EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
AMONG
PIVOTAL CORPORATION
AND
DAVID PRITCHARD
KIRK HERRINGTON
MICHAEL SATTERFIELD
CALVIN MAH
VW B.C. TECHNOLOGY INVESTMENT FUND, LIMITED PARTNERSHIP
VENROCK ASSOCIATES
VENROCK ASSOCIATES II, LIMITED PARTNERSHIP
WORKING VENTURES CANADIAN FUND INC.
BANK OF MONTREAL CAPITAL CORPORATION
SUSSEX CAPITAL INC.
AND
THE OTHER SHAREHOLDERS OF SIMBA TECHNOLOGIES INC.
CONCERNING ALL OF THE SHARES OF
SIMBA TECHNOLOGIES INC.
May 29, 2000
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is made and entered into
on May 29, 2000, by and among Pivotal Corporation, a British Columbia
corporation (the "Buyer"), David Pritchard, Kirk Herrington, Michael
Satterfield, Calvin Mah, Venrock Associates, Venrock Associates II, Limited
Partnership, VW B.C. Technology Investment Fund, Limited Partnership, Working
Ventures Canadian Fund Inc., Bank of Montreal Capital Corporation and Sussex
Capital Inc. (each a "Seller" and, collectively, the "Sellers"). The Buyer and
the Sellers are referred to collectively herein as the "Parties".
RECITALS
A. Each of the Sellers owns the outstanding shares of Simba Technologies
Inc. (the "Target") as set out in the Disclosure Schedule.
B. This Agreement contemplates a transaction in which the Buyer will
purchase from the Shareholders (as defined below) all of the outstanding shares
of the Target;
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions and Schedules.
(a) Definitions
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable legal fees and
expenses.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"Allocation Schedule" means the schedule of allocation of the Purchase
Price among the Shareholders as set out in Schedule 2 hereto.
"Applicable Law" means any and all Canadian and U.S. law, principle of
common law, regulation, rule, code, statute, treaty, ordinance, similar
provisions having the force or effect of law thereunder, and judicial and
administrative orders, injunctions, judgments, decrees, rulings and
determinations, of any federal, provincial, state, local or municipal government
or sub-division of any such country.
"Applicable Securities Laws" means all Applicable Law concerning
securities, including the Securities Act, the U.S. Securities Act and the
Securities Exchange Act.
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"Buyer Options" means options to purchase Buyer Shares referred to in
Section 2(e) below.
"Buyer Shares" means the common shares, without par value, of the
Buyer.
"Closing" has the meaning set forth in Section 2(g) below.
"Closing Date" has the meaning set forth in Section 2(g) below.
"Closing Shares" has the meaning set forth in Section 2(b) below.
"Closing Value" has the meaning set forth in Section 2(b) below.
"Code" means the United States Internal Revenue Code of 1986, as
amended and the regulations thereunder.
"Confidential Information" means any information concerning the
businesses and affairs of the Target and its Subsidiaries that is not already
generally available to the public.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Dollars and $" means United States dollars.
"Effective Date" means the effective day of this Agreement, being May
29, 2000.
"Employee Benefit Plan" means any plan, fund or program (whether
written or not) which is maintained or contributed to by Target or its
Subsidiaries for the benefit of current or former employees, including but not
limited to any (i) medical, surgical, health care, hospitalization, dental,
vision, workers compensation, life insurance, death, disability, legal services,
severance, sickness, or accident benefits; (ii) pension, profit sharing,
retirement, supplemental retirement, defined contribution or defined benefit, or
other deferred compensation benefits; (iii) bonus, incentive compensation, stock
option, stock appreciation rights, phantom stock or stock purchase benefits, or
change in control or "golden parachute" benefits ; (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits; or (v)other material fringe benefit or other retirement, bonus, or
incentive plan or program.
"Employee Sellers" means David Pritchard, Kirk Herrington and Calvin
Mah and "Employee Seller" means any one of them.
"Environmental, Health, and Safety Requirements" shall mean all
Applicable Laws concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, noise or radiation.
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"Escrow Agent" means the Person named as escrow agent under the Escrow
Agreement.
"Escrow Agreement" means an agreement in the form attached hereto as
Schedule 3.
"Escrowed Shares" has the meaning set forth in Section 2(f).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means Canadian generally accepted accounting principles as in
effect from time to time.
"Go Assets" means all of the assets, property and undertaking of the
Target related to its software applications for eBusiness analytics for Internet
channels business and includes, without limitation, the assets set out in
Schedule 6. For evidentiary purposes a computer compact disc containing the most
current version of the software comprising the Go Assets shall be agreed to by
the Parties and delivered to Clark Wilson, counsel for the Target and which
shall be delivered to the Buyer by Clark Wilson, upon expiry of the applicable
indemnity period.
"Herrington Agreement" means an agreement in form and substance
acceptable to the Buyer and its legal counsel, acting reasonably, evidencing the
satisfaction of the obligations of Kirk Herrington under an order of the Supreme
Court of British Columbia dated July 19, 1999 in respect of the Target Shares
and Target Options owned by him.
"Herrington Escrow Agreement" means an agreement in form and substance
acceptable to the Buyer and its legal counsel, acting reasonably, providing for
the escrow of the Buyer Shares issuable to Kirk Herrington hereunder, other than
the Escrowed Shares, pending execution of the Herrington Agreement.
"ITA" means the Income Tax Act (Canada) as amended from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Intellectual Property" means the Go Assets and (a) all inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
Confidential Information (including ideas, research and development, know-how,
formulas, compositions, processes and techniques, technical data,
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designs, drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all software
(including data and related documentation), (g) all other proprietary
information and rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Key Employees" means those employees listed in Part I of Schedule 11.
"Knowledge" means: (a) actual knowledge after diligent investigation;
(b) knowledge a prudent person could be expected to discover or otherwise become
aware of in the course of conducting a reasonably comprehensive investigation of
such matter and (c) actual knowledge after diligent enquiry of Kirk Herrington,
David Pritchard and Calvin Mah. When used in relation to a non-employee Seller,
"Knowledge" means actual knowledge after diligent enquiry of Kirk Herrington,
David Pritchard and Calvin Mah.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(g) below.
"Option Plan" means the Target's 1994 stock option plan, as amended
from June 11, 1998.
"Ordinary Course of Business" means the ordinary course of normal
day-to-day business consistent with past custom and practice (including with
respect to quantity and frequency).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or association , or a governmental
entity (or any department, agency, or political subdivision thereof).
"Proportional Share" means with respect to each Seller the percentage
attributed to such Seller in the Seller Apportionment schedule attached hereto
as Schedule 12.
"Purchase Agreement" means the purchase agreement to be entered into
between the Buyer and each Shareholder other than the Sellers, in substantially
the form set out as Schedule 4 to this Agreement.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Representative Seller" means Kirk Herrington.
"Securities Act" means the British Columbia Securities Act, R.S.B.C.
1996, c.418, as amended and the current rules and regulations thereunder.
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"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than in the case of the Target and its
Subsidiaries (but expressly not in the case of Target Shares and Section
3(a)(vi) hereof) (a) mechanic's, materialmen's, and similar liens, (b) liens for
Taxes not yet due and payable, (c) purchase money liens and liens securing
rental payments under capital lease arrangements, and (d) other liens arising in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Shareholders" means the Sellers and all of the other shareholders of
the Target as at the Closing Date.
"Shareholders' Consideration" means for each Shareholder the amount of
Buyer Shares to be received on Closing by such Shareholder as set out opposite
the Shareholder's name in the Allocation Schedule.
"Subsidiary" means any Person with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Target Options" means options to purchase Target Shares granted under
the Option Plan.
"Target Common Shares" means the common shares without par value of
the Target.
"Target Preference Shares" means the Class "A", Class "B", Class "C"
Preference Shares of the Target collectively, and the reference to a particular
class thereof shall mean that class alone.
"Target Shareholders Agreement" means collectively, the Simba
Technologies Inc. Shareholders Agreement dated with effect December 7, 1994 as
amended by an Amending Agreement dated September 30, 1996 and a Principal
Shareholders Agreement dated with effect December 7, 1994.
"Target Shares" means the Target Common Shares and Target Preference
Shares collectively.
"Target Warrants" means warrants to purchase common shares of the
Target.
"Tax" means any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, arising under Applicable Law or
any other law.
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"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
"Tools Business" means the database connectivity software business of
the Target.
"Tools Business Shut-Down" means the actions more particularly
described in Section 5(k).
"U.S. Securities Act" means the United States Securities Act of 1933,
as amended, and the current rules and regulations thereunder.
(b) Schedules
The following schedules are attached to and form part of this
Agreement:
Schedule Title
-------- -----
1. Disclosure Schedule
2. Allocation Schedule
3. Escrow Agreement
4. Share Purchase Agreement
5. Financial Statements
6. Detailed Description of Go Assets
7. Standard Form Licensing Agreement
8. Registration Rights Agreement
9. Key Employee Agreement
10. Intentionally Deleted
11. Employees
12. Seller Apportionment
13. Additional Securities Matters
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees:
(i) to purchase from each of the Sellers, and each of the
Sellers agrees to sell to the Buyer, all of his, hers or its
Target Shares for the consideration specified in Section
2(b) below;
(ii) to purchase all, but not less than all, of the Target Shares
owned by Shareholders (other than the Sellers) at Closing
for the Shareholders consideration specified in Section 2(b)
below; and
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(iii) to ensure that certain holders of unvested Target Options
will receive Buyer Options having the attributes described
in Section 2(e) below.
(b) Purchase Price. The purchase price for the Target Shares is
US$20,000,000 (the "Purchase Price"). Subject to the balance of this Article 2,
the Buyer shall pay the Purchase Price to the Shareholders at the Closing by
delivery of a certain number of Buyer Shares (the "Closing Shares") determined
by dividing US$20,000,000 by the weighted average of the closing price per share
of Buyer Shares as reported by the Nasdaq National Market for the ten (10)
consecutive trading day period ending two business days prior to the Effective
Date; provided that, if such weighted average price per share as so calculated,
is greater than US$66.67 per share, such price shall be deemed to be US$66.67
per share, and if such weighted average price per share, as so calculated, is
less than US$36.36 per share, such price shall be deemed to be US$36.36 per
share (the weighted average price per share as determined pursuant to this
sentence being referred to herein as the "Closing Value"). For the avoidance of
doubt, "weighted average" is calculated by multiplying the daily closing price
by the daily trading volume for each relevant day and dividing the total of such
sums by the total trading volume over the ten-day period. The Buyer shall not be
required to issue fractional shares of Buyer Shares, including as Buyer Shares
are released to the Sellers under the Escrow Agreement, and any resulting
fractional shares shall be ignored.
(c) Exercise of Warrants and Options. The Sellers shall exercise and shall
use their commercially reasonable efforts to cause all other holders to exercise
all Target Warrants and vested Target Options.
(d) Allocation of Purchase Price Among Shareholders. The Closing Shares
shall be allocated among the Shareholders as set out in the Schedule 2
Allocation Schedule. The parties acknowledge and agree that the Allocation
Schedule has been crystalized and fixed as of May 16, 2000 and that the
calculation of whether options have vested and the determination of the accrual
by the Shareholders of all rights to dividends and liquidation preferences cease
and are determined as of that date.
(e) Treatment of Unvested Target Options. The parties agree to amend the
terms and conditions of all of the Target Options that are unvested as at the
Closing, to the effect that such unvested Target Options:
(i) will constitute options to acquire Buyer Shares at a
conversion ratio of 13 Target Options for every 1 Buyer
Option;
(ii) will have an exercise price equal to the exercise price of
the underlying Target Options multiplied by 13;
(iii) will vest in accordance with the vesting schedule of the
underlying Target Options; and
(iv) in all other respects, will continue to be issued under the
Option Plan and which Option Plan will be amended prior to
Closing to have terms and conditions substantially similar
to those contained in the Pivotal
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Corporation Incentive Stock Option Plan (Amended and
Restated as of August 10, 1999).
(f) Escrowed Shares. US$2,000,000 in Buyer Shares of the Sellers and in
their respective Proportional Shares shall be held in escrow (the "Escrowed
Shares") under the terms of the Escrow Agreement until one year after the
Closing Date (or if an indemnity claim by the Buyer remains unsatisfied on such
one year anniversary date, then until such claim is satisfied). All Escrowed
Shares shall be valued at the Closing Value for purposes of determining the
extent to which an indemnity obligation is satisfied, irrespective of the market
price of the Escrowed Shares at the time of the indemnity payment. To the extent
there are Escrowed Shares available, they shall be released back to the Buyer in
satisfaction (or partial satisfaction) of any indemnity payment under Article
8(b) below, as more particularly set forth in and subject to the Escrow
Agreement.
(g) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Borden Ladner
Gervais in Vancouver, British Columbia, commencing at 9:00 a.m. local time on
the second business day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Buyer and the Sellers
may mutually determine (the "Closing Date").
(h) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the Purchase Agreements and the various certificates,
instruments, and documents referred to in Section 7(a) below, (ii) the Buyer
will deliver to the Sellers, on their own behalf and as agents for the other
Shareholders, the various certificates, instruments, and documents referred to
in Section 7(b) below, (iii) each of the Sellers will deliver to the Buyer share
certificates representing all of his or its Target Shares, and the
Representative Seller will deliver to the Buyer share certificates representing
all of the other Shareholders' Target Shares, endorsed in blank or accompanied
by duly executed assignment documents with signatures guaranteed by a commercial
bank or verified by a lawyer or notary public, and releases of any option,
warrant, purchase right, or other contract or commitment concerning the Target
and any capital stock of the Target and (iv) the Buyer will deliver to each of
the Sellers, on their own behalf and as agents for the other Shareholders, the
consideration specified in Section 2(b) above.
(i) Representative Seller. For the purposes of effecting deliveries at
Closing, the parties agree that all deliveries to or by Shareholders other than
the Sellers will be properly effected if delivered by or to, the Representative
Seller as agent for all Shareholders other than the Sellers.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this
Section 3(a) are correct and complete as of the Effective Date and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the Effective Date throughout this Section
3(a)) with respect to himself, herself or itself.
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(i) Organization of Certain Sellers. If the Seller is a
corporation, the Seller is duly organized, validly existing,
and in good standing under the laws of the jurisdiction of
its incorporation.
(ii) Authorization of Transaction. The Seller has full power and
authority (including, if the Seller is a corporation, full
corporate power and authority) to execute and deliver this
Agreement and to perform his, her or its obligations
hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any
notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the
Seller is subject or, if the Seller is a corporation, any
provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a
party or by which he or it is bound or to which any of his
or its assets is subject.
(iv) Brokers' Fees. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or
obligated.
