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AGREEMENT FOR SALE
AND PURCHASE OF SHARES
Parties
X X XXXXXX
XXXXXXX INVESTMENTS (N.Z.) LIMITED
XXXXXXX INVESTMENTS LIMITED
Relating to Microchannel Limited
LOWNDES JORDAN
BARRISTERS & SOLICITORS
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Agreement for Sale and Purchase of Shares
AGREEMENT dated 1998
PARTIES
1. XXXX XXXX XXXXXX of Auckland, Company Director (Vendor)
2. XXXXXXX INVESTMENTS (N.Z.) LIMITED at Auckland, (Purchaser).
3. XXXXXXX INVESTMENTS LIMITED a company listed on the Toronto Stock
Exchange (BKI).
INTRODUCTION
A. The Vendor is the holder of the Shares together with all rights attaching
to the Shares.
B. The Vendor has agreed to sell to the Purchaser and the Purchaser has
agreed to purchase from the Vendor all of the Shares for the
Consideration and upon the terms and conditions contained in this
Agreement.
TERMS
1. Interpretation
1.1 Defined Terms: In this Agreement the following terms shall have the
meanings specified:
Accounting Date 31 March 1999.
Associated Person the meaning given in section 0D7(1) of
the Income Tax Xxx 0000.
Business Day a day (other than a Saturday or Sunday)
on which registered banks are open for
business in Auckland.
Business Records all books of account, Financial
Statements, records, files, data,
databases, certificates or other
evidence of title to assets and
information howsoever recorded or stored
relating to or required for the business
of the Company or pertaining to its
affairs.
Cashflow the meaning ascribed to that term in the
Escrow Agreement.
Charge includes option, right to acquire, lien,
pledge, mortgagee, assignment, charge,
security interest,
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bailment, or encumbrance or adverse
interest of any nature whether legal or
equitable and no matter how arising but
excluding claims of suppliers of goods
subject to retention of title provisions
supplied in the normal course of
business.
Company Microchannel Limited, a company
incorporated under the Companies Xxx
0000 under No.AK/676642 having its
registered office at Auckland and having
its capital divided into 1,000 ordinary
shares and a total paid up capital of
$100,000.
Completion completion by the parties of the sale
and purchase of the Shares as provided
in clause 5.
Completion Date the actual date of Completion being the
later of 7 days after the date of
calculation of the Net Asset Value
pursuant to clause 2.3 or 7 days after
the date the conditions referred to in
clause 9 have been satisfied or waived
by the party entitled to waive the same
(whichever is the later) or such other
date as may be agreed upon by the
parties.
Consideration the sum calculated by applying a
multiple of 4 to the actual audited NPAT
of the Company for the Year ending on
the Accounting Date calculated on the
basis that an allowance is made for
income tax at the rate of 33% subject to
adjustment as provided in clauses 2.4
and 3.4.
Constitution the Constitution of the Company.
Costs includes any and all costs (on a
solicitor and own client basis),
expenses, damages, penalties, interest,
compensation, and awards.
Disclosure Letter the letter from the Vendor to the
Purchaser disclosing information
pursuant to clause 8 and Schedule 2.
Earn Out Period the Years ending on 31 March 2000
and 2001.
Earn Out Sum the Consideration less the Net Asset
Value.
Escrow the Escrow Agreement in the form annexed
Agreement as Annexure 3 to be entered into by BKI,
the Vendor and the Trustee.
Exchange Rate the average between the WestpacTrust buy
and sell rates for the exchange of $NZ
to $CAD, at the close of business on the
date specified in this Agreement or
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where a date is not specified, on the
last Business Day prior to the date of
the relevant transaction.
Financial each and every part of the financial
Statements statements of the Company for the Year
which ended on the Last Accounting Date.
GAAP Generally accepted accounting principles
adopted in New Zealand.
GST Goods and Services Tax levied under the
GST Act.
GST Act Goods and Services Tax Xxx 0000.
Intellectual all intellectual property necessary for
Property the Company to carry out the projects
described in the Company budgets to be
prepared pursuant to clause 6.1 and
includes all confidential information,
trade secrets, drawings, designs,
techniques, programmes, processes,
logos, copyrights, trade or service
marks, patents, registered designs, and
other information and rights capable of
being protected under New Zealand or
other laws relating to intellectual
property no matter how recorded or
stored and any applications for same.
Interest Rate the cost of funds rate for the BKI
Group.
Last Accounting 31 March 1998
Date
Net Asset Value the net tangible asset value of the
Company determined in accordance with
clause 2.4.
NPAT the net profit after income tax
calculated in accordance with GAAP less:
(a) the cost of any funds advanced to
the Company by the Purchaser
calculated at the WestpacTrust
Indicator Lending Rate plus a
standard commercial overdraft
margin; and
(b) any management fees charged to
the Company by the Purchaser in
accordance with clause 6.2.
Penalty Rate the WestpacTrust Indicator Lending Rate
plus 8%.
Premises the premises at 000 Xxxxxxx Xxxxxx,
Xxxxxxxx.
Proceedings includes proceedings, claims, demands,
actions, conferences, mediations,
conciliations, compromises,
arbitrations, hearings or appeals
arising out of,
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preliminary to or in connection with any
dispute or alleged dispute.
Related company a related company as defined sections 5
to 8 of the Companies Xxx 0000.
Shares all of the existing issued shares in the
capital of the Company being acquired by
the Purchaser pursuant to this
Agreement.
Statutory Books the Company's Constitution, and its
Certificate of Incorporation, Directors'
and Members' minute book, Register of
Members, Register of Directors and
Secretaries, Interests Register,
Register of Charges and Seal Register
(if any).
Strike Price in respect of the BKI shares to be
issued pursuant to this Agreement is the
last sale price for BKI shares on the
Toronto Stock Exchange on the relevant
dates specified in clause 3.
Subsidiary a subsidiary as defined in sections 5 to
8 of the Companies Xxx 0000.
Taxation all forms of taxation (including without
limitation capital gains tax, income
tax, surtax, estate duty, stamp duty,
rates, (GST, PAYE, withholding tax,
provisional tax, duties, customs and
other import or export duties and all
other statutory, fiscal, central or
local government or municipal
impositions, duties and levies) and all
re-assessments, penalties, Charges,
Costs and interest relating to such
taxation for non-compliance or
otherwise.
Trustee Montreal Trust or such other trustee
approved by the Toronto Stock Exchange
to hold BKI shares pursuant to the
Escrow Agreement.
Warranties the representations, warranties, and
undertakings of the Vendor set out in
Schedule 1.
Year a financial year from 1 April to 31
March in the next year.
1.2 General Interpretation: In the interpretation of this Agreement, unless
the context otherwise requires:
1.2.1 References to the parties include their respective executors,
administrators, successors and permitted assigns;
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1.2.2 Words in the singular shall include the plural and vice versa;
1.2.3 Words importing one gender shall include the other genders;
1.2.4 Any obligation not to do anything includes an obligation not to
suffer, permit or cause that thing to be done;
1.2.5 Headings have been inserted for convenience only and shall not
affect the construction of this Agreement;
1.2.6 Reference to a statute includes all statutes amending,
consolidating or replacing the statute referred to and includes
all subsidiary or delegated legislation or exercises of authority
under such statute or legislation;
1.2.7 References to clauses, schedules and annexures shall be construed
as references to cite same in this Agreement;
1.2.8 References to money are references to New Zealand currency.
1.3 Joint and Several: All covenants expressed or implied shall bind all
persons executing this Agreement and any two or greater number of them
jointly and each of them severally.
1.4 Time of the Essence: Time shall be of the essence of this Agreement both
as to dates and periods.
1.5 Precedence of Documents: If there is any conflict between the provisions
of this Agreement and the Escrow Agreement the provisions of this
Agreement shall prevail.
2. Agreement for Sale and Purchase
2.1 Sale and Purchase: The Vendor agrees to sell and the Purchaser agrees to
purchase the Shares for the Consideration.
2.2 Accrual Rules: The Consideration is the lowest price the parties would
have agreed upon at the date of this Agreement for the sale and purchase
of the Shares and is consequently the core acquisition price pursuant to
Section 0B1(c) of the Income Tax Xxx 0000.
2.3 Audit and Due Diligence: The Purchaser shall, at its cost, appoint KPMG
to conduct an audit and due diligence investigation. KPMG shall, if
required by the Purchaser, audit the Financial Statements and the
financial statements for the Company for the Year ending on the
Accounting Date and each Year of the Earn Out Period. Such audit shall be
conducted by KPMG adopting GAAP which shall be applied consistently over
the various audit periods.
2.4 Calculation of Consideration: KPMG shall calculate the Net Asset Value
and the
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Consideration in accordance with GAAP. The Vendor shall be provided with
a copy of the KPMG calculations and a period of 10 days following receipt
of such calculations to review and make submissions on the mode of
calculation. Following expiry of such period, if no objection is raised
by the Vendors, the KPMG calculations shall be deemed to have been
accepted and shall be binding on the parties
3. Consideration and Payment
3.1 Satisfaction of Consideration: The Consideration Shall be paid or
satisfied by the Purchaser as follows:
3.1.1 Net Asset Value: The Net Asset Value shall be paid upon
Completion; and
3.1.2 Earn Out Sum: The Earn Out Sum (subject to adjustment as provided
in clauses 2.4 and 3.4) shall be paid during the Earn Out Period;
in each case in the manner provided in clauses 3.2 and 3.3. by way of the
issue and allotment to the Vendor free from all Charges of fully paid
ordinary shares in the capital of BKI. Such shares shall rank in all
respects pari passu with the existing ordinary shares in the capital of
BKI.
3.2 Issue of Shares: BKI shall issue the shares pursuant to clause 3.1 as
follows:
3.2.1 Issue: BKI shares shall be issued in two tranches.
3.2.2 Net Asset Value: The first tranche (NAV Shares) shall be issued on
completion of the calculation of the Net Asset Value by KPMG
pursuant to clause 2.4 in numbers which have a value (based on the
Strike Price converted to $NZ at the Exchange Rate as at the Last
Accounting Date) equal to the Net Asset Value.
3.2.3 Earn Out Shares: The second tranche (Earn Out Shares) shall be
Issued on completion of the calculation of the Earn Out Sum
pursuant to clause 2.4 in numbers which have a value (based on the
Strike Price converted to $NZ at the Exchange Rate as at the
Accounting Date) equal to the Earn Out Sum.
3.2.4 Trust: The NAV Shares and the Earn Out Shares shall initially be
issued to the Trustee to be held in escrow pursuant to the Escrow
Agreement and subject to the escrow and earn out conditions
specified in clause 3.3 and in the Escrow Agreement.
3.3 Escrow and Earn Out Provisions:
3.3.1 NAV Shares: The NAV Shares shall be held by the Trustee and
released to the Vendor on 31 March 1999.
3.3.2 Earn Out Shares: The Earn Out Shares shall be held by the Trustee
subject
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to the following conditions:
(a) The Earn Out Shares shall only be released to the Vendor if
the Company produces sufficient cumulative Cashflow during
the Earn Out Period.
(b) The Earn Out Shares shall be released to the Vendor in 2
tranches no later than 30 June 2000 and 2001 respectively
(Release Dates).
3.3.3 Value: The Earn Out Shares to be released on each of the Release
Dates shall not exceed in value (based on the Strike Price
converted to $NZ at the Exchange Rate as at the Accounting Date)
the Cashflow of the Company for the Year which ended immediately
prior to the relevant Release Date.
3.4 Adjustment of Acquisition Price:
3.4.1 Calculation: The Earn Out Sum shall be reduced on the basis of a
$NZ 1.00 reduction for each $NZ 1.00 by which the cumulative
Cashflow of the Company over the Earn Out Period falls short of
the Earn Out Sum.
3.4.2 Final Calculation: Prior to 31 December 2000 there shall be a
final calculation of the Earn Out Sum based on the cumulative
Cashflow for Earn Out Period.
3.4.3 Adjustment: The Earn Out Sum and the Consideration shall then be
adjusted accordingly. Any Earn Out Shares which are not required
to be released to the Vendor following such final calculation
shall be cancelled.
3.4.4 Termination of Escrow: If the Company fails to achieve its
budgeted Cashflow during the year ending on the Accounting Date or
at any time during the Earn Out Period then the Purchaser shall
have the right as at the Accounting Date and at 6 monthly
intervals after that date by providing written notice to the
Vendor to terminate the escrow arrangements and cancel any shares
held in escrow. In such case the value of the BKI shares released
before such termination shall be accepted by the Vendor in lieu of
the Earn Out Sum and the Consideration shall be adjusted
accordingly.
3.5 Dividends on Earn Out Shares: Any dividends declared or bonus or rights
entitlements issued in respect of Earn Out Shares held in escrow pursuant
to clauses 3.2 or 3.3 shall be issued to and held in trust by the
Trustee. Any dividends declared or entitlements in respect of shares
which are released to the Vendor shall be paid or applied to the Vendor
when the shares are released. Any dividends or entitlements in respect of
BKI shares which are cancelled will be forfeited to BKI on the date of
cancellation.
4. Parties' Obligations on or before Completion
4.1 Vendor's Obligations: On or before Completion the Vendor shall:
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4.1.1 Disclosure: Deliver to the Purchaser prior to the time of
execution of this Agreement the Disclosure Letter signed by the
Vendor.
4.1.2 Release of Liability to Associated Persons: Procure that the
Company is released unconditionally from all liability and
obligations whatsoever (whether actual or contingent) to the
Vendor or any Associated Persons of the Vendor. If such release is
not or cannot properly be provided on or before Completion then
the Vendor will indemnify the Company and the Purchaser from and
against all Costs and Proceedings in respect of such liability and
obligations. Liabilities and obligations incurred in respect of
normal trade purchases or transactions on usual commercial terms
for payment and performance shall not be required to be so
released;
4.1.3 Access to Premises and Business: Ensure that the Purchaser and its
representatives have full access to the Premises, the Statutory
Books and the Business Records from the date of this Agreement and
will be given promptly all information they may reasonably require
concerning the business or affairs of the Company;
4.1.4 Filing of Satisfactions of Charges: File memoranda of satisfaction
with the Registrar of Companies, the High Court Chattels Register
or the Land Transfer Office or the Motor Vehicles Security
Register (as appropriate) in respect of all Charges registered
against the property of the Company.
