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FUTURELINK DISTRIBUTION CORP
PURCHASE OF
ALL OF THE ISSUED AND OUTSTANDING SHARES
IN THE CAPITAL OF
RIVERVIEW MANAGEMENT CORPORATION
August 4, 1998
THE SECURITIES, INCLUDING THE FUTURELINK SHARES AND ANY SHARES ISSUED PURSUANT
SUBSECTION 2.04(c) OF THIS AGREEMENT HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING SOLD PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
MORRISON, BROWN, SOSNOVITCH
1 TORONTO STREET
SUITE 910, P.O. BOX 28
TORONTO, ONTARIO
M5C 2V6
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TABLE OF CONTENTS
RECITALS ....................................................................................2
ARTICLE 1.00 - INTERPRETATION ...............................................................2
1.01 Definitions ..................................................................2
1.02 Canadian Dollars .............................................................6
1.03 Extended Meanings ............................................................6
1.04 Entire Agreement .............................................................6
1.05 Headings .....................................................................7
1.06 Accounting Terms .............................................................7
1.07 Schedules ....................................................................7
1.08 Recitals .....................................................................8
ARTICLE 2.00 - PURCHASE AND SALE OF SHARES ..................................................8
2.01 Purchase and Sale ............................................................8
2.02 Purchase Price ...............................................................8
2.04 Payment of Purchase Price ....................................................8
ARTICLE 3.00 - REPRESENTATIONS AND WARRANTIES ...............................................9
3.01 Representations and Warranties of the Sellers ................................9
3.02 Representations and Warranties of the Buyer .................................22
ARTICLE 4.00 - COVENANTS ...................................................................35
4.01 Covenants of the Sellers and the Corporation During Interim Period ..........35
4.02 Covenants of the Buyer During Interim Period ................................37
4.04 Covenants on Closing ........................................................39
4.05 Post-Closing Covenants ......................................................39
ARTICLE 5.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER ............................40
5.01 Conditions Precedent ........................................................40
5.02 Result of Failure to Satisfy Condition Precedent ............................44
6.01 Conditions Precedent ........................................................44
6.02 Result of Failure to Satisfy Condition Precedent ............................46
ARTICLE 7.00 - PRIOR TRANSACTIONS ..........................................................46
7.01 Interim Period Transactions .................................................46
ARTICLE 8.00 - BREAK-UP FEE AND DEPOSIT ....................................................47
ARTICLE 9.00 - RISK OF LOSS ................................................................47
9.01 Risk of Total Loss ..........................................................47
9.02 Risk of Partial Loss ........................................................48
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ARTICLE 10.00 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES .................................48
10.01 Survival of the Sellers's Representations, Warranties and Covenants ........48
10.02 Survival of the Buyer's Representations, Warranties and Covenants ..........49
ARTICLE 11.00 - INDEMNIFICATION ............................................................49
11.01 Scope of Indemnification ...................................................49
11.02 Litigation .................................................................49
11.03 Set Off and Similar Rights of the Buyer ....................................50
11.04 Reimbursement ..............................................................50
12.01 Public Announcement. .......................................................50
12.02 Notices ....................................................................50
12.03 Expense ....................................................................51
12.04 Time of the Essence ........................................................51
12.05 Governing Law ..............................................................51
12.06 Severability ...............................................................51
12.07 Further Assurances .........................................................52
12.08 Counterparts. ..............................................................52
12.09 Enurement ..................................................................52
12.10 Time Periods ...............................................................52
12.11 Language of Agreement ......................................................52
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SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 4th day of August, 1998
A M O N G:
FUTURELINK DISTRIBUTION CORP., a corporation incorporated pursuant to
the laws of the State of Colorado, (the "Buyer")
OF THE FIRST PART;
- and -
DONALD A. BIALIK., of the City of Calgary in the Province of Alberta
("Donald")
OF THE SECOND PART;
- and -
OLIVIA B. BIALIK of the City of Calgary, in the Province of Alberta
("Olivia") OF THE THIRD PART; - and -
BIALIK FAMILY TRUST (the "Trust")
OF THE FOURTH PART;
- and -
RIVERVIEW MANAGEMENT CORPORATION, a corporation incorporated under the
laws of the Province of Alberta ( "RMC")
OF THE FIFTH PART;
- and -
SYSGOLD LTD., a corporation incorporated under the laws of the Province
of Alberta ( "SysGold")
OF THE SIXTH;
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- and -
FUTURELINK DISTRIBUTION CORP., a corporation incorporated pursuant to
the laws of the Province of Alberta; (the "FutureLink Alberta")
OF THE FIRST PART;
RECITALS
WHEREAS:
A. The Buyer and the Sellers have agreed that it would be in the best
interests of the Buyer and SysGold to merge their operations;
B. RMC is the sole registered and beneficial owner of record of all of the
issued and outstanding shares in the capital of SysGold (the "SysGold
Shares")
C. Donald, Olivia and the Trust (collectively referred to as the "Sellers")
are the sole registered and beneficial owner of record of all of the
issued and outstanding shares in the capital of RMC (the "Purchased
Shares");
D. The Sellers have agreed to sell the Purchased Shares to the Buyer, and
the Buyer has agreed to buy such Purchased Shares from the Sellers, upon
and subject to the terms and conditions set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
sum of Two Dollars ($2.00) now paid by the Buyer to each of the Sellers, SysGold
and RMC (the receipt and sufficiency of which is hereby acknowledged) and of the
mutual covenants and agreements contained in this Agreement, the parties
covenant and agree with each other as follows:
ARTICLE 1.00 - INTERPRETATION
1.01 DEFINITIONS. In addition to any other defined terms contained in this
Agreement, the following words and phrases have the following meanings:
(a) "Agreement", "this Agreement", "hereto", "hereof", "herein", "hereunder"
and similar expressions refer to this Agreement including its Schedules
and not to any particular article, section or other portion of this
Agreement and include every amendment or instrument supplementary hereto
or in implementation hereof;
(b) "Arm's length" shall have the same meaning as those words are defined in
the Income Tax Act (Canada) from time to time;
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(c) "Assets" means all the assets, interests, undertakings, rights and
properties of the Corporation of every kind and description, real or
personal, tangible or intangible and wherever they are located as of the
date of this Agreement including, without limitation:
(i) all machinery, equipment, furniture, furnishings and
accessories, spare parts, manuals and supplies of all kinds;
(ii) all inventory;
(iii) all accounts receivable, trade accounts, notes receivable and
other debts due or accruing due and the full benefit of all
securities for such accounts, notes or debts;
(iv) the full benefit of all contracts, engagements or commitments,
whether written or oral, including, without limitation, all
forward commitments by the Corporation for equipment, inventory,
supplies and materials entered into in the ordinary course of
business except for two vehicle leases for a 1998 Chevrolet
Tahoe and a 1998 Chevrolet Suburban the obligations of which
will be assumed by the Sellers;
(v) prepaid expenses including, without limitation, prepaid rent,
insurance premiums, utility deposits and any other kind of
payment or amount that could be considered a prepaid expense
under generally accepted accounting principles;
(vi) all registered or unregistered trade marks, trade names, trade
or brand names, service marks, copyrights, designs, inventions,
patents, patent applications, patent rights (including any
patents issuing on such applications or rights), licences,
telephone numbers, customer lists, sub-licences, franchises,
formulae, trade secrets, processes, technology and other
industrial property and intangibles including, without
limitation, all restrictive agreements or negative covenant
agreements the Corporation may have;
(vii) the goodwill of the Business including, without limitation, any
rights which the Sellers or the Corporation possesses with
respect to the use the name "SysGold", or any variation thereof,
as part of the name of, or in connection with the business
carried on or to be carried on by, the Corporation; and
(viii) all other property, assets and rights, real or personal,
tangible or intangible, owned by the Corporation or to which it
is entitled;
(d) "Break-up Fee" has the meaning set out in Section 8.01;
(e) "Business" means the business presently carried on by the Corporation
including any business carried on under the name and style, "SysGold";
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(f) "Business Day" means a day which is not a Saturday, a Sunday or a
statutory holiday;
(g) "Buyer's Accountants" means Ernst & Young or such other firm of
chartered accountants as may be designated by the Buyer;
(h) "Buyer's Counsel" means Morrison, Brown, Sosnovitch or such other firm
of lawyers as may be designated by the Buyer;
(i) "Buyer's Employee Benefit Plan" has the meaning set out in subsection
3.02 (kk);
(j) "Closing Date" means August 20, 1998, or such other date as may be
agreed upon by the Buyer and the Sellers;
(k) "Corporation" means SysGold, SysGold Inc. and RMC together;
(l) "Confidential Information" means, with respect to the Sellers
obligations the following pertaining to the Buyer and FutureLink Alberta
and with respect to the Buyers obligations the following pertaining to
the Corporation: all information relating to the business of the other
party or any of its associated, related or affiliated companies,
including, but not limited to, material contracts, customer lists,
financial statements or information, reports, employee information,
banking information, and any information whether written or verbal which
the other receives through due diligence or otherwise in the preparation
of the transactions contemplated herein that is not generally available
to the public;
(m) "Deposit" has the meaning set out in section 2.03;
(n) "Employee Benefit Plans" has the meaning set out in subsection 3.01
(ll);
(o) "Encumbrances" means any claim, lien, security interest, right,
privilege, restriction, demand or other encumbrance whatsoever affecting
the property in question, or any right capable of becoming such an
encumbrance;
(p) "Financial Statements" means:
(i) the unaudited financial statements of SysGold, for the fiscal
years ended October 31, 1993 through 1997, and the interim
financial statements for the period ending May 31, 1998, each
consisting of a balance sheet as at the end of each fiscal
period, a statement of profit and loss, and a statement of
changes in financial position with accompanying notes, in
respect of each fiscal period, in each case prepared in
accordance with generally accepted accounting principles,
consistently applied from period to period; and
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(ii) the unaudited financial statements of RMC, for the fiscal year
ended September 30, 1993 through 1997, and the interim financial
statements for the period ending July 31, 1998 each consisting
of a balance sheet as at the end of each fiscal period, a
statement of profit and loss, and a statement of changes in
financial position with accompanying notes, in respect of each
fiscal period, in each case prepared in accordance with
generally accepted accounting principles, consistently applied
from period to period;
(iii) the unaudited financial statements of SysGold Inc., for the
fiscal year ended _________, 1993 through 1997, and the interim
financial statements for the period ending __________,1998 each
consisting of a balance sheet as at the end of each fiscal
period, a statement of profit and loss, and a statement of
changes in financial position with accompanying notes, in
respect of each fiscal period, in each case prepared in
accordance with generally accepted accounting principles,
consistently applied from period to period; a copy of each of
which are attached as the Financial Statements Schedule;
(q) "FutureLink Financial Statements" means:
(i) the audited financial statements of FutureLink Alberta,
for the fiscal years ended December 31, 1996 and 1997
each consisting of a balance sheet as at the end of each
fiscal period, a statement of profit and loss, and a
statement of changes in financial position with
accompanying notes, in respect of each fiscal period, in
each case prepared in accordance with Canadian generally
accepted accounting principles, consistently applied
from period to period; and
(ii) the audited financial statements of the Buyer for the
fiscal periods ending December 31, 1997 and May 31,
1998, each consisting of a balance sheet as at the end
of each fiscal period, a statement of profit and loss,
and a statement of changes in financial position with
accompanying notes, in respect of each fiscal period, in
each case prepared in accordance with Canadian generally
accepted accounting principles, except for the
non-consolidation of the FutureLink Alberta financial
statements, consistently applied from period to period;
a copy of each of which are attached as the FutureLink
Financial Statements Schedule;
(r) "FutureLink Shares" has the meaning set out in subsection 2.02(b);
(s) "Interim Period" means the period of time between the date of this
Agreement and the Time of Closing;
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(t) "Leased Property" means the premises leased by SysGold pursuant to a
lease or written agreement to lease, and used in the conduct of the
Business, as described in the Leased Property Schedule;
(u) "Permitted Encumbrance" has the meaning set out in section 5.01(m);
(v) "Purchase Price" means the aggregate consideration, as set out in this
Agreement, payable by the Buyer to the Sellers for the Purchased Shares;
(w) "Purchased Shares" means all of the issued and outstanding shares in the
capital of RMC;
(x) "Real Property" means each direct or indirect interest in real property
described in the Real Property Schedule, and, where the context
requires, means all of such real properties and real property interests;
(y) "Sellers" means Don, Olivia and the Trust;
(z) "Sellers' Counsel" means Howard, Mackie or such other firm of lawyers as
may be designated by the Sellers;
(aa) "Shareholder Loans" has the meaning set out in subsection 2.04 (b);
(bb) "SysGold Inc. Shares" has the meaning set out in subsection 3.01(d);
(cc) "SysGold Shares" has the meaning set out in subsection 3.01(d);
(dd) "Taxes" means all federal, provincial, municipal or other taxes,
imposts, rates, levies, assessments and government fees, charges or dues
lawfully levied, assessed or imposed against the relevant party or in
respect of the business of such party including, without limitation, all
income, capital gains, sales, excise, use, property, payroll, capital,
goods and services, business, transfer, withholding and value added
taxes, and all customs and import duties, together with all interest,
fines and penalties with respect thereto;
(ee) "Tax Returns" means all reports, returns and other documents filed or
required to be filed by the relevant party in respect of Taxes or in
respect of, or pursuant to, any federal, provincial, municipal or other
taxing statute applicable to the relevant party;
(ff) "Time of Closing" means 10:00 o' clock a.m. (Calgary time) on the
Closing Date or such other time on the Closing Date at which the
transaction is completed.
