CHELL GROUP CORPORATION
PURCHASE OF
ALL OF THE ISSUED AND OUTSTANDING SHARES
IN THE CAPITAL OF
LOGICORP DATA SYSTEMS LTD.
LOGICORP SERVICE GROUP LTD.
123557 ALBERTA LTD.
591360 ALBERTA LTD.
December 13, 2001
XXXXXXXX, XXXXX, SOSNOVITCH LLP
0 XXXXXXX XXXXXX
XXXXX 000, P.O. BOX 28
TORONTO, ONTARIO
M5C 2V6
Solicitors for the Buyer and Parent
XxXXXXXX XXXX
600, 00000 XXXXX XXXXX XXXX
XXXXXXXX, XXXXXXX
X0X 0X0
Solicitors for the Sellers
2
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made the 13th day of December, 2001.
A M O U N G:
CHELL GROUP CORPORATION, a corporation incorporated pursuant
to the laws of the State of New York, (the "Parent")
- and -
CHELL MERCHANT CAPITAL GROUP INC. a corporation to be
incorporated under the laws of the Province of Ontario, (the
"Buyer")
- and -
XXXXXXX XXXXXXXXXX, of the City of Edmonton in the Province of
Alberta ("Xxxxxxx")
- and -
XXXXX XXXXXXXXX, of the City of Edmonton, in the Province of
Alberta ("Xxxxx")
- and -
XXXXXX XXXXXXXXX, of the City of Edmonton, in the Province of
Alberta ("Xxxxxx")
- and -
XXXXXX XXXXXXXXX, of the City of Edmonton, in the Province of
Alberta ("Xxxxxx")
- and -
XXXXXXXXXX FAMILY TRUST
("Xxxxxxxxxx Family Trust")
- and -
BAXANDALL FAMILY TRUST
("Baxandall Family Trust")
- and -
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MERC FAMILY TRUST
("Xxxxxxxxx Family Trust")
- and -
LOGICORP DATA SYSTEMS LTD., a corporation incorporated under
the laws of the Province of Alberta ("LOGICORP")
- and -
123557 ALBERTA LTD., a corporation incorporated under the laws
of the Province of Alberta ("123557")
- and -
LOGICORP SERVICE GROUP LTD., a corporation incorporated under
the laws of the Province of Alberta ("LSG")
- and -
591360 ALBERTA LTD., a corporation incorporated under the laws
of the Province of Alberta; ("591360")
RECITALS
WHEREAS:
X. Xxxxxxx, Xxxxx and 123557 are the registered and beneficial owners of
record of all of the issued and outstanding shares in the capital of
LOGICORP (the "LOGICORP Shares").
X. Xxxxxx and Xxxxxx are the registered and beneficial owners of record of
all of the issued and outstanding shares in the capital of 123557 (the
"123557 Shares").
C. The Baxandall Family Trust, the Xxxxxxxxx Family Trust and 591360 are the
registered and beneficial owners of record of all of the issued and
outstanding shares in the capital of LSG (the "LSG Shares").
D. The Xxxxxxxxxx Family Trust is the sole registered and beneficial owner of
record of all of the issued and outstanding shares in the capital of
591360 (the "591360 Shares").
E. The Sellers have agreed to sell the Purchased Shares to the Buyer, and the
Buyer has agreed to buy such Purchased Shares from the Sellers, upon and
subject to the terms and conditions set out in this Agreement.
F. The Buyer is a wholly owned subsidiary of the Parent.
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NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the sum of Two
Dollars ($2.00) now paid by the Buyer to each of the Sellers (the receipt and
sufficiency of which is hereby acknowledged) and of the mutual covenants and
agreements contained in this Agreement, the parties covenant and agree with each
other as follows:
1.00 - INTERPRETATION
1.1 Definitions. In addition to any other defined terms contained in this
Agreement, the following words and phrases have the following meanings:
(a) "Agreement", "this Agreement", "hereto", "hereof", "herein", "hereunder"
and similar expressions refer to this Agreement including its Schedules
and not to any particular article, section or other portion of this
Agreement and include every amendment or instrument supplementary hereto
or in implementation hereof;
(b) "Arm's Length" shall have the same meaning as those words are defined in
the Income Tax Act (Canada) from time to time;
(c) "Assets" means all the assets, interests, undertakings, rights and
properties of the Corporation and the Holding Companies of every kind and
description, real or personal, tangible or intangible and wherever they
are located as of the date of this Agreement including, without
limitation:
(i) all machinery, equipment, furniture, furnishings and accessories,
spare parts, manuals and supplies of all kinds;
(ii) all inventory;
(iii) all accounts receivable, trade accounts, notes receivable and other
debts due or accruing due and the full benefit of all securities
for such accounts, notes or debts;
(iv) the full benefit of all contracts, engagements or commitments,
whether written or oral, including, without limitation, all forward
commitments by the Corporation for equipment, inventory, supplies
and materials entered into in the ordinary course of business;
(v) prepaid expenses including, without limitation, prepaid rent,
insurance premiums, utility deposits and any other kind of payment
or amount that could be considered a prepaid expense under
generally accepted accounting principles;
(vi) all registered or unregistered trade marks, trade names, trade or
brand names, service marks, copyrights, designs, inventions,
patents, patent applications, patent rights (including any patents
issuing on such applications or rights), licences, telephone
numbers, customer lists, sub-licences, franchises, formulae, trade
secrets, processes, technology and other industrial property and
intangibles including, without limitation, all restrictive
agreements or negative covenant agreements the Corporation or the
Holding Companies may have;
(vii) the goodwill of the Business including, without limitation, the
right to use the name "LOGICORP", or any variation thereof, as part
of the name of, or in connection with the business carried on or to
be carried on by, the Corporation; and
(viii) all other property, assets and rights, real or personal, tangible
or intangible, owned by the Corporation or the Holding Companies to
which either is entitled;
(d) "Business" means the business presently carried on by the Corporation
under the name and style, "LOGICORP" as a value added reseller and network
integrator which specializes in support and maintenance activities related
to networks, communications, production database environments and image
based applications;
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(e) "Business Day" means a day which is not a Saturday, a Sunday or a
statutory holiday in Alberta or Ontario;
(f) "Buyer's Accountants" means Xxxxx, Xxxxxx, Xxxxx LLP or such other firm of
chartered accountants as may be designated by the Buyer;
(g) "Buyer's Counsel" means Xxxxxxxx Xxxxx Sosnovitch LLP or such other firm
of lawyers as may be designated by the Buyer;
(h) "Buyer Shares" means the 5,355,000 exchangeable shares in the capital of
the Buyer, to be issued to the Sellers by the Buyer pursuant to Section
2.3 hereof;
(i) "Closing Date" means the earlier of:
(i) February 1, 2002;
(ii) the 5th Business Day next after the day that the shareholders
of the Parent approve the transactions contemplated herein; or
(iii) such other date as may be agreed upon by the Buyer and the
Sellers;
but in any event, not later than March 1, 2002;
(j) "Corporation" means LOGICORP and LSG together;
(k) "Confidential Information" means, with respect to the Sellers'
obligations, the following pertaining to the Parent and Buyer, and with
respect to the Parent's and Buyer's obligations, the following pertaining
to the Corporation and the Holding Companies: all information relating to
the business of the other party or any of its associated, related or
affiliated companies, including, but not limited to, material contracts,
customer lists, financial statements or information, reports, employee
information, banking information, and any information whether written or
verbal which the other receives through due diligence or otherwise in the
preparation of the transactions contemplated herein that is not generally
available to the public;
(l) "Deposit" means the amount of one hundred thousand ($100,000.00) dollars
payable to the Sellers pursuant to Section 2.3 hereof;
(m) "EBITDA" means, for any period, the sum of (i) the net income of LOGICORP
and LSG for such period, plus (ii) interest charges and other debt service
charges paid or accrued in respect of such period, plus (iii) income taxes
whether paid or deferred which are deducted in determining net income for
such period, if any, plus (iv) depreciation and amortization expense for
such period, all as defined and determined in accordance with generally
accepted accounting principles in Canada, consistently applied, and as
approved from time to time by the Canadian Institute of Chartered
Accountants.
(n) "Effective Date" means the 1st day of January, 2002;
(o) "Encumbrances" means any claim, lien, security interest, right, privilege,
restriction, demand or other encumbrance whatsoever affecting the property
in question, or any right capable of becoming such an encumbrance;
(p) "Financial Statements" means the financial statements of:
(i) LOGICORP and LSG for the fiscal years ended June 30, 2000 and
June 30, 2001 and the interim financial statements for the
period ending September 30, 2001;
(ii) 123557 for the fiscal years ended October 31, 2000 and October
31, 2001; and
(iii) 591360 for the fiscal years ended June 30, 2000 and June 30,
2001;
each consisting of a balance sheet as at the end of each fiscal period, a
statement of profit and loss, and a statement of changes in financial
position with accompanying notes, in respect of each fiscal period, in
each case prepared in accordance with generally accepted accounting
principles, consistently applied from
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period to period. Forthwith upon execution of this Agreement, the Sellers
shall provide the Buyer with a copy of each of the aforesaid financial
statements, (except for copies of the financial statements of 123557 for
the fiscal year ended October 31, 2001 and of 591360 for the fiscal year
ended June 30, 2001) and (i) prior to closing, the Sellers shall provide
the Parent and Buyer with audited financial statements with respect to
Logicorp or LSG for all of the above fiscal year ends and for the fiscal
year ending February 29, 2000 together with review engagement statements
for any other earlier period deemed necessary by the Parent/Buyer or its
solicitors, and a current general ledger of each of 123557 and 591360, and
(ii) within 60 days of the Time of Closing the Sellers shall provide the
Parent and the Buyer with audited financial statements with respect to
123557 and 591360 for each of their fiscal year ends referenced above;
(q) "Xxxx" means Xxxx Xxxxxxxxxx of the City of Edmonton, in the Province of
Alberta;
(r) "HSBC" means HSBC Bank Canada;
(s) "Holding Companies" means 123557 and 591360 together;
(t) "Interim Period" means the period of time between the date of this
Agreement and the Time of Closing;
(u) "Leased Property" means the premises leased by LOGICORP or LSG pursuant to
a lease or written agreement to lease, and used in the conduct of the
Business, as described in the Leased Property Schedule;
(v) "NASDAQ" means the NASDAQ Stock Market;
(w) "ordinary course" or "ordinary course of business" means, in relation to a
Party, any transaction which constitutes an ordinary, day to day business
activity of that Party, conducted in a commercially reasonable and
businesslike manner, consistent with past practices, having no unusual or
special features;
(x) "Parent Shares" means the shares in the capital of the Parent, to be
issued by the Parent to the Sellers upon the exchange of the Buyer Shares
pursuant to Sections 2.3 and 2.4 hereof
(y) "Permitted Encumbrance" has the meaning set out in section 5.1(l);
(z) "Purchase Price" means the aggregate consideration, as set out in this
Agreement, payable by the Parent and Buyer to the Sellers for the
Purchased Shares;
(aa) "Purchased Shares" means all of the issued and outstanding shares owned by
Xxxxx and Xxxxxxx in the capital of LOGICORP, all of the issued and
outstanding shares owned by Xxxxxx and Xxxxxx in the capital of 123557,
all issued and outstanding shares owned by the Xxxxxxxxx Family Trust and
the Baxandall Family Trust in the capital of LSG, and all of the issued
and outstanding shares owned by the Xxxxxxxxxx Family Trust in the capital
of 591360.";
(bb) "RCA Loans" means the loans from Retirement Compensation Agreements to the
Corporation or the Holding Companies as set out on the RCA Loans Schedule;
(cc) "Real Property" means each direct or indirect interest in real property
described in the Real Property Schedule , and, where the context requires,
means all of such real properties and real property interests;
(dd) "Registration Rights Agreement" means the agreement to be entered into and
relating to the registration rights set forth in Sections 2.3(d) and
2.4(c) hereof;
(ee) "Sellers" means Xxxxxxx and Xxxxx in respect of Xxxxxxxx, Xxxxxx and
Xxxxxx in respect of 123557, the Xxxxxxxxx Family Trust and the Baxandall
Family Trust in respect of LSG and the Xxxxxxxxxx Family Trust in respect
of 591360 but for the purpose of any representations, warranties or
covenants hereunder shall mean all such persons, jointly and severally;
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(ff) "Sellers' Counsel" means XxXxxxxx Xxxx or such other firm of lawyers as
may be designated by the Sellers;
(gg) "Taxes" means:
(i) in respect of the Corporations and the Holdings Companies, all
federal, provincial, municipal or other taxes, imposts, rates,
levies, assessments and government fees, charges or dues lawfully
levied, assessed or imposed against the Corporation or the Holding
Companies as applicable or in respect of the Business including,
without limitation, all income, capital gains, sales, excise, use,
property, payroll, capital, goods and services, business, transfer,
withholding and value added taxes, and all customs and import
duties, together with all interest, fines and penalties with respect
thereto, and
(ii) in respect of the Parent and the Buyer, all federal, state,
provincial, municipal or other taxes, imposts, rates, levies,
assessments and government fees, charges or dues lawfully levied,
assessed or imposed against the Parent or the Buyer as applicable or
in respect of their business including, without limitation, all
income, capital gains, sales, excise, use, property, payroll,
capital, goods and services, business, transfer, withholding and
value added taxes, and all customs and import duties, together with
all interest, fines and penalties with respect thereto;
(hh) "Tax Returns" means:
(i) in respect of the Corporation and the Holding Companies, all
reports, returns and other documents filed or required to be
filed by the Corporation or the Holding Companies in respect
of Taxes or in respect of, or pursuant to, any federal,
provincial, municipal or other taxing statute applicable to
them; and
(ii) in respect of the Parent and the Buyer, all reports, returns
and other documents filed or required to be filed by the
Parent or the Buyer in respect of Taxes or in respect of, or
pursuant to, any federal, state, provincial, municipal or
other taxing statute applicable to them;
(ii) "Time of Closing" means 10:00 o' clock a.m. MST on the Closing Date or
such other time on the Closing Date at which the transaction is completed;
(jj) "Weighted Price" means, in reference to a particular day, the average of
the closing sale prices (or last bid prices if no closing sale prices are
reported) of the common stock of the Parent as reported on Nasdaq for the
ten (10) trading days immediately preceding that particular day.
1.2 Canadian Dollars. All dollar amounts referred to in this Agreement are in
Canadian funds unless otherwise provided.
1.3 Extended Meanings. In this Agreement, where the context requires, the
singular number includes the plural and vice versa, the masculine gender
includes the feminine and neuter genders and vice versa and the word "person" is
not limited to an individual but includes any entity recognized by law.
1.4 Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set out in this Agreement or as may be
delivered by one or more of the Parties at the closing of the transactions
contemplated herein. No supplement, modification, waiver or termination of this
Agreement shall be binding, unless executed in writing by the party or parties
to be bound thereby.
1.5 Headings. All headings are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents of any
Article or section in this Agreement.
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1.6 Accounting Terms and Principles. All accounting terms not specifically
defined in this Agreement and all calculations and adjustments required to be
made pursuant to this Agreement are to be construed and made in accordance with
Canadian generally accepted accounting principles, consistently applied.
1.7 Schedules. The following are the Schedules are to be attached to and
incorporated in this Agreement by reference and deemed to be part hereof when
attached to this Agreement and initialled by the party required to produce such
Schedule:
Xxxxx's Directors and Officers Schedule
Purchase Price Allocation Schedule
RCA Loans Schedule
Sellers Disclosure Schedule
1.8 Recitals. Each of the parties acknowledges that the recitals of this
Agreement, so far as they relate to such party, are true and correct in
substance and in fact.
2.00 - PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale. Based upon the warranties, representations and covenants,
and subject to the terms and conditions, set out in this Agreement the Buyer
agrees to purchase the Purchased Shares from the Sellers and the Sellers agree
to sell the Purchased Shares to the Buyer effective as of the Effective Date.
2.2 Purchase Price. Subject to adjustment as set out in section 2.4 hereof, the
total Purchase Price payable by the Buyer to the Sellers shall be a maximum of
Eight Million One Hundred and Ninety-nine Thousand Six Hundred and Sixty-eight
Dollars ($8,199,668), subject to adjustments set forth in this Agreement. The
purchase price shall be allocated to the Sellers in accordance with the Purchase
Price Allocation Schedule, and all adjustments to the Purchase Price in section
2.4 and elsewhere in this Agreement shall be adjusted on a pro rata basis to the
allocation on the Purchase Price Allocation Schedule unless the Sellers
otherwise confirm in writing.