4.1.5 Service Agreement: Procure the execution by the Company of
employment contracts with Xxxxx Xxxxxxxx and such other members of
the Company's staff as may be selected by the Vendor in a form
acceptable to the Purchaser.
4.1.6 Personal Assets: Procure that all assets owned by the Company but
principally employed for the personal use of the Vendor are sold
and removed from the Company asset register by the Completion
Date.
4.1.7 Consultation: Consult with the Purchaser in relation to all
matters which materially affect the Company or its operations
including items of capital expenditure and general expenses
totalling more than $5,000 or falling outside the ordinary course
of business of the Company.
4.1.8 Constitution: Procure the adoption of a new Constitution by the
Company which has been approved by the Purchaser.
4.2 Purchaser's Obligations: The Purchaser shall use best endeavours to
obtain a release of the Vendor of all personal liabilities which may
arise after Completion in relation to personal guarantees (as specified
in Item 2 of Schedule 3) provided by him in respect of obligations of the
Company. Should any such releases not be procured then the Purchaser
shall indemnify the Vendor in respect of all Costs and Proceedings which
arise in relation to his personal guarantees for acts or omissions of the
Company after Completion.
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5. Completion
5.1 Initial Settlement: Completion shall take place on the Completion Date at
the offices of the Purchasers' solicitors Lowndes Jordan at 2.15 p.m. or
at such other time or place as the parties shall agree at which time the
Purchaser shall be entitled to the possession of the business conducted
by the Company and the Vendor will hand to the Purchaser:
5.1.1 Share Transfers: Transfers of the Shares to the Purchaser and/or
its nominee duly executed by the Vendor in registrable form;
5.1.2 Share Certificates: The share certificates (if any) for the Shares
or if none have been issued a statutory declaration by an officer
of the Company to such effect;
5.1.3 Pre-emptive Rights Waivers: A waiver signed by all the Vendor
whereby he waives all rights of pre-emption conferred on him by
the Constitution or otherwise in respect of the transfer of all or
any of the Shares;
5.1.4 Directors' Resolutions: Evidence of the passing of effective
resolutions of the Directors of the Company to register the
transfer of the Shares into the name of the Purchaser and/or its
nominee in the Register of Members of the Company in respect of
the Shares.
5.1.5 Shareholders' Resolutions: Evidence of the passing of effective
shareholders' resolutions appointing Xxxxxxx Xxxxxxx and Xxxxxxx
Xxxxxxx as directors of the Company in addition to the Vendor and
adopting a Constitution for the Company pursuant to clause 4.1.8.
5.1.6 Releases of Charges over Shares: Unconditional releases of any
Charges over any of the Shares;
5.1.7 Company Records: The Statutory Books and the Business Records of
the Company;
5.1.8 Pre-conditions: Evidence satisfactory to the Purchaser that the
Vendor has fulfilled his obligations under clause 4.
6. Post Settlement Obligations
6.1 Budgets: Xxxxx Xxxxxxx and the Company's management team shall produce a
profit and loss budget for the Years ending on 31 March 1999 and for each
subsequent Year. Such budget shall be agreed with the Purchaser before
being adopted.
6.2 Management: The Purchaser shall if required by the Company, provide
management services to the Company. Such services shall be undertaken
only in respect of work which would otherwise be undertaken by outside
contractors or in-
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house and charged at commercial rates
6.3 Vendor's Role: The Purchaser shall ensure that the Vendor remains as a
director and as a cheque signatory for the Company for the duration of
the Emit Out Period provided that he remains legally and commercially
competent to perform such functions.
7. Default
7.1 Default by Vendor: Without prejudice to clause 9, if the Vendor has not
fully complied with the provisions of clauses 4 or 5 on Completion, the
Purchaser may (in addition to and without prejudice to all other rights
or remedies available to the Purchaser under this Agreement or otherwise)
at the Purchaser's option:
7.1.1 Rescind: Rescind this Agreement; or
7.1.2 Completion: Effect Completion so far as practicable having regard
to the defaults which have occurred (without releasing the Vendor
from liability to comply as soon as possible with the Vendor's
obligations under clauses 4 and 5).
7.2 Default by Purchaser: If from any cause whatsoever except default of the
Vendor:
7.2.1 Interest: Any portion of the Consideration is not paid upon the
due date for payment the Purchaser shall pay to the Vendor
interest calculated at the Interest Rate on the portion of the
Consideration so unpaid from the due date for payment until
payment.
7.2.2 Other Action: The Purchaser and/or BKI shall be in default under
this Agreement then the Vendor may:
(a) Xxx the Purchaser for specific performance; or
(b) Cancel this agreement and xxx the Purchaser for damages.
8. Warranties
8.1 Vendor's Warranties: The Vendor warrants and undertakes to the Purchaser
in terms of the Warranties that:
8.1.1 Investigations not to affect Warranties: Except as disclosed in
Schedule 2 and/or the Disclosure Letter, the Warranties shall not
be modified, qualified or discharged or in any way affected by any
investigation made by the Purchaser into the affairs of the
Company:
8.1.2 Separate and Independent: Each of the Warranties shall be separate
and independent and save as expressly otherwise provided shall not
be limited by reference to any other of the Warranties or any
other provision of this
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Agreement.
8.2 Reliance on Warranties: The Vendor acknowledges that the Purchaser has
entered into this Agreement in reliance (among other things) on the
Warranties.
8.3 Vendor's Covenants: The Vendor warrants, represents and undertakes to the
Purchaser and also as a separate covenant to the Company:
8.3.1 Indemnity: That he will keep the Purchaser and the Company fully
indemnified against all and any depletion in or reduction in the
value of the Shares or any of the assets of the Company and all
Proceedings and Costs reasonably suffered or incurred by the
Purchaser or the Company as a result of or in relation to any
breach or non-fulfilment of any of the Warranties and all Costs
incurred in making, defending or compromising any Proceedings in
relation to facts or matters which are a breach or non-fulfilment;
and
8.3.2 No Representations Made: That no promise or representation has
been made to them in connection with any of the Warranties or the
Disclosure Letter in respect of which the Company or any of the
directors or employees of the Company might be liable; and
8.3.3 No Breach of Warranties Prior to Completion: That the Vendor will,
so far as he is able, procure that (except only as may be
necessary to give effect to this Agreement) neither he nor the
Company shall do, allow or procure any act or omission before
Completion which would constitute a breach of any of the
Warranties if they were given at any time prior to or on
Completion or which would make any of the Warranties inaccurate or
misleading if they were so given; and
8.3.4 Disclosure of Change in Circumstances: The Vendor will forthwith
disclose in writing to the Purchaser any matter or thing which may
arise or become known to any of them after the date of this
Agreement and prior to Completion which:
(a) is inconsistent with any of the Warranties or which might
render any of them inaccurate or misleading when given at
Completion; or
(b) might be material to be known by a purchaser for value of
the Shares;
(c) might have a material adverse effect on the value of the
Shares or any of the assets of the Company.
8.4 Warranty Limitations: Notwithstanding any other provisions of this
Agreement, the warranties are made and given subject to the provisions of
Schedule 2.
8.5 Purchaser Warranties to Vendor:
8.5.1 Purchaser's Power: The Purchaser has the legal right and power to
enter
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into this Agreement and purchase the Shares from the Vendor.
8.5.2 BKI's Power: BKI has the legal right and power to enter into this
Agreement and the Escrow Agreement.
8.5.3 Authorisation: The execution, delivery and performance of this
Agreement and the Escrow Agreement have been duly authorised by
all necessary corporate action and each of them is valid, binding
and enforceable against the Purchaser and BKI respectively.
9. Rights of Rescission
9.1 Rescission for Breach: Without prejudice to clause 7, if on or prior to
Completion it should be found that:
9.1.1 Unfulfilled Obligations: Any obligation of the Vendor contained in
this Agreement is or will on Completion be unfulfilled; or
9.1.2 Breach of Warranties: Any Warranty is or may at Completion be
inaccurate or misleading;
then the Purchaser may, without prejudice to any other rights available
to it under clause 9.2 of this Agreement, by notice in writing to the
Vendor, rescind this Agreement.
9.2 Effect of Rescission: Rescission of this Agreement under clause 9.1 shall
not extinguish any right of the Purchaser to damages or compensation.
9.3 Rescission for Matters other than Default: If on or prior to Completion:
9.3.1 Destruction of Assets: Any asset of the Company shall be destroyed
or damaged to an extent which in the opinion of the Purchaser
materially and adversely affects the Company or the carrying on of
the business of the Company; or
9.3.2 Material Adverse Change: Any other event shall occur which affects
or is likely to affect adversely to a material degree the Company
or the financial position, business, assets or profitability of
the Company or the value of the Shares to the Purchaser,
the Purchaser shall be entitled by notice in writing to the Vendor
to rescind this Agreement, but the occurrence of such an event
shall not give rise to any right to damages or compensation except
where the Vendor have failed to give notice of such event as
required by clause 8.2.4.
10. Conditions
10.1 This Agreement is conditional upon:
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10.1.1 Purchaser's Due Diligence: The Purchaser being satisfied with its
due diligence investigation into the affairs of the Company.
10.1.2 Asset Lessor's Consent: Consent being given by the lessor of any
assets leased by or on hire or conditional purchase to the Company
to the transfer of the Shares to the Purchaser where the failure
to obtain such consent might constitute an event of default under
such lease or hire or conditional purchase agreement; and
10.1.3 Government or Regulatory Consents: Consent being given by any
Canadian government or regulatory body whose consent is required
to enable Completion of this Agreement; and
10.1.4 Material Contractors' Consent: Consent being given by the other
party or parties to any agreement under which the Company enjoys
any material benefit where without such consent such agreement
might be terminated, which agreements include without limitation
those specified in Item 1, Schedule 4; and
10.1.5 Landlord's Consent: The lessor of the Premises consenting to the
transfer of the Shares to the Purchaser; and
10.1.6 Stock Exchange Approval: The approval of the Toronto Stock
Exchange.
10.1.7 Board Approval: The approval of the board of directors of the
Purchaser and of BKI.
10.2 Fulfilment of Conditions: Each of the parties shall do all acts and
things reasonably necessary to procure the fulfilment of the conditions
set out in clause 10.1
10.3 Failure of Conditions: Should
10.3.1 Not Satisfied: Any of the conditions set out in clause 10.1 not be
fulfilled or waived (as the case may be) by the Completion Date or
such later date as may be agreed by the parties; or
10.3.2 Unreasonable Conditions: Any consent or approval required in terms
of the conditions set out in clause 10.1 be granted on terms not
reasonably acceptable to any affected party;
then:
10.3.3 Agreement Voidable: This Agreement shall be voidable by notice in
writing and upon issue of such notice this Agreement shall then be
at an end and the parties shall not have any further rights or
obligations except that the Vendor will repay any deposit or part
payment of the Consideration.
11. Non Competition
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11.1 Non-Competition: In consideration of the Purchaser entering into this
Agreement and as a condition precedent the Vendor acknowledges that the
value of the Consideration is dependent upon and the Purchaser has agreed
to pay the Consideration on the basis that the Vendor will not carry on a
business the same as or in substantial competition with that at present
carried on by the Company being the distribution of Computer Associate's
micro range of products, including Accounting ACCPAC, development tools
and productivity products and PC applications (Business) in opposition to
the Company after Completion for the period specified below and
accordingly the Vendor covenants and agrees with the Purchaser that:
11.1.1 Business: He will not during a period of 1 year from the later of
the date of termination of the Earn Out Period or the date of
termination of his Service Agreement with the Company provided for
in clause 4.1.5 at any place in New Zealand or the South Pacific
be directly or indirectly engaged or connected or interested in a
Business either on his own account or as a partner with or as an
employee of any other person or as a shareholder, director,
officer, consultant, adviser or employee of any person or directly
or indirectly assist financially any such Business except:
(a) as a servant of the Company, the Purchaser or a Subsidiary
of the Purchaser; or
(b) with the prior written consent of the Purchaser; or
(c) as holder of not more than 5% of the shares in the capital
of any public company if and only so long as such shares
are listed on any official stock exchange; and
11.1.2 Orders: He will not on his own account or for any person,
enterprise, firm, trust, joint venture or syndicate solicit orders
for such Business otherwise than for the benefit of the Company
from any person, firm or company who at the Completion Date was or
had previously been a customer of the Company; and
11.1.3 Employees: He will not on his own account or for any person,
enterprise, firm, trust, joint venture or syndicate entice or
attempt to entice away from the Company or the Purchaser any
employee of the Company or of the Purchaser or of any Subsidiary
of the Purchaser.
11.2 Provisions With respect to Covenants: Each of the covenants contained in
clause 11.1 shall:
11.2.1 Separate and Severable: Be separate and severable and to the
extent that any such provision is unenforceable by reason of its
period, scope or area being held by a court of competent
jurisdiction to be unreasonable, then such provision shall be
limited to the maximum period, scope or area which such court
considers reasonable and shall be enforceable on those terms;
11.2.2 Benefit of Purchaser and Assigns: Be given for the benefit of and
be
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Agreement for Sale and Purchase of Shares
enforceable by the Purchaser and the Purchaser's Successors and
assigns.
12. First Right of Refusal
12.1 Right to Purchase: Should the Purchaser or BKI at any time after
settlement determine tat the Company and/or its assets are no longer
required within the BKI group, then the Purchaser shall procure that the
Vendor is provided with the first right to purchase the Company and/or
its assets as follows:
12.1.1 Price: The purchase price shall be the fair market value. Such
purchase price shall not be higher than the price at which the
Company and/or the Purchaser is prepared to sell to a third party.
12.1.2 Exercise of Right: The Purchaser or BKI shall give notice to the
Vendor of the desire to sell, the price and terms and conditions
of sale and the Vendor shall have a period of 30 days in which to
advise in writing whether they wish to exercise the right to
purchase.
12.1.3 Sale to Other Party: If the Vendor does not give notice within the
time provided in clause 12.1.2 then the Purchaser or BKI shall be
free to sell to a third party but shall not offer to a third party
a more favourable price or other terms and conditions without
first offering those terms to the Vendor as provided in clause
12.1.2.
12.1.4 Post Settlement: If such right is exercised by the Vendor then
with effect from settlement of the purchase all restrictions
imposed by clause 11 shall be terminated and any remaining shares
held in escrow pursuant to clause 3.3 shall be released to the
Vendor.
