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SHARE PURCHASE AGREEMENT
Dated the 15th day August, 2000
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JAWS ACQUISITION CANADA CORP.
- AND -
JAWS TECHNOLOGIES, INC.
- AND -
THE SHAREHOLDERS OF GENERAL NETWORK SERVICES - GNS INC.
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SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 15th day of August, 2000.
BETWEEN:
JAWS ACQUISITION CANADA CORP., a corporation incorporated under the
laws of the Province of Alberta, Canada,
(herein called the "Purchaser")
- and -
JAWS TECHNOLOGIES, INC., a corporation incorporated under the
laws of the State of Delaware, U.S.A.,
(herein called "JAWS")
- and -
THE PARTIES HEREIN DEFINED
AS AND WHO EXECUTE THIS AGREEMENT
AS THE VENDORS (herein called the "Vendors")
WHEREAS the Vendors wish to sell and convey their respective Vendors's
Rights to the Purchaser and the Purchaser wishes to purchase and receive such
Vendors's Rights from the Vendors in exchange for the Purchase Consideration.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises hereto and the mutual covenants, warranties, representations,
agreements and payments herein set forth, the Parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
SECTION 1.1 DEFINITIONS
In this Agreement, including the premises hereto, this clause and any
Schedules hereto, the words and phrases set forth below shall have the meaning
ascribed thereto below, namely:
"Business Day" means a day other than a Saturday or Sunday or a statutory
holiday in the City of Calgary, in the Province of Alberta.
"Cause" means in relation to section 3.2.4 of this Agreement:
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(a) Any breach of the Employment Agreement or any other agreement including the
non-disclosure agreement between each of the Vendors and the Company;
(b) Demonstrably willful misconduct; or
(c) Gross negligence in the performance of duties assigned to a Vendor.
Notwithstanding the foregoing, Cause shall include Xxxxx Xxxxxxxx being a
director or officer of any corporation which could be construed as being in
competition with JAWS and include Xxxxx Xxxxxxxx'x involvement, association or
affiliation with a competitor as a shareholder unless his shareholdings are
non-voting or less than 5% of the issued and outstanding shares of the
competitor.
Neither of the Vendors shall deemed to have been discharged for Cause unless
each or both have been given written notice specifying the reasons for the
termination and the allegations of Cause.
"Closing Date" means August 15, 2000 or such other date as the parties may
mutually determine.
"Closing Time" means 10:00 a.m. on the Closing Date or as agreed upon by the
parties.
"Corporation" means General Network Services - GNS Inc.
"Corporation's Assets" means all the Property owned or held by the Corporation
or to which the Corporation is entitled as more particularly described in
Schedule "A".
"Corporation's Financial Statements" means the most recent unaudited financial
statements of the Corporations dated July 21, 2000, a copy of which are attached
hereto as Schedule "B".
"Corporation's Shares" means the common voting shares in the capital of the
Corporation, as the same exist at the date hereof and at the Closing Date.
"Escrow Agent" means Montreal Trust Company of Canada;
"Escrow Agreement ("MP") means the escrow agreement between JAWS, the Purchaser,
Xxxxxxx Pluscauskas and the Escrow Agent, dated effective as of the Closing
Date;
"Escrow Agreement ("TM") means the escrow agreement between JAWS, the Purchaser,
Xxxxx Xxxxxxxx and the Escrow Agent, dated effective as of the Closing Date;
"Exchangeable Shares" means the exchangeable shares of the Purchaser, which
shares have the rights, privileges, restrictions and conditions as more
particularly set out in Schedule "D" attached hereto to be issued by the
Purchaser as the Purchase Consideration.
"JAWS" means JAWS Technologies, Inc., a Delaware Corporation, whose common
shares trade on the NASDAQ National Board in the United States of America.
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"JAWS Shares" means $570,000 worth of the common shares in the capital stock of
JAWS that are tradeable on the NASDAQ National Board, to be issued by JAWS as
part of the Purchase Consideration in accordance with Article 3;
"Party" or "Parties" means a party or parties to and bound by this Agreement.
"Permitted Encumbrances" means, in respect of the Corporations's Assets, the
encumbrances set out in Schedule "C" hereto or as the case may be:
(a) inchoate liens, taxes, assessments or governmental charges which are due or
which are not delinquent; and
(b) inchoate liens incurred or created in the ordinary course of business as
security in favour of any other person who is conducting the development or
operation of the property to which such liens relate for the Corporation's
or the Purchaser's share of the costs and expenses of such development or
operation, as the case may be, the payment of which is not then due;
"Person" means any individual, corporation, body corporate, partnership, joint
venture, association, group, trust, or other legal entity and includes any duly
constituted government of or in Canada and any minister, department, commission,
board, bureau, agency, authority, instrumentality or court and the like of any
such government.
"Property" means the interests of the Corporation, the Purchaser or JAWS, as the
case may be, in and to all property, assets and rights, including, without
limiting the generality of the foregoing, the entire interest of such Party in
and to:
(a) all contracts, agreements, documents, production sales contracts, books,
records and reports relating to the provision of products and services to
its customers and any and all rights in relation thereto;
b) all intellectual property and rights developed, acquired or incorporated
into the products and services of the Corporation, the Purchaser or JAWS,
as the case may be, or purchased in the course of carrying on the business
of the Corporation, the Purchaser or JAWS, as the case may be.
"Purchaser" means Jaws Acquisition Corp., an Alberta Corporation, whose articles
of incorporation have created a class of exchangeable shares, that are
exchangeable into common shares in the capital stock of JAWS and is a wholly
owned subsidiary of JAWS.
"Purchase Consideration" means (in $ CDN):
(1) $430,000 cash on the Closing Date;
(2) $570,000 worth of Jaws shares on the Closing Date at the Trading Price;
(3) $2,000,000 worth of the Purchasers Exchangeable Shares to be issued in
accordance with Article 3 at the Trading Price;
"Purchase Price" means Three Million ($ 3,000,000) Dollars.
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"Purchaser's Assets" means the Property owned or held by the Purchaser or JAWS
Technologies, Inc.;
"Registration Rights Agreement" means the Agreement dated August 15, 2000
between JAWS and the Vendors in the form attached hereto as Schedule "E";
"Regulations" means all applicable statutes, laws, rules, orders, regulations,
directives or other instruments (and all applicable requirements thereunder) of
any governmental agencies or authorities in the United States of America or
Canada having jurisdiction over the Parties, the Corporation, the Corporation's
Assets, or the specific property or matter in question, in effect from time to
time.
"Support Agreement" means the support agreement between JAWS and the Purchaser,
dated effective August 1, 2000;
"Trading Price" means the average of the closing asking price, as quoted on the
NASDAQ National Board, of the Common shares of JAWS for the 20 trading days
prior to the Closing Date;
"Vendors" mean:
Xxxxxxx Pluscauskas;
and Xxxxx Xxxxxxxx.
"Vendors's Rights" means, in respect of a Vendor, all:
(a) the Vendors's Shares,
(b) amounts owing to the Vendors, by the Corporation, whether presently
due or otherwise, except those amounts listed in Schedule "C"; and
(c) rights to acquire any securities of the Corporation, from the
Corporation or from any other Person, howsoever granted or acquired.
For the purposes of this Agreement, the value assigned to (b) and (c)
above is zero (0).
"Vendors's Shares" means, in respect of the Vendors, all the issued and
outstanding shares of the Corporation owned by the Vendors, or to which the
Vendors are entitled, at the Closing Date, as follows:
Xxxxxxx Pluscauskas - 50 common shares
Xxxxx Xxxxxxxx - 50 common shares
"Voting and Exchange Trust Agreement" - means the voting and exchange trust
agreement between JAWS, the Purchaser and Montreal Trust Company of Canada,
dated August 11, 2000;
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Section 1.2 EXPANDED MEANINGS
Unless the context otherwise necessarily requires, the following
provisions shall govern the interpretation of this Agreement:
1.2.1 words used herein importing the singular number only shall include
the plural and vice versa, and words importing the use of any
gender shall include all genders;
1.2.2 the terms "in writing" or "written" include printing, typewriting,
or any electronic means of communication by which words are
capable of being visually reproduced at a distant point of
reception, including by telecopier or telex;
1.2.3 references herein to any agreement or instrument, including this
Agreement, shall be deemed to be references to the agreement or
instrument as varied, amended, modified, supplemented or replaced
from time to time, and any specific references herein to any
enactment shall be deemed to be references to such enactment as
the same may be amended or replaced from time to time; and
1.2.4 "this Agreement" "the Agreement" "hereto", "herein", "hereby",
"hereunder", "hereof" and similar expressions refer to this Share
Purchase Agreement and not to any particular Article, Section,
Subsection, clause, subdivision or other portion hereof and
include any and every instrument amending, supplementing or
replacing this agreement.
Section 1.3 ENTIRE AGREEMENT
This Agreement and all schedules attached hereto together with the
agreements and other documents to be executed and delivered pursuant hereto,
constitute the entire agreement between the Parties and supersedes all other
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties and there are no warranties, representations, covenants
or other agreements between the Parties except as specifically set forth herein.
No supplement, modification or waiver or termination of this Agreement shall be
binding unless executed in writing by the Party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be valid unless in writing and
no such waiver shall constitute nor be deemed to constitute a waiver of any
other provisions (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 1.4 HEADINGS AND TABLE OF CONTENTS
The division of this Agreement into articles, sections and other
subdivisions, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect or be utilized in the
construction or interpretation hereof.
Section 1.5 SEVERABILITY
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, the remaining provisions or parts thereof contained
herein shall be and shall be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
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1.5.1 the validity, legality or enforceability of such remaining
provisions or parts thereof shall not in any way be affected or
impaired by the severance of the provisions or parts thereof
severed; and
1.5.2 the invalidity, illegality or unenforceability of any provision or
any part thereof contained in this Agreement in any jurisdiction
shall not effect or impair such provision or part thereof or any
other provisions of this Agreement in any other jurisdiction.
Section 1.6 NOT A BUSINESS DAY
In the event that any day on or before which any action is
required to be taken hereunder is not a Business Day, then such action shall be
required to be taken on or before the requisite time on the next succeeding day
that is a Business Day.
Section 1.7 CONSENTS AND APPROVALS
It shall be a condition hereof that any consent or approval of any
Party hereto, required hereby, shall be obtained in writing prior to the event
for which it is required.
Section 1.8 SCHEDULES
The following are the Schedules referred to and incorporated in
this Agreement, which are deemed to be a part hereof:
Schedule "A" - Corporation's Assets
Schedule "B" - Corporation's Financial Statements
Schedule "C" - Permitted Encumbrances & Liabilities
Schedule "D" - Provisions Attaching to the Exchangeable Shares
Schedule "E" - Registration Rights Agreement
ARTICLE 2
PURCHASE AND SALE
Section 2.1 PURCHASE AND SALE
Subject to the terms and conditions of this Agreement, the Vendors
hereby sell, assign, transfer and convey to the Purchaser and the Purchaser
hereby purchases and acquires from the Vendors the Vendors's Rights, effective
as of the Closing Date, to have and hold the same together with all benefits and
advantages to be derived therefrom, absolutely, subject only to the terms and
conditions of this Agreement, at and for the Purchase Consideration equal to the
Purchase Price.
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ARTICLE 3.
PAYMENT
Section 3.1 PAYMENT OF PURCHASE CONSIDERATION
3.1.1 Purchase Consideration - Subject to Article 3.2, the Purchase
Consideration equal to the Purchase Price shall be payable by the
Purchaser to the Vendors by:
3.1.1.1 the payment of $430,000 on the Closing Date;
3.1.1.2 the issuance to the Vendors of $570,000 worth of
JAWS Shares at the Trading Price on the Closing
Date; and
3.1.1.3 the issuance of $2,000,000 worth of Exchangeable
Shares at the Trading Price on the Closing Date to
be released in accordance with the table set out
below and subject to section 3.2.
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Vendors # of shares to be # of shares to be Total
released 12 months released 24 months
after the Closing after the Closing
Date Date
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Xxxxxxx Pluscauskas 97,276 194,553
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Xxxxx Xxxxxxxx 97,276 194,553
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3.1.2 Income Tax Act - The Vendors and the Purchaser acknowledge and agree that
the purchase and sale of the Vendor's Rights, in exchange for the
Exchangeable Shares, shall be carried out in accordance with subsection
85(l) of the Income Tax Act (Canada) as amended. The Vendors and the
Purchaser shall together determine the amount to be elected under such
subsection. The Vendors, JAWS and the Purchaser agree to execute and file
all necessary documentation to give effect to the subsection 85(1)
election on or before the due date as determined pursuant to subsection
85(6) of the Income Tax Act (Canada) as amended.
Section 3.2 ESCROW PROVISIONS
3.2.2 Exchangeable Share Releases - Xxxxxxx Pluskauskas - Upon notice being
provided to the Escrow Agent, the Exchangeable Shares shall be released
on the Closing Date to Xxxxxxx Pluskauskas in accordance with the
provisions of section 3.1.1.3, on the first (1st) and second (2nd) 12
month anniversary of the Closing Date, subject to his being employed by
JAWS, or a subsidiary of JAWS, on the six month anniversary of the
Closing Date and subject to the terms of the Escrow Agreement (MP).
3.2.2 Exchangeable Share Releases - Xxxxx Xxxxxxxx - Upon notice being provided
to the Escrow Agent, the Exchangeable Shares shall be released on the
Closing Date to Xxxxx Xxxxxxxx in accordance with the provisions of
section 3.1.1.3 on the first (1st) and second (2nd) 12 month anniversary
of the Closing Date, subject to his being employed by JAWS, or a
subsidiary of
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JAWS, on the 12 and 24 month anniversary of the Closing Date and subject
to the terms of the Escrow Agreement (TM).
3.2.3 No Release - If the terms of the escrow provisions in section 3.2.1 and
the Escrow Agreement (MP) are not fulfilled, the Exchangeable Shares to
be released to Xxxxxxx Pluskauskas as set out in section 3.1.1.3 shall
not be released. If the escrow provisions in section 3.2.2 and the Escrow
Agreement (TM) are not fulfilled, the Exchangeable Shares to be released
to Xxxxx Xxxxxxxx as set out in section 3.1.1.3 shall not be released.
3.2.4 Final Release - Notwithstanding section 3.2.3, all Exchangeable Shares to
be released to the Vendors shall be released to the Vendors on the third
anniversary of the Closing Date unless the Vendors are released from
their employment with JAWS for Cause.
ARTICLE 4
REPRESENTATIONS
Section 4.1 REPRESENTATIONS OF THE VENDORS
The Vendors hereby separately represent and warrant to the Purchaser, in
respect of their Vendors's Rights that:
4.1.1 Restrictions - There are no restrictions in either the charter
documents or the by-laws of the Corporation, each as amended, nor
are there any collateral agreements or rights of first refusal or
other pre-emptive rights of purchase, which would arise by reason
of the execution of this Agreement, completion of the sale or
otherwise and affect the transferability of the Vendors's Rights
from the Vendors to the Purchaser.
4.1.2 Title to the Vendors's Rights - The Vendors each has good and
marketable title to the Vendors's Rights free and clear of any
mortgages, liens, charges, security interests, adverse claims,
pledges, encumbrances, options, pre-emptive rights of purchase
(such as rights of first refusal), restrictions, claims or demands
of any kind or nature whatsoever.
4.1.3 Assets of the Corporation - Other than the Corporation's Assets
and as disclosed in the Corporations's Financial Statements, the
Corporation has no property, assets or undertakings of any nature
or kind whatsoever.
4.1.4 Insurance - During the period from the date of the Corporation's
Financial Statements until the Closing Time:
4.1.4.1 the Corporations's Assets shall be insured by the
Corporation against loss or damage under contracts
of insurance with reputable insurers which insurance
is customary for the Corporation's business for both
the type of coverage and the coverage amount; and
4.1.4.2 all third Party insurable liabilities of the
Corporation shall be insured against on an
occurrence basis under the contracts of insurance.
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4.1.5 Policies of Insurance - In connection with any and all policies of
insurance:
4.1.5.1 neither the Vendors nor the Corporation:
(a) has misrepresented or omitted to disclose to the
insurers thereunder or in connection therewith any
material fact or is in default with respect to any
of the provisions contained in any such insurance
policy,
(b) has failed to give any notice or present any claim
under any such policy in due and timely fashion, and
no such claim is outstanding and in dispute,
4.1.5.2. The Corporation, or the lessor of the equipment
leased by the Corporation, is the named insured with
loss payable to it, or the lessor as the case may
be, on those policies owned by it or obtained for
their benefit; and
4.1.5.3. there is no outstanding request, notice or order
from any insurer for any modification to or remedial
action in respect of any of the insured assets or
premises included in the Corporation's Assets.
4.1.6 Capital Structure - The authorized share capital of the
Corporation consists of an unlimited number of Class A Special
Shares, and unlimited number of Class B Special Shares and an
unlimited number of Common Shares of which only 100 Common Shares
are issued and outstanding as fully paid and non-assessable. No
securities, options, warrants or other rights to purchase shares
or other securities of the Corporation have been authorized or
agreed to be issued or are outstanding except as contemplated by
this Agreement.
