenses shall be limited to an amount that would cause the
Tangible Net Worth to be $20,000 after such payment, and any such fees and
expenses remaining unpaid, up to the maximum of $100,000, shall be paid by the
Purchaser or the Parent on behalf of the Vendors.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS, THE TRUSTEES
AND THE CORPORATION
3.1 BASIS OF REPRESENTATIONS.
(a) Each Individual Vendor, as to himself and such of the Purchased
Shares owned by him (and not as to any other Vendor or the
Purchased Shares owned by any other Vendor) hereby represents and
warrants to the Purchaser and the Parent that each of the
statements contained in Subsections 3.2(a) through (1),
inclusive, is true and correct as at the time of execution and
delivery of this Agreement by such Individual Vendor, except for
any such statement which expressly speaks as at some other time;
(b) each of the Principal Shareholders hereby jointly and severally
represents and warrants to the Purchaser and the Parent that each
of the statements contained in Subsections 3.2(m) and (n) is true
and correct as at the time of execution and delivery of this
Agreement by the Principal Shareholders, except for any such
statement which expressly speaks as at some other time.
(c) PRL hereby represents and warrants to the Purchaser and the
Parent that each of the statements contained in Section 3.3 with
respect to PRL is true and correct as at the time
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of execution and delivery of this Agreement by PRL, except for
any such statement which expressly speaks as at some other time;
(d) each of the Trusts and the Trustees in their capacities as
Trustees and not in any personal capacity, for and on behalf of
their respective Trust only, and not the other Trusts, hereby
represents and warrants to the Purchaser and the Parent that
each of the statements contained in Section 3.4 with respect to
the Trust of which they are Trustee is true and correct as at
the time of execution and delivery of this Agreement by the
Trustees, except for any such statement which expressly speaks
as at some other time;
(e) each of the Principal Shareholders and the Corporation hereby
jointly and severally represents and warrants to the Purchaser
and the Parent that each of the statements contained in Section
3.5 is true and correct as at the time of execution and delivery
of this Agreement by the Principal Shareholders and the
Corporation, except for any such statement which expressly
speaks as at some other time;
(f) any such statement which expressly speaks as at a time other
than the time of execution and delivery of this Agreement by any
or all of the Vendors, the Trustees and the Corporation was or
will be true and correct as at the time at which such statement
speaks, except to the extent affected by the transactions
contemplated hereby; and
(g) each of such statements will be true and correct at the Time of
Closing except for any such statement which expressly speaks as
at some other time except to the extent affected by the
transactions contemplated hereby,
and each of the Vendors, the Trustees and the Corporation acknowledge that the
Purchaser and the Parent are relying on such representations and warranties in
connection with the purchase of the Purchased Shares and the completion of the
other transactions hereunder.
3.2 REPRESENTATIONS AND WARRANTIES RELATING TO THE INDIVIDUAL VENDORS.
(a) CAPACITY - Each of the Individual Vendors has the capacity to
own the Purchased Shares owned by such Individual Vendor, to
duly enter into this Agreement and to perform his or her
obligations hereunder.
(b) BINDING AND ENFORCEABLE AGREEMENT - This Agreement has been duly
executed and delivered by each of the Individual Vendors and
constitutes a legal, valid and binding obligation of each of the
Individual Vendors enforceable in accordance with its terms.
(c) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by any of the Individual Vendors at or before the Time
of Closing will have been duly executed and delivered by each
such Individual Vendor and shall constitute a legal, valid and
binding obligation of each such Individual Vendor enforceable in
accordance with its terms.
(d) LITIGATION AND RELATED MATTERS - There are no actions, suits,
investigations or proceedings pending or, to the best of the
knowledge of the Individual Vendors threatened against or
affecting the Individual Vendor's Purchased Shares or its
ability to consummate the transactions contemplated hereby, at
law or in equity, or before any arbitrator of any kind, or
before or by any governmental or regulatory authority, domestic
or foreign, and
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the Individual Vendor is not aware of any existing ground on
which any such action or proceeding might be commenced with any
reasonable likelihood of success.
(e) NO OTHER PURCHASE AGREEMENTS - Except as disclosed in Schedule
3.2(e), no Person, other than the Purchaser, has any agreement,
option or commitment or any right or privilege (whether by law,
pre-emptive or contractual), capable of becoming an agreement,
option or commitment for the acquisition from the Individual
Vendor for any or all of the Individual Vendor's Purchased
Shares.
(f) LOANS - None of the Individual Vendors are indebted to the
Corporation and except for the Shareholder Loans, the
Corporation is not indebted to any of the Individual Vendors.
(g) SHAREHOLDINGS OF THE INDIVIDUAL VENDORS - The Individual Vendor
is the sole beneficial and registered owner of such of the
Purchased Shares as follows, with good and marketable title
thereto, free and clear of all Encumbrances and, without
limiting the generality of the foregoing, none of the Purchased
Shares owned by the Individual Vendor are subject to any voting
trust, shareholder agreement or voting agreement other than the
Drag Along Agreement:
NUMBER OF PURCHASED SHARES
VENDOR COMMON SHARES PREFERRED SHARES
Xxxx - 226,866
X. Xxx - 100,000
X.X. Xxx - 126,866
Xxxxxx - 226,866
Huger - 180,000
Xxxxxxxxxx - 95,000
Xxxxxxx 20,000 20,000
Xxxxxx 20,000 20,000
Xxxxxxx 10,000 10,000
TOTAL 40,000 1,005,598
(h) OWNERSHIP BY PURCHASER - Upon completion of the transactions
contemplated by this Agreement, all of the Purchased Shares as
are owned by the Individual Vendor will be transferred and
delivered to the Purchaser free and clear of any and all
Encumbrances.
(i) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement and each and every agreement or document to be
executed and delivered hereunder and the consummation of the
transactions contemplated herein will not:
(i) violate, be in conflict with, result in a breach of,
constitute a default, of cause the acceleration of any
obligation of the Individual Vendor, under:
(A) any agreement, instrument, licence, permit or
authority to which the Individual Vendor is, or
is entitled to be, a party or to which any or
all of its property and its Purchased Shares are
subject,
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(B) any judgment, decree, order, statute, rule or
regulation applicable to the Individual Vendor,
or
(C) to the best of the knowledge of the Individual
Vendor, any provision of law or regulation of
any governmental or regulatory authority or any
judicial or administrative order, award,
judgment or decree applicable to the Individual
Vendor;
(ii) result in the creation of any Encumbrance upon any or
all of the Purchased Shares owned by the Individual
Vendor under any such agreement or instrument; or
(iii) give to any Person any material interest or rights that
have not been waived prior to the date hereof, including
preferential rights of purchase of any part of the
Purchased Shares owned by the Individual Vendor or to
the best of the knowledge of the Individual Vendor (if
the Individual Vendor is not a Principal Shareholder),
any property of the Corporation or any right of
termination, cancellation or acceleration under any such
agreement, instrument, license, permit or authority.
(j) REGULATORY APPROVALS TO TRANSACTIONS - No permits, licenses,
certifications, approvals, consents, orders-in-council,
legislation or other action of any governmental or regulatory
authority (except for the certificates referred to in Section
2.6) are required in Canada for the execution, delivery or
performance by the Individual Vendor of this Agreement or the
transactions contemplated herein, or for the execution, delivery
or performance by the Individual Vendor of any other agreement
contemplated hereunder to be delivered by the Individual Vendor
at or before the Time of Closing or the transactions
contemplated therein.
(k) INTERMEDIARY FEES - No commission or other remuneration is
payable by the Purchaser or will be payable by the Purchaser to
any broker, agent or other intermediary who has acted for the
Individual Vendor in connection with the sale of the Purchased
Shares and the transactions herein contemplated.
(l) RESIDENCY - None of the Individual Vendors is a non-resident of
Canada for the purposes of Section 116 of the Tax Act, and each
of the Individual Vendors is a resident of Alberta, except for:
(i) Xxxxxx, who is a resident of the State of Illinois; and
(ii) Xxxxxxx, who is a resident of the State of Hawaii.
(m) NO FURTHER INFORMATION - The Principal Shareholders have no
information or knowledge of any facts relating to the Business,
the Assets or the Corporation not disclosed in writing to the
Purchaser which might reasonably be expected to have a material
adverse effect on the Business, the Company Intellectual
Property or the Corporation.
(n) CONTINUANCE - The Principal Shareholders are not aware of any
fact or circumstance that would reasonably be expected to
interfere with the Corporation being continued pursuant to the
laws of the Province of Nova Scotia.
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3.3 REPRESENTATIONS AND WARRANTIES RELATING TO THE CORPORATE VENDOR.
(a) ORGANIZATION - PRL is a duly organized and valid and subsisting
corporation under the laws of the Province of Alberta.
(b) CORPORATE POWER AND AUTHORITY - PRL has all necessary power,
authority and capacity to enter into this Agreement and perform
its obligations hereunder, and to own the Purchased Shares owned
by it.
(c) CORPORATE ACTION - At the Time of Closing, PRL will have taken
all necessary actions, steps and corporate or other proceedings
to approve or authorize, validly and effectively, the entering
into and the execution, delivery and performance of this
Agreement and the sale and transfer of the Purchased Shares
owned by it to the Purchaser.
(d) BINDING AND ENFORCEABLE AGREEMENT - This Agreement has been duly
authorized, executed and delivered by PRL and constitutes a
legal, valid and binding obligation of PRL, enforceable in
accordance with its terms.
(e) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by PRL at or before the Time of Closing will have been
duly executed and delivered by PRL and shall constitute a legal,
valid and binding obligation of PRL, enforceable in accordance
with its terms.
(f) NO OTHER PURCHASE AGREEMENTS - No Person, other than the
Purchaser, has any agreement, option or commitment or any right
or privilege (whether by law, pre-emptive or contractual),
capable of becoming an agreement, option or commitment for the
acquisition from PRL for any or all of the Purchased Shares.
(g) SHAREHOLDINGS OF PRL - PRL is the sole beneficial and registered
owner of 111,733 Common Shares and 111,733 Preferred Shares,
with good and marketable title thereto, free and clear of all
Encumbrances and, without limiting the generality of the
foregoing, none of the Purchased Shares owned by PRL are subject
to any voting trust, shareholder agreement or voting agreement
other than the Drag Along Agreement.
(h) LOANS - PRL is not indebted to the Corporation and the
Corporation will not be indebted to PRL as at the Time of
Closing.
(i) OWNERSHIP BY PURCHASER - Upon completion of the transactions
contemplated by this Agreement, all of the Purchased Shares as
are owned by PRL will be transferred and delivered to the
Purchaser free and clear of any and all Encumbrances.
(j) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement and each and every agreement or document to be
executed and delivered hereunder and the consummation of the
transactions contemplated herein will not:
(i) violate, be in conflict with, result in a breach of,
constitute a default, or cause the acceleration of any
obligation of PRL under:
(A) any agreement, instrument, licence, permit or
authority to which PRL is or is entitled to be,
a party or to which any or all of its property
and its Purchased Shares are subject,
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Page 23 of 67
(B) any provision of the articles, by-laws or
resolutions of the board of directors (or any
committee thereof) or shareholders of PRL,
(C) any judgment, decree, order, statute, rule or
regulation applicable to PRL, or
(D) to the best of the knowledge of PRL, any
provision of law or regulation of any
governmental or regulatory authority or any
judicial or administrative order, award,
judgment or decree applicable to PRL;
(ii) result in the creation of any Encumbrance upon any or
all of the Purchased Shares owned by PRL under any such
agreement or instrument; or
(iii) give to any Person any material interest or rights that
have not been waived prior to the date hereof, including
preferential rights of purchase of any part of the
Purchased Shares owned by PRL or, to the best of the
knowledge of PRL, any property of the Corporation or any
right of termination, cancellation or acceleration under
any such agreement, instrument, license, permit or
authority.
(k) REGULATORY APPROVALS TO TRANSACTIONS - No permits, licenses,
certifications, approvals, consents, orders-in-council,
legislation or other action of any governmental or regulatory
authority are required in Canada for the execution, delivery or
performance by PRL of this Agreement or the transactions
contemplated herein, or for the execution, delivery or
performance by PRL of any other agreement contemplated hereunder
to be delivered by PRL at or before the Time of Closing or the
transactions contemplated therein.
(l) INTERMEDIARY Fees - No commission or other remuneration is
payable by the Purchaser or will be payable by the Purchaser to
any broker, agent or other intermediary who has acted for PRL
in connection with the sale of the Purchased Shares and the
transactions herein contemplated.
(m) RESIDENCY - PRL is a resident of Alberta and a taxable Canadian
corporation within the meaning of the Tax Act.
(n) LITIGATION AND RELATED MATTERS - There are no actions, suits,
investigations or proceedings pending or threatened against or
affecting PRL's Purchased Shares or its ability to consummate
the transactions contemplated hereby, at law or in equity, or
before any arbitrator of any kind, or before or by any
governmental or regulatory authority, and PRL is not aware of
any existing ground on which any such action or proceeding might
be commenced with any reasonable likelihood of success.
(o) RELATIONSHIP BETWEEN PRL AND THE CORPORATION - Other than as a
shareholder of the Corporation, PRL has no interest in the
Corporation and the Corporation, its officers, directors and
shareholders have no beneficial interest in PRL.
3.4 REPRESENTATIONS AND WARRANTIES RELATING TO THE TRUSTS.
(a) CAPACITY - The Trust is a validly existing trust formed under
the laws of the Province of Alberta, the Trustees are duly
appointed as the only trustees thereof and the Trustees have the
power and authority, on behalf of the Trust, to own legal title
to the Purchased Shares,
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and the Trustees have the power and authority, on behalf of the
Trust, to duly enter into this Agreement and to perform the
obligations of the Trust hereunder.
