SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
May 27, 1999
Date of Report
(Date of Earliest Event Reported)
THINWEB.COM CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-25419 52-2102438
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
thinWEB.com Corporation
Suite 101, Phase 3
6 Antares Drive
Ottawa, Ontario K2E 8A9
(Address of principal executive offices)
613/225-8446
Registrant's telephone number
WARWICK ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to a Share Exchange and Share Purchase Agreement
and related documents (the "Exchange Agreement") dated April 22,
1999, among Warwick Acquisition Corporation, a Delaware corporation
(the "Registrant" or the "Company"), its wholly-owned subsidiary
Thinweb.com Inc., a Nova Scotia corporation (the "Purchaser"),
ThinWeb Software Incorporated, a Nova Scotia corporation
("ThinWeb"), and the shareholders of ThinWeb (the "ThinWeb
Shareholders"), the Purchaser purchased all the outstanding shares
of common stock of ThinWeb (16,916,344 shares) for aggregate
consideration of (i) the Purchaser issuing 16,916,344 Class A
exchangeable non-voting participating common shares of common stock
of the Purchaser (the "Class A Shares") (ii) the Registrant issuing
to StockTrans, Inc., a Pennsylvania corporation, as trustee for the
ThinWeb Shareholders (the "Trustee") 16,916,344 shares of common
stock (the "Registrant Shares") to be held in trust under the terms
of an Exchange and Voting Agreement dated April 22, 1999 (the "Trust
Agreement"), among the Registrant, the Trustee, the Purchaser and
the ThinWeb Shareholders, and (iii) the issuance by the Registrant
of 1,500,000 shares of its preferred stock to 583317 B.C. Ltd., a
British Columbia corporation, at $.0001 per share. (The foregoing
transactions are referred to collectively hereafter as the
"Transactions").
The Exchange Agreement was adopted by the unanimous consent of
the Board of Directors of the Registrant and
approved by the unanimous consent of the shareholders of the
Registrant on May 27, 1999. The Exchange Agreement was adopted by
the unanimous consent of the Board of Directors of ThinWeb on April
22, 1999 and approved by the unanimous consent of the ThinWeb
Shareholders on April 22, 1999.
Prior to the Transactions, the Registrant had 5,000,000 shares
of common stock outstanding. Pursuant to the Exchange Agreement,
the Registrant redeemed and retired 4,850,000 shares of its
outstanding common stock and issued 16,916,344 shares of its common
stock to be held by the Trustee for exchange by the holders of the
Class A Shares. After effect of the Transactions, the Registrant
had a total of 17,066,344 shares of its common stock outstanding.
Each beneficial shareholder of the Class A Shares has through
the Trustee voting rights in the Registrant equal to the number of Class A
Shares held for the benefit of such shareholder. As a result, the ThinWeb
Shareholders hold voting rights in the Registrant aggregating over
99.1% of the outstanding votes entitled to vote on matters brought
before the shareholders. The sole source of consideration used by
the ThinWeb Shareholders to acquire their respective interest in the
Registrant was the exchange of their shares for Class A Shares of
the Purchaser. The Exchange Agreement was structured to provide the
ThinWeb Shareholders with a capital gain deferral under applicable
Canadian tax laws, rules and regulations.
On the effective date of the Transactions, the officer and
director of Warwick Acquisition Corporation resigned and new
officers and directors of the Registrant were appointed. See
"Management" below.
Effective as of the date of the Transactions, the Registrant
changed its name to "thinWEB.com Corporation".
Warwick Acquisition Corporation was formed to provide a method
for a foreign or domestic private company to become a reporting
company whose securities would be qualified for trading in the
United States secondary market. Warwick Acquisition Corporation had
no operations, revenues, material assets or liabilities.
Copies of the Exchange Agreement and related agreements
including the Trust Agreement are filed as exhibits to this Form 8-K
and are incorporated in their entirety herein. The description of
the exhibits contained in this report is modified by such reference.
(b) The following table contains information regarding the
shareholdings of the Registrant's current directors and executive
officers and those persons or entities who have the right to vote or
direct the vote or beneficially own more than 5% of the Registrant's
common stock or rights to acquire common stock:
Amount of Common Percent of
Stock Beneficially Common Stock
Owned or Right to Beneficially Owned
Name Direct vote (1)(2) or Right to
Direct vote
James S. Anthony, Chairman 0 0
158 Amelia Street
Toronto, Canada M4X 1E7
Gary T. Hannah, President and 1,181,344 6.9%
Chief Executive Officer, Director
1250 Squire Drive
Manotick, Ontario, Canada K4M 1B8
C. James Enman, Vice President, (3) 2,666,666 15.6%
Secretary
1883 Seldon Street
Halifax, Nova Scotia, Canada B3H 3X3
Bryan MacLean, Vice President, Director (4) 2,666,667 15.6%
5444 Victoria Road, #8
Halifax, Nova Scotia, Canada B3H 1M5
Cory Reid, Vice President (5) 2,666,667 15.6%
1360 Lower Water Street, Suite 207
Halifax, Nova Scotia, Canada B3S 3N2
All directors and
executive officers as
a group (5 persons) 9,181,344 53.8%
3024704 Nova Scotia Limited (6) 891,000 5.2%
1550 Bedford Highway
Suite 210
Bedford, Nova Scotia
(1) Based upon 17,066,344 outstanding shares of common stock.
(2) Includes rights to acquire common stock through exercise
of exchangeable Class A Shares.
(3) James Enman is the trustee and beneficiary of the Enman
Family Investment Trust and is deemed to be the
beneficial owner of the 2,666,666 Class A Shares held by it.
(4) Bryan MacLean is the trustee and beneficiary of the B.
MacLean Family Trust and is deemed to be the beneficial
owner of the 2,666,667 Class A Shares held by it.
(5) Cory Reid is the trustee and beneficiary of the C. Reid
Family Trust and is deemed to be the beneficial owner of
the 2,666,667 Class A Shares held by it.
(6) 3024704 Nova Scotia Limited is an unaffiliated Nova Scotia,
Canada, corporation.
CLASS A SHARES
The Purchaser has authorized 20,000,000 Class A exchangeable
non-voting shares of which 16,916,344 have been issued pro rata to
the ThinWeb Shareholders. The Class A Shares are not entitled to
receive notice of or to attend any meeting of the shareholders of
the Purchaser nor to vote on any matters before the shareholders of
the Purchaser.
The Class A Shares have voting rights in the Registrant equal
to one vote for each Class A Share on all matters that properly come
before the shareholders of the Registrant at a meeting of
shareholders of the Registrant or in connection with any action
taken by shareholder consent. The holders of the Class A Shares are
entitled to receive notice of and attend any meeting of shareholders
of the Registrant and to vote at any such meetings.
The Class A Shares may be converted into or exchanged for an
equal number of shares of the Registrant, which shares are held by
the Trustee for such conversion or exchange, upon proper
notification to the Registrant. By having the Class A Shares
exchangeable for issued shares of the Registrant held by the Trustee
at some time in the future, the ThinWeb Shareholders are able to
defer certain Canadian taxes otherwise payable upon the disposition
of their shares in ThinWeb while maintaining voting rights in the
Registrant.
The Trust Agreement sets forth the rights and restrictions
pertaining to the Class A Shares and the Registrant Shares. The
Registrant Shares are held by the Trustee pending conversion of the
Class A Shares into such Registrant Shares. Upon conversion, the
Registrant Shares will be released to the converting ThinWeb
Shareholder and an equal number of Class A Shares will be delivered
to the Registrant. The ThinWeb Shareholders have the right to vote
their interests in the Registrant directly or through the Trustee as
holder of the Registrant Shares.
The Registrant Shares, while held by the Trustee, will not be
entitled to participate in dividends declared by the Registrant;
however, the Registrant has agreed that should it declare a dividend
on its common stock it will ensure that the Purchaser has the means
to pay a like dividend on the Class A Shares.
The Registrant has issued to and placed with the Trustee the
Registrant Shares consisting of 16,916,344 shares of its common
stock for use in exchange of the Class A Shares pursuant to the
Exchange Agreement. The Class A Shares contain certain rights and
provisions as set forth in the Trust Agreement and discussed below.
These rights and provisions are a summary only and should be read in
conjunction with the descriptions provided in the Transaction
documents which are attached hereto as exhibits.
(i) EXCHANGE RIGHTS ON THE LIQUIDATION OF THE PURCHASER.
Shareholders of the Class A Shares have the right, upon the
occurrence and during the continuance of any proceeding in
bankruptcy, insolvency, dissolution or winding up commenced by the
Purchaser or against the Purchaser, to require the Registrant to
purchase from each or any holder of the Class A Shares all or any
part of the Class A Shares held at an amount equal to (a) the
current market price the Registrant's common stock on the last
business day prior to the day of purchase plus (b) an additional
amount equal to the full amount of all dividends declared and upon
on such Class A Shares and on all dividends declared on the
Registrant's common stock which have not been declared on the Class
A Shares.
(ii) AUTOMATIC EXCHANGE ON THE LIQUIDATION OF THE REGISTRANT.
In order that holders of the Class A Shares will be able to
participate on a pro rata basis with the holders of the Registrant's
common stock in the event of a voluntary or involuntary dissolution,
liquidation or winding-up of the Registrant, all of the then
outstanding Class A Shares shall be automatically exchanged for
shares of common stock of the Registrant in the absence of an
affirmative written election from a holder of Class A Shares not to
participate in the automatic exchange.
(iii) RETRACTION BY HOLDER. A holder of Class A Shares is
entitled at any time to require the Purchaser to redeem any or all
of the Class A Shares held by it in an amount equal to (a) the
current market price the Registrant's common stock on the last
business day prior to the retraction date which may be satisfied in
full by the Purchaser causing to be delivered to such holder one
share of common stock of the Registrant for each Class A Share held
by the retracting holder plus (b) an additional amount equal to the
full amount of all dividends declared and upon on such Class A
Shares and on all dividends declared on the Registrant's common
stock which have not been declared on the Class A Shares.
(iv) AUTOMATIC REDEMPTION BY THE PURCHASER. On the 25th
anniversary of the closing date of the Transactions, unless
otherwise extended or accelerated, the Purchaser shall redeem all
the then outstanding Class A Shares for an amount per Class A Share
equal to (a) the current market price the Registrant's common stock
on the last business day prior to the redemption date which may be
satisfied in full by the Purchaser causing to be delivered to such
holder one share of common stock of the Registrant for each Class A
Share held by the retracting holder plus (b) an additional amount
equal to the full amount of all dividends declared and upon on such
Class A Shares and on all dividends declared on the Registrant's
common stock which have not been declared on the Class A Shares.
(v) PURCHASE FOR CANCELLATION. The Purchaser may at any time
and from time to time offer to purchase for cancellation all or any
of the outstanding Class A Shares at any price by tender to all of
the holders of the Class A Shares then outstanding at any price per
share determined by the Purchaser plus an amount equal to all
declared and unpaid dividends thereon. If in response to such
tender offer, more Class A Shares are tendered than the Purchaser is
willing to purchase, the Purchaser shall purchase as nearly as
possible pro rata according to the number of shares tendered by each
holder.
(vi) RECIPROCAL CHANGES. If the Registrant issues or
distributes its warrants, options or other rights to purchase its
securities to the holders of its outstanding common stock or issues
shares or securities of any other class of the Registrant than the
common stock exchangeable by the Class A Shares, or evidences of
indebtedness of the Registrant or assets of the Registrant, then the
Purchaser shall issue to the holders of the Class A Shares the
economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets.
(vii) RECLASSIFICATIONS. If the Registrant subdivides,
redivides or changes the outstanding number of its common stock into
a greater number or reduces, combines or consolidates the
outstanding number of its common stock into a lesser number or
reclassifies or otherwise changes its common stock or effects an
amalgamation, merger, reorganization or other transaction affecting
its common stock, then the Purchaser will make the same or an
economically equivalent change simultaneously to, or in the rights
of the holders of, the Class A Shares.
REGISTRATION OF REGISTRANT SHARES
The Registrant has agreed to register for sale in the United
States secondary market 6,500,000 of the Registrant Shares held by
the Trustee on behalf of certain current ThinWeb shareholders. The
Registrant intends to register such shares by filing with the United
States Securities and Exchange Commission, as soon as possible, a
registration statement on Form SB-2 pursuant to the Securities Act
of 1933. The timing of the sales of the registered sales, and the
prices at which such shares are sold into the public market (if such
market develops, of which there can be no assurance), will be
determined, respectively, by the holders of the registered shares
and by market conditions at the time of such sales. None of the
proceeds of such sales will belong to the Registrant or be applied
for its benefit.
PREFERRED STOCK
The Registrant has authorized 20,000,000 shares of
non-designated preferred stock, $.0001 par value per share, of
which 2,000,000 has been designated ("Convertible Preferred Shares")
and 1,500,000 of which have been issued. The Convertible Preferred
Shares are not entitled to dividends and are non-voting. In the
event of the liquidation, dissolution or winding up of the
Registrant, whether voluntary or involuntary, the holders of the
Convertible Preferred Shares shall be entitled to receive the par
value of each share before any amount shall be paid or any property
or assets distributed to the holders of the ordinary shares. After
payment in full to the holders of the Convertible Preferred Shares,
the surplus assets, if any, shall belong to and shall be divided
among the holders of other stock or shares in the Registrant.
The Registrant may redeem at any time commencing November 1,
1999, any number of the Convertible Preferred Shares then
outstanding by paying to the holder thereof the par value thereof.
The holder of the Preferred Shares shall be entitled to convert such
shares into ordinary shares of the Registrant on a one-for-one
exchange basis at any time before November 1, 1999 provided that the
holder was instrumental in arranging an equity financing which
results in the receipt of net proceeds by the Registrant of not less
than $5,000,000.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Registrant intends to continue the business development
formerly undertaken by ThinWeb Software Incorporated. Thinweb.com
Inc. (referred to as the "Purchaser") is a wholly-owned subsidiary
of the Registrant and as a result of the Transactions, ThinWeb
Software Incorporated, the Nova Scotia corporation (referred to as
"ThinWeb"), has become a wholly-owned subsidiary of Thinweb.com Inc.
BUSINESS
References herein to the Company include the Company's
wholly-owned subsidiaries, Thinweb.com Inc. and ThinWeb Software
Incorporated, unless the context otherwise requires. The Company
is a start-up company and has insignificant operations or revenues
to date. The ability of the Company to continue is dependent upon
it obtaining the necessary financing to complete its research and
development projects and upon future-profitable operations. There
can be no assurance that the Company will be able to complete the
development of its products, or if completed, that it will be able
to market them successfully. There is no assurance that even if
completed and marketed that revenues from the products will be
sufficient to fund the Company's operations or fund any additional
research, development or marketing.
COMPANY BACKGROUND
ThinWeb was founded in April, 1998, by two of the Company's
present officers and directors, Bryan MacLean and Cory Reid, to
focus on e-commerce business applications. Messrs. MacLean and Reid
were part of the initial software development team at Sanga
International, Inc., a company providing Web-based software business
solutions using Java technology. Messrs. MacLean and Reid
determined that a market opportunity existed to develop Web-based
software applications targeted to software developers and Internet
providers based on the use of Sun Microsystems' Java software
programming language. Messrs. MacLean and Reid began development of
ThinAccess and WebCrumbs and its core technology in March, 1998, and
thereafter established ThinWeb through which they continued
development of the technology and products.
TECHNOLOGY BACKGROUND
The Company has developed a core technology that will support
current and future e-commerce applications developed by the Company.
The core technology will provide the framework for all future
software developed by the Company and will eliminate the need and
cost for developing particular framework for each application
developed. The Company's first two applications are targeted for
the e-commerce Web applications market.
The Company's customer base will consist of either stand alone
software development companies, Internet providers or software
development teams within large organizations developing Web-based
applications. There is no assurance that the Company will be able
to successfully develop or market its technology. See "RISK FACTORS".
TECHNOLOGY AND PRODUCTS
Core Technology. Through its subsidiary, ThinWeb Software
Incorporated, the Company has developed its core technology which
will be utilized by the Company's e-commerce applications. The core
technology provides a framework for component containment,
interaction, naming and other perimeters. The core technology uses
Java software compliance and enterprise Application Programming
Interfaces (APIs) from Sun Microsystems, Inc. to retrieve data and
business logic wherever located and to integrate it into new
applications for use on the Web. The core technology approach
treats applications as a tapestry of inter-linked collaborating and
intelligent modular objects called components. Each component is
responsible for encapsulation of its internal data as well as
displaying the designed behavior. Any component connected into the
core requiring a particular action of another component can send
instructions via that component's interpretation mechanism, the API.
The core technology eliminates the need to build a new framework
for each new application developed by the Company.
During the past year, the Company has developed its first two
applications: ThinAccess and WebCrumbs. ThinAccess was tested and
approved by Sun Microsystems for listing on Sun Microsystem's Web
site as being an approved Java cross platform application (i.e.
"100% Pure Java") and WebCrumbs, utilizing the same framework, was
also listed. Both products are in the beta-marketing phase. The
Company has additional products in the design and development phases.
ThinAccess. ThinAccess is designed to offer remote access to
any database over the Internet running in any Web browser featuring
exceptional speed with an ultra-thin download. Databases are widely
used in computing and are crucial to many e-commerce applications
including payroll and employee records departments, travel and
reservation systems, financial services systems, accounting
departments and many other areas in both government and private
industry organizations. Timely access to databases is crucial and
ThinAccess is designed to provide such database access in seconds.
ThinAccess is designed to work on any platform, including cellular
phones and personal data assistants.
Java Database Connectivity (JDBC) is a standard defined by Sun
Microsystems to allow database access from Java applets and
applications. The JDBC API was developed to have a standard
interface. It allows Java applets and applications to access
different database management systems through the same interface.
ThinAccess is designed to be specialized for database access
from Internet applications running in any Web browser. It is intended
to provide high performance, powerful features and scalable JDBC
database access to network databases and improves user
responsiveness for Web database applications and gives Web
developers a single interface to access all databases enabling Web
applications to manipulate all databases uniformly.
ThinAccess is designed to improve the performance at both the
client and server level with these key features:
Decreases database application development cost
Reuses database connections across multiple clients
Provides remote management over the Web
Connects to multiple databases with one driver download
Increases Web page response time by avoiding large
driver downloads
Saves redundant database processing by enabling
multiple clients to browse same query results
Saves costs of installation of specialized software
WebCrumbs. WebCrumbs is designed to be a Web site management
and analysis tool. WebCrumbs is intended to gather and analyze information
about a visitor to a particular Web site and to generate a
personalized look to the Web site in response to the information
learned about that visitor. As a Web site analysis and reporting
tool, WebCrumbs is intended to offer a non-intrusive installation and
integrated real-time reporting and the ability to use any in-house database
customer reporting tool.
Management believes WebCrumbs to be unique from other Web site
analysis tools by its utilization of the "Dynamic Navigation
Technology", a technology developed by the Company that
automatically generates customized Web pages based on pre-defined
business rules and tracks Web site activity in real time. WebCrumbs
is designed to run on any operating system or Web site server supporting
Java. WebCrumbs Smart Agent technology learns about a visitor preferences
by monitoring such visitor's Web site usage patterns (such as pages
visited and length of stay) and utilizes such information in real
time by instantly presenting on the Web site information and
advertising most suitable.
Future Products and Research and Development. The Company
intends to develop additional e-commerce focused Internet
applications on its core technology, in response to perceived market
demands. The development of newer versions of the two products
currently developed and the development of new e-commerce products
will require a material investment of resources. During its first
nine months, the Company expended US$107,750 on research and
development which figure does not include the research and
development activities of the two principal developers of the
products prior to the incorporation of ThinWeb in April, 1998.
TRADEMARKS
The Company does not have any patents. The Company has
applied for trademark protection in the United States and Canada for
"ThinWeb", "WebCrumbs" and "ThinAccess". There is no guarantee that
other companies do not already utilize these names as their company
name or for their products and there is no assurance the Company
would be able to enforce against use of these marks against prior
users. Even if such trademark protection is granted, there is no
assurance that the Company will be able to prevent competitors from
using the same or similar marks, concepts or appearances or that the
Company will have the financial resources necessary to protect its
marks against infringing use.
REVENUES AND OTHER FINANCING
To date, the Company has used monies received from loans and
equity investment to develop its products and to pay administrative
expenses. See "FINANCIAL STATEMENTS".
The Company projects that funds may be received from the
following sources:
(1) The sale of the Company's products. The Company is
actively pursuing marketing and sales partnerships with established
companies in the Java marketplace.
(2) The sale of the Company's securities. The Company
anticipates that it will raise funds through the sale of its
securities.
The holder of the Company's 1,500,000 issued Preferred Shares
shall be entitled to convert such shares into ordinary shares of the
Company, on a one-for-one exchange basis, at any time before
November 1, 1999 provided that such holder was instrumental in
arranging equity financing on terms acceptable to the Company
resulting in the receipt of net proceeds by the Company of not less
than $5,000,000.
There is no assurance that the Company will be successful in
any sales of its products or support packages or that it will be
able to raise any funds through the sales of its securities. In
such event the Company may be required to seek financing for its
operations from other sources, including debt financing or borrowing
from financial institutions or other sources. There can be no
assurance that any such funding will be available, or available on
terms acceptable to the Company, if and when needed by the Company.
THE MARKET
The Company's first two products target the Internet
e-business intelligence software applications market.
ThinAccess targets companies utilizing Internet Web
applications using any database, any Web browser and requiring "thin
client" database connectivity. The Company perceives a major
initiative by e-commerce companies to Web-enable their business
activity and to provide it as another medium for their customers.
Database access is crucial to Web-enabling business activity as it
is the predominant mechanism to store and access information.
WebCrumbs targets companies that desire to upgrade their Web
sites with the ability to learn about and respond to Web site
visitors by instantly personalizing that company's Web site for that
visitor. The Company believes that this will assist companies to
increase customer response and to increase sales.
MARKETING
The Company anticipates generating sales inquiries through an
on-line marketing campaign designed to lead Java software developers
to the Company's Web site. Using discussion forums, chat groups,
and Web site advertising banners to be placed on strategic Web
sites, customers will be able to link directly to the Company's Web
site where the customer can learn more about the products or
download the products.
The Company plans to support its on-line advertising with
attendance at industry trade shows and selected magazine
advertisements.
The Company intends to target software manufacturers (database
and application), software developers and Internet service
providers. The Company anticipates that its products will be
marketed to directly to businesses. The Company also anticipates
that it will market its technology to developers directly through
Internet sales on its Web site in the form of a developers tools
kit. The Company anticipates that its thinner and faster Internet
solution will have a significant appeal to many software suppliers.
Many of the current database software companies have an application
too thick to be easily Internet ready.
The Company intends to establish a marketing staff during the
second quarter of 1999. The Company intends to lease larger space
in Halifax, Canada to accommodate increased research and
development, accounting and administrative personnel.
COMPETITION
The Company faces competition from different companies for
different aspects of its technology and for its different software
applications.
ThinAccess connects to any database over the Web with swift
high performance downloads of Web database applications. The
Company considers the competitors to ThinAccess to be those products
that can provide thin client (under 100K download) distributed
access in Java. Software Synergy's JDBCConnect provides a thin
access database application product, but it is a Windows specific
product supporting ODBC databases. IDS Software's IDS Server is
another competitor and is also a Windows/Linux product with support
for ODBC and Oracle databases.
The Company anticipates that WebCrumbs will face competition
from companies in the e-commerce field including Web Trends, Active
Concepts, Net.Genesis, Andromedia and Accrue. These companies
primarily supply static Web analyzer software providing detailed
reports on Web site activity without the Dynamic Navigation
Technology used by WebCrumbs which allows a Web page viewed by one
visitor to be different than the same Web page viewed by another.
The software industry is highly competitive with frequent
entries into all markets and fields by new start-up companies and by
established companies with new products. Many of these competitors
may have more experience and access to resources, including
financial and technological resources, than the Company.
