ASSET PURCHASE AGREEMENT
BETWEEN
PROFORMIX SYSTEMS, INC.
AND
VANITY SOFTWARE PUBLISHING CORPORATION
MADE AS OF
APRIL 30, 1998
TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1 - INTERPRETATION
1.01 Definitions...................................................... 1
1.02 Headings......................................................... 4
1.03 Extended Meanings................................................ 4
1.04 Statutory References............................................. 4
1.05 Accounting Principles............................................ 4
1.06 Currency......................................................... 4
1.07 Schedules........................................................ 5
ARTICLE 2 - SALE AND PURCHASE
2.01 Purchased Assets to be Sold and Purchased........................ 6
2.02 Purchase Price................................................... 7
2.03 Allocation of Purchase Price..................................... 8
2.04 Tax Returns...................................................... 8
2.05 Assumption of Obligations and Liabilities........................ 8
2.06 Obligations and Liabilities Not Assumed.......................... 8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.01 Vendor's Representations and Warranties.......................... 9
3.02 Survival of Vendor's Representations, Warranties and Covenants... 16
3.03 Purchaser's Representations and Warranties....................... 16
3.04 Survival of Purchaser's Representations, Warranties and
Covenants........................................................ 18
ARTICLE 4 - COVENANTS
4.01 Covenants of the Vendor.......................................... 19
4.02 Covenants of the Purchaser....................................... 21
Table Of Contents(cont'd)
ARTICLE 5 - CONDITIONS
5.01 Conditions for the Benefit of the Purchaser...................... 22
5.02 Conditions for the Benefit of the Vendor......................... 24
ARTICLE 6 - CLOSING ARRANGEMENTS
6.01 Closing.......................................................... 26
6.02 Examination of Records and Purchased Assets by Purchaser......... 26
6.03 Examination of Records by Vendor................................. 27
6.04 Risk of Loss..................................................... 27
6.05 Delivery of Purchased Assets..................................... 28
ARTICLE 7 - RISK FACTORS OF ACQUIRED SECURITIES
7.01 Acknowledgement by Vendor........................................ 28
ARTICLE 8 - GENERAL
8.01 Indemnification.................................................. 30
8.02 Further Assurances............................................... 30
8.03 Fees and Commissions............................................. 30
8.04 Public Announcements............................................. 30
8.05 Benefit of the Agreement......................................... 31
8.06 Entire Agreement................................................. 31
8.07 Amendments and Waivers........................................... 31
8.08 Assignment....................................................... 31
8.09 Notices.......................................................... 31
8.10 Remedies Cumulative.............................................. 32
8.11 Governing Law.................................................... 33
8.12 Attornment....................................................... 33
8.13 Counterparts..................................................... 33
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of April 30, 1998
BETWEEN:
PROFORMIX SYSTEMS, INC., a corporation
incorporated under the laws of the State of Delaware
(the "Purchaser"),
- and -
VANITY SOFTWARE PUBLISHING
CORPORATION, a corporation incorporated under the
laws of the Province of Ontario (the "Vendor"),
WHEREAS the Vendor carries on the business of, inter alia, creating,
manufacturing, selling and retailing ergonomic software;
AND WHEREAS the Vendor desires to sell and the Purchaser desires to
purchase certain of the assets of the Vendor pertaining to the said business
upon and subject to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE 1 - INTERPRETATION
1.01 Definitions
In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
"Affiliate" has the meaning attributed thereto in the Business Corporations Act
(Ontario).
"Agreement" means this agreement, including its recitals and schedules, as
amended from time to time.
"Applicable Law" means:
(i) any applicable domestic or foreign law including any statute,
subordinate legislation or treaty, and
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(ii) any applicable guideline, directive, rule, standard, requirement,
policy, order, judgment, injunction, award or decree of a
Governmental Authority.
"Balance Sheet" means the balance sheet of the Corporation as at the Balance
Sheet Date.
"Balance Sheet Date" means March 31, 1998.
"Business" means the business of, inter alia, creating, manufacturing, selling
and retailing ergonomic software at present and heretofore carried on by the
Vendor in Xxxxxxx, Xxxxxxx.
"Business Day" means a day other than a Saturday, Sunday or statutory holiday in
Ontario.
"Claims" means all losses, damages, expenses, liabilities (whether accrued,
actual, contingent, latent or otherwise), claims and demands of whatever nature
or kind including all legal fees and costs on a solicitor and client basis.
"Closing Date" means April 30, 1998 or such other date as may be agreed to in
writing between the Vendor and the Purchaser.
"Developers" has the meaning set out in Section 5.01(1)(j).
"Environmental Law" means any Applicable Law relating to the environment
including those pertaining to:
(i) reporting, licensing, permitting, investigating, remediating and
cleaning up in connection with any presence or release, or the
threat of the same, of Hazardous Substances, and
(ii) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling and the like of Hazardous Substances,
including those pertaining to occupational health and safety.
"Exercise Period" has the meaning set out in Section 2.02(1)(b).
"Financial Statements" has the meaning set out in Section 3.01(g).
"Governmental Authority" means any domestic or foreign legislative, executive,
judicial or administrative body or person having or purporting to have
jurisdiction in the relevant circumstances.
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"Hazardous Substance" means any substance or material that is prohibited,
controlled or regulated by any Governmental Authority pursuant to Environmental
Laws.
"Indemnitee" has the meaning set out in Section 8.01.
"Indemnitor" has the meaning set out in Section 8.01.
"Intellectual Property" means intellectual property of whatever nature and kind
including all domestic and foreign trade-marks, business names, trade names,
domain names, trading styles, patents, trade secrets, Software, industrial
designs and copyrights, whether registered or unregistered, and all applications
for registration thereof, and inventions, formulae, product formulations,
technology and techniques, know-how and manuals.
"Inventories" means all inventories of the Business which are of merchantable
quality and reasonably fit for the purpose intended including all Ergo Break
software, finished goods, work in progress and raw materials.
"Owned Intellectual Property" has the meaning set out in Section 2.01(e).
"Permits" means all permits, consents, waivers, licences, certificates,
approvals, authorizations, registrations, franchises, rights, privileges and
exemptions, or any item with a similar effect, issued or granted by any person.
"Proceeds" has the meaning set out in Section 6.04(1)(a).
"Proformix Shares" has the meaning set out in Section 2.02(1)(a).
"Purchased Assets" means the Purchased Assets referred to or described in
Section 2.01.
"Purchase Price" has the meaning set out in Section 2.02(1).
"Software" means all software relating to the Business including the computer
programs known by the names as set out in Schedule 2.01(e), including all
versions thereof, and all related documentation, manuals, source code and object
code, program files, data files, computer related data, field and data
definitions and relationships, data definition specifications, data models,
program and system logic, interfaces, program modules, routines, sub-routines,
algorithms, program architecture, design concepts, system designs, program
structure, sequence and organization, screen displays and report layouts, and
all other material related to such software.
"Subsidiary" has the meaning attributed thereto in the Business Corporations Act
(Ontario).
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"Time of Closing" means 9:00 a.m. (Toronto Time) on the Closing Date.
"Third Party Programs" has the meaning set out in Section 3.01(aa).