4.1.7 Financial Statements of the Corporation - The Corporation's
Financial Statements have been prepared in accordance with
applicable law and generally accepted accounting principles and
present fairly the financial position as at the dates indicated
and the results of operation of the Corporation for the period
indicated and no material adverse change in such financial
position or such results of operations has occurred since the date
thereof.
4.1.8 No Undisclosed Liabilities - The Corporation is not subject to any
liability or liabilities, absolute or contingent, which
individually or in the aggregate are material, and which are not
disclosed, or which are in excess of the amounts disclosed or
reserved for in, the balance sheet of the Corporation or which are
not otherwise disclosed in this Agreement, other than liabilities
of the same nature as those set forth in the Corporation's
Financial Statements or disclosed herein and reasonably incurred
in the usual and ordinary course of business to the Closing Date,
provided that the same do not materially and adversely affect the
financial position of the Corporation.
4.1.9 Material Contracts - The Corporation is not in default under any
material contract, nor are the Vendors aware of any default by any
other Party under any material contract, and the Vendors are not
aware of any facts or circumstances which would, with the giving
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of notice or the lapse of time, give rise to a default by the
Corporation under a material contract.
4.1.10 Taxes - With respect to its taxes:
4.1.10.1 the Corporation has, at the prescribed times:
(a) filed all tax returns required to be filed by it in
all applicable jurisdictions,
(b) made and remitted all required or desirable
deductions or withholdings at source, and
(c) paid all taxes, levies, assessments, reassessments,
penalties, interest and fines due and payable by it;
4.1.10.2 all such tax returns properly reflect, and do not in
any respect understate, the taxable income or the
liability for taxes of the Corporation in the
relevant tax year or calendar year;
4.1.10.3 adequate provision has been made in the
Corporation's Financial Statements for all taxes,
governmental charges, and assessments, whether
relating to income, sales, real or personal
property, or other types of taxes, governmental
charges, or assessments, including interest and
penalties thereon, payable in respect of the
business or assets of the Corporation or otherwise,
for all relevant periods;
4.1.10.4 All provincial and federal income tax assessments
have been issued to the Corporation covering all
past periods up to and including the Corporation's
fiscal year ending in December 31, 1999 and any
assessments issued for stub periods up to and
including the time of the Closing Date have been
accounted for and any amounts owing in respect
thereof have been paid;
4.1.10.5 assessments for all other applicable federal and
Provincial taxes and levies issued at the time of
the Closing Date have been accounted for and any
amounts owing thereunder have been paid;
4.1.10.6 there are no actions, suits or other proceedings or
investigations or claims in progress, pending or, to
the best of the Vendor's knowledge, threatened
against the Corporation in respect of any taxes,
governmental charges, or assessments and, in
particular, there are no currently outstanding
reassessments or written enquiries that have been
issued or raised by any governmental authority
relating to any such taxes, governmental charges and
assessments;
4.1.10.7 to the knowledge of the Vendors, there is no basis
for any adverse reassessment by any taxing authority
for any year remaining open for reassessment; and
4.1.10.8 the Corporation has not waived any statutory period
for assessment of any tax.
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Without limiting the generality of the foregoing,
the Corporation is in absolute compliance with all
registration, timely reporting, and remittance
obligations in respect of all Provincial and Federal
sales tax legislation and of any other Provincial or
Federal tax it may be subject to.
4.1.11 No Indebtedness to the Corporation - The Vendors are not indebted
to the Corporation.
4.1.12 Accounts Receivable Collectible - All accounts receivable are bona
fide, good and collectable, without set off or counterclaim and to
the best of the Vendor's knowledge all such accounts receivable
shall be paid in a timely fashion subject to a reasonable reserve
for bad debts.
4.1.13 Amounts In Trust - There are no amounts deposited in trust, for
the benefit of any third party, with the Corporation as at the
date hereof except as listed in Schedule "C".
4.1.14 No Material Adverse Change - There has been no material adverse
change in the business, assets, liabilities or financial condition
of the Corporation since date of the Corporation's Financial
Statements dated June 30, 2000.
4.1.15 Distributions to Shareholders - Since the date of the
Corporation's Financial Statements, the Corporation has not
declared or made any payment of any dividend or other distribution
in respect of any shares in its capital or purchased or redeemed
any such shares or effected any subdivision, consolidation,
reclassification or other modification of its share capital which
has not been approved in writing by the Purchaser prior to the
Closing Date.
4.1.16 Withholding Amounts - The Corporation has withheld all amounts
required to be withheld, including without limiting the generality
of the foregoing, all amounts required to be withheld under the
Income Tax Act (Canada), for employment insurance and for the
Canada Pension Plan and any other amounts required by law to be
withheld from any payments made to any of the officers, directors
and employees of the Corporation, and these withholdings have been
or will be paid to the proper taxing authority or receiving
offices.
4.1.17 Corporate Records - The corporate records and minute books of the
Corporation contain all minutes of the meetings of directors and
shareholders of the Corporation are complete, accurate and
up-to-date and the stock register of the corporation is complete
and accurate in all material respects.
4.1.18 Breach of Order - The Corporation is not in, and has not received
notice of any, material default under any order, writ, injunction
or decree of any court or governmental agency or authority having
jurisdiction, nor any agreement or obligation by which the
Corporation is bound or to which it is subject and which
materially affects or relates to the Corporation.
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4.1.19 No Subsidiaries - The Corporation does not have any ownership
interest (either directly or indirectly) in any other entity, nor
is it a party to or bound by any agreement to acquire such an
interest.
4.1.20 Employees - All withholding taxes, insurance related payments and
any other employment related payments to be made by the
Corporation are up to date, or accrued, as of the Closing Date.
4.1.21 Guarantee and Indemnity Agreements - The Corporation is not a
party as guarantor or indemnitor to any agreements of guarantee or
indemnity for debts or obligations of the Vendors or any other
person.
4.1.22 Debt Instruments - On the Closing Date the Corporation will not
have any outstanding bonds, debentures, mortgages, notes or other
evidence of indebtedness other than trade debts, trade accounts or
similar obligations entered into in the ordinary course of the
Corporation's business and as listed on Schedule B hereto, and the
Corporation is not under any obligation to create or issue any
bonds, debentures, mortgages, notes or other indebtedness.
4.1.23 Incentive Payments - To the best knowledge of the Vendor, the
Corporation has not received any incentives, credits, grants or
other governmental assistance pursuant to the Regulations in
effect at the relevant time which will have to be repaid by the
Corporation, or if accrued in the books and records of the
Corporation, will be disallowed.
4.1.24 Workers' Compensation - All payments due to the Workplace Safety &
Insurance Board (or similar body in any other jurisdiction) in
respect of the Corporation are current.
4.1.25 Bank Accounts - All information with respect to all deposits of
money with any bank, trust company, treasury branch or other
entity empowered or authorized to receive and hold deposits of
money and includes any and all deposit certificates or receipts or
other instrument of like tenor, held for or in the name of the
Corporation, have been provided to the Purchaser.
4.1.26 Execution of Agreement - The execution and delivery of this
Agreement and each and every agreement or document to be executed
and delivered hereunder and the consummation of the transactions
contemplated herein will not violate, nor be in conflict with, any
provision of any agreement or instrument to which the Vendors or
the Corporation are a party or are bound, or any judgment, decree,
order, statute, rule or regulation applicable to the Vendors or
the Corporation.
4.1.27 Binding Obligation - This Agreement has been duly executed and
delivered by the Vendors and constitutes legal, valid and binding
obligations of the Vendors enforceable in accordance with its
terms.
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4.1.28 Broker's Fees - The Vendors have not incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees
in respect of this transaction for which the Purchaser shall have
any obligation or liability except as provided for in section
10.6.
4.1.29 Defaults Under Statutes - The Corporation have not received any
notices of any breach of any statutes, regulations, rules, orders
and directives, including but not limited to those pertaining to
environmental matters, of all governmental agencies, departments
and authorities having jurisdiction over the business of the
Corporation.
4.1.30 Operating Records - The books and records of the Corporation
disclose all material transactions entered into by the Corporation
or on its behalf to the Closing Date.
4.1.31 Deterrence - Except for information relating to general economic
climate and general industry conditions and any changes of law,
the Vendors have no information or knowledge of any fact relating
to the Vendor's Rights, the Corporation's business or the
Corporation's ownership and operation of the Corporation's Assets
not disclosed to the Purchaser which, if known to the Purchaser,
might reasonably be expected to deter the Purchaser from
completing the transactions herein contemplated.
4.1.32 Title - The Vendors do not warrant title to the Corporation's
Assets, provided however, the Vendors do represent and warrant
that the Corporation has not done anything whereby any of the
Corporation's interest in and to the Corporation's Assets may be
cancelled or determined, nor has the Corporation or the Vendors
encumbered or alienated same and the Corporation's Assets shall
be, at the Closing Date, free and clear of all liens,
encumbrances, adverse claims, demands and royalties created by,
through or under the Vendors or the Corporation except for the
Permitted Encumbrances or as expressly set forth in Schedule "A".
Except as otherwise provided herein, neither the Vendors nor the
Corporation have received notice of any material defect in the
Corporation's title to the Corporation's Assets.
4.1.33 Notices of Default - The Corporation has received no notices of
default relating to the Corporation's Assets or any of them.
4.1.34 Lawsuits - The Corporation is not a party to any action, suit or
other legal, administrative or arbitration proceeding or
government investigation, actual or, to the best of the Vendor's
knowledge, threatened, which might reasonably be expected to
result in a material impairment or loss of the Corporation's
interest in the Corporation's Assets or any part thereof and no
particular circumstance, matter or thing has become known to the
Vendors which could reasonably be anticipated to give rise to any
such action, suit or other legal, administrative or arbitration
proceeding or government investigation.
4.1.35 Financial Commitments - There are no financial commitments which
are outstanding or due, or that hereafter may become due in
respect of the Corporation or the Corporation's Assets, or
operations in respect of the Corporation's Assets and which shall
become the responsibility of the Purchaser except as disclosed in
Schedule "C".
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4.1.36 Pre-emptive Rights - All rights of first refusal or other
pre-emptive rights applicable to any disposition of the
Corporation's Assets have been waived or satisfied in all
respects.
Section 4.2 REPRESENTATIONS OF JAWS AND THE PURCHASER
JAWS and the Purchaser hereby represent and warrant to the Vendors
in respect of the purchase of the Vendors' Rights that:
4.2.1 Organization of Jaws and The Purchaser - JAWS and the Purchaser
are both corporations duly organized and existing under the laws
of their jurisdiction of incorporation and the laws of those
jurisdictions in which they are each required to be registered.
4.2.2 Corporate Authority - JAWS and the Purchaser both have all the
requisite power and authority to enter into this Agreement, to
purchase and pay for and accept title to the Vendors's Rights on
the terms described herein and to perform the Purchaser's and
JAWS' other obligations under this Agreement and they have all
necessary corporate power, authority and capacity to carry on
business as it is now being conducted and to own, lease and
operate properties and assets.
4.2.3 Execution of Agreement - The execution and delivery of this
Agreement and each and every agreement or document to be executed
and delivered hereunder and the consummation of the transactions
contemplated herein will not violate, nor be in conflict with, any
provision of this Agreement or instrument to which JAWS and the
Purchaser is a party or is bound, or any judgment, decree, order,
statute, rule or regulation applicable to JAWS and the Purchaser
or the constating documents or bylaws of JAWS or the Purchaser.
4.2.4 Binding Obligation - This Agreement has been duly executed and
delivered by JAWS and the Purchaser and constitutes a legal, valid
and binding obligation of JAWS and the Purchaser enforceable in
accordance with its terms.
4.2.5 Consent - No consent, approval, permit, authorization, order of or
filing with any court or governmental agency, or regulatory
authority or body of Canada or the United States or any province
of Canada or state of the United States is required by JAWS or the
Purchaser for the execution and delivery of and the performance by
JAWS and the Purchaser of obligations under this Agreement, except
as may be required under applicable securities laws of such
jurisdiction and by the applicable stock exchange by-laws, rules
and regulations.
4.2.6 Reporting Issuer - JAWS is, and will at the Closing Date be a
reporting issuer for at least eight (8) months under the
securities laws of the United States of America and is in material
compliance with applicable stock exchange by-laws, rules and
regulations and is not in default in any material respect of any
provision of the Securities Act of 1933 or any regulation thereof
and no material change relating to JAWS has occurred since the
date of the JAWS' last Securities Act filing with respect to which
the requisite
15
material change report has not been filed under the applicable
securities laws and no such disclosure has been made on a
confidential basis.
4.2.7 Trading Orders - No order ceasing or suspending trading in
securities of the JAWS or prohibiting the sale of securities by
JAWS has been issued and to the best of JAWS knowledge, no
proceedings for this purpose have been instituted, are pending,
contemplated or threatened.
4.2.8 Dividends - There is not in the articles or by-laws of JAWS or the
Purchaser any restriction upon or impediment to the declaration or
payment of dividends by the directors of the Purchaser or the
payment of dividends by the Purchaser to the holders of JAWS
shares.
4.2.9 JAWS Transfer Agent - US Stock Transfer has been duly appointed as
the transfer agent and registrar for all of the outstanding JAWS
Shares.
4.2.10 JAC Transfer Agent - Montreal Trust Company of Canada has been
duly appointed as the transfer agent and registrar for all of the
outstanding JAC Shares.
4.2.11 Securities Filings - The information and statements set forth in
the documents and information filed by JAWS with the securities
commissions or similar regulatory authorities in Canada and the
United States, as they relate to JAWS, are, when taken as a whole,
true, correct and complete in all material respects and do not
contain any material misrepresentation, as of the date hereof.
4.2.12 Fully Paid & Non-Assessable - The JAWS shares issuable pursuant to
this Agreement, when issued, will be validly issued as fully paid
and non-assessable common shares in the capital of JAWS.
4.2.13 Resale Restrictions - Upon issue and following registration in
accordance with the Registration Rights Agreement, the JAWS Shares
issuable pursuant to this Agreement will not be subject to any
"hold period" under the securities laws of Alberta, Ontario or the
United States (other than "control person" restrictions), subject
to compliance by the holder of such shares with the conditions of
resale set forth in applicable securities legislation and to the
terms and conditions contemplated in this Agreement.
4.2.14 Broker's Fees - Neither JAWS nor the Purchaser have incurred any
obligation or liability, contingent or otherwise, for brokers' or
finders' fees in respect of this transaction for which the Vendors
shall have any obligation or liability, except as provided for in
section 10.6.
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ARTICLE 5.
VENDOR'S COVENANTS
Section 5.1 COVENANTS OF THE VENDORS
The Vendors hereby separately covenant to and with the Purchaser and JAWS
as follows:
5.1.1 Tax Returns and Other Records - The Vendors shall cause the
Corporation to deliver to the Purchaser any information, books,
accounts, records, tax returns or other data and information
relating to the Corporation on or as soon after the Closing Date
as reasonably possible.
5.1.2 Filing Tax Information - The Vendors shall cause the Corporation
to complete and file on a timely basis all returns, forms and
elections required to be filed by the Corporation in respect of
its taxation year ending immediately before the Closing Date and
shall cause the Corporation to pay any tax, interest or penalties
payable in respect thereof and the expenses of the preparation and
filing of same.
5.1.3 Securities Law Compliance Regarding Purchaser's Securities
Received - The Vendors acknowledges that the JAWS Shares acquired
hereunder may be subject to resale restrictions under applicable
securities legislation and policies and hereby agrees that the
Vendors will comply with all relevant securities legislation and
policies concerning any resale of such securities and will consult
with the Vendors's own legal advisors with respect to complying
with all applicable restrictions applying to any such resale. The
Vendors agree that the Purchaser shall legend the JAWS Shares,
unless subject to the Registration Right, as follows:
"The securities represented hereby have not been and will not be
registered under the United States Securities Act of 1933, as
amended (the "Securities Act"). These securities may be offered,
sold, pledged or otherwise transferred only (a) to the
corporation, (b) outside the United States in compliance with Rule
903 or 904 of Regulation S under the Securities Act, (c) in
compliance with the exemption from the registration requirements
under the Securities Act provided by Rule 144 thereunder, if
available, and in accordance with applicable state securities
laws, or (d) in a transaction that does not require registration
under the Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and the
holder has, prior to such sale, furnished to the corporation an
opinion of counsel, of recognized standing, or other evidence of
exemption, reasonably satisfactory to the corporation. Hedging
transactions involving the securities represented hereby may not
be conducted unless in compliance with the Securities Act."
5.1.4 Compliance for this Trade - If required by applicable securities
legislation, policy or order of any securities commission, stock
exchange or other regulatory authority, subject always to the
conditions precedent contained in section 10.2 hereof, the Vendors
will execute, deliver, file and otherwise assist the Purchaser in
filing, such reports, undertakings and other documents with
respect to this transaction.
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5.1.5 Compliance with Future Stock Exchange Requirements - Subject
always to the conditions precedent contained in section 10.2
hereof, the Vendors agree that if the Vendors are required by any
stock exchange or securities commission to give any undertakings,
to file any personal information or to escrow all or any of the
JAWS' Common Shares received hereunder in order for the Purchaser
or any successor corporation to meet the requirements of such
stock exchange or securities commission in connection with any
offering or listing of shares of the Purchaser or successor
corporation, the Vendors will give all such undertakings, file
such personal information and/or enter into such escrow as shall
be required for such purpose.