1.02 CANADIAN DOLLARS. All dollar amounts referred to in this Agreement are in
Canadian funds unless otherwise provided.
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1.03 EXTENDED MEANINGS. In this Agreement, where the context requires, the
singular number includes the plural and vice versa, the masculine gender
includes the feminine and neuter genders and vice versa and the word "person" is
not limited to an individual but includes any entity recognized by law.
1.04 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set out in this Agreement. No supplement,
modification, waiver or termination of this Agreement shall be binding, unless
executed in writing by the party or parties to be bound thereby.
1.05 HEADINGS. All headings are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents of any
Article or section in this Agreement.
1.06 ACCOUNTING TERMS. All accounting terms not specifically defined in this
Agreement are to be construed in accordance with Canadian generally accepted
accounting principles, consistently applied.
1.07 SCHEDULES. The following are the Schedules attached to and incorporated in
this Agreement by reference and deemed to be part hereof when attached to this
Agreement and initialled by the party required to produce such Schedule:
Time Period for Delivery
------------------------
Buyer's Contracts Schedule 6 days
Buyer's Counsel's Opinion Schedule 6 days
Buyer's Directors and Officers Schedule upon execution
Buyer's Employee Benefit Schedule 6 days
Buyer's Employee Schedule 6 days
Buyer's Employment and Consulting Agreements Schedule 6 days
Buyer's Equipment Lease Schedule 6 days
Buyer's Insurance Schedule 6 days
Buyer's Leased Property Schedule 6 days
Buyer's Options and Calls Schedule upon execution
Contracts Schedule 6 days
Debenture Schedule 6 days
Employee Benefit Schedule upon execution
Employee Schedule upon execution
Employment and Consulting Agreements Schedule upon execution
Employment Contract with Don Bialik Schedule 6 days
Encumbrances Schedule upon execution
Equipment Lease Schedule 6 days
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FutureLink Financial Statements Schedule upon execution
FutureLink Alberta Capital Schedule upon execution
Financial Statements Schedule upon execution
Insurance Schedule 6 days
Intellectual Property Schedule 6 days
Leased Property Schedule 6 days
License and Permits Schedule 6 days
Litigation Schedule upon execution
Permitted Transactions Schedule upon execution
Promissory Notes Schedule upon execution
Real Property Schedule 6 days
Release Schedule upon execution
Sellers' Counsel's Opinion Schedule 6 days
The parties hereto agree that all schedules will be attached by no later than
the time period set out next to each schedule.
1.08 RECITALS. Each of the parties acknowledges that the recitals of this
Agreement, so far as they relate to such party, are true and correct in
substance and in fact.
ARTICLE 2.00 - PURCHASE AND SALE OF SHARES
2.01 PURCHASE AND SALE. Based upon the warranties, representations and
covenants, and subject to the terms and conditions, set out in this Agreement,
the Buyer agrees to purchase the Purchased Shares from the Sellers and the
Sellers agree to sell the Purchased Shares to the Buyer.
2.02 PURCHASE PRICE. The total Purchase Price payable by the Buyer to the
Sellers for the Purchased Shares shall be the sum of:
(a) Three Million Six Hundred and Eighty-five Thousand Dollars
($3,685,000); and
(b) Four million, two hundred and fifty thousand (4,250,000) common
shares in the capital of the Buyer (the "FutureLink Shares").
The Buyer and Sellers each agree that the value of the
FutureLink Shares is Five Million Dollars ($5,000,000) or
Eighty-five Cents American (U.S.$.85) per share and that such
value was determined by the approximate average daily trading
price of the FutureLink Shares on the Over The Counter Bulletin
Board on the NASDAQ exchange during the period thirty (30) day
period ending July 22, 1998;
and such Purchase Price, and the payment thereof, shall be allocated between the
Sellers in the proportions agreed to by the parties hereto following the
transactions contemplated in Article 7.00.
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2.03 DEPOSIT. The Sellers acknowledge receipt of a deposit (the "Deposit") in
the amount of One Hundred Thousand Dollars ($100,000), to be applied to the
Purchase Price at the Time of Closing or otherwise dealt with in accordance with
Article 8.00.
2.04 PAYMENT OF PURCHASE PRICE. The Purchase Price payable to the Sellers shall
be paid as follows at the Time of Closing:
(a) payment of the sum of Three Million Dollars ($3,000,000) by certified
cheque or bank draft;
(b) the delivery to the Sellers of promissory notes from the Buyer in the
aggregate amount of Six Hundred and Eighty-five Thousand Dollars
($685,000) payable within ninety (90) days of the Closing Date and such
notes shall contain such other terms as are set out in the promissory
note in the Promissory Notes Schedule. The said promissory notes amount
shall be reduced by the amount of the Deposit;
(c) the allotment and issuance to the Sellers of the FutureLink Shares or
non-voting shares of RMC convertible into the FutureLink Shares. The
Sellers hereby agree that all offers and sales of the FutureLink Shares
or such other shares, from the Date of Closing and prior to the
expiration of a period commencing on the Date of Closing and ending one
year thereafter (the "Distribution Compliance Period") shall not be made
to U.S. persons or for the account or benefit of U.S. persons and shall
otherwise be made in compliance with the provisions of Regulation S (i)
unless registration has taken place prior to the expiry of the
Distribution Compliance Period. The certificates representing any such
shares shall bear the following legend unless registration has taken
place:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE. THE SECURITIES ARE BEING SOLD PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION
S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT
TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY BE MADE ONLY IN
COMPLIANCE WITH THE ACT.
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THE SELLERS UNDERSTAND AND AGREE THAT IN THE ABSENCE OF THE REGISTRATION OF THE
FUTURELINK SHARES OR THE RMC SHARES UNDER THE ACT, SUCH SHARES MAY ONLY BE
RESOLD AS PROVIDED FOR IN REGULATION S, PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE ACT, INCLUDING SALES UNDER RULE 144. Sales of FutureLink
Shares or the RMC shares may be made in reliance upon Rule 144 but ONLY (i) in
limited quantities by affiliates after the completion of the Distribution
Compliance Period, or (ii) in limited quantities by non-affiliates after the
completion of the Distribution Compliance Period, or (iii) in unlimited
quantities by non-affiliates after the first yearly anniversary after the
completion of the Distribution Compliance Period; in each case in accordance
with the conditions of the Rule, all of which must be met (including the
requirement, if applicable, that adequate information concerning the Buyer is
then available to the public).
The Sellers understands that the FutureLink Shares or the RMC shares have not
been registered under the Act and are being offered and sold pursuant to a "safe
harbor" from registration contained in Regulation S promulgated under the Act
based in part upon the representations of the Sellers contained herein.
ARTICLE 3.00 - REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers represent and
warrant to the Buyer as follows and acknowledge that the Buyer is relying upon
such representations and warranties in connection with the purchase by the Buyer
of the Purchased Shares:
(a) Schedules. The Schedules reference complete and accurate information
regarding those matters to which such Schedules pertain.
(b) Corporate Existence. The Corporation is duly incorporated, organized and
validly existing under the laws of the Province of Alberta. The Province
of Alberta is the only jurisdiction in which the Corporation carries on
business or owns or leases properties. The Corporation has the corporate
power and authority and does now possess all governmental and other
permits, licences and other authorizations required to own or lease its
properties, and to carry on its business as it was carried on at the
applicable time.
(c) Authority. This Agreement, when executed and delivered by the parties
hereto, will constitute a valid and binding agreement of the Corporation
and the Sellers enforceable in accordance with its terms. None of the
execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and the compliance with or
fulfilment of the terms and provisions of this Agreement, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any of the Corporation's constating documents
or by-laws, or a default under any instrument, agreement, mortgage,
judgment, order, award, decree or other restriction to which the
Corporation or the Sellers are a party or by which either are bound or
any regulatory provisions affecting either of them. Neither the
Corporation nor the Sellers are a party to or bound by any commitment,
agreement or document containing any covenant which limits
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the freedom of the Corporation to compete or solicit any line of
business, transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operation or
conditions of the Corporation or the continued operation of the Business
after closing.
(d) Authorized and Issued Capital. The current issued and outstanding shares
in the capital of RMC, all of which are fully paid and non-assessable to
the Sellers and which do not exceed the authorized capital of RMC, are
as follows:
Don - 100 Class "A" Shares and 5 Class "D" shares
Olivia - 100 Class "B" Shares and 5 Class "D" shares
Trust - 100 Class "C" Shares
The only issue and outstanding share capital of SysGold are three
thousand (3,000) Class "A" Common Voting Shares, which do not exceed the
authorized capital of SysGold, are issued and outstanding as fully paid
and non-assessable to RMC (the "SysGold Shares") and there are no other
shareholders.
