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As filed with the Securities and Exchange Commission on April 17, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BEA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 77-0394711
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
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2315 North First Street
San Jose, California 95131
(408) 570-8000
(Address, including zip code, and telephone number, including area code, of
registrar's principal executive offices)
William T. Coleman III
Chairman and Chief Executive Officer
2315 North First Street
San Jose, California 95131
(408) 570-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Cori M. Allen, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [-]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [-]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [-]
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CALCULATION OF REGISTRATION FEE
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Title of Shares to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered Aggregate Price Per Share Aggregate Offering Price Registration Fee
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Common Stock, $.001
par value............... 235,359 shares $59.00(1) $13,886,181(1) $3,665.95
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the Nasdaq National Market on April 14, 2000.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
an amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the commission, acting pursuant to said Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We may+
+ not sell these securities until the registration statement filed with the +
+ Securities and Exchange Commission is effective. This prospectus is not an +
+ offer to sell these securities and it is not soliciting an offer to buy these+
+ securities in any state where the offer of sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated April 17, 2000
Prospectus
BEA Systems, Inc.
235,359 Shares of Common Stock
235,359 shares of our common stock were issued to former stockholders of
The Workflow Automation Corporation as payment for the purchase of all
outstanding shares of The Workflow Automation Corporation. Some of these
stockholders may wish to sell these shares in the future, and this prospectus
allows them to do so. We will not receive any of the proceeds from any sale of
shares by these stockholders, but we have agreed to bear the expenses of
registration of the shares by this prospectus. Share numbers in this prospectus
do not reflect our 2-for-1 stock split to be effected April 24, 2000 in the form
of a stock dividend payable to record holders of our stock as of April 7, 2000.
Our stock is listed on the Nasdaq National Market under the symbol: BEAS
The last sale price of the common stock on the Nasdaq National Market on April
14, 2000 was $59 per share.
_______________________________
Investing in the common stock involves a high level of investment risk. See
"Risk Factors" beginning on page 8 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
_______________________________
April , 2000
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TABLE OF CONTENTS
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Page
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Available Information............................ 4
Incorporation of Certain Documents by Reference.. 4
The Company...................................... 5
Recent Events.................................... 7
Use of Proceeds.................................. 8
Risk Factors..................................... 8
Selling Stockholders............................. 17
Plan of Distribution............................. 18
Experts.......................................... 18
Legal Matters.................................... 18
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this prospectus in
connection with the offer described in this prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the selling stockholders. Neither the delivery of
this prospectus nor any sale made under this prospectus shall under any
circumstances create any implication that there has been no change in the
affairs of BEA Systems, Inc. since the date hereof or since the date of any
documents incorporated herein by reference. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the securities to which it relates, or an offer or solicitation in any state to
any person to whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the Act we
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information filed can be inspected and copied at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a web site
(http://www.sec.gov) containing reports, proxy and information statements and
other information of registrants, including ours, that file electronically with
the Commission. In addition, the Common Stock is listed on the Nasdaq National
Market and similar information concerning us can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 9513 Key West
Avenue, Rockville, Maryland 20850.
We have filed with the Commission a registration statement on Form S-3 (of
which this prospectus is a part) under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares being offered by this
prospectus. This prospectus does not contain all of the information set forth in
this registration statement, some portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement,
each of these statements are qualified in all respects by this reference and the
exhibits and schedules thereto. For further information regarding us and the
shares being offered by this prospectus, reference is hereby made to the
registration statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by BEA Systems, Inc. under the
Securities Exchange Act of 1934 with the Securities and Exchange Commission and
are incorporated herein by reference:
a. Our Annual Report on Form 10-K for the year ended January 31, 1999;
b. Our Quarterly Reports on Form 10-Q for the quarters ended April 30,
1999, July 31, 1999, and October 31, 1999;
c. Our Current Reports on Form 8-K filed on December 6, 1999 and December
13, 1999, as amended January 18, 2000; and
d. The description of our Common Stock contained in our registration
statement on Form 8-A (File No. 000-22369).
Each document we file pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein (or in the applicable prospectus supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
prospectus is delivered upon written or oral request. Requests should be
directed to Kevin A. Faulkner, Vice President-Investor Relations, 2315 North
First Street, San Jose 95131, telephone number: (408) 570-8000.
4
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THE COMPANY
Overview
We are a leading provider of e-commerce infrastructure software that helps
companies of all sizes build e-commerce systems that extend investments in
existing computer systems and provide the foundation for running a successful
integrated e-business. Our vision is to become the leading provider of
architecture and software infrastructure solutions for development and
deployment of reliable, scalable business applications for e-commerce.
Our core business has been providing infrastructure for high-volume
transaction systems, such as telecommunications billing applications, commercial
bank ATM networks and account management systems, credit card billing systems
and securities trading account management systems. These distributed systems
must scale to process high transaction volumes and accommodate large numbers of
users. As the Internet and e-commerce continue to develop, increasing
transaction loads are being placed on Web-based systems, such as retail e-
commerce sites. In addition, systems that historically have been strictly
internal are now being extended to the Internet, such as telecommunications,
bank and credit card account information. As the number and complexity of
transactions being processed by e-commerce systems grows, developers of high-
volume transaction Web sites have increasingly turned to our reliable, scalable,
end-to-end e-commerce solutions. With the extension of our BEA Tuxedo product to
e-commerce systems, increased adoption of WebLogic, and our recent acquisition
of The Theory Center, we are well positioned to meet the needs of companies who
require scalable and reliable e-commerce systems.
An e-commerce transaction involves much more than simply the purchase of an
item over the Web. In order to perform a single e-business transaction, a robust
e-commerce system must process several distinct computer transactions. A typical
e-commerce request, whether a purchase or an information search, generates a
series of interconnected computer transactions. These computer transactions may
include determining whether the ordered item is in stock, determining where the
item is located, scheduling the item for shipping, processing payment and
recording the transaction in the company's financial records. In addition, many
Web sites now gather information about users as they navigate the site. This
information is stored, identified with the particular user, and compared with
past behavior of the same and other users in order to personalize online
interaction by recommending specific merchandise, offering personalized pricing
and displaying targeted advertising, all based on the user's profile. As e-
commerce grows, an increasing number of e-business transactions generates
increasing numbers of computer transactions, driving the demand for more
scalable and reliable systems for managing them.
We provide an e-commerce transaction platform that is designed to address
this demand and help companies quickly develop and integrate e-business
initiatives and reliably deliver a wider range of dynamic, personalized
services.
Our products are marketed and sold worldwide through a network of sales
offices, as well as hardware vendors, independent software vendors and systems
integration companies that are BEA distribution partners and software
distributors. Licenses for our products are typically priced on a per-user, per-
application basis, but we also offer licenses priced per server CPU and time-
based enterprise licenses.
Products and Services
Our products and professional services together provide an end-to-end
transaction platform for developing and deploying e-commerce applications that
extend investments in existing computer systems. These products and services
are packaged as the BEA E-Commerce Transaction Platform/TM/. The BEA E-Commerce
Transaction Platform includes:
E-Commerce Server Software. We provide a family of Web and application
server software that enables scalable, reliable e-commerce applications. Our e-
commerce server software includes:
. BEA WebLogic Server, an award-winning Java/TM/ Web application server
software platform for e-commerce applications that uses Enterprise
JavaBeans (EJB).
. BEA WebLogic Enterprise, industrial-strength e-commerce server software
that leverages the BEA Tuxedo code base and extends the robust, high-
volume transaction processing capabilities of BEA Tuxedo to applications
written in Common Object Request Broker Architecture (CORBA) C++ and
CORBA Java. In addition, we recently extended the capabilities of BEA
Tuxedo to applications written in EJB through a new version of WebLogic
Enterpris.
. BEA Tuxedo, a leading application server software platform for building
and managing reliable high-transaction volume e-commerce and other
mission-critical applications in distributed environments.
All BEA application server software platforms are standards-compliant and
compatible with leading hardware, operating systems and databases. This enables
customers to extend their investments in existing computer systems and maintain
flexibility for future technology purchases.
5
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E-Commerce Integration Software. We provide solutions for rapidly and
reliably integrating large-scale enterprise applications and business processes
both within an enterprise and across the Web with suppliers, distribution
partners and customers to accomplish strategic e-business initiatives.
BEA eLink/TM/ is infrastructure software for integration of enterprise
applications. BEA eLink includes a robust and scalable integration server,
best-of-breed data integration and process management options, integration
components for leading databases, key customer relationship management (CRM) and
enterprise resource planning (ERP) applications. BEA eLink also includes a
broad set of mainframe adapters and an Extensible Markup Language (XML) adapter.
Integrated under a single interface, BEA eLink enables a variety of
packaged and proprietary applications to interact seamlessly across multiple
operating systems, standards, and programming languages. BEA eLink is built on
the BEA Tuxedo platform, and provides support for multiple synchronous and
asynchronous messaging formats, reliably processing transactions in high-volume,
highly distributed environments.
E-Commerce Application Components. We provide component-based products that
enable businesses to rapidly create adaptable e-commerce applications. To
sustain their competitive advantage, companies using the Web need to be able to
modify applications and implement new e-commerce initiatives quickly in response
to market changes, customer demands and competitive advances. To meet this
demand, we have introduced our new BEA Commerce Ready/TM/ family of products
that provides businesses with the building blocks required to create robust
adaptable e-commerce applications. By providing ready-made application
functionality in these pre-built reusable components, BEA helps enable companies
to quickly create new Web-based applications. The first product in the family,
BEA Commerce Ready Components/TM/, includes over 80 standard EJB components that
can be quickly assembled into adaptable, extensible and scalable e-commerce
solutions. Our recent acquisition of The Theory Center greatly enhanced the
number of components and the functionality offer by BEA. Components offered by
BEA provide business logic commonly used in e-commerce sites, such as shopping
cart, inventory management, order tracking, and pricing.
E-Commerce Services. We help bridge the gap between the need for companies
to get online quickly and our customers' lack of in-house expertise available to
make this transition. We provide accelerated design and delivery of e-commerce
solutions, 24x7 operations support, rapid knowledge transfer, and deep
experience with BEA platforms as well as legacy infrastructures. Our services
include:
. Customer support services. Our customer support can be scaled to meet a
variety of needs including around-the-clock support. We offer customer
support services through telephone, e-mail, BEA-sponsored electronic
bulletin boards and other channels. Our support personnel are located
throughout the world and provide on-site customer support as needed.
. Professional consulting services. We have significant expertise in
defining, architecting, building and deploying e-commerce solutions.
Professional consulting services are performed on-site as necessary and
also in our offices in the U.S. and Europe.
. BEA educational services. We offer formal training courses to educate
customers' developers in techniques for building e-commerce applications
using Web-optimized languages and technologies.
Customers
We have more than 3,500 worldwide customers for our products and services.
Our products and services have been chosen for e-commerce initiatives by
emerging Internet companies as well as established businesses. Traditional
companies are using our products and services to extend internal applications to
the Web, such as telecommunications billing, Internet banking securities
trading, online airline reservations, online inventory control, and online
monitoring and control of home appliances. Our products are used to support the
Web-based applications users see on their screens, as well as internal
applications that can now be accessed through the Web. Significant customers our
fiscal 2000 year include British Airways, British Telecom, Chase Manhattan Bank,
Deutsche Telekom, General Motors, Kaiser Permanente, MeritaNordbanken,
S.W.I.F.T., United Airlines, and Vattenfall. Significant Internet customers our
fiscal 2000 year include Amazon.com, Autoconnect, Beyond.com, E*Trade,
iAMnetworks.com, Intertainer, MetaMarkets.com, PlanetRx, priceline.com,
Sparks.com, Spendcash.com, Travelnow.com, and TRIP.com. Hardware vendors such as
Hewlett-Packard, Unisys, Bull Information Systems and NCR have selected BEA
application servers as the software infrastructure for their e-commerce hardware
solutions. BEA has also added relationships with systems integrators,
particularly Web enablement services companies iXL and Razorfish. BEA has been
adopted for Web-based applications by a large number of independent application
developers, including Calico, Cemax, Parametric Technologies, PeopleSoft,
Rubric, Six Degrees, and Tradex.
We were incorporated in Delaware in January 1995 under the name BEA
Enterprises, Inc. and changed our name to BEA Systems, Inc. in September 1995.
References to "BEA" or the "Company" refer to BEA Systems, Inc., our
subsidiaries and predecessor entities acquired in previous acquisitions. Our
headquarters are located at 2315 North First Street, San Jose, California,
95131. Our telephone number is (408) 570-8000.
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RECENT EVENTS
Stock Split. We recently announced a two-for-one split of our common stock,
to be effected in the form of a stock dividend, payable on April 24, 2000 to
stockholders of record on April 7, 2000. This split was approved by our
stockholders at a special stockholders' meeting on April 6, 2000. Share amounts
and related share information in this Offering Circular do not reflect this
split, but do reflect our previous two-for-one split effected in December 1999.
This split is in addition to our previous 2-for-1 split effected on December 19,
1999.
Acquisition of The Theory Center. On November 19, 1999, pursuant to an
Agreement and Plan of Merger, dated as of November 10, 1999, we acquired The
Theory Center, Inc., a privately held Delaware corporation. As consideration
for the transaction, we issued 3,635,414 shares of our common stock in exchange
for the outstanding shares of capital stock of The Theory Center, subject to the
withholding of 10.5% of such shares in escrow in accordance with the terms of
the acquisition agreement. The 3,635,414 shares of our common stock issued in
consideration do not reflect our recently announced two-for-one stock split.
See "--Stock Split." At the effective time of the merger, all outstanding
options and warrants to purchase shares of The Theory Center common stock were
automatically converted into options and warrants to purchase our common stock
based upon the conversion factor set forth in the acquisition agreement with
corresponding adjustment to their respective exercise prices.
Recent Announcement. In December 1999, BEA and Warburg, Pincus Ventures, LP
formed a new independent company, WebGain, Inc., to bring to market software
tools that are designed to accelerate the development and deployment of
component-based applications for e-commerce. Warburg, Pincus Ventures, LP holds
the controlling share of WebGain, Inc., and BEA, together with employees of the
new company hold the remaining interests. The first transaction by WebGain, Inc.
was the $75 million cash acquisition of the Visual Cafe product line of Symantec
Corporation's Internet Tools Division completed in December 1999.
Convertible Subordinated Debt Offering. In December, 1999, we sold
$550,000,000 of 4% Convertible Subordinated Notes due December 15, 2006, which
are convertible into 7,936,500 shares of Common Stock at a conversion rate of
14.43 shares per $1,000 principal amount of notes. We will pay interest on the
notes on June 15 and December 15 of each year. The first interest payment will
be made on June 15, 2000. In March, 2000, we filed a shelf registration
statement on Form S-3 to register the Convertible Notes and the underlying
Common Stock issuable upon the conversion of such notes.
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USE OF PROCEEDS
All of the shares being offered under this prospectus are offered by the
selling stockholders, and we will not receive any of the proceeds from the sale
of the shares. This registration statement is intended to satisfy certain of
our obligations under our stock purchase agreement with the selling
stockholders. Under that agreement, we have agreed to pay expenses of
registration of these shares under federal and state securities laws.
RISK FACTORS
Investors should carefully consider the following risk factors in
evaluating an investment in the common stock.
Significant unanticipated fluctuations in our quarterly revenues and operating
results may not meet securities analysts' or investors' expectations and result
in a decline in our stock price.
Although we have had significant revenue growth in recent quarters, our
growth rates may not be sustainable. If our revenues, operating results,
earnings or future projections are below the levels expected by securities
analysts, our stock price is likely to decline. Our stock price is also subject
to the volatility generally associated with software and technology stocks and
may also be affected by broader market trends unrelated to our performance.
We expect to experience significant fluctuations in our future quarterly
revenues and operating results as a result of many factors, including:
. the size and timing of customer orders
. introduction or enhancement of our products or its competitors' products
. general economic conditions, which can affect our customers' capital
investment levels and the length of the our sales cycle
. recent hiring ahead of demand
. the structure, timing and integration of acquisitions of businesses,
products and technologies
. the terms and timing of financing activities
. market acceptance of middleware products
. the lengthy sales cycle for our products
. technological changes in computer systems and environments
. whether we are able to develop, introduce and market new products on a
timely basis
. changes in our competitors' product offerings and pricing policies, and
customer order deferrals in anticipation of new products and product
enhancements from BEA or competitors
. whether we are able to expand its sales and marketing programs
. the mix of our products and services sold and mix of distribution
channels
. whether we are able to meet its customers' service requirements
. costs associated with acquisitions, including the acquisition of The
Theory Center and The Workflow Automation Corporation
. the impact and duration of deteriorating economic and political
conditions in Asia
. a widely-predicted freeze in deployment of new computer systems by large
corporations in the first quarter of 2000, related to remediation of the
Year 2000 problem
. loss of key personnel
. fluctuations in foreign currency exchange rates
. interpretations of the accounting pronouncements on software revenue
recognition.
As a result of all of these factors, we believe that quarterly revenues and
operating results are difficult to forecast and period-to-period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of trends or future performance.
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Our revenues are derived principally from large orders as customers deploy
our products throughout their organizations or choose to standardize on our
products for their system architecture. Increases in the dollar size of
individual license transactions also increase the risk of fluctuation in future
quarterly results. If we cannot generate large customer orders, or customers
delay or cancel such orders in a particular quarter, it will have a material
adverse effect on our revenues and, more significantly on a percentage basis,
our net income or loss in that quarter. Moreover, we typically receive and
fulfill a majority of our orders within the quarter, with the substantial
majority of our orders received in the last month of each fiscal quarter. As a
result, we may not learn of revenue shortfalls until late in a fiscal quarter,
after it is too late to adjust expenses for that quarter. Additionally, our
operating expenses are based in part on our expectations for future revenues and
are relatively fixed in the short term. Any revenue shortfall below our
expectations could have an immediate and significant adverse effect on our
results of operations.
