<PAGE> 1
As Filed with the Securities and Exchange Commission on August 24, 1998
Commission File No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FUTURELINK DISTRIBUTION CORP.
(Exact name of registrant as specified in its charter)
603-7 Avenue S.W.
Suite 550
Calgary, Alberta CANADA T2P 2T5
(403) 543-5511
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Colorado 7371 95-3895211
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
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CAMERON CHELL
CHIEF EXECUTIVE OFFICER
FUTURELINK DISTRIBUTION CORP.
603-7 Avenue S.W., Suite 550
Calgary, Alberta CANADA T2P 2T5
(403) 543-5511
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
possible after the Registration Statement is declared effective.
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, 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, 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(d) under
the Securities Act, 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. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount To Offering Price Per Aggregate Offering Amount of
To Be Registered Be Registered Security (1) Price Registration Fee(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock Underlying Bialik 4,250,000 Shares of $1.00 $ 4,250,000
Exchangeable Shares Common Stock $ 1253.75
Common Stock Underlying 10% 9,615,385 Shares of $1.00 $ 9,615,385 $ 2836.54
Convertible Debentures, Common Stock
Principal Amount $5,000,000
Common Stock Underlying 1,041,667 Shares of $0.96 $ 1,000,000 $ 295.00
Thomson, Kernaghan Warrants Common Stock
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 14,907,052 Shares of $ $14,865,385 $4,385.29
Common Stock
====================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) and (g).
(2) Based on the average closing bid and asked price of the Registrant's Common
Stock on August 18, 1998, on the NASD OTC Bulletin Board.
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
A FURTHER 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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
FUTURELINK DISTRIBUTION CORP.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN LOCATION
FORM SB-2 REGISTRATION STATEMENT IN PROSPECTUS
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<S> <C> <C>
1. Front of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Facing Page and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus ......................................... Inside Front Cover and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors................ Prospectus Summary; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... Not Applicable
6. Dilution............................................ Not Applicable
7. Selling Security Holders............................ Selling Security Holders
8. Plan of Distribution................................ Plan of Distribution
9. Legal Proceedings................................... Business
10. Directors, Executive Officers, Promoters and
Control Persons..................................... Management; Certain Transactions; Risk Factors
11. Security Ownership of Certain Beneficial Owners and Security Ownership of Certain Beneficial Owners and Management
Management..........................................
12. Description of Securities........................... Description of Securities
13. Interest of Named Experts and Counsel............... Experts
14 Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
15 Organization Within Last Five Years................. The Company; Business
16 Description of Business............................. Business; Prospectus Summary; Risk Factors; Management's
Discussion and Analysis
17 Management's Discussion and Analysis or Plan of
Operations.......................................... Management's Discussion and Analysis
18 Description of Property ............................ Business
19 Certain Relationships and Related Transactions...... Certain Relationships and Related Transactions
20 Market for Common Equity and Related Stockholder
Matters ............................................ Market for Common Equity and Related Stockholder Matters;
Description of Securities
21 Executive Compensation.............................. Management; Executive Compensation
22 Financial Statements................................ Financial Statements
23 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................. Not Applicable
</TABLE>
<PAGE> 4
PROSPECTUS August 24, 1998
FUTURELINK DISTRIBUTION CORP.
4,250,000 SHARES OF COMMON STOCK UNDERLYING BIALIK EXCHANGEABLE SHARES
9,615,384 SHARES OF COMMON STOCK UNDERLYING $5,000,000 CONVERTIBLE DEBENTURES
1,041,667 SHARES OF COMMON STOCK UNDERLYING THOMSON KERNAGHAN WARRANTS
This Prospectus relates to (i) 4,250,000 shares of common stock underlying
Exchangeable Shares issued to Don and Olivia Bialik in FutureLink Distribution
Corp., a Colorado corporation ("Futurelink USA") (The "Bialik Exchangeable
Shares") (ii) 9,615,384 shares of common stock of Futurelink USA issuable upon
exercise of a 10% Convertible Debenture with a US$5,000,000 principal amount
held by Thomson Kernaghan & Co., Ltd. ("Convertible Debenture") and (iii)
1,041,667 warrants ("Warrants") to purchase 1,041,667 shares of common stock of
Futurelink USA, issued to Thomson Kernaghan & Co., Ltd. The securities issued to
the Bialiks' and to Thomson Kernaghan were issued in Reg S transactions by
Futurelink USA on August 21, 1998. See "Selling Security Holder" and "Plan of
Distribution".
The Exchangeable Shares issued to Don and Olivia Bialik, allows Futurelink USA
to, issue 4,250,000 shares of Futurelink USA common stock in consideration for
exchange of the Exchangeable Shares. The Convertible Debenture issued allows
Thomson Kernaghan & Co., Ltd. to convert to common shares of Futurelink USA at a
conversion price equal to the lesser of $0.75 cents per share or the average
closing bid price on the OTC Bulletin Board for the Futurelink USA common shares
in the three trading days prior to the date of notice of conversion, which must
be on or before August 14, 2001. The 1,041,667 warrants issued to Thomson
Kernaghan & Co., Ltd. are at an exercise price $0.96 per share expiring August
14, 2001.
Don and Olivia Bialik and Thomson Kernaghan & Co. Ltd.(the "Selling Security
Holders") may be deemed underwriters within the meaning of the 1933 Act, with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
Futurelink USA will not receive any proceeds upon the exercise of the conversion
rights by Don and Olivia Bialik. In the event, that all the Thomson Kernaghan
Warrants and Debenture conversion features are exercised, Futurelink USA will
receive gross proceeds not to exceed $1,000,000. Futurelink USA will have
already received the proceeds from the initial placement of the Debenture in the
amount of up to $5,000,000. See "Selling Security Holders", "Plan of
Distribution" and "Use of Proceeds". The Company will pay all of the expenses of
this prospectus estimated at approximately $50,000.
FutureLink USA's Common Stock is traded on the NASD OTC Bulletin Board under the
symbol FLNK, and last traded at $0.93 on August 20, 1998.
-------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. FOR INFORMATION
REGARDING CERTAIN RISKS RELATING TO THE COMPANY, SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
AVAILABLE INFORMATION
FutureLink USA has filed with the Commission a registration statement under the
Securities Act with respect to the Securities registered hereby. This Prospectus
omits certain information contained in said registration statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is made to the
registration statement, including the exhibits thereto. Statements contained
herein concerning the contents of any contract or any other document are not
necessarily complete, and in each instance, reference is made to such contract
or other document filed with the Commission as an exhibit to the registration
statement, or otherwise, each such statement being qualified in all respects by
such reference. The registration statement, including exhibits and schedules
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such materials can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates and at the Commission's web site.
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<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in or incorporated by reference into this Prospectus. Except where
otherwise indicated, all share and per share data and information included in
this Prospectus relating to the number of shares of Common Stock assume no
exercise of (i) the Warrants, (ii) the options available for grant under
Futurelink USA's Stock Option Plan or (iii) the Bialik Reserved Shares.
THE COMPANY
DESCRIPTION OF THE COMPANY
FUTURELINK DISTRIBUTION CORP.
(A COLORADO CORPORATION) ("FUTURELINK USA")
FutureLink USA is a holding/investment company with a 100% interest in
FutureLink Acquisition Corp. (an Alberta corporation) and a 46.229% interest in
FutureLink Distribution Corp. (an Alberta corporation) ("FutureLink Alberta")
which is located in Calgary, Alberta. FutureLink USA, with certain exceptions,
is in the process of acquiring the remaining issued and outstanding securities
of FutureLink Alberta.
FutureLink USA's management believes that strategic acquisitions could
tremendously enhance FutureLink USA's growth and profitability over the next
several years. On August 3, 1998, FutureLink USA entered into an agreement with
FutureLink Alberta ("FutureLink Alberta Acquisition Agreement"), which provides
that, subject to regulatory approval and certain exceptions, FutureLink USA will
acquire all of the FutureLink Alberta Securities in consideration of the
issuance of FutureLink USA Common Shares to the FutureLink Alberta Security
holders on a one-for-one basis for each such security. Management of FutureLink
Alberta is identical to that of FutureLink USA and certain security holders of
FutureLink Alberta are also security holders of FutureLink USA.
In addition, by agreement among FutureLink Alberta, FutureLink USA, Donald A.
Bialik, Olivia B. Bialik, Bialik Family Trust, Riverview Management Corporation
("RMC") and SysGold Ltd. dated August 4, 1998, as amended by agreement dated
August 21, 1998, FutureLink USA has agreed to acquire all of the issued and
outstanding shares of RMC which in turn owns all of the issued and outstanding
shares of SysGold Ltd. and SysGold Inc.(the "SysGold Acquisition Agreement").
SysGold has approx. 60 employees and annual sales of CDN$10 million. RMC has
total liabilities of approx. CDN$1,800,000. The consideration is CDN$8,685,000
payable by CDN$3,000,000 cash on closing (scheduled for August 21, 1998),
CDN$685,000 by a promissory note payable within 90 days, and partly by the
issuance of 4,250,000 Riverview Management Corporation shares exchangeable into
4,250,000 FutureLink USA Common Shares (attributed value $0.85/share).
FutureLink USA has entered into a Debenture Acquisition Agreement dated August
14, 1998 with Thompson Kernaghan & Co., Ltd. an Ontario corporation ("TK").
Pursuant to this agreement TK has purchased from FutureLink USA up to $5,000,000
of a 10% convertible debenture ("Debenture") and $1,000,000 in a series of
warrants in FutureLink USA.
FUTURELINK DISTRIBUTION CORP. (AN ALBERTA CORPORATION) ("FUTURELINK ALBERTA")
FutureLink Alberta is the world's first computer utility company. It is
dedicated to providing small to medium sized businesses (50-1000 seats) with the
most efficient and cost effective system for the delivery of computer hardware,
software and electronic content at an attractive cost for installation,
administration and maintenance. It is FutureLink Alberta's objective to make
computer use as affordable and convenient to use as the telephone.
FutureLink USA's shareholders have approved the transactions contemplated
thereby, including, subject to regulatory approval, the acquisition of all of
the FutureLink Alberta Securities by FutureLink USA in consideration for the
FutureLink USA Common Shares, as may be adjusted in certain events. FutureLink
Alberta's key technology platform to deliver its computing model is the thin
client computing. A thin client
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<PAGE> 7
is a computer that has a central processing unit (CPU), a keyboard, a mouse and
a monitor that is connected to a network. Thin clients have no hard drive,
floppy disks or CD-ROM drives nor any moving parts thus greatly reducing
operating and maintenance costs. The thin client is connected to a network that
delivers any software application to any desktop from a server. The thin client
is designed to eliminate the need for constant computer upgrades, reduce the
initial capital investment of buying PCs and reduce the time and money spent on
computer maintenance.
FutureLink Alberta is offering its WATCH(TM) service as an integrated
information technology outsourcing service to the mid-market (companies with 50
- - 1000 seats).
RIVERVIEW MANAGEMENT CORPORATION. ("RMC")
RMC is a holding/investment company with operating, wholly owned subsidiaries
known as SysGold Ltd.("SysGold") and SysGold Inc. In 1992, RMC commenced
providing information technology (IT) outsourcing services in the Calgary,
Alberta vicinity through SysGold. SysGold has seen their revenues grow from
approximately CDN$200,000 in their first year of operation to approximately
CDN$9.5 million in their 1997 fiscal year. SysGold's clients come in a range of
sizes, industry sectors and growth stages. SysGold helps its clients use
information technology to enhance business, create efficiencies and drive
performance.
SysGold specializes in providing technical computing services to companies with
diverse and complex technology requirements. Over the past 6 years, they have
grown from having one client to over 90, from servicing 40 users to over 3500,
and from staffing four professionals to over 70. Many of their clients are in
the energy business. Others are in such industries as legal, advertising, and
construction.
SysGold is a total solution provider that supplies integrated business and IT
solutions in the areas of management consulting, land and land systems,
accounting, software development and infrastructure management. SysGold strives
to understand its clients' organizational processes and information requirements
and provides a full suite of information management services.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered Hereby 14,907,052 shares
Common Stock Outstanding as of August 21, 1998 15,499,303 shares
NASD OTC Bulletin Board Symbol FLNK
</TABLE>
SUMMARY FINANCIAL DATA
A. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The summary pro forma financial data in the table are derived from the pro forma
consolidated financial statements and related notes thereto of Futurelink USA.
The data should be read in conjunction with the pro forma consolidated financial
statements and the related notice contained elsewhere herein.
4
<PAGE> 8
SUMMARY OF SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (1)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended June 30, December 31
(Unaudited) (Unaudited)
1998 1997
-------------- -----------
<S> <C> <C>
Statement of Income Data:
Revenues $ 5,360,575 $ 6,665,460
Total operating expenses $ 6,572,265 $ 8,146,598
Loss from operations $(1,211,691) $(1,481,138)
Net loss $(1,382,115) $(2,225,912)
Balance Sheet Data:
Current assets $ 1,079,449 $ 774,411
Working capital $ (567,035) $(1,035,555)
Total assets $ 9,535,407 $ 8,534,625
Total liabilities $ 4,449,549 $ 4,213,176
Stockholders' equity $ 5,084,858 $ 4,321,449
</TABLE>
Note:
(1) The pro forma financial statements as at June 30, 1998, as at December 31,
1997, for the six months ended June 30, 1998 and for the year ended December 31,
1997 give effect to the acquisition of all the outstanding shares in FutureLink
Alberta and all the outstanding shares of RMC as if the effective dates of these
transactions were December 31, 1997/June 30, 1998, for the balance sheet data
and January 1, 1997/January 1, 1998 for the income statement data.
B. FUTURELINK DISTRIBUTION CORP., A COLORADO CORPORATION
The summary financial data in the table are derived from the consolidated
financial statements and related notes thereto of Futurelink USA. The data
should be read in conjunction with the consolidated financial statements and
the related notice contained elsewhere herein.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Six Months Years Ended December 31,
Ended June 30, ------------------------------
(Unaudited) (Audited) (Unaudited)
1998 1997 1996
----------- --------- -----------
<S> <C> <C> <C>
Statement of Income Data:
Revenues $ 0 $ 0 $ 0
Total operating expenses $ 71,076 $ 122,049 $ 6,864
Loss from operations $ (71,076) $(122,049) $ (6,864)
Net loss $ (482,392) $(737,049) $ (6,864)
Net loss per common share $ (0.25) $ (1.65) $ (2.75)
Balance Sheet Data:
Current assets $ 0 $ 0 $ 0
Working capital $ (24,981) $ (23,932) $ (6,873)
Total assets $ 1,269,259 $ 0 $ 515,000
Total liabilities $ 529,783 $ 23,932 $ 11,377
Stockholders' equity $ 739,476 $ (23,932) $ 503,623
</TABLE>
5
<PAGE> 9
FORWARD-LOOKING STATEMENTS
When included in this Prospectus, the words "expects," "intends,""anticipates,"
"plans," "projects" and "estimates," and analogous or similar expressions are
intended to identify forward-looking statements. Such statements, which include
statements contained in "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," are inherently subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements. For a discussion of certain of such risks, see "Risk
Factors." These forward-looking statements speak only as of the date of this
Prospectus. Futurelink USA expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Futurelink USA expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based.
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THE PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN
INVESTMENT. THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF FUTURELINK USA PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS
PROSPECTUS SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING
STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS. FUTURELINK USA ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS WELL
AS THOSE DISCUSSED ELSEWHERE HEREIN.
RISKS CONCERNING FUTURELINK USA
FutureLink USA has a significant subsidiary, FutureLink Alberta and is in the
process of acquiring 100% of Riverview Management Corporation.
Limited Control and Influence on Futurelink USA. The current officers and
directors, including the controlling beneficial shareholders of Futurelink USA
in the aggregate, directly or beneficially, currently own approximately 34% of
the total outstanding Common Stock. As a result, these individuals will probably
be able to elect a majority of Futurelink USA's directors and thereby control
the management policies of Futurelink USA, as well as determine the outcome of
corporate actions requiring shareholder approval by majority action, regardless
of how other shareholders of Futurelink USA, may vote. Such ownership of Common
Stock may have the effect of delaying, deferring or preventing a change in
control of Futurelink USA and may adversely affect the voting rights of holders
of Common Stock.
Limitation of Liability of Directors. As permitted by the Colorado Business
Corporation Act, Futurelink USA has Articles of Incorporation, as amended,
eliminates, with certain exceptions, the personal liability of its directors to
Futurelink USA and its shareholders for monetary damages as a result of a breach
of fiduciary duty. Such a provision makes it more difficult to assert a claim
and obtain damages from a director in the event of a breach of his fiduciary
duty. The Colorado Business Corporation Act provides that a corporation has the
power to (i) indemnify directors, officers, employees and agents of the
corporation against judgments, fines and amounts paid in settlement in
connection with suits, actions and proceedings and against certain expenses
incurred by such parties if specified standards of conduct are met: and (ii)
purchase and maintain insurance on behalf of any of the foregoing parties
against liabilities incurred by such parties in the foregoing capacities. The
Bylaws of Futurelink USA provide for indemnification of its officers and
directors against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they are
made parties by reason of being or having been officers or directors of
Futurelink USA; except in relation to matters as to which any such director or
officer is adjudged in such action, suit or proceeding to be liable for gross
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<PAGE> 10
negligence or willful misconduct in the performance of duty. However, such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any bylaw, agreement, vote of shareholders or otherwise.
Solvency of FutureLink USA. FutureLink USA has incurred significant losses.
FutureLink USA is subject to a lawsuit as described under "Legal Proceedings".
FutureLink USA may require additional financing in order to carry on its
business. There can be no assurance that such financing will be available or, if
available, will be upon terms satisfactory to FutureLink USA.
Dependence on Key Personnel. The success of Futurelink USA is highly dependent
on the efforts and abilities of its directors, officers and employees. The
unexpected loss or departure of any of FutureLink USA's key directors, officers
or employees could be detrimental to the future operations of FutureLink USA.
The success of FutureLink USA's business will depend, in part, upon FutureLink
USA's ability to attract and retain qualified personnel as they are needed.
There can be no assurance that FutureLink USA will be able to engage the
services of such personnel or retain its current personnel.
Dividends and Cash Flow. FutureLink USA has a limited history and currently does
not have any operating business. The Corporation has no present intention to pay
dividends to the holders of its FutureLink USA Common Shares.
Risks Related to Possible Acquisitions. Futurelink USA may expand its operations
through the acquisition of additional businesses. There can be no assurance that
Futurelink USA will be able to identify, acquire or profitably manage additional
businesses or successfully integrate any acquired businesses into Futurelink USA
without substantial expenses, delays or other operational or financial problems.
Further, acquisitions may involve a number of special risks or effects,
including diversion of management's attention, failure to retain key acquired
personnel, unanticipated events or circumstances, legal liabilities and
amortization of acquired intangible assets and other one-time or ongoing
acquisition related expenses, some or all of which could have a material adverse
effect on Futurelink USA business, operating results and financial condition.
Client satisfaction or performance problems of a single acquired firm could have
a material adverse impact on the reputation of Futurelink USA as a whole. In
addition, there can be no assurance that the acquired businesses, if any, will
achieve anticipated revenues and earnings. The failure of Futurelink USA to
arrange its acquisition strategy successfully could have a material adverse
effect upon Futurelink USA's business, operating results and financial
condition. Limited Trading History of FutureLink USA Common Shares; Stock Price
Volatility. Between January 1, 1998 and August 3, 1998, the closing sale price
has ranged from a low of $0.57 per share to a high of $4.34 per share. The
market price of the FutureLink USA Common Shares could continue to fluctuate
substantially due to a variety of factors, including quarterly fluctuations in
results of operations, adverse circumstances affecting the introduction of
market acceptance of new products and services offered by Futurelink USA,
announcements of new products and services by competitors, changes in the IT
environment, changes in earnings estimates by analysts, changes in accounting
principles, sales of FutureLink USA Common Shares by existing holders, loss of
key personnel and other factors. The market price for the FutureLink USA Common
Shares may also be affected by Futurelink USA's ability to meet analysts'
expectations, and any failure to meet such expectations, even if minor, could
have a material adverse effect on the market price of FutureLink USA Common
Shares. In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies for reasons unrelated to the operating
performance of these companies. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been instituted against such a company. Any such litigation instigated
against Futurelink USA could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon Futurelink USA's business, operating results and financial condition.
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<PAGE> 11
RISKS CONCERNING FUTURELINK ALBERTA
Creditworthiness of Clients. The value of FutureLink Alberta's computer
equipment, software, and intellectual property thereto may depend on the credit
and financial stability of FutureLink Alberta's customers. FutureLink Alberta's
projected income would be adversely affected if a significant number of
customers were unable to meet their obligations to FutureLink Alberta or if
FutureLink Alberta were unable to continue to collect its accounts receivables.
In the event of default by customers, FutureLink Alberta may experience delays
in enforcing its rights as a vendor and may incur substantial costs in
protecting its investment.
Start-Up Company. The business of FutureLink Alberta should be considered highly
speculative due to its present stage of development. FutureLink Alberta does not
have a history of earnings nor has it sufficiently diversified such that it can
mitigate the risks associated with its planned activities. FutureLink Alberta
has limited cash and other assets and a limited business history.
Securityholders must rely solely upon the ability, expertise, judgement,
discretion, integrity and good faith of FutureLink Alberta's management in all
aspects of the development and implementation of FutureLink Alberta's business
strategy.
Speculative Nature of Computer Business. The acquisition and management of
computer services may result in a failure to produce income or revenue.
Moreover, the industry is subject to significant risk factors including changes
in general economic conditions, competition from other properties, the failure
of customer to meet their obligations and other operating costs
Competition. The market for IT services is very competitive because of the large
number of competitors and the rapidly changing environment. Primary competitors
include participants from a variety of market segments, including "Big Six"
accounting firms, systems consulting and implementation firms, application
software firms, service groups of computer equipment companies, facilities
management companies, general management consulting firms and programming
companies. Many of these competitors have significantly greater financial,
technical and marketing resources and greater name recognition than FutureLink
Alberta. In addition, FutureLink Alberta competes with its client's internal
resources, particularly where these resources represent a fixed cost to the
client. Such competition may impose additional pricing pressures on FutureLink
Alberta. There can be no assurances that FutureLink Alberta will compete
successfully with its existing competitors or with any new competitors.
Tradename A number of U.S. International Companies currently use all or a
portion of the name "FutureLink" in connection with products or services in
similar industries as that engaged in by the Company. While the Company is
attempting to qualify under a trademark its name throughout the U.S. in Canada,
significant issues may be present as to the ability to widely use the name in
connection with the products or services to be rendered by the Company.
Rapid Technological Change; Dependance on New Solutions. FutureLink Alberta's
success will depend in part on its ability to develop IT solutions that keep
pace with continuing changes in IT, evolving industry standards and changing
client preferences. There can be no assurance that FutureLink Alberta will be
successful in adequately addressing these developments on a timely basis or
that, if these developments are addressed, FutureLink Alberta will be successful
in the marketplace. In addition, there can be no assurance that products or
technologies developed by others will not render FutureLink Alberta's services
uncompetitive or obsolete. FutureLink Alberta's failure to address these
developments could have a material adverse effect on FutureLink Alberta's
business, operating results and financial conditions.
8
<PAGE> 12
Attraction and Retention of Employees. FutureLink Alberta's business involves
the delivery of professional services and is labor-intensive. FutureLink
Alberta's success depends in large part upon its ability to attract, develop,
motivate and retain highly skilled technical employees. Qualified technical
employees are in great demand and are likely to remain a limited resource for
the foreseeable future. There can be no assurance that FutureLink Alberta will
be able to attract and retain sufficient numbers of highly skilled technical
employees in the future. FutureLink Alberta has historically experienced
turnover rates which it believes are consistent with industry norms. An increase
in this rate could have a material adverse effect on FutureLink Alberta's
business, operating results and financial condition, including its ability to
secure and complete engagements.
Project Risks. Many of FutureLink Alberta's engagements involve projects that
are critical to the operations of its clients' businesses and provide benefits
that may be difficult to quantify. FutureLink Alberta's failure or inability to
meet a client's expectations in the performance of its services could result in
a material adverse change to the client's operations and therefore could give
rise to claims against FutureLink Alberta or damage FutureLink Alberta's
reputation, adversely affecting its business, operating results and financial
condition.
Fixed-Bid Projects. FutureLink Alberta undertakes many projects billed on a
fixed-bid basis, which is distinguishable from the company's other method of
billing on a time and materials basis. The failure of the company to complete
such projects within budget would expose the company to risks associated with
cost overruns, which could have a material adverse effect on FutureLink
Alberta's business, operating results and financial condition.
Dividends. Since incorporation, FutureLink Alberta has not paid any dividends on
its outstanding FutureLink Alberta Common Shares and has no present intention to
pay dividends thereon.
RISKS CONCERNING RIVERVIEW MANAGEMENT CORPORATION
RMC purchased a 33% minority interest in its subsidiary SysGold Ltd. from a
minority shareholder for a purchase price of CDN$315,000 on July 24, 1998. The
buy out was based on an effective evaluation dated April 30, 1996. At that date,
the valuation for 100% of SysGold Ltd. was approximately CDN$950,000. The
acquisition by FutureLink USA values SysGold Ltd. at CDN$8,000,000 on an arms
length basis. FutureLink USA believes this to be a reasonable valuation at the
current time and substantially higher than the valuation of SysGold Ltd. at
April 30, 1996. The reasons for the increased valuation over the past 28 months
are primarily as follows:
a) SysGold's revenues have increased from approximately CDN$3 million
for the year ended October 31, 1995 to approximately CDN$9.7 million
for the year ended October 31, 1997,
b) SysGold's employee/consultant base (one of its key assets) has
increased from approximately 30 at the end of fiscal 1995 to a
current of 75,
c) SysGold currently has a strong management team, excellent
reputation, blue ship client base and proven technology service
delivery platform.
Creditworthiness of Clients. The value of SysGold's computer equipment,
software, and intellectual property thereto may depend on the credit and
financial stability of SysGold's customers. SysGold's projected income would be
adversely affected if a significant number of customers were unable to meet
their obligations to SysGold or if SysGold were unable to continue to collect
its accounts receivables. In the event of default by customers, SysGold may
experience delays in enforcing its rights as a vendor and may incur substantial
costs in protecting its investment.
Speculative Nature of Computer Business. The acquisition and management of
computer services may result in a failure to produce income or revenue.
Moreover, the industry is subject to significant risk factors including changes
in general economic conditions, competition from other properties, the failure
of customer to meet their obligations and other operating costs.
Competition. The market for IT services is very competitive because of the large
number of competitors and the rapidly changing environment. Primary competitors
include participants from a variety of market segments, including "Big Six"
accounting firms, systems consulting and implementation firms, application
software firms, service groups of computer equipment companies, facilities
management companies, general management consulting firms and programming
9
<PAGE> 13
companies. Many of these competitors have significantly greater financial,
technical and marketing resources and greater name recognition than SysGold. In
addition, SysGold competes with its clients internal resources, particularly
where these resources represent a fixed cost to the client. Such competition may
impose additional pricing pressures on SysGold. These can be no assurances that
SysGold will compete successfully with its existing competitors or with any new
competitors.
Rapid Technological Change; Dependence on New Solutions. SysGold's success will
depend in part on its ability to develop IT solutions that keep pace with
continuing changes in IT, evolving industry standards and changing client
preferences. There can be no assurance that SysGold will be successful in
adequately addressing these developments on a timely basis or that, if these
developments are addressed, SysGold will be successful in the marketplace. In
addition, there can be no assurance that products or technologies developed by
others will not render SysGold's services uncompetitive or obsolete. SysGold's
failure to address these developments could have a material adverse effect on
SysGold's business, operating results and financial conditions.
Attraction and Retention of Employees. SysGold's business involves the deliver
of professional services and is labor-intensive. SysGold's success depends in
large part upon its ability to attract, develop, motivate and retain highly
skilled technical employees. Qualified technical employees are in great demand
and are likely to remain a limited resource for the foreseeable future. There
can be no assurance that SysGold will be able to attract and retain sufficient
numbers of highly skilled technical employees in the future. SysGold has
historically experienced turnover rates which it believes are consistent with
industry norms. An increase in this rate could have a material adverse effect on
SysGold's business, operating results and financial condition, including its
ability to secure and complete engagements.
Project Risks. Many of SysGold's engagements involve projects that are critical
to the operations of its clients' businesses and provide benefits that may be
difficult to quantify. SysGold's failure or inability to meet a client's
expectations in the performance of its services could result in a material
adverse change to the client's operations and therefore could give rise to
claims against SysGold or damage SysGold's reputation, adversely affecting its
business, operating results and financial condition.
Fixed-Bid Projects. SysGold undertakes many projects billed on a fixed-bid
basis, which is distinguishable from the company's other method of billing on a
time and materials basis. The failure of the company to complete such projects
within budget would expose the company to risks associated with cost overruns,
which could have a material adverse effect on SysGold's business, operating
results and financial condition.
RISKS CONCERNING THE SECURITIES OF FUTURELINK USA
Possible Volatility of Securities Prices. The Stock market has from time to time
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of any particular company. The market prices of the
securities of many publicly-traded companies in the computer industry have in
the past been and can be expected in the future to be especially volatile.
Factors such as Futurelink USA's operating results, announcements by Futurelink
USA or its competitors concerning technological innovations, new products or
systems may have a significant impact on the market price of the Company's
securities.
Risks of Low-Priced or Penny Stock. The common stock of Futurelink USA is traded
on the NASD OTC Bulletin Board. As such it is subject to Rule 15(g)-(9) under
the 1934 Act. Such Rule may adversely effects the ability of purchasers in this
Offering to sell of the securities acquire hereby in the secondary market.
Rule 15g-9 requires additional disclosure, relating to the market for penny
stocks, in connection with trades in any stock defined as a penny stock. The
Commission defines a penny stock to be any equity security that has a market
price of less than $5.00 per share (exclusive of commissions), subject to
certain exceptions. Such exceptions include any equity security listed on Nasdaq
and any equity security issued by an issuer that has (i) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000, if such issuer has been in continuous operation
for less than three years. Unless an exemption is available, the regulations
10
<PAGE> 14
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith.
In addition, trading in the Common Stock would be covered by Rules 15g-1 through
15g-6 under the 1934 Act for non-Nasdaq and non-exchange listed securities.
Under such rules, broker/dealers who recommend such securities to persons other
than established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities also are exempt from these
rules if the market price is at least $5.00 per share.
No Dividends Anticipated on Common Stock. FutureLink USA has not paid any
dividends on its Common Stock to date. FutureLink USA does not currently intend
to declare or pay any dividends on its Common Stock in the foreseeable future,
but plans to retain earnings, if any, for development and expansion of its
business operations.
Current Prospectus and State Registration Required to Exercise Warrants. The
purchasers of the Warrants will only be able to exercise the Warrants if: (i) a
current Registration Statement under the 1933 Act relating to the Common Stock
is qualified for sale or exempt from qualification under the 1933 Act and; (ii)
such Common Stock is qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of the
Warrants reside. Although FutureLink USA will use its best efforts to maintain
the effectiveness of the current Registration Statement covering the Common
Stock issuable upon the exercise of the Warrants, there can be no assurance
FutureLink USA will be able to continue to do so. The value of the Warrants may
be greatly reduced if a current Registration Statement covering the Common Stock
issuable upon the exercise of the Warrants is not kept effective or if such
Common Stock is not qualified or exempt from qualification in the states in
which the holders of the Warrants reside.
USE OF PROCEEDS
With the exception of the exercise price of the Warrants, FutureLink USA will
not receive any proceeds from the sale of securities offered hereby. It is
currently anticipated that the net proceeds from the exercise of the Warrants,
estimated at $1,000,000 will be added to the general funds of FutureLink USA and
used for working capital and other general corporate purposes. FutureLink USA
will pay all the expenses of this Prospectus, estimated to be approximately
$50,000.
MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
FUTURELINK USA
The common stock of FutureLink USA commenced quotation on the OTC Bulletin Board
under the symbol "FLNK" in late 1995. Until the third quarter of 1995 no
substantial public trading market had developed for the common stock of
FutureLink USA.
NASD OTC Bulletin Board Symbols
Common Stock FLNK
FutureLink USA has not paid any dividends on its Common Stock since its
inception and has no current plans to pay dividends on the Common Stock in the
foreseeable future. In addition, FutureLink USA's ability to pay cash dividends
is restricted by FutureLink USA's current credit facilities, and future
borrowings may contain similar restrictions. The Company intends to reinvest
future earnings, if any, in the development and expansion of its business. Any
future
11
<PAGE> 15
determination to pay dividends on the Common Stock will depend upon FutureLink
USA's results of operations, financial condition and capital requirements and
such other factors deemed relevant by FutureLink USA's Board of Directors.
The closing price of the Common Stock of FutureLink USA as reported on the NASD
OTC Bulletin Board Issues on August 18, 1998, by brokers making a market, was
$1.00.
As of August 19, 1998, there were approximately 252 beneficial holders of the
common stock of the Company.
FutureLink USA's Common Stock is traded on the Nasdaq OTC Bulletin Board under
the symbol FLNK. The following table summarizes the trading activity of
FutureLink USA from January 1998.
<TABLE>
<CAPTION>
Price Range
-------------------- Trading Share Value
High Low Volume NOTE 1
---- ---- ---------- -----------
<S> <C> <C> <C> <C>
January, 1998 3.56 1.75 1,294,400 $3,849,893
February, 1998 3.50 2.90 714,100 2,241,748
March, 1998 4.12 2.75 1,834,300 6,253,275
April, 1998 4.34 3.06 5,333,400 14,219,948
May, 1998 4.00 1.37 7,575,200 19,470,561
June 1-5, 1998 1.31 1.00 1,001,300 1,044,374
June 8-12, 1998 1.25 1.03 572,000 632,511
June 15-19, 1998 1.02 0.73 1,763,500 1,407,873
June 22-26, 1998 1.03 0.08 688,200 583,900
June28-July 3, 1998 0.81 0.66 744,000 518,001
July 6-10, 1998 0.64 0.57 978,700 599,967
July 13-17, 1998 1.68 0.72 2,724,100 3,510,358
July 20-29, 1998 1.25 1.00 1,033,000 2,092,682
---------- -----------
Totals 25,586,200 $56,425,091
========== ===========
</TABLE>
- ----------
Note 1) Calculated by mutiplying the average daily price reported by
Bloomberg by the daily volume. This is only an estimate of the true
share values traded. This method would tend to overstate the true share
value.
On July 31, 1998 the high and low prices of FutureLink USA's Common Stock were
$1.10 and $.94 per share, respectively. As of July 31, 1997 there were
approximately 252 holders of record of FutureLink USA Common Stock.
FutureLink USA has not declared or paid any cash dividends on its Common Stock
and does not intend to declare or pay any cash dividends in the foreseeable
future. The payment of dividends, if any, is within the discretion of the Board
of Directors and will depend on the FutureLink USA's earnings, if any, its
capital requirements and financial condition, and such other factors as the
Board of Directors may consider.
FUTURELINK ALBERTA
There is no market for the securities of FutureLink Alberta to be acquired
pursuant to the FutureLink Alberta Acquisition Agreement.
RIVERVIEW MANAGEMENT CORPORATION
There is no market for the securities of RMC, SysGold Ltd. or SysGold Inc.
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<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with FutureLink USA's
consolidated financial statements and the related notes thereto and the other
financial information included elsewhere in this Prospectus. When used in the
following discussions, the words "believes", "anticipates", "intends", "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially from those projected, including, but
not limited to, those set forth in "Risk Factors." readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the
date hereof.
FUTURELINK USA
JUNE 30, 1998 VS. JUNE 30, 1997
On January 20, 1998, Core Ventures, Inc.(now known as FutureLink Distribution
Corp.) acquired a 46% interest in FutureLink Alberta.
FutureLink Alberta is the world's first computing utility and specializes in
providing IT services to mid-sized companies. FutureLink USA accounts for its
investment in FutureLink Alberta using the equity method for accounting for
investments.
In the six months ended June 30, 1998, FutureLink USA incurred $71,076 of
administration expenses in administering its 46% investment in FutureLink
Alberta. In addition, FutureLink USA recorded an increase on its share capital
of $60,200 related to the forgiveness of a loan to the company by a shareholder.
FutureLink USA's equity in FutureLink Alberta losses during this period was
$411,316.
FutureLink USA has no revenues or expenses in the similar period in 1997.
Liquidity and Capital Resources
FutureLink USA raised $1,351,602 in equity and advances from shareholders.
FutureLink USA has invested $1,680,515 in FutureLink Alberta in advances and
purchases of FutureLink Alberta shares. As at June 30, 1998, the company's
investment in FutureLink Alberta had a book value (net of its equity loss) of
$1,269,259. FutureLink USA had liabilities of $529,783 representing accounts
payable and advances from shareholders of $504,802. The $504,802 advance was
converted to equity in July 1998.
FISCAL 1997 VS. FISCAL 1996
For the year ended December 31, 1997, revenues were $0 compared to $0 in the
year ended December 31, 1996, as FutureLink USA had no active operations.
Operating expenses increased from $115,189 to $122,049 as FutureLink USA
unsuccessfully attempted to acquire the operations of Printscan Technologies
Inc.
Share capital income increased $39,494 as a result of the forgiveness of a loan
from a shareholder.
Other non-operation losses in 1997 included the write-off of mining assets
recorded on the balance sheet at a book value of $515,000 and a loss of a
non-refundable deposit of $100,000 related to the failed attempt to acquire the
assets of Printscan.
Liquidity and Capital Resources
In 1997, FutureLink USA raised $170,000 from the issuance of common shares.
These funds were used to pay operating
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<PAGE> 17
administration expenses and the non-refundable deposit in the failed attempt to
acquire the assets of Printscan. At the end of 1997, FutureLink USA had no
recorded assets and current account payables were $23,932.
1996
FutureLink USA has been an inactive company for a number of years. In 1996,
FutureLink USA incurred nominal administrative expenses of $6,864 in maintaining
the FutureLink USA legal entity.
Liquidity and Capital Resources
FutureLink USA received shareholder advances of $3,602 in 1996 and ended the
year with mining assets with a book value of $515,000 and liabilities (accounts
payable and shareholder advances) of $11,377.
FUTURELINK ALBERTA
JUNE 30, 1998 VS. JUNE 30, 1997
In January 1998, FutureLink USA acquired a significant interest in FutureLink
Alberta with plans to acquire the rest of FutureLink Alberta later in 1998 via a
takeover bid to minority shareholders. During the first six months of 1998,
FutureLink Alberta launched its information technology services business focused
on distributed thin client technology.
In the six months ended June 30, 1998, FutureLink Alberta recognized revenues of
CDN$30,675 from information technology services and hardware/software sales.
Operating expenses were CDN$1,096,052 in the six months ended June 30, 1998,
versus CDN$160,775 of operating expenses in the six months ended June 30, 1997.
The tremendous increase in operating expenses in 1998 vs. 1997 can be attributed
to an increase in office premises, administration, marketing and technical
management, marketing efforts and the addition of employees in conjunction with
the launch of FutureLink Alberta's IT services business. In addition, in July
1998 FutureLink Alberta discontinued its web page development activities and
sold its interest in the business to NextClick Ltd. in exchange for equity. This
equity was recorded at CDN$1.00 in its books and records.
As at June 30, 1998, FutureLink Alberta has signed significant multi-year IT
service contracts with revenues to be recognized over the next 3-5 years.
Liquidity and Capital Resources
During the six months ended June 30, 1998, FutureLink Alberta raised
CDN$2,193,198 of financing which included CDN$333,775 of common share equity
financing and CDN$1,859,423 of shareholder advances from FutureLink USA. The
financing helped fund CDN$1,492,710 of operating activities and CDN$370,173 of
capital asset investments. As of June 30, 1998, FutureLink Alberta had
CDN$232,971 of cash, CDN$143,703 of net working capital, capital assets of
CDN$515,050 and long-term liabilities of CDN$1,891,401 (including shareholder
loans and capital leases.).
FISCAL 1997 VS. FISCAL 1996
During the fiscal 1997 year, there was a shift in FutureLink Alberta's business
as the interactive cafe initiative was discontinued in favor of distribution of
computing services to businesses via thin client networks.
In 1997, FutureLink Alberta had nominal interest income of CDN$4,820 versus
CDN$2,752 in 1996. FutureLink Alberta had operating expenses of CDN$805,568,
with consulting expenses of CDN$401,320 being the major category of expense.
Operating expenses in 1997 increase tremendously from 1996 levels of CDN$200,845
as the company increased its development expenditures with respect to the
distribution of information technology services and ceased its interactive cafe
development expenditures. FutureLink Alberta's discontinued web page development
activities had a net loss of CDN$14,179 in 1997.
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<PAGE> 18
Liquidity and Capital Resources
In fiscal 1997, FutureLink Alberta raised CDN$593,454 of equity and debt
financing to help fund operating activities of CDN$392,897 (net of working
capital decrease) and capital asset purchases of CDN$279,523. At December 31,
1997, FutureLink Alberta had cash of CDN$10,886, a working capital deficit of
CDN$413,508 and capital assets of CDN$239,330. In addition, FutureLink Alberta
had long term debt obligations (including capital leases) of CDN$106,753.
FISCAL 1996
FutureLink Alberta commenced operations as 689936 Alberta Ltd. In March 1996
FutureLink Alberta was initially focused on developing a chain of internet cafes
focused on exposing and distributing new information technology to consumers.
From the date of commencement of operations to December 31, 1996, FutureLink
Alberta had nominal interest income of CDN$2,752 and incurred CDN$200,845 of
operating expenses in developing the interactive cafe business model.
CDN$109,625 of the expenses were for consultants who assisted the company in
developing its business model and planning its internet cafes.
Liquidity and Capital Resources
In 1996, FutureLink Alberta raised CDN$370,329 in equity financing. In addition
to funding CDN$269,817 of operations, the company loaned CDN$104,500 to a
company owned by a director. The loan was repaid in 1997. As of December 31,
1996, FutureLink Alberta had CDN$89,852 of cash, CDN$104,500 of notes
receivables and CDN$10,545 of other assets. The company had CDN$40,458 of trade
payables and accrued liabilities as of December 31, 1996.
RIVERVIEW MANAGEMENT CORPORATION
8 MONTHS ENDED JUNE 30, 1998 COMPARED TO 8 MONTHS ENDED JUNE 30, 1997
For the 8 months ended June 30, 1998, revenues increased CDN$2,351,872 (43%) to
CDN$7,844,545 from CDN$5,492,673 recorded in the 8 months ended June 30, 1997.
This increase resulted from several factors. The number of major clients
increased by 13 (29%) to 58 from 45. The number of staff increased by 28 (58%)
to 76 from 48.
Hardware and software sales increased by CDN$982,497 (37%) to CDN$4,232,998 from
CDN$2,863,237 for the same period in the previous fiscal year. Cost of goods
sold rose proportionately by CDN$911,046 (38%) to CDN$3,314,946 from
CDN$2,403,900.
The major cost of system consulting revenue - system consultant salaries,
benefits, and contract costs increased by CDN$1,283,238 (58%) to CDN$3,500,311
from CDN$2,217,073. This greater than proportional increase in staffing costs
rose from competitive pressure on staff salaries.
General and administrative expenses increased by CDN$332,435 (76%) to
CDN$769,665 (9.8% of revenue) from CDN$437,230 (8.0% of revenue) in the prior
year. This increase in overhead costs occurred because we had to add
supervisory, purchasing and administrative staff to handle our larger number of
consultants. Advertising and Promotional costs went up by CDN$33,380 (64%) to
CDN$85,851 (1.1% of revenue) from CDN$52,471 (1.0% of revenue) for the same
period.
After provision for income taxes, SysGold recorded a decrease in profit of
CDN$33,668 to CDN$143,716 for the 8 months ended June 30, 1998, compared to
CDN$177,384 for the 8 months ended June 30, 1997.
15
<PAGE> 19
FISCAL YEAR 1997 AS COMPARED TO FISCAL YEAR 1996
For the year ended October 31, 1997, revenues increased CDN$4,233,532 (80%) to
CDN$9,520,789 from CDN$5,287,257 recorded in the year ended October 31, 1996.
This increase resulted from several factors. The number of major clients
increased by 9 (22%) to 49 from 40. The number of staff increased by 21 (60%) to
58 from 35. SysGold's client base spent more on expansion of their management
information systems in 1997 compared to 1996.
Hardware and software sales increased by CDN$1,961,878 (66%) to CDN$4,929,610
from CDN$2,967,732 the previous fiscal year. Cost of goods sold rose
proportionately by CDN$1,776,779 (65%) to CDN$4,500,816 from CDN$2,724,037.
The major cost of system consulting revenue - system consultant salaries,
benefits, and contract costs increased by CDN$1,921,208 (100%) to CDN$3,835,563
from CDN$1,914,355. This greater than proportional increase in staffing costs
arose mainly from competitive pressure on staff salaries, prior to revenue
contract renewal dates with clients.
Advertising and Promotional costs went up by CDN$55,467 (130%) to CDN$97,897
(1.0% of revenue) from CDN$42,430 (0.8% of revenue) the previous fiscal year.
This low marketing cost basically reflected SysGold's policy of obtaining new
customers by reference from our staff and clients.
General and administrative expenses increased by CDN$217,975 (39%) to
CDN$773,921 (8.1% of revenue) from CDN$555,946 (10.5% of revenue) in the prior
year. This increase in overhead costs occurred generally because SysGold added
supervisory, purchasing and administrative staff to handle its larger number of
consultants. As well, a favorable tenant sub-lease ended and RMC moved,
incurring increased rent costs of CDN$48,000, additional furniture rent and
lease costs of CDN$28,000, and telephone cost of CDN$11,000.
After provision for income taxes, the Company recorded an increase in profit of
CDN$114,635 (430%) to CDN$141,311 for the year ended October 31, 1997, compared
to CDN$26,676 for the year ended October 31, 1996.
BUSINESS
FUTURELINK USA
FutureLink USA is a holding/investment company with a 100% interest in
FutureLink Acquisition Corp. (an Alberta corporation) and a 46.229% interest in
FutureLink Distribution Corp. (an Alberta corporation) ("FutureLink Alberta")
which is located in Calgary, Alberta. FutureLink USA, with certain exception, is
in the process of acquiring the remaining issued and outstanding securities of
FutureLink Alberta.
FutureLink USA was incorporated under the Colorado Corporation Code on April 4,
1955 under the name of Cortez Uranium and Mining Co. On February 25, 1957, its
name changed to Core Oil, Inc. On June 16, 1983, its name changed to Core
Mineral Recoveries, Inc. On July 20, 1997, its name changed to Core Ventures,
Inc. On February 17, 1998, its name changed to FutureLink Distribution Corp. In
conjunction with these name changes, the Corporation has undertaken a number of
changes to its authorized capital. Upon incorporation, the authorized capital
was 10,000,000 shares with a par value of $0.01. On June 16, 1983, the
authorized capital was altered to authorize the issuance of 15,000,000 shares
with a par value of $0.01/share. On October 7, 1986, the authorized capital was
altered to authorize the issuance of 30,000,000 shares with a par value of
$0.01/share. On July 20, 1997, the articles were amended to provide for a par
value of $0.001/share. On July 20, 1997, FutureLink USA effected a 200:1 reverse
split. On December 2, 1997, FutureLink USA effected a 30:1 reverse split. On
January 20, 1998, the articles were amended to authorize the issuance of
100,000,000 common shares with a par value of $0.0001/share and 5,000,000
preferred shares with no par value.
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<PAGE> 20
The principal executive office of FutureLink USA is located at Suite 550 - 603 -
7th Avenue S.W. Calgary, Alberta, T2P 2T5. The contact telephone number is (403)
543 - 5511. The registered and records office of the Company is located at 5025
South Federal Boulevard, Englewood, Colorado, 80110.
All references herein are in US dollars unless otherwise referenced. At this
date, the Canadian dollar equals .6521 cents US.
STRATEGIC ACQUISITIONS
FutureLink USA's management believes that strategic acquisitions could
tremendously enhance FutureLink USA's growth and profitability over the next
several years/
On August 3, 1998, FutureLink USA entered into an agreement with FutureLink
Alberta ("FutureLink Alberta Acquisition Agreement"), which provides that,
subject to regulatory approval and certain exceptions, FutureLink USA will
acquire all of the FutureLink Alberta Securities in consideration of the
issuance of FutureLink USA Common Shares to the FutureLink Alberta Security
holders on a one-for-one basis for each such security. Management of FutureLink
Alberta is identical to that of FutureLink USA and certain security holders of
FutureLink Alberta are also security holders of FutureLink USA.
A. SysGold
By agreement among FutureLink Alberta, FutureLink USA, Donald A. Bialik, Olivia
B. Bialik, Bialik Family Trust, Riverview Management Corporation ("RMC") and
SysGold Ltd. dated August 4, 1998, as amended by agreement dated August 21,
1998, FutureLink USA has agreed to acquire all of the issued and outstanding
shares of RMC which in turn owns all of the issued and outstanding shares of
SysGold Ltd. and SysGold Inc.(the "SysGold Acquisition Agreement"). SysGold has
approx. 60 employees and annual sales of CDN$10 million. RMC has total
liabilities of approx. CDN$1,800,000. The consideration is CDN$8,685,000 payable
by CDN$3,000,000 cash on closing (scheduled for August 21, 1998), CDN$685,000 by
a promissory note payable within 90 days, and partly by the issuance of
4,250,000 restricted FutureLink USA Common Shares (attributed value
$0.85/share). The SysGold Acquisition Agreement will be amended prior to
closing. SysGold Inc. will be added as a party. Donald A. Bialik will be subject
to an employment agreement which would pay him a significant salary/year, plus a
performance bonus and stock options totalling 250,000 FutureLink USA Common
Shares at a price to be agreed upon. The deposit of CDN$100,000 has been paid
and may become non-refundable in certain circumstances. The transaction is an
arms length transaction and numerous condition precedents must be satisfied
prior to closing.
B. Thomson Kernaghan
FutureLink USA has entered into a Debenture Acquisition Agreement dated August
14, 1998 with Thompson Kernaghan & Co., Ltd. an Ontario corporation ("TK").
Pursuant to this agreement TK has purchased from FutureLink USA up to $5,000,000
of a 10% convertible debenture ("Debenture") and $1,000,000 in a series of
warrants in FutureLink USA.
The purchase price for the Debenture shall be payable in a series of the
closings. The initial closing scheduled for August 21, 1998 provides FutureLink
USA with $2,250,000 U.S. to be utilized by the Company primarily for the
acquisition of stock in Sysgold, Ltd., as described below. The initial closing
is subject to certain financial requirements of Sysgold, the filing of a 1933
Act Registration Statement to cover conversion of the common shares underlying
the Debenture as described below and an opinion of FutureLink USA counsel.
Additional closings at the rate of no more than one per month and in the amount
$500,000 per month are subsequently scheduled. Subsequent closings are
conditioned upon effectiveness of the FutureLink USA 1933 Act and 1934 Act
Registrations maintenance of, minimum bid prices and daily volume requirements.
On the initial funding date, TK shall receive a 10% commission on all payments
made for the Debenture, and $1,000,000 principal amount of a series of warrants
of FutureLink USA exercisable at a per share price equal to $0.96 per share).
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In addition, FutureLink USA will be depositing into escrow a total of 11,000,000
shares of common stock, 10,657,052 shares of which shall be registered pursuant
to a Form SB-2 Registration Statement with the Securities and Exchange
Commission, as the common stock underlying the Debenture, and the Warrants
issued to TK.
The Debenture is all due and payable on August 21, 2001 provided that TK shall
have the right, at its option beginning on the 30th day after the initial
funding date to convert in $100,000 increments or multiples thereof the
principal amount to common shares of the Company at a conversion price equal to
the lower of 78% of the average closing bid price of the FutureLink USA common
stock on the principal market for the common stock for the three trading days
immediately preceding the date of notice of conversion, or the three trading
days prior to the initial closing date. If the price of the common stock of
FutureLink USA has substantially diminished for the three trading days prior to
notice of conversion, the number of shares of common stock issuable upon
conversion could exceed the amount registered hereunder.
The Warrants to purchase common stock consist of two separate warrants, one for
$250,000 face amount and the other for $750,000 face amount both issued to TK in
consideration for its execution and funding under the Debenture Purchase
Agreement. The warrants are exercisable on or after August 21, 1998 through and
including August 21, 2001 at an exercise price equal to $0.96 per share.
Therefore, the total number of shares of the common stock underlying the
warrants that are registered pursuant to the Form SB-2 registration statement
equal 1,041,667 shares of common stock.
FutureLink USA plans to acquire other IT service companies in the USA and
Canada. These purchases would provide FutureLink USA with the following:
- - a blue chip client base which gives FutureLink USA customer references
for sales proposals
- - quality management and client service delivery personnel critical to
success in the IT services sector
- - bases for entry into new geographic and industry markets
- - additional sources of potential revenues from customer sales of
additional IT.
FutureLink USA's general acquisition criteria are:
1. IT service companies in the outsourcing, network management, application
development and maintenance and Y2K consulting fields,
2. target is located in Canada or the United States,
3. target has strong customer base and valuable existing service contracts,
4. target has talented management and client service delivery teams that
can integrate into FutureLink USA's service organization,
PATENTS AND TRADEMARKS
FutureLink USA currently has no patents or trademarks pending or in place.
ENVIRONMENTAL MATTERS
FutureLink USA believes it is in material compliance with all relevant federal,
state, and local environmental regulations and does not expect to incur any
significant costs to maintain compliance with such regulations in the
foreseeable future.
RESEARCH AND DEVELOPMENT
During each of the last two Fiscal Years FutureLink USA did not expend in excess
of Ten Thousand Dollars ($10,000) on research and development of products.
During Fiscal Year 1997, FutureLink USA did not capitalize research, development
or engineering costs, and such costs were expensed during the period of their
occurrence.
GOVERNMENTAL MATTERS
Except for usual and customary business and tax licenses and permits, and the
licenses and permits described elsewhere herein, no governmental approval is
required for the principal products/services of FutureLink USA , nor does
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FutureLink USA know of any existing or probable governmental regulations
affecting FutureLink USA's activities.
INSURANCE
FutureLink USA maintains a $2,000,000 directors and officers liability insurance
policy. It currently does not, however, maintain commercial liability insurance
policy, a product liability insurance policy or an errors and omissions policy
to cover the sale of its services. There can be no assurance that its insurance
will be adequate to cover future claims or that FutureLink USA will be able to
maintain adequate liability insurance at commercially reasonable rates.
EMPLOYEES
FutureLink USA currently has no full-time employees and does not foresee
acquiring employees any time in the near future. Directors and officers are not
paid a salary.
DESCRIPTION OF PROPERTY
FutureLink USA does not currently own or lease property of any sort.
LEGAL PROCEEDINGS
FutureLink USA is aware of the following lawsuits:
1. Midland Walwyn Capital Inc. has commenced in Supreme Court of Ontario an
action against Core Ventures, Inc. (now known as FutureLink USA),
Abecorn Enterprises Limited, Alixe Cormick, Venture Law Corporation, and
Raymond Kompani. Midland Walwyn Capital Inc. is seeking judgement in the
amount of CDN$500,000 against all defendants. The action against Core
Ventures, Inc. alleges fraudulent misrepresentation, negligent
misrepresentation, intentional or negligent interference with
contractual relations. The action was commenced in October 1997. Core
Ventures, Inc. has filed a defence. The action relates to a share sale
transaction between Abecorn Enterprises Limited and Raymond Kompani.
Raymond Kompani apparently failed to pay Abecorn Enterprises Limited for
50,000 FutureLink USA Common Shares. Alixe Cormick acted as solicitor
for Abecorn Enterprises Limited and Core Ventures, Inc. Alixe Cormick
requested the General Securities Transfer Agency, Inc. to cancel share
certificate #3190 in the amount of 50,000 FutureLink USA Common Shares
standing in the name of Abecorn Enterprises Limited. The General
Securities Transfer Agency, Inc. cancelled share certificate #3190.
Raymond Kompani deposited share certificate #3190 with Midland Walwyn
Capital Inc. Midland Walwyn Capital Inc. proceeded to sell 50,000
FutureLink Common Shares on behalf of Raymond Kompani. When Midland
Walwyn Capital Inc. sent share certificate #3190 to the Depository Trust
Company (clearing house), the clearing house advised Midland Walwyn
Capital Inc. that the shares had been cancelled by the transfer agent
for Core Ventures, Inc. Midland Walwyn Capital Inc. had paid the net
sale proceeds to Raymond Kompani before they were advised by Depository
Trust Company of the problem. Midland Walwyn Capital Inc. was required
to repurchase 50,000 FutureLink USA Common Shares on the market. The
cost was $325,000. Midland Walwyn Capital Inc. demanded the repayment of
the funds from Raymond Kompani. Raymond Kompani has not repaid the
monies to Midland Walwyn Capital Inc. Midland Walwyn Capital Inc. is
suing to recover its losses.
2. US Bankruptcy Proceedings. FutureLink USA is aware that on April 4,
1995, Core Mineral Recoveries, Inc. voluntarily filed a petition under
Chapter 11 of the US Bankruptcy Code (95-70091) seeking protection from
its creditors. FutureLink USA was not discharged in bankruptcy. The
petition was dismissed thereby not compromising any of the creditors.
The outstanding debts should not exceed $100,000 and therefore should
not be considered material. FutureLink USA is investigating the extent
of the obligations and whether or not any lawsuits or judgements against
FutureLink USA exist. It was a term of the January 20, 1998 share
acquisition agreement that there were no debts in FutureLink USA.
FutureLink USA is investigating what recourse it may have relating to
this representation.
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FUTURELINK ALBERTA
FutureLink Alberta is the world's first computer utility company. It is
dedicated to providing small to medium sized businesses (50-1000 seats) with the
most efficient and cost effective system for the delivery of computer hardware,
software and electronic content at an attractive cost for installation,
administration and maintenance. It is FutureLink Alberta's objective to make
computer use as affordable and convenient to use as the telephone.
FutureLink USA's shareholders have approved the transactions contemplated
thereby, including, subject to regulatory approval, the acquisition of all of
the FutureLink Alberta Securities by FutureLink USA in consideration for the
FutureLink USA Common Shares, as may be adjusted in certain events.
The obligations of FutureLink USA to complete the transaction are conditional
upon, among other things, the following:
(a) no action, suit or proceeding shall have been threatened or taken before
or by any federal, provincial, municipal or other governmental
department, commission, bureau, agency or instrumentality in Canada or
elsewhere outstanding, pending or threatened by or against FutureLink
Alberta at law or in equity;
(b) there shall not have occurred any material change, change of material
fact or any development that could result in a material or change of a
material fact in the business, operations or affairs of FutureLink
Alberta;
(c) FutureLink Alberta shall have no liabilities (absolute, contingent,
accrued or otherwise) at the time of closing of the Offer other than
those disclosed in the most recent financial statements of FutureLink
Alberta presented to FutureLink USA and as otherwise disclosed to
FutureLink USA in writing; and
(d) all necessary steps and proceedings shall have been taken to allow the
FutureLink Alberta Securities to be transferred from the FutureLink
Alberta Securityholders to FutureLink USA and vest in FutureLink USA
good and marketable title to the FutureLink Alberta Securities free and
clear of all liens, claims, charges, security interests, mortgages and
encumbrances.
FutureLink Alberta's key technology platform to deliver its computing model is
the thin client computing. A thin client is a computer that has a central
processing unit (CPU), a keyboard, a mouse and a monitor that is connected to a
network. Thin clients have no hard drive, floppy disks or CD-ROM drives nor any
moving parts thus greatly reducing operating and maintenance costs. The thin
client is connected to a network that delivers any software application to any
desktop from a server. The thin client is designed to eliminate the need for
constant computer upgrades, reduce the initial capital investment of buying PCs
and reduce the time and money spent on computer maintenance.
Since 1995, FutureLink Alberta has been engaged in the development of its own
thin client service: Wide Area Thin Client Hook-up (WATCH(TM)). For a monthly
fee of approximately $200 per desktop (depending on the number of desktops and
applications required) FutureLink Alberta's customers will receive:
1. access to common business software applications including Microsoft
Office;
2. access to a secured Internet or Intranet connection and all the
necessary software;
3. the ability to use existing proprietary applications and databases;
4. security enabled workstations for each employee including monitor,
mouse, keyboard and thin client network computer; and
5. system management and support including installation, software upgrades,
help desk and technical support.
FutureLink Alberta is offering its WATCH(TM) service as an integrated
information technology outsourcing service to the mid-market (companies with 50
- - 1000 seats).
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SERVICES
FutureLink Alberta is the first company to take the next step in information
technology (IT) delivery and services: the outsourcing of small and mid-sized
company's computer networks (those companies with between 20 and 500 computer
users or seats) through the use of the thin client computers. FutureLink Alberta
will deliver this service by subscription (the customer signs a service
agreement) over highly secure, remote wide area networks (WAN) to its clients.
In addition, FutureLink Alberta will ally itself with value added resellers
(VARs) who will incorporate or bundle FutureLink Alberta's products and service
into their own, thus allowing FutureLink Alberta to quickly enter and capture
lucrative vertical industry markets such as oil and gas, independent insurance
brokerage companies and automobile dealerships.
FutureLink Alberta sells its service for a monthly rental fee (based on a three
or five year service contract) of approximately $200 per desktop under the brand
name of WATCH(TM) (Wide Area Thin Client Hook-up). FutureLink Alberta 's
WATCH(TM) system includes:
- - application software,
- - Internet services,
- - industry and company specific software,
- - customer premise equipment and operating software (the thin client, a
keyboard, mouse, monitor, network printer, the necessary connections,
and operating program(s)),
- - access to FutureLink Alberta's server farmer via bandwidth connectivity,
and
- - installation, training, network maintenance and support.
Applications Software
FutureLink Alberta will offer its customers access to the following high-use
software programs as part of FutureLink Alberta's service contract price:
Microsoft Office 97 (Word, Excel and PowerPoint) and either Netscape Navigator
or Microsoft's Internet Explorer Web Browser. It should be noted that these
programs are just a sample of the available programs.
Internet Services
FutureLink Alberta will offer customers seamless integration and access to the
Internet, and a secured Intranet environment due to FutureLink Alberta's
extensive use of firewalls designed to prevent unauthorized access to the
customer's network. For additional charges, FutureLink Alberta will provide its
customers with a Web site(s) and/or the ability to conduct electronic commerce
(e-commerce) over the Internet.
Industry and Company Specific Software
In certain industries, customers use industry specific or proprietary software
programs to conduct business, as an example, in the insurance industry many
brokers use Agency Manager. FutureLink Alberta's WATCH(TM) service will provide
users with access to industry specific software, as well as their existing
proprietary applications and databases. However, it should be noted that these
custom or industry specific applications must first be tested to ensure proper
operation in the thin client environment.
Customer Premise Equipment and Software
FutureLink Alberta is using Citrix Systems Software as its' primary network
operating system, WYSE Technologies as the main Thin Client hardware supplier,
and Network Computing Devices Inc. (NCD) as an additional source for Thin Client
hardware.
Citrix Systems, Inc. is the pace-setter and a world leader in Thin-Client/Server
software solutions. Their award winning WinFrame(R) and MetaFrame(TM) software,
based on the innovative ICA(R) and MultiWin(TM) technologies, provides access
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to virtually any application, across any type of network connection to any type
of client.
The Wyse(R) Winterm (TM) thin-client family delivers the broadest range of
innovative, cost-effective terminals for accessing 32-bit Windows(R)-,
Java(TM)-, and browser-based applications. Winterm thin clients combine the ease
of management and inherent security of a terminal environment with the
application and performance capabilities of desktop PCs. Wyse was named the
worldwide leader in unit shipments for the thin client/enterprise NC market
segments in 1997 according to a newly released report by industry analyst firm
International Data Corporation (IDC).
NCD was founded in 1988 and since then has shipped more than 500,000 thin
clients to various companies including Federal Express, Barclays' Bank and the
University of Washington.
FutureLink Alberta's Server Farm
Many of FutureLink Alberta's thin clients will be connected to a server
facility. A server facility consists of many servers linked together that act as
the central nervous system of the network, in that they store and receive all
the programs or data that the thin clients execute. It is through the servers
that FutureLink Alberta will perform all the network maintenance and hardware
upgrade functions, thus eliminating the time and cost of upgrading applications
on each individual computer. The client to server ratio is highly variable,
depending on the resource requirements of the applications, the performance
requirements of the user, and the fundamental processing power of the server
itself. The use of multiple servers permits dynamic load balancing and assures
maximum performance for all users.
FutureLink Alberta connects its server farm to its customers on-site thin
clients via the best available high capacity data transmission service (ie.
phone line, fiber optic network, coaxial cable network, ADSL (Asymmetric Digital
Subscriber Lines), ATM (Asynchronous Transfer Mode) in the customer's area. ADSL
and ATM are high-speed lines that are dedicated for data transmission.
Network Maintenance and Support
FutureLink Alberta will initially provide its customers with technical support
five days a week (Monday to Friday) for ten hours a day, a so-called 5 X 10
system. The support will include installation and upgrade of software, daily
maintenance and back-up of the network and the customers' files (tape, mirrored
or redundant storage) and an emergency four-hour battery power back-up system,
with the goal of providing 99.9% up-time reliability.
In addition, FutureLink Alberta will provide its customers with:
- - Year 2000 (Y2K) compliant general business application software. Y2K is
a serious problem for most companies that use computers, especially if
the company uses a legacy computer operating system (pre 1985 software).
When computer programmers were first designing programs, they decided
that in order to save space on the computer's memory (because it was
expensive), they only allowed two digits to express dates. The
accidental outcome of this shortcut is that computer programs will
recognize January 1, 2000 as January 1, 1900. This problem could have
dramatic effects on corporate and government payroll and accounts
payable and receivable programs. It has been estimated that the Y2K
problem will cause 50% of all companies (with more than 20 networked
computer users) to reshape and/or delay major IT deployment decisions
and will consume 15% to 20% of the company's IT budget (The Gartner
Group Report: Future, September 22, 1997, page 7);
- - security enabled workstations for each employee, allowing access to only
the appropriate or approved programs.
It should be noted that:
- - the cost of the data transmission service is not included in the $200 a
month rental fee. The connection is leased from the telecom, cable or
satellite provider and is managed by FutureLink Alberta;
- - the customer requires a minimum of a 56 kps baud rate per station to
allow the user to receive information from FutureLink Alberta's remote
server. An example: a customer that has 10 thin clients would therefore
requires a 560 kps data transmission pipeline. Bandwidth costs are
highly variable, depending on local infrastructure and competition.
These costs are dropping rapidly in many jurisdictions as cable
television companies and independent
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providers compete with telephone companies for this new and lucrative
business; and
- - through the use of FutureLink Alberta's WATCH(TM) program, companies may
be able to integrate a company's multiple locations under one system.
Prior to installing any equipment for a client, FutureLink Alberta would first
conduct a needs analysis of the customer's computing and software requirements.
The needs analysis consists of:
- - determining what are the requirements of the customer (Y2K software
compliance, data security, reducing the cost of managing a computer
network, etc.),
- - evaluating the customer's hardware and software needs and how they are
being addressed, and
- - conducting a cost/benefit analysis to demonstrate the economic viability
of FutureLink Alberta's service in comparison to other options.
INDUSTRY SUMMARY
The information technology ("IT") industry encompasses everything from mainframe
computers to personal computers ("PCs") to the Internet to computer service
companies. As such, the IT industry is in a constant state of evolution. At
present, the industry is undergoing three main revolutions:
1. the shift to a networked computer environment,
2. the desire of organizations to reduce their cost of operating and
maintaining their IT departments thereby increasing their operating
efficiencies, and
3. the ability to conduct business electronically without regard to
distance via the Internet or an Intranet (an internal or corporate
Internet).
The Networked Computer
Companies have shifted their computational resources away from mainframes,
developed in the 1960s, which required a legion of programmers and technicians
to manage the system. The problem with the mainframes of the 1960s was that they
used proprietary software and were difficult to manage, maintain and customize.
The advent of the desktop personal computers (PCs) in the 1980s changed the
dynamics of the computer industry, for it allowed individual users to create,
manage and distribute information throughout an organization. In the 1990s,
companies realized that by harnessing the power of individual PCs together to
form a network computing environment they could further streamline operations
while at the same time increase the communication capabilities of the users. The
networked computer or PC environment refers to having PCs connected to servers
(high-powered PCs, workstations or mainframe computers), which act as
information gatekeepers and route data over a local or wide area network (LAN or
WAN). The servers also maintain the databases that provide information to the
PCs.
IT Outsourcing
In the 1980s, organizations, as part of their drive to cut costs to become more
competitive, started to view their IT department as a cost center that should be
managed for cost efficiency and effectiveness. One of the ways that companies
optimized this cost was by outsourcing all or part of their IT functions to a
third party. Outsourcing refers to the process by which a company transfers
their computer hardware and software and their management information systems
(MIS) department to a third party who then manages it for up to a ten-year
period for a preset fee. As part of the outsourcing process, the third party may
buy the company's hardware and software and then supplies it back to the company
via a services agreement. According to International Data Corp, (IDC) of
Framingham, Mass., outsourcing is a $84 billion world-wide industry and this
market is projected to grow to over $120 billion by 2001. Part of the reason for
the explosive growth in IT outsourcing is that companies are realizing that they
can:
- - receive better IT products or service than the company could normally
afford,
- - receive a cash infusion. Normally when a company outsources its IT
department, there is a sale of assets (computer hardware and software
and the customers IT personnel) from the customer to the service
provider,
- - concentrate their resources on their core products and services, and
- - increase return on their assets -- by outsourcing they can take their IT
assets off the balance sheet.
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The Internet
The Internet is changing the dynamics of how business is conducted. Through the
use of electronic or Internet commerce (e-commerce) businesses can increase
their purchasing options, expand their geographic territory, and reduce their
delivery time while decreasing their costs. A case in point, Dell Computers of
Austin, TX, is selling over $4 million a day of computers over the Internet, up
from $750,000 a day just a year ago. According to market research firm Jupiter
Communications Co., e-commerce could balloon to $37.5 billion by 2002, up from
$2.6 billion in 1997. However most of these benefits (network PCs, IT
outsourcing and the Internet) are generally unavailable to small companies
(those with between 20 to 500 computer users) for they may not have:
- - the financial resources to keep upgrading their computer's processing
and storage capacity to accommodate the larger and slower application
software,
- - the corporate data security knowledge or backup storage technology that
is necessary in a networked PC environment,
- - calculated the true cost and time required to maintain their network. It
has been estimated that the yearly cost of maintaining and upgrading a
networked PC environment ranges from $7,000 to $12,000 per unit,
- - the opportunity to outsource their IT department to traditional
outsourcers, as most outsourcing companies cater to larger corporations
(those with 1,000 plus seats), and
- - the ability or resources to purchase and install the latest Internet
software & hardware technology.
COMPETITION
Status Quo (the networked PC)
A market researcher, Computer Intelligence, recently conducted a survey of 319
technology decision-makers at large U.S. companies and found that 42% of them
had no plans to evaluate or adopt thin clients in the next year. However, 51% of
those same respondents were not familiar with thin clients. The status quo is
FutureLink Alberta 's biggest roadblock to success, in that:
- - companies may be reluctant to try new technology,
- - it will upset chief information officers (CIOs) at some companies, who
will view FutureLink Alberta's product and service as a threat to their
department,
- - employees may resist the fact that FutureLink Alberta's products have no
storage devices or CD-ROMs, and
- - businesses have started to cut the costs of managing a PC network by
tightening up their computer management, maintenance and administration
practices (for example, by restricting users access to floppy disks),
using automated management tools and the standardization among PC
platforms and end-user configurations. These businesses may feel that
they can better manage their IT costs than an IT outsourcing company.
Computer Outsourcing Companies
The computer outsourcing market in the United States alone is estimated to have
generated over $30 billion in revenue in 1997. The four largest firms are IBM,
EDS, GE Capital Services and Computer Sciences Corp. These companies take over
the complete management and administration of large corporate IT networks
(1,000+ computer users) or government agency computer needs.
IBM Global Service is the world's largest information technology service company
with 1997 revenue of approximately $26 billion. IBM's 110,000 service employees
serve customers in 164 countries providing business and information technology
consulting, systems integration, application development, product-specific
support and managed network services to Fortune 500 companies.
EDS is the world's second largest global information service provider with 1997
revenue of $15.2 billion. EDS' 110,000 employees serve 9,000 customers in 44
countries, providing business and information technology consulting, systems
integration, application development, product-specific support and managed
network services to Fortune 500 companies
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and governments. It should be noted that EDS and Bell South have recently formed
a new alliance to develop and market network solutions to mid-size companies.
The new company is to be called MNS Alliance and will target companies with 500
to 10,000 employees. MNS will provide companies with an integrated
telecommunication and IT (software and hardware) management solution.
GE's IT Solutions is one of the leading global desktop service providers with
1997 revenue of $10 billion. IT Solutions provides desktop and client server
products, operating and application software, local and wide area network
design, and IT consulting service to government and commercial customers in over
20 countries.
Computer Sciences Corporation is a world leader in IT management with 1997
revenues of $6.3 billion of which $1.2 billion is derived from outsourcing
contracts. CSC's 44,000 employees serve clients from 600 offices world-wide
providing customers with management consulting, information systems consulting
and integration, and operation support.
None of the mainstream outsourcers are considered to be direct competition for
FutureLink Alberta as FutureLink Alberta is addressing a mid-market niche that
other IT outsourcers are not focusing on, and are deploying a leading edge thin
client technology platform.
COMPETITIVE ANALYSIS
FutureLink Alberta's network computing model: the delivery of data and
applications by subscription over highly-secure, remote WANs to thin client
desktop computers.
FutureLink Alberta's Competitive Advantages
- - Less expensive to operate than a networked PC. According to the Gartner
Group of Stamford, CT, the five-year cost of owning a PC with Windows
3.1 is $44,250. The cost would be $38,900 for Windows 95 and $38,400 for
Windows NT (Byte Magazine, April 1997 issue). This is compared with
FutureLink Alberta's cost of $200 per WATCH(TM) station per month over a
five-year period or $12,000 in total.
- - PC users often try to solve technical problems themselves -- which
sometimes makes the problems worse, interferes with their real jobs, and
lowers their productivity. In fact, users refer only one problem out of
10 to a help desk. With FutureLink Alberta's off-site troubleshooting,
the customer is ensured that a professional corrects the problem.
- - Its products and services provide intruder security through
state-of-the-art firewalls, mirrored (duplicated) servers and databases,
and sophisticated data access permissions. This level of protection is
usually only available in Fortune 500 companies and government agencies
- - It removes management's requirement to continually upgrade their PCs to
handle the latest software programs as all hardware upgrades occur on
FutureLink's server.
- - FutureLink Alberta's target market is companies with 20-1000 users,
where there is little competition from other IT service companies.
FutureLink Alberta's Challenges
- - FutureLink Alberta is a new company with a new method of distributing
computer services and applications. FutureLink must develop a brand name
and reference customer base to increase its market penetration.
- - WATCH(TM) may not be appropriate for people who require extensive amount
of local processing power or those users who use many different computer
peripherals.
- - WATCH(TM) works most effectively with software programs that are Windows
NT compliant.
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INDUSTRY ANALYSIS
Thin Client Computer Environment
The thin client computing model is just in its infancy. Even though the products
have been available for nearly ten years, they have been directed at very narrow
market segments. Their broader application potential is just now coming to
light. The boisterous debate surrounding JAVA has brought the thin client option
to the forefront and the eventual success of JAVA will cause this market to
explode. Leading computer market research firms have come up with a wide variety
of estimates regarding thin client penetration and adoption.
- - International Data Corp, (IDC) estimates that about 300,000 thin clients
will be shipped in 1998 and 7 million units by the year 2000.
- - Dataquest (San Jose, CA) estimates that 2.5 million thin client
computers will be shipped by the year 2000.
- - The Gartner Group predicts that by the year 2000, 20 - 30% of all
computers, or 18 million units, will be thin clients.
- - Zona Research Inc. predicts that the thin client market will grow from
approximately 1.7 million in 1997 to over 6.7 million in 2000 for the
commercial market and up to 70 million units for the consumer
marketplace.
IT Outsourcing Market
According to IDC of Framingham, Mass., computer outsourcing has a $84 billion
world-wide market and this market is projected to grow to over $120 billion by
2001. However, according to EDS, the market for managed network services or IT
outsourcing in the United States is expected to generate $36 billion in revenue
in 1998 and $70 billion by the year 2000.
FutureLink Alberta has estimated that there are 25 million desktops in Canada
and the United States in companies that have 50 - 1000 employees. The IT
outsourced service market opportunity for small to mid sized businesses in North
America is $60 billion a year (assuming each seat was outsourced at $200 per
seat per month). This market niche is virtually virgin as most IT outsourcers
focus on companies with 1000+ seats.
MARKETING STRATEGY
FutureLink Alberta is the first company to take the next step in information
technology delivery and services -- the outsourcing of a company's computer
network and delivering the software applications by subscription over a
highly-secure, remote wide area networks (WAN) to a mainstream corporate client
base via thin client desktop computers. It is the objective of FutureLink
Alberta to create a new model of network computing services that has the cost
and convenience of a telephone and will be the dominant player in this market.
FutureLink Alberta has chosen Calgary as its first market due to its proximity
to the advanced telecommunication infrastructure that Telus, Shaw Cable and
MetroNet have installed in the downtown core. Over the next 18 months,
FutureLink Alberta will expand its service offering to other cities in Western
Canada and the United States.
FutureLink Alberta will initially target:
1. companies with between 20 and 1000 users,
2. industries where the giants have chosen to outsource their IT
departments (ie: the oil and gas sector), thus giving a frame of
reference for mid-sized industry players,
3. marketing alliances with niche telecom service providers targeting the
business market, and
4. strategic alliances with value added resellers (VARs) of applications
and services.
FutureLink Alberta will initially target these market segments because of the
following:
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These industries use a few standard software programs. The key factor is that
these users rarely need new applications. Most industry segments will need some
standard word processor and spreadsheet package. Then there are typically a few
industry specific software packages that dominate each market segment. There is
seldom a need for a broad range of software offerings
Users share desktops. The old business model of full-time employees and one
person per office is giving way to a workplace with part-time employees,
independent contractors, temporary workers, and telecommuters. It makes little
sense to reserve a full-blown PC for everyone who might need occasional use of a
computer at the office. Because thin clients are stateless, employees can share
them and enjoy their own personalized working environment while sharing
desktops.
Services remote users who are difficult to support. If a PC breaks down at a
remote location (ie. an oil field), MIS must either send someone to fix the
problem or talk the user through the repairs. Because thin clients lack extras
such as persistent storage, there are lower failure risks. With a true hardware
failure, MIS can easily replace a stateless client with a new machine because
there's no local software or data files to restore.
Jobs revolve around remote data instead of local data. An order-entry person who
spends the day checking data in a centralized database and filling in electronic
forms is well served by a simple, foolproof machine. So is a factory foreman who
needs to view the latest engineering drawings in a database. These jobs are
highly specific and network-centric, so the workers aren't sacrificing
flexibility by switching to a network-centric device.
Security is paramount. Conventional desktop and laptop PCs can be security
nightmares because they store everything locally and users have virtually
unrestricted access to local storage. Every loss, theft, virus attack,
breakdown, or break-in is potentially catastrophic if it endangers strategic
data. Thin clients that store everything on a server are generally safer because
server closets are more physically secure and professionals regularly back up
the servers.
Companies need replacements for older, text-based terminals. Analysts estimate
that there are 30 million to 50 million dumb terminals (refers to terminals that
allowed only text-based information processing with all information being
processed by the company's mainframe). The insurance and the health care
industry continue to use dumb terminals for most of their data entry staff.
Today's thin clients can use the same legacy programs and data that these dumb
terminals use, yet they provide a graphic user interface (GUI), as well as
access to the Internet and corporate Intranets.
In addition, FutureLink Alberta will target companies that do not have a Chief
Information or Technology Officer. FutureLink Alberta plans to target the
Owner/Chief Executive Officer or the Chief Financial or Operating Officers of
these small to mid-size companies because they can understand the cost benefit
of outsourcing of their MIS department, and the MIS department may not be
powerful enough to resist the change.
The key to the sales of services is an impressive client reference list.
FutureLink Alberta is starting to generate a reference base through its initial
clients and also plans to build its client base and reputation via strategic
acquisitions of IT outsourcing and other information technology firms with solid
client bases, product and service offerings, and outstanding reputations.
It should be noted that FutureLink Alberta will not initially target companies
whose users need a lot of local processing power, frequently need to install new
software, or use a variety of peripherals.
SALES STRATEGY
FutureLink Alberta's sales strategy is to educate the customer on the benefits
of outsourcing their IT department by using the WATCH(TM) service. As part of
the sales process, FutureLink Alberta will emphasize to its customers:
- - Total Cost of Ownership (TCO). FutureLink Alberta's WATCH(TM) program is
less expensive than even a well managed networked PC environment,
- - the relief in not having their hardware become obsolete, as all hardware
upgrades are done on FutureLink Alberta's
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<PAGE> 31
Server,
- - state-of-the-art data security, back-up and encryption technology that
FutureLink Alberta provides which ensures that the customer's data is
secure against unwanted internal or external threats,
- - the removal of all the problems associated with the computer
administration and support functions, and the customer receives
extensive
- - customer service and support, including 5 days a week, 10 hours a day
on-line support.
FutureLink Alberta will sell its services through two sources:
- - FutureLink Alberta will hire sales representatives experienced in
selling information technology services or computer outsourcing
services.
- - FutureLink Alberta will form strategic alliance partnerships (SAPs)
within specific sectors. SAPs will be companies that offer a product or
service that can be easily integrated into the WATCH(TM) program. The
SAPs must create a win-win situation for FutureLink Alberta, the partner
and their customers. For example, FutureLink Alberta is forming a
strategic alliance partnership with several companies, including Sales
Force Automation Inc. ("SFAC") of Calgary, AB. SFAC provides training
and sale force automation programs that increase sales, decrease
employee turnover and provide management with better employee reporting
tools. SFAC will market WATCH(TM) as the technology platform of choice
to use in conjunction with implementing SFAC's sales force and data
management automation tools. SFAC has strong industry contacts in
industries including automobile dealerships, financial, investment,
communications and high technology.
ADVERTISING AND PROMOTION STRATEGY
FutureLink Alberta's advertising strategy is to place ads in vertical and
business publications that are read by its targeted industries (oil and gas,
insurance, hotels, etc). In addition, it will run direct marketing campaigns and
will advertise extensively over the Internet.
STRATEGIC GROWTH OPPORTUNITIES
This business plan and its projections are based on internal growth via sales of
computer utility IT services to small to medium sized businesses.
FutureLink Alberta is in discussions with several large customers concerning
outsourced IT services agreements using thin client technology and other
technology platforms. The opportunities are in such sectors as hospitality and
e-commerce in the office stationery sector.
In particular, FutureLink Alberta has been awarded the Information Technology
Services contract for Willson Stationers Ltd., a major Western Canadian retail
chain. Under the terms of the agreement, FutureLink will be responsible for the
design, implementation and management of Willson's complete network systems and
functions at all stores and the head office. The installation will involve more
than 175 computing stations and will provide FutureLink with contracted revenues
of approximately CAN$4,000,000 ($2,700,000) over the term of the contract.
Willson Stationers Ltd., founded in 1890, is one of the most widely recognized
and respected business names in Western Canada. Today, Willson's operates 25
retail outlets and four telemarketing/commercial sales offices in six cities, as
well as a distribution centre and custom products division.
Each of the other large strategic initiatives involves potential multi-million
dollar IT services contracts, and the closing of even one of these deals
significantly enhances FutureLink Alberta's reputation, revenue base, revenue
backlog and income.
TRADEMARKS
Although FutureLink Alberta's business has not depended on trademark or patent
protection, it recognizes the increasing
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<PAGE> 32
value of its various trade names, trademarks, and technical innovations.
FutureLink Alberta has applied for federal trademark registration of the names
"FutureLink", "Flink", "FutureServe", "Wide Area Thin Client Hook-up",
"W.A.T.C.H." and of our two logos in both Canada and the United States. In
addition, FutureLink Alberta may seek patents on its inventions in the future.
FutureLink Alberta's ability to compete may be enhanced by its ability to
protect its proprietary information, including the issuance of patents and
trademarks. The process of seeking patent protection can be expensive and can
consume significant management resources. FutureLink Alberta believes that
patents may strengthen its negotiating position with respect to future disputes
that may arise regarding its technology and processes. However, it believes that
its continued success depends primarily on such factors as the technological
skills and innovative abilities of its personnel rather than on any patents that
it may obtain. In addition, there can be no assurance that patents will issue
from pending or future applications or that any patents that are issued will
provide meaningful protection or other commercial advantage to FutureLink
Alberta.
ENVIRONMENTAL MATTERS
FutureLink Alberta believes it is in material compliance with all relevant
federal, provincial, and local environmental regulations and does not expect to
incur any significant costs to maintain compliance with such regulations in the
foreseeable future.
RESEARCH AND DEVELOPMENT
During each of the last two Fiscal Years FutureLink Alberta did not expend in
excess of Ten Thousand Dollars ($10,000) on research and development of
products. During Fiscal Year 1997, FutureLink Alberta did not capitalize
research, development or engineering costs, and such costs were expensed during
the period of their occurrence.
GOVERNMENTAL MATTERS
Except for usual and customary business and tax licenses and permits, and the
licenses and permits described elsewhere herein, no governmental approval is
required for the principal products/services of FutureLink Alberta , nor does
FutureLink Alberta know of any existing or probable governmental regulations
affecting FutureLink Alberta's activities.
INSURANCE
FutureLink Alberta maintains a $2,000,000 commercial liability insurance policy,
and an employee health insurance policy. It currently does not, however,
maintain either a product liability insurance policy or an errors and omissions
policy to cover the sale of its services. There can be no assurance that it's
insurance will be adequate to cover future product liability claims or that
FutureLink Alberta will be able to maintain adequate liability insurance at
commercially reasonable rates.
EMPLOYEES
As of August 19, 1998, FutureLink Alberta employed a total of 14 persons. Of
these employees, 2 are involved in sales and marketing, 7 in corporate and
general administration, and 5 in operations. FutureLink Alberta has experienced
no work stoppages and is not a party to a collective bargaining agreement. It
believes that it maintains good relations with its employees.
HISTORY
FutureLink Alberta was incorporated as a private company under the Business
Corporations Act (Alberta) on March 28, 1996 as 689936 Alberta Ltd. It's name
was then changed to Coffee.Com Interactive Cafe Corp., on June 19, 1996.
Coffee.com was established to provide "Internet cafe" services to the Calgary
market but after a short period of study, it abandoned this concept in favour of
providing network computing from remote servers to small to medium size
businesses and residential markets. On November 17, 1997, the company changed
its name to FutureLink Distribution Corp. to reflect this change.
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<PAGE> 33
FutureLink Alberta currently operates out of 7,000 square feet of leased
premises located at: 550, 603-7 Avenue SW, Calgary, Alberta, T2P 2T5,
telephone: (403) 543-5511, fax: (403) 543-5510, www.futurelink.net
DESCRIPTION OF PROPERTY
FutureLink Alberta maintains offices and a computer centre in a facility of
approximately 6,970 square feet in Calgary, Alberta under a lease that expires
April 30, 2002. This lease has an aggregate minimum annual rental payments of
approximately CDN$61,440 plus operating expenses and is subject to escalation.
FutureLink Alberta generally leases its equipment under standard commercial
leases, in some cases with purchase options which the company exercises from
time to time. FutureLink Alberta's equipment is generally covered by standard
commercial maintenance agreements.
FutureLink Alberta believes its current facilities are in good condition but
will not be sufficient to accommodate its expected volume of business once it
acquires RMC. The companies are actively searching for alternate lease space.
LEGAL PROCEEDINGS
The following sets out the lawsuits against FutureLink Alberta:
1. 554495 Alberta Ltd. commenced an action against Coffee.com Interactive
Cafe Corp. (now known as FutureLink Alberta) in October 1997 in the
Court of Queen's Bench of Alberta, Judicial District of Calgary, Action
# 9701-15514. The action relates to a purported lease agreement with
respect to space in Calgary. The Plaintiff seeks judgement an amount in
excess of CDN$285,000. FutureLink Alberta has defended and
counterclaimed. The parties are proceeding to discovery of corporate
officers.
2. Palmer Jarvis Inc. commenced an action against FutureLink Alberta in
June 1998 in the Court of Queen's Bench of Alberta, Judicial District of
Calgary, Action # 9801-07637. The action relates to a claim for unpaid
public relations and marketing services of approx. CDN$34,000.
FutureLink Alberta disputes the claim.
RIVERVIEW MANAGEMENT CORPORATION
RMC is a holding/investment company with an operating, wholly owned subsidiaries
known as SysGold Ltd.("SysGold") and SysGold Inc.
In 1992, RMC commenced providing information technology (IT) outsourcing
services in the Calgary, Alberta vicinity through SysGold. SysGold has seen
their revenues grow from approximately CDN$200,000 in their first year of
operation to approximately CDN$9.5 million in their 1997 fiscal year. Their
clients come in a range of sizes, industry sectors and growth stages. SysGold
helps its clients use information technology to enhance business, create
efficiencies and drive performance.
SysGold specializes in providing technical computing services to companies with
diverse and complex technology requirements. Over the past 6 years, they have
grown from having one client to over 90, from servicing 40 users to over 3500,
and from staffing four professionals to over 70. Many of their clients are in
the energy business. Others are in such industries as legal, advertising, and
construction.
SysGold is a total solution provider that supplies integrated business and IT
solutions in the areas of management consulting, land and land systems,
accounting, software development and infrastructure management. SysGold strives
to understand its clients' organizational processes and information requirements
and provides a full suite of information management services.
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<PAGE> 34
THE COMPUTER OUTSOURCING INDUSTRY
The outsourcing of computer service, whereby a client company obtains all or
part of its information processing requirements (including systems design,
software and hardware, communications, training, maintenance, and support) from
an information technology provider such as SysGold, continues to be a growing
trend. SysGold believes that it is generally significantly more cost-effective
and efficient for its clients to outsource information processing services to
SysGold than it would be to provide equivalent services for themselves by hiring
or contracting for service and support personnel.
Outsourcing provides clients with the following benefits:
- - The refocus of personnel, financial and technological resources on core
business and client related activities.
- - Access to highly skilled personnel and technology resources.
- - Access to experienced resources to perform selected information
processing functions.
- - Reduction of operating costs.
BUSINESS STRATEGY
SysGold's objective is to provide a comprehensive computer outsourcing
alternative to meet all or part of its clients' information technology
requirements. SysGold's strategy includes the following key elements:
Industry Specific Outsourcing Services SysGold develops and acquires
industry-specific outsourcing applications and services, so that SysGold 's
in-depth knowledge of a particular industry can then be applied to servicing
multiple clients in that field. SysGold currently provides outsourcing services
to approximately 90 clients, many of which are in the oil and gas sector.
Customer Service and Support SysGold believes that close attention to customer
service and support has been, and will continue to be, crucial to its success.
SysGold provides a high degree of customer service and support, including
customized training and rapid response to customer needs. SysGold has served
several clients since its inception in 1992. Because of its attention to
customer service, SysGold's client relationships have tended to be longer term.
Service Flexibility SysGold attempts to maximize utilization of its services by
offering a wide range of services to each client.
System Optimization SysGold's technical expertise is in networks, PC's, AS/400s,
NetWare, Windows, Windows 95 and NT. Their strength lies in their Total Quality
Management approach to system improvement. While many people can "optimize" a
single PC, SysGold is strongest at optimizing a "fleet" of PC's. The process of
optimization includes work and data flow analysis, user training and support,
and strong implementation of standards.
Facilities Management (Outsourcing) In most sites, SysGold can save money and
improve the service to users. They have the technical and management experience
to "outsource" the entire IT function, or any part of it. They can supply
full-time, part-time, or variable staffing as an organization's needs change.
The most significant economy from outsourcing is reducing duplicated effort. For
example, they will convert many sites to Windows NT in the coming year, but only
do the research once.
Network Design and Installation SysGold designs simple, effective networks. They
get installed on time, within budget, and with a minimum of disruption to
existing systems. Installation is followed by training and support to help users
quickly become efficient.
Application Design, Development and Implementation SysGold's technical expertise
is in software development, including the latest Internet / Intranet / Extranet
tools. Their strength is in the Total Quality Management approach to software
development. They design simple, effective applications that meet client
expectations.
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Training SysGold provides in-house, hands-on training for groups of up to 8
people at a time. They cover the most popular user software such as the
individual products in Microsoft Office and Lotus Smartsuite, as well as
specialized training on specific other packages. This type of training is
cheaper and more effective than sending your staff out to a training service.
Users learn on their own PC, on their own network, and print to the exact
network printer they use everyday.
Hardware and Software Procurement Services Most of SysGold's clients ask them to
procure their hardware and software for them. As a service to their clients,
they have set themselves up as a re-seller, enabling them to purchase at
wholesale prices. They sell hardware and software to their clients at a rate of
cost plus 10%. This allows them to cover their procurement, administrative and
handling and usually results in a savings over the street price for their
clients that can add up to thousands of dollars per year of value.
Information Technology Planning SysGold provides technology planning services to
a range of clients. The objective is to help clients determine their technology
needs, select the appropriate technologies, and implement and use these
technologies in ways that add value to their business operations.
Customer and Billing Arrangements SysGold has over ninety clients. They range in
size from three users to four hundred. The needs of their clients are diverse.
Some large clients contract to have several SysGold employees on-site all of the
time. Other smaller clients utilize SysGold resources on a "on call" hourly
basis. The service commitments SysGold makes vary from client to client,
depending on client needs and their ability to meet them.
SysGolds' contractual and working relationships are flexible. Their
responsibility can be for total systems management, or limited to a specific
system. Contracts are tailored to suit the needs of a particular client. Billing
is generally done on a cost plus model based on a per hour rat, based on a flat
monthly fee, or per-user-per-month. Contracts can be multi-year, or month to
month.
STRENGTHS
SysGold's mission is to be the best company at delivering outsourced information
systems services to small and mid-sized companies. The following factors give
SysGold a competitive advantage over its competitors:
- - SysGold strives to understand its clients' business as well as the
technology which supports it. SysGold establishes a long term
partnership with its clients.
- - SysGold has an eager service attitude that starts at the executive
level. Senior management is actively involved with customers.
- - SysGold has an eager service attitude that starts at the executive
level. Senior management is actively involved with customers.
- - SysGold is vendor-neutral. SysGold has no vested interest in pushing
particular products and is free to help clients choose products best
suited to their needs.
- - SysGold focuses on providing outsourcing services. For example, they
don't sell hardware and software to anyone outside of their existing
client base.
- - SysGold has experience managing many IT systems. Their 60+ professionals
support 3500 users on a daily basis.
- - SysGold leverages knowledge they gain from other clients. Experience
gained from one client benefits all of their clients.
COMPUTER OUTSOURCING MARKET OVERVIEW
According to IDC of Framingham, Mass., computer outsourcing has a $84 billion
world-wide market and this market is projected to grow to over $120 billion by
2001. However, according to EDS, the market for managed network services or IT
outsourcing in the United States is expected to generate $36 billion in revenue
in 1998 and $70 billion by the year 2000.
The computer outsourcing market in the United States alone is estimated to have
generated over $30 billion in revenue
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<PAGE> 36
in 1997. The four largest firms are IBM, EDS, GE Capital Services and Computer
Sciences Corp. These companies take over the complete management and
administration of large corporate IT networks (1,000+ computer users) or
government agency computer needs.
IBM Global Service is the world's largest information technology service company
with 1997 revenue of approximately $26 billion. IBM's 110,000 service employees
serve customers in 164 countries providing business and information technology
consulting, systems integration, application development, product-specific
support and managed network services to Fortune 500 companies.
EDS is the world's second largest global information service provider with 1997
revenue of $15.2 billion. EDS' 110,000 employees serve 9,000 customers in 44
countries, providing business and information technology consulting, systems
integration, application development, product-specific support and managed
network services to Fortune 500 companies and governments. It should be noted
that EDS and Bell South have recently formed a new alliance to develop and
market network solutions to mid-size companies. The new company is to be called
MNS Alliance and will target companies with 500 to 10,000 employees. MNS will
provide companies with an integrated telecommunication and IT (software and
hardware) management solution.
GE's IT Solutions is one of the leading global desktop service providers with
1997 revenue of $10 billion. IT Solutions provides desktop and client server
products, operating and application software, local and wide area network
design, and IT consulting service to government and commercial customers in over
20 countries.
Computer Sciences Corporation is a world leader in IT management with 1997
revenues of $6.3 billion of which $1.2 billion is derived from outsourcing
contracts. CSC's 44,000 employees serve clients from 600 offices world-wide
providing customers with management consulting, information systems consulting
and integration, and operation support.
None of the mainstream outsourcers are considered to be direct competition for
SysGold as SysGold is addressing small to medium sized clients that other IT
outsourcers, other than FutureLink Alberta, are not focusing on, and are
deploying a leading edge thin client technology platform.
ENVIRONMENTAL MATTERS
RMC believes it is in material compliance with all relevant federal, provincial,
and local environmental regulations and does not expect to incur any significant
costs to maintain compliance with such regulations in the foreseeable future.
RESEARCH AND DEVELOPMENT
During each of the last two Fiscal Years RMC did not expend in excess of Ten
Thousand Dollars ($10,000) on research and development of products. During
Fiscal Year 1997, RMC did not capitalize research, development or engineering
costs, and such costs were expensed during the period of their occurrence.
GOVERNMENTAL MATTERS
Except for usual and customary business and tax licenses and permits, and the
licenses and permits described elsewhere herein, no governmental approval is
required for the principal products/services of RMC , nor does RMC know of any
existing or probable governmental regulations affecting RMC's activities.
EMPLOYEES
As of August 19, 1998, SysGold employed a total of 61 persons. SysGold has
experienced no work stoppages and is not a party to a collective bargaining
agreement. It believes that it maintains good relations with its employees.
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<PAGE> 37
INSURANCE
SysGold maintains insurance coverage that management believes is reasonable,
including business interruption insurance to fund its operation in the event of
catastrophic damage to any of its operation centres and insurance for the loss
and reconstruction of its computer systems. SysGold also maintains extensive
data backup procedures to protect both client and company data.
DESCRIPTION OF PROPERTY
SysGold maintains offices in a facility of approximately 5,888 square feet in
Calgary, Alberta under a lease that expires January 31, 2002. This lease has an
aggregate minimum annual rental payments of approximately CDN$43,831 plus
operating expenses and is subject to escalation.
SysGold generally leases its equipment under standard commercial leases, in some
cases with purchase options which the company exercises from time to time. The
company's equipment is generally covered by standard commercial maintenance
agreements.
SysGold believes its current facilities are in good condition but will not be
sufficient to accommodate its expected volume of business once it is acquired by
FutureLink USA. The companies are actively searching for alternate lease space.
LEGAL PROCEEDINGS
A Statement of Claim was issued by TAP Consulting Ltd. On August 19, 1998 naming
SysGold Ltd. As a defendant. The suit alleges that SysGold Ltd. wrongfully
terminated a management services contract dated January 19, 1991 between SysGold
Ltd. and TAP Consulting Ltd. without cause or reasonable notice.
SysGold Ltd. believes it has a sustainable defence to the action and intends to
vigorously defend it and to file a counterclaim.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
FUTURELINK USA
To the knowledge of management, no one person or entity owns 10% or more of the
issued and outstanding FutureLink USA Common Shares, as at August 19, 1998, both
before and after giving effect to the FutureLink Alberta Acquisition. If
FutureLink USA concludes the SysGold Acquisition Agreement, Donald A. Bialik,
Olivia B. Bialik and their related family trust would collectively own more than
10% of the issued and outstanding shares of FutureLink USA on a non diluted
basis and a fully diluted basis. Further if FutureLink USA concludes the SysGold
Acquisition Agreement the proposed lender may own more than 10% of the issued
and outstanding FutureLink USA Common Shares on an non diluted basis and on a
fully diluted basis.
The directors and officers of FutureLink USA, and their associates and
affiliates, as a group, beneficially own, directly or indirectly 2,213,750
FutureLink USA Common Shares or 13.3% of the outstanding FutureLink USA Common
Shares. In addition to the foregoing, if the directors and officers of
FutureLink USA were to exercise the options to purchase 2,275,000 FutureLink USA
Common Shares issuable or exercise of all outstanding stock options, such
individuals, as a group, would beneficially own, directly or indirectly,
4,488,750 FutureLink USA Common Shares, representing approximately 23.7% of the
outstanding FutureLink USA Common Shares on a fully diluted basis.
After giving effect to the FutureLink Alberta Acquisition, the directors and
officers of FutureLink USA, and their associates and affiliates, as a group,
will beneficially own, directly or indirectly, 2,238,750 FutureLink USA
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<PAGE> 38
Common Shares or 12.1% of the outstanding FutureLink USA Common Shares. In
addition to the foregoing, if the directors and officers of FutureLink USA
exercise all outstanding stock options, such individuals as a group, would own,
directly or indirectly, 4,513,750 FutureLink USA Common Shares, representing
approximately 21.8% of the FutureLink USA Common Shares on a fully diluted
basis.
After giving effect to the SysGold Acquisition Agreement and assuming 100% of
FutureLink Alberta pursuant to the FutureLink Alberta Acquisition Agreement, the
directors and officers of FutureLink USA, and their associates and affiliates,
as a group, will beneficially own, directly or indirectly, 6,488,750 FutureLink
USA Common Shares or 25.3% of the outstanding FutureLink USA Common Shares. In
addition to the foregoing, if the directors and officers of FutureLink USA
exercise all outstanding stock options, such individuals as a group, would own,
directly or indirectly, 9,013,750 FutureLink USA Common Shares, representing
approximately 32% of the FutureLink USA Common Shares on a fully diluted basis.
FUTURELINK ALBERTA
As at the date hereof, no person or company owns of record, or is known by
FutureLink Alberta to own beneficially, directly or indirectly, or to exercise
control or direction over 10% or more of the FutureLink Alberta Common Shares
except as set forth below.
<TABLE>
<CAPTION>
Name and Type of Ownership Number of Percentage
Municipality of Residence Shares of Class
<S> <C> <C> <C>
FutureLink USA, Beneficial and 1,540,000 46%
Colorado, U.S.A. of Record
</TABLE>
RIVERVIEW MANAGEMENT CORPORATION
From 1993 to early August 1998, RMC's capital structure was as follows:
<TABLE>
<CAPTION>
OWNER # OF SHARES
----- -----------
<S> <C>
Don Bialik 100 Class A
5 Class D Preferred
Olivia Bialik 100 Class B
5 Class D
Bialik Family Trust 100 Class C
</TABLE>
Between August 7, 1998 and August 20, 1998, Don Bialik and Family entered into a
series of transactions (capital reorganization) in contemplation of RMC's
acquisition by FutureLink Acquisition Corp.
As of August 20, 1998, RMC's capital structure is as follows:
<TABLE>
<CAPTION>
OWNER # OF SHARES VALUE(CDN)
----- ----------- ----------
<S> <C> <C>
Don Bialik 500,000 Class J Preferred $500,000
2,168,334 Class K Preferred $2,168,334
100 Class B Common $342,500
Olivia Bialik 500,000 Class J Preferred $500,000
3,831,666 Class K Preferred $3,831,666
100 Class B Common $342,500
Bialik Family Trust 1,000,000 Class J Preferred $1,000,000
----------
Total $8,685,000
</TABLE>
It is expected that RMC's capital structure will be further reorganized in
advance and as part of the acquisition of RMC by FutureLink Acquisition Corp.
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<PAGE> 39
MANAGEMENT
FUTURELINK USA
<TABLE>
<CAPTION>
Name Age Position Held
---- --- -------------
<S> <C> <C>
Cameron B. Chell 29 Chairman of the Board and Chief Executive Officer
Don Bialik 42 President
Raghunath Kilambi 32 Director, V.P.-Corporate Finance and Chief Financial Officer,
Corporate Secretary
Linda M. Murray 32 Assistant Corporate Secretary
Philip Ladouceur 57 Director
Robert Kubbernus 39 Director
F. Bryson Farrill 71 Director
Robert H. Kohn 41 Director
</TABLE>
The following is a brief description of the background of the key management and
directors of FutureLink USA:
CAMERON CHELL - CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, PRESIDENT - Mr.
Chell's primary responsibility has been to assemble a leading edge professional
technology and business team to implement the FutureLink Alberta and FutureLink
USA business plans. His secondary responsibility is to seek financing for
FutureLink Alberta and FutureLink USA. Mr. Chell has helped build several
technology companies over the past 10 years. He is a Vice President of JAWS
Technologies Inc., an internet based encryption technology company. (OTC - BB
symbol JAWZ) He is also a principal of the investment banking firm of Chell
McNeill Inc. From 1994 to May 1997 Mr. Chell was employed as a registered
representative of a brokerage firm in Calgary, Alberta. Prior to 1994, Mr. Chell
was self employed in computer sales and other non related positions.
DON BIALIK - PRESIDENT - Mr. Don Bialik, B.Sc., P.Eng., MBA, has assumed the
role of President of FutureLink. His focus will be on the opening and
integration of new markets and acquisitions. Mr. Bialik is a highly respected,
successful entrepreneur and the founder of SysGold. With 15 years in the
Information Systems business, he is a pioneer in the outsourcing sector. Mr.
Bialik offers clients 10 years of specific information systems expertise.
RAGHU KILAMBI - DIRECTOR/VICE PRESIDENT OF CORPORATE FINANCE, CHIEF FINANCIAL
OFFICER AND CORPORATE SECRETARY - Mr. Kilambi has been Chief Financial Officer
of FutureLink USA since March 1998. As President of New Economy Capital Inc.,
Mr. Kilambi has raised significant equity and debt financing for Canadian and US
public and private high technology corporations. Previously, Mr. Kilambi was the
Director, Financial Services and Taxation and Corporate Secretary for Canada
Starch Company Inc., a CDN$400 million subsidiary in the US multinational
Bestfoods group of companies. Mr. Kilambi graduated from McGill University with
a Bachelor of Finance and Accounting. Mr. Kilambi is a Chartered Accountant. Mr.
Kilambi is also a director of Advanced Vision Systems Corp. (ASE:AVD).
LINDA M. MURRAY - ASSISTANT CORPORATE SECRETARY - Ms. Murray has extensive
experience in the hospitality industry and administration of companies which are
reporting issuers in Canada and the United States.
PHILIP LADOUCEUR - DIRECTOR - Mr. Ladouceur has served MetroNet as a director
since October 1996 and was President of MetroNet from October 1996 to October
1997. When Mr. Ladouceur joined MetroNet, the company was a local Calgary
telecom concern. He has led the company through equity and debt financings of
more than CDN$2 billion as well as the company's initial public offering on the
NASDAQ and Toronto Stock Exchanges. Also, Mr. Ladouceur guided the company
through its recent acquisition of Rogers Communications' Telecom business, a
transaction valued at over CDN$1 billion. MetroNet has now become a major
national presence and the largest competitive local exchange carrier in Canada.
Prior to joining MetroNet, Mr. Ladouceur was Executive Vice President,
Operations at Bell Canada International Inc., from February 1995 to October 1996
where he led key restructuring efforts and the formation of a major joint
venture with IBM Canada. From October 1992 to February 1995, Mr. Ladouceur was
the founding President and Chief Executive Officer of ISM Information Systems
Management (Alberta) Ltd., ("ISM") a Canadian computer
36
<PAGE> 40
and network management outsourcing company. Under Mr. Ladouceur's direction, ISM
grew to CDN$75 million in revenue on an annual basis, and over 700 employees in
a two-year period from start-up. Mr. Ladouceur founded and, from June 1990 to
October 1992, was the Managing Director of HDL Capital Corporation, a
Toronto-based merchant bank that specializes in business turnarounds, management
buyouts, and financing for medium and small businesses in the
telecommunications, technology, software, and retail sectors. From 1986 to 1989,
Mr. Ladouceur was Senior Vice President, Finance, Chief Financial Officer and a
director of Rogers Communications Inc., one of the largest cable, cellular and
broadcasting companies in North America. While there, he oversaw the completion
of over CDN$3 billion in public and private financings. Additionally, Mr.
Ladouceur is currently serving as the Chairman of the Competitive
Telecommunications Association of Canada.
ROBERT KUBBERNUS - DIRECTOR - Prior to 1992, Mr. Kubbernus was the Chief
Financial Officer of Bankers Capital Group. His responsibilities included the
development of new products and markets as well as overseeing the financial
controls of the corporation. Since 1992, Mr. Kubbernus has been the President of
Bankton Financial Corporation, which specializes in the placement of debt
instruments with institutional and private lenders. Bankton Financial
Corporation is also involved in corporate restructuring and planning. Mr.
Kubbernus is the President of JAWS Technologies, Inc. (OTC - BB symbol JAWZ).
F. BRYSON FARRILL - DIRECTOR - Until 1989 Mr. Farrill had various positions with
Scotia McLeod and McLeod Young Wier including acting in the capacity as the
former Chairman of Scotia McLeod (USA) Inc. and McLeod Young Weir Ltd. Mr.
Farrill brings to FutureLink USA more than 30 years of equity, fixed income and
corporate finance experience in North America and Europe. He is the President
and Chairman of Solar Pharmaceuticals Ltd. (VSE.SLR) and Director of Panther
Resources Ltd. (OTC-BB - PATHR), Devine Entertainment Inc. (TSE-BBD), and Home
Life Inc. (OTC-BB-HLMF).
ROBERT KOHN - DIRECTOR - Mr. Kohn has a Bachelor's degree in Business
Administration from California State University in Northridge. Mr. Kohn has a
law degree from Loyola Law School in Los Angeles. From 1983 to 1985 he worked as
corporate counsel to Ashton-Tate Corporation, a developer and marketer of
personal computer software. From October 1985 to March 1987 Mr. Kohn was
associate general counsel for Candel Corporation, a developer of software for
IBM mainframes. From March of 1987 to September 1996, Mr. Kohn was a Senior
Vice-President of Borland International, Inc. (now Inprise Corp.), a developer
and marketer of personal computer software (Inprise Corp. trades on
NASDAQ-National Board INPR). From October 1996 to December 1997, Mr. Kohn was
Vice President of Business Development and General Counsel of Pretty Good
Privacy, Inc. a data encryption company. From January 1998 to present Mr. Kohn
has been the Chairman of GoodNoise Corporation (OTC-BB symbol GDNO), an internet
record company. Mr. Kohn is also an Adjunct Professor of Law and Business
Organisations of the Monterey College of Law.
FUTURELINK ALBERTA
<TABLE>
<CAPTION>
Name Age Position Held
---- --- -------------
<S> <C> <C>
Cameron B. Chell 29 Chairman of the Board and Chief Executive Officer
Don Bialik 42 President
Raghunath Kilambi 32 Director, V.P.-Corporate Finance and Chief Financial Officer,
Corporate Secretary
Linda M. Murray 32 Assistant Corporate Secretary
Philip Ladouceur 57 Director
Robert Kubbernus 39 Director
F. Bryson Farrill 71 Director
</TABLE>
RIVERVIEW MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
Name Age Position Held
---- --- -------------
<S> <C> <C>
Don Bialik 42 Director, President
Olivia Bialik 42 Director, Vice-President
</TABLE>
37
<PAGE> 41
DON BIALIK - DIRECTOR, PRESIDENT - Mr. Don Bialik, B.Sc., P.Eng., MBA, has
assumed the role of President of FutureLink. His focus will be on the opening
and integration of new markets and acquisitions. Mr. Bialik is a highly
respected, successful entrepreneur and the founder of SysGold. With 15 years in
the Information Systems business, he is a pioneer in the outsourcing sector. Mr.
Bialik offers clients 10 years of specific information systems expertise.
OLIVIA BIALIK - DIRECTOR - VICE-PRESIDENT - Mrs. Bialik's main focus for the
last five years has been as Director and Vice-President of both Riverview
Management Corporation and SysGold Ltd.
EXECUTIVE COMPENSATION
FUTURELINK USA
CASH
The following table sets forth compensation in respect of the only two senior
officers of FutureLink USA for the fiscal year ended December 31, 1997 and the
fiscal period from January 1, 1998 to July 31, 1998:
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
--------------------------------------------------------
Securities
Other Under
Name and Annual Options All Other
Principal Period Salary Bonus Compensation Granted Compensation
Position Ended ($) ($) ($) (#) ($)
------ ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
C.E.O. 1997 Nil Nil Nil Nil Nil
Chell, Cameron 1998 Nil Nil Nil 500,000 Nil
Vice President 1997 Nil Nil Nil Nil Nil
Kilambi, Raghunath 1998 Nil Nil Nil 500,000 Nil
</TABLE>
FutureLink USA pays its non-employee directors an honorarium of $250.00 per
board meeting at which they are in physical attendance. FutureLink USA may
reimburse expenses incurred due to their attendance at such meetings. No other
payments have been made to directors. The directors are eligible to receive
stock options under the FutureLink USA's stock option plan.
FutureLink USA has adopted a stock option plan (the "FutureLink USA's Stock
Option Plan") for senior officers, directors and full-time employees of the
Corporation, which does not restrict the number of options which may be granted.
The number of options and the exercise price of all options is set by the board
of directors of FutureLink USA, or a committee thereof, at the time of grant.
38
<PAGE> 42
FUTURELINK USA STOCK OPTION PLAN
The following table sets forth options to purchase FutureLink USA Common Shares
which are outstanding under the Plan as of the date hereof:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
OPTION GRANTS
- ---------------------------------------------------------------------------------------------------------
NAME OF OPTIONEE EXERCISE PRICE VESTING AMOUNT VEST DATE EXPIRE DATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cameron Chell $0.76 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
Raghunath Kilambi $0.76 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
Gayle Howard $0.76 87,500 29-Jun-98 29-Jun-01
87,500 29-Jun-99 29-Jun-01
James Brecht $0.76 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
Dave Bolink $0.76 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
Linda M. Murray $0.76 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
Jason Cornick $0.76 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
Jeff Doepker $0.76 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
Scott Lambert $0.76 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
Marjorie Martin $0.76 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
Connie Turnbull $0.76 15,000 29-Dec-98 29-Jun-01
15,000 29-Jun-99 29-Jun-01
Bryson Farrill $0.76 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
Robert H. Kohn $0.76 100,000 29-Jun-98 29-Jun-01
100,000 29-Jun-99 29-Jun-01
Robert Kubbernus $0.76 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
Phillip Ladouceur $0.76 250,000 July 16, 1998 29-Jun-01
250,000 16-Jul-99 29-Jun-01
Henry Bilideau $1.17 25,000 5-Jan-99 5-Aug-01
25,000 5-Aug-99 5-Aug-01
Carl Fransen $1.17 12,500 5-Jan-99 5-Aug-01
12,500 5-Aug-99 5-Aug-01
Colin Curwen $1.17 37,500 5-Jan-99 5-Aug-01
37,500 5-Aug-99 5-Aug-01
Christopher McNeill $1.17 37,500 5-Jan-99 5-Aug-01
37,500 5-Aug-99 5-Aug-01
Glenn Lachowiez $1.17 12,500 5-Jan-99 5-Aug-01
</TABLE>
39
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
12,500 5-Aug-99 5-Aug-01
Troy Cleland $1.17 12,500 5-Jan-99 5-Aug-01
12,500 5-Aug-99 5-Aug-01
Katrina Cohrs $1.17 25,000 5-Jan-99 5-Aug-01
25,000 5-Aug-99 5-Aug-01
Don Bialik(1) $1.17 125,000 5-Aug-98 5-Aug-01
125,000 5-Aug-99 5-Aug-01
Doug Evans(1) $1.17 62,500 5-Jan-99 5-Aug-01
62,500 5-Aug-99 5-Aug-01
Bill Arnett(1) $1.17 75,000 5-Jan-99 5-Aug-01
75,000 5-Aug-99 5-Aug-01
</TABLE>
Note:
(1) Issuance of options is contingent on the Closing of the SysGold
Acquisition Agreement.
BOARD COMMITTEES
The Compensation Committee currently consists of Messrs. Farrill, Kohn and
Kubbernus. The Compensation Committee establishes salaries, incentives and other
forms of compensation for officers of FutureLink USA and FutureLink Alberta. The
Audit Committee consists of Messrs. Kohn, Kubbernus and Farrill.
FUTURELINK ALBERTA
Directors are not remunerated in their capacities as such. Out of pocket
expenses of directors incurred pursuant to their attendance at meetings of the
board of directors of FutureLink Alberta will be paid by FutureLink Alberta.
The following table sets forth compensation in respect of the three senior
officers and Directors of FutureLink Alberta for the fiscal year ended December
31, 1997 and the period from January 1 to July 31, 1998.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------------------------------
Securities
Name and Other Under
Principal Period Annual Options All Other
Position Ended Salary Bonus Compensation Granted(2) Compensation
($) ($) ($) (#) ($)
- -------- ----- ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Chief Executive Officer 1997 Nil Nil Nil Nil CDN$125,000
Cameron Chell 1998 CDN$62,500 Nil Nil Nil CDN$11,916
Past President 1997 N/A N/A N/A N/A N/A
Murray Korth 1998 CDN$28,214 Nil Nil Nil CDN$1,128
Chief Financial Officer 1997 N/A N/A N/A N/A N/A
Raghu Kilambi 1998 CDN$37,500 Nil Nil Nil CDN$7,500
Director 1997 N/A N/A N/A N/A N/A
Philip Ladouceur 1998 Nil CDN$100,000 Nil N/A N/A
Director 1997 N/A N/A N/A N/A N/A
Robert Kohn 1998 Nil Nil Nil Nil $6,000
</TABLE>
40
<PAGE> 44
STOCK OPTION PLAN
The following table sets forth options to purchase FutureLink Alberta Class "A"
Common Voting Shares which are outstanding under the Plan as of the date hereof:
<TABLE>
<CAPTION>
Number of Common Date of Grant Exercise Expiry Date
Shares Under Option Price Per
Common Share
<S> <C> <C> <C> <C>
Ali Janmohamed 120,000 Jan 1, 1998 CDN$1.00 Aug 26/98
</TABLE>
RIVERVIEW MANAGEMENT CORPORATION
The following table sets forth compensation in respect of the senior officers of
RMC for the fiscal years ended October 31 and the period from November 1, 1997
to June 30, 1998.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------------------
Securities
Name and Consolidated Salary Under
Principal Fiscal year From Options All Other
Position Ending Oct. 31 SysGold Ltd. Bonus Granted Compensation
-------- -------------- ------------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Director, President 1996 CDN$49,150 CDN$54,300 N/A N/A
Don Bialik 1997 CDN$17,083 CDN$110,250 N/A N/A
1998 Nil Nil N/A N/A
Director, VP 1996 CDN$61,150 CDN$54,300 N/A N/A
Olivia Bialik 1997 CDN$53,383 CDN$76,050 N/A CDN$2,520
1998 CDN$24,000 Nil N/A N/A
</TABLE>
41
<PAGE> 45
SELLING SECURITYHOLDERS
FUTURELINK USA
Since December 2, 1997 the following FutureLink USA Common Shares have been
issued and remain outstanding (adjusted for all consolidations):
<TABLE>
<CAPTION>
DATE NUMBER ISSUE PRICE AGGREGATE CONSIDERATION
- ---- OF SHARES PER SHARE ISSUE PRICE RECEIVED
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
December 2, 1997 (post 200:1 203,500 N/A $1,286,737 Services
consolidation) and post 30:1
consolidation
December 18, 1997 10,000,000 $ 0.01 $ 100,000 Cash
SUB-TOTAL-DEC 31, 1997 10,203,500 $1,386,737
January 20, 1998 83,334 $ 3.00 $ 250,000 Cash
January 20, 1998 1,540,000 $ 0.22 $ 338,800 Share Exchange
April 3, 1998 68,480 $ 3.75 $ 256,800 Cash
April 3, 1998 37,333 $ 3.75 $ 140,000 Cash
April 22, 1998 46,666 $ 3.00 $ 140,000 Cash
April 22, 1998 20,000 $ 3.00 $ 60,000 Cash
-------- ----------
SUB-TOTAL - MAY 31, 1998 11,999,313(1) $2,572,337
July 7, 1998 3,500,000 $ 0.001 $ 3,500 Services
TOTAL- JULY 31, 1998 15,499,313(1) $2,575,837
</TABLE>
Notes:
(1) The figures in this schedule reconcile to the audited financial
statements and the records of the Corporation. The records of the
transfer agent vary and are shown as the following as issued and
outstanding: December 31, 1997 10,231,025; May 31, 1998 11,826,834; and
July 20, 1998 15,499,303.
FUTURELINK ALBERTA
Since the date of incorporation of FutureLink Alberta, 3,331,275 Class "A"
Common Voting Shares have been issued as follows:
<TABLE>
<CAPTION>
CDN $ Issue Price Aggregate Issue
Date Number of Shares Per Share Price (CDN $) Consideration Received
- ---- ---------------- --------- ------------- ----------------------
<S> <C> <C> <C> <C>
Dec 31, 1997 2,952,500 Various $732,689 Cash/Services
Jan. 5, 1998 2,500 $1.00 2,500 Cash
Jan. 13, 1998 7,500 $1.00 7,500 Cash
Jan.14, 1998 60,000 $1.00 60,000 Cash
Jan.16, 1998 10,000 $1.00 10,000 Cash
Jan.19, 1998 25,000 $1.00 25,000 Cash
Jan.20, 1998 155,775 $1.00 155,775 Services
Feb.6, 1998 10,000 $1.00 10,000 Cash
Feb.10, 1998 20,000 $1.00 20,000 Cash
Feb.12, 1998 10,000 $1.00 10,000 Cash
Mar. 23, 1998 5,000 $1.00 5,000 Cash
May 6, 1998 28,000 $1.00 28,000 Services
</TABLE>
42
<PAGE> 46
<TABLE>
<CAPTION>
CDN $ Issue Price Aggregate Issue
Date Number of Shares Per Share Price (CDN $) Consideration Received
- ---- ---------------- --------- ------------- ----------------------
<S> <C> <C> <C> <C>
July 31, 1998 45,000 $1.00 45,000 Cash
------ ------
3,331,275 $1,111,464
</TABLE>
RIVERVIEW MANAGEMENT CORPORATION
From 1993 to August 6, 1998 RMC's capital structure was as follows:
<TABLE>
<CAPTION>
OWNER # OF SHARES VALUE(CDN)
----- ----------- ----------
<S> <C> <C>
Don Bialik 100 Class A $1
5 Class D Preferred $5,000
Olivia Bialik 100 Class B $1
5 Class D $5,000
Bialik Family Trust 100 Class C $1
</TABLE>
Between August 7, 1998 and August 20, 1998, Don Bialik and Family entered into a
series of transactions (capital reorganization) in contemplation of RMC's
acquisition by FutureLink Acquisition Corp.
As of August 20, 1998, RMC's capital structure is as follows:
<TABLE>
<CAPTION>
OWNER # OF SHARES VALUE(CDN)
----- ----------- ----------
<S> <C> <C>
Don Bialik 500,000 Class J Preferred $500,000
2,168,334 Class K Preferred $2,168,334
100 Class B Common $342,500
Olivia Bialik 500 Class J Preferred $500,000
3,831,666 Class K Preferred $3,831,666
100 Class B Common $342,500
Bialik Family Trust 1,000,000 Class J $1,000,000
</TABLE>
It is expected that RMC's capital structure will be further reorganized in
advance and as part of the acquisition of RMC by FutureLink Acquisition Corp.
DESCRIPTION OF SECURITIES
FUTURELINK USA
As of the date of this Registration Statement, FutureLink USA is authorized to
issue: (a) 100,000,000 FutureLink USA Common Shares with par value of
$.0001/share; and (b) 5,000,000 FutureLink USA Preferred Shares with no par
value. There are 15,499,313 FutureLink USA Common Shares issued and outstanding
as fully paid and non-assessable. As at the date hereof, FutureLink USA has
reserved for issuance: (a) 3,780,000 FutureLink USA Common Shares pursuant to a
stock option plan (See "FutureLink USA Stock Options"); (b) 255,813 FutureLink
USA Common Shares pursuant to warrant and (c) 1,127,240 FutureLink USA Common
Shares pursuant to a debt for share exchange agreement and an additional
1,127,240 FutureLink USA Common Shares pursuant to warrants granted in the same
debt for share exchange agreement. There are no issued and outstanding
FutureLink USA Preferred Shares.
The following is a general description of the material rights, privileges and
restrictions and conditions attaching to each class of shares:
43
<PAGE> 47
The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, $.0001 par value, and 5,000,000 shares of Preferred Stock, $1.00
par value.
As of August 19, 1998, there were (i) 15,499,303 shares of Common Stock
outstanding held of record by 252 stockholders.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders. Subject to preferences that may be applicable to
the holders of outstanding shares of Preferred Stock, if any, the holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". In the event of liquidation,
dissolution or winding up of the Company, and subject to the prior distribution
rights of the holders of outstanding shares of Preferred Stock, if any, the
holders of shares of Common Stock shall be entitled to receive pro rata all of
the remaining assets of the Company available for distribution to its
stockholders. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed by
the laws of the State of Colorado, with approval by the Company's stockholders,
to provide for the issuance of up to 5,000,000 shares of Preferred Stock in one
or more series, to establish from time to time the number of shares to be
included in each such series, to fix the designations, powers, preferences and
rights of the shares of each such series and any qualifications, limitations or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the stockholders. The Board of Directors
may authorize and issue Preferred Stock with voting or conversion rights that
could adversely affect the voting power or other rights of the holders of
Shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for FUTURELINK USA is General Securities
Transfer Agency, Inc. in Albuquerque, New Mexico.
FUTURELINK ALBERTA
The authorized share capital of FutureLink Alberta consists of an unlimited
number of: (a) Class "A" Common Voting Shares; (b) Class "B" Common Shares; and
(c) First Preferred Shares. There are 3,331,275 issued and outstanding Class "A"
Common Voting Shares as of August 19, 1998. There are no Class "B" Common Shares
issued and outstanding. There are no First Preferred Shares issued and
outstanding. All of the Class "A" Common Voting Shares issued and outstanding
are fully paid and non-assessable.
The following is a general description of the material rights, privileges,
restrictions and conditions attaching to each class of shares.
CLASS "A" COMMON VOTING SHARES OF FUTURELINK ALBERTA
Subject to the provisions of the Alberta Business Corporations Act ("ABCA"), the
holders of the Class "A" Common Voting Shares are entitled to receive notice of,
to attend and vote at all meetings of the shareholders of FutureLink Alberta
(other than meetings of a class or series of shares other than the Class "A"
Common Voting Shares as such) and are entitled to one vote for each Class "A"
Common Voting Share held, except as required by law.
44
<PAGE> 48
Subject to the payment of preferred rights attaching to any other class or
series of shares of the corporation, the holders of the Class "A" Common Voting
Shares are entitled to receive, if, as and when declared by the directors of
FutureLink Alberta, dividends in such amount and payable on such date as may be
determined from time to time by the directors of FutureLink Alberta. No dividend
may be declared or paid on the Class "A" Common Voting Shares if payment of the
dividend would cause the realizable value of the corporations assets to be less
than the aggregate of its liabilities and the amount required to redeem all
shares of the corporation then outstanding having attached thereto a redemption
or retraction right.
Subject to the preferential rights attaching to any other class or series of
shares of the corporation, if any, on the liquidation, dissolution or winding-up
of FutureLink Alberta, or any other distribution of the assets of FutureLink
Alberta among its shareholders for the purpose of winding-up its affairs, the
holders of the Class "A" Common Voting Shares shall be entitled to share, on a
per share basis, the remaining property and assets of FutureLink Alberta.
CLASS "B" COMMON SHARES OF FUTURELINK ALBERTA
Subject to the provisions of the ABCA, the holders of the Class "B" Common
Shares are not entitled to receive notice of, to attend and/or vote at meetings
of the shareholders of FutureLink Alberta (other than meetings of a class or
series of shares other than the Class "B" Common Shares as such).
Subject to the payment of preferred rights attaching to any other class or
series of shares of the corporation, the holders of the Class "B" Common Shares
are entitled to receive, if, as and when declared by the directors of FutureLink
Alberta, dividends in such amount and payable on such date as may be determined
from time to time by the directors of FutureLink Alberta. No dividend may be
declared or paid on the Class "B" Common Shares if payment of the dividend would
cause the realizable value of the corporations' assets to be less than the
aggregate of its liabilities and the amount required to redeem all shares of the
corporation then outstanding having attached thereto a redemption or retraction
right.
Subject to the preferential rights attaching to any other class or series of
shares of the corporation, if any, on the liquidation, dissolution or winding-up
of FutureLink Alberta, or any other distribution of the assets of FutureLink
Alberta among its shareholders for the purpose of winding-up its affairs, the
holders of the Class "A" Common Voting Shares shall be entitled to share, on a
per share basis, the remaining property and assets of FutureLink Alberta.
FIRST PREFERRED SHARES OF FUTURELINK ALBERTA
The First Preferred Shares may be issued from time to time in one or more series
in the number and with the designation, rights, privileges, restrictions and
conditions as determined by the directors of FutureLink Alberta in their sole
discretion. The First Preferred Shares will be entitled to preference, as to the
payment of dividends and the distribution of the remaining property of
FutureLink Alberta on dissolution, over the Class "A" Common Voting Shares and
the Class "B" Common Shares.
RIVERVIEW MANAGEMENT CORPORATION
The authorized capital of RMC after its capital reorganization in advance of its
acquisition by FutureLink Acquisition Corp. consists of:
An unlimited number of Class "A" Voting Common Shares
An unlimited number of Class "B" Voting Common Shares
An unlimited number of Class "C" Non Voting Common Shares
An unlimited number of Class "D" Non Voting Common Shares
An unlimited number of Class "E" Non Voting Common Shares
An unlimited number of Class "F" Non Voting Common Shares
An unlimited number of Class "G" Non Voting Common Shares
An unlimited number of Class "H" Non Voting Common Shares
An unlimited number of Class "I" Non Voting Common Shares
45
<PAGE> 49
An unlimited number of Class "J" Voting Redeemable Preferred Shares
An unlimited number of Class "K" Non Voting Redeemable Preferred Shares
(these would be Non Exchangeable into FutureLink USA Common Shares)
An unlimited number of Class "L" Non Voting Redeemable Preferred Shares
Immediately prior to the closing of the SysGold Acquisition Agreement, RMC would
amend its articles/share provisions so as to delete the provisions relating to
the existing class K non-voting Redeemable Preferred Shares substituting new
share provisions for a class to be labeled as class "K" non-voting Redeemable
Retractable Preferred Shares ("Bialik" Exchange Shares)
The share provisions attaching to the Bialik Exchangeable Shares are structured
so that the Bialik Exchangeable Shares are at all times, as nearly as possible,
the economic equivalence of FutureLink USA Common Shares and have the same
voting rights as to FutureLink USA Common Shares.
Economic Equivalence is accomplished in several ways: (a) by virtue of the
protections found in the Colorado Corporations Code for a separate class of
shares; (b) the terms of the Support Agreement, including through covenants of
FutureLink USA that:
(a) FutureLink USA will not declare or pay dividends on the FutureLink USA
Common Stock unless Riverview immediately thereafter declares or pays,
as the case may be, an equivalent dividend on the Class "K" Exchangeable
Shares and Riverview has resources available to pay equivalent dividends
on the Class "K" Exchangeable Shares;
(b) FutureLink USA will ensure that Riverview will be able to honour the
redemption and retraction rights and the entitlement upon liquidation
pursuant to the terms of the Class "K" Exchangeable Shares;
(c) Without the prior written approval of Riverview or the holders of Bialik
Exchangeable Shares, FutureLink USA will not:
(i) issue or distribute shares of FutureLink USA Common Shares (or
securities exchangeable or convertible into or carrying rights
to acquire shares of FutureLink USA) by way of stock dividend or
other distribution; issue or distribute rights, options or
warrants; or issue or distribute securities of any class other
than FutureLink USA Common Shares) rights, options, warrants or
evidences of FutureLink USA or assets of FutureLink USA unless
Riverview is permitted under the applicable law to issue or
distribute the economic equivalent on a per share basis such
rights, options, securities, shares evidences of indebtedness or
other assets simultaneously to the holders of Exchangeable
shares; and Riverview does in fact issue or distribute such
economic equivalent.
(ii) subdivide, divide or change the then outstanding shares of
FutureLink Common Shares into a greater number of FutureLink
Common Shares; or reduce, combine or consolidate into a lessor
number of shares of FutureLink Common Shares; or reclassify or
otherwise change the shares of FutureLink Common Shares or
affect an amalgamation, merger, reorganization or other
transaction affecting the shares of FutureLink USA Common Shares
unless Riverview is permitted under the applicable law to
simultaneously make the same or equivalent change to, or in the
rights of holders of, the Exchangeable Shares and the same or an
equivalent change is in fact made.
Voting Equivalence is provided by the terms of the Articles of FutureLink USA
relating to voting rights of the Trustee pursuant to the FutureLink USA Special
Voting Share and the Voting Trust & Exchange Agreement which entitles the
Trustee to a number of votes (in the calculation of FutureLink USA Common Share
votes) equal to the number of Class "K" Exchangeable Shares outstanding from
time to time that are not being held by FutureLink USA or its affiliates. Each
holder of a Class "K" Exchangeable Share will have the right to instruct the
Trustee as to the manner of voting thereupon.
Shareholder approval of FutureLink USA
Shareholder consent may be necessary to effectuate these restrictions.
46
<PAGE> 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FUTURELINK USA
The only material contracts entered into by FutureLink USA since incorporation
which can reasonably be regarded as presently material to FutureLink USA are as
follows:
1. The FutureLink Alberta Acquisition Agreement dated August 3, 1998
between FutureLink USA and FutureLink Alberta.
2. Option Agreements dated various dates various employees of FutureLink
Alberta.
3. An Escrow Agreement dated January 20, 1998 among the General Securities
Transfer Agency, Inc., FutureLink USA, Cameron Chell (as to 500,000
FutureLink USA Common Shares), Linda Carling (as to 490,000 FutureLink
USA Common Shares), Bernie March (as to 200,000 FutureLink USA Common
Shares), Colleen Rudolph (as to 250,000 FutureLink USA Common Shares)
and Gerald Albert (as to 100,000 FutureLink USA Common Shares) pursuant
to which an aggregate of 1,540,000 FutureLink USA Common Shares were
deposited in escrow. This agreement stated that one half of the
FutureLink USA Common Shares would be released on July 20, 1998 and one
half would be released on January 20, 1999.
4. A share acquisition agreement dated January 20, 1998, between Core
Ventures, Inc. (now known as FutureLink USA), FutureLink Alberta,
Cameron Chell, Linda Carling, Colleen Rudolph, Bernie March, and Gerald
Albert whereby FutureLink USA agreed to acquire 1,540,000 Class "A"
Common Voting Shares of FutureLink Alberta in consideration of the
issuance of 1,540,000 FutureLink USA Common Shares. The shares were
issued subject to an escrow agreement. The agreement provided that
3,500,000 FutureLink USA Common Shares would be issued to various
employees for the consideration of $3,500. FutureLink Alberta was added
as a party for the purpose of making representations and warranties to
induce FutureLink USA to enter into the agreement.
5. Indemnity agreement dated January 19, 1998 between John Anastasios Xinos
and Core Ventures, Inc. whereby John Anastasios Xinos agreed to
indemnify Core Ventures, Inc. for any losses suffered by Core Ventures,
Inc. arising from the Midland Walwyn Capital Inc. lawsuit.
6. Agreement among FutureLink Alberta, FutureLink USA, Donald A. Bialik,
Olivia B. Bialik, Bialik Family Trust, Riverview Management Corporation
("RMC") and SysGold Ltd. ("SysGold") dated August 4, 1998 ("SysGold
Acquisition Agreement") wherein FutureLink USA has agreed to acquire all
of the issued and outstanding shares of Riverview which in turn owns all
of the issued and outstanding shares of SysGold. SysGold has approx. 60
employees and annual sales of CDN$10 million. SysGold has liabilities of
approx. CDN$550,000. The consideration is CDN$8,685,000 payable by
CDN$3,000,000 cash on closing (scheduled for August 21, 1998),
CDN$685,000 by a promissory note payable within 90 days, and partly by
the issuance of 4,250,000 Exchangeable shares in RMC exchangeable into
shares of FutureLink USA Common Shares (attributed value $0.85/share).
Donald A. Bialik will be subject to an employment agreement which would
pay him a significant salary/year, plus a performance bonus and stock
options totalling 250,000 FutureLink USA Common Shares at a price to be
agreed upon. The deposit of CDN$100,000 has been paid and may become
non-refundable in certain circumstances. The transaction is an arms
length transaction and numerous condition precedents must be satisfied
prior to closing. FutureLink USA has entered into a financing
arrangement with Thomson Kernaghan & Co. Ltd., a Toronto investment
dealer to lend up to $5,000,000 to FutureLink USA, the proceeds of which
will be used to finance the SysGold Acquisition Agreement. Interest
would be at the rate of 10% per annum. The loan would be convertible to
FutureLink USA Common Shares at the lower of 75 cents or the bid price
of FutureLink USA quoted on the OTC-BB for the 3 days trading prior to
the Closing Date or the date of conversion. FutureLink USA also issued
1,041,667 warrants to the lender to purchase 1,041,667 shares at $0.96
per share.
47
<PAGE> 51
FUTURELINK ALBERTA
Except for contracts entered into by FutureLink Alberta in the ordinary course
of business or otherwise disclosed herein, the only material contracts entered
into by FutureLink Alberta since incorporation which can reasonably be regarded
as being material are as follows:
1. The FutureLink Alberta Acquisition Agreement .
2. FutureLink Alberta Stock Option Plan. FutureLink Alberta has entered in
various agreement with various employees for the issuance of securities
of FutureLink Alberta.
3. FutureLink Alberta entered into agreement with Fundcorp Financial
Inc.("Fundcorp") effective December 19, 1997. Fundcorp was obliged to
use best efforts to assist FutureLink Alberta over a 60 month period in
obtaining, structuring, negotiating and settling the terms of Financing
Arrangements (as defined). Fundcorp was to manage the development of a
FutureLink Alberta finance division and its documentation and related
structure. Fundcorp was to provide management counsel and assist in
placing strategic planning. In consideration, FutureLink Alberta agreed
to pay Fundcorp: (a) cash payments equal to 1% of amounts provided to
FutureLink Alberta from time to time pursuant to Financing Arrangements
paid to Fundcorp net of any advances paid to Fundcorp; (b) cash payments
equal to 1/3 of the operating profits of the FutureLink Alberta finance
division; (c) cash payments of all out of pocket costs; (d) issuance of
250,000 warrants upon signing of the agreement. Each warrant entitled
Fundcorp to acquire 1 freely tradeable Class "A" Common Voting Shares of
FutureLink Alberta for each warrant redeemed. Fundcorp agreed not to
exercise their warrants for a 12 month period from the date of the
agreement unless otherwise requested by FutureLink Alberta. Provided
that the agreement had not been cancelled, FutureLink Alberta also
agreed to issue an additional 250,000 warrants upon the signing of the
agreement. Each of these warrants entitled Fundcorp to acquire 1 Class
"A" Common Voting Share of FutureLink Alberta for each warrant redeemed
not freely tradeable for a 1 year period from the signing of the
agreement. The price of the warrants is CDN$0.75/share. The liability
pursuant to this agreement is unknown. The management of FutureLink
Alberta have represented to FutureLink USA that Fundcorp has not met its
obligations under the terms of the agreement and that the agreement
should be cancelled along with the obligations with respect to the
500,000 warrants.
4. A share acquisition agreement dated January 20, 1998, between Core
Ventures, Inc (now known as FutureLink USA), FutureLink Alberta, Cameron
Chell, Linda Carling, Gerald Albert, Bernie March and Colleen Rudolph
whereby FutureLink USA agreed to acquire 1,540,000 Class "A" Common
Voting shares of FutureLink Alberta in consideration of the issuance of
1,540,000 FutureLink USA Common Shares. The shares were issued subject
to the Escrow Agreement (January 20). The agreement provided that
3,500,000 FutureLink USA Common Shares would be issued to various
employees for the par value of $3,500. FutureLink Alberta was added as a
party for the purpose of making representations and warranties to induce
FutureLink USA to enter into the agreement.
5. Willson Stationers Contract. Willson Stationers Ltd. signed the standard
service provider agreement. The contract is material because of the
potential size of the transaction and because of the relationship with
Cameron Chell. Mr. Chell is the Chief Executive Officer of Willson
Stationers Ltd. He also has an option to acquire 50% of the issued and
outstanding shares in Willson Stationers Ltd.
6. JAWS Technologies, Inc. Contract. JAWS Technologies Inc. has signed the
standard service provider agreement. The contract value is approx.
CDN$3,000 per month. It is material because of the interest of Cameron
Chell and Robert Kubbernus. Both are officers and shareholders. Robert
Kubbernus is a director.
Cameron Chell, Chairman of the Board and Chief Executive Officer of the Alberta
corporation, has personally guaranteed repayment of certain of the FutureLink
Alberta obligations. As of May 31, 1998, Mr. Chell has personally guaranteed
capital lease obligations of FutureLink Alberta totaling approximately
CDN$41,000.
During the 1996 fiscal year, FutureLink Alberta lent CDN$100,000.00 to 695116
Alberta Ltd. so that it may handle a business transaction on behalf of
FutureLink Alberta. Cameron Chell is a principal in the numbered company. This
48
<PAGE> 52
transaction never occurred and the debt was repaid in the 1997 fiscal year.
Cameron Chell also lent FutureLink Alberta approximately CDN$282,000.00 either
personally or through his numbered company (679132 Alberta Ltd.) during 1997
which was a combination of loans and salary deferment on an interest-free basis.
These loans have been repaid in 1998.
RIVERVIEW MANAGEMENT CORPORATION
Both the directors of RMC, Don and Olivia Bialik, have personally guaranteed
leases of SysGold Ltd., a subsidiary of RMC. On October 31, 1997, the leases
which the directors have personally guaranteed are reflected in the lease
obligation balance of CDN$88,124 on the October 31, 1997 statements (Nil at
October 31, 1996). The June 30, 1998 financial statements reflect the
aforementioned capital leases at a total lease obligation of CDN$67,071.
The directors of the corporation have also personally guaranteed the operating
line of credit of SysGold Ltd., a subsidiary of RMC. The line of credit
outstanding at October 31, 1996, 1997 and June 1998 was CDN$24,580, CDN$17,962
and CDN$240,929 respectively.
The directors also have loaned certain amounts to the consolidated entity. At
October 31, 1996 and October 31, 1997 these balances are nominal, however, at
June 30, 1998, CDN$128,933 is owing as a result of the October 31, 1997 bonus
payment.
ACCOUNTING AND FINANCIAL DISCLOSURE
FUTURELINK USA
Due to the lack of activity for numerous years, FutureLink USA did not engage
the services of an accounting firm. We are not currently aware of any
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which this firm may have
had with their past auditors.
In May, 1998 FutureLink USA engaged Ernst & Young as their independent chartered
accountants, to audit the financial statements of the year ended December 31,
1997. Ernst & Young reported without reservation on those financial statements.
FUTURELINK ALBERTA
FutureLink Alberta retained Halpin Anthony Owen & Mayer(HAOM) since its
incorporation in March of 1996. During the term of HAOM's engagement, there were
no disagreements on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of HAOM, would have caused it to make reference to the subject
matter of the disagreement in connection with its report.
FutureLink Alberta has recently engaged Ernst & Young to become their
independent auditors replacing HAOM.
RIVERVIEW MANAGEMENT CORPORATION
RMC and SysGold Ltd. retained Buchanan Barry & Co. as accountants and then
auditors since 1993. During the term of Buchanan Barry's engagement there were
no disagreements on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Buchanan Barry, would have caused it to make reference to
the subject matter of the disagreement in connection with its report.
PLAN OF DISTRIBUTION
The Selling Securityholders (or pledges, donees, transferees or successors in
interest) may sell all or a portion of the respective Selling Securityholders'
Securities held by them from time to time while the registration statement of
which
49
<PAGE> 53
this Prospectus is a part remains effective. The aggregate proceeds to the
Selling Securityholders from the sale of the respective Selling Securityholders'
Securities offered by the Selling Securityholders hereby will be the prices at
which such securities are sold, less any commissions. There is no assurance that
the Selling Securityholders will sell any or all of the Selling Securityholders'
Securities offered hereby.
The Selling Securityholders' Securities may be sold by the Selling
Securityholders in transactions on the NASDAQ Bulletin Board, in negotiated
transactions, or by a combination of these methods, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices or through the writing of options on
the Selling Securityholders' Securities. The Selling Securityholders may elect
to engage a broker or dealer to effect sales in one or more of the following
transactions: (a) block trades in which the broker or dealer so engaged will
attempt to sell the Selling Securityholders' Securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction, (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus, and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
In effecting sales, brokers and dealers engaged by the Selling Securityholders
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling Securityholders in amounts to
be negotiated (and, if such broker-dealer acts as agent for the purchaser of
such Selling Securityholders' Securities, from such purchaser). Broker-dealers
may agree with the Selling Securityholders to sell a specified number of such
Selling Securityholders' Securities at a stipulated price per Selling
Securityholder's Security, and to the extent that such broker-dealer is unable
to do so, acting as agent for the Selling Securityholders to purchase as
principal any unsold Selling Securityholders' Securities at the price required
to fulfill the broker-dealer commitment to the Selling Securityholders.
Broker-dealers who acquire Selling Securityholders' Securities as principal may
thereafter resell such Selling Securityholders' Securities from time to time in
transactions (which may involve crosses and block transaction and sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, or otherwise at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions and, in connection with such resales,
may pay to or receive from the purchasers of such Selling Securityholders'
Securities commissions as described above.
The Selling Securityholders and any broker-dealers or agents that participate
with the Selling Securityholders in sales of the Selling Securityholders'
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 in connection with such sales. In such event, any
commissions received by such broker-dealers or agent and any profit on the
resale of the Selling Securityholders' Securities purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act of
1933.
FutureLink USA will pay all expenses incidental to this offering and sale of the
Selling Securityholders' Securities to the public other than selling commissions
and fees.
The Selling Securityholders have been advised that during the time they are
engaged in "distribution" (as defined under Regulation M under the Securities
Exchange Act of 1934, as amended) of the securities covered by this Prospectus,
they must comply with Regulation M under the Securities Exchange Act of 1934, as
amended, and pursuant thereto: (i) shall not engage in any stabilization
activity in connection with FutureLink USA's securities; and (ii) shall not bid
for or purchase any securities of FutureLink USA or attempt to include any
person to purchase any of FutureLink USA's securities other than as permitted
under the Securities Exchange Act of 1934, as amended. Any Selling
Securityholders who are "affiliated purchasers" of FutureLink USA, as defined in
Regulation M, have been further advised that they and their affiliates must
coordinate their sales under this Prospectus and otherwise with FutureLink USA
and any other "affiliated purchasers" of FutureLink USA for purposes of
Regulation M. The Selling Securityholders must also furnish each broker through
which Selling Securityholders' Securities are sold copies of this Prospectus.
LEGAL OPINION
The validity of certain of the Securities offered hereby will be passed upon for
FutureLink USA by Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles,
California.
50
<PAGE> 54
EXPERTS
The audited Financial Statements of FutureLink USA included in this Prospectus
as at December 31, 1997 and for the year then ended have been audited by Ernst &
Young, Independent Chartered Accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
The audited Financial Statements of FutureLink Alberta included in this
Prospectus as at December 31, 1996 and December 31, 1997 and the periods from
March 28, 1996 to December 31, 1996 and from January 1, 1997 to December 31,
1997 have been audited by Halpin Anthony Owen Mayer, Independent Chartered
Accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
The audited Financial Statements of RMC included in this Prospectus as at
October 31, 1996 and October 31, 1997 and for the years then ended have been
audited by Buchanan Barry & Co., Independent Chartered Accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
51
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description Pages
----------- -----
<S> <C>
1. FutureLink USA Unaudited Pro Forma Consolidated Statement of Income for
year ended December 31, 1997 and Unaudited Pro Forma Consolidated Balance Sheet as
at December 31, 1997 ............................................................ F-1
2. FutureLink USA Unaudited Pro Forma Consolidated Statement of Income for
six months ended June 30, 1998 and Unaudited Pro Forma Consolidated Balance Sheet
as at June 30, 1998 ............................................................. F-6
3. FutureLink USA Unaudited June 30, 1998 Financial Statements, Audited
December 31, 1997 Financial Statements and Unaudited December 31, 1996
Financial Statements ............................................................ F-11
4. FutureLink Alberta Unaudited June 30, 1998 Financial Statements, Audited
December 31, 1997 and December 31, 1996 Financial Statements .................... F-22
5. RMC Unaudited June 30, 1998 and 1997 Financial Statements ....................... F-31
6. RMC Audited October 31, 1997 and 1996 Financial Statements ...................... F-39
</TABLE>
F-i
<PAGE> 56
FUTURELINK DISTRIBUTION CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(All amounts stated in $U.S.)
December 31, 1997
<TABLE>
<CAPTION>
FutureLink
Riverview USA
FutureLink FutureLink Pro Forma Management Pro Forma Pro Forma
USA Alberta Adjustments Corporation Adjustments Consolidated
$ $ $ $ $ $
---------- ---------- ------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT
Cash -- 7,617 (2.2)(100,000) 26,542 (2.3)150,777 (240,064)
(2.4)(325,000)
Accounts receivable -- 37,172 -- 955,528 -- 992,699
Inventory -- -- -- 8,168 -- 8,168
Prepaid expenses -- 7,302 -- 6,305 -- 13,608
---------- ---------- ------------- ---------- ------------ -------------
-- 52,091 (100,000) 996,543 (174,223) 774,411
Goodwill -- (2.1)929,040 -- (2.3)6,091,699 7,445,739
-- (2.2)100,000 (2.4) 325,000
Capital assets -- 167,469 -- 141,924 -- 309,393
Incorporation costs -- 420 -- -- -- 420
Deposits -- -- -- 4,662 -- 4,662
---------- ---------- ---------- ---------- ---------- ----------
-- 219,980 929,040 1,143,129 6,242,476 8,534,625
========== ========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued 23,932 253,012 -- 916,932 -- 1,193,876
liabilities
Current portion of capital leases -- 21,602 -- 22,966 -- 44,568
Loan payable -- -- -- 23,639 -- 23,639
Promissory note payable -- -- -- -- (2.3)479,323 479,323
Shareholder loans -- -- -- 1,735 -- 1,735
Notes payable -- 66,825 -- -- -- 66,825
---------- ---------- ---------- ---------- ---------- ----------
23,932 341,439 -- 965,272 479,323 1,809,966
---------- ---------- ---------- ---------- ---------- ----------
DUE TO STOCKHOLDERS -- 61,259 -- -- -- 61,259
---------- ---------- ---------- ---------- ---------- ----------
OBLIGATIONS UNDER CAPITAL LEASES -- 13,441 -- 38,698 -- 52,139
---------- ---------- ---------- ---------- ---------- ----------
CONVERTIBLE DEBENTURE -- -- -- -- (2.3)2,250,000 2,250,000
---------- ---------- ---------- ---------- ---------- ----------
MINORITY INTEREST -- -- -- 39,812 -- 39,812
---------- ---------- ---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY
Share capital 1,020 512,693 (2.1)(512,693) 28 (2.3)(28) 4,346,401
(2.1)732,881 (2.3)3,612,500
Capital in excess of par 1,425,211 -- -- -- -- 1,425,211
Deficit (1,450,163) (708,852) (2.1)708,852 99,319 (2.3)(99,319) (1,450,163)
---------- ---------- ---------- ---------- ---------- ----------
(23,932) (196,159) 929,040 99,347 3,513,153 4,321,449
---------- ---------- ---------- ---------- ---------- ----------
-- 219,980 929,040 1,143,129 6,242,476 8,534,625
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements
F-1
<PAGE> 57
FUTURELINK DISTRIBUTION CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All amounts stated in $U.S.)
Year ended December 31, 1997
<TABLE>
<CAPTION>
FutureLink
Riverview USA
FutureLink FutureLink Pro Forma Management Pro Forma Pro Forma
USA Alberta Adjustments Corporation Adjustments Consolidated
$ $ $ $ $ $
---------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE -- 4,820 3,373 6,662,087 -- 6,665,460
---------- ---------- -------------- ---------- -------------- ----------
EXPENSES
Salaries and employee benefits -- 48,946 -- 2,052,751 -- 2,101,698
Staff development -- -- -- 120,253 -- 120,253
Consulting -- 280,820 -- 631,150 -- 911,970
Travel -- 13,293 -- 14,734 -- 28,027
Accounting and legal fees 109,992 9,818 -- 60,870 -- 180,681
Hardware and software purchases -- -- -- 3,149,406 -- 3,149,406
Advertising and promotion -- 21,057 -- 68,503 -- 89,560
Depreciation and amortization -- 34,084 (3.1)102,904 51,604 (3.2)641,670 831,261
Office 12,057 22,438 -- 133,515 -- 168,010
Rent -- 25,078 -- 70,628 -- 95,706
Equipment rental -- 20,780 -- 8,901 -- 29,680
Internet -- 13,961 -- -- -- 13,961
Architectural and design fees -- 47,922 -- -- -- 47,922
Automotive -- -- -- 26,492 -- 26,492
Other -- 24,492 54,547 79,039
Interest on long term debt -- -- -- -- (3.3)272,932 272,932
---------- ---------- -------------- ---------- -------------- ----------
122,049 563,689 -- 6,443,354 -- 8,146,598
---------- ---------- -------------- ---------- -------------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS (122,049) (560,316) -- 218,733 -- (1,481,138)
LOSS FROM DISCONTINUED OPERATIONS -- (9,922) -- -- -- (9,922)
---------- ---------- -------------- ---------- -------------- ----------
LOSS FROM OPERATIONS (122,049) (570,238) -- 218,733 -- (1,491,059)
WRITE-OFF MINING RELATED ASSETS (515,000) -- -- -- -- (515,000)
LOSS ON NON-REFUNDABLE DEPOSIT (100,000) -- -- -- -- (515,000)
---------- ---------- -------------- ---------- -------------- ----------
LOSS FOR THE YEAR BEFORE INCOME TAXES (737,049) (570,238) -- 218,733 -- (2,106,059)
INCOME TAXES -- -- -- (94,409) -- (94,409)
---------- ---------- -------------- ---------- -------------- ----------
(737,049) (570,238) -- 124,324 -- (2,200,469)
MINORITY INTEREST -- -- -- (24,443) -- (25,443)
---------- ---------- -------------- ---------- -------------- ----------
NET EARNINGS (LOSS) FOR THE YEAR (737,049) (570,238) -- 98,881 -- (2,225,912)
========== ========== ============== ========== ============== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements
F-2
<PAGE> 58
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
December 31, 1997
1. The accompanying unaudited pro forma consolidated financial statements
have been prepared by management from the audited financial statements as
at December 31, 1997 and for the year then ended of FutureLink
Distribution Corp. (a Colorado corporation) ("FutureLink USA") and
FutureLink Distribution Corp. (an Alberta corporation) ("FutureLink
Alberta"), and from the audited financial statements as at October 31,
1997 and for the year then ended of Riverview Management Corporation
("Riverview") together with other information available to the companies.
In the opinion of the management of FutureLink USA, these pro forma
consolidated financial statements include all adjustments necessary for
fair presentation in accordance with accounting principles generally
accepted in the United States. These pro forma consolidated financial
statements may not be indicative of the financial position or the results
of operations that actually would have occurred if the events reflected
therein had been in effect on the dates indicated nor of the financial
position or the results of operations which may be obtained in the future.
These pro forma consolidated financial statements should be read in
conjunction with the audited financial statements of the companies
included elsewhere in this registration document.
2. The pro forma consolidated balance sheet at December 31, 1997 gives effect
to the following assumptions and transactions, all of which will become
effective on the date of the fulfillment or waiver of the conditions of
the FutureLink Alberta Acquisition Agreement and the SysGold acquisition
agreement as if the effective dates of those agreements were December 31,
1997:
2.1 The acquisition of all of the outstanding common shares of
FutureLink Alberta in exchange for an equal number of common shares
of FutureLink USA. This acquisition has been reflected as though the
initial acquisition of 1,540,000 common shares and the subsequent
acquisition of all the remaining common shares at a later date both
occurred on December 31, 1997.
The acquisition has been accounted for in these pro forma
consolidated financial statements by the purchase method. Based on
an independent valuation report dated March 1998 that attributed a
value of $0.22 to common shares of FutureLink Alberta, the total
value ascribed to the investment was $732,881. The purchase price
has been allocated to the net assets acquired based on their
estimated fair values, as follows:
<TABLE>
<CAPTION>
Purchase
Allocation
$
--------
<S> <C>
Net liabilities acquired (196,159)
Goodwill 929,040
--------
Purchase price 732,881
========
</TABLE>
F-3
<PAGE> 59
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
December 31, 1997
2.2 The allocation to goodwill of the estimated costs of the acquisition
described in 2.1 above, in the amount of $100,000 financed through
bank credit facilities of FutureLink USA.
2.3 The acquisition of all of the outstanding common shares of Riverview
for cash consideration of $3,000,000 Canadian, as well as a
promissory note for $685,000 Canadian and 4,250,000 common shares of
FutureLink USA with an ascribed value of $3,612,500 U.S.
The acquisition has been accounted for in these pro forma
consolidated financial statements by the purchase method. The
purchase price has been allocated to the net assets acquired based
on their estimated fair values, as follows:
<TABLE>
<CAPTION>
Purchase
Allocation
$
---------
<S> <C>
Net assets acquired 99,347
Goodwill 6,091,699
---------
Purchase price 6,191,046
=========
Consideration:
Promissory note payable 479,323
10% convertible debenture* 2,099,223
Common shares of FutureLink USA 3,612,500
---------
Total consideration 6,191,046
=========
</TABLE>
*the proceeds from the debenture will be drawn in an initial amount
of $2,250,000, with the excess cash being held by FutureLink USA for
general use.
2.4 The allocation to goodwill of the estimated costs of the acquisition
described in 2.3 above, in the amount of $325,000 financed through
bank credit facilities of FutureLink USA.
F-4
<PAGE> 60
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
December 31, 1997
3. The pro forma consolidated statement of income for the year ended December
31, 1997 gives effect to the acquisitions by FutureLink USA as described
in 2.1 and 2.3 above which will become effective on the date of the
fulfillment or waiver of the conditions of the FutureLink Alberta
Acquisition Agreement and the SysGold acquisition agreement, as if the
transactions had occurred January 1, 1997. The following adjustments are
reflected:
3.1 The amortization of Goodwill attributable to the allocation of the
purchase price of FutureLink Alberta in excess of the carrying value
of the net assets acquired, (see 2.1 and 2.2 above) calculated on a
straight-line basis over a period of 10 years.
3.2 The amortization of Goodwill attributable to the allocation of the
purchase price of Riverview in excess of the carrying value of the
net assets acquired, (see 2.3 and 2.4 above) calculated on a
straight-line basis over a period of 10 years.
3.3 The inclusion of interest expense on the convertible debenture for
one year, at an annual rate of 10%.
4. The amounts shown in these pro forma consolidated financial statements for
FutureLink Alberta and for Riverview have been translated into United
States dollars from Canadian dollars at a rate of $1 US equal to $1.4291
Canadian.
F-5
<PAGE> 61
FUTURELINK DISTRIBUTION CORP.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(All amounts stated in $U.S.)
June 30, 1998
<TABLE>
<CAPTION>
FutureLink
Riverview USA
FutureLink FutureLink Pro Forma Management Pro Forma Pro Forma
USA Alberta Adjustments Corporation Adjustments Consolidated
$ $ $ $ $ $
---------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT
Cash -- 158,581 (2.2)(100,000) -- (2.3)207,933 (58,486)
(2.4)(325,000)
Accounts receivable -- 51,110 -- 1,028,028 -- 1,079,138
Inventory -- 2,480 -- 12,961 -- 15,441
Prepaid expenses -- 32,653 -- 10,704 -- 43,357
---------- ---------- -------------- ---------- -------------- ----------
-- 244,823 (100,000) 1,051,693 (117,067) 1,079,449
Goodwill -- -- (2.1)1,575,228 -- (2.3)5,957,683 7,957,911
(2.2)100,000 (2.4)325,000
Capital assets -- 350,589 -- 140,615 -- 491,203
Investment 1,269,259 -- (2.1)(1,269,259) -- -- --
Discontinued operations -- 1 -- -- -- 1
Incorporation costs -- 272 -- -- -- 272
Deposits -- -- -- 5,570 -- 5,570
---------- ---------- -------------- ---------- -------------- ----------
2,269,259 595,685 305,969 1,197,878 6,165,616 9,534,407
========== ========== ============== ========== ============== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank indebtedness -- -- -- 118,524 -- 118,524
Accounts payable and accrued 24,981 83,759 -- 748,873 -- 857,613
liabilities
Current portion of capital leases -- 29,187 -- 33,913 -- 63,100
Loan payable -- -- -- 19,152 -- 19,152
Promissory note payable -- -- -- -- (2.3)466,272 466,272
Shareholder loans -- -- -- 87,763 -- 87,763
Notes payable -- 34,060 -- -- -- 34,060
---------- ---------- -------------- ---------- -------------- ----------
24,981 147,006 -- 1,008,225 466,272 1,646,484
---------- ---------- -------------- ---------- -------------- ----------
DUE TO STOCKHOLDERS 504,802 10,338 -- -- -- 515,140
---------- ---------- -------------- ---------- -------------- ----------
OBLIGATIONS UNDER CAPITAL LEASES -- 11,429 -- 11,742 -- 23,171
---------- ---------- -------------- ---------- -------------- ----------
DUE TO FUTURELINK USA -- 1,265,689 (2.1)(1,265,689) -- -- --
---------- ---------- -------------- ---------- -------------- ----------
CONVERTIBLE DEBENTURE -- -- -- -- (2.3)2,250,000 2,250,000
---------- ---------- -------------- ---------- -------------- ----------
MINORITY INTEREST -- -- -- 14,755 -- 14,755
---------- ---------- -------------- ---------- -------------- ----------
STOCKHOLDERS' EQUITY
Share capital 1,200 725,930 (2.1)(725,930) 27 (2.3)(27) 4,346,581
(2.1)732,881 (2.3)3,612,500
Capital in excess of par 2,670,831 -- -- -- -- 2,670,831
Deficit (1,932,555) (1,564,707) (2.1)1,564,707 163,129 (2.3)(163,129) (1,932,555)
---------- ---------- -------------- ---------- -------------- ----------
739,476 (838,777) 1,571,658 163,156 3,449,344 5,084,858
---------- ---------- -------------- ---------- -------------- ----------
1,269,259 595,685 305,969 1,197,878 6,165,616 9,534,407
========== ========== ============== ========== ============== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements
F-6
<PAGE> 62
FUTURELINK DISTRIBUTION CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All amounts stated in $U.S.)
Six months ended June 30, 1998
<TABLE>
<CAPTION>
FutureLink
Riverview USA
FutureLink FutureLink Pro Forma Management Pro Forma Pro Forma
USA Alberta Adjustments Corporation Adjustments Consolidated
$ $ $ $ $ $
---------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE -- 20,880 -- 5,339,694 -- 5,360,575
---------- ---------- -------------- ---------- -------------- ----------
EXPENSES
Salaries and employee benefits -- 219,781 -- 2,382,623 -- 2,602,404
Staff development -- -- -- 172,522 -- 172,522
Consulting -- 154,316 -- -- -- 154,316
Travel -- 52,591 -- 9,541 -- 62,133
Accounting and legal fees 40,158 51,827 -- 43,102 -- 135,087
Hardware and software purchases -- -- -- 2,256,447 -- 2,256,447
Advertising and promotion -- 49,408 -- 58,438 -- 107,846
Depreciation and amortization -- 49,034 (3.1)83,762 46,634 (3.2)314,134 493,564
Office 30,918 48,101 -- 139,946 -- 218,964
Rent -- 34,771 -- 51,393 -- 86,164
Investor relations -- 22,229 -- -- -- 22,229
Equipment rental -- 19,578 -- 4,955 -- 24,533
Internet -- 16,754 -- -- -- 16,754
Automotive -- -- -- 26,268 -- 26,268
Other -- 27,681 29,542 57,223
Interest on long term debt -- -- -- -- (3.3)135,814 135,814
Equity in loss of an affiliate 411,316 -- (3.4)411,316 -- -- --
---------- ---------- -------------- ---------- -------------- ----------
482,392 746,070 -- 5,221,410 -- 6,572,265
---------- ---------- -------------- ---------- -------------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS (482,392) (752,190) -- 118,285 -- (1,211,691)
LOSS FROM DISCONTINUED OPERATIONS -- (149,965) -- -- -- (149,965)
---------- ---------- -------------- ---------- -------------- ----------
LOSS FOR THE YEAR BEFORE INCOME TAXES (482,392) (875,156) -- 118,285 -- (1,361,656)
INCOME TAXES -- -- -- (44,432) -- (44,432)
---------- ---------- -------------- ---------- -------------- ----------
(482,392) (875,156) -- 73,853 -- (1,406,088)
MINORITY INTEREST -- -- -- 23,973 -- 23,973
---------- ---------- -------------- ---------- -------------- ----------
NET EARNINGS (LOSS) FOR THE YEAR (482,392) (875,156) -- 97,826 -- (1,382,115)
========== ========== ============== ========== ============== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements
F-7
<PAGE> 63
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 1998
1. The accompanying unaudited pro forma consolidated financial statements
have been prepared by management from the unaudited financial statements
as at June 30, 1998 of FutureLink Distribution Corp. (a Colorado
corporation) ("FutureLink USA"), FutureLink Distribution Corp. (an Alberta
corporation) ("FutureLink Alberta") and Riverview Management Corporation
("Riverview"), and for the six month period then ended (eight month period
then ended in the case of Riverview) together with other information
available to the companies. In the opinion of the management of FutureLink
USA, these pro forma consolidated financial statements include all
adjustments necessary for fair presentation in accordance with accounting
principles generally accepted in the United States. These pro forma
consolidated financial statements may not be indicative of the financial
position or the results of operations that actually would have occurred if
the events reflected therein had been in effect on the dates indicated nor
of the financial position or the results of operations which may be
obtained in the future.
These pro forma consolidated financial statements should be read in
conjunction with the audited and unaudited financial statements of the
companies included elsewhere in this registration document.
2. The pro forma consolidated balance sheet at June 30, 1998 gives effect to
the following assumptions and transactions, all of which will become
effective on the date of the fulfillment or waiver of the conditions of
the FutureLink Alberta Acquisition Agreement and the SysGold acquisition
agreement as if the effective dates of those agreements were June 30,
1998:
2.1 The acquisition of all of the outstanding common shares of
FutureLink Alberta in exchange for an equal number of common shares
of FutureLink USA. This acquisition has been reflected as though the
initial acquisition of 1,540,000 common shares and the subsequent
acquisition of all the remaining common shares at a later date both
occurred on June 30, 1998.
The acquisition has been accounted for in these pro forma
consolidated financial statements by the purchase method. Based on
an independent valuation report dated March 1998 that attributed a
value of $0.22 to common shares of FutureLink Alberta, the total
value ascribed to the investment was $732,881. The purchase price
has been allocated to the net assets acquired based on their
estimated fair values, as follows:
<TABLE>
<CAPTION>
Purchase
Allocation
$
----------
<S> <C>
Net liabilities acquired (842,347)
Goodwill 1,575,228
----------
Purchase price 732,881
==========
</TABLE>
F-8
<PAGE> 64
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 1998
2.2 The allocation to goodwill of the estimated costs of the acquisition
described in 2.1 above, in the amount of $100,000 financed through
bank credit facilities of FutureLink USA.
2.3 The acquisition of all of the outstanding common shares of Riverview
for cash consideration of $3,000,000 Canadian, as well as a
promissory note for $685,000 Canadian and 4,250,000 common shares of
FutureLink USA with an ascribed value of $3,612,500 U.S.
The acquisition has been accounted for in these pro forma
consolidated financial statements by the purchase method. The
purchase price has been allocated to the net assets acquired based
on their estimated fair values, as follows:
<TABLE>
<CAPTION>
Purchase
Allocation
$
---------
<S> <C>
Net assets acquired 163,156
Goodwill 5,957,683
---------
Purchase price 6,120,839
=========
Consideration:
Promissory note payable 466,272
10% convertible debenture* 2,042,067
Common shares of FutureLink USA 3,612,500
---------
Total consideration 6,120,839
=========
</TABLE>
*the proceeds from the debenture will be drawn in an initial amount
of $2,250,000, with the excess cash being held by FutureLink USA for
general use.
2.4 The allocation to goodwill of the estimated costs of the acquisition
described in 2.3 above, in the amount of $325,000 financed through
bank credit facilities of FutureLink USA.
F-9
<PAGE> 65
FUTURELINK DISTRIBUTION CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 1998
3. The pro forma consolidated statement of income for the six months ended
June 30, 1998 gives effect to the acquisitions by FutureLink USA as
described in 2.1 and 2.3 above which will become effective on the date of
the fulfillment or waiver of the conditions of the FutureLink Alberta
Acquisition Agreement and the SysGold acquisition agreement, as if the
transactions had occurred January 1, 1998. The following adjustments are
reflected:
3.1 The amortization of Goodwill attributable to the allocation of the
purchase price of FutureLink Alberta in excess of the carrying value
of the net assets acquired, (see 2.1 and 2.2 above) calculated on a
straight-line basis over a period of 10 years.
3.2 The amortization of Goodwill attributable to the allocation of the
purchase price of Riverview in excess of the carrying value of the
net assets acquired, (see 2.3 and 2.4 above) calculated on a
straight-line basis over a period of 10 years.
3.3 The inclusion of interest expense on the convertible debenture for
six months, at an annual rate of 10%.
3.4 The reversal of FutureLink USA's equity in the loss of FutureLink
Alberta.
4. The amounts shown in these pro forma consolidated financial statements for
FutureLink Alberta and for Riverview have been translated into United
States dollars from Canadian dollars at a rate of $1 US equal to $1.4691
Canadian.
F-10
<PAGE> 66
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
FUTURELINK DISTRIBUTION CORP.
We have audited the accompanying balance sheet of FUTURELINK DISTRIBUTION CORP.
as at December 31, 1997 and the related statements of loss and deficit, changes
in stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Futurelink Distribution Corp.
as at December 31, 1997 and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG
Calgary, Canada
August 20, 1998 Chartered Accountants
F-11
<PAGE> 67
FUTURELINK DISTRIBUTION CORP.
BALANCE SHEETS
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
DECEMBER 31
JUNE 30, -------------------------
1998 1997 1996
(UNAUDITED) (Unaudited)
$ $ $
---------- ---------- ----------
<S> <C> <C> <C>
CAPITAL ASSETS -- -- 515,000
Investment [note 3] 1,269,259 -- --
---------- ---------- ----------
1,269,259 -- 515,000
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 24,981 23,932 6,873
---------- ---------- ----------
24,981 23,932 6,873
DUE TO STOCKHOLDER [NOTE 6] 504,802 -- 4,504
---------- ---------- ----------
529,783 23,932 11,377
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Authorized
5,000,000 preferred shares without par value
100,000,000 common shares with par value of $0.0001
Issued
11,999,313, 10,203,500 and 2,500 common shares
issued and outstanding at June 30, 1998 and
December 31, 1997 and 1996, respectively [note 5] 1,200 1,020 25
Capital in excess of par [note 5] 2,670,831 1,425,211 1,216,712
Deficit (1,932,555) (1,450,163) (713,114)
---------- ---------- ----------
739,476 (23,932) 503,623
---------- ---------- ----------
1,269,259 -- 515,000
========== ========== ==========
</TABLE>
Contingencies [note 9]
See accompanying notes
On behalf of the Board:
Director Director
F-12
<PAGE> 68
FUTURELINK DISTRIBUTION CORP.
STATEMENTS OF LOSS AND DEFICIT
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31
JUNE 30 -----------------------
1998 1997 1996
$ $ $
---------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUE -- -- --
---------- -------- --------
EXPENSES
Accounting and legal 40,158 109,992 3,803
General and administrative 30,918 12,057 3,061
---------- -------- --------
71,076 122,049 6,864
---------- -------- --------
Loss from operations (71,076) (122,049) (6,864)
========== ======== ========
Write-off mining related assets [note 4] -- (515,000) --
Loss on non-refundable deposit [note 7] -- (100,000) --
Equity in loss of affiliate [note 3] (411,316) -- --
---------- -------- --------
(411,316) (615,000) --
---------- -------- --------
NET LOSS FOR THE PERIOD [NOTE 8] (482,392) (737,049) (6,864)
Deficit, beginning of period (1,450,163) (713,114) (706,250)
---------- -------- --------
DEFICIT, END OF PERIOD (1,932,555) (1,450,163) (713,114)
========== ======== ========
LOSS PER COMMON SHARE (0.25) (1.65) (2.75)
========== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 1,964,120 447,445 2,500
========== ======== ========
</TABLE>
See accompanying notes
F-13
<PAGE> 69
FUTURELINK DISTRIBUTION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
------------------------ EXCESS OF PAR DEFICIT
SHARES $ $ $
---------- ----- --------- ----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 AND 1995 2,500 25 1,216,712 (713,114)
Issuance of share capital 1,000 10 9,990 --
---------- ----- --------- ----------
3,500 35 1,226,702 (713,114)
Change of par value from .01 to .0001 -- (35) 35 --
Issuance of share capital for cash 10,200,000 1,020 158,980 --
Forgiveness of shareholder debt -- -- 39,494 --
Net loss for the period -- -- -- (737,049)
---------- ----- --------- ----------
BALANCE, DECEMBER 31, 1997 10,203,500 1,020 1,425,211 (1,450,163)
Issuance of share capital on
exercise of special warrants 255,813 26 846,774 --
Issuance of share capital under
Share Purchase Agreement with
Futurelink Distribution Corp.,
an Alberta, Canada corporation 1,540,000 154 338,646 --
Forgiveness of shareholder debt -- -- 60,200 --
Net loss for the period -- -- -- (482,392)
---------- ----- --------- ----------
BALANCE, JUNE 30, 1998 11,999,313 1,200 2,670,831 (1,932,555)
========== ===== ========= ==========
</TABLE>
The above statement gives retroactive effect to a share rollback of 200 to 1 on
July 20, 1997 and a rollback of 30 to 1 on December 2, 1997.
See accompanying notes
F-14
<PAGE> 70
FUTURELINK DISTRIBUTION CORP.
STATEMENTS OF CASH FLOWS
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31
JUNE 30 -----------------------
1998 1997 1996
$ $ $
---------- -------- ------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss (482,392) (737,049) (6,864)
Adjustments to reconcile net loss to net cash
provided by operating activities
Write off mining related assets [note 4] -- 515,000 --
Equity in loss of affiliate 411,316 -- --
Loss on refundable deposit -- 100,000 --
---------- -------- ------
(71,076) (122,049) (6,864)
Changes in non-cash working capital balances
Accounts payable and accrued liabilities 1,049 17,059 3,802
---------- -------- ------
(70,027) (104,990) (3,062)
---------- -------- ------
CASH FLOWS USED IN INVESTING ACTIVITIES
Advances to Futurelink Distribution Corp. (Alberta)
[note 3] (1,341,775) -- --
Loss on refundable deposit -- (100,000) --
---------- -------- ------
(1,341,775) (100,000) --
---------- -------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from stockholders [note 6] 504,802 (4,504) 3,062
Proceeds from the issuance of common stock [note 5] 846,800 170,000 --
Forgiveness of shareholder debt [note 5] 60,200 39,494 --
----------
1,411,802 204,990 3,062
---------- -------- ------
INCREASE IN CASH -- -- --
Cash, beginning of period -- -- --
---------- -------- ------
CASH, END OF PERIOD -- -- --
========== ======== ======
</TABLE>
See accompanying notes
F-15
<PAGE> 71
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 is unaudited)
1. INCORPORATION AND OPERATIONS
The Company was formed on April 4, 1955 in the state of Colorado, USA, as Cortez
Uranium and Mining Co. The company was involved in several mining related
projects and had changed its name several times. On July 20, 1997, the company
changed its names to Core Ventures, Inc. The company changed its name to
Futurelink Distribution Corp. effective February 17, 1998.
The Company had no operations in the first six months of 1997. Accordingly
comparative interim financial statements are not presented for this period.
In early 1998, the Company changed its focus to concentrate on the acquisition
and development of companies in the business of information technology
outsourcing. The Company currently has no sources of revenue, except indirectly
through its investee, and has a deficit at June 30, 1998 of $1,932,555. Its
future viability is dependent upon acquiring or developing profitable operations
and securing additional financing to support these activities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have, in management's opinion, been properly prepared
in accordance with accounting principles generally accepted in the United
States. Differences between accounting principles generally accepted in Canada
and the United States would have no material impact on these financial
statements.
USE OF ESTIMATES
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates which would affect the amount of recorded assets,
liabilities, revenues and expenses. Actual amounts could differ from these
estimates.
INVESTMENT
The Company's investment in Futurelink Distribution Corp. (an Alberta, Canada
corporation), representing a 47% interest in the outstanding common shares at
June 30, 1998, is accounted for using the equity method.
F-16
<PAGE> 72
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 is unaudited)
INCOME TAXES
The Company records its provision for income taxes using the liability method.
Under this method deferred tax assets and liabilities are recognized based on
the anticipated future tax effects arising from the differences between the
financial statement carrying amounts of assets and liabilities and their
respective tax bases.
FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including accounts payable and
accrued liabilities, and amounts due to stockholders approximate their fair
values. It is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's investment is Canadian dollars.
Adjustments arising from translating the investee's financial statements into
United States dollars are recorded in stockholders' equity as a cumulative
translation adjustment.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as at and for the period ended June 30, 1998,
in the opinion of management, include all adjustments (consisting of normal
recurring adjustments and accruals) necessary to present fairly the results for
the interim period presented. Operating results for the period ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.
F-17
<PAGE> 73
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 is unaudited)
3. INVESTMENT
<TABLE>
<CAPTION>
DECEMBER 31
JUNE 30, -----------------------
1998 1997 1996
(UNAUDITED) (Unaudited)
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Futurelink Distribution Corp. (an Alberta,
Canada corporation)
1,540,000 common shares (47%) 338,800 -- --
Advances, non-interest bearing 1,341,775 -- --
--------- --------- ---------
Equity loss (411,316) -- --
--
1,269,259 -- --
========= ========= =========
</TABLE>
On January 20, 1998 the Company issued 1,540,000 common shares in exchange for
1,540,000 common shares of Futurelink Distributions Corp., an Alberta, Canada
corporation ("Futurelink Alberta") representing 48% of the issued and
outstanding shares at that time. Based on an independent valuation report dated
March 1998 that attributed a value of $0.22 to common shares of Futurelink
Alberta, the total value ascribed to the investment was $338,800. The Company
has also advanced Futurelink Alberta $1,341,775. This amount is non-interest
bearing and has no repayment terms.
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
------- ------- -------
<S> <C> <C> <C>
Mining concessions 85,000 -- 85,000
Proprietary mining process 430,000 -- 430,000
------- ------- -------
515,000 -- 515,000
======= ======= =======
</TABLE>
During 1997 the Company wrote off these assets to their estimated net realizable
value of nil. The Company is no longer in the mining business.
5. SHARE CAPITAL
On January 20, 1998 the articles of the Company were amended to increase the
authorized share capital to 100,000,000 common shares and 5,000,000 preferred
shares.
83,334 warrants were issued to the share subscribers who were issued shares on
January 29, 1998. The warrants allow the holder to purchase additional shares at
$3.00 on or before one year and $3.30 before two years from the date of
acquisition. None of the outstanding warrants have been exercised as at June 30,
1998.
F-18
<PAGE> 74
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 is unaudited)
105,813 warrants were issued to the share subscribers who were issued shares on
April 3, 1998. The warrants allow the holder to purchase additional shares at
$3.75 on or before one year and $4.00 before two years from the date of
acquisition. None of the outstanding warrants have been exercised as at June 30,
1998.
66,666 warrants were issued to the share subscribers who were issued shares on
April 22, 1998. The warrants allow the holder to purchase additional shares at
$3.25 on or before two years from the date of acquisition. None of the
outstanding warrants have been exercised as at June 30, 1998.
On January 19, 1998, the Company reserved 3,500,000 restricted common shares for
the issuance to officers, directors and employees of Futurelink Alberta. These
shares were issued on July, 1998.
Of the 11,999,313 shares issued at June 30, 1998, 1,341,000 are restricted and
10,658,313 are freely trading. Restricted shares held by non-affiliates of the
Company must be held for at least one year. Restricted shares held by affiliates
of the Company must be held for 1 to 2 years.
The 1,540,000 common shares issued to purchase a 48% investment in Futurelink
Alberta, are subject to a hold period. One half of the shares given to the
vendors will be released from escrow on July 20, 1998 and the balance will be
released on January 20, 1999.
