APPLICATION SOFTWARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 30th day of December 1998 (the "Effective
Date").
BETWEEN:
[PURCHASER 5], an Arizona corporation, having a business address at
[ADDRESS] ("Purchaser")
OF THE FIRST PART AND
ALYA INTERNATIONAL, INC., a Delaware corporation, having a business
address at 0000 Xxxx Xxxxxxxx Xxxx, Xx. 000, Xxxx Xxxx, XX 00000 (hereinafter
referred to as "Alya")
OF THE SECOND PART
WHEREAS:
1. Alya is the legal and beneficial owner of the Purchased Assets; and
2. Alya has agreed to sell and assign the Purchased Assets to Purchaser for
use in the Territory, and Purchaser has agreed to purchase the Purchased
Assets on the terms and conditions hereinafter set forth and contained.
NOW THEREFORE in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions shall have the following meanings:
a. "Annual Payments" means those payments included in the Purchase Price
and described at Section 1.1 p (iii) in the annual amount of Two Million
Five Hundred Thousand Canadian Dollars (Cdn. $2,500,000), pro-rated for
partial years.
b. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in
Schedule A to this Agreement together with Enhancements;
c. "Asset Valuation Report" means the software valuation prepared for
Purchaser by [APPRAISER];
d. "Closing" has the meaning set out in Section 7.1;
e. "Closing Date" means December 30, 1998, or such other date as the parties
may agree;
f. "Confidential Information" of a party (the "Disclosing Party") shall mean
information of a confidential and proprietary nature relative to the
Disclosing Party or its business and other matters deemed confidential and
proprietary by the Disclosing Party, written notice of which is given to
the party receiving such information (the "Receiving Party"); provided
that the terms and subject matter of this Agreement and the Management
Agreement, including the Application Software and the Purchased Assets, are
deemed to be confidential without the need for written notice and shall at
all times remain confidential, notwithstanding the exception to
confidentiality noted in the next sentence. "Confidential Information" of
the Disclosing Party shall not include:
i. written information not clearly marked as confidential or oral
disclosures not subsequently confirmed in writing as confidential;
ii. information which the Receiving Party can demonstrate
A. was published or generally known in the industry at the time of
its disclosure by the Disclosing Party, or became published or
generally known in the industry without breach of this Agreement
by the Receiving Party;
B. was known to the Receiving Party at the time of disclosure by the
Disclosing Party, independently of the Disclosing Party and
without breach of an obligation of confidentiality to the
Disclosing Party;
C. is disclosed to the Receiving Party by a third party which had a
right to disclose such information and was not in breach of an
obligation of confidentiality to the Disclosing Party;
2
D. is independently developed by the Receiving Party without use,
directly or indirectly, of any Confidential Information of the
Disclosing Party; or
E. information required to be disclosed pursuant to applicable law,
regulation, judicial or administrative order, lawful subpoena or
enforceable discovery demand, provided the Receiving Party uses
commercially reasonable efforts to obtain confidential treatment
of such information and further provided that the Disclosing
Party receives prior written notice of any pending disclosure,
with sufficient time to protest disclosure or seek an adequate
protective order.
g. "Customers" means any person using or distributing the Security System in
the Territory;
h. "Documentation" has the meaning specified in Subsection v. of the
definition of Purchased Assets;
i. "Enhancement" means any improvement, revision or other modification made
to, or replacement of, the Application Software by Alya or any other
person, to be utilized in connection with providing the Security System,
including, without limitation, any improvement, revision or other
modification which is necessary:
i. to provide Customers with then current Application Software; or
ii. to maintain the Application Software as a state of the art or industry
leading technology,
including, without limitation, the changes set out in Appendix A.1 to
Schedule A to the extent that Purchaser's manager pursuant to the
Management Agreement continues to believe that they are commercially
reasonable in light of then current market conditions and technical
developments;
j. "Infringement Claims" has the meaning specified in Subsection 5.1.b.;
k. "Initial Installment" means Five Hundred Thousand Canadian Dollars (Cdn.
$500,000) to be paid to Alya by [PURCHASER 5] at the Closing, as part of
the Purchase Price.
l. "Intellectual Property" has the meaning specified in Subsection iv. of the
definition of Purchased Assets";
3
m. "Letter of Representation" means a letter from Alya to [APPRAISER] in
substantially the form attached as Schedule B;
n. "Management Agreement" means the Management and Marketing Agreement to be
entered into by Purchaser and Alya on Closing for the management and
marketing of the Purchased Assets;
o. "Originality Certificate" means the Officer's Certificate in the form
attached as Schedule C;
p. "Payment Date" means the date for making an Annual Payment, which is
December 31 of the applicable year, commencing December 31, 1999 and
continuing through December 31, 2010.
q. "Prepayment" means that portion of any payment or payments made by
Purchaser to Alya during any year which is in excess of Cdn. $2,500,000,
provided that the cumulative payments made by Purchaser to Alya to date
exceed the product obtained by multiplying Cdn. $2,500,000 by the number of
Payment Dates to date.
r. "Purchase Price" means the sum of (i) Five Hundred Thousand Canadian
Dollars (Cdn. $500,000), payable at the Closing; (ii) Five Hundred Thousand
Canadian Dollars (Cdn. $500,000), payable on or before March 31, 1999; and
(iii) a eleven-year annual accrual of Two Million Five Hundred Thousand
Canadian Dollars (Cdn. $2,500,000), with the first annual payment accruing
on September 30, 1999 (pro-rated to Cdn. $1,875,000 for the partial year),
and due and payable on or before December 31, 1999, and continuing to
accrue on each September 30th thereafter, through September 30, 2010, with
the last annual payment due and payable on or before December 31, 2010.
s. "Purchased Assets" means the right to exclusively utilize, modify and
develop the Application Software within the Territory and to exclusively
distribute, market and sell the Application Software as incorporated in the
Security System, within the Territory, and to utilize all of Alya's
property and rights necessary for the operation of, or the realization of
benefits from, the Application Software within the Territory, including,
without limitation:
i. all products associated with or derivatives of the Application
Software;
4
ii. the benefit of all agreements necessary for the operation of, or the
realization of the benefit from, the Application Software within the
Territory, including, without limitation, a perpetual, non-exclusive,
royalty free right to use, modify, develop and distribute within the
Territory the OPEN cortex platform software, as described in Schedule
G hereto, and any modification or revision thereto, solely in
connection with the Application Software and the Security Systems, all
service agreements and third party license agreements and all
marketing and product business plans;
iii. customer and supplier lists, and all inventions necessary for the
operation of, or realization of the benefit from, the Application
Software within the Territory, including, without limitation, ideas,
research, discoveries, designs, systems, patterns, specifications,
technology, know-how, formulae, confidential information, data,
computer software development tools, operating systems, source code,
object code, subroutines, algorithms, methods and processes;
iv. all intellectual property rights necessary for the operation of, or
realization of the benefit from, the Application Software within the
Territory, including, without limitation, patents, trademarks,
copyrights and trade secrets and applications for and the right to
apply for any intellectual property (the items listed in paragraph
(iii) and (iv) are hereinafter collectively referred to as the
"Intellectual Property"); and
v. copies of all records, documents (including, without limitation, user
documentation and source code listings), correspondence, notes and
rights related to the foregoing ("Documentation");
t. "Section" means any section, subsection, article, clause, subclause,
paragraph or subparagraph of this Agreement;
u. "Security Agreement" means the Security Agreement to be entered into by
Alya, Purchaser and [SECURITY AGENT], as security agent, on the Closing,
for the purpose of holding the Shares pursuant to the terms thereof;
v. "Shares" means those 100 shares of Purchaser held in the name of
[SHAREHOLDER] and evidenced by stock certificate number 001.
5
w. "Security System" means the building access control system developed by
Alya and known as the O.P.E.N. centrix-Open Platform for Essential Network,
which includes, without limitation, the Application Software, the firmware
containing the Application Software, the O.P.E.N. cortex platform software
and all hardware related thereto; and
x. "Territory" means the geographical regions of Europe, as described in
Schedule F.
1.2 INTERPRETATION
a. The terms "this Agreement", "hereof", "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or
other portion of this Agreement and include any agreement amending or
supplementing this Agreement. Unless something in the subject matter or
context is inconsistent therewith, reference herein to Sections and
Subsections are to Sections and Subsections of this Agreement.
b. Except as specifically stated in this Agreement, all references to currency
are to Canadian dollars.
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires.
d. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
1.3 SCHEDULES
The following schedules are incorporated into and made part of this
Agreement:
Schedule A - Application Software Specifications
Schedule B - Letter of Representation
Schedule C - Originality Certificate
Schedule D - Exceptions to the representations and warranties set out in
Article 4, if any.
Schedule E - Territory
Schedule F - Description of O.P.E.N. cortex platform
ARTICLE 2
AGREEMENT TO SELL, ASSIGN AND PURCHASE
2.1 Alya hereby sells, assigns and transfers all its right, title and
interest in the Purchased Assets to Purchaser
6
and Purchaser hereby purchases the entire right, title and interest of Alya
therein, as of the Effective Date, at and for the Purchase Price payable in
accordance with Article 3 hereof.
2.2 The parties agree that the fair market value of the Purchased Assets
is equal to the Purchase Price and agree that this determination is
final and conclusive between them.
ARTICLE 3
PURCHASE PRICE, TERMS, CONDITIONS AND PAYMENT
3.1 The Purchase Price will be payable as follows:
a. Cdn. $500,000 on Closing, by wire transfer;
b. Cdn. $500,000 on or before March 31, 1999, by wire transfer;
c. Cdn. $1,875,000 on or before December 31, 1999, by wire transfer; and
d. Cdn. $2,500,000 on or before December 31 of each year, commencing December
31, 2000 and continuing through December 31, 2010.
3.2 Purchaser will deduct and remit any withholding tax required to be
deducted and remitted in connection with any payment made under Section 3.1.
3.3 Purchaser will not be responsible for any taxes, levies or other
similar assessments including, without limitation, sales or use taxes payable
in connection with the purchase and sale contemplated by this Agreement, if
any.
3.4 Purchaser may prepay any Annual Payment at any time without any
penalty. In the event that Purchaser pays a Prepayment to Alya, then
Purchaser shall receive a credit for such amount against the balance of the
Purchase Price, which credit shall be increased, as mutually agreed between
the parties, to reflect the future value of such present Prepayment.