Our limited operating history and need to continue to integrate our acquisitions
makes it difficult to predict our future results
We were incorporated in January 1995 and therefore have a limited operating
history. We have generated revenues to date primarily from sales of BEA TUXEDO,
a software product to which we acquired worldwide distribution rights in
February 1996, and from fees for related software products and services. We have
also acquired a number of businesses, technologies and products. Our limited
operating history and the need to integrate a number of separate and independent
business operations subject our business to numerous risks. At October 31, 1999,
we had an accumulated deficit of approximately $189.1 million. In addition, in
connection with certain acquisitions completed prior to October 31, 1999, we
recorded approximately $265.5 million as intangible assets. Under Generally
Accepted Accounting Principles, these intangible assets are required to be
amortized in future periods. Approximately $202.9 million of these assets have
been amortized as of October 31, 1999 and we expect to amortize the remaining
approximately $62.6 million in future periods through our fiscal year ending
January 31, 2003. We expect to amortize $11.0 million of such intangible assets
over the remaining quarter of the fiscal year ending January 31, 2000 and $39.0
million in the fiscal year ended January 31, 2001. If we acquire additional
businesses, products and technologies in the future, we may report additional,
potentially significant expenses. If future events cause the impairment of any
intangible assets acquired in our past or future acquisitions, we may have to
write off expenses sooner than we expect. Because of our limited operating
history and ongoing write-offs associated with our prior acquisitions, there can
be no assurance that we will be profitable in any future period and recent
operating results should not be considered indicative of future financial
performance.
If we cannot successfully integrate our past and future acquisitions, our
revenues may decline and expenses may increase
From our inception in January 1995, we have made several strategic
acquisitions. Integration of acquired companies, divisions and products involves
the assimilation of potentially conflicting operations and products, which
divert the attention of our management team and may have a material adverse
effect on our operating results in future quarters. We acquired Leader Group,
Inc. and a business unit of Penta Systems Technology, Inc. in the quarter ended
April 30, 1998, NCR's TOP END technology in June 1998, the Entersoft Systems
Corporation in July 1998, WebLogic, Inc. ("WebLogic") in September 1998,
Component Systems, LLC in May 1999, Technology Resource Group, Inc. in July
1999, Avitek, Inc. in August 1999, The Theory Center in November 1999 and The
Workflow Automation Corporation in March 2000. While we intend to make
additional acquisitions in the future, there may not be suitable companies,
divisions or products available for acquisition. Our acquisitions entail
numerous risks, including the risk we will not successfully assimilate the
acquired operations and products, or retain key employees of the acquired
operations. There are also risks relating to the diversion of our management's
attention, and difficulties and uncertainties in our ability to maintain the key
business relationships the acquired entities have established. In addition, if
we undertake future acquisitions, we may issue dilutive securities, assume or
incur additional debt obligations, incur large one-time expenses, and acquire
intangible assets that would result in significant future amortization expense.
Any of these events could have a material adverse effect on our business,
operating results and financial condition.
Recently, the Financial Accounting Standards Board ("FASB") voted to
eliminate pooling of interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion of
the purchase price for any future acquisitions that must be charged to the
Company's cost of revenues and operating expenses in the periods following any
such acquisitions. As a consequence, the Company's results of operations in
periods following any such acquisitions could be materially adversely affected.
Although these changes would not directly affect the purchase price for any of
these acquisitions, they would have the effect of increasing the reported
expenses associated with any of these acquisitions. To that extent, these
changes may make it more difficult for the Company to acquire other companies,
product lines or technologies.
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Our revenues are derived primarily from two main product and services lines, and
a decline in demand or prices for either could substantially adversely affect
our operating results
We currently derive the majority of our license and service revenues from
BEA TUXEDO and from related products and services. Although we expect these
products and services to continue to account for the majority of our revenues in
the immediate future, we believe that BEA WebLogic will become an increasingly
important revenue source. As a result, factors adversely affecting the pricing
of or demand for BEA TUXEDO and BEA WebLogic, such as competition, product
performance or technological change, could have a material adverse effect on our
business and consolidated results of operations and financial condition.
The lengthy sales cycle for our products makes our revenues susceptible to
substantial fluctuations
Our customers typically use our products to implement large, sophisticated
applications that are critical to their business, and their purchases are often
part of their implementation of a distributed or Web-based computing
environment. Customers evaluating our software products face complex decisions
regarding alternative approaches to the integration of enterprise applications,
competitive product offerings, rapidly changing software technologies and
limited internal resources due to other information systems requirements. For
these and other reasons, the sales cycle for our products is lengthy and is
subject to delays or cancellation over which we have little or no control. We
have experienced a significant increase in the number of million and multi-
million dollar license transactions. In some cases, this has resulted in more
extended customer evaluation and procurement processes, which in turn have
lengthened the overall sales cycle for our products. Moreover, in contrast,
during the second half of fiscal 1999, an increasing number of our customers
began negotiating licenses to use our enterprise application solutions as an
architectural platform for several applications. These architectural commitments
are larger in scope and potential revenue than single application transactions.
In some cases, these architectural commitments also have longer sales cycles
than our typical single application transactions, because of both the customer's
decision cycle in adopting an architectural platform and heightened corporate
approval requirements for larger contracts. We believe general economic
conditions that impact customers' capital investment decisions also affect our
sales cycles. In addition, industry sources widely predict that large
corporations will stop deploying new computer systems in early 2000, in order to
avoid disrupting their computer systems before the Year 2000. If our customers
stop deploying new computer systems, our revenues could be materially reduced
and our operating results could be materially adversely affected, especially the
first quarter of calendar 2000. Any significant change in customer buying
decisions or sales cycles for our products could have a material adverse effect
on our business, results of operations and financial condition.
Although we use a standard license agreement which meets the revenue
recognition criteria under current generally accepted accounting principles, we
must often negotiate and revise terms and conditions of this standard agreement,
particularly in larger license transactions. Negotiation of mutually acceptable
terms and conditions can extend the sales cycle and, in certain situations, may
require us to defer recognition of revenue on the license. In addition, while we
do not expect the Statement of Position 97-2, Software Revenues Recognition,
("SOP 97-2") and SOP 98-4 and SOP 98-9, which amend certain provisions of SOP
97-2, to have a material impact on our revenues and earnings, detailed
implementation guidelines of the standard have not yet been issued. Once issued,
such detailed guidance could lead to unanticipated changes in our current
revenues recognition practices and such changes could have an adverse impact on
revenues and earnings.
If we do not effectively compete with new and existing competitors, our revenues
and operating margins will decline
The market for application server and integration software, and related
software components and services is highly competitive. Our competitors are
diverse and offer a variety of solutions directed at various segments of this
marketplace. These competitors include operating system vendors such as IBM, Sun
Microsystems and database vendors such as Oracle. Microsoft has released a
product that includes certain basic application server functionality and has
announced that it intends to include application server and integration
functionality in future versions of its operating systems, including Windows
2000. In addition, there are companies offering and developing application
server and integration software products and related services that directly
compete with products we offer. Further, software development tool vendors
typically emphasize the broad versatility of their toolsets and, in some cases,
offer complementary software that supports these tools and performs basic
application server and integration functions. Last, internal development groups
within prospective customers' organizations may develop software and hardware
systems that may substitute for those we offer. A number of our competitors and
potential competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition
and a larger installed base of customers than us.
Our principal competitors currently include hardware vendors who bundle
their own application server and integration software products, or similar
products, with their computer systems and database vendors that advocate
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client/server networks driven by the database server. IBM and Sun Microsystems
are the primary hardware vendors who offer a line of application server and
integration solutions for its customers. IBM's sale of application server and
integration functionality along with its IBM proprietary hardware systems
requires us to compete with IBM in its installed base, where IBM has certain
inherent advantages due to its significantly greater financial, technical,
marketing and other resources, greater name recognition and the integration of
its enterprise application server and integration functionality with its
proprietary hardware and database systems. We need to differentiate our products
based on functionality, interoperability with non-IBM systems, performance and
reliability, and establish our products as more effective solutions to
customers' needs. Oracle is the primary relational database vendor offering
products that are intended to serve as alternatives to our enterprise
application server and integration solutions.
Microsoft has announced that it intends to include certain application
server and integration functionality in future versions of its Windows 2000
operating system. Microsoft has also introduced a product that includes certain
basic application server functionality. The bundling of competing functionality
in versions of Windows requires us to compete with Microsoft in the Windows
marketplace, where Microsoft has certain inherent advantages due to its
significantly greater financial, technical, marketing and other resources, its
greater name recognition, its substantial installed base and the integration of
its application server and integration functionality with Windows. We need to
differentiate our products from Microsoft's based on scalability, functionality,
interoperability with non-Microsoft platforms, performance and reliability, and
need to establish our products as more effective solutions to customers' needs.
We may not be able to successfully differentiate our products from those offered
by Microsoft, and Microsoft's entry into the application server and integration
market could materially adversely affect our business, operating results and
financial condition.
In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of our current and prospective customers. Accordingly, it is possible that
new competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect our ability to sell additional software licenses and
maintenance, consulting and support services on terms favorable to us. Further,
competitive pressures could require us to reduce the price of our products and
related services, which could materially adversely affect our business,
operating results and financial condition. We may not be able to compete
successfully against current and future competitors and any failure to do so
would have a material adverse effect upon our business, operating results and
financial condition.
If we fail to adequately protect our intellectual property rights, competitors
may use our technology and trademarks, which could weaken our competitive
position, reduce our revenues and increase our costs
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. It is possible that other companies could successfully
challenge the validity or scope of our patents and that our patents may not
provide a competitive advantage to us.
As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technology without
authorization, or develop similar technology independently. In particular, we
have, in the past, provided certain hardware OEMs with access to our source
code, and any unauthorized publication or proliferation of this source code
could materially adversely affect our business, operating results and financial
condition. It is difficult for us to police unauthorized use of our products,
and although we are unable to determine the extent to which piracy of our
software products exists, software piracy is a persistent problem. Effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. The protection of our proprietary rights may not be adequate
and our competitors could independently develop similar technology, duplicate
our products, and they could design around patents and other intellectual
property rights we hold.
Third parties could assert that our software products and services infringe
their intellectual property rights, which could expose us to increased costs and
litigation
It is possible that third parties could claim our current or future
products infringe their rights. Any such claims, with or without merit, could
cause costly litigation that could absorb significant management time, which
could materially adversely effect our business, operating results and financial
condition. These type of claims might require us to enter into
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royalty or license agreements. If required, we may not be able to obtain such
royalty or license agreements, or obtain them on terms acceptable to us, which
could have a material adverse effect upon our business, operating results and
financial condition.
Our international operations expose us to greater management, collections,
currency, intellectual property, regulatory and other risks
International revenues accounted for 31 and 33 percent of our consolidated
revenues for the quarters ended October 31, 1999 and 1998, respectively. We sell
our products and services through a network of branches and subsidiaries located
in 27 countries worldwide. In addition, we also market through distributors in
Europe and the Asia/Pacific region. We believe that our success depends upon
continued expansion of our international operations. Our international business
is subject to a number of risks, including unexpected changes in regulatory
practices and tariffs, greater difficulties in staffing and managing foreign
operations, longer collection cycles, seasonality, potential changes in tax
laws, greater difficulty in protecting intellectual property and the impact of
fluctuating exchange rates between the US dollar and foreign currencies in
markets where BEA does business, in particular the French franc, the German
mark, the British pound, the Japanese yen, the Australian dollar and the Korean
won. General economic and political conditions in these foreign markets may also
impact our international revenues. Since the late summer of 1997, a number of
Pacific Rim countries have experienced economic, banking and currency
difficulties that has led to economic downturns in those countries. Among other
things, the decline in value of Asian currencies, together with difficulties
obtaining credit, has resulted in a decline in the purchasing power of our Asian
customers, which in turn has resulted in the delay of orders for our products
from certain Asian customers and is likely to result in further delays and,
possibly the cancellation, of such orders. We anticipate that weak Asian
conditions may adversely impact our financial results. It is difficult for us to
predict the extent of the future impact of these conditions. There can be no
assurances that these factors and other factors will not have a material adverse
effect on our future international revenues and consequently on our business and
consolidated financial condition and results of operations.
If we are unable to manage our growth, our business will suffer
We have continued to experience a period of rapid and substantial growth
that has placed, and if such growth continues would continue to place, a strain
on the Company's administrative and operational infrastructure. We have
increased the number of our employees from 120 employees in three offices in the
United States at January 31, 1996 to over 1,600 employees in over 72 offices in
28 countries at October 31, 1999. Our ability to manage our staff and growth
effectively requires us to continue to improve our operational, financial and
management controls, reporting systems and procedures. In this regard, we are
currently updating our management information systems to integrate financial and
other reporting among our multiple domestic and foreign offices. In addition, we
intend to continue to increase our staff worldwide and to continue to improve
the financial reporting and controls for our global operations. It is possible
we will not be able to successfully implement improvements to our management
information and control systems in an efficient or timely manner and that,
during the course of this implementation, we could discover deficiencies in
existing systems and controls. If we are unable to manage growth effectively,
our business, results of operations and financial condition will be materially
adversely affected.
If the market for middleware and application servers and integration software
does not grow as quickly as we expect, our revenues will be harmed
We sell our products and services in the middleware and application server
and integration markets. These markets are emerging and are characterized by
continuing technological developments, evolving industry standards and changing
customer requirements. Our success is dependent in large part on acceptance of
our products by large customers with substantial legacy mainframe systems,
customers establishing a presence on the Web for commerce, and developers of
web-based commerce applications. Our future financial performance will depend in
large part on continued growth in the number of companies extending their
mainframe-based, mission-critical applications to an enterprise-wide distributed
computing environment and to the Internet through the use of application server
and integration technology. There can be no assurance that the markets for
application server and integration technology and related services will continue
to grow. If these markets fail to grow or grow more slowly than we currently
anticipate, or if we experience increased competition in these markets, our
business, results of operations and financial condition will be adversely
affected.
If we lose key personnel or cannot hire enough qualified personnel, it will
adversely affect our ability to manage our business, develop new products and
increase revenue
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel including the Company's founders, Messrs.
William T. Coleman III, Alfred S. Chuang and key members of management.
Competition for these types of employees is intense, and it is possible that we
will not be able to retain our key employees and that we will not
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be successful in attracting, assimilating and retaining qualified candidates in
the future. As we seek to expand our global organization, the hiring of
qualified sales, technical and support personnel will be difficult due to the
limited number of qualified professionals. Failure to attract, assimilate and
retain key personnel would have a material adverse effect on our business,
results of operations and financial condition.
Our failure to maintain ongoing sales through distribution channels will result
in lower revenues
To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as system platform
companies, packaged application software developers, systems integrators and
independent consultants, independent software tool vendors and distributors. Our
ability to achieve revenue growth in the future will depend in large part on our
success in expanding our direct sales force and in further establishing and
expanding relationships with distributors, ISVs, OEMs and systems integrators.
In particular, a significant part of our strategy is to embed our technology in
products our ISV customers offer. We intend to seek distribution arrangements
with additional ISVs to embed our middleware and Web application servers
technology in their products. It is possible that we will not be able to
successfully expand our direct sales force or other distribution channels,
secure license agreements with additional ISVs on commercially reasonable terms
or at all, and otherwise further develop our relationships with indirect
distribution channels. Moreover, even if we succeed in these endeavors, it still
may not increase our revenues. If we invest resources in these types of
expansion and our revenues do not correspondingly increase, our business,
results of operations and financial condition will be materially and adversely
affected.
We rely on informal relationships with a number of consulting and systems
integration firms to enhance our sales, support, service and marketing efforts,
particularly with respect to implementation and support of our products as well
as lead generation and assistance in the sale process. We will need to expand
our relationships with third parties in order to support license revenues
growth. Many such firms have similar, and often more established, relationships
with our principal competitors. It is possible that these and other third
parties will not provide the level and quality of service required to meet the
needs of our customers, that we will not be able to maintain an effective, long
term relationship with these third parties, and that these third parties will
not successfully meet the needs of our customers.
If we do not develop and enhance new and existing products to keep pace with
technological, market and industry changes, our revenues may decline
The market for our products is highly fragmented, competitive with
alternative computing architectures, and characterized by continuing
technological developments, evolving industry standards and changing customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards or changes in customer requirements could
render our existing products obsolete and unmarketable. As a result, our success
depends upon our ability to enhance existing products, respond to changing
customer requirements and develop and introduce in a timely manner new products
that keep pace with technological developments and emerging industry standards.
It is possible that our products will not adequately address the changing needs
of the marketplace and that we will not be successful in developing and
marketing enhancements to our existing products or products incorporating new
technology on a timely basis. Failure to develop and introduce new products, or
enhancements to existing products, in a timely manner in response to changing
market conditions or customer requirements, will materially and adversely affect
our business, results of operations and financial condition.
If our products contain software defects, it could harm our revenues and expose
us to litigation
The software products we offer are internally complex and, despite
extensive testing and quality control, may contain errors or defects, especially
when we first introduced them. We may need to issue corrective releases of our
software products to fix these defects or errors. These defects and errors could
also cause damage to our reputation, loss of revenues, product returns or order
cancellations, or lack of market acceptance of our products. Accordingly, these
defects and errors could have a material and adverse effect on our business,
results of operations and financial condition.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in our
license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale and
support of our products entails the risk of such claims, which could be
substantial in light of customers' use of such products in mission-critical
applications. If a claimant brings a product liability claim against us, it
could have a material adverse effect on our business, results of operations and
financial condition.
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Our products interoperate with many parts of complicated computer systems,
such as mainframes, servers, personal computers, application software,
databases, operating systems and data transformation software. Failure of anyone
of these parts due to the Year 2000 problem could cause all or large parts of
computer systems to fail. In such circumstances, it may be difficult to
determine which part failed, and it is likely that customers will bring a
lawsuit against several suppliers. Even if our software is not at fault, we
could suffer material expense and material diversion of management time in
defending any such lawsuits.
Year 2000 issues could negatively affect our business
It is possible that our current products contain undetected errors or
defects associated with Year 2000 date functions that may result in material
costs or liabilities to us, moreover, our software directly and indirectly
interacts with a large number of other hardware and software systems. Some of
our customers are running product versions that are not Year 2000 compliant. We
have been encouraging our customers to migrate to current product versions. We
are unable to predict to what extent our business may be affected if our
software or the systems that operate in conjunction with our software experience
a material Year 2000 related failure. Any Year 2000 defect in our products or
the software and hardware systems with which our products operate, as well as
any Year 2000 errors caused by older non-current products that were not upgraded
by our customers, could expose us to litigation that could have a material
adverse impact on us. The risks of such litigation may be particularly acute due
to the mission-critical applications for which our products are used. Some
commentators have stated that a significant amount of litigation will arise out
of Year 2000 compliance issues, and we are aware of a growing number of lawsuits
against other software vendors. Because of the unprecedented nature of such
litigation, it is uncertain whether or to what extent we may be affected by it.
