SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15 (d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): January 30, 1997
THE WIDECOM GROUP INC.
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(Exact Name of Registrant as Specified in its Charter)
Ontario, Canada
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(State or Other Jurisdiction of Incorporation)
1-13589 98-0139939
(Commission File Number) (IRS Employer Identification No.)
55 City Centre Drive, Suite 500, Mississauga, Ontario, Canada L5B 1M3
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(Address of Principal Executive Offices) (Zip Code)
(905) 566-0180
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(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, If Changed Since Last Report)
INFORMATION TO BE INCLUDED IN FORM 8-K
Item 1. Change in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
As of January 30, 1997, the Registrant announced that it has finalized
a joint venture agreement with Societe Innovatech du Grand Montreal, an
instrumentality of the Province of Quebec, Canada ("Innovatech"). Each of
the Registrant and Innovatech purchased 450 shares of the Class A Common
Stock of NovImage Inc., a Quebec corporation ("NovImage") for a purchase
price of approximately US $1,875,000 each. The consideration paid by the
Registrant for the stock of NovImage was in cash and was derived from the
Registrant's working capital. In addition, two other corporations, 3294412
Canada Inc., a Quebec corporation and 3294421 Canada Inc, a Quebec
corporation, both of which corporations are wholly-owned by Raja S. Tuli,
President and Chief Executive Officer of the Registrant, each acquired 50
shares of the Class A Common Stock of NovImage in exchange for the transfer
to NovImage of certain patents, patent applications and other technology and
intellectual property rights of those companies.
In connection with the transaction, the Registrant licensed all of its
patents and technology relating to its scanner and plotter manufacturing and
its WideView[TRADEMARK] and SLC-OVLY[TRADEMARK] software (collectively, the
"Intellectual Property") to NovImage for research and development purposes
in order to develop improvements, modifications, additions or alterations to
the Intellectual Property and to develop new products. In exchange for this
license and the payment of a 0.5% royalty fee on net revenue, licensing
revenue and net sales to sub-licensees, NovImage granted the Registrant an
exclusive perpetual worldwide (with the exception of the Province of Quebec,
Canada) license to use such improved scanner and plotter technology and
software to manufacture, distribute, market and sell the improved scanner,
plotter and software, and any new products developed by NovImage. NovImage
retained such rights with respect to the Province of Quebec, Canada.
In connection with the transaction, the Registrant also entered into a Stock
Exchange Agreement with Innovatech pursuant to which Innovatech would be
permitted, under certain circumstances, to exchange its shares of NovImage
for up to 253,000 shares of common stock of the Registrant for which
Innovatech would have demand registration rights.
Item 6. Resignation of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements and Exhibits.
Exhibits to this Form 8-K are attached hereto.
Item 8. Change in Fiscal Year.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
The WideCom Group Inc.,
an Ontario Corporation
Dated: January 30, 1997 /s/ Raja S. Tuli
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Raja S. Tuli, President and
Chief Executive Officer
Exhibit Index
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Exhibit No. Description
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10.1 Memorandum of Agreement by and between The WideCom Group Inc.
and Societe Innovatech Du Grand Montreal and 3294412 Canada
Inc. and 3294340 Canada Inc. regarding Flat Panel and
Fingerprint technology.
10.2 Subscription Agreement dated October 2, 1996 between Societe
Innovatech Du Grand Montreal and 3294340 Canada Inc.
10.3 Subscription Agreement dated October 2, 1996 between The
WideCom Group Inc. and 3294340 Canada Inc.
10.4 License Agreement between The WideCom Group Inc. ("Licensor")
and 3294340 Canada Inc. ("Licensee")
10.5 License Agreement between 3294340 Canada Inc. ("Licensor") and
The WideCom Group Inc. ("Licensee")
10.6 Stock Exchange between The WideCom Group Inc. and Societe
Innovatech Du Grand Montreal
20.1 Press Release
Exhibit 10.1
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MEMORANDUM OF AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 2ND DAY OF OCTOBER, 1996
BY AND AMONG: THE WIDECOM GROUP INC., a body politic and corporate, duly
incorporated according to the laws of the Province of Ontario,
having its head office and principal place of business at 55,
City Centre Dr., Suite 500, in Mississauga, Province of
Ontario,
(hereinafter referred to as "Widecom")
PARTY OF THE FIRST PART
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AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe Innovatech
du Grand Montreal, R.S.Q., ch. S-17.2, having its head office
and principal place of business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as the "Investor" or "Innovatech")
PARTY OF THE SECOND PART
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AND: 3294412 CANADA INC., a body politic and corporate, duly
incorporated under the Canadian Business Corporations Act,
having its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Finger Print")
PARTY OF THE THIRD PART
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AND: 3294421 CANADA INC., a body politic and corporate, duly
incorporated under the Canadian Business Corporations Act,
having its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Flat Panel")
PARTY OF THE FOURTH PART
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AND: 3294340 CANADA INC., a body politic and corporate, duly
incorporated according to the Canadian Business Corporations
Act, having its head office and principal place of business in
the City of Montreal, Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE FIFTH PART
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SECTION 1 - PREAMBLE
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1.1 WHEREAS the Corporation was incorporated pursuant to the CBCA by
Certificate and Articles of Incorporation dated September 6, 1996 in order
to carry on scientific research and experimental development activities;
1.2 WHEREAS the Corporation's activities will be based in the Montreal
area;
1.3 WHEREAS each of the Shareholders holds the following number and class
of Shares as of the date hereof:
Shareholder Number and Class
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Widecom 450 Class "A" shares
Innovatech 450 Class "A" shares
Finger Print 50 Class "A" shares
Flat Panel 50 Class "A" shares
1.4 WHEREAS the parties hereto are desirous of regulating their
respective rights, duties and obligations in and to the Corporation and
towards one another.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
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2.1 Definitions. In this Agreement:
2.1.1 "Accepting Party" has the meaning ascribed thereto in subsection
11.3;
2.1.2 "Additional Investor Offer" has the meaning ascribed thereto in
paragraph 13.3.5;
2.1.3 "Additional Investor Offer Period" has the meaning ascribed
thereto in paragraph 13.3.6;
2.1.4 "Additional Offer" has the meaning ascribed thereto in paragraph
13.1.5;
2.1.5 "Additional Offer Period" has the meaning ascribed thereto in
paragraph 13.1.5.1;
2.1.6 "Additional Shares" has the meaning ascribed thereto in
subsection 11.1;
2.1.7 "Affiliate" or "Affiliated" shall have the meaning ascribed
thereto in the CBCA;
2.1.8 "Agreement" shall mean this Shareholders Agreement and all
instruments supplemental hereto or in amendment or confirmation hereof;
"herein", "hereof", "hereto", "hereunder" and similar expressions mean
and refer to this Agreement and not to any particular Section, subsection
or other subdivision; "Section", "subsection" or other subdivision of
this Agreement means and refers to the specified Section, subsection or
other subdivision of this Agreement;
2.1.9 "Arm's Length" shall mean, in respect of any Person, a
relationship between such Person and any particular Person which would be
an arm's length relationship between such Person and the particular
Person within the meaning of the Income Tax Act (Canada);
2.1.10 "Auditors" shall mean BDO Dunwoody & Co., Chartered
Accountants, or such other firm of chartered accountants as may be
agreed upon from time to time by the Shareholders to act as auditors for
the Corporation;
2.1.11 "Board" shall mean the Board of Directors of the Corporation;
2.1.12 "Business Day" shall mean any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in the Province
of Quebec are not open for business during normal banking hours;
2.1.13 "Business Plan" shall have the meaning ascribed thereto in
subsection 8.4;
2.1.14 "CBCA" shall mean the Canadian Business Corporations Act;
2.1.15 "Closing" shall mean the sale of the Offered Shares by the
Offering Party to the Notified Party pursuant to subsection 13.1;
2.1.16 "Closing Date" shall mean, pursuant to subsection 13.1, the
date which is thirty (30) days after the expiry of the Offer Period, the
Additional Offer Period or the New Offer Period, as the case may be,
provided, however, that if on the Closing Date all Governmental Body and
third party approvals, consents, notifications and assurances necessary
to permit the consummation of the transactions contemplated by the
Closing have been applied for but not yet received by the Purchaser, then
the Closing Date shall be postponed to the thirtieth (30th) day after the
receipt by the Purchaser of the last of the aforesaid approvals,
consents, notifications and assurances; notwithstanding the foregoing,
the Closing shall not be extended more than one hundred and eighty (180)
days after the date which was supposed to have been the original Closing
Date herein;
2.1.17 "Confidential Information" shall mean all information howsoever
received or obtained by the Shareholder from or through the Corporation
after the date hereof which the Corporation identifies in writing as
being confidential or proprietary at the time of disclosure or within ten
(10) days thereafter; provided, however, that the phrase "Confidential
Information" shall not include information which:
2.1.17.1 is in the public domain through no fault of the
Shareholder or any of its former or current directors, officers or
employees,
2.1.17.2 is properly within the legitimate possession of the
Shareholder prior to its disclosure hereunder and without any
obligation of confidence,
2.1.17.3 after disclosure, is lawfully received by the
Shareholder from another Person who is lawfully in possession of
such Confidential Information and such other Person was not
restricted from disclosing the information to the Shareholder,
2.1.17.4 is independently developed by the Shareholder through
Persons who have not had access to, or knowledge of, the
Confidential Information, or
2.1.17.5 is approved by the Corporation in writing for
disclosure prior to its disclosure;
2.1.18 "Corporation's License Agreements" shall mean:
2.1.18.1 the license agreement entered into between Widecom and
the Corporation on the date hereof by which the Corporation
licenses to Widecom all its improvements to the technology licensed
from Widecom, which Widecom shall be entitled to use in the manner
provided for therein,
2.1.18.2 the license agreement entered into between Finger Print
and the Corporation on the date hereof by which the Corporation
licenses to Finger Print all the technology acquired from Finger
Print pursuant to the Finger Print Rollover Agreement and all
improvements thereon, which Finger Print shall be entitled to use
in the manner provided for therein, and
2.1.18.3 the license agreement entered into between the
Corporation and Flat Panel on the date hereof by which the
Corporation licenses to Flat Panel all the technology acquired from
Flat Panel pursuant to the Flat Panel Rollover Agreement and all
improvements thereon, which Flat Panel shall be entitled to use in
the manner provided for therein;
2.1.19 "Decision" has the meaning ascribed thereto in subsection 6.11;
2.1.20 "Declining Party" has the meaning ascribed thereto in
subsection 11.3;
2.1.21 "Declining Party's Shares" has the meaning ascribed thereto in
subsection 11.3;
2.1.22 "Dispute" has the meaning ascribed thereto in subsection 6.11;
2.1.23 "Finger Print Rollover Agreement" means the agreement entered
into between Finger Print and the Corporation on the date hereof by which
Finger Print sells to the Corporation all its technology in exchange for
50 Voting Shares;
2.1.24 "Flat Panel Rollover Agreement" means the agreement entered
into between Flat Panel and the Corporation on the date hereof by which
Flat Panel sells to the Corporation all its technology in exchange for 50
Voting Shares;
2.1.25 "Governmental Body" shall mean (i) any domestic or foreign
national, federal, provincial, state, municipal or other government or
body, (ii) any multinational, multilateral or international body, (iii)
any subdivision, agent, commission, board, instrumentality or authority
of any of the foregoing governments or bodies, (iv) any quasi-
governmental or private body exercising any regulatory, expropriation or
taxing authority under or for the account of any of the foregoing
governments or bodies, or (v) any domestic, foreign, international,
multilateral or multinational judicial, quasi-judicial, arbitration or
administrative court, tribunal, commission, board or panel;
2.1.26 "Investor" shall mean Innovatech and all transferees of Shares
of Innovatech;
2.1.27 "Investor Offer" has the meaning ascribed thereto in subsection
13.3;
2.1.28 "Investor Offer Period" has the meaning ascribed thereto in
paragraph 13.3.1;
2.1.29 "Investor's Subscription Agreement" shall mean the subscription
agreement dated the date hereof between the Corporation an the Investor
setting forth inter alia the rights and obligations of the Investor with
respect to its subscription for 450 Voting Shares;
2.1.30 "Involved Party" has the meaning ascribed thereto in paragraph
6.11.1;
2.1.31 "Material Agreements" has the meaning ascribed thereto in
subsection 6.11;
2.1.32 "Neutral Party" has the meaning ascribed thereto in paragraph
6.11.1;
2.1.33 "New Meeting" has the meaning ascribed thereto in subsection
6.4;
2.1.34 "New Offer" has the meaning ascribed thereto in subparagraph
13.1.5.6;
2.1.35 "New Offer Period" has the meaning ascribed thereto in
paragraph 13.1.5.7;
2.1.36 "Notice of Arbitration" has the meaning ascribed thereto in
paragraph 6.11.2;
2.1.37 "Notice of Dispute" has the meaning ascribed thereto in
paragraph 6.11.1;
2.1.38 "Notified Party" has the meaning ascribed thereto in
subsection 13.1;
2.1.39 "Offer" has the meaning ascribed thereto in subsection 13.1;
2.1.40 "Offer Period" has the meaning ascribed thereto in subsection
13.1.1;
2.1.41 "Offered Shares" has the meaning ascribed thereto in
subsection 13.1;
2.1.42 "Offered Securities" has the meaning ascribed thereto in
subsection 13.3;
2.1.43 "Offering Party" has the meaning ascribed thereto in
subsection 13.1;
2.1.44 "Permitted Transferee" shall, in respect of a Shareholder, mean
a corporation, all of the shares of which are held legally and
beneficially by such Shareholder;
2.1.45 "Person" shall mean an individual, corporation, company,
cooperative, partnership, trust, unincorporated association, entity with
judicial personality, Governmental Body; and pronouns when they refer to
a Person have a similarly extended meaning;
2.1.46 "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of interest for
commercial demand loans made in Canadian dollars and commonly known as
such bank's prime rate, as adjusted from time to time, on the basis of
the Prime Rate in effect on the first day of each month;
2.1.47 "Proportion" shall mean a fraction, the numerator of which
shall be the number of Voting Shares owned by the particular Shareholder
to whom reference is made and the denominator of which shall be the total
of the Voting Shares owned by all the Shareholders;
2.1.48 "Purchaser" has the meaning ascribed thereto in subparagraph
13.2.5.1;
2.1.49 "Rejecting Party" has the meaning ascribed thereto in
paragraph 13.3.5;
2.1.50 "Related" shall mean related as that term is used in the Income
Tax Act (Canada);
2.1.51 "Re-Notified Party" has the meaning ascribed thereto in
paragraph 13.3.6;
2.1.52 "Share(s)" shall mean any share(s) of any class, series or
category in the capital stock of the Corporation or any security in the
capital stock of the Corporation including, without limitation, purchase
warrants, options or securities in whole or in part convertible or
exchangeable for or into shares of any class, series or category in the
capital stock of the Corporation;
2.1.53 "Shareholder" shall mean any of the Shareholders;
2.1.54 "Shareholders" shall initially mean Widecom, Finger Print, Flat
Panel and the Investor and the definition shall be deemed to be modified
from time to time to (i) delete Persons who cease to hold Shares in
accordance with the terms of this Agreement, and (ii) add all Persons
who, from time to time, become holders of Shares and who undertake in
writing to be bound by the provisions of this Agreement;
2.1.55 "Stock Exchange Agreement" shall mean the stock exchange
agreement dated the date hereof between the Investor and Widecom,
providing inter alia for the exchange by the Investor of the 450 Voting
Shares held by it for common shares of the share capital of Widecom;
2.1.56 "Subscription Agreement" shall mean the subscription agreement
dated the date hereof between the Corporation and Widecom setting forth
inter alia the rights and obligations of Widecom with respect to the
subscription for 450 Voting Shares;
2.1.57 "Third Party" has the meaning ascribed thereto in
subsection 13.1;
2.1.58 "Third Party Offer" has the meaning ascribed thereto in
subsection 13.1;
2.1.59 "TP Offer" has the meaning ascribed thereto in subsection 13.3;
2.1.60 "TP Offeror" has the meaning ascribed thereto in
subsection 13.3;
2.1.61 "Tuli Group" has the meaning ascribed thereto in
subsection 11.2;
2.1.62 "Unaccepted Additional Shares" has the meaning ascribed thereto
in subsection 11.4;
2.1.63 "Unaccepted Offered Securities" has the meaning ascribed
thereto in paragraph 13.3.5;
2.1.64 "Voting Shares" shall mean Shares to which are attached votes
that may be cast to elect directors of the Corporation;
2.1.65 "Widecom License Agreement" shall mean the license agreement
entered into between Widecom and the Corporation on the date hereof by
which Widecom licenses to the Corporation all its technology, which the
Corporation shall be entitled to use for scientific research and
experimental development.
2.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
2.5 Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, among any or all of the parties, including without limitation, the
Letter of Intent of the Investor dated September 6, 1996 addressed to
Widecom.
2.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by the
Shareholders and the Corporation.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute a
waiver of any other provisions (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided in
an instrument duly executed by the parties.
2.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this
Agreement, the day which is the reference day in calculating such period
shall be excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business Day.
2.9 Conflict. This Agreement shall override the Schedules annexed hereto
to the extent of any inconsistency. If any conflict should appear between
this Agreement and the Articles, by-laws or resolutions of the Corporation,
then the provisions of this Agreement shall prevail.
2.10 Preamble and Schedules. The preamble hereof and any Schedules
hereto shall form an integral part of this Agreement.
2.11 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
SECTION 3 - COMMISSIONS, FEES, ETC.
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3.1 Commissions. No fee, rebate, commission or gain of whatsoever nature
shall be earned by any of the Shareholders as a result of that Shareholder
obtaining financing for or on behalf of the Corporation.
SECTION 4 - OPERATIONS OF THE CORPORATION
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4.1 Business of the Corporation. The Corporation shall not carry on any
business other than scientific research and experimental development with
respect to the intellectual property contemplated by the Widecom License
Agreement, including all matters necessary or ancillary thereto and the
intellectual property acquired by the Corporation pursuant to the Finger
Print Rollover Agreement and the Flat Panel Rollover Agreement.
SECTION 5 - BOOKS OF ACCOUNT
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5.1 Books of account. Proper and correct books of account and such other
books as may be necessary for the business of the Corporation shall be kept,
in which shall be entered all such transactions as are usually entered and
written in books of account kept by persons engaged in businesses of a
similar nature, and the Shareholders or a chartered accountant appointed by
any of them shall have free access at all times to inspect, examine and copy
same.
SECTION 6 - DIRECTORS
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6.1 Board. So long as the Investor, on the one hand, and Widecom, on the
other hand, each own at least forty-five percent (45%) of the issued and
outstanding Voting Shares, the Shareholders agree to vote their Shares each
and every year at the annual meetings of Shareholders so as to cause two (2)
nominees of Widecom and two (2) nominees of the Investor, to be elected to
the Board. In addition, so long as Finger Print and/or Flat Panel own at
least ten percent (10%) of the issued and outstanding Voting Shares, the
Shareholders agree to vote their Shares each and every year at the annual
meetings of Shareholders so as to cause one (1) nominee of Finger Print or
Flat Panel to be elected to the Board. A quorum of a meeting of directors
shall be a majority of the directors provided that a director appointed by
each of the Investor, Widecom and Finger Print or Flat Panel forms part of
such quorum and all decisions of the Board shall require the approval of a
majority of the directors present at a meeting of the Board at which a
quorum was present.
6.2 Designation of nominees. Each of the Shareholders shall advise the
other Shareholders and the Corporation in writing of the names of the
individuals such Shareholder has designated as its nominee to the Board as
soon as practicable before each annual meeting of Shareholders. In the event
that either of the nominees to the Board of the Investor is not an employee
of the Investor, the Corporation shall pay to such nominee a fee for his
attendance at each meeting of the Board.
6.3 Changes in Board. At such time as the Investor, on the one hand, or
Widecom on the other hand, owns more than fifty percent (50%) of the issued
and outstanding Voting Shares, the Shareholders agree to vote their Shares
at a special meeting of Shareholders duly convened and to continue to do so
each and every year at the annual meetings of Shareholders, to elect such
number of additional directors in order for the Shareholder who owns more
than fifty percent (50%) of the issued and outstanding Voting Shares to have
elected a third nominee to the Board. In such circumstances, a quorum of a
meeting of directors shall be a majority of the directors provided that one
of the directors designated by the Investor (in the event that Widecom owns
more than fifty percent (50%) of the issued and outstanding Voting Shares)
forms part of such quorum or one of the directors designated by Widecom (in
the event that the Investor owns more than fifty percent (50%) of the issued
and outstanding Voting Shares) forms part of such quorum, and all decisions
of the Board shall require the approval of a majority of the directors
present at a meeting of the Board at which a quorum was present. The
Shareholder who owns more than fifty percent (50%) of the issued and
outstanding Voting Shares shall advise the other Shareholders and the
Corporation in writing of the name of the individual such Shareholder has
designated as its additional nominee to the Board as soon as practicable
before the meeting of Shareholders called for such purpose. In addition, the
Shareholder who owns more than fifty percent (50%) of the issued and
outstanding Voting Shares hereby agrees to continue to vote its Shares so as
to cause to be elected to the Board (i) two (2) nominees of the Investor (in
the event that Widecom owns more than fifty percent (50%) of the issued and
outstanding Voting Shares and the Investor owns less than 45% of the issued
and outstanding Voting Shares) or (ii) two (2) nominees of Widecom (in the
event that the Investor owns more than fifty percent (50%) of the issued and
outstanding Voting Shares and Widecom owns less than 45% of the issued and
outstanding Voting Shares), and one (1) nominee of Finger Print or Flat
Panel, provided that Finger Print and/or Flat Panel own at least ten percent
(10%) of the issued and outstanding Voting Shares. Notwithstanding the
foregoing, each of the Investor and Widecom shall only be entitled to
nominate one director to the Board in the event that it holds less than 10%
of the issued and outstanding Voting Shares.
6.4 Absence of quorum. In the event that a meeting of the Board cannot
be held because quorum was not obtained, a new board meeting may be convened
for the same purposes (the "New Meeting"), upon notice of at least seven (7)
Business Days. The quorum at the New Meeting shall be the majority of the
directors and there shall be no requirement that any directors appointed by
any Shareholder be present at the New Meeting. This exception shall,
however, only be valid for the New Meeting.
6.5 Replacement of a director. In the event that a director(s) nominated
by a Shareholder dies or resigns or a Shareholder wishes to replace its
nominee director(s) on the Board, the Shareholders agree to vote their
Shares at a special meeting of Shareholders duly convened to elect such new
nominee director(s) as is(are) designated by the Shareholder whose nominee
died, resigned or was replaced. Such Shareholder shall advise the other
Shareholders and the Corporation in writing of the name(s) of the
individual(s) such Shareholder has designated as its new nominee(s) to the
Board as soon as practicable before the meeting of Shareholders called for
such purpose.
6.6 Voting by nominees. Each Shareholder shall at all times carry out
and cause the Corporation and its nominees on the Board to carry out the
provisions of this Agreement. Each Shareholder shall duly and punctually do,
or cause to be done, all such things, including, without limitation, voting
or causing to be voted all the Shares held by the Shareholder as shall be
necessary or desirable to give effect to this Agreement. In the event any of
the directors does not vote at meetings of the Board in a manner consistent
with this Agreement, all of the Shareholders shall cause a meeting of
Shareholders to be held and agree to vote their Shares in favour of the
resolutions approving the relevant matter in a manner consistent with this
Agreement, thereby restricting and removing the powers of the directors to
vote on such matter in accordance with Section 146 of the CBCA for the
purposes of the resolutions in question and replacing any previous
outstanding resolutions of the directors on such matter. The Corporation
shall carry out and be bound by this Agreement to the full extent that it
has the capacity and power to do so.
6.7 Unanimous Shareholders Agreement. To the extent that any of the
power vested by the CBCA in the directors have been allocated in whole or in
part to the Shareholders by this Agreement:
6.7.1 such power of the directors are hereby restricted to the extent
allocated to the Shareholders hereunder, and
6.7.2 the Shareholders shall manage the business and affairs of the
Corporation with respect to such powers as if they were the directors of
the Corporation.