(v) Target Shares. The Seller holds of record and owns
beneficially the number of Target Shares set forth next to
his, her or its name in the Disclosure Schedule, free and
clear of any restrictions on transfer (other than any
restrictions under Applicable Laws relating to securities or
pursuant to the Target Shareholders Agreement), Taxes,
Security Interests (ignoring, for purposes of this
representation and warranty, clauses (a) - (d) of the
definition of "Security Interest"), spousal or community
property rights (except as set out in section 3(a)(v) of the
Disclosure Schedule), options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The
Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require
the Seller to sell, transfer, or otherwise dispose of any
securities of the Target (other than this Agreement). The
Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of
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any securities of the Target with the exception of the
Target Shareholders Agreement.
(vi) Options. The number of Target Shares set forth next to his,
her or its name in the Disclosure Schedule includes all of
the Seller's options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Target
to issue, sell, or otherwise cause to become outstanding any
of its securities.
(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this Section 3(b) are
correct and complete as of the Effective Date and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the Effective Date throughout this Section 3(b)).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the
laws of the Province of British Columbia.
(ii) Authorization of Transaction. The Buyer has full corporate
power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order
to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer
is subject or any provision of its Memorandum or Articles or
(B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer
is a party or by which it is bound or to which any of its
assets is subject.
(iv) Brokers' Fees. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which any Seller could become liable or
obligated.
(v) Investment. The Buyer is not acquiring the Target Shares
with a view to or for sale in connection with any
distribution thereof within the meaning of Applicable
Securities Laws.
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(vi) SEC Filings. The Buyer has delivered or made available to
the Sellers (i) the Buyer's prospectus dated August 4, 1999;
(ii) and the Buyer's Quarterly Reports on Form 10-Q for the
fiscal quarters ended September 30, 1999, December 31, 1999
and March 31, 2000 and (iii) Current Report on Form 8-K
filed on January 25, 2000 (collectively referred to therein
as the "Securities Act and Exchange Act Filings"). None of
the U.S. Securities Act and Exchange Act Filings, as of
their respective filing dates, contained any untrue
statement of a material fact or omitted to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading. Except as disclosed to the
Sellers in writing, in materials filed by the Buyer pursuant
to the U.S. Securities Act or the Exchange Act, or set forth
in press releases that have been made public by the Buyer
(including but not limited to those from time to time posted
at or available through Nasdaq's website at
http://www.nasdaq.com), there has been no material adverse
change in the financial condition of the Buyer
since January 1, 2000.
(vii) Buyer Shares. All of the Buyer Shares issued at the Closing
(including the Escrowed Shares) shall have been duly
authorized, validly issued, fully paid, and nonassessable.
(viii) Reporting Issuer. The Buyer is a reporting issuer under the
securities laws of the Province of British Columbia and is
not in default with respect to the filing of financial
statements as required by such laws.
4. Representations and Warranties Concerning the Target and Its Subsidiaries.
The Sellers jointly and severally represent and warrant to the Buyer that
the statements contained in this Section 4 are correct and complete as of the
Effective Date and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 4), except as set forth in the disclosure
schedule attached hereto as Schedule 1 (the "Disclosure Schedule"). Nothing in
the Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of the Target
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Target and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the business, financial condition, operations, results of
operations, or future prospects of the Target and its Subsidiaries. Each of the
Target and its Subsidiaries has full corporate power and authority and all
licenses, permits and authorizations necessary to carry
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on the businesses in which it is engaged and to own and use the properties owned
and used by it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of each of the Target and its Subsidiaries. The Sellers have delivered
to the Buyer correct and complete copies of the charter and bylaws of each of
the Target and its Subsidiaries (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of each of the Target and its Subsidiaries are correct
and complete. None of the Target and its Subsidiaries is in default under or in
violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
consists of 15,000,000 Target Common Shares. 1,362,500 Class "A" Preference
shares, 1,764,800 Class "B" Preference shares and 2,360,458 Class "C" Preference
shares, of which 1,648,163 Target Common Shares, 1,350,000 Class "A" Preference
shares, 1,764,707 Class "B" Preference shares and 2,356,070 Class "C" Preference
shares are issued and outstanding. No Target Shares are held by the Target. All
of the issued and outstanding Target Shares have been duly authorized, are
validly issued, fully paid, and non-assessable, and were issued in compliance
with all the Securities Act and the U.S. Securities Act, and are held of record
by the respective Sellers and other Shareholders as set forth in Section 4(b) of
the Disclosure Schedule. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Target Shares are
as set forth in the Articles of the Target and such preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with Applicable Law. No outstanding Target Shares have been
issued in violation of any pre-emptive rights, rights of first refusal or
similar rights. Apart from the Warrants and the options outstanding under the
Option Plan, all of which are included on Section 4(b) of the Disclosure
Schedule, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to issue, sell, or
otherwise cause to become outstanding any of its securities. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of any of the shares of the Target with the exception of the Target
Shareholders Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Target and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Target and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Target and its Subsidiaries or on the ability of the Parties to
consummate the transactions contemplated by this Agreement. None of the Target
and its Subsidiaries needs to give any notice to, make any filing
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with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Target and its Subsidiaries or
on the ability of the Parties to consummate the transactions contemplated by
this Agreement.
(d) Brokers' Fees. None of the Target and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Target and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. Section 4(f) of the Disclosure Schedule sets forth for
each Subsidiary of the Target (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the number of shares
held by each such holder, and (iv) the number of shares of its capital stock
held in treasury. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Target have been duly authorized and are validly issued,
fully paid, and nonassessable. One of the Target and its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each Subsidiary of
the Target, free and clear of any restrictions on transfer (other than
restrictions Applicable Securities Laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Target and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of the Target to issue,
sell, or otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of the Target.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Target. None
of the Target and its Subsidiaries controls directly or indirectly or has any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association which is not a Subsidiary of the Target.
(g) Financial Statements. Attached hereto as Schedule 5 are the following
financial statements (collectively the "Financial Statements"): (i) audited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1999,
(the "Most Recent Fiscal Year End") for the Target and its Subsidiaries; and
(ii) unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the three months ended March 31, 2000 (the "Most Recent Fiscal Month
End") for the Target and its Subsidiaries. The Financial Statements (including
the notes thereto) have been prepared in
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accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Target and its
Subsidiaries as of such dates and the results of operations of the Target and
its Subsidiaries for such periods, and correct and complete, and are consistent
with the books and records of the Target and its Subsidiaries (which books and
records are correct and complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Target and its Subsidiaries taken as a whole. Without limiting
the generality of the foregoing, since that date:
(i) none of the Target and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or
intangible, outside the Ordinary Course of Business;
(ii) none of the Target and its Subsidiaries has entered into any
agreement, contract, lease, or license outside the Ordinary
Course of Business;
(iii) no party (including any of the Target and its Subsidiaries)
has accelerated, terminated, made material modifications to,
or canceled any material agreement, contract, lease, or
license to which any of the Target and its Subsidiaries is a
party or by which any of them is bound;
(iv) none of the Target and its Subsidiaries has granted or
imposed any, and there are no, Security Interest on any of
its assets, tangible or intangible;
(v) none of the Target and its Subsidiaries has made any capital
expenditures outside the Ordinary Course of Business;
(vi) none of the Target and its Subsidiaries has made any capital
investment in, or any loan to, any other Person, other than
the extension of trade credit in the Ordinary Course of
Business;
(vii) the Target and its Subsidiaries have not created, incurred,
assumed, or guaranteed more than $25,000 in aggregate
indebtedness for borrowed money and capitalized lease
obligations;
(viii) none of the Target and its Subsidiaries has granted any
license or sublicense of any rights under or with respect to
any Intellectual Property outside the Ordinary Course of
Business;
(ix) there has been no change made or authorized in the
constitutional documents of any of the Target and its
Subsidiaries with the exception of an amendment to the
Articles of the Target to reduce the number of directors
from seven to six;
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<PAGE>
(x) none of the Target and its Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted
any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of
its capital stock except under the Option Plan (all of which
are set forth in Section 4(b) of the Disclosure Schedule);
(xi) none of the Target and its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) none of the Target and its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by
insurance) to its property or assets;
(xiii) none of the Target and its Subsidiaries has made any loan
to, or entered into any other transaction with, any of its
directors, officers, and employees;
(xiv) none of the Target and its Subsidiaries has entered into any
employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such
contract or agreement except an employment contract for John
Ward, a copy of which has been provided to Buyer;
(xv) none of the Target and its Subsidiaries has granted any
increase in the base compensation of any of its directors,
officers, and employees outside the Ordinary Course of
Business;
(xvi) none of the Target and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or commitment
for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any
Employee Benefit Plan);
(xvii) none of the Target and its Subsidiaries has made any other
change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of
Business;
(xviii) none of the Target and its Subsidiaries has delayed or
postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business; and
(xix) none of the Target and its Subsidiaries has committed to any
of the foregoing;
(xx) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary
Course of Business involving any
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of the Target and its Subsidiaries except as set out in
Section 4(h)(xx) of the Disclosure Schedule.
(i) Undisclosed Liabilities. None of the Target or its Subsidiaries has
any material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for Taxes or breach of any Environmental, Health and Safety
Requirements), except for (i) liabilities set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) liabilities
which have arisen in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, material breach of warranty, tort, infringements, or
violation of Applicable Law).
(j) Legal Compliance. Each of the Target and its Subsidiaries, and their
respective predecessors and Affiliates, has complied with all Applicable Law and
other laws applicable to them, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply, except where
the failure to comply would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Target and its Subsidiaries.
(k) Tax Matters.
(i) Each of the Target and its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes owed by
any of the Target and its Subsidiaries (whether or not shown
on any Tax Return) have been paid. None of the Target and
its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction
where any of the Target and its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the
assets of any of the Target and its Subsidiaries that arose
in connection with any failure (or alleged failure) to pay
any Tax.
(ii) Each of the Target and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to, or transactions or
contracts with each other or any Affiliates, employee,
independent contractor, creditor, stockholder, customer, or
other third party.
(iii) No Seller or director or officer (or employee responsible
for Tax matters) of any of the Target and its Subsidiaries
expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of any of the
Target and its Subsidiaries either (A) claimed or raised by
any authority in writing or (B) as to which any of the
Sellers and the directors
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and officers (and employees responsible for Tax matters) of
the Target and its Subsidiaries has Knowledge based upon
personal contact with any agent of such authority. Section
4(k) of the Disclosure Schedule lists all income Tax Returns
of or for any country or jurisdiction filed with respect to
any of the Target and its Subsidiaries for taxable periods
ended on or after December 31, 1996, indicates those Tax
Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Sellers
have delivered to the Buyer correct and complete copies of
all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by
any of the Target and its Subsidiaries since December 31,
1996.
(iv) None of the Target and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(v) Section 4(k) of the Disclosure Schedule sets forth the
following information with respect to each of the Target and
its Subsidiaries as of the most recent practicable date: (A)
the "cost amount" as defined in the Income Tax Act or the
"basis" under the Internal Revenue Code, as the case may be,
of the Target or Subsidiary in its assets, including the
shares of the Subsidiaries; (B) Intentionally deleted; and
(C) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign Tax, or
excess charitable contribution allocable to the Target or
Subsidiary.
(vi) The unpaid Taxes of the Target and its Subsidiaries (A) did
not, as of the Most Recent Fiscal Month End, exceed the
reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with
the past custom and practice of the Target and its
Subsidiaries in filing their Tax Returns.
(vii) All transactions between the Target and any non-resident
person with whom the Target was not dealing at arm's length
were conducted at arm's length prices as defined in the Code
and the ITA, as the case may be, and the Target has made or
obtained sufficient records or documents supporting these
prices.
(viii) The Target is duly registered under subdivision (d) of
Division V of Part IX of the Excise Tax Act (Canada) with
respect to the goods and services tax and harmonized sales
tax and its registration number is 12183 3230 RT.
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(ix) The Target has not filed any elections, designations or
similar filings which will be applicable for any period
ending after Closing.
(l) Real Property. None of the Target and its Subsidiaries owns any real
property. Section 4(l) of the Disclosure Schedule lists and describes briefly
all real property leased or subleased to any of the Target and its Subsidiaries.
True, correct and complete copies of the leases and subleases, and all
amendments thereto, listed in Section 4(l) of the Disclosure Schedule (as
amended to date), are attached to the Disclosure Schedule. With respect to each
lease and sublease listed in Section 4(l) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby and any and all necessary
consents to the transactions contemplated in this Agreement
have been, or by the Closing shall have been, obtained;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iv) above
are true and correct with respect to the underlying lease;
(vi) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(vii) none of the Target and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
and
(viii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including
material licenses and permits) required in connection with
the operation thereof, and have been operated and maintained
in accordance with applicable laws, rules, and regulations
in all material respects.
(m) Intellectual Property.
(i) The Target and its Subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission
all Intellectual Property used in the operation of the
businesses of the Target and its Subsidiaries as presently
conducted, including the Go Assets. The description of the
Go
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Assets set forth in Schedule 6, including the functional
specifications thereof, is true, accurate and complete in
all material respects. Each item of Intellectual Property
owned or used by any of the Target and its Subsidiaries
immediately prior to the Closing hereunder will be owned or
available for use by the Target or its Subsidiary on
identical terms and conditions immediately subsequent to the
Closing hereunder. Each of the Target and its Subsidiaries
has taken all commercially reasonable steps to maintain and
protect each item of Intellectual Property that it owns or
uses.
(ii) None of the Target and its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third
parties, and none of the Sellers and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Target and its Subsidiaries has
ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any
of the Target and its Subsidiaries must license or refrain
from using any Intellectual Property rights of any third
party). To the Knowledge of the Sellers, no third party has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property
rights of any of the Target and its Subsidiaries.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies each
patent or trademark registration which has been issued to
any of the Target and its Subsidiaries with respect to any
of its Intellectual Property, identifies each pending patent
application or application for registration which any of the
Target and its Subsidiaries has made with respect to any of
its Intellectual Property, and identifies each license,
agreement, or other permission which any of the Target and
its Subsidiaries has granted to any third party with respect
to any of its Intellectual Property (together with any
exceptions). The Sellers have made available to the Buyer
correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and
permissions (as amended to date) and have made available to
the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. Section 4(m)(iii) of the
Disclosure Schedule also identifies each trade name or
unregistered trademark used by any of the Target and its
Subsidiaries in connection with any of its businesses. With
respect to each item of Intellectual Property required to be
identified in Section 4(m)(iii) of the Disclosure Schedule:
(A) the Target and its Subsidiaries possess all right,
title, and interest in and to the item, free and clear
of any Security Interest, license, or other restriction
except for any license, agreement or other permission
disclosed in Section 4(m)(iii) of the Disclosure
Schedule;
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(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to
the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of the Target and its
Subsidiaries, is threatened which challenges the
legality, validity, enforceability, use, or ownership
of the item; and
(D) none of the Target and its Subsidiaries has ever agreed
to indemnify any Person for or against any
interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 4(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and
that any of the Target and its Subsidiaries uses pursuant to
license, sublicense, agreement, or permission. The Sellers
have delivered to the Buyer correct and complete copies of
all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of
Intellectual Property required to be identified in Section
4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following
the consummation of the transactions contemplated
hereby (including the assignments and assumptions
referred to in Section 2 above);
(C) none of the Target or its Subsidiaries and, to the
Knowledge of the Sellers, no other party to the
license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or
default or permit termination, modification, or
acceleration thereunder;
(D) none of the Target or its Subsidiaries and, to the
Knowledge of the Sellers, no other party to the
license, sublicense, agreement, or permission has
repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D)
above are true and correct with respect to the
underlying license;
(F) to the Knowledge of the Sellers, the underlying item of
Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
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(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to
the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of the Target and its
Subsidiaries, is threatened which challenges the
legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(H) none of the Target and its Subsidiaries has granted any
sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) [intentionally deleted]
(vi) all employees of the Target and its Subsidiaries who have
contributed to or participated in the conception and/or
development of all or any part of the Go Assets or any of
the Target's or its Subsidiary's other Intellectual Property
(which is not licensed from a third party) either (i) have
been party to a "work-for-hire" arrangement or agreement
with the Target or its Subsidiary, in accordance with
Applicable Law, that has accorded the Target or its
Subsidiary full, effective, exclusive, and original
ownership of all tangible and intangible property thereby
arising, or (ii) have executed appropriate instruments of
assignment in favor of the Target or its Subsidiary as
assignee that have conveyed full, effective and exclusive
ownership of all tangible and intangible property thereby
arising.
