EXHIBIT 10.2
SHARE PURCHASE AGREEMENT
BETWEEN
LML PAYMENT SYSTEMS INC.
AND
PHOENIX EPS, INC.
XXXXXX X. XXXXXX
XXXXXX X. XXXXXXXX
XXXXX X. XXXXXXXX
MADE AS OF
JULY 9, 2000
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made as of July 9, 2000
BETWEEN:
LML Payment Systems Inc., a corporation continued under the laws
of the Yukon
(the "Purchaser"),
AND:
Phoenix EPS, Inc., an Arizona corporation incorporated under the
laws of the State of Arizona
(the "Corporation"),
AND:
Xxxxxx X. Xxxxxx, of the City of Scottsdale, in the State of
Arizona
("Peyton")
Xxxxxx X. Xxxxxxxx, of the City of Peoria, in the State of
Arizona
("Bandiera")
Xxxxx X. Xxxxxxxx, of the City of Tempe, in the State of Arizona
("Xxxxxxxx")
(Peyton, Bandiera and Xxxxxxxx are hereinafter referred to
collectively as the "Vendors"),
WHEREAS:
A. The Vendors are the beneficial and registered owners of the Shares,
being all the issued and outstanding common shares of the capital stock of the
Corporation; and
B. The Vendors desire to sell and the Purchaser desires to purchase the
Shares upon and subject to the terms and conditions hereinafter set forth; and
C. For federal income tax purposes, it is the intent of the parties that
the acquisition of the Shares contemplated hereby qualify as a reorganization
under Section 368(a)(1)(B) of the Code.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained (and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
ARTICLE 1 - INTERPRETATION
--------------------------
1.1 Definitions
-----------
In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
(a) "1933 Act" has the meaning set out in Section 3.1(vv)(ii);
(b) "Abco" means Abco Markets, Inc., a corporation incorporated under the
laws of the State of Arizona;
(c) "Agreement" means this agreement and all amendments made hereto by
written agreement between the Vendors and the Purchaser;
(d) "Balance Sheet" means the balance sheet of the Corporation as of the
date or period in question;
(e) "Balance Sheet Date" means December 31, 1999;
(f) "Business" means the business of the Corporation as it exists from
time to time;
(g) "Business Day" means a day other than a Saturday, Sunday or bank
holiday in the State of Arizona;
(h) "Certain Public Documents" means the documents referred to in Section
3.1(vv)(xi) and copies of which are attached as Schedule 3.1(vv)(xi);
(i) "Closing" means the closing of all the transactions contemplated in
this Agreement at the Time of Closing on the Closing Date which shall
be effected by the deposit by the parties hereto of all documents
required to be delivered in order to effect such Closing pursuant to
the provisions hereof, whereupon the Closing shall have
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occurred and the respective documents thus tabled will be delivered to
the respective parties and third parties, if any, in accordance with a
closing agenda to be mutually agreed upon by the Purchaser Counsel and
the Vendor's Counsel before the Time of Closing;
(j) "Closing Date" means July 9, 2000 or such other date as may be agreed
to in writing between the Vendors and the Purchaser;
(k) "Code" means the Internal Revenue Code of the United States of America
and all amendments thereto from time to time;
(l) "Corporation" means Phoenix EPS, Inc., an Arizona corporation;
(m) "Costbook System Software" means the Costbook System software
purchased and owned by the Corporation, the source code of which is in
the possession of the Corporation and the Software Licensees and the
executable code of which is stored in the main frame computer of Abco;
(n) "Employees" has the meaning set out in Section 5.4(a);
(o) "Encumbrance" means any lien, pledge, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation
whatsoever;
(p) "Environmental Laws" means any and all state, federal, and local
statutes, regulations and ordinances relating to the protection of
human health and the environment, including without limitation the
Federal Comprehensive Environmental Response, Compensation, the
Liability Act and the Toxic Substances Control Act and the Resource
Conservation and Recovery Act;
(q) "ERISA" has the meaning set out in Section 5.4(c);
(r) "Financial Statements" has the meaning set out in Section 3.1(k);
(s) "Hazardous Material" means any hazardous or toxic substance, material,
or waste, including, but not limited to those substances, materials,
pollutants, contaminants and wastes listed in the United States
Department of Transportation Hazardous Materials Table (49 C.F.R. (S)
172.101) or by the United States Environmental Protection Agency as
hazardous substances (40 C.F.R. Part 302 and amendments thereto),
petroleum products (as defined in Title I to the Resource Conservation
and Recovery Act, 42 U.S.C. (S) 6991-6991(i)) and their derivatives;
(t) "Intellectual Property" has the meaning set out in Section 3.1(p);
(u) "Interim Financial Statements" has the meaning set out in Section
3.1(l);
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(v) "Interim Balance Sheet" means the balance sheet of the Corporation as
at the Interim Balance Sheet Date;
(w) "Interim Balance Sheet Date" means July 3, 2000;
(x) "Knowledge of the Vendors"/"Knowledge of the Purchaser", as the case
may be, means with respect to the existence or absence of facts, that
none of the Vendors have had or the Purchaser has had come to their or
its attention any information which would give them or it actual
knowledge of the existence or absence of such facts and that they or
it have not undertaken any independent investigation to determine the
existence or absence of such facts;
(y) "LML Share Closing Value" means the closing offering price for the
purchase of an LML Share as reported on NASDAQ on the Business Day
immediately before the Closing;
(z) "LML Share" means one voting common share without par value of the
capital stock of the Purchaser;
(aa) "Losses" has the meaning set out in Section 6.1;
(bb) "NASDAQ" means the National Association of Security Dealer Automated
Quotation System;
(cc) "Material Acquisitions" means, collectively, the direct and indirect
acquisitions made by the Purchaser pursuant to that certain Asset
Purchase Agreement dated March 11, 1998 and made among the Purchaser,
ChequeMARK Holdings, Inc., ChequeMARK Inc. and ChequeMARK Technologies
Corporation, that certain Patent Purchase Agreement dated March 11,
1998 and made among the Purchaser, ChequeMARK Holdings, Inc.,
ChequeMARK Patent Inc, Xxxxxx X. Hills and Xxxxx X. Xxxxxxx, that
certain Share Purchase Agreement dated as of November 30, 1999 and
made among the Purchaser, Xxxxx X. Xxxxxx, Xxxxx Xxxxxx-Xxxxxx, Xxxx
X. Xxxxxx and X. Xxxxxxx Runner and that certain Share Purchase
Agreement dated as of January 4, 2000 and made among CFDC Holdings
Corp., Xxxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxx X. Xxxx;
(dd) "Material Contracts" has the meaning set out in Section 3.1(w);
(ee) "Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization, limited liability company, limited partnership,
governmental authority or other entity;
(ff) "Piggyback Registration" has the meaning set out in Section 5.2(a);
(gg) "Public Documents" has the meaning set out in Section 3.1(vv)(xi);
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(hh) "Purchase Price" has the meaning set out in Section 2.1(a);
(ii) "Purchaser Counsel" means, collectively, in Canada, XxXxxxxx Xxxxxxxx
of Vancouver, British Columbia, and Austing, Fendrick, Xxxxxxx &
Parkkari of Whitehorse, Yukon Territory, and in the United States of
America, Xxxxxx, Xxxxx Xxxx & Xxxx, P.C. of Dallas, Texas;
(jj) "Real Property" has the meaning set out in Section 3.1(aa);
(kk) "REPS Software" means the Retail Electronic Payment Systems software
developed and owned by the Corporation, the source code of which is
in the possession of the Corporation and the Software Licensees and
the executable code of which is stored in the main frame computers of
Abco;
(ll) "Registrable Securities" has the meaning set out in Section 5.2(a);
(mm) "Registration Statement" has the meaning set out in Section 5.2(a);
(nn) "Restricted Securities" has the meaning set out in Section
3.1(vv)(i);
(oo) "Rule 144" means Rule 144 of the 1933 Act, as such rule may be
amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC;
(pp) "SEC" has the meaning set out in Section 3.1(vv)(vi);
(qq) "Shares" means 100% of the issued and outstanding common shares with
a par value of $1.00 each of the capital stock of the Corporation;
(rr) "Sharing Percentages" means for Peyton, 80%, for Bandiera, 10%, and
for Xxxxxxxx, 10%;
(ss) "Software" means, collectively, all computer software designed and
being developed which is owned by the Corporation or licensed to be
used by the Corporation;
(tt) "Software Licensees" means all licensees, respectively, of the
Costbook Software or the REPS Software;
(uu) "Time of Closing" means 9:00 o'clock in the morning (Phoenix Time) on
the Closing Date; and
(vv) "Vendors' Counsel" means Xxxxxx & Xxxxxx, P.C. of Phoenix, Arizona,
legal counsel for the Vendors and the Corporation.
1.2 Headings
--------
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The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 Extended Meanings
-----------------
In this Agreement words importing the singular number only shall
include the plural and vice versa, words importing the masculine gender shall
include the feminine and neuter genders and vice versa and words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.4 Accounting Principles
---------------------
Wherever in this Agreement reference is made to a calculation to be
made in accordance with generally accepted accounting principles, such reference
shall be deemed to be to the generally accepted accounting principles in the
United States of America from time to time approved by the American Institute of
Certified Public Accountants, or any successor institute, applicable as at the
date on which such calculation is made or required to be made in accordance with
generally accepted accounting principles.
1.5 Currency
--------
All references to currency herein are to lawful money of the United
States of America.