3.5 Notwithstanding that each Annual Payment shall become due and
payable on December 31st of the applicable year, an Annual Payment shall not
become delinquent, and Purchaser shall not be in default hereunder, to the
extent that Net Revenues, as defined in the Management Agreement, are
insufficient to pay an Annual Payment. In such event, any unpaid Annual
Payment(s) shall continue to accrue, but shall not be delinquent, and
Purchaser shall not be in default
7
hereunder, unless such Annual Payment(s) are not paid in full on or before
December 31, 2010.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF ALYA
Alya hereby, undertakes, represents and warrants to Purchaser at the
date hereof and at the Closing Date, and acknowledges that Purchaser is
relying on such undertakings, representations and warranties that:
a. Alya is a corporation (i) duly incorporated and organized, validly
subsisting and in good standing under the laws of the jurisdiction of its
incorporation; (ii) duly authorized, with necessary and sufficient permits
and licenses to enable it to own its properties and to carry on its
business as presently owned and carried on by it; and (iii) having the
power and authority and right to enter into this Agreement and each and
every agreement and document to be executed and delivered by it pursuant
hereto and to perform each of its obligations as therein and herein
contained;
b. Alya has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other documents
contemplated hereby;
c. this Agreement constitutes the legal, valid and binding obligation of Alya,
enforceable against it in accordance with its terms;
d. neither execution nor delivery of this Agreement and each and every other
agreement executed and delivered by Alya pursuant hereto nor the
fulfillment or compliance with any of the terms hereof or thereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, the articles and by-laws, as amended, of
Alya or any material agreement or instrument to which Alya is subject or
will require any consent or other action by any person or administrative or
governmental body;
e. Alya now has and on the Closing Date will have good and marketable title,
free and clear of any and all claims, liens, encumbrances, mortgages,
security interests and charges, licenses or rights of other persons
whatsoever to all of the Purchased Assets except as set out in Subsection
4.1 e. of Schedule E;
8
f. there are no agreements or contracts or other documents pertaining to the
acquisition or development of the Purchased Assets except as set out in
Subsection 4.1 f. of Schedule E, copies of which have been delivered to
Purchaser and its counsel;
g. the individuals involved in the development of the Application Software,
the Purchased Assets or any element thereof, are or were:
i. employees of Alya Systems, Inc. ("Alya Systems") who worked within the
scope of their employment to develop the Application Software, the
Purchased Assets, or any element thereof, and who executed a written
waiver of their moral rights in the copyright to the foregoing in
favor of Alya Systems; or
ii. independent contractors or employees of independent contractors.
Except as set forth in subsection 4.1g of Schedule E, each contractor
was subject to agreements assigning their interest, if any, in the
Application Software, Purchased Assets, or any element thereof to Alya
Systems and executed a written waiver of their moral rights in the
copyright to the foregoing in favor of Alya. Copies of ALYA System's
standard Employee Invention Assignment and Confidentiality Agreement
and Consultant Invention Assignment and Confidentiality Agreement are
attached to Schedule E;
h. the Application Software does not contain any third party software.
However, certain third party software is required to operate the
Application Software and Alya has licenses for such third party software
which allow Alya to market such software, directly or indirectly through
sublicensees, as part of the Application Software and Alya will maintain
such licenses in good standing for the benefit of Purchaser. None of the
third party software is custom software developed specifically for use with
the Application Software. All of the third party software is readily
available in the open market and capable of being obtained by the Purchaser
in the event a license terminates, or if the particular software is not
capable of being obtained at such time, other software suitable for
substitution therefor is readily available in the open market and Alya will
modify, at its own cost and expense, the source code of the Application
Software, if necessary, to be compatible;
9
i. the Application Software was not derived from any third party's
pre-existing material except as set out in Subsection 4.1 i. of Schedule E;
j. Alya has not used or enforced or failed to use or enforce any Intellectual
Property rights or other rights associated with the Application Software or
Purchased Assets in any manner which could adversely affect the validity or
enforceability of the Intellectual Property;
k. there is not, and has not been, any infringement or violation of Alya's
rights in and to the Intellectual Property;
l. Alya has not received notice of any claim of adverse ownership, invalidity
or other opposition to or conflict with the Purchased Assets;
m. there are now no and at the Closing Date will be no action, claim or demand
or other proceedings pending or, to the best of its knowledge, threatened
against Alya before any court or administrative agency which could
materially adversely affect the financial condition or overall operations
of Alya or the Purchased Assets, nor any judgment, order or decree
enforceable against Alya which involves or may require the expenditure of
money as a condition to or a necessity for the right or ability of
Purchaser to conduct its business involving the Purchased Assets;
n. it has not entered into any agreement which would entitle any person to any
valid claim against Purchaser for a broker's commission, finder's fee or
any like payment in respect of the purchase and sale of the Purchased
Assets or any other matters contemplated by this Agreement;
o. the Application Software has been developed in accordance with good
professional standards applicable in the computer software industry
including, without limitation, using modern flexible programming languages
and development tools;
p. the Application Software operates in accordance with the applicable
associated user Documentation;
q. none of the Purchased Assets has been disclosed to any third party except
under obligations of confidentiality, the benefit of which obligations are
hereby assigned to Purchaser;
r. there are no licenses, agreements, approvals or consents required or
advisable to enable Alya to
10
lawfully and properly market the Application Software in the Territory
and no such licenses, agreements, approvals or consents will be required
by Purchaser;
s. it has not done anything so as to preclude Purchaser from having full
enjoyment and quiet possession of the Purchased Assets, subject to the
terms and conditions herein;
t. there are no outstanding options, agreements of purchase and sale or other
agreements or commitments obligating Alya to sell the Purchased Assets or
any of them, except pursuant to this Agreement;
u. there are no taxes, levies or other similar assessments including, without
limitation, sales, use or other taxes payable by Alya in connection with
the purchase and sale contemplated by this Agreement;
v. the Application Software is available for use;
w. the assumptions, referred to in the Asset Valuation Report, are true and
correct;
x. the Application Software is application software and is not system software
as the terms "application software" and "system software" are generally
used and understood in the computer industry; and
y. all copyright, patent or trademark registrations or applications for
registration of the Application Software in any jurisdiction have been
disclosed to the Purchaser, including complete and accurate documentation
relating thereto.
All of the representations, warranties and covenants contained in this
Agreement made and to be made by Alya will survive the Closing Date and
continue in full force and effect for the benefit of Purchaser until all
Annual Payments have been made in full.
4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser undertakes, represents and warrants to Alya at the date hereof
and at the Closing Date and acknowledges that Alya is relying on such
undertakings, representations and warranties that Purchaser is now and on the
Closing Date will be an individual who has the power, authority and right to
enter into this Agreement and each and every agreement to be executed and
delivered by Purchaser pursuant hereto and to perform each of his obligations
as therein and herein contained to purchase the Purchased Assets in
accordance with the terms of this Agreement.
11
The representations, warranties and covenants contained in this
Agreement and made and to be made by Purchaser will survive the Closing Date
and continue in full force and effect for the benefit of Alya while any
Annual Payments are outstanding.
ARTICLE 5
COVENANTS
5.1 ALYA'S ASSUMPTION OF LIABILITY AND INDEMNITY
Alya hereby covenants and agrees to be liable to Purchaser for and to
indemnify and save harmless Purchaser from and against, effective as and from
the Closing Date, any claims, demands, actions, causes of action, damages,
losses, costs (including legal costs of a solicitor on a full indemnity
basis), liabilities or expenses which may be made or brought against
Purchaser and which it may suffer or incur as a result of, in respect of, or
arising out of:
a. any non-fulfillment of or breach of any covenant, undertaking,
representation or warranty on the part of Alya, under this Agreement or any
document or instrument contemplated by this Agreement; and
b. subject to Section 5.2, infringement of any third party rights to the
Intellectual Property as a result of the use of the Intellectual Property
by Purchaser in accordance herewith on or after the Closing Date
("Infringement Claims").
5.2 INDEMNIFICATION PROCEDURE
Upon the occurrence of an event giving rise to indemnification
hereunder, Purchaser shall (i) give prompt notice to Alya of such events,
(ii) permit Alya's attorneys to handle and control the defense of such
claims, at Alya's expense, and (iii) shall cooperate in the defense thereof.
Purchaser may, at its own expense, participate in such defense, provided
however, that, if Alya has agreed in writing to assume the defense of such
claims, such participation expenses shall not become part of the
indemnification claim. There shall be no settlements, whether agreed to in
court or out of court, without the prior written consent of Alya and
Purchaser, except that Alya may settle a claim without the consent of
Purchaser if (i) the settlement is purely monetary, (ii) Alya hereunder
admits in writing its liability to Purchaser hereunder, and (iii)
concurrently with such settlement, Alya pays the full amount owed thereunder.
Notwithstanding the foregoing, in the event Alya does not assume the defense
of any such claim or litigation in accordance with the terms hereof within
the
12
earlier of (i) thirty (30) days following written notice from Purchaser or
(ii) the due date for response to any complaint filed, then Purchaser may
defend against such claim or litigation in such manner as it may deem
appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to Alya, on such terms as
Purchaser may deem appropriate. In any action by Purchaser seeking
indemnification from Alya in accordance with the provisions hereof, Alya
shall not be entitled to object to the manner in which Purchaser defended
such claim or the amount of or nature of any such settlement.
5.3 COVENANT NOT TO COMPETE
Purchaser acknowledges that the Purchased Assets have a territorial
limitation, and Purchaser covenants that it will only market, distribute and
sell the Application Software within the Territory. Alya covenants and
agrees that it shall not market, distribute and/or sell the Application
Software within the Territory or to any person that may use it in the
Territory, except as agent for Purchaser, as contemplated in the Management
Agreement. Alya retains the exclusive rights to use, modify, market,
distribute and sell the Application Software, the Enhancements and the
Intellectual Property in all regions of the world, other than the Territory.
Nothing herein precludes Alya from selling the O.P.E.N. cortex platform and
associated hardware as a stand-alone development platform.
5.4 OTHER COVENANTS
Alya (and with respect to Section 5.4 d. only, Purchaser) covenants and
agrees as follows:
a. until the Closing Date, Alya will not sell, license or otherwise dispose of
any of the Purchased Assets or any part thereof or interest therein, or
agree to do so, or enter into any negotiations with a view to any of the
foregoing, without the prior approval of Purchaser;
b. Alya will make available to Purchaser for due diligence investigations, all
information, documents and agreements pertaining to the development,
acquisition and marketing of the Application Software, including, without
limitation, computer code and related documentation, marketing and product
business plans and the full cooperation of Alya management;
c. Alya will complete the Originality Certificate and deliver it to Purchaser
and Purchaser's counsel on or before Closing;
13
d. each Receiving Party that receives Confidential Information from the
Disclosing Party shall maintain such Confidential Information in
confidence, shall not reveal the same to any third party (other than its
employees on a need to know basis in connection with the Receiving Party's
performance under this Agreement or the Management Agreement) and shall not
use such Confidential Information, directly or indirectly, for any purpose
other than as required in the performance of this Agreement or the
Management Agreement; and
e. Alya will acquire, at its expense and in Purchaser's name, licenses for any
third party software comprising part of the Purchased Assets not assignable
or assigned by Alya to Purchaser.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser hereunder will be subject to the
satisfaction or compliance with, at or before Closing, of each of the
following conditions precedent (each of which is hereby acknowledged to be
included for the exclusive benefit of Purchaser and may be waived in writing
in whole or in part):
a. the execution and delivery of all of the closing deliveries identified in
Section 7.3;
b. all legal and regulatory approvals and consents, whether from shareholders,
governmental authorities or other third parties necessary to the completion
of the transactions contemplated by the terms of this Agreement have been
obtained;
c. there will have been no material adverse change, financial or otherwise, in
Alya or the Purchased Assets;
d. Alya will have performed or complied with, in all respects, all of its
undertakings, covenants and agreements hereunder to be performed or
complied with; and
e. the representations and warranties of Alya contained in Section 4.1 will be
true and correct on Closing.
6.2 CONDITIONS TO ALYA'S OBLIGATIONS
The obligations of Alya hereunder will be subject to the satisfaction or
compliance with, at or before Closing,
14
of each of the following conditions precedent (each of which is hereby
acknowledged to be included for the exclusive benefit of Alya and may be
waived in writing in whole or in part):
a. delivery of the Initial Installment, and the execution and delivery of all
closing deliveries identified in Section 7.4;
b. Purchaser will have performed or complied with, in all respects, all of its
undertakings, covenants and agreements hereunder to be performed or
complied with; and
c. the representations and warranties of Purchaser contained in Section 4.2
will be true and correct on Closing.