1.02 Headings
The division of this Agreement into Articles and Sections and the
insertion of a table of contents and headings are for convenience of reference
only and do not affect the construction or interpretation of this Agreement. The
terms "hereof", "hereunder" and similar expressions refer to this Agreement and
not to any particular Article, Section or other portion hereof. Unless something
in the subject matter or context is inconsistent therewith, references herein to
Articles, Sections and Schedules are to Articles and Sections of and Schedules
to this Agreement.
1.03 Extended Meanings
In this Agreement words importing the singular number only include
the plural and vice versa, words importing any gender include all genders and
words importing persons include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations. The term "including" means
"including without limiting the generality of the foregoing".
1.04 Statutory References
In this Agreement, unless something in the subject matter or context
is inconsistent therewith or unless otherwise herein provided, a reference to
any statute is to that statute as now enacted or as the same may from time to
time be amended, re-enacted or replaced and includes any regulations made
thereunder.
1.05 Accounting Principles
Wherever in this Agreement reference is made to a calculation to be
made or an action to be taken in accordance with generally accepted accounting
principles, such reference will be deemed to be to the generally accepted
accounting principles from time to time approved by the Canadian Institute of
Chartered Accountants, or any successor institute, applicable as at the date on
which such calculation or action is made or taken or required to be made or
taken.
1.06 Currency
All references to currency herein are to lawful money of Canada.
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1.07 Schedules
The following are the Schedules to this Agreement:
Schedule 2.01(a) - Specified Machinery and Equipment
Schedule 2.01(d) - Royalty, Franchise, Licence and Management
Agreements; Other Contracts or Commitments
Schedule 2.01(e) - Owned Intellectual Property
Schedule 2.01(f) - Corporate Names and Trademarks
Schedule 2.05 - Assumed Contracts and Commitments
Schedule 3.01(b) - Permitted Encumbrances
Schedule 3.01(g) - Financial Statements of Vendor
Schedule 3.01(x) - Consents Required re Intellectual Property
Schedule 3.01(aa) - Third Party Programs
Schedule 3.01(dd) - Deliverees of Source Code
Schedule 3.01(ee) - Distributors, Agents, Representatives
Schedule 3.01(ff) - Licences, Maintenance and Support Agreements
Schedule 3.01(gg) - Known Problems or Defects in Software
Schedule 3.01(hh) - Current State of Software
Schedule 3.01(kk) - Pending or Threatened Proceedings
Schedule 3.01(pp) - Former Employees
Schedule 3.01(qq) - Employment and Consulting Contracts
Schedule 5.01(1)(i) - Non-Competition Agreement between Vendor and
Purchaser
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Schedule 5.01(1)(j) - Non-Competition Agreement between Purchaser and
Developers
Schedule 5.01(1)(k) - Legal Opinion of Vendor's Counsel
Schedule 5.02(1)(d) - Legal Opinion of Purchaser's U.S. Counsel
Schedule 5.02(1)(e) - Legal Opinion of Purchaser's Canadian Counsel
ARTICLE 2 - SALE AND PURCHASE
2.01 Purchased Assets to be Sold and Purchased
Upon and subject to the terms and conditions hereof, the Vendor will
sell to the Purchaser and the Purchaser will purchase from the Vendor all of the
right, title, benefit and interest of the Vendor in and to the following assets
(the "Purchased Assets"):
(a) all machinery and equipment and all computer hardware and peripheral
equipment, supplies and accessories of the Business, including the
machinery and equipment described in Schedule 2.01(a);
(b) all Inventories;
(c) all of the accounts receivable of the Business, including but not
limited to all income tax and National Research Council of Canada
refunds applicable to the Business, as permitted by law;
(d) all royalty, franchise, licence or management agreements and all
other contracts or commitments described in Schedule 2.01(d)
relating to the Purchased Assets including but not limited to,
(i) all unfilled orders received by the Vendor in connection with
the Purchased Assets; and
(ii) all current distribution contracts listed in Schedule 2.01(d);
(e) all Intellectual Property owned by the Vendor and belonging to or
used in the Business (the "Owned Intellectual Property"), including
the Intellectual Property listed in Schedule 2.01(e);
(f) the goodwill of the Business, including:
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(i) the exclusive right to the Purchaser to the use, to the extent
permitted by law, of the corporate names and trademarks listed
in Schedule 2.01(f); and
(ii) all records of sales, customer lists and supplier lists of or
used in connection with the Business;
(g) all inspection records and other records, books, documents and data
bases recorded or stored by means of any device, including in
electronic form, relating to the Purchased Assets as are in the
possession or under the control of the Vendor, and all other
documents referred to in Section 6.02(1) as shall be requested by
the Purchase save and except the Vendor's payroll records and
financial statements; and
(h) any and all U.S. government standing offer listings which have been
obtained or are in the process of being obtained by the Vendor in
connection with the Purchased Assets.
2.02 Purchase Price
(1) The consideration payable to the Vendor for the Purchased Assets (such
amount being hereinafter referred to as the "Purchase Price") will be as
follows:
(a) 224,000 common shares in the capital stock of the Purchaser
("Proformix Shares") to be issued in the name of and delivered to
the Vendor on the Closing Date; and
(b) a warrant (the "Warrant") to purchase at an exercise price of $5.00
(U.S.) per share an additional 224,000 Proformix Shares which
Warrant may be exercised by the Vendor at any time after one year
from the Closing Date and up to five years after the Closing Date
(the "Exercise Period"). Any exercise of the right to purchase
additional Proformix Shares by the Vendor shall be accompanied by a
written notice of exercise delivered by the Vendor to the Purchaser
during the Exercise Period stating the number of Proformix Shares
which the Vendor elects to so purchase. Upon timely receipt of such
notice accompanied by appropriate payment for the Proformix Shares,
as set forth above, the Purchaser shall cause the appropriate number
of Proformix Shares to be issued to the Vendor in accordance with
the then applicable securities laws.
(2) The Vendor acknowledges that Proformix Shares issued pursuant to
Section 2.02(1) shall be restricted as to any sale, transfer or other
disposition in Canada pursuant to subsection 72(4) of the Securities Act
(Ontario), as amended.
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(3) The Vendor acknowledges that Proformix Shares issued pursuant to
Section 2.02(1) shall be restricted as to any sale, transfer or other
disposition for a period of one (1) year from the Closing Date and shall
thereafter continue to be so restricted unless said shares have been registered
with the United States Securities and Exchange Commission or an exemption from
such registration is applicable.
(4) The Vendor acknowledges that Proformix Shares issued pursuant to this
Agreement have not been registered under the United States Securities Act of
1933 (the "United States Securities Act"), as amended, or with any state,
provincial or federal agency, including the United States Securities and
Exchange Commission, and may not be resold in the United States unless first
registered or exempted from registration. The Purchaser or its transfer agent
may require an opinion of counsel in support of any claim of exemption from
registration.
(5) For the purposes of Section 2.02(1)(b), a notice of exercise shall be
validly made if delivered to the Purchaser in writing, together with a certified
cheque in the appropriate U.S. dollar amount, by pre-paid registered mail to the
address of the Purchaser specified in Section 8.09.
2.03 Allocation of Purchase Price
The Purchase Price shall be allocated as follows:
(a) Tangible Purchased Assets as per the Balance Sheet; and
(b) Any remaining amount to intangible Purchased Assets, including
but not limited to the Software.
2.04 Tax Returns
The Vendor and the Purchaser, in filing their respective income tax
returns, will use the allocations of the Purchase Price as set forth in Section
2.03.