This Agreement shall, to the extent necessary to give effect to this
subsection 6.7, be deemed to be a unanimous shareholders agreement of the
Shareholders within the meaning of the CBCA.
6.8 Directors and Officers Insurance. The Corporation shall as soon as
reasonably practicable but not later than sixty (60) days from the date
hereof take out and thereafter maintain in full force at all times insurance
covering directors and officers liability.
6.9 Meeting of the Board. The parties hereto acknowledge and confirm
that there shall be a minimum of four (4) meetings of the Board in each
fiscal year of the Corporation. In the event that any executive committee of
the Board is formed, the Shareholders hereby agree that each Shareholder
shall be entitled to the same representation thereon as it has on the Board.
6.10 Fiscal Year. The fiscal year of the Corporation shall terminate on
March 31.
6.11 Disputes. Subject to subsection 6.12 hereof, any dispute or
controversy (the "Dispute") between the Corporation and any Shareholder (or
any Affiliate thereof) relating to any matter arising out of or connected
with the rights and obligations of any Shareholder vis-a-vis the Corporation
under this Agreement, the Subscription Agreement, the Investor's
Subscription Agreement, the Widecom License Agreement, the Corporation's
License Agreements, the Finger Print Rollover Agreement, the Flat Panel
Rollover Agreement or any other agreement creating obligations between the
Corporation and any Shareholder (collectively, the "Material Agreements")
shall be settled in accordance with the provisions of Section 17.1 of this
Agreement. However, any decision or action to be taken by the Corporation as
to whether or not the Corporation will be entitled to institute proceedings
in connection with any Dispute (the "Decision") shall be made as follows:
6.11.1 Subject to subsection 6.11.2, the Shareholder(s) who is (are)
not involved in the Dispute (the "Neutral Party"), shall be entitled to
cause the Corporation to make any Decision which it alone, without the
participation of the Shareholder involved in the Dispute (the "Involved
Party"), determines is appropriate, and such Decision will be valid and
binding upon the Corporation notwithstanding any provision herein to the
contrary, provided that the Neutral Party notifies the Involved Party of
the existence of each Dispute in accordance with Section 16 hereof (the
"Notice of Dispute") prior to causing the Corporation to make any
Decision. For the purposes hereof, in the event that there is more than
one Neutral Party, any Decision by the Neutral Parties shall be made by
the Neutral Party or Neutral Parties holding a majority of the Voting
Shares in relation to the Voting Shares held by all Neutral Parties.
In addition, for the purposes hereof, Widecom shall not be considered
a Neutral Party in the event that the Involved Party is Finger Print
and/or Flat Panel;
6.11.2 the Neutral Party shall not be entitled to exercise its rights
pursuant to subsection 6.11.1 hereof in the event that the Involved Party
notifies the Neutral Party (the "Notice of Arbitration") in accordance
with Section 16 hereof and within ten (10) days of the Involved Party's
receipt of the Notice of Dispute, that it wishes the Decision to be made
by an arbitrator in accordance with the arbitration procedures
(including, without limitation, all procedures relating to notices and
delays) set forth in the applicable Material Agreement, in which case the
Decision will be made in accordance with the determination of such
arbitrator using the laws governing such Material Agreement;
6.11.3 in the event that the Neutral Party provides the Involved Party
with the Notice of Dispute, but the Involved Party fails to provide the
Neutral Party with the Notice of Arbitration within the above-mentioned
delay, then the Neutral Party shall be entitled to exercise its rights
pursuant to subsection 6.11.1 hereof, notwithstanding subsection 6.11.2
hereof;
6.11.4 in the event that a Decision is referred to arbitration in
accordance with subsection 6.11.2 hereof, but the Involved Party fails to
respect the arbitration procedures set forth in the applicable Material
Agreement, then the Neutral Party shall be entitled to exercise its
rights pursuant to subsection 6.11.1 hereof, notwithstanding subsection
6.11.2 hereof.
6.12 Provisions do not apply. The provisions of subsection 6.11 hereof
shall not apply in the event that the Investor, on the one hand, or Widecom,
on the other hand, ceases to own at least thirty percent (30%) of the issued
and outstanding Voting Shares.
6.13 Proceeding instituted against the Corporation. In the event that a
Shareholder institutes an action against the Corporation in connection with
a Dispute, the Neutral Party shall be entitled to cause the Corporation to
respond and defend to such action which it alone, without the Involved
Party, determines is appropriate, and such determination by the Neutral
Party will be valid and binding upon the Corporation notwithstanding any
provision herein to the contrary.
SECTION 7 - OFFICERS
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7.1 Officers. The initial officers of the Corporation shall include Raja
Tuli, as President, and such other officers as the Board may determine from
time to time. The President of the Corporation shall be its chief executive
officer and shall be responsible for the day-to-day management and
operations of the Corporation in a manner consistent with this Agreement,
the Articles of Incorporation of the Corporation, the by-laws of the
Corporation and the operating and capital budgets, subject, however, to
overall supervision of the Board. The Board shall also appoint a Chairman.
The Corporation acknowledges and confirms that Raja Tuli shall also be
involved in the operations of various other companies and as such shall only
be required to devote such time and attention as is required, as President,
for the day-to-day management and operations of the Corporation.
SECTION 8 - ADOPTION OF BY-LAWS
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8.1 Adoption of By-laws. The Shareholders undertake to take whatever
steps that may be necessary to adopt a by-law of the Corporation consistent
with this Section 8 and they furthermore undertake that they will not vote
their Shares or exercise any voting rights or otherwise make any decision or
take any action in any manner or capacity whatsoever, for the purpose of
amending or repealing such a by-law, once adopted, unless they do so
unanimously. This by-law, once adopted, shall override, supersede and amend
all previous by-laws, resolutions, decisions or acts of the Corporation
inconsistent therewith.
8.2 Casting vote. This by-law shall provide that at no time and at no
meeting whatsoever shall the Chairman or President of the Corporation have
any additional vote or any vote whatsoever in addition to his ordinary vote
as Shareholder or as director, and that, more particularly, neither the
Chairman nor President shall have a casting vote in case of a tie.
8.3 Matters Requiring Special Shareholder Approval. Without limiting the
generality of the foregoing, this by-law shall also provide that there shall
be no by-law, resolution or act of the Shareholders, directors or officers
of the Corporation having any of the following objects or purposes unless
favourably voted upon at a meeting of the Board, and ratified and confirmed
by a resolution of the holders of seventy percent (70%) of the Voting
Shares:
8.3.1 an increase or decrease in the number of directors of the
Corporation, except as provided for in this Agreement;
8.3.2 the filing of Articles of Amendment or Articles of Amalgamation
by the Corporation;
8.3.3 an increase or decrease or alteration in the share capital of
the Corporation;
8.3.4 changes in the remuneration paid to the Shareholders, directors
or officers of the Corporation or to Persons Related or Affiliated to the
Shareholders, directors or officers of the Corporation, except for
increases in Raja Tuli's remuneration based on the percentage increases
in the Consumer Price Index as provided in the employment agreement
entered into between the Corporation and Raja Tuli on the date hereof; or
changes in the remuneration paid to any employees of the Corporation
which would cause such employee's annual remuneration to exceed $80,000;
8.3.5 payment of bonuses or other benefits to Shareholders, directors
or officers of the Corporation or to Persons Related or Affiliated to the
Shareholders, directors or officers of the Corporation;
8.3.6 granting or repayment of any loan to Shareholders, directors or
officers of the Corporation or to Persons Related or Affiliated to
Shareholders, directors or officers of the Corporation;
8.3.7 guaranteeing any obligations of Shareholders, directors or
officers of the Corporation or of Persons Related or Affiliated to
Shareholders, directors or officers of the Corporation;
8.3.8 the sale, issue or allotment of Shares from the treasury of the
Corporation, or the granting of options or warrants allowing for the
subscription thereof;
8.3.9 the transfer of Shares, except as provided in this Agreement and
the Stock Exchange Agreement;
8.3.10 the purchase or sale of any immoveable property on behalf of
the Corporation;
8.3.11 an assignment under the Bankruptcy and Insolvency Act or a
proposal made thereunder, or recourse to any other measure designed for
the protection of insolvent debtors pursuant to any other legislation in
connection with insolvency;
8.3.12 the judicial or voluntary winding-up of the Corporation or the
liquidation of the business or assets of the Corporation;
8.3.13 the entering into of any loan agreement or loan document on
behalf of the Corporation, or the granting of any security by the
Corporation on any of its movable or immovable property;
8.3.14 the sale or other disposition of the whole or a substantial
part of the assets of the Corporation or the granting of an option for
same;
8.3.15 the adoption for or on behalf of the Corporation of any
contract not in the ordinary course of the Corporation's business or
any contract with (i) any Shareholder, director or officer of the
Corporation or any Person Related or Affiliated to the Shareholder,
director or officer of the Corporation or (ii) any Person who is not
dealing at Arm's Length with the Corporation, other than the
Corporation's License Agreement referred to in subparagraph 2.1.18.1
only or (iii) any Person the value of which exceeds $200,000;
8.3.16 the conclusion of any partnership or joint venture agreement or
the creation of a subsidiary or acquisition of another business;
8.3.17 changes in the officers or directors of the Corporation, except
as provided in this Agreement;
8.3.18 the declaration of dividends by the Corporation or the
redemption, purchase or repurchase by the Corporation of its share
capital;
8.3.19 the amendment, repeal or abrogation of any by-law of the
Corporation;
8.3.20 the change in the powers of the directors in general or any one
of them in particular;
8.3.21 the approval of the annual operating budget of the Corporation
and the annual capital budget of the Corporation, and any amendments
thereto. Should the Shareholders refuse to approve the operating budget
or the capital budget for a given fiscal year, the Corporation must
conduct its business in conformity with the budgets of the preceding
fiscal year and the Corporation may not incur capital expenses for the
fiscal year then in progress unless the above-mentioned budgets have been
approved in accordance with the present provisions;
8.3.22 the removal or nomination of the Auditors;
8.3.23 the leasing by the Corporation of any premises for its
operations.
8.4 Transfer of Principal Office of the Corporation and Amendment of
Business Plan. Notwithstanding any provision of this Agreement, so long as
the Investor is a Shareholder no by-law, resolution or act of the
Shareholders, directors, or officers of the Corporation having as an object
or purpose (i) the change or transfer of the principal office of the
Corporation outside the Montreal region or transfer of all or any part of
the business of the Corporation outside of the Montreal region or (ii) the
material modification or amendment to the business plan prepared by Widecom
dated March 14, 1996, as amended on July 31, 1996 (the "Business Plan"),
shall be valid unless approved by the Investor.
8.5 Board of Shareholders unable to arrive at a decision. If the Board
or the Shareholders are unable to arrive at a decision within their
respective areas of competence, the Corporation shall continue to conduct
its business and affairs in accordance with the most recent (i) resolutions
of the Board and the Shareholders, and (ii) approved operating and capital
budgets.
SECTION 9 - BANKERS AND BANKING ARRANGEMENTS
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9.1 Bankers. The bankers of the Corporation shall be such bank or banks
as may be agreed upon from time to time by the Board.
9.2 Signatories. All drafts, cheques and bills of exchange for or on
behalf of the Corporation's bank accounts shall require the signatures of
such individuals as may be agreed upon from time to time by the Board.
SECTION 10 - AUDITORS OF THE CORPORATION
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10.1 Auditors. The auditors of the Corporation shall be the Auditors.
SECTION 11 - PREEMPTIVE RIGHT
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11.1 Issuance of Shares. Should the Board require additional funds, then
the Board shall, subject to the approval of the Shareholders as provided for
in subsection 8.3 of this Agreement, be entitled to cause the Corporation to
raise such funds by issuing Shares from treasury in accordance with this
Section 11. Each Shareholder shall have preemptive rights with respect to
the issue of such additional Shares (the "Additional Shares"), such that the
Corporation shall not issue any Additional Shares without offering to each
Shareholder the right to subscribe for its Proportion of the Additional
Shares to be issued by the Corporation.
11.2 Notice to Shareholders. If the Corporation decides to issue any
Additional Shares, then the Corporation shall give detailed notice thereof
to each Shareholder. Widecom may assign to Finger Print and/or Flat Panel
(the "Tuli Group") all or a portion of its right to subscribe for its
Proportion of the Additional Shares. The Tuli Group may assign to Widecom
all or a portion of its rights to subscribe for its Proportion of the
Additional Shares. Moreover, Finger Print or Flat Panel may assign to the
other party all or a portion of its right to subscribe for its Proportion of
the Additional Shares. Each Shareholder shall have thirty (30) days from the
receipt of such notice within which to notify the Corporation of its intent
to exercise its right under subsections 11.1 and 11.2 in connection with
such issue of Additional Shares. If a Shareholder fails to so notify the
Corporation within the prescribed delay, then such Shareholder shall be
conclusively deemed to have waived its preemptive right in connection with
such issue of Additional Shares.
11.3 Tuli Group and Widecom Rights. If either the Tuli Group or Widecom
has agreed to exercise its right under subsections 11.1 and 11.2 hereof to
subscribe for its Proportion of the Additional Shares (the "Accepting
Party") and the other has, or is deemed to have, declined to exercise such
preemptive right (the "Declining Party"), the Corporation shall, within
seven (7) days of the end of the above thirty (30) day period, be required
to offer by written notice to the Accepting Party all of the Additional
Shares which could have been subscribed for by the Declining Party (the
"Declining Party's Shares") before the Investor is offered pursuant to
subsection 11.4 its pro rata share of the Declining Party's Shares. If the
Accepting Party fails to exercise its right to subscribe for all of the
Declining Party's Shares within five (5) days of its receipt of written
notice from the Corporation, then the Accepting Party shall be deemed to
have declined its right to subscribe for the Declining Party's Shares. As
among themselves, each of the Tuli Group shall be entitled to subscribe for
the number of the Declining Party's Shares represented by the proportion of
Voting Shares owned by each of the Tuli Group in relation to the total
number of Voting Shares owned by the Tuli Group.
11.4 Shareholders Rights. (i) If one (1) or more Shareholders has or is
deemed to have declined its right to subscribe for its Proportion of the
Additional Shares, and, in the event such Additional Shares were offered to
the Accepting Party pursuant to subsection 11.3 and the Accepting Party
declined to exercise its right to acquire all of the Declining Party's
Shares, or (ii) if one (1) or more Shareholders has or is deemed to have
declined its right to subscribe for its Proportion of the Additional Shares
and subsection 11.3 is not applicable, then the Corporation, within seven
(7) days of the end of the above thirty (30) day period provided for in
subsection 11.2 or within seven (7) days of the end of the five (5) day
period provided for in subsection 11.3 hereof, as the case may be, shall be
required to offer by written notice to the Shareholder(s) who agreed to
exercise its or their right under subsections 11.1, 11.2 and 11.3, as the
case may be, in connection with the initial issue of Additional Shares, to
issue to such Shareholder(s), in addition to the Additional Shares such
Shareholder(s) initially agree to subscribe for, its or their pro rata share
of the Additional Shares for which any other Shareholder(s) has, or is
deemed to have, waived its or their preemptive right hereunder (collectively
the "Unaccepted Additional Shares"). For the purposes of the preceding, each
such Shareholder's pro rata share of the Unaccepted Additional Shares shall
be equal to the proportion that the number of Voting Shares held by such
Shareholder is to the aggregate of all Voting Shares held by all
Shareholders who agreed to exercise their right under this subsection 11.4.
11.5 Notice for Unaccepted Additional Shares. Each Shareholder who has
been offered to subscribe for Unaccepted Additional Shares by the
Corporation pursuant to subsection 11.4 shall have fifteen (15) days from
the receipt of the notice mentioned therein to notify the Corporation of its
intent to exercise its right to subscribe for its pro rata share of such
Unaccepted Additional Shares, failing which such Shareholder shall be deemed
to have waived its preemptive right in connection with the issue of such
Unaccepted Additional Shares.
11.6 Sale to any Person. The procedures set forth in subsections 11.4
and 11.5 shall be repeated, mutatis mutandis, with respect to any Unaccepted
Additional Shares which have not been subscribed for by a Shareholder until
(i) all Shareholders who have been made the most recent additional offer
shall have declined it, or (ii) all Additional Shares (including Unaccepted
Additional Shares) which have been offered by the Corporation pursuant to
this Section 11 shall have been subscribed for by some or all of the
Shareholders. If upon completion of the above procedures some or all of the
Additional Shares which the Corporation intended to issue will not be
purchased by the Shareholders pursuant to the exercise of their preemptive
rights, the Corporation shall be free for a period of ninety (90) days
thereafter to sell such Additional Shares, which will not be purchased by a
Shareholder, to any Person, on terms not more favourable than those provided
in the original offer of the Corporation to issue Additional Shares,
provided, however, that it shall be a condition precedent to such sale that
such Person has executed a counterpart of this Agreement in accordance with
subsection 18.6 and has agreed to be bound by the terms and conditions of
this Agreement and any other agreement executed by the parties in connection
with this Agreement.
11.7 Closing. The closing in connection with the issuance of Additional
Shares to any Shareholder or Person pursuant to subsections 11.1 to 11.6
shall be held at the principal offices of the Corporation at 10:00 a.m. on
the date which is thirty (30) days after the expiry of the applicable period
under subsections 11.2 to 11.6, as the case may be, or at such other place,
at such other time or on such other date as the parties thereto may agree,
and payment for the Additional Shares being issued shall be made in full at
such closing. All payments shall be made by way of bank draft or electronic
fund transfer to the Corporation's account.
SECTION 12 - ALIENATION OF SHARES
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12.1 Alienation prohibited. Unless otherwise provided for in accordance
with the terms hereof or the Stock Exchange Agreement, no Shareholder shall
transfer, assign, cede, pledge, mortgage, hypothecate, charge or otherwise
encumber, alienate or dispose of in any manner whatsoever the whole or any
part of its Shares without first obtaining the written consent of the other
Shareholders.
12.2 Transfer to Permitted Transferee. Notwithstanding anything herein
to the contrary, a Shareholder may transfer all (but not less than all) of
its Shares to a Permitted Transferee, provided that:
12.2.1 the Permitted Transferee has undertaken in writing to be bound
by the provisions hereof;
12.2.2 the Permitted Transferee has agreed, in form and terms
satisfactory to the legal counsel of the Corporation, acting reasonably,
that as long as it shall hold such Shares it shall (i) remain a
corporation, (ii) have no assets other than the Shares and other
shareholding interests, (iii) not conduct any business other than that of
holding the Shares and other shareholding interests, and (iv) be bound by
the terms and conditions of this Agreement as if the Permitted Transferee
had been an original party to this Agreement; and
12.2.3 the transferor has agreed prior to such assignment, in form and
terms satisfactory to the legal counsel of the Corporation, acting
reasonably, that as long as the Permitted Transferee holds such Shares,
the transferor shall (i) not transfer to any Person the ownership (either
absolutely, in trust or otherwise) of any issued and outstanding share,
equity security or ownership, participatory or profit interest in the
Permitted Transferee or otherwise transfer the control of the Permitted
Transferee by any mechanism whatsoever, (ii) not be relieved of its
obligations hereunder and continue to be solidarily bound with the
Permitted Transferee (each waiving the benefit of division and
discussion) by this Agreement as if it continued to be a Shareholder,
(iii) represent the Permitted Transferee in all of the Permitted
Transferee's dealings with the Corporation and the other Shareholders,
and (iv) solidarily with the Permitted Transferee (each waiving the
benefit of division and discussion) be liable to the other parties for
the obligations of the Permitted Transferee under this Agreement.
If the Permitted Transferee fails to perform or fulfil any of its
obligations hereunder, then any party may require by notice to the
transferor that the Permitted Transferee be forthwith liquidated and its
assets (including, without limitation, the Shares held by the Permitted
Transferee) distributed to the transferor.
For purposes of clarity only, in the event of a transfer by Widecom of
its Shares to a Permitted Transferee, Widecom shall remain bound by the
Stock Exchange Agreement.
12.3 Permitted Transfers by Investor. Notwithstanding anything herein to
the contrary, the Investor may transfer all or part of its Shares to any
Governmental Body of or controlled by the Government of Quebec, at any time
and from time to time without being subject to the other terms and
conditions in this Section 12 or in Section 13; provided however, that the
Investor shall be permitted to transfer its Shares to any Governmental Body
of or controlled by the Government of Quebec solely if such Governmental
Body shall have first (i) executed a counterpart of this Agreement in
accordance with subsection 18.6, and (ii) have agreed, in form and terms
satisfactory to the legal counsel of the Corporation, acting reasonably,
that as long as it shall hold such Shares it shall be bound by the terms and
conditions of this Agreement, as if the Governmental Body had been an
original party to this Agreement.
12.4 Permitted Transfers by Flat Panel, Finger Print and Widecom.
Notwithstanding anything herein to the contrary (i) Widecom may transfer all
or part of its Shares to the Tuli Group provided that the Tuli Group is a
Shareholder (ii) the Tuli Group may transfer all or part of its Shares to
Widecom provided that Widecom is a Shareholder and (iii) Finger Print or
Flat Panel may transfer all or part of its Shares to the other party
provided that the other party is a Shareholder. For purposes of clarity
only, in the event of a transfer by Widecom of all or part of its Shares to
the Tuli Group, Widecom shall remain bound by the Stock Exchange Agreement.
SECTION 13 - RIGHTS OF FIRST REFUSAL
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13.1 Alienation by the Tuli Group or Widecom. Notwithstanding subsection
12.1, if at any time on or after the third anniversary of the date hereof,
either the Tuli Group or Widecom (the "Offering Party") receives an
irrevocable offer (the "Third Party Offer") from a Person acting at Arm's
Length to the Offering Party (the "Third Party") to purchase for cash (all
of which is payable at closing) all (but not less than all) of the Shares
held by the Offering Party, which Third Party Offer the Offering Party
wishes to accept, it shall first offer to sell (the "Offer") such Shares
(the "Offered Shares") to the other of Widecom or the Tuli Group, as the
case may be (the "Notified Party") in accordance with the procedures set
forth hereinafter;
13.1.1 The Offer shall be sent to the Notified Party and shall be open
for acceptance by the Notified Party for thirty (30) days (the "Offer
Period") from the receipt of the Offer by the Notified Party.
13.1.2 The Notified Party shall be obliged by notice to the Offering
Party received within, but not after the expiration of the Offer Period,
at its sole option to either:
13.1.2.1 accept the Offer in whole, or
13.1.2.2 reject the Offer, in which case the Offer Period shall
expire on the date the Offer is rejected.
13.1.3 If the Notified Party has accepted the Offer, then the Offering
Party shall sell to the Notified Party, and the Notified Party shall
purchase from the Offering Party, all the Offered Shares, the whole in
accordance with this Agreement and the terms and conditions of the Offer.
13.1.4 If the Notified Party has not accepted the Offer by the expiry
of the Offer Period, then the Notified Party shall be deemed to have
rejected the Offer on such date.
