EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 28, 2003,
is made and entered into by and between Infowave Software, Inc., a British
Columbia company corporation ("Buyer"), and HiddenMind Technology, LLC, a
Delaware LLC ("Seller").
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires to
purchase and assume from Seller, on the terms and subject to the conditions set
forth in this Agreement, substantially all of the assets and certain liabilities
of Seller that are currently being used by Seller in the conduct of the Seller's
business.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements and the conditions set forth in this Agreement, Buyer
and Seller hereby agree as follows:
Article 1. Transfer of Assets; Assumption of Liabilities
1.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, Seller shall, at the Closing, sell, transfer and assign
to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of
any and all charges, claims, liens, mortgages, deeds of any kind whatsoever
("Encumbrances"), all of Seller's right, title and interest, as of the Closing
Date, in and to all of the assets of the Seller (collectively, except for the
excluded assets set forth in Section 1.2 hereof, the "Assets"), including
without limitations the following:
(a) All of the equipment, machinery, vehicles, furniture, fixtures,
furnishings and leasehold improvements owned by Seller and used by Seller
in the operation of its business including, without limitation, the items
listed on Schedule 1.1(a);
(b) All of Seller's inventories of supplies, raw materials, parts,
finished goods, work-in-process, product labels and packaging materials
used in connection with its business and Seller's interest in all orders or
contracts for the purchase of supplies, raw materials, parts, product
labels and packaging materials used in connection with its business;
(c) Seller's right, title and interest in the licenses, contracts and
agreements identified in Schedule 1.1(c), all of which are being assigned
in their entirety to the Buyer;
(d) Seller's right, title and interest (but for greater certainty no
liabilities, obligations or undertakings) under all of the Seller's other
licenses, contracts and agreements, other than those listed in Schedule
1.2(g);
(e) All unfilled or uncompleted customer contracts, commitments or
purchase or sales orders received and accepted by Seller in connection with
its business in the ordinary course of business;
(f) All documents (whether in paper or in electronic format) or other
tangible materials embodying technology or intellectual property rights
owned by, licensed to or otherwise controlled by Seller and used in
connection with its business, whether such properties are located on
Seller's business premises or on the business premises of Seller's
suppliers or customers, including, without limitation all software programs
(including both source and object codes) and related documentation for
software used in or developed for support of its business;
(g) All rights in patents, patent applications, trademarks, service
marks, trade names, corporate names, copyrights, mask works, trade secrets
or other intellectual property rights owned by, licensed to or otherwise
controlled by Seller or used in, developed for use in or necessary to the
conduct of its business as now conducted or planned to be conducted
including, without limitation, those set forth in the Disclosure Schedule
and including the rights to institute or maintain any action or
investigation for and to recover damages for any past infringement thereof
or any actions of unfair competition relating thereto;
(h) E-mail addresses and internet websites together with any URLs,
domain names or internet addresses related to the business of the Seller;
(i) The name "HiddenMind" or any combination of words in which the
name "HiddenMind" appears or any rights associated with such name or any
right to use such name in all jurisdictions in which Seller either
currently uses any such name or has any right to use any such name;
(j) All of Seller's books, records and other documents (whether in
paper or electronic format) and information relating to the Assets or its
business, including, without limitation, all customer, prospect, dealer and
distributor lists, sales literature, inventory records, purchase orders and
invoices, sales orders and sales order log books, customer information,
commission records, correspondence, employee payroll and personnel records,
product data, material safety data sheets, price lists, product
demonstrations, quotes and bids and all product catalogs and brochures;
(k) All accounts or notes receivable (excluding intra-company
accounts) owing to Seller that relate to its business and that are due
after the Closing Date;
(l) The current telephone listings of its business and the right to
use the telephone numbers currently being used at the principal offices and
other offices or facilities of its business;
(m) All permits, licenses and other governmental approvals held by
Seller with respect to its business, to the extent they are assignable;
(n) All prepaid expenses and deposits made by Seller with respect to
its business;
(o) All cash and cash equivalents of Seller with respect to its
business;
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(p) All long-term investments of Seller relating to its business;
(q) Goodwill (including all goodwill associated with and symbolized by
the name or names identified in subsection (i) above as used as a trademark
or service xxxx and all goodwill associated with and symbolized by any
other trademark or service xxxx, trade name or corporate name used in the
conduct of its business as now conducted), all related tangibles and
intangibles which Seller uses in the conduct of its business and all rights
to continue to use the Assets in the conduct of a going business.
The parties hereto expressly agree that Buyer is not assuming any of the
liabilities, obligations or undertakings relating to the foregoing Assets,
except for those liabilities and obligations specifically assumed by Buyer in
Section 1.3 hereof.
1.2 Excluded Assets. Notwithstanding the terms of Section 1.1, the
following assets shall be retained by Seller and shall not be sold, transferred
or assigned to Buyer in connection with the purchase of the Assets:
(a) All insurance policies of Seller obtained in connection with its
business and all rights of Seller (including rights to receive dividends)
under or arising out of such insurance policies, including, without
limitation, the director's and officer's insurance policy with American
International Companies, National Union Fire Insurance Company of
Pittsburgh, Pennsylvania.
(b) Any rights to recovery by Seller arising out of litigation with
respect to its business that is pending prior to or commences after the
Closing Date (to the extent that any such litigation relates to a matter
which arose prior to the Closing Date).
(c) Seller's interest in any real property.
(d) Seller's interest in any real property leases to which Seller is a
party that are used in connection with its business, all of which leases
are identified in Schedule 1.2(d) hereto and the letters of credit or other
security used to secure those leases.
(e) Any substance, material or waste which is or will foreseeably be
regulated by any governmental body, including any material, substance or
waste which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted hazardous
waste," "contaminant," "toxic waste" or "toxic substance" under any
provision of environmental law, and including petroleum, petroleum
products, asbestos, presumed asbestos-containing material or
asbestos-containing material, lead based paint, urea formaldehyde,
polychlorinated biphenyls, mold, any substance or product, and any
biological agent.
(f) All furniture, fixtures and leasehold improvements at the
currently-leased premises in Cary, North Carolina and Atlanta, Georgia,
except for furniture for five employees, which furniture shall be
determined by the Buyer and agreed to by the Seller, acting reasonably,
prior to Closing.
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(g) Seller's right, title and interest under all contracts listed in
Schedule 1.2(g);
(h) the Seller's liabilities, obligations and undertakings under all
licenses, contracts and agreements, other than as provided in Section 1.3;
(i) Any claims or rights alleging investment or contribution
obligations to the Seller from any current or former members or
shareholders of the Seller.
(j) The shares of XxxXxxxxxx.xxx.
(k) All accounts or notes receivable or intra-company accounts owing
to Seller that are due on or before the Closing Date.
(l) All cash and cash equivalents of Seller.
(m) Any other assets, licenses, agreements or contracts which the
Buyer notifies the Purchase in writing prior to Closing that it does not
wish to acquire.
(n) All cash and cash equivalents of Seller.
1.3 Assumption of Liabilities. Buyer shall assume, pay, perform in
accordance with their terms or otherwise satisfy, commencing as of Closing on
the Closing Date all of the obligations arising subsequent to the Closing Date
under the agreements, contracts and licenses described in Schedule 1.1(c).
1.4 Excluded Liabilities. Other than as set forth above in Section 1.3,
Seller shall retain, and Buyer shall not assume, and nothing contained in this
Agreement shall be construed as an assumption by Buyer of, any liabilities,
obligations or undertakings of Seller of any nature whatsoever, whether accrued,
absolute, fixed or contingent, known or unknown due or to become due,
unliquidated or otherwise. Seller shall be responsible for all of the
liabilities, obligations and undertakings of Seller not assumed by Buyer
pursuant to Section 1.3 hereof.