2.05 Assumption of Obligations and Liabilities
The Purchaser will assume, fulfil and perform the obligations and
liabilities of the Vendor accruing after the close of business on the day before
the Closing Date under the contracts and other commitments specifically
described in Schedule 2.05 only.
2.06 Obligations and Liabilities Not Assumed
Except as specifically provided in this Agreement, the Purchaser
does not assume and will not be liable for any obligations or liabilities of the
Vendor whatsoever
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including any taxes under the Income Tax Act (Canada) or any other taxes
whatsoever that may be or become payable by the Vendor including any income or
corporation taxes resulting from or arising as a consequence of the sale by the
Vendor to the Purchaser of the Purchased Assets hereunder.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.01 Vendor's Representations and Warranties
The Vendor represents and warrants to the Purchaser that:
Corporate
(a) The Vendor is a corporation duly incorporated, organized and
subsisting under the laws of the Province of Ontario with the
corporate power to own its Purchased Assets and to carry on its
business and has made all necessary filings under all applicable
corporate, securities and taxation laws or any other laws to which
the Vendor is subject.
(b) The Vendor has the power, authority and right to enter into and
deliver this Agreement, having obtained all necessary director and
shareholder approvals prior to the Closing Date, and to transfer the
legal and beneficial title and ownership of the Purchased Assets to
the Purchaser free and clear of all liens, charges, encumbrances and
any other rights of others, except as disclosed in Schedule 3.01(b).
(c) This Agreement constitutes a valid and legally binding obligation of
the Vendor, enforceable against the Vendor in accordance with its
terms subject to applicable bankruptcy, insolvency, reorganization
and other laws of general application limiting the enforcement of
creditors' rights generally and to the fact that specific
performance is an equitable remedy available only in the discretion
of the court.
(d) There is no contract, option or any other right of another binding
upon or which at any time in the future may become binding upon the
Vendor to sell, transfer, assign, pledge, charge, mortgage or in any
other way dispose of or encumber any of the Purchased Assets other
than pursuant to the provisions of this Agreement or pursuant to
purchase orders accepted by the Vendor in the usual and ordinary
course of the Business.
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(e) Neither the entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by the Vendor
will result in the violation of:
(i) any of the provisions of the constating documents or by-laws
of the Vendor,
(ii) any agreement or other instrument to which the Vendor is a
party or by which the Vendor is bound, or
(iii) any Applicable Law.
Financial
(f) The books and records of the Vendor relating to the Business are
true and correct and present fairly and disclose in all material
respects the financial position of the Business and all material
financial transactions of the Vendor relating to the Business have
been accurately recorded in such books and records and, to the
extent possible, such books and records have been prepared in
accordance with generally accepted accounting principles
consistently applied.
(g) The financial statements of the Vendor, consisting of the Balance
Sheet and statements of income, retained earnings and changes in
financial position for the period ended on the Balance Sheet Date,
(collectively, the "Financial Statements"), a copy of which is
attached hereto as Schedule 3.01(g):
(i) are in accordance with the books and accounts of the Vendor as
at the Balance Sheet Date,
(ii) are true and correct and present fairly the financial position
of the Vendor as at the Balance Sheet Date,
(iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, and
(iv) present fairly all of the Purchased Assets and liabilities of
the Vendor as at the Balance Sheet Date including all
contingent liabilities of the Vendor as at the Balance Sheet
Date.
(h) The financial position of the Vendor is at least as good as the
financial position of the Vendor as at the Balance Sheet Date.
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(i) Since the Balance Sheet Date the Business has been carried on in its
usual and ordinary course and the Vendor has not entered into any
transaction out of the usual and ordinary course of the Business.
(j) Since the Balance Sheet Date there has been no change in the
affairs, business, prospects, operations or condition of the
Business, financial or otherwise, whether arising as a result of any
legislative or regulatory change, revocation of any licence or right
to do business, fire, explosion, accident, casualty, labour dispute,
flood, drought, riot, storm, condemnation, act of God, public force
or otherwise, except changes occurring in the usual and ordinary
course of business that have not adversely affected the affairs,
business, prospects, operations or condition of the Business,
financial or otherwise.
(k) No current or former director, officer, shareholder or employee of
the Vendor or any person not dealing at arm's length within the
meaning of the Income Tax Act (Canada) with any such person or with
the Vendor is indebted to the Vendor.
Condition of Purchased Assets
(l) The Vendor is the owner of the Purchased Assets with good and
marketable title to the Purchased Assets, free and clear of all
liens, charges, encumbrances and any other rights of others, except
as disclosed in Schedule 3.01(b).
(m) The accounts receivable of the Business are good accounts receivable
collectible within 90 days and, to the knowledge of the Vendor, are
not subject to any defence, counterclaim or set-off.
(n) All machinery and equipment owned or used by the Vendor in the
Business have been properly maintained and are in good working order
for the purposes of on-going operation, subject to ordinary wear and
tear for machinery and equipment of comparable age.
(o) All of the Inventories are of merchantable quality and reasonably
fit for their usual purpose.
Contracts and Commitments
(p) The Vendor is not a party to any contract or commitment relating to
the Purchased Assets outside the usual and ordinary course of the
Business and is not a party to any contract or commitment relating
to the Purchased
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Assets, except such contracts or commitments as are disclosed in
Schedule 2.01(d).
(q) The Vendor is not in default or breach of any contract or commitment
referred to in Section 2.01(d) and there exists no condition, event
or act that, with the giving of notice or lapse of time or both,
would constitute such a default or breach, and all such contracts
and commitments are in good standing and in full force and effect
without amendment thereto and the Vendor is entitled to all benefits
thereunder.
(r) The Vendor is not a party to or bound by any guarantee,
indemnification, surety or similar obligation pertaining to the
Purchased Assets.
(s) There are no outstanding orders, notices or similar requirements
relating to the Purchased Assets issued by any Governmental
Authority and there are no matters under discussion with any
Governmental Authority relating to orders, notices or similar
requirements.
Intellectual Property
(t) The Vendor has the exclusive right to use the Owned Intellectual
Property except to the extent the Vendor has licensed others to use
the Owned Intellectual Property, which licences are listed in
Schedule 2.01(d).
(u) The Owned Intellectual Property is in good standing and has been
duly registered or applications to register the same have been filed
in all appropriate offices in Canada to preserve the rights therein
and of the Vendor thereto.
(v) The Intellectual Property listed on Schedule 2.01(e) includes all of
the Intellectual Property used in or required for the proper
carrying on of the Business.
(w) The Vendor is not a party to any contract or commitment to pay any
royalty, licence or other fee with respect to the use of the Owned
Intellectual Property except as set out in Schedule 2.01(d).
(x) No consents are required in order for the Intellectual Property to
be licensed or sub-licensed to any third party except as set out in
Schedule 3.01(x).
(y) The conduct of the Business does not involve any infringement,
misuse or misappropriation of any Intellectual Property rights of
third parties.
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(z) The Owned Intellectual Property is not invalid or unenforceable. No
infringement, misuse or misappropriation of the Owned Intellectual
Property has occurred.
(aa) Except for the third party software ("Third Party Programs") listed
in Schedule 3.01(aa), the Software neither contains nor embodies nor
uses nor requires any third party software, including development
tools and utilities, and the Software, together with the Third Party
Programs, contains all material necessary for the continued
maintenance and development of the Software.