ARTICLE 6.
NO MERGER AND SURVIVAL
Section 6.1 NON-MERGER
The covenants, representations and warranties set forth in Articles 4.
and 5. shall be deemed to apply to all assignments, conveyances, transfers and
documents conveying any of the Vendors's Rights from the Vendors to the
Purchaser and there shall not be any merger of any covenant, representation or
warranty in such assignments, transfers or documents notwithstanding any rule of
law, equity or statute to the contrary and all such rules are hereby waived.
Section 6.2 SURVIVAL
The covenants, representations and warranties set forth in Articles 4.
and 5. shall survive the closing of the purchase and sale of that Vendors's
Rights and, notwithstanding such closing or any investigation made by or on
behalf of the Vendors or the Purchaser, shall continue in full force and effect
for the benefit of the other Party, provided, however, that:
6.2.1 the covenants, representations and warranties of the Vendors, JAWS
and the Purchaser, except those relating to the tax liability of
the Corporation, shall terminate at the expiry of one year
following the Closing Date;
6.2.2 those covenants, representations and warranties of the Vendors,
JAWS and the Purchaser relating to 6.2.2 the tax liability of the
Corporations, shall, unless resulting from any negligent
misrepresentations made or fraud committed in filing a return or
supplying information for the purposes of any Regulations or any
other legislation imposing tax on the Corporation terminate at the
expiry of the last of the limitation periods contained in the
applicable Regulations or any other legislation imposing tax on
the Corporation subsequent to the expiry of which an assessment,
reassessment, or other form of recognized document assessing
liability for any year ended or deemed to have ended prior to the
Closing Date cannot be issued to the Corporation; and
6.2.3 there shall be no limit on the covenants, representations and
warranties of the Vendors relating to tax liability of the
Corporation based upon any negligent misrepresentations made or
fraud committed in filing a return or in supplying information for
the purposes of any Regulations or other legislation imposing tax
on the Corporation.
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ARTICLE 7.
INDEMNITY
Section 7.1 VENDORS'S INDEMNITY
The Vendors shall indemnify and save JAWS, the Purchaser and the
Corporation, harmless from and against any loss whatsoever arising out of, under
or pursuant to:
7.1.1 all claims, liabilities, contracts, undertakings and arrangements
of the Corporation, including, without limiting the generality of
the foregoing, any liabilities for federal, Provincial, sales,
excise, income, corporate and any other taxes of the Corporation,
existing at the Closing Date, and not disclosed in, provided for
or included in the Corporation's Financial Statements save and
except those liabilities;
7.1.1.1 disclosed in this Agreement or any Schedule hereto, or
7.1.1.2 accruing or incurred in the ordinary course of business
subsequent to the date of the Corporation's Financial
Statements and up to the Closing Date; and
7.1.1.3 any and all reassessments for income tax, sales tax,
excise tax and any interest or penalty for any period
ending on or before the Closing Date for which no
adequate reserve has been provided in the Corporation's
Financial Statements in respect of any matter arising
prior to the Closing Date.
7.1.2 any and all claims of and from any and all manner of action and
actions, cause and causes of action, suits, debts, sums of money,
indemnities, expenses, general damages, special damages, interest,
costs and claims of any and every kind and nature whatsoever, at
law or in equity, or under any statute, which might still arise.
ARTICLE 8.
PRE-CLOSING MATTERS
Section 8.1 COVENANTS OF THE VENDORS
During the period from the date hereof to the Closing Time:
8.1.1 the Vendors shall use their best efforts to cause all of the
conditions for the benefit of the Purchaser to be fulfilled at or
before the Closing Time;
8.1.2 the Vendors shall not submit or entertain any offers from any
other Person in respect of and shall not enter into discussions
with any other Person relating to a proposed disposition by the
Vendors of any interest in the Corporation or a disposition by the
Corporation of the Corporation's Assets or any part thereof
without the acknowledgement and consent of the Purchaser; and
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8.1.3 the Vendors shall not permit, cause or acquiesce in the issuance
of any securities by the Corporation to any Person.
Section 8.2 Covenants of the Purchaser and Jaws
During the period from the date hereof to the Closing Time, JAWS shall
use their best efforts to cause all of the conditions for the benefit of the
Vendors to be fulfilled at or before the Closing Time;
Section 8.3 Examination and Investigation by The Purchaser And Jaws
The Vendors shall permit or cause the Corporation to permit employees,
advisors and representatives of the Purchaser full and complete access to all
facilities and premises and all current and historical records and information
of every nature and kind within the Vendors' or the Corporation's possession or
control which relate to the acquisition, exploration, development, construction,
operation, maintenance, or ownership of any of the Corporation's Assets or the
conduct of its business or with respect to the incorporation, organization,
operations, or financial position of the Corporation or the acquisition or
ownership of the shares of the Corporation for the purposes of reviewing same
and such employees, advisors, and representatives shall be permitted to make
copies of such records and information as they may deem advisable. The Vendors
shall use their best efforts to make available, or cause the Corporation to make
available, to the Purchaser any pertinent information that is possessed by
another Person or which is relevant to the operation, maintenance, and ownership
of the Corporation's Assets or the conduct of its business. The Purchaser and
its employees, advisors, and representatives shall be entitled to make copies of
such information as they reasonably consider necessary. The Vendors shall not
require the return or destruction of any information prior to the Closing Time.
Section 8.4 Examination and Investigation by the Vendors
JAWS shall permit employees and advisors and representatives of the
Vendors full and complete access to all facilities and premises and all current
and historical records and information of every nature and kind within the
Purchaser's or JAWS' possession or control which relate to the acquisition or
ownership of any of the Purchaser's Assets or JAWS Shares or the conduct of
their business or with respect to the incorporation, organization, operations,
or financial position of the Purchaser or JAWS or the acquisition or ownership
of JAWS Shares for the purposes of reviewing same and such employees, advisors,
and representatives shall be permitted to make copies of such records and
information as they may deem advisable. JAWS shall use their best efforts to
make available to the Vendors any pertinent information that is possessed by
another Person or which is relevant to acquisition and ownership of the
Purchaser's Assets or JAWS Shares or the conduct of their business. The Vendors
and their employees, advisors, and representatives shall be entitled to make
copies of such information as they reasonably consider necessary, JAWS shall not
require the return or destruction of any information prior to the Closing Time.
Section 8.5 Corporation's Financial Statements
To the extent not previously delivered, the Vendors shall cause the
Corporation as soon as practical, to deliver the Corporation's Financial
Statements to the Purchaser.
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Section 8.6 Jaws' Financial Statements
To the extent not previously delivered, the Purchaser shall deliver JAWS
Financial Statements to the Vendors.
ARTICLE 9.
NON-DISCLOSURE AND USE OF INFORMATION
Section 9.1 Use of Corporation's Information
Notwithstanding the obligations of the Vendors to provide information to
the Purchaser pursuant to Article 8 hereof:
9.1.1 the Vendors and the Corporations shall not be under any obligation
to give such access or furnish such information if to do so would
cause the Corporation to be in violation of any confidentiality
agreement with any Person, if such Person has refused to permit
the release of such information to the Purchaser following
exercise by the Corporation of their best efforts to obtain
consent to such release when the exercise of such best efforts was
requested by the Purchaser;
9.1.2 any information provided to the Purchaser or any employee, advisor
and representative of the Purchaser hereunder which is not
publicly disclosed, is confidential or is proprietary in nature
(the "Corporation's Information") shall be kept confidential and
shall not, without the prior written consent of the Corporation,
be disclosed by a recipient in any manner whatsoever, in whole or
in part, and shall not be used by the Purchaser or any such
employee, advisor or representative (other than in connection with
this transaction) or following the termination of this Agreement
in the acquisition of any securities of the Corporation or any of
the Corporation's Assets in another transaction for a period of
one year following the termination of this Agreement. The
Corporation's Information shall be revealed only to employees,
advisors and representatives who need to know it for the purpose
of implementing the transaction who will be informed of the
confidential nature of the Corporation's Information and agree to
act in accordance herewith;
9.1.3 the term the Corporation's Information shall not include
information which:
9.1.3.1 is or becomes generally available to the public
other than as a result of a disclosure by the
Purchaser or any other recipient of the
Corporation's Information hereunder, or
9.1.3.2 is or becomes available to the Purchaser or any
other recipient of the Corporation's Information
hereunder on a non-confidential basis from a source
other than the Corporation which is not prohibited
from disclosing such Corporation's Information to
the Purchaser by a legal, contractual or fiduciary
obligation to the Corporation; and
9.1.4 in the event that the Purchaser or any other recipient of the
Corporation's Information hereunder becomes legally obliged to
disclose any of the Corporation's Information, the
21
Purchaser shall provide the Corporation with prompt notice of such
obligation (and in any event not less than 24 hours prior to the
time that the Corporation's Information is required to be
disclosed) so that the Corporation may seek a protective order or
other appropriate remedy and/or waive compliance with this
Subsection. In the event that such protective order or other
remedy is not obtained, or that the Corporation waives compliance
with this Subsection, the Purchaser or any other receipt of the
Corporation's Information hereunder shall furnish only that
portion of the Corporation's Information which is legally required
to be disclosed and exercise their best efforts to obtain reliable
assurance that confidential treatment will be accorded the
Corporation's Information.
Section 9.2 Use of Purchaser's Information
Notwithstanding the obligations of JAWS to provide information to the
Vendors pursuant to Article 8 hereof:
9.2.1 JAWS shall not be under any obligation to give such access or
furnish such information if to do so would cause JAWS to be in
violation of any confidentiality agreement with any Person, if
such Person has refused to permit the release of such information
to the Vendors following exercise by JAWS of its best efforts to
obtain consent to such release when the exercise of such best
efforts was requested by the Vendors;
9.2.2 any information provided to the Vendors or the Corporation or any
employee, advisor and representative of the Vendors or the
Corporation hereunder which is not publicly disclosed, is
confidential or is proprietary in nature ("the Purchaser's
Information") shall be kept confidential and shall not, without
the prior written consent of the Purchaser, be disclosed by a
recipient in any manner whatsoever, in whole or in part, and shall
not be used by the Vendors or the Corporation or any such
employee, advisor or representative (other than in connection with
this transaction) or following the termination of this Agreement
in the acquisition of any securities of the Purchaser or any of
the Purchaser's Assets in another transaction for a period of one
year following the termination of this Agreement. The Purchaser's
Information shall be revealed only to employees, advisors and
representatives who need to know it for the purpose of
implementing the transaction who will be informed of the
confidential nature of the Purchaser's Information and agree to
act in accordance herewith;
9.2.3 the term the Purchaser's Information shall not include information
which:
9.2.3.1 is or becomes generally available to the public
other than as a result of a disclosure by the
Vendors or the Corporation or any other recipient of
the Purchaser's Information hereunder, or
9.2.3.2 is or becomes available to the Vendors or the
Corporations or any other recipient of the
Purchaser's Information hereunder on a
non-confidential basis from a source other than the
Purchaser which is not prohibited from disclosing
such Purchaser's Information to the Vendors or the
Corporation by a legal, contractual or fiduciary
obligation to the Purchaser; and
22
9.2.4 in the event that the Vendors or the Corporation or any other
recipient of the Purchaser's Information hereunder becomes legally
obliged to disclose any of the Purchaser's Information, the
Vendors or the Corporation shall provide the Purchaser with prompt
notice of such obligation (and in any event not less than 24 hours
prior to the time that the Purchaser's Information is required to
be disclosed) so that the Purchaser may seek a protective order or
other appropriate remedy and/or waive compliance with this
Subsection. In the event that such protective order or other
remedy is not obtained, or that the Purchaser waives compliance
with this Subsection, the Vendors, the Corporation or any other
recipient of the Purchaser's Information hereunder shall furnish
only that portion of the Purchaser's Information which is legally
required to be disclosed and exercise their best efforts to obtain
reliable assurance that confidential treatment will be accorded
the Purchaser's Information.
Section 9.3 Press Releases
All press releases or other similar public written communications of any
sort by JAWS, the Vendors or the Corporation relating to this transaction and
this Agreement and the method of release for publication thereof, will be
subject to the approval of the Purchaser and the Vendors. The Purchaser and the
Vendors will deal expeditiously with a request for approval of such a written
communication. The Vendors and the Purchaser will cooperate in relation to other
public communications with respect to their respective businesses or this
transaction with a view to achieving consistency in the content of such
communication and ensuring that such communications are consistent with this
Agreement.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE PERFORMANCE UNDER THIS AGREEMENT
Section 10.1 Purchaser's Conditions
The obligation of the Purchaser to complete the purchase of the Vendors's
Rights shall be subject to the satisfaction of, or compliance with, at or before
the Closing Time, each of the following conditions (each of which is hereby
acknowledged to be inserted for the exclusive benefit of the Purchaser and may
be unilaterally waived by the Purchaser in whole or in part):
10.1.1 Truth and Accuracy of Representations - All of the
representations and warranties of the Vendors set forth in this
Agreement shall be true and correct as at the Closing Time with
the same force and effect as though made at the Closing Time
except to the extent affected by the transactions contemplated
by this Agreement.
10.1.2 Satisfactory Due Diligence - All requests for information about
the Vendors and the Corporations shall have been responded to by
the Vendors and the Corporation to the satisfaction of the
Purchaser in its sole discretion and the Purchaser shall have
received all documentation required to be delivered to the
Purchaser at or before the Closing Time in accordance with this
Agreement.
10.1.3 Compliance with Agreement - All of the terms, covenants,
agreements and conditions of this Agreement to be complied with
or performed by the Vendors at or before the Closing Time shall
have been complied with or performed.
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10.1.4 Receipt of Closing Documentation - The Purchaser shall have
received all documentation required to be delivered to the
Purchaser at or before the Closing Time in accordance with this
Agreement.
10.1.5 Approvals - All approvals relating to the consummation of the
transactions hereby contemplated shall have been obtained from
the relevant regulatory bodies;
10.1.6 Discharges - All liens, charges, encumbrances, security
interests and other claims, whatsoever, registered or made by
any Person on or against the Vendors's Rights shall have been
discharged or provision therefor, satisfactory to the Purchaser
shall have been made at or before the Closing Time.
10.1.7 Legal Formalities - All actions and proceedings and all
instruments and documents required to implement this Agreement
or any other agreements incidental thereto, and all other legal
matters relating to the purchase of the Vendors's Rights by the
Purchaser shall have been approved as to form and legality by
counsel for the Purchaser.
10.1.8 Condition of Corporation's Financial Statements - The Purchaser
shall have received the Corporation's Financial Statements in
accordance with Section 8.5 and shall be satisfied with the
financial condition of the Corporation based on the contents of
the Corporation's Financial Statements.
10.1.9 No Restrictions - No action or proceeding, judicial (at law or
in equity) or extra-judicial, shall be pending or threatened by
any Person to enjoin, restrict or prohibit:
10.1.9.1 the purchase and sale of the Vendors's Rights
contemplated hereby or the subsequent use, benefit
and enjoyment thereof; or
10.1.9.2 the right of the Corporation or the Purchaser from
and after the Closing Time to conduct, expand and
develop the business of the Corporation.
10.1.10 Opinion of Counsel to Vendors - The Vendors shall have delivered
to the Purchaser and Purchaser's counsel a favourable opinion of
counsel to the Vendors as to:
10.1.10.1 the legal status, power and authority of the Vendors
to execute and perform the terms of this Agreement
and any other agreement, document or instrument
required to be delivered by the Vendors hereunder;
10.1.10.2 the valid, binding and enforceable nature of all
such agreements, documents and instruments;
10.1.10.3 any other matters which, in the opinion of counsel
for the Purchaser, acting reasonably, are material
in connection with the transactions herein
contemplated; and
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Provided that counsel for the Vendors, in rendering the opinions
required in this Section, may rely as to any factual matters on
a certificate or certificates provided to them by the Vendors,
which certificate or certificates shall be attached to such
opinions and as to the laws of any jurisdiction other than the
Province of Ontario, may rely on opinions addressed to them from
other counsel satisfactory to counsel for the Vendors, and which
opinions from other counsel shall also be addressed to the
Purchaser and to counsel for the Purchaser.
10.1.11 No Change of Laws - After the date hereof and prior to
the Closing Time, there shall have been no change in the laws in
force in any jurisdiction in which any of the Corporation's
business is carried on, or any of the Corporation's Assets are
located including, without limitation, amendment to or repeal of
existing statutes, regulations, rules or policies and enactment
or implementation of new statutes, regulations, rules or
policies, nor the occurrence of any general or specific event
which, in the opinion of the Purchaser, could materially
adversely affect the Corporation's Assets, the conduct of its
business, or the transactions contemplated herein or the ability
of the Corporation to conduct, expand or develop its business or
to own or operate the Corporation's Assets after the Closing
Time, and no such change shall have been proposed.
10.1.12 Concurrent Closings - All of the conditions precedent to
the obligations of the Purchaser to complete the transactions
herein contemplated or contemplated in the other agreements
contemplated or required hereby and Schedules hereto shall have
been fulfilled or satisfactorily performed in accordance
therewith including, without limitation, the delivery of all
documents required to be delivered thereunder.
