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Exhibit 10.18
THIS PURCHASE AGREEMENT MADE THIS 30TH DAY OF NOVEMBER, 2000 WITH
EFFECT AS OF THE 31ST DAY OF AUGUST, 2000.
AMONGST:
XBOX TECHNOLOGIES, INC.
a corporation incorporated under the
laws of the state of Delaware
(hereinafter called the "Corporation")
OF THE FIRST PART;
-AND-
TECHINSPIRATIONS INC. (CAYMAN),
a Cayman Island corporation
(hereinafter referred to as the "Investor")
OF THE SECOND PART.
RECITALS:
1. At a June 22nd, 2000 meeting of the Board of Directors of the
Corporation, the Board of Directors (together with a representative of
the Investor who is also on the Board of Directors of the Corporation)
approved, in principle, management of the Corporation negotiating and
implementing a business and financing plan for the Corporation (the
"Plan") which included, amongst other matters, focusing the business
and development operations of the Corporation on the business of its
subsidiary, Knowledge Mechanics Inc., reorganizing the balance sheet
and share capital of the Corporation to include revised employee stock
option plans and the conversion of secured debt furnished by the
Investor to the Corporation into equity of the Corporation, and
pursuing additional equity investment in the Corporation;
2. In furtherance of the implementation of the Plan, senior management of
the Corporation, representatives of the Investor, and representatives
of the subsidiary met in Toronto, Canada, on August 10, 2000 and,
negotiated, agreed in principle and thereafter reduced to writing in a
memorandum of understanding, various features of the Plan, subject to
Board approval and legal documentation, including without limitation,
the conversion of the Investor's secured loans to the Corporation into
equity of the Corporation with effect as of the Effective Date (the
"Debt Conversion");
3. Those agreements in principle implementing the Plan were presented to
and approved by the Board of Directors of the Corporation (subject to
approval by a Special Committee of Independent Directors (the "Special
Committee") at a September 7th, 2000 meeting of the Board of Directors
of the Corporation, and the Board referred to such Special
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Committee the particulars of the Debt Conversion and as a result of the
foregoing, the Investor and the Board instructed their attorneys to
prepare legal documentation implementing those decisions in accordance
with the further directions to be provided by the Special Committee;
4. At a meeting of the Special Committee on October 31, 2000, the Special
Committee approved this Agreement and the conversion of certain of the
indebtedness of the Company owed to TECH into shares of convertible
preferred stock of the Company.
5. In accordance with the debt conversion aspects of the foregoing, this
Agreement sets out the terms and conditions whereby the Investor will
purchase from the Corporation $14,025,137 of Series A Preferred Shares
of the capital stock of the Corporation, at a purchase price of $16.80
per share, each Series A Preferred Share convertible into such number
of shares of common stock of the Corporation as is equal to $16.80
divided by $0.084 (as such figure may be adjusted from time to time in
accordance with the Certificate of Designation which created such
Series A Preferred Shares), which initially results in each share of
Series A Preferred being convertible into 200 shares of common stock,
which purchase price shall be paid or satisfied, to the extent of
$11,806,425.74 thereof, by the conversion of that amount of secured
loan advances by the Investor to the Corporation as of the Effective
Date into Series A Preferred Share equity with the balance of the
purchase price to be paid or satisfied by the conversion of loans by
the Investor subsequent to the Effective Date.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the
premises and the mutual covenants hereinafter contained, the parties hereto
agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINED TERMS
Capitalized terms denoting defined terms used in this Agreement that
are not defined in the recitals or body to this Agreement shall bear
the meanings attributable to them in Schedule 1.1 to this Agreement.
1.2 CURRENCY
All dollar amounts referred to in this Agreement are in the lawful
currency of the United States of America ($US).
1.3 TIME
Time shall be of the essence of this Agreement and of every part
hereof.
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1.4 HEADINGS
The division of this Agreement into sections, clauses and subclauses
and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof.
1.5 SCHEDULES
The following are the Schedules attached to and incorporated in this
Agreement by reference and deemed to be part hereof:
SCHEDULE DESCRIPTION
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1.1 Definitions
1.1(j) Closing Agenda
1.1(q) Software Description
1.9 Series A Preferred Share attributes
3.3 Exceptions, if any, to Representations and
Warranties
1.6 JURISDICTIONS
This Agreement shall be construed in accordance with, and the rights of
the parties hereto shall be governed by, the laws of the state of
Minnesota. Each of the parties hereto hereby irrevocably attorns to the
jurisdiction of the courts of the state of Minnesota.
1.7 CONSTRUCTION
In this Agreement:
(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) the word "including" shall mean "including without
limitation";
(c) any reference to a statute shall mean the statute in force as
at the date hereof and any regulation in force thereunder,
unless otherwise expressly provided;
(d) the use of headings is for convenience of reference only and
shall not affect the construction of this Agreement;
(e) when calculating the period of time within which or following
which any act is to be done or step taken, the date which is
the reference day in calculating such period shall be
excluded. If the last day of such period is not a Business
Day, the period shall end on the next Business Day;
(f) any tender of documents under this Agreement may be made upon
the parties or their respective counsel; and
(g) words or abbreviations which have well known or trade meanings
are used herein in accordance with their recognized meanings.
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1.8 ACKNOWLEDGEMENT
Each of the Parties hereto acknowledges and agrees that the recitals to
this Agreement are true in substance and in fact and are incorporated
into this Agreement.
1.9 PREFERRED SHARES
Pursuant to authority granted in the articles of the Corporation, the
directors have duly designated, authorized, and created, as of the date
hereof, 1,000,000 Series A Preferred Shares convertible into Common
Shares of the Corporation (the "Preferred Shares") which Preferred
Shares have the attributes rights and privileges more particularly set
out in the Certificate of Designation attached hereto as Schedule 1.9
(the "Certificate").
ARTICLE 2 - PURCHASE OF SHARES, FUNDAMENTAL AGREEMENTS
2.1 SUBSCRIPTION
Subject to the terms and conditions hereof, the Investor hereby
subscribes irrevocably for and agrees to purchase from the Corporation,
and the Corporation agrees to issue to the Investor 834,830 Preferred
Shares (the "Purchased Shares"). The subscription price (the "Share
Purchase Price") for the Purchased Shares shall be $16.80 per share, or
$14,025,137 in the aggregate.
2.2 PAYMENT AND ISSUANCE OF SHARES
(a) Payment of the Purchase Price shall be made at the Time of
Closing on the Closing Date and shall be made by the Investor
tabling its irrevocable direction to convert $11,806,425.74 of
the debt owed by the Corporation to the Investor as of the
Effective Date in part satisfaction of the Purchase Price
pursuant to the Conversion Agreement, dated the date hereof,
between the Corporation and the Investor and the balance of
the Purchase Price shall be satisfied in cleared funds by
advances from the Investor to the Corporation after the
Effective Date (the "Advances").