13. Arbitration
13.1 Submission: If any dispute or difference shall arise between any of the
parties in any way arising out of or in connection with this Agreement
such dispute or difference shall be referred to the arbitration pursuant
to the Arbitration Xxx 0000.
14. General
14.1 Non-Merger: The warranties, indemnities, representations and undertakings
set out in this Agreement shall notwithstanding any rule of law to the
contrary not merge in the instruments of transfer executed pursuant to
this Agreement but shall remain in full force and effect and enforceable
to the fullest extent.
14.2 No Announcement: The parties agree that (except as may be required by law
or by the requirements of the Toronto Stock Exchange) they will not make
any announcement or disclosures as to the subject matter of this
Agreement except in a form and manner and at such time as all parties may
agree.
14.3 Notices: Any notice to be given pursuant to this Agreement shall be given
in
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Agreement for Sale and Purchase of Shares
accordance wit and subject to the following provisions of this clause
13.3:
14.3.1 In Writing: Notices shall be in writing
14.3.2 Delivery: Without prejudice to any other sufficient mode of
delivery, a notice may be sent by hand, prepaid post, telex or
facsimile to the address or number (in the case of telex or
facsimile) of the intended recipient last advised to the sender in
accordance with this clause. The initial addresses and numbers of
the parties are:
Vendor c/x Xxxxxxx Xxxxxxxx
Barristers and Solicitors
Xxxxxxx Xxx 00000
Xxxxxxxxx Xxxxxx
XXXXXXXX 1
Facsimile: 307 0331
Purchaser 0 Xxxx Xxxxxx
Xxxx Xxxx
XXXXXXXX
Facsimile: 376 7891
14.3.3 Notice by Hand: Subject to clause 14.3.6, a notice delivered by
hand shall be received on delivery;
14.3.4 Notice by Post: Subject to clause 14.3.6, a notice sent by
prepaid post shall be deemed to be received 3 days alter being
posted;
14.3.5 Notice by Telex or Facsimile: Subject to clause 14.3.6, a notice
sent by telex or facsimile shall be deemed to be received at the
time of transmission where a transmission report or answerback
code produced by the sender's machine indicates successful
transmission;
14.3.6 Receipt Outside Business Hours: Any notice received or deemed to
be received pursuant to clauses 14.3.3, 14.3.4 or 14.3.5 after
5.00 p.m. (recipient's time) on a Business Day in the recipient's
city or on a day which is not a Business Day in the recipient's
city shall be deemed to be received at 9.00 a.m.. (recipient's
time) on the next Business Day in the recipient's city;
14.4 Proof of Delivery: In proving delivery of a notice, it shall be
sufficient:
14.4.1 By Hand: In the case of a notice by hand, to provide evidence that
the notice was delivered to the address of the recipient and no
acknowledgement from the recipient shall be necessary;
14.4.2 By Post: In the case of a notice by post, to provide evidence that
the notice
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Agreement for Sale and Purchase of Shares
was correctly addressed and posted in a prepaid envelope;
14.4.3 By Telex or Facsimile: In the case of a notice by telex or
facsimile, to provide the transmission report produced by the
sender's machine showing a successful transmission to the correct
number of the recipient and to have telephoned the recipient to
confirm receipt of a legible copy of such notice.
14.5 Applicable Law and Jurisdiction: This Agreement shall be governed by and
construed and interpreted in accordance with the laws of New Zealand and
the parties irrevocably submit to the exclusive jurisdiction of the New
Zealand courts.
14.6 Further Assurance: The parties will do all things including without
limitation the execution of documents as shall be necessary to give full
effect to this Agreement.
14.7 Entire Agreement: This Agreement including all schedules, annexures and
exhibits to it, and any documents incorporated by express reference forms
the entire agreement between the parties relating to its subject matter
and supersedes all prior agreements and understandings between the
parties with, respect to that subject matter. If there is any conflict
between the terms of this document and any
14.8 Variation: This Agreement may only be varied by an express written
agreement executed by all the parties or by persons duly authorised in
writing on their respective behalf.
14.9 Costs: Each party shall bear their own costs of and incidental to the
preparation, Completion and implementation of this Agreement. If either
party elects not to proceed with this Agreement prior to completion then
all professional fees incurred by both parties in relation to this
Agreement and the transactions associated with this Agreement shall be
borne by the party so withdrawing.
14.10 Waiver: No failure to exercise and no delay in exercising on the part of
any party any right under this Agreement shall operate as a waiver of
that right. No single or partial exercise of any right shall preclude any
other or further exercise of such right or the exercise of any other
right. Any such waiver unless otherwise expressly agreed in writing,
shall only apply in respect of the particular circumstances for which it
is given.
14.11 Counterparts: This Agreement may be signed in any number of counterparts,
all of which when taken together constitute one and the same instrument.
Any party may enter into this Agreement by executing any such
counterpart. The parties will cooperate to circulate all counterparts to
each other for the purposes of having all counterparts executed by all
parties as soon as practicable following Completion.
15. Execution:
15.1 Facsimile Copy: The execution of a facsimile copy of this Agreement and
its transmission by facsimile to all of the parties or their solicitors
shall be sufficient to constitute a legal contract and satisfy the
requirements of section 2 of the Contracts
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Agreement for Sale and Purchase of Shares
Enforcement Xxx 0000.
15.2 Original Copy: If any party requires the original signed facsimile copy
shall be delivered to that party within 5 Business Days of request being
made. If the original is not delivered any party which accepts a
facsimile copy may in any proceeding produce the facsimile copy. In such
case no party may object to such copy being produced as an original and
all parties shall be deemed to have waived any law of evidence or other
requirement that an original be produced as evidence of the existence or
contents of the original.
15.3 Parties Bound: Each party shall only become bound by this Agreement when
it has been executed by or on behalf of such party.
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Agreement for Sale and Purchase of Shares
EXECUTED by the parties.
SIGNED for XXXXXXX) ) Signature /s/ [ILLEGIBLE]
INVESTMENTS (NZ) LIMITED ) ---------------------------------------
by: ) Name
) ---------------------------------------
Officer
) Signature /s/ XXXXXXX XXXXXXX
) ---------------------------------------
) Name XXXXXXX XXXXXXX
) ---------------------------------------
Director
SIGNED for XXXXXXX) ) Signature /s/ [ILLEGIBLE]
INVESTMENTS LIMITED ) ---------------------------------------
by: ) Name
) ---------------------------------------
Officer
) Signature /s/ XXXXXXX XXXXXXX
) ---------------------------------------
) Name XXXXXXX XXXXXXX
) ---------------------------------------
Director
SIGNED for XXXX XXXX ) Signature /s/ XXXX XXXX XXXXXX
XXXXXX ) ---------------------------------------
in the presence of:
Witness ) /s/ X.X. XXXXXX
---------------------------------------
Witness Name ) X.X. Xxxxxx
---------------------------------------
Witness Address ) Auckland
---------------------------------------
Occupation ) Solicitor
---------------------------------------
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Agreement for Sale and Purchase of Shares
SCHEDULE 2
Warranties (clause 7.1)
1. General
1.1 Disclosure Letter: All information contained or referred to in the
Disclosure Letter is true complete and accurate in all respects. The
Vendor is not aware of any other fact or matter which renders or might
upon its disclosure render any such information misleading.
1.2 Agreement: The provisions of the recitals to this Agreement, clause 1.1
of this Agreement and all information contained in the Schedules and
Annexures to this Agreement are complete and correct in all respects.
1.3 Information Supplied: To the best of the knowledge of the Vendor all
information contained in any written documentation or communication
supplied by or on behalf the Vendor to the Purchaser in the course of the
Purchaser's due diligence investigation or in discussions or negotiations
leading to the signing of this Agreement, including advice, answers to
questions, information, books and papers given or shown to the Purchaser
and/or any of its employees or representatives by or on behalf of the
Vendor is accurate and not misleading in its context whether by omission
or otherwise. The Vendor is not aware of any fact or matter not disclosed
to the Purchaser which renders any such information untrue, incorrect or
misleading.
1.4 All Necessary Disclosures Made: All the facts and circumstances relating
to the Shares and to the assets, business and affairs of the Company
material for disclosure to an intending purchaser of the Shares have been
fully and fairly disclosed to the Purchaser or its advisers. Any such
material facts arising prior to Completion will forthwith be disclosed in
writing to the Purchaser or its advisers,
1.5 Constitution: The Constitution of the Company to be handed to the
Purchaser will be an accurate copy or an original, if available, of the
document in force at Completion and will have annexed a copy of every
resolution required to be annexed by the Companies Xxx 0000.
2. Shares
2.1 Shares: The Shares constitute the whole of the issued and allotted share
capital of the Company. They arc and will be on Completion held by the
Vendor in the Vendor's own right.
2.2 Encumbrances: There is not any and will not at Completion be any Charge
on, over or affecting the Shares. There is no agreement or commitment to
give or create any such Charge and no demand has been made by any person
claiming to be entitled to any such Charge.
2.3 No Subsidiaries: The Company never has had and does not have and will not
prior
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Agreement for Sale and Purchase of Shares
to Completion without the prior written consent of the Purchaser create
or acquire any Subsidiary or any shares in any other company.
2.4 No Increase in Capital: The Company has not since the Last Accounting
Date and will not pending Completion increase its share capital or
subdivide, amalgamate, or consolidate the Shares or any of them.
2.5 No Decrease in Capital: The Company has not at any time:
2.5.1 Repaid or agreed to repay or redeem or buy back or repurchase any
shares of any class of its share capital or otherwise reduced or
agreed to reduce its issued share capital or any class of its
share capital
2.5.2 Amalgamated or agreed to amalgamate with any other company.
2.6 No Related Companies: The Company has no Related Companies
2.7 No Change of Capital Structure or Name: The Vendor will not permit to be
passed before Completion any resolution by the Company:
2.7.1 Altering its share capital;
2.7.2 Altering the rights or obligations attaching to any of the Shares:
2.7.3 Changing its name;
2.7.4 Altering its Constitution.
3. Records
3.1 Books of Account: All the Business Records and Statutory Books are in the
Company's possession or under its control and have been fully and
correctly completed and will pending Completion continue to be so
completed.
There are and will pending Completion be no material inaccuracies or
discrepancies of any kind contained or reflected in any of them. They
give and reflect and at Completion will give and reflect a true and fair
view of the financial, contractual and trading position of the Company
and of its plant and machinery, fixed and current assets and liabilities
(actual and contingent), debtors and creditors, work in progress and
stock.
3.2 Retention of Records: The Company holds and will on Completion have in
its possession all books of Account and other records which it is bound
by law to retain in its possession either indefinitely or for a
particular period or periods of time.
4. Financial Statements:
4.1 True and Fair View: The Financial Statements are complete and accurate
and give
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Agreement for Sale and Purchase of Shares
and reflect and will at Completion give and reflect a true and fair view
of the Company, its activities and its financial status in all respects.
4.2 Comply with Statute: The Financial Statements comply with all applicable
requirements of the Companies Xxx 0000 and the Financial Reporting Xxx
0000.
4.3 GAAP: The Financial Statements have been prepared in accordance with
generally accepted accounting practice as that term is defined in the
Financial Reporting Xxx 0000 and to the extent consistent with such
generally accepted accounting practice on a basis consistent with that
adopted for preceding accounting periods.
4.4 No Unusual or Extraordinary Items: The Financial Statements are not
affected by any unusual extraordinary exceptional or non-recurring items
or by any other factor rendering the results set out in the Financial
Statements (or any of them) unusually better or worse than they (or any
of them) might otherwise be or have been.
4.5 Financial Position: The Financial Statements properly reflect the
financial position of the Company as at the Last Accounting Date and of
its results for the accounting period ending on that date.
4.6 Full Disclosure: The Financial Statements fully disclose all the assets
and liabilities (whether ascertained, contingent, deferred or otherwise
and whether or not quantified or disputed) of the Company as at the Last
Accounting Date and make full provision and/or reserve for all such
liabilities.
4.7 Provisions for Losses: The Financial Statements make full provision for
any foreseeable losses which may arise on Completion and/or on
realisation of stock and/or on Completion of any existing or proposed
contract.
4.8 Provision for Bad Debts: The Financial Statements make adequate provision
for all bad and doubtful debts of the Company and for depreciation of the
fixed assets of the Company having regard to their original cost and
estimated useful life.
4.9 Financial Commitments: The Financial Statements fully disclose all
financial commitments in existence as at the Last Accounting Date.
5. Period Between Agreement and Completion: From the Last Accounting Date to
Completion::
5.1 Conduct of Business: The Company has carried on and will carry on its
business in an efficient normal and proper manner so that the financial
standing and position of the Company as at Completion will not have
deteriorated materially from that disclosed in the Financial Statements;
5.2 Liabilities: The Company has not incurred and will not incur any
liability (whether contingent or otherwise) and has not made any payments
except in the normal and ordinary course of business;
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Agreement for Sale and Purchase of Shares
5.3 Disposals: The Company has not disposed of and will not dispose of any
material portion of its undertaking or any material part of its fixed
assets or any of its goodwill;
5.4 Acquisitions: The Company has not acquired any assets of a capital nature
and will not acquire any assets of a capital nature exceeding $5,000 in
value without the Purchaser's prior consent;
5.5 Revaluations: The Company has not revalued upwards and will not revalue
upwards any of its assets;
5.6 Capital Investments: The Company has not entered into and will not enter
into any material capital investment or commitment in excess of $5,000 in
aggregate or any major transaction as that term is defined in section
129(2) of the Companies Xxx 0000;
5.7 Dividends: The Company has not declared, paid or made and will not
declare, pay or make any dividend, bonus or similar distribution:
5.8 Insurance: The Company has kept and will keep effectively insured to the
full insurable amounts all assets and undertaking of the Company against
all normal insurance risks including reasonable loss of profits
insurance;
5.9 Terms of Trade: The Company has not made or permitted and will not make
or permit any change to any of its product lines or to the terms or
conditions of any agency held by the Company or to the selling prices or
terms and conditions of sale of any products or services of the Company;
5.10 Turnover: The Company has attained a turnover no less than that for the
corresponding period in the previous financial year;
5.11 Deposits: The Company has deposited and will deposit all amounts received
by it to the credit of its bank account and such amounts appear in the
appropriate books of Account;
5.12 Debts: The Company has paid and will continue to pay all its debts as
they fell or fall due.