We could also experience serious unanticipated negative consequences caused
by undetected Year 2000 defects in our internal systems, including third party
software and hardware products. Internal systems are primarily composed of
third-party software and third-party hardware which contain embedded software
and our own software products. For example we could experience a (i) corruption
of data contained in our internal information systems or a (ii) failure of
hardware, software, or other information technology systems, causing an
interruption or failure of normal business operations. Any such events could
have a material adverse impact on our operating results. In addition, we could
experience serious unanticipated negative consequences caused by the failure of
services or products provided by third parties that are critical to the
continued our day-to-day operation, such as electrical power, telecommunications
services, and shipping services (particularly outside of countries such as the
United States where Year 2000 remediation has progressed the furthest), which
consequences could have a material adverse effect on our business operations.
Industry sources widely predict that many large corporations will stop
deploying new computer systems in late early 2000, in order to avoid disrupting
their computer systems before the Year 2000. Large corporations represent the
majority of our customer base, and a material portion of our license fees come
from new computer system deployments. We are monitoring our customer base to
determine their plans and have been informed by some of our customers that they
intend to stop deploying new computer systems. We are also taking several
management steps to reduce our exposure to Year 2000 deployment delays, such as
providing special incentives to our sales force during this time and focusing on
transactions that are not dependent on new deployments of pending projects.
However, if the Year 2000 related delays in deployments are larger than we
anticipate, last longer than we anticipate, or involve more of our targeted
customers than we anticipate, our revenues in early 2000 could be materially
lower than expected. Furthermore, certain of our customers who originally
intended to delay deployments in late 1999 have informed us that they may
accelerate their deployments. This could result in an unusual fluctuation of
orders with a temporarily positive impact on orders received in late 1999
followed by a decline in orders in early 2000. Customer behavior, and
consequently our orders, will be unusually difficult to forecast.
We have substantial debt outstanding which could affect our ability to obtain
additional working capital and which requires substantial cash payments
In connection with our sale of 4% Convertible Subordinated Notes in June
and July 1998, we incurred $250 million in long-term indebtedness. Our principal
and interest payment obligations increased substantially because of this
indebtedness. The degree to which we are leveraged could materially and
adversely affect our ability to obtain financing for working capital,
acquisitions or other purposes and could make us more vulnerable to industry
downturns and competitive pressures. These notes are convertible into Common
Stock, which conversion could cause substantial dilution to stockholders and
would increase the number of shares eligible for sale in the market, but would
eliminate the need for the Company to repay the principal amount of such
converted notes. There can be no assurance, however, that any of these notes
will be converted. Our ability to meet our debt service obligations will be
dependent upon our future performance, which will be subject to financial,
business and other factors affecting our operations, many of which are beyond
our control.
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We will require substantial amounts of cash to fund scheduled payments of
interest on these notes, payment of the principal amount of these notes at
maturity, payment of principal and interest on our other indebtedness, future
capital expenditures and any increased working capital requirements. If we
cannot meet our cash requirements out of cash flow from operations, there can be
no assurance that we will be able to obtain alternative financing. If we cannot
obtain such financing, our ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results or
to fund capital expenditures or increased working capital requirements may be
adversely affected. Any failure by us to satisfy our obligations with respect to
these notes at maturity (with respect to payments of principal) or prior thereto
(with respect to payments of interest or required repurchases) would constitute
a default under the indenture entered into in connection with the issuance of
these notes and could cause a default under agreements governing our other
indebtedness, if any.
Recent accounting pronouncements could cause us to defer revenue
The American Institute of Certified Public Accountants has issued a series
of recent pronouncements which address revenue recognition in the software
industry, including SOP 97-2, SOP 98-4, and SOP 98-9. These pronouncements
principally focus on concepts versus specific implementation guidance. We
believe we are in compliance with these standards, but the software industry and
the accounting profession are currently discussing a wide range of potential
interpretations which may result in the issuance of more pronouncements or
interpretive guidance. As future guidance becomes available or if the software
industry broadly adopts certain practices which are different than the Company's
current revenue recognition practices which could have a material adverse effect
on our business practices, financial condition, or results of operations.
We have not fully assessed our ability to comply with SOP 98-9 using
current business practices. However, the Company believes that SOP 98-9 may
require significantly more revenues to be deferred for certain types of
transactions.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, as well as the Forms 10-Q, 10-K and 8-K incorporated by
reference into this prospectus, include "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of
historical fact are "Forward-Looking Statements" for purposes of these
provisions, including any projections of earnings, revenues or other financial
items, any statements of the plans and objectives of management for future
operations, any statements concerning proposed new products or services, any
statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. In some cases,
Forward-Looking Statements can be identified by the use of terminology such as
"may," "will," "expects," "plans," "anticipates," "estimates," "potential," or
"continue," or the negative thereof or other comparable terminology. Although
BEA believes that the expectations reflected in the Forward-Looking Statements
contained herein are reasonable, there can be no assurance that such
expectations or any of the Forward-Looking Statements will prove to be correct,
and actual results could differ materially from those projected or assumed in
the Forward-Looking Statements. Future financial condition and results of
operations, as well as any Forward-Looking Statements, are subject to inherent
risks and uncertainties, including but not limited to the factors described
under "Risk Factors" beginning on page 9 and the reasons described elsewhere in
this offering circular. All Forward-Looking Statements and reasons why results
may differ included in this offering circular are made as of the date hereof,
and BEA assumes no obligation to update any such Forward-Looking Statement or
reason why actual results might differ.
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SELLING STOCKHOLDERS
The following table provides the names of and the number of shares of
Common Stock beneficially owned by each Selling Stockholder, and the number of
shares of Common Stock beneficially owned by each Selling Stockholder upon
completion of the offering or offerings pursuant to this prospectus, assuming
each Selling Stockholder offers and sells all of its or his/her respective
Shares. Selling Stockholders may, however, offer and sell all, or some or none
of their Shares. Under some circumstances, the respective donees, pledgees and
transferees or other successors in interest of the Selling Stockholders may also
sell the shares listed below as being held by the Selling Stockholders. No
Selling Stockholder beneficially owns one percent or greater of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Prior to Ownership After the
Offering Offered Offering
------------------ -------------------
Number of Shares Number of Shares Number of Shares
------------------ ---------------- -------------------
<S> <C> <C> <C>
Barry M. Bernstein....................................... 29,420 29,420 0
P. Dawn Bernstein........................................ 29,420 29,420 0
Joseph S. Dachuk......................................... 58,839 58,839 0
Peter E.J. Hall.......................................... 29,420 29,420 0
Patricia L. Hall......................................... 29,420 29,420 0
Abe Schwartz............................................. 29,420 29,420 0
Marta I. Schwartz........................................ 29,420 29,420 0
</TABLE>
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PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
holders of up to 235,359 shares of Common Stock. These shares were issued in
connection with the stock purchase agreement among BEA, The Workflow Automation
Corporation and the Selling Stockholders. This prospectus has been prepared in
connection with registering these shares to allow for sales of these shares by
the applicable selling stockholders to the public as required by the terms of
this stock purchase agreement. We have registered the shares for sale pursuant
to the terms of the stock purchase agreement, but registration of these shares
does not necessarily mean that any of these shares will be offered and sold by
the holders thereof.
We will not receive any proceeds from this offering. The shares may be sold
from time to time to purchasers directly by any of the selling stockholders, or
under some circumstances, donees, pledgees, transferees or other successors in
interest ("Transferees") thereof. Alternatively, the selling stockholders, or
Transferees thereof, may from time to time offer the shares through dealers or
agents, who may receive compensation in the form of commissions from the selling
stockholders, or Transferees thereof, and/or the purchasers of the shares for
whom they may act as agent. The selling stockholders, or Transferees thereof,
and any dealers or agents that participate in the distribution of the shares may
be deemed to be "underwriters" within the meaning of the Securities Act and any
profit on the sale of the shares by them and any commissions received by any
such dealers or agents might be deemed to be underwriting commissions under the
Securities Act of 1933.
At a time a particular offer of the shares is made, a prospectus
supplement, if required, will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the selling stockholders, or Transferees thereof, and any
other required information. The shares may be sold from time to time at varying
prices determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
The shares may also be sold in one or more of the following transactions:
(a) block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (b) purchases
by any such broker-dealer as principal and resale by such broker-dealer for its
own account pursuant to a prospectus supplement; (c) ordinary brokerage
transactions and transactions in which any such broker-dealer solicits
purchasers; (d) sales "at the market" to or through a market maker or into an
existing trading market, on an exchange or otherwise, for such shares; and (e)
sales in other ways not involving market makers or established trading markets,
including direct sales to purchasers. In effecting sales, broker-dealers engaged
by the selling stockholders may arrange for other broker-dealers to participate.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual report on form 10-K for
the year ended January 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered pursuant
to this prospectus will be passed upon for the Company by Morrison & Foerster
LLP, Palo Alto, California. Certain attorneys at Morrison & Foerster LLP own an
aggregate of approximately 24,000 shares of Common Stock of the Company.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses payable by
the Company in connection with the issuance and distribution of the Common Stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee................................... $ 3,666
Printing and duplicating fees..................................... 10,000
Legal fees and expenses........................................... 15,000
Accounting fees and expenses...................................... 12,000
Miscellaneous expenses............................................ 5,000
---------
*Total......................................................... $ 45,666
---------
*None of the expenses listed above will be borne by the selling stockholders.
Item 15. Indemnification Of Directors And Officers
Under Section 145 of the General Corporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation provides
that the liability of its directors for monetary damages shall be eliminated to
the fullest extend permissible under Delaware law. Pursuant to Delaware law,
this includes elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to the Registrant and its Stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of non-
monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the securities laws or state or
federal environmental laws. The Registrant maintains a policy of directors' and
officers' liability insurance that insures the Company's directors and officers
against the cots of defense, settlement or payment of a judgment under certain
circumstances.
Pursuant to written agreement between the respective Selling stockholders
and the Company, the directors and officers of the Company are indemnified by
such Selling stockholders against certain civil liabilities that they may incur
under the Securities Act in connection with this registration statement and the
related prospectus.
ITEM 16. Exhibits
4.1 - Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's registration statement on Form SB-2
(File No. 333-20791))
4.2 - Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to
Registrant's registration statement on Form SB-2 (File No. 333-20791))
5.1 - Opinion of Morrison & Foerster LLP
10.1 - Form of Agreement for the Purchase of All the Shares of The Workflow
Automation Corporation dated March 21, 2000, by and among Barry M. Bernstein, P.
Dawn Bernstein, Peter E. J. Hall, Patricia L. Hall, Abe Schwartz, Marta I.
Schwartz, Joseph S. Dachuk, The Workflow Automation Corporation, BEA Systems
(Ontario) Inc., and BEA Systems, Inc.
23.1 - Consent of Ernst & Young LLP, Independent Auditors*
23.2 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
24.1 - Power of Attorney (included on signature page hereto)
*To be filed by amendment.
19
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) any deviation from the low or high and of the estimated
maximum offering price may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate changes in volume and
price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
these securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby further undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, when applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California on April 17, 2000.
BEA SYSTEMS, INC.
By: /s/ William T. Coleman III
___________________________________
Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints William T. Coleman, III and
William M. Klein as his/her true and lawful attorneys-in-fact and agents,
jointly and severally, with full power of substitution and resubstitution, for
and in his/her stead, in any and all capacities, to sign on his/her behalf the
registration statement on Form S-3 in connection with the sale by BEA Systems,
Inc. of shares of offered securities, and to execute any amendments thereto
(including post-effective amendments) or certificates that may be required in
connection with this registration statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission and granting unto said attorneys-in-fact and
agents, jointly and severally, the full power and authority to do and perform
each and every act and thing necessary or advisable to all intents and purposes
as he/she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, jointly and severally, or his/her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William T. Coleman III Chief Executive Officer, Chairman of the Board and April 17, 2000
- -----------------------------------
William T. Coleman III Director (Principal Executive Officer)
/s/ William M. Klein Chief Financial Officer (Principal Financial and April 17, 2000
- -----------------------------------
William M. Klein Accounting Officer)
/s/ Carol A. Bartz Director April 17, 2000
- -----------------------------------
Carol A. Bartz
/s/ Cary J. Davis Director April 17, 2000
- -----------------------------------
Cary J. Davis
/s/ Stewart K.P. Gross Director April 17, 2000
- -----------------------------------
Stewart K.P. Gross
/s/ William H. Janeway Director April 17, 2000
- -----------------------------------
William H. Janeway
/s/ Dean O. Morton Director April 17, 2000
- -----------------------------------
Dean O. Morton
/s/ Robert L. Joss Director April 17, 2000
- -----------------------------------
Robert L. Joss
</TABLE>
21
<PAGE>
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
April 17, 2000
BEA Systems, Inc.
2315 North First Street
San Jose, CA 95113
Ladies and Gentlemen:
At your request, we have examined the registration statement on Form S-3
filed by BEA Systems, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on April 17, 2000 (the "registration
statement") relating to the registration under the Securities Act of 1933, as
amended, of up to 235,359 shares of the Company's common stock, $.001 par value
(the "Stock"), being offered by certain selling stockholders specified therein
(the "Selling Stockholders").
As counsel to the Company, we have examined the proceedings taken by the
Company and the Selling Stockholders in connection with the sale by the Selling
Stockholders of up to 235,359 shares of Stock.
It is our opinion that the 235,359 shares of Stock that may be sold are
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the registration
statement and further consent to all references to us in the registration
statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 10.1
BARRY M. BERNSTEIN
- and -
P. DAWN BERNSTEIN
- and -
PETER E.J. HALL
- and -
PATRICIA L. HALL
- and -
ABE SCHWARTZ
- and -
MARTA I. SCHWARTZ
- and -
JOSEPH S. DACHUK
- and -
THE WORKFLOW AUTOMATION CORPORATION
- and -
BEA SYSTEMS (ONTARIO) INC.
- and -
BEA SYSTEMS, INC.
________________________________________________________________________________
AGREEMENT FOR THE PURCHASE OF ALL THE SHARES
OF
THE WORKFLOW AUTOMATION CORPORATION
________________________________________________________________________________
DATED March 21, 2000
blake
Box 25, Commerce Court West
199 Bay Street
Toronto, Ontario, Canada
M5L 1A9
<PAGE>
Execution Copy
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - INTERPRETATION 2
1.1 Definitions...................................................... 2
1.2 Headings and Table of Contents................................... 10
1.3 Number and Gender................................................ 10
1.4 Business Days.................................................... 11
1.5 Currency and Payment Obligations................................. 11
1.6 Calculation of Interest.......................................... 11
1.7 Statute References............................................... 11
1.8 Section and Schedule References.................................. 11
ARTICLE 2 - PURCHASE OF SHARES............................................. 12
2.1 Purchase and Sale................................................ 12
2.2 Amount of Purchase Price......................................... 12
2.3 Purchase Price Paid.............................................. 12
ARTICLE 3 - CLOSING ARRANGEMENTS; VENDORS' REPRESENTATIVE.................. 14
3.1 Closing.......................................................... 14
3.2 Authority of Vendors' Representative............................. 14
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES................................. 14
4.1 Representations and Warranties of the Vendors.................... 14
(1) Authorization of Vendors......................................... 14
(2) Enforceability of Vendors' Obligations........................... 15
(3) Residence of Vendors............................................. 15
(4) Ownership of Shares.............................................. 15
(5) Organization of the Corporation.................................. 15
(6) Corporate Records................................................ 15
(7) Bankruptcy....................................................... 16
(8) Financial Statements............................................. 16
(9) Title to Assets.................................................. 16
(10) Real Property.................................................... 16
(11) Personal Property................................................ 16
(12) Leased Premises.................................................. 17
(13) Personal Property Leases......................................... 17
(14) Material Contracts............................................... 17
(15) Receivables...................................................... 17
(16) Inventories...................................................... 17
(17) Intellectual Property Rights..................................... 18
(18) Products......................................................... 20
(19) Data Processing.................................................. 21
(20) Licenses and Permits............................................. 21
(21) Undisclosed Liabilities.......................................... 22
(22) Safety Deposit Boxes/Powers of Attorney.......................... 22
(23) Consents and Approvals........................................... 22
(24) Notices.......................................................... 22
(25) Absence of Conflicting Agreements................................ 22
(26) Litigation....................................................... 23
(27) Insurance........................................................ 23
</TABLE>
<PAGE>
- 2 -
<TABLE>
<S> <C>
(28) Environmental Matters............................................ 23
(29) Employment/Consulting Contracts.................................. 24
(30) Collective Agreements............................................ 25
(31) Employee Plans................................................... 25
(32) Bonuses.......................................................... 27
(33) Customers and Suppliers.......................................... 27
(34) Product Warranties............................................... 28
(35) Affiliated Transactions.......................................... 28
(36) Intercompany Services............................................ 28
(37) Tax Filings...................................................... 28
(38) Taxes Paid....................................................... 28
(39) Reassessments of Taxes........................................... 29
(40) Withholdings and Remittances..................................... 29
(41) Depreciable Property............................................. 29
(42) Capital Gains.................................................... 29
(43) Absence of Certain Changes or Events............................. 30
(44) Brokerage Fees................................................... 31
(45) Subsidiaries..................................................... 31
(46) Full Disclosure.................................................. 31
(47) Representations concerning US Securities Laws.................... 31
(48) Representations concerning Canadian Securities Laws.............. 31
4.2 Representations and Warranties of the Purchaser and BEA.......... 32
(1) Incorporation and Power.......................................... 32
(2) Due Authorization................................................ 32
(3) Enforceability of Obligations.................................... 32
(4) Capitalization of Purchaser and BEA.............................. 32
(5) No Violation..................................................... 33
(6) SEC Filings; Financial Statements................................ 33
(7) Consents and Approvals of Government Authorities................. 33
(8) Representations Complete......................................... 34
4.3 Survival of Representations and Warranties....................... 34
ARTICLE 5 - INDEMNIFICATION................................................ 34
5.1 Indemnity by the Vendor.......................................... 34
5.2 Indemnity by the Purchaser and BEA............................... 35
5.3 Limitations...................................................... 35
5.4 Notice of Claim.................................................. 36
5.5 Direct Claims.................................................... 36
5.6 Third Party Claims............................................... 37
5.7 Settlement of Third Party Claims................................. 38
5.8 Interest on Claims............................................... 38
5.9 GST/HST Gross-UP and other Tax Adjustments....................... 38
ARTICLE 6 - COVENANTS...................................................... 38
6.1 Compliance with US Securities Laws............................... 38
6.2 Compliance with Canadian Securities Laws......................... 38
6.3 Application for Relief from Certain Securities Laws.............. 39
</TABLE>
<PAGE>
- 3 -
<TABLE>
<S> <C>
6.4 Indemnity by BEA Re: Certain Redemptions of Exchangeable Shares.. 39
ARTICLE 7 - DISPUTE RESOLUTION............................................. 39
7.1 Arbitration Procedures........................................... 39
ARTICLE 8 - GENERAL........................................................ 40
8.1 Expenses......................................................... 40
8.2 Payment of Taxes................................................. 40
8.3 Public Announcements............................................. 40
8.4 Notices.......................................................... 40
8.5 Time of Essence.................................................. 42
8.6 Entire Agreement................................................. 42
8.7 Waiver........................................................... 42
8.8 Severability..................................................... 42
8.9 Survival and Non-Merger.......................................... 42
8.10 Further Assurances............................................... 43
8.11 Language......................................................... 43
8.12 Governing Law.................................................... 43
8.13 Successors and Assigns........................................... 43
8.14 Counterparts..................................................... 43
</TABLE>
<PAGE>
Execution Copy
SHARE PURCHASE AGREEMENT
------------------------
This Agreement is made as of the . day of March, 2000,
A M O N G:
Barry M. Bernstein, an individual resident in the Town of Thornhill
("BBernstein"),
- and -
P. Dawn Bernstein, an individual resident in the Town of Thornhill
("DBernstein"),
- and -
Peter E.J. Hall, an individual resident in the Town of Newmarket
("PEHall"),
- and -
Patricia L. Hall, an individual resident in the Town of Newmarket
("PLHall"),
- and -
Abe Schwartz, an individual resident in the City of Toronto
("ASchwartz"),
- and -
Marta I. Schwartz, an individual resident in the City of Toronto
("MSchwartz"),
- and -
Joseph S. Dachuk, an individual resident in the City of Toronto
("Dachuk"),
(collectively, BBernstein, DBernstein, PEHall, PLHall, ASchwartz,
MSchwartz and Dachuk are hereinafter referred to as the "Vendors"),
- and -
The Workflow Automation Corporation, a corporation incorporated under
the laws of the Province of Ontario (the "Corporation"),
- and -
<PAGE>
-2-
BEA Systems (Ontario) Inc., a corporation incorporated under the laws
of the Province of Ontario (the "Purchaser"),
- and -
BEA Systems, Inc., a corporation incorporated under the laws of the
State of Delaware ("BEA").