2.3 Payment of Purchase Price. On the day following the first advance of funds
to or on behalf of the Parent in respect of a financing by way of an issue of
notes through X Xxxxxx and Associates, and the Sellers having provided the
Buyer's Counsel with particulars of all legal proceedings and material contracts
that are referenced in section 3.1(ee) and (ii), the Buyer shall pay a
non-refundable Deposit of one hundred thousand ($100,000.00) dollars to the
Sellers in care of the Sellers' Counsel. The Deposit shall be applied towards
payment of the Purchase Price if the transactions close in accordance with this
Agreement, failing which the Deposit shall be paid to the Sellers on the Closing
Date and in any event no later than March 1, 2002 as a genuine estimate of their
liquidated damages and in full settlement of all claims of the Sellers against
the Buyer and the Parent in respect of this Agreement. The balance of the
Purchase Price payable to the Sellers shall be paid as follows:
(a) payment of the sum of One Million (Four) Hundred Thousand Dollars
($1,400,000) by certified cheque or bank draft on the day following the
first advance of funds to or on behalf of the Parent in respect of a
financing by way of an issue of notes through X Xxxxxx and Associates to
the Seller's solicitors in trust to be delivered to the Sellers at the
Time of Closing or returned to the Parent if Closing does not occur for
any reason. All interest accruing after the Effective Date shall accrue to
the Sellers;
(b) at the Time of Closing, by delivery to the Sellers of an interest-free
promissory note from the Buyer in the aggregate amount of One Million
Eight Hundred Thousand Dollars ($1,800,000) payable within six (6) months
of the Effective Date, provided however, at any time prior to the expiry
of such 6 month period, but in any event prior to payment of the aforesaid
$1,800,000 amount, the Buyer may elect to adjust the Purchase Price by
substituting the $1,800,000 promissory note for an interest-free
promissory note from the Buyer payable to the Sellers in the amount of Two
Million Forty Thousand Dollars ($2,040,000) one half of which is due six
(6) months from the Effective Date and the balance of which is due one (1)
year from the Effective Date, and upon delivery of the substituted
promissory note for $2,040,000 for the Sellers or to the Sellers' Counsel,
the $1,800,000 promissory note shall be returned to the Buyer or to the
Buyer's Counsel and cancelled;
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(c) at the time of Closing, the delivery to the Sellers of an interest free
promissory note from the Buyer in the aggregate amount of Five Hundred
Thousand Dollars ($500,000) payable within fifteen (15) months of the
Effective Date; in addition, the Buyer covenants to pay to the Sellers
within the aforesaid fifteen (15) month period, the amount by which the
EBITDA exceeds the amount of One Million Dollars ($1,000,000) for the
first 12 months following the Effective Date; and
(d) at the Time of Closing, the delivery of 5,355,000 exchangeable shares of
Buyer to the Sellers in accordance with the Purchase Price Allocation
Schedule together with the Registration Rights Agreement requiring Chell
Group Corporation to file a registration statement for 2,677,500 shares of
its common stock within six (6) months from the Effective Date and for a
further 2,677,500 shares of its common stock within one (1) year from the
Effective Date. Except with respect to the adjustment in subsection 2.4(c)
where the value of the common stock will be calculated as set out therein,
for the purposes of calculating the Purchase Price, the parties hereto
have agreed that the value of the exchangeable shares of the Buyer is
US$0.52 per share and that the current currency exchange rate to Canadian
dollars is $1.58 per US dollar and notwithstanding any fluctuation in the
market price of Parent's common stock or fluctuations in the currency
exchange ratio, there shall be no adjustment in the number of shares
deliverable hereunder.
2.4 Purchase Price and Parent Share Adjustment.
(a) The Purchase Price shall be adjusted downward by three (3) times the
amount, if any, that the EBITDA for the first full 12 months following the
Effective Date is less than One Million Dollars ($1,000,000) to a maximum
downward adjustment of Three Million Dollars ($3,000,000). The adjustment
will be made, at the option of the Sellers, by reduction of any
consideration remaining unpaid, by reducing the balance owing in respect
of any Promissory Note payable by the Buyer and the Parent to the Sellers
and cancelling such Promissory Note if fully paid, by payment of cash to
the Buyer, or by returning to the Buyer any share consideration equivalent
in dollar terms calculated by using the share price of US$1.00 per share
with a currency exchange rate of $1.58 Canadian per US dollar.
(b) To the extent that the Corporation and the Holding Companies have retained
earnings on a consolidated basis on the Effective Date of less than
$425,000.00, the Purchase Price shall be decreased dollar for dollar by
the amount of the difference between $425,000.00 and the retained earnings
amount as of the Effective Date. To the extent that the Corporation and
the Holding Companies have retained earnings on a consolidated basis on
the Effective Date of more than $425,000.00, the Purchase Price shall be
increased dollar for dollar by the amount of the difference between the
retained earnings as of the Effective Date and the amount of $425,000.00.
The Sellers or the Buyer, as the case may be, shall account to the other
of them for the applicable adjusted amount pursuant to this section, by
payment by certified cheque within 30 days of determination of the amount
of retained earnings as of the Effective Date, failing which interest
shall accrue and be paid at the rate of 15% per annum as and from the due
date of such adjustment. In the event that any amount is owed from Buyer
to Sellers, it shall be paid to Sellers from the Corporation.
(c) In the event that the Weighted Price on the six (6) month anniversary of
the Effective Date is less than U.S. $1.00 per share, the Purchase Price
shall be further adjusted such that the Buyer shall issue additional
exchangeable shares to the Sellers equal to the difference between the
Weighted Price on that date and U.S. $1.00 per share to a maximum of U.S.
$0.15 per share multiplied by 5,355,000 shares; provided however, if the
Weighted Price on the Effective Date is less than US$0.50 per share, then
the maximum adjustment to the Purchase Price of US$0.15 as aforesaid shall
be amended to US$0.20 per share multiplied by 5,355,000 shares. Such
additional shares shall be delivered within 10 days after the six (6)
month anniversary of the Effective Date and shall be issued to the Sellers
as fully paid; the Registration Rights Agreement shall require the Parent
to file a registration statement within six (6) months of the Effective
Date for shares of its common stock equal in number to the additional
exchangeable shares to be issued to the Sellers by the Buyer pursuant to
this section.
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2.5 Section 85 Elections. The Buyer acknowledges that Xxxxxx and Xxxxxx in
respect of 123557 and Xxxxxxx and Xxxxx in respect of Logicorp will be making
dispositions of shares pursuant to Section 85(1) of the Income Tax Act (Canada),
and the Buyer covenants and agrees to complete, execute and file all applicable
forms and elections (with the elected amount as determined by the applicable
Sellers) as required pursuant to Section 85 of the Income Tax Act (Canada), in
such form and manner and within such time limits as may be prescribed by the
Income Tax Act (Canada), and such parties shall do all such further things and
execute all such further forms and documents as may be required to give full
force and effect to such elections.
2.6 Promissory Notes. All Promissory Notes required to be delivered to the
Sellers pursuant to this Agreement shall be granted by the Buyer and the Parent
or shall be granted by the Buyer and guaranteed by the Parent, and shall include
provisions confirming that default in payment of an amount due under any
particular promissory note shall constitute default under all other promissory
notes and that on default interest shall accrue on the amount in default at the
rate of 15% per annum calculated from the date of default to the date of
payment. All promissory notes shall be in a form acceptable to the Parties
hereto.
2.7 Exchange of Buyer's Shares. Upon filing each of the registration statements
pursuant to the Registration Rights Agreement, and subject to the rights,
privileges, restrictions and conditions set forth in the Articles of
Incorporation of the Buyer, as amended: (a) each of the Sellers may from time to
time and at any time thereafter exercise their right to exchange their
respective Buyer Shares, or such number thereof as they determine, for the
Parent Shares set forth in each registration statement, on a one-for-one basis,
(b) the Buyer and the Parent shall not exchange any Buyer Shares for Parent
Shares without first receiving notice to do so from the Seller or the Trustee of
the Seller holding the Buyer Shares, and then only for such number of shares set
forth in such notice, and (c) subject to the filing of the respective
registration statements pursuant to the Registration Rights Agreement, each
Seller may give one or more notices to the Parent for all or any portion of the
Buyer's Shares allocated to that Buyer pursuant to the Purchase Price Allocation
Schedule.
3.00 - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Sellers. The Sellers represent and
warrant to the Buyer as follows and acknowledge that the Buyer is relying upon
such representations and warranties in connection with the purchase by the Buyer
of the Purchased Shares:
(a) Schedules. The Schedules set forth in this Section 3.1 reference complete
and accurate information regarding those matters to which such Schedules
pertain.
(b) Corporate Existence. The Corporation and the Holding Companies are duly
incorporated, organized and validly existing under the laws of the
Province of Alberta. The Provinces of Alberta, British Columbia,
Saskatchewan and Ontario are the only jurisdictions in which the
Corporation and the Holding Companies carry on business or own or lease
properties. The Corporation and the Holding Companies have the corporate
power and authority and do now possess all governmental and other permits,
licences and other authorizations required to own or lease its properties,
and to carry on its business as it was carried on at the applicable time.
The Corporation and the Holding Companies shall prior to the Closing Date
present to the Buyer copies of its minute books, certificate of
incorporation, by-laws, and any other corporate documents or records to
the Buyer, and such copies will be complete and correct copies.
(c) Authority. This Agreement, when executed and delivered by the parties
hereto, will constitute a valid and binding agreement of the Corporation,
the Holding Companies, and the individual Sellers in accordance with its
terms. Except as set forth in Section 3.1(c) of the Sellers Disclosure
Schedule, none of the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
compliance with or fulfilment of the terms and provisions of this
Agreement, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any of the
Corporation's or the Holding Companies' constating documents or by-laws,
or a default under any instrument, agreement, mortgage, judgment, order,
award, decree or other restriction to which the Corporation, Holding
Companies or the Sellers are a party or by which either are bound or any
regulatory provisions affecting either of them. Neither the Corporation
nor the Holding Companies nor the Sellers are a party to or bound by any
commitment, agreement or document containing any covenant which limits the
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freedom of the Corporation or Holding Companies to compete or solicit any
line of business, transfer or move any of its assets or operations or
which materially or adversely affects the business practices, operation or
conditions of the Corporation or Holding Companies or the continued
operation of the Business after closing.
(d) Authorized and Issued Capital. The authorized capital of LOGICORP consists
of unlimited Class "A" Common Voting Shares, unlimited Class "B" Common
Non-Voting Shares and unlimited Class C Preferred Shares of which the
following are issued and outstanding as fully paid and non-assessable to
Xxxxxxx, Xxxxx and 123557 and there are no other shareholders:
Xxxxxxx - 660 Class "A" Common Voting Shares
Xxxxx - 660 Class "A" Common Voting Shares
123557 - 660 Class "A" Common Voting Shares.
The authorized capital of 123557 consists of 10,000 Class "A" Common
Voting Shares, 5,000 Class "B" Common Non-Voting Shares and 5,000
Preferred Non-Voting Shares of which the following are issued and
outstanding as fully paid and non-assessable to Xxxxxx and Xxxxxx (the
"123557 Shares") and there are no other shareholders:
Xxxxxx - 55 Class "A" Common Voting Shares
Xxxxxx - 45 Class "A" Common Voting Shares and
10 Class "B" Common Non-Voting Shares.
The authorized capital of LSG consists of unlimited Class "A" Common
Voting Shares, unlimited Class "B" Common Non-Voting Shares, unlimited
Class "I" Preferred Non-Voting Shares and unlimited Class "II" Preferred
Non-Voting Shares of which the following are issued and outstanding as
fully paid and non-assessable to the Baxandall Family Trust, the Xxxxxxxxx
Family Trust, and 591360 (the "LSG Shares") and there are no other
shareholders:
Baxandall Family Trust - 1,000 Class "A" Common Voting Shares
Xxxxxxxxx Family Trust - 1,000 Class "A" Common Voting Shares
591360 - 1,000 Class "A" Common Voting Shares
Logicorp - 1 Class "I" Preferred Non-Voting Share.
The authorized capital of 591360 consists of unlimited Class "A" Common
Voting Shares, unlimited Class "B" Common Non-Voting Shares, unlimited
Class "I" Preferred Non-Voting Shares and unlimited Class "II" Preferred
Non-Voting Shares of which 1,000 Class "A" Common Voting Shares are issued
and outstanding as fully paid and non-assessable to the Xxxxxxxxxx Family
Trust (the "591360 Shares") and there are no other shareholders.
(e) Title to Purchased Shares. The Sellers are the registered and beneficial
owners of all of the Purchased Shares and has good and marketable title to
such shares, free and clear of all Encumbrances of any kind and each of
them has not received any notice of any adverse claim with respect to such
shares.
(f) Options and Calls. There are no outstanding agreements, calls,
commitments, options, subscriptions, warrants or other rights or
privileges to acquire the Purchased Shares or to require the Corporation
or the Holding Companies to issue additional shares, whether upon the
conversion of other securities or otherwise.
(g) Subsidiaries. Except as set forth in Schedule 3.1(g), the Corporation and
the Holding Companies do not own any interest in or control, directly or
indirectly, any corporation, business trust, partnership, limited
partnership, joint venture or other person. The Sellers represent and
warrant that none of Logicorp Consulting Ltd. 779194 Alberta Ltd. and
779202 Alberta Ltd. are involved in the operations of the Business or have
any assets that form part of the Business or have any contracts with any
customers or suppliers of the Business, and the Sellers covenant and agree
that within 30 days of the Time of Closing
12
they shall cause Logicorp Consulting Ltd. to change its name to a name
that does not include the word "Logicorp".
(h) Financial Assistance. Except as set out in Section 3.1(h) of the Seller
Disclosure Schedule, neither the Corporation nor the Holding Companies
have, directly or indirectly, made any loans, provided financial
assistance in any form, or given any guarantees, to or in respect of the
obligations of any person, including shareholders, other than loans,
financial assistance or guarantees which are no longer outstanding. The
Corporation and the Holding Companies will not, as of the Time of Closing,
be a party to or bound by any agreement of indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other party.
(i) No Joint Venture Interests, etc. Neither the Corporation nor the Holding
Companies are a partner, co-tenant, joint venturer or otherwise a
participant in any partnership, joint venture, co-tenancy or other
similarly jointly owned business undertaking and the Corporation and
Holding Companies have no other significant investment interests in any
business owned or controlled by any third party except as listed on the
Contracts Schedule.
(j) No Distributions on Shares. Except as set out in Section 3.1(j) of the
Seller Disclosure Schedule, neither the Corporation nor the Holding
Companies have, since their most recently completed fiscal year end for
2001, purchased or redeemed any shares in its capital, paid or declared
any dividend, made or agreed to make any other distribution in respect of
its capital or passed any resolution authorizing any of such actions.
(k) Financial Statements and Financial Books and Records. The books and
records of the Corporation and the Holding Companies and the Financial
Statements fairly and correctly set out and disclose in all material
respects, in accordance with Canadian generally accepted accounting
principles consistently applied from year to year, the assets,
liabilities, and financial position of the Corporation and the Holding
Companies as at the respective dates of the Financial Statements, at the
date hereof and, with respect to the books and records, will continue to
do so at the Time of Closing. All financial transactions of the
Corporation and the Holding Companies relating to their business have been
and will be accurately recorded in its books and records and, without
limiting the generality of the foregoing, all monies set aside or held in
trust by the Corporation or the Holding Companies for the benefit of
another person are properly accrued or so held and are completely and
accurately recorded in the books and records of the Corporation and
Holding Companies and no claim can be made against the Corporation or the
Holding Companies in respect thereof in excess of the amounts so set aside
or held.
(l) Disclosure to Accountants. The Corporation, the Holding Companies and the
Sellers have made known, or caused to be made known, to the accountants or
auditors who have prepared the Financial Statements all material facts and
circumstances which could affect the preparation of the Financial
Statements.