(b) The Purchased Shares shall be issued as follows: Such number
of Purchased Shares as is equal to $11,806,425.74 divided by
the Share Purchase Price shall be issued immediately upon the
execution of this Agreement with an effective issue date of
August 31, 2000 and the balance of the Purchased Shares (or
portion thereof) shall be issued from time to time after the
Effective Date at such time as the Investor requests that such
Advances be converted into Purchased Shares, provided that
such Advances shall automatically be converted into the
appropriate number of Purchased Shares at the end of each
calendar month following the Agreement Date in the event a
request for such conversion is not previously given by
Investor and provided further that the aggregate amount of
Advances to be converted into Purchase Shares shall be equal
to $2,218,711.26, with all such Advances being converted into
the number of Purchased Shares as is equal to the amount of
such Advances divided by the Share Purchase Price.
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2.3 REGISTRATION RIGHTS
If the Corporation shall receive from the Investor at any time after
the Closing Date, a written request that the Corporation effect any
registration under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Purchased Shares or the Common
Stock underlying the Purchased Shares (provided that the Investor, if
it is not already done so converts the Purchased Shares in respect of
such underlying Common Stock for which registration is requested) then,
with respect to such underlying Common Stock (collectively, the
"Registrable Securities") the Corporation shall, as soon as a
practical, use its commercially reasonable efforts to effect such
registration in accordance with this Agreement (including, without
limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with applicable
regulations issued under the Securities Act as may be so requested and
as would permit or facilitate the sale and distribution of all such
Registrable Securities as are specified in such request).
Notwithstanding the foregoing, the Corporation shall not be obligated
to effect, or take any action to effect, any such registration pursuant
to this Section: if, upon receipt of a registration request pursuant to
this Section, the Corporation is advised in writing (with a copy to the
Investor) by a recognized regional or national independent investment
banking firm selected by the Corporation that, in such firms opinion, a
registration at the time and on the terms requested would adversely
affect any public offering of securities of the Corporation by the
Corporation with respect to which the Corporation has commenced
preparation of a registration prior to the receipt of a registration
request for the Investor pursuant to this Section, then the Corporation
shall not be required to effect a registration pursuant to this Section
until the earlier of (x) 30 days after the completion of the
Corporation's offering, (y) promptly after abandoned meant of the
Corporation's offering, or (z) 60 days after the date of receipt of a
registration request by the Investor pursuant to this Section.
The Investor may request registration from time to time hereunder in
respect of any Common Stock underlying the Purchased Shares that have
not previously been subject to a registration request, or that have
been so subject to a registration request and for any reason were
withdrawn from registration or were not distributed during the
effectiveness of the relevant registration statement; provided however,
that the Investor may not request registration pursuant to this
Agreement more frequently than once every twelve (12) months. All
registration expenses incurred in connection with any registration,
qualification or compliance pursuant to this Agreement shall be borne
by the Corporation.
2.4 UNDERWRITING
If any registration request hereunder is to be conducted by an
underwriter, the Investor and the Corporation shall enter into
underwriting and related agreements in customary form with the
representatives of the underwriter or underwriters selected for the
underwriting of such distribution by the Investor and reasonably
acceptable to the Corporation. Such underwriting agreement will contain
such representations and warranties by the Corporation and such other
terms and provisions as are customarily
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contained in underwriting agreements with respect to secondary
distributions, including without limitation, indemnities and
contribution and the provision of opinions of counsel and accountants
letters in accordance with customary practice. The said representations
and warranties by, and the other agreements on the part of, the
Corporation and such opinions and accountants letter to and for the
benefit of such underwriters shall also be made to and for the benefit
of the Investor. The Corporation shall cooperate fully with the
Investor and the underwriters in connection with any underwritten
offering. Notwithstanding any other provisions of this Agreement, if
the representative of the underwriter advises the Investor in writing
that market factors require a limitation on the number of the shares to
be underwritten, the number of shares included in the registration by
the Investor shall be reduced by such minimum number of shares as is
necessary to comply with such request; and no Registrable Securities or
any other securities excluded from the underwriting by reason of the
underwriters marketing limitation shall be included in such
registration.
2.5 REGISTRATION PROCEDURES
The Corporation shall execute such further and other documents,
instruments and agreements and shall do or cause to be done such
further acts or things as made be necessary to give effect to the full
nature and intent of section 2.3 and 2.4 hereof, and as may be
necessary to keep the Investor and the underwriter fully informed (with
copies of all relevant documents and drafts thereof) of the
Corporation's progress on such registration request. In addition, and
without limiting the foregoing, the Corporation will:
(a) Keep such registration effective for a period of three months,
or until the Investor has completed the distribution described
in the registration statement relating thereto, whichever
occurs first;
(b) Provide the underwriters and the Investor no less than five
business days to review and comment upon any registration
statement, prospectus, or supplemental documents prior to the
filing thereof and accommodate any reasonable comments
thereon;
(c) Make available at all reasonable times for inspection and
review by the Investor, any underwriter, and any attorney or
accountant retained by the Investor or any underwriter, all
financial and other records, pertinent corporate documents and
properties of the Corporation and any document relevant to the
registration and cause the officers, directors and employees
of the Corporation to supply all information reasonably
requested by the Investor, any such underwriter, attorney or
accountant in connection with such registration and whether
before or after the filing of the applicable registration
statement or the effectiveness of the applicable registration
statement;
(d) Use its commercially reasonable efforts to register or qualify
all Registrable Securities covered by such registration under
such other securities or blue sky laws of such states of the
United States of America where an exemption is not available
and as the sellers of Registrable Securities covered by such
registration
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shall reasonably request and to keep such registration or
qualification in effect for so long as the applicable
registration statement remains in effect;
(e) use its commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of any
such registration, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction;
(f) Use its commercially reasonable efforts to cause all
Registrable Securities included in any registration pursuant
hereto to be listed on each securities exchange on which
securities of the same class are then listed, or, if not then
listed on any securities exchange, to be eligible for trading
in any over-the-counter market or trading system in which the
Corporation's securities of the same class are then traded.
2.6 OTHER MATTERS
In the event of any registration of shares of Common Stock pursuant to
Section 2.3, the Corporation shall indemnify the Investor, its officers
and directors and each person, if any, who controls such holder within
the meaning of Section 15 of the Securities Act against all losses,
claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented)
relating to such registration, or caused by any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they are made unless such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Corporation by such holder expressly for
use therein. The obligations of the Corporation to register any of its
securities in accordance with the foregoing shall be subject to the
condition that each holder shall agree in writing to indemnify the
Corporation, its officers and directors, and each person, if any, who
controls the Corporation within the meaning of Section 15 of the
Securities Act, and each underwriter of the Registrable Securities so
registered, and each person, if any, who controls such underwriter
within the meaning of Section 15 of the Securities Act, with respect to
losses, claims, damages and liabilities caused by any untrue statement
or omission made in reliance upon and in conformity with information
furnished in writing by such holder to the Corporation expressly for
use in such registration statement or prospectus. The costs and
expenses, if any, incurred by the Corporation in connection with any
registration made pursuant to Section 2.3, including but not limited to
legal fees, special audit fees, printing expenses, filing fees, fees
and expenses relating to qualifications under state securities or blue
sky laws and the premiums for insurance shall be borne entirely by the
Corporation; provided, however, that the Investor shall bear its own
underwriting discounts and commissions and the fees and expenses of its
own counsel or accountants in connection with any such registration.
