STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into on December 22, 1999 and
among XXXXXXX.XXX, INC., a Delaware corporation (the "Purchaser"), SFG
TECHNOLOGIES, INC., a corporation organized and existing under the laws of
Canada ("SFG"), the parties listed on the signature page attached hereto under
"Common Selling Shareholders," and the parties listed on the signature page
hereto under "Option Holders" (respectively, the "Common Selling Shareholders"
and the "Option Holders" and together, the "Selling Securityholders"), and Xxxxx
Xxxxxxx (the "Agent"). Certain capitalized terms used in this Agreement are
defined on Exhibit A.
RECITALS
A. The Common Selling Shareholders collectively are the registered and
beneficial owners of 30,156,964.84 shares of the common stock of SFG (the
"Common Shares"), and the Preferred Shareholders are collectively the registered
and beneficial owners of 341,319 shares of the preferred stock of SFG (the
"Preferred Shares") (the Common Shares and the Preferred Shares are hereinafter
collectively referred to as the "Shares"). Other that the BEA Shares and the
Residual Shares, the Shares constitute all of the issued and outstanding capital
stock of SFG .
B. The Option Holders collectively are the registered and beneficial
owners of options to purchase 2500 shares of the common stock of SFG (the
"Options"). The Options constitute all of the outstanding subscriptions, calls,
options, warrants or other rights, whether or not currently convertible,
exchangeable, exercisable or otherwise, to acquire any shares of the capital
stock or other securities of SFG. The Shares and the Options are hereinafter
collectively referred to as the "Securities."
X. Xxxxx Xxxxxxx Xxxxxxx and Xxxx Xxxxxxx Xxxxxxx (collectively, the
"Elliotts", and, for greater certainty, the Elliotts are also Selling
Securityholders for the purposes of this Agreement with respect to the Common
Shares personally owned by them) are the registered and beneficial owners of all
of the issued and outstanding shares (the "Xxxxxxx Shares") of Xxxxx Xxxxxxx &
Associates Inc. ("BEA"). BEA owns 20,000 Class B Common Shares of SFG (the "BEA
Shares").
D. The Selling Securityholders (except BEA) wish to sell the Securities
(other than the BEA Shares) to the Purchaser on the terms set forth in this
Agreement. The Elliotts wish to sell the Xxxxxxx Shares to the Purchaser on the
terms set forth in this Agreement.
AGREEMENT
The Purchaser, SFG the Selling Securityholders and the Elliotts
intending to be legally bound, agree as follows:
1. SALE AND PURCHASE OF SECURITIES; RELATED TRANSACTIONS
1.1 Sale and Purchase of Securities. At the Closing, the Selling
Securityholders shall sell, assign, transfer and deliver the Securities to the
Purchaser, and the Purchaser shall purchase the Securities from the Selling
Securityholders, on the terms and subject to the conditions set forth in this
Agreement. At the Closing, the Elliotts shall sell, assign, transfer and deliver
the Xxxxxxx Shares to the Purchaser, and the Purchaser shall purchase the
Xxxxxxx Shares from the Elliotts, on the terms and subject to the conditions set
forth in this Agreement.
1.2 Purchase Price.
(a) Subject to the terms of this Agreement, the aggregate purchase price
for the Securities and the Xxxxxxx Shares shall be the sum of US$15,731,962 (the
"Purchase Price"), payable subject to the following adjustments:
(i) the Purchase Price shall be reduced by an amount equal to the
principal amount of the Outstanding Long Term Debt (defined below) and the
aggregate retraction price of the Class C Preferred shares and the aggregate
redemption price of the Class F Preferred Shares (collectively, the "Preferred
Stock") to be repaid, retracted or redeemed, as the case may be, pursuant to
Section 1.4;
(ii) if the Closing Net Working Capital is less than zero (a
"Deficit"), then the Purchase Price shall be further reduced by an amount equal
to the Deficit;
(iii) if the Purchase Price is reduced pursuant to Section 1.2(a)(ii)
and the Closing Net Working Capital is less than the Estimated Closing Net
Working Capital, then the Purchase Price shall be further reduced by the amount
by which Closing Net Working Capital is less than the Estimated Closing Net
Working Capital;
(iv) if the Purchase Price is reduced pursuant to Section 1.2(a)(ii)
and the Closing Net Working Capital is greater than the Estimated Closing Net
Working Capital, then the Purchase Price shall be increased by the lesser of:
(1) the amount by which the Closing Net Working Capital exceeds the
Estimated Closing Net Working Capital, and
(2) the amount by which the Purchase Price was reduced pursuant to
Section 1.2(a)(ii);
(v) if the Purchase Price is not reduced pursuant to Section 1.2(a)(ii)
and the Closing Net Working Capital is less than zero (a "Final Deficit"), then
the Purchase Price shall be reduced by the Final Deficit; and
(vi) if an amount is received from the Canadian Customs and Revenue
Agency by the Company by way of credit or cash payment as a result of investment
tax credit claims which the Company has made under subsection 127(5) of the
Income Tax Act (Canada) for taxation years ending on or before the Closing or
credited or paid as related interest, then the Purchase Price shall be increased
by the amount so received.
(b) For the purposes of the calculation of the adjustments to the Purchase
Price, "Outstanding Long Term Debt" shall mean that long-term debt outstanding
at the Closing as detailed in Part 1.4 of the Disclosure Schedule. The current
portions of such debt and accrued interest thereon and all deferred revenue will
be excluded from Outstanding Long Term Debt for the purposes of the calculation
of adjustments to the Purchase Price.
(c) Closing Net Working Capital will be the consolidated current assets
less the consolidated current liabilities determined in accordance with GAAP
measured as at November 30, 1999 with the following modifications:
(i) current assets will exclude the full amount receivable in respect
of any investment tax credits referred to above in Section 1.2(a)(vi);
(ii) current assets will be increased by the aggregate amounts received
or receivable by SFG from holders of options who have exercised their option
after November 30, 1999 but prior to Closing;
(iii) current liabilities will exclude one-half of the current portion
of deferred revenue;
(iv) current assets will be reduced by the amount of US$120,000,
representing the portion of the Purchase Price relating to the pre-funding of
professional fees and expenses owed by SFG on Closing (provided however, that
the Estimated Closing Net Working Capital will not be calculated with this
adjustment);
(v) for greater certainty, current liabilities will include the current
portions of long-term debt and accrued interest thereon; and
(vi) for the purposes of the adjustments contemplated in this Section
1.2, all Canadian dollars shall be converted into United States dollars at a
rate of $US 0.67581266 for each Canadian dollar.
(d) If there is an increase in the Purchase Price in respect of any
investment tax credits referred to above in Section 1.2(a)(vi), the Purchaser
shall cause SFG to pay the amount of the increase to the Agent for distribution
to the Selling Securityholders on a Pro Rata basis within the later of the date
that is 10 days after receipt thereof and the date that the Toronto-Dominion
Bank has unconditionally released its security interest in such investment tax
credits granted pursuant to the Assignment of SR & ED Tax Credits, Refunds and
Payment between SFG and The Toronto-Dominion Bank dated April 30, 1998 .
(e) The Purchaser shall allocate the Purchase Price among the Securities
and the Xxxxxxx Shares as set out in Part 1.4 of the Disclosure Schedule. The
Selling Securityholders, the Elliotts and the Purchaser agree that the values so
attributed to the Securities and the Xxxxxxx Shares are the respective fair
market values thereof, and each party shall file in mutually agreeable form all
returns and elections required or desirable under the Income Tax Act (Canada) in
a manner consistent with the foregoing allocations. For greater certainty, the
Elliotts and the Purchaser agree that the portion of the Purchase Price
attributable to the Xxxxxxx Shares is determined as if each Xxxxxxx directly
owns such number of BEA Shares which is equal to his or her proportionate
interest in BEA on the Closing Date.
(f) In the case of each US Seller, the Purchaser shall withhold, and hold
in escrow, from that portion of the Purchase Price payable to such US Seller
(the "US Seller Payment") an amount equal to 33 1/3% of the US Seller Payment
(the "Tax Amount") pursuant to subsection 116(5) of the Income Tax Act (Canada).
The aggregate of all such Tax Amounts (the "Tax Escrow Amount") shall be
delivered to the Escrow Agent to be held in accordance with the Tax Escrow
Agreement.
1.3 Closing Net Working Capital Adjustment Procedures.
(a) At least one business day prior to the Closing Date, SFG shall cause to
be prepared and delivered to Purchaser a schedule setting forth, in reasonable
detail, SFG's good faith estimate of the Closing Net Working Capital (and for
greater certainty, without the reduction in current assets referred to in
Section 1.2(c)(iv)) (the "Estimated Closing Net Working Capital") along with a
copy of the computations used in connection with such determination of the
Estimated Closing Net Working Capital. If the Estimated Closing Net Working
Capital is negative (less than zero) (the "Base Closing Net Working Capital"),
the Purchase Price shall be reduced dollar-for-dollar as described in Section
1.2(a)(ii).
(b) As promptly as practicable, but in no event later than 60 days, after
the Closing Date, Purchaser shall prepare and deliver to Agent a schedule
("Purchaser's Closing Schedule") setting forth in reasonable detail Purchaser's
calculation of Closing Net Working Capital. Purchaser's Closing Schedule shall
also set forth, and explain, in reasonable detail, any differences between
Purchaser's calculation of Closing Net Working Capital and the Estimated Closing
Net Working Capital. Any computations and workpapers used in the preparation of
Purchaser's Closing Schedule shall also be provided to Agent at such time. If
Purchaser employs a firm of independent accountants in connection with the
preparation of Purchaser's Closing Schedule, Purchaser shall cause such
independent accountants to deliver to Agent any computations and workpapers used
in the preparation of Purchaser's Closing Schedule. In addition, Purchaser shall
make available to Agent the appropriate personnel involved in the preparation of
Purchaser's Closing Schedule.
(c) Agent will notify Purchaser in writing ("Agent's Dispute Notice")
within 30 days after receiving Purchaser's Closing Schedule if Agent disagrees
with Purchaser's calculation of the Closing Net Working Capital as set forth in
Purchaser's Closing Schedule, which notice shall set forth in reasonable detail
the basis for such disagreement, the dollar amounts involved and Agent's
calculation of the Closing Net Working Capital. Purchaser will give Agent and
its representatives reasonable access during the normal business hours of
Purchaser and SFG to the personnel, books and records of SFG to assist Agent in
the preparation of Agent's Dispute Notice. If no Agent's Dispute Notice is
received by Purchaser within such 30-day period, Purchaser's calculation of the
Closing Net Working Capital as set forth in Purchaser's Closing Schedule shall
be final and binding upon the parties hereto.
(d) Upon receipt by Purchaser of Agent's Dispute Notice, Agent and
Purchaser shall negotiate in good faith to resolve any disagreement with respect
to Closing Net Working Capital set forth in Agent's Dispute Notice. To the
extent Purchaser and Agent are unable to agree with respect to Closing Net
Working Capital within 30 days after receipt by Purchaser of Agent's Dispute
Notice, Purchaser and Agent shall promptly (but in any event within 10 days
after expiration of such 30 day period) select and retain a mutually acceptable
internationally recognized accounting firm with offices in Vancouver, British
Columbia, Canada, with no material relationship to Purchaser or Agent and submit
their dispute to such accounting firm for a binding resolution. Such accounting
firm shall be instructed to prepare a written statement of such accounting
firm's determination of the Closing Net Working Capital, and to deliver copies
thereof to Purchaser, Agent and the Escrow Agent, within 30 days of retention of
such accounting firm pursuant to this Section 1.3(d). The fees and expenses of
such accounting firm shall be paid one-half by Agent, on behalf of the Selling
Securityholders, and one-half by Purchaser. Closing Net Working Capital as
agreed upon by Agent and Purchaser, as deemed agreed upon pursuant to the last
sentence of Section 1.3(c) or as determined by such accounting firm, in
accordance herewith, shall be termed the "Final Closing Net Working Capital." If
the Estimated Closing Net Working Capital exceeds the Final Closing Net Working
Capital, the amount of such excess shall be paid to Purchaser out of the First
Escrow Amount and any remaining First Escrow Amount shall be paid to Agent, all
in accordance with the Escrow Agreement.
1.4 Closing and Closing Actions.
(a) The closing of the sale of the Securities and the Xxxxxxx Shares to the
Purchaser (the "Closing") shall take place at the offices of the Purchaser at
8:00 a.m. (Vancouver time) on December 22, 1999 (or at such other place or time
as the Purchaser and the Agent may jointly designate). For purposes of this
Agreement: "Scheduled Closing Time" shall mean the time and date as of which the
Closing is required to take place pursuant to this Section 1.4(a); and "Closing
Date" shall mean to the time and date as of which the Closing actually takes
place.
(b) At the Closing, the Purchaser shall pay to the Selling Securityholders
and to the Elliotts (unless otherwise directed in writing), in the amounts set
out in Part 1.4 of the Disclosure Schedule, an amount equal to US$15,731,962
less the aggregate of:
(i) the adjustments provided in Sections 1.2(a)(i) and 1.2(a)(ii);
(ii) the First Escrow Amount (as defined below);
(iii) the Second Escrow Amount (as defined below);
(iv) the BEA Escrow Amount (as defined below); and
(v) the Tax Escrow Amount.
(c) At the Closing:
(i) the Purchaser shall pay to SFG the amount of $1,217,746.84 which
shall be used to fund the aggregate retraction price of the Class C Preferred
Shares owned by some of the Common Selling Shareholders as more particularly
described in Part 1.4 of the Disclosure Schedule, which amount shall be paid by
SFG to such holders of the Class C Preferred Shares only upon surrender by such
holders of the original share certificates representing the Class C Preferred
Shares;
(ii) the Purchaser shall pay to SFG the amount of $218,490.23 which
shall be used to fund the aggregate retraction price of the Class F Preferred
Shares owned by Her Majesty the Queen in right of the Province of British
Columbia as more particularly described in Part 1.4 of the Disclosure Schedule,
which amount shall be paid by SFG to such holder of the Class F Preferred Shares
only upon surrender by such holder of the original share certificates
representing the Class F Preferred Shares;
(iii) the Purchaser shall pay to SFG the amount of $1,656,390.25 which
shall be used to fund the repayment of the principal amount of the Outstanding
Long-Term Debt and accrued interest thereon as more particularly described in
Part 1.4 of the Disclosure Schedule, which amount shall be paid by SFG to the
holders of the Outstanding Long-Term Debt only upon receipt of such releases and
discharges as the Purchaser reasonably considers satisfactory;
(iv) from amounts received pursuant to Section 1.4(b), $270,000 shall
be used to fund the payment of SFG's transaction costs incurred up to the
Closing Date in connection with the Transaction (including, without limitation,
all legal, accounting and financial advisors costs and expenses);
(v) Each of the Common Selling Shareholders shall deliver to the
Purchaser the stock certificates representing the Common Shares owned by them,
duly endorsed (or accompanied by duly executed stock powers);
(vi) Each of the Option Holders shall execute and deliver to the
Purchaser an Option Termination Agreement in the form of Exhibit B ("Option
Termination Agreements");
(vii) The Elliotts shall deliver to the Purchaser the stock
certificates representing the Xxxxxxx Shares, duly endorsed (or accompanied by
duly executed stock powers);
(viii) Each of Xxxxx Xxxxxxx and Xxxxx Xxxxx shall execute and deliver
to the Purchaser and SFG a Noncompetition Agreement substantially in the form of
Exhibit C1, and Xxxxx Xxxxxx shall execute and deliver to the Purchaser and SFG
a Noncompetition Agreement substantially in the form of Exhibit C2;
(ix) The Purchaser shall deliver the Tax Escrow Amount to the Escrow
Agent to be held in accordance with the Tax Escrow Agreement;
(x) The Purchaser, the Selling Securityholders, the Agent and the
Escrow Agent shall execute and deliver the Escrow Agreement;
(xi) The Purchaser shall deliver US$500,000 of the Purchase Price (the
"First Escrow Amount") to the Escrow Agent to be held in accordance with the
Escrow Agreement and Section 1.3;
(xii) The Purchaser shall deliver US$1,500,000 of the Purchase Price
(the "Second Escrow Amount") to the Escrow Agent to be held in accordance with
the Escrow Agreement and this Agreement;
(xiii) The Purchaser shall deliver US$43,513.03 of the Purchase Price
(the "BEA Escrow Amount") to the Escrow Agent to be held in accordance with the
BEA Escrow Agreement;
(xiv) The Purchaser shall have received from SFG's and certain of the
Selling Securityholders' respective counsel an opinion or opinions of such
counsel in a form satisfactory to Purchaser;
(xv) The Purchaser and SFG shall have received from each Selling
Securityholder a Securityholder Release in the form of Exhibit E;
(xvi) SFG shall execute and deliver to the Purchaser a certificate (the
"Closing Certificate") setting forth SFG's representations and warranties that
(A) each of the representations and warranties made by SFG in this Agreement was
accurate in all respects as of the date of this Agreement, (B) except as
expressly set forth in the Closing Certificate, each of the representations and
warranties made by SFG in this Agreement is accurate in all respects as of the
Closing Date as if made on the Closing Date, (C) each of the covenants and
obligations that SFG are required to have complied with or performed pursuant to
this Agreement at or prior to the Closing has been duly complied with and
performed in all respects, and (D) except as expressly set forth in the Closing
Certificate, each of the conditions set forth in Sections 8.4(a), 8.4(b), 8.5,
8.7 and 8.8 has been satisfied in all respects; and
(xvii) The directors of the Companies shall resign from their
respective positions as directors of the Companies, and Xxxxx Xxxxxx shall
resign in her capacity as corporate secretary of the Companies.
1.5 Tax Matters. For US federal income tax purposes, the parties intend the
sale of the Securities to be treated as a taxable transaction. All parties
understand that with respect to the sale of the Securities, the Purchaser
currently intends to file an election under Section 338 of the Internal Revenue
Code of 1986, as amended (the "Code") (the "Section 338 Election"), and all
parties agree to cooperate in connection with such election. The Purchaser shall
have sole responsibility for allocating consideration among SFG's assets
following such election, and the parties agree that they shall adhere to such
allocation for the purpose of all tax returns filed by them subsequent to the
Closing Date, including the determination of taxable gain or loss and the tax
basis of assets, for the purpose of all financial statements, and in all other
circumstances.
2. REPRESENTATIONS AND WARRANTIES OF SFG
Except as set forth in the disclosure schedules attached hereto (each a
"Schedule," and collectively, the "Disclosure Schedules") with respect to the
specific sections of this Article 2, or as disclosed in another section of the
Disclosure Schedules if it is reasonably apparent on the face of the disclosure
that it is applicable to another section of this Article 2, as of the date of
this Agreement and as of the Closing, SFG represents and warrants, to and for
the benefit of the Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) Each of the Companies is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all necessary power and authority:
(i) to conduct its business in the manner in which its business is
currently being conducted and in the manner in which its business is currently
proposed to be conducted;
(ii) to own and use its assets in the manner in which its assets are
currently owned and used and in the manner in which its assets are currently
proposed to be owned and used; and
(iii) to perform its obligations under all SFG Contracts.
(b) Except as disclosed in Part 2.1 of the Disclosure Schedule, none of the
Companies has ever conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name or
other name, other than the name "SFG Technologies Inc."
(c) None of the Companies has ever been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule. Each Company is in good standing as a foreign corporation
in each of the jurisdictions identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the names
of the members of each Company's board of directors, (ii) the names of the
members of each committee of each Company's board of directors, and (iii) the
names and titles of each Company's officers.
(e) Neither SFG nor any of its shareholders has ever approved, or commenced
any proceeding or made any election contemplating, the dissolution or
liquidation of SFG or the winding up or cessation of SFG's business or affairs.
(f) Except as identified in Part 2.1 of the Disclosure Schedule (which sets
forth the name, address and principal business of each Subsidiary): (i) SFG has
no direct or indirect subsidiaries, and SFG has never owned, beneficially or
otherwise, any shares or other securities of, or any direct or indirect interest
of any nature in, any Entity; and (ii) SFG has not agreed and is not obligated
to make any future investment in or capital contribution to any other Entity.
Except as identified in Part 2.1 of the Disclosure Schedule, SFG owns all of the
equity or other interests in and to each Subsidiary. Nissi Technologies (U.S.A.)
