EXHIBIT 10.1
SHARE PURCHASE AGREEMENT
BETWEEN
LML PAYMENT SYSTEMS INC.
AND
XXXXX XXXXXX
XX XXXXXXXX
MADE ON
JULY 22, 2000
SHARE PURCHASE AGREEMENT
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THIS AGREEMENT made on July 22, 2000
BETWEEN:
LML PAYMENT SYSTEMS INC., a corporation continued under the laws
of the Yukon Territory of Canada
(the "Purchaser"),
AND:
XXXXX XXXXXX, of the City of Garland, Texas
("Xx. Xxxxxx")
XX XXXXXXXX, of the City of Dallas, Texas
("Xx. Xxxxxxxx ")
(Xx. Xxxxxx and Xx. Xxxxxxxx are hereinafter referred to
collectively as the "Vendors")
WHEREAS:
A. The Vendors are the beneficial and registered owners of the Shares,
being all the issued and outstanding common shares of the capital stock of the
Corporation; and
B. The Vendors desire to sell and the Purchaser desires to purchase the
Shares upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained (and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
ARTICLE 1 - INTERPRETATION
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1.1 Definitions
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In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
(a) "Agreement" means this agreement and all amendments made hereto by
written agreement between the Vendors and the Purchaser;
(b) "Balance Sheet" means the balance sheet of the Corporation as of the
Balance Sheet Date;
(c) "Balance Sheet Date" means December 31, 1999;
(d) "Business Day" means a day other than a Saturday, Sunday or bank
holiday in Texas;
(e) "Closing" means the closing of all the transactions contemplated in
this Agreement at the Time of Closing on the Closing Date which shall
be effected by the deposit by the parties hereto of all documents
required to be delivered in order to effect such Closing pursuant to
the provisions hereof, whereupon the Closing shall have occurred and
the respective documents thus tabled will be delivered to the
respective parties and third parties, if any, in accordance with a
closing agenda to be agreed upon between the Purchaser Counsel and the
Vendor Counsel before the Time of Closing;
(f) "Closing Date" means July 22, 2000 or such other date as may be agreed
to in writing between the Vendors and the Purchaser;
(g) "Code" means the Internal Revenue Code of the United States of America
and all amendments thereto from time to time;
(h) "Corporation" means Check Technologies Inc., a Texas corporation;
(i) "Employment Agreement" means the Employment Agreement to be made
hereunder between Xx. Xxxxxx and the Corporation in the form attached
as Schedule 4.2(a)(x);
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(j) "Environmental Laws" means any and all applicable state, federal, and
local statutes, regulations and ordinances relating to the protection
of human health and the environment, including without limitation the
Federal Comprehensive Environmental Response, Compensation, and
Liability Act and the Toxic Substances Control Act;
(k) "Financial Statements" has the meaning set out in Section 3.1(k);
(l) "Hazardous Material" means any hazardous or toxic substance, material,
or waste, including, but not limited to those substances, materials,
pollutants, contaminants and wastes listed in the United States
Department of Transportation Hazardous Materials
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Table (49 C.F.R. (S) 172.101) or by the United States
Environmental Protection Agency as hazardous substances (40
C.F.R. Part 302 and amendments thereto), petroleum products (as
defined in Title I to the Resource Conservation and Recovery
Act, 42 U.S.C. (S) 6991-6991(i)) and their derivatives;
(m) "Interim Financial Statements" has the meaning set out in
Section 3.1(l);
(n) "Interim Balance Sheet Date" means May 31, 2000;
(o) "Interim Balance Sheet" means the balance sheet of the
Corporation at the Interim Balance Sheet Date;
(p) "Knowledge of Xx. Xxxxxx" or "Knowledge of Xx. Xxxxxxxx" means
with respect to the existence or absence of facts, that either
Xx. Xxxxxx or Xx. Xxxxxxxx, as the case may be, has had come to
his attention any information which would give him actual
knowledge of the existence or absence of such facts and that he
has not undertaken any independent investigation to determine
the existence or absence of such facts;
(q) "LML Share" means one common share without par value in the
capital stock of the Purchaser;
(r) "LML Share Closing Value" means the closing offering price for
the purchase of an LML Share as reported on NASDAQ on the
Business Day immediately before Closing;
(s) "Losses" has the meaning set out in Section 6.1;
(t) "NASDAQ" means the National Association of Securities Dealer
Automated Quotation System;
(u) "Material Contracts" has the meaning set out in Section 3.1(v);
(v) "Xxx. Xxxxxx" means Xxx. Xxxx Xxxxxx, businesswoman of Dallas,
Texas;
(w) "Non-Competition and Non-Solicitation Agreement(s)" has the
meaning set out in Section 4.2(a)(xi);
(x) "Purchase Price" has the meaning set out in Section 2.1(a);
(y) "Purchaser Counsel" means, collectively, in Canada, XxXxxxxx
Xxxxxxxx of Vancouver, British Columbia and Austring, Fendrick,
Xxxxxxx & Parkkari of Whitehorse, Yukon, and in the United
States of America, Munsch, Hardt, Xxxx & Xxxx, P.C. of Dallas,
Texas;
(z) "Real Property" has the meaning set out in Section 3.1(cc)(i)A;
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(aa) "Shareholders' Agreement" means the Shareholders Agreement made
between the Vendors dated August 27, 1998, a copy of which is
included among the documents attached as Schedule 3.1(f) hereto;
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(bb) "Shares" means the eighty-five (85) issued and outstanding
common shares of the capital stock of the Corporation;
(cc) "Sharing Percentages" means for Xx. Xxxxxx, 55% and for Xx.
Xxxxxxxx, 45%;
(dd) "Software" means, collectively, all computer software used by
the Corporation;
(ee) "Time of Closing" means 2 o'clock in the afternoon (Dallas Time)
on the Closing Date; and
(ff) "Vendor Counsel" means Gardere & Xxxxx, L.L.P of Dallas, Texas.
1.2 Headings
--------
The division of this Agreement into Articles and Sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 Extended Meanings
-----------------
In this Agreement words importing the singular number only
shall include the plural and vice versa, words importing the masculine gender
shall include the feminine and neuter genders and vice versa and words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.4 Accounting Principles
---------------------
Wherever in this Agreement reference is made to a calculation
to be made in accordance with generally accepted accounting principles, such
reference shall be deemed to be to the generally accepted accounting principles
from time to time approved by the American Institute of Certified Public
Accountants, or any successor institute, applicable as at the date on which such
calculation is made or required to be made in accordance with generally accepted
accounting principles.
1.5 Currency
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All references to currency herein are to lawful money of the
United States of America.
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1.6 Schedules
---------
The following are the Schedules annexed hereto and incorporated
by reference and deemed to be part hereof:
Schedule 3.1(c) Licenses and Permits
Schedule 3.1(f) Shareholder's Agreement and Rights
Attached to the Shares
Schedule 3.1(k) Financial Statements
Schedule 3.1(l) Interim Financial Statements
Schedule 3.1(o) Liens and Encumbrances
Schedule 3.1(q) Capital Expenditures
Schedule 3.1(r) Dividends Declared
Schedule 3.1(t) Tax Returns
Schedule 3.1(v) Material Contracts
Schedule 3.1(y) Leases of Real Property
Schedule 3.1(bb) Leases of Personal Property
Schedule 3.1(dd) Subsidiary
Schedule 3.1(ff) Royalty, License Fee, Management Fee
Schedule 3.1(gg) Employees
Schedule 3.1(hh) Employee Benefit Plans
Schedule 3.1(kk) Employee Payments Out of the Ordinary
Course
Schedule 3.1(ll) Pending Claims
Schedule 3.1(pp) Non-Arm's Length Debt
Schedule 3.1(qq) Legal Actions
Schedule 3.1(tt) Jurisdictions of Business, Permits, and
Licenses
Schedule 3.1(xx) Intellectual Property
Schedule 3.1(aaa) Insurance Policies
Schedule 3.1(bbb)(x) B.C. Initial Trade Report
Schedule 4.2(a)(ix) Opinion of Vendor Counsel
Schedule 4.2(a)(x) Employment Agreement
Schedule 4.2(a)(xi) Non-Competition and Non-Solicitation
Agreements
Schedule 4.2(a)(xiii) Releases
Schedule 4.3(a)(vi) Opinion of Purchaser Counsel
ARTICLE 2- PURCHASE AND SALE
----------------------------
2.1 Purchase and Sale and Purchase Price
------------------------------------
(a) The Vendors shall sell the Shares to the Purchaser and the
Purchaser shall purchase the Shares from the Vendors for a total purchase price
of five hundred thousand dollars ($500,000) (the "Purchase Price") upon and
subject to the terms and conditions hereof.
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(b) The Purchase Price shall be paid and satisfied as to two
hundred and fifty thousand dollars ($250,000) by delivery of immediately
available funds to each of the Vendors on Closing in the amount of their
respective Sharing Percentages of the Purchase Price and as to two hundred and
fifty thousand dollars ($250,000) by the issuance to each of the Vendors on
Closing in the amount of their respective Sharing Percentages of that number of
LML Shares that equals the amount that is equal to the product, rounded down to
the nearest whole number, of dividing (i) two hundred and fifty thousand dollars
($250,000) by (ii) the LML Share Closing Value.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
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3.1 Xx. Xxxxxx'x Representations and Warranties
-------------------------------------------
Xx. Xxxxxx represents and warrants to the Purchaser that the
following representations and warranties are true as of the date hereof or will
be true as of the Time of Closing:
(a) the Corporation is a corporation duly organized and validly
existing and in good standing under the laws of Texas with the
corporate power to own its assets and to carry on its business
and has made all necessary filings requested to be made as of the
date hereof under all applicable corporate, securities and
taxation laws or any other laws to which the Corporation is
subject;
(b) the Corporation is not qualified as a foreign corporation in any
jurisdiction other than Louisiana;
(c) except as described in Schedule 3.1(c), the Corporation is duly
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authorized and licensed and has all licenses, franchises, permits
and other governmental authorizations required under all
applicable laws, regulations, ordinances and orders of public
authorities to own, lease and operate its assets and to carry on
its business in the places and in the manner as now conducted
other than such licenses, permits and governmental authorities,
the failure to have which would not have a material adverse
effect upon the Corporation;
(d) Xx. Xxxxxx has delivered to the Purchaser or its representatives
complete and correct copies of the following documents relating
to the corporate existence of the Corporation:
(i) the Articles of Incorporation and Bylaws of the
Corporation, including all amendments and restatements
thereof, as in effect on the date hereof;
(ii) the stock records of the Corporation; and
(iii) the minutes and other records of the meetings and other
proceedings of the shareholders and directors of the
Corporation regarding the allotment, issuance, repurchase,
redemption, surrender and cancellation or other actions
pertaining to the shares of the capital stock of the
Corporation.