(n) Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that the Target and its Subsidiaries own and lease are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are recorded on the Most Recent Balance
Sheet in accordance with GAAP (that is, at historic costs).
(o) No Illegal or Improper Transactions. Neither the Target or its
Subsidiaries, any Seller nor any of the directors, officers or employees of the
Target or its Subsidiaries has, directly or indirectly, used funds or other
assets of the Target or its Subsidiaries, or made any promise or undertaking in
such regard, for (a) illegal contributions, gifts, entertainment or other
expenses relating to political activity; (b) illegal payments to or for the
benefit of governmental officials or employees, whether domestic or foreign; (c)
illegal payments to or for the benefit of any person, firm, corporation or other
entity, or any director, officer, employee, agent or representative thereof; or
(d) the establishment or maintenance of a secret or unrecorded fund; and there
have been no false or fictitious entries made in the books or records of the
Company. For purposes of the foregoing, "illegal" includes payments that would
be illegal under the U.S. Foreign Corrupt Practices Act were they made or to be
made by a Person subject to that Act.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the following
contracts and other agreements to which any of the Target and its Subsidiaries
is a party:
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(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for
lease payments in excess of $25,000 per annum;
(ii) except for customer contracts in the Ordinary Course of
Business any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which
will extend over a period of more than one year, result in a
material loss to any of the Target and its Subsidiaries, or
involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $25,000 or under which it has
imposed a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers and their Affiliates
(other than the Target and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, "golden
parachute" or other plan or arrangement for the benefit of
its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $25,000 or providing
severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the
business, financial condition, operations, results of
operations, or future prospects of the Target and its
Subsidiaries;
(xii) any agreement with independent sales representatives or
sales agents;
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(xiii) any licensing or other material agreement, understanding or
letter of intent with customers or prospects (other than in
the Ordinary Course of Business);
(xiv) any agreement giving the Target or its Subsidiaries any
rights to Intellectual Property, including OEM agreements;
and
(xv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$25,000.
A true, correct and complete copy of each written agreement listed in Section
4(p) of the Disclosure Schedule (as amended to date) and a written summary
setting forth the material terms and conditions of each oral agreement referred
to in Section 4(p) of the Disclosure Schedule, and all amendments thereto,
listed in Section 4(p) of the Disclosure Schedule, are attached as an exhibit to
the Disclosure Schedule. With respect to each such agreement: (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect in all
material respects; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transaction contemplated hereby; (C) none of the Target or
its Subsidiaries and, to the Knowledge of the Sellers, no other party, is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(q) Notes, Accounts Receivable and Prepayments. All notes in favor and
accounts receivable of the Target and its Subsidiaries are reflected properly on
their books and records, are valid and bona fide arm's length receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Target and its Subsidiaries. The Target has not billed and will
not bill, and the Target has not received any payments (in the form of retainers
or otherwise) from, any of its customers or potential customers for services to
be rendered or for expenses to be incurred subsequent to the Closing Date. To
the extent that accounts receivable include pre-billed amounts, the
corresponding liabilities have been accrued to the extent actual invoices
representing such liabilities have not been recorded on the Company's books.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Target and its Subsidiaries.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) with respect to which any of the Target and its
Subsidiaries is a party, a named insured, or otherwise the beneficiary of
coverage:
(i) the name, address, and telephone number of the agent;
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(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
is on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other material loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all respects; (B) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (C) none of the Target or its Subsidiaries and, to the
Knowledge of the Sellers, no other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Section 4(s) of the Disclosure Schedule describes any
material self-insurance arrangements affecting any of the Target and its
Subsidiaries.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each
instance in which any of the Target and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of any of the Sellers and the directors and officers
of the Target and its Subsidiaries, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any country or jurisdiction or
before any arbitrator.
(u) Product and Service Warranties. Each of the products, property and
items manufactured, sold, leased, licensed or delivered, or services rendered,
provided or delivered, by any of the Target and its Subsidiaries have conformed
in all material respects with all applicable contractual commitments and all
express and implied warranties, and none of the Target and its Subsidiaries has
any material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Target and its Subsidiaries. No product, property or
item manufactured, sold, licensed, leased, or delivered, or service rendered,
provided or delivered, by the Target and its Subsidiaries is subject to any
guaranty, warranty, service life, support or repair contract, upgrade
undertaking or other indemnity beyond the Target's or its Subsidiaries'
applicable standard terms and conditions concerning such types of sale, lease,
license or service. Section 4(u) of the Disclosure Schedule includes copies of
the standard terms and conditions of sale, lease or service
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for each of the Target and its Subsidiaries (containing applicable guaranty,
warranty, and indemnity provisions).
(v) Product Liability. None of the Target and its Subsidiaries has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by any of the Target and its
Subsidiaries.
(w) Employees. The Sellers and the directors and officers of the Target
and its Subsidiaries have not received any notice nor are they aware that any
executive, key employee, or significant group of employees plans to terminate
employment with any of the Target and its Subsidiaries. None of the Target and
its Subsidiaries is a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strike or grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past three years.
None of the Target and its Subsidiaries has committed any unfair labor practice.
None of the Sellers and the directors and officers of the Target and its
Subsidiaries has any Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
any of the Target and its Subsidiaries. Section 4(w) of the Disclosure Schedule
contains a true, complete and correct list setting forth (i) the names, job
descriptions/titles, current compensation rate and any promised increased
thereof (including but not limited to salary, commission and bonus
compensation), date of hire, vacation accrual rate and accrued vacation time of
all employees of the Target and its Subsidiaries, and (ii) the names and total
annual compensation for all independent contractors who render services on a
regular basis to the Target and its Subsidiaries whose current annual
compensation is or is expected to be in excess of $20,000. The Target and its
Subsidiaries have not made any prepayments of salaries, bonuses or any other
amounts due to any of its employees. Target and its Subsidiaries have a written
policy prohibiting unlawful employment discrimination and harassment, a true,
correct and complete copy of which has been made available to the Buyer. This
policy includes a reasonable complaint procedure and is distributed to all
employees.
(x) Employee Benefits. Section 4(x) of the Disclosure Schedule sets forth
all Employee Benefit Plans by name and provides a brief description for each
plan. None of the benefits under an Employee Benefit Plan have been materially
augmented nor will the Target or its Subsidiaries or any Affiliate of theirs
make any commitments to augment materially any such benefits. Except as
described in Section 4(x) of the Disclosure Schedule, no condition, agreement or
plan provision limits the right of the Target or its Subsidiaries or any
Affiliate to amend, cut back or terminate any Employee Benefit Plan, nor will
the transaction contemplated by this Agreement limit the right of the Target or
its Subsidiaries or any Affiliate to amend, cut back or terminate any Employee
Benefit Plan. Either as a matter of law or to obtain the intended tax treatment
and tax benefits, the Employee Benefit Plans have at all times complied with and
been duly administered in accordance with all applicable laws and regulations
and requirements having force of law and in accordance with their terms. There
are not in respect of any Employee Benefit Plan or the benefits thereunder any
actions, suits or claims pending or threatened other than routine claims for
benefits. None of the Target or its Subsidiaries or any Affiliate have received
any notice or directive that it has not complied with all material
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provisions of the Employee Benefit Plans applicable to it and has no knowledge
of any reason why the tax exempt (or favored) status, if any of the Employee
Benefit Plans might be withdrawn.
(y) Guaranties. None of the Target and its Subsidiaries is a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(z) Environment, Health, and Safety Matters.
(i) Each of the Target, its Subsidiaries, and their respective
predecessors and Affiliates has complied and is in
compliance, in each case in all material respects, with all
Environmental, Health, and Safety Requirements.
(ii) Without limiting the generality of the foregoing, each of
the Target, its Subsidiaries, and their respective
Affiliates, has obtained, has complied, and is in compliance
with, in each case in all material respects, all material
permits, licenses and other authorizations that are required
pursuant to Environmental, Health, and Safety Requirements
for the occupation of its facilities and the operation of
its business.
(iii) None of the Target, its Subsidiaries, or their respective
Affiliates has received any written or oral notice, report
or other information regarding any actual or alleged
material violation of Environmental, Health, and Safety
Requirements, or any material liabilities or potential
material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any material
investigatory, remedial or corrective obligations, relating
to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(iv) The Target and its Subsidiaries and their respective
Affiliates, have not, and have no knowledge of any other
Person who has caused any release, threatened release, or
disposal of any Hazardous Material on, in, at, under, or
from any real property or leased property associated with
the business and none of such property is adversely affected
by any release, threatened release, or disposal of a
Hazardous Material. Neither the Target, its Subsidiaries or
their respective Affiliates have transported or arranged for
the transportation for storage, treatment or disposal of any
Hazardous Materials to any location, nor is the Target, its
Subsidiaries or their respective Affiliates liable for any
response or corrective action, natural resource damage or
other harm pursuant to Environmental, Health and Safety
Requirements and there are no conditions or circumstances at
any lease property associated with the business which poses
a risk to the environment or to the health or safety of
Persons.
(aa) Customers. Part I of Section 4(aa) of the Disclosure Schedule is a
complete list by dollar volume of billings (within the fiscal year ended
December 31, 1999) of the Target's and its Subsidiaries' top ten customers. None
of such customers has canceled or otherwise terminated or threatened to cancel
or otherwise terminate, its relationship with the Target and its
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Subsidiaries or materially reduced or threatened to materially reduce, its
business with the Target and its Subsidiaries. To the Knowledge of any of the
Sellers and the directors and officers of the Target and its Subsidiaries, no
customer intends to cancel or otherwise modify its relationship with the Target
and its Subsidiaries on account of the transactions contemplated hereby or
otherwise, and none of the Sellers and the directors and officers of the Target
and its Subsidiaries has any reason to so believe. All customers of the Target
and its Subsidiaries are subject to licensing agreements with the Target or its
Subsidiaries substantially in the form of Target's standard form licensing
agreement, as copy of which is attached hereto as Schedule 7. The Target and its
Subsidiaries are not subject to any undertaking or obligation to support the Go
Assets or any earlier product or release, nor are they under subject to any
understanding or obligation to upgrade any such product or release except as
disclosed in Part II of Section 4(aa) of the Disclosure Schedule.
(bb) Interest in Customers, etc. None of the Target and its Subsidiaries,
or any Employee Seller, nor any of their respective Affiliates has any direct or
indirect interest in any competitor, supplier or customer of the Target and its
Subsidiaries or in any other person with whom the Target and its Subsidiaries
have any business relationship.
(cc) Certain Business Relationships With the Target and its Subsidiaries.
None of the Sellers and their Affiliates has been involved in any material
business arrangement or relationship with any of the Target and its Subsidiaries
within the past 12 months with the exception of the employment by the Target of
the Employee Sellers. In addition, none of the Sellers and their Affiliates owns
any material asset, tangible or intangible, which is used in the business of any
of the Target and its Subsidiaries.
(dd) Year 2000. The Target and its Subsidiaries have not experienced any
material problems or difficulties with their computer systems or their
Intellectual Property relating to or resulting from the "Year 2000" concern and
none of their customers have notified the Target or its Subsidiaries that they
have experienced any such problems with any items or services provided to them
by the Target or its Subsidiaries.
(ee) Bank Accounts. Section 4 (ee) of the Disclosure Schedule lists all of
the Targets and its Subsidiaries' bank accounts, including bank addresses,
routing and account numbers, and individuals with signature authority.
(ff) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(gg) Additional Securities Matters. Each of Venrock Associates and Venrock
Associates II, Limited Partnership hereby makes the covenants, representations
and warranties set out in Schedule 13-1 and has indicated the Categories in
paragraph (d) of that Schedule that apply to each of them respectively by
printing its name and initialing each of the relevant categories. Each of the
Sellers other than Venrock Associates and Venrock Associates II, Limited
Partnership hereby makes the covenants, representations and warranties set out
in Schedule 13-2.
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(hh) Residency. Each of the Sellers other that Venrock Associates and
Venrock Associates II, Limited Partnership is not a non-resident of Canada for
purpose of the ITA.
5. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing; provided that where the Sellers are
to cause the Target or its Subsidiaries to do anything as required pursuant to
Sections 5(b) through 5(e), Sellers other than the Employee Sellers are required
to do so only to the extent they are able or otherwise have the power or control
to do so.
(a) General. Each of the Parties will use his, her or its reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below and including that each of the Sellers shall use his,
her or its commercially reasonable efforts to cause third parties to take all
action and do all things contemplated or required in this Agreement and this
covenant of the Sellers is hereby expressly agreed between the parties to be a
material covenant and that any breach thereof will be deemed to be a material
breach).
(b) Notices and Consents. The Sellers will cause each of the Target and
its Subsidiaries to give any notices to third parties, and will cause each of
the Target and its Subsidiaries to use its reasonable efforts to obtain any
third party consents, that the Buyer reasonably may request in connection with
the matters referred to in Section 4(c) above. Each of the Parties will (and the
Sellers will cause each of the Target and its Subsidiaries to) give any notices
to, make any filings with, and use its reasonable efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above. Without limiting the generality of the
foregoing, each of the Parties will file (and the Sellers will cause each of the
Target and its Subsidiaries to file) any notifications and reports and related
material that he, she or it may be required (or be advisable) to file to comply
with any relevant merger, trade or competition laws or regulations under
Applicable Law, will use his or its reasonable efforts to obtain (and the
Sellers will cause each of the Target and its Subsidiaries to use its reasonable
efforts to obtain) a waiver from the applicable waiting period or approval or
consent, as the case may be, and will make (and the Sellers will cause each of
the Target and its Subsidiaries to make) any further filings pursuant thereto
that may be necessary, proper, or advisable in connection therewith.