PROPERTY
The Company's executive offices are located at Suite
101, 6 Antares Drive, Phase 3, Ottawa, Canada, at an annual rent of
CDN$20,950 and its telephone number is 613/225-8446. The Company
has entered into a lease for its research and development offices
beginning June 1, 1999, at Suite 1510, 1505 Barrington Street,
Halifax, Canada at an annual rent of CDN$41,615 and its telephone is
902/425-2802.
The Company Web site is http://www.thinweb.com.
MANAGEMENT
Name Age Title
James S. Anthony 51 Chairman of the Board
Gary T. Hannah 35 President, Chief Executive
Officer and Director
C. James Enman 45 Vice President and Secretary
Bryan C. MacLean 30 Vice President, Director
Cory Reid 28 Vice President
JAMES S. ANTHONY has served as Chairman of the Board of
ThinWeb since March, 1999. Since June, 1974, Mr. Anthony has been
the President of J. S. Anthony Ltd., Toronto, Canada, which provides
consulting services to corporations, including the Company,
including strategic planning, finance and corporate organization.
Mr. Anthony received his Bachelor of Arts degree from the University
of Manitoba in 1968 and attended Carleton University from 1968 to
1970. Mr. Anthony is the founder of The Foundation for the Study of
Objective Art, a charitable foundation which operates an art
gallery in Toronto and funds art education programs for the public.
Mr. Anthony also serves on the board of directors of Agritek Bio
Ingredients Corporation, Toronto, Canada, an agricultural
biotechnology investment company listed on the Montreal Exchange;
Borneo Gold Corporation, Toronto, Canada, a gold exploration company
listed on the Vancouver Stock Exchange; Denbridge Capital
Corporation, Toronto, Canada, a digital radar imaging company listed
on the Toronto Stock Exchange; and Independence Resources Ltd.,
Toronto, Canada, a gold exploration company listed on the Vancouver
Stock Exchange.
GARY T. HANNAH has served as President and Chief
Executive Officer and a director of ThinWeb since April, 1999. From
1995 to 1999, Mr. Hannah served as Vice President, Client Relations
of JetForm Corporation, an Ottawa, Ontario software manufacture.
From 1991 to 1995, Mr. Hannah served as President of GE Capital,
Missisauga, Ontario, a computer distribution company. Mr. Hannah
attended Saskatchewan Technical Institute from 1981 to 1983.
C. JAMES ENMAN, ESQ. has served as Vice President and
Secretary for ThinWeb since March, 1999. Since 1990, Mr. Enman has
been a member of the law partnership of Goldberg Thompson, Halifax,
Nova Scotia, providing general legal services. Mr. Enman received
his Bachelor of Arts degree from Acadia University in 1977 and his
LL.B. degree from Dalhousie University in 1980. Mr. Enman is a
member of the Nova Scotia Barristers Society, Canadian Tax
Foundation, and is a Canadian Trademark Agent. Mr. Enman serves as
general counsel to the Company.
BRYAN C. MACLEAN has served Vice President and a
director of ThinWeb since its inception in April, 1998. Mr. MacLean
is the co-founder of ThinWeb Software Incorporated and co-developer
of the Company's Java software e-commerce applications. From 1996 to
1998, Mr. MacLean was a software engineer for Sanga International
Research, Boston, Massachusetts specializing in Java software
solutions. From 1994 to 1996, Mr. MacLean was a software engineer
for Northern Telecom, Ottawa, Canada specializing in asynchronous
transfer software switch development. During 1996, Mr. MacLean was
employed by Bell Canada, Ottawa, Canada as a software engineer where
he served as one of the lead developers of that company's project to
process telephone bills over the Web using electronic data
interchange. Mr. MacLean obtained his Bachelor Commerce degree from
St. Francis Xavier University in 1990 and his Bachelor of Computer
Science degree from DalTech University of Nova Scotia in 1994.
CORY REID has served Vice President of ThinWeb since
its inception in April, 1998. Mr. MacLean is the co-founder of
ThinWeb Software Incorporated and co-developer of the Company's Java
software e-commerce applications. From 1996 to 1998, Mr. Reid was a
senior designer for Java Internet software at Sanga International
Research, Boston, Massachusetts and Halifax, Nova Scotia. From 1995
to 1996, Mr. Reid was a senior software designer at AT&T, Herndon,
Virginia specializing in telecommunications. Mr. Reid received his
Bachelor of Computer Science degree from DalTech University of Nova
Scotia in 1993.
REMUNERATION
Gary Hannah, President of the Company, has entered into
an employment agreement with the Company and receives an annual
salary of CDN$200,000. Messrs. MacLean and Reid, a director and
Vice Presidents, are negotiating employment agreements with the
Company and each receives an annual salary of CDN$120,000. Mr. Enman,
Vice President, Secretary and General Counsel, receives an annual
salary of CDN$100,000 and is negotiating an employment agreement
with the Company. Through his company J. S. Anthony & Co., Ltd.,
Mr. Anthony receives consulting fees for consultancy services
rendered to the Company.
RISK FACTORS
GOING CONCERN QUESTION; UNCERTAINTY OF FUTURE PROFITABILITY.
The Company has suffered losses from its start-up activities and
has no operations or revenues which raise doubt about its ability to
continue as a going concern. The ability of the Company to continue
as a going concern is dependent upon it obtaining the necessary
financing to complete its research and development projects, to
market those products once available and upon future profitable
operations. There can be no assurance that the Company will be able
to complete the development of its products, or if completed, that
it will be able to market them successfully. There is no assurance
that even if completed and marketed that revenues from the products
will be sufficient to fund the Company's operations or fund any
additional research, development or marketing. The Company may be
required to raise additional capital through debt or equity
financing. There are no assurances that the Company will receive
any revenues from operations or other proceeds nor that it will be
able to raise such capital through debt or equity financing. If the
Company is not able to raise such financing or to obtain alternative
sources of funding, management will be required to curtail
development. There is no assurance that the Company will be able to
continue to operate.
OPERATING LOSS. The Company has had insignificant operations
and revenues to date. The Company has used funds raised from the
offering of its securities and from borrowing to finance its
operations. The Company's ability to develop operations is
dependent upon its ability to bring its two developed products to
marketability and to sell such products at a profit. The Company
anticipates that it will offer for sale certain of its equity
securities. The Company has not yet determined the terms of such
offering, but the proceeds from such offering, if any, are crucial
to the continuation of the development of operations of the Company.
If the Company is not able to raise such financing or to obtain
alternative sources of funding, management will be required to
curtail development of operations and there is no assurance that the
Company will be able to continue.
NO OPERATING HISTORY. The Company and its subsidiaries have
no operating histories, have not begun any operations and to date
have not received any revenues from operations. The Company's
operations will be subject to all the risks inherent in the
establishment of a relatively new business enterprise, including the
lack of significant operating history. There can be no assurance
that future operations will be profitable. Revenues and profits of
the Company, if any, will depend upon various factors, including
market acceptance of the Company's concepts, market awareness,
reliability and of the software products, dependability and accuracy
of technical support, and general economic conditions. There is no
assurance that the Company will achieve its expansion goals and the
failure to achieve such goals would have an adverse impact on the
Company.
POSSIBILITY OF NOT DEVELOPING ACCEPTABLE SOFTWARE. The
Company's two products are currently in beta testing status and the
Company anticipates their release in Summer, 1999. There is no
assurance that circumstances or events will not delay or prevent
such release, including insufficient funds to finalize the products.
It is possible that the beta testing may produce results that
require the products to be redeveloped or reworked. A delay in the
release of the products would impact the Company's projected
operations and business plan.
COMPETING SOFTWARE MAY HURT COMPANY'S MARKET. There is no
assurance that a competitor may not offer similar or identical or
better software to that being developed or to be developed by the
Company prior to the availability of the Company's software. In
addition, a competitor may offer similar or identical software at a
cheaper price or as free software. There is an increasing amount of
software on the Web available for download without charge
("freeware"). Given the intense competition in the software market,
it can be an important factor to be the first available in an
application or to be offered for the cheapest price.
CHANGES IN SOFTWARE PLATFORM. The Company's software is Java
based, which is currently a widely used computer platform. There
can be no assurance that the Java platform will have such continued
wide-spread acceptance or that a competitor to Java will not develop
a better and more widely used platform not compatible with the
Company's software. Although the Company's software would continue
to be available and usable with the Java platform, there is no
assurance that the Java platform market would continue to expand or
that, potentially in light of a better platform, would not decrease
in size.
LACK OF CONTINUED DEVELOPMENT OF E-COMMERCE MARKET. The use
of the Internet and World Wide Web for commercial purposes is
expanding dramatically. There is no assurance, however, that as
increased commerce takes place on the Internet that unforeseen
overloads, lack of sufficient hardware, telephone availability or
other problems may develop. In addition, consumer use of the
Internet for purchases, banking, and other commercial uses may
decline for any number of reasons such as security problems,
overload difficulties, shopping trends, or slow Internet access.
COMPETITION FROM LARGER AND MORE ESTABLISHED COMPANIES. The
competition in the software industry is intense. There are numerous
well-established competitors, including national, regional and local
software developers possessing substantially greater financial,
marketing, personnel and other resources than the Company. The
Company may not be able to market or sell its products if faced with
direct product competition from of these larger software developers.
TRADEMARK PROTECTION AND PROPRIETARY MARKS. Notwithstanding
the pending registration of its trade names with the United States
Trademark Office, there is no assurance the Company will be able to
enforce against use of these marks against prior users. There is
also no assurance that the Company will be able to prevent
competitors from using the same or similar marks, concepts or
appearances or that the Company will have the financial resources
necessary to protect its marks against infringing use.
ISSUANCE OF FUTURE SHARES MAY DILUTE INVESTORS SHARE VALUE.
The Certificate of Incorporation of the Company authorizes the
issuance of a maximum of 100,000,000 shares of common stock and
20,000,000 shares of preferred stock. The future issuance of all or
part of the remaining authorized common stock of the Company may
result in substantial dilution in the percentage of the Company's
common stock held by the Company's then existing shareholders.
Moreover, any common stock issued in the future may be valued on an
arbitrary basis by the Company. The issuance of the Company's
shares for future services or acquisitions or other corporate
actions may have the effect of diluting the value of the shares held
by investors, and might have an adverse effect on any trading
market, should a trading market develop for the Company's common
stock.
POTENTIAL ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK.
The Company may, without further action or vote by shareholders of
the Company, designate and issue additional shares of preferred
stock. The terms of any series of preferred stock, which may
include priority claims to assets and dividends and special voting
rights, could adversely affect the rights of holders of the common
stock and thereby reduce the value of the common stock. The
designation and issuance of preferred stock favorable to current
management or shareholders could make the possible takeover of the
Company or the removal of management of the Company more difficult
and discourage hostile bids for control of the Company which bids
might have provided shareholders with premiums for their shares.
NO CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES. There
is currently no established public trading market for the securities
of the Company. No assurance can be given that an active trading
market in the Company's securities will develop or, if developed,
that it will be sustained. The Company intends to apply for
admission to quotation of its securities on the NASD OTC Bulletin
Board and, if and when qualified, it intends to apply for admission
to quotation on the Nasdaq SmallCap Market. There can be no
assurance that a regular trading market for the common stock will
develop or that, if developed, it will be sustained. Various
factors, such as the Company's operating results, changes in laws,
rules or regulations, general market fluctuations, changes in
financial estimates by securities analysts and other factors may
have a significant impact on the market price of the Company's
securities. The market price for the securities of public companies
often experience wide fluctuations which are not necessarily related
to the operating performance of such public companies such as high
interest rates or impact of overseas markets.
PENNY STOCK REGULATION. Upon commencement of trading in the
Company's stock, if such occurs (of which there can be no assurance)
the Company's common stock may be deemed a penny stock. Penny
stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided
that current price and volume information with respect to
transactions in such securities is provided by the exchange or
system. The Company's securities may be subject to "penny stock
rules" that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 together with their spouse). For transactions covered
by these rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have received
the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the "penny stock rules" require the delivery,
prior to the transaction, of a disclosure schedule prescribed by the
Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer
and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing
recent price information on the limited market in penny stocks.
Consequently, the "penny stock rules" may restrict the ability of
broker-dealers to sell the Company's securities. The foregoing
required penny stock restrictions will not apply to the Company's
securities if such securities maintain a market price of $5.00 or
greater. There can be no assurance that the price of the Company's
securities will reach or maintain such a level.
COMPUTER SYSTEMS REDESIGNED FOR YEAR 2000. Many existing
computer programs use only two digits to identify a year in such
program's date field. These programs were designed and developed
without consideration of the impact of the change in the century for
which four digits will be required to accurately report the date.
If not corrected, many computer applications could fail or create
erroneous results by or following the year 2000 (the "Year 2000
problem"). Many of the computer programs containing such date
language problems have been corrected by the companies or
governments operating such programs. The Company's operations are
dependent upon computer hardware and software some of which was
developed prior to the awareness of the Year 2000 Problem. The
Company does not know what steps, if any, have been taken by any of
the operators of such hardware and software. The Company's
operations will be severally curtailed if one or more of its
customers were to suffer Year 2000 problems or if the Internet or
World Wide Web was to suffer a full or partial shut down for any
length of time. It is impossible to predict the impact of the Year
2000 Problem. A prolonged disruption in the Internet or World Wide
Web or any of the may prohibit the Company from operating or selling
its products.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
As a result of the Transactions, the accountant to the
Registrant, Weinberg & Company, was replaced with the accountant for
ThinWeb, PricewaterhouseCoopers LLP. The financial statements for
the Registrant since inception and prior to the change in such
accountants have not contained any adverse opinion or disclaimer or
were modified as to any uncertainty, audit scope or accounting
principles and there were not any disagreements or "reportable
events" with such former accountant.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Transactions, the sole director and officer of
the Registrant resigned and the officers and directors of ThinWeb
were designated to serve in their same capacities for the Registrant
until the next annual meeting of stockholders and until their
respective successors are elected and qualified or until their prior
resignation or termination.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements for the fiscal year
ended December 31, 1998, for ThinWeb Software Incorporated prepared
by the independent public accounting firm of PricewaterhouseCoopers
LLP are filed herewith.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not applicable.
EXHIBITS
4.1 Share Exchange and Share Purchase Agreement among Warwick
Acquisition Corporation, Thinweb.com Inc., ThinWeb Software
Incorporated, and all of the shareholders of Thinweb Software
Incorporated
4.2 Exchange and Voting Agreement among Warwick Acquisition
Corporation, ThinWeb Software Incorporated, the Trustee, and
all of the shareholders of ThinWeb Software Incorporated
16.1 Letter of Weinberg & Company, former accountants to the
Registrant
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
THINWEB.COM CORPORATION
By /s/ Gary Hannah
President
Date: May 27, 1999
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA--U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the company's ability to continue as a going concern,
such as those described in note 1 to the financial statements. Our report
to the board of directors of THINWEB SOFTWARE INCORPORATED dated May 20,
1999 is expressed in accordance with the Canadian reporting standards
which do not permit a reference to such events and conditions in the
auditors' report when these are adequately disclosed in the financial
statements.
Halifax, Canada PRICEWATERHOUSECOOPERS LLP
May 20, 1999 Certified Accountants
ThinWeb Software Incorporated
(A Development Stage Company)
Financial Statements
December 31, 1998
(Information as at March 31, 1999 and the three
months ended March 31, 1999 is unaudited)
(expressed in U.S. dollars)
Report of Independent Accountants
To the Board of Directors of
ThinWeb Software Incorporated
We have audited the balance sheet of ThinWeb Software Incorporated as of
December 31, 1998 and the statements of operations and deficit and cash
flows for the period from April 22, 1998 to December 31, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the company as of
December 31, 1998 and the results of its operations and its cash
flows for the period then ended in accordance with generally accepted
accounting principles in Canada.
PRICEWATERHOUSECOOPERS LLP
Halifax, Canada
May 20, 1999 Chartered Accountants
ThinWeb Software Incorporated
(A Development Stage Company)
Balance Sheet
As of December 31, 1998
(expressedin US dollars)
March 31 December 31
1999 1998
(unaudited)
$ $
Assets
Current assets
Cash (note 3) 253,375 31,566
Subscriptions receivable 267,961 --
Investment tax credits receivable (note 4) 66,838 65,908
Other 13,881 5,784
------- -------
602,055 103,258
Capital assets (notes 4 and 5) 15,314 10,895
Trademarks 563 555
------ ------
617,932 114,708
-------- -------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 97,280 21,470
Accrued salaries 99,344 89,657
Current portion of long-term debt (note 7) 2,998 2,957
Loan payable 66,260 65,338
Amounts due to shareholders 21,484 21,484
------ ------
287,366 200,906
Long-term debt (note 7) 13,153 13,754
------- -------
300,519 214,660
------- -------
Shareholders' Equity
Capital stock (note 8) 519,065 1
Foreign currency translation adjustments (474) 343
Deficit accumulated during the development
stage (201,178) (100,296)
-------- --------
317,413 (99,952)
------- ------
617,932 114,708
------- -------
ThinWeb Software Incorporated
(A Development Stage Company)
Statement of Operations and Deficit
For the period from April 22, 1998 to December 31, 1998
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative Three Months Period ended
April 22, 1998 to ended December 31
March 31, 1999 March 31, 1999 1998
(unaudited) (unaudited)
$ $ $
<S> <C> <C> <C>
Revenue 1,409 253 1,156
------ ------- ------
Expenses
Research and development (note 4) 81,922 38,034 43,888
Selling, general and administration 117,376 61,480 55,896
Amortization 3,289 1,621 1,668
------- ------ -------
202,587 101,135 101,452
------- ------- -------
Loss for the period (201,178) (100,882) (100,296)
Deficit accumulated during the
development stage-Beginning of period --- (100,296) ---
-------- --------- ---------
Deficit accumulated during the
development stage-End of period (201,178) (201,178) (100,296)
--------- --------- ---------
Loss per share 1.03 28.30
Weighted average number of shares ------- --------
outstanding during the period 97,711 3,544
------- --------
</TABLE>
ThinWeb Software Incorporated
(A Development Stage Company)
Statement of Cash Flows
For the period from April 22, 1998 to December 31, 1998
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative Three Months Period Ended
April 22, 1998 ended December 31
to March 31, 1999 March 31, 1999 1998
(unaudited)
$ $ $
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities
Loss for the period (201,178) (100,882) (100,296)
Amortization 3,289 1,621 1,668
Net change in non-cash working
capital balances related
to operations
Increase in investment tax
credits receivable (66,918) -- (66,918)
Increase in other current assets (13,875) (8,002) (5,873)
Increase in accounts payable and
accrued liabilities 97,176 75,377 21,799
Increase in accrued salaries 99,438 8,407 91,031
------ ------ ------
(82,068) (23,479) (58,589)
-------- ------- -------
Financing activities
Proceeds from bank loan 16,966 -- 16,966
Repayments of bank loan (794) (794) --
Proceeds from loan payable 66,339 -- 66,339
Issue of common shares 251,132 251,132 --
Proceeds from shareholder loans 20,628 -- 20,628
------- ------- -------
354,271 250,338 103,933
------- ------- -------
Investing activities
Acquisition of capital assets (18,609) (5,878) (12,731)
Acquisition of trademarks (564) -- (564)
------- ------- -------
(19,173) (5,878) (13,295)
-------- ------- -------
Effect of exchange rate changes in cash 345 828 (483)
-------- ------- -------
Increase in cash during the period 253,375 221,809 31,566
Cash-- Beginning of period -- 31,566 --
------- ------- ------
Cash-- End of period 253,375 253,375 31,566
------- ------- ------
</TABLE>
ThinWeb Software Incorporated
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
(Information as of March 31, 1999 and for the
three months ended March 31, 1999 is unaudited)
1 Nature of operations and basis of presentation
The company incorporated on April 22, 1998 and is primarily a
software research and development company that has not yet
commenced commercial operations. All of the company's
operations are in Canada. These statements are prepared on
a going-concern basis. There is substantial doubt that as to
whether or not the company will be able to continue as a going
concern. The ability of the company to continue as a going-concern
is dependent upon it obtaining the necessary financing to
commercialize and market its products and upon future
profitable operations. Like other
companies at this stage of development, the company is subject to
numerous risks, including the uncertainty of its chosen market,
its ability to develop its markets and other risks.
The company plans to raise funds through a private
placement; however, there are no commitments for the private
placement and there can be no assurance that the company will
be successful in raising the required capital to finance operations.
2 Accounting policies
a) Financial statement presentation
These financial statements have been prepared in accordance
with Canadian generally accepted accounting principles.
The significant differences between these principles
and those that would be applied under U.S. generally
accepted accounting principles are disclosed in note 11.
b) Foreign currency translation
The company's currency of measurement is Canadian dollars;
however, the reporting currency is U.S. dollars. The assets
and liabilities of the company are translated into U.S.
dollars at year-end exchange rates, and income and expense
items are translated at rates approximating the average rates
of exchange for the year. Gains and losses from the translation
are excluded from the statement of operations and
deficit and are accumulated in the cumulative foreign
currency translation adjustment account.
c) Capital assets and amortization
Amortization of the following capital assets is calculated
using the declining balance method at annual rates
which will amortize their cost over their estimated useful lives.
These rates are:
Computer hardware 30%
Computer software 100%
Office furniture and equipment 20%
d) Income taxes
The company uses the liability method of accounting for income
taxes. Under this method, current income taxes are recognized
for the estimated income taxes payable for the current year.
Future income tax assets and liabilities are recognized for
temporary differences between the tax and accounting bases of
assets and liabilities as well as for the benefit of losses
available to be carried forward to future years for tax purposes.
Future income tax assets are evaluated and if realization is not considered
"more likely than not", a valuation allowance is provided.
Investment tax credits relating to scientific research and
experimental development expenditures are recorded in the
accounts in the fiscal period the qualifying expenditures
are incurred provided there is reasonable assurance
that the tax credit will be realized. Investment
tax credits in connection with research and development
activities are accounted for using the cost reduction
method which recognizes the credits as a reduction
of the cost of the related assets or expenditures.
e) Revenue recognition
The company recognizes revenue at the time of
delivery of its licensed software products to customers,
provided collectibility of proceeds from the sale of
licensed software is reasonably assured.
Currently, all sales are made from the company's web
site. An electronic order form is filled out on-line
by the customer; payment for the order is then
received when the customer provides a credit card number;
the product is then downloaded by the customer.
The product is not returnable; therefore, no provision is
required for sales returns.
f) Research and development
Research costs are expensed in the period incurred. Where,
in the opinion of management, the deferral criteria established
by the Canadian Institute of Chartered Accountants are
satisfied in all material respects, development expenditures
are capitalized and amortized over the estimated earning
life of the related products. To date, no development costs
have been deferred.
g) Loss per common share
Loss per common share is calculated using the weighted
number of common shares issued and outstanding during each
period. Fully diluted earnings per share are not
presented as the exercise of warrants and options
would be antidilutive.
h) Use of estimates
The presentation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of
contingent liabilities at the date of the financial
statements and the reported amounts of revenues and
expenditures during the reported period. Actual
results could differ from those reported.
i) Financial instruments
The fair value of the company's cash, subscriptions
receivable, investment tax credits receivable, other current
assets, accounts payable and accrued liabilities, accrued
salaries, long-term debt, loan payable and amounts due to
shareholders approximate their carrying values.
3 Restrictions on cash
Included in cash is $235,000 held in a trust account by the
company's solicitors, which requires the approval of two
shareholders in order to be released. The cash is to be
used to fund certain expenditures within the next year.
4 Investment tax credits receivable
For small, closely held Canadian corporations, a credit
of approximately 40% of eligible scientific research and
experimental development expenditures is available, refundable
in cash if no taxes are owed. For all other Canadian
corporations, the credit is reduced to approximately 20%
on a non-refundable basis, available only against taxes
otherwise payable. Eligible scientific research and
experimental development expenditures include direct
current and capital costs and an allowance for overhead in the
amount of 65% of specified salaries and wages.