Inc. ("Nissi") is an inactive corporation that does not carry on business or any
other activities. Nissi has no Liabilities whatsoever, including without
limitation, any Liabilities which may in any way expose any of the Companies to
Liability.
(g) SFG is a "private issuer" within the meaning of the Securities Act
(British Columbia).
(h) All eligible security transfer Taxes or similar Taxes payable in
connection with the transfer of any securities of the Companies have been duly
paid.
(i) Except as identified in Part 2.1 of the Disclosure Schedule, there are
no shareholders' agreements, pooling agreements, voting trusts or other similar
agreements with respect to the ownership or voting of any of the shares of the
Companies.
(j) Part 2.1 of the Disclosure Schedule lists each jurisdiction in which
operations of the Companies are carried on and briefly describes the nature of
such operations and each jurisdiction in which tangible assets owned or used by
the Companies are located.
1.7 Certificate of Incorporation and Bylaws; Records.
(a) SFG has delivered to the Purchaser accurate and complete copies of:
(i) the certificate of incorporation and bylaws or other charter
documents of each Company, including all amendments thereto;
(ii) the stock records of each of the Companies; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of each of the Companies, the board of directors
of each of the Companies and all committees of the board of directors of each of
the Companies. There have been no meetings or other actions or proceedings of
the shareholders of any of the Companies, the board of directors of any of the
Companies or any committee of the board of directors of any of the Companies
that are not fully reflected in such minutes or other records.
(b) There has not been any violation of any of the provisions of SFG's
certificate of incorporation or bylaws or of any resolution adopted by SFG's
shareholders, SFG's board of directors or any committee of SFG's board of
directors; and no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in such a violation.
(c) The books of account, stock records, minute books and other records of
each of the Companies are accurate, up-to-date and complete, and have been
maintained in accordance with sound and prudent business practices. All of the
records of the Companies are in the actual possession and direct control of SFG.
SFG has in place, and each of the Companies has at all times had in place, an
adequate and appropriate system of internal controls which is at least as
comprehensive and effective as the systems of internal controls customarily
maintained by Comparable Entities.
2.3 Capitalization, Etc.
(a) On the Closing Date, the authorized capital stock of SFG will consist
of:
(i) an unlimited number of Class A Common shares, of which 6,941,054.84
shares are issued and outstanding;
(ii) an unlimited number of Class B Common shares, of which 23,218,410
shares are issued and outstanding;
(iii) an unlimited number of Class X Common shares, of which no shares
are issued and outstanding;
(iv) an unlimited number of Class A Preferred shares, of which no
shares are issued and outstanding;
(v) an unlimited number of Class B Preferred shares, of which no shares
are issued and outstanding;
(vi) an unlimited number of Class C Preferred shares, of which 18,019
have been issued and are outstanding, all of which are to be redeemed by SFG on
Closing; and
(vii) an unlimited number of Class F Preferred shares, of which 323,300
are issued and outstanding, all of which are to be redeemed by SFG on Closing.
(viii) All of such Securities are registered in the names of the
Selling Securityholders in the amounts indicated on Part 3.3 of the Disclosure
Schedule.
(b) All of the Securities (i) have been duly authorized and validly issued,
(ii) were issued in compliance with any applicable preemptive or similar rights,
(iii) have been issued in full compliance with all applicable securities laws
and other applicable Legal Requirements and in compliance with all applicable
SFG Contracts, and (iv) have been issued in compliance with the articles of the
articles of incorporation, by-laws or other constating documents of SFG or the
terms of any shareholders' agreement or any other agreement to which SFG is a
party or by which it is bound. The Selling Shareholders have delivered to the
Purchaser accurate and complete copies of the stock certificates evidencing the
Shares and the Option Holders have delivered to the Purchaser fully executed and
complete copies of the option agreements evidencing the Options.
(c) All of the Shares are fully paid and non-assessable.
(d) Except as set forth in Part 2.3 of the Disclosure Schedules, there is
no:
(i) outstanding subscription, option, call, warrant or right (whether
or not currently exercisable) to acquire any shares of the capital stock or
other securities of any Company;
(ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or
other securities of any Company;
(iii) Contract under which any Company is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other securities;
or
(iv) condition or circumstance that may directly or indirectly give
rise to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of capital
stock or other securities of any Company.
(e) Except as set forth in Part 2.3 of the Disclosure Schedule, SFG has
never repurchased, redeemed or otherwise reacquired any shares of capital stock
or other securities. All securities so reacquired by SFG were reacquired in full
compliance with all applicable Legal Requirements.
(f) The information in Recital A is correct and accurate in all respects.
Part 2.3 of the Disclosure Schedule lists the name and state or province of
residence of each holder of Securities provided to the Company by such holder.
(g) Except as disclosed in Part 2.3 of the Disclosure Schedule, there are
no pre-emptive rights or agreements, arrangements or understandings to issue
pre-emptive rights with respect to the issuance or sale of Securities created by
statute, the articles of incorporation or by-laws of the Company, or any
agreement or other arrangement to which the Company is a party or to which it is
bound and there are no agreements, arrangements or understandings to which the
Company is a party (written or oral) pursuant to which the Company has the right
to elect to satisfy any liability by issuing Securities.
(h) Part 2.3 of the Disclosure Schedule sets forth the holder of each
Option, the number and type of securities issuable thereunder, and, if
applicable, the exercise price therefor, the exercise period, the maximum term,
and vesting schedule thereof (including a description of the circumstances under
which such vesting schedule can or will be accelerated).
(i) All of the Options were issued in compliance with all applicable
federal, provincial and foreign securities laws. None of the Options will vest
on an accelerated basis in connection with the acquisition contemplated herein
or any subsequent termination of the holder's employment or service.
2.4 Financial Statements.
(a) SFG has delivered to the Purchaser the following financial statements
and notes (collectively, the "SFG Financial Statements"):
(i) the audited consolidated balance sheet of SFG and the Subsidiaries
as of December 31, 1998, and the related audited consolidated statements of
operations, changes in shareholders' equity and cash flows of SFG for the year
then ended, together with the notes thereto and the unqualified report of KPMG
Peat Marwick LLP relating thereto; and
(ii) the unaudited balance sheet of SFG as of November 30, 1999 (the
"Unaudited Interim Balance Sheet"), and the related unaudited statements of
operations, for the nine months then ended is attached hereto in Part 2.4 of the
Disclosure Schedule.
(b) All of the SFG Financial Statements are accurate and complete in all
respects. The financial statements and notes referred to in Section 2.4(a)(i)
present fairly the consolidated financial position of SFG and the Subsidiaries
as of December 31, 1998 and the consolidated results of operations, changes in
shareholders' equity and cash flows of SFG and the Subsidiaries for the year
then ended. The financial statements and notes referred to in Sections 2.4(a)(i)
and 2.4(a)(ii) present fairly the financial position of SFG as of the respective
dates thereof and the results of operations, changes in shareholders' equity and
cash flows of SFG for the periods covered thereby. The SFG Financial Statements
have been prepared in accordance with GAAP, applied on a basis consistent with
the financial statements of previous years. Except for variances in SFG's
Ordinary Course of Business, there has been no material adverse change in
financial position of the Companies on a consolidated basis from that shown by
or reflected in the Unaudited Interim Balance Sheet.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since December 31, 1998:
(a) there has not been any adverse change in any Company's business,
condition, assets, liabilities, operations, financial performance, net income,
prospects or relationship with customers, suppliers or employees (or in any
aspect or portion thereof), and no event has occurred that might have an adverse
effect on any Company's business, condition, assets, liabilities, operations,
financial performance, net income, prospects or relationship with customers,
suppliers or employees (or on any aspect or portion thereof);
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any Company's assets (whether or not covered by
insurance);
(c) no Company has (i) declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, or (ii)
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities;
(d) no Company has sold or otherwise issued any shares of capital stock or
any other securities;
(e) no Company has amended its memorandum or articles of incorporation or
bylaws or other charter documents and has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) no Company has purchased or otherwise acquired any asset from any other
Person, except for supplies acquired in the Ordinary Course of Business;
(g) no Company has leased or licensed any asset from any other Person other
than in the Ordinary Course of Business;
(h) no Company has made any capital expenditure other than in the Ordinary
Course of Business;
(i) no Company has sold or otherwise transferred, and has not leased or
licensed, any asset to any other Person except for products sold by SFG from its
inventory in the Ordinary Course of Business;
(j) no Company has written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) no Company has pledged or hypothecated any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance;
(l) no Company has made any loan or advance to any other Person other than
travel related expenses incurred in the Ordinary Course of Business in
accordance with SFG's Policy Guidelines on Travel Expenses, a copy of which has
been provided to the Purchaser;
(m) no Company has (i) established or adopted any Employee Benefit Plan, or
(ii) paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees;
(n) no Company has entered into, and no Company nor any of the assets owned
or used by any Company has become bound by, any Contract that is not an Excluded
Contract;
(o) no Contract by which any Company or any of the assets owned or used by
any Company is or was bound, or under which any Company has or had any rights or
interest, has been amended or terminated;
(p) no Company has incurred, assumed or otherwise become subject to any
Liability, other than accounts payable (of the type required to be reflected as
current liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by SFG in the Ordinary Course of Business;
(q) no Company has discharged any Encumbrance or discharged or paid any
indebtedness or other Liability, except for accounts payable that (i) are
reflected as current liabilities in the "liabilities" column of the Unaudited
Interim Balance Sheet or have been incurred by SFG since December 31, 1998 in
the Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(r) no Company has forgiven any debt or otherwise released or waived any
right or claim other than in the Ordinary Course of Business;
(s) no Company has changed any of its methods of accounting or accounting
practices in any respect other than as prescribed by the Canadian Institute of
Chartered Accountants;
(t) no Company has entered into any transaction or taken any other action
outside the Ordinary Course of Business;
(u) no event has occurred out of the Ordinary Course of Business which
would result in any material adverse change to the Estimated Closing Working
Capital if such Estimated Closing Working Capital was calculated as at the
Closing Date, except for the payment of up to US$270,000 of SFG's transaction
costs incurred up to the Closing Date in connection with the Transaction
(including without limitation, all legal, accounting and financial advisor
costs); and
(v) no Company has agreed, committed or offered (in writing or otherwise),
and has not attempted, to take any of the actions referred to in clauses "(c)"
through "(t)" above.
2.6 Title to Assets.
(a) Each Company owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including:
(i) all assets reflected on the Unaudited Interim Balance Sheet (except
for inventory sold by SFG since November 30, 1999 in the Ordinary Course of
Business);
(ii) all assets acquired since November 30, 1999 (except for inventory
sold by SFG since November 30, 1999 in the Ordinary Course of Business);
(iii) all assets referred to in Parts 2.8, 2.9, 2.10 and 2.12 of the
Disclosure Schedule and all rights under SFG Contracts; and
(iv) all other assets reflected in the Companies' books and records as
being owned by the Companies.
Except as set forth in Part 2.6 of the Disclosure Schedule, all of said
assets are owned by the Companies free and clear of any Encumbrances.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that are
being leased or licensed to the Companies.
(c) The assets owned or leased by the Companies are adequate for the
conduct of their respective businesses as usually conducted and include all
proprietary rights, trade secrets and other property and assets, tangible and
intangible, applicable to or used in connection with such businesses. Neither
the Selling Securityholders nor any other Person owns any assets which are being
used in or are reasonably necessary to carry on the business or operations of
the Companies in the normal course except assets leased to the Companies.
2.7 Bank Accounts. Part 2.7 of the Disclosure Schedule accurately sets
forth, with respect to each account maintained by or for the benefit of any
Company at any bank or other financial institution:
(a) the name and location of the institution at which such account is
maintained , and the name and telephone number of the account manager;
(b) the name in which such account is maintained and the account number of
such account;
(c) a description of such account and the purpose for which such account is
used;
(d) the current balance in such account;
(e) the rate of interest being earned on the funds in such account; and
(f) the names of all individuals authorized to draw on or make withdrawals
from such account.
There are no safe deposit boxes or similar arrangements maintained by or
for the benefit of any Company.
2.8 Receivables; Major Customers.
(a) Part 2.8 of the Disclosure Schedule provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other
receivables of the Companies as of November 30, 1999.
(b) Except as set forth in Part 2.8 of the Disclosure Schedule, all
existing accounts receivable of the Companies (including those accounts
receivable reflected on the Unaudited Interim Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since November 30,
1999 and have not yet been collected):
(i) represent good, valid and enforceable obligations of customers of
the Companies arising from bona fide transactions entered into in the Ordinary
Course of Business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) on or before December 31, 2000.
(c) Part 2.8 of the Disclosure Schedule accurately identifies, and provides
an accurate and complete breakdown of the revenues received from, each customer
or other Person that accounted for (i) more than $50,000 of the consolidated
gross revenues of SFG in 1998 or (ii) more than $50,000 of SFG's consolidated
gross revenues year-to-date through November 30, 1999. No Company has received
any notice or other communication (in writing or otherwise), or any other
information, indicating that any customer or other Person identified in Part 2.8
of the Disclosure Schedule may cease dealing with the Companies or may otherwise
reduce the volume of business transacted by such Person with the Companies below
historical levels.
2.9 Inventory. Part 2.9 of the Disclosure Schedule provides an accurate and
complete breakdown of any and all inventory of the Companies as of November 30,
1999. All of the Companies' existing inventory, if any (including any and all
inventory that is reflected on the Unaudited Interim Balance Sheet and that has
not been disposed of by the Companies since November 30, 1999):
(a) is of such quality and quantity as to be usable and saleable by the
Companies in the Ordinary Course of Business;
(b) has been priced or valued in accordance with Canadian GAAP;
(c) is free of any defect or deficiency; and
(d) is the property of the Company free and clear of any Encumbrance and is
not held by the Companies on consignment from others.
The inventory levels maintained by the Companies (i) are not excessive in
light of the Companies' normal operating requirements, (ii) are adequate for the
conduct of the Companies' operations in the Ordinary Course of Business, and
(iii) are comparable to the inventory levels maintained by Comparable Entities.
2.10 Equipment, Etc.
(a) Part 2.10 of the Disclosure Schedule accurately identifies all
equipment, furniture, fixtures, improvements and other tangible assets (other
than inventory) owned by the Companies, and accurately sets forth the month and
year of acquisition, original cost and book value of each of said assets. Part
2.10 also accurately identifies all tangible assets leased to the Companies.
(b) Each asset identified or required to be identified in Part 2.10 of the
Disclosure Schedule:
(i) is structurally sound, free of defects and deficiencies and in good
condition and repair (ordinary wear and tear excepted);
(ii) complies in all respects with, and is being operated and otherwise
used in full compliance with, all applicable Legal Requirements; and
(iii) is adequate for the uses to which it is being put.
The assets identified in Part 2.10 of the Disclosure Schedule are adequate
for the conduct of the Companies' businesses in the manner in which such
businesses are currently being conducted and in the manner in which such
businesses are proposed to be conducted.
2.11 Real Property. None of the Companies own any real property or any
interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.13 of the Disclosure Schedule (the
"Leases"). Part 2.11 of the Disclosure Schedule provides an accurate and
complete description of the premises covered by said Leases and the facilities
located on such premises (the "Leased Premises"). Each Company enjoys peaceful
and undisturbed possession of its respective Leased Premises. In respect of the
Leases and the Leased Premises:
(a) Complete and correct copies of the Leases have been provided to the
Purchaser.
(b) Each Company is exclusively entitled to all rights and benefits as
lessee under the Leases to which it is a party, and has not sublet, assigned,
licensed or otherwise conveyed any rights in the Leased Premises or in the
Leases to any other Person.
(c) All rental and other payments and other obligations required to be paid
and performed by the Companies pursuant to the Leases have been duly paid and
performed. No Company is in default of any of its obligations under the Leases
to which it is a party and none of the landlords or other parties to the Leases
are in default of any of their obligations under the Leases.
(d) The terms and conditions of the Leases will not be affected by, nor
will any of the Leases be in default as a result of, the completion of the
Transaction.
(e) To the Knowledge of SFG, the use by each Company of its Leased Premises
is not in breach of any building, zoning or other statute, by-law, ordinance,
regulation, covenant, restriction or official plan, and each Company has
adequate rights of ingress and egress for the operation of its business in the
ordinary course and, specifically (i) no alteration, repair, improvement or
other work that has not been completed has been ordered, directed or requested
in writing by any competent Governmental Body to be done in respect of any
Leased Premises or any of the plumbing, heating, elevating, water, drainage or
electrical systems, fixtures or works; (ii) all accounts for work and services
performed and materials furnished in respect of the Leased Premises at the
request of the Companies have been paid and no Person is entitled to claim a
lien against the Leased Premises or any part thereof, other than for current
accounts in respect of which the due date has not yet passed; (iii) there is
nothing owing by any Company in respect of the Leased Premises to any municipal
corporation, or to any other corporation or commission owning or operating a
public utility for water, gas, electrical power or energy, steam or hot water,
or for the use thereof, other than current accounts in respect of which the due
date has not yet passed; and (iv) no part of the Leased Premises has been taken
or expropriated by any Governmental Body nor has any notice or proceeding in
respect thereof been given or commenced.
(f) To the Knowledge of SFG, (i) there are no outstanding work orders,
non-compliance orders, deficiency notices or other such notices relative to the
Leased Premises, the other properties and assets of the Companies or their
respective businesses which have been issued by any police or fire department,
sanitation, environment, labor, health or other Governmental Body; (ii) there
are no matters under discussion with any such department or authority relating
to work orders, non-compliance orders, deficiency notices or other such notices;
and (iii) the Companies' businesses are not being operated in a manner which is
in contravention of any statute, regulation, rule, code, standard, policy or
other Legal Requirement.
(g) To the Knowledge of SFG, (i) the buildings and structures comprising
the Leased Premises are free of any structural defect; (ii) the heating,
ventilating, plumbing, drainage, electrical and air conditioning systems and all
other systems used in the Leased Premises and all machinery, equipment, tools,
furniture, furnishings and materials used in the Companies' businesses are in
good working order, fully operational and free of any defect, except for normal
wear and tear; (iii) such buildings and structures are located completely within
the boundaries of the Leased Premises; and (iv) certificates of mechanical
fitness are readily available for all motor vehicles owned or leased by the
Companies.
2.12 Proprietary Assets.
(a) Part 2.12 of the Disclosure Schedule sets forth, with respect to each
Proprietary Asset owned by the Companies registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part 2.12
of the Disclosure Schedule identifies and provides a brief description of all
other Proprietary Assets owned by the Companies (the "Owned Proprietary
Assets"). Part 2.12 of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Companies by any Person
(except for any Proprietary Asset that is licensed to the Companies under any
third party software license generally available to the public at a cost of less
than $1,000 per copy) (the "Licensed Proprietary Assets"), and identifies the
license agreement under which such Proprietary Asset is being licensed to the
Companies (the Owned Proprietary Assets and the Licensed Proprietary Assets are
hereinafter collectively referred to as the "Company Proprietary Assets").
Except as set forth in Part 2.12 of the Disclosure Schedule, the Companies have
good, valid and marketable title to all of the Owned Proprietary Assets free and
clear of all liens and other Encumbrances, and have a valid right (contractual
or otherwise) to use, license, lease, sell or otherwise distribute to others all
Company Proprietary Assets identified in Part 2.12 of the Disclosure Schedule.
Except as set forth in Part 2.12 of the Disclosure Schedule, the Companies are
not obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.12 of the Disclosure Schedule,
the Companies have not developed jointly with any other Person any Company
Proprietary Asset with respect to which such other Person has any rights.
(b) The Companies all Licensed Proprietary Assets is licensed to the
Companies pursuant to written license agreements under which the Companies are
in good standing and are entitled to all benefits thereunder, and there exists
no state of facts which after notice or lapse of time or both would constitute a
default or breach thereunder and to the Knowledge of SFG no other party to such
agreements is in default thereunder.
(c) The Companies have taken all commercially reasonable measures and
precautions to protect and maintain the confidentiality and secrecy of all
Company Proprietary Assets (except Company Proprietary Assets whose value would
be unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Company Proprietary Assets. Except as set forth in Part 2.12 of the
Disclosure Schedule, none of the Companies has disclosed or delivered to any
Person, or permitted the disclosure or delivery to any Person of, (i) the source
code, or any portion or aspect of the source code, of any Company Proprietary
Asset, or (ii) other than to customers of the Company or for demonstration
purposes in the Ordinary Course of Business, the object code, or any portion or
aspect of the object code, of any Company Proprietary Asset. The source code for
Licensed Proprietary Assets is either in the Companies' possession or is subject
to a source code escrow agreement under which the Companies have the right to
obtain the source code upon the bankruptcy or other problem with the licensor.