ARTICLE 7
CLOSING
7.1 CLOSING DATE
The transaction of purchase and sale contemplated by this Agreement will
be completed at or about 3:00 P.M. on the Closing Date at the offices of
Purchaser's Solicitors ("Closing").
7.2 SURVIVAL
This Agreement and its component parts will not merge upon Closing or on
execution, delivery or registration of any documents executed, delivered or
registered pursuant to this Agreement or otherwise, but will survive Closing.
7.3 ALYA'S CLOSING DELIVERIES
At the Closing, Alya will duly execute and deliver or cause to be
executed and delivered to Purchaser the following:
a. a xxxx of sale assigning the Purchased Assets to Purchaser;
b. the Management Agreement;
c. the Originality Certificate;
d. the Letter of Representation;
e. the Security Agreement;
15
f. an electronic copy of the Application Software, including, without
limitation, a copy of all Documentation, each of which shall be delivered
to Purchaser or his designee by electronic transfer;
g. a certified copy of the resolutions of the directors of Alya authorizing
the transactions;
h. such other agreements and documents as Purchaser may reasonably request to
give effect to the terms and conditions of this Agreement;
i. a copy of all authors' assignments of copyright, patent and trademark and
waivers of moral rights in the Application Software; and
j. a copy of all patent, trademark and copyright registrations in respect of
the Application Software.
7.4 PURCHASER'S CLOSING DELIVERIES
At Closing, Purchaser will execute and deliver or cause to be executed
and delivered the following:
a. wire transfer, bank draft or solicitor's trust cheque for the cash amount
of the Initial Installment payable on Closing pursuant to Section 3.1,
subject to any withholding tax payable in connection with such payment;
b. the Management Agreement;
c. the Security Agreement; and
d. such other agreements and documents as Alya may reasonably request to give
effect to the terms and conditions of this Agreement.
7.5 DELIVERY TO SECURITY AGENT
At Closing and as security for its obligations hereunder, Purchaser will
deliver to the Security Agent, under the Security Agreement, the Shares.
ARTICLE 8
GENERAL
8.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, such provision shall be construed so as to most
closely reflect the original intent of the parties, but still be
16
enforceable, and the validity, legality or enforceability of such remaining
provisions or parts thereof will not in any way be affected or impaired
thereby. The invalidity, illegality or unenforceability of any provision or
part thereof contained in this Agreement in any jurisdiction will not affect
or impair such provision or part thereof or any other provisions of this
Agreement in any other jurisdiction.
8.2 FURTHER ASSURANCES
Each of the parties will, at any time and from time to time at the
request of the other, execute and deliver any and all such further
instruments or assurances as may be necessary or desirable to give effect to
the terms and conditions of this Agreement.
8.3 COUNTERPART AND FACSIMILE EXECUTION
This Agreement, and any and all ancillary documents contemplated herein,
may be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Agreement and will be binding on the parties
as if they had originally signed one copy of this Agreement.
8.4 ASSIGNMENT
Purchaser may assign any part of its interest in this Agreement or the
Purchased Assets, except that any assignment to a competitor of Alya requires
the prior written consent of Alya. Such assignment shall be effected by:
a. giving written notice of the name and address of the assignee; and
b. by delivering to Alya a written undertaking of the assignee, acknowledging
receipt of a copy of this Agreement and agreeing to be bound by the terms
and conditions of this Agreement.
Alya may not assign this Agreement, without the prior written consent of
Purchaser.
8.5 BINDING EFFECT
This Agreement and all of its provisions will enure to the benefit of
the parties and their respective successors and permitted assigns, and will
be binding upon the parties and their respective successors and permitted
assigns. The expressions "Alya" and "Purchaser", as used herein will
17
include Alya's and Purchaser's permitted assigns whether immediate or
derivative, respectively.
8.6 ARBITRATION OF DISPUTES
Any dispute arising between the parties under this Agreement will be
settled by initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot
resolve the dispute within 30 days of escalation of the dispute to such
level, then the parties agree that such dispute shall be settled by final
and binding arbitration in Vancouver, British Columbia, before a single
arbitrator mutually acceptable to Owner and Manager, in accordance with the
Commercial Arbitration Act, S.B.C. 1979c.3 then existing, except as otherwise
specifically provided herein. The arbitrator shall apply the laws of British
Columbia for the purposes of construing and enforcing this Agreement and any
dispute arising hereunder. The arbitration award shall be specifically
enforceable; judgment upon any arbitration award may be entered in any court
with personal jurisdiction over the parties and subject matter of the
disputes. Unless otherwise determined by the arbitrator, all expenses in
connection with such arbitration will be divided equally between the parties,
with the exception of expenses of counsel, witnesses and employees of the
parties which will be borne by the parties incurring them. Notwithstanding
anything to the contrary herein, either party will always be entitled to seek
preliminary or provisional remedies or release (including attachments and
preliminary injunctions) from any court of competent jurisdiction.
8.7 AMENDMENT
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise. Time will be of the essence of this Agreement.
8.8 COSTS
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in this transaction.
8.9 CONFIDENTIALITY
Each of the parties will treat this Agreement and all information
relating to this Agreement and the transactions contemplated by this
Agreement confidentially and no public disclosure by any party will be made
without the prior approval of the other, not to be unreasonably withheld,
except as legally required by a party to satisfy disclosure obligations to
shareholders and regulators, in which case
18
simultaneous notice of such disclosure will be given to the other party.
8.10 ENTIRE AGREEMENT
This Agreement, the Management Agreement, and the exhibits and schedules
referenced in each of the foregoing constitute the entire Agreement among the
parties and supersede all proposals, letters of intent, representations or
agreements, oral or written, among them relating to the subject matter hereof.
8.11 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of British Columbia and Canada (regardless of either
jurisdiction's or any other jurisdiction's choice of law principles). To the
extent permitted by law, the parties hereto agree that all actions or
proceedings arising in connection herewith, shall be arbitrated or litigated
in Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, and each party hereby waives any
right it may have to assert the doctrine of Forum Non Conveniens or to object
to venue. The parties each hereby stipulate that the courts located in
Vancouver, British Columbia, shall have personal jurisdiction and venue over
each party for the purpose of litigating any such dispute, controversy or
proceeding arising out of or related to this Agreement.
8.12 NOTICES
Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given by
personal delivery, international overnight courier service, or by facsimile
(subject to confirmation of receipt), addressed to the respective party at
the applicable address set forth above, or to any party at such other
addresses as shall be specified in writing by such party to the other parties
in accordance with the terms and conditions of this Section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or two (2) business days following deposit with any international overnight
courier service, or upon confirmation of receipt if sent by facsimile
transmission.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day first above written.
ALYA: ALYA INTERNATIONAL, INC.
19
By: /s/ Milan Carnogursky
--------------------------------
Milan Carnogursky
Chairman of the Board
PURCHASER: [PURCHASER 5]
By: /s/
--------------------------------
[VICE-PRESIDENT OF PURCHASER 5]
Vice-President
20
MANAGEMENT AND MARKETING AGREEMENT
THIS AGREEMENT made as of December 30, 1998.
BETWEEN:
[PURCHASER 5], an Arizona corporation, having a business address at
[ADDRESS], FAX [FAX]; (hereinafter referred to as "Owner")
OF THE FIRST PART AND
ALYA INTERNATIONAL, INC., a California corporation, having a business
address at 0000 Xxxx Xxxxxxxx Xxxx, Xx. 000, Xxxx Xxxx, XX 00000, FAX: (650)
000-0000 (hereinafter referred to as "Manager")
OF THE SECOND PART
WHEREAS:
A. Owner has acquired or developed and owns all of the right, title and
interest to use, distribute and sell the Assets in the Territory; and
B. Owner wishes to appoint Manager, as Owner's agent, to manage, market,
distribute and sell the Security System in the Territory on the terms and
conditions set out in this Agreement.
NOW THEREFORE in consideration of the entitlements to receive certain
cash distributions under this Agreement, and the covenants, agreements and
premises herein contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions will have the following meanings:
a. "Annual Payments" means those payments under the Annuity in the annual
amount of Two Million Five Hundred Thousand Canadian Dollars
(Cdn. $2,500,000), pro-rated for partial years.
b. "Annuity" means Owner's right to an annual accrual of Two Million Five
Hundred Thousand Canadian Dollars (Cdn. $2,500,000), with the first annual
payment accruing on September 30, 1999, and due and payable on
21
or before December 31, 1999, and continuing to accrue on each
September 30th thereafter, through September 30, 2010, with the last
annual payment on or before December 31, 2010, subject to pro-ration of
any payment for partial years and further subject to the terms and
conditions set forth in the Application Software Purchase Agreement.
c. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in Schedule A to this Application Software Purchase
Agreement together with Enhancements;
d. "Application Software Purchase Agreement" means the application software
purchase agreement made as of December 30, 1998, between Owner and Manager;
e. "Assets" means "Purchased Assets" as that term is defined in the
Application Software Purchase Agreement;
f. "Confidential Information" of a party (the "Disclosing Party") shall mean
information of a confidential and proprietary nature relative to the
Disclosing Party or its business and other matters deemed confidential and
proprietary by the Disclosing Party, written notice of which is given to
the party receiving such information (the "Receiving Party"); provided
that the terms and subject matter of this Agreement and the Application
Software Purchase Agreement, including the Application Software, the
Security System and the Purchased Assets, are deemed to be confidential
without the need for written notice and shall at all times remain
confidential, notwithstanding the exception to confidentiality noted in the
next sentence. "Confidential Information" of the Disclosing Party shall not
include:
i. written information not clearly marked as confidential or oral
disclosures not subsequently confirmed in writing as confidential;
ii. information which the Receiving Party can demonstrate
A. was published or generally known in the industry at the time of
its disclosure by the Disclosing Party, or became published or
generally known in the industry without breach of this Agreement
by the Receiving Party;
B. was known to the Receiving Party at the time of disclosure by the
Disclosing Party,
22
independently of the Disclosing Party and without breach of an
obligation of confidentiality to the Disclosing Party;
C. is disclosed to the Receiving Party by a third party which had a
right to disclose such information and was not in breach of an
obligation of confidentiality to the Disclosing Party;
D. is independently developed by the Receiving Party without use,
directly or indirectly, of any Confidential Information of the
Disclosing Party; or
E. information required to be disclosed pursuant to applicable law,
regulation, judicial or administrative order, lawful subpoena or
enforceable discovery demand, provided the Receiving Party uses
commercially reasonable efforts to obtain confidential treatment
of such information and further provided that the Disclosing
Party receives prior written notice of any pending disclosure,
with sufficient time to protest disclosure or seek an adequate
protective order.
g. "Customer" means any person using or distributing the Security System in
the Territory;
h. "Documentation" has the meaning set out in Subsection v. of the definition
of "Purchased Assets" as defined in the Application Software Purchase
Agreement;
i. "Enhancement" means any improvement, revision or other modification made
to, or replacement of, the Application Software by Manager, or any employee
or subcontractor of Alya, to be utilized in connection with providing the
Security System, including, without limitation, any improvement, revision
or other modification which is necessary:
i. to provide Customers with the then current Security System; or
ii. to maintain the Application Software as a state of the art or industry
leading technology,
including, without limitation, the changes set out in Appendix A.1 to
Schedule A of the Application Software Purchase Agreement, to the extent
that Manager continues to believe they are commercially reasonable in light
of then current market conditions and technical developments;
23
j. "Expenses" has the meaning specified in Subsection 3.1 b.;
k. "Gross Sales" has the meaning specified in Subsection 3.1 b.;
l. "Intellectual Property" has the meaning specified in Subsection iv. of the
definition of "Purchased Assets" as defined in the Application Software
Purchase Agreement;
m. "Management Fee" has the meaning specified in Subsection 3.1.b;
n. "Manager" means Alya International, Inc. and its permitted assigns in its
capacity as the agent for Owner and manager of the Assets appointed by
Owner under this Agreement;
o. "Net Revenue" has the meaning specified in Subsection 3.1 b.;
p. "Net Sales" has the meaning specified in Subsection 3.1 b.;
q. "Overhead and Administrative Costs" has the meaning specified in
Subsection 3.1 b.;
r. "Owner's Return" has the meaning specified in Subsection 3.1 b.;
s. "Security System" means the building access control system developed by
Manager and known as the O.P.E.N. centrix - Open Platform for Essential
Networks, which includes, without limitation, the Application Software, the
firmware containing the Application Software, the O.P.E.N. cortex platform
software and all hardware related thereto;
t. "Territory" means the geographic region of Europe, as described in
Schedule B; and
u. "year" means fiscal year ending September 30.