The Investor, with respect to the distribution of Registrable
Securities to be included in any registration, shall furnish to the
Corporation such information regarding the Investor and the
distribution proposed by such Investor as the Corporation may
reasonably request in writing and as shall be reasonably required in
connection with any registration,
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qualification or compliance referred to in this Agreement.
Notwithstanding any other provision contained in the sections 2.3, 2.4,
2.5, or 2.6, if the board of directors of the Corporation determines in
good faith that it is in the best interests of the Corporation not to
disclose the existence of facts surrounding any proposed or pending
acquisition, disposition, strategic alliance or financing transaction
involving the Corporation, the Corporation may by notice to the
Investor in writing postpone any registration request for such period
of time that the Board of Directors may reasonably determined, but in
no event fur a period exceeding 60 days.
2.7 AMENDMENT TO SHARE CAPITAL
The parties acknowledge that as of the date of this Agreement, the
Corporation does not have authorized common share capital sufficient to
accommodate the conversion rights contained in the Preferred Shares,
and the Purchased Shares subset thereof, and, accordingly, the
Corporation must undertake such corporate proceedings, information
circulars, SEC filings and approvals, shareholder approvals, and must
do or cause to be done all such further acts and things (including,
without limitation, the possible amendment to the par value of the
Corporation's Common Stock) as the attorneys for the Corporation and
the Investor advise are reasonably necessary in order to give full
effect to the conversion rights contained in the Preferred Shares (the
"Necessary Subsequent Proceedings"). The Investor hereby covenants to
exercise all votes attached to all shares of the capital stock of the
Corporation held by it in favor of the approval of the Necessary
Subsequent Proceedings. Subject to the Investor's compliance with the
foregoing, the Corporation hereby covenants and agrees with the
Investor that the Corporation will forthwith after the Closing Date
initiate, and thereafter diligently pursue, the full implementation of
the Necessary Subsequent Proceedings on or before March 1st, 2001 (the
"Outside Date"). If the Corporation does not fulfill the foregoing
obligations by the Outside Date, the Investor shall have the right to
elect, in its discretion and without obligation to do so, in
substitution for any right or remedy it might otherwise have for the
Corporation's failure to implement the Necessary Subsequent Proceedings
by the Outside Date, to have the Corporation repurchase the Purchased
Shares for the Share Purchase Price which obligation shall again become
a secured interest bearing debt obligation of the Corporation to the
Investor until fully paid and discharged.
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 THE INVESTOR'S REPRESENTATIONS AND WARRANTIES
The Investor hereby represents and warrants to the Corporation that the
following representations are true and correct at the Time of Closing.
The Investor acknowledges and confirms that the Corporation is relying
upon such representations and warranties in connection with the
issuance of the Securities to the Investor and the completion of the
transactions contemplated under the Agreement.
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GOOD STANDING
(a) The Investor is a Cayman Island corporation duly constituted
and validly subsisting under the laws of the Cayman Islands;
INVESTOR AUTHORITY
(b) The Investor has power and authority to enter into and perform
its obligations under this Agreement and all other Transaction
Documents executed and delivered by the Investor in
furtherance of the Closing of the transactions contemplated
under this Agreement including, without limitation, to
subscribe for the Securities in accordance with the terms of
this Agreement;
AGREEMENT BINDING
(c) Each of the Transaction Documents delivered by the Investor on
or before the Closing Date are, valid and legally binding
obligations of the Investor enforceable in accordance with
their respective terms except that: (i) the enforcement
thereof may be limited by bankruptcy, insolvency and other
laws effecting the enforcement of credits' rights generally,
(ii) rights of indemnity, contribution and waiver of
contribution thereunder may be limited under applicable law
and (iii) equitable remedies, including, without limitation,
specific performance and injunctive relief, may be granted
only in the discretion of a court of competent jurisdiction.
Neither the execution of this Agreement, or such other
Transaction Documents by the Investor, nor the performance by
the Investor of the various terms and provisions hereof and
thereof, will violate the trust instruments constituting the
Investor. The Investor is not a party to, subject to or bound
by any judgment, injunction or decree of any court or
government body that prevents the performance of this
Agreement, or any document referred to herein;
COMMISSIONS
(d) No commissions or brokerage or finders fees are payable by the
Corporation, through or on account of any acts of the Investor
or its representatives in connection with this Agreement or
the Closing Documents;
SECURITIES MATTERS
(e) The Investor:
(i) is subscribing for the Securities to be issued to be
held for its own account not for the purpose of
distributing the same in specie to any beneficiary;
(ii) has not been created, established, or formed solely
to acquire the Securities without a prospectus in
reliance on an exemption from the prospectus
requirements of applicable securities legislation;
and
(iii) is resident in the Cayman Islands.
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(f) The Securities are being acquired for investment for the
Investor's own account and not with the view to, or for resale
in connection with, any distribution or public offering
thereof. The Investor understands that the Securities have not
been registered under the Securities Act, or any state
securities laws by reason of their contemplated issuance in
transactions exempt from the registration requirements of the
Securities Act and applicable state securities laws and that
the reliance of the Corporation and others upon these
exemptions is predicated in part upon this representation by
each Investor. The Investor further understands that the
Securities may not be transferred or resold without
registration under the Securities Act and any applicable state
securities laws, or an exemption from the requirements of the
Securities Act and applicable state securities laws.
(g) The Investor qualifies as an "accredited investor," as defined
in Rule 501 of Regulation D under the Securities Act. The
Investor acknowledges that the Corporation has made available
to each such Investor at a reasonable time prior to the
execution of this Agreement the opportunity to ask questions
and receive answers concerning the business, operations and
financial condition of the Corporation and the terms and
conditions of the sale of securities contemplated by this
Agreement and to obtain any additional information (which the
Corporation possesses or can acquire without unreasonable
effort or expense) as may be necessary to verify the accuracy
of information furnished to such Investor. The Investor is
able to bear the loss of its entire investment in the
Securities without any material adverse affect on its
business, operations or prospects, and has such knowledge and
experience of financial and business matters that it is
capable of evaluating the merits and risks of the investment
to be made by it pursuant to this Agreement.
3.2 SURVIVAL
All statements contained in any Transaction Document, certificate or
other instrument delivered by or on behalf of the Investor pursuant to
or in connection with the transaction contemplated by this Agreement
shall be deemed to be made by the Investor hereunder. The
representations, warranties and covenants of the Investor contained or
deemed to be contained in this Agreement, or in the other Transaction
Documents shall survive the Closing of the subscription for, and issue
of, and sale of the Securities, and notwithstanding such Closing, and
regardless of any investigation by or on behalf of the Corporation with
respect thereto, shall continue in full force and effect for the
benefit of the Corporation for the Corporation's Period as defined
hereafter. For these purposes, "Corporation's Period" means that period
of time that obligations are explicitly expressed to survive in each
particular Transaction Document, or failing any such explicit
expression of survival, for the period of time starting from and
including the Closing Date and thereafter forever in the case of the
covenants herein or in the case of fraud and, otherwise with respect to
representations and warranties to and excluding the third (3rd)
anniversary of the Closing Date. After the expiration of the
Corporation's Period, the Investor shall be released from all
obligations and liabilities hereunder in respect of such
representations, warranties and covenants except with respect to any
claims made by the Corporation in writing prior to the expiration of
the particular Corporation's Period (in
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which event, liability shall survive until the final determination or
settlement of such claims).