1.5 Certain License. The Buyer acknowledges that the seller may have an
obligation to license certain intellectual property relating to the Seller's
"Maintrack Computer Software" product to Nortel Networks, Inc. pursuant to an
agreement possibly entered into between the Seller and Nortel Networks, Inc. in
2000, in the form provided to the Purchaser (the "Possible Nortel Contract"). In
the event that any such intellectual property is embodied in the Assets, the
Buyer agrees to grant the Seller a non-exclusive license in such intellectual
property solely to permit the Seller to meet its license obligations under the
Possible Nortel Contract.
Article 2. Purchase Price
2.1 Amount. The total purchase price for the Assets shall be 14,966,034
units (the "Units") at a price of Cdn$0.19 per Unit for an aggregate purchase
price of US$2,031,105 (based on a deemed Canadian/U.S. dollar exchange rate of
1.40:1.00) with each Unit consisting of one common share without par value of
the Buyer (the "Shares") and one-half of one common share purchase warrant (the
"Warrants"), which Warrants shall be evidenced by the
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Common Share Purchase Warrant attached hereto as Exhibit A, plus the value of
the liabilities and obligations of Seller to be assumed by Buyer pursuant to
Section 1.3.
2.2 Manner of Payment. Buyer shall pay the Purchase Price for the Assets to
Seller on the Closing Date by delivery of the Units to the escrow agent (the
"Escrow Agent") pursuant to the escrow agreement attached hereto as Exhibit B
(with such reasonable changes as the Escrow Agent may require) (the "Escrow
Agent").
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated in
a manner determined by the Buyer and agreed to by the Seller, acting reasonably,
prior to Closing. The parties shall use this allocation for all tax purposes,
including the filing of IRS form 8594.
Article 3. Closing
3.1 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Buyer's legal counsel in
Vancouver, British Columbia at the time and the date set forth in the
Subscription Agreement, but only if all conditions to the parties' obligations
set forth in Article VIII hereof have been satisfied or waived by the party
entitled to the benefit of such condition, or at such other place and on such
other date as is mutually agreeable to Buyer and Seller. The date on which the
Closing occurs is referred to herein as the "Closing Date," and the Closing
shall be deemed effective as of 11:59 p.m., North Carolina time, on the Closing
Date.
3.2 General Procedure. At the Closing, each party shall deliver to the
party entitled to receipt thereof the documents required to be delivered
pursuant to Article VII hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the Assets shall be effected by
Seller's execution and delivery to Buyer of a xxxx of sale substantially in the
form attached hereto as Exhibit C (the "Xxxx of Sale") and such other
instruments of conveyance, transfer, assignment and delivery as Buyer shall
reasonably request to cause Seller to transfer, convey, assign and deliver the
Assets to Buyer, and the assignment to and assumption by the Buyer of the
liabilities under Section 1.3 shall be effected by Seller's and Buyer's
execution of an assignment and assumption agreement substantially in the form
attached hereto as Exhibit D (the "Assignment and Assumption Agreement").
Article 4. Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer that, except as set forth in
the Disclosure Schedule delivered by Seller to Buyer on the date hereof (the
"Disclosure Schedule") (which Disclosure Schedule sets forth the exceptions to
the representations and warranties contained in this Article 4):
4.1 Organization and Corporate Power. Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority and all
authorizations, licenses, permits and certifications necessary to carry on its
business as now being conducted and to own, lease and operate the
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Assets. No act or proceeding has been taken by or against Seller in connection
with the dissolution, liquidation, winding up, bankruptcy or reorganization of
Seller.
4.2 Subsidiaries. The Assets do not include any stock, partnership
interest, joint venture interest or any other security or ownership interest
issued by any other corporation, organization or entity.
4.3 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Managers and Members of Seller (as such terms are defined in the
Seller's Limited Liability Company Agreement), and no other proceedings on its
part are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by Seller and,
assuming that this Agreement is the valid and binding agreement of Buyer,
constitutes the valid and binding obligation of Seller.
4.4 Authority; No Breach. Seller has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby do not conflict with or
result in any breach of any of the provisions of, or constitute a default under,
result in a violation of, result in the creation of a right of termination or
acceleration or any lien, security interest, charge or authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under:
(a) the provisions of the Certificate of Organization and Limited
Liability Company Agreement of Seller;
(b) any indenture, mortgage, lease, loan agreement or other agreement
or instrument by which Seller or the Assets are bound or affected; or
(c) any law, statute, rule or regulation or order, judgment or decree
to which Seller or the Assets are subject.
4.5 Governmental Authority; Consents. Seller is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement or the consummation of
the transactions contemplated hereby. Except as set forth in the Disclosure
Schedule, no consent, approval or authorization of any governmental or
regulatory authority is required to be obtained by Seller in connection with its
execution, delivery and performance of this Agreement.
4.6 Financial Statements. Attached as Exhibit E are copies of: (a) the
unaudited balance sheets, as of March 31, 2003 (the "Latest Balance Sheet"),
December 31, 2002 and December 31, 2001, of Seller's business and the unaudited
statements of earnings, shareholders' equity and cash flows of Seller for each
of the years ended December 31, 2002 and December 31, 2001 (such statements and
the balance sheets being herein referred to as the "Unaudited Financial
Statements"); and (b) the audited balance sheets, as of December 31, 2000, of
Seller's business and the audited statements of earnings, shareholders' equity
and cash flows of its business for the year ended December 31, 2000
(collectively, the "Audited Financial
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Statements"). The Unaudited Financial Statements and the Audited Financial
Statements are based upon the information contained in the books and records of
Seller and fairly present, in all material respects, the financial condition of
its business as of the dates thereof and results of operations for the periods
referred to therein. The Audited Financial Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated.
4.7 Absence of Undisclosed Liabilities. Seller has no liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, whether known or unknown, and regardless of when asserted) arising
out of transactions or events heretofore entered into, or any action or
inaction, or any state of facts existing, with respect to or based upon
transactions or events heretofore occurring, except (i) as reflected in the
Latest Balance Sheet, (ii) liabilities which have arisen after the date of the
Latest Balance Sheet in the ordinary course of business (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), or (iii) as otherwise set forth in any section
of the Disclosure Schedule.
4.8 No Adverse Material Change. Since the date of the Latest Balance Sheet
(the "Balance Sheet Date"), there has been no adverse material change in the
assets or financial condition of its business.
4.9 Title to Assets.
(a) Seller owns good and marketable title to each of the tangible
personal properties and tangible assets reflected on the Latest Balance
Sheet, or acquired since the date thereof, free and clear of all
Encumbrances, except for (i) liens for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings, (ii) liens
identified in Section 4.9 of the Disclosure Schedule, (iii) assets disposed
of since the Balance Sheet Date in the ordinary course of business, (iv)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due or delinquent, (v) liens in respect of pledges or
deposits under workers' compensation laws, and (vi) liens voluntarily
created in the ordinary course of business.
(b) The equipment and other tangible assets used in the conduct of its
business are, in all material respects, in good condition and repair,
ordinary wear and tear excepted, and are adequate and suitable for the
purposes for which they are currently being used
(c) The Assets are sufficient to permit the continued operation of the
Seller's business as presently carried on by it.