13.1.5 If the Notified Party has or is deemed to have rejected the
Offer, then the Offering Party shall be required forthwith at the time of
such rejection to offer to sell (the "Additional Offer") all of the
Offered Shares to the Notified Party and the Investor in accordance with
the procedure set forth hereinafter:
13.1.5.1 the Additional Offer shall be sent to the Notified
Party and the Investor and shall be open for acceptance by the
Notified Party and the Investor for thirty (30) days from receipt
of the Additional Offer by the Notified Party and the Investor
(hereinafter referred to as the "Additional Offer Period");
13.1.5.2 each of the Notified Party and the Investor shall be
obliged by notice to the Offering Party received within, but not
after the expiration of the Additional Offer Period, at its option
to either:
13.1.5.2.1 accept the Additional Offer in respect of the
whole of its proportion of the Offered Shares, or
13.1.5.2.2 reject the Additional Offer, in which case the
Additional Offer Period with respect to the Notified Party or
the Investor shall expire on the date the Additional Offer is
rejected;
13.1.5.3 if the Notified Party and the Investor have accepted
the Additional Offer, then each of them shall purchase from the
Offering Party, and the Offering Party shall sell to each of them,
such proportion of the Offered Shares as is equal to the proportion
that the number of Voting Shares of the Notified Party or the
Investor, as the case may be, is to the aggregate of all Voting
Shares held by the Notified Party and the Investor, the whole in
accordance with this Agreement and the terms and conditions of the
Additional Offer;
13.1.5.4 if the Notified Party or the Investor does not accept
the Additional Offer by the expiry of the Additional Offer Period,
then it shall be deemed to have rejected the Additional Offer on
such date;
13.1.5.5 if the Notified Party shall have accepted the
Additional Offer, but the Investor shall have or is deemed to have
rejected the Additional Offer, then the Notified Party shall be
deemed to have rejected the Additional Offer;
13.1.5.6 if the Notified Party shall have or is deemed to have
rejected the Additional Offer, but the Investor shall have accepted
the Additional Offer, then the Offering Party shall be required
forthwith to offer to sell (the "New Offer") all of the Offered
Shares to the Investor in accordance with the procedures set forth
hereinafter;
13.1.5.7 the New Offer shall be sent to the Investor and shall
be open for acceptance by the Investor for ten (10) days from
receipt of the New Offer (the "New Offer Period") by the Investor;
13.1.5.8 the Investor shall be obliged by notice to the Offering
Party received within, but not after the expiration of the New
Offer Period, at its sole option to either:
13.1.5.8.1 accept the New Offer in whole, or
13.1.5.8.2 reject the New Offer, in which case the New
Offer Period shall expire on the date the New Offer is
rejected;
13.1.5.9 if the Investor does not accept the New Offer by the
expiry of the New Offer Period, then the Investor shall be deemed
to have rejected the New Offer on such date;
13.1.5.10 if the Investor has accepted the New Offer, then the
Offering Party shall sell to the Investor and the Investor shall
purchase from the Offering Party all the Offered Shares, the whole
in accordance with this Agreement and the terms and conditions of
the Additional Offer and the New Offer;
13.1.5.11 if the Notified Party has or is deemed to have
rejected the Offer and the Additional Offer and the Investor shall
have or is deemed to have rejected the Additional Offer or the New
Offer, then the Notified Party and the Investor shall be deemed,
notwithstanding any notice otherwise delivered to the Offering
Party in accordance with this subsection 13.1, to have rejected the
Offer, the Additional Offer and the New Offer, as the case may be,
and the Offering Party shall be free for a period of ninety (90)
days from the end of the Additional Offer Period, or, if a New
Offer was made, from the end of the New Offer Period, to sell all
(but not less than all) of the Offered Shares to the Third Party on
the terms and conditions provided in the Third Party Offer,
provided, however, that it shall be a condition precedent to the
right of the Offering Party to sell the Offered Shares that the
Third Party has executed a counterpart of this Agreement in
accordance with subsection 18.6 and has agreed to be bound by the
terms and conditions of this Agreement, as if that Third Party had
been an original party to this Agreement in place of the Offering
Party. For purposes of clarity only, in the event of a transfer by
Widecom of its Shares pursuant to this subsection 13.1 to the Tuli
Group or to a Third Party, Widecom shall remain bound by the Stock
Exchange Agreement. In the event of a transfer by Widecom of all or
a portion of its Shares pursuant to this subsection 13.1 to
Innovatech, the Exchange Right (as defined in the Stock Exchange
Agreement) shall immediately become null and void;
13.1.5.12 if no sale takes place within the ninety (90) day
period referred to in subsection 13.1.5.11, then the Offering Party
shall not transfer the Offered Shares without again following and
being subject to this subsection 13.1.
13.1.6 Piggy-back. Notwithstanding the preceding subsections and
paragraphs of this Section 13, if Widecom receives a Third Party Offer
for all of its Shares at any time on or after the third anniversary of
the date hereof and the Notified Party does not accept the Offer pursuant
to subparagraph 13.1.2.1, then each of the Investor and the Tuli Group
shall have the right, before the commencement of the mechanism set forth
in paragraph 13.1.5, to require that Widecom include in any sale to the
Third Party all of its Shares on terms and conditions identical to those
offered by the Third Party to Widecom pursuant to the Third Party Offer.
Widecom shall notify the Investor upon the expiry of the Offer Period
whether or not the Notified Party has accepted the Offer. If either of
the Investor or the Tuli Group wishes to exercise this piggy back right,
then it shall notify Widecom of same within ten (10) days of the expiry
of the Offer Period. In the event that the Investor exercises its piggy
back right and the Tuli Group doesn't exercise its piggy back right
within the prescribed period, then Widecom shall sell its Shares to the
Third Party in accordance with the Third Party Offer and shall be obliged
to include in the sale to this Third Party all of the Shares of the
Investor, unless the Tuli Group agrees, within 10 days of being notified
by Widecom and the Investor that the Investor has exercised its piggy
back rights in accordance with this subsection 13.1.6, to purchase all of
the Shares of Widecom and the Investor on the terms and conditions set
forth in the Third Party Offer. In the event that the Tuli Group
exercises its piggy back right and the Investor doesn't exercise its
piggy back right within the prescribed period, then Widecom shall sell
its Shares to the Third Party in accordance with the Third Party Offer
and shall be obliged to include in the sale to the Third Party all of the
Shares of the Tuli Group, unless the Investor agrees, within 10 days of
being notified by Widecom and the Tuli Group that the Tuli Group has
exercised its piggy back rights in accordance with this subsection
13.1.6, to purchase all of the Shares of Widecom and the Tuli Group on
the terms and conditions set forth in the Third Party Offer. In the event
that both the Investor and the Tuli Group exercise their piggy back
rights, then Widecom shall be obliged to include in the sale to the Third
Party all of the Shares of the Investor and the Tuli Group. In the event
that neither of the Investor or the Tuli Group exercises its piggy back
rights, then the mechanism provided for in paragraph 13.1.5 shall apply.
13.2 Validity of Offer and Closing provisions. Each Offer, Additional
Offer and New Offer shall be in a writing signed by the Offering Party and
addressed to the Notified Party and/or the Investor and shall:
13.2.1 identify the subsection pursuant to which it is delivered and
identify and provide particulars of the Offered Shares;
13.2.2 require that the sale of the Offered Shares be on the same
terms and conditions as the Third Party Offer, except as otherwise
provided for in subsection 13.1;
13.2.3 state the purchase price per Offered Shares, which purchase
price shall be payable in full, in cash, in Canadian dollars at Closing;
13.2.4 state the name and address of the Third Party to whom it
proposes to sell the Offered Shares, and include a copy of the Third
Party Offer;
13.2.5 provide that the Closing shall be held at the principal offices
of the Corporation at 10:00 a.m. on the Closing Date, or at such other
place, at such other time or on such other date as the parties thereto
may agree, in accordance with the following terms and conditions:
13.2.5.1 at Closing, the Offering Party shall deliver to the
Notified Party and/or the Investor (the "Purchaser") certificates
representing the Offered Shares being transferred, which
certificates shall be accompanied by a duly executed assignment of
the Offered Shares to the Purchaser;
13.2.5.2 payment for the Offered Shares being transferred shall
be made in full at Closing. All payments shall be made by way of
bank draft or electronic fund transfer to the Offering Party's
account in Canada;
13.2.5.3 at Closing, the Offering Party shall deliver to the
Purchaser a written warranty that:
13.2.5.3.1 there are no contractual or other restrictions
on the transfer of the Offered Shares being transferred
(other than the restrictions set out in the Articles of
Incorporation of the Corporation and in this Agreement), and
13.2.5.3.2 the Offering Party is the registered and
beneficial owner of the Offered Shares being transferred with
full right, title and authority to transfer such Offered
Shares to the Purchaser, free and clear of all claims, liens
and other encumbrances whatsoever;
13.2.5.4 if there are two Purchasers, then the obligations of
each Purchaser in connection with the purchase of the Offered
Shares shall be independent of the obligations of the other
Purchaser in that regard. If, however, at the Closing the Notified
Party fails to pay for its Offered Shares but the Investor pays for
its Offered Shares, then the Offering Party shall not be obliged to
proceed with the Closing with the Investor, in which case it shall
be obliged once again to offer all of the Offered Shares to the
Investor pursuant to paragraphs 13.1.5.7 through 13.1.5.12. If,
however, at the Closing the Investor fails to pay for its Offered
Shares while the Notified Party pays for its Offered Shares, then
the Offering Party shall not be obliged to proceed with the Closing
with the Notified Party, in which case the Offering Party shall be
entitled to offer all of the Offered Shares to a Third Party
pursuant to paragraphs 13.1.5.11 and 13.1.5.12;
13.2.5.5 at Closing, all necessary and proper corporate
proceedings required by counsel for the Purchaser, acting
reasonably, shall be taken for the transfer of the Offered Shares;
13.2.5.6 if the Purchaser fails at the Closing to pay for its
Offered Shares, provided that the Offering Party has fulfilled all
of its obligations hereunder, then, without prejudice to any other
rights of the Offering Party, the purchase price for the Offered
Shares shall bear interest from the date of Closing until paid in
full at a rate of interest per annum equal to the Prime Rate plus
three percent (3%). Such interest shall be payable on demand;
13.2.5.7 at Closing, the Offering Party shall deliver to the
Corporation signed resignations of all of its nominees as
directors, officers and employees of the Corporation unless waived
by the Corporation;
13.2.5.8 if the Offering Party is bound by a guarantee whereby
such Offering Party has guaranteed the payment of any debt or
liability of the Corporation, then the Purchaser shall use all
reasonable efforts to cause such guarantee to be released and
cancelled at Closing, failing which the Purchaser shall agree to
indemnify and hold the Offering Party harmless from all claims,
costs, demands and actions suffered or incurred after the Closing
resulting from, arising out of, or relating to such guarantee;
13.2.5.9 if any of the conditions set forth in this subsection
13.2.5 made for the exclusive benefit of the Purchaser are not
satisfied at the Closing, then the Purchaser may, at its option,
either:
13.2.5.9.1 refuse to proceed with the Closing, or
13.2.5.9.2 proceed with the Closing,
in either case without prejudice to its remedies and recourses against the
Offering Party as a result of such condition not being satisfied;
13.2.5.10 however, if at Closing the Offered Shares being
transferred are not free and clear of all claims, liens and other
encumbrances whatsoever, the Purchaser may, without prejudice to
any other rights which it may have, purchase such Offered Shares
subject to such claims, liens and other encumbrances. In that
event, the Purchaser shall at the Closing assume all obligations
and liabilities with respect to such claims, liens and encumbrances
and the purchase price payable by the Purchaser for such Offered
Shares shall be satisfied, in whole or in part, as the case may be,
by such assumption. The amount so assumed shall reduce the purchase
price payable at Closing;
13.2.5.11 if the Offering Party fails to complete the
transaction, then the amount which the Purchaser would otherwise be
required to pay to the Offering Party at Closing may be deposited
by the Purchaser into an interest-bearing trust account in the name
of the Offering Party at the bank branch used by the Corporation.
Upon making such deposit and giving the Offering Party notice
thereof, the purchase of the Offering Party's Offered Shares by
that Purchaser shall be deemed to have been fully completed and all
right, title, benefit and interest in and to the Offered Shares to
which the Purchaser is entitled, shall be deemed to have been
transferred and assigned to and vested in the Purchaser. The
Offering Party shall be entitled to receive the amount deposited in
the trust account upon satisfying the Offering Party's obligations
pursuant to subsection 13.1;
13.2.5.12 the Offering Party hereby irrevocably nominates,
constitutes and appoints each Purchaser as its true and lawful
mandatary and agent for, in the name of and on behalf of the
Offering Party to execute and deliver in the name of the Offering
Party all such instruments as may be necessary to effectively
transfer the Offered Shares being sold to the Purchaser. The
Offering Party hereby ratifies and confirms, and agrees to ratify
and confirm, all that Purchaser may lawfully do or cause to be done
by virtue of such appointment and power of attorney;
13.2.5.13 it is recognized that serious and irreparable damage
for which monetary damages would not be an adequate remedy would
result to the Purchaser from the violation of the provisions of
subsections 13.1 or 13.2. Each party agrees that, in addition to
any and all remedies available to the Purchaser in the event of a
violation of such covenants, such Purchaser shall have the
immediate remedy of injunction or such other relief as may be
decreed or issued by any court of competent jurisdiction to enforce
subsections 13.1 or 13.2.
13.3 Alienation by the Investor. Notwithstanding subsection 12.1, if at
any time on or after the third anniversary of the date hereof, the Investor
receives an irrevocable written offer (the "TP Offer") from a Person acting
at Arm's Length to the Investor (the "TP Offeror") to purchase for cash (all
of which is payable at closing) all (but not less than all) of the Shares
held by the Investor which TP Offer the Investor wishes to accept, it shall
first offer to sell (the "Investor Offer") such Shares (the "Offered
Securities") to the Tuli Group and Widecom in accordance with the procedures
set forth hereinafter;
13.3.1 The Investor Offer shall be sent to the Tuli Group and Widecom
and shall be open for acceptance by each of the Tuli Group and Widecom
for thirty (30) days (the "Investor Offer Period") from the receipt of
the Investor Offer by the Tuli Group and Widecom.
13.3.2 Each of the Tuli Group and Widecom shall be obliged by notice
to the Investor received within but not after the expiration of the
Investor Offer Period at its sole option to either:
13.3.2.1 accept the Investor Offer in respect of the whole of
its proportion of the Offered Securities, or
13.3.2.2 reject the Investor Offer, in which case the Investor
Offer Period with respect to it shall expire on the date the
Investor Offer is rejected by it.
13.3.3 If both the Tuli Group and Widecom have accepted the Investor
Offer, then the Investor shall sell to each of the Tuli Group and
Widecom, and each of the Tuli Group and Widecom shall purchase from the
Investor, such proportion of the Offered Securities as is equal to the
proportion that the number of Voting Shares of each of the Tuli Group and
Widecom is to the aggregate of all Voting Shares held by both the Tuli
Group and Widecom, the whole in accordance with this Agreement and the
terms and conditions of the Investor Offer.
13.3.4 If the Tuli Group or Widecom does not accept the Investor Offer
by the expiry of the Investor Offer Period, then it shall be deemed to
have rejected the Investor Offer on such date.
13.3.5 If one (1) of the Tuli Group or Widecom shall have or be deemed
to have rejected the Investor Offer (the "Rejecting Party"), and the
other shall have accepted the Investor Offer then the Investor shall be
required forthwith to offer to sell (the "Additional Investor Offer") all
of the Offered Securities which were not accepted by the Rejecting Party
(the "Unaccepted Offered Securities") to the other party who accepted the
Investor Offer in accordance with the procedure set forth hereinafter.
13.3.6 The Additional Investor Offer shall be sent to the other party
who accepted the Investor Offer (the "Re-Notified Party") and shall be
open for acceptance by the Re-Notified Party for ten (10) days from
receipt of the Additional Investor Offer (the "Additional Investor Offer
Period") by the Re-Notified Party.
13.3.7 The Re-notified Party shall be obliged by notice to the
Investor received within but not after the expiration of, the Additional
Investor Offer Period at its option to either:
13.3.7.1 accept the Additional Investor Offer, or
13.3.7.2 reject the Additional Investor Offer, in which case the
Additional Investor Offer Period with respect to such Re-Notified
Party shall expire on the date the Additional Investor Offer is
rejected.
13.3.8 If the Re-Notified Party has accepted the Additional Investor
Offer, then the Investor shall sell to the Re-Notified Party and the Re-
Notified Party shall purchase from the Investor all the Offered
Securities (including the Unaccepted Offered Securities), the whole in
accordance with this Agreement and the terms and conditions of the
Investor Offer and the Additional Investor Offer.
13.3.9 If the Re-Notified Party has not accepted the Additional
Investor Offer by the expiry of the Additional Investor Offer Period,
then it shall be deemed to have rejected the Additional Investor Offer
on such date.
13.3.10 If both the Tuli Group and Widecom have or are deemed to have
rejected the Investor Offer or if the Re-Notified Party has or is deemed
to have rejected the Additional Investor Offer, then both the Tuli Group
and Widecom and the Re-Notified Party shall be deemed, notwithstanding
any notice otherwise delivered to the Investor in accordance with this
subsection 13.3, to have rejected the Investor Offer and the Additional
Investor Offer, as the case may be, and the Investor shall be free for a
period of ninety (90) days from the end of the Investor Offer Period, or
if an Additional Investor Offer was made, from the end of the Additional
Investor Offer Period, to sell all (but not less than all) of the Offered
Securities to the TP Offeror on terms not more favourable than those
provided in the Investor Offer, provided, however, that it shall be a
condition precedent to the right of the Investor to sell the Offered
Securities that the TP Offeror has executed a counterpart of this
Agreement in accordance with subsection 18.6 and has agreed to be bound
by the terms and conditions of this Agreement, as if that TP Offeror has
been an original party to this Agreement in place of the Investor.
13.3.11 If no sale takes place within the said ninety (90) day period
referred to in subsection 13.3.10, then the Investor shall not transfer
the Offered Securities without again following and being subject to this
subsection 13.3.
13.3.12 The provisions of subsection 13.2 shall apply mutatis mutandis
to any sale of Offered Securities pursuant to subsection 13.3.
13.4 Corporation's obligations. The Corporation shall record each
transfer of Shares provided, however, that the Corporation shall refuse to
record a transfer of Shares made in contravention of this Agreement.
13.5 Offers irrevocable. All Offers, Additional Offers, New Offers,
Investor Offers, Additional Investor Offers, Third Party Offers and TP
Offers and their acceptance, rejection, deemed acceptance and deemed
rejection are irrevocable.
13.6 Share Certificates. The Corporation shall cause, and the
Shareholders shall vote their Shares to cause the Corporation to cause, all
certificates for Shares to be endorsed with the following inscription:
"Ownership, alienation and encumbrance of the Shares represented by this
certificate are subject to the terms of the Shareholders Agreement of
3294340 Canada Inc. dated October 2, 1996, a copy of which is on file at
the registered office of 3294340 Canada Inc."
SECTION 14 - CONFIDENTIALITY
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14.1 Confidentiality. Each of the Shareholders agrees to use, and to use
its best efforts to ensure that its authorized representatives use, the same
degree of care as such Shareholder uses to protect its own confidential
information, to keep confidential and not to make use of any Confidential
Information in its possession. Such Shareholder may disclose Confidential
Information (i) to any partner, shareholder, subsidiary or parent of such
Shareholder for the purpose of reporting on the activities of, or evaluating
its investment in the Corporation as long as such partner, shareholder,
subsidiary or parent is advised of the confidentiality provisions of this
Section 14; or (ii) to any Third Party, TP Offeror, Permitted Transferee or
Governmental Body for purposes related to the purchase or transfer of such
Shareholder's Shares pursuant to the provisions of Sections 12 or 13 hereof,
provided that prior to disclosure such Third Party, TP Offeror, Permitted
Transferee or Governmental Body agrees to be bound by the confidentiality
provisions of this Section 14 and such other confidentiality provisions as
may be requested by the Corporation in its sole discretion.
14.2 Disclosure required. Anything to the contrary herein
notwithstanding, disclosure of Confidential Information shall not be
precluded if such disclosure is in response to a valid order of a
Governmental Body or is otherwise required by law; provided, however, that
the said Shareholders shall, if reasonably possible, first have given notice
thereof to the Corporation and shall have, as appropriate:
14.2.1 fully cooperated in the Corporation's attempt, if any, to
obtain a "protective order" from the appropriate Governmental Body; or
14.2.2 attempted to classify such documents to prevent access by the
public, in accordance with the provisions of any law pertaining to
freedom of information.
14.3 Reasonableness of Covenants. The covenants set forth in subsections
14.1 and 14.2 are reasonable and valid in all respects and each Shareholder
hereby irrevocably agrees to waive (and irrevocably agrees not to raise) as
a defense any issue of reasonableness in any proceeding to enforce any such
covenant.
SECTION 15 - FINANCIAL INFORMATION AND COVENANTS OF THE CORPORATION
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15.1 Financial Information. The Corporation undertakes toward the
Shareholders to remit to the latter the following documents:
15.1.1 within ninety (90) days after the end of each fiscal year, a
copy of the balance sheet of the Corporation as at the end of such year,
together with statements of earnings, shareholders' equity, statement of
changes in financial position and cash flow of the Corporation for such
year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, all in reasonable detail and duly
certified by the Auditors. These financial statements shall be prepared
in accordance with Canadian generally accepted accounting principles
applied on a consistent basis;
15.1.2 within twenty (20) days after the end of each of the first
three (3) fiscal quarters during each fiscal year, a balance sheet of
the Corporation as of the end of such fiscal quarter and statements of
earnings, shareholders' equity, statement of changes in financial
position and cash flow for such quarter and for the period from the
beginning of the then current fiscal year to the end of such quarter,
setting forth in each case in comparative form the corresponding figures
for the corresponding period of the preceding fiscal year, all in
reasonable detail. The financial statements delivered pursuant to this
subsection need not be audited;
15.1.3 within the twenty (20) days following the end of each month,
complete unaudited monthly financial statements, including the balance
sheet, the income statement and the statement of changes in financial
position as well as a comparison with the budgets established for the
same period, containing a detailed explanation of any variations;
15.1.4 at least thirty (30) days prior to the commencement of a fiscal
year, an annual operating budget, pro forma cash flow and pro forma
income statement for the Corporation;
15.1.5 promptly following the receipt thereof, any written report,
"management letter" and any other communication submitted to the
Corporation by its independent chartered accountants relating to the
business, prospects or financial condition of the Corporation; and
15.1.6 within ninety (90) days of the end of each fiscal year of the
Corporation, a report prepared by the Auditors describing all
transactions between the Corporation and Persons not dealing at Arm's
Length with the Corporation during the preceding fiscal year.
15.2 Inspection by Shareholders. The Corporation shall permit each
Shareholder, at such Shareholder's expense, to visit and inspect the
Corporation's premises, to examine its books of accounts and records and to
discuss the Corporation's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by the Shareholder.
15.3 Compliance by Corporation. The Corporation hereby agrees to take
all necessary action in order to comply with all applicable laws and
regulations in respect of its corporate existence and the conduct of its
business including, without limitation, those laws and regulations dealing
with the protection of the environment, and further agrees to obtain all
permits, licenses and authorizations necessary for the conduct of its
business and the ownership of its property.
15.4 Insurance. The Corporation hereby agrees to use its best efforts to
maintain in full force at all times adequate property insurance and civil
liability insurance, which insurance policies shall be subject to the
reasonable approval of the Board, and further agrees to advise each of the
Shareholders in writing of any loss or claim under such insurance policies,
within thirty (30) days of the occurrence of any loss or claim.
15.5 Operations of the Corporation. The Corporation undertakes to use
all reasonable measures in order to realize the objectives of the Business
Plan within the delays provided for therein, in accordance with the budget
provided for therein and in accordance with proper business practice. The
Corporation further undertakes not to materially modify or amend the
Business Plan except in the manner provided for in subsection 8.4 and in the
event of a breach by the Corporation of the foregoing, the Investor shall
(as long as it remains a Shareholder) be entitled to institute arbitration
proceeding in accordance with Subsection 17.1 hereof.
SECTION 16 - NOTICES
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16.1 Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:
if to Widecom: THE WIDECOM GROUP INC.
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: President
Telecopier: (905) 566-0181
if to Finger Print: 3294412 CANADA INC.
c/o Raja Tuli
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Telecopier: (905) 566-0181
if to Flat Panel: 3294421 CANADA INC.
c/o Raja Tuli
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Telecopier: (905) 566-0181
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: Andre Duquenne
Telecopier: (514) 864-4220
if to the Corporation: 3294340 CANADA INC.
c/o Raja Tuli
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Telecopier: (905) 566-0181
with a copy in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
with a copy in all cases to: BOIVIN O'NEIL
2000 Mansfield Street
Suite 1300
Montreal, Quebec
H3A 3A1
Attention: Anne O'Neil
Telecopier: (514) 844-5836
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received
on the date of delivery if delivered by hand, or the next Business Day
immediately following the date of transmission if sent by telecopier. The
original copy of any notice sent by telecopier shall be forwarded to the
other party by registered mail, receipt return requested.