10.1.13 No Change in Operations - Except as agreed to in writing by the
Purchaser, the Corporation shall not and the Vendors shall take
such steps as may be necessary to cause the Corporation not to:
10.1.13.1 acquire or agree to acquire any assets or acquire or
agree to acquire by amalgamating, merging or
consolidating with, purchasing substantially all of
the assets of or otherwise, any business or any
corporation, partnership, association or other
business organization or division thereof;
10.1.13.2 agree to sell, lease or otherwise dispose of or grant
any option with respect to any of its assets;
10.1.13.3 guarantee the payment of indebtedness or incur
indebtedness for money borrowed or issue any debt
securities; or
10.1.13.4 grant any director, any officer or any employee who
has a policy making function or who manages a
principal business unit, any increase in compensation
or in severance or termination pay (whether or not
such compensation or pay is payable in cash), or enter
into any employment agreement with any such director,
officer or employee, or hire or promote any Person,
except in the ordinary course of business.
25
10.1.14 No Damage - No destruction, material damage, appropriation,
expropriation or seizure of any of the Corporation's Assets or
Vendors's Rights or of all the Corporation's Assets shall have
occurred.
10.1.15 Statutory Restrictions - There shall be no impediment,
prohibition or restriction existing and no offence would occur
or result at the Closing Time under any applicable statute or
regulation to which the transactions contemplated hereby would
be subject, by the Closing of the transactions contemplated
hereby.
Section 10.2 Vendors' Conditions
The obligation of each Vendors to complete the sale of the Vendors's
Rights shall be subject to the satisfaction of, or compliance with, at or before
the Closing Time, each of the following conditions (each of which is hereby
acknowledged to be inserted for the exclusive benefit of each Vendors and may be
unilaterally waived by each Vendors in whole or in part):
10.2.1 Truth and Accuracy of Representations - All of the
representations and warranties of JAWS and the Purchaser set
forth in this Agreement shall be true and correct as at the
Closing Time with the same force and effect as though made at
the Closing Time.
10.2.2 Performance of Obligations - All of the terms, covenants,
agreements and conditions of this Agreement to be complied with
or performed by JAWS and the Purchaser at or before the Closing
Time shall have been complied with or performed.
10.2.3 Employment Agreements - JAWS shall have delivered to each of the
Vendors, a satisfactory employment agreement and/or consulting
services agreement.
10.2.4 Registration Rights Agreement - JAWS and the Vendors shall have
entered into the Registration Rights Agreement.
Section 1.3 Rights of The Purchaser
If any of the conditions for the exclusive benefit of the Purchaser as
set forth in Section 10.1 shall not have been fulfilled at or prior to the
Closing Time, the Purchaser shall be entitled, by notice to the Vendors prior to
the time of completion of the Closing:
10.3.1 to terminate their obligations hereunder and this Agreement
effective as of the time of such notice; or
10.3.2 to proceed with the Closing as contemplated by Article 11.
If no such notice is given prior to the completion of the Closing, the Purchaser
shall be deemed to have elected to proceed with the Closing as contemplated by
Article 11.
26
Section 10.4 Rights of the Vendors
If any of the conditions for the exclusive benefit of the Vendors set
forth in Section 10.2 shall not have been fulfilled at or prior to the Closing
Time, the Vendors shall be entitled, by notice to the Purchaser and JAWS prior
to the time of completion of the Closing:
10.4.1 to terminate their obligations hereunder and this Agreement
effective as of the time of such notice; or
10.4.2 to proceed with the Closing as contemplated by Article 11.
If no such notice is given prior to the completion of the Closing, the Vendors
shall be deemed to have elected to proceed with the Closing as contemplated by
Article 11.
Section 10.5 Break-Up Fee
JAWS agrees to pay GNS, as liquidated damages, a breakup fee of $100,000
CDN and legal fees to a maximum of $30,000, plus disbursements and taxes, if,
after:
10.5.1 the completion of JAWS and the Purchasers due diligence review
of GNS to the satisfaction of JAWS;
10.5.2 the completion of a satisfactory audit of GNS, by Ernst & Young
LLP, to the satisfaction of JAWS; and
10.5.3 all conditions to closing can be fulfilled
JAWS and the Purchaser fail to close the purchase of the Vendors Rights in
accordance with this Agreement.
Section 10.6 Closing Costs
JAWS agrees to pay the reasonable legal expenses of GNS payable to
Gowling Xxxxxxx Xxxxxxxxx, to a maximum of $30,000 CDN, plus disbursements and
taxes and the reasonable financial consultant costs of GNS payable to Deloitte
and Touche, to a maximum of $120,000, plus disbursements and taxes, on the
Closing Date.
Section 10.7 Rights of Termination
If this Agreement has been terminated pursuant to Section 10.3.1 or
Section 10.4.1 hereof, all Parties to this Agreement shall be released from all
their obligations under this Agreement.
27
ARTICLE 11.
CLOSING
Section 11.1 Place of Closing and Closing Time
The Closing shall take place at the Closing Time via facsimile, or at
such other place as may be agreed upon by the Vendors and the Purchaser;
Provided, However, if the Parties are diligently pursuing completion of the
conditions precedent to Closing, the Parties hereby agree that the Time for
Closing shall be extended for such reasonable period as shall be necessary to
complete such matters.
Section 11.2 Deliveries by Vendors
At the Closing Time and at the place of the Closing, each Vendors shall
deliver to the Purchaser:
11.2.1 certificates or other instruments representing or evidencing the
Vendors's Rights duly endorsed for transfer or assignment to the
Purchaser;
11.2.2 a certified copy of a resolution of the directors of the
Corporation consenting to the transfer of the Vendors's Rights and
authorizing the registration of such transfer on the appropriate
registers of the Corporation;
11.2.3 one or more certificates or other instruments representing or
evidencing the Vendors's Rights, registered in the name of the
Purchaser duly signed by the proper officers of the Corporation
and evidence satisfactory to the Purchaser that it is registered
as the holder thereof on the appropriate registers of the
Corporation;
11.2.4 at the Closing Time the resignations, or proof of termination, of
all of the directors, officers and employees of the Corporation
effective immediately upon the delivery thereof, together with a
complete release and discharge by such directors and officers of
any and all claims against the Corporation which may have arisen
prior to the Closing Time;
11.2.5 executed Offers of Employment from JAWS to each of Xxxx
Pluscauskas and Xxxxx Xxxxxxxx
11.2.6 a certificate signed by each Vendors to the effect that the
representations and warranties of the Vendors herein contained are
true and correct as at the Closing Time;
11.2.7 the opinion of counsel to the Vendors referred to in
Section 10.1.10;
11.2.8 deliver to the Purchaser such other documents as the Purchaser may
reasonably request.
Section 11.3 Deliveries Of The Purchaser And Jaws At Closing
At the Closing Time and at the Place of Closing, the Purchaser and JAWS
shall deliver to each of the Vendors:
28
11.3.1 one or more certificates or other instruments (or an
undertaking to provide one or more certificates or other
instruments) representing or evidencing the Purchase
Consideration herein payable to each of the Vendors, in
accordance with section 3.1 and subject to section 3.2;
11.3.2 an executed Voting and Exchange Trust Agreement;
11.3.3 an executed Support Agreement;
11.3.4 certified resolutions of the Purchaser and JAWS authorizing the
transactions contemplated hereby;
11.3.5 a certificate signed by an officer of the Purchaser and JAWS to
the effect that the representations and warranties of JAWS, herein
contained are true and correct as at the Closing Time; and
11.3.6 such other documents as the Vendors may reasonably request.
Section 11.4 Closing Escrow
All payments or documents delivered by any Person at the Closing Time
shall be deemed not to have been delivered until each of the Vendors, the
Purchaser and JAWS has declared that it is satisfied with the form and substance
of the payments or documents to be delivered to such Person and all conditions
to the delivery or release of any payments or documents to be delivered at the
Closing Time by Parties other than the Vendors or the Purchaser shall have been
satisfied.
ARTICLE 12.
MISCELLANEOUS
Section 12.1 Governing Law and Attornment
This Agreement shall, in all respects, be subject to and be interpreted,
construed and enforced in accordance with the laws in effect within the Province
of Ontario. Each Party hereby expressly attorns to the jurisdiction of the
courts of the Province of Ontario and all courts of appeal therefrom.
Section 12.2 Time of the Essence
Time shall in all respects be of the essence of this Agreement.
Section 12.3 Notices
The address for notices of each of the Parties shall be as follows:
Jaws Technologies, Inc.
Jaws Acquisition Canada Corp.
000 - 0xx Xxxxxx X.X.,
Xxxxxxx, Xxxxxxx
29
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Pluscauskas And Xxxxx Xxxxxxxx
c/o General Network Services - GNS Inc.
Xxxxx 0000, 000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Each of the Parties may from time to time change their address for
service herein by giving written notice to the other Party. Any notice, required
or contemplated hereunder, may be served by personal service upon an officer or
director of a Party or by telecopy, facsimile transmission or mailing the same,
except during periods of actual or anticipated postal disruptions, by prepaid
registered post in a properly addressed envelope addressed to the Party at its
address for service hereunder, as the same may be amended from time to time in
accordance herewith. Any notice given by service upon an officer or director of
a Party shall be deemed to be given on the date of such service. Any notice
given by mail shall be deemed to be given to and received by the addressee on
the fifth Business Day after the mailing thereof. Any notice given by telecopy
or facsimile transmission shall be deemed to be given to and received by the
addressee on the next Business Day after the sending thereof.
Section 12.4 Prior Agreements
This Agreement shall supersede and replace any and all prior agreements
between the Parties relating to the sale and purchase of the Vendors's Rights
and may be amended only by written instrument signed by all Parties.
Section 12.5 Further Assurances
Each Party hereto shall, from time to time, and at all times hereafter at
the request of any other Party hereto, but without further consideration, do all
such further acts and execute and deliver all such further instruments, notices,
releases, and documents as shall be reasonably required in order to fully
perform and carry out the terms hereof.
This instrument states the entire agreement between the Parties.
Section 12.6 Enurement
This Agreement shall be binding upon and shall enure to the benefit of
and be binding upon the Parties and their respective successors, receivers,
receiver-managers, trustees and permitted assigns, as the case may be.
Section 12.7 Counterparts
30
This Agreement and any certificate or other writing delivered in
connection herewith may be executed and delivered in any number of counterparts,
each of which when executed and delivered is an original but all of which taken
together constitute one and the same instruments. The execution of this
Agreement or any other writing by any party hereto or thereto will not become
effective until counterparts hereto or thereto, as the case may be, have been
executed by all the parties hereto or thereto.
Section 12.8 Transmission by Facsimile
Delivery of this Agreement by facsimile transmission shall constitute
effective delivery.
IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement
as of the date first above written.
JAWS ACQUISITION CANADA CORP.
Per: /s/ Xxxx Xxxxxxx
-----------------------------
Xxxx Xxxxxxx, President
JAWS TECHNOLOGIES, INC.
Per: /s/ Xxxx Xxxxxxx Per:
----------------------------- -----------------------------
Xxxx Xxxxxxx, CFO
/s/ Xxxxxxx Pluscauskas /s/ G.M. Power
---------------------------------- --------------------------------------
XXXXXXX PLUSCAUSKAS Witness
/s/ Xxxxx Xxxxxxxx /s/ G.M. Power
---------------------------------- --------------------------------------
XXXXX XXXXXXXX Witness
SCHEDULE "A" TO THAT SHARE PURCHASE AGREEMENT DATED THE 15TH, DAY
OF AUGUST, 2000, BETWEEN XXXXXXX PLUSCAUSKAS, XXXXX XXXXXXXX,
JAWS ACQUISITION CANADA CORP. AND JAWS TECHNOLOGIES, INC.
Corporation's Assets
See Financials dated July 21, 2000.
SCHEDULE "B" TO THAT SHARE PURCHASE AGREEMENT DATED THE 15TH, DAY
OF AUGUST, 2000, BETWEEN XXXXXXX PLUSCAUSKAS, XXXXX XXXXXXXX,
JAWS ACQUISITION CANADA CORP. AND JAWS TECHNOLOGIES, INC.
Corporation's Financial Statements
Financial Statements
General Network Services Inc.
As at June 30, 2000 [unaudited], September 30, 1999 and 1998 and
for the years ended September 30, 1999, 1998 and nine month
periods ended June 30, 2000 and 1999 [unaudited].
AUDITORS' REPORT
To the Directors of
General Network Services Inc.
We have audited the balance sheets of General Network Services Inc. as at
September 30, 1999 and September 30, 1998 and the statements of income (loss)
and comprehensive income (loss), stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at September 30, 1999 and
September 30, 1998 and the results of its operations and cash flows for the
years then ended in accordance with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
Ottawa, Canada,
July 21, 2000 Chartered Accountants
General Network Services Inc.
Incorporated under the laws of Canada
BALANCE SHEETS
[Canadian dollars]
June 30, September 30, September 30,
2000 1999 1998
$ $ $
------------------------------------------------------------------------------------------------------------------
[unaudited]
ASSETS
Current
Cash and cash equivalents 21,421 32,889 19,069
Accounts receivable [note 8] 37,065 120,466 106,711
Investments tax credits receivable 115,864 115,864 70,854
Prepaids and other 7,171 7,179 --
------------------------------------------------------------------------------------------------------------------
Total current assets 181,521 276,398 196,634
Fixed assets [note 3] 77,080 57,238 47,171
------------------------------------------------------------------------------------------------------------------
258,601 333,636 243,805
------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 102,993 88,916 50,457
Bonus payable -- 75,000 75,000
Deferred revenue -- 12,500 7,650
Deferred income taxes 9,900 9,900 9,900
------------------------------------------------------------------------------------------------------------------
Total current liabilities 112,893 186,316 143,007
------------------------------------------------------------------------------------------------------------------
Commitments [note 5]
Stockholders' equity
Capital stock
Common shares, voting, unlimited authorized,
100 issued and outstanding 100 100 100
Class A and B preferred shares, non-voting
unlimited authorized, Nil issued
Retained earnings 145,608 147,220 100,698
------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 145,708 147,320 100,798
------------------------------------------------------------------------------------------------------------------
258,601 333,636 243,805
------------------------------------------------------------------------------------------------------------------
See accompanying notes
On behalf of the board:
Director Director
General Network Services Inc.
STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS)
[Canadian dollars]
Nine month periods Years ended
ended June 30, September 30,
----------------------- ------------------------
2000 1999 1999 1998
$ $ $ $
------------------------------------------------------------------------------------------------------------------
[unaudited] [unaudited]
Service revenue 653,803 419,172 640,668 531,606
Cost of services 341,889 161,753 223,542 126,895
------------------------------------------------------------------------------------------------------------------
Gross margin 311,914 257,419 417,126 404,711
------------------------------------------------------------------------------------------------------------------
EXPENSES
General and administration 131,816 105,345 203,890 142,239
Sales and marketing 61,684 49,129 66,095 45,646
Research and development,
net of subsidies [note 4] 87,160 61,868 67,629 68,693
Depreciation 31,202 12,825 18,877 10,419
Interest and other 1,664 1,098 1,413 554
------------------------------------------------------------------------------------------------------------------
313,526 230,265 357,904 267,551
------------------------------------------------------------------------------------------------------------------
Net income (loss) before taxes (1,612) 27,154 59,222 137,160
Income tax provision: [note 4]
Current -- -- 12,700 6,281
Deferred -- -- -- 9,900
------------------------------------------------------------------------------------------------------------------
12,700 16,181
------------------------------------------------------------------------------------------------------------------
Net income (loss) and
comprehensive income (loss) (1,612) 27,154 46,522 120,979
------------------------------------------------------------------------------------------------------------------
See accompanying notes
General Network Services Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
[Canadian dollars]
Retained
Common Earnings
Shares Amount (deficit) Total
# $ $ $
-------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1997 100 100 (20,281) (20,181)
Net income -- -- 120,979 120,979
-------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1998 100 100 100,698 100,798
Net income -- -- 46,522 46,522
-------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1999 100 100 147,220 147,320
Net loss (unaudited) -- -- (1,612) (1,612)
-------------------------------------------------------------------------------------------------------------------
Balances, June 30, 2000 (unaudited) 100 100 145,608 145,708
-------------------------------------------------------------------------------------------------------------------
General Network Services Inc.
STATEMENTS OF CASH FLOWS
[Canadian dollars]
Nine month periods Years ended
ended June 30, September 30,
----------------------- ------------------------
2000 1999 1999 1998
$ $ $ $
-----------------------------------------------------------------------------------------------------------------------
[unaudited] [unaudited]
OPERATING ACTIVITIES
Net income (loss) (1,612) 27,154 46,522 125,979
Add non-cash items
Depreciation 31,202 12,825 18,877 10,419
Deferred income taxes -- -- -- 9,900
-----------------------------------------------------------------------------------------------------------------------
29,590 39,979 65,399 146,298
Net change in non-cash
working capital balances
related to operations
Decrease (increase) in accounts receivable 83,401 54,763 (13,755) (102,321)
Decrease (increase) in investment tax
credit receivable -- (40,000) (45,010) (70,854)
Decrease (increase) in prepaids and other 8 (9,287) (7,179) --
Increase (decrease) in accounts payable
and accrued liabilities 14,077 2,211 38,459 19,098
Increase (decrease) in bonus payable (75,000) -- -- 10,000
Increase (decrease) in deferred revenue(12,500) 12,350 4,850 (7,350)
-----------------------------------------------------------------------------------------------------------------------
Cash provided by (used in)
operating activities 39,576 60,016 47,764 (5,129)
-----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to fixed assets (51,044) (24,189) (28,944) (43,998)
-----------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (51,044) (24,189) (32,832) (40,110)
-----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (11,468) 35,827 13,820 (49,127)
Cash and cash equivalents,
beginning of period 32,889 19,069 19,069 68,196
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period 21,421 54,896 32,889 19,069
-----------------------------------------------------------------------------------------------------------------------
See accompanying notes
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
1. GENERAL
The Company was incorporated under the Canada Business Corporation Act on
February 12, 1996.