(d) None of the Company Proprietary Assets infringes or conflicts with any
Proprietary Asset owned or used by any other Person. None of the Companies is
infringing, misappropriating or making any unlawful use of, and none of the
Companies has at any time infringed, misappropriated or made any unlawful use
of, or received any notice or other communication (in writing or otherwise) of
any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. No
other Person is infringing, misappropriating or making any unlawful use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Company Proprietary Asset.
(e) Each Company Proprietary Asset conforms with any specification,
documentation, performance standard, representation or statement made or
provided with respect thereto by or on behalf of any of the Companies. There has
not been any claim by any customer or other Person alleging that any Company
Proprietary Asset (including each version thereof that has ever been licensed or
otherwise made available by the Companies to any Person) does not conform with
any specification, documentation, performance standard, representation or
statement made or provided by or on behalf of any of the Companies to such
customer or other Person and there is no basis for any such claim. SFG has
established adequate reserves on the Unaudited Interim Balance Sheet to cover
all costs associated with any obligations that the Companies may have with
respect to the correction or repair of programming errors or other defects in
the Company Proprietary Assets.
(f) The Company Proprietary Assets constitute all the Proprietary Assets
necessary to enable the Companies to conduct their business in the manner in
which such business has been and is being conducted. None of the Companies has
licensed any of the Company Proprietary Assets to any Person on an exclusive
basis. None of the Companies has entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its Proprietary Assets or
to transact business in any market or geographical area or with any Person.
(g) Except as set forth in Part 2.12 of the Disclosure Schedule: (i) all
current and former employees of the Companies have executed and delivered to the
Companies an agreement (containing no exceptions to or exclusions from the scope
of its coverage except for prior inventions that do not conflict with the
operations of the Companies' businesses or the use of the Companies' assets)
that is substantially identical to the standard form of employment agreement
previously delivered to the Purchaser, and (ii) all current and former
consultants and independent contractors of the Companies (excluding bankers,
accountants, lawyers and other non-technical consultants and independent
contractors) have executed and delivered to the Companies an agreement
(containing no exceptions to or exclusions from the scope of its coverage as it
relates to the specific project for which the consultant or independent
contractor was hired) that is substantially identical to such form of employment
agreement previously delivered to the Purchaser.
2.13 Contracts.
(a) Part 2.13 of the Disclosure Schedule identifies and provides an
accurate and complete description of each SFG Contract, except for any Excluded
Contract. SFG has delivered to the Purchaser accurate and complete copies of all
SFG Contracts identified in Part 2.13 of the Disclosure Schedule, including all
amendments thereto.
(b) Each SFG Contract is valid and in full force and effect, and is
enforceable by SFG or a Subsidiary, as the case may be, in accordance with its
terms. No SFG Contract contains any term or provision that is extraordinary or
that is otherwise not customarily found in Contracts entered into by Comparable
Entities.
(c) Except as set forth in Part 2.13 of the Disclosure Schedule:
(i) no Person has violated or breached, or declared or committed any
default under, any SFG Contract;
(ii) no event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time) (A) result in a violation
or breach of any of the provisions of any SFG Contract, (B) give any Person the
right to declare a default or exercise any remedy under any SFG Contract, (C)
give any Person the right to accelerate the maturity or performance of any SFG
Contract, or (D) give any Person the right to cancel, terminate or modify any
SFG Contract;
(iii) none of the Companies has received any notice or other
communication (in writing or otherwise) regarding any actual, alleged, possible
or potential violation or breach of, or default under, any SFG Contract; and
(iv) no Company has waived any of its rights under any SFG Contract.
(d) To the Knowledge of SFG, each Person against which any Company has or
may acquire any rights under any SFG Contract is solvent and is able to satisfy
all of such Person's current and future monetary obligations and other
obligations and Liabilities to the Companies.
(e) Except as set forth in Part 2.13 of the Disclosure Schedule:
(i) none of the Companies has ever guaranteed or otherwise agreed to
cause, insure or become liable for, and none of the Companies has ever pledged
any of its assets to secure, the performance or payment of any obligation or
other Liability of any other Person other than, as described on Part 2.13 of the
Disclosure Schedule, Liabilities of one or more of the Companies;
(ii) none of the Companies has ever been a party to or bound by (A) any
joint venture agreement, partnership agreement, profit-sharing agreement,
cost-sharing agreement, loss-sharing agreement or similar Contract, or (B) any
Contract that creates or grants to any Person, or provides for the creation or
grant of, any stock appreciation right, phantom stock right or similar right or
interest;
(iii) the Companies have not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation relating
directly or indirectly to any Government Contract or Government Bid;
(iv) the Companies have complied with all Legal Requirements with
respect to all Government Contracts and Government Bids;
(v) the Companies have not, in obtaining or performing any Government
Contract, violated any applicable procurement law or regulation or other Legal
Requirement in Canada or the United States or elsewhere, including without
limitation (A) the Truth in Negotiations Act of 1962, as amended, (B) the
Service Contract Act of 1963, as amended, (C) the Contract Disputes Act of 1978,
as amended, (D) the Office of Federal Procurement Policy Act, as amended, (E)
the Federal Acquisition Regulations (the "FAR") or any applicable agency
supplement thereto, (F) the Cost Accounting Standards, (G) the Defense
Industrial Security Manual (DOD 5220.22-M), or (H) the Defense Industrial
Security Regulation (DOD 5220.22-R) or any related security regulations;
(vi) all facts set forth in or acknowledged by the Companies in any
certification, representation or disclosure statement submitted by the Companies
with respect to any Government Contract or Government Bid were current, accurate
and complete as of the date of submission;
(vii) neither the Companies nor any of their employees has been
debarred or suspended from doing business with any Governmental Body and no
circumstances exist that would warrant the institution of debarment or
suspension proceedings against the Companies or any of their respective
employees;
(viii) no negative determinations of responsibility have been issued
against the Companies in connection with any Government Contract or Government
Bid;
(ix) no direct or indirect costs incurred by the Companies have been
questioned or disallowed as a result of a finding or determination of any kind
by any Governmental Body;
(x) no Governmental Body, and no prime contractor or higher-tier
subcontractor of any Governmental Body, has withheld or set off, or threatened
to withhold or set off, any amount due to the Companies under any Government
Contract other than routine retentions that are not in dispute;
(xi) there are not and have not been any irregularities, misstatements
or omissions relating to any Government Contract or Government Bid that have led
to or could reasonably be expected to lead to (A) any administrative, civil,
criminal or other investigation, legal proceeding or indictment involving the
Companies or any of their respective employees, (B) the questioning or
disallowance of any costs submitted for payment by the Companies, (C) the
recoupment of any payments previously made to the Companies, (D) a finding or
claim of fraud, defective pricing or improper payments on the part of the
Companies, or (E) the assessment of any penalties or damages of any kind against
the Companies;
(xii) there is not and has not been any (A) outstanding claim against
the Companies by, or dispute involving the Companies with, any prime contractor,
subcontractor, vendor or other person arising under or relating to the award or
performance of any Government Contract, (B) fact known by the Companies upon
which any such claim could reasonably be expected to be based or which may give
rise to any such dispute, or (C) final decision of any Governmental Body against
the Companies;
(xiii) the Companies are not undergoing and have not undergone any
audit, and there is no basis for any impending audit, arising under or relating
to any Government Contract (other than normal routine audits conducted in the
ordinary course of business);
(xiv) the Companies have not entered into any financing arrangement or
assignment of proceeds with respect to the performance of any Government
Contract;
(xv) no payment has been made by the Companies or by any person acting
on the Companies' behalf to any person (other than to any bona fide employee or
agent (as defined in subpart 3.4 of the FAR) of the Companies) which is or was
contingent upon the award of any Government Contract or which would otherwise be
in violation of any applicable procurement law or regulation or any other Legal
Requirement;
(xvi) each Company's cost accounting system is in compliance with
applicable regulations and other applicable Legal Requirements, and has not been
determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xvii) the Companies have complied with all applicable regulations and
other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other proprietary assets;
(xviii) in each case in which the Companies have delivered or otherwise
provided any technical data, computer software or Proprietary Assets of the
Companies to any Governmental Body in connection with any Government Contract,
the Companies have marked such technical data, computer software or Proprietary
Assets of the Companies with all markings and legends (including any "restricted
rights" legend and any "government purpose license rights" legend) necessary
(under the FAR or other applicable Legal Requirements) to ensure that no
Governmental Body or other person or entity is able to acquire any unlimited
rights with respect to such technical data, computer software or Proprietary
Assets of the Companies;
(xix) the Companies have not made any disclosure to any Governmental
Body pursuant to any voluntary disclosure agreement;
(xx) the Companies have reached agreement with the cognizant government
representatives approving and "closing" all indirect costs charged to Government
Contracts for all years from inception, and those years are closed;
(xxi) the responsible government representatives have agreed with the
Companies as to the "forward pricing rates" that the Companies are charging on
cost-type Government Contracts and including in Government Bids;
(xxii) the Companies are not and will not be required to make any
filing with or give any notice to, or to obtain any consent from, any
Governmental Body under or in connection with any Government Contract or
Government Bid as a result of or by virtue of the execution, delivery of
performance of this Agreement or any of the other agreements referred to in this
Agreement; and
(xxiii) Neither the Companies, nor any director, officer, agent,
employee or other person acting on behalf of the Companies has used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds. Neither the Companies, nor any director, officer, agent,
employee or other person acting on behalf of the Companies has accepted or
received any unlawful contributions, payments, gifts or expenditures.
(f) The performance of the SFG Contracts will not result in any violation
of or failure to comply with any Legal Requirement.
(g) Except as set forth in Part 2.13 of the Disclosure Schedule, no Person
is renegotiating, or has the express right to renegotiate, any amount paid or
payable to SFG under any SFG Contract or any other term or provision of any SFG
Contract.
(h) The Contracts identified in Part 2.13 of the Disclosure Schedule and
the Excluded Contracts collectively constitute all of the Contracts necessary to
enable each Company to conduct its business in the manner in which its business
is currently being conducted and in the manner in which its business is proposed
to be conducted.
(i) Part 2.13 of the Disclosure Schedule identifies and provides an
accurate and complete description of each proposed Contract as to which any bid,
offer, award, written proposal, term sheet or similar document has been
submitted or received by any Company since inception.
(j) Part 2.13 of the Disclosure Schedule provides an accurate description
and breakdown of the Companies' backlog as of November 30, 1999 under the SFG
Contracts.
2.14 Security Matters. Each Company is in compliance with all security and
related requirements on its Government Contracts.
2.15 Liabilities; Major Suppliers.
(a) No Company has any Liabilities, except for:
(i) liabilities identified as such in the "liabilities" column of the
Unaudited Interim Balance Sheet;
(ii) accounts payable (of the type required to be reflected as current
liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred in the Ordinary Course of Business since November
30, 1999; and
(iii) obligations under the Contracts listed in Part 2.13 of the
Disclosure Schedule and under Excluded Contracts, to the extent that the
existence of such obligations is ascertainable solely by reference to such
Contracts.
(b) Part 2.15 of the Disclosure Schedule:
(i) provides an accurate and complete breakdown and aging of each
Company's accounts payable as of November 30, 1999;
(ii) provides an accurate and complete breakdown of all customer
deposits and other deposits held by each Company as of the date of this
Agreement; and
(iii) provides an accurate and complete breakdown of each Company's
long-term debt and Preferred Stock as of the date of this Agreement.
(c) Part 2.15 of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the amounts paid to, each
supplier or other Person that received (i) more than $100,000 from the Companies
in 1997, (ii) more than $100,000 from the Companies in 1998, or (iii) more than
$100,000 from the Companies in the first three quarters of 1999.
2.16 Compliance With Legal Requirements.
(a) Except as set forth in Part 2.16 of the Disclosure Schedule:
(i) each of the Companies has at all times been in full compliance with
each Legal Requirement that is or was applicable to it or to the conduct of its
business or the ownership or use of any of its assets;
(ii) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a violation by any Company of, or a failure on the
part of any Company to comply with, any Legal Requirement; and
(iii) none of the Companies has received, at any time, any notice or
other communication (in writing or otherwise) from any Governmental Body or any
other Person regarding (i) any actual, alleged, possible or potential violation
of, or failure to comply with, any Legal Requirement, or (ii) any actual,
alleged, possible or potential obligation on the part of any of the Companies to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature.
(b) No Governmental Body has proposed, to the Knowledge of SFG, any Legal
Requirement that, if adopted or otherwise put into effect, (i) may reasonably be
expected to have a material adverse effect on the Companies' business,
condition, assets, liabilities, operations, financial performance, net income or
prospects or on the ability of any Company or any of the Selling Securityholders
to comply with or perform any covenant or obligation under any of the
Transactional Agreements, or (ii) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions.
2.17 Governmental Authorizations.
(a) Part 2.17 of the Disclosure Schedule identifies:
(i) each Governmental Authorization that is held by each Company; and
(ii) each other Governmental Authorization that is held by each
Company's employees and relates to or is useful in connection with the
Companies' business.
SFG has delivered to the Purchaser accurate and complete copies of all of
the Companies' Governmental Authorizations identified in Part 2.17 of the
Disclosure Schedule, including all renewals thereof and all amendments thereto.
Each Governmental Authorization identified or required to be identified in Part
2.17 of the Disclosure Schedule is valid and in full force and effect.
(b) Except as set forth in Part 2.17 of the Disclosure Schedule:
(i) the Companies and their respective employees are and have at all
times been in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 2.17
of the Disclosure Schedule;
(ii) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization identified or required to be
identified in Part 2.17 of the Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Authorization identified or required to be
identified in Part 2.17 of the Disclosure Schedule;
(iii) none of the Companies has ever received, and no employee of any
of the Companies has ever received, any notice or other communication (in
writing or otherwise) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations required to be identified in Part 2.17 of the
Disclosure Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and each other notice or filing required to have been given
or made with respect to such Governmental Authorizations has been duly given or
made on a timely basis with the appropriate Governmental Body.
(c) The Governmental Authorizations identified in Part 2.17 of the
Disclosure Schedule constitute all of the Governmental Authorizations necessary
(i) to enable each Company to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
proposed to be conducted, and (ii) to permit each Company to own and use its
assets in the manner in which they are currently owned and used and in the
manner in which they are proposed to be owned and used.
2.18 Tax Matters.
(a) Except as described on Part 2.18 of the Disclosure Schedules, each Tax
required to have been paid, or claimed by any Governmental Body to be payable,
by any of the Companies (whether pursuant to any Tax Return or otherwise) has
been duly paid in full on a timely basis. Except as described on Part 2.18 of
the Disclosure Schedules, any Tax required to have been withheld or collected by
any of the Companies has been duly withheld or collected; and (to the extent
required) each such Tax has been paid to the appropriate Governmental Body.
Except as described on Part 2.18 of the Disclosure Schedules, each Company has
withheld from each amount paid or credited to any Person the amount of Taxes
required to be withheld therefrom and has remitted such Taxes to the proper Tax
or other Governmental Body within the time required under all applicable Legal
Requirements.
(b) Part 2.18 of the Disclosure Schedule accurately identifies all Tax
Returns required to be filed by or on behalf of any of the Companies with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date ("SFG Returns"). Except as described on Part 2.18 of the Disclosure
Schedules, all SFG Returns (i) have been or will be filed when due, and (ii)
have been, or will be when filed, accurately and completely prepared in full
compliance with all applicable Legal Requirements. Except as described on Part
2.18 of the Disclosure Schedules, all amounts shown on the SFG Returns to be due
on or before the Closing Date, and all amounts otherwise payable in connection
with the SFG Returns on or before the Closing Date, have been or will be paid on
or before the Closing Date. SFG has delivered to the Purchaser accurate and
complete copies of all SFG income tax returns filed since December 31, 1995,
with the exception of those described on Part 2.18 of the Disclosure Schedules.
(c) The SFG Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP. SFG will establish, in the Ordinary Course of Business,
reserves adequate for the payment of all Taxes for the period from September 30,
1995 through the Closing Date, and SFG will disclose the dollar amount of such
reserves to the Purchaser on or prior to the Closing Date.
(d) Except as described in Part 2.18 of the Disclosure Schedule, each SFG
Return relating to income Taxes that has been filed with respect to any period
ended on or prior to December 31, 1995 has either (i) been examined and audited
by all relevant Governmental Bodies, or (ii) by virtue of the expiration of the
limitation period under applicable Legal Requirements, is no longer subject to
examination or audit by any Governmental Body. Part 2.18 of the Disclosure
Schedule accurately identifies each examination or audit of any SFG Return that
has been conducted since December 31, 1986. SFG has delivered to the Purchaser
accurate and complete copies of all audit reports and similar documents (to
which SFG has access) relating to SFG Returns. Except as set forth in Part 2.18
of the Disclosure Schedule, there are no agreements, waivers or other
arrangements providing for any extension of time with respect to the filing of
any Tax Return or other document or the payment of any Taxes by the Companies or
the period for any assessment or reassessment of Taxes. No Company has received
any written ruling related to Taxes or entered into any agreement with a
Governmental Body relating to Taxes.
(e) Except as set forth in Part 2.18 of the Disclosure Schedule, no claim
or other Proceeding is pending or has been threatened against or with respect to
any of the Companies in respect of any Tax. There are no unsatisfied Liabilities
for Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by any of the Companies. None of the Companies has
entered into or has become bound by any agreement or consent pursuant to Section
341(f) of the Code. None of the Companies has been, and SFG will not be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(f) Except as described in Part 2.18 of the Disclosure Schedules, there is
no agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of any of
the Companies that, individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code that would otherwise be actually
deductible on a United States federal tax return or pursuant to the Income Tax
Act (Canada). None of the Companies is or has ever been a party to or bound by
any tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
(g) Except as described on Part 2.18 of the Disclosure Schedules, the
liability for Taxes under the Income Tax Act (Canada) of SFG has been assessed
by Revenue Canada for all taxation years up to and including the taxation years
ending December 31, 1998. The assessment of liability for Taxes under the Income
Tax Act (Canada) is pending in those tax years disclosed in Part 2.18 of the
Disclosure Schedules. True and complete copies of the federal and provincial Tax
Returns for SFG and copies of all assessments and reassessments for all taxation
years including relating to the most recently completed taxation year for which
the same are available have been provided to the Purchaser.
(h) SFG is a Canadian-controlled private corporation, as defined in the
Income Tax Act, (Canada), and has been one since formation on amalgamation on
November 2, 1994.
(i) No debt or other obligation of any Company has been or will be settled
or extinguished on or prior to the Closing Date such that the provisions of
Section 80 of the Income Tax Act (Canada) applies or would apply thereto.
(j) No Company is involved in, subject to, or a party to any joint venture,
partnership, Contract or other arrangement that is treated as a partnership for
federal, state, local or foreign Income Tax purposes.
(k) No Company was included and no Company is includible in the Tax Return
of any relevant group with any corporation other than such a return of which the
Company is the common parent corporation.
(l) All material elections made by SFG with respect to Canadian income
Taxes affecting the Company are set forth in Part 2.18 of the Disclosure
Schedule.
(m) SFG is not nor has it ever been a United States real property holding
corporation within the meaning of Section 897(c)(1)(A)(ii) of the Code.
2.19 Employee and Labor Matters.
(a) Part 2.19 of the Disclosure Schedule accurately sets forth, with
respect to each employee of each Company (including any employee who is on a
leave of absence or on layoff status):
(i) the name of such employee and the date as of which such employee
was originally hired by such Company;
(ii) such employee's title, and a description of such employee's duties
and responsibilities;
(iii) the aggregate dollar amount of the compensation (including wages,
salary, commissions, director's fees, fringe benefits, bonuses, profit-sharing
payments and other payments or benefits of any type) received by such employee
from such Company with respect to services performed in 1998;
(iv) such employee's annualized compensation as of the date of this
Agreement;
(v) each Current Benefit Plan in which such employee participates or is
eligible to participate; and
(vi) any Governmental Authorization that is held by such employee and
that relates to or is useful in connection with SFG's business.