(b) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement and each and every agreement or document to be
executed and delivered hereunder and the consummation of the
transactions contemplated herein will not:
(i) violate, be in conflict with, result in a breach of,
constitute a default, or cause the acceleration of any
obligation of the Trust, under:
(A) any agreement, instrument, licence, permit or
authority to which the Trust is, or are entitled
to be, a party or to which any or all of its
property and its Purchased Shares are subject,
(B) any judgment, decree, order, statute, rule or
regulation applicable to the Trust, or
(C) to the best of the knowledge of the Trustees any
provision of law or regulation of any
governmental or regulatory authority or any
judicial or administrative order, award,
judgment or decree applicable to the Trust;
(ii) result in the creation of any Encumbrance upon the
Purchased Shares owned by that Trust under any such
agreement or instrument; or
(iii) give to any Person any material interest or rights that
have not been waived prior to the date hereof, including
preferential rights of purchase of any part of the
Purchased Shares owned by that Trust or, to the best of
the knowledge of the Trustees, any property of the
Corporation, or any right of termination, cancellation
or acceleration under any such agreement, instrument,
license, permit or authority.
(c) BINDING AND ENFORCEABLE AGREEMENT - The Trustees have the power,
authority and capacity to execute and deliver this Agreement and
to sell the Purchased Shares held by the Trust on behalf of the
Trust, and this Agreement has been duly executed and delivered
by each of the Trustees and constitutes a legal, valid and
binding obligation of the Trust enforceable in accordance with
its terms.
(d) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by the Trustees and the Trust at or before the Time of
Closing will have been duly executed and delivered by the
Trustees, on behalf of the Trust, and shall constitute a legal,
valid and binding obligation of the Trust enforceable in
accordance with its terms.
(e) NO OTHER PURCHASE AGREEMENTS - No Person, other than the
Purchaser, has any agreement, option or commitment or any right
or privilege (whether by law, pre-emptive or contractual),
capable of becoming an agreement, option or commitment for the
acquisition from the Trust for any or all of the Purchased
Shares.
(f) SHAREHOLDINGS OF THE TRUST - The Trust is the registered owner
of such of the Purchased Shares as follows, with good and
marketable title thereto, free and clear of all Encumbrances
and, without limiting the generality of the foregoing, none of
the Purchased
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Shares owned by the Trust are subject to any voting trust,
shareholder agreement or voting agreement other than the Drag
Along Agreement:
TRUST NUMBER OF PURCHASED SHARES
----- --------------------------
Xxxx Trust 226,866 Common Shares
X. Xxx Trust 100,000 Common Shares
X. Xxx Trust 126,866 Common Shares
Xxxxxx Trust 226,866 Common Shares
Huger Trust 180,000 Common Shares
Xxxxxxxxxx Trust 95,000 Common Shares
TOTAL 955,598 Common Shares
(g) BENEFICIARIES - Schedule 3.4(g) sets forth the names of such of
the Vendors as are beneficiaries of the Trust.
(h) OWNERSHIP - Upon completion of the transactions contemplated by
this Agreement, all of the Purchased Shares as are owned by the
Trust will be transferred and delivered to the Purchaser, free
and clear of any and all Encumbrances.
(i) LITIGATION AND RELATED MATTERS - There are no actions, suits,
investigations or proceedings pending or threatened against or
affecting such of the Purchased Shares held by the Trust or the
Trustees' ability to consummate the transactions contemplated
hereby, at law or in equity, or before any arbitrator of any
kind, or before or by any governmental or regulatory authority,
domestic or foreign, and none of the Trustees are aware of any
existing ground on which any such action or proceeding might be
commenced with any reasonable likelihood of success.
(j) REGULATORY APPROVALS TO TRANSACTIONS - No permits, licenses,
certifications, approvals, consents, orders-in-council,
legislation or other action of any governmental or regulatory
authority are required in Canada for the execution, delivery or
performance by any or all of the Trustees and the Trusts of this
Agreement or the transactions contemplated herein, or for the
execution, delivery or performance by any or all of the Trustees
and the Trusts of any other agreement contemplated hereunder to
be delivered by any or all of the Trust at or before the Time of
Closing or the transactions contemplated therein.
(k) INTERMEDIARY FEES - No commission or other remuneration is
payable by the Purchaser or will be payable by the Purchaser or
will be payable to any broker, agent or other intermediary who
has acted for the Trustees and the Trust in connection with the
sale of the Purchased Shares and the transactions herein
contemplated.
(l) RESIDENCY - Each of the Trusts is a resident of Alberta and a
resident of Canada within the meaning of the Tax Act.
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3.5 REPRESENTATIONS AND WARRANTIES RELATING TO THE CORPORATION
(a) ORGANIZATION - The Corporation is a duly organized and valid and
subsisting corporation under the laws of the Province of
Alberta.
(b) CORPORATE POWER AND AUTHORITY - The Corporation has all
necessary power, authority and capacity to enter into this
Agreement and perform its obligations hereunder, to own, lease,
licence or otherwise hold, as applicable, the Assets and to
carry on the Business as presently conducted and is validly
registered wherever necessary under the federal and provincial
laws of Canada and any other jurisdiction in which the failure
to be so registered would have a material adverse effect on the
Business or the tangible Assets, and in the case of the Company
Intellectual Property, in any other jurisdiction in North
America in which the failure to be so registered would have a
material adverse effect.
(c) CORPORATE ACTION - At the Time of Closing, the Corporation will
have taken all necessary actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively,
the entering into and the execution, delivery and performance of
this Agreement and the sale and transfer of the Purchased Shares
to the Purchaser.
(d) BINDING AND ENFORCEABLE AGREEMENT - This Agreement has been duly
authorized, executed and delivered by the Corporation and
constitutes a legal, valid and binding obligation of the
Corporation, enforceable in accordance with its terms.
(e) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by the Corporation at or before the Time of Closing
will have been duly executed and delivered by the Corporation
and shall constitute a legal, valid and binding obligation of
the Corporation, enforceable in accordance with its terms.
(f) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement by the Vendors and the Corporation and each and every
agreement or document to be executed and delivered hereunder and
the consummation of the transactions contemplated herein will
not:
(i) violate, be in conflict with, result in a breach of,
constitute a default, or cause the acceleration of any
obligation of the Corporation, under:
(A) any agreement, instrument, licence, permit or
authority to which the Corporation is, or is
entitled to be, a party or to which any or all
of its property and the Shares are subject,
(B) any provision of the articles, by-laws or
resolutions of the board of directors (or any
committee thereof) or shareholders of the
Corporation,
(C) any judgment, decree, order, statute, rule or
regulation applicable in Canada to the
Corporation, or
(D) any provision of law or regulation of any
governmental or regulatory authority or any
judicial or administrative order, award,
judgment or decree applicable in Canada to the
Corporation;
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(ii) to the best of the knowledge of the Corporation with
respect to the Vendors' execution and delivery of this
Agreement, result in the creation of any Encumbrance
upon the Assets under any such agreement or instrument;
or
(iii) to the best of the knowledge of the Corporation with
respect to the Vendors' execution and delivery of this
Agreement, give to any Person any material interest or
rights that have not been waived prior to the date
hereof, including preferential rights of purchase of any
part of the Shares or the Assets, or any right of
termination, cancellation or acceleration under any such
agreement, instrument, license, permit or authority.
(g) SHARE CAPITAL OF THE CORPORATION - The authorized share capital
of the Corporation consists of:
(i) an unlimited number of Class A common voting shares; and
(ii) an unlimited number of Class B preferred shares,
of which 1,117,331 Class A common voting shares, and 1,117,331
Class B preferred shares (and no more) are currently issued and
outstanding, and all of which, including the Purchased Shares,
have been duly and validly authorized and issued by the
Corporation and are outstanding as fully paid and
non-assessable.
(h) SHAREHOLDERS OF THE CORPORATION - As of the date hereof, and
immediately prior to the Time of Closing the following Persons
are, and will be, the sole registered owners of all of the
Shares, to the best of the knowledge of the Corporation, free
and clear of all Encumbrances and, without limiting the
generality of the foregoing, none of the Shares are subject to
any voting trust, shareholder agreement or voting agreement
other than the Drag Along Agreement:
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NUMBER OF COMMON NUMBER OF
REGISTERED OWNER SHARES PREFERRED SHARES
---------------- ------ ----------------
Xxxxxx Xxxx 226,866
Xxxxxxx Xxx 100,000
Xxx Xxxx Xxx 126,866
Xxxxxxxxxxx Xxxxxx 226,866
Xxxxxx Xxxxx 180,000
Xxxxxx Xxxxxxxxxx 95,000
Xxxxxx Xxxxxx 20,000 20,000
Xxxxxxxx Xxxxxxx 20,000 20,000
Xxx Xxxxxxx 10,000 10,000
Xxxx Trust 226,866
X. Xxx Trust 100,000
X. X. Xxx Trust 126,866
Xxxxxx Trust 226,966
Xxxxxxxxxx Trust 95,000
Huger Trust 180,000
PRL Resources Inc. 111,733 111,733
TOTAL 1,117,331 1,117,331
(i) OWNERSHIP BY PURCHASER - To the best of the knowledge of the
Corporation, upon completion of the transactions contemplated by
this Agreement, all of the Purchased Shares will be transferred
and delivered to the Purchaser, free and clear of any and all
Encumbrances.
(j) OPTIONS OR CONVERTIBLE SECURITIES - No Person has any agreement,
option, commitment, or any right or privilege (whether by law,
preemptive or contractual) capable of becoming an agreement,
option or commitment (including any such right or privilege
under convertible securities, warrants or convertible
obligations of any nature) for:
(i) the purchase, subscription, allotment or issuance of, or
conversion into, any of the unissued Shares or any other
securities of the Corporation; or
(ii) the purchase or other acquisition from the Corporation
of any of its undertaking, Business or Assets, other
than in the ordinary course of the Business, and except
pursuant to the agreements listed in Schedule 3.5(y).
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(k) SUBSIDIARIES - The Corporation does not own any subsidiaries or
shares or any other interest in any other Person, nor is the
Corporation subject to any agreements of any nature to acquire
any subsidiary or shares or any other interest in any other
Person or to acquire or lease any other business operations and
will not prior to the Time of Closing acquire, or agree to
acquire, any subsidiary or shares or any other interest in any
other Person or any other business operations without the prior
express written consent of the Purchaser.
(l) PARTNERSHIPS OR JOINT VENTURES - Except as the agreements listed
in Schedule 3.5(y) may create such, the Corporation is not a
partner or participant in any partnership, joint venture,
profit-sharing arrangement or other association of any kind and
is not party to any agreement under which the Corporation agrees
to carry on any part of the Business or any other activity in
such manner or by which the Corporation agrees to share any
revenue or profit with any other Person.
(m) BOOKS AND RECORDS - The books and records of the Corporation
fairly present, in accordance with Canadian GAAP, the financial
position of the Corporation and all Assets and undertakings, all
liabilities, including contingent liabilities and shareholders
equity accounts as at the date hereof, and all material
financial transactions of the Corporation relating to the
Business have been accurately recorded in such books and
records.
(n) FINANCIAL STATEMENTS - The Financial Statements of the
Corporation have been prepared in accordance with Canadian GAAP
on a basis consistent with that of previous years and present
fairly the Assets, liabilities and the financial position as at
the dates indicated and the results of operation of the
Corporation for the periods indicated and no material adverse
change in such financial position or such results of operations
has occurred since the date thereof.
(o) MINUTE BOOKS - In all material respects, the corporate records
and minute books of the Corporation contain complete and
accurate minutes of all meetings and resolutions of the
directors (and any committees thereof) and shareholders of the
Corporation, and the share certificate books, register of
shareholders, register of transfers and register of directors of
the Corporation are complete and accurate in all material
respects.
(p) NO CHANGES - Except as set forth in Schedule 3.5(p), since
February 28, 1998 there has not been, occurred or arisen any:
(i) transaction by the Corporation, except in the ordinary
course of business as conducted by the Corporation on
that date;
(ii) capital expenditure or commitment by the Corporation, in
excess of $10,000 individually or $25,000 in the
aggregate;
(iii) destruction of, damage to or loss of any material
tangible Assets (which includes any medium in which the
Company Intellectual Property resides), Business or
customer of the Corporation (whether or not covered by
insurance);
(iv) labour trouble or claim of wrongful discharge or other
unlawful labour practice or action;
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(v) change in accounting methods or practices (including any
change in depreciation or amortization, policies or
rates) by the Corporation;
(vi) revaluation for accounting purposes by the Corporation
of any of the Assets;
(vii) declaration, setting aside or payment of a dividend or
other distribution with respect to the Shares, or any
direct or indirect redemption, purchase, redemption or
other acquisition by the Corporation of any of its
securities;
(viii) increase in the salary or other compensation payable or
to become payable by the Corporation to any of its
officers, directors, employees or advisors, or the
declaration, payment or commitment or obligation of any
kind for the payment, by the Corporation, of a bonus or
other additional salary or compensation to any such
person except as otherwise contemplated by this
Agreement other than normal course of business salary
increases in connection with ongoing yearly reviews or
promotions (none of which individually exceeds 10% of
the previous year's salary);
(ix) acquisition, sale or transfer of any Assets, except in
the ordinary course of business as conducted on that
date, and except pursuant to the agreements listed in
Schedule 3.5(y);
(x) amendment or termination of any material contract,
agreement or license to which the Corporation is a party
or by which it is bound, except such amendments or
terminations as may have been made in the ordinary
course of business, or on a reasonable commercial basis;
(xi) loan by the Corporation to any Person or entity (other
than (A) loans to all employees aggregating to no more
that $5,000 and (B) expense advances to employees, all
of which are immaterial in any amount and are issued in
the normal course of business), incurring by the
Corporation of any indebtedness, guaranteeing by the
Corporation of any indebtedness, issuance or sale of any
debt securities of the Corporation or guaranteeing of
any debt securities of others;
(xii) waiver or release of any right or claim of the
Corporation, including any write-off or other compromise
of any account receivable of the Corporation in excess
of $ 10,000;
(xiii) the commencement or notice or, to the best knowledge of
the Corporation, threat of commencement of any lawsuit
or proceeding against or investigation of the
Corporation or its affairs;
(xiv) notice of any claim of ownership by a third party of the
Company Intellectual Property or of infringement by the
Corporation of any third party's intellectual property
rights;
(xv) issuance or sale by the Corporation of any of its Shares
or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities, except:
(A) the 111,733 Common Shares and 111,733
Preferred Shares as were issued to PRL pursuant
to the terms of the PRL Debenture, and
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(B) the Common Shares and Preferred Shares which
were issued in connection with a reorganization
of the Corporation on March 23, 1998;
(xvi) change in pricing or royalties set or charged by the
Corporation;
(xvii) any event or condition of any character that has or
could be reasonably expected to have a material adverse
impact on the Corporation and its Business;
(xviii) to the best of the knowledge of the Principal
Shareholders and the Corporation, any event or action
taken by the Corporation that could be reasonably
expected to interfere with the Parent's or Purchaser's
ability to account for the purchase and sale
contemplated hereby as a pooling of interests; or
(xix) negotiation or agreement, oral or written, by the
Corporation or any officer or employees thereof to do
any of the things described in Subsections 3.5(p)(i) to
(xviii), inclusive, (other than negotiations with the
Purchaser and its representatives regarding the
transactions contemplated by this Agreement).