RECITALS
WHEREAS:
A. The Vendors are the registered and beneficial owners of all the issued
and outstanding shares in the capital of the Corporation; and
B. The Purchaser is willing to purchase and the Vendors are willing to
sell all the issued and outstanding shares in the capital of the Corporation on
the terms and conditions contained in this Agreement.
NOW THEREFORE IN CONSIDERATION of the premises and the mutual
covenants and agreements hereinafter contained and for other good and valuable
consideration (the receipt and adequacy of which are hereby acknowledged), the
Parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 Definitions. In this Agreement, the following terms shall have the meanings
set out below unless the context requires otherwise:
"Affiliate" means, with respect to any Person, any other Person who directly or
indirectly controls, is controlled by, or is under direct or indirect common
control with, such Person, and includes any Person in like relation to an
Affiliate. A Person shall be deemed to control a Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise; and the term "controlled" shall
have a similar meaning.
"Agreement" means this Agreement, including the Schedules to this Agreement, as
it or they may be amended or supplemented from time to time, and the expressions
"hereof", "herein", "hereto", "hereunder", "hereby" and similar expressions
refer to this Agreement and not to any particular Section or other portion of
this Agreement.
"Applicable Employee Benefit Laws" has the meaning given in Section 4.1(31).
"Applicable Law" means, with respect to any Person, property, transaction, event
or other matter, any law, rule, statute, regulation, order, judgment, decree,
treaty or other requirement
<PAGE>
-3-
having the force of law (collectively, the "Law") relating or applicable to such
Person, property, transaction, event or other matter. Applicable Law also
includes, where appropriate, any interpretation of the Law (or any part thereof)
by any Person having jurisdiction over it, or charged with its administration or
interpretation.
"Assets" means all the properties, assets, interests and rights, whether choate
or inchoate, contingent, tangible or intangible, of the Corporation including,
without limitation, the following:
(1) all rights and interests of the Corporation to and in the Leased
Premises and under the Premises Leases, including prepaid rents,
security deposits and options to renew or purchase, rights of first
refusal under the Premises Leases and all leasehold improvements owned
by the Corporation and forming part of the Leased Premises;
(2) the Personal Property;
(3) the Inventories;
(4) the Receivables;
(5) all rights and interests under or pursuant to all warranties,
representations and guarantees, express, implied or otherwise, of or
made by suppliers or others in connection with the Assets;
(6) the Intellectual Property Rights;
(7) the Contracts;
(8) the Licenses and Permits;
(9) the Books and Records;
(10) all prepaid charges, deposits, sums and fees paid by the Corporation
before the Closing Time;
(11) all goodwill and other intangibles of the Corporation including the
present telephone numbers, internet domain addresses and other
communications numbers and addresses of the Corporation; and
(12) all income on and proceeds of any or all of the foregoing received or
receivable after the Closing Time.
"BEA Common Stock" means the shares of common stock of BEA and any other
securities into which such shares may be changed.
<PAGE>
-4-
"BEA Share Price" means the average closing price of one share of BEA Common
Stock as reported by NASDAQ over the ten (10) trading day period immediately
preceding (but not including) the Closing Date.
"Books and Records" means all books, records, files and papers of the
Corporation including drawings, engineering information, computer programs
(including source code and object code), software programs (including source
code and object code), manuals and data, sales and advertising materials, sales
and purchases correspondence, trade association files, research and development
records, lists of present and former customers and suppliers, personnel,
employment and other records, and the minute and share certificate books of the
Corporation, and all copies and recordings of the foregoing.
"Business" means the business carried on by the Corporation at the date hereof,
including without limitation, the research, development, licensing and support
of workflow automation software. The Corporation is the developer of jFlow, a
powerful new embedded workflow technology written entirely in Java. jFlow is a
middleware workflow technology that can be seamlessly embedded within software
products and computer applications. jFlow allows non-technical users to define,
modify and monitor business processes that span multiple applications,
platforms, technologies and even multiple organizations. jFlow is licensed to
software vendors, VARs and corporate end users who are looking to radically
improve business processes and create powerful E-commerce applications.
"Business Day" means any day except Saturday, Sunday or any day on which banks
are generally not open for business in both the Cities of Toronto, Ontario and
New York, New York.
"Canadian Dollars" means the lawful currency of Canada.
"Cause" shall mean: (i) any act or failure to act by employee or consultant, as
the case may be, that was performed in bad faith and to the detriment of the
Corporation; (ii) employee or consultant, as the case may be, refuses or fails
to act in accordance with any lawful, reasonable direction or order of the
Corporation and such refusal or failure could reasonable be expected to have a
materially adverse effect on the Corporation's business; (iii) misconduct or
dishonesty of employee or consultant, as the case may be, which could reasonably
be expected to have a materially adverse effect on the business and affairs of
the Corporation; or (iv) employee or consultant, as the case may be, is
convicted of a criminal offence and such conviction which could reasonably be
expected to have a materially adverse effect on the Corporation or on the
ability of the employee or consultant, as the case may be, to serve the
Corporation in such capacity.
"Claim" has the meaning given in Section 5.1.
"Closing" means the completion of the purchase and sale of the Shares in
accordance with the provisions of this Agreement.
"Closing Date" means the date first above written.
<PAGE>
-5-
"Closing Time" means the time of closing on the Closing Date provided for in
Section 3.1.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Consents and Approvals" means all consents and approvals required to be
obtained either by the Vendors or the Corporation in connection with the
execution and delivery of this Agreement and the completion of the transactions
contemplated by this Agreement.
"Contracts" means all rights and interests of the Corporation in all pending
and/or executory contracts, agreements, leases and arrangements to which the
Corporation is a party or by which the Corporation or any of the Assets or the
Business is bound or affected including the Material Contracts and the Leases.
"Corporation Intellectual Property Rights" has the meaning given in Section
4.1(17).
"Data Processing System" means the computer equipment and associated peripheral
devices and the related operating and application systems and other software
owned, leased or licensed by the Corporation other than off-the-shelf personal
computer software subject to transferable licenses.
"Direct Claim" has the meaning given in Section 5.4.
"Director" means a director of the Corporation; and "Directors" means every
Director.
"Employee" means an individual who is employed by the Corporation or is an
independent consultant to the Corporation, in either case, as listed in Schedule
4.1(29); and "Employees" means every Employee.
"Employee Plans" has the meaning given in Section 4.1(31).
"Engineering Team" shall mean Barry Bernstein, Joe Dachuk, Peter Hall, Adrian
Price, Michael Cincinatus, Gabe Quintos, Alex Dobrobaba, Sherif Makary, Shael
Brudner, Sicheng Yu, Steven Chartley and Maryam Ghiai.
"Environmental Laws" means Applicable Law in respect of the natural environment,
public or occupational health or safety, and the manufacture, importation,
handling, transportation, storage, disposal and treatment of Hazardous
Substances.
"Environmental Permits" means all permits, certificates, approvals, consents,
registrations and licenses issued or required by any Environmental Laws or any
court or governmental authority and relating to or required for the ownership
and/or operation of the Business and/or the Assets.
"Escrow Agent" means State Street Bank and Trust Company of California, N.A.
"Escrow Agreement 1" means the escrow agreement of even date herewith among the
Parties and the Escrow Agent in relation to the Indemnity Escrow Shares.
<PAGE>
-6-
"Escrow Agreement 2" means the escrow agreement of even date herewith among
certain Parties and the Escrow Agent in relation to the Principal Vendors Escrow
Shares.
"Escrowed Shares" means the sum of the Indemnity Escrow Shares and the Principal
Vendors Escrow Shares.
"Exchangeable Shares" means exchangeable shares in the capital of the Purchaser
governed by the share conditions set out on Schedule 1.1A.
"Exchangeco" means BEA Systems (Nova Scotia) Company, an unlimited liability
company incorporated under the laws of the Province of Nova Scotia.
"Financial Statements" has the meaning given in Section 4.1(8).
"GAAP" means those accounting principles which are recognized as being generally
accepted in Canada from time to time as set out in the handbook published by the
Canadian Institute of Chartered Accountants, consistently applied.
"GST/HST" means goods and services tax imposed under Part IX of the Excise Tax
Act (Canada).
"Hazardous Substance" means any solid, liquid, gas, odour, heat, sound,
vibration, radiation or combination of them that may impair the natural
environment, injure or damage property or plant or animal life or harm or impair
the health of any individual.
"including" means "including without limitation", and "includes" means "includes
without limitation".
"Indemnified Party" means a Person whom the Vendors or the Purchaser and BEA, as
the case may be, has agreed to indemnify under Article 5.
"Indemnity Escrow Shares" has the meaning given in Section 2.3(3)(b).
"Indemnifying Party" means, in relation to an Indemnified Party, the Party to
this Agreement that has agreed to indemnify that Indemnified Party under Article
5.
"Intellectual Property Rights" means all rights to and interests in:
(1) all business and trade names, corporate names, brand names and slogans
Related to the Business;
(2) 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;
<PAGE>
-7-
(3) all registered or unregistered 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;
(4) all rights and interests in and to processes, lab journals, notebooks,
data, trade secrets, designs, know-how, processes, product formulae
and information, manufacturing, engineering and other drawings and
manuals, technology, algorithms, software programs or applications (in
both source code and object code form), 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;
(5) all of the intellectual property affected by the registrations and
applications for registration listed in Schedule 4.1(17A) and the
licenses, sublicenses, agreements and permissions listed in Schedule
4.1(17C);
(6) all other intellectual and industrial property rights throughout the
world Related to the Business;
(7) all licenses of the intellectual property listed in items (1) to (6)
above;
(8) all future income and proceeds from any of the intellectual property
listed in items (1) to (6) above and the licenses listed in item (7)
above; and
(9) all rights to damages and profits by reason of the infringement of any
of the intellectual property listed in items (1) to (7) above.
"Inventories" means all inventories of stock-in-trade and merchandise including
materials, supplies, work-in-progress, finished goods, tooling, service parts
and purchased finished goods owned by the Corporation (including those in
possession of suppliers, customers and other third parties).
"Lands" means all real property that is owned by the Corporation.
"Leased Premises" means all real property that is leased or occupied by the
Corporation under the Premises Leases.
"Leases" means Personal Property Leases and Premises Leases.
"Liabilities" means all costs, expenses, charges, debts, liabilities, claims,
demands and obligations, whether primary or secondary, direct or indirect,
fixed, contingent, absolute or otherwise, under or in respect of any Contract,
agreement, arrangement, Lease, commitment or undertaking, Applicable Law and
Taxes or otherwise.
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"Licenses and Permits" means all licenses, permits, filings, authorizations,
approvals or indicia of authority issued to the Corporation including the
Environmental Permits.
"Lien" means any lien, mortgage, charge, hypothec, pledge, security interest,
prior assignment, option, warrant, lease, sublease, right to possession,
encumbrance, claim, right or restriction which affects, by way of a conflicting
ownership interest or otherwise, the right, title or interest in or to any
particular property.
"Material Adverse Change" means a change in the Business, prospects, financial
condition, operations, results of operations or capital of the Corporation or
otherwise, which has had or could reasonably be expected to have a significant
adverse effect on the value of the Shares.
"Material Adverse Effect" means any material adverse effect on the Business,
prospects, financial condition, operations, results of operations or capital of
the Corporation.
"Material Contract" means an agreement (whether oral or written) to which the
Corporation is a party or by which the Corporation or any of the Assets or the
Business is bound or affected, except an agreement which involves or may
reasonably be expected to involve the payment to or by the Corporation of less
than $25,000 over the term of the agreement and is not otherwise material to the
operation of the Business.
"NASDAQ" means The Nasdaq Stock Market.
"1933 Act" has the meaning given in Section 4.1(47).
"Notices" means the notices required to be given to any Person under Applicable
Law or pursuant to any contract or other obligation to which the Corporation is
a party or by which the Corporation is bound or which is applicable to any of
the Assets in connection with the execution and delivery of this Agreement or
the completion of the transactions contemplated by this Agreement.
"Officer" means an officer of the Corporation; and "Officers" means every
Officer.
"Party" means a party to this Agreement and any reference to a Party includes
its successors and permitted assigns; and "Parties" means every Party.
"Permitted Liens" means:
(1) Liens for Taxes;
(2) mechanics', construction, carriers', workers', repairers', storers' or
other similar liens (inchoate or otherwise) which individually or in
the aggregate are not material, arising or incurred in the ordinary
course of business which have not been filed, recorded or registered
in accordance with Applicable Law or of which notice has not been
given to the Corporation; and
(3) the mortgages, charges and other liens listed in Schedule 1.1B.
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"Person" is to be broadly interpreted and includes an individual, a corporation,
a limited liability company, a partnership, a trust, an unincorporated
organization, the government of a country or any political subdivision thereof
or any agency or department of any such government, and the executors,
administrators or other legal representatives of an individual in such capacity.
"Personal Property" means all machinery, equipment, furniture, motor vehicles
and other chattels owned or leased by the Corporation (including those in
possession of third parties).
"Personal Property Leases" means all chattel leases, equipment leases, rental
agreements, conditional sales contracts and other similar agreements relating to
the leasing of Personal Property.
"Premises Leases" means all the leases, agreements to lease, subleases, license
agreements and occupancy or other agreements relating to the Leased Premises.
"Prime Rate" means the prime rate of interest per annum quoted by Canadian
Imperial Bank of Commerce from time to time as its reference rate of interest
for Canadian dollar demand loans made to its commercial customers in Canada and
which Canadian Imperial Bank of Commerce refers to as its "prime rate", as such
rate may be changed from time to time.
"Principal Vendors" means BBernstein, PEHall, ASchwartz and Dachuk.
"Principal Vendors Escrow Shares" has the meaning given in Section 2.3(3)(c).
"Products" means the products produced, developed, licensed or sold by the
Corporation.
"Purchase Price" has the meaning given in Section 2.2.
"Purchase Price Shares" has the meaning given in Section 2.2(2).
"Purchaser's Solicitors" means, with respect to US law issues, Morrison &
Foerster LLP and, with respect to Canadian law issues, Blake, Cassels & Graydon
LLP.
"Receivables" means all accounts receivable, bills receivable, trade accounts,
book debts and insurance claims of the Corporation together with any unpaid
interest accrued on such items and any security or collateral for such items,
including recoverable deposits.
"Related to the Business" means, directly or indirectly, used in, arising from
or relating in any manner to the Business.
"Release" includes an actual or potential discharge, deposit, spill, leak,
pumping, pouring, emission, emptying, injection, escape, leaching, seepage or
disposal of a Hazardous Substance which is or may be in breach of any
Environmental Laws.
"Shares" means all the issued and outstanding shares in the capital of the
Corporation.
"Software" has the meaning given in Section 4.1(18).
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"Taxes" means all taxes, charges, fees, levies, imposts and other assessments,
including all income, sales, use, goods and services, value added, capital,
capital gains, alternative, net worth, transfer, profits, withholding, payroll,
employer health, excise, franchise, real property and personal property taxes,
and any other taxes, customs duties, fees, assessments or similar charges in the
nature of a tax including Canada Pension Plan and provincial pension plan
contributions, unemployment and employment insurance payments and workers'
compensation premiums, together with any instalments with respect thereto, and
any interest, fines and penalties imposed by any governmental authority
(including federal, state, provincial, municipal and foreign governmental
authorities), and whether disputed or not.
"Third Party Claim" has the meaning given in Section 5.4.
"to the best knowledge of the Vendors" or "to the best knowledge of the
Corporation" means to the actual knowledge of any of the Vendors, with respect
to the Vendors' joint representations and warranties, to the actual knowledge of
a Vendor, with respect to that Vendor's several representations and warranties,
or to the actual knowledge of the Corporation's directors, officers or
responsible employees with authority over the matters discussed, after
reasonable inquiry and investigation, with respect to the Corporation's
representations and warranties.
"US Person" means (i) any natural person resident in the United States; (ii) any
partnership or corporation organized or incorporated under the laws of the
United States; (iii) any estate of which any executor or administrator is a US
Person; (iv) any trust of which any trustee is a US Person; (v) any agency or
branch of a foreign entity located in the United States; (vi) any non-
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary for the benefit or account of a US Person; (vii) any
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated, or (if an individual)
resident in the United States; and (viii) any partnership or corporation if: (A)
organized or incorporated under the laws of any foreign jurisdiction; and (B)
formed by a US Person principally for the purpose of investing in securities not
registered under the 1933 Act, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule 501 of the 1933 Act) who are
not natural persons, estates or trusts.