The only issued and outstanding share capital of SysGold Inc. are 100
Class "A" Common Voting Shares, which do not exceed the authorized
capital of SysGold Inc., are issued and outstanding as fully paid and
non-assessable to RMC (the "SysGold Inc. Shares") and there are no other
shareholders.
(e) Title to Purchased Shares. RMC is the registered and beneficial owner of
all of the SysGold Inc. Shares and subject to Encumbrances listed in the
Encumbrances Schedule has good and marketable title to such shares, free
and clear of all Encumbrances of any kind and SysGold has not received
any notice of any adverse claim with respect to such shares. RMC is the
registered and beneficial owner of all of the SysGold Shares and subject
to Encumbrances listed in the Encumbrances Schedule has good and
marketable title to such shares, free and clear of all Encumbrances of
any kind and RMC has not received any notice of any adverse claim with
respect to such shares. The Sellers are the registered and beneficial
owner of all of the Purchased Shares and subject to Encumbrances listed
in the Encumbrances Schedule have good and marketable title to such
shares, free and clear of all Encumbrances of any kind and the Sellers
have not received any notice of any adverse claim with respect to such
shares.
(f) Options and Calls. There are no outstanding agreements, calls,
commitments, options, subscriptions, warrants or other rights or
privileges to acquire the Purchased Shares or the SysGold Shares or to
require the Corporation to issue additional shares, whether upon the
conversion of other securities or otherwise except in accordance with
Article 7.00.
(g) Subsidiaries. Except for SysGold and SysGold Inc. in the case of RMC,
the Corporation does not own any interest in or control, directly or
indirectly, any corporation, business trust, partnership, limited
partnership, joint venture or other person ;
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(h) Financial Assistance. The Corporation has not, directly or indirectly,
made any loans, provided financial assistance in any form, or given any
guarantees, to or in respect of the obligations of any person, other
than loans, financial assistance or guarantees which are no longer
outstanding. The Corporation will not, as of the Time of Closing, be a
party to or bound by any agreement of indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other party;
(i) No Joint Venture Interests, etc. The Corporation is not a partner,
co-tenant, joint venturer or otherwise a participant in any partnership,
joint venture, co-tenancy or other similarly jointly owned business
undertaking and the Corporation has no other significant investment
interests in any business owned or controlled by any third party except
for a joint bid with IBM for work at Canadian Natural Resources Ltd.
which is listed on the Contracts Schedule.
(j) No Distributions on Shares. The Corporation has not, since its most
recently completed fiscal year for which Financial Statements are
contained in the Financial Statements Schedule, purchased or redeemed
any shares in the capital of the Corporation, paid or declared any
dividend, made or agreed to make any other distribution in respect of
its capital or passed any resolution authorizing any of such actions
except with respect to the transactions planned in Article 7.00;
(k) Financial Statements and Financial Books and Records. The books and
records of the Corporation and the Financial Statements fairly and
correctly set out and disclose in all material respects, in accordance
with Canadian generally accepted accounting principles consistently
applied from year to year, the assets, liabilities, and financial
position of the Corporation as at the date of the Financial Statements,
at the date hereof and will continue to do so at the Time of Closing.
All financial transactions of the Corporation relating to the
Corporation business have been and will be accurately recorded in its
books and records and, without limiting the generality of the foregoing,
all monies set aside or held in trust by the Corporation for the benefit
of another person are properly accrued or so held and are completely and
accurately recorded in the books and records of the Corporation and no
claim can be made against the Corporation in respect thereof in excess
of the amounts so set aside or held.
(l) Disclosure to Accountants. The Corporation and the Sellers have made
known, or caused to be made known, to the accountants or auditors who
have prepared the Financial Statements all material facts and
circumstances which could affect the preparation of the Financial
Statements.
(m) Corporate Books and Records. The corporate records and minute books of
the Corporation are complete, accurate and up to date, and contain and
will contain at the Time of Closing complete and accurate copies of all
articles (as amended) and by-laws (as amended), minutes of all meetings
and/or written resolutions of the directors and/or Shareholders of the
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Corporation from incorporation to the Closing Date and all such by-laws
were duly enacted and passed, all such meetings were duly held, and all
such resolutions were duly enacted and passed and all matters and
transactions contained or reflected in the minute books are in
accordance with applicable corporation law requirements. The share
certificate books, registers of shareholders and directors and registers
of transfers are and will be accurate and complete on the Closing. No
resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of the Corporation, except
those contained in the minute books;
(n) Directors and Officers . The directors and officers of RMC are as
follows:
Don Bialik - Director and President
Olivia Bialik - Director and Vice-President
The directors and officers of SysGold are as follows:
Don Bialik - Director and President
Olivia Bialik - Director and Secretary
The directors and officers of SysGold Inc. are as follows:
Don Bialik - Director and President
Kevin J. Sebastian - General Manager
Harold Hogg - Secretary and Controller
(o) Outstanding Indebtedness. Except as set out in the Financial Statements
contained in the Financial Statements Schedule, the Corporation has no
outstanding, nor is it under any obligation to create or issue, any
bonds, debentures, mortgages, notes, security agreements or any other
Encumbrances except as set out in the Encumbrances Schedule.
(p) Availability of Assets. The Assets constitute all of the assets which
are now being used, and which are necessary, in the conduct of the
Business. The Assets are in good operating condition and repair,
reasonable wear and tear excepted.
(q) Title to Assets. The Corporation is the legal and beneficial owner of
all of the Assets having good and marketable legal and beneficial title
thereto, free and clear of all Encumbrances except as set out on the
Encumbrances Schedule. Except in the ordinary course of business, there
is no agreement, option or other right to sell, assign or otherwise
dispose of any Assets.
(r) Accounts Receivable. Other than as reserved against in the Financial
Statements, all accounts receivable have arisen from valid arm's length
transactions in the ordinary course of business. The accounts receivable
are not subject to any valid set-offs or counterclaims and are, subject
to the debtor's willingness and ability to pay, collectable in full
within 120
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days of the Closing Date, and the Sellers have received no notice of the
unwillingness or inability of any debtor to pay any of the accounts
receivable. Adequate provision has been made for bad debts and doubtful
accounts, in accordance with generally accepted accounting principals.
(s) Inventories. All inventories of the Corporation consist of items of a
quality usable in the ordinary course of business. On the Closing Date,
Inventories will be sufficient to meet the needs of the Business in the
ordinary course.
(t) Forward Commitments. All forward commitments which have been entered
into by the Corporation and which remain unfulfilled have been entered
into in the ordinary course of the Business.
(u) Real Estate. At the Time of Closing, the Corporation will not own any
real property other than the Real Property described in the Real
Property Schedule.
(v) Leases. All Leased Property is listed in the Leased Property Schedule.
Each lease and/or agreement to lease:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of SysGold and, without
limiting the generality of the foregoing, there has been no
default thereunder by SysGold, or to the best of the knowledge
of the Sellers, by the landlord, and SysGold has not received
notice of termination or threat by the landlord to terminate
such lease or agreement to lease; and
(ii) except where consent, approval or act of any party is required
pursuant to the terms of leases or agreements to lease, copies
of which have been delivered to Buyer's Counsel, will continue
in full force and effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such lease or agreement to
lease; for greater certainty, the Sellers will obtain any
required consents identified by the Buyer in the copies of the
leases or agreements to lease provided to Buyer's Counsel and
the Sellers shall be responsible for the costs of any consent,
approval or other act of any party which is required under any
leases or agreements to lease;
With respect to all Leased Property:
(iii) to the best of the Sellers' knowledge, the premises and
improvements thereto and the purposes for which any of them are
used, comply in all respects with the relevant zoning, building,
environmental and other governmental or municipal by-laws, laws,
requirements, regulations and ordinances (including municipal
and provincial fire regulations and pollution control
regulations) and with Fire Underwriters' regulations;
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(iv) there has not been received by SysGold or anyone on behalf of
SysGold, any notice with respect to any by-law change affecting
the premises or relating to any threatened or pending
condemnation or expropriation of such premises;
(v) neither SysGold nor anyone on behalf of it has received any
notice from any insurance carrier of defects or inadequacies in
any of the premises, which, if not corrected, could result in
termination of insurance coverage or an increase in the cost of
coverage;
(w) Environmental Matters and Occupational Health and Safety. To the best of
the Sellers' knowledge, after due inquiry the Corporation has in
connection with the carrying on of the Business complied with and will
be in compliance with all federal, provincial and municipal statutes,
orders, regulations and by-laws relating to environmental and
occupational health and safety matters, including the disposal of
hazardous substances;
(x) Equipment Leases. A complete list of all equipment leases to which the
Corporation is a party is listed in the Equipment Lease Schedule. A full
and complete copy of each equipment lease has been produced to the
Buyer. Each of such equipment leases:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of the Corporation; and
(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such equipment lease, except
as may be provided for in the copy of such equipment leases
provided to Buyer's Counsel. The Sellers will assist the Buyer
to obtain any required consents identified by the Buyer in the
copies of the equipment leases provided to Buyer's Counsel, and
the Sellers shall be responsible for any costs associated with
any consent, approval or other act of any party which is
required under any equipment leases.
(y) Insurance. All policies of fire and other insurance against casualty and
other losses and public liability insurance carried by the Corporation
are described in the Insurance Schedule (including the risks covered and
limits of such policies) and are in full force and effect. A full and
complete copy of each such insurance policy has been provided to the
Buyer, and such policies are summarized in the Insurance Schedule
attached hereto. All premiums in respect of such policies for which
premium notices have been received have been paid in full as the same
become due and payable. The Corporation has not failed to give any
notice or present any claim under any insurance policy in due and timely
fashion. There are no actual claims or claims threatened in writing
against the Corporation which would come within the scope of such
coverage nor are any such policies currently threatened with
cancellation. There are no outstanding requirements or recommendations
by any insurance company that issued a
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policy with respect to any of the Assets or the Business or by any Board
of Fire Underwriters or other body exercising similar functions or by
any governmental authority requiring or recommending any repairs or
other work to be done on, or with respect to, any of the Assets or
requiring or recommending any equipment or facilities to be installed on
any premises from which the Business is conducted or in connection with
any of the Assets. The Corporation does not have any knowledge of any
material proposed increase in applicable insurance rates or of any
conditions or circumstances applicable to the Business which might
result in such increases. No such policy is terminable by virtue of the
transactions contemplated by this Agreement.
(z) Proprietary Rights. Other than the trade name "SysGold" the Corporation
does not own any copyrights, uncopyrighted works, registered and
unregistered trade marks, certification marks, trade names, industrial
designs, patents, patent applications, unpatented inventions, trade
secrets, know-how and other proprietary rights (collectively, the
"Proprietary Rights") and no such Proprietary Rights are necessary or
desirable in the conduct of the Business as now conducted. The conduct
of the Business by the Corporation as now conducted does not infringe or
violate any Proprietary Rights belonging to third parties nor are the
Sellers aware of any threatened potential claim with respect to such,
including Proprietary Rights owned by a third party to any computer
software programs now used in the conduct of the Business, all of which
computer software programs are properly licensed by the Corporation.