(m) Corporate Books and Records. The corporate records and minute books of the
Corporation and the Holding Companies are complete, accurate and up to
date, and contain and will contain at the Time of Closing complete and
accurate copies of all articles (as amended) and by-laws (as amended),
minutes of all meetings and/or written resolutions of the directors and/or
Shareholders of the Corporation or Holding Companies from incorporation to
the Closing Date and all such by-laws were duly enacted and passed, all
such meetings were duly held, and all such resolutions were duly enacted
and passed and all matters and transactions contained or reflected in the
minute books are in accordance with applicable corporation law
requirements. The share certificate books, registers of shareholders and
directors and registers of transfers are and will be accurate and complete
on the Closing. No resolutions or by-laws have been passed, enacted,
consented to or adopted by the directors or shareholders of the
Corporation or Holding Companies, except those contained in the minute
books.
(n) Directors and Officers . The directors and officers of LOGICORP are as
follows:
Xxxx - Director
Xxxxxx - Director and President
13
Xxxxx - Director and Secretary/Treasurer
The directors and officers of 123557 are as follows:
Xxxxxx - Director and President
Xxxxxx - Director and Secretary
The directors and officers of LSG are as follows:
Xxxx - Director and President
Xxxxxx - Director and Vice-President
Xxxxx - Director and Secretary/Treasurer
The directors and officers of 591360 are as follows:
Xxxx - Director, President and Secretary
(o) Outstanding Indebtedness. Except as set out in the Financial Statements
for their most recently completed fiscal year end for 2001, the
Corporation and the Holding Companies have no outstanding, nor is it under
any obligation to create or issue, any bonds, debentures, mortgages,
notes, security agreements or any other Encumbrances except as set out in
the Encumbrances Schedule.
(p) Availability of Assets. The Assets constitute all of the assets which are
now being used, and which are necessary, in the conduct of the Business.
The Assets are in good operating condition and repair, reasonable wear and
tear excepted.
(q) Title to Assets. The Corporation and the Holding Companies are the legal
and beneficial owners of all of the Assets having good and marketable
legal and beneficial title thereto, free and clear of all Encumbrances
except as set out on the Encumbrances Schedule. Except in the ordinary
course of business, there is no agreement, option or other right to sell,
assign or otherwise dispose of any Assets.
(r) Accounts Receivable. Other than as reserved in the Financial Statements or
subsequently reserved for bad debts and doubtful accounts, all accounts
receivable have arisen from valid Arm's Length transactions in the
ordinary course of business. The accounts receivable are not subject to
any valid set-offs or counterclaims and except for those reserved for bad
debts and doubtful accounts are, subject to the debtor's willingness and
ability to pay, collectable and the Sellers have received no notice of the
unwillingness or inability of any debtor to pay any of the accounts
receivable. Adequate provision has been made for bad debts and doubtful
accounts, in accordance with generally accepted accounting principles.
(s) Inventories. All inventory of the Corporation recorded in the books and
records of the Corporation has been recorded at the lesser of cost and
realizable value and such inventory consists of items of a quality usable
in the ordinary course of business. On the Closing Date, Inventories will
be sufficient to meet the current needs of the Business in the ordinary
course.
(t) Forward Commitments. All forward commitments which have been entered into
by the Corporation and/or the Holding Companies, and which remain
unfulfilled, have been entered into in the ordinary course of the
Business.
(u) Real Estate. At the Time of Closing, neither the Corporation nor the
Holding Companies will own any real property.
(v) Leases. All Leased Property is listed in the Section 3.1(v) of the Seller
Disclosure Schedule . Each such lease and/or agreement to lease:
(i) is in full force and effect and in good standing and constitutes a
legal, valid and binding obligation of the Corporation or the
Holding Companies as the case may be, and, without limiting the
14
generality of the foregoing, there has been no default thereunder by
such party, or to the best of the knowledge of the Sellers, by the
landlord, and such party has not received notice of termination or
threat by the landlord to terminate such lease or agreement to
lease; and
(ii) except where consent, approval or act of any party is required
pursuant to the terms of leases or agreements to lease, copies of
which have been delivered to Buyer's Counsel, will continue in full
force and effect notwithstanding the closing of the transactions
contemplated by this Agreement without the consent, approval or act
of any party under such lease or agreement to lease; for greater
certainty, the Sellers will obtain any required consents identified
by the Buyer in the copies of the leases or agreements to lease
provided to Buyer's Counsel and the Sellers shall be responsible for
the costs of any consent, approval or other act of any party which
is required under any leases or agreements to lease.
With respect to all Leased Property:
(iii) to the best of the knowledge of the Sellers, after due inquiry, the
premises and improvements thereto and the purposes for which any of
them are used, comply in all material respects with the relevant
zoning, building, environmental and other governmental or municipal
by-laws, laws, requirements, regulations and ordinances (including
municipal and provincial fire regulations and pollution control
regulations) and with Fire Underwriters' regulations;
(iv) there has not been received by the Corporation or the Holding
Companies or anyone on behalf of them, any notice with respect to
any by-law change affecting the premises or relating to any
threatened or pending condemnation or expropriation of such
premises;
(v) neither the Corporation nor the Holding Companies nor anyone on
behalf of them has received any notice from any insurance carrier of
defects or inadequacies in any of the premises, which, if not
corrected, could result in termination of insurance coverage or an
increase in the cost of coverage.
(w) Environmental Matters and Occupational Health and Safety.
(i) the Corporation and the Holding Companies have in connection with
the carrying on of the Business complied with and will be in
compliance with all federal, provincial and municipal orders,
regulations and by-laws relating to environmental and occupational
health and safety matters, including the disposal of hazardous
substances;
(ii) the Corporation and the Holding Companies have in connection with
the carrying on of the Business complied with all federal,
provincial and municipal orders, regulations and by-laws relating to
environmental matters and the disposal of waste and there has not
been any other events, accidents or episodes of a similar nature
that would impose duties and obligations on the Corporation under
environmental legislation of other governmental authority having
jurisdiction;
(iii) the processing, storage, and handling, and disposal of chemicals,
hazardous substances and other products harmful to the environment
and of biological waste and other dangerous or potentially dangerous
materials in connection with the carrying on of the Business are
being conducted in accordance with all applicable municipal,
provincial and federal legislation and guidelines;
(iv) all environmental approvals or certificates required to be held by
the Corporation or the Holding Companies by any level of government
or governmental organization or agency have been obtained, are valid
and in full force and effect, have been, are being, and will be
complied with as of the Time of Closing, and there have been and are
no proceedings commenced or threatened to revoke or amend any
environmental approvals. No investigation or evaluation has been
commenced with respect to any alleged breach of any environmental
law or regulation; and
15
(v) all material environmental studies or assessments relating to the
Corporation, the Holding Companies or the Business have been
delivered to the Buyer.
(x) Equipment Leases. A complete list of all equipment leases to which the
Corporation or the Holding Companies is a party is listed in Section
3.1(x) of the Seller Disclosure Schedule. A full and complete copy of each
equipment lease shall be produced to the Buyer. Each of such equipment
leases:
(i) is in full force and effect and in good standing and constitutes a
legal, valid and binding obligation of the Corporation or the
Holding Companies as the case may be; and
(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such equipment lease, except as
may be provided for in the copy of such equipment leases provided to
Buyer's Counsel. The Sellers will assist the Buyer to obtain any
required consents identified by the Buyer in the copies of the
equipment leases provided to Buyer's Counsel, and the Sellers shall
be responsible for any costs associated with any consent, approval
or other act of any party which is required under any equipment
leases.
(y) Insurance. All policies of fire and other insurance against casualty and
other losses and public liability insurance carried by the Corporation and
the Holding Companies are described in Section 3.1(y) of the Seller
Disclosure Schedule (including the risks covered and limits of such
policies) and are in full force and effect. A full and complete copy of
each such insurance policy will be provided to the Buyer, and such
policies are summarized in the Insurance Schedule attached hereto. All
premiums in respect of such policies for which premium notices have been
received have been paid in full as the same become due and payable. The
Corporation and the Holding Companies have not failed to give any notice
or present any claim under any insurance policy in due and timely fashion.
There are no actual claims or claims threatened in writing against the
Corporation or the Holding Companies which would come within the scope of
such coverage nor are any such policies currently threatened with
cancellation. There are no outstanding requirements or recommendations by
any insurance company that issued a policy with respect to any of the
Assets or the Business or by any Board of Fire Underwriters or other body
exercising similar functions or by any governmental authority requiring or
recommending any repairs or other work to be done on, or with respect to,
any of the Assets or requiring or recommending any equipment or facilities
to be installed on any premises from which the Business is conducted or in
connection with any of the Assets. The Corporation and the Holding
Companies do not have any knowledge of any material proposed increase in
applicable insurance rates or of any conditions or circumstances
applicable to the Business which might result in such increases. No such
policy is terminable by virtue of the transactions contemplated by this
Agreement.
(z) Proprietary Rights. Other than the trade name "LOGICORP" and the domain
registration of "Xxxxxxxx.xx" the Corporation does not own any copyrights,
uncopyrighted works, registered and unregistered trade marks,
certification marks, trade names, industrial designs, patents, patent
applications, unpatented inventions, trade secrets, know-how and other
proprietary rights (collectively, the "Proprietary Rights") and no such
Proprietary Rights are necessary or desirable in the conduct of the
Business as now conducted. The conduct of the Business by the Corporation
as now conducted does not, to the best of the knowledge of the Sellers,
infringe or violate any Proprietary Rights belonging to third parties nor
are the Sellers aware of any threatened potential claim with respect to
such, including Proprietary Rights owned by a third party to any computer
software programs now used in the conduct of the Business, all of which
computer software programs are properly licensed by the Corporation or the
Holding Companies.
(aa) Business Conducted in No Other Name. All business of the Corporation and
the Holding Companies has been conducted in their respective names and for
their benefit and there are no parties related, either directly or
indirectly, which are competing for the business of the Corporation or the
Holding Companies. There are no trademarks or trade names other than those
set out in section 3.01(z) which are required to properly conduct the
business of the Corporation.
16
(bb) Absence of Certain Changes or Events. Except as set out in Section 3.1(bb)
of the Seller Disclosure Schedule, since the date of the most recent
fiscal year end of the Corporation and the Holding Companies, neither of
them has:
(i) incurred any fixed or contingent obligation, liability or
commitment except trade or business obligations incurred in the
ordinary course of business, none of which is materially adverse
or was entered into for inadequate consideration;
(ii) discharged or satisfied any Encumbrance or paid or satisfied any
fixed or contingent obligation or liability, except for current
obligations or liabilities incurred in the ordinary course of
business and except as otherwise provided for in this Agreement;
(iii) mortgaged, pledged or subjected any of the Assets to any
Encumbrance, other than liens, if any, for current taxes not yet
due and payable;
(iv) entered into any lease or rental agreement or transferred, leased,
licensed or disposed of any of the Assets other than in the
ordinary course of business and other than new leases or renewals
of any of the leases and/or agreements to lease listed on the
Seller Disclosure Schedule in accordance with the renewal rights
contained therein;
(v) waived, released, cancelled, forgiven or compromised any debt,
claim or right, other than in the ordinary course of business;
(vi) transferred or granted any right under any lease, license or other
agreement or with respect to any intangible asset other than in the
ordinary course of business;
(vii) paid or agreed to pay any bonus, except as outlined on the
Employment and Consulting Agreements Schedule;
(viii) suffered any material casualty loss (whether or not covered by
insurance) or any material operating or other loss;
(ix) suffered any adverse change in, or any event or events which have
had or will have a material adverse effect on the Assets or the
liabilities of any of the Corporation or the Holding Companies, the
conduct of the Business or the condition (financial or otherwise)
or prospects of the Corporation, taken as a whole;
(x) made any loan to or entered into any other transaction with any of
its officers, directors, employees or shareholders giving rise to
any claim or right of, by, or against any such person. The
Corporation and the Holding Companies are not indebted to any of
its officers, directors, employees or shareholders or any other
person not dealing at arms' length with the Corporation except for
the RCA Loans and loans to employees not exceeding $20,000 in
aggregate;
(xi) made or entered into any contract or commitment to make any
individual capital expenditures in excess of $50,000 or in
aggregate not more than $100,000;
(xii) declared or paid any dividend or made or agreed to make any payment
or distribution to any shareholder (including purchases and
redemptions of issued and outstanding shares or any other
securities);
(xiii) issued, sold or granted any options, rights or warrants to
purchase, or subscribe for, any shares of any corporation;
(xiv) sold or otherwise disposed of any fixed or capital assets except in
the ordinary course of business;
(xv) amended or terminated any contract or agreement which is material
to the Business; or
17
(xvi) entered into any agreement or commitment to do or cause any of the
matters described above to occur.
(cc) No Finder. Except as disclosed in Schedule 3.1(cc), the Corporation is not
obliged to pay any finder's fee or any type of commission in connection
with the transactions contemplated by this Agreement.
(dd) No Defaults under Agreements; No Violation of Laws. The Corporation and
the Holding Companies have not received notice of, nor have knowledge of,
the existence of any material default or event of default or the
occurrence of any event which with notice or lapse of time, or both, would
constitute a material default, and which is continuing, under the terms or
provisions, express or implied, of any agreement to which any of the
Assets, the Purchased Shares, or the conduct of the Business are subject.
The Corporation and the Holding Companies have not received notice of, nor
have any knowledge of, a violation of any applicable federal, provincial
or municipal law, ordinance, regulation, order or requirement relating to
the Assets, the Purchased Shares or the conduct of the Business which may
have a material adverse effect on the Assets, the Purchased Shares, or the
conduct of the Business. The Corporation and the Holding Companies are
conducting the Business in compliance with all applicable laws,
regulations, by-laws and ordinances of each jurisdiction in which the
Business is carried on including any required extra provincial
registrations except where such non-compliance would not be material to
the conduct of the business of the Corporation.
(ee) Litigation. Except as set out in Section 3.1(ee) of the Seller Disclosure
Schedule, no claim, action, suit, proceeding, litigation, arbitration or
investigation has been commenced or threatened in writing against the
Corporation, the Holding Companies, the Assets, the Purchased Shares, or
the Business (including the properties of others used in the conduct of
the Business), or the transactions contemplated by this Agreement, except
as set out in Section 3.1(ee) of the Seller Disclosure Schedule, and no
basis therefor is known to the Sellers. No matter which is set out in
Section 3.1(ee) of the Seller Disclosure Schedule would, if decided
adversely against the Corporation or the Holding Companies, have a
material adverse effect on the conduct of the Business or upon the Assets
or the Purchased Shares. Neither the Corporation, the Holding Companies,
the Assets, or the conduct of the Business is subject to any continuing
injunction, judgment or other order of any court, arbitrator, mediator or
governmental agency. The Corporation and the Holding Companies are not in
material default under any order, licence, regulation, nor in any default
of any demand of any federal, provincial, municipal or other governmental
agency or regulatory body or with respect to any order, writ, injunction
or decree of any court.
(ff) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement, the
Corporation and the Holding Companies have:
(i) prepared and filed with the appropriate governmental authorities by
the required filing date all Tax Returns required to be filed by it
under all applicable laws or regulations, which Tax Returns, were
prepared in conformity with such applicable laws and regulations and
properly reflect, and do not understate (including that all
deductions taken and to be taken are reasonable and fully deductible
for tax purposes in the manner claimed or to be claimed by the
Corporation) the taxable income and the liability for Taxes of such
corporation in the relevant taxation year;
(ii) duly and timely paid all Taxes as they have become due and payable;
and
(iii) made sufficient provision in the Financial Statements for all
accrued but unpaid Taxes, if any, whether or not disputed, for all
relevant periods.
