EXHIBIT 10.43
THIS SHARE PURCHASE AGREEMENT is dated as of the 19th day of May, 1999.
BETWEEN:
JETFORM CORPORATION
(the "Vendor" or "JetForm")
AND:
CALIAN TECHNOLOGY LTD.
(the "Purchaser" or "Calian")
WHEREAS:
A. The Vendor is the registered and beneficial owner of 1,000,000 common shares
and 23,750 Class B Cumulative Redeemable Retractable Convertible Preference
Shares (the "Purchased Shares") in the capital stock of Why Interactive Inc.
(the "Company"), being all the issued and outstanding shares in the capital
stock of the Company.
B. The Vendor has agreed to sell to the Purchaser and the Purchaser has agreed
to purchase from the Vendor the Purchased Shares in consideration of the
Purchase Price as defined hereinafter, such purchase to be effective as of April
30, 1999 (the "Effective Date").
C. The Vendor, the Purchaser and the Company have entered into a certain term
sheet as of April 30, 1999 as amended setting out the general terms in respect
of the purchase and sale of the Purchased Shares (the "Term Sheet"), which
general terms are fully defined pursuant to the herein Agreement.
D. Contemporaneously with the execution of the Term Sheet, the Vendor, the
Purchaser and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Escrow Agent") entered into a certain
escrow agreement as of April 30, 1999 (the "Escrow Agreement") pursuant to which
the Purchaser deposited the amount of $3,000,000 with the Escrow Agent, which
amount shall be applied in respect of the Purchase Price as hereinafter defined.
NOW THEREFORE THIS AGREEMENT WITNESSETH that for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
in consideration of the premises and mutual covenants herein contained, the
parties hereto agree as follows:
1. Purchase and Sale
On the Closing (as hereinafter defined), subject to the terms hereof, the Vendor
agrees to sell the Purchased Shares to the Purchaser and the Purchaser agrees to
purchase from the Vendor the Purchased Shares. The sale of the Purchased Shares
by the Vendor to the Purchaser shall be completed by the parties on the date set
forth in Section 4 hereof, by delivery by the Vendor to the Purchaser of the
documents set forth in Section 4 hereof against delivery by the Purchaser to the
Vendor of the consideration specified in Section 2 hereof.
2. Purchase Price and Payment
Subject to the adjustments as detailed below, if any, the aggregate
consideration for the Purchased Shares shall be $6,359,000 (the "Purchase
Price"). The Purchase Price shall be subject to adjustment by an increase in the
amounts (the "Adjustment Amounts") of any cash payments received after the
Effective Date by either the Purchaser or the Company in respect of amounts due
to the Company:
(a) from Viva Interactive Learning Inc. for events or services which were
completed prior to the Effective Date; and/or
(b) in respect of any research and development tax credits earned by the
Company attributable to activities taking place prior to the Effective
Date (the "ITCs").
On the Closing (as hereinafter defined), the Purchase Price shall be paid and
satisfied as follows:
(i) by the delivery by the Escrow Agent pursuant to the Escrow
Agreement to the Vendor of a certified cheque or bank draft in the
aggregate amount of $3,000,000 less $1,259,000 for liabilities
payable by the Company to the Vendor (the "Intercompany Liability")
as at the Effective Date (the "Closing Cash Payment");
(ii) by the delivery to the Vendor of a convertible debenture issued by
the Purchaser substantially in the form attached hereto as Schedule
A1 having a principal amount of $2,359,000 (the "Convertible
Debenture"), which Convertible Debenture shall have a term of three
(3) years from Closing, bear interest at a rate of five percent
(5%) per annum payable quarterly in arrears and shall be
convertible into five hundred and thirty-nine thousand, two hundred
(539,200) common shares of the Purchaser (the "Consideration
Shares") which shall be freely tradeable on the terms set out
therein; and
(iii) by the delivery to the Vendor of a debenture issued by the
Purchaser substantially in the form attached hereto as Schedule A2
having a principal amount of $1,000,000 (the "Debenture") which
Debenture shall be payable on April 15, 2000, bear interest at a
rate of five percent (5%) per annum payable quarterly in arrears.
Included in the Purchase Price, upon the Closing, the Purchaser shall cause the
Escrow Agent to deliver to the Vendor a certified cheque or bank draft
representing the Intercompany Liability.
Subsequent to the Closing, and for an indefinite period thereafter, the
Purchaser shall pay, or cause the Company to pay, amounts comprising the
Adjustment Amounts to the Vendor within 30 days of the receipt of same, or in
the case of any ITCs, within 30 days of Revenue Canada having issued its final
notice of assessment, reassessment or confirmation, as the case may be. The
Purchaser shall be liable to account to the Vendor in respect of the Adjustment
Amounts upon request by the Vendor acting reasonably. Notwithstanding any
provision herein to the contrary, the foregoing covenants shall survive the
completion of the transactions contemplated hereby.
The parties hereto acknowledge that the Vendor has operated the Company since
the Effective Date on behalf of the Purchaser and shall prepare and submit to
the Purchaser by June 15, 1999 the Company's financial statements for the month
of May 1999. Upon agreement by the parties hereto as to the accuracy of such
financial statements, to the extent of a surplus of cash for such month, the
Vendor shall remit such surplus to the Purchaser and, to the extent of a cash
deficit for such month, the Purchaser shall remit such deficit to the Vendor, in
either case within fifteen (15) days of the parties hereto agreeing on the
amount of such surplus or deficit, as the case may be. The foregoing is in
addition to the Vendor's right to withdraw the cash and cash equivalents as of
the Effective Date.
Other Covenants
(1) the Vendor shall have caused the Company to reduce the work in progress
shown on its books of account as at the Effective Date, as it relates to
its contract with ▇▇▇▇▇▇ ▇▇▇▇ by $300,000;
(2) within thirty (30) days of Closing, the Vendor shall enter into an
agreement with the Company, on terms acceptable to the Purchaser acing
reasonably, for a services solution worth a minimum of $200,000 to be
delivered by the Company no later than September 30, 1999;
(3) in the event that the total revenue of the Company for the five month
period ending September 30, 1999, calculated using the percentage of
completion method, falls short of $2,083,000, the Vendor shall contract
with the Company for services equal to the amount of such shortfall to be
billed at direct salary costs plus 400% of such costs, subject to an
aggregate maximum of $500,000 provided that the Purchaser provides a
written demand for such contract on or before December 31, 1999 and
provided further that the Purchaser uses its commercial best efforts to
realize on the value of the backlog and sales opportunities of the Company
so as to reasonably maximize the revenue of the Company as referred to
herein; and
(4) the Vendor shall use its commercial best efforts to make available the
services of ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the Company, or if ▇▇. ▇▇▇▇▇ ceases to be an
employee of the Vendor or any of its affiliates, or for any other reason,
the Vendor shall use its commercial best efforts to make available a
similarly qualified individual having knowledge of the operations of the
Company acceptable to the Purchaser acting reasonably, on a full-time
basis, for a period of two months from the date of Closing, and the Vendor
shall pay all salary and remuneration to ▇▇. ▇▇▇▇▇, or such other
individual as the case may be, during such period.
4. Closing
(a) Time of the Essence. Time shall be of the essence of this Agreement.
(b) Closing. The closing of this transaction (the "Closing") shall take
place at 6:00 p.m. on May 19, 1999 at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ or at
such other place and at such other time as may be approved in writing
by the parties hereto.