4.10 Intellectual Property Rights. The Disclosure Schedule describes all
rights in patents, patent applications, trademarks, service marks, trade names,
corporate names, copyrights mask works, trade secrets, know-how or other
intellectual property rights owned by, licensed to or otherwise controlled by
Seller in connection with the conduct of its business or used in, developed for
use in or necessary to the conduct of its business which are, individually or in
the aggregate with such other intellectual property rights, material to its
business. Seller owns and
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possesses all right, title and interest, or holds a valid license, in and to the
rights set forth in the Disclosure Schedule, free of Encumbrances. To the
knowledge of the Seller, no person has any right, title or interest in any of
such intellectual property and all such persons have waived their moral rights
in any copyright works within such intellectual property. The Seller has
diligently protected its legal rights to the intellectual property listed in the
Disclosure Schedule. The Disclosure Schedule describes all intellectual property
rights which have been licensed to third parties and those intellectual property
rights which are licensed from third parties. Seller has not received any notice
of any infringement or misappropriation by, or conflict from, any third party
with respect to the intellectual property rights which are listed in the
Disclosure Schedule; no claim by any third party contesting the validity of any
intellectual property rights listed in the Disclosure Schedule has been made, is
currently outstanding or, to the best knowledge of the Seller, is threatened;
Seller has not received any notice of any infringement, misappropriation or
violation by Seller of any intellectual property rights of any third parties.
4.11 Litigation. Except as set forth in the Disclosure Schedule, there is
no action, suit, proceeding, claim, application, complaint or investigation (in
this paragraph, a "Claim") in any court or before any arbitrator or before or by
any regulatory body or governmental or non-governmental body pending or
threatened by or against Seller or the transactions contemplated by this
Agreement; and, there is no factual or legal basis which could give rise to any
such action, suit, proceeding, claim, application, complaint or investigation.
The Claim described in the Disclosure Schedule does not involve a request for
any injunction or other equitable relief relating to any of the Assets.
4.12 Compliance with Laws; Permits.
(a) Seller is not in violation of or default under any law, regulation
or order applicable to it, the effect of which, individually or in the
aggregate with such other violations and defaults, could reasonably be
expected to have a material adverse effect on the business or financial
condition of its business.
(b) Seller has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities used in
and, individually or in the aggregate, material to the business or
financial condition of its business (collectively, the "Permits"). A true,
correct and complete list of all the Permits is set forth in the Disclosure
Schedule, with an indication as to whether the Permit is assignable to
Buyer. Seller has conducted its business in substantial compliance with all
material terms and conditions of the Permits. No Person has threatened to
revoke, amend or impose any condition in respect of, or commenced
proceedings to revoke, amend or impose conditions in respect of, any
Permit.
4.13 Real Property. Seller does not own, and has never owned, any real
property.
4.14 Personal Property. The Disclosure Schedule lists each item of personal
property of Seller which had a book value in the accounting records of Seller,
determined in accordance with generally accepted accounting principles, at the
date of the Seller's most recently completed financial year, of more than
$25,000 or is otherwise material to the business of Seller.
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4.15 Material Contracts. The Disclosure Schedule lists all the Material
Contracts. Seller has not received notice of any default, and the Seller is not
in default, under any Material Contract which default would have a material
adverse effect upon the Seller's business and there has not occurred any event
which, with a lapse of time or giving of notice, or both, would constitute such
a default. Each Material Contract is in full force and effect, unamended by
written or oral agreement, and the Seller is entitled to the full benefit and
advantage of each Material Contract in accordance with the terms of each
Material Contract. Each Material Contract is valid and enforceable by the
Seller, is in good standing and there has not been, to the knowledge of Seller,
any default by any party under any Material Contract nor any dispute between the
Seller and any party under any Material Contract. For purposes of this
Agreement, "Material Contract" means an agreement (whether oral or written),
directly or indirectly, used in, arising from, or relating in any manner to, the
Seller's business to which the Seller is a party or by which the Seller or any
of its business or the Assets is bound or affected except an agreement which
involves or may reasonably be expected to involve the payment to or by the
Seller of less than $5,000 over the term of the agreement and is not otherwise
material to the condition of the Seller's business.
4.16 Receivables. The Receivables are valid obligations which arose in the
ordinary course of business. None of the Receivables is due from a Person with
whom the Seller does not deal at arm's length.
4.17 Consents and Approvals. All consents and approvals required to be
obtained in connection with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement are listed in the
Disclosure Schedule (the "Consents and Approvals"). Except for the Consents and
Approvals, no consent or approval of any Person is required in connection with
the execution and delivery of this Agreement and the completion of the
transactions contemplated by this Agreement or to permit the Buyer to carry on
the Seller's business after the Closing as the business is currently carried on
by the Seller
4.18 Notices. All notices required to be given to any person under
applicable law or pursuant to any contract or other obligation to which Seller
is a party or by which Seller is bound or which is applicable to any of the
Assets, in connection with the execution and delivery of this Agreement or the
completion of the transactions contemplated by this Agreement are listed in the
Disclosure Schedule (the "Notices"). Except for the Notices, no notice is
required to be delivered to any person in connection with the execution and
delivery of this Agreement and the completion of the transactions contemplated
by this Agreement or to permit Buyer to carry on the business of Seller after
the Closing as the Seller's business is currently carried on by Seller.
4.19 Environmental Matters. The business of Seller and the Assets as
carried on or used by the Seller and its predecessors have been and are
currently carried on and used in compliance with all environmental laws. The
Seller does not have any liability under any environmental laws. The Buyer will
not, as a result of the transactions contemplated herein, directly or
indirectly, assume any liability under any environmental laws.
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4.20 Employment Contracts. The Disclosure Schedule lists all the employees
of Seller as of the date of this Agreement and the position, status, length of
service, compensation and benefits of each of them, respectively.
4.21 Employee Non-Competes. To the knowledge of the Seller, none of its
employees are subject to any agreement or other obligation not to compete with
the Seller or the business of the Seller or the Buyer or the business of the
Buyer.
4.22 Collective Agreements. Seller is not a party to any collective
bargaining agreement, contract or legally binding commitment to any trade union
or employee organization or group in respect of or affecting Employees. Seller
is not currently engaged in any labour negotiation. Seller is not a party to any
application, complaint or other proceeding under any statute. Seller is not the
subject of any union organization effort.
4.23 Customers and Suppliers. The Disclosure Schedule lists the four
largest customers and the two largest suppliers of the business of Seller for
the 12-month period ending immediately before the date of this Agreement. Seller
is not aware of, nor has it received notice of, any intention on the part of any
such customer or supplier to cease doing business with Seller or to modify or
change in any material manner any existing arrangement with Seller related to
the business of Seller for the purchase or supply of any products or services.
4.24 Deductions at Source. Seller has fulfilled all requirements under any
applicable federal, state or local legislation for withholding of amounts from
employees and has remitted all amounts withheld to the appropriate authorities
within the prescribed time services.
4.25 Tax Returns Filed and Taxes Paid. Seller and its predecessor
HiddenMind Technology, Inc., a Delaware corporation, has filed or caused to be
filed on a timely basis all tax returns and all reports with respect to taxes
that are or were required to be filed pursuant to applicable laws. All tax
returns and reports filed by Seller are true, correct and complete. Seller has
paid, or made provision for the payment of, all taxes that have or may have
become due for all periods covered by the tax returns or otherwise, or pursuant
to any assessment received by the Seller. Seller currently is not the
beneficiary of any extension of time within which to file any tax return or
report. No claim has ever been made or is expected to be made by any
governmental body in a jurisdiction where Seller does not file tax returns that
it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in connection with any failure (or
alleged failure) to pay any tax, and Seller has no knowledge of any basis for
assertion of any claims attributable to taxes which, if adversely determined,
would result in any such Encumbrance services.