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(e) the entire authorized capital stock of the Corporation consists
of one thousand (1,000) shares, of which eighty-five (85) shares
have been validly issued and are outstanding as fully paid and
non-assessable;
(f) a copy of the Shareholders' Agreement between the Vendors is
attached and the rights, privileges, restrictions and conditions
attached to the Shares are as set out in Schedule 3.1(f) attached
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hereto, and except as provided in Schedule 3.1(f), no person is
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entitled to any preemptive right or right of first refusal with
respect to the Shares who has not waived such right. There are no
outstanding preemptive rights, options, warrants, conversion
rights, agreements or other rights to purchase any of the
authorized but unissued stock of the Corporation other than those
identified herein or issued, reserved or committed to be issued
pursuant to this Agreement;
(g) other than community property rights, Xx. Xxxxxx is the sole
beneficial and registered owner of the number of Shares shown
adjacent to his name in the following table free and clear of all
liens, charges, encumbrances and any other rights of others and
to the knowledge of Xx. Xxxxxx, Xx. Xxxxxxxx is, subject to
community property rights, the sole beneficial and registered
owner of the number of shares shown adjacent to his name in the
following table:
Name of Vendor Number of Shares
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Xx. Xxxxxx 46.75
Xx. Xxxxxxxx 38.25
(h) each of the Vendors has good and sufficient power, authority and
right to enter into and deliver this Agreement and to transfer
the legal and beneficial title and ownership of the Shares
registered in their respective names to the Purchaser and the
Shares when sold and delivered in accordance with the terms of
this Agreement against payment therefore, will be duly and
validly issued, fully-paid, non-assessable and free and clear of
all liens, charges, encumbrances and any other rights of others
(other than liens, charges, encumbrances or rights created by the
Purchaser and general securities laws);
(i) other than as set forth in Schedule 3.1(f), there is no contract,
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option or any other right of another binding upon or which at any
time in the future may become binding upon:
(i) the Vendors to sell, transfer, assign, pledge, charge,
mortgage or in any other way dispose of or encumber any of
the Shares other than pursuant to the provisions of this
Agreement; or
(ii) the Corporation to allot or issue any of the authorized but
unissued shares of the Corporation or to create any
additional class of shares;
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(j) neither the entering into nor the delivery of this Agreement nor
the completion of the transactions contemplated hereby by the
Vendors or by the Corporation will result in the violation of:
(i) any of the provisions of the Articles of Incorporation or
Bylaws of the Corporation;
(ii) any agreement or other instrument to which the Corporation
is a party or by which the Corporation is bound which will
not be terminated as of the Closing Date, or
(iii) any law, rule or regulation applicable to the Corporation
or Xx. Xxxxxx;
(k) the unaudited financial statements of the Corporation ,
consisting of the Balance Sheets and statement of income, and
statement of cash flow for the fiscal period ended on the Balance
Sheet Date, together with the report of Xxxx, Canterbury &
Company L.L.P., certified public accountants, thereon
(hereinafter collectively referred to as the "Financial
Statements"), copies of which are attached hereto as Schedule
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3.1(k):
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(i) are in accordance with the books and accounts of the
Corporation as at the Balance Sheet Date,
(ii) are true and correct and present fairly the financial
position of the Corporation as at the Balance Sheet Date,
and
(iii) present fairly all of the assets and liabilities of the
Corporation as at the Balance Sheet Date including, without
limiting the generality of the foregoing, and to the
Knowledge of Xx. Xxxxxx all contingent liabilities of the
Corporation as at the Balance Sheet Date;
(l) the unaudited financial statements of the Corporation, consisting
of the Interim Balance Sheet and statement of operations and cash
flows for the period ended on the Interim Balance Sheet Date
(hereinafter collectively referred to as the "Interim Financial
Statements"), a copy of which is attached hereto as Schedule
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3.1(l):
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(i) are in accordance with the books and accounts of the
Corporation as at the Interim Balance Sheet Date;
(ii) are true and correct and present fairly the financial
position of the Corporation as at the Interim Balance Sheet
Date other than with respect to amounts and terms shown in
Schedule 3.1(v);
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(iii) subject to there being no accruals or notes and except as
previously disclosed to the Purchaser, have been prepared
in accordance with generally accepted accounting principles
consistently applied, and
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(iv) present fairly all of the assets and liabilities of the
Corporation as at the Interim Balance Sheet Date including,
without limiting the generality of the foregoing, and to
the Knowledge of Xx. Xxxxxx all contingent liabilities of
the Corporation as at the Interim Balance Sheet Date other
than with respect to amounts and terms shown in Schedule
--------
3.1(v);
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(m) since the Interim Balance Sheet Date there has been no material
adverse change in the assets, liabilities or financial position
of the Corporation including, without limitation the business,
prospects, operations or condition of the Corporation, financial
or otherwise, whether arising as a result of any known
legislative or regulatory change, revocation of any license or
right to do business, fire, explosion, accident, casualty, labour
dispute, flood, drought, riot, storm, condemnation, act of God,
public force or otherwise, except changes occurring in the usual
and ordinary course of business which have not materially and
adversely affected the affairs, business, prospects, operations
or condition of the Corporation , financial or otherwise;
(n) since the Interim Balance Sheet Date, the business of the
Corporation has been carried on in its usual and ordinary course
and the Corporation has not entered into any transaction out of
the usual and ordinary course of its business other than the
negotiation of the transaction contemplated in this Agreement;
(o) the Corporation is the owner with a good and marketable title,
free and clear of all liens, charges, encumbrances and any other
rights of others, of all assets of the Corporation shown or
reflected on the Interim Balance Sheet and listed in Schedule
--------
3.1(o) or Schedule 3.1(v), except for (A) such of the assets of
-------------------------
the Corporation as have been disposed of in the usual and
ordinary course of business since the Interim Balance Sheet Date,
(B) assets being leased, (C) liens disclosed in Schedule 3.1(o)
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and (D) liens which are to be released by the Closing Date or
which are not listed in such Schedule 3.1(o) because they (i) are
---------------
not substantial in character amount or extent, and do not
materially detract from the value of the assets subject thereto,
(ii) do not materially interfere with either the present or
intended use of such assets, and (iii) do not, individually or in
the aggregate, materially interfere with the conduct of the
Corporation's business;
(p) there are no outstanding orders, notices or similar requirements
relating to the Corporation issued by any building,
environmental, fire, health, labor or police authorities or from
any other similar federal, state or municipal authority and there
are no matters under discussion with any such authorities
relating to orders, notices or similar requirements;
(q) except as set out in Schedule 3.1(q), no single capital
---------------
expenditure in excess of ten thousand dollars ($10,000) or
capital expenditures in the aggregate in excess of fifteen
thousand dollars ($15,000) have been made or authorized by the
Corporation since the Interim Balance Sheet Date;
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(r) except as disclosed on Schedule 3.1(r), no dividends have been
---------------
declared or paid on or in respect of the Shares and no other
distribution on any of its securities or shares has been made by the
Corporation since the Interim Balance Sheet Date and all dividends
which to the date hereof have been declared or paid by the Corporation
have been duly and validly declared or paid;
(s) except for income taxes, sales taxes and franchise taxes, the
Corporation has no liability, obligation or commitment for the payment
of income taxes, corporation taxes or any other taxes or duties of
whatever nature or kind, or interest or penalties with respect thereto
in excess of one thousand dollars ($1,000.00), except such as are
disclosed in the Interim Financial Statements or such taxes or duties
not yet due and payable in the usual and ordinary course of business,
and the Corporation is not in arrears with respect to any required
withholdings or installment payments of any tax or duty of any kind
and has not filed any waiver for a taxation year of the Corporation
under the Code of the United States of America or any other
legislation imposing tax on the Corporation;
(t) except as disclosed in Schedule 3.1(t) the tax returns of the
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Corporation previously filed with appropriate taxing authorities were
true and complete in all material respects as of filing;
(u) except as set forth in Schedule 3.1(v) there are no outstanding
--------------
liabilities against the Corporation which could be reasonably expected
to have a material adverse effect on the Corporation;
(v) except as set out in Schedule 3.1(v), the Corporation is not a party
--------------
to any contract or commitment outside the usual and ordinary course of
business that is not cancellable without penalty extending for a
period of time longer than three (3) months or involves expenditures
by the Corporation in the aggregate in excess of five thousand dollars
($5,000) (collectively, the "Material Contracts");
(w) all such Material Contracts are in good standing and in full force and
effect and the Corporation is not in default or breach of any Material
Contract to which it is a party and there exists no condition, event
or act which, with the giving of notice or lapse of time or both would
constitute such a default or breach by the Corporation so that the
Corporation is entitled to all material benefits under the Material
Contract to which it is a party;
(x) the Corporation is not a party to or bound by any guarantee,
indemnification, surety or similar obligation;
(y) the Corporation neither has owned nor now owns any real property nor
is it currently a party to any lease or agreement in the nature of a
lease for real property, whether as lessor or lessee except as set out
in Schedule 3.1(y)
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(z) the leases of real property listed on Schedule 3.1(y) constitute all
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the real property leases to which the Corporation is a party (either
as lessor or lessee). True and
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complete copies of such leases and all amendments and modifications
thereof have been provided to the Purchaser. Except as set forth on
Schedule 3.1(y) and except as disclosed in Sections 3.1(aa)(vii) and
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3.1(aa)(viii), the Corporation has no obligation under any such leases
for the repair or reconstruction of any of the leasehold premises,
including any buildings, structures, leasehold improvements, fixtures,
or appurtenances. To the knowledge and belief of Xx. Xxxxxx, all such
leasehold premises are adequate and suitable for the purposes for
which they are presently being used, and conform in all material
respects to all applicable laws, ordinances, and regulations;
(aa) with respect to each of the leases of real property listed on Schedule
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3.1(y) except as described on Schedule 3.1(y). With respect to each
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such lease, except as otherwise disclosed on Schedule 3.1(y), (i) the
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leases are in full force and effect, and are valid, binding and
enforceable against the Corporation in accordance with their
respective terms, (ii all accrued and currently payable rents and
other payments required by such leases have been paid, (ii such leases
were entered into in the ordinary course of business and the
Corporation has been in peaceable possession since the beginning of
their respective possession (either as lessor or lessee) under any
such lease, (iv for a period of two (2) years prior to the date hereof
or, if shorter, during the period of the Corporation's possession
(either as lessor or lessee), no party has asserted any defense, set-
off or counterclaim thereunder, (v) for a period of two (2) years
prior to the date hereof or, if shorter, during the period of the
Corporation's possession (either as lessor or lessee), no waiver,
indulgence, or postponement of any obligations thereunder has been
granted by any party, (vi neither the Corporation nor, to the
Knowledge of Xx. Xxxxxx, any other party has violated any term or
condition under any such lease in any material respect, (vi there are
no known current repair or maintenance obligations in excess of one
thousand dollars ($1,000.00) and (vi as of the date hereof, except as
set forth in such lease there are no reconstruction, remodeling or
other obligations to restore the leased premises to their original
condition or to some other condition which would require the
expenditure of a material amount of funds by the Corporation;
(bb) except as set out in Schedule 3.1(bb) there are no leases or rental
---------------
agreements covering personal property to which the Corporation is a
party (either as lessor or lessee). True and complete copies of any
such leases and all amendments and modifications thereof or proper and
complete descriptions of such leases or rental agreements have been
provided to the Purchaser in such Schedule 3.1(bb);
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(cc) Environmental Representations and Warranties of Xx. Xxxxxx:
(i) to the Knowledge of Xx. Xxxxxx:
A. all activities of the Corporation with respect to real
property now or formerly owned or leased by the Corporation
("Real Property") have been and are being conducted in
material compliance with all federal, state and local
statutes, ordinances, rules, regulations and orders, as well
as all requirements of common law concerning those
activities,
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repairs or construction of any improvements, manufacturing
processing and/or handling of any materials, and discharges
to the air, soil, surface water or groundwater;
B. there has been no release or presence of any Hazardous
Materials on, in, from or onto the Real Property as a result
of the actions of the Corporation;
C. the Corporation has not generated, manufactured, refined,
transported, stored, handled, disposed of or released any
Hazardous Material on the Real Property;
D. the Corporation has obtained all approvals and caused all
notifications to be made with respect to the Corporation's
use of the Real Property as required by Environmental Laws,
if any;
E. the Corporation has delivered to the Purchaser a true and
complete list of all registrations with, licenses from, or
permits issued by governmental agencies or authorities
material to the operations of the business of the
Corporation pursuant to environmental, health and safety
laws, and all such registrations, licenses or permits are in
full force and effect;
F. the Corporation has not received any written notice of any
violation of any Environmental Laws with respect to the Real
Property;
G. to the Knowledge of Xx. Xxxxxx, no action has been commenced
or threatened regarding the Corporation's compliance with
any Environmental Laws with respect to the Real Property;
H. no tanks used for the storage of any Hazardous Material
above or below ground to the Knowledge of Xx. Xxxxxx are
present or to the Knowledge of Xx. Xxxxxx were at any time
present on or about the Real Property;