(aa) Business Conducted in No Other Name. All business of the Corporation has
been conducted in the name of the Corporation and for the benefit of the
Corporation and there are no parties related, either directly or
indirectly, which are competing for the business of the Corporation.
There are no trademarks or trade names other than those set out in
section 3.01(aa) which are required to properly conduct the business of
the Corporation;
(bb) Absence of Certain Changes or Events. Since the date of the most recent
fiscal year end of the Corporation, the Corporation has not:
(i) incurred any fixed or contingent obligation, liability or
commitment except trade or business obligations incurred in the
ordinary course of business, none of which is materially adverse
or was entered into for inadequate consideration;
(ii) discharged or satisfied any Encumbrance or paid or satisfied any
fixed or contingent obligation or liability, except for current
obligations or liabilities incurred in the ordinary course of
business and except as otherwise provided for in this Agreement;
(iii) mortgaged, pledged or subjected any of the Assets to any
Encumbrance, other than liens, if any, for current Taxes not yet
due and payable;
(iv) entered into any lease or rental agreement or transferred,
leased, licensed or disposed of any of the Assets other than in
the ordinary course of business and other than new
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leases or renewals of any of the leases and/or agreements to lease
listed on the Leased Property Schedule in accordance with the renewal
rights contained therein;
(v) waived, released, cancelled, forgiven or compromised any debt,
claim or right, other than in the ordinary course of business;
(vi) transferred or granted any right under any lease, license or
other agreement or with respect to any intangible asset other
than in the ordinary course of business;
(vii) paid or agreed to pay any bonus, except the payment of bonuses
of up to $30,000 to Doug Evans;
(viii) suffered any material casualty loss (whether or not covered by
insurance) or any material operating or other loss;
(ix) suffered any adverse change in, or any event or events which
have had or will have a material adverse effect on the Assets or
the liabilities of any of the Corporation, the conduct of the
Business or the condition (financial or otherwise) or prospects
of the Corporation, taken as a whole;
(x) made any loan to or entered into any other transaction with any
of its officers, directors, employees or shareholders giving
rise to any claim or right of, by, or against any such person.
The Corporation is not indebted to any of its officers,
directors, employees or shareholders or any other person not
dealing at arms' length with the Corporation except for the
Shareholder Loans;
(xi) made or entered into any contract or commitment to make any
capital expenditures;
(xii) declared or paid any dividend or made or agreed to make any
payment or distribution to any shareholder (including purchases
and redemptions of issued and outstanding shares or any other
securities) except in accordance with Article 7.00;
(xiii) issued, sold or granted any options, rights or warrants to
purchase, or subscribe for, any shares of any corporation;
(xiv) sold or otherwise disposed of any fixed or capital assets except
in the ordinary course of business;
(xv) amended or terminated any contract or agreement which is
material to the Business; or
(xvi) entered into any agreement or commitment to do or cause any of
the matters described above to occur.
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(cc) No Finder. The Corporation is not obliged to pay any finder's fee or any
type of commission in connection with the transactions contemplated by
this Agreement.
(dd) No Defaults under Agreements; No Violation of Laws. The Corporation has
not received notice of, nor has knowledge of, the existence of any
material default or event of default or the occurrence of any event
which with notice or lapse of time, or both, would constitute a material
default, and which is continuing, under the terms or provisions, express
or implied, of any agreement to which any of the Assets, the Purchased
Shares, or the conduct of the Business are subject. The Corporation has
not received notice of, nor has any knowledge of, a violation of any
applicable federal, provincial or municipal law, ordinance, regulation,
order or requirement relating to the Assets, the Purchased Shares or the
conduct of the Business which may have a material adverse effect on the
Assets, the Purchased Shares, or the conduct of the Business. The
Corporation is conducting the Business in compliance with all applicable
laws, regulations, by-laws and ordinances of each jurisdiction in which
the Business is carried on including any required extra provincial
registrations;
(ee) Litigation. No claim, action, suit, proceeding, litigation, arbitration
or investigation has been commenced or threatened in writing against the
Corporation, the Assets, the Purchased Shares, or the Business
(including the properties of others used in the conduct of the
Business), or the transactions contemplated by this Agreement, except as
set out in the Litigation Schedule, and no basis therefor is known to
the Sellers. No matter which is set out in the Litigation Schedule
would, if decided adversely against the Corporation, have a material
adverse effect on the conduct of the Business or upon the Assets or the
Purchased Shares. Neither the Corporation, the Assets, nor the conduct
of the Business is subject to any continuing injunction, judgment or
other order of any court, arbitrator, mediator or governmental agency.
The Corporation is not in material default under any order, licence,
regulation, nor in any default of any demand of any federal, provincial,
municipal or other governmental agency or regulatory body or with
respect to any order, writ, injunction or decree of any court.
(ff) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement, the
Corporation has:
(i) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Corporation) the taxable income
and the liability for Taxes of such corporation in the relevant
taxation year;
(ii) duly and timely paid all Taxes as they have become due and
payable; and
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(iii) made sufficient provision in the Financial Statements for all
accrued but unpaid Taxes, if any, whether or not disputed, for
all relevant periods.
Income tax assessments have been issued to RMC covering all past periods
up to and including the fiscal year ended September 30, 1997, to SysGold
covering all past periods up to and including the fiscal year ended
October 31, 1997 and to SysGold Inc. covering all past periods up to and
including the fiscal year ended _________________, 1997 and such
assessments, if any for amounts owing in respect thereof, have been paid
in full. There are no actions, suits, tax audits or other proceedings or
investigations or claims in progress, pending or threatened in writing
against the Corporation in respect of any Taxes and, in particular,
there are no currently outstanding reassessments or written inquiries
which have been issued or raised by any governmental authority relating
to Taxes. The Corporation is not aware of any contingent liabilities for
Taxes or any reasonable grounds for an assessment or reassessment of any
Tax Return filed by the Corporation, and has not received any indication
from any taxing authorities that an assessment or reassessment is
proposed in respect of any Taxes, regardless of the merits. The
Corporation has not executed or filed with any taxing authority any
agreement extending the period for assessment, reassessment or
collection of Taxes, or any waiver or agreement regarding statutes of
limitations relating to Taxes. All Taxes which are required to be
withheld or collected by the Corporation from payments made to its
present and former employees, officers and directors, and to all persons
who are not residents of Canada for purposes of the Income Tax Act have
been duly withheld or collected and, to the extent required, have been
duly remitted to the proper taxing authorities. The Corporation has
properly withheld all Canada Pension Plan contributions, Employment
Insurance premiums, and other Taxes payable by it in respect of its
employees and has remitted, or will remit such amounts to the proper
taxing authorities within the time required by the applicable
legislation if such time is prior to the Closing Date. Copies of all Tax
Returns and all schedules and other supporting documents thereto filed
by the Corporation with all taxing authorities for each of the last
three (3) completed fiscal years and all communications relating thereto
will have been delivered to the Buyer prior to Closing.
(gg) GST. SysGold Ltd. and RMC are properly registered under the Excise Tax
Act (Canada) for the purposes of the goods and services tax (GST), if
required pursuant to the provisions of the Excise Tax Act (Canada), and
the Corporation has charged, collected and remitted, in the time and
manner required under the said Act, all Taxes required to be charged,
collected and remitted pursuant to Part IX of the Excise Tax Act
(Canada) in respect of any "taxable supply" (as such term is defined
under the applicable sections of the said Act) made by the Corporation.
(hh) Potential Conflicts of Interest. No officer, director or shareholder of
the Corporation, and no person directly or indirectly controlling or
controlled by, or under the direct or indirect control of, any of the
foregoing persons:
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(i) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a
competitor, lessor, lessee, customer or supplier of the
Corporation;
(ii) holds a beneficial interest in any contract or other agreement
to which the Corporation is a party or by which it is obligated
or bound or to which any of the Assets may be subject;
(iii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property (including, without limitation, any
Proprietary Rights) which the Corporation are using or the use
of which is necessary for the Business; or
(iv) has any cause of action or other claim whatsoever against the
Corporation.
All purchases and sales or other transactions, if any, between the
Corporation and any such persons have been made on the basis of
prevailing market rates and all such transactions have been made on
terms no less favourable to the Corporation than those which would have
been available from unrelated third parties.
(ii) Agreements. Save and except for contracts otherwise referred to in this
Agreement or in the Schedules hereto, the Contracts Schedule sets out a
true and complete list of all contracts and agreements to which the
Corporation is a party or by which the Corporation or any of the Assets
are bound or subject and which (i) pursuant to their provisions,
performance by one or more of the parties thereto may extend beyond the
first anniversary of this Agreement, or (ii) are material contracts to
the conduct of the Business. Each such contract is valid, binding,
enforceable and in full force and effect. There is no default or event
in the performance of such contracts which, with notice or lapse of time
or both, would constitute a material default thereunder entitling one or
more parties to such contract to terminate same.
(jj) Customers and Suppliers. The relationship of the Corporation with its
customers, suppliers, and landlord is good. There has been no
termination or cancellation of any relationship between the Corporation
and any material supplier, or any customer or group of customers which
individually or in the aggregate provided more than five percent (5%) of
the combined gross revenues of the Business during the fiscal years
ended September 30, 1997 with respect to RMC and October 31, 1997 with
respect to SysGold, nor is there reason to believe that any such
terminations or cancellations are threatened. The Corporation is not a
party to any agreement which provides that any supplier will have the
exclusive right to supply any materials or services to the Business.
(kk) Employment Agreements; No Union or Collective Bargaining Agreements. The
Corporation is not a party to nor bound by any collective bargaining
agreement nor has the Corporation conducted negotiations with respect to
any such future agreement. No employees of the Corporation are
represented by any trade union or association which might qualify as a
trade
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union and there are no applications in progress or threatened which
could result in the certification of a bargaining agent for any
employees of the Corporation. There has been no strike, grievance,
dispute, representation, arbitration, proceedings or other labour
trouble against the Corporation and there is no such action or
proceeding in progress or threatened in writing, and the Corporation
does not know of any basis for any such action or proceeding. The
Corporation has not received notice of, nor does it have any knowledge
of, non-compliance with any laws concerning occupational safety,
employment practices, terms and conditions of employment, wages and
hours, and unfair labour practices, the enforcement of which would have
a material adverse effect on the conduct of the Business. The Employee
Schedule sets out a true and complete schedule, listing the names, total
annual compensation, and period of employment of each person presently
employed by the Corporation. There are no written employment contracts
with any employee or independent contractor or any oral contracts of
employment which are not terminable on the giving of reasonable notice
other than as set out on the Employment and Consulting Agreements
Schedule. All bonuses and vacation pay are properly accrued on the books
and records of the Corporation.