(b) Part 2.19 of the Disclosure Schedule accurately identifies each former
employee of any of the Companies who is receiving or is scheduled to receive (or
whose spouse or other dependent is receiving or is scheduled to receive) any
benefits (whether from SFG or otherwise) relating to such former employee's
employment with any of the Companies; and Part 2.19 of the Disclosure Schedule
accurately describes such benefits.
(c) Except as set forth in Part 2.19 of the Disclosure Schedule, none of
the Companies is or has ever been a party to or bound by any employment
agreement or any union contract, collective bargaining agreement or similar
Contract.
(d) With respect to any employees employed in Canada, except as disclosed
on Part 2.19 of the Disclosure Schedule, no Company is a party to any written
employment agreement and there is no agreement which cannot be terminated on
reasonable notice in accordance with applicable laws and without penalty. With
respect to any employees employed in the United States, the employment of each
such employee is terminable at will.
(e) SFG has delivered to the Purchaser accurate and complete copies of all
employee manuals and handbooks, disclosure materials, policy statements and
other materials relating to the employment of the current and former employees
of each of the Companies. Except as set forth in Part 2.19 of the Disclosure
Schedule:
(i) SFG is not aware that any employee of any Company intends to
terminate his employment with SFG;
(ii) SFG is not aware that any employee of any Company has received an
offer to join a business that may be competitive with SFG's business; and
(iii) SFG is not aware that any employee of any Company is a party to
or is bound by any confidentiality agreement, noncompetition agreement or other
Contract (with any Person) that may have an adverse effect on (A) the
performance by such employee of any of his duties or responsibilities as an
employee of such Company, or (B) SFG's business or operations.
(f) None of the Companies is or has ever been engaged in any unfair labor
practice of any nature. There has never been any slowdown, work stoppage, labor
dispute or union organizing, certifying or establishing activity, or any similar
activity or dispute, affecting any of the Companies or any of their employees.
To the Knowledge of SFG, there is not now pending, and no Person has threatened
to commence, any such slowdown, work stoppage, labor dispute or union
organizing, certifying or establishing activity or any similar activity or
dispute. To the Knowledge of SFG, no event has occurred, and no condition or
circumstance exists, that might directly or indirectly give rise to or provide a
basis for the commencement of any such slowdown, work stoppage, labor dispute or
union organizing, certifying or establishing activity or any similar activity or
dispute.
(g) Each Company has complied with all Legal Requirements applicable to it
relating to employment, including without limitation, those relating to wages,
hours, collective bargaining, payment of social security and other similar
taxes, equal employment opportunity, employment discrimination, occupational
health and safety, workers' hazardous materials, employment standards, pay
equity and workers' compensation. There are no outstanding charges, complaints
or claims against any Company relating to unfair labor practices or
discrimination or under any legislation relating to employees. Each Company has
paid in full all amounts owing under applicable workers' compensation
legislation, and the workers' compensation claims experience of the Companies
would not permit a penalty reassessment under such legislation. There are no
charges or orders requiring the Companies to comply outstanding under any Legal
Requirements relating to occupational health and safety.
(h) Except under the Options, the completion of the transactions
contemplated by this Agreement will not result in any payment or increased
payment becoming due from SFG to any officer, director, or employee of, or
consultant to, SFG.
2.20 United States Benefit Plans; ERISA.
(a) Part 2.20 of the Disclosure Schedule identifies and provides an
accurate and complete description of each Current Benefit Plan relating to the
U.S. operations of the Companies and each Past Benefit Plan relating to the U.S.
operations of the Companies. None of the Companies has ever established,
adopted, maintained, sponsored, contributed to, participated in or incurred any
Liability with respect to any Employee Benefit Plan, except for the Company
Plans identified in Part 2.20 of the Disclosure Schedule; and none of the
Companies has ever provided or made available any fringe benefit or other
benefit of any nature to any of its employees working in the U.S., except as set
forth in Part 2.20 of the Disclosure Schedule.
(b) No Company Plan:
(i) provides or provided any benefit guaranteed by the Pension Benefit
Guaranty Corporation;
(ii) is or was a "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA; or
(iii) is or was subject to the minimum funding standards of Section 412
of the Code or Section 302 of ERISA.
There is no Person that (by reason of common control or otherwise) is or
has at any time been treated together with any Company as a single employer
within the meaning of Section 414 of the Code.
(c) SFG has delivered to the Purchaser, with respect to each Company Plan:
(i) an accurate and complete copy of such Company Plan and all
amendments thereto (including any amendment that is scheduled to take effect in
the future);
(ii) an accurate and complete copy of each Contract (including any
trust agreement, funding agreement, service provider agreement, insurance
agreement, investment management agreement or recordkeeping agreement) relating
to such Company Plan;
(iii) an accurate and complete copy of any description, summary,
notification, report or other document that has been furnished by the Companies
to any employee of any of the Companies with respect to such Company Plan;
(iv) an accurate and complete copy of any form, report, registration
statement or other document that has been filed with or submitted to any
Governmental Body with respect to such Company Plan; and
(v) an accurate and complete copy of any determination letter, notice
or other document that has been issued by, or that has been received by any of
the Companies from, any Governmental Body with respect to such Company Plan.
(d) Each Current Benefit Plan relating to the U.S. operations of the
Companies is being operated and administered in material compliance with the
provisions thereof, and each Company Plan has at all times been operated and
administered in material compliance with the provisions thereof. Each
contribution or other payment that is required to have been accrued or made
under or with respect to any Company Plan has been duly accrued or made, as
applicable, on a timely basis.
(e) Each Current Benefit Plan complies and is being operated and
administered in material compliance with, and each Company Plan has at all times
complied and been operated and administered in full compliance with, all
applicable reporting, disclosure and other requirements of ERISA and the Code
and all other applicable Legal Requirements. None of the Companies has ever
incurred any Liability to the Internal Revenue Service or any other Governmental
Body with respect to any Company Plan; and, to the Knowledge of SFG, no event
has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) give rise directly or indirectly to any such
Liability. None of the Companies, and no Person that is or was an administrator
or fiduciary of any Company Plan (or that acts or has acted as an agent of any
of the Companies or any such administrator or fiduciary), has engaged in any
transaction or has otherwise acted or failed to act in a manner that has
subjected or may subject SFG to any Liability for breach of any fiduciary duty
or any other duty. No Company Plan, and no Person that is or was an
administrator or fiduciary of any Company Plan (or that acts or has acted as an
agent of any such administrator or fiduciary):
(i) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code;
(ii) has failed to substantially comply with the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA; or
(iii) to the Knowledge of SFG, has taken any action that (A) may
subject such Company Plan or such Person to any Tax, penalty or Liability
relating to any "prohibited transaction," or (B) may directly or indirectly give
rise to or serve as a basis for the assertion (by any employee or by any other
Person) of any claim under, on behalf of or with respect to such Company Plan.
(f) No inaccurate or misleading representation, statement or other
communication has been made or directed (in writing or otherwise) to any current
or former employee of any of the Companies (i) with respect to such employee's
participation, eligibility for benefits, vesting, benefit accrual or coverage
under any Company Plan or with respect to any other matter relating to any
Company Plan, or (ii) with respect to any proposal or intention on the part of
any of the Companies to establish or sponsor any Employee Benefit Plan or to
provide or make available any fringe benefit or other benefit of any nature.
(g) Except as set forth in Part 2.20 of the Disclosure Schedule, SFG has
not advised any of its employees (in writing or otherwise) that it intends or
expects to establish or sponsor any Employee Benefit Plan relating to the U.S.
operations of the Companies or to provide or make available any fringe benefit
or other benefit of any nature in the future.
2.21 Canadian Benefit Plans.
(a) Part 2.21 of the Disclosure Schedule lists all of SFG's bonus,
incentive compensation, profit sharing, group insurance, dental insurance,
disability, death benefit, health and welfare, hospitalization, vacation,
vacation pay, unemployment, pension, retirement and other employee benefit,
plans, agreements, policies, practices and other similar arrangements currently
applicable to the current and/or past Canadian employees, officers, agents
and/or independent contractors (the "Canadian Benefit Plans").
(b) SFG has delivered to the Purchaser true and complete copies of the
written texts of the Canadian Benefit Plans and of the funding agreements
therefor and any amendments to such documents. SFG has not made, or acquiesced
in the making of, any amendments to such documents other than those which SFG
has delivered to the Purchaser. SFG has performed all its obligations (including
fiduciary, funding, investment and administration obligations) required to be
performed in connection with the Canadian Benefit Plans or the funding
agreements therefor in a timely fashion and in accordance with the terms of the
Canadian Benefit Plans and applicable Legal Requirements. There are no
outstanding disputes concerning the assets held in respect of the Canadian
Benefit Plans pursuant to any such funding agreement. Where required, the
Canadian Benefit Plans are duly registered under the Income Tax Act (Canada) and
applicable pension legislation. All reports and disclosures relating to the
Canadian Benefit Plans required under this Agreement or by any applicable Legal
Requirements to be filed or distributed on or before the execution of this
Agreement have been filed or distributed. All such reports and disclosures
required by this Agreement or by any applicable Legal Requirements to be filed
or distributed on or before the Closing Date shall be filed or distributed. No
promises of benefit improvements under the Canadian Benefit Plans have been made
except as may be required, or are reasonably anticipated to be required, by any
Legal Requirement or collective agreement.
(c) All contributions or premiums required to be made by SFG to the
Canadian Benefit Plans have been made in a timely fashion in accordance with the
terms of the Canadian Benefit Plans and applicable Legal Requirements. All
employee contributions to the Canadian Benefit Plans required to be made by way
of authorized payroll deduction have been properly withheld by SFG and fully
paid into the Canadian Benefit Plans. There have been no improper withdrawals,
or applications of, the assets of the Canadian Benefit Plans. There are no taxes
owing in respect of the Canadian Benefit Plans.
(d) In respect of any registered pension plans in Canada (the "Canadian
Registered Pension Plans"):
(i) SFG has delivered to Purchaser all historical documentation
respecting the Canadian Registered Pension Plans, including copies of all prior
funding agreements;
(ii) each of the Canadian Registered Pension Plans is fully funded both
on an ongoing basis and on a solvency basis;
(iii) all employee data respecting each Canadian Registered Pension
Plan is correct;
(iv) none of the Canadian Registered Pension Plans is the subject of
any investigation, any other proceeding, action or claim and there exists no
state of facts which after notice or lapse of time or both could reasonably be
expected to give rise to any such proceeding, action or claim or to affect the
registration of any of the Canadian Registered Pension Plans; and,
(e) the most recent actuarial report required to be prepared in respect of
each of the Canadian Registered Pension Plans pursuant to the applicable Legal
Requirements has been delivered to the Purchaser and there have been no adverse
changes to any Canadian Registered Pension Plan since the date of such report.
2.22 Environmental Matters.
(a) To the Knowledge of SFG, (i) the Companies, the operation of their
respective businesses, the property and assets owned or used by them at any
time, and the use, maintenance and operation thereof have been and are in
compliance with all Environmental Laws; and (ii) the Companies have complied
with all reporting and monitoring requirements under all Environmental Laws.
Without limiting the generality of the foregoing, no Company is liable or
potentially liable for any response cost or natural resource damages under
Section 107(a) of CERCLA, or under any other so-called "superfund" or
"superlien" law or similar Legal Requirement, at or with respect to any site.
(b) None of the Companies has ever received any notice or other
communication (in writing or otherwise) from any Governmental Body or other
Person regarding any actual, alleged, possible or potential Liability arising
from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, discharge, release, emission or disposal of any Hazardous Material,
and, to the Knowledge of SFG, no Person has ever commenced or threatened to
commence any contribution action or other Proceeding against any of the
Companies in connection with any such actual, alleged, possible or potential
Liability; and no event has occurred, and no condition or circumstance exists,
that may directly or indirectly give rise to, or result in any Company becoming
subject to, any such Liability.
(c) To the Knowledge of SFG, none of the Companies has ever generated,
manufactured, produced, transported, imported, used, treated, refined,
processed, handled, stored, discharged, released or disposed of any Hazardous
Material (whether lawfully or unlawfully). To the Knowledge of SFG, none of the
Companies has ever permitted any Hazardous Material to be generated,
manufactured, produced, used, treated, refined, processed, handled, stored,
discharged, released or disposed of (whether lawfully or unlawfully):
(i) on or beneath the surface of any real property that is, or that has
at any time been, owned by, leased to, controlled by or used by any of the
Companies;
(ii) in or into any surface water, groundwater, soil or air associated
with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon, impoundment, ditch,
landfill, building, structure, facility, improvement, installation, equipment,
pipe, pipeline, vehicle or storage container that is or was located on or
beneath the surface of any such real property or that is or has at any time been
owned by, leased to, controlled by or used by any of the Companies.
(d) To the Knowledge of SFG, all property that is owned by, leased to,
controlled by or used by any Company, and all surface water, groundwater, soil
and air associated with or adjacent to such property:
(i) is in clean and healthful condition;
(ii) is free of any Hazardous Material and any harmful chemical or
physical conditions; and
(iii) is free of any environmental contamination of any nature.
(e) To the Knowledge of SFG, (i) there are no underground or surface
storage tanks or urea formaldehyde foam insulation, asbestos, polychlorinated
biphenyls or radioactive substances located on or in any of the properties used
by the Companies; (ii) the Companies are not, and there is no basis upon which
the Companies could become, responsible for any clean-up or corrective action
under any Environmental Laws; and (iii) no Company has ever conducted or caused
to be conducted an environmental assessment or study of any of its properties or
assets.
(f) To the Knowledge of SFG, each Company has obtained all Environmental
Permits necessary to conduct its business and to own, use and operate its
properties and assets. Complete and correct copies of such Environmental Permits
have been provided to Purchaser.
2.23 Sale of Products; Performance of Services.
(a) No Company has given any guarantee or warranty in respect of any of the
products sold or services provided by it, except warranties made in the Ordinary
Course of Business and in the form of such Company's standard written
warranties, copies of which have been provided to Purchaser.
(b) Except as disclosed on Part 2.23 of the Disclosure Schedule, each
product that has been sold by any of the Companies to any Person:
(i) conformed and complied in all respects with the terms and requirements
of any applicable warranty or other Contract and, to the Knowledge of SFG, with
all applicable Legal Requirements; and
(ii) was free of any design defects, programming errors, construction
defects or other defects or deficiencies at the time of sale. All repair
services, technical, maintenance and other services that have been performed by
the Companies were performed properly and in full conformity with the terms and
requirements of all applicable warranties and other Contracts and with all
applicable Legal Requirements.
(c) No Company will incur or otherwise become subject to any Liability
arising directly or indirectly from any product manufactured or sold by, or any
repair services or other services performed by, any of the Companies on or at
any time prior to the Closing Date.
(d) No product manufactured or sold by any of the Companies has been the
subject of any recall or other similar action; and no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any such
recall or other similar action relating to any such product.
(e) Except as set forth in Part 2.23 of the Disclosure Schedule, no
customer or other Person has ever asserted or threatened to assert any claim
against any of the Companies (i) under or based upon any warranty provided by or
on behalf of any of the Companies, or (ii) under or based upon any other
warranty relating to any product sold by any of the Companies or any services
performed by any of the Companies. No event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for the assertion of any
such claim.
(f) Each of the Companies has at all times had in place, an adequate and
appropriate quality control system that is at least as comprehensive and
effective as the quality control systems customarily maintained by Comparable
Entities.
2.24 Insurance.
(a) Part 2.24 of the Disclosure Schedule accurately sets forth, with
respect to each insurance policy maintained by or at the expense of, or for the
direct or indirect benefit of, each Company:
(i) the name of the insurance carrier that issued such policy and the
policy number of such policy;
(ii) whether such policy is a "claims made" or an "occurrences" policy;
(iii) a description of the coverage provided by such policy and the
material terms and provisions of such policy (including all applicable coverage
limits, deductible amounts and co-insurance arrangements and any non-customary
exclusions from coverage);
(iv) the annual premium payable with respect to such policy, and the
cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims that have been
asserted in the past, with respect to such policy.
Part 2.24 also identifies (1) each pending application for insurance that
has been submitted by or on behalf of each Company, and (2) each self-insurance
or risk-sharing arrangement affecting each Company or any of its assets. SFG has
delivered to the Purchaser accurate and complete copies of all of the insurance
policies identified in Part 2.24 of the Disclosure Schedule (including all
renewals thereof and endorsements thereto) and all of the pending applications
identified in Part 2.24 of the Disclosure Schedule.
(b) Each of the policies identified in Part 2.24 of the Disclosure Schedule
is valid, enforceable and in full force and effect, and has been issued by an
insurance carrier that is solvent, financially sound and reputable. All of the
information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete, and all premiums and other amounts owing with respect to said policies
have been paid in full on a timely basis. The nature, scope and dollar amounts
of the insurance coverage provided by said policies are sufficient to adequately
insure each Company's business, assets, operations, key employees, services and
potential liabilities; and said insurance coverage is at least as comprehensive
as the insurance coverage customarily maintained by Comparable Entities.
(c) Except as set forth in Part 2.24 of the Disclosure Schedule, there is
no pending claim under or based upon any of the policies identified in Part 2.24
of the Disclosure Schedule; and no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.
(d) Except as set forth in Part 2.24 of the Disclosure Schedule, none of
the Companies has received:
(i) any notice or other communication (in writing or otherwise)
regarding the actual or possible cancellation or invalidation of any of the
policies identified in Part 2.24 of the Disclosure Schedule or regarding any
actual or possible adjustment in the amount of the premiums payable with respect
to any of said policies;
(ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under, or any actual or
possible rejection of any claim under, any of the policies identified in Part
2.24 of the Disclosure Schedule; or
(iii) any indication that the issuer of any of the policies identified
in Part 2.24 of the Disclosure Schedule may be unwilling or unable to perform
any of its obligations thereunder.
2.25 Related Party Transactions. Except as set forth in Part 2.25 of the
Disclosure Schedule:
(a) no Related Party has, and no Related Party has at any time since
December 31, 1995 had, any direct or indirect interest of any nature in any
asset used in or otherwise relating to the business of any of the Companies;
(b) no Related Party is, or has at any time since December 31, 1995 been,
indebted to any of the Companies, nor are any of the Companies indebted to any
Related Party;
(c) since December 31, 1995, no Related Party has entered into, or has had
any direct or indirect financial interest in, any Contract, transaction or
business dealing of any nature involving any of the Companies;
(d) to the Knowledge of SFG, no Related Party is competing, or has at any
time since December 31, 1995 competed, directly or indirectly, with any of the
Companies in any market served by any of the Companies;
(e) no Related Party has any claim or right against any Company; and
(f) no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) directly or indirectly give rise
to or serve as a basis for any claim or right in favor of any Related Party
against any Company.
2.26 Certain Payments, Etc. None of the Companies, and no officer,
employee, agent or other Person associated with or acting for or on behalf of
any of the Companies, has at any time, directly or indirectly, used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made any unlawful political
contribution or gift or for any other unlawful purpose relating to any political
activity, made any unlawful payment to any governmental official or employee or
to any political party or campaign from corporate funds, violated any provision
of the corruption of Foreign Public Officers Act (Canada), the Foreign Corrupt
Practices Act of 1977, as amended, or the rules, regulations and guidelines
promulgated by the Organization for Economic Cooperation and Development's
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions, or made or proposed to make any bribe, rebate, payoff,
unlawful payment, kickback or other similar payment to any Person.
2.27 Proceedings; Orders.
(a) Except as set forth in Part 2.27 of the Disclosure Schedule, there is
no pending Proceeding, and no Person has threatened to commence any Proceeding:
(i) that involves any Company or that otherwise relates to or might
affect any Company's business or any of the assets owned or used by any Company
(whether or not such Company is named as a party thereto); or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Transactions.
Except as set forth in Part 2.27 of the Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) Except as set forth in Part 2.27 of the Disclosure Schedule, no
Proceeding has ever been commenced by or against any of the Companies; and no
Proceeding otherwise involving or relating to any of the Companies has been
pending or threatened at any time.
(c) SFG has delivered to the Purchaser accurate and complete copies of all
pleadings, correspondence and other written materials to which any Company has
access that relate to the Proceedings identified in Part 2.27 of the Disclosure
Schedule.
(d) There is no Order to which any Company, or any of the assets owned or
used by any Company, is subject; and none of the Selling Securityholders is
subject to any Order that relates to any Company's business or to any of the
assets owned or used by any Company.