I. no action has been commenced or, to the knowledge of Xx.
Xxxxxx, threatened regarding the presence of any Hazardous
Material on or about the Real Property;
J. no Hazardous Materials are present in any medium in the
operations of the business of the Corporation and/or at the
Real Property in such a manner as requires investigation or
remediation under any applicable law;
K. no polychlorinated biphenyls or substances containing
polychlorinated biphenyls are to the Knowledge of Xx. Xxxxxx
present on the Real Property; and
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L. to the knowledge of Xx. Xxxxxx, no friable asbestos is
present in the operations of the business of the Corporation
and/or to the Knowledge of Xx. Xxxxxx the Real Property;
(ii) the Corporation has not released or waived the liability of any
previous owner, lessee, or operator of the Real Property or any
party who may be potentially responsible for the presence or
removal of Hazardous Material on or about the Real Property and
has any indemnification obligation regarding Hazardous Material
with respect to the Real Property to any party except as may be
set out in the leases described in Schedule 3.1(y);
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(dd) except as set out in Schedule 3.1(dd), the Corporation has no
---------------
subsidiaries or agreements, options or commitments to acquire any
shares or securities of any corporation or other entity or partnership
or to acquire or lease any business operations, real property or
assets;
(ee) there is no unexpired agreement, option, understanding or commitment,
or any right or privilege capable of becoming an agreement, for the
purchase from the Corporation of its business or any of its assets
other than in the usual and ordinary course of business;
(ff) except as set out in Schedule 3.1(ff), the Corporation is not a party
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to or bound by any current contract or commitment to pay any royalty,
license fee or management fee;
(gg) the Corporation has no written or unwritten employment contract with
any person whomsoever and all the employees of the Corporation are
employees at will. Schedule 3.1(gg) truly and correctly sets out
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whether such contracts are or are not in writing and the annual
salary, car allowance, holiday entitlement, position and hire date of
each of the employees of the Corporation;
(hh) the Corporation is not bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any health, dental, life and disability insurance, retirement,
pension, bonus, profit-sharing or similar plan or incentive
management or deferred compensation plan of any kind whatsoever
or any benefit plan including, without limitation maintained by
or on behalf of the Corporation for any of its employees;
except such agreements and plans as are listed in Schedule 3.1(hh)
---------------
attached hereto and copies of which are attached to such Schedule
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3.1(hh) as exhibits;
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(ii) all benefit plans listed in Schedule 3.1(hh) have been duly registered
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where required by, and are in good standing und er, all applicable
legislation and all required employer contributions as of the date
hereof under any such plans have been made
-13-
and the applicable funds have been funded in accordance with the terms
thereof of the plans and no past service funding liabilities exist
thereunder other than with respect to current year funding
obligations;
(jj) no trade union, council of trade unions, employee bargaining agency or
affiliated bargaining agent:
(i) holds bargaining rights with respect to any of the Corporation's
employees by way of certification, interim certification,
voluntary recognition, designation, successor rights or other
means,
(ii) has applied to be certified as the bargaining agent of any of
the Corporation's employees, or
(iii) has applied to have the Corporation declared a related employer
pursuant to any law which would allow it to hold bargaining
rights with respect to any of the Corporation's employees;
(kk) except as disclosed in Schedule 3.1(kk), and except for remuneration
---------------
paid to employees in the usual and ordinary course of business
including, without limitation, holiday or other bonus remuneration or
severance payments and made at current rates of remuneration no
payments have been made or authorized since the Interim Balance Sheet
Date by the Corporation to officers, directors or employees of the
Corporation;
(ll) except as disclosed in Schedule 3.1(ll) there are no outstanding or,
---------------
to the Knowledge of Xx. Xxxxxx, threatened or pending actions, claims,
grievances or proceedings pertaining to the businesses of the
Corporation pursuant to any taxation, health, employment or other law
relating to employees or independent contractors;
(mm) the Corporation has made or paid all payments, premiums, assessments,
penalties and/or remittances in a timely fashion in respect of its
current employees except such amounts which have not been paid in a
timely fashion but in respect of which such untimely payment would not
have a material adverse effect;
(nn) to the Knowledge of Xx. Xxxxxx, there are no actual or threatened or
pending organizing activities of any trade union, council of trade
unions, employee bargaining agency or affiliated bargaining agent or
any actual, or, threatened or pending unfair labour practice
complaints pertaining to the businesses of the Corporation , nor have
there been any such activities or complaints within the last five
years;
(oo) except as described in Schedule 3.1(kk), all vacation pay for
---------------
employees of the Corporation is properly reflected in the books and
accounts of the Corporation;
(pp) except as set out in Schedule 3.1(pp), no current or former director,
---------------
officer, shareholder, employee or consultant of the Corporation or any
other person who may
-14-
be deemed to be not dealing at arm's length with the Corporation with
any such person, as the case may be, is indebted to the Corporation;
(qq) Xx. Xxxxxx has not received notice of any actions, suits or
proceedings (whether or not purportedly on behalf of the Corporation)
pending or threatened against or adversely affecting, or which could
adversely affect, the Corporation or any of its assets before or by
any federal, state, municipal or other governmental court, department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, whether or not insured, including without limitation, any
claim, litigation or liabilities in any way relating to the Fair
Credit Reporting Act, any federal or state equal employment
opportunity law or any other law, and which might involve the
possibility of any judgment or liability against the Corporation ,
except such actions, suits or proceedings as are disclosed in Schedule
--------
3.1(qq) attached hereto and to the Knowledge of the Vendors, the
------
Corporation has not been operating under or subject to, or in default
with respect to, any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, foreign or domestic;
(rr) there are no outstanding or unsatisfied judgments against Xx. Xxxxxx
or the Corporation;
(ss) other than Xx. Xxxxxx personally filing for bankruptcy in 1984, Xx.
Xxxxxx has not filed for bankruptcy protection under United States
bankruptcy laws nor, to the Knowledge of Xx. Xxxxxx, he does not know
of any circumstances which might reasonably lead any of them to seek
such protection during the period of ninety (90) days after the
Closing;
(tt) the Corporation is not seeking business in any jurisdiction other than
those set out in Schedule 3.1(tt);
---------------
(uu) the Corporation has complied with all applicable laws, rules,
regulations, notices, approvals and orders of the United States of
America and of the jurisdictions stated in Schedule 3.1(tt) and all
---------------
municipalities thereof in which its business is carried on, the non-
compliance with which could be reasonably expected to have a material
adverse effect on the Corporation and to the Knowledge of Xx. Xxxxxx,
the Corporation has not received notice of the breach of any such
laws, rules, regulations, notices, approvals or orders and to the
Knowledge of Xx. Xxxxxx, is not in breach of any such laws, rules,
regulations, notices, approvals or orders, except as specified in
Schedule 3.1(c);
--------------
(vv) to the Knowledge of Xx. Xxxxxx, (A) the Corporation is duly licensed,
registered or qualified, and duly possess all permits, in the
jurisdictions stated in Schedule 3.1(tt) and all municipalities
---------------
thereof in which the Corporation carries on its business to enable its
business to be carried on as now conducted and its assets to be owned,
leased and operated, except as specified in Schedule 3.1(b) and (B)
--------------
all such licenses, registrations, qualifications and permits are
listed in Schedule 3.1(tt) and are valid and subsisting and in good
---------------
standing;
-15-
(ww) to the Knowledge of Xx. Xxxxxx, the operation of the Corporation on
any lands from which it conducts the operations of its business is
not in contravention of any restriction or limitation applicable to
such lands and is not in contravention of any law or regulation or of
any decree or order of any court or other body having jurisdiction;
(xx) attached hereto as Schedule 3.1(xx) is a list of all Software,
----------------
registered trade marks, trade names, patents and copyrights, of all
unregistered trade marks, trade names and copyrights and of all
patent applications, trade xxxx registration applications and
copyright registration applications, both domestic and foreign, and
of any other intellectual property of the Corporation, owned or made
by the Corporation;
(yy) all trade marks, trade names, patents, copyrights and Software used
in or required for the proper carrying on of the Corporation's
business are listed in Schedule 3.1(xx) and to the Knowledge of Mr.