(ll) Employee Benefit Matters. The Employee Benefit Schedule sets out a
complete list of all employee benefit plans, including, without
limitation, life insurance, hospitalization, medical and dental plans,
executive compensation, bonus, deferred compensation, pension,
retirement, profit sharing, stock purchase and option plans, and all
other plans, arrangements or practices providing benefits for employees,
officers, or directors of the Corporation (collectively the "Employee
Benefit Plans"). The Corporation has no unfunded liability in respect of
any of the Employee Benefit Plans other than as disclosed on the
Employee Benefit Schedule. Each of the Employee Benefit Plans has been
operated in accordance with its provisions and is in substantial
compliance in all respects with all laws, rules and regulations
governing each such plan. None of the Employee Benefit Plans or the
related trusts thereunder is subject to any pending investigation,
examination or other proceeding initiated by any court, arbitrator,
governmental agency or regulating body.
(mm) Payments to Directors, Officers and Employees. Since June 30, 1998, no
payments have been made or authorized by the Corporation to its
officers, directors, shareholders or employees, except in the ordinary
course of the business and at the regular rates or salary or
remuneration payable to such persons, or as otherwise specifically
disclosed or contemplated by this Agreement.
(nn) Sellers Claims; Amounts Due from Officers. As of this date, there are no
accounts receivable, notes receivable or any other amounts due to the
Corporation from officers, directors or shareholders of the Corporation.
The Sellers do not have any claims against the Corporation other than
the Shareholder Loans and any current salary or remuneration payable in
the ordinary course.
(oo) Insolvency. The Corporation and the Sellers are not insolvent, have not
committed an act of bankruptcy, proposed a compromise or arrangement of
their creditors generally, had any
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petition or receiving order in bankruptcy filed against them, taken any
proceedings with respect to a compromise or arrangement or to have a
receiver appointed over any part of their assets, had an encumbrancer
take possession of any of their property, nor had an execution or
distress become enforceable or levied upon any of their property.
(pp) Sellers Resident of Canada. None of the Sellers are non-residents of
Canada for the purposes of the Income Tax Act (Canada).
(qq) The Corporation is a private corporation within the meaning of the
Securities Act (Alberta) and the sale of the Purchased Shares by the
Sellers to the Purchaser is made in compliance with all applicable
securities legislation.
(rr) The Sellers represent and warrant to the Buyer that (i) the Sellers are
not "U.S. persons" as that term is defined in Rule 902(o) of Regulation
S promulgated under the United States Securities Act of 1933, as amended
(the"Act"): (ii) the FutureLink Shares or the shares otherwise issuable
under subsection 2.04(e) were not sold to the Sellers in the United
States and at the time of execution of this Agreement and of any offer
to buy the FutureLink Shares or the shares otherwise issuable under
subsection 2.04(e) hereunder the Sellers were physically outside the
United States; (iii) each Seller is purchasing the FutureLink Shares or
the shares otherwise issuable under subsection 2.04(e) for his own
account and not on behalf of or for the benefit of any U.S. person and
the sale of the FutureLink Shares or the shares otherwise issuable under
subsection 2.04(e) has not been prearranged with or on behalf of any
person in the United States;and (iv) the Sellers are not dealers with
respect to the transactions contemplated herein and consequently a
"distributor" as defined in Regulation S of the Act.
(ss) To the best of the knowledge of the Sellers neither the Sellers nor any
person acting for the Sellers has conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S under the
United States Securities Act of 1933 in the offer and sale of the
FutureLink Shares or such other shares to be issued in accordance with
subsection 2.04(e).
(tt) The Sellers knows of no public solicitation or advertisement of an offer
in connection with the proposed issuance and sale of the FutureLink
Shares or such other shares to be issued pursuant subsection 2.04(e).
(uu) The Sellers are acquiring the FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) for their own accounts for
investment and not as a nominee and not with a view to the distribution
thereof. The Sellers understand that they must bear the economic risk of
this investment indefinitely unless sale of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) is registered
pursuant to the Act, or an exemption from such registration is
available, and that the Buyer has no present intention of registering
any such sale of the FutureLink Shares or such other shares to be issued
pursuant subsection 2.04(e) except as otherwise may be provided herein.
The Sellers
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represent and warrant to the Buyer that they have no present plan or
intention to sell any of such FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) in the United States or to a
United States person pursuant to any predetermined arrangements. The
Sellers covenant that neither they not their affiliates nor any person
acting on their behalf has the intention of entering or will enter
during the Distribution Compliance Period, into any put option, short
position, hedging transactions, equity swaps or other similar instrument
or position with respect to any of such FutureLink Shares or such other
shares to be issued pursuant subsection 2.04(e) or any shares of the
Buyer and neither the Sellers nor any of their affiliates or any person
acting on their behalf will use at any time any of such acquired
pursuant to this Agreement to settle any put option, short position,
hedging transactions, equity swaps or other similar instrument or
position that may have been entered into prior to the execution of this
Agreement.
(vv) To the best of the knowledge of the Sellers neither the Sellers nor any
person acting for the Sellers has conducted any "directed selling
efforts", as that term is defined in Rule 902 of Regulation S under the
United States Securities Act of 1933, in the offer and sale of the
FutureLink Shares.
(ww) The Sellers knows of no public solicitation or advertisement of an offer
in connection with the proposed issuance and sale of the FutureLink
Shares or such other shares to be issued pursuant subsection 2.04(e).
(xx) The Sellers are acquiring the FutureLink Shares or such other shares to
be issued pursuant subsection 2.04(e) for their own accounts for
investment and not as a nominee and not with a view to the distribution
thereof. The Sellers understand that they must bear the economic risk of
this investment indefinitely unless sale of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) are
registered pursuant to the Act, or an exemption from such registration
is available, and that the Buyer has no present intention of registering
any such sale of the FutureLink Shares or such other shares to be issued
pursuant subsection 2.04(e) except as otherwise may be provided herein.
The Sellers represent and warrant to the Buyer that they have no present
plan or intention to sell any of such FutureLink Shares or such other
shares to be issued pursuant subsection 2.04(e) in the United States or
to a United States person pursuant to any predetermined arrangements.
The Sellers covenant that neither they not their affiliates nor any
person acting on their behalf has the intention of entering or will
enter during the Distribution Compliance Period, into any put option,
short position, hedging transactions, equity swaps or other similar
instrument or position with respect to any of such FutureLink Shares or
such other shares to be issued pursuant subsection 2.04(e) or any shares
of the Buyer and neither the Sellers nor any of their affiliates or any
person acting on their behalf will use at any time any of such acquired
pursuant to this Agreement to settle any put option, short position,
hedging transactions, equity swaps or other similar instrument or
position that may have been entered into prior to the execution of this
Agreement.
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(yy) Residence. The Sellers are all residents of Alberta, Canada.
(zz) Full Disclosure. The Corporation or the Sellers have or will have
delivered to the Buyer prior to Closing true and current copies or, if
not available, photocopies of all agreements, documents and other
instruments referred to in this Agreement. None of the foregoing
representations and warranties and no other written statement furnished
by the Sellers to the Purchaser in connection with the transactions
contemplated hereby contain any untrue statement of a material fact or
omit to state any material fact necessary to make any such statement or
representation not misleading to a prospective purchase of the Purchased
Shares seeking full information as to the Corporation.
3.02 REPRESENTATIONS AND WARRANTIES OF THE BUYER. For the purposes of this
section 3.02 only, unless otherwise specified by referring to the Buyer as
FutureLink Colorado, all representations and warranties of the Buyer shall apply
to the Buyer and FutureLink Alberta. The Buyer represents and warrants to the
Sellers as follows and acknowledges that the Sellers are relying upon such
representations and warranties in connection with the sale by the Sellers of the
Purchased Shares:
(a) Corporate Existence. FutureLink Colorado is a public company and is duly
incorporated, organized and validly existing under the laws of the State
of Colorado. FutureLink Alberta is duly incorporated, organized and
validly existing under the laws of the Province of Alberta. The State of
Colorado and the Province of Alberta are the only jurisdictions in which
the Buyer carries on business or owns or leases properties. The Buyer
has the corporate power and authority and does now possess all
governmental and other permits, licences and other authorizations
required to own or lease its properties, and to carry on its business as
it was carried on at the applicable time.
(b) Authority. This Agreement, when executed and delivered by the parties
hereto, will constitute a valid and binding agreement of the Buyer
enforceable in accordance with its terms. None of the execution and
delivery of this Agreement, the consummation of the transactions
contemplated by this Agreement and the compliance with or fulfilment of
the terms and provisions of this Agreement, will conflict with or result
in a breach of the terms, conditions or provisions of or constitute a
default under any of the Buyer's constating documents or by-laws, or a
default under any instrument, agreement, mortgage, judgment, order,
award, decree or other restriction to which the Buyer is a party or by
which either are bound or any regulatory provisions affecting either of
them. The Buyer is not a party to or bound by any commitment, agreement
or document containing any covenant which limits the freedom of the
Buyer to compete or solicit any line of business, transfer or move any
of its assets or operations or which materially or adversely affects the
business practices, operation or conditions of the Buyer or the
continued operation of the Buyer's business after closing.
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(c) Authorized and Issued Capital. The authorized capital of FutureLink
Colorado consists of 5,000,000 preferred shares without par value and
100,000,000 common shares with par value of One-One hundredth of One
Cent ($.0001) of which 16,623,553 common shares are issued and
outstanding as fully paid and non-assessable. The authorized capital of
FutureLink Alberta consists of an unlimited number of Class A common
voting shares, an unlimited number of Class B common non-voting shares
and an unlimited number of first preferred share of which approximately
3,380,275 Class A common shares are issued and outstanding as fully paid
and non-assessable as set out in the FutureLink Alberta Capital
Schedule. The authorized capital of the Buyer may change prior to
closing due to planned transactions including the purchase of shares of
FutureLink Alberta from the shareholders other than FutureLink Colorado.
It may also change in the event of additional financing provided that
any issuance will not exceed ten percent (10%) of the outstanding shares
of the Buyer without the prior approval of the Sellers. With respect to
the conversion of debt to equity, the total indebtedness to Linear
Strategies Ltd., and its assignee with respect to debt of $US 350,000,
was $US 732,706 as of June 30, 1998 and such was converted at the rate
of $US 0.65 per common share of FutureLink Colorado.
(d) Options and Calls. There are no outstanding agreements, calls,
commitments, options, subscriptions, warrants or other rights or
privileges to acquire the shares of the Buyer other than as disclosed in
note 5 of the FutureLink Colorado financial statements dated May 31,
1998 contained in the FutureLink Financial Statements Schedule, except
as set out in the Buyer's Options and Calls Schedule and except for
warrants issued to Linear Strategies Inc. and Hampton Park Ltd. to
acquire 1,127,240 common shares of FutureLink Colorado for US$1.00 per
share until June 30, 1999 or for $US1.25 per share from July 1, 1999 to
June 30, 2000.