(bb) Copies of all licence and maintenance agreements for the Third Party
Programs have been made available by the Vendor to the Purchaser,
except in respect of Third Party Programs that are shrink wrapped
software and that are purchased off-the-shelf by the Vendor in order
to be passed through to the Vendor's customers.
(cc) Except as disclosed in Schedule 3.01(dd), the source code for the
Software has not been delivered or made available to any person and
the Vendor has not agreed to or undertaken to or in any other way
promised to provide such source code to any person other than the
Purchaser.
(dd) Except as listed in Schedule 3.01(ee), there are no, and have never
been any, distributors, sales agents, representatives or other
persons, including VARs, OEMs or resellers, who have or had rights
to market or license the Software.
(ee) Schedule 3.01(ff) lists all the other licences, maintenance or
support agreements, development contracts and all other agreements
(other than requests for proposals and proposals which are referred
to in such agreements) between the Vendor and users of the Software,
copies of each of which have been made available to the Purchaser.
(ff) Except as listed in Schedule 3.01(gg), there are no known problems
or defects in the Software including bugs, logic errors or failures
of the Software to operate as described in the related
documentation.
(gg) Schedule 3.01(hh) accurately describes the current state of the
Software, together with all current development plans for the
Software, including design problems, remedial plans, requests for
new features from customers and enhancement plans.
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Environmental
(hh) The Business, as carried on by the Vendor, and the Purchased Assets
are in compliance in all material respects with all Environmental
Laws and there are no facts that could give rise to a notice of
non-compliance with any Environmental Law.
Taxes
(ii) The Vendor is not a non-resident person within the meaning of
section 116 of the Income Tax Act (Canada).
General
(jj) There are no actions, suits or proceedings pending or threatened
against or adversely affecting, or which could adversely affect the
Purchased Assets, except such actions, suits or proceedings as are
disclosed in Schedule 3.01(kk).
(kk) The Vendor is conducting the Business in compliance with all
Applicable Laws of Canada and of the Province of Ontario and all
municipalities thereof in which the Business is carried on, is not
in breach of any such Applicable Laws and is duly licensed,
registered or qualified in the Province of Ontario and all
municipalities thereof in which the Vendor carries on the Business
to enable the Business to be carried on as now conducted and the
Purchased Assets to be owned, leased and operated, and all such
licences, registrations and qualifications are valid and subsisting
and in good standing and none of the same contains any term,
provision, condition or limitation which has or may have an adverse
effect on the operation of the Business or which may be affected by
the completion of the transactions contemplated hereby.
(ll) The Purchased Assets are validly insured and there are no pending
insurance claims in respect thereto.
(mm) The Vendor has provided to the Purchaser all information that it is
aware of relating to the Purchased Assets that would likely be
material to a purchaser of the Purchased Assets. To the Vendor's
knowledge, all such information is true and correct and no material
facts have been omitted therefrom that would make such information
misleading.
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Acquired Securities
(nn) The Vendor is not:
(i) a natural person resident of the United States;
(ii) a partnership or corporation organized or incorporated under
the laws of the United States;
(iii) an estate of which any executor or administrator is a U.S.
person;
(iv) a trust of which any trustee is a U.S. person;
(v) an agency or branch of a foreign entity located in the United
States;
(vi) a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) a discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary
organized, incorporated, or (if an individual) resident in the
United States; and/or
(viii) a partnership or corporation if organized or incorporated
under the laws of any foreign jurisdiction which is formed by
a U.S. person principally for the purpose of investing in
securities not registered under the Act.
Employees
(oo) The sole employee of the Vendor is Xx. Xxxxx Xxxxxx, who is a
non-paid employee. To the best of the Vendor's knowledge after due
inquiry, attached as Schedule 3.01(pp) is a complete list of former
employees of the Vendor.
(pp) To the best of the Vendor's knowledge after due inquiry, except as
disclosed in Schedule 3.01(qq), the Vendor is not a party to any
written or other employment contract or consulting contract, whether
formal or informal, with any person whomsoever.
(qq) The Vendor is not bound by or a party to any collective bargaining
agreement.
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3.02 Survival of Vendor's Representations, Warranties and Covenants
(1) The representations and warranties of the Vendor set forth in Section
3.01 will survive the completion of the sale and purchase of the Purchased
Assets herein provided for and, notwithstanding such completion, will continue
in full force and effect for the benefit of the Purchaser for a period of two
years from the Closing Date.
(2) The covenants of the Vendor set forth in this Agreement (other than
the covenant set forth in Section 4.01(2) with respect to representations and
warranties being true at the Time of Closing) will survive the completion of the
sale and purchase of the Purchased Assets herein provided for and,
notwithstanding such completion, will continue in full force and effect for the
benefit of the Purchaser in accordance with the terms thereof.
3.03 Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Vendor that:
(a) the Purchaser is a corporation duly incorporated, organized and
subsisting under the laws of the State of Delaware with the
corporate power to own its assets and to carry on its business and
has made all necessary filings under all applicable corporate,
securities, and taxation laws or any other laws to which the
Purchaser is subject;
(b) the Purchaser has good and sufficient power, authority and right to
enter into and deliver this Agreement and to complete the
transactions to be completed by the Purchaser contemplated
hereunder;
(c) this Agreement constitutes a valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with
its terms subject to applicable bankruptcy, insolvency,
reorganization and other laws of general application limiting the
enforcement of creditors' rights generally and to the fact that
specific performance is an equitable remedy available only in the
discretion of the court;
(d) neither the entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by the Purchaser
will result in a violation of:
(i) any of the provisions of the constating documents or by-laws
of the Purchaser;
(ii) any agreement or other instrument to which the Purchaser is a
party or by which the Purchaser is bound; or
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(iii) any Applicable Law;
(e) the Proformix Shares and the Warrant have been duly authorized and
issued and all necessary corporate action has been taken to permit
the transfer of the Proformix Shares and Warrant to the Vendor
pursuant to the terms of this Agreement;
(f) the issuance and transfer of the Proformix Shares and Warrant is in
compliance with Applicable Law;
(g) between January 1, 1998, and April 15, 1998, the Purchaser received
an aggregate U.S.$2,787,000 in additional equity capital against
issuance of 790,311 common shares;
(h) as of the date of this Agreement, the issued and outstanding capital
for the Purchaser is 4,749,132 common shares and 10 cumulative
preference shares;
(i) as of the date of this Agreement, there are outstanding warrants,
options and similar instruments issued by the Purchaser which, if
exercised, would increase the outstanding capital for the Purchaser
by 1,720,621 common shares and with the resulting capital infusion
of US $6,601,165;
(j) the Purchaser is current in all of its filings with all appropriate
federal, state and administrative agencies and regulators and is in
compliance with all applicable securities laws in the United States
and Canada;
(k) within the last six months, the Purchaser has not committed any act
of bankruptcy nor have proceedings been instituted by it or against
it in respect to any bankruptcy, reorganization, arrangement,
insolvency, liquidation or any other proceeding for the relief of
debtors;
(l) in the three months prior to this Agreement, there has been no
material adverse change in the Purchaser's business or financial
affairs;
(m) there has been no cease trade order made in the last year in respect
to the trading of Proformix Shares;
(n) the shares of Proformix are listed on NASDAQ OTC Electronic Bulletin
Board and have been so listed for the 6 months prior to the date of
this Agreement, and no proceedings have been instituted and no
notices have been given in the last 6 months to delist the shares of
Proformix from such NASDAQ OTC Electronic Bulletin Board;
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(o) the Purchaser is a non-resident of Canada;
(p) the Purchaser is not registered under Subdivision d of Division V of
Part IX of the Excise Tax Act (Canada);
(q) the Purchaser intends to export the Purchased Assets to a place
outside Canada as soon as practicable after receiving delivery
thereof;
(r) the Purchaser is not acquiring the Purchased Assets for consumption,
use or supply in Canada and will not process, transform or alter the
Purchased Assets while in Canada, except to the extent reasonably
necessary for, or incidental to their transportation to a place
outside Canada; and
(s) the Purchaser is acquiring the ownership, possession or use under
this Agreement of all or substantially all of the property that can
reasonably be regarded as being necessary for the Purchaser to be
capable of carrying on the Business of the Vendor as a business
within the meaning of section 167.1 of the Excise Tax Act (Canada).