(e) No officer or employee of any Company is subject to any Order that
prohibits such officer or employee from engaging in or continuing any conduct,
activity or practice relating to such Company's business.
(f) There is no proposed Order that, if issued or otherwise put into
effect, (i) may have an adverse effect on such Company's business, condition,
assets, liabilities, operations, financial performance, net income or prospects
(or on any aspect or portion thereof) or on the ability of any Company or any of
the Selling Securityholders to comply with or perform any covenant or obligation
under any of the Transactional Agreements, or (ii) may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
2.28 Authority; Binding Nature of Agreements. SFG has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
SFG of this Agreement have been duly authorized by all necessary action on the
part of SFG and its shareholders, board of directors and officers. This
Agreement constitutes the legal, valid and binding obligation of SFG,
enforceable against SFG in accordance with its terms (except as enforceability
may be limited by any applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or at law).
2.29 Non-Contravention; Consents. Except as set forth in Part 2.29 of the
Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of SFG's certificate of incorporation or bylaws, or (ii) any
resolution adopted by SFG's shareholders, SFG's board of directors or any
committee of SFG's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which any Company or any of the Selling Securityholders, or any of
the assets owned or used by any Company, is subject;
(c) cause any Company, the Purchaser or any affiliate of the Purchaser to
become subject to, or to become liable for the payment of, any Tax;
(d) cause any of the assets owned or used by any Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
(e) contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by any Company or any of its employees or that otherwise relates to any
Company's business or to any of the assets owned or used by any Company;
(f) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any SFG Contract;
(g) give any Person the right to (i) declare a default or exercise any
remedy under any SFG Contract, (ii) accelerate the maturity or performance of
any SFG Contract, or (iii) cancel, terminate or modify any SFG Contract;
(h) contravene, conflict with or result in a violation or breach of or a
default under any provision of, or give any Person the right to declare a
default under, any Contract to which any of the Selling Securityholders is a
party or by which any of the Selling Securityholders is bound; or
(i) result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by any Company.
Except as set forth in Part 2.29 of the Disclosure Schedule, neither any
Company nor any of the Selling Securityholders was, is or will be required to
make any filing with or give any notice to, or to obtain any Consent from, any
Person in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
2.30 Year 2000 Compliance. The Companies have taken commercially reasonable
actions necessary and appropriate to ensure that all of the Companies' products
and internal systems are designed to be used prior to, during and after the year
2000, and are Year 2000 Compliant. At the Purchaser's request, SFG will provide
evidence demonstrating adequate testing of the Companies' products and internal
systems to assure that they are Year 2000 Compliant.
2.31 Computer Systems.
(a) The Companies have taken commercially reasonable actions necessary and
appropriate to ensure that all computer systems used by the Companies and owned
or leased by the Companies, including hardware and software, are free from
Viruses and disabling codes and devices, and the Companies have taken, and will
continue to take, all commercially reasonable steps and implement all
commercially reasonable procedures to ensure that such systems are free from
viruses and disabling codes and devices and will remain so until the Closing
Date.
(b) The Companies have in place appropriate disaster recovery plans,
procedures and facilities and have taken all steps and implemented all
procedures to safeguard their computer systems and restrict unauthorized access
thereto.
(c) All the source codes for all proprietary software (other than
off-the-shelf applications software) used in and material to the Companies'
computer systems are subject to escrow arrangements that would enable the
Companies to have access to such source codes in the event of the applicable
licensor's insolvency or failure or refusal to maintain or provide support for
the software.
2.32 Brokers. SFG has not agreed or become obligated to pay, or has taken
any action that might result in any Person claiming to be entitled to receive,
any brokerage commission, finder's fee or similar commission or fee in
connection with any of the Transactions.
2.33 Full Disclosure.
(a) None of the Transactional Agreements contains or will contain any
untrue statement of fact; and none of the Transactional Agreements omits or will
omit to state any fact necessary to make any of the representations, warranties
or other statements or information contained therein not misleading.
(b) Except as set forth in Part 2.33 of the Disclosure Schedule, there is
no fact (other than publicly known facts relating exclusively to political or
economic matters of general applicability that will adversely affect all
Comparable Entities) that (i) may have an adverse effect on SFG's business,
condition, assets, liabilities, operations, financial performance, net income or
prospects (or on any aspect or portion thereof) or on the ability of SFG or any
of the Selling Securityholders to comply with or perform any covenant or
obligation under any of the Transactional Agreements, or (ii) may have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the Transactions.
(c) All of the information set forth in the Disclosure Schedule, and all
other information regarding the respective Companies and their business,
condition, assets, liabilities, operations, financial performance, net income
and prospects that has been furnished to the Purchaser or any of its
Representatives by or on behalf of SFG or any of SFG's Representatives, is
accurate and complete in all respects, and, in the case of those Disclosure
Schedules which are dated as being as of a date that is earlier than the date of
this Agreement (the "Dated Schedules"), the information set forth in each Dated
Schedule is accurate and complete in all respects as of the Closing Date other
than for matters arising in the Ordinary Course of Business since the date of
the applicable Dated Schedule.
(d) SFG will have provided the Purchaser and the Purchaser's
Representatives with full and complete access to all of each Company's records
and other documents and data.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDERS
Except as set forth in the Disclosure Schedules with respect to specific
sections of this Article 3, or as disclosed in another section of the Disclosure
Schedule, if it is reasonably apparent on the face of the Disclosure Schedule
that it is applicable to another section of this Article 3, as of the date of
this Agreement and as of the Closing, each of the Selling Securityholders
represents and warrants as to such Selling Securityholder only, severally and
not jointly, to and for the benefit of the Indemnitees, as follows:
3.1 Due Authorization; Etc.
(a) Such Selling Securityholder has the absolute and unrestricted right,
power and capacity to enter into and to perform such Selling Securityholder's
obligations under each of the Transactional Agreements to which such Selling
Securityholder is or may become a party. This Agreement constitutes the legal,
valid and binding obligation of such Selling Securityholder, enforceable against
such Selling Securityholder in accordance with its terms (except as
enforceability may be limited by any applicable bankruptcy, insolvency or other
laws affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at law).
Upon the execution of each of the other Transactional Agreements at the Closing,
each of such other Transactional Agreements will constitute the legal, valid and
binding obligation of such Selling Securityholder who is a party thereto, and
will be enforceable against such Selling Securityholder in accordance with its
terms (except as enforceability may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
equity or at law).
(b) Subject to Section 12.16, such Selling Securityholder (other than the
Funds) has given the Agent the unrestricted right, power, authority and capacity
to act for and bind such Selling Securityholder with respect to all matters
relating to the Transactional Agreements and the Transactions.
(c) If such Selling Securityholder is a corporate entity, the execution and
delivery by it of the Transactional Agreements and the consummation of the
Transaction have been duly and validly authorized, and no other corporate
proceedings or approvals on the part of such Selling Securityholder are
necessary to authorize the Transactional Agreements or the consummation of the
Transaction. The party signing this Agreement for on behalf of such Selling
Securityholder is a general partner of such Selling Securityholder.
(d) If such Selling Securityholder is a limited partnership, the execution
and delivery by its general partner of the Transactional Agreements and the
consummation of the Transaction have been duly and validly authorized in
accordance with its partnership agreement, and no other proceedings or approvals
on the part of such Selling Securityholder or its general partner are necessary
to authorize the Transactional Agreements or the consummation of the
Transaction.
(e) Such Selling Securityholder:
(i) has not, at any time, (A) made a general assignment for the benefit
of creditors, (B) filed, or had filed against such Selling Securityholder, any
bankruptcy petition or similar filing, (C) suffered the attachment or other
judicial seizure of all or a substantial portion of such Selling
Securityholder's assets, (D) admitted in writing such Selling Securityholder's
inability to pay such Selling Securityholder's debts as they become due, (E)
been convicted of, or pleaded guilty to, any felony, or (F) taken or been the
subject of any action that may have an adverse effect on such Selling
Securityholder's ability to comply with or perform any of such Selling
Securityholder's covenants or obligations under any of the Transactional
Agreements; or
(ii) is not subject to any Order that may have an adverse effect on
such Selling Securityholder's ability to comply with or perform any of such
Selling Securityholder's covenants or obligations under any of the Transactional
Agreements.
(f) There is no Proceeding pending, and to the knowledge of such Selling
Securityholder, no Person has threatened to commence any Proceeding, that may
have an adverse effect on the ability of such Selling Securityholder to comply
with or perform any of such Selling Securityholder's covenants or obligations
under any of the Transactional Agreements. To the knowledge of such Selling
Securityholder, no event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any such Proceeding.
3.2 Due Organization; Etc.
(a) If such Selling Securityholder a corporate entity, it is a corporation
duly incorporated, organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all necessary power and
authority to execute and deliver the Transactional Agreements and to consummate
the Transaction and otherwise perform its obligations under this Agreement.
(b) If such Selling Securityholder is a partnership, it is duly registered
as a limited partnership in the Province of British Columbia and was formed by
the filing of a certificate in the Office of the Registrar of Companies (British
Columbia), pursuant to the provisions of the Partnership Act (British Columbia).
The general partner of such Selling Securityholder that is acting and signing
for and on behalf of such Selling Securityholder in connection with the
Transaction (the "General Partner") was duly incorporated, validly exists and is
in good standing under the laws of its jurisdiction of incorporation. Such
Selling Securityholder and its General Partner have taken all necessary action
in accordance with the provisions of such Selling Securityholder's partnership
agreement and any other Legal Requirements to execute and deliver the
Transactional Agreements and to consummate the Transaction and to perform its
obligations under this Agreement.
(c) Such Selling Securityholder is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada), except as disclosed on Part 2.33 of the
Disclosure Schedule.
3.3 Ownership; Title to Securities. Except as set out in Part 3.3 of the
Disclosure Schedule, Such Selling Securityholder has, and will convey to the
Purchaser at the Closing, good and valid title to the Securities owned by such
Selling Securityholder free and clear of any Encumbrances, adverse claims or
claims of others. All of such Selling Securityholder's Securities are legally
and beneficially owned and controlled by such Selling Securityholders in the
amounts indicated next to such Selling Securityholder's name on Part 3.3 of the
Disclosure Schedule. No Person has any agreement, option, understanding or
commitment, or any right or privilege (whether by law, pre-emptive or
contractual) capable of becoming an agreement, option or commitment, including a
right of conversion or exchange attached to convertible securities, warrants or
convertible obligations of any nature, for the purchase or other acquisition
from such Selling Securityholder of any of the Securities owned by such Selling
Securityholder.
3.4 Non-Contravention; Consents. Neither the execution and delivery of any
of the Transactional Agreements, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice or lapse
of time):
(a) if the Selling Securityholder is a corporation, contravene, conflict
with or result in a violation of (i) any of the provisions of such Selling
Securityholder's certificate of incorporation or bylaws, or (ii) any resolution
adopted such Selling Securityholder's shareholders, Selling Securityholder's
board of directors or any committee of such Selling Securityholder's board of
directors;
(b) if the Selling Securityholder is a partnership, contravene, conflict
with or result in a violation of any of the provisions of such Selling
Securityholder's partnership agreement or other constating document; or
(c) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any remedy or obtain any relief under, (a) any Legal Requirement
or any Order to which such Selling Securityholder is subject, (ii) any Contract,
commitment or other agreement to which such Selling Securityholder is a party or
by which his, her or its assets are bound.
3.5 Brokers. Such Selling Securityholder has not agreed or become obligated
to pay, or has taken any action that might result in any Person claiming to be
entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the Transactions.
4. REPRESENTATIONS AND WARRANTIES OF THE ELLIOTTS
In addition to the representations and warranties made by them in Article 3
in their capacity as Selling Securityholders, the Elliotts jointly and severally
represent and warrant, to and for the benefit of the benefit of the Indemnitees,
as follows:
4.1 Article 2 Representations. Except as such representations or warranties
may be modified in this Article 4, each of the representations and warranties in
Article 2 of this Agreement (without giving effect to any of the Disclosure
Schedules or the exceptions contemplated thereby) shall apply mutatis mutandis
to BEA.
4.2 Article 3 Representations. Except as such representations or warranties
may be modified in this Article 4, each of the representations and warranties in
Article 3 of this Agreement (without giving effect to any of the Disclosure
Schedules or the exceptions contemplated thereby) shall apply mutatis mutandis
to the Elliotts and their interests in BEA.
4.3 BEA Capital. The authorized capital of BEA consists of 100,000 Class A
voting shares and 100,000 Class B non-voting shares, of which only the Xxxxxxx
Shares are issued and outstanding. Xxxxx Xxxxxxx legally and beneficially owns
one Class A voting share, and Xxxx Xxxxxxx legally and beneficially owns one
Class A voting share.
4.4 BEA Business. BEA's only business is the business of being a holding
company for the BEA Shares and providing management services to SFG pursuant to
a management agreement dated May 1, 1996 between BEA and SFG. Other than SFG,
BEA has no customers, suppliers or any contractual relationships (written or
otherwise) except those relating to the reorganization described in Part 4 of
the Disclosure Schedules (the "BEA Reorganization").
4.5 BEA Employees. BEA has never had, and does not currently have, any
employees other than Xxxxx Xxxxxxx and Xxxx Xxxxxxx.
4.6 BEA Assets and Liabilities. BEA does not own any assets or properties
other than those referred to in Part 4 of the Disclosure Schedules. BEA's
current assets (determined in accordance with GAAP) exceed its current
liabilities (determined in accordance with GAAP), including all accrued and
unpaid Tax Liabilities. BEA has no long-term Liabilities of any nature
whatsoever.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants, to and for the benefit of the
Selling Securityholders, as follows:
5.1 Authority; Binding Nature of Agreement. Upon the adoption of
appropriate resolutions by the Purchaser's board of directors:
(a) the Purchaser will have the absolute and unrestricted right, power and
authority to enter into and perform its obligations under this Agreement;
(b) the execution, delivery and performance of this Agreement by the
Purchaser will have been duly authorized by all necessary action on the part of
the Purchaser and its stockholders and board of directors; and
(c) this Agreement will constitute the legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its terms
(except as enforceability may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
equity or at law).
5.2 Brokers. Except for a fee payable to Xxxxxxxxxx & Partners Inc., the
Purchaser has not agreed or become obligated to pay, and has not taken any
action that might result in any Person claiming to be entitled to receive, any
brokerage commission, finder's fee or similar commission or fee in connection
with any of the Transactions.
5.3 Non-Contravention; Consents. Neither the execution and delivery of any
of the Transactional Agreements, nor the consummation or performance of any of
the Transactions, will directly or indirectly (with or without notice or lapse
of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the Purchaser's certificate of incorporation or bylaws, or (ii)
any resolution adopted by the Purchaser's shareholders, the Purchaser's board of
directors or any committee of the Purchaser's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Purchaser is subject; or
(c) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any remedy or obtain any relief under, (a) any Legal Requirement
or any Order to which the Purchaser is subject, (ii) any Contract, commitment or
other agreement to which the Purchaser is a party or by which its assets are
bound.
6. PRE-CLOSING COVENANTS OF SFG AND SELLING SECURITYHOLDERS
6.1 Access and Investigation. SFG shall ensure that, at all times during
the Pre-Closing Period:
(a) SFG and its Representatives, upon reasonable notice, provide the
Purchaser and its Representatives with free and complete access to each
Company's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Companies;
(b) SFG and its Representatives, upon reasonable notice, provide the
Purchaser and its Representatives with such copies of existing books, records,
Tax Returns, work papers and other documents and information relating to the
Companies as the Purchaser may request in good faith; and
(c) SFG and its Representatives, upon reasonable notice, compile and
provide the Purchaser and its Representations with such additional financial,
operating and other data and information regarding the Companies as the
Purchaser may request in good faith.
6.2 Operation of Business - Selling Shareholders. Each Selling
Securityholder severally shall ensure that, during the Pre-Closing Period
without the prior written consent of the Purchaser:
(a) except as disclosed in Part 2.3 of the Disclosure Schedule, it will
not, directly or indirectly, sell or otherwise transfer, or offer, agree or
commit (in writing or otherwise) to sell or otherwise transfer, any of the
Securities owned by it or any interest in or right relating to any of the
Securities owned by it;
(b) it will not permit, and it will not offer, agree or commit (in writing
or otherwise) to permit, any of the Securities owned by it to become subject,
directly or indirectly, to any Encumbrance;
6.3 Operation of Business - SFG. SFG, shall ensure that, during the
Pre-Closing Period without the prior written consent of the Purchaser:
(a) each Company conducts its operations exclusively in the Ordinary Course
of Business and in the same manner as such operations have been conducted prior
to the date of this Agreement;
(b) each Company preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains its
relations and good will with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with such Company;
(c) each Company keeps in full force all insurance policies identified in
Part 2.24 of the Disclosure Schedule;
(d) SFG's officers confer regularly with the Purchaser concerning
operational matters and otherwise report regularly to the Purchaser concerning
the status of each Company's business, condition, assets, liabilities,
operations, financial performance and prospects;
(e) SFG immediately notifies the Purchaser of any inquiry, proposal or
offer from any Person relating to any Acquisition Transaction;
(f) SFG and its officers use their Best Efforts to cause the Companies to
operate profitably and to maximize net income;
(g) no Company declares, accrues, sets aside or pays any dividend or makes
any other distribution in respect of any shares of its capital stock, nor
repurchases, redeems or otherwise reacquires any shares of its capital stock or
other securities;
(h) no Company sells or otherwise issues any shares of its capital stock or
any other securities;
(i) no Company amends its certificate of incorporation or bylaws, nor
effects or becomes a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(j) no Company forms any subsidiary or acquires any equity interest or
other interest in any other Entity;
(k) no Company makes any capital expenditure, except for capital
expenditures that are made in the Ordinary Course of Business and that, when
added to all other capital expenditures made on behalf of the Companies during
the Pre-Closing Period, do not exceed $25,000 in the aggregate;
(l) no Company enters into or permits any of the assets owned or used by
the Companies to become bound by any Contract, except for any Excluded Contract;
(m) no Company incurs, assumes or otherwise becomes subject to any
Liability, except for current liabilities (of the type required to be reflected
in the "liabilities" column of a balance sheet prepared in accordance with GAAP)
incurred in the Ordinary Course of Business;
(n) no Company establishes or adopts any Employee Benefit Plan, nor pays
any bonus or makes any profit-sharing or similar payment to, or increases the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees;
(o) no Company changes any of its methods of accounting or accounting
practices in any respect except as prescribed by the Canadian Institute of
Chartered Accountants;
(p) no Company makes any Tax election;
(q) no Company commences any Proceeding;
(r) no Company enters into any transaction or takes any other action of the
type referred to in Section 2.5;
(s) no Company enters into any transaction or takes any other action
outside the Ordinary Course of Business;
(t) no Company enters into any transaction or takes any other action that
might cause or constitute a Breach of any representation or warranty made by SFG
or any of the Selling Securityholders in this Agreement or in the Closing
Certificate; and
(u) no Company agrees, commits or offers (in writing or otherwise), nor
attempts, to take any of the actions described in clauses "(i)" through "(v)" of
this Section 6.2.
6.4 Filings and Consents. SFG or each Selling Securityholder (severally as
to itself), as the case may be, shall ensure that:
(a) each filing or notice required to be made or given (pursuant to any
applicable Legal Requirement, Order or Contract, or otherwise) by the Companies
or such Selling Securityholder in connection with the execution and delivery of
any of the Transactional Agreements or in connection with the consummation or
performance of any of the Transactions (including each of the filings and
notices identified in Part 2.29 of the Disclosure Schedule) is made or given as
soon as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable Legal
Requirement, Order or Contract, or otherwise) by the Companies or such Selling
Securityholder in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions (including each of the Consents identified in Part
2.29 of the Disclosure Schedule) is obtained as soon as possible after the date
of this Agreement and remains in full force and effect through the Closing Date;
(c) SFG or such Selling Securityholder promptly delivers to the Purchaser a
copy of each filing made, each notice given and each Consent obtained by the
Companies or such Selling Securityholder during the Pre-Closing Period; and
(d) during the Pre-Closing Period, SFG and its Representatives cooperate
with the Purchaser and with the Purchaser's Representatives, and prepare and
make available such documents and take such other actions as the Purchaser may
request in good faith, in connection with any filing, notice or Consent that the
Purchaser is required or elects to make, give or obtain.