(c) Closing Procedures. At or before Closing, the Vendor and the Purchaser
shall take or cause to be taken all actions, steps and corporate
proceedings necessary or desirable to validly and effectively approve
or authorize the completion of the transactions herein provided for;
and, upon fulfilment of all of the conditions set forth in Sections 5
and 6 which have not been waived in writing as therein provided, the
Vendor shall deliver or cause to be delivered to the Purchaser all
documents required to be delivered hereunder, including:
(1) the certificates representing the Purchased Shares duly endorsed
in blank for transfer;
(2) a certificate representing the Purchased Shares duly registered
in the name of the Purchaser;
(3) the minute books, share certificate books and corporate seals of
the Company;
(4) the written resignation of all directors and officers of the
Company and their release of all claims against the Company;
(5) the written release of all claims against the Company executed by
the Vendor; and
(6) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Purchaser to
complete the transactions provided for in this Agreement;
and upon fulfilment of the foregoing provisions of this Section 4 and upon
fulfilment of all of the conditions set forth in Sections 5 and 6 which have not
been waived in writing as therein provided, the Purchaser shall deliver the
Purchase Price on the terms and conditions specified in Section 2 to the Vendor
and a certified copy of the minutes of the meeting of the board of directors of
the Purchaser which approved of the transactions contemplated by this Agreement,
including the issuance of the Convertible Debenture, the Debenture and the
reservation of the Consideration Shares.
5. Conditions for the Benefit of the Purchaser
The Purchaser shall not be obliged to complete the purchase herein provided for
unless, at or prior to the Closing, each of the following conditions shall have
been satisfied, it being understood that the said conditions are included for
the exclusive benefit of the Purchaser and may be waived in writing by the
Purchaser at any time; and the Vendor covenants and agrees with the Purchaser to
use his best efforts to ensure that such conditions are fulfilled at or prior to
Closing:
(a) Representations and Warranties. The representations and warranties set
forth in Section 7 shall be true and correct in all respects at
Closing.
(b) Compliance. All of the terms, covenants and agreements set forth in
this Agreement to be complied with or performed at or prior to closing
shall have been complied with or performed at or prior to the Closing.
(c) Due Diligence Investigation. The Purchaser shall have conducted and
completed its investigation of the Company, and the Purchaser, in its
sole discretion, shall have been satisfied in all respects with the
results of such investigation, and, in its sole discretion, shall have
determined to proceed with the transactions contemplated in this
Agreement.
(d) Material Adverse Change. During the period from the Effective Date to
the Closing, there shall have been no material adverse change in the
Company, the Purchased Shares or the business of the Company.
(e) Good Title. The Vendor shall have good and marketable title to the
Purchased Shares, free and clear of any and all liens, encumbrances
and security interests of any nature and kind whatsoever (a "Lien").
(f) Consents and Approvals. All consents and approvals (the "Vendor
Consents and Approvals") required to be obtained by the Vendor in
connection with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement shall
have been obtained.
(g) Notices. All notices (the "Vendor Notices") required to be given by
the Vendor in connection with the execution and delivery of this
Agreement and the completion of the transactions contemplated by this
Agreement shall have been obtained.
(h) Deliveries. The Vendor shall have delivered to the Purchaser the
documents contemplated in Section 4 and otherwise hereunder.
In case any of the foregoing conditions shall not have been fulfilled at or
prior to Closing, the Purchaser in its sole discretion may either: (a) terminate
this Agreement by notice in writing to the Vendor, in which event the Purchaser
shall be released from all obligations under this Agreement, and unless the
Purchaser can show that the condition for which the Purchaser has terminated
this Agreement could reasonably have been performed or complied with or caused
to have been performed or complied with by the Vendor, then the Vendor shall
also be released from all obligations hereunder; or (b) waive compliance with
any such condition if it shall see fit to do so, without prejudice to its right
of termination in the event of non-fulfilment of any other condition in whole or
in part.
6. Conditions for the Benefit of the Vendor
The Vendor shall not be obliged to complete the sale herein provided for unless,
at or prior to Closing, each of the following conditions shall have been
satisfied, it being understood that the said conditions are included for the
exclusive benefit of the Vendor and may be waived in writing by the Vendor at
any time; and the Purchaser covenants and agrees with the Vendor to use its best
efforts to ensure that such conditions are fulfilled at or prior to Closing:
(a) Representations and Warranties. The representations and warranties set
forth in Section 8 shall be true and correct in all respects at
Closing.
(b) Compliance. All of the terms, covenants and agreements set forth in
this Agreement to be complied with or performed by the Purchaser at or
prior to Closing shall have been complied with or performed by the
Purchaser at or prior to Closing.
(c) Consents and Approvals. All consents and approvals required to be
obtained by the Purchaser in connection with the execution and
delivery of this Agreement and the completion of the transactions
contemplated by this Agreement shall have been obtained.
(d) Notices. All notices required to be given by the Purchaser in
connection with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement shall
have been obtained.
(e) Deliveries. The Purchaser shall have delivered to the Vendor the
Purchase Price on the terms and conditions specified in Section 2 and
all such other documents as the Vendor considers reasonably necessary
or desirable to complete the transactions contemplated hereby.
In case any of the foregoing conditions shall not have been fulfilled at or
prior to Closing, the Vendor in its sole discretion may either: (a) terminate
this Agreement by notice in writing to the Purchaser, in which event the Vendor
shall be released from all obligations under this Agreement, and unless the
Vendor can show that the condition for which he terminated this Agreement could
reasonably have been performed or complied with by the Purchaser, the Purchaser
shall also be released from all obligations hereunder; or (b) waive compliance
with any such condition if he shall see fit to do so, without prejudice to his
right of termination in the event of non-fulfilment of any other condition in
whole or in part.
7. Representations and Warranties of the Vendor.
As a material inducement to the Purchaser's entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Purchaser is entering into this Agreement in reliance upon the
representations and warranties of the Vendor set out in this Section 7, the
Vendor represents and warrants to the Purchaser as follows:
(a) Incorporation of Vendor. The Vendor is a corporation incorporated and
validly subsisting under the laws of the jurisdiction of its
incorporation. The Vendor has the corporate power and authority and is
qualified to own and dispose of the Purchased Shares. No act or
proceeding has been taken by or against the Vendor in connection with
the dissolution, liquidation, winding up, bankruptcy or reorganization
of the Vendor.
(b) Authorization by Vendor. The Vendor has the corporate power, authority
and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and
to carry out its obligations under this Agreement and such other
agreements and instruments. The execution and delivery of this
Agreement and such other agreements and instruments and the completion
of the transactions contemplated by this Agreement and such other
agreements and instruments have been duly authorized by all necessary
corporate action on the part of the Vendor and its shareholders.
(c) Enforceability of Vendor's Obligations. This Agreement constitutes a
valid and binding obligation of the Vendor enforceable against the
Vendor in accordance with its terms subject, however, to limitations
on enforcement imposed by bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of the rights of creditors and
others and to the extent that equitable remedies such as specific
performance and injunctions are only available in the discretion of
the court from which they are sought. The Vendor is not an insolvent
person within the meaning of the Bankruptcy and Insolvency Act
(Canada) or similar laws of any other jurisdiction and will not become
an insolvent person as a result of the Closing.
(d) Residence of Vendor. The Vendor is not a non-resident of Canada within
the meaning of Section 116 of the Income Tax Act (Canada).
(e) Ownership of the Purchased Shares. The Vendor is, and at the Closing
will be, the registered and beneficial owner of the Purchased Shares
with good and marketable title thereto, free and clear of all Liens.