3.3 CORPORATION'S REPRESENTATIONS AND WARRANTIES
Subject to the provisions of Section 7.2, the Corporation hereby
jointly and severally represents, warrants and covenants to the
Investor that, save and except as set out in Schedule 3.3 hereto, the
following representations are true and correct at the Time of Closing.
The Corporation acknowledges and confirms that the Investor is relying
upon such representations, warranties and covenants, in connection with
the subscription by the Investor for the Securities and the completion
of the transactions contemplated under the Agreement.
GOOD STANDING
(a) The Corporation is a corporation:
(i) duly incorporated and organized, validly subsisting
and in good standing under the laws of the state of
Delaware;
(ii) duly authorized, qualified and licensed to own its
properties, and to carry on business as presently
owned and carried on by it; and
(iii) having the power and authority and the right to enter
into and perform its obligations, if applicable,
under this Agreement and all other Transaction
Documents executed and delivered by such Company in
furtherance of the Closing of the transactions
contemplated under this Agreement including, without
limitation, to issue the Securities in accordance
with the terms of this Agreement.
CORPORATE AUTHORITY
(b) The execution and delivery of the Transaction Documents
including, without limitation, this Agreement and the
performance by the Corporation, of the transactions
contemplated by the Transaction Documents have been duly
authorized by all necessary corporate action of the
Corporation and by all other necessary corporate proceedings;
GUARANTEES AND UNDISCLOSED LIABILITIES
(c) The Corporation is not a party to nor bound by any agreement
of guarantee, indemnification, assumption or endorsement (or
any other like commitment) of the obligations, liabilities,
contingent or otherwise, or indebtedness of any other person,
firm or corporation, nor is the Corporation subject to any
liabilities save and except those disclosed in the SEC
Reports, except if incurred since May 31, 2000 to the date
hereof in the ordinary course of business consistent with past
experience;
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AGREEMENT BINDING
(d) Each of the Transaction Documents delivered by the
Corporation, are valid and legally binding obligations of the
Corporation, enforceable in accordance with their respective
terms except that: (i) the enforcement thereof may be limited
by bankruptcy, insolvency and other laws effecting the
enforcement of credits' rights generally, (ii) rights of
indemnity, contribution and waiver of contribution thereunder
may be limited under applicable law and (iii) equitable
remedies, including, without limitation, specific performance
and injunctive relief, may be granted only in the discretion
of a court of competent jurisdiction. Neither the execution of
this Agreement, or such other Transaction Documents by the
Corporation nor the performance by the Corporation of the
various terms and provisions hereof and thereof will violate
the articles of incorporation or other charter documents of
the Corporation. The Corporation is not a party to, subject to
or bound by any judgment, injunction or decree of any court or
governmental body that prevents the performance of this
Agreement, or any document referred to herein;
CONSENTS
(e) All Regulatory Approvals and all necessary consents or
approvals of any person or entity under any material contract
pertaining to each the Corporation or its assets or under any
regulatory authority having jurisdiction for the transactions
contemplated by the Transaction Documents have been obtained
by the Closing Date;
ADVERSE INFORMATION/EVENTS AND SEC REPORTS
(f) Other than the cessation of operations of Fullmetrics, Inc.,
the Corporation has no information nor knowledge of any facts
specific to its business or the Securities and not of general
knowledge that have not been disclosed to the Investor which,
if known to the Investor, might reasonably be expected to
deter an investor from completing the transaction herein. None
of the information or documents furnished by the Corporation
or the employees or agents of the Corporation, prior to the
date hereof to the Agent or the Investor in furtherance of the
Transaction Documents or in conjunction with this Agreement is
false, misleading or inaccurate in any material respect or
omits to state a material fact necessary in order to make any
of the statements therein not misleading. The Corporation has
previously furnished or made available to the Investor true
and complete copies of (i) its Annual Report on Form 10-KSB
for the fiscal year ended August 31, 1999, (ii) its quarterly
reports on Form 10-QSB filed since the fiscal year end for its
most recently filed Annual Report on Form 10-KSB was filed,
and (iii) its Proxy Statement relating to its most recent
Annual Meeting of Stockholders (collectively, the "SEC
Reports"). As of their respective dates, the SEC Reports (x)
complied as to form in all material respects with the
applicable requirements of the Securities Act and the rules
and regulations thereunder and the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, as
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the case may be, and (y) did not contain any untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
TRANSACTION COMPLIANCE
(g) The entering into of the Transaction Documents by the
Corporation, and the completion of the transactions
contemplated thereby do not result in the violation of any of
the terms and provisions of any indenture or other agreement,
written or oral, to which the Corporation may be a party, or,
of any applicable federal or state law or regulation;
LITIGATION
(h) Except as set forth in Schedule 3.3 or in the SEC Reports,
there are no actions, suits, arbitrations, or proceedings
pending or to the Corporation's knowledge threatened against,
by, or affecting the Securities, the business of the
Corporation, or the Corporation at law or in equity, or before
or by any federal, provincial, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which action, suit or
proceeding involves the possibility of any judgment against or
liability of the Corporation or the Investor, which would have
a material adverse effect on the Corporation. The Corporation
is not aware of any existing ground on which any such action,
claim, or proceeding may be commenced with any reasonable
likelihood of success which would produce a material adverse
effect;
RESIDENCY
(i) The Corporation is domiciled in the United States of America
for purposes of the Internal Revenue Code of 1986, as amended
("IRS Code");
CAPITAL
(j) The authorized capital of the Corporation consists of
75,000,000 shares of common stock, par value $.10 per share,
1,000,000 shares of Series A Convertible Preferred Stock, par
value $.10 per share, and 4,000,000 shares of undesignated
stock, par value $.10 per share. The SEC Reports sets out the
names of all persons who are registered owners of issued and
outstanding shares or rights to shares in the capital stock of
the Corporation holding 10% or more of the shares and rights
to shares of that class together with the number of such
shares or rights to shares held by that person and, on a fully
diluted basis, the number of shares and rights to shares of
each class of stock that are currently issued and outstanding.
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LICENSES
(k) The Corporation possess all material certificates, authority,
permits or licenses issued by the appropriate state,
provincial, municipal or federal regulatory agencies or bodies
necessary to conduct the business now operated by it and the
Corporation has not received any notice of proceedings
relating to the revocation or modification of any such
certificate, authority, permit or license which, if the
subject of an unfavourable decision, ruling or finding would
materially and adversely affect the conduct of the business,
operations, financial condition or income of the Corporation;
OPTIONS
(l) The Corporation is not a party to nor has granted any
agreement, warrant or right or privilege capable of becoming
an agreement, for the purchase, subscription or issuance of
any of the common shares or any other class of shares in the
capital stock of the Corporation, or securities convertible
into or exchangeable for such shares, other than as described
in the SEC Reports or pursuant to its 1995 Amended & Restated
Stock Incentive Plan;
FINANCIAL STATEMENTS/TITLE TO ASSETS
(m) The financial statements of the Corporation included in the
SEC Reports present fairly, in all material respects, the
financial position of the Corporation as of the periods set
out therein in accordance with generally accepted United
States accounting principles applied on a consistent basis.