The Company provides Public Key Infrastructure [PKI] services and solutions
development to meet e-business strategies and reduce network vulnerabilities.
2. SIGNIFICANT ACCOUNTING POLICIES
Uses of estimates
The financial statements have been prepared by management in accordance with
consistently applied accounting principles generally accepted in the United
States. Since a precise determination of many assets and liabilities is
dependent upon future events, the preparation of the financial statements for a
period necessarily involves the use of estimates and approximations which have
been made using careful judgment. The financial statements have been prepared
within reasonable limits of materiality and within the framework of the
accounting policies below.
Revenue recognition
Revenue from services is recognized when the services are rendered. Deferred
revenue represents amounts billed under terms of contracts in advance of work
performed.
Fixed assets
Fixed assets are initially recorded at cost and depreciated on the basis and at
the rates set out below. It is expected that these procedures will charge
operations with the total cost of the assets less estimated salvage value over
the useful life of the asset. One half of the normal annual depreciation is
taken in the year of acquisition.
Assets Basis Rate
Computer equipment Declining Balance 30%
Computer software Declining Balance 100%
Furniture and fixtures Declining Balance 20%
1
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
Research and development
Research and development costs are expensed as incurred. Government subsidies
relating to research and development costs are netted against the related
research and development expenses.
Income tax
The Company follows the liability method of accounting for the tax effect of
temporary differences between the carrying amount and the tax basis of the
Company's assets and liabilities. Temporary differences arise when the
realization of an asset or the settlement of a liability would give rise to
either an increase or decrease in the Company's income taxes payable for the
year or later period. Future income taxes are recorded at the income tax rates
that are expected to apply when the future tax liability is settled or the
future tax asset is realized. When necessary, valuation allowances are
established to reduce future income tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in future income tax assets and liabilities.
Fair value of financial instruments
The carrying values of the Company's financial instruments including cash and
cash equivalents, accounts receivable, investment tax credits receivable,
accounts payable and accrued liabilities and bonus payable approximate their
fair value.
Advertising costs
The costs of advertising are expensed as incurred as no direct-response
advertising has been incurred. Advertising expense incurred during each of the
years in the two year period ended September 30, 1999 and the nine month periods
ended June 30, 2000 and 1999 amounted to $12,822, $4,127, $16,387 and $10,515,
respectively.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. All cash and cash equivalents for
all periods were held with one financial institution.
On June 19, 2000, the Company entered into a $120,000 demand credit facility
with interest at prime plus 1 1/4%. As at June 30, 2000 no amount had been
utilized under this facility.
2
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
3. FIXED ASSETS
June 30, September 30, September 30,
2000 1999 1998
------------------------ ----------------------- --------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
$ $ $ $ $ $
------------------------------------------------------------------------------------------------------------------------------
[unaudited] [unaudited]
Computer equipment 44,492 18,785 39,500 12,046 20,891 4,268
Computer software 61,660 31,742 15,608 11,064 6,519 5,633
Furniture and fixtures 35,898 14,443 35,898 10,658 34,652 4,990
------------------------------------------------------------------------------------------------------------------------------
142,050 64,970 91,006 33,768 62,062 14,891
Less: accumulated depreciation 64,970 33,768 14,891
------------------------------------------------------------------------------------------------------------------------------
Net book value 77,080 57,238 47,171
------------------------------------------------------------------------------------------------------------------------------
4. INCOME TAXES
Income tax expense varies from the amount that would be computed by applying the
basic federal and provincial tax rates to earnings before income taxes, as
follows:
June 30, June 30, September 30, September 30,
2000 1999 1999 1998
$ $ $ $
-------------------------------------------------------------------------------------------------------------------
[unaudited] [unaudited]
Expected Canadian tax rate 44.6% 44.6% 44.6% 44.6%
Expected tax provision (719) 12,111 20,749 53,957
Increase (decrease) resulting from:
Losses not recognized 719 -- -- --
Provincial tax incentive -- (5,821) (4,605) (16,566)
Other -- (1,945) 4,000 --
Small business deduction -- (4,345) (7,444) (21,209)
-------------------------------------------------------------------------------------------------------------------
-- -- 12,700 16,181
-------------------------------------------------------------------------------------------------------------------
3
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
Deferred income taxes result principally from the net effects of temporary
differences between the carrying amounts and the income tax amounts of the
Company's assets and liabilities.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
June 30, September 30, September 30,
2000 1999 1998
$ $ $
------------------------------------------------------------------------------------------------------------------
Deferred tax assets -- -- --
Deferred tax liabilities
Investment tax credits 9,900 9,900 9,900
------------------------------------------------------------------------------------------------------------------
Total deferred tax liability and net tax liability 9,900 9,900 9,900
------------------------------------------------------------------------------------------------------------------
Research and development expenses have been reduced by federal and provincial
investment tax credits totaling $69,147 and $64,588 for the years ended
September 30, 1999 and 1998, respectively, and nil and $40,000 for the nine
months ended June 30, 2000 and 1999, respectively.
5. COMMITMENTS
Operating leases
Minimum lease payments for premises and equipment rental over the next three
years from June 30, 2000 are as follows:
$
-------------------------------------------------------------------------------
2001 89,400
2002 29,100
2003 1,000
-------------------------------------------------------------------------------
119,500
-------------------------------------------------------------------------------
Rent expense in the years ended September 30, 1998 and 1999 and the nine month
periods ended June 30, 1999 and 2000 amounted to $42,117, $53,886, $42,466 and
$45,666, respectively.
6. RELATED PARTY TRANSACTIONS
The Company provided services to a company owned by a shareholder totaling
$23,631 in the year ended September 30, 1999. The Company received services from
a company under common
4
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
control totaling $10,700 in the nine month period ended June 30, 2000. The
amounts have been recorded at their exchange amounts.
5
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
7. SEGMENTED INFORMATION
The Company operates in one business segment - PKI services and solutions
development. This segment engages in business activities from which it earns
license, support and services revenue and incurs expenses.
All of the Company's assets are located in Canada. Revenues attributable to each
geographic region are determined based on the location of the customer.
Geographic sales by region are as follows:
June 30, September 30,
-------------------------- -------------------------
2000 1999 1999 1998
$ $ $ $
--------------------------------------------------------------------------------
[unaudited] [unaudited]
Canada 634,573 405,332 614,478 531,606
Other 19,230 13,840 43,180 ---
--------------------------------------------------------------------------------
Total 653,803 419,172 640,668 531,606
--------------------------------------------------------------------------------
The Company sells primarily to Canadian Federal Government departments. Sales to
these customers accounted for 84.3% and 90% of the Company's total sales for the
years ended September 30, 1998 and 1999, respectively, and 82.4% and 92% of the
Company's sales for the periods ended June 30, 1999 and 2000, respectively.
8. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables. The Company provides credit,
in the normal course of business, to its customers which to date have been
primarily Canadian Federal Government departments. As of June 30, 2000,
September 30, 1999 and September 30, 1998, accounts receivable with government
departments as a percentage of total accounts receivable were concentrated as
follows: 81%, 62.4% and 100% respectively.
6
General Network Services Inc.
NOTES TO FINANCIAL STATEMENTS
Information as at June 30, 2000 and for the nine
month periods ended June 30, 2000 and 1999 is unaudited
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivatives and Hedging
Activities," which will be effective for fiscal years beginning after June 15,
2000. The Company does not acquire derivatives or engage in hedging activities.
In December 1999, the Securities and Exchange Commission [SEC] issued Staff
Accounting Bulletin [SAB] No. 101, Revenue Recognition in Financial Statements,
which was amended in March 2000 by SAB 101A. The SAB summarizes certain of the
SEC staff views in applying generally accepted accounting principles to revenue
recognition in financial statements. This SAB is effective beginning the
Company's first quarter of fiscal 2001. The Company does not expect the adoption
of this SAB to have a material impact on its results of operations or financial
position, however, the Company has not completed the analysis at this time.
7
SCHEDULE "C" TO THAT SHARE PURCHASE AGREEMENT DATED THE 15TH, DAY
OF AUGUST, 2000, BETWEEN XXXXXXX PLUSCAUSKAS, XXXXX XXXXXXXX,
JAWS ACQUISITION CANADA CORP. AND JAWS TECHNOLOGIES, INC.
Permitted Encumbrances & Liabilities.
None.
SCHEDULE "D" TO THAT SHARE PURCHASE AGREEMENT DATED THE 15TH, DAY
OF AUGUST, 2000, BETWEEN XXXXXXX PLUSCAUSKAS, XXXXX XXXXXXXX,
JAWS ACQUISITION CANADA CORP. AND JAWS TECHNOLOGIES, INC.
Exchangeable Share Provisions
SCHEDULE OF SHARE CAPITAL
A. SHARE CAPITAL
PROVISIONS ATTACHING TO THE COMMON SHARES
The common shares ("Common Shares") in the capital of the Corporation
shall have attached thereto the following rights, privileges, restrictions and
conditions:
Dividends
Subject to the prior rights of the Exchangeable Shares and any other
shares ranking prior to the Common Shares, holders of Common Shares have a right
to receive dividends when declared by the Board of Directors out of property of
the Corporation legally available therefor.
Liquidation
Subject to the prior rights of the Exchangeable Shares and any other
shares ranking prior to the Common Shares, the holders of Common Shares shall,
upon any liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or other distribution of the assets of the Corporation
for the purpose of winding-up its affairs, be entitled to receive the remaining
property and assets of the Corporation.
Voting
The holders of the Common Shares shall be entitled to receive notice of
and to attend all meetings of shareholders (other than separate meetings of
other classes or series of shares), and shall be entitled to one vote for each
Common Share held.
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The exchangeable shares (the "Exchangeable Shares") in the capital of the
Corporation shall have the following rights, privileges, restrictions and
conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these rights, privileges, restrictions and
conditions:
"Act" means the Business Corporations Act (Alberta), as amended,
consolidated or reenacted from time to time.
"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of Jaws US Common Stock are
entitled to vote, consent or otherwise act, the product of (i) the number
of Exchangeable Shares then issued and outstanding and held by holders
(other than Jaws US and its Subsidiaries) multiplied by
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(ii) the number of votes to which a holder of one share of Jaws US Common
Stock is entitled with respect to such matter, proposition or question.
"Automatic Redemption Date" means the date for the automatic redemption
by the Corporation of Exchangeable Shares Pursuant to Article 7 of these
share provisions, which date shall be the first to occur of (a) the date,
if any, selected pursuant to this clause (a) by the Board of Directors of
the Corporation, (b) the Business Day prior to the record date for any
meeting or vote of the shareholders of the Corporation to consider any
matter on which the holders of Exchangeable Shares would be entitled to
vote as shareholders of the Corporation, but excluding any meeting or
vote as described in clause (c) below, or (c) the Business Day following
the day on which the holders of Exchangeable Shares fail to take the
necessary action at a meeting or other vote of holders of Exchangeable
Shares, if and to the extent such action is required, to approve or
disapprove, as applicable, any change to, or in the rights of the holders
of, Exchangeable Shares, if the approval or disapproval, as applicable,
of such change would be required to maintain the economic and legal
equivalence of the Exchangeable Shares and the Jaws US Common Stock.
"Board of Directors" means the board of directors of the Corporation and
any committee thereof acting within its authority.
"Business Day" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in either or both of Delaware and
Alberta.
"Common Shares" means the common shares in the capital of the
Corporation.
"Corporation" means JAWS Acquisition Canada Corp., a corporation
organized and existing under the Act and includes any successor
corporation.
"Current Market Price" means, in respect of a share of Jaws US Common
Stock on any date, the average of the closing sale price per share
(computed and rounded to the third decimal point) of shares of Jaws US
Common Stock during the period of 20 consecutive trading days ending not
more than five trading days before such date on the Nasdaq National Board
(the "NASDAQ"), or, if Jaws US Common Stock is not then traded on the
NASDAQ, on such other U.S. stock exchange or automated quotation system
on which the Jaws US Common Stock is listed or quoted, as the case may
be, as may be selected by the Board of Directors for such purpose;
provided, however, that if, in the opinion of the Board of Directors the
public distribution or trading activity of Jaws US Common Stock during
such period does not create a market which reflects the fair market value
of a share of Jaws US Common Stock, then the Current Market Price of a
share of Jaws US Common Stock shall be determined by the Board of
Directors based upon the advice of such qualified independent financial
advisors as the Board of Directors may deem to be appropriate, and
provided further than any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding.
"Effective Date" means the date on which a registration statement or
amendment or supplement thereto filed from time to time by Jaws US
pursuant to the Securities Act to
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register the Jaws US Common Stock from time to time issuable upon the
exchange of the Exchangeable Shares is declared effective;
"Exchange Put Date" has the meaning provided in Section 8.2.
"Exchange Put Right" has the meaning provided in Section 8.1.
"Exchangeable Share Consideration" means, for any acquisition of or
redemption of or distribution of assets of the Corporation in respect of
or Purchase pursuant to these share provisions, the Support Agreement or
the Voting and Exchange Trust Agreement.
(a) certificates representing the aggregate number of shares of Jaws
US Common Stock deliverable in connection with such action;
(b) a cheque or cheques payable at par at any branch of the bankers of
the payor in the amount of all declared, payable and unpaid, and
all undeclared but payable, cash dividends deliverable in
connection with such action; and
(c) such stock or other property constituting any declared and unpaid,
and all undeclared but payable, non-cash dividends deliverable in
connection with such action,
provided that (i) part of the consideration which represents (a) above,
shall be fully paid and satisfied by the delivery of one share of Jaws US
Common Stock for each one Exchangeable Share, such share to be duly
issued as a fully paid and non-assessable share, (ii) part of the
consideration which represents (c) above shall be fully paid and
satisfied by delivery of such non-cash items, and (iii) any such
consideration shall be delivered free and clear of any lien, claim,
encumbrance, security interest or adverse claim or interest less any tax
required to be deducted and withheld therefrom and without interest.
"Exchangeable Share Price" means, for each Exchangeable Share, an amount
equal to the aggregate of:
(a) the Current Market Price of a share of Jaws US Common Stock; plus
(b) an additional amount equal to the full amount of all cash
dividends declared, payable and unpaid on such Exchangeable Share;
plus
(c) an additional amount equal to all dividends declared and payable
on Jaws US Common Stock which have not been declared on
Exchangeable Shares in accordance herewith; plus
(d) an additional amount representing non-cash dividends declared,
payable and unpaid on such Exchangeable Share.
"Exchangeable Shares" means the Exchangeable Shares of the Corporation
having the rights, privileges, restrictions and conditions set forth
herein.
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"Jaws US" means Jaws Technologies, Inc., a corporation organized and
existing under the laws of the State of Delaware, and includes any
successor corporation or any corporation in which the holders of Jaws US
Common Stock hold securities resulting from the application of Section
2.7 of the Support Agreement.
"Jaws US Call Notice" has the meaning provided in Section 6.3.
"Jaws US Common Stock" means the shares of common stock of Jaws US, with
a par value of U.S, $0.001 per share, having voting rights of one vote
per share, and any other securities resulting from the application of
Section 2.7 of the Support Agreement.
"Jaws US Dividend Declaration Date" means the date on which the board of
directors of Jaws US declares any dividend on the Jaws US Common Stock.
"Jaws US Special Share" means the one share of Special Voting Stock of
Jaws US, with a par value of U.S. $0.001, and having voting rights at
meetings of holders of Jaws US Common Stock equal to the Aggregate
Equivalent Voting Amount.
"Liquidation Amount" has the meaning provided in Section 5.1.
"Liquidation Call Right" has the meaning provided in the Articles of
Incorporation of the Corporation.
"Liquidation Date" has the meaning provided in Section 5.1.
"NASDAQ" means the Nasdaq National Board electronic stock exchange;
"Purchase Price" has the meaning provided in Section 6.3.
"Redemption Call Purchase Price" has the meaning provided in the Articles
of Incorporation of the Corporation.
"Redemption Call Right" has the meaning provided in the Articles of
Incorporation of the Corporation.
"Redemption Price" has the meaning provided in Section 7.1.
"Retracted Shares" has the meaning provided in subsection 6.1(a).
"Retraction Call Right" has the meaning provided in subsection 6.1(c).
"Retraction Date" has the meaning provided in subsection 6.1(b).
"Retraction Price" has the meaning provided in Section 6.1.
"Retraction Request" has the meaning provided in Section 6.1.
"Securities Act" means the Securities Xxx 0000 (United States), as
amended from time to time.
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"Subsidiary", in relation to any person, means any body corporate,
partnership, joint venture, association or other entity of which more
than 50% of the total voting power of shares of stock or units of
ownership or beneficial interest entitled to vote in the election of
directors (or members of a comparable governing body) is owned or
controlled, directly or indirectly, by such person.