(c) Operation of Business. Subject to Section 7(a)(xxii), the Sellers will
not cause or permit any of the Target and its Subsidiaries to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, the
Sellers will not cause or permit any of the Target and its Subsidiaries to (i)
declare, set aside, or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, or (ii) otherwise engage in any practice, take any action, or enter into
any transaction of the sort described in Section 4(h) above. Moreover, the
Sellers will cause the Target and its Subsidiaries to work closely with the
Buyer in anticipation of being fully integrated with the Buyer after the
Closing, including projecting to
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the customers and prospective customers a unified image of the Target and its
Subsidiaries and the Buyer (to the extent legal, practical and reasonable).
(d) Preservation of Business. The Sellers will cause each of the Target
and its Subsidiaries to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees
subject to Section 7(a)(xxii).
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause each of the Target and its Subsidiaries to permit, representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Target and its
Subsidiaries, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to each of the Target
and its Subsidiaries. The Buyer will treat and hold as such any Confidential
Information it receives from any of the Sellers, the Target, and its
Subsidiaries in the course of the reviews contemplated by this Section 5(e),
will not use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever, will
return to the Sellers, the Target, and its Subsidiaries all tangible embodiments
(and all copies) of the Confidential Information which are in its possession.
(f) Notice of Developments. The Sellers will give prompt written notice to
the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. None of the Sellers will (and the Sellers will not cause
or permit any of the Target and its Subsidiaries to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any voting or equity securities, or any substantial portion
of the assets, of any of the Target and its Subsidiaries (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will vote their Target Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange. The
Sellers will notify the Buyer immediately if any Person makes any proposal
offer, inquiry, or contact with respect to any of the foregoing.
(h) Trading Prohibition. Each Seller hereby acknowledges that the
transactions contemplated hereby and information disclosed and to be disclosed
to the Sellers and their representatives may, from time to time, constitute or
include material non-public information concerning the Buyer. Each Seller
acknowledges that they are aware, and that they have advised and will continue
to advise all employees and representatives of the Target and its Subsidiaries
or such Sellers to whom the existence of this transaction or any such
information has been or may be disclosed that (i) applicable securities laws may
prohibit a person who has material, non-
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public information from purchasing or selling securities of any company to which
such information relates and (ii) material non-public information shall not be
communicated to any other person except as expressly permitted by this
Agreement.
(i) Herrington Agreements. Kirk Herrington shall provide to the Buyer and
its legal counsel either of: (i) a Direction providing instructions to the Buyer
as to whom and in what numbers the Buyer Shares payable to Kirk Herrington upon
Closing are to be issued together with the Herrington Agreement duly executed by
all parties thereto save for the Buyer; or (ii) the Herrington Escrow Agreement
duly executed by all parties thereto save for the Buyer.
(j) Offers of Employment. Buyer and Seller shall co-operate in the making
by Buyer of offers of employment to the Key Employees on terms and conditions
that are substantially similar to the terms and conditions of their employment
with Target in effect upon execution of this Agreement and in the form of offer
letter set forth in Schedule 9.
(k) Tools Business Sale or Shut-Down. Until June 15, 2000, Sellers shall,
and shall cause Target to, use reasonable commercial efforts to sell the Tools
Business on terms and conditions acceptable to the Sellers and to the Buyer and
its legal counsel, acting reasonably. If the Sellers are unable to enter into an
agreement for the sale of the Tools Business prior to June 15, 2000, and (i) the
conditions to Closing set out in Sections 7(a)(iii), (vi), (vii), (xiii), (xv),
and (xx) have been satisfied or waived by the Buyer; and (ii) either 10 days
have elapsed since execution by the Buyer of this Agreement or the Buyer has
waived its right to terminate the Agreement pursuant to Section 10(a) (iv), then
the Sellers shall cause the Target to commence an orderly termination of the
operation by the Target of the Tools Business, by, among other things,
immediately carrying out the following activities:
(i) ceasing all product sales in the Tools Business;
(ii) terminating all employees of the Tools Business who do not have
employment opportunities with the Buyer (as advised by the Buyer);
(iii) commencing to inform current customers of the Tools Business
that have ongoing maintenance or support contracts that all service will be
discontinued upon expiry of their current contract with the Target;
(iv) terminating any supply, service, purchase, joint venture or other
contract, agreement or arrangement that relates solely or primarily to the Tools
Business; and
(v) organizing engineering and support staffing so that expenses
related to supporting the customers of the Tools Business are reduced to the
minimum reasonably necessary to meet the support obligations under existing
contracts,
(herein collectively referred to as the "Tools Business Shut-Down").
Notwithstanding the foregoing, the Sellers and the Target shall inform the Buyer
of the progress and actions taken in connection with the Tools Business
Shut-Down and the Buyer shall provide Sellers with reasonable non-financial
co-operation and assistance in causing an orderly shut-down by the Target of the
Tools Business.
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6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following the
Closing.
(a) General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort belonging to the Target and its
Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any of the Target and its Subsidiaries, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) Transition. None of the Sellers will take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
licenses, supplier, or other business associate of any of the Target and its
Subsidiaries from maintaining the same business relationships with the Target
and its Subsidiaries after the Closing as it maintained with the Target and its
Subsidiaries prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the businesses of the Target and its Subsidiaries to the
Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession and that belong to the Target or its Subsidiaries. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his or its reasonable efforts to obtain, at the reasonable
request of the Buyer, an order or other assurance that confidential treatment
will be
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accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
(e) Covenant Not to Compete. For a period from and after the Closing Date
and expiring one year after the later of the Closing Date and the last date of
employment of Seller with Buyer (if such Seller becomes an employee of Buyer
upon Closing), none of the Employee Sellers will engage directly or indirectly
in any business anywhere in the world that any of the Target and its
Subsidiaries conducts or has made plans to engage in as of the Closing Date;
provided, however, that no owner of less than 1% of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses. If an arbitrator declares that any term or provision
of this Section 6(e) is invalid or unenforceable, the Parties agree that the
arbitrator shall have the power to reduce the scope, duration, or area of the
term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
(f) Non-solicitation. For a period from and after the Closing Date and
expiring one year after the later of the Closing Date and the last date of
employment of Seller with Buyer (if such Seller is employed by Buyer on
Closing), each Seller agrees that it will not, either for itself, himself or
herself or any other Person, (A) induce or attempt to induce any employee of the
Target or its Subsidiaries or the Buyer to leave the employ of such companies,
(B) in any way interfere with the relationship between the Target and its
Subsidiaries or the Buyer and any employee of such companies, (C) cause to be
employed, or otherwise engaged as an employee, independent contractor, or
otherwise, any employee of the Target or its Subsidiaries or the Buyer, or (D)
induce or attempt to induce any customer, supplier, licensee, or business
relation of the Target and its Subsidiaries or the Buyer to cease doing business
with such companies, or in any way interfere with the relationship between any
customer, supplier, licensee, or business relation of the Target or its
Subsidiaries.
(g) Buyer Shares. Each certificate of Buyer Shares delivered at the
Closing will be imprinted with legends substantially in the following form:
1. U.S. Legend
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR
(D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT
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PRIOR TO SUCH SALE THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO
IT, AS TO THE AVAILABILITY OF AN EXEMPTION. THE HOLDER HEREOF FURTHER
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT MAY NOT ENGAGE IN
HEDGING TRANSACTIONS WITH RESPECT TO THE SECURITIES EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN CANADA. PROVIDED THAT THE COMPANY IS A "FOREIGN ISSUER"
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT AT THE
TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY," MAY BE OBTAINED FROM AMERICAN STOCK
TRANSFER & TRUST COMPANY UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO AMERICAN STOCK
TRANSFER & TRUST COMPANY AND THE COMPANY, TO THE EFFECT THAT THE SALE
OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.
2. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL [DATE] EXCEPT
AS PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND THE RULES
THEREUNDER.
Each holder desiring to transfer Buyer Shares received by the holder pursuant to
this Agreement first must furnish the Buyer with (i) a written opinion
reasonably satisfactory to the Buyer in form and substance from counsel
reasonably satisfactory to the Buyer by reason of experience to the effect that
the holder may transfer the Buyer Shares as desired without a prospectus under
the Securities Act or registration under the U.S. Securities Act and (ii) a
written undertaking executed by the desired transferee reasonably satisfactory
to the Buyer in form and substance agreeing to be bound by the restrictions on
transfer contained herein.
(h) Securities Registrations. As promptly as reasonably practical
following the Closing Date, the Buyer will use its reasonable efforts to
register on Form S-8 all the Buyer Shares issuable upon the exercise of Buyer
Options created upon the amendment of Target Options into Buyer Options.
(i) Registration Rights Agreement. On Closing, the parties will enter into
the registration rights agreement substantially in the form attached as Schedule
8.
(j) Joint Tax Election. Notwithstanding the Purchase Price to be paid by
the Buyer to the Sellers hereunder, the Buyer and the Sellers hereby agree and
confirm that, as may be required by any of the Sellers in connection with the
transactions contemplated hereby (an "Electing Seller"), the Buyer and the
Electing Seller will file a joint election, pursuant to section 85(1) of the
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ITA, in the prescribed form and within the time referred to in the ITA, to
transfer the Target Shares from the Electing Seller to the Buyer at an elected
amount as determined by the Seller.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through
the Closing;
(iii) the Target and its Subsidiaries shall have procured all of
the material third party consents specified in Section 5(b)
above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any country or jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C)
affect adversely the right of the Buyer to own the Target
Shares and to control the Target and its Subsidiaries, or
(D) affect materially and adversely the right of any of the
Target and its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in
Section 7(a)(i)-(iv) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under any applicable merger, trade or competition acts shall
have expired or otherwise been terminated and the Parties,
the Target, and its Subsidiaries shall have received all
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above;
(vii) the Key Employees and Target shall have entered into, and
delivered to the Buyer, employee offer letters in form and
substance as set forth in Schedule 9 attached hereto and the
same shall be in full force and effect;
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(viii) the Buyer shall have received from counsel to the Sellers
opinions in form and substance acceptable to the Buyer and
counsel to the Buyer, acting reasonably, addressed to the
Buyer, and dated as of the Closing Date;
(ix) the Buyer shall have received the resignations, effective as
of the Closing, of each director and officer of the Target
and its Subsidiaries requested by the Buyer;
(x) the Buyer shall have received Target's and all of its
Subsidiaries' minutes books, stock books, stock registries,
and bank signature cards;
(xi) an Escrow Agreement substantially in the form of Schedule 3
hereto shall have been validly entered into by all parties
thereto other than the Buyer;
(xii) [Intentionally Deleted];
(xiii) all Shareholders other than the Sellers shall have executed
and delivered to the Buyer a Purchase Agreement
substantially in the form of Schedule 4 hereto;
(xiv) all filings, registrations and exemptions required under all
Applicable Securities Law shall have been made or received;
(xv) the Buyer shall have received satisfactory evidence that all
existing employment contracts undertakings and
employment-related arrangements (including severance
agreements) by the Target and its Subsidiaries in favor of
the Sellers have been cancelled and all existing obligations
between the Target and its Subsidiaries and the Sellers for
borrowed money, advances, and other non-salary, non-wage and
non-commission arrangements have been settled and
discharged.
(xvi) all Target Warrants and all vested Target Options shall have
been exercised, Shareholders holding 100 percent of the
outstanding Target Shares as at the Closing shall have
tendered delivery of their Target Shares, and the holders of
all of the outstanding unvested Target Options shall have
agreed to amendments to the terms and conditions of their
Target Options as more particularly provided in paragraph
2(e) and the Option Plan shall have been amended in form and
substance satisfactory to the Buyer;
(xvii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance, and as
relevant delivered, to the Buyer;
(xviii) nothing shall have occurred after the date of this Agreement
relating to Target which, in the Buyer's reasonable opinion,
may have a material
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adverse effect on the business, financial condition,
operations, results of operations, or future prospects of
the Target and its Subsidiaries but for greater certainty,
this provision does not apply to general market conditions,
including currency, interest rate, general stock indices and
other factors not specific to Target;
(xix) all Key Employees not party to this Agreement have executed
Buyer's standard form Confidentiality, Non-Solicitation and
Non-Competition Agreement;
(xx) all option agreements to which any of Target's senior
management personnel are party shall have been amended to
change the vesting rights of such option holders upon a
change of control of Target so that 50% of such options vest
on a change of control and the Balance of the options vest
in accordance with Buyer's regular options vesting schedule;
(xxi) Target Shareholders Agreement shall have been terminated;
(xxii) Sellers shall, in the reasonable opinion of the Buyer, have
commenced the sale of the Tools Business or the Tools
Business Shut-Down all as more particularly provided in
5(k); and
(xxiii) Kirk Herrington shall have complied with the covenant set
out in Section 5(i).
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any country or jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
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(iv) the Buyer shall have delivered to the Sellers a certificate
to the effect that each of the conditions specified above in
Section 7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under any applicable merger, trade or competition acts shall
have expired or otherwise been terminated and the Parties,
the Target, and its Subsidiaries shall have received all
other material authorizations, consents, and approvals of
governments and governmental agencies referred to in Section
3(a)(ii), Section 3(b)(ii), and Section 4(c) above;
(vi) the Buyer shall have executed agreements in form and
substance as set forth in Schedules 3, 4 and 8 and the same
shall be in full force and effect;
(vii) the Sellers shall have received from counsel to the Buyer an
opinion in form and substance acceptable to the Sellers and
counsel to the Sellers, acting reasonably, addressed to the
Sellers, and dated as of the Closing Date which shall
include but not be limited to an opinion with respect to the
Canadian resale restrictions applicable to Buyer Shares
issued to the Canadian Sellers on Closing;
(viii) the Escrow Agreement shall have been validly entered into by
all parties thereto other than the Sellers and the Escrow
Shares shall have been deposited with the Escrow Agent;
(ix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Sellers;
(x) the Buyer shall have filed a notice with the British
Columbia Securities Commission regarding its intention to
use its final prospectus dated August 4, 1999 as an annual
information form for the purposes of BOR #98/7 under the
Securities Act; and
(xi) the Buyer shall, at the time of Closing, be a "qualifying
issuer" for purposes of BOR #98/7 under the Securities Act.
The Sellers together with the Representative Seller described in Section 2(i) on
behalf of all other Shareholders, may waive any condition specified in this
Section 7(b) if they execute a writing so stating at or prior to the Closing.