The Corporation owns all of its assets recorded as assets on
the said financial statements with a full and complete legal
and beneficial title thereto free and clear of all liens,
claims, or encumbrances save and except as more particularly
referred to in the aforesaid financial statements or otherwise
disclosed in the SEC Reports or as may have subsequently been
disposed of for fair value in the ordinary course of business;
COMMISSIONS
(n) No commissions, brokerage, or finders fees are payable by the
Corporation or the Investor through or on account of any acts
of the Corporation, it's shareholders, or it's representatives
in connection with this Agreement or the Closing Documents;
CEASE TRADING
(o) No order ceasing or suspending trading in securities of the
Corporation or prohibiting the sale of securities by the
Corporation has been issued and no proceedings for this
purpose have been instituted, are pending, contemplated or
threatened;
DIVIDENDS
(p) Since May 31, 2000, the Corporation has not, directly or
indirectly, declared or paid any dividend or declared or made
any other distribution on any of its shares or securities of
any class, or, directly or indirectly, redeemed, purchased or
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<PAGE> 15
otherwise acquired any of its shares or securities or agreed
to do any of the foregoing;
SOFTWARE AND INTELLECTUAL PROPERTY
(q) Schedule 3.3(q) annexed hereto contains a description of the
software components that constitutes the Corporation's
principle product and services lines (the "KSI System").
Except as disclosed in Schedules 3.3(m) or 3.3(q), the
Corporation has the ultimate right to use, free and clear of
any liens, all trade secrets, copyrights, intellectual
property, source and object code, documentation, and all other
intellectual property that constitutes the KSI System or is
furnished by the Corporation to its clients as ancillary to
the use of the KSI System. To the best of its knowledge, the
Corporation is not using or in any way making use of any
confidential information or trade secrets, copyrights, trade
marks, or other intellectual property of any third party that
is material to the KSI System or the business of the
Corporation which is not under a subsisting right or license
in good standing granted by such third party to the
Corporation, and no claim has been asserted by any person to
the contrary effect. The KSI System to date has been
developed, coded, structured, and documented in accordance
with the standard of care of professional software developers
and in accordance with current technical standards. The KSI
System that has been supplied to customers of the Corporation
up to the date hereof has operated, and hereafter will
continue to operate, in accordance with the descriptions,
documentation, and specifications pertaining thereto supplied
to such customers without any abnormal abends or aborts or
invalid or incorrect results or degradation of performance;
save and except as experienced within customer expectations
and within acceptable industry experience for well developed
software and, with respect to future experience with such
installed KSI System, at frequency and severity levels no
greater than experienced by the Corporation with respect to
the KSI System to the date hereof.
(r) To the best of the knowledge of the Corporation, the computer
systems, including hardware and software used internally in
the business of the Corporation, are free from significant
viruses and disabling devices, and the Corporation has taken,
and shall continue to take, all steps and implement all
procedures necessary to ensure, so far as reasonably possible,
that such systems are free from viruses and disabling devices
and will remain so.
SECURITIES
(s) Upon receipt of the Purchase Price for the Securities, the
Purchased Shares shall be at the Time of Closing duly and
validly issued, as fully paid and non-assessable securities of
the Corporation. Subject to the implementation of the
Necessary Subsequent Proceedings, the Common Stock underlying
the Purchased Shares shall, upon exercise of the conversion
rights in the Purchased Shares in accordance with the terms of
the Certificate and this Agreement, and without
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<PAGE> 16
further payment by the holder, be duly and validly issued, as
fully paid and non-assessable Common Shares of the capital
stock of the Corporation.
(t) The issue and delivery of the Securities to the Investor on
the Closing Date or upon conversion of the Purchased Shares,
as applicable, shall be made in compliance with all applicable
securities laws pertaining to the Corporation or the issue of
the Securities and, subject to implementation of the Necessary
Subsequent Proceedings, such issue shall be exempt from any
requirement respecting the filing of a prospectus or
registration statement and no rulings, orders, consents or
approvals required to permit the sale of the Securities to the
Investor under such securities legislation are required.
(u) One year after the date of issuance of the Purchased Shares,
the Common Shares issuable upon conversion of the Purchased
Shares may be resold pursuant to Rule 144 under the Securities
Act, as currently in effect, subject to the volume limitations
set forth therein and provided that (x) the Corporation's
Common Stock continues to be registered pursuant to Section 12
of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") and (y) the Corporation has filed all reports
required to be filed under Section 13 or 15(d) of the Exchange
Act during the one-year period prior to any resale of
Purchased Common Shares.
CONTRACTS AND CLIENT RELATIONS
(v) A true and complete list of all material contracts (the
"Contracts") in effect to which the Corporation is a party
have been filed as Exhibits to the SEC Reports and the
Corporation has prior to the date hereof provided the Investor
with true and complete copies of all such Contracts. All
Contracts have been duly authorized and delivered by the
Corporation, are in full force and effect against the
Corporation and constitute the valid and binding obligations
of the Corporation and, to the best of the Corporation's
knowledge, the other parties thereto, enforceable in
accordance with their respective terms. As to the Contracts,
(i) there are no existing breaches or defaults by the
Corporation thereunder or, to the knowledge of the Corporation
by the other parties to such Contracts, (ii) no event, act or
omission has occurred or, as the result of the consummation of
the transactions contemplated hereby will occur which (with or
without notice, lapse of time or the happening or occurrence
of any other event) would result in a default by the
Corporation or give cause for termination thereof, provided
that insofar as the foregoing representation involves the
actions or omissions of parties other than the Corporation it
shall be limited to the expressed terms of the Contracts
together with the knowledge of the Corporation and (iii) none
of the parties to such Contracts have expressed an indication
to the Corporation of their intention to cancel, renegotiate
or exercise or not exercise any right under such Contracts.
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<PAGE> 17
RELATED TRANSACTIONS
(w) Except as disclosed in the SEC Reports no current or former
shareholder, director or officer or employee of the
Corporation or any Associate of any such person is presently,
directly or indirectly, through his or its affiliation with
any other person or entity, party to any transaction with the
Corporation providing for the furnishing of services (other
than employment of such individuals by the Corporation), or
products by or to, or rental of real or personal property from
or to, or otherwise requiring cash payments to or by, any such
persons that would be required to be disclosed in the SEC
Reports).
SUBSIDIARIES AND INDIRECT INVESTMENTS
(x) The Corporation has no subsidiaries, or other indirect
investments, except for Fullmetrics, Inc. and Knowledge
Mechanics, Inc.