1.6 Schedules
---------
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 3.1(f) Rights Attached to the Shares
Schedule 3.1(g) Encumbrances in the Shares
Schedule 3.1(k) Financial Statements
Schedule 3.1(n) Changes Since Balance Sheet Date
Schedule 3.1(o) Liens and Encumbrances
Schedule 3.1(p) Intellectual Property
Schedule 3.1(r) Capital Expenditures
Schedule 3.1(s) Dividends Declared
Schedule 3.1(u) Tax Returns
Schedule 3.1(w) Material Contracts
Schedule 3.1(dd) Royalty, License Fee, Management Fee
Schedule 3.1(ee) Employees
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Schedule 3.1(ff) Employee Benefit Plans
Schedule 3.1(ii) Employee Payments Out of the Ordinary Course
Schedule 3.1(nn) Legal Actions
Schedule 3.1(qq) Jurisdictions of Business, Permits, and
Licenses
Schedule 3.1(rr) Breaches of Applicable Laws
Schedule 3.1(uu) Insurance Policies
Schedule 3.1(vv)(x) B.C. Initial Trade Report
Schedule 3.1(vv)(xi) Certain Public Documents
Schedule 4.2(a)(vi) Opinion of Vendors' Counsel
Schedule 4.2(a)(vii)A Employment Agreement of Peyton
Schedule 4.2(a)(vii)B Employment Agreement of Bandiera
Schedule 4.2(a)(xii)C Employment Agreement of Xxxxxxxx
Schedule 4.2(a)(xi) Releases
Schedule 4.3(a)(iii) Opinion of Purchaser's Counsel in the Yukon
Territory
ARTICLE 2 - PURCHASE AND SALE
-----------------------------
2.1 Purchase and Sale and Purchase Price
------------------------------------
(a) The Vendors shall sell the Shares to the Purchaser and the Purchaser
shall purchase the Shares from the Vendors, free and clear of any
liens, claims, charges and encumbrances whatsoever (except those
imposed by this Agreement or securities laws generally), for a total
purchase price of Four Million Five Hundred Thousand Dollars
($4,500,000) (the "Purchase Price").
(b) The Purchase Price shall be paid and satisfied by issuance to each of
the Vendors on Closing in the amount of their respective Sharing
Percentages of that number of LML Shares calculated as the product,
rounded down to the nearest whole number, of dividing (x) four million
five hundred thousand dollars ($4,500,000) by (y) the LML Share
Closing Value. No fractional LML Shares will be issued.
(c) Subject to the provisions of this Agreement, each of the Vendors, on
the one hand, and the Purchaser, on the other hand, shall use its best
efforts to cause the acquisition of the Shares contemplated hereby to
be treated as a reorganization within the meaning of Section
368(a)(1)(B) of the Code. From and after the Closing, the Purchaser
shall cause the Corporation to comply with all applicable reporting
requirements under Section 367(a) of the Code. In the absence of a
separate document reflecting such, this document shall be construed as
a "plan of reorganization" between the Vendors, the Corporations and
the Purchaser as contemplated in Section 368(a) (i) (B) of the Code.
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
3.1 Vendors' Representations and Warranties
---------------------------------------
The Vendors, jointly and severally, represent and warrant to the
Purchaser that the following representations and warranties are true as of the
date hereof and will be true as of the Time of Closing:
(a) the Corporation is a corporation duly organized and validly existing
and in good standing under the laws of the State of Arizona with the
corporate power to own its assets and to carry on the Business and has
made all necessary filings under all applicable corporate, securities
and taxation laws or any other laws to which the Corporation is
subject;
(b) the Corporation is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the Business
or the location of its assets requires such qualification;
(c) the Corporation is duly authorized and licensed and has all licenses,
franchises, permits and other governmental authorizations required
under all applicable laws, regulations, ordinances and orders of
public authorities to own, lease and operate its assets and to carry
on the Business in the places and in the manner as now conducted;
(d) the Vendors have delivered to the Purchaser or its representatives
complete and correct copies of the following documents relating to the
corporate existence of the Corporation:
(i) the Articles of Incorporation and Bylaws of the Corporation,
including all amendments and restatements thereof, as in effect
on the date hereof;
(ii) the stock records of the Corporation;
(iii) the minutes and other records of the meetings and other
proceedings of the shareholders and directors of the
Corporation since the date of their incorporation which
accurately disclose all material corporate actions relating to
the allotment, issuance, repurchase, redemption, surrender and
cancellation or other actions pertaining to the shares of the
capital stock of the Corporation; and
(iv) copy of a certificate of good standing for the Corporation for
each jurisdiction in which the nature of the Business or the
location of its assets requires qualification;
(e) the entire authorized capital stock of the Corporation consists of
10,000 Common Shares with a par value of $1.00 each, of which only 100
have been validly issued
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and are outstanding as fully paid and non-assessable to the Vendors in
accordance with their Sharing Percentages;
(f) the rights, privileges, restrictions and conditions attached to the
Shares are as set out in Schedule 31 attached hereto, and except as
provided in Schedule 3.1(f), no person is entitled to any preemptive
right or right of first refusal with respect to the Shares who has not
waived such right. There are no outstanding preemptive rights,
options, warrants, conversion rights, agreements or other rights to
purchase any of the authorized but unissued stock of the Corporation
other than those identified herein or issued, reserved or committed to
be issued pursuant to this Agreement;
(g) except as set out in Schedule 3.1(g) each of the Vendors is the
beneficial and registered owner of the number of Shares shown adjacent
to his name in the following table free and clear of all liens,
charges, encumbrances and any other rights of others:
Name of Vendor Number of Shares
-------------- ----------------
Peyton 80
Bandiera 10
Xxxxxxxx 10
and there are no other equity interests of the Corporation issued or
outstanding;
(h) each of the Vendors has good and sufficient power, authority and right
to enter into and deliver this Agreement and to transfer the legal and
beneficial title and ownership of the Shares registered in their
respective names to the Purchaser and the Shares when sold and
delivered in accordance with the terms of this Agreement against
payment therefore, will be duly and validly issued, fully paid, non-
assessable and free and clear of all liens, charges, encumbrances and
any other rights of others;
(i) 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:
(i) the Vendors to sell, transfer, assign, pledge, charge, mortgage
or in any other way dispose of or encumber any of the Shares
other than pursuant to the provisions of this Agreement; or
(ii) the Corporation to allot or issue any of the authorized but
unissued shares of the Corporation or to create any additional
class of shares;
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(j) neither the entering into nor the delivery of this Agreement nor the
completion of the transactions contemplated hereby by the Vendors or
by the Corporation will result in the violation of:
(i) any of the provisions of the articles of incorporation or
bylaws of the Corporation;
(ii) any agreement or other instrument to which the Corporation is a
party or by which the Corporation is bound which will not be
terminated as of the Closing Date, or
(iii) any applicable law, rule or regulation;
(k) the audited financial statements of the Corporation, consisting of the
Balance Sheets and statements of operations, and statements of cash
flow for the fiscal periods ended on December 31, 1998 and on the
Balance Sheet Date, together with the report of Xxxxx X. Xxxx, P.C.,
certified public accountants, thereon (hereinafter collectively
referred to as the "Financial Statements"), copies of which are
attached hereto as Schedule 3.1(k):
(i) are in accordance with the books and accounts of the
Corporation as at respectively, December 31, 1998 and the
Balance Sheet Date;
(ii) are true and correct and present fairly the financial position
of the Corporation as at respectively, December 31, 1998 and
the Balance Sheet Date; and
(iii) present fairly all of the assets and liabilities of the
Corporation as at respectively, December 31, 1998 and the
Balance Sheet Date including, without limiting the generality
of the foregoing, all contingent liabilities of the Corporation
as at respectively, December 31, 1998 and the Balance Sheet
Date;
(l) the unaudited financial statements of the Corporation, consisting of
the Interim Balance Sheet, Statement of Operations and Statement of
Cash Flow for the period ended on the Interim Balance Sheet Date
(hereinafter collectively referred to as the "Interim Financial
Statements"), which will not be available until after the Closing:
(i) will be prepared in accordance with the books and accounts of
the Corporation as at the Interim Balance Sheet Date:
(ii) will be true and correct and present fairly the financial
position of the Corporation as at the Interim Balance Sheet
Date;
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(iii) will be prepared in accordance with generally accepted
accounting principles consistently applied; and
(iv) will present fairly all of the assets and liabilities of the
Corporation as at the Interim Balance Sheet Date including,
without limiting the generality of the foregoing, all
contingent liabilities of the Corporation as at the Interim
Balance Sheet Date;
(m) since the Balance Sheet Date, there has been no material adverse
change in the assets, liabilities or financial position of the
Corporation including, without limitation the business, prospects,
operations or condition of the Corporation, financial or otherwise,
whether arising as a result of any legislative or regulatory change,
revocation of any license or right to do business, fire, explosion,
accident, casualty, labour dispute, flood, drought, riot, storm,
condemnation, act of God, public force or otherwise, except changes
occurring in the usual and ordinary course of business which have not
materially and adversely affected the affairs, business, prospects,
operations or condition of the Corporation, financial or otherwise
other than any distribution made in accordance with Section 5.6;
(n) since the Balance Sheet Date, except as set forth in Schedule 3.1(n),
the Business has been carried on in its usual and ordinary course and
the Corporation has not entered into any transaction out of the usual
and ordinary course of the Business other than any distribution made
in accordance with Section 5.6;
(o) the Corporation is the owner with a good and marketable title, free
and clear of all liens, charges, encumbrances and any other rights of
others, of all assets of the Corporation shown or reflected on the
Balance Sheet and listed in Schedule 3.1(o), except (as noted in such
Schedule 3.1(o)) for (A) such of the assets of the Corporation as have
been disposed of in the usual and ordinary course of business since
the Balance Sheet Date, (B) assets being leased, (C) liens which are
to be released by the Closing Date or which are not listed in such
Schedule 31 because they (i) are not substantial in character amount
or extent, and do not materially detract from the value of the assets
subject thereto, (ii) do not materially interfere with either the
present or intended use of such assets, and (iii) do not, individually
or in the aggregate, materially interfere with the conduct of the
Business;
(p) Intellectual Property Representations and Warranties:
(i) Except as shown on Schedule 3.1(p), no patents, copyrights or
trademarks or domain names (whether registered or unregistered)
of the Vendors or the Corporation are used in connection with
the Business as of the date hereof and no patent, copyright or
trademark applications or registrations have been filed or are
pending as of the date hereof;
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(ii) Schedule 31 hereto lists and contains a complete and correct
description of all patents, patent applications, copyrights,
copyright applications and registrations, domain names, trade-