Income tax assessments have been issued to the Corporations covering all
past periods up to and including the fiscal year ended June 30, 2000, and
such assessments, if any amounts were owing in respect thereof, have been
paid in full. Income tax assessments have been issued to 591360 covering
all past periods up to and including the fiscal year ended June 30, 2000,
and to 123557 covering all past periods up to and including the fiscal
year ended October 31, 1995, and such assessments, if any amounts were
owing in respect thereof, have been paid in full. There are no actions,
suits, tax audits or other proceedings or investigations or claims in
progress, pending or threatened in writing against the Corporation or the
18
Holding Companies in respect of any Taxes and, in particular, there are no
currently outstanding reassessments or written inquiries which have been
issued or raised by any governmental authority relating to Taxes. The
Corporation and the Holding Companies are not aware of any contingent
liabilities for Taxes or any reasonable grounds for an assessment or
reassessment of any Tax Return filed by the Corporation, and has not
received any indication from any taxing authorities that an assessment or
reassessment is proposed in respect of any Taxes, regardless of the
merits. The Corporation and the Holding Companies have not executed or
filed with any taxing authority any agreement extending the period for
assessment, reassessment or collection of Taxes, or any waiver or
agreement regarding statutes of limitations relating to Taxes. All Taxes
which are required to be withheld or collected by the Corporation or the
Holding Companies from payments made to its present and former employees,
officers and directors, and to all persons who are not residents of Canada
for purposes of the Income Tax Act have been duly withheld or collected
and, to the extent required, have been duly remitted to the proper taxing
authorities. The Corporation and the Holding Companies have properly
withheld all Canada Pension Plan contributions, Employment Insurance
premiums, and other Taxes payable by it in respect of its employees and
has remitted, or will remit such amounts to the proper taxing authorities
within the time required by the applicable legislation if such time is
prior to the Closing Date. Copies of all Tax Returns and all schedules and
other supporting documents thereto filed by the Corporation with all
taxing authorities for each of the last three (3) completed fiscal years
and all communications relating thereto have been delivered to the Buyer.
(gg) GST. The Corporation and the Holding Companies are properly registered
under the Excise Tax Act (Canada) for the purposes of the goods and
services tax (GST), if required pursuant to the provisions of the Excise
Tax Act (Canada), and each has charged, collected and remitted, in the
time and manner required under the said Act, all Taxes required to be
charged, collected and remitted pursuant to Part IX of the Excise Tax Act
(Canada) in respect of any "taxable supply" (as such term is defined under
the applicable sections of the said Act) made by them.
(hh) Potential Conflicts of Interest. No officer, director or shareholder of
the Corporation or the Holding Companies, and no person directly or
indirectly controlling or controlled by, or under the direct or indirect
control of, any of the foregoing persons:
(i) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a
competitor, lessor, lessee, customer or supplier of the Corporation;
(ii) holds a beneficial interest in any contract or other agreement to
which the Corporation or the Holding Companies are a party or by
which it is obligated or bound or to which any of the Assets may be
subject;
(iii) owns, directly or indirectly, in whole or in part, any tangible or
intangible property (including, without limitation, any Proprietary
Rights) which the Corporation or the Holding Companies are using or
the use of which is necessary for the Business; or
(iv) has any cause of action or other claim whatsoever against the
Corporation or the Holding Companies.
All purchases or other similar transactions, if any, between the
Corporation or the Holding Companies and any such persons have been made
on the basis of prevailing market rates and all such transactions have
been made on terms no less favourable to the Corporation or the Holding
Companies than those which would have been available from unrelated third
parties. There are no ongoing obligations of the Corporation or the
Holding Companies to provide or purchase products or services at less than
prevailing market rates.
(ii) Agreements. Section 3.1(ii) of the Seller Disclosure Schedule sets out a
true and complete list of all contracts and agreements to which the
Corporation or the Holding Companies are a party or by which the
Corporation, the Holding Companies, or any of the Assets are bound or
subject and which (i) pursuant to their provisions, performance by one or
more of the parties thereto may extend beyond the first anniversary
19
of this Agreement, or (ii) are material contracts to the conduct of the
Business with a value or commitment in excess of $50,000. Each such
contract is valid, binding, enforceable and in full force and effect.
There is no default or event in the performance of such contracts that,
with notice or lapse of time or both, would constitute a material default
thereunder entitling one or more parties to such contract to terminate
same.
(jj) Customers and Suppliers. The relationship of the Corporation and the
Holding Companies with its customers, suppliers, and landlord is good.
There has been no termination or cancellation of any relationship between
the Corporation, or the Holding Companies, and any material supplier, or
any customer or group of customers including without limitation Compaq,
Lexmark, Citrix, Hewlett Packard, IBM, Microsoft, Novell and Toshiba,
which individually or in the aggregate provided more than five percent
(5%) of the combined gross revenues of the Business during the fiscal year
ended June 30, 2001 with respect to the Corporation nor is there reason to
believe that any such terminations or cancellations are threatened, except
as disclosed in Section 3.1(jj) of the Sellers' Disclosure Schedule. The
Corporation is not a party to any agreement which provides that any
supplier will have the exclusive right to supply any materials or services
to the Business.
(kk) Employment Agreements; No Union or Collective Bargaining Agreements. The
Corporation and the Holding Companies are not a party to nor bound by any
collective bargaining agreement nor has either of them conducted
negotiations with respect to any such future agreement. No employees of
the Corporation or the Holding Companies are represented by any trade
union or association which might qualify as a trade union and there are no
applications in progress or threatened which could result in the
certification of a bargaining agent for any of their employees. There has
been no strike, grievance, dispute, representation, arbitration,
proceedings or other labour trouble against the Corporation or the Holding
Companies and there is no such action or proceeding in progress or
threatened in writing, and the Corporation and the Holding Companies do
not know of any basis for any such action or proceeding. The Corporation
and the Holding Companies have not received notice of, nor does it have
any knowledge of, non-compliance with any laws concerning occupational
safety, employment practices, terms and conditions of employment, wages
and hours, and unfair labour practices, the enforcement of which would
have a material adverse effect on the conduct of the Business. Section
3.1(kk) of the Seller Disclosure Schedule sets out a true and complete
schedule, listing the names, total annual compensation, and period of
employment of each person presently employed by the Corporation and the
Holding Companies. There are no written employment contracts with any
employee or independent contractor or any oral contracts of employment
which are not terminable on the giving of reasonable notice other than as
set out on the Employment and Consulting Agreements Schedule. All bonuses
and vacation pay has been accrued or recorded on the books and records of
the Corporation or the Holding Companies as the case may be, in a manner
consistent with prior years.
(ll) Employee Benefit Matters. Section 3.1(ll) of the Seller Disclosure
Schedule sets out a complete list of all employee benefit plans,
including, without limitation, life insurance, hospitalization, medical
and dental plans, executive compensation, bonus, deferred compensation,
pension, retirement, profit sharing, stock purchase and option plans, and
all other plans, arrangements or practices providing benefits for
employees, officers, or directors of the Corporation and the Holding
Companies (collectively the "Employee Benefit Plans"). The Corporation and
the Holding Companies have no unfunded liability in respect of any of the
Employee Benefit Plans other than as disclosed on the Employee Benefit
Schedule. Each of the Employee Benefit Plans has been operated in
accordance with its provisions and is in substantial compliance in all
respects with all laws, rules and regulations governing each such plan.
None of the Employee Benefit Plans or the related trusts thereunder is
subject to any pending investigation, examination or other proceeding
initiated by any court, arbitrator, governmental agency or regulating
body.
(mm) Payments to Directors, Officers and Employees. Since June 30, 2001, no
payments have been made or authorized by the Corporation or the Holding
Companies to its respective officers, directors, shareholders or
employees, except in the ordinary course of the business and at the
regular rates or salary or remuneration payable to such persons, or as
otherwise specifically disclosed or contemplated by this Agreement.
(nn) Sellers Claims; Amounts Due from Officers. As of this date, there are no
accounts receivable, notes receivable or any other amounts due to the
Corporation or the Holding Companies from their officers,
20
directors or shareholders. Except as disclosed herein or contemplated by
this Agreement, the Sellers do not have any claims against the Corporation
or the Holding Companies other than the RCA Loans and any current salary
or remuneration payable in the ordinary course.
(oo) Insolvency. The Corporation, the Holding Companies and the Sellers are not
insolvent, have not committed an act of bankruptcy, proposed a compromise
or arrangement of their creditors generally, had any petition or receiving
order in bankruptcy filed against them, taken any proceedings with respect
to a compromise or arrangement or to have a receiver appointed over any
part of their assets, had an encumbrancer take possession of any of their
property, nor had an execution or distress become enforceable or levied
upon any of their property.
(pp) Sellers Resident of Canada. None of the Sellers are non-residents of
Canada for the purposes of the Income Tax Act (Canada). All of the Sellers
are residents of Alberta.
(qq) The Corporation and the Holding Companies are private corporations within
the meaning of the Securities Act (Alberta) and the sale of the Purchased
Shares by the Sellers to the Buyer is made in compliance with all
applicable securities legislation.
(rr) Full Disclosure. The Corporation or the Sellers have delivered to the
Buyer true and current copies or, if not available, photocopies of all
agreements, documents and other instruments referred to in this Agreement.
None of the foregoing representations and warranties and no other written
statement furnished by the Sellers to the Buyer in connection with the
transactions contemplated hereby contain any untrue statement of a
material fact or omit to state any material fact necessary to make any
such statement or representation not misleading to a prospective purchaser
of the Purchased Shares seeking full information as to the Corporation or
the Holding Companies.
3.2 Representations and Warranties of the Buyer. The Parent and Buyer jointly
and severally represent and warrant to the Sellers as follows and acknowledge
that the Sellers are relying upon such representations and warranties in
connection with the sale by the Sellers of the Purchased Shares and in
connection with the issue of the Buyer Shares and the Parent Shares to the
Sellers:
(a) Corporate Existence. The Parent is duly incorporated, organized and
validly existing under the laws of the State of New York, and the Buyer is
duly incorporated, organized and validly existing under the laws of the
Province of Ontario. The Parent and the Buyer have the corporate power and
authority and do now possess all governmental and other permits, licences
and other authorizations required to own or lease its properties, and to
carry on its business as it was carried on at the applicable time.
(b) Authority. This Agreement, when executed and delivered by the parties
hereto, will subject to the approval of shareholder of Parent and Buyer,
constitute a valid and binding agreement of the Parent and Buyer in
accordance with its terms. None of the execution and delivery of this
Agreement, the consummation of the transactions contemplated by this
Agreement and the Registration Rights Agreement and the compliance with or
fulfilment of the terms and provisions of this Agreement and the
Registration Rights Agreement, will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under any
of the Parent's or Buyer's constating documents or by-laws, or a default
under any instrument, agreement, mortgage, judgment, order, award, decree
or other restriction to which the Parent or the Buyer is a party or by
which either are bound, or a default of any regulatory provisions
affecting either of them. The Parent and Buyer are not party to or bound
by any commitment, agreement or document containing any covenant which
limits the freedom of the Parent and Buyer to compete or solicit any line
of business, transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operation or
conditions of the Parent and Buyer or the continued operation of the
Parent's and Buyer's business after closing.
(c) Authorized and Issued Capital. The authorized capital of the Parent
consists of 50,000,000 shares of common stock, 1,500,000 preferred stock
and one special voting share having the rights, privileges, restrictions
and conditions as set out in the Certificate of Incorporation of the
Parent, as amended to the date hereof, copies of which has been delivered
to Sellers, of which 9,028,239 shares of Common Stock
21
and one special voting share are issued and outstanding as fully paid and
non-assessable and Xxxxxxx Xxxxx, directly or indirectly has a controlling
interest in the Parent. The authorized capital of the Buyer consists of an
unlimited number of common shares and an unlimited number of exchangeable
shares having the rights, privileges, restrictions and conditions as set
out in the articles of incorporation of the Buyer, a copy of which has
been delivered to Sellers, of which 100 common shares and 1 exchangeable
share are issued and outstanding as fully paid and non-assessable to the
Parent.
(d) Options and Calls. 1,488,750 options and 250,000 warrants to purchase
shares of the Parent are outstanding and 1,805,648 shares of Parent common
stock are reserved for issuance upon exercise of Parent Options. There are
no outstanding agreements, calls, commitments, options, subscriptions,
warrants or other rights or privileges to acquire the shares of the Buyer
or to require the Buyer to issue additional shares, whether upon the
conversion of other securities or otherwise..
(e) Financial Statements and Financial Books and Records. The Financial
Statements of the Parent are as disclosed in the Parent's filings with the
Securities and Exchange Commission and fairly and correctly set out and
disclose in all material respects, in accordance with United States
generally accepted accounting principles, consistently applied from year
to year, the assets, liabilities, and financial position of the Parent as
at the date of such financial statements. All financial transactions of
the Parent relating to the Parent's business have been and will be
accurately recorded in its books and records and, without limiting the
generality of the foregoing, all monies set aside or held in trust by the
Parent for the benefit of another person are properly accrued or so held
and are completely and accurately recorded in the books and records of the
Parent and no claim can be made against the Parent in respect thereof in
excess of the amounts so set aside or held. The Financial Statements of
the Parent include the financial position of the Buyer, and except for
statements prepared for management, the Buyer does not have any financial
statements relating to its financial position.
(f) Corporate Books and Records. The corporate records and minute books of
Buyer (and to the best of knowledge of Parent the corporate record and
minute books of Parent) are complete, accurate and up to date, and contain
and will contain at the Time of Closing complete and accurate copies of
all articles (as amended) and by-laws (as amended), minutes of all
meetings and/or written resolutions of the directors and/or shareholders
of the Parent or Buyer from incorporation to the Closing Date and all such
by-laws were duly enacted and passed, all such meetings were duly held,
and all such resolutions were duly enacted and passed and all matters and
transactions contained or reflected in the minute books are in accordance
with applicable corporation law requirements. The registers of
shareholders and directors and registers of transfers are and will be
accurate and complete on the Closing. No resolutions or by-laws have been
passed, enacted, consented to or adopted by the directors or shareholders
of Buyer or (to the best of knowledge of Parent) by Xxxxxx, except those
contained in the minute books.
(g) Disclosure to Accountants. The Parent has made known, or caused to be made
known, to the accountants or auditors who have prepared the Parent's
Financial Statements all material facts and circumstances that could
affect the preparation of such Financial Statements. The Buyer has made
known, or caused to be made known, to the accountants or auditors who have
prepared the Buyer's Financial Statements all material facts and
circumstances that could affect the preparation of such Financial
Statements.
(h) Outstanding Indebtedness. Except as set out in the Financial Statements of
the Parent and the Buyer, the Parent and the Buyer have no outstanding
indebtedness, nor are they under any obligation to create or issue, any
bonds, debentures, mortgages, notes, security agreements or other
encumbrances except as set forth in Schedule 3.2(h).
(i) Directors and Officers . The directors and officers of the Parent and
Xxxxx are as set out in the Parent's and Xxxxx's Directors and Officers
Schedule.
(j) No Defaults under Agreements; No Violation of Laws. Except as disclosed in
Parent's filings with the Securities and Exchange Commission, the Parent
and Buyer have not received notice of, nor have knowledge of, the
existence of any material default or event of default or the occurrence of
any event which with notice or lapse of time, or both, would constitute a
material default, and which is continuing, under the
22
terms or provisions, express or implied, of any agreement to which any of
the Parent's or Buyer's assets, the Parent's shares, or the conduct of the
Parent's business are subject. The Parent and the Buyer have not received
notice of, nor have any knowledge of, a violation of any applicable
federal, provincial, state or municipal law, ordinance, regulation, order
or requirement relating to the Parent's assets, the Parent's or Buyer's
shares or the conduct of the Parent's business which may have a material
adverse effect on the Parent's assets, the Parent's or Buyer's shares, or
the conduct of the Parent's business. The Parent and the Buyer are
conducting their respective businesses in compliance with all applicable
laws, regulations, by-laws and ordinances of each jurisdiction in which
their businesses are carried on, except where such non-compliance would
not be material to the conduct of the business of either the Parent or the
Buyer.
(k) Litigation. Except as disclosed in Parent's filings with the Securities
and Exchange Commission, no claim, action, suit, proceeding, litigation,
arbitration or investigation has been commenced or threatened in writing
against the Parent, the Parent's assets, the Parent's Shares, or the
Parent's business (including the properties of others used in the conduct
of the Business), or the transactions contemplated by this Agreement and
no basis therefor is known to the Parent. Neither the Parent, the Parent's
assets, nor the conduct of the Parent's business is subject to any
continuing injunction, judgment or other order of any court, arbitrator,
mediator or governmental agency. The Parent is not in material default
under any order, licence, regulation, nor in any default of any demand of
any federal, provincial, municipal or other governmental agency or
regulatory body or with respect to any order, writ, injunction or decree
of any court.