----------------
Jahnel are either validly licensed for all uses to which they are put
by the Corporation or are validly and beneficially owned, either by
the Corporation and are, to the extent indicated in such Schedule
--------
3.1(xx) duly registered in the United States Patent and Trademark
-------
Office except as reflected in Schedule 3.1(xx);
----------------
(zz) to the Knowledge of Xx. Xxxxxx, the conduct of the Corporation does
not infringe upon the trade marks, trade names, patents or
copyrights, domestic or foreign, of any other person;
(aa) attached hereto as Schedule 3.1(aaa) is a true and complete list of
-----------------
all insurance policies maintained by the Corporation that also
specifies the insurer, the amount of the coverage, the type of
insurance, the policy number and any pending claims thereunder (other
than pending health insurance laws which are not listed);
(bbb) Investment Representations and Covenants of the Vendors Regarding
U.S. and British Columbia Securities Law:
(i) Xx. Xxxxxx acknowledges that this Agreement is made by the
Purchaser with the Vendors in reliance upon the representations
and warranties made by the Vendors in this Section 3.1(bbb) and
in Section 3.2(g). Xx. Xxxxxx represents that the LML Shares
issued by the Purchaser to him will be acquired by him for
investment for his own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof,
and that he has no present intention of selling, transferring,
pledging or granting any participation in or otherwise
distributing same in violation of applicable law. Xx. Xxxxxx
further represents that he does not have any contract,
undertaking, agreement or arrangement with any person to sell,
transfer, pledge or grant participation to such person or to any
third person, with respect to any of the LML Shares received by
him or Xx. Xxxxxxxx (collectively, the "Restricted Securities");
-16-
(ii) Xx. Xxxxxx understands and acknowledges that the issuance of
the Restricted Securities pursuant to this Agreement will not
be registered under the Securities Act of 1933 of the United
States of America, as amended (the "1933 Act") or any state
securities laws on the ground that the sale of the LML Shares
as provided for in this Agreement is exempt pursuant to Section
4(2) of the 1933 Act, and that the reliance of the Purchaser on
such exemption is predicated on the representations made by Xx.
Xxxxxx herein;
(iii) Xx. Xxxxxx covenants that in no event will he make any
disposition of any Restricted Securities, except in accordance
with applicable United States federal and state securities laws
and the rules and regulations promulgated thereunder and with
applicable securities laws of British Columbia and he agrees
that the Purchaser may place stop transfer orders with its
transfer agents with respect to such certificates. The
appropriate portion of the legend and the stop transfer orders
will be removed promptly upon delivery to Purchaser of such
satisfactory evidence as reasonably may be required by the
Purchaser that such legend or stop orders are not required to
ensure compliance with the 1933 Act;
(iv) Xx. Xxxxxx represents that he has substantial knowledge and
experience in financial and business matters, that he is
capable of evaluating the merits and risks of his investment in
the Purchaser, that he has the ability to bear the economic
risks of the investment, that at the present time he is able to
afford a complete loss of his investment and that no guarantees
have been or can be made by the Purchaser or any of its
representatives respecting the future value, if any, of the
Restricted Securities or the profitability or success of the
business of the Purchaser and no assurances are or have been
made concerning the dividend or distribution by the Purchaser
of cash to its shareholders;
(v) Xx. Xxxxxx acknowledges and understands that the Restricted
Securities must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from
such registration is available, and, subject to the provisions
of this Section 3.1(bbb), that the Purchaser is under no
obligation to register the Restricted Securities for sale by
Xx. Xxxxxx;
(vi) Xx. Xxxxxx acknowledges that he is familiar with Rule 144
promulgated under the 1933 Act, which permits limited public
resales of securities acquired in a non-public offering,
subject to the satisfaction of certain conditions. Xx. Xxxxxx
understands that before Restricted Securities may be sold under
Rule 144 as currently in effect, the following conditions must
be fulfilled, except as otherwise described below: (a) certain
public information about the Purchaser must be available, (b)
the sale must occur at least one year after the date the
Restricted Securities were acquired by Xx. Xxxxxx, (c) the sale
must be made in a broker's transaction (as defined in section
4(4) of the 0000 Xxx) or directly with a market maker (as
defined in section 3(a)(38) of the Securities Exchange Act of
1934, as amended), (d) the number of Restricted
-17-
Securities sold must not exceed certain volume limitations, and
(e) under certain circumstances, notice on Form 144 must be
filed with the Security and Exchange Commission (the "SEC") and
in certain cases transmitted to the principal exchange on which
such securities are so admitted, prior to such sale;
(vii) Xx. Xxxxxx acknowledges that in the event the applicable
requirements of Rule 144 are not met, registration under the
1933 Act or compliance with another exemption from such
registration will be required for any disposition of Restricted
Securities, Xx. Xxxxxx understands that although Rule 144 is
not exclusive, the SEC has expressed its opinion that persons
proposing to sell restricted securities received in a private
offering other than in a registered offering or pursuant to
Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers
who participate in the transactions do so at their own risk;
(viii) Xx. Xxxxxx agrees to comply in all respects with the provisions
of this Section 3.1 (bbb)(viii). Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities,
unless there is in effect a registration statement under the
1933 Act covering the proposed transfer, Xx. Xxxxxx shall give
written notice to the Purchaser of Xx. Xxxxxx'x intention to
effect such transfer, sale, assignment or pledge. Each such
notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient
detail and, if the Purchaser so requests, shall be accompanied
at Xx. Xxxxxx'x expense either by (a) an opinion of legal
counsel which shall be reasonably satisfactory to the Purchaser
and its legal counsel, which opinion shall be addressed to the
Purchaser, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration
under the 1933 Act, or (b) a "no action" letter from the SEC to
the effect that the transfer of such securities without
registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto;
(ix) Legend on Certificates. Xx. Xxxxxx consents to the placement of
a legend on the certificates for the Restricted Securities in
substantially the following form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("1933 ACT"), AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION
UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAW
UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH
TRANSFER DOES NOT REQUIRE
-18-
REGISTRATION UNDER THE 1933 ACT OR ANY OTHER STATE
SECURITIES LAWS.
In addition to the legend required by this Section
3.1(bbb)(ix), each certificate issued hereunder shall be
stamped or otherwise imprinted with any legend required
pursuant to applicable state corporation and securities laws;
(x) Report of Initial Trade. The Vendors acknowledge that the
Restricted Securities will be subject to a hold period under
the Securities Act (British Columbia) and may not be traded in
British Columbia until July 22, 2001, except as permitted by
the Securities Act (British Columbia). The Vendors further
acknowledge that in lieu of the Purchaser placing a legend on
the certificates representing the Restricted Securities
pursuant to section 132(2) of the Rules under the Securities
Act (British Columbia), each Vendor must file a report with the
British Columbia Securities Commission in the form attached as
Schedule 3.1(bbb)(x) hereto within 10 days of the initial trade
--------------------
of any Restricted Securities.
(xi) Receipt of Information. Xx. Xxxxxx and his attorneys,
accountants and other advisors (A) have received and reviewed
this Agreement (including exhibits), the documents filed by LML
with the SEC (the "Public Documents") which include LML's
financial statements; and (B) have had access to, and an
opportunity to review all documents and other materials
requested of, the Purchaser; (C) have been given an opportunity
to ask any and all questions of, and receive answers from, the
Purchaser concerning the terms and conditions of the offering
and to obtain all information Xx. Xxxxxx or his attorneys,
accountants and other advisors believe necessary or appropriate
to verify the accuracy of the information provided and to
evaluate the suitability of an investment in the LML Shares;
and (D) in evaluating the suitability of an investment in the
LML Shares issued hereunder, have not relied upon any
representations or other information (whether oral or written)
other than as set forth herein or in the Public Documents;
(xii) Brokers or Finders. Xx. Xxxxxx has not incurred, and will not
incur directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated
hereby. Xx. Xxxxxx hereby indemnifies the Purchaser for any
claims, losses, and expenses incurred by the Purchaser as a
result of the representation in this Section 3.1(bbb)(xii)
being untrue;
(xiii) Accredited Investor. Xx. Xxxxxx is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated
under the 1933 Act by virtue of being either (i) an individual
whose net worth, or joint net worth with that person's spouse,
on the date hereof exceeds, and on the Closing Date will
exceed, $1,000,000; or (ii) an individual who had income in
excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000 in
each of those years and has a
-19-
reasonable expectation of reaching the same income level in
the current year. For purposes hereof, "individual income"
means adjusted gross income as reported for federal income tax
purposes, less any income attributable to the spouse or to
property owned by a spouse, increased by the following amounts
(but not including any amounts attributable to a spouse or to
property owned by a spouse): (i) the amount of any interest
income received which is tax-exempt under Section 103 of the
Code, (ii) the amount of losses claimed as a limited partner
in a limited partnership (as reported on Schedule E of Form
----------
1040), (iii) any deduction claimed for depletion under Section
611 et eq. of the Code, and (iv) any amount by which income
from long-term capital gains has been reduced in arriving at
adjusted gross income pursuant to the provisions of Section
1202 of the Code. For purposes hereof, "net worth" means the
excess of total assets at fair market value, including home
and personal property, over total liabilities, including all
home mortgages;
(xiv) No Review. Xx. Xxxxxx acknowledges that no securities
commission or similar regulatory authority has reviewed or
passed on the merits of the LML Shares;
(xv) No Insurance. Xx. Xxxxxx acknowledges that there is no
government or other insurance covering the LML Shares;
(xvi) Risks. Xx. Xxxxxx acknowledges that there are risks associated
with an investment in the LML Shares;
(xvii) Exemption From Prospectus Requirement. Xx. Xxxxxx acknowledges
that the Purchaser has advised them that the Purchaser is
relying on an exemption from the requirements to provide Xx.
Xxxxxx with a prospectus and to distribute the LML Shares
through a person registered to sell securities under the
Securities Act (British Columbia) and, as a consequence of
acquiring the LML Shares pursuant to this exemption, certain
protections, rights and remedies provided by the Securities
Act (British Columbia), including statutory rights of
rescission or damages, will not be available to Xx. Xxxxxx;
(xviii) Resale Restrictions. Xx. Xxxxxx acknowledges that, as provided
for elsewhere in this Agreement, there are restrictions on his
ability to resell the LML Shares and it is his responsibility
to find out what those restrictions are and to comply with
them before selling the LML Shares;
(xix) Not Resident. The Vendors are not resident in British Columbia
and are not acquiring the LML Shares for such residents; and
(ccc) The Vendors acknowledge that the Purchaser has agreed to pay a
finders' fee as disclosed in Section 3.4(e).