names, industrial designs, domestic or foreign, (whether
registered or unregistered), and all trade secrets, know-how,
inventions, Software, including, without limitation, the REPS
Software and the Costbook System Software and other
intellectual property owned or used by the Corporation relating
to the operation of or used in connection with the Business and
which are hereinafter collectively called the "Intellectual
Property" and, to the Knowledge of the Vendors as reflected on
Schedule 3.1(p), are either validly licensed for all uses to
which they are put by the Corporation or are validly and
beneficially owned, by the Corporation and are, to the extent
indicated in such Schedule 31 duly registered in the United
States Patent and Trademark Office except as reflected in
Schedule 3.1(p);
(iii) The Vendor has good and valid title in the United States of
America to and has the sole and exclusive right to use in the
United States of America and is the sole and exclusive owner of
all right, title and interest in the United States of America
in and to the Intellectual Property free and clear of any and
all Encumbrances except as shown in Schedule 3.1(p). The
Corporation has the exclusive right to use all of the
Intellectual Property and has not granted any license or other
rights to any other Person in respect of the Intellectual
Property except as shown in Schedule 3.1(p). The terms and
conditions attaching to the Intellectual Property and the
Corporation's use thereof shall not be affected by the
completion of the transaction contemplated hereunder;
(iv) To the Knowledge of the Vendors, there are no restrictions on
the ability of the Corporation to use and exploit all rights in
the Intellectual Property in the United States of America
except as set out in Schedule 3.1(p);
(v) To the Knowledge of the Vendors, the conduct of the Business
and the use of the Intellectual Property does not infringe, and
neither the Vendors nor any of them nor the Corporation has
received any notice, complaint, threat or claim alleging
infringement of, or adverse ownership of, any patent,
trademark, trade-name, copyright, domain name, industrial
design, trade secret or any other intellectual property or
proprietary right of any other Person;
(vi) Except as set out in Schedule 3.1(p), all copies of the source
codes of the REPS Software and the Costbook System Software are
kept securely in the possession of the Corporation and no one
other than authorized personnel of the Corporation has access
to such source codes. The only copies of the executable code of
the REPS Software and the Costbook System Software are stored
in the computer hardware of Abco;
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(vii) The REPS Software does not contain any confidential information
of Abco; and
(viii) except as described in Schedule 3.1(p), the REPS Software and
the Costbook System Software do not contain any protection
feature designed to prevent copying, or intentionally to
prevent the use thereof and without limiting the generality of
the foregoing, no portion thereof contains "back door", "time
bomb", "Trojan Horse" or other computer software routines or
computer hardware components which are designed to prevent
unauthorized access, to disable or erase software or data, or
to perform like actions;
(q) no outstanding orders, notices or similar requirements relating to the
Corporation issued by any building, environmental, fire, health,
labour or police authorities or from any other similar federal, state
or municipal authority and there are no matters under discussion with
any such authorities relating to orders, notices or similar
requirements;
(r) except as set out in Schedule 3.1(r), no single capital expenditure in
excess of $10,000 or capital expenditures in the aggregate in excess
of $50,000 have been made or authorized by the Corporation since the
Balance Sheet Date;
(s) except as disclosed on Schedule 3.1(s), no dividends have been
declared or paid on or in respect of the Shares and no other
distribution on any of its securities or shares has been made by the
Corporation since the Balance Sheet Date and all dividends which to
the date hereof have been declared or paid by the Corporation have
been duly and validly declared or paid;
(t) the Corporation has no liability, obligation or commitment for the
payment of income taxes, corporation taxes or any other taxes or
duties of whatever nature or kind, or interest or penalties with
respect thereto in excess of One Thousand Dollars ($1,000.00), except
such as are disclosed in the Financial Statements or such taxes or
duties not yet due and payable as have arisen since the Balance Sheet
Date in the usual and ordinary course of business and for which
adequate provision in the accounts of the Corporation has been made,
and neither the Vendors nor the Corporation are in arrears with
respect to any required withholdings or installment payments of any
tax or duty of any kind and has not filed any waiver for a taxation
year of the Corporation under the Code or any other legislation
imposing tax on the Corporation;
(u) the tax returns of the Corporation as disclosed in Schedule 3.1(u)
attached hereto are true and complete in all material respects;
(v) there are no outstanding liabilities against the Corporation which
could be reasonably expected to have a material adverse effect on the
Corporation;
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(w) the Corporation is not a party to any contract or commitment (i)
outside the usual and ordinary course of business (ii) extending for a
period of time longer than three (3) months and not cancellable
without penalty or (iii) involving expenditures by the Corporation in
the aggregate in excess of $5,000, except such contracts or
commitments as are listed in Schedule 3.1(w) attached hereto
(collectively, the "Material Contracts") and the Material Contracts
include all licenses of Intellectual Property to which the Corporation
is licensor or licensee;
(x) all such Material Contracts are in good standing and in full force and
effect and the Corporation is not in default or breach of any Material
Contract to which it is a party and there exists no condition, event
or act which, with the giving of notice or lapse of time or both would
constitute such a default or breach so that the Corporation is
entitled to all material benefits under the Material Contract to which
it is a party;
(y) the Corporation is not a party to or bound by any guarantee,
indemnification, surety or similar obligation;
(z) the Corporation does not own and has not owned any real property nor
is it or has it been a party to any lease or agreement in the nature
of a lease for real property, whether as lessor or lessee;
(aa) Environmental Representations and Warranties of the Vendors:
(i) to the Knowledge of the Vendors:
A. all activities of the Corporation with respect to real
property now or formerly owned, leased or used by the
Corporation (collectively, "Real Property") have been and
are being conducted in material compliance with all federal,
state and local statutes, ordinances, rules, regulations and
orders, as well as all requirements of common law concerning
those activities, repairs or construction of any
improvements, manufacturing processing and/or handling of
any materials, and discharges to the air, soil, surface
water or groundwater;
B. there has been no release or presence of any Hazardous
Materials on, in, from or onto the Real Property;
C. the Corporation has not generated, manufactured, refined,
transported, stored, handled, disposed of or released any
Hazardous Material on the Real Property;
D. the Corporation has obtained all approvals and caused all
notifications to be made with respect to the Real Property
as required by Environmental Laws, if any;
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E. the Corporation has delivered to the Purchaser a true and
complete list of all registrations with, licenses from, or
permits issued by governmental agencies or authorities
material to the operations of the Business pursuant to
environmental, health and safety laws, and all such
registrations, licenses or permits are in full force and
effect;
F. the Corporation has not received any written notice of any
violation of any Environmental Laws with respect to the Real
Property;
G. no action has been commenced or threatened regarding the
Corporation's compliance with any Environmental Laws with
respect to the Real Property;
H. no tanks used for the storage of any Hazardous Material
above or below ground are present or to the Knowledge of the
Vendors were at any time present on or about the Real
Property;
I. no action has been commenced or threatened regarding the
presence of any Hazardous Material on or about the Real
Property;
J. no Hazardous Materials are present in any medium in the
operations of the Business and/or at the Real Property in
such a manner as requires investigation or remediation under
any applicable law;
K. no polychlorinated biphenyls or substances containing
polychlorinated biphenyls are present on the Real Property;
and
L. no friable asbestos is present in the operations of the
Business and/or the Real Property;
(ii) the Corporation has not released or waived the liability of any
previous owner, lessee, or operator of the Real Property or any
party who may be potentially responsible for the presence or
removal of Hazardous Material on or about the Real Property and
has any indemnification obligation regarding Hazardous Material
with respect to the Real Property to any party;
(bb) the Corporation has no subsidiaries and no agreements, options or
commitments to acquire any shares or securities of any corporation or
other entity or partnership or to acquire or lease any business
operations, real property or assets;
(cc) there is no unexpired agreement, option, understanding or commitment,
or any right or privilege capable of becoming an agreement, for the
purchase from the Corporation of the Business or any of its assets
other than in the usual and ordinary course of business;
-15-
(dd) except as set out in Schedule 3.1(dd), the Corporation is not a party
to or bound by any contract or commitment to pay any royalty, license
fee or management fee;
(ee) the Corporation has no written or unwritten employment contract with
any person whomsoever except as set out in Schedule 3.1(ee) and
Schedule 3.1(ee) contains a list of all employees of the Corporation
and truly and correctly sets out the date of birth, annual salary,
car allowance, holiday entitlement, position and hire date of each of
the employees of the Corporation;
(ff) except for such agreements and plans as are listed in Schedule
3.1(ff) attached hereto and copies of which are attached to such
Schedule 31 as exhibits, the Corporation is not bound by or a party
to:
(i) any collective bargaining agreement, or
(ii) any health, dental, life and disability insurance, retirement,
pension, bonus, profit-sharing or similar plan or incentive
management or deferred compensation plan of any kind whatsoever
or any benefit plan including, without limitation maintained by
or on behalf of the Corporation for any of its employees;
(gg) all benefit plans listed in Schedule 3.1(ff) have been duly
registered where required by, and are in good standing under, all
applicable legislation and all required employer contributions under
any such plans have been made and the applicable funds have been
funded in accordance with the terms thereof of the plans and no past
service funding liabilities exist thereunder;
(hh) no trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent:
(i) holds bargaining rights with respect to any of the
Corporation's employees by way of certification, interim
certification, voluntary recognition, designation, successor
rights or other means,
(ii) has applied to be certified as the bargaining agent of any of
the Corporation's employees, or
(iii) has applied to have the Corporation declared a related employer
pursuant to any law which would allow it to hold bargaining
rights with respect to any of the Corporation's employees;
(ii) except as disclosed in Schedule 3.1(ii), and except for remuneration
paid to employees in the usual and ordinary course of business
including, without limitation, holiday or other bonus remuneration or
severance payments and made at current rates of remuneration, no
payments have been made or authorized since the Balance Sheet Date by