3.4 SURVIVAL OF CORPORATION'S REPRESENTATIONS
All statements contained in any Transaction Document, certificate or
other instrument delivered by or on behalf of the Corporation pursuant
to or in connection with the transaction contemplated by this Agreement
shall be deemed to be made by the Corporation hereunder. The
representations, warranties and covenants of the Corporation contained
or deemed to be contained in this Agreement or in the other Transaction
Documents, shall survive the Closing of the subscription for, and issue
of, the Securities, and notwithstanding such Closing, and regardless of
any investigation by or on behalf of the Investor with respect thereto,
shall continue in full force and effect for the benefit of the Investor
for the Investor's Period as defined hereafter. For these purposes,
"Investor's Period" means that period of time that obligations are
explicitly expressed to survive in each particular Transaction
Document, or failing any such explicit expression of survival, for the
period of time starting from and including the Closing Date and
thereafter forever in the case of the covenants herein or in the case
of fraud or in respect of matters pertaining to the shares set out in
subsection 3.3(s) hereof, and otherwise with respect to representations
and warranties, to and including the date of expiration of potential
liability under the IRS Code in respect of liability thereunder, and in
all other cases, to and excluding the third (3rd) anniversary of the
Closing Date. After the expiration of the Investor's Period, the
Corporation shall be released from all obligations and liabilities
hereunder in respect of such representations, warranties and covenants
except with respect to any claims made by the Investor in writing prior
to the expiration of the particular Investor's Period (in which event,
liability shall survive until the final determination or settlement of
such claims).
ARTICLE 4 - CLOSING ARRANGEMENTS
4.1 PLACE OF CLOSING
The parties will use all reasonable best efforts to avoid a formal
closing requiring personal attendance in one place at the same time.
Instead, the parties will use all reasonable efforts to effect closing
procedures through escrow of documents at Brien G. McKenna, Barrister &
Solicitor, Toronto, and through Oppenheimer, Wolff & Donnelly LLP,
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<PAGE> 18
Minnesota, in accordance with procedures agreed between those two law
firms. In the event that a formal closing is required with the
attendance of parties, such closing will take place at the Time of
Closing at the offices of:
Oppenheimer, Wolff & Donnelly LLP
Attorneys Plaza VII
45 South Seventh Street
Suite 3400
Minneapolis MN 55402-1609
The time and place for any such closing may be amended by agreement
between the parties hereto.
4.2 TENDER
Any tender of documents or money under this Agreement may be made upon
the parties or their respective counsel and money may be tendered by
official bank draft drawn upon a USA chartered bank or by negotiable
cheque payable in USA funds and certified by a Canadian chartered bank
or trust company.
4.3 CLOSING PROCEDURES FOR SECURITIES
(a) Without limiting the other matters to be deduced at the Time
of Closing, at the Time of Closing, the Corporation shall
deliver to the Investor:
(i) a certificate representing the Securities subscribed
for herein duly registered in the name of the
Investor; and
(ii) the requisite legal opinion and certificates and
other conditions of closing as contemplated in the
agenda tabled at Closing;
(b) Without limiting the other matters to de deduced at the Time
of Closing, at the Time of Closing, the Investor shall deliver
to the Corporation:
(i) an irrevocable direction to convert to equity a
portion of the Debt owed by the Corporation to the
Investor that is equal to the Purchase Price;
(ii) the requisite certificates and other conditions of
closing as contemplated in the agenda delivered at
Closing.
ARTICLE 5 - COVENANTS OF THE PARTIES RE CLOSING
5.1 APPROVALS AND CONSENTS
Prior to the Closing Date, each of the Corporation and Investor have
obtained all necessary consents of all other third parties, and shall
after the Closing Date comply with any conditions thereof, which are
required in connection with the completion of any of the transactions
contemplated by this Agreement, the execution of this Agreement or the
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<PAGE> 19
Closing, or the performance of any of the terms and conditions hereof,
provided that the Investor shall not be obliged to comply with any such
conditions unless the same have been disclosed to and accepted by the
Investor prior to Closing. To the extent that a necessary consent to
this transaction is to be obtained by the Investor, the Corporation
shall not be obliged to comply with any conditions of such consent
unless, prior to Closing, such conditions have been disclosed to and
accepted by the person(s) from whom compliance is required.
5.2 NATURE OF COVENANTS
The covenants of the Corporation and the Investor, as the case may be,
set forth in this Agreement shall survive the Closing and,
notwithstanding the Closing, shall continue in full force and effect
for the benefit of the Investor and the Corporation, as the case may
be.
5.3 COVENANTS OF THE CORPORATION
The Corporation hereby covenants to and with the Investor that it will:
(a) fulfil all legal requirements to permit the issuance and
offering of the Securities as contemplated in this Agreement
including, without limitation, compliance with all applicable
securities laws and regulations to enable the same to be
offered for subscription and issued without the necessity of
filing a prospectus or registration statement;
(b) obtain the necessary regulatory consents to the issue of the
Securities, if any; and
(c) within the time periods prescribed by law, after the Closing
Date (as herein defined), file such documents as may be
required under the applicable securities laws relating to the
private placement of the Securities, if applicable.
ARTICLE 6 - SIMULTANEOUS CLOSING
6.1 SIGN AND CLOSE
This Agreement has been executed and delivered coincidentally with the
closing of the transactions contemplated hereunder.
ARTICLE 7 - INDEMNIFICATIONS
7.1 INDEMNIFICATION BY INVESTOR
The Investor hereby agrees to indemnify and save harmless the
Corporation from and against all manner of debts, losses, demands,
claims, actions, causes of action, damage, liabilities, costs, expenses
or penalties whatsoever and howsoever arising (collectively, the
"Corporation's Damages") incurred by the Corporation at any time
hereafter, whether directly, or indirectly, that are existing, arising,
accruing, incurred or outstanding as at the
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Time of Closing on the Closing Date, or that arise thereafter in
respect of transactions to and including the Time of Closing of the
Closing Date and that are:
(a) Attributable to the breach or incorrectness of any and each
representations, warranties or covenants given in this
Agreement or that are given in any of the Transaction
Documents in favour of the Corporation;
(b) All reasonable costs and expenses of the Corporation in
pursuing its remedies under this Agreement, including
reasonable legal fees and expenses on a solicitor and client
basis; and
(c) Interest on all of the amounts aforesaid at the pre-judgment
and post-judgment interest rates allowed by courts of
competent jurisdiction in the state of Delaware;
provided however, that notice of such claim for indemnity is given by
the Corporation to the Investor during the Corporation's Period. The
indemnities given in this Section 7.1 are separate and distinct from
any indemnities given by, or any obligations of, the Investor in any
other Transaction Document and shall not merge with, or be in
substitution for, any such indemnities or obligations, all of which are
hereby expressed to be separately enforceable covenants. The foregoing
liability of the Investor shall not arise or be effective, except in
the case of fraud, until the aggregate amount of all liability claims
hereunder exceeds $25,000.00 at which time the Investor shall be liable
for all such liability claims including the first $25,000.00 thereof.
7.2 INDEMNIFICATION BY CORPORATION
The Corporation hereby agrees to indemnify and save harmless the
Investor from and against all manner of debts, losses, demands, claims,
actions, causes of action, damage, liabilities, costs, expenses, or
penalties, whatsoever and howsoever arising (collectively, the
"Investor's Damages"), incurred by the Investor at any time hereafter,
whether directly, or indirectly, or through the diminished value of the
Securities, that are existing, arising, accruing, incurred or
outstanding as of the Time of Closing on the Closing Date, or that
arise thereafter in respect of transactions to and including the Time
of Closing on the Closing Date and that are:
(a) Attributable to the breach or incorrectness of any and each of
the representations, warranties or covenants in this Agreement
or that are given in any of the Transaction Documents in
favour of the Investor;
(b) All reasonable costs and expenses of the Investor in pursuing
its remedies under this Agreement, including reasonable legal
fees and expenses on a solicitor and client basis; and
(c) Interest on all of the amounts aforesaid at the pre-judgment
and post-judgment interest rates allowed by courts of
competent jurisdiction in the state of Minnesota;
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provided, however, that notice of such claim for indemnity is given by
the Investor to the Corporation during the Investor's Period. The
indemnities given in this Section 7.2 are separate and distinct from
any indemnities given by, or any obligations of, the Corporation in any
other Transaction Document and shall not merge with, or be in
substitution for, any such indemnities or obligations, all of which are
hereby expressed to be separately enforceable covenants. The foregoing
liability of the Corporation shall not arise or be effective, except in
the case of fraud, until the aggregate amount of all liability claims
hereunder exceeds $25,000.00 at which time the Corporation shall be
liable for all such liability claims including the first $25,000.00
thereof.