(l) Tax Matters. Except as disclosed in Parent's filings with the Securities
and Exchange Commission and subject to any requirement to file arising
from, or in connection with, the transactions contemplated in this
Agreement, the Parent and the Buyer have:
(i) prepared and filed with the appropriate governmental authorities by
the required filing date all Tax Returns required to be filed by it
under all applicable laws or regulations, which Tax Returns, were
prepared in conformity with such applicable laws and regulations and
properly reflect, and do not understate (including that all
deductions taken and to be taken are reasonable and fully deductible
for tax purposes in the manner claimed or to be claimed by the
Parent and the Buyer) the taxable income and the liability for Taxes
of such corporation in the relevant taxation year;
(ii) duly and timely paid all Taxes as they have become due and payable;
and
(iii) made sufficient provision in their respective Financial Statements
for all accrued but unpaid Taxes, if any, whether or not disputed,
for all relevant periods.
The Parent and the Buyer have paid all taxes owing in respect of any
assessments and re-assessments received in respect of Taxes to the date
hereof. Except as disclosed in the Parents filings with the Securities and
Exchange Commission, there are no actions, suits, tax audits or other
proceedings or investigations or claims in progress, pending or threatened
in writing against the Parent or the Buyer in respect of any Taxes and, in
particular, there are no currently outstanding reassessments or written
inquiries which have been issued or raised by any governmental authority
relating to Taxes. Except as disclosed in the Parents filings with the
Securities and Exchange Commission, the Parent and the Buyer are not aware
of any contingent liabilities for Taxes or any reasonable grounds for an
assessment or reassessment of any Tax Return filed by them, and have not
received any indication from any taxing authorities that an assessment or
reassessment is proposed in respect of any Taxes, regardless of the
merits. The Parent and the Buyer have not executed or filed with any
taxing authority any agreement extending the period for assessment,
reassessment or collection of Taxes, or any waiver or agreement regarding
statutes of limitations relating to Taxes. Except as disclosed in the
Parents filings with the Securities and Exchange Commission, all Taxes
which are required to be withheld or collected by the Parent and the Buyer
from payments made to its present and former employees, officers and
directors, and to all persons who are not residents of Canada for purposes
of the Income Tax Act have been duly withheld or collected and, to the
extent required, have been duly remitted to the proper taxing authorities.
(m) Insolvency. The Parent and the Buyer are not insolvent, have not committed
an act of bankruptcy, proposed a compromise or arrangement of their
creditors generally, had any petition or receiving order in
23
bankruptcy filed against them, taken any proceedings with respect to a
compromise or arrangement or to have a receiver appointed over any part of
its assets, had an encumbrancer take possession of any of its property,
nor had an execution or distress become enforceable or levied upon any of
its property.
(n) The issue to the Sellers of the Buyer Shares by the Buyer pursuant to this
Agreement will be exempt from any registration and prospectus requirements
of any securities legislation in the Provinces of Alberta and Ontario and
in the State of New York, and except as set forth in the Registration
Rights Agreement, the issue to the Sellers of the Parent Shares by the
Parent pursuant to the Registration Rights Agreement will be exempt from
any registration and prospectus requirements of any securities legislation
in the Provinces of Alberta and Ontario and in the State of New York.
(o) As of the date hereof and as of the Time of Closing:
(i) the Parent is and will be a listed issuer of the Nasdaq SmallCap
Market tier of the Nasdaq;
(ii) the Parent has and will have performed or satisfied all of its
undertakings to and all of its obligations and requirements with the
Securities Exchange Commission and the Nasdaq;
(iii) the Parent is not and will not be in default of any undertaking to
or obligation or requirement with the Securities Exchange Commission
or the Nasdaq; and
(iv) no order has been or will have been issued to cease or suspend the
trading of the securities of the Parent listed on the Nasdaq or to
otherwise prohibit the issue of securities of the Parent, and no
proceedings for such are pending or to the knowledge of the Parent,
threatened.
(p) The issue of the Parent Shares to the Sellers pursuant to the Registration
Rights Agreement will not:
(i) require the consent of any party to any agreement or commitment to
which the Parent is a party or by which the Parent is bound, other
than the requirements of the Securities Exchange Commission and the
Nasdaq; or
(ii) result in a breach of or default under any loan or regulatory
requirement applicable to the Parent.
(q) The Parent Shares will be tradable by the Sellers on the Nasdaq
immediately upon the Parent Shares being transferred or issued to Sellers,
registered in the names of the Sellers and the registration statement
(including Parent Shares) being declared effective by the Securities
Exchange Commission of the United States, and subject to applicable
securities regulations, the Parent Shares will not be subject to any
escrow terms or subject to any statutory or regulatory hold periods upon
being transferred to and registered in the names of the Sellers.
(r) Full Disclosure. None of the information furnished by the Parent and Buyer
to the Sellers in connection with the transactions contemplated hereby
contain any untrue statement of a material fact or omit to state any
material fact necessary to make any such statement or representation not
misleading to a prospective seller of the Purchased Shares seeking full
information as to the Buyer.
4.00 - COVENANTS
4.1 Covenants of the Sellers and the Corporation During Interim Period. The
Sellers hereby covenant that, during the Interim Period, they shall and shall
cause LOGICORP, 123557, LSG, 591360 to and each of them hereby agrees to:
(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Assets, the Business and the clients and suppliers
associated with the Business;
24
(b) give the Parent/Buyer, the Buyer's Counsel, the Buyer's Accountants and
other representatives of the Buyer, reasonable access during normal
business hours to the properties, books, contracts, commitments and
records of the Corporation and the Holding Companies;
(c) treat in confidence all Confidential Information and other information and
findings which it or any of its authorized representatives, the Sellers'
Accountants or the Sellers' Counsel has obtained concerning the Parent,
the Buyer and/or the Parent business during the Interim Period in the
course of its investigations;
(d) furnish the Parent or the Buyer with all information concerning the
affairs of the Corporation and the Holding Companies as they may
reasonably request;
(e) instruct and authorize the accountants of the Corporation and the Holding
Companies and the Sellers' Counsel to co-operate with the Buyer's
Accountants and the Buyer's Counsel and instruct such auditors to give the
Buyer's Accountants full access during such period to their files and
working papers with respect to the Corporation and the Holding Companies;
(f) permit the Parent and Buyer and its representatives to observe all
operations of the Corporation and the Holding Companies and to meet with
such members of the management of the Corporation and the Holding
Companies as they may designate for such purposes as they may deem to be
appropriate;
(g) do all things and cause all things to be done to ensure that all the
warranties and representations of the Sellers contained in this Agreement
remain true and correct throughout the Interim Period as if such
representations and warranties were continuously made throughout such
period;
(h) not acquire or agree to acquire additional assets (or make leasehold
improvements), except in the ordinary course of business and provided that
the cost of such additional assets does not, in the aggregate, exceed
$150,000 from the date hereof to the Closing Date, without the prior
written approval of the Parent;
(i) not enter into or terminate any material contracts or any forward
commitments for inventories or supplies, in writing or otherwise, other
than material contracts or commitments made in the ordinary course of
business not exceeding $100,000 without the prior written, approval of the
Parent;
(j) not enter into any leases or agreements to lease, except with the prior
written approval of the Parent;
(k) consult with, and comply with the Parent's reasonable wishes in connection
with any decision to renew, or not renew, any lease or agreement to lease
where such decision is required on or before the Closing Date;
(l) keep in full force and effect all licenses and governmental approvals
required in the conduct of the Business;
(m) provide the Parent promptly with such interim financial statements and any
other internally prepared month end financial statements as are
customarily produced by the Corporation and the Holding Companies as and
when they are available;
(n) not incur any other indebtedness, obligations or liabilities out of the
ordinary course of business without the prior written approval of the
Parent;
(o) not sell, agree to sell or otherwise dispose of any of the Assets (other
than inventory and operating supplies sold or consumed in the ordinary
course of business);
(p) pay, satisfy and discharge its obligations and liabilities in the ordinary
course of business;
(q) not incur any capital expenditures out of the ordinary course of business
without the prior written approval of the Parent in excess of $50,000;
25
(r) assist the Corporation (and the Holding Companies if necessary) to retain
the services of all employees and not terminate any employees or
contractors, except in the ordinary course of business;
(s) except as set out in this Agreement, not declare, pay or authorize any
dividends or other distributions on any shares in the capital of the
Corporation or the Holding Companies or declare any bonuses payable to the
Sellers or any person not at Arm's Length with the Sellers, or pay or
authorize the repayment of any moneys owing to the Sellers or any person
not at Arm's-Length with the Sellers;
(t) keep in full force and effect all insurance currently in effect;
(u) obtain all consents and approvals reasonably required by the Parent
pursuant to the terms of any leases, contracts or rights of the
Corporation and the Holding Companies; and
(v) promptly advise the Parent in writing of any material adverse change in
the condition, financial or otherwise, of the Corporation, the Holding
Companies, the Assets or the Business.
4.2 Covenants of the Buyer and Parent During Interim Period. The Parent and
Buyer hereby covenant that, during the Interim Period, they shall:
(a) except for certain transactions contemplated in Parent's public filings
and any other planned acquisitions or divestitures, carry on their
business in the ordinary course and use its reasonable best efforts to
preserve their assets, their business and the clients and suppliers
associated with their business;
(b) give the Sellers, the Sellers' Counsel, the Sellers' Accountants and other
representatives of the Sellers, reasonable access during normal business
hours to the properties, books, contracts, commitments and records of the
Parent and the Buyer;
(c) treat in confidence all Confidential Information and other information and
findings which it or any of its authorized representatives, the Buyer's
Accountants or the Buyer's Counsel has obtained concerning the
Corporation, the Holding Companies and/or the Business during the Interim
Period in the course of its investigations;
(d) furnish the Sellers with all information concerning the affairs of the
Parent and the Buyer as the Sellers may reasonably request;
(e) instruct and authorize the auditors of the Parent and the Buyer's Counsel
to co-operate with the Sellers' Accountants and the Sellers' Counsel and
instruct such auditors to give the Sellers' Accountants full access during
such period to their files and working papers with respect to the Parent;
(f) do all things and cause all things to be done to ensure that all the
warranties and representations of the Buyer and the Parent contained in
this Agreement remain true and correct throughout the Interim Period as if
such representations and warranties were continuously made throughout such
period;
(g) promptly advise the Sellers in writing of any material adverse change in
the condition, financial or otherwise, of the Parent, the Buyer and their
respective assets and business; and
(h) pay, satisfy and discharge their obligations and liabilities in the
ordinary course of business.
4.3 Covenants Concerning Confidentiality. The parties hereto acknowledge that in
order to facilitate the completion of the transactions contemplated herein that
each will be afforded access to and be entrusted with Confidential Information
that is not a matter of public record and has not been disclosed to any person
who does not owe a duty of non-disclosure to the other pursuant to a written or
oral agreement, at common law or under the terms of applicable legislation. The
parties hereto acknowledges that the Confidential Information is proprietary and
confidential and disclosure thereof to competitors of the other or to the
general public would be detrimental to the best interests of the other and could
cause irreparable harm to the business of the such party. The parties therefore
agree that they will not, except for the benefit of and with the written consent
of the other, their successors or
26
assigns, or except as required by law, prior to the completion of the
transactions contemplated herein or at any time, if the transactions
contemplated herein are not completed for any reason whatsoever:
(a) disclose or divulge any Confidential Information to any person,
unless that person is also bound by a duty of confidentiality; or
(b) use, directly or indirectly, any Confidential Information for any
purpose other than to complete its due diligence in connection with
the transactions contemplated herein, or disclose or use for any
purpose other than that set out above, knowledge of the private
affairs of the others business and in particular shall not solicit
or attempt to solicit any client, customer, supplier or employee of
the other away from the other;
unless such party can establish beyond any reasonable doubt that the
Confidential Information:
(c) was previously known to the disclosing party, as evidenced by
written records, which the disclosing party can prove predate this
Agreement or any letters of understanding leading to this agreement;
or
(d) hereafter, and prior to disclosure or use as set out above, becomes
generally known to the public through no act or omission of the
disclosing party.
4.4 Covenants on Closing.
(a) To the extent that such are within the Sellers' power and control, the
Sellers covenant that at the Time of Closing it will satisfy, or cause to
be satisfied, all conditions precedent to the obligations of the Parent
and Buyer set out in this Agreement including, without limitation, the
provision of any information required by the Securities and Exchange
Commission.
(b) To the extent that such are within the Parent's or Xxxxx's power and
control, the Parent and Buyer covenant that at the Time of Closing they
will satisfy, or cause to be satisfied, all conditions precedent to the
obligations of the Sellers set out in this Agreement.
4.5 Post-Closing Covenants.
(a) The Sellers agree that, subsequent to the Time of Closing, they will:
(i) at the request and expense of the Parent and Buyer, execute and
deliver such additional conveyances, transfers and other assurances
as, in the opinion of the Buyer's Counsel, are reasonably required
to carry out the intent of this Agreement and to transfer the
Purchased Shares to the Buyer;
(ii) take all steps reasonably required by the Parent or Buyer to assist
them in making timely filings with the Securities and Exchange
Commission;
(iii) take all steps reasonably required by the Parent or Buyer to assist
them in retaining the goodwill of the Corporation and the Business
and in particular to retain all employees in the Employee Schedule
unless the Parent or Buyer requests otherwise; and
(iv) perform all of their obligations to be performed under this
Agreement after the Time of Closing.
(b) The Parent and Buyer agree that, subsequent to the Time of Closing, they
will, at the request and expense of the Sellers, execute and deliver such
additional conveyances, transfers and other assurances as, in the opinion
of the Seller's Counsel, are reasonably required to carry out the intent
of this Agreement, including without limitation, certificates for all
additional shares in the capital of the Parent as are required to be
issued to the Sellers pursuant to section 2.4(c) hereof.
27
4.6 General Covenants. The parties covenant and agree as follows:
(a) Notwithstanding any other provision set forth herein"
(i) 123557 shall be entitled to pay out and distribute all cash on hand,
if any, to Xxxxxx and Xxxxxx or as they direct,
(ii) 591360 shall be entitled to pay out and distribute all cash on hand,
if any, to Xxxx or as he may direct,
(iii) the Corporation and the Holding Companies shall pay to the Sellers,
dividends, bonuses and other distributions, in such manner and in
such amount as determined by the Sellers, provided that such
payments do not result in the consolidated retained earnings of the
Corporation and the Holding Companies being less than $425,000 for
the period ending as of the Effective Date; and
(iv) the Corporation shall be entitiled to make payments on the RCA Loans
so as to reduce the balance owing on the RCA Loans to $1,500,000 as
of the Effective Date
(b) Notwithstanding any other provision set forth herein, prior to the Time of
Closing:
(i) 123557 may transfer to Xxxxxx, or to his nominee, all shares owned
by 123557 in the capital of Logicorp Consulting Ltd., 779194 Alberta
Ltd. and 779202 Alberta Ltd., and
(ii) the Corporation may transfer and assign the existing life insurance
policies held by the Corporation on the lives of Xxxxxx, Xxxxx and
Xxxx, to Xxxxxx, Xxxxx and Xxxx or to their respective nominees, in
such manner as they determine,
provided that the transferee of each such asset shall be liable for all
tax liabilities, if any, payable in respect of such transfer, and such
transferee shall indemnify and save the Corporation harmless in respect of
all such tax liabilities;
(c) The Corporation and the Holding Companies shall be responsible for the
preparation and cost of all financial statements and tax returns of the
Corporation and Holding Companies as will be required to be prepared in
respect of the deemed year end that will result from the change of control
of the Corporation and the Holding Companies on closing of the
transactions, and such financial statements shall be prepared in a manner
consistent with the preparation of financial statements for the prior
years; notwithstanding the foregoing, the Sellers shall be responsible for
the cost of all expenses required to be paid by them pursuant to Section
11.3 hereof;
(d) For the purpose of determining any indemnity liability of the Sellers in
respect of accounts receivable, monies received after the Time of Closing
on account from a customer of the Corporation or the Holding Companies
shall be applied towards payment of the oldest or longer outstanding
accounts receivable of that customer with the Corporation and the Holding
Companies unless such customer gives specific written instructions to
allocate such payment to a specific account, in which case the payment
received from such customer shall be applied towards payment of the
account as instructed by the customer;
(e) At the Time of Closing the Buyer shall enter into a Unanimous Shareholders
Agreement with Xxxxxx, Xxxxx and Xxxx so as to restrict the number of
directors of Logicorp and LSG to 4 in number until such time as all
amounts owing in respect of the promissory notes referenced in Article 2
hereof have been paid in full to the Sellers, and providing for Xxxxxx,
Xxxxx and Xxxx to be appointed as 3 of such directors and for the fourth
person to be a nominee of the Buyer. Each purchase made by Logicorp and
LSG in excess of $100,000.00 shall require the unanimous approval of the
Board of Directors of Logicorp and LSG, as the case may be, and unless
made with the consent or approval in writing of the Buyer, the Board of
Directors of Logicorp and LSG shall not sell all or substantially all of
the Assets. Except as set forth in this subsection, the Buyer shall not
restrict or abrogate the powers of the directors of Logicorp and LSG for
so
28
long as any amount remains owing to the Sellers in respect of the
promissory notes referenced in Article 2 hereof.