"Support Agreement" means the Support Agreement between Jaws US and the
Corporation, made effective as of August 1, 2000, as amended or
supplemented to from time to time.
"Transfer Agent" means the duly appointed transfer agent for the time
being of the Exchangeable Shares, and, if there is more than one such
transfer agent, then the principal Canadian transfer agent.
"Trustee" means the Trustee appointed under the Voting and Exchange Trust
Agreement, and any successor trustee.
"Voting and Exchange Trust Agreement" means the Voting and Exchange Trust
Agreement among the Corporation, Jaws US and the Trustee, made effective
as of August 1, 2000, as amended or supplemented from time to time.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the Common
Shares and any other shares ranking junior to the Exchangeable Shares, with
respect to the payment of dividends and the distribution of assets in the event
of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the Board
of Directors shall, subject to applicable law, on each Jaws US Dividend
Declaration Date, declare a dividend on each Exchangeable Share (a) in the case
of a cash dividend declared on the Jaws US Common Stock, in an amount in cash
for each Exchangeable Share equal to the cash dividend declared on each share of
Jaws US Common Stock, (b) in the case of a stock dividend declared on the Jaws
US Common Stock to be paid in Jaws US Common Stock, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to the number of
shares of Jaws US Common Stock to be paid on each share of Jaws US Common Stock,
(c) in the case of a dividend declared on the Jaws US Common Stock in property
other than cash or securities of Jaws US, in such type and amount of property
for each Exchangeable Share as is the same as the type and amount of property
declared as a dividend on each share of Jaws US Common Stock or (d) in the case
of a dividend declared on the Jaws US Common Stock to be paid in securities of
Jaws US other than Jaws US Common Stock, in such number of either such
securities or economically equivalent securities of the Corporation, as the
Board of Directors determines, for each Exchangeable Share as is equal to the
number of securities of Jaws US to be paid on each share of Jaws US Common
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Stock. Such dividends shall be paid out of money, assets or property of the
Corporation properly applicable to the payment of dividends, or out of
authorized but unissued shares of the corporation.
3.2 Cheques of the Corporation payable at par at any branch of the bankers of
the Corporation shall be issued in respect of any cash dividends contemplated by
subsection 3.1(a) hereof and the sending of such a cheque to each holder of an
Exchangeable Share (less any tax required to be deducted and withheld from such
dividends paid or credited by the Corporation) shall satisfy the cash dividends
represented thereby unless the cheque is not paid on presentation. Certificates
registered in the name of the registered holder of Exchangeable Shares shall be
issued or transferred in respect of any stock dividends contemplated by
subsections 3.1(b) or (d) hereof and the sending of such a certificate to each
holder of an Exchangeable Share shall satisfy the stock dividend represented
thereby or dividend payable in other securities represented thereby. Such other
type and amount of property in respect of any dividends contemplated by
subsection 3.1(c) hereof shall be issued, distributed or transferred by the
Corporation in such manner as it shall determine and the issuance, distribution
or transfer thereof by the Corporation to each holder of an Exchangeable Share
shall satisfy the dividend represented thereby. In all cases, any such dividends
shall be subject to any reduction or adjustment for tax required to be deducted
and withheld from such dividends paid or credited by the Corporation. No holder
of an Exchangeable Share shall be entitled to recover by action or other legal
process against the Corporation any dividend which is represented by a cheque
that has not been duly presented to the Corporation's bankers for payment or
which otherwise remains unclaimed for a period of six years from the date on
which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable Shares
entitled to receive payment of, and the payment date for, any dividend declared
on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the Jaws US Common Stock.
3.4 If on any payment date for any dividends declared on the Exchangeable Shares
under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends which remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.5 Except as provided in this Article 3, the holders of Exchangeable Shares
shall not be entitled to receive dividends in respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the Corporation
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in Article 10 of these
share provisions:
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(a) pay any dividends on the Common Shares, or any other shares
ranking junior to the Exchangeable Shares, other than stock
dividends payable in any such other shares ranking junior to the
Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends or on
any liquidation distribution;
(c) redeem or purchase any other shares of the Corporation ranking
equally with the Exchangeable Shares with respect to the payment
of dividends or on any liquidation distribution; or
(d) amend the articles or by-laws of the Corporation, in either case
in any manner that would affect the rights or privileges of the
holders of the Exchangeable Shares.
The restrictions in subsections 4.1(a), 4.1(b) and 4.1(c) above shall not
apply if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared on the Jaws US Common Stock shall have been declared on the
Exchangeable Shares and paid in full. Nothing herein shall be interpreted to
restrict the Corporation from issuing additional Common Shares or Exchangeable
Shares.
4.2 The Exchangeable Shares have not been and will not be registered under the
Securities Act. The Exchangeable Shares may be offered, sold, pledged or
otherwise transferred only (a) to the Corporation, (b) outside the United States
in compliance with Rule 903 or 904 of Regulation S under the Securities Act, (c)
in compliance with the exemption from the registration requirements under the
U.S. Securities Act provided by Rule 144 thereunder, if available, and in
accordance with applicable state securities laws, or (d) in a transaction that
does not require registration under the Securities Act or any applicable state
laws and regulations governing the offer and sale of securities, and the holder
has, prior to such sale, furnished to the Corporation an opinion of counsel, of
recognized standing, or other evidence of exemption, reasonably satisfactory to
the Corporation. The Corporation and the Transfer Agent will not register the
transfer of any Exchangeable Shares not made in accordance with the requirements
in this Section 4.2. The Corporation and the Transfer Agent may require written
certification that any transfer of Exchangeable Shares is made in accordance
with the requirements in this Section 4.2.
4.3 Notwithstanding any other provisions pertaining to the Exchangeable Shares
contained herein, no Exchangeable Shares may be exchanged for Jaws US Common
Stock, no holder of Exchangeable Shares can require Jaws US to exchange the
Exchangeable Shares and no Jaws US Common Stock may be issued to holders of
Exchangeable Shares, except in the event of the liquidation, dissolution or
winding up of the Corporation or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs in
accordance with Article 5 herein, until: (i) after the Effective Date or (ii)
the Trustee has been provided with a written certification in form satisfactory
to the Trustee that the provisions of Section 4.2 have been complied with.
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4.4 The Exchangeable Shares may be exchanged for Jaws US Common Stock at any
time. However, if the Exchangeable Shares are exchanged prior to the Effective
Date, the certificates representing the Jaws US Common Stock will be legended
and subject to transfer restrictions.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date of such liquidation, dissolution or winding-up (the
"Liquidation Date"), before any distribution of any part of the assets of the
Corporation to the holders of the Common Shares or any other Shares ranking
junior to the Exchangeable Shares, an amount equal to the Exchangeable Share
Price applicable on the last Business Day prior to the Liquidation Date (the
"Liquidation Amount") in accordance with Section 5.2. In connection with payment
of the Liquidation Amount, the Corporation shall be entitled to liquidate some
of the Jaws US Common Stock which would otherwise be deliverable as Exchangeable
Share Consideration to the particular holder of Exchangeable Shares in order to
fund any statutory withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the exercise by
Jaws US of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the Certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of the Corporation and such additional documents
and instruments as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation in Schedule A hereto or by notice to the holders of
the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation in Schedule A hereto or by notice to the holders of
Exchangeable Shares, on behalf of the Corporation of the Exchangeable Share
Consideration representing the total Liquidation Amount. On and after the
Liquidation Date, the holders of the Exchangeable Shares shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Exchangeable Shares shall not be made upon
presentation and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the Exchangeable
Share Consideration in respect of the Exchangeable Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account or for safe keeping, in the case of
non-cash items, with any
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chartered bank or trust company in Canada. Upon such deposit being made, the
rights of the holders of Exchangeable Shares after such deposit shall be limited
to receiving their proportionate part of the total Liquidation Amount for such
Exchangeable Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of such Exchangeable Share
Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be the holders of the Jaws US Common
Stock delivered to them. Notwithstanding the foregoing, until such payment or
deposit of such Exchangeable Share Consideration, the holder shall be deemed to
still be a holder of Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
5.3 After the Corporation has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share, such
holders shall not be entitled to share in any further distribution of the assets
of the Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by Jaws US of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount equal to the Exchangeable Share Price applicable on the
last Business Day prior to the Retraction Date (the "Retraction Price") in
accordance with Section 6.4. In connection with payment of the Retraction Price,
the Corporation shall be entitled to liquidate some of the Jaws US Common Stock
that would otherwise be deliverable as Exchangeable Share Consideration to the
particular holder of Exchangeable Shares in order to fund any statutory
withholding tax obligation. To effect such redemption, the holder shall present
and surrender at the registered office of the Corporation or at any office of
the Transfer Agent as may be specified by the Corporation in Schedule A hereto
or by notice to the holders of Exchangeable Shares the certificate or
certificates representing the Exchangeable Shares which the holder desires to
have the Corporation redeem, together with such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under applicable
law and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Schedule "A"
hereto or in such other form as may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by such
certificate or certificates (the "Retracted Shares") redeemed by
the Corporation;
(b) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than five
Business Days nor more than 10 Business Days after the date on
which the Retraction Request is received by the Corporation and
further provided that, in the event that no such Business Day is
specified by the
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holder in the Retraction Request, the Retraction Date shall be
deemed to be the tenth Business Day after the date on which the
Retraction Request is received by the Corporation; and
(c) acknowledging the overriding right (the "Retraction Call Right")
of Jaws US to purchase all but not less than all the Retracted
Shares directly from the holder and that the Retraction Request
shall be deemed to be a revocable offer by the holder to sell the
Retracted Shares in accordance with the Retraction Call Right on
the terms and conditions set out in Section 6.3 below.
6.2 Subject to the exercise by Jaws US of the Retraction Call Right, upon
receipt by the Corporation or the Transfer Agent in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the Corporation redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be delivered to such holder the total
Retraction Price with respect to such shares in accordance with Section 6.4
hereof. If only a part of the Exchangeable Shares represented by any certificate
are redeemed or purchased by Jaws US pursuant to the Retraction Call right, a
new certificate for the balance of such Exchangeable Shares shall be issued to
the holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the Corporation
shall immediately notify Jaws US thereof. In order to exercise the Retraction
Call Right, Jaws US must notify the Corporation in writing of its determination
to do so (the "Jaws US Call Notice") within two Business Days of such
notification. If Jaws US does not so notify the Corporation within such two
Business Days, the Corporation will notify the holder as soon as possible
thereafter that Jaws US will not exercise the Retraction Call Right. If Jaws US
delivers the Jaws US Call Notice within such two Business Days, and provided
that the Retraction Request is not revoked by the holder in the manner specified
in Section 6.7, the Retraction Request shall thereupon be considered only to be
an offer by the holder to sell the Retracted Shares to Jaws US in accordance
with the Retraction Call Right. In such event, the Corporation shall not redeem
the Retracted Shares and Jaws US shall purchase from such holder and such holder
shall sell to Jaws US on the Retraction Date the Retracted Shares for a purchase
place per share (the "Purchase Price") equal to the Retraction Price. For the
purposes of completing a purchase pursuant to the Retraction Call Right, Jaws US
shall deposit with the Transfer Agent, on or before the Retraction Date, the
Exchangeable Share Consideration representing the total Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Transfer Agent, the closing of the purchase and sale of the Retracted Shares
pursuant to the Retraction Call Right shall be deemed to have occurred as at the
close of business on the Retraction Date and, for greater certainty, no
redemption by the Corporation of such Retracted Shares shall take place on the
Retraction Date. In the event that Jaws US does not deliver a Jaws US Call
Notice within two Business Days or otherwise comply with these Exchangeable
Share provisions in respect thereto, and provided that Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Corporation
shall redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
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6.4 The Corporation or Jaws US, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of the Corporation for the Exchangeable
Shares or at the address specified in the holder's Retraction Request or by
holding for pick up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the Corporation in
Schedule A hereto or by notice to the holders of Exchangeable Shares, the
Exchangeable Share Consideration representing the total Retraction Price or the
total Purchase Price, as the case may be, and such delivery of such Exchangeable
Share Consideration to the Transfer Agent shall be deemed to be payment of and
shall satisfy and discharge all liability for the total Retraction Price or
total Purchase Price, as the case may be, except as to any cheque included
therein which is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the holder of the
Retracted Shares shall cease to be a holder of such Retracted Shares and shall
not be entitled to exercise any of the rights of a holder in respect thereof,
other than the right to receive such holder's proportionate part of the total
Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made, in which case the rights of such holder
shall remain unaffected until the Exchangeable Share Consideration representing
the total Retraction Price or the total Purchase Price, as the case may be, has
been paid in the manner hereinbefore provided. On and after the close of
business on the Retraction Date, provided that presentation and surrender of
certificates and payment of the Exchangeable Share Consideration representing
the total Retraction Price or the total Purchase Price, as the case may be, has
been made in accordance with the foregoing provisions, the holder of the
Retracted Shares so redeemed by the Corporation or purchased by Jaws US shall
thereafter be considered and deemed for all purposes to be a holder of the Jaws
US Common Stock delivered to it. Notwithstanding the foregoing, until such
payment of such Exchangeable Share Consideration to the holder, the holder shall
be deemed to still be a holder of Exchangeable Shares for purposes of all voting
rights with respect thereto under the Voting and Exchange Trust Agreement.
6.6 Notwithstanding any other provision of this Article 6, the Corporation shall
not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that Jaws US shall not have
exercised the Retraction Call Right with respect to the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to liquidity or solvency
requirements or other provisions of applicable law, the Corporation shall redeem
Retracted Shares in accordance with Section 6.2 of these share provisions on a
pro rata basis and shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not
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redeemed by the Corporation pursuant to Section 6.2 hereof. Provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the holder of any such Retracted Shares not redeemed by the
Corporation pursuant to Section 6.2 of these share provisions as a result of
liquidity or solvency requirements or applicable law shall be deemed by giving
the Retraction Request to require Jaws US to purchase such Retracted Shares from
such holder on the Retraction Date or as soon as practicable thereafter on
payment by Jaws US to such holder of the Purchase Price for each such Retracted
Share, all as more specifically provided in the Voting and Exchange Trust
Agreement, and Jaws US shall make such purchase.
6.7 A holder of Retracted Shares may, by notice in writing given by the holder
to the Corporation before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to Jaws US shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law, and if Jaws US does not exercise the Redemption
Call Right, the Corporation shall on the Automatic Redemption Date redeem the
whole of the then outstanding Exchangeable Shares for an amount equal to the
Exchangeable Share Price applicable an the last Business Day prior to the
Automatic Redemption Date (the "Redemption Price") in accordance with Section
7.3. In connection with payment of the Redemption Price, the Corporation shall
be entitled to liquidate some of the Jaws US Common Stock which would otherwise
be deliverable as Exchangeable Share Consideration to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this Article 7, the
Corporation, or the Transfer Agent on behalf of the Corporation, shall, at least
45 days before an Automatic Redemption Date or before a possible Automatic
Redemption Date which may result from a failure of the holders of Exchangeable
Shares to take necessary action as described in clause (c) of the definition of
Automatic Redemption Date, send or cause to be sent to each holder of
Exchangeable Shares a notice in writing of the redemption or possible redemption
by the Corporation or the purchase by Jaws US under the Redemption Call Right,
as the case may be, of the Exchangeable Shares held by such holder. Such notice
shall set out the Redemption Price or the Redemption Call Purchase Price, as the
case may be, the Automatic Redemption Date and, if applicable, particulars of
the Redemption Call Right. In the case of any notice given in connection with a
possible Automatic Redemption Date, such notice will be given contingently and
will be withdrawn if the contingency does not occur.
7.3 On or after the Automatic Redemption Date and subject to the exercise by
Jaws US of the Redemption Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share upon presentation and
surrender at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such notice of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and the by-
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laws of the Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require. Payment of the total Redemption Price for
such Exchangeable Shares shall be made by delivery to each holder, at the
address of the holder recorded in the securities register or at any office of
the Transfer Agent as may be specified by the Corporation in such notice, on
behalf of the Corporation, of the Exchangeable Share Consideration representing
the total Redemption Price. On and after the Automatic Redemption Date, the
holders of the Exchangeable Shares called for redemption shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Redemption Price, unless payment of the total
Redemption Price for such Exchangeable Shares shall not be made upon
presentation and surrender of certificates in accordance with the foregoing
provisions, in which case the rights of the holders shall remain unaffected
until the total Redemption Price has been paid in the manner hereinbefore
provided. The Corporation shall have the right at any time after the sending of
notice of its intention to redeem the Exchangeable Shares as aforesaid to
deposit or cause to be deposited the Exchangeable Share Consideration with
respect to the Exchangeable Shares so called for redemption, or of such of the
said Exchangeable Shares represented by certificates that have not at the date
of such deposit been surrendered by the holders thereof in connection with such
redemption, in a custodial account or for safe keeping, in the case of non-cash
items, with any chartered bank or trust company in Canada named in such notice.
Upon the later of such deposit being made and the Automatic Redemption Date, the
Exchangeable Shares in respect whereof such deposit shall have been made shall
be redeemed and the rights of the holders thereof after such deposit or
Automatic Redemption Date, as the case may be, shall be limited to receiving
their proportionate part of the total Redemption Price for such Exchangeable
Shares so deposited, against presentation and surrender of the said certificates
held by them, respectively, in accordance with the foregoing provisions. Upon
such payment or deposit of such Exchangeable Share Consideration, the holders of
the Exchangeable Shares shall thereafter be considered and deemed for all
purposes to be holders of the Jaws US Common Stock delivered to them.