No person other than the Purchaser has any agreement, option, right or
privilege capable of becoming an agreement for the purchase from the
Vendor of any of the Purchased Shares.
(f) Consents and Approvals. All the Vendor Consents and Approvals are
listed in Schedule D. Except for the Vendor Consents and Approvals, no
consent or approval of any person is required in connection with the
execution and delivery of this Agreement and the completion of the
transactions contemplated by this Agreement or to permit the Company
to carry on the business of the Company after the Closing as the
business is currently carried on by the Company.
(g) Notices. All the Vendor Notices are listed in Schedule D. Except for
the Vendor Notices, no notice is required to be delivered to any
person in connection with the execution and delivery of this Agreement
and the completion of the transactions contemplated by this Agreement
or to permit the Company to carry on the business of the Company after
the Closing as the business is currently carried on by the Company.
(h) Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Vendor and the completion (with
any required Vendor Consents and Approvals and Vendor Notices) of the
transactions contemplated by this Agreement do not and will not result
in or constitute any of the following:
(i) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation
of any of the terms, conditions or provisions of the articles
or by-laws of the Vendor or the Company;
(ii) an event which, pursuant to the terms of any contract, licence
or permit, causes any right or interest of the Company to come
to an end or be amended in any way that is detrimental to the
business of the Company or entitles any other person to
terminate or amend any such right or interest;
(iii) the creation or imposition of any Lien on any asset of the
Company; or
(iv) the violation of any applicable law by the Vendor or the
Company.
(i) Organization of the Company. The Company is a corporation duly
incorporated and validly subsisting under the laws of Ontario. Except
as set out in Schedule D, the Company has no subsidiaries or
agreements of any nature to acquire any subsidiary or to acquire or
lease any business operation. The Company is licensed, registered and
qualified to do business and is in good standing under the laws of the
Province of Ontario, which jurisdictions is the only one in which the
business of the Company is carried on, and neither the character nor
the location of the properties owned by the Company or any subsidiary
nor the nature of the business conducted by it requires licensing,
registration or qualification under the laws of any other
jurisdiction. The Company has full corporate power to carry on the
business of the Company and to own and operate its assets, properties
and business as now carried on and owned and operated.
(j) Share Capital. The authorized capital of the Company including,
without limitation, any consists of an unlimited number of common
shares and an unlimited number of Class B Cumulative Redeemable
Retractable Convertible Preferred Shares of which there are 1,000,000
common shares and 23,750 Class B Cumulative Redeemable Retractable
Convertible Preferred Shares issued and outstanding as fully paid and
non-assessable. The Company does not have a stock option plan and
there are no outstanding securities convertible into or exchangeable
for any shares of capital stock or any rights (either pre-emptive or
other) to subscribe for or to purchase, or any options, rights or
warrants for the purchase of, or any agreements providing for the
issuance of, or any calls, commitments or claims of any character
relating to the issuance of, any securities in the capital of the
Company.
(k) Dividends. Except as set out in Schedule D in relation to the common
shares of the Company, the Company has not, since the date of its
incorporation, declared or made any payment of any dividend or other
distribution in respect of its common shares or its Class B Cumulative
Redeemable Retractable Convertible Preferred Shares and has not
redeemed, purchased or otherwise acquired any shares.
(l) Corporate Records. The minute books of the Company contain true,
correct and complete copies of its articles, its by-laws, the minutes
of every meeting of its board of directors and every committee thereof
and of its shareholders and every written resolution of its directors
and shareholders since the acquisition of the Company by the Vendor in
1993. The share certificate book, register of shareholders, register
of transfers and register of directors and officers of the Company are
complete and accurate in all material respects.
(m) Bankruptcy. The Company is not an insolvent person and has not
committed an act of bankruptcy within the meaning of the Bankruptcy
and Insolvency Act (Canada) or similar laws of any other jurisdiction
and has not made an assignment in favour of its creditors nor made a
proposal in bankruptcy to its creditors or any class thereof nor had
any petition for a receiving order presented in respect of it. The
Company has not initiated proceedings with respect to a compromise or
arrangement with its creditors or for its winding up, liquidation or
dissolution. No receiver has been appointed in respect of the Company
or any of its assets or the Purchased Shares and no execution or
distress has been levied upon any of such assets or the Purchased
Shares.
(n) Financial Statements. The Vendor has furnished the Purchaser with the
management prepared unaudited financial statements of the Company for
the fiscal year ended April 30, 1999 (collectively, the "Financial
Statements"), true and complete copies of which are annexed to
Schedule D. The Financial Statements have been prepared in accordance
with Canadian generally accepted accounting principles ("GAAP"). The
balance sheets contained in such Financial Statements fairly present
in all material respects the financial position of the Company as of
their respective dates and the statements of earnings and retained
earnings contained in the Financial Statements fairly present in all
material respects the results of operations for the periods indicated,
subject to the disallowance of any input tax credits claimed. Since
April 30, 1999, the Company has carried on its business in the
ordinary course and there has been no material adverse change in the
business, financial condition, assets, results of operations of the
Company. The fixed assets that form part of this transaction are made
up of those listed in Schedule D and any and all other fixed assets of
the Company will have been or shall be transferred to the Vendor on or
prior to the Closing. The Vendor shall be entitled to withdraw the
cash and cash equivalents of the Company as of the Effective Date,
being $300,095.
(o) Title to Assets. Except as disclosed in Schedule D, the Company has
good and marketable title to all of its assets, free and clear of any
and all Liens. Schedule D sets out a complete and accurate list of all
locations where the assets of the Company are situated, including a
brief description of the assets situated at each location. All
machines, machinery, equipment, tools or other moveable or mechanical
property forming part of the assets are in good operating condition
and are in a state of good repair and maintenance, reasonable wear and
tear excepted. There is no agreement, option or other right or
privilege outstanding in favour of any person for the purchase from
the Company and/or Vendor of the business of the Company or of any of
the assets out of the ordinary course of business. Such assets are
sufficient to permit the continued operation of the business of the
Company in substantially the same manner as conducted in the year
ended on the date of this Agreement. There is no agreement, option or
other right or privilege outstanding in favour of any person for the
purchase from the Company of its business or of any of its assets out
of the ordinary course of its business.
(p) Leased Premises. The Company leases the real property premises at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, which lease will terminate as of
June 15, 1999.
(q) Material Contracts. Schedule D lists all the contracts that the
Company is a party to which are material to the operation of the
Business ("Material Contracts"). The Company is not in default under
any Material Contract and there has not occurred any event which, with
the lapse of time or giving of notice or both, would constitute a
default under any Material Contract by the Company or any other party
to the Material Contract. Each Material Contract is in full force and
effect, unamended by written or oral agreement, and the Company is
entitled to the full benefit and advantage of each Material Contract
in accordance with its terms. Each Material Contract is in good
standing and neither the Company nor the Vendor has received any
notice of a default by any party under any Material Contract nor any
dispute between the Company and any other party in respect of any
Material Contract.
(r) Intellectual Property.
(i) Schedule D lists all of the Intellectual Property. The
Intellectual Property, and all registrations of the
Intellectual Property, are valid and subsisting. All of the
registrations and applications for registration of the
Intellectual Property are in good standing and are recorded in
the name of the Company. No application for registration of any
of the Intellectual Property has been rejected.
(ii) To the Vendor's and the Company's knowledge, the Company is the
first and only owner of the Intellectual Property and is
entitled to the exclusive and uninterrupted use of the
Intellectual Property without payment of any royalty or other
fees. No person has any right, title or interest in any of the
Intellectual Property and all such persons have waived their
moral rights in any copyright works within the Intellectual
Property.