(q) POOLING OF INTERESTS - To the knowledge of the Corporation and
the Principal Shareholders, based on consultation with the
Corporation's independent accountants, neither the Corporation
nor any of its directors, officers, Affiliates or shareholders
has taken or agreed to take any action which would preclude the
Parent's or Purchaser's ability to account for the purchase and
sale contemplated by this Agreement as a pooling of interests
under U.S. GAAP.
(r) ONLY BUSINESS - The Business is the only business which has been
or is currently conducted by the Corporation and the tangible
Assets and the Intellectual Property described in Schedule
3.5(iv) are sufficient to carry on the Business in the ordinary
course as conducted on the date hereof.
(s) ACCOUNTS RECEIVABLE - All Accounts Receivable have been created
in the course of bona fide business transactions by the
Corporation and to the best of the knowledge of the Corporation
are valid, enforceable and fully collectible and none of the
Vendors nor the Corporation have any reason to believe that any
Account Receivable of the Corporation will not be paid in
accordance with its respective terms of payment or is subject to
any setoff or counterclaim.
(t) NO UNDISCLOSED LIABILITIES OF THE CORPORATION - Subject to the
compliance by the Corporation with the terms of the agreements
listed in Schedules 3.5(y) and 3.5(ff)(i), the Corporation does
not have any liabilities, indebtedness, expense, claim,
deficiency, guarantee or endorsement of any type whatsoever in
excess of $5,000 individually or $15,000 in the aggregate,
whether accrued, absolute, contingent, matured, unmatured or
other and whether or not of the nature normally required to be
disclosed for financial statement purposes in accordance with
Canadian GAAP, except pursuant to the claim disclosed on
Schedule 3.5(mm).
(u) INDEBTEDNESS - Except as disclosed in the Financial Statements,
the Corporation does not have outstanding, and is under no
obligation to create or issue, any bonds, debentures, mortgages,
promissory notes or other indebtedness maturing more than one
year after the date of their original creation or issuance.
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(v) TAXES -
(i) save for the requirement to file Income Tax Returns, the
Corporation has in a due and timely manner, filed all
reports and returns respecting taxes, duties, royalties,
and other fees. charges and levies of every nature and
kind, and all information and data in connection
therewith, required to be filed by it with any taxing or
regulatory authority to whom the Corporation and the
Business are subject;
(ii) the Corporation has paid all taxes, duties, royalties,
and other fees, charges and levies, and any interest,
penalties and fines in connection therewith, properly
due and payable, and has paid all of same in connection
with all known assessments, reassessments and
adjustments;
(iii) other than taxes and other such levies incurred in the
ordinary course of business and not yet due, no other
taxes, duties, royalties, or other fees, charges or
levies, nor any interest, penalties and fines have been
claimed by any governmental or regulatory authority or
are known to any of the Vendors or the Corporation to be
due and owing by the Corporation or are to the best of
the knowledge of the Principal Shareholders and the
Corporation, pending or threatened (including all tax
instalments) or by reason of the transactions herein
contemplated will become due and owing by the
Corporation and there are no matters of dispute or under
discussion with any governmental or regulatory
authority, relating to taxes, duties, royalties or other
fees, charges, levies, interest, penalties or fines
asserted by such authority;
(iv) the Corporation has withheld all amounts required to be
withheld including, without limiting the generality of
the foregoing, all amounts required to be withheld under
the Tax Act, for employee deductions, unemployment
insurance, the Canada Pension Plan and Goods and
Services Tax payable under the Excise Tax Act (Canada)
and any other amounts required by law to be withheld
from any payments, made to non-residents and any of its
officers, directors and employees, and has paid the same
to the proper taxing authority or receiving offices;
(v there are no agreements, waivers (including a waiver in
respect of time within which a reassessment may be made
by any taxing authority) or other arrangements providing
for any extension of time with respect to the filing of
any tax return by, or payment of any tax, governmental
charge or deficiency against, the Corporation; and
(v) there are no actions, suits, proceedings, investigations
or claims threatened or pending against the Corporation
in respect of taxes, governmental charges or
assessments, or any other matters under discussion with
any governmental or regulatory authority relating to
taxes, charges or assessments asserted by any such
governmental or regulatory authority.
(w) EMPLOYEE COMMITMENTS -
(i) The employee records provided to the Purchaser
accurately set forth the names, duration of service,
salary or other terms of remuneration and unused
vacation entitlement for the employees of the
Corporation;
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except as set forth in Schedule 3.5(w), the Corporation
is not a party to or bound by:
(A) any written or oral employment, service,
pension, employee benefit agreement or
collective bargaining agreement or other
agreement with or respecting its employees or
bound by or obligated to make any contributions
under any pension plan or arrangement or any
retirement income plan, deferred profit sharing
plan or similar plan or arrangement, or any
plan, program or other arrangement providing for
medical services or coverage, dental care and
life insurance, or
(B) any agreements or arrangements that contain any
severance pay or post-employment liabilities or
obligations, or
(C) any employment or consulting agreement, contract
or commitment with an employee or individual
consultant or salesperson or consulting or sales
agreement, contract or commitment with a firm or
other organization, or
(D) any agreement or plan, including, without
limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased,
or the vesting of benefits of which will be
accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or
the value of any of the benefits of which will
be calculated on the basis of any of the
transactions contemplated by this Agreement;
(iii) except as set forth in Schedule 3.5(w), since February
28, 1998, the Corporation has not hired any new
employees, changed or agreed to change the terms of
employment of any existing employees of the Corporation,
or paid or agreed to pay any bonus or other payment to
any employee;
(iv) there are no existing or, to the best of the knowledge
of the Vendors and the Corporation, threatened, labour
strikes or labour disputes, grievances, controversies or
other labour troubles affecting the Corporation or the
Business;
(v) the Corporation has complied with all laws, rules,
regulations and orders applicable to it relating to
employment, including those relating to wages, hours,
collective bargaining, occupational health and safety,
workers' hazardous materials, employment standards, pay
equity and workers' compensation;
(vi) there are no outstanding charges or complaints against
the Corporation relating to unfair labour practices or
discrimination or under any legislation relating to
employees; and
(vii) the Corporation has paid in full all amounts owing under
provincial legislation relating to workers' compensation
and the workers' compensation claims experience of the
Corporation would not permit a penalty reassessment
under such legislation.
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(x) REAL PROPERTY - Other than the leasehold interest in the
Premises, the Corporation does not own or have any right, title
or interest in any real property.
(y) LEASES - Except as set forth in Schedule 3.5(y) and Schedule
3.5(hh), the Corporation is not a party to any lease or
agreement in the nature of a lease, whether as lessor or lessee,
and, except as expressly set forth in Schedule 3.5(y), each such
lease is in good standing and in full force and effect without
amendment thereto and the Corporation is not in breach of any of
the material covenants, conditions or agreements contained in
any such lease.
(z) TITLE TO TANGIBLE ASSETS - The Corporation owns its tangible
Assets free and clear of any and all Encumbrances except as
described in the Material Agreements.
(aa) BANK ACCOUNTS - Schedule 3.5(aa) contains a true and complete
list showing the name of each bank, trust company or similar
institution in which the Corporation has accounts or safe
deposit boxes and the names of all persons authorized to draw
thereon or to have access thereto.
(bb) DIRECTORS AND OFFICERS - Schedule 3.5(bb) sets forth the names
and titles of all directors and officers of the Corporation
immediately prior to the Time of Closing.
(cc) POWERS OF ATTORNEY - The Corporation has not granted to any
Person a general or special power of attorney for the
Corporation.
(dd) GUARANTEES - Except as set forth in Schedule 3.5(y), the
Corporation is not a party to or bound by any agreement of
guarantee, indemnification, assumption or endorsement or any
other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any Person or other
entity.
(ee) INSIDER DEBT - None of the directors, former directors,
officers, former officers, shareholders, former shareholders or
employees of the Corporation or any Person or corporation not
dealing at arm's length (as such term is construed under the Tax
Act) with any of the foregoing is indebted to the Corporation.
(ff) INTELLECTUAL PROPERTY.
(i) Schedule 3.5(ff)(i) sets forth all the Intellectual
Property that is owned by or exclusively licensed to the
Corporation (the "Company Intellectual Property").
Except as set forth on Schedule 3.5(ff)(i), each item of
Company Intellectual Property is free and clear of any
liens or Encumbrances. The Corporation owns,
exclusively, the copyrights to copyrighted works that
form part of the Company Intellectual Property.
(ii) To the extent that any Intellectual Property has been
developed or created by any Person other than the
Corporation for which the Corporation has, directly or
indirectly, paid, the Corporation has a written
agreement with such Person with respect thereto and the
Corporation thereby has obtained ownership of, and is
the exclusive owner of, all such Intellectual Property
that might otherwise vest in such Person.
(iii) Except pursuant to agreements set forth in Schedule
3.5(y), the Corporation has not transferred ownership of
or granted any licence of or right to use or authorized
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the retention of any rights to use any Intellectual
Property that is or was Company Intellectual Property,
to any other person, except for end user licence
agreements with respect to object code granted to
customers in the ordinary course of business, and there
are no exclusive distribution or other such rights that
have been granted by the Corporation except to Articon
Information Systems GmbH ("Articon") pursuant to the
Articon Agreement.
(iv) Schedule 3.5(ff)(iv) contains a list of, and the same is
all of, the Intellectual Property used in and/or
necessary to the conduct of the Business as it currently
is conducted including, without limitation, the design,
development, manufacture, use, import and sale of the
products, technology and services of the Corporation
(including products, technology or services currently
under development).
(v) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses
and agreements listed in Schedules 3.5(ff)(i), 3.5(y)
and 3.5(ff)(iv) include all contracts, licenses and
agreements, to which the Corporation is a party with
respect to any Intellectual Property. No person other
than the Corporation has ownership rights to
improvements made by the Corporation in Intellectual
Property which has been licensed to the Corporation and
which forms part of the Ballista Software.
(vi) Schedules 3.5(ff)(i), 3.5(y) and 3.5(ff)(iv) list all
contracts, licenses and agreements between the
Corporation and any other person wherein or whereby the
Corporation has agreed to, or assumed, any obligation or
duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or
liability or provide a right of rescission with respect
to the infringement or misappropriation by the
Corporation or such other person of the Intellectual
Property of any person other than the Corporation (and
copies of same have been provided to Purchaser).
(vii) Except with respect to the dispute set forth in Schedule
3.5(mm), the operation of the business of the
Corporation as it currently is conducted, including but
not limited to the Corporation's design, development,
use, import, manufacture and sale of the products,
technology or services (including products, technology
or services currently under development) of the
Corporation does not infringe or misappropriate the
Intellectual Property of any person, violate the rights
of any person (including rights to privacy or
publicity), or to the Corporation's knowledge constitute
unfair competition or trade practices under the federal
laws of Canada applicable in Alberta or, to the
Corporation's actual knowledge without investigation,
under the laws of any other jurisdiction. The
Corporation has not received notice from any Person
claiming that such operation or any act, product,
technology or service (including products, technology or
services currently under development) of the Corporation
infringes or misappropriates the Intellectual Property
of any Person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the
Corporation aware of any basis therefor).
(viii) There are no contracts, licenses or agreements between
the Corporation and any other person with respect to
Company Intellectual Property under which there is any
dispute known to the Corporation regarding the scope of
such agreement, or performance under such agreement
including with respect to any payments to be made or
received by the Corporation thereunder.
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(ix) To the knowledge of the Principal Shareholders and the
Corporation, no Person is infringing or misappropriating
any Company Intellectual Property.
(x) The Corporation has taken reasonable steps necessary to
protect the Corporation's rights in confidential
information and trade secrets of the Corporation or
provided by any other person to the Corporation. Without
limiting the foregoing, the Corporation has, and
enforces, a policy requiring each employee, consultant
and contractor other than ministerial employees to
execute proprietary information, confidentiality and
assignment agreements substantially in the Corporation's
standard forms, and all material current and former
employees, consultants and contractors of the
Corporation have executed such an agreement. Waivers of
moral rights in favour of the Corporation have been
obtained with respect of all elements of the Company
Intellectual Property created by independent contractors
and employees of the Corporation, which waivers have
been provided to the Purchaser and are summarized in
Schedule 3.5(ff)(x).
(xi) Except for the Agreements set forth in Schedules
3.5(ff)(i), 3.5(y) and 3.5(ff)(iv), no Company
Intellectual Property or product, technology or service
of the Corporation is subject to any proceeding or
outstanding decree, order, judgment, agreement or
stipulation that restricts in any manner the use,
transfer or licensing thereof by the Corporation or may
affect the validity, use or enforceability of Company
Intellectual Property.