6. Non-Disclosure of Liabilities: If it is discovered before or after
Completion that the Company had a liability at the Completion Date
(whether contingently or otherwise) to any person prior to the Completion
Date except in the ordinary course of business which liability has not
been fully disclosed to the Purchaser, then without prejudice to any
other rights of the Purchaser, the Vendor will immediately upon demand by
the Purchaser, pay to the Purchaser the amount of each such liability
after deducting from each such liability any saving to the Company in
Taxation as a result of such liability. For the purposes of this clause:
6.1 The word liability shall include liability for or in respect of Taxation
or any re-
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Agreement for Sale and Purchase of Shares
assessment of Taxation which the Company may be required to pay in
respect of any period prior to the Completion Date and which has not been
so fully disclosed and any amount whatsoever (including all Costs in
connection therewith) arising out of any occurrence or happening which
shall have taken place prior to the Completion Date;
6.2 Provision of any amount by way of note to the Financial Statements shall
not be deemed to be provision of that amount in the Financial Statements.
7. Stock
7.1 Valuation: The methods of valuing stock and work in progress as at the
Last Accounting Date (which included a physical stocktaking) were the
same as those adopted for the 3 immediately preceding financial years.
All redundant and obsolete stock was wholly written off, all slow moving
stock was written down appropriately and the value attributed to the
remaining stock did not exceed the lower of direct cost or net realisable
value.
7.2 Changes to Stock Since Last Accounting Date: The stock on hand at
Completion will comprise the stock as at the Last Accounting Date less
stock sold and with the addition of stock bought in the ordinary course
of business since that date. No stock currently held other than that
written off or written down in the Financial Statements or which are
service spares, is slow moving, out of date or fashion, redundant or
obsolete or which will not realise its book value within 12 months of the
Completion Date.
8. GST
8.1 Registration: The Company is registered for the purposes of the GST Act.
8.2 Not a Member of a Group: The Company has not at any time been a member of
a Group or been treated as a member of a Group for GST purposes. No
application for it to be so treated has at any time been or pending
Completion will be made. No act or transaction has been or pending
Completion will be effected which will result in the Company being held
liable for any GST chargeable against some other company.
8.3 Compliance with GST Act: The Company has complied and pending Completion
will comply in all respects with the GST Act legislation.
8.4 Maintenance of Records: The Company has given obtained made and
maintained and pending Completion will give, obtain, make and maintain
complete correct and up to date invoices, records and other documents
appropriate or requisite for the purposes of the GST Act.
8.5 No Arrears: The Company is not and will not pending Completion be in
arrears with any payment or returns under the GST Act or liable to any
abnormal or non-routine payment or any forfeiture or penalty or to the
operation of any penal provision and where payment is not yet due or
receivable has provided for such
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Agreement for Sale and Purchase of Shares
payment;
8.6 All Supplies Taxable: All supplies made and to be made pending Completion
by the Company are taxable supplies and the Company is not and will not
pending Completion be denied credit for any input tax.
9. Taxation
9.1 Returns Made: All forms, notices, elections, computations, payments
(including, without limitation, any fines or penalties) and returns which
should be made by the Company for any Taxation purpose have and will at
Completion have been made and are and will be up-to-date, correct and on
a proper basis and none of them is now the subject of any dispute with
the Inland Revenue Department or any other Taxation collection agency. In
particular the returns in relation to provisional Taxation will not give
rise to any assessment, adjustment or set-off (including any claim for
interest on unpaid Taxation) by the Inland Revenue Department.
9.2 No Knowledge of Dispute: There is no fact known to the Vendor after
making due enquiry which might be the occasion of any dispute with the
Inland Revenue Department or any other Taxation collection agency or a
claim for Taxation in respect of any period prior to the Completion Date
which is not provided for in the financial statements for the Company as
at the Last Accounting Date.
9.3 Provision in Financial Statements: Full provision and reserves were made
in the Financial Statements in respect of all Taxation liabilities to or
for which the Company was at the Last Accounting Date or at any time
since may have become or may become liable to be assessed or charged or
to pay. Provision of any amount by way of a notice to the Financial
Statements shall not be a provision for the purposes of this paragraph.
9.4 No Non-commercial Transactions: The Company has not at any time entered
into a transaction or series of transactions containing steps inserted
without any commercial or business purpose apart from the obtaining of a
Taxation or stamp duty advantage.
9.5 Debtors Recorded Appropriately: All amounts included in the Financial
Statements or (in the case of an amount arising after the date of the
Financial Statements) in the books of the Company as due from Debtors
represent amounts actually invoiced by the Company to such debtors not
earlier than 3 months prior to the Last Accounting Date (or in the case
of an amount arising after the date of the Financial Statements not
earlier than 3 months prior to the date on which it was recorded in the
books of the Company). No part of such amounts still outstanding has been
released on terms that any debtor pays less than the full book value of
its debt or has been written off or has proved to any extent
irrecoverable or is now regarded as irrecoverable or has been compromised
on any terms.
10. Loans
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Agreement for Sale and Purchase of Shares
10.1 No Undisclosed Loans: The aggregate amount appearing in the Financial
Statements as being outstanding in respect of loans owing by the Company
was at the Last Accounting Date the aggregate of all loans or financial
accommodation of whatever nature from any source so outstanding.
10.2 Loans Within Corporate Powers: Such aggregate did not (and the amount
outstanding in respect of loans owing by the Company does not and will
not at Completion) exceed any limitation on the Company's borrowing
contained in its Constitution or in any loan offer, facility letter,
debenture or other deed or document executed by it or, in the case of
borrowings on overdraft, its overdraft facilities.
10.3 Loans from Directors or Shareholders: All amounts outstanding and
appearing in the books of the Company as loan accounts or as due to
directors or shareholders wholly represent money or money's worth paid or
transferred to the Company as the case may be or remuneration accrued due
and payable for services rendered and (save for such remuneration) no
part thereof has been provided directly or indirectly out of the assets
of the Company.
10.4 No Repayments: The Company has not repaid and pending Completion will not
repay any loans or other financial accommodation in whole or in part nor
has it by reason of any default by it in any of its obligations become
bound or liable to be called upon to repay prematurely any loans or
borrowed moneys and pending Completion no such default will occur.
11. Liabilities and Commitments
11.1 No Capital Commitments: Since the Last Accounting Date the Company has
not except in the ordinary course of business made any capital
expenditure or incurred any capital commitments nor has it disposed of or
realised any substantial capital assets or any interest in such assets.
The Company has no outstanding capital commitment and pending Completion
no capital commitments or disposals of capital assets or land or any
estate or interest in such assets or land will be undertaken by the
Company without the prior written consent of the Purchaser.
11.2 No Guarantees: The Company is not and will not prior to Completion become
a party to any contract of guarantee or indemnity.
11.3 No Material Contracts: The Company has not entered into and will not
enter into any material contract (including the granting of options to
purchase or Charges over all or any of the Company's assets) except in
the normal and ordinary course of business. The Company has not and will
not become a party to any unusual, abnormal or onerous contract or
agreement whatsoever except as disclosed to the Purchaser or as approved
by the Purchaser.
11.4 No Long Term Contracts: The Company is not and will not on Completion be
a party to any contract of service or supply which cannot be terminated
by not more than 1 month's notice without giving rise to any claim for
damages or compensation.
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11.5 No Commitments since Last Accounting Date: The Company has not since the
Last Accounting Date been and will not at Completion be a party to any
contract, commitment or arrangement of any nature except such as have
been entered into in the normal and ordinary course of trading and are
capable of being wholly satisfied or performed within 3 months from
Completion or of being terminated within such period without cost to the
Company.
11.6 No Arrangements: The Company is not and will not on Completion be a party
to any joint venture, partnership, syndicate or other consortium
arrangement.
11.7 No Agents: No person is authorised to act as agent for the Company or
otherwise to bind the Company other than the directors of the Company
acting as a board. The Company has not appointed any agents, distributors
or managers in respect of any of its products or services in any part of
the world.
11.8 No Default under Agreements: The Company is not now, nor pending
Completion will it become, in default under any agreement to which it is
or may become a party or in respect of any other obligations binding upon
it. No event has occurred which would enable any third party to terminate
any contract or any benefit enjoyed by the Company.
12 Employees
12.1 Full Disclosure of Terms: Full disclosure in writing of the current rate
of remuneration, fees and expenses payable to each officer and employee
of or consultant to the Company and the terms of such employment or
consultancy (including obligations in respect of any directors' or
officers' keyman or indemnity insurance) have been made to the Purchaser
in writing. No such officer or employee or consultant has given notice or
is under notice of dismissal or termination of employment of any
consultancy agreement.
12.2 No Amounts Due: No amounts are due to or in respect of any former officer
or employee or consultant and there are no outstanding arrears of salary,
wages, fees, holiday pay or other remuneration.
12.3 No Industrial Disputes: The Company is not involved in any industrial or
trade dispute or any dispute with any trade union or organisation or body
of employees.
12.4 No Changes: No change has been made in the terms of employment or
consultancy by the Company of any person who was employed at the Last
Accounting Date. Pending Completion the Company will not without the
Purchaser's prior written consent engage any new employee or consultant.
12.5 No Other Payments: No moneys other than in respect of remuneration or
emoluments of employment or fees are payable to or for the benefit of any
director or officer of the Company.
12.6 No Profit Sharing: The Company is not and will not prior to Completion
become a
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Agreement for Sale and Purchase of Shares
party to any agreement with any director, officer, employee or consultant
of tbe Company under which any such person is entitled to a share of
profits of the Company or to any bonus calculated on profits or to
participate in any share incentive scheme or share option scheme or
similar arrangement. No pensions, retiring allowances or other benefits
are or will be payable by the Company to any director, officer or
employee of the Company during such person's employment or consultancy.
12.7 No Schemes: There are not now and will not on Completion be in existence
any retirement, death or disability benefit schemes for directors or
employees or any obligations to or in respect of any present or past
directors or employees with regard to retirement, redundancy, death,
sickness or disability pursuant to which the Company is or may become
liable to make any payments.
12.8 No Breaches of Contract: Since the Last Accounting Date no liability has
been incurred or payment made by the Company for breach of any contract
(whether express or implied) of service, for redundancy or for
compensation for loss of office or wrongful dismissal or in respect of
retirement, death, sickness or disability. No gratuitous payment has been
made or will prior to Completion be made or promised by the Company to or
in respect of any director or employee.
12.9 No Liability for Leave Payments: The Company is not and will not at
Completion be under any liability to any person in respect of long
service leave or accrued annual leave.
12.10 Compliance with Legislation: The Premises and operation of the business
of the Company and the terms on which the employees of the Company were
recruited and are employed to the extent that they are required to comply
and will at Completion comply with the Employment Contracts Xxx 0000, the
Equal Pay Xxx 0000, the Human Rights Xxx 0000, the New Zealand Xxxx of
Rights Xxx 0000, the Wages Protection Xxx 0000, the Holidays Xxx 0000,
the Health and Safety in Employment Xxx 0000 and all applicable
legislation governing employment and safety of employees.
13. Statutory Obligations
13.1 Holding of Licences: The Company holds and will on Completion be in
possession of all current licences (including import licences and
concessions, if any) consents, authorities and permits from or issued by
any Governmental Department, municipal or local body or other authority
whether in respect of the Premises, plant, machinery, buildings or other
assets of the business or otherwise necessary or required to enable it to
carry on its business fully and effectively. The Company has not had
notice that any such licences, consents, authorities or permits are being
or are likely to be withdrawn or in any manner qualified whether by
reason of the sale of the Shares or otherwise howsoever.
13.2 No Requisitions: There has not since the Last Accounting Date been and
will not on Completion be any unsatisfied requisitions by or dispute with
any local body health
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Agreement for Sale and Purchase of Shares
authority, government or ad hoc authority or other body or official or
authority having competent jurisdiction affecting or relating to any of
the Premises, plant, machinery, buildings or other assets of the
business, or the employment of staff by the Company.
13.3 No Illegal Trade Practices: The Company is not, has not been and will not
pending Completion be a party to any agreement, arrangement,
understanding or practice which is contrary to the provisions of the
Commerce Xxx 0000, the Fair Trading Xxx 0000, the Consumer Guarantees Xxx
0000, or the Privacy Xxx 0000.
13.4 No Breach of Statute: The Company has not committed any breach which was
unremedied at the Last Accounting Date of any statutory provision, order,
bylaw or regulation (in every case whether applicable in New Zealand or
elsewhere) binding on or applicable to it with regard to the formation
and operation of the Company, the carrying on of the business of the
Company or any other matter relating to the Company. The Company has not
since such date and will not prior to Completion commit any such breach.
13.5 All Documents Stamped: All documents which in any way affect the right,
title or interest of the Company in or to any of its property,
undertaking or assets or to which the Company is a party and which
attract stamp duty have been duly stamped. No liability to pay stamp duty
will arise as a result of Completion by virtue of any previous transfer
of any property, undertaking or assets to the Company in particular but
without limitation under section 13(4) of the Stamp and Cheque Duties Xxx
0000.
13.6 Compliance with Companies Act: The Company has complied with and will up
to Completion comply with all the requirements of the Companies Xxx 0000
including all requirements for filing of documents with the Registrar of
Companies.
13.7 All Registers Complete: The entries in the Register of Members, Register
of Directors and Secretaries, Interests Register, Register of Charges and
Register of Directors' Shareholdings of the Company are correct and such
registers have been properly kept.
14. Properties and Assets
14.1 Leasehold Premises: The Premises are held, upon lease terms which have
been fully disclosed to the Purchaser.
14.2 Title and Compliance: The Company had on the Last Accounting Date and
will on Completion have sole title to and possession and control of all
the freehold and leasehold properties used or occupied by it free from
all leases, tenancies or Charges. Each of the said properties complies
and will on Completion comply with the local body code or ordinances
affecting the same and with all other statutory, local body and other
regulations and requirements.
14.3 All Premises Included: The Premises comprise all the freehold and
leasehold land and premises owned, used or occupied by the Company and
all the estate interest
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Agreement for Sale and Purchase of Shares
right and title whatsoever of the Company in, under, over or in respect
of any such land or premises.