4.26 Delivery of Tax Returns and Information Regarding Audits and Potential
Audits. Seller has delivered or made available to Buyer copies of all tax
returns filed since incorporation. No tax returns of the Seller have been
audited or are currently under audit. Seller has no knowledge that any
governmental body is likely to assess any additional taxes for any period for
which tax returns have been filed. There is no dispute or claim concerning any
taxes of the Seller either (i) claimed or raised by any governmental body in
writing or (ii) as to which the Seller has knowledge. The Seller has not given
or been requested to give waivers or extensions
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(or is or would be subject to a waiver or extension given by any other person)
of any statute of limitations relating to the payment of taxes of Seller or for
which Seller may be liable.
4.27 Proper Accruals. The charges, accruals and reserves with respect to
taxes on the records of the Seller are adequate (determined in accordance with
GAAP) and are at least equal to the Seller's liability for Taxes. There exists
no proposed tax assessment or deficiency against the Seller.
4.28 Withholding. All taxes that the Seller is or was required by law to
withhold, deduct or collect have been duly withheld, deducted and collected and,
to the extent required, have been paid to the proper governmental body or other
person.
4.29 Tax Sharing or Similar Agreements. There is no tax sharing agreement,
tax allocation agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement, understanding or practice with respect to
taxes (including any advance pricing agreement, closing agreement or other
arrangement relating to taxes) that will require any payment by the Seller.
4.30 Employee Benefits.
(a) Neither the Seller, Xxxxxx Xxxxxxx ("Xxxxxxx") nor any other
corporation or trade or business controlled by, controlling or under common
control with the Seller or Trooien (within the meaning of Section 414 of
the Code) maintains or contributes to, or has ever maintained or
contributed to, an employee benefit plan that is either (i) subject to
Title IV of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (ii) a "multiemployer plan" (as defined in Section 3(37) of
ERISA), or (iii) subject to the minimum funding standards of Section 412 of
the Code or Section 302 of ERISA. Each of the Seller's employee benefit
plans that is intended to be qualified under Section 401(a) of the Code is
so qualified, each trust associated with each such plan is exempt from
taxation under Section 501(a) of the Code, and the Seller has no knowledge
of any circumstances that will or could result in the loss of such
qualification or exemption.
(b) The Seller has, at all times, complied, and currently complies, in
all material respects with the applicable continuation requirements for its
welfare benefit plans, including Section 4980B of the Code and Sections
601-608 of ERISA (collectively referred to as "COBRA") and any applicable
health care continuation coverage requirements under state law. Except to
the extent required under COBRA and applicable state law, the Seller has no
obligations or potential liability for, and has not made any promises to
provide, health or other welfare benefits under an employee benefit plan or
otherwise to employees or former employees of the Seller or their
respective dependents following termination of employment or retirement.
(c) The Seller has maintained workers' compensation coverage as
required by applicable state law through purchase of insurance and not by
self-insurance or otherwise.
11
4.31 Brokerage Fees. Seller has not entered into any agreement which would
entitle any person to any valid claim against the Buyer for a broker's
commission, finder's fee or any like payment in respect of the purchase and sale
of the Assets or any other matters contemplated by this Agreement.
4.32 Compliance with Bulk Transfer Laws. The Seller will comply with the
provisions of the Uniform Commercial Code in Bulk Transfers of the North
Carolina General Statutes in connection with the sale of the Assets.
4.33 Compliance with Applicable Laws. To the knowledge of Seller, Seller
has operated and is operating its business in material compliance with
applicable laws.
4.34 Records. The minute books of Seller are complete and accurate; no
shareholder agreements, shareholder declarations, by-laws or resolutions have
been entered into, made, passed or consented to by the shareholders or the board
of directors or any committee thereof of Seller, except for those described in
the Disclosure Schedule.
4.35 Securities Law Representations.
(a) Purchasing as Principal. Seller is purchasing all the Shares and
Warrants hereunder as principal (as defined under all applicable
"Securities Laws" which is defined as, collectively, the applicable
securities laws of the Province of British Columbia and regulations and
rules made and forms prescribed thereunder together with all applicable
published policy statements, blanket orders, rulings, instruments and
notices of the British Columbia Securities Commission) for his own account,
and not for the benefit of any other person.
(b) Purchasing for Investment Only. Seller is purchasing all the
Shares and Warrants hereunder for investment only and not with a view to
resale or distribution in violation of applicable Securities Laws, the
"U.S. Securities Act" (which is defined as the Securities Act of 1933, as
amended, of the United States of America) or applicable state securities
laws.
(c) No Registration. Seller acknowledges that none of the Shares or
Warrants (or common shares issuable upon exercise of the Warrants) have
been registered under the U.S. Securities Act or any applicable state
securities laws and that the sale contemplated hereby is being made in
reliance on a private placement exemption.
(d) Resales. Seller understands that if he decides to offer, sell, or
otherwise transfer any of the Shares, Warrants or common shares issuable
upon exercise of the Warrants, such securities may be transferred only: (A)
to Buyer, (B) outside the United States in accordance with Rule 904 of
Regulation S of the U.S. Securities Act and pursuant to applicable
Securities Laws and Toronto Stock Exchange policy, (C) within the United
States in accordance with the exemption from registration under the U.S.
Securities Act provided by Rule 144 thereunder, if available, and in
compliance with any applicable state securities laws, or (D) in a
transaction that does not require registration under the U.S. Securities
Act or any applicable state laws and regulations governing the
12
offer and sale of securities, where Seller has, prior to such sale,
furnished to Buyer an opinion of counsel, of recognized standing,
reasonably satisfactory to Buyer.
(e) Legend Requirements. Seller understands and acknowledges that:
(i) upon the original issuance thereof, and until such time as
the same is no longer required under applicable requirements of the
U.S. Securities Act or applicable state securities laws, certificates
representing Shares and Warrants, and all certificates issued in
exchange therefor or in substitution thereof, shall bear the following
legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S.
SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF BUYER THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO BUYER,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT, (C) WITHIN THE UNITED
STATES IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER
THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAWS, OR (D) in a transaction that does not require registration
under the U.S. Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and the
holder has, prior to such sale, furnished to Buyer an opinion of
counsel, of recognized standing, reasonably satisfactory to
Buyer. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD
DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA. PROVIDED THAT BUYER IS A "FOREIGN ISSUER" WITHIN THE
MEANING OF REGULATION S AT THE TIME OF SALE, A NEW CERTIFICATE
BEARING NO LEGEND MAY BE OBTAINED FROM COMPUTERSHARE TRUST
COMPANY OF CANADA, AS REGISTRAR AND TRANSFER AGENT, UPON DELIVERY
OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO COMPUTERSHARE TRUST COMPANY OF CANADA AND BUYER,
TO THE EFFECT THAT SUCH SALE IS BEING MADE IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE 1933 ACT."
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(ii) if the Shares or Warrants are being sold under section (B)
of the foregoing legend, and provided that Buyer is a "foreign issuer"
within the meaning of Regulation S at the time of sale, any such
legend may be removed by providing a declaration to Computershare
Trust Company of Canada, as registrar and transfer agent, to the
effect set forth in Schedule "C" to the Subscription Agreement (or as
Buyer may prescribe from time to time); and
(iii) if the Shares or Warrants are being sold under section (C)
of the foregoing legend, the legend may be removed by delivery to
Computershare Trust Company of Canada and Buyer of an opinion of
counsel, of recognized standing reasonably satisfactory to Buyer, that
such legend is no longer required under applicable requirements of the
U.S. Securities Act or state securities laws.