the Corporation, to officers, directors or employees of
-16-
the Corporation and all vacation pay for employees of the Corporation
is properly reflected in the books and accounts of the Corporation;
(jj) except as disclosed in Schedule 3.1(nn), there are no outstanding,
threatened or pending actions, claims, grievances or proceedings
pertaining to the Business pursuant to any taxation, health,
employment or other law relating to employees or independent
contractors;
(kk) the Corporation has made or paid all payments, premiums, assessments,
penalties and/or remittances in a timely fashion in respect of its
employees;
(ll) to the Knowledge of the Vendors, there are no actual or threatened or
pending organizing activities of any trade union, council of trade
unions, employee bargaining agency or affiliated bargaining agent or
any actual, or, threatened or pending unfair labour practice
complaints pertaining to the Business, nor have there been any such
activities or complaints within the last five years;
(mm) no current or former director, officer, shareholder, employee or
consultant of the Corporation or any other person who may be deemed
to be not dealing at arm's length with the Corporation is indebted to
the Corporation;
(nn) none of the Vendors has received notice of any actions, suits or
proceedings (whether or not purportedly on behalf of the Corporation)
pending or threatened against or adversely affecting, or which could
adversely affect, the Corporation or any of its assets before or by
any federal, state, municipal or other governmental court,
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, whether or not insured, including without
limitation, any claim, litigation or liabilities in any way relating
to the Fair Credit Reporting Act, any federal or state equal
employment opportunity law or any other law, and which might involve
the possibility of any judgment or liability against the Corporation,
except such actions, suits or proceedings as are disclosed in
Schedule 3.1(nn) attached hereto, and to the Knowledge of the
Vendors, the Corporation has not been operating under or subject to,
or in default with respect to, any order, writ, injunction or decree
of any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, foreign or
domestic;
(oo) there are no outstanding or unsatisfied judgements against the
Vendors or the Corporation;
(pp) none of the Vendors has filed for bankruptcy protection under United
States bankruptcy laws nor, to the Knowledge of the Vendors, do they
know of any circumstances which might reasonably lead any of them to
seek such protection during the period of ninety (90) days after the
Closing;
(qq) the Corporation is not doing business in any jurisdiction other than
those set out in Schedule 3.1(qq);
-17-
(rr) the Corporation has complied with all applicable laws, rules,
regulations, notices, approvals and orders of the United States of
America and of the jurisdictions stated in Schedule 3.1(qq) and all
municipalities thereof in which the Business is carried on, the non-
compliance with which could be reasonably expected to have a material
adverse effect on the Corporation and the Corporation has not
received notice of the breach of any such laws, rules, regulations,
notices, approvals or orders and is not in breach of any such laws,
rules, regulations, notices, approvals or orders, except as specified
in Schedule 3.1(rr);
(ss) to the Knowledge of the Vendors, (A) the Corporation is duly
licensed, registered or qualified, and duly possess all permits, in
the jurisdictions stated in Schedule 3.1(qq) and all municipalities
thereof in which the Corporation carries on its business to enable
the Business to be carried on as now conducted and its assets to be
owned, leased and operated, except as specified in Schedule 3.1(ss)
and (B) all such licenses, registrations, qualifications and permits
are listed in Schedule 3.1(qq) and are valid and subsisting and in
good standing and none of the same contains or is subject to any
term, provision, condition or limitation which has or may have a
material adverse effect on the operation of the Business;
(tt) to the Knowledge of the Vendors, the operation of the Corporation on
any lands from which it conducts the operations of the Business is
not in contravention of any restriction or limitation applicable to
such lands and is not in contravention of any law or regulation or of
any decree or order of any court or other body having jurisdiction;
(uu) attached hereto as Schedule 3.1(uu) is a true and complete list of
all insurance policies maintained by the Corporation that also
specifies the insurer, the amount of the coverage, the type of
insurance, the policy number and any pending claims thereunder;
(vv) Investment Representations and Covenants Regarding U.S. and British
Columbia Securities Law:
(i) the Vendors acknowledge that this Agreement is made by the
Purchaser with the Vendors in reliance upon the representations
and warranties made by the Vendors in this Section 3.1(vv). The
Vendors represent that the LML Shares issued by the Purchaser to
the Vendors pursuant to this Agreement will be acquired by the
Vendors for investment for their own accounts, not as nominees or
agents, and not with a view to the sale or distribution of any
part thereof, and that they have no present intention of selling,
transferring, pledging or granting any participation in or
otherwise distributing same. The Vendors further represent that
they do not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, pledge or grant
participation to such person or to any third person, with respect
to any such LML Shares received by them (collectively,
"Restricted Securities");
-18-
(ii) the Vendors understand and acknowledge that the issuance of the
Restricted Securities will not be registered under the
Securities Act of 1933 of the United States of America, as
amended (the "1933 Act") or any other applicable federal or
state securities laws on the ground that the sale of the
Restricted Securities as provided for in this Agreement are
exempt pursuant to Section 4(2) of the 1933 Act, and that the
reliance of the Purchaser on such exemption is predicated on the
accuracy and truthfulness of the representations made by the
Vendors herein and the Vendors hereby consent to such reliance;
(iii) the Vendors covenant that in no event will they make any
disposition of any Restricted Securities, except in accordance
with applicable United States federal and state securities laws
and the rules and regulations promulgated thereunder and with
applicable securities laws of British Columbia, and they agree
that the Purchaser may place stop transfer orders with its
transfer agents with respect to such certificates. The
appropriate portion of the legend and the stop transfer orders
will be removed promptly upon delivery to Purchaser of such
satisfactory evidence as reasonably may be required by the
Purchaser that such legend or stop transfer orders are not
required to ensure compliance with the 1933 Act;
(iv) the Vendors represent that they, alone or with their advisor,
have knowledge and experience in financial and business matters,
that they, alone or with their advisor, are capable of
evaluating the merits and risks of their investment in the
Purchaser, and that they have the ability to bear the economic
risks of the investments, and that at the present time they are
each able to afford a complete loss of their investment and that
no guarantees have been or can be made by the Purchaser or any
of its representatives respecting the future value, if any, of
the Restricted Securities or the profitability or success of the
business of the Purchaser and no assurances are or have been
made concerning the dividend or distribution by the Purchaser of
cash to its shareholders;
(v) the Vendors acknowledge and understand that the Restricted
Securities must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from
such registration is available, and, subject to the provisions
of this Section 3.1(vv) and Section 5.2, that the Purchaser is
under no obligation to register the Restricted Securities for
sale by the Vendors;
(vi) the Vendors acknowledge that they are familiar with Rule 144
promulgated under the 1933 Act, which permits limited public
resales of securities acquired in a non-public offering, subject
to the satisfaction of certain conditions. The Vendors
understand that before Restricted Securities may be sold under
Rule 144 as currently in effect, the following conditions must
be fulfilled, except as otherwise described below: (a) certain
public
-19-
information about the Purchaser must be available, (b) the sale
must occur at least one year after the date the Restricted
Securities were acquired by the Vendors, (c) the sale must be
made in a brokers' transaction (as defined in section 4(4) of
the 0000 Xxx) or directly with a market maker (as defined in
section 3(a)(38) of the Securities Exchange Act of 1934), (d)
the number of Shares sold must not exceed certain volume
limitations, and (e) under certain circumstances, notice on
Form 144 must be filed with the Security and Exchange
Commission (the "SEC") and in certain cases transmitted to the
principal exchange on which such securities are so admitted,
prior to such sale;
(vii) the Vendors acknowledge that in the event the applicable
requirements of Rule 144 are not met, registration under the
1933 Act or compliance with another exemption from such
registration will be required for any disposition of Restricted
Securities, the Vendors understand that although Rule 144 is
not exclusive, the SEC has expressed its opinion that persons
proposing to sell restricted securities received in a private
offering other than in a registered offering or pursuant to
Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available
for such offers or sales and that such persons or brokers who
participate in the transactions do so at their own risk;
(viii) the Vendors agree to comply in all respects with the provisions
of this Section 3.1(vv)(viii). Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities,
unless there is in effect a registration statement under the
1933 Act covering the proposed transfer, the Vendors shall give
written notice to the Purchaser of the Vendors' intention to
effect such transfer, sale, assignment or pledge. Each such
notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient
detail and, if the Purchaser so requests, shall be accompanied
at the Vendors' expense either by (a) an opinion of legal
counsel which shall be reasonably satisfactory to the Purchaser
and its legal counsel, which opinion shall be addressed to the
Purchaser, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration
under the 1933 Act, or (b) a "no action" letter from the SEC to
the effect that the transfer of such securities without
registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto;
(ix) Legend on Certificates. The Vendors consent to the placement of
a legend on the certificates for the Restricted Securities in
substantially the following form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 ("1933 ACT"), AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
-20-
THESE SHARES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT REGISTRATION UNDER THE 1933 ACT
AND ANY APPLICABLE STATE SECURITIES LAW
UNLESS THE ISSUER RECEIVES AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER
AND ITS COUNSEL THAT SUCH TRANSFER
DOES NOT REQUIRE REGISTRATION UNDER THE
1933 ACT OR ANY OTHER STATE SECURITIES
LAWS.
In addition to the legend required by this Section 3.1(vv)(ix),
each certificate issued hereunder shall be stamped or otherwise
imprinted with any legend required pursuant to applicable state
corporation and securities laws.
(x) Report of Initial Trade. The Vendors acknowledge that the
Restricted Securities will be subject to a hold period under
the Securities Act (British Columbia) and may not be traded in
British Columbia until July 10, 2001, except as permitted by
the Securities Act (British Columbia). The Vendors further
acknowledge that in lieu of the Purchaser placing a legend on
the certificates representing the Restricted Securities
pursuant to section 132(2) of the Rules under the Securities
Act (British Columbia), each Vendor must file a report with the
British Columbia Securities Commission in the form attached as
Schedule 3.1(vv)(xi) hereto within 10 days of the initial trade
of any Restricted Securities.