14.4 Compliance with Statutes: The Company has to the extent to which it is
required to complied with all provisions of the Building Xxx 0000,
Resource Management Xxx 0000 and all other legislation (including
regulations, bylaws, ordinances, codes of practice, circulars and
guidance notes made thereunder) relating to building, planning or
environmental matters and dealing with (but without limitation) waste,
contaminated land, discharges to land or ground and surface water or
sewers, emissions to air, noise, dangerous, hazardous or toxic substances
and materials, nuisance or health and safety. There are no actions,
claims or proceedings (whether actual or potential) existing in relation
to such matters nor any liability likely to arise in relation to such
matters.
14.5 Compliance with Leases: The Company has paid all rent that may be payable
and has performed and observed all covenants (whether in relation to
freehold or leasehold land) conditions, agreements, statutory
requirements, planning or building or resource consent, bylaws, orders
and regulations affecting the Premises or any business carried on the
Premises. No notice of any breach of any such matter has been received
nor is the Vendor aware of any such breach having occurred.
14.6 No Defects: No structural, drainage or other material defects have
appeared in respect of or affected the buildings and structures on or
comprising the Premises. All such buildings are in good and substantial
repair and condition and none has been constructed, maintained, altered
or repaired using materials containing any deleterious building material.
None of the Premises has been affected by flooding or subsidence.
14.7 No Other Matter: There is no other matter of which the Vendor is or ought
to be aware on reasonable enquiry and which adversely affects the value
of any of the Premises or casts any doubt on the right or title of the
Company to those Premises or its use of those Premises for its business
which should be revealed to a Purchaser of the Shares of the Company or
other person entering into this Agreement.
14.8 Plant and Machinery: The Company's plant and machinery (including fixed
plant and machinery) and all equipment, furniture and vehicles taking
into account their age and usage are in good repair and condition (fair
wear and tear excepted) and in satisfactory working order and none of it
is surplus to the Company's requirements.
14.9 Debts Recoverable: The amount of all debts due or recorded in the
Financial Statements or the books of the Company as being due to the
Company as at Completion (less the amount of any provision or reserve
made in the Financial Statements or the books of the Company in respect
of any particular debts) will be good and collectable in full in the
ordinary course of business and in any event not later than 6 months
after Completion. None of such debts is or will at Completion be subject
to any counterclaim or set-off except to the extent of any such provision
or reserve.
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Agreement for Sale and Purchase of Shares
14.10 Debtors Recovery: Should any of the debtors of the Company as at the
Completion fail to satisfy its liability to the Company in full within 3
months from the Completion Date and the aggregate amount due to such
debtors exceeds $3,000, the Vendor will immediately upon demand by the
Purchaser pay to the Purchaser (or the Purchaser may deduct from the
Consideration) the amount of such excess amount. Following payment of
such amount the Purchaser shall be entitled to an assignment of the
benefit of such excess debts.
14.11 Changes Since the Last Accounting Date: Since the Last Accounting Date:
14.11.1 No Write-Offs or Write-Downs: None of the assets of the Company
have been written off or written down nor has there been any
agreement for the release of any person under liability to the
Company;
14.11.2 Cash: The Company has neither disbursed nor received any cash
except in the ordinary course of its business and amounts
received by the Company have been deposited with its bankers and
appear in the appropriate books of account;
14.11.3 Depletion in Assets: There has been no depletion in the net
assets of the Company and they have not been materially
diminished by the negligent, wrongful or fraudulent act of any
person;
14.11.4 GAAP: Everything which should according to generally accepted
accounting practices (as defined in the Financial Reporting Act
1993) have been written up or recorded in the Statutory Books and
financial records of the Company with respect to the assets of
the Company (including the Premises) has been written up and
recorded;
14.11.5 Compliance with Notices: There have been no notices, claims or
demands served on the Company in respect of any of its assets
(including the Premises) which have not been fully complied with.
15. Intellectual Property
15.1 All Intellectual Property Included: The Consideration for the Shares is
assessed on the basis that all licences and all Intellectual Property or
other similar rights relating to the business of or used by the Company,
if any, are at present owned solely and beneficially by the Company. All
of such rights shall remain the property of the Company to the intent
that the Company shall be the sole unencumbered and undisputed owner of
all such things as at Completion.
15.2 No Intellectual Property Agreements: The Company has not entered into any
agreement or arrangement for the provision of technical information or
assistance or granting rights in respect of any patents, trade marks or
registered designs or copyright. To the best of the Vendor's knowledge
and belief the operations of the Company do not infringe any patent or
other intellectual property right of any kind vested in any other party.
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Agreement for Sale and Purchase of Shares
15.3 Disclosure of Intellectual Property: Full details of all Intellectual
Property owned or used by the Company have been given to the Purchaser.
No person has been authorised to make any use whatsoever of any
Intellectual Property owned by the Company. The Company has not disclosed
(except in the ordinary course of its business) any of its know-how,
trade secrets, technical processes, confidential information,
Intellectual Property or lists of customers or suppliers to any other
person.
15.4 Use of Names: The Company is entitled to use its trade names in those
parts of the world in which it currently conducts its business or its
products are sold to its customers. No person has been authorised to make
any use whatsoever of any such name. The use of such names by the Company
does not infringe the rights of any other person or entitle any other
person to a claim against the Company. No such name is being used,
claimed, opposed or attacked by any other person.
15.5 Name: The Company has not consented to and will not before Completion
consent to the adoption of a similar name by any other company or person.
15.6 Intellectual Property Not Disputed: The Intellectual Property rights of
the Company have not been and will not at Completion be challenged or
disputed by any third party. The is not aware of any facts or
circumstances which might entitle a third party to challenge the
Company's ownership or use of the Intellectual Property used in the
business.
16. Commercial Matters
16.1 All Actions Indemnified: There is no cause of action in respect of which
the Company is not fully indemnified which could and might be used for
the purpose of commencing proceedings either civil or criminal.
16.2 No Legal Proceedings; The Company is not engaged in any Proceedings
whatsoever nor are any Proceedings of any kind being taken against it nor
is the Vendor aware of any Proceedings against the Company pending or
threatened.
16.3 No Breaches of Contract: The Company is not and will not on Completion be
in breach of any contract, commitment or arrangement of any nature
whatsoever to which it is now or will then be a party and is not and will
not on Completion be a party to any contract, commitment or arrangement
which may be unenforceable by the Company by reason of the transaction
being voidable at the instance of any other party or ultra xxxxx, void or
illegal.
16.4 Insurance: Full details of all insurance policies maintained by the
Company have been supplied to the Purchaser. All such insurances are now
in force and all premiums due have been paid. Pending Completion the
Company shall not permit any of its insurances to lapse or do or omit to
do anything the doing or omission of which would make any such policy of
insurance void or voidable or would or might result in an increase in the
rate of premiums. No claims are outstanding and nothing has occurred to
give rise to any such claim.
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Agreement for Sale and Purchase of Shares
16.5 No Notice from Lenders to Repay: The Company has not received notice
(whether formal or informal) from any lenders of money to the Company
requiring repayment or intimating the enforcement by such lenders of any
security which they may hold over any assets of the Company. The Vendor
is not aware of any circumstances likely to give rise to any such notice
being given or which would enable any such notice to be given.
16.6 Effect of Acquisition of Shares: The Vendor has no reason to believe that
as a result of the proposed acquisition of the Shares by the Purchaser:
16.6.1 No Cessation of Supplies: Any supplier of the Company will cease
supplying the Company or may substantially reduce its supplies to
the Company or alter the terms on which it supplies the Company;
or
16.6.2 No Cessation of Custom: Any customer of the Company will terminate
any contract with the Company or cease or materially reduce its
business with it; or
16.6.3 No Notice of Termination of Employment: Any officer or senior
employee of the Company will give notice of termination of his or
her employment with the Company; or
16.6.4 No Termination of Contracts: Any of the licences, consents,
approvals, agreements or contracts currently granted to or entered
into by the Company required in connection with the carrying on of
its business in the manner in which it has been carried on at any
time during the 2 years prior, to the date hereof will be
withdrawn, cancelled or be capable of termination.
16.7 Arm's Length Supplies: All supplies of goods or services to the Company
are purchased by the Company direct from manufacturers or suppliers on an
arm's length basis and no commissions or similar payments are made to the
Vendor or any other intermediaries in respect of such supplies.
16.8 No Outstanding Offers: No offer, tender or the like given or made by the
Company and still outstanding is capable of giving rise to a contract
merely by any unilateral act of a third party.
16.9 No Liabilities: The Company does nor have and at Completion will not have
outstanding debts, liabilities, contracts or engagements, guarantees,
undertakings or liabilities (including contingent liabilities) other than
liabilities implied by stature or disclosed in the Financial Statements
or incurred in the ordinary and proper course of its trading business.
16.10 Continuance of Name: The Company does not and pending Completion will not
use on its letterheads, brochures, sales literature, books, Premises or
vehicles or otherwise carry on its business under any name other than its
corporate name.
16.11 Electronic Storage: The Company has not and will not pending Completion
have
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Agreement for Sale and Purchase of Shares
any of its records, systems, controls, data or information recorded,
stored, maintained, operated or otherwise dependent upon or held by any
means (including any electronic, mechanical or photographic process
whether computerised or not) which (including all means of access thereto
and therefrom) are not under the exclusive ownership and direct control
of the Company. There has been no breach of any service or maintenance
contract relevant to any such electronic, mechanical or photographic
process or equipment whereby any person or body providing services or
maintenance thereunder may have the right to terminate such service or
maintenance contract.
16.12 Transactions with Associated Persons: The Vendor and his Associated
Persons have not entered into and will not prior to Completion enter into
any loan, borrowing, agreement or other arrangement with or on behalf of
the Company (other than as employee of the Company on terms fully
disclosed to the Purchaser) and are not and will not at Completion be
interested, whether directly or indirectly, in or have any Charge over
any of the assets of the Company.
17. Corporate Matters
17.1. Share Capital: There is not now outstanding and will not be
outstanding at Completion in respect of the Company any option or
agreement under which any person has or may in any circumstances
have or acquire the right to subscribe for or purchase any share
or loan capital of the Company or to convert
17.2 Attorneys: The Company has not given any power of attorney or any
other authority (express, implied or ostensible) which is still
outstanding or effective to any person to enter into any contract
or commitment or do anything on its behalf (other than any
authority of employees to enter into routine trading contracts in
the normal course of their duties) nor will it do so prior to
Completion.
17.3 Officers: Since the Last Accounting Date no appointments or
removals of any officers of the Company have been made.
17.4 Ultra Xxxxx Contracts: To the best of the Vendor's knowledge and
belief none of the activities or contracts or rights of the
Company is ultra xxxxx, unauthorised, invalid or unenforceable or
in breach of any contract or covenant.
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Agreement for Sale and Purchase of Shares
SCHEDULE 2
(clause 7.3)
1. Warranty Limitations: Notwithstanding any other provisions of this
Agreement the Vendor shall not be liable in respect of any Proceedings or
Costs for breach of any of the Warranties or other breach of this
Agreement:
1.1 Notice: Unless, promptly after the Purchaser becomes aware or ought to
have become aware of any breach, they shall have received from the
Purchaser written notice containing full details of the relevant
Proceedings including, if practicable, the matter or default which gives
rise to the Proceedings, the breach that results and the amount claimed
in respect of the Proceedings:
1.2 Other than Taxation: in the case of any of the Warranties other than
Warranties in relation to Taxation, within a period of 2 years after
Completion; or
1.3 Taxation: in the case of any of the Warranties in relation to Taxation,
within a period ending the earlier of the date 7 years after Completion
and the date falling six weeks after the date on which any relevant
statutory limitation period in the jurisdiction relevant to the Taxation
Proceedings shall expire;
and (unless the relevant Proceedings shall have been withdrawn or
satisfied) action in a court of competent jurisdiction in respect of such
breach shall have been commenced within 1 year after receipt of such
notice;
1.4 Aggregate of Warranties to Exceed Specified Amount: Unless the aggregate
amount of the liability of the Vendor breach of Warranties exceeds
$5,000;
1.5 Limit for Single Proceedings: Unless, in respect of any single breach of
any of the Warranties, the amount of the liability of the Vendor exceeds
$1,000;
1.6 Exclusion where Covered by Insurance: If and to the extent that (after
taking account of related Costs and any normal excess in such policy)
recovery is made by the Purchaser or the Company under any policy of
insurance effected by or for the benefit of the Company in respect of any
of the subject matters of such Proceedings;
1.7 Exclusion where Recovery under Another Agreement: If and to the extent
that those Proceedings or Costs occasioned thereby has been recovered
under any other agreement entered into between the parties and vice
versa;
1.8 Provisions Made in Account: If and to the extent that proper provision or
allowance therefor has been made in the Financial Statements;
1.9 Subsequent Changes: If and to the extent that such Proceedings and any
Costs in connection therewith arise or is increased as a result of;
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Agreement for Sale and Purchase of Shares
1.9.1 Any alteration in rates of Taxation after the date of this
Agreement with retrospective effect or the withdrawal after the
date of this Agreement of any published extra-statutory concession
or the alteration after that date of any published statement of
practice of the relevant revenue authority; or
1.9.2 The passing of, or any change in, any legislation after the date
of this Agreement; or
1.9.3 Any change in accounting policy or practice of the Company after
Completion including any changes in methods or practices in
relation to stock valuation:
1.9.4 Any voluntary act or omission or transaction of the Purchaser or
the Company after Completion otherwise than in the ordinary course
of the Company's business as carried on at the date of this
Agreement including (without limitation):
1.9.5 The payment of any unusual or abnormal dividend by the Company;
1.9.6 A change of the date up to which the Company makes up its
Statutory Books:
1.9.7 The cessation of any business carried on by the Company:
1.10 Liability Disclosed: If and to the extent the facts, matters or
circumstances giving rise to the breach are referred to in the Disclosure
Letter or any document disclosed with the Disclosure Letter or in any
document disclosed to the Purchaser or any officer of or professional
adviser to the Purchaser in relation to this Agreement and such facts,
matters or circumstances are accepted by the Purchaser in writing as not
being subject to the Warranties;
1.11 Utilisation of Taxation Relief: In the case of a Proceedings arising in
connection with a payment of Taxation, if and to the extent that such
payment could have been avoided by the utilisation of trading losses or
other relief from Taxation (other than trading losses, or other relief
arising after the Last Accounting Date) available to the Company;
1.12 Over Provision in Financial Statements: If and to the extent that there
is any over provision in respect of any matter included in the Financial
Statements;
1.13 Pursuant to Agreement: If and to the extent that such matter giving rise
to the Proceedings properly falls to be done in implementing the terms of
this Agreement;
2. Limitations Separate and Independent: For the avoidance of doubt each of
the above paragraphs of this Schedule shall be construed as being
separate and independent and none of them shall be construed as limiting
the effect of any other.