During 1998, investment tax credits in the amount of $63,862
have been applied to reduce research and development expenditures
and $3,056 have been credited to the cost of capital assets.
5 Capital assets
March 31 December 31
1999 1998
- ---------------------------------------------------------------------------
Accumulated
Cost amortization Net
$ $ $ $
Computer hardware 13,289 1,790 11,499 8,705
Computer software 3,944 1,295 2,649 972
Office furniture
and equipment 1,371 205 1,166 1,218
------ ----- ------ ------
18,604 3,290 15,314 10,895
------ ----- ------ ------
6 Income taxes
The company has approximately $160,000 in losses for income
tax purposes, with an expiry date of 2005, which are available
to reduce future taxable income. This potential benefit is
offset by $53,000 in temporary differences between income
for accounting purposes and income for tax purposes.
The net potential future tax benefit, calculated at the
statutory rate of approximately 45%, amounts to $48,000.
This future income tax asset has been reduced to $nil
through the application of a valuation allowance based on the
likelihood of realization.
7 Long-term debt
March 31 December 31
1999 1998
$ $
Business Development Bank of Canada,
authorized amount $18,900, bearing interest
at 8.7% per annum, repayable in one principal
payment of $108 and 72 principal payments of
$261, secured by personal guarantees of certain
shareholders in the amount of $4,100 16,151 16,711
Less: Current portion 2,998 2,957
------ ------
13,153 13,754
------ ------
The loan was repaid in full subsequent to March 31, 1999.
8 Capital Stock
Authorized
On March 31, 1999, the company increased its authorized capital
by the creation of 90,000,000 common shares without nominal
or par value. At March 31, 1999, the authorized capital of the company is:
100,000,000 common shares, without nominal or par value
Ascribed
Number of Value
Shares $
Issued
Issued in 1998 pursuant to share
subscription agreements 900,000 32,669
Subscriptions receivable --- (32,668)
------- --------
Balance--December 31, 1998 900,000 1
Issued in the three months ended
March 31, 1999
For cash 1,447,333 73,565
Pursuant to share subscription
agreements 7,027,667 462,097
Subscriptions receivable -- (16,598)
---------------------------
Balance --- March 31, 1999 9,375,000 519,065
--------- -------
Subscriptions receivable are presented as a reduction
from capital stock unless paid subsequent to the period end.
Subsequent to March 31, 1999, $267,961 in share subscriptions
receivable were paid in cash.
9 Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems
use two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000 Issue may be
experienced before, on, or after January 1, 2000, and, if not addressed,
the impact on operations and financial reporting may range from minor
errors to significant systems failure which could affect the
company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issuer
affecting the company, including those related to the efforts
of customers, suppliers, or other third parties, will be fully
resolved.
10 Subsequent events
a) Repayment of loan payable
Subsequent to March 31, 1999, the company repaid in full,
the loan payable of $66,260 which was outstanding at March 31, 1999.
The company also paid a premium in the amount of $16,565 to the lender.
The premium was agreed with the lender in April 1999 and has been
accrued in the financial statements. As part of the loan repayment,
the company also issued, for no cash consideration, 100,000 shares
to the lender and 10,000 shares to the individual who arranged
the initial loan. Both individuals deal at arm's length with
the company.
b) Share issuances
Subsequent to March 31, 1999, the company issued shares as follows:
Ascribed
Number of value
shares $
For cash 7,431,344 83,435
Related to the repayment of loan payable 110,000 ---
--------- ------
7,541,344 83,435
--------- ------
The company appointed a new chief executive officer subsequent
to March 31, 1999. As part of the terms of the employment agreement,
the chief executive officer was issued 1,181,344 common shares
from treasury for no cash consideration, with 28.58% of
the shares vesting immediately, 35.71% vesting in one year
and the balance of 35.71% vesting in two years.
c) Corporate Re-organization
On April 22, 1999, the company entered into a combination
agreement with Warwick Acquisition Corporation ("Warwick").
This agreement was adopted by the Board of Directors of
Warwick and approved by the shareholders of Warwick on
May 20, 1999. Thinweb.com Inc. ("Thinweb.com"),
formerly 3028184 Nova Scotia Limited, a wholly-owned
subsidiary of Warwick, will acquire all of the issued
and outstanding shares of the company through the issuance of
16,916,344 Class "A" exchangeable, non-voting, participating common
shares without par value ("Exchangeable Shares") of Thinweb.com.
The Exchangeable Shares entitle the holder to voting rights in
Warwick as if the shareholder held an equivalent number of common
shares in Warwick. The Exchangeable Shares are exchangeable for
shares in Warwick on a share-for-share basis without any further
consideration.
Pursuant to this agreement, 4,850,000 of the issued and
outstanding shares of Warwick were redeemed and retired resulting
in 150,000 common shares of Warwick being issued and outstanding.
On closing of this transaction, Warwick issued 16,916,344 common
shares to be held in trust pending receipt of the Exchangeable Shares.
Warwick also issued 1,500,000 preferred shares on closing of this
agreement for deemed consideration of $0.0001 per share.
The holders of the preferred shares of Warwick are entitled to
convert them into common shares of Warwick on a share-for-share
basis any time prior to November 1, 1999, provided the holders
were instrumental in arranging for the company of not less than
$5,000,000. In addition, Warwick will grant a five year transferable
warrant entitling the holder to acquire up to 50,000 common shares
of Warwick for consideration of $1 per share.
If all Exchangeable Shares and preferred shares are converted
into shares of Warwick, the former shareholders of ThinWeb
Software Incorporated will own approximately 91% of the
issued shares of Warwick.
11 Differences between Canadian and U.S. Generally
Accepted Accounting Principles
The financial statements of the company have been prepared
in accordance with generally accepted accounting principles
in Canada ("Canadian GAAP") which are different in certain
respects from those applicable in the United States ("U.S. GAAP"),
as described below.
a) Comprehensive income
Under SFAS 130, "Comprehensive income", the company is required
to show the change in net assets, excluding shareholder
investments and distributions. The following summarizes
the company's comprehensive loss:
Three months ended Period ended
March 31, 1999 December 31
(unaudited) 1998
$ $
Loss for the period (100,882) (100,296)
Change in foreign currency
translation adjustment (474) 343
--------- --------
Comprehensive loss (101,356) (99,953)
--------- -------
b) Recent pronouncements
In 1998, Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities" was issued
and is effective for fiscal years commencing after June 15, 1999. The
company will comply with the requirements of SFAS 133 in fiscal year 2000
and does not expect the adoption of SFAS 133 will be material to the
company's results of operations.
In 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities". SOP 98-5 is effective in fiscal years
beginning after December 15, 1998 with earlier adoption permitted.
SOP 98-5 requires costs of start-up activities and organization costs
to be expenses as incurred. The company has complied with the
requirements of SOP 98-5.
THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for
reference the 22nd day of April, 1999.
AMONG:
WARWICK ACQUISITION CORPORATION., a corporation incorporated
under the laws of the State of Delaware,
(the "Parent")
AND:
THINWEB.COM INC., a corporation incorporated under the laws
of the Province of Nova Scotia
(the "Purchaser")
AND:
THINWEB SOFTWARE INC., a corporation incorporated under the
laws of the Province of Nova Scotia,
(the "Corporation")
AND:
ALL OF THE SHAREHOLDERS OF THE CORPORATION as more
particularly described on Schedule "A" attached hereto,
(Individually a "Shareholder" and collectively the
"Shareholders");
W H E R E A S:
A. the Corporation is a Java software developer for the
Internet E-commerce market:
B. the Shareholders own all of the issued and outstanding
shares of the Corporation (the "Corporation Shares");
C. the Parent owns all of the issued and outstanding shares in
the capital stock of the Purchaser;
D. the Purchaser desires to purchase all of the Corporation's
Shares and the Shareholders desire to sell all of the
Corporation's Shares to the Purchaser on the terms and
conditions hereinafter set forth;
E. the respective boards of directors of the Purchaser, Parent
and Corporation each deem it advisable and in the best
interests of their respective shareholders to combine their
respective businesses by the Purchaser acquiring all of the
shares in the capital stock of the Corporation pursuant to
the terms of this Agreement; and
F. the respective boards of directors of the Purchaser, Parent
and Corporation have approved and adopted this Agreement as
a plan of reorganization under section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
as a transfer of shares pursuant to section 85 of the Income
Tax Act (Canada) (the "Tax Act").
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
foregoing premises, the mutual representations, warranties,
covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect
common control with such other Person.
"AGREEMENT" means this Share Exchange and Share Purchase Agreement
by and among the Purchaser, Parent, Corporation and Shareholders.
"APPLICABLE LAW" means, with respect to any Person, any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement, all as in effect as of the
Closing, of any Governmental Authority applicable to such Person or
any of its Affiliates or any of their respective properties, assets,
officers, directors, employees, consultants or agents (in connection
with such officer's, director's, employee's, consultant's or agent's
activities on behalf of such Person or any of its Affiliates).
"ASSOCIATE" means with respect to any Person (a) any other Person of
which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities issued by such other Person, (b) any
trust or other estate in which such Person has a ten percent (10%)
or more beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity, and (c) any relative or
spouse of such Person, or any relative of such spouse who has the
same home as such Person or who is a director or officer of such
Person or any Affiliate thereof.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in Halifax, Nova Scotia are authorized
or required by law to close.
"BUYING GROUP" means the Purchaser and the Parent.
"BUYING GROUP BUSINESS" means the business as heretofore or
currently conducted by the Buying Group.
"BUYING GROUP CONTRACTS" means all contracts, agreements, options,
leases, licences, sales and purchase orders, commitments and other
instruments of any kind, whether written or oral, to which either
the Purchaser or the Parent is a party on the Closing Date.
"CORPORATION'S BALANCE SHEET" means the balance sheet of the
Corporation dated December 31, 1998.
"CORPORATION BUSINESS" means the business as heretofore or currently
conducted by the Corporation.
"CORPORATION CONTRACTS" means all contracts, agreements, options,
leases, licences, sales and purchase orders, commitments and other
instruments of any kind, whether written or oral, to which the
Corporation, or any Shareholder on behalf of the Corporation is a
party on the Closing Date.
"CORPORATION PERMITTED LIENS" means, with respect to the
Corporation, (i) Liens for Taxes or governmental assessments,
charges or claims the payment of which is not yet due, or for Taxes
the validity of which is being contested in good faith by
appropriate proceedings; (ii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, material men and other similar
Persons and other Liens imposed by Applicable Law incurred in the
ordinary course of business for sums not yet delinquent or being
contested in good faith; (iii) Liens relating to deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security or to secure the performance of leases, trade contracts or
other similar agreements (iv) Liens and Corporation Encumbrances
specifically identified in the Corporation's Balance Sheet included
in the Corporation Financials; (v) Liens securing executory
obligations under any lease that constitute an "operating lease"
under Canadian GAAP and (vi) other Liens set forth on Schedule "E"
hereto; provided, however, that, with respect to each of clauses (i)
through (v), to the extent that any such encumbrance or Lien arose
prior to the date of the Corporation's Balance Sheet included in the
Corporation's Financials and relates to, or secures the payment of,
a Liability that is required to be accrued under Canadian GAAP, such
encumbrance or Lien shall not be a Corporation Permitted Lien unless
adequate accruals for such Liability have been established therefor
on such Corporation's Balance Sheet in conformity with Canadian GAAP.
"CORPORATION PREMISES" means those premises that have been occupied
or used, or are occupied or used, by the Corporation in connection
with the Corporation Business.
"EXCHANGE AND VOTING AGREEMENT" means the agreement in substantially
the form set out in Schedule "B" hereto to be entered into by the
Parent, Purchaser and the Trustee.
"EXCHANGEABLE NON-VOTING SHARES" means those 16,916,344 Class "A"
exchangeable, non-voting, participating common shares without par
value in the capital stock of the Purchaser, having those rights and
terms set forth in the Exchange and Voting Agreement and the
Exchangeable Share Provisions, which will be issued to the
Shareholders in consideration for the purchase and sale of the
Corporation Shares.
"EXCHANGEABLE SHARE PROVISIONS" means those rights, restrictions,
terms and provisions pertaining to the Exchangeable Non-Voting
Shares, as set forth in Schedule "G" hereto, and as summarized in
section 5.03 hereof.
"GOVERNMENTAL AUTHORITY" means any United States (whether federal,
territorial, state, municipal or local), Canadian (whether federal,
territorial, provincial, municipal or local) or foreign government,
governmental authority, quasi-governmental authority,
instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing.
"GST" means all goods and services taxes, sales taxes levied by the
federal government of Canada, value added taxes or multi-stage taxes
and all provincial sales taxes integrated with such federal taxes,
assessed, rated or charged upon the Corporation.
"INTERIM PERIOD" means the period from and including the date of
this Agreement to and including the Closing Date.
"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured, joint
or several, due or to become due, vested or unvested, determined,
determinable or otherwise and whether or not the same is required to
be accrued on the financial statements of such Person.
"LIEN" means, with respect to any asset, any mortgage, assignment,
trust or deemed trust (whether contractual, statutory or otherwise
arising), title defect or objection, lien, pledge, charge, security
interest, hypothecation, restriction, encumbrance or charge of any
kind in respect of such assets.
"MATERIAL ADVERSE EFFECT" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of
operations, assets, Liabilities, reserves or any other aspect of a
party to this Agreement or to its business that results in a
material adverse effect on, or a material adverse change in, any
such aspect of the party or to its business.
"PARENT'S BALANCE SHEET" means the balance sheet of the Parent dated
December 31, 1998.
"PARENT COMMON SHARES" means 16,916,344 common shares in the capital
of the Parent to be issued to the Trustee pursuant to paragraph 2.05
hereof, in consideration of subscription proceeds from the Trustee
of $0.0001 per share, having those rights and terms as set forth in
the Exchange and Voting Agreement.
"PARENT PREFERRED SHARES" means 1,500,000 Preferred shares with a
par value of $.0001 each in the capital stock of the Parent to be
issued to 583317 B.C. Ltd ("BCCO") pursuant to paragraph 2.02
hereof, and having those rights and terms as set forth in the bylaws
or articles of the Parent.
"PERSON" includes an individual, body corporate, partnership,
company, unincorporated syndicate or organization, trust, trustee,
executor, administrator and other legal representative.
"SEC" means the United States Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
as to which more than 10% of the outstanding shares having ordinary
voting rights or power (and excluding shares having voting rights
only upon the occurrence of a contingency unless and until such
contingency occurs and such rights may be exercised) is owned or
controlled, directly or indirectly, by such Person and/or by one or
more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person (or any
Subsidiary thereof) and any other Person (whether pursuant to a
written agreement or otherwise).
"SUPPORT AGREEMENT" means that agreement between the Parent and the
Purchaser, in the form attached hereto as Schedule "H" hereto,
whereby the Parent agrees to make certain payments and deliveries to
enable the Purchaser to comply with the Exchangeable Share Provisions.
"TAX" means all taxes imposed of any nature including any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial or local) or foreign
income tax, alternative or add-on minimum tax, profits or excess
profits tax, franchise tax, gross income, adjusted gross income or
gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax), capital
tax, real or personal property tax or ad valorem tax, sales or use
tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, GST, severance tax, prohibited
tax, premiums tax, occupation tax, customs and import duties,
together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Authority responsible
for the imposition of any such tax or in respect of or pursuant to
any United States (whether federal, territorial, state or local),
Canadian (whether federal, territorial, provincial or local) or
other Applicable Law.
"TAX RETURN" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
"TRUSTEE" means the trustee or successor trustee designated under
the Exchange and Voting Agreement.
"33 ACT" means the United States Securities Act of 1933 and all
amendments thereto.
"34 ACT" means the United States Securities Act of 1934 and all
amendments thereto.
1.02 CURRENCY USED. All references herein to dollars or the use of
the symbol "$" shall be deemed to refer to United States dollars
unless such reference is prefaced by "CDN" in which case the
reference will be to Canadian dollars.
1.03 CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Where the
Canadian Institute of Chartered Accountants or any successor thereto
includes a statement in its handbook or any successor thereto on a
method or alternative methods of accounting or on a standard or
standards of auditing, such statement shall be regarded as the only
generally accepted accounting principle or principles or generally
accepted auditing standard or standards ("Canadian GAAP") applicable
to the circumstances that it covers, and references herein to
"generally accepted accounting principles" shall be interpreted
accordingly. All accounting and financial terms used herein with
respect to the Corporation, unless specifically provided to the
contrary, shall be interpreted and applied in accordance with
Canadian GAAP.
1.04 AMERICAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Where the
American Institute of Certified Public Accountants or any successor
thereto includes a statement in its handbook or any successor
thereto on a method or alternative methods of accounting or on a
standard or standards of auditing, such statement shall be regarded
as the only generally accepted accounting principle or principles or
generally accepted auditing standard or standards ("American GAAP")
applicable to the circumstances that it covers, and references
herein to "generally accepted accounting principles" shall be
interpreted accordingly. All accounting and financial terms used
herein with respect to the Parent, unless specifically provided to
the contrary, shall be interpreted and applied in accordance with
American GAAP.
ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION
2.01 PURCHASE OF CORPORATION SHARES. On the terms and subject to
the conditions set forth herein, the Shareholders hereby agree to
sell, transfer, convey, assign and deliver to the Purchaser, free
and clear of all Corporation Share Encumbrances (as defined in
paragraph 3.01.1), and the Purchaser hereby agrees to purchase,
acquire and accept from the Shareholders, all of the Corporation
Shares held by the Shareholders. At Closing, the Shareholders will
deliver to the Purchaser certificates evidencing all of the
Corporation Shares duly endorsed for transfer and such other
instruments as have been reasonably requested by the Purchaser to
transfer full legal and beneficial ownership of the Corporation
Shares to the Purchaser, free and clear of all Corporation Share
Encumbrances and the Corporation agrees to enter the Purchaser or
the Purchaser's nominee on the books of the Corporation as the
holder of the Corporation Shares and to issue one or more
replacement share certificates representing the Corporation Shares
to the Purchaser or the Purchaser's nominee. The Purchaser shall
pay the purchase price for the Corporation Shares in accordance with
the terms of Sections 2.02 of this Agreement.
2.02 CONSIDERATION FOR CORPORATION SHARES. The consideration to be
paid by the Purchaser for the Corporation Shares will be the
delivery of the Exchangeable Non-Voting Shares representing the
purchase price and the issuance by the Parent of 1,500,000 Parent
Preferred Shares to BCCO.
2.03 SUBSCRIPTION OF PARENT COMMON SHARES. The Parent
agrees to grant to each Shareholder:
a) such number of voting rights in the Parent as is equivalent to
the number of Exchangeable Non-Voting Shares held by each
Shareholder, as if each Shareholder held an equivalent number
of Parent Common Shares, and, subject to the remaining terms
of this Agreement, which voting rights will be exercisable by
the Shareholders through their holding Exchangeable Non-Voting
Shares in accordance with the Exchange and Voting Agreement;
b) the rights to exchange their Exchangeable Non-Voting Shares
for Parent Common Shares, such rights to be exercised in
accordance with the terms of the Exchange and Voting
Agreement.
To ensure that the Purchaser and the Parent has sufficient common
shares available to issue in exchange for Exchangeable Non-Voting
Shares, and as security for its covenant to do so, the Parent agrees
to issue the Parent Common Shares to the Trustee, at or shortly
following Closing, at the purchase price of $0.0001 per share; such
Parent Common Shares to be held in accordance with the Exchange and
Voting Agreement.
2.04 CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of
Maitland & Company on such date as the parties hereto may mutually
agree in writing (the "Closing Date").
2.05 PAYMENT OF PURCHASE PRICE. At Closing the Purchaser will
deliver to the Shareholders certificates representing the
Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting
Shares to be issued as fully paid and non-assessable, and registered
in the names of the Shareholders and in the denominations set forth
in Schedule "A" to the Exchange and Voting Agreement. On or shortly
following the Closing, the Parent will issue the Parent Preferred
Shares to BCCO and the Parent Common Shares to the Trustee, such
Parent Common Shares and Parent Preferred Shares to be issued as
fully paid and non-assessable, and registered in the name of the
Trustee in such denominations as the Trustee may request.
ARTICLE III: REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, each
Shareholder, as to himself, herself or itself and as to such of the
Corporation Shares owned by him, her or it (and not as to any other
Shareholder or to any of the Corporation Shares owned by any other
Shareholder) represents and warrants to the Buying Group as follows
and confirms that the Purchaser and the Parent are relying upon the
accuracy of each of such representations and warranties in
connection with the purchase of the Corporation Shares and the
completion of the transactions set out herein:
3.01 REPRESENTATIONS REGARDING THE CORPORATION SHARES.
3.01.1 Each Shareholder has good and marketable title to his
respective holdings in the Corporation Shares, free and clear of any
and all covenants, conditions, restrictions, voting trust
arrangements, rights of first refusal, options, Liens and adverse
claims and rights whatsoever (collectively, the "Corporation Share
Encumbrances"), and on the Closing Date, the Shareholders will
deliver to the Purchaser, good and marketable title to the
Corporation Shares free and clear of any and all Corporation Share
Encumbrances;
3.01.2 Each Shareholder has the full right, power and authority to
enter into this Agreement and each Shareholder has the full right,
power and authority to transfer, convey and sell to the Purchaser at
the Closing his respective holdings of the Corporation Shares sold
to the Purchaser by the Shareholders hereunder, and upon
consummation of the purchase, the Purchaser will acquire from the
Shareholders good and marketable title to the Corporation Shares
sold to the Purchaser by the Shareholders, free and clear of all
Corporation Share Encumbrances; and
3.01.3 No Shareholder is a party to, subject to or bound by any
agreement, judgment, order, writ, prohibition, injunction or decree
of any court or other Governmental Authority that would prevent the
execution or delivery to the Purchaser of this Agreement by any
Shareholder, the transfer, conveyance and sale of the Corporation
Shares sold by Shareholder to the Purchaser pursuant to the terms
hereof, or the consummation of the transactions under this Agreement
in accordance with the terms of this Agreement.
3.02 AUTHORIZATION. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided
for herein, by each Shareholder are within the respective powers of
each Shareholder and have been duly authorized by all necessary
action on the part of each Shareholder, respectively. This Agreement
has been duly and validly executed by each Shareholder and
constitutes a legal, valid and binding agreement of each
Shareholder, respectively, enforceable against each Shareholder in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and subject to general principles of
equity.
3.03 NON-CONTRAVENTION. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided
for herein, by each Shareholder, do not (a) contravene or conflict
with or constitute a material violation of any provision of any
Applicable Law binding upon or applicable to any Shareholder or the
Corporation Shares or (b) result in the creation or imposition of
any Lien.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, the
Corporation, represents and warrants to the Buying Group as follows:
4.01 EXISTENCE AND POWER. The Corporation is a corporation duly
incorporated, organized and validly existing under the laws of the
Province of Nova Scotia and has all corporate power and all
governmental licences, authorizations, permits, consents and
approvals required to carry on the Corporation Business as now
conducted and to own and operate the Corporation Business as now
owned and operated. The Corporation is not required to be qualified
to conduct business in any jurisdiction where the failure to be so
qualified, whether individually or in the aggregate, would have a
Material Adverse Effect. No Corporation proceedings have been taken
or authorized by the Corporation or any Shareholder or, to the
knowledge of the Corporation, by any other Person, with respect to
the bankruptcy, insolvency, liquidation, dissolution or winding-up
of the Corporation or with respect to any amalgamation, merger,
consolidation, arrangement or reorganization relating to the
Corporation.
4.02 AUTHORIZATION. The execution, delivery and performance by the
Corporation of this Agreement and the consummation thereby of the
transactions provided for herein are within the Corporation's powers
and have been duly authorized by all necessary action on its part.
This Agreement has been duly and validly executed by the Corporation
and constitutes a legal, valid and binding agreement of the
Corporation enforceable against it in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights and subject to general principles of equity.