(xii) Software programs being the subject matter of the
Company Intellectual Property will record, store,
process, calculate and present calendar dates falling on
and after (and if applicable, spans of time including)
January 1, 2000. The Ballista Software does not
calculate any information dependent on or relating to
dates, other than the expiry time clocks. None of the
Company Intellectual Property will lose functionality
with respect to the introduction of records containing
dates falling on or after January 1, 2000 (collectively,
"YEAR 2000 COMPLIANT"). All software used with or in
conjunction with the Ballista Software are Year 2000
Compliant.
(xiii) The Corporation has no Registered Intellectual Property,
except for the trademark application made for the
trademark "Ballista".
(xiv) No royalty or other fee is required to be paid by the
Corporation to any other Person with respect to the
Ballista Software, nor is any royalty or fee payable
(other than fees as have been paid) by the Corporation
to any other Person with respect to the OSF-Motif 2.0
Source License dated January 20, 1997, as set forth in
Schedule 3.5(ff)(i).
(xv) The computer systems of the Corporation contain at least
North American industry standard anti-virus software and
the Corporation will continue to take all steps and
implement all procedures in accordance with industry
standard to, so far as reasonably possible, ensure that
such systems are free from viruses and will remain so
until the Time of Closing.
(xvi) The Ballista Software performs in all material respects
in accordance with the functions and descriptions set
forth in the user manual for the Ballista Software,
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a copy of which has been provided to the Purchaser and
initialed by the parties hereto for future
identification.
(xvii) Except as specified in Schedule 3.5(ff)(xvii), the
Corporation has not and will not provide the source code
for the Ballista Software to any third party prior to
the Time of Closing, directly or indirectly, by license
transfer, sale, or escrow or otherwise permit any third
party to reverse engineer, disassemble or decompile the
Ballista Software to create such source code (except
decompilation permitted by law), and such Persons who
are identified in Schedule 3.5(ff)(xvii) are subject to
confidentiality agreements with the Corporation in
respect of such source code.
(xviii) The Corporation has designed three software programs
called "Sniper", "Decoynet" and "Watchtower" which
designs were conceived by employees or officers of the
Corporation and were not designed by appropriating the
Intellectual Property of any third party.
(xix) The Corporation has the exclusive right to use the
trademark "Ballista" in Canada in relation to the wares
and services set forth in Schedule 3.5(ff)(xix) and has
not received notice of any violation of any third
party's trademark in relation to the use of "Ballista"
in relation to the wares and services set forth in
Schedule 3.5(ff)(xix), except for a claim by Carnegie
Mellon University which is described in Schedule
3.5(mm).
(gg) SHAREHOLDER LOANS - Except for the Shareholder Loans, the
Corporation is not indebted to any of the directors, former
directors, officers, former officers, shareholders, former
shareholders or employees of the Corporation or any Person
(other than Millennium Systems Canada Inc.) not dealing at arm's
length (as such terms is construed under the Tax Act) with any
of the foregoing.
(hh) NON-ARM'S LENGTH TRANSACTIONS - Except as disclosed in Schedule
3.5(hh), no director, officer, shareholder or employee of the
Corporation and no entity that is an Affiliate or Associate of
one or more of such individuals:
(i) owns, directly or indirectly, in whole or in part, any
property that the Corporation uses in the operation of
the Business; or
(ii) has any cause of action or other claim whatsoever
against the Corporation in connection with the Business,
except for any liabilities reflected in the Financial
Statements and claims in the ordinary and normal course
of business.
(ii) GOVERNMENT PROGRAMS - No agreements, loans, funding arrangements
or assistance programs are outstanding in favour of the
Corporation from any governmental or regulatory authority, and,
to the best of the knowledge of the Principal Shareholders and
the Corporation no basis exists for any governmental or
regulatory authority to seek payment or repayment from the
Corporation of any amount or benefit received, or to seek
performance of any obligation of the Corporation, under any such
program.
(jj) COMPLIANCE WITH COVENANTS - The Corporation has, or has caused
to be, complied with, performed, observed and satisfied all
material covenants, terms, conditions, obligations and
liabilities required to be performed, observed, and satisfied by
it, whether express or implied, which have arisen under the
provisions of:
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(i) the Material Agreements; and
(ii) any other contracts, agreements, indentures or other
instruments to which the Corporation is a party,
and all such contracts, agreements, indentures and other
instruments are valid and enforceable, each in accordance with
its respective terms, and no party to any of them is in default
thereunder or in breach thereof or would, with the giving of
notice or the lapse of time or both be in breach or default in
any material respect.
(kk) NO DEFAULTS - The Corporation is not in breach or default, has
not received any notice of default or violation, and the
Principal Shareholders and the Corporation are not aware, after
due inquiry, of any potential or threatened notice of alleged
default or violation, of the provisions of any Material
Agreement or any other contracts, agreements, indentures or
instruments to which the Corporation is a party,
(ll) COMPLIANCE WITH LAWS - All laws, regulations, and orders of any
governmental or regulatory authority having jurisdiction over
the Corporation or its properties are being, and have been,
complied with in all material respects by the Corporation.
(mm) LITIGATION AND RELATED MATTERS - Except for the actions set
forth in Schedule 3.5(mm), there are no actions, suits,
investigations or proceedings pending or, to the best of the
knowledge of the Principal Shareholders and the Corporation,
threatened against or affecting the Corporation, at law or in
equity, or before any arbitrator of any kind, or before or by
any governmental or regulatory authority, domestic or foreign,
and, after due inquiry, the Principal Shareholders and the
Corporation are not aware of any existing ground on which any
such action or proceeding might be commenced with any reasonable
likelihood of success. The Corporation is not subject to any
outstanding orders, writs, injunctions, decrees, judgments,
awards, determinations, work orders or directions of any court,
arbitrator or governmental or regulatory authority, the failure
to comply with which can reasonably be expected to have a
material adverse effect on the Corporation's conduct of the
Business or its ownership or operation of the Assets.
(nn) INSURANCE - The Corporation currently holds no insurance.
(oo) ENVIRONMENTAL -
(i) The Corporation has been and is in compliance with all
applicable laws, statutes, ordinances, by-laws,
regulations, policies, orders, directives and decisions
rendered by any governmental or regulatory authority
relating to the protection of the environment, the
failure to comply with which would have a material
adverse effect on the Business or the financial
condition of the Corporation; and
(ii) there have been no orders issued, environmental audits,
evaluations, assessments or investigations conducted or
other proceedings taken or, to the best of the knowledge
of the Principal Shareholders and the Corporation,
threatened against or relating to the Corporation, its
officers or directors, the Business or the Assets under
any applicable environmental protection legislation.
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(pp) OPERATING PERMITS AND LICENSES - There are no permits, licenses,
consents, authorizations, approvals, privileges, waivers,
exemptions, orders (inclusionary or exclusionary) or other
concessions required in connection with the ownership and
operation of the Assets and the conduct of the Business.
(qq) OBLIGATIONS TO CUSTOMERS AND SUPPLIERS - The Corporation is not
required to provide any bonding or other financial security
arrangements in connection with any transactions with any of its
customers or suppliers in the ordinary course of the Business.
(rr) WARRANTIES AND INDEMNITIES - There are no existing warranty and
indemnity claims in excess of $5,000 made against the
Corporation.
(ss) SIGNIFICANT CUSTOMERS - The Business is not dependent for more
than 15% of its gross revenues on any single customer.
(tt) PAID UP CAPITAL - The paid up capital of the Purchased Shares
for the purposes of the Tax Act is $286,921 (Cdn.).
(uu) WORKPLACE EVENTS - Neither the Corporation nor the Business is
subject to any Workers' Compensation Board or similar authority
or workers' compensation legislation or regulations.
(vv) OTHER OUTSTANDING AGREEMENTS - The Corporation does not have
outstanding any guarantees or credit support agreements and does
not have any outstanding agreement (including employment
agreements), contract or commitment, whether written or oral, of
any nature or kind whatsoever, except:
(i) the Material Agreements;
(ii) agreements, contracts and commitments in the ordinary
course of business;
(iii) service contracts on office equipment;
(iv) the employment and service agreements described in
Schedule 3.5(w); and
(v) the other contracts and agreements described in Schedule
3.5(y).
(ww) PARTICULARS OF SCHEDULES - All particulars set out in the
Schedules referred to in this Article 3 are true, complete and
accurate and not misleading in any material respect.
(xx) GST REGISTRATION - The Corporation is a registrant for the
purposes of the Excise Tax Act (Canada) whose registration
number is R102251972.
(yy) JURISDICTION - The Corporation conducts business in Alberta
only.
(zz) RESIDENCY - The Corporation is a taxable Canadian corporation
within the meaning of the Tax Act.
(aaa) NOT AN OFFERING CORPORATION - The Corporation is not offering,
nor has it offered, any of its securities to the public within
the meaning of applicable federal or provincial laws and is not
a reporting issuer thereunder.
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(bbb) PRIVATE COMPANY - The Corporation is a "private company" within
the meaning of the Securities Act (Alberta).
(ccc) AGREEMENTS, CONTRACTS AND COMMITMENTS - The Corporation does not
have, is not a party to nor is bound by:
(i) any fidelity or surety bond or completion bond,
(ii) any lease of personal property having a value
individually in excess of $25,000 except as set forth in
Schedule 3.5(y),
(iii) any agreement of indemnification or guarantee except as
set forth in Schedules 3.5(y), 3.5(ff)(i) and
3.5(ff)(iv);
(iv) any agreement, contract or commitment relating to
capital expenditures and involving future payments in
excess of $25,000,
(v) any agreement, contract or commitment relating to the
disposition or acquisition of Assets or any interest in
any business enterprise outside the ordinary course of
the Business,
(vi) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments
relating to the borrowing of money or extension of
credit, including guarantees referred to in clause (ii)
hereof,
(vii) any purchase order or contract for the purchase of raw
materials involving $25,000 or more other than purchases
in the ordinary course of the Business,
(viii) any construction or development contracts except as set
forth in Schedules 3.5(y), 3.5(ff)(i) and 3.5(ff)(iv);
(ix) any distribution, joint marketing or development
agreement except as set forth in Schedules 3.5(y),
3.5(ff)(i) and 3.5(ff)(iv); or
(X) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without
penalty within thirty (30) days except as set forth in
Schedules 3.5(y), 3.5(ff)(i) and 3.5(ff)(iv).
(ddd) CONSENTS - The Corporation has obtained, or will obtain prior to
the Time of Closing, all necessary consents, waivers and
approvals of parties to any contracts as may be required in
connection with the purchase and sale of the Purchased Shares
except those that, if not obtained after reasonable efforts,
would not individually or in the aggregate be material to the
Corporation.
3.6 NON-WAIVER. No investigations made by or on behalf of the Purchaser at any
time shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by any or all of the Vendors, the
Trustees and the Corporation herein or pursuant hereto unless disclosure of the
fact at issue is expressly made in writing in a Schedule or a certificate of the
Vendors or of the Corporation delivered at or before the Time of Closing in
accordance with this Agreement and such disclosure contains no material untrue
statement.
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3.7 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
agreements, representations, warranties and indemnities of each of the Vendors,
the Trustees, the Beneficiaries and the Corporation contained in this Agreement
shall survive Closing of the purchase and sale herein provided for and,
notwithstanding Closing or any documents delivered or investigations made in
connection therewith, shall continue in full force and effect for the benefit of
the Purchaser.
3.8 LIMITATION AN REMEDIES FOR BREACH OF VENDORS' AND CORPORATION'S COVENANTS,
REPRESENTATIONS AND WARRANTIES. Notwithstanding the provisions of Section 3.7,
but without prejudice to the Vendors' obligations pursuant to Section 2.7 and
Article 11, the Purchaser shall not be entitled to bring any action or assert
any claim based upon the breach or untruth of any of the covenants contained in
this Agreement or the representations or warranties contained in Sections 3.2 to
3.5, inclusive after the first anniversary of the Time of Closing unless, on or
prior to such anniversary, written notice of such claim setting forth the
details thereof shall have been delivered by the Purchaser to the Vendors. The
Purchaser's remedies for any such breach and/or claim arising out of this
Agreement (except for claims arising pursuant to Section 2.7 and claims arising
after the first anniversary of the Time of Closing pursuant to Article 11)
shall be in all respects limited to recovery by the Purchaser against the Escrow
while the Escrow Shares are held by the Escrow Agent, in accordance with Section
2.4, provided that nothing contained in this Agreement shall limit the right and
remedies as are otherwise available to the Purchaser in the event of fraud on
the part of any of the Vendors or the Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT
4.1 BASIS OF REPRESENTATIONS.
(a) The Purchaser and the Parent jointly and severally represent and
warrant to the Vendors that each of the statements contained in
Section 4.2 is true and correct as at the time of execution and
delivery of this Agreement by the Purchaser, except for any such
statement which expressly speaks as at some other time;
(b) the Parent represents and warrants to the Vendors that each of
the statements contained in Section 4.3 is true and correct as
at the time of execution and delivery of this Agreement by the
Parent, except for any such statement which expressly speaks as
at some other time;
(C) any such statement which expressly speaks as at a time other
than the time of execution and delivery of this Agreement by the
Purchaser or the Parent was or will be true and correct as at
the time at which such statement speaks; and
(d) each of such statements will be true and correct at the Time of
Closing except for any such statement which expressly speaks as
at some other time, except to the extent affected by the
transactions contemplated hereby,
and each of the Purchaser and the Parent acknowledges that the Vendors are
relying on such representations and warranties in connection with the sale of
the Purchased Shares and the completion of the other transactions hereunder.
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4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
(a) DUE INCORPORATION AND ORGANIZATION OF PURCHASER - The Purchaser
is a corporation duty organized, validly existing and in good
standing under the laws of the State of Delaware, and is a
wholly-owned subsidiary of the Parent.
(b) CORPORATE POWER AND AUTHORITY - The Purchaser has all necessary
power, authority and capacity to enter into and perform its
obligations pursuant to the terms of this Agreement and is duly
qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have
a material adverse effect on the ability of the Purchaser to
consummate the transactions contemplated by this Agreement.