On June 29, 1998, the Company issued stock options to purchase 3,080,000 common
shares to employees and non-employee directors with an exercise price of $0.755.
These stock options were all outstanding as at June 30, 1998. The options expire
on June 29, 2001.
A stockholder of the Company forgave $60,200 in 1998 and $39,494 in 1997 which
he had advanced to the Company during that period.
F-19
<PAGE> 75
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 is unaudited)
6. RELATED PARTY TRANSACTIONS
During 1998, Linear Strategies Ltd., a stockholder, advanced the Company
$504,802. The Company in turn advanced the money to Futurelink Alberta. Interest
incurred on the loan to June 30, 1998 in the amount of $2,904 has been added to
the principal amount owing. Subsequent to June 30, 1998, the loan was converted
into shares and warrants.
The amount of $4,504 due to a stockholder of the Company at December 31, 1996
was non-interest bearing and had no repayment terms.
7. LOSS ON NON-REFUNDABLE DEPOSIT
During 1997, the Company made a $100,000 non-refundable deposit to purchase
Printscan Technology; however, the Company did not raise sufficient funds to
complete the purchase, and the deposit was forfeited.
8. INCOME TAXES
The provision for income taxes differs from the Company's statutory rate of 40
percent as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31
JUNE 30 ----------------------------
1998 1997 1996
$ $ $
--------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Provision for income taxes based on net loss as 192,957 294,820 2,746
reported
Add temporary differences not recognized
Write-off of mining related assets -- (206,000) --
Equity in loss of affiliate (164,526) -- --
Loss carryforwards (28,431) (88,820) (2,746)
--------- --------- ---------
Provision for income taxes -- -- --
========= ========= =========
</TABLE>
The Company has cumulative temporary differences related to mining operations
written off in prior years and loss carryforwards which would give rise to
deferred tax assets. The Company has not maintained sufficient taxation records
to quantify these amounts; however, valuation allowances would reduce all such
assets to zero as there is significant uncertainty as to whether the Company
will generate taxable income.
9. CONTINGENCIES
A statement of claim has been filed against the Company in the amount of
approximately of $350,000 plus any interest on any damages awarded, costs on a
solicitor client basis and other
F-20
<PAGE> 76
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 and June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and as at and for the year ended December 31, 1996 unaudited)
damages the court may award. The statement of claim alleges that the Company
made certain misrepresentations and interfered with contractual relations in
respect of a sale transaction between two third parties involving the Company's
common shares. It is management's position that the claim is without merit;
consequently, no liability in respect of the claim has been recorded in the
financial statements.
10. SUBSEQUENT EVENTS
On August 4, 1998 the Company signed a share purchase agreement which provides
for the acquisition of Riverview Management Corporation, an information
technology outsourcing and services firm, for cash consideration of $3,000,000
Canadian, as well as a 90 day promissory note for $685,000 Canadian and
4,250,000 common shares with an ascribed value of $3,612,500 U.S. Closing of the
purchase is subject to various conditions, including obtaining third party
financing for the cash portion of the purchase cost.
On August 20, 1998 the Company issued a takeover bid circular in order to
complete the purchase of 100% of Futurelink Alberta through the issue of an
additional 1,791,275 common shares with an ascribed value of $394,081. It is
management's intention to complete the acquisition by the end of September,
1998.
F-21
<PAGE> 77
FUTURELINK DISTRIBUTION CORP.
BALANCE SHEETS
(all amounts stated in $ Cdn.)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
-------------------------------------------
1998 1997 1996
(Unaudited)
$ $ $
---------- ---------- --------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash and short term deposits 232,971 10,886 89,852
Accounts receivable 75,085 53,122 8,158
Inventory 3,643 -- --
Prepaid expenses and deposits 47,971 10,436 1,669
Notes receivable [note 8] -- -- 104,500
---------- ---------- --------
359,670 74,444 204,179
CAPITAL ASSETS [NOTE 3] 515,050 239,330 9,745
DISCONTINUED OPERATIONS [NOTE 11] 1 -- --
INCORPORATION COSTS [NOTE 4] 400 600 800
---------- ---------- --------
875,121 314,374 214,724
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 123,051 361,581 40,458
Current portion of capital leases [note 5] 42,879 30,871 --
Notes payable [note 8] 50,037 95,500 --
---------- ---------- --------
215,967 487,952 40,458
---------- ---------- --------
DUE TO SHAREHOLDERS [NOTE 8] 15,188 87,545 2,030
---------- ---------- --------
OBLIGATION UNDER CAPITAL LEASES [NOTE 5] 16,790 19,208 --
---------- ---------- --------
DUE TO FUTURELINK DISTRIBUTION CORP., A COLORADO
CORPORATION [NOTE 8] 1,859,423 -- --
---------- ---------- --------
SHAREHOLDERS' EQUITY
Share capital [note 7] 1,066,464 732,689 370,329
Deficit (2,298,711) (1,013,020) (198,093)
---------- ---------- --------
(1,232,247) (280,331) 172,236
---------- ---------- --------
875,121 314,374 214,724
========== ========== ========
</TABLE>
Contingency [note 12]
See accompanying notes
Behalf of the Board:
Director Director
F-22
<PAGE> 78
FUTURELINK DISTRIBUTION CORP.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(all amounts stated in $ Cdn.)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JUNE 30 YEAR ENDED MARCH 28 TO
-------------------------- DECEMBER 31 DECEMBER 31
1998 1997 1997 1996
(Unaudited) (Unaudited)
$ $ $ $
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
Sales 10,015 -- -- --
Equipment sales 19,668 -- -- --
Interest income 992 3,083 4,820 2,752
---------- ---------- ---------- ----------
30,675 3,083 4,820 2,752
---------- ---------- ---------- ----------
EXPENSES
Salaries 322,881 69,950 69,949 7,716
Consulting 226,705 30,442 401,320 109,625
Travel 77,262 8,645 18,997 12,196
Accounting and legal fees 76,139 4,794 14,031 17,172
Advertising and promotion 72,585 12,178 30,093 11,778
Depreciation and amortization 72,036 2,849 50,138 2,145
Office 70,665 6,109 32,066 12,674
Rent 51,082 7,046 35,839 3,300
Investor relations 32,656 -- -- --
Equipment rental 28,762 13,074 29,696 6,569
Internet 24,613 -- 19,952 --
Architectural and design fees -- -- 68,485 --
Other 40,666 5,688 35,002 17,670
---------- ---------- ---------- ----------
1,096,052 160,775 805,568 200,845
---------- ---------- ---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS (1,065,377) (157,692) (800,748) (198,093)
LOSS FROM DISCONTINUED OPERATIONS
[NOTE 11] (220,314) (6,680) (14,179) --
---------- ---------- ---------- ----------
NET LOSS FOR THE PERIOD (1,285,691) (164,372) (814,927) (198,093)
DEFICIT, BEGINNING OF PERIOD (1,013,020) (198,093) (198,093) --
---------- ---------- ---------- ----------
DEFICIT, END OF PERIOD (2,298,711) (362,465) (1,013,020) (198,093)
========== ========== ========== ==========
</TABLE>
See accompanying notes
F-23
<PAGE> 79
FUTURELINK DISTRIBUTION CORP.
STATEMENTS OF CASH FLOWS
(all amounts stated in $ Cdn.)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MARCH 28 TO
SIX MONTHS ENDED JUNE 30 DECEMBER 31 DECEMBER 31
---------- ---------- ---------- ----------
1998 1997 1997 1996
(Unaudited) (Unaudited)
$ $ $ $
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH WAS PROVIDED BY (USED FOR):
Loss before discontinued operations (1,065,377) (157,692) (800,748) (198,093)
Add items not affecting cash:
Depreciation and amortization 72,036 2,849 50,138 2,145
---------- ---------- ---------- -----------
(993,341) (154,843) (750,610) (195,948)
Net change in non-cash working capital
related to operating activities
[note 10] (339,671) (24,483) 371,892 (73,869)
---------- ---------- ---------- -----------
Cash used for continuing operations (1,333,012) (179,326) (378,718) (269,817)
---------- ---------- ---------- -----------
Loss from discontinued operations (220,314) (6,680) (14,179) --
Add item not affecting cash:
Loss on discontinuance 60,616 -- -- --
---------- ---------- ---------- -----------
Cash used for discontinued operations
(159,698) (6,680) (14,179) --
---------- ---------- ---------- -----------
(1,492,710) (186,006) (392,897) (269,817)
---------- ---------- ---------- -----------
INVESTING ACTIVITIES
Purchase of capital assets (370,173) (68,019) (279,523) (11,690)
Incorporation costs -- -- -- (1,000)
---------- ---------- ---------- -----------
(370,173) (68,019) (279,523) (12,690)
---------- ---------- ---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common shares 333,775 160,000 362,360 370,329
Advances from shareholders (72,357) 31,500 85,515 2,030
Advances from Futurelink Distribution
Corp 1,859,423 -- -- --
Increase in capital lease obligation 9,590 -- 50,079 --
Increase (decrease) in note payable (45,463) -- 95,500 --
---------- ---------- ---------- -----------
2,084,968 191,500 593,454 372,359
---------- ---------- ---------- -----------
INCREASE (DECREASE) IN CASH 222,085 (62,525) (78,966) 89,852
CASH AND SHORT TERM DEPOSITS, END OF
PERIOD 232,971 27,327 10,886 --
---------- ---------- ---------- -----------
CASH, BEGINNING OF PERIOD 10,886 89,852 89,852 89,852
========== ========== ========== ===========
</TABLE>
See accompanying notes
F-24
<PAGE> 80
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
1. DESCRIPTION OF BUSINESS
The Company was incorporated under the Business Corporations Act (Alberta) on
March 28, 1996 as 689936 Alberta Ltd. The name of the Company was changed to
Coffee.com Interactive Cafe Corp. by articles of amendment on June 19, 1996. The
name of the Company was subsequently changed to Futurelink Distribution Corp. on
November 17, 1997.
The Company is in the initial stages of development. Its future viability is
dependent upon management's ability to generate revenues or secure additional
financing to support continued service.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in Canada. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates and approximations which have been made using careful judgment.
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant account policies summarized below.
CAPITAL ASSETS
Capital assets are recorded at cost. Depreciation is recorded at the following
rates:
Furniture and fixtures 20% declining balance
Computer hardware 30% declining balance
Computer software 100% declining balance
Leasehold improvements 5 years straight line
One half of the normal depreciation is taken in the year of acquisition.
INCORPORATION COSTS
Incorporation costs are recorded at cost and are amortized on a straight line
basis over five years.
FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash, accounts
receivable, accounts payable and accrued liabilities, notes payable, due to
shareholders, note payable, and long term debt, approximate their fair values.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------------------
<S> <C> <C> <C>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
</TABLE>
F-25
<PAGE> 81
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
<TABLE>
<CAPTION>
$ $ $
------- ------- -------
<S> <C> <C> <C>
Furniture and fixtures 67,290 8,785 58,505
Computer hardware 404,211 75,916 328,295
Computer software 92,916 33,779 59,137
Leasehold improvements 74,352 5,239 69,113
------- ------- -------
638,769 123,719 515,050
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
------- ------ -------
<S> <C> <C> <C>
Furniture and fixtures 33,385 4,346 29,039
Computer hardware 226,854 35,239 191,615
Computer software 20,830 11,284 9,546
Leasehold improvements 10,145 1,015 9,130
------- ------ -------
291,214 51,884 239,330
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
------ ----- -----
<S> <C> <C> <C>
Furniture and fixtures 5,595 559 5,036
Computer hardware 4,747 712 4,035
Computer software 1,348 674 674
------ ----- -----
11,690 1,945 9,745
====== ===== =====
</TABLE>
Included in computer hardware at June 30, 1998 are assets under capital lease of
$84,802 (December 31, 1997 - $61,069; December 31, 1996 - $Nil) and related
accumulated depreciation of $18,727 (December 31, 1997 - $9,160).
F-26
<PAGE> 82
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
4. INCORPORATION COSTS
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
----- --- ---
<S> <C> <C> <C>
Incorporation costs 1,000 600 400
===== === ===
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------
Accumulated Net Book
Cost Amortization Value
$ $ $
----- --- ---
<S> <C> <C> <C>
Incorporation costs 1,000 400 600
===== === ===
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------
Accumulated Net Book
Cost Amortization Value
$ $ $
----- --- ---
<S> <C> <C> <C>
Incorporation costs 1,000 200 800
===== === ===
</TABLE>
5. LEASE COMMITMENTS
The future minimum lease payments at June 30, 1998 under capital and operating
leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
$ $
------ -------
<S> <C> <C>
1998 25,435 72,903
1999 30,414 131,740
2000 8,843 131,184
2001 1,474 124,938
2002 -- 40,952
------ -------
Total future minimum lease payments 66,166 501,717
=======
Less: imputed interest (6,497)
------
Balance of obligations under capital lease 59,669
Less: current portion (42,879)
------
Long term obligation under capital lease 16,790
======
</TABLE>
6. NOTES PAYABLE
The notes payable are due to 679132 Alberta Ltd., a corporation controlled by a
director and officer of the Company. The notes are payable on demand on or
before December 31, 1998.
F-27
<PAGE> 83
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
Interest accrues on the notes at the prime rate of a Canadian chartered bank
plus 1%. These notes were repaid in full in July, 1998.
7. SHARE CAPITAL
AUTHORIZED:
Unlimited Class "A" common shares
Unlimited Class "B" non-voting common shares
Unlimited first preferred shares
<TABLE>
<CAPTION>
ISSUED Shares $
---------- ----------
Class A common shares
<S> <C> <C>
Balance at December 31, 1996 3,660,000 370,329
Rollback of initial founder shares (1,400,000) (140)
Shares issued for cash during the year, net of issue costs of
$5,000 367,500 362,500
Shares issued to key employees 325,000 --
---------- ----------
Balance, December 31, 1997 2,952,500 732,689
Shares issued for cash 145,000 145,000
Shares issued as compensation 188,775 188,775
---------- ----------
Balance, June 30, 1998 3,286,275 1,066,464
========== ==========
</TABLE>
At June 30, 1998, there were 165,000 (December 31, 1997 - 225,000) Class A
common shares reserved for issuance on exercise of stock options, of which
45,000 were exercised subsequent to June 30, 1998. These remaining 120,000
options outstanding may be exercised at a price of $1.00 per share and expire on
August 26, 1998.
8. RELATED PARTY TRANSACTIONS
At June 30, 1998, the Company had amounts due to shareholders of $15,188
(December 31, 1997 - $87,545; 1996 - $2,030).
At June 30, 1998, the Company had amounts owing to 679132 Alberta Ltd., a
corporation controlled by a director and officer of the Company of $47,000 plus
$3,037 of accrued interest (1997 - $95,500). This amount is due on or before
December 31, 1998. Interest is accumulated at the Royal Bank of Canada prime
plus 1%.
During the year, the Company received $1,859,423 of cash advances from a
significant shareholder, FutureLink Distribution Corp., a Colorado corporation,
which remains payable at June 30, 1998. The amount does not carry interest and
has no set repayment terms. The Company has been advised by its shareholder that
it does not intend to demand repayment within the next year; consequently, this
amount has been classified as long-term in the financial statements.
As at December 31, 1996 there is an amount of $104,500 including accrued
interest owing from a corporation controlled by a director of the Company. This
amount was repaid during 1997.
F-28
<PAGE> 84
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
Included in accounts receivable at June 30, 1998 are amounts due from two
shareholders of the Company, FutureLink Distribution Corp., a Colorado
corporation, and Chell McNeill Inc. for $18,893 and $9,681 respectively
(December 31, 1997 and 1996 - $Nil).
9. INCOME TAXES
As at December 31, 1997, the Company has approximately $950,000 of non-capital
loss carry forwards for tax purposes. The potential future benefit of these
losses has not been recognized in these financial statements. These losses
expire in 2004 and 2005.
10. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES RELATED TO OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JUNE 30 YEAR ENDED MARCH 28 TO
------------------------ DECEMBER 31 DECEMBER 31
1998 1997 1997 1996
$ $ $ $
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Accounts receivable (21,963) (11,806) (44,964) (8,158)
Inventory (3,643) -- -- --
Prepaid expenses and deposits (75,535) (25,689) (8,767) (1,669)
Notes receivable -- -- 104,500 (104,500)
Accounts payable and accrued
liabilities (238,530) 13,012 321,123 40,458
-------- ------- ------- -------
(339,671) (24,483) 371,892 (73,869)
======== ======= ======= =======
</TABLE>
F-29
<PAGE> 85
FUTURELINK DISTRIBUTION CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Information as at June 30, 1998 and for the six month periods ended June 30,
1998 and 1997 is unaudited)
11. DISCONTINUED OPERATIONS
Effective April 23, 1998, the Company discontinued its operations that provided
Internet web page design services. The remaining assets and liabilities related
to these operations have been written down to $1 resulting in a loss on
discontinuance of $60,616. On July 1, 1998, the Company disposed of the
discontinued operations in exchange for an investment in 50% of the common
shares of NextClick Ltd. The fair market value of this investment has been
estimated at $1.
During the period, revenues and results of the discontinued operations were as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JUNE 30 YEAR ENDED MARCH 28 TO
-------------------------- DECEMBER 31 DECEMBER 31
1998 1997 1997 1996
$ $ $ $
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Revenue 21,190 -- 22,585 --
======== ====== ======= =======
Results of operations (159,698) (6,680) (14,179) --
Loss on discontinuance (60,616) -- -- --
-------- ------ ------- -------
(220,314) (6,680) (14,179) --
======== ====== ======= =======
</TABLE>
12. CONTINGENCY
A statement of claim has been filed against the Company in the amount of
$285,000 seeking damages and loss of rent related to a purported lease agreement
with respect to a building in Calgary, Alberta. The Company is counter claiming
an amount of $360,000 against the claimant. It is impossible at this time for
the Company to predict with any certainty the outcome of such litigation.
However, management is of the opinion that the claim is without merit and will
defend the Company's position vigorously. These financial statements contain no
provision for loss related to the claims.
F-30
<PAGE> 86
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and 1997
----------------------
(Unaudited)
F-31
<PAGE> 87
[BUCHANAN, BARRY & CO. LETTERHEAD]
REVIEW ENGAGEMENT REPORT
To the Directors of
Riverview Management Corporation
We have reviewed the consolidated balance sheet of Riverview Management
Corporation as at June 30, 1998 and 1997 and the consolidated statements of
earnings and retained earnings and changes in financial position for the eight
months then ended. Our review was made in accordance with generally accepted
standards for review engagements and accordingly consisted primarily of enquiry,
analytical procedures and discussion related to information supplied to us by
the company.
A review does not constitute an audit and consequently we do not express an
audit opinion on these financial statements.
Based on our review, nothing has come to our attention that causes us to believe
that these financial statements are not, in all material respects, in accordance
with generally accepted accounting principles.
/s/ BUCHANAN, BARRY & CO.
--------------------------
Calgary, Alberta BUCHANAN, BARRY & CO.
August 13, 1998 CHARTEREDACCOUNTANTS
F-32
<PAGE> 88
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 AND 1997
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CURRENT
Accounts receivable $1,510,276 $1,539,994
Prepaid expenses 15,725 15,679
Inventory 19,041 51,840
---------- ----------
1,545,042 1,607,513
CAPITAL ASSETS (Note 2) 206,577 111,552
DEPOSITS 8,183 6,663
---------- ----------
$1,759,802 $1,725,728
========== ==========
LIABILITIES
CURRENT
Bank indebtedness $ 174,124 $ 101,401
Accounts payable and accrued liabilities 937,919 1,162,768
Income taxes payable 162,250 141,550
Loan payable 28,136 33,782
Shareholder loan 128,933 24,577
Current portion of obligation under capital lease 49,821 --
---------- ----------
1,481,183 1,464,078
OBLIGATION UNDER CAPITAL LEASE (Note 3) 17,250 --
---------- ----------
1,498,433 1,464,078
MINORITY INTEREST 21,676 83,600
---------- ----------
1,520,109 1,547,678
---------- ----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 4) 40 40
RETAINED EARNINGS
239,653 178,010
---------- ----------
239,693 178,050
---------- ----------
$1,759,802 $1,725,728
========== ==========
</TABLE>
APPROVED ON BEHALF OF THE BOARD
_______________________Director
_______________________Director
Buchanan, Barry & Co.
F-33
<PAGE> 89
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
EIGHT MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUE
System consulting $ 4,232,998 $ 2,863,237
Hardware and software sales 3,611,356 2,628,859
Sundry 191 577
----------- -----------
7,844,545 5,492,673
----------- -----------
EXPENSES
Advertising and promotion 85,851 52,471
Amortization 68,510 43,775
Automotive 38,590 18,662
Bad debts 7,475 3,300
Bank charges and interest 23,764 11,283
Equipment rental 7,280 8,498
Hardware and software purchases 3,314,946 2,403,900
Interest on capital lease obligation 12,161 --
Office 95,677 41,926
Professional fees 63,321 40,821
Rent 75,501 57,308
Salaries 3,500,311 2,217,073
Staff development 253,452 125,243
Telephone 109,917 78,351
Travel 14,017 8,063
----------- -----------
7,670,773 5,110,674
----------- -----------
EARNINGS BEFORE INCOME TAXES 173,772 381,999
INCOME TAXES 65,275 141,550
----------- -----------
108,497 240,449
MINORITY INTEREST (35,219) 63,065
----------- -----------
NET EARNINGS 143,716 177,384
RETAINED EARNINGS, beginning of period 141,937 46,626
----------- -----------
285,653 224,010
DIVIDENDS (46,000) (46,000)
----------- -----------
RETAINED EARNINGS, end of period $ 239,653 $ 178,010
=========== ===========
</TABLE>
Buchanan, Barry & Co.
F-34
<PAGE> 90
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
EIGHT MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 143,716 $ 177,384
Adjustments to operations not involving cash
Amortization 68,510 43,775
Minority interest (35,219) 63,065
--------- ---------
177,007 284,224
--------- ---------
Change in non-cash working capital items
Accounts receivable (144,732) (459,733)
Prepaid expense (6,714) (15,014)
Inventory (7,368) (45,000)
Accounts payable and accrued liabilities (53,779) 245,041
Deferred revenue -- (13,778)
Income taxes payable 28,060 127,289
Bonus payable (184,500) (108,600)
--------- ---------
(369,033) (269,795)
--------- ---------
(192,026) 14,429
--------- ---------
INVESTING ACTIVITIES
Acquisition of capital assets (72,264) (88,005)
Advancement of deposits (1,520) (6,663)
--------- ---------
(73,784) (94,668)
--------- ---------
FINANCING ACTIVITIES
Advances to shareholder 126,454 21,050
Repayment of loan payable (5,646) --
Repayment of capital lease obligation (21,053) --
Repayment of long-term debt -- (5,555)
Dividends paid (46,000) (46,000)
--------- ---------
53,755 (30,505)
--------- ---------
NET CHANGE IN CASH (BANK INDEBTEDNESS) (212,055) (110,744)
CASH, beginning of period 37,931 9,343
--------- ---------
BANK INDEBTEDNESS, end of period $(174,124) $(101,401)
========= =========
</TABLE>
Buchanan, Barry & Co.
F-35
<PAGE> 91
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
JUNE 30, 1998 AND 1997
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
company, its wholly-owned subsidiary Sysgold Inc. and Sysgold Ltd., an
entity controlled by the company. The consolidated financial statements
are prepared in accordance with accounting principles generally accepted
in Canada. The consolidated financial statements represent nine months of
the parent company and eight months of the subsidiaries as a result of
different fiscal year-ends.
INVENTORY
Inventory has been valued at the lower of cost or net realizable value.
Cost being determined on a first-in first-out basis.
CAPITAL ASSETS
Capital assets are recorded at cost. Amortization is provided annually at
rates calculated to write-off the assets over their estimated useful lives
as follows:
<TABLE>
<S> <C> <C>
Cellular phones 2.7% per month straight line
Computer hardware 4% per month straight line
Computer software 100% per annum declining balance
Leasehold improvements straight-line over the term of the lease
Office equipment 20% per annum declining balance
Equipment under capital lease 20% per annum declining balance
</TABLE>
MEASUREMENT UNCERTAINTY
The amount recorded for amortization of capital assets is based on
estimates. Management requires estimates to forecast economic indicators
for determining the net recoverable amount of such assets under generally
accepted accounting principles. By their nature, these estimates are
subject to measurement uncertainty and the effect of any changes in such
estimates on the financial statements of future periods could be material.
Management periodically reviews the useful lives of these assets to
determine the adequacy of the amortization policy.
2. CAPITAL ASSETS
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------
Accumulated Net Book Net Book
Cost Amortization Value Value
-------- ------------ -------- --------
<S> <C> <C> <C> <C>
Cellular phones $ 44,529 $ 23,007 $ 21,522 $ 15,844
Computer hardware 254,812 201,962 52,850 49,339
Computer software 28,752 25,883 2,869 4,354
Leasehold improvements 39,081 11,692 27,389 30,795
Office equipment 24,564 7,945 16,619 11,220
Equipment under capital lease 104,377 19,049 85,328 --
-------- -------- -------- --------
$496,115 $289,538 $206,577 $111,552
======== ======== ======== ========
</TABLE>
Buchanan, Barry & Co.
F-36
<PAGE> 92
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(Unaudited)
3. OBLIGATION UNDER CAPITAL LEASE
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
The following is a schedule of future minimum
lease payments under capital leases expiring
between July 1999 and July 2000.
Year ending October 31,
1998 $ 49,819 $ --
1999 30,222 --
2000 2,090 --
-------- ---------
Total minimum lease payments 82,131 --
Less amount representing interest imputed at
rates of 14 - 34% (15,060) --
-------- ---------
Balance of obligation 67,071 --
Less current portion (49,821) --
-------- ---------
Long-term portion of
obligation $ 17,250 $ --
======== =========
</TABLE>
4. SHARE CAPITAL
<TABLE>
<CAPTION>
Authorized 1998 1997
---------- ----------
<S> <C> <C>
Unlimited number of
Class A common voting shares
Class B common non-voting shares
Class C common non-voting redeemable shares
Class D common non-voting 8% cumulative
preferred shares with a redemption
price of $1 per share
Issued
100 Class A shares $ 10 $ 10
100 Class B shares 10 10
100 Class C shares 10 10
10 Class D shares 10 10
---------- ----------
$ 40 $ 40
========== ==========
</TABLE>
Buchanan, Barry & Co.
F-37
<PAGE> 93
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
JUNE 30, 1998 AND 1997
(Unaudited)
5. SUBSEQUENT EVENT
The company purchased the remaining 33% interest in its subsidiary Sysgold
Ltd. from the minority shareholder for cash proceeds of $315,000 on July
24, 1998. The shareholder buy-out was based on an effective valuation date
of April 30, 1996. The purchase was accounted for using the purchase
method. The purchase price allocation is estimated as follows:
<TABLE>
<CAPTION>
NET ASSETS ACQUIRED
<S> <C>
Current assets $514,182
Capital assets 67,257
Other assets 20,728
Goodwill 222,886
--------
825,053
--------
Current liabilities 411,740
Other liabilities 98,313
--------
510,053
--------
Net Assets $315,000
========
</TABLE>
6. COMMITMENTS
The company is committed under various operating leases including: office
equipment lease; $930 per month expiring May 2000, premises lease; $3,653
per month expiring January 2002 and vehicle lease; $1,693 expiring March
2001. The basic minimum lease payments for the duration of the agreements
is as follows:
<TABLE>
<S> <C>
1999 $ 75,311
2000 74,381
2001 59,068
2002 25,571
--------
$234,331
========
</TABLE>
Buchanan, Barry & Co.
F-38
<PAGE> 94
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997 and 1996
-------------------------
F-39
<PAGE> 95
[BUCHANAN, BARRY & CO. LOGO]
AUDITORS' REPORT
To the Directors of
Riverview Management Corporation
We have audited the consolidated balance sheet of Riverview Management
Corporation as at October 31, 1997 and 1996 and the consolidated statements of
earnings and retained earnings and changes in financial position for the years
then ended. These consolidated financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at October 31, 1997
and 1996 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
Calgary, Alberta Buchanan, Barry & co.
August 13, 1998 CHARTERED ACCOUNTANTS
F-40
<PAGE> 96
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CURRENT
Cash $ 37,931 $ 9,343
Accounts receivable 1,365,544 1,080,261
Prepaid expenses 9,011 665
Inventory 11,673 6,840
---------- ----------
1,424,159 1,097,109
CAPITAL ASSETS (Note 2) 202,823 67,319
DEPOSITS 6,663 --
---------- ----------
$1,633,645 $1,164,428
========== ==========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 991,698 $ 917,725
Bonus payable 184,500 108,600
Income taxes payable 134,190 14,261
Deferred revenue -- 13,778
Loan payable 33,782 33,782
Shareholder loans 2,479 3,527
Current portion of obligation under capital lease 32,821 --
Current portion of long-term debt (Note 3) -- 5,555
---------- ----------
1,379,470 1,097,228
OBLIGATION UNDER CAPITAL LEASE (Note 4) 55,303 --
---------- ----------
1,434,773 1,097,228
MINORITY INTEREST 56,895 20,534
---------- ----------
1,491,668 1,117,762
---------- ----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 40 40
RETAINED EARNINGS 141,937 46,626
---------- ----------
141,977 46,666
---------- ----------
$1,633,645 $1,164,428
========== ==========
</TABLE>
APPROVED ON BEHALF OF THE BOARD
_______________________Director
_______________________Director
Buchanan, Barry & Co.
F-41
<PAGE> 97
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUE
System consulting $ 4,587,504 $ 2,309,576
Hardware and software sales 4,929,610 2,967,732
Sundry 3,675 9,949
----------- -----------
9,520,789 5,287,257
----------- -----------
EXPENSES
Advertising and promotion 97,897 42,430
Amortization 73,747 57,218
Automotive 37,860 25,947
Bad debts 5,878 3,556
Bank charges and interest 15,986 13,474
Employee benefits 343,976 173,462
Equipment rental 12,720 --
Hardware and software purchases 4,500,816 2,724,037
Interest on long-term debt and capital lease obligation 4,629 4,150
Management fees -- 74,357
Memberships and subscriptions 26,161 27,351
Office 58,304 37,917
Out sourced administration 3,802 12,679
Professional fees 86,990 74,264
Rent 100,935 32,520
Repairs and maintenance 2,770 3,177
Salaries 2,589,611 1,386,708
Staff development 171,853 69,812
Supplies 18,727 23,067
System consultants 901,976 354,185
Telephone 132,503 78,360
Travel 21,056 18,097
----------- -----------
9,208,197 5,236,768
----------- -----------
EARNINGS BEFORE INCOME TAXES 312,592 50,489
INCOME TAXES 134,920 14,991
----------- -----------
177,672 35,498
MINORITY INTEREST 36,361 8,822
----------- -----------
NET EARNINGS 141,311 26,676
RETAINED EARNINGS, beginning of year 46,626 65,950
----------- -----------
187,937 92,626
DIVIDENDS (46,000) (46,000)
----------- -----------
RETAINED EARNINGS, end of year $ 141,937 $ 46,626
=========== ===========
</TABLE>
Buchanan, Barry & Co.
F-42
<PAGE> 98
RIVERVIEW MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
YEARS ENDED OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 141,311 $ 26,676
Adjustments to operations not involving cash
Amortization 73,747 57,218
Minority interest 36,361 8,822
--------- ---------
251,419 92,716
--------- ---------
Change in non-cash working capital items
Accounts receivable (285,283) (636,392)
Prepaid expense (8,346) 335
Inventory (4,833) 16,528
Accounts payable and accrued liabilities 73,973 552,704
Deferred revenue (13,778) (496)
Income taxes payable 119,929 (6,017)
Bonus payable 75,900 78,600
--------- ---------
(42,438) 5,262
--------- ---------
208,981 97,978
--------- ---------
INVESTING ACTIVITIES
Acquisition of capital assets (209,251) (66,001)
Advancement of deposits (6,663) --
--------- ---------
(215,914) (66,001)
--------- ---------
FINANCING ACTIVITIES
Advances (to) from shareholders (1,048) 5,423
Dividends paid to minority shareholders -- (2,128)
Advancement of capital lease obligation 104,376
Repayment of capital lease obligation (16,252)
Repayment of long-term debt (5,555) (13,332)
Dividends paid (46,000) (46,000)
--------- ---------
35,521 (56,037)
--------- ---------
NET CHANGE IN CASH 28,588 (24,060)
CASH, beginning of year 9,343 33,403
--------- ---------
CASH, end of year $ 37,931 $ 9,343
========= =========
</TABLE>
Buchanan, Barry & Co.
F-43
<PAGE> 99
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
OCTOBER 31, 1997 AND 1996
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
company, its wholly-owned subsidiary Sysgold Inc. and Sysgold Ltd., an
entity controlled by the company. The consolidated financial statements
are prepared in accordance with accounting principles generally accepted
in Canada. The fiscal year of the parent company is September 30th and the
fiscal year of the two subsidiaries is October 31st.
INVENTORY
Inventory has been valued at the lower of cost or net realizable value.
Cost being determined on a first-in first-out basis.
CAPITAL ASSETS
Capital assets are recorded at cost. Amortization is provided annually at
rates calculated to write-off the assets over their estimated useful lives
as follows:
<TABLE>
<S> <C> <C>
Cellular phones 2.7% per month straight line
Computer hardware 4% per month straight line
Computer software 100% per annum declining balance
Leasehold improvements straight-line over the term of the lease
Office equipment 20% per annum declining balance
Equipment under capital lease 20% per annum declining balance
</TABLE>
MEASUREMENT UNCERTAINTY
The amount recorded for amortization of capital assets is based on
estimates. Management requires estimates to forecast economic indicators
for determining the net recoverable amount of such assets under generally
accepted accounting principles. By their nature, these estimates are
subject to measurement uncertainty and the effect of any changes in such
estimates on the financial statements of future periods could be material.
Management periodically reviews the useful lives of these assets to
determine the adequacy of the amortization policy.
2. CAPITAL ASSETS
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------
Accumulated Net Book Net Book
Cost Amortization Value Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cellular phones $ 31,125 $ 15,551 $ 15,574 $ 11,323
Computer hardware 215,111 167,779 47,332 44,460
Computer software 21,896 19,444 2,452 1,723
Leasehold improvements 36,272 6,676 29,596 204
Office equipment 15,071 5,658 9,413 9,609
Equipment under capital lease 104,377 5,921 98,456
-------- -------- -------- --------
$423,852 $221,029 $202,823 $ 67,319
======== ======== ======== ========
</TABLE>
Buchanan, Barry & Co.
F-44
<PAGE> 100
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997 AND 1996
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
------------- -------
<S> <C> <C>
Bank loan bearing interest at prime plus 1%, secured by general
assignment of book debts and a chattel mortgage over equipment $ -- $ 5,555
Less current portion -- (5,555)
------------- -------
$ -- $ --
============= =======
</TABLE>
4. OBLIGATION UNDER CAPITAL LEASE
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
The following is a schedule of future minimum lease payments
under capital leases expiring between July 1999 and July 2000.
Year ending October 31,
1998 $ 49,819 $ --
1999 46,155 --
2000 19,370 --
--------- --------
Total minimum lease payments 115,344 --
Less amount representing interest imputed at rates of 14 - 34% (27,220) --
--------- --------
Balance of obligation 88,124 --
Less current portion of obligation 32,821 --
--------- --------
Long-term portion of obligation $ 55,303 $ --
========= ========
</TABLE>
5. SHARE CAPITAL
<TABLE>
<CAPTION>
Authorized 1997 1996
-------- --------
<S> <C> <C> <C>
Unlimited number of
Class A common voting shares
Class B common non-voting shares
Class C common non-voting shares
Class D common non-voting 8% non-cumulative preferred shares with a
redemption price of $1 per share
Issued
100 Class A shares $ 10 $ 10
100 Class B shares 10 10
100 Class C shares 10 10
10 Class D shares 10 10
-------- --------
$ 40 $ 40
======== ========
</TABLE>
Buchanan, Barry & Co.
F-45
<PAGE> 101
RIVERVIEW MANAGEMENT CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
OCTOBER 31, 1997 AND 1996
6. SUBSEQUENT EVENT
The company purchased the remaining 33% interest in its subsidiary Sysgold
Ltd. from the minority shareholder for cash proceeds of $315,000 on July
24, 1998. The shareholder buy-out was based on an effective valuation date
of April 30, 1996. The purchase was accounted for using the purchase
method. The purchase price allocation is estimated as follows:
<TABLE>
<CAPTION>
NET ASSETS ACQUIRED
<S> <C>
Current assets $514,182
Capital assets 67,257
Other assets 20,728
Goodwill 222,886
--------
825,053
--------
Current liabilities 411,740
Other liabilities 98,313
--------
510,053
--------
Net assets $315,000
========
</TABLE>
7. COMMITMENTS
The company is committed under various operating leases including: office
equipment lease; $930 per month expiring May 2000, premises lease; $3,653
per month expiring January 2002 and vehicle lease; $1693 per month
commencing March 1998 and expiring March 2001. The basic minimum lease
payments for the duration of the agreements are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 68,535
1999 75,311
2000 70,661
2001 64,151
2002 10,958
--------
$289,616
========
</TABLE>
Buchanan, Barry & Co.
F-46
<PAGE> 102
================================================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY.......................................
THE OFFERING.............................................
RISK FACTORS.............................................
USE OF PROCEEDS..........................................
DIVIDEND POLICY..........................................
CAPITALIZATION...........................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............
BUSINESS.................................................
MANAGEMENT...............................................
CERTAIN TRANSACTIONS.....................................
SELLING SHAREHOLDERS.....................................
DESCRIPTION OF CAPITAL STOCK.............................
PLAN OF DISTRIBUTION.....................................
LEGAL OPINION............................................
EXPERTS..................................................
INDEX TO FINANCIAL STATEMENTS............................ F-1
</TABLE>
================================================================================
14,907,052 SHARES
FUTURELINK DISTRIBUTION CORP.
4,250,000 SHARES OF COMMON STOCK
UNDERLYING BIALIK EXCHANGEABLE SHARES
9,615,384 SHARES OF COMMON STOCK
UNDERLYING $5,000,000 CONVERTIBLE DEBENTURES
1,041,667 SHARES OF COMMON STOCK UNDERLYING THOMSON KERNAGHAN WARRANTS
----------------
PROSPECTUS
----------------
August 24, 1998
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
FUTURELINK USA
FutureLink USA's Articles and bylaws provide that it may indemnify and advance
expenses to any person who incurs liability or expense by reason of such person
acting as a director, officer, employee or agent of FutureLink USA, to the
fullest extent allowed by the Colorado Business Corporation Act.
Sections 7-109-102 and 7-109-107 of the Colorado Business Corporation Act
provide that a corporation may indemnify its current and former officers,
directors, employees and agents against reasonable expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
which, in each case, were incurred in connection with actions, suits, or
proceedings in which such persons are parties by reason of the fact that they
are or were an officer, director, employee or agent of the corporation, if: (i)
they acted in good faith; (ii) in the case of conduct in an official capacity
with the corporation; the conduct was in the corporation's best interests; (iii)
in all other cases, the conduct was at least not opposed to the corporation's
best interests; and (iv) in the case of a criminal proceeding, they had no
reasonable cause to believe the conduct was unlawful. The corporation may not
indemnify an officer, director, employee or agent of the corporation: (i) in
connection with a proceeding by the corporation or enforcing rights of the
corporation in which such person is adjudged liable to the corporation or (ii)
in connection with any proceeding charging improper personal benefit, whether or
not acting in an official capacity, in which such person is adjudged liable on
the basis that personal benefit was improperly received. Unless limited by its
articles of incorporation, a corporation shall be required to indemnify an
officer, director, employee, or agent who was wholly successful in defense of a
proceeding, against reasonable attorneys' fees.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Effective July 1, 1998, FutureLink USA purchased Directors and Officers
Liability insurance with coverage of $2,000,000 from AON Financial Management
out of Denver, CO.
FUTURELINK ALBERTA
FutureLink Alberta's Articles state that it may, in its sole discretion
indemnify and advance expenses to any person who incurs liability or expense by
reason of such person acting as a director, officer, employee or agent of the
Corporation, to the fullest extent allowed by the Business Corporations Act
(Alberta).
The Business Corporations Act (Alberta) provides that a corporation may
indemnify its current and former officers and directors against reasonable
expenses which, in each case, were incurred in connection with actions, suits,
or proceedings in which such persons are parties by reason of the fact that they
are or were an officer or director of the corporation, if: (i) they acted
honestly and in good faith; (ii) in the case of a criminal or administrative
proceeding, they had no reasonable cause to believe the conduct was unlawful.
Unless limited by its articles of incorporation, a corporation shall
II-1
<PAGE> 104
be required to indemnify an officer or who was wholly successful in defense of a
proceeding, against reasonable attorneys' fees.
RIVERVIEW MANAGEMENT CORPORATION
RMC's Articles state that it may, in its sole discretion indemnify and advance
expenses to any person who incurs liability or expense by reason of such person
acting as a director, officer, employee or agent of the Corporation, to the
fullest extent allowed by the Business Corporations Act (Alberta).
The Business Corporations Act (Alberta) provides that a corporation may
indemnify its current and former officers and directors against reasonable
expenses which, in each case, were incurred in connection with actions, suits,
or proceedings in which such persons are parties by reason of the fact that they
are or were an officer or director of the corporation, if: (i) they acted
honestly and in good faith; (ii) in the case of a criminal or administrative
proceeding, they had no reasonable cause to believe the conduct was unlawful.
Unless limited by its articles of incorporation, a corporation shall be required
to indemnify an officer or who was wholly successful in defense of a proceeding,
against reasonable attorneys' fees.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following tables sets forth the various expenses in connection with the sale
and distribution of the securities being registered, other than underwriting
discounts and commissions and non-accountable expense allowance. All of the
amounts shown are estimates, except the Securities and Exchange Commission
registration and NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................ $ 4,385.29
Accounting fees and expenses................................................... $ 5,000.00
Printing and engraving expenses................................................ $ 5,000.00
Transfer agent and registrar (fees and expenses)............................... $ 2,000.00
Blue sky fees and expenses (including counsel fees)............................ $ 2,000.00
Other legal fees and legal expenses............................................ $25,000.00
Miscellaneous expenses......................................................... $ 8,000.00
----------
Total.......................................................................... $51,385.29
==========
</TABLE>
II-2
<PAGE> 105
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES.
Since December 2, 1997 the following FutureLink USA Common Shares have been
issued and remain outstanding (adjusted for all consolidations):
<TABLE>
<CAPTION>
NUMBER ISSUE PRICE AGGREGATE CONSIDERATION
DATE OF SHARES PER SHARE ISSUE PRICE RECEIVED
- ---- --------- --------- ----------- --------
<S> <C> <C> <C> <C>
December 2, 1997 (post 200:1 203,500 N/A $1,286,737 Services
consolidation) and post 30:1
consolidation
December 18, 1997 10,000,000 $0.01 $100,000 Cash
SUB-TOTAL-DEC 31, 1997 10,203,500 $1,386,737
January 20, 1998 83,334 $3.00 $250,000 Cash
January 20, 1998 1,540,000 $0.22 $338,800 Share Exchange
April 3, 1998 68,480 $3.75 $256,800 Cash
April 3, 1998 37,333 $3.75 $140,000 Cash
April 22, 1998 46,666 $3.00 $140,000 Cash
April 22, 1998 20,000 $3.00 $60,000 Cash
---------- ----- ---------
SUB-TOTAL - MAY 31, 1998 11,999,313(1) $2,572,337
July 7, 1998 3,500,000 $0.001 $3,500 Services
TOTAL- JULY 31, 1998 15,499,313(1) $2,575,837
</TABLE>
Notes:
(1) The figures in this schedule reconcile to the audited financial
statements and the records of the Corporation. The records of the
transfer agent vary and are shown as the following as issued and
outstanding: December 31, 1997 10,231,025; May 31, 1998 11,826,834; and
July 20, 1998 15,499,303.
ITEM 27. EXHIBITS.
(a) EXHIBITS
The following exhibits pursuant to Rule 601 of Regulation SB are included
herein.
3.1.1 Articles of Incorporation of Cortez Uranium and Mining Co. (now
known as FutureLink USA), as amended dated April 4, 1955 (to be
filed by amendment).
3.1.2 Articles of Incorporation of FutureLink Alberta dated March 28,
1996 as amended dated June 13, 1996 and November 17, 1997.
3.1.3 Articles of Incorporation of Riverview Management Corporation
dated August 18, 1987, as amended.
3.2.1 ByLaws of Core Ventures, Inc. (now known as FutureLink USA), as
adopted July 20, 1997.
3.2.2 By-Laws of FutureLink Alberta.
3.2.3 By-Laws of Riverview Management Corporation, as adopted
September 9, 1987.
4.1.1 Agreement by and between FutureLink and Thomson Kernaghan & Co.
Ltd. dated August 14, 1998.
4.1.2 Share Purchase Agreement by and among FutureLink USA, Donald A.
Bialik, Olivia B. Bialik, Bialik Family Trust, Riverview
Management Corporation, SysGold Ltd., and FutureLink Alberta
dated August 4, 1998.
4.1.3 Targetco Acquisition Agreement by and between FutureLink USA
and FutureLink Alberta, dated August 3, 1998.
5 Jeffer, Mangels, Butler & Marmaro LLP Legal Opinion (to be filed
by amendment).
10.1.1 Commercial Insurance Policy with Financial Management Alberta
Ltd., dated February 10, 1998.
10.1.2 Indemnity Agreement by and between Core Ventures, Inc. (now
known as FutureLink USA) and John Anastasios Xinos, dated
January 19, 1998.
10.1.3 Letter of Intent from Core Ventures, Inc. (now known as
FutureLink USA) to Printscan International, Inc., dated
August 22, 1997.
10.1.4 Lease Agreement, as amended by and between Coffee.Com
Interactive Cafe Corp. (now known as FutureLink Alberta) and
Manufacturers Life Insurance Company, dated March 20, 1997.
10.1.5 Employment Agreement by and between SysGold Ltd. and Apprentice
of Calgary dated January 1, 1998.
10.1.6 Consulting and Confidentiality Agreement by and between
SysGold, Inc. and S.1.Systems Ltd., dated August 13, 1997.
10.1.7 Independent Contractor Agreement by and SysGold Ltd. and BV
Ridge Consulting dated March 10, 1997.
10.1.8 Revised Offer to Lease by and between SysGold Ltd. and Bow
Valley Square Management Ltd., dated March 24, 1998.
10.1.9 Generic Contract Information Systems Services Agreement by and
between UMC Resources CANADA Ltd. and SysGold Ltd., dated
July 1, 1998.
10.1.10 Business Partner Agreement with addendum by and between SysGold
Ltd. and Lotus Development Canada Limited.
10.1.11 Final Invoice/Enrollment Contract by and between SysGold Ltd.
and Microsoft Certified Solution Provider, dated
December 12, 1997.
10.1.12 Agreement of understanding by and between SysGold Ltd. and
Seanix.
10.1.13 Industry Partner Agreement by and between MISSolutions D.B.A.
ETI Solutions and SysGold Ltd.
II-3
<PAGE> 106
10.1.14 Arbor Systems Integration Partner Agreement by and between Arbor
Software Corporation and SysGold, Inc., dated March 1, 1998.
10.1.15 Citrix Solutions Network Membership Agreement by and between
Citrix Systems, Inc. and FutureLink Alberta, dated May 5, 1998.
10.1.16 Solution Provider Contract by and between IBM Canada Ltd. and
SysGold Ltd. dated July 17, 1998.
10.1.17 Distributor Authorized Reseller Agreement by and between
Hewlett Packard and SysGold, Inc., dated March 19, 1998.
10.1.18 Security Agreement by and between Canadian Imperial Bank of
Commerce and Riverview Management Corporation, dated
December 11, 1997.
10.1.19 Letter Agreement by and between FutureLink USA and NTN Network,
dated April 29, 1998.
10.1.20 Enrollment Agreement by and between Microsoft Corporation and
FutureLink, dated April 28, 1998.
10.1.21 Service Agreement by and between FutureLink and Willson
Stationers Ltd., dated June 1, 1998.
10.1.22 Service Agreement by and between FutureLink and Jaws
Technologies, Inc., dated June 1, 1998.
10.1.23 Service Agreement by and between FutureLink and Financial
Management Alberta, Ltd.
10.1.24 Service Agreement by and between FutureLink and Chell McNeill,
Inc., dated April 17, 1998.
10.1.25 Service Agreement by and between FutureLink and Sheraton
Business Forms Ltd. dated July 1, 1998.
10.1.26 Service Agreement by and between FutureLink and Bankton
Financial Corporation, dated April 17, 1998.
10.1.27 Business Credit Agreement by and between Canadian Imperial Bank
of Commerce and SysGold Ltd., dated April 16, 1998.
10.1.28 Share Purchase Agreement by and among Core Ventures, Inc. (now
known as FutureLink USA), FutureLink Alberta, Cameron Chell, and
Linda Carling, dated January 20, 1998.
10.1.29 FutureLink USA Stock Option Plan dated June 29, 1998.
21 Subsidiaries of Issuer include:
1. FutureLink Alberta
2. Riverview Management Corporation
23.1 Consent of Jeffer, Mangels, Butler & Marmaro LLP.
23.2 Consent of Ernst & Young.
23.2.2 Consent of Halpin Antony Owen Mayer.
23.2.3 Consent of Buchanan Barry & Co.
ITEM 28. 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 the 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) and any
deviation from the low or high end of the
estimated maximum Offering range may be
reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b)
(Section 230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price
represent no more than a 20% 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 the Registration Statement or any
material change to such information in the
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 therein,
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 the securities being registered which
remain unsold at the termination of the Offering.
Insofar as indemnification for liabilities arising from the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Calgary,
Province of Alberta on the 24th day of August, 1998.
FUTURELINK DISTRIBUTION CORP.
By: /s/ CAMERON CHELL
--------------------------------------------
Cameron Chell, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Cameron Chell or Raghu Kilambi, or either of them, his true and lawful
attorney-in-fact and agent, acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, any Amendments thereto and any Registration
Statement for the same Offering which is effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, each acting
alone, full powers and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorney-in-fact and agent, acting alone, or his 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 has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ CAMERON CHELL CEO and Director August 24, 1998
- ----------------------------------------
Cameron Chell
/s/ ROBERT KUBBERNUS Director August 24, 1998
- ----------------------------------------
Robert Kubbernus
Director August 24, 1998
- ----------------------------------------
Bryson Farrill
/s/ RAGHU KILAMBI Director, Vice President Corporate August 24, 1998
- ---------------------------------------- Finance, Corporate Secretary,
Raghu Kilambi CFO and Chief Accounting Officer
/s/ LINDA M. MURRAY Assistant Corporate August 24, 1998
- ---------------------------------------- Secretary
Linda M. Murray
/s/ PHILIP LADOUCEUR Director August 24, 1998
- ----------------------------------------
Philip Ladouceur
/s/ DON BIALIK President August 24, 1998
- ---------------------------------------
Don Bialik
/s/ ROBERT H. KOHN Director August 24, 1998
- ---------------------------------------
Robert H. Kohn
</TABLE>
II-5
<PAGE> 1
- --------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 4
(SECTION 27 OR 171)
Consumer and
ALBERTA Corporate Affairs ARTICLES OF AMENDMENT
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION | 2. CORPORATE ACCESS NUMBER
|
COFFEE.COM INTERACTIVE CAFE CORP. | 20689936
|
- --------------------------------------------------------------------------------
3. ITEM NO. 1 OF THE ARTICLES OF THE ABOVE NAMED CORPORATION ARE AMENDED IN
ACCORDANCE WITH SECTION 167(1)(a) OF THE BUSINESS CORPORATION ACT
By deleting Article 1 in its entirety and by substituting the following
new Article 1:
1. The name of the Corporation if FUTURELINK DISTRIBUTION CORP.
- --------------------------------------------------------------------------------
| |
DATE | SIGNATURE | TITLE
| /s/ [SIG]
NOVEMBER 10, 1997 | --------------------------- | SECRETARY
| |
- --------------------------------------------------------------------------------
| FILED
FOR DEPARTMENTAL USE ONLY |
| NOV. 17, 1997
CCA-06.104 |
(REV 12/86) | Registrar of Corporations
Province of Alberta
<PAGE> 2
- --------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 4
(SECTION 27 OR 171)
Consumer and
ALBERTA Corporate Affairs ARTICLES OF AMENDMENT
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION | 2. CORPORATE ACCESS NUMBER
|
689936 ALBERTA LTD. | 20689936
|
- --------------------------------------------------------------------------------
3. ITEM NO. 1 OF THE ARTICLES OF THE ABOVE NAMED CORPORATION ARE AMENDED IN
ACCORDANCE WITH SECTION 167(1)(a) OF THE BUSINESS CORPORATIONS ACT
By deleting Article 1 in its entirety and by substituting the following
new Article 1:
1. The name of the Corporation if COFFEE.COM INTERACTIVE CAFE CORP.
- --------------------------------------------------------------------------------
| |
DATE | SIGNATURE | TITLE
| |
JUNE 19, 1996 | /s/ GERALD R. ALBERT | Solicitor
| --------------------------- |
| Gerald R. Albert |
- --------------------------------------------------------------------------------
| FILED
FOR DEPARTMENTAL USE ONLY |
| JUN 20, 1996
|
| Registrar of Corporations
| Province of Alberta
<PAGE> 3
- --------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 4
(SECTION 27 OR 171)
Consumer and
ALBERTA Corporate Affairs ARTICLES OF AMENDMENT
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION: 2. CORPORATE ACCESS NUMBER:
689936 ALBERTA LTD. 20689936
- --------------------------------------------------------------------------------
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
(a) BY DELETING ITEM NO 3. OF THE ARTICLES OF THE ABOVE-NAMED CORPORATION
IN ITS ENTIRETY IN ACCORDANCE WITH SECTION 167(l) OF THE BUSINESS
CORPORATIONS ACT AND REPLACE WITH NONE.
(b) BY AMENDING ITEM NO. 4 OF THE ARTICLES OF THE ABOVE-NAMED CORPORATION
IN ACCORDANCE WITH SECTION 167(k) OF THE BUSINESS CORPORATIONS ACT TO
READ AS FOLLOWS:
4. NUMBER, OR MINIMUM AND MAXIMUM NUMBER, OF DIRECTORS THAT THE
CORPORATION MAY HAVE:
The Corporation may have a minimum of three (3) directors and a
maximum of eleven (11) directors.
(c) BY AMENDING ITEM NO. 6 OF THE ARTICLES OF THE ABOVE-NAMED CORPORATION
IN ACCORDANCE WITH SECTION 167(m) OF THE BUSINESS CORPORATIONS ACT TO
READ AS FOLLOWS:
6. OTHER RULES OR PROVISIONS (IF ANY):
(1) The Corporation shall have a lien on all shares registered
in the name of a shareholder or his legal representative
for any debt of that shareholder to the Corporation.
(2) The directors of the Corporation may, between annual
meetings of the Corporation, appoint one or more additional
directors of the Corporation to hold office until the next
annual meeting, but the number of additional directors
shall not at any time exceed one-third of the number of
directors who held office at the close of the last annual
meeting of the Corporation.
- --------------------------------------------------------------------------------
DATE SIGNATURE TITLE
JUNE 12, 1996 [SIG] SOLICITOR
----------------
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
FILED
JUN 13, 1996
Registrar of Corporations
Province of Alberta
CCA-06.104
(REV 12/86)
<PAGE> 4
- --------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 1
(Section 6)
Consumer and
ALBERTA Corporate Affairs ARTICLE OF INCORPORATION
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION:
20689936
888936 ALBERTA LTD.
- --------------------------------------------------------------------------------
2. THE CLASSES, AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE.
See Schedule "A" attached hereto.
- --------------------------------------------------------------------------------
3. RESTRICTIONS ON SHARE TRANSFERS (IF ANY):
The right to transfer is restricted in that no shares may be transferred
without the approval of the directors of the Corporation.
- --------------------------------------------------------------------------------
4. NUMBER, OR MINIMUM AND MAXIMUM NUMBER OF DIRECTORS THAT THE CORPORATION
MAY HAVE.
The Corporation may have a minimum of one (1) director and a maximum of
eleven (11) directors.
- --------------------------------------------------------------------------------
5. IF THE CORPORATION IS RESTRICTED FROM CARRYING ON A CERTAIN BUSINESS, OR
RESTRICTED TO CARRYING ON A CERTAIN BUSINESS, SPECIFY THE RESTRICTION(S):
No restrictions.
- --------------------------------------------------------------------------------
6. OTHER RULES OR PROCEDURES (IF ANY):
(1) The number of shareholders of the Corporation, exclusive of:
(a) persons who are in its employment and are shareholders of the
Corporation, and
(b) persons who, having been formerly in the employment of the
Corporation were, while in that employment, shareholders of the
Corporation and have continued to be shareholders of the Corporation
after termination of that employment.
is limited to not more than fifty (5) persons, two or more persons who are
the joint registered owners of one or more shares being counted as one
shareholder.
(2) Any invitation to the public to subscribe for securities issued by the
Corporation is prohibited.
(3) The Corporation shall have a lien on all shares registered in the name of a
shareholder or his legal representative for any debt of that shareholder to
the Corporation.
(4) The directors of the Corporation may, between annual meetings of the
Corporation, appoint one or more additional directors of the Corporation
to hold office until the next annual meeting, but the number of additional
directors shall not at any time exceed one-third of the number of directors
who held office at the close of the last annual meeting of the Corporation.
- --------------------------------------------------------------------------------
7. DATE: 1996 March 27TH
- --------------------------------------------------------------------------------
INCORPORATORS NAMES: ADDRESS (including Postal Code) SIGNATURE [SIG]
- --------------------------------------------------------------------------------
GERALD R. ALBERT C200, 9705 HORTON ROAD S.W.
CALGARY, ALBERTA, T2V 2X5
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
CORPORATE ACCESS NO. INCORPORATION DATE MAR 28 1996
CCA-06.101 Registrar of Corporations
(REV 12/96) Province of Alberta
<PAGE> 5
-2-
dividend or of a proportionate dividend on the Class B Common shares.
(d) Notwithstanding (b), no dividend may be declared or paid on the Class
B Common Shares if payment of the dividend would cause the realizable
value of the Corporation's assets to be less than the aggregate of
its liabilities and the amount required to redeem all
SCHEDULE "A"
(1) The Corporation is authorized to issue an unlimited number of Class A
Common shares having attached thereto, as a class, the following rights,
privileges, restrictions and conditions:
(a) The right to vote at any meeting of the shareholders of the
Corporation.
(b) The right, subject to any preferential rights attaching to any other
class or series of shares of the Corporation, to receive dividends
as, when, and if declared on the Class A Common shares by the
Corporation.
(c) Notwithstanding (b) and subject to any preferential rights attaching
to any other class or series of shares of the Corporation, dividends
may be paid on the Class B Common shares to the exclusion of any
dividend or of a proportionate dividend on the Class A Common shares.
(d) Notwithstanding (b), no dividend may be declared or paid on the Class
A Common shares if payment of the dividend would cause the realizable
value of the Corporation's assets to be less than the aggregate of
its liabilities and the amount required to redeem all shares of the
Corporation then outstanding having attached thereto a redemption or
retraction right.
(e) the right, subject to any preferential rights attaching to any other
class or series of shares of the Corporation, to share in the
remaining property of the Corporation upon dissolution.
(2) The Corporation is also authorized to issue an unlimited number of
Class B Common shares having attached thereto, as a class, the following,
rights, privileges, restrictions and conditions:
(a) No right to notice of, to attend, or to vote at meetings of the
shareholders of the Corporation.
(b) The right, subject to any preferential rights attaching to any other
class or series of shares of the Corporation, to receive dividends
as, when and if declared on the Class B Common shares by the
Corporation.
(c) Notwithstanding (b) and subject to any preferential rights attaching
to any other class or series of shares of the Corporation, dividends
may be paid on the Class A Common shares to the exclusion of any
FILED
MAR 28 1996
Registrar of Corporations
Province of Alberta
<PAGE> 1
CORPORATE ACCESS NUMBER: 203707310
[ALBERTA LOGO]
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
AMENDMENT AND REGISTRATION
OF RESTATED ARTICLES
RIVERVIEW MANAGEMENT CORPORATION
AMENDED ITS ARTICLES ON 1998/08/07.
[REGISTRAR OF CORPORATIONS SEAL]
<PAGE> 2
20370731
---------------------
Corporate Account No.
[ALBERTA LOGO]
BUSINESS CORPORATIONS ACT
FORM 5
CERTIFICATE OF AMENDMENT
- RIVERVIEW MANAGEMENT CORPORATION -
- --------------------------------------------------------------------------------
Name of Corporation
I HEREBY CERTIFY THAT THE ARTICLES OF THE ABOVE-MENTIONED CORPORATION WERE
AMENDED.
/ / UNDER SECTION 13 OF THE BUSINESS CORPORATIONS ACT IN ACCORDANCE WITH THE
ATTACHED NOTICE;
/ / UNDER SECTION 27 OF THE BUSINESS CORPORATIONS ACT AS SET OUT IN THE
ATTACHED ARTICLES OF AMENDMENT DESIGNATING A SERIES OF SHARES;
/X/ UNDER SECTION 171 OF THE BUSINESS CORPORATIONS ACT AS SET OUT IN THE
ATTACHED ARTICLES OF AMENDMENT;
/ / UNDER SECTION 185 OF THE BUSINESS CORPORATIONS ACT AS SET OUT IN THE
ATTACHED ARTICLES OF REORGANIZATION;
/ / UNDER SECTION 186 OF THE BUSINESS CORPORATIONS ACT AS SET OUT IN THE
ATTACHED ARTICLES OF ARRANGEMENT.
[SIG]
---------------------------------------
Registrar of Corporations
February 24, 1993
---------------------------------------
Date of Amendment
[ALBERTA CORPORATE REGISTRY
CONSUMER AND CORPORATE AFFAIRS SEAL]
<PAGE> 3
20370731
--------
Corporate Account No.
ALBERTA
BUSINESS CORPORATIONS ACT
Form 2
CERTIFICATE OF INCORPORATION
- RIVERVIEW MANAGEMENT CORPORATION -
Name of Corporation
I HEREBY CERTIFY THAT THE ABOVE-MENTIONED CORPORATION, THE ARTICLES OF
INCORPORATION OF WHICH ARE ATTACHED, WAS INCORPORATED UNDER THE BUSINESS
CORPORATIONS ACT OF THE PROVINCE OF ALBERTA.
[SIG]
-----------------------------------------
Registrar of Corporations
September 9, 1987
ALBERTA -----------------------
CORPORATE REGISTRY Date of Incorporation
CONSUMER AND CORPORATE AFFAIRS
<PAGE> 4
<TABLE>
<CAPTION>
NAME/STRUCTURE CHANGE ALBERTA CORPORATION - REGISTRATION STATEMENT
<S> <C>
SERVICE REQUEST NUMBER: 517574
CORPORATE ACCESS NUMBER: 203707310
PREVIOUS LEGAL ENTITY NAME: RIVERVIEW MANAGEMENT CORPORATION
PREVIOUS FRENCH EQUIVALENT NAME:
LEGAL ENTITY NAME: RIVERVIEW MANAGEMENT CORPORATION
FRENCH EQUIVALENT NAME:
LEGAL ENTITY STATUS: Active
ALBERTA CORPORATION TYPE: Named Alberta Corporation
NUANS REPORT NUMBER: PRE-CONV
NUANS REPORT DATE: 1987/09/09
FRENCH NAME NUANS REPORT NUMBER:
FRENCH NAME NUANS REPORT DATE:
CLASSES OF SHARES AND ANY
MAXIMUM NUMBER (WITHIN EACH CLASS): SHARE CAPITAL ATTACHMENT
RESTRICTIONS ON SHARE TRANSFERS: SHARE TRANSFER RESTRICTIONS ATTACHMENT
MINIMUM NUMBER OF DIRECTORS: 2
MAXIMUM NUMBER OF DIRECTORS: 7
RESTRICTIONS ON BUSINESS TO: NONE
RESTRICTIONS ON BUSINESS FROM: NONE
OTHER PROVISIONS: OTHER PROVISIONS ATTACHMENT
SECTION AND SUBSECTION OF ACT CHANGE MADE UNDER: SECTION 167(1)(C),(D),(E) AND (F)
DIRECTORS ISSUE SHARES IN SERIES:
PROFESSIONAL ENDORSEMENT PROVIDED:
FUTURE DATING REQUIRED:
AMENDMENT DATE: 1998/08/07
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
ANNUAL RETURNS
<S> <C>
FILE YEAR DATE FILED
1997 1997/11/05
1996
1995
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Court Orders
<S> <C> <C> <C> <C>
ORDER TYPE ORDER DATE ORDER NUMBER JUDICIAL DISTRICT TERMINATION DATE
- ---------- ---------- ------------ ----------------- ----------------
- -----------------------------------------------------------------------------------------
</TABLE>
ATTACHMENTS
<PAGE> 5
<TABLE>
==============================================================================
ATTACHMENT TYPE MICROFILM BAR CODE DATE RECORDED
==============================================================================
<S> <C> <C>
Share Capital ELECTRONIC 1998/08/07
==============================================================================
Restrictions on Share Transfers ELECTRONIC 1998/08/07
==============================================================================
Other Rules or Provisions ELECTRONIC 1998/08/07
==============================================================================
Section 167(1)(f) Schedule ELECTRONIC 1998/08/07
==============================================================================
</TABLE>
REGISTRATION AUTHORIZED BY: MAX J. WANDINGER
SOLICITOR
<PAGE> 6
PROVINCE OF ALBERTA FORM 4
CONSUMER AND CORPORATE AFFAIRS
BUSINESS CORPORATIONS ACT
(SECTIONS 27 OR 171)
ARTICLES OF AMENDMENT
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION: 2. CORPORATE ACCESS NUMBER:
RIVERVIEW MANAGEMENT 20370731
CORPORATION
- --------------------------------------------------------------------------------
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
A. Pursuant to paragraphs 167(1)(c), 167(1)(d) and 167(1)(e) of the Business
Corporations Act, to delete therefrom Articles 2 in its entirety and to
substitute therefor the following:
2. The Classes and Any Maximum Number of Shares
That the Corporation is Authorized to Issue
2.1 Authorized Capital
(a) An unlimited number of Class "A" voting common shares;
(b) An unlimited number of Class "B" voting common shares;
(c) An unlimited number of Class "C" non-voting common shares;
(d) An unlimited number of Class "D" non-voting common shares;
(e) An unlimited number of Class "E" non-voting common shares;
(f) An unlimited number of Class "F" non-voting common shares;
(g) An unlimited number of Class "G" non-voting common shares;
(h) An unlimited number of Class "H" non-voting common shares;
(i) An unlimited number of Class "I" non-voting common shares;
(j) An unlimited number of Class "J" voting Redeemable Preferred shares;
(k) An unlimited number of Class "K" non-voting Redeemable Preferred shares; and
(l) An unlimited number of Class "L" non-voting Redeemable Preferred shares.
2.2 The Special Rights, Privileges, Restrictions
and Conditions Attaching to each Class of Shares
2.2(A) COMMON SHARES
(a) Voting
The holders of Class "A", Class "B" and Class "J" shares
shall be entitled to receive notice of and to vote at all
meetings of the shareholders of the Corporation except
meetings at which only holders of a specified class of shares
are by the provisions of the Business Corporations Act
entitled to vote. Subject always to the Business Corporations
Act, the holders of Class "C", "D", "E", "F", "G", "H", "I",
"K" and "L" shares shall not be entitled to receive notice of
or attend any meetings of the shareholders of the Corporation
and shall not be entitled to vote at such meetings.
</TABLE>
<PAGE> 7
-2-
(b) Dividends
Subject to the rights of the holders of all of the preferred classes
of shares, the holders of the Common Shares shall be entitled to
receive dividends declared and payable by the Corporation on the
Common Shares.
The holders of each share of every class of the shares shall be
entitled to receive dividends as and when declared by the
Directors, acting in their sole discretion, which dividends may be
declared on one class of shares wholly or partially to the
exclusion of dividends in respect of any other class of shares.
(c) Liquidation
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary:
(i) the holders of the Class "J", "K" and "L" shares shall rank
equally amongst themselves as to each share held and shall
be entitled to receive before distribution of any part of
the assets of the Corporation amongst the holders of shares
of any other class in the share capital of the Corporation,
an amount equal to one hundred (100%) per cent of the
redemption Amount of the shares and any dividends declared
thereon and unpaid and no more; and
(ii) the holders of the Class "A" shares shall be entitled to
receive in respect of each Class "A" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "B", "C", "D", "E", "F",
"G", "H" and "I" shares in the share capital of the
Corporation, an amount equal to the quotient obtained when
the stated capital maintained for the Class "A" shares is
divided by the number of Class "A" shares then outstanding;
(iii) the holders of the Class "B" shares shall be entitled to
receive in respect of each Class "B" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "C", "D", "E", "F", "G",
"H" and "I" shares in the share capital of the Corporation,
an amount equal to the quotient obtained when the stated
capital maintained for the Class "B" shares is divided by
the number of Class "B" shares then outstanding;
(iv) the holders of the Class "C" shares shall be entitled to
receive in respect of each Class "C" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "D", "E", "F", "G", "H"
and "I" shares in the share capital of the Corporation, an
amount equal to the quotient obtained when the stated
capital maintained for the Class "C" shares is divided by
the number of Class "C" shares then outstanding;
(v) the holders of the Class "D" shares shall be entitled to
receive in respect of each Class "D" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "E", "F", "G", "H" and
"I" shares in the share capital of the Corporation, an
amount equal to the
<PAGE> 8
- 3 -
quotient obtained when the stated capital maintained for
the Class "D" shares is divided by the number of Class "D"
shares then outstanding:
(vi) the holders of the Class "E" shares shall be entitled to
receive in respect of each Class "E" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "F", "G", "H" and "I"
shares in the share capital of the Corporation, an amount
equal to the quotient obtained when the stated capital
maintained for the Class "E" shares is divided by the
number of Class "E" shares then outstanding:
(vii) the holders of the Class "F" shares shall be entitled to
receive in respect of each Class "F" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "G", "H" and "I" shares
in the share capital of the Corporation, an amount equal
to the quotient obtained when the stated capital
maintained for the Class "F" shares is divided by the
number of Class "F" shares then outstanding;
(viii) the holders of the Class "G" shares shall be entitled to
receive in respect of each Class "G" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "H" and "I" shares in the
share capital of the Corporation, an amount equal to the
quotient obtained when the stated capital maintained for
the Class "G" shares is divided by the number of Class "G"
shares then outstanding:
(ix) the holders of the Class "H" shares shall be entitled to
receive in respect of each Class "H" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of the Class "I" shares in the share
capital of the Corporation, an amount equal to the
quotient obtained when the stated capital maintained for
the Class "H" shares is divided by the number of Class "H"
shares then outstanding:
(x) the holders of the Class "I" shares shall be entitled to
receive in respect of each Class "I" share held, before
distribution of any part of the assets of the Corporation
amongst the holders of any other class of shares in the
share capital of the Corporation other than a distribution
pursuant to paragraphs 2.2(f)(i) through 2.2(f)(ix)
herein, an amount equal to the quotient obtained when the
stated capital maintained for the Class "I" shares is
divided by the number of Class "I" shares then
outstanding; and
(xi) thereafter, the holders of Class "A", "B", "C", "D", "E",
"F", "G", "H" and "I" shares shall be entitled to
participate equally amongst themselves in respect of each
share held in any further distribution of the assets of
the Corporation.
2.2(B) CLASS "J" VOTING REDEEMABLE PREFERRED SHARES
An unlimited number of Class "J" Voting Redeemable Preferred Shares
(in this paragraph referred to as the "Class "J" Voting Redeemable Preferred
Shares") have been created by the Corporation for the purpose of issuances in
exchange for property, (other than a promissory note or a promise to pay), and
the Class "J" Voting Redeemable Preferred Shares shall have the following
rights, restrictions, privileges, conditions and limitations:
<PAGE> 9
-4-
(a) Dividend Rights
The holders of Class "J" Voting Redeemable Preferred Shares shall be
entitled to receive dividends as and when declared by the Directors but
always in preference and priority to any payment of dividends on any other
shares of the Corporation (except any shares which by their terms are
specifically stated to rank prior to the Class "J" Voting Redeemable
Preferred Shares in the declaration and payment of dividends) out of the
monies of the Corporation properly applicable to the payment of dividends,
which dividends shall be non-cumulative preferential dividends at a rate
per annum equal to the prescribed rate of interest for the purposes of
subsection 256(11) of the Income Tax Act (Canada) as of the time of
issuance of the first then issued shares of the particular class (the
"Prescribed Rate") in each case on the Redemption Amount thereof (as
described herein) as may be determined by the Directors, payable at such
time or times and at such place or places as the Directors may determine.
The Directors shall be entitled from time to time to declare part of the
said non-cumulative dividend for any fiscal year notwithstanding that such
dividend for such fiscal year shall not be declared in full. The said
dividends shall be non-cumulative whether earned or not earned and if in
any fiscal year the Directors in their discretion shall not declare the
said dividends or any part thereof, then the right of the holders of the
Preferred shares to such dividends or to any undeclared part thereof for
the fiscal year shall be extinguished. The holders of the Class "J" Voting
Redeemable Preferred Shares shall in no circumstances be entitled to any
dividends other than or in excess of the non-cumulative dividends at the
rate herein provided for.
(b) Repayment of Capital
In the event of the liquidation, dissolution or winding up of the
Corporation or other distribution of its assets amongst the shareholders by
way of repayment of capital, the holders of the Class "J" Voting Redeemable
Preferred Shares shall be entitled to receive an amount per share equal to
the Redemption Amount (as hereinafter defined) together with all declared
but unpaid dividends thereon to the date of the liquidation, dissolution or
winding up in priority to any distribution to the holders of any other
shares of the Corporation (except any shares which by the terms are
specifically stated to rank prior to the Class "J" Voting Redeemable
Preferred Shares in respect of such distributions) and the holders of the
Class "J" Voting Redeemable Preferred Shares shall have no further right to
participate in profits or assets in respect of such liquidation,
dissolution or winding up of the Corporation.
(c) Redemption
(i) The Class "J" Voting Redeemable Preferred Shares, or any number
thereof, shall be subject to redemption at an amount per share equal to the
amount obtained by dividing the difference between the fair market value of
the property (the "Property") transferred to the Corporation on the
issuance of the Class "J" Voting Redeemable Preferred Shares and the amount
of any consideration (other than Class "J" Voting Redeemable Preferred
Shares) transferred to the transferor of the Property in connection with
the transfer, by the number of Class "J" Voting Redeemable Preferred Shares
issued on the transfer of the Property to the Corporation (the "Redemption
Amount") together with all declared but unpaid dividends thereon, if any,
at any time at the option of the Directors without the consent of the
holders thereof. If
<PAGE> 10
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less than all of the outstanding Class "J" Voting Redeemable
Preferred Shares shall be so redeemed, the shares to be
redeemed shall at any particular time, or from time to time,
be selected by lot or otherwise in such manner as the
Directors may determine. Written notice shall be provided to
all holders of the number of shares redeemed and the notice
shall provide that payment for the redeemed shares shall be
made at the place in Canada designated in the aforesaid
notice upon surrender of the certificate or certificates for
the shares so redeemed. From and after the date of the
giving of the notice of redemption the Class "J" Voting
Redeemable Preferred Shares called for redemption shall be
deemed to be redeemed and the holders thereof shall have no
rights whatsoever in respect thereof except to receive the
payment therefor upon surrender of the certificate on
certificates representing the redeemed Class "J" Voting
Redeemable Preferred Shares. The Directors may make and
enforce all and any other such reasonable regulations not
inconsistent with this paragraph or the Articles or By-laws
governing the manner of the redemption of the Class "J"
Voting Redeemable Preferred Shares as they may in their sole
discretion deem advisable.
(iii) The Class "J" Voting Redeemable Preferred Shares or any
number thereof shall be subject to redemption at an amount
per share equal to the Redemption Amount together with all
declared but unpaid dividends thereon, if any, at any time
at the option of the holders thereof without the consent of
the Directors, or the Corporation, provided that if the
Corporation would be prevented by the Business Corporations
Act of Alberta or any other law in force in the Province of
Alberta from redeeming all of the Class "J" Voting
Redeemable Preferred Shares required to be redeemed, then
the Corporation shall redeem, disregarding fractions, that
number of Class "J" Voting Redeemable Preferred Shares that
it is permitted by law to redeem and the Corporation shall
redeem the balance of the outstanding Class "J" Voting
Redeemable Preferred Shares in respect of which redemption
has been demanded by the holder at such time or times as
the redemption is permitted by applicable law. Payment for
such Class "J" Voting Redeemable Preferred Shares shall be
made by cheque payable at any branch in Canada of the
Corporation's bankers upon surrender of the certificates
representing the Class "J" Voting Redeemable Preferred
Shares to be redeemed.
(ii) As set out above, the Redemption Amount per share of the
Class "J" Voting Redeemable Preferred Shares is intended to
equal the difference between the fair market value of the
Property transferred to the Corporation on the issuance of
the Class "J" Voting Redeemable Preferred Shares and the
amount of any consideration (other than Class "J" Voting
Redeemable Preferred Shares) transferred to the transferor
of the Property in connection with the transfer divided by
the number of Class "J" Voting Redeemable Preferred Shares
issued on the transfer of the Property to the Corporation.
Provided that should it be determined at any time by:
(A) a tribunal or court of competent jurisdiction; or
(B) agreement with the Department of National
Revenue, Taxation; or
(C) agreement between the Corporation and the holder
of the Class "J" Voting Redeemable Preferred
Shares;
<PAGE> 11
-6-
that the difference between the fair market value of the
Property transferred to the Corporation on the issuance of the
Class "J" Voting Redeemable Preferred Shares and the amount of
any consideration (other than Class "J" Voting Redeemable
Preferred Shares) transferred to the transferor of the
property in connection with the transfer is different from the
determination of such difference as made by the Directors on
the issuance of the Class "J" Voting Redeemable Preferred
Shares then, in such event, subject to the Business
Corporations Act of Alberta, the Redemption Amount as defined
herein of the Class "J" Voting Redeemable Preferred Shares
then issued and outstanding shall be adjusted accordingly and
retroactively, effective as of the date of issuance of the
Class "J" Voting Redeemable Preferred Shares to equal the
amount which is obtained by dividing the difference (as
determined pursuant to (A), (B) or (C) above, as the case may
be) between the fair market value of the Property transferred
to the Corporation and the amount of any consideration (other
than Class "J" Voting Redeemable Preferred Shares) transferred
to the transferor by the number of Class "J" Voting Redeemable
Preferred Shares issued upon the transfer of the Property to
the Corporation.
(iv) In the event that dividends are paid on the Class "J" Voting
Redeemable Preferred Shares between the date of issuance of
the Class "J" Voting Redeemable Preferred Shares and the
actual date of adjustment provided for above then, forthwith
upon any adjustment being made, an amount shall be paid by the
Corporation or by the recipient of the dividend on the Class
"J" Voting Redeemable Preferred Shares, as the case may be,
together with interest thereon at the prime rate of interest
charged by the bankers of the Corporation at the date of
payment of the dividends computed from the date of the payment
of the dividends to the date of the payment provided for in
this subparagraph which amount shall be equal to the
difference between the amount of dividend actually received
and the amount of dividend which would have been received if
the aforesaid adjustment had actually been made at the date of
issuance of the Class "J" Voting Redeemable Preferred Shares.
(v) In the event that any Class "J" Voting Redeemable Preferred
Shares are redeemed before the actual date of any adjustment
provided for above then, forthwith upon any adjustment being
made, an amount shall be paid by the Corporation or the
person whose Class "J" Voting Redeemable Preferred Shares were
redeemed, as the case may be, together with interest thereon
at the prime rate of interest charged by the bankers of the
Corporation at the date of the redemption of the Class "J"
Voting Redeemable Preferred Shares computed from the actual
date of payment of the Redemption Amount to the date of the
payment provided for in this subparagraph, which amount shall
be equal to the difference between the amount actually paid on
the redemption of the Class "J" Voting Redeemable Preferred
Shares and the amount which would have been paid if the
aforesaid adjustment had actually been made at the date of
issuance of then redeemed Class "J" Voting Redeemable
Preferred Shares.
(vi) The Directors shall not allot and issue any Class "J" Voting
Redeemable Preferred Shares or approve of the transfer of any
Class "J" Voting Redeemable Preferred Shares unless the person
to whom the shares are issued or the transferee, as the case
may be, is made aware of the provisions
<PAGE> 12
-7-
of this paragraph and agrees, in a form and manner
satisfactory to the Directors, to be bound by and
comply with the provisions of this paragraph.
(vii) Upon any adjustment being made pursuant to the
provisions of this paragraph the stated capital of the
Class "J" Voting Redeemable Preferred Shares shall, if
the Directors decide that any adjustment to the stated
capital of the Class "J" Voting Redeemable Preferred
Shares is necessary or desirable, be adjusted
accordingly and retroactively as of the date of
issuance of the Class "J" Voting Redeemable Preferred
Shares to the amount determined by the Directors
subject to the provisions of the Business Corporations
Act of Alberta.
(d) Purchase for Cancellation
The Corporation shall have the right at its option at any time
and from time to time, to purchase for cancellation the whole
or any part of the Class "J" Voting Redeemable Preferred Shares
outstanding pursuant to an agreement between the Corporation
and any holder of Class "J" Voting Redeemable Preferred Shares
or pursuant to tenders received by the Corporation upon request
for tenders addressed to all holders of Class "J" Voting
Redeemable Preferred Shares at the lowest price per share at
which in the opinion of the Directors such shares are
obtainable but not exceeding the Redemption Amount of Class "J"
Voting Redeemable Preferred Shares and from and after the date
of such purchase of any Class "J" Voting Redeemable Preferred
Shares such shares shall be regarded as having been redeemed;
provided that, if in response to an invitation for tenders, two
or more shareholders submit tenders at the same price and if
such tenders are acceptable to the Corporation in whole or in
part, then, unless the Corporation accepts all such tenders in
whole, the Corporation shall accept such tenders in proportion
as nearly as may be to the number of shares offered in each
such tender.
2.2(C) CLASS "K" NON-VOTING REDEEMABLE PREFERRED SHARES
An unlimited number of Class "K" Redeemable Preferred Shares (in
this paragraph referred to as the "Class "K" Redeemable Preferred Shares") have
been created by the Corporation for the purpose of issuances in exchange for
property, (other than a promissory note or a promise to pay), and the Class
"K" Preferred Shares shall have the following rights, restrictions, privileges,
conditions and limitations:
(a) Dividend Rights
The holders of Class "K" Preferred Shares shall be entitled to
receive dividends as and when declared by the Directors but
always in preference and priority to any payment of dividends
on any other shares of the Corporation (except any shares which
by their terms are specifically stated to rank prior to the
Class "K" Preferred Shares in the declaration and payment of
dividends) out of the monies of the Corporation properly
applicable to the payment of dividends, which dividends shall
be non-cumulative preferential dividends at a rate per annum
equal to the prescribed rate of interest for the purposes of
subsection 256(11) of the Income Tax Act (Canada) as of the
time of issuance of the first then issued shares of the
particular class (the "Prescribed Rate") in each case on the
Redemption Amount thereof (as described herein) as may be
determined by the Directors, payable at such time or times and
at such place or places as the Directors may determine. The
Directors
<PAGE> 13
-8-
shall be entitled from time to time to declare part of the said
non-cumulative dividend for any fiscal year notwithstanding
that such dividend for such fiscal year shall not be declared
in full. The said dividends shall be non-cumulative whether
earned or not earned and if in any fiscal year the Directors in
their discretion shall not declare the said dividends or any
part thereof, then the right of the holders of the Preferred
shares to such dividends or to any undeclared part thereof for
the fiscal year shall be extinguished. The holders of the Class
"K" Preferred shares shall in no circumstances be entitled to
any dividends other than or in excess of the non-cumulative
dividends at the rate herein provided for.
(b) Repayment of Capital
In the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of its assets amongst the
shareholders by way of repayment of capital, the holders of the
Class "K" Preferred Shares shall be entitled to receive an
amount per share equal to the Redemption Amount (as hereinafter
defined) together with all declared but unpaid dividends
thereon to the date of the liquidation, dissolution or winding
up in priority to any distribution to the holders of any other
shares of the Corporation (except any shares which by their
terms are specifically stated to rank prior to the Class "K"
Preferred Shares in respect of such distributions) and the
holders of the Class "K" Preferred Shares shall have no further
right to participate in profits or assets in respect of such
liquidation, dissolution or winding up of the Corporation.
(c) Redemption
(i) The Class "K" Preferred Shares, or any number thereof,
shall be subject to redemption at an amount per share
equal to the amount obtained by dividing the difference
between the fair market value of the property (the
"Property") transferred to the Corporation on the
issuance of the Class "K" Preferred Shares and the
amount of any consideration (other than Redeemable
Preferred Shares) transferred to the transferor of the
Property in connection with the transfer by the number
of Class "K" Preferred Shares issued on the transfer of
the Property to the Corporation (the "Redemption
Amount") together with all declared but unpaid dividends
thereon, if any, at any time at the option of the
Directors without the consent of the holders thereof and
if less than the whole amount of the outstanding Class
"K" Preferred Shares shall be so redeemed, the shares to
be redeemed shall at any particular time, or from time
to time, be selected by lot or otherwise in such manner
as the Directors may determine. Written notice shall be
provided to all holders of the number of shares redeemed
and the notice shall provide that payment for the
redeemed shares shall be made at the place in Canada
designated in the aforesaid notice upon surrender of the
certificate or certificates for the shares so redeemed.
From and after the date of the giving of the notice of
redemption the Class "K" Preferred Shares called for
redemption shall be deemed to be redeemed and the
holders thereof shall have no rights whatsoever in
respect thereof except to receive the payment therefor
upon surrender of the certificate or certificates
representing the redeemed Class "K" Preferred Shares.
The Directors may make and enforce all and any other
such reasonable regulations not inconsistent with this
paragraph or the Articles or By-laws governing the
manner of the redemption of the Class "K" Preferred
Shares as they may in their sole discretion deem
advisable.
<PAGE> 14
-9-
(ii) The Class "K" Preferred Shares or any number thereof shall be
subject to redemption at an amount per share equal to the
Redemption Amount together with all declared but unpaid
dividends thereon, if any, at any time at the option of the
holders thereof without the consent of the Directors, or the
Corporation, provided that if the Corporation would be
prevented by the Business Corporations Act of Alberta or any
other law in force in the Province of Alberta from redeeming
all of the Class "K" Preferred Shares required to be redeemed,
then the Corporations shall redeem, disregarding fractions, that
number of Class "K" Preferred Shares that it is permitted by
law to redeem and the Corporation shall redeem the balance of
the outstanding Class "K" Preferred Shares in respect of which
redemption has been demanded by the holder at such time or
times as the redemption is permitted by applicable law. Payment
for such Class "K" Preferred Shares shall be made by cheque
payable at any branch in Canada of the Corporation's bankers
upon surrender of the certificate or certificates representing
the Class "K" Preferred Shares to be redeemed.
(iii) As set out above, the Redemption Amount per share of the Class
"K" Preferred Shares is intended to equal the difference
between the fair market value of the Property transferred to
the Corporation on the issuance of the Class "K" Preferred
Shares and the amount of any consideration (other than Class
"K" Preferred Shares) transferred to the transferor of the
Property in connection with the transfer, divided by the number
of Class "K" Preferred Shares issued on the transfer of the
Property to the Corporation. Provided that should it be
determined at any time by:
(A) a tribunal of court of competent jurisdiction; or
(B) agreement with the Department of National Revenue,
Taxation; or
(C) agreement between the Corporation and the holder of the
Class "K" Preferred Shares;
that the difference between the fair market value of the
Property transferred to the Corporation on the issuance of the
Class "K" Preferred Shares and the amount of any consideration
(other than Class "K" Preferred Shares) transferred to the
transferor of the property in connection with the transfer is
different from the determination of such difference as made by
the Directors on the issuance of the Class "K" Preferred
Shares then, in such event, subject to the Business
Corporations Act of Alberta, the Redemption Amount as defined
herein of the Class "K" Preferred Shares then issued and
outstanding shall be adjusted accordingly and retroactively,
effective as of the date of issuance of the Class "K" Preferred
Shares to equal the amount which is obtained by dividing the
difference (as determined pursuant to (A), (B) or (C) above, as
the case may be) between the fair market value of the Property
transferred to the Corporation and the amount of any
consideration (other than Class "K" Preferred Shares)
transferred to the trasferor by the number of Class "K"
Preferred Shares issued upon the transfer of the Property to
the Corporation.
(iv) In the event that dividends are paid on the Class "K" Preferred
Shares between the date of issuance of the Class "K" Preferred
Shares and the actual date of adjustment, provided for above
then, forthwith upon any adjustment being made, an amount shall
be paid by the Corporation or by the recipient of the dividend
on the Class "K" Preferred Shares, as the case
<PAGE> 15
-10-
may be, together with interest thereon at the prime rate of
interest charged by the bankers of the Corporation at the date
of payment of the dividends computed from the date of payment
of the dividends to the date of the payment provided for in this
subparagraph which amount shall be equal to the difference
between the amount of dividend actually received and the amount
of dividend which would have been received if the aforesaid
adjustment had actually been made at the date of issuance of the
Class "K" Preferred Shares.
(v) In the event that any Class "K" Preferred Shares are redeemed
before the actual date of any adjustment provided for above
then, forthwith upon any adjustment being made, an amount shall
be paid by the Corporation or the person whose Class "K"
Preferred Shares were redeemed, as the case may be, together
with interest thereon at the prime rate of interest charged by
the bankers of the Corporation at the date of the redemption of
the Class "K" Preferred Shares computed from the actual date of
payment of the Redemption Amount to the date of the payment
provided for in this subparagraph, which amount shall be equal
to the difference between the amount actually paid on the
redemption of the Class "K" Preferred Shares and the amount
which would have been paid if the aforesaid adjustment had
actually been made at the date of issuance of the then redeemed
Class "K" Preferred Shares.
(vi) The Directors shall not allot and issue any Class "K" Preferred
Shares or approve of the transfer of any Class "K" Preferred
Shares unless the person to whom the shares are issued or the
transferee, as the case may be, is made aware of the provisions
of this paragraph and agrees, in a form and manner satisfactory
to the Directors, to be bound by and comply with the provisions
of this paragraph.
(vii) Upon any adjustment being made pursuant to the provisions of
this paragraph the stated capital of the Class "K" Preferred
Shares shall, if the Directors decide that any adjustment to the
stated capital of the Class "K" Preferred Shares is necessary or
desirable, be adjusted accordingly and retroactively as of the
date of issuance of Class "K" Preferred Shares to the amount
determined by the Directors subject to the provisions of the
Business Corporations Act of Alberta.
(d) Purchase for Cancellation
The Corporation shall have the right at its option at any time and
from time to time, to purchase for cancellation the whole or any part
of the Class "K" Preferred Shares outstanding pursuant to an agreement
between the Corporation and any holder of Class "K" Preferred Shares
or pursuant to tenders received by the Corporation upon request for
tenders addressed to all holders of Class "K" Preferred Shares at the
lowest price per share at which in the opinion of the Directors such
shares are obtainable but not exceeding the Redemption Amount of Class
"K" Preferred Shares and from and after the date of such purchase of
any Class "K" Preferred Shares such shares shall be regarded as having
been redeemed; provided that, if in response to an invitation for
tenders, two or more shareholders submit tenders at the same price and
if such tenders are acceptable to the Corporation in whole or in part,
then, unless the Corporation accepts all such tenders in whole, the
Corporation shall
<PAGE> 16
-11-
accept such tenders in proportion as nearly as may be to
the number of shares offered in each such tender.
2.2(D) CLASS "L" NON-VOTING REDEEMABLE PREFERRED SHARES
An unlimited number of Class "L" Redeemable Preferred
Shares (in this paragraph referred to as the "Class "L" Preferred Shares") have
been created by the Corporation for the purpose of issuances in exchange for
property, (other than a promissory note or a promise to pay), and the Class "K"
Preferred Shares shall have the following rights, restrictions, privileges,
conditions and limitations:
(a) Dividend Rights
The holders of Class "K" Preferred Shares shall be entitled
to receive dividends as and when declared by the Directors
but always in preference and priority to any payment of
dividends on any other shares of the Corporation (except
any shares which by their terms are specifically stated to
rank prior to the Class "L" Preferred Shares in the
declaration and payment of dividends) out of the monies of
the Corporation properly applicable to the payment of
dividends, which dividends shall be non-cumulative
preferential dividends at a rate per annum equal to the
prescribed rate of interest for the purposes of subsection
256(11) of the Income Tax Act (Canada) as of the time of
issuance of the first then issued shares of the particular
class (the "Prescribed Rate"") in each case on the
Redemption Amount thereof (as described herein) as may be
determined by the Directors, payable at such time or times
and at such place or places as the Directors may determine.
The Directors shall be entitled from time to time to
declare part of the said non-cumulative dividend for any
fiscal year notwithstanding that such dividend for such
fiscal year shall not be declared in full. The said
dividends shall be non-cumulative whether earned or not
earned and if in any fiscal year the Directors in their
discretion shall not declare the said dividends or any part
thereof, then the right of the holders of the Preferred
shares to such dividends or to any undeclared part thereof
for the fiscal year shall be extinguished. The holders of
the Class "L" Preferred shares shall in no circumstances be
entitled to any dividends other than or in excess of the
non-cumulative dividends at the rate herein provided for.
(a) Repayment of Capital
In the event of the liquidation, dissolution or winding up
of the Corporation or other distribution of it assets
amongst the shareholders by way of repayment of capital,
the holders of the Class "I", Preferred Shares shall be
entitled to receive an amount per share equal to the
Redemption Amount (as hereinafter defined) together with
all declared but unpaid dividends thereon to the date of
the liquidation, dissolution or winding up in priority to
any distribution to the holders of any other shares of the
Corporation (except any shares which by their terms are
specifically stated to rank prior to the Class "L"
Preferred Shares in respect of such distributions) and the
holders of the Class "L" Preferred Shares shall have no
further right to participate in profits or assets in
respect of such liquidation, dissolution or winding up of
the Corporation.
(c) Redemption
(i) The Class "L" Preferred Shares, or any number
thereof, shall be subject to redemption at an amount
per share equal to the amount obtained by
<PAGE> 17
-12-
dividing the difference between the fair market value of the property
(the "Property") transferred to the Corporation on the issuance of the
Class "L" Preferred Shares and the amount of any consideration (other
than Class "L" Preferred Shares) transferred to the transferor of the
Property in connection with the transfer by the number of Class "L"
Preferred Shares issued on the transfer of the Property to the
Corporation (the "Redemption Amount") together with all declared but
unpaid dividends thereon, if any, at any time at the option of the
Directors without the consent of the holders thereof and if less than
all of the outstanding Class "L" Preferred Shares shall be so
redeemed, the shares to be redeemed shall at any particular time, or
from time to time, be selected by lot or otherwise in such manner as
the Directors may determine. Written notice shall be provided to all
holders of the number of shares redeemed and the notice shall provide
that payment for the redeemed shares shall be made at the place in
Canada designated in the aforesaid notice upon surrender of the
certificate or certificates for the shares so redeemed. From and after
the date of the giving of the notice of redemption the Class "L"
Preferred Shares called for redemption shall be deemed to be redeemed
and the holders thereof shall have no rights whatsoever in respect
thereof except to receive the payment therefor upon surrender of the
certificate or certificates representing the redeemed Class "L"
Preferred Shares. The Directors may make and enforce all and any other
such reasonable regulations not inconsistent with this paragraph or
the Articles or By-laws governing the manner of the redemption of the
Class "L" Preferred Shares as they may in their sole discretion deem
advisable.
(ii) The Class "L" Preferred Shares or any number thereof shall be subject
to redemption at an amount per share equal to the Redemption Amount
together with all declared but unpaid dividends thereon, if any, at
any time at the option of the holders thereof without the consent of
the Directors, or the Corporation, provided that if the Corporation
would be prevented by the Business Corporations Act of Alberta or any
other law in force in the Province of Alberta from redeeming all of
the Class "L" Preferred Shares required to be redeemed, then the
Corporation shall redeem, disregarding fractions, that number of Class
"L" Preferred Shares that it is permitted by law to redeem and the
Corporation shall redeem the balance of the outstanding Class "L"
Preferred Shares in respect of which redemption has been demanded by
the holder at such time or times as the redemption is permitted by
applicable law. Payment for such Class "L" Preferred Shares shall be
made by cheque payable at any branch in Canada of the Corporation's
bankers upon surrender of the certificate or certificates representing
the Class "L" Preferred Shares to be redeemed.
(iii) As set out above, the Redemption Amount per share of the Class "L"
Preferred Shares is intended to equal the difference between the fair
market value of the Property transferred to the Corporation on the
issuance of the Class "L" Preferred Shares and the amount of any
consideration (other than Class "L" Preferred Shares) transferred to
the transferor of the Property in connection with the transfer,
divided by the number of Class "L" Preferred Shares issued on the
transfer of the Property to the Corporation. Provided that should it
be determined at any time by:
<PAGE> 18
-13-
(A) a tribunal of court of competent jurisdiction; or
(B) agreement with the Department of National Revenue,
Taxation; or
(C) agreement between the Corporation and the holder of
the Class "L" Preferred Shares;
that the difference between the fair market value of the
Property transferred to the Corporation on the issuance
of the Class "L" Preferred Shares and the amount of any
consideration (other than Class "L" Preferred Shares)
transferred to the transferor of the property in
connection with the transfer is different from the
determination of such difference as made by the
Directors on the issuance of the Class "L" preferred
Shares then, in such event, subject to the Business
Corporations Act of Alberta, the Redemption Amount as
defined herein of the Class "L" Preferred Shares then
issued and outstanding shall be adjusted accordingly and
retroactively, effective as of the date of issuance of
the Class "L" Preferred Shares to equal the amount which
is obtained by dividing the difference (as determined
pursuant to (A), (B) or (C) above, as the case may be)
between the fair market value of the Property
transferred to the Corporation and the amount of any
consideration (other than Class "L" Preferred Shares)
transferred to the transferor by the number of Class "L"
Preferred Shares issued upon the transfer of the
Property to the Corporation.
(iv) In the event that dividends are paid on the Class "L"
Preferred Shares between the date of issuance of the
Class "L" Preferred Shares and the actual date of any
adjustment provided for above then, forthwith upon any
adjustment being made, an amount shall be paid by the
Corporation or by the recipient of the dividend on the
Class "L" Preferred Shares, as the case may be, together
with the interest thereon at the prime rate of interest
charged by the bankers of the Corporation at the date of
payment of the dividends computed from the date of
payment of the dividends to the date of the payment
provided for in this subparagraph which amount shall be
equal to the difference between the amount of dividend
actually received and the amount of dividend which would
have been received if the aforesaid adjustment had
actually been made at the date of issuance of the Class
"L" Preferred Shares.
(v) In the event that any Class "L" Preferred Shares are
redeemed before the actual date of any adjustment
provided for above then, forthwith upon any adjustment
being made, an amount shall be paid by the Corporation
or the person whose Class "L" Preferred Shares were
redeemed, as the case may be, together with interest
thereon at the prime rate of interest charged by the
bankers of the Corporation at the date of the redemption
of the Class "L" Preferred Shares computed from the
actual date of payment of the Redemption Amount to the
date of the payment provided for in this subparagraph,
which amount shall be equal to the difference between
the amount actually paid on the redemption of the Class
"L" Preferred Shares and the amount which would have
been paid if the aforesaid adjustment had actually been
made at the date of issuance of the then redeemed Class
3 Preferred Shares.
(vi) The Directors shall not allot and issue any Class "L"
Preferred Shares or approve of the transfer of any Class
"L" Preferred Shares unless the person
<PAGE> 19
-14-
to whom the shares are issued or the transferee, as the
case may be, is made aware of the provisions of this
paragraph and agrees, in a form and manner satisfactory
to the Directors, to be bound by and comply with the
provisions of this paragraph.
(vii) Upon any adjustment being made pursuant to the
provisions of this paragraph the stated capital of the
Class "L" Preferred Shares shall, if the Directors
decide that any adjustment to the stated capital of the
Class "L" Preferred Shares is necessary or desirable,
be adjusted accordingly and retroactively as of the
date of issuance of the Class "L" Preferred Shares to
the amount determined by the Directors subject to the
provisions of the Business Corporations Act of Alberta.
(d) Purchase for Cancellation
The Corporation shall have the right at its option at any time
and from time to time, to purchase for cancellation the whole
or any part of the Class "L" Preferred Shares outstanding
pursuant to an agreement between the Corporation and any holder
of Class "L" Preferred Shares or pursuant to tenders received
by the Corporation upon request for tenders addressed to all
holders of Class "L" Preferred Shares at the lowest price per
share at which in the opinion of the Directors such shares are
obtainable but not exceeding the Redemption Amount of Class "L"
Preferred Shares and from and after the date of such purchase
of any Class "L" Preferred Shares such shares shall be regarded
as having been redeemed; provided that, if in response to an
invitation for tenders, two or more shareholders submit tenders
at the same price and if such tenders are acceptable to the
Corporation in whole or in part, then, unless the Corporation
accepts all such tenders in whole, the Corporation shall accept
such tenders in proportion as nearly as may be to the number of
shares offered in each such tender.
2.3 OTHER RIGHTS OF THE REDEEMABLE PREFERRED SHARES
Notwithstanding anything contained in this or any other
Schedule to the Articles of the Corporation or the Articles of the Corporation,
the Class "J" Voting Redeemable Preferred Shares and the Class "K" and "L"
Non-Voting Redeemable Preferred Shares and the Class "K" and "L" Non-Voting
Redeemable Preferred Shares shall rank pari passu with each other in respect
of all distributions on the liquidation, dissolution or winding up of the
Corporation but, for greater certainty, such classes of shares need not rank
equally or be treated equally in respect of redemptions made at the option of
the Corporation pursuant to the provisions of this Schedule or any other
Schedule to the Articles of the Corporation, or in the declaration or payment
of dividends and the Directors of the Corporation shall have full and absolute
discretion to declare and pay dividends, subject to the limitations in the
provisions of this Schedule, or any other Schedule to the Articles of the
Corporation, in such amounts, at such time and in such manner as the Directors
may determine to any or all (or none) of the Class "J" Preferred Shares, the
Class "K" Preferred Shares and the Class "L" Preferred Shares.
2.4 RESTRICTIONS ON PAYMENTS
Notwithstanding anything contained in or forming a part of this
or any other Schedule to the Articles of the Corporation or the Articles of the
Corporation, no dividends shall at any time be declared or paid on any shares
and no share shall be redeemed, purchased or otherwise acquired where the
payment of such dividend or the payment of the redemption, purchase or
acquisition price, as the case may be, would have the result of reducing the net
realizable value of
<PAGE> 20
-15-
the assets of the Corporation to an amount that is less than the amount
required to redeem all redeemable preferred shares of the Corporation then
issued and outstanding and for the purposes of this paragraph, the net
realizable value of the assets of the Corporation could be realized in
cash at the time less the aggregate of the liabilities of the Corporation
at that time.
B. Pursuant to paragraph 167(l)(f) of the Business Corporations Act, to
change the One hundred (100) Class "A" common shares, One hundred (100)
Class "B" common shares, One hundred (100) Class "C" common shares and Ten
(10) Class "D" preferred shares in the share capital of the Corporation
issued and outstanding immediately prior to this amendment to Two Million
(2,000,000) Class "J" preferred shares and Twenty seven thousand six
hundred seventy one (27,671) Class "A" shares in the amended share capital
of the Corporation.
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DATE SIGNATURE TITLE
August 7, 1998 /s/ DONALD A. BIALIK Director
--------------------
DONALD A. BIALIK
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FOR DEPARTMENTAL USE ONLY
<PAGE> 21
FORM 4
PROVINCE OF ALBERTA
CONSUMER AND CORPORATE AFFAIRS
BUSINESS CORPORATIONS ACT
(Section 27 or 171)
ARTICLES OF AMENDMENT
1. NAME OF CORPORATION: 2. CORPORATE ACCESS NUMBER:
RIVERVIEW MANAGEMENT CORPORATION 20370731
3. THE ARTICLES OF THE ABOVE NAMED CORPORATION ARE AMENDED AS FOLLOWS:
A. Pursuant to paragraphs 167(1)(c), 167(1)(d) and 167(1)(e) of the Business
Corporations Act, to delete therefrom Article 2 in its entirety and to
substitute therefor the following:
2. The Classes and Any Maximum Number of
Shares That The Corporation is Authorized to Issue
2.1 Authorized Capital
(a) An unlimited number of Class "A" shares; and
(b) An unlimited number of Class "B" shares; and
(c) An unlimited number of Class "C" shares; and
(d) An unlimited number of Class "D" shares.
2.2 The Special Rights, Privileges, Restrictions
and Conditions Attaching to each Class of Shares
(a) Voting
The holder of Class "A" shares shall be entitled to vote at all
meetings of the shareholders of the Corporation except meetings at
which only holders of a specified class of shares are, by the
provisions of the Business Corporations Act, entitled to vote.
Subject always to the provisions of the Business Corporations Act,
the holders of Class "B", "C" and "D" shares shall not be entitled
to receive notice of or attend any meetings of the shareholders of
the Corporation and shall not be entitled to vote at such meetings.
(b) Dividends
(i) Preference
The holders of the Class "D" shares shall in each year, at the
discretion of the Directors, but without preference or
priority with respect to payment of dividends to holders of
any other class of shares, be entitled.
<PAGE> 22
-2-
out of all or any profits or surplus available for
dividends, to non-cumulative dividends at the rate of
eight (8%) per cent per annum on the Redemption Amount
thereof (as described in subsection 2.2(c) herein) as
may be determined by the Directors, payable at such
time or times and at such place or places as the
Directors may determine. The said dividends shall be
non-cumulative whether earned or not earned, and if in
any fiscal year the Directors in their discretion shall
not declare the said dividends or any part thereof,
then the right of the holders of the Class "D" shares
to such dividends or any greater dividend actually
declared for the fiscal year shall be extinguished. The
holders of the Class "D" shares shall in no
circumstances be entitled to any dividends other than or
in excess of the non-cumulative dividends at the rate
of eight (8%) per cent per annum herein provided for.
(ii) Exclusive
Dividends on any class of shares of the Corporation may
be declared and paid exclusive of dividends in respect
of any other class of shares.
(iii) Restriction on Dividends
No dividends or distributions of any kind whatsoever
shall be declared or made in respect of any of the
shares of the Corporation which would be contrary to
any applicable law or which would have the effect of
reducing the net assets, including goodwill, of the
Corporation to an amount insufficient to enable the
redemption by the Corporation, at the aggregate of the
Redemption Amounts, of the issued and outstanding Class
"D" shares.
(c) Redemption Amount of Class "D" Shares
(i) The Redemption Amount for each Class "D" share shall be
equal to the fair market value of the property or
issued shares of the Corporation of a different class
(the "Assets") for which Class "D" shares were issued
by the Corporation (the "Asset Value") less the
aggregate value of any non-share consideration given or
assumed by the Corporation as partial consideration for
the Assets (the "Non-Share Value") divided by the
number of Class "D" shares issued in exchange for the
Assets.
(ii) Notwithstanding the provisions of the foregoing
paragraph 2.2(c)(i) hereof, if the Minister of National
Revenue, the Provincial Treasurer of the Province of
Alberta, their authorized representative or any similar
authority shall assess or reassess the Corporation or
its shareholders for income tax (or propose such an
assessment or reassessment) on the basis of a
determination or assumption that:
(A) the fair market value of the Assets received in
respect of the issuance of any Class "D" share
does not equal the Asset Value; or
(B) the Non-Share Value should have been a greater
or lesser amount than the amount determined
upon issuance of such Class "D" share;
<PAGE> 23
-3-
then the Asset Value shall be adjusted (the "Adjusted Asset
Value") or the Non-Share Value shall be adjusted (the
"Adjusted Non-Share Value"), as the case may be, and shall be
deemed to be:
(C) subject to subparagraph (E), hereof, the fair market
value of the Assets or Non-Share Value as determined by
the authority making or proposing such an assessment or
reassessment, provided that the Directors agree that
such determination is accurate; or
(D) subject to subparagraph (E) hereof, where the
Directors do not agree that the authority's
determination is accurate, the fair market value of the
Assets or Non-Share Value as determined by a qualified
person whom the Directors shall appoint to make that
determination forthwith following the making or
proposing of such an assessment or reassessment; or
(E) where any such assessment or reassessment is the subject
of an appeal to a Court of competent jurisdiction, the
fair market value of the Assets or Non-Share Value as
determined by that Court.
(iii) In the event of a determination of an Adjusted Asset Value or
an Adjusted Non-Share Value then the Redemption Amount
payable for each Class "D" share issued in exchange for the
Assets shall be adjusted by the Directors and shall be equal
to the Adjusted Asset Value (or if there has been no
adjustment the Asset Value) less the Adjusted Non-Share Value
(or if there has been no adjustment the Non-Share Value)
divided by the total number of Class "D" shares issued in
exchange for the Assets. If any Non-Share consideration shall
have been given or assumed, any Class "D" share shall have
been redeemed or any dividends shall have been declared
thereon prior to the Redemption Amount being adjusted as
aforesaid, any resulting over-payment by the Corporation
shall be a debt due on demand to the Corporation from the
holder of such Class "D" shares and any resulting
under-payment shall be a debt due on demand from the
Corporation to the holders of such Class "D" shares.
(d) Procedure
(i) Subject to the Business Corporations Act, the Corporation
may, upon giving notice as hereinafter provided, redeem the
whole or any part of the Class "D" shares on payment for each
Class "D" share to be redeemed of the Redemption Amount,
together with all dividends declared thereon and unpaid.
Unless waived by the registered holder of the shares to be
redeemed, the Corporation shall give not less than thirty
(30) days notice in writing of such redemption by mailing
such notice to the registered holder of each Class "D" share
to be redeemed, specifying the date and place or places of
redemption. If notice of any such redemption be given by the
Corporation in the manner aforesaid and an amount sufficient
to redeem such shares be deposited with any trust company or
chartered bank in Canada as specified in the notice on or
before the date fixed for redemption, dividends on the Class
"D" shares to be redeemed shall cease after the date so fixed
for redemption and the holders thereof shall thereafter have
no rights against the Corporation in respect thereof except,
upon the surrender of certificates for such Class "D" shares,
to receive payment therefor out of the monies so deposited.
Upon the Redemption
<PAGE> 24
-4-
Amount of such Class "D" shares being deposited with any trust
company or chartered bank in Canada as aforesaid, notice shall be
given to the holders of the Class "D" shares called for
redemption who have failed to present the certificates
representing such Class "D" shares, within two (2) months of the
date specified for redemption, to the effect that the monies have
been so deposited and may be obtained by the holders of the said
Class "D" shares upon presentation of the certificates
representing such Class "D" shares for redemption at the said
trust company or chartered bank in Canada.
(e) Retractable
(i) Each holder of a Class "D" share has the right, exercisable by
depositing the holder's share certificate with the Corporation at
its registered office, to require the Corporation to redeem any
Class "D" share within thirty (30) days after the date the
certificate is deposited, for an amount equal to one hundred
(100%) per cent of the Redemption Amount per Class "D" share so
deposited, together with all dividends declared thereon and
unpaid. The Corporation will not be obligated to redeem any Class
"D" share pursuant to this provision if and so long as the
redemption would be contrary to any applicable law.
(f) Liquidation
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary:
(i) the holders of the Class "D" shares shall be entitled to receive
before distribution of any part of the assets of the Corporation
amongst the holders of shares of any other class in the share
capital of the Corporation, an amount equal to one hundred (100%)
per cent of the Redemption Amount of the Class "D" shares and any
dividends declared thereon and unpaid and no more;
(ii) the holders of the Class "A" shares shall be entitled to receive
in respect of each Class "A" share held, before distribution of
any part of the assets of the Corporation amongst the holders of
the Class "B" and "C" shares in the share capital of the
Corporation, an amount equal to the quotient obtained when the
stated capital maintained for the Class "A" shares is divided by
the number of Class "A" shares then outstanding;
(iii) the holders of the Class "B" shares shall be entitled to receive
in respect of each Class "B" share held, before distribution of
any part of the assets of the Corporation amongst the holders of
the Class "C" shares in the share capital of the Corporation, an
amount equal to the quotient obtained when the stated capital
maintained for the Class "B" shares is divided by the number of
Class "B" shares then outstanding;
(iv) the holders of the Class "C" shares shall be entitled to receive
in respect of each Class "C" share held, before distribution of
any part of the assets of the Corporation amongst the holders of
any other class of shares in the share capital of the Corporation
other than a distribution pursuant to
<PAGE> 25
-5-
paragraphs 2.2(f)(i), 2.2(f)(ii) or 2.2(f)(iii) herein,
an amount equal to the quotient obtained when the
stated capital maintained for the Class "C" shares is
divided by the number of Class "C" shares then
outstanding; and
(v) the holders of the Class "A", "B" and "C" shares shall
be entitled to participate equally amongst themselves
in respect of each Class "A", "B" and "C" share held in
any further distribution of the assets of the
Corporation.
B. Pursuant to paragraph 167(1)(f) of the Business Corporations Act, to
change the ten (10) Class "A" shares in the share capital of the
Corporation issued and outstanding immediately prior to this amendment
to ten (10) Class "D" redeemable shares in the amended share capital of
the Corporation.
C. Pursuant to paragraph 167(1)(l) of the Business Corporations Act, to
delete therefrom Article 3 in its entirety and to substitute therefor
the following:
3. Restrictions if any on Share Transfers
No shares of the Corporation shall be transferred without the approval
of the directors of the Corporation either by a resolution passed at a
Board of Directors meeting or by an instrument or instruments in
writing signed by all the directors.
D. Pursuant to paragraph 167(1)(m) of the Business Corporations Act, to
delete therefrom Article 6 in its entirety and to substitute therefor
the following:
6. Other Provisions, if any:
See Schedule I attached hereto.
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DATE SIGNATURE TITLE
January 25, 1993 [SIG] President
----------------------------
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FOR DEPARTMENTAL USE ONLY
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<PAGE> 26
SCHEDULE I ATTACHED TO THE ARTICLES OF AMENDMENT OF
RIVERVIEW MANAGEMENT CORPORATION
6. Other provisions (if any):
(a) The number of shareholders of the Corporation, exclusive of:
(i) persons who are in its employment or that of an affiliate; and
(ii) persons, who having been formerly in its employment or that of
an affiliate were, while in that employment, shareholders of the
Corporation and have continued to be shareholders of that
Corporation after termination of that employment
is limited to not more than fifty (50) persons, two or more persons
who are joint registered owners of one or more shares being counted as
one shareholder.
(b) Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
<PAGE> 27
BUSINESS CORPORATIONS ACT FORM 1
[SEAL] [SEAL]
[ALBERTA LOGO] ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION.
[ILLEGIBLE COPY]
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2. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE.
[ILLEGIBLE COPY]
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3. RESTRICTIONS IF ANY ON SHARE TRANSFERS.
[ILLEGIBLE COPY]
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4. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS.
2 7
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5. IF THE CORPORATION IS RESTRICTED FROM CARRYING ON A CERTAIN BUSINESS,
SPECIFY THESE RESTRICTIONS.
- --------------------------------------------------------------------------------
6. OTHER PROVISIONS IF ANY.
[ILLEGIBLE COPY]
- --------------------------------------------------------------------------------
7. DATE:
- --------------------------------------------------------------------------------
INCORPORATION NAMES: ADDRESS (INCLUDE POSTAL CODE) SIGNATURE
- --------------------------------------------------------------------------------
[ILLEGIBLE COPY] [ILLEGIBLE COPY]
- --------------------------------------------------------------------------------
[ILLEGIBLE COPY] [ILLEGIBLE COPY]
- --------------------------------------------------------------------------------
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FOR DEPARTMENTAL USE ONLY
CORPORATE ACCESS NO. INCORPORATION DATE
CCA-06.101
<PAGE> 28
THIS IS SCHEDULE "A" TO THE
ARTICLES OF INCORPORATION
DATED AUGUST 18, 1987 OF
RIVERVIEW MANAGEMENT CORPORATION
2.0 The authorized capital of the Corporation is to consist of three classes of
shares: 1) an unlimited number of Class A voting common shares without
nominal or par value ("Voting Common Shares"), 2) an unlimited number of
Class B non-voting common shares without nominal or par value ("Non-Voting
Common Shares"), and 3) an unlimited number of non-voting redeemable
preferred shares ("Redeemable Preferred Shares").
2.1 The maximum price or consideration at or for which the Voting Common Shares
or the Non-Voting Common Shares may be issued or sold is not limited in
amount, and the maximum price or consideration at or for which the
Redeemable Preferred Shares may be issued or sold is not limited in amount,
provided however, that the Voting Common Shares, the Non-Voting Common
Shares and the Redeemable Preferred Shares may be issued and sold by the
Corporation each from time to time by resolution of the Directors of the
Corporation.
2.2 The rights attaching to the Redeemable Preferred Shares to the Voting
Common Shares and to the Non-Voting Common Shares shall be as follows:
(a) The holder of Voting Common Shares shall be entitled to one (1) vote
for each Voting Common Share. The holders of Non-Voting Common Shares
shall not be entitled to a vote for any Non-Voting Common Share.
(b) All or part of the Redeemable Preferred Shares at any time
outstanding may at any time and from time to time be purchased or be
redeemed by the Corporation on any date fixed by the Corporation at
an amount equal to the capital paid up thereon.
(c) In the event of liquidation, dissolution or winding-up of the
Corporation or other distribution of its assets to the shareholders
for the purpose of winding up its affairs, the holders of the
Redeemable Preferred Shares shall be entitled to receive the amount
paid up on such shares before any amount is paid or any property or
assets of the Corporation are distributed to the holders of any
Voting Common Shares or Non-Voting Common Shares or shares of any
other class ranking junior to the Redeemable Preferred Shares. Upon
payment of the amounts payable to them as provided above, the said
holders of the Redeemable Preferred Shares shall not be entitled to
share in any further distribution of the property or assets of the
Corporation.
(d) The holders of the Redeemable Preferred Shares shall not be entitled
as of right to subscribe for or purchase or receive any part of any
issue of shares or bonds, debentures or other securities of the
Corporation now or hereafter authorized.
<PAGE> 29
2.3 The capital of the Corporation may be increased, divided, converted,
consolidated and dealt with in accordance with the law then prevailing and new
capital may be issued having attached thereto any preferred, special, qualified
or deferred rights, privileges, conditions or restrictions, including any
preference or priority in the payment of dividends or the distribution of
assets, or voting or otherwise over any other shares, whether common or
preferred, and whether issued or not.
2.4 Any and all shares of the Corporation may be issued at the times and to the
person and for the consideration that the directors determine. The shares of
each class may be issued in one or more series and the directors may fix the
number of shares in each series and determine the designation, rights,
privileges, restrictions and conditions attaching to the shares of each series.
<PAGE> 30
THIS IS SCHEDULE "B" TO THE
ARTICLES OF INCORPORATION
DATED AUGUST 18, 1987 OF
RIVERVIEW MANAGEMENT CORPORATION
(a) the number of members for the time being shall be limited to fifty (50)
(exclusive of persons who are in the employment of the Corporation and persons
who, having been formerly in the employment of the Corporation, were while in
such employment and have continued after the termination of such employment to
be members of the Corporation); but where two (2) or more persons hold one(1) or
more shares of the Corporation jointly, they shall for the purposes of this
article, be treated as a single member;
(b) no invitation shall be made to the public to subscribe for any shares,
debentures or other securities of the Corporation;
(c) the right of the Shareholders to transfer or dispose of their shares shall
be subject to the approval of the Board of Directors, and also to the provisions
of any agreement restricting the transfer or disposal of the shares in question
provided that a notice of the existence of such agreement has been made by
authority of the Board on the Shares Certificate representing the shares in
question prior to such Share Certificate being presented for transfer.
<PAGE> 31
THIS IS SCHEDULE "C" TO THE
ARTICLES OF INCORPORATION
DATED AUGUST 18, 1987 OF
RIVERVIEW MANAGEMENT CORPORATION
6.0 The Directors of the Corporation from time to time may, without
authorization of the shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, re-issue, sell or pledge bonds, debentures, notes or other
evidence of indebtedness or guarantee of the Corporation, whether
secured or unsecured;
(c) give a guarantee on behalf of the Corporation to secured performance
of any person; and
(d) charge, mortgage, hypothecate, pledge or otherwise create a security
interest in all or any currently owned or subsequently acquired real
or personal, movable or immovable property of the Corporation
including book debts, rights, powers, franchises and undertaking, to
secure any obligation, present or future, of the Corporation.
The Directors may, from time to time, delegate to such one or more of the
Directors or Officers of the Corporation as may be designated by the Directors
all or any of the powers conferred on the Directors by the foregoing or by the
Business Corporations Act, to such extent and in such manner as the Directors
shall determine at the time of each such delegation. Nothing in this provision
limits or restricts the borrowing of money by the Corporation on bill of
exchange or promissory notes made, drawn, accepted or endorsed by or on behalf
of the Corporation.
6.1 The Directors may, between annual general meetings, appoint one or more
additional directors of the Corporation to serve until the next annual
general meeting, but the number of additional Directors shall not at any
time exceed one-third of the number of Directors who held office at the
expiration of the last annual meeting of the Corporation.
6.2 Directors of the Corporation shall be elected for terms not later than the
close of the third annual meeting following their election. The terms of
office of each director shall be staggered as required from time to time
to ensure that as close to one-third of the board as may be reasonably
practicable shall be up for election at each annual meeting of
shareholders to be held for the next 3 annual meeting of shareholders
following the election. If neither the resolution, notice of meeting or
information circular relating to a meeting at which directors are to be
elected for varying terms of office specify the term for each individual
director, the director or directors receiving the most votes shall serve
the longest terms, and for such purposes where two or more nominees
receive the same number of votes, a nominee whose name appears prior to
any other nominee or nominees in the resolution electing the directors
shall be deemed to have a greater number of votes than such other nominee
or nominees.
<PAGE> 1
BYLAWS
-OF-
CORE VENTURES, INC.
<PAGE> 2
"COLORADO BUSINESS CORPORATION ACT"
BYLAWS
-OF-
CORE VENTURES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - INTERPRETATION................................................ 1
PART 2 - SHARES AND SHARE CERTIFICATES................................. 2
PART 3 - ALLOTMENT AND ISSUE OF SHARES................................. 3
PART 4 - TRANSFER AND TRANSMISSION OF SHARES........................... 3
PART 5 - ALTERATION OF CAPITAL......................................... 6
PART 6 - PURCHASE OF SHARES............................................ 6
PART 7 - BORROWING POWERS.............................................. 7
PART 8 - CONVENING GENERAL MEETINGS.................................... 8
PART 9 - PROCEEDINGS AT GENERAL MEETINGS............................... 8
PART 10 - VOTING AT GENERAL MEETINGS................................... 11
PART 11 - DIRECTORS..................................................... 14
PART 12 - RETIREMENT AND ELECTION OF DIRECTORS......................... 15
PART 13 - POWERS AND DUTIES OF DIRECTORS............................... 15
PART 14 - PROCEEDINGS OF DIRECTORS..................................... 16
PART 15 - EXECUTION OF DOCUMENTS....................................... 19
PART 16 - OFFICERS..................................................... 20
PART 17 - INDEMNIFICATION AND PROTECTION OF DIRECTORS,
OFFICERS, EMPLOYEES AND CERTAIN AGENTS....................... 20
PART 18 - DIVIDENDS AND CAPITALIZATION................................. 21
PART 19 - ACCOUNTING RECORDS........................................... 22
PART 20 - NOTICES...................................................... 22
PART 21 - RECORD DATES................................................. 24
PART 22 - SHARE CLASS RIGHTS........................................... 25
PART 23 - RESTRICTIONS................................................. 26
</TABLE>
-i-
<PAGE> 3
"COLORADO BUSINESS CORPORATION ACT"
BYLAWS
-OF-
CORE VENTURES, INC.
PART I - INTERPRETATION
1.1 In these Bylaws, unless the context otherwise requires:
(a) "Corporation" means CORE VENTURES, INC. a Corporation incorporated
under the Colorado Business Corporation Act;
(b) "Colorado Corporation Act" means the Colorado Business Corporation Act
of the State of Colorado from time to time in force and all amendments
thereto and includes all regulations made pursuant to that Act;
(c) "Director" means, at any given time, an individual duly elected or
appointed to such office in accordance with these Bylaws and an
individual who would have been elected or appointed to such office in
accordance with these Bylaws but for a defect that may afterwards be
discovered with his appointment, election or qualification;
(d) "Dividend Record Date" means, in respect of the payment of any
dividend, the record date for determining the members, or the members
of a class of members, entitled to receive payment of any such
dividend;
(e) "Notice Record Date" means, in respect of a general meeting or a class
meeting, the record date for determining the members, or the members
of a class of members, entitled to receive notice of the general
meeting or the class meeting;
(f) "Register" means the register of members to be kept pursuant to the
Colorado Corporation Act;
(g) "Registered Address" means in respect of a member, his address as
recorded in the Register and with respect to a Director means his
address as recorded on the Corporation's register of Directors to be
kept pursuant to the Colorado Corporation Act;
(h) "Registered Holder" means, in respect of a share in the issued capital
of the Corporation, the person registered in the Register as being the
member holding that share;
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<PAGE> 4
(i) "Seal" means the common seal of the Corporation; and
(j) "Voting Record Date" means, in respect of a general meeting or a class
meeting, the record date for determining the members, or the members
of a class of members, entitled to vote at the general meeting or the
class meeting.
1.2 Expressions referring to writing shall be construed as including
references to manuscript, printing, lithography, typewriting, photography,
telecopy and other modes of representing or reproducing words in a visible and
hard copy form.
1.3 Unless the context otherwise requires, words importing the singular
include the plural and vice versa; and words importing a male person include a
female person and a corporation and other bodies corporate.
1.4 Unless otherwise defined in these Bylaws, words or phrases defined in
the Colorado Corporation Act shall have the meanings given to them in the
Colorado Corporation Act, with the necessary changes and so far as applicable.
Where there is any conflict between the Colorado Corporation Act and any other
Act or Statute with respect to any definition, the Colorado Corporation Act
shall prevail.
PART 2 - SHARES AND SHARE CERTIFICATES
2.1 Every share certificate issued by the Corporation shall be in such
form as the Directors approve and shall comply with the Colorado Corporation
Act.
2.2 Any share certificate may be mailed by registered prepaid mail to the
member entitled thereto at his Registered Address, and neither the Corporation
nor any registrar or transfer agent shall be liable for any loss occasioned to
the member if any such share certificate is so mailed.
2.3 In respect of a share held jointly by several persons, delivery of a
certificate for that share to one of such persons or to his duly authorized
agent shall be sufficient delivery to all.
2.4 If a share certificate:
(a) is worn out or defaced, upon production to the Corporation of that
certificate and upon such other terms, if any, as the Corporation may think
fit, the certificate shall be cancelled and a new certificate shall be issued
in lieu thereof;
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<PAGE> 5
(b) is lost, stolen or destroyed, then upon proof thereof to the
satisfaction of the Corporation and upon such indemnity and
security therefor, if any, as the Corporation deems adequate being
given, the Corporation shall issue a new share certificate in
place thereof to the person entitled to the lost, stolen or
destroyed certificate.
2.5 Except as required by law, statute or these Bylaws, no person
shall be recognized by the Corporation as holding any share upon any trust, and
the Corporation shall not be bound by or compelled in any way to recognize
(even when having notice thereof) any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share or
(except only as by law, statute or these Bylaws provided or as ordered by a
court of competent jurisdiction) any other rights in respect of any share
except an absolute right to the entirety thereof in the Registered Holder.
PART 3 - ALLOTMENT AND ISSUE OF SHARES
3.1 Subject to the Colorado Corporation Act and to any rights and
restrictions attached to any shares in the capital of the Corporation, the
allotment and issue of shares, whether in the original or any increased capital
of the Corporation, shall be under the control of the Directors who may allot
or otherwise dispose of, and/or grant options on, or otherwise deal in shares
authorized but not yet allotted at such times and to such persons, including
Directors, and in such manner, and upon such terms and conditions, and at the
price or for such consideration, as the Directors, in their absolute
discretion, may determine.
3.2 The Corporation may pay a commission or allow a discount to any
person in consideration of his subscribing or agreeing to subscribe, whether
absolutely or conditionally, for any shares in the Corporation, or procuring or
agreeing to procure subscriptions, whether absolutely or conditionally, for
any such shares provided that the rate of the commission or discount shall not
in the aggregate exceed such commission or discount as is authorized by the
Colorado Corporation Act. The Directors may also pay such brokerage as may be
lawful.
PART 4 - TRANSFER AND TRANSMISSION OF SHARES
4.1 The Corporation may appoint one or more persons as its registrar
or transfer agent for the purpose of issuing, countersigning, registering,
transferring, certifying and cancelling the shares and share certificates of
the Corporation.
4.2 The Corporation may keep or cause to be kept one or more branch
Registers at such place or places within or outside British Columbia as the
Directors determine.
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<PAGE> 6
4.3 Subject to the restrictions and provisions of the Articles and of
these Bylaws, a member may transfer any or all of his shares by instrument of
transfer executed by the member or his attorney duly authorized in writing. The
instrument of transfer of any share of the Corporation shall be in the form, if
any, provided on the back of the Corporation's form of share certificate, in
any usual and common form, or in any other form which the Directors may
approve. If the Directors so require, there shall be a separate instrument of
transfer for each class of share proposed to be transferred. The execution of
the instrument of transfer shall be attested and validated as the Directors may
from time to time reasonably require. Subject to the Colorado Corporation Act,
the transferor shall be deemed to remain the holder of the shares until the
name of the transferee is entered in the Register or branch Register in respect
thereof.
4.4 In order to effect a transfer of a share, a duly executed
instrument of transfer shall be deposited at the office of the registrar or
transfer agent together with the share certificate representing the share to be
transferred any such other evidence, if any, as the registrar or transfer agent
may require to prove the title of the transferor or his right to transfer the
share.
4.5 The signature of a Registered Holder or of his duly authorized
attorney on the instrument of transfer shall constitute complete and sufficient
authority to the Corporation to register in the name of the person named in
that instrument of transfer as transferee the shares specified in the
instrument of transfer, or if no number is specified, all the shares of the
Registered Holder evidenced by share certificates delivered with the instrument
of transfer. If no transferee is so named in the instrument of transfer, then
the instrument of transfer shall constitute a complete and sufficient authority
to the Corporation to register in any name designated in writing by the person
depositing the share certificate and the instrument of transfer with the
registrar or transfer agent the shares specified in the instrument of transfer
of, if no number is specified, all the shares of the Registered Holder
evidenced by share certificates delivered with the instrument of transfer.
4.6 None of the Corporation, the Directors and the officers and
agents of the Corporation shall be bound to enquire into the title of the
transferee of any shares to be transferred, and shall not be liable to any
person for registering the transfer.
4.7 The Corporation or its registrar or transfer agent may refuse to
recognize the transfer of a share to an infant, bankrupt or person suffering
mental infirmity.
4.8 Upon compliance with and subject to the provisions of these
Bylaws and the Colorado Corporation Act, the Corporation shall cause the name
of the transferee to be entered in the Register as the Registered Holder of the
share. Where there are more than one transferee, the transferees shall be
registered as joint Registered Holders of the share and their names shall stand
on the Register in the order in which their names appear on the instrument of
transfer.
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<PAGE> 7
4.9 Except in the case of fiduciaries (as defined below), the
Corporation may refuse to register more than three persons as joint Registered
Holders of a share.
4.10 A share may be registered in the name of a person as executor,
administrator, guardian, committee, curator or trustee of a named person, trust
or estate (the person in whose name any share is so registered or so proposed
to be registered being herein referred to as a "fiduciary").
4.11 Where application is made to issue or transfer a share to a
fiduciary, the Corporation shall be under no obligation to enquire into the
authority of the fiduciary, who shall be presumed, as against the Corporation,
to be acting in accordance with his authority unless, in the case of a transfer
of a share, the transfer proposed is from the person whose estate or interest
is sought to be represented.
4.12 In the case of a transfer by a fiduciary, including a transfer by
a fiduciary to himself, the Corporation shall be under no obligation to enquire
into the authority of the fiduciary or the propriety of the transaction or to
ascertain whether the fiduciary continues to occupy his office at the time of
transfer.
4.13 In all cases the Corporation shall be entitled to act on an order
of a court of record, wherever constituted or having jurisdiction in
proceedings to which the Registered Holder in respect of the shares appears
from the order to have been a party, directing a vesting or declaring the
ownership of shares, as evidenced by a copy of the order of the court certified
as such in accordance with the practice of the court.
4.14 Any grant of letters probate or letters of administration or
order appointing a trustee, guardian, committee, curator or directing a vesting
or declaring an ownership of shares (as evidenced by a copy thereof certified
in accordance with the practice of the authority issuing the grant or order and
so certified within one year of the date of its deposit with the registrar or
transfer agent of the Corporation) shall be deemed to be in full force and
effect and not to have been amended, revoked or reversed, unless and until
there is delivered to the registrar or transfer agent of the Corporation:
(a) a certificate of a court of record appearing to have the required
jurisdiction, certified in accordance with the practice of the
court, that proceedings have been commenced by way of appeal or
otherwise to amend, revoke or reserve the grant or order, or
(b) a copy of an order of a court of record appearing to have the
necessary jurisdiction certified as aforesaid, by which the
earlier grant or order is amended, revoked or reversed.
4.15 Upon compliance with and subject to the provisions of these
Bylaws and the Colorado Corporation Act, the Corporation shall cause the name
of the fiduciary to be entered in the Register as the Registered Holder of
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<PAGE> 8
the share. Where there is more than one fiduciary, the fiduciaries shall be
registered as joint Registered Holders of the share and their names shall stand
on the Register in the order in which their names appear on the grant or order.
4.16 Where a transfer or transmission of a share is completed by
registration in the Register, the instrument of transfer shall be retained by
the Corporation's registrar or its transfer agent. Where the Corporation
declines to register a proposed transfer or transmission of a share, the
instrument of transfer, share certificate and other documentation deposited for
the purpose of the transfer or transmission shall be retuned to the person
depositing the same, or other person entitled thereto.
4.17 There shall be paid to the Corporation in respect of the registration
of any transfer or transmission such fee as the Directors may determine.
4.18 The personal representative of a deceased member (not being one of
several joint Registered Holders) shall be the only person recognized by the
Corporation as having any title to a share registered in the name of the
deceased member. On the death of one of the joint Registered Holders of a
share, the survivor or survivors shall be the only person or persons recognized
by the Corporation as having any title to or interest in the share.
PART 5 - ALTERATIONS OF CAPITAL
5.1 Subject to any restrictions in its Articles or in these Bylaws, the
Corporation may by ordinary resolution alter its Articles to increase the
authorized capital of the Corporation by:
(a) creating shares with par value or shares without par value, or both;
(b) increasing the number of shares with par value or shares without par
value, or both; or
(c) increasing the par value of a class of shares with par value, if no
shares of that class are issued.
PART 6 - PURCHASE OF SHARES
6.1 Subject to the provisions of the Colorado Corporation Act with
respect to pro rata purchase and to the special rights and restrictions
attached to any class of shares, the Corporation may, by a resolution of the
Directors, purchase any of its shares at the price and upon the terms specified
in that resolution. The Corporation may, by a resolution of the Directors, sell
any of its shares so purchased at the price and upon the terms specified in
that resolution. The Corporation may, by a resolution of the Directors,
surrender by way of gift any of its shares purchased by the Corporation.
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<PAGE> 9
PART 7 - BORROWING POWERS
7.1 The Directors may from time to time authorize the Corporation to:
(a) borrow money in such manner and amount, on such security, from such
sources and upon such terms and conditions as they think fit;
(b) guarantee the repayment of any sum of money borrowed by any person
or corporation;
(c) guarantee the performance of any obligation of any person or
corporation;
(d) issue bonds, debentures and other debt obligations either outright or
as security for any liability or obligation of the Corporation or any
other person; and
(e) mortgage, charge, whether by way of specific or floating charge, or
give a security interest in or other security on the undertaking of
the whole or any part of the property and assets of the Corporation
(both present and future).
7.2 The Directors may make any debentures, bonds or other debt
obligations issued by the Corporation, by their terms assignable free from any
equities between the Corporation and the person to whom they may be issued, or
any other person who lawfully acquire the same by assignment, purchase or
otherwise.
7.3 The Directors may authorize the issue of any debentures, bonds or
other debt obligations of the Corporation at a discount, premium or otherwise
and with special or other rights or privileges as to redemption, surrender,
drawings, allotment of or conversion into or exchange for shares or other
securities, attending and voting at general meetings of the Corporation and
otherwise as the Directors may determine at or before the time of issue.
7.4 Every debenture, bond or other debt obligation of the Corporation
shall be signed manually by at least one Director or officer of the Corporation
or by or on behalf of a trustee, registrar, branch registrar, transfer agent or
branch transfer agent for the debenture, bond or other debt obligation
appointed by the Corporation or under any instrument under which the debenture,
bond or other debt obligation is issued and any additional signatures may be
printed or otherwise mechanically reproduced thereon and, in such event, a
debenture, bond or other debt obligation so signed is as valid as if signed
manually notwithstanding that any person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that he is stated
on such debenture, bond or other debt obligation to hold at the date of the
issue thereof.
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<PAGE> 10
PART 8 - CONVENING GENERAL MEETINGS
8.1 Every general meeting of the Corporation shall be held at such time
and place, in accordance with the Colorado Corporation Act, as the Directors may
determine.
8.2 Every general meeting, other than an annual general meeting, shall be
called an extraordinary general meeting.
8.3 The Directors may, whenever they think fit, convene an extraordinary
general meeting.
8.4 Notice of a general meeting shall specify the time and place of the
meeting and, in case of special business, the general nature of that business.
The accidental omission to give notice of any meeting to, or the non-receipt of
any such notice by, any person as may be entitled to receive that notice, shall
not invalidate any proceedings at that meeting.
8.5 Unless otherwise prohibited by law, members entitled to notice of a
general meeting may, by unanimous consent in writing, before, during or after
the meeting waive or reduce the period of notice convening the meeting, and an
entry in the minute book of such waiver or reduction shall be sufficient
evidence of the due convening of the meeting.
8.6 If any special business includes the presenting, considering,
approving, ratifying or authorizing of any document or of the execution of any
document, the portion of any notice relating to that document is sufficient if
it states that a copy of the document or proposed document is or will be
available for inspection by members at a place specified in that notice during
business hours in any working day or days prior to the date of the meeting.
PART 9 - PROCEEDINGS AT GENERAL MEETINGS
9.1 All business, other than the conduct of and voting at a general
meeting, shall be deemed special that is transacted at:
(a) an extraordinary general meeting; and
(b) an annual general meeting with the exception of:
(i) the consideration of the financial statements and the reports of
the Directors and auditors,
(ii) fixing or changing the number of Directors;
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<PAGE> 11
(iii) the election of Directors,
(iv) the appointment and remuneration of the auditors,
(v) the sanctioning of dividends, and
(vi) such other business as under these Bylaws or the
Colorado Corporation Act should be transacted at an
annual general meeting, or which is brought under
consideration by the report of the Directors issued
with the notice convening the meeting.
9.2 No business other than the election of a chairman and the
adjournment of the meeting shall be transacted at any general meeting unless a
quorum of members is present at the time when the meeting proceeds to business.
9.3 Save as provided in Article 9.4, a quorum shall be:
(a) one individual entitled to vote at the meeting, if there is
only one member of the Corporation entitled to vote; or
(b) two individuals entitled to vote at the meeting, if there is
more than one member of the Corporation entitled to vote at the
meeting.
9.4 If within 1/2 hour from the time appointed for a meeting a
quorum is not present, the meeting:
(a) if convened by requisition of the members, shall be terminated;
or
(b) in any case, shall stand adjourned to a place in the same city
as determined at the meeting by the chairman of the meeting.
The adjourned meeting shall be held at the same time on the same
day in the next week or, if that day is a holiday, on the
following business day. If at that time and place a quorum is
not present within 1/2 hour from the time appointed, the member
or members present in person or by proxy or by duly authorized
representative shall be a quorum.
9.5 Unless otherwise determined by a resolution of the Directors,
the chairman of the Directors, if any, or in his absence the president, if any,
or in their absence a vice-president, if any, shall preside as chairman of
every general meeting of the Corporation.
9.6 If at any general meeting there is no chairman of the
Directors, president or vice-president present within 15 minutes after the time
appointed for holding the meeting, or if the chairman of the Directors, the
president,
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<PAGE> 12
the vice-president (or such of them as are present at the general meeting) are
unwilling to act as chairman, the individuals present and entitled to vote at
the meeting shall by election choose one of their number to be chairman of the
meeting.
9.7 The chairman of the meeting shall appoint one or more scrutineers
to assist him in taking the attendance and counting proxies and ballots.
9.8 The chairman of the meeting may, with the consent of any general
meeting at which a quorum is present, and shall, if so directed by the meeting,
adjourn the meeting from time to time and from place to place. No business
shall be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When a meeting
is adjourned for 30 days or more, notice of the adjourned meeting, but not
"advance notice", shall be given either as in the case of a general meeting or
by advertisement published at least once in a daily newspaper in general
circulation nationally in Canada. Save as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at any
adjourned meeting.
9.9 The Directors, the secretary or, in the secretary's absence, an
assistance secretary, the president, the vice-presidents and a solicitor for
the Corporation shall be entitled to attend at any general meeting but no such
person shall be counted in the quorum or be entitled to vote at any general
meeting unless that person is a member or proxyholder or authorized
representative of a corporate member not being a subsidiary entitled to vote
thereafter.
9.10 Every question submitted to a general meeting shall be decided on a
show of hands unless a poll is, before or on the declaration of the result of
the show of hands, directed by the chairman or demanded by a member entitled to
vote who is present in person or by proxy or by authorized representative of a
corporate member not being a subsidiary, and unless a poll is so demanded, a
declaration by the chairman that a resolution has been carried unanimously or
by a particular majority, or not carried by a particular majority, and an entry
to that effect in the minute book of the Corporation shall be conclusive
evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against that resolution.
9.11 No resolution proposed at a meeting need be seconded and the
chairman of any meeting shall be entitled to move or second a resolution.
9.12 In case of an equality of votes upon a resolution, the chairman
shall, either on a show of hands or on a poll, have a casting vote in addition
to the vote or votes to which he may be entitled as a member.
9.13 If a poll is duly demanded it shall be taken within seven days and
in such manner as the chairman directs, provided that a poll demanded on the
election of a chairman, or on a question of adjournment shall be taken
forthwith and without an intervening adjournment. The results of the poll shall
be deemed to be the resolution of the meeting at which the poll was demanded. A
demand for a poll may be withdrawn.
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9.14 In the case of any dispute as to the admission or rejection of a
vote, the chairman shall determine whether that vote shall be admitted or
rejected. Provided that the decision of the chairman is made in good faith, the
decision of the chairman shall be final and conclusive.
9.15 A member entitled to more than one vote need not, if he votes, use
all his votes or cast all the votes he uses in the same way.
9.16 The demand for a poll shall not prevent the continuance of a
meeting for the transaction of any business other than the question on which a
poll has been demanded.
9.17 Unless the Colorado Corporation Act or these Bylaws otherwise
provide, any action to be taken by a resolution of the members may be taken by
an ordinary resolution.
PART 10 - VOTING AT GENERAL MEETINGS
10.1 Subject to any special rights or restrictions for the time being
attached to any class or series of shares and the restrictions on joint
Registered Holders, on a show of hands every member present in person or by
proxy shall have one vote, and on a poll every member present in person or by
proxy entitled to vote on that poll, shall have one vote for every share he
holds which confers on him the right to vote.
10.2 If, on the Voting Record Date, the name of a person was not on the
Register for the class of shares to be voted at a general meeting or a class
meeting, that person is not entitled to vote those shares at that meeting,
notwithstanding.
(a) the rights and restrictions attached to such shares; and
(b) that the name of the person is on such Register on the date of
such meeting or on the Notice Record Date.
10.3 Any corporation not being a subsidiary which is a member of the
Corporation may authorize such person as it thinks fit to act as its
representative at any general meeting, series meeting or class meeting. The
person so authorized shall be entitled to exercise in respect of and at such
meeting the same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual member of the
Corporation personally present, including, without limitation, the right,
unless restricted by the instrument under which he was authorized to appoint a
proxyholder to represent such corporation, and shall be counted for the purpose
of forming a quorum if present at the meeting. Before recognizing any person as
an authorized representative of a corporate member, the Corporation shall be
entitled to require evidence satisfactory to the Corporation of the appointment
of
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<PAGE> 14
such representative. Evidence of the appointment of any such representative may
be sent to the Corporation by written instrument, telegram, telex or any method
of transmitting legibly recorded messages. Notwithstanding the foregoing, a
corporation being a member may appoint a proxyholder.
10.4 Where there are joint members registered in respect of any share,
any one of the joint members may vote at any meeting, either personally or by
proxy, in respect of the share as if he were solely entitled to it. If more
than one of the joint members is present at any meeting, personally or by
proxy, the joint member present whose name stands first on the Register in
respect of the share shall alone be entitled to vote in respect of that share.
Several personal legal representatives of a deceased member in whose sole name
any share is registered shall, for the purpose of this Article, be deemed joint
members in the order in which their names stand on the order of representation
or if none has been granted, in the order on the testamentary instrument.
10.5 A member of unsound mind, entitled to attend and vote at any
meeting, in respect of whom an order has been made by any court having
jurisdiction, may vote, whether on a show of hands or on a poll, by his
committee, curator bonis or other person in the nature of a committee or
curator bonis appointed by that court, and any such committee, curator bonis,
or other person may appoint a proxyholder.
10.6 A form of proxy or an instrument appointing a duly authorized
representative of a corporation shall be in writing, under the hand of the
appointor or of his attorney duly authorized in writing, or, if such appointor
is a corporation, under the hand of an officer or attorney of that corporation.
10.7 Any person who has attained the age of majority may act as
proxyholder whether or not he is entitled on his own behalf to be present and
to vote at the meeting at which he acts as proxyholder. The proxy may authorize
the person so appointed to act as proxyholder for the appointor for the period,
at such meeting or meetings and to the extent permitted by the Corporation.
10.8 A member holding one share in respect of which he is entitled to
vote shall be entitled to appoint one proxyholder, with power of substitution,
to attend, act and vote for him and a member holding more than one share in
respect of which he is entitled to vote shall be entitled to appoint one or
more proxyholders to attend, act and vote for him on the same occasion and such
member shall be entitled to appoint such proxyholders with power of
substitution in each. If such a member should appoint more than one proxyholder
for the same occasion, he shall specify the number of shares that each
proxyholder shall be entitled to vote. A member may also appoint one or more
alternate proxyholders to act in the place and stead of an absent proxyholder.
10.9 Subject to any resolution of Directors as permitted by the
Colorado Corporation Act, a proxy and the power of attorney or other authority,
if any, under which it is signed or a notarially certified copy thereof shall
be deposited at the registered office of the Corporation or at such other place
as is specified for the purpose in the notice calling the meeting, not less
than 48 hours before the time for holding the meeting at which the person named
in the
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<PAGE> 15
proxy proposes to vote, or shall be deposited with the chairman of the meeting
prior to the commencement thereof. The Directors may from time to time by
resolution make regulations providing for the depositing of proxies at some
place or places other than the registered office of the Corporation or the
place at which a meeting or adjourned meeting of members is to be held and
providing for particulars of such proxies to be cabled, telexed, telegraphed,
telecopied or otherwise sent in writing before the meeting or an adjourned
meeting to the Corporation or any agent of the Corporation for the purpose of
receiving such particulars and providing that proxies so deposited may be
voted. Votes given in accordance with such regulations shall be valid and
counted.
10.10 A vote given in accordance with the terms of a proxy shall be
valid notwithstanding the previous death, incapacity, mental infirmity or
insanity of the member or revocation of the proxy or of the authority under
which the proxy was executed, or the transfer of the share in respect of which
the proxy is given, provided no prior notice in writing of the death,
incapacity, mental infirmity, insanity, revocation or transfer as aforesaid
shall have been received at the registered office of the Corporation or by the
chairman of the meeting or adjourned meeting prior to the time at which the
vote was given.
10.11 Other than in the case of a solicitation by or on behalf of the
management of the Corporation or by any other person or unless, in the
circumstances, the Colorado Corporation Act requires any other form of proxy,
an instrument appointing a proxy may be in the following form or in any other
form that the Directors shall approve:
CORE VENTURES, INC.
I, __________, of __________, being a member of __________, hereby appoint
__________, of _________, as my proxy to vote for me and on my behalf at the
(annual or extraordinary, as the case may be) general meeting of the
Corporation to be held on the __ day of ________, ____, and at any adjournment
of that meeting.
Signed this __ day of ________, ____.
- ------------------------------------
(Signature of Member)
In the case of a solicitation by or on behalf of the management of the
Corporation or by any other person the form of and the authority conferred by a
proxy shall comply with the provisions of the Colorado Corporation Act.
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PART 11 - DIRECTORS
11.1 The number of Directors of the Corporation may be determined from
time to time by ordinary resolution of the members of the Corporation but such
number shall not be less than the minimum number required under the Colorado
Corporation Act.
11.2 A Director shall not be required to hold any share in the capital
of the Corporation as qualification for that office.
11.3 The remuneration of each of the Directors as such may from time to
time be determined by the Directors. Any remuneration shall be in addition to
any salary or other remuneration paid to any officer or employee of the
Corporation who is also a Director. Every Director shall be repaid such
reasonable expenses as he may incur in and about the business of the
Corporation. If any Director shall perform any services for the Corporation that
in the opinion of the Directors are outside the ordinary duties of a Director,
that Director may be paid a remuneration to be fixed by the Directors, or, at
the option of such Director, by the Corporation in general meeting, and such
remuneration may be either in addition to, or in substitution for, any other
remuneration that he may be entitled to receive. Unless otherwise determined by
ordinary resolution, the Directors on behalf of the Corporation may pay a
gratuity or pension or allowance on retirement to any Director who has held any
salaried office or place of profit with the Corporation or to his spouse or
dependants and they may make contributions to any fund and pay premiums for the
purchase or provisions of any such gratuity, pension or allowance.
11.4 A Director may hold any office or place of profit with the
Corporation (other than the office of auditor of the Corporation) in
conjunction with his office of Director for such period and on such terms (as
to remuneration or otherwise) as the Directors may determine. No Director or
intended Director shall be disqualified by his office from contracting with the
Corporation either with regard to his tenure of any such other office or place
of profit or as vendor, purchaser or otherwise. Subject to compliance with the
provisions of the Colorado Corporation Act, no contract or transaction entered
into by or on behalf of the Corporation in which a Director is in any way
interested shall be liable to be voided by reason thereof.
11.5 Any Director may act by himself or his firm a professional
capacity for the Corporation, other than auditor, and he or his firm shall be
entitled to remuneration for professional service as if he were not a Director.
11.6 A Director may be a director or other officer or employee of, or
otherwise interested in, any corporation or firm in which the Corporation may
be interested as a shareholder or otherwise, and, a Director shall not be
accountable to the Corporation for any remuneration or other benefits received
by the Director as director, officer or employee of or from the Director's
interest in, such other corporation or firm.
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11.7 Any Director may from time to time appoint another Director to be his
alternate Director. The appointee, while he holds office as an alternate
Director, shall be entitled to notice of meetings of the Directors and, in the
absence of the Director for whom he is an alternate, to attend and vote thereat
as a Director and shall not be entitled to be remunerated otherwise than out of
the remuneration of the Director appointing him. Any Director may make or
revoke an appointment of his alternate Director by notice in writing or by
telegram, telex, telecopy, or by cable to be delivered or addressed, postage or
other charges prepaid, to the registered office of the Corporation. No person
shall act as an alternate Director unless he qualifies under the Colorado
Corporation Act to act as a Director of the Corporation.
PART 12 - RETIREMENT AND ELECTION OF DIRECTORS
12.1 The members may elect or appoint Directors at any time and from time
to time.
12.2 At each annual general meeting of the Corporation, each Director
shall retire from such office, but shall be eligible for re-election to such
office. Subject to the Articles and these Bylaws, the members shall elect the
Directors at each annual general meeting, and if no Directors are elected at
such meeting, the vacating Directors shall be deemed to have been re-elected.
12.3 Between annual general meetings, the Directors may appoint one or
more qualified persons as additional Directors but the number of additional
Directors shall not at any time exceed one-third of the number of Directors
elected at the last annual general meeting of the Corporation. Any Director so
appointed shall hold office until the next annual general meeting of the
Corporation and shall be eligible for re-election. So long as there is an
additional Director the number of Directors shall be increased accordingly.
However, the number of Directors shall not remain so increased at the next
annual general meeting.
12.4 The Directors may at any time and from time to time appoint any
person as a Director to fill a casual vacancy occurring among the Directors or
a vacancy resulting from an increase of the number of Directors, except where
the members have done so pursuant to Article 12.1. Any Director so appointed
shall hold office until the next annual general meeting of the Corporation and
shall be eligible for re-election.
PART 13 - POWERS AND DUTIES OF DIRECTORS
13.1 The Directors shall manage, or supervise the management of, the
affairs and business of the Corporation and shall have the authority to
exercise all such powers of the Corporation as are not, by the Colorado
Corporation Act or by the Articles or these Bylaws, required to be exercised by
the Corporation in general meeting.
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13.2 The Directors may from time to time by power of attorney or other
instrument under the seal, appoint any person to be the attorney of the
Corporation for such purposes, and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Directors
under these Bylaws and excepting the powers of the Directors relating to the
constitution of the board of Directors and of any of its committees and the
appointment or removal of officers and the power to declare dividends) and for
such period, with such remuneration and subject to such conditions as the
Directors may think fit, and any such appointment may be made in favour of any
of the Directors or any of the members of the Corporation or in favour of any
corporation, or of any of the members, directors, nominees or managers of any
corporation, firm or joint venture and any such power of attorney may contain
such provisions for the protection or convenience of persons dealing with such
attorney as the Directors think fit. Any such attorney may be authorized by the
Directors to sub-delegate all or any of the powers, authorities and discretions
for the time being vested in him.
PART 14 - PROCEEDINGS OF DIRECTORS
14.1 The Directors may meet for the dispatch of business at such places,
may adjourn and otherwise regulate their meetings and proceedings, as they
think fit. The Directors may from time to time fix the quorum necessary for the
transaction of business and, unless so fixed, the quorum shall be a majority of
the Directors. The chairman of the Directors, if any, or in his absence the
vice-chairman of the Directors, if any, or in their absence president of the
Corporation shall be the chairman of all meetings of the Directors, but if at
any meeting neither the chairman of the Directors nor the vice-chairman of the
Directors nor the president shall be present within 15 minutes after the time
appointed for holding the meeting or if all of the chairman of the Directors,
if any, the vice-chairman of the Directors, if any, and the president, being
present decline to act as the chairman of the meeting of the Directors, the
Directors present may choose one of their number to be chairman at the meeting.
A Director interested in a proposed contract or transaction with the
Corporation shall be counted in a quorum notwithstanding his interest. For the
purpose of calculating quorum, a Director who is an alternate Director shall be
counted in his own right and for each Director for whom he is an alternate.
14.2 A Director may at any time and the secretary, upon the written
request of a Director, shall call a meeting of the Directors. Reasonable notice
thereof specifying the time and place of that meeting shall be given to each
Director. Notice may be given in any way, including mail, postage prepaid,
addressed to each of the Directors at his address as recorded on the
Corporation's register of Directors kept pursuant to the Colorado Corporation
Act or may be given to each Director either personally or by leaving it at his
usual business or residential address or orally or by telephone, or telegram,
teletype, telex, facsimile transmission or other method of transmitting lasting
visually recorded messages. It shall not be necessary to give to any Director
notice of a meeting of Directors immediately following a general meeting at
which the Director has been elected or notice of a meeting of Directors at
which that Director has been appointed. Accidental omission to give notice of
a meeting of Directors at which that Director has been appointed. Accidental
omission to give notice of a meeting of Directors to, or the non-receipt of
notice by, any Director, shall not invalidate the proceedings at that meeting.
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14.3 Any Director may advise the secretary orally or in writing that
he waives notice of any past, present or future meetings or meetings of the
Directors being, or required to have been, sent to him and may at any time
withdraw orally or in writing such waiver with respect to meetings held after
the withdrawal. A waiver so given with respect to future meetings applies only
with respect to meetings convened up to and including the earliest of:
(a) the date 12 months from the date of giving the waiver;
(b) the date or time designated in the waiver as the date or time on
which the waiver expires;
(c) the date of the next annual general meeting; and
(d) the date or time on which such waiver is withdrawn.
14.4 Notwithstanding any vacancy that occurs among the Directors, the
continuing Directors or Director may act but so long as their number is reduced
below the number fixed by or pursuant to these Bylaws as the number of Directors
necessary for a quorum, the continuing Directors or Director may act for the
purpose of increasing the number of Directors to that number or of summoning a
general meeting of the Corporation, but for no other purpose.
14.5 Questions arising at any meeting of the Directors shall be
decided by a majority of votes. In case of an equality of votes the chairman
shall not have a second or casting vote. A Director who acts as an alternate for
one or more other Directors will be entitled at a meeting of the Directors to
cast one vote for each Director for whom he is an alternative in addition to the
vote to which he is entitled as a Director in his own right.
14.6 Notwithstanding any other provision of these Bylaws, a
resolution consented to in writing by all the Directors or all the members of a
committee shall be as valid and effectual as if it had been passed at a meeting
of the Directors or the committee, duly called, constituted and held. Any
resolution consented to in writing and otherwise valid:
(a) may be in two or more counterparts which together shall be
deemed to constitute one resolution in writing; and
(b) may be evidenced by telex, teletype, telegram, facsimile
transmission or any other method of transmitting lasting
visually recorded messages.
14.7 The Directors or any committee thereof may hold meetings by
means of conference telephone or any other communication facility whereby all
persons participating in the meeting can hear each other and make themselves
heard, provided that all such persons agree to such participation. Subject to
the foregoing, a meeting of the Directors or any committee thereof shall be
deemed to have been held provided all participants have agreed at the
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commencement thereof that such communication shall be considered to be a
meeting of the Directors or a committee thereof, as the case may be. A Director
participating in a meeting in accordance with this Article shall be deemed to
be present thereat and to have so agreed and shall be counted in the quorum
therefor and shall be entitled to speak and vote thereat.
14.8 The Directors may be resolution appoint an Executive Committee to
consist of such member or members of their body as they think fit, which
committee shall have, and may exercise during the intervals between the
meetings of the Directors, all the powers vested in the Directors except the
power to fill vacancies among the Directors, the power to change the membership
of, or fill vacancies in, the Executive Committee or any other Committee of the
Board and such other powers, if any, as may be specified in the resolution.
14.9 The Directors may by resolution appoint one or more committees,
including the audit committee required to be appointed to the Colorado
Corporation Act, consisting of one or more Directors and may delegate to any
such committee between meetings of the Directors any (but not all) of their
powers, except the powers to fill vacancies on the board to appoint additional
Directors and to change membership or fill vacancies on a committee; any
committee so formed shall in the exercise of the powers so delegated conform to
any terms that may be imposed on it by the Directors. The Directors shall also
have the power at any time to revoke or override any authority given to or acts
to be done by or pursuant to the authority of any such committees, except as to
acts done before such revocation or overriding, and to terminate the
appointment or change the membership of a committee and to fill vacancies in
its.
14.10 The powers of a committee may be exercised by a meeting at which
a quorum is present or by a resolution consented to in writing pursuant to
Article 14.6. Except as otherwise determined by the Directors:
(a) the number of Directors forming a quorum for a committee will be
a majority of the number of Directors constituting the committee
immediately after the last Director was appointed thereto;
(b) a question arising at any meeting of a committee will be
determined by a majority of the votes cast thereon, and in the
case of an equality of votes the chairman of the meeting will not
be entitled to a second or casting vote;
(c) each committee will meet and adjourn as it thinks proper and will
have power to elect its chairman and to make rules for the conduct
of its business; and
(d) a committee may act notwithstanding any vacancy in its body, so
long as:
(i) the number of members of the committee in office is
not reduced below the number fixed as the quorum for
meetings of the committee; and
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(ii) the number of Directors in office is not reduced
below the number fixed as a quorum of the board.
14.11 Each committee will keep regular minutes of its transactions and
will cause them to be recorded in books kept for that purpose, and will report
them to the Directors as the Directors from time to time require.
PART 15 - EXECUTION OF DOCUMENTS
15.1 The Directors may adopt a Seal, may from time to time, adopt a
new common seal, and will provide for the safe custody thereof.
15.2 The Corporation may have an official seal for use in any other
province, territory, state or country.
15.3 Neither the Seal nor an official seal will be impressed on any
document or instrument except:
(a) pursuant to the authorization of a resolution of the Directors,
which authorization may extend to the sealing of a particular
document or instruments, one or more documents and instruments
meeting a description, or to all documents and instruments to be
executed under seal; or
(b) by the secretary or an assistant secretary for the purpose of
certifying copies of or extracts from the Articles or these
Bylaws, minutes of meetings or resolutions of the members or of
the Directors or committees of the board or any instrument
executed or issued by the Corporation.
15.4 The signature of any officer or a Director of the Corporation
that is, by authority of the Directors, printed, lithographed, engraved or
otherwise reproduced upon any instrument or document (including any negotiable
instrument) to be signed, executed or issued by the Corporation or any Director
or any officer, and any instrument or document on which the signature of any
such person is so reproduced, will be as valid as if the signature had been
affixed manually by such person, and will be so valid notwithstanding that, at
the time of the issue or delivery of the instrument or document, the persons
whose signature is so reproduced is deceased, has ceased to hold the office
giving rise to his authority or is otherwise incapacitated from personally
signing such instrument or document.
15.5 To enable the Seal to be affixed to any instrument or document
(including any bond, debenture, share certificate or other security or other
negotiable instrument), whether in definitive or interim form, on which
facsimiles of any of the signatures of the Directors or officers of the
Corporation are, in accordance with the Colorado Corporation Act or these
Bylaws, printed, lithographed, engraved or otherwise reproduced, there may be
delivered to the person employed to engrave, lithograph or print such
instrument or document one or more unmounted dies reproducing the Seal and the
Directors may authorize such person to cause the Seal to be affixed to
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such instrument or document by the use of such dies. Instruments and documents
to which the Seal has been affixed shall for all purposes be deemed to be under
and to bear the Seal lawfully affixed hereto.
PART 16 - OFFICERS
16.1 The Directors shall from time to time appoint or elect a president
and a secretary and may from time to time appoint or elect such other officers
of the Corporation as in their discretion seems expedient. None of the officers
need be a Director other than the chairman of the Directors and the president,
each of whom shall be a Director.
16.2 The officers may be appointed or elected by the Directors upon such
terms and conditions and at such remuneration, whether by way of salary, fee,
commission, participation in profits, or otherwise, as the Directors may
determine, and every such appointment shall be subject to termination at the
pleasure of the Directors unless otherwise fixed by contract.
PART 17 - INDEMNIFICATION AND PROTECTION OF DIRECTORS,
OFFICERS, EMPLOYEES AND CERTAIN AGENTS
17.1 The Directors may cause the Corporation to indemnify:
(a) a Director or former Director of the Corporation; or
(b) a director or former director of a corporation of which the
Corporation is or was a shareholder; or
(c) any officer, employee or agent of the Corporation of or a corporation
of which the Corporation is or was a shareholder, notwithstanding that
he may also be a Director of the Corporation or a director of that
corporation; or
(d) the heirs and personal representatives of any person described in (a),
(b) or (c) above,
against all costs, charges and expenses including any amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him or them
including any amount paid to settle an action or proceeding to which he or they
are made a party by reason of his or their being or having been a director,
officer, employee or agent of the Corporation or a director, officer, employee
or agent of that corporation, as the case may be, including any action brought
by the Corporation or that corporation.
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17.2 The failure of any person to comply with the Colorado Corporation
Act, the Articles of the Corporation or these Bylaws shall not invalidate any
indemnity given by the Corporation to that person pursuant to this Part 17.
17.3 The Directors may cause the Corporation to purchase and maintain
insurance for the benefit of any person who is or was serving as a Director,
officer, employee or agent of the Corporation or as a director, officer,
employee or agent of any corporation of which the Corporation is or was a
shareholder and his heirs and personal representatives against any liability
incurred by him in that capacity.
17.4 The provisions of this Part 17 shall be subject in all respects to
the Colorado Corporation Act and if by reason thereof any provision of these
Bylaws shall be void, illegal or invalid the remaining provisions of these
Bylaws shall be construed and take effect as if that void, illegal or invalid
provision had never been contained herein.
PART 18 - DIVIDENDS AND CAPITALIZATION
18.1 Subject to the Articles and these Bylaws, the Directors may
declare dividends, and subject to the Colorado Corporation Act and Part 21, may
fix the date of record therefor and the date for payment thereof and may pay
the same out of any capital surplus, contributed surplus, appraisal surplus,
share premium or any other surplus or surplus account of the Corporation or out
of any other funds or assets of the Corporation properly available for that
purpose. No notice need be given to any member of the declaration of any
dividend.
18.2 No dividend shall bear interest against the Corporation. If the
dividend to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such payment shall
be deemed to be payment in full.
18.3 The Corporation may pay any dividend wholly or in part by the
distribution of specific assets and in particular by paid up shares, rights,
warrants, bonds, debentures or other securities of the Corporation or any other
corporation or in any one or more such ways as may be authorized by the
Corporation or the Directors. Where any difficulty arises with regard to such a
distribution, the Directors may settle the same as they think expedient and in
particular may fix the value for distribution of such specific assets or any
part thereof, and may determine that cash payments in substitution for all or
any part of the specific assets to which any members are entitled shall be made
to any members on the basis of the value so fixed in order to adjust the
rights of all parties and may vest any such specific assets in trustees for the
persons entitled to the dividend as may seem expedient to the Directors.
18.4 The Directors may, before declaring any dividend, set aside out of
the funds properly available for the payment of dividends such sums as they
think proper as a reserve or reserves, which shall, at the discretion of the
Directors, be applicable for meeting contingencies, or for equalizing
dividends, or for any other purpose to which
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such funds of the Corporation may be properly applied, and pending such
application may, at the like discretion, either be employed in the business of
the Corporation or be invested in such investments as the Directors may from
time to time think fit.
18.5 Any dividend or other moneys payable in respect of shares may be
paid by cheque or money order sent through the post by ordinary mail directed
to the Registered Holder at his Registered Address or, in the case of joint
Registered Holders, to the Registered Address of that one of the joint
Registered Holder who is first named on the Register or to such person and to
such address as the Registered Holder or joint Registered Holders may direct by
a written instruction to the Corporation. Every such cheque or money order
shall be made payable to the order of the person to whom it is sent and in the
case of joint Registered Holders to those joint Registered Holders. The mailing
of that cheque or money order shall to the extent of the amount thereof (plus
the amount of any tax required by law to be deducted) discharge the Corporation
of and from all liability for the payment of the dividend, unless that cheque
or money order shall not be paid on presentation, and the amount of the tax
deducted shall not have been paid to the taxing authority. Any one of two or
more joint Registered Holders may give effectual receipts for any dividends or
other moneys payable in respect of the shares held by them.
PART 19 - ACCOUNTING RECORDS
19.1 The Directors shall cause accounting records to be kept as
necessary to record properly the financial affairs and condition of the
Corporation and to comply with the provisions of statutes applicable to the
Corporation.
19.2 The Directors shall determine the place at which the accounting
records of the Corporation shall be kept and those records shall be open to the
inspection of any Director during the normal business hours of the Corporation.
19.3 Unless otherwise determined by ordinary resolution no member as
such shall have the right to inspect the accounting records of the Corporation.
PART 20 - NOTICES
20.1 In addition to any other method for giving notice provided in
these Bylaws, a notice, statement or report may be given by the Corporation to
any member or Director either by delivery to him personally or be sending it by
mail, postage prepaid, to his Registered Address. Where a notice, statement or
report is sent by mail, service or delivery of the notice, statement or report
shall be deemed to be given by properly addressing, prepaying and mailing the
notice, statement or report and to have been given on the day, Saturdays,
Sundays and holidays excepted,
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following the date of mailing. A certificate signed by the secretary or other
officer of the Corporation or of any other corporation acting in that behalf
for the Corporation that the letter, envelope or wrapper containing the notice,
statement or report was so addressed, prepaid and mailed shall be conclusive
evidence thereof.
20.2 A notice may be given by the Corporation to joint members in
respect of a share registered in their names by giving the notice to the joint
member first named in the Register in respect of that share.
20.3 A notice may be given by the Corporation to the person entitled to
a share in consequence of the death or bankruptcy of a member by sending it by
mail, postage prepaid addressed to him by name, or by the title of
representative of the deceased, or trustee of the bankrupt, or by any like
description, at the address, if any, supplied for that purpose by the person
claiming to be so entitled, and until that address has been so supplied, by
giving the notice in any manner in which the same might have been given if the
death or bankruptcy had not occurred.
20.4 Any notice or document sent by mail or left at the Registered
Address of any member, shall, notwithstanding that the member is then deceased
and whether or not the Corporation has notice of his death, be deemed to have
been duly given in respect of any registered shares, whether held solely or
jointly with other persons by that deceased member until some other person is
entitled to notice by the Colorado Corporation Act in respect of those shares
and shall for all purposes of these Bylaws be deemed a sufficient service of
such notice or document on his personal representatives and all persons, if
any, jointly interested with him in those shares.
20.5 Subject to Article 20.4, notice of every general meeting shall be
given in the manner authorized by these Bylaws to:
(a) every member holding a share or shares carrying the right to vote
at that meeting on the Notice Record Date, or, if no Notice Record Date was
established by the Directors, on the date of the mailing;
(b) the personal representative of a deceased member, if entitled to
notice by the Colorado Corporation Act;
(c) the trustee in bankruptcy of a bankrupt member, if entitled to
notice by the Colorado Corporation Act; and
(d) the auditor.
Subject to the Articles, no other person is entitled to receive notice of a
general meeting.
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PART 21 - RECORD DATES
----------------------
21.1 The Directors may fix in advance the Notice Record Date for any
general meeting or class meeting. The Directors may fix in advance the Voting
Record Date for a general meeting or a class meeting. The Voting Record Date
for a meeting may be the same date as the Notice Record Date or any date after
the Notice Record Date. The Voting Record Date shall be the same date as the
Notice Record Date, unless otherwise specified by the Directors.
21.2 If, on the Notice Record Date, the name of a person is not on the
Register for the class or classes of shares otherwise entitled to receive
notice of a general meeting or a class meeting, that person is not entitled to
receive notice of such meeting with respect to that class of shares,
notwithstanding.
(a) the rights and restrictions attached to that class of shares; and
(b) that the name of the person is on such Register on the date of such
meeting or on the Voting Record Date.
Notice for a general meeting or a class meeting will not be insufficient nor
will proceedings at the meeting be invalid by reason only that on the Notice
Record Date members entitled to vote as such meeting and whose names were not
on the Register for the class or classes of shares entitled to receive notice
of such meeting were not given notice of such meeting.
21.3 In relation to the payment of any dividend, the Directors may fix
in advance the Dividend Record Date, which shall not be more than the maximum
number of days permitted by the Colorado Corporation Act, preceding the date of
the payment of the dividend, and, in such case, notwithstanding anything
elsewhere contained in these Bylaws, only members of record on the date so
fixed shall be deemed to be members for the purposes aforesaid.
21.4 Where no date is fixed as provided in Bylaws 21.1 and 21.3, the
date on which the notice is mailed or on which the resolution declaring the
dividend is adopted, as the case may be, shall be the date.
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PART 22 - SHARE CLASS RIGHTS
22.1 COMMON SHARES. Subject to the rights of the preferred shares, and rights
of any other shares of the Corporation which are expressed to rank prior to the
common shares, the common shares shall be subject to the following rights,
privileges, restrictions and conditions, namely:
(a) The holders of the common shares shall be entitled to vote at
any meeting of shareholders of the Corporation.
(b) The holders of the common shares shall be entitled to receive
any dividend declared payable to the common shares by the
Corporation; and
(c) The holders of the common shares shall be entitled to receive
the remaining property of the Corporation on dissolution.
22.2 PREFERRED SHARES. The preferred shares shall have attached thereto, as a
class, the following rights, privileges and restrictions and conditions namely;
(a) DIRECTOR'S RIGHT TO ISSUE IN ONE OR MORE SERIES. The preferred
shares may at any time, or from time to time, be issued in one
or more series, each series to consist of such number of shares
as may, before the issue thereof, be determined by resolution of
the Board of Directors of the Corporation;
(b) DIRECTOR'S RIGHT TO FIX TERMS OF EACH SERIES. The Directors of
the Corporation shall, by ordinary resolution, fix from time to
time before the issue thereof the designation, price,
restrictions, conditions and limitations attaching to the
preferred shares of each series including, without limiting the
generality of the foregoing, the rate or amount of dividends or
the method of calculating dividends, the dates of payment
thereof, the redemption or purchase prices and terms and
conditions of redemption or purchase, any voting rights, any
conversion rights and any sinking fund or other provisions;
(c) RANKING OF PREFERRED SHARES. The preferred shares of each series
shall rank, both as regards to dividends and return of capital,
in priority to all other shares of the Corporation. The
preferred shares of any series may also be given such other
preferences over the common shares and over any other shares of
the Corporation ranking junior to the preferred shares, as may
be fixed in accordance with sub-section 22.2(b) hereof;
provided, however, that no rights, privileges, restrictions or
conditions attached to a series of shares shall confer on a
series a priority in respect of voting, dividends or return of
capital over any other series of shares of the same class that
are then outstanding.
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PART 23 - RESTRICTIONS
23.1 RESTRICTIONS ON TRANSFER OF SHARES. Notwithstanding anything contained
in these Bylaws, the Directors may, in their sole discretion, decline to
register any transfer of shares and will not be required to disclose their
reasons; provided that at such time as a class of shares in the capital of the
Corporation have been listed for trading on any stock exchange or any regulatory
authority has accepted for filing and issued a receipt for a prospectus
qualifying the distribution of such shares to the public, any restrictions on
the transfer of shares will, by that fact, be removed.
DATED the 20th day of July, 1997.
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BY-LAW NO. 1
TABLE OF CONTENTS
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1. Definitions........................................................ 1
2. Registered Office.................................................. 2
3. Seal............................................................... 2
DIRECTORS
4. Number............................................................. 2
5. Vacancies.......................................................... 2
6. Powers............................................................. 3
7. Duties............................................................. 3
8. Qualification...................................................... 4
9. Term of Office..................................................... 4
10. Election........................................................... 4
11. Consent to Election................................................ 5
12. Removal............................................................ 5
13. Vacation of Office................................................. 5
14. Validity of Acts................................................... 6
MEETINGS OF DIRECTORS
15. Place of Meeting................................................... 6
16. Notice............................................................. 6
17. Waiver of Notice................................................... 7
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18. Omission of Notice................................................ 7
19. Telephone Participation........................................... 7
20. Adjournment....................................................... 7
21. Quorum and Voting................................................. 8
22. Resolution in Lieu of Meeting..................................... 8
COMMITTEES OF DIRECTORS
23. General........................................................... 8
24. Audit Committee................................................... 9
25. Remuneration of Directors, Officers and Employees................. 10
26. Submission of Contracts or Transactions
to Shareholders for Approval...................................... 10
27. Conflict of Interest.............................................. 11
28. For the Protection of Directors and Officers...................... 12
29. Indemnities to Directors and Others............................... 13
OFFICERS
30. Appointment of Officers........................................... 13
31. Removal of Officers............................................... 14
32. Duties of Officers may be Delegated............................... 14
33. Chairman of the Board............................................. 14
34. President......................................................... 14
35. Vice-President.................................................... 14
36. Secretary......................................................... 15
37. Treasurer......................................................... 15
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38. Assistant Secretary and Assistant
Treasurer................................................................15
39. Managing Director........................................................16
40. Vacancies................................................................16
SHAREHOLDERS' MEETING
41. Annual Meeting...........................................................16
42. Special Meetings.........................................................16
43. Meeting on Requisition of Shareholders...................................16
44. Notice...................................................................17
45. Waiver of Notice.........................................................18
46. Omission of Notice.......................................................18
47. Record Dates.............................................................18
48. Chairman of the Meeting..................................................19
49. Votes....................................................................19
50. Right to Vote............................................................20
51. Proxies..................................................................21
52. Telephone Participation..................................................22
53. Adjournment..............................................................23
54. Quorum...................................................................23
55. Resolution in Lieu of Meeting............................................24
SHARES AND TRANSFERS
56. Issuance.................................................................24
57. Security Certificates....................................................24
58. Agent....................................................................24
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59. Dealings with Registered Holder...................................... 25
60. Surrender of Security Certificates.................................... 25
61. Defaced, Destroyed, Stolen or Lost
Security Certificates................................................. 25
62. Enforcement of Lien for Indebtedness.................................. 26
63. Dividends............................................................. 26
64. Dividends on Joint Holders of Securities.............................. 27
65. Voting Securities on Other Bodies
Corporate............................................................. 27
NOTICES, ETC.
66. Service............................................................... 27
67. Returned Notices...................................................... 28
68. Shares Registered in More than One Name............................... 28
69. Persons Becoming Entitled by Operation
of Law................................................................ 28
70. Deceased Shareholder.................................................. 28
71. Signatures to Notices................................................. 28
72. Computation of Time................................................... 29
73. Proof of Service...................................................... 29
74. Cheques, Drafts, Notes, Etc........................................... 29
75. Custody of Securities................................................. 29
76. Execution of Contracts, etc........................................... 30
77. Fiscal Period......................................................... 31
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BY-LAW NO. I
A BY-LAW RELATING GENERALLY TO THE CONDUCT OF THE BUSINESS AND AFFAIRS
OF 689936 ALBERTA LTD. (HEREINAFTER CALLED THE "CORPORATION").
IT IS HEREBY ENACTED as a by-law of the Corporation as follows:
DEFINITIONS
1. In this by-law and all other by-laws of the Corporation, unless the context
otherwise specified or requires:
(a) "Act" means the Business Corporations Act (Alberta) and the regulations
made thereunder, as from time to time amended, and in the case of such
amendment any reference in the by-laws shall be read as referring to
the amended provisions thereof;
(b) "Articles" means the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of
continuance, articles of reorganization, articles of arrangement,
articles of dissolution and articles of revival and includes an
amendment to any of them;
(c) "Board" means the board of directors of the Corporation;
(d) "By-laws" means the by-laws of the Corporation from time to time in
force and effect;
(e) all terms contained in the by-laws which are defined in the Act shall
have the meanings given to such terms in the Act;
(f) words importing the singular number only shall include the plural and
vice versa; words importing the masculine gender shall include the
feminine and neuter genders; and,
(g) the headings used in the by-laws are inserted for reference purposes
only and are not to be considered or taken into account in construing
the terms or provisions thereof or to be deemed in any way to clarify,
modify or explain the effect of any such terms or provisions.
<PAGE> 6
REGISTERED OFFICE
2. The Corporation shall at all times have a registered office within Alberta.
Subject to the Act, the directors of the Corporation may at any time:
(a) change the address of the registered office within Alberta;
(b) designate, or revoke or change a designation of, a separate records
office within Alberta; or
(c) designate, or revoke or change a designation of, a post office box
within Alberta as the address for service by mail of the Corporation.
SEAL
3. The corporate seal of the Corporation shall be such as the directors may by
resolution from time to time adopt.
DIRECTORS
4. Number. The number of directors shall be the number fixed by the articles, or
where the articles specify a variable number, the number shall be not less than
the minimum and not more than the maximum number so specified and may be
determined from time to time within such limits by resolution of the board of
directors. Subject to the Act, at least half of the directors shall be resident
Canadians.
5. VACANCIES. Subject to the Act, a quorum of directors may fill a vacancy among
the directors, except a vacancy resulting from an increase in the number or
minimum number of directors or from a failure to elect the number or minimum
number of directors required by the articles. If there is not a quorum of
directors, or if there has been a failure to elect the number or minimum number
of directors required by the articles, the directors then in office shall
forthwith call a special meeting of shareholders to fill the vacancy and, if
they fail to call a meeting or if there are no directors then in office, the
meeting may be called by a shareholder. Subject to the Act, if the shareholders
have adopted an amendment to the articles to increase the number or minimum
number of directors, and have not, at the meeting at which they adopted the
amendment, elected an additional number of directors authorized by the
amendment,
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the directors then in office shall forthwith call a special meeting of
shareholders to fill the vacancy.
A director appointed or elected to fill a vacancy holds office for the
unexpired term of his predecessor.