"Vendors' Representative" means ASchwartz.
"Vendors' Solicitors" means Aird & Berlis.
1.2 Headings and Table of Contents. The division of this Agreement into
Articles and Sections, the insertion of headings, and the provision of any table
of contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 Number and Gender. Unless the context requires otherwise, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
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1.4 Business Days. If any payment is required to be made or other action is
required to be taken pursuant to this Agreement on a day which is not a Business
Day, then such payment or action shall be made or taken on the next Business
Day.
1.5 Currency and Payment Obligations. Except as otherwise expressly provided
in this Agreement:
(1) all dollar amounts referred to in this Agreement are stated in
Canadian Dollars;
(2) any payment contemplated by this Agreement shall be made by cash or
certified cheque or any other method that provides immediately
available funds; and
(3) except in the case of any payment due on the Closing Date, any payment
due on a particular day must be received and available not later than
3:00 p.m. (local time) on the due date and any payment made after that
time shall be deemed to have been made and received on the next
Business Day.
1.6 Calculation of Interest. In calculating interest payable under this
Agreement for any period of time, the first day of such period shall be included
and the last day of such period shall be excluded.
1.7 Statute References. Any reference in this Agreement to any statute or any
section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.8 Section and Schedule References. Unless the context requires otherwise,
references in this Agreement to Sections or Schedules are to Sections or
Schedules of this Agreement. The Schedules to this Agreement are as follows:
1.9 Schedules
1.1A Exchangeable Share Provisions
1.1B Permitted Liens
2.3(3)(c) Purchase Price Payable to each Vendor
4.1(4) Ownership of Shares
4.1(5) Authorized Capital and Other Information concerning the
Corporation
4.1(8) Financial Statements
4.1(9) Assets
4.1(11) Personal Property
4.1(12) Leased Premises
4.1(13) Personal Property Leases
4.1(14) Material Contracts
4.1(17A) Intellectual Property Rights
4.1(17B) Legal Actions
4.1(17C) Licence and Sublicence Agreements
4.1(18) Products and Software
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4.1.(19) Data Processing
4.1(20) Licenses and Permits
4.1(22) Bank Accounts and Safety Deposit Boxes
4.1(23) Consents and Approvals
4.1(24) Notices
4.1(27) Insurance
4.1(28) Environmental Matters
4.1(29) Employees
4.1(30) Collective Agreements
4.1(31) Employee Plans
4.1(32) Bonuses Paid
4.1(33) Customers and Suppliers
4.1(41) Undepreciated Capital Cost of Depreciable Capital Property
4.1(44) Brokerage Fees
7.1 Arbitration Procedure
ARTICLE 2 - PURCHASE OF SHARES
2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement,
the Vendors hereby sell to the Purchaser, and the Purchaser hereby purchases
from the Vendors, the Shares.
2.2 Amount of Purchase Price. The purchase price hereby paid by the Purchaser
to the Vendors for the Shares (the "Purchase Price") is equal to:
(1) Four Million, Eight Hundred, Fifty Thousand U.S. Dollars
(US$4,850,000); plus
(2) the "Purchase Price Shares" which shall be 235,356 Exchangeable
Shares.
2.3 Purchase Price Paid. The Purchaser has paid and each Vendor hereby
acknowledges that the Purchase Price has been paid and satisfied as follows:
(1) Two Million, Eight Hundred Thousand US Dollars (US$2,800,000) has
been paid by the Purchaser to the Vendors in accordance with the
percentages set opposite their names on Schedule 2.3(3)(c);
(1.1) Two Million, Fifty Thousand US Dollars (US$2,050,000) has been paid
by the Purchaser upon direction of the Vendors for and on behalf of
the Vendors to Infinity Investments, L.L.C. and Terry Popowich, in
full satisfaction of the brokers' fees set out on Schedule 4.1(44);
(2) 191,896 Exchangeable Shares, have been delivered by the Purchaser
to the Vendors in accordance with the percentages set opposite
their names on Schedule 2.3(3)(c); and
(3) the Escrowed Shares have been delivered to the Escrow Agent to be
distributed by the Escrow Agent:
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(a) Intentionally deleted.
(b) in accordance with the Escrow Agreement 1, 27,660 Exchangeable
Shares (collectively, the "Indemnity Escrow Shares") shall be
delivered to the Vendors on the first anniversary of the Closing
Date.
(c) in accordance with the Escrow Agreement 2, 15,800 Exchangeable
Shares otherwise allocable to the Principal Vendors as set forth
on Schedule 2.3(3)(c) (collectively, the "Principal Vendors
Escrow Shares") shall be delivered to the Principal Vendors 18
months after the Closing Date; provided, however, that if, at any
time during the period from the date hereof through the 18 month
anniversary of the Closing Date, either:
(i) seventy-five percent (75%) of the Engineering Team of the
Corporation shall no longer be employed by the Corporation
or any successor because any such individual or
individuals, as the case may be, voluntarily resigns (other
than as a result of constructive dismissal) from the
Corporation or are terminated for Cause, and if the
Corporation is unable using commercially reasonable efforts
to replace such individual or individuals by a person or
persons of equivalent or better credentials, experience and
skill (as determined in good faith by the Corporation)
within ninety (90) days of such termination or
terminations; provided that, if the Corporation has in its
employment a person or persons, as the case may be, engaged
by the Corporation after the Closing Date, such person or
persons, if of equivalent or better credentials, experience
and skill to the person or persons so resigning or so
terminated (as determined in good faith by the
Corporation), shall be deemed for the purposes of this
Subsection 2.3(3)(c)(i) to have replaced the person or
persons, as the case may be, so resigning or so terminated
as at the date of such resignation or termination; or
(ii) if any of the Principal Vendors shall violate the non-
competition provision in such Principal Vendor's
noncompetition agreement with the Corporation ,
the Purchaser shall not be obligated to deliver to any Principal
Vendor, in the case of clause (i), or to such breaching Principal
Vendor, in the case of clause (ii), Principal Vendors Escrow
Shares pursuant to this Section 2.3(3)(c), in each case, to be
paid or delivered, as the case may be, by the Purchaser to the
Vendors or Vendor, as the case may be, in accordance with the
percentages set opposite their names on Schedule 2.3(3)(c); and
provided that if the number of the Purchase Price Shares to be
received by a Vendor is not a whole number, such number shall be
rounded to the nearest whole number, and in the event any
Purchase Price Shares that are not delivered to the Vendors or a
Vendor under Subsection 2.3(3)(c), the
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applicable Purchase Price for such Vendors or Vendor shall be
deemed to be reduced by the number of such Purchase Price Shares.
2.4 Tax Election. The Purchaser agrees that, at the request of a Vendor who is
a resident of Canada for purposes of the Income Tax Act (Canada), the Purchaser
will make a joint election with the Vendor with respect to the Shares under
subsection 85(1) of the Income Tax Act (Canada) and the corresponding provisions
of any applicable provincial income tax statute, with such "agreed amount" as is
determined by the Vendor in its sole discretion (within the limits under
applicable law). The Vendor shall have sole responsibility for the proper
completion of the election forms and the timely and proper filing of the
elections with the relevant tax authorities. The sole obligation of the
Purchaser shall be to provide any information reasonably requested by the Vendor
for the election form concerning the Purchaser, and to execute and return to the
Vendor any properly completed election form within ten (10) Business Days of
receipt of such form from the Vendor.
ARTICLE 3 - CLOSING ARRANGEMENTS; VENDORS' REPRESENTATIVE
3.1 Closing. The Closing has taken place effective contemporaneously with the
execution hereof on the Closing Date at the offices of Blake, Cassels & Graydon
LLP, or at such other time on the Closing Date or such other place as may be
agreed orally or in writing by the Vendors and the Purchaser.
3.2 Authority of Vendors' Representative. BEA and the Purchaser shall be
entitled to and shall act and rely on any notice, request, election, direction,
consent, waiver, extension, amendment or other communication given or agreement
entered into by or on behalf of the Vendors by the Vendors' Representative who
shall represent the Vendors and have the authority to bind the Vendors. In all
cases, the Vendors' Representative shall use its reasonable efforts to consult
with the Vendors prior to taking any action contemplated herein. In addition,
the Vendors hereby acknowledge and confirm the authority of the Vendors'
Representative with respect to the execution of the advisor and finder agreement
among the Vendors' Representative, on behalf of the Vendors, and Infinity
Investments, L.L.C. and Terry Popowich.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Vendors. As a material inducement to
the Purchaser and BEA entering into this Agreement and completing the
transactions contemplated by this Agreement and acknowledging that the Purchaser
and BEA are entering into this Agreement in reliance upon the representations
and warranties of the Vendors set out in this Section 4.1, each Vendor
represents and warrants to the Purchaser and to BEA as follows:
(1) Authorization of Vendors. Each Vendor severally warrants that he or
she has the power and capacity to own and dispose of the Shares owned
by him or her and that such Vendor has the power and capacity to enter
into this Agreement and all other agreements and instruments to be
executed by such Vendor as contemplated by this Agreement and to carry
out such Vendor's obligations under this Agreement and such other
agreements and instruments.
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(2) Enforceability of Vendors' Obligations. Each Vendor represents and
warrants as to him or her that (i) this Agreement and all other
agreements and instruments to be executed by such Vendors as
contemplated by this Agreement constitute, or will constitute, a valid
and binding obligation of such Vendor enforceable against such Vendor
in accordance with its terms subject, however, to limitations on
enforcement imposed by bankruptcy, insolvency 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 and (ii) such Vendor 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.
(3) Residence of Vendors. Each Vendor represents and warrants as to him
or her that such Vendor is not a non-resident of Canada for purposes
of section 116 of the Income Tax Act (Canada).
(4) Ownership of Shares. Each Vendor severally represents and warrants as
to him or her that such Vendor is, and at the Closing Time will be,
the registered and beneficial holder of the number of Shares set
opposite his or her name on Schedule 4.1(4), 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 any Vendor of any of the
Shares.
(5) Organization of the Corporation . The information set out in Schedule
4.1(5) concerning (i) the name and jurisdiction of incorporation, (ii)
the authorized, issued and outstanding shares, (iii) the registered
and beneficial holders of the Shares and the directors and officers,
of the Corporation is true and complete. The Corporation is
incorporated and validly subsisting under the laws of its jurisdiction
of incorporation. The Corporation is licensed or qualified to do
business under the laws of the jurisdictions specified in Schedule
4.1(5) and neither the character nor the location of the properties
owned by the Corporation nor the nature of the business conducted by
it requires licensing or qualification under the laws of any other
jurisdiction. The Corporation has full corporate power to carry on
its business and to own and operate its assets, properties and
business as now carried on and owned and operated. There are no
rights, subscriptions, warrants, options, conversion rights, calls,
commitments or plans or agreements of any kind outstanding which would
enable any Person to purchase or otherwise acquire any shares or other
securities of the Corporation including, without limitation, any
securities convertible into or exchangeable or exercisable for shares
or other securities of the Corporation.
(6) Corporate Records. The minute books of the Corporation 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. The share certificate book,
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register of shareholders, register of transfers and register of
directors and officers of the Corporation are complete and accurate in
all material respects.
(7) Bankruptcy. The Corporation is not an insolvent person within the
meaning of the Bankruptcy and Insolvency Act (Canada) nor has made an
assignment in favour of its creditors nor 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 Corporation 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 Corporation or any of
the Assets and no execution or distress has been levied upon any of
the Assets.
(8) Financial Statements. The Vendors have furnished the Purchaser with
the unaudited annual financial statements of the Corporation for the
fiscal year ended July 31, 1999, and the interim unaudited financial
statements of the Corporation for the five month period ended December
31, 1999, (collectively, the "Financial Statements"), true and
complete copies of which are annexed hereto as Schedule 4.1(8), which
schedule also includes a document which sets out outstanding vacation
entitlements that are included as liabilities of the Corporation in
the December 31, 1999 financial statements of the Corporation. The
Financial Statements have been prepared in accordance with GAAP and
are consistent with the books and records of the Corporation. The
balance sheets contained in such Financial Statements fairly present
the financial position of the Corporation as of their respective dates
and the statements of earnings and retained earnings contained in the
Financial Statements fairly present the results of operations for the
periods indicated.
(9) Title to Assets. The Corporation has good and marketable title to all
the Assets, free and clear of any and all Liens, except for Permitted
Liens. None of the Assets are located outside of Canada, except as
listed in Schedule 4.1(9). The Assets are sufficient to permit the
continued operation of the Business in the ordinary course consistent
with past practice. Schedule 4.1(9) sets out a complete and accurate
list of all locations where the Assets are situate, including a brief
description of the Assets situate at each location. There is no
agreement, option or other right or privilege outstanding in favour of
any Person for the purchase, transfer, assignment or hypothecation
from the Corporation of the Business or of any of the Assets out of
the ordinary course of business.
(10) Real Property. The Corporation does not own any Lands.
(11) Personal Property. Schedule 4.1(11) lists each item of Personal
Property which had a book value in the accounting records of the
Corporation, determined in accordance with GAAP at the date of the
Corporation's most recently completed financial year, of more than
$25,000 or is otherwise material to the Business. All Personal
Property is in good operating condition and repair, ordinary wear and
tear excepted.
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(12) Leased Premises. Schedule 4.1(12) lists all the Premises Leases.
Each Premises Lease is in full force and effect, unamended by oral or
written agreement, and the Corporation is entitled to the full benefit
and advantage of such Premises Lease in accordance with the terms
thereof. Each Premises Lease is in good standing and there has not
been any default by any party under any Premises Lease nor is there
any dispute between the Corporation and any landlord under any of the
Premises Leases. The Corporation has obtained from each mortgagee of
each landlord of each Leased Premises whose mortgage ranks in priority
to the applicable Premises Lease an agreement not to disturb the
Corporation's possession thereof while the Corporation is not in
default under the applicable Premises Lease. None of the Premises
Leases has been assigned by the Corporation in favour of any Person.
The current uses of the Leased Premises comply with Applicable Law.
(13) Personal Property Leases. Schedule 4.1(13) lists all the Personal
Property Leases and identifies the ones which cannot be terminated by
the Corporation without liability at any time upon less than 30 days'
notice or which involve payment by it in the future of more than
$25,000. Each Personal Property Lease is in full force and effect and
has not been amended, and the Corporation 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 Corporation and any other
party under any Personal Property Lease.
(14) Material Contracts. Schedule 4.1(14) lists all the Material
Contracts. To the best knowledge of the Vendors, the Corporation 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
Corporation or by any other party to the Material Contract. Each
Material Contract is in full force and effect, unamended by written or
oral agreement, and the Corporation is entitled to the full benefit
and advantage of each Material Contract in accordance with its terms.
The Corporation has not received any notice of a default by the
Corporation or a dispute between the Corporation and any other party
in respect of any Material Contract.
(15) Receivables. The Receivables are valid obligations which arose in the
ordinary course of business and will be collected in the ordinary
course of business, in the aggregate, at not less than 90% of their
full face value. None of the Receivables is due from an Affiliate of
the Corporation.
(16) Inventories. The Inventories consist of items that are current and of
good and merchantable quality and not subject to any write-down or
write-off. The portion of the Inventories consisting of finished
products is saleable in the ordinary course of business at normal
prices. The portion of the Inventories consisting of raw materials
and work-in-progress is of a quality useable in the production of
finished products.
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(17) Intellectual Property Rights.
(a) Schedule 4.1(17A) contains a list of all Intellectual Property
Rights owned or licensed and used or held for use by the
Corporation ("Corporation Intellectual Property Rights"),
specifying as to each, as applicable: (i) the nature of such
Intellectual Property Right; (ii) the owner of such Intellectual
Property Right; (iii) the jurisdictions by or in which such
Intellectual Property Right is recognized without regard to
registration or has been issued or registered or in which an
application for such issuance or registration has been filed,
including the respective registration or application numbers; and
(iv) licenses, sublicenses and other agreements as to which the
Corporation or Vendor is a party and pursuant to which any Person
is authorized to use such Intellectual Property Right, including
the identity of all parties thereto, a description of the nature
and subject matter thereof, the applicable royalty and the term
thereof.
(b) The Corporation Intellectual Property Rights constitute all
Intellectual Property Rights necessary for the operation of the
Corporation's business as presently conducted and as proposed to
be conducted. The Corporation Intellectual Property Rights will
be owned or available for use by the Corporation on identical
terms and conditions immediately subsequent to the Closing
hereunder. No Corporation Intellectual Property Rights are
involved in any interference or re-examination or cancellation or
opposition or abandonment proceeding and none of the Corporation
or the Vendors has been notified or alerted that any such
proceeding will hereafter be commenced. Except as set forth in
Schedule 4.1(17A), none of the Corporation or any Vendor, as to
itself, has any basis for provoking or initiating an interference
or opposition proceeding with respect to any Intellectual
Property Right held or used by others.
(c) Except as set forth on Schedule 4.1(17B), neither the Corporation
nor any Vendor is, or has been, a defendant in any action, suit,
investigation or proceeding relating to, or otherwise been
notified of, any alleged claim or infringement of the Corporation
Intellectual Property Rights, and (i) none of the Corporation,
the Vendors or the Corporation Intellectual Property Rights have
infringed or are infringing on the intellectual property of any
third party, and (ii) none of the Corporation or the Vendors has
any knowledge of any continuing infringement by any third party
of any Corporation Intellectual Property Right. Except as set
forth on Schedule 4.1(17B), neither the Corporation nor Vendor
has entered into any agreement to indemnify any other Person
against any charge of infringement, misappropriation or other
conflict with respect to any Intellectual Property Right. The
Employees have entered into written agreements with the
Corporation to maintain the confidentiality of confidential
Intellectual Property.
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(d) The Corporation has delivered to Purchaser correct and complete
copies of all of the Corporation's patents, registrations,
applications, licenses, agreements, and permissions (as amended
to date) relating to Corporation Intellectual Property Rights and
has made available to Purchaser correct and complete copies of
all other written documentation evidencing ownership and
prosecution (if applicable) of each such Corporation Intellectual
Property Right. With respect to each Intellectual Property Right
that the Corporation owns:
(i) all patents, copyrights and trademarks included in the
Corporation Intellectual Property Rights are listed on
Schedule 4.1(17A) and are valid and subsisting in good
standing and all pending applications are listed on
Schedule 4.1(17A) and have been prosecuted in good faith as
required by law and are in good standing, and no
application for registration of any Intellectual Property
Right has been rejected;
(ii) the Corporation possesses all right, title, and interest in
and to the item, and no other Person has any right, title
or interest in any such Intellectual Property Right and all
such other Persons have waived their moral rights in any
copyright works within such Intellectual Property Rights;
(iii) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge; and
(iv) to the best knowledge of the Vendors, there is no charge,
complaint, action, suit, proceeding, hearing,
investigation, claim, or demands pending or threatened
which challenges the legality, validity, enforceability,
use, or ownership of the Intellectual Property Right; and
(v) the item is not subject to any lien, security interest or
other encumbrance.