Notwithstanding the foregoing, until such payment or deposit of such
Exchangeable Share Consideration is made, the holder shall be deemed to still be
a holder of Exchangeable Shares for purposes of all voting rights with respect
thereto under the Voting and Exchange Trust Agreement.
ARTICLE 8
EXCHANGE PUT RIGHT
8.1 Upon and subject to the Term's and conditions contained in these share
provisions and the Voting and Exchange Trust Agreement:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require Jaws US to purchase
all or any part of the Exchangeable Shares of the holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to Jaws US, and Jaws US shall be
required to purchase from the holder, that number of Exchangeable
Shares in respect of which the Exchange Put Right is exercised, in
consideration of the payment by Jaws US of the Exchangeable Share
Price applicable thereto (which shall be the Exchangeable
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Share Price applicable on the last Business Day prior to receipt
of notice required under section 8.2) and delivery by or on behalf
of Jaws US of the Exchangeable Share Consideration representing
the total applicable Exchangeable Share Price. In connection with
payment of the Exchangeable Share Consideration, the Corporation
shall be entitled to liquidate some of the Jaws US Common Stock
which would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax
obligation.
8.2 The Exchange Put Right provided in section 8.1 hereof and in Article 5 of
the Voting and Exchange Trust Agreement may be exercised at any time by notice
in writing given by the holder to and received by the Trustee (the date of such
receipt, the "Exchange Put Date") and accompanied by Presentation and surrender
of the certificates representing such Exchangeable Shares, together with such
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Trustee may reasonably require, at
the principal transfer office of the Trustee, or at such other office or offices
of the Trustee or of other persons designated by the Trustee for that purpose as
may from time to time be maintained by the Trustee for that purpose. Such notice
may be (i) in the form of the panel, if any, on the certificates representing
Exchangeable Shares, (ii) in the form of the notice and election contained in
any letter of transmittal distributed or made available by the Corporation for
that purpose, or (iii) in other form satisfactory to the Trustee (or such other
persons aforesaid), shall stipulate the number of Exchangeable Shares in respect
of which the right is exercised (which may not exceed the number of shares
represented by certificates surrendered to the Trustee), shall be irrevocable
unless the exchange is not completed in accordance herewith and with the Voting
and Exchange Trust Agreement and shall constitute the holder's authorization to
the Trustee (and such other persons aforesaid) to effect the exchange on behalf
of the holder.
8.3 The completion of the sale and purchase referred to in section 8.1 shall be
required to occur, and Jaws US shall be required to take all actions on its part
necessary to permit it to occur, not later than the close of business on the
third Business Day following the Exchange Put Date.
8.4 The surrender by the holder of Exchangeable Shares under section 8.2 shall
constitute the representation, warranty and covenant of the holder that the
Exchangeable Shares so purchased are sold free and clear of any lien,
encumbrance, security interest or adverse claim or interest.
8.5 If a part only of the Exchangeable Shares represented by any certificate are
to be sold and purchased pursuant to the exercise of the Exchange Put Right, a
new certificate for the balance of such Exchangeable Shares shall be issued to
the holder at the expense of the Corporation,
8.6 Upon receipt by the Trustee of the notice, certificates and other documents
or instruments required by section 8.2, the Trustee shall deliver or cause to be
delivered, on behalf of Jaws US and subject to receipt by the Trustee from Jaws
US of the applicable Exchangeable Share Consideration, to the relevant holder at
the address of the holder specified in the notice or by holding for pick-up by
the holder at the registered office of the Corporation or at any office of the
Trustee (or other persons aforesaid) maintained for that purpose, the
Exchangeable Share Consideration representing the total applicable Exchangeable
Share Price, within the time stipulated in section 8.3. Delivery by Jaws US to
the Trustee of such Exchangeable Share
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Consideration shall be deemed to be payment of and shall satisfy and discharge
all liability for the total applicable Exchangeable Share Price, except as to
any cheque included therein, which is not paid on due presentation.
8.7 On and after the close of business on the Exchange Put Date, the holder of
the Exchangeable Shares in respect of which the Exchange Put Right is exercised
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive the total applicable Exchangeable Share
Price, unless upon presentation and surrender of certificates in accordance with
the foregoing provisions, payment of the Exchangeable Share Consideration shall
not be made, in which case the rights of such holder shall remain unaffected
until such payment has been made. On and after the close of business on the
Exchange Put Date provided that presentation and surrender of certificates and
payment of the Exchangeable Share Consideration has been made in accordance with
the foregoing provisions, the holder of the Exchangeable Shares so purchased by
Jaws US shall thereafter be considered and deemed for all purposes to be a
holder of the Jaws US Common Stock delivered to it. Notwithstanding the
foregoing, until payment of the Exchangeable Share Consideration to the holder,
the holder shall be deemed to still be a holder of Exchangeable Shares for
purposes of all voting rights with respect thereto under the Voting and Exchange
Trust Agreement.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions hereof, the holders
of the Exchangeable Shares shall not be entitled as such to receive notice of or
to attend any meeting of the shareholders of the Corporation or to vote at any
such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
10.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than 66 2/3% of the votes cast on such resolution by persons represented in
person or by proxy at a meeting of holders of Exchangeable Shares (excluding
Exchangeable Shares beneficially owned by Jaws US or its Subsidiaries) duly
called and held at which the holders of at least 20% of the outstanding
Exchangeable Shares at that time are present or represented by proxy. If at any
such meeting the holders of at least 20% of the outstanding Exchangeable Shares
at that time are not present or represented by proxy within one-half hour after
the time appointed for such meeting, then the meeting shall be adjourned to such
date not less than 10 days thereafter and to such time and place as may be
designated by the Chairman of such meetings. At such adjourned meeting, the
holders of Exchangeable Shares present or represented by proxy
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thereat may transact the business for which the meeting was originally called
and a resolution passed thereat by the affirmative vote of not less than 66 2/3%
of the votes cast on such resolution by persons represented in person or by
proxy at such meeting (excluding Exchangeable Shares beneficially owned by Jaws
US or its Subsidiaries) shall constitute the approval or consent of the holders
of the Exchangeable Shares. For the purposes of this section, any spoiled votes,
illegible votes, defective votes and abstinences shall be deemed to be votes not
cast.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF JAWS US COMMON STOCK
11.1 (a) Each holder of an Exchangeable Share acknowledges that the
Support Agreement provides, in part, that Jaws US will not:
(i) issue or distribute shares of Jaws US Common Stock (or
securities exchangeable for or convertible into or carry
rights to acquire shares of Jaws US Common Stock) to the
holders of all or substantially all of the then outstanding
shares of Jaws US Common Stock by way of stock dividend or
other distribution; or
(ii) issue or distribute rights, options or warrants to the
holders of all or substantially all of the then outstanding
shares of Jaws US Common Stock entitling them to subscribe
for or to purchase shares of Jaws US Common Stock (or
securities exchangeable for or convertible into or carrying
rights to acquire shares of Jaws US Common Stock); or
(iii) issue or distribute to the holders of all or substantially
all of the then outstanding shares of Jaws US Common Stock
(A) shares or securities of Jaws US of any class other than
Jaws US Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares of
Jaws US Common Stock), (B) rights, options or warrants
other than those referred to in subsection 11.1(a)(ii)
above, (C) evidences of indebtedness of Jaws US or (D)
assets of Jaws US;
unless
(iv) one or both of Jaws US and the Corporation is permitted
under applicable law to issue or distribute the economic
equivalent on a per share basis of such rights, options,
warrants, securities, shares, evidences of indebtedness or
other assets to the holders of the Exchangeable Shares; and
(v) one or both of Jaws US and the Corporation shall issue or
distribute the economic equivalent on a per share basis of
such rights, options, warrants, securities, shares,
evidences of indebtedness or other assets simultaneously to
the holders of the Exchangeable Shares.
(b) Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Jaws US will not:
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(i) subdivide, redivide or change the then outstanding shares
of Jaws US Common Stock into a greater number of shares of
Jaws US Common Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of Jaws US Common Stock into a lesser
number of shares of Jaws US Common Stock; or
(iii) reclassify or otherwise change the shares of Jaws US Common
Stock or effect an amalgamation, merger, reorganization or
other transaction involving or affecting the shares of Jaws
US Common Stock;
unless
(iv) the Corporation is permitted under applicable law to
simultaneously make the same or an economically equivalent
change to, or in the rights of the holders of, the
Exchangeable Shares; and
(v) the same or an economically equivalent change is
simultaneously made to, or in the rights of the holders of,
the Exchangeable Shares.
The Support Agreement further provides, in part, that, with the exception
of certain ministerial amendments, the aforesaid provisions of the Support
Agreement shall not be changed without the approval of the holders of the
Exchangeable Shares given in accordance with Article 10 of these share
provisions.
ARTICLE 12
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
12.1 The Corporation will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by Jaws US with all provisions of the Support Agreement, the
Voting and Exchange Trust Agreement and Jaws US's Certificate of Incorporation
applicable to the Corporation and Jaws US, respectively, in accordance with the
terms thereof including, without limitation taking all such actions and doing
all such things as shall be necessary or advisable to enforce to the fullest
extent possible for the direct benefit of the Corporation all rights and
benefits in favour of the Corporation under or pursuant thereto.
12.2 The Corporation shall not propose, agree to or otherwise give effect to any
amendment to, or waiver or forgiveness of its rights or obligations under, the
Support Agreement, the Voting and Exchange Trust Agreement or Jaws US's
Certificate of Incorporation, without the approval of the holders of the
Exchangeable Shares given in accordance with Article 10 of these share
provisions other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purpose of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares; or
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(b) making such provisions or modifications not inconsistent with such
agreement or certificate as may be necessary or desirable with
respect to matters or questions arising thereunder which, in the
opinion of the Board of Directors, it may be expedient to make,
provided that the Board of Directors shall be of the opinion,
after consultation with counsel, that such provisions and
modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement or
certificate which, on the advice of counsel to the Corporation,
are required for the purpose of curing or correcting any ambiguity
or defect or inconsistent provision or clerical omission or
mistake or manifest error contained therein, provided that the
Board of Directors shall be of the opinion, after consultation
with counsel, that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable
Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Exchangeable Shares shall contain or have
affixed thereto a legend in the following form:
"The securities represented hereby have not been and will not be
registered under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act"). These securities may be offered, sold,
pledged or otherwise transferred only (a) to the Corporation, (b)
outside the United States in compliance with Rule 903 or 904 of
Regulation S under the U.S. Securities Act, (c) in compliance with
the exemption from the registration requirements under the U.S.
Securities Act provided by Rule 144 thereunder, if available, and
in accordance with applicable state securities laws, or (d) in a
transaction that does not require registration under the U.S.
Securities Act or any applicable state laws and regulations
governing the offer and sale of securities and the holder has,
prior to such sale, furnished to the Corporation an opinion of
counsel, of recognized standing, or other evidence of exemption,
reasonably satisfactory to the Corporation. Hedging transactions
involving the securities represented hereby may not be conducted
unless in compliance with the U.S. Securities Act. Delivery of
this certificate may not constitute "good delivery" in settlement
of transactions on stock exchanges in Canada."
ARTICLE 14
MISCELLANEOUS
14.1 Any notice, request or other communication to be given to the Corporation
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of the Corporation and addressed to
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the attention of the President. Any such notice, request or other communication,
if given by mail, telecopy or delivery, shall only be deemed to have been given
and received upon actual receipt thereof by the Corporation.
14.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction, redemption or exchange of Exchangeable Shares
shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation or to such office of the Transfer Agent as
may be specified by the Corporation, in each case addressed to the attention of
the President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent, as the case may
be, and the method of any such presentation and surrender of certificates shall
be at the sole risk of the holder.
14.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last address of such holder known to the Corporation. Any
such notice, request or other communication, if given by mail, shall be deemed
to have been given and received on the fifth Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of Exchangeable
Shares shall not invalidate or otherwise alter or affect any action or
proceeding to be or intended to be taken by the Corporation.
14.4 For greater certainly, the Corporation shall not be required for any
purpose under these share provisions to recognize or take account of persons who
are not so recorded in such securities register.
14.5 All Exchangeable Shares acquired by the Corporation upon the redemption or
retraction thereof shall be cancelled.
SCHEDULE "A"
RETRACTION REQUEST
To the Corporation and Jaws Technologies, Inc. ("Jaws US")
This Retraction Request is given pursuant to Article 6 of the provisions
(the "Share Provisions") attaching to the Exchangeable Shares of the Corporation
and all capitalized words and expressions used in this Retraction Request which
are defined in the Share Provisions have the meaning attributed to such words
and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned requests the
Corporation to redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by the accompanying certificate(s); or
[ ] ______________ share(s) only.
The Undersigned hereby notifies the Corporation that the Retraction Date
shall be: ______________________
NOTE: The Retraction Date must be a Business Day and must not be less
than five Business Days nor more than 10 Business Days after the
date upon which this Retraction Request and the accompanying
shares are received at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified in this
Retraction Request or as may be specified by the Corporation by
notice to the holders of the Exchangeable Shares. In the event
that no such Business Day is correctly specified above, the
Retraction Date shall be deemed to be the tenth Business Day after
the date on which this Retraction Request is received by the
Corporation.
The undersigned acknowledges the Retraction Call Right of Jaws US to
purchase all but not less than all the Retracted Shares from the undersigned and
that this Retraction Request shall be deemed to be a revocable offer by the
undersigned to sell the Retracted Shares to Jaws US in accordance with the
Retraction Call Right on the Retraction Date for the Retraction Price and on the
other terms and conditions set out in Section 6.3 of the Share Provisions. If
Jaws US determines not to exercise the Retraction Call Right, the Corporation
will notify the undersigned of such fact as soon as possible. This Retraction
Request, and offer to sell the Retracted Shares to Jaws US, may be revoked and
withdrawn by the undersigned by notice in writing given to the Corporation at
any time before the close of business on the Business Date immediately preceding
the Retraction Date.
The undersigned acknowledges that if, as a result of liquidity or
solvency provisions of applicable law, the Corporation is unable to redeem all
Retracted Shares, the undersigned will be deemed to have exercised the Exchange
Right (as defined in the Voting and Exchange Trust Agreement) so as to require
Jaws US to purchase the unredeemed Retracted Shares.
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The undersigned hereby represents and warrants to the Corporation and
Jaws US that the undersigned has good title to, and owns, the share(s)
represented by the accompanying certificate free and clear of all liens, claims,
encumbrances, security interests and adverse claims or interests.
------------- ------------------------------------ ---------------------------
(Date) (Signature of Shareholder) Guarantee of Signature
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[ ] Please check box if the legal or beneficial owner of the
Retracted Shares is a non-resident of Canada.
[ ] Please check box if the securities and any cheque(s) or other
non-cash assets resulting from the retraction of the Retracted
Shares are to be held for pick-up by the shareholder at the
principal transfer office of the Transfer Agent in Calgary,
Alberta, failing which the securities and any cheque(s) or other
non-cash assets will be delivered to the shareholder in accordance
with the share provisions.
NOTE: This panel must be completed and the accompanying certificate,
together with such additional documents as the Transfer Agent may
require, must be deposited with the Transfer Agent at its
principal transfer office in Calgary, Alberta. The securities and
any cheque(s) or other non-cash assets resulting from the
retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, or transferred into,
respectively, the name of the shareholder as it appears on the
register of the Corporation and the securities, cheque(s) and
other non-cash assets resulting from such retraction or purchase
will be delivered to the shareholder in accordance with the Share
Provisions.
--------------------------------------------------------------------------------
Name of Person in Whose Name Securities or Date
Cheque(s) or Other Non-cash Assets Are To Be
Registered, Issued or Delivered (please print)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Street Address or P.O. Box Signature of Shareholder
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
City, Province Signature Guaranteed by
--------------------------------------------------------------------------------
NOTE: If this Retraction Request is for less than all of the share(s)
represented by the accompanying certificate, a certificate
representing the remaining shares of the Corporation will be
issued and registered in the name of the shareholder as it appears
on the register of the Corporation or its lawful transferee.
B. OTHER PROVISIONS
1.1 Meetings
Meetings of shareholders of the Corporation shall be held in the location
determined by the directors of the Corporation, and may be held in Delaware or
at any location within Alberta.
1.2 Definitions
Unless there is something in the subject matter or context inconsistent
therewith in Sections 1.3, 1.4 and 1.5 below, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
"ABCA" means the Business Corporations Act (Alberta), as amended;
"Automatic Redemption Date" has the meaning provided in the Exchangeable
Share Provisions;
"Business Day" has the meaning provided in the Exchangeable Share
Provisions;
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions;
"Exchangeable Share Consideration" has the meaning provided in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning provided in the Exchangeable
Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares;
"Exchangeable Shares" means the Exchangeable Shares in the capital of the
Corporation;
"Jaws US" has the meaning provided in the Exchangeable Share Provisions;
"Jaws US Common Stock" has the meaning provided in the Exchangeable Share
Provisions;
"Liquidation Call Purchase Price" has the meaning provided in Section
1.3;
"Liquidation Call Right" has the meaning provided in Section 1.3;
"Liquidation Date" has the meaning provided in the Exchangeable Share
Provisions;
"Redemption Call Purchase Price" has the meaning provided in Section 1.4;
"Redemption Call Right" has the meaning provided in Section 1.4;
"Subsidiary" has the meaning provided in the Exchangeable Share
Provisions;
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"Transfer Agent" means the duly appointed transfer agent for the time
being of the Exchangeable Shares, and, if there is more than one such
transfer agent, then the principal Canadian transfer agent; and
"Voting and Exchange Trust Agreement" has the meaning provided in the
Exchangeable Share Provisions.