6. POWERS. Subject to any unanimous shareholder agreement, the directors shall
manage the business and affairs of the Corporation and may exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation and are not prohibited by the Act, the articles, the by-laws, any
special resolution of the Corporation, a unanimous shareholder agreement or by
statute, or by statute, the articles, the by-laws, any special resolution of the
Corporation, or a unanimous shareholder agreement, expressly directed or
required to be done in some other manner.
7. DUTIES. Every director and officer of the Corporation in exercising his
powers and discharging his duties shall:
(a) act honestly and in good faith with a view to the best interests of the
Corporation; and,
(b) exercise the care, diligence and skill that a reasonably prudent person
would exercise in comparable circumstances.
8. QUALIFICATION. The following persons are disqualified from being a director
of the Corporation:
(a) anyone who is less than l8 years of age;
(b) anyone who,
(i) is a dependent adult as defined in the Dependent Adults Act or is the
subject of a certificate of incapacity under that Act,
(ii) is a formal patient as defined in the Mental Health Act,
(iii) is the subject of an order under the Mentally Incapacitated Persons Act
appointing a committee of his person or estate or both, or
(iv) has been found to be a person of unsound mind by a court elsewhere than
in Alberta;
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(c) a person who is not an individual;
(d) a person who has the status of bankrupt.
Unless the articles otherwise provide a director of the Corporation is not
required to hold shares issued by the Corporation.
9. TERM OF OFFICE. A director's term of office (subject to the provisions, if
any, of the Corporation's articles or any unanimous shareholder agreement, and
subject to his election for an expressly stated term or unless he was elected by
the board to fill a vacancy) shall be from the date of the meeting at which he
is elected or appointed until the close of the next annual meeting of
shareholders following his election or appointment or until his successor is
elected or appointed.
l0. ELECTION. Subject to the Act, shareholders of the Corporation shall, by
ordinary resolution at the first meeting of shareholders and at each succeeding
annual meeting at which an election of directors is required, elect directors to
hold office for a term expiring not later than the close of the third annual
meeting of shareholders following the election. Notwithstanding the foregoing,
shareholders may elect directors for the said term at any shareholders meeting.
A director not elected for an expressly stated term ceases to hold office at the
close of the first annual meeting of shareholders following his election but, if
qualified, is eligible for re-election. If directors are not elected at a
meeting of shareholders, the incumbent directors continue in office until their
successors are elected.
If a meeting of shareholders fails to elect the number or the minimum
number of directors required by the articles by reason of the disqualification
or death of any candidate, the directors elected at that meeting may exercise
all the powers of the directors if the number of directors so elected
constitutes a quorum.
ll. CONSENT TO ELECTION. A person who is elected or appointed a director is not
a director unless he was present at the meeting when he was elected or appointed
and did not refuse to act as a director or, if he was not present at the meeting
when he was elected or appointed, he consented to act as a director in writing
before his election or appointment or within ten (l0) days after it or he has
acted as a director pursuant to the election or appointment.
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l2. REMOVAL. Subject to the Act, the shareholders of the Corporation may by
ordinary resolution at a special meeting remove any director from office before
the expiration of his term of office and may, by a majority of the votes cast at
the meeting, elect any person in his stead for the remainder of his term.
l3. VACATION OF OFFICE. A director of the Corporation ceases to hold office
when:
(a) he dies or resigns;
(b) he is removed from office; or
(c) he becomes disqualified.
A resignation of a director becomes effective at the time a written
resignation is sent to the Corporation, or at the time specified in the
resignation, whichever is later.
l4. VALIDITY OF ACTS. An act of a director or officer is valid notwithstanding
an irregularity in his election or appointment or a defect in his qualification.
MEETINGS OF DIRECTORS
l5. PLACE OF MEETING. Unless the articles otherwise provide, meetings of
directors and of any committee of directors may be held at any place. A meeting
of directors may be convened by the Chairman of the board (if any), the
President or any director at any time and the Secretary shall upon direction of
any of the foregoing convene a meeting of directors.
l6. NOTICE. Notice of the time and place for the holding of any meeting of
directors or any committee of directors shall be sent to each director not less
than two (2) days (exclusive of the day on which the notice is sent but
inclusive of the day for which notice is given) before the date of the meeting;
provided that meetings of directors or of any committee of directors may be held
at any time without notice if all the directors are present (except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting
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is not lawfully called) or if all the absent directors have waived notice. The
notice of a meeting of directors shall specify any matter referred to in
subsection (3) of section ll0 of the Act that is to be dealt with at the
meeting, but need not otherwise specify the purpose or the business to be
transacted at the meeting. Each Director shall provide an address in Calgary to
which notice can be delivered. In absence of providing such an address in
writing, notice shall be conclusively deemed delivered upon delivery to the
registered office of the Corporation.
For the meeting of directors to be held following the election of
directors at an annual or special meeting of the shareholders or for a meeting
of directors at which a director is appointed to fill a vacancy in the board, no
notice of such meeting need be given to the newly elected or appointed director
or directors in order for the meeting to be duly constituted, provided a quorum
of the directors is present.
l7. WAIVER OF NOTICE. Notice of any meeting of directors or of any committee of
directors or the time for the giving of any such notice or any irregularity in
any meeting or in the notice thereof may be waived by any director in writing or
by telegram, cable or telex addressed to the corporation or in any other manner,
and any such waiver may be validly given either before or after the meeting to
which such waiver relates. Attendance of a director at any meeting of directors
or of any committee of directors is a waiver of notice of the meeting, except
when a director attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called.
l8. OMISSION OF NOTICE. The accidental omission to give notice of any meeting of
directors or of any committee of directors to or the non-receipt of any notice
by any person shall not invalidate any resolution passed or any proceeding taken
at any such meeting.
l9. TELEPHONE PARTICIPATION. A director may participate in a meeting of
directors or of any committee of directors by means of telephone or other
communication facilities that permit all persons participating in the meeting to
hear each other, and a director participating in a meeting by those means is
deemed for the purposes of the Act to be present at that meeting.
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20. ADJOURNMENT. Any meeting of directors or of any committee of directors may
be adjourned from time to time by the chairman of the meeting, with the consent
of the meeting, to a fixed time and place. Notice of an adjourned meeting of
directors or committee of directors is not required to be given if the time and
place of the adjourned meeting is announced at the original meeting. Any
adjourned meeting shall be duly constituted if held in accordance with the terms
of the adjournment and a quorum is present thereat. The directors who formed a
quorum at the original meeting are not required to form the quorum at the
adjourned meeting. If there is no quorum present at the adjourned meeting, the
original meeting shall be deemed to have terminated forthwith after its
adjournment. Any business may be brought before or dealt with at any adjourned
meeting which might have been brought before or dealt with at the original
meeting in accordance with the notice calling the same.
2l. QUORUM AND VOTING. Subject to the Articles, a majority of the number of
directors or where a minimum number of directors is required by the articles,
the minimum number of directors so required, constitute a quorum at any meeting
of directors and notwithstanding any vacancy among the directors, a quorum of
directors may exercise all the powers of the directors. Subject to the Act,
directors shall not transact business at a meeting of directors unless a quorum
is present and at least half of the directors present are resident Canadians.
Questions arising at any meeting of directors shall be decided by a majority of
votes. In the case of an equality of votes, the chairman of the meeting in
addition to his original vote shall have a second or casting vote.
22. RESOLUTION IN LIEU OF MEETING. Subject to the articles or a unanimous
shareholder agreement, a resolution in writing, signed by all the directors
entitled to vote on that resolution at a meeting of directors or committee of
directors, is as valid as if it had been passed at a meeting of directors or
committee of directors and shall be held to be effective as of the date
specified therein.
COMMITTEES OF DIRECTORS
23. General. The directors may from time to time appoint from their number a
managing director, who must be a resident Canadian, or a committee of directors,
at least half of whom shall be resident Canadians, and may delegate to the
managing
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director or such committee any of the powers of the directors, except that no
managing director or committee shall have the authority to:
(a) submit to the shareholders any question or matter requiring the
approval of the shareholders;
(b) fill a vacancy among the directors or in the office of auditor;
(c) issue securities except in the manner and on the terms authorized by
the directors;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation,
except in the manner and on the terms authorized by the directors;
(f) pay a commission to any person in consideration of his purchasing or
agreeing to purchase shares of the Corporation from the Corporation or
from any other person, or procuring or agreeing to procure purchasers
for shares of the Corporation;
(g) approve a management proxy circular;
(h) approve any annual financial statements to be placed before the
shareholders of the Corporation; or
(i) adopt, amend or repeal by-laws of the Corporation.
24. AUDIT COMMITTEE. Subject to the Act, if any of the issued shares of the
Corporation, or securities of the Corporation which may or might be exchanged
for or converted into shares of the Corporation, were part of a distribution to
the public and the Corporation has more than fifteen (l5) shareholders, the
directors shall elect annually from among their number an audit committee to be
composed of not fewer than three (3) directors, a majority of whom are not
officers or employees of the Corporation or any of its affiliates.
Each member of the audit committee shall serve during the pleasure of
the board of directors and, in any event, only so long as he shall be a
director. The directors may fill vacancies in the audit committee by election
from among their number.
The audit committee shall have power to fix its quorum at not less than
a majority of its members and to determine its own rules of procedure subject to
any
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regulations imposed by the board of directors from time to time and to the
following paragraph.
The auditor of the Corporation is entitled to receive notice of every
meeting of the audit committee and, at the expense of the Corporation, to attend
and be heard thereat, and, if so requested by a member of the audit committee,
shall attend every meeting of the committee held during the term of office of
the auditor. The auditor of the Corporation or any member of the audit committee
may call a meeting of the committee.
The audit committee shall review the financial statements of the
Corporation prior to approval thereof by the board and shall have such other
powers and duties as may from time to time by resolution be assigned to it by
the board.
REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES
25. Subject to the articles or any unanimous shareholder agreement, the
directors of the Corporation may fix the remuneration of the directors of the
Corporation and such remuneration shall be in addition to the salary paid to any
officer or employee of the Corporation who is also a director. The directors may
also by resolution award special remuneration to any director for undertaking
any special services on the Corporation's behalf other than the routine work
ordinarily required of a director of the Corporation. The confirmation of any
such resolution by the shareholders shall not be required. The directors,
officers and employees shall also be entitled to be paid their travelling and
other expenses properly incurred by them in connection with the affairs of the
Corporation.
SUBMISSION OF CONTRACTS OR TRANSACTIONS
TO SHAREHOLDERS FOR APPROVAL
26. The directors in their discretion may submit any contract, act or
transaction for approval, ratification or confirmation at any annual meeting of
the shareholders or at any special meeting of the shareholders called for the
purpose of considering the same and any contract, act or transaction that shall
be approved, ratified or confirmed by resolution passed by a majority of the
votes cast at any such meeting (unless any different or additional requirement
is imposed by the Act or by the
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Corporation's articles or any other by-law) shall be as valid and as binding
upon the Corporation and upon all the shareholders as though it had been
approved, ratified and/or confirmed by every shareholder of the Corporation.
CONFLICT OF INTEREST
27. A director or officer of the Corporation who is a party to a material
contract or proposed material contract with the Corporation, or is a director or
an officer of or has a material interest in any person who is a party to a
material contract or proposed material contract with the Corporation shall
disclose the nature and extent of his interest at the time and in the manner
provided in the Act. Except as provided in the Act, no such director of the
Corporation shall vote on any resolution to approve such contract. If a material
contract is made between the Corporation and one or more of its directors or
officers, or between the Corporation and another person of which a director or
officer of the Corporation is a director or officer or in which he has a
material interest,
(a) the contract is neither void nor voidable by reason only of that
relationship, or by reason only that a director with an interest in the
contract is present at or is counted to determine the presence of a
quorum at a meeting of the directors or committee of directors that
authorized the contract, and,
(b) a director or officer or former director or officer of the Corporation
to whom a profit accrues as a result of the making of the contract is
not liable to account to the Corporation for that profit by reason only
of holding office as a director or officer, if the director or officer
disclosed his interest in accordance with the provisions of the Act and
the contract was approved by the directors or the shareholders and it
was reasonable and fair to the Corporation at the time it was approved.
This paragraph is subject to any unanimous shareholder agreement.
FOR THE PROTECTION OF DIRECTORS AND OFFICERS
28. No director or officer for the time being of the Corporation shall be liable
for the acts, receipts, neglects or defaults of any other director or officer or
employee or for joining in any receipt or act for conformity or for any loss,
damage or expense happening to the Corporation through the insufficiency or
deficiency of title to any property acquired or disposed of by the Corporation
or for or on behalf of the Corporation or for the insufficiency or deficiency of
any security in or upon which any of the monies of or belonging to the
Corporation shall be placed out or invested or for any loss or damage arising
from the bankruptcy, insolvency or tortious act of any person,
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firm or corporation including any person, firm or corporation with whom or which
any monies, securities, or effects shall be lodged or deposited or for any loss,
conversion, misapplication or misappropriation of or any damage resulting from
any dealings with any monies, securities or other assets belonging to the
Corporation or for any other loss, damage or misfortune whatever which may
happen in the execution of the duties of his respective office of trust or in
relation thereto, unless the same shall happen by or through his failure to
exercise the powers and to discharge the duties of his office honestly, in good
faith with a view to the best interests of the Corporation, and in connection
therewith to exercise the care, diligence and skill that any reasonably prudent
person would exercise in comparable circumstances, provided that nothing herein
contained shall relieve a director or officer from the duty to act in accordance
with the Act or relieve him from liability under the Act. The directors for the
time being of the Corporation shall not be under any duty or responsibility in
respect of any contract, act or transaction whether or not made, done or entered
into in the name or on behalf of the Corporation, except such as shall have been
submitted to and authorized or approved by the directors. If any director or
officer of the Corporation shall be employed by or shall perform services for
the Corporation otherwise than as a director or officer or shall be a member of
a firm or a shareholder, director or officer of a body corporate which is
employed by or performs services for the Corporation, the fact of his being a
shareholder, director or officer of the Corporation or body corporate or member
of the firm shall not disentitle such director or officer or such firm or body
corporate, as the case may be, from receiving proper remuneration for such
services.
INDEMNITIES TO DIRECTORS AND OTHERS
29. Subject to the Act, except in respect of an action by or on behalf of the
Corporation or body corporate to procure a judgment in its favour against the
director or officer in question, the Corporation shall indemnify a director or
officer of the Corporation, a former director or officer of the Corporation or a
person who acts or acted at the Corporation's request as a director or officer
of a body corporate of which the Corporation is or was a shareholder or
creditor, and his heirs and legal representatives, against all costs, charges
and expenses, including any amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or body corporate,
if:
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(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; and,
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
OFFICERS
30. APPOINTMENT OF OFFICERS. Subject to the articles or any unanimous
shareholder agreement, the directors annually or as often as may be required may
appoint from among themselves a Chairman of the board and shall appoint a
President and a Secretary and if deemed advisable may appoint one or more
Vice-Presidents, a Treasurer and one or more Assistant Secretaries and/or one or
more Assistant Treasurers. None of such officers except the Chairman of the
Board need be a director of the Corporation although a director may be appointed
to any office of the Corporation. Two (2) or more offices of the Corporation may
be held by the same person. In case and whenever the same person holds the
offices of Secretary and Treasurer he may but need not be known as the
Secretary-Treasurer. The directors may from time to time appoint such other
officers, employees and agents as they shall deem advisable who shall have the
authority and shall perform such functions and duties as may from time to time
be prescribed by resolution of the directors. The directors may from time to
time and subject to the Act, vary, add to or limit the duties and powers of any
officer.
3l. REMOVAL OF OFFICERS, ETC. Subject to the articles or any unanimous
shareholder agreement, all officers, employees and agents, in the absence of
agreement by the directors to the contrary, shall be subject to removal by
resolution of the directors at any time, with or without cause.
32. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence or inability or
refusal to act of any officer of the Corporation or for any other reason that
the directors may deem sufficient, the directors may delegate all or any of the
powers of such officer to any other officer or to any director for the time
being.
33. CHAIRMAN OF THE BOARD. The Chairman of the Board (if any) shall, if present,
preside as chairman at all meetings of the board and of shareholders. He shall
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sign such contracts, documents or instruments in writing as require his
signature and shall have such other powers and shall perform such other duties
as may from time to time be assigned to him by resolution of the directors.
34. PRESIDENT. The President shall be the chief executive officer of the
Corporation and shall, subject to the direction of the board of directors,
exercise general supervision and control over the business and affairs of the
Corporation. In the absence of the Chairman of the Board (if any), and if the
President is also a director of the Corporation, the President shall, when
present, preside as chairman at all meetings of directors and shareholders. He
shall sign such contracts, documents or instruments in writing as require his
signature and shall have such other powers and shall perform such other duties
as may from time to time be assigned to him by resolution of the directors or as
are incident to his office.
35. VICE-PRESIDENT. The Vice-President or, if more than one, the Vice-Presidents
in order of seniority, shall be vested with all the powers and shall perform all
the duties of the President, provided however, that a Vice-President who is not
a director shall not preside as chairman at any meeting of directors or
shareholders. The Vice-President or, if more than one, the Vice-Presidents shall
sign such contracts, documents or instruments in writing as require his or their
signatures and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him or them by resolution of the
directors.
36. SECRETARY. The Secretary shall give or cause to be given notices for all
meetings of directors, and any committee of directors and shareholders when
directed to do so, and shall, subject to the provisions of the Act, maintain the
records referred to in subsections (l), (3) and (5) of section 20 of the Act. He
shall sign such contracts, documents or instruments in writing as require his
signature and shall have such other powers and shall perform such other duties
as may from time to time be assigned to him by resolution of the directors or as
are incident to his office.
37. TREASURER. Subject to the provisions of any resolution of the directors, the
Treasurer shall have the care and custody of all the funds and securities of the
Corporation and shall deposit the same in the name of the Corporation in such
bank of banks or with such other depository or depositories as the directors may
by resolution direct. He shall prepare and maintain adequate accounting records.
He shall sign such
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contracts, documents or instruments in writing as require his signature and
shall have such other powers and shall perform such other duties as may from
time to time be assigned to him by resolution of the directors or as are
incident to his office. He may be required to give such bond for the faithful
performance of his duties as the directors in their uncontrolled discretion may
require and no director shall be liable for failure to require any such bond or
for the insufficiency of any such bond or for any loss by reason of the failure
of the Corporation to seek any indemnity thereby provided.
38. ASSISTANT SECRETARY AND ASSISTANT TREASURER. The Assistant Secretary or, if
more than one, the Assistant Secretaries in order of seniority, and the
Assistant Treasurer or, if more than one, the Assistant Treasurers in order of
seniority, shall be vested with all the powers and shall perform all the duties
of the Secretary and Treasurer, respectively, in the absence or inability or
refusal to act of the Secretary or Treasurer as the case may be. The Assistant
Secretary or, of more than one, the Assistant Secretaries and the Assistant
Treasurer or, if more than one, the Assistant Treasurers shall sign such
contracts, documents or instruments in writing as require his or their
signatures respectively and shall have such other powers and shall perform such
other duties as may from time to time be assigned to him or them by resolution
of the directors.
39. MANAGING DIRECTOR. The directors may from time to time appoint from their
number a Managing Director who must be a resident Canadian and may delegate to
the Managing Director any of the powers of the directors subject to the limits
on authority imposed by the Act. The Managing Director shall conform to all
lawful directions given to him by the directors of the Corporation and shall at
all reasonable times give to the directors or any of them all information they
may require regarding the affairs of the Corporation. Any agent or employee
appointed by the Managing Director shall be subject to discharge by the
directors.
40. VACANCIES. If the office of President, Vice-President, Secretary, Assistant
Secretary, Treasurer, Assistant Treasurer, or any other office created by the
directors pursuant to paragraph 30 hereof shall be or become vacant by reason of
death, resignation or in any other manner whatsoever, the directors shall, in
the case of the President and Secretary, and may, in the case of any other
officers, appoint an individual to fill such vacancy.
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SHAREHOLDERS' MEETING
4l. Annual Meeting. Subject to the Act, the annual meeting of shareholders shall
be held at the registered office of the Corporation or at a place elsewhere
within Alberta determined by the directors or outside Alberta if all the
shareholders who are entitled to vote agree on such day in each year and at such
time as the directors may determine.
42. SPECIAL MEETINGS. The directors of the Corporation may at any time call a
special meeting of shareholders to be held on such day and at such time and,
subject to the Act, at such place within or outside Alberta if all the
shareholders who are entitled to vote agree as the directors may determine.
43. MEETING ON REQUISITION OF SHAREHOLDERS. The holders of not less than five
(5%) per cent of the issued shares of the Corporation that carry the right to
vote at a meeting sought to be held may requisition the directors to call a
meeting of shareholders for the purposes stated in the requisition. The
requisition which may consist of several documents of like form each signed by
one or more shareholders, shall state the business to be transacted at the
meeting and a copy of the requisition shall be sent to each director and the
original of the requisition shall be sent to the registered office of the
Corporation. Subject to the provisos set out in subsection 3 of section l37 of
the Act, upon receipt of the requisition, the directors shall call a meeting of
shareholders to transact the business stated in the requisition. If the
directors do not within twenty-one (2l) days after receiving the requisition
call a meeting, any shareholder who signed the requisition may call the meeting.
Unless the shareholders otherwise resolve at such a meeting, the corporation
shall reimburse the shareholders the expenses reasonably incurred by them in
requisitioning, calling and holding the meeting.
44. NOTICE. A printed, written or typewritten notice stating the day , hour and
place of meeting and if special business is to be transacted thereat, stating,
(i) the nature of that business in sufficient detail to permit the
shareholder to form a reasoned judgment on that business, and,
(ii) the text of any special resolution to be submitted to the meeting,
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shall be sent to each shareholder entitled to vote at the meeting, who on the
record date for notice is registered on the records of the Corporation or its
transfer agent as a shareholder, to each director of the Corporation and to the
auditor of the Corporation not less than twenty-one (2l) days and not more than
fifty (50) days (exclusive of the day of mailing and of the day for which notice
is given) before the date of every meeting; provided that a meeting of
shareholders may be held for any purpose on any day and at any time and, subject
to the Act, at any place without notice if all the shareholders and all other
persons entitled to attend such meeting are present in person or represented by
proxy at the meeting (except where a shareholder or other person attends the
meeting for the express purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called) or if all the
shareholders and all other persons entitled to attend such meeting and not
present in person nor represented by proxy thereat waive notice of the meeting.
A director of the Corporation is entitled to receive notice of and to
attend and be heard at every meeting of shareholders of the Corporation.
The auditor of the Corporation is entitled to receive notice of every
meeting of shareholders of the Corporation and, at the expense of the
Corporation, to attend and be heard at every meeting on matters relating to his
duties as auditor.
45. WAIVER OF NOTICE. Notice of any meeting of shareholders or the time for the
giving of any such notice or any irregularity in any meeting or in the notice
thereof may be waived by any shareholder, the duly appointed proxy of any
shareholder, any director or the auditor of the Corporation in writing or by
telegram, cable or telex addressed to the Corporation or in any other manner,
and any such waiver may be validly given either before or after the meeting to
which such waiver relates. Attendance of a shareholder or any other person
entitled to attend at a meeting of shareholders is a waiver of notice of the
meeting, except when he attends a meeting for the express purpose of objecting
to the transaction of any business on the grounds that the meeting is not
lawfully called.
46. OMISSION OF NOTICE. The accidental omission to give notice of any meeting of
shareholders to or the non-receipt of any notice by any person shall not
invalidate any resolution passed or any proceeding taken at any such meeting.
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47. RECORD DATES. Subject to the Act, the directors may fix in advance a date as
the record date for the determination of shareholders,
(a) entitled to receive payment of a dividend,
(b) entitled to participate in a liquidation distribution or,
(c) for any other purpose except the right to receive notice of or to vote
at a meeting of shareholders,
but such record date shall not precede by more than fifty (50) days the
particular action to be taken.
Subject to the Act, the directors may also fix in advance a date as the
record date for the determination of shareholders entitled to receive notice of
a meeting of shareholders, but such record date shall not precede by more than
fifty (50) days or by less than twenty-one (2l) days the date on which the
meeting is to be held.
If no record date is fixed,
(a) the record date for the determination of shareholders entitled to
receive notice of a meeting of shareholders shall be
(i) at the close of business on the last business day preceding the day on
which the notice is sent; or
(ii) if no notice is sent, the day on which the meeting is held; and,
(b) the record date for the determination of shareholders
for any purpose other than to establish a shareholder's right to receive notice
of a meeting or to vote shall be at the close of business on the day on which
the directors pass the resolution relating to that purpose.
48. CHAIRMAN OF THE MEETING. In the absence of the Chairman of the Board (if
any), the President and any Vice-President who is a director, the shareholders
present entitled to vote shall elect another director as chairman of the meeting
and if no director is present or if all the directors present decline to take
the chair then the shareholders present shall elect one of their number to be
the chairman.
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49. VOTES. Votes at meetings of shareholders may be given either personally or
by proxy. Every question submitted to any meeting of shareholders shall be
decided on a show of hands except when a ballot is demanded by a shareholder or
proxyholder entitled to vote at the meeting. A shareholder or proxyholder may
demand a ballot either before or on the declaration of the result of any vote by
show of hands. At every meeting at which he is entitled to vote, every
shareholder present in person and every proxyholder shall have one (l) vote on a
show of hands. Upon a ballot at which he is entitled to vote every shareholder
present or in person or by proxy shall (subject to the provisions, if any, of
the articles) have one (l) vote for every share registered in his name. In the
case of an equality of votes the chairman of the meeting shall not, either on a
show of hands or on a ballot, have a second or casting vote in addition to the
vote or votes to which he may be entitled as a shareholder or proxyholder.
At any meeting, unless a ballot is demanded by a shareholder or
proxyholder entitled to vote at the meeting, either before or after any vote by
a show of hands, a declaration by the chairman of the meeting that a resolution
has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority shall be conclusive evidence of the fact
without proof of the number of proportion of votes recorded in favour of or
against the resolution.
If at any meeting a ballot is demanded on the election of a chairman or
on the question of adjournment or termination, the ballot shall be taken
forthwith without adjournment. If a ballot is demanded on any other question or
as to the election of directors, the ballot shall be taken in such manner and
either at once or later at the meeting or after adjournment as the chairman of
the meeting directs. The result of a ballot shall be deemed to be the resolution
of the meeting at which the ballot was demanded. A demand for a ballot may be
withdrawn.
50. RIGHT TO VOTE. Subject to Article 49 hereof and unless the articles
otherwise provide, each share of the Corporation entitles the holder of it to
one (l) vote at a meeting of shareholders.
Where a body corporate or association is a shareholder of the
Corporation, any individual authorized by a resolution of the directors or
governing body of the body corporate or association to represent it at meetings
of shareholders of the
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Corporation is the person entitled to vote at all such meetings of shareholders
in respect of the shares held by such body corporate or association.
Where a person holds shares as a personal representative, such person
or his proxy is the person entitled to vote at all meetings of shareholders in
respect of the shares so held by him.
Where a person mortgages, pledges or hypothecates his shares, such
person or his proxy is the person entitled to vote at all meetings of
shareholders in respect of such shares so long as such person remains the
registered owner of such shares unless, in the instrument creating the mortgage,
pledge or hypothec, he has expressly empowered the person holding the mortgage,
pledge or hypothec to vote in respect of such shares, in which case, subject to
the articles, such holder or his proxy is the person entitled to vote in respect
of the shares.
Where two (2) or more persons hold shares jointly, one of those holders
present at a meeting of shareholders may in the absence of the others vote the
shares, but if two (2) or more of those persons who are present, in person or by
proxy, vote, they shall vote as one on the shares jointly held by them and if
they do not vote as one they shall be deemed to have abstained.
5l. PROXIES. Every shareholder, including a shareholder that is a body corporate
entitled to vote at a meeting of shareholders may by means of a proxy appoint a
proxyholder and one or more alternate proxyholders, who are not required to be
shareholders, to attend and act at the meeting in the manner and to the extent
authorized by the proxy and with the authority conferred by the proxy.
An instrument appointing a proxyholder shall be in written or printed
form and shall be executed by the shareholder or by his attorney authorized in
writing and is valid only at the meeting in respect of which it is given or any
adjournment of that meeting.
Any instrument appointing a proxyholder may be in the following form or
in any other form which complies with the requirements of the Act:
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"The undersigned shareholder of __________hereby appoints __________of
whom failing, ________ of ________ as the nominee of the undersigned to
attend and act for and on behalf of the undersigned at the meeting of
the shareholders of the said Corporation to be held on the ____ day of
1992 and at any adjournment thereof in the same manner, to the same
extent and with the same power as if the undersigned were personally
present at the said meeting or such adjournment thereof.
Dated the _________ May of ____________, l9__.
-----------------------------------
Signature of Shareholder
The directors may specify in a notice calling a meeting of shareholders
a time not exceeding forty-eight (48) hours, excluding Saturdays and holidays,
preceding the meeting or an adjournment of the meeting before which time proxies
to be used at the meeting must be deposited with the Corporation or its agent.
The chairman of the meeting of shareholders may in his discretion
accept telegraphic, telex, cable or written communication as to the authority of
anyone claiming to vote on behalf of and to represent a shareholder
notwithstanding that no instrument of proxy conferring such authority has been
deposited with the Corporation, and any votes given in accordance with such
telegraphic, telex, cable or written communication accepted by the chairman of
the meeting shall be valid and shall be counted.
52. TELEPHONE PARTICIPATION. A shareholder or any other person entitled to
attend a meeting of shareholders may participate in the meeting by means of
telephone or other communication facilities that permit all persons
participating in the meeting to hear each other and a person participating in
such a meeting by those means is deemed for the purposes of the Act to be
present at the meeting.
53. ADJOURNMENT. The chairman of the meeting may with the consent of the meeting
adjourn any meeting of shareholders from time to time to a fixed time and place
and if the meeting is adjourned by one (l) or more adjournments for an aggregate
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of less than thirty (30) days it is not necessary to give notice of the
adjourned meeting other than by announcement at the time of an adjournment. If a
meeting of shareholders is adjourned by one (l) or more adjournments for an
aggregate of thirty (30) days or more, notice of the adjourned meeting shall be
given as for an original meeting and if the meeting is adjourned by one (l) or
more adjournments for an aggregate of more than ninety (90) days, then the
provisions of subsections (l), (2) and (3) of section l43 of the Act shall
apply.
Any adjourned meeting shall be duly constituted if held in accordance
with the terms of the adjournment and a quorum is present thereat. The persons
who formed a quorum at the original meeting are not required to form the quorum
at the adjourned meeting. If there is no quorum present at the adjourned
meeting, the original meeting shall be deemed to have terminated forthwith after
its adjournment. Any business may be brought before or dealt with at any
adjourned meeting which might have been brought before or dealt with at the
original meeting in accordance with the notice calling the same.
54. QUORUM. One (1) person present and holding or representing by proxy at least
one (l) issued share of the Corporation shall be a quorum of any meeting of
shareholders for the election of a chairman of the meeting and for the
adjournment of the meeting to a fixed time and place but not for the transaction
of any other business; for all other purposes one (1) person present and holding
or representing by proxy a majority of the shares entitled to vote at the
meeting shall be a quorum. If a quorum is present at the opening of a meeting of
shareholders, the shareholders present may proceed with the business of the
meeting, notwithstanding that a quorum is not present throughout the meeting.
Notwithstanding the foregoing, if the Corporation has only one (l)
shareholder, or only one (l) holder of any class or series of shares, the
shareholder present in person or by proxy constitutes a meeting and a quorum for
such meeting.
55. RESOLUTION IN LIEU OF MEETING. A resolution in writing signed by all the
shareholders entitled to vote on that resolution is as valid as if it had been
passed at a meeting of the shareholders and shall be held to be effective as of
any date mentioned therein.
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SHARES AND TRANSFERS
56. ISSUANCE. Subject to the articles, any unanimous shareholder agreement and
the Act, shares in the Corporation may be issued at the times and to the persons
and for the consideration that the directors determine; provided that a share
shall not be issued until the consideration for the share is fully paid in money
or in property or past service that is not less in value than the fair
equivalent of the money that the Corporation would have received if the share
had been issued for money.
57. SECURITY CERTIFICATES. A security holder is entitled at his option to a
security certificate that complies with the Act or a non-transferrable written
acknowledgment of his right to obtain a security certificate from the
Corporation in respect of the securities of the Corporation held by him.
Security certificates shall (subject to compliance with the Act) be in such form
as the directors may from time to time by resolution approve and such
certificates shall be signed manually by at least one (l) director or officer of
the Corporation or by or on behalf of a registrar, transfer agent or branch
transfer agent of the Corporation, or by a trustee who certifies it in
accordance with a trust indenture, and any additional signatures required on a
security certificate may be printed or otherwise mechanically reproduced
thereon. If a security certificate contains a printed or mechanically reproduced
signature of a person, the Corporation may issue the security certificate,
notwithstanding that the person has ceased to be a director or an officer of the
Corporation, and the security certificate is as valid as if he were a director
or officer at the date of its issue.
58. AGENT. The directors may from time to time by resolution appoint or remove,
(a) one (l) or more trust companies registered under the Trust Companies
Act as its agent or agents to maintain a central securities register or
registers, or,
(b) an agent or agents to maintain a branch securities register or
registers for the Corporation.
59. DEALINGS WITH THE REGISTERED HOLDER. Subject to the Act, the Corporation may
treat the registered owner of a security as the person exclusively entitled to
vote, to receive notices, to receive any interest, dividends or other payments
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in respect of the security, and otherwise to exercise all the rights and powers
of an owner of the security.
60. SURRENDER OF SECURITY CERTIFICATES. Subject to the Act, no transfer of a
security issued by the Corporation shall be registered unless or until the
security certificate representing the security to be transferred has been
presented for registration or, if no security certificate has been issued by the
Corporation in respect of such security, unless or until a duly executed
transfer in respect thereof has been presented for registration.
6l. DEFACED, DESTROYED, STOLEN OR LOST SECURITY CERTIFICATES. In case of the
defacement, destruction, theft or loss of a security certificate, the fact of
such defacement, destruction, theft or loss shall be reported by the owner to
the Corporation or to an agent of the Corporation (if any), on behalf of the
Corporation, with a statement verified by oath or statutory declaration as to
the defacement, destruction, theft or loss and the circumstances concerning the
same and with a request for the issuance of a new security certificate to
replace the one so defaced, destroyed, stolen or lost. Upon the giving to the
Corporation (or if there be an agent, hereinafter in this paragraph referred to
as the "Corporation's agent", then to the Corporation and the Corporation's
agent) of a bond of a surety company (or other security approved by the
directors) in such form as is approved by the directors or by the Chairman of
the Board (if any), the President, a Vice-President, the Secretary or the
Treasurer of the Corporation, indemnifying the Corporation (and the
Corporation's agent if any) against all loss, damage or expense, which the
Corporation and/or the Corporation's agent may suffer or be liable for by reason
of the issuance of a new security certificate to such shareholder, and provided
that neither the Corporation nor the Corporation's agent has received notice
that the security has been acquired by a purchaser described in section 64 of
the Act, and before such a purchaser has received a new, reissued or
re-registered security, a new security certificate may be issued in replacement
of the one defaced, destroyed, stolen or lost, if such issuance is ordered and
authorized by any one of the Chairman of the Board (if any), the President, a
Vice-President, the Secretary or the Treasurer of the Corporation or by
resolution of the directors.
62. ENFORCEMENT OF LIEN FOR INDEBTEDNESS. Subject to the Act, if the articles of
the Corporation provide that the Corporation has a lien on a share registered in
the name of a shareholder or his legal representative for a debt of that
shareholder to
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the Corporation, the directors of the Corporation may refuse to permit the
registration of a transfer of any such share or shares until the debt has been
paid in full.
DIVIDENDS
63. The directors may from time to time by resolution declare and the
Corporation may pay dividends on its issued shares, subject to the provisions
(if any) of the Corporation's articles.
The directors shall not declare and the Corporation shall not pay a
dividend if there are reasonable grounds for believing that:
(a) the Corporation is, or would after the payment be, unable to pay its
liabilities as they become due; or,
(b) the realizable value of the Corporation's assets would thereby be less
than the aggregate of its liabilities and stated capital of all
classes.
Subject to the Act, the Corporation may pay a dividend in money or
property or by issuing fully paid shares of the Corporation.
64. In case several persons are registered as the joint holders of any
securities of the Corporation, any one of such persons may give effectual
receipts for all dividends and payments on account of dividends, principal,
interest and/or redemption payments in respect of such securities.
VOTING SECURITIES IN OTHER BODIES CORPORATE
65. All securities of any other body corporate carrying voting rights held from
time to time by the Corporation may be voted at all meetings of shareholders,
bondholders, debenture holders or holders of such securities, as the case may
be, of such other body corporate and in such manner and by such person or
persons as the directors of the Corporation shall from time to time determine
and authorize by resolution. The duly authorized signing officers of the
Corporation may also from time to time execute and deliver for and on behalf of
the Corporation proxies and arrange for the issuance of voting certificates or
other evidence of the right to vote in such names
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as they may determine without the necessity of a resolution or other action by
the directors.
NOTICES, ETC.
66. SERVICE. Any notice or document required by the Act, the articles or the
by-laws to be sent to any shareholder or director of the Corporation may be
delivered personally to or sent by mail addressed to:
(a) the shareholder at his latest address as shown in the records of the
Corporation or its transfer agent; and,
(b) the director at his latest address as shown in the records of the
Corporation in the last notice filed under section l0l or l08 of the
Act.
With respect to every notice or document sent by mail it shall be
sufficient to prove that the envelope or wrapper containing the notice or
document was properly addressed and put into a post office or into a post office
letter box.
67. If the Corporation sends a notice or document to a shareholder and the
notice or document is returned on three (3) consecutive occasions because the
shareholder cannot be found, the Corporation is not required to send any further
notices or documents to the shareholder until he informs the Corporation in
writing of his new address.
68. SHARES REGISTERED IN MORE THAN ONE NAME. All notices or documents shall,
with respect to any shares in the capital of the Corporation registered in more
than one name, be sent to whichever of such persons is named first in the
records of the Corporation and any notice or document so sent shall be
sufficient notice or delivery of such document to all the holders of such
shares.
69. PERSONS BECOMING ENTITLED BY OPERATION OF LAW. Every person who by operation
of law, transfer or by any other means whatsoever shall become entitled to any
shares in the capital of the Corporation shall be bound by every notice or
document in respect of such shares which prior to his name and address being
entered on the records of the Corporation in respect of such shares shall have
been duly sent to the person or persons from whom, directly or indirectly, he
derives his title to such shares.
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70. DECEASED SHAREHOLDER. Any notice or document sent to any shareholder in
accordance with paragraph 66 hereof shall, notwithstanding that such shareholder
be then deceased and whether or not the Corporation has notice of his decease,
be deemed to have been duly sent in respect of the shares held by such
shareholder (whether held solely or with other persons) until some other person
be entered in his stead in the records of the Corporation as the holder or one
of the holders thereof and shall be deemed to have been duly sent to his heirs,
executors, administrators and legal representatives and all persons (if any)
interested with him in such shares.
7l. SIGNATURES TO NOTICES. The signature of any director or officer of the
Corporation to any notice may be written, stamped, typewritten or printed or
partly written, stamped, typewritten or printed.
72. COMPUTATION OF TIME. Where a given number of days' notice or notice
extending over any period is required to be given under any provisions of the
articles or by-laws of the Corporation, the day the notice is sent shall be
counted in such number of days or other period and such notice shall be deemed
to have been sent on the day of personal delivery or mailing.
73. PROOF OF SERVICE. A certificate of any officer of the Corporation in office
at the time of the making of the certificate or of an agent of the Corporation
as to facts in relation to the sending of any notice or document to any
shareholder, director, officer or auditor or publication of any notice or
document shall be conclusive evidence thereof and shall be binding on every
shareholder, director, officer or auditor of the Corporation, as the case may
be.
CHEQUES, DRAFTS, NOTES, ETC.
74. All cheques, drafts or orders for the payment of money and all notes,
acceptances and bills of exchange shall be signed by such officer or officers or
other person or persons, whether or not officers of the Corporation, and in such
manner as the directors may from time to time designate by resolution.
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CUSTODY OF SECURITIES
75. All securities (including warrants) owned by the Corporation shall be lodged
(in the name of the Corporation) with a chartered bank or trust company or in a
safety deposit box, or if so authorized by resolution of the directors, with
such other depositories or in such other manner as may be determined from time
to time by the directors.
All securities (including warrants) belonging to the Corporation may be
issued and held in the name of a nominee or nominees of the Corporation (and if
issued or held in the names of more than one nominee shall be held in the names
of the nominees jointly with right of survivorship) and shall be endorsed in
blank with endorsement guaranteed in order to enable transfer thereof to be
completed and registration thereof to be effected.
EXECUTION OF CONTRACTS, ETC.
76. Contracts, documents or instruments in writing requiring the signature of
the Corporation may be signed by any one (1) director or officer and all
contracts, documents or instruments in writing so signed shall be binding upon
the Corporation without any further authorization or formality. The directors
are authorized from time to time by resolution to appoint any officer or
officers or any other person or persons on behalf of the Corporation either to
sign contracts, documents or instruments in writing generally or to sign
specific contracts, documents or instruments in writing.
The corporate seal of the Corporation may, when required, be affixed by
either one of the President or the Secretary, to contracts, documents or
instruments in writing signed by either one as aforesaid or by an officer or
officers, person or persons appointed as aforesaid by resolution of the board of
directors.
The term "contracts, documents or instruments in writing" as used in
this by-law shall include deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property, real or personal, immovable or movable,
agreements, releases, receipts and discharges for the payment of money or other
obligations, conveyances, transfers and assignments of securities and all paper
writings.
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In particular, without limiting the generality of the foregoing, any
one (1) director or officer, are authorized to sell, assign, transfer, exchange,
confer or convey all securities owned by or registered in the name of the
Corporation and to sign and execute (under the seal of the Corporation or
otherwise) all assignments, transfers, conveyances, powers of attorney and other
instruments that may be necessary for the purpose of selling, assigning,
transferring, exchanging, converting or conveying any such securities.
The signature or signatures of any officer or director of the
Corporation and/or of any other officer or officers, person or persons appointed
as aforesaid by resolution of the directors may, if specifically authorized by
resolution of the directors, be printed, engraved, lithographed or otherwise
mechanically reproduced upon all contracts, documents or instruments in writing
or bonds, debentures or other securities of the Corporation executed or issued
by or on behalf of the Corporation and all contracts, documents or instruments
in writing or securities of the Corporation on which the signature or signatures
of any of the foregoing officers, directors or persons shall be so reproduced,
by authorization by resolution of the directors, shall be deemed to have been
manually signed by such officers, directors or persons whose signature or
signatures is or are so reproduced and shall be as valid to all intents and
purposes as if they had been signed manually and notwithstanding that the
officers, directors or persons whose signature or signatures is or are so
reproduced may have ceased to hold office at the date of the delivery or issue
of such contracts, documents or instruments in writing or securities of the
Corporation.
FISCAL PERIOD
77. The fiscal period of the Corporation shall terminate on such day in each
year as the board of directors may from time to time by resolution determine.
ENACTED by the Board the ______day of _______________, 19___ and
confirmed by the Shareholders in accordance with the Business Corporations Act,
this ____ day of _____________, 19___.
PRESIDENT:_________________________
SECRETARY:_________________________
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BY-LAW NO. 2
A by-law respecting the borrowing of money, the issuing of securities
and the securing of liabilities by 689936 ALBERTA LTD. (hereinafter called the
"Corporation").
IT IS HEREBY ENACTED as a by-law of the Corporation as follows:
1. Without limiting the borrowing powers of the Corporation as set forth in The
Business Corporations Act, the Board may from time to time:
(a) borrow money upon the credit of the Corporation;
(b) re-issue, sell or pledge debt obligations of the Corporation;
(c) subject to Section 42 of the Business Corporations Act as amended from
time to time, give a guarantee on behalf of the Corporation to secure
performance of an obligation of any person;
(d) mortgage, hypothecate, pledge or otherwise create a security interest
in all or any property of the Corporation owned or subsequently
acquired to secure any obligation of the Corporation;
(e) to provide security for any loans of the Corporation by an assignment
of
(i) accounts receivable
(ii) the proceeds of any policy of insurance owned by the Corporation
(iii) the proceeds or benefit or any contract or chose in action;
(f) sign bills, notes, contracts and other evidences of or securities for
money borrowed or to be borrowed;
(g) authorize any two officers acting jointly, provided that one is either
one of the President or Secretary and the other is any one of the
Vice-Presidents or the Treasurer of the Corporation, with or without
substitution, to execute any or all documents necessary for the above
purposes.
2. The Board may, from time to time, delegate to a Committee of the Board, to a
Director or an Officer of the Corporation or any other person as may be
designated by the Board, all or any of the powers conferred on the Board by
Paragraph l hereof or
29
<PAGE> 34
by The Business Corporations Act, to such extent and in such manner as the Board
shall determine at the time of such delegation.
Enacted by the Board this ____ day of __________________, 19___ and
confirmed by the Shareholders in accordance with the Business Corporations Act,
this _____ day of ___________________, A.D. 19____.
_________________________________________
President
_________________________________________
Secretary/Treasurer
30
<PAGE> 1
BY-LAW NO. 3
A by-law respecting the borrowing of money, the issuing of securities
and the securing of liabilities by:
RIVERVIEW MANAGEMENT CORPORATION
BE IT ENACTED as a by-law of the Corporation as follows:
1. The Board may from time to time on behalf of the Corporation, without
authorization of the shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured;
(c) to the extent permitted by the Business Corporations Act, give a
guarantee on behalf of the Corporation to secure performance of any
present or future indebtedness, liability or obligation of any person;
and
(d) mortgage, hypothecate, pledge or otherwise create a security interest
in all or any currently owned or subsequently acquired real or
personal, movable or immovable, property of the Corporation including
book debts, rights, powers, franchises and undertakings, to secure any
such bonds, debentures, notes or other evidences of indebtedness or
guarantee or any other present or future indebtedness, liability or
obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
2. The Board may, by resolution, from time to time delegate to a
committee of the Board, one or more of the directors and/or one or more of the
officers of the Corporation or any other person or persons as may be designated
by the Board, all or any of the powers conferred on the Board by paragraph 1
hereof to such extent and in such manner as the Board may determine at the time
of such delegation.
3. The powers hereby conferred are in supplement of and not in
substitution for any powers possessed by the directors or officers of the
Corporation independently of this by-law #2.
By-Law No. 2 signed for identification this 9th day of September,
1987.
[SIG]
---------------------------------
President
<PAGE> 2
[BANK OF MONTREAL LOGO] BORROWING BY-LAW
RIVERVIEW MANAGEMENT CORPORATION
--------------------------------
Name of Corporation
BY-LAW No. TWO
RESPECTING THE BORROWING OF MONEY BY THE CORPORATION
RESOLVED;
WHEREAS it is necessary for the purposes of the Corporation
to borrow money or obtain other financial assistance on the
credit of the Corporation from time to time from one of the
chartered banks of Canada:
THEREFORE BE IT ENACTED by the Directors of RIVERVIEW
MANAGEMENT CORPORATION, as a By-law thereof;
1. That the Directors of the Corporation be and they are
hereby authorized to borrow moneys or obtain other financial
assistance from time to time from the Bank of Montreal (the
"Bank") (including without limitation through the issuance of
bills of exchange drawn by the Corporation and accepted by the
Bank) upon the credit of the Corporation in such amounts as they
deem proper and by way of overdraft or otherwise.
2. That any promissory notes, bills of exchange or other
negotiable paper (including renewals thereof in whole or in part)
signed on behalf of the Corporation by the officer or officers of
the Corporation authorized from time to time to sign negotiable
instruments on its behalf and granted to or accepted by the Bank
for moneys borrowed and interest thereon as may be agreed upon or
other financial assistance obtained from the Bank shall be
binding upon the Corporation.
3. That the Directors may from time to time. If they see fit
to do so, grant securities by way of mortgage, hypothecation,
pledge or otherwise covering all or any of the property and
assets of the Corporation present and future as security for all
or any moneys borrowed by the Corporation from the Bank or any
other liability of the Corporation to the Bank, and any such
mortgage, hypothecation, pledge or other security shall be valid
and binding upon the Corporation if signed by any of the officers
authorized to sign negotiable instruments on the Corporation's
behalf.
*Delete line 4. All contracts, deeds, grants, assurances and documents
bracketed reasonably required by the Bank of its Counsel for all or any of
status if the purposes aforesaid shall be executed and carried into effect
not appro- by the proper officers of the Corporation* (and when necessary
priate the seal of the Corporation shall be affixed thereto.)
5. This By-law when sanctioned by the Shareholders shall be
irrevocable until a by-law resealing this By-law shall have been
confirmed or sanctioned by the Shareholders and a copy thereof
duly certified* (under the seal of the Corporation) delivered to
the Bank, and meanwhile all the powers and authorities hereby
conferred shall continue in force.
*Insert I CERTIFY that the foregoing is true copy of By-law No. TWO
Corporation of** RIVERVIEW MANAGEMENT CORPORATION duly enacted by the
Name Directors of the said Corporation and duly confirmed or
sanctioned by the Shareholders thereof as required by law.
AS WITNESS* (the corporate seal of the Corporation) this
23RD day of SEPTEMBER, 1987
[SIG] AFFIX
------------------------------- SEAL
Secretary
MEMO
Corporation Incorporated SEPTEMBER 9, 1987
----------------------------------------
Articles of Continuance
-----------------------------------------
(When applicable) (date)
Charter ALBERTA BUSINESS CORPORATIONS ACTS
---------------------------------------------------------
Lender "Canada ?????? Corporations Act Corporations Act
Corporation, Canada Corporations Act Company, or ????? of
Provincial Corporation or Corporations Act"
<PAGE> 3
RIVERVIEW MANAGEMENT CORPORATION Duly ratified by the Sold
Shareholder Effective
September 9, 1987
By-Law No. 1, being a By-Law relating generally to
the transaction of the business and affairs of the
Corporation
CONTENTS:
1. Interpretation
2. Business of the Corporation
3. Borrowing and Securities
4. Directors
5. Committees
6. Officers
7. Protection of Directors, Officers and Others
8. Shares
9. Dividends and Rights
10. Meetings of Shareholders
11. Divisions and Departments
12. Notices
BE IT ENACTED as a By-Law of the Corporation as
follows:
Section One
INTERPRETATION:
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1.01 DEFINITIONS - in the By-Laws of the Corporation,
unless the context otherwise requires:
"Act" means the Alberta Business Corporations Act, and any
statute that may be substituted therefor, as from time to
time amended; marginal references to sections of the Act
herein are not made for the purpose of modifying or affecting
the meaning of any provision of this By-Law in any way but are
inserted only for the purpose of directing attention to
provisions of the Act which may be regarded as relevant;
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"appoint" includes "elect" and vice versa; 2(1)
"articles" means the articles attached to the Certificate
of Incorporation dated the 9th day of September, 1987, of
the Corporation as from time to time amended or restated;
"board" means the board of directors of the Corporation;
"By-Laws" means this By-Law and all other By-Laws of the 2(1)
Corporation from time to time in force and effect relating
to transaction of business and affairs of the Corporation
in addition hereto, or in amendment hereof or in substitution
for all or any part of this By-Law;
"Corporation" means the Corporation incorporated by
Certificate of Incorporation under the Act and named
RIVERVIEW MANAGEMENT CORPORATION.
"meeting of Shareholders" includes an annual meeting of
Shareholders and a Special Meeting of Shareholders;
"Special Meeting of Shareholders" includes both a meeting of
any class or classes acting separately from any other
class or classes and also a meeting, other than an annual
meeting, of all shareholders entitled to vote at an annual
meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day
that is a holiday as defined in the Interpretation Act
(Canada); or the Interpretation Act (Alberta);
"recorded address" means in the case of a Shareholder his
address as recorded in the securities register; and in
the case of joint Shareholders the address appearing in the
securities register in respect of such joint holding
determined under Section 8.09; and in the case of a Director,
Officer, auditor or member of a committee of Directors, his
latest address as recorded in the records of the Corporation;
"unanimous Shareholder agreement" means a written agreement 140(1)
among all the Shareholders of the Corporation, or among
all such Shareholders and a person who is not a Shareholder, 140(2)
that regulates the rights, obligations and liabilities of
the Shareholders, as shareholders, among themselves or
between themselves and such other party, regulates the
election of Directors, or restricts, in whole or in part,
the powers of the Directors under the Act to manage the
business and affairs of the Corporation, as from time to
time amended;
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save as aforesaid, words and expressions defined in the Act
have the same meaning when used herein; and
words importing the singular number include the plural and
vice versa; words importing gender include the masculine,
feminine and neuter genders; and words importing persons
include individuals, bodies corporate, partnerships, trusts and
unincorporated organizations.
Section Two
BUSINESS OF THE CORPORATION
2.01 REGISTERED OFFICE -- Until changed in accordance 19(1),(3)
with the Act, the registered office of the Corporation shall
be at the City of Calgary, in the Province of Alberta, and at
such location therein as the board may from time to time
determine.
2.02 CORPORATE SEAL -- Until 23(1),(5)
changed by the board, the corporate seal
of the Corporation and any facsimiles
thereof adopted by the board for use in
jurisdictions outside Alberta shall be in
the form impressed or stamped hereon.
2.03 FINANCIAL YEAR -- Until changed by the board, the
financial year of the Corporation shall end on the 31st day of
December in each year.
2.04 EXECUTION OF INSTRUMENTS -- Deeds, transfers,
assignments, contracts, obligations, certificates and other
instruments required by law or otherwise by these By-laws or
any resolution of the board or Shareholders of the Company
to be executed under corporate seal may be signed on behalf
of the Corporation by one or more persons who holds the
office of Chairman of the Board, President, Managing
Director, Vice-President, Secretary, Treasurer, Assistant
Secretary, Assistant Treasurer or any other office created by
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by-law or by resolution of the board. In addition, the board
may from time to time direct the manner in which and the
person or persons by whom any particular instrument or class
of instruments may or shall be signed. Any signing Officer
may affix the corporate seal to any instrument requiring the
same.
2.05 BANKING ARRANGEMENTS - The banking business of the
Corporation including, without limitation, the borrowing
of money and the giving of security therefor, shall be
transacted with such banks, trust companies or other bodies
corporate or organizations as may from time to time be
designated by or under the authority of the board. Such
banking business or any part thereof shall be transacted under
such agreements, instructions and delegations of powers as
the board may from time to time by resolution prescribe or
authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE -
The signing Officers of the Corporation may execute and
deliver proxies and arrange for the issuance of voting
certificates or other evidence of the right to exercise the
voting rights attaching to any securities held by the
Corporation. Such instruments, certificates or other
evidence shall be in favour of such person or persons as may
be determined by the Officers executing such proxies or
arranging for the issuance of voting certificates or such other
evidence of the right to exercise such voting rights. In
addition, the board may from time to time direct the manner
in which and the person or persons by whom any particular
voting rights or class of voting rights or shall
be exercised. 21
164
2.07 WITHHOLDING INFORMATION FROM 224
SHAREHOLDERS - Subject to the provisions of the Act, no 225
Shareholder shall be entitled to discovery of any information 259
respecting any details or conduct of the Corporation's
business which, in the opinion of the board, it would be
expedient in the interests of the Shareholders or the
Corporation to communicate to the public. The board may
from time to time determine whether and to what extent and
at what time and place and under what conditions or
regulations the accounts, records and documents of the
Corporation or any of them shall be open to the inspection of
Shareholders and no Shareholder shall have any right of
inspecting any account, record or document of the
Corporation except as conferred by the Act or authorized by
the board or by resolution passed at a general meeting of
Shareholders.
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Section Three
BORROWING AND SECURITIES
3.01 BORROWING POWER -- Without limiting the borrowing
powers of the Corporation as set forth in the Act, the board
is authorized from time to time: 98.1
(a) to borrow money upon the credit of the
Corporation in such amounts and on such terms as
may be deemed expedient by obtaining loans or
advances or by way of overdraft or otherwise;
(b) to issue, re-issue, sell or pledge bonds, debentures,
notes or other evidence of indebtedness or
guarantee of the Corporation, whether secured or
unsecured for such sums and at such prices as may
be deemed expedient;
(c) subject to the Act, to issue guarantees on behalf of 42
the Corporation to secure the performance of the
obligations of any person; and
(d) to charge, mortgage, hypothecate, pledge or
otherwise create a security interest in all or any
currently owned or subsequently acquired real or
personal, movable or immovable, property and
undertaking of the Corporation, including book
debts, rights, powers and franchises for the purpose
of securing any such bonds, debentures, notes or
other evidences of indebtedness or guarantee or
any other present or future indebtedness or liability
of the Corporation.
Nothing in this section limits or restricts the borrowing of
money by the Corporation on bills of exchange or promissory
notes made, drawn, accepted or endorsed by or on behalf of
the Corporation.
3.02 The board may from time to time delegate to such one
or more of the Directors and Officers of the Corporation as
may be designated by the board all or any of the powers
conferred on the board by section 3.01 to such extent and in
such manner as the board shall determine at the time of each
such delegation.
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Section Four
DIRECTORS
4.01 NUMBER OF DIRECTORS AND QUORUM - Until changed 97,167
in accordance with the Act, the board shall consist of not 107,100
fewer than two (2) and not more than seven (7) Directors.
Subject to Section 4.08 and subject also to the articles
and the Act the quorum for the transaction of business at
any meeting of the board shall consist of a majority of
the Directors or such lesser number of Directors, being
at least two (2) Directors, as the board may from time 109(2)
to time determine.
4.02 QUALIFICATION - No person shall be qualified for 100(1)
election as a Director if he is less than EIGHTEEN (18)
years of age; if he is of unsound mind and has been so 100(2)
found by a Court in Canada or elsewhere; if he is not 100(3)
an individual; or if he has the status of a bankrupt. A 97(2)
Director need not be a Shareholder. At least one-half of
the Directors shall be resident Albertans. When required
by the Act, but not otherwise, at least two Directors
shall not be Officers or employees of the Corporation or
its affiliates.
4.03 ELECTION AND TERM - An election of Directors shall
take place at each annual meeting of Shareholders for
each Director whose term of office expires at that annual
meeting pursuant to the Act and Articles. If qualified,
a retiring Director shall be eligible for reelection.
A Director shall retain office only until the election of
his successor. The election shall be by resolution. The
number of Directors to be elected at each annual meeting
shall consist of the number of Directors less the number
of Directors whose terms continue after that annual 101(7)
meeting, unless the Directors or the Shareholders otherwise 101(9)(a)
determine. The length of term for each director elected
at any annual meeting shall be as set forth in the relevant 107
resolution, notice of meeting or information circular, or
the Articles.
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Directors or the Shareholders otherwise determine. The
election shall be by resolution. If an election of 101(7)
Directors is not held at the proper time, the incumbent
Directors shall continue in office until their
successors are elected.
104(1)
4.04 REMOVAL OF DIRECTORS - Subject to the provisions
of the Act, the Shareholders may be ordinary resolution 104(3)
passed at a special meeting remove any Director elected 106
by such class of Shareholders from office and the
vacancy created by such removal may be filled at the
same meeting failing which it may be filled by the
Directors.
103(1)
4.05 VACATION OF OFFICE - A Director ceases to hold
office when he dies; he is removed from office by the
Shareholders; he ceases to be qualified for election as 103(2)
a Director; or his written resignation is sent or
delivered to the Corporation, or if a time is specified 106(1)
in such resignation, at the time so specified, whichever
is later.
4.06 VACANCIES - Subject to the Act and the articles,
a quorum of the board may fill a vacancy in the board, 106(3),(4)
except a vacancy resulting from an increase in the 101(4)
minimum number of Directors or from a failure of the
Shareholders to elect the minimum number of Directors 106(2)
and may also add to their numbers and appoint additional
Director(s) in accordance with the Act and the articles
but so that the total number of Directors shall not
exceed the maximum number fixed by Section 4.01. In the
absence of a quorum of the board, or if the vacancy has
arisen from a failure of the Shareholders to elect the
minimum number of Directors the board shall forthwith
call a special meeting of the Shareholders to fill the
vacancy. If the board fails to call such meeting or
if there are no such Directors then in office, any
Shareholder may call the meeting. 97
4.07 ACTION BY THE BOARD - Subject to any unanimous
Shareholder agreement, the board shall manage the
business and affairs of the Corporation. Subject to
Section 4.08 and 4.09, the powers of the board may be 112
exercised by resolution passed at a meeting at which a
quorum is present or by resolution in writing signed by
all the Directors entitled to vote on that resolution at
a meeting of the board and any resolution in writing so
signed shall be as valid as if it had been passed at a
meeting of Directors or a committee of Directors and
shall be held to relate to any date therein stated to be
the effective date thereof, and a copy of every such
resolution in writing shall be kept with the minutes of
the proceedings of Directors or committee of Directors.
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Where there is a vacancy in the board, the remaining Directors 109(S)
may exercise all the powers of the board as long as a quorum
remains in office. Where the Corporation has only one Director,
that Director may constitute a meeting. An act of a Director is
valid notwithstanding any irregularity in his election or 111
appointment or a defect in his qualifications.
4.08 RESIDENT ALBERTANS - The board shall not transact business 109(3)
at a meeting, other than filling a vacancy in the board, unless
at least half of the Directors present are resident Albertans,
except where:
(a) a resident Albertan Director who is unable to be present 109(4)
approves in writing or by telephone or other
communication facility the business transacted at the
meeting; and
(b) the number of resident Albertan Directors present at
the meeting together with any resident Albertan Director
who gives his approval under clause (a), totals at least
half of the Directors present at the meeting.
4.09 MEETINGS BY TELEPHONE - A Director may participate in a 109(9)
meeting of the board or of a committee of Directors by means of such
telephone or other communications facilities as permit all persons
participating in the meeting to hear each other, and a Director
participating in such meeting by such means is deemed to be present
at the meeting.
4.10 PLACE OF MEETINGS - Meetings of the board may be held at any 109(1)
place in or outside Canada.
4.11 CALLING OF MEETINGS - Meetings of the Board shall be held from 109(1)
time to time and at such place as the board may determine. In
addition, each of the Chairman of the Board, the Managing Director,
the President or any two Directors may convene or direct the
convening of a meeting of the Board.
4.12 NOTICE OF MEETING - Except as otherwise provided in Section 4.13, 109(1)
notice of the time and place of each meeting of the board shall be 109(5)
given in manner provided in Section 12.01 to each Director not less
than FORTY-EIGHT (48) hours before the time when the meeting is to
be held. A notice of a meeting of Directors need not specify the
purpose of or the
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business to be transacted at the meeting except where Section
109(5) of the Act requires such purpose or business to be
specified, including any proposal to:
(a) submit to the Shareholders any question or matter
requiring approval of the Shareholders;
(b) fill a vacancy among the Directors or in the office
of auditor;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem, or otherwise acquire shares of
the Corporation;
(f) pay a commission for the sale of shares;
(g) approve a management proxy circular;
(h) approve any annual financial statements; or
(i) adopt, amend or repeal By-laws.
A Director may in any manner waive notice of or otherwise 109(6)
consent to a meeting of the board either before or after the
convening of the meeting.
4.13 REGULAR MEETINGS - The board may by resolution appoint 109(1)
a day or days in any month or months for regular meetings of (5)
the board at a place and hour to be named in the resolution.
No notice shall be required for any such regular meeting.
4.14 FIRST MEETING OF NEW BOARD - Provided a quorum of
Directors is present, each newly elected board may without
notice hold its first meeting immediately following the
meeting of the Shareholders at which such board or portion
thereof is elected.
4.15 ADJOURNED MEETING - Notice of an adjourned meeting 108(7)
of the board is not required if the time and place of the
adjourned meeting is announced at the original meeting.
4.16 CHAIRMAN - The Chairman of any meeting of the board
shall be the first mentioned of such of the following
<PAGE> 12
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officers as have been appointed and who is a Director and is
present at the meeting: Chairman of the Board, Managing
Director, President, or a Vice-President who is a Director. If
no such officer is present, the Directors present shall choose
one of their number to be Chairman.
4.17 VOTES TO GOVERN - At all meetings of the board every
question shall be decided by a majority of the votes cast
on the question. In cases of an equality of votes the
Chairman of the meeting shall be entitled to a second or
casting vote.
4.18 CONFLICT OF INTEREST - A Director or Officer who is 115
a party to, or who is a director or officer of or has a
material interest in any person who is a party to, a material
contract or proposed material contract with the Corporation
shall disclose the nature and extent of his interest at the
time and in the manner provided by the Act. Any such contract
or proposed contract shall be referred to the board or
Shareholders for approval even if such contract is one that
in the ordinary course of the Corporation's business would
not require approval by the board or Shareholders, and a
Director interested in a contract so referred to the board
shall not vote on any resolution to approve the same except 115(5)
as provided by the Act.
4.19 REMUNERATION AND EXPENSES - Subject to any unanimous
Shareholder agreement, the Directors shall be paid such 120(1)
remuneration for their services as the board may from
time to time determine. The Directors shall also be entitled
to be reimbursed for traveling and other expenses properly
incurred by them in attending meetings of the board or any
committee thereof. Nothing herein contained shall preclude
any Director from serving the Corporation in any other
capacity and receiving remuneration therefor.
Section Five
COMMITTEES
5.01 COMMITTEE OF DIRECTORS - The board may appoint one 110(1)
or more committees of Directors, however, designated and
delegate to each such committee any of the powers of the
board except those which, under the Act, a committee of 110(3)
Directors has no authority to exercise. At least one-half 110(2)
of the members of any such committee shall be resident
Albertans.
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5.02 TRANSACTION OF BUSINESS - Subject to the
provisions of Section 4.09, the powers of a committee of
Directors may be exercised by a meeting at which a quorum 109(9)
is present or by resolution in writing signed by all the
members of such committee who would have been entitled to 112
vote on that resolution at a meeting of the committee.
Meetings of such committee may be held at any place in or
outside Canada.
5.03 AUDIT COMMITTEE - When required by the Act the 165(1)
board shall, and at any other time the board may, elect
annually from among its number an audit committee to be
composed of not fewer than three (3) Directors of whom a
majority shall not be Officers or employees of the
Corporation or its affiliates. The audit committee shall have
the powers and duties provided in the Act. 165(4)
5.04 PROCEDURE - Unless otherwise determined by the
board, each committee of Directors shall have the power to
fix its quorum at not less than a majority of its members, to
elect its chairman and to regulate its procedure.
Section Six
OFFICERS
6.01. APPOINTMENT - Subject to any unanimous Shareholder 116
agreement, the board may from time to time appoint a
President, one or more Vice-Presidents (to which title may be
added words indicating seniority or function), a
Secretary, a Treasurer and such other officers as the board may
determine, including one or more assistants to any of
the officers so appointed (herein referred to as "Officers"). The
board may specify the duties of and, in accordance with this
By-Law and subject to the provisions of the Act, delegate to 110(3)
such Officers powers to manage the business and affairs of
the Corporation. Subject to Section 6.02 and 6.03, an
Officer may but need not be a Director and one person may
hold more than one office.
6.02 CHAIRMAN OF THE BOARD - The board may from
time to time also appoint a Chairman of the Board who shall
be a Director. If appointed, the board may assign to him any
of the powers and duties that are by any provisions of this By-
law assigned to the Managing Director or to the President;
and he shall, subject to the provisions of the Act, have such
other powers and duties as the board may specify. During the
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absence or disability of the Chairman of the Board, his duties
shall be performed and his powers exercised by the Managing Director,
if any, or by the President. He shall be the chief executive officer
and, subject to the authority of the board, shall have general
supervision of the business and affairs of the Corporation; and he 116(a)
shall, subject to the provisions of the Act, have such other powers
and duties as the board may specify. With the concurrence of the
Chairman, the Board may appoint the Managing Director, if any, or the
President as chief executive officer.
6.03 MANAGING DIRECTOR - The Board may from time to time appoint a 110(1)
Managing Director who shall be a resident Albertan and a Director.
During the absence or disability of the President, or if no President 110(3)
has been appointed, the Managing Director shall also have the powers
and duties of that office.
6.04 PRESIDENT - If appointed, the President shall be the chief 116(a)
operating officer and, subject to the authority of the board, shall
have general supervision of the business of the Corporation; and he
shall have such other powers and duties as the board may specify.
During the absence or disability of the Managing Director, or if no
Managing Director has been appointed, the President shall also have
the powers and duties of that office.
6.05 VICE-PRESIDENT - A Vice-President shall have such powers and
duties as the board or the chief executive officer may specify.
6.06 SECRETARY - The Secretary shall attend and be the Secretary
of all meetings of the board, Shareholders and committees of the
board and shall enter or cause to be entered in records kept for
that purpose minutes of all proceedings thereat; he shall give or
cause to be given, as and when instructed, all notices to
Shareholders, Directors, Officers, the auditor and members of
committees of Directors; he shall be the custodian of the stamp or
mechanical device generally used for affixing the corporate seal
of the Corporation and of all books, papers, records, documents
and instruments belonging to the Corporation, except when some
other officer or agent has been appointed for that purpose; and
he shall have such other powers and duties as the board or the
chief executive officer may specify.
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6.07 TREASURER - The Treasurer shall keep proper
accounting records in compliance with the Act and shall be
responsible for the deposit of money, the safekeeping of
securities and the disbursement of the funds of the
Corporation; he shall render to the board whenever required
an account of all his transactions as Treasurer and of the
financial position of the Corporation; and he shall have such
other powers and duties as the board or the chief executive
officer may specify.
6.08 POWERS AND DUTIES OF OTHER OFFICERS - The
powers and duties of all other Officers shall be such as the
terms of their engagement call for or as the board or the
chief executive officer may specify. Any of the powers and
duties of an Officer to whom an assistant has been appointed
may be exercised and performed by such assistant, unless the
board of the chief executive officer otherwise directs.
6.09 VARIATION OF POWERS AND DUTIES - The board may 116
from time to time and subject to the provisions of the Act,
vary, add to or limit the powers and duties of any Officer.
6.10 TERM OF OFFICE - The board, in its discretion, may
remove any Officer of the Corporation, without prejudice to
such Officer's rights under any employment contract.
Otherwise each Officer appointed by the board shall hold
office until the earlier of the date his resignation becomes
effective, the date his successor is appointed or he shall
cease to be qualified for that office under Section 6.02 or
6.03 if applicable.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION -
The terms of employment and the remuneration of Officers
appointed by the board shall be settled by it from time to
time.
6.12 CONFLICT OF INTEREST - An Officer shall disclose his 115
interest in any material contract or proposed material
contract with the Corporation in accordance with Section
4.18.
6.13 AGENTS AND ATTORNEYS - The board shall have
power from time to time to appoint agents or attorneys for
the Corporation in or outside of Canada with such powers of
management or otherwise (including the power to sub-
delegate) as may be thought fit.
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6.14 FIDELITY BONDS - The board may require such
Officers, employees and agents of the Corporation as the
board deems advisable to furnish bonds for the faithful
discharge of their powers and duties, in such form and with
such surety as the board may from time to time determine.
Section Saver
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PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 LIMITATION OF LIABILITY - No director shall be liable 117(3)
for the acts, receipts, neglects or defaults of any other
Director or Officer or employee, or for joining in any receipt
or other act for conformity, or for any loss, damage or
expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired
for or on behalf of the Corporation, or for the insufficiency
or deficiency of any security in or upon which any of the
moneys of the Corporation shall be invested, or for any loss
or damage arising from the bankruptcy, insolvency or tortious
acts of any person with whom any of the moneys, securities
or effects of the Corporation shall be deposited, or for any
loss occasioned by any error of judgment or oversight on his
part, or for any other loss, damage or oversight on his part, or
for any other loss, damage or misfortune whatsoever which shall
happen in the execution of the duties of his office or in
relation thereto, unless the same are occasioned by his own 118(3)
wilful neglect or default; provided that nothing herein shall 113
relieve any Director or Officer from the duty to act in 114
accordance with the Act and the regulations thereunder or 117
from liability for any breach thereof.
7.02 INDEMNITY - Subject to the limitations contained in 119
the Act, and to the extent he is otherwise fairly and
reasonably entitled thereto, the Corporation shall indemnify a
Director or Officer, a former Director or Officer, or a person
who acts or acted at the Corporation's request as a director
or officer of a body corporate of which the Corporation is
or was a shareholder or creditor (or a person who undertakes
or has undertaken any liability on behalf of the Corporation
or any such body corporate) and his heirs and legal
representatives, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is
made a party by reason of being or having been a Director or
Officer of the Corporation or such body, if
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(a) he acted honestly and in good faith with a view to
the best interests of the Corporation; and
(b) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary
penalty, he had reasonable grounds for believing
that his conduct was lawful.
7.03 INSURANCE - Subject to the limitations contained in the 119(4)
Act, the Corporation may purchase and maintain such insurance
for the benefit of its Directors and Officers as such, as the
board may from time to time determine.
Section Eight
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SHARES
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8.01 ALLOTMENT AND ISSUE - The board may from time to time 35(1)
allot, or grant options to purchase the whole or any part 37(6)
of the authorized and unissued shares of the Corporation at
such times and to such persons and for such consideration as
the board shall determine, provided that no share shall be
issued until it is fully paid as prescribed by the Act. Subject 25(3)
to the articles, no holder of any class of share of the capital 28
of the Corporation shall be entitled as of right to subscribe
for, purchase or receive any part of any new or additional
issue or shares of any class, whether now or hereafter
authorized or any bonds, debentures or other securities
convertible into shares of any class.
8.02 COMMISSIONS - The board may from time to time authorize 39
the Corporation to pay a reasonable commission to any person
in consideration of his purchasing or agreeing to purchase
shares of the Corporation, whether from the Corporation or
from any other person, or procuring or agreeing to procure
purchasers for any such shares.
8.03 REGISTRATION OF TRANSFER - Subject to the provisions 71
of the Act, no transfer of shares shall be registered in
a securities register except upon presentation of the
Certificate representing such shares with a transfer
endorsed thereon or delivered therewith duly executed
by the registered holder or by his attorney or successor 61
duly appointed, together with such reasonable assurance or
evidence of signature, identification and authority to transfer 72
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as the board may from time to time prescribe, upon payment
of all applicable taxes and any fees prescribed by by the board,
upon compliance with such restrictions on transfer, if any,
as are authorized by the articles, and upon satisfaction of
any lien referred to in Section 8.05.
8.04 TRANSFER AGENTS AND REGISTRARS - The board may from time 20(2),46(2)
to time appoint a registrar to maintain the securities register
and a transfer agent to maintain the register of transfers and
may also appoint one or more branch registrars to maintain
branch securities registers and one or more branch transfer
agents to maintain branch registers of transfers, but one person
may be appointed both registrar and transfer agent. The board
may at any time terminate any such appointment.
8.05 LIEN FOR INDEBTEDNESS - If the articles provide that 43(2),(3)
the Corporation shall have a lien on shares registered in
the name of a Shareholder indebted to the Corporation, such
lien may be enforced, subject to any provision of the articles
and to any unanimous Shareholder agreement, by the sale of
the shares thereby affected or by any other action, suit,
remedy or proceeding authorized or permitted by law or by
equity and, pending such enforcement, may refuse to register
a transfer of the whole or any part of such shares.
8.06 NON-RECOGNITION OF TRUSTS - Subject to the provisions 47
of the Act, the Corporation shall treat as absolute owner 72(1)
of any share the person in whose name the share is registered 72(7)
in the securities register as if that person had full legal
capacity and authority to exercise all rights of ownership,
irrespective of any indication to the contrary through
knowledge or notice or description in the Corporation's records
or on the share Certificate.
8.07 SHARE CERTIFICATES - Every holder of one or more shares 45(1)
of the Corporation shall be entitled, at his option, to a
share Certificate, or to a non-transferable written
acknowledgement of his right to obtain a share Certificate,
stating the number and class or series of shares held by him 45(7)
as shown on the securities register. Share Certificates and
acknowledgements of a Shareholder's right to a share
Certificate, respectively, shall be in such form as the board
shall from time to time approve. Any share Certificate shall
be signed in accordance with Section 2.04 and need not be 45(4)
under the corporate seal; provided that, unless the board
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otherwise determines, Certificates representing shares in respect of
which a transfer agent and/or registrar has been appointed shall not be
valid unless countersigned by or on behalf of such transfer agent
and/or registrar. The signature of one of the signing Officers or, in
the case of share Certificates which are not valid unless countersigned
by or on behalf of such transfer agent and/or registrar. The signature
of one of the signing Officers or, in the case of share Certificates
which are not valid unless countersigned by or on behalf of a transfer
agent and/or registrar, the signatures of both signing Officers, may be
printed or mechanically reproduced in facsimile upon share Certificates
and every such facsimile signature shall for all purposes be deemed to
be the signature of the Officer whose signature it reproduces and shall
be binding upon the Corporation. A share Certificate executed as
aforesaid shall be valid notwithstanding that one or both of the 45(6)
Officers whose facsimile signature appears thereon no longer holds
office at the date of issue of the Certificate.
8.08 REPLACEMENT OF SHARE CERTIFICATES - The board or any Officer or 75
agent designated by the board may in its or his discretion direct the
issue of a new share Certificate in lieu of and upon cancellation of a
share Certificate that has been mutilated or in substitution for a share
Certificate claimed to have been lost, destroyed or wrongfully taken or
which does not comply as to form with the requirements from time to time 261(5)
of the Act in this regard, on payment of such fee, not exceeding THREE
DOLLARS ($3.00) and on such terms as to indemnity, reimbursement of
expenses and evidence of loss and of title as the board may from time to 45(2)
time prescribe, whether generally or in any particular case.
8.09 JOINT SHAREHOLDERS - If two or more persons are registered as 45(3)
joint holders of any share, the Corporation shall not be bound to issue
more than one Certificate in respect thereof, and delivery of such
Certificate to one of such persons shall be sufficient delivery to all
of them. Any one of such persons may give effectual receipts for the
Certificate issued in respect thereof or for any dividend, bonus,
return of capital or other money payable or warrant issuable in respect
of such share. Joint Shareholders may collectively designate in writing
an address as their recorded address for service of notice and payment
of dividends but in default of such designation the address of the
first named joint Shareholder shall be deemed to be the recorded
address aforesaid.
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8.10 DECEASED SHAREHOLDERS - In the event of the death of
a holder, or of one of the joint holders, of any share, the
Corporation shall not be required to make any entry in the 47(6),(7)
securities register in respect thereof or to make payment of 47(8),(9)
any dividends thereon except upon production of all such
documents as may be required by law and upon compliance with
the reasonable requirements of the Corporation and its
transfer agents.
Section Nine
DIVIDENDS AND RIGHTS
9.01 DIVIDENDS - Subject to the provisions of the Act, the
board may from time to time declare dividends payable to the 40
Shareholders according to their respective rights and
interests in the Corporation. Dividends may be paid in money 41
or property or by issuing fully paid shares of the
Corporation.
9.02 DIVIDEND CHEQUES - A dividend payable in cash shall be
paid by cheque drawn on the Corporation's bankers or one of
them to the order of each registered holder of shares of the
class or series in respect of which it has been declared and
mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs. In
the case of joint holders the cheque shall, unless such joint
holders otherwise direct, be made payable to the order of all
such joint holders and mailed to them at their recorded
address. The mailing of such cheque as aforesaid, unless the
same is not paid on due presentation, shall satisfy and
discharge the liability for the dividend to the extent of
the sum represented thereby plus the amount of any tax which
the Corporation is required to and does withhold.
9.03 NON-RECEIPT OF CHEQUES - In the event of non-receipt
of any dividend cheque by the person to whom it is sent as
aforesaid, the Corporation shall issue to such person a
replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of
non-receipt and of title as the board may from time to time
prescribe, whether generally or in any particular case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS - The board may
fix in advance a date, preceding by not more than FIFTY (50)
days the date for the payment of any dividend or the date for 128
the issue of any warrant or other evidence of right to
subscribe for securities of the Corporation, as a
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record date for the determination of the persons entitled
to receive payment of such dividend or to exercise the
right to subscribe for such securities, provided that,
where the Corporation is a distributing corporation for
purposes of the Act, notice of any such record date is
given not less than SEVEN (7) days before such record
date by newspaper advertisement and otherwise in the
manner provided in the Act. Where no record date is fixed
in advance as aforesaid, the record date for the 128(4)
determination of the persons entitled to receive payment
of any dividend or to exercise the right to subscribe
for securities of the Corporation shall be at the close 128(3)
of business on the day on which the resolution relating
to such dividend or right to subscribe is passed by the
board.
9.05 UNCLAIMED DIVIDENDS - Any dividend unclaimed after
a period of SIX (6) years from the date on which the
same has been declared to be payable shall be forfeited
and shall revert to the Corporation.
Section Ten
MEETINGS OF SHAREHOLDERS
10.01 ANNUAL MEETINGS - The annual meeting of Shareholders
shall be held at such time in each year and, subject to 127
the Act and to Section 10.04, at such place as the board,
the Chairman of the Board, the Managing Director or the
President may from time to time determine, for the purpose
of considering the financial statements and reports required 149
by the Act to be placed before the annual meeting, electing
Directors, appointing auditors and for the transaction of
such other business as may properly be brought before the
meeting.
10.02 SPECIAL MEETINGS - The board, the Chairman of the
Board, the Managing Director or the President shall have 129(7)
power to call a meeting of Shareholders at any time.
10.03 SPECIAL BUSINESS - All business transacted at a
special meeting of shareholders and all business 129(6)
transacted at an annual meeting of shareholders, except
consideration of the financial statements, auditors
reports, election of directors and reappointment of the
incumbent auditors, is deemed to be special business.
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10.04 PLACE OF MEETINGS - Meetings of Shareholders shall be held 126
at the registered office of the Corporation or elsewhere in the
municipality in which the registered office is situate or, if the
board shall so determine, at any other place in Alberta or at
Vancouver, British Columbia; Regina, Saskatchewan; Winnipeg,
Manitoba; Toronto, Ontario; Montreal, Quebec; Halifax, Nova Scotia; 129(1)
or such other place in Canada having a population of greater than
10,000 people as the board may from time to time determine.
10.05 NOTICE OF MEETINGS - Notice of the time and place of each
meeting of Shareholders shall be given in the manner provided in
Section 12.01 not less than TWENTY-ONE (21) nor more than FIFTY (50)
days before the date of the meeting to each Director, to the auditor
and to each Shareholder who at the close of business on the record
date, if any, for notice is entered in the securities register as
the holder of one or more shares carrying the right to vote at the
meeting. Notice of a meeting of Shareholders called for any purpose 129(7)
other than consideration of the financial statements and auditor's
report, election of Directors and re-appointment of the incumbent 130
auditor shall state the nature of such business in sufficient 47(2),129(1)
detail to permit the Shareholder to form a reasoned judgement thereon
and shall state the text of any special resolution to be submitted 132(1)
to the meeting. A Shareholder and any other person entitled to
attend a meeting of shareholders may in any manner waive notice of
or otherwise consent to a meeting of Shareholders.
10.06 LIST OF SHAREHOLDERS ENTITLED TO NOTICE - For every meeting
of Shareholders, the Corporation shall prepare a list of Shareholders,
entitled to receive notice of the meeting, arranged in alphabetical
order and showing the number of shares entitled to vote at the 47(2)
meeting held by each Shareholder. If a record date for the meeting
is fixed pursuant to Section 10.07, the Shareholders listed shall
be those registered or constructively registered pursuant to the 132(1)
Act at the close of business on a day not later than TEN (10) days
after such record date. If no record date is fixed, the Shareholders
listed shall be those registered or constructively registered as 132(4)
aforesaid at the close of business on the day immediately preceding
the day on which notice of the meeting is given, or where no such
notice is given, the day on which the meeting is held. The list
shall be available for examination by any Shareholder during usual
business hours at the records office of the Corporation or at the
place where the central securities register is kept and at the place
where the meeting is held.
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10.07 RECORD DATE FOR NOTICE - The board may fix in advance a
record date, preceding the date of any meeting of Shareholders by
not more than FIFTY (50) days and not less than TWENTY-ONE (21) 128(2)
days for the determination of the Shareholders entitled to notice
of the meeting, provided that notice of any such record date is
given, not less than SEVEN (7) days before such record date, by
newspaper advertisement in the manner provided in the Act. If no
record date is so fixed, the record date for the determination of
the Shareholders entitled to notice of the meeting shall be the 128(3)
close of business on the date immediately preceding the day on
which the notice is given, or if no notice is given, the day on
which the meeting is held.
10.08 MEETING WITHOUT NOTICE - A meeting of Shareholders may be
held without notice at any time and place permitted by the Act 130
(a) if all the Shareholders entitled to vote thereat are
present in person or represented by proxy or if those
not present or represented by proxy waive notice of or
otherwise consent to such meeting being held, and
(b) if the auditor and the Directors are present or waived
notice of or otherwise consent to such meeting being
held.
At such meeting any business may be transacted which the
Corporation at a meeting of Shareholders may transact. If the
meeting is held at a place outside Alberta, Shareholders not 126(2)
present or represented by proxy, but who have waived notice of or
otherwise consented to such meeting, shall also be deemed to have
consented to the meeting being held at such place.
10.09 MEETINGS BY TELEPHONE - If all the Shareholders consent,
a Shareholder may participate in a meeting of Shareholders by
means of such telephone or other communications facilities as 126(3)
permit all persons participating in the meeting to hear each other,
and a Shareholder participating in such a meeting by such
consent shall be effective whether given before or after the
meeting to which it relates.
10.10 CHAIRMAN, SECRETARY AND SCRUTINEERS - The Chairman of any
meeting of Shareholders shall be the first
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mentioned of such of the following Officers as have been appointed
and who is present at the meeting:
Chairman of the Board, President, Managing Director, or a
Vice-President who is a Shareholder. If no such officer is present
within FIFTEEN (15) minutes from the time fixed for holding the
meeting, the persons present and entitled to vote shall choose one
of their number to be Chairman. If the Secretary shall appoint some
person, who need not be a Shareholder, to act as Secretary of the
meeting. If desired, one or more scrutineers, who need not be
Shareholders, may be appointed by a resolution or by the Chairman
with the consent of the meeting. 46(2),105(1)
132(2),(3)
10.11 PERSONS ENTITLED TO BE PRESENT - The only persons entitled 162(1)
to be present at a meeting of Shareholders shall be those entitled
to vote thereat, the Directors and auditor of the Corporation and
others who, although not entitled to vote, are entitled or required
under any provision of the Act or the articles or By-Laws to be
present at the meeting. Any other person may be admitted only on
the invitation of the Chairman of the meeting or with the consent
of the meeting. 133(1)
10.12 QUORUM - Subject to the Act, a quorum for the transaction of
business at any meeting of Shareholders shall be TWO (2) persons
present in person, each being a Shareholder entitled to vote
thereat or a duly appointed proxy for an absent Shareholder so
entitled and together holding or representing by proxy not less
than ten percent (10%) of the outstanding shares of the Corporation
entitled to vote at the meeting. If a quorum is present at the 133(2)
opening of any meeting of shareholders, the shareholders present or
represented by proxy may proceed with the business of the meeting
notwithstanding that a quorum is not present throughout the
meeting. If a quorum is not present within one-half hour of the
time appointed for convening of any meeting of Shareholders, the
Shareholders present or represented by proxy may adjourn the 133(3)
meeting to a fixed time and place subject to Section 10.19 but may
not transact any other business provided, however, that if no
provision for adjournment is made at any such meeting or adjourned
meeting at which a quorum is not present, the meeting shall be
dissolved. 134(2)
10.13 RIGHT TO VOTE - RECORD DATE FOR VOTING - Subject to the
provisions of the Act as to authorized representative of any other
body corporate, at any meeting of
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Shareholders in respect of which the Corporation has
prepared the list referred to in Section 10.06, every person 134(1),134(4)
who is named in such list shall be entitled to vote the shares
shown thereon opposite his name except, where the 132(2)
Corporation has fixed a record date in respect of such
meeting pursuant to Section 10.07, to the extent that such
person has transferred any of his shares after such record
date and the transferee, upon producing properly endorsed
Certificates evidencing such shares or otherwise establishing
that he owns such shares, demands not later than TEN (10)
days before the meeting that his name be included in such list
in which event the transferee alone shall be entitled to vote
the transferred shares at the meeting. Where no record date
for notice has been fixed and no notice of meeting given, or
in the absence of a list prepared as aforesaid in respect of a
meeting of Shareholders, every person shall be entitled to 132(3)
vote at the meeting who at the time is entered in the
securities register as the holder of one or more shares
carrying the right to vote at such meeting.
10.14 PROXIES -- Every Shareholder entitled to vote at a
meeting of Shareholders, may appoint a proxyholder, or one 142(1)
or more alternate proxyholders, who need not be
Shareholders, to attend and act at the meeting in the manner
and to the extent authorized and with the authority conferred
by the proxy. A proxy shall be in writing executed by the
Shareholder or his attorney and shall conform with the 141
requirements of the Act. An instrument of proxy shall be 142(2)
valid only at the meeting in respect of which it is given or
any adjournment thereof. 142(3)
10.15 TIME FOR DEPOSIT OF PROXIES -- The board may 142(5)
specify in a notice calling a meeting of Shareholders a time,
preceding the time of such meeting by not more than
FORTY-EIGHT (48) hours exclusive of non-business days,
before which time proxies to be used at such meeting must be
deposited. A proxy shall be acted upon only if, prior to the
time so specified, it shall have been deposited with the
Corporation or an agent thereof specified in such notice, or, if
no such time is specified in such notice or, if no such time is
specified in such notice, unless it has been received by the
Secretary of the Corporation or by the Chairman of the
meeting or any adjournment thereof prior to the time of
voting.
10.16 JOINT SHAREHOLDERS -- If two or more persons hold 134(4)
shares jointly, any one of them present in person or
represented by proxy at a meeting of Shareholders may, in
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the absence of the other or others, vote the shares; but if
two or more of those persons are present in person or
represented by proxy and vote, they shall vote as one on the
shares jointly held by them and in the absence of agreement
between those so voting the person named first in the Register
shall vote the shares.
10.17 VOTES TO GOVERN - At any meeting of Shareholders every
question shall, unless otherwise required by the articles or
By-laws or by law, be determined by the majority of the votes
cast on the questions. In case of an equality of votes either
upon a show of hands or upon a poll, the Chairman of the
meeting shall be entitled to a second or casting vote. 135
10.18 SHOW OF HANDS - Subject to the provisions of the Act any
question at a meeting of Shareholders shall be decided by a
show of hands unless a ballot thereon is required or demanded
as hereinafter provided. Upon a show of hands every person who
is present and entitled to vote shall have one vote. Whenever
a vote by show of hands shall have been taken upon a question,
unless a ballot thereon is so required or demanded, a
declaration by the Chairman of the meeting that the vote upon
the question has been carried or carried by a particular
majority or not carried, an entry to that effect in the
minutes of the meeting shall be prima facie evidence of the
fact without proof of the number or proportion of the votes
recorded in favour of or against any resolution or other
proceeding in respect of the said question, and the result of
the vote so taken shall be the decision of the Shareholders
upon the said question. 135(2)
10.19 BALLOTS - On any question proposed for consideration at
a meeting of Shareholders, and whether or not a show of hands
has been taken thereon, any Shareholder or proxyholder
entitled to vote at the meeting may require or demand a
ballot. A ballot so required or demanded shall be taken in
such manner as the Chairman shall direct. A requirement or
demand for a ballot may be withdrawn at any time prior to the
taking of the ballot. If a ballot is taken each person present
shall be entitled in respect of the shares which he is entitled
to vote at the meeting upon the question, to that number of
notes provided by the Act or the articles, and the result of
the ballot so taken shall be the decision of the Shareholders
upon the said question. 129(4)
10.20 ADJOURNMENT - If a meeting of Shareholders is adjourned
for less than THIRTY (300 days, it shall not be necessary to
give notice of the adjourned meeting, other than
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by announcement at the earliest meeting that is adjourned. If 129(5)
a meeting of Shareholders is adjourned by one or more
adjournments for an aggregate of THIRTY (30) days or more,
notice of the adjourned meeting shall be given as for an
original meeting. At any such adjourned meeting no business
shall be transacted other than business left unfinished at the
meeting from which the adjournment took place.
10.21 RESOLUTION IN WRITING - A resolution in writing 136(1),(2)
signed by all the Shareholders entitled to vote on that
resolution at a meeting of Shareholders is as valid as if it had
been passed at a meeting of the Shareholders, and shall be
held to relate to any date therein stated to be the effective
date thereof.
10.22 ONLY ONE SHAREHOLDER - Where the Corporation 133(4)
has only one Shareholder or only one holder of any class or
series of shares, the Shareholder present in person or by proxy
constitutes a meeting.
Section Eleven
DIVISIONS AND DEPARTMENTS
11.01 CREATI0N AND CONSOLIDATION OF DIVISIONS -
The board may cause the business and operations of the
Corporation or any part thereof to be divided or to be
segregated into one or more divisions upon such basis,
including without limitation, character or type of operation,
geographical territory, product manufactured or service
rendered, as the board may consider appropriate in each
case. The board may also cause the business and operations
of any such division to be further divided into sub-units and
the business and operations of any such divisions or sub-units
to be consolidated upon such basis as the board may consider
appropriate in each case.
11.02 NAME OF DIVISION - Subject to the Act any division
or its sub-units may be designated by such name as the board
may from time to time determine and may transact business,
enter into contracts, sign cheques and other documents of any
kind and do all acts and things under such name, provided that
the corporation shall set out its name in legible characters in 10(8)
all contracts, invoices, negotiable instruments and orders for
goods or services issued or made by or on behalf of the
</TABLE>
<PAGE> 28
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corporation. Any such contract, cheque or documents shall be
binding upon the Corporation as if it had been entered into or
signed in the name of the Corporation.
11.03 OFFICERS OF DIVISION - From time to time the board or if
authorized by the board, the chief executive officers, may appoint
one or more officers for any division, prescribe their powers and
duties and settle their terms of employment and remuneration. The
board or, if authorized by the board, the chief executive officers,
may remove at its or his pleasure any officers so appointed,
without prejudice to such officer's right or under any employment
contract. Officers of divisions their sub-units shall not, as such,
be Officers of the Corporation.
Section Twelve
NOTICES
12.01 METHOD OF GIVING NOTICES - Any notice (which term includes
any communication or document) to be given (which term includes 246
sent, delivered or served) pursuant to the Act, the regulations
thereunder, the articles, the By-Laws or otherwise to a
Shareholder, Director, Officer, auditor or member of a committee of
Directors shall be sufficiently given if delivered personally to
the person to whom it is to be given or if delivered to his
recorded address or if mailed to him at his recorded address by
prepaid ordinary or air mail or if sent to him at his recorded
address by any means of prepaid transmitted or recorded
communication. A notice so delivered shall be deemed to have been
given when it is delivered personally or to the recorded address as
aforesaid; a notice so mailed shall be deemed to have been given
when deposited in a post office or public letter box; and a notice
so sent by any means of transmitted or recorded communication 129(2)
shall be deemed to have been dispatched or delivered to the
appropriate communication company or agency or its representative
for dispatch. Subject to the Act, a notice or document sent by mail
in the manner herein set forth to a Shareholder shall be deemed to
have been received by him at the time it would be delivered in the
ordinary course of the mails. The Secretary may change or cause to 246(3)
be changed the recorded address of any Shareholder, Director,
Officer, auditor or member of a committee of Directors in
accordance with any information believed by him to be reliable.
<PAGE> 29
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<TABLE>
<CAPTION>
BCA
SECTION
REFERENCE
<S> <C>
12.02 NOTICE TO JOINT SHAREHOLDERS -- If two or more
persons are registered as joint holders of any share, any
notice shall be addressed to all of such joint holders but
notice given to any one or more of such persons at the
recorded address for such joint shareholder shall be sufficient
notice to all of them.
12.03 COMPUTATION OF TIME -- In computing the date
when notice must be given under any provisions requiring a
specified number of days' notice of any meeting or other
event, the date of giving the notice shall be excluded and the
date of the meeting or other event in respect of which the
noticed is being given shall be included. 248(4)
12.04 UNDELIVERED NOTICES -- If any notice given to a
Shareholder pursuant to Section 12.01 is returned on THREE
(3) consecutive occasions because he cannot be found or
served or is unknown at his recorded address, the Corporation
shall not be required to give any further notices to such
Shareholder until he informs the Corporation in writing of his
new recorded address.
12.05 PROOF OF SERVICE -- A certificate of the Secretary
or other duly authorized Officer of the Corporation in office
at the time of the making of the certificate, or of any agent
of the Corporation as to the facts in relation to the mailing
or delivery or sending of any notice to any Shareholder,
Director, the auditors, or any Officer, or of publication of
any notice, shall be conclusive evidence thereof and shall be
binding on every Shareholder, Director, the auditors or any
Officer of the Corporation as the case may be.
12.08 OMISSIONS AND ERRORS -- The accidental omission
to give any notice to any Shareholder, Director, Officer,
auditor or member of a committee of Directors or the non-
receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate
any action taken at any meeting held pursuant to such notice
or otherwise founded thereon. 47(1)
(2)
12.07 PERSONS ENTITLED BY DEATH OR OPERATION OF (3)
LAW -- Every person who by operation of law, transfer, death
of a Shareholder or any other means whatsoever, shall
become entitled to any share, shall be bound by every notice
in respect of such share which shall be bound by every notice
in respect of such share which shall have been duly given to
the Shareholder from whom he derives his title prior to such
person's name and address being entered on the securities
</TABLE>
<PAGE> 30
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SECTION
REFERENCE
was given before or after the happening of the event upon which he
became so entitled and prior to his furnishing to the Corporation
the proof of authority or evidence of his entitlement prescribed by
the Act.
12.07 WAIVER OF NOTICE - Any Shareholder (or his duly appointed 248
proxyholder), Director, Officer, auditor or member of a committee
of Directors may at any time waive or abridge the time for any 109(6)
notice, required to be given to him under any provision of the Act,
the regulations thereunder, the articles, the By-Laws or otherwise
and such waiver or abridgement shall cure any default in the giving
or in the time of such notice, as the case may be. Any such waiver 130
or abridgement shall be in writing except a waiver of notice of a
meeting of Shareholders or of the board which may be given in any
manner.
ADOPTED by unanimous resolutions of the Shareholders and of the
Directors effective on the 9th day of September, 1987.
/s/ [SIG]
- ------------------------------------
President and Director
/s/ [SIG]
- ------------------------------------
Vice-President, Secretary and Director
<PAGE> 1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE ONLY IN COMPLIANCE WITH THE ACT.
DEBENTURE ACQUISITION AGREEMENT
THIS DEBENTURE ACQUISITION AGREEMENT (the "Agreement") is made
and entered into as of August 14, 1998, by and between FUTURELINK DISTRIBUTION
CORP., a Colorado corporation ("Seller") and THOMSON KERNAGHAN & CO. LTD, an
Ontario corporation ("Buyer"), with respect to the following facts:
A. Seller desires to sell to the Buyer, and Buyer desires to
purchase from the Seller up to $5,000,000 of a 10% Convertible Debentures (the
"Debentures") of Seller and $750,000 of Warrants of Seller (the "Warrants")
exercisable at a per share price equal to the average of the closing bid prices
of the Common Stock of the Seller as quoted on the NASD Electronic Bulletin
Board for the three trading days prior to the Initial Funding Date (as
hereinafter defined), in the forms of Exhibits A and B hereto, respectively,
(collectively, the "Securities"), upon the terms and conditions as set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing facts and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
1. PURCHASE AND SALE OF SECURITIES. Seller hereby sells the to
Buyer, and Buyer hereby purchases the Securities from Seller. Seller is
acquiring the Securities as Nominee and intends to resale the Securities to its
customers.
2. PURCHASE PRICE. The total purchase price (the "Purchase
Price") for the Securities shall be up to Five Million Dollars ($5,000,000),
payable in cash in accordance with the terms, conditions and procedures set
forth herein.
<PAGE> 2
3. TRANSFER OF SECURITIES AND DELIVERY OF PURCHASE PRICE.
3.1
(a) On the Initial Funding Date, the Buyer will advance
Two Million Two Hundred Twenty Five Thousand Dollars ($2,250,000) part of which
is to be used to purchase the stock of SysGold, Ltd. and the balance of which is
to be used for working capital; provided that:
(i) SysGold, Ltd. had revenues of at least
$5,000,000 for its last fiscal year;
(ii) The Seller has filed a, on an appropriate
form with the United States Securities and Exchange Commission (the "SEC") to
register its Common Stock under Section 12(g) of the Securities Exchange Act of
1934, as amended, and the registration statement with the SEC under the
Securities Act of 1933, as amended, as provided for in Section 6 hereof, which
registration statements contains the required clean opinion on the financial
statements of the Seller by Ernst & Young and was reviewed by United States
securities counsel for the Seller, Jeffer, Mangles, Butler & Marmaro LLP. The
Initial Funding Date shall occur on the third business day, as defined in the
form of Debenture, after the last of is so filed; and
(iii) and the opinion of the Seller's counsel,
Jeffer, Mangles, Butler and Marmaro, LLP to the effect that the Seller is duly
incorporated and has the corporate power to enter into this Agreement and the
Exhibits thereto, that this Agreement and the Exhibits thereto that have been
entered into as of the Initial Closing date have been duly approved by all
necessary action on behalf of the Seller and this Agreement and such Exhibits
are binding agreements effective according to their respective terms except for
bankruptcy and equitable principal.
The amount advanced shall be represented by a Debenture(s)
in the form of Exhibit A hereto for the amount advanced; provided that
Debentures, at the Buyer's request may be issued in amounts of One Hundred
Thousand Dollars ($100,000) or multiples thereof, whether issued at the Initial
Funding Date or any Subsequent Funding Date. The Seller shall also deliver to
the Buyer on the Initial Funding Date, the Warrants in the form of Exhibit B
hereto.
(b) After the Initial Funding Date, one or more Subsequent
Funding Dates may occur in which the Buyer will advance to the Seller no more
than an aggregate of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) under the following terms and conditions:
(i) No more than Five Hundred Thousand Dollars
($500,000) may be advanced on any Subsequent Funding Date;
(ii) A Subsequent Funding Date will occur on the
thirtieth (30) day (or the next business day if such thirtieth (30th) day is not
a business day, as defined
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<PAGE> 3
in the form of the Debenture) after the Buyer receives a written request (the
"Request") from the Seller to advance additional funds under this Section 3(b),
with such written request being sent by facsimile to the Buyer followed up in
writing by overnight courier service;
(iii) Notwithstanding any other provision of this
Section 3(b), the Buyer at a proposed Subsequent Funding Date is not required to
advance any additional amounts to the Seller if (A) the Form 10 or Form 10-SB
registration statement described in Section 3(a) hereof has not become effective
under the Securities Exchange Act of 1934, as amended and the registration
statement under the Securities Act of 1933, as amended, as provided for in
Section 6 hereof has not become effective; (B) the average closing bid price for
the Common Stock of the Seller on the principal market in which such Common
Stock is then trading was Fifty ($0,50) or less for the five trading days in
such principal market preceding the date the Request is dated, as reported by
the principal market on which the Common Stock is then traded; or (C) the
average daily trading volume of the Common Stock of the Seller on the principal
market in which such Common Stock is traded averaged Seventy Thousand (70,000)
shares or less per day for the five trading days in such principal market
preceding the date the Request is dated, as reported by the principal market on
which the Common Stock is then traded. The principal market for the Common Stock
of the Seller shall a the market within the United States on which the greatest
trading volume is occurring. Currently, the principal market for such Common
Stock is the NASD Electronic Bulletin Board:
(iv) The Resale Securities (as defined in Section
6 hereof) have not been placed in the escrow provided for by the Escrow
Agreement in the form of Exhibit D hereto.
3.2 On the Initial Funding Date, Seller shall (i) pay a
commission to the Buyer, as placement agent for Buyer's own account, an amount
equal to Ten percent (10%) of the Principal Sum (as defined in the Debenture)
that is funded on the Initial Funding Date, (ii) pay to the Buyer, for Buyer's
own account, Buyer's reasonable attorney's fees and costs incurred in entering
into this Agreement, (but not more than $10,000) against detailed invoices, and
(iii) issue to the Buyer, for Buyer's own account, $250,000 of Warrants of the
Seller exercisable at a per share price equal to the average of the closing bid
prices of the Common Stock of the Seller as quoted on the NASD Electronic
Bulletin Board for the three trading days prior to the Initial Funding Date, in
the form of Exhibit C hereto (the "Buyer Warrants").
3.3 On each Subsequent Funding Date. the Seller shall pay
a commission to the Buyer, as placement agents, for Buyer's own account, an
amount equal to Ten percent (10%) of the Principal Sum that is funded on each
such Subsequent Funding Date.
3.4 On the Initial Funding Date, the Seller and the Buyer
shall enter into the Escrow Agreement in the form of Exhibit D hereto, with the
Buyer as Escrow Agent.
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<PAGE> 4
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Buyer as follows:
4.1 Any Common Stock of Seller issuable upon conversion of
or as payment of interest pursuant to the Debentures and the exercise of the
Warrants and the Buyer's Warrants, will be duly and validly issued fully paid
and nonassessable Common Stock of the Seller.
4.2 The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. The
Seller has full corporate power and authority to own and operate its properties
and assets, and to carry on its business as presently conducted and as proposed
to be conducted. The Seller is duly qualified to do business as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
have a material adverse effect on the Seller. The Seller has furnished the Buyer
or its special counsel with true, correct and complete copies of its Articles of
Incorporation and Bylaws, as amended, as in effect on the date hereof. The
Seller has no subsidiaries.
4.3 The Seller has and will have at the Initial Date, all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Exhibits hereto, to sell and issue the Securities and the
Buyer's Warrants and all Common Stock underlying the Securities and the Buyer's
Warrants hereunder, and to carry out and perform its obligations under the terms
of this Agreement and the Exhibits hereto.
4.4 The authorized capital stock of the Seller consists of
(a) 100,000,000 shares of Common Stock, par value $.0001 per share, of which
16,626,523 shall be issued and outstanding as of August 13, 1998 and, (b)
5,000,000 shares of Preferred Stock, no par value, none of which are issued and
outstanding immediately prior to the Initial Funding Date. Schedule 4.4(a) sets
forth a true and correct list of the current stockholders of the Seller
indicating the number of shares of each class of the Seller's stock held by each
such stockholder. Except as set forth on Schedule 4.4(b), the Seller does not
have any authorized or outstanding options, warrants, convertible debentures,
rights or other securities exercisable for or convertible into any capital stock
of any of the Seller. Except for rights granted under this Agreement, no person
is entitled to any preemptive right or right of first refusal or similar right
with respect to any issuance of capital stock or other securities by the Seller.
Except for the Seller's obligations under this Agreement, there are no
outstanding obligations of the Seller to redeem, purchase or otherwise acquire
capital stock or other securities of any corporation. Except as provided herein
no person has any right to require the Seller to register any shares of its
capital stock for sale pursuant to the Securities Act of 1933, as amended.
4.5 All corporate action on the part of the Seller, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Exhibits hereto, the authorization,
sale, issuance and delivery of the Securities the Buyer's Warrants and all
underlying Common Stock and the performance of all of the Seller's obligations
hereunder and under each of the Exhibits hereto has been duly taken by the
Seller. This Agreement, when executed and delivered by the Seller, constitutes,
and
-4-
<PAGE> 5
each of the Exhibits thereto shall, when executed and delivered, constitute, a
valid and binding obligation of the Seller, enforceable in accordance with their
terms except for bankruptcy and equitable remedies. The Common Stock when issued
in compliance with the Securities and the Buyer's Warrants, shall be validly
issued, fully paid and non-assessable. The Securities and the Buyer's Warrants
are free of any liens claims or encumbrances; provided, however, that the will
be subject to restrictions on transfer under applicable state and/or federal
securities laws as set forth herein. The issuance of the Securities or Buyer's
Warrants will not be subject to any preemptive rights or rights of first
refusal, or result in any default of, or conflict with, the Articles of
Incorporation or By-Laws of the Seller, any contract or agreement to which the
Seller is a party or by which it is bound or any other obligation or commitment
of the Seller.
4.6 The Seller has delivered to the Buyer the unaudited
balance sheet and statements of operations and cash flows of the Seller as of
and for the period ended May 31, 1998 (the "Financial Statements"). The
Financial Statements are complete and correct and have been prepared in
accordance with the books and records of the Seller on a consistent basis. The
Financial Statements accurately set out, present fairly and describe the
consolidated financial condition and operating results of the Seller as of the
dates, and during the periods, indicated therein.
4.7 Except as set forth in Schedule 4.8 hereto, the Seller
has no liabilities or obligations of any kind, absolute, contingent or
otherwise, except (a) the liabilities and obligations set forth in the Financial
Statements, (b) liabilities with respect to equipment leases entered into in the
ordinary course of business, and (c) liabilities and obligations which have been
incurred subsequent to May 31, 1998, in the ordinary course of business and
consistent with past practice.
4.8 The Seller has good and marketable title to its
properties and assets, and has good title to all its leasehold interests, in
each case subject to no lien, claim or encumbrance other than (a) the lien of
current taxes not yet due and payable, (b) possible minor liens and encumbrances
which do not in any case or in the aggregate materially detract from the value
of the property subject thereto or materially impair the operations of the
Seller, and which have not arisen otherwise than in the ordinary course of
business. The assets and properties of the Seller are adequate to conduct the
operations currently conducted and proposed to be conducted by it. The Seller
enjoys peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect. The leasehold improvements of the Seller and all of their tangible
personal property, machinery, equipment, fixtures and inventories used in the
ordinary course of business are in good repair and in good operating condition,
reasonable wear and tear excluded.
4.9 The Seller is not in violation of any term of its
Articles of Incorporation or By-laws, or of any material term or provision of
any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment
or decree, including without limitation any Material Contract. The Seller is in
compliance with all judgments, decrees, governmental orders, laws, statutes,
rules and regulations by which it is bound or to which it or any of its
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<PAGE> 6
properties or assets is subject, except where the failure to comply would not
have a material adverse effect on the Seller. The Seller has all permits,
licenses, franchises and authorizations (collectively, the "Licenses") which are
required by law and/or necessary to operate its business as conducted or
proposed to be conducted, except where the failure to have any such License
would not have a material adverse effect on the Seller. All such Licenses were
validly issued and are in full force and effect. The Seller is in compliance in
all material respects with all of its Licenses and no suspension, revocation or
termination of any License is pending or, to the knowledge of the Seller,
threatened. The execution, delivery and performance of and compliance with this
Agreement and the Exhibits thereto, and the issuance of the Securities and the
Buyer's Warrants have not resulted and will not result in any violation of, or
conflict with, or constitute a material default under, (a) the Articles of
Incorporation or By-laws of the Seller or (b) assuming the accuracy of the
representations and warranties of the Seller set forth in hereto, any applicable
law, statute, rule, regulation or License, or (c) any agreement, contract,
franchise or instrument to which the Seller is a party, and has not resulted and
will not result in the creation of, any Lien upon any of the properties or
assets of the Seller.
4.10 The Seller has good and marketable title to, or valid
and continuing rights and licenses to use, all patents, patent rights, trade
secrets, trademarks, trademark rights, service marks, trade names, copyrights,
franchises, licenses, permits, inventions, customer lists, and all rights with
respect to the foregoing, which are necessary for the operation of its business
as presently conducted and now proposed to be operated (collectively, with any
application with respect to the issuance or granting of any of the foregoing,
the "Intangible Property"). To the Seller's knowledge, the conduct of business
of the Seller as now operated and as now proposed to be operated does not and
will not conflict with any valid intellectual property right of others. The
Seller has not received any notice of any claim against it that any of its
operations, activities, products or publications infringes on any patent,
trademark, trade name, copyright or other property right of a third party, or
that it is illegally or otherwise using the trade secrets or any property rights
of others. The Seller has no knowledge that any licensor of it has any disputes
with or claims against any third party for infringement by such third party of
any trade name or other Intangible Property. Each employee of the Seller has
executed a confidentiality and non-disclosure agreement in favor of the Seller.
4.11 There are no actions, suits, proceedings or
investigations pending against the Seller or its properties before any court or
governmental agency (nor, to the best of the Seller's knowledge, is there any
reasonable basis therefor or threat thereof).
4.12 To the best of the Seller's knowledge, no employee of
the Seller is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Seller.
4.13 All agreements material to the business of the Seller
("Material Contracts") are valid, binding and in full force and effect in all
material respects. The Seller and, to the best of the Seller's knowledge, each
other party to a Material Contract have in all
-6-
<PAGE> 7
material respects performed all the obligations required to be performed by
them, have received no notice of default and are not in default under any
Material Contract.
4.14 The Seller: (a) has accurately prepared and timely
filed all tax returns that are required to have been filed by it with all
appropriate federal, state, county and local governmental agencies (and all such
returns fairly reflect the Seller's operations for tax purposes); and (b) has
paid in full or made adequate provision on the Financial Statements for the
payment of all taxes.
4.15 None of this Agreement (including the Exhibits and
Schedules hereto), any instrument, certificate or report furnished to the
Shareholder when read together, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading. The Seller knows of no information or fact that has and/or
could have a material adverse effect on it that has not been disclosed to the
Buyer in writing.
4.16 The Seller represents that it has not offered the
Securities to the Subscriber in the U.S. or, to the best knowledge of the
Seller, to any person in the United States or any U.S. person (as defined in
Regulation S promulgated by the United States Securities and Exchange
Commission).
4.17 To the best of the knowledge of the Seller, neither
the Seller nor any person acting for the Seller has conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S.
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
BUYER. The Buyer hereby represents and warrants to and covenants and agrees with
the Seller the following:
5.1 The Buyer represents and warrants to the Seller that
(i) the Buyer is not a "U.S. person" as that term is defined in Rule 902(o) of
Regulation S; (ii) the Securities and the Buyer's Warrants were not offered to
the Buyer in the United States and at the time of execution of this Agreement
and of any offer to buy the Securities and Buyer's Warrants hereunder the Buyer
was physically outside the United States; (iii) the Buyer is purchasing the
Securities and Buyer's Warrant for its own account and not on behalf of or for
the benefit of any U.S. person and the sale of the Securities has not been
prearranged with or on behalf of any buyer in the United States; (iv) the Buyer
and to the best knowledge of the Buyer each distributor, if any, participating
in the offering of the Securities and Buyer's Warrants, has agreed and the Buyer
hereby agrees that all offers and sales of the Securities and the Buyer's
Warrants prior to the expiration of a period commencing on the closing of all
the sale of all Debentures offered by this Agreement and ending one year
thereafter (the "Distribution Compliance Period") shall not be made to U.S.
persons or for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of
-7-
<PAGE> 8
Regulation S. The Buyer is a dealer with respect to this transaction and
consequently a "distributor" as defined in Regulation S.
5.2 The Purchase Price to be paid by Buyer to Seller for
the Securities and Buyer's Warrants has been determined by Buyer as fair and
appropriate based solely upon Buyer's independent investigation and due
diligence of the Seller, and neither the Seller nor any of its agents,
including, without limitation, any of their officers, directors, employees,
accountants and attorneys, has made any representations or warranties whatsoever
in connection with the sale of the Securities and Buyer's Warrants by the Seller
to the Buyer, except as specifically set forth herein. The Buyer has had
sufficient opportunity in connection with the sale of the Securities and Buyer's
Warrants to review the Seller's business and affairs (including, without
limitation, the Seller's financial statements and other information) and to
inquire of the Seller's management with respect thereto. The Buyer has had
answered to its satisfaction any questions with respect to the Seller's business
and affairs. The Buyer further has had the opportunity to obtain independent
financial, legal, accounting, business, tax and other appropriate advice with
respect to the transactions contemplated by this Agreement, and is not relying
upon the Seller or any of its agents in any manner in connection with same.
5.3 The certificates representing the Securities and the
Buyer's Warrants shall bear the first legend set forth on the first page of this
Agreement and any other legend, if such legend or legends are reasonably
required by the Seller to comply with state, federal or foreign law.
5.4 THE BUYER UNDERSTANDS AND AGREES WITH THE SELLER, THAT
IN THE ABSENCE OF THE REGISTRATION OF THE SECURITIES, THE BUYER'S WARRANTS AND
THE UNDERLYING COMMON STOCK UNDER THE ACT, THE SECURITIES, THE BUYER'S WARRANTS
AND THE UNDERLYING COMMON STOCK MAY ONLY BE RESOLD AS PROVIDED FOR IN RULES 903
OR 904 OF REGULATION S, PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER
THE ACT, INCLUDING SALES UNDER RULE 144. Rule 144, promulgated by the United
States Securities and Exchange Commission under the Act, may not be currently
available for sale of the Securities and Buyer's Warrants and underlying Common
Stock in the United States, and there is no assurance that it will be available
at any particular time in the future. Sales of Common Stock underlying the
Securities and the Buyer's Warrants may be made in reliance upon Rule 144 but
ONLY (i) limited quantities after the completion of the Distribution Compliance
Period (for Common Stock underlying the Warrants, one year after exercise if
latter), or (ii) in unlimited quantities by non-affiliates after the first
yearly anniversary of the completion of the Distribution Compliance Period (for
Common Stock underlying the Warrants, two years after exercise if latter), in
each case in accordance with the conditions of the Rule, all of which must be
met (including the requirement, if applicable, that adequate information
concerning the Seller is then available to the public).
5.5 To the best of the knowledge of the Buyer and Seller
neither the Buyer nor any distributor, if any, participating in the offering of
the Securities and Buyer"s Warrants nor any person acting for the Buyer or any
such distributor has conducted any "directed selling efforts" as that terms is
defined in Rule 902 of Regulation S.
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<PAGE> 9
5.6 The Buyer understands that the Securities, the Buyer's
Warrants and all underlying Common Stock have not been registered under the Act
and are being offered and sold pursuant to a "safe harbor" from registration
contained in Regulation S promulgated under the Act based in part upon the
representations of the Seller contained herein. The Seller has reviewed the
terms of the Warrants and the Buyer's Warrants and is aware of the restrictions
on exercise of the Warrants and the Buyer's Warrants by U.S. Persons, namely the
following:
THE WARRANTS AND THE BUYER'S WARRANTS MAY ONLY BE EXERCISED (i) BY A PERSON WHO
IS NOT A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S.
PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST IN THE WARRANTS OR BUYER'S
WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS AND THE BUYER'S WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED
STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANTS AND THE BUYER'S
WARRANTS CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE SELLER
PRIOR TO EXERCISE OF THE WARRANTS AND BUYER'S WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
5.7 The Buyer knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale of
the Securities and the Buyer's Warrants, the Buyer's Warrants or any underlying
Common Stock.
5.8 The Buyer is acquiring the Securities to be issued and
sold hereunder (and the Common Shares issuable thereunder) as a nominee (but is
acquiring the Buyer's Warrants (and the underlying Common Stock) for its own
account for investment and not as a nominee and not with a view to the
distribution thereof). The Buyer understands that it must bear the economic risk
of this investment indefinitely unless the sale of such Securities and Buyer's
Warrants and the underlying shares of Common Stock is registered pursuant to the
Act, or an exemption from such registration is available, and that the Buyer has
no present intention of registering any such sale of the Securities, the Buyer's
Warrants and any underlying Common Stock, except as otherwise specifically
provide for herein. The Buyer represents and warrants to the Seller that it has
no present plan or intention to sell any of such Securities, the Buyer's
Warrants and the underlying Common Stock in the United States or to a United
States person pursuant to any predetermined arrangements. The Buyer covenants
that neither it not its affiliates nor any person acting on its or their behalf
has the intention of entering or will enter during the Distribution Compliance
Period, into any put option, short position, hedging transactions, equity swaps
or other similar instrument or position with respect to any of such Securities,
the Buyer's Warrants and the underlying Common Stock or
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<PAGE> 10
securities of the same class as any of such Securities, the Buyer's Warrants and
the underlying Common Stock in violation of the Act and neither the Buyer nor
any of its affiliates or any person acting on its or their behalf will use at
any time any of such acquired pursuant to this Agreement to settle any put
option, short position, hedging transactions, equity swaps or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement in violation of the Act.
5.9 The Buyer further covenants that it will not make any
sale, transfer or other disposition of the Securities and the Buyer's Warrants
or any underlying Common Stock in violation of the Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder.
5.10 The Buyer has the full power and authority to
execute, deliver and perform this Agreement. This Agreement when executed and
delivered by the Buyer will constitute a valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms except for bankruptcy and
equitable remedies.
5.11 The Buyer has reviewed with his, her or its own tax
advisors the foreign, federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. The Buyer is relying solely on such advisors and not on any
statements or representations of the Seller or any of its agents and understands
that the Buyer (and not the Seller) shall be responsible for the Buyer's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
5.12 The Buyer acknowledges that it has had this Agreement
and the transactions contemplated by this Agreement reviewed by its own legal
counsel. The Buyer is relying solely on such counsel and not on any statements
or representations of the Seller or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement.
5.13 The Buyer is a "distributor" as defined in Regulation
S will send to any broker/dealer or other person receiving a commission on the
sale of the Securities. the Buyer's Warrants and the underlying Common Stock, a
confirmation or other notice stating that such person is subject to the same
restrictions on transfer to U.S. Persons or for the account of or benefit of
U.S. Persons during the Distribution Compliance Period as provided herein.
5.14 Upon any transfer of the Securities, the Buyer's
Warrants or the underlying Common Stock unless such transfer is subject to Rule
144 or is covered by a current and effective registration statement under the
Act, the transferee must supply to the Seller with the same representations and
warranties as provided for in Section 5 hereof.
5.15 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS
AGREEMENT, THE DEBENTURES, THE WARRANTS OR THE BUYER'S
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<PAGE> 11
WARRANTS, THE SELLER DOES NOT HAVE TO AND WILL NOT RECOGNIZE AND WILL TREAT AS
NULL AND VOID ANY ATTEMPT TO TRANSFER THE DEBENTURES, THE WARRANTS, THE BUYER'S
WARRANTS AND THE UNDERLYING COMMON STOCK MADE IN VIOLATION OF THIS AGREEMENT OR
REGULATION S OR TO EXERCISE THE WARRANTS AND THE BUYER'S WARRANTS OTHER THAN AS
PROVIDED THEREIN.
6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) As soon as possible after the date (but in no case
prior to the Initial Funding Date, the Seller will include in an appropriate
form of registration statement filed under the Securities Act of 1933 (the
"Act") for resale by the potential holders (the "Buyer") the following shares of
Common Stock, but only Common Stock, of the Seller (collectively, the "Resale
Securities"):
(i) One hundred fifty percent (150%) of the
shares underlying the Debentures, assuming the aggregate outstanding Principal
Sum was Five Million Dollars ($5,000,000) based on a Conversion Price per share
equal to Seventy Eight Percent of the closing bid prices for the Common Stock of
the Seller for the three trading days prior to filing the registration
statement;
(ii) One hundred percent (100%) of the shares
underlying the Warrants to purchase Seven Hundred Fifty Thousand Dollars
($750,000) of the Common Stock of the Seller based on an exercise price per
share equal to the closing bid price for the Common Stock of the Seller for the
three trading days prior to the filing of the registration statement; and
(iii) One hundred percent (100%) of the shares
underlying the Buyer Warrants to purchase Two Hundred Fifty Thousand Dollars
($250,000) of the Common Stock of the Seller based on the same exercise price
per share as the Warrants.
(b) The Seller shall use its best efforts to cause the
registration statement provided for in Section 6(a) hereof to become effect
under the Act no latter than the ninetieth (90th) day after the Initial Funding
Date; provided, that if such registration statement has not been declared
effective by the close of such ninetieth (90th) day after the Initial Funding
Date, then for each of the next thirty (30) days after such ninetieth (90th) day
after the Initial Funding Date that such registration statement has not been
declared effective, the Seller shall pay the Holder and amount equal to the
Principal Sum funded on the Initial Funding Date times Nine Hundred Eighty Six
One Thousands of a percent (0.986%); provided further, that if such registration
statement has not been declared effective by the close of the one hundred
twentieth (120th) day after the Initial Funding Date, then for each day after
such one hundred twentieth (120th) day after the Initial Funding Date that such
registration statement has not been declared effective, the Seller shall pay the
Holder and amount equal to the Principal Sum funded on the Initial Funding Date
times One Thousand Six Hundred Fourfour One Ten Thousands of a percent
(0.1644%). Any amounts due to the Holder under this
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<PAGE> 12
Section 6(b) shall be paid by check no latter than the next business day after
an amount is incurred.
(c) The following provision of this Section 6 shall also
be applicable:
(i) The Buyer shall furnish the Seller with such
appropriate information (relating to the intentions of such holders with regard
to the sale of the Resale Securities included in the registration statement as
the Seller shall reasonably request in writing. Following the effective date of
such registration statement, the Seller shall upon the request of the Buyer
forthwith supply such a number of prospectuses meeting the requirements of the
Act, as shall be requested by the Buyer to permit the Buyer to make a public
offering of all the Resale Securities from time to time offered or sold to the
Buyer provided that the Buyer shall from time to time furnish the Seller with
such appropriate information (as provided for in the immediately proceeding
sentence) as the Seller shall request in writing and provided, further, that the
Seller shall keep such registration statement current and effective until the
last to occur of thirtieth (30th) day after the last to occur of (i) the
Principal Sum of the Debentures being reduced to zero or (ii) the first to occur
of the exercise or all of the Warrants and the Buyer's Warrants or the
expiration of the Warrants and the Buyer's Warrants. The Seller shall also use
its best efforts to qualify the Resale Securities for sale in New York and
Florida, provided that the Seller shall not be required to file a general
consent to service of process in any state pursuant to this sentence.
(ii) The Seller shall fill the registration
statement at its own expense and without charge to the Buyer. The Buyer shall,
however, bear the fees of his own counsel and any transfer taxes or underwriting
discounts or commissions applicable to the Resale Securities sold by it pursuant
thereto.
(iii) The Seller shall indemnify and hold
harmless the Buyer and each underwriter, within the meaning of the Act, who may
purchase from or sell for any the Buyer any Resale Securities from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement or any post-effective amendment thereto under the Act or
any prospectus included therein required to be filed or furnished by reason of
this Section 6 or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or alleged untrue statement
or omission or alleged omission based upon information furnished or required to
be furnished in writing to the Seller by the Buyer or underwriter expressly for
use therein, which indemnification shall include each person, if any, who
controls any such underwriter within the meaning of such Act; provided, however,
that the Seller shall not be obliged so to indemnify any such underwriter or
controlling person unless such underwriter shall at the same time indemnify the
Seller, its directors, each officer signing the related registration statement
and each person, if any, who controls the Seller within the meaning of such Act,
from and against any and all losses, claims, damages and liabilities caused by
any untrue statement or
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<PAGE> 13
alleged untrue statement of a material fact contained in any registration
statement or any prospectus required to be filed or furnished by reason of this
Section 6 or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission based upon information
furnished in writing to the Seller by any such underwriter expressly for use
therein.
(iv) The Seller's agreements with respect to the
Resale Securities in this Section 6 shall continue in effect regardless or the
conversion and surrender of the Debenture or any exercise of the Warrants or the
Buyer's Warrants. The registration rights of the Buyer under this Section 6 will
inure to the benefit and be assignable automatically to any transferee of the
Securities, the Warrants, the Buyer's Warrants or the underlying Common Stock,
except for any such underlying Common Stock sold pursuant to a registration
statement under the Act or sold pursuant to Rule 144.
7. ENTIRE AGREEMENT. This Agreement, and the Exhibits hereto,
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings relating to such subject matter.
8. CHOICE OF LAW AND VENUE. This Agreement shall be governed by
and construed under the laws of the Province of Alberta, Canada, without regard
to choice of laws, in force from time to time. Any proceeding arising out of
this Agreement shall be brought in Ontario, Canada.
9. ATTORNEYS' FEES. In any action to enforce this Agreement, the
prevailing party shall be entitled to recover from the non-prevailing party all
reasonable costs, including, without limitation, attorneys' fees.
10. PARTIES BOUND. This Agreement is binding on and shall inure
to the benefit of the parties and their respective successors, assigns, heirs,
and legal representatives.
11. NOTICES. Except as otherwise provided herein, all notices,
instructions or other communications required or permitted hereunder shall be in
writing and sent by registered mail, postage prepaid, addressed as follows:
To FutureLink Distribution Corp.
550-603-7 Avenue SW
Calgary, Alberta Canada T2P 2T5
Fax: 403-543-5510
Voice: 403-543-5511
Att.: Raghu Kilambi,
Chief Financial Officer
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<PAGE> 14
To Thomson Kernaghan & Co. Limited:
365 Bay Street,
Toronto, Ontario Canada M5H 2V2
Fax: 416-367-8055
Voice: 416-860-8800
Att.: Robert F. Wilson
or such other address, telephone numbers or contact persons as shall be
furnished in writing by such party to the other parties hereto. Any such notice,
instruction or communication shall be deemed to have been given three (3)
business days after the date mailed by registered mail or if sent by fax, upon
electronic confirmation or receipt.
12. GENDER. Masculine nouns and pronouns shall include feminine
nouns and pronouns.
13. ARBITRATION. All disputes that may arise between the parties
regarding the interpretation or application of this Agreement and the Exhibits
thereto and the legal affect of this Agreement shall, to the exclusion of any
court of law, be arbitrated and determined by a board of arbitrators, unless the
parties can resolve the dispute by mutual agreement. Either party shall have the
right to submit any dispute to arbitration thirty (30) days after the other
party has been notified as to the nature of the dispute. If the dispute goes to
arbitration, each party shall select one arbitrator and the two arbitrators so
selected shall jointly select a third arbitrator. The arbitration shall be
governed by the arbitration rules of the International Chamber of Commerce. The
arbitration proceeding shall be governed by the statutes of the Province of
Ontario, Canada, and the proceeding shall be held in Toronto, Ontario, Canada.
Anything to the contrary contained in the above-mentioned rules and statutes
notwithstanding, the parties consent that any papers, notices, or process
necessary or proper for the institution or continuance of, or relating to any
arbitration proceeding, or for the confirmation of an award and entry of
judgment on any award made, including appeals in connection with any judgment or
award, may be served on each of the parties by registered mail addressed to the
party at the principal office of the party, or by personal service on the party
in or without the above-mentioned state. The parties recognize and consent to
the above-mentioned arbitration association's jurisdiction over each and every
one of them.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
Seller: FUTURELINK DISTRIBUTION CORP.
By:_____________________________________
Its:____________________________________
Buyer: THOMSON KERNAGHAN & CO. LTD.
By:_____________________________________
Its:____________________________________
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<PAGE> 16
EXHIBIT "A"
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE ONLY IN COMPLIANCE WITH THE ACT.
FUTURELINK DISTRIBUTION CORP.
10% CONVERTIBLE DEBENTURE
$__________,000 _______ __, 1998
FUTURELINK DISTRIBUTION CORP., a Colorado corporation (the
"Company"), for the value received, hereby unconditionally and absolutely
promises to pay to the order of THOMSON KERNAGHAN & CO. LTD., or holder
(collectively, the "Holder"), upon presentation and surrender of this Debenture
to Thomson Kernaghan & Co. Ltd. at its office at 356 Bay Street, Toronto,
Ontario, Canada M5H 2V2 or such other place as the Company may, from time to
time, designate, the Principal Sum due under this Debenture, on August 20, 2001,
or if such day is not a regular business day, then on the next business day
thereafter (the "Maturity Date"), plus interest at the simple rate of 10 percent
(10%) per annum with all accrued and unpaid interest due and payable on the
Maturity Date.
All dollar amounts set forth in this Debenture are United States
Dollars. A regular business day is a day on which banks in the State of New York
and the Province of Alberta are open for business and a trading day is a day in
which the New York Stock Exchange is open for trading.
1. PRINCIPAL SUM.
The Principal Sum outstanding at any time shall be
________________ Dollars ($___________) less any Principal Sum prepaid through
the date of the calculation and less any Principal Sum which had been converted
into Common Stock as provided for in Section 2 hereof through the date of the
calculation.
<PAGE> 17
2. CONVERSION.
(a) The Holder of this Debenture shall have the right, at
its option, beginning on the thirtieth (30th) day after the Initial Funding Date
through 5:00 p.m. Alberta, Canada time on the last regular business day
immediately prior to the Maturity Date to convert, subject to the terms and
provisions of this Section 2, any or all of the outstanding Principal Sum of
this Debenture in increments of at least One Hundred Thousand Dollars ($100,000)
or multiples thereof, unless the outstanding Principal Sum at the time of the
conversion is less than One Hundred Thousand Dollars ($100,000) or not multiples
of One Hundred Thousand Dollars ($100,000) then the entire outstanding Principal
Sum may be converted. Any conversions under this Section 2 at the price per
share equal to the lower of (x) _____ ($__.__) or (y) Seventy-eight percent
(78%) of the average closing bid price of the Common Stock of the Company on the
principal market for such Common Stock for the three (3) trading days
immediately preceding the date of the Notice of Conversion (on the form attached
hereto), as reported by the principal market on which the Common Stock is then
traded (the "Conversion Price").
To convert this Debenture, this Debenture must be surrendered at
the principal executive office of the Escrow Agent pursuant to an Escrow
Agreement between the Company and Thomson Kernaghan & Co. Ltd., dated August 14,
1998, accompanied by Notice of Conversion duly executed, and, accompanied by a
written instrument or instruments of transfer in form satisfactory to the Escrow
Agent duly executed by the Holder or his attorney duly authorized in writing to
specify whether the Holder desires interest on the amount of the Principal Sum
being converted to be paid in cash by Company check or in shares of Common Stock
of the Company.
(b) As promptly as practicable after the surrender, as
herein provided, of this Debenture for conversion and the completed and executed
Notice of Conversion, the Company shall deliver or cause to be delivered, to or
upon the written order of the Holder of this Debenture so surrendered: (I)
certificates representing the largest number of fully paid and nonassessable
full shares of Common Stock into which this Debenture may be converted in
accordance with the provisions of this Section 2: (ii) a check in payment for
fractional shares, based on amount in cash equal to such fraction multiplied by
the current "Market Price" as defined in Section 4 hereof; (iii) cash or
additional shares of Common Stock of the Company for the accrued but unpaid
interest due on the Principal Sum being converted through the date of the Notice
of Conversion; and (iv) a replacement Debenture identical to this Debenture,
except as to the issue date and as adjusted to reflect the Principal Amount
actually outstanding after the conversion, if less than the then outstanding
Principal Sum is being converted. Such conversion shall be deemed to have been
made at the close of business on the date that this Debenture shall have been
received by the Company for conversion, with a Notice of Conversion duly
executed, in satisfactory form for conversion, so that the rights of the Holder
of this Debenture as a Debenture holder as to the Principal Sum being converted
shall cease at such time and, subject to the provisions of this Section 2(b),
the person or persons entitled to receive the shares of Common Stock upon
conversion of this Debenture shall be treated for all purposes as having become
the record holder or holders of such shares of Common Stock (including any
Common Stock issued for interest) at such time and such conversion shall be at
the Conversion Price in effect at such time.
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<PAGE> 18
3. PREPAYMENT.
The Company may prepay at any time, upon at least thirty
(30) days advance written notice any or all of the outstanding Principal Sum of
this Debenture by notifying the Holder in writing of the date the prepayment is
to be made. Along with any prepayment of the Principal Sum, all accrued but
unpaid interest on such Principal Sum shall also be paid. Within ten (10) days
of the receipt of a notice of prepayment, the Holder shall notify the Company as
to whether the interest to be paid shall be in cash by Company check or in
Common Stock of the Company. Notwithstanding any notice of intention to prepay
any or all of the then outstanding Principal Sum, such Principal Sum may be
converted into Common Stock pursuant to Section 2 hereof until the prepayment
actually is made.
4. INTEREST.
(a) At the Holder's election, accrued but unpaid interest
must be paid in Common Stock of the Company in an amount of shares equal to the
interest to be paid in Common Stock divided by the "Market Price Per Share" of
the Common Stock. Not earlier than the sixtieth (60th ) day and not latter than
the thirtieth (30th) day prior to the Maturity Date, the Holder shall notify the
Company if it desires to have the accrued but unpaid interest due on the
Maturity Date paid in shares of Common Stock of the Company. If the Holder does
not give any such notice in a timely manner, the interest at Maturity shall be
paid in cash by Company check,
(b) For purpose of this Debenture, the "Market Price Per
Share" of the Common Stock of the Company shall be determined as follows:
(I) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ system, the "Market Price Per Share" shall
be the average of the last reported sale prices of the Common Stock on such
principle exchange or system on the five trading days prior to the date the
Holder gives the Company its notice of election to have the interest payments
made in the Common Stock of the Company (or for payment of fractional shares,
the date of the relevant Conversion Notice) or if no such sale is made on any
such day, the average of the closing bid and asked prices for such day on such
exchange or system; or
(ii) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the "Market Price Per Share" shall be
the average of the mean of the last reported bid and asked prices reported by
the OTC Bulletin Board, if so quoted, or the "pink sheets" of the National
Quotation Bureau, Inc. on the five trading days prior to the date the Holder
gives the Company its notice of election to have the interest payments made in
the Common Stock of the Company (or for payment of fractional shares, the date
of the relevant Conversion Notice); or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the "Market Price Per Share" shall be an amount, not less than book
value thereof as at the end of the most recent fiscal
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<PAGE> 19
year of the Company ending prior to the date of the Conversion Notice; provided,
however, in the case of this Section 4(b)(iii) payment of interest shall be paid
only in cash by Company check and not in Common Stock of the Common.
5. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the Company, or in case of
any consolidation or merger of the Company with or into another corporation
(other than a merger with a subsidiary in which merger the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon conversion of this Debenture) or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by converting this Debenture at any time prior to the payment in full
of the Debenture, to acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been acquired
upon conversion of this Debenture immediately prior to such reclassification,
change consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Debenture. The foregoing
provisions of this Section 5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 5 hereof.
6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Company shall register certain of the shares of the
Common Stock which may be issued upon the conversion of this Debenture to the
extent and as provided for under the Debenture Acquisition Agreement between the
Company and the Holder, dated July __, 1998. (the Debenture Acquisition
Agreement").
7. REGULATION S.
This Debenture and the Common Stock issuable upon
conversion or as interest under this Debenture were issued under Regulation S
under the Securities Act of 1933, as amended, and may be transferred only as
provided for in the Debenture Acquisition Agreement.
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<PAGE> 20
8. EVENTS OF DEFAULT.
If one or more of the following described events shall occur
(each an "Event of Default"):
(a) The Company shall fail to pay the principal of, or
interest on, this Debenture within five (5) days after the Holder has given
written notice to the Company that the same has become due; or
(b) The Company shall fail to perform or observe any of
the provisions contained in any other Section of this Debenture or the Debenture
Acquisition Agreement and such failure shall continue for more than thirty (30)
days after the Holder has given written notice to the Company; or
(c) Any material representation or warranty made in
writing by or on behalf of the Company in this Debenture shall prove to have
been false or incorrect in any material respect, or omits to state a material
fact required to be stated therein in order to make the statements contained
therein, in the light of the circumstances under which made, not misleading, on
the date as of which made, and the Company shall have failed to cure such false
or incorrect statement within thirty (30) days after the Holder has given
written notice to Borrower; or
(d) The Company shall be adjudicated a bankrupt or
insolvent, or admit in writing its inability to pay its debts as they mature, or
make an assignment for the benefit of creditors; or the Company shall apply for
or consent to the appointment of a receiver, trustee, or similar officer for it
or for all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of the
Company and such appointment shall continue undischarged for a period of sixty
(60) days; or the Company shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Company and shall
remain undismissed for a period of ninety (90) days; or any judgment, writ,
warrant of attachment or execution or similar process shall be issued or levied
against a substantial part of the property of the Company and such judgment,
writ, or similar process shall not be released, vacated or fully bonded within
ninety (90) days after its issue or levy; or
(e) A final judgment for money of over One Hundred
Thousand ($100,000) not covered by insurance shall be rendered against the
Company and if, within ninety (90) days after entry thereof, such judgment shall
not have been discharged, satisfied or execution thereof stayed pending appeal,
or if, within ninety (90) days after the expiration of any such stay, such
judgment shall not have been discharged or satisfied; or
(f) The Company shall be enjoined, restrained or in any
way prevented by a court order from continuing to conduct all or any material
part of its business affairs;
-5-
<PAGE> 21
THEN, or at any time thereafter, and in each and every case:
(1) Where the Company is in default under the
provisions of Section 8(d) hereof, the entire unpaid principal amount of the
Debenture, all interest accrued and unpaid thereon, and all other amounts
payable to the Holder hereunder shall automatically become and be forthwith due
and payable without offset or counterclaim of any kind and without presentment,
demand, protest or notice of any kind, and without regard to the running of the
statute of limitations, all of which are hereby expressly waived by the Company;
and
(2) In any other case referred to in this Section
8, the Holder may, by written notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable hereunder to be forthwith due and payable, whereupon
the same shall become immediately due and payable, without offset or
counterclaim of any kind and without presentment, demand, protest or further
notice of any kind, and without regard to the running of any statutes of
limitation, all of which are hereby expressly waived by the Company.
Any declaration made pursuant to Section 8(2) hereof is subject
to the condition that, if at any time after the principal of this Debenture
shall have become due and payable, and before any judgment or decree for the
payment of the moneys so due, or any thereof, shall have been entered, all
arrears of interest upon this Debenture (except that Principal Sum of this
Debenture which by such declaration shall have become payable) shall have been
duly paid, and every Event of Default shall have been made good, waived or
cured, then and in every such case the Holder shall be deemed to have rescinded
and annulled such declaration and its consequences; but no such rescission or
annulment shall extend to or affect any subsequent Event of Default or impair
any right consequent thereon.
9. CORPORATE OBLIGATION. It is expressly understood that this
Debenture is solely a corporate obligation of the Company and that any and all
personal liability, either at common law or in equity, or by constitution or
statute, of, and any and all rights and claims against, every stockholder,
officer, or director, as such, past, present or future, are expressly waived and
released by the Holder as a part of the consideration for the issuance hereof.
10. TRANSFER. Subject to the appropriate provisions of the Act
and of Section 7 hereof, this Debenture or any portion of the principal amount
hereof in One Hundred Thousand Dollars ($100,000) increments, or multiples
thereof (unless the entire Principal Sum is being transferred), is transferable
on the records of the Company upon presentation of this Debenture, properly
endorsed, at its principal office; upon such presentation and transfer a new
Debenture or Debentures will be issued; provided, however, no transfer shall be
made no any competitors of the Company. For the purposes of payment and all
other purposes, the Company shall deem and treat the person in whose name this
Debenture is registered as the absolute owner hereof and the Company shall not
be affected by any notice to the contrary.
-6-
<PAGE> 22
11. MISCELLANEOUS.
(a) Notwithstanding the foregoing, the Company promises to
pay interest after maturity (whether by acceleration or otherwise, and before as
well as after judgment) at the same rate as above provided prior to maturity on
balances, if any, then outstanding.
(b) Interest under this Debenture shall be computed on the
basis of a thirty (30) day month and a year of 360 days for the actual number of
days elapsed.
(c) In case at any time any Common Stock shall be listed
on any stock exchange or NASDAQ, the Company will list on such exchange or
NASDAQ, and all other exchanges where such stock or other stock, warrants, and
securities at the time issuable upon the conversion of this Debenture may be
listed, and keep listed thereon subject to listing requirements of such exchange
or exchanges, an official notice of issuance upon the conversion of this
Debenture, all shares of common stock and other stock and securities from time
to time issuable upon such conversion.
(d) Unless otherwise specifically proved herein, any
notice required by this Agreement is effective and deemed delivered when faxed
to the numbers set forth herein and receipt of such fax is electronically
confirmed. Any such notice shall also be sent on the day such fax is sent (or if
such day is not a business day, the next business day by overnight courier),
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<PAGE> 23
properly addressed. Notices will be sent to the fax numbers and addresses set
forth in this Agreement, unless either party notifies the other of an fax and/or
address change in writing.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
executed in Calgary, Alberta, Canada as of the day and year first above written.
FUTURELINK DISTRIBUTION CORP.
By: ___________________________________
Its: ___________________________________
By: ___________________________________
Its:
________________________________________
(Fax Number, including Area Code)
________________________________________
(Contact Person)
THOMSON KERNAGHAN & CO. LTD.
By: ___________________________________
________________________________________
(Address)
________________________________________
(City) (State) (Zip Code)
________________________________________
(Fax Number, including Area Code)
________________________________________
(Contact Person)
<PAGE> 24
CONVERSION NOTICE
TO: FUTURE LINK DISTRIBUTION CORP.
The undersigned Holder of this Debenture hereby irrevocably exercises
the option to convert $________________ of the Principal Sum of this Debenture
into shares of Common Stock of FUTURELINK DISTRIBUTION CORP. in accordance with
the terms of this Debenture, or of such other kind of stock or other property as
shall be authorized under the terms of this Debenture, and directs that the
shares or other property issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any accrued and unpaid
interest on the portion being converted and any Debenture representing the
unconverted portion of this Debenture, be issued and delivered to the
undersigned unless a different name has been indicated below. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
The accrued and unpaid interest due upon the Principal Sum being
converted shall be paid in cash__ or Common Stock __ .(Please check one of the
blanks, if no blanks are check, such interest shall be paid in cash).
The date of this Conversion Notice is _______, ___, _____. The
undersigned has determined the closing bid price for the Common Stock of
FUTURELINK DISTRIBUTION CORP. for the three trading days preceding the date of
this Notice of Conversion on the principal market for such Common Stock, was
$_____, $______ and $____, or an average of $____. Therefore pursuant to Section
2(a) of the Debenture, the Conversion Price is $_____ per share.
If you want the stock certificate made out in another person's name,
fill in the form below and have your signature guaranteed: (Insert other
person's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type other person's name, address and zip code)
Date: _________ ___, ___ Your Signature: __________________________________
(Sign exactly as your name appears
on the face of this Debenture)
Signature Guarantee:______________________________
<PAGE> 25
ASSIGNMENT FORM
To assign this Debenture, fill in the
form below: I or we assign and transfer
this Security to (insert assignee's
social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(print or type other person's name, address and zip code)
and irrevocably appoint_________________________________________________________
___________________________ agent to transfer this Debenture on the books of the
FutureLink Distribution Corp. The agent may substitute another to act for him.
Date: _________ ___, ___ Your Signature: __________________________________
(Sign exactly as your name appears
on the face of this Debenture)
Signature Guarantee:______________________________
NOTE: This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.
<PAGE> 26
EXHIBIT "B"
Void after 5:00 p.m. Alberta Time, on August 20, 2001
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE Seller IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE ONLY IN COMPLIANCE WITH THE ACT.
________________________________
$750,000
WARRANT TO PURCHASE COMMON STOCK
OF
FUTURELINK DISTRIBUTION CORP.
________________________________
This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN &
CO. LTD., an Ontario corporation , or assigns ("Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from FUTURELINK
DISTRIBUTION CORP., a Colorado corporation ("Company"), SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($750,000) of the fully paid, validly issued and nonassessable
shares of Common Stock, $0.0001 par value, of the Company ("Common Stock") at
any time or from time to time during the period from the date hereof, through
and including August 20, 2001, but not later than 5:00 p.m. Calgary, Alberta
Time, on August 20, 2001 ("Exercise Period") at an initial exercise price equal
to $1.00 per share The total number of shares of Common Stock to be issued upon
exercise of this Warrant shall be an amount determined by dividing the portion
of the SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000) being exercised by the
then exercise price then in effect. Once a portion of the SEVEN HUNDRED FIFTY
<PAGE> 27
THOUSAND DOLLARS ($750,000) has been exercised, the amount of Dollars left to be
exercised shall be forever reduced by such amount being exercised. The price to
be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is being issued
pursuant to the Company's private placement consisting of up to $5,000,000
principal amount of a 10% Convertible Debenture (the "Debenture") and a
Debenture Acquisition Agreement dated as of August 14, 1998 between the Company
and Thomson Kernaghan & Co. Ltd. All dollar references are to United States
Dollars.
(a) Exercise of Warrant. This Warrant may be exercised in
whole or in part at any time or from time to time during the Exercise Period;
provided, however, that (i) if the last day of the Exercise Period is a day on
which banking institutions in the Province of Alberta are authorized by law to
close, then the Exercise Period shall terminate on the next succeeding day which
shall not be such a day, and during such period the Holder shall have the right
to exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated August 14, 1998, at its
principal office, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS
NOT A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON,
(iii) IF NO U.S. PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE
UNDERLYING SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED
STATES AND THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED
OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH,
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<PAGE> 28
THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM
AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY
PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT
REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.
(b) Reservation of Shares. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of the Warrants.
(c) Fractional Shares. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share, determined as
follows:
(1) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ system, the current market value shall be
the last reported sale price of the Common Stock on such exchange or system on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made (or reported) on such day, the average closing bid and asked
prices for such day on such exchange or system; or
(2) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current market value shall be the
mean of the last reported bid and asked prices reported by the Electronic
Bulletin Board or National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such reasonable manner
as may be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant.
This Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company, together with a
-3-
<PAGE> 29
written notice specifying the names and denominations in which new Warrants are
to be issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt of the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Securities Act of 1933, as
amended, and may be transferred only as provided for in the Debenture Purchase
Agreement between the Company and the Holder, dated August 14, 1998.
(e) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) Anti-Dilution Provisions. The respective Exercise
Price in effect at any time and the number and kind of securities purchasable
upon the exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(2) Whenever the respective Exercise Price payable
upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the
number of Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially issuable
upon exercise of this Warrant by the respective Exercise Price in effect on the
date hereof and dividing the product so obtained by the respective Exercise
Price, as adjusted.
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<PAGE> 30
(3) No adjustment in the respective Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least one cent ($0.01) in such price; provided, however, that any
adjustment which by reason of this Subsection (3) is not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section (f) shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the respective Exercise Price, in addition to those required by this Section
(f), as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter made by the Company
shall not result in any Federal Income tax liability to the holders of Common
Stock or securities convertible into Common Stock (including the Warrants).
(4) In the event that at any time, as a result of
an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (1) to (3) inclusive above.
(5) Irrespective of any adjustments in the
respective Exercise Price or the related number or kind of share purchasable
upon exercise of this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the similar Warrants initially issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the respective
Exercise Price shall be adjusted as required by the provisions of the foregoing
Section (f), the Company shall forthwith file in the custody of its Secretary or
an Assistant Secretary at its principal office, an officer's certificate showing
the adjusted respective Exercise Price determined as herein provided, setting
forth in reasonable detail the facts requiring such adjustment, including a
statement of the number of related additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and the manner
of computing such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the holder or any holder of
a Warrant executed and delivered pursuant to Section (a) and the Company shall,
forthwith after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant
shall be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer to the
holders of Common Stock for subscription or purchase by them any share of any
class or any other rights or (iii) if the capital reorganization of the Company,
reclassification of the capital stock of the Company,
-5-
<PAGE> 31
consolidation or merger of the Company with or into another corporation, sale,
lease or transfer of all or substantially all of the property and assets of the
Company to another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, then in any such
case, the Company shall cause to be mailed by certified mail to the Holder, at
least fifteen days prior the date specified in (x) or (y) below, as the case may
be, a notice containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise effect the action taken by the Company.
(i) Reclassification, Reorganization or Merger. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) Registration Under the Securities Act of 1933.
The shares of Common Stock underlying this Warrant shall
be registered under the United States Securities Act of 1933, as amended, to the
extend and subject to the provisions of the Debenture.
-6-
<PAGE> 32
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed and attested by the Undersigned, each being duly authorized, as of the
date below.
FUTURELINK DISTRIBUTION CORP.
By:__________________________________
Its: __________________________________
Dated: August 14, 1998
ATTEST:
______________________________________
_______________________, Secretary
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<PAGE> 33
EXERCISE FORM
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing $_____________ worth of the shares of Common
Stock of FutureLink Distribution Corp. at $__,__ per share for ___________
shares of Common Stock.
________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _____________________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________________
Social Security of Federal I.D. Number: __________________________
THE UNDERSIGNED REPRESENTS AND WARRANTS TO FUTURELINK DISTRIBUTION CORP. THAT
THE CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST
SENTENCE OF THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO
U.S. PERSON HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.
Signature _____________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE> 34
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________________
(Please typewrite or print in block letters)
Address ______________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of FutureLink Distribution Corp.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
___________________________ Attorney, to transfer the same on the books of
FutureLink Distribution Corp. with full power of substitution in the premises.
Date __________ __, ______
Signature _____________________________________
(Sign exactly as your name appears on
the first page of this Warrant)
NOTE: This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Purchase Agreement
between the Company and the Holder, dated July__, 1998.
-2-
<PAGE> 35
EXHIBIT "C"
Void after 5:00 p.m. Alberta Time, on August 20, 2001.
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED
IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THE Seller IS PROVIDED WITH OPINION
OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE ONLY IN COMPLIANCE WITH THE ACT.
________________________________
$250,000
WARRANT TO PURCHASE COMMON STOCK
OF
FUTURELINK DISTRIBUTION CORP.
________________________________
This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN &
CO. LTD., or assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from FUTURELINK DISTRIBUTION CORP., a Colorado
corporation ("Company"), TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) of the
fully paid, validly issued and nonassessable shares of Common Stock, $0.0001 par
value, of the Company ("Common Stock") at any time or from time to time during
the period from the date hereof, through and including August 20, 2001 but not
later than 5:00 p.m. Calgary, Alberta Time, on August 20, 2001 ("Exercise
Period") at an initial exercise price equal to $1.00 per share. The total number
of shares of Common Stock to be issued upon exercise of this Warrant shall be an
amount determined by dividing the portion of the TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000) being exercised by the then exercise price then in
<PAGE> 36
effect. Once a portion of the TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) has
been exercised, the amount of Dollars left to be exercised shall be forever
reduced by such amount being exercised. The price to be paid for each share of
Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as adjusted from time
to time, are hereinafter sometimes referred to as "Warrant Shares" and the
respective exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price." This Warrant is being issued pursuant to the Company's private
placement consisting of up to $5,000,000 principal amount of a 10% Convertible
Debenture (the "Debenture") and a Debenture Acquisition Agreement dated as of
August 4, 1998 between the Company and Thomson Kernaghan & Co. Ltd. All dollar
references are to United States Dollars.
(a) Exercise of Warrant. This Warrant may be exercised in
whole or in part at any time or from time to time during the Exercise Period;
provided, however, that (i) if the last day of the Exercise Period is a day on
which banking institutions in the Province of Alberta are authorized by law to
close, then the Exercise Period shall terminate on the next succeeding day which
shall not be such a day, and during such period the Holder shall have the right
to exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated August 14, 1998 at its principal
office, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS
NOT A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON,
(iii) IF NO U.S. PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE
UNDERLYING SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED
STATES AND THE
-2-
<PAGE> 37
WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED
STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED
ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS
ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE
WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING
SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933.
(b) Reservation of Shares. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of the Warrants.
(c) Fractional Shares. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share, determined as
follows:
(1) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ system, the current market value shall be
the last reported sale price of the Common Stock on such exchange or system on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made (or reported) on such day, the average closing bid and asked
prices for such day on such exchange or system; or
(2) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current market value shall be the
mean of the last reported bid and asked prices reported by the Electronic
Bulletin Board or National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such reasonable manner
as may be prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant.
This Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
-3-
<PAGE> 38
be canceled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt of the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this Warrant were
issued under Regulation S under the Securities Act of 1933, as amended, and may
be transferred only as provided for in the Debenture Purchase Agreement between
the Company and the Holder, dated August 4, 1998.
(e) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) Anti-Dilution Provisions. The respective Exercise
Price in effect at any time and the number and kind of securities purchasable
upon the exercise of the Warrants shall be subject to adjustment from time to
time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(2) Whenever the respective Exercise Price payable
upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the
number of Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially issuable
upon exercise of this Warrant by the respective
-4-
<PAGE> 39
Exercise Price in effect on the date hereof and dividing the product so obtained
by the respective Exercise Price, as adjusted.
(3) No adjustment in the respective Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least one cent ($0.01) in such price; provided, however, that any
adjustment which by reason of this Subsection (3) is not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section (f) shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the respective Exercise Price, in addition to those required by this Section
(f), as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter made by the Company
shall not result in any Federal Income tax liability to the holders of Common
Stock or securities convertible into Common Stock (including the Warrants).
(4) In the event that at any time, as a result of
an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (1) to (3) inclusive above.
(5) Irrespective of any adjustments in the
respective Exercise Price or the related number or kind of share purchasable
upon exercise of this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the similar Warrants initially issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the respective
Exercise Price shall be adjusted as required by the provisions of the foregoing
Section (f), the Company shall forthwith file in the custody of its Secretary or
an Assistant Secretary at its principal office, an officer's certificate showing
the adjusted respective Exercise Price determined as herein provided, setting
forth in reasonable detail the facts requiring such adjustment, including a
statement of the number of related additional shares of Common Stock, if any,
and such other facts as shall be necessary to show the reason for and the manner
of computing such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the holder or any holder of
a Warrant executed and delivered pursuant to Section (a) and the Company shall,
forthwith after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant
shall be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the
-5-
<PAGE> 40
Common Stock or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (iii) if the capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The failure to give such notice shall not otherwise effect the
action taken by the Company.
(i) Reclassification, Reorganization or Merger. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
-6-
<PAGE> 41
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed and attested by the Undersigned, each being duly authorized, as of the
date below.
FUTURELINK DISTRIBUTION CORP.
By:__________________________________
Its: __________________________________
Dated: August __, 1998
ATTEST:
______________________________________
_______________________, Secretary
THOMSON KERNAGHAN & CO. LTD.
By:__________________________________
Its: __________________________________
-7-
<PAGE> 42
EXERCISE FORM
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing $_____________ worth of the shares of
Common Stock of FutureLink Distribution Corp. at $1.00 per share for ___________
shares of Common Stock.
________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _____________________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________________
Social Security of Federal I.D. Number: __________________________
THE UNDERSIGNED REPRESENTS AND WARRANTS TO FUTURELINK DISTRIBUTION CORP. THAT
THE CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST
SENTENCE OF THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO
U.S. PERSON HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.
Signature ________________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE> 43
ASSIGNMENT FORM
FOR VALUE RECEIVED,
__________________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________________
(Please typewrite or print in block letters)
Address ______________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of FutureLink Distribution Corp.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
_________________________ Attorney, to transfer the same on the books of
FutureLink Distribution Corp. with full power of substitution in the premises.
Date __________ __, ______
Signature ___________________________________________
(Sign exactly as your name appears on
the first page of this Warrant)
NOTE: This Warrant and the Common Stock issueable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Purchase Agreement
between the Company and the Holder, dated August 4, 1998.
-2-
<PAGE> 1
FUTURELINK DISTRIBUTION CORP
PURCHASE OF
ALL OF THE ISSUED AND OUTSTANDING SHARES
IN THE CAPITAL OF
RIVERVIEW MANAGEMENT CORPORATION
August 4, 1998
THE SECURITIES, INCLUDING THE FUTURELINK SHARES AND ANY SHARES ISSUED PURSUANT
SUBSECTION 2.04(c) OF THIS AGREEMENT HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING SOLD PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
MORRISON, BROWN, SOSNOVITCH
1 TORONTO STREET
SUITE 910, P.O. BOX 28
TORONTO, ONTARIO
M5C 2V6
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS ....................................................................................2
ARTICLE 1.00 - INTERPRETATION ...............................................................2
1.01 Definitions ..................................................................2
1.02 Canadian Dollars .............................................................6
1.03 Extended Meanings ............................................................6
1.04 Entire Agreement .............................................................6
1.05 Headings .....................................................................7
1.06 Accounting Terms .............................................................7
1.07 Schedules ....................................................................7
1.08 Recitals .....................................................................8
ARTICLE 2.00 - PURCHASE AND SALE OF SHARES ..................................................8
2.01 Purchase and Sale ............................................................8
2.02 Purchase Price ...............................................................8
2.04 Payment of Purchase Price ....................................................8
ARTICLE 3.00 - REPRESENTATIONS AND WARRANTIES ...............................................9
3.01 Representations and Warranties of the Sellers ................................9
3.02 Representations and Warranties of the Buyer .................................22
ARTICLE 4.00 - COVENANTS ...................................................................35
4.01 Covenants of the Sellers and the Corporation During Interim Period ..........35
4.02 Covenants of the Buyer During Interim Period ................................37
4.04 Covenants on Closing ........................................................39
4.05 Post-Closing Covenants ......................................................39
ARTICLE 5.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER ............................40
5.01 Conditions Precedent ........................................................40
5.02 Result of Failure to Satisfy Condition Precedent ............................44
6.01 Conditions Precedent ........................................................44
6.02 Result of Failure to Satisfy Condition Precedent ............................46
ARTICLE 7.00 - PRIOR TRANSACTIONS ..........................................................46
7.01 Interim Period Transactions .................................................46
ARTICLE 8.00 - BREAK-UP FEE AND DEPOSIT ....................................................47
ARTICLE 9.00 - RISK OF LOSS ................................................................47
9.01 Risk of Total Loss ..........................................................47
9.02 Risk of Partial Loss ........................................................48
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 10.00 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES .................................48
10.01 Survival of the Sellers's Representations, Warranties and Covenants ........48
10.02 Survival of the Buyer's Representations, Warranties and Covenants ..........49
ARTICLE 11.00 - INDEMNIFICATION ............................................................49
11.01 Scope of Indemnification ...................................................49
11.02 Litigation .................................................................49
11.03 Set Off and Similar Rights of the Buyer ....................................50
11.04 Reimbursement ..............................................................50
12.01 Public Announcement. .......................................................50
12.02 Notices ....................................................................50
12.03 Expense ....................................................................51
12.04 Time of the Essence ........................................................51
12.05 Governing Law ..............................................................51
12.06 Severability ...............................................................51
12.07 Further Assurances .........................................................52
12.08 Counterparts. ..............................................................52
12.09 Enurement ..................................................................52
12.10 Time Periods ...............................................................52
12.11 Language of Agreement ......................................................52
</TABLE>
<PAGE> 4
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 4th day of August, 1998
A M O N G:
FUTURELINK DISTRIBUTION CORP., a corporation incorporated pursuant to
the laws of the State of Colorado, (the "Buyer")
OF THE FIRST PART;
- and -
DONALD A. BIALIK., of the City of Calgary in the Province of Alberta
("Donald")
OF THE SECOND PART;
- and -
OLIVIA B. BIALIK of the City of Calgary, in the Province of Alberta
("Olivia") OF THE THIRD PART; - and -
BIALIK FAMILY TRUST (the "Trust")
OF THE FOURTH PART;
- and -
RIVERVIEW MANAGEMENT CORPORATION, a corporation incorporated under the
laws of the Province of Alberta ( "RMC")
OF THE FIFTH PART;
- and -
SYSGOLD LTD., a corporation incorporated under the laws of the Province
of Alberta ( "SysGold")
OF THE SIXTH;
<PAGE> 5
2
- and -
FUTURELINK DISTRIBUTION CORP., a corporation incorporated pursuant to
the laws of the Province of Alberta; (the "FutureLink Alberta")
OF THE FIRST PART;
RECITALS
WHEREAS:
A. The Buyer and the Sellers have agreed that it would be in the best
interests of the Buyer and SysGold to merge their operations;
B. RMC is the sole registered and beneficial owner of record of all of the
issued and outstanding shares in the capital of SysGold (the "SysGold
Shares")
C. Donald, Olivia and the Trust (collectively referred to as the "Sellers")
are the sole registered and beneficial owner of record of all of the
issued and outstanding shares in the capital of RMC (the "Purchased
Shares");
D. The Sellers have agreed to sell the Purchased Shares to the Buyer, and
the Buyer has agreed to buy such Purchased Shares from the Sellers, upon
and subject to the terms and conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
sum of Two Dollars ($2.00) now paid by the Buyer to each of the Sellers, SysGold
and RMC (the receipt and sufficiency of which is hereby acknowledged) and of the
mutual covenants and agreements contained in this Agreement, the parties
covenant and agree with each other as follows:
ARTICLE 1.00 - INTERPRETATION
1.01 DEFINITIONS. In addition to any other defined terms contained in this
Agreement, the following words and phrases have the following meanings:
(a) "Agreement", "this Agreement", "hereto", "hereof", "herein", "hereunder"
and similar expressions refer to this Agreement including its Schedules
and not to any particular article, section or other portion of this
Agreement and include every amendment or instrument supplementary hereto
or in implementation hereof;
(b) "Arm's length" shall have the same meaning as those words are defined in
the Income Tax Act (Canada) from time to time;
<PAGE> 6
3
(c) "Assets" means all the assets, interests, undertakings, rights and
properties of the Corporation of every kind and description, real or
personal, tangible or intangible and wherever they are located as of the
date of this Agreement including, without limitation:
(i) all machinery, equipment, furniture, furnishings and
accessories, spare parts, manuals and supplies of all kinds;
(ii) all inventory;
(iii) all accounts receivable, trade accounts, notes receivable and
other debts due or accruing due and the full benefit of all
securities for such accounts, notes or debts;
(iv) the full benefit of all contracts, engagements or commitments,
whether written or oral, including, without limitation, all
forward commitments by the Corporation for equipment, inventory,
supplies and materials entered into in the ordinary course of
business except for two vehicle leases for a 1998 Chevrolet
Tahoe and a 1998 Chevrolet Suburban the obligations of which
will be assumed by the Sellers;
(v) prepaid expenses including, without limitation, prepaid rent,
insurance premiums, utility deposits and any other kind of
payment or amount that could be considered a prepaid expense
under generally accepted accounting principles;
(vi) all registered or unregistered trade marks, trade names, trade
or brand names, service marks, copyrights, designs, inventions,
patents, patent applications, patent rights (including any
patents issuing on such applications or rights), licences,
telephone numbers, customer lists, sub-licences, franchises,
formulae, trade secrets, processes, technology and other
industrial property and intangibles including, without
limitation, all restrictive agreements or negative covenant
agreements the Corporation may have;
(vii) the goodwill of the Business including, without limitation, any
rights which the Sellers or the Corporation possesses with
respect to the use the name "SysGold", or any variation thereof,
as part of the name of, or in connection with the business
carried on or to be carried on by, the Corporation; and
(viii) all other property, assets and rights, real or personal,
tangible or intangible, owned by the Corporation or to which it
is entitled;
(d) "Break-up Fee" has the meaning set out in Section 8.01;
(e) "Business" means the business presently carried on by the Corporation
including any business carried on under the name and style, "SysGold";
<PAGE> 7
4
(f) "Business Day" means a day which is not a Saturday, a Sunday or a
statutory holiday;
(g) "Buyer's Accountants" means Ernst & Young or such other firm of
chartered accountants as may be designated by the Buyer;
(h) "Buyer's Counsel" means Morrison, Brown, Sosnovitch or such other firm
of lawyers as may be designated by the Buyer;
(i) "Buyer's Employee Benefit Plan" has the meaning set out in subsection
3.02 (kk);
(j) "Closing Date" means August 20, 1998, or such other date as may be
agreed upon by the Buyer and the Sellers;
(k) "Corporation" means SysGold, SysGold Inc. and RMC together;
(l) "Confidential Information" means, with respect to the Sellers
obligations the following pertaining to the Buyer and FutureLink Alberta
and with respect to the Buyers obligations the following pertaining to
the Corporation: all information relating to the business of the other
party or any of its associated, related or affiliated companies,
including, but not limited to, material contracts, customer lists,
financial statements or information, reports, employee information,
banking information, and any information whether written or verbal which
the other receives through due diligence or otherwise in the preparation
of the transactions contemplated herein that is not generally available
to the public;
(m) "Deposit" has the meaning set out in section 2.03;
(n) "Employee Benefit Plans" has the meaning set out in subsection 3.01
(ll);
(o) "Encumbrances" means any claim, lien, security interest, right,
privilege, restriction, demand or other encumbrance whatsoever affecting
the property in question, or any right capable of becoming such an
encumbrance;
(p) "Financial Statements" means:
(i) the unaudited financial statements of SysGold, for the fiscal
years ended October 31, 1993 through 1997, and the interim
financial statements for the period ending May 31, 1998, each
consisting of a balance sheet as at the end of each fiscal
period, a statement of profit and loss, and a statement of
changes in financial position with accompanying notes, in
respect of each fiscal period, in each case prepared in
accordance with generally accepted accounting principles,
consistently applied from period to period; and
<PAGE> 8
5
(ii) the unaudited financial statements of RMC, for the fiscal year
ended September 30, 1993 through 1997, and the interim financial
statements for the period ending July 31, 1998 each consisting
of a balance sheet as at the end of each fiscal period, a
statement of profit and loss, and a statement of changes in
financial position with accompanying notes, in respect of each
fiscal period, in each case prepared in accordance with
generally accepted accounting principles, consistently applied
from period to period;
(iii) the unaudited financial statements of SysGold Inc., for the
fiscal year ended _________, 1993 through 1997, and the interim
financial statements for the period ending __________,1998 each
consisting of a balance sheet as at the end of each fiscal
period, a statement of profit and loss, and a statement of
changes in financial position with accompanying notes, in
respect of each fiscal period, in each case prepared in
accordance with generally accepted accounting principles,
consistently applied from period to period; a copy of each of
which are attached as the Financial Statements Schedule;
(q) "FutureLink Financial Statements" means:
(i) the audited financial statements of FutureLink Alberta,
for the fiscal years ended December 31, 1996 and 1997
each consisting of a balance sheet as at the end of each
fiscal period, a statement of profit and loss, and a
statement of changes in financial position with
accompanying notes, in respect of each fiscal period, in
each case prepared in accordance with Canadian generally
accepted accounting principles, consistently applied
from period to period; and
(ii) the audited financial statements of the Buyer for the
fiscal periods ending December 31, 1997 and May 31,
1998, each consisting of a balance sheet as at the end
of each fiscal period, a statement of profit and loss,
and a statement of changes in financial position with
accompanying notes, in respect of each fiscal period, in
each case prepared in accordance with Canadian generally
accepted accounting principles, except for the
non-consolidation of the FutureLink Alberta financial
statements, consistently applied from period to period;
a copy of each of which are attached as the FutureLink
Financial Statements Schedule;
(r) "FutureLink Shares" has the meaning set out in subsection 2.02(b);
(s) "Interim Period" means the period of time between the date of this
Agreement and the Time of Closing;
<PAGE> 9
6
(t) "Leased Property" means the premises leased by SysGold pursuant to a
lease or written agreement to lease, and used in the conduct of the
Business, as described in the Leased Property Schedule;
(u) "Permitted Encumbrance" has the meaning set out in section 5.01(m);
(v) "Purchase Price" means the aggregate consideration, as set out in this
Agreement, payable by the Buyer to the Sellers for the Purchased Shares;
(w) "Purchased Shares" means all of the issued and outstanding shares in the
capital of RMC;
(x) "Real Property" means each direct or indirect interest in real property
described in the Real Property Schedule, and, where the context
requires, means all of such real properties and real property interests;
(y) "Sellers" means Don, Olivia and the Trust;
(z) "Sellers' Counsel" means Howard, Mackie or such other firm of lawyers as
may be designated by the Sellers;
(aa) "Shareholder Loans" has the meaning set out in subsection 2.04 (b);
(bb) "SysGold Inc. Shares" has the meaning set out in subsection 3.01(d);
(cc) "SysGold Shares" has the meaning set out in subsection 3.01(d);
(dd) "Taxes" means all federal, provincial, municipal or other taxes,
imposts, rates, levies, assessments and government fees, charges or dues
lawfully levied, assessed or imposed against the relevant party or in
respect of the business of such party including, without limitation, all
income, capital gains, sales, excise, use, property, payroll, capital,
goods and services, business, transfer, withholding and value added
taxes, and all customs and import duties, together with all interest,
fines and penalties with respect thereto;
(ee) "Tax Returns" means all reports, returns and other documents filed or
required to be filed by the relevant party in respect of Taxes or in
respect of, or pursuant to, any federal, provincial, municipal or other
taxing statute applicable to the relevant party;
(ff) "Time of Closing" means 10:00 o' clock a.m. (Calgary time) on the
Closing Date or such other time on the Closing Date at which the
transaction is completed.
1.02 CANADIAN DOLLARS. All dollar amounts referred to in this Agreement are in
Canadian funds unless otherwise provided.
<PAGE> 10
7
1.03 EXTENDED MEANINGS. In this Agreement, where the context requires, the
singular number includes the plural and vice versa, the masculine gender
includes the feminine and neuter genders and vice versa and the word "person" is
not limited to an individual but includes any entity recognized by law.
1.04 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set out in this Agreement. No supplement,
modification, waiver or termination of this Agreement shall be binding, unless
executed in writing by the party or parties to be bound thereby.
1.05 HEADINGS. All headings are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents of any
Article or section in this Agreement.
1.06 ACCOUNTING TERMS. All accounting terms not specifically defined in this
Agreement are to be construed in accordance with Canadian generally accepted
accounting principles, consistently applied.
1.07 SCHEDULES. The following are the Schedules attached to and incorporated in
this Agreement by reference and deemed to be part hereof when attached to this
Agreement and initialled by the party required to produce such Schedule:
<TABLE>
<CAPTION>
Time Period for Delivery
------------------------
<S> <C>
Buyer's Contracts Schedule 6 days
Buyer's Counsel's Opinion Schedule 6 days
Buyer's Directors and Officers Schedule upon execution
Buyer's Employee Benefit Schedule 6 days
Buyer's Employee Schedule 6 days
Buyer's Employment and Consulting Agreements Schedule 6 days
Buyer's Equipment Lease Schedule 6 days
Buyer's Insurance Schedule 6 days
Buyer's Leased Property Schedule 6 days
Buyer's Options and Calls Schedule upon execution
Contracts Schedule 6 days
Debenture Schedule 6 days
Employee Benefit Schedule upon execution
Employee Schedule upon execution
Employment and Consulting Agreements Schedule upon execution
Employment Contract with Don Bialik Schedule 6 days
Encumbrances Schedule upon execution
Equipment Lease Schedule 6 days
</TABLE>
<PAGE> 11
8
<TABLE>
<S> <C>
FutureLink Financial Statements Schedule upon execution
FutureLink Alberta Capital Schedule upon execution
Financial Statements Schedule upon execution
Insurance Schedule 6 days
Intellectual Property Schedule 6 days
Leased Property Schedule 6 days
License and Permits Schedule 6 days
Litigation Schedule upon execution
Permitted Transactions Schedule upon execution
Promissory Notes Schedule upon execution
Real Property Schedule 6 days
Release Schedule upon execution
Sellers' Counsel's Opinion Schedule 6 days
</TABLE>
The parties hereto agree that all schedules will be attached by no later than
the time period set out next to each schedule.
1.08 RECITALS. Each of the parties acknowledges that the recitals of this
Agreement, so far as they relate to such party, are true and correct in
substance and in fact.
ARTICLE 2.00 - PURCHASE AND SALE OF SHARES
2.01 PURCHASE AND SALE. Based upon the warranties, representations and
covenants, and subject to the terms and conditions, set out in this Agreement,
the Buyer agrees to purchase the Purchased Shares from the Sellers and the
Sellers agree to sell the Purchased Shares to the Buyer.
2.02 PURCHASE PRICE. The total Purchase Price payable by the Buyer to the
Sellers for the Purchased Shares shall be the sum of:
(a) Three Million Six Hundred and Eighty-five Thousand Dollars
($3,685,000); and
(b) Four million, two hundred and fifty thousand (4,250,000) common
shares in the capital of the Buyer (the "FutureLink Shares").
The Buyer and Sellers each agree that the value of the
FutureLink Shares is Five Million Dollars ($5,000,000) or
Eighty-five Cents American (U.S.$.85) per share and that such
value was determined by the approximate average daily trading
price of the FutureLink Shares on the Over The Counter Bulletin
Board on the NASDAQ exchange during the period thirty (30) day
period ending July 22, 1998;
and such Purchase Price, and the payment thereof, shall be allocated between the
Sellers in the proportions agreed to by the parties hereto following the
transactions contemplated in Article 7.00.
<PAGE> 12
9
2.03 DEPOSIT. The Sellers acknowledge receipt of a deposit (the "Deposit") in
the amount of One Hundred Thousand Dollars ($100,000), to be applied to the
Purchase Price at the Time of Closing or otherwise dealt with in accordance with
Article 8.00.
2.04 PAYMENT OF PURCHASE PRICE. The Purchase Price payable to the Sellers shall
be paid as follows at the Time of Closing:
(a) payment of the sum of Three Million Dollars ($3,000,000) by certified
cheque or bank draft;
(b) the delivery to the Sellers of promissory notes from the Buyer in the
aggregate amount of Six Hundred and Eighty-five Thousand Dollars
($685,000) payable within ninety (90) days of the Closing Date and such
notes shall contain such other terms as are set out in the promissory
note in the Promissory Notes Schedule. The said promissory notes amount
shall be reduced by the amount of the Deposit;
(c) the allotment and issuance to the Sellers of the FutureLink Shares or
non-voting shares of RMC convertible into the FutureLink Shares. The
Sellers hereby agree that all offers and sales of the FutureLink Shares
or such other shares, from the Date of Closing and prior to the
expiration of a period commencing on the Date of Closing and ending one
year thereafter (the "Distribution Compliance Period") shall not be made
to U.S. persons or for the account or benefit of U.S. persons and shall
otherwise be made in compliance with the provisions of Regulation S (i)
unless registration has taken place prior to the expiry of the
Distribution Compliance Period. The certificates representing any such
shares shall bear the following legend unless registration has taken
place:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE. THE SECURITIES ARE BEING SOLD PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION
S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT
TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY BE MADE ONLY IN
COMPLIANCE WITH THE ACT.
<PAGE> 13
10
THE SELLERS UNDERSTAND AND AGREE THAT IN THE ABSENCE OF THE REGISTRATION OF THE
FUTURELINK SHARES OR THE RMC SHARES UNDER THE ACT, SUCH SHARES MAY ONLY BE
RESOLD AS PROVIDED FOR IN REGULATION S, PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE ACT, INCLUDING SALES UNDER RULE 144. Sales of FutureLink
Shares or the RMC shares may be made in reliance upon Rule 144 but ONLY (i) in
limited quantities by affiliates after the completion of the Distribution
Compliance Period, or (ii) in limited quantities by non-affiliates after the
completion of the Distribution Compliance Period, or (iii) in unlimited
quantities by non-affiliates after the first yearly anniversary after the
completion of the Distribution Compliance Period; in each case in accordance
with the conditions of the Rule, all of which must be met (including the
requirement, if applicable, that adequate information concerning the Buyer is
then available to the public).
The Sellers understands that the FutureLink Shares or the RMC shares have not
been registered under the Act and are being offered and sold pursuant to a "safe
harbor" from registration contained in Regulation S promulgated under the Act
based in part upon the representations of the Sellers contained herein.
ARTICLE 3.00 - REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers represent and
warrant to the Buyer as follows and acknowledge that the Buyer is relying upon
such representations and warranties in connection with the purchase by the Buyer
of the Purchased Shares:
(a) Schedules. The Schedules reference complete and accurate information
regarding those matters to which such Schedules pertain.
(b) Corporate Existence. The Corporation is duly incorporated, organized and
validly existing under the laws of the Province of Alberta. The Province
of Alberta is the only jurisdiction in which the Corporation carries on
business or owns or leases properties. The Corporation has the corporate
power and authority and does now possess all governmental and other
permits, licences and other authorizations required to own or lease its
properties, and to carry on its business as it was carried on at the
applicable time.
(c) Authority. This Agreement, when executed and delivered by the parties
hereto, will constitute a valid and binding agreement of the Corporation
and the Sellers enforceable in accordance with its terms. None of the
execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and the compliance with or
fulfilment of the terms and provisions of this Agreement, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any of the Corporation's constating documents
or by-laws, or a default under any instrument, agreement, mortgage,
judgment, order, award, decree or other restriction to which the
Corporation or the Sellers are a party or by which either are bound or
any regulatory provisions affecting either of them. Neither the
Corporation nor the Sellers are a party to or bound by any commitment,
agreement or document containing any covenant which limits
<PAGE> 14
the freedom of the Corporation to compete or solicit any line of
business, transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operation or
conditions of the Corporation or the continued operation of the Business
after closing.
(d) Authorized and Issued Capital. The current issued and outstanding shares
in the capital of RMC, all of which are fully paid and non-assessable to
the Sellers and which do not exceed the authorized capital of RMC, are
as follows:
Don - 100 Class "A" Shares and 5 Class "D" shares
Olivia - 100 Class "B" Shares and 5 Class "D" shares
Trust - 100 Class "C" Shares
The only issue and outstanding share capital of SysGold are three
thousand (3,000) Class "A" Common Voting Shares, which do not exceed the
authorized capital of SysGold, are issued and outstanding as fully paid
and non-assessable to RMC (the "SysGold Shares") and there are no other
shareholders.
The only issued and outstanding share capital of SysGold Inc. are 100
Class "A" Common Voting Shares, which do not exceed the authorized
capital of SysGold Inc., are issued and outstanding as fully paid and
non-assessable to RMC (the "SysGold Inc. Shares") and there are no other
shareholders.