1.2 INTERPRETATION
a. The terms "this Agreement", "hereof", "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or
other portion of this Agreement and include any agreement amending or
supplemental to this Agreement. Unless something in the subject matter or
context is inconsistent therewith,
24
reference herein to Sections and Subsections are to Sections and
Subsections of this Agreement;
b. Except as specifically stated in this Agreement, all references to currency
are to United States of America dollars. Any currency conversion required
or contemplated by this Agreement with respect to Canadian and United
States of America currency will be based on the rate published by the Bank
of Canada as the noon spot rate of exchange applicable for such currencies
on the business day immediately before the date of conversion;
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires and the provisions hereof.
d. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
1.3 SCHEDULES
The following schedules are incorporated into and made part of this
Agreement:
a. Schedule A - Specifications of Application Software; and
b. Schedule B - Territory.
ARTICLE 2
MANAGEMENT SERVICES
2.1 APPOINTMENT OF AGENT/MANAGER
Owner hereby appoints Manager as its sole and exclusive agent for the
purpose of managing the marketing, distribution, sale, Enhancement and
support of the Security System within the Territory, subject to the terms and
conditions of this Agreement, and Manager hereby accepts such appointment.
2.2 MANAGEMENT DUTIES
a. Manager will, in good faith, observe and perform the following obligations
in respect of the marketing, distribution, sale, Enhancement and support,
within the Territory, of the Security System in a good and workmanlike
manner, utilizing its capable management and technical expertise:
25
i. MARKETING, DISTRIBUTION AND SALE. Manager will be responsible for the
marketing and selling of the Security System, within the Territory,
including, without limitation, developing marketing materials,
organizing product demonstrations, establishing distribution channels,
pricing, promotion and sale of the Security System. Manager will use
commercially reasonable efforts to maximize sales of the Security
System within the Territory. Manager will be responsible for
developing and negotiating the contracts required to sell the Security
System to Customers within the Territory. Owner will be entitled to
receive copies of and to comment on standard form sales and support
service contracts and Manager shall address all such comments with
Owner and take into account all of Owner's directions and instructions
forming a part of such comments. All such contracts will contain
provisions of confidentiality acceptable to Owner. In addition,
Manager will have responsibility for the billing and collection of
fees and payments from Customers and for the payment of fees to Owner.
Manager shall comply with all applicable laws and regulations and
obtain all appropriate government approvals pertaining to the sale,
distribution and advertising of good and services utilizing the
trademark "O.P.E.N. centrix";
Owner will be entitled to conduct an inspection of the management of
the marketing, distribution, sale, Enhancement and support of the
Security System at any time during regular business hours upon
reasonable notice to Manager. Notwithstanding any other provision in
this Agreement, Manager will take into account any and all
commercially reasonable directions and/or specifications given by
Owner pertaining to the marketing, distribution, sale, Enhancement and
support of the Security System which Manager may receive from Owner
from time to time in writing;
ii. SUPPORT, TRAINING AND CONSULTING. Manager will have complete
responsibility for delivery and installation of the Security System
within the Territory. Manager will provide all support services for
Customers including telephone and on-site support. Manager will also
provide all required training and consulting support;
iii. MAINTENANCE AND ENHANCEMENTS. All maintenance necessary to correct
any errors in the Assets
26
found by any Customer will be provided by Manager pursuant to the
terms of its support services agreements. Manager will prepare and
provide all Enhancements to Owner; and
iv. With respect to any third party software required to operate the
Security System, Alya has licenses for such third party software which
allow Alya to market such software, directly or indirectly through
sublicensees, in conjunction with the Security System and will
maintain such licenses in good standing for the benefit of Owner.
b. In addition to the duties referred to in Subsection 2.2 a., Manager will,
in good faith and in satisfaction of its fiduciary duty to Owner do the
following:
i. REVIEWS. Manager will review and report to Owner or its duly appointed
agent on Manager's performance under this Agreement on a quarterly
basis. Such reviews will be scheduled by mutual agreement of all
parties;
ii. COMPUTER CODE. Upon request, Manager will deliver computer code (in
object code and source code form) together with all related
documentation and development tools necessary or desirable to enable
the Application Software and all Enhancements to operate properly to
Owner or its duly appointed agent quarterly, within thirty (30) days
of the end of each calendar quarter. Manager will assist Owner or its
agent in verifying that the computer code delivered to Owner is fully
functional Application Software and Enhancements; and
iii. CONFLICT OF INTEREST. Manager acknowledges and agrees that it is
acting in a fiduciary capacity as agent of Owner, it will act in good
faith and in the best interest of Owner, and will conduct itself as
such in all dealings on behalf of Owner and in connection with the
performance of its obligations under this Agreement. In particular,
Manager will avoid conflicts of interest between itself and Owner in
connection with the business of marketing, distribution, sale and
support of the Security System in the Territory.
2.3 INSURANCE
a. Without in any way limiting the liability of Manager under this Agreement,
Manager will be responsible to maintain and keep in force during the term
of this Agreement the following insurance coverage:
27
i. automobile liability insurance on all vehicles used in connection with
this Agreement. In respect of such vehicles not owned by Manager, it
will maintain and keep in force as aforesaid non-owned automobile
liability insurance protecting its liability including that assumed
under this Agreement. The limits of such insurance will be at least;
for bodily injury (including passenger hazard) and property damages,
one million dollars ($1,000,000.00) inclusive for any one accident;
ii. comprehensive general liability insurance (including liability under
this Agreement) with inclusive limits of not less than two million
dollars ($2,000,000.00) for bodily injury and property damage;
iii. employer's liability insurance with limits of not less than one
million dollars ($1,000,000.00) for each employee where Workers'
Compensation does not exist; and
iv. unless otherwise directed by Owner, in writing, insurance covering
loss of or damage to all machinery, tools, equipment, supplies and
structures owned by Manager and/or rented or leased from a third party
or parties and used by Manager or its sub-contractors in performing
its obligations under this Agreement.
b. The above insurance policies will not be changed in any manner which could
affect the interests of the Owner without thirty (30) days' prior written
notice by registered mail to the Owner.
c. For greater certainty, the parties agree and understand that the
obligations of Manager, as set forth in this Section 2.3, may be fulfilled
if Manager's existing insurance policy satisfies the requirements of this
Section.
d. Upon request Manager will supply Owner with certificates evidencing the
above insurance. Any insurance carried by Manager will name Manager as an
additional insured and loss payee, and will contain a waiver of subrogation
in favor of Owner.
ARTICLE 3
ALLOCATION AND DISTRIBUTION OF FEES
3.1 DISTRIBUTION OF FEES
28
a. Manager will distribute, annually, the Net Revenues for the preceding year
in the following order of priority:
i. To pay the most recent Annual Payment due, plus any accrued and
unpaid Annual Payment from any previous year;
ii. To pay the Owner's Return, including any cumulative amount of the
Owner's Return not paid in prior years; and
iii. To pay any balance to the Owner.
b. For the purposes of this Agreement the following terms have the following
meanings:
i. "Management Fee" means an annual marketing and management fee payable
to Manager by Owner and calculated at the end of each year pursuant to
the following formula:
Formula:
Management Fee = (N - A + O) X .55,
[but not less than zero]
Where,
A = the current Annual Payment, plus any accrued and unpaid Annual
Payments;
N = Net Revenues, excluding the Management Fee; and
O = Owner's Return
ii. "Expenses" means the following cumulative costs and fees to the extent
not previously recouped by Manager in accordance herewith:
A. the cost of goods sold relating to the Application Software,
including without limitation, costs of material, manufacturing,
quality assurance and testing, costs of third party licenses, but
excluding any costs of goods sold relating to the hardware
incorporated in the Security System;
B. direct costs of marketing, distributing and selling the Security
System in the Territory;
C. the pro rata share of the cost of Enhancements in a year,
determined by multiplying the cost of Enhancements in such year
by a fraction, the numerator of which is
29
the Net Sales in such year and the denominator of which is the
gross amount paid to Alya in such year for the purchase,
installation and support of the Security System worldwide, less
normal course of business selling credits for discounts and
rebates in such year and less return adjustments for which a
refund has been paid or credited to the customer to the extent
of the payment or credit in such year;
D. Overhead and Administrative Costs; and
E. Management Fee.
iii. "Gross Sales" means gross amounts paid by Customers in the Territory,
in a year, to purchase, install, and receive support for the Security
System less the price of the hardware incorporated therein, applying
Manager's standard prices charged to similar customers, as in effect
from time to time;
iv. "Net Revenue" means Net Sales less Expenses;
v. "Net Sales" means Gross Sales less:
A. normal course of business selling credits for discounts or
rebates to Customers for the year; and
B. returns or adjustments for the Security System for which a refund
has been paid or credited to the Customer, or any distributor or
other reseller, to the extent of the payment or credit in the
year;
vi. "Overhead and Administrative Costs" means the overhead and
administrative costs of Manager to manage and market the Security
System in the Territory, for a year, determined by multiplying
Manager's total overhead and administrative costs for marketing and
managing the Security System worldwide in such year by a fraction, the
numerator of which is the Net Sales for such year and the denominator
of which is the aggregate gross amount paid to Alya in such year, for
the purchase, installation and support of the Security System
worldwide, less normal course of business selling credits for
discounts and rebates in such year and less return adjustments for
which a refund has been paid or credited to the customer, to the
extent of the payment or credit in such year; and
30
vii. "Owner's Return" means an annual cumulative preferential return to
Owner of Five Hundred Thousand Canadian Dollars (Cdn. $500,000)
(prorated for any partial year);
d. Notwithstanding anything else contained in this Agreement, in no event,
without the prior written consent of Owner, will fees or other amounts for
the Security System:
i. be set below competitive prices prevailing in the market for similar
products or services as determined by Manager acting in the best
interests of Owner; or
ii. be discounted for any other consideration granted to Manager, its
affiliates or associates that is not provided to Owner; and
e. All amounts to be determined for the purposes of the calculations required
pursuant to this Article 3 will be determined in accordance with United
States generally accepted accounting principles consistently applied from
year to year and consistently applied between the Security System sold by
Manager hereunder and the other services sold by Manager outside the scope
of this Agreement.
3.2 TIMING AND PAYMENT OF DISTRIBUTIONS
Amounts payable to Owner for a year pursuant to Section 3.1 will be paid
within 60 days following the year end.