6.5 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, SFG or each Selling Securityholder
(severally as to itself), as the case may be, shall promptly notify the
Purchaser in writing of:
(i) the discovery by SFG or such Selling Securityholder of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a Breach of any representation
or warranty made by SFG or such Selling Securityholder in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute a
Breach of any representation or warranty made by SFG or such Selling
Securityholder in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any Breach of any covenant or obligation of SFG or such Selling
Securityholder; and
(iv) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Section 8 or Section 9
impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 6.5(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then SFG and the Selling Securityholders shall promptly deliver to
the Purchaser an update to the Disclosure Schedule specifying such change. No
such update shall be deemed to supplement or amend the Disclosure Schedule for
the purpose of (i) determining the accuracy of any of the representations and
warranties made by SFG or any of the Selling Securityholders in this Agreement
or in the Closing Certificate, or (ii) determining whether any of the conditions
set forth in Section 8 has been satisfied.
6.6 Payment of Indebtedness by Related Parties. SFG shall cause all
indebtedness and other Liabilities of each Related Party to SFG (including any
such indebtedness or other Liability identified in Part 2.25 of the Disclosure
Schedule) to be discharged and paid in full prior to the Closing.
67 No Negotiation. SFG shall ensure that, during the Pre-Closing Period,
neither SFG nor any of SFG's Representatives directly or indirectly:
(a) solicits or encourages the initiation or submission of any expression
of interest, inquiry, proposal or offer from any Person (other than the
Purchaser) relating to any Acquisition Transaction;
(b) participates in any discussions or negotiations or enters into any
agreement with, or provides any non-public information to, any Person (other
than the Purchaser) relating to any Acquisition Proposal; or
(c) entertains or considers the merits of any unsolicited inquiry, proposal
or offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction, or accepts any such inquiry, proposal or offer.
6.8 Commercially Reasonable Efforts - SFG. During the Pre-Closing Period,
SFG shall use all commercially reasonable efforts to cause the conditions set
forth in Sections 8.2 and 8.3 that relate to it to be satisfied on a timely
basis.
6.9 Commercially Reasonable Efforts - Securityholder. During the
Pre-Closing Period each Selling Securityholder (severally) shall use all
commercially reasonable efforts to cause the conditions set forth in Sections
8.2 and 8.3 that relate solely to it to be satisfied on a timely basis.
6.10 Confidentiality. Each party to this Agreement shall ensure that,
during the Pre-Closing Period, neither it nor its Representatives:
(a) shall not make or permit any disclosure to any Person regarding (a) the
existence and terms of this Agreement and the Transactions contemplated hereby
or (b) the existence of negotiations between the parties hereto;
(b) shall issue or disseminate any press release or other publicity or
otherwise make any disclosure of any nature (to any suppliers, customers,
landlords, creditors or employees or to any other Person) regarding any of the
Transactions, except to the extent that such party is required by law to make
any such disclosure regarding the Transactions; and
(c) if such party is required by law to make any disclosure regarding the
Transactions, it advises the other parties, at least five business days before
making such disclosure, of the nature and content of the intended disclosure.
6.11 Section 256(9) Election. SFG hereby agrees to elect in its return of
income under Part I of the Income Tax Act (Canada) filed for its taxation year
ended immediately before the acquisition of control by the Purchaser to not have
subsection 256(9) of the Income Tax Act (Canada) apply.
7. PRE-CLOSING COVENANTS OF PURCHASER
7.1 Commercially Reasonable Efforts. During the Pre-Closing Period, the
Purchaser shall use all commercially reasonable efforts to cause the conditions
set forth in Article 9 to be satisfied.
8.CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to purchase the Securities and the Xxxxxxx
Shares and to take the other actions required to be taken by the Purchaser at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by the Purchaser, in
whole or in part, in accordance with Section 12.15):
8.1 Satisfactory Completion of Pre-Acquisition Review. The Purchaser shall
have satisfactorily completed its pre-acquisition investigation and review of
SFG's and BEA's business, condition, assets, liabilities, operations, financial
performance, net income and prospects and shall be satisfied with the results of
that investigation and review.
8.2 Accuracy of Representations.
(a) Each of the Specified Representations and the Xxxxxxx Representations
shall have been accurate in all respects as of the Scheduled Closing Time as if
made at the Scheduled Closing Time and as of the Closing as if made at the
Closing, without giving effect to any update to the Disclosure Schedule.
(b) All of the other representations and warranties made by SFG, the
Selling Securityholders and the Elliotts in this Agreement (considered
collectively), and each of said representations and warranties (considered
individually), shall have been accurate as of the date of this Agreement, and
shall be accurate as of the Scheduled Closing Time as if made at the Scheduled
Closing Time and as of the Closing, as if made at the Closing, each without
giving effect to any update to the Disclosure Schedule.
8.3 Performance of Obligations.
(a) SFG, the Common Selling Shareholders and the Option Holders shall have
executed and delivered each of the agreements required to be executed and
delivered by SFG, the Selling Shareholders or the Option Holders pursuant to
this Agreement.
(b) The Common Selling Shareholders shall have delivered to the Purchaser
the certificates representing the Shares as required by Section 1.4(c)(v), and
each Selling Shareholder shall have executed and delivered each of the other
documents required to be executed and delivered by such Common Selling
Shareholder pursuant to Section 1.4(b).
(c) Each Common Selling Shareholder who own Class C Preferred Shares shall
have delivered to SFG a notice of retraction in respect of the Class C Preferred
Shares owned by such Common Selling Shareholder and delivered the share
certificates representing such shares duly endorsed for transfer;
(d) Her Majesty the Queen in right of the Province of British Columbia (the
"Province") shall have delivered the share certificates representing Class F
Preferred Shares owned by the Province duly endorsed for transfer.
(e) The Option Holders shall have delivered to the Purchaser the Option
Termination Agreements as required by Section 1.4(c)(vi), and each Option Holder
shall have executed and delivered each of the other documents required to be
executed and delivered by such Option Holder pursuant to Section 1.4(c).
(f) The Elliotts shall have delivered to the Purchaser the certificates
representing the Xxxxxxx Shares as required by Section 1.4(c)(vii) duly endorsed
for transfer.
(g) All of the other covenants and obligations that SFG and the Selling
Securityholders are required to comply with or to perform at or prior to the
Closing (considered collectively), and each of said covenants and obligations
(considered individually), shall have been duly complied with and performed.
8.4 Consents.
(a) Each of the Consents identified in Part 2.29 of the Disclosure Schedule
shall have been obtained, shall be in full force and effect and shall be
absolute or on terms acceptable to Purchaser.
(b) The Purchaser shall have received (a) acknowledgments from the lessors
under the Leases that such leases are in full force and the Companies are not in
breach of any of the terms thereof, (b) any such consent to the change in
ownership effected by Transaction may be required by the terms of such Leases.
8.5 No Adverse Change. There shall have been no adverse change in SFG's or
BEA's business, condition, assets, liabilities, operations, financial
performance, net income or prospects (or in any aspect or portion thereof) since
the date of this Agreement.
8.6 Additional Documents. The Purchaser shall have received such other
documents as the Purchaser may reasonably request in good faith for the purpose
of (i) evidencing the accuracy of any representation or warranty made by SFG or
any of the Selling Securityholders, (ii) evidencing the compliance by SFG or any
of the Selling Securityholders with, or the performance by SFG or any of the
Selling Securityholders of, any covenant or obligation set forth in this
Agreement, (iii) evidencing the satisfaction of any condition set forth in this
Section 8, or (iv) otherwise facilitating the consummation or performance of any
of the Transactions.
8.7 No Proceedings. Since the date of this Agreement, there shall not have
been commenced or threatened against the Purchaser, or against any Person
affiliated with the Purchaser, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Transactions, or
(b) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
8.8 No Claim Regarding Stock Ownership or Sale Proceeds. No Person shall
have made or threatened any claim asserting that such Person (a) may be the
holder or the beneficial owner of, or may have the right to acquire or to obtain
beneficial ownership of, any capital stock or other securities of any Company or
BEA, respectively, or (b) may be entitled to all or any portion of the Purchase
Price.
8.9 No Prohibition. Neither the consummation nor the performance of any the
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of, or cause the
Purchaser or any Person affiliated with the Purchaser to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been proposed by or before any Governmental
Body.
9.0 CONDITIONS PRECEDENT TO SELLING SECURITYHOLDERS' OBLIGATION TO CLOSE
The Selling Securityholders' obligation to sell the Securities and to
take the other actions required to be taken by the Selling Securityholders at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by the Agent, in whole
or in part, in accordance with Section 12.15):
9.1 Accuracy of Representations. All of the representations and warranties
made by the Purchaser in this Agreement (considered collectively), and each of
said representations and warranties (considered individually), shall have been
accurate as of the date of this Agreement and shall be accurate as of the
Scheduled Closing Time as if made at the Scheduled Closing Time.
9.2 Purchaser's Performance.
(a) The Purchaser shall have made the cash payments contemplated by Section
1.4.
(b) All of the other covenants and obligations that the Purchaser is
required to comply with or to perform pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of said covenants and
obligations (considered individually), shall have been complied with and
performed.
9.3 No Injunction. There shall not be in effect any injunction that shall
have been entered by a court of competent jurisdiction since the date of this
Agreement and that prohibits the sale of the Securities by the Selling
Securityholders to the Purchaser.
10. TERMINATION
10.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by the Purchaser if (i) there is a material Breach of any covenant or
obligation of SFG or any of the Selling Securityholders, or (ii) the Purchaser
reasonably determines that the timely satisfaction of any condition set forth in
Section 8 has become impossible or impractical (other than as a result of any
failure on the part of the Purchaser comply with or perform its covenants and
obligations under this Agreement);
(b) by the Agent if (i) there is a material Breach of any covenant or
obligation of the Purchaser, or (ii) the Agent reasonably determines that the
timely satisfaction of any condition set forth in Section 9 has become
impossible or impractical (other than as a result of any failure on the part of
SFG or any of the Selling Securityholders to comply with or perform any covenant
or obligation set forth in this Agreement);
(c) by the Purchaser at or after the Scheduled Closing Time if any
condition set forth in Section 8 has not been satisfied by the Scheduled Closing
Time;
(d) by the Agent at or after the Scheduled Closing Time if any condition
set forth in Section 9 has not been satisfied by the Scheduled Closing Time;
(e) by the Purchaser if the Closing has not taken place on or before
December 31, 1999 (other than as a result of any failure on the part of the
Purchaser to comply with or perform its covenants and obligations under this
Agreement);
(f) by the Agent if the Closing has not taken place on or before December
31, 1999, (other than as a result of the failure on the part of SFG or any of
the Selling Securityholders to comply with or perform any covenant or obligation
set forth in this Agreement); or
(g) by the mutual consent of the Purchaser and the Agent.
10.2 Termination Procedures. If the Purchaser wishes to terminate this
Agreement pursuant to Section 10.1(a), Section 10.1(c) or Section 10.1(e), the
Purchaser shall deliver to the Agent a written notice stating that the Purchaser
is terminating this Agreement and setting forth a brief description of the basis
on which the Purchaser is terminating this Agreement. If the Agent wishes to
terminate this Agreement pursuant to Section 10.1(b), Section 10.1(d) or Section
10.1(f), the Agent shall deliver to the Purchaser a written notice stating that
the Agent is terminating this Agreement and setting forth a brief description of
the basis on which the Agent is terminating this Agreement.
10.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that:
(a) no party shall be relieved of any obligation or other Liability arising
from any Breach by such party of any provision of this Agreement;
(b) the parties shall, in all events, remain bound by and continue to be
subject to the provisions set forth in Section 12; and
(c) SFG and the Selling Securityholders shall, in all events, remain bound
by and continue to be subject to Section 6.10.
10.4 Nonexclusivity of Termination Rights. The termination rights provided
in Section 10.1 shall not be deemed to be exclusive. Accordingly, the exercise
by any party of its right to terminate this Agreement pursuant to Section 10.1
shall not be deemed to be an election of remedies and shall not be deemed to
prejudice, or to constitute or operate as a waiver of, any other right or remedy
that such party may be entitled to exercise (whether under this Agreement, under
any other Contract, under any statute, rule or other Legal Requirement, at
common law, in equity or otherwise).
11. INDEMNIFICATION, ETC.
11.1 Survival of Representations and Covenants.
(a) Subject to Sections 11.1(b), 11.1(c) and 11.1(d), the representations
and warranties, covenants and obligations of each party shall survive (without
limitation):
(i) the Closing and the sale of the Securities and the Xxxxxxx Shares
to the Purchaser;
(ii) the sale or other disposition of any or all of the Securities and
the Xxxxxxx Shares by the Purchaser; and
(iii) any Acquisition Transaction effected or otherwise effected or
otherwise involving the Purchaser and SFG or BEA;
(b) Subject to Section 11.1(c), all of the said representations,
warranties, covenants and obligations shall remain in full force and effect and
shall survive until the earlier of (the "First Expiry Date"):
(i) the final day of the 18th month following the date of this
Agreement; or
(ii) the date of the report of the Purchaser's independent auditor on
the Purchaser's financial statements for the year ended December 31, 2000.
(c) Any claims for Damages concerning the Breaches of any Specified
Representations or fraud shall remain in full force and effect and shall survive
from the Closing Date until the last day of the 36th month following the date of
this Agreement (the "Second Expiry Date").
(d) The representations, warranties, covenants and obligations of SFG, the
Selling Securityholders and the Elliotts, and the rights and remedies that may
be exercised by the Indemnitees, shall not be limited or otherwise affected by
or as a result of any information furnished to, or any investigation made by or
Knowledge of, any of the Indemnitees or any of their Representatives.
11.2 Indemnification by Selling Securityholders.
(a) Subject to the limitations set out in Section 11.3, the Selling
Securityholders will, jointly and severally, hold harmless and indemnify each of
the Indemnitees for any Damages which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise directly or indirectly from or
as a direct or indirect result of, or are directly or indirectly connected with:
(i) any Breach of any representation or warranty made by SFG in this
Agreement;
(ii) any Breach of any covenant or obligation of SFG in this Agreement;
(iii) any Breach of any representation or warranty made by the Selling
Securityholders in this Agreement (excluding the representations and warranties
contained in Article 4);
(iv) any Breach of any covenant or obligation of the Selling
Securityholders in this Agreement (excluding any covenants or obligations of the
Elliotts with respect to BEA);
(v) any Liability to which any Company or any of the other Indemnitees
may become subject and that arises directly or indirectly from or relates
directly or indirectly to:
(1) any product manufactured or sold, any service performed, by or
on behalf of any of the Companies on or at any time on or prior to the Closing
Date;
(2) the presence of any Hazardous Materials at any site owned,
leased, occupied or controlled by any of the Companies on or at any time prior
to the Closing Date; or
(3) the generation, manufacture, production, transportation,
importation, use, treatment, processing, refinement, processing, handling,
storage, discharge, release, disposal of any Hazardous Material (whether
lawfully or unlawfully) by or on behalf any of the Companies or on or at any
time on or prior to the Closing Date,
(vi) any proceeding relating directly or indirectly to any Breach,
alleged Breach, Liability or matter of the type referred to in clauses "(i)",
"(ii)", "(iii)", "(iv)" or "(v)" above (including any Proceeding commenced by
any Indemnitee for the purpose of enforcing its rights under this Section 11).
(b) Subject to the limitations set out in Section 11.3, each Selling
Securityholder will jointly and severally up to the balance of the Second Escrow
Amount after all indemnification claims under Section 11.2(a) have been paid and
thereafter, other than in the case of VWP and DEI, severally, in proportion to
the amount set out opposite each such Selling Securityholder's name in Schedule
11.3, hold harmless and indemnify each of the Indemnitees for any Damages which
are directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
which arise directly or indirectly from or as a direct or indirect result of, or
are directly or indirectly connected with:
(i) fraud on the part of such Selling Securityholder; or
(ii) any Breach of any of the Specified Representations by such Selling
Securityholder.
(c) Subject to the limitations set out in Section 11.3, any party that is
required to indemnify any other Person pursuant to this Article 11 with respect
to any Damages shall also be required to pay such other Person interest on the
amount of such Damages (for the period commencing as of the date on which such
other Person first incurred or otherwise became subject to such Damages and
ending on the date on which the applicable indemnification payment is made by
such party) at a floating rate three percentage points above the rate of
interest publicly announced by Bank of America from time to time as its prime
rate, base or reference rate.
11.3 Indemnification Limitations.
Notwithstanding any other provision contained in this Agreement, the
indemnity obligations of the Selling Securityholders pursuant to Section 11.2 or
otherwise, will be limited in the following respects:
(a) the Selling Securityholders will only be liable for Damages arising
under Section 11.2(a) if a claim for indemnity is made by the Indemnitee on or
before the First Expiry Date;
(b) the Selling Securityholders will only be liable for Damages arising
under Section 11.2(b) if a claim for indemnity is made by the Indemnitee on or
before the Second Expiry Date;
(c) the Selling Securityholders shall not be required to make any
indemnification payment pursuant to Section 11.2 unless the Damages exceeds
$50,000 in the aggregate;
(d) the Selling Securityholders shall not be required to make any
indemnification payment pursuant to Section 11.2(a) in excess of the Second
Escrow Amount in accordance with the Escrow Agreement shall be the only and sole
source of payment for the indemnification rights of the Indemnitees under
Section 11.2(a);
(e) VWP and DEI shall not be required to make any indemnification payment
pursuant to Section 11.2(a) or 11.2(b) in excess of their respective Pro Rata
interest in the Second Escrow Amount as set out in this Section 11.3 in excess
of their respective Pro Rata interests and such Pro Rata payment out of the
Second Escrow Amount in accordance with the Escrow Agreement shall be the only
and sole source of payment for the indemnification rights of the Indemnitees
under Section 11.2 in the case of VWP and DEI;
(f) the aggregate amount of Damages for which a Selling Securityholder may
be liable to the Indemnitees under Section 11.2(b) or otherwise will first be
satisfied out of the balance of the Second Escrow Amount, if any, after all
indemnification claims under Section 11.2(a) have been paid and any Damages in
excess of the balance of the Second Escrow Amount, if any, will be limited
solely to the amount set opposite the Selling Securityholder's name in Schedule
11.3, provided that neither VWP nor DEI shall be responsible or liable for any
such additional amounts; and
(g) the liability of VWP and DEI for any and all indemnification claims
under Section 11.2 or any other claims which may have been made against either
of VWP or DEI under this Agreement is limited to their Pro-Rata interests in the
Second Escrow Amount as set out in Schedule 11.3.
(h) For the purposes of determining the liability of the Elliotts in their
capacity as Selling Shareholders pursuant to this Article 11, in addition to any
Securities owned or held directly by each Xxxxxxx as set out in Part 3.3 of the
Disclosure Schedule, each Xxxxxxx shall be deemed to hold BEA Shares equal to
his or her proportionate interest in BEA and shall be deemed to own any
Securities sold by Protec Management Ltd. as set out in Part 4 of the Disclosure
Schedule pursuant to this Agreement in the same proportion, and his or her
liability adjusted upwards accordingly.
11.4 Indemnification by the Elliotts.
(a) Notwithstanding anything else to the contrary contained in this
Agreement and in this Section 11, the Elliotts shall jointly and severally hold
harmless and indemnify each of the Indemnitees from and against, and shall
compensate and reimburse each of the Indemnitees for: (i) any and all Damages
which are directly or indirectly suffered or incurred by any of the Indemnitees
or to which any of the Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any Third Party Claim) and
which arise directly or indirectly from or as a direct or indirect result of, or
are directly or indirectly connected with any Breach of any representation or
warranty made by the Elliotts in Article 4 of this Agreement, (ii) any Liability
relating to the BEA Reorganization; and (iii).any additional costs and expenses
incurred by the Purchaser as a result of the acquisition of the Xxxxxxx Shares
or the BEA Reorganization.
(b) The Elliotts' liability under Section 11.4 shall not be subject to a
minimum claim and shall be unlimited.