(e) Title to Purchased Shares. RMC is the registered and beneficial owner of
all of the SysGold Inc. Shares and subject to Encumbrances listed in the
Encumbrances Schedule has good and marketable title to such shares, free
and clear of all Encumbrances of any kind and SysGold has not received
any notice of any adverse claim with respect to such shares. RMC is the
registered and beneficial owner of all of the SysGold Shares and subject
to Encumbrances listed in the Encumbrances Schedule has good and
marketable title to such shares, free and clear of all Encumbrances of
any kind and RMC has not received any notice of any adverse claim with
respect to such shares. The Sellers are the registered and beneficial
owner of all of the Purchased Shares and subject to Encumbrances listed
in the Encumbrances Schedule have good and marketable title to such
shares, free and clear of all Encumbrances of any kind and the Sellers
have not received any notice of any adverse claim with respect to such
shares.
(f) Options and Calls. There are no outstanding agreements, calls,
commitments, options, subscriptions, warrants or other rights or
privileges to acquire the Purchased Shares or the SysGold Shares or to
require the Corporation to issue additional shares, whether upon the
conversion of other securities or otherwise except in accordance with
Article 7.00.
(g) Subsidiaries. Except for SysGold and SysGold Inc. in the case of RMC,
the Corporation does not own any interest in or control, directly or
indirectly, any corporation, business trust, partnership, limited
partnership, joint venture or other person ;
<PAGE> 15
12
(h) Financial Assistance. The Corporation has not, directly or indirectly,
made any loans, provided financial assistance in any form, or given any
guarantees, to or in respect of the obligations of any person, other
than loans, financial assistance or guarantees which are no longer
outstanding. The Corporation will not, as of the Time of Closing, be a
party to or bound by any agreement of indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other party;
(i) No Joint Venture Interests, etc. The Corporation is not a partner,
co-tenant, joint venturer or otherwise a participant in any partnership,
joint venture, co-tenancy or other similarly jointly owned business
undertaking and the Corporation has no other significant investment
interests in any business owned or controlled by any third party except
for a joint bid with IBM for work at Canadian Natural Resources Ltd.
which is listed on the Contracts Schedule.
(j) No Distributions on Shares. The Corporation has not, since its most
recently completed fiscal year for which Financial Statements are
contained in the Financial Statements Schedule, purchased or redeemed
any shares in the capital of the Corporation, paid or declared any
dividend, made or agreed to make any other distribution in respect of
its capital or passed any resolution authorizing any of such actions
except with respect to the transactions planned in Article 7.00;
(k) Financial Statements and Financial Books and Records. The books and
records of the Corporation and the Financial Statements fairly and
correctly set out and disclose in all material respects, in accordance
with Canadian generally accepted accounting principles consistently
applied from year to year, the assets, liabilities, and financial
position of the Corporation as at the date of the Financial Statements,
at the date hereof and will continue to do so at the Time of Closing.
All financial transactions of the Corporation relating to the
Corporation business have been and will be accurately recorded in its
books and records and, without limiting the generality of the foregoing,
all monies set aside or held in trust by the Corporation for the benefit
of another person are properly accrued or so held and are completely and
accurately recorded in the books and records of the Corporation and no
claim can be made against the Corporation in respect thereof in excess
of the amounts so set aside or held.
(l) Disclosure to Accountants. The Corporation and the Sellers have made
known, or caused to be made known, to the accountants or auditors who
have prepared the Financial Statements all material facts and
circumstances which could affect the preparation of the Financial
Statements.
(m) Corporate Books and Records. The corporate records and minute books of
the Corporation are complete, accurate and up to date, and contain and
will contain at the Time of Closing complete and accurate copies of all
articles (as amended) and by-laws (as amended), minutes of all meetings
and/or written resolutions of the directors and/or Shareholders of the
<PAGE> 16
13
Corporation from incorporation to the Closing Date and all such by-laws
were duly enacted and passed, all such meetings were duly held, and all
such resolutions were duly enacted and passed and all matters and
transactions contained or reflected in the minute books are in
accordance with applicable corporation law requirements. The share
certificate books, registers of shareholders and directors and registers
of transfers are and will be accurate and complete on the Closing. No
resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of the Corporation, except
those contained in the minute books;
(n) Directors and Officers . The directors and officers of RMC are as
follows:
Don Bialik - Director and President
Olivia Bialik - Director and Vice-President
The directors and officers of SysGold are as follows:
Don Bialik - Director and President
Olivia Bialik - Director and Secretary
The directors and officers of SysGold Inc. are as follows:
Don Bialik - Director and President
Kevin J. Sebastian - General Manager
Harold Hogg - Secretary and Controller
(o) Outstanding Indebtedness. Except as set out in the Financial Statements
contained in the Financial Statements Schedule, the Corporation has no
outstanding, nor is it under any obligation to create or issue, any
bonds, debentures, mortgages, notes, security agreements or any other
Encumbrances except as set out in the Encumbrances Schedule.
(p) Availability of Assets. The Assets constitute all of the assets which
are now being used, and which are necessary, in the conduct of the
Business. The Assets are in good operating condition and repair,
reasonable wear and tear excepted.
(q) Title to Assets. The Corporation is the legal and beneficial owner of
all of the Assets having good and marketable legal and beneficial title
thereto, free and clear of all Encumbrances except as set out on the
Encumbrances Schedule. Except in the ordinary course of business, there
is no agreement, option or other right to sell, assign or otherwise
dispose of any Assets.
(r) Accounts Receivable. Other than as reserved against in the Financial
Statements, all accounts receivable have arisen from valid arm's length
transactions in the ordinary course of business. The accounts receivable
are not subject to any valid set-offs or counterclaims and are, subject
to the debtor's willingness and ability to pay, collectable in full
within 120
<PAGE> 17
14
days of the Closing Date, and the Sellers have received no notice of the
unwillingness or inability of any debtor to pay any of the accounts
receivable. Adequate provision has been made for bad debts and doubtful
accounts, in accordance with generally accepted accounting principals.
(s) Inventories. All inventories of the Corporation consist of items of a
quality usable in the ordinary course of business. On the Closing Date,
Inventories will be sufficient to meet the needs of the Business in the
ordinary course.
(t) Forward Commitments. All forward commitments which have been entered
into by the Corporation and which remain unfulfilled have been entered
into in the ordinary course of the Business.
(u) Real Estate. At the Time of Closing, the Corporation will not own any
real property other than the Real Property described in the Real
Property Schedule.
(v) Leases. All Leased Property is listed in the Leased Property Schedule.
Each lease and/or agreement to lease:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of SysGold and, without
limiting the generality of the foregoing, there has been no
default thereunder by SysGold, or to the best of the knowledge
of the Sellers, by the landlord, and SysGold has not received
notice of termination or threat by the landlord to terminate
such lease or agreement to lease; and
(ii) except where consent, approval or act of any party is required
pursuant to the terms of leases or agreements to lease, copies
of which have been delivered to Buyer's Counsel, will continue
in full force and effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such lease or agreement to
lease; for greater certainty, the Sellers will obtain any
required consents identified by the Buyer in the copies of the
leases or agreements to lease provided to Buyer's Counsel and
the Sellers shall be responsible for the costs of any consent,
approval or other act of any party which is required under any
leases or agreements to lease;
With respect to all Leased Property:
(iii) to the best of the Sellers' knowledge, the premises and
improvements thereto and the purposes for which any of them are
used, comply in all respects with the relevant zoning, building,
environmental and other governmental or municipal by-laws, laws,
requirements, regulations and ordinances (including municipal
and provincial fire regulations and pollution control
regulations) and with Fire Underwriters' regulations;
<PAGE> 18
15
(iv) there has not been received by SysGold or anyone on behalf of
SysGold, any notice with respect to any by-law change affecting
the premises or relating to any threatened or pending
condemnation or expropriation of such premises;
(v) neither SysGold nor anyone on behalf of it has received any
notice from any insurance carrier of defects or inadequacies in
any of the premises, which, if not corrected, could result in
termination of insurance coverage or an increase in the cost of
coverage;
(w) Environmental Matters and Occupational Health and Safety. To the best of
the Sellers' knowledge, after due inquiry the Corporation has in
connection with the carrying on of the Business complied with and will
be in compliance with all federal, provincial and municipal statutes,
orders, regulations and by-laws relating to environmental and
occupational health and safety matters, including the disposal of
hazardous substances;
(x) Equipment Leases. A complete list of all equipment leases to which the
Corporation is a party is listed in the Equipment Lease Schedule. A full
and complete copy of each equipment lease has been produced to the
Buyer. Each of such equipment leases:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of the Corporation; and
(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such equipment lease, except
as may be provided for in the copy of such equipment leases
provided to Buyer's Counsel. The Sellers will assist the Buyer
to obtain any required consents identified by the Buyer in the
copies of the equipment leases provided to Buyer's Counsel, and
the Sellers shall be responsible for any costs associated with
any consent, approval or other act of any party which is
required under any equipment leases.
(y) Insurance. All policies of fire and other insurance against casualty and
other losses and public liability insurance carried by the Corporation
are described in the Insurance Schedule (including the risks covered and
limits of such policies) and are in full force and effect. A full and
complete copy of each such insurance policy has been provided to the
Buyer, and such policies are summarized in the Insurance Schedule
attached hereto. All premiums in respect of such policies for which
premium notices have been received have been paid in full as the same
become due and payable. The Corporation has not failed to give any
notice or present any claim under any insurance policy in due and timely
fashion. There are no actual claims or claims threatened in writing
against the Corporation which would come within the scope of such
coverage nor are any such policies currently threatened with
cancellation. There are no outstanding requirements or recommendations
by any insurance company that issued a
<PAGE> 19
16
policy with respect to any of the Assets or the Business or by any Board
of Fire Underwriters or other body exercising similar functions or by
any governmental authority requiring or recommending any repairs or
other work to be done on, or with respect to, any of the Assets or
requiring or recommending any equipment or facilities to be installed on
any premises from which the Business is conducted or in connection with
any of the Assets. The Corporation does not have any knowledge of any
material proposed increase in applicable insurance rates or of any
conditions or circumstances applicable to the Business which might
result in such increases. No such policy is terminable by virtue of the
transactions contemplated by this Agreement.
(z) Proprietary Rights. Other than the trade name "SysGold" the Corporation
does not own any copyrights, uncopyrighted works, registered and
unregistered trade marks, certification marks, trade names, industrial
designs, patents, patent applications, unpatented inventions, trade
secrets, know-how and other proprietary rights (collectively, the
"Proprietary Rights") and no such Proprietary Rights are necessary or
desirable in the conduct of the Business as now conducted. The conduct
of the Business by the Corporation as now conducted does not infringe or
violate any Proprietary Rights belonging to third parties nor are the
Sellers aware of any threatened potential claim with respect to such,
including Proprietary Rights owned by a third party to any computer
software programs now used in the conduct of the Business, all of which
computer software programs are properly licensed by the Corporation.
(aa) Business Conducted in No Other Name. All business of the Corporation has
been conducted in the name of the Corporation and for the benefit of the
Corporation and there are no parties related, either directly or
indirectly, which are competing for the business of the Corporation.
There are no trademarks or trade names other than those set out in
section 3.01(aa) which are required to properly conduct the business of
the Corporation;
(bb) Absence of Certain Changes or Events. Since the date of the most recent
fiscal year end of the Corporation, the Corporation has not:
(i) incurred any fixed or contingent obligation, liability or
commitment except trade or business obligations incurred in the
ordinary course of business, none of which is materially adverse
or was entered into for inadequate consideration;
(ii) discharged or satisfied any Encumbrance or paid or satisfied any
fixed or contingent obligation or liability, except for current
obligations or liabilities incurred in the ordinary course of
business and except as otherwise provided for in this Agreement;
(iii) mortgaged, pledged or subjected any of the Assets to any
Encumbrance, other than liens, if any, for current Taxes not yet
due and payable;
(iv) entered into any lease or rental agreement or transferred,
leased, licensed or disposed of any of the Assets other than in
the ordinary course of business and other than new
<PAGE> 20
17
leases or renewals of any of the leases and/or agreements to lease
listed on the Leased Property Schedule in accordance with the renewal
rights contained therein;
(v) waived, released, cancelled, forgiven or compromised any debt,
claim or right, other than in the ordinary course of business;
(vi) transferred or granted any right under any lease, license or
other agreement or with respect to any intangible asset other
than in the ordinary course of business;
(vii) paid or agreed to pay any bonus, except the payment of bonuses
of up to $30,000 to Doug Evans;
(viii) suffered any material casualty loss (whether or not covered by
insurance) or any material operating or other loss;
(ix) suffered any adverse change in, or any event or events which
have had or will have a material adverse effect on the Assets or
the liabilities of any of the Corporation, the conduct of the
Business or the condition (financial or otherwise) or prospects
of the Corporation, taken as a whole;
(x) made any loan to or entered into any other transaction with any
of its officers, directors, employees or shareholders giving
rise to any claim or right of, by, or against any such person.
The Corporation is not indebted to any of its officers,
directors, employees or shareholders or any other person not
dealing at arms' length with the Corporation except for the
Shareholder Loans;
(xi) made or entered into any contract or commitment to make any
capital expenditures;
(xii) declared or paid any dividend or made or agreed to make any
payment or distribution to any shareholder (including purchases
and redemptions of issued and outstanding shares or any other
securities) except in accordance with Article 7.00;
(xiii) issued, sold or granted any options, rights or warrants to
purchase, or subscribe for, any shares of any corporation;
(xiv) sold or otherwise disposed of any fixed or capital assets except
in the ordinary course of business;
(xv) amended or terminated any contract or agreement which is
material to the Business; or
(xvi) entered into any agreement or commitment to do or cause any of
the matters described above to occur.
<PAGE> 21
18
(cc) No Finder. The Corporation is not obliged to pay any finder's fee or any
type of commission in connection with the transactions contemplated by
this Agreement.
(dd) No Defaults under Agreements; No Violation of Laws. The Corporation has
not received notice of, nor has knowledge of, the existence of any
material default or event of default or the occurrence of any event
which with notice or lapse of time, or both, would constitute a material
default, and which is continuing, under the terms or provisions, express
or implied, of any agreement to which any of the Assets, the Purchased
Shares, or the conduct of the Business are subject. The Corporation has
not received notice of, nor has any knowledge of, a violation of any
applicable federal, provincial or municipal law, ordinance, regulation,
order or requirement relating to the Assets, the Purchased Shares or the
conduct of the Business which may have a material adverse effect on the
Assets, the Purchased Shares, or the conduct of the Business. The
Corporation is conducting the Business in compliance with all applicable
laws, regulations, by-laws and ordinances of each jurisdiction in which
the Business is carried on including any required extra provincial
registrations;
(ee) Litigation. No claim, action, suit, proceeding, litigation, arbitration
or investigation has been commenced or threatened in writing against the
Corporation, the Assets, the Purchased Shares, or the Business
(including the properties of others used in the conduct of the
Business), or the transactions contemplated by this Agreement, except as
set out in the Litigation Schedule, and no basis therefor is known to
the Sellers. No matter which is set out in the Litigation Schedule
would, if decided adversely against the Corporation, have a material
adverse effect on the conduct of the Business or upon the Assets or the
Purchased Shares. Neither the Corporation, the Assets, nor the conduct
of the Business is subject to any continuing injunction, judgment or
other order of any court, arbitrator, mediator or governmental agency.
The Corporation is not in material default under any order, licence,
regulation, nor in any default of any demand of any federal, provincial,
municipal or other governmental agency or regulatory body or with
respect to any order, writ, injunction or decree of any court.
(ff) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement, the
Corporation has:
(i) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Corporation) the taxable income
and the liability for Taxes of such corporation in the relevant
taxation year;
(ii) duly and timely paid all Taxes as they have become due and
payable; and
<PAGE> 22
19
(iii) made sufficient provision in the Financial Statements for all
accrued but unpaid Taxes, if any, whether or not disputed, for
all relevant periods.
Income tax assessments have been issued to RMC covering all past periods
up to and including the fiscal year ended September 30, 1997, to SysGold
covering all past periods up to and including the fiscal year ended
October 31, 1997 and to SysGold Inc. covering all past periods up to and
including the fiscal year ended _________________, 1997 and such
assessments, if any for amounts owing in respect thereof, have been paid
in full. There are no actions, suits, tax audits or other proceedings or
investigations or claims in progress, pending or threatened in writing
against the Corporation in respect of any Taxes and, in particular,
there are no currently outstanding reassessments or written inquiries
which have been issued or raised by any governmental authority relating
to Taxes. The Corporation is not aware of any contingent liabilities for
Taxes or any reasonable grounds for an assessment or reassessment of any
Tax Return filed by the Corporation, and has not received any indication
from any taxing authorities that an assessment or reassessment is
proposed in respect of any Taxes, regardless of the merits. The
Corporation has not executed or filed with any taxing authority any
agreement extending the period for assessment, reassessment or
collection of Taxes, or any waiver or agreement regarding statutes of
limitations relating to Taxes. All Taxes which are required to be
withheld or collected by the Corporation from payments made to its
present and former employees, officers and directors, and to all persons
who are not residents of Canada for purposes of the Income Tax Act have
been duly withheld or collected and, to the extent required, have been
duly remitted to the proper taxing authorities. The Corporation has
properly withheld all Canada Pension Plan contributions, Employment
Insurance premiums, and other Taxes payable by it in respect of its
employees and has remitted, or will remit such amounts to the proper
taxing authorities within the time required by the applicable
legislation if such time is prior to the Closing Date. Copies of all Tax
Returns and all schedules and other supporting documents thereto filed
by the Corporation with all taxing authorities for each of the last
three (3) completed fiscal years and all communications relating thereto
will have been delivered to the Buyer prior to Closing.
(gg) GST. SysGold Ltd. and RMC are properly registered under the Excise Tax
Act (Canada) for the purposes of the goods and services tax (GST), if
required pursuant to the provisions of the Excise Tax Act (Canada), and
the Corporation has charged, collected and remitted, in the time and
manner required under the said Act, all Taxes required to be charged,
collected and remitted pursuant to Part IX of the Excise Tax Act
(Canada) in respect of any "taxable supply" (as such term is defined
under the applicable sections of the said Act) made by the Corporation.
(hh) Potential Conflicts of Interest. No officer, director or shareholder of
the Corporation, and no person directly or indirectly controlling or
controlled by, or under the direct or indirect control of, any of the
foregoing persons:
<PAGE> 23
20
(i) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a
competitor, lessor, lessee, customer or supplier of the
Corporation;
(ii) holds a beneficial interest in any contract or other agreement
to which the Corporation is a party or by which it is obligated
or bound or to which any of the Assets may be subject;
(iii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property (including, without limitation, any
Proprietary Rights) which the Corporation are using or the use
of which is necessary for the Business; or
(iv) has any cause of action or other claim whatsoever against the
Corporation.
All purchases and sales or other transactions, if any, between the
Corporation and any such persons have been made on the basis of
prevailing market rates and all such transactions have been made on
terms no less favourable to the Corporation than those which would have
been available from unrelated third parties.
(ii) Agreements. Save and except for contracts otherwise referred to in this
Agreement or in the Schedules hereto, the Contracts Schedule sets out a
true and complete list of all contracts and agreements to which the
Corporation is a party or by which the Corporation or any of the Assets
are bound or subject and which (i) pursuant to their provisions,
performance by one or more of the parties thereto may extend beyond the
first anniversary of this Agreement, or (ii) are material contracts to
the conduct of the Business. Each such contract is valid, binding,
enforceable and in full force and effect. There is no default or event
in the performance of such contracts which, with notice or lapse of time
or both, would constitute a material default thereunder entitling one or
more parties to such contract to terminate same.
(jj) Customers and Suppliers. The relationship of the Corporation with its
customers, suppliers, and landlord is good. There has been no
termination or cancellation of any relationship between the Corporation
and any material supplier, or any customer or group of customers which
individually or in the aggregate provided more than five percent (5%) of
the combined gross revenues of the Business during the fiscal years
ended September 30, 1997 with respect to RMC and October 31, 1997 with
respect to SysGold, nor is there reason to believe that any such
terminations or cancellations are threatened. The Corporation is not a
party to any agreement which provides that any supplier will have the
exclusive right to supply any materials or services to the Business.
(kk) Employment Agreements; No Union or Collective Bargaining Agreements. The
Corporation is not a party to nor bound by any collective bargaining
agreement nor has the Corporation conducted negotiations with respect to
any such future agreement. No employees of the Corporation are
represented by any trade union or association which might qualify as a
trade
<PAGE> 24
21
union and there are no applications in progress or threatened which
could result in the certification of a bargaining agent for any
employees of the Corporation. There has been no strike, grievance,
dispute, representation, arbitration, proceedings or other labour
trouble against the Corporation and there is no such action or
proceeding in progress or threatened in writing, and the Corporation
does not know of any basis for any such action or proceeding. The
Corporation has not received notice of, nor does it have any knowledge
of, non-compliance with any laws concerning occupational safety,
employment practices, terms and conditions of employment, wages and
hours, and unfair labour practices, the enforcement of which would have
a material adverse effect on the conduct of the Business. The Employee
Schedule sets out a true and complete schedule, listing the names, total
annual compensation, and period of employment of each person presently
employed by the Corporation. There are no written employment contracts
with any employee or independent contractor or any oral contracts of
employment which are not terminable on the giving of reasonable notice
other than as set out on the Employment and Consulting Agreements
Schedule. All bonuses and vacation pay are properly accrued on the books
and records of the Corporation.
(ll) Employee Benefit Matters. The Employee Benefit Schedule sets out a
complete list of all employee benefit plans, including, without
limitation, life insurance, hospitalization, medical and dental plans,
executive compensation, bonus, deferred compensation, pension,
retirement, profit sharing, stock purchase and option plans, and all
other plans, arrangements or practices providing benefits for employees,
officers, or directors of the Corporation (collectively the "Employee
Benefit Plans"). The Corporation has no unfunded liability in respect of
any of the Employee Benefit Plans other than as disclosed on the
Employee Benefit Schedule. Each of the Employee Benefit Plans has been
operated in accordance with its provisions and is in substantial
compliance in all respects with all laws, rules and regulations
governing each such plan. None of the Employee Benefit Plans or the
related trusts thereunder is subject to any pending investigation,
examination or other proceeding initiated by any court, arbitrator,
governmental agency or regulating body.
(mm) Payments to Directors, Officers and Employees. Since June 30, 1998, no
payments have been made or authorized by the Corporation to its
officers, directors, shareholders or employees, except in the ordinary
course of the business and at the regular rates or salary or
remuneration payable to such persons, or as otherwise specifically
disclosed or contemplated by this Agreement.
(nn) Sellers Claims; Amounts Due from Officers. As of this date, there are no
accounts receivable, notes receivable or any other amounts due to the
Corporation from officers, directors or shareholders of the Corporation.
The Sellers do not have any claims against the Corporation other than
the Shareholder Loans and any current salary or remuneration payable in
the ordinary course.
(oo) Insolvency. The Corporation and the Sellers are not insolvent, have not
committed an act of bankruptcy, proposed a compromise or arrangement of
their creditors generally, had any
<PAGE> 25
22
petition or receiving order in bankruptcy filed against them, taken any
proceedings with respect to a compromise or arrangement or to have a
receiver appointed over any part of their assets, had an encumbrancer
take possession of any of their property, nor had an execution or
distress become enforceable or levied upon any of their property.
(pp) Sellers Resident of Canada. None of the Sellers are non-residents of
Canada for the purposes of the Income Tax Act (Canada).
(qq) The Corporation is a private corporation within the meaning of the
Securities Act (Alberta) and the sale of the Purchased Shares by the
Sellers to the Purchaser is made in compliance with all applicable
securities legislation.
(rr) The Sellers represent and warrant to the Buyer that (i) the Sellers are
not "U.S. persons" as that term is defined in Rule 902(o) of Regulation
S promulgated under the United States Securities Act of 1933, as amended
(the"Act"): (ii) the FutureLink Shares or the shares otherwise issuable
under subsection 2.04(e) were not sold to the Sellers in the United
States and at the time of execution of this Agreement and of any offer
to buy the FutureLink Shares or the shares otherwise issuable under
subsection 2.04(e) hereunder the Sellers were physically outside the
United States; (iii) each Seller is purchasing the FutureLink Shares or
the shares otherwise issuable under subsection 2.04(e) for his own
account and not on behalf of or for the benefit of any U.S. person and
the sale of the FutureLink Shares or the shares otherwise issuable under
subsection 2.04(e) has not been prearranged with or on behalf of any
person in the United States;and (iv) the Sellers are not dealers with
respect to the transactions contemplated herein and consequently a
"distributor" as defined in Regulation S of the Act.
(ss) To the best of the knowledge of the Sellers neither the Sellers nor any
person acting for the Sellers has conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S under the
United States Securities Act of 1933 in the offer and sale of the
FutureLink Shares or such other shares to be issued in accordance with
subsection 2.04(e).
(tt) The Sellers knows of no public solicitation or advertisement of an offer
in connection with the proposed issuance and sale of the FutureLink
Shares or such other shares to be issued pursuant subsection 2.04(e).
(uu) The Sellers are acquiring the FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) for their own accounts for
investment and not as a nominee and not with a view to the distribution
thereof. The Sellers understand that they must bear the economic risk of
this investment indefinitely unless sale of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) is registered
pursuant to the Act, or an exemption from such registration is
available, and that the Buyer has no present intention of registering
any such sale of the FutureLink Shares or such other shares to be issued
pursuant subsection 2.04(e) except as otherwise may be provided herein.
The Sellers
<PAGE> 26
23
represent and warrant to the Buyer that they have no present plan or
intention to sell any of such FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) in the United States or to a
United States person pursuant to any predetermined arrangements. The
Sellers covenant that neither they not their affiliates nor any person
acting on their behalf has the intention of entering or will enter
during the Distribution Compliance Period, into any put option, short
position, hedging transactions, equity swaps or other similar instrument
or position with respect to any of such FutureLink Shares or such other
shares to be issued pursuant subsection 2.04(e) or any shares of the
Buyer and neither the Sellers nor any of their affiliates or any person
acting on their behalf will use at any time any of such acquired
pursuant to this Agreement to settle any put option, short position,
hedging transactions, equity swaps or other similar instrument or
position that may have been entered into prior to the execution of this
Agreement.
(vv) To the best of the knowledge of the Sellers neither the Sellers nor any
person acting for the Sellers has conducted any "directed selling
efforts", as that term is defined in Rule 902 of Regulation S under the
United States Securities Act of 1933, in the offer and sale of the
FutureLink Shares.
(ww) The Sellers knows of no public solicitation or advertisement of an offer
in connection with the proposed issuance and sale of the FutureLink
Shares or such other shares to be issued pursuant subsection 2.04(e).
(xx) The Sellers are acquiring the FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) for their own accounts for
investment and not as a nominee and not with a view to the distribution
thereof. The Sellers understand that they must bear the economic risk of
this investment indefinitely unless sale of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) are
registered pursuant to the Act, or an exemption from such registration
is available, and that the Buyer has no present intention of registering
any such sale of the FutureLink Shares or such other shares to be issued
pursuant subsection 2.04(e) except as otherwise may be provided herein.
The Sellers represent and warrant to the Buyer that they have no present
plan or intention to sell any of such FutureLink Shares or such other
shares to be issued pursuant subsection 2.04(e) in the United States or
to a United States person pursuant to any predetermined arrangements.
The Sellers covenant that neither they not their affiliates nor any
person acting on their behalf has the intention of entering or will
enter during the Distribution Compliance Period, into any put option,
short position, hedging transactions, equity swaps or other similar
instrument or position with respect to any of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) or any shares
of the Buyer and neither the Sellers nor any of their affiliates or any
person acting on their behalf will use at any time any of such acquired
pursuant to this Agreement to settle any put option, short position,
hedging transactions, equity swaps or other similar instrument or
position that may have been entered into prior to the execution of this
Agreement.
<PAGE> 27
24
(yy) Residence. The Sellers are all residents of Alberta, Canada.
(zz) Full Disclosure. The Corporation or the Sellers have or will have
delivered to the Buyer prior to Closing true and current copies or, if
not available, photocopies of all agreements, documents and other
instruments referred to in this Agreement. None of the foregoing
representations and warranties and no other written statement furnished
by the Sellers to the Purchaser in connection with the transactions
contemplated hereby 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 purchase of the Purchased
Shares seeking full information as to the Corporation.
3.02 REPRESENTATIONS AND WARRANTIES OF THE BUYER. For the purposes of this
section 3.02 only, unless otherwise specified by referring to the Buyer as
FutureLink Colorado, all representations and warranties of the Buyer shall apply
to the Buyer and FutureLink Alberta. The Buyer represents and warrants to the
Sellers as follows and acknowledges that the Sellers are relying upon such
representations and warranties in connection with the sale by the Sellers of the
Purchased Shares:
(a) Corporate Existence. FutureLink Colorado is a public company and is duly
incorporated, organized and validly existing under the laws of the State
of Colorado. FutureLink Alberta is duly incorporated, organized and
validly existing under the laws of the Province of Alberta. The State of
Colorado and the Province of Alberta are the only jurisdictions in which
the Buyer carries on business or owns or leases properties. The Buyer
has the corporate power and authority and does now possess all
governmental and other permits, licences and other authorizations
required to own or lease its properties, and to carry on its business as
it was carried on at the applicable time.
(b) Authority. This Agreement, when executed and delivered by the parties
hereto, will constitute a valid and binding agreement of the Buyer
enforceable in accordance with its terms. None of the execution and
delivery of this Agreement, the consummation of the transactions
contemplated by this Agreement and the compliance with or fulfilment of
the terms and provisions of this Agreement, will conflict with or result
in a breach of the terms, conditions or provisions of or constitute a
default under any of the Buyer's constating documents or by-laws, or a
default under any instrument, agreement, mortgage, judgment, order,
award, decree or other restriction to which the Buyer is a party or by
which either are bound or any regulatory provisions affecting either of
them. The Buyer is not a party to or bound by any commitment, agreement
or document containing any covenant which limits the freedom of the
Buyer to compete or solicit any line of business, transfer or move any
of its assets or operations or which materially or adversely affects the
business practices, operation or conditions of the Buyer or the
continued operation of the Buyer's business after closing.
<PAGE> 28
25
(c) Authorized and Issued Capital. The authorized capital of FutureLink
Colorado consists of 5,000,000 preferred shares without par value and
100,000,000 common shares with par value of One-One hundredth of One
Cent ($.0001) of which 16,623,553 common shares are issued and
outstanding as fully paid and non-assessable. The authorized capital of
FutureLink Alberta consists of an unlimited number of Class A common
voting shares, an unlimited number of Class B common non-voting shares
and an unlimited number of first preferred share of which approximately
3,380,275 Class A common shares are issued and outstanding as fully paid
and non-assessable as set out in the FutureLink Alberta Capital
Schedule. The authorized capital of the Buyer may change prior to
closing due to planned transactions including the purchase of shares of
FutureLink Alberta from the shareholders other than FutureLink Colorado.
It may also change in the event of additional financing provided that
any issuance will not exceed ten percent (10%) of the outstanding shares
of the Buyer without the prior approval of the Sellers. With respect to
the conversion of debt to equity, the total indebtedness to Linear
Strategies Ltd., and its assignee with respect to debt of $US 350,000,
was $US 732,706 as of June 30, 1998 and such was converted at the rate
of $US 0.65 per common share of FutureLink Colorado.
(d) Options and Calls. There are no outstanding agreements, calls,
commitments, options, subscriptions, warrants or other rights or
privileges to acquire the shares of the Buyer other than as disclosed in
note 5 of the FutureLink Colorado financial statements dated May 31,
1998 contained in the FutureLink Financial Statements Schedule, except
as set out in the Buyer's Options and Calls Schedule and except for
warrants issued to Linear Strategies Inc. and Hampton Park Ltd. to
acquire 1,127,240 common shares of FutureLink Colorado for US$1.00 per
share until June 30, 1999 or for $US1.25 per share from July 1, 1999 to
June 30, 2000.
(e) Subsidiaries. Except for FutureLink Alberta, the Buyer does not own any
interest in or control, directly or indirectly, any corporation,
business trust, partnership, limited partnership, joint venture or other
person. The Buyer is contemplating other purchase transactions which may
take effect prior to the Time of Closing but shall not do so without the
consent of the Sellers;
(f) Financial Assistance. The Buyer has not, directly or indirectly, made
any loans, provided financial assistance in any form, or given any
guarantees, to or in respect of the obligations of any person, other
than loans, financial assistance or guarantees which are no longer
outstanding or which were made from FutureLink Colorado to FutureLink
Alberta. The Buyer will not, as of the Time of Closing, be a party to or
bound by any agreement of indemnification, assumption or endorsement or
any other like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any other party;
(g) No Joint Venture Interests, etc. The Buyer is not a partner, co-tenant,
joint venturer or otherwise a participant in any partnership, joint
venture, co-tenancy or other similarly jointly
<PAGE> 29
26
owned business undertaking and the Buyer has no other significant
investment interests in any business owned or controlled by any third
party.
(h) No Distributions on Shares. The Buyer has not, since May 31, 1998,
purchased or redeemed any shares in the capital of the Buyer, paid or
declared any dividend, made or agreed to make any other distribution in
respect of its capital or passed any resolution authorizing any of such
actions;
(i) Financial Statements and Financial Books and Records. The books and
records of the Buyer and the financial statements contained in the
FutureLink Financial Statement Schedule fairly and correctly set out and
disclose in all material respects, in accordance with Canadian generally
accepted accounting principals (except for the non- consolidation of the
financial statements of FutureLink Alberta), consistently applied from
year to year, the assets, liabilities, and financial position of the
Buyer as at the date of such financial statements, at the date hereof
and will continue to do so at the Time of Closing. All financial
transactions of the Buyer relating to the Buyer's business have been and
will be accurately recorded in its books and records and, without
limiting the generality of the foregoing, all monies set aside or held
in trust by the Buyer for the benefit of another person are properly
accrued or so held and are completely and accurately recorded in the
books and records of the Buyer and no claim can be made against the
Buyer in respect thereof in excess of the amounts so set aside or held.
(j) Corporate Books and Records. To the best of the knowledge of the Buyer
the corporate records and minute books of the Buyer are complete,
accurate and up to date, and contain and will contain at the Time of
Closing complete and accurate copies of all articles (as amended) and
by-laws (as amended), minutes of all meetings and/or written resolutions
of the directors and/or shareholders of the Buyer from incorporation to
the Closing Date and all such by-laws were duly enacted and passed, all
such meetings were duly held, and all such resolutions were duly enacted
and passed and all matters and transactions contained or reflected in
the minute books are in accordance with applicable corporation law
requirements. The registers of shareholders and directors and registers
of transfers are and will be accurate and complete on the Closing. The
transfer agent for FutureLink Colorado is General Securities Transfer
Agency Inc., 3614 Calle De Sole NE, Albuquerque, NM, 87110-6112. No
resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of the Buyer, except those
contained in the minute books;
(k) Disclosure to Accountants. The Buyer has made known, or caused to be
made known, to the accountants or auditors who have prepared the
FutureLink Financial Statements all material facts and circumstances
which could affect the preparation of the FutureLink Financial
Statements.
(l) Directors and Officers . The directors and officers of the Buyer are as
set out in the Buyers Directors and Officers Schedule.
<PAGE> 30
27
(m) Outstanding Indebtedness. Except as set out in the FutureLink Financial
Statements and as contemplated by the terms of this Agreement and a term
sheet dated July 13, 1998 with Thomson Kernaghan & Co. Limited attached
hereto as the Debenture Schedule, the Buyer has no outstanding, nor is
it under any obligation to create or issue, any bonds, debentures,
mortgages, notes, security agreements or any other Encumbrances.
(n) Availability of Assets. The assets currently owned by the Buyer
constitute all of the assets which are now being used, and which are
necessary, in the conduct of the business of the Buyer. Such assets are
in good operating condition and repair, reasonable wear and tear
excepted.
(o) Title to Assets. The Buyer is the legal and beneficial owner of all of
its assets accounted for in the preparation of the FutureLink Financial
Statements having good and marketable legal and beneficial title
thereto, free and clear of all Encumbrances. Except in the ordinary
course of business, there is no agreement, option or other right to
sell, assign or otherwise dispose of any of such assets.
(p) Accounts Receivable. Other than as reserved in the FutureLink Financial
Statements, all accounts receivable have arisen from valid arm's length
transactions in the ordinary course of business. The accounts receivable
are not subject to any valid set-offs or counterclaims and are, subject
to the debtor's willingness and ability to pay, collectable in full
within 120 days of the Closing Date, and the Sellers have received no
notice of the unwillingness or inability of any debtor to pay any of the
accounts receivable. Adequate provision has been made for bad debts and
doubtful accounts, in accordance with generally accepted accounting
principals.
(q) Inventories. All inventories of the Buyer consist of items of a quality
usable in the ordinary course of business. On the Closing Date,
Inventories will be sufficient to meet the needs of the business in the
ordinary course.
(r) Forward Commitments. All forward commitments which have been entered
into by the Buyer and which remain unfulfilled have been entered into in
the ordinary course of the business of the Buyer.
(s) Real Estate. At the Time of Closing, the Buyer will not own any real
property.
(t) Leases. All leased property of the Buyer is listed in the Buyer's Leased
Property Schedule. Each lease and/or agreement to lease:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of FutureLink Alberta or
FutureLink Colorado as the case may be and, without limiting the
generality of the foregoing, there has been no default
thereunder by FutureLink Alberta or FutureLink Colorado as the
case may be, or to
<PAGE> 31
28
the best of the knowledge of FutureLink Alberta or FutureLink
Colorado as the case may be, by the landlord, and FutureLink
Alberta or FutureLink Colorado as the case may be has not
received notice of termination or threat by the landlord to
terminate such lease or agreement to lease; and
(ii) will continue in full force and effect notwithstanding the
closing of the transactions contemplated by this Agreement
without the consent, approval or act of any party under such
lease or agreement to lease;
With respect to all leased property:
(iii) to the best of the FutureLink Alberta's or FutureLink Colorado's
knowledge as the case may be, the premises and improvements
thereto and the purposes for which any of them are used, comply
in all respects with the relevant zoning, building,
environmental and other governmental or municipal by-laws, laws,
requirements, regulations and ordinances (including municipal
and provincial fire regulations and pollution control
regulations) and with Fire Underwriters' regulations;
(iv) there has not been received by FutureLink Alberta or FutureLink
Colorado as the case may be or anyone on behalf of FutureLink
Alberta or FutureLink Colorado as the case may be, any notice
with respect to any by-law change affecting the premises or
relating to any threatened or pending condemnation or
expropriation of such premises;
(v) neither FutureLink Alberta or FutureLink Colorado as the case
may be nor anyone on behalf of it has received any notice from
any insurance carrier of defects or inadequacies in any of the
premises, which, if not corrected, could result in termination
of insurance coverage or an increase in the cost of coverage;
(u) Environmental Matters and Occupational Health and Safety. To the best of
the Buyer's knowledge, after due inquiry the Buyer has in connection
with the carrying on of its business complied with and will be in
compliance with all federal, provincial, state and municipal orders,
regulations and by-laws relating to environmental and occupational
health and safety matters, including the disposal of hazardous
substances;
(v) Equipment Leases. A complete list of all equipment leases to which the
Corporation is a party is listed in the Buyer's Equipment Lease
Schedule. A full and complete copy of each equipment lease has been
produced to the Buyer. Each of such equipment leases:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of the Buyer; and
<PAGE> 32
29
(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such equipment lease.
(w) Insurance. All policies of fire and other insurance against casualty and
other losses and public liability insurance carried by the Buyer are
described in the Buyer's Insurance Schedule (including the risks covered
and limits of such policies) and are in full force and effect. A full
and complete copy of each such insurance policy has been provided to the
Sellers, and such policies are summarized in the Buyer's Insurance
Schedule attached hereto. All premiums in respect of such policies for
which premium notices have been received have been paid in full as the
same become due and payable. The Buyer has not failed to give any notice
or present any claim under any insurance policy in due and timely
fashion. There are no actual claims or claims threatened in writing
against the Buyer which would come within the scope of such coverage nor
are any such policies currently threatened with cancellation. There are
no outstanding requirements or recommendations by any insurance company
that issued a policy with respect to any of the assets of the Buyer or
the business of the Buyer or by any Board of Fire Underwriters or other
body exercising similar functions or by any governmental authority
requiring or recommending any repairs or other work to be done on, or
with respect to, any of the assets of the buyer or requiring or
recommending any equipment or facilities to be installed on any premises
from which the Buyer's business is conducted or in connection with any
of the assets. The Buyer does not have any knowledge of any material
proposed increase in applicable insurance rates or of any conditions or
circumstances applicable to the Buyer's business which might result in
such increases. No such policy is terminable by virtue of the
transactions contemplated by this Agreement.
(x) Proprietary Rights. Other than the trade name "FutureLink", the Buyer
does not own any copyrights, uncopyrighted works, registered and
unregistered trade marks, certification marks, trade names, industrial
designs, patents, patent applications, unpatented inventions, trade
secrets, know-how and other proprietary rights (collectively, the
"Proprietary Rights") and no such Proprietary Rights are necessary or
desirable in the conduct of the Buyer's business as now conducted. The
conduct of the Buyer's business by the Buyer as now conducted does not
infringe or violate any Proprietary Rights belonging to third parties,
including Proprietary Rights owned by a third party to any computer
software programs now used in the conduct of the Buyer's business, all
of which computer software programs are properly licensed by the Buyer.
Except as set out below, all of the computer programs now used in the
conduct of the Buyer's business, and which are material to the conduct
of the Buyer's business, are "Year 2000 Compliant", meaning that such
programs are able to accept and accurately process and tabulate dates
and date data regardless of the century to which such dates and date
data relate.
(y) Business Conducted in No Other Name. All business of the Buyer has been
conducted in the name of the Buyer or in the prior names of the Buyer
for business conducted prior to such name changes and for the benefit of
the Buyer and there are no parties related, either directly
<PAGE> 33
30
or indirectly, which are competing for the business of the Buyer. There
are no trademarks or trade names other than those set out in section
3.02(aa) which are required to properly conduct the business of the
Buyer;
(z) Absence of Certain Changes or Events. Since May 31, 1998, the Buyer has
not:
(i) incurred any fixed or contingent obligation, liability or
commitment except trade or business obligations incurred in the
ordinary course of business, none of which is materially adverse
or was entered into for inadequate consideration;
(ii) discharged or satisfied any Encumbrance or paid or satisfied any
fixed or contingent obligation or liability, except for current
obligations or liabilities incurred in the ordinary course of
business and except as otherwise provided for in this Agreement;
(iii) mortgaged, pledged or subjected any of the Buyer's assets to any
Encumbrance, other than liens, if any, for current Taxes not yet
due and payable except as contemplated in the Debenture
Schedule;
(iv) entered into any lease or rental agreement or transferred,
leased, licensed or disposed of any of the Buyer's assets other
than in the ordinary course of business and other than new
leases or renewals of any of the leases and/or agreements to
lease listed on the Buyer's Leased Property Schedule in
accordance with the renewal rights contained therein;
(v) waived, released, cancelled, forgiven or compromised any debt,
claim or right, other than in the ordinary course of business;
(vi) transferred or granted any right under any lease, license or
other agreement or with respect to any intangible asset other
than in the ordinary course of business;
(vii) paid or agreed to pay any bonus;
(viii) suffered any material casualty loss (whether or not covered by
insurance) or any material operating or other loss;
(ix) suffered any adverse change in, or any event or events which
have had or will have a material adverse effect on, the Buyer's
assets or the liabilities of the Buyer, the conduct of the
Buyer's business or the condition (financial or otherwise) or
prospects of the Buyer, taken as a whole;
(x) made any loan to or entered into any other transaction with any
of its officers, directors, employees or shareholders giving
rise to any claim or right of, by, or against any such person.
The Buyer is not indebted to any of its officers, directors,
<PAGE> 34
31
employees or shareholders or any other person not dealing at
arms' length with the Corporation except in the ordinary course
of business;
(xi) made or entered into any contract or commitment to make any
capital expenditures (not including leasehold improvements) with
an aggregate cost in excess of One Hundred Thousand Dollars
($100,000.00) in the aggregate;
(xii) declared or paid any dividend or made or agreed to make any
payment or distribution to any shareholder (including purchases
and redemptions of issued and outstanding shares or any other
securities);
(xiii) issued, sold or granted any options, rights or warrants to
purchase, or subscribe for, any shares of any corporation other
than those listed in the Buyer's Options and Calls Schedule;
(xiv) sold or otherwise disposed of any fixed or capital assets except
in the ordinary course of business other than the sale of the
assets of FutureServe effective July 1, 1998;
(xv) amended or terminated any contract or agreement which is
material to the Buyer's business; or
(xvi) entered into any agreement or commitment to do or cause any of
the matters described above to occur.
(aa) No Finder. The Buyer is not obliged to pay any finder's fee or any type
of commission in connection with the transactions contemplated by this
Agreement.
(bb) No Defaults under Agreements; No Violation of Laws. The Buyer has not
received notice of, nor has knowledge of, the existence of any material
default or event of default or the occurrence of any event which with
notice or lapse of time, or both, would constitute a material default,
and which is continuing, under the terms or provisions, express or
implied, of any agreement to which any of the Buyer's assets, the
trading of the Buyer's shares on the OTCBB on the NASDAQ Exchange, or
the conduct of the Buyer's business are subject. The Corporation has not
received notice of, nor has any knowledge of, a violation of any
applicable federal, provincial, state or municipal law, ordinance,
regulation, order or requirement relating to the Buyer's assets, the
Buyer's shares or the conduct of the Buyer's business which may have a
material adverse effect on the Buyer's assets, the Buyer's shares, or
the conduct of the Buyer's business. The Buyer is conducting the Buyer's
business in compliance with all applicable laws, regulations, by-laws
and ordinances of each jurisdiction in which such business is carried on
including any required extra provincial registrations;
(cc) Litigation. Except for:
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32
(i) a claim in the Court of Queen's Bench of Alberta, Action No.
9801-07637 between Palmer Jarvis Inc. and FutureLink Alberta;
(ii) a claim in the Court of Queen's Bench of Alberta, Action
No. #97- CV-134063 between Midland Walwyn and Core Ventures,
Inc. (predecessor of FutureLink Colorado), Raymond Kompani,
Abecorn Enterprises Limited, Alixe Cormick and Venture Law
Corporation; and
(iii) a claim in the Court of Queen's Bench of Alberta, Action
No. #9701-15514 between 554495 Alberta Ltd. and Coffee.com
Interactive Cafe Corp. (predecessor to FutureLink Alberta);
no claim, action, suit, proceeding, litigation, arbitration or
investigation has been commenced or threatened in writing against the
Buyer, the Buyer's assets, the Buyer's Shares, or the Buyer's business
(including the properties of others used in the conduct of the
Business), or the transactions contemplated by this Agreement and no
basis therefor is known to the Buyer. Neither the Buyer, the Buyer's
assets, nor the conduct of the Buyer's business is subject to any
continuing injunction, judgment or other order of any court, arbitrator,
mediator or governmental agency. The Buyer is not in material default
under any order, licence, regulation, nor in any default of any demand
of any federal, provincial, municipal or other governmental agency or
regulatory body or with respect to any order, writ, injunction or decree
of any court.
(dd) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement,
FutureLink Alberta has:
(i) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Buyer) the taxable income and
the liability for Taxes of such corporation in the relevant
taxation year;
(ii) duly and timely paid all Taxes as they have become due and
payable; and
(iii) made sufficient provision in the FutureLink Financial Statements
for all accrued but unpaid Taxes, if any, whether or not
disputed, for all relevant periods.
Income tax assessments have been issued to FutureLink Alberta covering
all past periods up to and including the fiscal year ended December 31,
1996 and such assessments, if any amounts were owing in respect thereof,
have been paid in full. There are no actions, suits, tax audits or other
proceedings or investigations or claims in progress, pending or
threatened
<PAGE> 36
33
in writing against FutureLink Alberta in respect of any Taxes and, in
particular, there are no currently outstanding reassessments or written
inquiries which have been issued or raised by any governmental authority
relating to Taxes. The Buyer is not aware of any contingent liabilities
for Taxes or any reasonable grounds for an assessment or reassessment of
any Tax Return filed by FutureLink Alberta, and has not received any
indication from any taxing authorities that an assessment or
reassessment is proposed in respect of any Taxes, regardless of the
merits. FutureLink Alberta has not executed or filed with any taxing
authority any agreement extending the period for assessment,
reassessment or collection of Taxes, or any waiver or agreement
regarding statutes of limitations relating to Taxes. All Taxes which are
required to be withheld or collected by FutureLink Alberta from payments
made to its present and former employees, officers and directors, and to
all persons who are not residents of Canada for purposes of the Income
Tax Act have been duly withheld or collected and, to the extent
required, have been duly remitted to the proper taxing authorities.
FutureLink Alberta has properly withheld all Canada Pension Plan
contributions, Employment Insurance premiums, and other Taxes payable by
it in respect of its employees and has remitted, or will remit such
amounts to the proper taxing authorities within the time required by the
applicable legislation if such time is prior to the Closing Date. Copies
of all Tax Returns and all schedules and other supporting documents
thereto filed by the Buyer with all taxing authorities for each of the
last two (2) completed fiscal years and all communications relating
thereto will have been delivered to the Sellers prior to Closing.
Subject to any requirement to file arising from, or in connection with, the
transactions contemplated in this Agreement, FutureLink Colorado has or will
have by the Time of Closing:
(iv) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Buyer) the taxable income and
the liability for Taxes of such corporation in the relevant
taxation year;
(v) duly and timely paid all Taxes as they have become due and
payable; and
(vi) made sufficient provision in the FutureLink Financial Statements
for all accrued but unpaid Taxes, if any, whether or not
disputed, for all relevant periods.
Income tax assessments covering all past periods up to and including the
most recent fiscal year end where filings have been made for FutureLink
Colorado shall be provided to the Sellers and pursuant such assessments,
if any amounts were owing in respect thereof, the Sellers shall have
been paid such assessments in full except fort a dispute with the
Internal Revenue Service with respect to $US 22,000 of taxes which may
be payable . Except as set out herein, there are no actions, suits, tax
audits or other proceedings or investigations or
<PAGE> 37
34
claims in progress, pending or threatened in writing against FutureLink
Colorado in respect of any Taxes and, in particular, there are no
currently outstanding reassessments or written inquiries which have been
issued or raised by any governmental authority relating to Taxes. Except
as set out herein, the Buyer is not aware of any contingent liabilities
for Taxes or any reasonable grounds for an assessment or reassessment of
any Tax Return filed by the Buyer, and has not received any indication
from any taxing authorities that an assessment or reassessment is
proposed in respect of any Taxes, regardless of the merits. FutureLink
Colorado has not executed or filed with any taxing authority any
agreement extending the period for assessment, reassessment or
collection of Taxes, or any waiver or agreement regarding statutes of
limitations relating to Taxes. All Taxes which are required to be
withheld or collected by the Buyer from payments made to its present and
former employees, officers and directors, and to all persons who are not
residents of the United States have been duly withheld or collected and,
to the extent required, have been duly remitted to the proper taxing
authorities. FutureLink Colorado has properly withheld all Taxes payable
by it in respect of its employees and has remitted, or will remit such
amounts to the proper taxing authorities within the time required by the
applicable legislation if such time is prior to the Closing Date. Copies
of all Tax Returns and all schedules and other supporting documents
thereto filed by the Buyer with all taxing authorities for each of the
last two completed fiscal years and all communications relating thereto
will have been delivered to the Sellers prior to Closing.
(ee) GST. FutureLink Alberta is properly registered under the Excise Tax Act
(Canada) for the purposes of the goods and services tax (GST), and the
FutureLink Alberta has charged, collected and remitted, in the time and
manner required under the said Act, all Taxes required to be charged,
collected and remitted pursuant to Part IX of the Excise Tax Act
(Canada) in respect of any "taxable supply" (as such term is defined
under the applicable sections of the said Act) made by the Buyer.
(ff) Potential Conflicts of Interest. No officer, director or shareholder of
the Buyer, and no person directly or indirectly controlling or
controlled by, or under the direct or indirect control of, any of the
foregoing persons:
(i) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a
competitor, lessor, lessee, customer or supplier of the Buyer
except for:
(A) Cameron Chell who is President of and will be a shareholder
of Willson Stationary and who is President and Shareholder of
Jaws Technology, both companies of which are customers of
FutureLink Alberta;
(B) Cameron Chell who is a shareholder of Chell McNeill which
has a sublease for office space from FutureLink Alberta; and
<PAGE> 38
35
(C) Sheraton Business Forms, a customer whose majority
shareholder owns shares in FutureLink Alberta.
all of which were entered into in the ordinary course of
business and at competitive rates.
(ii) holds a beneficial interest in any contract or other agreement
to which the Buyer is a party or by which it is obligated or
bound or to which any of the Assets may be subject;
(iii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property (including, without limitation, any
Proprietary Rights) which the Buyer is using or the use of which
is necessary for the Buyer's business; or
(iv) has any cause of action or other claim whatsoever against the
Buyer.
All purchases and sales or other transactions, if any, between the Buyer
and any such persons have been made on the basis of prevailing market
rates and all such transactions have been made on terms no less
favourable to the Buyer than those which would have been available from
unrelated third parties.
(gg) Agreements. Save and except for contracts otherwise referred to in this
Agreement or in the Schedules hereto, the Buyer's Contracts Schedule
sets out a true and complete list of all contracts and agreements to
which the Buyer is a party or by which the Buyer or any of the Buyer's
Assets are bound or subject and which (i) pursuant to their provisions,
performance by one or more of the parties thereto may extend beyond the
first anniversary of this Agreement, or (ii) are material contracts to
the conduct of the Buyer's business. Each such contract is valid,
binding, enforceable and in full force and effect. There is no default
or event in the performance of such contracts which, with notice or
lapse of time or both, would constitute a material default thereunder
entitling one or more parties to such contract to terminate same.
(hh) Customers and Suppliers. The relationship of the Buyer with its
customers, suppliers, and landlord is good. There has been no
termination or cancellation of any relationship between the Buyer and
any material supplier, or any customer or group of customers which
individually or in the aggregate provided more than five percent (5%) of
the combined gross revenues of the Buyer's business during the fiscal
years ended December 31, 1997 with respect to FutureLink Alberta and May
31, 1998 with respect to FutureLink Colorado, nor is there reason to
believe that any such terminations or cancellations are threatened. The
Buyer is not a party to any agreement which provides that any supplier
will have the exclusive right to supply any materials or services to the
Buyer's business.
<PAGE> 39
36
(ii) Employment Agreements; No Union or Collective Bargaining Agreements. The
Buyer is not a party to nor bound by any collective bargaining agreement
nor has the Buyer conducted negotiations with respect to any such future
agreement. No employees of the Buyer are represented by any trade union
or association which might qualify as a trade union and there are no
applications in progress or threatened which could result in the
certification of a bargaining agent for any employees of the Buyer.
There has been no strike, grievance, dispute, representation,
arbitration, proceedings or other labour trouble against the Buyer and
there is no such action or proceeding in progress or threatened in
writing, and the Buyer does not know of any basis for any such action or
proceeding. The Buyer has not received notice of, nor does it have any
knowledge of, non-compliance with any laws concerning occupational
safety, employment practices, terms and conditions of employment, wages
and hours, and unfair labour practices, the enforcement of which would
have a material adverse effect on the conduct of the Buyer's business.
The Buyer's Employee Schedule sets out a true and complete schedule,
listing the names, total annual compensation, and period of employment
of each person presently employed by the Buyer. There are no written
employment contracts with any employee or independent contractor or any
oral contracts of employment which are not terminable on the giving of
reasonable notice other than as set out on the Buyer's Employment and
Consulting Agreements Schedule. All bonuses and vacation pay are
properly accrued on the books and records of the Buyer.
(jj) Employee Benefit Matters. The Buyer's Employee Benefit Schedule sets out
a complete list of all employee benefit plans, including, without
limitation, life insurance, hospitalization, medical and dental plans,
executive compensation, bonus, deferred compensation, pension,
retirement, profit sharing, stock purchase and option plans, and all
other plans, arrangements or practices providing benefits for employees,
officers, or directors of the Buyer (collectively the "Buyer's Employee
Benefit Plans"). The Buyer has no unfunded liability in respect of any
of the Buyer' Employee Benefit Plans other than as disclosed on the
Buyer's Employee Benefit Schedule. Each of the Buyer's Employee Benefit
Plans has been operated in accordance with its provisions and is in
substantial compliance in all respects with all laws, rules and
regulations governing each such plan. None of the Buyer's Employee
Benefit Plans or the related trusts thereunder is subject to any pending
investigation, examination or other proceeding initiated by any court,
arbitrator, governmental agency or regulating body.
(kk) Payments to Directors, Officers and Employees. Since May 31, 1998, no
payments have been made or authorized by the Buyer to its officers,
directors, shareholders or employees, except in the ordinary course of
the business and at the regular rates or salary or remuneration payable
to such persons, or as otherwise specifically disclosed or contemplated
by this Agreement and except for the repayment of a shareholder loan to
Cameron Chell which appeared on the December 31 FutureLink Financial
Statements for FutureLink Alberta.
(ll) Sellers Claims; Amounts Due from Officers. As of this date, there are no
accounts receivable, notes receivable or any other amounts due to the
Buyer from officers, directors or shareholders of the Buyer.
<PAGE> 40
37
(mm) Insolvency. The Buyer is not insolvent, has not committed an act of
bankruptcy, proposed a compromise or arrangement of their creditors
generally, had any petition or receiving order in bankruptcy filed
against them, taken any proceedings with respect to a compromise or
arrangement or to have a receiver appointed over any part of its assets,
had an encumbrancer take possession of any of its property, nor had an
execution or distress become enforceable or levied upon any of its
property except for a voluntary petition for Chapter 11 protection in
the United States Bankruptcy Court filed April 4, 1995 and which was
dismissed by said court.
(nn) Regulatory Approval. All approvals, permits, consents, orders and
authorizations required in connection with the issuance of the
FutureLink Shares or the shares issuable upon exercise of the conversion
rights referred to in subsection 2.04(c) have been obtained, or if not
obtained, will be obtained prior to Closing and all documents, if any,
to be filed with the U.S. Securities and Exchange Commission and the
NASD have been filed, or if not filed, will be filed prior to closing.
(oo) Corporate Action. All necessary corporate action has been taken by the
Buyer to authorize the issuance of the FutureLink Shares or the shares
issuable upon exercise of the conversion rights referred to in
subsection 2.04(c) and such shares, when issued and paid for, will be
issued as fully paid and non-assessable.
(pp) Trading of FutureLink Colorado Shares. The common shares of FutureLink
Colorado are approved for trading on the NASD Electronic Bulletin Board.
FutureLink Colorado is not in default of any of its obligations to the
SEC or the NASD Electronic Bulletin Board.
(qq) Full Disclosure. The Buyers have or will have delivered to the Sellers
prior to Closing true and current copies or, if not available,
photocopies of all agreements, documents and other instruments referred
to in this Agreement. None of the foregoing representations and
warranties and no other written statement furnished by the Buyer to the
Sellers in connection with the transactions contemplated hereby 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 seller of the Purchased Shares seeking full
information as to the Buyer.
ARTICLE 4.00 - COVENANTS
4.01 COVENANTS OF THE SELLERS AND THE CORPORATION DURING INTERIM PERIOD. The
Sellers hereby covenant that, during the Interim Period, it shall and shall
cause the Corporation to and the Corporation hereby agrees to:
<PAGE> 41
38
(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Assets, the Business and the clients and
suppliers associated with the Business;
(b) give the Buyer, the Buyer's Counsel, the Buyer's Accountants and other
representatives of the Buyer, reasonable access during normal business
hours to the properties, books, contracts, commitments and records of
the Corporation;
(c) treat in confidence all Confidential Information and other information
and findings which it or any of its authorized representatives, the
Sellers' Accountants or the Sellers' Counsel has obtained concerning the
Buyer and/or the Buyer's business during the Interim Period in the
course of its investigations;
(d) furnish the Buyer with all information concerning the affairs of the
Corporation as the Buyer may reasonably request;
(e) instruct and authorize the accountants of the Corporation and the
Sellers' Counsel to co-operate with the Buyer's Accountants and the
Buyer's Counsel and instruct such auditors to give the Buyer's
Accountants full access during such period to their files and working
papers with respect to the Corporation;
(f) permit the Buyer and its representatives to observe all operations of
the Corporation and to meet with such members of the management of the
Corporation as the Buyer may designate for such purposes as the Buyer
may deem to be appropriate;
(g) do all things and cause all things to be done to ensure that all the
warranties and representations of the Sellers contained in this
Agreement remain true and correct throughout the Interim Period as if
such representations and warranties were continuously made throughout
such period;
(h) not acquire or agree to acquire additional assets (or make leasehold
improvements), except in the ordinary course of business and provided
that the cost of such additional assets does not, in the aggregate,
exceed $30,000.00 from July 31, 1998 to the Closing Date, without the
prior written approval of the Buyer;
(i) not enter into or terminate any material contracts or any forward
commitments for inventories or supplies, in writing or otherwise, other
than material contracts or commitments made in the ordinary course of
business not exceeding $100,000 without the prior written, approval of
the Buyer;
(j) not enter into any leases or agreements to lease, except with the prior
written approval of the Buyer;
<PAGE> 42
39
(k) consult with, and comply with the Buyer's reasonable wishes in
connection with any decision to renew, or not renew, any lease or
agreement to lease where such decision is required on or before the
Closing Date;
(l) keep in full force and effect all licenses and governmental approvals
required in the conduct of the Business;
(m) provide the Buyer promptly with such interim financial statements and
any other financial reports as are customarily produced by the
Corporation as and when they are available;
(n) not incur any other indebtedness, obligations or liabilities out of the
ordinary course of business without the prior written approval of the
Buyer;
(o) not sell, agree to sell or otherwise dispose of any of the Assets (other
than operating supplies consumed in the ordinary course of business)
except in accordance with Article 7.00;
(p) pay, satisfy and discharge its obligations and liabilities in the
ordinary course of business;
(q) not incur any capital expenditures out of the ordinary course of
business without the prior written approval of the Buyer;
(r) assist the Corporation to retain the services of all employees and not
terminate any employees or contractors, unless otherwise instructed by
the Buyer;
(s) not declare, pay or authorize any dividends or other distributions on
any shares in the capital of the Corporation or declare any bonuses
payable to the Sellers or any person not at Arm's Length with the
Sellers or, except as set out in this Agreement, pay or authorize the
repayment of any moneys owing to the Sellers or any person not at
Arm's-Length with the Sellers except in accordance with Article 7.00;
(t) keep in full force and effect all insurance set out in the Insurance
Schedule;
(u) obtain all consents and approvals reasonably required by the Buyer
pursuant to the terms of any leases, contracts or rights of the
Corporation; and
(v) promptly advise the Buyer in writing of any material adverse change in
the condition, financial or otherwise, of the Corporation, the Assets or
the Business.
4.02 COVENANTS OF THE BUYER DURING INTERIM PERIOD. The Buyer hereby covenants
that, during the Interim Period, it shall:
<PAGE> 43
40
(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Buyer's assets, the Buyer's business and the
clients and suppliers associated with the Buyer's business;
(b) give the Sellers, the Sellers' Counsel, the Sellers' Accountants and
other representatives of the Sellers, reasonable access during normal
business hours to the properties, books, contracts, commitments and
records of the Buyer;
(c) treat in confidence all Confidential Information and other information
and findings which it or any of its authorized representatives, the
Buyer's Accountants or the Buyer's Counsel has obtained concerning the
Corporation and/or the Business during the Interim Period in the course
of its investigations;
(d) furnish the Sellers with all information concerning the affairs of the
Buyer as the Sellers may reasonably request;
(e) instruct and authorize the auditors of the Buyer and the Buyer's Counsel
to co-operate with the Sellers' Accountants and the Sellers' Counsel and
instruct such auditors to give the Sellers' Accountants full access
during such period to their files and working papers with respect to the
Buyer;
(f) permit the Sellers and their representatives to observe all operations
of the Buyer and to meet with such members of the management of the
Buyer as the Sellers may designate for such purposes as the Sellers may
deem to be appropriate;
(g) do all things and cause all things to be done to ensure that all the
warranties and representations of the Buyer contained in this Agreement
remain true and correct throughout the Interim Period as if such
representations and warranties were continuously made throughout such
period;
(h) keep in full force and effect all licenses and governmental approvals
required in the conduct of the Business;
(i) provide the Sellers promptly with such interim financial statements and
any other financial reports as are customarily produced by the Buyer as
and when they are available;
(j) not incur any other indebtedness, obligations or liabilities out of the
ordinary course of business without the prior written approval of the
Sellers;
(k) not sell, agree to sell or otherwise dispose of any of the Buyer's
assets (other than operating supplies consumed in the ordinary course of
business);
(l) pay, satisfy and discharge its obligations and liabilities in the
ordinary course of business;
<PAGE> 44
41
(m) not incur any capital expenditures out of the ordinary course of
business without the prior written approval of the Sellers;
(n) attempt to retain the services of all directors and officers;
(o) not declare, pay or authorize any dividends or other distributions on
any shares in the capital of the Buyer or declare any bonuses to any
person not at Arm's Length with the Buyer, except as set out in this
Buyer's Employment and Consulting Agreements Schedule , pay or authorize
the repayment of any moneys owing from FutureLink Alberta to FutureLink
Colorado or any person not at Arm's-Length with the Sellers except
pursuant to the terms of any obligations to such persons;
(p) keep in full force and effect all insurance set out in the Buyer's
Insurance Schedule; and
(q) promptly advise the Sellers in writing of any material adverse change in
the condition, financial or otherwise, of the Buyer, the Assets or the
Business. (r) The Buyer covenants and agrees that it will either amend
its current registration statement filed with the SEC to include the
FutureLink Shares or the shares issuable upon exercise of the conversion
right referred to in subsection 2.04(c) or file a new registration
statement covering the FutureLink Shares or the shares issuable upon
exercise of the conversion right referred to in subsection 2.04(c) and
use its best efforts to cause a registration statement to be declared
effective by the U.S. Securities and Exchange Commission as soon as
possible, in any event, not later than the effective date of the
registration statement covering the debenture and common stock issued to
Thomson Kernaghan & Co. Ltd. The Buyer agrees to use its reasonable
commercial efforts to secure the approval for the OTCBB trading on the
NASDAQ Exchange of the shares of FutureLink Colorado and the shares
issuable upon exercise of the conversion right referred to in subsection
2.04(c).
4.03 COVENANTS CONCERNING CONFIDENTIALITY. The parties hereto acknowledge that
in order to facilitate the completion of the transactions contemplated herein
that each will be afforded access to and be entrusted with Confidential
Information that is not a matter of public record and has not been disclosed to
any person who does not owe a duty of non-disclosure to the other pursuant to a
written or oral agreement, at common law or under the terms of applicable
legislation. The parties hereto acknowledges that the Confidential Information
is proprietary and confidential and disclosure thereof to competitors of the
other or to the general public would be detrimental to the best interests of the
other and could cause irreparable harm to the business of the such party. The
parties therefore agrees that they will not, except for the benefit of and with
the written consent of the other, their successors or assigns, prior to the
completion of the transactions contemplated herein or at any time, if the
transactions contemplated herein are not completed for any reason whatsoever:
(a) disclose or divulge any Confidential Information to any person,
unless that person is also bound by a duty of confidentiality;
or
<PAGE> 45
42
(b) use, directly or indirectly, any Confidential Information for
any purpose other than to complete its due diligence in
connection with the transactions contemplated herein, or
disclose or use for any purpose other than that set out above,
knowledge of the private affairs of the others business and in
particular shall not solicit or attempt to solicit any client,
customer, supplier or employee of the other away from the other;
unless such party can establish beyond any reasonable doubt that the
Confidential Information:
(c) was previously known to the disclosing party, as evidenced by
written records, which the Buyer can prove predate this
Agreement or any letters of understanding leading to this
agreement; or
(d) hereafter, and prior to disclosure or use as set out above,
becomes generally known to the public through no act or omission
of the disclosing party.
4.04 COVENANTS ON CLOSING.
(a) To the extent that such are within the Sellers' power and control, the
Sellers covenant that at the Time of Closing they will satisfy, or cause
to be satisfied, the conditions precedent to the obligations of the
Buyer set out in subsections 5.01(e),(f),(g),(i),(k),(l) and (p) of this
Agreement.
(b) To the extent that such are within the Buyer's power and control, the
Buyer covenants that at the Time of Closing it will satisfy, or cause to
be satisfied, all conditions precedent to the obligations of the Sellers
set out in subsections 5.02(b),(e) and (f) this Agreement.
4.05 POST-CLOSING COVENANTS.
(a) The Sellers agrees that, subsequent to the Time of Closing, they will:
(i) at the request and expense of the Buyer, execute and deliver
such additional conveyances, transfers and other assurances as,
in the opinion of the Buyer's Counsel, are reasonably required
to carry out the intent of this Agreement and to transfer the
Purchased Shares to the Buyer;
(ii) take all steps reasonably required by the Buyer to assist the
Buyer in retaining the goodwill of the Corporation and the
Business and in particular to retain all employees in the
Employee Schedule unless the Buyer requests otherwise;
(iii) perform all of their obligations to be performed under this
Agreement after the Time of Closing.
<PAGE> 46
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(iv) not make any sale, transfer or other disposition of the
FutureLink Shares or such other shares issued in accordance with
subsection 2.04 (c) in violation of the Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or the
rules and regulations of the Securities and Exchange Commission
(the "Commission") promulgated thereunder.
(v) The Sellers will cause a "distributor" as defined in Regulation
S to send to any broker/dealer or other person receiving a
commission on the sale of the FutureLink Shares or such other
shares issued pursuant subsection 2.04(c), a confirmation or
other notice stating that the transferee is subject to the same
restrictions on transfer to U.S. Persons or for the account of
or benefit of U.S. Persons during the Distribution Compliance
Period as provided herein. Further, any transferee of the
FutureLink Shares or such other shares issued pursuant
subsection 2.04(c) during the Distribution Compliance Period
will have to enter into an agreement with the Buyer covering the
matters set forth herein.
(b) The Buyer agrees that, subsequent to the Time of Closing, it will, at
the request of and expense of the Sellers, execute and deliver such
additional conveyances, transfers and other assurances as, in the
opinion of the Seller's Counsel, are reasonably required to carry out
the intent of this Agreement and to use its best efforts to have its
registration statement declared effective by the U.S. Securities and
Exchange Commission no later than the effective date of the registration
statement covering the debentures and common stock issued to Thomson
Kernaghan & Co. Ltd and to provide to the Sellers at the request
therefor by the Sellers such information that it may request regarding
the status of its registration with the SEC;
The Buyer agrees to use its reasonable commercial efforts to meet all of
its obligations under the terms of its convertible debenture financing
with Thomson Kernaghan & Co. Ltd. so that the funds, or so much thereof
as may be required, will be released to pay the promissory notes
attached hereto in the Promissory Notes Schedule within 90 days of the
Closing Date.
The Buyer agrees to use its reasonable commercial efforts to become a
reporting issuer in the United States by no later than December 1, 1998.
ARTICLE 5.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
5.01 CONDITIONS PRECEDENT. The obligations of the Buyer under this Agreement are
subject to the fulfilment, at or before the Time of Closing, of the following
conditions. All of the following conditions have been included for the sole
benefit of the Buyer and each is a condition of the closing of the transactions
provided for in this Agreement. Any of the following conditions may be waived by
the Buyer, in whole or in part, at or at any time prior to the Time of Closing,
provided that no such waiver shall constitute a waiver by the Buyer of any of
its other rights or remedies in connection
<PAGE> 47
44
with any other condition or conditions, and any waiver will only be binding upon
the Buyer if made by the Buyer in writing:
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Sellers contained in this
Agreement are true and correct in all respects at the Time of Closing
with the same effect as though such representations and warranties had
been made at and as of such time and there has been compliance by the
Sellers with, and no breach by the Sellers of, any of its covenants in
this Agreement.
(b) No Changes in Operations. During the Interim Period, there has been no
material adverse change in the Assets or in the Business or in the
affairs, liabilities, or condition (financial or otherwise), or
prospects of the Corporation or the Business, or other event or
development which would, in the sole discretion of the Buyer, affect the
decision of a prudent purchaser in similar circumstances to complete the
purchase of the Purchased Shares. In the event that the Sellers do not
prevent the Corporation from entering into or terminating any material
contracts with a value of over One Hundred Thousand Dollars ($100,000)
without the consent of FutureLink during the interim period, such
entering into or termination of contracts will be deemed to be a
material adverse change.
(c) Retention of Key Contracts. The Buyer shall be satisfied that
arrangements have been made to ensure the continued employment of all
employees in the Employee Schedule and the continued relationship with
all agents, suppliers, subcontractors and customers who the Buyer, in
its sole discretion, acting reasonably, determines to be essential for
the continued operation of the Business.
(d) No Undisclosed Material Liabilities. No material liabilities of the
Corporation, being liabilities in aggregate of more than One Hundred
Thousand Dollars ($100,000), contingent or otherwise shall exist which
have not been recorded on the Financial Statements of the Corporation
nor shall there be any actions, causes of action, suits, damages,
judgments, claims or demands pending, threatened or otherwise against
the Corporation which have not been disclosed to the Buyer in writing
prior to the date hereof. This clause will not apply if, after the
determination of such unrecorded liabilities and the satisfaction of the
Buyer with the quantification of such, the Sellers agree to a decrease
in the Purchase Price by an amount equivalent to such unrecorded
liabilities.
(e) Employment Contract with Don Bialik. Don shall have entered into an
employment agreement for a term of three (3) years with the Buyer in the
form attached hereto in the Employment Contract with Don Bialik Schedule
agreeing to act as President and a director of the Buyer and FutureLink
Alberta and such agreement shall include a first year annual salary of
One Hundred and Eighty Thousand Dollars ($180,000), a performance based
bonus of up to Thirty-six Thousand Dollars ($36,000), options to
purchase approximately 250,000 common shares of the Buyer and which will
contain a non-competition and non-solicitation covenant during the term
thereof and for two (2) years thereafter notwithstanding the reason
<PAGE> 48
45
for termination of such employment agreement. Compensation for the
second and third year of the term shall be as set by the board of
directors but shall not be less than the first year compensation
formula.
(f) Officer's Declaration of the Corporation. The Buyer shall have received
a statutory declaration of a senior executive officer of the Corporation
that:
(i) there are not any applications or filings outstanding which
would in any way alter the constating documents or corporate
status of the Corporation;
(ii) no resolutions or by-laws have been passed, enacted, consented
to or adopted by the directors or the shareholders of the
Corporation, except those contained in the minute books of such
corporation;
(iii) there is no unanimous shareholders' agreement in place which
restricts, in whole or in part, the powers of the directors of
the Corporation to manage or supervise the management of the
Business and affairs of the Corporation;
(iv) the persons listed as directors of the Corporation on such
declaration are all of the directors of the Corporation and the
persons listed as officers of the Corporation on such
declaration are all of the officers of the Corporation, and hold
the offices set out opposite their respective names on the
declaration; and
(v) such persons have no knowledge of any action, suit or proceeding
by any governmental body or authority, or by any private third
party, seeking to restrain the transactions contemplated by this
Agreement or its consummation which has been threatened or
instituted against the Corporation and remains pending at the
Time of Closing.
(g) Declaration of the Sellers. The Buyer shall have received a statutory
declaration of the Sellers that:
(i) all representations and warranties of the Sellers contained in
this Agreement are true and correct at the Time of Closing as
though then made;
(ii) there has been compliance with each of the covenants and
obligations on the part of the Sellers required to be complied
with at or before the Time of Closing; and
(iii) the sale of the Purchased Shares has been authorized by all
necessary actions including all necessary shareholders'
authorizations and any required consents of the trustees of the
Trust.
<PAGE> 49
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(h) Restraint of Transactions. No order of any court of competent
jurisdiction is effective restraining the transactions contemplated by
this Agreement.
(i) Agreements and Consents. All consents of any persons, which are
necessary to be obtained by the Buyer, the Corporation or the Sellers
for the consummation of the transactions contemplated by this Agreement
and for the continuance of all contracts, agreements, licenses, permits
and authorizations material to the Business and operations of the
Corporation have been obtained by the Buyer, the Corporation or the
Sellers as the case may be at the Sellers's sole cost and expense,
except for any such Buyer consents, and shall have been delivered to the
Buyer at, or before, the Time of Closing.
(j) TAP Consulting Ltd. Litigation. The Sellers shall have obtained and
delivered to the buyer on or before the Time of Closing, at their
expense, a release from TAP Consulting Ltd. of any and all claims for
debts, liabilities, damages, or any amount claimed to be owing to TAP
Consulting Ltd. by SysGold or RMC or failing such shall deliver an
indemnity to the Buyer with respect to such in a form satisfactory to
the Buyer's Counsel. There shall, at the Time of Closing, be no new
claims from TAP Consulting Ltd.
(k) Opinion Letter of Sellers's Counsel. The Buyer and the Buyer's Counsel
have received from the Sellers's Counsel an opinion, dated the Closing
Date, in the form attached in the Seller's Counsel Opinion Letter
Schedule. In giving such opinion, the Sellers's Counsel may rely, as to
matters of fact, upon certificates of senior executive officers of the
Corporation and a certificate of an official of the jurisdiction
governing the status of the Corporation as to the corporate status of
the Corporation, provided that the Sellers's Counsel state that they
believe that they are justified in relying upon such certificate and
deliver copies of all certificates relied upon to the Buyer and the
Buyer's Counsel prior to, or at, the Time of Closing. Sellers' Counsel
shall also deliver an opinion prior to closing to the Buyer with respect
to the relevant date of valuation in an oppression remedy case and
verifying that the proper date for calculation of a purchase price in
the case referred to in section 5.01(j) was the date of commencement of
the action; and Sellers' Counsel shall conduct a reasonable review of
Canadian authorities and report on such authorities if any which deal
with the status of a shareholder following commencement of an oppression
action under the Alberta Business Corporations Act.
(l) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Sellers to the Buyer pursuant
to this Agreement, the Sellers have delivered to the Buyer, at or before
the Time of Closing, the following:
(i) certificates representing the Purchased Shares registered in the
name of the Sellers duly endorsed for transfer to the Buyer;
<PAGE> 50
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(ii) the resignation of each of the directors and officers of the
Corporation except Don and a release from each of such persons
in the form of the release set out in the Release Schedule; and
(iii) all other indemnities, agreements, instruments, consents and
documentation as are required in the opinion of Buyer's Counsel
to complete the transactions as contemplated herein.
(m) Release of Encumbrances. Except for security granted to CIBC with
respect to a line of credit in the amount of Five Hundred Thousand
Dollars ($500,000) (the "Permitted Encumbrance"), all encumbrances,
other than as permitted by the Buyer with respect to the Corporation,
with respect to the Purchased Shares and the Corporation shall have been
released and discharged on or before the Closing Date, or the Sellers
shall provide satisfactory evidence that the amount required to obtain
such releases and discharges, as stated in writing by the holder of the
encumbrance, has been paid to such holder or directed from the proceeds
of closing to be paid to such holder and the holder has given an
undertaking in writing to release and discharge the Sellers from such
encumbrance.
(n) Financing. The Buyer shall have obtained financing for the transactions
contemplated herein either pursuant to the terms set out in the
Debenture Schedule or similar terms satisfactory to the Buyer and all
conditions of such financing set by the financing party shall have been
met.
(o) SysGold Inc. - The Sellers shall have caused SysGold Inc., a wholly
owned subsidiary of SysGold, to wind up its business and assets into
SysGold at the cost of the Sellers.
(p) Consents of Encumbrancers. The Sellers shall have obtained, at their
expense, the consent to the transactions contemplated herein from the
CIBC, if required by the terms of the Permitted Encumbrance.
(q) Interim Transactions. The Buyer must be satisfied that the transactions
contemplated in Article 7.00 do not cause any adverse tax consequences
to the Buyer, RMC or SysGold which would not have occurred had the Buyer
purchased the shares of SysGold directly from RMC. The Buyers and the
Sellers shall have agreed on the concept and the structure of the
Permitted Transactions including all ancillary documentation. This
clause will not apply if, after the determination of such adverse
consequences, the Sellers agree to cause RMC to sell its shares of
SysGold to the Buyer on the same terms and conditions, mutatis mutandis,
as contained herein or if the Sellers agree to a reduction in that part
of the Purchase Price set out in Section 2.02 (a) by an amount equal to
such adverse tax consequences as determined by the Buyer's Accountant.
<PAGE> 51
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(r) Schedules. The Buyer must be satisfied, acting reasonably, with all
information and supporting documentation provided with respect to all
schedules whether attached on the date hereof or hereafter.
5.02 RESULT OF FAILURE TO SATISFY CONDITION PRECEDENT. If any of the foregoing
conditions precedent to the obligations of the Buyer have not been satisfied at
the Time of Closing, and have not be waived by the Buyer at, or at any time
prior to, the Time of Closing, the Buyer may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Sellers or the Sellers's Counsel and, in
such event, all parties shall be released from their obligations under
this Agreement except as set out in Section 4.03 and Article 8.00; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any rights or remedies the buyer may
have in connection with any misrepresentation or breach of warranty or
covenant herein.
ARTICLE 6.00- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
6.01 CONDITIONS PRECEDENT. The obligations of the Sellers under this Agreement
are subject to the fulfilment, at or before the Time of Closing, of the
following conditions. All of the following conditions have been included for the
sole benefit of the Sellers and each is a condition of the closing of the
transactions provided for in this Agreement. Any of the following conditions may
be waived by the Sellers, in whole or in part, at or at any time prior to the
Time of Closing, by a waiver in writing signed by the Sellers, provided that no
such waiver shall constitute a waiver by the Sellers of any of his rights or
remedies in connection with any other condition or conditions, and any waiver
will only be binding upon the Sellers if made in writing by the Sellers.
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Buyer contained in this Agreement
are true and correct in all respects at the Time of Closing with the
same effect as though such representations and warranties had been made
at and as of such time and there has been compliance by the Buyer with,
and no breach by the Buyer of, any of its covenants in this Agreement.
(b) Officer's Declaration. The Sellers shall have received a statutory
declaration of a senior executive officer of the Buyer that:
(i) all representations and warranties of the Buyer contained in
this Agreement are true and correct at the Time of Closing as
though then made;
(ii) there has been compliance with each of the covenants and
obligations on the part of the Buyer required to be complied
with at or before the Time of Closing;
<PAGE> 52
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(iii) the purchase of the Purchased Shares has been authorized by all
necessary actions including actions of the directors and
shareholders of the Buyer and any required actions with the U.S.
securities regulators; and
(iv) such person has no knowledge of any action, suit or proceeding
by any governmental body or authority, or by any private third
party, seeking to restrain the transactions contemplated by this
Agreement or its consummation which has been threatened or
instituted against the Buyer and remains pending at the Time of
Closing.
(c) Restraint of Transactions. No order of any court of competent
jurisdiction is effective restraining the transactions contemplated by
this Agreement.
(d) Agreements and Consents. All consents of any persons, which are
necessary to be obtained by the Buyer for the consummation of the
transactions contemplated by this Agreement have been obtained by the
Buyer at its sole cost and expense, and all consents of any persons
which are necessary to be obtained by the Sellers or the Corporation for
the consummation of the transaction contemplated by this Agreement and
for the continuance of all contracts, agreements, licenses, permits and
authorizations material to the Business and operations of the
Corporation have been obtained, provided that the Sellers uses their
best efforts to obtain all such consents.
(e) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Buyer to the Sellers pursuant
to this Agreement, the Buyer has delivered to the Sellers, at or before
the Time of Closing, the following:
(i) an opinion from the Buyer's U.S. counsel satisfactory to the
Sellers and Sellers' Counsel with respect to resale restrictions
affecting the FutureLink Shares pursuant to any U.S. securities
laws;
(ii) an opinion from the Buyer's U.S. Counsel as to the number of
options which can be issued by the Buyer and the rights of the
board of directors to issue further options subject to
ratification by the shareholders of the Buyer;
The Sellers shall further be satisfied that the FutureLink Shares are
not subject to any hold period pursuant to the Securities Act (Alberta),
or that the hold period, if any, is identical and runs concurrently with
the hold period prescribed by the US Securities Act, 1933.
(f) Opinion Letter of Counsel for Buyer. The Sellers and the Sellers'
Counsel have received from the Buyer's Counsel an opinion, dated the
Closing Date, in the form set out in the Buyer's Counsel's Opinion
Letter. In giving such opinion the Buyer's Counsel may rely, as to
matters of fact, upon certificates of senior executive officers of the
Corporation and a certificate of an official of the jurisdiction
governing the status of the Buyer as to the corporate status of the
Buyer, provided that the Buyer's Counsel state that they believe that
<PAGE> 53
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they are justified in relying upon such certificate and deliver copies
of all certificates relied upon to the Sellers and the Sellers's Counsel
prior to, or at, the Time of Closing. Buyer's Counsel may also rely upon
the opinions of other counsel in each jurisdiction relevant to the
transactions contemplated herein.
(g) Evidence of Financing. The Buyer shall have provided the Sellers with
the confirmation of available financing in an amount of not less than
Five Million ($5,000,000.00) Dollars U.S. prior to the Time of Closing
and at the Time of Closing shall provide an executed copy of an
irrevocable subscription agreement to the Sellers with respect to such
financing. The Sellers, acting reasonably, shall be satisfied with the
terms of such subscription agreement.
(h) Release of Guarantee. Don shall have obtained a release of his personal
guarantee of the line of credit of the Corporation with CIBC.
(i) Closing Funds. The Buyer shall have delivered to the Sellers a certified
cheque or bank draft in an amount not less than Three Million
($3,000,000.00) Dollars together with a share certificate to the Sellers
for the FutureLink Shares or the convertible shares referred to in
subsection 2.04(c).
(j) Registration Statement. The Buyer shall have provided to the Sellers a
copy of the registration statement (both in respect of becoming a
reporting issuer and for the registration of the FutureLink Shares or
the shares issuable upon exercise of the conversion rights referred to
in subsection 2.04(c)) filed with the SEC and the Sellers acting
reasonably shall be satisfied that such statement will be declared
effective by the SEC as soon as possible, in any event not more than
ninety (90) days after the Closing Date. The Sellers, acting reasonably
shall be satisfied that the FutureLink Shares or the shares issuable
upon exercise of the conversion rights referred to in subsection 2.04(c)
have been or will within 90 days be approved for trading on the OTCBB.
(k) Schedules. The Seller must be satisfied, acting reasonably, with all
information and supporting documentation provided with respect to all
schedules whether attached on the date hereof or hereafter.
(l) The Seller shall be satisfied as to the tax effect resulting from the
sale.
6.02 RESULT OF FAILURE TO SATISFY CONDITION PRECEDENT. If any of the foregoing
conditions precedent to the obligations of the Sellers have not been satisfied
at the Time of Closing, and have not been waived by the Sellers at, or at any
time prior to, the Time of Closing, the Sellers may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Buyer or the Buyer's Counsel and, in such
event, all parties shall be released from their obligations under this
Agreement except as set out in section 4.03 and Article 8.00; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any of the
<PAGE> 54
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Sellers's rights or remedies in connection with any misrepresentation or breach
of warranty or covenant herein.
ARTICLE 7.00 - PRIOR TRANSACTIONS
7.01 INTERIM PERIOD TRANSACTIONS. During the Interim Period, the Sellers and the
Corporation shall be permitted to complete a reorganization of the Corporation
which may, subject to the consent of the Buyer, be similar to the reorganization
outlined in the Permitted Transactions Schedule or in any amended form which
will permit the Sellers to reduce their taxes otherwise payable as a result of
the transactions contemplated by this Agreement subject to the consent of the
Buyer. The Sellers shall only be permitted to complete the transactions in the
Permitted Transactions Schedule if the condition in subsection 5.01(r) has been
complied with. The Sellers agree that they shall pay any costs associated with
the planning of, giving effect to or resulting from any of the transactions set
out in the Permitted Transactions Schedule or any amendment thereto whether such
costs are on the account of the Buyer, the Seller or the Corporation except that
the Buyers shall be responsible for costs associated only with respect to the
creation of any shares of RMC which are exchangeable for FutureLink Shares. The
parties hereto agree to execute all such further documents and agreements, give
such further assurances and undertake such further action as may be necessary to
give effect thereto.
The Buyer shall be permitted, during the Interim Period, to provide a take-over
bid circular to the shareholders of FutureLink Alberta, other than the Buyer,
offering to purchase all of their shares in FutureLink Alberta.
ARTICLE 8.00 - BREAK-UP FEE AND DEPOSIT
8.01 BREAK-UP FEE. The parties hereto acknowledge that the other will be
expending resources and time and will be foregoing other potential transactions
during the Interim Period. The parties hereto have agreed that a fee (the
"Break-up Fee") shall be paid by the Sellers to the Buyer in the event that the
Sellers, RMC or SysGold directly or indirectly:
(a) accept any offer or enter into any agreement with any other party
with respect to any sale or other disposition of the Purchased Shares,
Business or Assets prior to the Time of Closing; or
(b) solicit, initiate, entertain or encourage enquiries, submissions,
discussions, proposals or offers from any other person for the sale or
other disposition of the Purchased Shares, Business or Assets prior to
the Time of Closing.
<PAGE> 55
52
The Break-up Fee payable by the Sellers shall be One Hundred Thousand Dollars
($100,000) and in the event that such is payable, the Deposit shall also be
returned to the Buyer without interest or deduction.
8.02 DEPOSIT NON-REFUNDABLE. In the event that the Buyer decides not to proceed
with the transactions contemplated herein, the Deposit shall not be refundable
to the Buyer unless the Buyer decides not to proceed based on the non-fulfilment
of the conditions set out in subsections 5.01(b),(d), (j), (r) or if the Sellers
are not able to deliver or cause to be delivered all of the Purchased Shares or
all of the outstanding shares of SysGold at the Time of Closing.
8.03 SELLER TERMINATION OF THE AGREEMENT. Notwithstanding section 8.02, the
Deposit shall be returned to the Buyer without interest or deduction in the
event that the Sellers discover material liabilities (contingent or otherwise)
of the Buyer which are less than One Hundred Thousand Dollars ($100,000) other
than those recorded on the FutureLink Financial Statements Schedule or as
disclosed in section 3.02(dd) and other than liabilities incurred in the
ordinary course since the date of the financial statements. The Sellers agree to
act in good faith in determining such material liabilities.
8.04 NOTIFICATION OF TERMINATION. If any party decides not to proceed with the
Proposed transaction, such party shall provide the other party with written
notice setting forth the reasons that the other party is not so proceeding. If
the Deposit is refundable to the Buyer, it shall be paid by the Seller within
forty-eight (48) hours of the Buyer advising the Seller in writing that it does
not wish to proceed and the basis for not proceeding in the case of section 8.02
or the Sellers advising the Buyers that they do not wish to proceed in the case
of section 8.03.
ARTICLE 9.00 - RISK OF LOSS
9.01 RISK OF TOTAL LOSS. If, at or before the Time of Closing, all or
substantially all of the Assets are destroyed or damaged by fire, or any other
casualty, or are expropriated or otherwise seized by governmental or other
lawful authority, the Sellers shall immediately advise the Buyer in writing and
the Buyer shall have the option, exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, provided
that the Purchase Price shall be reduced by an amount equal to the
replacement cost of the Assets destroyed, damaged, expropriated or
seized minus the amount of all insurance proceeds and other compensation
payable to the Corporation in connection with, or as a result of, such
destruction, damage, expropriation or seizure; or
(b) to refuse to complete the transaction contemplated herein by notice to
the Sellers and, in such event, all parties hereto shall be released
from all obligations hereunder except the obligations of such party to
maintain the confidentiality of Confidential Information obtained in the
course of the negotiation of this Agreement and the due diligence
leading up to the Time of Closing.
<PAGE> 56
53
9.02 RISK OF PARTIAL LOSS. If, at or before the Time of Closing, a material part
of the Assets, but less than all or substantially all of the Assets, are
destroyed or damaged by fire, or any other casualty, or are expropriated or
otherwise seized by governmental or other lawful authority, the Sellers shall
immediately advise the Buyer in writing and the Buyer shall have the option,
exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, without
reduction of the Purchase Price provided that the amount of all
insurance proceeds and other compensation payable to the Corporation in
connection with, or as a result of, such destruction, damage,
expropriation or seizure is paid to the Corporation; or
(b) to refuse to complete the transaction contemplated herein by notice to
the Sellers and, in such event, all parties hereto shall be released
from all obligations hereunder except the obligations of such party to
maintain the confidentiality of Confidential Information obtained in the
course of the negotiation of this Agreement and the due diligence
leading up to the Time of Closing.
ARTICLE 10.00 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.01 SURVIVAL OF THE SELLERS'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Sellers contained in this
Agreement shall, unless otherwise expressly provided in this Agreement, survive
the closing of the transactions provided for in this Agreement and,
notwithstanding such closing and notwithstanding any investigations made by or
on behalf of the Buyer, shall continue in full force and effect:
(a) with respect to those representations and warranties relating to Taxes,
for so long as the Corporation may be assessed or reassessed, or any
action or proceeding may be brought against the Corporation in
connection with Taxes;
(b) with respect to all representations and warranties with respect to the
Sellers' title to the Purchased Shares and the Corporation's title to
the Assets, for five (5) years; and
(c) with respect to all other representations and warranties of the Sellers,
for a period of two (2) years after the Time of Closing.
10.02 SURVIVAL OF THE BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Buyer contained in this
Agreement shall survive the closing of the transactions provided for in this
Agreement and, notwithstanding such closing and notwithstanding any
investigations made by or on behalf of the Sellers, shall, unless otherwise
expressly provided in this Agreement, continue in full force and effect:
(a) with respect to those representations and warranties relating to Taxes,
for so long as the Corporation may be assessed or reassessed, or any
action or proceeding may be brought against the Corporation in
connection with Taxes; and
(b) with respect to all other representations and warranties of the Sellers,
for a period of two (2) for a period of two (2) years after the Time of
Closing.
<PAGE> 57
54
ARTICLE 11.00 - INDEMNIFICATION BY SELLERS
11.01 SCOPE OF INDEMNIFICATION. In the event that the transactions provided for
in this Agreement are completed and it is subsequently determined that the
Corporation or the Buyer or any agent, employee, affiliate, successor or nominee
of the Corporation or the Buyer, or any of the officers, directors,
shareholders, subsidiaries, affiliates, employees and agents of any of the
aforesaid (collectively the "Indemnified Parties") has or is subject to any
loss, damage, liability, deficiency, claim, cost, recovery, expense (including
interest, penalties and reasonable legal fees), assessment or re-assessment
(collectively the "Claims") arising out of or from, the incorrectness, failure,
non-compliance or other breach of any representation, warranty or covenant made
by the Sellers pursuant to this Agreement, notwithstanding any investigations
made by the Buyer or its representatives, and including any accounts receivables
of the Corporation existing as of the Time of Closing which have not been
collected within 120 days from the Time of Closing, the Sellers unconditionally
agree to indemnify and save harmless the Indemnified Parties for the amount of
such Claims and accounts receivables. The obligation of the Sellers to indemnify
the Indemnified Parties pursuant to the foregoing is limited, in the case of
accounts receivables of the Corporation, to the amount of accounts receivable
which have not been collected in full within 120 days of the Closing Date and
which, in the aggregate, exceed fifteen percent (15%) of the aggregate amount
(before deduction of any reserve or allowance for doubtful accounts) of all
accounts receivable of the Corporation on the Closing Date. The Sellers shall
further indemnify the Buyer with respect to any Claims arising from SysGold Inc.
not complying with the Excise Tax Act. Any claim against the Sellers under this
section shall be in writing and shall be made within one hundred and twenty
(120) days of the date on which such representation or warranty ceases to
survive according to the provisions of this Agreement.
The Indemnified Parties shall forthwith notify the Sellers of any liability or
claim for which the Sellers may be liable hereunder promptly after the
Indemnified Parties receive notice thereof and the Sellers shall have the right
to participate in any negotiations with respect thereto. The Sellers shall at
all times have the right, at its joint sole expense, to dispute and contest any
liability to, or claim asserted by, any person other than the Indemnified
Parties for which the Sellers may be liable hereunder, provided that the Sellers
first admits to the Buyer that if there is a liability in respect of such claim,
the Sellers is responsible for such liability. The Indemnified Parties shall,
and shall cause the Corporation to, fully co-operate with the Sellers and its
counsel in any proceedings with respect to any such liability.
11.02 LITIGATION. The Sellers hereby, irrevocably and unconditionally, agrees to
indemnify and save harmless each of the Indemnified Parties from and against any
and all Claims incurred in connection with existing, pending and threatened
litigation and in particular, without limiting the foregoing, shall indemnify
and save harmless the Indemnified Parties from any Claims from TAP Consulting
Ltd. The Sellers agrees to defend diligently such litigation through counsel to
be agreed upon by both the Buyer and the Sellers, and to advise and keep the
Buyer informed of all material developments relating thereto and that they will
not settle or otherwise compromise any such action without the consent of the
Buyer.
<PAGE> 58
55
11.03 SET OFF AND SIMILAR RIGHTS OF THE BUYER. In the event that the Sellers
fail to make any payment required to be made pursuant to this Agreement,
including without limitation, payments required pursuant to the indemnification
provisions of this Article, then the Buyer shall be entitled, in addition to any
other remedies in this Agreement, or at law or in equity, to set off the amount
of such payment against any other amount which may be or become due from the
Buyer or the Corporation to the Sellers, however arising, notwithstanding that
such indebtedness might have arisen from a different transaction.
11.04 REIMBURSEMENT. If any claim is made by any of the Indemnified Parties
under this Article and such claim is shown to be wrongfully made, then the
Indemnified Party to whom payment had been made under this Article shall
reimburse the Sellers for the amount paid by the Sellers or by the Buyer on the
Sellers's behalf on account of such claim.
ARTICLE 12.00 - INDEMNIFICATION BY BUYERS
12.01 SCOPE OF INDEMNIFICATION. In the event that the transactions provided for
in this Agreement are completed and it is subsequently determined that the
Sellers or any agent, employee, affiliate, successor or nominee of the Sellers
(collectively the "Indemnified Parties") has or is subject to any loss, damage,
liability, deficiency, claim, cost, recovery, expense (including interest,
penalties and reasonable legal fees), assessment or re-assessment (collectively
the "Claims") arising out of or from, the incorrectness, failure, non-compliance
or other breach of any representation, warranty or covenant made by the Buyer
pursuant to this Agreement, notwithstanding any investigations made by the
Sellers or its representatives, the Buyer unconditionally agree to indemnify and
save harmless the Indemnified Parties for the amount of such Claims.
The Indemnified Parties shall forthwith notify the Buyer of any liability or
claim for which the Buyer may be liable hereunder promptly after the Indemnified
Parties receive notice thereof and the Buyer shall have the right to participate
in any negotiations with respect thereto. The Buyer shall at all times have the
right, at its joint sole expense, to dispute and contest any liability to, or
claim asserted by, any person other than the Indemnified Parties for which the
Buyer may be liable hereunder, provided that the Buyer first admits to the
Sellers that if there is a liability in respect of such claim, the Buyer is
responsible for such liability.
ARTICLE 13.00 - GENERAL MATTERS
13.01 PUBLIC ANNOUNCEMENT. The parties to this Agreement agree that a public
announcement of this Agreement and the transactions herein contemplated shall be
made upon execution of this Agreement in a form and at a time agreed to by the
parties hereto prior to execution of this agreement except that it shall be done
on a basis so as not to violate any securities regulations or laws. The parties
agree that the Purchase price shall not be made public unless required by such
securities laws.
<PAGE> 59
56
13.02 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, THE BUYER DOES NOT
HAVE TO AND WILL NOT RECOGNIZE AND WILL TREAT AS NULL AND VOID ANY ATTEMPT TO
TRANSFER THE FUTURELINK SHARES OR SUCH OTHER SHARES ISSUED PURSUANT SUBSECTION
2.04(E) MADE IN VIOLATION OF THE PROVISIONS OF THIS AGREEMENT.
13.03 NOTICES. All notices, requests, demands or other communications required
or desired to be given or made by one party to another shall be given in writing
by personal delivery or prepaid registered mail or by facsimile transmission or
other means of instantaneous transmission in regular commercial usage at such
time, verified by a transmission report, as follows:
(a) to the Sellers: 3911 Crestview Road S.W.
Calgary, Alberta
T2T 2L5
with a copy to: Howard, Mackie
1000 Canterra Tower
400 Third Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Jeff Vallis
(b) to the Buyer: FutureLink Distribution Corp
No. 550, 603 - 7 Avenue SW
Calgary, Alberta
T2P 2T5
Attention: Raghu Kilambi
with a copy to: Morrison, Brown, Sosnovitch
1 Toronto Street
Suite 910
Toronto, Ontario
M5C 2V6
Attention: Kevin Gallagher
or at such other address as may be given by any of them to the others. Any
notice or other communication so given or made shall be conclusively deemed to
have been given and received when delivered personally, if delivered personally,
or when transmitted, if given by facsimile transmission, provided that if it is
delivered or transmitted on a day which is not a Business Day then
<PAGE> 60
57
the notice or communication shall be deemed to have been given and received on
the next Business Day following such date, or on the fifth (5th) Business Day
following the date of mailing, if mailed by prepaid registered mail, except in
the event of disruption of mail services in which event any notice shall be
delivered personally or by facsimile transmission.
13.04 EXPENSES. The expenses incurred by each of the parties in connection with
the negotiation of this Agreement and the completion of the transactions
provided for in this Agreement, including, except as otherwise provided in this
Agreement, the fees of their respective accountants and solicitors in connection
with such transactions, shall be borne by such party.
13.05 TIME OF THE ESSENCE. Time is of the essence of this Agreement and every
part of this Agreement and no extension or variation of this Agreement shall
operate as a waiver of this provision. Notwithstanding such, the parties hereto
agree that where the fulfilment of any condition relies on the action of a third
party, that such reasonable extensions as are necessary to ensure the fulfilment
of such conditions shall be granted by the parties hereto, it being understood
that Closing shall take place, in any event, not later than the 20th day of
October, 1998.
13.06 GOVERNING LAW. This Agreement and any of the agreements required to be
executed pursuant to the provisions of this Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the Province of Alberta and of Canada applicable thereto and the
parties submit to the jurisdiction of the courts of the Province of Alberta.
13.07 SEVERABILITY. If any of the provisions contained in this Agreement are,
for any reason, held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained in this Agreement unless the deletion of such provision or provisions
would result in such a material change as to cause the completion of the
transactions contemplated in this Agreement to be unreasonable.
13.08 FURTHER ASSURANCES. The parties covenant and agree to execute such further
and other documents and undertake such other actions as may be reasonably
required to give effect to the terms and intent of the transactions contemplated
in this Agreement.
13.09 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties and delivered to each of the other parties.
13.10 ENUREMENT. This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective heirs, administrators, executors,
successors and permitted assigns, provided that the rights of any party hereto
may not be assigned without the prior written consent of all other parties
hereto.
<PAGE> 61
58
13.11 TIME PERIODS. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date which is the reference day in calculating such period shall be
excluded.
13.12 LANGUAGE OF AGREEMENT. It is the express wish of the parties that this
document and any related documents be drawn up and executed in English. Les
parties aux presentes ont expressement demande que ce document et tous les
documents s'y rattachant soient rediges et signes en anglais.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the date first above written.
FUTURELINK DISTRIBUTION CORP.
(Colorado)
Per: /s/ Raghu Kilambi - A.S.O.
--------------------------------
Raghu Kilambi - A.S.O.
)
)
) /s/ DONALD A. BIALIK
- -------------------------------- ) ------------------------------------
Witness ) DONALD A. BIALIK
)
)
) /s/ OLIVIA B. BIALIK
- -------------------------------- ) ------------------------------------
Witness ) OLIVIA B. BIALIK
------------------------------------
BIALIK FAMILY TRUST
Per: /s/ DONALD A. BIALIK
--------------------------------
- Trustee
Per: /s/ OLIVIA B. BIALIK
--------------------------------
- Trustee
RIVERVIEW MANAGEMENT CORPORATION
Per: /s/ DONALD A. BIALIK
--------------------------------
A.S.O.
<PAGE> 62
59
SYSGOLD LTD
Per: /s/ DONALD A. BIALIK
--------------------------------
A.S.O.
FUTURELINK DISTRIBUTION CORP.
(Alberta)
Per: /s/ Raghu Kilambi
--------------------------------
Raghu Kilambi -A.S.O.
<PAGE> 63
BUYER'S DIRECTORS AND OFFICERS SCHEDULES
FUTURELINK DISTRIBUTION CORP. (ALBERTA)
<TABLE>
<CAPTION>
Name Address Position
- ---- ------- --------
<S> <C> <C>
Cameron Chell 306-20 Street N.W. Chairman of the Board,
Calgary, Alberta President & CEO
Raghu Kilambi 286 Briar Hill Avenue Director, CFO,
Toronto, Ontario VP-Corporate Finance,
M4R 1J2 Corporate Secretary
Robert Kubbernus 300 Waterstone Crescent Director
Airdrie, Alberta
T4B 1H4
Bryson Farrill 305 Old Oaks Road Director
Fairfield, CT
U.S.A. 06432
Linda M. Murray 302-1711-11 Street S.W. Assistant Corporate
Calgary, Alberta Secretary
T2T 3L7
Philip R. Ladouceur 119 Valley Ridge Green NW Director
Calgary, Alberta
T3B 5L5
</TABLE>
FUTURELINK DISTRIBUTION CORP. (COLORADO)
<TABLE>
<CAPTION>
Name Address Position
- ---- ------- --------
<S> <C> <C>
Cameron Chell 306-20 Street N.W. Chairman of the Board,
Calgary, Alberta President & CEO
Raghu Kilambi 286 Briar Hill Avenue Director, CFO,
Toronto, Ontario VP-Corporate Finance,
M4R 1J2 Corporate Secretary
Robert Kubbernus 300 Waterstone Crescent Director
Airdrie, Alberta
T4B 1H4
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
Name Address Position
- ---- ------- --------
<S> <C> <C>
Bryson Farrill 305 Old Oaks Road Director
Fairfield, CT
U.S.A. 06432
Linda M. Murray 302-1711-11 Street S.W. Assistant Corporate
Calgary, Alberta Secretary
T2T 3L7
Robert H. Kohn One Arbor Lane Director
Pebble Beach, CA
U.S.A. 93953
Philip R. Ladouceur 119 Valley Ridge Green NW Director
Calgary, Alberta
T3B 5L5
</TABLE>
<PAGE> 65
PROMISSORY NOTES SCHEDULE
CDN$685,000 August, 1998
FOR VALUE RECEIVED THE UNDERSIGNED PROMISES TO PAY to at 3911 Crestview
Road S.W., Calgary Alberta, T2T 2L5, in ninety (90) days from the date hereof
the principal sum of Six Hundred and Eighty-five Thousand Dollars ($685,000) in
lawful money of Canada together with interest on all amounts of the said
principal sum remaining unpaid hereunder from time to time from the date hereof
until paid, both before and after default, at a rate per annum equal to Seven
Percent (7%). Such interest shall be calculated and compounded monthly and shall
be paid at the same time as the principal amount is paid.
THE UNDERSIGNED FURTHER AGREES TO PAY all costs and expenses
(including without limitation, lawyer fees as between a solicitor and his own
client on a full indemnity basis) incurred by it in enforcing payment in the
event of default hereunder, together with interest as aforesaid on all such
costs until paid by the undersigned.
Presentment, demand, protest and notice of dishonour and non-payment
are hereby waived by the undersigned.
The undersigned shall be entitled to prepay any or all of the
indebtedness evidenced by this promissory note without notice, bonus or penalty.
This promissory note shall be governed by and construed in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein.
DATED the day of , 19 .
SIGNED, SEALED AND DELIVERED ) FUTURELINK DISTRIBUTION CORP
)
)
) per:_______________________c/s
) Authorized Signing Officer
THIS IS A FORM OF NOTE ONLY AND THE ISSUE OF MORE THAN ONE NOTE MAY BE REQUIRED
BASED ON THE ALLOCATION OF THE PURCHASE PRICE
<PAGE> 66
RELEASE SCHEDULE
WHEREAS (hereinafter referred to as the "Releasor") has acted as a
director/officer/employee of RMC/SysGold Inc./SysGold Ltd.(the "Corporation");
AND WHEREAS the controlling shareholder of the Corporation has agreed
to allow for a change of control and has agreed to cause directors and officers
appointed by it to resign;
In consideration of the payment by the Corporation to the undersigned
of the sum of Ten Dollars ($10.00) and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the
undersigned), the undersigned hereby remise, release and forever discharge the
Corporation its directors, officers, employees and shareholders (the
"Releasees") of and from all actions, causes of action, suits, debts, dues,
covenants, accounts, contracts, rights, damages, costs, judgments, expenses,
claims or demands which the undersigned may now have, whether in law or in
equity, against the Releasees including those arising out of or relating to the
Agreements.
The undersigned further covenants and agrees not to make any claim,
demand or to maintain or to bring, or take any steps for the bringing of, any
proceeding against any person, firm, corporation or other entity who/which might
claim damages from the Releasees, and/or contribution and indemnity, and/or
other relief under the common law and/or any other statute of this or any other
jurisdiction or otherwise from the Releasees.
The provisions hereof shall enure to the benefit of the successors and
assigns of the Releasors and shall be binding upon the heirs, executors,
administrators, legal personal representatives and assigns of the undersigned.
IN WITNESS WHEREOF the undersigned have signed these presents this day
of August, 1998.
SIGNED, SEALED AND DELIVERED
in the presence of )
)
)
- ------------------------------------ )
Witness )
)
<PAGE> 67
BUYER'S OPTIONS AND CALLS SCHEDULE
<TABLE>
<CAPTION>
Vesting
Grant # Name of Optionee Total # of Shares Type of Option Amount Vest Date Expiration Date
- ------- ---------------- ----------------- -------------- ------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 Cameron Chell 500,000 Nonqualified 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
2 Raghunath Kilambi 500,000 Nonqualified 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
3 Gayle Howard 175,000 Nonqualified 87,500 29-Jun-98 29-Jun-01
87,500 29-Jun-99 29-Jun-01
4 James Brecht 100,000 Nonqualified 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
5 Dave Bolink 100,000 Nonqualified 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
6 Linda M. Murray 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
7 Jason Cornick 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
8 Jeff Doepker 50,000 Nonqualified 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
9 Scott Lambert 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
10 Marjorie Martin 50,000 Nonqualified 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
11 Connie Turnbull 30,000 Nonqualified 15,000 29-Dec-98 29-Jun-01
15,000 29-Jun-99 29-Jun-01
12 Bryson Farrill 250,000 Nonqualified 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
13 Robert H. Kohn 200,000 Nonqualified 100,000 29-Jun-98 29-Jun-01
100,000 29-Jun-99 29-Jun-01
14 Robert Kubbernus 250,000 Nonqualified 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
15 Phillip Ladouceur 500,000 Nonqualified 250,000 Upon signing 16-Jul-98
agreement
with FLNK
250,000 One year 16-Jul-99
anniversary from
signing date
2,930,000
</TABLE>
<PAGE> 1
TARGETCO ACQUISITION AGREEMENT ENTERED INTO THIS 3RD DAY OF AUGUST, 1998.
BETWEEN:
FUTURELINK DISTRIBUTION CORP. (A COLORADO CORPORATION)
(hereinafter called "FutureLink USA")
- and -
FUTURELINK DISTRIBUTION CORP. (AN ALBERTA CORPORATION)
(hereinafter called "FutureLink Alberta")
RECITALS
WHEREAS:
1. The Board of directors of FutureLink Alberta wishes to encourage
FutureLink USA to make a take-over bid to the shareholders of
FutureLink Alberta by offering to purchase all of the outstanding
Class "A" Common Voting Shares.
2. The board of directors of FutureLink Alberta has determined that it
would be in the best interest of FutureLink Alberta and its
shareholders to recommend acceptance of the FutureLink USA offer to
the shareholders of FutureLink Alberta to cooperate with FutureLink
USA and take all reasonable action to support the FutureLink USA
offer.
3. The board of directors of FutureLink Alberta has determined that it
would be in the best interest of FutureLink Alberta and its
shareholders to enter into this Agreement; and
4. FutureLink USA is willing to make an offer subject to the terms and
conditions of this Agreement.
NOW THEREFORE IN CONSIDERATION of the mutual covenants hereinafter set out, the
parties hereby agree as follows:
<PAGE> 2
ARTICLE I
THE OFFER
1.1 THE OFFER
(a) Subject to the terms and conditions of this Agreement, FutureLink
USA agrees to mail on or about August 3, 1998 or so soon as the
documentation is available to the holders of Class "A" Common Voting
Shares of FutureLink Alberta an offer to purchase all of the
outstanding Class "A" Common Voting Shares of FutureLink Alberta, by
the exchange of one (1) FutureLink USA Common Share for each issued
and outstanding FutureLink Alberta Class A Common Voting Share
subject to the terms and conditions set out in the Offer marked as
Schedule "A" to this Agreement (as such Offer may be amended from
time to time as permitted under this Agreement. FutureLink USA
expressly reserves the right to modify the terms of the Offer except
that, without the prior written consent of FutureLink Alberta,
FutureLink USA shall not reduce the Offer price; change the form of
consideration payable under the Offer; or add to, amend or change
any of the Offer terms in any manner adverse to the holders of
Shares.
(b) The Offering shall expire approximately 21 calendar days after it is
commenced (or, if such date is not a business day, on the next
following business day), provided that the Offer may be extended, at
the sole discretion of FutureLink USA, if the conditions thereto set
forth in Schedule "A" hereto are not satisfied on the expiry day of
the Offer. Subject to the satisfaction or waiver of the conditions
set forth in Schedule "A" hereto, FutureLink USA shall within the
time periods required by law take up and pay for all Class "A"
Common Voting Shares validly tendered (and not properly withdraw)
pursuant to the Offer. FutureLink USA shall use its reasonable
commercial efforts to consummate the Offer, subject only to the
terms and conditions hereof.
1.2 FUTURELINK ALBERTA APPROVAL OF THE OFFER
(a) FutureLink Alberta represents that its board of directors, upon
consultation with its advisors, has determined unanimously that:
(i) the Offer is fair to and is in the best interest of FutureLink
Alberta and its Shareholders
(ii) The board of directors will recommend that FutureLink Alberta
Shareholders accept the Offer; and
(iii) this Agreement is in the best interests of FutureLink Alberta and
the Shareholders;
2
<PAGE> 3
(b) FutureLink Alberta represents that its board of directors has received an
opinion from CST Financial Services Inc., that the Offer is fair from a
financial point of view to the Shareholders.
1.3 POST OFFER COVENANTS
If FutureLink USA takes up and pays for Class "A" Common Voting Shares
pursuant to the Offer, FutureLink USA and FutureLink Alberta agree to use
all reasonable commercial efforts to enable FutureLink USA to acquire the
balance of the Class "A" Common Voting Shares as soon as practicable after
completion of the Offer by way of compulsory acquisition, arrangement,
amalgamation or other type of acquisition transaction carried out for a
consideration at least of equal value of the consideration paid in the
Offer.
1.4 OUTSTANDING STOCK OPTIONS
FutureLink Alberta agrees and represents that its board of directors has
determined unanimously to use its and their respective best efforts to
encourage and facilitate all persons holding options to purchase Class "A"
Common Voting Shares pursuant to FutureLink Alberta's employee stock
option plan and other compensation arrangements or otherwise, to exercise
their option prior to the expiry of the Offer and to tender all Class "A"
Common Voting Shares issued in connection therewith to the Offer.
FutureLink Alberta further agrees and represents that its board of
directors shall authorize and direct FutureLink Alberta to cause the
accelerated vesting of all stock option entitlements prior to the Expiry
Date.
ARTICLE II
COVENANTS OF FUTURELINK ALBERTA
2.1 ORDINARY COURSE OF BUSINESS
FutureLink Alberta covenants and agrees that;
(a) FutureLink Alberta shall conduct its business only, and not
take any action except in, the usual, ordinary and regular
course of business and consistent with past practice;
(b) FutureLink Alberta shall not directly or indirectly do or
permit to occur any of the following:
(i) issue, sell pledge, lease, dispose of, encumber or agree
to issue, sell, pledge, lease dispose of or encumber:
3
<PAGE> 4
(a) Any additional shares of, or any options,
warrants, calls, conversion privileges or rights
of any kind to acquire any shares of, any capital
stock of FutureLink Alberta (other than pursuant
to the exercise, or
(b) except with the usual, ordinary and regular course
of business and consistent with past practice, any
assets of FutureLink Alberta.
(ii) amend or propose to amend its articles or by-laws;
(iii) split, combine or reclassify any outstanding Class "A"
Common Voting Shares, or declare, set aside or pay any
dividend or other distribution payable in cash, stock,
property or otherwise with respect to the Class "A"
Common Voting Shares;
(iv) redeem, purchase or offer to purchase any Class "A"
Common Voting Shares or other securities of FutureLink
Alberta;
(v) reorganize, amalgamate or merge FutureLink Alberta
with any other person, corporation, partnership or
other business organization whatsoever;
(vi) acquire or agree to acquire (by merger, amalgamation,
acquisition of stock or assets or otherwise) any
persona, corporation, partnership, joint venture or
other business organization or division or acquire or
agree to acquire any material assets;
(vii) except in the usual, ordinary and regular course of
business and consistent with past practice, satisfy
any material claims or liabilities except such as have
been reserved against in FutureLink Alberta's
financial statements delivered to FutureLink USA,
relinquish any material contractual rights or enter
into any interest rate, currency or commodity swaps,
hedges or other similar financial instruments; or
4
<PAGE> 5
(viii) incur or commit to incur any indebtedness for borrowed
money or issue any debt securities except for the
borrowing of working capital in the ordinary course of
business and consistent with past practice not in
excess of $500,000 other than renewals of existing
credit facilities;
(c) FutureLink Alberta shall cooperate with FutureLink USA in
structuring the acquisition by FutureLink USA of FutureLink Alberta
in a tax efficient manner provided that no such cooperation shall be
required where such structuring shall have any adverse effect on
FutureLink Alberta.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FUTURELINK ALBERTA
3.1 REPRESENTATIONS
FutureLink Alberta hereby represents to FutureLink USA that the
information as it relates to FutureLink Alberta as set forth in Schedule
"B" to this Agreement are accurate and FutureLink Alberta hereby warrants
the accuracy of the representations contained therein (and acknowledge
that FutureLink USA is relying upon those representations and warranties
in connection with entering into this Agreement).
3.1 INVESTIGATION
Any investigation by FutureLink USA and its advisors shall not mitigate,
diminish or affect the representations and warranties of FutureLink
Alberta provided pursuant to this Agreement. Where the provisions of
Schedule "B" or elsewhere in this Agreement refer to disclosure in
writing, such disclosure shall be made expressly in response to the
applicable provision and shall be signed by a senior officer of FutureLink
Alberta.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FUTURELINK USA
4.1 REPRESENTATIONS
FutureLink USA hereby represents and warrants to FutureLink Alberta that
the information as it relates to FutureLink USA as set forth in The
Circular attached as Schedule B to this Agreement are accurate and
FutureLink USA hereby warrants the accuracy of the representations
contained
5
<PAGE> 6
therein (and acknowledges that FutureLink Alberta is relying upon such
representations and warranties in connection with the entering into of
this Agreement).
ARTICLE V
MUTUAL COVENANTS
5.1 FURTHER ASSURANCES
Subject to the terms and conditions herein, FutureLink USA and FutureLink
Alberta agree to use their respective commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations, to consummate the transactions contemplated by this Agreement
and the Offer. FutureLink Alberta and FutureLink USA will use their
commercially reasonable efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to material loan agreements,
leases, and other contracts or agreements (including in particular but
without limitation, the agreement of any persons as may be required
pursuant to any agreement, arrangement or understanding relating to
FutureLink Alberta's operations), (ii) to obtain all necessary consents,
approvals and authorizations as are required to be obtained under any
federal, provincial or foreign law or regulations with respect to this
Agreement or the Offer, (iii) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby or by the
Offer, and (iv) to fulfil all conditions and satisfy all provisions of
this Agreement and the Offer.
ARTICLE VI
TERMINATION
6.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective Time:
(a) by mutual written consent of FutureLink USA and FutureLink Alberta;
(b) by either FutureLink USA or FutureLink Alberta after September 30,
1998 if FutureLink USA has not purchased Class "A" Common Voting
Shares pursuant to the Offer;
6
<PAGE> 7
(c) by either FutureLink USA or FutureLink Alberta, if the conditions of
the Offer has not been satisfied or waived on the Expiry Date.
In the event of the termination of this Agreement as provided in this
Section 6.1, (i) this Agreement shall forthwith become void and there
shall be no liability on the part of FutureLink USA or FutureLink Alberta
ARTICLE VII
MISCELLANEOUS
7.1 ENTIRE AGREEMENT
This Agreement and the documents referred to herein constitute the entire
agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements, arrangements or understandings with
respect thereto.
7.2 COUNTERPARTS
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument but all such
counterparts together shall constitute but one Agreement.
7.3 SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
effect, impaired, or invalidated and the parties shall negotiate in good
faith to modify the Agreement to preserve each party's anticipated
benefits under the Agreement.
7.4 CHOICE OF LAW
This Agreement shall be governed by, construed and in accordance with the
laws of the Province of Alberta.
7
<PAGE> 8
7.5 REMEDIES
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to remedy or prevent non-compliance or breaches with the terms
of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the Province of Alberta having jurisdiction;
provided that such remedies shall be in addition to, and not in
substitution for, any other remedy to which the parties may be entitled at
law or in equity.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized as
of the date first written above.
FUTURELINK DISTRIBUTION CORP.
(a Colorado Corporation)
PER:
-----------------------------------
Cameron Chell, President
FUTURELINK DISTRIBUTION CORP.
(an Alberta Corporation)
PER:
-----------------------------------
Cameron Chell, President
8
<PAGE> 1
[FINANCIAL MANAGEMENT ALBERTA LTD. LETTERHEAD]
February 10, 1998
Ms. Mitzi Murray
Futurelink Distribution
Corporation
550 603 - 7 Ave S W
Calg AB T2P 2T5
Re: Policy# GU-1389055 (COMMERCIAL POLICY)
Effective December 1, 1997 to December 1, 1998
Dear Mitzi:
We are pleased to enclose an endorsement for attachment to the above captioned
policy, amending the following:
1. Increasing contents limit to $100,000.
2. Increasing computer equipment limit to $750,000.
3. Increasing extra expense limit to $50,000.
4. Increasing Tenants Legal Liability to $250,000.
5. Adding Innterode Inc. as additional named insured.
These amendments resulted in an additional premium of $863.00 as per our
enclosed invoice. The total premium owing on your account is $1,113.00. Your
prompt attention to this matter is appreciated.
I trust you will find the enclosed in order. If you have any questions or
concerns, please do not hesitate to contact our office.
Thanking you, once again, for your continued support.
Yours truly,
[sig]
John Simonot
<PAGE> 2
COMMERCIAL INSURANCE [GUARDIAN LOGO]
================================================================================
POLICY DECLARATIONS Policy No. CIP 139055
GUARDIAN INSURANCE COMPANY OF CANADA
HEAD OFFICE: 181 UNIVERSITY AVE., TORONTO, ON M5H 3M7
HEREINAFTER CALLED THE INSURER
- --------------------------------------------------------------------------------
The Policy Declarations together with the Supplementary Declarations, Policy
Conditions, forms, riders and endorsements forming a part thereof, complete the
Policy.
- --------------------------------------------------------------------------------
This Document is issued as evidence of: MISCELLANEOUS OR MULTIPLE CHANGE(S)
- --------------------------------------------------------------------------------
Agent/ FINANCIAL MANAGEMENT ALTA. LTD
Broker 100 6001 1A ST. S.W.
CALGARY, ALBERTA T2H0G5 Agent/Broker No. 0168
- --------------------------------------------------------------------------------
Name of FUTURELINK DISTRIBUTION CORP. AND INNTERNODE INC., A WHOLLY
Insured OWNED SUBSIDIARY OF FUTURELINK DISTRIBUTION CORPORATION
- --------------------------------------------------------------------------------
The Named Insured is: CORPORATION
- --------------------------------------------------------------------------------
Postal #550, 603 - 7 AVENUE S.W.
Address of CALGARY
Insured ALBERTA T2P 2T5
- --------------------------------------------------------------------------------
Policy Day Month Year Day Month Year
Period From 29 01 1998 To 01 12 1998
12:01 a.m. standard time at the postal address of the Named
Insured stated herein.
- --------------------------------------------------------------------------------
Loss Refer to the Declarations & form 11407 attached for
if Any, mortgagees or loss payees.
Payable to (The standard mortgage clause printed on form 11410 is
applicable to building(s) only.)
- --------------------------------------------------------------------------------
The insurance provided is only with respect to such of the
following classes of insurance as are indicated by specific
premium charge. Refer to the attached Supplementary
Insurance Declarations for specific kind of coverages, amounts of
Afforded insurance, type of forms applicable and premiums for each
insured location. These premiums may be subject to
adjustment.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS OF INSURANCE PREMIUM $
- --------------------------------------------------------------------------------
<S> <C> <C>
Section 1- Fire and Extended Coverage Insurance
Section 2- Multi-Peril Insurance 226
Section 3- Inland Marine Insurance 1,320
Section 4- Crime Insurance 250
Section 5- Liability Insurance 638
Section 6- Glass Insurance
Section 7- Boiler & Machinery Insurance
Section 8- Miscellaneous Insurance Coverages
- --------------------------------------------------------------------------------
Total Annual Premium 2,434
- --------------------------------------------------------------------------------
PREMIUM FOR THIS TRANSACTION 863
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
THIS POLICY CONTAINS A CLAUSE THAT MAY LIMIT THE AMOUNT PAYABLE
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the Insurer has duly executed this policy, provided,
however, that this policy shall not be valid or binding unless countersigned by
a duly Authorized Representative of the Insurer.
[sig] [sig]
----------------------------------
President Authorized Representative
- --------------------------------------------------------------------------------
(01/97) PAGE 1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
COMMERCIAL INSURANCE [GUARDIAN LOGO]
==================================================================================================================================
POLICY DECLARATIONS Policy No. CIP 1389055
Name of Insured: Risk location no. 1
FUTURELINK DISTRIBUTION CORP. AND INNTERNODE INC., A WHOLLY #550. 603 - 7 AVENUE S.W.
OWNED SUBSIDIARY OF FUTURELINK DISTRIBUTION CORPORATION CALGARY
ALBERTA
- ----------------------------------------------------------------------------------------------------------------------------------
Construction: FIRE-RESISTIVE T2P 2T5
- ----------------------------------------------------------------------------------------------------------------------------------
Business conducted by Insured at the risk location Loss, if any, payable to:
(Absence of entry denotes
loss payable to Insured)
- ----------------------------------------------------------------------------------------------------------------------------------
COMPUTER & INTERNET PROGRAMMING THE MANUFACTURERS LIFE
INSURANCE COMPANY
By others as: 350 - 6 AVENUE S.W.
CALGARY ALBERTA T2P 0G2
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE IS PROVIDED FOR ONLY FOR THOSE COVERAGES FOR WHICH A SPECIFIC AMOUNT OF INSURANCE OR SPECIFIC INDICATIONS OF COVERAGE IS
STATED HEREUNDER.
- ----------------------------------------------------------------------------------------------------------------------------------
Class & Coverage Co-Insurance + Deductible $ Stated Replacement Inflation Earthquake Amounts of Rate Premium $
Form # Codes % Amount Cost Protection Damage Insurance $
- ----------------------------------------------------------------------------------------------------------------------------------
Fire &
E.C.
- -------- B [ ] [ ] [ ] [ ]
E [ ] [ ] [ ]
S [ ]
APB [ ] [ ] [ ]
ACB [ ] [ ]
BR As per paragraph 2 (A) of form [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-
Peril
- --------
CBF [ ] [ ] [ ] [ ]
11088 OCF 90 500 [ ] [X] [ ] 100,000 .100 100
BR As per paragraph 3 (A) of form [ ]
BCBF [ ] [ ] [ ] [ ]
CPF [ ] [ ] [ ]
And also ) 9(B) $ 8(C) $ 3(D) $
as per ) (as per paragraph
paragraphs ) 9(E) $ 9(F) $ of form 3(A) of form)
- -----------------------------------------------------------------------------------------------------------------------------------
Business Ordinary Ordinary Period
Interruption Full Payroll Limited Payroll of
- ------------ Coverage Cover Excluded Indemnity
-------------------------------------------------
RI see form
ME see form
GE [ ] [ ] [ ] see form
PFTS see form [ ] [ ] months
11104 EE see form 50,000 .252 126
- -----------------------------------------------------------------------------------------------------------------------------------
Inland Deductible $
Marine ------------
- -------
11125 VALUABLE PAPERS 500 250,000 150
11128 MISCELLANEOUS FORM (BROAD) 1,000 12,000 3.500 420
11411 (PART "C" COMPUTER SYSTEMS PROTECTION) SEE DEC SEE CSP DEC .100 750
- -----------------------------------------------------------------------------------------------------------------------------------
Crime Description of Coverage
- ------------------------------------------------------------------------------------------------
Inside, Outside Robbery: (A) Inside Robbery
(B) Outside Robbery
Damage to building by Burglary/Robbery
Stock Burglary
Safe Burglary
11138 Money and Securities: (A) Inside Loss 10,000 250
(B) Outside Loss 10,000 INCL
Comprehensive Dishonesty and Forgery See Crime
Scheduled Fidelity Coverage Declarations
- -----------------------------------------------------------------------------------------------------------------------------------
Liability
- ---------
11404 SECTION 5 - LIABILITY INSURANCE (PART "A") See Liability 638
Declarations
- -----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Deductible $
- ------------- ------------
* Earthquake deductible: % or amount $
Glass Insurance
- -----------------------------------------------------------------------------------------------------------------------------------
(01/97) DEFINITIONS OF COVERAGE CODES USED ABOVE ARE PRINTED ON FORM 11410 TOTAL PREMIUM THIS PAGE 2,434
- -----------------------------------------------------------------------------------------------------------------------------------
PAGE 2
</TABLE>
<PAGE> 4
COMMERCIAL INSURANCE [GUARDIAN LOGO]
================================================================================
SUPPLEMENTARY DECLARATIONS POLICY NO. CIP 1389055
SECTION 3 - INLAND MARINE INSURANCE (PART "C" - COMPUTER SYSTEMS PROTECTION)
Effective Date 29/01/98
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Loss, if any, payable as follows: Risk location no. 1
- ------------------------------------------------------------------------------------------------------------------------------------
#550, 603 - 7 AVENUE S.W.
CALGARY
ALBERTA
T2P 2T5
(absence or entry denotes loss payable to the insured)
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE IS PROVIDED FOR ONLY THOSE COVERAGES FOR WHICH FORMS ARE ATTACHED AND A SPECIFIC AMOUNT OF INSURANCE OR SPECIFIC
INDICATION OF COVERAGE IS STATED HEREUNDER.
- ------------------------------------------------------------------------------------------------------------------------------------
Co-
Form No. Description of Coverages Insurance Deductible Amount of insurance $ Premiums $
11114 %
- ------------------------------------------------------------------------------------------------------------------------------------
SYSTEMS HARDWARE & EQUIPMENT
Primary cover 90 1,000 750,000 750
Difference in Conditions Cover
ITEM 1 * [ ] Actual Cash Value
* [X] Replacement Cost
* [ ] Stated Amount
* (see clause 9 & 10 of items No. 1 in form)
- ------------------------------------------------------------------------------------------------------------------------------------
ACTIVE SYSTEMS MEDIA
ITEM 2 [ ] Valued items
(if checked see list of specified items attached)
- ------------------------------------------------------------------------------------------------------------------------------------
VALUABLE PAPERS AND RECORDS
ITEM 3 [ ] Valued items
(if checked see list of specified items attached)
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM 4 ACCOUNTS RECEIVABLE
- ------------------------------------------------------------------------------------------------------------------------------------
EXTRA EXPENSE
ITEM 5 Period of indemnity not to Exceed ------------------------------------------> days
48 hours waiting period applicable to item #5
(see clause 7 of item 5 in form #11114)
- ------------------------------------------------------------------------------------------------------------------------------------
BUSINESS INTERRUPTION
ITEM 6 48 hours waiting period applicable to item #6 per working day
(see clause 8 of item 6 in form #11114) for days
- ------------------------------------------------------------------------------------------------------------------------------------
ENDORSEMENT AND OTHER SPECIAL CONDITIONS
- ------------------------------------------------------------------------------------------------------------------------------------
DEDUCTIBLE CLAUSE:
-----------------
DEDUCTIBLE AMOUNT UNDER ALL ITEMS OF FORM NO. 11114 IS $1,000 IN RESPECT TO LOSS OR DAMAGE CAUSED BY ELECTRICAL
OR MECHANICAL BREAKDOWN OR $500 IN RESPECT TO LOSS OR DAMAGE CAUSED BY ANY OTHER INSURED PERIL.
- ------------------------------------------------------------------------------------------------------------------------------------
(03/97) Total Premium This Page 750
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 3
</TABLE>
<PAGE> 5
COMMERCIAL INSURANCE [GUARDIAN LOGO]
- --------------------------------------------------------------------------------
STANDARD MORTGAGE CLAUSE
(approved by The Insurance Bureau of Canada)
(applicable to Buildings only - Excluding Quebec)
IT IS HEREBY PROVIDED AND AGREED THAT:
1. Breach of Conditions by Mortgagor, Owner or Occupant - This insurance and
every documented renewal thereof - AS TO THE INTEREST OF THE MORTGAGEE ONLY
THEREIN - is and shall be in force notwithstanding any act, neglect, omission
or misrepresentation attributable to the mortgagor, owner or occupant of the
property insured, including transfer of interest, any vacancy or non-occupancy,
or the occupancy of the property for the purposes more hazardous than specified
in the description of the risk;
PROVIDED ALWAYS that the Mortgagee shall notify forthwith the Insurer (if
known) of any vacancy or non-occupancy extending beyond thirty (30) consecutive
days, or of any transfer of interest or increased hazard THAT SHALL COME TO HIS
KNOWLEDGE; and that every increase of hazard (not permitted by the policy)
shall be paid for by the Mortgagee - on reasonable demand - from the date such
hazard existed, according to the established scale of rates for the acceptance
of such increased hazard, during the continuance of this insurance.
2. Right of Subrogation - Whenever the Insurer pays the Mortgagee any loss
award under this policy and claims that - as to the Mortgagor or Owner - no
liability therefor existed, it shall be legally subrogated to all rights of the
Mortgagee against the Insured; but any subrogation shall be limited to the
amount of such loss payment and shall be subordinate and subject to the basic
right of the Mortgagee to recover the full amount of its mortgage equity in
priority to the Insurer; or the Insurer may at its option pay the Mortgagee all
amounts due or to become due under the mortgage or on the security thereof, and
shall thereupon receive a full assignment and transfer of the mortgage together
with all securities held as collateral to the mortgage debt.
3. Other Insurance - If there be other valid and collectible insurance upon
the property with loss payable to the Mortgagee - at law or in equity - then
any amount payable thereunder shall be taken into account in determining the
amount payable to the Mortgagee.
4. Who May Give Proof of Loss - In the absence of the Insured, or the
inability, refusal or neglect of the Insured to give notice of loss or deliver
the required Proof of Loss under the policy, then the Mortgagee may give the
notice upon becoming aware of the loss and deliver as soon as practicable the
Proof of Loss.
5. Termination - The term of this mortgage clause coincides with the term of
the policy;
PROVIDED ALWAYS that the Insurer reserves the right to cancel the policy as
provided by Statutory provision but agrees that the Insurer will neither
terminate nor alter the policy to the prejudice of the Mortgagee without the
notice stipulated in such Statutory provision.
6. Foreclosure - Should title or ownership to said property become vested in
the Mortgagee and/or assigns as owner or purchaser under foreclosure or
otherwise, this insurance shall continue until expiry or cancellation for the
benefit of the said Mortgagee and/or assigns.
SUBJECT TO THE TERMS OF THIS MORTGAGE CLAUSE (and these shall supersede any
policy provisions in conflict therewith BUT ONLY AS TO THE INTEREST OF THE
MORTGAGEE), loss under this policy is made payable to the Mortgagee.
- --------------------------------------------------------------------------------
DEFINITIONS OF COVERAGE CODES
Fire and Extended Coverage Section:
B - Building, E - Equipment, S - Stock in trade,
APB - All Property (Blanket), ACB - All Contents (Blanket),
BR - Builders Risk.
Multi-peril Section:
CBF - Commercial Building Form, OCF - Office Contents Floater,
BR - Builders Risk, BCBF - Building & Contents Broad Form,
CPF - Commercial Property Floater.
Business Interruption Section:
RI - Rental Income, ME - Monthly Earnings, GE - Gross Earnings,
PFTS - Profits, EE - Extra Expense.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TERMINATION OF POLICY NO. CIP 1389055
Day Month Year
Date of Termination
-------------------------
Date of Policy
-------------------------
Time in Force Days
-------------------------
Whole Premium $
------------------------
Premium Earned $
------------------------
Rebate $
------------------------
Please state whether PRO RATA or SHORT RATE and why:
- --------------------------------------------------------------
Return Premium
-------------------------------
Agent/Broker
- ------------------------------------------------- -----------------------------
Signature Date
In Consideration of Dollars,
-----------------------------------------------------
return Premium, the receipt of which is hereby acknowledged, this policy is
terminated and surrendered to the INSURER, and Interim and Renewal
Certificates, (if any), for same, acknowledged to be of no effect.
Insured.
----------------------
PAYEE, (IF ANY), MUST
DISCHARGE INTEREST
Payee.
-----------------------
- --------------------------------------------------------------------------------
PAGE 4
<PAGE> 6
COMMERCIAL INSURANCE [GUARDIAN LOGO]
_______________________________________________________________________________
SUPPLEMENTARY DECLARATIONS POLICY NO. CIP 1389055
SECTION 5 - LIABILITY INSURANCE (PART "A") Effective Date 29/01/1998
_______________________________________________________________________________
INSURANCE IS PROVIDED FOR ONLY THOSE COVERAGES FOR WHICH FORMS ARE ATTACHED AND
SPECIFIC LIMITS OF INSURANCE OR SPECIFIC INDICATION OF COVERAGE ARE STATED
HEREUNDER. OUR LIMIT OF INSURANCE AGAINST EACH SUCH COVERAGE SHALL BE AS STATED
HEREIN, SUBJECT TO ALL THE TERMS OF THIS POLICY HAVING REFERENCE THERETO.
_______________________________________________________________________________
SCHEDULE NO. 1 (Forms, coverages and limits of insurance)
_______________________________________________________________________________
Form No. Coverage and Limits of Insurance
_______________________________________________________________________________
<TABLE>
<S> <C> <C> <C>
11550 COMMERCIAL GENERAL LIABILITY $ 2,000,000
Each Occurrence Limit $ 2,000,000
Products-Completed Operations Aggregate Limit $ 2,000,000
Personal Injury Limit $ 2,000,000
Tenants Legal Liability Limit $ 250,000 any one premises
/X/ Broad Form (/X/ check where coverage applicable)
Medical Expense Limit $ 10,000 any one person
11158 Non-Owned Automobile $ 2,000,000 Inclusive limit for bodily injury
and property damage combined
______________________________________________________________________________________________________________________________
SCHEDULE NO. 1A (deductibles)
______________________________________________________________________________________________________________________________
Coverage A - Bodily Injury Liability $ per claim $ per occurrence
- Property Damage Liability $ per claim $ 500 per occurrence
- Bodily Injury Liability and $ per claim $ per occurrence
Property Damage Liability combined
</TABLE>
Enter below any limitations on the application of the deductibles. If no
limitation is entered, the deductibles apply to compensatory damages for
all "Bodily Injury" and/or "Property Damage", however caused:
_______________________________________________________________________________
SCHEDULE NO. 2 (Additional coverages)
_______________________________________________________________________________
The following additional coverages are included where indicated by /X/
/ / Employers' Bodily Injury Liability / / Voluntary Compensation
/ / Garage Liability
_______________________________________________________________________________
SCHEDULE NO. 3 (Description of operations - premises if different from Policy
Declarations)
_______________________________________________________________________________
COMPUTER & INTERNET PROGRAMMING
_______________________________________________________________________________
SCHEDULE NO. 4 (Premium, including rating basis and additional endorsements)
_______________________________________________________________________________
Code No. Premium Basis Rate $ Advance Premium $
_______________________________________________________________________________
6610 REVENUE 225,000 2.444 PER 1,000 REVENUE 550
2222 LIMIT OF INS. 250,000 .025 PER $100 OF INSURANCE 63
(TLL)
1111 FLAT CHARGE(NOA) 25
_______________________________________________________________________________
The following endorsements are attached to this form:
EXCLUSION - ERRORS & OMISSIONS INSURANCE
_______________________________________________________________________________
MINIMUM PREMIUM $638 TOTAL ADVANCE PREMIUM THIS PAGE $638
_______________________________________________________________________________
PAGE 5
<PAGE> 7
COMMERCIAL INSURANCE [GUARDIAN LOGO]
================================================================================
CLAUSES/ENDORSEMENTS POLICY NO. CIP 1389055
Agent/Broker Name: No.
FINANCIAL MANAGEMENT ALTA. LTD 0168
- --------------------------------------------------------------------------------
Name of Insured: FUTURELINK DISTRIBUTION CORP. AND INNTERNODE INC., A WHOLLY
OWNED SUBSIDIARY OF FUTURELINK DISTRIBUTION CORPORATION
- --------------------------------------------------------------------------------
Effective Date: 29/01/1998
- --------------------------------------------------------------------------------
OVERNIGHT LIMITATION
THIS ENDORSEMENT MODIFIES INSURANCE PROVIDED UNDER THE FOLLOWING:
BROAD FORM MONEY AND SECURITIES #11138
THE AMOUNT OF INSURANCE IN RESPECT TO BROAD FORM MONEY AND SECURITIES FORM
11138. INSIDE PREMISES, IS REDUCED TO $500 WHILST THE PREMISES ARE CLOSED
FOR BUSINESS.
- --------------------------------------------------------------------------------
PAGE 7
<PAGE> 8
COMMERCIAL INSURANCE [GUARDIAN LOGO]
CLAUSES/ENDORSEMENTS POLICY NO. CIP 1389055
Agent/Broker Name: No.
FINANCIAL MANAGEMENT ALTA, LTD 0168
- --------------------------------------------------------------------------------
Name of Insured: FUTURELINK DISTRIBUTION CORP. AND INNTERNODE INC., A WHOLLY
OWNED SUBSIDIARY OF FUTURELINK DISTRIBUTION CORPORATION
- --------------------------------------------------------------------------------
Effective Date: 29/01/1998
- --------------------------------------------------------------------------------
EXCLUSION - ERRORS AND OMISSIONS
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE FORM #11550
This insurance does not apply to "bodily injury", "property damage" or
"personal injury" arising out of:
1. The rendering of or failure to render any professional services by or
for you including:
(a) The preparing, approving, or failing to prepare or approve maps,
drawings, opinions, reports, surveys, change orders, designs or
specifications; and
(b) Supervisory, inspection or engineering services of engineers,
architects and surveyors.
2. The rendering or failure to render any professional services by or for
you in the performance of any claim, investigation, adjustment,
appraisal or audit service.
3. The rendering or failure to render any of the following designated
professional services by you or for you:
COMPUTER & INTERNET PROGRAMING
<PAGE> 1
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT DATED AND EFFECTIVE THIS 19TH DAY OF JANUARY, 1998.
BETWEEN:
JOHN ANASTASIOS XINOS,
OF THE CITY OF VANCOUVER, IN THE PROVINCE OF BRITISH COLUMBIA
(HEREINAFTER REFERRED TO AS "XINOS")
OF THE FIRST PART
-AND-
CORE VENTURES INC.
A BODY CORPORATE WITH AND OFFICE IN THE CITY OF VANCOUVER,
IN THE PROVINCE OF BRITISH COLUMBIA
(HEREINAFTER REFERRED TO AS "CORE")
OF THE SECOND PART
WHEREAS CORE is currently involved in the acquisition of FutureLink
Distribution Corp., a body corporate of the City of Calgary, in the Province of
Alberta;
AND WHEREAS the consideration to be paid by Core Ventures to FutureLink
Distribution is shares in Core Ventures Inc.;
AND WHEREAS there has been a Statement of Claim issued against Core
Ventures Inc., Raymond Kompani, Abicorn Enterprises, Alixe Cormick, and Venture
Law Corporation by Midland Walwyn Capital Inc. in Court File #97-CV-134063;
AND WHEREAS the major shareholders in FutureLink Distribution Corp.
require that Core Ventures Inc. be indemnified of any liability Core may incur
as a result of it being involved in such litigation;
AND WHEREAS JOHN XINOS is desirous of providing the following
indemnification on matters relating to, associated with and arising out of the
Statement of Claim;
<PAGE> 2
Indemnity Agreement
-Page 2-
NOW THEREFORE in consideration of the sum of TEN ($10.00) DOLLARS paid
by each party to the other, the receipt of which is hereby acknowledged, plus
all other good and valuable consideration, the parties covenant and agree as
follows:
1. XINOS agrees to indemnify and save CORE harmless from any and all
claims, damages, costs, expenses, or fees which may be expended or
incurred by CORE on all matters relating to or arising from the
Statement of Claim.
2. Without in any manner restricting the generality of the foregoing, it
is specifically acknowledged and agreed that the indemnification
provided by XINOS in favour of CORE shall specifically include any:
(a) legal fees and disbursements reasonably incurred by CORE in
defending and investigating such claims.
(b) Any judgment that may result from the Statement of Claim
whether the judgment may be a default judgment of a judgment
after trial.
3. This indemnification shall remain in full force and effect until such
time that CORE's liability under the Statement of Claim has been
extinguished.
4. XINOS further agrees to indemnify and save CORE harmless from any and
all claims, damages, costs, expenses, or fees which may be expended or
incurred by CORE on any judgment relating to or arising from the
Statement of Claim.
5. Prior to the commitment to pay or the actual payment of any funds by
XINOS to CORE in accordance with clauses 1 - 4 above, CORE shall
provide documentation in sufficient detail so as to allow XINOS, acting
reasonably, to satisfy and confirm itself that the indemnification is
required to be made.
<PAGE> 3
Indemnity Agreement
-Page 3-
6. It is acknowledged that XINOS shall be entitled to assume conduct of
the Defence of this action so long as XINOS acts reasonably and
prudently.
7. Concurrent with payment by XINOS of any funds relating to the
aforedescribed indemnification, CORE shall agree to assign and convey
to XINOS any rights they may have to claim reimbursement from any third
parties.
8. In the event that a dispute arises as to the amount, timing, or
obligation to provide the indemnity, the matter shall immediately be
referred to arbitration pursuant to the provisions of the Arbitration
Act of Alberta then in force to be decided by a single arbitrator
within 30 days of the requested arbitration and the decision of the
arbitrator shall be final and binding. All costs associated with the
arbitration shall be subject to the sole discretion of the arbitrator.
9. The parties agree to enter into and execute such further and other
documents as may be necessary to give full and complete effect to the
terms of this Agreement and the intentions hereinbefore set out.
10. This Agreement shall enure to and be binding upon the heirs, executors,
administrators, and assigns of the parties hereto.
IN WITNESS WHEREOF the parties have set their hands and seals on the
date first above written.
__________________________________ ___________________________________
Witness JOHN ANASTASIOS XINOS
CORE VENTURES INC.
__________________________________ Per ___________________________________
Witness CAMERON CHELL, PRESIDENT
<PAGE> 4
L E T T E R O F A G R E E M E N T
THIS AGREEMENT, dated for reference December 19, 1997, is made
BETWEEN:
FUTURELINK DISTRIBUTION CORP., a company incorporated under the law of
Alberta, having its head office at 550-603-7 Avenue S.W., Calgary.
Alberta T2P 2T5
(the "COMPANY")
AND
FUNDCORP FINANCIAL INC., a company incorporated under the laws of British
Columbia, having an office at 13th Floor, Park Place, 666 Burrard Street,
Vancouver, British Columbia, V6C 318
("FUNDCORP")
The basic business of COMPANY is to provide to its customers a computer based
network system including software, hardware, electronic programming content and
maintenance. This system is rented to customers on a 36 month term contract
base. COMPANY desires to form a financing arm of its operations to manage over
the procurement of financial underwriting of the rental agreements and to
interface with the customers in regards to contract finance. This finance
department will be developed such that it will become a profit centre to
COMPANY.
COMPANY has declared to FUNDCORP that it has intentions to, (in the early part
of 1998) merge its shares with those of a NASDAQ public trading company in
order to facilitate needed equity financing for its operations. Accordingly,
the share warrants referred to in this agreement will become a condition of
closing the merger with the public company.
COMPANY has elected to appoint FUNDCORP to manage over the establishment and
ongoing operations of this aforementioned financing division of COMPANY and the
two parties therefore agree as follows:
WHEREAS:
A. FUNDCORP has agreed to assist the COMPANY over the next 60 months in
obtaining, structuring, negotiating, managing and settling a combination of
debt, and other credit financing arrangements including a line of credit,
with certain financial institutions or persons, throughout North America.
(Collectively, the "Financing Arrangements and Management"); and
<PAGE> 5
B. In consideration for its services in connection with the Financing
Arrangements and Management and its continuing assistance in removing the
conditions precedent to and facilitating the closing of the Financing
Arrangements, the COMPANY has agreed to pay to FUNDCORP as a finder's fee
(the "Finder's Fee"). 1% of the amounts provided to the COMPANY from time
to time pursuant to the Financing Arrangements. FUNDCORP will also be
entitled to share prorata, one third (1/3) of the net income after tax
earned by the Finance Department(1).
C. FUNDCORP will be reimbursed all out of pocket costs related to COMPANY and
will be entitled to draw an advancement of $6,000 per month against finder
fee earnings during the six month period following the signing of this
agreement.
THEREFORE, the parties agree.
1. FUNDCORP will use its best efforts to assist the COMPANY over the next 60
months in obtaining, structuring, negotiating and settling the terms of
the Financing Arrangements and in removing the conditions precedent there
to and facilitating the closing of the transactions contemplated in the
Financing Arrangements. FUNDCORP will manage over the development of
COMPANY finance division and its documentation and related structure.
2. FUNDCORP will also provide advice to the COMPANY over the next 60 months
with respect to various finance possibilities, including without
limitation, debt/equity swaps, barter arrangements and similar financial
arrangements with certain financial institutions (unless FUNDCORP's
engagement is otherwise terminated in accordance with the provisions of
this Agreement). FUNDCORP will also provide management counsel to
COMPANY'S President and assist in the strategic planning of COMPANY'S
business.
3. The COMPANY will pay to FUNDCORP as follows:
a) Cash payment of 1% of amounts provided to COMPANY from time to time
pursuant to Financing Arrangements paid to FUNDCORP net of any
advances paid to FUNDCORP, and
b) Cash payment equal to one third (1/3) of the operating profit of
COMPANY finance department of COMPANY as described earlier in this
agreement. This payment is to be paid to FUNDCORP within 30 days of
each annual date of the signing of this agreement.
c) Cash payment to reimburse all receipted and authorized out of pocket
expenses incurred by FUNDCORP while fulfilling the duties called for
under this agreement with COMPANY.
- -----------------
(1) "Net Income" to be determined by an independent audit
<PAGE> 6
d) Issuance of 250,000 Warrants upon signing of this agreement each
warrant entitling FUNDCORP to acquire one freely tradable common
share of COMPANY for each Warrant redeemed. FUNDCORP agrees with
COMPANY not to exercise these Warrants for a twelve month period from
date of this agreement unless otherwise requested by COMPANY.
Provided this agreement has not been cancelled:
e) Issuance of additional 250,000 Warrant upon signing of this agreement
each Warrant entitling FUNDCORP to acquire one common share of
COMPANY for each Warrant redeemed not freely tradable for a one year
period from the signing of this agreement.
4. Each Warrant will entitle FUNDCORP to acquire one common share of the
COMPANY for a period of two years from the date of issuance of the
Warrants at a price of CDN $0.75 each.
5. The right to receive the Warrants under this Agreement may not be assigned
or transferred in any way without the prior written approval of the
COMPANY or applicable Exchange; if the common shares of the COMPANY are
listed on an Exchange, and where necessary, any other stock exchange or
quotation system upon which the Company's securities may be listed or
quoted.
6. The COMPANY will issue the Warrants to FUNDCORP under the applicable
exemptions Rules of the Securities Act of the applicable exchange.
7. The obligations of the COMPANY to provide Warrants to FUNDCORP under this
Agreement are subject to the acceptance by the applicable Exchange. The
Company will file this Agreement for acceptance with the Exchange, will
diligently seek the acceptance of the Exchange to this Agreement, and will
take all other steps and file such other documents as may be necessary in
connection with the transactions contemplated by this Agreement, including
without limitation, filing, from time to time, Forms under the Securities
Act with the Securities Commission in connection with the issuance of
Warrants to FUNDCORP.
8. FUNDCORP represents and warrants to the COMPANY that:
a) It is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated, continued or amalgamated;
and
b) It will fully comply with the requirements of all applicable
securities laws, including without limitation, the Securities Act and
its rules and regulations and with the Regulatory Authorities, in all
matters relating to the performance of this Agreement.
9. FUNDCORP acknowledges and agrees that:
No Finder's Fee is payable by the COMPANY in connection with
financing provided to the COMPANY from time to time pursuant to its
normal operating lines of credit with its bankers.
<PAGE> 7
10. FUNDCORP will keep all information provided to it by the COMPANY and all
notes, analysis, compilations or other documents containing or derived
from the Financing Arrangements strictly confidential and will not use
such information for any purpose other than performing the services under
this Agreement and will not, without the prior written consent of the
COMPANY, disclose any of the information.
11. FUNDCORP will act as an agent of the COMPANY only, but will not have the
authority to bind or commit the COMPANY to any Financing Arrangement
unless specifically authorized by a signing officer of COMPANY or where
required by resolution of the board of directors of the COMPANY.
12. Time is of the essence of this Agreement.
13. This Agreement constitutes the entire agreement between the parties with
respect to Financing Arrangements and supersedes and replaces any prior
understanding and agreements between parties with respect to Financing
Arrangements.
IN WITNESS of this Agreement, the parties have executed and delivered this
Agreement as of the date given above.
THE COMMON SEAL of FUTURELINK DISTRIBUTION CORP.
was hereunto affixed in the presence of:
[SIG]
- --------------------------------------
Authorized Signatory
- --------------------------------------
Authorized Signatory
THE COMMON SEAL of FUNDCORP FINANCIAL INC.
was hereunto affixed in the presence of
[SIG]
- --------------------------------------
Authorized Signatory
[SIG]
- --------------------------------------
Authorized Signatory
<PAGE> 1
CORE VENTURES, INC.
688 WEST HASTINGS STREET
SUITE 618, VANCOUVER, BRITISH COLUMBIA
V6B 1P1
August 22, 1997
Adam Gottbetter, Esq.
Kaplan Gottbetter & Levenson, LLP
Attorney for Core Venture, Inc.
630 Third Avenue
New York, NY 10017
RE: PROPOSED ACQUISITION OF PRINTSCAN INTERNATIONAL, INC., A NEW JERSEY
CORPORATION, BY CORE VENTURES, INC., A COLORADO CORPORATION
Dear Mr. Gottbetter:
This Letter of Intent is intended to confirm our recent discussions
with respect to the proposed acquisition by Core Ventures, Inc., a Colorado
Corporation (hereafter referred to as "Core") of PrintScan International, Inc.,
("PrintScan"), in exchange for 8,683,888 shares of Core common stock par value
$.001 per share ("Common Stock") on a share for share basis. It has been the
object of our discussion to execute and implement as soon as practical a
definitive acquisition agreement and plan of reorganization between Core and
PrintScan which among other things, would provide for the various matters set
forth below:
1. ACQUISITION
a) Subject to the conditions listed below in paragraph 8, it is
intended that Core shall acquire all of the outstanding shares of PrintScan (the
"Acquisition") in exchange for 8,683,888 shares of Core Common Stock to be
issued to the current shareholders of PrintScan representing 55% of the total
shares issued after completion of the Acquisition and floatation of 1,000,000
shares. All of the 8,683,888 shares of Core Common Stock shall be issued from
the authorized, but previously unissued Core Common Stock pursuant to the
transactions contemplated hereby and shall be deemed "restricted securities" as
defined by Rule 144 of the Securities Act of 1933, as amended (the "Act"). It is
the further intent of the parties hereto that following the execution of the
acquisition agreement, PrintScan shall become a wholly-owned subsidiary of Core,
that the principal place of business of Core shall be moved to New Jersey and
that the management and operations of Core will be reorganized to become engaged
in the current business endeavors of PrintScan.
b) It is the intent of the parties that the Acquisition shall be
structured so as to qualify as a tax free exchange pursuant to the provision of
Section 351 of the Internal Revenue Code.
<PAGE> 2
c) It is intended that both parties will take all necessary actions in
order to facilitate the proposed transaction and cause the consummation of the
transactions contemplated herein.
d) It is the intent of the parties that the Acquisition shall be
consummated subject to the fulfillment of the terms and conditions set forth
herein and upon the consent of the shareholders of PrintScan and Core.
2. CAPITALIZATION OF CORE
As of this date hereof, Core has an authorized capitalization of
30,000,000 shares of common stock, par value $.001 per share ("Common Stock") of
which 6,105,000 shares are issued as of the date of final agreement. After the
Acquisition, there will be approximately 14,788,888 shares of Common Stock
outstanding.
3. SHAREHOLDER'S MEETING
Upon the execution of this Letter of Intent, Core will immediately take
the appropriate and necessary corporate action to hold a Special Meeting of
Shareholders in order to vote on and authorize the Acquisition by Core of
PrintScan and to authorize the issuance by Core to the PrintScan shareholders
and/or their assigns 8,683,888 shares of authorized but previously unissued Core
Common Stock. Also, the shareholders of Core will be presented with and asked to
vote upon the following proposals:
a) To effect an amendment to the Articles of Incorporation of Core
whereby the authorized capitalization will be changed to 35,000,000 shares
consisting of 30,000,000 shares of common stock, with a par value of $0.001 per
share and 5,000,000 shares of blank check preferred stock, with a par value of
$0.001 per share.
b) To elect a new Board of Directors to consist of five (5) members of
which three (3) shall be nominated by PrintScan and two (2) by Core.
c) To change the corporate name of Core to "PrintScan International
Corp." ("PIC").
d) To reincorporate PIC in the State of Delaware as soon as is
practicable after the closing of the Acquisition.
e) To take whatever corporate action deemed necessary by the parties
hereto in order to carry out the transactions anticipated hereby.
4. FINAL AGREEMENT
Immediately following the execution of this Letter of Intent
by Core and PrintScan, the parties shall endeavor to have prepared the
final agreement between the parties, which agreement shall embody the
definitive contractual obligations to which the parties agree to be
bound and shall elaborate the terms and conditions set forth herein and
<PAGE> 3
shall contain the representations, warranties and indemnities that are
customary in such agreements ("Final Agreement"). No commitment by
either party will be binding in the event a material discrepancy exists
between the actual facts and situations as they exist, and that which
is disclosed in the course of execution of this Letter of Intent. This
letter of Intent is designed to express the intent of the parties and
to take the course of action expressed herein, and, it is further
intended that the terms and conditions expressed herein will be
included in the Final Agreement.
5. REPRESENTATIONS OF CORE
a) Core is a corporation duly organized, validly existing and in good
standing under the law of the State of Colorado, and has the authority to
execute this Letter of Intent and to be bound by the terms and conditions hereof
and to enter and be bound by the Final Agreement.
b) Upon execution of the Final Agreement, Core will have $500,000.00 in
cash assets (the "Cash Asset"), which shall be held pursuant to paragraph 7
below and no liabilities except for those that shall be agreed by the parties.
c) Core has or will obtain prior to the close of the Final Agreement,
all necessary corporate actions required for the execution of this Letter of
Intent and the Final Agreement.
d) Core represents that it will not enter into any contract or
agreement with any other entity prior to the execution of the Final Agreement
which may effect the terms or materiality of this Letter of Intent.
e) Core represents that it has good and marketable title to all assets
and liabilities set forth in its financial statements and that any and all
liens, mortgages or other encumbrances against said assets and properties are
duly and completely set forth in the respective financial statements, business
plan or other presentations which is made available to the other party before
execution of the final Agreement.
6. REPRESENTATIONS OF PRINTSCAN
a) PrintScan is a corporation duly organized, validly existing and in
good standing under the laws of New Jersey and has the authority to execute this
Letter of Intent and to be bound by the terms and conditions hereof and to enter
and be bound by the Final Agreement.
b) PrintScan has or will obtain prior to the close of the Final
Agreement, all necessary corporate actions required for the execution of this
Letter of Intent and the Final Agreement.
c) PrintScan represents that it will not enter into any contract or
agreement with any other entity prior to the execution of the Final Agreement
which may effect the terms or materiality of this Letter of Intent, so long as
the Final Agreement proceeds in a timely businesslike manner and is executed
within thirty (30) days of the execution of this Letter of Intent.
<PAGE> 4
d) PrintScan represents that it has good and marketable title to all
assets and liabilities set forth in its financial statements and that any and
all liens, mortgages or other encumbrances against said assets and properties
are duly and completely set forth in the respective financial statements,
business plan or other presentations which are made available to the other party
before execution of the Final Agreement.
e) PrintScan states that all representations made in the business plan
regarding PrintScan products, technology, capabilities and contracts are
accurate only as to those representations made by PrintScan to Core.
f) PrintScan represents and acknowledges that the 8,683,888 shares of
Core Common Stock to be issued pursuant to the terms of the Final Agreement (as
described in paragraph 1) shall be deemed "restricted securities" as defined by
Rule 144 of the Act, and that the recipients are acquiring such shares for
"investment purposes only" and not with the intent to make any further
distribution of such shares.
g) The Board of PrintScan has agreed to the terms transferring from
PrintScan Holdings Ltd. ("PHL") to PrintScan the patent in the Republic of
Ireland which was specifically excluded from the assignment agreement, dated May
12, 1996 between PHL and PrintScan.
7. FINANCINGS
a) Upon the signing of this Letter of Intent, Ashif Jiwa and John Xinos
will pay accountable costs incurred by PrintScan in its pre negotiations phase
for all outstanding legal and technical help in an amount not to exceed
$75,000.00 and for work still to be done in due diligence under this Letter of
Intent in an amount not to exceed $25,000.00
b) Upon the closing of the Acquisition, Core and PrintScan agree that
the Cash Assets of $500,000 shall be held in an escrow maintained by Kaplan
Gottbetter & Levenson, LLP (the "Escrow Agent") at the Bank of New York, 100
east 42nd Street, New York, NY pursuant to a separate escrow agreement. The
Escrow Agent shall make payment from the escrow in accordance with the capital
budget contained in the Final Agreement.
c) Messrs. Jiwa and Xinos will arrange a financing for a minimum of $3
million (the "Financing") as soon as possible after the closing of the
Acquisition (the "Closing") from the sale of 1,000,000 shares of Common Stock to
be reserved. The shares will be issued on an as needed basis. If the shares are
sold at a higher price all the revenue including the $3 million will be placed
in PIC's treasury.
In the event that the full funding is not realized within the six (6)
months following the date of the Final Agreement, then Messrs. Jiwa and Xinos
will pay to the escrow $500,000 provided the sales projections are met for the
last six (6) month period as estimated in a business plan to be agreed in the
Final Agreement.
<PAGE> 5
Further, if Messrs. Jiwa and Xinos do not cause the funding of the
Financing within twelve (12) months, then a second tranche of $500,000 will be
paid to the escrow under the same conditions as above. In the event the funding
for $3,000,000 is achieved, then PIC shall pay $1,000,000 back to Messrs. Jiwa
and Xinos of funds received from the financing. If $5,000,000 is raised then the
starting capital asset of $500,000 will furthermore be paid back to Messrs. Jiwa
and Xinos.
In the event that Messrs. Jiwa and Xinos do not cause funding the
financing within eighteen (18) months after the closing of the Acquisition, then
the parties will unwind the Acquisition and PIC will convey to the present
shareholders of PrintScan ownership of all PIC assets transferred by PrintScan
to include Patents, Copyrights, Know How and any and all improvements and/or
modifications made hereof within the 18 months and will stop using the name PIC
in exchange for the conveyance back to Core of the 8,683,888 shares of Common
stock issued in accordance with paragraph 1 of this Letter of Intent without any
further liability attached.
8. INTELLECTUAL PROPERTY
PrintScan agrees to obtain an amendment to the Assignment, dated May
12, 1996, and the Amendment to Assignment Agreement, dated October 15, 1996
(collectively the "Assignment") as follows:
a) The first sentence of paragraph 6 of the Assignment will be amended
to read as follows:
"Within three (3) months after the end of the third (3rd) year of
operations of PrintScan or the successor in title or at any time
before, but not after, unless delayed for a specified period of time at
the sole discretion of the Assignor, the Assignee shall pay to the
Assignor, or to its order, the total amount of US$1,500,000.00 or at
the sole discretion of the Assignor, Core shall issue to Assignor the
number of shares of Core Common Stock equal to 1,500,000, as the
numerator, divided by 80% of the average closing bid price of Core's
common stock, as the denominator, as quoted on a recognized stock
exchange or over-the-counter for the period of ten (10) consecutive
trading days immediately preceding the date on which Assignor requests
in writing a stock payment in lieu of said cash payment of
US$1,500,000.00; and on such conveyance, the fee to be paid to Assignor
for this Assignment shall be reduced from twelve and one half percent
(12 1/2%) to four percent (4%) of the gross income actually received by
the Assignee on account of any and all sales, distribution or other use
of the Invention or System herein assigned."
b) The Assignment shall further be amended by adding the following
sentence after the last sentence of paragraph 5:
"In the event 12 1/2% of sales meets or exceeds the minimum fee, then
no minimum fee shall be due or payable in each year for the first three
years."
<PAGE> 6
9. DUE DILIGENCE
a) From the date hereof, each party, will make available to the other
party for review, their respective financial statements, books, records and
other corporate documents as the other party may reasonably request, and each
party shall have the opportunity to meet with attorneys, accountants and key
personnel of the other party to discuss the financial and business conditions of
the respective party and to make whatever future independent investigation
deemed necessary and prudent. The parties agree to cooperate with each other in
complying with these requests and providing such materials as the other may
request.
b) Each party shall make appropriate representations in the Final
Agreement that it has fully and independently reviewed, verified, or audited
directly all aspects of the other party's business, including but not limited to
financial statements, books and records.
c) Each party shall represent and agree that all confidential
information which each party or any of its officers, employees, agents,
consultants, or representatives, may possess or may receive in the future
pertaining to the financial or other condition of the other party, shall not be
disclosed or made available to any other person or entity except current members
of the Board of Directors or any officer of each other's company at any time
without the express written consent of the other party.
d) PrintScan will assist Core in obtaining records of registration and
statements from PHL.
10. TERMINATION
This Letter of Intent may be terminated by the mutual consent of the
parties hereto. In the event there has been a misrepresentation or material
omission by either party or in the event either party or its attorneys,
accountants and key personnel fails to produce or provide information requested
by any party during its due diligence inquiry then this Agreement may be
terminated by the non-defaulting party. If the terms and conditions of this
Letter of Intent are not fulfilled and the Final Agreement is not finalized and
executed prior to the expiration of thirty (30) business days from the date
hereof, this Letter of Intent shall expire without execution. This Letter of
Intent and execution of the proposed Final Agreement shall be subject to and
conditioned upon receiving approval of the proposed transaction from its Board
of Directors and ratified by its shareholders.
11. ASSIGNABILITY
This Letter of Intent shall not be assignable or transferable by either
party hereto.
12. GOVERNING LAWS
<PAGE> 7
The validity and interpretation of this Letter of Intent shall be
governed by and construed in accordance with the laws of the State of New York.
The parties to this Letter of Intent agree that any litigation arising out of
the terms of the proposed acquisition set forth herein shall be commenced in the
courts of the State of New York, New York County. All parties consent to the
jurisdiction and venue of the federal and state courts of New York County.
13. AMENDMENT
This Letter of Intent shall be amended only with the written consent of
all parties hereto.
14. COUNTERPARTS
If the foregoing accurately reflects our discussion and is in accord
with the understanding of both Core and PrintScan, please so indicate by
executing this Letter of Intent and returning it to the undersigned at your
earliest convenience. Execution by both parties shall constitute a binding
Letter of Intent between the parties in accordance with its terms and the
parties will proceed to consummate in a business like manner and speed of the
transactions contemplated hereby and to prepare the Final Agreement for
execution.
(REMAINDER OF PAGE INTENTIONALLY BLANK)
<PAGE> 8
The foregoing Letter of Intent of eight (8) pages is accepted, approved
and agreed to by Core, its Directors and Officers and also by John Xinos and
Ashif Jiwa, as individuals this day of August ___, 1997.
CORE VENTURES, INC.
________________________________ By:________________________________
John Xinos
Name:______________________________
________________________________ Title:_____________________________
Ashif Jiwa
The foregoing Letter of Intent is accepted, approved and agreed to by
PrintScan, by its Directors and Officers this ____ day of August, 1997.
PRINTSCAN INTERNATIONAL, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE> 1
[LOGO]
MANULIFE FINANCIAL
LEASE AGREEMENT
COFFEE.COM INTERACTIVE CAFE CORP.
- --------------------------------------------------------------------------------
PROPERTY: R.E. 426
BUILDING: MANULIFE HOUSE
603 - 7TH AVENUE S.W.
CALGARY,ALBERTA
- --------------------------------------------------------------------------------
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. LEASED PREMISES.......................................................... 1
2. TERM
a) Term................................................................ 1
b) Delay in Occupancy.................................................. 1
c) Overholding......................................................... 2
3. RENT
a) Basic Rent.......................................................... 2
b) Additional Rent..................................................... 2
i) Taxes.......................................................... 2
ii) Operating Costs................................................ 2
c) Payment - Additional Rent........................................... 2
d) Accrual of Rent..................................................... 3
e) Recovery of Rent.................................................... 3
f) Limitations......................................................... 3
4. SECURITY DEPOSIT......................................................... 3
5. GENERAL COVENANTS
a) Landlord's Covenant ................................................ 3
b) Tenant's Covenant .................................................. 3
6. USE AND OCCUPANCY
a) Use................................................................. 4
b) Waste, Nuisance, etc................................................ 4
c) Insurance Risks..................................................... 4
d) Compliance with Law................................................. 4
e) Environmental Compliance............................................ 4
f) Rules and Regulations............................................... 4
7. ASSIGNMENT AND SUB-LETTING
a) No Assignment Without Consent....................................... 4
b) Assignment of Obligations........................................... 4
c) Assumption of Obligations........................................... 5
d) Tenants Continuing Obligations...................................... 5
8. REPAIR AND DAMAGE
a) Landlord's Repairs to Building and Property......................... 5
b) Landlord's Repairs to the Leased Premises........................... 5
c) Tenant's Repairs.................................................... 5
d) Indemnification..................................................... 6
e) Damage and Destruction............................................... 6
9. INSURANCE AND LIABILITY
a) Landlord's Insurance................................................ 7
b) Tenant's Insurance.................................................. 7
c) Limitation of Landlord's Liability.................................. 8
d) Indemnity of Landlord............................................... 8
e) Definition of "Insured Damage"...................................... 8
</TABLE>
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<TABLE>
<S> <C>
10. EVENTS OF DEFAULT AND REMEDIES
a) Events of Default and Remedies ................................. 8
b) Payment of Rent, etc. on Termination ........................... 9
ADDITIONAL PROVISIONS
11. Relocation of Leased Premises............................................ 9
12. Subordination and Amount................................................. 10
13. Certificates............................................................. 10
14. Inspection of and Access to the Leased Premises.......................... 10
15. Delay.................................................................... 10
16. Waiver................................................................... 11
17. Sale, Demolition and Renovation.......................................... 11
18. Public Taking............................................................ 11
19. Registration of Lease.................................................... 12
20. Lease Entire Agreement .................................................. 12
21. Notices.................................................................. 12
22. Interpretation........................................................... 12
23. Extent of Lease Obligations.............................................. 12
24. Use and Occupancy Prior to Term ......................................... 13
25. Schedules ............................................................... 13
</TABLE>
<TABLE>
<CAPTION>
DEFINITIONS OF PRINCIPAL TERMS PARAGRAPH PAGE
<S> <C> <C>
Additional Rent 3(b) 2
Additional Services 4(a) D-1
Basic Rent 3(a) 2
Building 1 1
Debts, Liabilities & Obligations 4 3
Fiscal Period 3(c) 2
Insured Damage 9(e) 8
Landlord 1,11
Landlord's Taxes 2(a) C-1
Leased Premises 1 1
Leasehold Improvements 1 F-1
Landlord's Work 2 F-2
Operating Costs 5 D-2
Property 1 1
Public Taking 18 11
Rent 3(d) 3
Taxes 2(b) C-1
Tenant 1
Tenant's Proportionate Share 2(d) C-2
Tenant's Proportionate Share 7 D-3
Tenant's Taxes 2(c) C-1
Term 2(a) 1
</TABLE>
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THIS AGREEMENT made this 20th day of March, 1997.
BETWEEN:
THE MANUFACTURERS LIFE INSURANCE COMPANY,
a body corporate, having its head office
in Toronto, Canada, and having a local
office at SUITE 1475, 550 - 6TH AVENUE S.W.
in the CITY
of CALGARY, PROVINCE OF ALBERTA
(hereinafter called the "Landlord")
OF THE FIRST PART,
--- and ---
COFFEE.COM INTERACTIVE CAFE CORP.
having an office at SUITE 550
603 - 7TH AVE. S.W.
in the City
of CALGARY, PROVINCE OF ALBERTA
(hereinafter called the "Tenant")
OF THE SECOND PART,
In consideration of the rents, covenants and agreements hereinafter
contained, the Landlord and Tenant hereby agree as follows.
1. LEASED PREMISES
LEASED PREMISES
The Landlord does demise and lease to the Tenant the premises (the
"Leased Premises") located in a building (the "Building") having a municipal
address of 603 - 7TH AVENUE S.W. , in the CITY OF CALGARY, PROVINCE OF ALBERTA
and known as MANULIFE HOUSE
(the Leased Premises, the Building, together with the lands described in
Schedule "A" attached hereto and present and future improvements, additions and
changes thereto being herein called the "Property"), the Leased Premises
consisting of approximately TWO THOUSAND EIGHT HUNDRED EIGHTY square feet
rentable (2,880 s.f.r.) on the FIFTH (5th) floor -- as outlined in red on the
plan or plans marked Schedule "B" attached hereto, excluding the exterior
surfaces of the exterior walls of the Leased Premises.
2. TERM
TERM
(a) TO HAVE AND TO HOLD the Leased Premises for and during the term of Five (5)
years and zero (0) days/months (the "Term") to be computed from the 1st day of
MAY, 1997, and to be fully complete and ended on the 30th day of APRIL, 2002,
unless otherwise terminated.
DELAY IN OCCUPANCY
(b) If the Leased Premises or any part thereof are not ready for occupancy on
the date of commencement of the Term, no part of the "Rent" (as hereinafter
defined) or only a proportionate part thereof, in the event that the Tenant
shall occupy a part of the Leased Premises, shall be payable for the period
prior to the date when the entire Leased Premises are ready for occupancy and
the full Rent shall accrue only after such last mentioned date. The Tenant
agrees to accept any such abatement of Rent in full settlement of all claims
which the Tenant might otherwise have by reason of the Leased Premises not being
ready for occupancy on the date of commencement of the
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Term, provided that when the Landlord has completed construction of such part of
the Leased Premises as it is obliged hereunder to construct, the Tenant shall
not be entitled to any abatement of Rent for any delay in occupancy due to the
Tenant's failure or delay to provide plans or to complete any special
installations or other work required for its purposes or due to any other
reason, nor shall the Tenant be entitled to any abatement of Rent for any delay
in occupancy if the Landlord has been unable to complete construction of the
Leased Premises by reason of such failure or delay by the Tenant. A certificate
of the Landlord as to the date the Leased Premises were ready for occupancy and
such construction as the Landlord is obliged to complete is substantially
completed, or as to the date upon which the same would have been ready for
occupancy and completed respectively but for the failure or delay of the Tenant,
shall be conclusive and binding on the Tenant and Rent in full shall accrue and
become payable from the date set out in the said certificate. Notwithstanding
any delay in occupancy, the expiry date of this Lease shall remain unchanged.
OVER-HOLDING
(c) If at the expiration of the Term or sooner termination hereof, the Tenant
shall remain in possession without any further written agreement or in
circumstances where a tenancy would thereby be created by implication of law or
otherwise, a tenancy from year to year shall not be created by implication of
law or otherwise, but the Tenant shall be deemed to be a monthly tenant only, at
double "Basic Rent" (as hereinafter defined) payable monthly in advance plus
"Additional Rent" (as hereinafter defined) and otherwise upon and subject to the
same terms and conditions as herein contained, excepting provisions for renewal
(if any) and leasehold improvement allowance (if any), contained herein, and
nothing, including the acceptance of any Rent by the Landlord, for periods other
than monthly periods, shall extend this Lease to the contrary except an
agreement in writing between the Landlord and the Tenant and the Tenant hereby
authorizes the Landlord to apply any moneys received from the Tenant in payment
of such monthly Rent.
3. RENT
BASIC RENT
(a) The Tenant shall without deduction or right of offset pay to the Landlord
yearly and every year during the Term as rental (herein called "Basic Rent"),
the sum of FOURTEEN THOUSAND FOUR HUNDRED Dollars ($14,400.00) of lawful money
of the jurisdiction in which the Leased Premises are located, in equal monthly
installments of ONE THOUSAND TWO HUNDRED Dollars ($1,200.00 ) each in advance on
the first day of each month during the Term, the first payment to be made on the
first day of MAY, 1997.
ADDITIONAL RENT
(b) The Tenant shall, without deduction or right of offset pay to the Landlord
yearly and every year during the Term as additional rental (herein called
"Additional Rent")
(i) the amounts of any Taxes payable by the Tenant to the Landlord
pursuant to the provisions of Schedule "C" attached hereto;
and
(ii) the amounts required to be paid to the Landlord pursuant to
the provisions of Schedule "D" attached hereto.
PAYMENT - ADDITIONAL RENT
(c) Additional Rent shall be paid and adjusted with reference to a fiscal period
of twelve (12) calendar months ("Fiscal Period"), which shall be a calendar year
unless the Landlord shall from time to time have selected a Fiscal Period which
is not a calendar year by written notice to the Tenant.
The Landlord shall advise the Tenant in writing of its estimate of the
Additional Rent to be payable by the Tenant during the Fiscal Period (or broken
portion of the Fiscal Period, as the case may be, if applicable at the
commencement or end of the term or because of a change in Fiscal Period) which
commenced upon the commencement date of the Term and for each succeeding Fiscal
Period or broken portion thereof which commences during the Term. Such estimate
shall in every case be a reasonable estimate and, if requested by the Tenant,
shall be accompanied by reasonable particulars of the manner in which it was
calculated. The Additional Rent payable by the Tenant shall be paid in equal
monthly installments in advance at the same time as payment of Basic Rent is due
hereunder based on the Landlord's estimate as aforesaid. From time to time, the
Landlord may re-estimate, on a reasonable basis, the amount of Additional Rent
for any Fiscal Period or broken portion thereof, in which case the Landlord
shall advise the Tenant in writing of such re-estimate and fix new equal monthly
installments for the remaining balance of such Fiscal Period or broken portion
thereof. After the end of each such Fiscal Period or broken portion thereof
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the Landlord shall submit to the Tenant a statement of the actual Additional
Rent payable in respect of such Fiscal Period or broken portion thereof and a
calculation of the amounts by which the Additional Rent payable by the Tenant
exceeds or is less than (as the case may be) the aggregate installments paid by
the Tenant on account of Additional Rent for such Fiscal Period.
Within thirty (30) days after the submission of such statement either
the Tenant shall pay to the Landlord any amount by which the amount found
payable by the Tenant with respect to such Fiscal Period or broken portion
thereof exceeds the aggregate of the monthly payments made by it on account
thereof during such Fiscal Period or broken portion thereof, or the Landlord
shall pay to the Tenant any amount by which the amount found payable as
aforesaid is less than the aggregate of such monthly payments.
ACCRUAL OF RENT
(d) Basic Rent and Additional Rent (herein collectively called "Rent") shall be
considered as accruing from day to day, and Rent for an irregular period of less
than one year or less than one calendar month shall be apportioned and adjusted
by the Landlord for the Fiscal Periods of the Landlord in which the tenancy
created hereby commences and expires. Where the calculation of Additional Rent
for a period cannot be made until after the termination of this Lease, the
obligation of the Tenant to pay Additional Rent shall survive the termination
hereof and Additional Rent for such period shall be payable by the Tenant upon
demand by the Landlord. If the Term commences or expires on any day other
than the first or the last day of a month, Rent for such fraction of a month
shall be apportioned and adjusted as aforesaid and paid by the Tenant on the
commencement date of the Term.