3.04 Survival of Purchaser's Representations, Warranties and Covenants
(1) The representations and warranties of the Purchaser set forth in
Section 3.03 will survive the completion of the sale and purchase of the
Purchased Assets herein provided for and, notwithstanding such completion, will
continue in full force and effect for the benefit of the Vendor for a period of
two years from the Closing Date.
(2) The covenants of the Purchaser set forth in this Agreement (other than
the covenant set forth in Section 4.02(2) with respect to representations and
warranties being true at the Time of Closing) will survive the completion of the
sale and purchase of the Purchased Assets herein provided for and,
notwithstanding such completion, will continue in full force and effect for the
benefit of the Vendor in accordance with the terms thereof.
3.05 Appointment of Trustee for Rights of Dissolved Vendor
(1) Subject to subsection 3.05(2), the Purchaser appoints 1293614 Ontario
Inc. and its heirs, estate trustees, successors and assigns as trustee (the
"Trustee") of the rights of the Vendor under this Agreement for the benefit of
the shareholders of the Vendor (as last recorded in the Vendor's corporate
records), with the intent that the Trustee shall be entitled to maintain any
action against the Purchaser in the place and stead of the Vendor and as if the
Trustee were the Vendor, mutatis mutandis. The Purchaser shall bear no liability
for the fees and expenses of the Trustee.
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(2) Subsection 3.05(1) shall be without effect until such time as the
Vendor has been dissolved pursuant to Part XIV of the Business Corporations Act
(Ontario), and shall be without effect unless there remain statutory rights
pursuant to that act enabling the Purchaser to maintain actions against the
Vendor, and the shareholders of the Vendor to whom property of the Vendor is
distributed upon dissolution, in form and substance similar to the rights
currently set out in sections 242 and 243 of that act. The rights of the Trustee
shall be further limited in that the amount of any judgment that the Trustee may
obtain in any action against the Purchaser shall be reduced by a percentage
equal to the percentage of the 224,000 Proformix Shares which were not, as of
the date of commencement of such action, beneficially owned by persons who were,
as at the Closing Date, registered shareholders of the Vendor, or their
respective heirs, estate trustees or successors.
(3) The provisions of this section 3.05 will survive the completion of the
sale and purchase of the Purchased Assets herein provided for and
notwithstanding such completion will, subject to the conditions precedent
specified in subsection 3.05(2), continue in full force and effect until the
fifth anniversary of the date of dissolution of the Vendor.
ARTICLE 4 - COVENANTS
4.01 Covenants of the Vendor
(1) In addition to any other provision for indemnification by the Vendor
contained in this Agreement, the Vendor will indemnify and save harmless the
Purchaser and the directors, officers, employees and agents of the Purchaser
from and against:
(a) all third party claims relating to the Purchased Assets and accruing
up to the close of business on the day before the Closing Date; and
(b) all Claims incurred by the Purchaser directly or indirectly
resulting from any breach of any covenant of the Vendor contained in
this Agreement or, subject to Section 2.05, from any inaccuracy or
misrepresentation in any representation or warranty set forth in
Section 3.01.
(2) The Vendor will ensure that the representations and warranties of the
Vendor set forth in Section 3.01 are true and correct at the Time of Closing and
that the conditions of closing for the benefit of the Purchaser set forth in
Section 5.01(1) have been performed or complied with by the Time of Closing.
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(3) The Vendor immediately after the Closing Date will file:
(a) articles of amendment changing its corporate name to one that does
not include any trade xxxx or trade name included in the Purchased
Assets, and
(b) cancellations with all applicable Governmental Authorities of the
registrations of all business names included in the Purchased
Assets.
(4) The Vendor will, from and after the Closing Date, refrain from using
or conducting business under any of the business names, trade names, trade-marks
or other Intellectual Property acquired pursuant to this Agreement, including
but not limited to the business name "Vanity" and the trade-xxxx "Ergo Break".
(5) The Vendor will not be responsible for Goods and Services Tax or
Retail Sales Tax payable upon and in connection with the conveyance and transfer
of the Purchased Assets by the Vendor to the Purchaser under this Agreement.
(6) The Vendor and its designees shall cooperate with the Purchaser in all
respects in connection with supplying all information reasonably requested by
the Purchaser or its counsel and executing and returning all documents
reasonably requested in connection with the claim of exemption from registration
including, but not limited to, investor suitability and accreditation
questionnaires.
(7) Notwithstanding any of the other provisions of this Agreement, the
Vendor will not be liable to the Purchaser or to the directors, officers,
employees, shareholders or agents of the Purchaser for any Claim directly or
indirectly resulting from:
(a) any inaccuracy or misrepresentation in any representation or
warranty set forth in Section 3.01 unless any claim or demand by the
Purchaser against the Vendor with respect thereto is given to the
Vendor by the Purchaser within the time period referred to in
Section 3.02(1);
(b) any matter from and against which the Purchaser and the directors,
officers, employees and agents of the Purchaser are indemnified
pursuant to Section 4.01(1) unless any claim or demand by the
Purchaser or the directors, officers, employees or agents of the
Purchaser against the Vendor with respect thereto is given to the
Vendor by the Purchaser within two years from the date hereof; or
(c) any breach of any covenant of the Vendor contained in this Agreement
or from any inaccuracy or misrepresentation in any representation or
-21-
warranty set forth in Section 3.01 or resulting from any matter from
and against which the Purchaser and the directors, officers,
employees and agents of the Purchaser are indemnified hereunder,
unless and until the aggregate of all such Claims exceeds $10,000,
and then only to the extent that such aggregate exceeds such amount,
other than, in any case, any Claim attributable to the lack of ownership of, or
title to, the Purchased Assets.
4.02 Covenants of the Purchaser
(1) In addition to any other provision for indemnification by the
Purchaser contained in this Agreement, the Purchaser will indemnify and save
harmless the Vendor and the directors, officers, employees and agents of the
Vendor from and against all Claims incurred by the Vendor directly or indirectly
resulting from any breach of any covenant of the Purchaser contained in this
Agreement or from any inaccuracy or misrepresentation in any representation or
warranty set forth in Section 3.03.