For purposes of complying with applicable Securities Laws and
Multilateral Instrument 45-102, Resale of Securities, Seller
understands and acknowledges that upon the issuance of Shares and
Warrants, all the certificates representing the Shares and Warrants,
as well as all certificates issued in exchange for or in substitution
of the foregoing securities, shall bear the following legend:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER
OF THE SECURITIES SHALL NOT TRADE THESE SECURITIES BEFORE
[date which is four months and one day after the date of the
Closing]."
(f) Adequate Information. Seller has access to all information, if
any, concerning Buyer as he has considered necessary in connection with his
investment decision to acquire Shares and Warrants hereunder.
(g) No Solicitation or Advertising. Seller acknowledges that it has
not purchased Shares or Warrants hereunder as a result of any general
solicitation or general advertising, including advertisements, articles,
notices or other communications published in any newspaper, magazine, or
similar media or broadcast over radio or television, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising.
(h) Income Tax Consequences. Seller acknowledges that, although an
investment in Shares and Warrants may have certain material federal and
state income tax consequences, neither Buyer nor any of their
representatives, have made any representations concerning income tax
consequences to Seller and Seller has relied solely, if at all, on Seller's
own tax advisors in evaluating the tax aspects of such an investment.
(i) Absence of Offering Memorandum. Seller acknowledges that none of
the documents provided to him by Buyer in connection with the transactions
contemplated hereby constitute an offering memorandum or similar document
for the purposes of the Securities Laws or other applicable securities
laws.
14
(j) Investment Suitability. Seller has such knowledge and experience
in financial and business affairs as to be capable of evaluating the merits
and risks of the investment hereunder in the Shares and Warrants and is
able to bear the economic risk of loss of such investment.
(k) Distribution of Shares and Warrants to Seller Members. Pursuant to
Seller's Limited Liability Company Agreement, dated August 26, 2002 (the
"LLC Agreement"), the transactions contemplated by this Agreement
constitute a Capital Transaction (as defined in the LLC Agreement).
Therefore, Xxxxxx X. Xxxxxxx is the only member of Seller that would be
entitled to receive any of the Shares or Warrants, or the proceeds thereof
from Seller, in the event of a distribution by Seller, liquidation of
Seller, or otherwise. The transactions contemplated by this Agreement may
be approved, pursuant to the LLC Agreement, solely by the affirmative vote
of Xxxxxx X. Xxxxxxx, as the holder of a majority of the member interests
of Seller. Xxxxxx X. Xxxxxxx (i) is an "accredited investor," as defined in
Rule 501(a) of Regulation D under the United States Securities Act of 1933,
as amended, and (ii) has such knowledge and experience in financial and
business affairs as to be capable of evaluating the merits and risks of
investing in and owning the Shares and Warrants and is able to bear the
economic risk of loss of such investment.
4.36 No Other Charges on Units to be held in Escrow. At Closing, the Seller
shall receive and hold the Units free and clear of any security interest or
Encumbrance. No security agreement, financing statement or other notice with
respect to any or all of the Units is or will be on file or on record in any
public office, except for filings in favour of the Buyer.
4.37 Information Circular. The Seller understands that the Buyer is
required to provide disclosure regarding the Seller, its business and the Assets
to its shareholders in the form of an information circular (the "Buyer's
Information Circular") prepared in accordance with applicable laws. The
information regarding the Seller, its business and the Assets to be contained in
the Buyer's Information Circular Agreement, and to be provided by the Seller,
together with all information set forth in this Agreement, including the
financial statements delivered and to be delivered to the Buyer, shall not
contain any misrepresentation as defined under the Securities Act (British
Columbia).
4.38 No Material Subsidiaries. The Company has no subsidiaries other than
XxxXxxxxxx.xxx, Inc. and no investment in any other corporation or
unincorporated organization. XxxXxxxxxx.xxx has no assets or undertaking and,
without restricting the generality of the foregoing, has no right, title or
interest in any of the Assets.
Article 5. Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller that:
5.1 Incorporation and Corporate Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of British
Columbia, with the requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
15
5.2 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement,
except for the approval of shareholders as specified in Section 8.1(i). This
Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights or by general principles of equity.
5.3 No Breach. The execution, delivery and performance of this Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby do
not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of Buyer, or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the [Articles/Certificate] of
Incorporation or Bylaws of Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected,
or any law, statute, rule or regulation or order, judgment or decree to which
Buyer is subject.
5.4 Governmental Authorities; Consents. Buyer is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement or the consummation of
the transactions contemplated hereby, except for notice to the Toronto Stock
Exchange and a report of exempt distribution to be filed with the applicable
Canadian securities regulatory authorities. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by Buyer in connection with its execution,
delivery and performance of this Agreement or the transactions contemplated
hereby, except for the approval of the Toronto Stock Exchange.
5.5 Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Buyer, except
Agile Equity, LLC.
5.6 Subscription Agreement Representations and Warranties. In connection
with the Private Placement (defined in Section 8.1(i) below), Buyer has made
certain representations and warranties to Xxxxxx X. Xxxxxxx pursuant to a
subscription agreement dated the date hereof (the "Subscription Agreement").
Buyer hereby makes to Seller all of the representations and warranties set forth
in Section 6 of the Subscription Agreement, which representations and warranties
are hereby incorporated herein by reference as though set forth in full herein,
including the defined terms therein.
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Article 6. Covenants of Seller
6.1 Conduct of the Business. In connection with the Assets or the Seller's
business, Seller agrees to observe each term set forth in this Section 6.1 and
agrees that, from the date hereof until the Closing Date, unless otherwise
consented to by Buyer in writing:
(a) The Seller's business shall be conducted only in, and Seller shall
not take any action except in, the ordinary course of Seller's business,
and Seller's past custom and practice;
(b) Seller shall not, directly or indirectly, do or permit to occur
any of the following insofar as they relate to the Seller's business or the
Assets: (i) sell, pledge, dispose of or encumber any of the Assets, except
in the ordinary course of business; (ii) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business organization or
division or material assets thereof; (iii) incur any indebtedness for
borrowed money or issue any debt securities except the borrowing of working
capital in the ordinary course of business and consistent with past
practice; (iv) enter into or propose to enter into, or modify or propose to
modify, any agreement, arrangement or understanding with respect to any of
the matters set forth in this Section 6.1(b); or (v) release or waive any
material rights.