(e) Subsidiaries. Except for FutureLink Alberta, the Buyer does not own any
interest in or control, directly or indirectly, any corporation,
business trust, partnership, limited partnership, joint venture or other
person. The Buyer is contemplating other purchase transactions which may
take effect prior to the Time of Closing but shall not do so without the
consent of the Sellers;
(f) Financial Assistance. The Buyer has not, directly or indirectly, made
any loans, provided financial assistance in any form, or given any
guarantees, to or in respect of the obligations of any person, other
than loans, financial assistance or guarantees which are no longer
outstanding or which were made from FutureLink Colorado to FutureLink
Alberta. The Buyer will not, as of the Time of Closing, be a party to or
bound by any agreement of indemnification, assumption or endorsement or
any other like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any other party;
(g) No Joint Venture Interests, etc. The Buyer is not a partner, co-tenant,
joint venturer or otherwise a participant in any partnership, joint
venture, co-tenancy or other similarly jointly
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owned business undertaking and the Buyer has no other significant
investment interests in any business owned or controlled by any third
party.
(h) No Distributions on Shares. The Buyer has not, since May 31, 1998,
purchased or redeemed any shares in the capital of the Buyer, paid or
declared any dividend, made or agreed to make any other distribution in
respect of its capital or passed any resolution authorizing any of such
actions;
(i) Financial Statements and Financial Books and Records. The books and
records of the Buyer and the financial statements contained in the
FutureLink Financial Statement Schedule fairly and correctly set out and
disclose in all material respects, in accordance with Canadian generally
accepted accounting principals (except for the non- consolidation of the
financial statements of FutureLink Alberta), consistently applied from
year to year, the assets, liabilities, and financial position of the
Buyer as at the date of such financial statements, at the date hereof
and will continue to do so at the Time of Closing. All financial
transactions of the Buyer relating to the Buyer's business have been and
will be accurately recorded in its books and records and, without
limiting the generality of the foregoing, all monies set aside or held
in trust by the Buyer for the benefit of another person are properly
accrued or so held and are completely and accurately recorded in the
books and records of the Buyer and no claim can be made against the
Buyer in respect thereof in excess of the amounts so set aside or held.
(j) Corporate Books and Records. To the best of the knowledge of the Buyer
the corporate records and minute books of the Buyer are complete,
accurate and up to date, and contain and will contain at the Time of
Closing complete and accurate copies of all articles (as amended) and
by-laws (as amended), minutes of all meetings and/or written resolutions
of the directors and/or shareholders of the Buyer from incorporation to
the Closing Date and all such by-laws were duly enacted and passed, all
such meetings were duly held, and all such resolutions were duly enacted
and passed and all matters and transactions contained or reflected in
the minute books are in accordance with applicable corporation law
requirements. The registers of shareholders and directors and registers
of transfers are and will be accurate and complete on the Closing. The
transfer agent for FutureLink Colorado is General Securities Transfer
Agency Inc., 3614 Calle De Sole NE, Albuquerque, NM, 87110-6112. No
resolutions or by-laws have been passed, enacted, consented to or
adopted by the directors or shareholders of the Buyer, except those
contained in the minute books;
(k) Disclosure to Accountants. The Buyer has made known, or caused to be
made known, to the accountants or auditors who have prepared the
FutureLink Financial Statements all material facts and circumstances
which could affect the preparation of the FutureLink Financial
Statements.
(l) Directors and Officers . The directors and officers of the Buyer are as
set out in the Buyers Directors and Officers Schedule.
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(m) Outstanding Indebtedness. Except as set out in the FutureLink Financial
Statements and as contemplated by the terms of this Agreement and a term
sheet dated July 13, 1998 with Thomson Kernaghan & Co. Limited attached
hereto as the Debenture Schedule, the Buyer has no outstanding, nor is
it under any obligation to create or issue, any bonds, debentures,
mortgages, notes, security agreements or any other Encumbrances.
(n) Availability of Assets. The assets currently owned by the Buyer
constitute all of the assets which are now being used, and which are
necessary, in the conduct of the business of the Buyer. Such assets are
in good operating condition and repair, reasonable wear and tear
excepted.
(o) Title to Assets. The Buyer is the legal and beneficial owner of all of
its assets accounted for in the preparation of the FutureLink Financial
Statements having good and marketable legal and beneficial title
thereto, free and clear of all Encumbrances. Except in the ordinary
course of business, there is no agreement, option or other right to
sell, assign or otherwise dispose of any of such assets.
(p) Accounts Receivable. Other than as reserved in the FutureLink Financial
Statements, all accounts receivable have arisen from valid arm's length
transactions in the ordinary course of business. The accounts receivable
are not subject to any valid set-offs or counterclaims and are, subject
to the debtor's willingness and ability to pay, collectable in full
within 120 days of the Closing Date, and the Sellers have received no
notice of the unwillingness or inability of any debtor to pay any of the
accounts receivable. Adequate provision has been made for bad debts and
doubtful accounts, in accordance with generally accepted accounting
principals.
(q) Inventories. All inventories of the Buyer consist of items of a quality
usable in the ordinary course of business. On the Closing Date,
Inventories will be sufficient to meet the needs of the business in the
ordinary course.
(r) Forward Commitments. All forward commitments which have been entered
into by the Buyer and which remain unfulfilled have been entered into in
the ordinary course of the business of the Buyer.
(s) Real Estate. At the Time of Closing, the Buyer will not own any real
property.
(t) Leases. All leased property of the Buyer is listed in the Buyer's Leased
Property Schedule. Each lease and/or agreement to lease:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of FutureLink Alberta or
FutureLink Colorado as the case may be and, without limiting the
generality of the foregoing, there has been no default
thereunder by FutureLink Alberta or FutureLink Colorado as the
case may be, or to
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the best of the knowledge of FutureLink Alberta or FutureLink
Colorado as the case may be, by the landlord, and FutureLink
Alberta or FutureLink Colorado as the case may be has not
received notice of termination or threat by the landlord to
terminate such lease or agreement to lease; and
(ii) will continue in full force and effect notwithstanding the
closing of the transactions contemplated by this Agreement
without the consent, approval or act of any party under such
lease or agreement to lease;
With respect to all leased property:
(iii) to the best of the FutureLink Alberta's or FutureLink Colorado's
knowledge as the case may be, the premises and improvements
thereto and the purposes for which any of them are used, comply
in all respects with the relevant zoning, building,
environmental and other governmental or municipal by-laws, laws,
requirements, regulations and ordinances (including municipal
and provincial fire regulations and pollution control
regulations) and with Fire Underwriters' regulations;
(iv) there has not been received by FutureLink Alberta or FutureLink
Colorado as the case may be or anyone on behalf of FutureLink
Alberta or FutureLink Colorado as the case may be, any notice
with respect to any by-law change affecting the premises or
relating to any threatened or pending condemnation or
expropriation of such premises;
(v) neither FutureLink Alberta or FutureLink Colorado as the case
may be nor anyone on behalf of it has received any notice from
any insurance carrier of defects or inadequacies in any of the
premises, which, if not corrected, could result in termination
of insurance coverage or an increase in the cost of coverage;
(u) Environmental Matters and Occupational Health and Safety. To the best of
the Buyer's knowledge, after due inquiry the Buyer has in connection
with the carrying on of its business complied with and will be in
compliance with all federal, provincial, state and municipal orders,
regulations and by-laws relating to environmental and occupational
health and safety matters, including the disposal of hazardous
substances;
(v) Equipment Leases. A complete list of all equipment leases to which the
Corporation is a party is listed in the Buyer's Equipment Lease
Schedule. A full and complete copy of each equipment lease has been
produced to the Buyer. Each of such equipment leases:
(i) is in full force and effect and in good standing and constitutes
a legal, valid and binding obligation of the Buyer; and
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(ii) will continue in effect notwithstanding the closing of the
transactions contemplated by this Agreement without the consent,
approval or act of any party under such equipment lease.
(w) Insurance. All policies of fire and other insurance against casualty and
other losses and public liability insurance carried by the Buyer are
described in the Buyer's Insurance Schedule (including the risks covered
and limits of such policies) and are in full force and effect. A full
and complete copy of each such insurance policy has been provided to the
Sellers, and such policies are summarized in the Buyer's Insurance
Schedule attached hereto. All premiums in respect of such policies for
which premium notices have been received have been paid in full as the
same become due and payable. The Buyer has not failed to give any notice
or present any claim under any insurance policy in due and timely
fashion. There are no actual claims or claims threatened in writing
against the Buyer which would come within the scope of such coverage nor
are any such policies currently threatened with cancellation. There are
no outstanding requirements or recommendations by any insurance company
that issued a policy with respect to any of the assets of the Buyer or
the business of the Buyer or by any Board of Fire Underwriters or other
body exercising similar functions or by any governmental authority
requiring or recommending any repairs or other work to be done on, or
with respect to, any of the assets of the buyer or requiring or
recommending any equipment or facilities to be installed on any premises
from which the Buyer's business is conducted or in connection with any
of the assets. The Buyer does not have any knowledge of any material
proposed increase in applicable insurance rates or of any conditions or
circumstances applicable to the Buyer's business which might result in
such increases. No such policy is terminable by virtue of the
transactions contemplated by this Agreement.
(x) Proprietary Rights. Other than the trade name "FutureLink", the Buyer
does not own any copyrights, uncopyrighted works, registered and
unregistered trade marks, certification marks, trade names, industrial
designs, patents, patent applications, unpatented inventions, trade
secrets, know-how and other proprietary rights (collectively, the
"Proprietary Rights") and no such Proprietary Rights are necessary or
desirable in the conduct of the Buyer's business as now conducted. The
conduct of the Buyer's business by the Buyer as now conducted does not
infringe or violate any Proprietary Rights belonging to third parties,
including Proprietary Rights owned by a third party to any computer
software programs now used in the conduct of the Buyer's business, all
of which computer software programs are properly licensed by the Buyer.
Except as set out below, all of the computer programs now used in the
conduct of the Buyer's business, and which are material to the conduct
of the Buyer's business, are "Year 2000 Compliant", meaning that such
programs are able to accept and accurately process and tabulate dates
and date data regardless of the century to which such dates and date
data relate.
(y) Business Conducted in No Other Name. All business of the Buyer has been
conducted in the name of the Buyer or in the prior names of the Buyer
for business conducted prior to such name changes and for the benefit of
the Buyer and there are no parties related, either directly
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or indirectly, which are competing for the business of the Buyer. There
are no trademarks or trade names other than those set out in section
3.02(aa) which are required to properly conduct the business of the
Buyer;
(z) Absence of Certain Changes or Events. Since May 31, 1998, the Buyer has
not:
(i) incurred any fixed or contingent obligation, liability or
commitment except trade or business obligations incurred in the
ordinary course of business, none of which is materially adverse
or was entered into for inadequate consideration;
(ii) discharged or satisfied any Encumbrance or paid or satisfied any
fixed or contingent obligation or liability, except for current
obligations or liabilities incurred in the ordinary course of
business and except as otherwise provided for in this Agreement;
(iii) mortgaged, pledged or subjected any of the Buyer's assets to any
Encumbrance, other than liens, if any, for current Taxes not yet
due and payable except as contemplated in the Debenture
Schedule;
(iv) entered into any lease or rental agreement or transferred,
leased, licensed or disposed of any of the Buyer's assets other
than in the ordinary course of business and other than new
leases or renewals of any of the leases and/or agreements to
lease listed on the Buyer's Leased Property Schedule in
accordance with the renewal rights contained therein;
(v) waived, released, cancelled, forgiven or compromised any debt,
claim or right, other than in the ordinary course of business;
(vi) transferred or granted any right under any lease, license or
other agreement or with respect to any intangible asset other
than in the ordinary course of business;
(vii) paid or agreed to pay any bonus;
(viii) suffered any material casualty loss (whether or not covered by
insurance) or any material operating or other loss;
(ix) suffered any adverse change in, or any event or events which
have had or will have a material adverse effect on, the Buyer's
assets or the liabilities of the Buyer, the conduct of the
Buyer's business or the condition (financial or otherwise) or
prospects of the Buyer, taken as a whole;
(x) made any loan to or entered into any other transaction with any
of its officers, directors, employees or shareholders giving
rise to any claim or right of, by, or against any such person.