RECOVERY OF RENT
(e) Rent and any other amounts required to be paid by the Tenant to the Landlord
under this Lease shall be deemed to be and be treated as rent and payable and
recoverable as rent, and the Landlord shall have all rights against the Tenant
for default in any payment of rent and other amounts as in the case of arrears
in rent.
LIMITATIONS
(f) The information set out in statements, documents or other writings setting
out the amount of Additional Rent submitted to the Tenant under or pursuant to
this Lease shall be binding on the Tenant and deemed to be accepted by it and
shall not be subject to amendment for any reason unless the Tenant gives written
notice to the Landlord within sixty (60) days of the Landlord's submission of
such statement, document, or writing identifying the statement, document, or
writing and setting out in reasonable detail the reason why such statement,
document or writing should not be binding on the Tenant.
4. SECURITY DEPOSIT
SECURITY DEPOSIT
The Tenant has paid to the Landlord the sum of TWO THOUSAND SEVEN HUNDRED
FORTY-THREE Dollars FORTY-EIGHT Cents ($2,743.48 ) as a deposit to the Landlord
to stand as security for the payment by the Tenant of any and all present and
future debts and liabilities of the Tenant to the Landlord and for the
performance by the Tenant of all of its obligations arising under or in
connection with this Lease (the "Debts, Liabilities and Obligations"). The
Landlord shall not be required to keep the deposit separate from its general
funds. In the event of the Landlord disposing of its Interest in this Lease, the
Landlord shall credit the deposit to its successor and thereupon shall have no
liability to the Tenant to repay the security deposit to the Tenant. Subject to
the foregoing and to the Tenant not being in default under this Lease, the
Landlord shall repay the security deposit to the Tenant without interest at the
end of the Term or sooner termination of the Lease provided that all Debts,
Liabilities and Obligations of the Tenant to the Landlord are paid and performed
in full, failing which the Landlord may on notice to the Tenant elect to retain
the security deposit and to apply it in reduction of the Debts, Liabilities and
Obligations and the Tenant shall remain fully liable to the Landlord for payment
and performance of the remaining Debts, Liabilities and Obligations,
5. GENERAL COVENANTS
LANDLORD'S COVENANT
(a) The Landlord covenants with the Tenant:
(i) for quiet enjoyment, and
(ii) to observe and perform all the covenants and obligations of
the Landlord herein.
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TENANT'S CONVENANT
(b) The Tenant convenants with the Landlord:
(i) to pay Rent, and
(ii) to observe and perform all the covenants and obligations of
the Tenant herein.
6. USE AND OCCUPANCY
USE
The Tenant covenants with the Landlord:
(a) not to use the Leased Premises for any purpose other than an office for the
conduct of the Tenant's business which is ADMINISTRATION OF A RESTAURANT CHAIN.
WASTE NUISANCE, ETC.
(b) not to commit, or permit, any waste, injury or damage to the Property
including the Leasehold Improvements and any trade fixtures therein, any loading
of the floors thereof in excess of the maximum degree of loading as determined
by the Landlord acting reasonably, any nuisance therein or any use or manner of
use causing annoyance to other tenants and occupants of the Property or to the
Landlord,
INSURANCE RISKS
(c) not to do, omit or permit to be done or omitted to be done upon the Property
anything which would cause to be increased the Landlord's cost of insurance or
the costs of insurance of another tenant of the Property against perils as to
which the Landlord or such other tenant has insured or which shall cause any
policy of insurance on the Property to be subject to cancellation;
COMPLIANCE WITH LAW
(d) to comply at its own expense with all governmental laws, regulations and
requirements pertaining to the occupation and use of the Leased Premises, the
condition of the Leasehold Improvements, trade fixtures, furniture and equipment
installed by or on behalf of the Tenant therein and the making by the Tenant of
any repairs, changes or improvements therein,
ENVIRONMENTAL COMPLIANCE
(e) (i) to conduct and maintain its business and operations at the Leased
Premises so as to comply in all respects with common law and with all
present and future applicable federal, provincial/ state, local,
municipal, governmental or quasi-governmental laws, by-laws, rules,
regulations, licenses, orders, guidelines, directives, permits,
decisions or requirements concerning occupational or public health and
safety or the environment and any order, injunction, judgment,
declaration, notice or demand issued thereunder, ("Environmental
Laws").
(ii) not to permit or suffer any substance which is hazardous or is
prohibited, restricted, regulated or controlled under any Environmental
Law to be present at, on or in the Leased Premises, unless it has
received the prior written consent of the Landlord which consent may be
arbitrarily withheld.
RULES AND REGULATIONS
(f) to observe and perform, and to cause its employees, invitees and others over
whom the Tenant can reasonably be expected to exercise control to observe and
perform, the Rules and Regulations contained in Schedule "E" hereto, and such
further and other reasonable rules and regulations and amendments and additions
therein as may hereafter be made by the Landlord and notified in writing to the
Tenant, except that no change or addition may be made that is inconsistent with
this Lease unless as may be required by governmental regulation or unless the
Tenant consents thereto. The imposition of such Rules and Regulations shall not
create or imply any obligation of the Landlord to enforce them or create any
liability of the Landlord for their non-enforcement or otherwise.
7. ASSIGNMENT AND SUE-LETTING
NO ASSIGNMENT AND SUB-LETTING
(a) The Tenant covenants that it will not assign this Lease or sub-let the
Leased Premises in whole or in part without the prior written consent of the
Landlord, which consent the Landlord covenants not to withhold unreasonably (i)
as to any assignee or sub-lessee who is in a satisfactory financial condition,
agrees to use the Leased Premises for those purposes permitted hereunder, and is
otherwise satisfactory to the Landlord, and (ii) as to any portion of the Leased
Premises which, in the Landlord's sole judgement, is a proper and rational
division of the Leased Promises, subject to the Landlord's right of termination
arising under this paragraph. Without limitation, the Tenant shall for the
purpose of this paragraph be considered to assign or sub-let in any case where
it permits the Leased Premises or any portion thereof to be, or the Leased
Promises or any portion thereof are, occupied by persons other than the Tenant,
its employees and others engaged in carrying on the business of the Tenant,
whether pursuant to assignment, sub-letting, license or other right, or where
any of the foregoing occurs by operation of law.
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ASSIGNMENT OR SUB-LETTING PROCEDURES
(b) The Tenant shall not assign this Lease or sub-let the whole or any part of
the Leased Premises unless:
(i) it shall have received or procured a bone fide written offer
to take an assignment or sublease which is not inconsistent
with the Lease, and the acceptance of which would not breach
any provision of this Lease if this paragraph is complied with
and which the Tenant has determined to accept subject to this
paragraph being complied with, and
(ii) it shall have first requested and obtained the consent in
writing of the Landlord thereto.
Any request for consent shall be in writing and accompanied by a copy of the
offer certified by the Tenant to be true and complete, and the Tenant shall
furnish to the Landlord all information available to the Tenant and requested by
the Landlord as to the responsibility, financial standing and business of the
proposed assignee or sub-tenant. Notwithstanding the provisions of sub-paragraph
(a), within twenty (20) days after the receipt by the Landlord of such request
for consent and of all information which the Landlord shall have requested
hereunder, the Landlord shall have the right upon written notice of termination
submitted to the Tenant, if the request is to assign this Lease or sub-let the
whole of the Leased Premises, to cancel and terminate this Lease, or if the
request is to sub-let a part of the Leased Premises only, to cancel and
terminate this Lease with respect to such part, in each case as of a termination
date to be stipulated in the notice of termination which shall be not less than
sixty (60) days or more than ninety (90) days following the giving of such
notice. In such event the Tenant shall surrender the whole or part, as the case
may be, of the Leased Premises in accordance with such notice of termination and
Basic Rent and Additional Rent shall be apportioned and paid to the date of
surrender and, if a part only of the Leased Premises is surrendered, Basic Rent
and Additional Rent shall after the date of surrender abate proportionately. If
such consent shall be given the Tenant shall assign or sub-let, as the case may
be, only upon the terms set out in the offer submitted to the Landlord as
aforesaid and not otherwise,
ASSUMPTION OF OBLIGATIONS
(c) No assignment or sub-letting of this Lease shall be effective unless the
assignee or sub-lessee shall execute an assumption agreement on the Landlord's
form, assuming all the obligations of the Tenant hereunder, and shall pay to the
Landlord its reasonable fee for processing the assignment or sub-letting.
TENANT'S CONTINUING OBLIGATIONS
(d) The Tenant agrees that any consent to an assignment or sub-letting of this
Lease or Leased Premises, shall not thereby release the Tenant of its
obligations hereunder.
8. REPAIR & DAMAGE
LANDLORD'S REPAIRS TO BUILDING & PROPERTY
(a) The Landlord covenants with the Tenant to keep in a good and reasonable
state of repair and decoration:
(i) those portions of the Property consisting of the entrance,
lobbies, stairways, corridors, landscaped areas, parking
areas, and other facilities from time to time provided for use
in common by the Tenant and other tenants of the Building or
Property, and the exterior portions (including foundations and
roofs) of all buildings and structures from time to time
forming part of the Property and affecting its general
appearance;
(ii) the Building (other than the Leased Promises and premises of
other tenants) including the systems for interior climate
control, the elevators and escalators (if any), entrances,
lobbies, stairways, corridors and washrooms from time to time
provided for use in common by the Tenant and other tenants of
the Building or Property and the systems provided for use in
common by the Tenant and other tenants of the Building or
Property and the systems provided for bringing utilities to
the Leased Premises.
LANDLORD'S REPAIRS TO THE LEASED PREMISES
(b) The Landlord covenants with the Tenant to repair, so far as reasonably
feasible, and as expeditiously as reasonably feasible, defects in standard
demising walls or structural elements, exterior walls of the Building, suspended
ceiling, electrical and mechanical installations standard to the Building
installed by the Landlord in the Leased Premises (if and to the extent that such
defects are sufficient to impair the Tenant's use of the Leased Premises while
using them in a manner consistent with this Lease) and "Insured Damage" (as
herein defined), The Landlord shall in no event be required to make repairs to
Leasehold Improvements made by the Tenant, or by the Landlord on behalf of the
Tenant or another tenant or to make repairs to wear and tear within the Leased
Premises.
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TENANT'S REPAIRS
(c) The Tenant covenants with the Landlord to repair, maintain and keep at the
Tenant's own cost, except insofar as the obligation to repair rests upon the
Landlord pursuant to this paragraph, the Leased Premises, including Leasehold
Improvements in good and substantial repair, reasonable wear and tear excepted,
provided that this obligation shall not extend to structural elements or to
exterior glass or to repairs which the Landlord would be required to make under
this paragraph but for the exclusion therefrom of defects not sufficient to
impair the Tenant's use of the Leased Premises while using them in a manner
consistent with this Lease. The Landlord may enter the Leased Premises at all
reasonable times and view the condition thereof and the Tenant covenants with
the Landlord to repair, maintain and keep the Leased Premises in good and
substantial repair according to notice in writing, reasonable wear and tear
excepted. If the Tenant shall fail to repair as aforesaid after reasonable
notice to do so, the Landlord may effect the repairs and the Tenant shall pay
the reasonable cost thereof to the Landlord on demand. The Tenant covenants with
the Landlord that the Tenant will at the expiration of the Term or sooner
termination thereof peaceably surrender the Leased Premises and appurtenances in
good and substantial repair and condition, reasonable wear and tear excepted.
INDEMNIFICATION
(d) If any part of the Property becomes out of repair, damaged or destroyed
through the negligence of, or misuse by, the Tenant or its employees, agents,
invitees or others under its control, the Tenant shall pay the Landlord on
demand the expense of repairs or replacements, including the Landlord's
reasonable administration charge thereof, necessitated by such negligence or
misuse.
DAMAGE AND DESTRUCTION
(e) It is agreed between the Landlord and the Tenant that;
(i) In the event of damage to the Property or to any part thereof,
if the damage is such that the Leased Premises or any
substantial part thereof is rendered not reasonably capable of
use and occupancy by the Tenant for the purposes of its
business for any period of time in excess of ten (10) days,
then
(1) unless the damage was caused by the fault or
negligence of the Tenant or its employees, agents,
invitees or others under its control, from the date
of occurrence of the damage and until the Leased
Premises are again reasonably capable for use and
occupancy as aforesaid, the Rent payable pursuant to
this Lease shall abate from time to time in
proportion to the part or parts of the Leased
Premises not reasonably capable of such use and
occupancy, and
(2) unless this Lease is terminated as hereinafter
provided, the Landlord or the Tenant as the case may
be (according to the nature of the damage and their
respective obligations to repair as provided in
sub-paragraphs (a), (b) and (c) of this paragraph)
shall repair such damage with all reasonable
diligence, but to the extent that any part of the
Leased Premises is not reasonably capable of such use
and occupancy by reason of damage which the Tenant is
obligated to repair hereunder, any abatement of Rent
to which the Tenant would otherwise be entitled
hereunder shall not extend later than the time by
which, in the reasonable opinion of the Landlord,
repairs by the Tenant ought to have been completed
with reasonable diligence; and
(ii) if the Leased Premises are substantially damaged or destroyed
by any cause and if in the reasonable opinion of the Landlord
given in writing within thirty (30) days of the occurrence the
damage cannot reasonably be repaired within one hundred and
eighty (180) days after the occurrence thereof, then the
Lease shall terminate, in which event neither the Landlord nor
the Tenant shall be bound to repair as provided in
sub-paragraphs (a), (b) and (c) of this paragraph, and the
Tenant shall instead deliver up possession of the Leased
Premises to the Landlord with reasonable expedition and Rent
shall be apportioned and paid to the date of the occurrence;
and
(iii) if premises whether of the Tenant or other tenants of the
Property comprising in the aggregate half or more of the total
number of square feet of rentable office area in the Property
or half or more of the total number of square feet of rentable
office area in Building (as determined by the Landlord) or
portions of the Property which affect access or services
essential thereto, are substantially damaged or destroyed by
any cause and if in the reasonable opinion of the Landlord the
damage cannot reasonably be repaired within one hundred and
eighty (180) days after the occurrence thereof, then the
Landlord may, by written notice to the Tenant given within
thirty (30) days after the occurrence of such damage or
destruction, terminate this Lease, in which event neither the
Landlord nor the Tenant shall be bound to repair as provided
in sub-paragraphs (a) (b) and (c) of this
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paragraph, and the Tenant shall instead deliver up possession
of the Leased Premises to the Landlord with reasonable
expedition but in any event within sixty (60) days after
delivery of such notice of termination, and Rent shall he
apportioned and paid to the date upon which possession is so
delivered up (but subject to any abatement to which the Tenant
may be entitled under subparagraph (e) (i) of this paragraph),
9. INSURANCE AND LIABILITY
LANDLORD'S INSURANCE
(a) The Landlord shall take out and keep in force during the Term insurance with
respect to the Property except for the "Leasehold Improvements" (as hereinafter
defined) in the Leased Premises. The insurance to be maintained by the Landlord
shall be in respect of perils and to amounts and on terms and conditions which
from time to time are insurable at a reasonable premium and which are normally
insured by reasonable prudent owners of properties similar to the Property, all
as from time to time determined at reasonable intervals by insurance advisors
selected by the Landlord, and whose opinion shall be conclusive. Unless and
until the insurance advisors shall state that any such perils are not
customarily insured against by owners of properties similar to the Property, the
perils to be insured against by the Landlord shall include, without limitation,
public liability, boilers and machinery, fire and extended perils and may
include at the option of the Landlord losses suffered by the Landlord in its
capacity as Landlord through business interruption. The insurance to be
maintained by the Landlord shall contain a waiver by the insurer of any rights
of subrogation or indemnity or any other claim over which the insurer might
otherwise be entitled against the Tenant or the agents or employees of the
Tenant.
TENANT'S INSURANCE
(b) The Tenant shall take out and keep in force during the Term:
(i) comprehensive general public liability insurance all on an
occurrence basis with respect to the business carried on in or
from the Leased Premises and the Tenant's use and occupancy of
the Leased Premises and of any other part of the Property,
with coverage for any one occurrence or claim of not less than
One Million Dollars ($1,000,000) or such other amount as the
Landlord may reasonably require upon not less than one (1)
month notice at any time during the Term, which insurance
shall include the Landlord as a named insured and shall
protect the Landlord in respect of claims by the Tenant as if
the Landlord were separately insured,
(ii) insurance in respect of fire and such other perils as are from
time to time in the usual extended coverage endorsement
covering the Leasehold Improvements, trade fixtures, and the
furniture and equipment in the Leased Premises for not less
than 80% of the full replacement cost thereof, and which
insurance shall include the Landlord as a named insured as the
Landlord's interest may appear, and
(iii) Insurance against such other perils and in such amounts as the
Landlord may from time to time reasonably require upon not
less than ninety (90) days' written notice, such requirement
to be made on the basis that the required insurance is
customary at the time for prudent tenants of properties
similar to the Property.
All insurance required to be maintained by the Tenant shall be on terms and with
insurers satisfactory to the Landlord. Each policy shall contain a waiver by the
insurer of any rights of subrogation or indemnity or any other claim over to
which the insurer might otherwise be entitled against the Landlord or the agents
or employees of the Landlord, and shall also contain an undertaking by the
insurer that no material change adverse to the Landlord or the Tenant will be
made, and the policy will not lapse or be cancelled, except after not less than
thirty (30) days' written notice to the Landlord of the intended change, lapse
or cancellation. The Tenant shall furnish to the Landlord, if and whenever
requested by it, certificates or other evidences acceptable to the Landlord as
to the insurance from time to time effected by the Tenant and its renewal or
continuation in force, together with evidence as to the method of determination
of full replacement cost of the Tenant's Leasehold Improvements, trade fixtures,
furniture and equipment, and if the Landlord reasonably concludes that the full
replacement cost has been underestimated, the Tenant shall forthwith arrange for
any consequent increase in coverage required under subparagraph (b). If the
Tenant shall fail to take out, renew and keep in force such insurance, or if the
evidences submitted to the Landlord are unacceptable to the Landlord (or no such
evidences are submitted within a reasonable period after request therefor by the
Landlord), then the Landlord may give to the Tenant written notice requiring
compliance with this sub-paragraph and specifying the respects in which the
Tenant is not then in compliance with this sub-paragraph, If the Tenant does not
within forty-eight (48) hours provide appropriate evidence of compliance with
this sub-paragraph, the Landlord may (but shall not be
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obligated to) obtain some or all of the additional coverage or other insurance
which the Tenant shall have failed to obtain, without prejudice to any other
rights of the Landlord under this Lease or otherwise, and the Tenant shall pay
all premiums and other reasonable expenses incurred by the Landlord to the
Landlord on demand.
LIMITATION OF LANDLORD'S LIABILITY
(c) The Tenant agrees that the Landlord shall not be liable for any bodily
injury or death of or loss or damage to any property belonging to, the Tenant or
its employees, invitees or licensees or any other person in, on or about the
Property unless resulting from the actual willful misconduct or gross negligence
of the Landlord or its own employees. In no event shall the Landlord be liable
for any damage which is caused by steam, water, rain or snow or other thing
which may leak into, issue or flow from any part of the Property or from the
pipes or plumbing works, including the sprinkler system (if any) therein or from
any other place or for any damage caused by or attributable to the condition or
arrangement of any electric or other wiring or of sprinkler heads (if any) or
for any damage caused by anything done or omitted by any other tenant.
INDEMNITY OF LANDLORD
(d) Except with respect to claims or liabilities in respect of any damage which
is Insured Damage to the extent of the cost of repairing such Insured Damage,
the Tenant agrees to indemnify and save harmless the Landlord in respect of
(i) all claims for bodily injury or death, property damage or
other loss or damage arising from the conduct of any work or
any act or omission of the Tenant or any assignee, sub-tenant,
agent, employee, contractor, invitee or licensee of the
Tenant, and in respect of all costs, expenses and liabilities
incurred by the Landlord in connection with or arising out of
all such claims, including the expenses of any action or
proceeding pertaining thereto, and
(ii) any loss, cost, (including, without limitation, lawyers' fees
and disbursements), expense or damage suffered by the Landlord
arising from any breach by the Tenant of any of its covenants
and obligations under this Lease.
DEFINITION OF "INSURED DAMAGE"
(e) For purposes of this Lease, "Insured Damage" means that part of any damage
occurring to the Property of which the entire cost of repair (or the entire cost
of repair other than deductible amount properly collectable by the Landlord as
part of the Additional Rent) is actually recovered by the Landlord under a
policy or policies of insurance from time to time effected by the Landlord
pursuant to sub-paragraph (a) Where an applicable policy of insurance contains
an exclusion for damages recoverable from a third party, claims as to which the
exclusion applies shall be considered to constitute Insured Damage only if the
Landlord successfully recovers from the third party.
10. EVENTS OF DEFAULT AND REMEDIES
EVENTS OF DEFAULT AND REMEDIES
(a) In the event of the happening of any one of the following events:
(i) the Tenant shall have failed to pay an installment of Basic
Rent or of Additional Rent or any other amount payable
hereunder when due, and such failure shall be continuing for a
period of more than ten (10) days after the date such
installment or amount was due;
(ii) there shall be a default of or with any condition, covenant,
agreement or other obligation on the part of the Tenant to be
kept, observed or performed hereunder (other than a condition,
covenant, agreement or other obligation to pay Basic Rent,
Additional Rent or any other amount of money) and such default
shall be continuing for a period of more than fifteen (15)
days after written notice by the Landlord to the Tenant
specifying the default and requiring that it discontinue;
(iii) if any policy of insurance upon the Property or any part
thereof from time to time effected by the Landlord shall be
cancelled or about to be cancelled by the insurer by reason of
the use or occupation of the Leased Premises by the Tenant or
any assignee, sub-tenant or licensee of the Tenant or anyone
permitted to be upon the Leased Premises and the Tenant after
receipt of notice in writing from the Landlord shall have
failed to take such immediate steps in respect of such use or
occupation as shall enable the Landlord to reinstate or avoid
cancellation (as the case may be) of such policy of insurance,
(iv) the Leased Premises shall, without the prior written consent
of the Landlord, be used by any other persons than the Tenant
or its permitted assigns or sub-tenants or for any purpose
other than that for which they were leased or occupied or by
any persons whose
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occupancy is prohibited by this Lease,
(v) the Leased Premises shall be vacated or abandoned, or remain
unoccupied without the prior written consent of the Landlord
for fifteen (15) consecutive days or more while capable of
being occupied,
(vi) the balance of the Term of this Lease or any of the goods and
chattels of the Tenant located in the Leased Premises, shall
at any time be seized in execution or attachment, or
(vii) the Tenant shall make any assignment for the benefit of
creditors or become bankrupt or insolvent or take the benefit
of any statute for bankrupt or insolvent debtors or, if a
corporation, shall take any steps or suffer any order to be
made for its winding-up or other termination of its corporate
existence; or a trustee, receiver or receiver-manager or agent
or other like person shall be appointed of any of the assets
of the Tenant,
the Landlord shall have the following rights and remedies all of which are
cumulative and not alternative and not to the exclusion of any other or
additional rights and remedies in law or equity available to the Landlord by
statute or otherwise:
(A) to remedy or attempt to remedy any default of the Tenant, and
in so doing to make any payments due or alleged to be due by
the Tenant to third parties and to enter upon the Leased
Premises to do any work or other things therein, and in such
event all reasonable expenses of the Landlord in remedying or
attempting to remedy such default shall be payable by the
Tenant to the Landlord on demand;
(B) with respect to unpaid overdue Rent, to the payment by the
Tenant of the Rent and of interest (which said interest shall
be deemed included herein in the term "Rent") thereon at a
rate equal to the lesser of three percent (3%) above the prime
commercial loan rate charged to borrowers having the highest
credit rating from time to time by the Landlord's principal
bank from the date upon which the same was due until actual
payment thereof and the maximum amount allowed under the laws
of the jurisdiction in which the Building is located;
(C) to terminate this Lease forthwith by leaving upon the Leased
Premises or by affixing to an entrance door to the Leased
Premises notice terminating the Lease and to immediately
thereafter cease to furnish any services hereunder and enter
into and upon the Leased Premises or any part thereof in the
name of the whole and the same to have again, repossess and
enjoy as of its former estate, anything in this Lease
contained to the contrary notwithstanding; and
(D) to enter the Leased Premises as agent of the Tenant and as
such agent to re-let them and to receive the rent therefor and
as the agent of the Tenant to take possession of any furniture
or other property thereon and upon giving ten (10) days'
written notice to the Tenant to store the same at the expense
and risk of the Tenant or to sell or otherwise dispose of the
same at public or private sale without further notice and to
apply the proceeds thereof and any rent derived from
re-letting the Leased Premises upon account of the Rent due
and to become due under this Lease and the Tenant shall be
liable to the Landlord for the deficiency if any.
PAYMENT OF RENT, ETC. ON TERMINATION
(b) Upon the giving by the Landlord of a notice in writing terminating this
Lease under sub-paragraph (a)(C) of this paragraph, this Lease and the term
shall terminate, Rent and any other payments for which the Tenant is liable
under this Lease, shall be computed, apportioned and paid in full to the date of
such termination forthwith, and there shall immediately become due and payable
forthwith in one lump sum as liquidated damages and not a penalty the aggregate
of Basic Rent and additional Rent (as estimated by the Landlord acting
reasonably), for a period of one year, being the estimated time required for
re-releasing the Leased Premises or, if less than one year remains of the
Tenant, the aggregate of Basic Rent and Additional Rent (as estimated by the
Landlord acting reasonably) for the unexpired portion of the Term. Upon
termination of this Lease and the Term, the Tenant shall immediately deliver up
possession of the Leased Premises to the Landlord, and the Landlord may
forthwith re-enter and take possession of them.
(c) The Tenant shall pay to the Landlord on demand all costs and expenses,
including lawyers' fees, incurred by the Landlord in enforcing any of the
obligations of the Tenant under this Lease.
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ADDITIONAL PROVISIONS
RELOCATION OF LEASED PREMISES
11. The Landlord shall have the right at any time upon sixty(60)days' written
notice (the "Notice of Relocation") to relocate the Tenant to other premises in
the Property (the "Relocated Premises") and the following terms and conditions
shall be applicable.
(a) the Relocated Premises (which term shall mean the Leased
Premises after relocation) shall contain approximately the
same as, or greater rentable area than, the Leased Premises;
(b) the Landlord shall provide at its expense leasehold
improvements in the Relocated Premises equal to the standards
of the "Leasehold Improvements" (as hereinafter defined) in
the Leased Premises which have been completed or which the
Landlord is obliged herein to provide in the Leased Premises;
(c) the Landlord shall pay for the reasonable moving costs (if
any) from the Leased Premises to the Relocated Premises of the
Tenant's trade fixtures and furnishings;
(d) as compensation for all other costs, expenses and damages
which the Tenant may suffer or incur in connection with the
relocation including disruption and loss of business, Basic
Rent and Additional Rent for the Relocated Premises for the
period of the first one (1) month of occupancy shall abate,
(e) Basic Rent and "Tenant's Proportionate Share" (as hereinafter
defined) of Additional Rent for the Relocated Premises shall
be no greater than the Basic Rent and Tenant's Proportionate
Share of Additional Rent for the Leased Premises,
notwithstanding the Relocated Premises may contain a greater
rentable area;
(f) all other terms and conditions of the Lease shall apply to the
Relocated Premises except as are inconsistent with the terms
and conditions of this sub-paragraph.
SUBORDINATION AND ATTORNMENT
12. This Lease and all rights of the Tenant hereunder are subject and
subordinate to all underlying leases and charges, or mortgages now or hereafter
existing (including charges, and mortgages by way of debenture, note, bond,
deeds of trust and mortgage and all instruments supplemental thereto) which may
now or hereafter affect the Property or any part thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof provided the
lessor, chargee, mortgagee or trustee agrees to accept this Lease if not in
default; and in recognition of the foregoing the Tenant agrees that it will,
whenever requested, attorn to such lessor, chargee, mortgagee as a tenant upon
all the terms of this Lease. The Tenant agrees to execute promptly whenever
requested by the Landlord or by the holder of any such lease, charge, or
mortgage an instrument of subordination or attornment, as the case may be, as
may be required of it,
CERTIFICATES
13. The Tenant agrees that it shall promptly whenever requested by the Landlord
from time to time execute and deliver to the Landlord, and if required by the
Landlord, to any lessor, chargee, or mortgagee (including any trustee) or other
person designated by the Landlord, an acknowledgment in writing as to the then
status of this Lease, including as to whether it is in full force and effect, is
modified or unmodified, confirming the Basic Rent and Additional Rent payable
hereunder and the State of the accounts between Landlord and the Tenant, the
existence or non-existence of defaults, and any other matters pertaining to this
Lease as to which the Landlord shall request an acknowledgment.
INSPECTION OF ACCESS TO THE LEASED PREMISES
14. The Landlord shall be permitted at any time and from time to time to enter
and to have its and authorized agents, employees and contractors enter the
Leased Premises for the purposes of inspection, window cleaning, maintenance,
providing janitor service, making repairs, alterations or improvements to the
Leased Premises or the Property, or to have access to utilities and services
(including all ducts and access panels (if any), which the Tenant agrees not to
obstruct) and the Tenant shall provide free and unhampered access for the
purpose, and shall not be entitled to compensation for any inconvenience,
nuisance or discomfort caused thereby. The Landlord and its authorized agents
and employees shall be permitted entry to the Leased Premises for the purpose of
exhibiting them to prospective tenants. The Landlord in exercising its rights
under this paragraph shall do so to the extent reasonably necessary so as to
minimize interference with the Tenant's use and enjoyment of the Leased Premises
provided that in an emergency the Landlord or persons
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authorized by it may enter the Leased Premises without regard to minimizing
interference.
DELAY
15. Except as herein otherwise expressly provided, if and whenever and to the
extent that either the Landlord or the Tenant shall be prevented, delayed or
restricted in the fulfillment of any obligation hereunder in respect of the
supply or provision of any service or utility, the making of any repair, the
doing of any work or any other thing (other than the payment of moneys required
to be paid by the Tenant to the Landlord hereunder) by reason of:
(a) strikes or work stoppages;
(b) being unable to obtain any material, service, utility or labor
required to fulfill such obligation;
(c) any statute, law or regulation of, or inability to obtain any
permission from any government authority having lawful
jurisdiction preventing, delaying or restricting such
fulfillment;
or
(d) other unavoidable occurrence,
the time for fulfillment of such obligation shall be extended during the period
in which such circumstance operates to prevent, delay or restrict the
fulfillment thereof, and the other party to this Lease shall not be entitled to
compensation for any inconvenience, nuisance or discomfort thereby occasioned;
provided that nevertheless the Landlord will use its best efforts to maintain
services essential to the use and enjoyment of the Leased Premises and provided
further that if the Landlord shall be prevented, delayed or restricted in the
fulfillment of any such obligation hereunder by reason of any of the
circumstances set out in sub-paragraph (c) of this paragraph 15 and to fulfill
such obligation could not, in the reasonable opinion of the Landlord, be
completed without substantial additions to or renovations of the Property, the
Landlord may on sixty (60) days' written notice to the Tenant terminate this
Lease.
WAIVER
16. If either the Landlord or the Tenant shall overlook, excuse, condone or
suffer any default, breach, non-observance, improper compliance or
non-compliance by the other of any obligation hereunder, this shall not operate
as a waiver of such obligation in respect of any continuing or subsequent
default, breach, or non-observance, and no such waiver shall be implied but
shall only be effective if expressed in writing.
SALE, DEMOLITION AND RENOVATION
17. (a) The term "Landlord" as used in this Lease, means only the owner for
the time being of the Property, so that in the event of any sale or sales or
transfer or transfers of the Property, or the making of any lease or leases
thereof, or the sale or sales or the transfer or transfers or the assignment or
assignments of any such lease or leases, previous landlords shall be and hereby
are relieved of all covenants and obligations of Landlord hereunder. It shall be
deemed and construed without further agreement between the parties, or their
successors in interest, or between the parties and the transferee or acquiror,
at any such sale, transfer or assignment, or lessee on the making of any such
lease, that the transferee, acquiror or lessee has assumed and agreed to carry
out any and all of the covenants and obligations of Landlord hereunder to
Landlord's exoneration, and Tenant shall thereafter be bound to and shall attorn
to such transferee, acquiror or lessee, as the case may be, as Landlord under
this Lease;
(b) Notwithstanding anything contained in this Lease to the contrary,
in the event the Landlord intends to demolish or to renovate substantially all
the Building, then the Landlord, upon giving the Tenant one hundred and eighty
(180) days' written notice, shall have the right to terminate this Lease and
this Lease shall thereupon expire on the expiration of one hundred and eighty
(180) days from the date of the giving of such notice without compensation of
any kind to the Tenant.
PUBLIC TAKING
18. The Landlord and Tenant shall co-operate, each with the other, in respect of
any Public Taking of the Leased Premises or any part thereof so that the Tenant
may receive the maximum award to which it is entitled in law for relocation
costs and business interruption and so that the Landlord may receive the maximum
award for all other compensation arising from or relating to such Public Taking
(including all compensation for the value of the Tenant's leasehold interest
subject to the Public Taking) which shall be the property of the Landlord, and
the Tenant's rights to such compensation are hereby assigned to the Landlord. If
the whole or any part of the Leased Premises is
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Publicly Taken, as between the parties hereto, their respective rights and
obligations under this Lease shall continue until the day on which the Public
Taking authority takes possession thereof. If the whole or any part of the
Leased Premises is Publicly Taken, the Landlord shall have the option, to be
exercised by written notice to the Tenant, to terminate this Lease and such
termination shall be effective on the day the Public Taking authority takes
possession of the whole or the portion of the Property Publicly Taken. Rent and
all other payments shall be adjusted as of the date of such termination and the
Tenant shall, on the date of such Public Taking, vacate the Leased Premises and
surrender the same to the Landlord, with the Landlord having the right to
re-enter and re-possess the Leased Premises discharged of this Lease and to
remove all persons therefrom. In this paragraph, the words "Public Taking" shall
include expropriation and condemnation and shall include a sale by the Landlord
to an authority with powers of expropriation, condemnation or taking, in lieu of
or under threat of expropriation or taking and "Publicly Taken" shall have a
corresponding meaning.
REGISTRATION OF LEASE
19. The Tenant agrees with the Landlord not to register this Lease in any
recording office and not to register notice of this Lease in any form without
the prior written consent of the Landlord. If such consent is provided such
notice of Lease or caveat shall be in such form as the Landlord shall have
approved and upon payment of the Landlord's reasonable fee for same and all
applicable transfer or recording taxes or charges. The Tenant shall remove and
discharge at Tenant's expense registration of such a notice or caveat at the
expiry or earlier termination of the Term, and in the event of Tenant's failure
to so remove or discharge such notice or caveat after ten (10) days' written
notice by Landlord to Tenant, the Landlord may in the name and on behalf of the
Tenant execute a discharge of such a notice or caveat in order to remove and
discharge such notice of caveat and for the purpose thereof the Tenant hereby
irrevocably constitutes and appoints any officer of the Landlord the true and
lawful attorney of the Tenant.
LEASE ENTIRE AGREEMENT
20. The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions express or implied, collateral or otherwise
forming part of or in any way affecting or relating to this Lease save as
expressly set out in this Lease and Schedules attached hereto and that this
Lease and such Schedules constitute the entire agreement between the Landlord
and the Tenant and may not be modified except as herein explicitly provided or
except by agreement in writing executed by the Landlord and the Tenant.
NOTICES
21. Any notice, advice, document or writing required or contemplated by any
provision hereof shall be given in writing and if to the Landlord, either
delivered personally to an officer of the Landlord or mailed by prepaid mail
addressed to the Landlord at the said local office address of the Landlord shown
above, and if to the Tenant, either delivered personally to the Tenant (or to an
officer of the Tenant, if a corporation) or mailed by prepaid mail addressed to
the Tenant at the Leased Premises, or if an address of the Tenant is shown in
the description of the Tenant above, to such address. Every such notice, advice,
document or writing shall be deemed to have been given when delivered
personally, or if mailed as aforesaid, upon the fifth day after being mailed.
The Landlord may from time to time by notice in writing to the Tenant designate
another address as the address to which notices are to be mailed to it, or
specify with greater particularity the address and persons to which such notices
are to be mailed and may require that copies of notices be sent to an agent
designated by it. The Tenant may, if an address of the Tenant is shown in the
description of the Tenant above, from time to time by notice in writing to the
Landlord, designate another address as the address to which notices are to be
mailed to it, or specify with greater particularity the address to which such
notices are to be mailed.
INTERPRETATION
22. In this Agreement "herein", "hereof", "hereby", "hereunder", "hereto",
"hereinafter" and similar expressions refer to this Lease and not to any
particular paragraph, clause or other portion thereof, unless there is something
in the subject matter or context inconsistent therewith; and the parties agree
that all of the provisions of this Lease are to be construed as covenants and
agreements as though words importing such covenants and agreements were used in
each separate paragraph hereof, and that should any provision or provisions of
this Lease be illegal or not enforceable it or they shall be considered separate
and severable from the Lease and its remaining provisions shall remain in force
and be binding upon the parties hereto as though the said provision or
provisions had never been included, and further that the captions appearing for
the provisions of this Lease have been inserted as a matter of convenience and
for reference only and in no way define, limit or enlarge the scope or meaning
of this Lease or of any provisions hereof.
EXTENT OF LEASE OBLIGATIONS
23. This Agreement and everything herein contained shall enure to the benefit
of and be binding upon the respective heirs, executors, administrators,
successors, assigns and other legal representatives, as the case may be, of each
and every of the parties hereto, subject to the granting of
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consent by the Landlord to any assignment or sublease, and every reference
herein to any party hereto shall include the heirs, executors, administrators,
successors, assigns and other legal representatives of such party, and where
there is more than one tenant or there is a male or female party the provisions
hereof shall be read with all grammatical changes thereby rendered necessary and
all covenants shall be decreed joint and several.
USE AND OCCUPANCY PRIOR TO TERM
24. If the Tenant shall for any reason use or occupy the Leased Premises in any
way prior to the commencement of the Term without there being an existing lease
between the Landlord and Tenant under which the Tenant has occupied the Leased
Premises, then during such prior use or occupancy the Tenant shall be a Tenant
of the Landlord and shall be subject to the same covenants and agreements in
this Lease mutatis mutandis.
SCHEDULES
25. The provisions of the following Schedules attached hereto shall form part of
this Lease as if the same were embodied herein:
Schedule "A" - Legal Description of Property
Schedule "B" - Outline of Leased Premises
Schedule "C" - Taxes Payable by Landlord and Tenant
Schedule "D" - Services and Costs
Schedule "E" - Rules and Regulations
Schedule "F" - Leasehold Improvements
Schedule "G" - N/A
Schedule "H" - N/A
Schedule "I" - N/A
Schedule "J" - N/A
Schedule "K" - OCCUPANCY PRIOR TO COMMENCEMENT OF TERM
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
Landlord:
THE MANUFACTURERS LIFE INSURANCE
COMPANY
CHECKED
[SIG]
VERIFIED
[SIG]
[SIG] by Signature /s/ CHRIS HOLTVED
- ----------------------------- ----------------------------
Witness as to signing Title: CHRIS HOLTVED
by Landlord Regional Director
Tenant:
COFFEE.COM INTERACTIVE CAFE CORP.
[SIG] by Signature /s/ LINDA CARLING
- ------------------------------ ----------------------------
Witness as to signing by Title: V.P. Promotions
Tenant or officer(s) of Tenant
by Signature
----------------------------
Title:
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SCHEDULE "A"
(Legal Description of Property)
TO A LEASE AGREEMENT BETWEEN
THE MANUFACTURERS LIFE INSURANCE COMPANY
- AND -
COFFEE.COM INTERACTIVE CAFE CORP.
Those portions of Lots Seventeen (17), Eighteen (18),
Nineteen (19) and Twenty (20), which lie to the South of
the Northerly Seven (7) feet throughout the said Lots
Seventeen (17), Eighteen (18), Nineteen (19) and
Twenty (20) in Block Forty-eight (48) on Plan "A-1", Calgary,
Excepting out of Lots Nineteen (19) and Twenty (20)
all mines and minerals.
(hereinafter referred to as the "Property')
DATED THE 20TH DAY OF MARCH, 1997.
MUNICIPALLY DESCRIBED AS: 603 - 7th Avenue S.W.
Calgary, Alberta
Property Name: MANULIFE HOUSE
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SCHEDULE "B"
(Plan of Leased Premises outlined in red)
7TH AVENUE
[DIAGRAM]
Suite 550
2,880 square feet
Property Name: MANULIFE HOUSE
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SCHEDULE "C"
TAXES PAYABLE BY LANDLORD AND TENANT
TENANT'S TAXES
1. (a) The Tenant covenants to pay all Tenant's Taxes, as and when
the same become due and payable. Where any Tenant's Taxes are
payable by the Landlord to the relevant taxing authorities,
the Tenant covenants to pay the amount thereof to the
Landlord.
(b) The Tenant covenants to pay the Landlord the Tenant's
Proportionate Share of the amount of the Landlord's Taxes in
each Fiscal Period.
(c) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the costs and expenses (including legal
and other professional fees and interest and penalties on
deferred payments) incurred in good faith by the Landlord in
contesting, resisting or appealing any of the Taxes.
LANDLORD'S TAXES
(d) The Landlord covenants to pay all Landlord's Taxes subject to
the payments on account of Landlord's Taxes required to be
made by the Tenant elsewhere in this Lease. The Landlord may
appeal any official assessment or the amount of any Taxes or
other taxes based on such assessment and relating to the
Property. In connection with any such appeal, the Landlord may
defer payment of any Taxes or other taxes, as the case may be,
payable by it to the extent permitted by law, and the Tenant
shall co-operate with the Landlord and provide the Landlord
with all relevant information reasonably required by the
Landlord in connection with any such appeal.
SEPARATE ALLOCATION
(e) In the event that the Landlord is unable to obtain from the
taxing authorities any separate allocation of Landlord's
Taxes, Tenant's Taxes or assessment as required by the
Landlord to make calculations of Additional Rent under this
Lease, such allocation shall be made by the Landlord acting
reasonably and shall be conclusive.
INFORMATION
(f) Whenever requested by the Landlord, the Tenant shall deliver
to it receipts for payment of all the Tenant's Taxes and
furnish such other information in connection therewith as the
Landlord may reasonably require.
TAX ADJUSTMENT
(g) If the Building has not been taxed as a completed and fully
occupied building for any Fiscal Period, the Landlord's Taxes
will be determined by the Landlord as if the Building had been
taxed as a completed and fully occupied building for any such
Fiscal Period.
DEFINITION
2. In this lease:
(a) "Landlord's Taxes" shall mean the aggregate of all Taxes
attributable to the Property, the Rent or the Landlord in
respect thereof and including, any amounts imposed, assessed,
levied or charged in substitution for or in lieu of any such
Taxes, but excluding such taxes as capital gains taxes,
corporate income, profit or excess profit taxes to the extent
such taxes are not levied in lieu of any of the foregoing
against the Property or the Landlord in respect thereof;
(b) "Taxes" shall mean all taxes, rates, duties, levies, fees,
charges, local improvement rates, capital taxes, rental taxes
and assessments whatsoever including fees, rents, and levies
for air rights and encroachments on or over municipal property
imposed, assessed, levied or charged by any school, municipal,
regional, state, provincial, federal, parliamentary or other
body, corporation, authority, agency or commission provided
that "Taxes" shall not include any special utility, levies,
fees or charges imposed, assessed, levied or charged which are
directly associated with initial construction of the Property;
(c) "Tenant's Taxes" shall mean the aggregate of:
(i) all Taxes (whether imposed upon the Landlord or the
Tenant) attributable to the personal property, trade
fixtures, business, income, occupancy or sales of the
Tenant or any other occupant of the Leased Premises,
and to any Leasehold Improvements or fixtures
installed by or on behalf of the Tenant within the
Leased Premises, and to the use by the Tenant of any
of the Property, and
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SCHEDULE "D"
SERVICES AND COSTS
INTERIOR CLIMATE CONTROL
1. The Landlord covenants with the Tenant:
(a) To maintain in the Leased Premises conditions of reasonable
temperature and comfort in accordance with good standards
applicable to normal occupancy of premises for office purposes
subject to governmental regulations during hours to be
determined by the Landlord (but to be at least the hours from
8:00 a.m. to 6:00 p.m. from Monday to Friday inclusive with
the exception of holidays, Saturdays and Sundays), such
conditions to be maintained by means of a system for heating
and cooling, filtering and circulating air; the Landlord shall
have no responsibility for any inadequacy of performance of
the said system if the occupancy of the Leased Premises or the
electrical power or other energy consumed on the Leased
Premises for all purposes exceeds reasonable amounts as
determined by the Landlord or the Tenant installs partitions
or other installations in locations which interfere with the
proper operation of the system of interior climate control or
if the window covering on exterior windows is not kept fully
closed;
JANITOR SERVICE
(b) To provide janitor and cleaning services to the Leased
Premises and to common areas of the Building consisting of
reasonable services in accordance with the standards of
similar office buildings;
ELEVATORS, LOBBIES, ETC.
(c) To keep available the following facilities for use by the
Tenant and its employees and invitees in common with other
persons entitled thereto:
(i) passenger and freight elevator service to each floor
upon which the Leased Premises are located provided
such service is installed in the Building and
provided that the Landlord may prescribe the hours
during which and the procedures under which freight
elevator service shall be available and may limit the
number of elevators providing service outside normal
business hours;
(ii) common entrances, lobbies, stairways and corridors
giving access to the Building and the Leased
Premises, including such other areas from time to
time which may be provided by the Landlord for common
use and enjoyment within the Property;
(iii) the washrooms as the Landlord may assign from time to
time which are standard to the Building, provided
that the Landlord and the Tenant acknowledge that
where an entire floor is leased to the Tenant or some
other tenant the Tenant or such other tenant, as the
case may be, may exclude others from the washrooms
thereon.
ELECTRICITY
2. (a) The Landlord covenants with the Tenant to furnish electricity
to the Leased Premises (except Leased Premises which have
separate meters) for normal office use for lighting and for
office equipment capable of operating from the circuits
available to the Leased Premises and standard to the Building
during hours to be determined by the Landlord (but to be at
least the hours from 8:00 a.m. to 6:00 p.m. from Monday to
Friday inclusive with the exception of holidays, Saturdays and
Sundays) and during such other hours that the Tenant elects at
its sole cost and expense subject to governmental regulations;
(b) The amount of electricity consumed on the Leased Premises in
excess of electricity required by the Tenant for normal office
use shall be as determined by the Landlord acting reasonably
or by a metering device installed by the Tenant at the
Tenant's expense. The Tenant shall pay the Landlord for any
such excess electricity on demand.
3. The Landlord shall maintain and keep in repair the facilities required for
the provision of the interior climate control, elevator (if installed in the
Building) and other services referred to in sub-paragraph (a) and (c) of
paragraph I and sub-paragraph (a) of paragraph 2 of this Schedule in accordance
with the standards of office buildings similar to the Building but reserves the
right to stop the use of any of these facilities and the supply of the
corresponding services when necessary by reason of accident or breakdown or
during the making of repairs, alterations or improvements, in the reasonable
judgment of the Landlord necessary or desirable to be made until the repairs,
alterations or improvements shall have been completed to the satisfaction of the
Landlord.
ADDITIONAL SERVICES
4. (a) The Landlord may (but shall not be obliged) on request of the
Tenant supply services or materials to the Leased Premises and
the Property which are not provided for under this Lease and
which are used by the Tenant (the "Additional Services")
including, without limitation,
(i) replacement of tubes and ballasts;
(ii) carpet shampooing;
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(iii) drapery cleaning;
(iv) locksmithing;
(v) removal of bulk garbage;
(vi) picture hanging; and
(vii) special security arrangement.
(b) When Additional Services are supplied or furnished by the
Landlord, accounts therefor shall be rendered by the Landlord
and shall be payable by the Tenant to the Landlord on demand.
In the event the Landlord shall elect not to supply or furnish
Additional Services, only persons with prior written approval
by the Landlord (which approval shall not be unreasonably
withheld) shall be permitted by the Landlord or the Tenant to
supply or furnish Additional Services to the Tenant and the
supplying and furnishing shall be subject to the reasonable
rules fixed by the Landlord with which the Tenant undertakes
to cause compliance and to comply.
OPERATING CHARGES PAYABLE
5. (a) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the amount of the Operating Costs in
each Fiscal Period;
(b) Subject to the other terms and conditions of this Lease, the
Landlord shall not be responsible during the Term for any
costs, charges, expenses and outlays of any nature whatsoever
arising from or relating to the Leased Premises and the Tenant
shall pay all charges, impositions, costs and expenses of
every nature and kind relating to the Leased Premises and the
amounts included as Additional Rent whether or not
specifically provided for herein and the Tenant covenants with
the Landlord accordingly;
(c) In this Lease "Operating Costs" shall include all costs
incurred or which will be incurred by the Landlord in the
maintenance, operation, administration and management of the
Property including without limitation:
(i) cost of heating, ventilating and air-conditioning;
(ii) cost of water and sewer charges;
(iii) cost of electricity, fuel or other form of energy
which are not separately metered and recovered or
paid by tenants;
(iv) costs of insurance carried by the Landlord pursuant
to paragraph 9(a) of this Lease and cost of any
deductible amount paid by the Landlord in connection
with each claim made by the Landlord under such
insurance;
(v) cost of building office expenses, including
telephone, rent, stationery and supplies;
(vi) costs of all elevator and escalator (if installed in
the Building) maintenance and operation;
(vii) costs of operating staff, management staff and other
administrative personnel, including salaries, wages,
and fringe benefits;
(viii) cost of providing security;
(ix) cost of providing janitorial services, window
cleaning, garbage and snow removal and pest control;
(x) cost of supplies and materials;
(xi) cost of decoration of common areas;
(xii) cost of landscaping;
(xiii) cost of maintenance and operation of the parking
area;
(xiv) cost of consulting, and professional fees including
expenses;
(xv) cost of replacements, additions and modifications
unless otherwise included under Operating Costs under
subparagraph (xvi), and cost of repair and;
(xvi) costs in respect of each Major Expenditure (as
hereinafter defined) as amortized over the period of
the Landlord's reasonable estimate of the economic
life of the Major Expenditure, but not to exceed
fifteen (15) years, using equal monthly installments
of principal and interest at ten percent (10%) per
annum compounded semi-annually. For the purpose
hereof "Major Expenditure" shall mean any expenditure
incurred after the date of substantial completion of
the Building for replacement of machinery, equipment,
building elements, systems or facilities forming a
part of or used in connection with the Property or
for modifications, upgrades or additions to the
Property or facilities used in connection therewith,
provided that, in each case, such expenditure was
more than ten percent (10%) of the total Operating
Costs for the immediately preceding Fiscal Period.
(d) In this Lease there shall be excluded from Operating Costs the
following:
(i) interest on debt and capital retirement of debt;
(ii) such of the Operating Costs as are recovered from
insurance proceeds; and
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(iii) costs as determined by the Landlord of acquiring
tenants for the Property.
6. In calculating Operating Costs for any Fiscal Period, if less than one
hundred percent (100%) of Building is occupied by tenants, then the amount of
such Operating Costs shall be deemed for the purposes of this Schedule to be
increased to an amount equal to the like Operating Costs which normally would be
expected by the Landlord to have been incurred had such occupancy been one
hundred percent (100%) during such entire period.
7. In this Lease, "Tenant's Proportionate Share" shall mean THREE DECIMAL FIVE
NINE percent (3.59%) subject to adjustment as determined solely by the Landlord
and notified to the Tenant in writing for physical increases or decreases in the
total rentable area of the Property provided that total rentable area of the
Property and the rentable area of the Leased Premises shall exclude areas
designated (whether or not rented) for parking and for storage.
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SCHEDULE "E"
RULES AND REGULATIONS
1. The sidewalks, entry passages, elevators (if installed in the Building) and
common stairways shall not be obstructed by the Tenant or used for any other
purpose than for ingress and egress to and from the Leased Premises. The Tenant
will not place or allow to be placed in the Building corridors or public
stairways any waste paper, dust, garbage, refuse or anything whatever.
2. The washroom plumbing fixtures and other water apparatus shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown therein. The
expense of any damage resulting by misuse by the Tenant shall be borne by the
Tenant,
3. The Tenant shall permit window cleaners to clean the windows of the Leased
Premises during normal business hours.
4. No birds or animals shall be kept in or about the Property nor shall the
Tenant operate or permit to be operated any musical or sound-producing
instruments or device or make or permit any improper noise inside or outside the
Leased Premises which may be heard outside such Leased Premises.
5. No one shall use the Leased Premises for residential purposes, or for the
storage of personal effects or articles other than those required for business
purposes.
6. All persons entering and leaving the Building at any time other than during
normal business hours shall register in the books which may be kept by the
Landlord at or near the night entrance and the Landlord will have the right to
prevent any person from entering or leaving the Building or the Property unless
provided with a key to the premises to which such person seeks entrance and a
pass in a form to be approved by the Landlord. Any persons found in the Building
at such times without such keys and passes will be subject to the surveillance
of the employees and agents of the Landlord.
7. No dangerous or explosive materials shall be kept or permitted to be kept in
the Leased Premises.
8. The Tenant shall not and shall not permit any cooking in the Leased
Premises. The Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Leased Premises without the prior
written approval of the Landlord. Only persons authorized by the Landlord shall
be permitted to deliver or to use the elevators (if installed in the Building)
for the purpose of delivering food or beverages to the Leased Premises.
9. The Tenant shall not bring in or take out, position, construct, install or
move any safe, business machine or other heavy office equipment without first
obtaining the prior written consent of the Landlord. In giving such consent, the
Landlord shall have the right in its sole discretion, to prescribe the weight
permitted and the position thereof, and the use and design of planks, skids or
platforms to distribute the weight thereof. All damage done to the Building by
moving or using any such heavy equipment or other office equipment or furniture
shall be repaired at the expense of the Tenant. The moving of all heavy
equipment or other office equipment or furniture shall occur only at times
consented to by the Landlord and the persons employed to move the same in and
out of the Building must be acceptable to the Landlord. Safes and other heavy
office equipment will be moved through the halls and corridors only upon steel
bearing plates. No freight or bulky matter of any description will be received
into the Building or carried in the elevators (if installed in the Building)
except during hours approved by the Landlord.
10. The Tenant shall give the Landlord prompt notice of any accident to or any
defect in the plumbing, heating, air-conditioning, ventilating, mechanical or
electrical apparatus or any other part of the Building.
11. The parking of automobiles shall be subject to the charges and the
reasonable regulations of the Landlord. 'Me Landlord shall not be responsible
for damage to or theft of any car, its accessories or contents whether the same
be the result of negligence or otherwise.
12. The Tenant shall not mark, drill into or in any way deface the walls,
ceilings, partitions, floors or other parts of the Leased Premises and the
Building.
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13. Except with the prior written consent of the Landlord, no tenant shall use
or engage any person or persons other than the janitor or janitorial contractor
of the Landlord for the purpose of any cleaning of the Leased Premises.
14. If the Tenant desires any electrical or communications wiring, the Landlord
reserves the right to direct qualified persons as to where and how the wires are
to be introduced, and without such directions no borings or cutting for wires
shall take place. No other wires or pipes of any kind shall be introduced
without the prior written consent of the Landlord.
15. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the Leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord. Additional keys may be
obtained from the Landlord at the cost of the Tenant.
16. The Tenant shall be entitled to have its name shown upon the directory board
of the Building and at one of the entrance doors to the Leased Premises all at
the Tenant's expense, but the Landlord shall in its sole discretion design the
style of such identification and allocate the space on the directory board for
the Tenant.
17. The Tenant shall keep the sun drapes (if any) in a closed position at all
times. The Tenant shall not interfere with or obstruct any perimeter heating,
air-conditioning or ventilating units.
18. The Tenant shall not conduct, and shall not permit any, canvassing in the
Building.
19. The Tenant shall take care of the rugs and drapes (if any) in the Leased
Premises and shall arrange for the carrying-out of regular spot cleaning and
shampooing of carpets and dry cleaning of drapes in a manner acceptable to the
Landlord.
20. The Tenant shall permit the periodic closing of lanes, driveways and
passages for the purpose of preserving the Landlord's rights over such lanes,
driveways and passages.
21. The Tenant shall not place or permit to be placed any sign, advertisement,
notice or other display on any part of the exterior of the Leased Premises or
elsewhere if such sign, advertisement, notice or other display is visible from
outside the Leased Premises without the prior written consent of the Landlord
which may be arbitrarily withheld. The Tenant, upon request of the Landlord,
shall immediately remove any sign, advertisement, notice or other display which
the Tenant has placed or permitted to be placed which, in the opinion of the
Landlord, is objectionable, and if the Tenant shall fail to do so, the Landlord
may remove the same at the expense of the Tenant.
22. The Landlord shall have the right to make such other and further reasonable
rules and regulations and to alter the same as in its judgment may from time to
time be needful for the safety, care, cleanliness and appearance of the Leased
Premises and the Building and for the preservation of good order therein, and
the same shall be kept and observed by the tenants, their employees and
servants. The Landlord also has the right to suspend or cancel any or all of
these rules and regulations herein set out.
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SCHEDULE "F"
LEASEHOLD IMPROVEMENTS
DEFINITION OF LEASEHOLD IMPROVEMENTS
1. For purposes of this Lease, the term "Leasehold Improvements" includes,
without limitation, all fixtures, improvements, installations, alterations and
additions from time to time made, erected or installed by or on behalf of the
Tenant, or any previous occupant of the Leased Premises, in the Leased Premises
and by or on behalf of other tenants in other premises in the Building
(including the Landlord if an occupant of the Building), including all
partitions, doors and hardware however affixed, and whether or not movable, all
mechanical, electrical and utility installations and all carpeting and drapes
with the exception only of furniture and equipment not of the nature of
fixtures.
INSTALLATION OF IMPROVEMENTS AND FIXTURES
2. The Tenant shall not make, erect, install or alter any Leasehold
Improvements in the Leased Premises without having requested and obtained the
Landlord's prior written approval. The Landlord's approval shall not, if given,
under any circumstances be construed as consent to the Landlord having its
estate charged with the cost of work. The Landlord shall not unreasonably
withhold its approval to any such request, but failure to comply with the
Landlord's reasonable requirements from time to time for the Building shall be
considered sufficient reason for refusal. In making, erecting, installing or
altering any leasehold Improvements the Tenant shall not, without the prior
written approval of the Landlord, alter or interfere with any installations
which have been made by the Landlord or others and in no event shall alter or
interfere with window coverings (if any) or other light control devices (if
any) installed in the Building. The Tenant's request for any approval hereunder
shall be in writing and accompanied by an adequate description of the
contemplated work and, where appropriate, working drawings and specifications
thereof. If the Tenant requires from the Landlord drawings or specifications of
the Building in connection with leasehold Improvements, the Tenant shall pay
the cost thereof to the Landlord on demand. Any reasonable costs and expenses
incurred by the Landlord in connection with the Tenant's Leasehold Improvements
shall be paid by the Tenant to the Landlord on demand. All work to be performed
in the Leased Premises shall be performed by competent contractors and
sub-contractors of whom the Landlord shall have approved in writing prior to
commencement of any work, such approval not to be unreasonably withheld (except
that the Landlord may require that the Landlord's contractors and
sub-contractors be engaged for any mechanical or electrical work) and by
workmen who have labor union affiliations that are compatible with those
affiliations (if any) of workmen employed by the Landlord and its contractors
and sub-contractors. All such work including the delivery, storage and removal
of materials shall be subject to the reasonable supervision of the Landlord,
shall be performed in accordance with any reasonable conditions or regulations
imposed by the Landlord including, without limitation, payment on demand of a
reasonable fee of the Landlord for such supervision, and shall be completed in
good and workmanlike manner in accordance with the description of the work
approved by the Landlord and in accordance with all laws, regulations and
by-laws of all regulatory authorities. Copies of required building permits or
authorizations shall be obtained by the Tenant at its expense and copies
thereof shall be provided to the Landlord. No locks shall be installed on the
entrance doors or in any doors in the Leased Premises that are not keyed to the
Building master key system.
LIENS AND ENCUMBRANCES ON IMPROVEMENTS
AND FIXTURES
3. In connection with the making, erection, installation or alteration of
leasehold Improvements and all other work or installations made by or for the
Tenant in the Leased Premises the Tenant shall comply with all the provisions
of the mechanics' lien and other similar statutes from time to time applicable
thereto (including any proviso requiring or enabling the retention by way of
holdback of portions of any sums payable) and, except as to any such holdback,
shall promptly pay all accounts relating thereto. The Tenant will not create
any mortgage, conditional sale agreement or other encumbrance in respect of its
Leasehold Improvements or, without the written consent of the Landlord, with
respect to its trade fixtures nor shall the Tenant take any action as a
consequence of which any such mortgage, conditional sale agreement or other
encumbrance would attach to the Property or any part thereof. If and whenever
any mechanics' or other lien for work, labor, services or materials supplied to
or for the Tenant or for the cost of which the Tenant may be in any way liable
or claims therefor shall arise or be filed or any such mortgage, conditional
sale agreement or other encumbrance shall attach, the Tenant shall within
twenty (20) days after submission by the
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SCHEDULE "K"
OCCUPANCY PRIOR TO COMMENCEMENT OF TERM
The Tenant may enter the Leased Premises thirty (30 ) days prior to commencement
of the Term for the sole purpose of installing Leasehold Improvements (the
"Improvement Period"). Landlord and Tenant mutually acknowledge and agree that
the Improvement Period precedes and is not part of Basic Rent Free Period, if
any, provided for in this Lease.
Tenant's occupancy of the Leased Premises during the Improvement Period shall be
upon and subject to the following conditions:
1. During the Improvement Period the Tenant, its servants, agents,
employees, contractors, subcontractors, officers and directors shall be
subject to and bound by all of the terms and conditions of this Lease
including without limiting the generality of the foregoing insurance
and indemnification subject only to the following:
(a) During the Improvement Period the Tenant shall not be
obligated to pay Rent.
(b) In the event the Tenant commences to conduct its business
from the Leased Premises during the Improvement Period all
Rent and other charges shall commence from the date of such
commencement notwithstanding that the Term has not yet begun.
(c) During the Improvement Period the Landlord shall have no
obligation to provide the Tenant any of the services required
to be provided by the Landlord hereunder to the Tenant
including without limitation any of the services referred to
in paragraphs 1, 2, 3 and 4 of Schedule "D" of this Lease and
the Landlord shall not be liable to the Tenant for any loss
whatsoever resulting from Landlord not providing any such
services.
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(ii) the amount by which Taxes (whether imposed upon the Landlord
or the Tenant) are increased above the Taxes which would have
otherwise been payable as a result of the Leased Premises or
the Tenant or any other occupant of the Leased Premises being
taxed or assessed in support of separate schools; and
(d) "Tenant's Proportionate Share" shall mean THREE DECIMAL FIVE NINE
percent (3.59%) subject to adjustment as determined solely by the
Landlord and notified to the Tenant in writing for physical increases
or decreases in the total rentable area of the Property provided that
total rentable area of the Property and the rentable area of the Leased
Premises shall exclude areas designated (whether or not rented) for
parking and for storage.
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<PAGE> 28
AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT TO LEASE AGREEMENT made this 13th day of November, 1997.
BETWEEN:
THE MANUFACTURERS LIFE INSURANCE COMPANY
(hereinafter called the "Landlord")
OF THE FIRST PART,
and
COFFEE.COM INTERACTIVE CAFE CORP.
(hereinafter called the "Tenant")
OF THE SECOND PART,
WHEREAS by a Lease Agreement made the 20th day of March 1997 (the "Lease"), the
Landlord leased to the Tenant the following premises:
Property: - 603 - 7th Avenue S.W., Calgary: as per
Lease,
Leased Premises: - 2,880 square feet, fifth (5th) Floor,
Suite 550: as per Lease,
Term: - Five (5) years: as per Lease,
Basic Rent: - $14,440.00 per annum: as per Lease,
Tenant's Proportionate Share: - 3.59%: as per Lease;
AND WHEREAS the Landlord and the Tenant have agreed to amend the Lease;
NOW WITNESSTH that in consideration of the rents, covenants and agreements
contained in the Lease, and in consideration of the covenants and agreements
hereinafter contained, and the sum of ONE DOLLAR ($1.00) now paid by each of the
parties to the other (the receipt and sufficiency of which is hereby
acknowledged), the Landlord and Tenant hereby agree to amend the Lease as
follows to give effect to Tenant's expansion within the Property:
1) (i) Clause 1 of the Lease shall be amended as follows:
"As of the 1st day of December 1997 (the "Effective Date") the
area of the Leased Premises shall be increased by Four
Thousand Ninety rentable square feet (4,090 r.s.f) as outlined
on Schedule "B-1" attached hereto (the "Expansion Premises"),
and the revised area of the Leased Premises shall be deemed to
consist of Six Thousand Nine Hundred Seventy rentable square
feet (6,970 r.s.f.)."
(ii) Clause 3 Paragraph 3(a) of the Lease shall be amended
as follows:
"As of the Effective Date the Basic Rent shall be increased by
Forty-Seven Thousand Forty dollars ($47,040.00) to Sixty-One
Thousand Four Hundred Forty dollars ($61,440.00) of lawful
money of the jurisdiction in which the Leased Premises are
located, payable in equal month installments. The monthly
installments shall be Five Thousand One Hundred Twenty dollars
($5,120.00) each in advance on the first day of each month
during the Term. The first amended payment to be made on the
1st day of December, 1997, subject to Schedule "K" attached
hereto, which shall form part of the Lease as if the same were
embodied therein."
Commencing on the 1st day of December, 1999 and continuing
until the 30th day of November, 2000, the Basic Rent shall be
increased to Sixty-Five Thousand Five Hundred Twenty dollars
($65,520.00) per annum of lawful money of the jurisdiction in
which the Leased Premises are located payable in equal monthly
installments of Five Thousand Four Hundred Sixty dollars
($5,460.00) each in advance on the first day of each month
during the Term, the first payment to be made on the 1st day
of December, 1999.
Commencing on the 1st day of December, 2000 and continuing
until the 30th day of April, 2002, the Basic Rent shall be
increased to Sixty-Nine Thousand Six Hundred Twelve
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[SIG] [SIG]
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dollars ($69,612.00) per annum of lawful money of the
jurisdiction in which the Leased Premises are located payable
in equal monthly installments of Five Thousand Eight Hundred
One dollars ($5,801.00) each in advance on the first day of
each month during the Term, the first payment to be made on
the 1st day of December, 2000.
(iii) Clause 4 of the Lease shall be amended by the
addition of the following:
"On the 1st day of March, 1998 the Tenant shall pay an
additional Security Deposit of Five Thousand dollars
($5,000.00) to Landlord, such that the total Security Deposit
held is Seven Thousand Seven Hundred Forty-Three dollars and
Forty-Eight cents ($7,743.48)."
(iv) Schedule C Clause 2 Paragraph 2(d) and Schedule D
Clause 7 shall be amended by the addition of the
following:
"As of the Effective Date Tenant's Proportionate Share shall
be increased by five decimal one one percent (5.11%) to eight
decimal seven zero percent (8.70%)".
(v) Schedule F Clause 5 Paragraph 5(b) shall be amended
by the addition of the following:
"As of the Effective Date Landlord's Work for the Expansion
Premises shall include:
The Landlord shall, at its sole cost demolish
approximately 15 feet of lineal drywall in the
existing reception area, repair and paint walls
relating to the demolition area only and patch the
carpet with existing carpet base."
2) As of the Effective Date, Schedule "B-1" - Outline of Additional
Leased Premises, attached hereto, shall form part of the Lease as if the same
were embodied therein.
3) As of the Effective Date Schedule "K-1", Occupancy Prior to
Commencement of Term, attached hereto, shall form part of the Lease as if the
same were embodied therein.
4) The Landlord and the Tenant hereby confirm each to the other the
several covenants and agreements in the Lease as amended by this Amendment to
Lease Agreement.
5) This Amendment to Lease Agreement and everything herein contained
shall enure to the benefit of and be binding upon the respective heirs,
executors, administrators, successors, assigns and other legal representatives,
as the case may be, of each of the parties hereto, and every reference herein to
any party hereto shall include the heirs, executors, administrators, successors,
assigns and other legal representatives of such party, and where there is more
than one tenant or there is a male or female party, the provisions hereof shall
be read with all grammatical changes thereby rendered necessary and all
covenants shall be deemed joint and several.
IN WITNESS HEREOF the, parties hereto have executed this Amendment to Lease
Agreement. I/We have authority to bind the corporation.
LANDLORD:
THE MANUFACTURERS LIFE INSURANCE COMPANY
by Signature: /s/ CHRIS HOLTVED
---------------------------
Name: Chris Holtved
Title: Regional Director
TENANT:
COFFEE.COM INTERACTIVE CAFE CORP.
/s/ [SIG] by Signature: /s/ [SIG]
- -------------------- ---------------------------
Witness as to Name: ??????
signing by Tenant Title: ??????
INITIAL
Landlord | Tenant
[SIG] [SIG]
<PAGE> 30
SCHEDULE "B1"
(Location of Leased Premises cross-hatched)
This Schedule is for identification purposes only and is not to be interpreted
as being a representation or warranty on the part of the Landlord as to the
exact location, area, configuration and layout,
5th floor diagram
Property Name: MANULIFE HOUSE
INITIAL
Landlord | Tenant
[SIG] [SIG]
<PAGE> 31
SCHEDULE "K"
BASIC RENT FREE PERIOD
The Tenant shall not be required to pay Basic Rent for the Expansion Premises
the first thirty-one (31) days of the Term of this Lease (herein called the
"Basic Rent Free Period"). For clarification, this represents a reduction of
Three Thousand Nine Hundred Twenty dollars ($3,920.00) in the revised Basic Rent
for the month of December 1997.
All other terms and provisions of this Lease shall, however, remain in full
force and effect during the Basic Rent Free Period and thereafter including
without limitation the payment of Additional Rent.
INITIAL
Landlord | Tenant
[SIG] [SIG]
<PAGE> 32
SCHEDULE "K-1
OCCUPANCY PRIOR TO COMMENCEMENT OF TERM
The Tenant may enter the Expansion Premises sixteen (16) days prior to
commencement of the Term for the sole purpose of installing Leasehold
Improvements (the, "Improvement Period"). Landlord and Tenant mutually
acknowledge and agree that the Improvement Period precedes and is not part of
Basic Rent Free Period, if any, provided for in this Lease.
Tenant's occupancy of the Leased Premises during the Improvement Period shall be
upon and subject to the following conditions:
1. During the Improvement Period the Tenant, its servants, agents,
employees, contractors, subcontractors, officers and directors shall be
subject to and bound by all of the terms and conditions of this Lease
including without limiting the generality of the foregoing insurance
and indemnification subject only to the following:
(a) During the Improvement Period the Tenant shall not be
obligated to pay Rent except those charges set out in l(d).
(b) In the event the Tenant commences to conduct its business from
the Leased Premises during the Improvement Period all Rent and
other charges shall commence from the date of such
commencement notwithstanding that the Term has not yet begun.
(c) During the Improvement Period the Landlord shall have no
obligation to provide the Tenant any of the services required
to be provided by the Landlord hereunder to the Tenant
including without limitation any of the services referred to
in paragraphs 1, 2, 3 and 4 of Schedule "D" of this Lease
except those services reasonably required by the Tenant for
the purposes of installing the Leasehold Improvements and the
Landlord shall not be liable to the Tenant for any loss
whatsoever resulting from Landlord not providing any such
services.
(d) The Tenant shall be responsible for the Landlord's reasonable
charges during the Improvement Period for services and
utilities used for or in connection with the Leased Premises,
including, without limiting the generality of the foregoing,
those relating to security and access to the Leased Premises,
garbage removal from the Leased Premises and the use and
consumption of utilities such as water, fuel, power and
telephone. The Tenant shall pay to the Landlord on demand the
amount of such charges, based on estimates by the Landlord.
(e) Tenant acknowledges that Landlord may be completing Landlord's
Work for the Expansion Premises during the Improvement Period.
INITIAL
Landlord | Tenant
[SIG] [SIG]
<PAGE> 1
Employment Agreement
This Agreement made the 1st day of January, 1998.
BETWEEN:
SysGold Ltd., a body corporate, incorporated under the laws of the Province of
Alberta with a Head Office in the City of Calgary in the said Province
(hereinafter referred to as the Company).
AND
Apprentice of Calgary in the Province of Alberta (hereinafter referred to as the
Employee).
WITNESSETH as follows:
The Company hereby appoints Apprentice to the position of Apprentice Systems
Consultant upon the following terms and conditions which the Employee accepts,
namely:
1. The Employee shall carry out the duties and assume the responsibilities set
forth in the position description annexed hereto as Schedule A.
2. The Employees salary shall be as set out in Schedule A, commencing January 1,
1998, payable twice monthly.
3. The Employee shall be entitled to 3 weeks of vacation each year, with times
and dates as mutually arranged.
4. The Employee shall participate in the Company's incentive compensation plan
as presently structured, with the personal incentive compensation being
determined as outlined in Schedule A.
5. The Employee may terminate this contract on 2 weeks notice in writing to the
Company. The Company may terminate this contract on the notice or pay in lieu
required by the Employment Standards Code (Alberta). In the case of termination
for cause, no notice is required.
6. Should employment be terminated for any reason, the Employee shall not
directly or indirectly work for a client of the Company in any capacity for a
period of 12 months after termination. Without limiting the generality of the
foregoing, this shall include, but not be limited to employment by the client,
employment by another party who contracts with the client, contracting,
subcontracting, agency, partnership or any other association. A client is
defined as an existing client of the Company or one for which the Company has
performed services in the preceding 12 months.
Should the employee breach this covenant (which covenant shall survive
the termination of employment), the employee shall pay to the Company as
liquidated damages, and not a penalty, an amount equal to 50% of any fees or
gross income earned during that period, which amounts shall be due and payable
on demand.
7. In consideration of receiving training, the Employee agrees that in the event
this contract is terminated by the Employee after attending training the
Employee will reimburse SysGold for the cost of the training plus any expenses
which may have been incurred by the employee and paid by SysGold according to
the following schedule:
Terminated within 6 months of completion date of training 100% of cost
reimbursed to SysGold Ltd.
Terminated within 9 months of completion date of training 75% of cost
reimbursed to SysGold Ltd.
Terminated within 12 months of completion date of training 50% of cost
reimbursed to SysGold Ltd.
If the contract is terminated by SysGold, in the case of termination for
cause, then the Employee will also reimburse SysGold.
If the contract is terminated by SysGold for other reasons, then the
Employee need not reimburse the cost of training.
<PAGE> 2
8. The employee shall use their best efforts to promote the interests of SysGold
and shall not disclose the private affairs, trade secrets, business or methods
of carrying on business or confidential information of SysGold or any of its
clients to any persons for any purposes other than those of the employer.
The terms and conditions of this Agreement shall remain in effect throughout the
Employee's employment with the Company unless modified or superseded by
agreement in writing signed by each of the parties.
IN WITNESS WHEREOF the parties have hereunto affixed their hands and seals all
as of the day and year first above written.
SysGold Ltd. Employee
Bill Arnett, Vice President Apprentice
Schedule A
Employment Contract - Apprentice
1. The Employee's duties and responsibilities are:
a) Client support, hardware and software installation and support,
and network administration.
b) Other duties as may be assigned from time to time.
2. The Employee's compensation is:
a) A salary of $36,000.00 per year.
b) Incentive compensation of 5 % of revenue billed to SysGold's
clients for work performed by the Employee. The incentive compensation is to
reward hard work, overtime and excellent performance.
c) A RRSP contribution of 5% of the net of your previous year's T-4
income less the prior year's RRSP contribution included in that T-4 income, with
no tax deducted. To enable the employee to purchase a RRSP within 60 days of the
end of the past tax year, (RRSP eligible tax deduction for either the past or
the current tax year), this amount will be paid before the end of February. The
employee shall not be entitled to RRSP payments if the employee is not still
employed with the company at the time payment would normally be made.
d) Certain benefits will be paid on the employee's behalf. An outline
of the current benefit package is attached, however SysGold Ltd. reserves the
right to change the carrier and the plan to provide the most cost effective
benefits package available.
<PAGE> 3
Employment Agreement
This Agreement made the 1st day of January, 1998.
BETWEEN:
SysGold Ltd., a body corporate, incorporated under the laws of the Province of
Alberta with a Head Office in the City of Calgary in the said Province
(hereinafter referred to as the Company).
AND
Junior Systems Consultant of Calgary in the Province of Alberta (hereinafter
referred to as the Employee).
WITNESSETH as follows:
The Company hereby appoints Junior Systems Consultant to the position of Systems
Consultant upon the following terms and conditions which the Employee accepts,
namely:
1. The Employee shall carry out the duties and assume the responsibilities set
forth in the position description annexed hereto as Schedule A.
2. The Employees salary shall be as set out in Schedule A, commencing January 1,
1998, payable twice monthly.
3. The Employee shall be entitled to 3 weeks of vacation each year, with times
and dates as mutually arranged.
4. The Employee shall participate in the Company's incentive compensation plan
as presently structured, with the personal incentive compensation being
determined as outlined in Schedule A.
5. The Employee may terminate this contract on 2 weeks notice in writing to the
Company. The Company may terminate this contract on the notice or pay in lieu
required by the Employment Standards Code (Alberta). In the case of termination
for cause, no notice is required.
6. Should employment be terminated for any reason, the Employee shall not
directly or indirectly work for a client of the Company in any capacity for a
period of 12 months after termination. Without limiting the generality of the
foregoing, this shall include, but not be limited to employment by the client,
employment by another party who contracts with the client, contracting,
subcontracting, agency, partnership or any other association. A client is
defined as an existing client of the Company or one for which the Company has
performed services in the preceding 12 months.
Should the employee breach this covenant (which covenant shall survive
the termination of employment), the employee shall pay to the Company as
liquidated damages, and not a penalty, an amount equal to 50% of any fees or
gross income earned during that period, which amounts shall be due and payable
on demand.
7. In consideration of receiving training, the Employee agrees that in the event
this contract is terminated by the Employee after attending training the
Employee will reimburse SysGold for the cost of the training plus any expenses
which may have been incurred by the employee and paid by SysGold according to
the following schedule:
Terminated within 6 months of completion date of training 100% of cost
reimbursed to SysGold Ltd.
Terminated within 9 months of completion date of training 75% of cost
reimbursed to SysGold Ltd.
Terminated within 12 months of completion date of training 50% of cost
reimbursed to SysGold Ltd.
If the contract is terminated by SysGold, in the case of termination for
cause, then the Employee will also reimburse SysGold.
If the contract is terminated by SysGold for other reasons, then the
Employee need not reimburse the cost of training.
<PAGE> 4
8. The employee shall use their best efforts to promote the interests of SysGold
and shall not disclose the private affairs, trade secrets, business or methods
of carrying on business or confidential information of SysGold or any of its
clients to any persons for any purposes other than those of the employer.
The terms and conditions of this Agreement shall remain in effect throughout the
Employee's employment with the Company unless modified or superseded by
agreement in writing signed by each of the parties.
IN WITNESS WHEREOF the parties have hereunto affixed their hands and seals all
as of the day and year first above written.
SysGold Ltd. Employee
Bill Arnett, Vice President Apprentice
Schedule A
Employment Contract - Junior
1. The Employee's duties and responsibilities are:
a) Site Management of information systems for SysGold's clients, project
management, project support, site support, research and development, and
training.
b) Other duties as may be assigned from time to time.
2. The Employee's compensation is:
a) A salary of $24,000.00 per year.
b) Incentive compensation of 20 % of revenue billed to SysGold's clients
for work performed by the Employee. The incentive compensation is to reward hard
work, overtime and excellent performance.
c) A RRSP contribution of 5% of the net of your previous year's T-4
income less the prior year's RRSP contribution included in that T-4 income, with
no tax deducted. To enable the employee to purchase a RRSP within 60 days of the
end of the past tax year, (RRSP eligible tax deduction for either the past or
the current tax year), this amount will be paid before the end of February. The
employee shall not be entitled to RRSP payments if the employee is not still
employed with the company at the time payment would normally be made.
d) Certain benefits will be paid on the employee's behalf. An outline of
the current benefit package is attached, however SysGold Ltd. reserves the right
to change the carrier and the plan to provide the most cost effective benefits
package available.
<PAGE> 5
Employment Agreement
This Agreement made the 1st day of January, 1998.
BETWEEN:
SysGold Ltd., a body corporate, incorporated under the laws of the Province of
Alberta with a Head Office in the City of Calgary in the said Province
(hereinafter referred to as the Company).
AND
Intermediate Systems Consultant of Calgary in the Province of Alberta
(hereinafter referred to as the Employee).
WITNESSETH as follows:
The Company hereby appoints Intermediate Systems Consultant to the position of
Systems Consultant upon the following terms and conditions which the Employee
accepts, namely:
1. The Employee shall carry out the duties and assume the responsibilities set
forth in the position description annexed hereto as Schedule A.
2. The Employees salary shall be as set out in Schedule A, commencing January 1,
1998, payable twice monthly.
3. The Employee shall be entitled to 3 weeks of vacation each year, with times
and dates as mutually arranged.
4. The Employee shall participate in the Company's incentive compensation plan
as presently structured, with the personal incentive compensation being
determined as outlined in Schedule A.
5. The Employee may terminate this contract on 2 weeks notice in writing to the
Company. The Company may terminate this contract on the notice or pay in lieu
required by the Employment Standards Code (Alberta). In the case of termination
for cause, no notice is required.
6. Should employment be terminated for any reason, the Employee shall not
directly or indirectly work for a client of the Company in any capacity for a
period of 12 months after termination. Without limiting the generality of the
foregoing, this shall include, but not be limited to employment by the client,
employment by another party who contracts with the client, contracting,
subcontracting, agency, partnership or any other association. A client is
defined as an existing client of the Company or one for which the Company has
performed services in the preceding 12 months.
Should the employee breach this covenant (which covenant shall survive
the termination of employment), the employee shall pay to the Company as
liquidated damages, and not a penalty, an amount equal to 50% of any fees or
gross income earned during that period, which amounts shall be due and payable
on demand.
7. In consideration of receiving training, the Employee agrees that in the event
this contract is terminated by the Employee after attending training the
Employee will reimburse SysGold for the cost of the training plus any expenses
which may have been incurred by the employee and paid by SysGold according to
the following schedule:
Terminated within 6 months of completion date of training 100% of cost
reimbursed to SysGold Ltd.
Terminated within 9 months of completion date of training 75% of cost
reimbursed to SysGold Ltd.
Terminated within 12 months of completion date of training 50% of cost
reimbursed to SysGold Ltd.
If the contract is terminated by SysGold, in the case of termination for
cause, then the Employee will also reimburse SysGold.
If the contract is terminated by SysGold for other reasons, then the
Employee need not reimburse the cost of training.
<PAGE> 6
8. The employee shall use their best efforts to promote the interests of SysGold
and shall not disclose the private affairs, trade secrets, business or methods
of carrying on business or confidential information of SysGold or any of its
clients to any persons for any purposes other than those of the employer.
The terms and conditions of this Agreement shall remain in effect throughout the
Employee's employment with the Company unless modified or superseded by
agreement in writing signed by each of the parties.
IN WITNESS WHEREOF the parties have hereunto affixed their hands and seals all
as of the day and year first above written.
SysGold Ltd. Employee
Bill Arnett, Vice President Apprentice
Schedule A
Employment Contract - Intermediate
1. The Employee's duties and responsibilities are:
a) Site Management of information systems for SysGold's clients, project
management, project support, site support, research and development, and
training.
b) Other duties as may be assigned from time to time.
2. The Employee's compensation is:
a) A salary of $33,000.00 per year.
b) Incentive compensation of 20 % of revenue billed to SysGold's clients
for work performed by the Employee. The incentive compensation is to reward hard
work, overtime and excellent performance.
c) Incentive compensation of 50 % of revenue billed to Northstar Energy
Corporation for billable hours in excess of 200 hours per month.
d) Incentive compensation of 50% of the revenue billed for work performed
by the employee at SysGold sites other than Northstar.
e) A RRSP contribution of 5% of the net of your previous year's T-4
income less the prior year's RRSP contribution included in that T-4 income, with
no tax deducted. To enable the employee to purchase a RRSP within 60 days of the
end of the past tax year, (RRSP eligible tax deduction for either the past or
the current tax year), this amount will be paid before the end of February. The
employee shall not be entitled to RRSP payments if the employee is not still
employed with the company at the time payment would normally be made.
d) Certain benefits will be paid on the employee's behalf. An outline of
the current benefit package is attached, however SysGold Ltd. reserves the right
to change the carrier and the plan to provide the most cost effective benefits
package available.
<PAGE> 7
Employment Agreement
This Agreement made the 1st day of January, 1998.
BETWEEN:
SysGold Ltd., a body corporate, incorporated under the laws of the Province of
Alberta with a Head Office in the City of Calgary in the said Province
(hereinafter referred to as the Company).
AND
Senior Systems Consultant of Calgary in the Province of Alberta (hereinafter
referred to as the Employee).
WITNESSETH as follows:
The Company hereby appoints Senior Systems Consultant to the position of Senior
Consultant upon the following terms and conditions which the Employee accepts,
namely:
1. The Employee shall carry out the duties and assume the responsibilities set
forth in the position description annexed hereto as Schedule A.
2. The Employees salary shall be as set out in Schedule A, commencing January 1,
1998, payable twice monthly.
3. The Employee shall be entitled to 3 weeks of vacation each year, with times
and dates as mutually arranged.
4. The Employee shall participate in the Company's incentive compensation plan
as presently structured, with the personal incentive compensation being
determined as outlined in Schedule A.
5. The Employee may terminate this contract on 2 weeks notice in writing to the
Company. The Company may terminate this contract on the notice or pay in lieu
required by the Employment Standards Code (Alberta). In the case of termination
for cause, no notice is required.
6. Should employment be terminated for any reason, the Employee shall not
directly or indirectly work for a client of the Company in any capacity for a
period of 12 months after termination. Without limiting the generality of the
foregoing, this shall include, but not be limited to employment by the client,
employment by another party who contracts with the client, contracting,
subcontracting, agency, partnership or any other association. A client is
defined as an existing client of the Company or one for which the Company has
performed services in the preceding 12 months.
Should the employee breach this covenant (which covenant shall survive
the termination of employment), the employee shall pay to the Company as
liquidated damages, and not a penalty, an amount equal to 50% of any fees or
gross income earned during that period, which amounts shall be due and payable
on demand.
7. In consideration of receiving training, the Employee agrees that in the event
this contract is terminated by the Employee after attending training the
Employee will reimburse SysGold for the cost of the training plus any expenses
which may have been incurred by the employee and paid by SysGold according to
the following schedule:
Terminated within 6 months of completion date of training 100% of cost
reimbursed to SysGold Ltd.
Terminated within 9 months of completion date of training 75% of cost
reimbursed to SysGold Ltd.
Terminated within 12 months of completion date of training 50% of cost
reimbursed to SysGold Ltd.
If the contract is terminated by SysGold, in the case of termination for
cause, then the Employee will also reimburse SysGold.
If the contract is terminated by SysGold for other reasons, then the
Employee need not reimburse the cost of training.
<PAGE> 8
8. The employee shall use their best efforts to promote the interests of SysGold
and shall not disclose the private affairs, trade secrets, business or methods
of carrying on business or confidential information of SysGold or any of its
clients to any persons for any purposes other than those of the employer.
The terms and conditions of this Agreement shall remain in effect throughout the
Employee's employment with the Company unless modified or superseded by
agreement in writing signed by each of the parties.
IN WITNESS WHEREOF the parties have hereunto affixed their hands and seals all
as of the day and year first above written.
SysGold Ltd. Employee
Bill Arnett, Vice President Apprentice
Schedule A
Employment Contract - Senior
1. The Employee's duties and responsibilities are:
a) Site Management of information systems for SysGold's clients, project
management, project support, site support, research and development, and
training.
b) Supervision of SysGold employees and subcontractors assigned to the
employee from time to time.
c) Other duties as may be assigned from time to time.
d) Overall profitability and client satisfaction at assigned clients.
2. The Employee's compensation is:
a) A salary of $60,000.00 per year.
b) Incentive compensation of 15 % of revenue billed to SysGold's clients
for work performed by the Employee. The incentive compensation is to reward hard
work, long hours and excellent performance..
c) Incentive compensation of 1 % of revenue billed to SysGold's clients
for work done by SysGold employees or sub-contractors who report to, and work
under the direct supervision of the Employee.
d) Marketing Commission. If the employee brings in a lead, and closes a
deal with that organization, the commission is 2% of the consulting revenue
generated from that client in the first 12 months. If the employee brings in a
lead, and hands it off to someone else who closes a deal with them, the
commission is 1% of the consulting revenue generated in the first 12 months.
Commission is paid quarterly, approximately at the end of the following quarter,
to staff still with the company on the date it is paid.
e) A RRSP contribution of 5% of the net of your previous year's T-4
income less the prior year's RRSP contribution included in that T-4 income, with
no tax deducted. To enable the employee to purchase a RRSP within 60 days of the
end of the past tax year, (RRSP eligible tax deduction for either the past or
the current tax year), this amount will be paid before the end of February. The
employee shall not be entitled to RRSP payments if the employee is not still
employed with the company at the time payment would normally be made.
d) Certain benefits will be paid on the employee's behalf. An outline of
the current benefit package is attached, however SysGold Ltd. reserves the right
to change the carrier and the plan to provide the most cost effective benefits
package available.
<PAGE> 9
Employment Agreement
This Agreement made the 1st day of January, 1998.
BETWEEN:
SysGold Ltd., a body corporate, incorporated under the laws of the Province of
Alberta with a Head Office in the City of Calgary in the said Province
(hereinafter referred to as the Company).
AND
of Calgary in the Province of Alberta (hereinafter referred to as the Employee).
WITNESSETH as follows:
The Company hereby appoints to the position of Manager, Land Services upon the
following terms and conditions which the Employee accepts, namely:
1. The Employee shall carry out the duties and assume the responsibilities set
forth in the position description annexed hereto as Schedule A.
2. The Employees salary shall be as set out in Schedule A, commencing February
19, 1998, payable twice monthly.
3. The Employee shall be entitled to 3 weeks of vacation each year, with times
and dates as mutually arranged.
4. The Employee shall participate in the Company's incentive compensation plan
as presently structured, with the personal incentive compensation being
determined as outlined in Schedule A.
5. The Employee may terminate this contract on 2 weeks notice in writing to the
Company. The Company may terminate this contract on the notice or pay in lieu
required by the Employment Standards Code (Alberta). In the case of termination
for cause, no notice is required.
6. Should employment be terminated for any reason, the Employee shall not
directly or indirectly work for a client of the Company in any capacity for a
period of 12 months after termination. Without limiting the generality of the
foregoing, this shall include, but not be limited to employment by the client,
employment by another party who contracts with the client, contracting,
subcontracting, agency, partnership or any other association. A client is
defined as an existing client of the Company or one for which the Company has
performed services in the preceding 12 months.
Should the employee breach this covenant (which covenant shall survive
the termination of employment), the employee shall pay to the Company as
liquidated damages, and not a penalty, an amount equal to 50% of any fees or
gross income earned during that period, which amounts shall be due and payable
on demand.
7. In consideration of receiving training, the Employee agrees that in the event
this contract is terminated by the Employee after attending training the
Employee will reimburse SysGold for the cost of the training plus any expenses
which may have been incurred by the employee and paid by SysGold according to
the following schedule:
Terminated within 6 months of completion date of training 100% of cost
reimbursed to SysGold Ltd.
Terminated within 9 months of completion date of training 75% of cost
reimbursed to SysGold Ltd.
Terminated within 12 months of completion date of training 50% of cost
reimbursed to SysGold Ltd.
If the contract is terminated by SysGold, in the case of termination for
cause, then the Employee will also reimburse SysGold.
If the contract is terminated by SysGold for other reasons, then the
Employee need not reimburse the cost of training.
<PAGE> 10
8. The employee shall use their best efforts to promote the interests of SysGold
and shall not disclose the private affairs, trade secrets, business or methods
of carrying on business or confidential information of SysGold or any of its
clients to any persons for any purposes other than those of the employer.
The terms and conditions of this Agreement shall remain in effect throughout the
Employee's employment with the Company unless modified or superseded by
agreement in writing signed by each of the parties.
IN WITNESS WHEREOF the parties have hereunto affixed their hands and seals all
as of the day and year first above written.
SysGold Ltd. Employee
Bill Arnett, Vice President Apprentice
Schedule A
Employment Contract
1. The Employee's duties and responsibilities are:
a) Duties and responsibilities as mutually agreed to.
b) Other duties as may be assigned from time to time.
2. The Employee's compensation is:
a) A salary of per year.
b) Incentive compensation consisting of the following components:
i) A Personal Billings incentive of 20% of billings to clients
for work performed by the employee. This incentive
compensation is to reward hard work, overtime and excellent
performance.
ii) A Supervisory Incentive of 2% of billings to clients for work
performed by staff supervised by the employee. This incentive
is to reward the employee for developing staff, and guiding
them in performing excellent service to clients.
iii)A Marketing Incentive of 5% of consulting billings by the
company to new Land Services clients with whom the employee
has closed the deal. This occurs for the first 12 months of
the company's association with that client.
iv) A Marketing Incentive of 1% of consulting billings by the
company to new clients that require services other than those
provided by the Land Services practice with whom the employee
has closed the deal. This occurs for the first 12 months of
the company's association with that client.
v) A Bonus Incentive, to be determined at the discretion of the
company, for exceptional contribution by the employee to the
company's interests.
vi) Incentives are calculated quarterly, and paid around the end
of the following quarter. If the employee choose to leave the
company, or if the employee is terminated by the company,
incentives will be due and payable at the time they would
otherwise have been payable.
c) Minimum total compensation level for the first twelve months of
employment will be guaranteed at $110,400 as shown in the
Compensation spreadsheet.
d) A RRSP contribution of 5% of the net of your previous year's T-4
income less the prior year's RRSP contribution included that T-4
income, with no tax deducted. To enable the employee to purchase a
RRSP within 60 days of the end of the past tax year, (RRSP eligible
tax deduction for either the past or the current tax year), this
amount will be paid before the end of February. The company must
employ the employee at the time the contribution is paid; to be
entitled to receive the payment.
e) Underground parking will be paid for by the company.
f) A club such as the Professional Club or the Commerce Club will be paid
for by the company.
<PAGE> 11
g) Educational Assistance. The company will pay for, or reimburse the
employee for all training and education approved by the company,
which the employee completes successfully.
h) Professional Dues such as CIPS, CAPL will be paid for by the Company.
i) Certain other benefits will be paid on the employee's behalf. An
outline of the current benefit package is attached, however SysGold
Ltd. Reserves the right to change the carrier and the plan to provide
the most cost effective benefits package available.
COMPENSATION
<TABLE>
<S> <C> <C> <C>
Reference Amounts
# Staff Supervised 2 5 8
Avg Billings/Staff $120,000 $120,000 $120,000
Supervisory Billing $240,000 $600,000 $960,000
New Client Consulting $200,000 $300,000 $400,000
Personal Billings $100,000 $ 90,000 $ 80,000
Compensation
Base $ 70,000 $ 70,000 $ 70,000
Personal Billing Incentive 20% $ 20,000 $ 18,000 $ 16,000
Supervisory Billing Incentive 2% $ 4,800 $ 12,000 $ 19,200
Marketing Incentive Land Services 5% $ 10,000 $ 15,000 $ 20,000
Subtotal $104,800 $115,000 $125,200
RRSP $ 5,240 $ 5,750 $ 6,260
Total $110,400 $116,500 $131,460
</TABLE>
<PAGE> 12
LEASE BETWEEN
OMERS REALTY CORPORATION
AND
SYSGOLD LTD.
FEBRUARY 21, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 - INTERPRETATION Page
<S> <C> <C>
Section 1.1 Variable Terms 2
Section 1.2 Certain Standard Definitions 3
Section 1.3 Schedules 5
Section 1.4 Extended Meanings 5
Section 1.5 Readings and Captions 5
Section 1.6 Obligations as Covenants 5
Section 1.7 Entire Agreement 5
Section 1.8 Governing Law 5
Section 1.9 Severability 5
Section 1.10 Successors and Assigns 5
Section 1.11 Time of the Essence 6
Section 1.12 Tenant Partnership 6
ARTICLE 2 - DEMISE
Section 2.1 Leased Premises 6
Section 2.2 Acceptance of Leased Premises 6
Section 2.3 Early Occupancy 6
ARTICLE 3-TERM
Section 3.1 Term 6
Section 3.2 Overholding 6
ARTICLE 4- RENT
Section 4.1 Basic Rent 6
Section 4.2 Additional Rent 7
Section 4.3 Determination of Rentable Area 7
Section 4.4 Payment of Tenant's Proportionate Share 7
Section 4.5 Accrual of Rent 7
Section 4.6 Currency and Place of Payment 7
Section 4.7 Additional Rent Treated as Rent 7
Section 4.8 Interest on Amounts in Default 7
Section 4.9 Net Lease to Landlord 7
Section 4.10 Post-Dated Cheques/Automatic Account Debit 7
Section 4.11 Accord and Satisfaction 8
Section 4.12 Late Payment Charge 8
Section 4.13 Allocation of Occupancy Costs 8
ARTICLE 5 - GENERAL COVENANTS
Section 5.1 Landlord's Covenants 8
Section 5.2 Tenant's Covenants 8
ARTICLE 6- BUILDING SERVICES,
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
COMMON AREAS, UTILITIES
Section 6.1 Heating, Ventilating and Air-Conditioning 8
Section 6.2 Common Areas 8
Section 6.3 Janitorial Services 9
Section 6.4 Utilities 9
Section 6.5 Communication Systems 9
ARTICLE 7- USE OF LEASED PREMISES
Section 7.1 Use 9
Section 7.2 Nuisance 10
Section 7.3 Compliance with Laws 10
Section 7.4 Compliance with Rules and Regulations 0
Section 7.5 Signs and Advertising 10
Section 7.6 Disfiguration, Overloading, Etc. 10
Section 7.7 Energy Conservation 10
Section 7.8 Remedial Action 10
Section 7.9 Security Devices 10
Section 7.10 Hazardous Substances 10
ARTICLE 8 - INSURANCE
Section 8.1 Landlord's Insurance 11
Section 8.2 Landlord's Policy 11
Section 8.3 Tenant's Insurance 11
Section 8.4 Tenant's Policy 11
Section 8.5 premium Increases and Cancellations 12
ARTICLE 9 - REPAIR AND DAMAGE
Section 9.1 Landlord's Obligations 12
Section 9.2 Tenant's Obligations 12
Section 9.3 Damage, Abatement and Termination 12
ARTICLE 10 - TAXES Page
Section 10.1 Taxes Payable by the Landlord 13
Section 10.2 Taxes Payable by the Tenant 13
Section 10.3 Business Taxes and Other Taxes of the Tenant 13
Section 10,4 Postponement 13
Section 10.5 Tenant to Deliver Receipts 14
Section 10.6 Assessment Appeals 14
ARTICLE 11 - ASSIGNMENT AND SUBLETTING
Section 11.1 Permitted Occupants 14
Section 11.2 Assignment Or Subletting 14
Section 11.3 Change in Control 15
Section 11.4 Surrender 15
Section 11.5 Continuing Obligations 15
Section 11.6 Assignment by Landlord 15
ARTICLE 12 - STATUS CERTIFICATES,
ATTORNMENT, SUBORDINATION
Section 12.1 Status Certificates 15
Section 12.2 Subordination and Attornment 15
Section 12.3 Attorney 16
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C>
ARTICLE 13 - LIMITATION OF LIABILITIES
AND INDEMNITY
Section 13.1 Unavoidable Delay 16
Section 13.2 Waiver 16
Section 13.3 No Claim for Inconvenience 16
Section 13.4 Limitation of Landlord's Liability 16
Section 13.5 Indemnity by Tenant 16
Section 13.6 Limitations of Tenant's Liability 17
Section 13.7 Environmental Indemnity 17
ARTICLE 14 - ACCESS
Section 14.1 Entry by Landlord 17
Section 14.2 Exhibiting Leased Premises 17
Section 14.3 Excavation 17
ARTICLE 15 - ALTERATIONS AND ADDITIONS
Section 15.1 Landlord's Alterations 17
Section 15.2 Tenant's Alterations 17
Section 15.3 Liens 18
ARTICLE 16 - REMEDIES OF LANDLORD ON
TENANT'S DEFAULT
Section 16.1 Remedying by Landlord 18
Section 16.2 Right to Re-Enter 18
Section 16,3 Bankruptcy of Tenant 19
Section 16.4 Termination 19
Section 16.5 Right to Re-Let 19
Section 16.6 Remedies Cumulative 19
Section 16.7 Waiver of Exemption From Distress 19
Section 16.8 Removal of Chattels 19
Section 16.9 Companies Creditors' Arrangement Act
and Bankruptcy and Insolvency Act 19
Section 16.10 Legal Costs 20
ARTICLE 17- MISCELLANEOUS
Section 17.1 Notice 20
Section 17.2 Registration of Lease 20
Section 17.3 Decision of Expert 20
Section 17.4 No Partnership or Agency 20
Section 17.5 Brokerage Commissions 20
Section 17.6 Confidentiality 20
Section 17.7 Consent 20
Section 17.8 Additional Provisions 20
Section 17.9 Acceptance 21
Section 17.10 Execution by Landlord 21
SCHEDULES
SCHEDULE "A" LANDS
SCHEDULE "B" SITE PLAN OF DEVELOPMENT
SCHEDULE "C" PLAN SHOWING LEASED PREMISES
SCHEDULE "D" ADDITIONAL PROVISIONS
SCHEDULE "E" RULES & REGULATIONS
</TABLE>
BOW VALLEY SQUARE LEASE
<PAGE> 15
THIS LEASE dated the 21st day of February, 1997.
BETWEEN:
OMERS REALTY CORPORATION
(the "Landlord"),
OF THE FIRST PART
- - and -
SYSGOLD LTD.
(the "Tenant")
OF THE SECOND PART
1. The Landlord has agreed to lease to the Tenant, and the Tenant has agreed to
tease from the Landlord the Leased Premises in the Building forming part of the
Development.
Now, therefore, in consideration of the rents, covenants and agreements
hereinafter contained, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Variable Terms
In this Lease and the Recitals, unless there is something in the subject matter
or context inconsistent therewith, the following terms will have the following
meanings: (1) "Landlord" OMERS Realty Corporation, its successors and assigns.
(2) "Landlord's Address" BV Square Management Ltd., Suite 300,205-5th Avenue
S.W., Calgary, Alberta, T2P 2V7
(3) "Tenant" SysGold Ltd. and its successors and permitted assigns.
(4) "Tenant's Address" the Leased Premises, or at Fax No.261-5090
(5) "Leased Premises" those premises shown outlined in red on Schedule "C"
hereto, being on the 4th floor of the Building, which is presently designated
Suite 450.
(6) "Building" "Building" means the multi-storey office building and related
retail, parking and storage located on, and including the Lands, commonly known
as Bow Valley Square 4, municipally described as 250 Sixth Avenue S. W.,
Calgary, together with any other structures or improvements erected thereon from
time to time, as they may be altered, expanded or reduced from time to time at
the sole discretion of the Landlord, the whole being known by the name of the
Building as the same may be designated by the Landlord from time to time.
(7) "Rentable Area of the means the area of the Leased Premises expressed in
square feet being approximately Four Thousand Leased Premises" Two Hundred and
Seventy (4,270) square feet, subject to a final determination being made
pursuant to Section 4.3(1).
(8) "Basic Rent" Forty-Three Thousand, Eight Hundred and Thirty-One----44/100
($43,831.44) per annum, to be paid in twelve equal monthly payments of Three
Thousand, Six Hundred and Fifty-Two----621100 ($3,652.62).
(9) "Commencement Date" February 1,1997.
<PAGE> 16
(10) "Term" Five (5) years, Zero (0) months commencing on the Commencement Date
or such shorter period if this Lease is terminated in accordance with the
provisions of this Lease.
(11) "Expiry Date" January 31, 2002, unless terminated earlier as provided in
this Lease.
(12) "Permitted Use" The Tenant shall use the Leased Premises solely for the
purpose of the offices for a computer consulting and development firm, and its
related activities.
(13) "Prime" "Prime" means the rate of interest from time to time announced by
the Landlord's designated Canadian chartered bank as its prime rate and which is
four and three-quarters percent (4.750/0) as at the date hereof.
Section 1.2 Certain Standard Definitions
In this Lease and in the Recitals, unless there is something in the subject
matter or context inconsistent therewith:
"Additional Rent" means all amounts in addition to Basic Rent payable by the
Tenant to the Landlord pursuant to any provision of this Lease;
"Administrative Charge" means a sum equal to fifteen percent (15%) of the costs,
fees and expenses incurred by the Landlord in connection with the performance of
any work, or the supply of any material or service, which is the responsibility
of the Tenant pursuant to this Lease;
"Business Day" means any date which is not a holiday, as defined in the
Interpretation Act (Alberta);
"Business Hours" means the period from 8:00 a.m. to 6:00 p.m. on any Business
Day;
"Business Taxes" means all taxes and license fees in respect of any business
carried on by tenants or other occupants of the Building and includes, without
limitation, business taxes levied or assessed pursuant to the Municipal
Government Act (Alberta) or any legislation in substitution or in pari materia
therewith;
"Capital Tax" means the applicable amount as hereinafter defined of any tax or
taxes payable by the Landlord under the legislation of the province of Alberta
based upon or computed by reference to the paid-up capital or place of business
of the Landlord or its ownership of capital employed in the Building or the
Development, as determined for the purposes of such tax; provided that for the
purpose of this definition the phrase "applicable amount" of such tax means:
(A) with respect to a tax payable under the legislation of the province of
Alberta the amount thereof that would be payable if the Building or the
Development were the only establishment of the Landlord in and any other
establishments of the Landlord therein were located outside the province; and
(B) with respect to a tax imposed in excess of a specified limit or exemption,
the amount of the limit or exemption attributable to the Building or Development
shall be allocated by the Landlord acting equitably.
"Common Areas" means those portions of the Development designated from time to
time by the Landlord for the common use and enjoyment of all the tenants of the
Development and their respective agents, invitees, servants, employees and
licensees and includes, without limitation, the public entrance doors, halls,
loading areas and entry thereto and public lobbies, malls and elevators;
"Development" means the complex of office buildings and the parking structures
forming an integral part thereof as they may be altered, expanded or reduced
from time to time at the sole discretion of the Landlord together with the
improvements, equipment and facilities erected on the Development Lands, the
whole being known as "Bow Valley Square" or such other name as may be designated
by the Landlord from time to time;
"Development Lands" means those lands more particularly described in paragraph A
of Schedule "A".
"Eligible Corporation" means a corporation which controls, is controlled by or
is under common control with the Tenant, control meaning the direct or indirect
beneficial ownership of more than fifty percent (50%) of the voting shares of a
corporation which may be voted at any meeting held for the purpose of the
election of directors of that corporation;
<PAGE> 17
"Expert means any independent architect, engineer, land surveyor, chartered
accountant or other professional consultant, appointed by the Landlord in
connection with any matter relevant to this Lease, and, in the reasonable
opinion of the Landlord, qualified to perform the function for which the
consultant is appointed, acting as an expert and not as an arbitrator;
"Food Court" means those portions of the Common Areas designated as such by the
Landlord from time to time for use for the provision and consumption of food and
includes without limitation public table and seating areas, refuse collection
facilities associated with such use and other areas, facilities and equipment
intended for such use;
"HVAC System" means the system used for heating, ventilating and air
conditioning the Building;
"Landlord's Income Taxes" means all income or profit taxes upon the income of
the Landlord to the extent that such taxes are not levied in lieu of taxes,
rates, duties, levies and assessments against the Development or upon the
Landlord in respect thereof;
"Lands" means the lands legally described in paragraph B of Schedule "A"
"Lease" means this lease as it may be amended from time to time, including all
Schedules hereto;
"Lease Year" means a period of twelve (12) months commencing on the first day of
January in each year except that: (a) the first Lease Year begins on the first
day of the Term and ends on the last day of the calendar year in which the first
day of the Term occurs, and (b) the last Lease Year of the Term begins on the
first day of the calendar year during which the last day of the Term occurs and
ends on the last day of the Term, provided that the Landlord may from time to
time by written notice to the Tenant specify an annual date upon which each
subsequent Lease Year is to commence, in which event the Lease Year which would
otherwise be current when such annual date first occurs shall terminate on the
preceding day;
"Mortgage" means any mortgage, charge or security instrument (including a deed
of trust and mortgage securing bonds) and all indentures supplemental thereto
which may now or hereafter affect the Building or the Development;
"Mortgagee" means the mortgagee, chargee, secured party or trustee for
bondholders, as the case may be, named in a Mortgage;
"Occupancy Costs" means the aggregate of Operating Costs and Property Taxes;
"Operating Costs" means, without duplication, the aggregate of all costs,
expenses, fees, rentals and disbursements of every kind and nature, direct or
indirect, incurred, accrued or attributed by or on behalf of the Landlord in the
complete maintenance, repair, operation, supervision and management of the
Building and the Development and without limitation, shall include:
(i) the cost of providing cleaning, janitorial, landscaping, supervisory,
maintenance and other services including elevator and escalator services;
(ii) the cost of heating, cooling and ventilating the Building and the Leased
Premises and the cost of providing water, electricity and all other utilities
and services not payable by any specific tenant of the Development;
(iii) the cost of policing and providing security for and supervision of the
Development;
(iv) the cost of all insurance maintained by the Landlord in respect of the
Development including loss of rentals insurance and the cost of any deductible
amounts paid by the Landlord in respect of any insured risk or claim;
(v) reasonable fees and expenses incurred for legal, accounting and other
professional services relating to the Development;
(vi) the fair market rental value as determined by the Landlord from time to
time, of space in the Development which would otherwise be rentable but which
the Landlord uses in leasing, operating, managing or maintaining the
Development;
<PAGE> 18
(vii) salaries, wages, fringe benefits and other compensation of all personnel,
including clerical, supervisory and managerial personnel, employed directly (or
indirectly and therefore on a pro-rata basis, as determined by the Landlord,
acting reasonably) in the maintenance, repair, operation, administration or
management of the Development;
(viii) amounts paid to independent contractors for any services in connection
with the Building or Development and amounts payable for the rental of any
equipment, installations or signs;
(ix) all expenditures incurred by or on behalf of the Landlord in connection
with the operation, maintenance, repair and replacements to the Development, its
appurtenances, systems, equipment and facilities, including redecoration,
structural maintenance, repairs and replacements and expenditures undertaken
primarily to maintain the Development as an up to date office complex having
regard to the size, age, location and character of the Development, conserve
energy, or reduce Operating Costs unless the Landlord elects to depreciate or
amortize such expenditures and thus includes them in the costs referred to in
the next paragraph;
(x) interest on the undepreciated cost of all expenditures referred to in
subparagraph (ix) and in respect of which the Landlord has elected to depreciate
or amortize at a rate of one percent (1%) per annum in excess of Prime;
(xi) all costs:
(a) incurred by Landlord in consequence of its interest in the
Development such as maintaining, cleaning and clearing of ice and snow from
municipal sidewalks, adjacent property and the like; and
(b) paid or incurred as determined by the Landlord acting reasonably and
bona fide but in the Landlord's sole discretion and whose determination shall be
final and binding, in respect of all shared structures, improvements,
facilities, equipment, amenities, services (including retail and commercial) and
common areas, including, without limitation, loading areas and docks, parking
ramps, driveways and exterior areas which are or will be shared by users of the
Development and the users of any other property, and all costs to the extent the
Landlord is required to contribute to the same in respect of the Development, or
the Landlord's ownership of them, whether or not such costs are incurred
directly in respect of the Development; and
(xii) an administration and supervisory fee equal to three percent (3%) of the
gross collections of all amounts (including amounts of the nature of Additional
Rent) from all tenants or occupants of the Development; but shall exclude:
(A) debt service payable upon the Landlord's financing or refinancing of the
Development;
(B) fines, penalties and interest thereon;
(C) any bad debt losses, rent losses or reserves therefor;
(D) leasing expenses incurred by the Landlord including without limitation legal
fees, space planner's fees, leasing commissions, lease take-over costs,
advertising costs and marketing costs;
(E) taxes of a personal nature of the Landlord (other than Capital Tax) to the
extent they are not imposed in lieu of Property Taxes;
(F) any ground or head lease rent payable to a superior landlord;
(G) the amount of any damage or loss resulting from any casualty which the
Landlord has agreed to insure against pursuant to the provisions of this Lease
except any deductibles;
(H) depreciation on the Development except as provided in paragraph (x),
and there shall be deducted from Operating Costs:
(I) net proceeds received by the Landlord from its insurance policies to the
extent that such proceeds relate to costs and expenses included in the Operating
Costs;
(J) all Food Court costs, as defined in the leases of Food Court tenants in the
Development, to the extent that such costs are included in Operating Costs; and
<PAGE> 19
(K) all amounts which tenants of the Development (including the Tenant) are
obligated to reimburse or pay to the Landlord under their respective leases,
other than amounts (including Additional Rent payable by the Tenant) calculated
on the basis of or representing contributions of a proportionate share of
Occupancy Costs pursuant to the relevant provisions of such tenants' leases.
Notwithstanding anything contained in this Lease, in order to calculate the
Tenant's equitable share of the Operating Costs during any Lease Year when less
than one hundred percent (100%) of the Building or the Development is leased or
occupied by tenants, those items of Operating Costs which vary directly with the
use and occupancy of the Development, including without limitation items such as
janitorial costs, garbage removal and utility costs not separately metered to
tenants, including the Tenant, shall be grossed up and expressed as to what in
the Landlord's reasonable estimation they would have been if the Building or the
Development had been one hundred percent (100%) leased or occupied during the
entire Lease Year;
"Party", according to the context, includes any person, corporation, firm,
partnership or other entity, any group of persons, corporations, firms,
partnerships or other entities, or any combination thereof;
"Property Taxes" means all taxes, rates, duties, levies, fees, charges, sewer
levies, local improvement rates and assessments whatsoever, imposed, assessed,
levied, rated or charged against the Building or any part thereof from time to
time by any lawful taxing authority whether school, municipal, regional,
provincial, federal, parliamentary or otherwise and any taxes or other amounts
which are imposed in lieu of, or in addition to, any of the foregoing whether or
not in existence at the commencement of the Term and whether of the foregoing
character or not and any such taxes levied against the Landlord on account of
its ownership of the Building or its interest therein, and Capital Tax, but
excluding Landlord's Income Taxes;
"Proportionate Share" for any period means a fraction, calculated at or as of
the end of such period, the numerator of which is the Rentable Area of the
Leased Premises, and the denominator of which is the difference between the
Rentable Area of the Building and the areas, if any, occupied by the Landlord or
its agents or contractors in order to maintain, repair, operate, manage and
supervise the Development;
"Rent" means all Basic Rent and Additional Rent payable pursuant to this Lease;
"Rentable Area of the Leased Premises" means the area expressed in square feet,
set out in Section 2.1, subject to a final determination being made pursuant to
Section 4.3;
"Rentable Area of the Building" means the aggregate of the rentable areas of all
the premises in the Building leased or designated by the Landlord as being
available for lease, whether office or retail, determined in accordance with
Section 4.3, provided that areas for (a) any Storage Area; (b) Common Areas; (c)
any theatres, meeting room or auditoria; (d) entertainment, recreational and
health establishments and (e) facilities exclusively for the passage and parking
of motor vehicles are not included in such aggregate;
"Rental Taxes" means any tax or duty imposed upon, or collectable by, the
Landlord which is measured by or based in whole or in part directly upon the
Rent, whether existing at the date hereof or hereinafter imposed by any
governmental authority, including without limitation the goods and services tax,
value added tax, business transfer tax, retail sales tax, federal sales tax,
excise tax or duty, or any tax similar to any of the foregoing;
"Retail Area" means the portions of the Development at the ground floor and Plus
Ii levels containing the Retail Premises and the adjacent Common Areas,
including, without limitation, the Food Court;
"Retail Premises" means those premises in the Building, other than the Common
Areas, designated or intended from time to time to be used and occupied by
businesses which sell, lease or otherwise provide goods or services to the
public, and, in addition to retail stores includes, without limitation, premises
occupied by chartered banks, trust companies, finance companies, governmental
agencies and public institutions (other than offices of such); theatres, and all
entertainment, recreational, sports and health establishments or facilities, but
shall not include premises used in their entirety for office purposes; and
"Unavoidable Delay" means any cause beyond the control of the party affected
thereby which prevents the performance by such panty of any obligation hereunder
and not caused by its default or act of commission or omission and not avoidable
by the exercise of reasonable care, excluding financial inability.
<PAGE> 20
Section 1.3 Schedules
The following Schedules of this Lease constitute part of this Lease:
Schedule "A" - Development Lands and Lands
Schedule "B" - Site Plan of Development
Schedule "C" - Plan of Leased Premises
Schedule "D" - Additional Provisions
Schedule "E" - Rules & Regulations
Section 1.4 Extended Meanings
The words "hereof', "herein", "hereunder" and similar expressions used in any
Section or Subsection of this Lease relate to the whole of this Lease and not to
that Section or Subsection only, unless otherwise expressly provided. The use of
the neuter singular pronoun to refer to the Landlord or the Tenant is deemed a
proper reference even though the Landlord or the Tenant is an individual, a
partnership, a corporation or a group of two or more individuals, partnerships
or corporations. The necessary grammatical changes required to make the
provisions of this Lease apply in the plural sense where the Tenant comprises
more than one Party and to corporations, firms, partnerships, or individuals,
male or female, will be assumed as though in each case fully expressed.
References to the Tenant shall be read with such changes in gender as may be
appropriate, and if the Tenant is more than one Party, the covenants of the
Tenant shall be deemed to be joint and several.
Section 1.5 Headings and Captions
The index, article numbers, article headings, section numbers and section
headings are inserted for convenience of reference only and are not to be
considered when interpreting this Lease.
Section 1.6 Obligations as Covenants
Each obligation of the Landlord or the Tenant expressed in this Lease shall be a
covenant for all purposes.
Section 1.7 Entire Agreement
This Lease contains all the representations, warranties, covenants, agreements,
conditions and understandings between the Landlord and the Tenant concerning the
Leased Premises and the subject matter of this Lease, and may be amended only by
an agreement in writing signed by the Parties hereto.
Section 1.8 Governing Law
This Lease shall be interpreted under and is governed by the laws of the
Province of Alberta.
Section 1.9 Severability
If any provision of this Lease is illegal or unenforceable it shall be
considered separate and severable from the remaining provisions of this Lease,
which shall remain in force and be binding as though the said provision had
never been included. Section 1.10 Successors and Assigns
This Lease and everything herein contained shall enure to the benefit of and
bind the successors and assigns of the Landlord and the executors,
administrators or successors and permitted assigns, as the case may be, of the
Tenant.
Section 1.11 Time of the Essence
Time is of the essence of this Lease and every part thereof.
Section 1.12 Tenant Partnership
If the Tenant is a partnership (the "Tenant Partnership") each person who is
presently a member of the Tenant Partnership, and each person who becomes a
member of any successor Tenant Partnership hereafter, shall be and continue to
be liable jointly and severally for the hill and complete performance of, and
shall be and continue to be
<PAGE> 21
subject to the terms, covenants and conditions of this Lease, whether or not
such person ceases to be a member of such Tenant Partnership or successor Tenant
Partnership. Each person on becoming a member of the Tenant Partnership, or any
successor Tenant Partnership, shall enter into such further and other documents
as the Landlord may reasonably require for the purpose of this Section 1.12.
ARTICLE 2
DEMISE
Section 2.1 Leased Premises
(1) The Landlord, being registered as owner of an estate in fee simple in the
Lands, subject to registered encumbrances, liens and interests, if any, in the
Lands, does hereby demise and lease the Leased Premises to the Tenant to be held
by it as Tenant, for the Term, at the Rent, and upon and subject to the
covenants and conditions of this Lease.
(2) The outside walls of the Leased Premises and walls between the Leased
Premises and the Common Area and any space in the Leased Premises used for
stairways and passageways to other adjoining premises, shafts, stacks, pipes,
conduits, ducts or other building facilities, the heating, electrical, plumbing,
air-conditioning and other building systems, and the use thereof as well as
access thereto through the Leased Premises for the purpose of use, operation,
maintenance and repair are expressly reserved to the Landlord.
Section 2.2 Acceptance Of Leased Premises
The Tenant shall notify the Landlord of any defects in the Landlord's work
relating to the Leased Premises that prevent or diminish its use of the Leased
Premises within fifteen (15) days after the completion of such work, and failing
the giving of notice the Tenant will be considered for all purposes to have
accepted the Leased Premises in their then existing condition and the Landlord
will not have any further obligation to the Tenant for defects or faults
excepting: (a) latent defects which could not be discovered on a reasonable
examination, and (b) defects or faults in structural elements relating to the
Leased Premises not caused by acts or omissions of the Tenant.
Section 2.3 Early Occupancy
(1) Provided the Lease has been executed, the Tenant shall be permitted early
occupancy of the Leased Premises on a non-exclusive basis prior to the
Commencement Date for the purpose of doing the Tenant's Work from the date that
the Landlord has occupancy and the Landlord has delivered non-exclusive
possession of the Leased Premises to the Tenant. During such early occupancy
period the Tenant shall not be required to pay Basic Rent and the Tenant's
Proportionate Share of Occupancy Costs but shall be deemed a tenant of the
Landlord and shall be subject to all of the covenants and agreements as are
contained in this Lease save as aforesaid. The Tenant acknowledges that the
Landlord may complete the Landlord's Work during the early occupancy period.
(2) Notwithstanding anything contained in this Section 2.3, if the Tenant
conducts any business in and from any part of the Leased Premises prior to the
Commencement Date but after any period provided for the doing of the Tenant's
Work, the Tenant shall pay to the Landlord, in advance, Basic Rent and the
Tenant's Proportionate Share of Occupancy Costs in respect of that portion of
the Leased Premises so used, calculated and pro rated on a per diem basis from
the date on which the Tenant so commences to conduct business to the
Commencement Date.
ARTICLE 3
TERM
Section 3.1 Term
The Term of the Lease is as defined in Section 1.1.
Section 3.2 Overholding
(1) If the Tenant, with the prior written consent of the Landlord, remains in
possession of the Leased Premises after the end of the Term without the
execution and delivery of a new lease, there shall be no implied renewal, and
the Tenant shall be deemed to be occupying the Leased Premises as a tenant from
month to month upon the same terms
<PAGE> 22
and conditions as are set forth in this Lease insofar as the same are applicable
to a month to month tenancy, except the Basic Rent which shall be the Basic Rent
stipulated by the Landlord when providing its written consent.
(2) If the Tenant, without the prior written consent of the Landlord, remains in
possession of the Leased Premises after the end of the Term without the
execution and delivery of a new lease, there shall be no implied renewal, and
the Tenant shall be deemed to be occupying the Leased Premises as a tenant at
sufferance upon the same terms and conditions as are set forth in this Lease
insofar as the same are applicable to such a tenancy except the Basic Rent shall
be increased by three hundred percent (300%) and the Tenant shall indemnity the
Landlord for any and all losses, costs and expenses including legal fees on a
solicitor and client basis, which the Landlord may incur by reason of the Tenant
remaining in possession of the Leased Premises after the expiry of the Term
without the prior written consent of the Landlord.
ARTICLE 4
RENT
Section 4.1 Basic Rent
(1) The Tenant shall pay to the Landlord the Basic Rent for the Leased Premises
calculated in accordance with Section 1.1 annually throughout the Term, without
any deduction, abatement, set-off or compensation whatsoever.
(2) Basic Rent shall be payable in equal monthly installments, in advance, on
the first day of each calendar month during the Term.
Section 4.2 Additional Rent
The Tenant shall also pay to the Landlord yearly and every year during the Term,
as rent, the Proportionate Share of the Occupancy Costs and as and when required
by this Lease, all other items of Additional Rent without any deduction,
abatement, set-off or compensation whatsoever. Whenever the Landlord performs
any work or supplies any service pursuant to this Lease, or causes the same to
be performed or supplied which is or are the responsibility of the Tenant or for
which the Tenant is responsible following the giving of notice to the Tenant,
the Tenant shall pay to the Landlord as Additional Rent, in addition to the
amount otherwise payable to the Landlord in respect thereof pursuant to this
Lease, an Administrative Charge in connection therewith. Any item of Additional
Rent for which no payment dale is provided in this Lease shall be payable within
fifteen (15) days of receipt of invoice.
Section 4.3 Determination of Rentable Area
(1) The Rentable Area of the Leased Premises and the Rentable Area of the
Building shall be determined in the first instance by the Landlord in accordance
with the Standard Method of Measuring Floor Area in Office Buildings (American
National Standard AN51265.l-1980, re-affirmed 1919 and reprinted August, 1993)
published by Building Owners and Managers Association International. The
Rentable Area of the Leased Premises, the Building or any other component of the
Development shall be conclusively deemed to be the area, expressed in square
feet, set out in a certificate of the Landlord or an Expert.
(2) Upon determination of the Rentable Area of the Leased Premises by the
Landlord or an Expert, the Basic Rent and Occupancy Costs shall, if necessary,
be adjusted accordingly, retroactive to the Commencement Date, and the Tenant
shall pay to the Landlord any deficiency in payments of Basic Rent and Occupancy
Costs made to such time or the Landlord shall refund to the Tenant any excess
Basic Rent and Occupancy Costs paid by the Tenant to such time (as the case may
be) within fifteen (15) days after the Tenant is given written notice of such
determination. At the Landlord's request the Tenant shall enter into an
amendment to this Lease reflecting such adjustment to the Rentable Area of the
Leased Premises and in the Basic Rent.
Section 4.4 Payment of Tenant's Proportionate Share
Prior to the commencement of each Lease Year, the Landlord shall notify the
Tenant of its reasonable and bona fide estimate of the Tenant's Proportionate
Share of Occupancy Costs for that Lease Year. The Tenant shall pay such
estimated amount in equal monthly installments in advance on the first day of
each month during the Lease Year. From time to time during a Lease Year the
Landlord may, acting reasonably, re-estimate the amount of the Tenant's
Proportionate Share of Occupancy Costs and shall fix monthly installments for
the then remaining balance of the Lease Year so that the Landlord's estimate,
original or revised, of the Tenant's Proportionate Share will have been entirely
paid during that Lease Year. The Landlord shall make a final determination of
the Tenant's Proportionate
<PAGE> 23
Share of Occupancy Costs for the relevant Lease Year within 120 days of the
Landlord's financial year end, which shall be binding upon both Parties and
shall provide the Tenant with a statement of the Occupancy Costs for the
relevant Lease Year. The Landlord and the Tenant shall expeditiously make any
necessary readjusting payment; provided that the Tenant may not claim a
re-adjustment based solely upon any error of estimation, determination or
calculation unless claimed in writing within one (1) year after the Lease Year
to which the claim relates.
Section 4.5 Accrual of Rent
Rent shall be considered as accruing from day to day hereunder from the
Commencement Date and where it becomes necessary for any reason to calculate
such rent for an irregular period of less than one year or less than one
calendar month, an appropriate apportionment and adjustment shall be made on the
basis that each Lease Year is comprised of 365 days. If the Commencement Date is
not the first day of a month, rent for such fraction of a month shall be
adjusted as aforesaid, and paid by the Tenant on the Commencement Date.
Section 4.6 Currency and Place of Payment
(1) All Rent hereunder shall be payable in lawful money of Canada and shall be
paid to the Landlord, or to such Party as the Landlord may from time to time
direct by notice to the Tenant.
(2) The obligations of the Tenant to pay Rent owing, accrued or unpaid at the
end of the Term shall survive the expiration or sooner termination of this
Lease.
Section 4.7 Additional Rent Treated as Rent
All Additional Rent shall be deemed to be and be treated as rent, and payable
and recoverable as Rent.
Section 4.8 Interest on Amounts in Default
If the Tenant fails to pay when due any amount of Rent, then at the option of
the Landlord, interest shall accrue on the unpaid amount from the due date to
the date of payment at the rate per annum which is three percent (3%) above the
Prime (P + 3%), and shall be payable by the Tenant to the Landlord as Additional
Rent forthwith on demand.
Section 4.9 Net Lease to Landlord
The Tenant acknowledges and agrees that it is intended that this Lease shall be
a completely carefree net lease for the Landlord, except as expressly herein set
out, and that the Tenant shall pay, except as herein expressly set out, (a) all
costs, charges, expenses and outlays of every kind relating to or affecting the
Leased Premises, and (b) as provided in this Lease its share of all costs,
charges, expenses and outlays of every kind relating to or affecting the
Building or Development.
Section 4.10 Post-dated Cheques/Automatic Account Debit
(1) If requested by the Landlord, the Tenant shall prior to the commencement of
each and every Lease Year forward twelve (12) post-dated cheques in the amounts
equal to the sum of the monthly installment of Basic Rent and the estimated
monthly installment of the Tenant's Proportionate Share of Occupancy Costs for
each of the twelve (12) months of the next Lease Year.
(2) In the alternative, the Tenant may elect to provide to the Landlord a
pre-authorized debit form to permit automatic debiting of the Tenant's account
with its banker for the monthly installment of Basic Rent and the estimated
monthly installment of the Tenant's Proportionate Share of Occupancy Costs, as
aforesaid. The Tenant agrees to provide replacement authorizations from time to
time during the Term as the monthly installment of Basic Rent or the monthly
installment of the Tenant's Proportionate Share of Occupancy Costs change
forthwith upon notice of such change being given to the Tenant by the Landlord.
The Tenant agrees to make all other Additional Rent payments to the Landlord by
cheque at the times contemplated by the terms of this lease.
Section 4.11 Accord and Satisfaction
<PAGE> 24
(1) Acceptance by the Landlord of a lesser amount than the monthly payment of
Rent herein stipulated shall be deemed to constitute only payment on account of
the stipulated Rent for the earlier period in respect of which Rent is then
unpaid, and shall not constitute settlement of any payment made on account of
Rent owing, and any endorsement or statement on any cheque or documentation
accompanying any payment of Rent shall not be deemed an acknowledgment of full
payment or an accord and satisfaction, and the Landlord may accept such payment
without prejudice to the Landlord's right to recover the balance of such Rent or
pursue any other remedy provided in this Lease.
(2) The Tenant hereby waives and renounces any and all existing and future
claims, set-offs and compensation against any Basic Rent or Additional Rent and
agrees to pay all monthly installments of Basic Rent and Additional Rent
regardless of any claim, set-offs or compensation which may be asserted by the
Tenant or on its behalf.
Section 4.12 Late Payment Charge
The Tenant hereby acknowledges that late payment by the Tenant to the Landlord
of the monthly installment of Basic Rent or the Tenant's Proportionate Share of
Occupancy Costs or Additional Rent due hereunder will cause the Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult or impracticable to ascertain. Such costs include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on the Landlord by the terms of any Mortgage. Accordingly, if any
monthly installment of Basic Rent or the Tenant's Proportionate Share of
Occupancy Costs or Additional Rent shall not be received by the Landlord or the
Landlord's designee when such amount is due, the Tenant shall thereupon pay to
the Landlord a late charge of $50.00 per occurrence. Acceptance of such late
charge by the Landlord shall in no event Constitute a waiver to the Tenant's
default with respect to such overdue amount nor prevent the Landlord from
exercising any of the other rights and remedies granted hereunder. The foregoing
shall be without prejudice to any other right or remedy available to the
Landlord under or pursuant to this Lease by reason of a monetary default by the
Tenant.
Section 4.13 Allocation of Occupancy Costs
(1) The Landlord may, for reasons of bona fide administrative convenience or for
more efficient or economical operation of the Development or for the more
equitable distribution of Occupancy Costs establish, from time to time,
Development components, of which the Building shall be one, and divide,
apportion and allocate Occupancy Costs among such Development components.
(2) The Landlord shall, in any such division, apportionment and allocation of
Occupancy Costs, divide, apportion and allocate Occupancy Costs on an equitable
basis, having regard, without limitation, to the various uses and values of the
subject Development components, to prudent practices of property management, to
provisions of this Lease and to generally accepted accounting principles or
engineering principles.
ARTICLE 5
GENERAL COVENANTS
Section 5.1 Landlord's Covenants
The Landlord covenants with the Tenant:
(a) for quiet enjoyment; and
(b) to observe and perform all the covenants and obligations of the Landlord
herein.
Section 5.2 Tenant's Covenants
The Tenant covenants with the Landlord:
(a) to pay the Rent; and
(b) to observe and perform all the covenants and obligations of the Tenant
herein.
ARTICLE 6
BUILDING SERVICES, COMMON AREAS, UTILITIES
<PAGE> 25
Section 6.1 Heating, Ventilating and Air-Conditioning
(1) The Landlord shall provide heating, ventilating and air-conditioning in such
quantities and at such temperatures as shall maintain in the Leased Premises,
conditions of reasonable temperature and comfort during Business Hours. In no
event, however, shall the Landlord have any obligation or liability in
connection with the cessation, interruption or suspension of the supply of such
heating, ventilating and air-conditioning but the Landlord shall use its
reasonable efforts to restore any cessation, interruption or suspension of the
supply thereof.
(2) The Landlord shall not be responsible for the failure of the HVAC system to
perform its function if this is attributable to any arrangement of partitioning
in the Leased Premises or failure to shade windows, if any, which are exposed to
the sun, or any use of electrical power by the Tenant which, in the Landlord's
opinion, is excessive; and provided further that the Landlord shall not be
liable to the Tenant or to invitees or licensees including clients or customers
of the Tenant for direct, indirect or consequential damages or damages by reason
of the operation or non-operation of such equipment or systems, nor shall the
Tenant be entitled to any compensation or to any repayment or reduction of the
Rent during any such non-operation. The layout of the Leased Premises shall be
modified by the Tenant, if necessary, in accordance with the reasonable
requirements of the Landlord to secure maximum efficiency of the HVAC system
serving the Leased Premises.
Section 6.2 Common Areas
(1) The Landlord shall operate, manage, maintain and repair the Development in
accordance with the standards applicable for comparable office buildings in the
City of Calgary, having regard to the size, age, location and character of the
Development.
(2) The Tenant shall be entitled to use of the Common Areas, subject to the
rules and regulations referred to in Section 7.4 provided that the Common Areas
shall at all times be subject to the exclusive control and management of the
Landlord. The Tenant and all other persons using the Common Areas shall do so at
their sole risk.
(3) The Landlord shall be entitled to use, maintain, operate, police,
reconstruct, alter, and deal with the Common Areas, change the area, location
and arrangement thereof and make all rules and regulations pertaining to and
necessary for the proper operation and maintenance thereof; provided that in
exercising such rights the Landlord shall use reasonable efforts to minimize
interference with the Tenant's use of the Leased Premises.
(4) Subject to Section 9.3, if there should be an interruption in any service or
use of any facility, the Landlord shall proceed expeditiously to restore
service, but in no event will the Landlord be liable to the Tenant or invitees
or licensees including clients or customers of the Tenant for direct, indirect
or consequential damage or damages nor will the Tenant be entitled to any
compensation or to any repayment or reduction of Rent.
Section 6.3 Janitorial Services
(1) The Landlord shall provide janitorial services to the Leased Premises to a
standard similar to that provided to comparable office buildings in the City of
Calgary, provided that all curtains, carpets, rugs or drapes of any kind (if
any) in the Leased Premises shall be cleaned and maintained by the Tenant.
(2) The Landlord shall not be responsible for any omission or act of any person
employed or retained to perform such work, or for any loss thereby sustained by
the Tenant, its servants, agents, invitees or others, except as otherwise
provided herein.
(3) The Tenant shall not engage any person or entity to provide janitorial
services to the Leased Premises.
(4) The Tenant shall grant access necessary for the performance of the
janitorial services and shall leave the Leased Premises in a reasonably tidy
condition at the end of each day to permit the performance of such services.
Section 6.4 Utilities
(1) The Landlord shall, subject to interruptions beyond its control, provide and
permit the Tenant to use any utility services (including electricity and water)
serving the Building provided that the Tenant does not overload the capacity of
any such service.
<PAGE> 26
(2) The Tenant shall, to the extent that the costs and expenses for such utility
services have not been included by the Landlord, in Operating Costs, pay to the
Landlord, or as it otherwise directs, as Additional Rent all such costs and
expenses relating to such use. The Tenant shall make such payments in monthly
installments in advance based upon estimates by the Landlord and subject to
adjustment by the Landlord within a reasonable time after the end of the Lease
Year for which such estimate has been made; if required by the Landlord, the
Tenant shall install at its own expense (and in a location designated by the
Landlord) its separate check meter for the purpose of measuring, without
limitation, the consumption of electricity and water in the Leased Premises.
(3) The Tenant shall advise the Landlord prior to their use, of any
installations, appliances or business machines used by the Tenant which are
likely to require large consumption of electricity or other utilities.
(4) The Landlord shall replace from time to time electrical light bulbs, tubes
and ballasts serving the Leased Premises and the Tenant shall, to the extent
that the costs and expenses in effecting the replacement have not been included
by the Landlord in Operating Costs, pay to the Landlord forthwith upon demand as
Additional Rent the cost thereof plus an Administrative Charge in respect
thereof.
Section 6.5 Communication Systems
(1) The Landlord shall provide a reasonable amount of secure space within the
Building or the Development so as to permit suppliers of telecommunication
systems, including without limitation telephone, data transmission, electronic
transmission or fibre optic transmission or telecommunication system, (herein, a
"Telecom Supplier") to install and terminate such telecommunication systems
(herein the "External System") in the Building or the Development.
(2) The Landlord covenants and agrees with the Tenant that, subject to (i) the
Tenant having entered into a contract with a Telecom Supplier which permits,
among other things, the Tenant to connect its internal telecommunication systems
(the "Internal System") to such Telecom Supplier's External System, and (ii)
providing the Landlord with evidence thereof, the Tenant may connect its
Internal System to such Telecom Supplier's External System.
(3) The connection of the Internal System to the External System shall, at the
Landlord's option, be carried out by the Landlord or an Expert appointed by the
Landlord. The Tenant shall be responsible for all costs and expenses incurred by
or on behalf of the Landlord in effecting the connection and the Tenant shall
reimburse the Landlord for any costs and expenses it or its Expert may incur
together with the Administrative Charge, within fifteen (15) days of receipt of
an invoice therefor.
(4) If the Landlord elects not to effect or cause to be effected the connection,
the Tenant may effect such connection, subject to complying with such rules and
regulations as the Landlord may impose, from time to time.
(5) The Landlord shall provide a reasonable amount of space within the Building
or the Development so as to permit the Tenant to run the necessary conduits and
lines from the Tenant's Internal System to the location of the External System,
based on the typical requirements for normal office use, having regard to the
size of the Leased Premises and the use of the Leased Premises for general and
normal office use. The Tenant acknowledges and agrees with the Landlord that
access to such space may be restricted to the Landlord or the Landlord's Expert,
in which case the provisions of Section 6.6(3) shall apply with the necessary
modifications and if the Landlord permits the Tenant to have access, such access
shall be subject to complying with such rules and regulations as the Landlord
may impose.
ARTICLE 7
USE OF LEASED PREMISES
Section 7.1 Use
(1) The Tenant shall use the Leased Premises solely for the purpose of
conducting the Permitted Use and the Tenant shall not use or allow the use of
the Leased Premises or any part thereof for any other business or purpose.
(2) The Tenant shall not use or permit to be used any part of the Leased
Premises in any manner which directly or indirectly interferes with the free
ingress and egress of other tenants, their servants, agents, licensees or
invitees to or
<PAGE> 27
from the Development, central corridors, elevators or any other Common Areas and
without limitation the Tenant shall not suffer or permit picketing arising from
a trade union or other labour dispute in any part of the Development.
(3) If the Tenant, at any time during the Term, vacates the Leased Premises and
is not carrying on the Permitted Use in the Leased Premises in a bona fide
manner, the Landlord may terminate this Lease upon notice to the Tenant
specifying the termination date and the provisions of Section 16.4(2) shall
apply.
Section 7.2 Nuisance
The Tenant shall conduct the Permitted Use in the Leased Premises in a
first-class and reputable manner befitting the Development. Without limitation,
the Tenant shall not commit or allow any waste upon, or damage to, the Leased
Premises, any nuisance, or any act or omission which disturbs the enjoyment of
any other tenant or occupant of premises in the Development or which
unreasonably disturbs, interferes with or annoys any person in the immediate
vicinity of the Development.
Section 7.3 Compliance with Laws
The Tenant shall promptly comply with and conform to the requirements of every
applicable statute, law, by-law, regulation, ordinance and order at any time or
from time to time in force during the Term affecting the Leased Premises or the
leasehold improvements, trade fixtures, furniture and equipment installed by the
Tenant. If any obligation to modify, extend, alter or replace any part of the
Leased Premises or any such items is imposed upon the Landlord, the Landlord may
at its option either do or cause to be done the necessary work, at the expense
of the Tenant, or forthwith give notice to the Tenant to do so within the
requisite period of time, failing which the Landlord may by further notice to
the Tenant terminate this Lease. The costs of any work done by the Landlord and
an Administrative Charge in respect thereof shall be payable by the Tenant to
the Landlord forthwith upon demand as Additional Rent.
Section 7.4 Compliance with Rules and Regulations
The Tenant shall observe, perform and comply with the Landlord's rules and
regulations for the Development, receipt of a copy of which is acknowledged by
the Tenant, and shall cause everyone for whom the Tenant is in law responsible,
or over whom the Tenant might reasonably be expected to have control, to do the
same. Each such rule and regulation shall, for all purposes, be a covenant in
this Lease, and will accordingly be binding as such on the Tenant. The Landlord
shall have the right from time to time during the Term to make reasonable
amendments, deletions and additions to such rules and regulations. Such rules
and regulations, together with all reasonable amendments, deletions and
additions made thereto by the Landlord and of which notice shall have been given
to the Tenant, shall be deemed to be part of this Lease provided that in the
event of a conflict, the provisions of this Lease shall prevail.
Section 7.5 Signs and Advertising
(1) The Development shall be known and identified as "Bow Valley Square" or by
such other name as designated by the Landlord from time to time.
(2) The Tenant shall not erect any sign or advertising material upon any part of
the Development, including the Leased Premises.
(3) The Tenant shall be entitled to have its name upon the directory board
installed by the Landlord in the ground floor lobby of the Building.
(4) The Tenant, at its own expense, shall be entitled to require the Landlord to
affix to the entrance of the Leased Premises its name in accordance with the
Landlord's uniform scheme of tenant identification in use in the Development or
such other scheme as may be approved in writing by the Landlord, which approval
may be arbitrarily withheld. At the expiration or sooner termination of the Term
the Tenant shall, to the extent that the Tenant has used an identification
scheme other than the Landlord's uniform scheme of tenant identification,
restore, at its own expense, the entrance of the Leased Premises to the
condition it was prior to the affixation of its name and if the Tenant fails to
do so, the Landlord may do so and the Tenant shall reimburse the Landlord for
all costs and expenses incurred by the Landlord in so doing together with the
Administration Charge which shall be payable by the Tenant to the Landlord
immediately upon demand.
<PAGE> 28
Section 7.6 Disfiguration, Overloading, etc.
The Tenant shall not do or suffer any waste or damage, disfiguration or injury
to the Leased Premises and shall not permit or suffer any overloading of the
floors thereof or the bringing into any part of the Development or Building
(including the Leased Premises) any articles or fixtures that by reason of their
weight or size might damage or endanger the structure of the Building.
Section 7.7 Energy Conservation
The Tenant shall comply with any measures the Landlord or any legislative
authority may from time to time introduce to conserve or to reduce consumption
of energy or to reduce or control other Operating Costs or pay as Additional
Rent the cost, to be estimated by the Landlord acting reasonably, of the
additional energy consumed by reason of non-compliance with such measures. The
Tenant shall also convert to whatever system or units of measurement of energy
consumption the Landlord may from time to time adopt.
Section 7.8 Remedial Action
If the Tenant is in breach of any of its obligations or restrictions stipulated
in this Article 7, the Landlord may, in addition to any other remedies that it
may have hereunder, enter upon the Leased Premises and take such remedial action
as is necessary to remedy the breach and repair any damage caused thereby and
the Tenant shall forthwith upon demand pay to the Landlord as Additional Rent
the Landlord's costs incurred in connection therewith together with an
Administrative Charge in respect thereof.
Section 7.9 Security Devices
The Tenant shall obtain, at its expense, additional keys, security access cards
and any other similar security devices from the Landlord or the Landlord's agent
as required.
Section 7.10 Hazardous Substances
The Tenant shall not cause or permit any hazardous substances (as such term is
defined in the Environmental Protection and Enhancement Act, Alberta, or any
legislation in pari materia therewith or in substitution therefor, (herein
"Hazardous Substance")) to be brought upon, kept or used in or about the Leased
Premises without the prior written consent of the Landlord, which consent may be
unreasonably or arbitrarily withheld unless the Tenant demonstrates to the
Landlord's reasonable satisfaction that such Hazardous Substance (i) is
reasonably necessary for the Tenant's use of the Leased Premises, (ii) the
Hazardous Substance will be used, kept, stored and disposed of in a manner that
complies with all applicable laws and regulations regulating a Hazardous
Substance, and (iii) the Tenant will comply with the rules and regulations the
landlord may impose in connection with the use, storage or disposal of Hazardous
Substances including the posting of security in the form of a letter of credit
or other similar security, as determined by the Landlord, acting reasonably.
ARTICLE 8
INSURANCE
Section 8.1 Landlord's Insurance
The Landlord, acting reasonably, shall carry or cause to be carried such
insurance with such deductibles and exclusions for the account and benefit of
the Landlord as the Landlord from time to time considers useful, expedient or
beneficial, and such insurance shall include the following:
(a) insurance against all risks of loss or damage caused by or resulting from
fire, lightning, tempest or any additional peril defined in a standard insurance
additional perils supplemental contract, including sprinkler leakage, covering
all property owned by the Landlord relative to the Development including the
Building and the Common Areas, excluding the leasehold improvements in the
Leased Premises and all trade fixtures, furniture and stock-in-trade belonging
to the Tenant and other tenants of the Development;
(b) insurance against loss of the Landlord's gross profits including loss of
Basic Rent and Additional Rent;
<PAGE> 29
(c) insurance against mechanical breakdown, explosion, rupture or failure of
boilers, pressure vessels, heating, ventilating and air conditioning equipment,
electrical apparatus and other like apparatus owned by the Landlord;
(d) comprehensive general liability insurance with respect to the operation of
the Development covering bodily injury, death and damage to property of others;
and
(e) insurance against any other form or forms of loss which a Mortgagee may
require from time to time.
At the written request of the Tenant the Landlord shall provide the Tenant with
a written summary of the Landlord's insurance then in place with regard to the
Development.
Section 8.2 Landlord's Policy
(1) Notwithstanding any direct or indirect contribution by the Tenant to the
payment of insurance premiums on policies taken out and maintained by the
Landlord, the Tenant shall in no circumstances have or be deemed to have any
interest in such policies and the Tenant shall have no right to receive any
proceeds of insurance from policies carried by the Landlord.
(2) At the request of the Tenant and at its expense, if any, the Landlord will
endeavour to obtain a waiver of the insurer's right of subrogation as against
the Tenant under the policy described in Section 8.1(a) with respect to any loss
covered by such policy provided that such waiver is obtainable by the Landlord
from its insurers. Notwithstanding such a waiver and any of the other provisions
of this Lease, the Landlord shall retain all of its rights as against the Tenant
arising out of any loss or damage to the Development up to the amount of the
Landlord's deductible or the amount the Landlord is self insured in respect of
any one occurrence.
(3) The Landlord shall not in any way be accountable to the Tenant regarding the
use of any insurance proceeds arising from any claim, and the Landlord shall not
be obliged to account for such proceeds, or to apply such proceeds to the repair
or restoration of that which was insured except to the extent provided herein.
(4) If the Tenant desires to receive indemnity by way of insurance for any
property, work or thing whatever including the Tenant's leasehold improvements,
the Tenant shall insure same for its own account and shall not look to the
Landlord for reimbursement or recovery in the event of loss or damage from any
cause.
Section 8.3 Tenant's Insurance
The Tenant shall keep in force during the Term at its own expense the following:
(a) insurance against damage by fire, lightning, tempest or any additional peril
defined in a standard fire insurance additional perils supplemental contract
including sprinkler leakage, if applicable, in any amount equal to the hill
insurable value, calculated on a replacement cost basis without deduction for
depreciation, covering all property of every description and kind owned by the
Tenant or for which the Tenant is responsible pursuant to this Lease including
the leasehold improvements, furniture, trade fixtures, alterations, moveable
partitions, additions and all other contents of the Leased Premises and
containing a joint loss endorsement or agreement;
(b) comprehensive general liability insurance, including Tenant's legal
liability insurance in respect of the Leased Premises, in an amount not less
than five million Dollars ($5,000,000), or such greater amount as may be
stipulated from time to time by the Landlord in writing, acting reasonably, in
respect of injury to or death of one or more than one person and for damage to
property, regardless of the number of claims arising as a result of any one
occurrence;
(c) business interruption insurance in amounts sufficient to adequately
reimburse the Tenant for loss of gross profits or loss of earnings attributable
to all perils commonly insured against; and
(d) such other insurance as either the Landlord or any Mortgagee may reasonably
require from time to time with respect to the property and operations of the
Tenant.
Section 8.4 Tenant's Policy
(1) The Tenant's insurance policies shall be in a form satisfactory to the
Landlord and shall be placed with insurers licensed to do business in Canada and
shall exclude the exercise of any claim of the insurer or insurers, whether by
subrogation or otherwise, against the Landlord and against those for whom the
Landlord is in law
<PAGE> 30
responsible. All policies of comprehensive general liability insurance shall
contain a severability of interest clause and a cross-liability clause as
between the Landlord and Tenant.
(2) Each such policy shall name the Landlord as an additional insured as its
interest may appear and shall contain a waiver in favour of the Landlord and any
Mortgagee, of any breach or violation of any warranties, representations,
declarations or conditions contained in such policies.
(3) All such insurance shall be primary insurance and shall not call into
contribution any insurance carried by the Landlord or any Mortgagee.
(4) The portion of the proceeds of insurance referred to in Section 8.3(a)
payable for the leasehold improvements are hereby assigned to and shall be made
payable to the Landlord in priority to all others. If this Lease is not
terminated such proceeds received by the Landlord shall be released to the
Tenant upon receipt by the Landlord of a certificate of the Landlord's architect
stating that repairs to the leasehold improvements to the extent of such
proceeds have been satisfactorily completed by the Tenant, free of liens. If the
Lease is terminated pursuant to any provision in Article 9, the Tenant shall and
does assign to and agrees to pay to the Landlord, the proceeds of its policies
of insurance relating to the leasehold improvements, in each case, in an amount
equal to the hill replacement cost thereof without any deduction for
depreciation.
(5) All policies of insurance shall contain a provision requiring that at least
thirty (30) days written notice be given to the Landlord by the insurer prior to
cancellation or expiry and the Tenant shall obtain undertakings from all
insurers to that effect.
(6) The Tenant shall, ten (10) days prior to the Commencement Date and ten (10)
days prior to the expiry of any insurance required to be carried by the Tenant,
deliver certificates of insurance to the Landlord in a form acceptable to the
Landlord, and, if required, certified copies of each insurance policy. Receipt
by the Landlord of certificates of insurance or certified copies of insurance
policies from the Tenant shall in no way act as confirmation by the Landlord
that the Tenant's insurance complies with the terms of this Lease and shall not
be construed as a waiver with regard to the Tenant's obligations to insure.
(7) If the Tenant fails to perform its obligations pursuant to Section 8.3 or
8.4, the Landlord shall have the right, but not the obligation, to perform such
obligations and to pay the costs or premium therefore and in such event the
Tenant shall repay to the Landlord, as Additional Rent, forthwith on demand, the
amount paid by the Landlord, together with an Administrative Charge in respect
thereof.
(8) The acquisition and maintenance by the Tenant of the insurance policies as
required pursuant to Section 8.3 shall not limit or restrict the liability of
the Tenant under this Lease. Notwithstanding any other provisions of this Lease,
the Tenant hereby releases the Landlord, and any Party for whom the Landlord is
legally responsible, from any liability for loss to the extent of all insurance
proceeds paid under the policies of insurance maintained by the Tenant or which
would have been paid if the Tenant had maintained the insurance it is required
to maintain under this Lease and had diligently processed any claims thereunder.
Section 8.5 Premium Increases and Cancellation
The Tenant shall promptly comply with all requirements of the insurance
underwriters for the Landlord and any Mortgagee regarding the use and occupation
of the Leased Premises, and the Tenant shall not do, omit, or permit to be done
or omitted anything which shall cause any insurance premium with respect to the
Development or any part thereof to be increased, or which may cause any policy
or insurance with respect to the Development to be cancelled. If any insurance
premium shall be so increased the Tenant shall pay to the Landlord forthwith
upon demand the amount of such increase. If any insurer threatens to cancel,
cancels or refuses to renew any insurance policy of the Landlord upon the
Development by reason of the use or occupation of the Leased Premises or any
part thereof by the Tenant, the Tenant shall forthwith remedy or rectify such
use or occupation within the time limit required by the insurer upon being
requested to do so in writing by the Landlord, and if the Tenant shall fail to
do so, the Landlord may, at its option, without prejudice to any other rights it
may have, terminate this Lease by notice to the Tenant and thereupon the
provisions of Section 16.4 shall apply, the Tenant shall immediately deliver up
vacant possession of the Leased Premises to the Landlord, and the Landlord shall
have the right to reenter the Leased Premises.
ARTICLE 9
REPAIR AND DAMAGE
<PAGE> 31
Section 9.1 Landlord's Obligations
The Landlord shall at all times during the Term keep the Development (other than
the Leased Premises and premises of other tenants) in a good and substantial
state of repair, consistent with the general standards of comparable office
buildings in the City of Calgary, including the foundation, subfloor, bearing
walls, columns, beams, roof, exterior walls, systems for interior climate
control, elevators, entrances, stairways, corridors, lobbies and washrooms used
in common by the Tenant and other tenants of the Development, provided that such
obligation is subject to reasonable wear and tear and Section 9.3. Subject to
Section 2.2, the Landlord shall also repair defects in construction performed,
or installations made by the Landlord in the Leased Premises.
Section 9.2 Tenant's Obligations
(1) The Tenant shall at all times during the Term, subject to Section 9.3, at
its own expense keep the Leased Premises, including all leasehold improvements
and fixtures therein (and including those portions of the HVAC System which
serve the Leased Premises, and do not form part of the Common Areas), in a good
and substantial state of repair consistent with the general standards of
comparable office buildings in the City of Calgary, excepting (i) reasonable
wear and tear, and (ii) repairs to be made by the Landlord under Section 9.1.
(2) At the expiration or sooner termination of the Term, the Tenant will
peaceably surrender and give up the Leased Premises in good and proper repair
and operating condition, in accordance with the provisions of Section 9.2(1),
without notice from the Landlord unless otherwise required by this Lease, any
right or notice to quit or vacate otherwise being expressly waived by the
Tenant, any law, usage or custom to the contrary notwithstanding.
Section 9.3 Damage, Abatement and Termination
The Landlord and the Tenant agree that:
(a) if there is damage to the Leased Premises caused by any casualty in respect
of which the Landlord is required to insure against pursuant to Section 8.1 or
in respect of which the Landlord has insured against and if the damage is such
that the Leased Premises or any substantial part thereof are rendered not
reasonably capable of use and occupancy by the Tenant for the purposes of its
business, then:
(i) from and after the date of the occurrence of the damage, the Basic
Rent payable under Section 4.1 and the Tenant's Proportionate Share of Occupancy
Costs payable under Section 4.4 shall abate until at least a substantial part of
the Leased Premises is again reasonably capable of such use and occupancy for
the purpose aforesaid, such abatement to be from time to time in the proportion
that the Rentable Area of the part or parts of the Leased Premises rendered not
reasonably capable of such use and occupancy bears to the Rentable Area of the
Leased Premises provided that to the extent that any part of the Leased Premises
is not reasonably capable of use and occupancy by reason of damage which the
Tenant is obliged to repair, any abatement of Rent to which the Tenant is
otherwise entitled shall not extend beyond the time by which, in the reasonable
opinion of the Landlord, repairs by the Tenant ought to have been completed; and
(ii) unless this Lease is terminated as hereinafter provided, the
Landlord or the Tenant, as the case may be, will repair such damage with all
reasonable diligence (according to their respective obligations to repair set
forth in Sections 9.1 and 9.2);
(b) in the event that:
(i) premises, whether of the Tenant or other tenants of the Building,
comprising in the aggregate twenty-five percent (25%) or more of the Rentable
Area of the Building are substantially damaged or destroyed by any cause; or
(ii) the Leased Premises are damaged or destroyed by any cause such that,
in the reasonable opinion of the Landlord, such damage cannot with reasonable
diligence be repaired within 180 days after the occurrence thereof; or
(iii) portions of the Development which affect access or services
essential to the Leased Premises are damaged or destroyed by any cause such
that, in the reasonable opinion of the Landlord, such damage cannot with
reasonable diligence be repaired within 180 days after the occurrence thereof
then the Landlord may at its option, exercisable by notice to the Tenant given
within ninety (90) days of the occurrence of such damage or destruction,
terminate this Lease, in which event the Tenant shall forthwith deliver up
possession of the Leased Premises to the
<PAGE> 32
Landlord and Rent shall be apportioned and paid to the date upon which
possession is so delivered up (but subject to any abatement to which the Tenant
may be entitled under Section 9.3(a)(i));
(c) any certificate of an Expert shall be conclusive as to the percentage of the
Leased Premises or Common Area, or of the Building which is destroyed or damaged
or capable of use and occupancy by the Tenant, the state of completion of any
work or repair of either the Landlord or Tenant, and the computation of the area
of any premises including the Leased Premises, and the length of time required
for the repair, with reasonable diligence, of any damage or destruction; and
(d) in repairing or rebuilding the Building or the Development in accordance
with its repair obligations the Landlord may use drawings, designs, plans and
specifications other than those used in the original construction and may alter
or relocate any or all of the Common Areas and other improvements to the
Building or the Development, including the Leased Premises, provided that the
Leased Premises as altered or relocated shall be of substantially the same size
and in all material respects comparable to or better than the original Leased
Premises.
ARTICLE 10
TAXES
Section 10.1 Taxes Payable by the Landlord
The Landlord shall pay all Property Taxes, subject to Section 10.2, provided
that it may defer such payments or compliance with any taxing statute, law,
by-law, regulation or ordinance to the fullest extent permitted by law, so long
as it diligently pursues any contest or appeal of any such taxes.
Section 10.2 Taxes Payable by the Tenant
(1) If separate real property tax bills and separate real property assessment
notices for the Leased Premises are not issued, the Tenant shall pay monthly in
advance, in accordance with Section 4.4, the Tenant's Proportionate Share of the
Property Taxes.
(2) If separate real property tax bills and separate real property assessment
notices for the Leased Premises are issued, the Tenant shall:
(a) pay promptly when due to the taxing authorities all Property Taxes
levied, rated, charged or assessed from time to time against the Leased
Premises, or any part thereof, and forthwith provide the Landlord with evidence
of payment upon request; and
(b) provide the Landlord with a copy of each separate real property tax
bill and separate assessment notice within ten (10) days after receipt, provided
that if the Landlord so elects by notice to the Tenant, the Tenant shall, to the
extent permitted by law, pay such Taxes to the Landlord in equal monthly
installments in advance, adding such amounts to the monthly installments of the
Tenant's Proportionate Share otherwise payable in accordance with Section 4.4.
Section 10.3 Business Taxes and Other Taxes of the Tenant
The Tenant shall pay promptly when due to the taxing authorities or to the
Landlord, if it so directs, all taxes, rates, duties, levies and assessments
whatsoever, including Business Taxes and Rental Taxes, whether municipal,
parliamentary or otherwise, levied, imposed or assessed in respect of operations
at, occupancy of, or conduct of business in or from the Leased Premises by the
Tenant or any other permitted occupant. The Tenant shall also pay to the
Landlord promptly on demand an amount equal to any of the following taxes the
Landlord may determine to recover from the Tenant, and any amounts so paid by
the Tenant to the Landlord (and by other tenants under corresponding clauses of
other leases) shall be excluded from the determination of Property Taxes:
(a) all taxes charged in respect of all leasehold Improvements and trade
fixtures and all furniture and equipment made, owned or installed by or on
behalf of the Tenant in the Leased Premises; and
(b) if by reason of the act, election or religion of the Tenant or any
subtenant, licensee or occupant of the Leased Premises, the Leased Premises or
any part of them shall be assessed for the support of separate schools, the
amount by which the taxes so payable exceed those which would have been payable
if the Leased Premises had been assessed for the support of public schools,
shall be payable by the Tenant forthwith upon demand.
<PAGE> 33
If and so long as the Landlord elects not to separately determine and collect
from the tenants of the Building directly amounts which would otherwise be
payable by the Tenant under this Section 10.3 (and by other tenants under
comparable provisions of other leases of premises in the Building) the taxes
described herein shall form part of the Property Taxes, without prejudice to the
right of the Landlord to make any such determination in the future, either
generally or in the case of the Tenant or any other tenant.
Section 10.4 Postponement
The Landlord may postpone payment of any taxes payable by it pursuant to Section
10.1 and the Tenant may, subject to Section 10.6, postpone payment of any taxes,
rates, duties, levies and assessments payable by it under Section 10.3 in each
case to the extent permitted by lay if either Party is proceeding in good faith
with an appeal against the imposition thereof, provided that in the case of a
postponement by the Tenant such postponement does not render the Development, or
any part thereof, subject to imminent sale or forfeiture or render the Landlord
liable to prosecution, fine or other liability.
Section 10.5 Tenant 10 Deliver Receipts
Whenever requested by the Landlord, the Tenant shall deliver to the Landlord
copies of receipts for payment of all taxes, rates, duties, levies and
assessments payable by the Tenant under this Article and furnish such other
information in connection therewith as the Landlord may reasonably require.
Section 10.6 Assessment Appeals
The Landlord alone shall be entitled to conduct any appeal from any governmental
assessment or determination of Property Taxes or Inc value of Inc Building or
Development or any portion thereof whether or not the assessment or
determination affects the amount to be paid by the Tenant.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
Section 11.1 Permitted Occupants
The Tenant shall not permit any part of the Leased Premises to be used or
occupied by any person other than the Tenant and its employees and any subtenant
or assignee permitted under Section 11.2 and the employees of such subtenant or
assignee, nor shall it permit any persons to be upon the Leased Premises other
than the Tenant, such permitted subtenant or assignee and their respective
employees, customers and others having lawful business with them.
Section 11.2 Assignment or Subletting
(1) The Tenant shall not assign this Lease or any part thereof, nor sublet or
part with or share the occupation. control or possession of the Leased Premises
or any part thereof without the prior written consent of the Landlord. The
prohibition against assignment and subletting includes assignments or
sublettings by operation of law including an assignment resulting from the
merger or consolidation of the Tenant. If at any time, the Tenant wishes to
assign this Lease or to sublet the whole or any part of the Leased Premises, or
part with or share the occupation, control or possession of the whole or any
part of the Leased Premises (herein sometimes referred to as a "Transfer") the
Tenant shall give notice to the Landlord (i) which shall include an offer by the
Tenant to the Landlord to have the Landlord act as the Tenant's broker with
respect to any assignment and subletting (the "Brokerage Offer") and (ii) which
shall include a first offer to surrender this Lease (the "Surrender Offer") in
respect of the whole or any part of the Leased Premises (the "Subject Area")
which the Tenant wishes to Transfer. Notice of the Tenant's intent to assign or
sublet, of the Brokerage Offer and the Surrender Offer shall be given to the
Landlord not less than ninety (90) days prior to the date on which the Tenant
proposes that the surrender be effective. The Landlord shall have a period of
fifteen (15) Business Days after such notice is given to accept or to decline
the Brokerage Offer and the Surrender Offer. If the Landlord declines the
Brokerage Offer or does not respond thereto, within such period, the Tenant
shall be free to retain such brokerage firm as the Tenant considers appropriate.
If the Landlord elects to act as the Tenant's broker, the brokerage agreement
shall be consistent with industry standards, as determined by the Landlord
acting reasonably. If the Landlord accepts the Surrender Offer, then this Lease
shall terminate with respect to the Subject Area on the date proposed in the
Surrender Offer (or if none is proposed, upon a date selected by the Landlord),
unless the Tenant notifies the Landlord in writing within three (3) Business
Days after receiving notice from the
<PAGE> 34
Landlord of such termination, that the Tenant has decided not to proceed with
the Transfer. The Landlord shall, in addition to the right of termination set
out in the preceding sentence, have the right to sublease from the Tenant, the
Subject Area on the same terms and conditions as set out in any proposed
subletting by the Tenant, except in respect of the Basic Rent which shall be the
lesser of the Basic Rent payable by the Tenant under this Lease or the Basic
Rent specified in such proposed subletting and the Landlord shall have the
further right thereafter to sublease the subject area without requiring the
further consent of the Tenant as sublessor and to terminate this Lease in
respect of the subject area by giving written notice to the Tenant.
(2) If the Landlord declines the Surrender Offer or does not respond within the
aforesaid time period, the Tenant shall be free to Transfer this Lease or sublet
the Subject Area provided that the Tenant shall have received or procured a bona
fide written offer therefor which is not inconsistent with, and the acceptance
of which would not breach, any provision of this Lease including Section 7.1 (if
this Section 11.2 is complied with) and which the Tenant has determined to
accept subject to this Section 11.2 being complied with, and the Tenant shall
have first requested and obtained the consent of the Landlord to such Transfer.
Any request for the Landlord's consent shall be accompanied by a true copy of
such offer and all information available to the Tenant, or any additional
information requested by the Landlord, as to the responsibility, reputation,
financial standing, business of, and intended use of the Leased Premises by, the
proposed Transferee. The consent of the Landlord shall not be unreasonably
withheld provided that, without limitation, the Landlord shall not be deemed to
be unreasonably withholding its consent if it refuses such consent upon the
basis that (i) such offer provides for a rental which is less than the rental
payable under this Lease, or is less than fair market rental as determined by
the Landlord acting reasonably, or (ii) such offer is made by, or the proposed
assignment is in favour of, any existing occupant of the Development, or (iii)
the intended use is not in accord with Section 7.1, or (iv) the intended use
would cause the Landlord to be in breach of an obligation it may have to another
tenant in the Development, or (v) any other basis consistent with sound business
principles as determined by the Landlord, acting reasonably.
(3) if the Landlord refuses to provide its consent under this Section 11.2, the
Tenant's remedy shall be restricted to an application to a court of competent
jurisdiction for an order determining the matter but under no circumstances
whatsoever shall any refusal by the Landlord to provide its consent give rise to
any right on the part of the Tenant to terminate or repudiate this Lease or
render the Landlord in any way liable to the Tenant for damages as a result
thereof or otherwise.
(4) If such consent is given, the Tenant shall effect the Transfer, only upon
the terms set out in the offer submitted to the Landlord. The Landlord may
require as a condition of its consent that:
(a) a Transfer agreement satisfactory to the Landlord be executed by the
Tenant and the transferee,
(b) the proposed transferee agree with the Landlord to observe and to
perform all the obligations of the Tenant under this Lease, and
(c) the Tenant agrees with the Landlord that:
(i) in the case of an assignment, if the Tenant is to receive from
any assignee, either directly or indirectly, any consideration or premium for
the assignment of the Lease, either in the form of cash, goods or services, the
Tenant shall forthwith pay any amount equal to such consideration to the
Landlord: or
(ii) In the case of a subletting, if the Tenant receives a rental,
consideration or premium in the form of cash, goods or services or other
consideration from the subtenant which is higher than the rental payable under
this Lease (on a per square foot basis) to the Landlord for the Subject Area,
the Tenant shall pay any such excess to the Landlord in addition to all rentals
and other costs payable hereunder.
(5) No consent of the Landlord to a Transfer shall be effective unless given in
writing and executed by the Landlord. No such consent shall be deemed or
presumed by any act or omission of the Landlord or by the Landlord's failure to
respond to any request for a Transfer or by the Landlord accepting any payment
in any amount payable hereunder from any party other than the Tenant. Without
limiting the generality of the foregoing, the Landlord may collect Rent and any
other amounts from any transferee and apply the amount collected to any Rent and
the collection or acceptance of any Rent shall not be deemed to be a waiver of
the Landlord's right under this Article 11 nor an acceptance or a consent to any
such Transfer or a release of any of the Tenant's obligations under this Lease.
No Transfer and no consent by the Landlord to any Transfer shall constitute a
waiver of the necessity to obtain the Landlord's consent to a subsequent or
other Transfer.
<PAGE> 35
(6) Whether or not the Landlord consents to any request as aforesaid, the Tenant
shall pay to the Landlord all reasonable costs incurred by the Landlord,
including legal fees, in considering any consent and in completing any of the
documentation involved in implementing any Transfer.
(7) Any advertisement of the Leased Premises or a portion thereof as being
available for assignment, sublease or otherwise without the written approval of
the Landlord as to the form and content of such advertisement is prohibited,
which approval may be granted by the Landlord in its sole discretion.
Section 11.3 Change In Control
(1) For the purpose of this Section 11.3, "change in control" means (in the case
of any corporation or partnership) the transfer by sale, assignment,
amalgamation, transmission on death, trust, operation of law or otherwise of any
shares, interest or voting rights which may result in a change of identity of
the Party exercising, or who might exercise, effective control of such
corporation or partnership,
(2) This Section shall not apply to a change in control of the Tenant if and so
long as the Tenant is a Public Corporation, or to a change in control of an
Eligible Corporation which controls the Tenant, if and so long as such Eligible
Corporation is a Public Corporation and provided further that, in either case,
such change of control does not affect the continuity of the existing management
of the Tenant and of its business practices and policies. For the purposes of
this Section "Public Corporation" means a corporation the shares of which are
listed on any recognized stock exchange in Canada or the United States.
(3) If after the date of execution of this Lease there is a change in control,
either of the Tenant or of an Eligible Corporation which controls the Tenant, or
if other steps are to be taken to accomplish a change of control, the Tenant
shall promptly notify the Landlord of the change, which will be considered to be
an assignment of this Lease to which Section 11.2 applies. If the Tenant does
not notify the Landlord, the Landlord may terminate this Lease within sixty (60)
days after the Landlord learns of the change in control. The Tenant shall make
available to the Landlord or its lawful representatives for inspection at all
reasonable times. all relevant books and records of the Tenant and of any
Eligible Corporation which controls the Tenant, to enable the Landlord to
ascertain whether there has been a change of control.
Section 11.4 Surrender
If the Landlord accepts the Tenant's offer 10 surrender the whole or any part of
the Leased Premises pursuant to Section 11.2, the Tenant shall do so upon the
date specified in the notice of offer to surrender accepted by the Landlord. If
the whole of the Leased Premises is required to be surrendered, all Rent shall
be apportioned and paid to the date of surrender. If a part of the Leased
Premises is required to be surrendered, all Rent payable under this Lease which
is fairly attributable to such part, shall be apportioned by the Landlord and
paid to the date of surrender of such part, and Rent for the remaining portion
of the Leased Premises not so surrendered shall thereafter be adjusted
consistent with such apportionment made by the Landlord, and the Tenant's
Proportionate Share shall be redetermined. The Tenant shall reimburse the
Landlord for the cost of partitioning, entrances and separate services and all
other work required to make the part so surrendered become functionally separate
and suitable for separate use and occupancy, together with an Administrative
Charge in respect thereof. The Tenant shall be responsible for any appropriate
modifications which are necessary in the portion of the Leased Premises retained
by the Tenant. At the Landlord's request, the Tenant shall enter into an
amendment to this Lease to document such surrender.
Section 11.5 Continuing Obligations
(1) The Landlord's consent to any Transfer shall not release the Tenant from its
obligation to perform fully all the terms, covenants and conditions of this
Lease on its part to be performed.
(2) Any refusal of or failure to respond to an offer made to the Landlord to
surrender this Lease pursuant to Section 11.2 shall not relieve the Tenant of
the obligation to again offer to the Landlord to surrender the Subject Area
pursuant to such Section if the Transfer contemplated at the time of such
previous offer to surrender occurred more than six months prior to the date of
the subsequent intended assignment or subletting.
Section 11.6 Assignment by Landlord
If the Landlord transfers the Development or the Building or any interest in the
Development or Building, the Landlord shall, upon assumption of the obligations
of the Landlord hereunder by the transferee and upon the
<PAGE> 36
agreement of the transferee to perform the Landlord's covenants and without
further written agreement, be freed and relieved of liability with respect to
such covenants and obligations.
ARTICLE 12
STATUS CERTIFICATES, ATTORNMENT, SUBORDINATION
Section 12.1 Status Certificates
The Tenant shall, as the Landlord may direct, at any time and from time to time
execute and deliver to the Landlord a statement in writing, in the form supplied
by the Landlord, certifying that this Lease is unmodified and in full force and
effect (or if modified, stating the modification and stating that the Lease is
in full force and effect as modified), the Commencement Date, the amount of the
Basic Rent, Additional Rent and other amounts then being paid hereunder, the
dates to which such rent and amounts payable hereunder have been paid, the
particulars and amounts of insurance policies on the Leased Premises in which
the interest of the Tenant is noted, and whether or not there is any existing
default on the part of the Landlord of which the Tenant has notice, and
certifying any other particulars that the Landlord may reasonably request. Any
such statement may be conclusively relied on by any prospective purchaser or any
Mortgagee or any prospective Mortgagee, save as to any default on the part of
the Landlord of which the Tenant does not have knowledge at the date thereof.
Section 12.2 Subordination and Attornment
Unless otherwise expressly agreed by the Landlord, this Lease and the rights of
the Tenant hereunder shall be subject and subordinate to all existing or future
Mortgages and to all renewals, modifications, consolidations, replacements and
extensions thereof. Whenever requested by the Landlord or a Mortgagee, the
Tenant shall enter into an agreement with the Mortgagee whereby the Tenant
postpones or subordinates this Lease to the interest of any stipulated
Mortgagee, and agrees that if such Mortgagee becomes a mortgagee in possession
or realizes on its security, it shall attorn to such Mortgagee as a tenant upon
all the terms of this Lease, provided that such Mortgagee shall enter into an
agreement with the Tenant which shall provide that (i) such Mortgagee shall not
disturb the Tenant and will permit the Tenant 10 remain in possession of the
Leased Premises pursuant to the Terms of this Lease so long as the Tenant is not
in default hereunder and has failed to remedy such default, and (ii) the
Mortgagee shall not be liable for any acts, omissions or defaults of the
Landlord under the Lease or at law or for any obligations required to be
observed or performed by the Landlord prior to the date that the Mortgagor
becomes a mortgagee in possession or realizes on its security.
Section 12.3 Attorney
The Tenant shall, upon request of the Landlord or the Mortgagee or any other
person having an interest in the Development, execute and deliver within ten
(10) days such instruments and certificates to carry out the intent of this
Article 12 as are requested by the Landlord. If ten (10) days after the date of
a request by the Landlord to execute any such instruments or certificates the
Tenant has not executed the same, the Landlord shall give the Tenant a further
request to execute such instruments or certificates which shall set out the
consequences of the Tenant's failure to execute such instruments and
certificates. If the Tenant fails to deliver such instruments and certificates
appropriately executed after the expiry of ten (10) days following the second
request, the Tenant hereby irrevocably appoints the Landlord as the Tenant's
attorney with full power and authority to execute and deliver in the name of the
Tenant any such instruments or certificates.
ARTICLE 13
LIMITATION OF LIABILITIES AND INDEMNITY
Section 13.1 Unavoidable Delay
Except as otherwise expressly provided in this Lease, if and to the extent that
either the Landlord or the Tenant shall be prevented, delayed or restricted by
reason of Unavoidable Delay in the fulfillment of any obligation hereunder,
other than a monetary obligation, it shall be deemed not to be in default in the
performance of such obligation, and any period for the performance of such
obligation shall be extended accordingly and the other Party to this Lease shall
not be entitled to any compensation for any loss, inconvenience, nuisance or
discomfort thereby occasioned, or to any other remedy in respect thereof.
Section 13.2 Waiver
<PAGE> 37
(1) If either the Landlord or the Tenant shall overlook, excuse, condone or
suffer any default, breach or non-observance by the other party of any
obligation hereunder, this shall not operate as a waiver of such obligation in
respect of any continuing or subsequent default, breach or non-observance, and
no such waiver shall be effective unless expressed in writing.
(2) The acceptance of Rent by the Landlord from the Tenant or any other Party
will not be considered to be a waiver of a breach by the Tenant of a term,
covenant or condition of this Lease, regardless of the knowledge by the Landlord
of the breach at the time of acceptance of the Rent.
Section 13.3 No Claim for Inconvenience
The Landlord shall, in no event be liable for direct, indirect or consequential
damage or damages to the Tenant nor shall the Tenant be entitled to any
compensation or to any repayment or reduction in Rent by reason of any
interruption, inconvenience, nuisance or discomfort arising from the repair,
renovation, alteration, rebuilding or expansion of any portion of the
Development (including the Common Areas) or any construction or other work on
the Lands provided the Landlord uses its reasonable efforts to minimize such
interruption, inconvenience, nuisance or discomfort.
Section 13.4 Limitation of Landlord's Liability
The Landlord shall not be liable or responsible in any way for any death or any
injury of any nature whatsoever that may be suffered or sustained by the Tenant
or any employee, agent or customer of the Tenant or any other person who may be
upon the Leased Premises, or for any loss or damage or injury to any property
belonging to the Tenant or its employees or to any other person while such
property is on the Leased Premises unless caused by or resulting from the
negligent acts or omissions of the Landlord or those for whom it is responsible.
Without limiting the generality of the foregoing, the Landlord shall not be,
except as provided in the preceding sentence, liable for any damage or damages
of any nature whatsoever to persons or property on the Leased Premises caused by
explosion, fire, theft or breakage, by sprinkler, drainage or plumbing systems,
by failure for any cause to supply adequate drainage or snow or ice removal, by
the interruption of any public utility or service, by steam, gas, water, rain,
snow, or other substances leaking, issuing or flowing into any part of the
Leased Premises, or by anything done or omitted to be done by any tenant,
occupant or person in the Development or any damage to the Leased Premises or
the contents thereof incurred by reason of the Landlord, its agents, servants,
employees or contractors entering upon the Leased Premises to undertake in any
examination thereof or any work therein.
Section 13.5 Indemnity by Tenant
The Tenant shall and does hereby indemnity the Landlord and its servants,
agents, employees and any other Party for whom the Landlord is responsible in
law and other tenants and occupants of the Development and shall hold the
Landlord and each such Party harmless from and against any and all liabilities,
claims, damages, losses and expenses, including all legal fees and disbursements
which it or they may suffer or incur, due to, arising from or to the extent
contributed by:
(a) any breach by the Tenant of any of the provisions of this Lease,
(b) any act, omission, negligence or wilful misconduct of the Tenant or
any Party for whom the Tenant is responsible at law occurring on the Leased
Premises or elsewhere on or about the Development;
(c) the use or occupancy of the Leased Premises or of any equipment,
machinery or articles in the Leased Premises,
(d) any injury, death or damage to persons or property of the Tenant or
its servants, agents, employees, customers, contractors or any persons on the
Development by or with the invitation, license or consent of the Tenant; and
(e) any damage, destruction or need of repair to any part of the
Development caused by any act, omission, negligence or wilful misconduct of the
Tenant or any Party for whom the Tenant is in law responsible,
except to the extent such liabilities, claims, damages, losses and expense were
caused by or contributed to by the negligent acts or omissions of the Landlord
or any Party for whom the Landlord is responsible in law.
<PAGE> 38
Section 13.6 Limitations of Tenant's Liability
Notwithstanding the provisions of Section 13.5, the Landlord hereby releases the
Tenant, and any Party for whom the Tenant is responsible in law from any
liability for loss or damage to the Development to the extent that such loss or
damage exceeds the insurance and the insurance limits maintained or required to
be maintained by the Tenant pursuant to Section 8.3.
Section 13.7 Environmental Indemnity
The Tenant acknowledges and agrees with the Landlord that the limitation on the
Tenant's liability as set out in Section 13.6 shall not apply if the Landlord
suffers or incurs any liability, claim, damage, loss or expense including legal
fees (on a solicitor client basis) and disbursements by reason of the Tenant
causing or permitting a Hazardous Substance to be brought upon, kept or used in
or about the Leased Premises and the indemnity set out in Section 13.5 shall
apply without any limitation whatsoever.