(c) Seller shall not, directly or indirectly, enter into or modify any
employment, severance or similar agreements or arrangements with, or grant
any bonuses, salary increases, severance or termination pay to, any
employee, officer or director or consultant;
(d) Seller shall not adopt or amend any bonus, profit sharing,
compensation, pension, retirement, deferred compensation, employment or
other employee benefit plan, trust, fund or group arrangement for the
benefit or welfare of any employees, officers, directors, consultants or
affiliates;
(e) Seller shall not cancel or terminate its current insurance
policies covering the Assets and the Seller's business, or cause any of the
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;
(f) Seller shall (i) use its best efforts to preserve intact the
organization and goodwill of the Seller's business, keep available the
services of Seller's officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors, customers and
others having business relationships with Seller in connection with the
Seller's business; (ii) confer on a regular and frequent basis with
representatives of Buyer to report operational matters and the general
status of ongoing operations with respect to the Seller's business; (iii)
not intentionally take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it in
this Agreement untrue at the Closing; (iv) notify Buyer of any emergency or
other change in the normal course of the Seller's business or in the
operation of the properties of the
17
Seller's business and of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may
be contemplated) if such emergency, change, complaint, investigation or
hearing would be material, individually or in the aggregate, to the
business, operations or financial condition of Seller or to Seller's or
Buyer's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if Seller shall
discover that any representation or warranty made by it in this Agreement
was when made, or has subsequently become, untrue in any respect;
(g) Seller shall (i) file any tax returns, elections or information
statements with respect to any liabilities for taxes of Seller or other
matters relating to taxes of Seller which affect the Assets and pursuant to
applicable law must be filed prior to the Closing Date; (ii) promptly upon
filing provide copies of any such tax returns, elections or information
statements to Buyer; (iii) make any such tax elections or other
discretionary positions with respect to taxes taken by or affecting Seller
only upon prior consultation with and consent of Buyer; and (iv) not amend
any tax return; and
(h) Seller shall allow the Buyer and its authorized representatives,
including legal counsel, reasonable access to all information, books or
records relating to its business and the Assets and to its senior
management.
6.2 Conditions. Seller shall take all commercially reasonable actions
necessary to cause the conditions set forth in Section 8.1 to be satisfied and
to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three business
days of such date).
6.3 No Negotiations, Etc. Seller shall not directly or indirectly, through
any officer, director, agent or otherwise, solicit, initiate or encourage
submission of any proposal or offer from any person or entity (including any of
its or their officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Seller or other
similar transaction or business combination involving Seller or participate in
any negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person or entity to
do or seek any of the foregoing.
6.4 Buyer's Information Circular. From the date hereof to the Closing Date,
the Seller shall co-operate with and assist the Buyer in the preparation of the
Buyer's Information Circular, including the provision of disclosure relating to
the Seller, its business and the Assets.
6.5 Compliance with Bulk Transfer Laws. The Seller will comply with the
provisions of the Uniform Commercial Code in Bulk Transfers of the North
Carolina General Statutes, and any other similar applicable legislation, in
connection with the sale of the Assets.
Article 7. Covenants of Buyer
7.1 Conditions. Buyer shall take all commercially reasonable actions
necessary to cause the conditions set forth in Section 8.2 to be satisfied and
to consummate the transactions
18
contemplated herein as soon as reasonably possible after the satisfaction
thereof (but in any event within three business days of such date).
7.2 Access. From the date hereof until the Closing Date or the Termination
of this Agreement, the Buyer shall allow the Seller and its authorized
representatives, including legal counsel, reasonable access to all information,
books or records relating to its business and to its senior management.
Article 8. Conditions To Closing
8.1 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date (it being
understood that the following conditions are included for the exclusive benefit
of the Buyer and may be waived, in whole or in part, in writing by the Buyer at
any time):
(a) The representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects (except those which are
already subject to materiality in which case they shall be true) at and as
of the Closing Date as though then made, except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) Seller shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it
under this Agreement prior to the Closing;
(c) Seller shall have assigned to Buyer the agreements and permits
specified in Schedule 1.1(c), and any third-party consents required for
such assignment shall have been obtained;
(d) Seller shall have obtained, or caused to be obtained, each consent
and approval required in order to complete the transactions contemplated
hereby;
(e) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages
in connection with such transactions, (ii) seeking to prohibit direct or
indirect ownership or operation by Buyer of all or a material portion of
the Assets, or to compel Buyer or any of its subsidiaries to dispose of or
to hold separately all or a material portion of the business or assets of
Buyer and its subsidiaries, as a result of the transactions contemplated
hereby, (iii) seeking to invalidate or render unenforceable any material
provision of this Agreement or any of the other agreements attached as
exhibits hereto (collectively, the "Related Agreements"), or (iv) otherwise
relating to and materially adversely affecting the transactions
contemplated hereby;
(f) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed
19
applicable to the transactions contemplated hereby by any federal, state or
foreign court, government or governmental authority or agency, which would
reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in Section 8.1(e) hereof;
(g) Seller shall have completed and delivered to Buyer audited balance
sheets, as of December 31, 2002 and December 31, 2001, of Seller's business
and the audited statements of earnings, shareholders' equity and cash flows
of its business for the years ended December 31, 2002 and December 31,
2001, which audited financial statements shall be based upon the
information contained in the books and records of Seller and fairly
present, in all material respects, the financial condition of its business
as of the dates thereof and results of operations for the periods referred
to therein, and such audited financial statements shall have been prepared
in accordance with general accepted accounting principles, consistently
applied throughout the periods indicated, and shall not be materially
different than the unaudited balance sheet and statements of earnings,
shareholders' equity and cash flows attached as Exhibit E;
(h) On the Closing Date, Seller shall have delivered to Buyer all of
the following:
(i) an executed copy of the Xxxx of Sale and such other
instruments of conveyance, transfer, assignment and delivery as Buyer
shall have reasonably requested pursuant to Section 3.2 hereof;
(ii) an executed copy of the Assignment and Assumption Agreement;
(iii) an executed copy of the Escrow Agreement;
(iv) an executed copy of the Security Agreement (as defined in
Section 11.5);
(v) an executed certificate substantially in the form set forth
in Exhibit F attached hereto, dated the Closing Date, stating that the
conditions precedent set forth in subsections (a), (b), (e) and (f)
above have been satisfied;
(vi) an executed certificate of the Secretary of the Seller
certifying and attaching the constating documents of the Seller,
certifying and attaching all requisite resolutions or actions of
Seller's members and board of managers approving the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, and certifying to the incumbency and signatures
of the officers of the Seller executing this Agreement and any other
document relating to the transactions;
(vii) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (d) above;
(viii) an executed copy of an Indemnification Agreement from
Xxxxxx X. Xxxxxxx in the form of Exhibit G;
20
(ix) an executed copy of each of the Related Agreements;
(x) if required, completed and duly signed copy of the Private
Placement Questionnaire and Undertaking, in the form attached as
Schedule "A" to the Subscription Agreement;
(xi) physical possession of all assets, to the extent applicable;
and
(xii) such other certificates, documents and instruments as Buyer
reasonably requests related to the transactions contemplated hereby.
(i) The Buyer having received shareholder approval of the closing of a
US$3,000,000 private placement of units by the Buyer to Xxxxxx Xxxxxxx or
his nominee pursuant to an agreement dated the date hereof between the
Buyer and Xxxxxx Xxxxxxx (the "Private Placement") and the transactions
contemplated in this Agreement;
(j) Receipt by the Buyer of a fairness opinion from its financial
advisor, Agile Equity LLC, that the transaction contemplated in this
Agreement is fair from a financial point of view to the shareholders of the
Buyer and such fairness opinion not having been withdrawn;
(k) Receipt by the Buyer of approval of the Toronto Stock Exchange to
the transaction contemplated herein and to the issuance of the units under
the Subscription Agreement;
(l) Execution of employment and assignment of inventions and
intellectual property agreements between the Buyer and employees of the
Seller who are selected by the Buyer, on terms satisfactory to the Buyer at
its sole discretion; and
(m) a certificate of good standing (or equivalent) issued by the
applicable corporate regulatory authority.