SECTION 17 - ARBITRATION
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17.1 Arbitration. Except as otherwise provided for in subsection 6.11.2
hereof, any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be
definitively settled by arbitration in accordance with the provisions set
forth in Schedule "17.1" hereof. The decision of the arbitrator shall be
final and binding upon the parties, to the exclusion of courts of law.
SECTION 18 - MISCELLANEOUS PROVISIONS
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18.1 Press release. Any press release or any public announcement,
statement or publicity with respect to the transaction contemplated in this
Agreement shall be made only with the prior consent of the Shareholders
unless such release, announcement, statement or publicity is required by
law, in which case the Shareholder required to make such release,
announcement, statement or publicity shall use its best efforts to obtain
the approval of the other Shareholders to the form, nature and extent of
such disclosure, which approval shall not be unreasonably withheld.
18.2 Further documents. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably necessary or desirable to effect complete consummation of
the transactions contemplated by this Agreement.
18.3 Successors and assigns. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns.
18.4 Transfer contrary to this Agreement. Any purported transfer of
Shares contrary to the terms of this Agreement shall be null and void and
have no legal effect.
18.5 Time of the essence. Time shall be of the essence in this
Agreement.
18.6 Counterpart. No Person shall become a holder of any Securities
without first having executed a counterpart of this Agreement in accordance
with Schedule "18.6" annexed hereto. Each such counterpart so executed shall
be deemed to be an original and such counterparts together shall constitute
one and the same instrument.
18.7 Originals. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
18.8 Termination of Agreement. This Agreement shall terminate
automatically upon the occurrence of any of the following eventualities:
18.8.1 the bankruptcy or dissolution (whether voluntary or
involuntary) of the Corporation;
18.8.2 all issued and outstanding Shares are held by one Person only;
or
18.8.3 by written agreement of all of the Shareholders.
18.9 Language. The parties hereto agree that this Agreement as well as
all documentation contemplated hereby or pertaining hereto or to be executed
in connection herewith be drawn up in the English language; les parties
consentent a l'effet que cette convention de meme que tous documents
envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
THE WIDECOM GROUP INC. 3294412 CANADA INC.
Per: Per:
Raja S. Tuli Raja S. Tuli
SOCIETE INNOVATECH DU 3294421 CANADA INC.
GRAND MONTREAL
Per: Per:
Bernard Coupal Raja S.Tuli
3294340 CANADA INC.
Per:
Shareholders Agreement
SCHEDULE 17.1
ARBITRATION RULES (subsection 17.1)
Jurisdiction and Scope
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1. As provided for in subsection 17.1 of the Agreement, a Dispute or
Decision (hereinafter referred to as a "Dispute") shall be submitted to the
Arbitrator referred to in Section 10 hereof for arbitration (the
"Arbitration"). The rules governing the Arbitration (the "Rules") are set
out below.
2. The Arbitrator has the jurisdiction to deal with all matters relating
to a Dispute as provided for by Articles 2638 to 2643 of the Civil Code of
Quebec and Articles 940 to 945.8 of the Code of Civil Procedure of Quebec.
Notwithstanding the foregoing, the provisions hereof shall have precedence
over such Articles, except to the extent such Articles are of public order,
and the parties hereto renounce to the application of Articles 941, 941.1,
941.2, 942, 942.1, 942.2, 942.3, 942.4, 942.6, 942.8, 943, 943.1, 944.6,
944.8 and 944.9 of the Code of Civil Procedure of Quebec.
3. Unless the parties shall at any time otherwise agree in writing, the
Arbitrator shall have the power, on the application of either of the parties
or on its own motion:
3.1 to allow other parties to be joined in the Arbitration with their
express consent, and make a single final award determining all disputes
between them;
3.2 to allow any party, upon such terms (as to costs and otherwise) as
it shall determine, to amend its claim, defence, reply, counter-claim or
defence to counter-claim;
3.3 to determine what witnesses (if any) are to attend before it, and
the order and manner (including cross-examination, as recognized under
the laws of Quebec) in which, and by whom, they are to be orally
examined;
3.4 to conduct such further or other inquiries as may appear to it to
be necessary or expedient;
3.5 to order the parties to make any property or thing available for
its inspection or inspection by the other party and inspect it in their
presence;
3.6 to order the parties to provide to it, and to each other for
inspection, and to supply copies of, any documents in their respective
possession, control or power which it determines to be relevant; and
3.7 to order the preservation, storage, sale or other disposal of any
property or thing under the control of any of the parties relevant to the
Dispute before it.
Law of Dispute
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4. The Arbitrator shall determine a Dispute in accordance with the
substantive law as set out in subsection 2.11 of the Agreement and any
applicable customs and usages of the trade, and no such determination shall
be made amiable compositeur.
Applicable Law
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5. The law governing the Arbitration shall be that of the Province of
Quebec.
Place of Arbitration
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6. The place of the Arbitration shall be Montreal, Quebec, Canada.
Language of Arbitration
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7. All written and oral proceedings relating to Arbitration shall be in
English.
8. The Arbitrator shall ensure that any person giving evidence before it
may be heard in French, and that in being so heard the person will not be
placed at a disadvantage by not being heard in English.
9. The Arbitrator must be capable of understanding English and French
without the assistance of an interpreter.
Appointment of Arbitral Tribunal
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10. As used in these Rules, the term "Arbitrator" means the sole
arbitrator appointed pursuant to Sections 11 and 12 of these Rules.
11. In the event that the Dispute relates exclusively to a financial
matter, the sole Arbitrator shall be a senior partner from the accounting
firm of KPMG Peat Marwick Thorne in Montreal, Quebec. In the event that the
Dispute relates exclusively to a technological matter, the sole Arbitrator
shall be a senior partner from the firm of Leger Robic Richard in Montreal,
Quebec. In the event that the Dispute relates to any matter other than a
financial matter or a technological matter, as provided for hereinabove, the
sole Arbitrator shall be a senior partner from the law firm of McKenzie
Gervais in Montreal, Quebec. The choice of the senior partner to be
appointed as Arbitrator shall be at the sole discretion of the firm in
question.
12. The Arbitration shall be commenced by delivery by one party (the
"Applicant") of written notice (the "Notice") to the other (the
"Respondent"). The Notice shall describe the Dispute and state which firm
shall be responsible for appointing the Arbitrator. The Applicant shall
concurrently with the sending of the Notice to the Respondent send a copy of
same to the firm in question requesting that it appoint the senior partner
who shall act as Arbitrator. In the event that the firm in question agrees
to appoint the Arbitrator, it shall forthwith confirm same in writing to the
Applicant and the Respondent. Notwithstanding the provisions of Section 10
hereof, in the event that for any reason whatsoever, the firm does not think
it is competent to handle the Arbitration, it shall forthwith be required to
notify in writing one of the other two firms contemplated herein, which it
in its discretion deems appropriate, that it wishes such other firm to
handle the Arbitration. The refusing firm shall notify the Applicant and the
Respondent of same in writing concurrently with notifying such other firm
who shall notify the Applicant and the Respondent of its acceptance or
refusal of the mandate in writing within 5 days of its receipt of the
refusing firms' notice. In the event that such other firm does not accept
the mandate within 5 days of its receipt of the refusing firms' notice,
either the Applicant or the Respondent may request that a judge of the
Superior Court, in the City of Montreal appoint one Arbitrator to resolve
the Dispute.
13. Any decision of the Arbitrator made with respect to a Dispute or with
respect to any aspect of, or any matter related to, the Arbitration
(including, without limitation, the procedures of the Arbitration) shall be
made by him, acting alone. All decisions of the Arbitrator with respect to a
Dispute, except procedural decisions, shall be rendered in writing and shall
contain a brief recital of the facts upon which the decision is made and the
reasons therefor. Notwithstanding any other provision of these Rules to the
contrary, the Arbitrator shall be entitled, at his sole discretion, to
dispense with the requirement of any pre-hearing procedures and to make a
decision and award with respect to a Dispute on the basis of the Pleadings,
without the necessity of holding a Hearing.
Pleadings
- ---------
14. The following shall apply to the Arbitration of any Dispute:
14.1 within 5 days of receipt of confirmation from the firm in
question that it agrees to appoint the Arbitrator or within 5 days of
the appointment of the Arbitrator by a judge of the Superior Court, as
the case may be, the Applicant shall deliver to the Respondent and the
Arbitrator a written statement (the "Claim") concerning a Dispute setting
forth, with particularity, its position with respect to the Dispute and
the material facts upon which it intends to rely;
14.2 if the Applicant fails to deliver a Claim within the time limits
referred to in 14.1 above, the Dispute shall be deemed to have been
withdrawn and the Arbitrator shall dismiss the matter in Dispute;
14.3 within 5 days after the delivery of the Claim, the Respondent
shall deliver to the Applicant and the Arbitrator a written response
(the "Defence") setting forth, with particularity, its position on the
Dispute and the material facts upon which it intends to rely;
14.4 if the Respondent fails to deliver a Defence within the time
limit referred to in 14.3 above, the Arbitrator shall be entitled to
render its decision and award without the necessity of a Hearing on the
basis of the Claim, exclusively, or proceed with the Hearing;
14.5 within 5 days after delivery of the Defence, the Applicant may
deliver to the Respondent and the Arbitrator a written reply (the
"Reply") to the Defense, setting forth, with particularity, its response,
if any, to the Defence;
14.6 within the time provided for the delivery of the Defence to the
Claim, the Respondent may also deliver to the Applicant and the
Arbitrator a counter-claim (the "Counter-Claim") setting forth, with
particularity, any additional Dispute for the Arbitrator to decide;
14.7 within 5 days of the delivery of Counter-Claim, the Applicant
shall deliver to the Respondent and the Arbitrator a defence to such
Counter-Claim. If the Applicant fails to deliver a defence to the
Counter-Claim within such 5-day period, the Arbitrator shall proceed with
the Hearing without such defence;
14.8 within 5 days after the delivery of a defence to the
Counter-Claim, if any, the Respondent may deliver to the Applicant and
the Arbitrator a reply to such defence to Counter-Claim; and
14.9 any Dispute submitted to Arbitration in accordance with 14.6
above, shall be governed by, and dealt with as if it were the subject
of a Notice in accordance with these Rules, except that it shall be
deemed a submission to the Arbitrator already appointed, and shall be
determined by the Arbitrator accordingly.
Hearings
- --------
15. Subject to Section 13 hereof, the Arbitrator shall determine the
time, date and place of the hearing (the "Hearing") and will give all the
parties adequate notice of these. The Hearing shall take place within 15
days of receipt by the Arbitrator of the last of the Pleadings referred to
in Section 14 of these Rules. The place of all proceedings in the
Arbitration shall be as set out in Section 6 of these Rules and all
proceedings shall take place there, unless the Arbitrator otherwise directs.
The Hearing must be completed within 7 days of its commencement.
16. All proceedings and the rendering of the award will be in private and
the parties shall ensure that the Arbitration and the terms of the award
shall be kept confidential unless the parties otherwise agree. The award
must be rendered by the Arbitrator within 10 days of the completion of the
Hearing.
Miscellaneous
- -------------
17. If the Arbitrator is in default to fulfil his duties within the
delays prescribed for hereunder (except as a result of circumstances beyond
his reasonable control), then either the Applicant or the Respondent shall
be entitled to notify the Arbitrator in writing of such default and provide
him with a delay of three (3) days in which to cure same, failing which his
mandate shall be automatically revoked and the Arbitrator shall not be
entitled to receive his professional fees and costs. If the Arbitrator's
mandate is revoked pursuant to this Section 17 or by a judge of the Superior
Court in the City of Montreal, either the Applicant or the Respondent shall
then be entitled to request that the firm in question appoint a replacement
Arbitrator and such firm shall be required to do so within five (5) days of
its receipt of such request. If the firm in question fails to do so within
the prescribed time period, either the Applicant or the Respondent shall be
entitled to request that a judge of the Superior Court, in the City of
Montreal appoints one Arbitrator to resolve the Dispute.
18. All written statements and responses thereto and other notices,
requests and demands, required or permitted hereunder, shall be delivered in
writing as provided in Section 16 of the Shareholders Agreement.
19. The Arbitrator shall, subject to Section 17 hereof, be paid its
normal professional fees for its time and attendance in dealing with a
Dispute, which fees together with all other costs of the Arbitration (except
for the fees of the counsel and other experts retained by the parties which
shall be for the sole account of the party who shall have retained such
counsel and other expert), unless otherwise directed by the Arbitrator,
shall be paid equally be the Applicant and the Respondent.
20. The award shall be rendered in writing and shall contain a recital of
the facts upon which the award is made and the reasons therefor.
21. Unless the parties otherwise agree in writing, time is of the essence
of the Arbitration pursuant to these rules.
*** *** ***
Shareholders Agreement
SCHEDULE 18.6
THIS INSTRUMENT forms part of the Shareholders Agreement (the
"Agreement") made as of the 2nd day of October, 1996, by and among The
Widecom Group Inc., 3294412 Canada Inc., 3294421 Canada Inc., Societe
Innovatech du Grand Montreal and 3294340 Canada Inc. which Agreement permits
execution by counterpart. The undersigned hereby acknowledges having
received a copy of the said Agreement (which is annexed hereto as Schedule
"1") and, having read the said Agreement in its entirety, hereby agrees that
the terms and conditions of the said Agreement shall be binding upon the
undersigned (including, without limitation, the obligations of
confidentiality) as if the undersigned had been an original party to the
Agreement as a Shareholder (as such terms are defined in the Agreement) and
such terms and conditions shall enure to the benefit of and be binding upon
the undersigned, its successors and assigns.
IN WITNESS WHEREOF the undersigned has executed this instrument
this * day of *, [year]
[Shareholder]
per:
Exhibit 10.2
------------
SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 2ND DAY OF OCTOBER, 1996
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe
Innovatech du Grand Montreal, R.S.Q., ch. S-17.2, having
its head office and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE FIRST PART
-----------------------
AND: 3294340 CANADA INC., a body politic and corporate, duly
incorporated according to the Canadian Business
Corporations Act, having its head office and principal
place of business in the City of Montreal, Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE SECOND PART
------------------------
SECTION 1 - PREAMBLE
- ----------------------
1.1 WHEREAS Innovatech wishes to subscribe for shares from the treasury
of the Corporation at the price set forth hereinafter, the whole on the
terms and conditions hereinafter set out in this Agreement.
1.2 WHEREAS concurrently with the execution of this Agreement, Widecom
entered into a Subscription Agreement with the Corporation (the "Widecom
Subscription Agreement") providing for the subscription by Widecom for
shares from the treasury of the Corporation.
1.3 WHEREAS concurrently with the execution of this Agreement, Finger
Print entered into a Rollover Agreement with the Corporation pursuant to
which Finger Print sold its technology to the Corporation in consideration
of the issuance by the Corporation to Finger Print of 50 Class A Shares in
the capital stock of the Corporation (the "Finger Print Rollover
Agreement").
1.4 WHEREAS concurrently with the execution of this Agreement, Flat Panel
entered into a Rollover Agreement with the Corporation pursuant to which
Flat Panel sold its technology to the Corporation in consideration of the
issuance by the Corporation to Flat Panel of 50 Class A Shares in the
capital stock of the Corporation (the "Flat Panel Rollover Agreement").
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2. - INTERPRETATION
- -----------------------------
2.1 Definitions. In this Agreement:
2.1.1 "Agreement" shall mean this Subscription Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof; "herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this Agreement and not to any particular
Section, subsection or other subdivision; "Section", "subsection" or
other subdivision of this Agreement means and refers to the specified
Section, subsection or other subdivision of this Agreement;
2.1.2 "Business Day" shall mean any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in the
Province of Quebec are not open for business during normal banking
hours;
2.1.3 "Class A Shares" shall have the meaning ascribed thereto in
the Articles of Incorporation of the Corporation;
2.1.4 "Dollar", "Dollars" and the sign "$" shall, unless otherwise
indicated, each mean lawful money of Canada;
2.1.5 "Finger Print" shall mean 3294412 Canada Inc.;
2.1.6 "Finger Print Rollover Agreement" shall have the meaning
ascribed thereto in subsection 1.3;
2.1.7 "Flat Panel" shall mean 3294421 Canada Inc.;
2.1.8 "Flat Panel Rollover Agreement" shall have the meaning
ascribed thereto in subsection 1.4;
2.1.9 "Governmental Body" shall mean (i) any domestic or foreign
national, federal, provincial, state, municipal or other government or
body, (ii) any multinational, multilateral or international body,
(iii) any subdivision, agent, commission, board, instrumentality or
authority of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing governments or bodies, or (v) any domestic, foreign,
international, multilateral or multinational judicial, quasi-judicial,
arbitration or administrative court, tribunal, commission, board or
panel;
2.1.10 "Innovatech Shares" shall have the meaning ascribed thereto
in subsection 3.1;
2.1.11 "Person" shall mean an individual, corporation, company,
cooperative, partnership, trust, unincorporated association, entity
with judicial personality, Governmental Body; and pronouns when they
refer to a Person have a similarly extended meaning;
2.1.12 "Shareholders Agreement" shall mean the Memorandum of
Agreement of even date among the parties hereto and Widecom, Finger
Print and Flat Panel setting forth the terms and conditions which will
govern the relationship of the shareholders of the Corporation;
2.1.13 "Widecom License Agreement" shall mean the license agreement
entered into between Widecom and the Corporation on the date hereof by
which Widecom licenses to the Corporation all its technology, which
the Corporation shall be entitled to use for scientific research and
experimental development;
2.1.14 "Widecom" shall mean The Widecom Group Inc.;
2.1.15 "Widecom Subscription Agreement" shall have the meaning
ascribed thereto in subsection 1.2.
2.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
2.5 Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, among any or all of the parties.
2.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each of the
parties hereto.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute a
waiver of any other provisions (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided in
an instrument duly executed by the parties.
2.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this
Agreement, the day which is the reference day in calculating such period
shall be excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business Day.
2.9 Preamble. The preamble hereof shall form an integral part of this
Agreement.
2.10 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
SECTION 3. - SUBSCRIPTION
- ---------------------------
3.1 Innovatech Subscription. Subject to the terms and conditions
contained herein, Innovatech hereby subscribes for four hundred and fifty
(450) Class A Shares (collectively the "Innovatech Shares") of the
Corporation's share capital at the aggregate subscription price of two
million and five hundred thousand dollars ($ 2,500,000.00). The Corporation
hereby accepts the subscription of Innovatech for the Innovatech Shares
subject to the terms and conditions contained herein.
3.2 Payment and Issue of Innovatech Shares. Innovatech hereby agrees to
remit to the Corporation on the date hereof the aggregate subscription price
set forth in subsection 3.1, and the Corporation shall, upon receipt of a
cheque for the aggregate subscription price set forth in subsection 3.1,
issue the Innovatech Shares to Innovatech and deliver share certificates
representing same.
SECTION 4. - REPRESENTATIONS AND WARRANTIES
- ---------------------------------------------
4.1 Representations and Warranties of Innovatech. Innovatech hereby
represents and warrants to the Corporation, and acknowledges and confirms
that the Corporation is relying upon such representations and warranties in
connection herewith and would not have entered into this Agreement without
such representations and warranties:
4.1.1 it is duly constituted or formed, validly existing and in
good standing under the laws pursuant to which it was constituted or
formed;
4.1.2 it has the necessary corporate power and authority to execute
this Agreement and to perform its obligations hereunder. The execution
of this Agreement by it and the performance by it of its obligations
hereunder have been duly authorized by all necessary action on its
part. The execution of this Agreement by it and performance by it of
its obligations hereunder do not require any action or consent of, any
registration with, or notification to any Person, or any action or
consent under any laws to which it is subject, other than the consent
of the board of directors of Innovatech, which has been obtained;
4.1.3 the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by it of its
obligations hereunder and the compliance by it with this Agreement do
not:
4.1.3.1 violate, contravene or breach, or constitute a
default under, its constating laws or by-laws; or
4.1.3.2 violate, contravene or breach any laws to which it is
subject;
4.1.4 neither it nor any of its directors, officers, employees or
agents has employed or incurred any liability to any broker, finder or
agent for any brokerage fees, finder's fees, commissions or other
amounts with respect to this Agreement or any of the transactions
contemplated hereby.
4.2 Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants as follows to Innovatech and acknowledges and
confirms that Innovatech is relying upon such representations and warranties
in connection herewith and would not have entered into this Agreement
without such representations and warranties:
4.2.1 the Corporation:
4.2.1.1 is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
and
4.2.1.2 has not carried on any business since its
incorporation;
4.2.2 the Corporation has the necessary corporate power and
authority to execute this Agreement and to perform its obligations
hereunder. The execution of this Agreement by the Corporation and the
performance by the Corporation of its obligations hereunder have been
duly authorized by all necessary action on its part. The execution of
this Agreement by the Corporation and performance by the Corporation
of its obligations hereunder do not require any actions or consent of,
any registration with, or notification to, any Person, or any action
or consent under any laws to which the Corporation is subject;
4.2.3 the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by the Corporation
of its obligations hereunder and the compliance by it with this
Agreement do not:
4.2.3.1 violate, contravene or breach, or constitute a
default under, the constating documents or by-laws of the
Corporation;
4.2.3.2 violate, contravene or breach, or constitute a
default under any contract, agreement, indenture, instruments,
or commitment to which the Corporation may be a party, or its
properties may be subject, or by which it is bound or affected;
or
4.2.3.3 violate, contravene or breach any applicable laws to
which the Corporation is subject;
4.2.4 the authorized capital of the Corporation consists of an
unlimited number of Class A Shares, an unlimited number of Class B
Shares, an unlimited number of Class C Shares, an unlimited number of
Class D Shares, an unlimited number of Class E Shares and an unlimited
number of Class F Shares. After giving effect to this Agreement, the
Finger Print Rollover Agreement, the Flat Panel Rollover Agreement and
the Widecom Subscription Agreement, the only shares of the Corporation
which are issued and outstanding are the Innovatech Shares, the fifty
(50) Class A shares issued to Finger Print pursuant to the Finger
Print Rollover Agreement, the fifty (50) Class A shares issued to Flat
Panel pursuant to the Flat Panel Rollover Agreement and the four
hundred and fifty (450) Class A shares issued to Widecom pursuant to
the Widecom Subscription Agreement, which shares are fully paid and
non-assessable;
4.2.5 no Person has any agreement, option, right or privilege
(whether pre-emptive or contractual) capable of becoming an agreement
for the purchase from the Corporation of any securities of the
Corporation other than as provided in the Shareholders Agreement;
4.2.6 neither the Corporation nor any of its respective directors,
officers, employees or agents has employed or incurred any liability
to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to this Agreement or any of
the transactions contemplated hereby;
4.2.7 the Corporation is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
4.3 Reliance on Representations and Warranties. Notwithstanding any
investigation conducted prior or subsequent to the date hereof, the parties
shall be entitled to rely upon the representations and warranties set forth
herein and the obligations of the parties with respect thereto shall survive
the execution of this Agreement for a period of three (3) years except for
the representations and warranties set forth in subsections 4.2.4 and 4.2.5
which shall survive indefinitely.
4.4 Representations and Warranties of Widecom. Widecom hereby agrees and
confirms that the representations and warranties made by it pursuant to
subsection 4.1 of the Widecom Subscription Agreement shall apply mutatis
mutandis in favour of Innovatech as if made in this Agreement and hereby
acknowledges and confirms that Innovatech is relying upon such
representations and warranties in connection herewith and would not have
entered into this Agreement without such representations and warranties.