(c) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement and each and every agreement or document to be
executed and delivered hereunder and the consummation of the
transactions contemplated herein will not in any material
respect violate, nor be in conflict with, result in a breach of,
constitute a default or cause the acceleration of any obligation
of the Purchaser under:
(i) any of the terms and provisions of the constating
documents or by-laws of the Purchaser or resolutions of
the shareholders or directors thereof;
(ii) any judgment, decree, order, or award of any court,
arbitrator or governmental or regulatory authority; or
(iii) any applicable law, statute, rule or regulation
applicable to the Purchaser,
and which would materially adversely affect the ability of the
Purchaser to fulfil and comply with the terms and provisions
hereof.
(d) BINDING AND ENFORCEABLE AGREEMENT - This Agreement has been duly
executed and delivered by the Purchaser and this Agreement
constitutes a legal, valid and binding obligation of the
Purchaser enforceable in accordance with its terms.
(e) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by the Purchaser at or before the Time of Closing will
have been duly executed and delivered by the Purchaser and shall
constitute a valid and binding obligation of the Purchaser
enforceable in accordance with its terms.
(f) REGULATORY APPROVALS OF TRANSACTIONS - No permits, licenses,
certifications, approvals, consents, orders-in-council,
legislation or other action of any governmental or regulatory
authority are required for the execution, delivery or
performance by the Purchaser and the Parent of this Agreement or
the transactions contemplated herein, or for the execution,
delivery or performance by the Purchaser of any other agreement
contemplated hereunder to be delivered by the Purchaser at or
before the Time of Closing or the transactions contemplated
therein, except for such consents, approvals, orders,
authorizations, registrations, declarations and filings as may
be required under applicable federal, foreign, provincial and
state securities (or related) laws and such other consent,
authorizations, filings, approvals and registrations which if
not obtained or made would not be material to the Purchaser or
have a material adverse effect on the ability of the Purchaser
to complete the transactions contemplated hereby.
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4.3 REPRESENTATIONS AND WARRANTIES OF PARENT.
(a) DUE INCORPORATION AND ORGANIZATION OF PARENT - The Parent is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) CORPORATE POWER AND AUTHORITY - The Parent has all necessary
power, authority and capacity to enter into and perform its
obligations pursuant to the terms of this Agreement and is duly
qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have
a material adverse effect on the ability of the Parent to
consummate the transactions contemplated by this Agreement.
(c) NO CONFLICTING INTERESTS - The execution and delivery of this
Agreement and each and every agreement or document to be
executed and delivered hereunder and the consummation of the
transactions contemplated herein will not in any material
respect violate, nor be in conflict with, result in a breach of,
constitute a default or cause the acceleration of any obligation
of the Parent under:
(i) any of the terms and provisions of the constating
documents or by-laws of the Parent or resolutions of the
shareholders or directors thereof;
(ii) any judgment, decree, order, or award of any court,
arbitrator or governmental or regulatory authority; or
(iii) any applicable law, statute, rule or regulation
applicable to the Parent,
and which would materially adversely affect the ability of the
Parent to fulfil and comply with the terms and provisions
hereof.
(d) BINDING AND ENFORCEABLE AGREEMENT - This Agreement has been duly
executed and delivered by the Parent and this Agreement
constitutes a legal, valid and binding obligation of the Parent
enforceable in accordance with its terms.
(e) BINDING EFFECT OF OTHER AGREEMENTS - At the Time of Closing,
each agreement contemplated to be executed and delivered
hereunder by the Parent at or before the Time of Closing will
have been duly executed and delivered by the Parent and shall
constitute a valid and binding obligation of the Parent
enforceable in accordance with its terms.
(f) REGULATORY APPROVALS OF TRANSACTIONS - No permits, licenses,
certifications, approvals, consents, orders-in-council,
legislation or other action of any governmental or regulatory
authority are required for the execution, delivery or
performance by the Parent of this Agreement or the transactions
contemplated herein, or for the execution, delivery or
performance by the Parent of any other agreement contemplated
hereunder to be delivered by the Parent at or before the Time of
Closing or the transactions contemplated therein, except for
such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable
federal, foreign, provincial and state securities (or related)
laws and such other consent, authorizations, filings, approvals
and registrations which if not obtained or made would not be
material to the Parent or have a material adverse effect on the
ability of the Parent to complete the transactions contemplated
hereby.
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(g) SEC FILINGS; MATERIAL ADVERSE EFFECT - The Parent has filed all
forms, reports and documents required to be filed by parent with
the SEC since January 1, 1996, and has made available to the
Vendors such forms, reports and documents in the form filed with
the SEC. All such required forms, reports and documents
(including those that Parent may file subsequent to the date
hereof) are referred to herein as the "PARENT SEC REPORTS". As
of their respective dates, the Parent SEC Reports:
(i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports; and
(ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary
in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading.
Except as disclosed in the Parent SEC Reports filed by the
Parent and publicly available prior to the date of this
Agreement, there has not been any material adverse effect with
respect to Parent.
(h) PARENT FINANCIAL STATEMENTS - Each of the audited consolidated
financial statements of the Parent (including any related notes
and schedules thereto) including (or incorporated by reference)
in its Annual Report on Form 10-K for the year ended December
31, 1997, is accurate and complete and fairly presents, in
conformity with U.S. GAAP applied on a consistent basis through
the periods involved (except as may be noted therein), and in
conformity with the SEC's Regulation S-X, the consolidated
financial position of the Parent and its consolidated
subsidiaries as of its date and the consolidated results of
operations and changes in financial position for the period then
ended.
(i) NAI Shares. The Issued NAI Shares, when issued in accordance
with the terms and provisions of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and
will not be subject to any preemptive or other statutory right
of stockholders and will be issued in compliance with applicable
United States federal and state securities laws, and in
compliance with securities laws applicable in the Province of
Alberta.
4.4 NON-WAIVER. No investigations made by or on behalf of any or all of the
Vendors at any time shall have the effect of waiving, diminishing the scope of
or otherwise affecting any representation or warranty made by the Purchaser or
the Parent herein or pursuant hereto, unless disclosure of the fact at issue is
expressly made in writing in a Schedule or certificate of the Parent or of the
Corporation delivered at or before the Time of Closing in accordance with this
Agreement and such disclosure contains no material untrue statement.
4.5 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
agreements, representations, warranties and indemnities of the Purchaser and the
Parent contained in this Agreement shall survive Closing of the purchase and
sale herein provided for and, notwithstanding Closing or any documents delivered
or investigations made in connection therewith, shall continue in full force and
effect for the benefit of the Vendors.
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4.6 LIMITATION ON PRINCIPALS' VENDORS' REMEDIES FOR BREACH OF PURCHASES AND
PARENT'S REPRESENTATION AND WARRANTIES. Notwithstanding the provisions of
Section 4.5, but without prejudice to the Purchaser's obligations pursuant to
Section 5.2(b), the Vendors shall not be entitled to bring any action or assert
any claim based upon the breach or untruth of any of the representations or
warranties contained in Section 4.2 or Section 4.3 after the first anniversary
of the Time of Closing unless, on or prior to such anniversary, written notice
of such claim setting forth the details thereof shall have been delivered by the
Vendors to the Purchaser and the Parent.
ARTICLE 5
COVENANTS OF THE VENDORS, THE CORPORATION,
AND THE PURCHASER
5.1 COVENANTS OF THE VENDORS. Each of the Vendors and the Corporation covenants
and agrees with the Purchaser, during the period from the date hereof to the
Time of Closing, as set forth below.
(a) NO SHOPPING - The Vendors and the Corporation agree that they
shall not, nor shall they permit any of their respective
Affiliates, agents, consultants, advisors or representatives to
solicit, initiate, encourage, or participate in any discussions
or negotiations with any third party concerning:
(i) any sale of the Assets, or any portion thereof other
than in the ordinary course of the Business;
(ii) any sale of the Purchased Shares, or any portion
thereof; or
(iii) any merger, amalgamation, consolidation, business
combination or similar transaction involving the
Corporation.
(b) CONTINUANCE TO NOVA SCOTIA - The Vendors shall and shall cause
the Corporation to, and the Corporation shall, initiate the
steps and proceedings necessary to continue the Corporation
pursuant to the laws of the Province of Nova Scotia, on terms
and conditions and pursuant to such documentation as is
satisfactory to the Purchasers' counsel, acting reasonably, and
will provide to the Purchaser such assistance as may be
requested by the Purchaser following closing to complete such
continuance.
(c) EXAMINATION AND INVESTIGATION - Immediately after the execution
and delivery of this Agreement and prior to the Time of Closing,
the Vendors and the Corporation shall permit employees, advisors
and representatives of the Purchaser full and complete access to
all facilities and premises and all current and historical
Records and information of every nature and kind within either
of the Vendors' or the Corporation's possession or control which
relate to:
(i) the acquisition, development, construction, operation,
maintenance, or ownership of any of the Assets or the
Business;
(ii) the incorporation, organization, operations, or
financial position of the Corporation; and
(iii) the acquisition or ownership of the Purchased Shares,
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for the purposes of reviewing the Records and information and
such employees, advisors, and representatives shall be permitted
to make copies of such records and information as they may deem
advisable. The Vendors and the Corporation shall use their best
efforts to make available to the Purchaser any pertinent
information that is possessed by a third party or which is
relevant to Subsections 5.1(c)(i), 5.1(c)(ii) OR 5.1(c)(iii),
(d) DELIVERY OF BOOKS AND RECORDS - At the Time of Closing there
shall be delivered to the Purchaser, by the Vendors or as
directed by the Vendors, all of the Records of and relating to
the Corporation and the Business. The Purchaser agrees that it
will preserve the Records to be delivered to it for a period of
six years from the date of Closing, or for such longer period as
is required by any applicable law, and will permit the Vendors
or their authorized representatives reasonable access thereto in
connection with the affairs of the Vendors relating to their
matters, but the Purchaser shall not be responsible or liable to
the Vendors for or as a result of any accidental loss or
destruction of or damage to any such Records.
(e) CONDUCT OF BUSINESS - The Vendors shall and shall cause the
Corporation to, and the Corporation shall:
(i) operate and maintain the Business in a good and
business-like manner in the ordinary course thereof so
as to:
(A) maintain and enhance the goodwill of the
Business,
(B) preserve and protect the Assets and rights of
the Corporation under the Material Agreements,
(C) maintain and enhance the Corporation's
relationship with its suppliers and customers,
and
(D) keep available the services of its present
officers and employees;
(ii) take all action within their control to ensure that the
representations and warranties of the Vendors, the
Trustees, and the Corporation hereunder are true and
correct at the time indicated for such representations
and warranties;
(iii) promptly advise the Purchaser of any facts that come to
their attention which would cause any of the Vendors',
Trustees' and the Corporation's representations and
warranties herein to be untrue in any material respect;
(iv) promptly advise the Purchaser in writing of any material
adverse change in the Business, the Assets or the
Corporation;
(v) ensure that the Corporation does not make any purchase,
sale or lease of Assets with a total sale price or
purchase price, as the case may be, of more than $5,000
in the aggregate without the prior express written
consent of the Purchaser;
(vi) ensure that the Corporation does not create, incur or
assume any long-term debt or create any Encumbrance upon
any of the Assets not in the ordinary course of the
Business or guarantee or otherwise become liable for the
obligations of any other Person or make any loans or
advances to any Person;
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(vii) ensure that the Corporation does not declare or pay any
dividends on the Shares, redeem or repurchase any Shares
in the capital of the Corporation, or make any other
distributions in respect of the securities of the
Corporation;
(viii) ensure that the Corporation does not hire any new
employees, change the terms of employment of any of the
existing employees of the Corporation or pay any bonus
or other payment to any employee, without the prior
express verbal or written consent of the Purchaser;
(ix) maintain all of the tangible Assets in the same
condition as they now exist, normal wear and tear and
depreciation excepted, shall not sell, lease or
otherwise dispose of any of the Assets except in the
ordinary course of the Business;
(x) maintain the books, records and accounts of the
Corporation in the ordinary course of the Business and
record all transactions on a basis consistent with
Canadian GAAP;
(xi) ensure that the Corporation does not take any action to
amend its constating documents or its by-laws;
(xii) ensure that the Corporation does not take any action
which is out of the ordinary course of the Business
without the prior express written consent of the
Purchaser; and
(xiii) maintain existing policies of insurance and shall give
all notices and present all claims under all policies of
insurance in a due and timely fashion.
(f) REGULATORY CONSENTS - The Vendors shall use their reasonable
commercial efforts to obtain or cause the Corporation to obtain,
and the Corporation shall use its reasonable commercial efforts
to obtain at or prior to the Time of Closing, from all
appropriate federal, provincial, state, municipal or other
governmental or regulatory authorities, the licenses, permits,
consents, approvals, certificates, registrations and
authorizations required to effect the transactions contemplated
herein, except for those transactions contemplated in the
Registration Rights Agreement which licences, permits, consents,
approvals, certificates, registrations and authorizations
required by the Registration Rights Agreement will be obtained
in accordance with the terms of that agreement.
(g) CONTRACTUAL CONSENTS - The Vendors shall use their reasonable
commercial efforts to give or obtain or cause the Corporation to
give or obtain and the Corporation shall use its reasonable
commercial efforts to obtain, at or prior to the Time of Closing
the notices, consents and approvals required to give effect to
the transactions contemplated herein.
(h) TRANSFER OF SHARES - At or before the Time of Closing, the
Vendors shall use their best efforts to take and to cause the
Corporation to take, and the Corporation shall use its best
efforts to take, all necessary steps and corporate proceedings
to be taken in order to permit the Purchased Shares to be duly
transferred to the Purchaser, free and clear of all
Encumbrances.
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(i) DISCHARGE LIABILITIES - The Vendors shall cause the Corporation
to pay and discharge, and the Corporation shall pay and
discharge, the liabilities of the Corporation in the ordinary
course of the Business except those contested in good faith by
the Corporation.
(j) RESIGNATION OF OFFICERS AND DIRECTORS - At or before the Time of
Closing, the Vendors shall cause each officer and director of
the Corporation, to submit his written resignation as a director
or officer of the Corporation, effective at the Time of Closing.