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8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Sellers contained in
Section 4 above shall survive the Closing hereunder (even if the Buyer knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one year
thereafter. All of the other representations and warranties of the Parties
contained in this Agreement shall survive the Closing (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
Each of the Sellers, severally shall indemnify the Buyer, the Target
and its Subsidiaries, their Affiliates, and the officers, directors, employees
(except in their capacity as Sellers), agents successors and permitted assigns
of each of them (collectively the "Seller Indemnified Parties") from and against
the entirety of any Adverse Consequences they may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival period) subject to,
and in accordance with, the following:
(i) In the event any of the Sellers breaches any of their
representations, warranties, and covenants contained herein
(other than the representations, warranties and covenants in
Sections 2(a), 3(a), 4(m), 4(u), 4(v) and 4(aa) above) or
any certificate, document or agreement delivered or entered
into at the Closing or in connection with any registration
or exemption contemplated hereunder, and, if there is an
applicable survival period pursuant to Section 8(a) above,
provided that the Buyer makes a written claim for
indemnification against any of the Sellers pursuant to
Section 11(h) below within such survival period, then each
of the Sellers agrees to severally indemnify the Seller
Indemnified Parties, from and against its Proportional Share
of any Adverse Consequences they may suffer through and
after the date of the claim for indemnification (including
any Adverse Consequences the Seller Indemnified Parties may
suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature
of, or caused by the breach provided that such
indemnification shall not exceed a cumulative total of
US$2,000,000 (the "General Cap") in respect of all Sellers;
provided further, however, that the Sellers shall not have
any obligation to indemnify the Buyer from and against any
Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of
any representation, warranty or covenant of the Sellers
contained in this Agreement above until the Seller
Indemnified Parties have collectively suffered Adverse
Consequences by reason of all such breaches in excess of a
US$100,000 aggregate threshold (at which point the Sellers
will be obligated to
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indemnify the Buyer from and against all such Adverse
Consequences relating back to the first dollar).
(ii) In the event: (A) any of the Sellers breaches any of their
representations, warranties, and covenants contained in
Sections 4(m), 4(u), 4(v) and 4(aa) above, and, if there is
an applicable survival period pursuant to Section 8(a)
above, provided that the Buyer makes a written claim for
indemnification against any of the Sellers pursuant to
Section 11(h) below within such survival period; or (B)
Adverse Consequences are suffered by any of the Seller
Indemnified Parties in connection with the Tools Business
Shut-Down, then each of the Sellers agrees to severally
indemnify the Seller Indemnified Parties, from and against
its Proportional Share of any Adverse Consequences they may
suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the
Seller Indemnified Parties may suffer after the end of any
applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach or
the Tools Business Shut-Down provided that such
indemnification shall not exceed a cumulative total of the
General Cap plus an additional US$4,000,000 (the "IP Cap")
for a total amount of US$6,000,000 (the "Total Cap");
provided further, however, that the Sellers shall not have
any obligation to indemnify the Buyer from and against any
Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of
any representation, warranty or covenant of the Sellers
contained in this Agreement above until the Seller
Indemnified Parties have collectively suffered Adverse
Consequences by reason of the events in sub-subparagraphs
8(b) (ii) (A) and/or (B) above in excess of an aggregate
threshold of US$200,000 plus any net cash proceeds received
by the Target upon the closing of a sale to a purchaser of
the Tools Business prior to July 31, 2000 and specifically
including cash royalty payments forming part of the purchase
price for the Tools Business received from such purchaser by
the Target during the period for which the Sellers are
obligated to indemnify the Purchaser under this Section
8(b)(ii) (at which point the Sellers will be obligated to
indemnify the Buyer from and against all such Adverse
Consequences relating back to the first dollar).
For greater certainty, the total amount of all indemnity
payments to be made pursuant to Sections 8(b) (i) and (ii)
hereunder shall at no time exceed the Total Cap. However,
any indemnity claims made by the Buyer pursuant to
subparagraph 8(b) (ii) above shall not reduce the total
amount of the indemnity available for payment under the
General Cap until a total of US$4,000,000 has been claimed
against the Total Cap. In addition, the first US$2,000,000
in aggregate of indemnity claims made by the Buyer pursuant
to either or both of subparagraphs 8(b)(i) and 8(b)(ii)
shall be satisfied by claiming against the Escrowed Shares
pursuant to the Escrow Agreement.
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(iii) In the event any of the Sellers breaches any of his or its
covenants in Section 2(a) above or any of his or its
representations and warranties in Section 3(a) above, and,
if there is an applicable survival period pursuant to
Section 8(a) above, provided that the Seller Indemnified
Parties makes a written claim for indemnification against
the Seller pursuant to Section 11(h) below within such
survival period, then the Seller agrees to indemnify the
Seller Indemnified Parties from and against the entirety of
any Adverse Consequences the Seller Indemnified Parties may
suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach; provided that such
indemnification shall not exceed a cumulative total amount
for each Seller equal to such Seller's Proportional Share of
the Purchase Price less any amounts paid by such Seller to
any Seller Indemnified Parties pursuant to Section 8(b)(i)
and (ii).
(c) Indemnification Provisions for Benefit of the Sellers. In the event
the Buyer breaches any of its representations, warranties, and covenants
contained herein or any certificate, document or agreement delivered or entered
into at the Closing, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that any of the Sellers makes a written claim for
indemnification against the Buyer pursuant to Section 11(h) below within such
survival period, then the Buyer agrees to indemnify each of the Sellers from and
against the entirety of any Adverse Consequences the Seller may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this
Section 8, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse
Consequences the Indemnified Party may
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suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that
the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or
an adverse judgment with respect to, the Third Party Claim
is not, in the good faith judgment of the Indemnified Party,
likely to establish a presidential custom or practice
materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (C)
the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent
provided in this Section 8.
(e) Treatment of Payments. All indemnification payments under this Section
8 shall be deemed adjustments to the Purchase Price.
(f) Exclusive Remedy. Without prejudice to Sections 10(c) and 11(o), the
Parties hereto acknowledge and agree that the foregoing indemnification
provisions in this Section 8 shall be the exclusive remedy of the Buyer and the
Seller with respect to the Target, its Subsidiaries, and the transactions
contemplated by this Agreement. Each of the Sellers hereby
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releases each, and agrees that he, she or it will not make any claim for
indemnification against any, of the Target and its Subsidiaries by reason of the
fact that he or it was a director, officer, employee, or agent of any such
entity or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise), and, without
limiting the generality of the foregoing, including with respect to any action,
suit, proceeding, complaint, claim, or demand brought by the Buyer against such
Seller (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, Applicable Law, or otherwise).
9. Tax Matters.
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain Tax matters following the Closing Date:
(a) Tax Returns. Buyer shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Target and its Subsidiaries for all
periods ending on or prior to the Closing Date which are filed after the Closing
Date.
(b) Cooperation on Tax Matters.
(i) The Buyer and the Sellers shall cooperate fully, as and to
the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to
provide additional information and explanation of any
material provided hereunder. The Buyer and the Sellers
agree, or shall cause the Target and its Subsidiaries, (A)
to retain all books and records with respect to Tax matters
pertinent to the Target and its Subsidiaries relating to any
taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such
books and records and, if the other party so requests, the
Target and its Subsidiaries or Sellers, as the case may be,
shall allow the other party to take possession of such books
and records.
(ii) Buyer and Seller further agree, upon request, to use their
best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may
be necessary to mitigate, reduce or eliminate
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any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) Tax Sharing Agreements. The Sellers represent and warrant that there
are no tax sharing agreements or similar agreements with respect to or involving
the Target and its Subsidiaries.
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred by any one or more of the Sellers in connection with this
Agreement are the responsibility of and shall be paid by such Sellers when due,
and Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by Applicable Law, Buyer
will, and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
(e) Section 116 Certificate. If each of the Sellers that is not resident
in Canada (collectively the "Non-Resident Sellers") has not provided Buyer with
a certificate (the "Certificate") issued by the Minister of National Revenue
evidencing compliance with the provisions of Section 116 of the ITA prior to the
Closing, Buyer will withhold an amount equal to 33 1/3 % of the Non-Resident
Sellers' collective proportional share of the Purchase Price payable pursuant to
paragraph 2(b) hereof until the earlier of:
(i) the last day of the month following the month in which the
Closing occurs (the "Filing Date"); or
(ii) the date upon which each of the Non-Resident Sellers
delivers a Certificate to Buyer.
Upon receipt of the Certificate prior to the Filing Date, Buyer will be required
to immediately pay the withheld amounts to Clark, Wilson who will receive the
same on behalf of each of the Non-Resident Sellers. In the event that the
Certificate is not delivered as aforesaid prior to the Filing Date Buyer will
remit the withheld amounts to the Receive General of Canada, whose receipt will
discharge Buyer from any liability to the Non-Resident Sellers or any of them
for the funds so remitted.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A)
in the event any of the Sellers has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified
the Seller of the breach, and the breach has continued
without cure for a period of 10
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days after the notice of breach or (B) if the Closing shall
not have occurred on or before June 30, 2000, by reason of
the failure of any condition precedent under Section 7(a)
hereof (unless the failure results primarily from the Buyer
itself breaching any representation, warranty, or covenant
contained in this Agreement);
(iii) Sellers holding collectively greater than 66% of the Target
Common Shares, but not individually, may terminate this
Agreement with respect to all of the Sellers by giving
written notice to the Buyer at any time prior to the Closing
(A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Sellers have notified
the Buyer of the breach, and the breach has continued
without cure for a period of 10 days after the notice of
breach or (B) if the Closing shall not have occurred on or
before June 30, 2000, by reason of the failure of any
condition precedent under Section 7(b) hereof (unless (i)
the condition precedent in Section 7(a)(xiii) shall not have
been satisfied or waived by the Buyer by that time in which
case the Sellers' right to terminate this Agreement pursuant
to this Section 10(a)(iii)(B) shall only arise if the
Closing shall not have occurred on or before July 31, 2000
rather than June 30, 2000; or (ii) the failure results
primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iv) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to 5:00 p.m. on the
tenth day after execution by the Buyer of this Agreement, if
the Buyer is not reasonably satisfied with the results of
its continuing business, legal and accounting due diligence
regarding the Target and its Subsidiaries.
(b) Effect of Termination. Subject to Section 10(c) below, if any Party
terminates this Agreement pursuant to Section 10(a) above, all rights and
obligations of all the Parties hereunder shall terminate without any liability
of any Party to any other Party; provided, however, that the confidentiality
provisions contained in Section 5(e) above shall survive termination.
(c) Breakup Fee. As the sole and exclusive remedy to the terminating
Party:
(i) if the Buyer terminates this Agreement under Section
10(a)(ii)(A) above for any reason, and the Sellers could not
themselves terminate this Agreement under Section
10(a)(iii)(A) above each of the Sellers shall pay the Buyer
their respective Proportional Share of US$500,000; or
(ii) if the Sellers terminate this Agreement under Section
10(a)(iii)(A) above for any reason, and the Buyer could not
itself terminate this Agreement under Section 10(a)(ii)(A)
above, the Buyer shall pay the Sellers collectively and not
individually US$500,000.
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<PAGE>
Any payment required to be made pursuant to this Section 10(c) shall be
made not later than two business days after delivery to the of the relevant
termination notice, and shall be made by wire transfer of immediately
available funds to an account designated by terminating Party, payment by
the buyer to the designated Seller described in Section 2(i) shall be
deemed to be payment to all the Sellers.
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section 2(a) above
concerning the sale of his, her or its Target Shares to the
Buyer and the representations and warranties of each of the
Sellers in Section 3(a) above concerning the transaction are
several obligations. This means that the particular Seller
making the representation, warranty, or covenant will be
solely responsible to the extent provided in Section 8 above
for any Adverse Consequences the Buyer may suffer as a
result of any breach thereof.
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several
obligations. This means that each Seller will be responsible
to the extent provided in Section 8 above for the entirety
of any Adverse Consequences the Buyer may suffer as a result
of any breach thereof.
(b) Press Releases and Public Announcements. The Sellers agree not to
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer; provided, however, that any Seller which is a public company may
make any public disclosure that is required by Applicable Law or any listing or
trading agreement concerning its publicly-traded securities (in which case such
Seller will consult with the Buyer prior to making the disclosure). In addition,
the Sellers agree to allow the Buyer to dictate the positioning, whether verbal
or written, of all public announcements related to this transaction.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns and, for purposes of Section 8(b) above, the
Target, Affiliates of the Buyer and the Target, and their officers, directors,
employees and agents.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
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<PAGE>
Affiliates, and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts (including separate signature pages by fax), each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers, whether collectively or individually:
Kirk Herrington
400 - 885 Dunsmuir Street
Vancouver, B.C. V6C 1N8
Copy to:
Simba Technologies Inc.
400 - 885 Dunsmuir Street
Vancouver, BC V6C 1N8
Attention: Mr. David Pritchard
Fax: (604) 601-5320
VW B.C. Technology Investment Fund,
Limited Partnership
c/o Ventures West Management B.C. Ltd.
Suite 280 - 1285 West Pender Street
Vancouver, BC V6E 4B1
Attention: Mr. Howard L. Riback
Fax: (604) 687-2145
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<PAGE>
Clark Wilson
800 - 885 West Georgia Street
Vancouver, BC V6C 3H1
Attention: Mr. David J. Cowan
Fax: (604) 687-6314
If to the Buyer:
Pivotal Corporation
#300 - 224 West Esplanade
North Vancouver, BC V7M 3M6
Attention: Mr. Vince Mifsud
Fax: (604) 988-0035
Copy to:
Borden Ladner Gervais
1200 - 200 Burrard Street
Vancouver, BC V7X 1T2
Attention: Mr. Neil de Gelder, Q.C.
Fax: (604) 687-1415
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, 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 intended recipient. 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.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the province of British Columbia, and the laws of
Canada applicable therein, without giving effect to any choice or conflict of
law provision or rule (whether of the province of British Columbia or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the province of British Columbia.
(j) Dispute Resolution. Any dispute, controversy or claim arising out of
or relating to this Agreement, or the breach, termination or invalidity of it
shall be settled by arbitration in accordance with the UNCITRAL Arbitration
Rules in effect on the date of this Agreement. The appointing authority shall be
the British Columbia International Commercial Arbitration Centre. The place of
arbitration shall be Vancouver, British Columbia, Canada. The number of
arbitrators shall be one. The arbitrator shall be fully fluent in English. The
arbitrator will issue findings of fact and conclusions of law to support his or
her opinion. Judgment upon the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof and enforced as any other judgment. The
arbitrator shall have the power, but not the obligation, to hire an
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<PAGE>
accounting firm or other professional within the financial services industry as
an expert in order to assist the arbitrator in issuing findings of fact. The
arbitration proceedings and all discovery shall be confidential and neither
party shall release any decision rendered by the arbitrator to any third party.
Discovery shall be limited to that which is directly relevant to the claim or
controversy and to key documents and witnesses that are substantive and
reasonably necessary to establish a party's claim or defense. Whenever
reasonably possible and unless manifestly prejudicial or unfair, affidavits will
be substituted for direct testimony. Notwithstanding any of the foregoing, the
Parties recognize that certain business relationships could give rise to the
need for one or more of the Parties to seek emergency, provisional or summary
injunctive relief. Immediately following the issuance of any such relief, the
Parties agree to the stay of any judicial proceedings pending arbitration of all
underlying claims between the parties.
(k) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any 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 such occurrence.