3.2 Xx. Xxxxxxxx'x Representations and Warranties
---------------------------------------------
-20-
Xx. Xxxxxxxx represents and warrants to the Purchaser that the
following representations and warranties are true as of the date hereof or will
be true as of the Time of Closing:
(a) Xx. Xxxxxxxx is the beneficial and registered owner of 38.25 Shares
free and clear of all liens, charges, encumbrances and any other
rights of others other than under the Shareholders' Agreement.
(b) Xx. Xxxxxxxx has good and sufficient power, authority and right to
enter into and deliver this Agreement and to transfer the legal and
beneficial title and ownership of the Shares registered in his name to
the Purchaser and the Shares when sold and delivered in accordance
with the terms of this Agreement against payment therefore, will be
duly and validly issued, fully-paid, non-assessable and free and clear
of all liens, charges, encumbrances and any other rights of others
(other than liens, charges, encumbrances or rights created by the
Purchaser and general securities laws restrictions);
(c) there is no contract, option or any other right of another binding
upon or which at any time in the future may become binding upon him to
sell, transfer, assign, pledge, charge, mortgage or in any other way
dispose of or encumber any of the Shares other than pursuant to the
provisions of this Agreement and the Shareholders' Agreement;
(d) to the Knowledge of Xx. Xxxxxxxx, he has not received notice of any
actions, suits or proceedings (whether or not purportedly on behalf of
the Corporation) pending or threatened against or adversely affecting,
or which could adversely affect, the Corporation or any of its assets
before or by any federal, state, municipal or other governmental
court, department, commission, board, bureau, agency or
instrumentality, domestic or foreign, whether or not insured,
including without limitation, any claim, litigation or liabilities in
any way relating to the Fair Credit Reporting Act, any federal or
state equal employment opportunity law or any other law, and which
might involve the possibility of any judgment or liability against the
Corporation, except such actions, suits or proceedings as are
disclosed in Schedule 3.1(qq) attached hereto;
----------------
(e) there are no outstanding or unsatisfied judgements against Xx.
Xxxxxxxx;
(f) Xx. Xxxxxxxx has not filed for bankruptcy protection under United
States bankruptcy laws nor, to the Knowledge of Xx. Xxxxxxxx, does he
know of any circumstances which might reasonably lead any of them to
seek such protection during the period of ninety (90) days after the
Closing;
(g) Investment Representations and Covenants of the Vendors Regarding U.S.
and British Columbia Securities Law:
(i) Xx. Xxxxxxxx acknowledges that this Agreement is made by the
Purchaser with the Vendors in reliance upon the representations
and warranties made by the Vendors in Section 3.1(bbb) and this
Section 3.2(g). Xx. Xxxxxxxx represents that the LML Shares
issued by the Purchaser to Xx. Xxxxxxxx will
-21-
be acquired by Xx. Xxxxxxxx for investment for his own account,
not as nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that he has no present
intention of selling, transferring, pledging or granting any
participation in or otherwise distributing same in violation of
applicable law. Xx. Xxxxxxxx further represents that he does
not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer, pledge or grant
participation to such person or to any third person, with
respect to any of the Restricted Securities;
(ii) Xx. Xxxxxxxx understands and acknowledges that the issuance of
the Restricted Securities pursuant to this Agreement will not
be registered under the 1933 Act or any state securities laws
on the ground that the sale of the LML Shares as provided for
in this Agreement is exempt pursuant to Section 4(2) of the
1933 Act, and that the reliance of the Purchaser on such
exemption is predicated on the representations made by Xx.
Xxxxxxxx herein;
(iii) Xx. Xxxxxxxx covenants that in no event will he make any
disposition of any Restricted Securities, except in accordance
with applicable United States federal and state securities laws
and the rules and regulations promulgated thereunder and with
applicable securities laws of British Columbia and he agrees
that the Purchaser may place stop transfer orders with its
transfer agents with respect to such certificates. The
appropriate portion of the legend and the stop transfer orders
will be removed promptly upon delivery to Purchaser of such
satisfactory evidence as reasonably may be required by the
Purchaser that such legend or stop orders are not required to
ensure compliance with the 1933 Act;
(iv) Xx. Xxxxxxxx represents that he has substantial knowledge and
experience in financial and business matters, that he is
capable of evaluating the merits and risks of his investment in
the Purchaser, that he has the ability to bear the economic
risks of the investment, that at the present time he is able to
afford a complete loss of his investment and that no guarantees
have been or can be made by the Purchaser or any of its
representatives respecting the future value, if any, of the
Restricted Securities or the profitability or success of the
business of the Purchaser and no assurances are or have been
made concerning the dividend or distribution by the Purchaser
of cash to its shareholders;
(v) Xx. Xxxxxxxx acknowledges and understands that the Restricted
Securities must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from
such registration is available, and, subject to the provisions
of this Section 32, that the Purchaser is under no obligation
to register the Restricted Securities for sale by Xx. Xxxxxxxx;
(vi) Xx. Xxxxxxxx acknowledges that he is familiar with Rule 144
promulgated under the 1933 Act, which permits limited public
resales of securities acquired in a non-public offering,
subject to the satisfaction of certain
-22-
conditions. Xx. Xxxxxxxx understands that before Restricted
Securities may be sold under Rule 144 as currently in effect,
the following conditions must be fulfilled, except as otherwise
described below: (a) certain public information about the
Purchaser must be available, (b) the sale must occur at least
one year after the date the Restricted Securities were acquired
by Xx. Xxxxxxxx, (c) the sale must be made in a broker's
transaction (as defined in section 4(4) of the 0000 Xxx) or
directly with a market maker (as defined in section 3(a)(38) of
the Securities Exchange Act of 1934, as amended), (d) the
number of Restricted Securities sold must not exceed certain
volume limitations, and (e) under certain circumstances, notice
on Form 144 must be filed with the SEC and in certain cases
transmitted to the principal exchange on which such securities
are so admitted, prior to such sale;
(vii) Xx. Xxxxxxxx acknowledges that in the event the applicable
requirements of Rule 144 are not met, registration under the
1933 Act or compliance with another exemption from such
registration will be required for any disposition of Restricted
Securities, Xx. Xxxxxxxx understands that although Rule 144 is
not exclusive, the SEC has expressed its opinion that persons
proposing to sell restricted securities received in a private
offering other than in a registered offering or pursuant to
Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers
who participate in the transactions do so at their own risk;
(viii) Xx. Xxxxxxxx agrees to comply in all respects with the
provisions of this Section 32(viii). Prior to any proposed
sale, assignment, transfer or pledge of any Restricted
Securities, unless there is in effect a registration statement
under the 1933 Act covering the proposed transfer, Xx. Xxxxxxxx
shall give written notice to the Purchaser of Xx. Xxxxxxxx'x
intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of
the proposed transfer, sale, assignment or pledge in sufficient
detail and, if the Purchaser so requests, shall be accompanied
at Xx. Xxxxxxxx'x expense either by (a) an opinion of legal
counsel which shall be reasonably satisfactory to the Purchaser
and its legal counsel, which opinion shall be addressed to the
Purchaser, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration
under the 1933 Act, or (b) a "no action" letter from the SEC to
the effect that the transfer of such securities without
registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto;
(ix) Legend on Certificates. Xx. Xxxxxxxx consents to the placement
of a legend on the certificates for Restricted Securities in
substantially the following form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("1933 ACT"), AS AMENDED, OR
-23-
UNDER ANY STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE
SECURITIES LAW UNLESS THE ISSUER RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR
ANY OTHER STATE SECURITIES LAWS.
In addition to the legend required by this Section 32, each
certificate issued hereunder shall be stamped or otherwise
imprinted with any legend required pursuant to applicable state
corporation and securities laws;
(x) Report of Initial Trade. The Vendors acknowledge that the
Restricted Securities will be subject to a hold period under the
Securities Act (British Columbia) and may not be traded in
British Columbia until July 22, 2001, except as permitted by the
Securities Act (British Columbia). The Vendors further
acknowledge that in lieu of the Purchaser placing a legend on
the certificates representing the Restricted Securities pursuant
to section 132(2) of the Rules under the Securities Act (British
Columbia), each Vendor must file a report with the British
Columbia Securities Commission in the form attached as Schedule
--------
3.1(bbb)(x) hereto within 10 days of the initial trade of any
-----------
Restricted Securities.
(xi) Receipt of Information. Xx. Xxxxxxxx and his attorneys,
accountants and other advisors (A) have received and reviewed
this Agreement (including exhibits), the documents filed by LML
with the SEC (the "Public Documents") which include LML's
financial statements; and (B) have had access to, and an
opportunity to review all documents and other materials
requested of, the Purchaser; (C) have been given an opportunity
to ask any and all questions of, and receive answers from, the
Purchaser concerning the terms and conditions of the offering
and to obtain all information Xx. Xxxxxxxx or his attorneys,
accountants or other advisors believe necessary or appropriate
to verify the accuracy of the information provided and to
evaluate the suitability of an investment in the LML Shares; and
(D) in evaluating the suitability of an investment in the LML
Shares issued hereunder, have not relied upon any
representations or other information (whether oral or written)
other than as set forth herein or in the Public Documents;
(xii) Brokers or Finders. Xx. Xxxxxxxx has not incurred, and will not
incur directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated
hereby. Xx. Xxxxxxxx hereby indemnifies the Purchaser for any
claims, losses, and expenses incurred by the Purchaser as a
result of the representation in this Section 32 being untrue;
-24-
(xiii) Accredited Investor. Xx. Xxxxxxxx is an "accredited
investor" as that term is defined in Rule 501of
Regulation D promulgated under the 1933 Act by virtue of
being either (i) an individual whose net worth, or joint
net worth with that person's spouse, on the date hereof
exceeds, and on the Closing Date will exceed,
$1,000,000; or (ii) an individual who had income in
excess of $200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the
current year. For purposes hereof, "individual income"
means adjusted gross income as reported for federal
income tax purposes, less any income attributable to the
spouse or to property owned by a spouse, increased by
the following amounts (but not including any amounts
attributable to a spouse or to property owned by a
spouse): (i) the amount of any interest income received
which is tax-exempt under Section 103 of the Code, (ii)
the amount of losses claimed as a limited partner in a
limited partnership (as reported on Schedule E of
----------
Form 1040), (iii) any deduction claimed for
depletion under Section 611 et eq. of the Code, and (iv)
any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 1202 of the Code.