(2) The Purchaser will ensure that the representations and warranties of
the Purchaser set forth in Section 3.03 are true and correct at the Time of
Closing and that the conditions of closing for the benefit of the Vendor set
forth in Section 5.02(1) have been performed or complied with by the Time of
Closing.
(3) Notwithstanding any of the other provisions of this Agreement, the
Purchaser will not be liable to the Vendor or to the directors, officers,
employees, shareholders or agents of the Vendor for any Claim directly or
indirectly resulting from:
(a) any inaccuracy or misrepresentation in any representation or
warranty set forth in Section 3.03 unless any claim or demand by the
Vendor against the Purchaser with respect thereto is given to the
Purchaser by the Vendor within the time period referred to in
Section 3.04(1); or
(b) any breach of any covenant of the Purchaser contained in this
Agreement or from any inaccuracy or misrepresentation in any
representation or warranty set forth in Section 3.03 or resulting
from any matter from and against which the Vendor and the directors,
officers, employees and agents of the Vendor are indemnified
hereunder, unless and until the aggregate of all such Claims exceeds
$10,000, and then only to the extent that such aggregate exceeds
such amount,
other than, in either case, any Claim attributable to any misrepresentation
contained in subsections 3.03(e) or 3.03(f) of this Agreement.
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(4) The Purchaser shall use its best efforts to avoid the taking of any
action a material purpose of which is to hinder or impede the efforts of the
Vendor or its shareholders (or former shareholders, as the case may be) to trade
the Proformix Shares in accordance with Applicable Law.
(5) The Purchaser shall, following the expiration of the one year hold
period applicable to the Proformix Shares, use its best efforts to assist the
holder(s) of the Proformix Shares in complying with applicable exemptions
available under United States securities laws, in order to assist such holder(s)
in the trading of the Proformix Shares.
ARTICLE 5 - CONDITIONS
5.01 Conditions for the Benefit of the Purchaser
(1) The sale by the Vendor and the purchase by the Purchaser of the
Purchased Assets is subject to the following conditions, which are for the
exclusive benefit of the Purchaser and which are to be performed or complied
with at or prior to the Time of Closing:
(a) the representations and warranties of the Vendor set forth in
Section 3.01 will be true and correct at the Time of Closing with
the same force and effect as if made at and as of such time;
(b) the Vendor will have performed or complied with all of the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Vendor at or prior to the Time of Closing;
(c) the Purchaser will be furnished with such certificates or other
instruments (including instruments of conveyance with respect to the
Purchased Assets) of the Vendor or of officers of the Vendor as the
Purchaser or the Purchaser's counsel may reasonably think necessary
in order to establish that the terms, covenants and conditions
contained in this Agreement to have been performed or complied with
by the Vendor at or prior to the Time of Closing have been performed
or complied with and that the representations and warranties of the
Vendor herein given are true and correct at the Time of Closing;
(d) the transactions contemplated by this Agreement shall have been
approved by the shareholders of the Vendor by special resolution and
no shareholder of the Vendor shall have exercised a right of dissent
pursuant to Section 185 of the Business Corporations Act (Ontario)
in respect thereto;
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(e) no action or proceeding in Canada will be pending or threatened by
any person, government, governmental authority, regulatory body or
agency to enjoin, restrict or prohibit the sale and purchase of the
Purchased Assets contemplated hereby;
(f) no material damage by fire or other hazard to the Purchased Assets
will have occurred from the date hereof to the Time of Closing;
(g) the Purchaser will have been furnished with evidence satisfactory to
it that the sale and purchase of the Purchased Assets is in
compliance with the provisions of the Bulk Sales Act (Ontario);
(h) all necessary steps and proceedings will have been taken to permit
the Purchased Assets to be duly and regularly transferred to and
registered in the name of the Purchaser;
(i) there will be a non-competition agreement entered into between the
Vendor and the Purchaser substantially in the form attached hereto
as Schedule 5.01(1)(i);
(j) there will be a non-competition agreement entered into between each
of Xxxxx Xx, Xxxxx Xxxx and Xxxxxxx Mudarth (collectively, "the
Developers") and the Purchaser substantially in the form attached
hereto as Schedule 5.01(1)(j)
(k) the Vendor will have delivered to the Purchaser a favourable opinion
of the Vendor's counsel substantially in the form attached hereto as
Schedule 5.01(1)(k);
(l) the Vendor will have delivered to the Purchaser a certificate issued
by the Ministry of Finance of Ontario pursuant to section 6 of the
Retail Sales Tax Act (Ontario) which indicates that the Vendor has
paid all taxes collectable or payable under the said Act up to the
Closing Date or has entered into an arrangement satisfactory to the
said Minister for the payment of such taxes;
(m) the Developers shall have waived all rights and interests, moral,
proprietary or otherwise, if any, in and to the Software;
(n) the Purchaser shall have had an opportunity to inspect and test
compilable source code versions of the Software, and the results of
such inspection and testing shall be acceptable to the Purchaser in
its sole discretion, acting reasonably; and
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(o) the Purchaser shall be satisfied that Goods and Services Tax and
Retail Sales Tax is not exigible in respect of the sale of the
Purchased Assets by the Vendor to the Purchaser.
(2) In case any term or covenant of the Vendor or condition to be
performed or complied with for the benefit of the Purchaser at or prior to the
Time of Closing has not been performed or complied with at or prior to the Time
of Closing, the Purchaser, without limiting any other right that the Purchaser
has, may at its sole option either:
(a) rescind this Agreement by notice to the Vendor, and in such event
the Purchaser will be released from all obligations hereunder; or
(b) waive compliance with any such term, covenant or condition in whole
or in part on such terms as may be agreed upon without prejudice to
any of its rights of rescission in the event of non-performance of
any other term, covenant or condition in whole or in part;
and, if the Purchaser rescinds this Agreement pursuant to Section 5.01(2)(a),
the Vendor will also be released from all obligations hereunder.
5.02 Conditions for the Benefit of the Vendor
(1) The sale by the Vendor and the purchase by the Purchaser of the
Purchased Assets is subject to the following conditions, which are for the
exclusive benefit of the Vendor and which are to be performed or complied with
at or prior to the Time of Closing:
(a) the representations and warranties of the Purchaser set forth in
Section 3.03 will be true and correct at the Time of Closing with
the same force and effect as if made at and as of such time;
(b) the Purchaser will have performed or complied with all of the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Purchaser at or prior to the Time of Closing;
(c) the Vendor will be furnished with such certificates or other
instruments of the Purchaser or of officers of the Purchaser as the
Vendor or the Vendor's counsel may reasonably think necessary in
order to establish that the terms, covenants and conditions
contained in this Agreement to have been performed or complied with
by the Purchaser at or prior to the Time of Closing have been
performed or complied with and that the representations and
warranties of the Purchaser herein given are true and correct at the
Time of Closing;
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(d) the Purchaser will have delivered to the Vendor a favourable opinion
of the Purchaser's U.S. counsel substantially in the form attached
as Schedule 5.02(1)(d);
(e) the Purchaser will have delivered to the Vendor a favourable opinion
of the Purchaser's Canadian counsel substantially in the form
attached as Schedule 5.02(1)(e);
(f) prior to the Time of Closing, the Purchaser shall have made adequate
provision for the immediate payment in full of (i) all claims of the
unsecured creditors of the Vendor of which the Purchaser has notice
and (ii) all claims of secured creditors of the Vendor of which the
Purchaser has notice;
(g) the Purchaser shall have delivered to the Vendor an acknowledgement
that all indebtedness owed to the Purchaser in respect of demand
promissory notes dated (i) Xxxxx 00, 0000, (xx) April 17, 1998, and
(iii) April 22, 1998, is no longer owing or due and the Purchaser
shall have delivered such demand promissory notes to the Vendor;
(h) the Vendor shall be satisfied that Goods and Services Tax and Retail
Sales Tax is not exigible in respect of the sale of the Purchased
Assets by the Vendor to the Purchaser; and
(i) the transactions contemplated by this Agreement shall have been
approved by the Shareholders of the Vendor by special resolution,
and no shareholder of the Vendor shall have exercised a right of
dissent pursuant to Section 185 of the Business Corporations Act
(Ontario) in respect thereto.