(e) Schedule 4.1(17C) sets forth a complete listing, and the
Corporation has supplied Purchaser with correct and complete
copies of, all licenses, sublicenses, agreements, and permissions
(as amended to date) with respect to the Corporation Intellectual
Property Rights. With respect to each such Intellectual Property
Right:
(i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable in
accordance with its terms, and in full force and effect;
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(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
Closing;
(iii) the Corporation has, and to the best knowledge of the
Corporation and the Vendors, no other party to the license,
sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or
lapse of time could constitute a breach or default or
permit termination, modification, or acceleration
thereunder;
(iv) the Corporation has, and to the best knowledge of the
Corporation and the Vendors, no other party to the license,
sublicense, agreement, or permission has repudiated any
provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above
are true and correct in all material respects with respect
to the underlying license;
(vi) the underlying item of the Intellectual Property Right is
not subject to any outstanding judgment, order, decree,
stipulation, injunction, charge, or governmental
restriction; and
(vii) to the best knowledge of the Corporation and the Vendors,
no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or threatened
which challenges the legality, validity, or enforceability
of the underlying item of the Intellectual Property Right.
(18) Products.
(a) Schedule 4.1(18) sets out a list of all Products and any other
proprietary software developed by the Corporation and currently sold,
licensed or otherwise used by the Corporation in its business, and any
and all enhancements, upgrades, customizations, modifications and
maintenance thereof (the "Software").
(b) Each of the Products and/or Software produced, developed or sold
by the Corporation is, and at all times up to and including the
sale thereof by the Corporation has been (i) in compliance in all
material respects with all applicable federal, state, and local
laws and regulations and (ii) conforms in all material respects
to any promises or affirmations of fact made on the container or
label for such product or in connection with its sale, subject to
returns, repairs, defects and allowances in the ordinary course
which would not reasonably be expected to have a material adverse
effect on the Corporation.
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(c) There is no material design defect with respect to any of such
Products and/or Software and, to the best knowledge of the
Corporation, each of such products contains adequate warnings,
presented in a reasonably prominent manner, in accordance with
applicable laws, rules and regulations and current industry
practice with respect to its contents and use.
(d) The Products and/or Software and, to the best knowledge of the
Corporation, any non-proprietary software used by the
Corporation, is free from significant programming errors and
operates in substantial conformity with its user documentation
and other descriptions and standards applicable thereto provided
by the Corporation, and the Products and/or Software does not
contain any virus, timer, clock, counter or other limiting
design, instruction or routine, that would erase data,
programming or become inoperable or otherwise incapable of being
used in the full manner for which it was designed and created nor
has the Corporation been informed that the non-proprietary
software has any such problems.
(19) Data Processing. Schedule 4.1(19) sets out (i) a brief description of
the Data Processing System and (ii) a list of all agreements including
warranties, leases and licenses relating to the Data Processing
System. The Data Processing System adequately meets the data
processing needs of the Business and operations of the Corporation as
presently conducted. The Corporation has taken appropriate action by
instruction, agreement or otherwise with its Employees or other
Persons permitted access to system application programs and data files
used in the Data Processing System to protect against unauthorized
access, use, copying, modification, theft and destruction of such
programs and files. The data processing and data storage facilities
of the Corporation are adequate and properly protected. The
Corporation has arranged for back-up data processing services adequate
to meet its data processing needs in the event the Data Processing
System or any of its components is rendered temporarily or permanently
inoperative as a result of a natural or other disaster.
(20) Licenses and Permits. Schedule 4.1(20) lists all the Licenses and
Permits and identifies the ones that by their terms are not
transferable. The Corporation holds the Licenses and Permits free and
clear of any and all Liens. All the Licenses and Permits are in full
force and effect, the Corporation is not in violation of any term or
provision or requirement of any such Licenses 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 License or Permit. The Corporation has
obtained all licenses and permits and all approvals of any
governmental or regulatory authorities that are required to operate
the Business as presently conducted and presently proposed to be
conducted, except as would not individually or in the aggregate result
in a Material Adverse Effect.
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(21) Undisclosed Liabilities. The Corporation 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
ordinary course of business, consistent with past practice; and (ii)
which do not exceed $25,000 individually or in the aggregate.
(22) Safety Deposit Boxes/Powers of Attorney. Schedule 4.1(22) lists:
(a) the name of each bank, trust company and other financial
institution in which the Corporation holds accounts or safety
deposit boxes and the names of every Person authorized to draw
thereon or to have access thereto; and
(b) the name of each Person holding a general or special power of
attorney from the Corporation and a summary of the terms thereof.
(23) Consents and Approvals. All the Consents and Approvals are listed in
Schedule 4.1(23). Except for the Consents and Approvals and other than
the application submitted or to be submitted, as the case may be,
jointly on behalf of the Parties to the Ontario Securities Commission
for relief in respect of certain of the trades contemplated by the
share conditions of the Exchangeable Shares and the support agreement
and exchange right agreement to be entered into on the date hereof by
certain of the Parties, 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 Corporation to carry on the Business after
the Closing as the Business is currently carried on by the
Corporation.
(24) Notices. All the Notices are listed in Schedule 4.1(24). Except for
the Notices, no notice is required to be delivered to any Person in
connection with the execution and delivery of this Agreement and the
completion of the transactions contemplated by this Agreement or to
permit the Corporation to carry on the Business after the Closing as
the Business is presently conducted and presently proposed to be
conducted.
(25) Absence of Conflicting Agreements. Each Vendor represents and warrants
as to him or her that the execution, delivery and performance of this
Agreement by such Vendor 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:
(a) 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 Corporation;
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(b) an event which, pursuant to the terms of any Contract or License
or Permit, causes any right or interest of the Corporation to
come to an end or be amended in any way that is detrimental to
the Business or entitles any other Person to terminate or amend
any such right or interest;
(c) the creation or imposition of any Lien on any Asset; or
(d) the violation of any Applicable Law by such Vendor or the
Corporation.
(26) Litigation. Other than as disclosed in Schedule 4.1(17B), 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 to the best knowledge of the Vendors threatened by or against the
Corporation Related to the Business or affecting the Business or the
operations or capital of the Corporation 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.
(27) Insurance. Particulars of the policies of insurance maintained by the
Corporation at the date of this Agreement are set out in Schedule
4.1(27). All such policies are in full force and effect and the
Corporation is not in default, whether as to the payment of premiums
or otherwise, under the terms of such policies. Such policies are of
the type and in the amount customarily carried by Persons conducting
business similar to the Corporation.
(28) Environmental Matters.
(a) The Business and the Assets as carried on or used by the
Corporation and its predecessors have been carried on and used
and are currently carried on and used in compliance with all
Environmental Laws.
(b) The Corporation and its predecessors have not used any machinery,
equipment or facility included in the Assets, or permitted them
to be used, to generate, manufacture, refine, treat, transport,
store, handle, dispose of, transfer, produce or process any
Hazardous Substance, except in compliance with all Environmental
Laws.
(c) The Corporation is not, and has not been, subject to any
proceedings alleging the violation of any Environmental Law or to
determine whether any remedial action is needed to respond to a
Release.
(d) There are no circumstances that could reasonably be expected to
give rise to any civil or criminal proceedings or Liability
regarding the Release or presence of a Hazardous Substance or the
violation of any Environmental Law by the Corporation, its
employees, agents or others for whom it is responsible.
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(e) The Environmental Permits listed in Schedule 4.1(28) constitute
all Environmental Permits held by the Corporation. The
Corporation has obtained all Environmental Permits required for
the conduct of its Business and the ownership of its property.
The Environmental Permits presently held are valid and in full
force and effect, and no violations thereof have been
experienced, noted or recorded, and no proceedings are pending or
threatened to revoke or limit any of them.
(f) All Hazardous Substances disposed of, treated or stored by the
Corporation or its predecessors have been disposed of, treated
and stored in compliance with all Environmental Laws and no part
of the Assets contains a Hazardous Substance which exceeds an
applicable soil, groundwater or other environmental, health or
safety criteria or standard published or enacted by a
governmental authority or agency having jurisdiction over the
Assets, whether or not such criteria or standard constitutes
Environmental Law.
(g) There are no proceedings nor any circumstances or material facts
which could, if true, give rise to any proceedings, in which it
is alleged that the Corporation or its predecessors are
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.
(h) The Corporation or its predecessors have maintained all
environmental and operating documents and records in the manner
and for the time periods required by any Environmental Law and
have never conducted an environmental audit of the Business and
Assets. For purposes of this Section, an environmental audit
includes any evaluation, assessment, review or study performed at
the request of or on behalf of the Corporation, a prospective
purchaser of the Business or the Assets, a court or governmental
authority.
(i) There are no pending or proposed changes to Environmental Laws of
which the Vendors are aware which would render illegal or
materially restrict the Business or the operations of the
Corporation.
(29) Employment/Consulting Contracts. Schedule 4.1(29) lists all the
Employees as of the date of this Agreement and the position, status,
length of service, compensation and benefits of each of them,
respectively. The Corporation is in compliance with all Applicable
Laws respecting employment and its employment practices. Except as set
out in Schedule 4.1(29), the Corporation is not a party to or bound by
any contracts or requirements of Applicable Law in respect of any
Employee or former employee, including:
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(a) any contracts for the employment or statutorily required
re-employment of any Employee; or
(b) any bonus, deferred compensation, profit sharing, pension,
retirement, hospitalization insurance or other plans or
arrangements providing employee benefits, except for the plans
providing employee benefits described in Schedules 4.1(29) and
(32).
(30) Collective Agreements. Except as set out in Schedule 4.1(30):
(a) the Corporation is not a party to any collective bargaining
agreement, contract or legally binding commitment to any trade
union or employee organization or group in respect of or
affecting Employees;
(b) the Corporation is not currently engaged in any labour
negotiation;
(c) the Corporation has not engaged in any unfair labour practice and
the Corporation is not aware of any pending or threatened
complaint regarding any alleged unfair labour practices;
(d) there is no strike, labour dispute, work slow down or stoppage
pending or threatened against the Corporation; and
(e) the Corporation is not the subject of any union organization
effort.
(31) Employee Plans.
(a) Schedule 4.1(31) lists all the employee benefit, health, welfare,
supplemental unemployment benefit, bonus, pension, profit
sharing, deferred compensation, stock compensation, stock
purchase, retirement, hospitalization insurance, medical, dental,
legal, disability and similar plans or arrangements or practices
relating to the Employees or former Employees which are currently
maintained or were maintained at any time in the last five
calendar years (the "Employee Plans").
(b) All of the Employee Plans are and have been established,
registered, qualified, invested and administered in all respects
in accordance with all laws, regulations, orders or other
legislative, administrative or judicial promulgations applicable
to the Employee Plans ("Applicable Employee Benefit Laws"). No
fact or circumstance exists that could adversely affect the tax-
exempt status of an Employee Plan, if applicable.
(c) All obligations regarding the Employee Plans have been satisfied,
there are no outstanding defaults or violations by any party to
any Employee Plan and no Taxes, penalties or fees are owing or
exigible under any of the Employee Plans.
<PAGE>
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(d) The Corporation may unilaterally amend, modify, vary, revoke or
terminate, in whole or in part, each Employee Plan and take
contribution holidays under or withdraw surplus from each
Employee Plan, subject only to approvals required by Applicable
Employee Benefit Laws.
(e) No Employee Plan, nor any related trust or other funding medium
thereunder, is subject to any pending investigation, examination
or other proceeding, action or claim initiated by any
governmental agency or instrumentality, or by any other party
(other than routine claims for benefits), 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 investigation,
examination or other proceeding, action or claim or to affect the
registration of any Employee Plan required to be registered.
(f) All contributions or premiums required to be made by the
Corporation under the terms of each Employee Plan or by
Applicable Employee Benefit Laws have been made in a timely
fashion in accordance with Applicable Employee Benefit Laws and
the terms of the Employee Plans, and the Corporation does not
have, and as of the Closing Time will not have, any liability
(other than liabilities accruing after the Closing Time) with
respect to any of the Employee Plans. Contributions or premiums
will be paid by the Corporation on an accrual basis for the
period up to the Effective Time even though not otherwise
required to be made until a later date.
(g) No amendments have been made to any Employee Plan and no
improvements to any Employee Plan have been promised and no
amendments or improvements to an Employee Plan will be made or
promised by the Corporation before the Closing Time.
(h) There have been no improper withdrawals, applications or
transfers of assets from any Employee Plan or the trusts or other
funding media relating thereto, and neither the Corporation nor
any of its agents has been in breach of any fiduciary obligation
with respect to the administration of the Employee Plans or the
trusts or other funding media relating thereto.
(i) Subject to approvals under Applicable Employee Benefit Laws, the
Corporation may amend, revise or merge any Employee Plan or the
assets transferred from any Employee Plan with any other
arrangement, plan or fund.
(j) The Vendors have furnished to the Purchaser true, correct and
complete copies of all the Employee Plans as amended as of the
date hereof together with all related documentation including
funding agreements, actuarial reports, funding and financial
information returns and statements, all professional opinions
(whether or not internally prepared) with respect to
<PAGE>
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each Employee Plan, all material internal memoranda concerning
the Employee Plans, copies of material correspondence with all
regulatory authorities with respect to each Employee Plan and
plan summaries, booklets and personnel manuals. No material
changes have occurred to the Employee Plans or are expected to
occur which would affect the actuarial reports or financial
statements required to be provided to the Purchaser pursuant to
this Section 4.1(31).
(k) Each Employee Plan is fully funded or fully insured on both an
ongoing and solvency basis pursuant to the actuarial assumptions
and methodology set out in Schedule 4.1(31).
(l) None of the Employee Plans enjoys any special tax status under
Applicable Employee Benefit Laws, nor have any advance tax
rulings been sought or received in respect of the Employee Plans.
(m) All employee data necessary to administer each Employee Plan has
been provided by the Vendors to the Purchaser and is true and
correct.
(n) No insurance policy or any other contract or agreement affecting
any Employee Plan requires or permits a retroactive increase in
premiums or payments due thereunder. The level of insurance
reserves under each insured Employee Plan is reasonable and
sufficient to provide for all incurred but unreported claims.
(o) Except as disclosed in Schedule 4.1(31), none of the Employee
Plans provides benefits to retired employees or to the
beneficiaries or dependants of retired employees.
(32) Bonuses. Except as disclosed in Schedule 4.1(32), the Corporation 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 Schedules 4.1(29) and 4.1(31)).
(33) Customers and Suppliers. Schedule 4.1(33) lists the five largest
customers and the ten largest suppliers of the Corporation (or such
additional customers or suppliers of the Corporation which are
sufficient to constitute ten per cent or more of total sales or
purchases, as the case may be) for the 12 month period ending
immediately before the date of this Agreement. The aggregate amount
which each customer listed on Schedule 4.1(33) was invoiced and each
supplier listed on Schedule 4.1(33) was paid during the 12 month
period ending immediately before the date of this Agreement. Each
Vendor represents and warrants as to him or her that such Vendor is
not aware of, nor has he or she received notice of, any intention on
the part of any such customer or supplier to cease doing business with
the Corporation or to modify or change in any material manner any
existing
<PAGE>
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arrangement with the Corporation for the purchase or supply of any
products or services. The relationships of the Corporation with each
of its principal suppliers, shippers and customers are commercially
satisfactory, and there are no unresolved disputes with any such
supplier, shipper or customer.
(34) Product Warranties. There are no claims against the Corporation on
account of product warranties or with respect to the production or
sale of defective or inferior products, other than claims made in the
ordinary course of business.
(35) Affiliated Transactions. Other than consulting agreements with
personal holding companies of each of the Principal Vendors, the
Corporation is not a party to any Contract with, nor liable in respect
of any advance, loan, guarantee to or on behalf of, any shareholder,
officer, director, Employee or Affiliate of the Corporation or any
other Person with whom the Corporation does not deal at arm's length.
(36) Intercompany Services. Other than consulting agreements with personal
holding companies of each of the Principal Vendors, and other than as
disclosed in Schedule 4.1(29), there are no material intercompany
services provided to the Corporation by any Vendor or by any Affiliate
of any Vendor other than the Corporation.
(37) Tax Filings. The Corporation has prepared and filed on time with all
appropriate governmental bodies all tax returns, declarations,
remittances, information returns, reports and other documents of every
nature required to be filed by or on behalf of the Corporation 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 Date. 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. There are no circumstances existing which
could result in the application of Section 78 of the Income Tax Act
(Canada), as amended, or any equivalent provincial provision, to the
Corporation, other than in respect of unpaid bonuses as disclosed in
Schedule 4.1(32).
(38) Taxes Paid. The Corporation 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 Date and no other Taxes are or will be payable by the
Corporation in respect of any fiscal period ending on or before the
Closing Date.
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(39) Reassessments of Taxes. There are no reassessments of the
Corporation's Taxes that have been issued and are outstanding and
there are no outstanding issues relating to Taxes which have been
raised and communicated to the Corporation by any governmental body
for any taxation year in respect of which a Tax return of the
Corporation has been audited. No governmental body has challenged,
disputed or questioned the Corporation in respect of Taxes or of any
returns, filings or other reports filed under any statute providing
for Taxes. The Corporation is not negotiating any Tax assessment or
reassessment with any governmental body. Each Vendor represents and
warrants as to him or her that such Vendor is not aware of any
contingent liabilities for Taxes of the Corporation or any grounds for
an assessment or reassessment of the Corporation. Neither the
Corporation nor such Vendor has received any indication from any
governmental body that an assessment or reassessment of the
Corporation is proposed in respect of any Taxes, regardless of its
merits. The Corporation 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 July 31, 1995 are
considered closed by Canadian federal and provincial governmental
bodies for the purposes of all Taxes.
(40) Withholdings and Remittances. The Corporation 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 Corporation has remitted all Canada Pension Plan contributions,
provincial pension plan contributions, unemployment and employment
insurance premiums, employer health taxes 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 Corporation 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 Corporation.
(41) Depreciable Property. At the Closing Date, but before claiming any
capital cost allowance in respect of the fiscal period ending
immediately before Closing, for purposes of the Income Tax Act
(Canada), the Corporation will own depreciable property of the
prescribed classes and having undepreciated capital costs as set out
in Schedule 4.1(41).