For purposes hereof, "net worth" means the excess of
total assets at fair market value, including home and
personal property, over total liabilities, including all
home mortgages;
(xiv) No Review. Xx. Xxxxxxxx acknowledges that no securities
commission or similar regulatory authority has reviewed
or passed on the merits of the LML Shares;
(xv) No Insurance. Xx. Xxxxxxxx acknowledges that there is no
government or other insurance covering the LML Shares;
(xvi) Risks. Xx. Xxxxxxxx acknowledges that there are risks
associated with an investment in the LML Shares;
(xvii) Exemption From Prospectus Requirement. Xx. Xxxxxxxx
acknowledges that the Purchaser has advised them that
the Purchaser is relying on an exemption from the
requirements to provide Xx. Xxxxxx with a prospectus and
to distribute the LML Shares through a person registered
to sell securities under the Securities Act (British
Columbia) and, as a consequence of acquiring the LML
Shares pursuant to this exemption, certain protections,
rights and remedies provided by the Securities Act
(British Columbia), including statutory rights of
rescission or damages, will not be available to Xx.
Xxxxxxxx;
(xviii) Resale Restrictions. Xx. Xxxxxxxx acknowledges that, as
provided for elsewhere in this Agreement, there are
restrictions on Xx. Xxxxxxxx'x ability to resell the LML
Shares and it is Xx. Xxxxxxxx'x responsibility to find
out what those restrictions are and to comply with them
before selling the LML Shares;
-25-
(xix) Not Resident. Xx. Xxxxxxxx is not resident in British
Columbia and is not acquiring the LML Shares for such
residents; and
(h) Xx. Xxxxxxxx acknowledges that the Purchaser has agreed to pay a
finders' fee as disclosed in Section 3.4(e).
3.3 Survival of Vendors' Representations, Warranties and Covenants
--------------------------------------------------------------
The representations, warranties and covenants of the Vendors set
forth in this Agreement shall survive the completion of the sale and purchase of
the Shares herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Purchaser in accordance
with the terms thereof for a period of eighteen (18) months from the Closing
Date.
3.4 Purchaser's Representations and Warranties
------------------------------------------
The Purchaser represents and warrants to the Vendors that the
following representations and warranties are true as of the date hereof and will
be true as of the Time of Closing:
(a) the Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the Yukon
Territory of Canada with the corporate power to own its assets
and to carry on its business and has made all necessary filings
under all applicable corporate, securities and taxation laws or
any other laws to which the Purchaser is subject;
(b) the Purchaser is duly authorized and licensed and has all
licenses, franchises, permits and other governmental
authorizations required under all applicable laws, regulations,
ordinances and orders of public authorities to own, lease and
operate its assets and to carry on its business in the places
and in the manner as now conducted; provided that the
subsidiaries of the Purchaser are each duly qualified or
licensed to do business in each jurisdiction in which the nature
of its business requires such qualifications or license; except
such jurisdictions in which the failure to so qualify would not
have a material adverse affect on the financial condition of the
Purchaser or any such subsidiaries;
(c) the Purchaser has good and sufficient power, authority and right
to enter into and deliver this Agreement and to complete the
transactions to be completed by the Purchaser contemplated
hereby;
(d) the Purchaser is acquiring the Shares for its own account and
not with a view to their distribution within the meaning of
Section 2(11) of the 1933 Act;
(e) the Purchaser and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment
in connection with this Agreement other than a finder's fee in
the amount of nine thousand five hundred and ten dollars
($9,510.00) payable to
-26-
Cumberland Capital Corporation of Fort Worth, Texas and nine
thousand five hundred and ten dollars ($9,510.00) payable to Xx.
Xxxxxxx Xxxxxxx of Omaha, Nebraska payable, as determined by the
Purchaser in its sole discretion, in cash or common shares of
the capital stock of LML Payment Systems Inc. to be issued at an
issue price per common share equal to the average sale price for
LML Shares as reported by NASDAQ on the first Business Day
previous to the Closing Date or if no such price is available,
the average of the bid and ask price for LML Shares on such
first Business Day previous to the Closing Date and will
indemnify and hold the Vendors harmless from any such payment
alleged to be due by or through Purchaser as a result of the
action of Purchaser or its officers or agents;
(f) neither the entering into nor the delivery of this Agreement nor
the completion of the transactions contemplated hereby by the
Purchaser will result in the violation of:
(i) any of the provisions of the constating documents or
bylaws of the Purchaser;
(ii) any agreement or other instrument to which the
Corporation is a party or by which the Corporation is
bound which will not be terminated as of the Closing
Date;
(iii) any applicable law, rule or regulation;
(g) upon issuance hereunder, the LML Shares issuable upon the
Closing to the Vendors shall have been validly issued and shall
be outstanding as fully paid and non-assessable;
(h) there are no restrictions or prohibitions contained in
applicable law, rules or regulations against the Purchaser
complying with the terms and conditions of this Agreement; and
(i) when duly executed and delivered by the parties hereto in
accordance with the provisions of this Agreement, this Agreement
shall be a legal, valid and binding obligation of the Purchaser.
3.5 Survival of Purchaser's Representations, Warranties and
-------------------------------------------------------
Covenants
---------
The covenants of the Purchaser set forth in this Agreement shall
survive the completion of the sale and purchase of the Shares herein provided
for and, notwithstanding such completion, shall continue in full force and
effect for the benefit of the Vendors in accordance with the terms thereof for a
period of two (2) years from the Closing Date.
-27-
ARTICLE 4 - CLOSING
-------------------
4.1 Closing
-------
The sale and purchase of the Shares shall be completed at the
Time of Closing at the offices of Purchaser's Counsel, 0000 Xxxxxxxx Xxxxx, 0000
Xxxx Xxxxxx, Xxxxxx, Xxxxx.
4.2 Deliveries by the Vendors to the Purchaser
------------------------------------------
(a) At the Closing, the Vendors shall deliver or cause to be
delivered to the Purchaser the following:
(i) certificates of each of the Vendors as to the accuracy
of their respective representations and warranties
hereunder at Closing;
(ii) certificate of the secretary of the Corporation
certifying a copy of the resolution of the directors of
the Corporation authorizing all things necessary that
are contemplated by the transaction herein, including,
without limitation, the transfer of all shares in the
capital of the Corporation to the Purchaser on the
Closing Date and issuance of a share certificate to the
Purchaser on the Closing Date representing all shares in
the Corporation;
(iii) Certificate of Existence and Certificate of Good
Standing of the Corporation;
(iv) Certificate of Foreign Qualification in the State of
Louisiana of the Corporation;
(v) a certified copy of the Articles of Incorporation and
Bylaws of the Corporation certified by the Secretary of
the Corporation;
(vi) incumbency certificate certifying as to the authority of
the signatory of the Corporation to execute certificates
on behalf of the Corporation;
(vii) certificates evidencing the Shares being purchased by
the Purchaser, which shall be delivered free and clear
of all liens other than liens created by the Purchaser,
registered in the name of the Purchaser;
(viii) instruments of transfer with respect to the certificates
described in Section 4.2(a)(vii)
(ix) opinion of Vendor Counsel, substantially in the form
attached hereto as Schedule 4.2(a)(ix);
-------------------
(x) Employment Agreement executed by Xx. Xxxxxx in the form
attached hereto as Schedule 4.2(a)(x);
------------------
-28-
(xi) Non-Competition and Non-Solicitation Agreements executed
by Xx. Xxxxxx, Xx. Xxxxxxxx and Xxx. Xxxxxx in the forms
attached hereto as Schedule 4.2(a)(xi);
-------------------
(xii) resignations of certain of the officers and directors of
the Corporation requested by the Purchaser;
(xiii) Releases of the Vendors and Xxx. Xxxxxx in the forms
attached as Schedule 4.2(a)(xiii);
---------------------
(xiv) a true, accurate and complete list (including name of
contact, address, telephone and facsimile number, and
email address, if available, and percentage of total
attributable thereto) of each customer of the
Corporation (i) who has engaged in any purchases or
sales with the Corporation during the 12 month period
prior to the Closing or (ii) who the Corporation would
reasonably expect, but for the transactions contemplated
by this Agreement, to engage in any purchases or sales
with the Corporation during the 12 month period after
the Closing; and
(xv) a true and accurate copy of the Assumed Name
Certificates filed with the Texas Secretary of State and
Clerk of Dallas County, Texas for the Corporation.
4.3 Deliveries by the Purchaser to the Vendors
------------------------------------------
(a) At the Closing, the Purchaser shall deliver or cause to be
delivered to the Vendors the following:
(i) certified copy of the constating documents of the
Purchaser;
(ii) certificate of status of the Purchaser;
(iii) certificate of the President and the Secretary of the
Purchaser certifying copies of the Board of Directors'
resolutions and/or meeting minutes, evidencing
authorization of the transaction contemplated herein;
(iv) incumbency certificate certifying as to the authority of
the signatory of the Purchaser to execute this
Agreement;
(v) the portions of the Purchase Price payable by the
Purchaser by delivery of readily available funds and by
the issuance of LML Shares free and clear of all liens
(other than transfer restrictions disclosed herein)to
each of the Vendors in accordance with Section 2.1(b);
(vi) opinion of Purchaser Counsel in the Yukon Territory,
substantially in the form attached hereto as Schedule
--------
4.3(a)(vi); and
----------
-29-
(vii) a check of the Purchaser made payable to Xx. Xxxxxx in
the principal sum of seven thousand four hundred twenty
eight and 72/100 dollars ($7,428.72) being the amount of
the principal and accrued interest to the Closing of the
amount of Xx. Xxxxxx'x loan to the Corporation.
ARTICLE 5 - COVENANTS
---------------------
5.1 Taxes
-----
The Purchaser does not assume and shall not be liable for any
taxes under the Code of the United States of America or any other taxes
whatsoever which may be or become payable by the Vendors including, without
limitation, any taxes resulting from or arising as a consequence of the sale by
the Vendors to the Purchaser of the Shares herein contemplated, and the Vendors
shall severally indemnify and save harmless the Purchaser from and against all
such taxes.
5.2 Price Protection
----------------
The Purchaser covenants and agrees that if, at any time during
the first ninety (90) days that the LML Shares issued hereunder are, by
effluxion of time or otherwise not subject to any resale provisions under any
applicable securities legislation, any of the Vendors sells any such LML Shares
through the facilities of NASDAQ at a price per LML Share that is less than the
LML Share Closing Value, then, upon such Vendor supplying proof to the Purchaser
of the relevant circumstances of such sale in form acceptable to the Purchaser,
then the Purchaser shall issue additional LML Shares to such Vendor equal to the
lessor of (A) the maximum number of shares that may be issued by the Purchaser
without obtaining shareholder approval under the rules and regulations
applicable to issues listed on the NASDAQ small-cap market and (B) remainder
obtained by subtracting the number of LML Shares sold from the product of (i)
multiplying the number of LML Shares sold by (ii) the fraction in which the
numerator is equal to the LML Share Closing Value and the denominator is equal
to the price per LML Share obtained by such Vendor in such sale.