4.03 CAPITAL STOCK.
4.03.1 The authorized capital stock of the Corporation consists
solely of 100,000,000 common shares without par value, of which
16,916,344 common shares are issued and outstanding and are held by
the Shareholders (the "Corporation Shares").
4.03.2 All such issued and outstanding Corporation Shares have been
duly and validly authorized and issued and are validly outstanding,
fully paid and non-assessable. The Corporation Shares represent all
of the issued and outstanding shares of the Corporation. The
Corporation does not hold any of the issued and outstanding
Corporation Shares in the treasury of the Corporation, and there are
not outstanding (i) any options, warrants, rights of first refusal
or other rights to purchase any shares of the Corporation except as
disclosed in Schedule "H") hereto, (ii) any securities convertible
into or exchangeable for such shares or (iii) any other commitments
of any kind for the issuance of additional shares of the Corporation
or options, warrants or other securities of the Corporation.
4.04 SUBSIDIARIES. The Corporation has no Subsidiaries.
4.05 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Corporation of this Agreement requires no action
by, consent or approval of, or filing with, any Governmental
Authority other than as expressly referred to in this Agreement.
4.06 NON-CONTRAVENTION. The execution, delivery and performance of
this Agreement by the Corporation, and the consummation by it of the
transactions provided for herein, do not and will not (a) contravene
or conflict with the articles or bylaws of the Corporation; (b)
contravene or conflict with or constitute a material violation of
any provision of any Applicable Law binding upon or applicable to
the Corporation, the Corporation Business or the Corporation Shares
and would not, individually or in the aggregate have a Material
Adverse Effect; (c) constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss
of any benefit to which the Corporation is entitled, under any
Corporation Contract to which the Corporation is a party or any
permit or similar authorization relating to the Corporation, the
Corporation Business or the Corporation Shares by which the
Corporation, the Corporation Business or the Corporation Shares may
be bound or affected; or (d) result in the creation or imposition of
any Lien.
4.07 FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES.
4.07.1 Attached hereto as Schedule "C" are true and complete copies
of the Corporation's Balance Sheet as of December 31,1998 and the
related statements of income and retained earnings and changes of
financial position for the year ended December 31, 1998
(collectively, the "Corporation's Financials").
4.07.2 The Corporation's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Corporation in accordance with Canadian GAAP and present fairly the
financial position, results of operations and statements of changes
in the Corporation's financial position as of the dates indicated or
the periods indicated; (ii) contain and reflect all necessary
adjustments and accruals for a fair presentation of its financial
position and the results of its operations for the periods covered
by said financial statements; (iii) contain and reflect adequate
provisions for all reasonably anticipated Liabilities (including
Taxes) with respect to the periods then ended and all prior periods;
and (iv) with respect to the Corporation Contracts and commitments
for the sale of goods or the provision of services by the
Corporation, contain and reflect adequate reserves for all
reasonably anticipated material losses and costs and expenses in
excess of expected receipts.
4.07.3 To the best of the knowledge of the Corporation, there are
no Liabilities of the Corporation other than: (i) any Liabilities
accrued as Liabilities on the Corporation's Balance Sheet; (ii)
Liabilities incurred since the date of the Corporation's Balance
Sheet that do not, and could not, individually or in the aggregate
have a Material Adverse Effect; and (iii) other Liabilities
disclosed in this Agreement or in any schedules attached hereto.
4.08 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, the
Corporation Business has been conducted in the ordinary course, and
there has not been:
(a) any event, occurrence, state of circumstances, or facts or
change in the Corporation or in the Corporation Business that
has had, or which the Corporation, after reasonable inquiry,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Corporation that has
had, or which the Corporation may, after reasonable inquiry,
expect to have, a Material Adverse Effect or (ii) any
incurrence, assumption or guarantee of any indebtedness for
borrowed money by the Corporation in connection with the
Corporation Business or otherwise;
(c) any (i) payments by the Corporation in respect of any
indebtedness of the Corporation for borrowed money or in
satisfaction of any Liabilities of the Corporation related to
the Corporation Business, other than in the ordinary course of
business or the guarantee by the Corporation of any of the
indebtedness of any other Person or (ii) creation, assumption
or sufferance of (whether by action or omission) the existence
of any Lien on any assets reflected on the Corporation's
Balance Sheet, other than Corporation Permitted Liens;
(d) any transaction or commitment made, or any Contract entered
into, by the Corporation, or any waiver, amendment,
termination or cancellation of any of the Corporation
Contracts by the Corporation, or any relinquishment of any
rights thereunder by the Corporation or of any other right or
debt owed to the Corporation, other than, in each such case,
actions taken in the ordinary course of business consistent
with past practice;
(e) any (i) grant of any severance, continuation or termination
pay to any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (ii) entering
into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement)
with any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (iii)
increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or
employment agreements with any director, officer, stockholder
or employee of the Corporation or any Affiliate of the
Corporation, (iv) increase in compensation, bonus or other
benefits payable or potentially payable to directors,
officers, stockholders or employees of the Corporation or any
Affiliate of the Corporation other than in the normal course
of business, (v) change in the terms of any bonus, pension,
insurance, health or other benefit plan of the Corporation or
(vi) representation of the Corporation to any employee or
former employee of the Corporation that the Purchaser promised
to continue any Corporation benefit plan after the Closing Date,
(f) any change by the Corporation in its accounting principles,
methods or practices or in the manner it keeps its books and
records;
(g) any distribution, dividend, bonus, management fee or other
payment by the Corporation to any officer, director,
stockholder or Affiliate of the Corporation or any of their
respective Affiliates or Associates; or
(h) any (i) material single capital expenditure or commitment, or
any group of related capital expenditures or commitments, or
(ii) sale, assignment, transfer, lease or other disposition of
or agreement to sell, assign, transfer, lease or otherwise
dispose of any asset or property other than in the ordinary
course of business.
4.09 PROPERTIES; CORPORATION MATERIAL LEASES; TANGIBLE ASSETS.
4.09.1 The Corporation does not own any real property.
4.09.2 The Corporation holds title to each of its properties and
assets free and clear of all Liens, adverse claims, easements,
rights of way, servitudes, zoning or building restrictions or any
other rights of others or other adverse interests of any kind,
including leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest
retention arrangements (collectively, "Corporation Encumbrances"),
except Corporation Permitted Liens.
4.09.3 All tangible properties and assets reflected on the
Corporation's Balance Sheet are in all material respects fit for the
purposes for which they are used and are in good operating condition
and repair and are adequate for the uses to which they are put, and
no material properties or assets necessary for the conduct of the
Corporation Business in substantially the same manner as the
Corporation Business has heretofore been conducted are in need of
replacement, maintenance or repair except for routine replacement,
maintenance and repair.
4.10 AFFILIATES. Other than as disclosed herein, there are no
Corporation Contracts which have been entered into within the past
five years or are currently in force and effect between the
Corporation and any Shareholder, or any Affiliate or Associate of
any Shareholder. The Corporation is not indebted to any Shareholder.
4.11 LITIGATION. There are no material proceedings pending or, to
the knowledge of the Corporation, threatened against or affecting
the Corporation or the Corporation Business or that seeks to
prevent, enjoin, alter or delay the transactions contemplated by
this Agreement and (ii) there is no existing order, judgment or
decree of any Governmental Authority naming the Corporation as an
affected party which has not been paid or discharged in full.
4.12 MATERIAL CONTRACTS. All Corporation Contracts are legal,
valid and binding obligations of the Corporation and each other
Person who is a party thereto, enforceable against the Corporation
and each such Person in accordance with its terms, and none are
subject to any material default thereunder.
4.13 REQUIRED CONSENTS. There are no governmental or other
registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications or waivers required under
Applicable Law or otherwise required to be obtained or made with any
Governmental Authority to be obtained by the Corporation or any
Shareholder by virtue of the execution and delivery of this
Agreement and the consummation of the transactions provided for
herein for any reason; nor are there any Corporation Contracts with
respect to which the consent of the other party or parties thereto
must be obtained by the Corporation or any Shareholder by virtue of
the execution and delivery of this Agreement and the consummation of
the transactions provided for herein (the "Required Consents").
4.14 CORPORATION INTELLECTUAL PROPERTY.
4.14.1 Schedule "F" sets forth a complete and correct list of each
patent, patent application and invention, trademark, tradename,
trademark or tradename registration or application, copyright or
copyright registration or application for copyright registration,
and each licence or licensing agreement, for any of the foregoing
relating to the Corporation Business as conducted by the Corporation
or held by the Corporation (the "Corporation Intellectual Property
Rights"). Corporation Intellectual Property Rights also include any
trade secrets that are material to the conduct of the Corporation
Business in the manner that the Corporation Business has heretofore
been conducted.
4.14.2 The Corporation has not during the three years preceding the
date of this Agreement been a party to any proceeding, nor to the
knowledge of the Corporation, is any proceeding threatened as to
which there is a reasonable possibility of a determination adverse
to the Corporation, involving a claim of infringement by any Person
(including any Governmental Authority) of any Corporation
Intellectual Property Right. No Corporation Intellectual Property
Right is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the
Corporation or restricting the licensing thereof by the Corporation
to any Person. The Corporation has no knowledge that would cause
such Person to believe that the use of the Corporation Intellectual
Property Rights or the conduct of the Corporation Business conflicts
with, infringes upon or violates any patent, patent licence, patent
application, trademark, tradename, trademark or tradename
registration, copyright, copyright registration, service mark, brand
mark or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes, or any similar
rights, of any Person.
4.14.3 To the knowledge of the Corporation, the Corporation either
owns the entire right, title and interest in, to and under, or has
acquired an exclusive licence to use, any and all patents,
trademarks, trade names, brand names and copyrights that are
material to the conduct of the Corporation Business in the manner
that the Corporation Business has heretofore, been conducted. The
Corporation Intellectual Property Rights are in full force and
effect and have not been used or enforced or failed to be used or
enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Corporation
Intellectual Property Rights. All registrations and filings
necessary to preserve the rights of the Corporation in and to the
Corporation Intellectual Property Rights have been made.
4.15 TAX MATTERS.
4.15.1 The Corporation has prepared and filed all Tax Returns on
time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such Tax
Return was correct and complete. True copies of all Tax Returns
prepared and filed by the Corporation during the past three years
and that the Purchaser has requested have been given to the
Purchaser on or before the date of this Agreement.
4.15.2 The Corporation has paid all Taxes due and payable by it and
has paid all assessments and reassessments it has received in
respect of Taxes. The Corporation has paid all Tax installments due
and payable by it as at December 31, 1998.
4.15.3 The Corporation has withheld from each payment made to any of
its present or former employees, officers and directors, and to all
persons who are non-residents of Canada for the purposes of the
Income Tax Act (Canada) all amounts required by Applicable Law and
has remitted such withheld amounts within the prescribed periods to
the appropriate Governmental Authority. The Corporation has
remitted all Canada Pension Plan contributions, employment insurance
premiums, employer health taxes and other Taxes payable by it in
respect of its employees and has remitted such amounts to the proper
Governmental Authority within the time required by Applicable Law.
The Corporation has charged, collected and remitted on a timely
basis all Taxes as required by Applicable Law on any sale, supply or
delivery whatsoever, made by the Corporation.
4.15.4 The Corporation Business is the only business ever conducted
by the Corporation. The non-capital losses (as defined in the Tax
Act and any applicable provincial taxing statute) were incurred by
the Corporation only in carrying on the Corporation Business. The
Corporation is not prevented by virtue of any amalgamation or
dissolution from carrying back against income earned by it prior to
the Closing Date, any losses incurred by it after the Closing Date.
4.15.5 The Corporation has paid all Taxes imposed by applicable
legislation in the province of Nova Scotia on the acquisition of its
tangible personal property as defined in applicable legislation in
the province of Nova Scotia, and none of its tangible personal
property has been transferred at any time on a tax-exempt basis
under applicable legislation of the Province of Nova Scotia or any
predecessor legislation thereof. The foregoing is accurate, mutatis
mutandis, with respect to all sales or transfer Taxes imposed under
comparable legislation of other provinces.
4.16 SECURITIES LEGISLATION. The Corporation is a private issuer
within the meaning of the Securities Act (Nova Scotia) and the sale
of the Corporation Shares by the Shareholders to the Purchaser is
made in compliance with the exempt takeover-bid provisions of such Act.
4.17 FULL DISCLOSURE. The information contained in the documents,
certificates and written statements (including this Agreement and
the schedules and exhibits hereto) furnished to the Purchaser by or
on behalf of the Corporation with respect to the Corporation
(including the Corporation Business and the results of operations,
financial condition and prospects of the Corporation) for use in
connection with this Agreement or the transactions contemplated by
this Agreement is true and complete in all material respects and
does not, to the best of the knowledge of the Corporation after
conducting an inquiry which a reasonably prudent person would make
under the circumstances, omit to state any material fact necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. There is
no fact known to the Corporation the Corporation that has not been
disclosed to the Purchaser by the Corporation in writing that has
had a Material Adverse Effect on or, so far as the Corporation can
now foresee, could be reasonably likely to have a Material Adverse
Effect on the Corporation (including the Corporation Business and
the results of operations, financial condition or prospects of the
Corporation).
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE BUYING GROUP
As an inducement to the Corporation and each Shareholder to enter
into this Agreement and to consummate the transactions provided for
herein, the Purchaser and the Parent, jointly and severally,
represent and warrant to the Corporation and each Shareholder that:
5.01 EXISTENCE AND POWER. Each of the Purchaser and the Parent is
a corporation duly incorporated, organized and validly existing
under the laws of the Province of Nova Scotia and the State of
Delaware respectively and each has all corporate power and all
governmental licences, authorizations, permits, consents and
approvals required to carry on the Buying Group Business as now
conducted and to own and operate their respective businesses as now
owned and operated. The Purchaser and the Parent are not required
to be qualified to conduct business in any jurisdiction where the
failure to be so qualified, whether individually or in the
aggregate, would have a Material Adverse Effect. No proceedings
have been taken or authorized by the Purchaser or the Parent or, to
the knowledge of the Purchaser or the Parent, by any other Person,
with respect to the bankruptcy, insolvency, liquidation, dissolution
or winding-up of the Purchaser or the Parent or with respect to any
amalgamation, merger, consolidation, arrangement or reorganization
relating to the Purchaser or the Parent.
5.02 AUTHORIZATION. The execution, delivery and performance by
each of the Purchaser and the Parent of this Agreement and the
consummation thereby of the transactions provided for herein are
within the powers of the Purchaser and the Parent and have been duly
authorized by all necessary action on their part. This Agreement has
been duly and validly executed by each of the Purchaser and the
Parent and constitutes a legal, valid and binding agreement of the
Purchaser and the Parent enforceable against them in accordance with
its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and subject to general principles of equity.
5.03 CAPITAL STOCK OF THE PURCHASER.
5.03.1 The authorized capital stock of the Purchaser consists of
100,000,000 common shares no par value of which one common share is
issued and outstanding on the date hereof to and in the name of the
Parent and 20,000,000 Exchangeable Non-Voting Shares with no par
value of which no shares are issued and outstanding. Each
Exchangeable Non-Voting Share shall:
(a) be non-voting as to matters concerning the Purchaser (such
that all voting shares of the Purchaser will be and remain
held by the Parent); however, as stated above in paragraph
2.03, the holder of Exchangeable Non-Voting Shares will be
entitled to voting rights in the Parent as is equivalent to
the number of Exchangeable Non-Voting Shares held by each
Shareholder as if each Shareholder held an equivalent number
of Parent Common Shares;
(b) entitle the holder thereof (the "Holder") to dividend rights
equal, after conversion into Canadian dollars based on the
Canadian/U.S. exchange rate in effect on the record date
thereof, to the per share dividend rights of Parent Common
Shares;
(c) entitle the Holder, on a liquidation of the Purchaser, to
receive in exchange for each Exchangeable Non-Voting Share one
Parent Common Shares for a period ending on the twenty-fifth
anniversary of the Closing Date; and
(d) entitle the Holder, at his election from time to time for a
period ending on the twenty-fifth anniversary of the Closing
Date, upon 30 days' written notice given by such Holder to the
Purchaser, to require the Purchaser to redeem any or all
Exchangeable Non-Voting Shares and to exchange therefor, on a
share for share basis, Parent Common Shares (the "Right of
Retraction"),
5.03.2 The Parent and the Purchaser shall be entitled to deduct and
withhold from the consideration otherwise payable to any Holder of
Exchangeable Non-Voting Shares, including any dividend payments in
respect of the Exchangeable Non-Voting Shares, such amount as the
Parent or the Purchaser is required or permitted to deduct and
withhold with respect to such payment under the United States
Internal Revenue Code, the Income Tax Act (Canada) or any provision
of state, provincial, local or foreign tax law. The Parent and the
Purchaser shall not initially withhold any United States Tax on
dividends paid on the Exchangeable Non-Voting Shares. However, if
any United States taxing authority determines that the Parent or the
Purchaser is liable for United States withholding Tax on dividends
paid to the Holders on the Exchangeable Non-Voting Shares, the
Purchaser shall be entitled to reduce the amount of any future
dividends to be paid to the Holders by such withholding obligation.
To the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes hereof as having been paid to the
Holder of Exchangeable Non-Voting Shares in respect of which such
deduction and withholding was made; provided, however, that such
withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or permitted
to be deducted or withheld from any payment to a Holder exceeds the
cash portion of the consideration otherwise payable to the Holders,
the Parent upon at least ten (10) days' prior written notice to such
Holder, is hereby authorized to sell or otherwise dispose of at fair
market value such portion of such non-cash consideration otherwise
payable to the Holder as is necessary to provide sufficient funds to
the Parent in order to enable it to comply with such deduction or
withholding requirement and the Parent shall give an accounting to
the Holder with respect thereof and any balance of such proceeds of
sale.
5.03.3 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Purchaser, (ii) any securities convertible into or exchangeable
for such shares or (iii) any other commitments of any kind for the
issuance of additional shares of the Purchaser or options, warrants
or other securities of the Purchaser.
5.04 CAPITAL STOCK OF THE PARENT.
5.04.1 The authorized capital stock of the Parent consists
solely of 100,000,000 common shares, $.0001 par value per share
("Parent Common Shares") and 20,000,000 preferred shares which may
be issued in classes or series at the discretion of the Board of
Directors of the Parent (the "Preferred Shares") of which 5,000,000
Parent Common Shares and nil Preferred Shares are issued and
outstanding on the date hereof. The Parent further warrants that it
will cause all but 150,000 of the Parent Common Shares to be
canceled on or before the Closing Date.
5.04.2 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Parent, (ii) any securities convertible into or exchangeable for
such shares or (iii) any other commitments of any kind for the
issuance of additional shares of the Parent or options, warrants or
other securities of the Parent.
5.05 GENERAL PROVISIONS OF THE CAPITAL OF THE PURCHASER AND THE
PARENT.
5.05.1 All of the issued and outstanding shares in the respective
capital stocks of the Purchaser and the Parent have been duly and
validly authorized and issued and are validly outstanding, fully
paid and non-assessable. The Purchaser does not hold any of the
issued and outstanding shares in the treasury of the Purchaser or
the Parent, the Parent does not hold any of the issued and
outstanding shares in the treasury of the Parent and there are not
outstanding (i) any options, warrants, rights of first refusal or
other rights to purchase any shares of the Purchaser or the Parent,
(ii) any securities convertible into or exchangeable for such shares
or (iii) any other commitments of any kind for the issuance of
additional shares of the Purchaser or Parent or options, warrants or
other securities of the Purchaser or Parent other than as disclosed
in Article 5.03.1 herein.
5.05.2 All of the Exchangeable Non-Voting Shares, the Parent Common
Shares and the Parent Preferred Shares which will be issued
hereunder will be fully paid and non-assessable, subject to such
terms and provisions as set forth in the Exchange and Voting
Agreement, and the Purchaser and Parent's articles of incorporation
and the Directors Resolutions relating to the issuance of the Parent
Common Shares and Parent Preferred Shares, as applicable, and all
such shares will be issued free and clear of all Liens, charges,
encumbrances and trading restrictions other than as may be imposed
by Applicable Law.
5.06 SUBSIDIARIES. The Purchaser has no Subsidiaries and the only
Subsidiary of the Parent is the Purchaser.
5.07 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Buying Group of this Agreement requires no action
by, consent or approval of, or filing with, any Governmental
Authority other than as expressly referred to in this Agreement.
5.08 NON-CONTRAVENTION. The execution, delivery and performance of
this Agreement by the Buying Group, and the consummation by it of
the transactions provided for herein, do not and will not (a)
contravene or conflict with the respective articles or bylaws of the
Buying Group; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Buying Group, the Buying Group Business or
the outstanding shares in their respective capital stocks and would
not, individually or in the aggregate have a Material Adverse
Effect; (c) constitute a default under or give rise to any right of
termination, cancellation or acceleration of, or to a loss of any
benefit to which the Purchaser or the Parent are entitled, under any
Buying Group Contract to which the Purchaser or the Parent is a
party or any Permit or similar authorization relating to the
Purchaser or Parent, the Buying Group Business or the outstanding
shares in their respective capital stocks may be bound or affected;
or (d) result in the creation or imposition of any Lien.
5.09 FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES.
5.09.1 Attached hereto as Schedule "D" are true and complete copies
of the Parent's Balance Sheet, as of December 31, 1998 and the
related statements of income and retained earnings and changes of
financial position, for the year ended December 31, 1998
(collectively, the "Parent's Financials").
5.09.2 The Parent's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Parent in accordance with American GAAP and present fairly the
financial position, results of operations and statements of changes
in the Parent's financial position as of the dates indicated or the
periods indicated; (ii) contain and reflect all necessary
adjustments and accruals for a fair presentation of its financial
position and the results of its operations for the periods covered
by said financial statements; (iii) contain and reflect adequate
provisions for all reasonably anticipated liabilities (including
Taxes) with respect to the periods then ended and all prior periods;
and (iv) with respect to Buying Group Contracts and commitments for
the sale of goods or the provision of services by the Parent,
contain and reflect adequate reserves for all reasonably anticipated
material losses and costs and expenses in excess of expected receipts.
5.09.3 To the best of the knowledge of the Buying Group, there are
no Liabilities of the Buying Group other than: (i) any Liabilities
accrued as Liabilities on the Parent's Balance Sheet; (ii)
Liabilities incurred since the date of the Parent's Balance Sheet
that do not, and could not, individually or in the aggregate have a
Material Adverse Effect; (iii) other Liabilities disclosed in this
Agreement or in any schedules attached hereto; and (iv) the Tax on
reserves.