(42) Capital Gains. The Corporation will not at any time be deemed to have
a capital gain pursuant to subsection 80.03(2) of the Income Tax Act
(Canada) as a result of any transaction or event taking place in any
taxation year ending on or before the Closing Date.
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(43) Absence of Certain Changes or Events. Since the date to which the
Financial Statements are made up, the Corporation has not:
(a) suffered any Material Adverse Change;
(b) amended its articles;
(c) 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;
(d) issued or sold any shares or other securities or issued, sold or
granted any option, warrant or right to purchase any shares or
other securities;
(e) disposed of any of the Assets reflected on the balance sheet
forming part of the Financial Statements, except sales of Assets
or Real Property in the ordinary course of business, consistent
with past practice and not in excess of US$50,000, individually
or in the aggregate;
(f) changed any accounting or costing systems or methods in any
material respect;
(g) suffered any extraordinary loss or cancelled or waived any debt,
claim or other right;
(h) incurred or assumed any liabilities, obligations or indebtedness
(whether accrued, absolute, contingent or otherwise), except
unsecured current liabilities, obligations and indebtedness
incurred in the ordinary course of business, consistent with past
practice and not in excess of US$25,000, individually or in the
aggregate;
(i) other than as disclosed in Schedules 4.1(29) and (32), 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 since the date of
the latest Financial Statements;
(j) mortgaged, pledged, granted a security interest in or otherwise
encumbered any of the Assets, except in the ordinary course of
business, consistent with past practice, and in amounts which,
individually and in the aggregate are not material to the
financial condition of the Corporation or operation of the
Business.
(k) entered into any Material Contract or any other transaction that
was not in the ordinary course of business, consistent with past
practice; or
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(l) 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.
(44) Brokerage Fees. Except as disclosed in Schedule 4.1(44), the
Corporation has not entered into any agreement which would entitle any
Person to any valid Claim against any of the Corporation, the
Purchaser or BEA for a broker's commission, finder's fee or any like
payment in respect of the purchase and sale of the Shares or any other
matters contemplated by this Agreement. Furthermore, each Vendor
represents and warrants as to him or her that such Vendor has not
entered into any agreement which would entitle any Person to any valid
Claim against any of the Corporation, the Purchaser or BEA for a
broker's commission, finder's fee or any like payment in respect of
the purchase and sale of the Shares or any other matters contemplated
by this Agreement.
(45) Subsidiaries. The Corporation does not have any subsidiary nor does it
have any direct or indirect interest in any Person.
(46) Full Disclosure. Except to the extent superseded by another document,
none of the representations and warranties of the Vendors contained in
this Section 4.1 and no document furnished by or on behalf of the
Vendors 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
to a prospective purchaser of the Shares seeking full information as
to the Corporation and its properties, business and affairs. There is
no fact, or information, known to the Corporation or the Vendors which
is reasonably expected by it or them, as the case may be, to occur
after the Closing Date which has not been disclosed to the Purchaser
in writing and which either the Corporation or any of the Vendors
presently believes has or could have a Material Adverse Effect, other
than any changes in the prospects of the Corporation which result from
developments affecting general economic or industry conditions.
(47) Representations concerning US Securities Laws. Each Vendor represents
that it is not a US Person and is not acquiring any securities
hereunder (including any shares of BEA Common Stock issuable upon
exchange of the Exchangeable Shares) for the account or for the
benefit of any US Person. Each Vendor acknowledges that any transfer
of any such securities may only be made (i) pursuant to Regulation S
of the Securities Act of 1933, as amended (the "1933 Act"), (ii)
pursuant to registration under the 1933 Act, or (iii) pursuant to an
available exemption from the registration requirements of the 1933
Act.
(48) Representations concerning Canadian Securities Laws. Each Vendor
represents that (i) the Vendor is a resident of the Province of
Ontario, (ii) the Vendor is acquiring all securities hereunder
(including any right to acquire shares of BEA Common Stock issuable
upon exchange of the Exchangeable Shares) as principal
<PAGE>
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for its own account and not for the benefit of any other Person and
(iii) the Corporation has always been and continues to be a "private
company" as such term is defined by the Securities Act (Ontario). Each
Vendor acknowledges that any transfer of any securities acquired
hereunder or upon the exchange of any such security may only be made
pursuant to the registration and prospectus requirements of the
applicable Canadian provincial securities laws or pursuant to
exemptions therefrom.
4.2 Representations and Warranties of the Purchaser and BEA. The Purchaser and
BEA jointly and severally represent and warrant to the Vendors as follows:
(1) Incorporation and Power. Each of the Purchaser and BEA is a
corporation duly incorporated under the laws of the jurisdiction of
its incorporation and is duly organized, validly subsisting and in
good standing under such laws.
(2) Due Authorization. Each of the Purchaser and BEA has all necessary
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 each
of the Purchaser and BEA.
(3) Enforceability of Obligations. This Agreement and all other agreements
and instruments to be executed by the Purchaser or BEA as contemplated
by this Agreement constitute, or will constitute, a valid and binding
obligation of each of the Purchaser and BEA enforceable against it in
accordance with its terms subject, however, to limitations on
enforcement imposed by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally 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.
(4) Capitalization of Purchaser and BEA. The authorized capital of the
Purchaser consists of an unlimited number of common shares, of which
100 are outstanding, an unlimited number of Exchangeable Shares and
1,000 Preferred Shares, none of each of which were outstanding prior
to the Closing. The authorized capital stock of BEA consists of
285,000,000 shares of common stock and 5,000,000 shares of preferred
stock. All of the issued and outstanding common shares of the
Purchaser are directly or indirectly owned by Exchangeco, and all of
the issued and outstanding shares of Exchangeco are directly or
indirectly owned by BEA. All of the Exchangeable Shares and all shares
of BEA common stock to be issued to the Vendors at Closing or in
exchange for Exchangeable Shares (i) have been or will be duly
authorized and validly issued, fully paid and non-assessable when
issued and (ii) assuming the accuracy of the representations and
warranties of the
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Corporation and the Vendors contained herein, will be offered, issued,
sold and delivered by the Purchaser, Exchangeco or BEA, as applicable,
in compliance with all applicable Canadian and U.S. securities laws.
(5) No Violation. Neither the execution and deliver of this Agreement or
the other agreements and instruments contemplated by this Agreement
nor the consummation of the transactions contemplated hereby or
thereby will violate any provisions of the articles of incorporation
or bylaws of the Purchaser or BEA, violate, or be in conflict with, or
constitute a default under or cause the acceleration of the maturity
of any debt or obligation pursuant to, any agreement of mutual
commitment to which the Purchaser or BEA is a party or which the
Purchaser or BEA is bound, or violate any statute or law or any
judgement, decree, order, regulation, or rule of any court or
governmental authority.
(6) SEC Filings; Financial Statements. All statements, reports, schedules,
forms and other documents required to have been filed by BEA with the
SEC have been so filed. As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of such
documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of such documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The consolidated financial statements
contained in such documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods covered (except as may be indicated in the
notes to such financial statements and, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are
subject to normal and reoccurring year-end audit adjustments which
will not, individually or in the aggregate, be material in amount);
and (iii) fairly present, in all material respects, the consolidated
financial position, in all material respect of BEA and its
subsidiaries as of the respective dates hereof and the consolidated
results of operations of BEA and its subsidiaries for the periods
covered thereby. To the knowledge of senior management of BEA, no
material adverse change in BEA's business or financial condition,
taken as a whole, has occurred since its most recently filed Form 10-
Q, except (i) as disclosed in any document referred to above filed or
amended after the date of such Form 10-Q, (ii) as disclosed to
Vendor's Representative, or (iii) for any changes in the economy in
general (or in the overall industry in which BEA operates) or in any
stock market or trading system (including, without limitation, any
change in the value of any trading indices with respect thereto).
(7) Consents and Approvals of Government Authorities No consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or
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regulatory authority is required in connection with the execution,
delivery and performance of this Agreement or the other documents
contemplated hereby by BEA or the Purchaser and the consummation of
the transactions contemplated hereby or thereby.
(8) Representations Complete. None of the representations and warranties
of Purchaser and BEA contained in this Section 4.2 contain any untrue
statement of a material fact and do not omit to state any material
fact necessary to make such representations and warranties, in light
of the circumstances under which they were made, not misleading to a
prospective purchaser of Exchangeable Shares or shares of BEA Common
Stock.
4.3 Survival of Representations and Warranties.
(1) The representations and warranties of each Vendor contained in Section
4.1 or any other agreement, certificate or instrument delivered pursuant to this
Agreement shall survive the Closing for a period of one (1) year from the
Closing Date, and notwithstanding the Closing and any inspection or inquiries
made by or on behalf of the Purchaser, shall continue in full force and effect
for the benefit of the Purchaser and BEA, after which time, except as otherwise
provided herein, such Vendor shall be released from all obligations in respect
of such representations and warranties except with respect to any Claims
asserted by the Purchaser or BEA in writing (setting out in reasonable detail
the nature of the Claim and the approximate amount of such Claim) before the
expiration of such period.
(2) The representations and warranties of the Purchaser and BEA contained
in Section 4.2 or any other agreement, certificate or instrument delivered
pursuant to this Agreement shall survive the Closing for a period of one (1)
year from the Closing Date, and notwithstanding the Closing and any inspection
or inquires made by or on behalf of the Vendors, shall continue in full force
and effect for the benefit of the Vendors, after which time the Purchaser and
BEA shall be released from all obligations in respect of such representations
and warranties except with respect to any Claims asserted by the Vendors in
writing (setting out in reasonable detail the nature of the Claim and the
appropriate amount thereof) before the expiration of such period.
ARTICLE 5 - INDEMNIFICATION
5.1 Indemnity by the Vendor. Each Vendor shall severally indemnify and hold the
Purchaser, the Corporation and BEA and their respective directors, officers,
employees, agents and representatives, and the Affiliates of the Purchaser, the
Corporation and BEA and their respective directors, officers, employees, agents,
representatives 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:
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(1) any incorrectness in or breach of any representation or warranty of
such Vendor contained in this Agreement or under any other agreement,
certificate or instrument executed and delivered pursuant to this
Agreement; or
(2) any breach of or any non-fulfilment of any covenant or agreement on
the part of such Vendor under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement;
provided, that for purposes of determining the amount of damages for any breach
specified in clauses (1) or (2) above, such representation, warranty or covenant
shall be deemed breached where the damages relating thereto, individually or in
the aggregate, are in excess of $25,000 (once such $25,000 threshold has been
surpassed, such amount shall be included in full in determining whether the
aggregate amount of damages exceeds the U.S.$100,000 limitation set forth in
Section 5.3).
5.2 Indemnity by the Purchaser and BEA. The Purchaser and BEA shall jointly and
severally indemnify and hold each Vendor, his or her respective heirs,
representatives, successors and permitted assigns harmless in respect of any
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:
(1) any incorrectness in or breach of any representation or warranty of
the Purchaser or BEA contained in this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement; or
(2) any breach or non-fulfilment of any covenant or agreement on the part
of the Purchaser or BEA under this Agreement or under any other
agreement, certificate or instrument executed and delivered pursuant
to this Agreement;
provided, that for purposes of determining the amount of damages for any breach
specified in clauses (1) or (2) above, such representation, warranty or covenant
shall be deemed breached where the damages relating thereto, individually or in
the aggregate, are in excess of $25,000 (once such $25,000 threshold has been
surpassed, such amount shall be included in full in determining whether the
aggregate amount of damages exceeds the U.S.$100,000 limitation set forth in
Section 5.3).
5.3 Limitations. Subject to the last sentence of this Section 5.3, all
indemnification claims under Section 5.1 shall be satisfied solely from the
Indemnity Escrow Shares held pursuant to and in accordance with the provisions
of the Escrow Agreement 1 and, no Person shall have any further right to
recovery directly from any Vendor. Subject to the last sentence of this Section
5.3, the maximum liability pursuant to indemnification claims under Section 5.1
of any Vendor shall be limited to those Indemnity Escrow Shares in which such
Vendor has an interest that is held pursuant to the Escrow Agreement 1. Subject
to the last sentence of this Section 5.3, the maximum liability pursuant to
indemnification claims under Section 5.2 of the Purchaser and BEA, collectively,
shall not exceed US$2,050,000. The Vendors shall not have any Liability for
indemnification pursuant to Sections 5.1 or relating to any breach of any of the
representations
<PAGE>
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and warranties contained in Sections 4.1 unless and until the accumulated
aggregate amount of Claims against the Vendors arising from breaches of
representations and warranties hereunder exceeds US$100,000, following which all
such accumulated Claims and all further Claims against such party shall be
recoverable as provided in this Agreement. BEA and the Purchaser shall not have
any Liability for indemnification pursuant to Sections 5.2 or relating to any
breach of any of the representations and warranties contained in Sections 4.2
unless and until the accumulated aggregate amount of Claims against BEA and the
Purchaser arising from breaches of representations and warranties hereunder
exceeds US$100,000, following which all such accumulated Claims and all further
Claims against such party shall be recoverable as provided in this Agreement. No
Vendor shall have any Liability under this Agreement for the breach of a
representation and warranty made on a several (and not joint and several) basis
by any other Vendor. For purposes of this Section 5.3, a Vendor's pro rata share
of a Liability shall be that percentage of the Liability as is equal to the
percentage that the Purchase Price received by such Vendor is of the total
Purchase Price as set forth in Schedule 2.3(3)(c). The limitations of the first
three sentences of this Section 5.3 shall not apply in the case of a fraudulent
or intentional misrepresentation or breach by any party, but no Person shall be
liable for any misrepresentation or breach by any other Person (except to the
extent of its share of the shares held under the Escrow Agreement 1).
5.4 Notice of Claim. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to either of Section
5.2 or 5.1, as the case may be, 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.
5.5 Direct Claims. In the case of a Direct Claim, the Indemnifying Party shall
have forty-five (45) 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 forty-five (45) 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
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which the matter shall be referred to and finally settled by binding arbitration
as contemplated herein from which there shall be no appeal.
5.6 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 representation of both the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate, in the reasonable
opinion of the Indemnity Party's counsel, due to the actual or potential
differing interests between them (such as the availability of different
defences). The Indemnified Party shall co-operate 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 reasonable 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 as reasonably requested so as not to materially
interfere with the Indemnified Party's business. 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, in the reasonable opinion of the Indemnified
Party's counsel, then the Indemnified Party shall be entitled, at the
Indemnifying Party's expense, 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 Business or
(B) a Third Party Claim relating to any Contract which is necessary to the
ongoing operations of the Business 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
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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, and the
amount to be paid by the Indemnified Party to the Indemnifying Party, if any,
shall be referred to and finally settled by binding arbitration as contemplated
herein from which there shall be no appeal.
5.7 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 (which would have been accepted by the Third Party)
if any such consent is not obtained for any reason within a reasonable time
after the request therefor.
5.8 Interest on Claims. The amount of any Claim submitted under Section 5.1 or
Section 5.2 as damages or by way of indemnification shall bear interest from and
including the date any Indemnified Party is required to make payment in respect
thereof at the Prime Rate calculated from and including such date to but
excluding the date reimbursement of such Claim by the Indemnifying Party is
made, and the amount of such interest shall be deemed to be part of such Claim.
5.9 GST/HST Gross-UP and other Tax Adjustments. The amount of any Claim
submitted under Section 5.1 or 5.2 as damages or by way of indemnification as
determined without regard to this Section shall be increased by an amount equal
to the rate of GST/HST or any similar Tax applicable to such amount. The amount
of any Claim submitted under Sections 5.1 or 5.2 as damages or by way of
indemnification shall be determined on an after-Tax basis, and without limiting
the generality of the foregoing, shall include the amount necessary to hold the
Indemnified Party harmless after Tax.
ARTICLE 6 - COVENANTS
6.1 Compliance with US Securities Laws..Each Vendor agrees not to sell or
transfer any shares of BEA Common Stock received upon exchange of the
Exchangeable Shares unless such sale or transfer is made (i) pursuant to
Regulation S of the 1933 Act, (ii) pursuant to registration under the 1933 Act,
or (iii) pursuant to an available exemption from the registration requirements
of the 1933 Act. Each Vendor acknowledges BEA's right to refuse to register any
such transfer or sale of BEA Common Stock in breach of this Section 6.1 and
holds BEA harmless from any Claim that may result from such actions.
6.2 Compliance with Canadian Securities Laws. Each Vendor agrees not to (i)
sell or transfer any Exchangeable Shares, any right to acquire shares of BEA
Common Stock or any shares of BEA Common Stock or (ii) exercise any exchange or
retraction right provided by the provisions of the Exchangeable Shares, unless
such sale, transfer or exercise, as the case may be, is made pursuant to the
registration and prospectus requirements of the applicable Canadian
<PAGE>
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provincial securities laws or pursuant to exemptions therefrom. Each Vendor
acknowledges the right of the Purchaser, Exchangeco and BEA to refuse to take
any action in furtherance of any such sale, transfer or exercise in breach of
this Section 6.2 and holds each of the Purchaser, Exchangeco and BEA harmless
from any Claim that may result from such actions.
6.3 Application for Relief from Certain Securities Laws. BEA and the Purchaser
shall cause its counsel to submit jointly on behalf of the Parties to the
Ontario Securities Commission within five (5) Business Days of the Closing, the
application referred to in Subsection 4.1(23), which application shall be in
form acceptable to the Vendors and their counsel, acting reasonably. BEA and
the Purchaser shall use their reasonable commercial efforts to prosecute and
obtain such relief as soon as is reasonably practicable. Each Vendor shall
fully cooperate with BEA and the Purchaser in the preparation, submission and
prosecution of such application, including without limitation executing a
verification of facts statement to be filed in connection therewith.
6.4 Indemnity by BEA Re: Certain Redemptions of Exchangeable Shares. If any
Exchangeable Shares are (A) redeemed (i) prior to the five (5) year anniversary
of the date of this Agreement and (ii) pursuant to either of Subsections (b),
(c) and (d) of the definition of "Redemption Date" in the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares (the
"Exchangeable Share Provisions"), or (B) purchased by Exchangeco pursuant to the
exercise by it of the Redemption Call Right (as that term is defined in the
Exchangeable Share Provisions) (each an "early redemption"), then BEA shall pay
to the Vendors at the same time as, and as a condition to, an early redemption
an amount equal to 50% of the product of the following:
(1) the amount of income or capital gains tax payable by the Vendors or
Vendor, as the case may be, arising directly as a result of the
exchange of the Exchangeable Shares subject of the early redemption,
for shares of BEA Common Stock;
(2) the number of years from the date on which the Vendors or Vendor
referred to in Subsection (1) above are required to remit the income
tax payable to Revenue Canada as a result of an early redemption until
April 30, 2006 and by way of example, if an early redemption occurred
on December 1, 2000, the number of years for the purposes of this
Subsection would be five (5); and
(3) the fluctuating annual rate of interest (however designated) of CIBC
from time to time for determining interest chargeable by CIBC on
Canadian dollar commercial loans in Canada with such interest rate to
be set on the date which is five (5) Business Days immediately
preceding the applicable Redemption Date (as such term is defined in
the Exchangeable Share Provisions).