5.3 Employment of Xxx. Xxxxxx and Others
------------------------------------
With the exception of Mr. Jahnal who will be employed pursuant
to the Employment Agreement, the Purchaser will cause the Corporation to
continue to employ all the employees of the Corporation at the time of Closing
until the close of business on the thirtieth (30th) day after the Closing with
the same terms and conditions as existed immediately before the Closing and on
such thirtieth (30th) day, their employment by the Corporation will be
terminated; provided that Xxx. Xxxxxx, Xx. Xxxxxxx Xxxxxx and Xx. Xxx Xxxxxx
will continue to be employed by the Corporation for three (3) months after the
Closing on the same terms and conditions as they were employed by the
Corporation immediately prior to Closing. From and after the expiration of such
three (3) month period, neither the Corporation nor Purchaser shall have any
obligation to employ any of Xxx. Xxxxxx, Xx. Xxxxxxx Xxxxxx or Xx. Xxx Xxxxxx,
but the Corporation or Purchaser may employ any of them on terms mutually agreed
to on an "at will" basis, unless the Corporation or Purchaser, as the case may
be, on the one hand, and Xxx. Xxxxxx, Xx. Xxxxxxx Xxxxxx or Xxx. Xxx Xxxxxx, as
the case may be, on the other hand, enter into a separate written employment
agreement. The Corporation and the Purchaser will do all things necessary or
desirable in order that there be no
-30-
period after the Closing during which any member of the Jahnel family employed
by the Corporation will have a loss of medical insurance coverage during such
employment due to a "wait period" in respect of the health insurance replacing
that formerly carried by the Corporation. If the Corporation or the Purchaser
and any of Xxx. Xxxxxx, Xx. Xxxxxxx Xxxxxx or Xx. Xxx Xxxxxx cannot mutually
agree upon terms for the continuance of their respective employments neither the
Corporation nor the Purchaser will owe an obligation for severance pay or any
other liability to such of them as do not, as a result of such failure to agree,
continue in employment by the Corporation or the Purchaser. During any period of
"at will" employment, either the employer or employee may terminate the
employment relationship at any time, for any reason or no reason, and without
any prior notice.
5.4 Maintenance of Errors and Omissions Insurance
---------------------------------------------
The Purchase shall maintain the existing errors and omissions
insurance policy of the Corporation after the Closing unless materially
equivalent coverage can be obtained on a basis acceptable to the Vendors from
the insurers of the Purchaser or any of its subsidiaries.
5.5 Xx. Xxxxxx'x Personal Guarantee of the Corporation's Line of
------------------------------------------------------------
Credit
------
Within five (5) business days after the Closing, the Purchaser
will either obtain the termination of Xx. Xxxxxx'x personal guarantee of the
Corporation's line of credit with its bankers or pay all outstanding principal
and interest in respect of such line of credit and terminate such line of
credit.
ARTICLE 6 - INDEMNIFICATION
---------------------------
6.1 By the Vendors
--------------
(a) Subject to Section 6.4, Xx. Xxxxxx shall severally indemnify,
defend and hold harmless the Purchaser, and its parents, subsidiaries, officers,
directors, employees, consultants, attorneys, insurers, affiliates and
controlling persons (collectively, and including the Corporation and its
subsidiaries after the Time of Closing, the "Purchaser Indemnified Parties")
from and against any and all loss, damage, expense (including, without
limitation, court costs, interest, penalties, reasonable legal fees and
expenses), suit, action, claim, liability or obligation (collectively, "Losses")
related to, caused by or arising from any misrepresentation, breach of warranty
or failure to fulfill any covenant or agreement of Xx. Xxxxxx contained in this
Agreement or any agreement ancillary hereto and any liability for income taxes,
sales taxes and franchise taxes of the Corporation accrued to the Time of
Closing, (an "Indemnification Claim"); provided, however, that Xx. Xxxxxx shall
not have any obligation to indemnify the Purchaser from and against any Losses
until the Purchaser or other Purchaser Indemnified Parties has collectively
suffered Losses by reason of all such breaches (or alleged breaches) in excess
of a twenty thousand dollars ($20,000) aggregate threshold (in which case Xx.
Xxxxxx will be obligated to indemnify the Purchaser or any other Purchaser
Indemnified Party from and against only such Losses from the first dollar of
such Losses resulting from, arising out of, or relating to an Indemnification
Claim against Xx. Xxxxxx). In computing the extent of any Loss under this
Agreement, the liability of Xx. Xxxxxx for an Indemnification Claim shall be
taken into account, if appropriate.
-31-
(b) Subject to Section 6.4, Xx. Xxxxxxxx shall severally indemnify
and hold harmless the Purchaser Indemnified Parties from and against any and all
Losses related to, caused by or arising from any misrepresentation, breach of
warranty or failure to fulfill any covenant or agreement of Xx. Xxxxxxxx
contained in this Agreement or any agreement ancillary hereto.
6.2 By Purchaser
------------
Subject to Section 6.4, the Purchaser shall indemnify and hold
harmless the Vendors from and against any and all Losses related to, caused by
or arising from any misrepresentation, breach of warranty or failure to fulfill
any covenant or agreement of the Purchaser contained in this Agreement;
provided, however, that the Purchaser shall not have any obligation to indemnify
the Vendors from and against any Losses until the Vendors have collectively
suffered Losses by reason of all such breaches (or alleged breaches) in excess
of a ($20,000) twenty thousand dollars aggregate threshold (in which case the
Purchaser will be obligated to indemnify the Vendors from the first dollar of
such Losses resulting from, arising out of, or relating to an Indemnification
Claim against the Vendors. In computing the extent of any Loss under this
Agreement, the liability of the Purchaser for the Indemnification Claim shall be
taken into account, if appropriate.
6.3 Indemnification Procedure
-------------------------
(a) Any party seeking indemnification must have a good faith belief
that it is entitled to such indemnification and shall give prompt (and, in any
event, within thirty (30) days after receipt of actual notice of the claim)
written notice (in accordance with the provisions of Section 8.10 hereof) to the
indemnifying party of the facts and circumstances giving rise to the claim, and
the amount of the claim for which it is seeking indemnification. The
indemnifying party shall be relieved of the duty to indemnify for any damages
which are incurred as a result of the failure to give such notice within the
time required by the preceding sentence, however, except for such reductions,
the failure to provide such notice within the time required by the preceding
sentence, without the incurrence of damages as a result, will not reduce such
indemnification obligation. Such notice shall contain a description in
reasonable detail of the basis for such claim for indemnification. With respect
to any claim for which indemnification is sought, the party seeking
indemnification has an obligation to exercise its best efforts to mitigate the
amount of any such indemnification claim.
(b) Any indemnifying party will have the right to defend the
indemnified party against any third party claim with counsel of the indemnifying
party's choice reasonably satisfactory to the indemnified party so long as (i)
the indemnifying party notifies the indemnified party in writing within fifteen
(15) days after the indemnified party has given notice of the third party claim
that the indemnifying party will, subject to the limitation of this Agreement,
indemnify the indemnified party from and against such claims, and (ii) the
indemnifying party conducts the defense of such third party claim actively and
diligently. The indemnified party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the third party claim. In
addition, if a legitimate conflict of interests exists such that one firm of
attorneys cannot ethically represent both the indemnified party and the
indemnifying party or the counsel retained by the indemnifying party otherwise
advises the indemnifying party that separate counsel should be obtained, then
the indemnified party may select its own counsel with the reasonable fees and
expenses thereof to be paid by the indemnifying party.
-32-
(c) The indemnified party will not consent to the entry of any
judgment or enter into any settlement with respect to the third party claim
without the prior written consent of the indemnifying party (not to be delayed,
conditioned or withheld unreasonably), and the indemnifying party will not
consent to the entry of any judgment or enter into any settlement with respect
to the third party claim without the prior written consent of the indemnified
party (not to be delayed, conditioned or withheld unreasonably).
6.4 Maximum Amount of Indemnification Obligations
---------------------------------------------
Notwithstanding anything in this Agreement to the contrary,
the aggregate potential liability for a breach of this Agreement, or otherwise
arising from the transaction contemplated hereby, including, but not limited to,
any liability arising under Article 6 of this Agreement or any liability arising
for breach of contract, indemnity claims, tort claims or otherwise, is hereby
expressly limited in respect of Xx. Xxxxxx to two hundred and seventy-five
thousand dollars ($275,000) and in respect of Xx. Xxxxxxxx to two hundred and
twenty-five thousand dollars ($225,000) and in respect of the Purchaser to five
hundred thousand dollars ($500,000).
ARTICLE 7 - CONDITIONS
----------------------
7.1 Conditions for the Benefit of the Purchaser
-------------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the
Shares is subject to the following conditions which are for the exclusive
benefit of the Purchaser to be performed or complied with at or prior to the
Time of Closing:
(i) the representations and warranties of the Vendors set forth in
Section 3.1, 3.2 shall be correct at the Time of Closing with
the same force and effect as if made at and as of such time;
(ii) the Vendors shall have performed or complied with all the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Vendors at or prior to the Time of Closing;
and
(iii) the Purchaser shall be furnished with such certificates,
affidavits or statutory declarations of the Corporation and of
the Vendors or of officers of the Corporation and of the Vendors
as the Purchaser or the Purchaser's Counsel may deem reasonably
necessary in order to establish that the terms, covenants and
conditions contained in this Agreement have been performed or
complied with by the Vendors, the Corporation at or prior to the
Time of Closing and that the representations and warranties of
the Vendors herein are true and correct at the Time of Closing;
and
(iv) the Non-Competition and Non-Solicitation Agreements with Xx.
Xxxxxx, Xxx. Xxxxxx and Xx. Xxxxxxxx are executed and delivered.
(b) In case any term or covenant of the Vendors or condition to be
performed or complied with for the benefit of the Purchaser at or prior to the
Time of Closing shall not have been performed
-33-
or complied with at or prior to the Time of Closing, the Purchaser may, without
limiting any other right that the Purchaser may have, at its sole option,
either:
(i) rescind this Agreement by notice to the Vendors, and in such
event the Purchaser shall be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part.