(k) RELEASES - At the Time of Closing, each of the Vendors shall
execute and deliver to the Corporation and the Purchaser, a
release, in substantially the form set forth in Schedule 5. 1
(k).
(l) POOLING OF INTEREST - None of the Vendors and the Corporation
shall commit any act or omission that they are informed by the
Purchaser or the Parent could be reasonably expected to
interfere with the Parent's or the Purchaser's ability to
account for the purchase and sale contemplated hereby as a
pooling of interests pursuant to U.S. GAAP, and the Corporation
and the Vendors shall use their reasonable commercial efforts to
cause the purchase and sale contemplated hereby to be accounted
for as a pooling of interests.
(m) AFFILIATE AGREEMENTS AND RELEASES -
(i) Prior to the Time of Closing, the Corporation shall
deliver to the Parent a written list, identifying all
Persons who are, as at the date of this Agreement, an
Affiliate of the Company (each, a "COMPANY AFFILIATE")
within the meaning of Rule 145 promulgated under the
Securities Act.
(ii) At or prior to the Time of Closing, the Vendors and the
Corporation shall cause each Company Affiliate to:
(A) execute and deliver an Affiliate Agreement in
the form attached as Schedule 5. 1 (m); and
(B) execute and deliver a General Release in
substantially the form attached as Schedule 5.
l(k) with such amendments as the Purchaser's
counsel may reasonably require to such form.
(n) REGISTRATION RIGHTS AGREEMENT AND INVESTORS REPRESENTATION
CERTIFICATE - At or prior to the Time of Closing, each of the
Vendors shall execute and deliver a:
(i) Registration Rights Agreement, in the form attached as
Schedule 5. l(n)(i); and
(ii) Investors Representation Certificate, in the form
attached as Schedule 5. 1 (n)(ii).
(o) BENEFICIARIES RATIFICATION - At or before the Time of Closing,
the Vendors who are beneficiaries of the Trusts as set forth in
Schedule 3.4(g)shall execute and deliver a letter confirming the
Trustees' authority to execute this Agreement and to perform the
obligations of the Trusts and Trustees hereunder.
(p) SHAREHOLDER OPTION AGREEMENTS - At or before the Time of
Closing, the Option Holders pursuant to those Purchase
Agreements described in Schedule 3.2(e) shall either terminate
those agreements or execute and deliver an acknowledgement
agreeing to the substitution
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of Issued NAI Shares for the Option Shares (defined therein)
upon completion of the transactions contemplated by this
Agreement, and releasing the Parent and the Purchaser for any
matter arising out of the Option.
(q) CONDITIONS OF CLOSING - Each of the Vendors and the Corporation
shall use their best efforts to cause all of the conditions for
the benefit of the Vendors or the Purchaser to be fulfilled at
or before the Time of Closing.
5.2 PURCHASER'S AND PARENT'S COVENANTS. The Purchaser and Parent covenant and
agree with the Vendors, during the period from the date hereof to the Time of
Closing, as set forth below.
(a) TRANSFER OF SHARES - At or before the Time of Closing, the
Parent and the Purchaser shall cause all necessary steps and
corporate proceedings to be taken in order to permit the
Purchased Shares to be duly transferred to the Purchaser.
(b) CONFIDENTIALITY - In the event that the purchase and sale of the
Purchased Shares contemplated herein is not completed, the
Parent and the Purchaser agree that they shall not, in any
manner whatsoever:
(i) use the Confidential Information for any purpose
including, without limitation their personal benefit or
the benefit of any third party;
(ii) charge or receive, any direct or indirect payments by
way of trade of services, compensation or fees from
third party for use of the Confidential Information; or
(iii) copy or otherwise reproduce or render capable of
reproduction by any means whatsoever all or part of the
Confidential Information.
The Purchaser and the Parent further agree that they will not
disclose the Confidential Information to any third party
including publishing or otherwise communicating to any Person,
in any form, the Confidential Information.
(c) The restrictions set forth in Subsection 5.2(b) shall not apply
to any part of the Confidential Information which:
(i) is at the time of disclosure to the Purchaser or the
Parent or thereafter becomes a part of the public domain
through no violation of this Agreement;
(ii) was in the lawful possession of the Purchaser or the
Parent prior to its disclosure to either of them by the
Vendors or the Corporation.
(iii) is hereafter lawfully acquired by the Parent or the
Purchaser through a third party which, to the best of
the Parent's or Purchaser's knowledge, is not under an
obligation of confidence to the Corporation and which
third party was not in a contractual or fiduciary
relationship with the Corporation;
(iv) is disclosed following receipt of the express written
consent of the Corporation to such disclosure being
made; or
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(v) is required by law or requested by a court of competent
jurisdiction, tribunal, administrative or regulatory
body or by a stock exchange having jurisdiction over the
Parent or the Purchaser to be disclosed.
(d) RETURN OF CONFIDENTIAL INFORMATION - In the event that the
purchase and sale of the Purchased Shares herein provided for is
not completed, the Parent and the Purchaser agree, on demand, to
return to the Corporation all Confidential Information,
including correspondence, records, specifications, software
source code, models, notes, reports and other documents and any
copies thereof. The Parent and the Purchaser shall confirm in
writing of their compliance with their obligations hereunder.
5.3 ARTICON AGREEMENT. The Corporation has executed a letter of intent (the
"ARTICON AGREEMENT") between ARTICON Information Systems GmbH ("Articon") and
the Corporation on or about December 11, 1997 (Germany time) with respect to,
among other things, the Corporation appointing Articon as its reseller in
Germany and other regions. The Vendors, the Purchaser and the Parent shall use
their best efforts to assist the Corporation to terminate or convert the Articon
Agreement to a non-exclusive arrangement (collectively, the "COMPROMISE"). The
Purchaser and the Vendors' Agent jointly shall have the right to settle the
terms of the Compromise; provided, however, that the Purchaser and the Vendors'
Agent, both acting reasonably, mutually agree to such settlement. With respect
to any litigation in connection with the Articon Agreement, the Purchaser shall
have the right to participate in or assume control of the negotiation or defence
of such litigation. All of the costs of the Compromise (including without
limitation any amounts payable by the Corporation to Articon in connection with
the Compromise and the Corporation's legal fees and disbursements on a solicitor
and his own client basis) shall:
(a) if the Compromise occurs before the Time of Closing, constitute
a purchase price adjustment pursuant to the provisions of
Section 2.5; or
(b) if the Compromise occurs on or after the Time of Closing, be
paid by the Vendors to the Purchaser from the Escrow Fund
pursuant to the provisions of Section 2.4,
to a maximum amount of $500,000, with 50% of the first $60,000 of such costs to
be borne by the Purchaser. In the event the Compromise is not completed by the
last day of the Escrow Period, then on such day the Vendors shall pay to the
Purchaser from the Escrow Fund (pursuant to the provisions of Section 2.4) the
amount of $470,000, as liquidated damages.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATIONS UNDER THIS AGREEMENT
6.1 PURCHASER'S CONDITIONS. The obligation of the Purchaser to complete the
purchase of the Purchased Shares contemplated by this Agreement shall be subject
to the satisfaction of, or compliance with, at or before the Time of Closing,
the conditions set forth below (which is hereby acknowledged to be inserted for
the exclusive benefit of the Purchaser and may be unilaterally waived by the
Purchaser in whole or in part).
(a) TRUTH AND ACCURACY OF REPRESENTATIONS - All of the
representations and warranties of the Vendors, the Trustees and
the Corporation set forth in this Agreement shall be true and
correct as at the Time of Closing with the same force and effect
as though made at the Time of Closing, except to the extent
affected by the transactions contemplated by this Agreement, and
certificates of each of the Vendors, the Trustees and the
President (or other officer acceptable to the Purchaser) of the
Corporation dated the date of Closing to
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that effect shall have been delivered to the Purchaser, such
certificates to be in form and substance reasonably satisfactory
to the Purchaser.
(b) COMPLIANCE WITH AGREEMENT - All of the terms, covenants,
agreements and conditions of this Agreement to be complied with
or performed by the Vendors, the Trustees and the Corporation at
or before the Time of Closing shall have been complied with or
performed and certificates of each of the Vendors, the Trustees
and the President (or other officer acceptable to the Purchaser)
of the Corporation dated the date of Closing to that effect
shall have been delivered to the Purchaser, such certificates to
be in form and substance reasonably satisfactory to the
Purchaser.
(c) RECEIPT OF CLOSING DOCUMENTATION - The Purchaser and the Parent
shall have received all documentation required to be delivered
to the Purchaser and the Parent at or before the Time of Closing
in accordance with this Agreement.
(d) POOLING MATTERS -
(i) No action shall have been taken or have been agreed to
have been taken by the Corporation or its officers,
directors, shareholders or Affiliates that would, in the
reasonable judgement of the Parent's independent
accountants, jeopardize the accounting treatment of the
transactions contemplated hereby as a pooling of
interests pursuant to U.S. GAAP;
(ii) the Parent shall have received a letter from Coopers &
Xxxxxxx LLP dated as of the date of the Closing and
addressed to the Parent and the Purchaser stating that
the transactions contemplated hereby will qualify as a
pooling of interests transaction pursuant to U.S. GAAP;
and
(iii) not to limit the generality of Subsections 6. 1(b) and
(c); the Vendors and the Company Affiliates, as
applicable, shall have executed and delivered to the
Purchaser and the Parent the documentation referred to
in Subsections 5. 1 (m) and (n).
(e) APPROVALS AND CONSENTS - All required approvals, consents,
authorizations and waivers relating to the consummation of the
transactions hereby contemplated shall have been obtained from
the relevant governmental or regulatory authorities as are
required by law to be obtained to permit the change of
ownership of the Purchased Shares, the creditors of any of the
Vendors and the Corporation and other third parties.
(f) CONTINUANCE OF THE CORPORATION - There shall be no impediment
existing at the Time of Closing to the continuance of the
Corporation pursuant to the laws of the Province of Nova Scotia
which cannot, in the opinion of counsel to the Purchaser, be
cured with reasonable efforts.
(g) LEGAL FORMALITIES - All necessary corporate action and all
instruments and documents required to authorize the sale and
transfer of the Purchased Shares to the Purchaser and implement
this Agreement or any other agreements incidental thereto, shall
have been taken,
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(h) LEGAL OPINION - The Vendors shall have delivered to the
Purchaser a favourable opinion of Code Xxxxxx Xxxxxxxx, counsel
to the Vendors, in a form reasonably satisfactory to the Parent
and the Purchaser and their counsel.
(i) NO RESTRICTIONS - No action or proceeding, judicial (at law or
in equity) or extrajudicial shall be pending or threatened by
any Person to enjoin, restrict or prohibit:
(i) the purchase and sale contemplated hereby or the
Purchaser's subsequent ownership, use, or
enjoyment of the Purchased Shares; or
(ii) the right of the Corporation or the Purchaser
from and after the Time of Closing to conduct
the Business.
(j) CONCURRENT CLOSINGS - All of the conditions precedent to the
obligations of the Purchaser to complete the transactions herein
contemplated or contemplated in the other agreements
contemplated or required hereby and the Schedules shall have
been fulfilled or satisfactorily performed in accordance
therewith including, without limitation, the delivery of all
documents required to be delivered thereunder.
(k) CONSENT UNDER MATERIAL AGREEMENTS - No consents are required
under the Material Agreements to the transactions contemplated
hereunder.
(l) NO DAMAGE - No destruction, material damage, appropriation,
expropriation or seizure of all or any part of the tangible
Assets (which shall include any medium in which Intellectual
Property resides), or the Purchased Shares shall have occurred,
except such as has been fully insured against in accordance with
the provisions hereof.
(m) RESIGNATION OF DIRECTORS AND OFFICERS - Such directors and
officers of the Corporation as the Purchaser may specify shall
have resigned from the Corporation, effective as at the Time of
Closing.
(n) SHAREHOLDER LOANS - The Corporation shall have paid, in full,
all amounts outstanding under the Shareholder Loans.
(o) EMPLOYMENT AGREEMENTS - The Parent and the Key Employees shall
have entered into the Employment Agreements.
(p) NO MATERIAL ADVERSE CHANGE - No material adverse change to the
Business, the Assets or the financial condition of the
Corporation shall have occurred since February 28, 1998.
6.2 VENDORS' CONDITIONS. The obligation of the Vendors to complete the sale of
the Purchased Shares contemplated by this Agreement shall be subject to the
satisfaction of, or compliance with, at or before the Time of Closing, the
conditions set forth below (which is hereby acknowledged to be inserted for the
exclusive benefit of the Vendors and may be unilaterally waived by the Vendors
in whole or in part).
(a) TRUTH AND ACCURACY OF REPRESENTATIONS - All of the
representations and warranties of the Purchaser and of the
Parent set forth in this Agreement shall be true and correct as
at the Time of Closing with the same force and effect as though
made at the Time of Closing, and certificates to that effect of
the President (or other officer acceptable to the Vendors) of
the Purchaser and of the Parent dated the date of Closing to
that effect shall have been
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delivered to the Vendors, such certificates to be in form and
substance reasonably satisfactory to the Vendors.
(b) PERFORMANCE OF OBLIGATIONS - All of the terms, covenants,
agreements and conditions of this Agreement to be complied with
or performed by the Purchaser and the Parent at or before the
Time of Closing shall have been complied with or performed, and
a certificate to that effect of the President (or other officer
acceptable to the Vendors) of the Purchaser and of the Parent
dated the date of Closing to that effect shall have been
delivered to the Vendors, such certificates to be in form and
substance reasonably satisfactory to the Vendors.
(c) RECEIPT OF CLOSING DOCUMENTATION - The Vendors shall have
received all documentation required to be delivered to the
Vendors at or before the Time of Closing in accordance with this
Agreement.
(d) APPROVALS AND CONSENTS - All required approvals consents,
authorizations and waivers relating to the consummation of the
transactions hereby contemplated shall have been obtained from
the relevant governmental and regulatory authorities as are
required by law to be obtained to permit the change of ownership
of the Purchased Shares, the creditors of the Vendors and the
Corporation, and other third parties.