The Buyer is not indebted to any of its officers, directors,
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employees or shareholders or any other person not dealing at
arms' length with the Corporation except in the ordinary course
of business;
(xi) made or entered into any contract or commitment to make any
capital expenditures (not including leasehold improvements) with
an aggregate cost in excess of One Hundred Thousand Dollars
($100,000.00) in the aggregate;
(xii) declared or paid any dividend or made or agreed to make any
payment or distribution to any shareholder (including purchases
and redemptions of issued and outstanding shares or any other
securities);
(xiii) issued, sold or granted any options, rights or warrants to
purchase, or subscribe for, any shares of any corporation other
than those listed in the Buyer's Options and Calls Schedule;
(xiv) sold or otherwise disposed of any fixed or capital assets except
in the ordinary course of business other than the sale of the
assets of FutureServe effective July 1, 1998;
(xv) amended or terminated any contract or agreement which is
material to the Buyer's business; or
(xvi) entered into any agreement or commitment to do or cause any of
the matters described above to occur.
(aa) No Finder. The Buyer is not obliged to pay any finder's fee or any type
of commission in connection with the transactions contemplated by this
Agreement.
(bb) No Defaults under Agreements; No Violation of Laws. The Buyer has not
received notice of, nor has knowledge of, the existence of any material
default or event of default or the occurrence of any event which with
notice or lapse of time, or both, would constitute a material default,
and which is continuing, under the terms or provisions, express or
implied, of any agreement to which any of the Buyer's assets, the
trading of the Buyer's shares on the OTCBB on the NASDAQ Exchange, or
the conduct of the Buyer's business are subject. The Corporation has not
received notice of, nor has any knowledge of, a violation of any
applicable federal, provincial, state or municipal law, ordinance,
regulation, order or requirement relating to the Buyer's assets, the
Buyer's shares or the conduct of the Buyer's business which may have a
material adverse effect on the Buyer's assets, the Buyer's shares, or
the conduct of the Buyer's business. The Buyer is conducting the Buyer's
business in compliance with all applicable laws, regulations, by-laws
and ordinances of each jurisdiction in which such business is carried on
including any required extra provincial registrations;
(cc) Litigation. Except for:
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(i) a claim in the Court of Queen's Bench of Alberta, Action No.
9801-07637 between Palmer Jarvis Inc. and FutureLink Alberta;
(ii) a claim in the Court of Queen's Bench of Alberta, Action
No. #97- CV-134063 between Midland Walwyn and Core Ventures,
Inc. (predecessor of FutureLink Colorado), Raymond Kompani,
Abecorn Enterprises Limited, Alixe Cormick and Venture Law
Corporation; and
(iii) a claim in the Court of Queen's Bench of Alberta, Action
No. #9701-15514 between 554495 Alberta Ltd. and Coffee.com
Interactive Cafe Corp. (predecessor to FutureLink Alberta);
no claim, action, suit, proceeding, litigation, arbitration or
investigation has been commenced or threatened in writing against the
Buyer, the Buyer's assets, the Buyer's Shares, or the Buyer's business
(including the properties of others used in the conduct of the
Business), or the transactions contemplated by this Agreement and no
basis therefor is known to the Buyer. Neither the Buyer, the Buyer's
assets, nor the conduct of the Buyer's business is subject to any
continuing injunction, judgment or other order of any court, arbitrator,
mediator or governmental agency. The Buyer is not in material default
under any order, licence, regulation, nor in any default of any demand
of any federal, provincial, municipal or other governmental agency or
regulatory body or with respect to any order, writ, injunction or decree
of any court.
(dd) Tax Matters. Subject to any requirement to file arising from, or in
connection with, the transactions contemplated in this Agreement,
FutureLink Alberta has:
(i) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Buyer) the taxable income and
the liability for Taxes of such corporation in the relevant
taxation year;
(ii) duly and timely paid all Taxes as they have become due and
payable; and
(iii) made sufficient provision in the FutureLink Financial Statements
for all accrued but unpaid Taxes, if any, whether or not
disputed, for all relevant periods.
Income tax assessments have been issued to FutureLink Alberta covering
all past periods up to and including the fiscal year ended December 31,
1996 and such assessments, if any amounts were owing in respect thereof,
have been paid in full. There are no actions, suits, tax audits or other
proceedings or investigations or claims in progress, pending or
threatened
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in writing against FutureLink Alberta in respect of any Taxes and, in
particular, there are no currently outstanding reassessments or written
inquiries which have been issued or raised by any governmental authority
relating to Taxes. The Buyer is not aware of any contingent liabilities
for Taxes or any reasonable grounds for an assessment or reassessment of
any Tax Return filed by FutureLink Alberta, and has not received any
indication from any taxing authorities that an assessment or
reassessment is proposed in respect of any Taxes, regardless of the
merits. FutureLink Alberta has not executed or filed with any taxing
authority any agreement extending the period for assessment,
reassessment or collection of Taxes, or any waiver or agreement
regarding statutes of limitations relating to Taxes. All Taxes which are
required to be withheld or collected by FutureLink Alberta from payments
made to its present and former employees, officers and directors, and to
all persons who are not residents of Canada for purposes of the Income
Tax Act have been duly withheld or collected and, to the extent
required, have been duly remitted to the proper taxing authorities.
FutureLink Alberta has properly withheld all Canada Pension Plan
contributions, Employment Insurance premiums, and other Taxes payable by
it in respect of its employees and has remitted, or will remit such
amounts to the proper taxing authorities within the time required by the
applicable legislation if such time is prior to the Closing Date. Copies
of all Tax Returns and all schedules and other supporting documents
thereto filed by the Buyer with all taxing authorities for each of the
last two (2) completed fiscal years and all communications relating
thereto will have been delivered to the Sellers prior to Closing.
Subject to any requirement to file arising from, or in connection with, the
transactions contemplated in this Agreement, FutureLink Colorado has or will
have by the Time of Closing:
(iv) prepared and filed with the appropriate governmental authorities
by the required filing date all Tax Returns required to be filed
by it under all applicable laws or regulations, which Tax
Returns, were prepared in conformity with such applicable laws
and regulations and properly reflect, and do not understate
(including that all deductions taken and to be taken are
reasonable and fully deductible for tax purposes in the manner
claimed or to be claimed by the Buyer) the taxable income and
the liability for Taxes of such corporation in the relevant
taxation year;
(v) duly and timely paid all Taxes as they have become due and
payable; and
(vi) made sufficient provision in the FutureLink Financial Statements
for all accrued but unpaid Taxes, if any, whether or not
disputed, for all relevant periods.
Income tax assessments covering all past periods up to and including the
most recent fiscal year end where filings have been made for FutureLink
Colorado shall be provided to the Sellers and pursuant such assessments,
if any amounts were owing in respect thereof, the Sellers shall have
been paid such assessments in full except fort a dispute with the
Internal Revenue Service with respect to $US 22,000 of taxes which may
be payable . Except as set out herein, there are no actions, suits, tax
audits or other proceedings or investigations or
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claims in progress, pending or threatened in writing against FutureLink
Colorado in respect of any Taxes and, in particular, there are no
currently outstanding reassessments or written inquiries which have been
issued or raised by any governmental authority relating to Taxes. Except
as set out herein, the Buyer is not aware of any contingent liabilities
for Taxes or any reasonable grounds for an assessment or reassessment of
any Tax Return filed by the Buyer, and has not received any indication
from any taxing authorities that an assessment or reassessment is
proposed in respect of any Taxes, regardless of the merits. FutureLink
Colorado has not executed or filed with any taxing authority any
agreement extending the period for assessment, reassessment or
collection of Taxes, or any waiver or agreement regarding statutes of
limitations relating to Taxes. All Taxes which are required to be
withheld or collected by the Buyer from payments made to its present and
former employees, officers and directors, and to all persons who are not
residents of the United States have been duly withheld or collected and,
to the extent required, have been duly remitted to the proper taxing
authorities. FutureLink Colorado has properly withheld all Taxes payable
by it in respect of its employees and has remitted, or will remit such
amounts to the proper taxing authorities within the time required by the
applicable legislation if such time is prior to the Closing Date. Copies
of all Tax Returns and all schedules and other supporting documents
thereto filed by the Buyer with all taxing authorities for each of the
last two completed fiscal years and all communications relating thereto
will have been delivered to the Sellers prior to Closing.
(ee) GST. FutureLink Alberta is properly registered under the Excise Tax Act
(Canada) for the purposes of the goods and services tax (GST), and the
FutureLink Alberta has charged, collected and remitted, in the time and
manner required under the said Act, all Taxes required to be charged,
collected and remitted pursuant to Part IX of the Excise Tax Act
(Canada) in respect of any "taxable supply" (as such term is defined
under the applicable sections of the said Act) made by the Buyer.
(ff) Potential Conflicts of Interest. No officer, director or shareholder of
the Buyer, and no person directly or indirectly controlling or
controlled by, or under the direct or indirect control of, any of the
foregoing persons:
(i) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a
competitor, lessor, lessee, customer or supplier of the Buyer
except for:
(A) Cameron Chell who is President of and will be a shareholder
of Willson Stationary and who is President and Shareholder of
Jaws Technology, both companies of which are customers of
FutureLink Alberta;
(B) Cameron Chell who is a shareholder of Chell McNeill which
has a sublease for office space from FutureLink Alberta; and
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(C) Sheraton Business Forms, a customer whose majority
shareholder owns shares in FutureLink Alberta.
all of which were entered into in the ordinary course of
business and at competitive rates.
(ii) holds a beneficial interest in any contract or other agreement
to which the Buyer is a party or by which it is obligated or
bound or to which any of the Assets may be subject;
(iii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property (including, without limitation, any
Proprietary Rights) which the Buyer is using or the use of which
is necessary for the Buyer's business; or
(iv) has any cause of action or other claim whatsoever against the
Buyer.
All purchases and sales or other transactions, if any, between the Buyer
and any such persons have been made on the basis of prevailing market
rates and all such transactions have been made on terms no less
favourable to the Buyer than those which would have been available from
unrelated third parties.