3. Recovery from Third Party: If the Vendor pays an amount pursuant to a
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Agreement for Sale and Purchase of Shares
Proceedings in respect of breach of any of the Warranties and the Company
or the Purchaser has a right of reimbursement against any person other
than the Company in respect of or relating to those Proceedings, the
Company or the Purchaser shall (subject to the Company or the Purchaser,
as the case may be, being indemnified to its reasonable satisfaction by
the Vendor against all reasonable Costs) take all reasonable steps or
proceedings to enforce such right. If the Purchaser subsequently recovers
such reimbursement from such third party, the Purchaser shall forthwith
repay to the Vendor as the case requires such part of the amount paid by
either of them by way of damages for breach of that Warranty as equals
the amount which is so recovered by the Purchaser in respect of the
facts, matters or circumstances giving rise to the breach of that
Warranty (after taking account of the Costs of recovery and (if
appropriate) any Taxation arising solely as a result of the recovery).
4. Conduct of Proceedings by the Vendor; The Purchaser shall give and shall
procure that the Company shall give, to the Vendor full facilities to
investigate any Proceedings and the extent of possible liability under
the Warranties and at the request of the Vendor shall (subject to the
Purchaser being indemnified as to any reasonable Costs which may be
incurred thereby) allow them at their own expense to participate in, or
have the conduct of (as they may elect), all proceedings of whatsoever
nature against the relevant third party arising out of or in connection
with such Proceedings or dispute, in the name of the Company or the
Purchaser as it may consider necessary in order to mitigate any
Proceedings or Costs arising under this Agreement. Neither the Purchaser
nor the Company shall accept or pay or compromise any such liability or
Proceedings as is referred to above without the Vendor either consenting
to such action or having a reasonable opportunity to resist the same.
5. No Double Liability: No liability shall attach to the Vendor for any loss
resulting from any breach of the Warranties or otherwise under this
Agreement to the extent that the same loss has been recovered by the
Company or the Purchaser under any indemnity under this Agreement. No
liability shall attach to the Vendor under any indemnity to the extent
that the same loss has been recovered by a claim under a Warranty.
6. Insurances: If, in respect of any claim, against the Vendor which may
arise in respect of this Agreement, the Purchaser or the Company is
entitled to claim under any policy of insurance, then the Vendor shall
not be liable in respect of such claim until a claim has been made under
such policy. Any claims against the Vendor shall be reduced by any amount
actually recovered under any such policy.
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Agreement for Sale and Purchase of Shares
SCHEDULE 3
Item 1. Consents (clauses 9.1.3 - 9.1.6)
Nil
Item 2. Guarantees (clause 4.2)
Nil
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Agreement for Sale and Purchase of Shares
ANNEXURES
1. Financial Statements (clause 1.1)
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40
E-448
MICROCHANNEL LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 1998
CONTENTS
Accountants Disclaimer
Statement of Financial Position
Statement of Financial Performance
Statement of Movements of Equity
Notes to the Financial Statements
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
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E-449
MICROCHANNEL LIMITED
ACCOUNTANTS DISCLAIMER
FOR THE YEAR ENDED 31ST MARCH 1998
We have compiled the attached Financial Statements. A compilation is limited to
the collection, classification and summarisation of financial information
supplied by the client. A compilation does not involve the verification of that
information. We have not carried out an audit or a review assignment on the
Financial Statements and therefore neither we nor any of our employees accept
any responsibility for the accuracy of the information from which the Financial
Statements have been prepared.
Further, the Financial Statements have been prepared at the request of and for
the purpose of the client only and neither we nor any of our employees accept
any responsibility on any ground whatever, including liability in negligence, to
any other person.
/s/ Xxxxx Xxxxxxx Xxxxxx
5th May, 1998
Auckland Xxxxx Xxxxxxx Xxxxxx
Chartered Accountants
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
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MICROCHANNEL LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31ST MARCH 1998
This Year Last Year
--------- ---------
Current Assets
Trade Debtors 119610 250382
Stock 240897 77295
Taxation Refund Due 23 548
Esquire Systems Limited -- 27000
------ ------
360530 355125
Deduct current Liabilities
Bank Accounts 3495 [ILLEGIBLE]
Trade Creditors 154429 236114
Fat Xxxx Corporation Limited - [ILLEGIBLE] 12000 [ILLEGIBLE] --
Xxxxxx Finance Limited - [ILLEGIBLE] 30000 [ILLEGIBLE] --
Esquire Systems Limited - [ILLEGIBLE] 29950 (paid out @ --
a Rate of
$2000 per
month)
Goods and Services Tax 3445 13270
------ ------
233323 253560
------ ------
Working Capital 127207 101565
Add
Fixed Assets
Fixed Assets at Cost 88588 49924
Less Accumulated Depreciation 33906 18906
------ ------
54602 31018
Intangible
Preliminary Expenses 850 850
------ ------
55452 31868
------ ------
182659 133433
Deduct
Term Liabilities
Hire Purchase Creditors 14417 24593
Less Precharged Interest 1266 3599
------ ------
13151 20994
Shareholders Advances 65758 106235
------ ------
78909 127229
------ ------
Net Assets 103750 6204
====== ======
The information above has not been audited or reviewed and is to be read in
conjunction with the Accountant Disclaimer and Notes to the Financial Statements
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-451
MICROCHANNEL LIMITED
STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31ST MARCH 1999
This Year Last Year
Represented By
Shareholders Equity
Share Capital
150000 Ordinary Shares 160000 1000
Revenue Reserves
Retained Earnings (56250) 5204
------ ------
Total Sharesholders Equity 103750 6204
====== ======
The financial statements have not been audited.
...............Director ...............Director
...................Date ...................Date
The information above has not been audited or reviewed and is to be read in
conjunction with the Accountant Disclaimer and Notes to the Financial Statements
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-452
MICROCHANNEL LIMITED
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31ST MARCH 1998
This Year Last Year
--------- ---------
Income
Sales 1000245 703470
Deduct Cost of Sales
Opening Stock 77295 34982
Purchases 556622 307800
------- -------
633917 342752
Deduct Closing Stock 240897 77295
------- -------
393020 265487
------- -------
Cost of Sale: 393020 265487
------- -------
Gross Profit 607226 437983
Deduct Expenses --
Directors Salaries 24000
Wages 342336 221779
ACC Levies 3164 --
Advertising 102606 69236
Accountancy 8533 2270
Bank Fees 1479 1454
Cafeteria Expenses 1069 1095
Cleaning 1109 --
Conference and Courses 3249 2266
Relocation Expenses 2111 --
Equipment Hire 6273 7729
Exchange Loss 5801 (1263)
Freight and Cartage 5490 6711
General Expenses 756 1584
Entertainnment 683 22
Insurance 254 (137)
Interest 2702 1812
Internet and Compuserve Charges 2384 1818
Licences and Subscriptions 1000 207
Light and Power 1317 --
Motor Vehicle Expenses 1992 (546)
Postage 2900 1815
Printing and Stationery 10758 9051
Rate 819 --
Rent 27300 18000
Repairs and Maintenance 3480 2947
Staff Recruitment Expenses 580 --
Staff Training Expenses 5365 5090
Telephone and Tolls 33026 15938
Travel 21566 13303
Travel - Overseas 26541 12144
------- -------
284364 180040
Depreciation as per Schedule 11980 12859
------- -------
Total Expenses 668680 415278
------- -------
Net Deficit 61454 (22705)
======= =======
The information above has not been audited or reviewed and is to be read in
conjunction with the Accountant Disclaimer and Notes to the Financial Statements
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-453
MICROCHANNEL LIMITED
STATEMENT OF MOVEMENTS IN EQUITY
FOR THE YEAR ENDED 31ST MARCH 1998
This Year Last Year
--------- ---------
Equity at Beginning of Year 6204 (16501)
Net Surplus/(Deficit) for Year (61454) 22705
----------- -----------
Total Recognised Revenues and Expenses for
the period [ILLEGIBLE] [ILLEGIBLE]
Increase in Share Capital 159000 --
----------- -----------
Equity at End of Year 103750 6204
=========== ===========
The information above has not been audited or reviewed and is to be read in
conjunction with the Accountant Disclaimer and Notes to the Financial Statements
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-454
MICROCHANNEL LIMITED
FIXED ASSETS & DEPRECIATION FOR THE YEAR ENDED 31ST MARCH 1998
------------------------------------------------------------------------------------------------------------------------------------
Description Date of Cost: Accum. Bk value: Rate: Method: No 97/98 Accum. Book Value
Purchase: Depn: Mth: Depn: Depn: 31/3/98
------------------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT
P/C Jul-95 2,774.00 1,793.00 981.00 40.0% XX 00 392.00 2,185.00 589.00
Laser Printer Jul-95 2,795.00 1,553.00 1,242.00 33.0% XX 00 410.00 1,963.00 832.00
Mail Software Jul-95 550.00 356.00 198.00 40.0% XX 00 78.00 434.00 116.00
Network Card Jul-95 372.00 240.00 132.00 40.0% XX 00 53.00 293.00 79.00
Ram Card Aug-95 466.00 301.00 165.00 40.0% XX 00 66.00 367.00 99.00
P/C Aug-95 3,050.00 1,508.00 1,142.00 40.0% XX 00 457.00 2,365.00 685.00
Mobile Phone Nov-95 229.00 174.00 55.00 50.0% XX 00 28.00 202.00 27.00
Alarm System Sep-95 730.00 220.00 510.00 18.0% XX 00 92.00 312.00 418.00
PC Jun-95 4,314.00 2,515.00 1,735.00 40.0% XX 00 716.00 3,237.00 1,077.00
Backup-Tape Dec-95 245.00 133.00 112.00 40.0% XX 00 45.00 178.00 67.00
Canon Fax Jul-95 3,795.00 1,654.00 2,141.00 33.0% XX 00 707.00 2,351.00 1,424.00
Ram Card Aug-95 675.00 338.00 337.00 40.0% XX 00 135.00 473.00 202.00
PCanywhere Mar-96 232.00 116.00 116.00 40.0% XX 00 46.00 162.00 70.00
CPU Mar-96 376.00 180.00 196.00 40.0% XX 00 78.00 258.00 118.00
Network Hub Aug-96 1,256.00 402.00 854.00 40.0% XX 00 342.00 744.00 512.00
NEC Telephone
System Sep-96 22,228.00 4,027.00 18,191.00 26.0% XX 00 4,730.00 8,777.00 13,483.00
Modem Oct-96 275.00 66.00 209.00 40.0% XX 00 84.00 150.00 125.00
M/Soft Exchange
Software Oct-96 126.00 63.00 63.00 100.0% XX 00 63.00 126.00 --
Clipart Nov-96 140.00 58.00 82.00 100.0% XX 00 82.00 140.00 --
4Mg Memory Computer Dec-96 180.00 60.00 120.00 100.0% XX 00 120.00 180.00 --
Network Card Jan-97 160.00 40.00 120.00 100.0% XX 00 120.00 160.00 --
Network Card Feb-97 165.00 28.00 137.00 100.0% XX 00 137.00 165.00 --
Notebook 486 Apr-97 1000.00 1000.00 40.0% XX 00 400.00 400.00 600.00
PCMCIA Card Apr-97 800.00 800.00 40.0% XX 00 320.00 320.00 480.00
Monitors x 2 Apr-97 400.00 400.00 40.0% XX 00 160.00 160.00 240.00
Hp deskjet printer Apr-97 200.00 200.00 40.0% XX 00 80.00 80.00 120.00
Modem Apr-97 200.00 200.00 40.0% XX 00 80.00 80.00 120.00
Klipbind Binding
Machine Apr-97 600.00 600.00 26.4% XX 00 158.00 158.00 442.00
2.1 GB
HardDisk SCSI Apr-97 550.00 550.00 48.0% XX 00 264.00 246.00 286.00
16 MB Ram x2 May-97 300.00 300.00 48.0% XX 00 132.00 132.00 168.00
IBM Thinkpad 380D May-97 3,618.00 3,618.00 48.0% XX 00 1,592.00 1,592.00 2,026.00
Modem 56K May-97 299.00 299.00 48.0% XX 00 132.00 132.00 167.00
HP Tape Backup Jun-97 1,137.00 1,137.00 48.0% XX 00 455.00 455.00 682.00
IOMEGA 21p Drive Jun-97 385.00 385.00 48.0% XX 00 114.00 114.00 171.00
ARCserve NT
Single Server Aug-97 679.00 679.00 48.0% XX 0 217.00 217.00 462.00
IBM Thinkpad 365 Aug-97 2,626.00 2,626.00 48.0% DV 8 840.00 840.00 1,786.00
Pentium 166 MMX Aug-97 2,058.00 2,058.00 48.0% DV 8 659.00 659.00 1,399.00
--------------------------------------------------------------------------------------------------------
59,895.00 16,349.00 43,646.00 14,586.00 30,835.00 29,060.00
FURNITURE & FITTINGS
Steel Racks Dec-95 564.00 108.00 456.00 9.5% XX 00 43.00 151.00 413.00
Book Shelf May-95 62.00 62.00 -- 100.0% XX 00 -- 62.00 --
Filing Cabinet Aug-95 179.00 119.00 60.00 100.0% XX 00 60.00 179.00 --
Curtains Oct-96 626.00 83.00 343.00 22.0% XX 00 119.00 202.00 424.00
Boardroom Table Mar-97 465.00 6.00 459.00 12.0% XX 00 55.00 61.00 404.00
[ILLEGIBLE] Mar-97 178.00 15.00 163.00 100.0% XX 00 163.00 178.00 --
Mobile Phone Mar-97 181.00 13.00 148.00 100.0% XX 00 148.00 161.00 --
Drawers x 3 Apr-97 450.00 450.00 15.0% XX 00 68.00 68.00 382.00
Black Cabinet x 3 Apr-97 350.00 350.00 15.0% XX 00 38.00 38.00 212.00
Desks x 2 Apr-97 700.00 700.00 15.0% XX 00 105.00 105.00 395.00
Grey Chairs x 5 Apr-97 350.00 350.00 15.0% XX 00 53.00 53.00 297.00
Chairs x 25 Apr-97 1,250.00 1,250.00 15.0% XX 00 188.00 188.00 1,062.00
Tall Chairs x 7 Apr-97 490.00 490.00 15.0% XX 00 74.00 74.00 416.00
Desks x 5 Apr-97 750.00 750.00 15.0% XX 00 113.00 113.00 637.00
Partition Apr-97 600.00 600.00 18.0% XX 00 108.00 108.00 492.00
Blank Filing
Cabinet x 2 Apr-97 200.00 200.00 18.0% XX 00 36.00 36.00 164.00
Blind Sep-97 373.00 373.00 18.0% XX 0 39.00 39.00 394.00
Desks Sep-97 2,710.00 2,710.00 18.0% XX 0 285.00 285.00 2,425.00
Stackable Chairs Sep-97 100.00 100.00 100.0% DV 7 100.00 100.00 --
Boardroom Desk Oct-97 976.00 976.00 18.0% XX 0 88.00 88.00 888.00
Reception Desk Oct-97 1000.00 1000.00 18.0% DV 6 90.00 90.00 910.00
Leasehold
Improvement Oct-97 16,259.00 16,259.00 9.5% XX 0 772.00 772.00 15,487.00
--------------------------------------------------------------------------------------------------------
28,893.00 406.00 28,287.00 2,745.00 3,151.0 25,543.00
--------------------------------------------------------------------------------------------------------
TOTAL FIXED ASSETS 88,588.00 16,655.00 71,933.00 17,331.00 33,986.00 54,602.00
========================================================================================================
------------------------------------------------------------------------------------------------------------------------------------
[INIT]
E-455
MICROCHANNEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 1998
NOTE 1: STATEMENT OF ACCOUNTING POLICIES
Reporting Entity
The company is registered under the Companies Xxx 0000. The financial
statements have been prepared in accordance with the Financial Reporting
Xxx 0000.