3.3 SET OFF
Manager will have the right to set off amounts payable by Manager to
Owner under this Agreement against amounts payable to Manager by Owner
pursuant to the Annuity, except that Manager will have no right of set off
and will pay the following amounts to Owner without regard to the equities
between Manager or its affiliates and Owner:
i. amounts payable to Owner pursuant to Subsection 3.1 a.ii. for his
retention; and
ii. amounts payable by Owner as sales taxes or goods and services taxes,
which amounts will be remitted forthwith upon their being due, by
Manager to the appropriate authorities on behalf of Owner.
3.4 REPORTS
31
a. Manager will give Owner, on a confidential basis, annual reports within 90
days following the end of each fiscal year, setting forth the details in
respect of all sales and support of the Security System in the Territory
during such year, including the name and address of all Customers, the
amount and type of all fees and other amounts payable to date, potential
Customers and projected revenues in the Territory. Manager will give
Owner, on a confidential basis, quarterly reports within forty-five (45)
days following the end of each fiscal quarter, which quarterly reports
shall set forth Gross Sales and Net Sales received by Manager from
Customers in the Territory for the immediately preceding quarter.
Additionally, Manager will give Owner, on a confidential basis, the Gross
Sales, Net Sales, Net Revenues, Expenses, and Overhead and Administrative
Costs for the quarter ending December 31st on or before the following
February 28th.
b. In addition, Manager will give Owner, on a confidential basis, the detailed
calculations necessary to establish Gross Sales, Net Sales, Expenses,
Overhead and Administrative Costs and Net Revenues including, without
limitation, the component parts thereof annually, within 90 days following
the end of each fiscal year.
3.5 FINANCIAL STATEMENTS
Manager will provide the following financial statements, for the
business pertaining to the Security System, to Owner, annually, within 90
days following the end of each fiscal year of Manager:
i. the annual reports referred to in Section 3.4;
ii. an audited income statement; and
iii. an audited balance sheet.
3.6 BOOKS AND RECORDS
Manager will keep and maintain complete and accurate books and records
related to the business of selling the Security System in the Territory,
separate and apart from the books and records maintained for its own sales or
other business. These will include records of all sales and support of the
Security System in the Territory, all costs of providing the Security System
and the appropriate fees accruing and collected. These books and records will
be maintained according to U.S. generally accepted accounting principles and
practices respecting all matters pertinent to this Agreement. Owner will
have the right, at his own expense, to audit the books and records of Manager
32
pertaining to marketing the Security System in the Territory, and the
performance of its other obligations hereunder, once each year. For this
purpose, Owner or its nominee will have, during normal business hours, access
to and the right to copy and remove copies of all books and accounting
records relating to the calculation of fees accrued and collected from the
sale of the Security System in the Territory. All information obtained by
Owner or its nominee will be subject to the confidentiality obligations of
this Agreement.
3.7 TAXES
a. Manager will charge and collect from Customers any and all taxes of any
type that are imposed on the use, sale or support of the Security System in
the Territory by Manager by any federal, state, local or any other taxing
authority in which the Security System is sold and Manager will pay and
duly remit on a timely basis to the appropriate taxation authority the tax
so charged and collected;
b. Manager is responsible to withhold and remit on a timely basis the amount
of any income, sales or any other tax imposed on the Management Fee or any
other amount paid or credited to the Manager hereunder by any federal,
provincial, state, local or any other taxation authority in any country
regardless of whether the obligation to withhold and remit such amount is
on the Owner;
c. Subject to subsections 3.7(b) hereof, the Owner and Manager are required to
pay their respective taxes of any type imposed on them for fees paid or
credited to the Owner or Manager hereunder; and
d. Manager will prepare or provide the Owner with any and all information or
other documentation on a timely basis required by the Owner to enable the
Owner to prepare any return required to be filed by it with any taxing
authority in connection with an amount withheld or payable in accordance
with this Agreement or alternately, the Manager shall prepare and file such
a return on the Owner's behalf in the name of the Owner within the time
required to file such return and shall provide a copy thereof to the Owner.
ARTICLE 4
GRANT OF RIGHTS
4.1 In consideration of the Owner's Return and other good and valuable
consideration (the receipt and sufficiency of which is acknowledged by
Owner), Owner hereby grants
33
Manager, during the term of this Agreement and subject to the restrictions
imposed in this Agreement, an exclusive Territory-wide right to use, modify,
market, distribute and sell the right to use the Application Software, the
Intellectual Property and the Documentation in the Territory, but only with
products or services that are not competitive with the Security System.
4.2 Owner shall own the exclusive rights to use, market, distribute and
sell the right to use within the Territory any modification to the
Application Software made by Manager which constitutes an Enhancement.
Manager shall retain the exclusive right to use, market, distribute and sell
the right to use, in all regions of the world other than the Territory, any
Enhancement. Any modification to the Application Software which does not
constitute an Enhancement will be owned by Manager. Any modification to the
Intellectual Property or the Documentation that does not relate to an
Enhancement will be owned by Manager.
4.3 During the term of this Agreement, neither Manager nor any of its
affiliates or associates will, directly or indirectly, market, distribute or
sell any product or service within the Territory, which product or service
directly or indirectly competes with the Security System. Nothing precludes
Manager from selling the O.P.E.N. cortex platform and associated hardware as
a stand-alone development platform.
4.4 Manager will have, upon termination of this Agreement, an
exclusive, Territory-wide, paid up right to use, market, promote, distribute
and sell the right to use the Application Software in accordance with Section
4.1:
a. upon termination of this Agreement by Owner pursuant to Subsection 5.4, if
Manager is not then in default of this Agreement; or
b. upon termination of this Agreement by Owner, pursuant to Section 5.3, if
Manager pays Owner, an amount calculated as the difference between Five
Million Canadian Dollars (Cdn. $5,000,000) and the amount of Owner's Return
credited to Owner to the date of termination.
4.5 PROTECTION OF PROPRIETARY RIGHTS
Each party hereto shall promptly notify the other party in writing of
any infringement by a third party of a patent, copyright or trademark or
misappropriation of any trade secret relating to the Security System or the
Assets within the Territory. In the case of an infringement,
misappropriation or other action described herein, Manager
34
is hereby authorized to, but shall not be required to, institute an action
against the infringer, misappropriator or other third party, and to defend or
prosecute such action in whatever manner deemed appropriate by Manager, in
its sole discretion. The reasonable costs and expenses relating thereto
shall be deemed to be included within the definition of "Expenses". If
Manager elects not to commence such an action, then Owner may, but shall not
be required to, institute such an action, and the reasonable costs and
expenses relating thereto shall be deemed to be included within the
definition of Expenses. Any recoveries obtained as a result of instituting
such an action shall be deemed to be Net Revenues for the purposes of
distributing such funds. Owner shall cooperate with and generally assist
Manager in taking any action authorized hereunder. This provision shall
survive any termination or expiration of this Agreement, to the extent
Manager retains any license to the Application Software.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM
This Agreement will be for an initial term expiring December 30, 2008,
(the "initial term") and may be extended, for two additional two year terms,
each term expiring on the respective second anniversary date of the beginning
of such term.
5.2 AUTOMATIC EXTENSION
The initial term or any-extension term of this Agreement will be
automatically extended to the next extension term without notice or election
by Manager. Manager may, during any extension term, terminate this Agreement
on 90 days notice given to Owner.
5.3 TERMINATION
Owner may, during the initial term or any extension term, terminate this
Agreement as follows:
a. upon 10 days written notice by Owner to Manager of a breach of any of
Manager's obligations to pay Owner under this Agreement, subject to Section
3.4, if such breach has not been remedied;
b. upon 30 days written notice by Owner to Manager of a material breach by
Manager (other than a failure to pay referred to in SubSection a.) of this
Agreement if such breach is not remedied within the 30 day notice period,
or if steps are not being taken by Manager within the 30 days notice period
which can reasonably
35
be expected to remedy such breach within 60 days of the date of the
notice; or
c. forthwith upon written notice to Manager, in the case of the petitioning
into bankruptcy of Manager, the appointment of a receiver or the
liquidation of the business and affairs of Manager or the commencement of
or ordering of the winding-up of the business and affairs of Manager.
5.4 TERMINATION BY NON-RENEWAL
Owner may, at the end of the initial term or during any extension term,
terminate this Agreement upon 90 days notice given to Manager and upon payment
of all future unpaid Annual Payments to be made under the Annuity, less a
mutually agreed upon discount for any prepayments of all or any portion of any
Annual Payment.
5.5 RIGHTS AND DUTIES ON TERMINATION
Should the Agreement terminate pursuant to this Article 5, Manager will:
a. provide the Owner with copies of any additional Enhancements not yet
delivered to Owner;
b. cease marketing the Security System in the Territory and the rights of the
Manager under Section 4.1 shall also terminate;
c. pay all accrued fees to Owner (subject to Manager's right to set-off
amounts owed to Manager by Owner in accordance with Section 3.4) and
provide a full accounting to Owner for fees payable to Owner under this
Agreement; and
d. within 90 days of the termination date, provide to Owner, a final report
setting forth the details in respect of all sales and support of the
Security System in the Territory during the period from the end of the last
year to the termination date including the amount and type of all fees and
other amounts payable to date, potential Customer and projected revenues,
and all other information necessary and relevant to marketing and
supporting the Security System.
5.6 SURVIVING OBLIGATIONS
Section 5.5 and Articles 6, 7, 8, 9, 10 and 11 will survive the
termination of this Agreement.
ARTICLE 6
OWNERSHIP OF TECHNOLOGY
36
6.1 OWNERSHIP OF ASSETS
Manager acknowledges that Owner owns all right, title and interest to
the Assets and the Enhancements in the Territory.
ARTICLE 7
LIABILITY
7.1 INDEMNIFICATION BY MANAGER
Manager will be liable to Owner for and indemnify and hold Owner
harmless from any and all claims, losses, liabilities, costs, taxes
(including penalties and interest thereon), expenses (including reasonable
legal costs of a solicitor) and damages which may arise pursuant to this
Agreement including misrepresentations made by Manager, improper installation
of, improper support of, improper use of or infringement of any third party
right by, the Assets (whether in negligence or otherwise), failure to comply
with Section 3.7 herein or any other material breach of this Agreement.
7.2 INDEMNIFICATION PROCEDURE
Upon the occurrence of an event giving rise to indemnification
hereunder, Owner shall (i) give prompt notice to Manager of such events, (ii)
permit Manager's attorneys to handle and control the defense of such claims,
at Manager's expense, and (iii) shall cooperate in the defense thereof.
Owner may, at its own expense, participate in such defense, provided however,
that, if Manager has agreed in writing to assume the defense of such claims,
such participation expenses shall not become part of the indemnification
claim. There shall be no settlements, whether agreed to in court or out of
court, without the prior written consent of Manager and Owner, except that
Manager may settle a claim without the consent of Owner if (i) the settlement
is purely monetary, (ii) Manager hereunder admits in writing its liability to
Owner hereunder, and (iii) concurrently with such settlement, Manager pays
the full amount owed thereunder. Notwithstanding the foregoing, in the event
Manager does not assume the defense of any such claim or litigation in
accordance with the terms hereof within the earlier of (i) thirty (30) days
following written notice from Owner or (ii) the due date for response to any
complaint filed, then Owner may defend against such claim or litigation in
such manner as it may deem appropriate, including, but not limited to,
settling such claim or litigation, after giving notice of the same to
Manager, on such terms as Owner may deem appropriate. In any action by Owner
seeking indemnification from Manager in accordance with the provisions
hereof,
37
Manager shall not be entitled to object to the manner in which Owner defended
such claim or the amount of or nature of any such settlement.