(iii) To the Vendor's and the Company's knowledge, there is no
litigation relating to the Intellectual Property.
(iv) The employees of the Company have agreed to maintain the
confidentiality of confidential Intellectual Property.
(v) All of the Company's permissions and licences to use the
industrial or intellectual property of other Persons are
disclosed in Schedule D. The Company has not permitted or
licensed any person to use any of the Intellectual Property
except as disclosed in Schedule D. Each licence referred to in
Schedule D is in full force and effect and neither the Company
nor the licensor is in default of its obligations thereunder.
(vi) To the Vendor's and the Company's knowledge, no person has
challenged the validity of any registrations for the
Intellectual Property or the Company's rights to any of the
Intellectual Property.
(vii) To the Vendor's and the Company's knowledge, neither the use of
the Intellectual Property nor the conduct of the business of
the Company has infringed or currently infringes upon the
industrial or intellectual property rights of any other person.
(viii) To the Vendor's and the Company's knowledge, no other person
has infringed the Company's rights to the Intellectual
Property, except as set out in Schedule D.
(ix) There is no governmental prohibition or restriction on the use
of the Intellectual Property in the jurisdictions in which the
Company currently carries on business.
For the purposes of this Agreement, "Intellectual Property" means all
rights to and interests in:
(i) all business and trade names, corporate names, brand names and
slogans related to the business of the Company;
(ii) all inventions, patents, patent rights, patent applications
(including all reissues, divisions, continuations,
continuations-in-part and extensions of any patent or patent
application), industrial designs and applications for
registration of industrial designs related to the business of
the Company;
(iii) all copyrights and trade-marks (whether used with wares or
services and including the goodwill attaching to such
trade-marks), registrations and applications for trade-marks
and copyrights (and all future income from such trade-marks and
copyrights) related to the business;
(iv) all rights and interests in and to processes, lab journals,
notebooks, data, trade secrets, designs, know-how, product
formulae and information, manufacturing, engineering and other
drawings and manuals, technology, blue prints, research and
development reports, agency agreements, technical information,
technical assistance, engineering data, design and engineering
specifications, and similar materials recording or evidencing
expertise or information related to the business of the
Company;
(v) all of the intellectual property listed in Schedule D;
(vi) all other intellectual and industrial property rights
throughout the world related to the business of the Company;
(vii) all licences of the intellectual property listed in items (i)
to (vi) above;
(viii) all future income and proceeds from any of the intellectual
property listed in items (i) to (vi) above and the licences
listed in item (vii) above; and
(ix) all rights to damages and profits by reason of the infringement
of any of the intellectual property listed in items (i) to
(vii) above.
(s) Undisclosed Liabilities. Except as disclosed in Schedule D, the
Company does not have any liabilities, obligations, indebtedness or
commitments, whether accrued, absolute, contingent or otherwise, which
are not disclosed in the Financial Statements or referred to or
disclosed herein, other than liabilities, obligations and indebtedness
(i) incurred in the normal course of business; and (ii) which do not
exceed in the aggregate $15,000.
(t) Litigation. Except for the DREX Lawsuit (as defined herein), there is
no action, suit, proceeding, claim, application, complaint or
investigation in any court or before any arbitrator or before or by
any regulatory body or governmental or non-governmental body pending
or threatened by or against the Company and/or Vendor related to its
business or affecting its business, operations or capital or the
transactions contemplated by this Agreement, and there is no factual
or legal basis which could give rise to any such action, suit,
proceeding, claim, application, complaint or investigation.
(u) Employee Matters. Schedule D lists all the employees of the Company as
of the date of this Agreement and the age, position, status, length of
service, compensation, vacation entitlement, remaining vacation for
1999 and all other benefits of each of them, respectively. The
Purchaser has been provided with copies of all employment agreements.
Except as set out in Schedule D, the Company is not a party to or
bound by any contracts or requirements of applicable laws in respect
of any of its employees or former employees, including:
(i) any contracts for the employment or statutorily required
re-employment of any employee; or
(ii) any bonus, deferred compensation, profit sharing, stock option
or purchase, pension, retirement, hospitalization insurance or
other plans or arrangements providing employee benefits.
There is no labour strike, dispute, slowdown or stoppage actually
pending or involving or, to the knowledge of the Vendor or the
Company, threatened against the Company with respect to the business
of the Company. No union representation question exists respecting the
employees in connection with the business of the Company and no
collective bargaining agreement is in place or currently being
negotiated by the Company. Except as set out in Schedule D, there are
no wages, salaries or bonuses owing or promised to any of the
employees other than wages accruing, and unpaid, in the normal course
of business for the most recent pay period to the Closing and in
respect of accrued vacation. No notice has been received by the
Company or the Vendor of any complaint which has not been resolved,
filed by any of its employees claiming that the Company has violated
the Employment Standards Act (Ontario) or the Human Rights Code
(Ontario) (or any applicable employee or human rights or similar
legislation in the other jurisdictions in which the Company operates),
or of any complaints or proceedings which have not been resolved of
any kind involving the Company or, to the Vendor's or the Company's
knowledge, after due inquiry, any of the employees before any labour
relations board. There are no outstanding orders or charges against
the Company under the Occupational Health and Safety Act (Ontario) (or
any applicable health and safety legislation in the other
jurisdictions in which the Company carries on business). All levies,
assessments and penalties made against the Company pursuant to the
workers' compensation legislation in the jurisdictions in which the
Company carries on business have been paid by the Company and the
Company has not been reassessed under any such legislation except such
as have been resolved.
(v) Bonuses. The Company has not paid any bonus, fee, distribution,
remuneration or other compensation to any person (other than salaries,
wages or bonuses paid or payable to employees in the ordinary course
of business in accordance with current compensation levels and
practices as set out in Schedule D and fees to professional advisors
in the ordinary course of business).
(w) Affiliated Transactions. Except as disclosed in Schedule D, the
Company is not liable in respect of advances, loans, guarantees to or
on behalf of any shareholder, officer, director, employee or
subsidiary of the Company or any other person with whom the Company
does not deal at arm's length.
(x) Tax Filings. Except as disclosed in Schedule D, the Company has
prepared and filed on time with all appropriate taxing authorities all
returns, declarations, remittances, information returns, reports and
other documents of every nature required to be filed by or on behalf
of the Company in respect of any taxes or in respect of any other
provision in any domestic or foreign federal, provincial, municipal,
state, territorial or other taxing statute for all fiscal periods
ending prior to the date hereof and will continue to do so in respect
of any fiscal period ending on or before the Closing. All such
returns, declarations, remittances, information returns, reports and
other documents are correct and complete in all material respects, and
no material fact has been omitted therefrom. No extension of time in
which to file any such returns, declarations, remittances, information
returns, reports or other documents is in effect. All taxes shown on
all such returns, or on any assessments or reassessments in respect of
any such returns have been paid in full. To the Vendor's and the
Company's knowledge, no action, proceeding or investigation has been
threatened by any governmental authority for the assessment or
collection of any taxes for which the Company would be liable.
(y) Taxes Paid. Except as disclosed in Schedule D, the Company has paid in
full all taxes required to be paid on or prior to the date hereof and
has made adequate provision in the Financial Statements in accordance
with GAAP for the payment of all taxes in respect of all fiscal
periods ending on or before the Closing.