Measurement Base
The financial statements have been prepared on the basis of historical
cost with the exception of certain item for which specific accounting
policies are identified.
Specific Accounting Policies
The following specific accounting policies which materially affect the
measurement of profit and the financial position have been applied:
1) Debtors
Debtors are valued at anticipated rea1isable value. Bad debts are
written off during the period in which they are identified.
ii) Stock
Finished goods are stated at the lower of cost and net realisable
value. Costs have been assigned to stock quantities on hand at
balance date using the weighted average (first in first out)
basis.
iii) Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation of fixed assets, is calculated at rates as allowed by
the Inland Revenue Department.
Gains and losses on disposal of fixed assets are taken into
account in determining the operatinq result for the year.
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-456
MICROCHANNEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 1998
iv) Leased Assets
Assets acquired under finance leases are included as fixed assets
in the Statement of Financial Position.
Other leases under which all the risks and benefits of ownership
are effectively retained by the lessor are classified as operating
leases. Operating lease payments are charged to expense over the
periods of expected benefit.
v) Foreign Currencies
Foreign currency transaction, are converted at the exchange rate
at the date of the transaction. Foreign currency receivable and
payable at balance date are translated at exchange rates current
at balance. Exchange gains and losses are brought to account in
determining the gain or loss for the year.
vi) Income Tax
Income tax is accounted for using the taxes payable method after
taking full advantage of all deductions and concessions. No
provision has been made for deferred taxation. There is no
provision for taxation due to losses incurred.
vii) Goods and Services Tax (GST)
The financial statements have been prepared so that all components
are stated exclusive of GST.
viii) Preliminary Expenses
Preliminary Expenses are not amortised.
Changes in Accounting Policies
There have been no significant changes in accounting policies. All
policies applied have been on a basis consistent with those used
in previous years.
NOTE 2: NATURE OF BUSINESS
The principal activity is that of computer software reselling.
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-457
MICROCHANNEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 1999
NOTE 3: DIFFERENTIAL REPORTING
The company is a qualifying entity within the Institute of Chartered
Accountants of New Zealand's Differential Reporting framework.
The company qualifies under the size criteria and is not publicly
accountable.
The comapny has taken advantage of all differential reporting exemptions
available to it.
NOTE 4: MOVEMENTS IN RETAINED EARNINGS AND RESERVES
i) Retained Earnings
Balance at beginning of period 5204
Add
Net Surplus/(Deficit) for period (61454)
Deduct
Dividends paid and provided --
------
Balance at end of period (56250)
======
NOTE 5: LEASE COMMITMENTS
Lease commitments from non-cancellable operating leases at balance date
are:
Current 37940
Non Current 164700
------
202640
======
NOTE 6: RELATED PARTY INFORMATION
Related Party Transactions
The company has conducted the following types of transactions with
related parties as follows:
Relationships
Name of Related Party Description of Transactions
Esquire Systems Ltd. - Controlling Shareholder - Rent & Advances
Fat Xxxx Corportion Ltd - Common Sharebholder - Advances
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-458
MICROCHANNEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 1999
NOTE 7: INVENTORY
Some inventory on hand at balance date may be subject to Romalpa clauses.
NOTE 8: RESTRICTIONS ON TITLE OF ASSETS
Hire purchases are secured by the assets being financed.
NOTE 9: CAPITAL EXPENDITURE COMMITMENTS
There are no liabilities in respect of capital expenditure at balance
date other than those provided for in the accounts.
NOTE 10: CONTINGENT LIABILITIES
There are no contingent liabilities at balance date other than normal
lease commitments.
XXXXX XXXXXXX XXXXXX - CHARTERED ACCOUNTANTS - AUCKLAND - NEW ZEALAND
[INIT]
E-459
Agreement for Sale and Purchase of Shares
2. Form of Escrow Agreement (clause 1.1)
[INIT]
41
E-460
2
"Profit" means the net income, after tax, of MicroChannel.
"MicroChannel" shall mean MicroChannel Limited.
1.2 Words importing the singular number shall include the plural and vice
versa.
1.3 References to persons shall be deemed to include the references to
individuals, companies, corporations, firms, partnerships, joint
ventures, associations, organizations, trusts, states or agencies of
state, government departments and local authorities in each case whether
or not having separate legal personality.
1.4 Expressions defined in the main body of this Agreement bear their defined
meaning in the whole of this Agreement including the recitals.
1.5 Words importing one gender shall include the other genders.
Consideration
2.1 In consideration of the sum of ONE DOLLAR ($1.00) paid by the parties to
each other, receipt of this sum being acknowledged by each of the
parties, the Security Holder covenants and agrees with the Issuer and
with the Trustee, and the Issuer and the Trustee covenant and agree each
with the other and with the Security Holder as set out below.
Securities deposited with Trustee
3.1 The Security Holder hereby agrees to place and deposit in escrow with the
Trustee the Escrowed Shares which are to be issued to the Security Holder
for the goodwill value of the Shares of MicroChannel in part
consideration for the Property pursuant to the terms of the Sale
Agreement.
3.2 The Security Holder agrees to deposit in escrow any further certificates
representing shares in the Issuer which the Security Holder may receive
as a stock dividend on shares hereby escrowed, and to deliver to the
Trustee immediately on receipt thereof the certificates for any such
further shares and any replacement certificates which may at any time be
issued for any Escrowed Shares.
3.3 The Parties hereby agree that, subject to the provisions of clause 5, the
Escrowed Shares and the beneficial ownership of or any interest in them
and the certificates representing them (including any replacement shares
or certificates) shall not be sold, assigned, hypothecated, alienated,
released from escrow, transferred within escrow, or otherwise in any
manner dealt with, without the written consent of the Exchange given to
the Trustee or except as may be required by reason of the death or
bankruptcy of a Security Holder, in which case the Trustee shall hold the
said certificates subject to this Agreement, for whatever person or
[INIT]
E-461
3
company shall be legally entitled to become the registered owner thereof,
3.4 The Security Holder directs the Trustee to retain the Escrowed Shares and
the certificates (including any replacement shares or certificates)
representing them and not to do or cause anything to be done to release
them from escrow or to allow any transfer, hypothecation or alienation
thereof without the written consent of the Exchange.
3.5 Any Security Holder prior to applying to the Exchange for a consent for a
transfer within escrow shall, before applying, give notice in writing of
his intention to the Issuer and the Trustee.
3.6 If a dividend is declared while the Escrowed Shares or any of them
continue to be held in escrow under this Agreement, then the dividend
shall be paid to the Trustee, who shall hold the dividend in escrow on
the same terms as the Escrowed Shares, such dividend to be subject to
release or return to the Issuer in the same manner as the Escrowed Shares
to which the dividend is attributed.
4 Trustee Accepts Obligations
4.1 The Trustee accepts the obligations placed on it under this Agreement and
hereby agrees to perform the obligations in accordance with the terms of
this Agreement and any written consents, orders or directions of the
Exchange.
4.2 The Security Holder and the Issuer hereby agree to and do hereby release
and indemnify and save harmless the Trustee from and against all claims,
suits, demands, costs, damages and expenses which may be occasioned by
reason of the Trustee s compliance in good faith with the terms of this
Agreement.
4.3 If the Trustee should wish to resign, it shall give at least 3 months'
notice to the Issuer which may, with the written consent of the Exchange,
by writing appoint another Trustee in its place and such appointment
shall be binding on the Security Holder, and the new Trustee shall assume
and be bound by the obligations of the Trustee hereunder.
5 Release of Escrowed Shares
5.1 The Trustee upon receipt of written notice of MicroChannel's Profit for
the financial years ending March 31,1999, March 31, 2000 and March 31,
2001 shall in the said years release to the Security Holder such number
of Escrowed Shares which shall be equal in value to MicroChannel Profit
as notified to the Trustee in each year.
5.2 The Trustee in calculating the number of Escrowed Shares to be released
pursuant to clause 5.1 above shall use;
[INIT]
E-462
4
5.2.1 The average of the WestpacTrust Foreign Exchange buy and sell
rates on March 31 of each applicable year as the exchange rate for
conversion of the New Zealand dollar denominated MicroChannel's
Profit after Lax sum to Canadian dollars,
5.2.2 The BIL Share price shall be the price on the Exchange at the
close of business on March 31, 1999 expressed in Canadian Dollars,
5.3 The Issuer shall ensure that the Trustee shall receive written
notification of MicroChannel's Profit no later than September 30, of each
year.
5.4 A release from escrow of all or part of the Escrowed Shares shall release
from this Agreement only those Escrowed Shares so released. For greater
certainty, this clause does not apply to shares transferred within
escrow.
5.5 Any Escrowed Shares remaining in escrow on September 30, 2001 shall be
cancelled by the Issuer.
Right to Cancel Shares
6.1 If the MicroChannel Profit for any of the periods ended March 31, 1999,
March 31, 2000 or March 31, 2001 are less them the amounts projected for
such period, as provided for by the Sale Agreement, then the Issuer shall
have the right, as at March 31, 1999 or on any 6 month anniversary
thereof; to cancel any of the Escrowed Shares then remaining in escrow.
Issuer Wound Up
7.1. If the Issuer is wound up and any Escrowed Shares remain in escrow under
this Agreement at the time when a distribution of assets to holders of
shares is made by the liquidator, the Security Holder shall assign his
right to receive that part of the distribution which is attributable to
the escrowed shares to the Trustee, for the benefit of and in trust for
the persons and companies who are then holders of free shares in the
Issuer in proportion to their holdings in the Issuer except that this
section shall not apply to those of the Escrowed Shares which are or
would be entitled to be released pursuant to clause 5 but have not yet
been so released.
Voting Rights
8.1 All voting rights attached to the Shares shall at all times be exercised
by the Security Holder or respective registered holders thereof.
[INIT]
E-463
ESCROW AGREEMENT
DATED the 10th day of June, 1998.
BETWEEN: XXXXXXX INVESTMENTS LTD at Alberta, Canada
("the Issuer")
AND: MONTREAL TRUST COMPANY OF CANADA at Alberta, Canada
("The Trustee")
AND: XXXX XxXXXX, of Auckland, New Zealand
("the Security Holder")
INTRODUCTION
1. The Security Holder and the Issuer have entered into an agreement dated
the 10th day of June, 1998 whereby the Security Holder has agreed to sell
his shareholdings in MicroChannel Limited to the Issuer, the
consideration for the Property being in the allotment of shares in the
Issuer to the Security Holder.
2. One of the terms of the Sale Agreement is that the Escrowed Shares issued
in consideration for the Property are to be deposited with the Trustee
pursuant to the terms of this Agreement.
3. The Trustee has agreed to undertake and perform its duties according to
the terms and conditions under this Agreement.
THE PARTIES AGREE as follows:
1. Interpretation,
1.1 in this Agreement unless the context otherwise requires:
"The Sale Agreement" means the agreement between the Security
Holder and the Issuer dated the 10th day of June, 1998.
"The Property" means the Security Holders shares in MicroChannel
Limited.
The BIL Shares" mean the shares allotted, by the Issuer to the
Security Holder as part consideration for the purchase of the
Property.
"Escrowed Shares" means those of the BIL Shares escrowed
hereunder.
"The Exchange" means the principle stock exchange on which the
Common Shares of the Issuer may be listed at such time.
[INIT]
E-464
9. Issuer's Obligation
9.1 The Issuer [ILLEGIBLE] Agreement [ILLEGIBLE] its [ILLEGIBLE] as
Trustee [ILLEGIBLE]
10. Security Holder's [ILLEGIBLE]
10.1 The covenant [ILLEGIBLE] are made with [ILLEGIBLE] holders from
[ILLEGIBLE] enforced not [ILLEGIBLE]
11. Miscellaneous
11.1 This Agreement [ILLEGIBLE] the aprts as [ILLEGIBLE] agreement, and
[ILLEGIBLE] construed as if [ILLEGIBLE] this Agreement.
11.2 This Agreement [ILLEGIBLE] parties to this [ILLEGIBLE]
administrators, [ILLEGIBLE]
11.3 The proper law for [ILLEGIBLE] Zealand and any [ILLEGIBLE] shall
be brought in [ILLEGIBLE] hereto, in writing, [ILLEGIBLE]
IN WITNESS WHEREOF [ILLEGIBLE]caused their respective [ILLEGIBLE]
E-465
MicroChannel
--------------------------------------------------------------------------------
MicroChannel Limited
Xxxxxxx Xxx 00 000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxx Xxxxxxx
Ph: (00-0) 000 0000
Fax: (00-0) 000 0000
10th June 1998
Xxx Xxxxxxxx
Xxxxxxx Investments
P0 Box 99222
Newmarket
Dear Hal,
Re: Letter of Disclosure - Share Options to Related Parties
You are aware of the open option to Xxxxx Xxxxxxxx and Xxx Xx for 20% each of
the MicroChannel shares (now Xxxxxxx Investments stock), after payment to myself
for their net asset value.