(l) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(m) Expenses. Each of the Parties, the Target, and its Subsidiaries will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. Notwithstanding the foregoing, Target may pay reasonable legal fees and
expenses of the Shareholders incurred in connection with this Agreement and the
transactions contemplated hereby.
(n) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction will be applied. Any reference to any law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation. Singular words, terms and usage shall be construed to
include the plural, and vice versa, as the context permits. The phrase "the
Target and its Subsidiaries" and variations of such phrase shall be construed to
include, as the context permits any of such Persons and not merely the Target
and its Subsidiaries taken as a whole (unless expressly so stated). The Parties
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
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<PAGE>
the relative levels of specificity) which 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.
(o) Specific Performance. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof, in addition to any other remedy
to which they may be entitled, at law or in equity.
(p) Time of Essence. With regard to all dates and time periods set forth
in the Agreement, time is of the essence.
(q) Incorporation of Exhibits and Schedules. The Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
PIVOTAL CORPORATION
By: /s/ Vince Mifsud
---------------------------------
Title: ------------------------------
/s/ Kirk Herrington for David illegible
------------------------------------- ------------------------------
DAVID PRITCHARD Witness
/s/ Kirk Herrington illegible
------------------------------------- ------------------------------
KIRK HERRINGTON Witness
/s/ Michael Satterfield illegible
------------------------------------- ------------------------------
MICHAEL SATTERFIELD Witness
/s/ Calvin Mah illegible
------------------------------------- ------------------------------
CALVIN MAH Witness
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<PAGE>
VW B.C. TECHNOLOGY INVESTMENT VENROCK ASSOCIATES
FUND, LIMITED PARTNERSHIP by its
general partner Ventures West
Management B.C. Ltd.
By: illegible By: illegible
--------------------------------- ---------------------------------
Title: Title: General Partner
-------------------------- -----------------------------
VENROCK ASSOCIATES II, LIMITED WORKING VENTURES CANADIAN
PARTNERSHIP FUND INC.
By: illegible By: illegible
--------------------------------- ---------------------------------
Title: General Partner Title: SVP & CIO
-------------------------- -----------------------------
BANK OF MONTREAL CAPITAL SUSSEX CAPITAL INC.
CORPORATION by its manager, Ventures
West Management TIP Inc.
By: illegible By: illegible
--------------------------------- ---------------------------------
Title: Title: President
-------------------------- -----------------------------
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SCHEDULES
Schedule Title
-------- -----
1.* Disclosure Schedule
2.* Allocation Schedule
3.* Escrow Agreement
4. Share Purchase Agreement
5.* Financial Statements
6.* Detailed Description of Go Assets
7.* Standard Form Licensing Agreement
8. Registration Rights Agreement
9.* Key Employee Agreement
10.* Intentionally Deleted
11.* Employees
12.* Seller Apportionment
13.* Additional Securities Matters
* These Schedules have been omitted from this report pursuant to Item
601(b)(2) of Regulation S-K under the Securities Act of 1933. The
registrant agrees to supplementally furnish a copy of the omitted
schedule(s) to the Commission upon request.
<PAGE>
SCHEDULE 4
SHARE PURCHASE AGREEMENT
for
SIMBA TECHNOLOGIES INC.
THIS SHARE PURCHASE AGREEMENT made between PIVOTAL CORPORATION ("Pivotal")
and the undersigned (the "Seller"), a shareholder of Simba Technologies Inc.
("Simba");
WITNESSES THAT WHEREAS the Seller owns the outstanding shares of Simba (the
"Simba Shares") as set out in Part 1 of the attached Schedule A;
NOW THEREFORE in consideration of the mutual promises and representations
contained in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale Transaction
1.1 On and subject to the terms and conditions of this Agreement, Pivotal
agrees to purchase from the Seller and the Seller agrees to sell to Pivotal all
of the Seller's Simba Shares for the purchase price set out in Part 1 of
Schedule A (the "Purchase Price").
1.2 The Purchase Price shall be paid by Pivotal to the Seller by delivery of
the number of shares of Pivotal set out in Part 1 of Schedule A (the "Pivotal
Shares") at a closing (the "Closing") to be held simultaneously with the closing
of the purchase by Pivotal of shares of Simba owned by shareholders who are a
party to a share purchase agreement with Pivotal dated May 26, 2000 (the "Main
Agreement").
2. Appointment of Representative Seller
2.1 The Seller hereby irrevocably appoints Kirk Herrington (the "Representative
Seller") as the Seller's agent for the purposes of: (a) delivery of the Simba
Shares to Pivotal; (b) the delivery of the Pivotal Shares to the Seller; and (c)
negotiating and executing the Registration Rights Agreement (attached as
Schedule 8 to the Main Agreement). The Seller hereby further grants the
authority and delegates the responsibility to the Representative Seller to make
such decisions and take such actions as may be necessary or desirable to effect:
(a) the purchase and sale of the Simba Shares in accordance with this Agreement,
including the waiver of any term or condition of Closing in favour of the
Seller, other than payment of the Purchase Price; and (b) the Registration
Rights Agreement.
2.2 In furtherance of the foregoing, the Seller hereby confirms to and agrees
with Pivotal that any decisions or actions by the Representative Seller shall be
deemed binding on the Seller and the Representative Seller may, but shall not be
obligated to, deal or communicate directly with the Seller in respect of such
decisions or actions.
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<PAGE>
3. Representations and Warranties of the Seller
The Seller represents and warrants to Pivotal that the statements contained
in this Section 3 are correct and complete as of the date of execution hereof,
and shall be correct and complete as of the Closing, as though made at the
Closing:
(a) Organization of Certain Sellers. If the Seller is a corporation, the
Seller is duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. The Seller has full power and authority
(including, if the Seller is a corporation, full corporate power and
authority) to execute and deliver this Agreement and to perform his,
her or its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Seller. The Seller is not
required to obtain any authorization, consent, or approval of any
person, including any court or governmental agency, in order to
complete the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the completion of the transactions contemplated hereby,
will violate any injunction, judgment, order, decree, ruling, charge,
or other restriction of any governmental agency or court to which the
Seller is subject or, if the Seller is a corporation, any provision of
its charter or bylaws.
(d) Simba Shares. The Seller owns the number of Simba Shares set out in
Schedule A free and clear of security interests, liens, charges,
encumbrances, spousal or community property rights, options, warrants,
purchase rights, contracts, commitments, equities, claims, demands or
any other restrictions on transfer (other than any restrictions under
applicable laws relating to securities). The Seller is not a party to
any option, warrant, purchase right, or other contract or commitment
that could require the Seller to sell, transfer, or otherwise dispose
of any Simba Shares to any other person. The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with
respect to the voting of any shares of Simba.
(e) Options. The Seller has exercised, or will on or prior to Closing have
exercised, all of the vested options or warrants described in Part 2
of Schedule A to this Agreement, and the Simba Shares to be sold to
Pivotal under this Agreement include the Simba Shares received or
receivable on such exercise. The number of options or warrants set
forth next to the Seller's name in Part 3 of Schedule A accurately
reflects all of the Seller's other options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Simba to issue any of its
securities.
(f) Residency. The Seller [please check one of the following] [ ---- is]
[---- is not] a non-resident of Canada for purposes of the Income Tax
Act (Canada).
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<PAGE>
(g) Securities Matters. The Seller [please check one of the following]:
---- is a "U.S. Person" and hereby makes the covenants,
representations and warranties set out in Schedule B-1 and has
indicated the Categories set out in paragraph (d) of that Schedule
that apply to the Seller by checking the relevant Categories.
---- is not a "U.S. Person" and hereby makes the covenants,
representations and warranties set out in Schedule B-2.
4. Representations and Warranties of Pivotal
Pivotal agrees that the same representations and warranties concerning
Pivotal that are made to the Simba shareholders in the Main Agreement are
extended to the Seller with respect to Pivotal and the Pivotal Shares.
5. Section 116 Certificate
If the Seller has indicated in Section 3(f) above that it is not resident
in Canada (a "Non-Resident Seller") and has not provided Pivotal with a
certificate (the "Certificate") issued by the Minister of National Revenue
evidencing compliance with the provisions of Section 116 of the Income Tax Act
(Canada) prior to the Closing, Pivotal will withhold an amount equal to 33 1/3 %
of the Purchase Price payable to the Seller pursuant to Section 1 hereof until
the earlier of:
(i) the last day of the month following the month in which the Closing
occurs (the "Filing Date"); or
(ii) the date upon which the Non-Resident Seller delivers a Certificate to
Pivotal.
Upon receipt of the Certificate prior to the Filing Date, Pivotal will be
required to immediately pay the withheld amounts to Clark, Wilson, Barristers
and Solicitors who will receive the same on behalf of the Seller. In the event
that the Certificate is not delivered as aforesaid prior to the Filing Date,
Pivotal will remit the withheld amounts to the Receive General of Canada, whose
receipt will discharge Pivotal from any liability to the Seller for the funds so
remitted.
6. Maximum Liability
The maximum aggregate liability of the Seller to the Buyer for claims made
by the Buyer that arise as a result of a breach by the Seller of any of its
representations and warranties contained in Section 3 above, is limited to an
amount equal to the Purchase Price.
7. Conditions to Closing
The Closing will indirectly be subject to all the terms and conditions of
closing that are set out in the Main Agreement, in that no purchase and sale of
the Simba Shares will be completed unless and until the purchase of shares of
Simba under the Main Agreement is
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<PAGE>
completed. The Closing will also be subject to the Seller's representations and
warranties set out in section 3 above being true and correct as at the Closing.
8. Legends
Each certificate of Pivotal Shares delivered at the Closing will be
imprinted with legends substantially in the following form:
(a) U.S. Legend
The securities represented hereby have not been and will not be
registered under the United States Securities Act of 1933, as amended
(the "Securities Act"). The holder hereof, by purchasing such
securities, agrees for the benefit of the company that such securities
may be offered, sold or otherwise transferred only (a) to the company,
(b) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (c) inside the United States in
accordance with Rule 144 under the Securities Act, if applicable, or
(d) in a transaction that is otherwise exempt from registration under
the Securities Act and applicable state securities laws, provided that
prior to such sale the company shall have received an opinion of
counsel of recognized standing, in form and substance satisfactory to
it, as to the availability of an exemption. The holder hereof further
agrees for the benefit of the company that it may not engage in
hedging transactions with respect to the securities except in
compliance with the Securities Act. Delivery of this certificate may
not constitute "good delivery" in settlement of transactions on stock
exchanges in Canada. Provided that the company is a "foreign issuer"
within the meaning of Regulation S under the Securities Act at the
time of sale, a new certificate, bearing no legend, delivery of which
will constitute "good delivery," may be obtained from American Stock
Transfer & Trust Company upon delivery of this certificate and a duly
executed declaration, in a form satisfactory to American Stock
Transfer & Trust Company and the company, to the effect that the sale
of the securities represented hereby is being made in compliance with
rule 904 of Regulation S under the Securities Act.
(b) Canadian Legend
The shares represented by this certificate are subject to a hold
period and may not be traded in British Columbia until [date] except
as permitted by the Securities Act (British Columbia) and the rules
thereunder.
Each holder desiring to transfer Pivotal Shares first must furnish Pivotal with
(i) a written opinion reasonably satisfactory to Pivotal in form and substance
from counsel reasonably satisfactory to Pivotal by reason of experience to the
effect that the holder may transfer Pivotal Shares as desired without a
prospectus under the Securities Act (British Columbia) or registration under the
U.S. Securities Act of 1933 and (ii) a written undertaking executed by the
desired transferee reasonably satisfactory to Pivotal in form and substance
agreeing to be bound by the restrictions on transfer contained herein.
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<PAGE>
9. Termination
This Agreement may not be unilaterally terminated by either party but shall
be automatically terminated, without any other steps or advance notices, in the
event that the Main Agreement is terminated for any reason by any party thereto.
Pivotal will, however provide notice to Seller's Representative of such
termination. Neither party shall have any liability or responsibility of any
nature whatsoever to the other party in connection with any such termination.
10. Standstill Agreement
The Seller agrees that until two full days following the earlier of the
Closing or receipt from Seller's Representative of notice of termination of this
Agreement, the Seller shall not purchase or sell any shares of Pivotal.
11. Confidentiality
The Seller agrees to keep strictly confidential the existence and nature of
this Agreement and the Main Agreement. Notwithstanding this obligation of strict
confidentiality, the Seller may consult with his, her or its legal, accounting
or financial advisor with respect to this transaction provided that such advisor
is made aware of the Seller's obligation of confidentiality.
12. Notices and Delivery
All notices, deliveries and other communications pursuant to this Agreement
must be in writing and will be validly delivered if delivered to the
Representative Seller at the head office of Simba in Vancouver, British
Columbia.
13. Miscellaneous
(a) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by
or among the parties, written or oral, to the extent they related in
any way to the subject matter hereof.
(b) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors
and permitted assigns. The Seller may not assign this Agreement or any
of the Seller's rights, interests, or obligations hereunder without
the prior written approval of Pivotal. Pivotal may (i) assign any or
all of its rights and interests hereunder to one or more of its
Affiliates, and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases
Pivotal nonetheless shall remain responsible for the performance of
all of its obligations hereunder).
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<PAGE>
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the province of British Columbia, and the
laws of Canada applicable therein.
(d) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by Pivotal and the Seller or the Representative Seller. No
waiver 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.
(e) Expenses. Each of the parties will bear its own costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the ------------ day of May, 2000.
PIVOTAL CORPORATION
By: -----------------------------
Title: --------------------------
SELLER: WITNESS:
--------------------------------- ---------------------------------
Name
---------------------------------
Address
---------------------------------
Telephone No.
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<PAGE>
SCHEDULE A
SIMBA TECHNOLOGIES INC.
PART 1 - SHARES PURCHASED
(includes shares received on exercise of options/warrants as per Part 2)
No. of Pivotal Shares
Class Number Purchase Price to be Received
------------- ---------------- -------------------- -------------------------
PART 2 - OPTIONS/WARRANTS EXERCISED PRIOR TO CLOSING
Date of
No. of Options Grant/Issuance Exercise Price Vested/Unvested
----------------- ------------------- -------------------- ---------------------
PART 3 - OPTIONS/WARRANTS UNEXERCISED AT CLOSING
Date of
No. of Options Grant/Issuance Exercise Price Vested/Unvested
----------------- ------------------- -------------------- ---------------------
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<PAGE>
SCHEDULE B-1
SIMBA TECHNOLOGIES INC.
ONLY U.S. SELLER NEEDS TO COMPLETE AND INITIAL
(Capitalized terms not specifically defined herein shall have the meaning
ascribed to them in the Share Purchase Agreement to which this Schedule is
attached.)