7.3 LIMITATION OF LIABILITY
Except with respect to Manager's indemnification obligations relating to
third party claims as set forth in Section 7.1 hereof, neither party shall be
liable for any indirect, incidental, special or consequential damages
including, without limitation, damages for loss of data, loss of business or
failure to realize expected profits or savings or other economic or
commercial loss of any kind or loss of use of the Application Software or the
Assets or costs of substituted technology or services, whether under any
theory of contract (even in the nature of a breach of a condition or a
fundamental term or a fundamental breach), tort (including negligence or
misrepresentation), strict liability or any other legal or equitable theory,
even if such party has been advised of the possibility thereof, all of which
liability is hereby expressly waived by each party.
ARTICLE 8
CONFIDENTIALITY AND NON-DISCLOSURE
8.1 Each party that receives Confidential Information shall maintain
such Confidential Information in confidence, shall not reveal the same to any
third party (other than its employees on a need to know basis in connection
with the receiving party's performance under this Agreement or the Agreement)
and shall not use such Confidential Information, directly or indirectly, for
any purpose other than as required in the performance of this Agreement or
the Application Software Purchase Agreement.
8.2 All memoranda, notes, records, reports, papers and any other
documents and all copies thereof about any party's business in any way
obtained by any other party pursuant to this Agreement will be the disclosing
party's property and will be returned promptly to the disclosing party upon
termination of this Agreement or at any time upon request.
8.3 The contents of this Agreement and any agreements entered into
pursuant to this Agreement are hereby declared proprietary and confidential
to the parties hereto.
8.4 Each of the parties (the "Indemnifying Party") agrees to indemnify
the other (the "Indemnified Party") for all damages, costs, and expenses
(including court costs and reasonable legal fees) incurred by the Indemnified
Party as a result of a failure of the Indemnifying Party to comply with its
obligations under this Article 8.
38
ARTICLE 9
RIGHT OF FIRST REFUSAL
In the event that Owner desires to transfer all or any part of the
Assets (or is required by operation of law or other involuntary transfer to
do so), Owner shall first offer such Assets to Manager in accordance with the
following provisions:
a. Owner shall deliver a written notice (the "Notice") to Manager, stating i.
Owner's bona fide intention to transfer the Assets; ii. the purchase price
and terms of payment for which Owner proposes to transfer the Assets; and
iii. the name and address of the proposed transferee;
b. Within thirty (30) days after receipt of the Notice, Manager shall have the
right, but not the obligation, to elect to purchase the Assets upon the
price and terms of payment designated in the Notice, by delivering written
notice to Owner of such election (the "Election Notice"). If the Notice
provides for the payment of non-cash consideration, Manager may elect to
pay the consideration in cash equal to the good faith estimate of the
present fair market value of the non-cash consideration offered;
c. If Manager elects to purchase or obtain the Assets designated in the
Notice, then the closing of such purchase shall occur within thirty (30)
days after delivery of the Election Notice, and each of Owner and Manager
shall execute such documents and instruments and make such deliveries as
may be reasonably required to consummate such purchase and sale; and
d. If Manager elects not to purchase or acquire the Assets, then Owner may
transfer the Assets to the transferee proposed in the Notice, provided that
such transfer: i. is completed within thirty (30) days after the expiration
of Manager's right to elect to purchase the Assets, ii. is made on terms no
less favorable to Owner than as designated in the Notice, and iii. complies
with all of the terms and conditions of this Agreement and the Application
Software Purchase Agreement. If the Assets are not so transferred, Owner
must give notice in accordance with this Section prior to any other or
subsequent transfer of the Assets.
ARTICLE 10
ARBITRATION
10.1 ARBITRATION OF DISPUTES
39
Any dispute arising between the parties under this Agreement will be
settled by initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot
resolve the dispute within 30 days of escalation of the dispute to such
level, then the parties agree that such dispute shall be settled by final
and binding arbitration in Vancouver, British Columbia, before a single
arbitrator mutually acceptable to Owner and Manager, in accordance with the
Commercial Arbitration Act, S.B.C. 1979c.3 then existing, except as otherwise
specifically provided herein. The arbitrator shall apply California law for
the purposes of construing and enforcing this Agreement and any dispute
arising hereunder. The arbitration award shall be specifically enforceable;
judgment upon any arbitration award may be entered in any court with personal
jurisdiction over the parties and subject matter of the disputes. Unless
otherwise determined by the arbitrator, all expenses in connection with such
arbitration will be divided equally between the parties, with the exception
of expenses of counsel, witnesses and employees of the parties which will be
borne by the parties incurring them. Notwithstanding anything to the
contrary herein, either party will always be entitled to seek preliminary or
provisional remedies or release (including attachments and preliminary
injunctions) from any court of confident jurisdiction.
ARTICLE 11
GENERAL
11.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, such provision shall be construed so as to most
closely reflect the original intent of the parties, but still be enforceable,
and the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired thereby. The
invalidity, illegality or unenforceability of any provision or part thereof
contained in this Agreement in any jurisdiction will not affect or impair
such provision or part thereof or any other provisions of this Agreement in
any other jurisdiction.
11.2 FURTHER ASSURANCES
The parties will, at any time and from time to time at the request of
the other, execute and deliver any and all such further instruments or
assurances as may be necessary or desirable to give effect to the terms and
conditions of this Agreement.
40
11.3 COUNTERPART AND FACSIMILE EXECUTION
This Agreement, and any and all ancillary documents contemplated herein,
may be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Agreement and will be binding on the parties
as if they had originally signed one copy of this Agreement.
11.4 ASSIGNMENT
a. Owner may assign all or any part of its interest in this Agreement or the
Assets, provided however, that any assignment to a competitor of Manager,
shall require the prior written consent of Manager. Any assignment shall
be effected by:
i. giving written notice of the name and address of the assignee; and
ii. by delivering to Manager a written undertaking of the assignee,
acknowledging receipt of a copy of this Agreement and agreeing to be
bound by the terms and conditions of this Agreement; and
b. Manager may not assign this Agreement, without the prior written consent of
Owner.
11.5 BINDING EFFECT
This Agreement and all of its provisions will enure to the benefit of
the parties and their respective successors and permitted assigns, and will
be binding upon the parties and their respective successors and permitted
assigns. The expressions the "Manager" and the "Owner" as used herein will
include Manager's and Owner's permitted assigns whether immediate or
derivative, respectively.
11.6 RELATIONSHIP OF THE PARTIES
This Agreement is not a joint venture or other such business arrangement
and any agreement between the parties as to joint business activities will be
set forth in subsequent written agreements. Each party is acting
independently and not as partner, or joint venturer with the other parties
for any purpose. Except as provided in this Agreement none of the parties
will have any right, power, or authority to act or to create any obligations,
express or implied, on behalf of the other parties hereto.
11.7 TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
41
11.8 AMENDMENT
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise.
11.9 COSTS
Each party hereto will bear its-own legal, accounting and other costs
relating to all matters involved in this transaction.
11.10 CONFIDENTIALITY
The parties will treat this Agreement and all information relating to
this Agreement and the transactions contemplated by this Agreement
confidentially and no public disclosure by either party will be made without
the prior approval of the other, not to be unreasonably withheld, except as
legally required by a party to satisfy disclosure obligations to shareholders
and regulators, in which case simultaneous notice of such disclosure will be
given to the other party.
11.11 ENTIRE AGREEMENT
This Agreement and the Application Software Purchase Agreement, and the
exhibits and schedules referred to in each of the foregoing, constitute the
entire Agreement among the parties and SUPERSEDE all proposals, letters of
intent, oral or written, and all other communications among them relating to
the subject matter hereof.
11.12 EQUITABLE REMEDIES
The parties acknowledge that money damages would not be a sufficient
remedy for certain violations of the terms of this Agreement and,
accordingly, either party will be entitled to specific performance and
injunctive relief as remedies for such violations of the Agreement by the
other party. These remedies will not be exclusive remedies but will, in
addition to all other remedies, be available to such party, at law or equity.
11.13 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of British Columbia and of Canada (regardless of
either jurisdiction's or any other jurisdiction's choice of law principles).
To the extent permitted by law, the parties hereto agree that all actions or
proceedings arising in connection herewith, shall be
42
arbitrated or litigated in Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, and each
party hereby waives any right it may have to assert the doctrine of Forum Non
Conveniens or to object to venue. The parties each hereby stipulate that the
courts located in Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, shall have personal
jurisdiction and venue over each party for the purpose of litigating any such
dispute, controversy or proceeding arising out of or related to this
Agreement.
11.14 NOTICES
Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given
personal delivery, international overnight courier service, or by facsimile
(subject of confirmation of receipt), addressed to the respective party at
the applicable address set forth above, or to any party at such other
addresses as shall be specified in writing by such party to the other parties
in accordance with the terms and conditions of this Section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or two (2) business days following deposit with any international overnight
courier service, or upon confirmation of receipt if sent by facsimile
transmission.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed by their duly authorized representatives as of the date first above
written.
ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
--------------------------------
Milan Carnogursky
Chairman of the Board
[PURCHASER 5]
By: /s/
--------------------------------
[VICE-PRESIDENT OF PURCHASER 5]
Vice-President
43
SECURITY AGENT AGREEMENT
THIS AGREEMENT made as of the 31st day of December, 1998, is by and
AMONG:
[SECURITY AGENT], having a business address at [ADDRESS] ("Security Agent");
OF THE FIRST PART
AND
ALYA INTERNATIONAL, INC. a Delaware corporation having a business
address at 0000 Xxxx Xxxxxxxx Xxxx, Xx. 000, Xxxx Xxxx, XX 00000
("Alya")
OF THE SECOND PART
AND
[PURCHASER 5], a corporation incorporated pursuant to the laws of
Arizona, having a business address at [PURCHASER 5'S ADDRESS]
("[PURCHASER 5]").
OF THE THIRD PART
WHEREAS:
A. Pursuant to that certain Application Software Purchase
Agreement dated as of December 31, 1998, by and between Alya and [PURCHASER 5]
(the "Purchase Agreement"), [PURCHASER 5] purchased the Purchased Assets, as
more particularly described in Schedule A to the Purchase Agreement;
B. Pursuant to the terms of the Purchase Agreement, [PURCHASER 5]
caused [PURCHASER 5'S SHAREHOLDER] to grant a security interest in the Shares,
as defined in the Purchase Agreement, to ALYA as a means of securing
performance of [PURCHASER 5]'s obligations under the Purchase Agreement. In
connection therewith, the parties hereto have agreed to establish and
maintain this Security Agent Agreement; and
C. This Security Agent Agreement provides, INTER ALIA, that
[PURCHASER 5] shall deliver, or cause to be delivered, to the Security Agent
the source code version of the Application Software, and that the Security
Agent shall hold the source code version of the Application Software subject
to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals, and
the terms, conditions and covenants contained herein, [PURCHASER 5], the
Security Agent and Alya hereby agree as follows:
1. INTERPRETATION.
1.1 DEFINITIONS.
Except as otherwise set forth herein, capitalized terms shall
have the meanings ascribed to them in the Purchase Agreement:
44
a. "Release Notice" means a notice to the Security Agent in the form
attached as Schedule A to this Agreement; and
1.2 INTERPRETATION.
a. The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular Section,
Subsection or other portion of this Agreement and include any
agreement amending or supplemental to this Agreement. Unless something
in the subject matter or context is inconsistent therewith, reference
herein to Sections and Subsections are to Sections and Subsections of
this Agreement;
b. Except as specifically stated in this Agreement, all references to
currency are to Canadian dollars. Any currency conversion required or
contemplated by this Agreement with respect to Canadian and United
States of America currency will be based on the rate published by the
Bank of Canada as the noon spot rate of exchange applicable for such
currencies on the business day immediately before the date of
conversion; and
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires.