7.2 Conditions for the Benefit of the Vendors
-----------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the
Shares is subject to the following conditions which are for the exclusive
benefit of the Vendors to be performed or complied with at or prior to the Time
of Closing:
(i) the representations and warranties of the Purchaser set forth in
Section 3.4 shall be true and correct at the Time of Closing
with the same force and effect as if made at and as of such
time;
(ii) the Purchaser shall have performed or complied with all of the
terms, covenants and conditions of this Agreement to be
performed or complied with by the Purchaser at or prior to the
Time of Closing; and
(iii) the Vendors shall be furnished with such certificates,
affidavits or statutory declarations of the Purchaser or of
officers of the Purchaser as the Vendors or the Vendors' counsel
may reasonably think necessary in order to establish that the
terms, covenants and conditions contained in this Agreement to
have been performed or complied with by the Purchaser at or
prior to the Time of Closing have been performed and complied
with and that the representations and warranties of the
Purchaser herein given are true and correct at the Time of
Closing; and
(iv) the Employment Agreement with Xx. Xxxxxx is executed and
delivered.
(b) In case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Vendors at or prior to the
Time of Closing shall not have been performed or complied with at or prior to
the Time of Closing, the Vendors may, without limiting any other right that the
Vendors may have, at its sole option, either:
(i) rescind this Agreement by notice to the Purchaser, and in such
event the Vendors shall be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part.
-34-
ARTICLE 8 - GENERAL
-------------------
8.1 Further Assurances
------------------
Each of the Vendors and the Purchaser shall from time to time execute
and deliver all such further documents and instruments and do all acts and
things as the other party may, either before or after the Closing Date,
reasonably require to effectively carry out or better evidence or perfect the
full intent and meaning of this Agreement.
8.2 Time of the Essence
-------------------
Time shall be of the essence of this Agreement.
8.3 Commissions
-----------
The Vendors shall indemnify and save harmless the Purchaser from and
against any claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any person in respect of the sale and purchase of
the Shares to the extent that such person purports to act or have acted for the
Vendors in connection with the sale of the Shares. The Purchaser shall pay the
finder's fee contemplated in Section 34
8.4 Legal and Accounting Fees
-------------------------
Each of the parties hereto shall pay their respective legal and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses whatsoever and
howsoever incurred; provided that the Corporation shall pay up to five thousand
dollars ($5,000) to the legal costs of the Vendors upon proof of the Vendors
having incurred at least that amount in legal fees and disbursements in respect
of the transaction contemplated in this Agreement and further provided that the
audit fees incurred in connection with the preparation of the Financial
Statements are an expense of the Corporation.
8.5 Public Announcements
--------------------
No public announcement or press release concerning the sale and
purchase of the Shares shall be made by the Vendors without the prior consent
and joint approval of the Vendors and the Purchaser. The Purchaser will publish
a press release concerning the sale and purchase of the Shares as required by
law. The Purchaser will allow the Vendors to review such press release and will
consider corrections thereto suggested by the Vendors but will not be bound to
publish in such press release anything except as is finally determined in the
sole discretion of the Purchaser.
8.6 Benefit of the Agreement
------------------------
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns of
the parties hereto.
-35-
8.7 Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and cancels and supersedes any
prior understandings and agreements between the parties hereto with respect
thereto. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements, express, implied or statutory, between
the parties other than as expressly set forth in this Agreement.
8.8 Amendments and Waiver
---------------------
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by both of the parties
hereto and no waiver of any breach of any term or provision of this Agreement
shall be effective or binding unless made in writing and signed by the party
purporting to give the same and, unless otherwise provided, shall be limited to
the specific breach waived.
8.9 Assignment
----------
This Agreement may not be assigned by the Vendors without the written
consent of the Purchaser or by the Purchaser without the written consent of the
Vendors.
8.10 Notices
-------
Any demand, notice or other communication to be given in connection
with this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
To the Vendors:
Xxxxx Xxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
X.X.X.
Fax No.: (000) 000-0000
Xx Xxxxxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
X.X.X.
Fax No.: (000) 000-0000
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with a copy to:
Gardere & Xxxxx, L.L.P
0000 Xxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
X.X.X.
Attention: Xxxxxxx X. Xxxxxxxx
---------
Fax No.: (000) 000-0000
To the Purchaser:
LML Payment Systems Inc.
Suite 600
0000 Xxxxx Xxxx
Xxxxxx, Xxxxx 00000
X.X.X.
Attention: President
---------
Fax No.: (000) 000-0000
With a copy to:
LML Payment Systems, Inc.
0000-0000 X. Xxxxxx Xx.
Xxxxxxxxx, XX
Xxxxxx X0X 0X0
Attention: Secretary
---------
FaxNo. (000)-000-0000
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery shall be conclusively deemed
to have been given on the day of actual delivery thereof and, if given by
registered mail, on the seventh Business Day following the deposit thereof in
the mail and, if given by electronic communication, on the day of transmittal
thereof if given during the normal business hours of the recipient and on the
Business Day during which such normal business hours next occur if not given
during such hours on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system which might affect the delivery of mail, any such demand, notice
or other communication shall not be mailed but shall be given by personal
delivery or by electronic communication.
8.11 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas and the laws of the United States of America
applicable therein.
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8.12 Forum Selection
---------------
For the purpose of all legal proceedings this Agreement shall be
deemed to have been performed in the State of Texas and the courts of the State
of Texas shall have jurisdiction to entertain any action arising under this
Agreement. The Vendors and the Purchaser each hereby attorns to the
jurisdiction of the courts of the State of Texas.
8.13 Severability
------------
The parties agree that if one or more provisions contained in this
Agreement shall be deemed or held to be invalid, illegal or unenforceable in any
respect under any applicable law, this Agreement shall be construed with the
invalid, illegal and unenforceable provision deleted, and the validity, legality
and unenforceability of the remaining provisions contained herein shall not be
affected or impaired thereby.
8.14 Counterparts and Facsimile Signatures
-------------------------------------
This Agreement may be executed in any number of counterparts with the
same effect as if the parties had all signed the same document. All
counterparts shall be construed together and shall constitute one instrument.
In making proof of this Agreement, it shall not be necessary to account for more
than one counterpart executed by the party against whom enforcement is sought.
Facsimile signatures are binding on the party providing the facsimile signature.
8.15 Construction
------------
The parties acknowledge that each party and their counsel have had the
opportunity to review and negotiate the terms and conditions of this Agreement,
and that the normal rule of construction to the effect that any ambiguities are
to be construed against the drafting party shall not be employed in the
interpretation of this Agreement or any exhibits or amendments hereto.
IN WITNESS WHEREOF the parties have executed this Agreement on the
date first written above.
* * * * * *
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LML PAYMENT SYSTEMS INC.
Per: ________________________________
Xxxxxxx X. Xxxxxx, President
SIGNED, SEALED AND DELIVERED in the )
presence of: )
)
----------------------------------------- ) --------------------------------
Witness ) XXXXX XXXXXX
)
----------------------------------------- ) --------------------------------
Witness ) XX XXXXXXXX
ACKNOWLEDGMENT AND CONSENT OF VENDORS' SPOUSES
----------------------------------------------
Each Vendor's spouse joins in the execution of this Agreement to evidence
his/her knowledge of its existence and his/her consent to its provisions, and
that s/he desires to bind his/her interest, if any, in the Shares to the
performance of this Agreement. Accordingly, Vendor's spouse agrees that the
covenants made in this Agreement will be, and hereby are, accepted as binding on
her/him individually and upon all persons ever to claim under her/him. However,
the foregoing is not intended to, and will not be construed to, confer or create
any interests in the Shares in any Vendor's spouse.
)
_________________________________________ ) ________________________________
) XXXX XXXXXX
Witness ) (spouse of Xxxxx Xxxxxx)
)
)
_________________________________________ ) ________________________________
Witness ) __________ XXXXXXXX
(spouse of Xx Xxxxxxxx)
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TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1 - INTERPRETATION
--------------------------
1.1 Definitions........................................................... 2
-----------
1.2 Headings.............................................................. 4
--------
1.3 Extended Meanings..................................................... 4
-----------------
1.4 Accounting Principles................................................. 4
---------------------
1.5 Currency.............................................................. 4
--------
1.6 Schedules............................................................. 5
---------
ARTICLE 2 - PURCHASE AND SALE
-----------------------------
2.1 Purchase and Sale and Purchase Price.................................. 5
------------------------------------
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
3.1 Xx. Xxxxxx'x Representations and Warranties........................... 6
-------------------------------------------
3.2 Xx. Xxxxxxxx'x Representations and Warranties......................... 20
---------------------------------------------
3.3 Survival of Vendors' Representations, Warranties and Covenants........ 26
--------------------------------------------------------------
3.4 Purchaser's Representations and Warranties............................ 26
------------------------------------------
3.5 Survival of Purchaser's Representations, Warranties and Covenants..... 27
-----------------------------------------------------------------
ARTICLE 4 - CLOSING
-------------------
4.1 Closing............................................................... 28
-------
4.2 Deliveries by the Vendors to the Purchaser............................ 28
------------------------------------------
4.3 Deliveries by the Purchaser to the Vendors............................ 29
------------------------------------------
ARTICLE 5 - COVENANTS
---------------------
5.1 Taxes................................................................. 30
-----
5.2 Price Protection...................................................... 30
----------------
5.3 Employment of Xxx. Xxxxxx and Others.................................. 30
------------------------------------
5.4 Maintenance of Errors and Omissions Insurance......................... 31
---------------------------------------------
5.5 Xx. Xxxxxx'x Personal Guarantee of the Corporation's Line of Credit... 31
-------------------------------------------------------------------
ARTICLE 6 - INDEMNIFICATION
---------------------------
6.1 By the Vendors........................................................ 31
--------------
6.2 By Purchaser.......................................................... 32
------------
6.3 Indemnification Procedure............................................. 32
-------------------------
6.4 Maximum Amount of Indemnification Obligations......................... 33
---------------------------------------------
ARTICLE 7 - CONDITIONS
----------------------
7.1 Conditions for the Benefit of the Purchaser........................... 33
-------------------------------------------
7.2 Conditions for the Benefit of the Vendors............................. 34
-----------------------------------------
ARTICLE 8 - GENERAL
-------------------
8.1 Further Assurances.................................................... 35
------------------
8.2 Time of the Essence................................................... 35
-------------------
8.3 Commissions........................................................... 35
-----------
8.4 Legal and Accounting Fees............................................. 35
-------------------------
8.5 Public Announcements.................................................. 35
--------------------
8.6 Benefit of the Agreement.............................................. 35
------------------------
8.7 Entire Agreement...................................................... 36
----------------
8.8 Amendments and Waiver................................................. 36
---------------------
8.9 Assignment............................................................ 36
----------
8.10 Notices............................................................... 36
-------
8.11 Governing Law......................................................... 37
-------------
8.12 Forum Selection....................................................... 38
---------------
8.13 Severability.......................................................... 38
------------
8.14 Counterparts and Facsimile Signatures................................. 38
-------------------------------------
8.15 Construction.......................................................... 38
------------
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