5.10 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, the
Buying Group Business has been conducted in the ordinary course, and
there has not been:
(a) any event, occurrence, state of circumstances, or facts or
change in the Purchaser or the Parent or in the Buying Group
Business that has had, or which the Purchaser or the Parent,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Purchaser or the
Parent that has had, or which the Purchaser or the Parent
expect to have, a Material Adverse Effect or (ii) any
incurrence, assumption or guarantee of any indebtedness for
borrowed money by the Purchaser or the Parent in connection
with the Buying Group Business or otherwise;
(c) any (i) payments by the Purchaser or Parent in respect of any
indebtedness of the Purchaser or Parent for borrowed money or
in satisfaction of any Liabilities of the Purchaser or Parent
related to the Buying Group Business, other than in the
ordinary course of business or the guarantee by the Purchaser
or the Parent of any of the indebtedness of any other Person
or (ii) creation, assumption or sufferance of (whether by
action or omission) the existence of any Lien on any assets
reflected on the Parent's Balance Sheet, other than Buying
Group Permitted Liens;
(d) any transaction or commitment made, or any Contract entered
into, by the Buying Group, any waiver, amendment, termination
or cancellation of any Contract by the Buying Group, or any
relinquishment of any rights thereunder by the Buying Group or
of any other right or debt owed to the Buying Group, other
than, in each such case, actions taken in the ordinary course
of business consistent with past practice;
(e) any (i) grant of any severance, continuation or termination
pay to any director, officer, stockholder or employee of the
Buying Group or any Affiliate of the Buying Group, (ii)
entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing
agreement) with any director, officer, stockholder or employee
of the Buying Group or any Affiliate of the Buying Group,
(iii) increase in benefits payable or potentially payable
under any severance, continuation or termination pay policies
or employment agreements with any director, officer,
stockholder or employee of the Buying Group or any Affiliate
of the Buying Group, (iv) increase in compensation, bonus or
other benefits payable or potentially payable to directors,
officers, stockholders or employees of the Buying Group or any
Affiliate of the Buying Group, (v) change in the terms of any
bonus, pension, insurance, health or other benefit plan of the
Buying Group or (vi) representation of the Buying Group to any
employee or former employee of the Buying Group that the
Buying Group promised to continue any benefit plan after the
Closing Date,
(f) any change by the Buying Group in its accounting principles,
methods or practices or in the manner it keeps its books and
records;
(g) any distribution, dividend, bonus, management fee or other
payment by the Buying Group to any of their respective
officers, directors, stockholders or Affiliates of the Buying
Group or any of their respective Affiliates or Associates; and
(h) any (i) material single capital expenditure or commitment, or
any group of related capital expenditures or commitments by
either the Purchaser or the Parent or (ii) material sale,
assignment, transfer, lease or other disposition of or
agreement to sell, assign, transfer, lease or otherwise
dispose of any asset or property by either of the Purchaser or
the Parent other than in the ordinary course of business.
5.11 PROPERTIES; MATERIAL LEASES; TANGIBLE ASSETS. Neither the
Purchaser nor the Parent own or lease any real property or material
assets.
5.12 AFFILIATES. There are no contracts between either the Parent
or Purchaser and any of its shareholders, or any Affiliate or
Associate of any of its shareholders. There is no indebtedness of
either the Parent or the Purchaser to any of its shareholders, or to
any Affiliate or Associate of any of its shareholders.
5.13 LITIGATION. There is no proceeding pending or, to the
knowledge of the Buying Group, threatened against or affecting the
Buying Group or the Buying Group Business or that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this
Agreement, and there is no existing order, judgment or decree of any
Governmental Authority naming either the Purchaser or the Parent as
an affected party which has not been paid or discharged in full.
5.14 MATERIAL CONTRACTS. The Buying Group is not party to any
Buying Group Contract other than as specified herein.
5.15 COMPLIANCE WITH APPLICABLE LAWS. The operation of the Buying
Group Business (i) has not violated or infringed, except for
violations or infringements that have been cured and the prior
existence of which could not, individually or in the aggregate,
reasonably be expected to have an adverse effect on either the
Purchaser or the Parent and (ii) does not in any material respect
violate or infringe any Applicable Law, the terms of any Permit or
any order, writ, injunction or decree of any Governmental Authority
including but not limited to, the 33 Act, the 34 Act, the Rules and
Regulations of the SEC, or the Securities Laws and Regulations of
any state. The Parent is not an investment company as defined in, or
otherwise subject to regulation under, the Investment Company Act of
1940. The Parent is required to file reports pursuant to Section
12(g) of the 34 Act and is now and as of the Closing Date will be
current in its filings.
5.16 BUYING GROUP EMPLOYMENT AGREEMENTS; AND EMPLOYEE BENEFITS.
5.16.1 There are no employment, consulting, severance pay,
continuation pay, termination pay, indemnification agreements,
collective agreements, employee benefit plans or other similar
agreements of any nature whatsoever affecting either the Purchaser
or the Parent.
5.16.2 The Buying Group and its Affiliates have complied and are
currently complying, in respect of all employees of the Buying Group
and its Affiliates, with all Applicable Laws respecting employment
and employment practices and the protection of the health and safety
of employees, except for such instances which are not, in the
aggregate, material.
5.17 INTELLECTUAL PROPERTY. The Buying Group has no interest in
any patent, patent application and invention, trademark, trade name,
trademark or trade name registration or application, copyright or
copyright registration or application for copyright registration.
5.18 TAX MATTERS.
5.18.1 Except as disclosed in the Parent's Financials, the Purchaser
and the Parent have prepared and filed all Tax Returns on time with
all appropriate Governmental Authorities which were required to be
filed on or prior to the Closing Date. Each such Tax Return was
correct and complete.
5.18.2 The Purchaser is not a registrant for the purposes of the
goods and services tax provided for under the Tax Act.
5.18.3 The Purchaser is a taxable Canadian Corporation, as
that term is defined in the Tax Act.
5.18.4 The Purchaser has paid all applicable sales and retail taxes
in the Province of Nova Scotia, and none of its tangible personal
property has been transferred at any time on a tax-exempt basis
under applicable legislation in the Province of Nova Scotia. The
foregoing is accurate, mutatis mutandis, with respect to all sales
or transfer Taxes imposed under comparable legislation of other
provinces.
5.18.5 The Purchaser has never acquired or had the use of any of its
assets from a Person (a "Related Person") with whom the Purchaser
was not dealing at arm's length, within the meaning of the Tax Act.
The Purchaser has never disposed of any asset to a Related Person
for proceeds less than the fair market value of that asset. The
Purchaser is not a party to or bound by any agreement with, is not
indebted to, and no amount is owing to the Purchaser by any Related
Person, not dealing at arm's length, within the meaning of the Tax
Act, with the Purchaser.
5.18.6 For the purposes of the Tax Act the Purchaser and the
Shareholders hereby covenant and agree to elect jointly under
Subsection 85(1) of the Tax Act, by completing and filing with the
Department of National Revenue the prescribed form T2057 within the
prescribed time for the purposes of the Tax Act with respect to the
sale by the Shareholders to the Purchaser of the Corporation Shares
and further agree to transfer the Corporation Shares at an agreed
amount equal to the adjusted cost base of the Corporation Shares to
the Shareholders for purposes of the Tax Act or such greater amount
determined by the Shareholders (the "Elected Amount").
5.18.7 If at any time after the Closing Date the
Shareholders determine that either:
(a) it is necessary or desirable to change the Elected Amount; or
(b) the Tax Act deems the Elected Amount to be an amount which is
different than the amount agreed upon between the Shareholder
and the Purchaser,
then the Shareholder and the Purchaser shall do all things
reasonably necessary to reflect such change including, for example,
filing an amended election pursuant to subsection 85(1) of the Tax Act.
5.19 ISSUANCE OF SHARES.
5.19.1 The issuance of the Parent Common Shares and the Parent
Preferred Shares by the Parent, and the terms and provisions of the
Parent Common Shares and the Parent Preferred Shares, will not
violate any provisions of the Parent's articles or bylaws or any
Applicable Law, nor will the voting rights attached to the Parent
Common Shares derogate from any rights under Applicable Law.
5.19.2 The issuance of the Exchangeable Non-Voting Shares by the
Purchaser, and the terms and provisions of the Exchangeable
Non-Voting Shares, will not violate any provisions of the
Purchaser's articles or bylaws or any Applicable Law.
5.20 NASD STATUS. The Parent warrants that the parent
has not made an application to the National Association of
Securities Dealer for an unpriced quotation of its common shares,
including the Parent Common Shares, on the over-the-counter bulletin
board in the United States.
5.21 FULL DISCLOSURE. The information contained in the documents,
certificates and written statements (including this Agreement and
the schedules and exhibits hereto) furnished to the Shareholders by
or on behalf of the Buying Group with respect to each of the
Purchaser and the Parent (including the Buying Group Business and
the respective results of operations, financial condition and
prospects of the Purchaser and the Parent) for use in connection
with this Agreement or the transactions contemplated by this
Agreement is true and complete in all material respects and does
not, to the best of the knowledge of each Shareholder after
conducting an inquiry which a reasonably prudent person would make
under the circumstances, omit to state any material fact necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. There is
no fact known to the Purchaser or the Parent or any Shareholder that
has not been disclosed to the Shareholders by the Buying Group in
writing that has had a Material Adverse Effect on or, so far as the
Buying Group can now foresee, could be reasonably likely to have a
Material Adverse Effect on the Buying Group (including the Buying
Group Business and the respective results of operations, financial
condition or prospects of the Buying Group).
ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS
6.01 CONDUCT OF THE BUSINESS. During the Interim Period, other
than with the express written approval of the Purchaser, the
Corporation shall conduct the Corporation Business in the ordinary
course consistent with past practice and shall use its best efforts
to preserve intact the organization, relationships with third
parties and goodwill of the Corporation and keep available the
services of the present officers, employees, agents and other
personnel of the Corporation Business.
6.01.1 Without limiting in any way the importance of the foregoing,
during the Interim Period, other than with the express written
approval of the Purchaser, the Corporation shall not, and each
Shareholder shall not cause the Corporation to:
(a) adopt any material change in any method of accounting or
accounting practice used by the Corporation other than by
reason of a concurrent change in generally accepted accounting
principles;
(b) amend its articles or bylaws;
(c) sell, mortgage, pledge or otherwise dispose of any substantial
assets or properties of the Corporation;
(d) declare, set aside or pay any management fee or dividend or
make any other distribution with respect to the capital stock
of the Corporation or otherwise make a distribution or payment
to any Shareholder;
(e) amalgamate, merge or consolidate with or agree to amalgamate,
merge or consolidate with, or purchase or agree to purchase
all or substantially all of the assets of, or otherwise
acquire, any corporation, partnership or other business
organization or division thereof;
(f) authorize for issuance, issue, sell or deliver any additional
shares of its capital stock of any class or any securities or
obligations convertible into shares of its capital stock of
any class or commit to doing any of the foregoing;
(g) split, combine or reclassify any shares of the capital stock
of any class of the Corporation or redeem or otherwise
acquire, directly or indirectly, any shares of such capital
stock;
(h) incur or agree to incur any debt or guarantee any debt for
borrowed money, including any debt to any Shareholder, or to
any Affiliate or Associate of any Shareholder, except debt
incurred in the ordinary course of business consistent with
past practice;
(i) make any loan, advance or capital contribution to or
investment in any person other than loans, advances and
capital contributions to or investments in joint ventures or
other similar arrangements in which the Corporation has an
equity interest in the ordinary course of business and travel
advances made in the ordinary course of business by the
Corporation to its employees to meet business expenses
expected to be incurred by such employees;
(j) enter into any settlement with respect to any Proceeding or
consent to any order, decree or judgment relating to or
arising out of any such Proceeding;
(k) take any action to terminate, dismiss or cause the retirement
of any key employee of the Corporation;
(l) fail in any material respect to comply with any Applicable
Laws; or
(m) make, or make any commitments for, capital expenditures
exceeding $25,000 for any individual commitment or $100,000
for all such commitments taken in the aggregate.
6.01.2 During the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall:
(a) file all Canadian, United States, foreign, federal, state,
provincial and local Tax Returns required to be filed and make
timely payment of all applicable Taxes when due;
(b) promptly notify the Purchaser in writing of any action or
circumstance that results in, or could reasonably be expected
to result in, a Material Adverse Effect or the occurrence of
any breach by the Corporation or any Shareholder of any
representation or warranty, or any covenant or agreement
contained in this Agreement; and
(c) promptly notify the Purchaser in writing of the commencement
of any proceeding or the threat thereof by or against the
Corporation or any Shareholder.
6.02 MAINTENANCE OF CORPORATION INSURANCE POLICIES. On and after
the Closing Date, the Corporation shall not take or fail to take any
action if such action or inaction would adversely affect the
applicability of any insurance in effect on the date hereof that
covers all or any material part of the assets of the Corporation or
the Business.
6.03 TAX ELECTION. The Corporation shall not file an election
pursuant to subsection 256(9) of the Income Tax Act (Canada) or any
equivalent provincial provision.
ARTICLE VII: COVENANTS OF THE BUYING GROUP
7.01 APPOINTMENT OF DIRECTORS AND OFFICERS. At Closing, the
following persons will be appointed officers and directors of the
Parent so that the directors and officers of the Parent will be:
NAME POSITION
James Anthony Director, Chairman and Chief
Executive Officer
Gary Hannah Director, President
and Chief Executive
Officer
Bryan Maclean Director, Vice-President and
Chief Technology Officer
Cory Reid Vice President
James Enman Chief Administration Officer
and Secretary
7.02 CONDUCT OF BUSINESS. During the Interim Period, the Buying
Group will conduct the Buying Group Business in the ordinary course
consistent with past practice and shall use its best efforts to
preserve intact the organization, relationships with third parties
and goodwill of the Buying Group and keep available the services of
the present officers, directors, employees, agents and other
personnel of the Buying Group Business; and without limiting in any
way the importance of the foregoing, the Buying Group shall not
undertake any of those matters referred to in sections 6.01.1 and
6.01.2, and all such clauses thereof shall apply mutatis mutandis to
the Buying Group.
7.03 PRIORITY. Notwithstanding any term of the Purchaser's bylaws,
memorandum and articles to the contrary, the terms and provisions of
this Agreement and the Exchange and Voting Agreement shall prevail
such that the directors of the Purchaser will only authorize the
exchange of the Exchangeable Non-Voting Shares for shares in the
Parent Common Shares in accordance with the terms of the Exchange
and Voting Agreement.
ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES
8.01 FURTHER ASSURANCES. Each party hereto agrees to execute and
deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably
necessary or desirable (including obtaining all required consents)
in order to evidence the consummation or implementation of the
transactions provided for under this Agreement.
8.02 CERTAIN FILINGS. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required or reasonably
appropriate, or any action, consent, approval or waiver from any
party to any Contract is required or reasonably appropriate, in
connection with the consummation of the transactions contemplated by
this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the
parties hereto shall furnish information required in connection
therewith and seek timely to obtain any such actions, consents,
approvals or waivers.
8.03 REGISTRATION. All parties acknowledge and agree that the
Parent is a reporting issuer in the United States, and all of the
Parent Common Shares has been registered under the 33 Act; and all
parties further acknowledge and agree that neither the Parent nor
the Purchaser is a reporting issuer in any province of Canada, and
the Exchangeable Non-Voting Shares, Parent Common Shares and Parent
Preferred Shares will be subject to such resale restrictions as
imposed by the Applicable Law of the jurisdiction in which a
Shareholder is resident
8.04 FORM SB-2. As soon as practicable after the Closing the
Parent will file a Form SB-2 registration statement and related
documents (the "Registration Documents") with the SEC which, upon
the effective date of the registration statement which is part of
the Registration Documents, will register certain shares of the
Parent, as determined by the Corporation.
ARTICLE IX: CONDITIONS TO CLOSING
9.01 CONDITIONS TO OBLIGATION OF THE BUYING GROUP. The obligations
of the Buying Group to consummate the Closing are subject to the
satisfaction of each of the following conditions:
(a) (i) the Corporation and each Shareholder shall have performed
and satisfied each of their respective obligations hereunder
required to be performed and satisfied by them on or prior to
the Closing Date, (ii) each of the representations and
warranties of the Corporation and each Shareholder contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such
representation or warranty misleading when made and shall be
true and correct and contain no misstatement or omission that
would make any such representation or warranty misleading at
and as of the Closing with the same force and effect as if
made as of the Closing, and (iii) the Buying Group shall have
received certificates signed by each Shareholder and a duly
authorized executive officer of the Corporation to the
foregoing effect and to the effect that the conditions
specified within this Section 9.01(a) have been satisfied.
(b) All Required Consents for the transactions contemplated by
this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to the
Corporation, the Business, the Corporation Shares or the
Buying Group (or any of its Affiliates or Associates) after
the Closing that would be materially burdensome upon the
Corporation, the Business, the Corporation Shares or the
Buying Group (or any of its Affiliates or Associates) or their
respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said
businesses, as of the date hereof, would be reasonably
expected to be conducted after the Closing Date. All such
approvals shall be in effect, and no proceedings shall have
been instituted or threatened by any Governmental Authority or
other Person with respect thereto as to which there is a
material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify
the terms of, any such approval; all applicable waiting
periods with respect to such approvals shall have expired; and
all conditions and requirements prescribed by Applicable Law
or by such approvals to be satisfied on or prior to the
Closing Date shall have been satisfied to the extent necessary
such that all such approvals are, and will remain, in full
force and effect assuming continued compliance with the terms
thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable
Law. The operation of the Business shall not have violated or
infringed, or be in violation or infringement of any
Applicable Law or any order, writ, injunction or decree of any
Governmental Authority, where such violations and
infringements, individually or in aggregate, have resulted in,
or could reasonably be expected to result in a Material
Adverse Effect.
(d) Since the date hereof, there shall not have been any event,
occurrence, development or state of circumstances or facts or
change in the Corporation or the Corporation Business,
including any damage, destruction or other casualty loss
affecting the Corporation or the Corporation Business that has
had or that may be reasonably expected to have, either alone
or together with all such events, occurrences, developments,
states of circumstances or facts or changes, a Material
Adverse Effect on the Corporation.
9.02 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of each Shareholder to consummate the Closing are
subject to the satisfaction of each of the following conditions:
(a) (i) the Buying Group shall have performed and satisfied each
of its obligations hereunder required to be performed and
satisfied by it on or prior to the Closing Date; (ii) each of
the representations and warranties of the Buying Group
contained herein shall have been true and correct and
contained no misstatement or omission that would make any such
representation or warranty misleading when made and shall be
true and correct and contain no misstatement or omission that
would make any such representation or warranty misleading at
and as of the Closing with the same force and effect as if
made as of the Closing and (iii) each Shareholder shall have
received a certificate signed by a duly authorized executive
officer of the Buying Group to the foregoing effect and to the
effect that the conditions specified within this Section
9.02(a) have been satisfied.
(b) All Required Consents for the transactions contemplated by
this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to any
Shareholder (or any of their respective Affiliates or
Associates) after the Closing that would be materially
burdensome upon any such Person. All such approvals shall be
in effect, and no Proceedings shall have been instituted or
threatened by any Governmental Authority with respect thereto
as to which there is a material risk of a determination that
would terminate the effectiveness of, or otherwise materially
and adversely modify the terms of, any such approval. All
applicable waiting periods shall have expired, and all
conditions and requirements such approvals to be satisfied on
or prior to the Closing extent necessary such that all such
approvals are, and will remain, in full force and effect
assuming continued compliance with the terms thereof after the
Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable
Law. No temporary restraining order, preliminary or permanent
injunction, cease and desist order or other order issued by
any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or
prohibition preventing the transfer and exchange contemplated
hereby or the consummation of the Closing, or imposing Damages
in respect thereto, shall be in effect, and there shall be no
pending actions or proceedings by any Governmental Authority
(or determinations by any Governmental Authority) or by any
other Person challenging or seeking to materially restrict or
prohibit the transfer and exchange contemplated hereby or the
consummation of the Closing.
(d) Since the date hereof, there shall not have been any event,
occurrence, development or state of circumstances or facts or
change in the Buying Group or the Buying Group Business,
including any damage, destruction or other casualty loss
affecting the Buying Group or the Buying Group Business that
has had or that may be reasonably expected to have, either
alone or together with all such events, occurrences,
developments, states of circumstances or facts or changes, a
Material Adverse Effect on the Buying Group.
(e) Since the date hereof, there shall not have been any:
i) change in the capital structure of either the
Purchaser or the Parent, other than as to effect the
creation or issuance of the Exchangeable Non-Voting
Shares or the Parent Common Shares as contemplated
herein, or to effect the rights, restrictions,
privileges and terms of the Exchangeable Non-Voting
Shares or Parent Common Shares in accordance with
the terms hereof; or
ii) any actions, investigations, inquiries or
proceedings commenced or continued against either
the Parent or the Purchaser, or their respective
officers, directors, promoters, representatives,
agents or their respective businesses by any
securities regulatory authority, tribunal or body
having jurisdiction.
(f) The Parent's Board of Directors, by proper and sufficient
vote, shall have approved this Agreement, the Exchange and
Voting Agreement and the Support Agreement, and the
transactions contemplated hereby.
(g) The Parent shall have completed the cancellation of all but
150,000 shares of the Parent Common Stock;
(h) The Parent and the Purchaser will have entered into the
Exchange and Voting Agreement and the Supporting Agreement.
ARTICLE X: INDEMNIFICATION
10.01 AGREEMENT TO INDEMNIFY.
10.01.1 Each of the Purchaser and the Parent, and their
respective Affiliates, Associates, officers, directors,
shareholders, representatives and agents (collectively, the
"Purchaser Indemnitees") shall each be indemnified and held harmless
to the extent set forth in this Article X by each Shareholder in
respect of any and all damages incurred by any Purchaser Indemnitee
as a result of any inaccuracy or misrepresentation in or breach of
any representation or warranty made in this Agreement by such
Shareholder, provided, however, that each Shareholder shall have no
obligation to indemnify the Purchaser Indemnitees with respect to
damages incurred by any Purchaser Indemnitee as a result of any
inaccuracy or misrepresentation in or breach of any representation
or warranty made in this Agreement by any other Shareholder and
further a Shareholder shall have no such obligation to indemnify a
Purchaser Indemnitee hereunder unless, and to the extent, the
aggregate of all damages incurred by the Purchaser Indemnities for
all items covered by this Section 10.01(1) shall exceed $1,000 in
the aggregate. Notwithstanding the foregoing, no Shareholder shall
have any obligation to indemnify the Purchaser Indemnitees in an
amount that exceeds the Purchase Price paid to Shareholder.
10.01.2 Each of the Purchaser Indemnitees shall be
indemnified and held harmless to the extent set forth in this
Article X by the Corporation in respect of any and all damages
incurred by any Purchaser Indemnitee as a result of any inaccuracy
or misrepresentation in or breach of any representation, warranty,
covenant or agreement made in this Agreement by the Corporation.
10.01.3 Each Shareholder and their respective Affiliates and
Associates and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the
"Shareholder Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by the Purchaser
and Parent in respect of any and all damages incurred by any
Shareholder Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made by the Parent or the Purchaser in this
Agreement.
10.02 SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS. Except
as hereinafter provided in this Section 10.02, all representations,
warranties, covenants, agreements and obligations of each
Indemnifying Party contained herein and all claims of any Purchaser
Indemnitee or Shareholder Indemnitee in respect of any breach of any
representation, warranty, covenant, agreement or obligation of any
Indemnifying Party contained in this Agreement, shall survive the
Closing and shall expire one year following the Closing Date.
ARTICLE XI: MISCELLANEOUS
11.01 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given (i) if personally delivered, when so delivered, (ii) if
mailed, two Business Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, (iii) if
given by facsimile or telecopier, once such notice or other
communication is transmitted to the facsimile or telecopier number
specified below and the appropriate answer back or telephonic
confirmation is received, provided that such notice or other
communication is promptly thereafter mailed in accordance with the
provisions of clause (ii) above or (iv) if sent through an overnight
delivery service in circumstances under which such service
guarantees next day delivery, the day following being so sent:
If to the Corporation: Suite 1405 - 1959 Upper Water
Street
Halifax, Nova Scotia B3J 3N2
If to the Purchaser: Suite 1405 - 1959 Upper Water
Street
Halifax, Nova Scotia B3J 3N2
If to the Parent: 1504 - R. Street Northwest
Washington DC 20009
If to a Shareholder: Suite 1405 - 1959 Upper Water
Street
Halifax, Nova Scotia B3J 3N2
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary
mail or electronic mail), but no such notice, request, demand, claim
or other communication shall be deemed to have been duly given
unless and until it actually is received by the individual for whom
it is intended. Any party may change the address to which notices,
requests, demands, claims and other communications hereunder are to
be delivered by giving the other parties notice in the manner herein
set forth.
11.02 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or
in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent occurrence. No failure or delay by a
party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies
provided by law.
11.03 EXPENSES. All costs and expenses incurred in connection
with this Agreement and enclosing and carrying out the transactions
provided for herein shall be paid by the party incurring such cost
or expense. This Section shall survive the termination of this
Agreement.
11.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and enure to the benefit, of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors
and permitted assigns. No party hereto may assign either this
Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of each other party, which
approval shall not be unreasonably withheld.