Widecom hereby also agrees and confirms that the representations and
warranties made by it pursuant to Section 9 of the Widecom License Agreement
shall apply mutatis mutandis in favour of Innovatech as if made in this
Agreement and hereby also acknowledges and confirms that Innovatech is
relying upon such representations and warranties in connection herewith and
would not have entered into this Agreement without such representations and
warranties.
4.5 Representations and Warranties of Flat Panel. Flat Panel hereby
agrees and confirms that the representations and warranties made by it
pursuant to subsection 3.1 of the Flat Panel Rollover Agreement shall apply
mutatis mutandis in favour of Innovatech as if made in this Agreement and
hereby acknowledges and confirms that Innovatech is relying upon such
representations and warranties in connection herewith and would not have
entered into this Agreement without such representations and warranties.
4.6 Representations and Warranties of Finger Print. Finger Print hereby
agrees and confirms that the representations and warranties made by it
pursuant to subsection 3.1 of the Finger Print Rollover Agreement shall
apply mutatis mutandis in favour of Innovatech as if made in this Agreement
and hereby acknowledges and confirms that Innovatech is relying upon such
representations and warranties in connection herewith and would not have
entered into this Agreement without such representations and warranties.
SECTION 5. - INDEMNIFICATION
- ------------------------------
5.1 The Corporation hereby covenants to indemnify and save harmless
Innovatech from and against any claims, demands, actions, causes of actions,
judgments, damages, losses (which shall include any diminution in value),
liabilities, costs or expenses (including, without limitation, interest,
penalties and reasonable attorneys' and experts' fees and disbursements)
which may be made against Innovatech or which it may suffer or incur solely
as a result of, arising out of or relating to any incorrectness in, or
breach of, any representation or warranty made by the Corporation in this
Agreement.
5.2 Widecom hereby covenants to indemnify and save harmless Innovatech
from and against any claims, demands, actions, causes of actions, judgments,
damages, losses (which shall include any diminution in value), liabilities,
costs or expenses (including, without limitation, interest, penalties and
reasonable attorneys' and experts' fees and disbursements) which may be made
against Innovatech or which it may suffer or incur solely as a result of,
arising out of or relating to any incorrectness in, or breach of, any
representation or warranty made by Widecom in this Agreement.
5.3 Flat Panel hereby covenants to indemnify and save harmless Innovatech
from and against any claims, demands, actions, causes of actions, judgments,
damages, losses (which shall include any diminution in value), liabilities,
costs or expenses (including, without limitation, interest, penalties and
reasonable attorneys' and experts' fees and disbursements) which may be made
against Innovatech or which it may suffer or incur solely as a result of,
arising out of or relating to any incorrectness in, or breach of, any
representation or warranty made by Flat Panel in this Agreement.
5.4 Finger Print hereby covenants to indemnify and save harmless
Innovatech from and against any claims, demands, actions, causes of actions,
judgments, damages, losses (which shall include any diminution in value),
liabilities, costs or expenses (including, without limitation, interest,
penalties and reasonable attorneys' and experts' fees and disbursements)
which may be made against Innovatech or which it may suffer or incur solely
as a result of, arising out of or relating to any incorrectness in, or
breach of, any representation or warranty made by Finger Print in this
Agreement.
SECTION 6. - GENERAL PROVISIONS
- ---------------------------------
6.1 Further Assurances. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably necessary or desirable to effect complete consummation of
the transactions contemplated by this Agreement.
6.2 Successors in Interest. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns.
6.3 Arbitration. Any dispute or controversy between the Corporation and
Innovatech relating to any matter arising out of or connected with the
rights and obligations of the parties hereto under this Agreement shall be
settled in accordance with the provisions of subsection 6.11 and Section 17
of the Shareholders Agreement.
6.4 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: Andre Duquenne
Telecopier: (514) 864-4220
if to the Corporation: 3294340 CANADA INC.
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: President
Telecopier: (905) 566-0181
with a copy in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
with a copy in all cases to: BOIVIN O'NEIL
2000 Mansfield Street
Suite 1300
Montreal, Quebec
H3A 3A1
Attention: Anne O'Neil
Telecopier: (514) 844-5836
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received
on the date of delivery if delivered by hand, or the next Business Day
immediately following the date of transmission if sent by telecopier. The
original copy of any notice sent by telecopier shall be forwarded to the
other party by registered mail, receipt return requested.
6.5 Time of the essence. Time shall be of the essence in this Agreement.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
6.7 Legal Fees. The Corporation hereby confirms that it shall pay for
all legal fees incurred by Innovatech in connection with the preparation
and/or review of this Agreement, as well as all other agreements executed on
this day among Innovatech, Widecom, Finger Print, Flat Panel and the
Corporation.
6.8 Use of Subscription Price. The Corporation hereby confirms that the
aggregate subscription price paid by Innovatech for the Innovatech Shares
shall be used by it substantially for the purposes and in the manner set out
in the business plan prepared by Widecom dated March 14, 1996, as amended on
July 31, 1996.
6.9 Language. The parties hereto agree that this Agreement as well as
all documentation contemplated hereby or pertaining hereto or to be executed
in connection herewith be drawn up in the English language; les parties
consentent a l'effet que cette convention de meme que tous documents
envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
SOCIETE INNOVATECH DU GRAND MONTREAL
Per:
Bernard Coupal
3294340 CANADA INC.
Per:
Raja S. Tuli
INTERVENTION
------------
AND TO THESE PRESENTS DOES INTERVENE the undersigned, who hereby takes
cognizance of this Agreement and agrees to be bound by the provisions of
subsections 4.4 and 5.2 of this Agreement which are applicable to it.
Montreal, this 2nd day of October, 1996.
THE WIDECOM GROUP INC.
Per:
INTERVENTION
------------
AND TO THESE PRESENTS DOES INTERVENE the undersigned, who hereby takes
cognizance of this Agreement and agrees to be bound by the provisions of
subsections 4.5 and 5.3 of this Agreement which are applicable to it.
Montreal, this 2nd day of October, 1996.
3294421 CANADA INC.
Per:
INTERVENTION
------------
AND TO THESE PRESENTS DOES INTERVENE the undersigned, who hereby takes
cognizance of this Agreement and agrees to be bound by the provisions of
subsections 4.6 and 5.4 of this Agreement which are applicable to it.
Montreal, this 2nd day of October, 1996.
3294412 CANADA INC.
Per:
SOLIDARY UNDERTAKING
--------------------
The undersigned hereby takes cognizance of this Agreement and agrees
to be solidarily bound with 3299421 Canada Inc. in respect of the
representations, warranties and indemnifications made by 3294421 Canada Inc.
pursuant to subsections 4.5 and 5.3 of this Agreement and to be solidarily
bound with 3294412 Canada Inc. in respect of the representations, warranties
and indemnifications made by 3294412 Canada Inc. pursuant to subsections 4.6
and 5.4 of this Agreement.
Montreal, this 2nd day of October, 1996.
RAJA S. TULI
Exhibit No. 10.3
----------------
SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 2ND DAY OF OCTOBER, 1996
BY AND AMONG: THE WIDECOM GROUP INC., a body politic and corporate duly
constituted according to the laws of Ontario, having its
head office and principal place of business in the City of
Mississauga, Province of Ontario,
(hereinafter referred to as "Widecom")
PARTY OF THE FIRST PART
-----------------------
AND: 3294340 CANADA INC., a body politic and corporate, duly
incorporated according to the Canadian Business
Corporations Act, having its head office and principal
place of business in the City of Montreal, Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE SECOND PART
------------------------
SECTION 7 - PREAMBLE
- ----------------------
7.1 WHEREAS Widecom wishes to subscribe for shares from the treasury of
the Corporation at the price set forth hereinafter, the whole on the terms
and conditions hereinafter set out in this Agreement.
7.2 WHEREAS concurrently with the execution of this Agreement, Innovatech
entered into a Subscription Agreement (the "Innovatech Subscription
Agreement") with the Corporation providing for the subscription by
Innovatech for shares from the treasury of the Corporation.
7.3 WHEREAS concurrently with the execution of this Agreement, 3294412
Canada Inc. ("Finger Print") entered into a Rollover Agreement with the
Corporation pursuant to which Finger Print sold its technology to the
Corporation in consideration of the issuance by the Corporation to Finger
Print of 50 Class A Shares in the capital stock of the Corporation (the
"Finger Print Rollover Agreement").
7.4 WHEREAS concurrently with the execution of this Agreement, 3294421
Canada Inc. ("Flat Panel") entered into a Rollover Agreement with the
Corporation pursuant to which Flat Panel sold its technology to the
Corporation in consideration of the issuance by the Corporation to Flat
Panel of 50 Class A Shares in the capital stock of the Corporation (the
"Flat Panel Rollover Agreement").
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 8. - INTERPRETATION
- -----------------------------
8.1 Definitions. In this Agreement:
8.1.1 "Agreement" shall mean this Subscription Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof; "herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this Agreement and not to any particular
Section, subsection or other subdivision; "Section", "subsection" or
other subdivision of this Agreement means and refers to the specified
Section, subsection or other subdivision of this Agreement;
8.1.2 "Business Day" shall mean any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in the
Province of Quebec are not open for business during normal banking
hours;
8.1.3 "Class A Shares" shall have the meaning ascribed thereto in
the Articles of Incorporation of the Corporation;
8.1.4 "Dollar", "Dollars" and the sign "$" shall, unless otherwise
indicated, each mean lawful money of Canada;
8.1.5 "Finger Print Rollover Agreement" shall have the meaning
ascribed thereto in subsection 1.3;
8.1.6 "Flat Panel Rollover Agreement" shall have the meaning
ascribed thereto in subsection 1.4;
8.1.7 "Governmental Body" shall mean (i) any domestic or foreign
national, federal, provincial, state, municipal or other government or
body, (ii) any multinational, multilateral or international body,
(iii) any subdivision, agent, commission, board, instrumentality or
authority of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing governments or bodies, or (v) any domestic, foreign,
international, multilateral or multinational judicial, quasi-judicial,
arbitration or administrative court, tribunal, commission, board or
panel;
8.1.8 "Innovatech" shall mean Societe Innovatech du Grand Montreal;
8.1.9 "Innovatech Subscription Agreement" shall have the meaning
ascribed thereto in subsection 1.2;
8.1.10 "Person" shall mean an individual, corporation, company,
cooperative, partnership, trust, unincorporated association, entity
with judicial personality, Governmental Body; and pronouns when they
refer to a Person have a similarly extended meaning;
8.1.11 "Shareholders Agreement" shall mean the Memorandum of
Agreement of even date among the parties hereto, Finger Print, Flat
Panel and Innovatech setting forth the terms and conditions which will
govern the relationship of the Investor, Finger Print, Flat Panel and
Innovatech as shareholders of the Corporation;
8.1.12 "Widecom Shares" shall have the meaning ascribed thereto in
subsection 3.1.
8.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
8.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
8.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
8.5 Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, among any or all of the parties.
8.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each of the
parties hereto.
8.7 Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute a
waiver of any other provisions (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided in
an instrument duly executed by the parties.
8.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this
Agreement, the day which is the reference day in calculating such period
shall be excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business Day.
8.9 Preamble. The preamble hereof shall form an integral part of this
Agreement.
8.10 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
SECTION 9. - SUBSCRIPTION
- ---------------------------
9.1 Widecom subscription. Widecom hereby subscribes for four hundred and
fifty (450) Class A Shares (collectively the "Widecom Shares") of the
Corporation's share capital at the aggregate subscription price of two
million and five hundred thousand dollars ($ 2,500,000.00). The Corporation
hereby accepts the subscription of Widecom for the Widecom Shares subject to
the terms and conditions contained herein.
9.2 Payment and Issue of Widecom Shares. Widecom hereby agrees to remit
to the Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.1, and the Corporation shall, upon receipt of a cheque
for the aggregate subscription price set forth in subsection 3.1, issue the
Widecom Shares to Widecom and deliver share certificates representing same.
SECTION 10. - REPRESENTATIONS AND WARRANTIES
- ----------------------------------------------
10.1 Representations and Warranties of Widecom. Widecom hereby
represents and warrants to the Corporation, and acknowledges and confirms
that the Corporation is relying upon such representations and warranties in
connection herewith and would not have entered into this Agreement without
such representations and warranties:
10.1.1 Widecom is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
10.1.2 Widecom has the necessary corporate power and authority to
execute this Agreement and to perform its obligations hereunder. The
execution of this Agreement by Widecom and the performance by Widecom
of its obligations hereunder have been duly authorized by all
necessary action on its part. The execution of this Agreement by
Widecom and performance by Widecom of its obligations hereunder do not
require any action or consent of, any registration with, or
notification to any Person, or any action or consent under any laws to
which Widecom is subject;
10.1.3 the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by Widecom of its
obligations hereunder and the compliance by it with this Agreement do
not:
10.1.3.1 violate, contravene or breach, or constitute a
default under, the constating documents or by-laws of Widecom;
or
10.1.3.2 violate, contravene or breach any laws to which
Widecom is subject;
10.1.4 neither Widecom nor any of its shareholders, directors,
officers, employees or agents has employed or incurred any liability
to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to this Agreement or any of
the transactions contemplated hereby.
10.2 Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants as follows to Widecom and acknowledges and
confirms that Widecom is relying upon such representations and warranties in
connection herewith and would not have entered into this Agreement without
such representations and warranties:
10.2.1 the Corporation:
10.2.1.1 is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
and
10.2.1.2 has not carried on any business since its
incorporation;
10.2.2 the Corporation has the necessary corporate power and
authority to execute this Agreement and to perform its obligations
hereunder. The execution of this Agreement by the Corporation and the
performance by the Corporation of its obligations hereunder have been
duly authorized by all necessary action on its part. The execution of
this Agreement by the Corporation and performance by the Corporation
of its obligations hereunder do not require any actions or consent of,
any registration with, or notification to, any Person, or any action
or consent under any laws to which the Corporation is subject;
10.2.3 the execution of this Agreement, the consummation of the
transactions contemplated herein, the performance by the Corporation
of its obligations hereunder and the compliance by it with this
Agreement do not:
10.2.3.1 violate, contravene or breach, or constitute a
default under, the constating documents or by-laws of the
Corporation;
10.2.3.2 violate, contravene or breach, or constitute a
default under any contract, agreement, indenture, instruments,
or commitment to which the Corporation may be a party, or its
properties may be subject, or by which it is bound or affected;
or
10.2.3.3 violate, contravene or breach any applicable laws to
which the Corporation is subject;
10.2.4 the authorized capital of the Corporation consists of an
unlimited number of Class A Shares, an unlimited number of Class B
Shares, an unlimited number of Class C Shares, an unlimited number of
Class D Shares, an unlimited number of Class E Shares and an unlimited
number of Class F Shares. After giving effect to this Agreement, the
Finger Print Rollover Agreement, the Flat Panel Rollover Agreement and
the Innovatech Subscription Agreement, the only shares of the
Corporation which are issued and outstanding are the Widecom Shares,
the fifty (50) Class A shares issued to Finger Print pursuant to the
Finger Print Rollover Agreement, the fifty (50) Class A shares issued
to Flat Panel pursuant to the Flat Panel Rollover Agreement and the
four hundred and fifty (450) Class A shares issued to Innovatech
pursuant to the Innovatech Subscription Agreement, which shares are
fully paid and non-assessable;
10.2.5 no Person has any agreement, option, right or privilege
(whether pre-emptive or contractual) capable of becoming an agreement
for the purchase from the Corporation of any securities of the
Corporation other than as provided in the Shareholders Agreement;
10.2.6 neither the Corporation nor any of its respective directors,
officers, employees or agents has employed or incurred any liability
to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to this Agreement or any of
the transactions contemplated hereby;
10.2.7 the Corporation is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
10.3 Reliance on Representations and Warranties. Notwithstanding any
investigation conducted prior or subsequent to the date hereof, the parties
shall be entitled to rely upon the representations and warranties set forth
herein and the obligations of the parties with respect thereto shall survive
the execution of this Agreement for a period of three (3) years except for
the representations and warranties set forth in subsections 4.2.4 and 4.2.5
which shall survive indefinitely.
SECTION 11. - GENERAL PROVISIONS
- ----------------------------------
11.1 Further Assurances. Each party upon the request of the other, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably necessary or desirable to effect complete consummation of
the transactions contemplated by this Agreement.
11.2 Successors in Interest. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns.
11.3 Arbitration. Any dispute or controversy between the Corporation and
the Investor relating to any matter arising out of or connected with the
rights and obligations of the parties hereto under this Agreement shall be
settled in accordance with the provisions of subsection 6.11 (if applicable)
and Section 17 of the Shareholders Agreement.
11.4 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:
if to Widecom: The Widecom Group Inc.
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: President
Telecopier: (905) 566-0181
if to the Corporation: 3294340 Canada Inc.
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: President
Telecopier: (905) 566-0181
with a copy in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received
on the date of delivery if delivered by hand, or the next Business Day
immediately following the date of transmission if sent by telecopier. The
original copy of any notice sent by telecopier shall be forwarded to the
other party by registered mail, receipt return requested.
11.5 Time of the essence. Time shall be of the essence in this
Agreement.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
11.7 Language. The parties hereto state their express wish that this
Agreement as well as all documentation contemplated hereby or pertaining
hereto or to be executed in connection herewith be drawn up in the English
language; les parties expriment leur desir explicite a l'effet que cette
convention de meme que tous documents envisages par les presentes ou y ayant
trait ou qui seront signes relativement aux presentes soient rediges en
anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
THE WIDECOM GROUP INC.
Per:
Raja S. Tuli
3294340 CANADA INC.
Per:
Raja S. Tuli
Exhibit 10.4
-------------
THIS AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF MONTREAL,
ON THE 2ND DAY OF OCTOBER, 1996
BY AND BETWEEN: THE WIDECOM GROUP INC., a body politic and corporate,
duly incorporated according to the laws of the Province of
Ontario, having its head office and principal place of
business in the City of Mississauga, Ontario
(hereinafter referred to as "Licensor")
PARTY OF THE FIRST PART
-----------------------
AND: 3294340 CANADA INC., a body politic and corporate, duly
incorporated according to the Canadian Business
Corporations Act, having its head office and principal
place of business in the City of Montreal, Province of
Quebec,
(hereinafter referred to as "Licensee")
PARTY OF THE SECOND PART
------------------------
SECTION 12 - PREAMBLE
- -----------------------
12.1 WHEREAS Licensor owns the Intellectual Property (as hereinafter
defined);
12.2 WHEREAS Licensee wishes to obtain from Licensor an exclusive license
to use the Intellectual Property for research and development purposes in
order to develop improvements, modifications, additions or alterations to
the Intellectual Property so as to improve the Plotter, the Scanner and the
Applications Software (as hereinafter defined) and to develop one or more
new marketable products, and Licensor wishes to grant such license to
Licensee subject to the terms and conditions set forth hereinafter;
12.3 WHEREAS Licensor wishes to obtain from Licensee, upon completion of
such research and development, an exclusive perpetual license to i) use the
improvements, modifications, additions or alterations to the Intellectual
Property developed by Licensee for research and development purposes in
order to develop improvements, modifications, additions or alterations to
the Intellectual Property developed by Licensee and the Plotter, the Scanner
and the Applications Software and any other product manufactured using same,
ii) manufacture, distribute, sell and market any improved product or other
product manufactured using such new intellectual property in the Territory
(as hereinafter defined), and iii) grant sub-licenses of those rights; and
12.4 WHEREAS Licensee wishes to grant the license referred to in
subsection 1.3 hereof to Licensor, subject to the terms and conditions set
forth in the license agreement entered into between Licensee and Licensor
simultaneously with the execution of this Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 13 - INTERPRETATION
- -----------------------------
13.1 Definitions. As used in this Agreement, initial capitalized terms
defined in Schedule "2.1" shall have the meaning set out in such Schedule.
13.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
13.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
13.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
13.5 Entire Agreement. This Agreement together with any other
instruments to be delivered pursuant hereto, constitute the entire agreement
among the Parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations, and discussions, whether
oral or written, between the Parties.
13.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each Party
hereto.
13.7 Waiver. Except as otherwise provided in this Agreement, no waiver
of any of the provisions of this Agreement shall be deemed to constitute a
waiver of any other provisions (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided in
an instrument duly executed by the Parties.
13.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this
Agreement, the day which is the reference day in calculating such period
shall be excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business Day.
13.9 Preamble. The preamble hereof shall form an integral part of this
Agreement.
13.10 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
SECTION 14 - GRANT OF RIGHTS
- ------------------------------
14.1 Licensor hereby grants to Licensee, and Licensee hereby accepts, the
exclusive right to use the Intellectual Property for research and
development purposes in order to develop improvements, modifications,
additions or alterations to the Intellectual Property, including, without
limitation, a print head to be comprised in the Plotter which would enhance
the print speed of the Plotter, as well as the development of a full contact
scan chip to be comprised in the Scanner, so as to improve the Plotter and
the Scanner and to develop one or more new marketable products (hereinafter
called the "Rights") during the Term.
14.2 During the Term of this Agreement, Licensor, including any of its
Affiliates, shareholders, directors, employees or consultants, shall not,
directly or indirectly, without Licensee's prior written consent, use the
Intellectual Property for research and development purposes as contemplated
in this Agreement, nor shall it grant all or a portion of the Rights to any
Person.
SECTION 15 - LICENSOR'S OBLIGATIONS
- -------------------------------------
15.1 Following the execution of this Agreement, and at any other time
upon request by Licensee, Licensor shall disclose to Licensee the
Intellectual Property and all other documents, information and data required
by Licensee pursuant to the execution of this Agreement, including, without
limitation, the source-code of the Software and the Applications Software.
SECTION 16 - LICENSEE'S OBLIGATIONS
- -------------------------------------
16.1 Licensee undertakes to use the Intellectual Property for research
and development purposes in order to develop improvements, modifications,
additions or alterations to the Intellectual Property in the manner
described in section 3.1 hereof so as to improve the Plotter, the Scanner
and the Applications Software and to develop one or more new marketable
products.
SECTION 17 - IMPROVEMENTS, MODIFICATIONS AND ADDITIONS
- --------------------------------------------------------
17.1 The Parties hereby agree that any improvements, modifications,
additions and alterations made to the Intellectual Property and any patents,
technology, know-how and trade secrets resulting from such improvements,
modifications, additions and alterations developed by or on behalf of
Licensee, its agents, employees, consultants or representatives at any time
during the Term shall be the exclusive property of Licensee. Licensor shall
cooperate fully with and assist Licensee in obtaining, at Licensor's
expense, patents, copyrights, industrial designs, trademarks and other
intellectual property registration with respect to such improvements,
modifications, additions and alterations. The Parties further agree that, in
consideration for the grant of the Rights, Licensee shall, simultaneously
with the execution of this Agreement, execute and deliver a license
agreement, pursuant to which Licensee shall grant to Licensor an exclusive
perpetual license to i) use the improvements, modifications, additions or
alterations to the Intellectual Property developed by Licensee for research
and development purposes in order to develop improvements, modifications,
additions or alterations to the Intellectual Property developed by Licensee,
the Plotter, the Scanner, the Applications Software and any other product
manufactured using same, ii) manufacture, distribute, sell and market any
improved product and other product manufactured using such new intellectual
property in the Territory, and iii) grant sub-licenses of those rights.
SECTION 18 - CONFIDENTIAL INFORMATION
- ---------------------------------------
18.1 Each Party hereby acknowledges that it may receive Confidential
Information from the other Party (the "Disclosing Party"). Each Party
hereby acknowledges, accepts and agrees that:
18.1.1 the Confidential Information is non public and confidential
and shall at all times remain the property of the Disclosing Party;
18.1.2 the disclosure by the Disclosing Party of the Confidential
Information to the other Party (the "Receiving Party") is for the sole
purpose of enabling it to carry out its obligations under the terms of
this Agreement; and
18.1.3 the Receiving Party shall not assert, directly or
indirectly, any right with respect to the Confidential Information
which may impair or be adverse to the Disclosing Party's ownership
thereof.