(xi) Receipt of Information. The Vendors and their respective
attorneys, accountants and other advisors (A) have received and
reviewed this Agreement (including exhibits), the documents
filed by the Purchaser with the SEC (the "Public Documents")
including but not limited to the Public Documents attached
hereto as Schedule 3.1(vv)(x) collectively, the "Certain Public
Documents") which include the Purchaser's financial statements;
and (B) have had access to, and an opportunity to review all
documents and other materials requested of, the Purchaser; (C)
have been given an opportunity to ask any and all questions of,
and receive answers from, the Purchaser concerning the terms
and conditions of the offering and to obtain all information
the Vendors or their attorneys, accountants and other advisors
believe necessary or appropriate to verify the accuracy of the
information provided and to evaluate the suitability of an
investment in the Restricted Securities; and (D) in evaluating
the suitability of an investment in the Restricted Securities,
have not relied upon any representations or other information
(whether oral or written) other than as set forth herein or in
the Public Documents;
(xii) Brokers or Finders. The Vendors have not incurred, and will not
incur directly or indirectly, any liability for brokerage or
finders' or agents' commissions or any similar charges in
connection with this Agreement or
-21-
any transactions contemplated hereby. The Vendors hereby
indemnify the Purchaser for any claims, losses, all expenses
incurred by the Purchaser as a result of the representation in
this Section 3.1(vv)(xii) being untrue;
(xiii) Accredited Investor. Peyton is an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act by virtue of being either (i) an individual whose
net worth, or joint net worth with that person's spouse, on the
date hereof exceeds, and on the Closing Date will exceed,
$1,000,000; or (ii) an individual who had income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year. For purposes hereof,
"individual income" means adjusted gross income as reported for
federal income tax purposes, less any income attributable to
the spouse or to property owned by a spouse, increased by the
following amounts (but not including any amounts attributable
to a spouse or to property owned by a spouse): (i) the amount
of any interest income received which is tax-exempt under
Section 103 of the Code, (ii) the amount of losses claimed as a
limited partner in a limited partnership (as reported on
Schedule E of Form 1040), (iii) any deduction claimed for
depletion under Section 611 et seq. of the Code, and (iv) any
amount by which income from long-term capital gains has been
reduced in arriving at adjusted gross income pursuant to the
provisions of Section 1202 of the Code. For purposes hereof,
"net worth" means the excess of total assets at fair market
value, including home and personal property, over total
liabilities, including all home mortgages;
(xiv) No Review. The Vendors acknowledge that no securities
commission or similar regulatory authority has reviewed or
passed on the merits of the Restricted Securities;
(xv) No Insurance. The Vendors acknowledge that there is no
government or other insurance covering the Restricted
Securities;
(xvi) Risks. The Vendors acknowledge that there are risks associated
with an investment in the Restricted Securities;
(xvii) Exemption From Prospectus Requirement. The Vendors acknowledge
that the Purchaser has advised them that the Purchaser is
relying on an exemption from the requirements to provide the
Vendors with a prospectus and to distribute the Restricted
Securities through a person registered to sell securities under
the Securities Act (British Columbia) and, as a consequence of
acquiring the Restricted Securities pursuant to this exemption,
certain protections, rights and remedies provided by the
Securities Act (British Columbia), including statutory rights
of rescission or damages, will not be available to the Vendors;
-22-
(xviii) Resale Restrictions. The Vendors acknowledge that, as provided
for elsewhere in this Agreement, there are restrictions on
each Vendors' ability to resell the Restricted Securities and
it is the responsibility of each Vendor to find out what those
restrictions are and to comply with them before selling the
Restricted Securities; and
(xix) Not Resident. The Vendors are not resident in British Columbia
and are not acquiring the Restricted Securities for such
residents.
(ww) The Vendors acknowledge that the Purchaser has agreed to pay a
finders' fee as disclosed in Section 3.3(d), 3.3(e), 3.3(f).
(xx) None of the Vendors, the Corporation or any of their respective
affiliates has taken or agreed to take any action that would prevent
the acquisition of the Shares contemplated hereby from qualifying as a
reorganization under Section 368(a)(1)(B) of the Code.
3.2 Survival of Vendors' Representations, Warranties and Covenants
--------------------------------------------------------------
The representations and warranties of the Vendors and the Corporation
set forth in this Agreement shall survive the completion of the sale and
purchase of the Shares herein provided for and, notwithstanding such completion,
shall continue in full force and effect for the benefit of the Purchaser in
accordance with the terms thereof for a period of three (3) years from the
Closing Date.
3.3 Purchaser's Representations and Warranties
------------------------------------------
The Purchaser represents and warrants to the Vendors that the
following representations and warranties are true as of the date hereof and will
be true as of the Time of Closing:
(a) the Purchaser is a corporation duly incorporated, organized and
subsisting under the laws of the Yukon;
(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 hereby;
(c) the Purchaser is acquiring the Shares for its own account and not with
a view to their distribution within the meaning of Section 2(11) of
the 1933 Act;
(d) the Purchaser and its officers and agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with
this Agreement other than a finder's fee in the amount equal to Three
and One-Half Percent (3.5%) of the Purchase Price payable to Xxxxxxx
Xxxxxxx of Omaha, Nebraska, payable in common shares in
-23-
the capital stock of LML Payment Systems Inc. to be issued at an issue
price per common share equal to the last sale price for the purchase
of such common share as reported by NASDAQ on the day previous to the
Closing Date and will indemnify and hold the Vendors harmless from any
such payment alleged to be due by or through the Purchaser as a result
of the actions of the Purchaser or its officers or agents;
(e) to the Knowledge of the Purchaser, neither the Purchaser nor any of
its affiliates has taken or agreed to take any action that would
prevent the acquisition of the Shares contemplated hereby from
qualifying as a reorganization under Section 368(a)(1)(B) of the Code;
(f) immediately before the Closing, there are Fifteen Million Two Hundred
and Thirty-Three Thousand Nine Hundred and Eighty-Seven (15,233,987)
LML Shares issued and outstanding and after the transaction none of
the Vendors, either individually or in the aggregate, shall own more
than 5% of the Shares and more than 5% of the voting control of
Purchaser;
(g) for more than thirty-six (36) months before the Closing, Legacy
Promotions Inc., a company incorporated under the laws of the Province
of British Columbia, one of the provinces of Canada:
(i) has been a wholly-owned subsidiary of the Purchaser;
(ii) has had an office in Vancouver, British Columbia;
(iii) has had no office or other place of business in the United
States of America;
(iv) has carried on for profit the business of licensing a trademark
to a third party licensee on an arm's length basis; and
at the Closing, neither the Purchaser nor Legacy Promotions Inc. have
any intention of disposing of or discontinuing the business of Legacy
Promotions Inc.;
(h) at the Closing, the fair market value of the Purchaser will exceed the
fair market value of the Corporation; and
(i) all of the assets acquired by the Purchaser pursuant to the Material
Acquisitions are used in the electronic payment processing business of
the Purchaser and its subsidiaries and the principal purpose for the
acquisition of those assets directly or indirectly by the Purchaser
was not to satisfy any test contained in U.S. Treasury Regulation
1.367(a)-3.
-24-
3.4 Survival of Purchaser's Representations, Warranties and Covenants
-----------------------------------------------------------------
The representations and warranties of the Purchaser set forth in this
Agreement shall survive the completion of the sale and purchase of the Shares
herein provided for and, notwithstanding such completion, shall continue in full
force and effect for the benefit of the Vendors in accordance with the terms
thereof for a period of three (3) years from the Closing Date.
ARTICLE 4 - CLOSING
-------------------
4.1 Closing
-------
The sale and purchase of the Shares shall be completed at the Time of
Closing at the offices of Vendors' Counsel, Xxx Xxxxxxxxx, Xxxxx X, Xxxxx 000,
2525 E. Camelback Road, Phoenix, Arizona;
4.2 Deliveries by the Vendors to the Purchaser
------------------------------------------
(a) At the Closing, the Vendors shall deliver or cause to be delivered to
the Purchaser the following:
(i) duly executed certificate of the Secretary of the Corporation
certifying the Articles of Incorporation and Bylaws of the
Corporation, a copy of the resolution of the directors of the
Corporation authorizing transfer of the Shares to the Purchaser
and the incumbency and authority of the signatory of the
Corporation to execute documents on behalf of the Corporation;
(ii) a Certificate of Good Standing or evidence of such good standing
of the Corporation from each state in which the nature of the
Business or the location of its assets requires qualification;
(iii) share certificates #3, #4 and #5 evidencing the Shares being
purchased by the Purchaser duly endorsed for transfer, which
shall be delivered free and clear of all liens, claims, charges
and encumbrances;
(iv) share certificate #6 evidencing that the Purchaser is the
registered owner of Shares;
(v) certified copy of the share register of the Corporation naming
the Purchaser as registered holder of all the Shares;
(vi) opinion of Vendors' Counsel, substantially in the form attached
hereto as Schedule 4.2(a)(vi);
-25-
(vii) Employment Agreements between each of:
X. Xxxxxx;
X. Xxxxxxxx; and
X. Xxxxxxxx;
substantially in the forms attached hereto as Schedules
4.2(a)(vii)A, B and C, respectively;
(viii) Resignations of certain of the officers and directors of the
Corporation requested by the Purchaser;
(ix) the consent of the Auditor of the Corporation as to use of its
audit report in public filings;
(x) evidence satisfactory to the Purchaser of the accredited
investor and sophisticated investor status of the Vendors; and
(xi) Releases of each of the Vendors in the forms attached as
Schedule 4.2(a)(xi).