(c) Sections 11.5 through and including 11.6(g) shall apply mutatis
mutandis to any claims made against the Elliotts pursuant to this Section 11.4
11.5 No Contribution. Each Selling Securityholder waives, and acknowledges
and agrees that such Selling Securityholder shall not have and shall not
exercise or assert or attempt to exercise or assert, any right of contribution
or right of indemnity or any other right or remedy against SFG (either directly,
indirectly or vicariously through exercising or asserting any right of
contribution or right of indemnity against any of SFG's Representatives in such
Representative's capacity as an officer, employee, director, agent or
representative of SFG) in connection with any indemnification obligation or any
other Liability to which such Selling Securityholder may become subject under
any of the Transactional Agreements or otherwise in connection with any of the
Transactions. Notwithstanding the foregoing, subject to the limitations in
Section 11.3, each Selling Securityholder (a "Paying Securityholder") shall have
and may exercise or assert, or attempt to exercise or assert, any right of
contribution or indemnity against any such Representative who is a Selling
Securityholder in his, her or its capacity as a Selling Securityholder (a
"Contributing Securityholder"). For greater certainty, if it is determined that
a Contributing Securityholder must either indemnify a Paying Securityholder or
contribute to any Liability of a Paying Securityholder, the Contributing
Securityholder shall not have and shall not exercise or assert or attempt to
exercise or assert, any right of contribution or right of indemnity or any other
right or remedy against SFG in respect of such indemnification or contribution
obligation to the Paying Securityholder.
11.6 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against SFG,
against any other Indemnitee or against any other Person) with respect to which
any of the Selling Securityholders (an "Indemnifier") may become obligated to
indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant to
this Article 11 (but subject to the limitations set out in Section 11.3) (a
"Third Party Claim"), such Indemnitee shall give the Agent reasonably prompt
written notice of such Third Party Claim. The Agent shall have the right to
participate in or, by giving notice to that effect to the Indemnitee Party not
later than 30 days after receipt of notice of such Third Party Claim and subject
to the rights of any insurer, to elect to assume the defence of any Third Party
Claim at Indemnifier's own expense and by the Agent's own counsel, and the
Indemnitee shall have the right to participate in the defence of any Third Party
Claim assisted by counsel of its own choosing. The Indemnitee shall not settle
or compromise any Third Party Claim without the prior written consent of the
Agent. If the Agent so elects to assume the defense of any such claim or
Proceeding:
(a) the Agent shall proceed to defend such claim or Proceeding in a
diligent manner with counsel satisfactory to the Purchaser;
(b) the Purchaser shall make available to the Agent any non-privileged
documents and materials in the possession of the Purchaser that may be necessary
to the defense of such claim or Proceeding;
(c) the Agent shall keep the Purchaser informed of all material
developments and events relating to such claim or Proceeding;
(d) the Purchaser shall have the right to participate in the defense of
such claim or Proceeding;
(e) the Agent shall not settle, adjust or compromise such claim or
Proceeding without the prior written consent of the Purchaser; and
(f) the Purchaser may at any time assume the defense of such claim or
Proceeding.
If the Agent does not elect to assume the defense of any such claim or
Proceeding (or if, after the Agent assumes such defense, the Purchaser elects to
assume such defense), the Purchaser may proceed with the defense of such claim
or Proceeding on its own. If the Purchaser so proceeds with the defense of any
such claim or Proceeding on its own:
(i) the Selling Securityholders shall make available to the Purchaser
any documents and materials in the possession or control of any of the Selling
Securityholders that may be necessary to the defense of such claim or
Proceeding;
(ii) the Purchaser shall keep the Agent informed of all material
developments and events relating to such claim or Proceeding; and
(iii) the Purchaser shall have the right to settle, adjust or
compromise such claim or Proceeding with the consent of the Agent; provided,
however, that the Agent shall not unreasonably withhold such consent
(g) Exercise of Remedies by Indemnitees Other Than Purchaser. No Indemnitee
(other than the Purchaser or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless the Purchaser (or any successor thereto or assign thereof)
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
12. MISCELLANEOUS PROVISIONS
12.1 Selling Securityholders' Agent.
(a) Subject to Section 12.16, the Selling Securityholders hereby
irrevocably nominate, constitute and appoint Xxxxx Xxxxxxx as the agent and,
other than in the case of the Funds, true and lawful attorney-in-fact of the
Selling Securityholders (the "Agent"), with full power of substitution, to act
in the name, place and stead of the Selling Securityholders for purposes of
executing any documents and taking any actions that the Agent may, in his sole
discretion, determine to be necessary, desirable or appropriate in connection
with any of the Transactional Agreements or any of the Transactions. Xxxxx
Xxxxxxx hereby accepts his appointment as Agent.
(b) Subject to Section 12.16, the Selling Securityholders (other than the
Funds) hereby grant to the Agent full authority to execute, deliver,
acknowledge, certify and file on behalf of the Selling Securityholders (in the
name of any or all of the Selling Securityholders or otherwise) any and all
documents that the Agent may, in his sole discretion, determine to be necessary,
desirable or appropriate, in such forms and containing such provisions as the
Agent may, in his sole discretion, determine to be appropriate (including the
Closing Certificate and any amendment to or waiver of rights under any of the
Transactional Agreements). Notwithstanding anything to the contrary contained in
any of the Transactional Agreements, but subject to Section 12.16 hereof:
(i) the Purchaser shall be entitled to deal exclusively with the Agent
on all matters relating to the respective Transactional Agreements and the
respective Transactions (including all matters relating to any notice to, or any
Consent to be given or action to be taken by, any such Selling Securityholders);
and
(ii) each Indemnitee shall be entitled to rely conclusively (without
further evidence of any kind whatsoever) on any document executed or purported
to be executed on behalf of any Selling Securityholder by the Agent, and on any
other action taken or purported to be taken on behalf of any Selling
Securityholder by the Agent, as fully binding upon such Selling Securityholder.
(c) The Selling Securityholders (other than the Funds) recognize and intend
that the power of attorney granted in Section 12.1:
(i) is coupled with an interest and is irrevocable;
(ii) may be delegated by the Agent; and
(ii) shall survive the death and, in accordance with the Power of
Attorney Act (British Columbia), the mental infirmity of, each of the Selling
Securityholders.
(d) The Agent shall be entitled to treat as genuine, and as the document it
purports to be, any letter, facsimile, telex or other document that is believed
by her to be genuine and to have been telexed, telegraphed, faxed or cabled by a
Selling Securityholder or to have been signed and presented by a Selling
Securityholder.
(e) If the Agent shall die, become disabled or otherwise be unable to
fulfill her responsibilities hereunder, the Selling Securityholders shall,
within ten days after such death or disability, appoint a successor to the Agent
and immediately thereafter notify the Purchaser of the identity of such
successor. Any such successor shall succeed the Agent as Agent hereunder. If for
any reason there is no Agent at any time, all references herein to the Agent
shall be deemed to refer to the Selling Securityholders.
(f) All expenses incurred by the Agent in connection with the performance
of her duties as Agent shall be borne and paid by the Selling Securityholders.
12.2 Further Assurances. Each party hereto shall execute and/or cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the Transactions.
12.3 Fees and Expenses. Except as expressly provided otherwise in this
Agreement, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement.
12.4 Attorneys' (Legal) Fees. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
(legal) fees, costs and disbursements (in addition to any other relief to which
the prevailing party may be entitled). The prevailing party's entitlement to
recover such fees and disbursements shall be subject to Section 11.3.
12.5 Currency; Exchange Rate. Except as expressly provided otherwise in
this Agreement, all currency denominations shall be in United States dollars.
Except as expressly provided otherwise in this Agreement, any conversion of
Canadian dollar amounts to United States dollar amounts for any purposes in
connection with this Agreement shall be done using the spot exchange rate quoted
in the latest edition of The Wall Street Journal available before the date on
which any payment must be made.
12.6 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile number set forth beneath the name of such party below (or
to such other address or facsimile number as such party shall have specified in
a written notice given to the other parties hereto):
if to SFG:
SFG Technologies, Inc.
====================
Attention: Xxxxx Xxxxxxx
Facsimile:
if to any of the Selling Securityholders:
====================
Attention:
Facsimile:
if to the Agent:
J. Xxxxx Xxxxxxx as Agent of certain Selling
Securityholders
2600 - 0000
Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X.
Facsimile: (000) 000-0000
if to the Purchaser:
Xxxxxxx.xxx, Inc.
c/o The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxx and Xxxxxx Xxxx
Facsimile: (000) 000-0000
with a copy to
The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
if to the Funds, as set out in Exhibit "F".
12.7 Publicity. Subject to any disclosure required to be made under any
Legal Requirements, without limiting the generality of anything contained in
Section 6.10, on and at all times after the Closing Date:
(a) no press release or other publicity concerning any of the Transactions
shall be issued or otherwise disseminated by or on behalf of any of the Selling
Securityholders, and the Selling Securityholders shall continue to keep the
existence and terms of this Agreement and the other Transactional Agreements
strictly confidential;
(b) each Selling Securityholder shall keep strictly confidential, and shall
not use or disclose to any other Person, any non-public document or other
information in such Selling Securityholder's possession that relates directly or
indirectly to the business of SFG, the Purchaser or any affiliate of the
Purchaser; and
(c) none of the Selling Securityholders shall make any public disclosure or
comment about, concerning, referencing or alluding to any other Selling
Securityholder (or its Representatives) in connection with its investment or
participation in SFG prior to the Closing (other than that such Selling
Securityholder participated in the Transaction) without the prior written
consent of that Selling Securityholder.
(d)
12.8 WOF & VWP Publicity Notwithstanding Sections 6.10 and 12.7, each of
WOF and VWP shall be entitled to make public disclosure of the sale of its
shares in SFG, its gain on the disposition of its interest in SFG as
contemplated herein, its rate of return on its investment in SFG resulting from
the transactions contemplated herein, and provide a general description of the
business of SFG in its promotional literature or otherwise, provided that it
shall not mention the name of any other party hereto (other than SFG) without
such party's prior written consent, unless such information comes into the
public domain other than as a result of a breach of Sections 6.10 and 12.7.
12.9 Time of the Essence. Time is of the essence of this Agreement.
12.10 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
12.11 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
12.12 Governing Law; Venue.
(a) This Agreement shall be construed in accordance with, and governed in
all respects by, the internal laws of the Province of British Columbia (without
giving effect to principles of conflicts of laws).
(b) Except where this Agreement specifically provides for arbitration, any
legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement may be brought or otherwise
commenced in any of the courts of the Province of British Columbia. Each party
to this Agreement:
(i) expressly and irrevocably consents and submits to the jurisdiction
of each court located in the Province of British Columbia (and each appellate
court located in the Province of British Columbia) in connection with any such
legal proceeding;
(ii) agrees that each court located in the Province of British Columbia
shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any court in the Province
of British Columbia, any claim that such party is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
(c) The Selling Securityholders irrevocably constitute and appoint the
Agent as their agent to receive service of process in connection with any legal
proceeding relating to this Agreement or the enforcement of any provision of
this Agreement.
(d) The Selling Securityholders irrevocably waive the right to a jury trial
in connection with any legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement.
12.13 Successors and Assigns. This Agreement shall be binding upon: SFG and
its successors and assigns (if any); the Selling Securityholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); and the Purchaser and its successors and
assigns (if any). This Agreement shall inure to the benefit of: SFG; the Selling
Securityholders; the Purchaser; the other Indemnitees (subject to Section 12);
and the respective successors and assigns (if any) of the foregoing. The
Purchaser may freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 11), in whole or in part, to
any other Person as part of or in connection with any merger, consolidation,
business combination, share exchange, asset sale, reorganization or similar
transaction involving the Purchaser and any of its affiliates without obtaining
the consent or approval of any other party hereto or of any other Person.
12.14 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). Each Selling
Securityholder agrees that:
(a) in the event of any Breach or threatened Breach by such Selling
Securityholder of any covenant, obligation or other provision set forth in this
Agreement, the Purchaser shall be entitled (in addition to any other remedy that
may be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (ii) an injunction restraining such Breach or threatened
Breach; and
(b) neither the Purchaser nor any other Indemnitee shall be required to
provide any bond or other security in connection with any such decree, order or
injunction or in connection with any related action or Proceeding.
12.15 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
12.16 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser and the Agent. Notwithstanding anything
else contained in this Agreement, the Agent shall have no right to amend Article
11 of this Agreement.
12.17 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12.18 Parties in Interest. Except for the provisions of Section 11 hereof,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
12.19 Entire Agreement. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
12.20 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
12.21 Negotiation of Disputes. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement or the grounds
for the termination thereof, and the parties cannot resolve the dispute within
thirty days of a written request by either party to the other, such dispute
shall be referred to the Chief Executive Officer, Chief Financial Officer or
General Counsel of the Purchaser and the Agent for resolution. Such persons
shall hold a meeting to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within 10 business days
after such meeting, the Chief Executive Officer, Chief Financial Officer or
General Counsel of the Purchaser and the Agent have not succeeded in negotiating
a resolution of the dispute, such dispute may be resolved through arbitration
pursuant to Section 12.22.
12.22 Arbitration.
(a) Disputes that have been unsuccessfully resolved pursuant to Section
12.20 may be submitted to final and binding arbitration conducted by 1
arbitrator agreed upon by the Purchaser and the Agent, or if no such arbitrator
is agreed upon within 10 days following a party giving notice of its desire to
arbitrate a dispute, then by 3 arbitrators, 1 selected by the Purchaser and 1
selected by the Agent, and the 2 arbitrators selected by the Purchaser and the
Agent shall select a third arbitrator.
(a) The arbitrator(s) shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery of information
relating to any dispute while allowing the parties an opportunity, adequate as
determined in the sole judgement of the arbitrator(s), to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrators shall rule upon motions to compel, limit or allow discovery as
they shall deem appropriate given the nature and extent of the disputed claim.
The arbitrators shall also have the authority to impose sanctions, including
legal fees and other costs incurred by the parties, to the same extent as a
court of law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to by a party without substantial justification. The decision of the
arbitrator or a majority of the 3 arbitrators, as the case may be, as to the
validity and amount of any claim shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions regarding the dispute which shall
set forth the award, judgement, decree or order awarded by the arbitrator(s).
(b) Judgement upon any award rendered by the arbitrators may be entered in
any court having competent jurisdiction. The place of arbitration shall be
Vancouver, British Columbia under the British Columbia International Commercial
Arbitration Centre in accordance with its Rules.
(c) Independent Legal Advice. Each of the parties to this Agreement
acknowledges and agree that Farris, Vaughan, Xxxxx & Xxxxxx has acted as counsel
only to the Companies, that Xxxxx, White & Xxxxxxxx has acted as counsel only to
Working Opportunity Fund (EVCC) Ltd. ("WOF") and the Agent, that XxXxxxxx
Xxxxxxxx has acted as counsel only SCC and that Xxxxxxxx & Xxxxxxx has acted as
counsel only to the Elliotts, BEA and certain other Selling Securityholders and
that Farris, Vaughan, Xxxxx & Murphy, Irwin, White & Xxxxxxxx, Xxxxxxxx &
Xxxxxxx and XxXxxxxx Xxxxxxxx are not protecting the rights and interests of any
other party to this Agreement or the other Transaction Documents. The other
parties to this Agreement acknowledge and agree that SFG, Farris, Vaughan, Xxxxx
& Murphy, Irwin, White & Xxxxxxxx, Xxxxxxxx & Xxxxxxx and XxXxxxxx Xxxxxxxx have
given them the opportunity to seek, and have recommended that such parties
obtain, independent legal advice with respect to the subject matter of this
Agreement and, further, each of the other parties hereby represent and warrant
to SFG, Farris, Vaughan, Xxxxx & Murphy, Irwin, White & Xxxxxxxx, Xxxxxxxx &
Xxxxxxx and XxXxxxxx Xxxxxxxx that such party has sought independent legal
advice or waives such advice.
[THIS SPACE INTENTIONALLY LEFT BLANK]
The parties hereto have caused this Agreement to be executed and
delivered as of December __, 1999.
PURCHASER: XXXXXXX.XXX, INC.,
a Delaware corporation
By: __________________
Name: Xxxxx Xxxxxxx
Title: Chief Executive
Officer &
President
SFG Technologies Inc.,
a corporation organized and existing
the laws of British Columbia, Canada
By: _________________________
Name:
Title:
By: _________________________
Name:
Title:
AGENT: _______________________________
Xxxxx Xxxxxxx
SELLING SECURITYHOLDERS:
By: _________________________
Johne Seinen, as duly appointed attorney
for those owning Class A Common Shares
Discovery Enterprises
By: _________________________
Name:
Title:
Working Opportunity Fund (EVCC) Ltd.
by its manager Growth Works Capital Ltd.
By: _________________________
Name:
Title:
Ventures West III - Canada Limited Partnership, by its
General Partner, Ventures West Management III Ltd.
By: _________________________
Name:
Title:
By: _________________________
Name:
Title:
SCC Canada Inc., acting as agent for and on behalf
of Finova (Canada) Capital Corporation and The
Toronto Dominion Bank
By: _________________________
Name:
Title:
Option Holders:
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of
SFG's business or assets (other than in the Ordinary Course of
Business);
(b) the issuance, sale or other disposition of (i) any capital
stock of SFG, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of SFG, or (iii)
any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock of SFG; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving SFG.
Agent. "Agent" shall have the meaning specified in Section 12.1 of the
Agreement.
Agreement. "Agreement" shall mean the Stock Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it
may be amended from time to time.
BEA Escrow Agreement. "BEA Escrow Agreement" shall mean the certain BEA
Escrow Agreement of even date herewith between the Purchaser, BEA,
Protec Management Ltd. and the Escrow Agent.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use in order to
ensure that such result is achieved as expeditiously as possible.
Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has
been (a) any inaccuracy in or breach of, or any failure to comply with
or perform, such representation, warranty, covenant, obligation or
other provision, or (b) any claim (by any Person) or other circumstance
that is inconsistent with such representation, warranty, covenant,
obligation or other provision; and the term "Breach" shall be deemed to
refer to any such inaccuracy, breach, failure, claim or circumstance.
Canadian Benefit Plans. "Canadian Benefit Plans" shall have the meaning
specified in Section 2.21(a) of this Agreement.
Canadian Registered Pension Plans. "Canadian Registered Pension Plans"
shall have the meaning specified in Section 2.21(d) of this Agreement.
CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.
Closing. "Closing" shall have the meaning specified in Section 1.4(a)
of the Agreement.
Closing Certificate. "Closing Certificate" shall have the meaning
specified in Section 1.4(c)(xiv) of the Agreement.
Closing Date. "Closing Date" shall have the meaning specified in
Section 1.4(a) of the Agreement.
Code. "Code" shall mean the Internal Revenue Code of 1986.
Companies. "Companies" shall mean SFG and the Subsidiaries.
Company Plan. "Company Plan" shall mean any Current Benefit Plan or
Past Benefit Plan.
Comparable Entities. "Comparable Entities" shall mean Entities (other
than the Companies) that are engaged in businesses similar to the
Companies' business and are of similar size and stage of development as
SFG and the Companies considered as a whole.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, exemption, waiver or authorization (including any
Governmental Authorization).
Contract. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation, warranty, deed, assignment, power
of attorney, certificate, purchase order, work order, insurance policy,
benefit plan, commitment, covenant, assurance or undertaking of any
nature.
Current Benefit Plan. "Current Benefit Plan" shall mean any Employee
Benefit Plan that is currently in effect and:
(a) that was established or adopted by any of the Companies or
any ERISA Affiliate or is maintained or sponsored by any of the
Companies;
(b) in which any of the Companies participate;
(c) with respect to which any of the Companies or any ERISA
Affiliate is or may be required or permitted to make any contribution;
or
(d) with respect to which any of the Companies or any ERISA
Affiliate is or may become subject to any Liability.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement,
judgment, award, fine, penalty, Tax, fee (including any legal fee,
expert fee, accounting fee or advisory fee), charge, cost (including
any cost of investigation) or expense of any nature.
DEI. "DEI" means Discovery Enterprises Inc.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to the Purchaser on
behalf of SFG and the Selling Securityholders, a copy of which is
attached to the Agreement and incorporated in the Agreement by
reference.