ARTICLE 14
ACCESS
Section 14.1 Entry by Landlord
The Landlord and its authorized agents, employees and contractors shall be
permitted, at any time and from time to time, upon 24 hours' prior written
notice to the Tenant (except in an emergency, when no notice shall be required)
to enter the Leased Premises to inspect, provide services and maintenance, make
repairs, alterations, improvements or additions to the Common Areas or to the
other parts of the Development or to gain access to utilities and services. In
exercising its rights hereunder the Landlord shall use reasonable efforts to
minimize interference with the Tenant's business and provided the Landlord uses
such reasonable efforts, the Tenant shall not be entitled to a diminution or
abatement of Rent or compensation for any interruption, inconvenience, nuisance
or discomfort caused thereby.
Section 14.2 ExhibIting Leased Premises
The Tenant will, on reasonable notice, permit the Landlord or the agents of the
Landlord to exhibit the Leased Premises to prospective tenants at all reasonable
hours during the last six (6) months of the Term. The Landlord shall further
have the right to enter upon the Leased Premises at all reasonable hours during
the Term for the purpose of exhibiting the Building to any prospective purchaser
or mortgagee.
Section 14.3 Excavation
The Tenant shall upon reasonable notice grant entrance to the Leased Premises
for the performance of such work as the Landlord considers necessary to preserve
the structure of the Building from injury or damage from any excavation or other
construction upon the Lands and to support the same in any appropriate manner.
In exercising its rights hereunder the Landlord shall use reasonable efforts to
minimize interference with the Tenant's business and provided the Landlord uses
such reasonable efforts, the Tenant shall not be entitled to a diminution or
abatement of Rent or compensation for any interruption, inconvenience, nuisance
or discomfort caused thereby.
ARTICLE 15
ALTERATIONS AND ADDITIONS
Section 15.1 Landlord's Alterations
The Landlord, at any time and from time to time and without compensation to the
Tenant, may:
(a) make alterations or additions to, change the location of, expand or
reduce, and build structures adjoining any part of, any buildings, facilities,
improvements and areas from time to time on the Lands, other than the Leased
Premises, but including, without limitation, the Common Areas;
(b) make alterations or additions to, or change the location of, the
Leased Premises or any facilities in the Leased Premises if:
(i) the Rentable Area of the Leased Premises is not substantially
changed; and
<PAGE> 39
(ii) the Landlord makes such alterations or additions or change of
location at its expense, completes the finishing or fixturing of the Leased
Premises to the standard existing before the alterations, additions or change of
location and pays the Tenant's cost of moving and other reasonable direct costs
incurred by the Tenant;
(c) deal with the Lands as it deems appropriate in its absolute
discretion including, without limitation, dedicating or conveying portions of
the Lands to any municipal or other public authority or other Party and granting
easements, rights-of-way or other interests in the Lands; and
(d) construct on the Lands such buildings, structures, facilities,
roadways and other improvements as it deems appropriate in its absolute
discretion including, without limitation, multiple deck, elevated or underground
parking facilities,
and in each case the Landlord shall use all reasonable efforts not to disturb or
interfere with the Tenant's use and enjoyment of the Leased Premises any more
than is reasonably necessary in the circumstances.
Section 15.2 Tenant's Alterations
(1) The Tenant shall not make, erect, or install any partitions (including
moveable partitions), leasehold improvements, alterations or fixtures (including
trade fixtures) in or about the Leased Premises without the prior written
consent of the Landlord acting reasonably. All such work shall be performed in
accordance with and subject to the Landlord's construction procedures for the
Development. If the Tenant performs any work without complying with the
provisions of this Section and does not remove it upon notice, the Landlord
shall have the right to do so and to restore the Leased Premises to their
previous condition, in which case the Tenant shall pay to the Landlord as
Additional Rent the costs of such work, together with an Administrative Charge
in respect thereof. All partitions, leasehold improvements, alterations or
fixtures made, erected or installed in the Leased Premises, whether made
pursuant to this Section 15.2 or otherwise, shall become the property of the
Landlord upon installation or affixation without compensation therefor but
without the Landlord having or thereby accepting any responsibility with respect
to the maintenance, repair, replacement or insurance thereof, all of which is
and shall be the Tenant's responsibility, but subject to the rights and
obligations of the Tenant respecting removal thereof as provided in this
Section.
(2) The Landlord may by notice to the Tenant, require the removal prior to the
end of the Term, at the expense of the Tenant, of all partitions, leasehold
improvements, alterations or fixtures and the restoration of the Leased Premises
to the same condition that they were in prior to their making, erection or
installation, such work to be done by or at the direction of the Landlord.
(3) Subject to Section 15.2(2), upon the expiration or other termination of this
Lease, all partitions, leasehold improvements, alterations or fixtures made,
erected or installed upon the Leased Premises (including carpeting and light
fixtures) shall remain upon and be surrendered with the Leased Premises as a
part thereof and any trade fixtures not removed by the Tenant shall be and
become the property of the Landlord absolutely, provided that if the Tenant has
paid the Rent and performed the covenants and conditions herein contained, it
shall, at the end of the Term, have the right to remove its trade fixtures but
shall make good the damage caused to the Leased Premises by their installation
or removal; if the Tenant fails to do so the Landlord shall have the right to
perform such work, in which case the Tenant shall pay the Landlord as Additional
Rent the costs of such work, and an Administrative Charge in respect thereof.
(4) No trade fixtures, furniture or equipment shall be removed by the Tenant
from the Leased Premises during the Term except that the Tenant may remove its
furniture and equipment in the usual and normal course of its business, if
excess for its purposes, or if it is substituting new furniture and equipment.
Section 15.3 Liens
The Tenant shall comply with all the provisions of the Builders Lien Act
(Alberta) and other statutes from time to time applicable to any work done on or
improvements made to the Leased Premises by or on behalf of the Tenant
(including any provision requiring or enabling holdbacks) and shall take all
steps necessary to ensure that no lien shall attach to the Leased Premises or
any part of the Development. If any lien or certificate of lis pendens with
respect thereto is registered, the Tenant shall immediately cause the lien or
the certificate of lis pendens, or both, as the case may be, to be discharged
and any registration thereof vacated, and if such lien or certificate of lis
pendens or both, as the case may be, shall not have been discharged and the
registration thereof vacated within a period of fifteen (IS) Business Days after
the Landlord gives the Tenant notice requiring it to do so, the Landlord shall
be entitled to make such payment or take such action as may be necessary or
expedient to discharge such lien and the
<PAGE> 40
registration thereof. The Tenant shall, forthwith on demand and as Additional
Rent, indemnify and reimburse the Landlord for any payment, cost or expense
(including reasonable legal fees on a solicitor-client basis) incurred by the
Landlord in taking any action permitted under this Section including an
Administrative Charge in respect thereof.
ARTICLE 16
REMEDIES OF LANDLORD ON TENANT'S DEFAULT
Section 16.1 Remedying by Landlord
In addition to all rights and remedies available to the Landlord by any
provision of this Lease or any applicable law, in the event of default by
Tenant, and the Tenant's failure to remedy such default within the applicable
time period for the remedying of such default as set Out in this Lease, the
Landlord shall have the right to remedy or attempt to remedy any default of the
Tenant, and in so doing may make any payments which appear to be payable by the
Tenant to third parties, and may enter upon the Leased Premises to do work or
other things therein on not less than five (5) Business Days notice to the
Tenant, or without notice in the event of an emergency; all costs and expenses
of the Landlord in remedying or attempting to remedy such default including,
without limitation, legal fees on a solicitor and client basis, and an
Administrative Charge in respect of all such costs (except legal fees), shall be
payable by the Tenant to the Landlord as Additional Rent forthwith upon receipt
of invoice, or, If expressly provided herein, upon demand.
Section 16.2 Right to Re-enter
If and when,
(a) the Tenant fails to pay any Rent or other sums due hereunder on the
day or dates appointed for the payment thereof; or
(b) the Tenant fails to observe or perform any other of the terms,
covenants or conditions of this Lease to be observed or performed by the Tenant
(other than the terms, covenants or conditions set out below in Subparagraphs
(c) to (I) inclusive, for which no notice shall be required) provided the
Landlord first gives the Tenant ten (10) days, or such shorter period of time as
is otherwise provided herein, written notice of any such failure to perform, and
the Tenant within such period of ten (10) days fails to commence diligently and
thereafter to proceed diligently to cure any such failure to perform; or
(c) the Tenant or any agent of the Tenant falsifies any report required
to be furnished to the Landlord pursuant to this Lease; or
(d) the Tenant or any indemnifier of this Lease or any Party occupying
the Leased Premises or any part thereof becomes bankrupt or insolvent or takes
benefit of any act now or hereafter in force for bankrupt or insolvent debtors
or files any proposal or makes any assignment for the benefit of creditors or
any arrangement or compromise; or
(e) a receiver, a receiver and manager or liquidator is appointed for all
or a portion of the Tenant's property or such Indemnifier's, or occupant's
property; or
(f) any step is taken or any action or proceeding is instituted by the
Tenant or by any other party including, without limitation, any court or
governmental body of competent jurisdiction for the dissolution, winding-up or
liquidation of the Tenant or its assets; or
(g) the Tenant makes a sale in bulk of any of its assets, wherever
situated (other than a bulk sale made to an assignee or sublessee pursuant to
permitted assignment or subletting hereunder); or
(h) the Tenant abandons or attempts to abandon the Leased Premises, or
sells or disposes of the goods and chattels of the Tenant or removes them from
the Leased Premises so that there would not in the event of such sale or
disposal be sufficient goods of the Tenant on the Leased Premises subject to
distress to satisfy all Rent due or accruing hereunder for a period of at least
twelve (12) months; or
(i) the Tenant assigns, transfers, encumbers, sublets or permits the
occupation or use or the parting with or sharing possession of all or any part
of the Leased Premises by anyone except in a manner permitted by this Lease; or
<PAGE> 41
(j) this Lease or any of the Tenant's assets are taken under any writ of
execution or similar legal process; or
(k) re-entry is permitted under any other terms of this Lease,
then and in every such cash the Landlord, in addition to any other rights or
remedies it has pursuant to this Lease or by law, has the immediate right of
re-entry upon the Leased Premises and it may repossess the Leased Premises and
enjoy them as of its former estate, and it may exel all persons and remove all
property from the Leased Premises, and such property may be removed and sold or
disposed of by the Landlord as it deems advisable or may be stored in a public
warehouse or elsewhere at the cost and for the account of the Tenant, all
without service notice or resort to legal process and without the Landlord being
considered guilty of trespass or becoming liable for any loss or damage which
may be occasioned thereby.
Section 16.3 Bankruptcy of Tenant
If the Term or a substantial portion of the goods and chattels of the Tenant on
the Leased Premises at any time during the Term are seized or taken in execution
or attachment by a creditor of the Tenant, or if the Tenant makes an assignment
for the benefit of creditors or if a receiver, receiver and manager or
liquidator is appointed to control the conduct of the business on or from `he
Leased Premises, or if the Tenant becomes bankrupt or insolvent or takes the
benefit of a statute now or hereafter in force for bankrupt or insolvent
debtors, or if an order is made for the winding-up of the Tenant, or if the
Leased Premises, without the written consent of the Landlord, become and remain
vacant or abandoned for a period of five (5) consecutive days or arc used or
occupied by any persons other than those entitled to do so under the terms of
this Lease, the next ensuing three (3) months' Rent immediately will become due
and payable as accelerated rent and the Landlord may reenter and take possession
of the Leased Premises as though the Tenant or the servants of the Tenant or any
other occupant of the Leased Premises were holding over after the expiration of
the Term, and this Lease, at the option of the Landlord exercisable by written
notice to the Tenant, forthwith will become forfeited and determined. In every
one of the cases mentioned herein, the accelerated rent will be recoverable by
the Landlord in the same manner as the Rents hereby reserved and as if Rent were
in arrears.
Section 16.4 Termination
(1) If and whenever the Landlord becomes entitled to re-enter the Leased
Premises under any provision of this Lease, in addition to all other rights and
remedies, it shall have the right to terminate this Lease forthwith by leaving
upon the Leased Premises written notice of such termination. If such notice is
given, pursuant to this or any other provision of this Lease, this Lease and the
Term shall terminate; Basic Rent and all other payments for which the Tenant is
liable under this Lease shall be computed, apportioned and paid in full to the
date of such termination, and the Tenant shall immediately deliver up possession
of the Leased Premises to the Landlord.
(2) If the Landlord terminates this Lease for any breach, in addition to other
remedies it may have, it may recover from the Tenant all damages it incurs by
reason of the breach, including the cost of recovering the Leased Premises,
legal fees (on a solicitor and client basis) and the worth at the time of
termination of the excess, if any, of the amount of Rent and charges equivalent
to rent reserved in this Lease for the remainder of the Term, over the then
reasonable rental value of the Leased Premises for the remainder of the Term,
all of which amounts shall be immediately due and payable by the Tenant to the
Landlord.
Section 16.5 Right to Re-let
If the Landlord re-enters the Leased Premises pursuant to the provisions of
either this Lease or any applicable law, it may either terminate this Lease or
it may from time to time, without terminating the Tenant's obligations under
this Lease, make any alterations and repairs considered by the Landlord
necessary to facilitate a re-letting, and re-let the Leased Premises or any part
thereof as agent of the Tenant for such term or terms and at such rental or
rentals and upon such other terms and conditions as the Landlord in its
reasonable discretion considers advisable. Upon each re-letting all Rent and
other moneys received by the Landlord from the re-letting will be applied to the
payment of (a) indebtedness other than Rent due hereunder from the Tenant to the
Landlord (b) costs and expenses of the re-letting including brokerage fees,
legal fees and costs of the alterations and repairs and (c) Rent due and unpaid
hereunder. The residue, if any, will be held by the Landlord and applied in
payment of future Rent as it becomes due and payable. If the rent received from
the re-letting during a month is less than the Rent to be paid during that month
by the Tenant, the Tenant shall pay the deficiency to the Landlord. The
deficiency will be calculated and paid monthly.
<PAGE> 42
No reentry by the Landlord will be construed as an election on its part to
terminate this Lease unless a written notice of that intention is given to the
Tenant. Despite a re-letting without termination, the Landlord may subsequently
elect at any time to terminate this Lease for a breach which is then continuing.
Section 16.6 Remedies Cumulative
Notwithstanding any other provision in this Lease, the Landlord may from time to
time resort to any or all of the rights and remedies available to it in the
event of any default hereunder by the Tenant, either by any provision of this
Lease, or by statute or the general law, all of which rights and remedies are
intended to be cumulative and not alternative, and the express provisions
hereunder as to certain rights and remedies are not to be interpreted as
excluding any other or additional rights and remedies available to the Landlord
by statute or the general law.
Section 16.7 Waiver of Exemption from Distress
Notwithstanding anything contained in any statute now or hereafter in force
limiting or abrogating the right of distress, none of the goods, chattels and
trade fixtures of the Tenant on the Leased Premises at any time during the Term
shall be exempt from levy by distress for Rent in arrears, and if any claim is
made for such exemption by the Tenant or if a distress is made by the Landlord,
or if any action is brought to test the right of the Landlord to levy upon any
such goods as are so exempted, this covenant and agreement may be pleaded as an
estoppel against the Tenant; the Tenant hereby waiving each and every benefit
that could or might have accrued to the Tenant under and by virtue of any such
statute but for this covenant.
Section 16.8 Removal of Chattels
If the Tenant at any time throughout the Term or at the expiration or earlier
termination of the Term is in default under this Lease, the Landlord shall have
a lien on all stock-in-trade, inventory, fixtures, equipment and facilities of
the Tenant, which are hereby mortgaged by the Tenant to the Landlord as security
against loss or damage resulting from any such default by the Tenant and such
items shall not be removed by the Tenant until such default is cured, or the
prior written consent of the Landlord has been obtained. The provisions of this
Section shall survive the expiration or earlier termination of this Lease. In
case of removal by the Tenant of the goods and chattels of the Tenant from the
Leased Premises, the Landlord may follow same.
Section 16.9 Companies Creditors' Arrangement Act and Bankruptcy and Insolvency
Act
By virtue of the Landlord's interest in this Lease, the importance to the
Landlord of the Tenant continuing to carry on business in the Leased Premises at
all times in accordance with this Lease, the general synergy and interdependence
of the leasable premises of the Development and the Landlord's entitlement to
damages where this Lease is terminated by reason of an event of default, the
Landlord does and will constitute a separate class or category of creditor in
any plan of arrangement or proposal submitted by or on behalf of the Tenant
under the Companies Creditors' Arrangement Act or the Bankruptcy And Insolvency
Act, despite any changes in circumstances of the Tenant or its business.
Section 16.10 Legal Costs
The Tenant hereby agrees to pay to the Landlord promptly all legal fees, on a
solicitor and his own client basis, incurred by the Landlord for the enforcement
of any rights of the Landlord under this Lease or in the enforcement of any of
the provisions of this Lease or in the obtaining of possession of the Leased
Premises, or for the collection of any monies from the Tenant or for any other
related matter.
ARTICLE 17
MISCELLANEOUS
Section 17.1 Notice
Any notice, demand, statement or request ("Notice") herein required or permitted
to be given by either Party to the other shall be in writing and shall be deemed
to have been sufficiently and effectually given if signed by or on behalf of the
Party giving the notice and delivered or sent by facsimile transmission,
(i) in the case of notice to the Landlord, to it at:
Suite 300, Bow Valley Square 2
<PAGE> 43
205 - 5th Avenue S.W.
Calgary, Alberta 12P 2V7
Fax: (403) 261-0627
Attention: General Manager
(ii) in the case of notice to the Tenant, to it asset out in Section 1.1.
Any such Notice given as aforesaid shall be conclusively deemed to have been
given if delivered on the date of such delivery or, if sent by facsimile
transmission, on the next Business Day following the transmission. The Landlord
and the Tenant may, from time to time, by Notice change the address to which
Notice to it is to be given.
Section 17.2 Registration of Lease
Neither the Tenant nor anyone on the Tenant's behalf shall register or permit to
be registered this Lease at the Land Titles Office for the South Alberta Land
Registration District, provided that the Tenant may and shall, at the request of
the Landlord, register at its own expense a caveat to give notice of this Lease
which shall describe only the parties, the Leased Premises, the duration of the
Term, and any options to renew, and shall not make any financial disclosure
whatsoever. Any such caveat will be discharged by the Tenant, at its expense on
the expiration or termination of this Lease. If the Tenant fails to discharge
such caveat and the Landlord is required to take steps to discharge such caveat,
the Tenant shall pay the Landlord the sum of $200 plus reasonable disbursements
incurred in obtaining a discharge of such caveat. This Section shall survive the
expiry or earlier termination of this Lease.
Section 17.3 Decision of Expert
The decision of any Expert whenever provided for under this Lease and any
certificate related thereto shall be final and binding on the parties hereto
(and there shall be no further right of dispute or appeal).
Section 17.4 No Partnership or Agency
By entering into this Lease the Landlord does not in any way or for any purpose
become a partner of the Tenant nor is the relationship of principal and agent
created.
Section 17.5 Brokerage Commissions
(1) The Tenant represents and warrants that it has not dealt with any agent or
broker representing or purporting to represent the Landlord in connection with
its leasing of the Leased Premises.
(2) The Tenant shall be responsible for, and indemnify the Landlord from, any
brokerage fees or commissions relating to this Lease.
Section 17.6 ConfidentialIty
The Tenant hereby agrees that:
(a) the terms and conditions of this Lease (the "Confidential Terms") are
sensitive and confidential in nature and that the disclosure of the same to any
third party may be expected to cause substantial loss and damage to the
Landlord, and
(b) except for disclosure on the same confidential basis as is provided
herein only to officers and/or employees of the Tenant who have a bona fide and
actual need to know the Confidential Terms on behalf of the Tenant, it and its
officers and employees to whom disclosure is made as aforesaid will hold In
strict confidence and will not disclose the same to any third party.
Section 17.7 Consent
Except as otherwise specifically provided, whenever consent or approval of the
Landlord or the Tenant is required under the terms of this Lease, such consent
or approval shall not be unreasonably withheld or delayed and whenever the
Landlord or the Tenant is required to act or make a determination hereunder, the
Landlord, or the Tenant, as the case may be, shall act or make such
determination acting reasonably and not arbitrarily.
<PAGE> 44
Section 17.8 Additional Provisions
The Landlord and the Tenant agree that this Lease is subject to the additional
provisions contained in Schedule "D" hereto.
Section 17.9 Acceptance
The Tenant does hereby accept this Lease of the Leased Premises to be held by it
as Tenant, subject to the conditions, restrictions and covenants herein set
forth.
Section 17.10 ExecutIon by Landlord
If this Lease is not executed by the Landlord, this Lease shall not have any
force or effect regardless of negotiations, acts or expenditures by the Landlord
or the Tenant.
IN WITNESS WHEREOF the Parties hereto have executed this Lease under seal.
OMERS REALTY CORPORATION,
by its duly authorized agent
BV SQUARE MANAGEMENT LTD.
by:
Herb L. Reynolds, President
by:
Jonnie Lea-Wilson, Comptroller
SYSGOLD LTD.
by:
Don Bialik
President
SCHEDULE "A"
LANDS
LEGAL DESCRIPTION OF DEVELOPMENT LANDS AND LANDS
A. DEVELOPMENT LANDS
BOW VALLEY SQUARE I
PLAN "C" CALGARY
BLOCK 29
LOTS 21 TO 26 INCLUSIVE
EXCEPTING OUT OF LOTS 21 THE CORNER CUT ON PLAN 4272JK
EXCEPTING THE SOUTH 7 FEET OF LOTS 21 TO 26 INCLUSIVE
AND THE EAST 7 FEET OF LOTS 21 BY INSTRUMENT 560KW
EXCEPTING THEREOUT ALL MINES AND MINERALS
BOW VALLEY SQUARE 2
PLAN "C" CALGARY
BLOCK 29
THAT PORTION OF LOT 12 LYING EAST OF THE WEST 4.6 FEET
THROUGHOUT OF SAID LOT 12 AND ALL OF LOTS 13 TO 20
EXCEPTING THEREOUT STREET WIDENING ON PLAN 1665 L.K.
EXCEPTING THEREOUT ALL MINES AND MINERALS
BOW VALLEY SQUARE 3
<PAGE> 45
PLAN "C" CALGARY
BLOCK 29
LOTS I TO 11 AND THE WEST (4.6) FEET THROUGHOUT OF LOT 12
EXCEPTING THEREOUT STREET WIDENING ON PLAN 1665 L.K.
EXCEPTING THEREOUT ALL MINES AND MINERALS
BOW VALLEY SQUARE 4
PLAN "C" CALGARY
BLOCK 29
LOTS 31 TO 40 INCLUSIVE
EXCEPTING OUT OF LOT 40 AS TO SURFACE ONLY, THE CORNER CUT-OFF ON
PLAN 4272JK
ALSO EXCEPTING THEREOUT
OUT OF LOTS 31,32,35 AND 36, PORTION FOR ROAD ON PLAN 8711177
OUT OF LOTS 33.34,37,311,39 AND 40 AS TO SURFACE ONLY PORTION
FOR ROAD ON PLAN 8711177 EXCEPTING OUT OF SAID LOTS 31,32,35 AND
36 ALL MINES AND MINERALS
VACANT LANDS
PLAN "C" CALGARY
BLOCK 29
LOTS 27 TO 30 INCLUSIVE
B. LANDS
BOW VALLEY SQUARE 4
PLAN "C" CALGARY
BLOCK 29
LOTS 31 TO 40 INCLUSIVE
EXCEPTING OUT OF LOT 40 AS TO SURFACE ONLY, THE CORNER CUT-OFF ON
PLAN 4272JK
ALSO EXCEPTING THEREOUT
OUT OF LOTS 31,32,35 AND 36, PORTION FOR ROAD ON PLAN 8711177
OUT OF LOTS 33.34,37,38,39 AND 40 AS TO SURFACE ONLY PORTION
FOR ROAD ON PLAN 8711177 EXCEPTING OUT OF SAID LOTS 31,32,35 AND
36 ALL MINES AND MINERALS
SCHEDULE "D"
ADDITIONAL PROVISIONS
Section 1.01 Leasehold Improvement Allowance:
The Leased Premises would be accepted as they are improved as at December 13,
1996. The Landlord will provide an allowance equal to the costs incurred in
renovating the Leased Premises (design, materials and labour) to a maximum
contribution of $5.00 per rentable square foot of the Leased Premises, (total
of $21,350.00) plus G.S,T. (the "Leasehold Improvement Allowance"). Eighty-five
percent (85%) of the Leasehold Improvement Allowance would be paid on the date
of the commencement of the Term of the Lease and the date when the following
conditions are satisfied:
(i) the Tenant has substantially completed the Tenant's work so that the Leased
Premises can be used for their intended purpose, in the opinion of the Landlord
or the Landlord's expert,
(ii) the Tenant is in possession of the entire Leased Premises and not in
default under the Lease, and the Lease has been duly executed by both parties;
and
<PAGE> 46
(iii) no builders' liens attributable to the performance of the Tenant's work
has been registered against the certificate of title to the Building.
The remaining fifteen percent (15%) of the Leasehold Improvement Allowance will
be paid when all of the Tenant's work has been completed and the Tenant has
produced evidence satisfactory to the Landlord that all of the Tenant's work has
been fully paid for and no builders' liens have been registered against the
certificate of title to the Building.
Section 1.02 Security Deposit
a) the Tenant has deposited with the Landlord, the sum of Six Thousand, Six
Hundred and Sixty-Two----99/100 ($6,662.99) Dollars (the "Security Deposit"),
receipt of which is hereby acknowledged by the Landlord. The Security Deposit
shall be held by the Landlord, without liability for interest, as security for
the faithful performance by the Tenant of all of the terms, covenants and
conditions of this Lease by the Tenant to be kept, observed and performed.
b) if at any time during the Term, the Rent or other sums payable by the Tenant
to the Landlord hereunder are overdue and unpaid, or if the Tenant fails to keep
and perform all of the terms, covenants and conditions of this Lease to be kept,
observed and performed by the Tenant, then the Landlord may at its option, in
addition to any and all other rights and remedies provided for in this Lease or
by law, appropriate and apply the entire Security Deposit, or so much thereof as
is necessary to compensate the Landlord for loss or damage sustained or suffered
by the Landlord due to such breech on the part of the Tenant. If the entire
Security Deposit or any portion thereof is appropriated and applied by the
Landlord for the payment of overdue Rent or other sums due and payable to the
Landlord, then the Tenant shall, upon written demand forthwith remit to the
Landlord a sufficient amount in cash to restore the Security Deposit to the
original sum deposited. The Tenant's failure to do so within five (5) business
days after receipt of such demand constitutes a breech of this Lease. Provided
the Tenant complies with all of the terms, covenants and conditions of this
Lease and promptly pays all of the Rent and other sums hereunder provided, the
Security Deposit shall be applied equally to the Basic Rent payable by the
Tenant during the first and last month of the Term.
c) the Landlord may deliver the Security Deposit to any purchaser of the
Landlord's interest in the Leased Premises, if such interest is sold and
thereupon the Landlord is discharged from any further liability with respect to
the Security Deposit.
Section 1.03 Parking:
The Landlord shall during the Term of the Lease and so long as the Tenant is not
in default in the due observance or performance of its obligations hereunder,
provide to the Tenant the right to park two (2) motor vehicles in those levels
of the Development designated as unassigned Tenant parking and one (1)
additional motor vehicle on a month-to-month basis, if and when such
month-to-month stall is available at the prevailing monthly rental rate from
time to time in effect. The Tenant may surrender and the Landlord may terminate
any month-to-month stalls utilized by the Tenant upon thirty (30) days advance
written notice to the other party. In the event that the Tenant is in default,
the Landlord may on notice to the Tenant, withdraw the right to park hereby
granted. Such spaces may be used only by the Tenant, its officers or employees.
The current monthly parking rate is $165.00 per unassigned stall and $200.00 per
assigned stall. Parking charges are payable in advance on the first day of each
month as Additional Rent.
Section 1.04 Right of First Opportunity:
Provided that the Tenant and occupant of the entire Leased Premises is SysGold
Ltd. and the Tenant has duly and regularly performed all of its obligations
under this Lease and is not in default hereunder, the Tenant shall have the
right to expand the Leased Premises, to include the space on the 4th Floor of
the Building shown outlined in blue on Schedule "A" hereto (the "Additional
Premises") subject to the following terms and conditions:
(a) If at any time between February 1, 1997 and the end of the original term
(exclusive of any renewal whether granted herein or not), the Additional
Premises become vacant and available for lease, the Landlord shall notify the
Tenant of the availability of the Additional Premises and the Tenant shall have
a period of three (3) Business Days after such notice to exercise its right by
notifying the Landlord, in writing, that it will lease the Additional Premises
on the terms hereinafter set out.
<PAGE> 47
(b) The Additional Premises shall be leased upon the same terms and conditions
as contained in this Lease, save and except for:
(i) the Basic Rent which shall be the then current market rent for
similar space in the Building which shall be set out in the Landlord's notice to
the Tenant;
(ii) the term of the lease of the Additional Premises shall expire at the
same time that the original term of this Lease for the Leased Premises expires;
(iii) there shall be no further right to expand the Leased Premises.
(c) If the Tenant exercises its right within the time and in the manner as set
out in (a) above, then the Landlord and the Tenant agree to enter into a
supplement to the Lease to include the Additional Premises, all as above
provided.
(d) If the Tenant does not exercise its rights within the time and manner as set
out in (a) above, the Landlord shall have no further obligation to the Tenant
with respect to the Additional Premises and this section will be of no further
force or effect and the Landlord may proceed to lease the Additional Premises to
prospective tenants on such terms as the Landlord may, in its discretion,
determine.
SCHEDULE "E"
RULES & REGULATIONS
1. The Tenant shall keep the Leased Premises tidy and free from rubbish which
shall be deposited in proper receptacles which are either designated by the
Landlord or clearly intended for waste.
2. The Tenant shall at all times abide by all laws, rules, regulations,
ordinances, provisions and requirements relating to the Building and the
Development, or to the Leased Premises, and shall keep the Leased Premises, its
employees, servants, agents and invitees under its control, so as to prevent the
performance of any act, or the carrying on of any practice which would damage
the Building and/or the Development, or its reputation or the Leased Premises,
or could injure or annoy the other tenants in the Building and/or the
Development, their employees, servants, agents or invitees, or the public.
3. The sidewalks, entries, passages, elevators, escalators and staircases in the
Building shall not be obstructed or used by the Tenant, its agents, servants,
contractors, invitees or employees for any purpose other than ingress to and
egress from the Leased Premises. The Landlord reserves unrestricted control of
all parts of the Development employed for the common benefit of the tenants
including, without limitation, the Common Area, the sidewalks, entries,
corridors, and passages not within the Leased Premises, washrooms, lavatories,
air-conditioning closets, fan rooms, janitor's closets, electrical closets and
other closets, stairs, elevator shafts, flues, stacks, pipe shafts and ducts and
shall have the right to place such signs and appliances therein, as it may deem
advisable, provided that the ingress to and egress from the Leased Premises is
not unduly impaired thereby.
4. No animals, birds or reptiles shall be brought into the Building or the
Development.
5. The Tenant shall not enter the Leased Premises at any time other than regular
business hours except by such entrances as the Landlord may designate from time
to time and subject 10 such controls as the Landlord may implement when the
Development is closed to the public.
6. Any hand truck, carry alls, or similar appliances used in the Development
shall be equipped with rubber tires, side guards and such other safeguards as
the Landlord shall require.
7. The water closets and other water apparatus shall not be used for any purpose
other than those for which they were constructed and no sweepings, rubbish,
rags, ashes or other substances shall be thrown therein. Any damage resulting
from misuse shall be borne by the Tenant by whom or by whose agents, servants,
employees, licensees or invitees the same is caused. Tenants shall not let the
water run unless it is in actual use.
8. No person shall use the Leased Premises for sleeping apartments or
residential purposes, or for the storage of personal effects or articles other
than those required for business purposes.
<PAGE> 48
9. Canvassing, soliciting and peddling or distribution of handbills or other
advertising matter in the Building and Development are prohibited.
10. The Tenant, its agents, servants, contractors, invitees or employees shall
not bring in or take out, position, construct, install or move any safe,
business machine or other heavy office equipment without the prior written
consent of the Landlord who shall have the absolute right to withhold consent,
or to prescribe the maximum weight permitted and the position thereof, and the
use and design of planks, skids or platforms to distribute the weight of such
equipment. All damage done to the Building or Development by the moving or use
of any such heavy equipment or other office equipment or furniture shall be
repaired at the expense of the Tenant. The moving of all heavy equipment or
other office equipment or furniture shall occur only between 6:00 p.m. and 8:00
a.m. or other time consented to by the Landlord. Safes and other heavy office
equipment will be moved through the halls and corridors only upon steel bearing
plates. No deliveries requiring the use of an elevator for freight purposes will
be received in the Development or carried in the elevator, except during hours
approved by the Landlord.
11. The Tenant shall not install or permit the installation or use any machine
selling merchandise, service or entertainment on the Leased Premises or the
Building or Development or permit the delivery of any food or beverage to the
Leased Premises without the approval of the Landlord or in contravention of any
regulation fixed or to be fixed by the Landlord.
12. Whenever an emergency situation shall exist because of fire, explosion or
the threat of fire, explosion or other hazard, the Tenant, agent, servants,
contractors, invitees or employees shall, if requested by the Landlord, the Fire
Department or the Police, vacate the Development forthwith in the manner
prescribed by Fire Department instructions.
13. The Leased Premises shall not be used for storage of any flammable,
explosive or dangerous materials for any purpose which may in any way increase
the risk of fire or obstruct or interfere with the rights of other occupants of
the Development or violate or be at variance with any laws relating to fire or
with the regulations of the Fire Department or the Board of Health.
The Tenant shall notify the Landlord immediately of any chemicals or substances
presently used or stored in the Leased Premises including storage rooms which
are classified as hazardous. Commonly used hazardous substances are as follows:
Ammonia, Acetone, Asbestos, PCB, Carbon Tetrachloride. If these substances are
in your Leased Premises, their use and storage must meet all Federal and
Provincial codes and regulations, including the Occupational Health and Safety
Act. The tenant agrees to indicate room number, whether they are located in a
cabinet, the amount, and any other details of which the Landlord should be aware
of.
14. No musical instruments or sound-producing equipment or amplifiers which may
be heard outside the Leased Premises shall be played or operated on the Leased
Premises, nor will the Tenant allow any odor, vapour, vibration or noise to
emanate from the Leased Premises, which in the Landlord's sole opinion is
objectionable.
15. The use of car parking spaces shall be in accordance with the Parking
Privileges Contract Terms Agreement and the reasonable Rules and Regulations of
the Landlord.
16. The Tenant shall permit and facilitate the entry of the Landlord, or those
designated by it, into the Leased Premises for the purpose of inspection, repair
and other proper purposes, and shall not obstruct access to main header ducts,
janitor and electrical closets and other necessary means of access to
mechanical, electrical and other facilities. The Tenant shall not place any
additional locks or other security devices upon any doors of the Leased Premises
without the prior written approval of the Landlord, which may be arbitrarily
withheld or granted on a conditional basis.
17. Areas in the Development containing communication systems shall be
controlled solely by the Landlord. The Tenant shall be allowed access to
communications connection rooms and closets on the floor(s) of the Building
leased by the Tenant, subject to the requirements of the Landlord, which would
include using the Landlord's consultant and/or contractors for such work.
18. The Tenant shall not mark, drill into, bore or cut, drive nails, spikes,
hooks, or screws or in any way damage or deface the walls, ceilings, or floors
of the Leased Premises. The Tenant shall be allowed to hang small pictures and
photographs from the walls of the Leased Premises provided such installation
will not cause any damage to the Leased Premises and pictures or photographs are
properly affixed. The Tenant agrees to repair any damage caused by the hanging
mechanism at the expiry or sooner termination of the Term, or when removed by
the Tenant. No
<PAGE> 49
wires, pipes or conduits shall be installed on the Leased Premises without the
prior approval of the Landlord, such approval not to be unreasonably withheld.
No broadloom or carpeting shall be affixed to the Leased Premises by means of a
non-soluble adhesive or similar product.
19. The Tenant will arrange with its suppliers for minor deliveries or
envelopes, packets, etc., which may be accomplished at any time during normal
Business Hours. Furniture, cartons of freight and/or stationery and/or supplies
and/or merchandise must be delivered to the underground loading and holding area
from the truck ramp on the 6th Avenue side of the Development, between the hours
of 9:30 to 11:30 a.m. and 1:30 to 4:00 p.m., Monday to Friday. The foregoing
items will be brought to the Tenant's place of business by the Landlord's
employees, as soon as is reasonably convenient. Tenant move-ins or move-ins must
be booked through the Dockmaster's office, giving as much advance notice as is
possible.
Any Tenant moves will be accommodated before 8:00 a.m. or after 5:00 p.m. or on
weekends and at no other lime. Notwithstanding anything contained herein, the
Landlord shall not be liable for any loss or damage to any of the goods or
merchandise of the Tenant, or of others, which shall be received and/or handled,
directly or indirectly, from any cause whatsoever, as a result of the operation
of the said underground loading and holdings area.
20. Any Tenant shall not burn any trash or garbage in or about the Leased
Premises, or anywhere within the confines of the Development. All garbage, trash
and rubbish shall be kept within the interior of the Leased Premises until the
day of removal. Such removal shall be at the expense of the Tenant on a regular
basis as described by the Landlord, If the Tenant's trash or garbage is of a
deteriorating nature, creating offensive odours, then the Tenant shall utilize
and maintain at Its cost and expense, refrigerated garbage facilities as
designated by the Landlord. In the event that it is considered necessary by the
Landlord that such garbage be placed outside the Leased Premises, and the
Landlord consents in writing to the placing of garbage outside the Leased
Premises, then such garbage shall be placed in a container specified by the
Landlord, but provided at the sole cost and expense of the Tenant.
21. No cooking or preparation of food, nor any electrical apparatus likely to
cause an overloading of electrical circuits, is permitted in the Leased
Premises.
22. The Tenant shall not overload the floor of the Leased Premises nor shall it
hang or suspend from any wall or ceiling or roof, or any other part of the
Building or Leased Premises, any equipment, displays, fixtures or signs which
are not authorized by the Landlord or its agents.
23. The Tenant shall provide to the Landlord, the names, addresses and telephone
numbers of two (2) authorized employees and an insurance representative of the
Tenant, who may be contacted by the Landlord in the event of an emergency
relevant to the Leased Premises.
24. The Tenant shall participate fully in the Landlord's fire warden or other
life safety programs, including periodic fire drills.
25. The Tenant shall not place or maintain any merchandise or other articles
outside the main entrance door of the Leased Premises, on the pedestrian
passages adjacent thereto or elsewhere outside the Leased Premises.
26. Bicycles shall not be left upon any part of the Development other than the
space in the parkade designated by the Landlord.
27. The Tenant shall keep clean all glass in the doors and partitions of the
interior of the Leased Premises and the office frontage of the Leased Premises
and replace promptly, at its expense, any such glass which is cracked or broken
with glass of similar kind and quality.
28. The Tenant shall give the Landlord prompt written notice of any accident
which occurs upon any part of the Development or any defect in the Development,
of which it has knowledge, including the common Areas or the facilities and
systems serving the Building.
29. The Tenant shall maintain the Leased Premises in a sanitary condition free
of insects, rodents, vermin and other pests, using a pest exterminator
designated by the Landlord at such times as the Landlord directs, acting
reasonably.
<PAGE> 50
30. The Tenant shall cooperate with the Landlord in the conservation of energy
in the Development (including the Leased Premises) and shall comply with all
laws, by-laws, regulations and orders relating to the conservation of energy.
31. The Tenant shall not use or permit the use of the Leased Premises in such
manner as to create any objectionable noises, odours or other nuisance or hazard
or to breach the provisions of any municipal by-law or other lawful requirement
applicable thereto or any requirement of the insurers of the Development. The
Tenant shall not suffer or permit any smoking to occur within the Leased
Premises, unless it installs, at its expense, separate exhaust fans in the
Leased Premises, approved by the Landlord, to dissipate the smoke.
32. The Tenant shall refer to the Development only by the name from time to time
designated by the Landlord, and shall use such name only for the business
address of the Leased Premises and not for any promotional or other purposes.
33. The Tenant shall not interfere with any window coverings installed upon
exterior windows, and shall close such window coverings during such hours from
dusk to dawn as the Landlord may require, and shall not install or operate any
interior drapes that will interfere with the exterior appearance or the climate
control system of the Development.
34. After hours air handling may be produced by the Landlord at the rates and in
accordance with the provisions of the Landlord's then current policy to tenants
of Bow Valley Square 2, 3, and 4. Should the Tenant wish to use this service,
the Tenant shall provide the Landlord a list of those authorized by the Tenant
to request such service.
These Rules and Regulations, together with all reasonable amendments made by the
Landlord from time to time, deletions and additions, will not necessarily be
uniformly applied and may be waived in whole or in part in respect of other
tenants of the Development without affecting their enforce ability with respect
to the Tenant and the Leased Premises, and may be waived in whole or in part
with respect to the Leased Premises without waiving them as to future
application to the Leased Premises. The imposition of such Rules and Regulations
shall not create or imply any obligation of the Landlord to enforce them or
create any liability of the Landlord for their non-enforcement.
<PAGE> 1
CONSULTING AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT made effective the list day of August, 1997.
Between:
Sysgold Inc.
450, 250 - 6th Avenue SW
Calgary
AB, T2P 3H7
(hereinafter called the Client)
and
S.l. Systems Ltd.
1400, 505 - 3rd Street S.W.
Calgary, AB
T2P 3E6
(hereinafter called the Consultant)
WHEREAS the Client wishes to retain the Consultants representative, Alex
Fernandez for Services;
AND WHEREAS the Client and the Consultant wish to identify their respective
responsibilities and to provide for confidentiality of any information relating
to this Agreement.
NOW THEREFORE the parties agree as follows:
1 The Consultant will provide the hourly consulting Services, hereinafter called
the Services, to the Client at a rate of $65 per hour.
2 The Consultant will provide the professional Services as required and directed
by the Client. The Services shall be performed at the venue directed by the
Client.
3 The Consultants representative will work to the reasonable office hours
dictated by the Client.
4 (a) Any and all designs, design concepts and improvements thereto which
the Consultant may conceive as a direct result of his/her work for the Client,
including all print copies, originals, and demo copies shall be the property of
the Client and shall not be expressed in any form to any other party without the
express written consent of the Client.
(b) Immediately upon completion of the Services, the Consultant shall
deliver to the Client at the aforementioned address all originals and copies of
any documentation relating to the Services and any other confidential
information.
5 (a) The Consultant shall at all times, both during and after the term of
this Agreement, ensure that it and any of its associates, servants, or employees
maintain in confidence and not to disclose or permit disclosure of any
Confidential Information to any entity or utilize any Confidential Information,
except as may be required to perform the Services under this Agreement.
(b) For the purposes of this Agreement, Confidential Information shall
include all information (whether or not reduced to writing) received or acquired
by the Consultant during the course of or incidental to the performance of the
Services and which in any way concern or is related to the property, business,
undertaking or affairs of the Client, including without limitation the
following:
(i) all Client documentation
(ii) all Client proprietary application knowledge
with the exception only of information which is public or becomes
public information through no action of the Consultant and information which is
received from another entity lawfully in possession of the information and under
no obligation to keep the information confidential.
<PAGE> 2
6 The Client agrees not to directly or indirectly solicit the Services of the
Consultants representative for a period of six months from the termination of
this contract. It is the Clients responsibility to monitor the activities, hours
and value of Services provided by the Consultants representative.
7 This Agreement shall constitute a periodic consultancy commencing August 1,
1997 and shall terminate the Services September 15, 1997. The Client may
terminate the Services of this contract with a two (2) day written notice to
S.l. Systems Ltd.
DATED at Calgary, Alberta, this 13th day August, 1997.
Per:
SysGold Inc.
Per:
S.I. Systems Ltd.
<PAGE> 1
Independent Contractor Agreement
This agreement made as of the 10th day of March, 1997
BETWEEN:
SysGold Ltd. an Alberta Corporation with its head office at Calgary, ("SysGold")
- - and -
BV RIDGE CONSULTING, an Alberta Corporation with its head office at Calgary,
("Independent Contractor") - and -
BRIAN OLDRIDGE, ("Key Person")
WHEREAS:
(a) SysGold is a consulting company offering information Systems services
to its clients.
(b) The Independent Contractor provides systems services and wishes to
have SysGold market its services.
(c) The Independent Contractor wishes to offer the expertise of its Key
Person to SysGold.
IT IS AGREED THAT:
1. SysGold agrees to hire the Independent Contractor to provide a Key Person,
acceptable to SysGold, for the purpose of offering Information Systems Services
to SysGold's clients, and the Independent Contractor is to be paid as set forth
in Appendix A.
2. For the purposes of this Agreement, the Key Person acceptable to SysGold is
Brian Oldridge.
3. This Contract is effective from March 15.1997, to March 14.1998, and shall
renew automatically for successive one-year periods, unless otherwise terminated
earlier.
4. The Independent Contractor and the Key Person agree that they will provide
services to SysGold and may provide services to other clients subject to SysGold
approval during the Contract term.
5. Without prejudice to any right that either party may have for earlier
termination for cause, the Contract may be terminated without cause by either
party providing the other party with 4 weeks written notice at the addresses
listed below. In such event, every reasonable effort will be made to ensure a
smooth transition, including performing on-going work during the notice period.
The party choosing to terminate may choose to continue beyond 4 weeks to
complete on-going work.
6. The Independent Contractor shall be deemed to be an Independent Contractor,
and not an employee, agent, or servant of SysGold. The Independent Contractor
shall be responsible for all remittances to Revenue Canada, including income
tax, Canada Pension Plan, and G.S.T. remittances. The Independent Contractor
shall be responsible to compensate its Key Person for service rendered to the
Independent Contractor including the payment of vacation pay to the Key Person.
The Key Person shall have no claim whatsoever against SysGold for remuneration.
wages. Profit sharing. vacation Day, or otherwise. The Independent Contractor
shall be responsible for providing its Key Person with transportation, and shall
bear all costs of such transportation including the maintenance of adequate
insurance coverage.
7. SysGold shall have the right to establish the hours during which service must
be provided to SysGold. SysGold acknowledges that the Independent Contractor and
Key Person have an agreement for 4 weeks vacation per year, and 2 days off per
month to accommodate the fact that a lot of travel occurs. SysGold agrees that
travel requested of the Key Person will be limited to an average of 3 days each
second week.
8. All information, material, and data prepared and performed by the Key Person
and the Independent Contractor under this Agreement shall become the property of
SysGold, or at SysGold's option, of a SysGold client.
9. SysGold shall reimburse the Independent Contractor for reasonable expenses
incurred by the Independent Contractor in the course of performing its duties in
such amounts as may be approved by SysGold from time to time.
10. Should this Contract be terminated by any reason, neither the Independent
Contractor nor the Key Person shall indirectly or directly work for a client of
SysGold in any capacity for a period of 12 months after termination.
<PAGE> 2
Without limiting the generality of the foregoing, it shall include but not be
limited to employment by the client, employment by another party who contracts
with the client, contracting, sub-contracting, agency, partnership, or any other
association. A client is defined as an existing client of the Company or one
which the Company has performed services in the preceding twelve months.
Should the Independent Contractor or the Key Person breach this covenant
(which covenant shall survive the termination of the Contract), the Independent
Contractor and the Key Person shall jointly and severally pay SysGold as
liquidated damages and not a penalty, an amount equal to the greater of 50% of
any fees or gross income earned during that period, which amount shall be due
and payable on demand. Additionally, it is agreed that SysGold may enforce this
covenant by an injunction or otherwise.
11. The Independent Contractor and the Key Person shall use their best efforts
to promote the interests of SysGold and shall not disclose the private affairs,
trade secrets, or confidential information to any persons for any purposes other
than those of the employer. This paragraph shall not apply, however, to
information that:
a) is already known to the Independent Contractor and Key Person as at
the date of this Agreement;
b) is disclosed to the Independent Contractor or the Key Person by a
third party in possession of such information and under no confidential
obligation not to disclose it;
c) is publicly available by other than unauthorized disclosure; or
d) is required by law to be disclosed by the Independent Contractor or
the Key Person.
12. The rights that accrue to SysGold under this Agreement shall pass to its
successors or assigns. The rights of the Independent Contractor or its Key
Person under this Agreement are not assignable or transferable.
13. Any notice required or permitted to be given to the Independent Contractor
shall be sufficiently given if delivered, or if mailed, by registered mail, to
the address last known to SysGold.
14. In the event that any portion or part of this Agreement shall be deemed void
or invalid by a court of competent jurisdiction, the remaining parts shall be
and remain in full force and effect.
15. This Agreement constitutes the entire Agreement between the parties with
respect to the provision of services by the Independent Contractor and Key
Person and any and all previous Agreements, written, oral, or expressly implied
between the parties on their behalf relating to previous employment of the Key
Person by SysGold are terminated and canceled and each of the parties releases
and forever discharges the other party from all manner of action, causes of
actions, claims and demands whatsoever under and in respect of any agreement.
16. Any modification of this Agreement must be in writing and signed by each of
the parties or it shall have no effect and it shall be void.
17. This Agreement shall be construed in accordance with the laws of the
Province of Alberta. The parties hereby attorn to the Court of Queen's Bench,
Alberta and agree that such court will have jurisdiction.
18. The waiver by any party of any breach or violation of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
or violation.
19. Any notice to be given or sent hereunder by any party to the other shall be
deemed to have been duly given or sent when made in writing by registered mail,
postage prepaid, on the third day after the date of mailing thereof, and
addresses as follows:
To SysGold: SysGold Ltd.
401, 205 - 5th Avenue S.W.
Calgary, Alberta T2P 2W
To Independent Contractor: BV Ridge Consulting
216 Spring Dale Circle
Airdrie, Alberta T4A I N7
To Key Person: Brian Oldridge
216 Spring Dale Circle
Airdrie, Alberta T4A 1N7
<PAGE> 3
or to such address as either party may designate by notice as above provided.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the day
month and year first above written.
SysGold Ltd. Independent Contractor Key Person
Don Bialik, BV Ridge Consulting Brian Oldridge
President Brian Oldridge, President
Independent Contractor Agreement
Appendix A
1. The Independent Contractor's remuneration shall be calculated, on a monthly
basis, as follows:
a) a monthly service fee of $4000.00 (GST not included);
b) additional revenue based fees of 20% of revenue billed to SysGold
clients for work done by the Key Person up to 200 billable hours per month.
c) additional revenue based fees of 50% of revenue billed to SysGold
clients for work done by the Key Person over 200 billable hours a month.
<PAGE> 1
BOW VALLEY SQUARE
March 24, 1998
CONFIDENTIAL
HAND DELIVERED
Mr. Bill Arnett
SysGold Ltd.
Suite 450, Bow Valley Square 4
250 Sixth Avenue S. W.
Calgary, Alberta T2P 3H7
Dear Bill:
RE: EXPANSION: 4TH FLOOR, BOW VALLEY SQUARE 4
Further to our recent conversations, we are pleased to submit the following
revised Offer to Lease with respect to your proposed expansion on the 4th and
5th Floors, Bow Valley Square 4. This Offer to Lease will be held open for the
acceptance of SysGold Ltd. (the "Tenant") until 4:00 PM on Tuesday, March 31st,
1998.
Leased Premises:
Approximately 1,618 rentable square feet as outlined in red on the attached
floorplan, being a portion of the 4th floor (the "Leased Premises"), of Bow
Valley Square 4, 250 Sixth Avenue S.W., Calgary (the "Building"). The purpose of
such plan is solely to indicate the approximate location of the Leased Premises.
Term:
Three (3) years, Four (4) months, commencing Sept 1st, 1998 (the "Commencement
Date") and running concurrent with your lease dated February 21st, 1997 (the
"Lease") expiring January 31st, 2002, (the "Term").
Basic Rent:
$20.00 per rentable square foot of the Leased Premises, per annum, on a net
basis, (the "Basic Rent"), being an annual total of Thirty-Two Thousand, Three
Hundred and Sixty-----04/l00 ($32,360.04) Dollars, to be paid to OMERS Realty
Corporation (the "Landlord") by the Tenant in twelve equal monthly installments
of Two Thousand, Six Hundred and Ninety-Six-----67/l00 ($2,696.67) Dollars in
advance, throughout the Term, without any deduction, abatement or set-off.
Acceptance of Leased Premises:
The Leased Premises would be accepted by the Tenant on an "as is, where is"
basis.
Additional Rent:
The Tenant agrees to pay, as Additional Rent, its Proportionate Share of
Occupancy Costs for the Building, estimated by the Landlord, acting reasonably,
to total $8.94 per rentable square foot of the Leased Premises during the 1998
calendar year. As with the annual Basic Rent, Occupancy Costs are payable by the
Tenant in twelve equal monthly installments in advance, throughout the Term,
without any deduction, abatement or set-off. The Tenant understands and agrees
that the Landlord shall not be liable for any loss or damage as a result of the
Tenant or any permitted subtenant or assignee relying upon this estimate. The
Landlord shall make a final determination of the Tenant's Proportionate Share of
Occupancy Costs as set out in Section 4.4 of the Lease. The Tenant shall remain
responsible for the payment of all other items of Additional Rent as defined in
the Lease.
Brokerage Fees:
The Tenant warrants that it has not dealt with any agent or broker representing
or purporting to represent the Landlord in connection with the leasing of the
Leased Premises and the Tenant shall be responsible for and
<PAGE> 2
indemnify the Landlord from any brokerage fees or commissions relating to this
Offer to Lease or any resultant agreement.
Parking:
Provided the Tenant is not in default, space for one motor vehicle in those
levels of the Development designated as unassigned Tenant parking will be made
available to the Tenant throughout the Term at the prevailing monthly rental
rate from time to time in effect. The Tenant understands and agrees the use of
any parking spaces shall be subject to the terms and conditions contained in the
Landlord's standard Parking Privileges Contract Terms. Effective April 1st,
1998, current monthly parking rental rate is $210.00 per unassigned space.
Parking charges are payable in advance on the first day of each month as
Additional Rent.
Permitted Use:
The Tenant shall use the Leased Premises solely for the purpose of conducting
the business of a computer consulting and development firm, and its related
activities (the "Permitted Use").
Taxes:
(a) Property Taxes form a part of Occupancy Costs, however, Business
Taxes do not and the Tenant shall remain entirely responsible for all taxes,
rates, duties, levies and assessments whatsoever, including Business Taxes, in
respect of the Leased Premises.
(b) Amounts payable as outlined in this Offer to Lease do not include
G.S.T., however G.S.T. is payable on all amounts due to the Landlord.
No Smoking:
The Tenant shall not suffer or permit any smoking to occur within the Leased
Premises, unless it installs, at its expense, separate exhaust fans in the
Leased Premises, approved by the Landlord, to dissipate the smoke.
Insurance Requirements:
Before entering the Leased Premises for any purpose, the Tenant shall provide to
the Landlord certificates of insurance for all policies required to be effected
and maintained by it pursuant to Section 8.3 of the Lease, including, without
limitation, "all risks" insurance upon the property of the Tenant located in the
Leased Premises, comprehensive general liability insurance in an amount not less
than $5,000,000, business interruption insurance and "all risks" tenant legal
liability insurance.
Documentation of Offer:
This Offer to Lease would be documented by way of an amendment to the Lease, and
the Tenant agrees to observe and perform all of the conditions, covenants and
restrictions required under the Lease. Upon unconditional acceptance of this
Offer to Lease, BV Square Management Ltd. will prepare and forward the Lease
Amending Agreement to the Tenant, which shall incorporate the terms of this
Offer to Lease. The Tenant agrees to execute and return the Lease Amending
Agreement within fifteen (15) Business Days of receiving it. In no event shall
the Tenant be allowed occupancy for the purpose of conducting the Permitted Use
if the Lease Amending Agreement has not been executed by both parties.
Termination by Landlord:
In the event the Tenant is in default of any of the terms, covenants, conditions
or provisos of this Offer to Lease, the Landlord shall have the right to
terminate this Offer to Lease upon written notice to the Tenant. If such notice
is given pursuant to this or any other provision of this Offer to Lease or the
Lease, this Offer to Lease and the Term and all of the rights of the Tenant
hereunder shall terminate; Basic Rent and all other payments for which the
Tenant is liable under this Offer to Lease shall be computed, apportioned and
paid in full to the date of such termination, and the Tenant shall immediately
deliver up possession of the Leased Premises to the Landlord. If the Landlord
terminates this Offer to Lease for any breach by the Tenant, in addition to
other remedies the Landlord may have, the Landlord may recover from the Tenant
all damages it incurs by reason of the breach, including cost of recovering the
Leased Premises, legal fees (on a solicitor and client basis) and the worth at
the time of the termination of the excess,
<PAGE> 3
if any, of the amount of Rent and charges equivalent to the rent reserved in
this Offer to Lease for the remainder of the Term, over the then reasonable
rental value of the Leased Premises for the remainder of the Term, all of which
amounts shall be immediately due and payable by the Tenant to the Landlord.
Confidentiality:
SysGold Ltd. hereby agrees that the terms and conditions of this Offer to Lease
are sensitive and confidential in nature and that the disclosure of this
information to any third party may be expected to cause substantial loss and
damage to the Landlord. For this reason, SysGold Ltd. agrees that, except for
disclosure on the same confidential basis as provided herein, and only to
officers and/or employees of SysGold Ltd. who have a bona fide and actual need
to know the confidential terms on behalf of SysGold Ltd., it and its officers
and/or employees to whom disclosure is made as aforesaid, will hold in strict
confidence, and will not disclose the same to any third party.
Undefined Terms:
Any capitalized words used in this Offer to Lease but not defined herein, shall
have the meaning attributed to them in Sections 1.1 and 1.2 of the Lease.
Time of the Essence:
Time shall be of the essence of this Offer to Lease and every part thereof.
Entire Agreement:
The Tenant acknowledges that there are no agreements, representations,
warranties or conditions relating to this Offer to Lease, the Leased Premises or
the Building (express or implied) made by the Landlord or any of its agents
except those contained in this Offer to Lease.
Governing Law:
This Offer to Lease shall be interpreted and is governed by the laws of the
Province of Alberta.
Successors and Assigns:
This Offer to Lease and everything herein contained shall enure to the benefit
of and be binding upon the successors and assigns of the Landlord and Tenant.
Conditions:
This Offer to Lease is subject to approval by an Officer of OMERS Realty
Corporation.
Trusting the foregoing meets with your approval, we would ask if you could
signify your acceptance by countersigning in the space provided below, returning
one (1) counterpart for our files. BV Square Management Ltd. will then work to
remove the condition to allow us to proceed with this Offer to Lease, and will
advise of our progress. In the event the foregoing condition is not removed by
BV Square Management Ltd. in writing on or before April 7th, 1998, this Offer to
Lease shall become null and void and have no further force or effect. Once BV
Square Management Ltd. has notified the Tenant in writing of the removal of the
above condition, this Offer to Lease shall be binding upon both parties.
Yours very truly, Accepted For and On Behalf Of:
BV S UARE MANAGEMENT LTD. SYSGOLD LTD.
Gerry S. Jobagy Per: Don Bialik
Leasing Manager
Dated this 15 day of May, l998
Attachment
<PAGE> 1
GENERIC CONTRACT
INFORMATION SYSTEMS SERVICES AGREEMENT
THIS AGREEMENT made as of the 1st day of July, 1998.
BETWEEN:
UMC RESOURCES CANADA LTD., an Alberta corporation with its head office at Suite
1000 350 - 7th Avenue S.W., Calgary, Alberta T2P 3N9.
("UMC")
- - and -
SYSGOLD LTD., an Alberta corporation with its head office at 450, 250 - 5th
Avenue SW. Calgary. Alberta, T2P 3H7 ("SysGold")
WHEREAS:
(a) UMC Resources desires to outsource some of its computer and information
systems functions, to ensure continuity and reliability in its computer and
information Systems operations for an extended period
(b) SysGold has agreed to provide such services upon the terms and conditions
set forth below.
IT IS AGREED THAT:
1. SysGold shall provide computer and information systems operating and
consulting services to UMC Resources described and for the consideration set
forth in the attached Schedule A.
2. SysGold shall provide additional computer and information systems operating
and consulting services (not specifically set forth in Schedule A) to UMC
Resources if, as and when requested by UMC. SysGold shall charge UMC Resources
for such additional work at its then current standard commercial billing rates
charged to third parties for similar work.
3. This Agreement is effective from July 1, 1998 until June 30. 1999, and
automatically renews thereafter for successive 3 month terms unless either party
gives written notice of termination to the other party 60 days prior to the end
of the current term.
4. Either party may terminate this contract with 30 days notice, if the other
party is failing to meet its obligations under the contract.
5. SysGold may change specific consultants assigned to support UMC Resources
with 30 days notice. UMC Resources also reserves the right to request that
SysGold change personnel assigned to the account with 30 days notice.
6. SysGold shall invoice UMC Resources at the end of each month for services
rendered during that month. Such invoices shall be accompanied by statements
which identify the relevant accounts, services, credits and charges, summarized
by appropriate classifications, except that unusual charges and credits shall be
separately identified and described in detail. UMC Resources shall pay all
invoices rendered within 30 days of receipt thereof. If any invoice or amount is
not paid when due, the unpaid amount shall bear interest at a nominal rate of
18% per annum (1.5% per month) Payment of any invoice shall not prejudice UMC's
right to protest or question the correctness thereof; provided however, all
invoices and statements rendered to UMC Resources shall be conclusively be
deemed to be true and correct 90 days following rendering thereof, unless UMC
Resources takes written exception thereto within the said 90 days and makes
claim to SysGold for adjustment.
7. Any controversy, uncertainty or difference arising out of this Agreement or
in respect of the terms thereof that cannot be resolved by discussion between
the parties hereto shall be submitted to arbitration, under the Arbitration Act
of Alberta.
8. This Agreement is governed by the laws in force in Alberta.
9 Time is of the essence in this Agreement.
<PAGE> 2
10. The terms of this Agreement express and constitute the entire agreement
between the parties in respect of the matters set forth herein. No implied
covenant or liability is created or shall arise by reason of this Agreement or
anything herein contained. No amendment or variation of the provisions of this
Agreement shall be binding upon any party unless it is evidenced in writing and
executed by all parties hereto.
11. This Agreement shall be binding upon and shall endure to the benefit of the
parties hereto and their respective successors, receivers, receiver-managers,
trustees and permitted assigns. Neither party may assign its interest in this
Agreement or any monies due or claim arising hereunder, or subcontract all or
any portion of the services to be provided hereunder, without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
Such consent to any assignment or subcontracting shall not relieve a party from
its primary obligations pursuant to this Agreement.
12. UMC Resources agrees that former SysGold employees shall not be allowed to
work indirectly or directly for UMC Resources until a period of six months after
termination of this contract. Without limiting the generality of the foregoing,
it shall include, but not be limited to, employment by UMC, employment by
another party who contracts with UMC, contracting, subcontracting, agency,
partnership, or any other association. Should UMC Resources breach this covenant
(which covenant shall survive the termination of the Contract), UMC Resources
shall pay to SysGold as liquidated damages and not a penalty, an amount equal to
50% of any fees or gross income earned during that period, which amount shall be
due and payable on demand. Additionally, it is agreed that SysGold may enforce
this covenant by an injunction or otherwise.
13. SysGold agrees to keep confidential the affairs of UMC, its affiliates and
subsidiaries and not to divulge or make use of any confidential or other
information in connection with the same, whether or not such information is in
the public domain, including the names of and dealings with any clients of UMC
Resources or its affiliates or subsidiaries. If requested by UMC, all SysGold
employees who work for UMC Resources shall sign confidentiality agreements.
IN WITNESS WHEREOF, the parties have executed and delivered these presents as of
the day and year first above written.
UMC RESOURCES CANADA LTD. SYSGOLD LTD.
Schedule A
Services & Remuneration
1. Consultants. SysGold will provide consulting services to UMC Resources at a
rate of $45/60/$801$100/$120/$150 per hour for Apprentice, Junior, Intermediate,
Senior, Expert and Principal resources.
2. SysGold will provide the services of an Apprentice Consultant to UMC, on a
full-time basis for a fee of $6,000 per month. Full-time shall mean
approximately 8 hours per working day. If the consultant is required to work
more than 8 hours per day, averaged over a month, UMC Resources will pay
$45/hour discounted at 20%, for hours in excess of that, calculated on a monthly
basis.
3. The Consultant shall initially be Chris Williams, and will continue to be Mr.
Williams as long as he remains employed by SysGold. If Mr. Williams should leave
SysGold's employ, a replacement Consultant must be someone acceptable to UMC.
The replacement resource will assume responsibilities at UMC after a suitable
transition period to familiarize them with the site. This transition period will
be at no cost to UMC.
4. SysGold will also provide the services of an Intermediate Consultant to UMC
on an hourly basis at $80 per hour less 10%.
5. The initial resource assignment is for a period of 3 months. A review of
staffing requirements will be conducted in late September to determine the
appropriate level of resource required for the account
6. If other SysGold resources are required they will be billed at 1998 rates
defined in clause 1
7. The scope of work covered by the consultants will be support. Small projects
may also be covered during support coverage. Larger projects will be defined,
estimated, and billed separately.
<PAGE> 3
8. Hardware. SysGold will purchase all required Network and PC hardware, and
desktop software for UMC Resources. Prices will be based on a cost plus 10%
arrangement.
9. Computers. UMC Resources will provide access for SysGold staff to PC's of a
type appropriate for the kind and nature of work SysGold performs for UMC.
10. Travel Expenses. UMC Resources will reimburse all travel and accommodation
costs associated with support provided by SysGold to UMC's field operations.
11. The network and desktop PC services to be performed by the consultant may
include the following:
a) Disk Management
- Daily, Weekly & Monthly Server backups and tape rotation,
including off site storage.
- Server disk maintenance, ie. prodding users to delete files,
cleanup of logs and temporary files.
b) Hardware Management
- Keep hardware inventory, floor plans.
- Hardware maintenance; troubleshoot PC, printer, and network
problems. PC optimization.
- Install and maintain hardware at remote sites designated by
UMC.
c) Security Management
- Set up new user ID's, delete obsolete ID's.
- Maintain security, including checking logs for symptoms of
security problems.
- Update virus detection on a monthly basis.
d) User Support
- Regular meetings with user representatives for scheduling
downtime, resolving issues.
- Coaching users on LANIWAN and application software use.
- Maintain, monitor and resolve user issues tracked by the
help desk.
e) Communications
- Maintain communications server.
- Set up remote sites for hookup to LAN/WAN through
communications server.
- Maintain Email system, including Internet links.
f) Network Software
- Install upgrades and new LAN/WAN software releases.
g) Application Software
- Test application software candidates.
- Install application software. Create automated application
software upgrades with scripts.
- Maintain software license inventory.
<PAGE> 1
LOTUS DEVELOPMENT CANADA LIMITED
BUSINESS PARTNER AGREEMENT
Name and Address of Business Partner:
SysGold Ltd.
401, 205 - 5th Avenue S.W.
Calgary, Alberta
T2P 2Y7
Attention: Don Bialik
This Agreement sets forth the terms under which the Business Partner identified
above may participate in Lotus Development Canada Limited Business Partner
Program (the "Program"), including the receipt of Lotus products (the
"Products") and services.
1. PRODUCTS AND SERVICES AVAILABLE UNDER THE PROGRAM.
(a) Products. Business Partner shall have the right to acquire and use
Lotus products made available to Program participants from time to time, in the
quantity and for the prices or fees established by Lotus for Program
participants. Business Partner agrees to use any Product acquired under the
Program solely for sales, marketing and demonstration purposes related to the
Products, and not for general internal business purposes or for resale or
distribution to third parties. Business Partner shall be solely responsible for
its activities, products and services relating to or provided with Lotus
Products. Business Partner shall not make any representations or statements
regarding Lotus Products other than those contained in Lotus' marketing
literature and advertising copy. Business Partners other rights and obligations
relating to such Products shall be covered by the Lotus Software Agreement
accompanying the particular Product acquired. Business Partner shall provide to
Lotus, upon request, information related to Business Partner's involvement in
sales of the Products.
(b) Support Business Partner shall be entitled to receive the technical
support services made available to Program participants from time to time,
including electronic and telephone support, under the terms and conditions
established by Lotus.
(c) Marketing services. Business Partner shall be entitled to receive the
marketing services Lotus elects to provide from time to time for its Business
Partners.
(d) Program terms subject to change. Lotus may change any of the terms
for products or support offered to Program participants without prior notice to
Business Partner; provided, however, that Business Partner shall be permitted to
terminate this Agreement and its participation in the Program without cause upon
any change by Lotus in these terms.
2. PRE-RELEASE PRODUCTS.
(a) Use. Lotus may in its sole discretion extend to Business Partner the
right to use the prerelease software and related documentation that it makes
available under the Business Partner Marketing Program from time to time (the
"Pre-Release Software") solely for the purpose of evaluating the Pre-Release
Software, and subject to the following terms:
(b) Acceptance of terms. Business Partner shall acknowledge its
acceptance of the terms of this Section 2, in the form stipulated by Lotus,
prior to receiving any Pre-Release Software under the Program.
(c) Confidentiality; proprietary rights. Business Partner agrees with
Lotus that the Pre-Release Software is Lotus Confidential Information subject to
the terms of Section 8 of this Agreement and constitutes a trade secret of
Lotus, and that, unless otherwise specifically agreed by Lotus in writing,
Business Partner:
(i) shall not copy the Pre-Release Software or the related
documentation in excess of the number designated by Lotus in computer readable
or human readable form except for one backup copy; and
(ii) shall, at Lotus' request, promptly return to Lotus or destroy
all diskettes, documentation or other materials furnished to Business Partner by
Lotus under this Agreement.
<PAGE> 2
(d) No Warranty. In view of the developmental nature of Pre-Release
Software, Lotus makes no warranty as to the operational performance of
Pre-Release Software. LOTUS DISCLAIMS ALL WARRANTIES WITH REGARD TO PRE-RELEASE
SOFTWARE AND THE RELATED DOCUMENTATION INCLUDING WITHOUT LIMITATION WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NO INFRINGEMENT.
3. PAYMENT TERMS. Unless otherwise stated by Lotus, payment of applicable
subscription, license and support fees for the Program and Products are due upon
submission of Business Partners order form for the particular Product or service
requested. Business Partner agrees to pay shipping and related insurance
charges. as well as any tax. however characterized, including customs duties and
tariffs, arising out of this Agreement or the use of the Products, other than
taxes assessed on Lotus' net income.
4. PROPRIETARY RIGHTS. During the term of this Agreement, Business Partner may
represent Itself as an authorized Lotus Business Partner of Lotus Products.
Business Partner shall not represent that Business Partner's products and
services are affiliated with or endorsed by Lotus.
Lotus hereby grants Business Partner a non-exclusive, revocable right to use the
Lotus Business Partner Logo (the "Logo") on Business Partners company business
cards, letterhead and In related sales, marketing and promotional materials in
the manner set forth and subject to the color and size restrictions determined
by Lotus from time to time. The Logo is NOT to be used on Business Partners
Lotus companion product or any other product Business Partner agrees to submit
to Lotus, upon request, samples of its use of the Logo for Lotus' inspection and
evaluation. Upon expiration or termination of this Agreement, Business Partner
agrees to cease using the Logo and to delete it from all sales promotion and
marketing materials, business cards and letterhead.
Nothing done pursuant to this Addendum shall transfer to Business Partner title
to any Intellectual property rights (including, without limitation. any
trademark or copyright) in or to Lotus Products or any ether software
application, or any associated documentation or training materials, provided to
Business Partner by, Lotus. Business Partner shall not manufacture, duplicate,
translate, reverse engineer or decompile Lotus Products or information relating
thereto.
5. TECHNICAL SUPPORT. From time to time and depending upon the particular Lotus
Product involved, Lotus may require that Business Partner obtain a certain level
of technical expertise in order to resell or recommend Lotus Products. Lotus or
its designee shall offer fee-based periodic training classes in order for
Business Partner personnel to obtain and maintain such technical expertise.
6. LIMITED WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THE
APPLICABLE PRODUCT SOFTWARE AGREEMENT AND ELSEWHERE HEREIN, LOTUS DISCLAIMS ALL
WARRANTIES WITH REGARD TO PRODUCTS AND SERVICES RECEIVED UNDER THIS AGREEMENT,
INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7. LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE FOR SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL, TORT OR COVER DAMAGES, INCLUDING, WITHOUT LIMITATION,
DAMAGES RESULTING FROM THE USE OR INABILITY TO USE THE PRODUCTS, DELAY OF
DELIVERY OR LOSS OF PROFITS, DATA, BUSINESS OR GOODWILL, WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. THE LIMIT
OF MONETARY DAMAGES AGAINST LOTUS UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED
THE AMOUNTS PAID BY BUSINESS PARTNER TO LOTUS UNDER THE BUSINESS PARTNER
PROGRAM.
8. CONFIDENTIAL INFORMATION.
(a) No Disclosure. During the term of this Agreement and for a period of
three (3) years thereafter, neither Lotus nor Business Partner shall disclose to
any third party and Business Partner may not use except as permitted under this
Agreement any information of the other party identified as confidential or
proprietary at the time of disclosure and, if disclosed orally, confirmed in
writing by the disclosing party as such promptly after its disclosure
(*Information). without the prior written consent of the other party and then
only to the extent specified In such consent. The parties shall limit access to
the Information of the other to those employees and independent contractors who
have entered into appropriate confidentiality agreements and shall ensure
compliance with the terms of such agreements. Information may be copied and
<PAGE> 3
disseminated within the receiving party's own organization only to the extent
reasonably required for the purposes hereof.
(b) Exceptions. The restrictions on disclosure of Information described
in Paragraph 8(a) do not extend to any item of information which (i) is publicly
known at the time of its disclosure, (ii) Is lawfully received by the receiving
party from a third party not bound in a confidential relationship to the
disclosing party, (iii) is published or otherwise made known to the public by
the disclosing party. or (iv) was generated or developed independently before
its receipt from the disclosing party. Either party may disclose Information to
the extent required by law provided that the party so required must give the
other party prompt notice and make a reasonable effort to obtain a protective
order.
(c) Electronic connections. Business Partner acknowledges that Lotus
maintains electronic connection and communications with third parties similar to
those maintained with Business Partner; however, Business Partner acknowledges
and agrees that only direct electronic communications with Lotus are permitted
under this Agreement and any use of said electronic connections to communicate
with said third parties is expressly prohibited and constitutes a material
breach of this Agreement
9. ASSIGNMENT. This Agreement is not assignable and the duties hereunder are not
delegable by Business Partner. Except as set forth herein, nothing in this
Agreement shall be construed as granting to Business Partner the right to sell,
distribute to third parties, lease, license or otherwise transfer or dispose of
the Products in whole or in part.
10. NOTICES. Any notice hereunder shall be deemed to be sufficiently given and
any delivery hereunder deemed made when delivered in person or sent by facsimile
(followed by written confirmation) or by registered or certified mail or courier
addressed to the Business Partner at the address stated above and to Lotus at 10
Bay Street, 17th Floor. Toronto. Ontario MSJ 2R8, Attn: Legal Department or at
such changed address as either party shall have specified by written notice.
11. ENTIRE AGREEMENT; RELATIONSHIP OF PARTIES. This Agreement and the Lotus
Software Agreements and other documents. such as acknowledgments, referred to
herein, set forth the complete and exclusive agreement and understanding between
the parties as to the subject matter hereof and are in lieu of and supersede all
other communications, understandings and agreements, whether written or oral,
prior or contemporaneous. Any waiver, amendment or modification of this
Agreement will not be effective unless contained in a writing signed by the
party or parties to be bound, and any variance from or addition to the terms of
this Agreement contained in any Business Partner purchase order or other written
notification will be of no effect The invalidity in whole or in part of any
provision of this Agreement shall not void or affect the validity of any other
provision hereof. The parties hereto are independent contractors and neither
party shall have the right to bind the other to any agreement with a third party
nor to represent itself as an agent, partner or joint venture of the other or to
incur any obligation or liability on behalf of the other party. Each party shall
be responsible for the acts, negligence and omissions of its employees, agents,
representatives and subcontractors. If any provision of this Addendum is held to
be contrary to law or public policy or otherwise unenforceable, the remaining
provisions shall remain in full force and effect, and the invalid provision
shall remain in force as reformed.
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.
13. EXPORT; COMPLIANCE WITH LAW. The export, distribution and disclosure of the
Products and any Pre-Release Software are subject to Canadian and United States
Export Administration Regulations. The export of the North American Edition of
Lotus Notes Is controlled by the U.S. Department of State.
14. TERM AND TERMINATION; SURVIVAL
(a) Term. This Agreement shall have a term of one year from the date
given below and shall automatically renew far successive one-year terms, subject
to earlier termination as set forth below.
(b) Termination.
(i) Termination without cause: Either party may terminate this
Agreement without cause upon ninety (90) days prior written notice to the other
party.
(ii) Termination upon breach: Either party may terminate this
Agreement fourteen (14) days after written notice of material breach of this
Agreement if such breach Is net cured within such period.
(c) Actions upon termination. Upon expiration or termination of this
Agreement, Business Partner shall Immediately return all copies of Products,
Pre-Release Software and documentation provided by, Lotus under this Agreement,
destroy any additional copies made by, Business Partner and certify in writing
<PAGE> 4
that such actions have been taken. Upon expiration or termination of this
Agreement, each party shall return to the other any Information, including any
copies thereof, together with a letter certifying that all such Information has
been returned. Business Partner shall not be entitled to a refund of any amounts
paid for Products or services received under or In connection with this
Agreement upon the expiration or termination of this Agreement
(d) Surviving Sections. The provisions of Sections 2(c), 2(d), 6, 7 and 8
of this Agreement shall survive any termination of this Agreement for any
reason.
15. LANGUAGE. Lea parties aux presentes confirment leur volonte que le present
contrat de meme que tous autres documents S'y rapportant soient rediges en
anglais seulement.
canbuspa.sam
LOTUS DEVELOPMENT CANADA UMITED
Name: Enza Ciancidta
Date: 12/19/95
BUSINESS PARTNER
Name: Don Bialik
Title: President
Date: Nov. 20/95
Return to:
Lotus Development Canada Limited
10 Bay Street, 17th Floor
Toronto, Ontario M5J 2R8
ATTN: Business Partner Marketing
Reseller Addendum to the Lotus Business Partner Agreement
Lotus Development Canada Limited
10 Bay Street, 17th Floor
Toronto, Ontario M5J 2R8
Telephone: (416) 364-8000
Attention: Authorization Programs
Effective Date:
Business Partner Name and Address:
SysGold Ltd.
401, 205 - 5th Avenue SW
Calgary, Alberta T2P 2V7
Telephone: (403) 261-5560
Attention: Don Bialik
This Reseller Addendum to the Lotus Business Partner Agreement (the "Agreement")
sets forth the terms and conditions under which Lotus authorizes the Business
Partner identified above ("Business Partner") to resell the Lotus products
identified on Attachment A (the "Lotus Products"). This Addendum supplements the
terms of the Agreement.
1 APPOINTMENT AND DISTRIBUTION RIGHTS. Lotus hereby authorizes Business Partner,
on a non-exclusive and nontransferable basis, to market and distribute the Lotus
Products in Canada to its customers (referred to herein as "End Users") subject
to the terms and conditions of this Addendum, the Agreement and the terms of the
Business Partner Program, as they are made known to Business in Lotus from time
to time. Such authorization may be suspended by Lotus during any period in which
Business Partner is past due on any amounts owing to Lotus.
<PAGE> 5
2 END USER SOFTWARE AGREEMENT. Business Partner shall deliver to each End User
the Lotus Software Agreement accompanying the Lotus Products purchased by
Business Partner.
3 PURCHASE OF LOTUS PRODUCTS. Business Partner shall acquire Lotus Products only
from a distributor authorized by Lotus (an "Authorized Distributor". The terms
of purchase shall be determined between Business Partner and the Authorized
Distributor. Lotus will endeavor to provide Business Partner with thirty (30)
days prior written notice of changes to the Suggested Retail Price ("SRP") of
Lotus Products. On or before the tenth of each month, Business Partner shall
forward to Lotus at the address above information reasonably requested by Lotus
sales of Lotus Products made by Business Partner during the previous month.
Lotus shall maintain the confidentiality of such information in accordance with
the terms of the Agreement. Lotus reserves the right to modify and/or
discontinue Lotus Products at any time. Lotus also reserves the right to modify
the SRP of Lotus Products at any time.
4 MAINTENANCE. Depending upon the particular product configuration and
availability from Lotus, Business Partner may offer End Users the option of
purchasing future upgrades of Lotus Products on an annual basis ("Maintenance")
or purchasing upgrades to Lotus Products as they become available from time to
time. Business Partner shall purchase such offerings from its Authorized
Distributor. When providing upgrades to any End User that has not purchased
Maintenance, Business Partner shall collect satisfactory proof of such End
User's ownership of Lotus Products. Business Partner shall keep all such proofs
of ownership on its premises for a period of one (1) year the date of sale and
make such proofs of ownership available to Lotus for inspection during normal
business hours.
5 WARRANTIES. For a period of sixty (60) days following receipt of any Lotus
Products by Business Partner, Lotus warrants to Business Partner that the media,
documentation and packaging shall not contain any physical defects in
workmanship or materials. During the warranty period Lotus shall, at its option
and expense, repair or replace any defective Lotus Products product or refund to
Business Partner any amounts paid therefor. The foregoing remedies constitute
Business Partner's sole and exclusive remedies for breach of warranty. This
warranty is made to Business Partner separate and apart from any warranty Lotus
makes to an End User in the Lotus Software Agreement.
EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 5, LOTUS MAKES NO WARRANTIES,
GUARANTEES OR REPRESENTATIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
6 INDEMNIFICATION. Lotus shall indemnify and hold Business Partner harmless from
and against and defend any claim, suit or proceeding, and pay any settlement
amounts or damages awarded by court of final jurisdiction, arising out of claims
by third parties that a Lotus Product infringes any Canadian or United States
copyright or patent, provided that Business Partner promptly notifies Lotus in
writing of any such claim, suit or proceeding, permits Lotus to control the
defense or settlement thereof and cooperates in the defense or settlement
thereof. Business Partner shall have the option to be represented by counsel at
its own expense. Lotus shall have the right to demand the return from Business
Partner of any inventory of Lotus Products which is the subject of a claim of
infringement and to credit Business Partner the net amount paid therefor. Upon
notice, Business Partner shall discontinue distribution of any Lotus Product
which is the subject of a claim of infringement. Lotus shall have no obligation
under this section with respect to any claim of infringement of proprietary
rights based upon any modification of Lotus Products by Business Partner or the
combination, operation or use of Lotus Products with materials not supplied by
Lotus if such infringement would not have occurred without such modification,
combination, operation or use.
7 SURVIVAL The provisions of Sections 5 and 6 shall survive the termination or
expiration of this Addendum.
8 LANGUAGE. Los parties aux presentes confirment leur volonte que le present
contrat de meme que tous autres documents s'y rapportant soient rediges en
anglais seulement.
IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by
their duly authorized representatives as of the Effective Date.
LOTUS DEVELOPMENT CANADA LIMITED BUSINESS PARTNER
Name: Enza Cianciotta Don Bialik
<PAGE> 1
Final Invoice (MCSP)
North America
MCSP Company Name: SysGold Ltd.
MCSP ID: 65764
Confirmation Number (required if you applied via the MCSP Application and
Business Profile Tool):
CAN1skuf0ncw3ip5kh50c6w
Primary Contact: Brad Mooney
Street Address 1 (not a P0 Box): 420 - 205 - 6th Avenue S.W.
Street Address 2:
Street Address 3/Department/Mail Stop:
City/Town: Calgary State/Province/County: AB
ZIP/Postal Code: T2P 3H7 Name of Country: Canada
Telephone: (403) 861-8965 Fax: (403) 216-6050
Internet E-mail: [email protected]
Annual Fee Schedule:
The following annual fees apply to all new and renewing Microsoft Certified
Solution Provider memberships and MCSP site locations. These fees reflect a one
year membership beginning January 1, 1998, and are pro-rated.
Please find the time of year when you are applying and its corresponding fee,
and enter the fee in the space below.
Table 1
<TABLE>
<CAPTION>
Received by December 16, July 1, 1998 October 1, 1998
December 15, 1997 - March April 1, 1998 September 30, - December 31,
Country 1997 31, 1998 June 30, 1998 1998 1998
<S> <C> <C> <C> <C> <C>
United States New Early $1,395 $1,195 $995 $795
(US Dollars) Enrollments:
$1,595
Renewals: $1,395
Canada New Early $1,925 $1,650 $1,375 $1,100
(Canadian Enrollments:
Dollars) $2,075
Renewals:
$1,925
</TABLE>
The fees listed do not include taxes. You must calculate and add your local tax
as appropriate.
Please add applicable sales tax if each of your site(s) resides in the following
states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA,
MD, ME, Ml, MN, MO, MS, NC, ND, NE, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN,
TX, UT, VA, VT, WA, WI, WV, WY. In Canada, add a 7% GST, 15% HST, and in BC and
ON, add the PST per your provincial requirements. Microsoft's GST Registration
number is R135625069. Microsoft reserves the right to correct tax rates and/or
collect the state tax assessed by additional states as required by law, without
notice. Microsoft Corporation Federal Tax ID#91-1144442. If you are tax exempt
organization, please attach a copy of your tax exemption certificate. For
assistance in calculating the appropriate taxes for each site, please call
1-800~SOLPROV (1-800-765-7768)
<TABLE>
<CAPTION>
MCSP ID I Site Annual Fee Applicable
Location Amount Taxes Amount Due
<S> <C> <C> <C> <C>
65764 1925 134.75 2059.75
Total 2059.75
</TABLE>
(if needed, add additional page)
Payment Method (circle one): Check VISA Mastercard American Express
By Check: Check # is:
<PAGE> 2
Make checks payable to Microsoft Corporation, in U.S. or Canadian funds.
By Credit Card: # Expiration Date Phone
Name on Card Authorized Signature
Membership acceptance is conditioned upon MS's final approval, payment (which is
due upon receipt of this invoice), the return of the Final Invoice (MCSP) and
MCSP Site Annex (if applicable). Please remit invoice, payment and any
applicable business correspondence to:
Microsoft Certified Solution Provider Applications Processing
P0 Box 573629, Salt Lake City, UT 84157-9805
Any legal notices should be delivered to the applicable Microsoft entity listed
in the Country Annex in your Microsoft Certified Solution Provider Agreement,
Attn: Microsoft Certified Solution Provider Marketing Manager.
ACCEPTANCE OF AGREEMENT
A. FOR NEW ENROLLEES: Subject to MS' final approval, the MCSP identified above,
by signing this Final Invoice (MCSP), agrees that it shall be legally bound by
the terms and conditions of the Agreement, including, but not limited to, the
Site Annex (if applicable), the Country Annex, MCSP Program Guide, the Final
Invoice (MCSP) and any other applicable annexes, addenda and invoices which may
be required in the Territory, all of which terms and conditions are incorporated
herein. Before signing, the MCSP should particularly note and review once again
the bulleted Sections of the Agreement identified in Section C. below. If MCSP
agrees with all of these terms and conditions, MCSP, through its authorized
representative shall complete all required information in the Final Invoice
(MCSP), sign, date and return the Final In voice (MCSP) and the Site Annex (if
applicable), and the appropriate fees to the Microsoft address set forth above.
B. FOR RENEWING MCSP's: Subject to MS' final approval, the MCSP identified
above, through its Electronic Acceptance, or if MCSP is in a Territory that does
not recognize Electronic Acceptance then MCSP's signature on this invoice,
agrees that is shall be legally bound by the terms and conditions of the
Agreement, including, but not limited to, the Site Annex (if applicable), the
Country Annex, MCSP Program Guide, the Final Invoice (MCSP) and any other
applicable annexes, addenda and invoices which may be required in the Territory,
all of which terms and conditions are incorporated herein. Before MCSP submits
its Electronic Acceptance or provides a signature, the MCSP should particularly
note and review once again the bulleted Sections to the Agreement identified in
Section C. below.
If MCSP agrees with all of these terms and conditions, its authorized
representative has submitted its Electronic Acceptance and such representative
shall complete all required information in the Final Invoice (MCSP), date and
return the Final Invoice (MCSP) and the Site Annex (if applicable), and the
appropriate fees to the Microsoft address set forth above.
C. ALL MCSPs SHOULD REVIEW ONCE MORE THE FOLLOWING SECTIONS OF THE
AGREEMENT:
o The confidentiality provisions in Sections 8.C and 10
o The warranty/limited warranties provisions in Section 12
o The exclusion of incidental, consequential and other damages provision
in Section 13
o The limitation of liability provisions in Section 14
o The instructions concerning acceptance of the Agreement in Section 17J.
o The provisions relating to the term and renewal of the Agreement in
Section 3A
The effectiveness of this Agreement is specifically conditioned on MS's final
review and approval. MS shall indicate formal approval of MCSP by a written
acceptance letter sent to the MCSP in the MCSP Welcome Kit, by regular mail. The
capitalized terms used herein shall have the same meaning as set forth in the
Agreement.
ACKNOWLEDGED AND AGREED:
"MCSP"
SysGold Ltd.
[FULL LEGAL COMPANY NAME)
<PAGE> 3
Brad Mooney
[SIGNATURE OF AUTHORIZED REPRESENTATIVE)
[NAME AND TITLE]
Date: 97/12/18
ID: CAN1skuf0ncw3ip5kh50c6w
[MCSPID or ONLINE CONFIRMATION NUMBER)
Very Important: For your application to be processed, this invoice must be
returned with your payment and appropriate tax if applicable.
If you are a NEW MCSP enrollee, before enclosing this invoice with your payment,
please make sure that you have signed this invoice.
NOTE FOR RENEWING MCSP's: If you are a RENEWING MCSP paying by Credit Card, you
may return the invoice and Site Annex (if Applicable) by facsimile.
<PAGE> 1
SEANIX
BUSINESS PARTNER
AUTHORIZED SERVICE CENTRE
SERVICE AND SUPPORT PROGRAM
A. Business Partner Authorized Service Centre
The Authorized Service Centre Program at Seanix
<TABLE>
<CAPTION>
Authorized Service Centre
<S> <C>
Access to Seanix * 30 day 1-800 toll free end-user line
Technical Support * Dedicated technical service line
* Seanix engineering support
Signage / Recognition * ASC plaque
* Marketing material
Financial Rewards * Competitive reimbursement rates
* Automated monthly payment with statements
Other Support * Access to training programs and partnering on training program
* Service request and tracking via the Internet
Customer Service * Perform upgrades and configuration without voiding
manufacturer's warranty
* Priority 1 Advance Exchange cross shipments
To Obtain ASC Status
Authorized Service Centre
Support for Seanix A commitment to Seanix and its product lines
Minimum Monthly $30,000
Sales Commitment
Service Area Dedicated area
Field Service Must have technicians available
Capabilities Must be able to provide corporate references
Technicians Certified Must have one dedicated technician, preferably two certified by Seanix
Parts Must purchase and maintain spare parts kits
Annual Training Must attend annual Seanix Certification seminar
Customer Service Commitment to service all Seanix product, regardless of where sold
</TABLE>
<PAGE> 2
AUTHORIZED SERVICE CENTRE POLICIES AND PROCEDURES
Table of Contents
A. Warranty
a) Seanix Brand Computer Systems
b) Seanix Brand Monitors
B. Warranty Repair Procedures
1.0 Return Credit Authorization ("RCA")
2.0 Priority 1("P1") - Request for key component Cross-shipment
3.0 Repair Work Order ("RWO")
3.1 Repair of components not eligible for cross-shipment.
3.2 Authorization for non-part related repair.
3.3 Repair of Seanix brand name computer systems.
3.4 Repair of Seanix brand name monitors.
4.0 Warranty Labour Reimbursement Rates
Schedule 1 - Dealer - Agreement of Understanding
Warranty
As referenced, the Seanix Warranty is:
Seanix Brand Name
Computer systems - Parts - 3 years from original date of
purchase Labour - 3 years from original date of
purchase 1-800 Hardware Support End-User - free 30
days from original date of purchase ASC - Unlimited
support
Seanix 5 Year Warranty
Additional 2 years (totaling 5 years) Parts Only
Warranty on the following Seanix board components
when purchased as part of a complete Seanix system:
* Motherboard
* Memory
* CPU
* Video Card
Seanix Brand Name
Monitors - Parts - 3 years from original date of purchase
Labour -3 years from original date of purchase
The warranty on computer systems is a depot warranty and includes replacement
components as well as labour. The warranty covers the entire unit with all the
components originally installed by Seanix in its manufacturing facility.
In order to benefit from the warranties provided with the Seanix computer
system, all warranties must be completed and initialized within 30 days of
purchase. The end user, dealer, or corporate customer can initialize warranties
by completing the warranty card included with the computer system at the time of
purchase and mailing it to Seanix.
The length of warranty for components sold separately (not with or for
installation in computer systems) varies depending on the type of component.
These warranties are activated at the time of purchase.
<PAGE> 3
Warranty Repair Procedures
1.0 Return Credit Authorization (RCA)
Seanix's RCA policy applies to equipment that has hardware deficiencies that
have been identified and reported to Seanix within 15 days from Seanix invoice
date to the reseller.
Please note: If an ASC's RCA rate exceeds the national average by more than 2%,
the reseller's ASC status will be reviewed and potentially revoked.
To Request an RCA Number:
1. Select the appropriate menu item from our SMART Service Seanix Web Site or
Fax a completed RCA request form to the Seanix Service Center in Richmond, BC at
604-278-4567
A completed RCA request form must include:
* Seanix invoice number
* model number
* serial number
* previous applicable RWO number (if any)
* a detailed description of the problem.
2. A Seanix Service Representative will contact you to confirm the information,
and resolve any discrepancies.
3. Seanix will fax / e-mail back the RCA number to the ASC.
4. Return the complete equipment freight collect by the carrier designated by
Seanix to: Seanix Technology Service Depot, # 150 - 6651 Elmbridge Way,
Richmond, BC V7C 4N1
Include the RCA number and a copy of the invoice with the returned equipment.
The RCA number must be clearly marked on the waybill and box, otherwise, the
shipment will be refused. The unit must be complete including all accessories,
manuals and software. Should the unit be incomplete, the dealer will be advised
by telephone or fax and the unit will be transferred to an RWO (Repair Work
Order) and processed accordingly. If the wrong equipment was sent, Seanix will
return the equipment (freight collect) to the dealer and the RCA number will be
closed.
5. The equipment will be tested upon receipt at Seanix. When the problem is
confirmed, a credit will be issued within 14 days of receipt at Seanix. If the
problem cannot be confirmed, the dealer will be advised and the system will be
returned to the dealer.
6. Appropriate blank RCA Request Forms are attached (see Appendix A) and
available by contacting the Seanix Service Center at 1-800-663-5656(English).
Any question(s) in regards to these procedures should be directed to your Seanix
Sales or Service Representative.
7. Chronic Hardware Failure
Seanix will consider a system to be replaced under our "lemon policy" under the
following circumstance:
The original equipment has had three hardware replacement issues in the first
six months after purchase. The system must have been returned to Seanix for
hardware diagnosis and replacement at least one of those times. If the system
fails for a fourth time, the system may be eligible for replacement.
2.0 Priority 1 Part Order ("P1") - Request for Advance Exchange Cross-shipment
The Seanix P1 program allows for advance exchange on all the main components
that make a Seanix system unique. All Seanix ASC's are expected to carry spare
part levels which are reflective of your sales volume and your ability to
provide prompt service (both on-site and depot) on most repairs.
This P1 service is only available on the following types of original Seanix
components:
<PAGE> 4
* hard drive * motherboard * video card * power supply * sound cards * modem
* -ROM * floppy drive
To Request a P1 Number:
1. Select the appropriate P1 menu item from our SMART Service Seanix Web Site or
Fax a completed P1 request form to the Seanix Service Center in Richmond, BC at
604-278-4567
A completed P1 request form must include:
* model number
* serial number
* defective part
* detailed description of the problem
* ASC Purchase Order tracking number or credit card number
2. Once the warranty has been validated, a P1 will be issued and faxed I
e-mailed back to the ASC.
3. All requests made prior to 1:00 PM Pacific Time will be processed and shipped
the same day provided the component is available. Seanix will ship the component
with a maximum 2-day delivery time (depending on location - most centres can
expect delivery next day). Remote locations may require an extra day. Same day
service is available in some major Canadian centres subject to premium courier
charges. If the replacement component is not immediately available, the ASC will
be notified with an expected delivery date.
4. The ASC must cross-ship the defective component to Seanix within 15 days of
receipt. Shipping costs to Seanix are the responsibility of the ASC. A summary
sheet of all components and associated P1 numbers must be included in a multiple
component shipment. The P1 number(s) must be clearly marked on the box and the
waybill. The ASC is responsible for the proper packaging of all product shipped
to Seanix. If upon receiving at Seanix, there is physical damage due to poor
packaging, the ASC will be notified and will be responsible for that product.
5. Seanix must receive defective P1 components within 20 days from Seanix date
of shipping. If components are not received within this allocated time frame,
the ASC will be contacted and will have 5 calendar days to return the product.
If Seanix has not been notified by the 25th day, the component will be charged
against either the ASC's purchase order number or credit card number. If the
component is returned to Seanix subsequent to the PO number I credit card being
charged, the component will then be processed as a standard RWO and returned to
the ASC. ASC's exceeding the 20-day cross-ship return date more than 3 times per
quarter may not be eligible for the P1 program. As well, Seanix will not
reimburse the labour on any product that is not returned within this 20-day time
frame.
6. Defective components returned within the 20-day time frame will be received
and tested to confirm the defect reported. Components confirmed defective would
be subject to labour reimbursements as defined in Schedule 1. For any tested
components that are not defective, a second technician will test and confirm,
the ASC will be advised as part of the monthly reimbursement statement, and the
component will be considered a "No Fault Found" component and will not be
considered for labour reimbursement.
7. Labour reimbursements will be issued monthly based on the product returned,
the test results of the returned component, and the rates listed in Schedule 1.
Seanix will issue a statement on the first of the month covering the previous
month's work. The ASC will have until the 10th of the month to report any
discrepancies. Seanix will issue cheques on the 11th of the month and ASC's can
expect their cheques to arrive by mail by the 20th of every month.
3.0 Repair Work Order ("RWO")
Reasons for Requesting an RWO Number:
* Warranty repair of components not available for cross-shipment. This
includes but is not limited to microprocessor fans, DRAM, SRAM, cases, (eligible
for labour reimbursement).
<PAGE> 5
* Authorization to perform non-part related work, such as a flash ROM
upgrade (eligible for labour reimbursement).
* Warranty repair of Seanix brand name computer systems (NOT eligible for
labour reimbursement).
* Warranty repair of Seanix brand name monitors (NOT eligible for labour
reimbursement).
A dealer must request an RWO number when warranty service is required on
components that are not eligible for P1 cross-shipment or warranty work is
required by the ASC that does not involve the replacement of components. In
addition, RWO numbers can be requested for warranty service work that the ASC
would like Seanix to provide. The latter is not eligible for labour
reimbursement.
To Request an RWO Number:
1. Select the appropriate RWO menu item from our SMART Service Seanix Web Site
or Fax a completed RWO request form to the Seanix Service Center in Richmond, BC
at 604-278-4567
A completed RWO request form must include:
* model number
* serial number
* defective part
* detailed description of the problem
A copy of the Seanix invoice or a copy of the end-user's POP may be required in
the last 3 months of the product's eligible warranty period.
2. Once the warranty has been validated, an RWO number will be issued and faxed/
e-mailed back to the ASC.
3. The ASC must return the equipment freight prepaid to:
Seanix Technology - Service Depot
Unit 150 - 6651 Elmbridge Way
Richmond, BC
V7C 4N1
Note: Please do not send shipments collect. As an ASC you are required to incur
the cost to ship the product to Seanix. Seanix will ship the repaired product
back freight prepaid. Collect shipments will be refused and returned to the
sender.
4. A summary sheet of all components and associated RWO numbers must be included
in a multiple component shipment. The RWO number(s) must be clearly marked on
the box and the waybill. The ASC is responsible for the proper packaging of all
product shipped to Seanix. If upon receiving at Seanix, there is physical damage
due to poor packaging, the ASC will be notified and will be responsible for that
product.
5. In the event there are any discrepancies with the serial number or model
number of the component being returned, Seanix will contact the dealer to
determine the correct information. If both parties determine that the wrong
component was sent, Seanix will return the component (freight collect) to the
dealer and will close the associated RWO. For warranty work on systems and
monitors, if any components are missing the dealer will be advised and will be
responsible for the missing items.
6. The repaired component will be returned to the point of origin under the
associated RWO number. Seanix will ship the product via ground freight prepaid
to the ASC. In the event that the component was found to be fully functional, a
second technician will test the component, the dealer will be advised and the
component will be returned to the ASC. The ASC will not be eligible for labour
reimbursement on that RWO number. Warranty repair work of Seanix brand name
computer systems and monitors are not eligible for labour reimbursement.
7. Labour reimbursements will be issued monthly based on the product returned,
the test results of the returned component, and the rates listed in Schedule 1.
Seanix will issue a statement on the first of the month covering the previous
month's work. The ASC will have until the 10th of the month to report any
<PAGE> 6
discrepancies. Seanix will issue cheques on the 11th of the month and ASC's can
expect their cheques to arrive by mail by the 20th of every month.
Any additional questions or specific requirements can be addressed with our
service representatives. A Representative can be reached by contacting Seanix's
1-800 support line at:
1-800-663-5656(English)
4.0 Warranty Labour Reimbursement Rates
ASC
Reimbursement Rates
DEPOT
<TABLE>
<S> <C>
Motherboards - Pentium $75
Motherboards- 486 $40
Hard Drives $55
Video/Sound/Controller Cards, Power Supply, Cache, Ram, Modem
CD-ROM Drives, Floppy Drive, CPU $45
Mice, Keyboards, Speakers, Microphone, Cooling fans (CPU/Case) $10
Non-Part related work, (Prior approval from Seanix required) Labour only as
listed below: Flash ROM upgrade Cards/Components unseated Cable replacement
Display Panel not functioning $10
ON - SITE
Additional claim for travel time (to be added to depot rates) $100
</TABLE>
SCHEDULE 1
AGREEMENT OF UNDERSTANDING
Agreement of Understanding
I, of
Print Name Print Company Name
have read and understood the policies and procedures outlined in the document
attached and for valuable consideration received, the receipt of which is
acknowledged, agree to abide by all of such policies and procedures.
Signed Witnessed
Print Name Print Name
Date: Date:
<PAGE> 1
ETi Solutions
Industry Partner
Agreement
THIS AGREEMENT is made and entered into by and between MIS Solutions, Inc. DBA
as ETi Solutions, a Delaware Corporation ("ETi"), having its principal office at
4755 Oceanside Blvd., Suite 130, Oceanside, California 92056, U.S.A., and
Name ("Partner"): SysGold Ltd.
Address: Suite 450, 250 - 6th Avenue S.W.
Address:
City, State, Zip: Calgary, Alberta T2P 3H7
Phone: (403) 216-6000
Email: [email protected]
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the parties hereto agree as
follows:
Freedom to Enter Agreement: Partner warrants that Partner is free to enter into
this Agreement and to fully perform the duties as well as receive the rights
specified herein. Partner is not bound by any non-competition or similar
agreement previously entered into which would limit or restrict any of Partner's
activities as contemplated by this Agreement
Appointment. ETi hereby appoints Partner to market its Products as listed an
Exhibit "A" in the United States and Canada on a non-exclusive basis. Accounts
must be called in and pre-approved, in advance, by ETi to be accredited.
Independent Contractor Relationship Partner and ETi both acknowledge that
Partner is an independent contractor and is not subject to the control or
direction of ETi as to the method or manner in which Partner performs the
services set forth in this Agreement. Partner shall be solely responsible for
all costs, expenses, taxes, and liabilities incurred or imposed with respect to
Partner's conduct and methods of operation, and shall indemnify, defend, save
and hold ETi harmless from any and all liabilities thereon.
Term: This Agreement shall become effective upon acceptance by ETi and may be
canceled with thirty days written notice by either party.
Title to the Products: Partner acknowledges and agrees that each item comprising
the Products finished pursuant to this Agreement shall be finished solely under
license to Partner or third party licensees. Title to the Products, and each
part thereof, is reserved to ETi and no title to or ownership of the Products,
in whole or in part, is transferred to Partner or third party licensees under
this Agreement, or any licensing arrangement contemplated by this Agreement, and
ETi is and shall remain the owner of each item comprising the Products and any
copy thereof; whether complete or incomplete, no matter where located or in
whose possession. Partner shall not do or fail to do any act or thing which
would impair ETi's ownership or proprietary rights in any portion of the
Products in any manner whatsoever.
General Obligations of ETi:
ETi will provide to Partner an initial free stock of two (2) copies of all
current technical documentation material for the Products and an initial free
stock of ten (10) copies of all marketing material for the Products. Any
additional technical documentation and marketing material will be provided to
Partner at ETi's cost plus shipping charges. Information shipped directly to a
Partners prospect will be sent at ETi's expense.
ETi covenants that it will provide Partner with technical support for the
Products by telephone, email and/or by facsimile transmission.
ETi will provide marketing, support, installation, and training through a
telephone implementation of each product, at no charge to Partner.
General Obligations of Partner:
<PAGE> 2
Partner shall promote, market, distribute, and install, ETi's Products in
accordance with this Agreement in an honest, ethical, diligent, sincere,
businesslike and professional manner. and shall be solely responsible for such
Partner shall not register any patent, copyright, trademark, service mark, or
other proprietary information of ETi, whether or not relating to the Products,
with any country, state. province or other governmental agency without prior
written permission of ETi.
Partner shall not modify, alter, decompile, or reverse-assemble the Product(s)
or any portion thereof in any manner whatsoever.
Partner is required to pre-register all prospects with ETi. If ETi currently has
product installed and/or in test the account will not be approved. Approval will
only be granted for accounts being actively worked by the Partner, and will only
be reserved for 90 days.
Partner is required to sell products based on the price list attached as Exhibit
"B" unless discounts are pre approved by ETi.
Partner shall contact ETi for all customer agreements. Agreements will be sent
directly to the customer for signature.
Customer Billings: ETi will handle all customer billings and collections;
billing shall he in the local currency.
Royalty Payment to Partner: ETi will pay Partner a royalty for product sold by
the Partner according to Exhibit "C". ETi will pay the Partner on the 15th of
each month for all moneys received in the prior month from the customer.
Nondisclosure of Proprietary Property: The Products subject hereto are a
proprietary development and constitute valuable work product in the form of
trade secrets, know how and confidential information, which is the exclusive
property of ETi.
Neither to Act as Agent or Legal Representative: This Agreement does not
constitute Partner the legal agent or legal representative of ETi, or ETi as the
agent or legal representative of Partner for any purpose whatsoever, unless
specifically otherwise provided for herein. Neither party is granted any right
or authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of the other party, or to bind the other
party in any manner or thing whatsoever.
Indemnification: Unless otherwise provided in this Agreement, Partner and ETI
shall each indemnify, defend, save and hold harmless the other against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, and attorneys' fees, that the other party shall incur or suffer,
which arise, result from, or relate to any action or failure to act by Partner
or ETi, as the case may be, by any person or entity whatsoever, or any breach
of, or failure by Partner or ETi, as the case may be, to perform any of its
representations, warranties. covenants, or agreements in this Agreement.
Waiver: No waiver of compliance with or breach of any provision of this
Agreement shall be valid unless in writing, such waiver shall not be deemed a
waiver of future compliance therewith, and such provision shall remain in full
force and effect.
Entire Agreement: This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the subject
matter hereof and contains all of the covenants and agreements between the
parties with respect to said subject matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements
concerning the subject matter of this Agreement have been made, orally or
otherwise, by any party, or anyone acting on behalf of any party, which are not
embodied herein.
Law Governing Agreement: This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
laws of the State of California, United States of America. The parties hereby
acknowledge and agree that this Agreement is made and entered into in the City
of San Diego, County of San Diego, State of California, United States of
America.
<PAGE> 3
Dispute Resolution: All disputes between ETi and Partner relating to this
Agreement will be settled under the rules of conciliation and arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said rules. The arbitration shall take place in San Diego,
California unless agreed otherwise. Any decision rendered shall be final and
conclusive upon both ETi and Partner and a judgment thereon maybe enforced in
any court having jurisdiction. ALL costs incurred in settling a dispute by
arbitration shall be shared in proportion to the parties respective amounts of
liability. Except where clearly prevented by the subject matter of the dispute,
both ETi and Partner will continue performing their respective obligations under
this Agreement while the dispute is being resolved. Notwithstanding the
foregoing ETi shall have the right to institute an action in any court or
tribunal in the event Partner infringes ETi's proprietary rights or Partner
breaches its non-disclosure obligations.
Captions: Captions contained in this Agreement are inserted on]y as a matter of
convenience and in no way define, limit or extend the scope or intent of this
Agreement or any provision hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.
ETi Solutions
By:
John F. Loudermilk
President
Partner
Print Name: BCM van Blokland
EXHIBIT "A"
PRODUCTS
ETi DASD-Plus
Eti Report Manager
Eti Solutions
By:
John F. Loudermilk
President
Partner
By:
BCM. Van Blokland
EXHIBIT "B"
PRICE LIST
Products
ETi DASD-Plus $5,900
ETi Report Manager $1,995
Destinations
ETi Report Manager comes standard with 50 destinations. Additional destinations
may be purchased in the following package groups.
Destinations:
500 $500.00
1,000 $900.00
2,500 $2,200.00
<PAGE> 4
5,000 $ 4,200.00
10,000 $ 8,000.00
15,000 $11,700.00
20,000 $15,200.00
25,000 $18,500.00
30,000 $21,000.00
Maintenance: will be billed at 15% of the list price. No Partner royalty will be
paid on Maintenance.
ETi Solutions
By:
John F. Loudermilk
President
Partner
By:
BCM van Blokland
EXHIBIT "C"
Silver Status 30%
Gold Status 35%
8 Customers and above
Or total sales revenue above $45,000
Platinum Status 40%
15 Customers and above
Or total sales revenue above $95,000
Customer Discount: for any Partner who would like to pass a discount to their
customer, rather than receive the royalty, you must let ETi know at the time you
call in the customer order form.
ETi Solutions
By:
John F. Loudermilk
President
Partner
By:
BCM van Blokland
PRODUCT ORDER FORM
<TABLE>
<CAPTION>
Qty Unit Price Extended Price
<S> <C> <C>
1 ETi REPORT MANAGER $3,995 N/C
2,000 Report Manager Destinations
1 ETi DASD-PLUS $5,900 n/c
Remote Site(s)
1 ETi WORKSTATION $350 n/c
REPORTER
PRODUCT SUB-TOTAL n/c
MAINTENANCE (15%) for 1 year from date of license n/c
(Prorated to reflect 90 days at no charge.)
TOTAL AMOUNT* n/c
</TABLE>
<PAGE> 5
Account Manager
Sales Manager
PERIOD OF USE: Term of the license for each Product is "perpetual". ETi will
provide maintenance and support for the first 90 days after the Installation
Date for each Product. After the first 90 days, maintenance will continue upon
the payment by Customer of a maintenance charge, pursuant to ETi's price list
terms in effect at the Installation Date. ETi's obligation to provide
maintenance, and Customers obligation to pay for maintenance, will be renewed
automatically, pursuant to ETi's price list terms in effect at time of renewal,
for successive one-year periods, unless cancellation in writing is given to the
other party at least thirty (30) days prior to the expiration of the term.
Maintenance and support shall include toll-free telephone technical support, and
all Product updates and maintenance releases. Customer understands and
acknowledges that ETi may develop and market new or different Products which use
all or part of the subject product. Nothing herein permits Customer any rights
with respect to such new or different Products without additional charges.
CHARGES: Customer shall pay to ETi the sum indicated as "Total Amount" on this
ETi Order Form. The full sum is due and payable in net U.S. Dollars upon receipt
of invoice. One-time charges and taxes imposed by the government, whether based
upon the Product, its use, or this agreement, are the additional obligations and
responsibility of the Customer.
ANNUAL INDUSTRY PARTNER LICENSE: The "Industry Partner" shall have the right to
use the listed product(s) for the sole purpose of training and demonstration of
the product(s) for a period of one (1) calendar year form the date of this
agreement. This agreement shall be renewed upon mutual agreement of the "IP" and
ETi Solutions on an annual basis.
Customer Approval
Customer Name: SysGold Ltd.
Address: Suite 450, 250 - 6th Avenue S.W.
Calgary, Alberta T2P 3H7
Print Name: BCM van Blockland
Askoo Systems Professional
Date: April 10/1998
AS/400 Model: 405
O/S Version: V3R7
Media: Optical Disk
Purchase Order No.:
Credit Card: VISA AMX DISC MC
Card #:
Expiration Date:
ETi Solutions
Approved Signature:
Print Name:
Title:
Date:
<PAGE> 1
Arbor Software
Dear Customer,
Enclosed, please find a fully executed copy of the following license
agreement(s) and related attachment(s), if any, for your files:
Evaluation Agreement End-User Third-Party
Non-Disclosure Agreement
Software License Agreement
Support Services Terms and Conditions
Product Schedule Number
Consulting Partner Agreement
OEM Reseller Agreement
Application Partner Agreement
Essbase Ready Development and
Marketing Program Agreement
International Attachment
Addendum
X Other: System Integrator Partner Agreement
Comments:
If you have any questions, or if I can be of assistance to you, please feel free
to contact me at (408) 543-4382.
We are happy to be doing business with you.
Sincerely,
Sandra Gonzales
Administrative Assistant
Contract / Legal Department
Arbor Software
Enclosure(s)
Systems Integrator Partner Agreement
<TABLE>
<CAPTION>
ARBOR PARTNER
<S> <C> <C>
Arbor Software Corporation Company Name: SysGold Inc.
1344 Crossman Avenue Address: Suite 450, 250 - 6th Avenue S.
Sunnyvale, CA 94089 Calgary, Alberta T2P 3H7
Canada
Phone: 408-744-9500 Phone: 403-216-6000
Fax: 408-744-0400 Fax: 403-216-6050
Effective Date: March 1, 1998
Stephen Imbler Kevin J. Sebastian
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Vice President Finance, CFO General Manager
</TABLE>
Arbor and Partner desire to cooperate in joint marketing activities, share sales
opportunity information in return for marketing assistance fees, and develop and
market Partner products, specifically value-added Essbase(R) software
applications. Accordingly, this Arbor Software Systems Integration Partner
Agreement ("Agreement") is made and entered into as of the Effective Date by and
between Arbor Software Corporation and the Partner identified above.
This Agreement consists of this Systems Integrator Partner Agreement, the
attached general terms and conditions, and the attached exhibits.
1. DEFINITIONS
(a) "Agreement" refers to and includes this Systems Integrator Partner
Agreement. the General Terms and Conditions, and the Exhibits. all of which
taken together govern the rights and obligations of Arbor and Partner.
(b) "Bundled Solution" means combinations of copies of Software and
Partner Products sold to End Users as single packages as described on Exhibit B.
(c) "Contract Year" means a year beginning on the last day of the month
containing the Effective Date and on each anniversary of such date thereafter
during the term of this Agreement.
(d) "Demonstration License" means the license of Software used by Partner
to demonstrate Partner Product.
(e) "Development License" means the license of Software used in, and
limited to, the development of Partner Products.
(f) "Development License Fees" means the license fees payable by Partner
in consideration of the Development License.
(g) "Development Support Fees" means the Support fees payable by Partner
in consideration of the Support provided by Arbor in connection with the
Development License.
(h) "Documentation" means the operating instructions, user manuals, read
me files, and all technical information and reference materials, in whatever
form, provided by Arbor.
(i) "Effective Date" means the date first written above.
(j) "End User" means a customer of Partner that licenses Partner Products
and Bundled Solutions for use in its internal business operations.
(k) "End User Evaluation License" means the license of Software used by
Partner to enable the End User to evaluate Partner Products.
(I) "Marketing Assistance Fee" or "MAF" means a fee paid to a Partner who
supplies Arbor with a qualified referral for a previously unidentified Software
license sale opportunity that meets the conditions described in Section 6(h) of
this Agreement or a fee paid to Arbor who supplies a Partner with a qualified
referral for a previously unidentified Partner Product license sale.
(m) "Partner Products" means the computer hardware, software, or services
that Partner provides with Software to provide the Bundled Solution more fully
described in Exhibit B.
(n) "Software" means Arbor's software products in object code form,
including but not limited to Essbase, and related product documentation as more
fully described in Exhibit A. and any updates and modifications to such products
that may be provided by Arbor from time to time.
(o) "Sublicense Fees" means the fees payable by Partner in connection
with each sublicense of the Software granted by Partner whether or not as part
of the licensing of the Partner Product.
<PAGE> 3
(p) "Support" means technical support, software diagnosis, and software
problem analysis and resolution provided over the telephone, by fax, via e-mail,
or by other remote electronic means, and the provision of Updates, bug fixes and
other related services, as described in Exhibit D.
(q) "Territory" means the geographical region and market segment
described in Exhibit A in which Partner has rights to distribute Partner
Products.
(r) "Updates" means maintenance releases, improvements, and enhancements
to the Software or Documentation which are generally provided by Arbor to
current maintenance customers. Updates do not include those releases for which
Arbor charges a separate or additional fee.
2. LICENSE AND DELIVERY
(a) Development License. Upon payment of the Development License Fees
described in Section 6 and Exhibit A, Arbor will provide to Partner the Software
listed in Exhibit A. The Software shall be used by Partner for internal
development purposes only and shall not be used to run the internal operations
of Partner or for the benefit of any third party, nor shall the Software be
provided to any third party.
(b) Distribution of Sublicenses. During the term of this Agreement and
subject to its terms and conditions, Arbor grants to Partner a non-exclusive
right to distribute sublicenses of the Software to Partner's End User customers
within the Territory; provided that Partner may market, sublicense and
distribute the Software only as part of a Bundled Solution to its End Users.
Partner agrees to distribute the Software only with license provisions contained
in a written and signed agreement at least as protective of Arbor's rights as
the limitations of liability, disclaimers, and use restrictions identified in
this Agreement and in the Arbor Software License Agreement contained in Exhibit
F.
(c) Demonstration and End User Evaluation Licenses. Partner may copy
Software for the purpose of demonstrations at Partner locations and at trade
show, user group, or seminar presentations or by Partner sales representatives.
Partner also may copy Software for the purpose of installation at an End User
location for End User evaluation for up to 45 days, after which the Software
shall be considered to be sublicensed and specific sublicense fee payments will
be due. Partner will maintain a list of evaluation and demonstration copies and
supply such list to Arbor upon request. Demonstration and End User Evaluation
copies of the Software may not be rented, leased, transferred, distributed or
assigned by Partner in any manner.
(d) Restrictions on End User Licensing. Partner may extend the
sublicenses granted in subsections (b) and (c) above only to End Users in the
Territory, provided. however, that such End Users shall not include any company,
or the employees or consultants of such company, whose principal line of
business competes directly with Arbor. A current list of such competitors is
provided in Exhibit C. Arbor reserves the right to make changes to Exhibit C
upon prior written notice to Partner.
3. PARTNER OBLIGATIONS
(a) Arbor Attribution. Partner will make commercially reasonable efforts
to ensure that Arbor's corporate and product identifications and copyrights are
preserved including, but not limited to ensuring that all the Arbor corporate
and product names are prominently identified in any collateral, materials or
Documentation produced which describes the Bundled Solution or the Software or
components of either.
(b) Arbor Reputation and Goodwill. Partner agrees to use the current
names used by Arbor for the Software and shall not knowingly make false or
misleading representations with regard to the Software or Arbor. Partner further
agrees to conduct business in a professional manner and act in good faith with
respect to the Software and the good reputation of Arbor.
(c) Minimum Annual Quota. Partner is required to achieve the minimum
annual Sublicense Fee quotas specified in Exhibit A during each Contract Year.
The quotas consist of actual payments made to Arbor by Partner for Sublicense
Fees. Development License Fees and Development Support Fees are not included in
the quotas. Failure to achieve the annual Sublicense Fee quota is cause for
termination of the Agreement as provided in Section 7(b), but Partner is not
required to pay any deficiency between actual Sublicense Fees paid during a
Contract Year and the minimum annual quota.
<PAGE> 4
(d) Minimum Annual Training Commitment. Partner agrees to undertake
during each Contract Year the minimum training specified in Exhibit A by
attending the Arbor training courses listed therein at the prices indicated.
4. MARKETING ACTIVITIES
(a) Public Announcements. Upon the execution of this Agreement, each
party agrees to make reasonable efforts to publicly announce as soon as possible
the general nature and purpose of the relationship created by this Agreement,
provided, however, that any such announcements must have received the prior
written approval of the other party. Any announcement may be made jointly and/or
separately by mutual consent of the parties.
(b) Joint Marketing. During the term of this Agreement, Partner and Arbor
may mutually agree from time to time to engage in joint marketing activities
which promote their products including seminars, press announcements, trade
shows, user groups or other events. Neither party will issue any public
announcement nor publish any materials which reference or discuss the other
party or its products without the prior written consent of the other party.
5. SUPPORT AND SERVICES
(a) Arbor Support to Partner's End Users. Partner will make commercially
reasonable efforts to arrange for each End User to contract directly with Arbor
for Support of the Software. Arbor will provide Support, including all Updates
for Software, directly to Partner's End Users for those End Users who have
contracted with Arbor for such services. Arbor shall not be responsible for
providing maintenance or Support with respect to Partner Products. Any error or
other problem arising from an End User~s use of Partner Products shall be
referred to Partner, and Arbor shall have no further obligation with respect to
such error or problem.
(b) Development Support. In consideration of the payments described in
Section 6(a) and Section 6(b) and specified in Exhibit A, Arbor will provide
Support services to Partner in connection with the Development License during
the periods for which such payments have been made.
(c) Additional Products and Services. In consideration of the payments
specified in Exhibit A, Arbor shall provide to Partner the additional Software
and services specifically described therein.
6. FEES AND PAYMENT
(a) Development License Fees. Upon execution of this Agreement, Partner
shall pay to Arbor the Development License Fees specified in Exhibit A.
(b) Development Support Fees. The payment of the Development Support Fees
for the first Contract Year shall be due 30 days after the Effective Date of
this Agreement. On-going Development Support Fees after the first year shall be
payable on an annual basis in advance of the period for which they apply. Arbor
shall invoice Partner for the Development Support Fees and payment shall be due
30 days after receipt of invoice. Partner will reimburse Arbor's reasonable and
necessary out-of-pocket expenses incurred to provide such Support, payable
within 30 days after receipt of invoice.
(c) Ordering and Shipment or Sublicenses, and other Arbor products or
services. Partner shall submit written orders to Arbor for Software, by
providing Arbor with a customer signed copy of the Arbor Software Maintenance
Services Agreement provided in Exhibit 0, and a Partner's Purchase Order for
both the Software and first year's Maintenance and Support at the time each
order is placed. At a minimum the Purchase Order should list End User Company
name and address, End User contact, Ship To address, and the specific Essbase
product(s) and quantities being ordered, including appropriate server
platform(s). If and only if the End User is already bound by an Arbor standard
Software License Agreement that includes Arbor's standard Maintenance terms and
conditions, Partner may, in lieu of submitting a signed Arbor Software
Maintenance Services Agreement for such End User, include a provision in
Partner's own license agreement described in Section 2(b), that the Maintenance
for the Software shall be provided by Arbor under Arbor's standard Maintenance
terms and conditions and that End User confirms its consent to be bound by such
terms. Partner shall indicate such End User confirmation of consent by including
the Agreement Number of the existing Arbor Standard License Agreement on the
Purchase Order submitted to Arbor on End User's behalf. Arbor will endeavor to
fulfill orders promptly, but may delay orders that are in excess of its capacity
to produce Software in no event shall Arbor be liable for late delivery.
Software shall
<PAGE> 5
be shipped by Arbor F.O.B. Origin, freight prepaid with risk of
loss to pass to Partner upon delivery by Arbor to a common carrier. When
separately ordering Documentation, Internal Development Licenses, Maintenance or
Support, Partner will follow the process described above.
(d) Sublicense Fees. The Sublicense Fees payable by Partner for each such
sublicense will be Arbor's then-current list price for such Software in effect
in the Territory less the applicable discount specified in Exhibit A. Partner
can earn additional volume discounts as specified in Exhibit A by achieving the
annual cumulative fee payment levels specified. Whenever Partner achieves a
specified fee payment level, the stated additional discount percentage shall
become effective. The additional discount percentage in effect at the end of any
Contract Year shall remain effective during the immediately succeeding Contract
Year. However, if during such succeeding Contract Year Partner does not maintain
the annual fee payment level associated with the additional discount percentage,
the additional discount percentage will be reset at the end of such Contract
Year to the applicable level. All discounts are applied prospectively only and
not retroactively. All discounts are based on the then-current Arbor price list
applicable within the Territory. Arbor shall have the right to change its price
list upon 60 days written notice to Partner.
(e) Initial Annual Support Fees for End Users. For all Software
sublicensed by its End Users, Partner shall pay Arbor a fee equal to the first
year of Arbor's then-current Support fees. After the first annual maintenance
period, Arbor shall invoice the End User for Support fees which shall be payable
in advance of the period for which they apply.
(f) Terms of Payment. All payments made to Arbor shall be in U.S.
Dollars. Partner's obligation to pay Arbor under this Agreement shall not be
affected by its ability to collect payment from its Agents and End Users. Arbor
reserves the right to require prepayment for all orders placed by Partner if
Partner fails to maintain prompt payments to Arbor. Partner agrees to pay
interest at the rate of 1.5% per month (or the maximum rate allowed by law,
whichever is lower) on amounts more than 30 days past due, and to pay all
reasonable costs, including attorneys' fees and costs, associated with Arbor's
collection of past due amounts. In addition, Partner will pay all charges
reasonably incurred in the purchase and/or shipment of Software, including
transportation charges, insurance premiums, taxes (except taxes based on Arbor's
net income), duties and other government assessments. Partner will receive full
credit for Software returned to Arbor provided any such return has prior
authorization by Arbor and is accompanied by a valid return authorization
number.
(g) Audit. At any time, Arbor may, upon 5 days written notice and not
more than once in each twelve month period, examine Partner's books and records
related to the amounts due to Arbor. Such examination may be done, at Arbor's
expense, by Arbor or its certified public accounting firm, provided, however,
that if any such audit uncovers one or more underpayments totaling in excess of
5 percent of the correct amount due, Partner shall immediately reimburse Arbor
for the full costs of such audit and the amount of underpayment, if any,
uncovered during the course of the audit.
(h) Marketing Assistance Fee ("MAF"). Arbor will pay a MAF to Partner in
the amount of ten percent (10%) of the net Software license revenue received by
Arbor from Arbor's end users up to a maximum of twenty-five thousand dollars
($25,000) for each qualified referral by Partner of a previously unidentified
Software license sales opportunity. In order to qualify, a referral, the Partner
must (i) register the Software sales opportunity with the appropriate Arbor
Regional Manager and (ii) obtain approval using the Qualifying Order Form
attached as Exhibit E to this Agreement. A MAF request is valid for 90 days
after approval by Arbor. If the Software license sales opportunity does not
close within 90 days, the term of the request may be extended solely at the
discretion of the Arbor Regional Manager for an additional 90 days. No NIAF
request can be outstanding for more than one hundred 180 days. The maximum
cumulative NIAFs that can be received by Partner for referrals into a single
account cannot exceed S50,000. A single account includes all divisions of the
purchasing corporation and all subsidiaries and other corporations more than 50
percent owned by the purchasing corporation.
7. TERM AND TERMINATION
(a) Initial Term. This Agreement and the licenses granted under it shall
remain in effect from the Effective Date of this Agreement for an initial term
of one (1) year and shall automatically renew for subsequent one (1) year terms,
unless either party provides 30 days written notice of termination to the other
party at any time after the expiration of the initial term, or unless otherwise
terminated pursuant to the terms of this Section.
<PAGE> 6
(b) Termination. This Agreement and the license(s) granted under it may
be terminated by: (i) Arbor, if in Arbor's sole opinion, Partner does not
actively and continuously support its End Users; and (ii) Arbor, if Partner
fails to meet any of the minimum annual Sublicense Fee quotas outlined in
Exhibit A; and (iii) by either party if (1) the other party materially fails to
perform or comply with this Agreement or any of its material provisions, or (2)
the other party becomes insolvent, makes an assignment for the benefit of
creditors, ceases to do business, or if any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding is instituted by or against
such party and such proceeding is not terminated within 30 days after
institution of such proceeding.
(c) Effective Date of Termination. Termination shall become effective if
the breach is not remedied within 30 days (10 days in the event of a failure to
make a payment when due) after written notice of termination to the defaulting
party.
(d) Effects of Termination. Upon termination of this Agreement by either
party, all rights and licenses granted under this Agreement shall terminate and
revert to Arbor, except that sublicenses of the Software granted by Partner to
End Users in accordance with this Agreement as of the date of termination will
remain in effect in accordance with their terms and conditions. Upon termination
of this Agreement for any reason, Partner shall (i) cease using all
Demonstration and Development Licenses and Documentation; (ii) cease using any
unused End User Evaluation Licenses, sales literature and other written
information and materials supplied by Arbor pursuant to this Agreement or which
contain Arbor's trademarks; (iii) cease issuing new sublicenses of Software;
(iv) return to Arbor any unused Demonstration and Development Licenses,
Documentation, End User Evaluation Licenses, sales literature and other written
information and materials supplied by Arbor pursuant to this Agreement or which
contain Arbor's trademarks; and (v) no longer identify or hold itself out as an
authorized distributor for Arbor or as otherwise affiliated with Arbor.
General Terms and Conditions
1. Definitions. For the purposes of the General Terms and Conditions,
`Agreement' shall mean the agreement of which these terms and conditions are a
part and Licensee~' shall mean the Licensee, Partner, Systems Integrator, or
Reseller identified in the Agreement.
2. Ownership. Arbor retains all right, title and interest in the Software and in
any ideas, know-how, programs, processes, designs, inventions, works, trade
secrets, and other information, which may be developed by Arbor in the course of
providing any technical services, including any enhancements or modifications
made to the Software (collectively, Arbor Materials"), and all patents,
copyrights, trade secrets, and other proprietary rights in or related to the
Arbor Materials, whether or not specifically recognized or perfected under the
laws of the country where the Arbor Materials are located. Licensee will not
remove, alter or destroy any form of copyright notice, proprietary markings or
confidential legends placed upon or contained within the Arbor Materials.
Further, Licensee will reproduce Arbor's copyright and other proprietary rights
notices on any copies of the Arbor Materials it uses, including archival and
backup copies.
3. Restrictions. Licensee shall not translate, disassemble, reverse engineer,
decompile or otherwise attempt to reconstruct or discover any source code or
underlying ideas or algorithms of; or embodied in, the Software. Licensee shall
not cause or permit unauthorized copying, reproduction or disclosure of any
portion of the Software, or any instructions, manuals, or other Documentation,
or the delivery or distribution of any part of either the Software or the
Documentation, to any third person or entity, for any purpose whatsoever,
including, but not limited to, transmission, uploading, downloading, leasing, or
operating the Software as a timeshare or service bureau without the prior
written consent of Arbor.
4. Confidential Information.
(a) Confidential Information" means all information related to the
business of the disclosing party that may be obtained by the receiving party
from any source as a result of this Agreement, provided that if written, the
information is clearly identified as proprietary or confidential, and if oral,
shall be followed by a written summary of such oral communication within fifteen
(15) days of the date of disclosure. Confidential Information includes (but is
not limited to) source code, algorithms, concepts, pricing information, business
methods, business and technical plans, research and test results, including the
results of any performance or benchmark tests or evaluation of the Software.
(b) What is Not "Confidential Information". Confidential Information does
not include information that the receiving parry can demonstrate throughout
written documentation (i) is or becomes
<PAGE> 7
publicly available through no act or omission of the receiving party; (ii) the
disclosing party discloses to a third party without restriction on further
disclosure; (iii) is rightfully disclosed to the receiving party by a third
party without restriction on disclosure; (iv) is independently developed by the
receiving party without access to the disclosing party's Confidential
Information; or (v) Is previously known to the receiving party without
nondisclosure obligations.
(c) Nondisclosure. Each party agrees that it will not disclose to any
third party any Confidential Information belonging to the other party without
the other party's prior written consent. Each party agrees that it will not use
the Confidential Information of the other party except as authorized in the
Agreement. Each parry further agrees that it will maintain the confidentiality
of all Confidential Information of the other party and prevent the unauthorized
disclosure or use of any Confidential Information by its clients, customers,
employees, subcontractors or representatives. In no event shall any party use
less care to maintain the Confidential Information of the other party than it
uses to maintain the confidentiality of its own similar non-public information.
Each party further agrees to notify the other in writing of any misuse or
misappropriation of the other party's Confidential Information that may come to
its attention.
5. Indemnification by Arbor.
(a) Provided by Arbor. Arbor will defend and settle at its own expense,
and will indemnify Licensee for any damages or expenses including reasonable
attorneys' fees resulting from, any action brought against the Licensee to the
extent that it is based on a claim that the Software infringes any U.S. patent
issued as of the date of the Agreement, or any copyright or trade secret of a
third party in any jurisdiction in which Licensee is licensed by Arbor to use or
distribute the Software, provided that: (i) Arbor is promptly notified in
writing of the claim; (ii) Arbor has sole control of the defense and any
negotiations for its settlement; and (iii) Licensee provides Arbor, at Arbor's
expense, with all reasonable assistance, information, and authority necessary to
perform the above.
(b) Limitations. This indemnity obligation shall not apply with respect
to a claim which arises (i) from the use of a superseded or modified release of
the Software. if the claim would have been avoided by the use of the current or
unmodified release; (ii) from the use, operation, or combination of Software
with programs, data, equipment, or materials not provided by Arbor, if the claim
would have been avoided by the use of the Software without such programs, data,
equipment, or materials; or (iii) to the extent that Licensee continues the
allegedly infringing activity after being informed of and provided modifications
that would avoid the alleged infringement.
(c) Options for Remedy. Should the Software become, or in Arbor's opinion
be likely to become, the subject of any such claim of infringement, then the
Licensee will permit Arbor, at Arbor's option and expense, either: (i) to
procure for Licensee the right to continue using the Software; (ii) replace or
modify the Software so that its use becomes non-infringing; or (iii) refund the
fees paid by Licensee to Arbor for the allegedly infringing Software, provided
that the amount of fees subject to refund shall be amortized on a straight line
monthly basis over a three (3) year period.
6. Indemnification by Licensee. Licensee will indemnify Arbor for any and all
damages, settlements, reasonable attorneys' fees and expenses based on a claim
that the Partner Products infringe any intellectual property right of a third
party, provided that: (i) Licensee is promptly notified in writing of the claim;
(ii) Licensee has sole control of the defense and any negotiations for its
settlement; and (iii) Arbor provides Licensee, at Licensee's expense, with all
reasonable assistance, information, and authority necessary to perform the
above.
7. Limited Warranty and Disclaimer. Arbor warrants that, when delivered and for
a period of ninety (90) days thereafter, the Software will materially conform to
Arbor's current Documentation. This warranty will only apply to problems
reported to Arbor during the warranty period and will not apply: (i) where the
Software is not used in accordance with the Documentation; (ii) if the Software
or any part of thereof has been altered or modified without the prior written
consent of Arbor; or (iii) where a defect in the Software has been caused by any
of Licensee's malfunctioning equipment. EXCEPT FOR ANY EXPRESS WARRANTIES MADE
HEREIN, ARBOR MAKES NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH
REGARD TO THE SOFTWARE AND ANY SERVICES COVERED BY THE AGREEMENT, INCLUDING BUT
NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. ARBOR DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS THAT THE
SOFTWARE IS ERROR-FREE OR REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE
SOFTWARE IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY OR OTHERWISE.
<PAGE> 8
8. Limitation of Remedy. FOR ANY BREACH OF THE SOFTWARE WARRANTY DESCRIBED
ABOVE, LICENSEE'S ENTIRE REMEDY AND ARBOR'S ENTIRE LIABILITY SHALL BE LIMITED TO
REPAIR OR REPLACEMENT OF THE SOFTWARE OR, IF SUCH REPAIR OR REPLACEMENT IS
INADEQUATE AS A REMEDY OR, IN ARBOR'S OPINION, NOT COMMERCIALLY REASONABLE, TO A
REFUND OF THE LICENSE FEES PAID FOR THE SOFTWARE.
9. Limitation of Liability. NEITHER ARBOR NOR LICENSEE WILL BE LIABLE, UNDER ANY
CONTRACT, TORT, STRICT LIABILITY OR OTHER THEORY, FOR ANY SPECIAL, PUNITIVE.
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING, BUT NOT LIMITED TO,
LOSS OF OR DAMAGE TO DATA, LOSS OF ANTICIPATED REVENUE OR PROFITS. WORK STOPPAGE
OR IMPAIRMENT OF OTHER ASSETS, WHETHER OR NOT FORESEEABLE AND WHETHER OR NOT A
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT AS STATED IN
SECTION 5 ABOVE, IN NO EVENT SHALL ARBOR'S LIABILITY UNDER THE AGREEMENT EXCEED
THE TOTAL AMOUNT ACTUALLY PAID TO ARBOR BY LICENSEE UNDER THE AGREEMENT.
10. Taxes. All fees charged by Arbor and payable by Licensee are in U.S. dollars
and do not include taxes. If Arbor is required to pay any sales, use,
value-added or other taxes based on transactions under this Agreement (other
than taxes based on Arbor's income), such taxes shall be billed to and paid for
by Licensee.
11. Export. Licensee acknowledges that the Software, the Confidential
Information of Arbor and all Documentation and other technical information
delivered pursuant to the Agreement (collectively, "Technical Data") are subject
to export controls under U.S. laws including but not limited to the Export
Administration Act and the regulations promulgated thereunder. Licensee agrees
to (a) comply strictly with all legal requirements established under these
controls, (b) cooperate fully with Arbor in any official or unofficial audit or
inspection that relates to these controls, and (c) not export, re-export,
divert, transfer, or disclose directly or indirectly, any Technical Data to any
country, or to the nationals of any such country, which the U.S. government
determines is a country to which such export, re-export, diversion, transfer, or
disclosure is restricted, without obtaining the prior written authorization of
Arbor and the applicable U.S. government agency. Any breach of this provision
shall be considered a material breach of the Agreement.
12. Government Contract. Licensee agrees that it will sublicense the Software to
agencies of the United States government or to contractors acquiring sublicenses
under government contracts only if such agencies or contractors acknowledge and
agree that the Software was developed entirely at private expense and that the
Software is "commercial computer software" and that use, duplication and
disclosure rights are subject to the restrictions stated in paragraph (c)(l)(ii)
of the Rights in Technical Data and Computer Software Clause at DFARS
252.227-7013 or in the Commercial Computer Software Restricted Rights clause at
FAR 52.227-19, as appropriate.
13. Force Ma jeure. Neither party shall be responsible for any delay in its
performance due to causes beyond its reasonable control.
14. Assignment. Licensee may not assign, delegate or otherwise transfer the
Agreement or any of its rights or obligations to a third party and any such
attempted transfer shall be void. Notwithstanding the foregoing, Licensee may
assign, upon written notice to the Arbor, its rights and obligations under this
Agreement to the surviving corporation in any merger or consolidation to which
it is a party or to any entity which acquires all or substantially all of its
capital stock or assets provided that such entity is not a competitor of Arbor.
15. Amendment and Waiver. Any waiver, amendment or modification of any provision
of this Agreement must be in writing. No waiver or consent shall constitute a
continuing waiver or consent or commit a parry to provide a waiver in the future
except as specifically set forth in writing. The failure of either party to
exercise Agreement shall not be any right provided for by this deemed a waiver
of that right.
16. Notices. All notices and other communications required or permitted under
this Agreement shall be in writing addressed to the Chief Financial Officer of
the party being notified at its address first written above, and shall be deemed
given: (a) upon receipt when delivered personally, (b) upon confirmation of
receipt following delivery of registered or certified mail, return receipt
requested, or (c) upon delivery by a recognized overnight courier service which
provides confirmation of delivery.
<PAGE> 9
17. Attorneys' Fees. If either party to this Agreement shall bring any action,
suit, counterclaim, appeal, arbitration or mediation against the other regarding
the terms of this Agreement, the losing party shall pay to the prevailing party
a reasonable sum for attorneys fees and costs as determined by the Court,
arbitrator or mediator.
18. Authority to Sign. Each person signing this Agreement represents and
warrants that he or she is duly authorized and has legal capacity to execute and
deliver this Agreement. Each party represents and warrants to the other that the
execution and delivery of this Agreement and the performance of such party's
obligations have been duly authorized and that the Agreement is a valid and
legal agreement binding on the parry and enforceable according to its terms.
19. Governing Law. This Agreement shall be deemed to have been made in, and
shall be construed under, the laws of the State of California without regard to
its conflicts of laws provisions The United Nations Convention on the
International Sale of Goods shall not apply to this Agreement. In any legal
action relating to this Agreement, Licensee agrees that the federal or state
courts of California located in Santa Clara County shall have the sale and
exclusive jurisdiction over the matter.
20. Survival of Obligations. The following obligations will survive termination
of the Agreement for any reason: (a) all obligations relating to non-use and
nondisclosure of Confidential Information, (b) all obligations relating to
indemnification and protection of proprietary rights; (c) all obligations to
make payments of amounts that are or become due under this Agreement prior to
termination, (d) all obligations regarding maintenance of records for tracking
sublicense fees owing to Arbor; and (e) all provisions regarding the limitations
of warranty, remedy and liability.
21. Severability. Wherever possible, each provision of the Agreement shall be
interpreted in such a way as to be enforceable and valid under applicable law.
If any term or provision of this Agreement is determined to be illegal,
unenforceable, or invalid in whole or in part for any reason, that provision
shall be stricken from this Agreement and shall not affect the legality,
enforceability or validity of the remainder of this Agreement.
22. Entire Agreement. The Agreement, including the General Terms and Conditions
and attached Exhibits, constitutes the entire agreement between the parties. and
supersedes all prior oral or written agreements or communications with regard to
the subject matters described. No additional or conflicting term in a purchase
order or other document shall have any effect on the terms of this Agreement.
EXHIBIT A
Business Terms Summary
I. Development License and Support Fees
One Developer Kit (5 ports) - Development License Fees ($9,500 per license)
$6,500
(Net charge to Partner after application of $3,000 credit for Development
Licenses already purchased under Consulting Partner Agreement previously
executed by and between Arbor and Partner)
Developer License Platform: Windows NT
* 2 Technical Support Contacts are included with first Development License only
* Developer license maintenance renewal is $2,000 per license per year beginning
on the first anniversary date of the Agreement.
II. Additional Software and Services
Partner shall also be entitled to the following discounts from Arbor's then
current list and/or pricing terms on additional Arbor products and services
<TABLE>
<CAPTION>
Products and Services Pricing & Description
<S> <C>
Technical Support Services * Additional Tech Support Contacts $2500 each
Arbor Consulting Services * Quickstart Package $1200 each.
* Additional Consulting services are
available at $1200
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
per day.
Standard Arbor Software Training
Courses * 25% off any generally available Arbor
headquarter based course.
* Limit 3 discounted seats per course for
partners; no limit on per course per
partner at list price.
* 2 additional seats per course are
available as free seats-included in
initial partner program fees.
* 50% off on stand-by course availability-offered
5 days
* in advance of scheduled course date if
seat(s) available.
* Partners will be notified via email of
availability.
On-Site Courses * Includes Up to 8 students in base rate
at 25% off list price.
* Additional students may be added at 25%
off of the price
* specified in Arbor Price list.
* Partner shall reimburse Arbor for
instructor's actual travel costs.
Partner Only Courses * Arbor offers a series of fast track,
compressed courses for partners on a
quarterly basis. If entire week long
series of coursework is purchased,
partner shall be entitled to receive
25% discount from list. If complete
series is purchased, individuals may
attend each course. Individual courses
are available at list price.
Products and Services PRICING & DESCRIPTION
* Course schedules are available from
Arbor Training department.
Education Documentation * Available to Arbor certified instructors
at Arbor List Price.
Product Documentation * Partner may acquire additional Product
Documentation at 25% off of Arbor List Price.
</TABLE>
III. Prepaid Sublicense Fees
The following prepaid sublicense fees are due upon execution of this Agreement:
Prepaid Sublicense Fees Total Fees $ 0
IV. Total Fees Paid
The following fees are due upon execution of this Agreement:
Total Fees Paid (I + II + III): $ 6500
V. Software Available for Sublicensing
Partner shall have the right to sublicense the following products, including
subsequent updates and enhancements to such products commercially released by
Arbor during the term of this Agreement.
<TABLE>
<CAPTION>
Software Description Operating System
<S> <C>
Essbase Analysis Server, Web Gateway, All Arbor-supported platforms
Extended Spreadsheet Add-in, SQL Drill-
Through, SQL Interface, API Toolkit,
Currency Conversion, Tools Bundle
Objects, Partitioning, Wired for OLAP
</TABLE>
<PAGE> 11
VI. Base Discount
The Sublicense Fees payable by Partner for each such sublicense will be Arbor's
then-current list price for such Software in effect in the Territory less the
following discounts.
Base Sublicense Discount 30%
(Note: Wired-for-OLAP must be sublicensed only in conjunction with an Essbase
Software license and as part of a Bundled Solution as set forth in section 2 b)
of the Agreement. Partner shall have no other sublicensing rights for
Wired-for-OLAP.)
VII. Additional Volume Discounts
Partner shall be entitled to additional cumulative volume discounts in
accordance with section 6(d) of the Agreement upon reaching the volume
thresholds set forth below:
<TABLE>
<CAPTION>
Annual Cumulative Sublicense Fees Paid Additional % Sublicense Discount
<S> <C>
0 - $750K (USD) 0%
$750K - $1.5M (USD) 2.5%
$l.5M - $2.5M (USD) 2.5%
> $2.5M (USD) 5.0%
</TABLE>
VIII. Minimum Annual Sublicense Fee Quotas
The following is a summary of the minimum Sublicense Fee and End User Support
Fee amounts due during the term of this Agreement in accordance with Sections
3(c) and 7(b) of the Agreement:
<TABLE>
<CAPTION>
Contract Year Actual Sublicense Fees Paid
<S> <C>
Year 1 $100,000 (USD) I
Year 2 $125,000 (USD)
Year 3 $150,000 (USD)
</TABLE>
IX. Minimum Annual Training Commitment *
Partner agrees to undertake during each Contract Year the minimum training
specified below by attending the Arbor training courses listed therein at the
prices set forth in II above.
<TABLE>
<CAPTION>
Training Course Description Minimum Number of Attendees Discount from List Prices
<S> <C> <C>
Fundamentals I As noted in II
Arbor Sales Training No Charge
</TABLE>
* One class seat for Fundamentals I or II training at an Arbor training facility
is included with the initial development license purchased as part of this
Agreement. Selection of training class provided should be noted in Exhibit A-Il.
Sales training must be completed within 90 days of the date of this Agreement.
X. Approved Territories
The following is a summary of the geographical regions where Partner may
sublicense Arbor Software to Partner's End Users:
<TABLE>
<CAPTION>
Territory Restrictions
<S> <C>
- - Western Canada (BC, AB, SK) Subject to applicable U.S. export laws.
(Territory may be expanded by mutual agreement)
</TABLE>
XI. Additional Terms
1. SysGold will be provided one (1) training course for a consultant to
attend Essbase v5 Fundamentals and Essbase Partitioning (a $1,575 value) at no
charge, provided that course is attended prior to December 31, 1998.
<PAGE> 12
2. SysGold agrees to have one consultant certified as a "Certified Arbor
Professional" ("CAP") by June I, 1998. Additionally, SysGold shall to have one
additional consultant CAP certified by December 31, 1998 (for a total of 2 CAP
certified consultants). Certification requirements are as set forth in Arbor's
documentation on the CAP program.
EXHIBIT B
Partner Product Description
Description of Partner Product(s) to be included in a Bundled Solution.
Bundled Solutions shall be comprised of Arbor Software and Partner's consulting
services with each sublicense of Arbor Software, including ports, sold by
Partner.
EXHIBIT C
Disallowed Customers
(effective May 1, 1997)
Applix
Hyperion, Inc.
Information Advantage
Information Builders, Inc.
Informix Software, Inc.
Kenan Systems Corporation
Kopcke and Associates
Metapraxis
MicroStrategy Inc.
Microsoft Corporation
Oracle Corporation
Pilot Software Corporation
Planning Sciences Ltd.
Platinum Technology
SAS Software
Seagate Software
United Information Technologies, Inc.
EXHIBIT D
MAINTENANCE & SUPPORT SERVICES
1. SUPPORT SERVICE
(a) Summary. In consideration of the fees described in Exhibit A, Arbor
will provide Maintenance Service which includes telephone support services and
Software product maintenance as described herein. The maintenance phase for a
Software product version begins upon the general, commercial shipment date and
continues until such version is retired as described below. All Software updates
or maintenance releases provided to Distributor shall be governed by the terms
of the Agreement. Arbor may change the services included in Maintenance Service
at any time, effective as of the commencement of any renewal period.
(b) Supported Versions. Arbor shall retire prior commercial releases of
the Software (i.e. discontinue problem determination and Bug Fixes) as follows:
(i) one month after the commercial shipment of a maintenance release; (ii) no
sooner than two (2) months after the commercial shipment of a new minor
functional release; (iii) no sooner than six (6) months after the commercial
shipment of a new major functional release. Notwithstanding the foregoing, Arbor
will provide telephone support services for commercial releases with respect to
questions regarding the "how-to" use of a retired release of the Software for
six (6) months following its retirement.
(c) Exclusions. Arbor shall have no obligation to support:
(i) altered, damaged or modified Software;
<PAGE> 13
(ii) Software problems caused by abuse, misapplication,
negligence, or other causes beyond the control of Arbor; or
(iii) Software installed on any computer hardware or in
combination with other software, except as specified in the Documentation.
2. TELEPHONE SUPPORT SERVICES
(a) Staffing. During normal business hours, Arbor shall exercise
commercially reasonable efforts to provide reasonable technical assistance to
any telephone request by Distributor. Such assistance to Distributor shall
include assistance related to the then-currently supported release(s) of the
Software including installation and general use, identification and isolation of
Software and/or Documentation problems, and in providing a conduit for the
reporting of Bugs.
(b) Distributor Contacts. Subject to the terms hereof, Distributor shall
name the number of Distributor contacts specified in Exhibit A hereof to request
and receive telephone support services from Arbor. Additional Distributor
contacts can be designated for the fees described herein. Distributor shall
notify Arbor in writing of any changes to the designated Distributor contacts.
(c) Telephone Assistance not Adequate. In the event that telephone
assistance is not adequate to resolve a problem, upon Distributor's request,
Arbor will dispatch a qualified Software specialist, at Arbor's expense, to the
Distributor site requesting support, provided, however, that Arbor and
Distributor have mutually agreed that on-site support is required and the
parties, in good faith, reasonably believe such on-site support would be
beneficial in resolving the problem. In the event that it is determined that the
problem was not caused by the Software, Distributor shall pay for the on-site
support at Arbor's then-current and standard consulting rates, plus
reimbursement of Arbor's reasonable and necessary out-of-pocket expenses to
provide such support.
3. SOFTWARE PRODUCT MAiNTENANCE
(a) Bug Fixes. Arbor shall exercise commercially reasonable efforts to
correct any Bug reported to Arbor by Distributor which prevents the current,
unmodified release of Software (other than as described in the Documentation)
from performing in accordance with the operating specifications described in the
Documentation. Such reasonable efforts will be based on the severity of such
Bug. "Bug" means a malfunction in the Software which prevents the Software from
materially performing in accordance with Arbor's then-current Documentation for
such Software or an error in the Documentation.
(b) Updates. Maintenance Service will include each Software update,
defined as a new release which increases the functional capabilities or
performance (i.e. minor and major functional releases) of the Software, that
Arbor, in its discretion, makes generally available and which is intended to
replace a prior Software release. For each such update, Arbor shall make
available to Distributor one (1) copy of the machine-readable Software for which
copies may be made in accordance with the Agreement.
(c) Problems Not Classified as Bug's. If, in Arbor's discretion, it is
determined that a problem reported by Distributor may not be due to a Bug in the
Software, Arbor will so notify Distributor. At that time, Distributor may, at
its option, instruct Arbor to proceed with problem determination at the possible
expense of Distributor as set forth below. If Distributor so elects and Arbor
determines that the reported problem was not due to a Bug in the Software, or
was the result of any modifications to the Software or combination of the
Software with other products in a way not described in the Documentation,
Distributor shall pay to Arbor, at Arbor's then-current and standard consulting
rates, a f~e for all work performed in connection with such determination, plus
reasonable related expenses incurred therewith. Distributor shall not be liable
for any such fees or related expenses if the problem is determined to be due to
a Bug(s) in the Software or for work performed after Distributor has notified
Arbor to terminate any problem determination efforts (such notice shall be
deemed given when actually received by Arbor).
EXHIBIT E
MARKETING ASSISTANCE FEE
QUALIFYING ORDER FORM
Client Name
Client Contact Name
<PAGE> 14
Date of Introduction
Anticipated Purchase Amount
Anticipated Purchase Date
Description of Opportunity
Arbor Approval Name Signature * Date of Approval
Regional Manager
VP-Sales
VP - Channel Sales
* Signature or hardcopy of electronic mail approval is acceptable
Partner
Company Name
By
Printed Name
Title
Date
EXHIBIT F
ARBOR SOFTWARE LICENSE AGREEMENT
SOFTWARE LICENSE AGREEMENT
This software license agreement (the "Agreement") is between Arbor Software
Corporation and the person or entity named below ("Licensee"). This Agreement
includes the attached Maintenance Service Terms and Conditions, the attached
Software Copy and Use Restrictions, any Product Schedule(s) that reference this
Agreement by its agreement number and any attachments to the Product
Schedule(s).
1. DEFINITIONS
(a) "Documentation" means, collectively, the operation instructions, user
manuals, help files and all technical information and materials, in written or
electronic form, provided by Arbor to Licensee and that are intended for use in
connection with the Software.
(b) "Port" means the right to access the Server Software with a single
end user computer client, either over a network or through the Internet.
(c) "Product Schedule" means an Arbor authorized product order schedule
for ordering Software and related products and services, or such other document
containing substantially the same information in a form acceptable to Arbor.
(d) "Server Location" means the address at which the Server Software is
to be installed, as indicated in the applicable Product Schedule.
(e) "Software" means each Arbor software program in object code format
set forth in a Product Schedule, including any updates, modifications, or new
releases of such software program that Arbor provides to Licensee from time to
time.
<PAGE> 15
2. GRANT OF LICENSE Arbor grants Licensee the non-exclusive perpetual right to
install and use the Software in accordance with this Agreement. The Software is
licensed by Arbor, not sold.
3. COPY AND USE RESTRICTIONS (a) Licensee's use of the Software is subject to
the terms on the attached Software Copy and Use Restrictions.
(b) Licensee may copy the Software as reasonably necessary for backup,
archival or disaster recovery purposes. Documentation may not be copied.
(c) Licensee may not, nor allow any third party to: (i) decompile,
disassemble, or reverse engineer the Software except to the extent expressly
permitted by applicable law without Arbor's consent; (ii) remove any product
identification or proprietary rights notices; (iii) lease, lend, use the
Software for timesharing or service bureau purposes; (iv) except with Arbor's
prior written permission, publish any performance or benchmark tests or analysis
relating to the Software; or (v) otherwise use or copy the Software except as
expressly provided herein.
4. LICENSE FEES The license fees payable for the Software as set forth in the
Product Schedule(s) are due and payable within thirty (30) days of the date of
invoice. Late payments will bear interest at the rate of 1.5% per month, or, if
lower, the maximum rate allowed by law.
5. MAINTENANCE SERVICES The terms governing any Software maintenance and support
services purchased by Licensee are set out on the attached Maintenance Terms and
Conditions.
6. TRANSFER OF RIGHTS
(a) Licensee may not transfer, assign or delegate its rights or duties
under this Agreement without the prior written consent of Arbor; provided
however, that Licensee may assign its rights in whole (but not in part) (i) to
any entity that acquires substantially all of Licensee's stock or assets or (ii)
to the surviving corporation of any merger, consolidation or reorganization to
which Licensee is a party. No such assignment shall be effective unless (i)
Licensee notifies Arbor of the assignment in writing and (ii) the assignee
agrees in writing to abide by the terms of this Agreement. Any assignment in
violation of the foregoing shall be void.
(b) Licensee may be subject to an additional fee if Licensee installs or
uses the Software in a location outside the country designated as the Server
Location.
7. TERMINATION
(a) Arbor may terminate this Agreement if Licensee fails to cure any
material breach of this Agreement within thirty (30) days of receiving notice of
such breach from Arbor. Upon any such termination, all of Licensee's right to
use the Software shall immediately cease and Licensee shall promptly return to
Arbor or destroy all copies of the Software and Documentation.
(b) Any obligations to pay fees incurred under Sections 4 and 5 prior to
termination and the provisions of Sections 8,9, 10 and 12 shall survive
termination of the Agreement for any reason. Termination is not an exclusive
remedy and all other remedies will be available whether or not the Agreement is
terminated.
8. LIMITED WARRANTY AND DISCLAIMER
(a) Arbor warrants that, when delivered and for a period of ninety (90)
days thereafter, the Software licensed hereunder will materially conform to
Arbor's then-current Documentation for such Software. Arbor further warrants
that all Software delivered to Licensee hereunder will record, store, process
and present calendar dates falling on or after January 1, 2000, in the same
manner, and with substantially similar functionality, as such Software on or
before December 31, 1999.
(b) The preceding warranty will not apply if: (i) the Software is not
used in accordance with the Documentation; (ii) the Software or any part thereof
has been modified without the prior written consent of Arbor; or (iii) a defect
in the Software has been caused by any of Licensee's malfunctioning equipment.
(c) ANY LIABILITY OF ARBOR WITH RESPECT TO ANY SOFTWARE OR THE
PERFORMANCE THEREOF UNDER ANY THEORY WILL BE LIMITED EXCLUSIVELY TO
<PAGE> 16
PRODUCT REPAIR OR REPLACEMENT OR, IF SUCH REPAIR OR REPLACEMENT IS INADEQUATE AS
A REMEDY OR, IN ARBOR'S OPINION, IMPRACTICAL, TO A REFUND OF THE LICENSE FEE
PAID FOR SUCH SOFTWARE. ARBOR DISCLAIMS ALL OTHER WARRANTIES OR CONDITIONS,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OR CONDITIONS
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
9. LiMITATION OF REMEDIES AND DAMAGES Regardless of the basis of recovery
claimed, whether under any contract, negligence, strict liability or other
theory, Arbor's aggregate liability, with respect to any and all subject matters
of the Agreement or any attachment, Product Schedule, or terms and conditions
related thereto will be only for (A) indemnification payments referred to in
Section 10 below, (B) bodily injury (including death) and damage to real and
tangible personal property and (C) the amount of any other direct damages or
loss up to the amount of the license fee paid by Licensee for the Software.
ARBOR SHALL NOT BE LIABLE FOR LOSS OF OR DAMAGE TO, RECORDS OR DATA; COST OF
PROCUREMENT OF SUBSTITUTE GOODS, SERVICES OR TECHNOLOGY; OR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO LOSS
OF PROFITS, EVEN IF ARBOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. INTELLECTUAL PROPERTY INDEMNITY
(a) Arbor shall defend and hold Licensee harmless from any claim by a
third parry that the Software infringes any United States patent, trade secret
or copyright of that third party, provided: (i) Arbor is promptly notified of
the claim; (ii) Arbor receives reasonable cooperation from Licensee in
protecting its rights related thereto; and (iii) Arbor has the opportunity to
assume sole control over the defense and all negotiations for a settlement or
compromise. Arbor will not be responsible for any settlement it does not approve
in writing. The foregoing obligation of Arbor does not apply with respect to
Software or portions or components thereof: (i) not supplied by Arbor; (ii) made
in whole or in part in accordance with Licensee's specifications; (iii) which
are modified by Licensee, if the alleged infringement relates to such
modification; (iv) combined with other products (hardware or software),
processes or materials where the alleged infringement relates to such
combination; or (v) where Licensee continues the allegedly infringing activity
after being notified thereof and provided modifications that would have avoided
the alleged infringement.
(b) In the event the Software is held by a court of competent
jurisdiction to constitute an infringement and its use is enjoined, Arbor shall,
at its sole option, either: (i) procure for Licensee the right to continue use
of the Software; (ii) provide a modification to the Software so that its use
becomes non-infringing; or (iii) replace the Software with software which is
substantially similar in functionality and performance. If none of the foregoing
alternatives is reasonably available to Arbor, Arbor shall refund the residual
value of the License fees paid by Licensee for the infringing Software,
depreciated over a three (3) year period from the date of delivery of the
Software to Licensee. This Section 10 states Arbor's sole liability and
Licensee's exclusive remedy for infringement claims.
11. U.S. GOVERNMENT USERS The Software and Documentation are subject to
Restricted Rights for U.S. Government users asset forth in the installation
program of the Software.
12. GENERAL
(a) Licensee is responsible for the cost of shipping, for payment of all
applicable sales, use and other taxes and all applicable export and import fees,
customs duties and similar charges (other than taxes based on Licensor's net
income) arising from the payment of license or maintenance fees or the delivery
or license of the Software or maintenance services. Licensee will make all
payments without reduction for any withholding taxes, which taxes shall be
Licensee's sole responsibilitv, and Licensee will provide Arbor with such
evidence as Arbor may reasonably request to establish that such taxes have been
paid.
(b) The Agreement shall be governed by and construed under the laws of
the State of California without regard to the conflicts of laws provisions
thereof.
(c) All notices delivered under the Agreement shall be in writing and
deemed given upon receipt when delivered personally or upon confirmation of
receipt following delivery of (I) overnight courier service or (ii) registered
or certified mail, return receipt requested, postage prepaid, in each cased
addressed
<PAGE> 17
to the Legal Department at the address indicated in the last executed Product
Schedule, or at such other address of which one parry is notified by the other
in writing.
(d) If a provision of the Agreement or portion thereof is found to be
invalid or unenforceable under applicable law, it shall be omitted from the
Agreement without invalidating the remainder of such provision or the remaining
provisions of the Agreement
(e) The Software is subject to U.S. export control laws and regulations
and Licensee agrees to comply with all such applicable laws and regulations.
(f) The provisions of the Agreement shall be binding upon and inure to
the benefit of the parties, their successors and permitted assigns.
(g) The Agreement, including the attached Exhibits or Attachments,
represents the entire agreement between the parties, and expressly supersedes
and cancels any prior oral or written agreements on the subjects herein. Each
parry acknowledges that it is not entering into the Agreement on the basis of
any representations not expressly contained herein. Other than as specified
herein, the Agreement may only be supplemented or modified by an amendment in a
writing executed by the parties No additional or conflicting term in a purchase
order or other document shall have any effect.
Agreed by the authorized representatives of the parties.
Licensee: SysGold Inc.
By:
Name: Kevin J. Sebastian
Title: General Manager
Date: March 1, 1998
ARBOR SOFTWARE CORPORATION
By:
Name:
Title:
Date:
SOFTWARE COPY AND USE RESTRICTIONS
This attachment relates to and is incorporated into the above-referenced
Software License Agreement between Arbor Software Corporation and the named
Licensee (the `Agreement'). Capitalized terms not specifically defined below
have the same meaning as in the Agreement.
The following product specific restrictions apply to Licensee's use of the
Software:
1. Licensee may use and install one copy of the following Software products on
one computer at a time at the Server Location;
Arbor Essbase OLAP Server
Arbor Essbase Currency Conversion
Arbor Essbase SQL Interface
2. Licensee may use, install and make unlimited copies of the following Software
products provided that Licensee must license one copy of such product(s) for
each copy of the Arbor Essbase OLAP Server with which it or they will be used:
Arbor Essbase Web Gateway
<PAGE> 18
Arbor Essbase Adjustment Module
Arbor Essbase API
Arbor Essbase Spreadsheet Toolkit
Arbor Essbase Objects
Arbor Essbase SQL Drill-Through
Arbor Essbase Partitioning Option
3. Licensee may use, install and make unlimited copies of the following Software
products:
Arbor Essbase Application Manager
Arbor Essbase Spreadsheet Add-in
4. Licensee may use and install one copy of the following Software products on
one computer at a time:
Personal Essbase
WIRED Windows Client per Seat
WIRED Application Server for NT
5. Licensee may not permit or authorize concurrent access to any Arbor Essbase
OLAP Server or WIRED Application Server for NT by more than the number of Ports
that have been licensed by Licensee for that copy of the respective product.
6. Licensee may use, install and make unlimited copies of the following
Software, provided that Licensee licenses one Port for each Port of the Arbor
Essbase OLAP Server with which it will be used:
WIRED Windows per Essbase Port
7. Licensee may not install or use a copy the Arbor Essbase OLAP Server at a
location different than the Server Location without first notifying Arbor in
writing.
8. WIRED Software products are subject to the use and copy restrictions set
forth above and in the electronic copy of the software license agreement
("Electronic License") contained in such products. The terms and conditions of
the Agreement shall govern when to the extent any term of the Electronic License
is expressly contrary thereto.
EXHIBIT G
ARBOR SOFTWARE MAINTENANCE SERVICES AGREEMENT
MAINTENANCE SERVICE AGREEMENT
This Agreement is between Arbor Software Corporation ("Arbor") and the person or
entity named below ("Licensee") and concerns the provision of certain services
by Arbor with respect to Arbor software products licensed by the Arbor
authorized reseller named above ("Reseller") to Licensee.
1. DEFINITIONS
(a) "Bug" means a malfunction o(the Software that prevents the Software
from performing in accordance with the operating specifications described in the
then current Documentation.
(b) "Documentation" means, collectively, the operation instructions, user
manuals, help files and all technical information and materials, in written or
electronic form, provided by Arbor to Licensee and that are intended for use in
connection with the Software.
(c) "Product Schedule" means each Reseller product order schedule
ordering Software and related products and services for Licensee, or such other
document containing substantially the same information in a form acceptable to
Arbor.
(d) "Software" means each Arbor software program in object code format
set forth in a Product Schedule, including any updates, modifications, or new
releases of such software program that Arbor provides to Licensee from time to
time.
<PAGE> 19
2. MAINTENANCE SERVICES In consideration for the fees described in Section 5
below, Arbor will provide the services described below ("Maintenance Services"):
(a) Standard Telephone Support. During normal business hours (6:00 a.m.
to 5:00 p.m. Pacific Time, holidays excepted) Arbor shall provide Licensee
technical assistance by telephone with the installation and use of the Software,
the identification of Software and or Documentation problems and the reporting
of Bugs. Licensee shall designate two contacts to request and receive telephone
support services from Arbor. Additional Licensee contacts can be designated in
the Product Schedule for Arbor's then current fee. Licensee shall notify Arbor
in writing of any changes to the designated Licensee contacts.
(b) Supplemental Support. Standard telephone support does not include
assistance with Essbase API Toolkit, Essbase Objects, Essbase Web Gateway,
Essbase Adjustments Module and other products for which separate fees are
charged. Licensee may designate contacts to receive telephone support services
specific to use of Arbor's API Toolkit, Essbase Objects, Essbase Web Gateway,
Essbase Adjustments Module or such other products for Arbor's then current
annual fee for each contact.
(c) Software Updates. Arbor will make available to Licensee each minor
and major functional release of the Software, that Arbor makes generally
available without additional charge to its maintenance customers and which is
intended to replace a prior Software release. Arbor shall make available to
Licensee one (I) copy of the machine-readable Software for each Server
Location. A major functional release is indicated by a change in the first digit
of a version number, e.g. from 4.0.0 to 5.0.0; a minor functional release is
indicated by a change in the second digit, e.g. from 4.0.0 to 4.1.0. Maintenance
releases, which are indicated by a change in the third digit of a version
number, e.g. from 5.0.1 to 5.0.2, are provided as needed in response Licensee
inquiry.
(d) Bug Fixes. Arbor shall exercise commercially reasonable efforts to
correct any reproducible Bug reported to Arbor by Licensee.
3. CONDITIONS OF SERVICE
(a) Retirement of Releases. Arbor provides Maintenance Services for a
Software product version from the date the version becomes generally available
until such version is retired. Arbor retires prior commercial releases of the
Software (i.e. discontinue problem determination and Bug fixes) as follows: (i)
one month after the commercial release of the subsequent maintenance release;
(ii) no sooner than two (2) months after the commercial release of a new minor
functional release; (iii) no sooner than six (6) months after the commercial
release of a new major functional release. In all events, however, Arbor will
provide telephone support services with respect to questions regarding the
"how-to" use of a retired release of the Software for six (6) months following
its retirement.
(b) Use of Software. Licensee's use of any Software provided by Arbor as
part of Maintenance Services shall be governed by the terms of the Software
license agreement between Licensee and Reseller. Arbor may change the services
included in Maintenance Service at any time, effective as of the commencement of
any renewal period.
4. TERM AND TERMINATION
(a) Term. Maintenance Service shall be provided for a term of one (1)
year from the delivery date of Software under Licensee's initial Product
Schedule and shall be extended each year for one (1) additional year unless
terminated by either party as provided herein.
(b) Termination. Licensee may terminate Maintenance Service at the end of
the term by giving written notice to Arbor at least thirty (30) days prior to
the end of any such term. Arbor may suspend or cancel Maintenance Service if
Licensee fails to make payment pursuant to Section 5 below. Either party may
terminate Maintenance Service if the other party breaches any material term or
condition of the Maintenance Service terms and conditions and the breach is not
remedied within thirty (30) days after receiving `written notice of the breach.
In the event the Agreement is terminated, Maintenance Service will also
terminate automatically.
5. FEES AND PAYMENT
(a) Fees. The fee for the first year of Maintenance Service for any
Software licensed is specified in the applicable Product Schedule. The
applicable fee for any renewal period shall be Arbor's then
<PAGE> 20
prevailing price. For Software licensed after Licensee's initial order, the term
of Maintenance Service will be set, and the fee will be pro-rated, so that the
coverage periods for all Software licensed to Licensee and covered by
Maintenance Services will coincide. When ordered, Maintenance Service must be
ordered for all of the Software on a Product Schedule.
(b) Payment. Maintenance Service fees will be billed on an annual basis,
payable in advance and due within thirty (30) days of receipt of invoice.
(c) Lapse of Coverage. In the event that coverage for Maintenance Service
lapses as a result of either termination by Licensee for any reason or by Arbor
for Licensee's non-payment, renewal of such service will require payment by
Licensee of a reinstatement fee to Arbor equal to one hundred fifty percent
(150%) of the sum of the fees for any previously unpaid contract period(s) plus
full payment for the subsequent annual period.
6. EXCLUSIONS Arbor shall have no obligation to support:
(a) Software modified without Arbor's written consent;
(b) Use of the Software other than in accordance with the Documentation;
(c) Software installed on any computer hardware or in combination with
other software, except as specified in the Documentation.
7 LIMITATION OF LIABILITY Arbor's aggregate liability for damages from any cause
of action whatsoever relating to Arbor's obligations to provide maintenance
Services shall be limited to the amount paid by Licensee for such services for
the applicable year. ARBOR SHALL NOT BE LIABLE FOR LOSS OF OR DAMAGE TO, RECORDS
OR DATA; COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES OR TECHNOLOGY; OR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED
TO LOSS OF PROFITS, EVEN IF ARBOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
8. SERVICE CONTRACT THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND
NOT A PRODUCT WARRANTY OR CONDITION. ANY WARRANTIES OR CONDITIONS WITH RESPECT
TO THE SOFTWARE IS LIMITED TO THOSE SET FOR IN THE SOFTWARE LICENSE AGREEMENT
BETWEEN LICENSEE AND RESELLER.
9. GENERAL
(a) Licensee is responsible for the cost of shipping, for payment of all
applicable sales, use and other taxes and all applicable export and import fees,
customs duties and similar charges (other than taxes based on Licensor's net
income) arising from the payment of or maintenance fees or the delivery of
Maintenance Service Licensee will make all payments without reduction for any
withholding taxes, which taxes shall be Licensee's sole responsibility, and
Licensee will provide Arbor with such evidence as Arbor may reasonably request
to establish that such taxes have been paid.
(b) The Agreement shall be governed by and construed under the laws of
the State of California without regard to the conflicts of laws provisions
thereof.
(c) All notices delivered under the Agreement shall be in writing and
deemed given upon receipt when delivered personally or upon confirmation of
receipt following delivery of (i) overnight courier service or (ii) registered
or certified mail, return receipt requested, postage prepaid, in each cased
addressed to the Legal Department at the address indicated in the last executed
Product Schedule, or at such other address of which one party is notified by the
other in writing.
(d) If a provision of the Agreement or portion thereof is found to be
invalid or unenforceable under applicable law, it shall be omitted from the
Agreement without invalidating the remainder of such provision or the remaining
provisions of the Agreement
(e) The Software is subject to U.S. export control laws and regulations
and Licensee agrees to comply with all such applicable laws and regulations.
<PAGE> 21
(f) The provisions of the Agreement shall be binding upon and inure to
the benefit of the parties, their successors and permitted assigns.
(g) The Agreement represents the entire agreement between the parties,
and expressly supersedes and cancels any prior oral or written agreements on the
subjects herein. Each parry acknowledges that it is not entering into the
Agreement on the basis of any representations not expressly contained herein.
Other than as specified herein, the Agreement may only be supplemented or
modified by an amendment in a writing executed by the parties. No additional or
conflicting term in a purchase order or other document shall have any effect.
Agreed by the authorized representatives of the parties.
Licensee: SysGold Inc.
By:
Name: Kevin J. Sebastian
Title: General Manager
Date: March 1, 1998
Arbor Software Corporation
By:
Name:
Title:
Date:
EXHIBIT H
ESSBASE SOFTWARE FAMILY PRICE LIST
<PAGE> 22
TECHNICAL TEAM MEETING NOTES - 8/19/98
COLIN CURWEN, GORD JANZEN, JASON CORNICK, STEVEN BLAIR, MIKE SHARESKI
1) CUSTOMERS
a. RESULTS
Network - Firewall problems, but not killing network, VPN installed,
Develop costing for remote access/VPN, Terminal Server in
test phase, procedure needed for backup with Scott
W./James, Budget presentation to Cam to hire Steven, Oscar
and Shannon.
Help Desk -
Onyx - Mike Shareski will be DBA and is going to Seattle on Aug. 24
Forms/Tools -
b. PROJECT STATUS/BUSINESS PLAN REVIEW
SMTP - Steven
- Waiting for server - not ordered yet
- Clients tested and doc'ed
- Plan for migration for - August 28
- Send e-mail blast on 21 to inform people of impending change
- Require review of migration plan with Jason
SBF - Colin
- Carl in Edmonton today installing PC's
- Colin presenting communication options to Bruce and Mike
tomorrow at 2
Result - Colin
- Some snags with installation
- Return visit tonight
- Create e-mail accounts
AMO - Jason
- Survey went great
- Current Plan for Jason and Dan to visit on Monday for two
weeks
- Carl will be assuming Server responsibilities
- Steven will be assuming help desk
ONYX - Colin
- Rick Larsen will be meeting with Colin and Mike
Exchange - Colin
- On hold until Eltron arrives
Wilson - Mike/Gord
- Out of the picture for accounting implementation - Handed
off to Sysgold
- Mike and Gord currently spearheading network planning
- Mike and Gord will be visiting tomorrow
JAWS - Colin
- Needs assessment and project plan for Jaws completed
- Soon will begin ONYX implementation
Durst - Jason
- Winterm shipped last Thursday, supposedly arrived yesterday
- Dave calling today
c. SURVEY/BIDS
<PAGE> 23
Outsourcing - waiting on PRI, AMO phase II in bid stage, Ryder trucks
meeting in September
Distributed -
Training -
2) PEOPLE
Allocations - Jason added to Result short term, Carl assigned to FMA,
Steven assigned Help Desk, Jason on AMO, Gord moved to
FMA-VIP-PRI-DST-CPL
New Hires - Seeking approval for Shannon and Oscar to be hired
3) ENVIRONMENT:
a. ORGANIZATION
b. EQUIPMENT- GORD WILL MOVE WHITEBOARDS, STEVEN MOVED TABLE, NEED KIOSK
BUILT, NEED SWITCHBOXES AND CABLE SPLITTERS
2) PROFIT
a. COSTING TEMPLATE:
- Completed for tech department
b. BUDGET
- Presentation to Cam today
c. LOST SALES
<PAGE> 1
CITRIX SOLUTIONS NETWORK MEMBERSHIP AGREEMENT
This Agreement ("Agreement") is between:
Citrix Systems, Inc. ("Citrix"), a Delaware corporation, located at 6400 NW 6th
Way, Fort Lauderdale, Florida 33309, and FutureLink Distribution Corp., an
Alberta, corporation located at: 550, 603 - 7th Avenue S.W., Calgary, AB T2P 2T5
(the Citrix Solutions Network Member or "CSN Member") -/
Whereas, CSN Member desires to recommend or to provide comprehensive computer
solutions to its customers in the Territory in accordance with the Member
program defined in the attached Schedule; and
Citrix desires to supply Citrix software and provide services and support on
Citrix products to assist CSN Member in providing its customers with such
solutions;
Now, therefore, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. Member Obligations. Pursuant to this Agreement, Member makes the following
promises and undertakes the following obligations to Citrix:
1.1 CSN Member shall procure Citrix products from authorized distributors
of Citrix products in accordance with the terms of the license agreements
provided with each product, provided however that CSN Member may distribute the
Citrix products in accordance with the license granted in Section 2.1 of this
Agreement.
1.2 When requested by Citrix, CSN Member shall provide information to
Citrix regarding sales leads, referrals and services provided relating to the
Citrix products. The information shall be compiled in the form requested by
Citrix or such other form as may be agreed upon by the parties and shall be
forwarded to the Citrix address indicated above.
1.3 CSN Member represents and warrants that all the information provided to
Citrix hereunder, including the information supplied on the completed Schedule
attached to this Agreement, is, in all material respects, true and Correct to
the best of its knowledge and belief, and will Continue to be so during the term
of this Agreement. Should there be any changes in such information during the
course of this Agreement, CSN Member agrees to promptly inform Citrix in
writing, giving details of such changes.
1.4 CSN Member warrants that at all times during the term of this Agreement
at least one (1) full-time member of its staff located at CSN Member's principal
place of business will be a Citrix-certified WinFrame Service Professional.
1.5 Upon execution of this Agreement, the Citrix Solutions Member shall pay
the fees set forth in the Schedule that accompanies this Agreement.
2. Citrix Obligations. Pursuant to this Agreement, Citrix grants the following
license, makes the following promises and undertakes the following obligations
to CSN Member:
2.1 Citrix grants to CSN Member a non-exclusive, non-transferable license
to distribute Citrix products to end users in the Territory pursuant to the
license agreements included with such products.
2.2 Citrix grants to CSN Member a non-exclusive, non-transferable license
to sublicense a limited number of copies of Citrix products to end users for
evaluation purposes only in accordance with the terms of the Citrix Evaluation
Program. The terms of the Citrix Evaluation Program are available upon request
and may be amended by Citrix at any time.
2.3 CSN Member is entitled to the support option shown in the Schedule to
this Agreement.
3. Trademarks.
3.1 During the term of this Agreement, CSN Member shall have the right to
identify itself as a "Citrix Solutions Provider."
3.2 During the term of this Agreement, CSN Member may refer to Citrix
products using the Citrix product trademarks in compliance with local laws and
Customs concerning the protection of trademarks and
<PAGE> 2
trade names if the reference is not misleading and does not indicate or imply
Citrix's endorsement, testing, or approval of any other product or of any
service offered by CSN Member. The appropriate trademark symbol (either "TM"
[standard trademark] or (R) [registered trademark] in a superscript following
the product name) shall be used whenever a Citrix product name is mentioned in
any advertisement, brochure, or material circulated or published in any form
whatsoever by CSN Member. The appropriate trademark symbol must be used in
conjunction with, at least, the first reference to each Citrix product in all
CSN Member's publications.
3.3 Citrix reserves the right to amend any Citrix trademark, service mark
or logo and agrees to notify CSN Member of any such amendments that are relevant
to CSN Member's business. CSN Member agrees to ensure that its use of any such
mark and/or logo is amended accordingly.
3.4 CSN Member shall obtain Citrix's written approval prior to the
commencement of any other use of a Citrix trademark or trade name.
3.5 CSN Member shall not use any Citrix service mark during the term of
this Agreement or thereafter.
4. Confidentiality.
4.1 Each party expressly undertakes to retain in confidence the terms and
conditions of this Agreement and all information transmitted to the other that
the disclosing party has identified in writing as confidential.
4.2 Either party may disclose confidential information as required by
governmental or judicial order, provided such party gives the other party prompt
written notice prior to such disclosure and complies with any protective order
(or equivalent) imposed on such disclosure.