11.05 GOVERNING LAW. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws in force in
the Province of Nova Scotia and the laws of Canada applicable
therein (excluding any conflict of laws rule or principle that might
refer such interpretation to the laws of another jurisdiction). Each
party irrevocably submits to the jurisdiction of the courts of Nova
Scotia with respect to any matter arising hereunder or related hereto.
11.06 COUNTERPARTS; EFFECTIVENESS. This Agreement and the
documents relating to the transactions contemplated by this
Agreement may be signed in any number of counterparts and the
signatures delivered by telecopy, each of which shall be deemed to
be an original, with the same effect as if the signatures thereto
were upon the same instrument and delivered in person. This
Agreement and such documents shall become effective when each party
thereto shall have received a counterpart thereof signed by the
other parties thereto. In the case of delivery by telecopy by any
party, that party shall forthwith deliver a manually executed
original to each of the other parties.
11.07 ENTIRE AGREEMENT. This Agreement (including the Schedules
referred to herein, which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, between the
parties with respect to the subject matter of this Agreement.
Neither this Agreement nor any provision hereof is intended to
confer upon any Person other than the parties hereto any rights or
remedies hereunder.
11.08 CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or
interpretation hereof. All references to an Article or Section
include all subparts thereof.
11.09 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be
held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such
provisions as applied to other Persons, places and circumstances
shall remain in full force and effect only if, after excluding the
portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby
in substantially the same manner as originally set forth at the
later of the date this Agreement was executed or last amended.
11.10 CONSTRUCTION. The parties hereto intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty
or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached
shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
11.11 MEANING OF INCLUDE AND INCLUDING. Whenever in this Agreement
the word "include" or "including" is used, it shall be deemed
to mean "include, without limitation" or "including without
limitation", as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an
exhaustive list.
11.12 CUMULATIVE REMEDIES. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
11.13 THIRD PARTY BENEFICIARIES. Other than Indemnitees under
Article X hereof who are not parties to this Agreement, no provision
of this Agreement shall create any third party beneficiary rights in
any Person, including any employee or former employee of the
Corporation or any Affiliate or Associate thereof (including any
beneficiary or dependent thereof).
11.14 TRANSMISSION BY FACSIMILE. The parties hereto agree that this
Agreement may be transmitted by facsimile or such similar device and
that the reproduction of signatures by facsimile or such similar
device will be treated as binding as if originals and each party
hereto undertakes to provide each and every other party hereto with
a copy of the Agreement bearing original signatures forthwith upon
demand.
11.15 FEES AND COMMISSIONS. Except as described in this Article
11.15, no broker, finder or other person or entity is entitled to
any fee or commission from the Buying Group or the Corporation for
services rendered on behalf of the Buying Group or the Corporation
in connection with the transactions contemplated by this Agreement.
As compensation for its services in initiating this transaction the
Parent agrees to issue to the TPG Capital Corporation ("TPG") a 5
year transferable warrant to acquire up to 50,000 registered shares
of the Parent's common stock at a price of $1.00 per share.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the
day and year first above written.
WARWICK ACQUISITION CORPORATION
Per: ___________________________
(Authorized Signatory)
THINWEB.COM INC.
Per: ___________________________
(Authorized Signatory)
THINWEB SOFTWARE, INC.
Per: ___________________________
(Authorized Signatory)
BUTTERNUT CAPITAL LIMITED
Per: ___________________________
(Authorized Signatory)
INTERNATIONAL SHAREHOLDINGS CORP.
Per: ___________________________
(Authorized Signatory)
SEISMIC INVESTMENTS LTD.
Per: ___________________________
(Authorized Signatory)
AMERY ASSOCIATES INC.
Per: ___________________________
(Authorized Signatory)
CANNON EQUITY LIMITED
Per: ___________________________
(Authorized Signatory)
ANTIGHONISH LIMITED
Per: ___________________________
(Authorized Signatory)
STRATHGLEN CAPITAL LIMITED
Per: ___________________________
(Authorized Signatory)
GREENSTED EQUITIES LIMITED
Per: ___________________________
(Authorized Signatory)
ARRENDADORA SOLARSA S.A.
Per: ___________________________
(Authorized Signatory)
TRANSATLANTIC CO., S.A.
Per: ___________________________
(Authorized Signatory)
CHEETAH SYSTEMS LTD.
Per: ___________________________
(Authorized Signatory)
SHAFTESBURY GLOBAL LIMITED
Per: ___________________________
(Authorized Signatory)
MIDLAND SHAREHOLDINGS LIMITED
Per: ___________________________
(Authorized Signatory)
B. MACLEAN FAMILY TRUST
Per: ___________________________
(Authorized Signatory)
C. REID FAMILY TRUST
Per: ___________________________
(Authorized Signatory)
ENMAN FAMILY INVESTMENT TRUST
Per: ___________________________
(Authorized Signatory)
J. SMYTH FAMILY TRUST
Per: ___________________________
(Authorized Signatory)
T. MACLEAN FAMILY TRUST
Per: ___________________________
(Authorized Signatory)
3024704 NOVA SCOTIA LIMITED
Per: ___________________________
(Authorized Signatory)
EVERGREEN (PRIVATE) TRUST COMPANY
Per: ___________________________
(Authorized Signatory)
SIGNED, SEALED AND DELIVERED
BY DONALD WILE in the presence of:
___________________________
___________________________________ DONALD WILE
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY GARY HANNAH in the presence of:
___________________________
___________________________________ GARY HANNAH
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY PAUL LANDRY SR. in the presence of:
___________________________
___________________________________ PAUL LANDRY SR.
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY PAUL LANDRY JR. in the presence of:
___________________________
___________________________________ PAUL LANDRY JR.
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SCHEDULE "B"
EXCHANGE AND VOTING AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 22 day of April 1999.
AMONG:
WARWICK ACQUISITION CORPORATION, a corporation
subsisting under the laws of the State of Delaware
(hereinafter referred to as the "Parent")
AND:
THINWEB SOFTWARE, INC., a corporation incorporated
under the laws of Nova Scotia
(hereinafter referred to as the "Purchaser"),
AND:
STOCKTRANS, INC., having a business address at 7
East Lancaster Ave. Ardmore, Pennsylvania 19003-2318
(hereinafter referred to as the "Trustee").
AND:
EACH OF THOSE PERSONS holding shares of the
purchaser, as listed in Appendix "A" hereto
(hereinafter referred to as the "Shareholders")
W H E R E A S:
A. The Purchaser is the wholly owned subsidiary of the
Parent;
B. Pursuant to a share exchange and share purchase agreement
dated as of April 22, 1999 (the "Purchase Agreement") by and
among the Parent, the Purchaser, Thinweb Software, Inc..
("Thinweb Inc.") and, the Shareholders, the Purchaser
acquired all of the 16,916,344 issued and outstanding common
shares of Thinweb Inc. from the Shareholders in
consideration of among other things: (i) the Purchaser
issuing to the Shareholders 16,916,344 Exchangeable
Non-Voting Shares (as herein defined), and (ii) the Parent,
granting to each Shareholder Voting Rights (as herein
defined) in the Parent on the basis of each Shareholder
having an equivalent number of votes in the Parent as the
number of Exchangeable Non-Voting Shares held by such
Shareholder;
C. As security for the Parent's covenant to issue common shares
in its capital stock in exchange for Exchangeable Non-Voting
Shares, the Parent agreed to issue 16,916,344 common shares
(as herein defined as the "Parent Common Shares") to the
Trustee; and
D. In accordance with the Purchase Agreement, this Agreement
stipulates the means by which: (i) the Shareholders have
voting rights in the Parent; ii) the Trustee holds the
Parent Common Shares for the Shareholders; and (iii) the
Shareholders exercise their rights of conversion of the
Exchangeable Non-Voting Shares,
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and
valuable consideration (the receipt and sufficiency of which are
hereby acknowledged), the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS. In this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" of any person means any other person directly or
indirectly controlled by, or under common control of, that person.
For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common
control of"), as applied to any person, means the possession by
another person, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that first
mentioned person, whether through the ownership of voting
securities, by contract or otherwise.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of
Parent to effect the automatic exchange of Exchangeable Non-Voting
Shares for Parent Common Shares pursuant to Section 4.12 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of the Purchaser.
"BUSINESS DAY" means a day other than a Saturday, Sunday or a day
when banks are not open for business in Nova Scotia;
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed
in a foreign currency (the "Foreign Currency Amount") at any date
the product obtained by multiplying (a) the Foreign Currency Amount
by (b) the exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported in The Wall Street Journal
under "Currency Trading; Exchange Rates" or, in the event such
exchange rate is not available, such exchange rate on such date for
such foreign currency expressed in Canadian dollars as may be deemed
by the Board of Directors to be appropriate for such purpose.
"CURRENT MARKET PRICE" means, in respect of a Parent Common Share on
any date, the Canadian Dollar Equivalent of closing price of Parent
Common Shares on the day before such date, on such stock exchange
or automated quotation system on which the Parent Common Shares are
listed or quoted, as the case may be, as may be selected by the
Board of Directors for such purpose; provided, however, that if
there is no public distribution or trading activity of Parent Common
Shares during such period, then the Current Market Price of a Parent
Common Share shall be determined by the Board of Directors based
upon the advice of such qualified independent financial advisors as
the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding.
"EXCHANGEABLE NON-VOTING SHARES" means the Class "A" exchangeable,
non-voting, participating common shares without par value in the
capital stock of the Purchaser, including the 16,916,344 shares
issuable under the Purchase Agreement.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attached to the Exchangeable Non-Voting
Shares as set forth in Schedule "G" to the Purchase Agreement.
"INSOLVENCY EVENT" means the institution by the Purchaser of any
proceeding to be adjudicated bankrupt or insolvent or to be
dissolved or wound up, or the consent of the Purchaser to the
institution of bankruptcy, insolvency, dissolution or winding up
proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding up under any bankruptcy,
insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and
Insolvency Act (Canada), and the failure by the Purchaser to contest
in good faith any such proceedings commenced in respect of the
Purchaser within fifteen (15) days of becoming aware thereof, or the
consent by the Purchaser to the filing of any such petition or to
the appointment of a receiver, or the making by the Purchaser of a
general assignment for the benefit of creditors, or the admission in
writing by the Purchaser of its inability to pay its debts generally
as they become due, or the Purchaser not being permitted, pursuant
to solvency requirements of applicable law, to redeem any Retracted
Shares pursuant to section 27.6 (e) of the Exchangeable Share
Provisions.
"INSOLVENCY EXCHANGE RIGHT" has the meaning ascribed thereto in
Section 4.1.
"LIQUIDATION EVENT" has the meaning ascribed thereto in Section 4.12.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto
in Section 4.12(c).
"LIST" has the meaning ascribed thereto in Section 3.8.
"OFFICER'S CERTIFICATE" means, with respect to the Parent or the
Purchaser, as the case may be, a certificate signed by any one of
the Chairman of the Board, the Vice-Chairman of the Board, the
President, any Vice-President or any other officer of the Parent or
the Purchaser, as the case may be.
"PARENT COMMON SHARES" means the shares of common stock of the
Parent, without par value, having voting rights of one vote per
share, and any other securities into which such shares may be changed.
"PARENT CONSENT" has the meaning ascribed thereto in Section 3.2.
"PARENT MEETING" has the meaning ascribed in Section 3.2.
"PARENT SUCCESSOR" has the meaning ascribed thereto in Section 11.1(a).
"PURCHASE AGREEMENT" means the Purchase Agreement between the Parent
, the Purchaser, Thinweb Inc., and the Shareholders named therein,
dated as of the same date hereof.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"RETRACTED SHARES" has the meaning ascribed thereto in Section 4.7.
"SHAREHOLDERS" means the registered holders from time to time of
Exchangeable Non-Voting Shares, other than the Parent and its
Affiliates, as listed in Appendix "A" hereto.
"SHAREHOLDER VOTES" has the meaning ascribed thereto in Section 3.2.
"SUPPORT AGREEMENT" means that certain support agreement made as of
the same date hereof between the Purchaser and the Parent, which
agreement is attached as Schedule "I" to the Purchase Agreement.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Trust Shares and any other securities,
money or other property which may be held by the Trustee from time
to time pursuant to this Agreement.
"TRUST SHARES" has the meaning ascribed thereto in Section 2.2.
"TRUSTEE" means Stocktrans, Inc., and subject to the provisions of
Article 9, includes any successor trustee.
"VOTING RIGHTS" has the meaning ascribed thereto in Section 3.1.
INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
Agreement into articles, sections and paragraphs and the insertion
of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
NUMBER, GENDER, ETC. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any
gender shall include all genders.
DATE FOR ANY ACTION. If any date on which any action is required to
be taken under this Agreement is not a Business Day, such action
shall be required to be taken on the next succeeding Business Day.
ARTICLE 2
TRUST SHARES
2.1 ESTABLISHMENT OF TRUST. One purpose of this Agreement is to
create the Trust for the benefit of the Shareholders, as herein
provided. The Trustee will hold the Parent Common Shares acquired
pursuant to the requirements of the Purchase Agreement, Exchangeable
Share Provisions and Support Agreement both to support the Parent's
and the Purchaser's obligations thereunder in the event of default
and, only if required by applicable law, to provide a mechanism for
Shareholders of each Exchangeable Non-Voting Share to direct the
voting of a corresponding Parent Common Share held by the Trustee.
2.2 ISSUE AND OWNERSHIP OF THE PARENT COMMON SHARES. Upon
execution of this Agreement, the Parent shall transfer to the
Trustee a number of Parent Common Shares equal to the number of
Exchangeable Non-Voting Shares issued to Shareholders under the
Purchase Agreement, such shares to be hereafter held of record by
the Trustee as trustee for and on behalf of, and for the use and
benefit of, the Shareholders and in accordance with the provisions
of this Agreement. From time to time, the Parent shall transfer
additional shares of Parent Common Shares to the Trustee as required
under the Purchase Agreement, Exchangeable Share Provisions and
Support Agreement, also to be held of record by the Trustee as
trustee for and on behalf of, and for the use and benefit of, the
Shareholders and in accordance with the provisions of this
Agreement. All Parent Common Shares so transferred by the Parent to
the Trustee pursuant to this Section 3.1 shall hereafter be referred
to as the "Trust Shares". The Parent hereby acknowledges receipt
from the Trustee as trustee for and on behalf of the Shareholders of
good and valuable consideration (and the adequacy thereof) for the
issuance of the Trust Shares by the Parent to the Trustee. During
the term of the Trust and subject to the terms and conditions of
this Agreement, the Trustee shall possess and be vested with full
legal ownership of the Trust Shares and, subject to the terms
hereof, shall be entitled to exercise all of the rights and powers
of an owner with respect to the Trust Shares, provided that the
Trustee shall:
(a) hold the Trust Shares and the rights associated therewith as
conveyed by this Agreement as trustee solely for the use and
benefit of the Shareholders in accordance with the
provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal
in or with the Trust Shares and the Trust Shares shall not
be used or disposed of by the Trustee for any purpose other
than the purposes for which this Trust is created pursuant
to this Agreement.
ARTICLE 3
VOTING
3.1 VOTING RIGHTS. The Parent will grant to the Shareholders,
by requisite shareholder or director resolutions, the right for each
Shareholder to receive notice and attend each Parent Meeting and to
consent to or to vote in person or by proxy, on any matter, question
or proposition whatsoever that may properly come before the
stockholders of the Parent at a Parent Meeting or in connection with
a Parent Consent (in each case, as hereinafter defined) (the "Voting
Rights") on the basis of one Voting Right for every one Exchangeable
Non-Voting Share held by a Shareholder, as if and to the same extent
and effect as if the Shareholder held an equivalent number of Parent
Common Shares. The Voting Rights shall be and remain vested in and
exercised by the Shareholders.
3.2 NUMBER OF VOTES. With respect to all meetings of
stockholders of the Parent at which holders of shares of Parent
Common Shares are entitled to vote (a "Parent Meeting") and with
respect to all written consents sought by the Parent from its
stockholders including the holders of shares of Parent Common Shares
(a "Parent Consent"), each Shareholder shall be entitled to cast and
exercise, in the manner instructed, the Voting Rights ordinarily
attributable to one Parent Common Share for each Exchangeable
Non-Voting Share owned of record by such Shareholder on the record
date established by the Parent or by applicable law for such Parent
Meeting or Parent Consent, as the case may be (the "Shareholder
Votes") in respect of each matter, question or proposition to be
voted on at such Parent Meeting or to be consented to in connection
with such Parent Consent.
3.3 LEGENDED SHARES CERTIFICATES. The Purchaser will cause each
certificate representing Exchangeable Non-Voting Shares to bear an
appropriate legend notifying the Shareholders of their right to a
number of votes in the Parent as is equal to the number of shares
represented by the Exchangeable Non-Voting Share certificates.
3.4 SAFEKEEPING OF CERTIFICATES. The certificate(s)
representing the Trust Shares shall at all times be held in safe
keeping by the Trustee or its agent.
3.5 MAILINGS TO SHAREHOLDERS OF EXCHANGEABLE NON-VOTING SHARES.
With respect to each Parent Meeting and Parent Consent, the Parent
will mail or cause to be mailed (or otherwise communicate in the
same manner as the Parent utilizes in communications to holders of
Parent Common Shares, to each of the Shareholders named in the List
(as defined below) on the same day as the initial mailing or notice
(or other communication) with respect thereto is given by the Parent
to its stockholders:
(a) a copy of such notice, together with any proxy or
information statement and related materials to be provided
to stockholders of the Parent;
(b) a statement that such Shareholder is entitled to the
exercise of the Shareholder Votes with respect to such
Parent Meeting or Parent Consent, as the case may be, and
to attend such Parent Meeting and to exercise personally the
Shareholder Votes thereat;
(c) a statement as to the manner in which to give a proxy to a
designated agent or other representative of the management
of the Parent to exercise such Shareholder Votes; and
(d) a statement of (i) the time and date by which such must be
received by the Parent in order to be binding upon it, which
in the case of a Parent Meeting shall not be earlier than
the close of business on the second Business Day prior to
such meeting, and (ii) the method for revoking or amending
such proxies.
For the purpose of determining Shareholder Votes to which a
Shareholder is entitled in respect of any such Parent Meeting or
Parent Consent, the number of Exchangeable Non-Voting Shares owned
of record by the Shareholder shall be determined at the close of
business on the record date established by the Parent or by
applicable law for purposes of determining stockholders entitled to
vote at such Parent Meeting or to give written consent in connection
with such Parent Consent.
3.6 COPIES OF STOCKHOLDER INFORMATION. The Parent will deliver
to the Shareholders copies of all proxy materials (including notices
of Parent Meetings), information statements, reports (including
without limitation all interim and annual financial statements) and
other written communications that are to be distributed from time to
time to holders of Parent Common Shares.
3.7 OTHER MATERIALS. Immediately after receipt by the Parent or
any stockholder of the Parent of any material sent or given
generally to the holders of Parent Common Shares by or on behalf of
a third party, including without limitation dissident proxy and
information circulars (and related information and material) and
tender and exchange offer circulars (and related information and
material), the Parent shall use its best efforts to obtain and
deliver copies thereof to each Shareholder as soon as possible
thereafter.
3.8 LIST OF PERSONS ENTITLED TO VOTE. The Purchaser shall (a)
prior to each annual, general and special Parent Meeting or the
seeking of any Parent Consents and (b) forthwith upon each request
made at any time by the Trustee or the Parent in writing, prepare or
cause to be prepared a list (a "List") of the names and addresses of
the Shareholders arranged in alphabetical order and showing the
number of Exchangeable Non-Voting Shares held of record by each such
Shareholder, in each case at the close of business on the date
specified by the Trustee in such request or, in the case of a List
prepared in connection with a Parent Meeting or a Parent Consent, at
the close of business on the record date established by the Parent
or pursuant to applicable law for determining the holders of Parent
Common Shares entitled to receive notice of and/or to vote at such
Parent Meeting or to give consent in connection with such Parent
Consent. Each such List shall be delivered to the Parent promptly
after receipt by the Purchaser of such request or the record date
for such meeting or seeking of consent, as the case may be, and in
any event within sufficient time as to enable the Parent to perform
its obligations under this Agreement. The Parent agrees to give the
Purchaser written notice (with a copy to the Trustee) of the calling
of any Parent Meeting or the seeking of any Parent Consent, together
with the record dates therefor, sufficiently prior to the date of
the calling of such meeting or seeking of such consent so as to
enable the Purchaser to perform its obligations under this Section 3.8.
3.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to
be distributed by the Parent to the Shareholders pursuant to this
Agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner as the Parent utilizes in
communications to holders of Parent Common Shares) to each
Shareholder at its address as shown on the books of the Purchaser.
The Purchaser shall provide or cause to be provided to the Parent
for this purpose, on a timely basis and without charge or other
expense current lists of the Shareholders.
3.10 TERMINATION OF VOTING RIGHTS. All of the rights of a
Shareholder with respect to the Shareholder Vote exercisable in
respect of each Exchangeable Non-Voting Share held by such
Shareholder shall be deemed to be surrendered by the Shareholder to
the Parent and such Shareholder Votes and the Voting Rights
represented thereby shall cease immediately upon the exchange,
retraction or redemption of the Exchangeable Non-Voting Shares by or
from the Shareholder.
3.11 ALTERNATIVE VOTING RIGHTS. In the event it is alleged or
determined by any chairman at a shareholders' meeting, the board of
directors of the Parent, a shareholder, or by any corporate or third
party action or securities or judicial authority having jurisdiction
that the Shareholders are not properly entitled to vote the
Shareholder Votes or the Voting Rights, for whatever reason, then at
the sole discretion and judgment of a Shareholder, such Shareholder
may elect to suspend such Shareholder's exercise of the Shareholder
Votes or the Voting Rights and direct the Trustee, as the holder of
record of the Trust Shares, to be entitled to all of the Voting
Rights attributable to such Trust Shares. The Trustee shall
exercise the Voting Rights only on the basis of instructions
received pursuant to this section 3.11 from Shareholders entitled to
instruct the Trustee as to the voting thereof at the time at which
the Parent Consent is sought or the Parent Meeting is held. To the
extent that no instructions are received from a Shareholder with
respect to the Voting Rights to which such Shareholder is entitled,
the Trustee shall not exercise or permit the exercise of such
Shareholder's Voting Rights.
Any Shareholder named in a List prepared in connection with any
Parent Meeting or any Parent Consent will be entitled (a) to
instruct the Trustee with respect to the exercise of the Shareholder
Votes to which such Shareholder is entitled or (b) to attend such
meeting and personally to exercise thereat (or to exercise with
respect to any written consent), as the proxy of the Trustee, the
Shareholder Votes to which such Shareholder is entitled except, in
each case, to the extent that such Shareholder has transferred the
ownership of any Exchangeable Non-Voting Shares in respect of which
such Shareholder is entitled to Shareholder Votes after the close of
business on the record date for such meeting or seeking of consent.
In connection with each Parent Meeting and Parent Consent, the
Trustee shall exercise, either in person or by proxy, in accordance
with the instructions received from a Shareholder , the Shareholder
Votes as to which such Shareholder is entitled to direct the Voting
Rights (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Shareholder prior to the time and
date fixed by it for receipt of such instructions in the notice
given by the Trustee to the Shareholder.
The Trustee shall cause such representatives as are empowered by it
to sign and deliver, on behalf of the Trustee, proxies for Voting
Rights to attend each Parent Meeting. Upon submission by a
Shareholder (or its designee) of identification satisfactory to the
Trustee's representatives, and at the Shareholder's request, such
representatives shall sign and deliver to such Shareholder (or its
designee) a proxy to exercise personally the Shareholder Votes as to
which such Shareholder is otherwise entitled hereunder to direct the
vote, if such Shareholder either (i) has not previously given the
Trustee instructions in respect of such meeting, or (ii) submits to
the Trustee's representatives written revocation of any such
previous instructions. At such meeting, the Shareholder exercising
such Shareholder Votes shall have the same rights as the Trustee to
speak at the meeting in respect of any matter, question or
proposition, to vote by way of ballot at the meeting in respect of
any matter, question or proposition and to vote at such meeting by
way of a show of hands in respect of any matter, question or
proposition.