The Seller covenants, represents and warrants to Pivotal that:
(a) it has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of an investment in the
Pivotal Shares and it is able to bear the economic risk of loss of its
entire investment;
(b) it is acquiring the Pivotal Shares for its own account, for investment
purposes only and not with a view to any resale, distribution or other
disposition of the Pivotal Shares in violation of the United States
securities laws;
(c) it understands that the Pivotal Shares have not been and will not be
registered under the United States Securities Act of 1933, as amended (the
"U.S. Securities Act") or the securities laws of any state of the United
States and that the sale contemplated hereby is being made in reliance of
an exemption from such registration requirements;
(d) it satisfies one or more of the categories indicated below (please place an
"X" on the appropriate lines):
---- Category 1. An organization described in Section 501(c)(3) of
the United States Internal Revenue Code, a
corporation, a Massachusetts or similar business
trust or partnership, not formed for the specific
purpose of acquiring the Pivotal Shares, with total
assets in excess of US$5,000,000;
---- Category 2. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the
date hereof exceeds US$1,000,000;
---- Category 3. A natural person who had an individual income in
excess of US$200,000 in each of the two most recent
years or joint income with that person's spouse in
excess of US$300,000 in each of those years and has
a reasonable expectation of reaching the same income
level in the current year;
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<PAGE>
---- Category 4. A trust that (a) has total assets in excess of
US$5,000,000, (b) was not formed for the specific
purpose of acquiring the Pivotal Shares and
(c) is directed in its purchases of securities by a
person who has such knowledge and experience in
financial and business matters that he/she is
capable of evaluating the merits and risks of an
investment in the Pivotal Shares;
---- Category 5. An investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48)
of that Act;
---- Category 6. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act
of 1958;
---- Category 7. A private business development company as defined in
Section 202(a)(22) of the Investment Advisors Acts
of 1940;
---- Category 8. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing
categories; or
---- Category 9. A natural person or entity that either alone or
together with its representative, has such
knowledge and experience in financial and business
matters that the Seller is capable of evaluating
the merits and risks of the prospective investments
in the Pivotal Shares and is able to bear the
economic consequences thereof.
(e) it has not purchased the Pivotal Shares as a result of any form of general
solicitation or general advertising, including advertisements, articles,
notices or other communications published in any newspaper, magazine or
similar media or broadcast over radio, or television, or any seminar or
meeting whose attendees have been invited by general solicitation or
general advertising;
(f) the Seller agrees for the benefit of Pivotal that the Pivotal Shares may be
offered, sold or otherwise transferred only
I. to Pivotal;
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<PAGE>
II. outside the United States in accordance with Rule 904 of Regulation S
under the U.S. Securities Act;
III. inside the United States in accordance with Rule 144 under the U.S.
Securities Act; or
in a transaction that is otherwise exempt from registration under the U.S.
Securities Act and applicable state securities laws, provided that prior to such
sale Pivotal shall have received an opinion of counsel of recognized standing,
in form and substance satisfactory to it, as to the availability of an
exemption.
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SCHEDULE B-2
SIMBA TECHNOLOGIES INC.
NON-U.S. SELLERS
(Capitalized terms not specifically defined herein shall have the meaning
ascribed to them in the Share Purchase Agreement to which this Schedule is
attached.)
The Seller covenants, represents and warrants to Pivotal that:
(a) the Seller is not a "U.S. Person" as such term is defined by Rule 902 of
Regulation S under the United States Securities Act of 1933, as amended
(the "U.S. Securities Act"), (the definition of which includes, but is not
limited to, an individual resident in the United States and an estate or
trust of which any executor or administrator or trustee, respectively, is a
U.S. Person and any partnership or corporation organized or incorporated
under the laws of the United States);
(b) the Seller was outside the United States at the time of execution and
delivery of the Agreement and this Schedule B to the Agreement;
(c) no offers to sell the Pivotal Shares were made by any person to the Seller
while the Seller was in the United States;
(d) the Pivotal Shares are not being acquired, directly or indirectly, for the
account or benefit of a U.S. Person or a person in the United States;
(e) the Seller agrees for the benefit of Pivotal that the Pivotal Shares may be
offered, sold or otherwise transferred only:
I. to Pivotal;
II. outside the United States in accordance with Rule 904 of Regulation S
under the U.S. Securities Act;
III. inside the United States in accordance with Rule 144 under the U.S.
Securities Act; or
IV. in a transaction that is otherwise exempt from registration under the
U.S. Securities Act and applicable state securities laws, provided
that prior to such sale Pivotal shall have received an opinion of
counsel of recognized standing, in form and substance satisfactory to
it, as to the availability of an exemption.
(f) the Seller agrees for the benefit of Pivotal that it will not engage in
hedging transactions with respect to the Pivotal Shares unless in
compliance with the U.S. Securities Act.
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SCHEDULE 8
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated -------, 2000, is made and entered into by and between
Pivotal Corporation, a British Columbia company ("Pivotal") and David Pritchard,
Kirk Herrington, on his own behalf and as agent for the Other Shareholders (as
defined below), Michael Satterfield, Calvin Mah, VW B.C. Technology Investment
Fund, Limited Partnership, Venrock Associates, Venrock Associates II, Limited
Partnership, Working Ventures Canadian Fund Inc., Bank of Montreal Capital
Corporation and Sussex Capital Inc. (individually, a "Holder", and collectively,
the "Holders"). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Stock Purchase Agreement (as defined
in the recitals below).
WITNESSETH:
WHEREAS, Pivotal has agreed to issue to the Holders common shares of
Pivotal, without par value (the "Pivotal Shares"), in exchange for -------
shares (the "Company Shares") of common stock, $------- par value per share
("Company Common Stock"), of Simba Technologies Inc., a ------- corporation (the
"Company"), pursuant to that certain Stock Purchase Agreement, dated as of
-------, 2000 (the "Stock Purchase Agreement") by and among Pivotal and the
Holders; and
WHEREAS, the Pivotal Shares will be issued to the Holders without
registration under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and Pivotal and the Holders desire to provide for compliance with the
Securities Act and for the registration of the sale by the Holders of the
Pivotal Shares upon the terms and subject to conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Commission" means the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Other Shareholders" means all of the shareholders of Simba
Technologies Inc. other than the shareholders that are parties to this
agreement.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act, and the
declaration or ordering by the Commission of the effectiveness of such
registration statement.
"Registrable Securities" means (i) any and all of the Pivotal Shares
issued in exchange for the Company Shares and (ii) any other securities
issued or issuable with respect to any shares of Pivotal Common Shares
described in clause (i) above by way of a
<PAGE>
stock dividend or stock split or in connection with a combination,
exchange, reorganization, recapitalization or reclassification of Pivotal's
securities or pursuant to a merger, consolidation or other similar business
combination transaction involving Pivotal.
"Registration Expenses" means all expenses incurred by Pivotal in
connection with the registration of the Registrable Securities, including,
without limitation, all registration and filing fees (including fees and
expenses associated with filings required to be made with the Nasdaq
National Market), printing expenses (including expenses of printing
certificates for the Common shares of Pivotal being registered in a form
eligible for deposit with the Depository Trust Company and of printing
prospectuses), fees and disbursements of counsel for Pivotal and fees and
expenses of compliance with state securities or "Blue Sky" laws, Pivotal's
accountants' fees and expenses, fees of transfer agents and registrars, but
specifically excluding any and all fees, commission, discounts or similar
payments made to any brokers or dealers in connection with the selling of
any Registrable Securities and any and all fees of professional advisors of
Holders.
"Shelf Registration Statement" is defined in Section 3(a).
Section 2. Restrictions on Transfer.
(a) Restrictions. Each Holder agrees that such Holder will not sell,
assign, transfer or otherwise dispose of (each, a "Transfer") any of the Pivotal
Shares (or any interest therein) except upon the terms and conditions specified
herein, and such Holder will cause any subsequent holder of such Holder's
Pivotal Shares to agree to take and hold the Pivotal Shares subject to the terms
and conditions of this Agreement if such Pivotal Shares are required to include
a legend pursuant to Section 2(b) hereof.
(b) Legend. Each certificate representing Pivotal Shares issued to the
Holders or to any subsequent holder of such shares shall include a legend in
substantially the following form; provided, however, that such legend shall not
be required if (i) a Transfer is being made (a) in connection with a sale of
Pivotal Shares registered under the Securities Act, (b) in connection with a
sale of Pivotal Shares in compliance with Rule 144 under the Securities Act or
(c) in connection with a sale of Pivotal Shares in compliance with Rule 904 of
Regulation S under the Securities Act (each, a "Public Sale"), or (ii) the
opinion of counsel referred to in Section 2(d) hereof is to the further effect
that neither such legend nor the restrictions on transfer in this Section 2 are
required in order to ensure compliance with the Securities Act:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES IN
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<PAGE>
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF APPLICABLE, OR (D) IN
A TRANSACTION THAT IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT PRIOR TO
SUCH SALE THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL OF
RECOGNIZED STANDING, IN FORM AND SUBSTANCE SATISFACTORY TO IT, AS TO THE
AVAILABILITY OF AN EXEMPTION. THE HOLDER HEREOF FURTHER AGREES FOR THE
BENEFIT OF THE COMPANY THAT IT MAY NOT ENGAGE IN HEDGING TRANSACTIONS WITH
RESPECT TO THE SECURITIES EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
COMPANY IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT AT THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND,
DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY," MAY BE OBTAINED FROM
AMERICAN STOCK TRANSFER & TRUST COMPANY UPON DELIVERY OF THIS CERTIFICATE
AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO AMERICAN STOCK
TRANSFER & TRUST COMPANY AND THE COMPANY, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904
OF REGULATION S UNDER THE SECURITIES ACT.
(c) Notices of Transfer. Prior to any proposed Transfer of any Pivotal
Shares other than pursuant to an offering registered under the Securities Act,
the Holder proposing to make such Transfer shall give written notice to Pivotal
of such Holder's intention to effect such Transfer, which notice shall set forth
the date of such proposed Transfer. Such Holder also shall furnish to Pivotal
(i) a written agreement by the proposed Transferee that it is taking and holding
the same subject to the terms and conditions specified in this Agreement, except
with respect to any Pivotal Shares which are being sold in a Public Sale and
(ii) except with respect to any Pivotal Shares which have been registered under
the Securities Act, a written opinion of such Holder's counsel, in form
reasonably satisfactory to Pivotal, to the effect that the proposed Transfer may
be effected without registration under the Securities Act.
(d) Termination of Restrictions. Except as provided in Section 2(a), the
restrictions set forth in this Section 2 shall terminate and cease to be
effective with respect to any of the Pivotal Shares (i) upon the sale of any
such Pivotal Shares, if the Pivotal Shares in respect of which such sale occurs
have been registered under the Securities Act and the sale is made pursuant to
the Registration Statement, (ii) upon receipt by Pivotal of an opinion of
counsel (in form and substance satisfactory to Pivotal) to the effect that
compliance with such restrictions is not necessary in order to comply with the
Securities Act with respect to the Transfer of such Pivotal Shares, or (iii)
upon the expiration of the two-year period referred to in Rule 144(k) under the
Securities Act (as such Rule may be amended from time to time), if, pursuant to
Rule 144(k), such Holder was not an "Affiliate" of Pivotal (as such term is
defined in Rule 144(a) under the Securities Act) at the time of the sale of the
Pivotal Common Shares and has not been an Affiliate of Pivotal during the
preceding three months.
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<PAGE>
Section 3. Registration under Securities Act; Indemnification.
(a) Shelf-Registration.
(i) After Pivotal becomes eligible to file a short-form resale
registration statement on Form F-3 or Form S-3, Pivotal shall prepare and
file with the Commission before September 30, 2000 (the date of such filing
being hereinafter referred to as the "Filing Date"), a "shelf" registration
statement on Form F-3 or Form S-3, in Pivotal's sole discretion, (or, in
Pivotal's sole discretion, on any appropriate form under the Securities Act
as may then be available to Pivotal) relating to the resale of the Pivotal
Shares by the Holders in accordance with the methods of distribution set
forth in such registration statement (which shall not include, without the
consent of Pivotal (which may be granted or withheld in Pivotal's sole
discretion) an underwritten offering) and Rule 415 under the Securities Act
(hereafter, the "Shelf Registration Statement"), and shall use commercially
reasonable efforts to cause the Shelf Registration Statement to be declared
effective by the Commission as soon as reasonably practicable thereafter.
(ii) Restrictions on Eligibility to Participate in Shelf-Registration.
If at the time of filing of the shelf-registration statement pursuant to
Section 3(a)(i), Pivotal is listed for trading on The Toronto Stock
Exchange and an individual Holder is eligible to sell his or her Pivotal
Shares pursuant to the exclusion from registration provided by Rule 904 of
Regulation S under the Securities Act, that Holder will not be eligible to
participate in the shelf-registration statement described in Section
3(a)(i).
(iii) Pivotal shall be obligated to prepare, file and cause to be
effective only one (1) Shelf Registration Statement, pursuant to Section
3(a)(i).
(iv) Effective Period. Pivotal agrees to use commercially reasonable
efforts to keep the Shelf Registration Statement continuously effective for
at least one hundred eighty (180) days or until the distribution described
in the registration statement has been completed, whichever is shorter,
provided that the period for which the Shelf Registration Statement must be
kept effective shall be extended by one day for every day sales of
securities pursuant to the Shelf Registration Statement are suspended
pursuant to Section 3(a)(v) hereof.
(v) Black-out Period. Without limiting the provisions of Section
3(a)(iii), each holder of Registrable Securities agrees that, if so
requested by Pivotal, not to effect any offer or sale of Pivotal Shares
pursuant to the Shelf Registration Statement, or otherwise, or engage in
any hedging or other transaction intended to reduce or transfer the risk of
ownership for any period deemed necessary (x) by Pivotal or any underwriter
in connection with the offering of Pivotal Common Shares pursuant to any
demand registration rights granted to any other person or to the offering
of Pivotal Common Shares by Pivotal for its own account or (y) by Pivotal
in connection with any proposal or plan by Pivotal to engage in any
material financing or material acquisition or disposition by Pivotal or any
subsidiary thereof of the capital stock or substantially all the assets of
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<PAGE>
any other person (other than in the ordinary course of business), any
tender offer or any merger, consolidation, corporate reorganization,
strategic partnership arrangement or restructuring or other similar
transaction (each, a "Business Combination") material to Pivotal and its
subsidiaries taken as a whole. Any period within the Effective Period
during which Pivotal fails to keep the Shelf Registration Statement
effective and usable for resales of Pivotal Shares, or requires pursuant to
this Section 3(a)(v) that the Holders not effect sales of Pivotal Shares
pursuant to the Shelf Registration Statement, is hereafter referred to as a
"Suspension Period". A Suspension Period shall commence on the date set
forth in a written notice by Pivotal to the Holders that the Shelf
Registration Statement is no longer effective or that the prospectus
included in the Shelf Registration Statement is no longer usable for
resales of Pivotal Shares or, in the case of a suspension pursuant to this
Section 3(a)(v) the date specified in the notice delivered by Pivotal
pursuant to this Section 3(a)(v), and shall end on the date when each
Holder of Pivotal Shares covered by the Shelf Registration Statement either
receives the copies of the supplemented or amended prospectus contemplated
by Section 3(c)(v) or is advised in writing by Pivotal that use of the
prospectus or sales may be resumed. Each Holder also agrees that at any
time such Holder is an employee of Pivotal, such Holder will be subject to
and comply with the policies of Pivotal regarding purchases and sales of
Pivotal Common Shares. The Holders acknowledge that such policy may be
changed by Pivotal from time to time.