Employee Benefit Plan. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust,
equitable interest, claim, preference, right of possession, lease,
tenancy, license, encroachment, covenant, infringement, interference,
Order, proxy, option, right of first refusal, preemptive right,
community property interest, legend, defect, impediment, exception,
reservation, limitation, impairment, imperfection of title, condition
or restriction of any nature (including any restriction on the voting
of any security, any restriction on the transfer of any security or
other asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction
on the possession, exercise or transfer of any other attribute of
ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, cooperative,
foundation, society, political party, union, company (including any
limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
Environmental Laws. "Environmental Laws" shall mean all applicable
statutes, regulations, ordinances, by-laws, and codes and all
international treaties and agreements, now or hereafter in existence in
Canada (whether federal, provincial or municipal) and in the United
States (whether federal, state or local) relating to the protection and
preservation of the environment, occupational health and safety,
product safety, product liability or Hazardous Material, including
without limitation the Canadian Environmental Protection Act, the Waste
Management Act (British Columbia), CERCLA, the Clean Air Act, the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the California
Safe Drinking Water and Toxic Enforcement Act, all as amended from time
to time.
Environmental Permits. "Environmental Permits" shall include all
orders, permits, certificates, approvals, consents, registrations and
licenses issued by any authority of competent jurisdiction under
Environmental Laws.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
ERISA Affiliate. "ERISA Affiliate" shall mean any Person that is, was
or would be treated as a single employer with any of the Companies
under Section 414 of the Code.
Escrow Agent. "Escrow Agent" means the Escrow Agent named in the Escrow
Agreement.
Escrow Agreement. "Escrow Agreement" shall mean that certain Escrow
Agreement of even date herewith among Purchaser, the Selling
Securityholders, the Agent and the Escrow Agent.
Excluded Contract. "Excluded Contract" shall mean any SFG Contract
that:
(a) SFG has entered into in the Ordinary Course of Business;
(b) is identical in all material respects to one of the
Standard Form Agreements;
(c) has a term of less than 90 days or may be terminated by
SFG (without penalty or damages) within 90 days after the delivery of a
termination notice by SFG; and
(d) does not contemplate or involve the payment of cash or
other consideration in an amount or having a value in excess of
$10,000.
Funds. "Funds" shall mean, collectively, Discovery Enterprises Inc.,
Working Opportunity Fund (EVCC) Ltd., Ventures West III - Canada
Limited Partnership and SCC Canada Inc.
GAAP. "GAAP" shall mean Canadian generally accepted accounting
principles, applied on a consistent basis throughout the periods
covered.
Governmental Authorization. "Governmental Authorization" shall mean
any:
(a) permit, license, certificate, franchise, concession,
approval, consent, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration,
qualification or authorization that is, has been or may in the future
be issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal
Requirement; or
(b) right under any Contract with any Governmental Body.
Government Bid. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime
contractor or higher-tier subcontractor of any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any
nature;
(b) federal, state, provincial, local, municipal, foreign or
other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative,
regulatory, police, military or taxing authority or power of any
nature.
Government Contract. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery
order executed or submitted to or on behalf of any Governmental Body or
any prime contractor or higher-tier subcontractor, or under which any
Governmental Body or any such prime contractor otherwise has or may
acquire any right or interest.
Hazardous Material. "Hazardous Material" shall include:
(a) any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl;
(b) any waste, gas or other substance or material that is
explosive or radioactive;
(c) any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "regulated substance," "hazardous chemical", "toxic
chemical", "hazardous product", "dangerous goods", "waste", "toxic
substance", "deleterious substance" or words of similar import under
any Environmental Laws, including without limitation, CERCLA, any other
so-called "superfund" or "superlien" law, the Resource Conservation
Recovery Act, the Federal Water Pollution Control Act, the Toxic
Substances Control Act, the Emergency Planning and Community
Right-to-Know Act;
(d) any other substance or material (regardless of physical
form) or form of energy that is subject to any Legal Requirement and/or
Environmental Laws which regulates or establishes standards of conduct
in connection with, or which otherwise relates to, the protection of
human health, plant life, animal life, natural resources, property or
the enjoyment of life or property from the presence in the environment
of any solid, liquid, gas, odor, noise or form of energy; and (e) any
compound, mixture, solution, product or other substance or material
that contains any substance or material referred to in clause "(a)",
"(b)", "(c)" or "(d)" above.
Indemnitees. "Indemnitees" shall mean the following Persons:
(a) the Purchaser;
(b) the Purchaser's current and future affiliates (including
SFG);
(c) the respective Representatives of the Persons referred to
in clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons
referred to in clauses "(a)", "(b)" and "(c)" above;
provided, however, that (i) SFG shall not be entitled to exercise any
rights as an Indemnitee prior to the Closing, and (ii) the Selling
Securityholders shall not be deemed to be "Indemnitees."
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a diligent and comprehensive investigation concerning the
truth or existence of such fact or other matter.
SFG shall be deemed to have "Knowledge" of a particular fact or other
matter if any officer, employee or other Representative of SFG has
Knowledge of such fact or other matter.
Leased Premises. "Leased Premises" shall have the meaning specified in
Section 2.11(a) of the Agreement.
Leases. "Leases" shall have the meaning specified in Section 2.11(a) of
the Agreement.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation,
constitution, principle of common law, resolution, ordinance, code,
edict, decree, proclamation, treaty, convention, rule, regulation,
ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is, has been or
may in the future be issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under
the authority of any Governmental Body.
Liability. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied,
vicarious, derivative, joint, several or secondary liability),
regardless of whether such debt, obligation, duty or liability would be
required to be disclosed on a balance sheet prepared in accordance with
GAAP and regardless of whether such debt, obligation, duty or liability
is immediately due and payable.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award that is, has been or may in the future be
issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is, has been or
may in the future be entered into in connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of SFG
shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, is consistent with
SFG's past practices and is taken in the ordinary course of SFG's
normal day-to-day operations;
(b) such action is taken in accordance with sound and prudent
business practices;
(c) such action is not required to be authorized by SFG's
shareholders, SFG's board of directors or any committee of SFG's board
of directors and does not require any other separate or special
authorization of any nature; and
(d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in
the ordinary course of the normal day-to-day operations of other
Entities that are engaged in businesses similar to SFG's business.
Past Benefit Plan. "Past Benefit Plan" shall mean any Employee Benefit
Plan (other than a Current Benefit Plan):
(a) of which any of the Companies or any ERISA Affiliate has
ever been a "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or
that otherwise has at any time been established, adopted, maintained or
sponsored by any of the Companies or by any ERISA Affiliate;
(b) in which any of the Companies or any ERISA Affiliate has
ever participated;
(c) with respect to which any of the Companies or any ERISA
Affiliate has ever made, or has ever been required or permitted to
make, any contribution; or
(d) with respect to which any of the Companies or any ERISA
Affiliate has ever been subject to any Liability.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Pre-Closing Period. "Pre-Closing Period" shall mean the period
commencing as of the date of the Agreement and ending on the Closing
Date.
Preferred Shareholders. "Preferred Shareholders" shall mean all the
registered and beneficial holders of the Class C Preferred Shares and
the Class F Preferred Shares of SFG.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding),
prosecution, contest, hearing, inquiry, inquest, audit, examination or
investigation that is, has been or may in the future be commenced,
brought, conducted or heard by or before, or that otherwise has
involved or may involve, any Governmental Body or any arbitrator or
arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether
or not relating to a published work), trademark application, trade
name, fictitious business name, service xxxx (whether registered or
unregistered), service xxxx application, copyright (whether registered
or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, franchise, system, computer
software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or
intangible asset.
Pro Rata. "Pro Rata" means the percentage that the number of Securities
a Selling Securityholder owned immediately prior to the Closing of the
Transaction is of the total number of Securities at that time.
Purchase Price. "Purchase Price" shall have the meaning specified in
Section 1.2 of the Agreement.
Purchaser. "Purchaser" shall mean Cayenta, Inc., a Delaware
corporation.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) each of the Selling Securityholders;
(b) each individual who is, or who has at any time been, an
officer or director of any Company;
(c) each member of the family of each of the individuals
referred to in clauses "(a)" and "(b)" above; and
(d) any Entity (other than SFG) in which any one of the
individuals referred to in clauses "(a)", "(b)" and "(c)" above holds
(or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity
interest.
Representatives. "Representatives" shall mean officers, directors,
employees, agents and representatives.
Residual Shares. "Residual Shares" shall means the 400 Class A Common
Shares owned by Xxxx Xxxxx , the 200 Class A Common Shares owned by
Xxxxx Xxxxxx, and the 1177.94 Class A Common Shares owned by Investor
Co, in trust for Xxxxx Sambamdam.
Scheduled Closing Time. "Scheduled Closing Time" shall have the meaning
specified in Section 1.4(a) of the Agreement.
Securities. "Securities" shall have the meaning specified in Recital
"B" to the Agreement.
Selling Securityholders. "Selling Securityholders" shall have the
meaning specified in the introductory paragraph of the Agreement and,
for greater certainty, shall include the Elliotts in their capacity as
sellers of the Xxxxxxx Shares for the purposes of Sections 6, 8, 9, 10,
11.1 to 11.6(g) and 12.
Selling Shareholders. "Selling Shareholders" shall have the meaning
specified in the introductory paragraph of the Agreement.
SFG. "SFG" shall mean SFG Technologies, Inc., a corporation organized
and existing under the laws of Canada.
SFG Contract. "SFG Contract" shall mean any Contract:
(a) to which any Company is a party;
(b) by which any Company or any of its assets is or may become
bound or under which any Company has, or may become subject to, any
obligation; or
(c) under which any Company has or may acquire any right or
interest.
SFG Financial Statements. "SFG Financial Statements" shall have the
meaning specified in Section 2.4(a) of the Agreement.
SFG Returns. "SFG Returns" shall have the meaning specified in Section
2.18(a) of the Agreement.
Securityholder Release. "Securityholder Release" shall mean the
Securityholder Release being executed by each of the Selling
Securityholders contemporaneously with the execution and delivery of
the Agreement.
Shares. "Shares" shall have the meaning specified in Recital "A" to the
Agreement.
Specified Representations. "Specified Representations" shall mean the
representations and warranties set forth in Sections 2.1, 2.3, 2.18,
2.22, 2.28 and 3.
Standard Form Agreements. "Standard Form Agreements" shall mean the
forms of agreements attached as Appendices 2.13(x) and 2.13(y) to the
Disclosure Schedule.
Subsidiaries. "Subsidiaries" shall mean the Entities listed on Part 2.1
of the Disclosure Schedule.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax,
goods and services tax, use tax, property tax, business tax, occupation
tax, inventory tax, occupancy tax, withholding tax or payroll tax),
levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), that is, has been or may in
the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any
tax-sharing agreement or similar Contract.
Tax Escrow Agreement. "Tax Escrow Agreement" shall mean the certain Tax
Escrow Agreement of even date herewith among The Purchaser, the US
Sellers, the Agent and The Escrow Agent.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate,
schedule, notice, notification, form, election, certificate or other
document or information that is, has been or may in the future be filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
Transactional Agreements. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Securityholder Releases;
(c) the Option Termination Agreements;
(d) the Noncompetition Agreements referred to in Section
1.4(c)(viii) of the Agreement;
(e) the Escrow Agreement;
(f) the Tax Escrow Agreement;
(g) the BEA Escrow Agreement; and
(h) the Closing Certificate.
Transactions. "Transactions" shall mean (a) the execution and delivery
of the respective Transactional Agreements, and (b) all of the
transactions contemplated by the respective Transactional Agreements,
including:
the sale of the Securities by the Selling Securityholders to
the Purchaser in accordance with the Agreement; and
the performance by SFG, the Selling Securityholders and the
Purchaser of their respective obligations under the Transactional
Agreements and the exercise by SFG, the Selling Securityholders and the
Purchaser of their respective rights under the Transactional
Agreements.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet"
shall have the meaning specified in Section 2.4(a)(ii) of the
Agreement.
US Seller. "US Seller" shall mean any of the Selling Securityholders
identified in Part 2.33 of the Disclosure Schedule as being a
non-resident of Canada within the meaning of the Income Tax Act
(Canada).
Viruses. "Viruses" shall mean any computer code designed to disrupt,
disable, harm, or otherwise impede in any manner, the operation of the
computer program, or any other associated software, firmware, hardware,
or network (including local area or wide-area networks), in a manner
not intended by the creator(s) of such software, firmware, hardware, or
network.
VWP. "VWP" shall mean Ventures West III - Canada Limited Partnership
Year 2000 Compliant. "Year 2000 Compliant" shall mean, in regard to any
product or internal system, that such product or internal system can
individually continue to be used normally and to operate successfully
(both in functionality and performance) over the transition into the
twenty first century when used in accordance with the documentation
relating to such product or internal system, including being able to,
before, on and after January 1, 2000 substantially conform to the
following: (i) use logic pertaining to dates that allow users to
identify and/or use the century portion of any date fields without
special processing; and (ii) respond to all date elements and date
input so as to resolve any ambiguity as to century in a disclosed,
defined and pre-determined manner and provide date information in ways
that are unambiguous as to century, either by permitting or requiring
the century to be specified or where the data element is represented
without a century, the correct century is unambiguous for all
manipulations involving that element.
STOCK PURCHASE AGREEMENT
among:
XXXXXXX.XXX, INC.
a Delaware corporation;
SFG TECHNOLOGIES, INC.
a corporation organized and existing
under the laws of British Columbia, Canada;
and
[SECURITYHOLDERS]
Dated as of December __, 1999
TABLE OF CONTENTS
1. SALE AND PURCHASE OF SECURITIES; RELATED TRANSACTIONS....................................................1
1.1 Sale and Purchase of Securities.................................................................1
1.2 Purchase Price..................................................................................2
1.3 Closing Net Working Capital Adjustment..........................................................3
1.4 Closing.........................................................................................4
1.5 Tax Matters.....................................................................................5
2. REPRESENTATIONS AND WARRANTIES OF SFG....................................................................5
2.1 Due Organization; No Subsidiaries; Etc..........................................................6
2.2 Certificate of Incorporation and Bylaws; Records................................................7
2.3 Capitalization, Etc.............................................................................7
2.4 Financial Statements............................................................................9
2.5 Absence of Changes.............................................................................10
2.6 Title to Assets................................................................................12
2.7 Bank Accounts..................................................................................12
2.8 Receivables; Major Customers...................................................................13
2.9 Inventory......................................................................................13
2.10 Equipment, Etc.................................................................................14
2.11 Real Property..................................................................................14
2.12 Proprietary Assets.............................................................................15
2.13 Contracts......................................................................................17
2.14 Security Matters...............................................................................21
2.15 Liabilities; Major Suppliers...................................................................21
2.16 Compliance With Legal Requirements.............................................................22
2.17 Governmental Authorizations....................................................................22
2.18 Tax Matters....................................................................................23
2.19 Employee and Labor Matters.....................................................................25
2.20 United States Benefit Plans; ERISA.............................................................27
2.21 Canadian Benefit Plans.........................................................................29
2.22 Environmental Matters..........................................................................30
2.23 Sale of Products; Performance of Services......................................................32
2.24 Insurance......................................................................................32
2.25 Related Party Transactions.....................................................................34
2.26 Certain Payments, Etc..........................................................................34
2.27 Proceedings; Orders............................................................................35
2.28 Authority; Binding Nature of Agreements........................................................35
2.29 Non-Contravention; Consents....................................................................36
2.30 Year 2000 Compliance...........................................................................37
2.32 Brokers........................................................................................37
2.33 Full Disclosure................................................................................37
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDERS...........................................38
3.1 Due Authorization; Etc.........................................................................38
3.2 Due Organization; Etc..........................................................................39
3.3 Ownership; Title to Securities.................................................................40
3.4 Brokers........................................................................................40
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................................40
4.1 Acquisition of Securities......................................................................40
4.2 Authority; Binding Nature of Agreement.........................................................40
4.3 Brokers........................................................................................40
4.4 Non-Contravention; Consents....................................................................41
5. PRE-CLOSING COVENANTS OF SFG AND SELLING SECURITYHOLDERS................................................41
5.1 Access and Investigation.......................................................................41
5.2 Operation of Business..........................................................................41
5.3 Filings and Consents...........................................................................43
5.4 Notification; Updates to Disclosure Schedule...................................................44
5.5 Payment of Indebtedness by Related Parties.....................................................44
5.6 No Negotiation.................................................................................44
5.7 Best Efforts...................................................................................45
5.8 Confidentiality................................................................................45
5.9 [Section 256(9) Election.......................................................................45
6. PRE-CLOSING COVENANTS OF PURCHASER......................................................................45
6.1 Best Efforts...................................................................................45
7. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE.............................................45
7.1 Satisfactory Completion of Pre-Acquisition Review..............................................45
7.2 Accuracy of Representations....................................................................46
7.3 Performance of Obligations.....................................................................46
7.4 Approval of the Purchaser's Board of Directors; Consents.......................................46
7.5 No Adverse Change..............................................................................47
7.6 Additional Documents...........................................................................47
7.7 No Proceedings.................................................................................47
7.8 No Claim Regarding Stock Ownership or Sale Proceeds............................................47
7.9 No Prohibition.................................................................................47
8. CONDITIONS PRECEDENT TO SELLING SECURITYHOLDERS' OBLIGATION TO CLOSE....................................48
8.1 Accuracy of Representations....................................................................48
8.2 Purchaser's Performance........................................................................48
8.3 No Injunction..................................................................................48
9. TERMINATION.............................................................................................48
9.1 Termination Events.............................................................................48
9.2 Termination Procedures.........................................................................49
9.3 Effect of Termination..........................................................................49
9.4 Nonexclusivity of Termination Rights...........................................................49
10. INDEMNIFICATION, ETC....................................................................................49
10.1 Survival of Representations and Covenants......................................................49
10.2 Indemnification by Selling Securityholders.....................................................50
10.3 Indemnification Limitations....................................................................51
10.4 No Contribution................................................................................52
10.5 Setoff.........................................................................................52
10.6 Defense of Third Party Claims..................................................................52
10.7 Exercise of Remedies by Indemnitees Other Than Purchaser.......................................53
11. MISCELLANEOUS PROVISIONS................................................................................53
11.1 Joint and Several Liability....................................................................53
11.2 Selling Securityholders' Agent.................................................................54
11.3 Further Assurances.............................................................................55
11.4 Fees and Expenses..............................................................................55
11.5 Attorneys' (Legal) Fees........................................................................55
11.6 Currency; Exchange Rate........................................................................55
11.7 Notices........................................................................................55
11.8 Publicity......................................................................................56
11.9 Time of the Essence............................................................................56
11.10 Headings.......................................................................................56
11.11 Counterparts...................................................................................57
11.12 Governing Law; Venue...........................................................................57
11.13 Successors and Assigns.........................................................................58
11.14 Remedies Cumulative; Specific Performance......................................................58
11.15 Waiver.........................................................................................58
11.16 Amendments.....................................................................................58
11.17 Severability...................................................................................58
11.18 Parties in Interest............................................................................59
11.19 Entire Agreement...............................................................................59
11.20 Construction...................................................................................59
11.21 Negotiation of Disputes........................................................................59
EXHIBITS
Exhibit A:........Certain Definitions
Exhibit B:........Form of Option Termination Agreement
Exhibit C:........Form of Noncompetition Agreements
Exhibit D: Form of opinion letter from Farris, Vaughan, Xxxxx & Xxxxxx
Exhibit E: Form of Securityholder Release
Exhibit F: Notice Information for Funds
DISCLOSURE SCHEDULES
1.2 Allocation of Purchase Price
1.4 Outstanding Long Term-Debt / Class C & F Preferred
2.1 Due Organization; Subsidiaries
2.3 Capitalization, Etc.
2.4 Unaudited Interim Balance Sheet
2.5 Absence of Changes
2.6 Title to Assets
2.7 Bank Accounts
2.8 Receivables; Major Customers
2.9 Inventory
2.10 Equipment
2.11 Real Property
2.12 Owned & Leased Proprietary Assets
2.13 Contracts
2.15 Liabilities; Major Suppliers
2.16 Compliance with Legal Requirements
2.17 Governmental Authorizations
2.18 Tax Matters
2.19 Employee and Labor Matters
2.20 United States Benefit Plans; ERISA
2.21 Canadian Benefit Plans
2.23 Sale of Products; Performance of Services
2.24 Insurance
2.25 Related Party Transactions
2.27 Proceedings; Orders
2.29 Non-Contravention; Consents
2.33 Full Disclosure
3.2 Due Organization; Etc.
3.3 Title to Shares
4 Xxxxxxx Representations
11.3 Indemnification