(f) All documents herein required to be executed and delivered by one or more
of the parties at the Time of Closing shall be in such form as is
acceptable to all parties and their respective solicitors, acting
reasonably;
(g) From time to time after the closing of the transactions contemplated
herein, the Buyer and the Parent shall use commercially reasonable efforts
to obtain the release of all guarantees and other indemnities that have
been provided by the Sellers and their related entities in respect of the
obligations of the Corporation and the Holding Companies; the Buyer and
the Parent, jointly and severally, hereby covenant and agree to indemnify
and save the Sellers harmless in respect of all actions, causes of
actions, debts, damages, monies and costs, including legal costs on a
solicitor/client basis, resulting from or arising out of the enforcement
or attempted enforcement of any such guarantees of the Sellers or their
related entitles;
(h) If the guarantees that have been provided by the Sellers to HSBC in
respect of the obligations of the Corporation and the Holding Companies
have not been released by HSBC to the Sellers on or before January 31,
2002, then on or prior to the Time of Closing the Buyer and the Parent
shall cause Xxxxxxx Xxxxx to also provide his personal guarantee to HSBC
in respect of the obligations of the Corporation and the Holding
Companies; such guarantee of Xxxxxxx Xxxxx shall be in a form similar to
the form of guarantees provided by the Sellers to HSBC but with the
principal limit of the guarantee of Xxxxxxx Xxxxx being equal to
one-quarter of the aggregate principal limit of the guarantees of the
Sellers to HSBC; notwithstanding any other provision set forth herein, on
or before the expiry of 15 months from the Effective Date, the Buyer and
the Parent shall obtain the release of all guarantees that have been
provided by the Sellers to HSBC in respect of the obligations of the
Corporation and the Holding Companies; in the event that the aforesaid
guarantees of the Sellers have not been released by HSBC on or before
January 31, 2001 and if Xxxxxxx Xxxxx does not provide his guarantee as
aforesaid to HSBC on or prior to the Time of Closing, then the Buyer and
the Parent shall pay a monthly fee to the Sellers in the aggregate amount
of $10,000.00, payable on the first day of each and every month commencing
the first day of the month next following the Time of Closing and
continuing thereafter until the aforesaid guarantees of the Sellers have
been released by HSBC or Xxxxxxx Xxxxx has provided his guarantee as
aforesaid to HSBC, whichever is the earlier;
(i) Until such time as all monies have been paid in respect of all promissory
notes referenced herein and the Sellers and their related entities have
been released of all obligations and liabilities under all guarantees and
other indemnities that they have provided in respect of the obligations of
the Corporation and the Holding Companies, the Corporation and the Holding
Companies may declare, book and accrue, but shall not pay, any
distributions to the Buyer or the Parent or any other Person not dealing
at Arm's Length with the Buyer or the Parent (whether by way of dividends
or bonuses or otherwise) or pay any management fees or similar expenses
(but excluding product purchases from Buyer, Parent or parties not dealing
at Arm's Length with the Buyer) claimed by the Buyer or the Parent
(whether or not recorded or accrued on the books and records of the
Corporation and the Holding Companies), without the approval or consent in
writing of the Board of Directors or President (for amounts under
$35,000.00) of Logicorp and LSG, and in any event, no such distributions,
management fees or expenses shall be considered for the purpose of
calculating EBITDA pursuant to this Agreement unless first approved by the
Board of Directors or President (for amounts under $35,000.00) of Logicorp
and LSG;
(j) As and from the date hereof, neither the Buyer nor the Parent shall amend
their Articles of Incorporation or Certificate of Incorporation,
respectively, so as to add, change or remove any provisions restricting or
constraining the transfer or redemption of the Buyer Shares or the Parent
Shares, or to amend, alter or change any rights, privileges, restrictions
or conditions relating to the Buyer Shares unless such amendments are made
with the consent in writing of the Sellers; and
(k) Unless the Board of Directors otherwise determines, the Buyer and the
Parent shall loan or otherwise fund to the Corporation the $500,000.00
payment due by the Corporation on the twelfth (12th) month after the
Effective Date in respect of the RCA Loans.
29
(l) Xxxxx agrees to provide notice to Sellers or any claims of creditors of
the Corporation or the Holding Companies for which the Sellers may be
liable for hereunder within five (5) days of receipt of such claims.
5.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
5.1 Conditions Precedent . The obligations of the Parent and the Buyer under
this Agreement are subject to the fulfilment, at or before the Time of Closing,
of the following conditions. All of the following conditions have been included
for the sole benefit of the Parent and the Buyer and each is a condition of the
closing of the transactions provided for in this Agreement. Any of the following
conditions may be waived by the Parent or Buyer, in whole or in part, at or at
any time prior to the Time of Closing, provided that no such waiver shall
constitute a waiver by the Parent or Buyer of any of its other rights or
remedies in connection with any other condition or conditions, and any waiver
will only be binding upon the Parent or Buyer if made by them in writing:
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Sellers contained in this Agreement
are true and correct in all respects at the Time of Closing with the same
effect as though such representations and warranties had been made at and
as of such time and there has been compliance by the Sellers with, and no
breach by the Sellers of, any of its covenants in this Agreement.
(b) No Changes in Operations. During the Interim Period, there has been no
material adverse change in the Assets or in the Business or in the
affairs, liabilities, or condition (financial or otherwise), or prospects
of the Corporation or the Holding Companies or the Business, or other
event or development which would, in the sole discretion of the Parent or
Buyer, affect the decision of a prudent purchaser in similar circumstances
to complete the purchase of the Purchased Shares. In the event that the
Sellers do not prevent the Corporation or the Holding Companies from
entering into or terminating any material contracts with a value of over
One Hundred Thousand Dollars ($100,000) without the consent of the Parent
during the interim period, such entering into or termination of contracts
will be deemed to be a material adverse change.
(c) Retention of Employees and Key Contracts. The Parent shall be satisfied
that arrangements have been made to ensure the continued employment of
substantially all employees (at least 80% of those employees listed) in
the Employee Schedule and subject to subparagraph (e) below, the continued
employment of Xxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxx (Xxxxxxxxxx on a
fulltime basis and Xxxxxxxxx on a part-time basis), and the continued
relationship with all agents, suppliers, subcontractors and customers who
the Parent, in its sole discretion, acting reasonably, determines to be
essential for the continued operation of the Business.
(d) No Undisclosed Material Liabilities. No material liabilities of the
Corporation, being liabilities in aggregate of more than One Hundred
Thousand Dollars ($100,000), contingent or otherwise shall exist which
have not been recorded on the Financial Statements of the Corporation nor
shall there be any actions, causes of action, suits, damages, judgments,
claims or demands pending, threatened or otherwise against the Corporation
which have not been disclosed to the Parent in writing prior to the date
hereof. This clause will not apply if, after the determination of such
unrecorded liabilities and the satisfaction of the Buyer with the
quantification of such, the Sellers agree to a decrease in the Purchase
Price by an amount equivalent to such unrecorded liabilities.
(e) Employment Contracts with Xxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxx. Each of
Xxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxx shall have entered into an employment
agreement for a term of three (3) years with Logicorp. The agreement with
Xxxx Xxxxxxxxxx shall include annual remuneration of $150,000, a bonus
(except in the first year) for achievement thresholds to be set forth in
the agreement and a non-competition and non-solicitation covenant during
the term thereof and for one (1) year thereafter. The Buyer shall have
agreed to a satisfactory arrangement with Xxxxx Xxxxxxxxx commensurate
with the time he will spend working for the Corporation and which will
contain a non-competition and non-solicitation covenant during the term
thereof and for one (1) year thereafter. Xxxxxx shall deliver a
non-competition covenant to the Parent for the time that he serves on the
board of directors of the Corporation and for one year thereafter.
30
(f) Officer's Declaration of the Corporation. The Parent and Buyer shall have
received a statutory declaration of a senior executive officer of the
Corporation and for each Holding Company that:
(i) there are not any applications or filings outstanding which would in
any way alter the constating documents or corporate status of such
corporation;
(ii) no resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or the shareholders of such corporation,
except those contained in the minute books of such corporation;
(iii) there is no unanimous shareholders' agreement in place which
restricts, in whole or in part, the powers of the directors of such
corporation to manage or supervise the management of the Business
and affairs of the corporation;
(iv) the persons listed as directors of the corporation on such
declaration are all of the directors of the corporation and the
persons listed as officers of the corporation on such declaration
are all of the officers of the corporation, and hold the offices set
out opposite their respective names on the declaration; and
(v) such persons have no knowledge of any action, suit or proceeding by
any governmental body or authority, or by any private third party,
seeking to restrain the transactions contemplated by this Agreement
or its consummation which has been threatened or instituted against
the corporation and remains pending at the Time of Closing.
(g) Declaration of the Sellers. The Parent and Buyer shall have received a
statutory declaration of each Seller that:
(i) all representations and warranties of the Sellers contained in this
Agreement are true and correct at the Time of Closing as though then
made;
(ii) there has been compliance with each of the covenants and obligations
on the part of the Sellers required to be complied with at or before
the Time of Closing; and
(iii) the sale of the Purchased Shares has been authorized by all
necessary actions including all necessary shareholders'
authorizations and any required consents of the trustees of the
Trust.
(h) Restraint of Transactions. No order of any court of competent jurisdiction
is in effect restraining the transactions contemplated by this Agreement.
(i) Agreements and Consents. All consents of any persons, which are necessary
to be obtained by the Buyer, the Corporation, the Holding Companies, or
the Sellers for the consummation of the transactions contemplated by this
Agreement and for the continuance of all contracts, agreements, licenses,
permits and authorizations material to the Business and operations of the
Corporation or the Holding Companies have been obtained by the Buyer, the
Corporation or the Sellers as the case may be at the Sellers' sole cost
and expense, except for any such Buyer consents, and shall have been
delivered to the Buyer at, or before, the Time of Closing.
(j) Opinion Letter of Sellers' Counsel. The Buyer and the Buyer's Counsel have
received an opinion from the Sellers' Counsel, dated the Closing Date, in
a form satisfactory to Buyer's Counsel acting reasonably. In giving such
opinion the Sellers' Counsel may rely, as to matters of fact, upon
certificates of senior executive officers of the Buyer or Parent and a
certificate of an official of the jurisdiction governing the status of the
Seller as to the corporate status of the Seller, provided that the
Sellers' Counsel state that they believe that they are justified in
relying upon such certificate and deliver copies of all certificates
relied upon to the Buyer and the Buyer's' Counsel prior to, or at, the
Time of Closing. Sellers' Counsel may also rely upon the opinions of other
counsel in each jurisdiction relevant to the transactions contemplated
herein.
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(k) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Sellers to the Buyer pursuant to
this Agreement, the Sellers have delivered to the Buyer, at or before the
Time of Closing, the following:
(i) certificates representing the Purchased Shares registered in the
name of the Sellers duly endorsed for transfer to the Buyer;
(ii) the resignation of each of the directors and officers of the
Corporation except Xxxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx and Xxxxxx
Xxxxxxxxx and a release from each of such persons; and
(iii) all other indemnities, agreements, instruments, consents and
documentation as are consistent with the provisions hereof and
reasonably required in the opinion of Xxxxx's Counsel to complete
the transactions as contemplated herein.
(l) Release of Encumbrances. Except for security granted to HSBC with respect
to an operating line of $3,000,000, a term loan of $300,000 and an
evergreen loan facility of $300,000, and except for security relating to
the RCA Loans listed in Section 5.1(l) of the Sellers' Disclosure
Schedule, and except for the permitted encumbrances identified in Schedule
3.1(o) (collectively the "Permitted Encumbrances") all other encumbrances
with respect to the Purchased Shares and the Corporation and the Holding
Companies shall have been released and discharged on or before the Closing
Date, or the Sellers shall provide satisfactory evidence that the amount
required to obtain such releases and discharges, as stated in writing by
the holder of the encumbrance, has been paid to such holder or directed
from the proceeds of closing to be paid to such holder and the holder has
given an undertaking in writing to release and discharge the Sellers from
such encumbrance.
(m) Financing. The Parent and Buyer shall have obtained financing in the
minimum amount of $3,000,000 pursuant to a private placement to be sold by
Xxxxxx Xxxxxx & Co. pursuant to an agency agreement dated November 14,
2001.
(n) Schedules. The Parent must be satisfied with all information and
supporting documentation provided with respect to all schedules whether
attached on the date hereof or hereafter.
(o) RCA Loans. RCA Loans of One Million Five Hundred Thousand Dollars
($1,500,000) have been made to LOGICORP and shall continue to be
outstanding on the Effective Date, and such loans shall be due two (2)
years following the Effective Date with monthly payment of principal and
interest in accordance with the particulars set forth in Schedule 5.1(o)
until the due date and with interest accruing at a rate equal to HSBC
prime (from time to time) plus 4.75% per annum.
(p) Buyer shall be satisfied that $1,500,000 in RCA Loans exist on the
Effective Date and that the existing credit facilities of $3,600,000 with
HSBC shall be available on Closing. The Buyer and the Parent each
acknowledges that it may be required to guarantee the credit facility and
term loan and shall use commercially reasonable efforts to maintain the
existing credit facilities with HSBC upon closing. Any security granted on
the RCA Loans shall be subordinate to the bank or primary lender's
security provided such security does not secure indebtedness in excess of
$4,000,000 in the aggregate or such greater amount as the holders of such
security may determine. The existing credit facilities of $3,600,000 may
be increased up to $4,600,000 provided that (i) the Sellers shall not be
required to increase their existing guarantee obligations and (ii) the RCA
Loans are prepaid by the Corporation by an amount equal to the amount of
the increase in the credit facilities over $4,000,000.
5.2 Result of Failure to Satisfy Condition Precedent. If any of the foregoing
conditions precedent to the obligations of the Parent and Buyer have not been
satisfied at the Time of Closing, and have not be waived by the Parent and Buyer
at, or at any time prior to, the Time of Closing, the Parent and Buyer may:
32
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Sellers or the Seller's Counsel and, in such
event, all parties shall be released from their obligations under this
Agreement except as set out in Section 4.3; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any rights or remedies the buyer may have
in connection with any misrepresentation or breach of warranty or covenant
herein.
6.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
6.1 Conditions Precedent. The obligations of the Sellers under this Agreement
are subject to the fulfilment, at or before the Time of Closing, of the
following conditions. All of the following conditions have been included for the
sole benefit of the Sellers and each is a condition of the closing of the
transactions provided for in this Agreement. Any of the following conditions may
be waived by the Sellers, in whole or in part, at or at any time prior to the
Time of Closing, by a waiver in writing signed by the Sellers, provided that no
such waiver shall constitute a waiver by the Sellers of any of his rights or
remedies in connection with any other condition or conditions, and any waiver
will only be binding upon the Sellers if made in writing by the Sellers.
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Parent and Buyer contained in this
Agreement are true and correct in all respects at the Time of Closing with
the same effect as though such representations and warranties had been
made at and as of such time and there has been compliance by the Parent
and Buyer with, and no breach by the Parent and Buyer of, any of its
covenants in this Agreement.