(e) NO RESTRICTIONS - No action or proceeding, judicial (at law or
in equity) or extrajudicial, shall be pending or threatened by
any Person to enjoin, restrict or prohibit the purchase and sale
contemplated hereby.
(f) STATUTORY RESTRICTIONS - There shall be no impediment,
prohibition or restriction existing and no offence would occur
or result at the Time of Closing under any applicable statute or
regulation to which the transactions contemplated hereby would
be subject, by Closing of the transactions contemplated hereby.
(g) LEGAL OPINIONS - The Purchaser and the Parent shall have
delivered to the Vendors:
(i) a favourable opinion of Xxxxxx Xxxxxxx Xxxxxxxx and
Xxxxxx, counsel to the Parent and the Purchaser in a
form reasonably satisfactory to the Vendors and their
counsel; and
(ii) a favourable opinion of Xxxxxx Xxxxxxx, counsel to the
Purchaser in a form reasonably satisfactory to the
Vendors and their counsel.
(h) ORDER OF THE ALBERTA SECURITIES COMMISSION - The Alberta
Securities Commission shall not have:
(i) finally refused (which refusal shall not include an
adjournment) the application dated May 7, 1998 for an
order (the "Order") pursuant to section 116 of the
Securities Act (Alberta) with respect to the first trade
(the "First Trade") of the Issued NAI Shares acquired by
the Vendors (other than Xxxxxx and Xxxxxxx) and made by
Xxxxxx Xxxxxxx on behalf of the Parent; or
(ii) indicated that it is unlikely to approve the Order in a
form that would permit the First Trade of such Issued
NAI Shares through the facilities of NASDAQ (without
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the need to resort to the use of the exemptions from the
prospectus requirements of the Securities Act (Alberta)
other than the Order).
6.3 RIGHTS OF PURCHASER. If any of the conditions for the exclusive benefit of
the Purchaser as set forth in Section 6.1 shall not have been fulfilled in any
material respect at or prior to the Time of Closing to the satisfaction of the
Purchaser, then the Purchaser shall be entitled, by notice to the Vendors' Agent
prior to the Time of Closing:
(a) to provide written notice, describing the condition that has not
been fulfilled and of its intention to terminate its obligations
hereunder and this Agreement effective as of the date that is 30
days from the date of receipt of such written notice by the
Vendors' Agent unless such condition has been fulfilled on or
before the end of such 30 day period; or
(b) to proceed with Closing as contemplated by Article 8.
If no such notice is given prior to the completion of Closing, then the
Purchaser shall be deemed to have elected to proceed with Closing as
contemplated by Article 8.
6.4 RIGHTS OF VENDORS. If any of the conditions for the exclusive benefit of the
Vendors set forth in Section 6.2 shall not have been fulfilled in any material
respect at or prior to the Time of Closing to the satisfaction of the Vendors,
then the Vendors shall be entitled, by notice from the Vendors' Agent to the
Purchaser prior to the time of completion of Closing:
(a) to provide written notice, describing the condition that has not
been fulfilled and of their intention to terminate their
obligations hereunder and this Agreement effective as of the
date that is 30 days from the date of receipt of such written
notice by the Purchaser unless such condition has been fulfilled
on or before the end of such 30 day period; or
(b) to proceed with Closing as contemplated by Article 8.
If no such notice is given prior to the completion of Closing, then the Vendors
shall be deemed to have elected to proceed with Closing as contemplated by
Article 8.
6.5 RIGHTS OF TERMINATION. If this Agreement has been terminated pursuant to
Subsection 6.3(a) or Subsection 6.4(a), then the party terminating the Agreement
shall be released from all its obligations under this Agreement other than any
obligations set out in Section 2.7 and Section 5.2(b) and the termination of
this Agreement shall not affect the rights and remedies of the party terminating
this Agreement against the other parties.
6.6 REIMBURSEMENT OF COSTS FOR CONTINUANCE. Notwithstanding any other provision
of this Agreement, in the event that the purchase and sale of the Purchased
Shares herein provided for is not consummated by reason of termination of this
Agreement pursuant to Subsection 6.4(a) and the Vendor's have completed the
continuance of the Corporation into Nova Scotia as contemplated by Section 5. 1
(b), the Purchaser and Parent shall bear the reasonable costs and expenses (to a
maximum total amount of $5,000) of the Vendors and the Corporation to
discontinue the Corporation pursuant to the laws of Nova Scotia and to continue
the Corporation pursuant to the laws of Alberta upon the Vendors' and the
Corporation's written request.
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ARTICLE 7
EMPLOYMENT MATTERS
7.1 EMPLOYMENT AGREEMENTS. The Purchaser agrees that, at or before the Time of
Closing, the Parent shall offer employment contracts to, and shall enter into
letters of understanding (the "EMPLOYMENT AGREEMENTS") with each of Xxxxxx
Xxxxx, Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxx and Xxxxxxxx Xxxxxx (the "KEY
EMPLOYEES").
7.2 OTHER EMPLOYEES. The Parent shall negotiate in good faith to retain the
services of such other employees and independent contractors of the Corporation
as the Purchaser deems appropriate.
ARTICLE 8
CLOSING
8.1 PLACE OF CLOSING. The Closing shall take place at the Time of Closing at the
offices of Xxxxxx Xxxxxxx, 00xx Xxxxx, Xxxxx Xxxxxx Xxxxx, 237 - 4th Avenue
S.W., Calgary, Alberta, or at such other place as may be agreed upon by the
Vendors and the Purchaser.
8.2 DELIVERIES BY VENDOR. At the Time of Closing and at the place of Closing,
the Vendors shall deliver to the Purchaser:
(a) one or more share certificates representing the Purchased Shares
duly endorsed for transfer to the Purchaser;
(b) certificates of incumbency for PRL, each of the Trusts and the
Corporation listing all of the directors and officers of PRL and
the Corporation, and all of the Trustees of each Trust, as at
Closing;
(c a letter from such of the beneficiaries of the Trusts as set
forth in Schedule 3.4(g) confirming the authority of the
Trustees;
(d) notarized copies of the constating documents and by-laws of the
Corporation;
(e) a certificate of status of the Corporation and of PRL;
(f) a certified copy of a resolution of the directors of the
Corporation consenting to the transfer of the Purchased Shares
to the Purchaser and authorizing the registration of such
transfer on the share register of the Corporation;
(g) a certified copy of a resolution of the directors of PRL
authorizing this Agreement and the transactions contemplated
herein;
(h) a certificate signed by each of the Vendors and the Corporation
to the effect that the representations and warranties of each of
the Vendors and the Corporation herein contained are true and
correct as at the Time of Closing;
(i) a certificate signed by each of the Vendors to the effect that
all of the terms, covenants, agreements and conditions of this
Agreement to be complied with or performed by the Vendors and
the Corporation at or before the Time of Closing have been
complied with or performed.
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(j) written consents pursuant to the Material Agreements to the
extent required;
(k) the minute books and corporate seals of the Corporation;
(1) the Employment Agreements, executed by the Key Employees;
(m) the legal opinion of Code Xxxxxx Xxxxxxxx, the Vendors' counsel,
dated as of the date of Closing;
(n) resignations of the directors and officers of the Corporation;
(o) the documentation referred to in Subsections 5. 1(m), (n), (o)
and (p);
(p) such other certificates or documents as the Vendors and the
Corporation are required to deliver pursuant to the terms of
this Agreement or as the Purchaser or its counsel may reasonably
require.
8.3 DELIVERIES OF PURCHASER AT CLOSING. At the Time of Closing and at the place
of Closing, the Purchaser shall deliver to the Vendors:
(a) copies of all duly executed documentation submitted to the
Parent's registrar and transfer agent authorizing and directing
the issuance of the Issued NAI Shares and subject to all terms
and conditions in favour of the Purchaser contained herein being
waived or satisfied, the Parent's registrar and transfer agent
shall be directed to make an entry in the share register of the
Parent as at the Time of Closing that the Issued NAI Shares have
been issued;
(b) a certified copy of a resolution of the directors of the
Purchaser consenting to the purchase of the Purchased Shares;
(c) a certificate signed by the Purchaser to the effect that the
representations and warranties of the Purchaser herein contained
are true and correct as at the Time of Closing;
(d) certificates signed by the Purchaser and the Parent to the
effect that all of the terms, covenants, agreements and
conditions of this Agreement to be complied with or performed by
the Purchaser, or the Parent as the case may be, at or before
the Time of Closing have been complied with or performed;
(e) a legal opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, the
Purchaser's U.S. counsel, dated the date of closing;
(f) a legal opinion of Xxxxxx Xxxxxxx, the Purchaser's Canadian
counsel, dated the date of closing;
(g) a draft of the Registration Statement containing such
information concerning the Parent as is accurate at the Time of
Closing referred to in the Registration Rights Agreement; and
(h) such other certificates or documents as the Purchaser is
required to deliver pursuant to the terms of this Agreement or
as the Vendors or their counsel may reasonably require.
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8.4 CLOSING ESCROW. All payments or documents delivered by any Person at the
Time of Closing shall be deemed not to have been delivered until each of the
Vendors and the Purchaser has declared that it is satisfied with the form and
substance of all of the payments and documents to be delivered to such Person at
Closing and all conditions to the delivery or release of any payments or
documents to be delivered at the Time of Closing by parties other than the
Vendors or the Purchaser shall have been satisfied.
ARTICLE 9
SOLICITATION OF EMPLOYEES AND INJUNCTIVE RELIEF
9.1 SOLICITATION OF EMPLOYEES. None of the Vendors shall, for a period ending on
the later of one year from the date of this Agreement or one year following
cessation of employment with the Purchaser's Group, on its own behalf or on
behalf of any other Person, solicit, encourage or otherwise induce any of the
employees of the Purchaser's Group to leave such employee's employment with the
Purchaser's Group.
9.2 INJUNCTIVE RELIEF. Each of the Vendors acknowledges that breach by it of the
covenants contained in Section 9.1 may cause irreparable harm to the Business,
the Corporation and to the Purchaser, which may not be compensable through
monetary damages. Each of the Vendors, therefore, hereby acknowledges that the
Purchaser may enforce such covenants through injunctive relief.
ARTICLE 10
INDEMNIFICATION
10.1 VENDOR INDEMNIFICATION. Subject to the provisions of Section 3.8, each of
the Vendors and the Corporation covenants and agrees to defend, indemnify and
save harmless the Purchaser and its officers, directors, employees and agents
and affiliates and the Corporation (which collectively shall be a "PURCHASER"
for the purpose of this Section 10.1 and an "INDEMNIFIED PARTY" for the purpose
of Sections 10.3 to 10.4, inclusive, where the context so requires) from and
against any losses, liabilities, obligations, damages, penalties, claims,
actions, suits, costs and expenses of any nature whatsoever arising out of,
under or pursuant to any of the following:
(a) any or all debts, liabilities, contracts or engagements
whatsoever, including any liabilities for federal, provincial,
sales, excise (including goods and services), income, capital,
corporate, withholding or any other taxes of the Corporation in
an amount, together with all other liability for or in
connection with taxes to be indemnified hereunder, existing at
the Time of Closing and not disclosed on or included in the
balance sheet forming part of the Financial Statements, save and
except those liabilities:
(i) disclosed in this Agreement or any Schedule, or
(ii) accruing or incurred subsequent to February 28, 1998 in
the ordinary course of business;
(b) all contingent liabilities which the Corporation becomes
obligated to pay, existing at the Time of Closing, not disclosed
or reflected in the balance sheets forming part of the Financial
Statements;
(c) any liability arising under the Employment Standards Code
(Alberta) for the period prior to the Time of Closing, but
excluding severance payments payable to the employees of the
Corporation whose employment ends on or after the Time of
Closing;
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(d) any reassessment for income, capital or corporate tax, interest
and all penalties for any period up to the Time of Closing for
which no adequate reserve has been provided for and disclosed in
the Financial Statements, other than:
(i) a reassessment disallowing an expense or a deduction
claimed by the Corporation in respect of which any of
such corporations subsequently will be entitled to claim
capital cost allowances pursuant to the regulations to
the Tax Act, and
(ii) any reassessments, interest and penalties which,
together with all other liabilities for Or in connection
with taxes to be indemnified hereunder, is in the
aggregate amount less than or equal to the Tax
Deductible;
(e) any loss suffered by the Purchaser or the Corporation as a
result of any breach of any representation, warranty or covenant
contained in this Agreement given by any or all of the Vendors
and the Corporation or in the Registration Rights Agreement, the
Affiliates Agreements, the General Releases, or the Investors
Representation Certificate or in any other certificate delivered
pursuant to this Agreement by any or all of the Vendors and the
Corporation; and
(f) all claims, demands, fines, penalties, costs and expenses of any
nature whatsoever (including, without limitation, legal fees,
charges and disbursements on an as between a solicitor and his
own client basis) in respect of the foregoing.
10.2 PURCHASER INDEMNIFICATION. Subject to the provisions of Section 4.6, the
Purchaser and Parent agree to indemnify and save harmless the Vendors from any
loss suffered or incurred by the Vendors as a result of or arising directly or
indirectly out of or in connection with:
(a) any breach by the Purchaser or Parent of or any inaccuracy of
any representation or warranty given by either or both of the
Purchaser or Parent contained in this Agreement or in any
agreement, instrument, certificate or other document delivered
pursuant hereto; and
(b) any breach or non-performance by the Purchaser or Parent of any
covenant to he performed by it that is contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto.
10.3 NOTICE OF CLAIM. In the event that an indemnified party (the "INDEMNIFIED
PARTY") shall become aware of any claim, proceeding or other matter (a "CLAIM")
in respect of which the Vendors, the Corporation, the Purchaser or the Parent
(the "INDEMNIFYING PARTY") agreed to indemnify the Indemnified Party pursuant to
this Agreement, the Indemnified Party shall promptly give written notice thereof
to the Indemnifying Party. Such notice shall specify whether the Claim arises as
a result of a claim by a Person against the Indemnified Party (a "THIRD PARTY
CLAIM") or whether the Claim does not so arise (a "DIRECT CLAIM"), and shall
also specify with reasonable particularity (to the extent that the information
is available) the factual basis for the Claim and the amount of the Claim, if
known.