18.2 Each Party shall keep the Confidential Information, and the fact
that the Confidential Information has been provided, confidential at all
times (regardless of the extent or duration of the relationship of the
Parties and regardless of whether such Confidential Information was
disclosed before or after the date of this Agreement) and shall not disclose
such Confidential Information, in whole or in part, to any person other than
to its sub-licensees, agents, employees and other authorized representatives
(collectively herein referred to as the "Representatives") who need to know
such information in connection with the performance of its obligations under
the terms of this Agreement, without the prior written consent of the
Disclosing Party. Each Party agrees to use, and shall use its best efforts
to ensure that its Representatives use, the same degree of care as such
Party uses to protect its own Confidential Information. Each Party shall
inform its Representatives of the confidential nature of the Confidential
Information and shall require such Representatives to keep such information
confidential. Each Party shall be fully responsible for any breach of this
Agreement by its Representatives.
18.3 Any Confidential Information disclosed by the Disclosing Party shall
remain the sole and exclusive property of the Disclosing Party.
18.4 Any Confidential Information supplied to the Receiving Party by the
Disclosing Party prior to the execution of this Agreement shall be
considered in the same manner and be subject to the same treatment as the
Confidential Information made available after the execution of this
Agreement.
18.5 In the event of a material breach of the undertakings of either
Party under this Section 7, money damages may be inadequate and the
Disclosing Party shall be entitled to seek injunctive relief and specific
performance. Such remedy shall not be deemed to be the exclusive remedy for
any such breach but shall be in addition to all other remedies available at
law. The Disclosing Party shall be entitled to reasonable legal fees
(including reasonable attorney's fees and expenses) and other costs
reasonably incurred to remedy any and all material breaches by the Receiving
Party of this Agreement.
SECTION 19 - TERM AND TERMINATION
- -----------------------------------
19.1 Term. Subject to the provisions of Section 8.2 hereof, the grant
herein of the Rights shall be for a term commencing on the date of execution
hereof and terminating on the earlier of i) the date of Completion of the
Research and Development, or ii) the date on which no more funds shall be
available to Licensee to pursue the research and development contemplated in
this Agreement, or iii) the expiration of a five (5)-year period (the
"Term").
19.2 Default. Without prejudice to any other remedy available at law,
either Party (the "Notifying Party") shall have the right to terminate this
Agreement immediately upon written notice to the other (the "Defaulting
Party") if:
19.2.1 there is a material breach by the Defaulting Party of any
provision of this Agreement other than the provisions of Section 7,
provided such breach continues unremedied for at least sixty (60) days
after written notice of such is given to the Defaulting Party;
19.2.2 there is a breach by the Defaulting Party of any provision
of Section 7; or
19.2.3 an Event of Default occurs with respect to the Defaulting
Party.
19.3 Upon termination of this Agreement:
19.3.1 Licensee will cease to hold any interest in the Rights
granted to it in this Agreement and the Intellectual Property;
19.3.2 Licensee will immediately deliver to Licensor all
documentation or other information provided to Licensee under this
Agreement, without retaining any copy or record of them.
19.4 Termination of this Agreement for any reason whatsoever will not
release the Parties from any obligation which remains unfulfilled at that
time or release the Parties from those obligations which survive such
termination including, without limiting the foregoing, the obligations set
forth in Sections 7 and 11.
SECTION 20 - REPRESENTATIONS AND WARRANTIES
- ---------------------------------------------
20.1 Licensor hereby represents and warrants:
20.1.1 that it owns the Intellectual Property, and that the
Intellectual Property constitutes all the intellectual property
required to perform the research and development contemplated by this
Agreement;
20.1.2 that it has the right to grant the Rights;
20.1.3 that, as of the date hereof, the Intellectual Property is
free and clear of any hypothecs, liens or encumbrances. However, in
the event that Licensor wishes to hypothecate or encumber any of the
Intellectual Property, Licensor hereby agrees and undertakes to inform
its creditors of the existence of this Agreement;
20.1.4 that the Patents have been duly filed with the appropriate
Authorities and such filing remains in full force and effect;
20.1.5 that the execution, delivery and performance of this
Agreement, the granting of the Rights and the consummation of the
transactions contemplated hereby will not breach, violate or conflict
with any instrument or agreement, written or oral, governing the
Intellectual Property and will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of Licensor'
rights to the Intellectual Property or in any way impair the right of
Licensor to bring any action for the infringement of the Intellectual
Property or any part thereof;
20.1.6 that there are no pending or, to the best of Licensor's
knowledge, threatened proceedings, litigation or other adverse claims
affecting, or with respect to, the Intellectual Property or any part
thereof and no Person is, to the best of Licensor's knowledge,
infringing the Intellectual Property;
20.1.7 that it has all the rights and power to enter into this
Agreement;
20.1.8 that the undersigned officer has full authority to execute
this Agreement.
20.2 Licensee hereby represents and warrants:
20.2.1 that it has all the rights and power to enter into this
Agreement;
20.2.2 that the undersigned officer has full authority to execute
this Agreement;
20.2.3 that this Agreement does not violate the terms of any other
agreement to which Licensee is subject or to which Licensee is bound.
SECTION 21 - VALIDITY AND INFRINGEMENT OF THE INTELLECTUAL PROPERTY
- ---------------------------------------------------------------------
21.1 Licensor will maintain the validity of the Patents, and take all
steps to register the Patents in any jurisdictions as may be required by
Licensee from time to time, by paying all required maintenance fees and
other costs associated with maintaining the validity and registering the
Patents.
21.2 Each Party shall promptly notify the other of any infringement or
threatened infringement by a third party of the Intellectual Property as
well as any action to invalidate or revoke the Intellectual Property which
may come to its attention.
21.3 The Parties shall consult with one another with respect to each
infringement or violation of the Intellectual Property. Whenever the
Parties conclude that proceedings should be taken with respect to any such
infringement or violation, they shall promptly and diligently prosecute same
and each party shall assume one-half (1/2) of the costs and expenses related
thereto and be entitled to one-half (1/2) of all recoveries and awards
therefrom. Whenever a Party advises the other Party that it does not intend
to participate in any such proceedings, the other Party shall be free to
prosecute same and shall pay all costs and expenses related thereto and be
entitled to all recoveries and awards therefrom. Licensor shall, however,
be entitled to join in any such proceedings at any time. The parties shall
at all times fully cooperate in the prosecution of all such proceedings.
21.4 If only one of the Parties decides to institute suit or action, it
is understood that the Party that did not institute suit or action shall
render all reasonable assistance to the Party that did institute suit or
action, including, but not limited to, executing all documents as may be
reasonably requested by the Party that did institute such suit or action,
and providing all necessary documentation evidencing the infringement that
such Party has in its possession or may acquire thereafter.
21.5 In the event that Licensee initiates any and all lawsuits involving
or relating to the Intellectual Property, it shall do so in good faith and
to the best of its ability.
21.6 Licensee shall not contest the ownership or validity of the
Intellectual Property, whether directly or indirectly, at any time during
the Term or at any time thereafter.
SECTION 22 - INDEMNIFICATION
- ------------------------------
22.1 Licensee shall indemnify and save and hold Licensor harmless from
and against any debts, liabilities, claims, actions, causes of actions,
suits, damages, losses, costs and expenses, including injury or death to
persons, damage to property and reasonable attorneys' fees and expenses,
which Licensor is or may become liable for or be compelled to pay as a
result or by reason of any act or omission of Licensee or its directors,
officers, servants, agents or employees in connection with Licensee's
performance under the terms of this Agreement, or arising or resulting in
any way from the use of the Intellectual Property, subject to the provisions
of subsection 11.2 hereof.
22.2 Licensor shall indemnify and save and hold Licensee harmless from
and against any debts, liabilities, claims, actions, causes of action,
suits, damages, losses, costs and expenses, including injury or death to
persons, damage to property and reasonable attorneys' fees and expenses,
which Licensee is or may become liable for or be compelled to pay as a
result or by reason of any act or omission of Licensor or its directors,
officers, servants, agents or employees in connection with Licensor'
performance under the terms of this Agreement, or any defects of the
Intellectual Property, or by reason of any proceeding of a third party
claiming that the use of all or any part of the Intellectual Property by
Licensee constitutes an infringement of its rights.
22.3 Throughout the Term and for a period of two (2) years after its
termination, each Party shall maintain comprehensive general public
liability insurance, including blanket contractual liability and personal
injury liability endorsements, against claims for product liability and such
other claims as are contemplated herein. Such insurances shall be for no
less than one million CDN dollars ($1,000,000 CDN) per occurrence and shall
be written with a reputable insurer. The other Party shall be named as an
additional insured, as its interest may appear, under each such policy of
insurance. Each such policy shall contain an endorsement providing that
coverage thereunder shall not be amended, reduced or cancelled without
thirty (30) days prior written notice having been provided to the other
Party.
SECTION 23 - NOTICES
- ----------------------
23.1 Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other Party at the following addresses:
if to Licensor: THE WIDECOM GROUP INC.
55, City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: The President
Telecopier: (905) 566-0181
if to Licensee: 3294340 CANADA INC.
c/o Raja Tuli
55, City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: The President
Telecopier: (905) 566-0181
with a copy in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
or at such other address as the parties may have previously indicated to the
other Party in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received
on the date of delivery if delivered by hand, or the next Business Day
immediately following the date of transmission if sent by telecopier. The
original copy of any notice sent by telecopier shall be forwarded to the
other Party by registered mail, receipt return requested.
SECTION 24 - MISCELLANEOUS PROVISIONS
- ---------------------------------------
24.1 Press release. Any press release or any public announcement,
statement or publicity with respect to the transaction contemplated in this
Agreement shall be made only with the prior consent of both Parties.
24.2 Further documents. Each Party upon the request of the other, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably necessary or desirable to effect complete consummation of
the transactions contemplated by this Agreement.
24.3 Successors and assigns. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns. Licensee shall not assign any
of its rights, title and interest in and to this Agreement without Licensor'
prior written consent, which consent shall not be unreasonably withheld or
delayed.
24.4 Time of the essence. Time shall be of the essence in this
Agreement.
24.5 Arbitration. Any dispute or controversy between the Parties
relating to any matter arising out of or connected with the rights and
obligations of the Parties hereto under this Agreement shall be settled in
accordance with the provisions of subsection 6.11 and Section 18 of the
Shareholders Agreement.
24.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
24.7 Language. The parties hereto confirm their consent that this
Agreement as well as all documentation contemplated hereby or pertaining
hereto or to be executed in connection herewith be drawn up in the English
language; les parties consentent a ce que cette convention de meme que tous
documents envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
IN WITNESS WHEREOF, the Parties have signed at the place and on the date
first hereinabove mentioned.
3294340 CANADA INC. THE WIDECOM GROUP INC.
Per: Per:
Raja S. Tuli Raja S. Tuli
Licence Agreement
SCHEDULE "2.1"
DEFINITIONS
"Affiliate" of a Person means an entity which controls, is controlled by, or
is under common control with such Person; however, the Parties shall not be
deemed to be "Affiliates" of one another for the purposes of this Agreement;
"Applications Software" means the two applications software packages owned
by Licensor, namely i) the software known as the "WIDEview" software, which
is designed to enhance the user's documents imaging capabilities and which
is generally sold together with the Scanner, and ii) the software known as
the "SLC-OVLY" software, which enables users to scan documents into AutoCAD
software and edit documents by converting the scanned image from raster
format to vector format;
"Authorities" means, in any jurisdiction, all applicable governmental or
regulatory bodies, agencies, officials, and other authorities in such
jurisdiction;
"Business Day" means any day, other than a Saturday or Sunday or a day on
which the principal commercial banks in the Province of Quebec are not open
for business during normal banking hours;
"Completion of the Research and Development" means the date on which
Licensor shall have confirmed to Licensee that the research and development
contemplated by this Agreement has been completed to its satisfaction;
"Confidential Information" means all concepts, methods, procedures,
inventions, know-how, secrets, data and other information, whether in
written, printed, electronic, unrecorded or any other form whatsoever, and
whether known now or developed throughout the duration of this Agreement and
which relates in any way to the Intellectual Property, including processes,
research and development, manufacture and use thereof, and all
communications and documentation relevant to the Intellectual Property, or
which relates in any way to the business of the Disclosing Party, except for
information that the Receiving Party can reasonably demonstrate:
a) is in the public domain (provided that information in the
public domain has not or does not come into the public domain as the
result of disclosure by a receiving Party);
b) is known to the Receiving Party prior to disclosure by the
other Party;
c) becomes available to a Party on a non-confidential basis
from a source other than the Disclosing Party; or
d) is independently developed by the Receiving Party through
Persons who have not had access to, or knowledge of the Confidential
Information of the Disclosing Party;
"Event of Default" means, with respect to any Defaulting Party, the
occurrence of any of the following events:
a) an order is made or a resolution or other action is taken
for the dissolution, liquidation, winding up or other termination of
the corporate existence of the Defaulting Party; or
b) the Defaulting Party commits an act of bankruptcy, becomes
insolvent; makes an assignment for the benefit of its creditors or
proposes to its creditors a reorganization, arrangement, composition
or readjustment of its debts or obligations or otherwise proposes to
take advantage of or shelter under any legislation for the protection
of debtors; or
c) if any proceeding is taken with respect to a compromise or
arrangement, or to have the Defaulting Party declared bankrupt or to
have a receiver appointed in respect of the Defaulting Party or a
substantial portion of its property such proceeding is instituted by
the Defaulting Party or is not opposed by the Defaulting Party or such
proceeding is instituted by a Person other than the Defaulting Party
and the Defaulting Party does not proceed diligently and in good faith
to have such proceeding withdrawn forthwith; or
d) the Defaulting Party is placed under judicial management,
provisionally or finally, or a receiver or a receiver and manager of
any of the assets of the Defaulting Party is appointed and such
receiver, receiver and manager is not removed within sixty (60) days
of such appointment unless the Defaulting Party diligently contest, in
good faith, the validity of the appointment of such receiver or
receiver and manager; or
e) the Defaulting Party ceases or takes steps to cease to carry
on its business;
"Intellectual Property" means the Patents, the Know-How and the Software;
"Know-How" means all present technical knowledge, unpatented inventions,
manufacturing and trade secrets, secret processes, manufacturing procedures,
methods, as well as current and accumulated experience acquired by Licensor
as a result of research, practical experience or otherwise, with respect to
the Plotter, the Scanner and the Applications Software;
"Parties" means Licensee and Licensor and their respective successors and
permitted assigns and "Party" means any one of them;
"Patents" means the issued patents and patent applications or parts thereof
which describe or claim subject matter conceived or reduced to practice by
Licensor bearing numbers US 08403177, US 08510510, US 08546788 and US
08546785 attached hereto, and any reissues, extensions, substitutions,
confirmations, registrations, revalidations, additions, or continuations,
continuations-in-part, and divisions of the foregoing which are granted
hereafter;
"Person" means an individual, partnership, joint venture, trustee, trust,
corporation, division of a corporation, unincorporated organization or other
entity or a government, state or agency or political subdivision thereof,
and pronouns have a similarly extended meaning;
"Plotter" means a 36-inch-wide plain paper printer developed by Licensor and
known as the "WIDEfax Plotter";
"Scanner" means a color wide format scanner capable of scanning a document
up to 36" wide and known as the "WIDEfax Scan";
"Shareholders Agreement" means the Memorandum of Agreement of even date
among the Parties, 3294412 Canada Inc., 3294421 Canada Inc. and Societe
Innovatech du Grand Montreal, setting forth the terms and conditions which
will govern the relationship of Licensor, 3294412 Canada Inc., 3294421
Canada Inc. and Societe Innovatech du Grand Montreal as shareholders of
Licensee;
"Software" means any software, other than the Applications Software,
required to perform the research and development contemplated in this
Agreement;
"Territory" means the world, except for the Province of Quebec, in Canada.
Exhibit 10.5
------------
THIS AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF MONTREAL,
ON THE 2ND DAY OF OCTOBER, 1996
BY AND BETWEEN: 3294340 CANADA INC., a body politic and corporate, duly
incorporated according to the Canadian Business
Corporations Act, having its head office and principal
place of business in the City of Montreal, Province of
Quebec,
(hereinafter referred to as "Licensor")
PARTY OF THE FIRST PART
-----------------------
AND: THE WIDECOM GROUP INC., a body politic and corporate, duly
incorporated according to the laws of the Province of
Ontario, having its head office and principal place of
business at 55, City Center Drive, in the City of
Mississauga, Province of Ontario,
(hereinafter referred to as "Licensee")
PARTY OF THE SECOND PART
------------------------
SECTION 25 - PREAMBLE
- -----------------------
25.1 WHEREAS pursuant to a license agreement entered into between the
parties simultaneously with the execution hereof, Licensor has been granted
by Licensee an exclusive license to use the Intellectual Property (as
hereinafter defined) for research and development purposes in order to
develop improvements, modifications, additions or alterations to the
Intellectual Property so as to improve the Plotter, the Scanner and the
Applications Software (as hereinafter defined) and to develop one or more
new marketable products (the "License Agreement");
25.2 WHEREAS pursuant to the License Agreement, Licensor is the exclusive
owner of any patents, technology, know-how and trade secrets resulting from
any improvements, modifications, additions and alterations made to the
Intellectual Property and developed by or on behalf of Licensor;
25.3 WHEREAS Licensee wishes to obtain an exclusive perpetual license
from Licensor, commencing on the first day of the Commercialisation Period
(as hereinafter defined), to i) use the Intellectual Property of Licensor
(as hereinafter defined) for research and development purposes in order to
develop improvements, modifications, additions or alterations to the
Intellectual Property of Licensor and the Products (as hereinafter defined),
ii) manufacture, distribute, sell and market the Products in the Territory,
and iii) grant any sub-licenses of those rights to third parties; and
25.4 WHEREAS Licensor wishes to grant such license to Licensee subject to
the terms and conditions set forth hereinafter.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 26 - INTERPRETATION
- -----------------------------
26.1 Definitions. As used in this Agreement, initial capitalized terms
defined in Schedule "2.1" shall have the meaning set out in such Schedule.
26.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
26.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
26.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
26.5 Entire Agreement. This Agreement together with any other
instruments to be delivered pursuant hereto, constitute the entire agreement
among the Parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations, and discussions, whether
oral or written, between the Parties.
26.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each Party
hereto.
26.7 Waiver. Except as otherwise provided in this Agreement, no waiver
of any of the provisions of this Agreement shall be deemed to constitute a
waiver of any other provisions (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided in
an instrument duly executed by the Parties.
26.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this
Agreement, the day which is the reference day in calculating such period
shall be excluded. If the day on which such delay expires is not a Business
Day, then the delay shall be extended to the next succeeding Business Day.
26.9 Preamble. The preamble hereof shall form an integral part of this
Agreement.
26.10 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein.
26.11 Payments. Except as otherwise expressly provided in this
Agreement, all payments under this Agreement shall be made in Canadian
dollars by means of electronic transfer.
SECTION 27 - GRANT OF RIGHTS BY LICENSOR
- ------------------------------------------
27.1 Licensor hereby grants to Licensee, and Licensee hereby accepts,
commencing on the first day of the Commercialisation Period, the exclusive
perpetual license to i) use the Intellectual Property of Licensor for
research and development purposes in order to develop improvements,
modifications, additions or alterations to the Intellectual Property of
Licensor and the Products and ii) manufacture, distribute, sell and market
the Products in the Territory (hereinafter called the "Rights") during the
term of this Agreement.
27.2 Licensee may sub-license any of the Rights granted to Licensee under
this Agreement. Any sub-license agreement entered into by Licensee shall
contain terms and conditions substantially similar to the terms and
conditions of this Agreement. The Parties agree that as Licensor is the
owner of the Intellectual Property of Licensor, it is a third party
beneficiary of the sub-license agreements; therefore, Licensor shall be
entitled to enforce the terms and conditions of those agreements against
sub-licensees, and to take any legal proceedings that may be necessary to
protect its interests directly against any sub-licensee of Licensee if
Licensee fails to properly protect the interests of Licensor under the terms
of the relevant sub-license agreement. The parties to any such sub-license
agreements shall acknowledge and agree that Licensor is a third party
beneficiary of same and is entitled to enforce their terms and conditions
against the sub-licensee thereunder. All sub-license agreements shall
terminate upon termination of this Agreement.
27.3 Licensor, including any of its Affiliates, shareholders, directors,
employees or consultants, shall not, directly or indirectly, at any time
during the R&D Period, without Licensee's prior written consent, grant to
any Person any right to use all or a portion of the Rights in the Territory
so that it would or could create rights which may be in contravention with
the license granted to Licensee hereunder. Commencing on the first day of
the Commercialisation Period, Licensor, including any of its Affiliates,
shareholders, directors, employees or consultants, shall not, directly or
indirectly, at any time, without Licensee's prior written consent, use any
of the Rights, or grant all or a portion of the Rights to any Person in the
Territory.
SECTION 28 - GRANT OF RIGHTS BY LICENSEE
- ------------------------------------------
28.1 Licensee hereby grants to Licensor, and Licensor hereby accepts,
commencing on the first day of the Commercialisation Period, the right to
use the Intellectual Property in association with the Intellectual Property
of Licensor solely to manufacture, distribute, sell and market the Products
in the Province of Quebec, in Canada, during the term of this Agreement
("Licensor's Rights").
SECTION 29 - LICENSOR'S OBLIGATIONS
- -------------------------------------
29.1 Following the execution of this Agreement, and at any other time
upon request by Licensee, Licensor shall disclose to Licensee the
Intellectual Property of Licensor and all other documents, information and
data required by Licensee pursuant to the execution of this Agreement,
including, without limitation, the source-code of the Software of Licensor
and the Applications Software of Licensor.
SECTION 30 - LICENSEE'S OBLIGATIONS
- -------------------------------------
30.1 Commencing on the first day of the Commercialisation Period,
Licensee undertakes to do one or both of the following: i) use the
Intellectual Property of Licensor for research and development purposes in
order to develop improvements, modifications, additions or alterations to
the Intellectual Property of Licensor and the Products and ii) manufacture,
distribute, sell and market the Products in the Territory. Licensee shall
use its commercially reasonable efforts to promote and stimulate interest
in, and market and sell the Products in the Territory.
30.2 In consideration for the grant of the Rights, Licensee shall pay to
Licensor a continuing royalty-fee equal to the aggregate of (the "Royalty"):
30.2.1 0.5% of Net Revenue;
30.2.2 0.5% of Licensing Revenue; and
30.2.3 0.5 % of the Sales Price.
The Royalty shall be payable no later than the 15th day of the month
following the end of each calendar quarter during the term of this
Agreement.
30.3 Licensee shall keep accurate and complete books and records relating
to its operation in order that the Royalty payable hereunder may be
accurately determined and the statements furnished by Licensee hereunder
verified. Such books and records shall be made available to Licensor
throughout the term of this Agreement and for a period of two (2) years
thereafter for inspection and/or audit by any duly authorized
representatives of Licensor. Licensee shall cooperate fully with the
representatives of Licensor during such inspection or audit. Whenever any
such inspection or audit discloses an understatement of Net Revenue,
Licensing Revenue or Sales Price for any period, Licensee shall pay to
Licensor, within fifteen (15) days of the receipt of a statement in respect
of such inspection or audit, all amounts due and unpaid hereunder by reason
of such understatement, together with interest thereon at the rate set forth
in subsection 13.2 hereof. In addition, whenever any such inspection and/or
audit discloses an understatement, in excess of two percent (2%), of Net
Revenue, Licensing Revenue or Sales Price for any period, all reasonable
expenses in connection with such inspection and/or audit shall be paid by
Licensee to Licensor on demand. Within ninety (90) days of the end of each
calendar year, Licensee shall submit to Licensor a detailed statement
prepared by an independent chartered accountant attesting to the Net
Revenue, Licensing Revenue and Sales Price for such calendar year.