(2) In case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Vendor at or prior to the Time
of Closing has not been performed or complied with at or prior to the Time of
Closing, the Vendor, without limiting any other right that the Vendor has, may
at its sole option either:
(a) rescind this Agreement by notice to the Purchaser, and in such event
the Vendor will be released from all obligations hereunder; or
(b) waive compliance with any such term, covenant or condition in whole
or in part on such terms as may be agreed upon without prejudice to
any of its rights of rescission in the event of non-performance of
any other term, covenant or condition in whole or in part;
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and, if the Vendor rescinds this Agreement pursuant to Section 5.02(2)(a), the
Purchaser will also be released from all obligations hereunder.
ARTICLE 6 - CLOSING ARRANGEMENTS
6.01 Closing
The sale and purchase of the Purchased Assets will be completed at
the Time of Closing at the offices of XxXxxxxx Xxxxxxxx, Xxxxx 0000, Xxxxxxx
Xxxxxxxx Xxxx Xxxxx, Xxxxxxx-Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx.
6.02 Examination of Records and Purchased Assets by Purchaser
(1) The Vendor will forthwith make available to the Purchaser and its
authorized representatives all data bases recorded or stored by means of any
device, including in electronic form, title documents, abstracts of title,
deeds, surveys, leases, certificates of trade marks and copyrights, Software,
contracts and commitments in its possession or under its control relating to any
of the Purchased Assets or the Business; and the Vendor will forthwith make
available to the Purchaser and its authorized representatives for examination
all books of account and accounting records relating to the Business and the
Vendor will, if reasonably requested, provide copies of the following records
maintained in connection with the Business: financial statements, records of
past sales, customer lists, supplier lists, payroll records, inventory data,
inventory master records and accounts receivable data. The Vendor will give the
Purchaser and its authorized representatives every reasonable opportunity to
have access to and to inspect the Purchased Assets. The exercise of any rights
of access or inspection by or on behalf of the Purchaser under this Section
6.02(1) will not affect or mitigate the covenants, representations and
warranties of the Vendor hereunder which will continue in full force and effect.
(2) At the Time of Closing the Vendor will deliver to the Purchaser all of
the documents referred to in Section 6.02(1) as shall be requested by the
Purchaser, save and except the payroll records and the financial statements. The
Purchaser will preserve the documents so delivered for a period of six years
from the Closing Date, or for such other period as is required by any Applicable
Law, and will permit the Vendor and its authorized representatives reasonable
access thereto in connection with the affairs of the Vendor, but the Purchaser
will not be responsible or liable to the Vendor for or as a result of any loss
or destruction of or damage to any such documents.
(3) Both prior to the Closing Date and, if the sale and purchase of the
Purchased Assets hereunder fails to occur for whatever reason, thereafter the
Purchaser will not disclose to anyone or use for its own or for any purpose
other than the purpose
-27-
contemplated by this Agreement any confidential information concerning the
Vendor or the Business obtained by the Purchaser pursuant hereto, will hold all
such information in the strictest confidence and, if the sale and purchase of
the Purchased Assets hereunder fails to occur for whatever reason, will return
all documents, records and all other information or data relating to the Vendor
or to the Business which the Purchaser obtained pursuant hereto.
(4) From and after the Closing Date the Vendor will not disclose to anyone
or use for any purpose any confidential information concerning the Purchased
Assets purchased by the Purchaser pursuant hereto and will hold all such
information in the strictest confidence.
6.03 Examination of Records by Vendor
(1) The Vendor may request an opportunity to verify any of the information
relating to the Purchaser included herein and to obtain any additional
information regarding the Purchaser which is publicly available to shareholders
of the Purchaser.
6.04 Risk of Loss
(1) Until the Time of Closing the Purchased Assets will remain at the risk
of the Vendor. In the event of any loss, damage or claim in respect of any risk
for which insurance is to be carried as aforesaid arising before the Time of
Closing the Purchaser, as an additional condition of closing, will be entitled
to be satisfied that the insurers have accepted the claim of the Vendor for
payment in accordance with the terms of the policies. If any destruction or
damage occurs to the Purchased Assets on or before the Time of Closing or if any
or all of the Purchased Assets are appropriated, expropriated or seized by
governmental or other lawful authority on or before the Time of Closing, the
Vendor will forthwith give notice thereof to the Purchaser and the Purchaser
will have the option, exercisable by notice to the Vendor on or before the Time
of Closing:
(a) to reduce the Purchase Price by an amount equal to the proceeds of
insurance or compensation for destruction or damage or
appropriation, expropriation or seizure and business interruption
with respect thereto (in this Section 6.04 referred to as the
"Proceeds"), and to complete the purchase; or
(b) to complete the purchase without reduction of the Purchase Price, in
which event all Proceeds will be payable to the Purchaser and all
right and claim of the Vendor to any such amounts not paid by the
Closing Date will be assigned to the Purchaser.
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(2) If the cost to repair the destruction or damage referred to in Section
6.04(1) is in excess of $15,000 and if the Vendor gives notice pursuant to
Section 6.04(1) within 30 Business Days prior to Closing Date, the Closing Date
will be postponed until 5 Business Days after the giving of such notice by the
Vendor.
(3) If the Purchaser elects to reduce the Purchase Price pursuant to
Section 6.04(1)(a), the Vendor and the Purchaser will at the Time of Closing
determine the amount of the reduction to the extent that it is then determinable
and will undertake to adjust such amount after the Closing Date, if necessary.
6.05 Delivery of Purchased Assets
Immediately following closing, the Vendor shall ship the Purchased
Assets to or to the direction of the Purchaser at a location which shall be
outside of Canada, which shipment shall be made using a carrier and in the
manner approved by the Purchaser prior to the Time of Closing. The Purchaser
shall be responsible for payment of all costs of shipment in connection with
such shipment of the Purchased Assets.
ARTICLE 7 - RISK FACTORS OF ACQUIRED SECURITIES
7.01 Acknowledgement by Vendor
The Vendor acknowledges that Proformix Shares issued pursuant to
this Agreement may carry certain significant risks which include but are not
limited to the following:
(a) The Purchaser has a limited operating history and its operations are
subject to all of the risks inherent in the establishment and development of
like business enterprises. The Purchaser offers no assurances that the
Purchaser's products will be profitably produced and marketed or that it can
manage its growth effectively or that the demand for the Purchaser's products
will not decrease.