This entitlement will be transferred into individual names from my entitlement
of the stocks to be Issued from the results of trading for the year ended 31st
March 1999.
From the joint entitlement of XxXxxx, Ho and Kirkness, a total of 6% will be
issued to Xxxx Xxxxxxxx (4%) and Xxxxx Xxxxxx (2%) as an incentive on achieving
the agreed tax paid net profit of $184,568.00.
The resultant position of Xxxxxxx Investments stock on achievement of the budget
will be as follows:
Xxxx XxXxxx 56.4%
Xxx Xx 18.8%
Xxxxx Xxxxxxxx 18.8%
Xxxxx Xxxxxx 2.0%
Xxxx Xxxxxxxx 4.0%
I trust that this now finalizes all matters and that you will have received all
required information and that the transaction is now completed.
Sincerely,
/s/ XXXX XXXXXX
Xxxx XxXxxx
Attached please find copy of letters to:
1. Xxx Xx
2. Xxxxx Xxxxxxxx
3. Xxxx Xxxxxxxx
4. Xxxxx Xxxxxx
[INIT]
E-466
MicroChannel
--------------------------------------------------------------------------------
MicroChannel Limited
Xxxxxxx Xxx 00 000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxx Xxxxxxx
Ph: (00-0) 000 0000
Fax: (00-0) 000 0000
10th June 1998
Xxx Xx
138 Mokoia Raad
Birkenhead
Auckland
Share/Bonus Option
Dear Xxx,
I would like to formalize the discussion we had in regards to the Bonus/Share
option for this financial year April 1996 -- March 1999.
On achieving our agreed after tax net profit budget of $184,568.00 you will be
issued equity by the way of shares. This share payment is calculated on our net
profit result and is made up in the follow manner.
You will be issued Xxxxxxx Investments shares to the value of 20% of the
companies Net Profit x 4.
i.e. $184,506.00 Net x 20% = $36,913.60 x 4 = $147,654.40 paid in shares
The value of these shares will be issued to you in April 1999 and can be earned
out when MicroChannel NZ has achieved $184,566.00 net profit x 4 in the
proceeding financial years(s). The above share option is governed by the
conditions of the escrow agreement. Copy of the sale and purchase agreement and
escrow contract are attached.
The above shares offered are from myself as the Vendor of MicroChannel, this is
a private transaction between yourself and Xxxx XxXxxx. There is no obligation
from Xxxxxxx Investments or MicroChannel in this matter. This does not form part
of your income from the company.
I hope you find this satisfactory.
Sincerely,
/s/ XXXX XXXXXX
Xxxx XxXxxx
[INIT]
E-467
MicroChannel
--------------------------------------------------------------------------------
MicroChannel Limited
Xxxxxxx Xxx 00 000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxx Xxxxxxx
Ph: (00-0) 000 0000
Fax: (00-0) 000 0000
10th June 1998
Xxxxx Xxxxxxxx
00 Xxxxxxx Xxxx
Xx Xxxx
Xxxxxxxx
Share/Bonus Option
Dear Xxxxx,
I would like to formalize the discussion we had in regards to the Bonus/Share
option for this financial year April 1996 -- March 1999.
On achieving our agreed after tax net profit budget of $184,568.00 you will be
issued equity by the way of shares. This share payment is calculated on our net
profit result and is made up in the follow manner.
You will be issued Xxxxxxx Investments shares to the value of 20% of the
companies Net Profit x 4.
i.e. $184,506.00 Net x 20% = $36,913.60 x 4 = $147,654.40 paid in shares
The value of these shares will be issued to you in April 1999 and can be earned
out when MicroChannel NZ has achieved $184,566.00 net profit x 4 in the
proceeding financial years(s). The above share option is governed by the
conditions of the escrow agreement. Copy of the sale and purchase agreement and
escrow contract are attached.
The above shares offered are from myself as the Vendor of MicroChannel, this is
a private transaction between yourself and Xxxx XxXxxx. There is no obligation
from Xxxxxxx Investments or MicroChannel in this matter. This does not form part
of your income from the company.
I hope you find this satisfactory.
Sincerely,
/s/ XXXX XXXXXX
Xxxx XxXxxx
[INIT]
E-468
MicroChannel
--------------------------------------------------------------------------------
MicroChannel Limited
Xxxxxxx Xxx 00 000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxx Xxxxxxx
Ph: (00-0) 000 0000
Fax: (00-0) 000 0000
10th June 1998
Xxxx Xxxxxxxx
000 Xxxxxxxxx Xxx.
Xxxxxxxxxx Xxx
Xxxxxxxx
Share/Bonus Option
Dear Xxxx,
I would like to formalize the discussion we had in regards to the Bonus/Share
option for this financial year April 1996 -- March 1999.
On achieving our agreed after tax net profit budget of $184,568.00 you will be
issued equity by the way of shares. This share payment is calculated on our net
profit result and is made up in the follow manner.
You will be issued Xxxxxxx Investments shares to the value of 4% of the
companies Net Profit x 4.
i.e. $184,506.00 Net x 4% = $7,382.70 x 4 = $29,530.80 paid in shares
The value of these shares will be issued to you in April 1999 and can be earned
out when MicroChannel NZ has achieved $184,566.00 net profit x 4 in the
proceeding financial years(s). The above share option is governed by the
conditions of the escrow agreement. Copy of the sale and purchase agreement and
escrow contract are attached.
The above shares offered are from myself as the Vendor of MicroChannel, this is
a private transaction between yourself and Xxxx XxXxxx. There is no obligation
from Xxxxxxx Investments or MicroChannel in this matter. This does not form part
of your income from the company.
I hope you find this satisfactory.
Sincerely,
/s/ XXXX XXXXXX
Xxxx XxXxxx
[INIT]
E-469
MicroChannel
--------------------------------------------------------------------------------
MicroChannel Limited
Xxxxxxx Xxx 00 000
Xxxxxxx Xxxxxx
Xxxxxxxx
Xxx Xxxxxxx
Ph: (00-0) 000 0000
Fax: (00-0) 000 0000
10th June 1998
Xxxxx Xxxxxx
000 Xxxxxx Xxxx
Xxxxxxxxx
Xxxxxxxx
Share/Bonus Option
Dear Xxxxx,
I would like to formalize the discussion we had in regards to the Bonus/Share
option for this financial year April 1996 -- March 1999.
On achieving our agreed after tax net profit budget of $184,568.00 you will be
issued equity by the way of shares. This share payment is calculated on our net
profit result and is made up in the follow manner.
You will be issued Xxxxxxx Investments shares to the value of 2% of the
companies Net Profit x 4.
i.e. $184,506.00 Net x 2% = $3,691.40 x 4 = $14,765.60 paid in shares
The value of these shares will be issued to you in April 1999 and can be earned
out when MicroChannel NZ has achieved $184,566.00 net profit x 4 in the
proceeding financial years(s). The above share option is governed by the
conditions of the escrow agreement. Copy of the sale and purchase agreement and
escrow contract are attached.
The above shares offered are from myself as the Vendor of MicroChannel, this is
a private transaction between yourself and Xxxx XxXxxx. There is no obligation
from Xxxxxxx Investments or MicroChannel in this matter. This does not form part
of your income from the company.
I hope you find this satisfactory.
Sincerely,
/s/ XXXX XXXXXX
Xxxx XxXxxx
[INIT]
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Heads of Agreement
Date: Friday, 13 February 1996
Parties
1. Xxxxxxx Investments (NZ) Limited (BINZ) a subsidiary of Xxxxxxx
Investments Limited a company listed on the Alberta stock Exchange (BIK)
2. The shareholders of MicroChannel Limited (Vendor)
Introduction:
A. BKI wishes to acquire all of the shares of MicroChannel Limited.
B. The Vendor wishes to sell these shares.
C. This Agreement sets out the understanding reached between the parties.
Terms:
1 BKNZ will purchase the business of the Vendor (Business) as a going
concern.
2 The purchase price, inclusive of GST (if any), shall comprise the value
of goodwill less the value of the net tangible assets.
3 The net tangible assets shall be valued at 31/3/98. An audit/due
diligence review shall be conducted by KPMG, to confirm the net asset
values. Unless otherwise agreed all value calculations shall be made in
accordance with GAAP as determined by KPMG.
4 The goodwill shall be valued as follows
4.1 A formula of 4 times shall be applied to the audited net profit
after tax of the Business after deducting any cost of funds
provided by BKNZ calculated at commercial rates, and management
fees charged in accordance with clause 5 (if applicable).
4.2 The calculation is to be based on the audited annual accounts for
the Business as at 31 March, 1999.
4.3 A profit and loss budget for the Business shall be produced by
and agreed with BKNZ for the financial years ending 31 March
1999, which the formula will apply to calculate the goodwill value
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5 Following settlement management fees will be charged to the Business by
BKNZ at commercial rates and apply only to work which would otherwise be
undertaken by outside contractors, or be undertaken in house. It is not a
prerequisite that BKNZ be used for the supply of any services to the
Business. Any activity undertaken in this regard will be quoted upon, and
charged monthly as a standard debtor transaction.
6 Settlement will be by way of
6.1 The issuance of BKI shares subject to the earn out provisions in
clause 8.
7 All BKI shares referred to in clause 6.1 shall be issued by BKI once the
Net tangible asset and Goodwill values have been calculated and held in
escrow by BKI subject to the following provisions.
7.1 Shares issued in the first tranche, to the value of the Net
tangible asset value as at 31/3/98, will be subject to a 12 month
escrow period, ending 31/3/99.
7.2 Shares which are issued in the second trance, to the value of the
goodwill less the value of the net tangible asset value as at
31/3/98, shall be released subject to the earn out provisions in
clause 8 on 30 June 1999, 2000, and 2001.
7.3 The strike price for the shares issued will be set at the close of
business on the 31/3/98 and 31/3/99 for the respective 1st and
second trenches of BKI shares. The exchange rate for conversion
to NZ currency will be the average between the Westpac buy and
sell rates at the time of the transaction.
7.4 Any dividends declared in respect of Escrow Shares shall be held
in trust by BKI, until the appropriate release date.
8 The following earn out provisons will apply to the release of the Escrow
Shares:
8.1 The Shares issued in the second tranche will be earned out through
future profits generated by the Business over the 3 financial
years which ending 31/3/99, 31/3/2000 and 31/3/2001.
8.2 The earn out provisions are governed by the rules of the Alberta
Stock Exchange and the Toronto Stock Exchange.
8.3 If profits equal to the Balance are not achieved by the Business
by 31 March 2001, the unearned portion of the Balance shall not be
payable, the value of the goodwill shall be adjusted and a portion
of the unissued Escrow Shares equal in value to the unearned
portion of the Balance shall be cancelled.
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8.4 To protect the future earnings for BINZ, if the Business does not
realise it's projected profitability relative to budget over a
period of three years from 31 March 1998 by first achieving
projected profitability by 31 March 1999 and second by sustaining
profitable operation for years ending 31 March 1999, 2000 and 2001
then BKNZ shall have the right, as at 31 March 1999 and on the 6
monthly anniversaries thereafter, to terminate the escrow
arrangement and cancel any unissued Escrow Shares. If this right
is exercised the consideration already paid by BINZI at that date
will be deemed to be full settlement of the acquisition price and
no further consideration shall be payable.
9 Should BINZ determine that the Vendors assets are no longer required
within the Xxxxxxx Investments Group, then first right to purchase the
Business, at fair market value, shall be granted to the Vendor.
10 Xx Xxxxx Xxxxxxxx and selected staff who currently work within the
Business shall be offered employment contracts with BINZ on favourable
terms but not exceeding his current compensation of $65000 Per Annum and
10% of Net profit before tax as a bonus.
11 Xxxxx Xxxxxxxx will hold the position of General Manager and will report
to Xxxx Xxxxxxx, CEO of BINZ.
12 Each party will pay their legal costs in preparation of the sale and
purchase agreement. The Vendor warrants to the best of its knowledge that
the information provided to BINZ in relation to the Business is fair and
accurate.
13 The parties agree to proceed to formal sale and purchase agreement, once
the acquisition terms and conditions have been has been established and
agreed.
14 If one party withdraws from the negotiations prior to completion, and
professional service fees have been incurred, these costs will be born by
the party withdrawing.
15 BINZ will be Indemnified by the shareholders of the Vendor from any
liability of the Vendor or the Business whether contingent or not
relating to or arising out of any act, omission, obligation, or
circumstance undertaken by or imposed the Business prior to the
Settlement Date which has not been disclosed to the Purchaser prior to
the date of the signing of this Agreement
16 BINZ will be consulted on all matters of material interest, which affect
the Business, prior to acquisition. This includes expenditure on all
items of capital expenditure and general expenses above $5000
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17 All parties will keep this Agreement and all information disclosed during
negotiations confidential. BKI shall be entitled to make a press
announcement in Canada, once this Agreement is signed, stipulating that
BKI has entered into a heads of Agreements with the Vendor. There will be
no general disclosure in New Zealand, until the formal Agreement for Sale
and Purchase is signed.
18 Xxxx XxXxxx is to remain as a Director and as a cheque signatory of
MicroChannel Limited for the term of the acquisition.
19 This heads of agreement is subject to the approval by 20th February 1998
or such later date as agreed between the parties of:
19.1 The Alberta Stock Exchange and Toronto Stock Exchange
19.2 Board approval by BKI.
19.3 Any other regulatory authority in New Zealand end Canada.
19.4 The Directors of the Vendor.
19.5 The major product suppliers to the Business is C.A.
20 All amounts referred to in this Agreement are in NZ$, unless otherwise
specified
Signed by the parties:
/s/ [ILLEGIBLE] (officer)
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Xxxxxxx Xxxxx Xxxxxxx for and on behalf of Xxxxxxx Investments (N.Z.) Limited
/s/ XXXX XXXXXX
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Xxxx XxXxxx for and on behalf of the Shareholders and Directors of the Vendor
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