2. DEPOSIT OF SECURITY.
2.1 ORIGINAL DEPOSIT. Concurrently with the Closing, [PURCHASER 5]
shall deliver, or cause to be delivered, to the Security Agent, the Shares,
duly endorsed in blank, as security for [PURCHASER 5]'s obligations to ALYA
under the Purchase Agreement.
2.2 RETENTION OF SECURITY. The Security Agent shall hold the Shares
and shall release the same upon the terms and conditions provided in this
Agreement.
3. RELEASE OR RETURN OF SHARES BY SECURITY AGENT.
3.1 DELIVERY TO [PURCHASER 5]. The Security Agent shall deliver all
Shares which have been deposited with the Security Agent to [PURCHASER 5] upon
the occurrence of either of the following events:
a. ALYA and [PURCHASER 5] deliver a Release Notice, executed by each of
ALYA and [PURCHASER 5], to the Security Agent; or
b. Subject to compliance with Section 3.2 hereof, the Security Agent has
received from [PURCHASER 5] each of the following items:
i. notice that (x) the Management Agreement has been terminated or
(y) that all the Purchase Price under the Purchase Agreement has
been paid;
ii. written demand that all Shares deposited with the Security Agent
be delivered to [PURCHASER 5]; and
iii. specific instructions from [PURCHASER 5] for delivery of the
Shares.
45
3.2 PROCEDURE FOR DELIVERY TO [PURCHASER 5] .
a. If the provisions of Section 3.1 b. are met, the Security Agent shall,
within five days following receipt of all of the items specified in
Section 3.1 b., send by overnight courier to ALYA a copy of all such
documents received by the Security Agent pursuant to Section 3.1 b.
ALYA shall have twenty (20) days from the date that the Security Agent
shall have delivered the documents to ALYA to send to the Security
Agent written notice of its objection to the release of all the Shares
and to request that the issue of [PURCHASER 5]'s entitlement to the
Shares be submitted to arbitration in accordance with the provisions
of this Agreement;
b. If ALYA shall request arbitration, the matter shall be submitted to
and settled by arbitration in accordance with Article 7 hereof; and
c. If within twenty (20) days following delivery of the items specified
in Section 3.1 b. to ALYA, the Security Agent has not received written
notice of ALYA's objection to the release of the Shares and its
request for arbitration, then the Security Agent shall release the
Shares to [PURCHASER 5] in accordance with the instructions specified
in Section 3.1 b. iii.
3.3 DELIVERY TO ALYA. The Security Agent shall deliver all Shares which
have been deposited with the Security Agent to ALYA upon the occurrence of
either of the following events:
a. [PURCHASER 5] and ALYA deliver a Release Notice executed by each of
[PURCHASER 5] and ALYA to the Security Agent; or
b. Subject to compliance with Section 3.4 hereof, the Security Agent has
received from ALYA each of the following items:
i. written notification that [PURCHASER 5] is in breach of the
Purchase Agreement or the Marketing Agreement;
ii. a written demand that all Shares deposited with the Security
Agent be delivered to ALYA; and
iii. specific instructions from ALYA for delivery of the Shares.
3.4 PROCEDURE FOR DELIVERY TO ALYA.
a. If the provisions of Section 3.3 b. are met, the Security Agent shall,
within five days following receipt of all of the items specified in
Section 3.3 b., send by overnight courier to [PURCHASER 5] a copy of
all such documents received by the Security Agent pursuant to
Section 3.3 b. [PURCHASER 5] shall have twenty (20) days from the date
the Security Agent shall have delivered the documents to [PURCHASER 5]
to send to the Security Agent written notice of its objection to the
release of all the Shares and to request that the issue of ALYA's
entitlement to the Shares be submitted to arbitration in accordance
with the provisions of this Agreement;
46
b. If [PURCHASER 5] shall request arbitration, the matter shall be
submitted to and settled by arbitration in accordance with Article 7
hereof; and
c. If within twenty (20) days following delivery of the items specified
in Section 3.3 b. to [PURCHASER 5], the Security Agent has not
received written notice of [PURCHASER 5]'s objection to the release of
the Shares and its request for arbitration, then the Security Agent
shall release the Shares to ALYA in accordance with the instructions
specified in Section 3.3 b. iii.
4. OWNERSHIP OF PURCHASED ASSETS.
ALYA and [PURCHASER 5] each hereby recognize and acknowledge that
[PURCHASER 5'S SHAREHOLDER] owns all right, title and interest in and to the
Shares, subject only to the security interest created pursuant to the
Purchase Agreement in favor of ALYA. Without limiting the generality of the
foregoing, [PURCHASER 5'S SHAREHOLDER]shall retain the exclusive rights to vote
the Shares, elect directors of [PURCHASER 5], and otherwise control
[PURCHASER 5], unless and/or until the Shares may be released to Alya
pursuant to Section 3.4 hereof.
47
5. DUTIES AND RESPONSIBILITIES OF THE SECURITY AGENT.
5.1 DUTIES. The Security Agent shall not be bound in any way by an
agreement or contract between [PURCHASER 5] and ALYA (whether or not the
Security Agent has knowledge thereof), and the Security Agent's only duties
and responsibilities shall be to hold the Shares it receives and to deliver
same in accordance with the terms of this Agreement. The Security Agent
shall have no duties except those which are expressly set forth herein and it
shall not be bound by any waiver, modification, amendment, termination or
rescission of this Agreement, unless received by it in writing and signed by
ALYA and [PURCHASER 5]and, if its duties are affected, unless it shall have
given its prior written consent thereto.
5.2 AUTHORITY TO ACT. The Security Agent has the absolute authority to
accept or act upon each executed Release Notice and any other document
received pursuant to this Agreement, without any obligation of inquiry as to
the validity, authenticity or accuracy thereof. Should it be necessary for
the Security Agent to accept or act upon any instructions, directions,
documents or instruments signed or issued by or on behalf of any corporation,
partnership, fiduciary or individual, it shall not be necessary for the
Security Agent to inquire into the authority of the signer(s). The Security
Agent shall be protected in acting upon any notice, request, waiver, consent,
receipt, statutory declaration or other paper or document furnished to it,
signed by any of the parties hereto, not only as to its due execution and
validity and effectiveness of its provisions but also as to the truth and
accuracy of any information therein contained. Unless otherwise directed in
a writing mutually executed by ALYA and [PURCHASER 5], the Security Agent is
hereby authorized to make deliveries pursuant hereto by the commercial
courier, which the Security Agent, in its sole discretion, selects. The
Security Agent shall not be liable in any manner for the acts, omissions,
delays or failures to deliver by any such selected commercial couriers.
5.3 AMENDMENT, RESIGNATION AND/OR TERMINATION. This Agreement may be
altered or amended only with the consent of each of ALYA, [PURCHASER 5] and
Security Agent. The Security Agent may resign as Security Agent at any time
upon 30 days' prior written notice to [PURCHASER 5] and ALYA. [PURCHASER 5]
and ALYA may remove the Security Agent as security agent at any time upon 30
days' prior written notice to the Security Agent. In the event of
resignation or removal of the Security Agent, ALYA and [PURCHASER 5] shall
attempt to mutually agree upon the selection of a new security agent. In the
event that they are unable to agree, the new security agent shall be another
firm of barristers and solicitors authorized to practice law in Canada or an
independent, qualified trust or escrow company or organization selected by
[PURCHASER 5]. From the date the Security Agent receives notice of
termination or gives notice of resignation and until a successor Security
Agent shall have been appointed and shall have accepted such appointment, the
Security Agent's only duty shall be to hold any deposited Shares then in the
Security Agent's possession in accordance with the provisions of this
Agreement (but without regard to any notices, requests, instructions or
demands received by the Security Agent from any party hereto after the
Security Agent's notice of resignation shall have been given or notice of
termination shall be received). Upon the appointment of, and acceptance by, a
successor security agent, the former Security Agent shall deliver to the
successor security agent any Shares and other documents or instruments
relating thereto then in its possession.
5.4 NO ACTION REQUIRED. In the event that any of the notices and/or
Shares or other documents or instruments to be delivered pursuant to the
terms hereof are not delivered to the Security Agent, Security Agent shall
have no duty whatsoever to take any action with respect to procurement of the
same. The Security Agent shall have no obligation or responsibility to
verify that any Shares or other documents or instruments delivered hereunder
are the documents required to be delivered by the respective party.
48
5.5 EXPENSE REIMBURSEMENT. In addition to the indemnification
obligations set forth herein, ALYA hereby agrees to reimburse Security Agent
for all expenses incurred in connection with performing and carrying out its
responsibilities hereunder, including without limitation, legal and
professional fees and expenses.
5.6 DISCLAIMER OF LIABILITY. Except for fraud or intentional
misconduct, neither the Security Agent nor its partners, employees or agents
shall be liable to ALYA, [PURCHASER 5] or any other party claiming
beneficiary status under this Agreement for any act, or failure to act, by
the Security Agent in connection with this Agreement. The Security Agent
will not be liable for special, indirect, incidental or consequential damages
hereunder.
5.7 INDEMNITY AND LIABILITY. [PURCHASER 5], ALYA and any party
claiming beneficiary status under this Agreement hereby, jointly and
severally, agree to indemnify and hold harmless and be liable to Security
Agent and each of its partners, employees and agents, absolutely and forever,
from and against any and all claims, actions, damages, suits, liabilities,
obligations, costs, fees, charges, and any other expenses whatsoever,
including legal and professional fees and expenses, that may be asserted
against or incurred by Security Agent or any of its partners, employees or
agents, with respect to the performance of its duties under this Agreement.
This indemnity shall survive the termination of this Agreement and the
resignation or removal of the Security Agent.
5.8 DISPUTES AND INTERPLEADER. In the event of any dispute between
[PURCHASER 5] and ALYA or any third party claiming beneficiary status under
this Agreement, Security Agent may submit this matter to any court of
competent jurisdiction in an interpleader or similar action. Any and all
costs incurred by Security Agent in connection therewith shall be borne by
the party seeking a the Shares deposited with Security Agent. Without
limiting the generality of the foregoing, if Security Agent shall be
uncertain as to its duties or rights hereunder, shall receive any notice,
advice, schedule, report, certificate, direction or other document from any
person or entity with respect to the Shares, that in the opinion of the
Security Agent, in its sole discretion, is in conflict with any provisions of
this Agreement, or shall be advised that a dispute has arisen with respect to
the ownership or right of possession of the Shares or any part thereof,
Security Agent shall be entitled, without liability to anyone, to refrain
from taking any action other than to exercise best efforts to keep safely the
Shares until Security Agent shall be directed otherwise in writing by an
order, decree, or judgment of a court of competent jurisdiction that is then
finally affirmed on appeal or that by the lapse of time or otherwise is no
longer subject to appeal; but Security Agent shall be under no duty to
institute or defend any such proceeding.