(b) Products developed for the computer workplace face intense
competition. The Purchaser will be at a competitive disadvantage in seeking to
compete with companies having more Purchased Assets, larger technical staffs,
established market shares and greater financial and operational resources than
the Purchaser. The Purchaser offers no assurances that it will be able to meet
this competition and operate profitably.
(c) Proformix Shares are highly speculative, involve a high degree of risk
and should not be purchased by any person who cannot afford the loss of his
entire investment. The acquisition of Proformix Shares would be "unsuitable" for
any person who cannot afford to sustain such a loss.
-29-
(d) The Purchaser offers no assurances that an active public trading
market for Proformix Shares will continue following the execution of this
Agreement, or that there will be any market for Proformix Shares at the time
that the Proformix Shares acquired pursuant to this Agreement become freely
tradeable. Similarly, the Purchaser offers no assurances that the value of the
Proformix Shares acquired by the Vendor pursuant to this Agreement, in any
market which may develop, will equal or exceed the present value of the Shares.
(e) Proformix Shares acquired by the Vendor pursuant to this Agreement
have not been registered with the Securities and Exchange Commission under the
United States Securities Act of 1933 or under the securities laws of any state
or province. The right of any purchaser to sell, transfer, pledge or otherwise
dispose of Proformix Shares in the United States, Canada and, specifically, in
the United States over-the-counter market will be limited by the United States
securities laws, state and provincial securities laws and any regulations
promulgated thereunder; unless, in the opinion of counsel satisfactory to the
Purchaser, any such sale, transfer, assignment, pledge or hypothecation will not
violate the registration and other requirements under such laws. Consequently, a
holder of Proformix Shares may not be able to readily liquidate his investment.
(f) Holders of Proformix Shares are not entitled to accumulate their votes
for the purposes of electing directors or otherwise. Accordingly, a majority of
holders of Proformix Shares present at a meeting of shareholders will be able to
elect all of the directors of the Purchaser and any minority shareholders will
not be able to elect a representative to the Purchaser's board of directors.
(g) The Purchaser has no present intention to pay dividends to holders of
Proformix Shares and plans to retain earnings, if any, for the operation and
expansion of its business.
(h) The value of the Proformix Shares and Warrant which constitute the
Purchase Price may not bear any relationship to the Purchased Assets, book
value, earnings or net worth of the Purchaser and should not be considered an
indication of the actual value of the Purchaser's securities.
-30-
ARTICLE 8 - GENERAL
8.01 Indemnification
The obligations of the Vendor and the Purchaser under this Agreement
to indemnify and save harmless the other and its directors, officers, employees
and agents are, in the case of any Claim by a third party, conditional upon the
party that is otherwise entitled to be indemnified (the "Indemnitee") giving
prompt notice to the other (the "Indemnitor") of such Claim and permitting the
Indemnitor at its expense to participate in all negotiations relating thereto,
to assume the defence of any action or proceeding relating thereto and to
determine (with the Indemnitee, acting reasonably) whether any settlement should
be made with respect thereto; provided that if, in the sole opinion of the
Indemnitee, the interests of the Indemnitee are different from those of the
Indemnitor in connection with such Claim, the Indemnitee will have the right, at
the Indemnitor's expense, to defend its own interests provided that any
settlement of such Claim is on terms and conditions approved by the Indemnitor,
acting reasonably. If the Indemnitor does not defend any Claim, the Indemnitee
will have the right to do so on its own behalf and on behalf of the Indemnitor
at the expense of the Indemnitor.
8.02 Further Assurances
Each of the Vendor and the Purchaser will from time to time execute
and deliver all such further documents and instruments and do all acts and
things as the other party may, either before or after the Closing Date,
reasonably require to effectively carry out or better evidence or perfect the
full intent and meaning of this Agreement.
8.03 Fees and Commissions
Each of the Vendor and the Purchaser will pay its respective legal
and accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses whatsoever and
howsoever incurred, except that the Purchaser shall reimburse the Vendor for
legal expenses incurred in connection with the transaction contemplated by this
Agreement to a maximum of $25,000, of which $12,500 has been previously advanced
by the Purchaser to the Vendor.
8.04 Public Announcements
Except as required by law, no public announcement or press release
concerning the sale and purchase of the Purchased Assets may be made by the
Vendor or the Purchaser without the prior consent and joint approval of the
Vendor and the Purchaser.
8.05 Benefit of the Agreement
This Agreement will enure to the benefit of and be binding upon the
respective heirs, executors, administrators, other legal representatives,
successors and permitted assigns of the parties hereto.
8.06 Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and cancels and supersedes any
prior understandings and agreements between the parties hereto with respect
thereto. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements,
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express, implied or statutory, between the parties other than as expressly set
forth in this Agreement.
8.07 Amendments and Waivers
No amendment to this Agreement will be valid or binding unless set
forth in writing and duly executed by both of the parties hereto. No waiver of
any breach of any provision of this Agreement will be effective or binding
unless made in writing and signed by the party purporting to give the same and,
unless otherwise provided, will be limited to the specific breach waived.
8.08 Assignment
This Agreement may not be assigned by the Vendor without the written
consent of the Purchaser but may be assigned by the Purchaser without the
consent of the Vendor to an Affiliate of the Purchaser, provided that such
Affiliate enters into a written agreement with the Vendor to be bound by the
provisions of this Agreement in all respects and to the same extent as the
Purchaser is bound and provided that the Purchaser will continue to be bound by
all the obligations hereunder as if such assignment had not occurred and perform
such obligations to the extent that such Affiliate fails to do so.
8.09 Notices
Any demand, notice or other communication to be given in connection
with this Agreement must be given in writing and will be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
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To the Vendor: Vanity Software Publishing Corporation
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Fax No.: (000) 000-0000
Attention: Xxxxx Xxxxxx
President and CEO
To the Purchaser: Proformix Systems, Inc.
00 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx
00000
Fax No.: (000) 000-0000
Attention: Xxxxx Xxxx
President
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery will be conclusively deemed to
have been given on the day of actual delivery thereof and, if given by
registered mail, on the seventh (7th) Business Day following the deposit thereof
in the mail and, if given by electronic communication, on the day of transmittal
thereof if given during the normal business hours of the recipient and on the
Business Day during which such normal business hours next occur if not given
during such hours on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system that might affect the delivery of mail, any such demand, notice or
other communication may not be mailed but must be given by personal delivery or
by electronic communication.
8.10 Remedies Cumulative
The right and remedies of the parties hereunder are cumulative and
are in addition to, and not in substitution for, any other rights and remedies
available at law or in equity or otherwise. No single or partial exercise by a
party of any right or remedy precludes or otherwise affects the exercise of any
other right or remedy to which that party may be entitled.
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8.11 Governing Law
This Agreement is governed by and will be construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
8.12 Attornment
For the purpose of all legal proceedings this Agreement will be
deemed to have been performed in the Province of Ontario and the courts of the
Province of Ontario will have jurisdiction to entertain any action arising under
this Agreement. The Vendor and the Purchaser each hereby attorns to the
jurisdiction of the courts of the Province of Ontario.
8.13 Counterparts
This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original and all of which taken together will
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement.
PROFORMIX SYSTEMS, INC.
Per: /s/ Xxxxx Xxxx
-------------------------------
c/s
-----------------------------------
VANITY SOFTWARE PUBLISHING
CORPORATION
Per: /s/ Xxxxx Xxxxxx
-------------------------------
c/s
-----------------------------------