8.2 Conditions to Seller's Obligations. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date (it being
understood that the following conditions are included for the exclusive benefit
of the Seller and may be waived, in whole or in part, in writing by the Seller
at any time):
(a) The representations and warranties set forth in Article V hereof
will be true and correct in all material respects (except those which are
already subject to materiality in which case they shall be true) at and as
of the Closing as though then made;
(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this
Agreement prior to the Closing;
(c) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly
21
restrain or prohibit, the consummation of the transactions contemplated
hereby or seeking to obtain material damages in connection with such
transactions, (ii) seeking to invalidate or render unenforceable any
material provision of this Agreement or any of the Related Agreements, or
(iii) otherwise relating to and materially adversely affecting the
transactions contemplated hereby;
(d) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
hereby by any federal, state or foreign court, government or governmental
authority or agency, which would reasonably be expected to result, directly
or indirectly, in any of the consequences referred to in Section 8.2(d)
hereof;
(e) There shall not have been any material adverse change in the
business or prospects of Buyer (including the termination of employment of
Xxxxxx Xxxx or Xxxxxx Xxxxxx);
(f) On the Closing Date, Buyer will have delivered to Seller:
(i) an executed copy of the Escrow Agreement;
(ii) an executed copy of the Security Agreement (as defined in
Section 11.5);
(iii) an executed copy of the Assignment and Assumption Agreement
and of each of the Related Agreements; (iv) an executed certificate
substantially in the form set forth in Exhibit H attached hereto,
dated the Closing Date, stating that the conditions precedent set
forth in subsections (a), (b), (c), (d) and (e) above have been
satisfied;
(v) an executed certificate of the Secretary of the Buyer
certifying and attaching the constating documents of the Buyer,
certifying and attaching all requisite resolutions or actions of
Company's members and board of directors approving the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, and certifying to the incumbency and signatures
of the officers of the Buyer executing this Agreement and any other
document relating to the transactions;
(vi) such other certificates, documents and instruments as Seller
reasonably requests related to the transactions contemplated hereby;
and
(vii) a certificate of good standing (or equivalent) issued by
the applicable corporate regulatory authority.
(g) On the Closing Date, Buyer will have delivered to the Escrow Agent
the Units.
22
(h) The closing and delivery of all documents required under the
Private Placement.
Article 9. Termination
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of
the other in the representations, warranties and covenants set forth in
this Agreement;
(c) by either Buyer or Seller if the transactions contemplated hereby
have not been consummated by July 30, 2003; provided that, neither Buyer
nor Seller will be entitled to terminate this Agreement pursuant to this
Section 9.1(c) if such party's willful breach of this Agreement has
prevented the consummation of the transactions contemplated hereby; or
(d) by either party if, after the date hereof, there shall have been a
material adverse change in the financial condition or business of the other
party or if, after the date hereof, an event shall have occurred which, so
far as reasonably can be foreseen, would result in any such change.
9.2 Effect of Termination. In the event of termination of this Agreement by
either Buyer or Seller as provided in Section 9.1, this Agreement shall become
void and there shall be no liability on the part of either Buyer or Seller, or
their respective stockholders, officers, or directors, except that Sections
12.1, 12.2 and 12.11 hereof shall survive indefinitely, and except with respect
to willful breaches of this Agreement prior to the time of such termination.
Article 10. Intentionally Left Blank
Article 11. Survival; Indemnification
11.1 Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article IV and
Article V hereof shall survive the Closing for 15 months provided that the
representations and warranties of the Seller which relate to the enforceability
of the Seller's obligations under this Agreement, the due authorisation of this
Agreement by the Seller, incorporation of the Seller, tax matters, environmental
matters or to the title of any person to any property (whether real or personal,
tangible or intangible) shall survive the Closing for three years.
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11.2 Indemnification by Seller.
(a) Subject to the limitations of Section 11.2(b), Seller agrees to
indemnify in full Buyer and its officers, directors, employees, agents and
stockholders (collectively, the "Buyer Indemnified Parties") and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses), whether or not actually incurred or
paid prior to the first anniversary of the Closing Date (collectively,
"Losses"), which Buyer Indemnified Parties may suffer, sustain or become
subject to, as a result of (i) any misrepresentation in any of the
representations and warranties of Seller contained in this Agreement or in
any exhibits, schedules, certificates or other documents delivered or to be
delivered by or on behalf of Seller pursuant to the terms of this Agreement
or otherwise referenced or incorporated in this Agreement (collectively,
the "Related Documents"), (ii) any breach of, or failure to perform, any
agreement of Seller contained in this Agreement or any of the Related
Documents, or (iii) any "Claims" (as defined in Section 11.4(a) hereof) or
threatened Claims against Buyer arising out of the actions or inactions of
Seller with respect to the Assets or the Business prior to the Closing
(collectively, "Buyer Losses").
(b) Seller shall be liable to Buyer Indemnified Parties for any Buyer
Losses (i) only if Buyer or another Buyer Indemnified Party delivers to
Seller written notice, setting forth in reasonable detail the identity,
nature and amount of Buyer Losses related to such claim or claims prior to
the first anniversary of the Closing Date and (ii) only if the aggregate
amount of all Buyer Losses exceeds $25,000 (the "Basket Amount"), in which
case Seller shall be obligated to indemnify the Buyer Indemnified Parties
only for the excess of the aggregate amount of all such Buyer Losses over
the Basket Amount. So long as Seller retains the Buyer Shares, Seller's
sole recourse and Buyer's sole remedy, shall be a return of the Buyer
Shares in an amount equal to the liability of Seller. In no event shall
Seller have liability under this Agreement in excess of the Buyer Shares
(or US$2,031,105 if Seller has disposed of the Buyer Shares to a party who
has not agreed to accept the indemnification obligations hereunder). A
Buyer Indemnified Party's failure to provide the detail required by clause
(i) in the preceding sentence shall not constitute either a breach of this
Agreement by the Buyer Indemnified Party or any basis for Seller to assert
that the Buyer Indemnified Party did not comply with the terms of this
Section 11.2 sufficient to cause the Buyer Indemnified Party to have waived
its rights under this Section 11.2, unless Seller demonstrates that its
ability to defend against any Claims with respect thereto has been
materially adversely affected.
11.3 Indemnification by Buyer.
(a) Subject to the limitations of Section 11.3(b), Buyer agrees to
indemnify in full the Seller, and its officers, directors, employees,
agents and stockholders (collectively, the "Seller Indemnified Parties")
and hold them harmless against any Losses which any of the Seller
Indemnified Parties may suffer, sustain or become subject to as a result of
(i) any misrepresentation in any of the representations and warranties of
Buyer contained in this Agreement or in any of the Related Documents, (ii)
any breach of, or failure to perform, any agreement of Buyer contained in
this Agreement or any of the Related Documents, or (iii) any Claims or
threatened Claims against Seller arising out
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of the actions or inactions of Buyer with respect to the Assets or the
Seller's business after the Closing (collectively, "Seller Losses").
(b) Buyer shall be liable to the Seller Indemnified Parties for any
Seller Losses (i) only if Seller or another Seller Indemnified Party
delivers to Buyer written notice, setting forth in reasonable detail the
identity, nature and amount of Seller Losses related to such claim or
claims prior to the first anniversary of the Closing Date and (ii) only if
the aggregate amount of all Seller Losses exceeds the Basket Amount, in
which case Buyer shall be obligated to indemnify the Seller Indemnified
Parties only for the excess of the aggregate amount of all such Seller
Losses over the Basket Amount. A Seller Indemnified Party's failure to
provide the detail required by clause (i) in the preceding sentence shall
not constitute either a breach of this Agreement by the Seller Indemnified
Party or any basis for Buyer to assert that the Seller Indemnified Party
did not comply with the terms of this Section 11.3 sufficient to cause the
Seller Indemnified Party to have waived its rights under this Section 11.3,
unless Buyer demonstrates that its ability to defend against any Claims
with respect thereto has been materially adversely affected.