ARTICLE 7 - DISPUTE RESOLUTION
7.1 Arbitration Procedures. All disputes over the Claims made pursuant to
Article 5 and any other Claims arising out of, connected with or related to this
Agreement, the negotiation and/or performance of same ("Disputes") shall, if not
resolved pursuant to Section 5.7, be
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determined in accordance with Schedule 7.1, which sets out the sole and
exclusive procedure for the resolution of Disputes. The resolution of Disputes
pursuant to the terms of Schedule 7.1 shall be final and binding upon the
parties to this Agreement, and there shall be no appeal therefrom, including,
without limitation, any appeal to a court on a question of law, a question of
fact, or a question of mixed fact and law. For greater certainty, Subsection
7(2) of the Arbitration Act, 1991 (Ontario) shall not apply to an arbitration
under this Section 7.1.
ARTICLE 8 - GENERAL
8.1 Expenses. BEA shall be responsible for the legal and other expenses
(including any Taxes imposed on such expenses) of BEA, the Purchaser and
Exchangeco and BEA shall also be responsible for the reasonable legal and other
expenses (including any Taxes imposed on such expenses) of the Vendors and the
Corporation incurred in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the transactions contemplated by
this Agreement. The Vendors will be solely responsible for the payment of any
broker's commission, finder's fee or like payment payable by them in respect of
the purchase and sale of the Shares pursuant to this Agreement, including
without limitation the brokers' fee set out in Schedule 4.1(44).
8.2 Payment of Taxes. Except as otherwise provided in this Agreement, the
Purchaser shall pay all Taxes applicable to, or resulting from transactions
contemplated by this Agreement (other than Taxes payable under applicable
legislation by the Vendors) and any filing or recording fees payable in
connection with the instruments of transfer provided for in this Agreement.
8.3 Public Announcements. Except to the extent otherwise required by
Applicable Law, made to its accounting, legal or financial advisors who are
subject to confidentiality requirements, or with the prior written consent of
the other Parties, no Party shall make prior to the Closing or termination of
this Agreement any (i) public announcement or (ii) disclosure to its employees
(other than as necessary to consummate the transactions contemplated hereby) or
customers, regarding this Agreement or the transactions contemplated by this
Agreement.
8.4 Notices.
(1) 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:
(a) if to the Vendors, to Vendors' Representative:
Abe Schwartz
c/o The Workflow Automation Corporation
8920 Woodbine Avenue
Suite 400
<PAGE>
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Markham, Ontario L3R 9W9
Fax No: (905) 940-5600
The Vendors' Representative hereby agrees to forward to the
other Vendors copies of any notice or other communication
received by the Vendors' Representative in accordance
herewith.
with a copy to:
Aird & Berlis
BCE Place, Box 754
1800 - 181 Bay Street
Toronto, Ontario M5J 2T9
Attention: Martin E. Kovnats
Fax No.: (416) 863-1515
(b) if to the Purchaser and/or BEA, to:
BEA Systems, Inc.
2315 North First Street
San Jose, California 95131
Attention: General Counsel
Fax No.: (408) 570-8923
with a copy to each of:
Morrison & Foerster
1290 Avenue of the Americas
New York, New York 10104 0050
Attention: Lorraine Massaro, Esq.
John L. Cleary, Esq.
Fax No.: (212) 468-7900
- and -
Blake, Cassels & Graydon LLP
Box 25 Commerce Court West
Toronto, Ontario M5L 1A9
Attention: Kenneth G. Klassen
Fax No.: (416) 863-2653
<PAGE>
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(2) 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.
(3) 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.
8.5 Time of Essence. Time shall be of the essence of this Agreement in all
respects.
8.6 Entire Agreement. This Agreement (together with the Escrow Agreement 1,
the Escrow Agreement 2, a registration rights agreement, non-competition
agreements, a release by the Vendors, a support agreement, exchange right
agreement and employment offer letters and an unanimous shareholders' agreement
(collectively, the "Documents")), constitutes the entire agreement between the
Parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, including, it its entirety, the letter of intent of BEA dated January
21, 2000 and agreed and accepted by the Vendors on January 21, 2000, which
letter of intent is hereby terminated. There are no conditions, warranties,
representations or other agreements between the Parties in connection with the
subject matter of this Agreement (whether oral or written, express or implied,
statutory or otherwise) except as specifically set out in this Agreement or in
the Documents.
8.7 Waiver. 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).
8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
8.9 Survival and Non-Merger. Each Party hereby agrees that all provisions of
this Agreement, other than (a) the conditions in Article 4 and (b) the
representations and warranties
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contained in Article 4 and the related indemnities in Sections 5.1 and 5.2
hereof (which shall be subject to the special arrangements provided in such
Articles or 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.
8.10 Further Assurances. 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.
8.11 Language. The Parties have required that this Agreement and all deeds,
documents and notices relating to this Agreement be drawn up in the English
language. Les parties aux presentes ont exige que le present contrat et tous
autres contrats, documents ou avis afferents aux presentes soient rediges en
langue anglaise.
8.12 Governing Law. 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.
8.13 Successors and Assigns. This Agreement shall enure to the benefit of, and
be binding on, the Parties and their respective heirs, representatives,
successors and permitted assigns. No 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 Parties.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original or faxed form and the Parties
adopt any signatures received by a receiving fax machine as original signatures
of the Parties; provided, however, that the Party providing its signature in
such manner shall promptly forward to the other Parties an original of the
signed copy of this Agreement which was so faxed
IN WITNESS WHEREOF the have caused this Agreement to be duly executed
as of the date first above written.
_________________________________ _________________________________
Witness Barry M. Bernstein,
_________________________________ _________________________________
Witness P. Dawn Bernstein
_________________________________ _________________________________
Witness Peter E.J. Hall
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_________________________________ _________________________________
Witness Patricia L. Hall
_________________________________ _________________________________
Witness Abe Schwartz
_________________________________ _________________________________
Witness Marta I. Schwartz
_________________________________ _________________________________
Witness Joseph S. Dachuk
THE WORKFLOW AUTOMATION CORPORATION
By:_________________________
BEA SYSTEMS (ONTARIO) INC.
By:_________________________
BEA SYSTEMS, INC.
By:_________________________
<PAGE>
Execution Copy
SCHEDULE 7.1
to the Share Purchase Agreement dated ., 2000
among the shareholders of The Workflow Automation Corporation,
The Workflow Automation Corporation, BEA Systems (Ontario) Inc. and BEA Systems,
Inc.
________________________________________________________________________________
DISPUTE RESOLUTION
------------------
Definitions
1. In this Schedule 7.1:
(a) "Arbitrator" means the arbitrator or arbitrators appointed pursuant to
Section 5;
(b) "Claimant" means a Party that commences an arbitration pursuant to
Section 4;
(c) "Disputes" has the meaning attributed to such term in Section 7.1 of
the Agreement;
(d) "Party" means a party to a Dispute;
(e) "Section" means a Section of this Schedule; and
(f) "Respondent" means a Party who is not the Claimant, and the term
"Respondents" shall, where there is only one Respondent, refer to that
Respondent.
General
2. All Disputes which are to be determined according to the terms of this
Schedule pursuant to Section 7.1 of the Agreement shall be arbitrated in
accordance with the provisions of the Arbitration Act, 1991 (Ontario) (the
"Arbitration Act") except to the extent that those provisions are modified by
the provisions of the Agreement and this Schedule.
3. No individual shall be appointed to mediate or arbitrate a Dispute pursuant
to this Schedule unless he or she agrees in writing to be bound by the
provisions of this Schedule.
Commencement of Arbitration
4. A Party may commence an arbitration as Claimant: (i) in the case of a
Direct Claim, upon the expiration of the 60 day period referred to in Section
5.5 of the Agreement by delivering a written notice of arbitration (the "Notice
of Arbitration") to each of the Respondents; and (ii) in the case of a Third
Party Claim, immediately by delivering a Notice of Arbitration to each of the
Respondents.
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5. The Notice of Arbitration shall include in the text or in one or more
attachments:
(a) the full names, descriptions and addresses of the Parties;
(b) a demand that the Dispute be referred to arbitration pursuant to this
schedule;
(c) a general description of the Dispute;
(d) the relief or remedy sought; and
(e) the name of the person the Claimant nominates as an arbitrator.
Arbitration
6. The arbitrator nominated by the Claimant shall be appointed as the
Arbitrator to resolve the Dispute unless, within seven days after the receipt or
deemed receipt of the Notice of Arbitration by all the Respondents, any
Respondent, by notice to the Claimant, objects to the Claimant's appointee.
Following such objection by a Respondent, (i) the Respondent shall name one
arbitrator; (ii) the Claimant shall name a second arbitrator; (iii) the two
arbitrators thus selected shall select a third arbitrator; and (iv) the three
arbitrators thus selected shall resolve the Dispute.
7. Subject to the Arbitration Act, the Agreement, this Schedule and the rules
of natural justice, the Arbitrator may conduct the arbitration in such manner as
the Arbitrator considers appropriate.
Interim Relief
8. Prior to the appointment of the Arbitrator, the Parties may apply to the
courts for interim relief. A request for interim relief by a Party to a court
shall not be considered to be incompatible with Section 7.1 of the Agreement or
as a waiver of that provision.
9. At the request of any Party, the Arbitrator may take such interim measures
as the Arbitrator considers necessary in respect of the Dispute, including
measures for the preservation of assets, the conservation of goods or the sale
of perishable goods. The Arbitrator may require security for the costs of such
measures.
Pleadings
10. The following shall apply to the arbitration of any Dispute:
(a) within 10 business days of the appointment of the Arbitrator, the
Claimant shall deliver to all the Respondents and the Arbitrator a
written statement (the "Statement") concerning the Dispute setting
forth, with particularity, the Claimant's position with respect to the
Dispute and the material facts upon which the Claimant intends to
rely;
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(b) within 10 Business Days after the delivery of the Statement, each
Respondent shall deliver to the Claimant and the Arbitrator a written
response (an "Answer") to the Statement setting forth, with
particularity, the Respondent's position on the Dispute and the
material facts upon which the Respondent intends to rely;
(c) if any Respondent fails to deliver an Answer within the time limit in
Section 10 (b), that Respondent shall be deemed to have waived any
right to provide an Answer to the Statement and the arbitration may
continue without further notice to that Respondent;
(d) within 5 Business Days after the earlier of: (i) the day all Answers
have been delivered, and (ii) the end of the time period referred to
in Section 10(b), the Claimant may deliver to all Respondents and the
Arbitrator a written reply (a "Reply") to the Answer of each
Respondent, setting forth, with particularity, the Claimant's response
if any, to the Answer;
(e) within the time limit in Section 10(b), a Respondent may also deliver
to the Claimant, each other Respondent and the Arbitrator a counter-
statement (a "Counter-Statement") setting forth, with particularity,
any additional Dispute for the Arbitrator to decide. Within 10
Business Days of the delivery of a Counter-Statement, the Claimant
shall deliver to each Respondent and the Arbitrator an Answer to the
Counter-Statement. If the Claimant fails to deliver an Answer to the
Counter-Statement within such 10 day period, the Claimant shall be
deemed to have waived any right to provide an Answer to the Counter-
Statement. Within 5 Business Days after the delivery of an Answer to
the Counter-Statement, the Respondents may deliver to the Claimant and
the Arbitrator a Reply to such Answer. Any Dispute submitted to
arbitration in accordance with this Section 11(e) shall be governed
by, and dealt with as if it were the subject of a Statement in
accordance with this Schedule, except that it shall be decided by the
Arbitrator already appointed and shall be determined by the Arbitrator
accordingly; and
(f) the time limits referred to in Sections 10 (a) to 10 (e) may be
extended by the Arbitrator for such period and for such reasons as the
Arbitrator in the Arbitrator's discretion may determine upon
application in writing made to the Arbitrator by the Claimant or any
Respondent on notice to each other Party to the arbitration, either
before or within 2 days after the expiry of the relevant time limits
and in the event that the other Party or Parties wishes to oppose the
application, the other Party or Parties shall be given an opportunity
to make submissions on the application.
Case Conferences
11. At any time after the appointment of the Arbitrator, any Party may apply in
writing to the Arbitrator to convene a case conference for the determination of
any preliminary or interlocutory matter or to provide for planning and
scheduling of the arbitration and such other date as the Arbitrator may select.
The Arbitrator shall convene the case conference on the date specified in
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the application. The Party requesting a case conference shall deliver a copy of
the application to each other Party to the arbitration before delivering the
application to the Arbitrator.
12. Issues to be determined at the first case conference after the completion
of the steps contemplated by Section 10 or the expiry of the time limit for any
mandatory step not taken by such time shall include the following:
(a) any request for an adjournment of the case conference and the terms,
if any, of any adjournment;
(b) the identification and narrowing of the issues in the arbitration;
(c) the desirability of the Parties engaging in further settlement
negotiations or some other dispute resolution process, with or without
the assistance of a mediator;
(d) fixing a date, time and place for the Hearing (as defined in Section
13 of this Schedule);
(e) the manner of presentation of evidence at the Hearing; and
(f) a timetable for the disclosure by each Party to each other Party of
the evidence in that Party's possession, power, or control which is
relevant to any issue in the Dispute.
The Hearing
13. At the date, time and place fixed at a case conference or, if no case
conference has been held, at a date, time and place fixed by the Arbitrator
within 120 days of the appointment of the Arbitrator, the Arbitrator shall
convene a hearing (the "Hearing"). If there has been no case conference, the
Hearing shall be convened by delivery by the Arbitrator of notice of the date,
time and place of the Hearing to each Party to the arbitration at least 30 days
before the date of the Hearing.
14. Unless otherwise determined by the Arbitrator, the presentation of a
Party's case at the Hearing shall include the delivery of a pre-hearing
memorandum to the Arbitrator and to each other Party including the following
elements:
(a) a statement of facts;
(b) a statement of each issue to be determined;
(c) a statement of the applicable law on which the Party relies;
(d) a statement of the relief requested including the basis for any
damages claimed;
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(e) a statement of the evidence to be presented including the name,
capacity and expected evidence of each witness to be called, and an
estimate of the time required for the witness's direct testimony; and
(f) an appendix containing all sworn statements or transcripts or portions
of transcripts on which the Party intends to rely at the Hearing.
15. The pre-hearing memorandum of the Claimant shall be delivered not less than
20 days before the date of the Hearing. The pre-hearing memorandum of each
Respondent shall be delivered not less than 10 days before the date of the
Hearing.
16. At the Hearing, the Arbitrator shall consider any evidence as would be
admissible in a court of law and any other evidence the Arbitrator considers
appropriate to determine the Dispute. Evidence may be presented in written or
oral form as the Party presenting the evidence considers appropriate, provided
that no written statement of any witness shall be accepted by the Arbitrator
unless each other adverse Party has been given an opportunity at the Hearing to
cross-examine the witness on the information contained in the written statement.
The Arbitrator shall determine the applicability of any privilege or immunity
and the admissibility, relevance, materiality and weight of any evidence
offered.
17. The Arbitrator shall have the right to exclude any witness from the Hearing
during the testimony of any other witness.
18. Despite Subsection 28(1) of the Arbitration Act, the Arbitrator shall not,
without the written consent of all Parties, retain any expert.
Awards
19. The Arbitrator may make final, interim, interlocutory and partial awards.
An award may grant any remedy or relief which the Arbitrator considers just and
equitable and consistent with the intention of the Parties under the Agreement.
The Arbitrator shall state in the award whether or not the Arbitrator views the
award as final or interim, for purposes of any judicial proceedings in
connection with such award. Subject to Section 39 of the Arbitration Act, the
Arbitrator's final award shall be made within 30 days of the conclusion of the
Hearing.
20. All awards for the payment of money shall include prejudgment and
postjudgment interest in accordance with Sections 127 to 130 the Courts of
Justice Act (Ontario) with necessary modifications.
21. All awards shall be in writing and shall state reasons.
22. The Arbitrator may apportion the costs of the arbitration, including the
reasonable fees and disbursements of the Arbitrator and the legal costs and
disbursements of the Parties, between or among the Parties in such manner as the
Arbitrator considers reasonable. In determining the allocation of these costs,
the Arbitrator shall invite submissions as to costs and may consider, among
other things, any offer of settlement made by any Party during the course of the
arbitration.
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23. Executed copies of all awards shall be delivered by the Arbitrator to the
Parties as soon as is reasonably possible.
24. Subject to Section 44 of the Arbitration Act, all awards of the Arbitrator
shall be final and binding on the Parties, and there shall be no appeal of any
such award whatsoever. The Parties undertake to satisfy any award without delay.
Additional Matters
25. All case conferences and Hearings shall be conducted in Toronto, Ontario in
the English language.
26. All notices or other communications required or permitted to be given under
this Schedule to a Party shall be given in the manner specified in Section 8.4
of the Agreement. All notices or other communications and all other documents
required or permitted by this Schedule to be given by the Parties to the
Arbitrator shall be given in accordance with the Arbitrator's instructions.
27. The Parties desire that any Dispute should be conducted in strict
confidence and that there shall be no disclosure to any Person of the existence
of the Dispute or any aspect of the Dispute except as is necessary for the
resolution of the Dispute. Any case conference or Hearing shall be attended only
by those Persons whose presence, in the opinion of any Party or the Arbitrator,
is reasonably necessary for the resolution of the Dispute. All matters relating
to, all evidence presented to, all submissions made in the course of, and all
documents produced in accordance with this Schedule or any order of the
Arbitrator or created in the course of or for the purposes of an arbitration, as
well as any arbitral award, shall be kept confidential and shall not be
disclosed to any person without the prior written consent of all the Parties
except as is necessary for resolution of the Dispute as required in connection
with an application of a Party under Section 46 of the Arbitration Act, to
enforce the arbitral award, by applicable laws, or by an order of an Arbitrator
made pursuant to a motion or application on notice to all Parties.