1.3 Jaws US Liquidation Call Right
(a) Jaws US shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding any proposed
liquidation, dissolution or winding-up of the Corporation as
referred to in Article 5 of the Exchangeable Share Provisions, to
purchase from all but not less than all of the holders (other than
Jaws US or any Subsidiary thereof) of Exchangeable Shares on the
Liquidation Date all but not less than all of the Exchangeable
Shares held by such holders on payment by Jaws US to each holder
of the Exchangeable Share Price applicable on the last Business
Day prior to the Liquidation Date (the "Liquidation Call Purchase
Price") in accordance with subsection 1.3(c). In the event of the
exercise of the Liquidation Call Right by Jaws US, each holder
shall be obligated to sell all the Exchangeable Shares held by
such holder to Jaws US on the Liquidation Date on payment by Jaws
US to the holder of the Liquidation Call Purchase Price for each
such share.
(b) To exercise the Liquidation Call Right, Jaws US must notify the
Corporation's Transfer Agent in writing, as agent for the holders
of Exchangeable Shares, and the Corporation of Jaws US's intention
to exercise such right at least 55 days before the Liquidation
Date in the case of a voluntary liquidation, dissolution or
winding-up of the Corporation and at least five Business Days
before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding-up of the Corporation. The
Transfer Agent will notify the holders of Exchangeable Shares as
to whether or not Jaws US has exercised the Liquidation Call Right
forthwith after the expiry of the xxxx by which the same may be
exercised by Jaws US. If Jaws US exercises the Liquidation Call
Right, on the Liquidation Date, Jaws US will purchase and the
holders will sell all of the Exchangeable Shares then outstanding
for a price per share equal to the Liquidation Call Purchase
Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, Jaws US shall
deposit with the Transfer Agent, on or before the Liquidation
Date, the Exchangeable Share Consideration representing the total
Liquidation Call Purchase Price. Provided that such Exchangeable
Share Consideration has been so deposited with the Transfer Agent,
on and after the Liquidation Date, the right of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase Price
payable by Jaws US, without interest, upon presentation and
surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall, on
and after the
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Liquidation Date, be considered and deemed for all purposes to be
the holder of the Jaws US Common Stock delivered to such holder.
Upon surrender to the Transfer Agent of a certificate or
certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the ABCA and the by-laws of
the Corporation and such additional documents and instruments as
the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf of
Jaws US shall deliver to such holder, the Exchangeable Share
Consideration to which such holder is entitled. If Jaws US does
not exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date, the holders of the Exchangeable
Shares will be entitled to receive in exchange therefor the
liquidation price otherwise payable by the Corporation in
connection with the liquidation, dissolution or winding-up of the
Corporation pursuant to Article 5 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such Exchangeable
Share Consideration is delivered to the holder, the holder shall
be deemed to still be a holder of Exchangeable Shares for purposes
of all voting rights with respect thereto under the Voting and
Exchange Trust Agreement.
1.4 Jaws US Redemption Call Right
(a) Jaws US shall have the overriding right (the "Redemption Call
Right"), notwithstanding any proposed redemption of the
Exchangeable Shares by the Corporation pursuant to Article 7 of
the Exchangeable Share Provisions, to purchase from all but not
less than all of the holders (other than Jaws US or any Subsidiary
thereof) of Exchangeable Shares on the Automatic Redemption Date
all but not less than all of the Exchangeable Shares held by each
such holder on payment by Jaws US to the holder of the
Exchangeable Share Price applicable on the last Business Day prior
to the Automatic Redemption Date (the "Redemption Call Purchase
Price") in accordance with subsection 1.4(c). In the event of the
exercise of the Redemption Call Right by Jaws US, each holder
shall be obligated to sell all the Exchangeable Shares held by the
holder to Jaws US on the Automatic Redemption Date on payment by
Jaws US to the holder of the Redemption Call Purchase Price for
each such share.
(b) To exercise the Redemption Call Right, Jaws US must notify the
Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and the Corporation of the Corporation's
intention to exercise such right not later than the date by which
the Corporation is required to give notice of the Automatic
Redemption Date. The Transfer Agent will notify the holders of the
Exchangeable Shares as to whether or not Jaws US has exercised the
Redemption Call Right forthwith after the date by which the same
may be exercised by Jaws US. If Jaws US exercises the Redemption
Call Right, on the Automatic Redemption Date, Jaws US will
purchase and the holders will sell all of the Exchangeable Shares
then outstanding for a price per share equal to the Redemption
Call Purchase Price.
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(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, Jaws US shall
deposit with the Transfer Agent, on or before the Automatic
Redemption Date, the Exchangeable Share Consideration representing
the total Redemption Call Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date, the
rights of each holder of Exchangeable Shares will be limited to
receiving such holder's proportionate part of the total Redemption
Call Purchase Price payable by Jaws US upon presentation and
surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall on
and after the Automatic Redemption Date be considered and deemed
for all purposes to be the holder of the Jaws US Common Stock
delivered to such holder. Upon surrender to the Transfer Agent of
a certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
ABCA and the by-laws of the Corporation and such additional
documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and the Transfer Agent on behalf of Jaws US shall deliver to such
holder, the Exchangeable Share Consideration to which such holder
is entitled. If Jaws US does not exercise the Redemption Call
Right in the manner described above, on the Automatic Redemption
Date, the holders of the Exchangeable Shares will be entitled to
receive in exchange therefor the redemption price otherwise
payable by the Corporation in connection with the redemption of
the Exchangeable Shares pursuant to Article 7 of the Exchangeable
Share Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder, the
holder shall be deemed to still be a holder of Exchangeable Shares
for purposes of all voting rights with respect thereto under the
Voting and Exchange Trust Agreement.
SCHEDULE "E" TO THAT SHARE PURCHASE AGREEMENT DATED THE 15TH, DAY
OF AUGUST, 2000, BETWEEN XXXXXXX PLUSCAUSKAS, XXXXX XXXXXXXX, JAWS
ACQUISITION CANADA CORP. AND JAWS TECHNOLOGIES, INC.
Registration Rights Agreements
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Agreement is dated for reference the _ day of August, 2000.
BETWEEN:
JAWS Technologies, Inc. a corporation duly incorporated pursuant
to the laws of Delaware
("JAWS")
AND:
VENDORS, Xxxxxxx Pluscauskas and Xxxxx Xxxxxxxx
(the "Vendors")
WHEREAS:
A. JAWS and the Vendors have executed a Share Purchase Agreement dated as of
August ___, 2000 (the "Share Purchase Agreement"); and
B. it is a condition to the Vendors' obligations under the Share Purchase
Agreement that JAWS and the Vendors enter into this Agreement in order to
provide the Vendors with certain rights to register the JAWS Shares
issued under the Share Purchase Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
recitals and of the mutual covenants and conditions hereinafter contained and
the payment of one dollar made by each party to the other, the receipt and
sufficiency of which is acknowledged by each party, the parties agree as
follows:
1. Registration Rights. JAWS and the Vendors covenant and agree as
follows:
1.1 Definitions and Interpretation. In this part:
------------------------------
(a) Forms S-1. The term "Form S-1" means such the form under the U.S.
Securities Act of 1933, as amended (the "Securities Act") as are
in effect on the date hereof or any successor forms under the
Securities Act;
(b) Holder. The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in
accordance with section 1.9 of this Agreement;
(c) Registration. The terms "register," "registered" and
"registration" refer to a registration effected by preparing and
filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such
registration statement;
(d) Registrable Securities. The term "Registrable Securities" means:
(i) the JAWS Shares issued to the Vendors pursuant to the Share
Purchase Agreement, and (ii) any other JAWS Shares issued as (or
issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other
distribution with respect to, or in exchange
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for or in replacement of, the JAWS Shares referred to in (i);
provided, however, that the foregoing definition shall exclude in
all cases any Registrable Securities sold by a person in a
transaction in which the person's rights under this Agreement are
not assigned. Notwithstanding the foregoing, JAWS Shares or other
Securities shall only be treated as Registrable Securities if and
so long as they have not been: (A) sold to or through a broker or
dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from
the registration and prospectus delivery requirements of the
Securities Act under section 4(l) thereof so that all transfer
restrictions, and restrictive legends with respect thereto, if
any, are removed upon the consummation of such sale;
(e) Registrable Securities Outstanding. The number of "Registrable
Securities then outstanding" shall be determined by the number of
JAWS Shares outstanding which are Registrable Securities, and the
number of JAWS Shares issuable pursuant to then exercisable or
convertible securities which are Registrable Securities; and
(f) SEC. The term "SEC" means the U.S. Securities and Exchange
Commission.
1.2 Request for Registration - Long Form Registration - Demand Registration.
------------------------
(a) JAWS shall use its reasonable best efforts to effect as soon as
practicable the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered
and in any event not later than one hundred and twenty (120) days
from the date of such request.
1.3 Piggy-Back Registration. If (but without any obligation to do so) JAWS
proposes to register any of its shares under the Securities Act in
connection with the public offering of such securities solely for cash
(other than a registration relating solely to the sale of securities to
participants pursuant to a stock option, stock purchase or similar plan
or an SEC Rule 145 transaction, a registration in which the only shares
being registered are JAWS Shares issuable upon conversion of debt
securities which are also being registered, or any registration on any
form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale
of the Registrable Securities), JAWS shall, at such time, promptly give
each Holder written notice of such registration. Upon the written request
of each Holder given within twenty (20) days after mailing of such notice
by JAWS, JAWS shall, subject to the provisions of section 1.6, cause to
be registered under the Securities Act all of the Registrable Securities
that each such Holder has requested to be registered. Each Holder shall
be entitled to have its Registrable Securities included in an unlimited
number of registrations pursuant to this section 1.3.
1.4 Obligations of JAWS. Whenever required under this section 1 to effect the
registration of any Registrable Securities, JAWS shall, as expeditiously
as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such
registration statement effective for up to fourteen (14) days;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement;
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(c) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them;
(d) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or state laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that JAWS shall not
be required in connection therewith or as a condition thereto to
qualify to do business, or to file a general consent to service of
process or to subject itself to taxation in any such states or
jurisdictions;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall
cooperate in good faith with JAWS in negotiating the underwriting
agreement and enter into and perform its obligations under such an
agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
a material fact required to be .stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, such obligation to continue for one
hundred twenty (120) days;
(g) cause all Registrable Securities registered hereunder to be listed
on each securities exchange on which similar securities issued by
JAWS are then listed;
(h) provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective
date of such registration; and
1.5 Furnish Information. It shall be a condition precedent to the obligations
of the JAWS to take any action pursuant to this section 1 with respect to
the Registrable Securities of any selling Holder that such Holder furnish
to the JAWS such information regarding the Holder, the Registrable
Securities held by the Holder, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.6 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses other than: (i) underwriting
fees, discounts and commissions, (ii) stock transfer taxes, and
(iii) fees and disbursements of counsel for The Holders, incurred
in connection with registrations, filings or qualifications
pursuant to section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and
accounting fees and fees and disbursements of counsel for the
JAWS, shall be borne by the JAWS; provided, however, that the JAWS
shall not be required to pay for any
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expenses of any registration proceeding begun pursuant to section
1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a Majority of the Registrable Securities
to be registered (in which case all participating Holders shall
bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 1.2; provided further, however,
that if at the time of such withdrawal, the Holders have learned
of a material adverse change in the condition, business, or
prospects of the JAWS from that known to the Holders at the time
of their request and have withdrawn the request with reasonable
promptness following disclosure by the JAWS of such material
adverse change, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to section
1.2.
(b) JAWS Registration. All expenses other than: (i) underwriting fees,
discounts, commissions, (ii) stock transfer taxes, and (iii) fees
and disbursements of counsel for the Holders, incurred in
connection with registrations, filings or qualifications of
Registrable Securities pursuant to section 1.3 for each Holder
(which right may be assigned as provided in Section 1.19),
including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees and fees and
disbursements of counsel for JAWS, shall be borne by JAWS.
1.7 Indemnification. In the event any Registrable Securities are included in
a registration statement under this section 1:
(a) to the extent permitted by law, JAWS will indemnify and hold
harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively
a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading, or (iii) any violation or
alleged violation by JAWS of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities
law; and JAWS will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
subsection 1.7(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of JAWS (which consent
shall not be unreasonably withheld), nor shall JAWS be liable to
any Holder, underwriter or controlling person for any such loss,
claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder,
underwriter or controlling person or from a failure of such Holder
to deliver to a person at or prior to the written confirmation of
a sale a copy of the final prospectus, as amended or supplemented,
if JAWS has previously furnished copies thereof to such Holder in
a timely fashion;
5-
(b) to the extent permitted by law, each selling Holder will indemnify
and hold harmless JAWS, each of its directors and officers who has
signed the registration statement, each person, if any, who
controls JAWS within the meaning of the Securities Act, any
underwriter, any other Holder of selling securities in such
registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such
Holder expressly for use and in connection with such registration;
and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.7(b), in connection with
investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; provided, that in no event shall any indemnity under
this subsection 1.7(b) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by
such Holder;
(c) promptly after receipt by an indemnified party under this section
1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under
this section 1.7, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided however,
that an indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the
reasonable fees and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action, if such failure is prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this section 1.7, but the
omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any
indemnified party otherwise than under this section 1.7;
(d) if the indemnification provided for in this Section 1.7 is held by
a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim,
damage or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution
by a Holder under this Subsection 1.7(d) exceed the net proceeds
from the
6-
offering received by such Holder, except in the case of willful
fraud by such Holder. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission;
(e) notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control; and
(f) the obligations of JAWS and Holders under this Section 1.7 shall
survive the completion of any offering of Registrable Securities
in a registration statement under this Section 1, and otherwise.
1.8 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at
any time permit a Holder to sell Securities of JAWS to the public without
registration or pursuant to a registration on Form S-1, JAWS agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration
statement filed by JAWS for the offering of its securities to the
general public for as long as JAWS remains subject to the periodic
reporting requirements under Sections 13 or 15(d) of the Exchange
Act;
(b) take such action, including the voluntary registration of its JAWS
Shares under Section 12 of the Exchange Act, as is necessary to
enable the Holders to utilize Form S- I or Form S-3 for the sale
of their Registrable Securities, such action to be taken as soon
as practicable after the end of the fiscal year in which the
registration statement filed by JAWS is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of JAWS under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request: (i) a written statement by
JAWS that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by JAWS), the
Securities Act and the Exchange Act (at any Time after it has
become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant
to Form S-1 or Form S-3 (at any time after it so qualifies), (ii)
a copy of the most recent annual or quarterly report of JAWS and
such other reports and documents so filed by JAWS, and (iii) such
other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to
such form.
7-
1.9 Assignment of Registration Rights. The rights to cause JAWS to register
Registrable Securities pursuant to this section 1 may be assigned (but
only with all related obligations) to a transferee or assignee of all of
the Registrable Securities held by such Holder, provided JAWS is, within
a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned,
subject to assumption by the assignee in writing of the corresponding
obligations hereunder; and provided, further, that such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
2. Miscellaneous.
-------------
2.1 Successors and Assigns. Except as otherwise provided in this Agreement,
the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective permitted successors and assigns of
the parties (including transferees of any of the JAWS Shares or JAWS
Shares issued upon conversion thereof or any other Registrable
Securities). Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
2.2 Amendments and Waivers. Any term of this Agreement may be amended or
waived only with the written consent of each party. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon
each holder of Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and JAWS.
2.3 Notices. Unless otherwise provided, any notice required or permitted by
this Agreement shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the
Canadian mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party's address or fax
number as set forth below or as subsequently modified by written notice.
2.4 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then:
(i) such provision shall be excluded from this Agreement, (ii) the
balance of the Agreement shall be interpreted as if such provision were
so excluded, and (iii) the balance of the Agreement shall be enforceable
in accordance with its terms.
2.5 Governing Law. This Agreement and all acts and transactions pursuant
hereto shall be governed, construed and interpreted in accordance with
the laws of the Province of Ontario, without giving effect to principles
of conflicts of laws. Any dispute arising under or in relation to this
Agreement shall be resolved in the courts of Ontario and each of the
parties hereto attorns to the exclusive jurisdiction of such courts.
2.6 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
8-
2.7 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. In this Agreement, unless the context
otherwise requires, words importing the singular include the plural and
vice versa.
The parties have executed this Registration Rights Agreement as of the date
first above written.
JAWS Technologies, Inc.
Per: __________________________________
Authorized Signatory
VENDORS
Per: __________________________________
Xxxxxxx Pluscauskas
Per: __________________________________
Xxxxx Xxxxxxxx