11.4 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Buyer Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for liabilities, costs or
expenses which are Losses (any such third party action or proceeding being
referred to as a "Claim"), the Notifying Party shall give the Indemnifying
Party prompt notice thereof. The failure to give such notice shall not
affect any Indemnified Party's ability to seek reimbursement except to the
extent such failure has materially and adversely affected the Indemnifying
Party's ability to defend successfully a Claim. The Indemnifying Party
shall be entitled to contest and defend such Claim; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding that such
defense may be successful and (ii) diligently contests and defends such
Claim. Notice of the intention so to contest and defend shall be given by
the Indemnifying Party to the Notifying Party within 20 business days after
the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to
be filed). Such contest and defense shall be conducted by reputable
attorneys employed by the Indemnifying Party. The Notifying Party shall be
entitled at any time, at its own cost and expense (which expense shall not
constitute a Loss unless the Notifying Party reasonably determines that the
Indemnifying Party is not adequately representing or, because of a conflict
of interest, may not adequately represent, any interests of the Indemnified
Parties, and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented by attorneys
of its or their own choosing. If the Notifying Party elects to participate
in such defense, the Notifying Party will cooperate with the Indemnifying
Party in the conduct of such defense. Neither the Notifying Party nor the
Indemnifying
25
Party may concede, settle or compromise any Claim without the consent of
the other party, which consents will not be unreasonably withheld.
Notwithstanding the foregoing, (i) if a Claim seeks equitable relief or
(ii) if the subject matter of a Claim relates to the ongoing business of
any of the Indemnified Parties, which Claim, if decided against any of the
Indemnified Parties, would materially adversely affect the ongoing business
or reputation of any of the Indemnified Parties, then, in each such case,
the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do
not contest, defend or settle such Claim, the Indemnifying Party shall then
have the right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party
that it does not dispute the claim described in such notice or fails to
notify the Notifying Party within 30 days after delivery of such notice by
the Notifying Party whether the Indemnifying Party disputes the claim
described in such notice, the Loss in the amount specified in the Notifying
Party's notice will be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed
its Liability with respect to such claim, the Chief Executive Officers of
each of the Indemnifying Party and the Notifying Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved
through the negotiations of such Chief Executive Officers within 60 days
after the delivery of the Notifying Party's notice of such claim, such
dispute shall be resolved fully and finally in Minneapolis, Minnesota by an
arbitrator selected pursuant to, and an arbitration governed by, the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within 30 days after selection and
judgment upon the award rendered by such arbitrator may be entered in any
court of competent jurisdiction.
(c) After the Closing, the rights set forth in this Article XI shall
be each party's sole and exclusive remedies against the other party hereto
for misrepresentations or breaches of covenants contained in this Agreement
and the Related Documents.
(d) Any indemnification payable under this Article XI shall be, to the
extent permitted by law, an adjustment to purchase price.
11.5 Security for Seller Indemnification.
(a) At Closing, the Buyer shall deliver the Units to the Escrow Agent
to be held by the Escrow Agent as security for the satisfaction,
performance and observance by the Seller of its obligations, duties and
liabilities under this Agreement in accordance with the terms of the Escrow
Agreement.
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(b) The Seller shall grant the Buyer a security interest in the Units
pursuant to a security agreement (the "Security Agreement") on terms and
conditions satisfactory to the Buyer and the Seller, acting reasonably.
(c) For so long as the Units remain in escrow, upon notice to the
Seller of any Claim pursuant to Section 11.2, the Buyer may make a claim
against the Units in accordance with the Escrow Agreement. Neither the
exercise nor failure to exercise such right shall constitute an election of
remedies or limit the remedies available to the Buyer in the enforcement of
its rights under this Agreement.
Article 12. Miscellaneous
12.1 Press Releases and Announcements. Prior to the Closing Date, neither
party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of Seller
without prior written approval of the other party hereto, except as may be
necessary, in the opinion of counsel to the party seeking to make disclosure, to
comply with the requirements of this Agreement, applicable law or the rules,
policies and instruments of any applicable securities regulatory authority or
stock exchange. If any such press release or public announcement is so required,
the party making such disclosure shall consult, to the extent reasonably
practical, with the other party prior to making such disclosure, and the parties
shall use all reasonable efforts, acting in good faith, to agree upon a text for
such disclosure which is satisfactory to both parties.
12.2 Expenses. Except as otherwise expressly provided for herein, Seller
and Buyer will pay all of their own expenses (including attorneys' and
accountants' fees in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
12.3 Further Assurances. Seller agrees that, on and after the Closing Date,
it shall take all appropriate action (without incurring any out-of-pocket
expenses) and execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
provisions hereof, including, without limitation, putting Buyer in possession
and operating control of the Assets and transferring all Permits and
Environmental Permits to Buyer that are transferable.
12.4 Cooperation and Exchange of Information. Seller and Buyer will provide
each other with such cooperation and information as either of them reasonably
may request of the other in filing any Tax return, amended return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of relevant Tax returns or portions
thereof, together with accompanying schedules and related work papers and
documents relating to rulings or other determinations by Taxing authorities.
Each party shall make its employees available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder.
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12.5 Amendment and Waiver. This Agreement may not be amended or waived
except in writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
12.6 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or three
business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
Notices to Seller:
HiddenMind Technology, LLC
00 Xxxxx Xxxx Xxxxx, Xxxxx 000
Xx. Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Notices to Buyer:
Infowave Software, Inc.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attn: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
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With a copy to:
Blake, Xxxxxxx & Xxxxxxx LLP
Suite 2600, Three Bentall Centre
XX Xxx 00000
Xxxxxxxxx, XX
Xxxxxx X0X 0X0
Attn: Xxxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
12.7 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by either party
hereto without the prior written consent of the other party hereto.
12.8 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.9 Complete Agreement. This Agreement and the Related Agreements and the
Exhibits hereto, the Disclosure Schedule and the other documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
12.11 Governing Law. The internal law, without regard to conflicts of laws
principles, of the State of North Carolina will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
12.12 No Statutory Right of Rescission or Damages. Seller acknowledges and
agrees that as a consequence of acquiring Shares pursuant to exemptions from
registration and prospectus requirements under the Securities Laws and the
securities laws of the United States, certain protections, rights and remedies
provided by the Securities Laws and the securities laws of the United States,
including statutory rights of rescission or damages, will not be available to
Seller.
12.13 Resale Restrictions. Seller understands and acknowledges that the
Shares and Warrants purchased hereunder will be subject to certain resale
restrictions under applicable
29
securities laws and the Private Placement Questionnaire and Undertaking and
Seller agrees to comply with such restrictions. Seller also acknowledges that it
has been advised to consult its own legal advisors with respect to applicable
resale restrictions and that it is solely responsible for complying with such
restrictions.
12.14 No Statutory Right of Rescission or Damages; Additional
Acknowledgements. Seller acknowledges and agrees that: (a) no securities
commission or similar regulatory authority has reviewed or passed on the merits
of the Units; (b) there is no government or other insurance covering the Units;
(c) there are risks associated with the purchase of the Units; and (d) as a
consequence of acquiring Units pursuant to exemptions from registration and
prospectus requirements under the Securities Laws, certain protections, rights
and remedies provided by the Securities Laws, including statutory rights of
rescission or damages, will not be available to Seller.
30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INFOWAVE SOFTWARE, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
HIDDENMIND TECHNOLOGY, LLC
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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