7.3 PROCEDURE FOR INDEMNIFICATION
(a) CLAIMS OTHER THAN THIRD PARTY CLAIMS. Following receipt from
the Corporation or the Investor, as the case may be (the
"Indemnified Party"), of a written notice of a claim for
indemnification which has not arisen in respect of a Third
Party Claim (as defined in Section 7.3(b) below), the party
who is in receipt of such notice (the "Indemnifying Party")
shall have 30 days to make such investigation of the claim as
the Indemnifying Party considers necessary or desirable. For
the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information
relied upon by the Indemnified Party to substantiate the
claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of such 30 day period (or
any mutually agreed upon extension thereof) to the validity
and amount of the claim, the Indemnifying Party shall
immediately pay to the Indemnified Party the full agreed upon
amount of the claim. If the Indemnified Party and the
Indemnifying Party do not agree within such period (or any
mutually agreed upon extension thereof), such dispute shall be
resolved by an action in a court of law.
(b) THIRD PARTY CLAIMS. The Indemnified Party shall notify the
Indemnifying Party in writing as soon as is reasonably
practicable after being informed in writing that facts exist
which may result in a claim originating from a Person other
than the Indemnified Party (a "Third Party Claim") and in
respect of which a right of indemnification given pursuant to
Section 7.1 or 7.2 may apply. The Indemnifying Party shall
have the right to elect, by written notice delivered to the
Indemnified Party within 10 days of receipt by the
Indemnifying Party of the notice from the Indemnified Party in
respect of the Third Party Claim, at the sole expense of the
Indemnifying Party, to participate in or assume control of the
negotiation, settlement or defense of the Third Party Claim,
provided that:
(i) such will be done at all times in a diligent and bona
fide matter;
(ii) the Indemnifying Party acknowledges in writing its
obligation to defend the Indemnified Party in
accordance with the terms contained in this Agreement
in respect of that Third Party Claim; and
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(iii) the Indemnifying Party shall pay all reasonable
out-of-pocket expenses incurred by, the Indemnified
Party as a result of such participation or
assumption.
If the Indemnifying Party elects to assume such control, the
Indemnified Party shall cooperate with the Indemnifying Party and its
counsel and shall have the right to participate in the negotiation,
settlement or defense of such Third Party Claim at its own expense. If
the Indemnifying Party does not so elect or, having elected to assume
such control, thereafter fails to proceed with the settlement or
defense of any such Third Party Claim, the Indemnified Party shall be
entitled to assume such control. In such case, the Indemnifying Party
shall cooperate where necessary with the Indemnified Party and its
counsel in connection with such Third Party Claim and the Indemnifying
Party shall be bound by the results obtained by the Indemnified Party
with respect to such Third Party Claim.
7.4 ADDITIONAL RULES AND PROCEDURES
The obligation of the parties to indemnify each other pursuant to this
Article 7 shall also be subject to the following:
(a) an Indemnified Party shall only be entitled to make a claim
for indemnification pursuant to Section 7.1 or 7.2, as the
case be, if written notice containing reasonable particulars
of such claim is delivered to the Indemnifying Party within
the time periods provided for in Section 3.2 or 3.4, as the
case may be;
(b) if any Third Party Claim is of a nature such that the
Indemnified Party is required by applicable law to make a
payment to any Person (a "Third Party") with respect to such
Third Party Claim before the completion of settlement
negotiations or related legal proceedings, the Indemnified
Party may make such payment and the Indemnifying Parry shall,
forthwith after demand by the Indemnified Party, reimburse the
Indemnified Party for any such payment. If the amount of any
liability under the Third Party Claim in respect of which such
a payment was made, as finally determined, is less than the
amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, forthwith
after receipt of the difference from the Third Party, pay such
difference to the Indemnifying Party;
(c) except in the circumstances contemplated by subsection 7.4(b)
above, and whether or not the Indemnifying Party assumes
control of the negotiation, settlement or defense of any Third
Party Claim, the Indemnified Party shall not settle or
compromise any Third Party Claim except with the prior written
consent of the Indemnifying Party;
(d) the Indemnifying Party and the Indemnified Party shall provide
each other on an ongoing basis with all information which may
be relevant to the other's liability relating to a Third Party
Claim hereunder and shall supply copies of all relevant
documentation promptly as they become available; and
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(e) notwithstanding subsection 7.4(c), the Indemnifying Party
shall not settle any Third Party Claim or conduct any related
legal or administrative proceeding in a manner which would, in
the opinion of the Indemnified Party, acting reasonably, have
a material adverse impact on the Indemnified Party.
7.5 RIGHTS CUMULATIVE
The rights of indemnification contained in this Article 7 are
cumulative and are in addition to every other right or remedy of the
parties contained in this Agreement or otherwise.
ARTICLE 8 - GENERAL
8.1 NON-MERGER
Each party hereby agrees that all provisions of this Agreement shall
not merge on the Closing of the transactions contemplated in this
Agreement and shall, thereafter, survive for the periods of time
expressly set out in this Agreement and if such survival is not limited
in time shall, subject to applicable limitation periods otherwise
imposed by law, forever survive the execution and delivery of this
Agreement until fully fulfilled or performed.
8.2 EXPENSES
Except as set out hereafter, each of the parties hereto shall bear all
expenses incurred by it in connection with this Agreement including,
without limitation, the charges of their respective, accountants and
financial advisors. Notwithstanding the foregoing however, the
Corporation shall bear the reasonable legal and accounting fees
incurred by the Investor in connection with its due diligence and the
drafting and legal review of the transactions, agreements and documents
contemplated by and directly relating to the transactions contemplated
herein.
Such amounts payable by the Corporation accruing to, or known by, the
Time of Closing shall be paid by the Corporation at the Time of
Closing.
8.3 FURTHER ASSURANCES
The parties shall do all such things and provide all such reasonable
assurances as may be required to consummate the transactions
contemplated hereby, and each party shall provide such further
documents or instruments required by any other party as may be
reasonably necessary or desirable to effect the purpose of this
Agreement and carry out its provisions, whether before or after the
closing.
8.4 BENEFIT OF THE AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted
assigns of the parties.
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8.5 ENTIRE AGREEMENT
With respect to the subject matter of the Transaction Documents, the
Transaction Documents (a) set forth the entire agreement between the
parties and any persons who have in the past or who are now
representing any of the parties, (b) supersedes all prior
understandings and communications between the parties or any of them,
oral or written, express or implied including the Letter of Intent, and
(c) constitutes the entire agreement between the parties. Each party
acknowledges that it shall have no right to rely upon any amendment,
promise, modification, statement or representation made or occurring
subsequent to the execution of this Agreement unless the same is in
writing and executed by the parties hereto.