(z) Reassessments of Taxes. Except as disclosed in Schedule D, there are
no reassessments of the Company's taxes that have been issued and are
outstanding and there are no outstanding issues which have been raised
and communicated to the Company by any governmental body for any
taxation year in respect of which a tax return of the Company has been
audited. No governmental body has challenged, disputed or questioned
the Company in respect of taxes or of any returns, filings or other
reports filed under any statute providing for taxes. The Company is
not negotiating any draft assessment or reassessment with any
governmental body. The Vendor is not aware of any contingent
liabilities for taxes or any grounds for an assessment or reassessment
of the Company, including, without limitation, unreported benefits
conferred on any shareholder of the Company, aggressive treatment of
income, expenses, credits or other claims for deduction under any
return or notice other than as disclosed in the Financial Statements.
Neither the Company nor the Vendor has received any indication from
any governmental body that an assessment or reassessment of the
Company is proposed in respect of any taxes, regardless of its merits.
The Company has not executed or filed with any governmental body any
agreement or waiver extending the period for assessment, reassessment
or collection of any taxes. All taxation years up to and including the
taxation year ended March 31, 1998 are considered closed by Canadian
federal and provincial governmental bodies for the purposes of all
taxes.
(AA) Withholdings and Remittances. The Company has withheld from each
payment made to any of its present or former employees, officers and
directors, and to all persons who are non-residents of Canada for the
purposes of the Income Tax Act (Canada) all amounts required by law to
be withheld, and furthermore, has remitted such withheld amounts
within the prescribed periods to the appropriate governmental body.
The Company has remitted all Canada Pension Plan contributions,
provincial pension plan contributions, employment insurance premiums,
employer health taxes, workers compensation premiums and other taxes
payable by it in respect of its employees and has remitted such
amounts to the proper governmental body within the time required under
the applicable legislation. The Company has charged, collected and
remitted on a timely basis all taxes as required under applicable
legislation on any sale, supply or delivery whatsoever, made by the
Company.
(BB) Absence of Certain Changes or Events. Except as disclosed in Schedule
D, since the date to which the Financial Statements are made up, the
Company has not:
(i) suffered any material adverse change in the business of the
Company, financial condition, assets or results of operations
of the Company;
(ii) amended its articles;
(iii) declared or made any payment of any dividend or other
distribution in respect of its shares and has not redeemed,
purchased or otherwise acquired any shares;
(iv) issued or sold any shares or other securities or issued, sold
or granted any option, warranty or right to purchase any shares
or other securities of the Company; (v) disposed of any of the
assets reflected on the balance sheet forming part of the
Financial Statements, except sales of assets in the normal
course of business;
(vi) changed any accounting or costing systems or methods in any
material respect;
(vii) suffered any extraordinary loss or cancelled or waived any
debt, claim or other right;
(viii) incurred or assumed any liabilities, obligations or
indebtedness (whether accrued, absolute, contingent or
otherwise), except unsecured current liabilities, obligations
and indebtedness incurred in the normal course of business and
not in excess of $5,000;
(ix) made or granted any bonus, increased the compensation paid
(other than for normal merit and cost of living increases) or
made loans or advances to any director, officer or employee;
(x) mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets, except in the normal course of
business and in amounts which, individually and in the
aggregate are not material to the financial condition of the
Company or operation of its business;
(xi) entered into any Material Contract or any other transaction
that was not in the normal course of business; or
(xii) terminated, cancelled or modified in any material respect or
received notice or a request for termination, cancellation or
modification in any material respect of any Material Contract.
(CC) Full Disclosure. None of the foregoing representations and warranties
and no document furnished by or on behalf of the Company and the
Vendor to the Purchaser in connection with the negotiation of the
transactions contemplated by this Agreement contain any untrue
statement of a material fact or omit to state any material fact
necessary to make any such statement or representation not misleading.
(DD) Use of Name. The Vendor shall, as immediately as practicable after the
Closing Time, discontinue further use of the name "Why Interactive
Inc." and not use names similar to that name.
(EE) Personal Property. All personal property used by the Company for its
business is in good operating condition, and repair, ordinary wear and
tear excepted.
(FF) Real Property. The Company has no real property.
(GG) Personal Property Leases. Each personal property lease covering
property used by the Company for its business is in full force and
effect and has not been amended, and the Company is entitled to the
full benefit and advantage of each personal property lease in
accordance with its terms. Each personal property lease is in good
standing and there has not been any default by any party under any
personal property lease nor any dispute between the Company and any
other party under any personal property lease.
(HH) Insurance. The business, properties and assets of the Company are
insured for the benefit of the Company in amounts deemed adequate by
the Company's management against risk usually insured against by
persons operating a business similar to the business of the Company in
the localities where such properties are located. All policies are in
full force and effect and the Company is not in material default,
whether as to payment of premiums or otherwise, under the terms of
such policies.
(II) Receivables. The receivables as disclosed in the books of the Company
at the Effective Date are valid obligations which arose in the
ordinary course of business and are enforceable and fully collectable
accounts in the ordinary course of business subject to the reasonable
allowance for doubtful accounts as recorded on the books and records
of the Company on or before the Effective Date and to the knowledge of
the Vendor and the Company are not subject to any set off or
counterclaim. None of the receivables are due from a person with whom
the Company does not deal at arm's length.
(JJ) Inventories. The inventories consist of items of a quality and
quantity usable and saleable in the ordinary course of business. All
items included in the inventories are owned by the Company. No items
included in the inventories are held by the Company on consignment
from others or have been pledged as collateral.
(KK) Licences and Permits. Schedule D lists all the material licenses and
permits required for the lawful operation of its business and
identifies the ones that by their terms are not transferable. The
Company holds the licences and permits, free and clear any and all
liens or encumbrances. All the licences and permits are in good
standing and in full force and effect, the Company is not in material
violation of any term or provision or requirement of any such licences
and permits, and no Person has threatened to revoke, amend or impose
any condition in respect of, or commenced proceedings to revoke, amend
or impose conditions in respect of, any licence or permit.
(LL) Environmental Matters. The Business and the assets as carried on or
used by The Company have been carried on and used and are currently
carried on and used in compliance with all environmental laws. The
Company is not, and has not been, subject to any proceedings alleging
the violation by the Company or its employees, agents or others for
whom it is responsible of any environmental law and in relation to the
business or the assets of the Company. There are no proceedings nor,
to the knowledge of the Vendor and the Company, any circumstances or
material facts which could, if true, give rise to any proceedings, in
which it is alleged that the Company is potentially responsible for a
domestic or foreign federal, provincial, state, municipal or local
clean-up or remediation of lands contaminated with hazardous
substances or for any other remedial or corrective action under an
environmental law.
(MM) Customers. To the Vendor's and the Company's knowledge, the Company
has not received notice of any intention on the part of any customer
of the Company to cease doing business with the Company or to modify
or change in any material manner any existing arrangement with the
Company. To the Vendor's and the Company's knowledge, the
relationships of the Company with each of its principal customers is
satisfactory and there are no unresolved disputes with any such
customers.
(NN) Product Warranties. To the knowledge of the Vendor and the Company,
there are no material claims against the Company greater than five
thousand dollars ($5,000) in Canadian funds on account of product
warranties or with respect to the production or sale of defective or
inferior products.
(OO) Brokerage Fees. Neither the Vendor nor the Company has entered into
any agreement which would entitle any person to any valid claim
against either the Company or the Purchaser for a broker's commission,
finder's fee or any like payment in respect of the purchase and sale
of the Purchased Shares or any other matters contemplated by this
Agreement.