(b) Piggyback Registration.
(i) Each time Pivotal shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities Act
in connection with the proposed offer and sale for money of any of its
securities by it or any of its security holders (other than a registration
statement on Form S-8, Form S-4 or other limited purpose form), Pivotal
will give written notice of its determination to all record holders of
Registrable Securities. Upon the written request of a record holder of any
shares of Registrable Securities given within 30 days after the date of
mailing of any such notice from Pivotal, Pivotal will, except as herein
provided, cause all the Registrable Securities, the registration of which
is requested to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Registrable Securities to be so registered;
provided, however, that nothing herein shall prevent Pivotal from, at any
time, abandoning or delaying any registration; and provided further that
Pivotal's obligation under this Section 3(b) shall be subject to Pivotal's
obligations to any holder of securities which shall have registration
rights which limit or forbid the inclusion of the Registrable Securities in
any Registration Statement.
(ii) If any registration pursuant to this Section 3(b) is underwritten
in whole or in part, Pivotal may require that the Registrable Securities
included in the registration be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of
the Public Offering, the inclusion of all of the Registrable Securities
originally covered by requests for registration would reduce the number of
shares to be offered by Pivotal or interfere with the successful marketing
of the shares offered by
-5-
<PAGE>
Pivotal, the number of Registrable Securities to be included in the
Offering may be reduced pro rata among the holders of all securities
proposed to be included in this registration, in the proportion that the
number of common shares of Pivotal held by each holder proposing to include
common shares in the registration statement bears to the total number of
common shares held by all such holders.
(c) Registration Procedures. If and whenever Pivotal is required by the
provisions of Sections 3(a) and 3(b) to effect the registration of shares of
Registrable Securities under the Securities Act, Pivotal will use commercially
reasonable efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition specified by
the holders participating therein. Without limiting the foregoing, Pivotal in
each such case will, as expeditiously as is commercially reasonable:
(i) cause the registration statement and the related prospectus and
any amendment or supplement thereto, as of the effective date of the
registration statement, or such amendment or supplement, (A) to comply in
all material respects with the applicable requirements of the Securities
Act and the rules and regulations of the Commission promulgated under the
Securities Act and (B) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(ii) promptly prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in
connection with the registration statement as may be necessary to keep the
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by the registration statement until the earlier of such
time as all such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the Holder or Holders thereof
set forth in the registration statement (which shall not include, without
the consent of Pivotal (which may be granted or withheld in Pivotal's sole
discretion) an underwritten offering) or a date calculated as described in
Section 3(a)(iii) hereof; provided that if the Board of Directors of
Pivotal determines that amending the registration statement or
supplementing the prospectus might be detrimental to Pivotal, then
notwithstanding this Section 3(c)(ii) Pivotal may defer such amendment or
supplement for up to 120 days, provided that: (a) Pivotal shall not use
such right of deferral with respect to any registration statement for more
than an aggregate of 120 days in any 12-month period; and (b) the number of
days Pivotal is required to keep the registration statement effective shall
be extended by the number of days for which Pivotal shall have used such
right of deferral;
(iii) furnish to each Holder of such Registrable Securities one
conformed copy of the registration statement and of each such amendment and
supplement thereto (in each case including all exhibits) and one of each
document incorporated by reference therein and such number of copies of the
prospectus included in the registration statement (including any summary
prospectus);
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<PAGE>
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by the registration statement under
such securities or Blue Sky laws of the states of the United States as each
Holder of such Registrable Securities shall reasonably request, to keep
such registration or qualification in effect for so long as the
registration statement remains in effect (subject to the limitations in
Section 3(a)), except that Pivotal shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction in which it is not and would not, but for the requirements
of this Section 3(c)(iv), be obligated to be so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(v) immediately notify each Holder of Registrable Securities covered
by the registration statement, at any time when a prospectus or prospectus
supplement relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in the registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing which untrue statement or omission requires
amendment of the registration statement or supplementation of the
prospectus, and (subject to Section 3(a)(v) and Section 3(c)(ii) hereof)
promptly thereafter prepare and furnish to such Holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; provided,
however, that each Holder of Registrable Securities registered pursuant to
the registration statement agrees that such Holder will not sell any
Registrable Securities pursuant to the registration statement during the
time that Pivotal is preparing and filing with the Commission a supplement
to or an amendment of such prospectus or registration statement;
(vi) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission; and
(vii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the registration
statement from and after a date not later than the effective date of the
registration statement.
Each Holder of Registrable Securities as to which any registration is being
effected shall furnish to Pivotal such information regarding such Holder and the
distribution of such Registrable Securities as Pivotal may from time to time
reasonably request in connection therewith, and if any holder fails to do so
within a reasonable time after Pivotal requests such information, Pivotal may
exclude such Holder's Registrable Securities from such registration.
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<PAGE>
(d) Indemnification.
(i) Indemnification by Pivotal. Pivotal shall indemnify and hold
harmless each Holder (including the trustee(s) of any such Holder) of
Registrable Securities whose securities are covered by the registration
statement from and against any demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, interest and penalties,
costs and expenses (including, without limitation, reasonable legal fees
and disbursements incurred in connection therewith and in seeking
indemnification therefor, and any amounts or expenses required to be paid
or incurred in connection with any action, suit, proceeding, claim, appeal,
demand, assessment or judgment) (individually, a "Loss" and, collectively
"Losses"), joint or several, to which such Holder may become subject under
the Securities Act or otherwise insofar as such Losses (or related actions
or proceedings) arise out of or are based upon (A) any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement, final prospectus or summary prospectus contained in the
registration statement, or any amendment or supplement to the registration
statement, or any document incorporated by reference in the registration
statement or (B) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Pivotal shall
not be liable in any such case to the extent that any such Losses (or
actions or proceedings in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in the registration statement, or any such final prospectus,
summary prospectus, amendment or supplement, as the case may be, in
reliance upon and in conformity with written information furnished to
Pivotal by a Holder specifically for use in the preparation of such
registration statement; and provided further, that Pivotal shall not be
liable in any such case to the extent that any such Losses arise out of or
are based upon an untrue statement or alleged untrue statement or omission
or alleged omission in the final prospectus, if such untrue statement or
alleged untrue statement or omission or alleged omission is corrected in an
amendment or supplement to the final prospectus and such Holder thereafter
fails to deliver such final prospectus as so amended or supplemented prior
to or concurrently with the sale of the Registrable Securities covered by
the registration statement to the person asserting such Losses after
Pivotal had furnished such Holder with a sufficient number of copies
thereof in a manner and at a time sufficient to permit delivery of the same
by such Holder.
(ii) Indemnification by the Holders. As a condition to including any
Registrable Securities in the registration statement, Pivotal shall have
received an undertaking reasonably satisfactory to it from each prospective
Holder of such Registrable Securities, severally and not jointly, to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 3(d)(i) hereof) Pivotal, each director of Pivotal,
each officer of Pivotal who shall sign the registration statement and each
other person, if any, who controls Pivotal within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and each other
Holder of Registrable Securities included in the registration statement
with respect to any untrue statement in or omission from such registration
statement, final prospectus or summary prospectus included in the
registration statement, or any amendment or supplement to the
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<PAGE>
registration statement, as the case may be, of a material fact if such
statement or omission was made in reliance upon and in conformity with
information furnished to Pivotal by such Holder specifically for use in the
preparation of the registration statement, final prospectus, summary
prospectus, amendment or supplement, as the case may be.
(iii) Notice of Claims, etc. In the event that any of the indemnified
parties under Sections 3(d)(i) or 3(d)(ii) (each, an "Indemnified Party")
is made a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability or the
costs or expenses of which are Losses (any such third party action or
proceeding being referred to as a "Claim"), the Indemnified Party shall
give the party hereto obligated to indemnify such Indemnified Party (the
"Indemnifying Party") prompt notice thereof. The failure to give such
notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected the
Indemnifying Party's ability to defend successfully a Claim. The
Indemnifying Party shall be entitled to contest and defend such Claim.
Notice of the intention so to contest and defend shall be given by the
Indemnifying Party to the Indemnified Party within 20 business days after
the Indemnified Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to
be filed). Such contest and defense shall be conducted by reputable
attorneys employed by the Indemnifying Party. The Indemnified Party shall
be entitled at any time, at its own cost and expense (which expense shall
not constitute a Loss unless the Indemnified Party reasonably determines
that the Indemnifying Party, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, to
participate in such contest and defense and to be represented by attorneys
of its or their own choosing, provided that the Indemnifying Party shall
not be required to bear the fees and expenses of counsel to all Indemnified
Parties in any one action or any action arising out of the same
registration statement. If the Indemnified Party elects to participate in
such defense, the Indemnified Party will cooperate with the Indemnifying
Party in the conduct of such defense. Neither the Indemnified Party nor the
Indemnifying Party may concede, settle or compromise any Claim without the
consent of the other party, which consents will not be unreasonably
withheld.
(iv) Contribution. If the indemnification provided for in this Section
3(d) is unavailable or insufficient to hold harmless an Indemnified Party
in respect of any Losses, then each Indemnifying Party shall, in lieu of
indemnifying such Indemnified Party, contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such
proportion as appropriate to reflect the relative fault of Pivotal, on the
one hand, and such Holder of Registrable Securities, on the other hand, and
to the parties' relative intent, knowledge, access to information and
opportunity to correct or mitigate the damage in respect of or prevent any
untrue statement or omission giving rise to such indemnification
obligation. Pivotal and the Holders of Registrable Securities agree that it
would not be just and equitable if contributions pursuant to this Section
3(d)(iv) were determined by pro rata allocation (even if the Holders of
Registrable Securities were treated as one entity for such purpose) or by
any other method of allocation which did not take account of the equitable
considerations referred to above in this Section 3(d)(iv). No person guilty
of fraudulent misrepresentation (within the
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<PAGE>
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(e) Registration Expenses. Pivotal shall bear all Registration Expenses.
Section 4. Termination. The rights and obligations under this Agreement
(other than under Sections 3(d) and 3(e) hereof) shall automatically terminate
upon the earlier to occur of (a) the sale of all Registrable Securities by the
Holders and (b) the date on which the Registrable Securities shall have been
outstanding for two years. No holder shall have the right to request to include
Registrable Securities in any registration statement if (a) the Registrable
Securities are eligible for sale pursuant to Rule 144(k), or (b) the Registrable
Securities are eligible for sale pursuant to Rule 144 and the Holder owns
Registrable Securities in the amount of less than 1% of Pivotal's outstanding
Common Shares.
Section 5. Amendments and Waivers. This Agreement may be amended or
modified and Pivotal may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if Pivotal shall have
obtained the written consent to such amendment, modification, action or omission
to act, of the holder or holders (at such time) of a majority of the shares of
Registrable Securities (and, in the case of any amendment, modification, action
or omission to act which adversely affects any specific holder of Registrable
Securities or a specific group of holders of Registrable Securities, the written
consent of each such holder or holders of a majority of the Registrable
Securities held by such group). Each holder of any Registrable Securities at the
time shall be bound by any consent authorized by this Section 5, whether or not
such Registrable Securities shall have been marked to indicate such consent.
Section 7. Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three days after being mailed by first class mail, return receipt requested, or
when receipt is acknowledged, if sent by facsimile, telecopy or other electronic
transmission device. Notices, demands and communications to Pivotal and the
Holders will, unless another address is specified in writing, be sent to the
address indicated below:
Notices to Pivotal: with a copy to:
------------------ --------------
Pivotal Corporation Dorsey & Whitney LLP
300 - 224 West Esplanade 1420 Fifth Avenue, Suite 3400
North Vancouver, British Columbia Seattle, Washington 98101
Canada V7M 3M6 Attention: Christopher J. Barry
Attention: Vince Mifsud Fax: (206) 903-8820
Fax: (604) 983-6658
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<PAGE>
Notices to the Holders whether with a copy to:
collectively or individually: --------------
----------------------------
Simba Technologies Inc.
Kirk Herrington 400 - 885 Dunsmuir Street
400 - 885 Dunsmuir Street Vancouver, British Columbia
Vancouver, British Columbia Canada V6C 1N8
Canada V6C 1N8 Attention: Mr. David Pritchard
Fax: (604) 601-5320
VW B.C. Technology Investment Fund,
Limited Partnership
-------------- Street
Vancouver, British Columbia
Canada V--------------
Attention: Mr. Howard Riback
Fax: (604) --------------
Clark Wilson
800 - 885 West Georgia Street
Vancouver, British Columbia
Canada V6C 3H1
Attention: Mr. David J. Cowan
Fax: (604) 687-6314
If notice is given pursuant to this Section 7 of any assignment to a permitted
successor or assignee of a party hereto, the notice shall be given as set forth
above to such successor or the assignee of such party.
Section 8. Entire Agreement. This Agreement represents the entire agreement
and understanding between Pivotal and the other parties to this Agreement in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties, or undertakings, other than those set forth or referred to
herein or in the Stock Purchase Agreement or required by applicable law, with
respect to the registration rights granted by the Company with respect to the
Registrable Securities. This Agreement and the Stock Purchase Agreement
supersede all prior agreements and understandings between the parties with
respect to the subject matter of this Agreement.
Section 9. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Washington (other than its
rules of conflicts of laws to the extent the application of the laws of another
jurisdiction would be required thereby).
Section 10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected impaired or invalidated
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<PAGE>
thereby, so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon a suitable and equitable substitute provision to effect the original
intent of the parties.
Section 11. Miscellaneous. The headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning of this
Agreement. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which, when taken together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PIVOTAL CORPORATION
By: --------------------------
Name: ------------------------
Title: -----------------------
THE HOLDERS:
--------------------------
Name: David Pritchard
Address: --------------------------
--------------------------
--------------------------
--------------------------
Name: Kirk Herrington
Address: 400 - 885 Dunsmuir Street
Vancouver, British Columbia
Canada V6C 1N8
--------------------------
Name: Michael Satterfield
Address: --------------------------
--------------------------
--------------------------
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<PAGE>
--------------------------
Name: Calvin Mah
Address: --------------------------
--------------------------
--------------------------
VW B.C. TECHNOLOGY INVESTMENT
FUND, LIMITED PARTNERSHIP
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
VENROCK ASSOCIATES
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
VENROCK ASSOCIATES II
LIMITED PARTNERSHIP
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
WORKING VENTURES CANADIAN
FUND INC.
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
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<PAGE>
BANK OF MONTREAL CAPITAL
CORPORATION
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
SUSSEX CAPITAL INC.
By: --------------------------
Name: ------------------------
Title: -----------------------
Address: --------------------------
--------------------------
--------------------------
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