(b) Officer's Declaration. The Sellers shall have received a statutory
declaration of a senior executive officer of the Parent and Buyer that:
(i) all representations and warranties of the Parent or Buyer contained
in this Agreement are true and correct at the Time of Closing as
though then made;
(ii) there has been compliance with each of the covenants and obligations
on the part of the Parent or Buyer required to be complied with at
or before the Time of Closing;
(iii) the purchase of the Purchased Shares has been authorized by all
necessary actions including actions of the directors and
shareholders of the Buyer and any required actions with the U.S.
securities regulators; and
(iv) such person has no knowledge of any action, suit or proceeding by
any governmental body or authority, or by any private third party,
seeking to restrain the transactions contemplated by this Agreement
or its consummation which has been threatened or instituted against
the Buyer and remains pending at the Time of Closing.
(c) Restraint of Transactions. No order of any court of competent jurisdiction
is in effect restraining the transactions contemplated by this Agreement.
(d) Agreements and Consents. All consents of any persons, which are necessary
to be obtained by the Parent or Buyer for the consummation of the
transactions contemplated by this Agreement have been obtained by the
Parent or Buyer at its sole cost and expense, and all consents of any
persons which are necessary to be obtained by the Sellers or the
Corporation for the consummation of the transaction contemplated by this
Agreement and for the continuance of all contracts, agreements, licenses,
permits and authorizations material to the business and operations of the
Corporation have been obtained, provided that the Sellers uses their best
efforts to obtain all such consents.
(e) Opinion Letter of Counsel for Buyer. The Sellers and the Sellers' Counsel
have received from the Buyer's Counsel and Parent's Counsel an opinion,
dated the Closing Date, in a form acceptable to Sellers' Counsel, acting
reasonably. In giving such opinion the Buyer's Counsel may rely, as to
matters of fact, upon
33
certificates of senior executive officers of the Parent or Buyer and a
certificate of an official of the jurisdiction governing the status of the
Buyer as to the corporate status of the Buyer, provided that the Buyer's
Counsel state that they believe that they are justified in relying upon
such certificate and deliver copies of all certificates relied upon to the
Sellers and the Sellers' Counsel prior to, or at, the Time of Closing.
Xxxxx's Counsel may also rely upon the opinions of other counsel in each
jurisdiction relevant to the transactions contemplated herein.
(f) Schedules. The Sellers must be satisfied with all information and
supporting documentation provided with respect to all schedules whether
attached on the date hereof or hereafter.
(g) Share Pledge. The Buyer shall have entered into a share pledge agreement
in a form of acceptable to the Sellers to secure outstanding portions of
the Purchase Price payable pursuant to the Promissory Notes to be issued
to the Sellers under section 2.
(h) Employment Agreements. Xxxx and Xxxxx shall be satisfied with their form
of Employment Agreement.
(i) No Undisclosed Material Liabilities. No material liabilities of the Buyer
or Parent, being liabilities in aggregate of more than One Hundred
Thousand Dollars ($100,000), contingent or otherwise shall exist which
have not been recorded on the Financial Statements or in public filings of
Parent with the Securities and Exchange Commission nor shall there be any
actions, causes of action, suits, damages, judgments, claims or demands
pending, threatened or otherwise against the Parent or Buyer which have
not been disclosed in public filings of Parent with the Securities and
Exchange Commission.
(j) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Buyers or Parent to the Sellers
pursuant to this Agreement, all other indemnities, agreements,
instruments, consents and documentation as are consistent with the
provisions hereof and reasonably required in the opinion of Sellers'
Counsel to complete the transactions as contemplated herein.
(k) Registration Rights Agreement. The Registration Rights Agreement shall be
in a form acceptable to the Sellers; the Buyer and the Parent shall
provide a draft of the Registration Rights Agreement to the Sellers within
14 days of the date of this Agreement.
6.2 Result of Failure to Satisfy Condition Precedent. If any of the foregoing
conditions precedent to the obligations of the Sellers have not been satisfied
at the Time of Closing, and have not been waived by the Sellers at, or at any
time prior to, the Time of Closing, the Sellers may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Buyer or the Buyer's Counsel and, in such
event, all parties shall be released from their obligations under this
Agreement except as set out in section 4.3; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any of the Sellers' rights or remedies in
connection with any misrepresentation or breach of warranty or covenant
herein.
7.00 - RISK OF LOSS
7.1 Risk of Total Loss. If, at or before the Time of Closing, all or
substantially all of the Assets are destroyed or damaged by fire, or any other
casualty, or are expropriated or otherwise seized by governmental or other
lawful authority, the Sellers shall immediately advise the Buyer in writing and
the Buyer shall have the option, exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, provided that
the Purchase Price shall be reduced by an amount equal to the replacement
cost of the Assets destroyed, damaged, expropriated or seized minus the
amount of all insurance proceeds and other compensation payable to the
Corporation in connection with, or as a result of, such destruction,
damage, expropriation or seizure; or
34
(b) to refuse to complete the transaction contemplated herein by notice to the
Sellers and, in such event, all parties hereto shall be released from all
obligations hereunder except the obligations of such party to maintain the
confidentiality of Confidential Information obtained in the course of the
negotiation of this Agreement and the due diligence leading up to the Time
of Closing.
7.2 Risk of Partial Loss. If, at or before the Time of Closing, a material part
of the Assets, but less than all or substantially all of the Assets, are
destroyed or damaged by fire, or any other casualty, or are expropriated or
otherwise seized by governmental or other lawful authority, the Sellers shall
immediately advise the Buyer in writing and the Buyer shall have the option,
exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, without
reduction of the Purchase Price provided that the amount of all insurance
proceeds and other compensation payable to the Corporation in connection
with, or as a result of, such destruction, damage, expropriation or
seizure is paid to the Corporation; or
(b) to refuse to complete the transaction contemplated herein by notice to the
Sellers and, in such event, all parties hereto shall be released from all
obligations hereunder except the obligations of such party to maintain the
confidentiality of Confidential Information obtained in the course of the
negotiation of this Agreement and the due diligence leading up to the Time
of Closing.
8.00 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival of the Sellers' Representations, Warranties and Covenants. The
representations, warranties and covenants of the Sellers contained in this
Agreement shall, unless otherwise expressly provided in this Agreement, survive
the closing of the transactions provided for in this Agreement and,
notwithstanding such closing and notwithstanding any investigations made by or
on behalf of the Parent or Buyer, shall continue in full force and effect:
(a) with respect to those representations and warranties relating to Taxes,
for so long as the Corporation may be assessed or reassessed, or any
action or proceeding may be brought against the Corporation in connection
with Taxes; and
(b) three (3) years from the Closing Date with respect to all other
representations, warranties and covenants of each of the Sellers .
8.2 Survival of the Buyer's Representations, Warranties and Covenants. The
representations, warranties and covenants of the Parent/Buyer contained in this
Agreement shall survive the closing of the transactions provided for in this
Agreement and, notwithstanding such closing and notwithstanding any
investigations made by or on behalf of the Sellers, shall, unless otherwise
expressly provided in this Agreement, continue in full force and effect for a
period of three (3) years after the Time of Closing.
35
9.00 - INDEMNIFICATION
9.1 Indemnification by Sellers. In the event that the transactions provided for
in this Agreement are completed and it is subsequently determined that the
Corporation or the Parent or Buyer or any agent, employee, affiliate, successor
or nominee of the Corporation or the Parent or Buyer, or any of the officers,
directors, shareholders, subsidiaries, affiliates, employees and agents of any
of the aforesaid (collectively the "Indemnified Parties") has or is subject to
any loss, damage, liability, deficiency, claim, cost, recovery, expense
(including interest, penalties and reasonable legal fees), assessment or
re-assessment (collectively the "Claims") arising out of or from, the
incorrectness, failure, non-compliance or other breach of any representation,
warranty or covenant made by the Sellers pursuant to this Agreement,
notwithstanding any investigations made by the Parent or Buyer or its
representatives, and including any accounts receivables of the Corporation
existing as of the Time of Closing which have not been collected within 180 days
from the Time of Closing, the Sellers unconditionally agree to indemnify and
save harmless the Indemnified Parties for the amount of such Claims, accounts
receivables and any liability for Taxes arising in the Corporation or holding
Companies for periods prior to the Effective Date. The obligation of the Sellers
to indemnify the Indemnified Parties pursuant to the foregoing is limited, in
the case of accounts receivables of the Corporation, to the amount of accounts
receivable which have not been collected in full within 180 days of the Closing
Date and which, in the aggregate, exceed fifteen percent (15%) of the aggregate
amount (before deduction of any reserve or allowance for doubtful accounts) of
all accounts receivable of the Corporation on the Closing Date; notwithstanding
the foregoing, the Sellers shall not be responsible to indemnify any party in
respect of any accounts receivable or other intercorporate debt between and
among any of Logicorp, LSG, 123557 and 591360. Any Claim against the Sellers
under this section shall be in writing and shall be made within one hundred and
twenty (120) days of the date on which such representation or warranty ceases to
survive according to the provisions of this Agreement. In the event that the
Sellers make an indemnity payment with respect to accounts receivable, then the
uncollected accounts receivable in respect of which the indemnity payment is
made, shall be transferred and assigned to the Sellers as of the date of the
indemnity payment.
The Indemnified Parties shall forthwith notify the Sellers of any liability or
Claim for which the Sellers may be liable hereunder promptly after the
Indemnified Parties receive notice thereof and the Sellers shall have the right
to participate in any negotiations with respect thereto. The Sellers shall at
all times have the right, at its joint sole expense, to dispute and contest any
liability to, or Claim asserted by, any person other than the Indemnified
Parties for which the Sellers may be liable hereunder, provided that the Sellers
first admit to the Buyer that if there is a liability in respect of such Claim,
the Sellers is responsible for such liability. The Indemnified Parties shall,
and shall cause the Corporation to, fully co-operate with the Sellers and its
counsel in any proceedings with respect to any such liability.
There shall be no obligation for the Sellers to indemnify the Parent or the
Buyer:
(a) in respect of any Claims occurring within 12 months of the Closing Date if
such Claims have already been taken into account in reducing the Purchase
Price pursuant to section 2.4(a) hereof;
(b) unless the amount required to be paid in respect of the Claims or the
aggregate Claims exceeds $100,000; or
(c) in respect of any Claims that are paid pursuant to an insurance policy of
the Corporation or Holding Companies.
9.2 Indemnification by Xxxxx and Parent. In the event that the transactions
provided for in this Agreement are completed and it is subsequently determined
that the Sellers have or are subject to any loss, damage, liability, deficiency,
claim, cost, recovery, expense (including interest, penalties and reasonable
legal fees), assessment or re-assessment (collectively the "Claims") arising out
of or from the incorrectness, failure, non-compliance or other breach of any
representation, warranty or covenant made by the Buyer and the Parent, or either
of them, pursuant to this Agreement, notwithstanding any investigations made by
the Sellers or their representatives, the Buyer and the Parent unconditionally
covenant and agree, jointly and severally, to indemnify and save harmless the
Sellers for the amount of such Claims. Any Claim against the Buyer and the
Parent under this section shall be in writing and shall
36
be made within 120 days of the date of which such representation, warranty or
covenant ceases to survive according to the provisions of this Agreement.
The Sellers shall forthwith notify the Buyer and the Parent of any liability or
Claim for which the Buyer and the Parent, or either of them, may be liable
hereunder promptly after the Sellers receive notice thereof and the Buyer and
the Parent shall have the right to participate in any negotiations with respect
thereto. The Buyer and the Parent shall at all times have the right, at their
joint sole expense, to dispute and contest any liability to, or Claim asserted
by, any person other than the Sellers for which the Buyer and the Parent may be
liable hereunder, provided the Buyer and the Parent first admit to the Sellers
that if there is a liability in respect of such Claim, the Buyer and the Parent
are responsible for such liability.
9.3 Litigation. The Sellers hereby, irrevocably and unconditionally, agrees to
indemnify and save harmless each of the Indemnified Parties from and against any
and all Claims incurred in connection with existing, pending and threatened
litigation. The Sellers agree to defend diligently such litigation through
counsel to be agreed upon by both the Buyer and the Sellers, and to advise and
keep the Buyer informed of all material developments relating thereto and that
they will not settle or otherwise compromise any such action without the consent
of the Buyer.
9.4 Set Off and Similar Rights of the Buyer. In the event that the Sellers fail
to make any payment required to be made pursuant to this Agreement, including
without limitation, payments required pursuant to the indemnification provisions
of this Article, and such payment has not been disputed or contested by the
Sellers, then the Parent or Buyer shall be entitled, in addition to any other
remedies in this Agreement, or at law or in equity, to set off the amount of
such payment against any other amount which may be or become due from the Parent
or Buyer or the Corporation to the Sellers, however arising, notwithstanding
that such indebtedness might have arisen from a different transaction.
9.5 Reimbursement. If any Claim is made by any of the Indemnified Parties under
this Article and such claim is shown to be wrongfully made, then the Indemnified
Party to whom payment had been made under this Article shall reimburse the
Sellers for the amount paid by the Sellers or by the Parent or Buyer on the
Sellers' behalf on account of such Claim.
10.00 - REPURCHASE RIGHTS
10.1 Repurchase Rights. The Sellers shall have a right to repurchase the
Purchased Shares if during the sixteen (16) month period following the Closing
Date or during any period of time that the guarantees of the Sellers to HSBC
have not been released by HSBC, any of the following events should occur:
(a) the Parent or Buyer fails to pay any amount owing to the Sellers pursuant
to this Agreement or the Promissory Notes granted pursuant to this
Agreement, within five (5) days of written notice of default in payment
thereof;
(b) the Parent fails to file the registration statements as required pursuant
to this Agreement provided that Sellers who are directors of the
Corporation have caused the Corporation to provide all information
necessary for filing of such registration statement;
(c) the Parent is delisted from the NASDAQ SmallCap Market or trading of its
shares is suspended for a period of 15 days or more;
(d) the Parent, within six (6) months of the Closing Date, does a reverse
share split unless the Sellers have been compensated by the delivery of
additional shares to ensure that as of the date of such share split the
Weighted Price of each share delivered to the Sellers pursuant to section
2.3(d) is no less than U.S. $1.00 per share;
(e) any change of control of the board of directors of LOGICORP occurs without
the prior written consent of the Sellers.
37
The purchase price in any repurchase of Purchased Shares shall be a repayment to
the Buyer equal to all share consideration paid to Sellers to the date of the
repurchase and all cash consideration paid to the Sellers in excess of $2.37
million and a cancellation of any outstanding promissory notes. In addition, the
Parent will be required to deliver to the Sellers, common stock of the Parent
equal to an aggregate of $500,000 at a price per share equal to the Weighted
Price as of the date of the exercise of the repurchase rights by the Sellers. If
the Sellers exercise their right of repurchase pursuant to this section, then
all declared, booked and accrued amounts, if any, in respect of any
distributions, management fees and other similar expenses referenced in section
4.6(i) shall be waived in their entirety by the Buyer and the Parent and upon
the closing of the repurchase of the Purchased Shares, the Corporation and the
Holding Companies shall be released of all obligations to pay any and all such
distributions, management fees and similar expenses.
10.2 Restrictions. Unless the Sellers otherwise agree in writing, for a period
of 16 months from the Closing Date:
(a) the Buyer shall not sell, transfer, convey, assign, encumber, redeem or
otherwise dispose of, or enter into any agreement for the sale, transfer,
conveyance, assignment, encumbrance, redemption or other disposition of
the Purchased Shares, save and except to or in favour of the Sellers;
(b) the Buyer shall not vote the Purchased Shares so as to authorize, approve,
ratify, allow or cause the Corporations or the Holding Companies:
(i) to amend their respective Articles of Incorporation or Continuance
so as to add, change or remove any provisions restricting or
constraining the transfer or redemption of the Purchased Shares, or
to amend, alter or change any rights, privileges, restrictions or
conditions relating to the Purchased Shares,
(ii) to amalgamate, merge or re-organize with any other corporation or
entity,
(iii) to be continued under the laws of any other jurisdiction,
(iv) to sell, lease or exchange all or substantially all of their
property and assets,
(v) to be dissolved, wound-up or liquidated, or
(vi) to do or permit any act contrary to sub-clause (c) of this section;
(c) the Corporation and the Holding Companies:
(i) shall carry on and conduct their business in the ordinary normal
course consistent with past practice, and shall use their reasonable
best efforts to preserve the Assets, the Business and the goodwill
of clients and suppliers associated with the Business,
(ii) shall not change the nature of the Business.