4.3 Deliveries by the Purchaser to the Vendors
------------------------------------------
(a) At the Closing, the Purchaser shall deliver or cause to be delivered
to the Vendors the following:
(i) certificate of the Secretary of the Purchaser certifying copies
of the Board of Directors' resolutions and/or meeting minutes,
evidencing authorization of the transaction contemplated herein
and the incumbency and the authority of the signatory of the
Purchaser to execute this Agreement;
(ii) the Purchase Price payable by the Purchaser at the Closing to
each of the Vendors by issuance of LML Shares in accordance with
Section 2.1(b); and
(iii) the Opinion of Purchaser's Counsel in the Yukon Territory.
ARTICLE 5 - COVENANTS
---------------------
5.1 Taxes
-----
The Purchaser does not assume and shall not be liable for any taxes
under the Code or any other taxes whatsoever which may be or become payable by
the Corporation with respect to the income, business, properties and activities
of the Corporation up to and including
-26
the Closing Date or the Vendors including, without limitation, any taxes
resulting from or arising as a consequence of:
(a) the income earned by the Corporation up to and including the Closing
Date, which the Vendors are liable to pay because of the S-Corporation
designation of the Corporation; and
(b) the sale by the Vendors to the Purchaser of the Shares herein
contemplated;
and the Vendors shall jointly and severally indemnify and save harmless the
Purchaser and the Corporation from and against all such taxes.
5.2 Registration of LML Shares
--------------------------
(a) If while the Vendors hold Restricted Securities, the Purchaser
proposes to file a registration statement under the 1933 Act (a
"Registration Statement") with respect to an underwritten Public
offering of any class of equity securities for its own account (other
than a registration statement (i) on Form F-4, F-8 or any successor
form thereto or (ii filed solely in connection with an offering made
solely to employees of the Purchaser), then the Purchaser will give
written notice of such proposed filing to the Vendors at least thirty
(30) days before the anticipated filing date. Such notice will set
forth the aggregate number of securities proposed to be included in
the registration and offer the Vendors the opportunity to register
such amount of Restricted Securities (the "Registrable Securities") as
each such holder may request (a "Piggyback Registration"). Subject to
Section 5.2(b) hereof, the Purchaser will use its best efforts to
include in each such Piggyback Registration all Registrable Securities
with respect to which the Purchaser has received written requests for
inclusion therein from any of the Vendors within fifteen (15) days
after the mailing date of the notice. The Vendors will be permitted to
withdraw all or part of the Registrable Securities from a Piggyback
Registration at any time prior to the effective date of such Piggyback
Registration.
(b) The Purchaser will use its best efforts to cause the underwriters of a
proposed underwritten offering to permit the Vendors to include in the
Piggyback Registration all such Registrable Securities requested to be
so included on the same terms and conditions as any similar securities
included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver an opinion to the
holders of Registrable Securities to the effect that the total amount
of securities which such holders, the Purchaser and any other persons
having rights to participate in such registration propose to include
in such offering is such as to materially and adversely affect the
success of such offering, then the amount of securities to be included
therein (x) for the account of the Vendors on the one hand (allocated
pro rata among such holders on the basis of the amount of Registrable
Securities requested to be included therein by each such holder), and
(y) for the account of all other shareholders having rights to
-27-
participate (exclusive of the Purchaser), on the other hand, will be
reduced (to zero if necessary) pro rata in proportion to the
respective amounts of securities requested to be included therein to
the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
underwriter or underwriters.
(c) In connection with the registration of the Registrable Securities
pursuant to either Sections 5.2(a) or 5.2(b), the Vendors shall have
the following obligations:
(i) it shall be a condition precedent to the obligations of the
Purchaser to take any action pursuant to this Agreement with
respect to each Vendor that such Vendor shall furnish to the
Purchaser such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably
required to effect the registration of the Registrable
Securities and shall execute such documents in connection with
such registration as the Purchaser may reasonably request. At
least fifteen (15) days prior to the first anticipated filing
date of the Registration Statement, the Purchaser shall notify
each Vendor of the information the Purchaser requires from each
such Vendor (the "Requested Information") in the case of a
Registration Statement being prepared pursuant to this Section
or if such Vendor elects to have any of such Vendor's
Registrable Securities included in the Registration Statement in
the case of a Registration Statement being prepared pursuant to
this Section.
(ii) Each Vendor by such Vendor's acceptance of the Registrable
Securities agrees to cooperate with the Purchaser as reasonably
requested by the Purchaser in connection with the preparation
and filing of the Registration Statement hereunder, unless such
Vendor has notified the Purchaser in writing of such Vendor's
election to exclude all of such Vendor's Registrable Securities
from the Registration Statement; and
(iii) No Vendor may participate in any underwritten registration
hereunder unless such Vendor (i) agrees to sell such Vendor's
Registrable Securities on the basis provided in any underwriting
arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and other
fees and expenses of investment bankers and any manager or
managers of such underwriting, except as provided in Section
5.2(d) below.
(d) All expenses, other than underwriting discounts and commissions and
other fees and expenses of investment bankers and other than brokerage
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 5.2(a) or 5.2(b), including,
without limitation, all registration, listing and
-28-
qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Purchaser and the Vendors, shall be
borne by the Purchaser; provided, however, that the Purchaser shall
only be required to bear the fees and out-of-pocket expenses of one
legal counsel selected by the Vendors in connection with any such
registration. Accordingly, any holder of Registrable Securities who
desires separate counsel from the counsel selected by the Vendors
shall bear the fees of his or its own counsel. Each Vendor shall bear
the transfer taxes, if any, applicable to the sale of such Vendor's
Registrable Securities.
5.3 Price Protection
----------------
The Purchaser covenants and agrees that if, at any time during the
first ninety (90) days that some or all of the LML Shares issued hereunder, by
effluxion of time or otherwise may be resold pursuant to the provisions of
applicable securities legislation, and any of the Vendors sells any such LML
Shares through the facilities of NASDAQ at a price per LML Share that is less
than the LML Share Closing Value, then, upon such Vendor supplying proof to the
Purchaser of the relevant circumstances of such sale in form acceptable to the
Purchaser, then the Purchaser shall issue additional LML Shares (the "Additional
LML Shares") to such Vendor equal to the lesser of (A) the maximum number of
shares that may be issued by the Purchaser without obtaining shareholder
approval under the rules and regulations applicable to issuers listed on the
NASDAQ small cap market and (B) the remainder obtained by subtracting (x) the
number of LML Shares sold from (y) the product of (i) multiplying the number of
LML Shares sold by (ii) the fraction in which the numerator is equal to the LML
Share Closing Value and the denominator is equal to the price per LML Share
obtained by such Vendor in such sale (the "Additional LML Shares Closing
Value"). In the event such Additional LML Shares issued to the Vendors are not
immediately free trading shares through the facilities of NASDAQ, at any time
during the first ninety (90) days after some or all of the Additional LML Shares
issued hereunder are, by effluxion of time or otherwise may be resold pursuant
to the provisions of any applicable securities legislation, and any of the
Vendors sells any such Additional LML Shares through the facilities of NASDAQ at
a price per LML Share that is less than the Additional LML Share Closing Value,
then, upon such Vendor supplying proof to the Purchaser of the relevant
circumstances of such sale in form acceptable to the Purchaser, then the
Purchaser shall issue additional LML Shares to such Vendor equal to lesser of
(A) the maximum number of shares that may be issued by the Purchaser without
obtaining shareholder approval under the rules and regulations applicable to
issuers listed on the NASDAQ small cap market and (B) the remainder obtained by
subtracting (x) the number of Additional LML Shares sold (y) from the product of
(i) multiplying the number of Additional LML Shares sold by (ii) the fraction in
which the numerator is equal to the Additional LML Share Closing Value and the
denominator is equal to the price per LML Share obtained by such Vendor in such
sale. Such treatment shall again continue for any further loss by Vendors.
5.4 Employees
---------
(a) The Purchaser intends for the immediately foreseeable future to cause
the Corporation to maintain the employment of all employees of the
Corporation upon the Closing Date (collectively, the "Employees"),
subject to Sections 5.4(f) and
-29-
5.4(g), at the wage and benefit levels in existence on the Closing
Date or as otherwise set forth on Schedule 3.1(ee). The Purchaser
shall cause the Corporation to honor all Employees vacation, sick
leave, cash bonus and similar bonuses, incentives and benefits
properly accrued as of the Closing Date as set forth on Schedule
31(ee) and to continue to offer existing benefits for the immediately
foreseeable future.
(b) The Purchaser shall indemnify, defend and hold the Vendors harmless
from liability, if any, resulting from the Corporation's failure after
the Time of Closing to honor, continue and pay the accrued benefits
and obligations described in this Section 5.4 or any failure to
continue to offer any benefits as required by applicable federal,
state and local law. In the event the termination of any Employee
occurs after the Time of Closing or a dispute arises over the
Corporation's failure to honor properly accrued vacation, sick leave,
cash bonus, or any other bonuses or benefits after the Time of
Closing, the Purchaser shall indemnify, defend and hold harmless the
Vendors from all such liability.
(c) The Vendors will pay and be liable to the Purchaser and its affiliates
and shall indemnify and defend the Purchaser and its affiliates (EVEN
IF THE PURCHASER OR ITS AFFILIATES ARE NEGLIGENT OR STRICTLY LIABLE)
in respect of any and all losses, damages, liabilities, taxes, and
sanctions that arise under Sections 106(b)(1) and 162(i)(2) of the
Code, interest and penalties, costs and expenses (including, without
limitation), disbursements and reasonable legal fees incurred in
connection therewith and in seeking indemnification therefor and any
amounts or expenses required to be paid or incurred in connection with
any action, suit, proceeding, claim, appeal, demand, assessment, or
judgment imposed upon, incurred by, or assessed against the Purchaser
or any of its Affiliates or any of their respective employees arising
by reason of or relating to any failure to comply with the
continuation health care coverage requirements of Section 162(k) of
the Code and Sections 601 through 608 of the Employee Retirement
Income Security Act of 1974 ("ERISA") which failure occurred with
respect to any current or prior employee of the Corporation or any
qualified beneficiary of such employee (as defined in Section
162(k)(7)(B) of the Code) on or prior to the Closing Date.