4.3 Neither party shall have an obligation to maintain the confidentiality
of information that (i) it received rightfully from a third party prior to its
receipt to the disclosing party; (ii) the disclosing party has disclosed to a
third party without any obligation to maintain to such information in
confidence; or (iii) is independently developed by the obligated party. Each
party's obligation under this Section shall survive the expiration or earlier
termination of this Agreement and shall extend to the earlier of such time as
the information protected hereby falls into the public domain through no fault
of the obligated party or five (5) years following termination or expiration of
this Agreement.
5. Term and Termination.
5.1 This Agreement shall take effect on the date of its execution by Citrix
("Effective Date"), and unless terminated earlier as provided herein, shall
continue for a period of one year from the Effective Date. Either party shall
have the right to terminate this Agreement at any time, without Cause and
without the intervention of the courts, on the giving of thirty (30) days' prior
written notice. Neither party shall be responsible to the other for any costs or
damages resulting from the termination of this Agreement.
5.2 Upon expiration or termination of this Agreement, all rights and
licenses granted by this Agreement shall revert to Citrix and CSN Member shall
immediately cease use of all licenses and the Citrix Solutions Provider logo,
and shall cease to represent itself as a Citrix Solutions Provider.
6. New Products.
6.1 Notwithstanding any other provisions of this Agreement, Citrix may
elect any time during the term of this Agreement to announce new Citrix products
to which the terms and conditions of this Agreement may not apply. New versions
(upgrades), minor product revisions (updates), and maintenance releases of
existing titles are not considered new Citrix products.
7. Warranties/Limited Warranties.
7.1 Citrix warrants Citrix products on the terms set Out in the license
agreement accompanying each such product. THESE LIMITED WARRANTIES ARE IN LIEU
OF ALL OTHER WARRANTIES AND CONDITIONS, EXPRESSED, IMPLIED, OR STATUTORY,
INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND
<PAGE> 3
AGAINST INFRINGEMENT AND OF ALL OTHER OBLIGATIONS, CONDITIONS, OR LIABILITIES ON
CITRIX'S PART EXCEPT AS OTHERWISE PROVIDED BY APPLICABLE LAW.
8. Limitation of Liability.
8.1 Subject to applicable law, neither Citrix nor anyone else who has been
involved in the creation, production, or delivery of the products or services
that are the subject of this Agreement shall be liable for any direct, indirect,
consequential or incidental damages (including damages for loss of business
profits, business interruption, loss of business information, and the like)
arising out of the use of or inability to use the Citrix products, or provision
of, or failure to provide, support, even if Citrix has been advised of the
possibility of such damages. Because some jurisdictions do not allow the
exclusion or limitation of consequential or incidental damages, the above
limitation may not apply. In any event, except as otherwise provided by law, the
liability of Citrix or its suppliers, whether for negligence, breach of
contract, breach of warranty, or otherwise, shall, in the aggregate, not exceed
the amount paid to Citrix by CSN Member hereunder.
9. General.
9.1 Except as expressly granted herein, no license regarding the use of
Citrix's copyrights, patents, trademarks or trade names is granted or will be
implied.
9.2 If a particular provision of the Agreement is terminated or held by a
court of competent jurisdiction to be invalid, illegal, or unenforceable, this
Agreement shall remain in full force and effect as to the remaining provisions.
9.3 No waiver of any breach of any provisions of this Agreement shall
constitute a waiver of any prior, Concurrent, or subsequent breach of the same
or any other provisions hereof, and no waiver shall be effective unless made in
writing and signed by an authorized representative of the waiving party.
9.4 Neither this Agreement, nor any terms and conditions contained herein,
shall be construed as Creating a partnership, joint venture, franchise or agency
relationship between Citrix and CSN Member.
9.5 CSN Member agrees that it shall inform its Customers that CSN Member is
an independent business from Citrix, and shall not hold itself out as an agent
of Citrix, or attempt to bind Citrix to any third-party agreement. CSN Member
shall defend, indemnify, and hold harmless Citrix from and against all
liabilities, claims, costs, fines, and damages of any type (including attorney's
fees) arising out of or in any way related to CSN Member's delivery of training
services and/or product support to its customers.
9.6 This Agreement, and any rights or obligations hereunder, shall not be
assigned or sublicensed by CSN Member, without prior written Consent from
Citrix.
9.7 This Agreement shall be governed by the laws of the State of Florida
and CSN Member Consents to jurisdiction and venue in the state and federal
Courts sitting in the State of Florida. If either Citrix or CSN Member employs
attorneys to enforce any rights arising Out of or relating to this Agreement,
the prevailing party shall be entitled to recover costs and attorney's fees.
9.8 The making, execution and delivery of this Agreement have been induced
by no representations, statements, warranties or agreements other than those
herein expressed.
9.9 No term or provision of this Agreement may be changed, waived,
discharged or terminated except by a writing signed by duly authorized officers
of the parties hereof. The terms of any other documents or electronic
Communications exchanged (including the terms Set forth on any purchase order)
shall be of no force or effect unless incorporated herein as a modification or
addition to the terms of this Agreement.
9.10 This Agreement and the Schedule (which is incorporated herein by
reference) constitute the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior and Contemporaneous
communications including all prior and Current Citrix Authorized Reseller and
Citrix Authorized Premier Reseller Agreements. It shall not be modified except
by a written agreement dated subsequent to the Effective Date of the Agreement
and signed on behalf of CSN Member and Citrix by their respective duly
authorized representatives.
<PAGE> 4
CSN Member
Company Name: FutureLink Distribution Corp.
Authorized Signature:
Name (printed): James Brecht
Title: Controller
Date: May 5, 1998
Accepted by Citrix Systems
Authorized Signature:
Name (printed)
Title:
Effective Date:
Schedule for Citrix Gold Solutions Provider
CSN Member: FutureLink Distribution Corp.
This is a Schedule to and a part of the Agreement between Citrix Systems, Inc.
("Citrix"), a Delaware corporation, located at 6400 NW 6th Way, Fort Lauderdale,
Florida 33309, and the Citrix Solutions Network Member ("CSN Member") named
above.
1. Purchase Commitment; Territory
1.1 The benefits offered to Citrix Gold Solutions Providers pursuant to
this Schedule are based upon a commitment by CSN Member to achieve an annual
distribution to end users of a minimum of One Hundred Thousand Dollars
($100,000) of Citrix products. During the term of this Agreement, CSN Member
shall inform Citrix if, for any twelve month period beginning on the date of
execution of this Agreement or, in subsequent years, on the anniversary of such
date, the CSN Member shall not achieve this committed volume. The achievement of
the committed volume will be demonstrated at the close of each annual period by
submission to Citrix of copies of paid invoices for Citrix products.
1.2 CSN Member Territory: United States of America and Canada.
2. Fees, Payment Terms
2.1 A fee in the amount of Four Thousand Five Hundred Forty Five Dollars
($4,545) for the products and services provided by Citrix pursuant to this
Schedule shall he submitted to Citrix with CSN Member's signed copy of this
Agreement.
3. Citrix agrees to provide the following products and services to Citrix Gold
Solutions Providers:
3.1 Citrix Tool Box The box will include marketing, sales and technical
information and materials useful in the promotion of Citrix-based solutions for
Windows application deployment and remote Windows computing.
3.2 Citrix Sales Representative - Citrix will assign a Citrix sales
representative to assist Citrix Gold Solutions Providers in the marketing of
products.
3.3 Market Development Program - Citrix will provide up to Fifteen Hundred
Dollars ($1,500) in matching Market Development Funds and Volume Bonus rewards.
These funds may be used to match expenditures by CSN Member for pre-approved
marketing activities such as seminars, mailings and advertising. During the term
of this Agreement, CSN Member will Continue to be eligible to participate in the
Market Development programs offered by Citrix to Citrix Gold Solutions
Providers. All funds expire if not used during the term of the Agreement.
<PAGE> 5
3.4 Volume Bonus Program - For every Fifty Thousand Dollars ($50,000) in
WinFrame products acquired by CSN Member (as demonstrated by submission to
Citrix of copies of paid invoices for Citrix products), CSN Member will receive
one (1) copy of WinFrame for Networks at no charge.
3.5 Sales Lead Program - During the term of this Agreement, CSN Member will
be eligible to participate in Citrix generated sales leads and referrals
programs offered by Citrix to Citrix Gold Solutions Providers in CSN Member's
designated
market place.
3.6 Support Engineer - Citrix will assign a Citrix support engineer to
provide technical support by telephone and/or on-line to each Citrix Gold
Solutions Provider. Such technical support shall:
3.6.1 Be provided only to a CSN Member's Citrix-certified WinFrame
Service Professional;
3.6.2 Consist of access to a Citrix support engineer on weekdays
(other than nationally recognized holidays) between the hours of 8:00 AM and
8:00 PM (EST) for reporting problems encountered in the use of Citrix products
and the provision of workarounds released by Citrix to address reported
problems; and
3.6.3 Require the submission by email of a problem report which
includes a description of the software bug and a test case which demonstrates
the bug on the then current or penultimate release of the Citrix product.
3.7 On-line Technical Support - Citrix Gold Solutions Providers shall be
provided on-line technical support via CompuServe forum and/or BBS and FTP
sites.
3.8 One "virtual" Technical Self Study Kit. The virtual Kit provides a no
charge Technical Self Study Kit should the CSN Member's Citrix-certified
WinFrame Professional cease to be employed by CSN Member
3.9 Not-for-Resale WinFrame Software for Internal Use - Citrix will provide
to each Citrix Gold Solutions Provider one (1) not-for-resale copy of each
Citrix product procured by CSN Member hereunder solely for internal use to
provide support to end users.
3.10 Citrix Corporation Evaluation Program - Each Citrix Gold Solutions
Provider shall be eligible to place Citrix evaluation software at selected
accounts in accordance with the terms of the Citrix Evaluation Program.
<PAGE> 1
July 20, 1998
Mr. William Arnett
SysGold
450, 250 6th Avenue SW
Calgary, Alberta
T2P 3H7
Dear Mr. Arnett,
Please find enclosed your copy of the Solution Provider contract signed by both
yourself and IBM. Also attached is your Focus `98 letter.
Your contract dates are now as indicated on the contract:
Contract Start Date: July 17, 1998 Renewal Date: July 16, 2000
We value you as an IBM Business Partner and wish you every success in your
business.
If you have any questions please call your IBM Representative.
Yours truly
Mathew Ensoll
BP Contract Administration
(905)316-1192
Attachment
IBM Canada Ltd.
Subject: Focus 98 is Available to You on the Web
Dear Business Partner Owner/Principal
We are pleased to announce that Focus 98, your complete guide to IBM's incentive
and support programs, is now available on the Business Partner Home Page. Visit
the site at http://www.can.ibm.com/ibmpartners/Programs for all the details on
our 1998 programs.
Please make your staff aware that our website is the source for 1998 program
information. In response to Business Partner requests for the information in an
electronic format we will not be publishing hard copies of Focus 98. All
programs applicable to your organization can easily be printed as needed and you
will be sure to get the most current information as we will update the website
as required.
Here are some of the highlights of what you'll see when you visit the website.
(Not all programs will apply to all Business Partner so please refer to the "Who
is Eligible to Participate" section for each program.)
* The Business Plan, which acknowledges your agreement to specific IBM
commitments Is available to all Business Partners.
* IBM's business development funding is known by many names depending on your
Business Partner relationship. This funding is based on a percentage of your
revenue and allows you to invest in the growth of your IBM business.
* Performance Bonuses continue to provide leverage for meeting and exceeding
your Business Plan commitments.
* The Customer Satisfaction Program, which includes the `Express Survey
offering, Thomas J. Watson Award Program and Customer First!
* Recognition programs continue to recognize our outstanding Business Partners
as measured against a consistent set of criteria. -
<PAGE> 2
We believe the 1998 Focus Program acts as a solid foundation for us to be
mutually successful. If you have questions on Focus 98 programs please contact
your IBM representative.
Once you have visited the website we'd like to know what you think. On each and
every page within the "Programs" section, you will be provided with the
opportunity to send immediate feedback to us. Simply click on the feedback
button and let us know what you like and what could use some fine tuning. Unlike
the hard copy Focus booklets of previous years which were static once published,
we can update the site as required. Please help us to make the website work for
you.
Martin P. Griscti
Manager, Channel Incentive Programs
IBM Canada Ltd.
(905) 316-4169
IBM Business Partner Agreement for Solution Providers
SysGold Ltd. - IBM Canada Ltd.
1. Marketing Approval
As our IBM Business Partner - Solution Provider, we approve you under the terms
of this Agreement to market Products and Services specified in this Agreement to
End Users. You acquire such Products and Services from an IBM Distributor. We
may specify the type of account or specific industry codes to which you may
market Products and Services. When you do so, you agree that, at a minimum, 80%
of your annual IBM system unit revenue will be to those accounts. Certain
Products we make available to your IBM Distributor are eligible for marketing in
both canada and the United States. Your IBM Distributor will advise you of those
Products which are eligible for export between canada and the United States.
2. Definitions
End User is anyone, who is not part of the Enterprise of which you are a part,
who uses Services or acquires Products for its own use and not for resale.
Enterprise is any legal entity and the subsidiaries it owns by more than 50%.
Machine is a machine, its features, conversions, upgrades, elements,
accessories, or any combination of them. The term `Machine' includes an IBM
Machine and any non-IBM Machine (including other equipment) that we approve you
to market. Product is a Machine or Program. Program is an IBM Program or a
non-IBM Program provided under its applicable license terms, that we approve you
to market. Service is the performance of a task, provision of advice and
counsel, assistance, or use of a resource that we approve you to market.
3. Value Added Enhancement
For Products we specify to your IBM Distributor, you are required to have a
solution which is a value added enhancement that we approve and specify and
which significantly adds to the Product's function and capability. You agree to
market Products and Services only with your approved value added enhancement as
part of an integrated solution for End Users. certain Products we specify do not
require a value added enhancement.
In the event we withdraw approval of your value added enhancement, we also
withdraw your approval as an IBM Business Partner for that value added
enhancement.
We may, at any time, modify the criteria for approval of your value added
enhancement You are responsible to modify your value added enhancement to meet
these criteria.
You agree to market Products, including processor upgrades requiring a processor
serial number change, only to End Users for whom your value added enhancement is
their primary reason for acquiring the Products. A sale to an End User without a
value added enhancement, when required, is a material breach of the Agreement
<PAGE> 3
However, your value added enhancement is not required to be the End User's
primary reason for acquiring upgrades to systems you previously installed with
your enhancement and where your enhancement is still in productive use. Upgrades
include processor upgrades (non-serial number change), peripherals and programs.
Unless we specify otherwise in writing, you may market upgrades only to those
End Users where you have installed your value added enhancement, and who intend
on-going use of that value added enhancement.
4. Our Relationship
Each of us agrees that:
1. each of us is responsible for our own expenses regarding fulfillment
of our responsibilities and obligations under the terms of this Agreement;
2. neither of us will assume or create any obligations on behalf of the
other or make any representations or warranties about the other, other than
those authorized;
3. neither of us will bring a legal action against the other more than
two years after the cause of action arose unless otherwise provided by local law
without the possibility of contractual waiver;
4. failure by either of us to insist on strict performance or to exercise
a right when entitled does not prevent either of us from doing so at a later
time, either in relation to that default or any subsequent one; and
5. IBM may change the terms of this Agreement on one month's written
notice. otherwise, for any other change to be valid, both of us must agree in
writing. changes are not retroactive. Additional or different terms in a
communication from you are void; and
6. IBM reserves the right to assign, in whole or in part, this Agreement
to any other IBM related company.
5. Your Responsibilities To IBM
You agree:
1. to develop a mutually acceptable business plan with us or your IBM
Distributor, as we specify, if we require one. Such plan will document your
marketing plans as they apply to our relationship. IBM or your IBM Distributor
will review the plan, at a minimum, once a year;
2. to provide us, or our representative, with access to your facilities
in order for us to fulfill our obligations and to review your compliance with
the Agreement;
3. to use demonstration and development Products primarily in support of
your Product marketing activities, and to use internal use Products only within
your Business Partner operations;
4. to comply with all terms regarding Program upgrades;
5. your rights under this Agreement are not property rights and,
therefore, you can not transfer them to anyone else or encumber them in any way;
6. to maintain the criteria we specified when we approved you;
7. for a Program requiring the End User's signature on the Program's
license agreement, to obtain the signature before providing the Program to the
End User, and return any required documentation to your IBM Distributor (all
other Programs are licensed under the terms of the agreement provided with
them);
8. to retain records of each Product and Service transaction (for
example, a sale, a credit or a warranty claim) for three years and provide us
relevant records on our request. We may reproduce and retain copies of these
records;
<PAGE> 4
9. to provide information, including installation reporting, to us or
your IBM Distributor, as we require your Distributor to provide to us;
10. to report to us any suspected Product defects or safety problems, and
to assist us in tracing and locating Products;
11. to comply with the highest ethical principles in performing under the
Agreement You will not offer or make payments or gifts (monetary or otherwise)
to anyone for the purpose of wrongfully influencing decisions in favor of IBM,
directly or indirectly. IBM may terminate this Agreement immediately in case of
a) a breach of this clause or b) when IBM reasonably believes such a breach has
occurred; and
12. that the products and deliverables you market in conjunction with IBM
Products and Services are Year 2000 Ready. A product (for example, a machine or
program) or a deliverable is Year 2000 Ready if the product or deliverable, when
used in accordance with its associated documentation, is capable of correctly
processing, providing and/or receiving date data within and between the
twentieth or twenty-first centuries, provided that all products used with the
product or deliverable properly exchange accurate date data with it.
6. Your Responsibilities To End Users
You agree to:
1. be responsible for customer satisfaction and to participate in
customer satisfaction programs as we determine;
2. refund the amount paid for a Product returned to you because the End
User returned it to you under the terms of its warranty or did not accept the
terms of the license. You may return such Products to the IBM Distributor from
whom you acquired them, for credit;
3. develop a plan agreed to by the End User, for installation and post
installation support for the offering you market. For Products and Services we
approve you to market, support includes your being the primary contact for
Product information, technical advice and operational advice associated with the
offering. You may delegate these support responsibilities for Products and
Services, and any other associated products, to another IBM Business Partner who
is approved to market such Products. If you do, you retain customer satisfaction
responsibilities. Alternatively, such support responsibilities will be provided
by IBM if you market the applicable IBM Services to the End User. If you do, we
assume customer satisfaction responsibilities for such support;
4. provide a dated written record, such as a sales receipt or an invoice,
which specifies the End User's name, the part number or Machine type/model, and
serial number, if applicable;
5. inform your End User, in writing, who the warranty provider is, if
other than yourself, and of any other applicable Warranty information, as well
as any modification you or the IBM Distributor make to a Product and advise that
such modification may void the warranty;
6. inform your End User that the sales receipt (or other documentation we
may specify, such as Proof of Entitlement if it is required) will be necessary
for proof of warranty entitlement and for Program upgrades;
7. provide to your End Users the Program Services the IBM Distributor
provides to you; and
8. assist the End User~to achieve productive use of your solution and the
Products and Services you marketed.
7. Status Change
You agree to give us prompt written notice (unless precluded by law or
regulation) of any substantive change or anticipated change to the information
supplied in your application. Upon notification of such change, (or in the event
of failure to give notice of such change) IBM may, at its sole discretion,
immediately terminate this Agreement.
<PAGE> 5
8. Marketing Funds and Promotional Offerings
We may provide marketing funds and promotional offerings. If we do, you agree to
use them according to our guidelines and to maintain records of your activities
regarding the use of such funds and offerings for three years. We may withdraw
or recover marketing funds and promotional offerings from you if you breach any
terms of the Agreement. Upon notification of termination of the Agreement,
marketing funds and promotional offerings will no longer be available for use by
you, unless we specify otherwise in writing.
9. Production Status
Each IBM Machine is manufactured from new parts, or new and used parts. In some
cases, the IBM Machine may not be new and may have been previously installed.
You agree to inform your End User of these terms, in writing Regardless of the
IBM Machine's production status, IBM's warranty terms apply. Warranty
information is available from your IBM Distributor.
10. Warranty Service
If we approve you to provide Warranty Service, you agree to do so for those
Products specified and according to the guidelines provided to you.
11. Marketing of Services
The following are the conditions under which you may market Services, which your
Distributor makes available to you:
1. if you marketed a Product to the End User; or
2. regardless of whether you marketed a Product to the End User, you may
market the Services we specify in this Agreement.
You may market Services on eligible non-IBM Products regardless of whether you
marketed a Machine or Program to the End User.
Marketing of Services for a Fee
If you market an IBM Service which is eligible for a fee and which your IBM
Distributor makes available to you, we will pay the fee to your IBM Distributor.
Alternatively, if such IBM Service is not available from your IBM Distributor,
but is available to you from us, we will pay the fee to you.
In either case we pay the fee when 1) you identify the opportunity and perform
the marketing activities, 2) you provide the order and any required documents
signed by the End User, and 3) a standard Statement of Work is used and there
are no changes, and no marketing assistance from us is required.
Additionally, for Services we specify, and which are not available from your IBM
Distributor, we will pay you a fee when you provide us a lead and the following
criteria are met 1) it is submitted on the form we provide to you, 2) it is for
an opportunity which is not known to us, and 3) it results in the End User
ordering the Service from us within six months from the date we receive the lead
from you.
We will not pay you the fee if 1) the machine or program is already under the
applicable Service, 2) we have an agreement with the End User to place the
machine or program under the applicable Service, or 3) the Service was
terminated by the End User within the last six months.
Remarketing of Services
We provide terms in an applicable Attachment governing your remarketing of
Services the End User purchases from you and which we perform under the terms of
the IBM Service agreement signed by the End User.
Shrink-wrap Services are performed under the terms of the agreement provided
with them. If the terms of the agreement are not visible on the shrink-wrap
package, you agree to provide (or, if applicable, request your Remarketer to
provide) the Services terms to the End User before such Services are acquired by
the End User.
<PAGE> 6
12. Marketing of Financing
If we approve you on the signature page of this Agreement, you may market our
Financing Services for Products and Services and any associated products and
services you market to the End User. If you market our Financing Services, we
will pay a fee if specified in the Business Partner Financing Fee Schedule.
We provide Financing Services to End Users under the terms of our applicable
agreements signed by the End User. You agree, that for the items that will be
financed, 1) you will promptly provide us, or your Distributor, as we specify,
any required documents including invoices, with serial numbers, if applicable,
2) the supplier will transfer clear title to us, and 3) you will not transfer to
us any obligations under your agreements with the End User.
We will make payment for the items to be financed when the End User has
initiated financing and acknowledged acceptance of the items being financed.
Payment will be made to you, your Distributor, or the supplier, as appropriate.
13. Export
You may actively market Products and Services only within the geographic scope
specified in this Agreement. You may not market outside this scope, and you
agree not to use anyone else to do so. If a customer acquires a Product for
export, our responsibilities, if any, under this Agreement no longer apply to
that Product unless the Product's warranty or license terms state otherwise. You
agree to use your best efforts to ensure that your customer complies with all
export laws and regulations including those of the United States and the country
specified in the Governing Law Section of this Agreement, and any laws and
regulations of the country in which the Product is imported or exported. Before
your sale of such Product, you agree to prepare a support plan for it and obtain
your customer's agreement to that plan. Within one month of sale, you agree to
provide us with the customer's name and address, Machine type/model and serial
number, date of sale, and destination country. We exclude these Products from
any of your attainment objectives and qualification for applicable promotional
offerings and marketing funds.
14. Licensed Internal Code
Machines ("Specific Machines") containing Licensed Internal Code will be
identified to you by the IBM Distributor. We grant the rightful possessor of a
Specific Machine a license to use the code (or any replacement we provide) on,
or in conjunction with, only the Specific Machine, designated by serial number,
for which the code is provided. We license the code to only one rightful
possessor at a time. You agree that you are bound by the terms of the separate
license agreement that is provided to you.
Your Responsibilities
You agree to inform your customer and record on the sales receipt, that the
Machine you provide is a Specific Machine. The license agreement must be
provided to the customer before the sale is finalized.
15. Machine Code
For certain Machines we may provide basic input/output system code, utilities,
diagnostics, device drivers, or microcode (collectively called "Machine Code").
This Machine Code is licensed under the terms of the agreement provided with it.
16. Trademarks
We will notify you in written guidelines of the IBM Business Partner title and
emblem which you are authorized to use. You may not modify the emblem in any
way. You may use our Trademarks (which include the title, emblem, IBM Trademarks
and service marks) only:
1. within the geographic scope of this Agreement;
2. in association with Products and Services we approve you to
market; and
3. as described in the written guidelines provided to you.
<PAGE> 7
The royalty normally associated with non-exclusive use of the Trademarks will be
waived, since the use of this asset is in conjunction with marketing activities
supporting sales of Products and Services. You agree to promptly modify any
advertising or promotional materials that do not comply with our guidelines. If
you receive any complaints about your use of a Trademark, you agree to promptly
notify us. When this Agreement ends, you agree to promptly stop using our
Trademarks. If you do not, you agree to pay any expenses and fees we incur in
getting you to stop. You agree not to register or use any mark that is
confusingly similar to any of our Trademarks. Our Trademarks. and any goodwill
resulting from your use of them, belong to us.
17. Liability
Circumstances may arise where, because of a default or other liability, one of
us is entitled to recover damages from the other. In each such instance,
regardless of the basis on which damages can be claimed, the following terms
apply as your exclusive remedy and our exclusive liability.
We are responsible for the amount of any actual direct loss or damage arising
from our negligence or breach of this Agreement, up to the greater of $100,000
or the charges for the Product or Service that is the subject of the claim.
Under no circumstances (except as required by law) are we liable for third-party
claims against you for losses or damages, or for special, incidental, or
indirect charges, or for any economic consequential damages (including lost
profits or savings) even if we are informed of their possibility.
In addition to damages for which you are liable under law and the terms of this
Agreement, you will indemnify us for claims made against us by others
(particularly regarding statements, representations, or warranties not
authorized by us) arising out of your conduct under this Agreement or as a
result of your relations with anyone else.
18. Electronic Communications
Each of us may communicate with the other by electronic means, and such
communication is acceptable as a signed writing to the extent permissible under
applicable law. Both of us agree that for all electronic communications, an
identification code (called a "user lD") contained in an electronic document is
sufficient to verify the sender's identity and the document's authenticity.
19. ConfidentIal Information
This section comprises a Supplement to the IBM Agreement for Exchange of
Confidential Information (AECI). Confidential Information' means:
1. all information IBM marks or otherwise states to be confidential,
2. any of the following prepared or provided by IBM:
a. sales leads,
b. information regarding End Users,
c. unannounced information about Products and Services,
d. business plans, or
e. market intelligence, and
3. any of the following written information you provide to us on our
request and which you mark as confidential
a. reporting data,
b. financial data, or
c. the business plan.
All other information exchanged between us is nonconfidential, unless disclosed
under a separate Supplement to the IBM Agreement for Exchange of Confidential
Information.
20. Ending the Agreement
Either of us may terminate this Agreement, with or without cause, on three
months' written notice. If, under applicable law, a longer period is mandatory,
then the notice period is the minimum notice period allowable.
<PAGE> 8
If we terminate for cause we may, at our discretion, allow you a reasonable
opportunity to cure. If you fail to do so, the date of termination is that
specified in the notice.
However, if either party breaches a material term of the Agreement, the other
party may terminate the Agreement on written notice. Examples of such breach by
you are if you do not maintain customer satisfaction; if you repudiate this
Agreement; or if you make any material misrepresentations to us. You agree that
our only obligation is to provide the notice called for in this section and we
are not liable for any claims or losses if we do so.
If the relationship between you and your named IBM Distributor ends, or the
relationship between IBM and that Distributor ends, and you reapply with a new
IBM Distributor to continue as our Business Partner, you must notify us within
two months 60 days of the name of your new IBM Distributor. We will review your
application to source Products from this IBM Distributor and advise the new IBM
Distributor when the application is approved.
You agree that if we permit you to perform certain activities after this
Agreement ends, you will do so under the terms of this Agreement.
21. Geographic Scope
All the rights and obligations of both of us are valid only in Canada.
22. Governing Law
The laws of the Province of Ontario govern this Agreement. The `United Nations
Convention on the International Sale of Goods' does not apply.
Contract Start Date: July 17, 1998 Renewal Date: July 16, 2000
Unless we specify otherwise in writing, the Agreement will be renewed
automatically for subsequent two year periods. Each of us is responsible to
provide the other three months' written notice if the Agreement will not be
renewed.
Products and Services you are approved to market
<TABLE>
<CAPTION>
Value Added Value Added
Enhancement Enhancement
Products(1) Required (yes/no) Product Required (yes/no)
<S> <C> <C> <C>
AS/400 9401 No AS/400 9402/9404 Yes
AS/400 9406 mdis:600.62012175 Yes PC Products No
S1O,S20.170
</TABLE>
(1) When we approve you to market these Products, you are also approved to
market their associated Product Services.
If you are approved to market the following Services, you may do so without the
requirement to have marketed a Machine or
Program to the End User.
Additional Terms
Attachment for Services Marketing for Solution Provider or Reseller
Yes Form 1030
Minimum Annual Attainment:
When the following Section is completed, you agree to meet the following:
<TABLE>
<CAPTION>
Minimum Annual
Attainment Measurement
Product Volume/Revenue Period Dates
<S> <C> <C>
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
AS/400 Products $70K annual
PC Products n/a n/a
</TABLE>
You acquire Products and Services you market from the IBM Distributors specified
(personal computer Products may be acquired from any IBM approved Distributor).
Distributor: Name and address (if required) of Distributor:
Product: A51400 Products
Distributor: JBA International Ltd.
Address: 80 Tiverton Court. Suite 700
Markham. Ontario
L3R 004
Value added enhancement description:
*Energy Warehouse for the oil and gas industry, which operates on the AS/400
Entry, includes at a minimum: Oil Production Load Module, Gas Production Load
Module, Report Wizard and ESSBase datawarehousing for petroleum*
This Agreement is the complete agreement regarding this relationship, and
replaces any prior oral or written communications between us. Once this
Agreement is signed, 1) any reproduction of this Agreement made by reliable
means (for example, photocopy or facsimile) is considered an original, to the
extent permissible under applicable law, and 2) all Products and Services you
market and Services you perform under this Agreement are subject to it.
If you have not already signed an Agreement for Exchange of Confidential
Information (AECI), your signature on this Agreement includes your acceptance of
the AECI.
Agreed to: (IBM Business Partner name) Agreed to:
SysGold Ltd. IBM Canada Ltd.
Name: William Arnett Name: Wayne Flanigan
Date: 14th July 1998 Date: July 17/98
IBM Business Partner no.: IRA759 IBM address:
IBM Business Partner address: IBM Canada Ltd.
450,250 8th Avenue SW 3800 Steeles Ave. E.
Calgary, Alberta Markham, Ontario
T2P 3H7 L3R 9Z7
SysGold Ltd. - IBM Canada Ltd.
Agreement for Exchange of Confidential Information
This Agreement and its Supplements are the complete and exclusive agreement
regarding our disclosures of Information, and replace any prior oral or written
communications between us. By signing below for our respective enterprises, each
of us agrees to the terms of this Agreement. Once signed, any reproduction made
by reliable means (for example, photocopy or facsimile) is considered an
original.
Agreed to: Agreed to:
SysGold Ltd. IBM Canada Ltd.
450, 250 6th Avenue SW AS/400
Calgary, Alberta 3600 Steeles Avenue East
T2P 3H7 Markham, Ontario
L3R 9Z7
By: By:
<PAGE> 10
Name: William Arnett Name: Wayne Flanigan
Title: VP Title: Natl. Sales Mgr., Midrange
Date: 14th July 1998 Date: July 17/98
Customer No.:
SysGold Ltd. - IBM Canada Ltd. 2
Our mutual objective under this Agreement is to provide appropriate protection
for Confidential Information (Information) while maintaining our ability to
conduct our respective business activities. Each of us agrees that the following
terms apply when one of us (Discloser) discloses Information to the other
(Recipient) under this Agreement.
1.0 Table of Contents
<TABLE>
<S> <C>
1.1 Associated Contract Documents 2
1.2 Disclosure 2
1.3 Obligations 3
1.4 Confidentiality Period 3
1.5 Exceptions to Obligations 4
1.6 Residual Information 4
1.7 Disclaimers 4
1.8 General 5
</TABLE>
1.1 Associated Contract Documents
Each time one of the parties wishes to disclose specific Information to the
other, the Discloser will issue a Supplement to this Agreement (Supplement)
before disclosure.
The Supplement will identify the Recipient's person designated to be its Point
of Contact for the disclosure and will contain the Initial and Final Disclosure
Dates. If either of these dates is omitted from the Supplement, such date will
be deemed to be the actual date of disclosure. Information becomes subject to
this Agreement on the Initial Disclosure Date. The Supplement will also contain
a nonconfidential description of the specific Information to be disclosed and
any additional terms for that Information.
The only time Recipient and Discloser are required to sign the Supplement is
when it contains additional terms. When signatures are not required, the
Recipient indicates acceptance of Information under the terms of this Agreement
by participating in the disclosure, after receipt of the Supplement.
1.2 Disclosure
The Discloser and the Recipient's Point of Contact will coordinate and control
the disclosure. Information will be disclosed either:
* in writing:
* by delivery of items:
* by initiation of access to Information, such as may be contained
in a data base: or
* by oral and/or visual presentation.
Information should be marked with a restrictive legend of the Discloser. If
Information is not marked with such legend or is disclosed orally:
* the Information will be identified as confidential at the time of
disclosure; and
* the Discloser will promptly provide the Recipient with a written
summary.
1.3 Obligations
The Recipient agrees to:
<PAGE> 11
* use the same care and discretion to avoid disclosure, publication or
dissemination of the Discloser's Information as it uses with its own similar
information that it does not wish to disclose, publish, or disseminate; and
* use the Discloser's Information for the purpose for which it was
disclosed or otherwise for the benefit of the Discloser.
The Recipient may disclose Information to:
1. its employees and employees of its Related Companies who have a need
to know. A Related Company is any corporation, company, or other entity
* more than 50 percent of whose voting shares are owned or controlled
directly or indirectly by Recipient,
* which owns or controls, directly or indirectly, more than 50 percent
of voting shares of Recipient, or
* more than 50 percent of whose voting shares are under common
ownership or control, directly or indirectly, with the voting shares of the
Recipient.
However, any such corporation, company, or other entity is considered
to be a Related Company only so long as such ownership or control exists.
Voting shares are outstanding shares or securities representing the
right to vote for the election of directors or other managing authority or an
ownership interest representing the right to make decisions for an entity.
2. any other party with the Discloser's prior written consent.
Before disclosure to any of the above parties, the Recipient will ensure there
is a written agreement with such party sufficient to require that party to treat
Information in accordance with this Agreement.
For purposes of the remaining terms of this Agreement, the word "Recipient"
includes Related Companies.
The Recipient may disclose Information to the extent required by law. However,
the Recipient will give the Discloser prompt notice to allow the Discloser a
reasonable opportunity to obtain a protective order.
1.4 Confidentiality Period
Information disclosed pursuant to this Agreement will be subject to the terms of
this Agreement for two years following the Final Disclosure Date.
1.5 Exceptions to Obligations
The Recipient may disclose, publish, disseminate, and use Information that is:
* already in its possession without obligation of confidentiality;
* developed independently;
* obtained from a source other than the Discloser without obligation of
confidentiality;
* publicly available when received, or thereafter becomes publicly
available through fault of the Recipient; or
* disclosed by the Discloser to another party without obligation of
confidentiality.
1.6 Residual Information
The Recipient may disclose, publish, disseminate, and use the ideas, concepts,
know-how and techniques, related to the Recipient's business activities, which
are contained in the Discloser's Information and retained in the memories of
Recipient's employees who have had access to the Information pursuant to this
Agreement (Residual Information).
Nothing contained in this Section gives the Recipient the right to disclose,
publish, or disseminate, except as set forth elsewhere in this Agreement:
* the source of Residual Information;
* any financial, statistical or personnel data of the Discloser; or
* the business plans of the Discloser.
<PAGE> 12
1.7 Disclaimers
THE DISCLOSER PROVIDES INFORMATION WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND.
The Discloser will not be liable for any damages arising out of the use of
Information.
Neither this Agreement nor any disclosure of Information grants the Recipient
any right or license under any trademark, copyright or patent now or hereafter
owned or controlled by the Discloser.
For greater certainty, the Discloser may change or cancel, at any time, any
business plans in its Information and the use of such Information is at the
Recipient's own risk.
The receipt of Information pursuant to this Agreement will not preclude, or in
any way limit, the Recipient from:
* providing to others products or services which may be competitive with
products or services of the Discloser;
* providing products or services to who compete with the Discloser; or
* assigning its employees in any way may choose.
1.8 General
This Agreement does not require either party to disclose or to receive
Information.
Neither party may assign, or otherwise transfer, its rights or delegate its
duties or obligations under this Agreement without prior written consent. Any
attempt to do so is void.
The Recipient will comply with all applicable government export and import laws
and regulations.
Only a written agreement signed by both of us can modify this Agreement.
Either party may terminate this Agreement by providing one month's written
notice to the other. Any terms of this Agreement which by their nature extend
beyond its termination remain in effect until fulfilled, and apply to respective
successors and assignees.
If there is a conflict between the terms of this Agreement and a Supplement,
those of the Supplement prevail. Except as modified by a Supplement, the terms
of this Agreement remain in full force and effect.
This Agreement is governed by the laws in the Province of Ontario.
* * * END * * *
IBM Business Partner Agreement
Attachment for Services Marketing
for Solution Provider or Reseller
SysGold Ltd. - IBM Canada Ltd.
The following terms govern your marketing of Services you acquire from your iBM
Distributor and which the End User purchases from you and which we perform under
the terms of the IBM Agreement for Services Acquired from an IBM Business
Partner (IBM Service Agreement). We provide additional terms to you, if any, in
specific Service Attachments, or transaction documents.
1. IBM Services
Services may be either standard offerings or customized to the End User's
specific requirements. Each Service transaction may include one or more Services
that:
1. expire at task completion or an agreed upon date;
<PAGE> 13
2. automatically renew as another transaction with a specified contract period.
Renewals will continue until the Service is terminated; or
3. do not expire and are available for use until either of us terminates the
Service, or we withdraw the Service.
If we make a change to the terms of a renewable Service that affects the End
User's current Service Agreement contract period and the End User considers it
unfavorable and you advise your Distributor, who is responsible to advise us in
writing, we will defer the change until the end of that contract period.
2. Service Charges
Prepaid Services must be used within the applicable contract period. If we
withdraw a Service which has been prepaid, and we have not fully provided such
Service, we will give a prorated refund to your Distributor. Otherwise, we do
not give credits or refunds for unused prepaid Services.
If an End User is eligible for a credit under the terms of the IBM Service
Agreement (for example, a satisfaction guarantee credit, or a credit for
withdrawn Services not fulfilled), you agree to ensure the applicable credit is
issued to the End User. Your Distributor will issue the appropriate credit to
you.
You may market Services we make available to your Distributor on a
recurring-charge basis, only on a recurring charge basis.
3. Notices
Each of us agrees to give the other a copy, through your Distributor, of notices
or requests received from or sent to an End User, applicable to the IBM Service
Agreement.
You agree to ensure certain Service Attachments and transaction documents, if
any, are made available to End Users for their signature, if required. Such
documents may have terms in addition to those we specify in the IBM Service
Agreement.
4. Services Requirements Changes
During the Service period you may update the requirements, including adding
Products to be covered by the Service, as well as increasing the Service
requirements. We will adjust our invoicing to your Distributor accordingly.
Check with your Distributor to determine if you will incur an additional charge.
5. Termination of Services
If either IBM or the End User does not meet its obligations concerning a
Service, the other party may terminate the Service. We will inform your
Distributor of any such termination.
You may terminate an expiring or renewable Service transaction. Check with your
Distributor to determine if you will incur a charge for such termination.
For a Service the End User terminates, you agree to ensure we are provided one
month's written notice from the End User. For a Service you decide to terminate,
you agree to provide one month's written notice to us and the End User.
* * * END * * *
<PAGE> 1
Hewlett Packard
March 19, 1998
Bill Arnett
SysGold Inc.
430-150-6th Ave S.W.
Calgary, Alberta T2P 3H7
Dear Bill,
Congratulations! The Distributor Authorized Reseller application you submitted
has been approved. You have been authorized to sell the HP products listed below
under the terms of Hewlett-Packard's DAR program.
Distributor Name: Ingram Micro Inc.
DAR Number: CAN00931
Effective Date: March 19, 1998
Expiration Date: March 19, 1999
Products: HP9000
Value-add: Energy Warehouse Program/Outsourcing IT Services
Target Geography: British Colombia
Target Market: (A) Restricted to only selling HP Products into accounts
purchasing your Energy Warehouse Program or Outsourcing IT Services as per
Business Plan submitted with DAR Application.
(B) Requires written HP-RSM approval to sell Outsourcing IT Services into
existing HP accounts
DAR Account Type: Solution Implementor
You are expected to ensure that all sales are made as specified in the
application with the above value-add into the above geography. Please be advised
that this authorization is for a 12-month period beginning on the Effective Date
and ending on the Expiration Date listed above, and providing your business
focus has not changed.
To secure authorization status, you have six months to become compliant with the
HP certification requirements of a minimum of one HP certified sales
professional, one HP certified presales technical consultant and one HP
certified postsales technical consultant per selling region in which you are
authorized. Certification is required by product line (HP9000 workstations and
servers), is based on the product line being resold, and is effective for one
year; annual recertification is required. Please refer to the training and
certification overview enclosed.
To help our resellers remain up-to-date with Hewlett-Packard products and
programs, a regular communication plan is also being established. Please
complete and return the enclosed faxback form to ensure that the appropriate
people in your company are kept informed of HP update training sessions, video
and audioconferences. We appreciate your interest in the DAR program and look
forward to your success with Hewlett-Packard products.
Regards,
Jay Khaira
Distribution Account Manager
Hewlett-Packard (Canada) Ltd.
cc: Geoff Coutts Hewlett-Packard (Canada) Ltd.
Alan Taylor Hewlett-Packard (Canada) Ltd.
<PAGE> 2
Deanna Hicken Hewlett-Packard (Canada) Ltd.
Judy Morellato Hewlett-Packard (Canada) Ltd.
Bernie Schmidt Ingram Micro Inc.
Fred Shaw Ingram Micro Inc.
Liz Groves Ingram Micro Inc.
Andrew Skidd Ingram Micro Inc.
<PAGE> 1
SECURITY AGREEMENT
Branch: 309 - 8th Avenue S.W., Calgary, AB T2P 1C6
For valuable consideration, the undersigned (the "Customer") agrees with
Canadian Imperial Bank of Commerce ("CIBC',) as follows:
1. Grant of Security. The Customer mortgages, charges and assigns to CIBC, and
grants to CIBC, and CIBC takes, a Security Interest in the property described in
the following paragraph or paragraphs of this section (as applicable in
accordance with the NOTE appearing at the end of this section), and in all
property described in any schedules, documents or listings that the Customer may
from time to time sign and provide to CIBC in connection with this Agreement,
and in all present and future Accessions to, and all Proceeds of, any such
property (collectively, the "Collateral") as a general and continuing collateral
security for the due payment and performance of the Liabilities:
(a) Specific Personal Property: the Personal Property described in
Schedule A.
(b) All Personal Property: all of the Customer's present and
alter-acquired undertaking and Personal Property (including any property that
may be described in Schedule A).
(c) All Real Property: all of the Customer's present and after-acquired
real property (including any property that may be described in Schedule A),
together with all buildings placed, installed or erected on any such property
and all fixtures.
NOTE: check appropriate box or boxes to indicate which of paragraphs (a), (b) or
(c) are to apply. If no box is checked off, paragraph (b) will apply.
2. Governing law. This Agreement is governed by the laws of Alberta
ADDITIONAL TERMS AND CONDITIONS. THE ADDITIONAL TERMS AND CONDITIONS (INCLUDING
ANY SCHEDULES) ON THE FOLLOWING PAGES FORM PART OF THIS AGREEMENT
The Customer has signed this Agreement on December 11, 1997
Customers Name in Full: Riverview Management Corporation
1000, 400 - 3 Avenue S.W., Calgary, AB T2P 4H2
Note: If the Customer is a corporation, the office (such as "President" or
"Secretary") of the person signing should be noted below that person's
signature.
FOR INDIVIDUALS ONLY, record the following information:
First and second names in full; surname
Birth Date:
Sex: M/F
*For Alberta, Ontario, Saskatchewan and the Yukon, record: day/month/year.
For British Columbia, Manitoba, New Brunswick and Nova Scotia, record:
year/month/day.
BANK COPY
Schedule A
The following is description of property included in the Collateral (describe
personal property item or kind; if s pace is insufficient, use a separate
sheet):
Schedule B
The following are the Places of Business (if space is insufficient, use a
separate sheet)
BANK COPY
<PAGE> 2
ADDITIONAL TERMS AND CONDITIONS
3. Places of Business. The Customer represents and warrants that the locations
of all existing Places of Business are specified in Schedule B. The Customer
will promptly notify CIBC in writing of any additional Places of Business as
soon as they are established. Subject to section 5, the Collateral will at all
times be kept at the Places of Business and will not be removed without CIBC's
prior written consent.
4. Collateral Free of Charges. The Customer represents and warrants that the
Collateral is. and agrees that the Collateral will at all times be, free of any
Charge or trust except in favour of CIBC or incurred with CIBC's prior written
consent. CIBC may, but will not have to pay any amount or take any action
required to remove or redeem any unauthorized Charge. The Customer will
immediately reimburse CIBC for any amount so paid and will indemnify CIBC in
respect of any action so taken.
5. Use of Collateral. The Customer will not, without CIBC's prior written
consent, sell, lease or otherwise dispose of any of the Collateral (other than
inventory, which may be sold. leased or otherwise disposed of in the ordinary
course of the Customer's business). All Proceeds of the Collateral (including
among other things all amounts received in respect of Receivables), whether or
not arising in the ordinary course of the Customer's business, will be received
by the Customer as trustee for CIBC and will be immediately paid to CIBC.
6. Insurance. The Customer will keep the Collateral insured to its full
insurable value against loss or damage by fire and such other risks as are
customarily insured for property similar to the Collateral (and against such
other risks as CIBC may reasonably require). At CIBC's request, all policies in
respect of such insurance will contain a loss payable clause, and if the
Collateral includes real property will contain a mortgage clause, in favour of
CIBC and in any event the Customer assigns all proceeds of insurance on the
Collateral to CIBC. The Customer will, from time to time at CIBC's request,
deliver such policies (or satisfactory evidence of such policies) to CIBC. If
the Customer does not obtain or maintain such insurance, CIBC may, but will not
have to, do so. The Customer will immediately reimburse CIBC for any amount so
paid. The Customer will promptly give CIBC written notice of any loss or damage
to all or any part of the Collateral.
7. Information and Inspection. The Customer will from time to time immediately
give CIBC in writing all information requested by CIBC relating to the
Collateral, the Places of Business and the Customer's financial or business
affairs. The Customer will promptly advise CIBC of the Serial Number, model
year, make and model of each Serial Number Good at any time included in the
Collateral that is held as Equipment, including in circumstances where the
Customer ceases holding such Serial Number Good as Inventory and begins holding
it as Equipment. CIBC may from time to time inspect any Books and Records and
any Collateral, wherever located. For that purpose CIBC may, without charge,
have access to each Place of Business and to all mechanical or electronic
equipment devices and processes where any of them may be stored or from which
any of them may be retrieved. The Customer authorizes any Person holding any
Books and Records to make them available to CIBC, in a readable form, upon
request by CIBC.
8. Receivables. If the Collateral includes Receivables, CIBC may advise any
Person who is liable to make any payment to the Customer of the existence of
this Agreement. CIBC may from time to time confirm with such Persons the
existence and the amount of the Receivables. Upon Default, CIBC may collect and
otherwise deal with the Receivables in such manner and upon such terms as CIBC
considers appropriate.
9. Receipts Prior to Default. Until Default, all amounts received by CIBC as
Proceeds of the Collateral will be applied on account of the Liabilities in such
manner and at such times as CIBC may consider appropriate or, at CIBC's option,
may be held unappropriated in a collateral account or released to the Customer.
10. Default.
(1) Events of Default. The occurrence of any of the following events or
conditions will be a Default:
(a) the Customer does not pay any of the Liabilities when due;
(b) the Customer does not observe or perform any of the Customer's
obligations under this Agreement or any other agreement or document existing at
any time between the Customer and CIBC;
<PAGE> 3
(c) any representation, warranty or statement made by or on behalf of the
Customer to CIBC is untrue in any material respect at the time when or as of
which it was made;
(d) the Customer ceases or threatens to cease to carry on in the normal
course the Customer's business or any material part thereof;
(e) if the Customer is a corporation, there is, in CIBC's reasonable
opinion, a change in effective control of the Customer, or if the Customer is a
partnership, there is a dissolution or change in the membership of the
partnership;
(f) the Customer becomes insolvent or bankrupt or makes a proposal or
files an assignment for the benefit of creditors under the Bankruptcy Act
(Canada) or similar legislation in Canada or any other jurisdiction; a petition
in bankruptcy is filed against the Customer; or, if the Customer is a
corporation, steps are taken under any legislation by or against the Customer
seeking its liquidation, winding~up, dissolution or reorganization or any
arrangement or composition of its debts;
(g) a Receiver, trustee, custodian or other similar official is appointed
in respect of the Customer or any of the Customer's property;
(h) the holder of a Charge -takes possession of all or any part of the
Customer's property, or a distress, execution or other similar process is levied
against all or any part of such property; or
(i) CIBC, in good faith and upon commercially reasonable grounds,
believes that the prospect of payment or performance is or is about to be
impaired or that the Collateral is or is about to be placed in jeopardy.
(2) Rights upon Default. Upon Default, CIBC and a Receiver, as applicable, will
to the extent permitted by law have the following rights.
(a) Appointment of Receiver. CIBC may by instrument in writing appoint
any Person as a Receiver of all or any part of the Collateral. CIBC may from
time to time remove or replace a Receiver, or make application to any court of
competent jurisdiction for the appointment of a Receiver. Any Receiver appointed
by CIBC will (for purposes relating to responsibility for the Receiver's acts or
omissions) be considered to be the Customer's agent. CIBC may from time to time
fix the Receiver's remuneration and the Customer will pay CIBC the amount of
such remuneration. CIBC will not be liable to the Customer or any other Person
in connection with appointing or not appointing a Receiver or in connection with
the Receiver's actions or omissions.
(b) Dealings with the Collateral. CIBC or a Receiver may take possession
of all or any part of the Collateral and retain it for as long as CIBC or the
Receiver considers appropriate, receive any rents and profits from the
Collateral, carry on (or concur in carrying on) all or any part of the
Customer's business or refrain from doing so, borrow on the security of the
Collateral, repair the Collateral, process the Collateral, prepare the
Collateral for sale, lease or other disposition, and sell or lease (or concur in
selling or leasing) or otherwise dispose of the Collateral on such terms and
conditions (including among other things by arrangement providing for deferred
payment) as CIBC or the Receiver considers appropriate. CIBC or the Receiver may
(without charge and to the exclusion of all other Persons including the
Customer) enter upon any Place of Business.
(c) Realization. CIBC or a Receiver may use, collect, sell, lease or
otherwise dispose of, realize upon, release to the Customer or other Persons and
otherwise deal with, the Collateral in such manner, upon such terms (including
among other things by arrangement providing for deferred payment) and at such
times as CIBC or the Receiver considers appropriate. CIBC or the Receiver may
make any sale, lease or other disposition of the Collateral in the name of and
on behalf of the Customer or otherwise.
(d) Application of Proceeds After Default. All Proceeds of Collateral
received by CIBC or a Receiver may be applied to discharge or satisfy any
expenses (including among other things the Receiver's remuneration and other
expenses of enforcing CIBC's rights under this Agreement), Charges, borrowings,
taxes and other outgoings affecting the Collateral or which are considered
advisable by CIBC or the Receiver to preserve, repair, process, maintain or
enhance the Collateral or prepare it for sale, lease or other disposition, or to
keep in good standing any Charges on the Collateral ranking in priority to any
Charge created by this Agreement, or to sell, lease or otherwise dispose of the
Collateral. The balance of such
<PAGE> 4
Proceeds will be applied to the Liabilities in such manner and at such times as
CIBC considers appropriate and thereafter will be accounted for as required by
law.
(3) Other Legal Rights. Before and after Default, CIBC will have, in addition to
the rights specifically provided in this Agreement, the rights of a secured
party under the PPSA, as well as the rights recognized at law and in equity. No
right will- be exclusive of or dependent upon or merge in any other right, and
one or more of such rights may be exercised independently or in combination from
time to time. (4) Deficiency. The Customer will remain liable to CIBC for
payment of any Liabilities that are outstanding following- realization of all or
any part of the Collateral,
11. CIBC not Liable, CIBC will not be liable to the Customer or any other Person
for any failure or delay in exercising any of its rights under this Agreement
(including among other things any failure to take possession of, collect, or
sell, lease or otherwise dispose of, any Collateral). None of CIBC, a Receiver
or any agent of CIBC (including, in Alberta, any sheriff) is required to take,
or will have any liability for any failure to take or delay in taking, any steps
necessary or advisable to preserve rights against other Persons under any
Chattel Paper, Securities or Instrument in possession of CIBC, a Receiver or
CIBC's agent.
12. Charges and Expenses. The Customer agrees to pay on demand all costs and
expenses incurred (including among other things legal fees on a solicitor and
client basis) and fees charged by CIBC in connection with obtaining or
discharging this Agreement or establishing or confirming the priority of the
Charges created by this Agreement or by law, compliance with any demand by any
Person under the PPSA to amend or discharge any registration relating to this
Agreement, and by CIBC or any Receiver in exercising any remedy under this
Agreement (including among other things preserving, repairing, processing,
preparing for disposition and disposing of the Collateral by sale, lease or
otherwise) and in carrying on the Customer's business. All such amounts will
bear interest from time to time at the highest interest rate then applicable to
of the Liabilities, and the Customer will reimburse CIBC upon demand for any
amount so paid.
13. Further Assurances. The Customer will from time to time immediately upon
request by CIBC take such action (including among other things the signing and
delivery of financing statements and financing change statements, other
schedules, documents or listings describing property included in the Collateral,
further assignments and other documents, and the registration of this Agreement
or any other Charge against any of the Customer's real property) as CIBC may
require in connection with the Collateral or as CIBC may consider necessary to
give effect to this Agreement. If permitted by law, the Customer waives the
right to sign or receive a copy of any financing statement or financing change
statement, or any statement issued by any registry that confirms any
registration of a financing statement or financing change statement, relating to
this Agreement. The Customer irrevocably appoints the Manager or the Acting
Manager from time to time of CIBC's branch specified on the first page of this
Agreement as the Customer's attorney (with hill powers of substitution and
delegation) to sign, upon Default, all documents required to give effect to this
section. Nothing in this section affects the right of CIBC as secured party, or
any other Person on CIBC's behalf, to sign and file or deliver (as applicable)
all such financing statements, financing change statements, notices,
verification agreements and other documents relating to the Collateral and this
Agreement as CIBC or such other Person considers appropriate.
14. Dealings by CIBC. CIBC may from time to time increase, reduce, discontinue
or otherwise vary the Customer's credit facilities, grant extensions of time and
other indulgences, take and give up any Charge, abstain from taking, perfecting
or registering any Charge, accept compositions, grant releases and discharges
and otherwise deal with the Customer, customers of the Customer, guarantors and
others, and with the Collateral and any Charges held by CIBC, as CIBC considers
appropriate without affecting the Customer's obligations to CIBC or CIBC's
rights under this Agreement.
15. Definitions. In this Agreement:
"Accessions", "Account", "Chattel Paper", "Document of Title", "Equipment",
"Goods", "Instrument", "Intangible", "Inventory", "Proceeds", "Purchase-Money
Security Interest" and "Security Interest" have the respective meanings given to
them in the PPSA.
"Books and Records" means all books, records, files, papers, disks, documents
and other repositories of data recording, evidencing or relating to the
Collateral to which the Customer (or any Person on the Customer's behalf) has
access.
"Charge" means any mortgage, charge, pledge, hypothecation, lien (statutory or
otherwise), assignment, financial lease, title retention agreement or
arrangement, security interest or other encumbrance of any
<PAGE> 5
nature however arising, or any other security agreement or arrangement creating
in favour of any creditor a right in respect of a particular property that is
prior to the right of any other creditor in respect of such property.
"Consumer Goods" has the meaning given to it in the PPSA, except that, if this
Agreement is governed by the laws of the Yukon, it does not include special
consumer goods as that term is defined in the Yukon PPSA.
"Default" has the meaning set out in subsection 10(1).
"Liabilities means all present and future indebtedness and liability of every
kind, nature and description (whether direct or indirect, joint or several,
absolute or contingent, matured or unmatured) of the Customer to CIBC, wherever
and however incurred and any unpaid balance thereof,
"Money" has the meaning given to it in the PPSA or, if there is no such
definition, means a medium of exchange authorized or adopted by the Parliament
of Canada as part of the currency of Canada, or by a foreign government as part
of its currency.
"Person" means any natural person or artificial body (including among others any
firm, corporation or government),
"Personal Property" means personal property and includes among other things
Inventory, Equipment, Receivables, Books and Records, Chattel Paper, Goods,
Documents of Title, Instruments, Intangibles (including intellectual property),
Money, and Securities, and includes all Accessions to such property.
"Place of Business" means a location where the Customer carries on business or
where any of the Collateral is located (including any location described in
Schedule B).
"PPSA" means the legislation that applies in the province or territory noted in
section 2 of this Agreement, as such legislation may be amended, renamed or
replaced from time to time (and includes all regulations from time to time made
under such legislation) as follows: in the case of Ontario, the Personal
Property Security Act, 1989; in the case of Alberta, British Columbia, Manitoba,
Prince Edward Island, Saskatchewan and the Yukon Territory, the Personal
Property Security Act; and in the case of any other province or territory, such
legislation as deals generally with Charges on personal property.
"Receivables" means all debts, claims and choses in action (including among
other things Accounts and Chattel Paper) now or in the future due or owing to or
owned by the Customer.
"Receiver" means a receiver or a receiver and manager.
"Securities" has the meaning given to it in the PPSA or, if there is no such
definition and the PPSA defines "security" instead, it means the plural of that
term.
"Serial Number" means the number that the Person who manufactured or constructed
a Serial Number Good permanently marked or attached to it for identification
purposes or, if applicable, such other number as the PPSA stipulates as the
serial number or vehicle information number to be used for registration purposes
of such Serial Number Good.
"Serial Number Good" means a motor vehicle, trailer, mobile home, aircraft
airframe, aircraft engine or aircraft propeller, boat or an outboard motor for a
boat.
16. General.
(1) Reservation of the Last Day of any Lease. The Charges created by this
Agreement do not extend to the day of the term of any lease or agreement for
lease; however, the Customer will hold such last day in trust for CIBC and, upon
the exercise by CIBC of any of its rights under this Agreement following
Default, will assign such last day as directed by CIBC.
(2) Attachment of Security Interest. The Security Interests created by this
Agreement are intended to attach (i) to existing Collateral when the Customer
signs this Agreement, and (ii) to Collateral subsequently acquired by the
Customer, immediately upon the Customer acquiring any rights in such Collateral.
The parties do not intend to postpone the attachment of any Security Interest
created by this Agreement.
<PAGE> 6
(3) Purchase-Money Security Interest. If CIBC gives value for the purpose of
enabling the Customer to acquire rights in or to any of the Collateral, the
Customer will in fact apply such value to acquire those rights (and will provide
CIBC with such evidence in this regard as CIBC may require), and the Customer
grants to CIBC, and CIBC takes, a Purchase-Money Security Interest in such
Collateral to the extent that the value is applied to acquire such rights. A
certificate or affidavit of any of CIBC's authorized representatives is
admissible in evidence to establish the amount of any such value,
(4) Description of Collateral in Schedule A. The fact that box (b) or box (c) of
section 1 has been checked without there being any property described in
Schedule A does not affect the nature or validity of CIBC's security in the
Collateral.
(5) Entire Agreement. CIBC has not made any representation or undertaken any
obligation in connection with the subject matter of this Agreement other than as
specifically set out in this Agreement, and in particular nothing contained in
this Agreement will require CIBC to make, renew or extend the time for payment
of any loan or other credit accommodation to the Customer or any other Person.
(6) Additional Security. The Charges created by this Agreement are in addition
and without prejudice to any other Charge now or later held by CIBC. No Charge
held by CIBC will be exclusive of or dependent upon or merge in any other
Charge, and CIBC may exercise its rights under such Charges independently or in
combination.
(7) Joint and Several Liability. If more than one Person signs this Agreement as
the Customer, the obligations of such Persons will be joint and several.
(8) Severability; Headings. Any provision of this Agreement that is void or
unenforceable in any jurisdiction is, as to that jurisdiction, ineffective to
that extent without invalidating the remaining provisions of this Agreement. The
headings in this Agreement are for convenience only and do not limit or extend
the provisions of this Agreement.
(9) Interpretation. When the context so requires, the singular will be read as
the plural, and vice versa.
(10) Copy of Agreement. The Customer acknowledges receipt of a copy of this
Agreement.
(11) Waivers. If this Agreement is governed by the laws of Saskatchewan and the
Customer is a corporation, the Customer agrees that The Limitation of Civil
Rights Act, The Land Contracts (Actions) Act and Part W (excepting only section
46) of The Saskatchewan Farm Security Act do not apply insofar as they relate to
actions as defined in those Acts, or insofar as they relate to or affect this
Agreement, the rights of CIBC Under this Agreement or any instrument, Charge,
security agreement or other document of any nature that renews, extends or is
collateral to this Agreement.
(12) Notice. CIBC may send to the Customer, by prepaid regular mail addressed to
the Customer at the Customer's address last known to CIBC, copies of any
document required by the PPSA to be delivered by CIBC to the Customer. Any
document mailed in this manner will be deemed to have been received by the
Customer upon the earlier of actual receipt by the Customer and the expiry of 10
days after the mailing date. A certificate or affidavit of any of CIBC's
authorized representatives is admissible in evidence to establish the mailing
date.
(13) Enurement; Assignment. This Agreement will enure to the benefit of and be
binding upon (i) CIBC, its successors and assigns, and (ii) the Customer and the
Customer's heirs, executors, administrators, successors and permitted assigns.
The Customer will not assign this Agreement without CIBC's prior written
consent.
<PAGE> 7
GUARANTEE
For valuable consideration, I, the undersigned guarantor, agree with Canadian
Imperial Bank of Commerce ("CIBC") as follows:
1. Customer's Name. The name of the customer whose debts I am guaranteeing is:
SysGold Ltd. (the "Customer")
2. Guarantee. I guarantee payment to CIBC of all the Customer's Debts. My
liability under this Guarantee is:
(a) unlimited.
(b) limited to the principal sum of $______________ plus interest and expenses
in accordance with Section 5.
NOTE: IF NEITHER BOX (a) NOR BOX (b) IS CHECKED OFF, OR IF BOTH ARE CHECKED OFF,
OR IF BOX (b) IS CHECKED OFF BUT NO FIGURE IS INSERTED IN THE BLANK, THEN BOX
(a) ALONE WILL BE CONSIDERED TO HAVE BEEN CHECKED OFF.
3. Governing Law. This Guarantee is governed by the laws of Alberta (without
reference to the choice of law rules). I irrevocably agree to submit to the
non-exclusive jurisdiction of its courts.
4. Copy Received. I acknowledge having received a copy of this Guarantee.
NOTE: THE "ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE" ON THE FOLLOWING
PAGES FORM PART OF THIS GUARANTEE.
Dated December 11, 1997
Witness: Timothy C. Platnich Guarantor: Olivia Barbara Bialik
1600, 400 - 3rd Avenue S.W. 534 Point McKay Grove N.W.
Calgary, Alberta Calgary, Alberta T3B 5C5
Note: (i) If the Guarantor is a corporation, no witness is needed. The office
(such as "President" or "Secretary") of the person signing should be noted below
that person's signature. The corporation's seal should be affixed if the
resolution so states.
(ii) If the Guarantor is an individual, a red wafer seal is
advisable, but not mandatory. (No seal required in Quebec.)
(iii) For The Guarantees Acknowledgement Act certificate in Alberta,
see page 4.
<PAGE> 8
ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE
5. Payment On Demand. I will immediately pay CIBC on demand:
(a) the amount (and in the currency) of the Customer's Debts (but if
Section 2(b) applies, subject to that limitation), plus any expenses (including
all legal fees and disbursements) incurred by CIBC in enforcing any of CIBC's
rights under this Guarantee; and
(b) interest (including interest on overdue interest, compounded monthly)
on unpaid amounts due under this Guarantee calculated from the date on which
those amounts were originally demanded until payment in full, both before and
after judgment, at the rates (and in the currency) applicable to the
corresponding Customer's Debts.
6. Making Demand. Demand and any other notices given under this Guarantee will
be conclusively considered to have been made upon me when the envelope
containing it, addressed to me (or, if there is more than one Person signing
this Guarantee, to any one of us) at the last address known to ClBC, is
deposited, postage prepaid, first class mail, in a post office, or is personally
delivered to that address. I will give CIBC immediate written notice, addressed
to the Manager of the Bank Office, of each and every change of my address.
7. No Setoff or Counterclaim. I will make all payments required to be made under
this Guarantee without regard to any right of setoff or counterclaim that I have
or may have against the Customer or CIBC.
8. Application of Moneys Received. CIBC may apply all moneys received from me,
the Customer or any other Person (including under any Security that CIBC may
from time to time hold) upon such part of the Customer's Debts as CIBC considers
appropriate.
9. Exhausting Recourse. CIBC does not need to exhaust its recourse against the
Customer or any other Person or under any Security CIBC may from time to time
hold before being entitled to full payment from me under this Guarantee.
10. Absolute Liability. My liability under this Guarantee is absolute and
unconditional. It will not be limited or reduced, nor will CIBC be responsible
or owe any duty (as a fiduciary or otherwise) to me, nor will CIBC's rights
under this Guarantee be prejudiced, by the existence or occurrence (with or
without my knowledge or consent) of any one or more of the following events:
(a) any termination, invalidity, unenforceability or release by CIBC of
any of its rights against the Customer or against any other Person or of any
Security;
(b) any increase, reduction, renewal, substitution or other change in, or
discontinuance of, the terms relating to the Customer's Debts or to any credit
extended by CIBC to the Customer; any agreement to any proposal or scheme of
arrangement concerning, or granting any extensions of time or any other
indulgences or concessions to, the Customer or any other Person; any taking or
giving up of any Security; abstaining from taking, perfecting or registering any
Security; allowing any Security to lapse (whether by failing to make or maintain
any registration or otherwise); or any neglect or omission by CIBC in respect
of, or in the course of, doing any of these things;
(c) accepting compositions from or granting releases or discharges to the
Customer or any other Person, or any other dealing with the Customer or any
other Person or with any Security that CIBC considers appropriate;
(d) any unenforceability or loss of or in respect of any Security held
from time to time by CIBC from me, the Customer or any other Person, whether the
loss is due to the means or timing of any registration, disposition or
realization of any collateral that is the subject of that Security or otherwise
due to CIBC's fault or any other reason;
(e) the death of the Customer; any change in the Customer's name; or any
reorganization (whether by way of amalgamation, merger, transfer, sale, lease or
otherwise) of the Customer or the Customer's business;
(f) any change in my financial condition or that of the Customer or any
other Guarantor (including insolvency and bankruptcy);
<PAGE> 9
(g) if I am or the Customer is a corporation, any change of effective
control, or if I am or the Customer is a partnership, a dissolution or any
change in the membership;
(h) any event, whether or not attributable to CIBC, that may be
considered to have caused or accelerated the bankruptcy or insolvency of the
Customer or any Guarantor, or to have resulted in the initiation of any such
proceedings;
(i) CIBC's filing of any claim for payment with any administrator,
provisional liquidator, conservator, trustee, receiver, custodian or other
similar officer appointed for the Customer or for all or substantially all of
the Customer's assets;
(j) any failure by CIBC to abide by any of the terms and conditions of
CIBC's agreements with, or to meet any of its obligations or duties owed to, me,
the Customer or any Person, or any breach of any duty (whether as a fiduciary or
otherwise) that exists or is alleged to exist between CIBC and me, the Customer
or any Person;
(k) any incapacity, disability, or lack or limitation of status or of the
power of the Customer or of the Customer's directors, managers, officers,
partners or agents; the discovery that the Customer is not or may not be a legal
entity; or any irregularity, defect or informality in the incurring of any of
the Customer's Debts; or
(l) any event whatsoever that might be a defence available to, or result
in a reduction or discharge of, me, the Customer or any other Person in respect
of either the Customer's Debts or my liability under this Guarantee.
For greater certainty, I agree that CIBC may deal with me, the Customer
and any other Person in any manner without affecting my liability under this
Guarantee.
11. Principal Debtor. All moneys and liabilities (whether matured or unmatured,
present or future, direct or indirect, absolute or contingent) obtained from
CIBC will be deemed to form part of the Customer's Debts, notwithstanding the
occurrence of any one or more of the events described in Section 10(k). I will
pay CIBC as principal debtor any amount that CIBC cannot recover from me as
Guarantor immediately following demand as provided in this Guarantee.
12. No Liability for Negligence, etc. CIBC will not be liable to me for any
negligence or any breaches or omissions on the part of CIBC, or any of its
employees, officers, directors or agents, or any receivers appointed by CIBC, in
the course of any of its or their actions.
13. Continuing Guarantee. This is a continuing guarantee of the Customer's
Debts.
14. Terminating Further Liability. I may discontinue any further liability to
pay the Customer's Debts by written notice to the Bank Office. I will, however,
continue to be liable under this Guarantee for any of the Customer's Debts that
the Customer incurs up to and including the 30th day after CIBC receives my
notice.
15. Statement Conclusive. Except for demonstrable errors or omissions, the
amount appearing due in any account stated by CIBC or settled between CIBC and
the Customer will be conclusive as to that amount being due.
16. CIBC's Priority.
(a) If any payment made to CIBC by the Customer or any other Person is
subsequently rendered void or must otherwise be returned for any reason, I will
be liable for that payment (but if Section 2(b) applies, subject to that
limitation). Until all of CIBC's claims against the Customer in respect of the
Customer's Debts have been paid in full, I will not require that CIBC assign to
me any Security held, or any other rights that CIBC may have, in connection with
the Customer's Debts, and I will not assert any right of contribution against
any Guarantor, or claim repayment from the Customer, for any payment that I make
under this Guarantee.
(b) If the Customer is bankrupt, or (if the Customer is a corporation)
liquidated or wound up, or if the Customer makes a bulk sale of any assets under
applicable law, or if the Customer proposes any composition with creditors or
any scheme of arrangement, CIBC will be entitled to all dividends and other
payments until CIBC is paid in full, and I will remain liable under this
Guarantee (but if Section 2(b) applies, subject to that limitation).
<PAGE> 10
(c) If CIBC gives to any trustee in bankruptcy or receives a valuation
of, or retains, any Security that CIBC holds for payment of the Customer's
Debts, that will not be considered, as between CIBC and me, to be a purchase of
such Security or payment, satisfaction or reduction of the Customer's Debts.
17. Assignment and Postponement of Claim. I postpone in favour of CIBC all debts
and liabilities that the Customer now owes or later may from time to time owe to
me in any manner until CIBC is paid in full. I further assign to CIBC all such
debts and liabilities, to the extent of the Customer's Debts, until CIBC is paid
in full. If I receive any moneys in payment of any of such debts and
liabilities, I will hold them in trust for, and will immediately pay them to,
CIBC without reducing my liability under this Guarantee.
18. Withholding Taxes. Unless a law requires otherwise, I will make all payments
under this Guarantee without deduction or withholding for any present or future
taxes of any kind. If a law does so require, I will pay to CIBC an additional
amount as is necessary to ensure CIBC receives the full amount CIBC would have
received if no deduction or withholding had been made.
19. Judgment Currency. My liability to pay CIBC in a particular currency (the
"First Currency") will not be discharged or satisfied by any tender or recovery
under any judgment expressed in or converted into another currency (the "Other
Currency") except to the extent the tender or recovery results in ClBC's
effective receipt of the full amount of the First Currency so payable.
Accordingly, I will be liable to CIBC in an additional cause of action to
recover in the Other Currency the amount (if any) by which that effective
receipt falls short of the full amount of the First Currency so payable, without
being affected by any judgment obtained for any other sums due.
20. Consent to Disclose Information. CIBC may from time to time give any credit
or other information about me to, or receive such information from, any credit
bureau, reporting agency or other Person.
21. General. Any provision of this Guarantee that is void or unenforceable in a
jurisdiction is, as to that jurisdiction, ineffective to that extent without
invalidating the remaining provisions. If two or more Persons sign this
Guarantee, each Person's liability will be joint and several. This Guarantee is
in addition and without prejudice to any Security of any kind now or in the
future held by CIBC. There are no representations, collateral agreements or
conditions with respect to, or affecting my liability under, this Guarantee
other than as contained in this Guarantee.
22. Quebec Only. If this Guarantee is governed by the laws of Quebec:
(a) I acknowledge that the terms and conditions of the Customer's Debts
have been expressly brought to my attention;
(b) I renounce the benefit of division and discussion;
(c) if two or more Persons sign this Guarantee, each Person's liability
will be solidary;
(d) I acknowledge that the thirty days' notice specified in Section 14
constitutes prior and sufficient notice to CIBC;
(e) if this Guarantee is attached to the performance of special duties, I
agree that this Guarantee shall not terminate upon cessation of such duties; and
If) it is the express wish of the parties that this document and any related
documents be drawn up in English. Les parties aux presentes ont expressement
demande que ce document et tous les documents s'y rattachant solent rediges en
anglais.
23. Definitions. In this Guarantee:
(a) "Bank Office" means the CIBC office noted on the first page of this
Guarantee, or such address as CIBC may, from time to time, advise me in the
manner provided in Section 6;
(b) "Customer's Debts" means the debts and liabilities that the Customer
has incurred or may incur with CIBC including, among other things, those in
respect of dealings between the Customer and CIBC, as well as any other dealings
by which the Customer may become indebted or liable to CIBC in any manner
whatever;
(c) "Guarantor" means any Person who has guaranteed or later guarantees
to CIBC any or all of the Customer's Debts, whether or not such Person has
signed this Guarantee or another document;
(d) "I", "me" and "my" mean the Person who has signed this Guarantee, and
if two or more Persons sign, each of them;
<PAGE> 11
(e) "Person" includes a natural person, personal representative,
partnership, corporation, association, organization, estate, trade union, church
or other religious organization, syndicate, joint venture, trust, trustee in
bankruptcy, government and government body and ~ny other entity, and, where
appropriate, specifically includes any Guarantor;
(f) "Section" means a section or paragraph of this Guarantee; and
(g) "Security" means any security held by CIBC as security for payment of
the Customer's Debts and includes, among other things, any and all guarantees.
For Use In Alberta Only
THE GUARANTEES ACKNOWLEDGEMENT ACT (ALBERTA)
CERTIFICATE OF NOTARY PUBLIC
(BMO VIA-7-5.06, .07)
I HEREBY CERTIFY THAT:
1. Donald Allan Bialik of Calgary, AB ,the Guarantor in the above Guarantee,
appeared in person before me and acknowledged that he/she had executed the
Guarantee;
2. I satisfied myself by examination of him/her that he/she is aware of the
contents of the Guarantee and understands it.
Given at Calgary, AB this 11th day of December, 1997, under my hand and seal of
office.
DARWIN A. SCHOFER
Barrister and Solicitor
A Notary Public in and for the Province of AB
STATEMENT OF GUARANTOR
I am the Person named in this certificate.
Donald Allan Bialik
<PAGE> 12
INSTRUCTIONS TO SOLICITOR
The signature of the Guarantor should be witnessed by yourself on the reverse
side of the Guarantee and a letter of Independent Legal Advice along the lines
of the Proforma below, should be provided on your letterhead.
CERTIFICATE OF INDEPENDENT LEGAL ADVICE
My client, OLIVIA BARBARA BIALIK, has consulted me, independently of all other
interest, including yourselves, and DONALD ALLAN BIALIK (neither for whom I
act), in regard to signing a Guarantee dated December 11, 1997, for Full
Liability, in favour of the Bank to secure advances made to SysGold Ltd.
My client executed the Guarantee in my presence and I forward it to you
herewith. Before such execution:
1. I considered the Guarantee and explained to my client its effect as a whole
and the effect of its various provisions considered separately, including
its ramifications under the GUARANTEE'S ACKNOWLEDGEMENT ACT, so that my
client understood these matters and appreciated the liability the
transaction would impose on her and the rights and remedies of the bank in
connection with it.
2. I satisfied myself that my client would sign the Guarantee of her own free
will and not under any undue influence exercised either by DONALD ALLAN
BIALIK or otherwise.
GIVEN AT the City of Calgary, in the Province of Alberta, this 11 day of
December, 1997.
A NOTARY PUBLIC IN AND FOR THE PROVINCE OF ALBERTA
<PAGE> 13
GUARANTEE
For valuable consideration, I, the undersigned guarantor, agree with Canadian
Imperial Bank of Commerce ("CIBC") as follows:
1. Customer's Name. The name of the customer whose debts I am guaranteeing is:
SysGold Ltd. (the "Customer")
2. Guarantee. I guarantee payment to CIBC of all the Customer's Debts. My
liability under this Guarantee is:
(a) unlimited
(b) limited to the principal sum of $______________ plus interest and expenses
in accordance with Section 5.
NOTE: IF NEITHER BOX (a) NOR BOX (b) IS CHECKED OFF, OR IF BOTH ARE CHECKED OFF,
OR IF BOX (b) IS CHECKED OFF BUT NO FIGURE IS INSERTED IN THE BLANK, THEN BOX
(a) ALONE WILL BE CONSIDERED TO HAVE BEEN CHECKED OFF.
3. Governing Law. This Guarantee is governed by the laws of Alberta (without
reference to the choice of law rules). I irrevocably agree to submit to the
non-exclusive jurisdiction of its courts.
4. Copy Received. I acknowledge having received a copy of this Guarantee.
NOTE: THE "ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE" ON THE FOLLOWING
PAGES FORM PART OF THIS GUARANTEE.
Dated December 11, 1997
<TABLE>
<S> <C>
Witness: Darwin A. Schofer Guarantor: Riverview Management Corporation
Howard Mackie #1000, 400 - 3rd Avenue S.W. 1000, 400 - 3rd Avenue S.W.
Calgary, Alberta Calgary, AB T2P 4H2
</TABLE>
Note: (i) If the Guarantor is a corporation, no witness is needed. The office
(such as "President" or "Secretary") of the person signing should be noted below
that person's signature. The corporation's seal should be affixed if the
resolution so states.
(ii) If the Guarantor is an individual, a red wafer seal is advisable,
but not mandatory. (No seal required in Quebec)
(iii) For The Guarantees Acknowledgement Act certificate in Alberta, see
page 4.
<PAGE> 14
ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE
5. Payment On Demand. I will immediately pay CIBC on demand:
(a) the amount (and in the currency) of the Customer's Debts (but if
Section 2(b) applies, subject to that limitation), plus any expenses (including
all legal fees and disbursements) incurred by CIBC in enforcing any of CIBC's
rights under this Guarantee; and
(b) interest (including interest on overdue interest, compounded monthly)
on unpaid amounts due under this Guarantee calculated from the date on which
those amounts were originally demanded until payment in full, both before and
after judgment, at the rates (and in the currency) applicable to the
corresponding Customer's Debts.
6. Making Demand. Demand and any other notices given under this Guarantee will
be conclusively considered to have been made upon me when the envelope
containing it, addressed to me (or, if there is more than one Person signing
this Guarantee, to any one of us) at the last address known to ClBC, is
deposited, postage prepaid, first class mail, in a post office, or is personally
delivered to that address. I will give CIBC immediate written notice, addressed
to the Manager of the Bank Office, of each and every change of my address.
7. No Setoff or Counterclaim. I will make all payments required to be made under
this Guarantee without regard to any right of setoff or counterclaim that I have
or may have against the Customer or CIBC.
8. Application of Moneys Received. CIBC may apply all moneys received from me,
the Customer or any other Person (including under any Security that CIBC may
from time to time hold) upon such part of the Customer's Debts as CIBC considers
appropriate.
9. Exhausting Recourse. CIBC does not need to exhaust its recourse against the
Customer or any other Person or under any Security CIBC may from time to time
hold before being entitled to full payment from me under this Guarantee.
10. Absolute Liability. My liability under this Guarantee is absolute and
unconditional. It will not be limited or reduced, nor will CIBC be responsible
or owe any duty (as a fiduciary or otherwise) to me, nor will CIBC's rights
under this Guarantee be prejudiced, by the existence or occurrence (with or
without my knowledge or consent) of any one or more of the following events:
(a) any termination, invalidity, unenforceability or release by CIBC of
any of its rights against the Customer or against any other Person or of any
Security;
(b) any increase, reduction, renewal, substitution or other change in, or
discontinuance of, the terms relating to the Customer's Debts or to any credit
extended by CIBC to the Customer; any agreement to any proposal or scheme of
arrangement concerning, or granting any extensions of time or any other
indulgences or concessions to, the Customer or any other Person; any taking or
giving up of any Security; abstaining from taking, perfecting or registering any
Security; allowing any Security to lapse (whether by failing to make or maintain
any registration or otherwise); or any neglect or omission by CIBC in respect
of, or in the course of, doing any of these things;
(c) accepting compositions from or granting releases or discharges to the
Customer or any other Person, or any other dealing with the Customer or any
other Person or with any Security that CIBC considers appropriate;
(d) any unenforceability or loss of or in respect of any Security held
from time to time by CIBC from me, the Customer or any other Person, whether the
loss is due to the means or timing of any registration, disposition or
realization of any collateral that is the subject of that Security or otherwise
due to CIBC's fault or any other reason;
(e) the death of the Customer; any change in the Customer's name; or any
reorganization (whether by way of amalgamation, merger, transfer, sale, lease or
otherwise) of the Customer or the Customer's business;
(f) any change in my financial condition or that of the Customer or any
other Guarantor (including insolvency and bankruptcy);
<PAGE> 15
(g) if I am or the Customer is a corporation, any change of effective
control, or if I am or the Customer is a partnership, a dissolution or any
change in the membership;
(h) any event, whether or not attributable to CIBC, that may be
considered to have caused or accelerated the bankruptcy or insolvency of the
Customer or any Guarantor, or to have resulted in the initiation of any such
proceedings;
(i) CIBC's filing of any claim for payment with any administrator,
provisional liquidator, conservator, trustee, receiver, custodian or other
similar officer appointed for the Customer or for all or substantially all of
the Customer's assets;
(j) any failure by CIBC to abide by any of the terms and conditions of
CIBC's agreements with, or to meet any of its obligations or duties owed to, me,
the Customer or any Person, or any breach of any duty (whether as a fiduciary or
otherwise) that exists or is alleged to exist between CIBC and me, the Customer
or any Person;
(k) any incapacity, disability, or lack or limitation of status or of the
power of the Customer or of the Customer's directors, managers, officers,
partners or agents; the discovery that the Customer is not or may not be a legal
entity; or any irregularity, defect or informality in the incurring of any of
the Customer's Debts; or
(l) any event whatsoever that might be a defence available to, or result
in a reduction or discharge of, me, the Customer or any other Person in respect
of either the Customer's Debts or my liability under this Guarantee.
For greater certainty, I agree that CIBC may deal with me, the Customer
and any other Person in any manner without affecting my liability under this
Guarantee.
11. Principal Debtor. All moneys and liabilities (whether matured or unmatured,
present or future, direct or indirect, absolute or contingent) obtained from
CIBC will be deemed to form part of the Customer's Debts, notwithstanding the
occurrence of any one or more of the events described in Section 10(k). I will
pay CIBC as principal debtor any amount that CIBC cannot recover from me as
Guarantor immediately following demand as provided in this Guarantee.
12. No Liability for Negligence, etc. CIBC will not be liable to me for any
negligence or any breaches or omissions on the part of CIBC, or any of its
employees, officers, directors or agents, or any receivers appointed by CIBC, in
the course of any of its or their actions.
13. Continuing Guarantee. This is a continuing guarantee of the Customer's
Debts.
14. Terminating Further Liability. I may discontinue any further liability to
pay the Customer's Debts by written notice to the Bank Office. I will, however,
continue to be liable under this Guarantee for any of the Customer's Debts that
the Customer incurs up to and including the 30th day after CIBC receives my
notice.
15. Statement Conclusive. Except for demonstrable errors or omissions, the
amount appearing due in any account stated by CIBC
or settled between CIBC and the Customer will be conclusive as to that amount
being due.
16. CIBC's Priority.
(a) If any payment made to CIBC by the Customer or any other Person is
subsequently rendered void or must otherwise be returned for any reason, I will
be liable for that payment (but if Section 2(b) applies, subject to that
limitation). Until all of CIBC's claims against the Customer in respect of the
Customer's Debts have been paid in full, I will not require that CIBC assign to
me any Security held, or any other rights that CIBC may have, in connection with
the Customer's Debts, and I will not assert any right of contribution against
any Guarantor, or claim repayment from the Customer, for any payment that I make
under this Guarantee.
(b) If the Customer is bankrupt, or (if the Customer is a corporation)
liquidated or wound up, or if the Customer makes a bulk sale of any assets under
applicable law, or if the Customer proposes any composition with creditors or
any scheme of arrangement, CIBC will be entitled to all dividends and other
payments until CIBC is paid in full, and I will remain liable under this
Guarantee (but if Section 2(b) applies, subject to that limitation).
<PAGE> 16
(c) If CIBC gives to any trustee in bankruptcy or receives a valuation
of, or retains, any Security that CIBC holds for payment of the Customer's
Debts, that will not be considered, as between CIBC and me, to be a purchase of
such Security or payment, satisfaction or reduction of the Customer's Debts.
17. Assignment and Postponement of Claim. I postpone in favour of CIBC all debts
and liabilities that the Customer now owes or later may from time to time owe to
me in any manner until CIBC is paid in full. I further assign to CIBC all such
debts and liabilities, to the extent of the Customer's Debts, until CIBC is paid
in full. If I receive any moneys in payment of any of such debts and
liabilities, I will hold them in trust for, and will immediately pay them to,
CIBC without reducing my liability under this Guarantee.
18. Withholding Taxes. Unless a law requires otherwise, I will make all payments
under this Guarantee without deduction or withholding for any present or future
taxes of any kind. If a law does so require, I will pay to CIBC an additional
amount as is necessary to ensure CIBC receives the full amount CIBC would have
received if no deduction or withholding had been made.
19. Judgment Currency. My liability to pay CIBC in a particular currency (the
"First Currency") will not be discharged or satisfied by any tender or recovery
under any judgment expressed in or converted into another currency (the "Other
Currency") except to the extent the tender or recovery results in ClBC's
effective receipt of the full amount of the First Currency so payable.
Accordingly, I will be liable to CIBC in an additional cause of action to
recover in the Other Currency the amount (if any) by which that effective
receipt falls short of the full amount of the First Currency so payable, without
being affected by any judgment obtained for any other sums due.
20. Consent to Disclose Information. CIBC may from time to time give any credit
or other information about me to, or receive such information from, any credit
bureau, reporting agency or other Person.
21. General. Any provision of this Guarantee that is void or unenforceable in a
jurisdiction is, as to that jurisdiction, ineffective to that extent without
invalidating the remaining provisions. If two or more Persons sign this
Guarantee, each Person's liability will be joint and several. This Guarantee is
in addition and without prejudice to any Security of any kind now or in the
future held by CIBC. There are no representations, collateral agreements or
conditions with respect to, or affecting my liability under, this Guarantee
other than as contained in this Guarantee.
22. Quebec Only. If this Guarantee is governed by the laws of Quebec:
(a) I acknowledge that the terms and conditions of the Customer's Debts
have been expressly brought to my attention;
(b) I renounce the benefit of division and discussion;
(c) if two or more Persons sign this Guarantee, each Person's liability
will be solidary;
(d) I acknowledge that the thirty days' notice specified in Section 14
constitutes prior and sufficient notice to CIBC;
(e) if this Guarantee is attached to the performance of special duties, I
agree that this Guarantee shall not terminate upon cessation of such duties; and
If) it is the express wish of the parties that this document and any related
documents be drawn up in English. Les parties aux presentes ont expressement
demande que ce document et tous les documents s'y rattachant solent rediges en
anglais.
23. Definitions. In this Guarantee:
(a) "Bank Office" means the CIBC office noted on the first page of this
Guarantee, or such address as CIBC may, from time to time, advise me in the
manner provided in Section 6;
(b) "Customer's Debts" means the debts and liabilities that the Customer
has incurred or may incur with CIBC including, among other things, those in
respect of dealings between the Customer and CIBC, as well as any other dealings
by which the Customer may become indebted or liable to CIBC in any manner
whatever;
(c) "Guarantor" means any Person who has guaranteed or later guarantees
to CIBC any or all of the Customer's Debts, whether or not such Person has
signed this Guarantee or another document;
(d) "I", "me" and "my" mean the Person who has signed this Guarantee, and
if two or more Persons sign, each of them;
<PAGE> 17
(e) "Person" includes a natural person, personal representative,
partnership, corporation, association, organization, estate, trade union, church
or other religious organization, syndicate, joint venture, trust, trustee in
bankruptcy, government and government body and ~ny other entity, and, where
appropriate, specifically includes any Guarantor;
(f) "Section" means a section or paragraph of this Guarantee; and
(g) "Security" means any security held by CIBC as security for payment of
the Customer's Debts and includes, among other things, any and all guarantees.
For Use In Alberta Only
THE GUARANTEES ACKNOWLEDGEMENT ACT (ALBERTA)
CERTIFICATE OF NOTARY PUBLIC
(BMO VIA-7-5.06, .07)
I HEREBY CERTIFY THAT:
1. of ,the Guarantor in the above Guarantee, appeared in person before me and
acknowledged that he/she had executed the Guarantee;
2. I satisfied myself by examination of him/her that he/she is aware of the
contents of the Guarantee and understands it.
Given at this ____ day of _____ , under my hand and seal of office.
A Notary Public in and for
STATEMENT OF GUARANTOR
I am the Person named in this certificate.
<PAGE> 18
RESOLUTION FOR A COMPANY TO AUTHORIZE THE GIVING BY
IT TO THE BANK OF A GUARANTEE AND RELATED SECURITY
Resolution of the Board of Directors of RIVERVIEW MANAGEMENT CORPORATION (the
"Corporation")
WHEREAS the Corporation has business relations with SysGold Ltd. And it is
expedient and in the interest of the Corporation to guarantee the present and
future indebtedness and liability of the said SysGold Ltd. To Canadian Imperial
Bank of Commerce ("CIBC").
AND WHEREAS it is desirable to give security on certain property and assets of
the Corporation to secure the obligation and liability of the Corporation under
the said guarantee:
THEREFORE BE IT RESOLVED
1. That the Corporation guarantee payment to CIBC on demand of all the
liabilities of SysGold Ltd. To CIBC and that the Corporation postpone all
debts and claims held by it against the said SysGold Ltd. In favour of the
debts and claims of CIBC against the said SysGold Ltd. In the manner and
upon the terms set forth in CIBC's form of guarantee and postponement of
claim known as Form 81, a specimen of which is attached to this resolution.
2. That to secure the obligation and liability of the Corporation to CIBC
under the guarantee the Corporation gives security to CIBC by way of
general Security Agreement in terms of CIBC's Bank Form Number 6100, a
specimen of which is attached to this resolution.
3. That the President and the Secretary are hereby authorized for an on behalf
of the Corporation to execute and deliver to CIBC a guarantee and
postponement of the claim and also general Security Agreement substantially
in the form of the above-mentioned specimen form(s), subject to such
modifications as the President and Secretary may approve, such approval to
be conclusively evidenced by their execution of the said documents.
4. That the President and Secretary are hereby authorized for and on behalf of
the Corporation, to execute and deliver all other documents and instruments
and to do all acts and things as may be requisite to give full effect to
this resolution.
We hereby certify that the foregoing is a true copy of a resolution passed by
the Board of Directors of the Corporation on the ____ day of 19 , and recorded
in the Minute Book of proceedings of the Directors of the Corporation; and
further that the said resolution is now in full force and effect.
Dated this 11th day of December, 1997.
RIVERVIEW MANAGEMENT CORPORATION
<PAGE> 19
GUARANTEE
For valuable consideration, I, the undersigned guarantor, agree with Canadian
Imperial Bank of Commerce ("CIBC") as follows:
1. Customer's Name. The name of the customer whose debts I am guaranteeing is:
SysGold Ltd. (the "Customer")
2. Guarantee. I guarantee payment to CIBC of all the Customer's Debts. My
liability under this Guarantee is:
(a) unlimited
(b) limited to the principal sum of $______________ plus interest
and expenses in accordance with Section 5.
NOTE: IF NEITHER BOX (a) NOR BOX (b) IS CHECKED OFF, OR IF BOTH ARE CHECKED OFF,
OR IF BOX (b) IS CHECKED OFF BUT NO FIGURE IS INSERTED IN THE BLANK, THEN BOX
(a) ALONE WILL BE CONSIDERED TO HAVE BEEN CHECKED OFF.
3. Governing Law. This Guarantee is governed by the laws of Alberta (without
reference to the choice of law rules). I irrevocably agree to submit to the
non-exclusive jurisdiction of its courts.
4. Copy Received. I acknowledge having received a copy of this Guarantee.
NOTE: THE "ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE" ON THE FOLLOWING
PAGES FORM PART OF THIS GUARANTEE.
Dated December 11, 1997
Witness: Darwin A. Schofer Guarantor: Donald Allan Bialik
Howard Mackie #1000, 400 - 3rd Avenue S.W. 534 Point McKay Grove N.W.
Calgary, Alberta Calgary, Alberta T3B 5C5
Note: (i) If the Guarantor is a corporation, no witness is needed. The office
(such as "President" or "Secretary") of the person signing should be noted below
that person's signature. The corporation's seal should be affixed if the
resolution so states.
(ii) If the Guarantor is an individual, a red wafer seal is advisable,
but not mandatory. (No seal required in Quebec.)
(iii) For The Guarantees Acknowledgement Act certificate in Alberta, see
page 4.
<PAGE> 20
ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE
5. Payment On Demand. I will immediately pay CIBC on demand:
(a) the amount (and in the currency) of the Customer's Debts (but if
Section 2(b) applies, subject to that limitation), plus any expenses (including
all legal fees and disbursements) incurred by CIBC in enforcing any of CIBC's
rights under this Guarantee; and
(b) interest (including interest on overdue interest, compounded monthly)
on unpaid amounts due under this Guarantee calculated from the date on which
those amounts were originally demanded until payment in full, both before and
after judgment, at the rates (and in the currency) applicable to the
corresponding Customer's Debts.
6. Making Demand. Demand and any other notices given under this Guarantee will
be conclusively considered to have been made upon me when the envelope
containing it, addressed to me (or, if there is more than one Person signing
this Guarantee, to any one of us) at the last address known to ClBC, is
deposited, postage prepaid, first class mail, in a post office, or is personally
delivered to that address. I will give CIBC immediate written notice, addressed
to the Manager of the Bank Office, of each and every change of my address.
7. No Setoff or Counterclaim. I will make all payments required to be made under
this Guarantee without regard to any right of setoff or counterclaim that I have
or may have against the Customer or CIBC.
8. Application of Moneys Received. CIBC may apply all moneys received from me,
the Customer or any other Person (including under any Security that CIBC may
from time to time hold) upon such part of the Customer's Debts as CIBC considers
appropriate.
9. Exhausting Recourse. CIBC does not need to exhaust its recourse against the
Customer or any other Person or under any Security CIBC may from time to time
hold before being entitled to full payment from me under this Guarantee.
10. Absolute Liability. My liability under this Guarantee is absolute and
unconditional. It will not be limited or reduced, nor will CIBC be responsible
or owe any duty (as a fiduciary or otherwise) to me, nor will CIBC's rights
under this Guarantee be prejudiced, by the existence or occurrence (with or
without my knowledge or consent) of any one or more of the following events:
(a) any termination, invalidity, unenforceability or release by CIBC of
any of its rights against the Customer or against any other Person or of any
Security;
(b) any increase, reduction, renewal, substitution or other change in, or
discontinuance of, the terms relating to the Customer's Debts or to any credit
extended by CIBC to the Customer; any agreement to any proposal or scheme of
arrangement concerning, or granting any extensions of time or any other
indulgences or concessions to, the Customer or any other Person; any taking or
giving up of any Security; abstaining from taking, perfecting or registering any
Security; allowing any Security to lapse (whether by failing to make or maintain
any registration or otherwise); or any neglect or omission by CIBC in respect
of, or in the course of, doing any of these things;
(c) accepting compositions from or granting releases or discharges to the
Customer or any other Person, or any other dealing with the Customer or any
other Person or with any Security that CIBC considers appropriate;
(d) any unenforceability or loss of or in respect of any Security held
from time to time by CIBC from me, the Customer or any other Person, whether the
loss is due to the means or timing of any registration, disposition or
realization of any collateral that is the subject of that Security or otherwise
due to CIBC's fault or any other reason;
(e) the death of the Customer; any change in the Customer's name; or any
reorganization (whether by way of amalgamation, merger, transfer, sale, lease or
otherwise) of the Customer or the Customer's business;
(f) any change in my financial condition or that of the Customer or any
other Guarantor (including insolvency and bankruptcy);
<PAGE> 21
(g) if I am or the Customer is a corporation, any change of effective
control, or if I am or the Customer is a partnership, a dissolution or any
change in the membership;
(h) any event, whether or not attributable to CIBC, that may be
considered to have caused or accelerated the bankruptcy or insolvency of the
Customer or any Guarantor, or to have resulted in the initiation of any such
proceedings;
(i) CIBC's filing of any claim for payment with any administrator,
provisional liquidator, conservator, trustee, receiver, custodian or other
similar officer appointed for the Customer or for all or substantially all of
the Customer's assets;
(j) any failure by CIBC to abide by any of the terms and conditions of
CIBC's agreements with, or to meet any of its obligations or duties owed to, me,
the Customer or any Person, or any breach of any duty (whether as a fiduciary or
otherwise) that exists or is alleged to exist between CIBC and me, the Customer
or any Person;
(k) any incapacity, disability, or lack or limitation of status or of the
power of the Customer or of the Customer's directors, managers, officers,
partners or agents; the discovery that the Customer is not or may not be a legal
entity; or any irregularity, defect or informality in the incurring of any of
the Customer's Debts; or
(l) any event whatsoever that might be a defence available to, or result
in a reduction or discharge of, me, the Customer or any other Person in respect
of either the Customer's Debts or my liability under this Guarantee.
For greater certainty, I agree that CIBC may deal with me, the Customer
and any other Person in any manner without affecting my liability under this
Guarantee.
11. Principal Debtor. All moneys and liabilities (whether matured or unmatured,
present or future, direct or indirect, absolute or contingent) obtained from
CIBC will be deemed to form part of the Customer's Debts, notwithstanding the
occurrence of any one or more of the events described in Section 10(k). I will
pay CIBC as principal debtor any amount that CIBC cannot recover from me as
Guarantor immediately following demand as provided in this Guarantee.
12. No Liability for Negligence, etc. CIBC will not be liable to me for any
negligence or any breaches or omissions on the part of CIBC, or any of its
employees, officers, directors or agents, or any receivers appointed by CIBC, in
the course of any of its or their actions.
13. Continuing Guarantee. This is a continuing guarantee of the Customer's
Debts.
14. Terminating Further Liability. I may discontinue any further liability to
pay the Customer's Debts by written notice to the Bank Office. I will, however,
continue to be liable under this Guarantee for any of the Customer's Debts that
the Customer incurs up to and including the 30th day after CIBC receives my
notice.
15. Statement Conclusive. Except for demonstrable errors or omissions, the
amount appearing due in any account stated by CIBC or settled between CIBC and
the Customer will be conclusive as to that amount being due.
16. CIBC's Priority.
(a) If any payment made to CIBC by the Customer or any other Person is
subsequently rendered void or must otherwise be returned for any reason, I will
be liable for that payment (but if Section 2(b) applies, subject to that
limitation). Until all of CIBC's claims against the Customer in respect of the
Customer's Debts have been paid in full, I will not require that CIBC assign to
me any Security held, or any other rights that CIBC may have, in connection with
the Customer's Debts, and I will not assert any right of contribution against
any Guarantor, or claim repayment from the Customer, for any payment that I make
under this Guarantee.
(b) If the Customer is bankrupt, or (if the Customer is a corporation)
liquidated or wound up, or if the Customer makes a bulk sale of any assets under
applicable law, or if the Customer proposes any composition with creditors or
any scheme of arrangement, CIBC will be entitled to all dividends and other
payments until CIBC is paid in full, and I will remain liable under this
Guarantee (but if Section 2(b) applies, subject to that limitation).
<PAGE> 22
(c) If CIBC gives to any trustee in bankruptcy or receives a valuation
of, or retains, any Security that CIBC holds for payment of the Customer's
Debts, that will not be considered, as between CIBC and me, to be a purchase of
such Security or payment, satisfaction or reduction of the Customer's Debts.
17. Assignment and Postponement of Claim. I postpone in favour of CIBC all debts
and liabilities that the Customer now owes or later may from time to time owe to
me in any manner until CIBC is paid in full. I further assign to CIBC all such
debts and liabilities, to the extent of the Customer's Debts, until CIBC is paid
in full. If I receive any moneys in payment of any of such debts and
liabilities, I will hold them in trust for, and will immediately pay them to,
CIBC without reducing my liability under this Guarantee.
18. Withholding Taxes. Unless a law requires otherwise, I will make all payments
under this Guarantee without deduction or withholding for any present or future
taxes of any kind. If a law does so require, I will pay to CIBC an additional
amount as is necessary to ensure CIBC receives the full amount CIBC would have
received if no deduction or withholding had been made.
19. Judgment Currency. My liability to pay CIBC in a particular currency (the
"First Currency") will not be discharged or satisfied by any tender or recovery
under any judgment expressed in or converted into another currency (the "Other
Currency") except to the extent the tender or recovery results in ClBC's
effective receipt of the full amount of the First Currency so payable.
Accordingly, I will be liable to CIBC in an additional cause of action to
recover in the Other Currency the amount (if any) by which that effective
receipt falls short of the full amount of the First Currency so payable, without
being affected by any judgment obtained for any other sums due.
20. Consent to Disclose Information. CIBC may from time to time give any credit
or other information about me to, or receive such information from, any credit
bureau, reporting agency or other Person.
21. General. Any provision of this Guarantee that is void or unenforceable in a
jurisdiction is, as to that jurisdiction, ineffective to that extent without
invalidating the remaining provisions. If two or more Persons sign this
Guarantee, each Person's liability will be joint and several. This Guarantee is
in addition and without prejudice to any Security of any kind now or in the
future held by CIBC. There are no representations, collateral agreements or
conditions with respect to, or affecting my liability under, this Guarantee
other than as contained in this Guarantee.
22. Quebec Only. If this Guarantee is governed by the laws of Quebec:
(a) I acknowledge that the terms and conditions of the Customer's Debts
have been expressly brought to my attention;
(b) I renounce the benefit of division and discussion;
(c) if two or more Persons sign this Guarantee, each Person's liability
will be solidary;
(d) I acknowledge that the thirty days' notice specified in Section 14
constitutes prior and sufficient notice to CIBC;
(e) if this Guarantee is attached to the performance of special duties, I
agree that this Guarantee shall not terminate upon cessation of such duties; and
If) it is the express wish of the parties that this document and any related
documents be drawn up in English. Les parties aux presentes ont expressement
demande que ce document et tous les documents s'y rattachant solent rediges en
anglais.
23. Definitions. In this Guarantee:
(a) "Bank Office" means the CIBC office noted on the first page of this
Guarantee, or such address as CIBC may, from time to time, advise me in the
manner provided in Section 6;
(b) "Customer's Debts" means the debts and liabilities that the Customer
has incurred or may incur with CIBC including, among other things, those in
respect of dealings between the Customer and CIBC, as well as any other dealings
by which the Customer may become indebted or liable to CIBC in any manner
whatever;
(c) "Guarantor" means any Person who has guaranteed or later guarantees
to CIBC any or all of the Customer's Debts, whether or not such Person has
signed this Guarantee or another document;
(d) "I", "me" and "my" mean the Person who has signed this Guarantee, and
if two or more Persons sign, each of them;
<PAGE> 23
(e) "Person" includes a natural person, personal representative,
partnership, corporation, association, organization, estate, trade union, church
or other religious organization, syndicate, joint venture, trust, trustee in
bankruptcy, government and government body and ~ny other entity, and, where
appropriate, specifically includes any Guarantor;
(f) "Section" means a section or paragraph of this Guarantee; and
(g) "Security" means any security held by CIBC as security for payment of
the Customer's Debts and includes, among other things, any and all guarantees.
For Use In Alberta Only
THE GUARANTEES ACKNOWLEDGEMENT ACT (ALBERTA)
CERTIFICATE OF NOTARY PUBLIC
(BMO VIA-7-5.06, .07)
I HEREBY CERTIFY THAT:
1. Donald Allan Bialik of Calgary, AB ,the Guarantor in the above Guarantee,
appeared in person before me and acknowledged that he/she had executed the
Guarantee;
2. I satisfied myself by examination of him/her that he/she is aware of the
contents of the Guarantee and understands it.
Given at Calgary, AB this 11th day of December, 1997, under my hand and seal of
office.
DARWIN A. SCHOFER
Barrister and Solicitor
A Notary Public in and for the Province of AB
STATEMENT OF GUARANTOR
I am the Person named in this certificate.
Donald Allan Bialik
<PAGE> 1
Between:
FutureLink Distribution Corporation (FutureLink)
550, 603 - 7th Avenue S.W.
Calgary, Alberta
T2P 2T5
And:
NTN Network (NTN)
5966 La Place Court
Carlsbad, California
92008
1. FutureLink and NTN have had discussions regarding FutureLink's ability to
provide NTN with the technology platform for the replacement of a PC network in
its hospitality environment with a thin client or NC network that has the full
capacity to function with the new generation NTN gaming initiative.
2. FutureLink and NTN plan to continue to discuss a possible business
relationship whereby FutureLink may be responsible for the specifications,
manufacturing and delivery of the hand held Playmaker for NTN that will work
with its new generation gaming initiative.
3. FutureLink and NTN plan to continue to discuss a possible business
relationship whereby FutureLink may be responsible for the IT services for NTN.
4. NTN's decision will be based on pricing, deliverability, function and
comparison of such specifics to other competitive providers. This letter of
understanding is non-binding and is designed to move the process of a potential
transaction closer to possible closure.
Size
1. Current range for upgrade of NC's from PC's in the hospitality arena is
between 3,000 and 10,000 units.
2. Current range for upgrade of Playmakers is between 30,000 and 300,000 units.
3. The overall potential size of this contract is up to $30 million.
Timing
It is the intent of both parties to move as quickly as possible to see the
fruition of this potential contract.
Next Steps
FutureLink is to provide full schematic and proposed specifications for both the
thin client or network computer station as well as the Playmaker, complete with
pricing models and proposed delivery times.
Dated this 29th day of April, 1998.
FutureLink Distribution Corporation
NTN Network
<PAGE> 1
July 22, 1998
Microsoft Corporation
1 Microsoft Way
Redmond, WA 98052
To whom it may concern:
This letter is to verify that the following company is a Microsoft Certified
Solution Provider for calendar year 1998:
FutureLink Distribution Corp.
#550, 603 - 7th Avenue S.W.
Calgary, Alberta, Canada T2P 2T5
Phone: 403-543-5511
Fax: 403-543-5510
If you have any questions regarding the status of this company, or the Microsoft
Certified Solution Provider program, please contact a customer service
representative at 1-800-SOLPROV.
Sincerely,
J.R. Dickson
Microsoft Certified Solution Provider Group
Microsoft Corporation
<PAGE> 2
Final Invoice (MCSP)
North America
MCSP Company Name: FutureLink Distribution Corp.
MCSPID
Confirmation Number (required if you applied via the MCSP Application and
Business Profile Tool):
CAN1xn2lj416rr3ipqnjg10
Primary Contact: Jeff Doepker
Street Address 1 (not a P0 Box): #550, 603 - 7 Ave SW
Street Address 2:
Street Address 3/Department/Mail Stop:
City/Town: Calgary State/Province/County: Ab
ZIP/Postal Code: T2P 2T5 Name of Country: Canada
Telephone: (403) 543-5511 Fax: (403) 543-5510
Internet E-mail: j [email protected]
Annual Fee Schedule:
The following annual fees apply to all new and renewing Microsoft Certified
Solution Provider memberships and MCSP site locations. These fees reflect a one
year membership beginning January 1, 1998, and are pro-rated.
Please find the time of year when you are applying and its corresponding fee,
and enter the fee in the space below.
Table 1
<TABLE>
<CAPTION>
Received by December 16, April 1, 1998 July 1, 1998 October 1, 1998
Country December 15, 1997 - March June 30, 1998 September 30, - December 31,
1997 31, 1998 1998 1998
<S> <C> <C> <C> <C> <C>
United States New Early $1,395 $1,195 $995 $795
(US Dollars) Enrollments:
$1,595
Renewals: $1,395
Canada New Early $1,925 $1,650 $1,375 $1,100
(Canadian Enrollments:
Dollars) $2,075
Renewals:
$1,925
</TABLE>
The fees listed do not include taxes. You must calculate and add your local tax
as appropriate.
Please add applicable sales tax if each of your site(s) resides in the following
states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA,
MD, ME, Ml, MN, MO, MS, NC, ND, NE, NJ, NM, NV, NY, OH, OK, PA, RI, SC, SD, TN,
TX, UT, VA, VT, WA, WI, WV, WY. In Canada, add a 7% GST, 15% HST, and in BC and
ON, add the PST per your provincial requirements. Microsoft's GST Registration
number is R135625069. Microsoft reserves the right to correct tax rates and/or
collect the state tax assessed by additional states as required by law, without
notice. Microsoft Corporation Federal Tax ID#91-1144442. If you are tax exempt
organization, please attach a copy of your tax exemption certificate. For
assistance in calculating the appropriate taxes for each site, please call
1-800~SOLPROV (1-800-765-7768)
MCSP ID I Site Location Annual Fee Amount Applicable Taxes Amount Due
1650.00 Cdn 115.50 1765.50
Total
(if needed, add additional page)
Payment Method (circle one): Check VISA Mastercard American Express
By Check: Check # is: 048
<PAGE> 3
Make checks payable to Microsoft Corporation, in U.S. or Canadian funds.
By Credit Card: # Expiration Date Phone
Name on Card Authorized Signature
Membership acceptance is conditioned upon MS's final approval, payment (which is
due upon receipt of this invoice), the return of the Final Invoice (MCSP) and
MCSP Site Annex (if applicable). Please remit invoice, payment and any
applicable business correspondence to:
Microsoft Certified Solution Provider Applications Processing
P0 Box 573629, Salt Lake City, UT 84157-9805
Any legal notices should be delivered to the applicable Microsoft entity listed
in the Country Annex in your Microsoft Certified Solution Provider Agreement,
Attn: Microsoft Certified Solution Provider Marketing Manager.
ACCEPTANCE OF AGREEMENT
A. FOR NEW ENROLLEES: Subject to MS' final approval, the MCSP identified above,
by signing this Final Invoice (MCSP), agrees that it shall be legally bound by
the terms and conditions of the Agreement, including, but not limited to, the
Site Annex (if applicable), the Country Annex, MCSP Program Guide, the Final
Invoice (MCSP) and any other applicable annexes, addenda and invoices which may
be required in the Territory, all of which terms and conditions are incorporated
herein. Before signing, the MCSP should particularly note and review once again
the bulleted Sections of the Agreement identified in Section C. below. If MCSP
agrees with all of these terms and conditions, MCSP, through its authorized
representative shall complete all required information in the Final Invoice
(MCSP), sign, date and return the Final In voice (MCSP) and the Site Annex (if
applicable), and the appropriate fees to the Microsoft address set forth above.
B. FOR RENEWING MCSP's: Subject to MS' final approval, the MCSP identified
above, through its Electronic Acceptance, or if MCSP is in a Territory that does
not recognize Electronic Acceptance then MCSP's signature on this invoice,
agrees that is shall be legally bound by the terms and conditions of the
Agreement, including, but not limited to, the Site Annex (if applicable), the
Country Annex, MCSP Program Guide, the Final Invoice (MCSP) and any other
applicable annexes, addenda and invoices which may be required in the Territory,
all of which terms and conditions are incorporated herein. Before MCSP submits
its Electronic Acceptance or provides a signature, the MCSP should particularly
note and review once again the bulleted Sections to the Agreement identified in
Section C. below.
If MCSP agrees with all of these terms and conditions, its authorized
representative has submitted its Electronic Acceptance and such representative
shall complete all required information in the Final Invoice (MCSP), date and
return the Final Invoice (MCSP) and the Site Annex (if applicable), and the
appropriate fees to the Microsoft address set forth above.
C. ALL MCSPs SHOULD REVIEW ONCE MORE THE FOLLOWING SECTIONS OF THE AGREEMENT:
- The confidentiality provisions in Sections 8.C and 10
- The warranty/limited warranties provisions in Section 12
- The exclusion of incidental, consequential and other damages
provision in Section 13
- The limitation of liability provisions in Section 14
- The instructions concerning acceptance of the Agreement in Section
17J.
- The provisions relating to the term and renewal of the Agreement
in Section 3A
The effectiveness of this Agreement is specifically conditioned on MS's final
review and approval. MS shall indicate formal approval of MCSP by a written
acceptance letter sent to the MCSP in the MCSP Welcome Kit, by regular mail. The
capitalized terms used herein shall have the same meaning as set forth in the
Agreement.
ACKNOWLEDGED AND AGREED:
"MCSP"
FutureLink Distribution Corporation
(FULL LEGAL COMPANY NAME)
<PAGE> 4
James Brecht, Controller
[SIGNATURE OF AUTHORIZED REPRESENTATIVE)
[NAME AND TITLE]
Date: April 28, 1998
ID: CANlxn21J416rr3ipgnjg10
[MCSPID or ONLINE CONFIRMATION NUMBER)
Very Important: For your application to be processed, this invoice must be
returned with your payment and appropriate tax if applicable.
If you are a NEW MCSP enrollee, before enclosing this invoice with your payment,
please make sure that you have signed this invoice.
NOTE FOR RENEWING MCSP's: If you are a RENEWING MCSP paying by Credit Card, you
may return the invoice and Site Annex (if Applicable) by facsimile.
1998 Microsoft Certified Solution Provider Agreement (1 November 1997)
Final Invoice (MCSP)
Part Number 098-xxxxx-Online
Version 2.0 Last Updated 18 September 1997
<PAGE> 5
Wednesday, August 19, 1998
From Jeff Doepker
Training Services
FutureLink Distribution
(403) 543-5511
(403) 234-4109 Dir
(403) 543-5510 Fax
To James Brecht
Please find your Microsoft Certified Solution Provider (MCSP) ID number below.
You will want to keep this ID number as you may need to reference it in the
future for questions on membership status or benefits. In addition, your ID
number enables you to access the MCSP Online private web site. Simply go to
http://www.microsoft.com/mcsp/ and follow instructions on how to access the MCSP
private site.
Your Microsoft Certified Solution Provider ID Number is 512399
The current MCSP password we have on file for you is: DOEPKER
Thank you again for participating in the MCSP program. Should you have any
questions, please contact your regional service center as indicated in the MCSP
Program Guide.
Regards,
The Microsoft Certified Solution Provider Team
<PAGE> 1
FUTURELINK DISTRIBUTION CORP.
SERVICE AGREEMENT
(PROVINCE OF ALBERTA)
Date: June 1, 1998
Client #: 980007
Between:
FUTURELINK DISTRIBUTION CORP.
No. 550, 603-7 Avenue SW
Calgary, AB
Canada T2P 2T5
(FutureLink)
And
WILLSON STATIONERS LTD.
4920 - 72nd Ave SE
Calgary, Alberta
T2C 4B5
(Client)
Background to the Agreement
Client has agreed to form a relationship with FutureLink where FutureLink will
provide consulting support for network development with the plan for FutureLink
to assume full network management and implementation responsibility.
FutureServe, a Division of FutureLink, will provide Web based development,
design and implementation support which marries with the overall FutureLink
solution for Network services.
The Client will provide access to the Willson facilities, employees and
suppliers to facilitate the analysis, investigation and implementation of the
network consulting and management programs.
PHASE I
FutureLink will provide consulting support to the client for network design
development from June 15th, 1998 to August 10th, 1998. Design development will
include:
1. Evaluation of Winsol as a long term solution
Evaluation of alternative POS system (if required)
Evaluation of alternative Inventory system (if required)
Evaluation of alternative Accounting system (if required)
2. Implementation plan for hardware migration to thin clients
Certification of all required applications on Winframe Server
Determination of what users require the use of thick clients
User testing of Winframe solution
Upgrade of existing wiring from serial cable to CAT5
Replacement of Dumb terminals with Thin Clients
3. Implementation plan for upgrade of POS systems at retail stores
4. Implementation plan for upgrade of Accounting system
FINANCIAL AGREEMENT
The Client will pay FutureLink a one-time consulting support fee for the period
June 15th, 1998 to August 10th, 1998.
The consulting fee will be $18,000.00 and is due August 10th, 1998.
PHASE II
FutureLink will assume network management of the client's information technology
services which will include:
- - Assumption of all existing network management and staff at the client
location
- - Assumption of all costs associated with network management excluding
software and connectivity costs
- - Maintenance of all network systems and functions to facilitate the
information flow for operations, accounting, marketing, retail sales
and support functions at all client locations
FINANCIAL AGREEMENT
The final structure of the full service management agreement and terms will be
developed at the conclusion of the consulting period and will be itemized under
a separate agreement.
Per:
FutureLink Distribution Corp. ______________________________
Dated: ______________________________
Willson Stationers Ltd. ______________________________
Dated: ______________________________
<PAGE> 1
FUTURELINK DISTRIBUTION CORP.
SERVICE AGREEMENT
(PROVINCE OF ALBERTA)
Date: June 1, 1998
Client #: 980004
Between:
FUTURELINK DISTRIBUTION CORP.
No. 550, 603-7 Avenue SW
Calgary, AB
Canada T2P 2T5 (FutureLink)
And
JAWS TECHNOLOGIES INC
No. 380 - 7Avenue SW
Calgary, AB
Canada T2P 2T5 (Client)
Background to the Agreement
Client has agreed to rent computing services from FutureLink. The purpose of
this document is to set out the agreement for rental services between FutureLink
and the Client.
1. DEFINITIONS
1.1. SPECIFIC
As used in this Agreement the following words and phrases shall have the
following meanings respectively:
a) Agreement means this Agreement including schedules and addenda attached to
and forming an integral part of this Agreement, and any amendments made
pursuant to this Agreement.
b) Business Day means any day except a Saturday, a Sunday and any statutory
holiday observed in the Province of Alberta.
c) Rental services means the provision and support of work station computing
hardware, access to designated software and means the equipment that the
Client will be required to rent in order to effectively and efficiently
interface with the FutureLink designated server facility.
d) Currency means Canadian dollars ($).
e) Effective Date of the Agreement means the commencement date as defined in
Schedule A.
f) Minimum Term of the Agreement means the minimum number of months, as
specified in the "Lease"
g) Location means the location(s) specified in Schedule A where FutureLink
shall deliver the rental services.
h) Party refers to either FutureLink or the Client
1.2. INCORPORATION OF SCHEDULES
The following Schedules, annexed hereto, are incorporated in this Agreement and
deemed to be part hereof: Schedule A Equipment List and Location, Security,
Billing Rates, Service Provision, Application Support
2. SERVICES
2.1 RENTAL SERVICES
FutureLink agrees to provide rental services to the Client for the duration of
the minimum term of the agreement and thereafter as mutually renewed by the
Client and FutureLink.
2.2. INSTALLATION PLAN
FutureLink and the Client agree that activities called for are to be
accomplished prior to the effective date of rental services. The
responsibilities of both FutureLink and the Client are detailed in the
Installation Plan.
3. RESPONSIBILITY OF FUTURELINK
3.1. SERVICE COMMITMENT
FutureLink shall use all commercially reasonable efforts to meet or exceed the
services levels defined herein.
a) Reporting
FutureLink will provide the client with a monthly invoice summarizing the
provision of service including the provision of any client specific
enhancement upgrades.
b) System Integrity and Access
FutureLink will provide 24 hour service access. Further, FutureLink will
not perform routine maintenance that would interfere with access between
the hours of 7:00am and 7:00pm Mountain Time on Business Days.
c) Application Support
FutureLink will provide general application support for common business
applications as defined in Schedule A.
d) Security
Fire-walling for the security of client information held at the FutureLink
Central Server facility will be provided at the cost of FutureLink.
e) Customer Service
FutureLink's customer service help desk will be available 8:00 AM to 5:00
PM Mt on business days.
f) Service Reviews
FutureLink will conduct monthly service reviews with clients.
g) Service Standards
FutureLink will strive for a 95% access rate which means between 7:00am and
7:00pm FutureLink will attempt to provide network access . Access limited
by FutureLink hardware at the Client site will be rectified through the
provision of repaired or replacement equipment.
3.2 SUPPLY AND MAINTENANCE OF RENTAL EQUIPMENT
a) The Client will supply and maintain "client owned" equipment as outlined in
Schedule A.
b) FutureLink will supply, maintain and replace, as necessary, all user
equipment owned by FutureLink as detailed in
<PAGE> 2
Schedule A. Ownership title to all FutureLink owned rental equipment
provided under the terms of this Agreement shall remain with FutureLink.
4. RESPONSIBILITIES OF THE CLIENT
4.1. RENTAL PAYMENTS
a) The Client shall pay to FutureLink the monthly rental and service fees
outlined in Schedule A.
b) The Client is responsible for all facility wiring, connectivity
installation and monthly connectivity charges necessary to facilitate the
performance of FutureLink's services.
4.2. SITE ACCESS
a) The Client shall provide FutureLink and its employees, contractors and
agents physical access to client site premises as may be necessary for
FutureLink to perform its obligations under this Agreement. These
obligations include without limitation the installation of those components
of rental equipment that are to be placed on the Client's premises;
b) The Client shall arrange such security clearances as may be required in
order to provide such access;
c) In the event that the access required cannot be provided on a timely basis,
the Client shall waive compliance with the Installation Plan or service
commitments for the period that access is delayed;
d) The Client shall be responsible for satisfying all requirements imposed by
law or contract as it applies to service installation and for meeting any
landlord requirements. This includes any additional fees, design
submissions, installation approvals including but not limited to: Cabling
4.3. OPERATIONS
a) The Client agrees to not, through its own operations or otherwise, cause
disturbances, outages or any other actions which may affect FutureLink's
network or service program, or which may adversely affect FutureLink's
ability to deliver service.
b) The Client further agrees to provide sufficient advance notice of the
Client's intention to change, modify, or reconfigure components or elements
of the Client's computer environment which may affect FutureLink's network,
service standards, or rental equipment, or which may affect FutureLink's
ability to meet the service standards.
c) The Client is responsible for maintenance of the Client facilities and
operating environment (including without limitation cleanliness, humidity
etc.) in which FutureLink rental equipment is located. Should the Client
fail to provide such in its entirety or of a standard such that is
detrimental to the operation of the rental equipment, the Client shall
waive any non-compliance with Service Levels resulting from such and shall
make FutureLink harmless for any loss of service standards.
4.4. USE OF COMMUNICATIONS SERVICES
The rental services provided by FutureLink in accordance with the terms and
conditions of this Agreement are for the sole and exclusive use of the Client
for its internal business and operational use only. Any resale of the rental
services in whole or in part is strictly prohibited without the express written
permission of FutureLink.
4.5. INSURANCE
The equipment shall be at the risk of the Client. The Client shall protect and
insure, for the term of this agreement and any renewal period, at the Client's
expense insurance against property loss or damage to the equipment listed in
Schedule B including without limitations, loss by fire (including extended
coverage), theft, collision, injury or death and damage to property of others
and such other risks of loss. The value of insurance carried shall equal the
replacement value of the equipment listed in Schedule B.
5. TERM AND TERMINATION
5.1. TERM
The Agreement shall remain in effect for 36 months.
5.2. TERMINATION FOR CAUSE
a) Either Party may terminate this Agreement immediately upon an occurrence of
the following:
(i) A material breach by the other;
(ii) Insolvency or bankruptcy;
(iii) Assignment for the benefit of creditors;
(iv) Appointment of a receiver or trustee in bankruptcy; or
(v) Upon any proceeding in bankruptcy, receivership or liquidation being
instituted and continuing for thirty (30) days without being
dismissed.
b) For the purpose of this Subparagraph 5.2, a failure to achieve committed
service standards shall not be deemed a material breach of the Agreement
unless both (1) the actual service levels achieved are less than ninety
percent (90%) of the service standards for three consecutive months and (2)
such failure is caused by FutureLink.
c) Termination for cause by the client will result in the client assuming full
responsibility for the financing agreements signed by the Client with the
FutureLink assigned finance agent. All equipment, business data and
software owned by the Client as part of the finance and/or lease equipment
listing shall become the property of the Client.
6. LIABILITYAND INDEMNITY
6.1. LIMITATION OF LIABILITY
Except as provided in Subparagraph 6.3 and except in the case of use or
disclosure of Confidential Information contrary to paragraph 7 and except for
damages or losses caused by the failure of the other Party to comply with its
obligations under this Agreement, neither FutureLink nor the Client shall be
liable to the other in connection with any single event or series of related
events for any special, incidental, indirect or consequential loss or damage
including, but not limited to, lost profits, lost business revenue, lost or
damaged data, failure to realize expected savings, other commercial or economic
loss of any kind even if FutureLink or the Client Party has been advised of the
possibility of these losses or damages, and regardless of the form of action,
whether in contract or in tort including negligence or based upon any other
legal or equitable theory. Furthermore, in no event will FutureLink or the
Client, its employees, subcontractors and agents be liable for any losses and
damages if and to the extent caused by the other or its employees,
subcontractors and agents failure to perform its obligations under this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
maximum liability of FutureLink to the Client, regardless of the cause or form
of action, shall be the amount paid to FutureLink by the Client under this
Agreement.
6.2. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
FutureLink agrees to indemnify, defend and save harmless the Client from and
against any claims made upon the Client by any third party, in the event that
the use of rental services by FutureLink, as described in this Agreement,
infringes a third party's lawful rights in any valid patent, copyright, trade
secret, or other proprietary interest enforceable in Canada provided that:
a) FutureLink shall have sole conduct of the proceedings;
b) The Client has promptly notified FutureLink of all such claims and has not
made any admissions in respect of them;
<PAGE> 3
c) The Client provides FutureLink with reasonable assistance and authority in
connection with such claims; and
d) FutureLink, may, in its discretion and at its expense either procure for
the Client the right to continue to use the infringing item and/or modify
or replace the infringing item or, if neither option is commercially
practicable, remove the infringing item from the rental service.
This indemnity shall not apply to the extent that any infringement is caused or
contributed to by the Client, the connection of services to the FutureLink
network, the Client's corporation, operation or use of the rental equipment with
any other devices, data or programs not furnished by FutureLink or its
authorized subcontractors, or any modification by the Client of the Connectivity
Services that has not been authorized in writing by FutureLink.
7. CONFIDENTIALITY
7.1. CONFIDENTIAL INFORMATION
For the purposes of this Agreement, 'Confidential Information' shall include,
but is not limited to, business information concerning both FutureLink, the
Client and their clients, specifications, research, software, trade secrets,
discoveries, ideas, know-how, designs, drawings, flow charts, data, computer
programs, marketing plans, customer names and other technical, financial or
business information which is disclosed, whether orally, visually or in a
material form, to another in support of the activities provided for in this
Agreement. Any information of third persons disclosed in the course of
performing such activities shall be deemed to be the disclosing entity
information and such information shall be governed by the terms of this
Agreement. FutureLink and the Client acknowledge that any confidential
information disclosed is and shall remain the property of the entity that
disclosed the Confidential Information. All Confidential Information disclosed
in tangible form shall be marked by the disclosing entity with the word
'Confidential' or otherwise identified by an appropriate stamp or legend
indicating its confidential nature. All Confidential Information disclosed
orally or visually and identified by the disclosing Party as confidential when
disclosed shall be confirmed by the disclosing Party with a written summary of
such information within thirty (30) days following disclosure, and the written
summary shall be marked by the disclosing Party in the same manner described
above.
7.2. OBLIGATIONS OF CONFIDENTIALITY
FutureLink and the Client agree that they shall hold Confidential Information
exchanged under this Agreement in confidence and shall use the same solely for
the purpose of performing their obligations under this Agreement. FutureLink and
the Client further agree that they shall not disclose any Confidential
Information to anyone except those employees or contractors to whom such
disclosure is necessary for the purposes authorized herein. In the event such
Confidential Information must be disclosed by any Party to third persons for the
purpose of performing this Agreement, the disclosing Party shall, poor to
disclosure, obtain written consent from the Party that disclosed the
Confidential Information and obtain from the third person a written agreement
regarding confidentiality of the Confidential Information, the terms of which
shall be substantially the same as those contained herein. Notwithstanding the
foregoing, a Party may disclose Confidential Information to its professional
advisors without the written consent of the disclosing Party where, in the
opinion of the receiving Party, the advice of its professional advisors is
necessary to accomplish the objectives of this Agreement. Each Party shall use
not less than the same degree of care to avoid disclosure of Confidential
Information as it uses for its own confidential information of like importance
and, in any event, shall use a reasonable degree of care.
7.3. EXCLUSIONS
This Agreement shall not apply to information: (a) previously known to a Party
free of any obligation to keep it confidential; (b) that has been or is
subsequently made public by a Party that owns that information or by a third
Party who is under no obligation of confidence to any Party; (c) that is
independently developed by a Party or an affiliate without reference to or
knowledge of the other Party's Confidential Information; or, (d) that is
disclosed with the prior approval of the owner of the information. Any
combination of Confidential Information regarding, for example, products or
features of technology, shall not be deemed to be within the foregoing exception
merely because individual portions of such combination are disclosed or
separately known in the public domain or known by the receiving Party.
7.4. DISCLOSURE BY LAW
If the Confidential Information is requested by a government agency, a Party may
disclose the Confidential Information of another, provided that the disclosing
Party has obtained protective arrangements reasonably satisfactory to the owner;
provided further that if the governmental agency has jurisdiction to compel
production of the Confidential information and exercises that jurisdiction, the
request shall be treated as a demand for discovery. Notwithstanding the
foregoing, either Party may reveal such Confidential Information as may be
reasonably necessary to any regulatory authority having jurisdiction over it, or
its affiliates, for the purpose of analyzing the regulatory implications and
constraints that may apply to the business relationship and in order to obtain
such regulatory approvals as may be required. If a Party is involved in court
proceedings and is subject to a legally enforceable demand for discovery of
Confidential Information, that Party shall give written notice to the owner of
the Confidential information prior to disclosing the Confidential information,
and shall cooperate in seeking such reasonable protective arrangements as may be
requested by the owner. Nothing in this Subparagraph shall affect the duty of
any Party to take such action as it may deem advisable, including legal action,
to protect its Confidential Information.
8. GENERAL
8.1. DISPUTE RESOLUTION
a) If during their course of work in progress, either Party has cause to
believe that the other Party is not fulfilling its obligations under the
terms of this Agreement or a Party raises a dispute relating to the
validity, construction, meaning, performance or effect of this Agreement or
the rights and obligations of FutureLink or the Client or any matter
arising out of or connected with this Agreement, then the dissatisfied
Party shall give written notice to the other Party of its objections and
the reasons therefor. FutureLink's C.O.O. shall consult with the Client's
designate in an effort to reach a mutual agreement to overcome the
objections. In the event that mutual agreement cannot be reached within a
time period that is satisfactory to the Party raising the issue under
consideration, that Party may refer the dispute to FutureLink's President,
and FutureLink's C.O.O. for resolution of the dispute. FutureLink's C.O.O.
and FutureLink's President shall meet as soon as is reasonably possible
after a dispute is referred to it, giving due regard to the nature and
impact of the issue under consideration.
b) Except as provided elsewhere in this Agreement, any controversy, dispute,
or claim that is of a fundamental nature in relation to this Agreement
(including the question whether any
<PAGE> 4
particular matter is eligible for arbitration hereunder) which cannot be
resolved in the manner set forth in paragraph (a) above, shall, at the
written request of one Party to the other not less than sixty (60) days in
advance of submittal to arbitration, be settled by arbitration in
accordance with the Arbitration Act S.A. 1991, c.43.1 or any statutory
modification or re-enactment thereof, (the "Act") by one arbitrator
appointed in accordance with the Act. The arbitrator shall sit in Calgary,
Alberta.
c) The Client and FutureLink shall continue the performance of their
respective obligations during the resolution of any dispute or
disagreement, including during any period of arbitration, unless and until
this Agreement is terminated or expires in accordance with its terms and
conditions. The determination resulting from the arbitration process shall
be final and binding upon the parties to the arbitration. Accordingly,
there shall be no right of appeal from the award of the arbitrator.
d) The costs of the arbitration shall be borne by the Client and FutureLink as
may be specified in the arbitrator's decision.
e) Notwithstanding anything else in this Subparagraph 8.1, where the
arbitrator conducts a resolution or otherwise receives evidence from a
Party to the arbitration or their respective employees, agents, consultants
or advisors, such evidence shall be treated as Confidential Information of
the Party on whose behalf the evidence is presented and the Advisors shall
enter into a form of non-disclosure agreement in a form acceptable to the
disclosing Party as a pre-condition to receiving, reviewing or auditing any
Confidential Information of the disclosing Party in the arbitration.
f) If a Party desires a remedy that an arbitrator is unable by law to provide,
that matter shall be excluded from arbitration. The following additional
matters shall also be excluded from arbitration:
(i) A decision by either Party to terminate this Agreement pursuant to
Paragraph 5;
(ii) Any law suit involving third parties;
(iii) Intellectual property claims whether initiated by third parties or by
FutureLink or the Client, or
(iv) Any actions arising from an alleged breach of Paragraph 7, Confidentiality.
8.2. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between FutureLink and the
Client. This Agreement supersedes all prior understandings and communications
between FutureLink and the Client whether oral or written.
8.3. ASSIGNMENT
a) This Agreement shall be binding upon and inure to the benefit of FutureLink
and the Client and their respective successors and permitted assigns. This
Agreement may be assigned in whole or in part by FutureLink without the
prior written consent of the Client.
b) Any permitted assignment of this Agreement shall be conditional upon
reciprocal provision to this Agreement:
(i) A true copy of the assignment agreement, and
(ii) An agreement and undertaking from the assignee to be directly bound by the
provisions of this Agreement and not to further assign its rights hereunder
without complying with the provisions of this Subparagraph 8.3.
8.4. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, if by reason of Force
Majeure, any Party is wholly or part unable to perform certain of its
obligations under this Agreement it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability
and nature, cause and expected duration of the Force Majeure. The Party affected
by Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to such labor disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction.
'Force Majeure' shall mean an event, the cause of which is beyond the reasonable
control of the Party affected thereby and which could not reasonably have been
foreseen and provided against, including, without limitation, acts of God,
strikes, Lockouts or other labor or industrial disturbances, accidents, fires,
explosions, weather conditions materially preventing or impeding work, inability
to secure fuel, power, materials, contractors or labor, mechanical breakdown,
failure of equipment or machinery, delays in transportation, wars, civil
commotion, sabotage, applicable legislation and regulations thereunder,
interruptions by government or court orders and future orders (lawful or
otherwise) of any regulatory body of competent jurisdiction but shall not
include financial difficulty.
8.5. NOTICES
All notices, consents, invoices or other communications, other than day to day
communications, provided for under this Agreement shall be in writing and shall
be deemed to be sufficiently given if delivered by overnight courier, in which
case the notice shall be deemed to have been received two (2) Business Days
after the sending thereof, or if delivered by hand to a representative of such
Party, in which case the notice shall be deemed to have been received on the
date of delivery thereof, or if sent by telecopier to such Party, in which case
the notice shall be deemed to have been received on the Business Day (in the
locality of the addressee) on the sending thereof. Unless notice of change of
address has been given in the manner provided in this Subparagraph 8.5, notices
shall be addressed as follows:
FUTURELINK DISTRIBUTION CORPORATION
Suite #550 - 603 7th Avenue SW
Calgary, Alberta T2P 2T5
Attention: C.O.O.
Phone: (403) 543-5511
Fax: (403) 543-5510
CLIENT
JAWS TECHNOLOGIES INC.
#380 - 603 7TH Ave SW
Calgary, Alberta
T2P 2T5
Attention: Mitch Tarr
VP Marketing
Phone: (403) 505-5055
Fax: (403) 508-5058
8.6. WAIVER
No indulgence or forbearance by any Party hereunder shall be deemed to
constitute a waiver of its rights to insist on performance in full and in a
timely manner of all covenants of the other Party hereunder and any such waiver,
in order to be binding upon a Party, must be express and in writing and signed
by such Party and then such waiver shall be effective only in the specific
instance and for the purpose for which it is given. No waiver of any term,
<PAGE> 5
condition or covenant by any Party shall be deemed to be a waiver by such Party
of its rights to require full and timely compliance with the same term,
condition or covenant thereafter, or with any other term, covenant or condition
of this Agreement at any time.
8.7. AMENDMENT OR MODIFICATION
This Agreement may not be amended except by written instrument signed by
FutureLink and the Client.
8.8. SURVIVAL
The terms of this Agreement which, by their nature, extend beyond the term of
this Agreement shall survive any termination or expiration of this Agreement.
8.9. AUTHORITY
Each Party has full power and authority to enter into and perform this Agreement
and the person signing this Agreement on behalf of each Party has been properly
authorized and empowered to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by it.
8.10. LEGAL COSTS
Each Party shall bear its own costs incurred in connection with the preparation
and negotiation of this Agreement. In the event it is necessary for FutureLink
to seek a determination or enforcement of its rights under this Agreement by
arbitration in any court of competent jurisdiction, FutureLink shall recover
from the client, in addition to any and all other remedies awarded by such
court, its legal fees and court costs on a solicitor client basis, including
such fees and costs on appeal.
8.11. GOVERNING LAW
This Agreement shall be governed and interpreted abiding to the laws of the
Province of Alberta. Venue and jurisdiction shall be in Alberta. In witness
whereof FutureLink and the Client have executed this Agreement under the hand of
its officer duly authorized in that regard.
8.12 RULES AND REGULATIONS
The Client shall at all times use the rental services in accordance with the
usage rules and policies established by FutureLink from time to time and
communicated to the Client in writing. Any failure by the Client to comply with
said rules and policies, which is not remedied to the satisfaction of FutureLink
within 48 hours (or such shorter time period as may be reasonable in the
circumstances) of notice of such failure to comply, shall be deemed to be a
material breach of this Agreement.
FUTURELINK DISTRIBUTION CORP.
Dated: Per:
Title:
JAWS TECHNOLOGIES INC.
Dated: Per:
Title:
<PAGE> 1
FutureLink
SERVICE AGREEMENT
Between:
FutureLink Distribution Corp.
(FutureLink)
And
Financial Management Alberta Ltd.
(Client)
Background to the Agreement
Client has agreed to rent computing services from FutureLink. The purpose of
this document is to set out the agreement for rental services between FutureLink
and the Client.
1. DEFINITIONS
1.1. SPECIFIC
As used in this Agreement the following words and phrases shall have the
following meanings respectively:
a) Agreement means this Agreement including schedules and addenda attached
to and forming an integral part of this Agreement, and any amendments
made pursuant to this Agreement.
b) Business Day means any day except a Saturday, a Sunday and any statutory
holiday observed in the Province of Alberta.
c) Rental services means the provision and support of work station
computing hardware, access to designated software and means the
equipment that the Client will be required to rent in order to
effectively and efficiently interface with the FutureLink designated
server facility.
d) Currency means Canadian dollars ($).
e) Effective Date of the Agreement means the date in Schedule A.
f) Minimum Term of the Agreement means the minimum number of months, as
specified in Schedule A, the Agreement shall remain in full force and
effect.
g) Location means the location(s) specified in Schedule B where FutureLink
shall deliver the rental services.
h) Party refers to either FutureLink or the Client
1.2. INCORPORATION OF SCHEDULES
The following Schedules, annexed hereto, are incorporated in this Agreement and
deemed to be part hereof:
Schedule A Rental Fees, Term of Agreement, Effective Date
Schedule B Location and Provision of Equipment
Schedule C Installation Plan
Schedule D Service Levels, Client Credits
<PAGE> 2
2. SERVICES
2.1 RENTAL SERVICES
FutureLink agrees to provide rental services to the Client for the duration of
the minimum term of the agreement and thereafter as mutually renewed by the
Client and FutureLink.
2.2. INSTALLATION PLAN
FutureLink and the Client agree that activities called for are to be
accomplished prior to the effective date of rental services. The
responsibilities of both FutureLink and the Client are detailed in the
Installation Plan.
3. RESPONSIBILITY OF FUTURELINK
3.1. SERVICE COMMITMENT
FutureLink shall use all commercially reasonable efforts to meet or exceed the
services levels defined herein.
a) Reporting
FutureLink will provide the client with a monthly electronic invoice
summarizing the provision of service including the provision of any
client specific enhancement upgrades, or service credits.
b) System Integrity and Access
FutureLink will strive to allow 24 hour rental service access. Further,
FutureLink will not perform routine maintenance that would interfere
with access between the hours of 7:00am and 7:00pm Mountain Standard
Time.
c) Application Support
FutureLink is able to provide contract application support to clients or
will source software application support for clients. Rates will be
negotiated under separate Agreement.
d) Security
Fire-walling and encryption coding for the security of client
information will be provided at the cost of FutureLink.
e) Customer Service
FutureLink's customer service help desk will be open 24 hours per day.
f) Service Reviews
FutureLink will conduct regular service reviews for clients.
g) Service Standards
FutureLink will attempt to strive for a 95% access rate which means
between 7:00am and 7:00pm MST FutureLink will attempt to provide a
minimum access rate of 95%. Access limited by FutureLink hardware at
the Client site will be rectified through the provision of repaired
or replacement equipment. Access limited by the fault of FutureLink
will result in an hourly-prorated credit. Credits are defined under
Schedule D.
3.2 SUPPLY AND MAINTENANCE OF RENTAL EQUIPMENT
FutureLink will supply, maintain and replace, as necessary, all user
equipment owned by FutureLink as detailed in the Client Installation
Plan - Schedule C.
<PAGE> 3
4. RESPONSIBILITIES OF THE CLIENT
4.1. SITE ACCESS
a) The Client shall provide FutureLink and its employees, contractors and
agents physical access to client site premises as may be necessary for
FutureLink to perform its obligations under this Agreement. These
obligations include without limitation the installation of those
components of rental equipment that are to be placed on the Client's
premises;
b) The Client shall arrange such security clearances as may be required in
order to provide such access;
c) In the event that the access required cannot be provided on a timely
basis, the Client shall waive compliance with the Installation Plan for
the period that access is delayed;
d) The Client shall be responsible for satisfying all requirements imposed
by law or contract as it applies to service installation and for meeting
any landlord requirements. This includes any additional fees, design
submissions, installation approvals including but not limited to:
Cabling
Internet Hook-up
4.3. OPERATIONS
a) The Client agrees to not, through its own operations or otherwise, cause
disturbances, outages or any other actions which may affect FutureLink's
network or service program, or which may adversely affect FutureLink's
ability to meet the service standards.
b) The Client further agrees to provide sufficient advance notice of the
Client's intention to change, modify, or reconfigure components or
elements of the Client's computer environment which may affect
FutureLink's network, service standards, or rental equipment, or which
may affect FutureLink's ability to meet the service standards.
c) The Client is responsible for maintenance of the Client facilities and
operating environment (including without limitation cleanliness,
humidity etc.) in which FutureLink rental equipment is located. Should
the Client fail to provide such in its entirety or of a standard such
that is detrimental to the operation of the rental equipment, the Client
shall waive any non-compliance with Service Levels resulting from such
and shall make FutureLink harmless for any loss of service standards.
4.4. USE OF COMMUNICATIONS SERVICES
The rental services provided by FutureLink in accordance with the terms
and conditions of this Agreement are for the sole and exclusive use of
the Client for its internal business and operational use only. Any
resale of the rental services in whole or in part is strictly prohibited
without the express written permission of FutureLink.
4.5. INSURANCE
The Client shall retain insurance for the rental equipment provided by
FutureLink to the Client facilities. The value of such insurance shall
be equivalent to 36 months times the monthly cost per workstation.
<PAGE> 4
5. PRICE AND PAYMENT
5.1. MONTHLY SERVICE AND USAGE FEES
Commencing on the effective date, FutureLink shall be credited from the
Client, on a pre-payment plan, the monthly per station charge as set out
in Schedule 'C'. Adjustments to charges due to expanded application use
by the client or the provision of additional workstations will result in
the issue of a revised Schedule C to reflect the change in rental
service.
Credits due to the Client from FutureLink will issued electronically or
by cheque.
A monthly electronic invoice will be forwarded to the Client designate.
5.2. FIRST PAYMENT AND SECURITY DEPOSIT
The Client will be responsible for payment of the first month in full
prior to the commencement of services plus a security deposit equal to
the first month billings. Upon termination of the agreement, the
security deposit shall be returned to the client with interest due
payable.
6. TERM AND TERMINATION
6.1. INITIAL TERM
The Agreement shall remain in effect for a minimum of 36 months. The
Agreement shall be renewed after the initial term unless terminated in
writing by the Client as follows:
a) In the event that the Client fails to give a notice of termination 3
months prior to the expiry of the minimum term of the Agreement, this
Agreement shall be deemed to be renewed on a 3 month basis.
b) Either Party may terminate a 3 month renewal by providing the other not
less than 3 months written notice.
6.3. TERMINATION FOR CONVENIENCE
a) The Client may terminate this Agreement for convenience by giving
FutureLink 3 months written notice.
b) If the Client elects to exercise its right to terminate this Agreement
for convenience the Client shall pay to FutureLink a termination for
convenience fee at the rate set forth in Schedule A.
6.4. TERMINATION FOR CAUSE
a) Either Party may terminate this Agreement immediately upon an occurrence
of the following:
(i) A material breach by the other;
(ii) Insolvency or bankruptcy;
(iii) Assignment for the benefit of creditors;
(iv) Appointment of a receiver or trustee in bankruptcy; or
(v) Upon any proceeding in bankruptcy, receivership or liquidation
being instituted and continuing for thirty (30) days without
being dismissed.
b) Termination by the Client pursuant to Subparagraph 6.4(a) will not be
subject to the termination for convenience fee specified in Subparagraph
6.3 above.
c) For the purpose of this Subparagraph 6.4, a failure to achieve committed
service standards shall not be deemed a material breach of the Agreement
unless both (1) the actual service levels achieved are less than ninety
percent (90%) of the service standards for three consecutive months and
(2) such failure is caused by FutureLink.
<PAGE> 5
7. LIABILITY AND INDEMNITY
7.1. LIMITATION OF LIABILITY
Except as provided in Subparagraph 7.3 and except in the case of use or
disclosure of Confidential Information contrary to paragraph 8 and except for
damages or losses caused by the failure of the other Party to comply with its
obligations under this Agreement, neither FutureLink nor the Client shall be
liable to the other in connection with any single event or series of related
events for any special, incidental, indirect or consequential loss or damage
including, but not limited to, lost profits, lost business revenue, lost or
damaged data, failure to realize expected savings, other commercial or economic
loss of any kind even if FutureLink or the Client Party has been advised of the
possibility of these losses or damages, and regardless of the form of action,
whether in contract or in tort including negligence or based upon any other
legal or equitable theory. Furthermore, in no event will FutureLink or the
Client, its employees, subcontractors and agents be liable for any losses and
damages if and to the extent caused by the other or its employees,
subcontractors and agents failure to perform its obligations under this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
maximum liability of FutureLink to the Client, regardless of the cause or form
of action, shall be the amount paid to FutureLink by the Client under this
Agreement.
7.3. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
FutureLink agrees to indemnify, defend and save harmless the Client from
and against any claims made upon the Client by any third party, in the
event that the use of rental services by FutureLink, as contemplated in
this Agreement, infringes a third party's lawful rights in any valid
patent, copyright, trade secret, or other proprietary interest
enforceable in Canada provided that:
a) FutureLink shall have sole conduct of the proceedings;
b) The Client has promptly notified FutureLink of all such claims and has
not made any admissions in respect of them; c) The Client provides
FutureLink with reasonable assistance and authority in connection with
such claims; and
d) FutureLink, may, in its discretion and at its expense either procure for
the Client the right to continue to use the infringing item and/or
modify or replace the infringing item or, if neither option is
commercially practicable, remove the infringing item from the rental
service.
This indemnity shall not apply to the extent that any infringement is caused or
contributed to by the Client, the connection of services to the FutureLink
network, the Client's corporation, operation or use of the rental equipment with
any other devices, data or programs not furnished by FutureLink or its
authorized subcontractors, or any modification by the Client of the Connectivity
Services that has not been authorized in writing by FutureLink.
8. CONFIDENTIALITY
8.1. CONFIDENTIAL INFORMATION
For the purposes of this Agreement, 'Confidential Information' shall include,
but is not limited to, business information concerning both FutureLink, the
Client and their clients, specifications, research, software, trade secrets,
discoveries, ideas, know-how, designs, drawings, flow charts, data, computer
programs, marketing plans, customer names and other technical, financial or
business information which is disclosed, whether orally, visually or in a
material form, to another in support of the activities provided for in this
Agreement. Any information of third persons disclosed in the course of
performing such activities shall be deemed to be the disclosing entity
information and such information shall be governed by the terms of this
Agreement. FutureLink and the Client acknowledge that any confidential
information disclosed is and shall remain the property of the entity that
disclosed the Confidential Information. All Confidential Information disclosed
in tangible form shall be marked by the disclosing entity with the word
'Confidential' or otherwise identified by an appropriate stamp or legend
Indicating its confidential nature. All Confidential Information disclosed
orally or visually and identified by the disclosing Party as confidential when
disclosed shall be confirmed by the disclosing Party with a written summary of
such information within thirty (30) days following disclosure, and the written
summary shall be marked by the disclosing Party in the same manner described
above.
<PAGE> 6
8.2. OBLIGATIONS OF CONFIDENTIALITY
FutureLink and the Client agree that they shall hold Confidential Information
exchanged under this Agreement in confidence and shall use the same solely for
the purpose of performing their obligations under this Agreement. FutureLink and
the Client further agree that they shall not disclose any Confidential
Information to anyone except those employees or contractors to whom such
disclosure is necessary for the purposes authorized herein. In the event such
Confidential Information must be disclosed by any Party to third persons for the
purpose of performing this Agreement, the disclosing Party shall, poor to
disclosure, obtain written consent from the Party that disclosed the
Confidential Information and obtain from the third person a written agreement
regarding confidentiality of the Confidential Information, the terms of which
shall be substantially the same as those contained herein. Notwithstanding the
foregoing, a Party may disclose Confidential Information to its professional
advisors without the written consent of the disclosing Party where, in the
opinion of the receiving Party, the advice of its professional advisors is
necessary to accomplish the objectives of this Agreement. Each Party shall use
not less than the same degree of care to avoid disclosure of Confidential
Information as it uses for its own confidential information of like importance
and, in any event, shall use a reasonable degree of care.
8.3. EXCLUSIONS
This Agreement shall not apply to information: (a) previously known to a Party
free of any obligation to keep it confidential; (b) that has been or is
subsequently made public by a Party that owns that information or by a third
Party who is under no obligation of confidence to any Party; (c) that is
independently developed by a Party or an affiliate without reference to or
knowledge of the other Party's Confidential Information; or, (d) that is
disclosed with the poor approval of the owner of the information. Any
combination of Confidential Information regarding, for example, products or
features of technology, shall not be deemed to be within the foregoing exception
merely because individual portions of such combination are disclosed or
separately known in the public domain or known by the receiving Party.
8.4. DISCLOSURE BY LAW
If the Confidential Information is requested by a government agency, a Party may
disclose the Confidential Information of another, provided that the disclosing
Party has obtained protective arrangements reasonably satisfactory to the owner;
provided further that if the governmental agency has jurisdiction to compel
production of the Confidential information and exercises that jurisdiction, the
request shall be treated as a demand for discovery. Notwithstanding the
foregoing, either Party may reveal such Confidential Information as may be
reasonably necessary to any regulatory authority having jurisdiction over it, or
its affiliates, for the purpose of analyzing the regulatory implications and
constraints that may apply to the business relationship and in order to obtain
such regulatory approvals as may be required. If a Party is involved in court
proceedings and is subject to a legally enforceable demand for discovery of
Confidential Information, that Party shall give written notice to the owner of
the Confidential information prior to disclosing the Confidential information,
and shall cooperate in seeking such reasonable protective arrangements as may be
requested by the owner. Nothing in this Subparagraph shall affect the duty of
any Party to take such action as it may deem advisable, including legal action,
to protect its Confident Information.
9. GENERAL
9.1. DISPUTE RESOLUTION
a) If during their course of work in progress, either Party has cause to
believe that the other Party is not fulfilling its obligations under the
terms of this Agreement or a Party raises a dispute relating to the
validity, construction, meaning, performance or effect of this Agreement
or the lights and obligations of FutureLink or the Client or any matter
arising out of or connected with this Agreement, then the dissatisfied
Party shall give written notice to the other Party of its objections and
the reasons therefor. FutureLink's C.O.O. shall consult with the
Client's designate in an effort to reach a mutual agreement to overcome
the objections. In the event that mutual agreement cannot be reached
within a time period that is satisfactory to the Party raising the issue
under consideration, that Party may refer the dispute to FutureLink's
President, and FutureLink's Vice President Engineering and Operations
for resolution of the dispute. FutureLink's Vice President Engineering
and Operations, and FutureLink's President shall meet as soon as is
reasonably possible after a dispute is referred to it, giving due regard
to the nature and impact of the issue under consideration.
<PAGE> 7
b) Except as provided elsewhere in this Agreement, any controversy,
dispute, or claim that is of a fundamental nature in relation to this
Agreement (including the question whether any particular matter is
eligible for arbitration hereunder) which cannot be resolved in the
manner set forth in paragraph (a) above, shall, at the written request
of one Party to the other not less than sixty (60) days in advance of
submittal to arbitration, be settled by arbitration in accordance with
the Arbitration Act S.A. 1991, c.43.1 or any statutory modification or
re-enactment thereof, (the 'Act') by one arbitrator appointed in
accordance with the Act. The arbitrator shall sit in Calgary, Alberta.
c) The Client and FutureLink shall continue the performance of their
respective obligations during the resolution of any dispute or
disagreement, including during any period of arbitration, unless and
until this Agreement is terminated or expires in accordance with its
terms and conditions. The determination resulting from the arbitration
process shall be final and binding upon the parties to the arbitration.
Accordingly, there shall be no right of appeal from the award of the
arbitrator.
d) The costs of the arbitration shall be borne by the Client and FutureLink
as may be specified in the arbitrator's decision.
e) Notwithstanding anything else in this Subparagraph 9.1, where the
arbitrator conducts a resolution or otherwise receives evidence from a
Party to the arbitration or their respective employees, agents,
consultants or advisors, such evidence shall be treated as Confidential
Information of the Party on whose behalf the evidence is presented and
the Advisors shall enter into a form of non-disclosure agreement in a
form acceptable to the disclosing Party as a pre-condition to receiving,
reviewing or auditing any confidential Information of the disclosing
Party in the arbitration.
f) If a Party desires a remedy that an arbitrator is unable by law to
provide, that matter shall be excluded from arbitration. The following
additional matters shall also be excluded from arbitration:
(i) A decision by either Party to terminate this Agreement pursuant to
Paragraph 6;
(ii) Any law suit involving third parties;
(iii) Intellectual property claims whether initiated by third parties or by
FutureLink or the Client, or
(iv) Any actions arising from an alleged breach of Paragraph 8,
Confidentiality.
9.2. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between FutureLink and
the Client. This Agreement supersedes all prior understandings and
communications between FutureLink and the Client whether oral or
written.
9.3. ASSIGNMENT
a) This Agreement shall be binding upon and inure to the benefit of
FutureLink and the Client and their respective successors and permitted
assigns. This Agreement shall not be assigned in whole or in part by
FutureLink or the Client without the prior written consent of both
FutureLink and the Client.
b) Any permitted assignment of this Agreement shall be conditional upon
reciprocal provision to this Agreement:
(i) A true copy of the assignment agreement, and
(ii) An agreement and undertaking from the assignee to be directly bound by
the provisions of this Agreement and not to further assign its rights
hereunder without complying with the provisions of this Subparagraph
9.8.
<PAGE> 8
9.9. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, if by reason of Force
Majeure, any Party is wholly or party unable to perform certain of its
obligations under this Agreement it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability
and nature, cause and expected duration of the Force Majeure. The Party affected
by Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to such labor disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction.
'Force Majeure' shall mean an event, the cause of which is beyond the reasonable
control of the Party affected thereby and which could not reasonably have been
foreseen and provided against, including, without limitation, acts of God,
strikes, Lockouts or other labor or industrial disturbances, accidents, fires,
explosions, weather conditions materially preventing or impeding work, inability
to secure fuel, power, materials, contractors or labor, mechanical breakdown,
failure of equipment or machinery, delays in transportation, wars, civil
commotion, sabotage, applicable legislation and regulations thereunder,
interruptions by government or court orders and future orders (lawful or
otherwise) of any regulatory body of competent jurisdiction but shall not
include financial difficulty.
9.10. NOTICES
All notices, consents, invoices or other communications, other than day to day
communications, provided for under this Agreement shall be in writing and shall
be deemed to be sufficient given if delivered by overnight courier, in which
case the notice shall be deemed to have been received two (2) Business Days
after the sending thereof, or if delivered by hand to a representative of such
Party, in which case the notice shall be deemed to have been received on the
date of delivery thereof, or if sent by telecopier to such Party, in which case
the notice shall be deemed to have been received on the Business Day (in the
locality of the addressee) on the sending thereof. Unless notice of change of
address has been given in the manner provided in this Subparagraph 9.10, notices
shall be addressed as follows:
FUTURELINK DISTRIBUTION CORPORATION
Suite #550 - 603 7th Avenue SW
Calgary, Alberta
T2P 2T5
Attention: C.O.O.
Phone: (403) 543 - 5511
Fax: (403) 543 - 5510
FINANCIAL MANAGEMENT ALBERTA LIMITED
#100, 6001 - 1A Street S.W.
Calgary, Alberta
T2H 0G5
Attention: Chris Frederick, Managing Director
Phone: (403) 255-2876
Fax: (403) 252-7145
9.12. WAIVER
No indulgence or forbearance by any Party hereunder shall be deemed to
constitute a waiver of its lights to insist on performance in full and in a
timely manner of all covenants of the other Party hereunder and any such waiver,
in order to be binding upon a Party, must be express and in writing and signed
by such Party and then such waiver shall be effective only in the specific
instance and for the purpose for which it is given. No waiver of any term,
condition or covenant by any Party shall be deemed to be a waiver by such Party
of its rights to require full and timely compliance with the same term,
condition or covenant thereafter, or with any other term, covenant or condition
of this Agreement at any time.
<PAGE> 9
9.13. AMENDMENT OR MODIFICATION
This Agreement may not be amended except by written instrument signed by
FutureLink and the Client.
9.14. SURVIVAL
The terms of this Agreement which, by their nature, extend beyond the term of
this Agreement shall survive any termination or expiration of this Agreement.
9.15. AUTHORITY
Each Party has full power and authority to enter into and perform this Agreement
and the person signing this Agreement on behalf of each Party has been properly
authorized and empowered to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by it
9.17. LEGAL COSTS
Each Party shall bear its own costs incurred in connection with the preparation
and negotiation of this Agreement. In the event it is necessary for FutureLink
to seek a determination or enforcement of its rights under this Agreement by
arbitration in any court of competent jurisdiction, FutureLink shall recover
from the client, in addition to any and all other remedies awarded by such
court, its legal fees and court costs on a solicitor client basis, including
such fees and costs on appeal.
9.18. GOVERNING LAW
This Agreement shall be governed and interpreted abiding to the laws of the
Province of Alberta. Venue and jurisdiction shall be in Alberta.
In witness whereof FutureLink and the Client have executed this Agreement under
the hand of its officer duly authorized in that regard.
9.19. RULES AND REGULATIONS
The Client shall at all times use the rental services in accordance with the
usage rules and policies established by FutureLink from time to time and
communicated to the Client in writing. Any failure by the Client to comply with
said rules and policies, which is not remedied to the satisfaction of FutureLink
within 48 hours (or such shorter time period as may be reasonable in the
circumstances) of notice of such failure to comply, shall be deemed to be a
material breach of this Agreement
FUTURELINK DISTRIBUTION CORP.
Dated: Per:
Title:
FINANCIAL MANAGEMENT ALBERTA LIMITED
Dated: Per:
Title:
<PAGE> 1
[FUTURE LINK LOGO]
SERVICE AGREEMENT
(PROVINCE OF ALBERTA)
Date: April 17, 1998
Between: Client #: 980005
FUTURELINK DISTRIBUTION CORP.
No. 550, 603-7 Avenue SW
Calgary, AB
Canada T2P 2T5
(FutureLink)
And
CHELL MCNEILL INC.
No. 550, 603 - 7 Avenue SW
Calgary, AB
Canada T2P 2T5
(Client)
Background to the Agreement
Client has agreed to rent computing services from FutureLink. The purpose of
this document is to set out the agreement for rental services between FutureLink
and the Client.
1. DEFINITIONS
1.1. SPECIFIC
As used in this Agreement the following words and phrases shall have the
following meanings respectively:
a) Agreement means this Agreement including schedules and addenda attached
to and forming an integral part of this Agreement, and any amendments
made pursuant to this Agreement.
b) Business Day means any day except a Saturday, a Sunday and any statutory
holiday observed in the Province of Alberta.
c) Rental services means the provision and support of work station
computing hardware, access to designated software and means the
equipment that the Client will be required to rent in order to
effectively and efficiently interface with the FutureLink designated
server facility.
d) Currency means Canadian dollars ($).
e) Effective Date of the Agreement means the commencement of the lease
agreement.
f) Minimum Term of the Agreement means the minimum number of months, as
specified in the "Lease."
g) Location means the location(s) specified in Schedule A where FutureLink
shall deliver the rental services.
h) Party refers to either FutureLink or the Client.
1.2. INCORPORATION OF SCHEDULES
The following Schedules, annexed hereto, are incorporated in this Agreement and
deemed to be part hereof:
Schedule A Equipment List and Location
2. SERVICES
2.1 RENTAL SERVICES
FutureLink agrees to provide rental services to the Client for the duration of
the minimum term of the agreement and thereafter as mutually renewed by the
Client and FutureLink.
2.2. INSTALLATION PLAN
FutureLink and the Client agree that activities called for are to be
accomplished prior to the effective date of rental services. The
responsibilities of both FutureLink and the Client are detailed in the
Installation Plan.
3. RESPONSIBILITY OF FUTURELINK
3.1. SERVICE COMMITMENT
FutureLink shall use all commercially reasonable efforts to meet or exceed the
services levels defined herein.
a) Reporting
FutureLink will provide the client with a monthly electronic invoice
summarizing the provision of service including the provision of any
client specific enhancement upgrades, or service credits.
b) System Integrity and Access
FutureLink will strive to allow 24 hour service access. Further,
FutureLink will not perform routine maintenance that would interfere
with access between the hours of 7:00am and 7:00pm Mountain Standard
Time.
c) Application Support
FutureLink is able to provide contract application support to clients or
will source software application support for clients. Rates will be
negotiated under separate Agreement.
d) Security
Fire-walling for the security of client information will be provided at
the cost of FutureLink.
e) Customer Service
FutureLink's customer service help desk will be available during the
client's business hours of operation.
f) Service Reviews
FutureLink will conduct regular service reviews for clients.
g) Service Standards
FutureLink will attempt to strive for a 95% access rate which means
between 7:00am and 7:00pm FutureLink will attempt to provide network
access . Access limited by FutureLink hardware at the Client site will
be rectified through the provision of repaired or replacement equipment.
3.2 SUPPLY AND MAINTENANCE OF RENTAL EQUIPMENT
FutureLink will supply, maintain and replace, as necessary, all user equipment
owned by FutureLink as detailed in Schedule A. Ownership title to all rental
equipment provided under the terms of this Agreement shall remain with
FutureLink.
4. RESPONSIBILITIES OF THE CLIENT
4.1. RENTAL PAYMENTS
<PAGE> 2
a) The Client agrees to have FutureLink acquire financing on the Client's
behalf for the provision of services and equipment placed at the Client
site. Financing shall be acquired by FutureLink based on the Client's
credit.
b) The Client shall pay to FutureLink the monthly rental and service fees
outlined in Schedule A.
c) The Client authorizes FutureLink to pay to the financing agent the
monthly costs due based on the Client's financing requirements for
equipment and services.
d) In the event of default by FutureLink to the financing agent, the Client
shall then be responsible directly for the monthly costs due to the
financing agent. In the event of default by FutureLink to the financing
agent, the Agreement and payments from the Client to FutureLink shall be
terminated pursuant to section 5.2 of this Agreement, Termination for
Cause.
e) The Client is responsible for all facility wiring, connectivity
installation and monthly connectivity charges necessary to facilitate
the performance of FutureLink's services.
4.2. SITE ACCESS
a) The Client shall provide FutureLink and its employees, contractors and
agents physical access to client site premises as may be necessary for
FutureLink to perform its obligations under this Agreement. These
obligations include without limitation the installation of those
components of rental equipment that are to be placed on the Client's
premises;
b) The Client shall arrange such security clearances as may be required in
order to provide such access;
c) In the event that the access required cannot be provided on a timely
basis, the Client shall waive compliance with the Installation Plan for
the period that access is delayed;
d) The Client shall be responsible for satisfying all requirements imposed
by law or contract as it applies to service installation and for meeting
any landlord requirements. This includes any additional fees, design
submissions, installation approvals including but not limited to:
Cabling.
4.3. OPERATIONS
a) The Client agrees to not, through its own operations or otherwise, cause
disturbances, outages or any other actions which may affect FutureLink's
network or service program, or which may adversely affect FutureLink's
ability to deliver service.
b) The Client further agrees to provide sufficient advance notice of the
Client's intention to change, modify, or reconfigure components or
elements of the Client's computer environment which may affect
FutureLink's network, service standards, or rental equipment, or which
may affect FutureLink's ability to meet the service standards.
c) The Client is responsible for maintenance of the Client facilities and
operating environment (including without limitation cleanliness,
humidity etc.) in which FutureLink rental equipment is located. Should
the Client fail to provide such in its entirety or of a standard such
that is detrimental to the operation of the rental equipment, the Client
shall waive any non-compliance with Service Levels resulting from such
and shall make FutureLink harmless for any loss of service standards.
4.4. USE OF COMMUNICATIONS SERVICES
The rental services provided by FutureLink in accordance with the terms and
conditions of this Agreement are for the sole and exclusive use of the Client
for its internal business and operational use only. Any resale of the rental
services in whole or in part is strictly prohibited without the express written
permission of FutureLink.
4.5. INSURANCE
The equipment shall be at the risk of the Client. The Client shall protect and
insure, for the term of this agreement and any renewal period, at the Client's
expense insurance against property loss or damage to the equipment listed in
Schedule B including without limitations, loss by fire (including extended
coverage), theft, collision, injury or death and damage to property of others
and such other risks of loss. The value of insurance carried shall equal the
replacement value of the equipment listed in Schedule B.
5. TERM AND TERMINATION
5.1. TERM
The Agreement shall remain in effect for 36 months.
5.2. TERMINATION FOR CAUSE
a) Either Party may terminate this Agreement immediately upon an occurrence
of the following:
(i) A material breach by the other;
(ii) Insolvency or bankruptcy;
(iii) Assignment for the benefit of creditors;
(iv) Appointment of a receiver or trustee in bankruptcy; or
(v) Upon any proceeding in bankruptcy, receivership or
liquidation being instituted and continuing for thirty (30) days without
being dismissed.
b) For the purpose of this Subparagraph 6.4, a failure to achieve committed
service standards shall not be deemed a material breach of the Agreement
unless both (1) the actual service levels achieved are less than ninety
percent (90%) of the service standards for three consecutive months and
(2) such failure is caused by FutureLink.
c) Termination for cause by the client will result in the client assuming
full responsibility for the financing agreements signed by the Client
with the FutureLink assigned finance agent. All equipment, business data
and software owned by the Client as part of the finance and/or lease
equipment listing shall become the property of the Client.
6. LIABILITY AND INDEMNITY
6.1. LIMITATION OF LIABILITY
Except as provided in Subparagraph 6.3 and except in the case of use or
disclosure of Confidential Information contrary to paragraph 7 and except for
damages or losses caused by the failure of the other Party to comply with its
obligations under this Agreement, neither FutureLink nor the Client shall be
liable to the other in connection with any single event or series of related
events for any special, incidental, indirect or consequential loss or damage
including, but not limited to, lost profits, lost business revenue, lost or
damaged data, failure to realize expected savings, other commercial or economic
loss of any kind even if FutureLink or the Client Party has been advised of the
possibility of these losses or damages, and regardless of the form of action,
whether in contract or in tort including negligence or based upon any other
legal or equitable theory. Furthermore, in no event will FutureLink or the
Client, its employees, subcontractors and agents be liable for any losses and
damages if and to the extent caused by the other or its employees,
subcontractors and agents failure to perform its obligations under this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
maximum liability of FutureLink to the Client, regardless of the cause or form
of action, shall be the amount paid to FutureLink by the Client under this
Agreement.
6.3. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
FutureLink agrees to indemnify, defend and save harmless the Client from and
against any claims made upon the Client by any third party, in the event that
the use of rental services by FutureLink, as contemplated in this Agreement,
infringes a third party's lawful
<PAGE> 3
rights in any valid patent, copyright, trade secret, or other proprietary
interest enforceable in Canada provided that:
a) FutureLink shall have sole conduct of the proceedings;
b) The Client has promptly notified FutureLink of all such claims and has
not made any admissions in respect of them;
c) The Client provides FutureLink with reasonable assistance and authority
in connection with such claims; and
d) FutureLink, may, in its discretion and at its expense either procure for
the Client the right to continue to use the infringing item and/or
modify or replace the infringing item or, if neither option is
commercially practicable, remove the infringing item from the rental
service.
This indemnity shall not apply to the extent that any infringement is caused or
contributed to by the Client, the connection of services to the FutureLink
network, the Client's corporation, operation or use of the rental equipment with
any other devices, data or programs not furnished by FutureLink or its
authorized subcontractors, or any modification by the Client of the Connectivity
Services that has not been authorized in writing by FutureLink.
7. CONFIDENTIALITY
7.1. CONFIDENTIAL INFORMATION
For the purposes of this Agreement, 'Confidential Information' shall include,
but is not limited to, business information concerning both FutureLink, the
Client and their clients, specifications, research, software, trade secrets,
discoveries, ideas, know-how, designs, drawings, flow charts, data, computer
programs, marketing plans, customer names and other technical, financial or
business information which is disclosed, whether orally, visually or in a
material form, to another in support of the activities provided for in this
Agreement. Any information of third persons disclosed in the course of
performing such activities shall be deemed to be the disclosing entity
information and such information shall be governed by the terms of this
Agreement. FutureLink and the Client acknowledge that any confidential
information disclosed is and shall remain the property of the entity that
disclosed the Confidential Information. All Confidential- Information disclosed
in tangible form shall be marked by the disclosing entity with the word
'Confidential' or otherwise identified by an appropriate stamp or legend
Indicating its confidential nature. All Confidential Information disclosed
orally or visually and identified by the disclosing Party as confidential when
disclosed shall be confirmed by the disclosing Party with a written summary of
such information within thirty (30) days following disclosure, and the written
summary shall be marked by the disclosing Party in the same manner described
above.
7.2. OBLIGATIONS OF CONFIDENTIALITY
FutureLink and the Client agree that they shall hold Confidential Information
exchanged under this Agreement in confidence and shall use the same solely for
the purpose of performing their obligations under this Agreement. FutureLink and
the Client further agree that they shall not disclose any Confidential
Information to anyone except those employees or contractors to whom such
disclosure is necessary for the purposes authorized herein. In the event such
Confidential Information must be disclosed by any Party to third persons for the
purpose of performing this Agreement, the disclosing Party shall, poor to
disclosure, obtain written consent from the Party that disclosed the
Confidential Information and obtain from the third person a written agreement
regarding confidentiality of the Confidential Information, the terms of which
shall be substantially the same as those contained herein. Notwithstanding the
foregoing, a Party may disclose Confidential Information to its professional
advisors without the written consent of the disclosing Party where, in the
opinion of the receiving Party, the advice of its professional advisors is
necessary to accomplish the objectives of this Agreement. Each Party shall use
not less than the same degree of care to avoid disclosure of Confidential
Information as it uses for its own confidential information of like importance
and, in any event, shall use a reasonable degree of care.
7.3. EXCLUSIONS
This Agreement shall not apply to information: (a) previously known to a Party
free of any obligation to keep it confidential; (b) that has been or is
subsequently made public by a Party that owns that information or by a third
Party who is under no obligation of confidence to any Party; (c) that is
independently developed by a Party or an affiliate without reference to or
knowledge of the other Party's Confidential Information; or, (d) that is
disclosed with the prior approval of the owner of the information. Any
combination of Confidential Information regarding, for example, products or
features of technology, shall not be deemed to be within the foregoing exception
merely because individual portions of such combination are disclosed or
separately known in the public domain or known by the receiving Party.
7.4. DISCLOSURE BY LAW
If the Confidential Information is requested by a government agency, a Party may
disclose the Confidential Information of another, provided that the disclosing
Party has obtained protective arrangements reasonably satisfactory to the owner;
provided further that if the governmental agency has jurisdiction to compel
production of the Confidential information and exercises that jurisdiction, the
request shall be treated as a demand for discovery. Notwithstanding the
foregoing, either Party may reveal such Confidential Information as may be
reasonably necessary to any regulatory authority having jurisdiction over it, or
its affiliates, for the purpose of analyzing the regulatory implications and
constraints that may apply to the business relationship and in order to obtain
such regulatory approvals as may be required. If a Party is involved in court
proceedings and is subject to a legally enforceable demand for discovery of
Confidential Information, that Party shall give written notice to the owner of
the Confidential information prior to disclosing the Confidential information,
and shall cooperate in seeking such reasonable protective arrangements as may be
requested by the owner. Nothing in this Subparagraph shall affect the duty of
any Party to take such action as it may deem advisable, including legal action,
to protect its Confident Information.
8. GENERAL
8.1. DISPUTE RESOLUTION
a) If during their course of work in progress, either Party has cause to
believe that the other Party is not fulfilling its obligations under the
terms of this Agreement or a Party raises a dispute relating to the
validity, construction, meaning, performance or effect of this Agreement
or the rights and obligations of FutureLink or the Client or any matter
arising out of or connected with this Agreement, then the dissatisfied
Party shall give written notice to the other Party of its objections and
the reasons therefor. FutureLink's C.O.O. shall consult with the
Client's designate in an effort to reach a mutual agreement to overcome
the objections. In the event that mutual agreement cannot be reached
within a time period that is satisfactory to the Party raising the issue
under consideration, that Party may refer the dispute to FutureLink's
President, and FutureLink's C.O.O. for resolution of the dispute.
FutureLink's C.O.O. and FutureLink's President shall meet as soon as is
reasonably possible after a dispute is referred to it, giving due regard
to the nature and impact of the issue under consideration.
b) Except as provided elsewhere in this Agreement, any controversy,
dispute, or claim that is of a fundamental nature in
<PAGE> 4
relation to this Agreement (including the question whether any
particular matter is eligible for arbitration hereunder) which cannot be
resolved in the manner set forth in paragraph (a) above, shall, at the
written request of one Party to the other not less than sixty (60) days
in advance of submittal to arbitration, be settled by arbitration in
accordance with the Arbitration Act S.A. 1991, c.43.1 or any statutory
modification or re-enactment thereof, (the "Act") by one arbitrator
appointed in accordance with the Act. The arbitrator shall sit in
Calgary, Alberta.
c) The Client and FutureLink shall continue the performance of their
respective obligations during the resolution of any dispute or
disagreement, including during any period of arbitration, unless and
until this Agreement is terminated or expires in accordance with its
terms and conditions. The determination resulting from the arbitration
process shall be final and binding upon the parties to the arbitration.
Accordingly, there shall be no right of appeal from the award of the
arbitrator.
d) The costs of the arbitration shall be borne by the Client and FutureLink
as may be specified in the arbitrator's decision.
e) Notwithstanding anything else in this Subparagraph 8.1, where the
arbitrator conducts a resolution or otherwise receives evidence from a
Party to the arbitration or their respective employees, agents,
consultants or advisors, such evidence shall be treated as Confidential
Information of the Party on whose behalf the evidence is presented and
the Advisors shall enter into a form of non-disclosure agreement in a
form acceptable to the disclosing Party as a pre-condition to receiving,
reviewing or auditing any confidential Information of the disclosing
Party in the arbitration.
f) If a Party desires a remedy that an arbitrator is unable by law to
provide, that matter shall be excluded from arbitration. The following
additional matters shall also be excluded from arbitration:
(i) A decision by either Party to terminate this Agreement pursuant to
Paragraph 5;
(ii) Any law suit involving third parties;
(iii) Intellectual property claims whether initiated by third parties or by
FutureLink or the Client, or
(iv) Any actions arising from an alleged breach of Paragraph 7,
Confidentiality.
8.2. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between FutureLink and the
Client. This Agreement supersedes all prior understandings and communications
between FutureLink and the Client whether oral or written.
8.3. ASSIGNMENT
a) This Agreement shall be binding upon and inure to the benefit of
FutureLink and the Client and their respective successors and permitted
assigns. This Agreement may be assigned in whole or in part by
FutureLink without the prior written consent of the Client.
b) Any permitted assignment of this Agreement shall be conditional upon
reciprocal provision to this Agreement:
(i) A true copy of the assignment agreement, and
(ii) An agreement and undertaking from the assignee to be directly bound by
the provisions of this Agreement and not to further assign its rights
hereunder without complying with the provisions of this Subparagraph
8.3.
8.4. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, if by reason of Force
Majeure, any Party is wholly or party unable to perform certain of its
obligations under this Agreement it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability
and nature, cause and expected duration of the Force Majeure. The Party affected
by Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to such labor disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction.
'Force Majeure' shall mean an event, the cause of which is beyond the reasonable
control of the Party affected thereby and which could not reasonably have been
foreseen and provided against, including, without limitation, acts of God,
strikes, Lockouts or other labor or industrial disturbances, accidents, fires,
explosions, weather conditions materially preventing or impeding work, inability
to secure fuel, power, materials, contractors or labor, mechanical breakdown,
failure of equipment or machinery, delays in transportation, wars, civil
commotion, sabotage, applicable legislation and regulations thereunder,
interruptions by government or court orders and future orders (lawful or
otherwise) of any regulatory body of competent jurisdiction but shall not
include financial difficulty.
8.5. NOTICES
All notices, consents, invoices or other communications, other than day to day
communications, provided for under this Agreement shall be in writing and shall
be deemed to be sufficient given if delivered by overnight courier, in which
case the notice shall be deemed to have been received two (2) Business Days
after the sending thereof, or if delivered by hand to a representative of such
Party, in which case the notice shall be deemed to have been received on the
date of delivery thereof, or if sent by telecopier to such Party, in which case
the notice shall be deemed to have been received on the Business Day (in the
locality of the addressee) on the sending thereof. Unless notice of change of
address has been given in the manner provided in this Subparagraph 8.5, notices
shall be addressed as follows:
FUTURELINK DISTRIBUTION CORPORATION
Suite #550 - 603 7th Avenue SW
Calgary, Alberta T2P 2T5
Attention: C.O.O.
Phone: (403) 543 - 5511
Fax: (403) 543 - 5510
CHELL MCNEILL INC.
#550 - 603 7TH Avenue SW
Calgary, Alberta T2P 2T5
Attention: Chris McNeill
Phone: (403) 543 - 9880
Fax: (403) 543 - 9899
8.6. WAIVER
No indulgence or forbearance by any Party hereunder shall be deemed to
constitute a waiver of its rights to insist on performance in full and in a
timely manner of all covenants of the other Party hereunder and any such waiver,
in order to be binding upon a Party, must be express and in writing and signed
by such Party and then such waiver shall be effective only in the specific
instance and for the purpose for which it is given. No waiver of any term,
condition or covenant by any Party shall be deemed to be a waiver by such Party
of its rights to require full and timely compliance with the same term,
condition or covenant thereafter, or with any other term, covenant or condition
of this Agreement at any time.