8.6 WAIVER
The failure of any party to enforce at any time any of the provisions
of this Agreement or any of its rights in respect thereto or to insist
upon strict adherence to any term of this Agreement shall not be
considered to be a waiver of such provision, right or term or in any
way to affect the validity of this Agreement or deprive the applicable
party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. The exercise by any party of
any of its rights provided by this Agreement shall not preclude or
prejudice such party from exercising any other right it may have under
this Agreement, irrespective of any previous action or proceeding taken
by it hereunder. Any waiver by any party of the performance of any of
the provisions of this Agreement shall be effective only if in writing
and signed by a duly authorized representative of such party.
8.7 NOTICES
All communications which may be or are required to be given by any
party to any other party, shall be in writing and (i) delivered
personally, (ii) sent by prepaid courier service or mail, or (iii) sent
by prepaid telecopier or other similar means of electronic
communication to the parties at their following respective address.
TO THE CORPORATION:
------------------
XBOX TECHNOLOGIES, INC.
10400 Viking Drive, Suite 110
Eden Prairie, Minnesota 55344
Attention: President
Telecopier: (952) 944-7812 with a copy to:
Oppenheimer, Wolff & Donnelly LLP
Attorneys Plaza VII
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402-1609
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Attention: Mr. Thomas A. Letscher
Telecopier: (612) 607-7100
TO THE INVESTOR:
---------------
TECHinspirations Inc. (Cayman)
c/o CIBC Bank and Trust Company (Cayman) Limited
P.O. Box 694
CIBC Building, Edward Street
Georgetown, Grand Cayman
B.W.I.
Attention: Mr. Ian Phillips
Telecopier: (345) 949-7904
with a copy to TECHinspirations (Canada) Inc.
2275 No. 8 Side Road
R.R. #2
Milton, Ontario L9T 2X6
Attention: Mr. Frank van Luttikhuizen
Telecopier: (905) 335-1889
and with a copy to the Investor's counsel at:
Brien G. McKenna
60 Bedford Road, 2nd Floor
Toronto, ON M5R 2K2
Attention: Mr. Brien G. McKenna
Telecopier: (416) 929-9931
8.8 ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder shall be
assignable by any party without the prior written consent of each of
the other parties.
8.9 SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, such
provision shall be severed and the remainder of this Agreement shall be
unaffected thereby, but shall continue to be valid and enforceable to
the fullest extent permitted by law.
8.10 COUNTERPARTS
This Agreement may be executed by the parties in separate counterparts
(by original or facsimile signature) each of which when so executed and
delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
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IN WITNESS WHEREOF the parties have hereunder duly executed this
Agreement on the date first above written.
XBOX TECHNOLOGIES, INC.
Per:
-------------------------------
Name:
Title:
TECHinspirations Inc. (Cayman)
Per:
-------------------------------
Name:
Title:
TECHinspirations Inc. (Cayman)
Per:
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Name:
Title:
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SCHEDULE 1.1
DEFINITIONS
This is Schedule 1.1 of the Agreement between XBOX Technologies, Inc. and
TECHinspirations Inc. (Cayman) made as of the 31st day of October, 2000 with
effect as of the 31st day of August, 2000. Where used herein or in any amendment
hereto, the following terms have the following meanings, respectively:
(a) "Advisor" means TECHinspirations, Inc. a Nevada corporation.
(b) "Agreement" means this Agreement and includes all Schedules
annexed to this Agreement and referenced in Section 1.5 of
this Agreement;
(c) "Agreement Date" means October 31, 2000;
(d) "Authority" means any governmental or regulatory authority,
body, agency or department, whether federal, provincial or
municipal;
(e) "Business Day" means a day other than a Saturday, Sunday or
any other day on which the principal commercial banks located
at the City of Minneapolis, Minnesota are not open for
business during normal banking hours;
(f) "Closing" means the completion of the issuance by the
Corporation, and subscription by the Investor, of the Security
as provided hereunder;
(g) Closing Date" or "Date of Closing" means the Agreement Date;
(h) "Closing Documents" means all documents of conveyance,
instruments and agreements delivered at the Closing of the
transactions contemplated hereunder;
(i) "Common Shares" or "common shares" or "Common Stock" means
shares of common stock, $.10 par value, of the Corporation.;
(j) "Corporation's Liabilities" bears the meaning attributable to
it in Section 7.1 of the Agreement;
(k) "Corporation's Period" bears the meaning attributable to it in
Section 3.2 of the Agreement;
(1) "Indemnified Party" bears the meaning attributable to it in
subsection 7.3(a) of the Agreement;
(m) "Indemnifying Party" bears the meaning attributable to it in
subsection 7.3(a) of the Agreement;
(n) "Investor's Damages" bears the meaning attributable to that
term in Section 7.2 of this Agreement;
Sch. 1.1 - 1
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(o) "Investor's Period" bears the meaning attributable to that
term in Section 3.4 of this Agreement;
(p) "Person" includes an individual, corporation, partnership,
trustee, trust, unincorporated association, organization,
syndicate, executor, administrator or other legal or personal
representative and pronouns have a similarly extended meaning;
(q) "Regulatory Approvals" means all necessary approvals, permits,
sanctions, rulings, orders or consents from any government,
governmental body, regulatory authority or self-regulatory
organization within the United States with respect to the
transactions contemplated by this Agreement;
(r) "SEC Reports" bears the meaning attributable to that term in
paragraph 3.3(f) hereof;
(s) "Securities" means the Purchased Shares and the shares of
Common Stock issuable upon conversion of the Purchased Shares.
(t) "Shares" bears the meaning attributable to that term in
Section 2.1 of this Agreement;
(u) "Third Party Claim" bears the meaning attributable to it in
Section 7.3(b) of the Agreement;
(v) "Time of Closing" means 10:00 a.m. (Minnesota time) on the
Closing Date or such other time as the Investor and the
Corporation may agree upon; and
(w) Transaction Documents" collectively means the documents to be
delivered at Closing and this Agreement.
Sch. 1.1 - 2
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SCHEDULE 3.3
TO PURCHASE AGREEMENT
DATED AS OF ______, 2000
BETWEEN XBOX TECHNOLGIES, INC. AND
TECHINSPIRATIONS, INC. (CAYMAN)
This Disclosure Schedule (the "Disclosure Schedule") which consists of
this cover page and all the accompanying pages arid attachments, is made and
given by XBOX TECHNOLOGIES, INC. (the "Company") to TECHinspirations, Inc.
(Cayman) (the "Investor") in connection with the execution and delivery of the
Purchase Agreement, dated as of _________, 2000, by and between the Company and
the Investor.
Sch. 3.3 - 1
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SECTION 3.3(h) LITIGATION
The Company is involved with a dispute with MicroSoft Corporation over
the name "XBOX".
Sch. 3.3 - 2
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SECTION 3.3(q) SOFTWARE AND INTELLECTUAL PROPERTY
Need input from Bill Klco
Sch. 3.3 - 3