(d) If any of the Employees who are employed by the Corporation after the
Closing do not perform satisfactorily and their employment with the
Corporation is terminated prior to the first anniversary of the
Closing, then, subject to the following limitations, the Vendors will
be liable for that portion of all severance amounts and/or damages for
wrongful dismissal owing to such Employees which is based on their
employment with the Corporation up to the time of the Closing. The
Vendors will have no liability under this subparagraph if the
employment of any such Employee is terminated due to disability and
the amounts owing to such Employee are covered by insurance;
-30-
(e) The Vendors will use good faith best efforts to encourage the
Employees to continue employment in the Business following the
Closing.
(f) Notwithstanding anything contained in this Section 5.4, the
Corporation shall not be required to continue the employment after
Closing of any Employee who:
(i) is not performing his or her job functions to the Corporation's
reasonable satisfaction, or
(ii) due to circumstances not foreseen at Closing, should not, in the
sole discretion of management of the Corporation continue in the
employment of the Corporation.
(g) Notwithstanding anything contained in this Section 5.4, the continuing
employment of Peyton, Xxxxxxxx and Bandiera shall be governed by
Employment Agreements in the form attached hereto, respectively, as
Schedule 4.2(a)(vii)A, B and C.
(h) This Section 5.4 shall not be construed to create a contract of
employment for any Employee or to otherwise create any third party
beneficiary rights for any Employee.
5.5 ABCO Markets, Inc.
------------------
The Vendors will use their best efforts to do all things necessary or
desirable in order to obtain from ABCO Markets, Inc. a clarification of the
right, title and interest of the Corporation in REPS Software and the Costbook
System Software in terms beneficial to the Purchaser.
5.6 Distributions before Closing
----------------------------
The Purchaser, the Corporation and the Vendors covenant and agree that
the Corporation may declare and pay dividends in cash and/or in kind from funds
or other assets legally available for such distribution to the stockholders of
the Corporation at any time before the Closing but it is expressly agreed that
any such distribution by the Corporation shall not form any part of the purchase
and sale of the Shares pursuant to the terms of this Agreement or the "plan of
reorganization" affected hereby.
ARTICLE 6 - INDEMNIFICATION
---------------------------
6.1 By the Vendors
--------------
Each of the Vendors shall jointly and severally indemnify, defend and
hold harmless the Purchaser, and its parents, subsidiaries, officers, directors,
employees, consultants, attorneys, insurers, affiliates and controlling persons
(collectively, and including the Corporation
-31-
and its subsidiaries after the Time of Closing, the "Purchaser Indemnified
Parties") from and against any and all loss, damage, expense (including, without
limitation, court costs, interest, penalties, reasonable legal fees and
expenses), suit, action, claim, liability or obligation (collectively, "Losses")
related to, caused by or arising from any misrepresentation, breach of warranty
or failure to fulfill any covenant or agreement of the Vendors contained in this
Agreement or any agreement ancillary hereto (an "Indemnification Claim");
provided, however, that the Vendors shall not have any obligation to indemnify
the Purchaser or other Purchaser Indemnified Party from and against any Losses
until the Purchaser or other Purchaser Indemnified Party has collectively
suffered Losses by reason of all such breaches (or alleged breaches) in excess
of a Twenty-Five Thousand ($25,000) Dollar aggregate threshold (in which case
the Vendors will be jointly and severally obligated to indemnify the Purchaser
from and against such Losses from the first dollar of such Losses resulting
from, arising out of, or relating to an Indemnification Claim against the
Vendors). In computing the extent of any Loss under this Agreement, the
liability of the Vendors for the Indemnification Claim shall be taken into
account, if appropriate.
6.2 By Purchaser
------------
(a) The Purchaser shall indemnify, defend and hold harmless the Vendors
from and against any and all Losses related to, caused by or arising
from any misrepresentation, breach of warranty or failure to fulfill
any covenant or agreement of the Purchaser contained in this
Agreement; provided, however, and subject to Section 6.2(b), that the
Purchaser shall not have any obligation to indemnify the Vendors from
and against any Losses until the Vendors have collectively suffered
Losses by reason of all such breaches (or alleged breaches) in excess
of a Twenty-Five Thousand ($25,000) Dollar aggregate threshold (in
which case the Purchaser will be obligated to indemnify the Vendors
from the first dollar of such Losses resulting from, arising out of,
or relating to an Indemnification Claim against the Vendors). In
computing the extent of any Loss under this Agreement, the liability
of the Purchaser for the Indemnification Claim shall be taken into
account, if appropriate.
(b) The Purchaser and the Vendors expressly acknowledge that the Twenty-
Five Thousand ($25,000) Dollar limitation contemplated in Sections 6.1
and 6.2(a) is intended to restrict the number of small and potentially
annoying and uneconomical claims to be made under the indemnification
provisions of this Agreement. The Purchaser also agrees that such
limitation is not appropriate and does not apply to any substantial
continuing obligations of the Purchaser to the Vendors including,
without limitation, any obligation of the Purchaser under any
employment agreement to which any Vendor may be a party which is
contemplated in this Agreement.
6.3 Indemnification Procedure
-------------------------
(a) Any party seeking indemnification must have a good faith belief that
it is entitled to such indemnification and shall give prompt (and, in
any event, within thirty (30)
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days after receipt of actual notice of the claim) written notice (in
accordance with the provisions of Section 8.10 hereof) to the
indemnifying party of the facts and circumstances giving rise to the
claim, and the amount of the claim for which it is seeking
indemnification. The indemnifying party shall be relieved of the duty
to indemnify for any damages which are incurred as a result of the
failure to give such notice within the time required by the preceding
sentence, however, except for such reductions, the failure to provide
such notice within the time required by the preceding sentence,
without the incurrence of damages as a result, will not reduce such
indemnification obligation. Such notice shall contain a description in
reasonable detail of the basis for such claim for indemnification.
With respect to any claim for which indemnification is sought, the
party seeking indemnification has an obligation to exercise its best
efforts to mitigate the amount of any such indemnification claim.
(b) Any indemnifying party will have the right to defend the indemnified
party against any third party claim with counsel of the indemnifying
party's choice reasonably satisfactory to the indemnified party so
long as (i) the indemnifying party notifies the indemnified party in
writing within fifteen (15) days after the indemnified party has given
notice of the third party claim that the indemnifying party will,
subject to the limitation of this Agreement, indemnify the indemnified
party from and against such claims, and (ii) the indemnifying party
conducts the defense of such third party claim actively and
diligently. The indemnified party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the third
party claim. In addition, if a legitimate conflict of interests exists
such that one firm of attorneys cannot ethically represent both the
indemnified party and the indemnifying party or the counsel retained
by the indemnifying party otherwise advises the indemnifying party
that separate counsel should be obtained, then the indemnified party
may select its own counsel with the reasonable fees and expenses
thereof to be paid by the indemnifying party.
(c) The indemnified party will not consent to the entry of any judgment or
enter into any settlement with respect to the third party claim
without the prior written consent of the indemnifying party (not to be
delayed, conditioned or withheld unreasonably), and the indemnifying
party will not consent to the entry of any judgment or enter into any
settlement with respect to the third party claim without the prior
written consent of the indemnified party (not to be delayed,
conditioned or withheld unreasonably).
6.4 Maximum Amount of Indemnification Obligations
---------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the
aggregate potential liability for a breach of this Agreement, or otherwise
arising from the transaction contemplated hereby, including without limitation,
any liability arising under Article 6 of this Agreement or other liability
arising from breach of contract, indemnity claims, tort claims or otherwise, is
expressly severally limited for each of the Vendors to his Sharing Percentage of
the Purchase Price, except for Peyton, who shall be jointly and severally
liable. The Vendors agree
-33-
that Bandiera and Xxxxxxxx shall each cease to be severally liable for any
particular indemnification hereunder and become jointly and severally liable in
respect thereof if the reason for such indemnification is solely the result of
the acts of one (1) or more but not all of the Vendors' actions.
ARTICLE 7 - CONDITIONS
----------------------
7.1 Conditions for the Benefit of the Purchaser
-------------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the
Shares is subject to the following conditions which are for the
exclusive benefit of the Purchaser to be performed or complied with at
or prior to the Time of Closing:
(i) the representations and warranties of the Vendors set forth in
Section 3.1 shall be correct at the Time of Closing with the
same force and effect as if made at and as of such time;
(ii) the Vendors shall have performed or complied with all the terms,
covenants and conditions of this Agreement to be performed or
complied with by the Vendors at or prior to the Time of Closing;
and
(iii) the Purchaser shall be furnished with such certificates,
affidavits or statutory declarations of the Corporation and of
the Vendors or of officers of the Corporation and of the Vendors
as the Purchaser or the Purchaser's Counsel may deem reasonably
necessary in order to establish that the terms, covenants and
conditions contained in this Agreement have been performed or
complied with by the Vendors or the Corporation, as the case may
be, at or prior to the Time of Closing and that the
representations and warranties of the Vendors herein are true
and correct at the Time of Closing.
(b) In case any term or covenant of the Vendors or condition to be
performed or complied with for the benefit of the Purchaser at or
prior to the Time of Closing shall not have been performed or complied
with at or prior to the Time of Closing, the Purchaser may, without
limiting any other right that the Purchaser may have, at its sole
option, either:
(i) rescind this Agreement by notice to the Vendors, and in such
event the Purchaser shall be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part.