5.9 NO CONFLICT. ALYA and [PURCHASER 5] acknowledge that (a) the
Security Agent or her employees, agents or associates have provided counsel
to [PURCHASER 5] and Alya; (b) the duties of the Security Agent hereunder are
purely mechanical; and (c) the Security Agent is acting hereunder for the
convenience of ALYA and [PURCHASER 5] and shall not be impeachable or
accountable because of any conflicting or potentially conflicting duty to
either party or any advice provided to either party.
5.10 LEGAL COUNSEL. If the Security Agent believes it to be reasonably
necessary to consult with counsel concerning any of its duties hereunder, or
if the Security Agent becomes involved in litigation relating to this
Agreement, ALYA and [PURCHASER 5] shall be jointly and severally responsible
for the costs, expenses and legal fees incurred by the Security Agent, and
the Security Agent is authorized to act on the instructions of such counsel
without being liable.
6. NOTICES.
49
All notices and other communications hereunder or in connection
herewith shall be in writing and shall be given by personal delivery,
international overnight courier service or facsimile, to the respective party
at the address set forth below, or to any party at such other addresses as
shall be specified in writing by such party to the other parties in
accordance with the terms and conditions of this Section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or upon the next business day after sending by facsimile or two (2) business
days following deposit with any international overnight courier service.
If to [PURCHASER 5] to:
[PURCHASER 5]
[PURCHASER 5'S ADDRESS]
Attention: President
Fax No.: [PURCHASER 5'S FAX]
50
If to Alya to:
Milan Carnogursky
Alya International, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Fax No.: (000) 000-0000
If to Security Agent to:
[SECURITY AGENT]
[SECURITY AGENT'S ADDRESS]
Fax No. [SECURITY AGENT'S FAX]
7. ARBITRATION
In the event that either party disputes the release of the Shares
in accordance with Article 3 hereof, or has any other dispute relating to the
terms and conditions of this Agreement, and such dispute cannot be resolved
informally, then upon written notice by either party to the other party, such
dispute shall be settled by final and binding arbitration in Santa Clara,
California, by a single neutral arbitrator mutually agreed upon by the
parties, or in the event the parties are unable to agree within fifteen (15)
days following notice of arbitration, by an arbitrator appointed by
JAMS/ENDISPUTE in accordance with the rules and regulations of
JAMS/ENDISPUTE, or by any other body mutually agreed upon by the parties.
Except as otherwise set forth herein, such arbitration shall be conducted in
accordance with the then-existing rules (the "Rules") of JAMS/ENDISPUTE and
judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof; provided, however, that the law applicable
to any such controversy shall be the law of California, regardless of its or
any jurisdiction's choice of law principle. By entering into this provision,
it is the parties intention to expedite, and limit the costs involved in,
resolution of any future dispute, and therefore pre-hearing discovery shall
be limited to production of key documents and, if appropriate, subpoena of
not more than one key witness, as determined by the arbitrator, and shall not
extend to depositions of parties. Any award shall be limited to a recovery
of foreseeable, contract damages, which are a direct consequence of a breach
of this Agreement. In further limitation hereof, no arbitrator shall be
empowered to award any other damages, including, but not limited to,
consequential, compensatory or punitive damages.
8. NO WAIVER OF RIGHTS.
The delay or failure of either party to enforce at any time any
provision of this Agreement shall in no way be considered a waiver of any
such provision, or any other provision, of this Agreement. No waiver of, or
delay or failure to enforce any provision of this Agreement shall in any way
be considered a continuing waiver or be construed as a subsequent waiver of
any such provision, or any other provision of this Agreement. No waiver or
modification of this Agreement shall be binding unless it is in writing
signed by the parties hereto.
9. BINDING EFFECT; ASSIGNMENT.
51
This Agreement shall be binding upon, and enure to the benefit of,
all the parties hereto and their respective successors, legal representatives
and assigns permitted under the Purchase Agreement. Each of the parties
hereto acknowledges and accepts that any assignee permitted under the
Purchase Agreement, which assignee has agreed to abide by and be bound by all
the applicable conditions set forth in each of the Purchase Agreement and the
Management Agreement, shall constitute an intended third party beneficiary
under this Agreement, and be entitled to all the rights of an intended third
party beneficiary. The parties will amend this agreement to include such
persons, if requested to do so by [PURCHASER 5] or ALYA, and in any event
[PURCHASER 5] and ALYA will notify the Security Agent of the name of any
assignee.
10. GENERAL.
10.1 VALIDITY. If any one or more of the provisions or parts thereof
contained in this Agreement should be or become invalid, illegal or
unenforceable in any respect in any jurisdiction, such provision shall be
construed so as to most closely reflect the original intent of the parties
but still be enforceable, and the validity, legality or enforceability of
such remaining provisions or parts thereof will not in any way be affected or
impaired thereby. The invalidity, illegality or unenforceability of any
provision or part thereof contained in this Agreement in any jurisdiction
will not affect or impair such provision or part thereof or any other
provisions of this Agreement in any other jurisdiction.
10.2 FURTHER ASSURANCES. The parties will, at any time and from time to
time at the request of the other, execute and deliver any and all such
further instruments or assurances as may be necessary or desirable to give
effect to the terms and conditions of this Agreement.
10.3 COUNTERPART AND FACSIMILE EXECUTION. This Agreement, and any and
all ancillary documents contemplated herein, may be executed in one or more
counterparts and may be executed by facsimile signatures and all such
counterparts and facsimile signatures taken together will constitute one and
the same Agreement and will be binding on the parties as if they had
originally signed one copy of this Agreement.
10.4 TIME OF THE ESSENCE. Time will be of the essence of this Agreement.
10.5 COSTS. Except as specifically provided in this Agreement, each
party hereto will bear its own legal, accounting and other costs relating to
all matters involved in this transaction.
10.6 CONFIDENTIALITY. The parties will treat this Agreement and all
information relating to this Agreement and the transactions contemplated by
this Agreement confidentially and no public disclosure by either party will
be made without the prior approval of the other, not to be unreasonably
withheld, except as legally required by a party to satisfy disclosure
obligations to shareholders and regulators, in which case simultaneous notice
of such disclosure will be given to the other party.
10.7 ENTIRE AGREEMENT. This agreement, constitutes the entire Agreement
among the parties and supersede all proposals, oral or written, and all other
communications among them relating to the subject matter hereof.
10.8 THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
[PURCHASER 5'S SHAREHOLDER] is a third party beneficiary under this Agreement,
and is entitled to all the rights and benefits of a third party beneficiary.
10.9 JURISDICTION, VENUE AND GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of California (regardless of that jurisdiction or any other
jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising
52
in connection herewith, shall be arbitrated or litigated in the state and
federal courts located in the State of California, and each party hereby
waives any right it may have to assert the doctrine of Forum Non Conveniens
or to object to venue. The parties each hereby stipulate that the state and
federal courts located in the County of Sonoma, State of California, shall
have personal jurisdiction and venue over each party for the purpose of
litigating any such dispute, controversy or proceeding arising out of or
related to this Agreement.
53
IN WITNESS WHEREOF the undersigned have executed this Security
Agent Agreement as of the date first set forth above.
[PURCHASER 5]
By: /s/ [OFFICER OF PURCHASER 5]
--------------------------
-----------------------------
(Print Name and Title)
ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
--------------------------
Milan Carnogursky, President
-----------------------------
(Print Name and Title)
/s/
-----------------------------
[SECURITY AGENT]
THE UNDERSIGNED hereby grants a security interest in the Shares to
ALYA to secure [PURCHASER 5]'s obligations under the Purchase Agreement..
The undersigned will promptly deliver to Security Agent Certificate Number 1
in the name of [PURCHASER 5'S SHAREHOLDER], evidencing his ownership of 100
shares of Common Stock of [PURCHASER 5]. The undersigned hereby consents to
the terms and conditions set forth herein.
Dated: December 31, 1998 /s/
----------------------------------
[PURCHASER 5'S SHAREHOLDER]
54
SCHEDULE "A" to the Security Agent Agreement dated December 31, 1998
RELEASE NOTICE
[SECURITY AGENT]
[SECURITY AGENT'S ADDRESS]
RE: SECURITY AGENT AGREEMENT
Dear [SECUIRTY AGENT],
This Release Notice is being delivered pursuant to the Security
Agreement dated as of December 31, 1998 ("Security Agent Agreement"), among
[PURCHASER 5] ("[PURCHASER 5]"), Alya International, Inc. ("ALYA") and you
("Security Agent"). Except as otherwise set forth herein, capitalized terms
shall have the meanings ascribed to them in the Security Agent Agreement.
Security Agent is hereby authorized and directed to deliver all the Shares
and all documents, instruments and other items delivered to it by
[PURCHASER 5] or ALYA in its capacity as Security Agent to [______________].
55
AMENDMENT NO. 1
This AMENDMENT NO. 1 is entered into this 24th day of February,
1999, by and between [PURCHASER 5], an Arizona corporation ("[PURCHASER 5]"),
and Alya International, Inc., a Delaware corporation ("Alya"), and amends
that certain Application Software Purchase Agreement dated December 30, 1998,
by and between [PURCHASER 5] and Alya (the "Purchase Agreement"), and that
certain Management and Marketing Agreement, dated December 30, 1998, by and
between [PURCHASER 5]and Alya (the "Management Agreement") as set forth
below.
1. Except as otherwise set forth herein, capitalized terms shall
have the meanings ascribed to them in the Purchase Agreement.
2. Section 1.1(r) of the Purchase Agreement is hereby amended and
restated to read as follows:
"r. "Purchase Price" means the sum of (i) Five Hundred Thousand Canadian
Dollars (Cdn. $500,000), payable at the Closing; (ii) Two Hundred
Thousand Canadian Dollars (Cdn. $200,000), payable on or before
February 25, 1999; (iii) Two Hundred Fifty Thousand Canadian Dollars
(Cdn. $250,000), payable on or before March 31, 1999; and (iii) an
eleven-year annual accrual of Two Million Five Hundred Thousand U.S.
Dollars (U.S. $2,500,000), with the first annual payment accruing on
September 30, 1999 (pro-rated to U.S. $1,875,000 for the partial
year), and due and payable on or before December 31, 1999, and
continuing to accrue on each September 30th thereafter, through
September 30, 2010, with the last annual payment due and payable on or
before December 31, 2010."
3. Section 3.1 of the Purchase Agreement is hereby amended and
restated to read as follows:
"3.1 The Purchase Price will be payable as follows:
a. Cdn. $500,000 on Closing, by wire transfer;
b. Cdn. $200,000 on or before February 25, 1999, by wire transfer;
c. Cdn. $250,000 on or before March 31, 1999, by wire transfer;
c. U.S. $1,875,000 on or before December 31, 1999, by wire transfer;
and
56
d. U.S. $2,500,000 on or before December 31 of each year, commencing
December 31, 2000 and continuing through December 31, 2010."
4. All references to Canadian currency in Sections 1.1(a) and
1.1(q) of the Purchase Agreement are hereby amended and revised to be
references to U.S. currency.
5. Notwithstanding anything to the contrary, all references in
the Management Agreement to Canadian currency shall be deemed to be
references to U.S. currency.
6. Except as amended herein, each of the Purchase Agreement and
the Management Agreement shall continue in full force and effect, in
accordance with their respective terms and conditions.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
No. 1 as of this 24th day of February, 1999.
ALYA INTERNATIONAL, INC. [PURCHASER 5]
By: /s/ Milan Carnogursky By: /s/
-------------------------- --------------------------------
Milan Carnogursky, President
----------------------------- -----------------------------------
(Print Name and Title) (Print Name and Title)
57