ARTICLE 4
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
4.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. The Parent
hereby grants to the Shareholders the right, upon the occurrence and
during the continuance of an Insolvency Event, to require the Parent
to purchase from each or any Shareholder all or any part of the
Exchangeable Non-Voting Shares held by the Shareholder in accordance
with the provisions of this Agreement (the "Insolvency Exchange
Right"). The Parent hereby acknowledges receipt from the
Shareholders of good and valuable consideration (and the adequacy
thereof) for the issuance of the Insolvency Exchange Right to them.
4.2 LEGENDED SHARE CERTIFICATES. The Purchaser will cause each
certificate representing Exchangeable Non-Voting Shares to bear an
appropriate legend notifying the Shareholders of:
(a) their right with respect to the exercise of the Insolvency
Exchange Right in respect of the Exchangeable Non-Voting
Shares held by a Shareholder; and
(b) the Automatic Exchange Rights.
4.3 PURCHASE PRICE. The purchase price payable by the Parent
for each Exchangeable Non-Voting Share to be purchased by the Parent
under the Insolvency Exchange Right shall be an amount per share
equal to (a) the Current Market Price of a Parent Common Share on
the last Business Day prior to the day of closing of the purchase
and sale of such Exchangeable Non-Voting Share under the Insolvency
Exchange Right plus (b) an additional amount equivalent to the full
amount of all dividends declared and unpaid on each such
Exchangeable Non-Voting Share and all dividends declared on Parent
Common Shares which have not been declared on such Exchangeable
Non-Voting Shares in accordance with section 27.3 of the
Exchangeable Share Provisions (provided that if the record date for
any such declared and unpaid dividends occurs on or after the day of
closing of such purchase and sale the purchase price shall not
include such additional amount equivalent to such declared and
unpaid dividends). In connection with each exercise of the
Insolvency Exchange Right, the Parent will provide to the
Shareholders an Officer's Certificate setting forth the calculation
of the purchase price for each Exchangeable Non-Voting Share. The
purchase price for each such Exchangeable Non-Voting Share so
purchased may be satisfied only by delivering or causing to be
delivered to the relevant Shareholder, one Parent Common Share and a
check for the balance, if any, of the purchase price without interest.
4.4 EXERCISE INSTRUCTIONS. Subject to the terms and conditions
set forth herein, a Shareholder shall be entitled, upon the
occurrence and during the continuance of an Insolvency Event, to
exercise the Insolvency Exchange Right with respect to all or any
part of the Exchangeable Non-Voting Shares registered in the name of
such Shareholder on the books of the Purchaser. To cause the
exercise of the Insolvency Exchange Right, the Shareholder shall
deliver to the Parent, in person or by certified or registered mail
the certificates representing the Exchangeable Non-Voting Shares
which such Shareholder desires the Parent to purchase, duly endorsed
in blank, and accompanied by such other documents and instruments as
may be required to effect a transfer of Exchangeable Non-Voting
Shares under the Company Act (Nova Scotia), and the articles of the
Purchaser and such additional documents and instruments as the
Parent may reasonably require together with (a) a duly completed
form of notice of exercise of the Insolvency Exchange Right,
contained on the reverse of or attached to the Exchangeable
Non-Voting Share certificates, stating (i) that the Shareholder
elects to exercise the Insolvency Exchange Right so as to require
the Parent to purchase from the Shareholder the number of
Exchangeable Non-Voting Shares specified therein, (ii) that such
Shareholder has good title to and owns all such Exchangeable
Non-Voting Shares to be acquired by Parent free and clear of all
liens, claims and encumbrances, (iii) the name in which the
certificates representing Parent Common Shares deliverable in
connection with the exercise of the Insolvency Exchange Right are to
be issued and (iv) the names and addresses of the persons to whom
such new certificates should be delivered, and (b) payment (or
evidence satisfactory to the Purchaser and the Parent of payment) of
the taxes (if any) payable as contemplated by Section 4.7 of this
Agreement. If only a part of the Exchangeable Non-Voting Shares
represented by any certificate or certificates delivered to the
Trustee are to be purchased by the Parent under the Insolvency
Exchange Right, a new certificate for the balance of such
Exchangeable Non-Voting Shares shall be issued to the Shareholder at
the expense of the Purchaser.
4.5 DELIVERY OF PARENT COMMON SHARES; EFFECT OF EXERCISE.
Promptly, and as soon as reasonably practicable after receipt of the
certificates representing the Exchangeable Non-Voting Shares which
the Shareholder desires the Parent to purchase under the Insolvency
Exchange Right, together with such documents and instruments of
transfer and a duly completed form of notice of exercise of the
Insolvency Exchange Right (and payment of taxes, if any, or evidence
thereof), duly endorsed for transfer to the Parent, the Parent shall
immediately thereafter upon receipt of such notice deliver or cause
to be delivered to the Shareholder of such Exchangeable Non-Voting
Shares (or to such other persons, if any, properly designated by
such Shareholder), the certificates for the number of Parent Common
Shares deliverable in connection with the exercise of the Insolvency
Exchange Right, which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or
encumbrance, and checks for the balance, if any, of the total
purchase price therefor. The Parent may instruct the Trustee to use
the Trust Shares it holds for delivery to the Shareholder under the
previous sentence. The Parent shall, immediately upon receipt of
such certificates representing the Exchangeable Non-Voting Shares
from the Shareholder, deliver the certificates to the registered
office of the Purchaser for cancellation. Immediately upon the
giving of notice by the Shareholder to the Parent of the exercise
of the Insolvency Exchange Right, as provided in this Section 4.5,
the closing of the transaction of purchase and sale contemplated by
the Insolvency Exchange Right shall be deemed to have occurred, and
the Shareholder of such Exchangeable Non-Voting Shares shall be
deemed to have transferred to the Parent its right, title and
interest in and to such Exchangeable Non-Voting Shares and shall
cease to be a Shareholder of such Exchangeable Non-Voting Shares and
shall not be entitled to exercise any of the rights of a Shareholder
in respect thereof, other than the right to receive his
proportionate part of the total purchase price therefor, unless the
requisite number of Parent Common Shares (together with a check for
the balance, if any, of the total purchase price therefor) is not
allotted, issued and delivered by the Parent to such Shareholder
(or to such other persons, if any, properly designated by such
Shareholder), within five (5) Business Days of the date of the
giving of such notice by the Shareholder, in which case the rights
of the Shareholder shall remain unaffected until such Parent Common
Shares are so allotted, issued and delivered by the Parent and any
such check is so delivered and paid. Concurrently with such
Shareholder ceasing to be a Shareholder of Exchangeable Non-Voting
Shares, the Shareholder shall be considered and deemed for all
purposes to be the holder of Parent Common Shares delivered to it
pursuant to the Insolvency Exchange Right.
4.6 EXERCISE OF INSOLVENCY EXCHANGE RIGHT SUBSEQUENT TO
RETRACTION. In the event that a Shareholder has exercised its right
under Article 27.6 of the Exchangeable Share Provisions to require
the Purchaser to redeem any or all of the Exchangeable Non-Voting
Shares held by the Shareholder (the "Retracted Shares") and is
notified by the Purchaser pursuant to section 27.6 (a) of the
Exchangeable Share Provisions that the Purchaser will not be
permitted as a result of solvency requirements of applicable law to
redeem all such Retracted Shares, and the Shareholder has not
revoked the retraction request delivered by the Shareholder to the
Purchaser pursuant to section 27.6 (a) of the Exchangeable Share
Provisions, the retraction request will constitute and will be
deemed to constitute notice from the Shareholder to the Parent to
exercise the Insolvency Exchange Right with respect to those
Retracted Shares which the Purchaser is unable to redeem. In any
such event, the Purchaser hereby agrees with the Shareholder
immediately to notify the Parent of such prohibition against the
Purchaser redeeming all of the Retracted Shares and immediately to
forward or cause to be forwarded to the Parent all relevant
materials delivered by the Shareholder to the Purchaser of the
Exchangeable Non-Voting Shares (including without limitation a copy
of the retraction request delivered pursuant to section 27.6 (a) of
the Exchangeable Share Provisions) in connection with such proposed
redemption of the Retracted Shares and the Parent will thereupon
exercise the Insolvency Exchange Right with respect to the Retracted
Shares that the Purchaser is not permitted to redeem and will
purchase such shares in accordance with the provisions of this
Article 4.
4.7 STAMP OR OTHER TRANSFER TAXES. Upon any sale of
Exchangeable Non-Voting Shares to the Parent pursuant to the
Insolvency Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing Parent Common Shares
to be delivered in connection with the payment of the total purchase
price therefor shall be issued in the name of the Shareholder of the
Exchangeable Non-Voting Shares so sold without charge to the
Shareholder of the Exchangeable Non-Voting Shares so sold; provided,
however that such Shareholder (a) shall pay (and neither the Parent,
the Purchaser nor the Trustee shall be required to pay) any
documentary, stamp, transfer, withholding or other taxes that may be
payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Shareholder, or
(b) shall have established to the satisfaction of the Trustee, the
Parent and the Purchaser that such taxes, if any, have been paid.
4.8 NOTICE OF INSOLVENCY EVENT. Immediately upon the occurrence
of an Insolvency Event or any event which with the giving of notice
or the passage of time or both would be an Insolvency Event, the
Purchaser and the Parent shall give written notice thereof to the
Trustee and the Shareholders, which notice shall contain a brief
statement of the right of the Shareholders with respect to the
Insolvency Exchange Right.
4.9 QUALIFICATION OF PARENT COMMON SHARES. The Parent
represents and warrants that it has taken all actions and done all
things as are necessary under any United States or Canadian federal,
provincial or state law or regulation or pursuant to the rules and
regulations of any regulatory authority or the fulfilment of any
other legal requirement (collectively, the "Applicable Laws") as
they exist on the date hereof and will in good faith expeditiously
take all such actions and do all such things as are necessary under
Applicable Laws as they may exist in the future to cause the Parent
Common Shares to be issued and delivered pursuant to the
Exchangeable Share Provisions, the Insolvency Exchange Right or the
Automatic Exchange Rights; provided that all Parent Common Shares
will be subject to such resale restrictions as imposed by applicable
securities legislation.
4.10 RESERVATION OF PARENT COMMON SHARES. The Parent hereby
represents, warrants and covenants that it has irrevocably reserved
for issuance and will at all times keep available, free from
preemptive and other rights, out of its authorized and unissued
capital stock such number of Parent Common Shares (a) as is equal to
the sum of (i) the number of Exchangeable Non-Voting Shares issued
and outstanding from time to time and (ii) the number of
Exchangeable Non-Voting Shares issuable upon the exercise of all
rights to acquire Exchangeable Non-Voting Shares outstanding from
time to time and (b) as are now and may hereafter be required to
enable and permit the Purchaser and the Parent to meet their
respective obligations hereunder, under the Support Agreement, under
the Exchangeable Share Provisions and under any other security or
commitment pursuant to which the Parent may now or hereafter be
required to issue Parent Common Shares. To the extent permitted
under Article 5 hereof, the Trust Shares may be used to satisfy the
Parent's obligations under this Section 4.10.
4.11 AUTOMATIC EXCHANGE ON LIQUIDATION OF THE PARENT
(a) The Parent will give the Trustee and the Shareholders notice
of each of the following events (each a "Liquidation
Event") at the time set forth below:
(i) in the event of any determination by the
board of directors of the Parent to
institute voluntary liquidation, dissolution
or winding-up proceedings with respect to
the Parent or to effect any other
distribution of assets of the Parent among
its shareholders for the purpose of winding
up its affairs, at least sixty (60) days
prior to the proposed effective date of such
liquidation, dissolution, winding-up or
other distribution; or
(ii) immediately, upon the earlier of (A) receipt
by the Parent of notice of or (B) the Parent
otherwise becoming aware of any threatened
or instituted claim, suit, petition or other
proceedings with respect to the involuntary
liquidation, dissolution or winding-up of
the Parent or to effect any other
distribution of assets of the Parent
notifying its shareholders for the purpose
of winding up its affairs.
(b) Such notice shall include a brief description of the
automatic exchange of Exchangeable Non-Voting Shares for
Parent Common Shares provided for in Section 4.12(c) and the
ability of a Shareholder not to participate in such
automatic exchange.
(c) In order that the Shareholders will be able to participate
on a pro rata basis with the holders of Parent Common Shares
in the distribution of assets of the Parent in connection
with a Liquidation Event, on the fifth Business Day prior to
the effective date of a Liquidation Event (the "Liquidation
Event Effective Date") all of the then outstanding
Exchangeable Non-Voting Shares shall be automatically
exchanged for Parent Common Shares in the absence of an
affirmative written election from a Shareholder not to
participate in the automatic exchange received by the Parent
before the fifth Business Day before the Liquidation Event
Effective Date. To effect such automatic exchange the
Parent shall purchase each Exchangeable Non-Voting Share
outstanding on the fifth Business Day prior to the
Liquidation Event Effective Date and held by Shareholders,
and each Shareholder shall sell the Exchangeable Non-Voting
Shares held by it at such time, for a purchase price per
share equal to (a) the Current Market Price of one (1)
Parent Common Share on the fifth Business Day prior to the
Liquidation Event Effective Date, which shall be satisfied
in full by the Parent delivering or causing to be delivered
to the Shareholder one Parent Common Share, plus (b) an
additional amount equivalent to the full amount of all
dividends declared and unpaid on each such Exchangeable
Non-Voting Share and all dividends declared on Parent Common
Shares which have not been declared on such Exchangeable
Non-Voting Shares in accordance with section 27.3 of the
Exchangeable Share Provisions (provided that if the record
date for any such declared and unpaid dividends occurs on or
after the day of closing of such purchase and sale the
purchase price shall not include such additional amount
equivalent to such declared and unpaid dividends). In
connection with such automatic exchange, the Parent will
provide to the Shareholders an Officer's Certificate setting
forth the calculation of the purchase price for each
Exchangeable Non-Voting Share, together with a notice of the
anticipated Liquidation Event Effective Date.
(d) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the transaction of purchase
and sale contemplated by the automatic exchange of
Exchangeable Non-Voting Shares for Parent Common Shares
shall be deemed to have occurred, and each Shareholder shall
be deemed to have transferred to the Parent all of the
Shareholder's right, title and interest in and to its
Exchangeable Non-Voting Shares and shall cease to be a
Shareholder of such Exchangeable Non-Voting Shares and the
Parent shall deliver or cause to be delivered to the
Shareholder Parent Common Shares deliverable upon the
automatic exchange of Exchangeable Non-Voting Shares for
Parent Common Shares and shall deliver to the Shareholder a
check for the balance, if any, of the total purchase price
for such Exchangeable Non-Voting Shares. Concurrently with
such Shareholder ceasing to be a Shareholder, the
Shareholder shall be considered and deemed for all purposes
to be the holder of Parent Common Shares issued to it
pursuant to the automatic exchange of Exchangeable
Non-Voting Shares for Parent Common Shares and the
certificates held by the Shareholder previously representing
the Exchangeable Non-Voting Shares exchanged by the
Shareholder with the Parent pursuant to such automatic
exchange shall thereafter be deemed to represent Parent
Common Shares delivered to the Shareholder by the Parent
pursuant to such automatic exchange prior to the surrender
by the Shareholder of the Exchangeable Non-Voting Share
certificates. Upon the request of a Shareholder and the
surrender by the Shareholder of Exchangeable Non-Voting
Share certificates deemed to represent Parent Common Shares,
duly endorsed in blank and accompanied by such instruments
of transfer as the Parent may reasonably require, the Parent
shall deliver or cause to be delivered to the Shareholder
certificates representing Parent Common Shares of which the
Shareholder is the holder.
4.12 WITHHOLDING RIGHTS. The Parent will retain tax counsel to
advise the Parent and the Trustee on all income tax and withholding
obligations of the Parent, the Trust and the Trustee. The Parent and
the Trustee shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any
Shareholder such amounts as the Parent or the Trustee is required or
permitted to deduct and withhold with respect to the making of such
payment under the United States Internal Revenue Code of 1986 as
amended (the "Code"), the Income Tax Act (Canada) or any provision
of state, local, provincial or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the
Shareholder of the shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the
extent that the amount so required or permitted to be deducted or
withheld from any payment to a Shareholder exceeds the cash portion
of the consideration otherwise payable to the Shareholder, the
Parent or the Trustee is hereby authorized to sell or otherwise
dispose of at fair market value such portion of the consideration as
is necessary to provide sufficient funds to the Parent or the
Trustee, as the case may be, in order to enable it to comply with
such deduction or withholding requirement and shall account to the
relevant Shareholder for any balance of such sale proceeds.
ARTICLE 5
DIVIDENDS
5.1 The holders of Exchangeable Non-Voting Shares will be
entitled to participate in all dividends declared by the Purchaser,
in accordance with the provisions of the Exchangeable Share
Provisions and the Support Agreement.
5.2 The Trustee hereby expressly waives, for and on its own
behalf and on behalf of all Shareholders, all rights to receive
dividends of every nature as may be payable to it as holder of the
Trust Shares, and the parties acknowledge that the Parent need not
include the Trust Shares in its calculations for purposes of
determining the payment of dividends, and need not pay or distribute
any dividends (either in cash, shares or otherwise) to the Trustee
as holder of the Trust Shares, provided however that such waiver may
be rescinded by the Trustee upon receipt of notice from a
Shareholder that the Purchaser has omitted to pay any dividends
otherwise payable or that either the Parent or the Purchaser
contests the right of the holders of Exchangeable Non-Voting Shares
to receive dividends, or the right to receive dividends on the
Exchangeable Non-Voting Shares that are otherwise in doubt whereupon
the Parent will pay and the Trustee shall collect all dividends paid
on the Trust Shares from time to time until the Trustee receives an
Officer's Certificate from the Purchaser certifying that the
Purchaser is in compliance with its obligations to pay dividends in
accordance with the Exchangeable Share Provisions. Any dividends
received by the Trustee on the Trust Shares shall be paid to the
Shareholders in the same manner as dividends would have been paid by
the Purchaser to the holders of Exchangeable Non-Voting Shares.
5.3 For clarity, the Voting Rights and exchange rights granted
by the Parent to the Shareholders hereunder do not in any manner
confer any additional rights to the Shareholders, including, but
subject to the provisions of the Support Agreement, any rights to
receive or participate in dividends declared or paid by the Parent.
ARTICLE 6
SUPPORT PROVISIONS
6.1 USE OF TRUST SHARES IN CONNECTION WITH SUPPORT AGREEMENT.
Pursuant to section 2.11 of the Support Agreement, the Trust Shares
provide additional security for the Parent's and the Purchaser's
obligations under the Purchase Agreement, the Exchangeable Share
Provisions and the Support Agreement. In the event that the
Purchaser and the Parent both default on their obligations to
acquire the Exchangeable Non-Voting Shares pursuant to the
Exchangeable Share Provisions, the Support Agreement, or Article 4
of this Agreement, a Shareholder may provide written notice to the
Parent, the Purchaser and the Trustee of such default. If such
default is not cured within ten (10) Business Days, the Shareholder
may provide written notice to the Trustee of such failure to cure.
The Trustee shall then use the Trust Shares to satisfy the Parent's
obligation to acquire the Exchangeable Non-Voting Shares as if the
Parent had instructed the Trustee to use the Trust Shares for such
purpose pursuant to section 4.5 hereof. The Exchangeable Non-Voting
Shares acquired by the Trustee in such transaction shall be
distributed to the Parent. In the event that the Trustee uses the
Trust Shares to so acquire Exchangeable Non-Voting Shares, and if
the Parent is obligated to pay any declared but unpaid dividends (or
dividends declared on Parent Common Shares which have not been
declared on such Exchangeable Non-Voting Shares in accordance with
section 27.3 of the Exchangeable Share Provisions), the Parent shall
remain obligated to pay such amount to the Shareholder.
6.2 APPLICATION OF TRUST SHARES. At such time as either the
Purchaser or the Parent acquires Exchangeable Non-Voting Shares from
a Shareholder, it shall provide the Trustee with an Officer's
Certificate specifying (i) the former Shareholder, (ii) the number
of Exchangeable Non-Voting Shares acquired, (iii) the form of the
acquisition, designated by the provision of the applicable agreement
(Exchangeable Share Provisions, Support Agreement or this Agreement)
and (iv) the date of such acquisition. If such certification is
made, the Trustee shall distribute to the Parent a number of Trust
Shares equal to the number of Exchangeable Non-Voting Shares so
acquired by the Parent (or, if so requested by the Parent,
distributed such Parent Common Shares to the former Shareholder on
behalf of the Parent).
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and
authorities of the Trustee under this Agreement, in its capacity as
trustee of the Trust, shall include:
(a) receiving and depositing the Trust Shares from the Parent as
trustee for and on behalf of the Shareholders in accordance
with the provisions of this Agreement;
(b) distributing materials to Shareholders as provided in this
Agreement;
(c) holding title to the Trust Estate;
(d) investing any moneys forming, from time to time, a part of
the Trust Estate as provided in this Agreement; and
(e) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of
this Agreement as the Trustee, acting in good faith and in the
reasonable exercise of its discretion, may deem necessary or
appropriate to effect the purpose of the Trust. Any exercise of
such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons.
Notwithstanding anything to the contrary herein, the Trustee shall
have no obligation to exercise any discretion in the performance of
its obligations hereunder and shall only be required to act upon the
express written instructions of the Parent, the Purchaser or the
Shareholders. For greater certainty, the Trustee shall have only
those duties as are set out specifically in this Agreement.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and in accordance
with its fiduciary duties to the Shareholders and shall exercise the
care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances. The Trustee shall not be
required to take any notice of, or to do or to take any act, action
or proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or
breach, which notice shall distinctly specify the default or breach
desired to be brought to the attention of the Trustee and, in the
absence of such notice, the Trustee may for all purposes of this
Agreement conclusively assume that no default or breach has been
made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
7.2 NO CONFLICT OF INTEREST. The Trustee represents to the
Purchaser and the Parent that at the date of execution and delivery
of this Agreement there exists no material conflict of interest in
the role of the Trustee as a fiduciary hereunder and the role of the
Trustee in any other capacity. The Trustee shall, within ninety
(90) days after it becomes aware that such a material conflict of
interest exists, either eliminate such material conflict of interest
or resign in the manner and with the effect specified in Article 9.
7.3 DEALINGS WITH THIRD PARTIES. The Purchaser and the Parent
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with any respective
registrars, transfer agents, payment agents or any other
person or entity appointed from time to time by the Parent
in connection with any matter relating to the Exchangeable
Non-Voting Shares and Parent Common Shares; and
(b) requisition, from time to time, (i) from any such registrar,
transfer agent payment agent or other person or entity,
appointed from time to time by the Parent, as applicable,
any information readily available from the records
maintained by it which the Trustee may reasonably require
for the discharge of its duties and responsibilities under
this Agreement; and (ii) from the Purchaser, the holder of
Parent Common Shares, and any subsequent holder or agent of
such shares, the share certificates issuable upon the
exercise from time to time of the Insolvency Exchange Right
and pursuant to the Automatic Exchange Rights in the manner
specified in Article 4 hereof. The Purchaser and the Parent
irrevocably authorize their respective payment agent, or any
other authorized agent appointed from time to time by the
Parent to comply with all such requests.
7.4 BOOKS AND RECORDS. The Trustee shall keep available for
inspection, during normal business hours, by the Parent and the
Purchaser, at the Trustee's principal office in Pennsylvania,
correct and complete books and records of account relating to the
Trustee's actions under this Agreement, including without limitation
all information relating to mailings and instructions to and from
Shareholders.