SECTION 31 - IMPROVEMENTS, MODIFICATIONS AND ADDITIONS
- --------------------------------------------------------
31.1 The Parties hereby agree that any improvements, modifications,
additions and alterations made to the Intellectual Property of Licensor or
the Products and any patents, technology, know-how and trade secrets
resulting from such improvements, modifications, additions and alterations
developed by or on behalf of Licensee, its agents, employees, consultants or
representatives at any time during the term of this Agreement shall be the
exclusive property of Licensee. Licensor shall cooperate fully with and
assist Licensee in obtaining, at Licensee' expense, patents, copyrights,
industrial designs, trademarks and other intellectual property registration
with respect to such improvements, modifications, additions and alterations.
SECTION 32 - CONFIDENTIAL INFORMATION
- ---------------------------------------
32.1 Each Party hereby acknowledges that it may receive Confidential
Information from the other Party (the "Disclosing Party"). Each Party
hereby acknowledges, accepts and agrees that:
32.1.1 the Confidential Information is non public and confidential
and shall at all times remain the property of the Disclosing Party;
32.1.2 the disclosure by the Disclosing Party of the Confidential
Information to the other Party (the "Receiving Party") is for the sole
purpose of enabling it to carry out its obligations under the terms of
this Agreement; and
32.1.3 the Receiving Party shall not assert, directly or
indirectly, any right with respect to the Confidential Information
which may impair or be adverse to the Disclosing Party's ownership
thereof.
32.2 Each Party shall keep the Confidential Information, and the fact
that the Confidential Information has been provided, confidential at all
times (regardless of the extent or duration of the relationship of the
Parties and regardless of whether such Confidential Information was
disclosed before or after the date of this Agreement) and shall not disclose
such Confidential Information, in whole or in part, to any person other than
to its sub-licensees, agents, employees and other authorized representatives
(collectively herein referred to as the "Representatives") who need to know
such information in connection with the performance of its obligations under
the terms of this Agreement or under the terms of any sub-license granted
pursuant to the provisions of subsection 3.2, without the prior written
consent of the Disclosing Party. Each Party agrees to use, and shall use
its best efforts to ensure that its Representatives use, the same degree of
care as such Party uses to protect its own Confidential Information. Each
Party shall inform its Representatives of the confidential nature of the
Confidential Information and shall require such Representatives to keep such
information confidential. Each Party shall inform its Representatives of the
confidential nature of the Confidential Information and shall require such
Representatives to keep such information confidential. Each Party shall be
fully responsible for any breach of this Agreement by its Representatives.
32.3 Any Confidential Information disclosed by the Disclosing Party shall
remain the sole and exclusive property of the Disclosing Party.
32.4 Any Confidential Information supplied to the Receiving Party by the
Disclosing Party prior to the execution of this Agreement shall be
considered in the same manner and be subject to the same treatment as the
Confidential Information made available after the execution of this
Agreement.
32.5 In the event of a material breach of the undertakings of either
party under this Section 7, money damages may be inadequate and the
Disclosing Party shall be entitled to seek injunctive relief and specific
performance. Such remedy shall not be deemed to be the exclusive remedy for
any such breach but shall be in addition to all other remedies available at
law. The Disclosing Party shall be entitled to reasonable legal fees
(including reasonable attorney's fees and expenses) and other costs
reasonably incurred to remedy any and all material breaches by the Receiving
Party of this Agreement.
SECTION 33 - TERM AND TERMINATION
- -----------------------------------
33.1 Term. Subject to the provisions of Section 8.2 hereof, the grant
herein of the Rights and Licensor's Rights is in perpetuity commencing on
the first day of the Commercialisation Period.
33.2 Default. Without prejudice to any other remedy available at law,
either Party (the "Notifying Party") shall have the right to terminate this
Agreement immediately upon written notice to the other Party (the
"Defaulting Party") if:
33.2.1 there is a material breach by the Defaulting Party of any
provision of this Agreement other than the provisions of Section 7,
provided such breach continues unremedied for at least sixty (60) days
after written notice of such is given to the Defaulting Party;
33.2.2 there is a breach by the Defaulting Party of any provision
of Section 7; or
33.2.3 an Event of Default occurs with respect to the Defaulting
Party.
33.3 Without prejudice to any other remedy available at law, if Licensor
is the Defaulting Party and has not remedied the material breach within the
sixty (60) day delay following written notice, if any, pursuant to
subsection 8.2.1, Licensee's obligation to pay the Royalty shall be
suspended from the date of the material breach until such material breach is
remedied.
33.4 Upon termination of this Agreement:
33.4.1 Licensee will cease to hold any interest in the Rights
granted to it in this Agreement and the Intellectual Property of
Licensor;
33.4.2 Licensor will cease to hold any interest in the Licensor's
Rights granted to it in this Agreement and the Intellectual Property;
33.4.3 all amounts owing to Licensor will become due and payable
without notice; and
33.4.4 Licensee will immediately deliver to Licensor all
documentation or other information provided to Licensee under this
Agreement, without retaining any copy or record of them.
33.5 Termination of this Agreement for any reason whatsoever will not
release the Parties from any obligation which remains unfulfilled at that
time or release the Parties from those obligations which survive such
termination including, without limiting the forgoing, the obligations set
forth in Sections 7 and 11.
SECTION 34 - REPRESENTATIONS AND WARRANTIES
- ---------------------------------------------
34.1 Licensor hereby represents and warrants that the following
representations and warranties are true and accurate as of the date of
execution of this Agreement and shall, as of the first day of the
Commercialisation Period, confirm that such representations and warranties
are true and accurate as of the first day of the Commercialisation Period:
34.1.1 that it has all the rights and power to enter into this
Agreement;
34.1.2 that the undersigned officer has full authority to execute
this Agreement.
34.2 Licensor shall, as of the first day of the Commercialisation Period,
represent and warrant to Licensee and confirm that such representations and
warranties are true and accurate as of the first day of the
Commercialisation Period:
34.2.1 that it owns the Intellectual Property of Licensor, and that
the Intellectual Property of Licensor constitutes all the intellectual
property resulting from the research and development performed under
the License Agreement;
34.2.2 that it has the right to grant the Rights;
34.2.3 that the Intellectual Property of Licensor is free and clear
of any hypothecs, liens or encumbrances. However, in the event that
Licensor wishes to hypothecate or encumber any of the Intellectual
Property of Licensor, Licensor hereby agrees and undertakes to inform
its creditors of the existence of this Agreement;
34.2.4 that the Patents of Licensor, if any, are duly registered
with, filed in or issued by, as the case may be, the appropriate
Authorities and that such registrations, filing and issuances remain
in full force and effect;
34.2.5 that the execution, delivery and performance of this
Agreement, the granting of the Rights and the consummation of the
transactions contemplated hereby will not breach, violate or conflict
with any instrument or agreement, written or oral, governing the
Intellectual Property of Licensor and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of
Licensor' rights to the Intellectual Property of Licensor or in any
way impair the right of Licensor to bring any action for the
infringement of the Intellectual Property of Licensor or any part
thereof;
34.2.6 that there are no pending or, to the best of Licensor's
knowledge, threatened proceedings, litigation or other adverse claims
affecting, or with respect to, the Intellectual Property of Licensor
or any part thereof and no Person, to the best of Licensor's
knowledge, is infringing the Intellectual Property of Licensor.
34.3 Licensee hereby represents and warrants:
34.3.1 that it has all the rights and power to enter into this
Agreement;
34.3.2 that the undersigned officer has full authority to execute
this Agreement;
34.3.3 that this Agreement does not violate the terms of any other
agreement to which Licensee is subject or to which Licensee is bound.
SECTION 35 - VALIDITY AND INFRINGEMENT OF THE INTELLECTUAL PROPERTY OF
- ------------------------------------------------------------------------
LICENSOR
--------
35.1 Licensor will, at Licensee's sole cost and expense, maintain the
validity of the Patents of Licensor and take all steps to register the
Patents of Licensor in any jurisdictions as may be required by Licensee from
time to time.
35.2 Each Party shall promptly notify the other of any infringement or
threatened infringement by a third party of the Intellectual Property of
Licensor as well as any action to invalidate or revoke the Intellectual
Property of Licensor which may come to its attention.
35.3 The Parties shall consult with one another with respect to each
infringement or violation of the Intellectual Property of Licensor.
Whenever the Parties conclude that proceedings should be taken with respect
to any such infringement or violation, they shall promptly and diligently
prosecute same and each party shall assume one-half (1/2) of the costs and
expenses related thereto and be entitled to one-half (1/2) of all recoveries
and awards therefrom. Whenever a Party advises the other Party that it does
not intend to participate in any such proceedings, the other Party shall be
free to prosecute same and shall pay all costs and expenses related thereto
and be entitled to all recoveries and awards therefrom. Licensor shall,
however, be entitled to join in any such proceedings at any time. The
parties shall at all times fully cooperate in the prosecution of all such
proceedings.
35.4 If only one of the Parties decides to institute suit or action, it
is understood that the Party that did not institute suit or action shall
render all reasonable assistance to the Party that did institute suit or
action, including, but not limited to, executing all documents as may be
reasonably requested by the Party that did institute such suit or action,
and providing all necessary documentation evidencing the infringement that
such Party has in its possession or may acquire thereafter.
35.5 In the event that Licensee initiates any and all lawsuits involving
or relating to the Intellectual Property of Licensor, it shall do so in good
faith and to the best of its ability.
35.6 Licensee shall not contest the ownership or validity of the
Intellectual Property of Licensor, whether directly or indirectly, at any
time during the term of this Agreement or at any time thereafter.
SECTION 36 - INDEMNIFICATION
- ------------------------------
36.1 Licensee shall indemnify and save and hold Licensor harmless from
and against any debts, liabilities, claims, actions, causes of actions,
suits, damages, losses, costs and expenses, including injury or death to
persons, damage to property and reasonable attorneys' fees and expenses,
which Licensor is or may become liable for or be compelled to pay as a
result or by reason of any act or omission of Licensee or its directors,
officers, servants, agents or employees in connection with Licensee'
performance under the terms of this Agreement, or arising or resulting in
any way from the use of the Products manufactured or sold by or on behalf of
Licensee, or arising or resulting from the use of the Intellectual Property
of Licensor, subject to the provisions of subsection 11.2 hereof.
36.2 Licensor shall indemnify and save and hold Licensee harmless from
and against any debts, liabilities, claims, actions, causes of action,
suits, damages, losses, costs and expenses, including injury or death to
persons, damage to property and reasonable attorneys' fees and expenses,
which Licensee is or may become liable for or be compelled to pay as a
result or by reason of any act or omission of Licensor or its directors,
officers, servants, agents or employees in connection with Licensor's
performance under the terms of this Agreement, or any defects of the
Intellectual Property of Licensor, or by reason of any proceeding of a third
party claiming that the use of all or any part of the Intellectual Property
of Licensor by Licensee constitutes an infringement of its rights.
36.3 Commencing on the first day of the Commercialisation Period and for
a period of two (2) years after the termination of this Agreement, each
Party shall maintain comprehensive general public liability insurance,
including blanket contractual liability and personal injury liability
endorsements, against claims for product liability and such other claims as
are contemplated herein. Such insurances shall be for no less than five
million canadian dollars ($5,000,000 CDN) per occurrence and shall be
written with a reputable insurer. The other Party shall be named as an
additional insured, as its interest may appear, under each such policy of
insurance. Each such policy shall contain an endorsement providing that
coverage thereunder shall not be amended, reduced or cancelled without
thirty (30) days prior written notice having been provided to the other
Party.
SECTION 37 - NOTICES
- ----------------------
37.1 Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other Party at the following addresses:
if to Licensor: 3294340 CANADA INC.
c/o Raja Tuli
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Telecopier: (905) 566-0181
if to Licensee: THE WIDECOM GROUP INC.
55, City Center Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention: The President
Telecopier: (905) 566-0181
with a copy in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Perry Kliot
Telecopier: (514) 925-9001
or at such other address as the parties may have previously indicated to the
other Party in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received
on the date of delivery if delivered by hand, or the next Business Day
immediately following the date of transmission if sent by telecopier. The
original copy of any notice sent by telecopier shall be forwarded to the
other Party by registered mail, receipt return requested.
SECTION 38 - MISCELLANEOUS PROVISIONS
- ---------------------------------------
38.1 Press release. Any press release or any public announcement,
statement or publicity with respect to the transaction contemplated in this
Agreement shall be made only with the prior consent of both Parties.
38.2 Interest rate. Subject to the provisions of subsection 5.2 hereof,
all amounts owing by Licensee hereunder shall be paid without any deduction,
set-off or compensation whatsoever. All amounts which remain unpaid by
Licensee to Licensor hereunder for more than three (3) days following their
respective due date shall bear interest at an annual rate of interest equal
to three percent (3%) more than the rate of interest advertised from time to
time by The Royal Bank of Canada at its principal place of business in
Montreal, Province of Quebec, Canada as the annual rate of interest charged
to its most credit-worthy customers for commercial loans in canadian
currency.
38.3 Further documents. Each Party upon the request of the other, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably necessary or desirable to effect complete consummation of
the transactions contemplated by this Agreement.
38.4 Successors and assigns. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns. Licensee shall not assign any
of its rights, title and interest in and to this Agreement without
Licensor's prior written consent, which consent shall not be unreasonably
withheld or delayed.
38.5 Time of the essence. Time shall be of the essence in this
Agreement.
38.6 Arbitration. Any dispute or controversy between the Parties
relating to any matter arising out of or connected with the rights and
obligations of the Parties hereto under this Agreement shall be settled in
accordance with the provisions of subsection 6.11 and Section 18 of the
Shareholders Agreement.
38.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
38.8 Language. The parties hereto confirm their consent that this
Agreement as well as all documentation contemplated hereby or pertaining
hereto or to be executed in connection herewith be drawn up in the English
language; les parties consentent a ce que cette convention de meme que tous
documents envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
IN WITNESS WHEREOF, the Parties have signed at the place and on the date
first hereinabove mentioned.
3294340 CANADA INC. THE WIDECOM GROUP INC.
Per: Per:
Raja S. Tuli Raja S. Tuli
Licence Agreement
SCHEDULE "2.1"
DEFINITIONS
"Affiliate" of a Person means an entity which controls, is controlled by, or
is under common control with such Person; however, the Parties shall not be
deemed to be "Affiliates" of one another for the purposes of this Agreement;
"Applications Software" has the meaning ascribed thereto in the License
Agreement;
"Applications Software of Licensor" means all improvements, modifications,
additions and alterations made to the Applications Software and developed by
or on behalf of Licensor pursuant to the License Agreement, as well as any
software developed as part of the research and development performed by
Licensor or on behalf of Licensor, designed to be used with any marketable
product manufactured using the Intellectual Property, the Intellectual
Property of Licensor, any Software and any Software of Licensor and which
may be licensed independently from any such marketable product;
"Authorities" means, in any jurisdiction, all applicable governmental or
regulatory bodies, agencies, officials, and other authorities in such
jurisdiction;
"Business Day" means any day, other than a Saturday or Sunday or a day on
which the principal commercial banks in the Province of Quebec are not open
for business during normal banking hours;
"Commercialisation Period" means the period commencing on the first day
following the expiration of the R & D Period;
"Confidential Information" means all concepts, methods, procedures,
inventions, know-how, secrets, data and other information, whether in
written, printed, electronic, unrecorded or any other form whatsoever, and
whether known now or developed throughout the duration of this Agreement and
which relates in any way to the Intellectual Property of Licensor or the
Products, including the chemistry, processes, research and development,
manufacture and use thereof, and all communications and documentation
relevant to the Intellectual Property of Licensor or the Products, or which
relates in any way to the business of the Disclosing Party, except for
information that the Receiving Party can reasonably demonstrate:
a) is in the public domain (provided that information in the
public domain has not or does not come into the public domain as the
result of disclosure by a receiving Party);
b) is known to the Receiving Party prior to disclosure by the
other Party; or
c) becomes available to a Party on a non-confidential basis
from a source other than the Disclosing Party; or
d) is independently developed by the Receiving Party through
Persons who have not had access to, or knowledge of the Confidential
Information of the Disclosing Party;
"Event of Default" means, with respect to any Defaulting Party, the
occurrence of any of the following events:
a) an order is made or a resolution or other action is taken
for the dissolution, liquidation, winding up or other termination of
the corporate existence of the Defaulting Party; or
b) the Defaulting Party commits an act of bankruptcy, becomes
insolvent; makes an assignment for the benefit of its creditors or
proposes to its creditors a reorganization, arrangement, composition
or readjustment of its debts or obligations or otherwise proposes to
take advantage of or shelter under any legislation for the protection
of debtors; or
c) if any proceeding is taken with respect to a compromise or
arrangement, or to have the Defaulting Party declared bankrupt or to
have a receiver appointed in respect of the Defaulting Party or a
substantial portion of its property such proceeding is instituted by
the Defaulting Party or is not opposed by the Defaulting Party or such
proceeding is instituted by a Person other than the Defaulting Party
and the Defaulting Party does not proceed diligently and in good faith
to have such proceeding withdrawn forthwith; or
d) the Defaulting Party is placed under judicial management,
provisionally or finally, or a receiver or a receiver and manager of
any of the assets of the Defaulting Party is appointed and such
receiver, receiver and manager is not removed within sixty (60) days
of such appointment unless the Defaulting Party diligently contest, in
good faith, the validity of the appointment of such receiver or
receiver and manager; or
e) the Defaulting Party ceases or takes steps to cease to carry
on its business;
"Know-How" has the meaning ascribed thereto in the License Agreement;
"Know-How of Licensor" means all present technical knowledge, unpatented
inventions, manufacturing and trade secrets, secret processes, manufacturing
procedures, methods, as well as current and accumulated experience acquired
by Licensor related to improvements, modifications, additions and
alterations to the Know-How and developed by or on behalf of Licensor
pursuant to the License Agreement;
"Intellectual Property" has the meaning ascribed thereto in the License
Agreement;
"Intellectual Property of Licensor" means the Patents of Licensor, the Know-
How of Licensor and the Software of Licensor;
"Licensing Revenue" means the total revenue received by Licensee from each
if its sub-licensees under the sub-license agreements entered into pursuant
to subsection 3.2 hereof, less any sums collected by Licensee for any duly
constituted governmental authority and paid out to such authority on account
of any tax imposed by such authority upon such amounts including, without
limitation, any value added tax;
"Net Revenue" means the aggregate of all sales prices charged from time to
time by Licensee in connection with the sale of Products, less any sums
collected by Licensee for any duly constituted governmental authority and
paid out to such authority on account of any tax imposed by such authority
upon the sale of Products including, without limitation, any value added
tax;
"Parties" means Licensor and Licensee and their respective successors and
permitted assigns and "Party" means any one of them;
"Patents" has the meaning ascribed thereto in the License Agreement;
"Patents of Licensor" means any issued patents and patent applications or
parts thereof which describe or claim subject matter conceived or reduced to
practice by Licensor resulting from improvements, modifications, additions
and alterations to the Patents and developed by or on behalf of Licensor
pursuant to the License Agreement and any reissues, extensions,
substitutions, confirmations, registrations, revalidations, additions or
continuations, continuations-in-part, and divisions of the foregoing which
are granted hereafter;
"Person" means an individual, partnership, joint venture, trustee, trust,
corporation, division of a corporation, unincorporated organization or other
entity or a government, state or agency or political subdivision thereof,
and pronouns have a similarly extended meaning;
"Plotter" means a 36-inch-wide plain paper printer developed by Licensor and
known as the "WIDEfax Plotter";
"Products" means i) the improved Plotter or Scanner and any other new
marketable product manufactured using the Intellectual Property and the
Intellectual Property of Licensor, and ii) any Applications Software of
Licensor;
"R & D Period" means the period commencing on the date of execution of the
License Agreement and terminating on the earlier of i) the expiration of a
five (5)-year period, or ii) the date on which Licensee shall have confirmed
to Licensor that the research and development conducted by Licensor and
contemplated by the License Agreement has been completed to Licensee's
satisfaction, or iii) the date on which no more funds shall be available to
Licensor to pursue the research and development contemplated in the License
Agreement;
"Sales Price" means the aggregate of all sales prices charged from time to
time by Licensee to its sub-licensees under the sub-license agreements
entered into pursuant to subsection 3.2 hereof in connection with the sale
to any sub-licensees of any equipment or other materials required by any
such sub-licensee to give effect to the terms of its sub-license, less any
sums collected by Licensee for any duly constituted governmental authority
and paid out to such authority on account of any tax imposed by such
authority upon the sale of such equipment or other materials including,
without limitation, any value added tax;
"Scanner" means a color wide format scanner capable of scanning a document
up to 36" wide and known as the "WIDEfax Scan";
"Shareholders Agreement" means the Memorandum of Agreement dated October 2,
1996, among the Parties, 3294412 Canada Inc., 3294421 Canada Inc. and
Societe Innovatech du Grand Montreal, setting forth the terms and conditions
which will govern the relationship of Licensor, Licensee, 3294412 Canada
Inc., 3294421 Canada Inc. and Societe Innovatech du Grand Montreal as
shareholders of Licensor;
"Software" has the meaning ascribed thereto in the License Agreement;
"Software of Licensor" means all improvements, modifications, additions and
alterations made to the Software, as well as any other software, other than
the Applications Software of Licensor, developed as part of the research and
development performed by Licensor or on behalf of Licensor pursuant to the
License Agreement;
"Territory" means the world, except for the Province of Quebec, in Canada.
Exhibit 10.6
------------
STOCK EXCHANGE AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 2ND DAY OF OCTOBER, 1996
BY AND BETWEEN: THE WIDECOM GROUP INC., a body politic and corporate,
duly incorporated according to the laws of the Province of
Ontario,
(hereinafter referred to as "Widecom")
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe
Innovatech du Grand Montreal, R.S.Q. ch. S-17.2
(hereinafter referred to as "Innovatech")
SECTION 39 - PREAMBLE
- ---------------------
39.1 WHEREAS concurrently with the execution of this Agreement,
Innovatech has subscribed for 450 Class "A" shares in the capital stock of
3294340 Canada Inc. ("Newco") and Widecom has subscribed for 450 Class "A"
shares in the capital stock of Newco;
39.2 WHEREAS the parties hereto wish to enter into this Agreement in
order to enable Innovatech to exchange its 450 Class "A" shares in the
capital stock of Newco for common shares in the capital stock of Widecom on
the terms and conditions provided for herein.
WHEREFORE THE PARTIES AGREE AS FOLLOWS:
SECTION 40 - DEFINITIONS
- --------------------------
40.1 In this Agreement, the following terms shall have the following
meaning:
40.1.1 "Acquisition" has the meaning attributed to it in
paragraph 5.1.1;
40.1.2 "Acquisition Notice" has the meaning attributed to it in
subsection 5.2;
40.1.3 "Arm's Length" has the meaning attributed to such term for
the purposes of the Income Tax Act (Canada), as amended;
40.1.4 "Business Day" means any day, other than a Saturday or
Sunday or a day on which the principal commercial banks in the
Province of Quebec or the Province of Ontario are not open for
business during normal banking hours;
40.1.5 "Charges" means any security interest, hypothec, prior
claim, lien, charge, pledge, encumbrance, mortgage, adverse claim or
title retention agreement of any nature of kind;
40.1.6 "Class "A" Shares" means the Class "A" shares in the capital
stock of Newco;
40.1.7 "Closing" has the meaning attributed to it in subsection 4.1;
40.1.8 "Closing Date" has the meaning attributed to it in
subsection 4.1;
40.1.9 "Common Shares" means the common shares in the capital stock
of Widecom;
40.1.10 "Exchange Act" means the Securities and Exchange Act of
1934 (United States), as amended;
40.1.11 "Exchange Rate" means, at any time, the number of Common
Shares that Innovatech will be entitled to receive for each Exchange
Share, as such Exchange Rate may be adjusted under subsection 3.3
hereof;
40.1.12 "Exchange Right" means the right of Innovatech to exchange
the Exchange Shares for Common Shares as set out in subsection 5.1
hereof;
40.1.13 "Exchange Shares" means the 450 Class "A" Shares issued to
Innovatech on the date hereof;
40.1.14 "Finger Print" means 3294412 Canada Inc.;
40.1.15 "Flat Panel" means 3294421 Canada Inc.;
40.1.16 "Newco" has the meaning attributed to it in subsection 1.1;
40.1.17 "Notice of Exchange" has the meaning attributed to it in
subsection 4.1;
40.1.18 "Participation Notice" has the meaning attributed to it in
subsection 5.2;
40.1.19 "Person" means any individual, partnership, limited
partnership, joint venture, syndicate, sole proprietorship, company or
corporation with or without share capital, unincorporated association,
trust, trustee, executor, administrator, or other legal personal
representative, regulatory body or agency, government or governmental
agency, authority or entity however designated or constituted;
40.1.20 "Recapitalization" has the meaning attributed to it in
subsection 3.3;
40.1.21 "SEC" means the United States Securities and Exchange
Commission;
40.1.22 "Securities Act" means the Securities Act of 1993 (United
States), as amended;
40.1.23 "Shareholders Agreement" means the shareholders agreement
entered into concurrently herewith among Innovatech, Widecom, Flat
Panel, Finger Print and Newco;
40.1.24 "Tag-Along Sale" has the meaning attributed to it in
subsection 6.1;
40.1.25 "Widecom SEC Documents" has the meaning attributed to it in
paragraph 7.1.1.