-34-
7.2 Conditions for the Benefit of the Vendors
-----------------------------------------
(a) The sale by the Vendors and the purchase by the Purchaser of the
Shares is subject to the following conditions which are for the
exclusive benefit of the Vendors to be performed or complied with at
or prior to the Time of Closing:
(i) the representations and warranties of the Purchaser set forth in
Section 3.3 shall be true and correct at the Time of Closing
with the same force and effect as if made at and as of such
time;
(ii) the Purchaser shall have performed or complied with all of the
terms, covenants and conditions of this Agreement to be
performed or complied with by the Purchaser at or prior to the
Time of Closing;
(iii) the Vendors shall be furnished with such certificates,
affidavits or statutory declarations of the Purchaser or of
officers of the Purchaser as the Vendors or the Vendors' counsel
may reasonably think necessary in order to establish that the
terms, covenants and conditions contained in this Agreement to
have been performed or complied with by the Purchaser at or
prior to the Time of Closing have been performed and complied
with and that the representations and warranties of the
Purchaser herein given are true and correct at the Time of
Closing; and
(iv) that the Employment Agreements with each of the Vendors are
signed and executed.
(b) In case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Vendors at or prior
to the Time of Closing shall not have been performed or complied with
at or prior to the Time of Closing, the Vendors may, without limiting
any other right that the Vendors may have, at its sole option, either:
(i) rescind this Agreement by notice to the Purchaser, and in such
event the Vendors shall be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part.
-35-
ARTICLE 8 - GENERAL
-------------------
8.1 Further Assurances
------------------
Each of the Vendors, the Corporation and the Purchaser shall from time
to time execute and deliver all such further documents and instruments and do
all acts and things as the other party may, either before or after the Closing
Date, reasonably require to effectively carry out or better evidence or perfect
the full intent and meaning of this Agreement.
8.2 Time of the Essence
-------------------
Time shall be of the essence of this Agreement.
8.3 Commissions
-----------
The Vendors shall indemnify and save harmless the Purchaser from and
against any claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any person in respect of the sale and purchase of
the Shares, whether such person purports to act or have acted for the Vendors or
the Corporation in connection with the sale of the Shares save and except the
finders fee payable to Xxxxxxx Xxxxxxx, described in Section 3.3(b), 3.3(e),
3.3(f).
8.4 Legal Fees
----------
Each of the parties hereto shall pay their respective legal and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses whatsoever and
howsoever incurred. However, it is understood that the audit fees incurred in
connection with the preparation of the Financial Statements and the Interim
Financial Statements are an expense of the Corporation.
8.5 Public Announcements
--------------------
No public announcement or press release concerning the sale and
purchase of the Shares shall be made by the Vendors or the Corporation without
the prior consent and approval of the Purchaser. The Purchaser will publish a
press release concerning the sale and purchase of the Shares as required by law.
The Purchaser will allow the Vendors to review such press release and will
consider corrections thereto suggested by the Vendors but will not be bound to
publish in such press release anything except as is finally determined in the
sole discretion of the Purchaser.
8.6 Benefit of the Agreement
------------------------
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns of
the parties hereto.
-36-
8.7 Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and cancels and supersedes any
prior understandings and agreements between the parties hereto with respect
thereto. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements, express, implied or statutory, between
the parties other than as expressly set forth in this Agreement.
8.8 Amendments and Waiver
---------------------
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by both of the parties
hereto and no waiver of any breach of any term or provision of this Agreement
shall be effective or binding unless made in writing and signed by the party
purporting to give the same and, unless otherwise provided, shall be limited to
the specific breach waived.
8.9 Assignment
----------
This Agreement may not be assigned by the Vendors or the Corporation
without the written consent of the Purchaser or by the Purchaser without the
written consent of the Vendors.
8.10 Notices
-------
Any demand, notice or other communication to be given in connection
with this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
To the Vendors:
Xxxxxx X. Xxxxxx
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx
X.X.X. 00000
Fax No.: 000-000-0000
Xxxxxx X. Xxxxxxxx
0000 X. Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X.X.X. 00000
Fax No.: 000-000-0000
-37-
Xxxxx X. Xxxxxxxx
0000 X. Xxxx Xxxxx
Xxxxx, Xxxxxxx
X.X.X. 00000
Fax No.: 000-000-0000
With a copy to:
Xxxxxx & Xxxxxx, P.C.
The Xxxxxxxxx
Xxxxx 0, Xxxxx 000
0000 X. Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X.X.X. 00000-0000
Fax No.: 000-000-0000
Attention: Xxxx Xxxxxxx
To the Purchaser and the Corporation:
LML Payment Systems Inc.
Xxxxx 000
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxx
X.X.X. 00000
Fax No.: (000) 000-0000
Attention: President
With a copy to:
LML Payment Systems, Inc.
0000 - 0000 X. Xxxxxx Xx.
Xxxxxxxxx, XX
Xxxxxx X0X 0X0
Fax No. (000)-000-0000
Attention: Chief Executive Officer
-38-
With a copy to:
XxXxxxxx Xxxxxxxx
X.X. Xxx 00000, Xxxxxxx Xxxxxx
Xxxxx 0000, 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Fax No.: (000) 000-0000
Attention: D. Xxxxxxx Xxxx
Munsch, Hardt, Xxxx & Xxxx, P.C.
0000 Xxxxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx
X.X.X. 00000-0000
Fax No.: (000) 000-0000
Attention: Xxx Xxxx
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery shall be conclusively deemed
to have been given on the day of actual delivery thereof and, if given by
registered mail, on the seventh Business Day following the deposit thereof in
the mail and, if given by electronic communication, on the day of transmittal
thereof if given during the normal business hours of the recipient and on the
Business Day during which such normal business hours next occur if not given
during such hours on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system which might affect the delivery of mail, any such demand, notice
or other communication shall not be mailed but shall be given by personal
delivery or by electronic communication.
8.11 Governing Law
-------------
(a) This Agreement shall be governed by, construed, enforced and
interpreted in accordance with the laws of the State of Arizona and
the laws of the United States of America applicable therein.
(b) For the purpose of all legal proceedings this Agreement shall be
deemed to have been performed in the State of Arizona and the courts
of the State of Arizona shall have jurisdiction to entertain any
action arising under this Agreement. The Vendors and the Purchaser
each hereby attorns to the jurisdiction of the courts of the State of
Arizona.
-39-
8.12 Severability
------------
The parties agree that if one or more provisions contained in this
Agreement shall be deemed or held to be invalid, illegal or unenforceable in any
respect under any applicable law, this Agreement shall be construed with the
invalid, illegal and unenforceable provision deleted, and the validity, legality
and unenforceability of the remaining provisions contained herein shall not be
affected or impaired thereby.
8.13 Counterparts and Facsimile Signatures
-------------------------------------
This Agreement may be executed in any number of counterparts with the
same effect as if the parties had all signed the same document. All
counterparts shall be construed together and shall constitute one instrument.
In making proof of this Agreement, it shall not be necessary to account for more
than one counterpart executed by the party against whom enforcement is sought.
Facsimile signatures are binding on the party providing the facsimile signature.
8.14 Construction
------------
The parties acknowledge that each party and their counsel have had the
opportunity to review and negotiate the terms and conditions of this Agreement,
and that the normal rule of construction to the effect that any ambiguities are
to be construed against the drafting party shall not be employed in the
interpretation of this Agreement or any exhibits or amendments hereto.
IN WITNESS WHEREOF the parties have executed this Agreement.
LML PAYMENTS SYSTEMS INC.
Per: ___________________________
___________________________
Name:
___________________________
Title:
-40-
PHOENIX EPS, INC.
Per: _______________________________
_______________________________
Name:
_______________________________
Title:
SIGNED, SEALED AND DELIVERED in the )
presence of: )
)
___________________________________ ) _______________________________
Witness ) XXXXXX X. XXXXXX
)
___________________________________ ) _______________________________
Witness ) XXXXXX X. XXXXXXXX
)
___________________________________ ) _______________________________
Witness ) XXXXX X. XXXXXXXX
TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1 - INTERPRETATION
--------------------------
1.1 Definitions......................................................... 2
-----------
1.2 Headings............................................................ 6
--------
1.3 Extended Meanings................................................... 6
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1.4 Accounting Principles............................................... 6
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1.5 Currency............................................................ 6
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1.6 Schedules........................................................... 6
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ARTICLE 2 - PURCHASE AND SALE
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2.1 Purchase and Sale and Purchase Price................................ 7
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
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3.1 Vendors' Representations and Warranties............................. 8
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3.2 Survival of Vendors' Representations, Warranties and Covenants...... 23
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3.3 Purchaser's Representations and Warranties.......................... 23
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3.4 Survival of Purchaser's Representations, Warranties and Covenants... 25
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ARTICLE 4 - CLOSING
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4.1 Closing............................................................. 25
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4.2 Deliveries by the Vendors to the Purchaser.......................... 25
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4.3 Deliveries by the Purchaser to the Vendors.......................... 26
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ARTICLE 5 - COVENANTS
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5.1 Taxes............................................................... 27
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5.2 Registration of LML Shares.......................................... 27
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5.3 Price Protection.................................................... 29
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5.4 Employees........................................................... 30
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5.5 ABCO Markets, Inc................................................... 31
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5.6 Distributions before Closing........................................ 31
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ARTICLE 6 - INDEMNIFICATION
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6.1 By the Vendors...................................................... 32
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6.2 By Purchaser........................................................ 32
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6.3 Indemnification Procedure........................................... 33
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6.4 Maximum Amount of Indemnification Obligations....................... 34
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ARTICLE 7 - CONDITIONS
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7.1 Conditions for the Benefit of the Purchaser......................... 34
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7.2 Conditions for the Benefit of the Vendors........................... 35
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ARTICLE 8 - GENERAL
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8.1 Further Assurances.................................................. 36
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8.2 Time of the Essence................................................. 36
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8.3 Commissions......................................................... 36
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8.4 Legal Fees.......................................................... 36
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8.5 Public Announcements................................................ 36
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8.6 Benefit of the Agreement............................................ 37
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8.7 Entire Agreement.................................................... 37
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8.8 Amendments and Waiver............................................... 37
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8.9 Assignment.......................................................... 37
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8.10 Notices............................................................. 37
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8.11 Governing Law....................................................... 39
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8.12 Severability....................................................... 40
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8.13 Counterparts and Facsimile Signatures.............................. 40
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8.14 Construction....................................................... 40
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