8. Purchaser's Representations and Warranties.
As a material inducement to the Vendor's entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Vendor is entering into this Agreement in reliance upon the
representations and warranties of the Purchaser set out in this Section 8, the
Purchaser represents and warrants to the Vendor as follows:
(a) Incorporation of Purchaser. The Purchaser is a corporation
incorporated and validly subsisting under the laws of the jurisdiction
of its incorporation. The Purchaser has the corporate power and
authority and is qualified to purchase the Purchased Shares. No act or
proceeding has been taken by or against the Purchaser in connection
with the dissolution, liquidation, winding up, bankruptcy or
reorganization of the Vendor.
(b) Authorization by Purchaser. The Purchaser has the corporate power,
authority and capacity to enter into this Agreement and all other
agreements and instruments to be executed by it as contemplated by
this Agreement and to carry out its obligations under this Agreement
and such other agreements and instruments. The execution and delivery
of this Agreement and such other agreements and instruments and the
completion of the transactions contemplated by this Agreement and such
other agreements and instruments have been duly authorized by all
necessary corporate action on the part of the Purchaser and its
shareholders. Concurrently with the execution of this Agreement, the
Purchaser shall deliver to the Vendor evidence that the transactions
contemplated by this Agreement have been approved by the Purchaser's
board of directors.
(c) Enforceability of Purchaser's Obligations. This Agreement constitutes
a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms subject, however, to
limitations on enforcement imposed by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of the rights
of creditors and others and to the extent that equitable remedies such
as specific performance and injunctions are only available in the
discretion of the court from which they are sought. The Purchaser is
not an insolvent person within the meaning of the Bankruptcy and
Insolvency Act (Canada) and will not become an insolvent person as a
result of the Closing.
(d) Consents and Approvals. All consents and approvals required to be
obtained by the Purchaser in connection with the execution and
delivery of this Agreement and the completion of the transactions
contemplated by this Agreement have been obtained.
(e) Notices. All notices required to be given by the Purchaser in
connection with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement have
been obtained.
(f) Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Purchaser and the completion
(with any required Consents and Approvals and Notices) of the
transactions contemplated by this Agreement do not and will not result
in or constitute any of the following:
(i) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation
of any of the terms, conditions or provisions of the articles
or by-laws of the Purchaser;
(ii) an event which, pursuant to the terms of any contract, licence
or permit, causes any right or interest of the Purchaser to
come to an end or be amended in any way that is detrimental to
its business or entitles any other person to terminate or amend
any such right or interest;
(iii) the creation or imposition of any lien on any asset of the
Purchaser; or
(iv) the violation of any applicable law by the Purchaser.
(g) Litigation. There is no action, suit, proceeding, claim, application,
complaint or investigation in any court or before any arbitrator or
before or by any regulatory body or governmental or non-governmental
body pending or threatened by or against the Purchaser related to its
business or affecting its business, operations or capital or the
transactions contemplated by this Agreement, and there is no factual
or legal basis which could give rise to any such action, suit,
proceeding, claim, application, complaint or investigation.
(h) Brokerage Fees. The Purchaser has not entered into any agreement which
would entitle any person to any valid claim against the Vendor or the
Purchaser for a broker's commission, finder's fee or any like payment
in respect of the purchase and sale of the Purchased Shares or any
other matters contemplated by this Agreement.
(i) Purchaser Reports and Financial Statements. The Purchaser has
previously furnished to the Vendor complete and accurate copies of its
(a) Annual Report for the year ended September 30, 1998, as filed with
the Canadian securities regulatory authorities, (b) Quarterly Report
for the quarter ended December 31, 1998 as filed with the Canadian
securities regulatory authorities and (c) Annual Information Form for
the year ended September 30, 1998 as filed with the Canadian
securities regulatory authorities (the "Purchaser Reports"). The
Purchaser Reports did not contain any statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The financial
statements of the Purchaser contained in the Purchaser Reports fairly
present, in conformity with generally accepted accounting principles
in Canada GAAP applied on a consistent basis throughout the periods
covered thereby, in all material respects the financing condition of
the Purchaser on a consolidated basis at the dates of said statements
and the results of its operations and its cash flows for the periods
covered thereby. The financial statements consisting in each case of a
balance sheet and the accompanying statements of income retained
earnings and changes in financial position for the period then ended
and notes to the financial statements, together with the report of the
auditors thereon are complete and accurate in all material respects.
(j) Consideration Shares. The Consideration Shares will have been duly
authorized, conditionally allotted, set aside and reserved for
issuance pursuant to the conversion of the Convertible Debenture, and
upon exercise of the Convertible Debenture the Consideration Shares
will be issued and delivered by the Purchaser as fully paid and
non-assessable shares in the capital of the Purchaser.
(k) Timely Disclosure. All material facts and material changes, as such
terms are defined in the Securities Act (Ontario), regarding the
Purchaser or its securities, that have occurred since September 30,
1998, have been publicly disclosed in accordance with applicable law
and the Purchaser has experienced no material changes that have not
been so disclosed since that date.
(l) Listing of Consideration Shares. The Purchaser shall have obtained at
or prior to the Closing the necessary consents from The Toronto Stock
Exchange (the "TSE") to the issue of the Consideration Shares, on such
conditions as are prescribed by the TSE, and shall arrange for the
listing and posting for trading of the Consideration Shares on the TSE
upon their issue following the Closing.
(m) Reporting Issuer Status. The Purchaser is a reporting issuer in good
standing under the securities laws of any province of Canada in which
it is a reporting issuer at the date hereof.
(n) No Cease Trade Order. No securities commission or other regulatory
authority has issued any order preventing or suspending the trading of
the Purchaser's securities or prohibiting the sale of the
Consideration Shares, and no proceedings for such purpose are pending
or threatened, to the Purchaser's best knowledge.
(o) Full Disclosure. None of the foregoing representations and warranties
and no document furnished by or on behalf of the Purchaser to the
Vendor in connection with the negotiation of the transactions
contemplated by this Agreement contain any untrue statement of a
material fact or misleading statement.
9. Survival of Representations and Warranties
The representations, warranties and covenants of the parties contained in this
Agreement shall survive the completion of the transaction contemplated in it and
shall continue in full force and effect for the benefit of the Purchaser and the
Vendor as the case may be for a period of two (2) years following the date of
Closing, after which time the parties shall be released from all obligations in
respect of such representations and warranties except with respect to any Claim
(as defined herein) attested to by a party in writing before the expiration of
such period, but there shall be no time limitation on the representations and
warranties of the Vendor set out in Section 7 which relate to the incorporation
of the Vendor and the Company, the due authorization of this Agreement by the
Vendor, the enforceability of Vendor's obligations under this Agreement, tax
matters which shall be time limited to the statutory expiration of claims
thereon, environmental matters or to the title of any person to any property
(whether real or personal, tangible or intangible), or no time limitation on the
representations and warranties of the Purchaser set out in Section 8 which
relate to the incorporation of the Purchaser, the due authorization of this
Agreement by the Purchaser, and the enforceability of the Purchaser's
obligations under this Agreement.
10. Indemnification
10.1 Indemnity. The Vendor (an "Indemnifying Party") shall indemnify and hold
the Purchaser, its directors, officers, employees, agents, representatives
and the Purchaser's affiliates and their respective directors, officers,
employees, agents, representatives (an "Indemnified Party") harmless in
respect of any claim, demand, action, cause of action, damage, loss, cost,
liability or expense (hereinafter referred to as a "Claim") which may be
made or brought against an Indemnified Party or which it may suffer or
incur directly or indirectly as a result of, in respect of or arising out
of:
(a) any incorrectness in or breach of any representation or warranty of
the Vendor contained in this Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement; or
(b) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Vendor under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement.