(iii) shall not, except for the RCA Loans, and an operating loan and
credit facility in the maximum aggregate amount of $4,600,000, incur
any other indebtedness, obligations or liabilities or permit the
Assets to be encumbered, mortgaged or charged, out of the ordinary
course of business,
(iv) shall not pay any dividends or other distributions on any shares in
the capital of the Corporation or the Holding Companies or pay
bonuses to its shareholder or to any person not at Arms-Length with
the Buyer or the Parent if such dividends, distributions or bonuses
result in the consolidated retained earnings of the Corporation and
the Holding Companies falling below $425,000.00 as at the time of
payment of any such dividend, distribution or bonus,
38
(v) shall not sell, issue or allot any additional shares or securities
in their capital stock to any person or entity or enter into any
agreement, option or other commitment in respect thereof;
(vi) shall not assume, guarantee, indemnify, endorse or otherwise become
directly or contingently liable for any obligation or indebtedness
of any other person nor provide financial assistance to any other
person, and
(vii) shall not loan any monies to any person not dealing at Arms-Length
with the Corporation, the Holding Companies, the Buyer or the
Parent.
10.3 Formal Agreement. At the Time of Closing the Buyer, the Parent and the
Sellers shall enter into formal agreement documenting the repurchase rights set
forth herein and providing for the closing procedures and requirements relating
to the repurchase of the Purchased Shares.
11.00 - GENERAL MATTERS
11.1 Public Announcement. The parties to this Agreement agree that a public
announcement of this Agreement and the transactions herein contemplated shall be
made upon execution of this Agreement in a form and at a time agreed to by the
parties hereto prior to execution of this agreement except that it shall be done
on a basis so as not to violate any securities regulations or laws. The parties
agree that the Purchase price shall not be made public unless required by such
securities laws.
11.2 Notices. All notices, requests, demands or other communications required or
desired to be given or made by one party to another shall be given in writing by
personal delivery or prepaid registered mail or by facsimile transmission or
other means of instantaneous transmission in regular commercial usage at such
time, verified by a transmission report, as follows:
to the Sellers: c/o XxXxxxxx Xxxx
Barristers and Solicitors
000, 00000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX X0X 0X0
Attention: Xxxxxx Xxxxxx, Q.C.
Fax: (000) 000-0000
to the Buyer: Chell Merchant Capital Group Inc.
00 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxx Xxxxxxxx, CFO
Fax: (000) 000-0000
with a copy to: Xxxxxxxx, Xxxxx, Sosnovitch LLP
0 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxxxxx
Fax: (000) 000-0000
or at such other address as may be given by any of them to the others. Any
notice or other communication so given or made shall be conclusively deemed to
have been given and received when delivered personally, if delivered personally,
or when transmitted, if given by facsimile transmission, provided that if it is
delivered or transmitted on a day which is not a Business Day then the notice or
communication shall be deemed to have been given and received on the next
Business Day following such date, or on the fifth (5th) Business Day following
the date of
39
mailing, if mailed by prepaid registered mail, except in the event of disruption
of mail services in which event any notice shall be delivered personally or by
facsimile transmission.
11.3 Expenses. The expenses incurred by each of the parties in connection with
the negotiation of this Agreement and the completion of the transactions
provided for in this Agreement, including, except as otherwise provided in this
Agreement, the fees of their respective accountants and solicitors in connection
with such transactions, shall be borne by such party. For greater certainty, the
Sellers shall ensure that all expenses of the transactions contemplated herein,
legal and accounting advice are borne by the Sellers and not the Corporation or
Holding Companies. Sellers shall also be responsible for the payment of all
annual fees of the trustee required to hold special voting shares of the Sellers
in Chell Group Corporation. Current fees are approximately $6,000 per year.
11.4 Time of the Essence. Time is of the essence of this Agreement and every
part of this Agreement and no extension or variation of this Agreement shall
operate as a waiver of this provision. Notwithstanding such, the parties hereto
agree that where the fulfilment of any condition relies on the action of a third
party, that such reasonable extensions as are necessary to ensure the fulfilment
of such conditions shall be granted by the parties hereto, it being understood
that Closing shall take place, in any event, not later than the 1st day of
March, 2002.
11.5 Governing Law. This Agreement and any of the agreements required to be
executed pursuant to the provisions of this Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the Province of Alberta and of Canada applicable thereto and the
parties submit to the jurisdiction of the courts of the Province of Alberta.
11.6 Severability. If any of the provisions contained in this Agreement are, for
any reason, held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained in
this Agreement unless the deletion of such provision or provisions would result
in such a material change as to cause the completion of the transactions
contemplated in this Agreement to be unreasonable.
11.7 Further Assurances. The parties covenant and agree to execute such further
and other documents and undertake such other actions as may be reasonably
required to give effect to the terms and intent of the transactions contemplated
in this Agreement.
11.8 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties and delivered to each of the other parties.
11.9 Enurement. This Agreement shall be binding upon and enure to the benefit of
the parties hereto and their respective heirs, administrators, executors,
successors and permitted assigns, provided that the rights of any party hereto
may not be assigned without the prior written consent of all other parties
hereto.
11.10 Time Periods. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date which is the reference day in calculating such period shall be
excluded.
11.11 Contra Proferentum. Each party hereto acknowledges that each party and its
legal counsel have reviewed and participated in settling the terms of this
Agreement, and the parties hereby agree that any rule of construction to the
effect that any ambiguity is to be resolved against the drafting party shall not
be applicable in the interpretation of this Agreement.
40
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
date first above written.
CHELL GROUP CORPORATION
Per:
--------------------------------
Per:
--------------------------------
CHELL MERCHANT CAPITAL GROUP INC.
Per:
--------------------------------
Per:
--------------------------------
-------------------------------------- ---------------------------
Witness XXXXXXX XXXXXXXXXX
-------------------------------------- ---------------------------
Witness XXXXX XXXXXXXXX
-------------------------------------- ---------------------------
Witness XXXXXX XXXXXXXXX
-------------------------------------- ---------------------------
Witness XXXXXX XXXXXXXXX
XXXXXXXXXX FAMILY TRUST
Per:
--------------------------------
Per:
--------------------------------
41
BAXANDALL FAMILY TRUST
Per:
--------------------------------
Per:
--------------------------------
MERC FAMILY TRUST
Per:
--------------------------------
Per:
--------------------------------
LOGICORP DATA SYSTEMS LTD.
Per:
--------------------------------
Per:
--------------------------------
LOGICORP SERVICE GROUP LTD.
Per:
--------------------------------
Per:
--------------------------------
123557 ALBERTA LTD.
Per:
--------------------------------
Per:
--------------------------------
591360 ALBERTA LTD.
Per:
--------------------------------
Schedule 3.2(h)
1. A convertible debenture in the amount of US$1.7 million with VC Advantage
Limited Partnership dated October 3, 2000 and subsequently assigned to CALP II
Limited Partnership in trust was converted into two five year promissory notes
covering all principal and accrued interest to date. The notes are for
US$504,900 to Advantage Bermuda (Fund) Ltd. and for US$1,365,100 for Canadian
Advantage Limited Partnership. Interest at 10% is payable in common stock of
Parent and there are no principal payments until the due date of August 31,
2006. Guarantees and General Security Agreements were entered into by Parent
subsidiaries to support the obligations.
2. A conditional agreement for the merger with Stardrive Solutions Inc. as
reported in Parent's 8K filing has some debt obligations including an obligation
to provide a bridge loan to Stardive Solutions Inc. prior to closing.
3. An agency agreement was entered into with X Xxxxxx & Associates permitting
them to act as agents for the Parent in the sale of Parent convertible notes
pursuant to a private placement memorandum. The minimum closing is for
US$3,000,000 and the maximum is for US$8,000,000.
4. The existing Royal Bank Mortgage for CDN$1,200,000 was replaced by a mortgage
for CDN $1,250,000 plus an operating line of CDN $300,000 with the Bank of
Montreal.
5. A securities purchase agreement was entered into between parent and Big Fish
Ltd. to purchase 250,000 units in the VC Advantage (Bermuda) Fund Ltd. Parent is
paying the purchase price by way of a promissory note for the full purchase
price of $1,500,000. The value of the units is guaranteed by a mortgage on
property of BOTB Corporation. The note is payable in 5 years with interest of 3%
per annum payable in stock of the Parent.
PARENT AND BUYERS DIRECTORS AND OFFICERS SCHEDULE
BUYER - CHELL MERCHANT CAPITAL GROUP INC.
DIRECTORS
Xxxxxx Xxxxxxxx
Xxxxxxx Xxxxx
Xxxxxx Xxxxxx
OFFICERS
Xxxx Xxxxxx Secretary
Xxxxxxx Xxxxx President and CEO
Xxxxxx Xxxxxxxx Vice-President Finance and CFO
Xxxxxx Xxxxxx Senior Managing Director
PARENT - CHELL GROUP CORPORATION
DIRECTORS
Xxxxxxx Xxxxx
Xxx Xxxxxxxx
Xxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxxx
Xxx Xxxxx
Xxxxxx Xxxxxxx
OFFICERS
Xxxxxxx Xxxxx CEO and President
Xxxxxx Xxxxxxxx Executive Vice-President and CFO
Xxxx Xxxxxx Secretary
RCA LOAN SCHEDULE
DUE TO RCA TRUSTS AT NOV 30, 2001
Due to Xxxx
Due to Xxxxxx Xxxxxxxxx Due to Xxxxxxx Xxxxxxxxxxx RCA Total Due to
RCA Trust Baxandall RCA Trust Trust RCA Trusts
================================================================================
$ 536,505 $ 530,307 $ 530,264 $ 1,597,076
PARTICULARS OF LIFE AND DISABILITY INSURANCE POLICIES
Policy # JR 124789 JR124791 JR124790
Insurer RBC Dominion RBC Dominion RBC Dominion
Policy Type Security Fund Security Fund Security Fund
Policy Date 9/6/1996 9/6/1996 9/6/1996
Owner Logicorp Data Systems Ltd. Logicorp Data Systems Ltd. Logicorp Data Systems Ltd.
Beneficiary Logicorp Data Systems Ltd. Logicorp Data Systems Ltd. Logicorp Data Systems Ltd.
Life Benefit $500,000.00 $500,000.00 $500,000.00
Note:
1. The policies noted above will be transferred to Xxxx, Xxxxx and
Xxxxxx or their respective nominee prior to the Closing Date.
2. Life Insurance Policies JR131691, JR131692, JR131693 were
transferred to Xxxx, Xxxxx and Xxxxx as of Nov 30, 2001.
3. Disability Policies H-0947105, H-0947106, H-0947126 are not being
renewed by the Corporation.
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(x)
EQUIPMENT LEASES
LOCATION TYPE LESSOR Contract # MONTHLY AMOUNT BUYOUT
========================================================================================================
VANCOUVER BRANCH TELEPHONE EQUIPMENT GE CAPITAL 2002877 356.9 163.67
VANCOUVER BRANCH TELEPHONE EQUIPMENT GE CAPITAL 2002288 34.44 206.64
VANCOUVER BRANCH TELEPHONE EQUIPMENT GE CAPITAL 90015 398.45 2358.45
SASKATOON BRANCH POSTAGE METER PITNEY XXXXX LEASING 260978-9 39.95 N/A
EDMONTON BRANCH POSTAGE METER PITNEY XXXXX LEASING 04372597-0001 46.45 N/A
VANCOUVER BRANCH POSTAGE METER FRANCOTYP-POSTALIA CANADA 168444 42.95 N/A
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(v)
LEASED PROPERTY
CONSENT
REQUIREMENTS
IN RESPECT OF
DATE OF CHANGE IN
LOCATION ADDRESS LANDLORD LEASE CONTROL
----------------------------------------------------------------------------------------
0000 XXXXXXX XXXXX, COLLEGE PLAZA CAN TERMINATE
EDMONTON 0000 - 000 XXXXXX, INC/AGENT - WESTCORP WITH 30 DAYS
EDMONTON AB INC. 2/15/1999 NOTICE
000 - 00XX XXXXXX X.X. METROPOLITAN LIFE
CALGARY CALGARY, ALBERTA INSURANCE COMPANY 7/29/1998 NONE
CHANGE IN
CONTROL
VANCOUVER SUITE 500, 1130 WEST 1862 HOLDINGS LTD./ DEEMED TO
XXXXXX STREET, AGENT BENTALL CONSTITUTE A
VANCOUVER, B.C. PROPERTY MANAGEMENT 10/1/1998 SUB-LEASE
SUITE 221 BAYSIDE BENTALL PROPERTIES
CENTRE, 255 - 2ND LTD/TRUSCAN CAN TERMINATE
XXXXXXXXX XXXXXX XXXXX, XXXXXXXXX, PROPERTIES WITH 5 DAYS
SASKATCHEWAN LTD/WESTERN LIMITED 5/1/1999 NOTICE
REGINA 000 - 0000 -00XX XXXXXX, RAINHA PROPERTIES o/a
REGINA SASKATCHEWAN MACRO BUSINESS PLACE 6/15/2001 NONE
0000 XXXXXXX XXXXX, COLLEGE PLAZA CAN TERMINATE
CORPORATE 0000 - 000 XXXXXX, INC/AGENT - WESTCORP WITH 30 DAYS
EDMONTON AB INC. 2/15/1999 NOTICE
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(kk)
LOGICORP DATA SYSTEMS LTD.
SUMMARY OF EMPLOYEES AND COMPENSATION
CONFIDENTIAL - DELETED FOR FILING PURPOSES
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(ii)
Contracts and Agreements
Agreement Type Name Document Number Effective Date Period Value
Reseller
Computer Associates 605007-001 29-Mar-01 27-Mar-04 1250 /yr
Compaq Canada 24-Oct-01 23-Oct-01
IBM Canada 7-Dec-99 6-Dec-01
HP Canada 28-Sep-01 28-Sep-02
Sitara Networks 3-Oct-00 3-Oct-03
Oracle 4-Oct-00 3-Oct-03
Educom 14-May-01 1-May-03
3 Com CFP0008 15-Oct-01 28-Feb-02
Microsoft 3-Dec-01 2-Dec-02
Avaya 30-Nov-01 30-Nov-02
XIOtech 3-Dec-01 3-Dec-02
Citrix 15-Nov-01 14-Nov-01
Novell 1-Mar-98 ongoing
Viewsonic 27-Sep-01 27-Sep-03
Service Authorization
Compaq Canada SVA0009503 27-Jan-01 26-Jan-02
IBM Canada 7-Dec-99 6-Dec-01
HP Canada 28-Sep-01 28-Sep-02
Toshiba
Sony
Supercom 4-Dec-01 3-Dec-02
Microsoft 3-Dec-01 3-Dec-02
Avaya 30-Nov-01 30-Nov-02
Computer Associates 605007-001 29-Mar-01 27-Mar-04
Novell 1-Mar-98 Ongoing
Service Agreement
Internet working
service agreement Telus 6/5/2000 5-Jun-05 3505 /mth
Customer Agreements
Technology Rollover Telus M106070-1 4/1/2001 1-Apr-04 3150 /yr
Technology Rollover Telus M004050-1 11/1/2000 1-Nov-03 2697 /yr
Technology Rollover Telus M007062-1 11/1/2000 1-Nov-03 357 /yr
Technology Rollover Telus M007050-1 11/1/2000 1-Nov-03 119 /yr
All agreements and documents relating to:
* The RCA Loans
* The credit facilities with HSBC
* The Encumbrances listed in the Encumbrances Schedule 3.1(o)
* The Real Property Leases liseted in Schedule 3.1(v)
* The Equipment Leases listed in Schedule 3.1(x)
GENERAL LIABILITY AND EXTENDED INSURANCE COVERAGE
Policy # MPR 2738212
Insurer Continental Insurance Company
Policy Type See attached
Policy Date April 30, 2001 - April 30, 2002
Owner Logicorp Data Systems
Beneficiary Ltd. Logicorp Data Systems Ltd.
As per the attached.
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(y)
INSURANCE
See particulars in the 13 pages attached.
SELLERS DISCLOSURE SCHEDULE - SECTION 3.1(h) FINANCIAL ASSISTANCE
Logicorp Data Systems has guarranteed the amounts loaned from the RCA Trusts
which amounted to $1,597,076 at Nov 30, 2001