10.4 DIRECT CLAIMS. With respect to any Direct Claim, following receipt of
notice from the Indemnified Party of the Claim, the Indemnifying Party shall
have 60 days to make such investigation of the Claim as is considered 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
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request. If both parties agree at or prior to the expiration of such 60 day
period (or any mutually agreed upon extension thereof) to the validity and
amount of such Claim, then the Indemnifying Party shall immediately pay to the
Indemnified Party the full agreed upon amount of the Claim subject to Section
2.4, failing which the matter shall be referred to binding arbitration as
provided in Section 12.2 or shall be determined by a court of competent
jurisdiction,
10.5 THIRD PARTY CLAIMS. With respect to any Third Party Claim, such claims
shall be governed by the provisions of Subsection 2.4(k).
10.6 LIMITATION. Notwithstanding anything else contained herein:
(a) the Purchaser's remedies against the Vendors and the Corporation
pursuant to the Indemnities contained herein shall be limited to
recovery against the Escrow Fund while such Escrow Fund is held
by the Escrow Agent, in accordance with Sections 2.4 and 3.8,
except in a circumstance of fraud; and
(b) the Vendors' remedies against the Purchaser and the Parent
pursuant to the Indemnities contained herein shall be limited to
the amount of the Purchase Price.
ARTICLE 11
CONFIDENTIALITY AND NON-COMPETITION
11.1 CONFIDENTIALITY. The Vendors acknowledge that they have heretofore had
access to and have been entrusted with Confidential Information, the disclosure
of which to competitors of the Corporation or of the Purchaser, or to the
general public would be highly detrimental to the best interests of the
Purchaser and the Corporation. The Vendors further acknowledge and agree that
the right to maintain confidential the Confidential Information constitutes a
proprietary right that the Corporation and the Purchaser are entitled to
protect. Accordingly, the Vendors covenant and agree with the Corporation and
the Purchaser that they will not disclose any Confidential Information to any
Person nor will they use the same for any purposes other than those of the
Corporation or the Purchaser.
11.2 NON-COMPETITION. None of the Vendors shall within one year after Closing in
any area where the Corporation is carrying on business as at the Time of
Closing:
(a) be, either directly or indirectly, interested in any business
other than the Business, which manufactures, assembles,
distributes or supplies products or services competitive with
the Business; or
(b) in any way:
(i) solicit in respect of the sale of products or services
competitive with the Business from, or
(ii) enter into contractual relations for the supply of
products or services competitive with the Business with,
any customer of the Corporation which is a customer of the
Corporation as at the Time of Closing.
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11.3 SURVIVAL. The provisions of this Article II shall survive Closing of the
purchase and sale herein provided for and notwithstanding Closing, shall
continue in full force and effect for the benefit of the Corporation and the
Purchaser.
ARTICLE 12
GENERAL
12.1 NOTICES. Any notice or other writing required or permitted to be given
hereunder or for the purposes hereof to any party shall be sufficiently given if
delivered personally or by telecopier to such party:
(a) in the case of a notice to the Vendors, in care of the Vendors'
Agent:
Xxxxxx Xxxx
Xxxxx 000, 0000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X OX6
Telecopy: (000) 000-0000,
with a copy to the Vendors' solicitors at:
Code Xxxxxx Xxxxxxxx
Xxxxx 0000, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxxxx
Tclecopy: (000) 000-0000;
(b) in the case of a notice to the Purchaser at:
FSA Combination Corporation
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000,
with a copy to Purchaser's and Parent's solicitors at:
Xxxxxx Xxxxxxx -and- Xxxxxx Xxxxxxx
00xx Xxxxx, Xxxxx Xxxxxx Xxxxx Xxxxxxxx & Xxxxxx
000 - 0xx Xxxxxx X.X. 000 Xxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxx Xxxx, Xxxxxxxxxx
X0X 0X0 94304-1050
Attention: Xxxxx Xxxxxxxx Attention: Xxxx Xxxxxxx
Telecopy: (000) 000-0000; and Telecopy: (000) 000-0000
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(c) in the case of a notice to the Parent at:
Networks Associates, Inc. - and- Xxxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
Xxxxx Xxxxx, XX 00000 000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx
00000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq. Attention: Xxxx Xxxxxxx
Telecopy: (000) 000-0000; and Telecopy: (000) 000-0000
(d) with a copy to Parent's solicitors at:
Xxxxxx Xxxxxxx - and- Xxxxxx Xxxxxxx
00xx Xxxxx, Xxxxx Xxxxxx Xxxxx Xxxxxxxx & Xxxxxx
000 - 0xx Xxxxxx X.X. 000 Xxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxx Xxxx, Xxxxxxxxxx
X0X 0X0 94304-1050
Attention: Xxxxx Xxxxxxxx Attention: Xxxx Xxxxxxx
Telecopy: (000) 000-0000; and Telecopy: (000) 000-0000
(e) in the case of a notice to the Escrow Agent at:
Greater Bay Trust Company
000 Xxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx
00000
Attention: Xxxx Xxxxx
(f) in the case of a notice to the Corporation:
Secure Networks Inc.
Xxxxx 000, 0000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx Xxxx
Telecopy: (000) 000-0000,
or at such other address as the party to whom such writing is to be given shall
have last notified to the party giving the same in the manner provided in this
Section 12.1. Any notice delivered to the party to whom it is addressed
hereinbefore provided shall be deemed to have been given and received on the day
it is so delivered at such address, provided that if the notice is delivered
after 4:00 p.m. (local time) or if such day is not a Business Day then the
notice shall be deemed to have been given and received on the Business Day next
following such day.
12.2 ARBITRATION PROCEDURE. Should a dispute, controversy or claim (each, a
"DISPUTE") arise respecting anything contained in this Agreement or any related
agreement or contracts ("RELATED CONTRACTS") specifically referred to in this
Agreement or the performance, non-performance, breach,
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termination or invalidity hereof or thereof, such Dispute shall be referred to
and finally resolved by arbitration in accordance with the provisions of
Schedule 12.2.
12.3 AUDIT AND INSPECTION. The Purchaser, upon notice in writing to the Vendors'
Agent and the Corporation, shall have the right (but not the obligation) to
audit the Corporation's and any of its Affiliate's accounts and records. Any
claims of discrepancies disclosed by such audit shall be made by the Purchaser
to the Vendors' Agent and the Corporation in writing. The cost of such audit
shall be borne by the Purchaser.
12.4 ENUREMENT. This Agreement shall enure to the benefit of and be binding upon
the parties and their respective successors and permitted assigns but shall not
be assignable by any of the parties prior to the Time of Closing without the
prior written consent of the other parties.
12.5 FURTHER ASSURANCES. The parties shall provide all such reasonable
assurances as may be required to consummate the transactions contemplated
hereby, and each party shall provide such further documents or instruments
required by any other party as may be reasonably necessary or desirable to
effect the purpose of this Agreement and carry out its provisions, whether
before or after Closing.
12.6 EXPENSES. Subject to Section 2.8 and Section 6.6, all costs and expenses
(including, without limitation, the fees and disbursements of legal counsel)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
67
12.7 COUNTERPARTS. Ms Agreement may be executed in one or more counterparts,
which so executed shall constitute an original and all of which together shall
constitute one and the same agreement. A signed counterpart provided by way of
telecopier shall be as binding upon the parties as an originally signed
counterpart.
IN WITNESS WHEREOF the parties have duly executed this Agreement as
of the date first above written.
/s/ [SIG] /s/ XXXXXX XXXX
------------------------------------------ -------------------------------
WITNESS XXXXXX XXXX
/s/ [SIG] /s/ XXXXXXX XXX
------------------------------------------ -------------------------------
WITNESS XXXXXXX XXX
/s/ [SIG] /s/ XXX XXXX XXX
------------------------------------------ -------------------------------
WITNESS XXX XXXX TAM
/s/ [SIG] /s/ XXXXXXXXXXX XXXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXXXXXXX XXXXXX
/s/ [SIG] /s/ XXXXXX XXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXX XXXXX
/s/ [SIG] /s/ XXXXXX XXXXXXXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXX XXXXXXXXXX
/s/ [SIG] /s/ XXXXXXXXX XXXXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXXXXX XXXXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXX XXXXXX
------------------------------------------ -------------------------------
WITNESS XXXXXXX XXXXXXX
PRL RESOURCES INC.
By: [SIG]
--------------------------------------
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
68
12.7 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
which so executed shall constitute an original and all of which together shall
constitute one and the same agreement. A signed counterpart provided by way of
telecopier shall be as binding upon the parties as an originally signed
counterpart.
IN WITNESS WHEREOF the parties have duly executed this Agreement as of the
date first above written.
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXX XXX
----------------------------------- -----------------------------------
WITNESS XXX XXXX XXX
----------------------------------- -----------------------------------
WITNESS XXXXXXXXXXX XXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXXXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXXXX XXXXXXX
/s/ XXXXXXXX XXXXX /s/ XXXXXX XXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXX XXXXXXX
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
69
12.7 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
which so executed shall constitute an original and all of which together shall
constitute one and the same agreement. A signed counterpart provided by way of
telecopier shall be as binding upon the parties as an originally signed
counterpart.
IN WITNESS WHEREOF the parties have duly executed this Agreement as of the
date first above written.
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXX XXX
----------------------------------- -----------------------------------
WITNESS XXX XXXX XXX
----------------------------------- -----------------------------------
WITNESS XXXXXXXXXXX XXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXXXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXXXX XXXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXX XXXXXX
/s/ XXXX XXXXX /s/ XXXXXXX XXXXXXX
----------------------------------- -----------------------------------
WITNESS XXXXXXX XXXXXXX
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
70
XXXX FAMILY 1998 TRUST
By: /s/ XXXXXX XXXX /s/ X. XXXXX
---------------------------------- ---------------------------------------
Xxxxxx Xxxx, as Trustee Witness
By: /s/ XXXXXXX XXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxx Xxx, as Trustee Witness
By: /s/ XXXXX XXXX /s/ X. XXXXX
---------------------------------- ---------------------------------------
Xxxxx Xxxx, as Trustee Witness
XXXXXXX XXX FAMILY 1998 TRUST
By: /s/ XXXXXXX XXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxx Xxx, as Trustee Witness
By: /s/ XXXXXX XXXX /s/ X. XXXXX
---------------------------------- ---------------------------------------
Xxxxxx Xxxx, as Trustee Witness
By: /s/ XXXXXXXXXXX XXXXXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxxxxxx Xxxxxx, as Trustee Witness
XXX XXXX TAM FAMILY 1998 TRUST
By: /s/ XXX XXXX XXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxx Xxxx Xxx, as Trustee Witness
By: /s/ XXXXXXX XXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxx Xxx, as Trustee Witness
By: /s/ MU XXXX XX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Mu Xxxx Xx, as Trustee Witness
XXXXXX FAMILY 1998 TRUST
By: /s/ XXXXXXXXXXX XXXXXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxxxxxx Xxxxxx, as Trustee Witness
By: /s/ XXXXXXX XXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxx Xxx, as Trustee Witness
By: /s/ XXXXXXXXXXX XXXX /s/ XXXXX XXXXX
---------------------------------- ---------------------------------------
Xxxxxxxxxxx Xxxx, as Trustee Witness
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
71
HUGER FAMILY 1998 TRUST
By: /s/ XXXXXX XXXXX /s/ XXXXX XXXXX
----------------------------- -----------------------------
Xxxxxx Xxxxx, as Trustee Witness
By: /s/ XXXXXX XXXXXXXXXX /s/ XXXXX XXXXX
----------------------------- -----------------------------
Xxxxxx Xxxxxxxxxx, as Trustee Witness
By: /s/ XXXX XXXXXXX /s/ XXXXX XXXXX
----------------------------- -----------------------------
Xxxx Xxxxxxx, as Trustee Witness
XXXXXXXXXX FAMILY 1998 TRUST
By: /s/ XXXXXX XXXXXXXXXX /s/ XXXXX XXXXX
----------------------------- -----------------------------
Xxxxxx Xxxxxxxxxx, as Trustee Witness
By: /s/ XXXXXX XXXXX /s/ XXXXX XXXXX
----------------------------- -----------------------------
Xxxxxx Xxxxx, as Trustee Witness
By: /s/ XXXXXX XXXX /s/ X. XXXXX
----------------------------- -----------------------------
Xxxxxx Xxxx, as Trustee Witness
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
72
SECURE NETWORKS INC.
By: /s/ [SIG]
-----------------------------------
By:
-----------------------------------
This is a counterpart execution page to a Share Purchase Agreement
dated May 7, 1998, relating to Secure Networks Inc.
73
PRL RESOURCES INC. FSA COMBINATION CORPORATION
By: By: /s/ [SIG]
------------------------------- -------------------------------
Its: Its: Chief Financial Officer
------------------------------ ------------------------------
By:
-------------------------------
Its:
------------------------------
NETWORKS ASSOCIATES, INC.
By:
-------------------------------
Its:
------------------------------
GREATER BAY TRUST COMPANY
By:
-------------------------------
Its:
------------------------------
This is a counterpart execution page to a Share Purchase Agreement
dated May __, 1998, relating to Secure Networks Inc.
74
PRL RESOURCES INC. FSA COMBINATION CORPORATION
By: By:
--------------------------- ---------------------------
Its: Its:
-------------------------- ---------------------------
By:
---------------------------
Its:
--------------------------
NETWORKS ASSOCIATES, INC.
By: /s/ [SIG]
---------------------------
Its: CFO
--------------------------
GREATER BAY TRUST COMPANY
By: /s/ [SIG]
---------------------------
Its: Vice President
--------------------------
This is a counterpart execution page to a Share Purchase Agreement
dated May ___, 1998, relating to Secure Networks Inc.