SECTION 41. - AUTHORIZATION AND EXCHANGE OF EXCHANGE SHARES
- -------------------------------------------------------------
41.1 Prior to the date hereof, Widecom has authorized the exchange and
issuance to Innovatech, in accordance with the terms hereof, of up to
253,000 Common Shares, having the rights, privileges and preferences as set
forth in the Certificate of Incorporation of Widecom, as amended.
41.2 Subject to the terms and conditions hereof, Innovatech shall have
the right to exchange all and not less than all of the Exchange Shares for
the Common Shares. Subject to the terms and conditions hereof, Widecom shall
issue to Innovatech upon delivery by Innovatech of each of the Exchange
Shares 562.2036 Common Shares. The right of Innovatech to exchange any
other Class "A" Shares to be issued to Innovatech and the exchange rate with
respect to such Class "A" Shares shall be negotiated in good faith by
Widecom and Innovatech prior to the issuance of such Class "A" Shares by
Newco.
41.3 The number of Common Shares to be issued upon the exchange referred
to in subsection 3.2 shall be adjusted to take into account changes to the
Common Shares occurring during the period from the date hereof until the
date of such exchange. Such adjustment shall be made such that Innovatech
shall be issued such number of Common Shares (or any security or property
such Common Shares may have become) as shall be equal to the number of
Common Shares (or such other security or property the Common Shares may have
become) Innovatech would have been issued in the aggregate if they had
exercised the Exchange Right upon the date hereof and had owned such shares
from the date hereof until the date of the exchange. For greater clarity, if
Widecom shall undertake a stock split, stock dividend or recapitalization
(collectively, a "Recapitalization") prior to the issuance of the Common
Shares to Innovatech, Innovatech shall receive such number of Common Shares
or other securities as Innovatech would have received following such
Recapitalization had Innovatech been issued its Common Shares prior to such
Recapitalization and had subsequently participated fully in such
Recapitalization.
41.4 Whenever the Exchange Rate is adjusted as provided in subsection
3.3, Widecom shall forthwith send to Innovatech a statement, signed by an
officer of Widecom, describing in reasonable detail the facts giving rise to
such adjustment, as well as the new Exchange Rate.
SECTION 42. - CLOSING DATES AND DELIVERY
- ------------------------------------------
42.1 The closing of the exchange of the Exchange Shares for the Common
Shares shall be held at the offices of Lapointe Rosenstein, 1250 Rene-
Levesque Boulevard West, Suite 1400, Montreal, Quebec at 10:00 a.m., local
time, on the first Business Day twenty (20) days after receipt by Widecom of
a properly completed and executed notice of exchange in the form attached
hereto as Schedule 4.1 (the "Notice of Exchange") or Participation Notice,
as the case may be, on behalf of Innovatech (the "Closing") or at such other
time and place upon which Widecom and Innovatech shall mutually agree (the
date of the Closing is hereinafter referred to as the "Closing Date").
42.2 At the Closing, Innovatech shall surrender the certificate or
certificates representing all the Exchange Shares duly endorsed. Thereupon,
Widecom shall promptly issue and deliver at such office to Innovatech a
certificate or certificates for the number of Common Shares to which
Innovatech is entitled pursuant to subsection 3.2. Such exchange shall be
deemed to have been made at the close of business on the date of such
surrender of the certificate(s) endorsed in favour of Widecom representing
all the Exchange Shares, and Innovatech shall be treated for all purposes as
the record holder of such Common Shares on such date.
SECTION 43. - RESTRICTIONS ON EXCHANGE
- ----------------------------------------
43.1 Innovatech may exchange from time to time all and not less than all
of the Exchange Shares for the Common Shares ("Exchange Right"), provided
that the Exchange Right subsists, subject to the following:
43.1.1 Prior to the first anniversary of the date hereof,
Innovatech may exercise the Exchange Right only if (a) Widecom or its
shareholders consent to the exercise of the Exchange Right, or (b)
Widecom has received and accepted an offer for an Acquisition. In the
event Innovatech exercises its Exchange Right pursuant to clause (b)
of the preceding sentence, the Closing of such share exchange shall
take place immediately prior to the closing of an Acquisition. As used
herein "Acquisition" shall mean: (a) a consolidation or merger of
Widecom with or into any other corporation or corporations pursuant to
which the shareholders of Widecom prior to the merger or similar
transaction shall own less than fifty percent (50%) of the voting
securities of the surviving corporation, (b) or a sale, conveyance or
disposition or series of related transactions of all, or substantially
all, of the assets of Widecom, or (c) the effectuation by Widecom or
the shareholders of Widecom of a transaction or series of related
transactions in which more than fifty percent (50%) of the voting
power of Widecom is disposed of (by way of the sale or issuance of new
shares other than the sale or issuance of preferred shares), and (i)
the consideration received in connection with such transaction, or
series of related transactions, is at least sixty percent (60%) in
cash, or (ii)(a) Widecom's corporate existence under the laws of the
Province of Ontario shall not be terminated upon the consummation of
the transaction or series of related transactions, and (b) the
acquiring party in the acquisition does not agree in writing to permit
Innovatech, upon the exchange of the Exchange Shares in accordance
with this Agreement, to further exchange its Common Shares into shares
of the acquirer on the same terms and conditions as were granted to
the other shareholders of Widecom who upon such acquisition became
shareholders of the acquirer.
43.1.2 On or after the first anniversary of the date hereof,
Innovatech may exercise the Exchange Right at any time upon proper
notice to Widecom.
43.2 Widecom shall promptly provide Innovatech with notice of a proposed
Acquisition ("Acquisition Notice"). The Acquisition Notice shall include the
material terms and conditions of the proposed Acquisition, including but not
limited to the aggregate number of shares of Widecom proposed to be acquired
in the Acquisition, the aggregate number of issued and outstanding shares of
Widecom's common shares and preferred shares and the amount and form of
consideration to be paid by the proposed acquiror. Innovatech shall provide
written notice ("Participation Notice") to Widecom within twenty (20) days
of receipt of the Acquisition Notice of the number of Common Shares, if any,
that Innovatech elects to include in any Tag-Along Sale in connection with
the proposed Acquisition. If Widecom does not receive a timely Participation
Notice from Innovatech then no Common Shares from Innovatech shall be
included in the Tag-Along Sale in connection with the proposed Acquisition.
In the event Innovatech elects to participate in a Tag-Along Sale and timely
files a Participation Notice with Widecom, Innovatech shall not be required
to file a Notice of Exchange with respect to the Exchange Shares. In the
event that the Acquisition is an acquisition of all of the issued and
outstanding shares of Widecom held by all of the shareholders of Widecom and
Innovatech does not provide the Participation Notice and include in the Tag-
Along Sale all of the Common Shares which would be issued to it upon the
exchange of the Exchange Shares, then the Exchange Right shall upon the
closing of the Acquisition become null and void.
SECTION 44. - TAG-ALONG RIGHT
- -------------------------------
44.1 In the event of an Acquisition, Innovatech shall have the right, but
not the obligation, to cause, as a condition to such Acquisition ("Tag-Along
Sale"), that the proposed acquiror purchase from Innovatech, up to the
number of Common Shares derived by multiplying the total number of Common
Shares owned by or issuable to Innovatech upon the exchange of the Exchange
Shares by a fraction, the numerator of which is equal to the aggregate
number of shares of Widecom's common shares and preferred shares that are to
be purchased by the proposed acquiror and the denominator of which shall be
the total number of shares of Widecom's common shares and preferred shares
outstanding immediately prior to the Acquisition, each as set forth in the
Acquisition Notice. Any sales by Innovatech in a Tag-Along Sale shall be on
the same terms and conditions as proposed by the proposed acquiror. If
Innovatech so elects to participate in a Tag-Along Sale it shall deliver a
Participation Notice to Widecom as specified in subsection 5.2.
44.2 Without prejudice to the Exchange Right set forth in subsection 3.1
hereof, notwithstanding anything in this Section 6 to the contrary,
Innovatech hereby acknowledges and agrees that if an Acquisition is proposed
directly with Widecom's shareholders, Widecom and Widecom's shareholders
shall have no obligation to cause the proposed acquiror to purchase any
Common Shares from Innovatech.
SECTION 45. - REPRESENTATIONS AND WARRANTIES OF WIDECOM
- ---------------------------------------------------------
45.1 Widecom represents and warrants to Innovatech, as of the date hereof
and upon the Closing, the following:
45.1.1 Widecom has delivered to Innovatech accurate and complete
copies (excluding copies of exhibits) of each report, registration
statement (on a form other than Form S-8) and definitively filed by
Widecom with the SEC between December 16, 1995 and the date the
representation or warranty is made (the "Widecom SEC Documents"). As
of the time it was filed with the SEC (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such
filing): (i) each of the Widecom SEC Documents complied in all
material respects with the applicable requirements of the Securities
Act or the Exchange Act, as the case may be; and (ii) none of the
Widecom SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
45.1.2 The financial statements contained in the Widecom SEC
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such financial
statements and (in the case of unaudited statements) as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements
may not contain footnotes and are subject to normal and recurring
year-end audit adjustments (which will not, individually or in the
aggregate, be material in magnitude); and (iii) fairly present the
financial position of Widecom as of the respective dates thereof and
the results of operations of Widecom for the periods covered thereby.
45.1.3 Widecom is a corporation duly organized, validly existing,
and in good standing under the laws of the Province of Ontario.
Widecom has full power and authority to own and operate its properties
and assets, and to carry on its business as presently conducted and as
presently proposed to be conducted.
45.1.4 Widecom will have upon the date hereof all requisite legal
and corporate power and authority to execute and deliver this
Agreement and to carry out and perform its obligations under the terms
of this Agreement.
45.1.5 Assuming the accuracy of the representations and warranties
of Innovatech contained in Section 8 hereof, the offer, sale and
issuance of the Common Shares will be exempt from the registration
requirements of the Securities Act and will have been registered or
qualified (or are exempt from registration or qualification) under the
registration, permit or qualification requirements of all applicable
United States securities laws.
SECTION 46. - REPRESENTATIONS AND WARRANTIES OF INNOVATECH
- ------------------------------------------------------------
46.1 Innovatech hereby represents and warrants to Widecom as follows:
46.1.1 Innovatech is acquiring the right to the Common Shares for
investment for Innovatech's own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any
distribution thereof. Innovatech understands that the right to the
Common Shares has not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment
intent and the accuracy of Innovatech's representations as expressed
herein.
46.1.2 Innovatech acknowledges that, if acquired, the Common Shares
must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is
available. Innovatech is aware that Rule 144 promulgated under the
Securities Act permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions,
including, among other things, the existence of a public market for
the shares, the availability of certain current public information
about Widecom, the resale occurring not less than two years after a
party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions
directly with a "market maker" and the number of shares being sold
during any three-month period not exceeding specified limitations.
46.1.3 Innovatech has had an opportunity to discuss Widecom's
business, management and financial affairs with Widecom's management
and has had the opportunity to inspect Widecom's facilities.
Innovatech has also had an opportunity to ask questions of officers of
Widecom, which questions were answered to its satisfaction. Innovatech
understands that such discussions, as well as any written information
issued by Widecom, were intended to describe certain aspects of
Widecom's business and prospects but were not a thorough or exhaustive
description.
46.1.4 Innovatech is upon the date hereof and shall be upon the
Closing Date the lawful owner (both beneficially and of record) of the
Exchange Shares. Innovatech has upon the date hereof and will have
upon the Closing Date good and marketable title to the Exchange Shares
and the absolute right, power and capacity to transfer and deliver the
Exchange Shares to Widecom pursuant to this Agreement, free and clear
of any Charges.
46.1.5 Widecom has not incurred and will not incur, directly or
indirectly, as a result of any action taken by Innovatech, any
liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
SECTION 47. - RESTRICTIONS ON TRANSFER
- ----------------------------------------
47.1 The Exchange Right shall not be transferable except to any
transferee of Exchange Shares as permitted in the Shareholders Agreement.
SECTION 48. - REGISTRATION RIGHTS
- -----------------------------------
48.1 In the event of the exercise by Innovatech of the Exchange Right in
accordance with the terms of this Agreement, Widecom shall:
48.1.1 within thirty days of receipt of a written request for
registration from Innovatech, file a registration statement under the
Securities Act on Form S-3 (the "3-year Registration Statement")
covering the registration of all the Common Shares received by
Innovatech pursuant to this Agreement;
48.1.2 cause the 3-year Registration Statement to be declared
effective by the SEC under the Securities Act as soon as is
practicable after the filing of such 3-year Registration Statement;
and
48.1.3 cause the 3-year Registration Statement to remain effective
for a period of one hundred eighty (180) days after the effective date
of the 3-year Registration Statement.
All expenses of the public offering of securities of Widecom pursuant to the
3-year Registration Statement (other than underwriters and brokerage fees
and commissions) shall be borne by Widecom.
48.2 Following the receipt by Innovatech of Common Shares pursuant to
this Agreement, and if the demand registration rights pursuant to subsection
10.1 hereof have not previously been exercised, Widecom shall notify
Innovatech in writing at least ten (10) days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of Widecom (excluding registration statements
relating to employee benefit plans and corporate reorganizations) and will
afford Innovatech the opportunity to include in such registration statement
all or part of the Common Shares received by Innovatech pursuant to this
Agreement. The expenses of such public offering of securities of Widecom
(other than underwriters' commissions, if any, related to Innovatech's
Common Shares included in such public offering, which shall be borne by
Innovatech) shall be borne by Widecom. If Innovatech desires to include in
any such registration statement all or any part of the Common Shares held by
it, it shall, within ten (10) days after receipt of the above-described
notice from Widecom, so notify Widecom in writing. Such notice shall state
the intended method of disposition of the Common Shares by Innovatech.
48.3 If the registration statement under which Widecom gives notice under
subsection 10.2 hereof is for an underwritten offering, Widecom shall so
advise Innovatech. In such event, the right of Innovatech to be included in
a registration pursuant to subsection 10.2 hereof shall be conditioned upon
Innovatech's participation in such underwriting and the inclusion of
Innovatech's Common Shares in the underwriting to the extent provided
herein. If Innovatech proposes to distribute its Common Shares through such
underwriting it shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of such agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, then the underwriter may reduce or
exclude from such registration and underwriting up to all of Innovatech's
Common Shares, provided that no securities of any Widecom shareholders are
included in a public offering in which Innovatech's Common Shares are
entirely excluded. Widecom shall so advise Innovatech, and the number of
shares of Innovatech's Common Shares that may be included in the
registration and underwriting will be reduced accordingly. No such reduction
shall reduce the securities being offered by Widecom for its own account to
be included in the registration and underwriting. If Innovatech disapproves
of the terms of any such underwriting, it may elect to withdraw therefrom by
written notice to Widecom and the underwriter, delivered at least one (1)
day prior to the effective date of the registration statement. Any Common
Shares excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
48.4 All registration rights granted under this Section 10 shall
terminate and be of no further force and effect on such date as the Common
Shares received by Innovatech pursuant to this Agreement may be resold
pursuant to the provisions of Rule 144 promulgated under the Securities Act.
SECTION 49. - COVENANTS OF WIDECOM
- ------------------------------------
49.1 As soon as practicable after the filing of any Widecom SEC Documents
with the SEC, and in any event within twenty (20) days thereafter, Widecom
will furnish Innovatech with such Widecom SEC Document.
49.2 Promptly after the issuance of the Common Shares to Innovatech
pursuant to this Agreement, if Widecom's securities are publicly traded,
Widecom shall take all necessary action to list such Common Shares, to the
extent not already listed, on the securities exchange or over-the-counter
market where the Widecom's securities are listed.
49.3 At the request of Innovatech, Widecom shall use its best efforts to
ensure the application of Regulation S under the Securities Act to the
issuance of the Common Shares to Innovatech pursuant to this Agreement.
49.4 So long as the Exchange Shares remain outstanding and the Exchange
Right subsists, Widecom will at all times reserve and keep available, solely
for issuance and delivery upon the exchange of the Exchange Shares, all
Common Shares issuable upon such exchange.
49.5 At the Closing, Innovatech shall have obtained from Partridge Snow &
Hahn, United States counsel to Widecom, an opinion letter covering
substantially the same matters as was tendered upon the date hereof,
addressed to it, dated the date of the Closing.
49.6 Widecom shall from the date hereof deliver to Innovatech such
information and notices as Widecom is required to deliver to the holders of
common shares and preferred shares of Widecom pursuant to Widecom's
certificate of incorporation, as amended, or otherwise.
SECTION 50. - APPLICABLE LAW
- ------------------------------
50.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Quebec and the laws of Canada
applicable therein.
50.2 Any dispute or controversy or claim arising out of this Agreement or
any further agreements resulting herefrom shall be finally determined and
settled by arbitration in accordance with the provisions of Section 17 of
the Shareholders Agreement. The decision of the arbitrator shall be final
and binding upon the parties, to the exclusion of courts of law.
SECTION 51. - ADDITIONAL INSTRUMENTS
- --------------------------------------
51.1 Each party hereto shall, from time to time and at any time hereafter
and as often as required by the other, make, do, execute and deliver, or
cause to be made, done, executed and delivered, all such further acts,
deeds, matters and things as may be reasonably devised or required by the
other, whether for the purpose of more effectually and completely carrying
out the terms of this Agreement.
SECTION 52. - NOTICES
- -----------------------
52.1 All notices or other communications required or permitted to be
given under this Agreement to a party hereto shall be in writing and
delivered by hand or given by telecopier addressed to the party for whom it
is intended as follows:
To Widecom : The Widecom Group Inc.
55 City Centre Dr.
Suite 500
Mississauga, Ontario
L5B 1M3
Attention of: President
Telecopier: (905) 566-0181
To Innovatech : Societe Innovatech du Grand Montreal
2020 University Street
Suite 1527
Montreal, Quebec
Canada
H3A 2A5
Attention of: Andre Duquenne
Telecopier: (514) 864-4220
52.2 Notices delivered will be deemed given and received upon delivery
and those sent by telecopier, on the next Business Day following the
transmission.
52.3 Any party hereto may at any time and from time to time designate a
substitute address for the purpose of subsection 14.1 by giving written
notice thereof to the other party at least ten days in advance of the
effective date of such designation.
SECTION 53. - ENTIRE AGREEMENT AND MODIFICATION OF AGREEMENT
- --------------------------------------------------------------
53.1 This Agreement and the Shareholders Agreement constitute the entire
agreement of the parties hereto with respect to the matters contained
herein. No change or modification of this Agreement shall be binding, unless
in writing and signed by the parties hereto.
SECTION 54. - UNENFORCEABILITY OF ANY PROVISION OF AGREEMENT
- --------------------------------------------------------------
54.1 The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein
contained, and this Agreement shall be construed as if such invalid or
unenforceable provision or covenant was omitted.
SECTION 55. - COUNTERPARTS
- ----------------------------
55.1 This Agreement may be executed in several counterparts, each of
which when executed by either of the parties shall be deemed to be an
original and such counterparts shall together constitute but one and the
same instrument.
SECTION 56. - SUCCESSORS AND PERMITTED ASSIGNS
- ------------------------------------------------
56.1 Except as otherwise provided for herein or in the Shareholders
Agreement, this Agreement shall enure to the benefit of and be binding upon
the heirs, legal representatives, executors, administrators, successors and
permitted assigns of the parties hereto.
SECTION 57. - INTERPRETATION
- ------------------------------
For the purpose of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:
57.1 Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular number
only shall include the plural and vice versa.
57.2 The division of this Agreement into Sections, subsections and other
subdivisions, and the insertion of headings are for convenience of reference
only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
SECTION 58. - LANGUAGE
- ------------------------
58.1 The parties hereto agree that this Agreement as well as all
documentation contemplated hereby or pertaining hereto or to be executed in
connection herewith be drawn up in the English language; les parties
consentent a l'effet que cette convention de meme que tous documents
envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
IN WITNESS WHEREOF, the parties have duly signed and executed these presents
as of the place and date first hereinabove mentioned.
THE WIDECOM GROUP INC.
Per:
Per:
SOCIETE INNOVATECH DU GRAND MONTREAL
Per:
SCHEDULE 4.1
NOTICE OF EXCHANGE
In accordance with the terms of that certain Stock Exchange Agreement, dated
as of October 2, 1996, between The Widecom Group Inc. ("Widecom") and
Societe Innovatech du Grand Montreal ("Innovatech") (the "Exchange
Agreement"), notice is hereby given pursuant to subsection 4.1 of the
Exchange Agreement that the undersigned elects to exchange all of the
Exchange Shares (as defined in the Exchange Agreement) held by the
undersigned on the date hereof, for the number of Common Shares (as defined
in the Exchange Agreement) calculated pursuant to the relevant provisions of
the Exchange Agreement.
Dated this day of 19 .
SOCIETE INNOVATECH DU GRAND MONTREAL
By: --------------------------------------
Print name: --------------------------------------
Title: --------------------------------------
Exhibit 20.1
FOR IMMEDIATE RELEASE TRADED: NASDAQ: WIDEF, WIDWF
JANUARY 30, 1997 BOSTON: WDE, WDEW
WIDECOM COMPLETES R&D JOINT VENTURE
MISSISSAUGA, ONTARIO, CANADA--The WideCom Group Inc. announced today
that it had entered into a joint venture with Societe Innovatech du Grand
Montreal ("Innovatech") to establish a research and development consortium.
Each of WideCom and Innovatech, which is an economic development
agency of the Province of Quebec, have acquired an equal stake in the
Consortium in exchange for capital contributions from each of approximately
US$1,875,000. The Consortium expects to be eligible to receive subsidies and
direct payments under various Canadian and Provincial R&D incentive
programs, which could substantially expand the amount of research and
development that the Consortium can undertake.
Raja S. Tuli, President of WideCom, stated "We are delighted that the
Company was offered this opportunity. Conducting our R&D through the
Consortium should permit us to expand the work we can pursue while achieving
a lower effective cost. This arrangement is a win-win for all involved, and
could prove strongly beneficial to our stockholders and Quebec over many
years to come."
In addition to WideCom's stake in the Consortium, WideCom's management
will direct the activities of the Consortium and WideCom will have a license
to any technology developed by the Consortium that is useful to the business
of WideCom. WideCom and Innovatech have also entered into an agreement which
may permit WideCom to acquire Innovatech's interest in the Consortium in
exchange for 253,000 shares of WideCom's restricted common stock.
The WideCom Group Inc. designs, manufactures and markets high-speed, high-
performance, wide-format document management systems. WideCom's product
lines include its 36" WIDEfax(R) facsimile machines, engineering scanners
and direct imaging plotters. WideCom distributes its products directly
through VARs, OEMs and distributors internationally. There can be no
assurance that the Consortium will be successful in developing new
technologies useful to WideCom, nor can there be any assurance that the
Consortium will be eligible for government subsidies or other assistance, or
that current government programs providing subsidies or assistance to
research and development will be continued in the future.