8.7. AMENDMENT OR MODIFICATION
<PAGE> 5
This Agreement may not be amended except by written instrument signed by
FutureLink and the Client.
8.8. SURVIVAL
The terms of this Agreement which, by their nature, extend beyond the term of
this Agreement shall survive any termination or expiration of this Agreement.
8.9. AUTHORITY
Each Party has full power and authority to enter into and perform this Agreement
and the person signing this Agreement on behalf of each Party has been properly
authorized and empowered to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by it.
8.10. LEGAL COSTS
Each Party shall bear its own costs incurred in connection with the preparation
and negotiation of this Agreement. In the event it is necessary for FutureLink
to seek a determination or enforcement of its rights under this Agreement by
arbitration in any court of competent jurisdiction, FutureLink shall recover
from the client, in addition to any and all other remedies awarded by such
court, its legal fees and court costs on a solicitor client basis, including
such fees and costs on appeal.
8.11. GOVERNING LAW
This Agreement shall be governed and interpreted abiding to the laws of the
Province of Alberta. Venue and jurisdiction shall be in Alberta.
In witness whereof FutureLink and the Client have executed this Agreement under
the hand of its officer duly authorized in that regard.
8.12 RULES AND REGULATIONS
The Client shall at all times use the rental services in accordance with the
usage rules and policies established by FutureLink from time to time and
communicated to the Client in writing. Any failure by the Client to comply with
said rules and policies, which is not remedied to the satisfaction of FutureLink
within 48 hours (or such shorter time period as may be reasonable in the
circumstances) of notice of such failure to comply, shall be deemed to be a
material breach of this Agreement.
FUTURELINK DISTRIBUTION CORP.
Dated: Per:
Title:
CHELL MCNEILL INC.
Dated: Per:
Title:
<PAGE> 1
[FUTURELINK DISTRIBUTION GROUP LOGO]
SERVICE AGREEMENT
(PROVINCE OF ALBERTA)
Date: July 1, 1998
Client #: 980002
Between:
FUTURELINK DISTRIBUTION CORP.
No. 550, 603-7 Avenue SW
Calgary, AB
Canada T2P 2T5
(FutureLink)
And
SHERATON BUSINESS FORMS LTD.
1451 Hastings Crescent SE
Calgary, AB
T2G 4C8
(Client)
Background to the Agreement
Client has agreed to rent computing services from FutureLink. The purpose of
this document is to set out the agreement for rental services between FutureLink
and the Client.
1. DEFINITIONS
1.1. SPECIFIC
As used in this Agreement the following words and phrases shall have the
following meanings respectively:
a) Agreement means this Agreement including schedules and addenda attached
to and forming an integral part of this Agreement, and any amendments
made pursuant to this Agreement.
b) Business Day means any day except a Saturday, a Sunday and any statutory
holiday observed in the Province of Alberta.
c) Rental services means the provision and support of work station
computing hardware, access to designated software and means the
equipment that the Client will be required to rent in order to
effectively and efficiently interface with the FutureLink designated
server facility.
d) Currency means Canadian dollars ($).
e) Effective Date of the Agreement means the commencement date as defined
in Schedule A.
f) Minimum Term of the Agreement means the minimum number of months, as
specified in the "Lease".
g) Location means the location(s) specified in Schedule A where FutureLink
shall deliver the rental services.
h) Party refers to either FutureLink or the Client.
1.2. INCORPORATION OF SCHEDULES
The following Schedules, annexed hereto, are incorporated in this Agreement and
deemed to be part hereof:
Schedule A
Equipment List and Location, Security, Billing Rates, Application Support
2. SERVICES
2.1 RENTAL SERVICES
FutureLink agrees to provide rental services to the Client for the duration of
the minimum term of the agreement and thereafter as mutually renewed by the
Client and FutureLink.
2.2. INSTALLATION PLAN
FutureLink and the Client agree that activities called for are to be
accomplished prior to the effective date of rental services. The
responsibilities of both FutureLink and the Client are detailed in the
Installation Plan.
3. RESPONSIBILITY OF FUTURELINK
3.1. SERVICE COMMITMENT
FutureLink shall use all commercially reasonable efforts to meet or exceed the
services levels defined herein.
a) Reporting
FutureLink will provide the client with a monthly invoice summarizing
the provision of service including the provision of any client specific
enhancement upgrades.
b) System Integrity and Access
FutureLink will provide 24 hour service access. Further, FutureLink will
not perform routine maintenance that would interfere with access between
the hours of 7:00am and 7:00pm Mountain Time on Business Days.
c) Application Support
FutureLink will provide general application support for common business
applications as defined in Schedule A.
d) Security
Fire-walling for the security of client information held at the
FutureLink Central Server facility will be provided at the cost of
FutureLink.
e) Customer Service
FutureLink's customer service help desk will be available 8:00 AM to
5:00 PM Mt on business days.
f) Service Reviews
FutureLink will conduct monthly service reviews with clients.
g) Service Standards
FutureLink will strive for a 95% access rate which means between 7:00am
and 7:00pm FutureLink will attempt to provide network access . Access
limited by FutureLink hardware at the Client site will be rectified
through the provision of repaired or replacement equipment.
3.2 SUPPLY AND MAINTENANCE OF RENTAL EQUIPMENT
FutureLink will supply, maintain and replace, as necessary, all user equipment
owned by FutureLink as detailed in Schedule A. Ownership title to all rental
equipment provided under the terms of this Agreement shall remain with
FutureLink.
4. RESPONSIBILITIES OF THE CLIENT
4.1. RENTAL PAYMENTS
<PAGE> 2
a) The Client agrees to have FutureLink acquire financing on the Client's
behalf for the provision of services and equipment placed at the Client
site. Financing shall be acquired by FutureLink based on the Client's
credit.
b) The Client shall pay FutureLink the monthly rental and service fees
outlined in Schedule A.
c) The Client authorizes FutureLink to pay to the financing agent the
monthly costs due based on the Client's financing requirements for
equipment and services.
d) In the event of default by FutureLink to the financing agent, the Client
shall then be responsible directly for the monthly costs due to the
financing agent. In the event of default by FutureLink to the financing
agent, the Agreement and payments from the Client to FutureLink shall be
terminated pursuant to section 5.2 of this Agreement, Termination for
Cause.
e) The Client is responsible for all facility wiring, connectivity
installation and monthly connectivity charges necessary to facilitate
the performance of FutureLink's services.
4.2. SITE ACCESS
a) The Client shall provide FutureLink and its employees, contractors and
agents physical access to client site premises as may be necessary for
FutureLink to perform its obligations under this Agreement. These
obligations include without limitation the installation of those
components of rental equipment that are to be placed on the Client's
premises;
b) The Client shall arrange such security clearances as may be required in
order to provide such access;
c) In the event that the access required cannot be provided on a timely
basis, the Client shall waive compliance with the Installation Plan or
service commitments for the period that access is delayed;
d) The Client shall be responsible for satisfying all requirements imposed
by law or contract as it applies to service installation and for meeting
any landlord requirements. This includes any additional fees, design
submissions, installation approvals including but not limited to:
Cabling.
4.3. OPERATIONS
a) The Client agrees to not, through its own operations or otherwise, cause
disturbances, outages or any other actions which may affect FutureLink's
network or service program, or which may adversely affect FutureLink's
ability to deliver service.
b) The Client further agrees to provide sufficient advance notice of the
Client's intention to change, modify, or reconfigure components or
elements of the Client's computer environment which may affect
FutureLink's network, service standards, or rental equipment, or which
may affect FutureLink's ability to meet the service standards.
c) The Client is responsible for maintenance of the Client facilities and
operating environment (including without limitation cleanliness,
humidity etc.) in which FutureLink rental equipment is located. Should
the Client fail to provide such in its entirety or of a standard such
that is detrimental to the operation of the rental equipment, the Client
shall waive any non-compliance with Service Levels resulting from such
and shall make FutureLink harmless for any loss of service standards.
4.4. USE OF COMMUNICATIONS SERVICES
The rental services provided by FutureLink in accordance with the terms and
conditions of this Agreement are for the sole and exclusive use of the Client
for its internal business and operational use only. Any resale of the rental
services in whole or in part is strictly prohibited without the express written
permission of FutureLink.
4.5. INSURANCE
The equipment shall be at the risk of the Client. The Client shall protect and
insure, for the term of this agreement and any renewal period, at the Client's
expense insurance against property loss or damage to the equipment listed in
Schedule B including without limitations, loss by fire (including extended
coverage), theft, collision, injury or death and damage to property of others
and such other risks of loss. The value of insurance carried shall equal the
replacement value of the equipment listed in Schedule B.
5. TERM AND TERMINATION
5.1. TERM
The Agreement shall remain in effect for 36 months.
5.2. TERMINATION FOR CAUSE
a) Either Party may terminate this Agreement immediately upon an occurrence
of the following:
(i) A material breach by the other;
(ii) Insolvency or bankruptcy;
(iii) Assignment for the benefit of creditors;
(iv) Appointment of a receiver or trustee in bankruptcy; or
(v) Upon any proceeding in bankruptcy, receivership or liquidation
being instituted and continuing for thirty (30) days without
being dismissed.
b) For the purpose of this Subparagraph 5.2, a failure to achieve committed
service standards shall not be deemed a material breach of the Agreement
unless both (1) the actual service levels achieved are less than ninety
percent (90%) of the service standards for three consecutive months and
(2) such failure is caused by FutureLink.
c) Termination for cause by the client will result in the client assuming
full responsibility for the financing agreements signed by the Client
with the FutureLink assigned finance agent. All equipment, business data
and software owned by the Client as part of the finance and/or lease
equipment listing shall become the property of the Client.
6. LIABILITY AND INDEMNITY
6.1. LIMITATION OF LIABILITY
Except as provided in Subparagraph 6.3 and except in the case of use or
disclosure of Confidential Information contrary to paragraph 7 and except for
damages or losses caused by the failure of the other Party to comply with its
obligations under this Agreement, neither FutureLink nor the Client shall be
liable to the other in connection with any single event or series of related
events for any special, incidental, indirect or consequential loss or damage
including, but not limited to, lost profits, lost business revenue, lost or
damaged data, failure to realize expected savings, other commercial or economic
loss of any kind even if FutureLink or the Client Party has been advised of the
possibility of these losses or damages, and regardless of the form of action,
whether in contract or in tort including negligence or based upon any other
legal or equitable theory. Furthermore, in no event will FutureLink or the
Client, its employees, subcontractors and agents be liable for any losses and
damages if and to the extent caused by the other or its employees,
subcontractors and agents failure to perform its obligations under this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
maximum liability of FutureLink to the Client, regardless of the cause or form
of action, shall be the amount paid to FutureLink by the Client under this
Agreement
6.2. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
FutureLink agrees to indemnify, defend and save harmless the Client from and
against any claims made upon the Client by any third party, in the event that
the use of rental services by FutureLink, as described in this Agreement,
infringes a third party's lawful rights in
<PAGE> 3
any valid patent, copyright, trade secret, or other proprietary interest
enforceable in Canada provided that:
a) FutureLink shall have sole conduct of the proceedings;
b) The Client has promptly notified FutureLink of all such claims and has
not made any admissions in respect of them;
c) The Client provides FutureLink with reasonable assistance and authority
in connection with such claims; and
d) FutureLink, may, in its discretion and at its expense either procure for
the Client the right to continue to use the infringing item and/or
modify or replace the infringing item or, if neither option is
commercially practicable, remove the infringing item from the rental
service.
This indemnity shall not apply to the extent that any infringement is caused or
contributed to by the Client, the connection of services to the FutureLink
network, the Client's corporation, operation or use of the rental equipment with
any other devices, data or programs not furnished by FutureLink or its
authorized subcontractors, or any modification by the Client of the Connectivity
Services that has not been authorized in writing by FutureLink.
7. CONFIDENTIALITY
7.1. CONFIDENTIAL INFORMATION
For the purposes of this Agreement, 'Confidential Information' shall include,
but is not limited to, business information concerning both FutureLink, the
Client and their clients, specifications, research, software, trade secrets,
discoveries, ideas, know-how, designs, drawings, flow charts, data, computer
programs, marketing plans, customer names and other technical, financial or
business information which is disclosed, whether orally, visually or in a
material form, to another in support of the activities provided for in this
Agreement. Any information of third persons disclosed in the course of
performing such activities shall be deemed to be the disclosing entity
information and such information shall be governed by the terms of this
Agreement. FutureLink and the Client acknowledge that any confidential
information disclosed is and shall remain the property of the entity that
disclosed the Confidential Information. All Confidential Information disclosed
in tangible form shall be marked by the disclosing entity with the word
'Confidential' or otherwise identified by an appropriate stamp or legend
indicating its confidential nature. All Confidential Information disclosed
orally or visually and identified by the disclosing Party as confidential when
disclosed shall be confirmed by the disclosing Party with a written summary of
such information within thirty (30) days following disclosure, and the written
summary shall be marked by the disclosing Party in the same manner described
above.
7.2. OBLIGATIONS OF CONFIDENTIALITY
FutureLink and the Client agree that they shall hold Confidential Information
exchanged under this Agreement in confidence and shall use the same solely for
the purpose of performing their obligations under this Agreement. FutureLink and
the Client further agree that they shall not disclose any Confidential
Information to anyone except those employees or contractors to whom such
disclosure is necessary for the purposes authorized herein. In the event such
Confidential Information must be disclosed by any Party to third persons for the
purpose of performing this Agreement, the disclosing Party shall, poor to
disclosure, obtain written consent from the Party that disclosed the
Confidential Information and obtain from the third person a written agreement
regarding confidentiality of the Confidential Information, the terms of which
shall be substantially the same as those contained herein. Notwithstanding the
foregoing, a Party may disclose Confidential Information to its professional
advisors without the written consent of the disclosing Party where, in the
opinion of the receiving Party, the advice of its professional advisors is
necessary to accomplish the objectives of this Agreement. Each Party shall use
not less than the same degree of care to avoid disclosure of Confidential
Information as it uses for its own confidential information of like importance
and, in any event, shall use a reasonable degree of care.
7.3. EXCLUSIONS
This Agreement shall not apply to information: (a) previously known to a Party
free of any obligation to keep it confidential; (b) that has been or is
subsequently made public by a Party that owns that information or by a third
Party who is under no obligation of confidence to any Party; (c) that is
independently developed by a Party or an affiliate without reference to or
knowledge of the other Party's Confidential Information; or, (d) that is
disclosed with the prior approval of the owner of the information. Any
combination of Confidential Information regarding, for example, products or
features of technology, shall not be deemed to be within the foregoing exception
merely because individual portions of such combination are disclosed or
separately known in the public domain or known by the receiving Party.
7.4. DISCLOSURE BY LAW
If the Confidential Information is requested by a government agency, a Party may
disclose the Confidential Information of another, provided that the disclosing
Party has obtained protective arrangements reasonably satisfactory to the owner;
provided further that if the governmental agency has jurisdiction to compel
production of the Confidential information and exercises that jurisdiction, the
request shall be treated as a demand for discovery. Notwithstanding the
foregoing, either Party may reveal such Confidential Information as may be
reasonably necessary to any regulatory authority having jurisdiction over it, or
its affiliates, for the purpose of analyzing the regulatory implications and
constraints that may apply to the business relationship and in order to obtain
such regulatory approvals as may be required. If a Party is involved in court
proceedings and is subject to a legally enforceable demand for discovery of
Confidential Information, that Party shall give written notice to the owner of
the Confidential information prior to disclosing the Confidential information,
and shall cooperate in seeking such reasonable protective arrangements as may be
requested by the owner. Nothing in this Subparagraph shall affect the duty of
any Party to take such action as it may deem advisable, including legal action,
to protect its Confidential Information.
8. GENERAL
8.1. DISPUTE RESOLUTION
a) If during their course of work in progress, either Party has cause to
believe that the other Party is not fulfilling its obligations under the
terms of this Agreement or a Party raises a dispute relating to the
validity, construction, meaning, performance or effect of this Agreement
or the rights and obligations of FutureLink or the Client or any matter
arising out of or connected with this Agreement, then the dissatisfied
Party shall give written notice to the other Party of its objections and
the reasons therefor. FutureLink's C.O.O. shall consult with the
Client's designate in an effort to reach a mutual agreement to overcome
the objections. In the event that mutual agreement cannot be reached
within a time period that is satisfactory to the Party raising the issue
under consideration, that Party may refer the dispute to FutureLink's
President, and FutureLink's C.O.O. for resolution of the dispute.
FutureLink's C.O.O. and FutureLink's President shall meet as soon as is
reasonably possible after a dispute is referred to it, giving due regard
to the nature and impact of the issue under consideration.
b) Except as provided elsewhere in this Agreement, any controversy,
dispute, or claim that is of a fundamental nature in
<PAGE> 4
relation to this Agreement (including the question whether any
particular matter is eligible for arbitration hereunder) which cannot be
resolved in the manner set forth in paragraph (a) above, shall, at the
written request of one Party to the other not less than sixty (60) days
in advance of submittal to arbitration, be settled by arbitration in
accordance with the Arbitration Act S.A. 1991, c.43.1 or any statutory
modification or re-enactment thereof, (the "Act") by one arbitrator
appointed in accordance with the Act. The arbitrator shall sit in
Calgary, Alberta.
c) The Client and FutureLink shall continue the performance of their
respective obligations during the resolution of any dispute or
disagreement, including during any period of arbitration, unless and
until this Agreement is terminated or expires in accordance with its
terms and conditions. The determination resulting from the arbitration
process shall be final and binding upon the parties to the arbitration.
Accordingly, there shall be no right of appeal from the award of the
arbitrator.
d) The costs of the arbitration shall be borne by the Client and FutureLink
as may be specified in the arbitrator's decision.
e) Notwithstanding anything else in this Subparagraph 8.1, where the
arbitrator conducts a resolution or otherwise receives evidence from a
Party to the arbitration or their respective employees, agents,
consultants or advisors, such evidence shall be treated as Confidential
Information of the Party on whose behalf the evidence is presented and
the Advisors shall enter into a form of non-disclosure agreement in a
form acceptable to the disclosing Party as a pre-condition to receiving,
reviewing or auditing any Confidential Information of the disclosing
Party in the arbitration.
f) If a Party desires a remedy that an arbitrator is unable by law to
provide, that matter shall be excluded from arbitration. The following
additional matters shall also be excluded from arbitration:
(i) A decision by either Party to terminate this Agreement pursuant
to Paragraph 5;
(ii) Any law suit involving third parties;
(iii) Intellectual property claims whether initiated by third parties
or by FutureLink or the Client, or
(iv) Any actions arising from an alleged breach of Paragraph 7,
Confidentiality.
8.2. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between FutureLink and the
Client. This Agreement supersedes all prior understandings and communications
between FutureLink and the Client whether oral or written.
8.3. ASSIGNMENT
a) This Agreement shall be binding upon and inure to the benefit of
FutureLink and the Client and their respective successors and permitted
assigns. This Agreement may be assigned in whole or in part by
FutureLink without the prior written consent of the Client.
b) Any permitted assignment of this Agreement shall be conditional upon
reciprocal provision to this Agreement:
(i) A true copy of the assignment agreement, and
(ii) An agreement and undertaking from the assignee to be directly bound by
the provisions of this Agreement and not to further assign its rights
hereunder without complying with the provisions of this Subparagraph
8.3.
8.4. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, if by reason of Force
Majeure, any Party is wholly or part unable to perform certain of its
obligations under this Agreement it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability
and nature, cause and expected duration of the Force Majeure. The Party affected
by Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to such labor disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction.
'Force Majeure' shall mean an event, the cause of which is beyond the reasonable
control of the Party affected thereby and which could not reasonably have been
foreseen and provided against, including, without limitation, acts of God,
strikes, Lockouts or other labor or industrial disturbances, accidents, fires,
explosions, weather conditions materially preventing or impeding work, inability
to secure fuel, power, materials, contractors or labor, mechanical breakdown,
failure of equipment or machinery, delays in transportation, wars, civil
commotion, sabotage, applicable legislation and regulations thereunder,
interruptions by government or court orders and future orders (lawful or
otherwise) of any regulatory body of competent jurisdiction but shall not
include financial difficulty.
8.5. NOTICES
All notices, consents, invoices or other communications, other than day to day
communications, provided for under this Agreement shall be in writing and shall
be deemed to be sufficiently given if delivered by overnight courier, in which
case the notice shall be deemed to have been received two (2) Business Days
after the sending thereof, or if delivered by hand to a representative of such
Party, in which case the notice shall be deemed to have been received on the
date of delivery thereof, or if sent by telecopier to such Party, in which case
the notice shall be deemed to have been received on the Business Day (in the
locality of the addressee) on the sending thereof. Unless notice of change of
address has been given in the manner provided in this Subparagraph 8.5, notices
shall be addressed as follows:
FUTURELINK DISTRIBUTION CORPORATION
Suite #550 - 603 7th Avenue SW
Calgary, Alberta T2P 2T5
Attention: C.O.O.
Phone: (403) 543 - 5511
Fax: (403) 543 - 5510
SHERATON BUSINESS FORMS LTD.
1451 Hastings Crescent S.E.
Calgary, Alberta T2G 4C8
Attention: Ernie Zacher
Phone: (403) 287 - 0414
Fax: (403) 243 - 0328
8.6. WAIVER
No indulgence or forbearance by any Party hereunder shall be deemed to
constitute a waiver of its rights to insist on performance in full and in a
timely manner of all covenants of the other Party hereunder and any such waiver,
in order to be binding upon a Party, must be express and in writing and signed
by such Party and then such waiver shall be effective only in the specific
instance and for the purpose for which it is given. No waiver of any term,
condition or covenant by any Party shall be deemed to be a waiver by such Party
of its rights to require full and timely compliance with the same term,
condition or covenant thereafter, or with any other term, covenant or condition
of this Agreement at any time.
8.7. AMENDMENT OR MODIFICATION
<PAGE> 5
This Agreement may not be amended except by written instrument signed by
FutureLink and the Client.
8.8. SURVIVAL
The terms of this Agreement which, by their nature, extend beyond the term of
this Agreement shall survive any termination or expiration of this Agreement.
8.9. AUTHORITY
Each Party has full power and authority to enter into and perform this Agreement
and the person signing this Agreement on behalf of each Party has been properly
authorized and empowered to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by it.
8.10. LEGAL COSTS
Each Party shall bear its own costs incurred in connection with the preparation
and negotiation of this Agreement. In the event it is necessary for FutureLink
to seek a determination or enforcement of its rights under this Agreement by
arbitration in any court of competent jurisdiction, FutureLink shall recover
from the client, in addition to any and all other remedies awarded by such
court, its legal fees and court costs on a solicitor client basis, including
such fees and costs on appeal.
8.11. GOVERNING LAW
This Agreement shall be governed and interpreted abiding to the laws of the
Province of Alberta. Venue and jurisdiction shall be in Alberta.
In witness whereof FutureLink and the Client have executed this Agreement under
the hand of its officer duly authorized in that regard.
8.12 RULES AND REGULATIONS
The Client shall at all times use the rental services in accordance with the
usage rules and policies established by FutureLink from time to time and
communicated to the Client in writing. Any failure by the Client to comply with
said rules and policies, which is not remedied to the satisfaction of FutureLink
within 48 hours (or such shorter time period as may be reasonable in the
circumstances) of notice of such failure to comply, shall be deemed to be a
material breach of this Agreement.
FUTURELINK DISTRIBUTION CORP.
Dated: Per:
Title:
SHERATON BUSINESS FORMS LTD.
Dated: Per:
Title:
<PAGE> 1
[FUTURELINK DISTRIBUTION CORP. LOGO]
SERVICE AGREEMENT
(PROVINCE OF ALBERTA)
Date: April 17, 1998
Between: Client #: 980006
FUTURELINK DISTRIBUTION CORP.
No. 550, 603-7 Avenue SW
Calgary, AB
Canada T2P 2T5
(FutureLink)
And
BANKTON FINANCIAL CORPORATION
No. 380, 603 - 7 Avenue SW
Calgary, AB
Canada T2P 2T5
(Client)
Background to the Agreement
Client has agreed to rent computing services from FutureLink. The purpose of
this document is to set out the agreement for rental services between FutureLink
and the Client.
1. DEFINITIONS
1.1. SPECIFIC
As used in this Agreement the following words and phrases shall have the
following meanings respectively:
a) Agreement means this Agreement including schedules and addenda attached
to and forming an integral part of this Agreement, and any amendments
made pursuant to this Agreement.
b) Business Day means any day except a Saturday, a Sunday and any statutory
holiday observed in the Province of Alberta.
c) Rental services means the provision and support of work station
computing hardware, access to designated software and means the
equipment that the Client will be required to rent in order to
effectively and efficiently interface with the FutureLink designated
server facility.
d) Currency means Canadian dollars ($).
e) Effective Date of the Agreement means the commencement of the lease
agreement.
f) Minimum Term of the Agreement means the minimum number of months, as
specified in the "Lease".
g) Location means the location(s) specified in Schedule A where FutureLink
shall deliver the rental services.
h) Party refers to either FutureLink or the Client.
1.2. INCORPORATION OF SCHEDULES
The following Schedules, annexed hereto, are incorporated in this Agreement and
deemed to be part hereof:
Schedule A Equipment List and Location
2. SERVICES
2.1 RENTAL SERVICES
FutureLink agrees to provide rental services to the Client for the duration of
the minimum term of the agreement and thereafter as mutually renewed by the
Client and FutureLink.
2.2. INSTALLATION PLAN
FutureLink and the Client agree that activities called for are to be
accomplished prior to the effective date of rental services. The
responsibilities of both FutureLink and the Client are detailed in the
Installation Plan.
3. RESPONSIBILITY OF FUTURELINK
3.1. SERVICE COMMITMENT
FutureLink shall use all commercially reasonable efforts to meet or exceed the
services levels defined herein.
a) Reporting
FutureLink will provide the client with a monthly electronic invoice
summarizing the provision of service including the provision of any
client specific enhancement upgrades, or service credits.
b) System Integrity and Access
FutureLink will strive to allow 24 hour service access. Further,
FutureLink will not perform routine maintenance that would interfere
with access between the hours of 7:00am and 7:00pm Mountain Standard
Time.
c) Application Support
FutureLink is able to provide contract application support to clients or
will source software application support for clients. Rates will be
negotiated under separate Agreement.
d) Security
Fire-walling for the security of client information will be provided at
the cost of FutureLink.
e) Customer Service
FutureLink's customer service help desk will be available during the
client's business hours of operation.
f) Service Reviews
FutureLink will conduct regular service reviews for clients.
g) Service Standards
FutureLink will attempt to strive for a 95% access rate which means
between 7:00am and 7:00pm FutureLink will attempt to provide network
access . Access limited by FutureLink hardware at the Client site will
be rectified through the provision of repaired or replacement equipment.
3.2 SUPPLY AND MAINTENANCE OF RENTAL EQUIPMENT
FutureLink will supply, maintain and replace, as necessary, all user equipment
owned by FutureLink as detailed in Schedule A. Ownership title to all rental
equipment provided under the terms of this Agreement shall remain with
FutureLink.
4. RESPONSIBILITIES OF THE CLIENT
4.1. RENTAL PAYMENTS
<PAGE> 2
a) The Client agrees to have FutureLink acquire financing on the Client's
behalf for the provision of services and equipment placed at the Client
site. Financing shall be acquired by FutureLink based on the Client's
credit.
b) The Client shall pay to FutureLink the monthly rental and service fees
outlined in Schedule A.
c) The Client authorizes FutureLink to pay to the financing agent the
monthly costs due based on the Client's financing requirements for
equipment and services. In the event of default by FutureLink to the
financing agent, the Client shall then be responsible directly for the
monthly costs due to the financing agent.
d) In the event of default by FutureLink to the financing agent, the
Agreement and payments from the Client to FutureLink shall be terminated
pursuant to section 5.2 of this Agreement, Termination for Cause.
e) The Client is responsible for all facility wiring, connectivity
installation and monthly connectivity charges necessary to facilitate
the performance of FutureLink's services.
4.2. SITE ACCESS
a) The Client shall provide FutureLink and its employees, contractors and
agents physical access to client site premises as may be necessary for
FutureLink to perform its obligations under this Agreement. These
obligations include without limitation the installation of those
components of rental equipment that are to be placed on the Client's
premises;
b) The Client shall arrange such security clearances as may be required in
order to provide such access;
c) In the event that the access required cannot be provided on a timely
basis, the Client shall waive compliance with the Installation Plan for
the period that access is delayed; The Client shall be responsible for
satisfying all requirements imposed by law or contract as it applies to
service installation and for meeting any landlord requirements. This
includes any additional fees, design submissions, installation approvals
including but not limited to: Cabling
4.3. OPERATIONS
a) The Client agrees to not, through its own operations or otherwise, cause
disturbances, outages or any other actions which may affect FutureLink's
network or service program, or which may adversely affect FutureLink's
ability to deliver service.
b) The Client further agrees to provide sufficient advance notice of the
Client's intention to change, modify, or reconfigure components or
elements of the Client's computer environment which may affect
FutureLink's network, service standards, or rental equipment, or which
may affect FutureLink's ability to meet the service standards.
c) The Client is responsible for maintenance of the Client facilities and
operating environment (including without limitation cleanliness,
humidity etc.) in which FutureLink rental equipment is located. Should
the Client fail to provide such in its entirety or of a standard such
that is detrimental to the operation of the rental equipment, the Client
shall waive any non-compliance with Service Levels resulting from such
and shall make FutureLink harmless for any loss of service standards.
4.4. USE OF COMMUNICATIONS SERVICES
The rental services provided by FutureLink in accordance with the terms and
conditions of this Agreement are for the sole and exclusive use of the Client
for its internal business and operational use only. Any resale of the rental
services in whole or in part is strictly prohibited without the express written
permission of FutureLink.
4.5. INSURANCE
The equipment shall be at the risk of the Client. The Client shall protect and
insure, for the term of this agreement and any renewal period, at the Client's
expense insurance against property loss or damage to the equipment listed in
Schedule B including without limitations, loss by fire (including extended
coverage), theft, collision, injury or death and damage to property of others
and such other risks of loss. The value of insurance carried shall equal the
replacement value of the equipment listed in Schedule B.
5. TERM AND TERMINATION
5.1. TERM
The Agreement shall remain in effect for 36 months.
5.2. TERMINATION FOR CAUSE
a) Either Party may terminate this Agreement immediately upon an occurrence
of the following:
(i) A material breach by the other;
(ii) Insolvency or bankruptcy;
(iii) Assignment for the benefit of creditors;
(iv) Appointment of a receiver or trustee in bankruptcy; or
(v) Upon any proceeding in bankruptcy, receivership or liquidation
being instituted and continuing for thirty (30) days without
being dismissed.
b) For the purpose of this Subparagraph 6.4, a failure to achieve committed
service standards shall not be deemed a material breach of the Agreement
unless both (1) the actual service levels achieved are less than ninety
percent (90%) of the service standards for three consecutive months and
(2) such failure is caused by FutureLink.
c) Termination for cause by the client will result in the client assuming
full responsibility for the financing agreements signed by the Client
with the FutureLink assigned finance agent. All equipment, business data
and software owned by the Client as part of the finance and/or lease
equipment listing shall become the property of the Client.
6. LIABILITY AND INDEMNITY
6.1. LIMITATION OF LIABILITY
Except as provided in Subparagraph 6.3 and except in the case of use or
disclosure of Confidential Information contrary to paragraph 7 and except for
damages or losses caused by the failure of the other Party to comply with its
obligations under this Agreement, neither FutureLink nor the Client shall be
liable to the other in connection with any single event or series of related
events for any special, incidental, indirect or consequential loss or damage
including, but not limited to, lost profits, lost business revenue, lost or
damaged data, failure to realize expected savings, other commercial or economic
loss of any kind even if FutureLink or the Client Party has been advised of the
possibility of these losses or damages, and regardless of the form of action,
whether in contract or in tort including negligence or based upon any other
legal or equitable theory. Furthermore, in no event will FutureLink or the
Client, its employees, subcontractors and agents be liable for any losses and
damages if and to the extent caused by the other or its employees,
subcontractors and agents failure to perform its obligations under this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
maximum liability of FutureLink to the Client, regardless of the cause or form
of action, shall be the amount paid to FutureLink by the Client under this
Agreement
6.3. INTELLECTUAL PROPERTY RIGHTS INDEMNITY
FutureLink agrees to indemnify, defend and save harmless the Client from and
against any claims made upon the Client by any third party, in the event that
the use of rental services by FutureLink, as contemplated in this Agreement,
infringes a third party's lawful
<PAGE> 3
rights in any valid patent, copyright, trade secret, or other proprietary
interest enforceable in Canada provided that:
a) FutureLink shall have sole conduct of the proceedings;
b) The Client has promptly notified FutureLink of all such claims and has
not made any admissions in respect of them;
c) The Client provides FutureLink with reasonable assistance and authority
in connection with such claims; and
d) FutureLink, may, in its discretion and at its expense either procure for
the Client the right to continue to use the infringing item and/or
modify or replace the infringing item or, if neither option is
commercially practicable, remove the infringing item from the rental
service.
This indemnity shall not apply to the extent that any infringement is caused or
contributed to by the Client, the connection of services to the FutureLink
network, the Client's corporation, operation or use of the rental equipment with
any other devices, data or programs not furnished by FutureLink or its
authorized subcontractors, or any modification by the Client of the Connectivity
Services that has not been authorized in writing by FutureLink.
7. CONFIDENTIALITY
7.1. CONFIDENTIAL INFORMATION
For the purposes of this Agreement, 'Confidential Information' shall include,
but is not limited to, business information concerning both FutureLink, the
Client and their clients, specifications, research, software, trade secrets,
discoveries, ideas, know-how, designs, drawings, flow charts, data, computer
programs, marketing plans, customer names and other technical, financial or
business information which is disclosed, whether orally, visually or in a
material form, to another in support of the activities provided for in this
Agreement. Any information of third persons disclosed in the course of
performing such activities shall be deemed to be the disclosing entity
information and such information shall be governed by the terms of this
Agreement. FutureLink and the Client acknowledge that any confidential
information disclosed is and shall remain the property of the entity that
disclosed the Confidential Information. All Confidential-Information disclosed
in tangible form shall be marked by the disclosing entity with the word
'Confidential' or otherwise identified by an appropriate stamp or legend
Indicating its confidential nature. All Confidential Information disclosed
orally or visually and identified by the disclosing Party as confidential when
disclosed shall be confirmed by the disclosing Party with a written summary of
such information within thirty (30) days following disclosure, and the written
summary shall be marked by the disclosing Party in the same manner described
above.
7.2. OBLIGATIONS OF CONFIDENTIALITY
FutureLink and the Client agree that they shall hold Confidential Information
exchanged under this Agreement in confidence and shall use the same solely for
the purpose of performing their obligations under this Agreement. FutureLink and
the Client further agree that they shall not disclose any Confidential
Information to anyone except those employees or contractors to whom such
disclosure is necessary for the purposes authorized herein. In the event such
Confidential Information must be disclosed by any Party to third persons for the
purpose of performing this Agreement, the disclosing Party shall, poor to
disclosure, obtain written consent from the Party that disclosed the
Confidential Information and obtain from the third person a written agreement
regarding confidentiality of the Confidential Information, the terms of which
shall be substantially the same as those contained herein. Notwithstanding the
foregoing, a Party may disclose Confidential Information to its professional
advisors without the written consent of the disclosing Party where, in the
opinion of the receiving Party, the advice of its professional advisors is
necessary to accomplish the objectives of this Agreement. Each Party shall use
not less than the same degree of care to avoid disclosure of Confidential
Information as it uses for its own confidential information of like importance
and, in any event, shall use a reasonable degree of care.
7.3. EXCLUSIONS
This Agreement shall not apply to information: (a) previously known to a Party
free of any obligation to keep it confidential; (b) that has been or is
subsequently made public by a Party that owns that information or by a third
Party who is under no obligation of confidence to any Party; (c) that is
independently developed by a Party or an affiliate without reference to or
knowledge of the other Party's Confidential Information; or, (d) that is
disclosed with the prior approval of the owner of the information. Any
combination of Confidential Information regarding, for example, products or
features of technology, shall not be deemed to be within the foregoing exception
merely because individual portions of such combination are disclosed or
separately known in the public domain or known by the receiving Party.
7.4. DISCLOSURE BY LAW
If the Confidential Information is requested by a government agency, a Party may
disclose the Confidential Information of another, provided that the disclosing
Party has obtained protective arrangements reasonably satisfactory to the owner;
provided further that if the governmental agency has jurisdiction to compel
production of the Confidential information and exercises that jurisdiction, the
request shall be treated as a demand for discovery. Notwithstanding the
foregoing, either Party may reveal such Confidential Information as may be
reasonably necessary to any regulatory authority having jurisdiction over it, or
its affiliates, for the purpose of analyzing the regulatory implications and
constraints that may apply to the business relationship and in order to obtain
such regulatory approvals as may be required. If a Party is involved in court
proceedings and is subject to a legally enforceable demand for discovery of
Confidential Information, that Party shall give written notice to the owner of
the Confidential information prior to disclosing the Confidential information,
and shall cooperate in seeking such reasonable protective arrangements as may be
requested by the owner. Nothing in this Subparagraph shall affect the duty of
any Party to take such action as it may deem advisable, including legal action,
to protect its Confident Information.
8. GENERAL
8.1. DISPUTE RESOLUTION
a) If during their course of work in progress, either Party has cause to
believe that the other Party is not fulfilling its obligations under the
terms of this Agreement or a Party raises a dispute relating to the
validity, construction, meaning, performance or effect of this Agreement
or the rights and obligations of FutureLink or the Client or any matter
arising out of or connected with this Agreement, then the dissatisfied
Party shall give written notice to the other Party of its objections and
the reasons therefor. FutureLink's C.O.O. shall consult with the
Client's designate in an effort to reach a mutual agreement to overcome
the objections. In the event that mutual agreement cannot be reached
within a time period that is satisfactory to the Party raising the issue
under consideration, that Party may refer the dispute to FutureLink's
President, and FutureLink's C.O.O. for resolution of the dispute.
FutureLink's C.O.O. and FutureLink's President shall meet as soon as is
reasonably possible after a dispute is referred to it, giving due regard
to the nature and impact of the issue under consideration.
b) Except as provided elsewhere in this Agreement, any controversy,
dispute, or claim that is of a fundamental nature in
<PAGE> 4
relation to this Agreement (including the question whether any
particular matter is eligible for arbitration hereunder) which cannot be
resolved in the manner set forth in paragraph (a) above, shall, at the
written request of one Party to the other not less than sixty (60) days
in advance of submittal to arbitration, be settled by arbitration in
accordance with the Arbitration Act S.A. 1991, c.43.1 or any statutory
modification or re-enactment thereof, (the "Act") by one arbitrator
appointed in accordance with the Act. The arbitrator shall sit in
Calgary, Alberta.
c) The Client and FutureLink shall continue the performance of their
respective obligations during the resolution of any dispute or
disagreement, including during any period of arbitration, unless and
until this Agreement is terminated or expires in accordance with its
terms and conditions. The determination resulting from the arbitration
process shall be final and binding upon the parties to the arbitration.
Accordingly, there shall be no right of appeal from the award of the
arbitrator.
d) The costs of the arbitration shall be borne by the Client and FutureLink
as may be specified in the arbitrator's decision.
e) Notwithstanding anything else in this Subparagraph 8.1, where the
arbitrator conducts a resolution or otherwise receives evidence from a
Party to the arbitration or their respective employees, agents,
consultants or advisors, such evidence shall be treated as Confidential
Information of the Party on whose behalf the evidence is presented and
the Advisors shall enter into a form of non-disclosure agreement in a
form acceptable to the disclosing Party as a pre-condition to receiving,
reviewing or auditing any confidential Information of the disclosing
Party in the arbitration.
f) If a Party desires a remedy that an arbitrator is unable by law to
provide, that matter shall be excluded from arbitration. The following
additional matters shall also be excluded from arbitration:
(i) A decision by either Party to terminate this Agreement pursuant to
Paragraph 5;
(ii) Any law suit involving third parties;
(iii) Intellectual property claims whether initiated by third parties or by
FutureLink or the Client, or
(iv) Any actions arising from an alleged breach of Paragraph 7,
Confidentiality.
8.2. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between FutureLink and the
Client. This Agreement supersedes all prior understandings and communications
between FutureLink and the Client whether oral or written.
8.3. ASSIGNMENT
a) This Agreement shall be binding upon and inure to the benefit of
FutureLink and the Client and their respective successors and permitted
assigns. This Agreement may be assigned in whole or in part by
FutureLink without the prior written consent of the Client.
b) Any permitted assignment of this Agreement shall be conditional upon
reciprocal provision to this Agreement:
(i) A true copy of the assignment agreement, and
(ii) An agreement and undertaking from the assignee to be directly bound by
the provisions of this Agreement and not to further assign its rights
hereunder without complying with the provisions of this Subparagraph
8.3.
8.4. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, if by reason of Force
Majeure, any Party is wholly or party unable to perform certain of its
obligations under this Agreement it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability
and nature, cause and expected duration of the Force Majeure. The Party affected
by Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to such labor disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction.
'Force Majeure' shall mean an event, the cause of which is beyond the reasonable
control of the Party affected thereby and which could not reasonably have been
foreseen and provided against, including, without limitation, acts of God,
strikes, Lockouts or other labor or industrial disturbances, accidents, fires,
explosions, weather conditions materially preventing or impeding work, inability
to secure fuel, power, materials, contractors or labor, mechanical breakdown,
failure of equipment or machinery, delays in transportation, wars, civil
commotion, sabotage, applicable legislation and regulations thereunder,
interruptions by government or court orders and future orders (lawful or
otherwise) of any regulatory body of competent jurisdiction but shall not
include financial difficulty.
8.5. NOTICES
All notices, consents, invoices or other communications, other than day to day
communications, provided for under this Agreement shall be in writing and shall
be deemed to be sufficient given if delivered by overnight courier, in which
case the notice shall be deemed to have been received two (2) Business Days
after the sending thereof, or if delivered by hand to a representative of such
Party, in which case the notice shall be deemed to have been received on the
date of delivery thereof, or if sent by telecopier to such Party, in which case
the notice shall be deemed to have been received on the Business Day (in the
locality of the addressee) on the sending thereof. Unless notice of change of
address has been given in the manner provided in this Subparagraph 8.5, notices
shall be addressed as follows:
FUTURELINK DISTRIBUTION CORPORATION
Suite #550 - 603 7th Avenue SW
Calgary, Alberta T2P 2T5
Attention: C.O.O.
Phone: (403) 543 - 5511
Fax: (403) 543 - 5510
BANKTON FINANCIAL CORPORATION
#380 - 603 7TH Avenue SW
Calgary, Alberta T2P 2T5
Attention: The President
Phone: (403) 242 - 4882
Fax: (403) 948 - 1385
8.6. WAIVER
No indulgence or forbearance by any Party hereunder shall be deemed to
constitute a waiver of its rights to insist on performance in full and in a
timely manner of all covenants of the other Party hereunder and any such waiver,
in order to be binding upon a Party, must be express and in writing and signed
by such Party and then such waiver shall be effective only in the specific
instance and for the purpose for which it is given. No waiver of any term,
condition or covenant by any Party shall be deemed to be a waiver by such Party
of its rights to require full and timely compliance with the same term,
condition or covenant thereafter, or with any other term, covenant or condition
of this Agreement at any time.
8.7. AMENDMENT OR MODIFICATION
<PAGE> 5
This Agreement may not be amended except by written instrument signed by
FutureLink and the Client.
8.8. SURVIVAL
The terms of this Agreement which, by their nature, extend beyond the term of
this Agreement shall survive any termination or expiration of this Agreement.
8.9. AUTHORITY
Each Party has full power and authority to enter into and perform this Agreement
and the person signing this Agreement on behalf of each Party has been properly
authorized and empowered to enter into this Agreement. Each Party further
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by it.
8.10. LEGAL COSTS
Each Party shall bear its own costs incurred in connection with the preparation
and negotiation of this Agreement. In the event it is necessary for FutureLink
to seek a determination or enforcement of its rights under this Agreement by
arbitration in any court of competent jurisdiction, FutureLink shall recover
from the client, in addition to any and all other remedies awarded by such
court, its legal fees and court costs on a solicitor client basis, including
such fees and costs on appeal.
8.11. GOVERNING LAW
This Agreement shall be governed and interpreted abiding to the laws of the
Province of Alberta. Venue and jurisdiction shall be in Alberta. In witness
whereof FutureLink and the Client have executed this Agreement under the hand of
its officer duly authorized in that regard.
8.12 RULES AND REGULATIONS
The Client shall at all times use the rental services in accordance with the
usage rules and policies established by FutureLink from time to time and
communicated to the Client in writing. Any failure by the Client to comply with
said rules and policies, which is not remedied to the satisfaction of FutureLink
within 48 hours (or such shorter time period as may be reasonable in the
circumstances) of notice of such failure to comply, shall be deemed to be a
material breach of this Agreement.
FUTURELINK DISTRIBUTION CORP.
Dated: Per:
Title:
BANKTON FINANCIAL CORPORATION
Dated: Per:
Title:
<PAGE> 1
Amendment No. 1
to the
Business Credit Agreement
dated November 26, 1997
Between Canadian Imperial Bank of Commerce ("CIBC") and the Customer noted below
Customer: Sysgold Ltd. CIBC Branch/Centre:
CIBC Place
309 - 8th Avenue SW, 3rd Floor
Calgary, Alberta
Amendments. The Agreement is amended as follows:
Operating line limit increased to $500,000 and based on same margin
requirements.
Conditions.
1. Life insurance covering the life of Don Bialik to be obtained for coverage
up to $520,000.
2. Renewal/amendment fee of .5% ($2,600) will be collected.
All other terms and conditions remain unchanged.
Other Matters (1) The term "the Agreement" means the Business Credit Agreement
referred to above, as it may have been revised up to the date of this Amendment.
(2) Except as revised by this Amendment, the Agreement remains in full force.
Dated as of: April 16, 1998
For CIBC: R.E. (Bob) Brown, Manager, Knowledge Based
For the Customer: Don Bialik, President
<PAGE> 2
CORPORATE VISA * APPLICATION
The undersigned requests CANADIAN IMPERIAL BANK OF COMMERCE (the "Bank") to open
a VISA account in the name of the undersigned and to issue a CIBC VISA Card
Account, renewals and replacements (the "Cards") to the undersigned in the
following name or style.
(max. 25 spaces no symbols) and bearing the names of the individual customers
designated on the reverse and such other individuals as the undersigned may
advise the Bank from time to time. Such cards shall have an aggregate credit
limit of $20,000 or such other amount as the Bank approves from time to time.
The undersigned agrees to be bound, with respect to each Card, by the provisions
of the following Corporate VISA Agreement as amended from time to time
DATED this 9 day of December,1997. SysGold Ltd.
CORPORATE VISA AGREEMENT
1. In this Agreement the "Customer" is the corporation or firm in whose name or
style Canadian Imperial Bank of Commerce (the "Bank") has opened a VISA account
(the "Account") and whose name or style is embossed on a CIBC VISA Card Account
(the "Card"). The Customer shall pay the Bank in full, at the address designated
by the Bank and by the Payment Due Date specified on the monthly statement
prepared by the Bank, the amount of all sales drafts, Convenience Cheques and
cash advances (including cash advances referred to in section 7(b) hereof if
such service is applicable to this Agreement pursuant to section 7(a) hereof) in
respect of which the Card has been used and all fees and other charges specified
on the statement (collectively, the "Indebtedness") and any interest accrued
thereon.
2. Interest on Indebtedness is charged as follows:
(a) interest on cash advances is charged, for any particular day, on the
amount of such advances exceeding $100 outstanding on such day;
(b) interest on Indebtedness other than cash advances is charged from the
day it is charged to the Account, except that interest is not charged on any
such other Indebtedness which appears on a statement for the first time if the
entire balance shown on the statement is paid in full by the statement's Payment
Due Date'
(c) interest is charged at a daily rate of 0.04520% (16.50% per year);
(d) interest is calculated by totalling the interest-bearing Indebtedness
owing at the end of each day in the period in question and multiplying the
result by the daily interest rate.
3. The Customer will pay an annual fee of $20.00 for each Card and such other
fees and charges as may be described in any notice or monthly statement sent to
the customer from time to time.
4. The Customer will ensure that the Card is used to incur Indebtedness for
business rather than personal purposes. The Customer will also ensure that the
Card is not used to incur Indebtedness in excess of the Card's credit limit and
not after its embossed expiry date, and that the Card is not used to facilitate
the cashing of cheques. Nevertheless, the Customer will be liable for all
Indebtedness incurred in contravention of these provisions and all loss suffered
by the Bank as a result of any such contravention. The Bank shall have no
obligation to notify the Customer if the Card is used in contravention, of these
provisions (whether or not the Bank shall have given such notice at any previous
time or times).
5. The Customer is liable for all Indebtedness and interest on it (whether or
not the Indebtedness is incurred by the individual named on it unless the Card
is lost or stolen. In the case of loss or theft, the Customer is liable, until
notification of the loss or theft has been received by the Bank, for a maximum
of $50 for unauthorized use except, if the Bank's Instant Teller service is
applicable to this Agreement pursuant to section 7(a) hereof, as otherwise
provided in the Bank's Instant Teller agreement as amended from time to time.
6. The Bank will not be liable if the Card is not honoured at any time. All
claims, including any right of set-off by the Customer, and all disputes
regarding any credit voucher or any transaction involving the Card must be
settled directly between the Merchant and the Customer. The Bank will credit the
Account upon receipt of a Merchant's credit voucher for a purchase made with the
Card. If the Bank has not received a credit voucher when a monthly statement is
prepared, the balance shown on the statement must be paid as required by this
Agreement, and any credit will appear on a subsequent statement following the
Bank's receipt of the voucher.
7. (a) The Bank's Instant Teller service is applicable to this Agreement if
the "Daily Instant Teller Withdrawal Limit" section on the reverse is completed
in respect of any one or more individuals listed thereon, or listed on any form
which requests the issuance of Card(s) for use by such individual(s), or if the
Customer and the Bank at any time agree that such service should be applicable
to this Agreement.
(b) The Customer acknowledges that the Card may be used to obtain cash
advances at any automated banking machine which is part of the Bank's Instant
Teller service and agrees to be bound by the terms of the Bank's Instant Teller
agreement, as amended from time to time. The Customer acknowledges receipt of a
copy of such agreement. Notwithstanding the terms of such agreement-
<PAGE> 3
(i) all cash advances referred to in 7(b) above will be debited to the
Account;
(ii) the term "Customer" as used in such agreement shall mean the
Customer, except that the Customer may permit the individual named on the Card
to exercise the Customer's rights thereunder; and
(iii) the Secret Code associated with the Card shall be sent to the
individual named on the Card, and section 10 of the Bank's Instant Teller
agreement shall be deemed to refer to such individual's failure to maintain the
confidentiality of such Secret Code or to keep such Code and Card separate.
The provision of this section 7(b) shall apply only if the Bank's
Instant Teller service is applicable to this Agreement in accordance with the
provisions of section 7(a) hereof.
8. A purchase, credit voucher, cash advance or Convenience Cheque incurred in a
foreign currency will be charged to the account in Canadian dollars. The Bank
determines a rate of exchange which reflects cost of foreign funds and an
administration charge for transaction handling through the VISA International
Network. A service charge will also be applied for a Convenience Cheque written
in a foreign currency.
9. If the Customer does not notify the Bank in writing within 30 days after the
date of a consolidated statement summary or monthly statement of any error or
omission, the statement will be conclusively settled to be complete and correct
except for any amount improperly credited to the Account. A microfilm or other
copy of a sales draft, cash advance draft, credit voucher or other document
relating to a transaction involving the Card will be sufficient to establish
liability.
10. This Agreement may be cancelled by either the Customer or the Bank without
notice. On cancellation, all Indebtedness and other amounts owing hereunder
shall become due and payable. Cancellation shall not affect the Customer's
liability for Indebtedness or interest (whether incurred before or after
cancellation).
11. The Card is the Bank's property and the Bank may revoke and take possession
of it, without refund of any part of the annual fee, upon cancellation of this
Agreement or breach of any obligation contained herein. The Customer shall
immediately return the Card to the Bank on termination of employment of the
individual named on it, on advice by the Bank of revocation of the Card or on
cancellation of this Agreement.
12. Unless otherwise notified, the Bank shall send all notices, monthly
statements, consolidated statement summaries and other communications with the
Customer as follows:
Address: 450, 250 - 6th Avenue S.W., Calgary, Alberta T2P 3H7
13. This Agreement may be amended from time to time by the Bank, and each
amendment shall take effect 30 days after a copy thereof, placed in an envelope
and addressed to the Customer, has been deposited in a mail box. An amendment
may apply both to existing indebtedness and to indebtedness arising after the
amendment is made.
<PAGE> 4
SECURITY AGREEMENT
Branch: 309 - 8th Avenue S.W., Calgary, AB T2P 1C6
For valuable consideration, the undersigned (the "Customer") agrees with
Canadian Imperial Bank of Commerce ("CIBC") as follows:
1. Grant of Security. The Customer mortgages, charges and assigns to CIBC, and
grants to CIBC, and CIBC takes, a Security Interest in the property described in
the following paragraph or paragraphs of this section (as applicable in
accordance with the NOTE appearing at the end of this section), and in all
property described in any schedules, documents or listings that the Customer may
from time to time sign and provide to CIBC in connection with this Agreement,
and in all present and future Accessions to, and all Proceeds of, any such
property (collectively, the "Collateral") as a general and continuing collateral
security for the due payment and performance of the Liabilities:
(a) Specific Personal Property: the Personal Property described in
Schedule A.
(b) All Personal Property: all of the Customer's present and
alter-acquired undertaking and Personal Property (including any property that
may be described in Schedule A).
(c) All Real Property: all of the Customer's present and after-acquired
real property (including any property that may be described in Schedule A),
together with all buildings placed, installed or erected on any such property
and all fixtures.
NOTE: check appropriate box or boxes to indicate which of paragraphs (a), (b) or
(c) are to apply. If no box is checked off, paragraph (b) will apply.
2. Governing law. This Agreement is governed by the laws of Alberta
ADDITIONAL TERMS AND CONDITIONS. THE ADDITIONAL TERMS AND CONDITIONS (INCLUDING
ANY SCHEDULES) ON THE FOLLOWING PAGES FORM PART OF THIS AGREEMENT
The Customer has signed this Agreement on December 11, 1997
Customers Name in Full: SysGold Ltd.
#450, 250 - 6 Avenue S.W., Calgary, AB T2P 3H7
Note: If the Customer is a corporation, the office (such as "President" or
"Secretary") of the person signing should be noted below that person's
signature.
FOR INDIVIDUALS ONLY, record the following information:
First and second names in full; surname
Birth Date:
Sex: M/F
*For Alberta, Ontario, Saskatchewan and the Yukon, record: day/month/year.
For British Columbia, Manitoba, New Brunswick and Nova Scotia, record:
year/month/day.
BANK COPY
Schedule A
The following is description of property included in the Collateral (describe
personal property item or kind; if s pace is insufficient, use a separate
sheet):
Schedule B
The following are the Places of Business (if space is insufficient, use a
separate sheet)
BANK COPY
<PAGE> 5
ADDITIONAL TERMS AND CONDITIONS
3. Places of Business. The Customer represents and warrants that the locations
of all existing Places of Business are specified in Schedule B. The Customer
will promptly notify CIBC in writing of any additional Places of Business as
soon as they are established. Subject to section 5, the Collateral will at all
times be kept at the Places of Business and will not be removed without CIBC's
prior written consent.
4. Collateral Free of Charges. The Customer represents and warrants that the
Collateral is and agrees that the Collateral will at all times be, free of any
Charge or trust except in favour of CIBC or incurred with CIBC's prior written
consent. CIBC may, but will not have to pay any amount or take any action
required to remove or redeem any unauthorized Charge. The Customer will
immediately reimburse CIBC for any amount so paid and will indemnify CIBC in
respect of any action so taken.
5. Use of Collateral. The Customer will not, without CIBC's prior written
consent, sell, lease or otherwise dispose of any of the Collateral (other than
inventory, which may be sold leased or otherwise disposed of in the ordinary
course of the Customer's business). All Proceeds of the Collateral (including
among other things all amounts received in respect of Receivables), whether or
not arising in the ordinary course of the Customer's business, will be received
by the Customer as trustee for CIBC and will be immediately paid to CIBC.
6. Insurance. The Customer will keep the Collateral insured to its full
insurable value against loss or damage by fire and such other risks as are
customarily insured for property similar to the Collateral (and against such
other risks as CIBC may reasonably require). At CIBC's request, all policies in
respect of such insurance will contain a loss payable clause, and if the
Collateral includes real property will contain a mortgage clause, in favour of
CIBC and in any event the Customer assigns all proceeds of insurance on the
Collateral to CIBC. The Customer will, from time to time at CIBC's request,
deliver such policies (or satisfactory evidence of such policies) to CIBC. If
the Customer does not obtain or maintain such insurance, CIBC may, but will not
have to, do so. The Customer will immediately reimburse CIBC for any amount so
paid. The Customer will promptly give CIBC written notice of any loss or damage
to all or any part of the Collateral.
7. Information and Inspection. The Customer will from time to time immediately
give CIBC in writing all information requested by CIBC relating to the
Collateral, the Places of Business and the Customer's financial or business
affairs. The Customer will promptly advise CIBC of the Serial Number, model
year, make and model of each Serial Number Good at any time included in the
Collateral that is held as Equipment, including in circumstances where the
Customer ceases holding such Serial Number Good as Inventory and begins holding
it as Equipment. CIBC may from time to time inspect any Books and Records and
any Collateral, wherever located. For that purpose CIBC may, without charge,
have access to each Place of Business and to all mechanical or electronic
equipment devices and processes where any of them may be stored or from which
any of them may be retrieved. The Customer authorizes any Person holding any
Books and Records to make them available to CIBC, in a readable form, upon
request by CIBC.
8. Receivables. If the Collateral includes Receivables, CIBC may advise any
Person who is liable to make any payment to the Customer of the existence of
this Agreement. CIBC may from time to time confirm with such Persons the
existence and the amount of the Receivables. Upon Default, CIBC may collect and
otherwise deal with the Receivables in such manner and upon such terms as CIBC
considers appropriate.
9. Receipts Prior to Default. Until Default, all amounts received by CIBC as
Proceeds of the Collateral will be applied on account of the Liabilities in such
manner and at such times as CIBC may consider appropriate or, at CIBC's option,
may be held unappropriated in a collateral account or released to the Customer.
10. Default.
(1) Events of Default. The occurrence of any of the following events or
conditions will be a Default:
(a) the Customer does not pay any of the Liabilities when due;
(b) the Customer does not observe or perform any of the Customer's
obligations under this Agreement or any other agreement or document existing at
any time between the Customer and CIBC;
<PAGE> 6
(c) any representation, warranty or statement made by or on behalf of the
Customer to CIBC is untrue in any material respect at the time when or as of
which it was made;
(d) the Customer ceases or threatens to cease to carry on in the normal
course the Customer's business or any material part thereof;
(e) if the Customer is a .corporation, there is, in CIBC's reasonable
opinion, a change in effective control of the Customer, or if the Customer is a
partnership, there is a dissolution or change in the membership of the
partnership;
(f) the Customer becomes insolvent or bankrupt or makes a proposal or
files an assignment for the benefit of creditors under the Bankruptcy Act
(Canada) or similar legislation in Canada or any other jurisdiction; a petition
in bankruptcy is filed against the Customer; or, if the Customer is a
corporation, steps are taken under any legislation by or against the Customer
seeking its liquidation, winding~up, dissolution or reorganization or any
arrangement or composition of its debts;
(g) a Receiver, trustee, custodian or other similar official is appointed
in respect of the Customer or any of the Customer's property;
(h) the holder of a Charge -takes possession of all or any part of the
Customer's property, or a distress, execution or other similar process is levied
against all or any part of such property; or
(i) CIBC, in good faith and upon commercially reasonable grounds,
believes that the prospect of payment or performance is or is about to be
impaired or that the Collateral is or is about to be placed in jeopardy.
(2) Rights upon Default. Upon Default, CIBC and a Receiver, as applicable, will
to the extent permitted by law have the following rights.
(a) Appointment of Receiver. CIBC may by instrument in writing appoint
any Person as a Receiver of all or any part of the Collateral. CIBC may from
time to time remove or replace a Receiver, or make application to any court of
competent jurisdiction for the appointment of a Receiver. Any Receiver appointed
by CIBC will (for purposes relating to responsibility for the Receiver's acts or
omissions) be considered to be the Customer's agent. CIBC may from time to time
fix the Receiver's remuneration and the Customer will pay CIBC the amount of
such remuneration. CIBC will not be liable to the Customer or any other Person
in connection with appointing or not appointing a Receiver or in connection with
the Receiver's actions or omissions.
(b) Dealings with the Collateral. CIBC or a Receiver may take possession
of all or any part of the Collateral and retain it for as long as CIBC or the
Receiver considers appropriate, receive any rents and profits from the
Collateral, carry on (or concur in carrying on) all or any part of the
Customer's business or refrain from doing so, borrow on the security of the
Collateral, repair the Collateral, process the Collateral, prepare the
Collateral for sale, lease or other disposition, and sell or lease (or concur in
selling or leasing) or otherwise dispose of the Collateral on such terms and
conditions (including among other things by arrangement providing for deferred
payment) as CIBC or the Receiver considers appropriate. CIBC or the Receiver may
(without charge and to the exclusion of all other Persons including the
Customer) enter upon any Place of Business.
(c) Realization. CIBC or a Receiver may use, collect, sell, lease or
otherwise dispose of, realize upon, release to the Customer or other Persons and
otherwise deal with, the Collateral in such manner, upon such terms (including
among other things by arrangement providing for deferred payment) and at such
times as CIBC or the Receiver considers appropriate. CIBC or the Receiver may
make any sale, lease or other disposition of the Collateral in the name of and
on behalf of the Customer or otherwise.
(d) Application of Proceeds After Default. All Proceeds of Collateral
received by CIBC or a Receiver may be applied to discharge or satisfy any
expenses (including among other things the Receiver's remuneration and other
expenses of enforcing CIBC's rights under this Agreement), Charges, borrowings,
taxes and other outgoings affecting the Collateral or which are considered
advisable by CIBC or the Receiver to preserve, repair, process, maintain or
enhance the Collateral or prepare it for sale, lease or other disposition, or to
keep in good standing any Charges on the Collateral ranking in priority to any
Charge created by this Agreement, or to sell, lease or otherwise dispose of the
Collateral. The balance of such
<PAGE> 7
Proceeds. will be applied to the Liabilities in such manner and at such times as
CIBC considers appropriate and thereafter will be accounted for as required by
law.
(3) Other Legal Rights. Before and after Default, CIBC will have, in addition to
the rights specifically provided in this Agreement, the rights of a secured
party under the PPSA, as well as the rights recognized at law and in equity. No
right will- be exclusive of or dependent upon or merge in any other right, and
one or more of such rights may be exercised independently or in combination from
time to time.
(4) Deficiency. The Customer will remain liable to CIBC for payment of any
Liabilities that are outstanding following- realization of all or any part of
the Collateral,
11. CIBC not Liable, CIBC will not be liable to the Customer or any other Person
for any failure or delay in exercising any of its rights under this Agreement
(including among other things any failure to take possession of, collect, or
sell, lease or otherwise dispose of, any Collateral). None of CIBC, a Receiver
or any agent of CIBC (including, in Alberta, any sheriff) is required to take,
or will have any liability for any failure to take or delay in taking, any steps
necessary or advisable to preserve rights against other Persons under any
Chattel Paper, Securities or Instrument in possession of CIBC, a Receiver or
CIBC's agent.
12. Charges and Expenses. The Customer agrees to pay on demand all costs and
expenses incurred (including among other things legal fees on a solicitor and
client basis) and fees charged by CIBC in connection with obtaining or
discharging this Agreement or establishing or confirming the priority of the
Charges created by this Agreement or by law, compliance with any demand by any
Person under the PPSA to amend or discharge any registration relating to this
Agreement, and by CIBC or any Receiver in exercising any remedy under this
Agreement (including among other things preserving, repairing, processing,
preparing for disposition and disposing of the Collateral by sale, lease or
otherwise) and in carrying on the Customer's business. All such amounts will
bear interest from time to time at the highest interest rate then applicable to
of the Liabilities, and the Customer will reimburse CIBC upon demand for any
amount so paid.
13. Further Assurances. The Customer will from time to time immediately upon
request by CIBC take such action (including among other things the signing and
delivery of financing statements and financing change statements, other
schedules, documents or listings describing property included in the Collateral,
further assignments and other documents, and the registration of this Agreement
or any other Charge against any of the Customer's real property) as CIBC may
require in connection with the Collateral or as CIBC may consider necessary to
give effect to this Agreement. If permitted by law, the Customer waives the
right to sign or receive a copy of any financing statement or financing change
statement, or any statement issued by any registry that confirms any
registration of a financing statement or financing change statement, relating to
this Agreement. The Customer irrevocably appoints the Manager or the Acting
Manager from time to time of CIBC's branch specified on the first page of this
Agreement as the Customer's attorney (with hill powers of substitution and
delegation) to sign, upon Default, all documents required to give effect to this
section. Nothing in this section affects the right of CIBC as secured party, or
any other Person on CIBC's behalf, to sign and file or deliver (as applicable)
all such financing statements, financing change statements, notices,
verification agreements and other documents relating to the Collateral and this
Agreement as CIBC or such other Person considers appropriate.
14. Dealings by CIBC. CIBC may from time to time increase, reduce, discontinue
or otherwise vary the Customer's credit facilities, grant extensions of time and
other indulgences, take and give up any Charge, abstain from taking, perfecting
or registering any Charge, accept compositions, grant releases and discharges
and otherwise deal with the Customer, customers of the Customer, guarantors and
others, and with the Collateral and any Charges held by CIBC, as CIBC considers
appropriate without affecting the Customer's obligations to CIBC or CIBC's
rights under this Agreement.
15. Definitions. In this Agreement:
"Accessions", "Account", "Chattel Paper", "Document of Title", "Equipment",
"Goods", "Instrument", "Intangible", "Inventory", "Proceeds", "Purchase-Money
Security Interest" and "Security Interest" have the respective meanings given to
them in the PPSA.
"Books and Records" means all books, records, files, papers, disks, documents
and other repositories of data recording, evidencing or relating to the
Collateral to which the Customer (or any Person on the Customer's behalf) has
access.
"Charge" means any mortgage, charge, pledge, hypothecation, lien (statutory or
otherwise), assignment, financial lease, title retention agreement or
arrangement, security interest or other encumbrance of any
<PAGE> 8
nature however arising, or any other security agreement or arrangement creating
in favour of any creditor a right in respect of a particular property that is
prior to the right of any other creditor in respect of such property.
"Consumer Goods" has the meaning given to it in the PPSA, except that, if this
Agreement is governed by the laws of the Yukon, it does not include special
consumer goods as that term is defined in the Yukon PPSA.
"Default" has the meaning set out in subsection 10(1).
"Liabilities means all present and future indebtedness and liability of every
kind, nature and description (whether direct or indirect, joint or several,
absolute or contingent, matured or unmatured) of the Customer to CIBC, wherever
and however incurred and any unpaid balance thereof,
"Money" has the meaning given to it in the PPSA or, if there is no such
definition, means a medium of exchange authorized or adopted by the Parliament
of Canada as part of the currency of Canada, or by a foreign government as part
of its currency.
"Person" means any natural person or artificial body (including among others any
firm, corporation or government),
"Personal Property" means personal property and includes among other things
Inventory, Equipment, Receivables, Books and Records, Chattel Paper, Goods,
Documents of Title, Instruments, Intangibles (including intellectual property),
Money, and Securities, and includes all Accessions to such property.
"Place of Business" means a location where the Customer carries on business or
where any of the Collateral is located (including any location described in
Schedule B).
"PPSA" means the legislation that applies in the province or territory noted in
section 2 of this Agreement, as such legislation may be amended, renamed or
replaced from time to time (and includes all regulations from time to time made
under such legislation) as follows: in the case of Ontario, the Personal
Property Security Act, 1989; in the case of Alberta, British Columbia, Manitoba,
Prince Edward Island, Saskatchewan and the Yukon Territory, the Personal
Property Security Act; and in the case of any other province or territory, such
legislation as deals generally with Charges on personal property.
"Receivables" means all debts, claims and choses in action (including among
other things Accounts and Chattel Paper) now or in the future due or owing to or
owned by the Customer.
"Receiver" means a receiver or a receiver and manager.
"Securities" has the meaning given to it in the PPSA or, if there is no such
definition and the PPSA defines "security" instead, it means the plural of that
term.
"Serial Number" means the number that the Person who manufactured or constructed
a Serial Number Good permanently marked or attached to it for identification
purposes or, if applicable, such other number as the PPSA stipulates as the
serial number or vehicle information number to be used for registration purposes
of such Serial Number Good.
"Serial Number Good" means a motor vehicle, trailer, mobile home, aircraft
airframe, aircraft engine or aircraft propeller, boat or an outboard motor for a
boat.
16. General.
(1) Reservation of the Last Day of any Lease. The Charges created by this
Agreement do not extend to the day of the term of any lease or agreement for
lease; however, the Customer will hold such last day in trust for CIBC and, upon
the exercise by CIBC of any of its rights under this Agreement following
Default, will assign such last day as directed by CIBC.
(2) Attachment of Security Interest. The Security Interests created by this
Agreement are intended to attach (i) to existing Collateral when the Customer
signs this Agreement, and (ii) to Collateral subsequently acquired by the
Customer, immediately upon the Customer acquiring any rights in such Collateral.
The parties do not intend to postpone the attachment of any Security Interest
created by this Agreement.
<PAGE> 9
(3) Purchase-Money Security Interest. If CIBC gives value for the purpose of
enabling the Customer to acquire rights in or to any of the Collateral, the
Customer will in fact apply such value to acquire those rights (and will provide
CIBC with such evidence in this regard as CIBC may require), and the Customer
grants to CIBC, and CIBC takes, a Purchase-Money Security Interest in such
Collateral to the extent that the value is applied to acquire such rights. A
certificate or affidavit of any of CIBC's authorized representatives is
admissible in evidence to establish the amount of any such value,
(4) Description of Collateral in Schedule A. The fact that box (b) or box (c) of
section 1 has been checked without there being any property described in
Schedule A does not affect the nature or validity of CIBC's security in the
Collateral.
(5) Entire Agreement. CIBC has not made any representation or undertaken any
obligation in connection with the subject matter of this Agreement other than as
specifically set out in this Agreement, and in particular nothing contained in
this Agreement will require CIBC to make, renew or extend the time for payment
of any loan or other credit accommodation to the Customer or any other Person.
(6) Additional Security. The Charges created by this Agreement are in addition
and without prejudice to any other Charge now or later held by CIBC. No Charge
held by CIBC will be exclusive of or dependent upon or merge in any other
Charge, and CIBC may exercise its rights under such Charges independently or in
combination.
(7) Joint and Several Liability. If more than one Person signs this Agreement as
the Customer, the obligations of such Persons will be joint and several.
(8) Severability; Headings. Any provision of this Agreement that is void or
unenforceable in any jurisdiction is, as to that jurisdiction, ineffective to
that extent without invalidating the remaining provisions of this Agreement. The
headings in this Agreement are for convenience only and do not limit or extend
the provisions of this Agreement.
(9) Interpretation. When the context so requires, the singular will be read as
the plural, and vice versa.
(10) Copy of Agreement. The Customer acknowledges receipt of a copy of this
Agreement.
(11) Waivers. If this Agreement is governed by the laws of Saskatchewan and the
Customer is a corporation, the Customer agrees that The Limitation of Civil
Rights Act, The Land Contracts (Actions) Act and Part W (excepting only section
46) of The Saskatchewan Farm Security Act do not apply insofar as they relate to
actions as defined in those Acts, or insofar as they relate to or affect this
Agreement, the rights of CIBC Under this Agreement or any instrument, Charge,
security agreement or other document of any nature that renews, extends or is
collateral to this Agreement.
(12) Notice. CIBC may send to the Customer, by prepaid regular mail addressed to
the Customer at the Customer's address last known to CIBC, copies of any
document required by the PPSA to be delivered by CIBC to the Customer. Any
document mailed in this manner will be deemed to have been received by the
Customer upon the earlier of actual receipt by the Customer and the expiry of 10
days after the mailing date. A certificate or affidavit of any of CIBC's
authorized representatives is admissible in evidence to establish the mailing
date.
(13) Enurement; Assignment. This Agreement will enure to the benefit of and be
binding upon (i) CIBC, its successors and assigns, and (ii) the Customer and the
Customer's heirs, executors, administrators, successors and permitted assigns.
The Customer will not assign this Agreement without CIBC's prior written
consent.
<PAGE> 1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 20th day of January, 1998.
BETWEEN:
CORE VENTURES, INC., a corporation incorporated under the laws
of the State of Colorado and having an office at 618 - 688 West
Hastings Street, Vancouver, British Columbia V6B 1P1.
(the "Purchaser")
AND:
FUTURELINK DISTRIBUTION CORP., a company incorporated under the
laws of Alberta, having an office at address at No. 550, 603 -
7th Avenue SW, Calgary, Alberta, T2P 2T5.
(the "Corporation")
AND:
CAMERON CHELL, a businessperson residing at 306 - 20 St. N.W.
Calgary, Alberta T2N 2K3
AND:
LINDA CARLING, a businessperson residing at 2302 - 939 Homer
Street Vancouver, British Columbia, V6B 2W6.
(together the "Vendors")
WHEREAS:
1. The Corporation carries on the business of developing and marketing a
computer access process that allows computer users to avoid purchasing
hardware and software. It provides a computer user with the monitor,
keyboard and "FLink" which together allow a user to access a remote
server farm which hosts a broad menu of software applications. Users
are charged a monthly fee for the software applications used from the
remote server farm.
2. Cameron Chell is the registered and beneficial owner of 500,000 shares
in the share capital of FutureLink Distribution Corp. (the
"Corporation");
3. Linda Carling is the registered and beneficial owner of 490,000 shares
in the share capital of the Corporation;
4. The Vendors wish to sell, and the Purchaser wishes to purchase the
shares of the Corporation owned by the Vendors (the "Purchased
Shares") on the terms and subject to the conditions contained in this
agreement;
THE PARTIES AGREE AS FOLLOWS:
1. INTERPRETATION
1.1 DEFINED TERMS. In this agreement and in the Schedules hereto, unless
there is something in the
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<PAGE> 2
subject-matter or context inconsistent therewith, the following terms and
expressions will have the following meanings:
(a) "Affiliate" of any person means any corporation which, directly or
indirectly, is controlled by, controls or is under direct or indirect
common control with such person;
(b) "arm's length" will have the meaning ascribed to such term under the
Income Tax Act, R.S.C. 1952, c. 148 (Canada);
(c) "Audited Financial Statements" means the audited consolidated
financial statements of the Corporation as at and for the fiscal year
ended on December 31 1996, inclusive, including the balance sheets,
income statements, statements of changes in financial position
together with the notes to such financial statements and the opinion
of the Corporation' auditors on such financial statements, copies of
which are attached hereto as Schedule "A", all prepared in accordance
with generally accepted accounting principles, consistently applied;
(d) "Audited Statements Date" means December 31;
(e) "Business" means the business of developing and marketing a computer
access process that allows computer users to avoid purchasing hardware
and software. It provides a computer user with the monitor, keyboard
and "FLink" which together allows a user to access a remote server
farm which hosts a broad menu of software applications. Users are
charged a monthly fee for the software applications used from the
remote server farm.;
(f) "Business Day" means any day other than a day which is a Saturday, a
Sunday or a statutory holiday in Vancouver, British Columbia;
(g) "Closing Date" means January 19, 1998, or such other date as the
Vendor and Purchaser may agree upon but no later than January 21,
1998.
(h) "Closing Time" means 10:00 a.m. in the City of Vancouver on the
Closing Date or such other time on the Closing Date as the parties
hereto may agree upon;
(i) "Condition" of the Corporation means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs and
financial position of the Corporation;
(j) "Corporation" means FutureLink Distribution Corp. together with any
subsidiaries held by this company
(k) "Encumbrances" means mortgages, charges, pledges, security interests,
liens, encumbrances, actions, claims, demands and equities of any
nature whatsoever or howsoever arising and any rights or privileges
capable of becoming any of the foregoing;
(l) "Escrow Agreement" means the escrow agreement between the Vendor, the
Purchaser and a designated escrow agent governing the issuance and
release of all the shares in the capital stock of the Purchaser given
to the Vendor in satisfaction of the Purchase Price for the Purchased
Shares, a copy of which is attached to this agreement as Schedule "E";
(m) "generally accepted accounting principles" means the accounting
principles so described and promulgated by the Canadian Institute of
Chartered Accountants which are applicable as at the date on which any
calculation made hereunder is to be effective or as at the date of any
financial statements referred to herein, as the case may be;
(n) "Interim Financial Statements" means the Notice to Reader Report and
Financial Statements of the Corporation as at March 31, 1997 and
September 30, 1997 which are attached to this agreement as Schedule
"B";
(o) "Interim Period" means the period from and including the date of this
agreement to and including the Closing Date;
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<PAGE> 3
(p) "Leased Premises" means all premises leased by the Corporation under
the Leases;
(q) "Leases" means the leases and the agreements to lease under which the
Vendor leases any real property, as listed in Schedule "C" attached to
this agreement;
(r) "Licenses" means all of the licenses, registrations, and
qualifications to do the business held by the Corporation;
(s) "New Business Entity" means the Corporation at the time the Purchaser
has control of the Corporation and is conducting the business of the
Corporation;
(t) "person" means and includes any individual, corporation, partnership,
firm, joint venture, syndicate, association, trust, government,
governmental agency or board or commission or authority, and any other
form of entity or organization;
(u) "Purchased Shares" means the 990,000 issued and outstanding shares in
the capital stock of FutureLink Distribution Corp. being those shares
sold by the Vendors to the Purchaser;
(v) "Real Properties" means the real properties owned by the Vendor, which
are described in Schedule "D" attached hereto; and
(w) "Warranty Claim" means a claim made by either the Purchaser or the
Vendor based on or with respect to the inaccuracy or non-performance
or non-fulfilment or breach of any representation or warranty made by
the other party contained in this agreement or contained in any
document or certificate given in order to carry out the transactions
contemplated hereby.
1.2 BEST OF KNOWLEDGE. Any reference herein to "the best of the knowledge"
of the Vendor will mean the actual knowledge of the Vendor and the knowledge
which they would have had if they had conducted a diligent inquiry into the
relevant subject-matter.
1.3 SCHEDULES. The Schedules which are attached to this agreement are
incorporated into this agreement by reference and are deemed to be part of this
agreement. These schedules are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Schedule "A" Audited Financial Schedule "T" Employees
Statements Schedule "U" Employee Benefit and
Schedule "B" Interim Financial Pension Plans
Statements Schedule "V" Insurance
Schedule "C" Leased Premises Schedule "W" Government Assistance
Schedule "D" Real Properties Schedule "X" Purchaser's
Schedule "E" Escrow Agreement Contractual and
Schedule "F" Employment Contract Regulatory Approvals
Schedule "G" Vendor's Contractual and Schedule "Y" Release by Vendor
Regulatory Approvals Schedule "Z" Vendor's Confirming
Schedule "H" Constating Documents Certificate
Schedule "I" Licences Schedule "AA" Estoppel Certificate
Schedule "J" Tax Matters Schedule "BB" Release by Directors
Schedule "K" Litigation and Officers
Schedule "L" Environmental Matters Schedule "CC" Opinion of Vendor's
Schedule "M" Encumbrances Counsel
Schedule "N" Bank Accounts Schedule "DD" Purchaser's Confirming
Schedule "O" Leases of Personal Certificate
Properties Schedule "EE" Release by the
Schedule "P" Intellectual Property Corporation
Schedule "Q" Guarantees, Warranties Schedule "FF" Opinion of Purchaser's
and Discounts Counsel
Schedule "R" Licences, Agency and
Distribution Agreements
Schedule "S" Material Contracts
</TABLE>
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<PAGE> 4
1.4 CURRENCY. Unless otherwise indicated, all dollar amounts referred to in
this agreement are in lawful money of Canada.
1.5 CHOICE OF LAW AND ATTORNMENT.
(1) This agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein.
(2) The parties agree that the courts of that province will have exclusive
jurisdiction to determine all disputes and claims arising between the parties.
1.6 INTERPRETATION NOT AFFECTED BY HEADINGS OR PARTY DRAFTING. The division
of this agreement into articles, sections, paragraphs, subparagraphs and clauses
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this agreement. The terms "this
agreement", "hereof", "herein", "hereunder" and similar expressions refer to
this agreement and the Schedules hereto and not to any particular article,
section, paragraph, subparagraph, clause or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto. Each party hereto
acknowledges that it and its legal counsel have reviewed and participated in
settling the terms of this agreement, and the parties hereby agree that any rule
of construction to the effect that any ambiguity is to be resolved against the
drafting party shall not be applicable in the interpretation of this agreement.
1.7 NUMBER AND GENDER. In this agreement, unless there is something in the
subject matter or context inconsistent therewith,
(a) words in the singular number include the plural and such words shall
be construed as if the plural had been used,
(b) words in the plural include the singular and such words shall be
construed as if the singular had been used, and
(c) words importing the use of any gender shall include all genders where
the context or party referred to so requires, and the rest of the
sentence shall be construed as if the necessary grammatical and
terminological changes had been made.
1.8 TIME OF ESSENCE. Time shall be of the essence hereof.
1.9 JOINT AND SEVERAL OBLIGATIONS. If the Vendor is constituted by more
than one person, their obligations hereunder as the Vendor are joint and
several.
2. PURCHASE AND SALE
2.1 PURCHASED SHARES. On the terms and subject to the fulfilment of the
conditions hereof, the Vendor hereby agrees to sell, assign and transfer to the
Purchaser, and the Purchaser hereby agrees to purchase and accept from the
Vendor, the Purchased Shares.
2.2 PURCHASE PRICE AND PAYMENT. The purchase price will be satisfied by the
issuance of 990,000 shares in the Capital Stock of the Purchaser. These shares
shall be exchanged for the Purchased Shares. This shall be the sole
consideration to the vendors for the Purchased Shares. The shares issued in the
capital stock of the Purchaser will be subject to an escrow agreement as
attached as Schedule "E"
2.3 ESCROW AGREEMENT. All shares to be given to the Vendors in satisfaction
of the purchase price of the Purchased Shares are subject to a hold period and
will be released from escrow as follows:
(a) one half of the shares given to each of the Vendors are subject to a
six month hold period and will be released from escrow on the date six
months from the anniversary of this agreement,
(b) the balance of the shares are subject to a one year hold period and
will be released from escrow on the one year anniversary of this
agreement.
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<PAGE> 5
2.8 EMPLOYEES.
(1) Continued Employment. The Purchaser will offer continued employment to
such employees of the Business as agreed on by the Purchaser and the Vendor on
the same terms and conditions as they had been employed by the Vendor.
(2) Vendor's Obligation to Employees. The Vendor will pay or provide for
all salary and other amounts (except for reasonable vacation pay) due to all
employees of the Business up to and including the closing. The Vendor will pay
all severance amounts due to employees of the Business not hired by the
Purchaser. The Purchaser will assume responsibility for reasonable amounts of
vacation pay accrued to employees of the Business up to the closing.
(3) Termination of Long-Standing Employees. If any long-standing employees
of the Business (being those identified on Schedule "T" attached hereto) do not
perform satisfactorily and their employment is terminated by the Purchaser,
then, subject to the following limitations, the Vendor will be liable for that
portion of all severance amounts and/or damages for wrongful dismissal owing to
such employees which is based on their employment in the Business up to the time
of closing. The Vendor will have no liability under this paragraph if the
employment of any such long-standing employee is terminated due to disability
and the amounts owing to such employee are covered by insurance.
(4) Indemnification to Vendor . Except for the foregoing, the Purchaser
agrees to indemnify the Vendor against all claims and demands by employees who
accept the Purchaser's offer of employment which claims and demands are based on
events arising after the Closing Date (including termination of such employees
from employment by the Purchaser). Without limiting the generality of the
foregoing, such indemnity shall include any claims or demands by such employees
with respect to wages, severance pay, notice of termination or pay in lieu
thereof, benefits, damages for wrongful dismissal or other employee benefits or
claims under the employment legislation in the Province of Alberta, or at common
law and including any costs or expenses incurred by the Vendor in defending any
such claim or demand.
3. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES BY THE VENDORS. The Vendors represents
and warrants to the Purchaser as follows, and confirm that the Purchaser is
relying upon the accuracy of each of such representations and warranties in
connection with the purchase of the Purchased Shares and the completion of the
other transactions hereunder:
(1) Corporate Authority and Binding Obligation. The Vendors have good
right, full power and absolute authority to enter into this agreement and to
sell, assign and transfer the Purchased Shares to the Purchaser in the manner
contemplated herein and to perform all of the Vendors' obligations under this
agreement. Each of the Corporation and their respective shareholders and boards
of directors have taken all necessary or desirable actions, steps and corporate
and other proceedings to approve or authorize, validly and effectively, the
entering into of, and the execution, delivery and performance of, this agreement
and the sale and transfer of the Purchased Shares by the Vendor to the
Purchaser. This agreement is a legal, valid and binding obligation of the
Vendors and enforceable against the Vendors in accordance with its terms subject
to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally, and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
(2) No Other Purchase Agreements. No person has any agreement, option,
understanding or commitment, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement, option or
commitment, including convertible securities, warrants or convertible
obligations of any nature, for:
(a) the purchase, subscription, allotment or issuance of, or conversion
into, any of the unissued
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<PAGE> 6
shares in the capital of the Corporation or any securities of the
Corporation,
(b) the purchase from the Vendor of any of the Purchased Shares, or
(c) the purchase or other acquisition from the Corporation of any of its
undertaking, property or assets, other than in the ordinary course of
the Business.
(3) Contractual and Regulatory Approvals. Except as specified in Schedule
"G" attached hereto, neither the Corporation nor the Vendor is under any
obligation, contractual or otherwise, to request or obtain the consent of any
person, and no permits, licences, certifications, authorizations or approvals
of, or notifications to, any federal, state, municipal or local government or
governmental agency, board, commission or authority are required to be obtained
by the Corporation or the Vendor,
(a) in connection with the execution, delivery or performance by the
Vendor or the Corporation of this agreement or the completion of any
of the transactions contemplated herein,
(b) to avoid the loss of any permit, licence, certification or other
authorization, or
(c) in order that the authority of the Corporation to carry on the
Business in the ordinary course and in the same manner as presently
conducted remains in good standing and in full force and effect as of
and following the closing of the transactions contemplated hereunder.
Complete and correct copies of any agreements under which the Corporation or the
Vendor is obligated to request or obtain any such consent have been provided to
the Purchaser.
(4) Status, Constating Documents and Licences.
(a) The Corporation is a corporation duly incorporated and validly
subsisting in all respects under the laws of Alberta. The Corporation
is a non-reporting private corporation. The Corporation and the Vendor
has all necessary corporate power to own its properties and to carry
on its business as it is now being conducted.
(b) The articles, by-laws and other constating documents of the
Corporation, as amended to the date hereof, are listed in Schedule "H"
attached hereto, and complete and correct copies of each of those
documents have been delivered to the Purchaser.
(c) The Corporation is duly licensed, registered and qualified as a
corporation to do business, is up-to-date in the filing of all
required corporate returns and other notices and filings and is
otherwise in good standing in all respects, in each jurisdiction in
which:
(i) it owns or leases property, or
(ii) the nature or conduct of its business or any part thereof,
or the nature of the property of the Corporation or any part
thereof, makes such qualification necessary or desirable to
enable the Business to be carried on as now conducted or to
enable the property and assets of the Corporation to be
owned, leased and operated by it.
All of the Corporations' Licences are listed in Schedule "I" attached hereto and
are valid and subsisting. Complete and correct copies of the Licences have been
delivered to the Purchaser. The Corporation is in compliance with all terms and
conditions of the Licences. There are no proceedings in progress, pending or, to
the best of the knowledge of the Vendor threatened, which could result in the
revocation, cancellation or suspension of any of the Licences.
(5) Compliance with Constating Documents, Agreements and Laws. The
execution, delivery and performance of this agreement and each of the other
agreements contemplated or referred to herein by the Vendor and the Corporation,
and the completion of the transactions contemplated hereby, will not constitute
or result in a violation or breach of or default under, or cause the
acceleration of any obligations of the Corporation under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of the
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<PAGE> 7
Corporation,
(b) subject to obtaining the contractual consents referred to in
Schedule "G" hereof, the terms of any agreement (written or
oral), indenture, instrument or understanding or other obligation
or restriction to which the Corporation or the Vendor is a party
or by which either of them is bound, or
(c) subject to obtaining the regulatory consents referred to in
Schedule "G" hereof, any term or provision of any of the Licences
or any order of any court, governmental authority or regulatory
body or any law or regulation of any jurisdiction in which the
Business is carried on.
(6) Corporate Records. The corporate records and minute books of the
Corporation, all of which have been provided to the Purchaser, contain complete
and accurate minutes of all meetings of the directors and shareholders of the
Corporation held since its incorporation, and original signed copies of all
resolutions and by-laws duly passed or confirmed by the directors or
shareholders of the Corporation other than at a meeting. All such meetings were
duly called and held. The share certificate books, register of security holders,
register of transfers and register of directors and any similar corporate
records of the Corporation is complete and accurate. All exigible security
transfer tax or similar tax payable in connection with the transfer of any
securities of the Corporation has been duly paid.
(7) Authorized and Issued Capital. The authorized capital of the FutureLink
Distribution Corp. consists of an unlimited number of class A voting Shares,
unlimited number of Class B non-voting Shares and an unlimited of First
Preferred Shares, of which no more than 3,080,000 class A voting shares have
been duly issued. The issued shares are outstanding as fully paid and
non-assessable shares. A maximum of 500,000 options have been issued in the
Corporation. Each option entitles the holder to purchase one Class A voting
share for $1.00. No shares or other securities of the Corporation have been
issued in violation of any laws, the articles of incorporation, by-laws or other
constating documents of the Corporation or the terms of any shareholders'
agreement or any agreement to which the Corporation is a party or by which they
are bound. The Vendors own 990,000 of the issued and outstanding shares of the
Corporation as the shareholders of record and as the beneficial owners, with
good and marketable title thereto, free and clear of any and all Encumbrances.
(8) Shareholders' Agreements, etc. There are no shareholders' agreements,
pooling agreements, voting trusts or other similar agreements with respect to
the ownership or voting of any of the shares of the Corporation.
(9) Financial Statements.
(a) The Audited Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with that of the previous fiscal year, are true, correct and complete
in all material respects and present fairly the consolidated financial
condition of the Corporation as of December 31, 1996, including the
consolidated assets and liabilities of the Corporation as of December
31, 1996, and the consolidated revenues, expenses and results of the
operations of the Corporation for the fiscal year ended on December
31, 1996.
(b) The Interim Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the Audited Financial Statements, are true, correct and complete
in all material respects and present fairly in all material respects
the consolidated financial condition of the Corporation as of December
31, 1997.
(c) The financial condition of the Corporation is now at least as good as
the financial condition reflected in the Interim Financial Statements.
(10) Financial Records. All material financial transactions of the
Corporation has been recorded in the financial books and records of the
Corporation in accordance with good business practice, and such financial books
and records,
(a) accurately reflect in all material respects the basis for the
financial condition and the revenues, expenses and results of
operations of the Corporation shown in the Audited Financial
Statements and the Interim Financial Statements, and
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<PAGE> 8
(b) together with all disclosures made in this agreement or in the
Schedules hereto, present fairly in all material respects the
financial condition and the revenues, expenses and results of the
operations of the Corporation as of and to the date hereof.
No information, records or systems pertaining to the operation or administration
of the Business are in the possession of, recorded, stored, maintained by or
otherwise dependent on any other person.
(11) Liabilities of the Corporation. There are no liabilities (contingent
or otherwise) of the Corporation of any kind whatsoever, and to the best of the
knowledge of the Vendor there is no basis for assertion against the Corporation
of any liabilities of any kind, other than:
(a) liabilities disclosed or reflected in or provided for in the Audited
Financial Statements or the Interim Financial Statements;
(b) liabilities incurred since the Audited Statements Date which were
incurred in the ordinary course of the routine daily affairs of the
Business and, in the aggregate, are not materially adverse to the
Business;
(c) liabilities incurred for lease of office equipment and computer
hardware used in the Business; and
(d) other liabilities disclosed in this agreement or in the Schedules
attached hereto.
(12) Indebtedness. Except as disclosed in the Audited Financial Statements,
the Corporation has no bonds, debentures, mortgages, promissory notes or other
indebtedness maturing more than one year after the date of their original
creation or issuance, and is not under any obligation to create or issue any
bonds, debentures, mortgages, promissory notes or other indebtedness maturing
more than one year after the date of their original creation or issuance.
(13) Absence of Certain Changes or Events. Since the Audited Statements
Date, the Corporation has not:
(a) incurred any obligation or liability (fixed or contingent), except
normal trade or business obligations incurred in the ordinary course
of the Business, none of which is materially adverse to the
Corporation;
(b) paid or satisfied any obligation or liability (fixed or contingent),
except
(i) current liabilities included in the Audited Financial Statements,
(ii) current liabilities incurred since the Audited Statements Date in
the ordinary course of the Business, and
(iii) scheduled payments pursuant to obligations under loan agreements
or other contracts or commitments described in this agreement or
in the Schedules hereto;
(c) created any Encumbrance upon any of its properties or assets, except
as described in this agreement or in the Schedules hereto;
(d) sold, assigned, transferred, leased or otherwise disposed of any of
its properties or assets, except in the ordinary course of the
Business;
(e) purchased, leased or otherwise acquired any properties or assets,
except in the ordinary course of the Business;
(f) waived, cancelled or written-off any rights, claims, accounts
receivable or any amounts payable to the Corporation, except in the
ordinary course of the Business;
(g) entered into any transaction, contract, agreement or commitment,
except in the ordinary course of the Business;
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<PAGE> 9
(h) terminated, discontinued, closed or disposed of any plant, facility or
business operation;
(i) had any supplier terminate, or communicate to the Corporation the
intention or threat to terminate, its relationship with the
Corporation, or the intention to substantially reduce the quantity of
products or services it sells to the Corporation, except in the case
of suppliers whose sales to the Corporation is not, in the aggregate,
material to the Business or the Condition of the Corporation;
(j) had any customer terminate, or communicate to the Corporation the
intention or threat to terminate, its relationship with the
Corporation, or the intention to substantially reduce the quantity of
products or services it purchases from the Corporation, or its
dissatisfaction with the products or services sold by the Corporation,
except in the case of customers whose purchases from the Corporation
is not, in the aggregate, material to the Business or the Condition of
the Corporation;
(k) made any material change in the method of billing customers or the
credit terms made available by the Corporation to its customers;
(l) made any material change with respect to any method of management,
operation or accounting in respect of the Business;
(m) suffered any damage, destruction or loss (whether or not covered by
insurance) which has materially adversely affected or could materially
adversely affect the Business or the Condition of the Corporation;
(n) increased any form of compensation or other benefits payable or to
become payable to any of the employees of the Corporation, except
increases made in the ordinary course of the Business which do not
exceed 2%, in the aggregate, of the amount of the aggregate salary
compensation payable to all of the Corporation's employees prior to
such increase;
(o) suffered any extraordinary loss relating to the Business;
(p) made or incurred any material change in, or become aware of any event
or condition which is likely to result in a material change in, the
Business or the Condition of the Corporation or its relationships with
its customers, suppliers or employees; or
(q) authorized, agreed or otherwise become committed to do any of the
foregoing.
(14) Commitments for Capital Expenditures. The Corporation has not
committed to make any capital expenditures, nor have any capital expenditures
been authorized by the Corporation at any time since the Interim Statements
Date, except for capital expenditures made in the ordinary course of the routine
daily affairs of the Business which, in the aggregate, do not exceed $
50,000.00.
(15) Dividends and Distributions. Since the Audited Statements Date, the
Corporation has not declared or paid any dividend or made any other distribution
on any of its shares of any class, or redeemed or purchased or otherwise
acquired any of its shares of any class, or reduced its authorized capital or
issued capital, or agreed to do any of the foregoing.
(16) Tax Matters.
(a) For purposes of this agreement, the term "Governmental Charges" means
and includes all taxes, customs duties, rates, levies, assessments,
reassessments and other charges, together with all penalties, interest
and fines with respect thereto, payable to any federal, state,
municipal, local or other government or governmental agency,
authority, board, bureau or commission, domestic or foreign.
(b) The Corporation has duly and on a timely basis prepared and filed all
tax returns and other documents required to be filed by them in
respect of all Governmental Charges and such returns and documents are
complete and correct. Complete and correct copies of all such returns
and
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<PAGE> 10
other documents filed in respect of the one fiscal year of the
Corporation ending prior to the date hereof have been provided to the
Purchaser.
(c) The Corporation has paid all Governmental Charges which are due and
payable by them on or before the date hereof. Adequate provision was
made in the Audited Financial Statements and Interim Financial
Statements for all Governmental Charges for the periods covered by the
Audited Financial Statements and Interim Financial Statements,
respectively. The Corporation has no liability for Governmental
Charges other than those provided for in the Audited Financial
Statements and those arising in the ordinary course of the operation
of the Business since the Audited Statements Date.
(d) Canadian federal and provincial income tax assessments have been
issued to the Corporation covering all past periods up to and
including the fiscal year ended 1996. There are no actions, suits,
proceedings, investigations, inquiries or claims now pending or made
or, to the best of the knowledge of the Vendor, threatened against the
Corporation in respect of Governmental Charges.
(e) There are no agreements, waivers or other arrangements providing for
any extension of time with respect to the filing of any tax return or
other document or the payment of any Governmental Charges by the
Corporation or the period for any assessment or reassessment of
Governmental Charges. Only the fiscal years of the Corporation
subsequent to 1996 remain open for reassessment for additional taxes.
(f) The Corporation has withheld from each amount paid or credited to any
person the amount of Governmental Charges required to be withheld
therefrom and have remitted such Governmental Charges to the proper
tax or other receiving authorities within the time required under
applicable legislation.
(g) Schedule "J" attached hereto accurately sets out as at December 31,
1996, for purposes of the Income Tax Act, the following:
(i) the paid-up capital of all issued and outstanding shares in
the capital of the Corporation;
(ii) all non-capital losses of the Corporation;
(ii) all net capital losses of the Corporation;
(iv) the amount of all investment tax credits available to the
Corporation;
(v) the adjusted cost base of the Corporation' capital
properties;
(vi) the cost of the Corporation' depreciable properties, the
capital cost allowance taken in respect of each class of
such properties and the undepreciated capital cost of each
class of such properties;
(vii) the amount (if any) of the Corporation' capital dividend
account;
(viii) the amount (if any) of the Corporation' cumulative eligible
capital account; and
(ix) the amount (if any) of the Corporation' refundable dividend
tax on hand.
(17) Litigation. Except for the matters referred to in Schedule "K"
attached hereto, there are no actions, suits or proceedings, judicial or
administrative (whether or not purportedly on behalf of the Corporation or the
Vendor) pending or, to the best of the knowledge of the Vendor threatened, by or
against or affecting the Corporation, at law or in equity, or before or by any
court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Except for the matters referred to in Schedule "K" there are no grounds on which
any such action, suit or proceeding might be commenced with any reasonable
likelihood of success.
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(18) Environmental Matters.
(a) For purposes of this agreement, the following terms and expressions
will have the following meanings:
(i) "Environmental Laws" means all applicable federal, state,
municipal and local laws, regulations and orders issued by
any governmental or regulatory agency relating to the
environment, occupational health and safety, product safety,
product liability and storage and transportation of goods;
(ii) "Hazardous Substances" means any waste, pollutant,
contaminant, material or substance which is or may be
dangerous, hazardous, toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic or
mutagenic or which could otherwise pose a risk to health,
safety or the environment or the value of the properties
owned by the Corporation or which is the subject of any
Environmental Laws governing its Release, use, storage or
identification, including without limitation any substance
which contains polychlorinated biphenyls (PCBs), asbestos,
lead, urea formaldehyde or radon gas; and
(iii) "Release" means any release, spill, leak, emission,
discharge, leach, dumping, emission, escape or other
disposal.
(b) Except as disclosed in Schedule "L" attached hereto, the Corporation,
the operation of the Business, the property and assets owned or used
by the Corporation and the use, maintenance and operation thereof have
been and are in compliance with all Environmental Laws. The
Corporation has complied with all reporting and monitoring
requirements under all Environmental Laws. The Corporation has not
received any notice of any non-compliance with any Environmental Laws.
(c) The Corporation has obtained all permits, certificates, approvals,
registrations and licences necessary to conduct the Business and to
own, use and operate the properties and assets of the Corporation is
in compliance with all Environmental Laws. All such permits,
certificates, approvals, registrations and licences are listed in
Schedule "L", and complete and correct copies thereof have been
provided to the Purchaser.
(d) Except as disclosed in Schedule "L", there are no Hazardous Substances
located on or in any of the properties or assets owned or used by the
Corporation, and no Release of any Hazardous Substances has occurred
on or from the properties and assets of the Corporation or have
resulted from the operation of the Business and the conduct of all
other activities of the Corporation. Except as disclosed in Schedule
"L", the Corporation has not used any of its properties or assets to
produce, generate, store, handle, transport or dispose of any
Hazardous Substances and none of the Real Properties or Leased
Premises has been or is being used as a landfill or waste disposal
site.
(e) Without limiting the generality of the foregoing, except as disclosed
in Schedule "L", there are no underground or surface storage tanks or
urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls
(PCBs) or radioactive substances located on or in any of the
properties or assets owned or used by the Corporation. The Corporation
is not, and there is no basis upon which the Corporation could become,
responsible for any clean-up or corrective action under any
Environmental Laws. The Corporation has never conducted or had
conducted an environmental audit, assessment or study of any of the
properties or assets of the Corporation.
(19) Title to Assets. The Corporation is the owners of and have good and
marketable title to all of their properties and assets, including, without
limitation, all properties and assets reflected in the Audited Financial
Statements and all properties and assets acquired by the Corporation after the
Audited Statements Date, free and clear of all Encumbrances whatsoever, except
for:
(a) the properties and assets disposed of, utilized or consumed by the
Corporation since the Audited Statements Date in the ordinary course
of the Business;
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(b) the Encumbrances disclosed or reflected in the Interim Financial
Statements;
(c) liens for taxes not yet due and payable; and
(d) the Encumbrances described in Schedule "M" attached hereto.
No other person owns any assets which are being used in the Business, except for
the Leased Premises and personal property leased by the Corporation. There are
no agreements or commitments to purchase property or assets by the Corporation,
other than in the ordinary course of the Business.
(20) Deposit Accounts and Safe Deposit Boxes of the Corporation. The name
and address of each bank, trust company or similar institution with which the
Corporation has one or more accounts or one or more safe deposit boxes, the
number of each such account and safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto are as set forth in
Schedule "N" attached hereto.
(21) Accounts Receivable. The accounts receivable of the Corporation
reflected in the Interim Financial Statements and all accounts receivable of the
Corporation arising since the date of the Interim Financial Statements arose
from bona fide transactions in the ordinary course of the Business and are
valid, enforceable and fully collectible accounts (subject to a reasonable
allowance, consistent with past practice, for doubtful accounts as reflected in
the Interim Financial Statements or as previously disclosed in writing to the
Purchaser). Such accounts receivable are not subject to any set-off or
counterclaim.
(22) Inventory. The current inventory of the Corporation, subject to a
reasonable allowance for obsolete inventory (consistent with the allowances
reflected in the Audited Financial Statements and the Interim Financial
Statements), is good and usable and is capable of being processed and sold in
the ordinary course of the Business at normal profit margins.
(23) Real Properties.
(a) Schedule "D" attached hereto lists all real properties owned by the
Corporation.
(24) Leased Premises. Schedule "C" attached hereto describes all leases or
agreements to lease under which the Corporation leases any real property.
Complete and correct copies of the Leases have been provided to the Purchaser.
The Corporation has exclusively entitled to all rights and benefits as lessee
under the Leases and the Corporation has not sublet, assigned, licensed or
otherwise conveyed any rights in the Leased Premises or in the Leases to any
other person. The names of the other parties to the Leases, the description of
the Leased Premises, the term, rent and other amounts payable under the Leases
and all renewal options available under the Leases are accurately described in
Schedule "C". All rental and other payments and other obligations required to be
paid and performed by the Corporation pursuant to the Leases have been duly paid
and performed; the Corporation is not in default of any of its obligations under
the Leases; and, to the best of the knowledge of the Vendor none of the
landlords or other parties to the Leases are in default of any of their
obligations under the Leases. The terms and conditions of the Leases will not be
affected by, nor will any of the Leases be in default as a result of, the
completion of the transactions contemplated hereunder. The use by the
Corporation of the Leased Premises is not in breach of any building, zoning or
other statute, by-law, ordinance, regulation, covenant, restriction or official
plan. The Corporation has adequate rights of ingress to and egress from the
Leased Premises for the operation of the Business in the ordinary course.
(25) Work Orders and Deficiencies. There are no outstanding work orders,
non-compliance orders, deficiency notices or other such notices relative to the
Real Properties, the Leased Premises, the other properties and assets of the
Corporation or the Business which have been issued by any regulatory authority,
police or fire department, sanitation, environment, labour, health or other
governmental authorities or agencies. There are no matters under discussion with
any such department or authority relating to work orders, non-compliance orders,
deficiency notices or other such notices. The Business is not being carried on,
and none of the Real Properties, the Leased Premises or the other properties or
assets of the Corporation is being operated, in a manner which is in
contravention of any statute, regulation, rule, code, standard or policy. No
amounts are owing by the Corporation in respect of the Real Properties or the
Leased Premises to any governmental authority or public utility, other than
current accounts which are not in arrears.
(26) Condition of Properties and Equipment. The buildings and structures
comprising the Real Properties
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and, to the best of the knowledge of the Vendor those comprising the Leased
Premises, are free of any structural defect. The heating, ventilating, plumbing,
drainage, electrical and air-conditioning systems and all other systems used in
the Real Properties and the Leased Premises and all machinery, equipment, tools,
furniture, furnishings and materials used in the Business are in good working
order, fully operational and free of any defect, except for normal wear and
tear.
(27) Leases of Personal Property. Except as set out in Schedule "O"
attached hereto, the Corporation is not the lessee under any lease of personal
property in respect of which the annual financial obligation exceeds $6,000.
Complete and correct copies of each of the leases referred to in Schedule "O"
have been provided to the Purchaser.
(28) Intellectual Property.
(a) Schedule "P" attached hereto lists and contains a description of:
(i) all patents, patent applications and registrations, trade marks,
trade mark applications and registrations, copyrights, copyright
applications and registrations, trade names and industrial
designs, domestic or foreign, owned or used by the Corporation or
relating to the operation of the Business,
(ii) all trade secrets, know-how, inventions and other intellectual
property owned or used by the Corporation or relating to the
Business, and
(iii) all computer systems and application software, including without
limitation all documentation relating thereto and the latest
revisions of all related object and source codes therefor, owned
or used by the Corporation or relating to the Business,
(all of the foregoing being collectively called the "Intellectual
Property").
(b) The Corporation has good and valid title to all of the Intellectual
Property, free and clear of any and all Encumbrances, except in the
case of any Intellectual Property licensed to the Corporation as
disclosed in Schedule "P". Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property have
been granted or licensed to the Corporation has been provided to the
Purchaser. No royalty or other fee is required to be paid by the
Corporation to any other person in respect of the use of any of the
Intellectual Property except as provided in such agreements delivered
to the Purchaser. The Corporation has protected their rights in the
Intellectual Property in the manner and to the extent described in
Schedule "P". Except as indicated in Schedule "P", the Corporation has
the exclusive right to use all of the Intellectual Property and have
not granted any licence or other rights to any other person in respect
of the Intellectual Property. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property have
been granted or licensed by the Corporation to any other person have
been provided to the Purchaser.
(c) Except as disclosed in Schedule "P", there are no restrictions on the
ability of the Corporation or any successor to or assignee from the
Corporation to use and exploit all rights in the Intellectual
Property. All statements contained in all applications for
registration of the Intellectual Property were true and correct as of
the date of such applications. Each of the trade marks and trade names
included in the Intellectual Property is in use. None of the rights of
the Corporation in the Intellectual Property will be impaired or
affected in any way by the transactions contemplated by this
agreement.
(d) The conduct of the Business and the use of the Intellectual Property
does not infringe, and the Corporation has not received any notice,
complaint, threat or claim alleging infringement of, any patent, trade
mark, trade name, copyright, industrial design, trade secret or other
Intellectual Property or proprietary right of any other person, and
the conduct of the Business does not include any activity which may
constitute passing-off.
(29) Subsidiaries and Other Interests. The Corporation has no subsidiaries
and do not own any securities issued by, or any equity or ownership interest in,
any other person. The Corporation is not subject to any obligation
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to make any investment in or to provide funds by way of loan, capital
contribution or otherwise to any person.
(30) Partnerships or Joint Ventures. The Corporation is not a partner or
participant in any partnership, joint venture, profit-sharing arrangement or
other association of any kind and is not party to any agreement under which the
Corporation agrees to carry on any part of the Business or any other activity in
such manner or by which the Corporation agrees to share any revenue or profit
with any other person.
(31) Customers. The Vendor has previously delivered to the Purchaser a true
and complete list of all customers of the Business as of the date hereof. The
Corporation is the sole and exclusive owners of, and have the unrestricted right
to use, such customer list. Neither the customer list nor any information
relating to the customers of the Business have, within three years prior to the
date of this agreement, been made available to any person other than the
Purchaser. The Vendor does not have any knowledge of any facts which could
reasonably be expected to result in the loss of any customers or sources of
revenue of the Business which, in the aggregate, would be material to the
Business or the Condition of the Corporation.
(32) Restrictions on Doing Business. The Corporation is not a party to or
bound by any agreement which would restrict or limit its right to carry on any
business or activity or to solicit business from any person or in any
geographical area or otherwise to conduct the Business as the Corporation may
determine. The Corporation is not subject to any legislation or any judgment,
order or requirement of any court or governmental authority which is not of
general application to persons carrying on a business similar to the Business.
To the best of the knowledge of the Vendor there are no facts or circumstances
which could materially adversely affect the ability of the Corporation to
continue to operate the Business as presently conducted following the completion
of the transactions contemplated by this agreement.
(33) Guarantees, Warranties and Discounts. Except as described in Schedule
"Q" attached hereto,
(a) the Corporation is not a party to or bound by any agreement of
guarantee, indemnification, assumption or endorsement or any other
like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any person;
(b) the Corporation has not given any guarantee or warranty in respect of
any of the products sold or the services provided by it, except
warranties made in the ordinary course of the Business and in the form
of the Corporation' standard written warranty, a copy of which has
been provided to the Purchaser, and except for warranties implied by
law;
(c) during each of the three fiscal years of the Corporation ended
immediately preceding the date hereof, no claims have been made
against the Corporation for breach of warranty or contract requirement
or negligence or for a price adjustment or other concession in respect
of any defect in or failure to perform or deliver any products,
services or work which had, in any such year, an aggregate cost
exceeding $5,000
(d) there are no repair contracts or maintenance obligations of the
Corporation in favour of the customers or users of products of the
Business, except obligations incurred in the ordinary course of the
Business and in accordance with the Corporation' standard terms, a
copy of which has been provided to the Purchaser;
(e) the Corporation is not now subject to any agreement or commitment, and
the Corporation has not, within three years prior to the date hereof,
entered into any agreement with or made any commitment to any customer
of the Business which would require the Corporation to repurchase any
products sold to such customers or to adjust any price or grant any
refund, discount or other concession to such customer; and
(f) the Corporation is not required to provide any letters of credit,
bonds or other financial security arrangements in connection with any
transactions with its suppliers or customers.
(34) Licences, Agency and Distribution Agreements. Schedule "R" attached
hereto lists all agreements to which the Corporation is a party or by which they
are bound under which the right to manufacture, use or market any product,
service, technology, information, data, computer hardware or software or other
property has been granted, licensed or otherwise provided to the Corporation or
by the Corporation to any other person, or under
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which the Corporation has been appointed or any person has been appointed by the
Corporation as an agent, distributor, licensee or franchisee for any of the
foregoing. Complete and correct copies of all of the agreements listed in
Schedule "R" have been provided to the Purchaser. None of the agreements listed
in Schedule "R" grant to any person any authority to incur any liability or
obligation or to enter into any agreement on behalf of the Corporation.
(35) Outstanding Agreements. The Corporation is not a party to or bound by
any outstanding or executory agreement, contract or commitment, whether written
or oral, except for:
(a) any contract, lease or agreement described or referred to in this
agreement or in the Schedules hereto,
(b) any contract, lease or agreement made in the ordinary course of the
routine daily affairs of the Business under which the Corporation has
a financial obligation of less than $70,000.00 per annum and which can
be terminated by the Corporation without payment of any damages,
penalty or other amount by giving not more than 30 days' notice, and
(c) the contracts, leases and agreements described in Schedule "S"
attached hereto.
Complete and correct copies of each of the contracts, leases and agreements
described in Schedule "S" have been provided to the Purchaser.
(36) Good Standing of Agreements. The Corporation is not in default or
breach of any of its obligations under any one or more contracts, agreements
(written or oral), commitments, indentures or other instruments to which they
are a party or by which they are bound and there exists no state of facts which,
after notice or lapse of time or both, would constitute such a default or
breach. All such contracts, agreements, commitments, indentures and other
instruments are now in good standing and in full force and effect without
amendment thereto, the Corporation is entitled to all benefits thereunder and,
to the best of the knowledge of the Vendor the other parties to such contracts,
agreements, commitments, indentures and other instruments are not in default or
breach of any of their obligations thereunder. There are no contracts,
agreements, commitments, indentures or other instruments under which the
Corporation' rights or the performance of its obligations are dependent on or
supported by the guarantee of or any security provided by any other person.
(37) Employees. Schedule "T" attached hereto sets forth the name, job
title, duration of employment, vacation entitlement, employee benefit
entitlement and rate of remuneration (including bonus and commission
entitlement) of each employee of the Corporation. Schedule "T" also sets forth
the names of all employees of the Corporation who are now on disability,
maternity or other authorized leave or who are receiving workers' compensation
or short-term or long-term disability benefits.
(38) Employment Agreements. The Corporation is not a party to any written
or oral employment, service or consulting agreement relating to any one or more
persons, except for oral employment agreements which are of indefinite term and
without any special arrangements or commitments with respect to the continuation
of employment or payment of any particular amount on termination of employment.
The Corporation do not have any employee who cannot be dismissed on such period
of notice as is required by law in respect of a contract of hire for an
indefinite term.
(39) Labour Matters and Employment Standards.
(a) The Corporation is not subject to any agreement with any labour union
or employee association and have not made any commitment to or
conducted negotiations with any labour union or employee association
with respect to any future agreement and, to the best of the knowledge
of the Vendor during the period of five years preceding the date of
this agreement there has been no attempt to organize, certify or
establish any labour union or employee association in relation to any
of the employees of the Corporation.
(b) There are no existing or, to the best of the knowledge of the Vendor
threatened, labour strikes or labour disputes, grievances,
controversies or other labour troubles affecting the Corporation or
the Business.
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(c) The Corporation has complied with all laws, rules, regulations and
orders applicable to them relating to employment, including those
relating to wages, hours, collective bargaining, occupational health
and safety, workers' hazardous materials, employment standards, pay
equity and workers' compensation. There are no outstanding charges or
complaints against the Corporation relating to unfair labour practices
or discrimination or under any legislation relating to employees. The
Corporation has paid in full all amounts owing under any government
required employee worker's compensation program, and the workers'
compensation claims experience of the Corporation would not permit a
penalty reassessment under such legislation.
(40) Employee Benefit and Pension Plans.
(a) Except as listed in Schedule "U" attached hereto, the Corporation do
not have, and is not subject to any present or future obligation or
liability under, any pension plan, deferred compensation plan,
retirement income plan, stock option or stock purchase plan, profit
sharing plan, bonus plan or policy, employee group insurance plan,
hospitalization plan, disability plan or other employee benefit plan,
program, policy or practice, formal or informal, with respect to any
of its employees, other than any Government Required Pension Plan and
any health plans established pursuant to state or federal statute.
Schedule "U" also lists the general policies, procedures and
work-related rules in effect with respect to employees of the
Corporation, whether written or oral, including but not limited to
policies regarding holidays, sick leave, vacation, disability and
death benefits, termination and severance pay, automobile allowances
and rights to company-provided automobiles and expense reimbursements.
(The plans, programs, policies, practices and procedures listed in
Schedule "U" are collectively called the "Benefit Plans".) Complete
and correct copies of all documentation establishing or relating to
the Benefit Plans listed in Schedule "U" or, where such Benefit Plans
are oral commitments, written summaries of the terms thereof, and the
most recent financial statements and actuarial reports related thereto
and all reports and returns in respect thereof filed with any
regulatory agency within three years prior to the date hereof have
been provided to the Purchaser.
(b) The pension plans included in the Benefit Plans are registered under
and are in compliance with all applicable federal and state
legislation and all reports, returns and filings required to be made
thereunder have been made. Such pension plans have been administered
in accordance with their terms and the provisions of applicable law.
Each pension plan has been funded in accordance with the requirements
of such plans and based on actuarial assumptions which are appropriate
to the employees of the Corporation and the Business. Based on such
assumptions, there is no unfunded liability under any such pension
plan. No changes have occurred since the date of the most recent
actuarial report provided to the Purchaser in respect of such pension
plans which makes such report misleading in any material respect and,
since the date of such report, the Corporation has not made or granted
or committed to make or grant any benefit improvements to which
members of the pension plans are or may become entitled which are not
reflected in such actuarial report. No funds have been withdrawn by
the Corporation from any such pension plan or other Benefit Plans.
(c) There are no pending claims by any employee covered under the Benefit
Plans or by any other person which allege a breach of fiduciary duties
or violation of governing law or which may result in liability to the
Corporation and, to the best of the knowledge of the Vendor there is
no basis for such a claim. There are no employees or former employees
of the Corporation who are receiving from the Corporation any pension
or retirement payments, or who are entitled to receive any such
payments, not covered by a pension plan to which the Corporation is a
party.
(41) Insurance. Schedule "V" attached hereto contains a true and complete
list of all insurance policies maintained by the Corporation or under which the
Corporation is covered in respect of its properties, assets, business or
personnel as of the date hereof. Complete and correct copies of all such
insurance policies have been provided to the Purchaser. Such insurance policies
are in full force and effect and the Corporation is not in default with respect
to the payment of any premium or compliance with any of the provisions contained
in any such insurance policy. To the best of the knowledge of the Vendor, there
are no circumstances under which the Corporation would be required to or, in
order to maintain its coverage, should give any notice to the insurers under any
such insurance policies which has not been given. The Corporation has not
received notice from any of the insurers regarding cancellation of such
insurance policies. The Corporation has not failed to present any claim
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under any such insurance policy in due and timely fashion. The Corporation has
not received notice from any of the insurers denying any claims.
(42) Non-Arm's Length Matters. The Corporation is not a party to or bound
by any agreement with, is not indebted to, and no amount is owing to the
Corporation by the Vendor or any of the Vendor's Affiliates or any officers,
former officers, directors, former directors, shareholders, former shareholders,
employees (except for oral employment agreements with employees) or former
employees of the Corporation or any person not dealing at arm's length with any
of the foregoing. The exception to this are Shareholders loans made to the
Corporation by Cameron Chell. Since the Audited Statements Date, the Corporation
has not made or authorized any payments to the Vendor or any of the Vendor's
Affiliates or any officers, former officers, directors, former directors,
shareholders, former shareholders, employees or former employees of the
Corporation or to any person not dealing at arm's length with any of the
foregoing, except for salaries and other employment compensation payable to
employees of the Corporation in the ordinary course of the routine daily affairs
of the Business and at the regular rates payable to them.
(43) Government Assistance. Schedule "W" attached hereto describes all
agreements, loans, other funding arrangements and assistance programs
(collectively called "Government Assistance Programs") which are outstanding in
favour of the Corporation from any federal, state, municipal or other government
or governmental agency, board, commission or authority, domestic or foreign
(collectively called "Government Agencies"). Complete and correct copies of all
documents relating to the Government Assistance Programs have been delivered to
the Purchaser. The Corporation has performed all of its obligations under the
Government Assistance Programs, and no basis exists for any Government Agencies
to seek payment or repayment by the Corporation of any amount or benefit
received by them under any Government Assistance Programs.
(44) Compliance with Laws. The Corporation is not in violation of any
federal, state, municipal or other law, regulation or order of any government or
governmental or regulatory authority, domestic or foreign, including, without
limitation, any law, regulation or order relating to any specific area of
regulation applicable to the Corporation.
(45) Vendor's Residency. The Vendors are residents of Canada within the
meaning of the Income Tax Act.
(46) Copies of Documents. Complete and correct copies (including all
amendments) of all contracts, leases and other documents referred to in this
agreement or any Schedule hereto or required to be disclosed hereby have been
delivered to the Purchaser.
(47) Disclosure. No representation or warranty contained in this Section,
and no statement contained in any Schedule, certificate, list, summary or other
disclosure document provided or to be provided to the Purchaser pursuant hereto
or in connection with the transactions contemplated hereby contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact which is necessary in order to make the statements contained
therein not misleading.
(48) Statutory Liens.
(a) The Corporation has paid in full all amounts owing to employees under
the Labour Standards Act or applicable state statute, and there are no
claims or potential claims against the Corporation by former employees
for wrongful dismissal.
(b) The Corporation has kept current all amounts owing for the supply of
utilities or telephone services.
(c) The Corporation has deducted and paid to the appropriate governmental
authorities all payroll source deductions as required, including
workers' compensation, unemployment insurance, government regulated
pension plan and income tax.
(d) The Corporation have collected and remitted all amounts required by
all governmental authorities as state sales tax, education and health
tax and other taxes of similar nature.
(e) There are no land taxes or local improvement levies owing with respect
to the Real Properties except as otherwise permitted under this
Agreement.
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3.2 REPRESENTATIONS AND WARRANTIES BY THE PURCHASER. The Purchaser hereby
represents and warrants to the Vendor as follows, and confirms that the Vendor
are relying on the accuracy of each of such representations and warranties in
connection with the sale of the Purchased Shares and the completion of the other
transactions hereunder:
(1) Corporate Authority and Binding Obligation. The Purchaser is a
corporation duly incorporated and validly subsisting in all respects under the
laws of Colorado and is in good standing with the State of Colorado. The
Purchaser has good right, full corporate power and absolute authority to enter
into this agreement and to purchase the Purchased Shares from the Vendor in the
manner contemplated herein and to perform all of the Purchaser's obligations
under this agreement. The Purchaser and its shareholders and board of directors
have taken all necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the entering into
of, and the execution, delivery and performance of, this agreement and the
purchase of the Purchased Shares by the Purchaser from the Vendor. This
agreement is a legal, valid and binding obligation of the Purchaser, enforceable
against them in accordance with its terms subject to
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
(2) Contractual and Regulatory Approvals. Except as specified in Schedule
"X" attached hereto, the Purchaser is not under any obligation, contractual or
otherwise, to request or obtain the consent of any person, and no permits,
licences, certifications, authorizations or approvals of, or notifications to,
any federal, state, municipal or local government or governmental agency, board,
commission or authority are required to be obtained by the Purchaser in
connection with the execution, delivery or performance by the Purchaser of this
agreement or the completion of any of the transactions contemplated herein.
Complete and correct copies of any agreements under which the Purchaser is
obligated to request or obtain any such consent have been provided to the
Vendor.
(3) Compliance with Constating Documents, Agreements and Laws. The
execution, delivery and performance of this agreement and each of the other
agreements contemplated or referred to herein by the Purchaser, and the
completion of the transactions contemplated hereby, will not constitute or
result in a violation or breach of or default under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of the Purchaser,
(b) subject to obtaining the contractual consents referred to in Schedule
"X" hereof, the terms of any indenture, agreement (written or oral),
instrument or understanding or other obligation or restriction to
which the Purchaser is a party or by which they are bound, or
(c) subject to obtaining the regulatory consents referred to in Schedule
"X" hereof, any term or provision of any licences, registrations or
qualification of the Purchaser or any order of any court, governmental
authority or regulatory body or any applicable law or regulation of
any jurisdiction.
(4) Corporate Records. The corporate records and minute books of the
Purchaser, all of which have been provided to the Vendors, contain complete and
accurate minutes of all meetings of the directors and shareholders of the
Purchaser held since its incorporation, and original signed copies of all
resolutions and by-laws duly passed or confirmed by the directors or
shareholders of the Purchaser other than at a meeting. All such meetings were
duly called and held. The share certificate books, register of security holders,
register of transfers and register of directors and any similar corporate
records of the Purchaser is complete and accurate. All exigible security
transfer tax or similar tax payable in connection with the transfer of any
securities of the Corporation has been duly paid.
(5) Authorized and Issued Capital. The authorized capital of the Purchaser
consists of 30,000,000 shares in the common stock with a par value of $.0001 per
share and 1,000,000 preferred shares with a par value of $.10, of which
10,203,500 shares in the common stock and no preferred shares have been duly
issued and are outstanding as fully paid and non-assessable shares. The
Purchaser has received shareholder approval to issue 1,000,000 Preferred shares
to Cameron Chell which are convertible to Common Shares at $.10 per share. The
Purchaser has also received shareholder approval to issue 3,500,000 shares of
144 stock to various employees of
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the Corporation. No shares or other securities of the Corporation has been
issued in violation of any laws, the articles of incorporation, by-laws or other
constating documents of the Corporation or the terms of any shareholders'
agreement or any agreement to which the Corporation is a party or by which they
are bound. There are no outstanding subscriptions, options, warrants,
convertible securities or rights or commitments of any nature in regard to the
Purchasers authorized but unissued common stock.
(6) Shareholders' Agreements, etc. There are no shareholders' agreements,
pooling agreements, voting trusts or other similar agreements with respect to
the ownership or voting of any of the shares of the Purchaser.
(7) Assets and Liabilities. The Purchaser will have no assets or
liabilities at the time of Closing.
(8) Debt and Other Obligations. The Purchaser has no outstanding debt or
obligations whatsoever except for any items which have already been expressly
disclosed to the Buyer by the Sellers. There are no outstanding judgments of UCC
financing instruments or UCC Securities Interests filed against the Purchaser.
(9) Litigation. Except for the matters referred to in Schedule "K" attached
hereto, there are no actions, suits or proceedings, judicial or administrative
(whether or not purportedly on behalf of the Purchaser) pending or, to the best
of the knowledge of the Purchaser threatened, by or against or affecting the
Purchaser, at law or in equity, or before or by any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Except for the matters referred to in
Schedule "K" there are no grounds on which any such action, suit or proceeding
might be commenced with any reasonable likelihood of success.
(10) Real Properties. The Purchaser does not own any real estate or any
interests in real estate.
(11) Subsidiaries and Other Interests. The Purchaser has no subsidiaries or
other interests.
(12) Outstanding Agreements. The Purchaser is not a party to any contract,
lease or agreement which would subject it to any performance or business
obligations in the future after the closing of this Agreement. The Purchaser is
not in default under any contract, or any other document
(13) Employees, Employee Benefit and Pension Plans. The Purchaser has no
employment contracts or agreements with any of its officers, directors, or with
any consultants, employees or other such parties. The Company has no insurance
or employee benefit plans whatsoever
(14) Tax Matters. The Purchaser is not liable for any income, real or
personal property taxes to any governmental agencies whatsoever.
(15) Compliance with Laws. The Purchaser is not in violation of any
federal, state, municipal or other law, regulation or order of any government or
governmental or regulatory authority, domestic or foreign, including, without
limitation, any law, regulation or order relating to any specific area of
regulation applicable to the Purchaser.
4. SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES
4.1 SURVIVAL OF WARRANTIES BY THE VENDOR. The representations and
warranties made by the Vendor and contained in this agreement, or contained in
any document or certificate given in order to carry out the transactions
contemplated hereby, will survive the closing of the purchase of the Purchased
Shares provided for herein and, notwithstanding such closing or any
investigation made by or on behalf of the Purchaser or any other person or any
knowledge of the Purchaser or any other person, shall continue in full force and
effect for the benefit of the Purchaser, subject to the following provisions of
this section.
(a) Except as provided in paragraphs (b) and (c) of this section, no
Warranty Claim may be made or brought by the Purchaser after the date
which is 3 months following the Closing Date.
(b) Any Warranty Claim which is based on or relates to the tax liability
of the Corporation for a particular taxation year may be made or
brought by the Purchaser at any time prior to the expiration of the
period (if any) during which an assessment, reassessment or other form
of
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recognized document assessing liability for tax, interest or penalties
in respect of such taxation year under applicable tax legislation
could be issued, assuming that the Corporation do not file any waiver
or similar document extending such period as otherwise determined.
(c) Any Warranty Claim which is based on or relates to the title to the
Purchased Shares or which is based on intentional misrepresentation or
fraud by the Vendor may be made or brought by the Purchaser at any
time.
After the expiration of the period of time referred to in paragraph (a) of this
section, the Vendor will be released from all obligations and liabilities in
respect of the representations and warranties made by the Vendor and contained
in this agreement or in any document or certificate given in order to carry out
the transactions contemplated hereby, except with respect to any Warranty Claims
made by the Purchaser in writing prior to the expiration of such period and
subject to the rights of the Purchaser to make any claim permitted by paragraph
(b) or paragraph (c) of this section.
4.2 SURVIVAL OF WARRANTIES BY PURCHASER. The representations and warranties
made by the Purchaser and contained in this agreement or contained in any
document or certificate given in order to carry out the transactions
contemplated hereby will survive the closing of the purchase and sale of the
Purchased Shares provided for herein and, notwithstanding such closing or any
investigation made by or on behalf of the Vendor or any other person or any
knowledge of the Vendor or any other person, shall continue in full force and
effect for the benefit of the Vendor.
4.3 LIMITATIONS ON WARRANTY CLAIMS.
(1) The Purchaser shall not be entitled to make a Warranty Claim if the
Purchaser has been advised in writing or otherwise has actual knowledge prior to
the Closing Time of the inaccuracy, non-performance, non-fulfilment or breach
which is the basis for such Warranty Claim and the Purchaser completes the
transactions hereunder notwithstanding such inaccuracy, non-performance,
non-fulfilment or breach.
(2) The amount of any damages which may be claimed by the Purchaser
pursuant to a Warranty Claim shall be calculated to be the cost or loss to the
Purchaser after giving effect to
(a) any insurance proceeds available to the Corporation in relation to the
matter which is the subject of the Warranty Claim, and
(b) the value of any related, determinable tax benefits realized, or which
will (with reasonable certainty) be realized within a 3 year period
following the date of incurring such cost or loss, by the Corporation
or the Purchaser in relation to the matter which is the subject of the
Warranty Claim.
(3) The Purchaser shall not be entitled to make any Warranty Claim until
the aggregate amount of all damages, losses, liabilities and expenses incurred
by the Purchaser as a result of all misrepresentations and breaches of
warranties contained in this agreement or contained in any document or
certificate given in order to carry out the transactions contemplated hereby,
after taking into account paragraph (2) of this section, is equal to $
100,000.00. After the aggregate amount of such damages, losses, liabilities and
expenses incurred by the Purchaser exceeds $100,000.00, the Purchaser shall only
be entitled to make Warranty Claims to the extent that such aggregate amount,
after taking into account the provisions of paragraph (2) of this section,
exceeds $ 100,000.00.
(4) Notwithstanding any other provisions of this agreement or of any
agreement, certificate or other document made in order to carry out the
transactions contemplated hereby, the maximum aggregate liability of the Vendor
together in respect of all Warranty Claims by the Purchaser will be limited to
$100,000.00.
5. COVENANTS
5.1 COVENANTS BY THE VENDOR. The Vendor covenants to the Purchaser that he
will do or cause to be done the following:
(a) Investigation of Business and Examination of Documents. During the
Interim Period, the
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Vendor will provide and will cause the Corporation to provide access
to, and will permit the Purchaser, through its representatives, to
make such investigation of, the operations, properties, assets and
records of the Corporation and of its financial and legal condition as
the Purchaser deems necessary or advisable to familiarize itself with
such operations, properties, assets, records and other matters.
Without limiting the generality of the foregoing, during the Interim
Period the Vendor will permit the Purchaser and its representatives to
have access to the premises used in connection with the Business [at
such reasonable times as may be designated by the Vendor so as not to
disrupt the routine daily affairs of the Business], and will produce
for inspection and provide copies to the Purchaser of:
(i) all agreements and other documents referred to in Section
3.1 hereof or in any of the Schedules attached hereto and
all other contracts, leases, licences, title documents,
title opinions, insurance policies, pension plans,
information relating to employees of the Corporation,
customer lists, information relating to customers and
suppliers of the Corporation, documents relating to all
indebtedness and credit facilities of the Corporation,
documents relating to legal or administrative proceedings
and all other documents of or in the possession of the
Corporation or relating to the Business;
(ii) all minute books, share certificate books, registers of
security holders, registers of transfers of securities,
registers of directors and other corporate documents of the
Corporation;
(iii) all books, records, accounts, tax returns and financial
statements of the Corporation; and
(iv) all other information which, in the reasonable opinion of
the Purchaser's representatives, is required in order to
make an examination of the Corporation and the Business.
All such investigations and inspections shall not mitigate or affect
the representations and warranties of the Vendor contained in this agreement,
which shall continue in full force and effect.
(b) Conduct of Business. Except as contemplated by this agreement or with
the prior written consent of the Purchaser, during the Interim Period
the Vendor will, and will cause the Corporation to:
(i) operate the Business only in the ordinary course thereof,
consistent with past practices;
(ii) take all actions within their control to ensure that the
representations and warranties in Section 3.1 hereof remain
true and correct at the Closing Time, with the same force
and effect as if such representations and warranties were
made at and as of the Closing Time, and to satisfy or cause
to be satisfied the conditions in Section 6.1 hereof;
(iii) promptly advise the Purchaser of any facts that come to
their attention which would cause any of the Vendor's
representations and warranties contained in this agreement
to be untrue in any respect;
(iv) take all action to preserve the Business and the goodwill of
the Corporation and their relationships with customers,
suppliers and others having business dealings with it, to
keep available the services of its present officers and
employees and to maintain in full force and effect all
agreements to which the Corporation is a party, and take all
other action reasonably requested by the Purchaser in order
that the Business and the Condition of the Corporation will
not be impaired during the Interim Period;
(v) promptly advise the Purchaser in writing of any material
adverse change in the Business or the Condition of the
Corporation during the Interim Period;
(vi) maintain all of the Corporation' tangible properties and
assets in the same condition as they now exist, ordinary
wear and tear excepted;
(vii) maintain the books, records and accounts of the Corporation
in the ordinary course and record all transactions on a
basis consistent with past practice;
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(viii) ensure that the Corporation do not create, incur or assume
any long-term debt (including obligations in respect of
leases) or create any Encumbrance upon any of its properties
or assets or guarantee or otherwise become liable for the
obligations of any other person or make any loans or
advances to any person;
(ix) ensure that the Corporation do not sell or otherwise dispose
of any of its properties or assets except in the ordinary
course of the Business;
(x) ensure that the Corporation do not terminate or waive any
right of substantial value of the Business;
(xi) ensure that the Corporation do not make any capital
expenditure in excess of $ 5,000.00 in respect of any
particular item or in excess of $ 10,000.00 in the
aggregate;
(xii) maintain the inventories of the Business in accordance with
past practice;
(xiii) keep in full force all of the Corporation' current insurance
policies;
(xiv) take all actions within their control to ensure that the
Corporation performs all of its obligations falling due
during the Interim Period under all agreements to which the
Corporation is a party or by which they are bound;
(xv) ensure that the Corporation do not enter into any agreement
other than agreements made in the ordinary course of the
Business consistent with past practice and which involve
obligations of less than $ 10,000;
(xvi) not take any action to amend the articles of incorporation
or by-laws of the Corporation;
(xvii) ensure that the Corporation do not declare or pay any
dividends, redeem or repurchase any shares in the capital of
the Corporation; and
(xviii) ensure that the Corporation do not increase, in any manner,
the compensation or employee benefits of any of its
directors, officers or employees, or pay or agree to pay to
any of its directors, officers or employees any pension,
severance or termination amount or other employee benefit
not required by any of the employee benefit plans and
programs referred to in the Schedules attached hereto.
(c) Transfer of Purchased Shares. At or before the Closing Time, the
Vendor will cause all necessary steps and corporate proceedings to be
taken in order to permit the Purchased Shares to be duly and regularly
transferred to the Purchaser.
(d) Releases by the Vendor. At the Closing Time, the Vendor will execute
and deliver to the Purchaser and Corporation a release in the form of
the draft release attached hereto as Schedule "Y".
5.2 COVENANTS BY THE PURCHASER. The Purchaser covenants to the Vendor that
prior to the Closing Time and, if the transaction contemplated hereby is not
completed, at all times after the Closing Time, the Purchaser will keep
confidential all information obtained by them relating to the Corporation and
the Business, except such information which
(a) prior to the date hereof was already in the possession of the
Purchaser, as demonstrated by written records,
(b) is generally available to the public, other than as a result of a
disclosure by the Purchaser, or
(c) is made available to the Purchaser on a non-confidential basis from a
source other than the Vendor or his representatives.
The Purchaser further agrees that such information will be disclosed only to
those of its employees and
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representatives of its advisors who need to know such
information for the purposes of evaluating and implementing the transaction
contemplated hereby. Notwithstanding the foregoing provisions of this paragraph,
the obligation to maintain the confidentiality of such information will not
apply to the extent that disclosure of such information is required in
connection with governmental or other applicable filings relating to the
transactions hereunder, provided that, in such case, unless the Vendor otherwise
agrees, the Purchaser will, if possible, request confidentiality in respect of
such governmental or other filings. If the transactions contemplated hereby are
not consummated for any reason, the Purchaser will return forthwith, without
retaining any copies thereof, all information and documents obtained from the
Vendor and the Corporation.
6. CONDITIONS
6.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. Notwithstanding
anything herein contained, the obligation of the Purchaser to complete the
transactions provided for herein will be subject to the fulfilment of the
following conditions at or prior to the Closing Time, and the Vendor covenants
to use his best efforts to ensure that such conditions are fulfilled.
(a) Accuracy of Representations and Warranties and Performance of
Covenants. The representations and warranties of the Vendor contained
in this agreement or in any documents delivered in order to carry out
the transactions contemplated hereby shall be true and accurate on the
date hereof and at the Closing Time with the same force and effect as
though such representations and warranties had been made as of the
Closing Time (regardless of the date as of which the information in
this agreement or in any Schedule or other document made pursuant
hereto is given). In addition, the Vendor shall have complied with all
covenants and agreements herein agreed to be performed or caused to be
performed by them at or prior to the Closing Time. In addition, the
Vendor shall have delivered to the Purchaser a certificate in the form
of Schedule "Z" attached hereto confirming that the facts with respect
to each of such representations and warranties by the Vendor are as
set out herein at the Closing Time and that the Vendor have performed
all covenants required to be performed by them in this agreement.
(b) Material Adverse Changes. During the Interim Period there will have
been no change in the Business or the Condition of the Corporation,
howsoever arising, except changes which have occurred in the ordinary
course of the Business and which, individually or in the aggregate,
have not affected and may not affect the Business or the Condition of
the Corporation in any material adverse respect. Without limiting the
generality of the foregoing, during the Interim Period:
(i) no damage to or destruction of any material part of the
property or assets of the Corporation shall have occurred,
whether or not covered by insurance;
(ii) none of the employees of the Corporation shall have resigned
or have indicated their intention to resign from employment
with the Corporation; and
(iii) none of the 5 largest customers of the Business will have
ceased, or advised the Corporation or the Purchaser of their
intention to cease, purchasing from or doing business with
the Corporation.
(c) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been
made, and no action or proceeding shall be pending or threatened
which, in the opinion of counsel to the Purchaser, is likely to result
in an order, decision or ruling,
(i) to disallow, enjoin, prohibit or impose any limitations or
conditions on the purchase and sale of the Purchased Shares
contemplated hereby or the right of the Purchaser to own the
Purchased Shares; or
(ii) to impose any limitations or conditions which may have a
[material] adverse affect on the Business or the Condition
of the Corporation.
(d) Consents. All consents required to be obtained in order to carry out
the transactions contemplated hereby in compliance with all laws and
agreements binding on the parties hereto
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shall have been obtained, including the consents referred to in
Schedules "G" and "X" attached hereto.
(e) Estoppel Certificates. Prior to the Closing Time, the Purchaser shall
have received from the landlords of the Leased Premises executed
copies of estoppel certificates in the form of the draft certificate
attached hereto as Schedule "AA".
(f) Opinion of Vendor's Counsel. At the Closing Time, the Purchaser shall
have received an opinion of legal counsel for the Vendor in the form
of the draft opinion attached hereto as Schedule "CC, which opinion
may rely on certificates of one or more senior officers of the Vendor
and the Corporation as to factual matters and may rely on opinions of
local counsel with respect to matters governed by laws other than the
laws of the Province of Alberta and the federal laws of Canada
applicable in the Province of Alberta.
6.2 WAIVER OR TERMINATION BY PURCHASER. The conditions contained in Section
6.1 hereof are inserted for the exclusive benefit of the Purchaser and may be
waived in whole or in part by the Purchaser at any time. The Vendor acknowledge
that the waiver by the Purchaser of any condition or any part of any condition
shall constitute a waiver only of such condition or such part of such condition,
as the case may be, and shall not constitute a waiver of any covenant,
agreement, representation or warranty made by the Vendor in this agreement that
corresponds or is related to such condition or such part of such condition, as
the case may be. If any of the conditions contained in Section 6.1 hereof are
not fulfilled or complied with as herein provided, the Purchaser may, at or
prior to the Closing Time at its option, rescind this agreement by notice in
writing to the Vendor and in such event the Purchaser shall be released from all
obligations hereunder and, unless the condition or conditions which have not
been fulfilled are reasonably capable of being fulfilled or caused to be
fulfilled by the Vendor or the Corporation, then the Vendor shall also be
released from all obligations under this agreement.
6.3 CONDITIONS TO THE OBLIGATIONS OF THE VENDOR. Notwithstanding anything
herein contained, the obligations of the Vendor to complete the transactions
provided for herein will be subject to the fulfilment of the following
conditions at or prior to the Closing Time, and the Purchaser will use its best
efforts to ensure that such conditions are fulfilled.
(a) Accuracy of Representations and Warranties and Performance of
Covenants. The representations and warranties of the Purchaser
contained in this agreement or in any documents delivered in order to
carry out the transactions contemplated hereby will be true and
accurate on the date hereof and at the Closing Time with the same
force and effect as though such representations and warranties had
been made as of the Closing Time (regardless of the date as of which
the information in this agreement or any such Schedule or other
document made pursuant hereto is given). In addition, the Purchaser
shall have complied with all covenants and agreements herein agreed to
be performed or caused to be performed by them at or prior to the
Closing Time. In addition, the Purchaser shall have delivered to the
Vendor a certificate in the form of Schedule "DD attached hereto
confirming that the facts with respect to each of the representations
and warranties of the Purchaser are as set out herein at the Closing
Time and that the Purchaser has performed each of the covenants
required to be performed by it hereunder.
(b) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been
made, and no action or proceeding shall be pending or threatened
which, in the opinion of counsel to the Vendor is likely to result in
an order, decision or ruling, to disallow, enjoin or prohibit the
purchase and sale of the Purchased Shares contemplated in this
agreement.
(c) Consents. All consents required to be obtained in order to carry out
the transactions contemplated hereby in compliance with all laws and
agreements binding on the parties hereto shall have been obtained,
including the consents referred to in Schedules "G" and "X" attached
hereto.
(d) Releases from Guarantees, etc. The Vendor will have received releases
from all necessary parties, in form acceptable to the Vendor's
counsel, whereby the Vendor is unconditionally released from all
guarantees, covenants and other arrangements providing financial
assistance or
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<PAGE> 25
support to or on behalf of the Corporation.
(e) Release by the Corporation. The Vendor will have received a release
from the Corporation in the form of the draft release attached hereto
as Schedule "EE" releasing the Vendor from all claims, demands,
covenants and obligations whatsoever based on any matter or thing
arising prior to the Closing Time, except for the performance of the
Vendor's obligations under this agreement.
(f) Opinion of Purchaser's Counsel. At the Closing Time, the Vendor shall
have received an opinion of the Purchaser's counsel in the form of the
draft opinion attached hereto as Schedule "FF", which opinion may rely
on certificates of senior officers of the Purchaser as to factual
matters and may rely upon opinions of local counsel with respect to
matters governed by laws other than the laws of the Province of
British Columbia and the federal laws of Canada applicable in the
Province of British Columbia.
6.4 WAIVER OR TERMINATION BY VENDOR. The conditions contained in Section
6.3 hereof are inserted for the exclusive benefit of the Vendor and may be
waived in whole or in part by the Vendor at any time. The Purchaser acknowledges
that the waiver by the Vendor of any condition or any part of any condition
shall constitute a waiver only of such condition or such part of such condition,
as the case may be, and shall not constitute a waiver of any covenant,
agreement, representation or warranty made by the Purchaser herein that
corresponds or is related to such condition or such part of such condition, as
the case may be. If any of the conditions contained in Section 6.3 hereof are
not fulfilled or complied with as herein provided, the Vendor may, at or prior
to the Closing Time at their option, rescind this agreement by notice in writing
to the Purchaser and in such event the Vendor shall each be released from all
obligations hereunder and, unless the condition or conditions which have not
been fulfilled are reasonably capable of being fulfilled or caused to be
fulfilled by the Purchaser, then the Purchaser shall also be released from all
obligations hereunder.
7. CLOSING
7.1 CLOSING ARRANGEMENTS. Subject to the terms and conditions hereof, the
transactions contemplated herein shall be closed at the Closing Time at the
offices of Venture Law Corporation at 618 - 688 West Hastings Street in person
or by telephone or at such other place or places as may be mutually agreed on by
the Vendor and the Purchaser.
7.2 DOCUMENTS TO BE DELIVERED. At or before the Closing Time, the Vendor
shall execute, or cause to be executed, and shall deliver, or cause to be
delivered, to the Purchaser all documents, instruments and things which are to
be delivered by the Vendor pursuant to the provisions of this agreement, and the
Purchaser shall execute, or cause to be executed, and shall deliver, or cause to
be delivered, to the Vendor all documents, instruments and things which the
Purchaser is to deliver or to cause to be delivered pursuant to the provisions
of this agreement.
8. INDEMNIFICATION AND SET-OFF
8.1 INDEMNITY BY THE VENDOR.
(1) The Vendor agrees to indemnify and save the Purchaser harmless from and
against any claims, demands, actions, causes of action, damage, loss,
deficiency, cost, liability and expense which may be made or brought against the
Purchaser or which the Purchaser may suffer or incur as a result of, in respect
of or arising out of:
(a) any non-performance or non-fulfilment of any covenant or agreement on
the part of the Vendor contained in this agreement or in any document
given in order to carry out the transactions contemplated hereby;
(b) any misrepresentation, inaccuracy, incorrectness or breach of any
representation or warranty made by the Vendor contained in this
Agreement or contained in any document or certificate given in order
to carry out the transactions contemplated hereby, and
(c) all costs and expenses including, without limitation, legal fees on a
solicitor and client basis,
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incidental to, arising from or in respect of the foregoing.
(2) The obligations of indemnification by the Vendor pursuant to paragraph
(1) of this section will be:
(a) subject to the limitations referred to in Section 4.1 hereof with
respect to the survival of the representations and warranties by the
Vendor;
(b) subject to the limitations referred to in Section 4.3; and
(c) subject to the provisions of Section 8.2.
8.2 PROVISIONS RELATING TO INDEMNITY CLAIMS. The following provisions will
apply to any claim by the Purchaser for indemnification by the Vendor pursuant
to Section 8.1 hereof (an "Indemnity Claim").
(a) Promptly after becoming aware of any matter that may give rise to an
Indemnity Claim, the Purchaser will provide to the Vendor written
notice of the Indemnity Claim specifying (to the extent that
information is available) the factual basis for the Indemnity Claim
and the amount of the Indemnity Claim or, if an amount is not then
determinable, an estimate of the amount of the Indemnity Claim, if an
estimate is feasible in the circumstances.
(b) If an Indemnity Claim relates to an alleged liability of the
Corporation to any other person (a "Third Party Liability"), including
without limitation any governmental or regulatory body or any taxing
authority, which is of a nature such that the Corporation is required
by applicable law to make a payment to a third party before the
relevant procedure for challenging the existence or quantum of the
alleged liability can be implemented or completed, then the Purchaser
may, notwithstanding the provisions of paragraphs (c) and (d) of this
section, make such payment or cause the Corporation to make such
payment and forthwith demand reimbursement for such payment from the
Vendor in accordance with this agreement; provided that, if the
alleged Third Party Liability as finally determined on completion of
settlement negotiations or related legal proceedings is less than the
amount which is paid by the Vendor in respect of the related Indemnity
Claim, then the Corporation or the Purchaser, as the case may be,
shall forthwith following the final determination pay to the Vendor
the amount by which the amount of the Third Party Liability as finally
determined is less than the amount which is so paid by the Vendor.
(c) The Purchaser shall not negotiate, settle, compromise or pay (except
in the case of payment of a judgment) any Third Party Liability as to
which it proposes to assert an Indemnity Claim, except with the prior
consent of the Vendor (which consent shall not be unreasonably
withheld or delayed), unless there is a reasonable possibility that
such Third Party Liability may materially and adversely affect the
Business, the Condition of the Corporation or the Purchaser, in which
case the Purchaser shall have the right, after notifying the Vendor to
negotiate, settle, compromise or pay such Third Party Liability
without prejudice to its rights of indemnification hereunder.
(d) With respect to any Third Party Liability, provided the Vendor first
admit the Purchaser's right to indemnification for the amount of such
Third Party Liability which may at any time be determined or settled,
then, in any legal, administrative or other proceedings in connection
with the matters forming the basis of the Third Party Liability, the
following procedures will apply:
(i) except as contemplated by subparagraph (iii) of this
paragraph, the Vendor will have the right to assume carriage
of the compromise or settlement of the Third Party Liability
and the conduct of any related legal, administrative or
other proceedings, but the Purchaser and the Corporation
shall have the right and shall be given the opportunity to
participate in the defence of the Third Party Liability, to
consult with the Vendor in the settlement of the Third Party
Liability and the conduct of related legal, administrative
and other proceedings (including consultation with counsel)
and to disagree on reasonable grounds with the selection and
retention of counsel, in which case counsel satisfactory to
the Vendor and the Purchaser shall be retained by the
Vendor;
26
<PAGE> 27
(ii) the Vendor will co-operate with the Purchaser in relation to
the Third Party Liability, will keep it fully advised with
respect thereto, will provide it with copies of all relevant
documentation as it becomes available, will provide it with
access to all records and files relating to the defence of
the Third Party Liability and will meet with representatives
of the Purchaser at all reasonable times to discuss the
Third Party Liability; and
(iii) notwithstanding subparagraphs (i) and (ii) of this
paragraph, the Vendor will not settle the Third Party
Liability or conduct any legal, administrative or other
proceedings in any manner which could, in the reasonable
opinion of the Purchaser, have a material adverse affect on
the Business, the Condition of the Corporation or the
Purchaser, except with the prior written consent of the
Purchaser.
(e) If, with respect to any Third Party Liability, the Vendor do not admit
the Purchaser's right to indemnification or decline to assume carriage
of the settlement or of any legal, administrative or other proceedings
relating to the Third Party Liability, then the following provisions
will apply:
(i) the Purchaser, at its discretion, may assume carriage of the
settlement or of any legal, administrative or other
proceedings relating to the Third Party Liability and may
defend or settle the Third Party Liability on such terms as
the Purchaser, acting in good faith, considers advisable;
and
(ii) any cost, loss, damage or expense incurred or suffered by
the Purchaser and the Corporation in the settlement or
defence of such Third Party Liability or the conduct of any
legal, administrative or other proceedings shall be added to
the amount of the Indemnity Claim.
8.3 RIGHT OF SET-OFF. Each of the Purchaser and the Corporation shall have
the right to satisfy any amount from time to time owing by each of them to the
Vendor by way of set-off against any amount from time to time owing by the
Vendor the Purchaser or the Corporation, including any amount owing to the
Purchaser pursuant to the Vendor's indemnification pursuant to Section 8.1
hereof.
9. GENERAL PROVISIONS
9.1 FURTHER ASSURANCES. Each of the Vendor and the Purchaser hereby
covenants and agrees that at any time and from time to time after the Closing
Date they will, on the request of the other, do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, assignments, transfers, conveyances and assurances as may
be required for the better carrying out and performance of all the terms of this
agreement.
9.2 NOTICES.
(1) Any notice, designation, communication, request, demand or other
document, required or permitted to be given or sent or delivered hereunder to
any party hereto shall be in writing and shall be sufficiently given or sent or
delivered if it is:
(a) delivered personally to an officer or director of such party,
(b) sent to the party entitled to receive it by registered mail, postage
prepaid, mailed in North America, or
(c) sent by fax machine.
(2) Notices shall be sent to the following addresses or fax numbers:
27
<PAGE> 28
(a) in the case of the Vendors,
Beaumont Church
Barristers & Solicitors
2200 Telus Tower
411 - 1st Street
Calgary, Alberta T2G 5E7 Fax: 403-264-0478
Attention: Riaz A. Mamdani
(b) in the case of the Purchaser,
Venture Law Corporation
618 - 688 West Hastings Street
Vancouver, British Columbia
V6B 1P1 Fax: 604-257-9178
Attention: Alixe B. Cormick
(c) in the case of the Corporation,
FutureLink Distribution Corp.
No. 550, 603 - 7th Avenue SW
Calgary, Alberta T2P 2T5 Fax: 403-543-5510
Attention: Cameron Chell
or to such other address or fax number as the party entitled to or receiving
such notice, designation, communication, request, demand or other document
shall, by a notice given in accordance with this section, have communicated to
the party giving or sending or delivering such notice, designation,
communication, request, demand or other document.
(3) Any notice, designation, communication, request, demand or other
document given or sent or delivered shall:
(a) if delivered, be deemed to have been given, sent, delivered and
received on the date of delivery;
(b) if sent by mail, be deemed to have been given, sent, delivered and
received (but not actually received) on the fourth Business Day
following the date of mailing, unless at any time between the date of
mailing and the fourth Business Day thereafter there is a
discontinuance or interruption of regular postal service, whether due
to strike or lockout or work slowdown, affecting postal service at the
point of dispatch or delivery or any intermediate point, in which case
the same shall be deemed to have been given, sent, delivered and
received in the ordinary course of the mails, allowing for such
discontinuance or interruption of regular postal service; and
(c) if sent by fax machine, be deemed to have been given, sent, delivered
and received on the date the sender receives the fax machine
confirmation receipt confirming receipt by the recipient.
9.3 COUNTERPARTS. This agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts together shall constitute but one and the same instrument.
9.4 EXPENSES OF PARTIES. Each of the parties hereto shall bear all expenses
incurred by it in connection with this agreement including, without limitation,
the charges of their respective counsel, accountants, financial advisors and
finders.
9.5 BROKERAGE AND FINDER'S FEES. The Vendor agrees to indemnify the
Purchaser and the Corporation and
28
<PAGE> 29
hold each of them harmless in respect of any claim for brokerage or other
commissions relative to this agreement or the transactions contemplated hereby
which is caused by actions of the Vendor. The Purchaser will indemnify the
Vendor and hold him harmless in respect of any claim for brokerage or other
commissions relative to this agreement or to the transactions contemplated
hereby which is caused by actions of the Purchaser or any of its Affiliates.
9.6 ANNOUNCEMENTS. No announcement with respect to this agreement will be
made by any party hereto without the prior approval of the other parties. The
foregoing will not apply to any announcement by any party required in order to
comply with laws pertaining to timely disclosure, provided that such party
consults with the other parties before making any such announcement.
9.7 ASSIGNMENT. The rights of the Vendor under this agreement must not be
assignable without the written consent of the Purchaser. The rights of the
Purchaser under this agreement may not be assigned without the written consent
of the Vendor.
9.8 SUCCESSORS AND ASSIGNS. This agreement shall be binding on and enure to
the benefit of the parties and their respective successors and permitted
assigns. Nothing in this agreement, express or implied, is intended to confer on
any person, other than the parties and their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
agreement.
9.9 ENTIRE AGREEMENT. This agreement and the Schedules attached constitute
the entire agreement between the parties hereto and supersede all prior
agreements, representations, warranties, statements, promises, information,
arrangements and understandings, whether oral or written, express or implied,
with respect to the subject matter hereof. None of the parties hereto shall be
bound or charged with any oral or written agreements, representations,
warranties, statements, promises, information, arrangements or understandings
not specifically set forth in this agreement or in the Schedules, documents and
instruments to be delivered on or before the Closing Date pursuant to this
agreement. The parties hereto further acknowledge and agree that, in entering
into this agreement and in delivering the Schedules, documents and instruments
to be delivered on or before the Closing Date, they have not in any way relied,
and will not in any way rely, on any oral or written agreements,
representations, warranties, statements, promises, information, arrangements or
understandings, express or implied, not specifically set forth in this agreement
or in such Schedules, documents or instruments.
9.10 WAIVER. Any party hereto which is entitled to the benefits of this
agreement may, and has the right to, waive any term or condition hereof at any
time on or prior to the Closing Time; provided, however, that such waiver shall
be evidenced by written instrument duly executed on behalf of such party.
9.11 AMENDMENTS. No modification or amendment to this agreement may be made
unless agreed to by the parties hereto in writing.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement
under seal as of the day and year first above written.
CORE VENTURES, INC. FUTURELINK DISTRIBUTION CORP.
/s/ FRANK DEMITRO /s/ CAMERON CHELL
- ------------------------------------ ------------------------------------
By: Frank Demitro, President By Cameron Chell, President &
Chairman
/s/ CAMERON CHELL
- ------------------------------------ ------------------------------------
Witness Cameron Chell
/s/ LINDA CARLING
- ------------------------------------ ------------------------------------
Witness Linda Carling
29
<PAGE> 1
FUTURELINK DISTRIBUTION CORP.
STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purpose............................................................... 1
2. Incentive and Non-Qualified Stock Options............................. 1
3. Definitions........................................................... 1
3.1 Board........................................................ 1
3.2 Code......................................................... 1
3.3 Common Stock................................................. 1
3.4 Company...................................................... 1
3.5 Disabled or Disability....................................... 1
3.6 Fair Market Value............................................ 1
3.7 Incentive Stock Option....................................... 2
3.8 Non-Qualified Stock Option................................... 2
3.9 Optionee..................................................... 2
3.10 Plan......................................................... 2
3.11 Plan Administrator........................................... 2
3.12 Stock Option or Option....................................... 2
4. Administration........................................................ 2
4.1 Administration by Board...................................... 2
4.2 Administration by Committee.................................. 3
5. Eligibility........................................................... 3
6. Shares Subject to Options............................................. 3
7. Terms and Conditions of Options....................................... 4
7.1 Number of Shares Subject to Option........................... 4
7.2 Option Price................................................. 4
7.3 Notice and Payment........................................... 4
7.4 Term of Option............................................... 5
7.5 Exercise of Option........................................... 5
7.6 No Transfer of Option........................................ 6
7.7 Limit on Incentive Stock Options............................. 6
7.8 Restriction on Issuance of Shares............................ 6
7.9 Investment Representation.................................... 6
7.10 Rights as a Shareholder or Employee.......................... 7
7.11 No Fractional Shares......................................... 7
7.12 Exercisability in the Event of Death......................... 7
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.13 Recapitalization or Reorganization of Company................ 7
7.14 Modification, Extension, and Renewal of Options.............. 8
7.15 Other Provisions............................................. 8
8. Termination or Amendment of the Plan.................................. 8
9. Indemnification....................................................... 8
10. Effective Date and Term of Plan....................................... 9
</TABLE>
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<PAGE> 4
FUTURELINK DISTRIBUTION CORP.
STOCK OPTION PLAN
1. PURPOSE. The purpose of this FutureLink Distribution Corp.
Stock Option Plan ("Plan") is to further the growth and development of
FutureLink Distribution Corp. (the "Company") by providing, through ownership of
stock of the Company, an incentive to officers, other key employees and
directors who are in a position to contribute materially to the prosperity of
the Company, to increase such persons' interests in the Company's welfare, to
encourage them to continue their services to the Company or its subsidiaries,
and to attract individuals of outstanding ability to enter the employment of the
Company or its subsidiaries, to remain or become directors of the Company and to
provide valuable services to the Company or its subsidiaries.
2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of Stock
Options (referred to herein as "Options" without distinction between such two
types) may be granted under the Plan: Options intended to qualify as Incentive
Stock Options under Section 422 of the Code and Non-Qualified Stock Options not
specifically authorized or qualified for favorable income tax treatment by the
Code.
3. DEFINITIONS. The following definitions are applicable to the
Plan:
3.1 BOARD. The Board of Directors of the Company.
3.2 CODE. The Internal Revenue Code of 1986, as amended
from time to time.
3.3 COMMON STOCK. The shares of the $.01 par value per
share common stock of the Company.
3.4 COMPANY. FutureLink Distribution Corp., a Colorado
corporation.
3.5 DISABLED OR DISABILITY. For the purposes of Section
7.4, a disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is Disabled or has a Disability is
determined under procedures established by the Plan Administrator for purposes
of the Plan.
3.6 FAIR MARKET VALUE. For purposes of the Plan, the "fair
market value" per share of Common Stock of the Company at any date shall be (a)
if the Common Stock is listed on an established stock exchange or exchanges or
the NASDAQ National Market System, the closing price per share on the last
trading day immediately preceding such date on the principal exchange on which
it is traded or as reported by NASDAQ, or (b) if the Common Stock is not then
listed on an exchange or the NASDAQ National Market System,
<PAGE> 5
the closing price per share on the last trading day immediately preceding such
date reported by NASDAQ, or if sales are not reported by NASDAQ, the average of
the closing bid and asked prices per share for the Common Stock in the
over-the-counter market as quoted on NASDAQ on the last trading day immediately
preceding such date, or (c) if the Common Stock is not then listed on an
exchange, the NASDAQ National Market System or quoted on NASDAQ, an amount
determined in good faith by the Plan Administrator.
3.7 INCENTIVE STOCK OPTION. Any Stock Option intended to
be and designated as an "incentive stock option" within the meaning of Section
422 of the Code.
3.8 NON-QUALIFIED STOCK OPTION. Any Stock Option that is
not an Incentive Stock Option.
3.9 OPTIONEE. The recipient of a Stock Option.
3.10 PLAN. The FutureLink Distribution Corp. Stock Option
Plan, as amended from time to time.
3.11 PLAN ADMINISTRATOR. The Board or the Compensation
Committee designated pursuant to Section 4.2 hereof to administer, construe and
interpret the terms of the Plan.
3.12 STOCK OPTION OR OPTION. Any option to purchase shares
of Common Stock granted pursuant to Section 7 hereof.
4. ADMINISTRATION.
4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2
hereof, the Plan Administrator shall be the Board of Directors of the Company
(the "Board") during such periods of time as all members of the Board are
"outside directors" as defined in Treas. Regs. Section 1.162-27(e)(3) ("outside
directors"). Anything to the contrary notwithstanding, the requirement that all
members of the Board be outside directors shall not apply for any period of time
during which the Company's Common Stock is not registered pursuant to Section 12
of the Securities Exchange Act of 1934, as amended. Subject to the provisions of
the Plan, the Plan Administrator shall have authority to construe and interpret
the Plan, to promulgate, amend, and rescind rules and regulations relating to
its administration, from time to time to select from among the eligible
employees and directors (as determined pursuant to Section 5) of the Company and
its subsidiaries those employees and directors to whom Stock Options will be
granted, to determine the timing and manner of the grant of the Options, to
determine the exercise price, the number of shares covered by and all of the
terms of the Stock Options, to determine the duration and purpose of leaves of
absence which may be granted to Stock Option holders without constituting
termination of their employment for purposes of the Plan, and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Plan Administrator of any provision of
the Plan, or of any agreement issued and executed under the Plan, shall be final
and binding upon all
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<PAGE> 6
parties. No member of the Board shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.
4.2 ADMINISTRATION BY COMMITTEE. The Board may, in its
sole discretion, delegate any or all of its duties as Plan Administrator and,
subject to the provisions of Section 4.1 of the Plan, at any time the Board
includes any person who is not an outside director, the Board shall delegate all
of its duties as Plan Administrator during such period of time to a compensation
committee (the "Committee") of not fewer than two (2) members of the Board, all
of the members of which Committee shall be persons who, in the opinion of
counsel to the Company, are outside directors and "non-employee directors"
within the meaning of Rule 16b-3(b)(3)(i) promulgated by the Securities and
Exchange Commission, to be appointed by and serve at the pleasure of the Board.
Anything to the contrary notwithstanding, the requirement that all members of
the Committee be non-employee directors and outside directors shall not apply
for any period of time during which the Company's Common Stock is not registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. Those
provisions of the Plan that make express reference to Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, shall apply only to reporting
persons. From time to time, the Board may increase or decrease (to not less than
two members) the size of the Committee, and add additional members to, or remove
members from, the Committee. The Committee shall act pursuant to a majority
vote, or the written consent of a majority of its members, and minutes shall be
kept of all of its meetings and copies thereof shall be provided to the Board.
Subject to the provisions of the Plan and the directions of the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may deem advisable. No member of the Committee shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
5. ELIGIBILITY. Any employee or director (including any officer
or director who is an employee) of the Company or any of its subsidiaries shall
be eligible to receive Options under the Plan; provided, however, that no person
who owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any of its parent or subsidiary
corporations shall be eligible to receive an Incentive Stock Option under the
Plan unless at the time such Incentive Stock Option is granted the Option price
(determined in the manner provided in Section 7.2 hereof) is at least 110% of
the Fair Market Value of the shares subject to the Option and such Option by its
terms is not exercisable after the expiration of five years from the date such
Option is granted. An Optionee may receive more than one Option under the Plan.
However, non-employee directors are not eligible to receive an Incentive Stock
Option under the Plan.
6. SHARES SUBJECT TO OPTIONS. The stock available for grant of
Options under the Plan shall be shares of the Company's authorized but unissued,
or reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Options granted under the Plan, as amended, shall not
exceed 3,400,000 shares of Common Stock (subject to adjustment as provided in
Section 7.13 hereof), including shares previously issued under the Plan. The
maximum number of shares with respect to which options may be
-3-
<PAGE> 7
granted to any employee in any one calendar year shall be 500,000 shares. In the
event that any outstanding Option under the Plan for any reason expires, or is
terminated, the shares of Common Stock allocable to the unexercised portion of
the Option shall again be available for Options under the Plan as if no Option
had been granted with respect to such shares.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the
Plan shall be evidenced by agreements (which need not be identical) in such form
and containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:
7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option
agreement shall specify the number of shares subject to the Option.
7.2 OPTION PRICE. The purchase price for the shares
subject to any Option shall be determined by the Plan Administrator at the time
of grant, but shall not be less than par value per share. Anything to the
contrary notwithstanding, the purchase price for the shares subject to any
Incentive Stock Option shall not be less than 100% of the Fair Market Value of
the shares of Common Stock of the Company on the date the Stock Option is
granted. In the case of an Incentive Stock Option granted to an employee who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its parent or subsidiary corporations,
the Option price shall not be less than 110% of the fair market value per share
of the Common Stock of the Company on the date the Option is granted.
7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock
Option may be exercised only by:
(a) delivery of a written notice to the Company,
prior to the time when such Stock Option becomes unexercisable under Section 7.4
hereof, stating the number of shares being purchased and complying with all
applicable rules established by the Plan Administrator;
(b) payment in full of the exercise price of such
Option by, as applicable, (i) cash or check for an amount equal to the aggregate
Option exercise price for the number of shares being purchased, (ii) in the
discretion of the Plan Administrator, upon such terms as the Plan Administrator
shall approve, a copy of instructions to a broker directing such broker to sell
the Common Stock for which such Option is exercised, and to remit to the Company
the aggregate exercise price of such Options (a "cashless exercise"), or (iii)
in the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, the Optionee may pay all or a portion of the
purchase price for the number of shares being purchased by tendering shares of
the Company's Common Stock owned by the Optionee, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
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<PAGE> 8
to the aggregate purchase price of the shares with respect to which such Stock
Option or portion is thereby exercised (a "stock-for-stock exercise");
(c) payment of the amount of tax required to be
withheld (if any) by the Company or any parent or subsidiary corporation as a
result of the exercise of a Stock Option. At the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve, the
Optionee may pay all or a portion of the tax withholding by (i) cash or check
payable to the Company, (ii) cashless exercise, (iii) stock-for-stock exercise,
or (iv) a combination of one or more of the foregoing payment methods; and
(d) delivery of a written notice to the Company
requesting that the Company direct the transfer agent to issue to the Optionee
(or to his designee) a certificate for the number of shares of Common Stock for
which the Option was exercised or, in the case of a cashless exercise, for any
shares that were not sold in the cashless exercise.
Notwithstanding the foregoing, the Company may extend and maintain, or arrange
for the extension and maintenance of, credit to any Optionee to finance the
Optionee's purchase of shares pursuant to exercise of any Stock Option, on such
terms as may be approved by the Plan Administrator, subject to applicable
regulations of the Federal Reserve Board and any other laws or regulations in
effect at the time such credit is extended.
7.4 TERM OF OPTION. No Option shall be exercisable after
the expiration of the earliest of (a) ten years after the date the Option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates if such termination is for any reason
other than Disability or death, (c) one year after the date the Optionee's
employment with the Company and its subsidiaries terminates if such termination
is a result of death or Disability; provided, however, that the Option agreement
for any Option may provide for shorter periods in each of the foregoing
instances. In the case of an Incentive Stock Option granted to an employee who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its parent or subsidiary corporations,
the term set forth in (a), above, shall not be more than five years after the
date the Option is granted.
7.5 EXERCISE OF OPTION. No Option shall be exercisable
during the lifetime of an Optionee by any person other than the Optionee.
Subject to the foregoing, the Plan Administrator shall have the power to set the
time or times within which each Option shall be exercisable and to accelerate
the time or times of exercise. Unless otherwise provided by the Plan
Administrator, each Option granted under the Plan shall become exercisable on a
cumulative basis as to one-third (1/3) of the total number of shares covered
thereby at any time after one year from the date the Option is granted and an
additional one-third (1/3) of such total number of shares at any time after the
end of each consecutive one-year period thereafter until the Option has become
exercisable as to all of such total number of shares. To the extent that an
Optionee has the right to exercise an Option and purchase shares pursuant
thereto, the Option may be exercised from time to time by written notice to the
Company,
-5-
<PAGE> 9
stating the number of shares being purchased and accompanied by payment in full
of the exercise price for such shares.
7.6 NO TRANSFER OF OPTION. No Option shall be transferable
by an Optionee otherwise than by will or the laws of descent and distribution.
7.7 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair
market value (determined at the time the Option is granted) of the stock with
respect to which Incentive Stock Options granted after 1986 are exercisable for
the first time by an Optionee during any calendar year (under all Incentive
Stock Option plans of the Company and its subsidiaries) shall not exceed
$100,000. To the extent that the aggregate Fair Market Value (determined at the
time of the Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an Optionee during
any calendar year (under all Incentive Stock Option plans of the Company and any
parent or subsidiary corporations) exceeds $100,000, such Stock Options shall be
treated as NonQualified Stock Options. The determination of which Stock Options
shall be treated as NonQualified Stock Options shall be made by taking Stock
Options into account in the order in which they were granted.
7.8 RESTRICTION ON ISSUANCE OF SHARES. The issuance of
Options and shares shall be subject to compliance with all of the applicable
requirements of law with respect to the issuance and sale of securities,
including, without limitation, any required qualification under the securities
laws of the United States, Canada, any state of the United States, or any
province of Canada. If an Optionee acquires shares of Common Stock pursuant to
the exercise of an Option at a time when the shares are not registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended, the Plan
Administrator, in its sole discretion, may require as a condition of issuance of
shares covered by the Option that the shares of Common Stock shall be subject to
restrictions on transfer. The Company may place a legend on the certificates
evidencing the shares, reflecting the fact that they are subject to restrictions
on transfer pursuant to the terms of this Section. In addition, the Optionee may
be required to execute a shareholders' agreement in favor of the Company, its
designee and/or other shareholders with respect to all or any of the shares so
acquired. In such event, the terms of such agreement shall apply to such shares.
7.9 INVESTMENT REPRESENTATION. Each Option shall contain
and any Optionee may be required, as a condition of the grant of the Option and
the issuance of shares covered by his or her Option, to represent that the
Option and the shares to be acquired pursuant to exercise of the Option will be
acquired for investment and without a view to distribution thereof; and in such
case, the Company may place a legend on the certificate evidencing the shares
reflecting the fact that they were acquired for investment and cannot be sold or
transferred unless registered under the Securities Act of 1933, as amended, or
unless counsel for the Company is satisfied that the circumstances of the
proposed transfer do not require such registration.
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<PAGE> 10
7.10 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An Optionee or
transferee of an Option shall have no right as a shareholder of the Company with
respect to any shares covered by any Option until the date of the issuance of a
share certificate for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether cash, securities, or other property) or
distributions or other rights for which the record date is prior to the date
such share certificate is issued, except as provided in Section 7.13. Nothing in
the Plan or in any Option agreement shall confer upon any employee any right to
continue in the employ of the Company or any of its subsidiaries or interfere in
any way with any right of the Company or any subsidiary to terminate the
Optionee's employment at any time.
7.11 NO FRACTIONAL SHARES. In no event shall the Company
be required to issue fractional shares upon the exercise of an Option.
7.12 EXERCISABILITY IN THE EVENT OF DEATH. In the event of
the death of the Optionee, any Option or unexercised portion thereof granted to
the Optionee, to the extent exercisable by him or her on the date of death, may
be exercised by the Optionee's personal representatives, heirs, or legatees
subject to the provisions of Section 7.4 hereof.
7.13 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except
as otherwise provided herein, appropriate and proportionate adjustments shall be
made in the number and class of shares subject to the Plan, to the Option rights
granted under the Plan, including the any formula grants or automatic grant
authorizations, and the exercise price of such Option rights, in the event that
the number of shares of Common Stock of the Company are increased or decreased
as a result of a stock dividend (but only on Common Stock), stock split, reverse
stock split, recapitalization, reorganization, merger, consolidation,
separation, or like change in the corporate or capital structure of the Company.
In the event there shall be any other change in the number or kind of the
outstanding shares of Common Stock of the Company, or any stock or other
securities into which such common stock shall have been changed, or for which it
shall have been exchanged, whether by reason of a complete liquidation of the
Company or a merger, reorganization, or consolidation of the Company with any
other corporation in which the Company is not the surviving corporation or the
Company becomes a wholly-owned subsidiary of another corporation, then if the
Plan Administrator shall, in its sole discretion, determine that such change
equitably requires an adjustment to shares of Common Stock currently subject to
Options under the Plan, or to prices or terms of outstanding Options, such
adjustment shall be made in accordance with such determination.
To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by the Plan
Administrator, the determination of which in that respect shall be final,
binding, and conclusive. No right to purchase fractional shares shall result
from any adjustment of Options pursuant to this Section. In case of any such
adjustment, the shares subject to the option shall be rounded down to the
nearest whole share. Notice of any adjustment shall be given by the Company to
each Optionee whose Options shall have been so adjusted and such adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the Plan.
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<PAGE> 11
In the event of a complete liquidation of the Company or a
merger, reorganization, or consolidation of the Company with any other
corporation in which the Company is not the surviving corporation or the Company
becomes a wholly-owned subsidiary of another corporation, any unexercised
Options theretofore granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization, or consolidation
elects to assume the Options under the Plan or to issue substitute Options in
place thereof; provided, however, that, notwithstanding the foregoing, if such
Options would be cancelled in accordance with the foregoing, the Optionee shall
have the right, exercisable during a ten-day period ending on the fifth day
prior to such liquidation, merger, or consolidation, to exercise such Option in
whole or in part without regard to any installment exercise provisions in the
Option agreement.
7.14 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of the Plan, the
Plan Administrator may modify, extend, or renew outstanding Options granted
under the Plan, and accept the surrender of outstanding Options (to the extent
not theretofore exercised). The Plan Administrator shall not, however, modify
any outstanding Incentive Stock Option in any manner which would cause the
Option not to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code. Notwithstanding the foregoing, no modification of an Option
shall, without the consent of the Optionee, alter or impair any rights of the
Optionee under the Option. However, a termination of the Option in which the
Optionee receives a cash payment equal to the difference between the Fair Market
Value and the exercise price for all shares subject to exercise under any
outstanding Option shall not alter or impair any rights of the Optionee.
7.15 OTHER PROVISIONS. Each Option may contain such other
terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Plan Administrator.
8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any
time terminate or amend the Plan; provided that, without approval of the holders
of a majority of the shares of Common Stock of the Company represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum) or by the
written consent of a majority of the outstanding shares of Common Stock, there
shall be, except by operation of the provisions of Section 7.13, no increase in
the total number of shares covered by the Plan, no change in the class of
persons eligible to receive Options granted under the Plan, and no extension of
the term of the Plan beyond ten (10) years after the earlier of the date the
Plan is adopted or the date the Plan is approved by the Company's shareholders;
and provided further that, without the consent of the Optionee or as provided by
Section 7.14 hereof, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof.
9. INDEMNIFICATION. To the extent permitted by law, the
Certificate of Incorporation of the Company, the Bylaws of the Company and any
indemnity agreements between the Company and its directors or employees, the
Company shall indemnify each member of the Board and of the Plan Administrator,
and any other employee of the Company
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<PAGE> 12
with duties under the Plan, against expenses (including any amount paid in
settlement) reasonably incurred by him in connection with any claims against him
by reason of his conduct in the performance of his duties under the Plan.
10. EFFECTIVE DATE AND TERM OF PLAN. This Plan shall become
effective (the "Effective Date") on June 29, 1998. No options granted under the
Plan will be effective unless the Plan is approved by shareholders of the
Company within 12 months of the date of adoption. Unless sooner terminated by
the Board in its sole discretion, the Plan will expire on June 28, 2008.
Dated: June 29, 1998
FUTURELINK DISTRIBUTION CORP.
By:____________________________________________
Cameron Chell, President and Chief Executive
Officer
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<PAGE> 13
[INSERT]
TERMS OF CLASS K EXCHANGEABLE SHARES
Pursuant to the Share Purchase Agreement dated August 4, 1998,
Riverview Management Company had issued Class K non-voting redeemable
exchangeable shares as follows:
Donald A. Bialik - $1,418,046
Olivia Bialik - $2,881,916
A subsidiary of FutureLink Distribution Corp. will have the right
to exercise a call pursuant to which one share of FutureLink Distribution Corp.,
would be exchangeable for each share of Class K non-voting redeemable preferred
of Riverview Management Corporation.
Pursuant to a "Support Agreement" among the parties FutureLink
USA is restricted, prior to conversion of the Class K exchangeable shares from
taking various action with respect to its common shares. The restrictions
imposed under the Support Agreement would require shareholder consent of
majority of the shareholders of FutureLink Distribution Corp.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF JEFFER, MANGELS, BUTLER & MARMARO LLP
We consent to the reference to our firm under the caption "Legal Opinion" and to
the inclusion of our opinion as an Exhibit to the Form SB-2 Registration
Statement of FutureLink Distribution Corp. as filed with the Securities and
Exchange Commission on August 24, 1998.
/s/ JEFFER, MANGELS, BUTLER & MARMARO LLP
<PAGE> 1
EXHIBIT 23.2.1
[ERNST & YOUNG LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 20, 1998 on the financial statements included in
the Prospectus filed as part of the registration statement on Form SB-2 of
FutureLink Distribution Corp., a Colorado corporation.
/s/ ERNST & YOUNG
Chartered Accountants
Calgary, Canada
August 21, 1998
<PAGE> 1
EXHIBIT 23.2.2
[HALPIN - ANTONY - OWEN - MAYER LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 26, 1998 on the financial statements included
in the Prospectus filed as part of the registration statement of Form SB-2 of
FutureLink Distribution Corp., a Colorado corporation.
/s/ HALPIN ANTONY OWEN MAYER
Chartered Accountants
Calgary, Canada
August 21, 1998
<PAGE> 1
EXHIBIT 23.2.3
[BUCHANAN, BARRY & CO. LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated August 13, 1998 on the financial statements listed on
Exhibit A hereto which are to be included in the registration statement on
Form SB-2 of FutureLink Distribution Corp., a Colorado corporation.
/s/ BUCHANAN, BARRY & CO.
Chartered Accountants
Calgary, Canada
August 21, 1998