7.5 INCOME TAX RETURNS AND REPORTS. The Trustee will allocate
and distribute all income and losses of the Trust to the
Shareholders in each year such that the Trust is not in a position
to pay any tax or file any tax returns. Shareholders will be
individually and personally responsible for all income and losses
incurred by the Trust. In this regard, the Parent will retain tax
counsel on behalf of the Trust, and agrees to prepare and distribute
to each Shareholder all necessary tax forms for them to complete
their United States and Canadian tax returns. The Shareholders may
obtain the advice and assistance of such experts as they may
consider necessary or advisable.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The
Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this Agreement at the request, order or
direction of any Shareholder upon such Shareholder furnishing to the
Trustee reasonable funding, security and indemnity against the
costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby.
The Trustee shall not be required to expend any of its own funds or
otherwise incur any financial liability in the exercise of any of
its rights, powers, duties or authorities, but instead shall be
entitled to be fully funded, given security and indemnity in advance
as aforesaid.
7.7 ACTIONS BY SHAREHOLDERS. Shareholders shall be entitled to
take proceedings in any court of competent jurisdiction to enforce
any of their rights hereunder as against the Purchaser and the Parent.
7.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be
considered to be in contravention of any of its rights, powers,
duties and authorities hereunder if, when required, it acts and
relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or
documents furnished pursuant to the provisions hereof or required by
the Trustee to be furnished to it in the exercise of its rights,
powers, duties and authorities hereunder.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE. The Purchaser and the
Parent shall furnish to the Trustee evidence of compliance with the
conditions provided for in this Agreement relating to any action or
step required or permitted to be taken by the Purchaser and/or the
Parent for the Trustee under this Agreement or as a result of any
obligation imposed under this Agreement including, without
limitation, in respect of the Insolvency Exchange Right or the
Automatic Exchange Rights and the taking of any other action to be
taken by the Trustee at the request of or on the application of the
Purchaser and the Parent forthwith if and when:
(a) such evidence is required by any other section of this
Agreement to be furnished to the Trustee in accordance with
the terms of this Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties
and authorities under this Agreement, gives the Purchaser
and/or the Parent written notice requiring it to furnish
such evidence in relation to any particular action or
obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of the
Purchaser and/or the Parent, a statutory declaration or a
certificate made by persons entitled to sign an Officer's
Certificate stating that any such condition has been complied with
in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting
Rights, the Insolvency Exchange Right or the Automatic Exchange
Rights and, except as otherwise specifically provided herein, such
evidence may consist of a report or opinion of any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert or
any other person whose qualifications give authority to a statement
made by him, provided that if such report or opinion is furnished by
a director, officer or employee of the Purchaser and/or the Parent
shall be in the form of an Officer's Certificate or a statutory
declaration.
Each statutory declaration, certificate, opinion, report or other
paper or document furnished to the Trustee as evidence of compliance
with a condition provided for in this Agreement shall include a
statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation
as he believes is necessary to enable him to make the
statements or give the opinions contained or expressed therein.
7.10 EXPERTS, ADVISORS AND AGENTS. The Trustee may:
(a) in relation to these presents, act and rely on the opinion
or advice of or information obtained from any solicitor,
auditor, accountant, appraiser, valuer, engineer or other
expert, whether retained by the Trustee or by the Purchaser
and/or the Parent or otherwise, and may employ such
assistants as may be necessary to the proper discharge of
its powers and duties and determination of its rights
hereunder and may pay proper and reasonable compensation for
all such legal and other advice or assistance as aforesaid
without taxation for costs and fees; and
(b) employ such agents and other assistants as it may reasonably
require for the proper discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all
services performed for it,
(and shall be entitled to receive reasonable remuneration for all
services performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the discharge of its duties hereunder and in the
management of the Trust without taxation for costs and fees, which
compensation reimbursement may be requested to be received in
advance prior to undertaking any actions hereunder.
7.11 INVESTMENT OF MONEYS HELD BY THE TRUSTEE. Unless otherwise
provided in this Agreement, any moneys held by or on behalf of the
Trustee which under the terms of this Agreement may or ought to be
invested or which may be on deposit with the Trustee or which may be
in the hands of the Trustee may be invested and reinvested in the
name or under the control of the Trustee in securities in which,
under the laws of the State of Pennsylvania, trustees are authorized
to invest trust moneys, provided that such securities are stated to
mature within two (2) years after their purchase by the Trustee, and
the Trustee shall so invest such moneys on the written direction of
the Purchaser. Pending the investment of any moneys as hereinbefore
provided, such moneys may be deposited in the name of the Trustee in
any bank, loan or trust company authorized to accept deposits under
the laws of the United States, Canada or any state or province
thereof, at the rate of interest then current on similar deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall
not be required to give any bond or security in respect of the
execution of the trusts, rights, duties, powers and authorities of
this Agreement or otherwise in respect of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON CORPORATION'S REQUEST. Except
as in this Agreement or otherwise specifically provided, the Trustee
shall not be bound to act in accordance with any direction or
request of the Purchaser and/or the Parent or the directors thereof
until a duly authenticated copy of the instrument or resolution
containing such direction or request shall have been delivered to
the Trustee and the Trustee shall be empowered to act and rely upon
any such copy purporting to be authenticated and believed by the
Trustee to be genuine.
7.14 CONFLICTING CLAIMS. If conflicting claims or demands are
made or asserted with respect to any interest of any Shareholder in
any Exchangeable Non-Voting Shares, including any disagreement
between the heirs, representatives, successors or assigns succeeding
to all or any part of the interest of any Shareholder in any
Exchangeable Non-Voting Shares resulting in conflicting claims or
demands being made in connection with such interest, then the
Trustee shall be entitled, at its sole discretion, to refuse to
recognize or to comply with any such claim or demand. In so
refusing, the Trustee may elect not to exercise any Insolvency
Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands and in so doing, the Trustee shall not
be or become liable to any person on account of such election or its
failure or refusal to comply with any such conflicting claims or
demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the
Insolvency Exchange Right or Automatic Exchange Rights
subject to such conflicting claims or demands have been
adjudicated by a final judgment of a court of competent
jurisdiction; or
(b) all differences with respect to the Insolvency Exchange
Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been conclusively settled
by a valid written agreement binding on all such adverse
claimants, and the Trustee shall have been furnished with an
executed copy of such agreement. If the Trustee elects to
recognize any claim or comply with any demand made by any
such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security
satisfactory to the Trustee as it shall deem appropriate
fully to indemnify it as between all conflicting claims or
demands.
7.15 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust
created and provided for by and in this Agreement and agrees to
perform the same upon the terms and conditions set forth herein and
to hold all rights, privileges and benefits conferred hereby and by
law in trust for the various persons who shall from time to time be
Shareholders, subject to all the terms and conditions set forth herein.
7.16 VALIDITY OF CERTIFICATES. If at any time in the performance
of its duties under this Agreement, it shall be necessary for the
Trustee to receive, accept, act or rely upon any certificate,
notice, request, waiver, consent, receipt, direction, affidavit or
other paper, writing or document furnished to it and purporting to
have been executed or issued by the Purchaser, the Parent or the
Shareholders or their authorized officers or attorneys, the Trustee
shall be entitled to rely and act upon the genuineness and
authenticity of any such writing submitted to it. It shall not be
necessary for the Trustee to ascertain whether or not the persons
who have executed, signed or otherwise issued, authenticated or
receipted such papers, writings or documents have authority to do so
or that they are the same persons named therein or otherwise to pass
upon any requirement of such papers, writing or documents that may
be essential for their validity or effectiveness or upon the truth
and acceptability of any information contained therein which the
Trustee in good faith believes to be genuine
ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE. The Parent, Purchaser and
the Shareholders jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under
this Agreement and will reimburse the Trustee for all reasonable
expenses and disbursements, including, without limitation, legal
fees and expenses and the reasonable compensation and disbursements
of all other advisors, agents and assistants not regularly in its
employ and the cost and expense of any suit or litigation of any
character and any proceedings before any governmental agency
reasonably incurred by the Trustee in connection with its rights and
duties under this Agreement; provided that the Parent and the
Purchaser shall have no obligation to reimburse the Trustee for any
expenses or disbursements paid, incurred or suffered by the Trustee
in any suit or litigation in which the Trustee is determined to have
acted fraudulently or in bad faith or with gross negligence or
willful misconduct. The Trustee shall be obliged to provide only
one account or invoice to the Parent from time to time during this
Agreement in connection with any services rendered by it under this
Agreement on behalf of any of the parties.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE. The Parent, Purchaser and
the Shareholders jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers, partners,
employees and agents appointed and acting in accordance with this
Agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal
counsel) which, without fraud, gross negligence, willful misconduct
or bad faith on the part of such Indemnified Party, may be paid,
incurred or suffered by the Indemnified Party by reason of or as a
result of the Trustee's acceptance or administration of the Trust,
its compliance with its duties set forth in this Agreement, or any
written or oral instructions delivered to the Trustee by the Parent
or the Purchaser pursuant hereto. Subject to (ii), below, the
Parent and the Purchaser shall be entitled to participate at their
own expense in the defence and, if the Parent and the Purchaser so
elect at any time after receipt of such notice, either of them may
assume the defence of any suit brought to enforce any such claim.
In the event the Parent and/or the Purchaser assume the defence of
the Trustee, no settlement of any claim shall be entered into
without the prior approval of the Trustee; and the Trustee shall
have the right to re-assume the defence of any suit if the Parent or
Purchaser fail to actively continue such defence so assumed. The
Trustee shall have the right to employ separate counsel in any such
suit and participate in the defence thereof but the fees and
expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by
the Parent or the Purchaser; or (ii) the named parties to any such
suit include both the Trustee and the Parent; or (iii) the Purchaser
and the Trustee shall have been advised by counsel acceptable to the
Parent or the Purchaser that there may be one or more legal defences
available to the Trustee which are different from or in addition to
those available to the Parent or the Purchaser (in which case the
Purchaser shall not have the right to assume the defence of such
suit on behalf of the Trustee but shall be liable to pay the
reasonable fees and expenses of counsel for the Trustee).
9.2 LIMITATION OF LIABILITY. The Trustee shall not be liable
for any act or omission by it except where such act or omission
occurs as a result of the Trustee's gross negligence or willful
misconduct. The Trustee shall not be liable for any losses or
damages due to the acts or omissions of third parties, including
without limitation, the failure by the Parent and/or the Purchaser
to comply with its obligations under this Agreement, as the case may
be. Under no circumstances shall the Trustee be liable for any
special, indirect or consequential losses or damages (including
without limitation loss of profits and penalties) whether caused by
the Trustee's negligence or that of its employees, agents or
otherwise. The Trustee shall not be held liable for any loss which
may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss incurred on any investment of funds
pursuant to this Agreement except to the extent that such loss is
attributable to the fraud, gross negligence, willful misconduct or
bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION. The Trustee, or any trustee hereafter
appointed, may at any time resign by giving written notice of such
resignation to the Parent and the Purchaser specifying the date on
which it desires to resign, provided that such notice shall never be
given less than thirty (30) days before such desired resignation
date unless the Parent and the Purchaser otherwise agree and
provided further that such resignation shall not take effect until
the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon
receiving such notice of resignation, the Parent and the Purchaser
shall promptly appoint a successor trustee by written instrument in
duplicate, one copy of which shall be delivered to the resigning
trustee and one copy to the successor trustee.
10.2 REMOVAL. The Trustee, or any trustee hereafter appointed at
any time on thirty (30) days' prior notice by written instrument
executed by the Parent and the Purchaser, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to
the successor trustee. Any successor trustee to be appointed upon
the removal of the Trustee shall be appointed in accordance with the
provisions as provided under Section 10.3 of this Agreement.
10.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as
provided under this Agreement shall execute, acknowledge and deliver
to the Parent and the Purchaser and to its predecessor trustee an
instrument accepting such appointment. Thereupon the resignation or
removal of the predecessor trustee shall become effective and such
successor trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement with like effect
as if originally named as trustee in this Agreement. However, on
the written request of the Parent and the Purchaser or of the
successor trustee, the trustee ceasing to act shall, upon payment of
any amounts then due it pursuant to the provisions of this
Agreement, execute and deliver an instrument transferring to such
successor trustee all of the rights and powers of the trustee so
ceasing to act. Upon the request of any such successor trustee, the
Parent and the Purchaser and such predecessor trustee shall execute
any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor trustee all such rights
and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment
by a successor trustee as provided herein the Parent and the
Purchaser shall cause to be mailed notice of the succession of such
trustee hereunder to each Shareholder at the address of such
Shareholder shown on the register of Shareholders of Exchangeable
Non-Voting Shares. If the Parent or the Purchaser shall fail to
cause such notice to be mailed within ten (10) days after acceptance
of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Parent and the
Purchaser.
ARTICLE 11
THE PARENT SUCCESSORS
11.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. The
Parent shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer,
sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any
other person or, in the case of a merger, of the continuing
corporation resulting therefrom unless:
(a) such other person or continuing corporation is a corporation
(herein called the "Parent Successor") incorporated under
the laws of any state of the United States or the laws of
Canada or any province thereof; and
(b) the Parent Successor, by operation of law, becomes, without
more, bound by the terms and provisions of this Agreement
or, if not so bound, executes, prior to or contemporaneously
with the consummation of such transaction a Agreement
supplemental hereto and such other instruments (if any) as
are satisfactory to the Trustee and in the opinion of legal
counsel to the Trustee are necessary or advisable to
evidence the assumption by the Parent Successor of liability
for all moneys payable and property deliverable hereunder
and the covenant of such Parent Successor to pay and deliver
or cause to be delivered the same and its agreement to
observe and perform all of the covenants and obligations of
the Parent under this Agreement.
11.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of
Section 11.1 hereof have been duly observed and performed, the
Trustee, if required by Section 11.1 hereof, the Parent Successor
and the Purchaser shall execute and deliver the supplemental
Agreement provided for in Article 12 and thereupon the Parent
Successor shall possess and from time to time may exercise each and
every right and power of the Parent under this Agreement in the name
of the Parent or otherwise and any act or proceeding by any
provision of this Agreement required to be done or performed by the
board of directors of Parent or any officers of the Parent may be
done and performed with like force and effect by the directors or
officers of such the Parent Successor.
11.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be
construed as preventing the amalgamation, merger or sale of any
wholly-owned subsidiary of the Parent with or into the Parent, the
winding-up or merger of any wholly-owned subsidiary of the Parent
with or into the Parent, or the winding-up, liquidation or
dissolution of any wholly-owned subsidiary of the Parent, and
nothing herein shall prohibit the Parent in any manner whatsoever
from selling, transferring or otherwise disposing of any and all of
the assets of the Parent including, without limitation, any and all
of the assets of such subsidiary provided that all of the assets of
such subsidiary are transferred to the Parent or another
wholly-owned subsidiary of the Parent.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may
not be amended or modified except by an agreement in writing
executed by the Purchaser, the Parent and the Shareholders in
accordance with section 27.10 of the Exchangeable Share Provisions.
12.2 MEETING TO CONSIDER AMENDMENTS. The Purchaser, at the
request of the Parent shall call a meeting or meetings of the
Shareholders for the purpose of considering any proposed amendment
or modification requiring approval pursuant hereto. Any such
meeting or meetings shall be called and held in accordance with the
by-laws of the Purchaser, the Exchangeable Share Provisions and all
applicable laws.
12.3 CHANGES IN CAPITAL OF PARENT OR THE PURCHASER. At all times
after the occurrence of any event effected pursuant to section 2.7
or 2.8 of the Support Agreement, as a result of which either Parent
Common Shares or the Exchangeable Non-Voting Shares or both are in
any way changed, this Agreement shall forthwith be amended and
modified as necessary in order that it shall apply with full force
and effect, mutatis mutandis, to all new securities into which
Parent Common Shares or the Exchangeable Non-Voting Shares or both
are so changed and the parties hereto shall execute and deliver a
supplemental Agreement giving effect to and evidencing such
necessary amendments and modifications.
12.4 EXECUTION OF SUPPLEMENTAL AGREEMENTS. No amendment to or
modification or waiver of any of the provisions of this Agreement
otherwise than as permitted hereunder shall be effective unless made
in writing and signed by all of the parties hereto. From time to
time the parties may, subject to the provisions of these presents,
and they shall, when so directed by these presents, execute and
deliver by their proper officers, Agreements or other instruments
supplemental hereto, which thereafter shall form part hereof, for
any one or more of the following purposes:
(a) evidencing the succession of Parent Successors to the Parent
and the covenants of and obligations assumed by each such
Parent Successor in accordance with the provisions of
Article 11 and the successor of any successor trustee in
accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of
the provisions of this Agreement or the Insolvency Exchange
Right or the Automatic Exchange Rights which, in the opinion
of the Parent and its counsel, will not be prejudicial to
the interests of the Shareholders as a whole or are in the
opinion of counsel to the Parent necessary or advisable in
order to incorporate, reflect or comply with any legislation
the provisions of which apply to the parties or this
Agreement; and
(c) for any other purposes not inconsistent with the provisions
of this Agreement, including without limitation to make or
evidence any amendment or modification to this Agreement as
contemplated
hereby, provided that, in the opinion of the Parent and its
counsel, the rights of the Trustee and the Shareholders as a
whole will not be prejudiced thereby.
ARTICLE 13
TERMINATION
13.1 TERM. The Trust created by this Agreement shall continue
until the earliest to occur of the following events:
(a) no outstanding Exchangeable Non-Voting Shares are held by
any Shareholder;
(b) each of the Purchaser and the Parent acts in writing to
terminate the Trust and such termination is approved by the
Shareholders of the Exchangeable Non-Voting Shares in
accordance with section 27.10 of the Exchangeable Share
Provisions; and
(c) December 31, 2098.
13.2 SURVIVAL OF AGREEMENT. Subject to the provisions of Section
13.1(b) hereof, this Agreement shall survive any termination of the
Trust and shall continue until there are no Exchangeable Non-Voting
Shares outstanding held by any Shareholder; and for clarity, that
the provisions of Articles 8 and 9 shall survive any such
termination of the Trust or this Agreement.
ARTICLE 14
GENERAL
14.1 SEVERABILITY. If any provision of this Agreement is held to
be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any
way be affected or impaired thereby and the agreement shall be
carried out as nearly as possible in accordance with its original
terms and conditions.
14.2 INUREMENT. This Agreement shall be binding upon and endure
to the benefit of the parties hereto and their respective successors
and permitted assigns and to the benefit of the Shareholders.
14.3 NOTICES TO PARTIES. All notices and other communications
between the parties hereunder shall be in writing and shall be
deemed to have been given if delivered personally or by confirmed
facsimile to the parties at the following addresses (or at such
other address for such party as shall be specified in like notice):
if to the Parent or the Purchaser:
Suite 1405 - 1959 Upper Water Street
Halifax, Nova Scotia B3J 3N2
if to the Trustee at:
Stocktrans, Inc.
7 East Lancaster Ave
Ardmore,
if to the Shareholders:
Suite 1405 - 1959 Upper
Water Street
Halifax, Nova Scotia B3J
Any notice or other communication given personally shall be deemed
to have been given and received upon delivery thereof and if given
by telecopy shall be deemed to have been given and received on the
date of receipt thereof unless such day is not a Business Day in
which case it shall be deemed to have been given and received upon
the immediately following Business Day.
14.4 NOTICE OF SHAREHOLDERS. Any and all notices to be given and
any documents to be sent to any Shareholders may be given or sent to
the address of such Shareholder shown on the register of
Shareholders in any manner permitted by the by-laws of the Purchaser
from time to time in force in respect of notices to shareholders and
shall be deemed to be received (if given or sent in such manner) at
the time specified in such by-laws, the provisions of which by-laws
shall apply mutatis mutandis to notices or documents as aforesaid
sent to such Shareholders.
14.5 RISK OF PAYMENTS BY MAIL. Whenever payments are to be made
or documents are to be sent to any Shareholder by the Trustee or by
the Purchaser, or by such Shareholder to the Trustee or to the
Parent or the Purchaser, the making of such payment or sending of
such document sent through the mail shall be at the risk of the
Purchaser, in the case of payments made or documents sent by the
Trustee or the Purchaser, and the Shareholder, in the case of
payments made or documents sent by the Shareholder.
14.6 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
14.7 JURISDICTION. This Agreement shall be construed and
enforced in accordance with the laws of the State of Pennsylvania
and the laws of the United States applicable therein, except insofar
as it relates to internal governance of the Purchaser, which is to
be construed and enforced in accordance with the laws of the
Province of Nova Scotia and the laws of Canada applicable therein.
14.8 ATTORNMENT. The Parent and the Purchaser each agree that
any action or proceeding arising out of or relating to this
Agreement may be instituted in the courts of the State of Delaware,
each waives any objection which it may have now or hereafter to the
venue of any such action or proceeding, irrevocably submits to the
non-exclusive jurisdiction of the said courts in any such action or
proceeding, agrees to be bound by any judgment of the said courts
and not to seek, and hereby waives, any review of the merits of any
such judgment by the courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
WARWICK ACQUISITION CORPORATION
By:
Name:
Title:
THINWEB.COM INC.
By:
Name:
Title:
STOCKTRANS, INC.
By:
Name:
Title:
BUTTERNUT CAPITAL LIMITED
By:
Name:
Title:
INTERNATIONAL SHAREHOLDINGS CORP.
By:
Name:
Title:
SEISMIC INVESTMENTS LTD.
By:
Name:
Title:
AMERY ASSOCIATES INC.
By:
Name:
Title:
CANNON EQUITY LIMITED
By:
Name:
Title:
ANTIGHONISH LIMITED
By:
Name:
Title:
STRATHGLEN CAPITAL LIMITED
By:
Name:
Title:
GREENSTED EQUITIES LIMITED
By:
Name:
Title:
ARRENDADORA SOLARSA S.A.
By:
Name:
Title:
TRANSATLANTIC CO., S.A.
By:
Name:
Title:
CHEETAH SYSTEMS LTD.
By:
Name:
Title:
SHAFTESBURY GLOBAL LIMITED
By:
Name:
Title:
MIDLAND SHAREHOLDINGS LIMITED
By:
Name:
Title:
B. MACLEAN FAMILY TRUST
By:
Name:
Title:
C. REID FAMILY TRUST
By:
Name:
Title:
ENMAN FAMILY INVESTMENT TRUST
By:
Name:
Title:
J. SMYTH FAMILY TRUST
By:
Name:
Title:
T. MACLEAN FAMILY TRUST
By:
Name:
Title:
3024704 NOVA SCOTIA LIMITED
By:
Name:
Title:
EVERGREEN (PRIVATE) TRUST COMPANY
By:
Name:
Title:
SIGNED, SEALED AND DELIVERED
BY DONALD WILE in the presence of:
___________________________
___________________________________ DONALD WILE
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY GARY HANNAH in the presence of:
___________________________
___________________________________ GARY HANNAH
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY PAUL LANDRY SR. in the presence of:
___________________________
___________________________________ PAUL LANDRY
SR.
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
SIGNED, SEALED AND DELIVERED
BY PAUL LANDRY JR. in the presence of:
___________________________
___________________________________ PAUL LANDRY
JR.
Signature of Witness
___________________________________
Name of Witness
___________________________________
Address of Witness
___________________________________
WEINBERG & COMPANY
May 20, 1999
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549
RE: Thinweb.com Corporation
F/K/A Warwick Acquisition Corporation
File Ref. No. 0-25419
We were previously the principal accountant for Thinweb.com Corporation
f/k/a/ Warwick Acquisition Croporation and, under the date of January
4, 1999, we reported on the consolidated financial statements of
Thinweb.com Corporation f/k/a Warwick Acquisition Corporation as
of December 31, 1998. On May 1, 1999, our appointment as principal
accountant was terminated. We have read Thinweb.com Corporation
f/k/a Warwick Acquisition Corporation's statements included under
Item 4 of its Form 8-K dated May 25, 1999, and we agree with such
statements.
Very truly yours,
WEINBERG & COMPANY, P.A.
Certified Public Accountants