The Purchaser (an "Indemnifying Party") shall indemnify and hold the Vendor
(an "Indemnified Party") harmless in respect of any claim, demand, action,
cause of action, damage, loss, cost, liability or expense (hereinafter
referred to as a "Claim") which may be made or brought against an
Indemnified Party or which it may suffer or incur directly or indirectly as
a result of, in respect of or arising out of:
(a) any incorrectness in or breach of any representation or warranty of
the Purchaser contained in this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement; or
(b) any breach of or any non-fulfilment of any covenant or agreement on
the part of the Purchaser under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement.
10.2 Notice of Claim. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to Section 10.1,
the Indemnified Party shall promptly give written notice of the Claim to
the Indemnifying Party. Such notice shall specify whether the Claim arises
as a result of a claim by a person against the Indemnified Party (a "Third
Party Claim") or whether the Claim does not so arise (a "Direct Claim"),
and shall also specify with reasonable particularity (to the extent that
the information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does
not receive notice of any Claim in time effectively to contest the
determination of any liability susceptible of being contested, then the
Liability of the Indemnifying Party to the Indemnified Party under this
Article shall be reduced by the amount of any losses incurred by the
Indemnifying Party resulting from the Indemnified Party's failure to give
such notice on a timely basis.
10.3 Direct Claims. In the case of a Direct Claim, the Indemnifying Party shall
have 30 days from receipt of notice of the Claim within which to make such
investigation of the Claim as the Indemnifying Party considers necessary or
desirable. For the purpose of such investigation, the Indemnified Party
shall make available to the Indemnifying Party the information relied upon
by the Indemnified Party to substantiate the Claim, together with all such
other information as the Indemnifying Party may reasonably request. If both
parties agree at or before the expiration of such 30 day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified
Party the full agreed upon amount of the Claim, failing which the matter
shall be referred to binding arbitration in such manner as the parties may
agree or shall be determined by a court of competent jurisdiction.
10.4 Third Party Claims. In the case of a Third Party Claim, the Indemnifying
Party shall have the right, at its expense, to participate in or assume
control of the negotiation, settlement or defence of the Claim. If the
Indemnifying Party elects to assume such control, the Indemnifying Party
shall reimburse the Indemnified Party for all of the Indemnified Party's
out-of-pocket expenses incurred as a result of such participation or
assumption. The Indemnified Party shall have the right to participate in
the negotiation, settlement or defence of such Third Party Claim and to
retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless
the Indemnifying Party consents to the retention of such counsel at its
expense or unless the named parties to any action or proceeding include
both the Indemnifying Party and the Indemnified Party and a representation
of both the Indemnifying Party and the Indemnified Party by the same
counsel would be inappropriate due to the actual or potential differing
interests between them (such as the availability of different defences).
The Indemnified Party shall cooperate with the Indemnifying Party so as to
permit the Indemnifying Party to conduct such negotiation, settlement and
defence and for this purpose shall preserve all relevant documents in
relation to the Third Party Claim, allow the Indemnifying Party access on
reasonable notice to inspect and take copies of all such documents and
require its personnel to provide such statements as the Indemnifying Party
may reasonably require and to attend and give evidence at any trial or
hearing in respect of the Third Party Claim. If, having elected to assume
control of the negotiation, settlement or defence of the Third Party Claim,
the Indemnifying Party thereafter fails to conduct such negotiation,
settlement or defence with reasonable diligence, then the Indemnified Party
shall be entitled to assume such control and the Indemnifying Party shall
be bound by the results obtained by the Indemnified Party with respect to
such Third Party Claim. If any Third Party Claim is of a nature such that
(i) the Indemnified Party is required by applicable law or the order of any
court, tribunal or regulatory body having jurisdiction, or (ii) it is
necessary in the reasonable view of the Indemnified Party acting in good
faith and in a manner consistent with reasonable commercial practices, in
respect of (A) a Third Party Claim by a customer relating to products or
services supplied by the Company or (B) a Third Party Claim relating to any
Contract which is necessary to the ongoing operations of the Company or any
material part thereof in order to avoid material damage to the relationship
between the Indemnified Party and any of its major customers or to preserve
the rights of the Indemnified Party under such an essential Contract, to
make a payment to any person (a "Third Party") with respect to the Third
Party Claim before the completion of settlement negotiations or related
legal proceedings, as the case may be, then the Indemnified Party may make
such payment and the Indemnifying Party shall, promptly after demand by the
Indemnified Party, reimburse the Indemnified Party for such payment. If the
amount of any liability of the Indemnified Party under the Third Party
Claim in respect of which such a payment was made, as finally determined,
is less than the amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, promptly after receipt of
the difference from the Third Party, pay the amount of such difference to
the Indemnifying Party. If such a payment, by resulting in settlement of
the Third Party Claim, precludes a final determination of the merits of the
Third Party Claim and the Indemnified Party and the Indemnifying Party are
unable to agree whether such payment was unreasonable in the circumstances
having regard to the amount and merits of the Third Party Claim, then such
dispute shall be referred to and finally settled by binding arbitration
from which there shall be no appeal.
10.5 Settlement of Third Party Claims. If the Indemnifying Party fails to assume
control of the defence of any Third Party Claim, the Indemnified Party
shall have the exclusive right to contest, settle or pay the amount
claimed. Whether or not the Indemnifying Party assumes control of the
negotiation, settlement or defence of any Third Party Claim, the
Indemnifying Party shall not settle any Third Party Claim without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that the liability of
the Indemnifying Party shall be limited to the proposed settlement amount
if any such consent is not obtained for any reason within a reasonable time
after the request therefor.
10.6 Indemnification Limitations. Notwithstanding anything else contained in
this Agreement:
(a) the indemnification provided for in Section 10.1 or any other claim by
an Indemnified Party in connection with this Agreement shall be
subject to the limitation that no indemnification or other such claim
shall be payable under Section 10.1 or otherwise under this Agreement
unless the total of all claims exceeds $50,000 in the aggregate,
whereupon the full amount of such claims exceeding $50,000 but subject
to Section 10.6(b)) shall be recoverable in accordance with the terms
hereof; and
(b) the indemnification provided for in Sections 10.1 and any other claim
brought by any Indemnified Party in connection with this Agreement
shall be subject to the further limitation that any and all payments
to an Indemnified Party by an Indemnifying Party, pursuant to Section
10.1 or pursuant to any other claim made by an Indemnified Party in
connection with this Agreement shall not, in the aggregate, exceed the
Purchase Price received pursuant to this Agreement.
10.7 Set-off. The Purchaser and Vendor shall be entitled to set-off the amount
of any Claim submitted under Section 10.1 as damages or by way of
indemnification against any other amounts payable by the Purchaser or the
Company to the Vendor or payable by the Vendor to the Purchaser, whether
under this Agreement or otherwise.
11. Other Covenants
11.1 DREX Lawsuit: The Purchaser acknowledges that the Company and the Vendor
are currently defendants in a lawsuit ("DREX Lawsuit") between DREX
Engineering Consultants Inc., as plaintiff and the Vendor and Company, as
defendants, commenced in the Ontario Superior Court of Justice (Court File
No. 98-CU-7164). The Vendor covenants to diligently defend and/or settle
the DREX Lawsuit in such a manner as to not materially effect the Company
or the Purchaser. The Vendor acknowledges that it is entirely
responsibility for the DREX Lawsuit. For greater certainty, the Purchaser
and the Company shall be under no obligation to assist the Vendor in the
DREX Lawsuit except as provided for in this Section 11. The Vendor agrees
that neither the Purchaser nor the Company shall in any way be responsible
for any costs, damages or expenses related in any manner to the DREX
Lawsuit and the Vendor further agrees, without limitation, to indemnify and
hold harmless the Purchaser, the Company and all of their respective
officers, directors, employees, agents and representatives from any claim,
demand, damage, cost, expense or liability arising out of or related to the
DREX Lawsuit. The Purchaser covenants and agrees to provide any and all
reasonable access to the records and books of the Company and, at the
Vendor's sole expense, to provide any and all reasonable assistance as may
be requested by the Vendor in relation to the DREX Lawsuit.
11.2 Revenue Canada Appeal. The Purchaser acknowledges that the Company has
filed notices of objection with Revenue Canada in respect of the Company's
1991, 1992, 1993 and 1994 corporate income tax returns ("Revenue Canada
Appeals"), which have not been responded to by Revenue Canada. The Vendor
covenants and agrees to take all steps that it deems necessary to complete
the Revenue Canada Appeals, including but not limited to paying any and all
costs, expenses, interest, penalties and damages in relation to such
appeals, and to indemnify and hold harmless the Purchaser, the Company and
all their respective officers, directors, heirs, agents and representatives
for such costs, expenses, interest, penalties and damages arising out of or
related to the Revenue Canada Appeals. The Purchaser covenants and agrees
to provide any and all reasonable access to the records and books of the
Company and, at the Vendor's sole expense, to provide any and all
reasonable assistance as may be requested by the Vendor in relation to the
Revenue Canada Appeals.
11.3 Tax Credits. The Vendor agrees to take all steps that it deems necessary to
process and complete all filings necessary to claim ITCs on behalf of the
Company for the period up to the Effective Date. The Vendor agrees that
neither the Purchaser nor the Company shall in any way be responsible for
any costs, damages or expenses related in any manner to the ITCs and the
Vendor further agrees, without limitation, to indemnify and hold harmless
the Purchaser, the Company and all of their respective officers, directors
and employees from any claim, demand, damage, cost, expense or liability
arising out of or related to the ITCs. The Purchaser covenants and agrees
to provide any and all reasonable access to the records and books of the
Company and, at the Vendor's sole expense, to provide any and all
reasonable assistance as may be requested by the Vendor in relation to the
ITCs.
12. General
(a) This Agreement, together with the delivery by the Vendor of share
certificates representing the Purchased Shares, shall constitute the
actual conveyance of the Purchased Shares as of the Effective Date but
each party agrees with the other to do, execute, acknowledge and
deliver all such further documents, assignments, transfers, agreements
and other assurances as may be reasonably necessary or desirable to
give full effect to this Agreement;
(b) The parties hereto acknowledge that they have had an opportunity to
obtain independent financial and/or legal advice before signing this
Agreement and agrees that either such advice has been obtained or that
they do not wish to seek or obtain such independent advice. The
parties hereto acknowledge that they have read this Agreement and
fully understand the nature and effect of it and the terms contained
herein and that the said terms are fair and reasonable and correctly
set out the party's understanding and intention.
(c) Each party shall be responsible for its own legal and other expenses
incurred in connection with the negotiation, execution, delivery and
performance of this Agreement and the transactions contemplated
hereby.
(d) This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Province of Ontario.
(e) This Agreement is for the benefit of the parties and shall be binding
upon their respective heirs, executors, administrators, successors and
assigns, as applicable.
(f) Any notice, certificate, consent, determination or other communication
required or permitted to be given or made under this Agreement shall
be in writing and shall be effectively given and made if (i) delivered
personally, (ii) sent by prepaid courier service or mail, or (iii)
sent prepaid by fax or other similar means of electronic
communication, in each case to the applicable address set out below:
(i) if to the Vendor, to:
JetForm Corporation
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▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇▇
Facsimile: 751-4802
with a copy to:
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▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇▇
Facsimile: 231-3900
(ii) if to the Purchaser, to:
Calian Technology Ltd.
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▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 273
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if
delivered, or on the day of faxing or sending by other means of
recorded electronic communication, provided that such day in either
event is a business day and the communication is so delivered, faxed
or sent before 4:30 p.m. on such day. Otherwise, such communication
shall be deemed to have been given and made and to have been received
on the next following business day. Any such communication sent by
mail shall be deemed to have been given and made and to have been
received on the fifth business day following the mailing thereof;
provided however that no such communication shall be mailed during any
actual or apprehended disruption of postal services. Any such
communication given or made in any other manner shall be deemed to
have been given or made and to have been received only upon actual
receipt. Any party may from time to time change its address under this
Section by notice to the other party given in the manner provided by
this Section.
(g) A waiver of any default, breach or non-compliance under this Agreement
is not effective unless in writing and signed by the party to be bound
by the waiver. No waiver shall be inferred from or implied by any
failure to act or delay in acting by a party in respect of any
default, breach or non-observance or by anything done or omitted to be
done by the other party. The waiver by a party of any default, breach
or non-compliance under this Agreement shall not operate as a waiver
of that party's rights under this Agreement in respect of any
continuing or subsequent default, breach or non-observance (whether of
the same or any other nature).
(h) Each party hereby agrees that all provisions of this Agreement, other
than (a) the conditions in Sections 5 and 6 and (b) the
representations and warranties contained in Sections 7 and 8 and the
related indemnities in Section 10 hereof (which shall be subject to
the special arrangements provided in such Sections) shall forever
survive the execution, delivery and performance of this Agreement,
Closing and the execution, delivery and performance of any and all
documents delivered in connection with this Agreement.
(i) This Agreement and the terms hereof shall constitute the entire
agreement between the parties hereto with respect to all of the
matters herein and its execution has not been induced by, nor do any
of the parties hereto rely upon or regard as material, any
representations or writings whatsoever not incorporated herein and
made a part hereof. If any paragraph, section or portion thereof in
this Agreement is determined to be unenforceable or invalid for any
reason whatsoever, that unenforceability or invalidity shall not
affect the enforceability or validity of the remaining portions of
this Agreement and such unenforceable or invalid paragraph, section or
portion thereof shall be deemed to be severed from the remainder of
this Agreement. Upon execution of this Agreement, the Term Sheet, as
amended by a letter agreement dated May 17, 1999 between the Purchaser
and the Vendor, shall be terminated and cease to be of any force and
effect.
(j) Each Party shall promptly do, execute, deliver or cause to be done,
executed and delivered all further acts, documents and things in
connection with this Agreement that the other Party may reasonably
require, for the purposes of giving effect to this Agreement.
(k) This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable
in that Province and shall be treated, in all respects, as an Ontario
contract.
(l) This Agreement shall enure to the benefit of, and be binding on, the
Parties and their respective successors and permitted assigns. Neither
party may assign or transfer, whether absolutely, by way of security
or otherwise, all or any part of its respective rights or obligations
under this Agreement without the prior written consent of the other
party.
(m) This Agreement may be signed by manual or facsimile signature in
several counterparts of like form, each of which when so executed
shall be deemed to be an original and such counterparts together shall
constitute one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
CALIAN TECHNOLOGY LTD.
Per:
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Authorized Officer
JETFORM CORPORATION
Per:
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Authorized Officer