(gg) Agreements. Save and except for contracts otherwise referred to in this
Agreement or in the Schedules hereto, the Buyer's Contracts Schedule
sets out a true and complete list of all contracts and agreements to
which the Buyer is a party or by which the Buyer or any of the Buyer's
Assets are bound or subject and which (i) pursuant to their provisions,
performance by one or more of the parties thereto may extend beyond the
first anniversary of this Agreement, or (ii) are material contracts to
the conduct of the Buyer's business. Each such contract is valid,
binding, enforceable and in full force and effect. There is no default
or event in the performance of such contracts which, with notice or
lapse of time or both, would constitute a material default thereunder
entitling one or more parties to such contract to terminate same.
(hh) Customers and Suppliers. The relationship of the Buyer with its
customers, suppliers, and landlord is good. There has been no
termination or cancellation of any relationship between the Buyer and
any material supplier, or any customer or group of customers which
individually or in the aggregate provided more than five percent (5%) of
the combined gross revenues of the Buyer's business during the fiscal
years ended December 31, 1997 with respect to FutureLink Alberta and May
31, 1998 with respect to FutureLink Colorado, nor is there reason to
believe that any such terminations or cancellations are threatened. The
Buyer is not a party to any agreement which provides that any supplier
will have the exclusive right to supply any materials or services to the
Buyer's business.
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(ii) Employment Agreements; No Union or Collective Bargaining Agreements. The
Buyer is not a party to nor bound by any collective bargaining agreement
nor has the Buyer conducted negotiations with respect to any such future
agreement. No employees of the Buyer are represented by any trade union
or association which might qualify as a trade union and there are no
applications in progress or threatened which could result in the
certification of a bargaining agent for any employees of the Buyer.
There has been no strike, grievance, dispute, representation,
arbitration, proceedings or other labour trouble against the Buyer and
there is no such action or proceeding in progress or threatened in
writing, and the Buyer does not know of any basis for any such action or
proceeding. The Buyer has not received notice of, nor does it have any
knowledge of, non-compliance with any laws concerning occupational
safety, employment practices, terms and conditions of employment, wages
and hours, and unfair labour practices, the enforcement of which would
have a material adverse effect on the conduct of the Buyer's business.
The Buyer's Employee Schedule sets out a true and complete schedule,
listing the names, total annual compensation, and period of employment
of each person presently employed by the Buyer. There are no written
employment contracts with any employee or independent contractor or any
oral contracts of employment which are not terminable on the giving of
reasonable notice other than as set out on the Buyer's Employment and
Consulting Agreements Schedule. All bonuses and vacation pay are
properly accrued on the books and records of the Buyer.
(jj) Employee Benefit Matters. The Buyer's Employee Benefit Schedule sets out
a complete list of all employee benefit plans, including, without
limitation, life insurance, hospitalization, medical and dental plans,
executive compensation, bonus, deferred compensation, pension,
retirement, profit sharing, stock purchase and option plans, and all
other plans, arrangements or practices providing benefits for employees,
officers, or directors of the Buyer (collectively the "Buyer's Employee
Benefit Plans"). The Buyer has no unfunded liability in respect of any
of the Buyer' Employee Benefit Plans other than as disclosed on the
Buyer's Employee Benefit Schedule. Each of the Buyer's Employee Benefit
Plans has been operated in accordance with its provisions and is in
substantial compliance in all respects with all laws, rules and
regulations governing each such plan. None of the Buyer's Employee
Benefit Plans or the related trusts thereunder is subject to any pending
investigation, examination or other proceeding initiated by any court,
arbitrator, governmental agency or regulating body.
(kk) Payments to Directors, Officers and Employees. Since May 31, 1998, no
payments have been made or authorized by the Buyer to its officers,
directors, shareholders or employees, except in the ordinary course of
the business and at the regular rates or salary or remuneration payable
to such persons, or as otherwise specifically disclosed or contemplated
by this Agreement and except for the repayment of a shareholder loan to
Cameron Chell which appeared on the December 31 FutureLink Financial
Statements for FutureLink Alberta.
(ll) Sellers Claims; Amounts Due from Officers. As of this date, there are no
accounts receivable, notes receivable or any other amounts due to the
Buyer from officers, directors or shareholders of the Buyer.
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(mm) Insolvency. The Buyer is not insolvent, has not committed an act of
bankruptcy, proposed a compromise or arrangement of their creditors
generally, had any petition or receiving order in bankruptcy filed
against them, taken any proceedings with respect to a compromise or
arrangement or to have a receiver appointed over any part of its assets,
had an encumbrancer take possession of any of its property, nor had an
execution or distress become enforceable or levied upon any of its
property except for a voluntary petition for Chapter 11 protection in
the United States Bankruptcy Court filed April 4, 1995 and which was
dismissed by said court.
(nn) Regulatory Approval. All approvals, permits, consents, orders and
authorizations required in connection with the issuance of the
FutureLink Shares or the shares issuable upon exercise of the conversion
rights referred to in subsection 2.04(c) have been obtained, or if not
obtained, will be obtained prior to Closing and all documents, if any,
to be filed with the U.S. Securities and Exchange Commission and the
NASD have been filed, or if not filed, will be filed prior to closing.
(oo) Corporate Action. All necessary corporate action has been taken by the
Buyer to authorize the issuance of the FutureLink Shares or the shares
issuable upon exercise of the conversion rights referred to in
subsection 2.04(c) and such shares, when issued and paid for, will be
issued as fully paid and non-assessable.
(pp) Trading of FutureLink Colorado Shares. The common shares of FutureLink
Colorado are approved for trading on the NASD Electronic Bulletin Board.
FutureLink Colorado is not in default of any of its obligations to the
SEC or the NASD Electronic Bulletin Board.
(qq) Full Disclosure. The Buyers have or will have delivered to the Sellers
prior to Closing true and current copies or, if not available,
photocopies of all agreements, documents and other instruments referred
to in this Agreement. None of the foregoing representations and
warranties and no other written statement furnished by the Buyer to the
Sellers in connection with the transactions contemplated hereby contain
any untrue statement of a material fact or omit to state any material
fact necessary to make any such statement or representation not
misleading to a prospective seller of the Purchased Shares seeking full
information as to the Buyer.
ARTICLE 4.00 - COVENANTS
4.01 COVENANTS OF THE SELLERS AND THE CORPORATION DURING INTERIM PERIOD. The
Sellers hereby covenant that, during the Interim Period, it shall and shall
cause the Corporation to and the Corporation hereby agrees to:
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(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Assets, the Business and the clients and
suppliers associated with the Business;
(b) give the Buyer, the Buyer's Counsel, the Buyer's Accountants and other
representatives of the Buyer, reasonable access during normal business
hours to the properties, books, contracts, commitments and records of
the Corporation;
(c) treat in confidence all Confidential Information and other information
and findings which it or any of its authorized representatives, the
Sellers' Accountants or the Sellers' Counsel has obtained concerning the
Buyer and/or the Buyer's business during the Interim Period in the
course of its investigations;
(d) furnish the Buyer with all information concerning the affairs of the
Corporation as the Buyer may reasonably request;
(e) instruct and authorize the accountants of the Corporation and the
Sellers' Counsel to co-operate with the Buyer's Accountants and the
Buyer's Counsel and instruct such auditors to give the Buyer's
Accountants full access during such period to their files and working
papers with respect to the Corporation;
(f) permit the Buyer and its representatives to observe all operations of
the Corporation and to meet with such members of the management of the
Corporation as the Buyer may designate for such purposes as the Buyer
may deem to be appropriate;
(g) do all things and cause all things to be done to ensure that all the
warranties and representations of the Sellers contained in this
Agreement remain true and correct throughout the Interim Period as if
such representations and warranties were continuously made throughout
such period;
(h) not acquire or agree to acquire additional assets (or make leasehold
improvements), except in the ordinary course of business and provided
that the cost of such additional assets does not, in the aggregate,
exceed $30,000.00 from July 31, 1998 to the Closing Date, without the
prior written approval of the Buyer;
(i) not enter into or terminate any material contracts or any forward
commitments for inventories or supplies, in writing or otherwise, other
than material contracts or commitments made in the ordinary course of
business not exceeding $100,000 without the prior written, approval of
the Buyer;
(j) not enter into any leases or agreements to lease, except with the prior
written approval of the Buyer;
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(k) consult with, and comply with the Buyer's reasonable wishes in
connection with any decision to renew, or not renew, any lease or
agreement to lease where such decision is required on or before the
Closing Date;
(l) keep in full force and effect all licenses and governmental approvals
required in the conduct of the Business;
(m) provide the Buyer promptly with such interim financial statements and
any other financial reports as are customarily produced by the
Corporation as and when they are available;
(n) not incur any other indebtedness, obligations or liabilities out of the
ordinary course of business without the prior written approval of the
Buyer;
(o) not sell, agree to sell or otherwise dispose of any of the Assets (other
than operating supplies consumed in the ordinary course of business)
except in accordance with Article 7.00;
(p) pay, satisfy and discharge its obligations and liabilities in the
ordinary course of business;
(q) not incur any capital expenditures out of the ordinary course of
business without the prior written approval of the Buyer;
(r) assist the Corporation to retain the services of all employees and not
terminate any employees or contractors, unless otherwise instructed by
the Buyer;
(s) not declare, pay or authorize any dividends or other distributions on
any shares in the capital of the Corporation or declare any bonuses
payable to the Sellers or any person not at Arm's Length with the
Sellers or, except as set out in this Agreement, pay or authorize the
repayment of any moneys owing to the Sellers or any person not at
Arm's-Length with the Sellers except in accordance with Article 7.00;
(t) keep in full force and effect all insurance set out in the Insurance
Schedule;
(u) obtain all consents and approvals reasonably required by the Buyer
pursuant to the terms of any leases, contracts or rights of the
Corporation; and
(v) promptly advise the Buyer in writing of any material adverse change in
the condition, financial or otherwise, of the Corporation, the Assets or
the Business.
4.02 COVENANTS OF THE BUYER DURING INTERIM PERIOD. The Buyer hereby covenants
that, during the Interim Period, it shall:
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(a) carry on the Business in the ordinary course and use its reasonable best
efforts to preserve the Buyer's assets, the Buyer's business and the
clients and suppliers associated with the Buyer's business;
(b) give the Sellers, the Sellers' Counsel, the Sellers' Accountants and
other representatives of the Sellers, reasonable access during normal
business hours to the properties, books, contracts, commitments and
records of the Buyer;
(c) treat in confidence all Confidential Information and other information
and findings which it or any of its authorized representatives, the
Buyer's Accountants or the Buyer's Counsel has obtained concerning the
Corporation and/or the Business during the Interim Period in the course
of its investigations;
(d) furnish the Sellers with all information concerning the affairs of the
Buyer as the Sellers may reasonably request;
(e) instruct and authorize the auditors of the Buyer and the Buyer's Counsel
to co-operate with the Sellers' Accountants and the Sellers' Counsel and
instruct such auditors to give the Sellers' Accountants full access
during such period to their files and working papers with respect to the
Buyer;
(f) permit the Sellers and their representatives to observe all operations
of the Buyer and to meet with such members of the management of the
Buyer as the Sellers may designate for such purposes as the Sellers may
deem to be appropriate;
(g) do all things and cause all things to be done to ensure that all the
warranties and representations of the Buyer contained in this Agreement
remain true and correct throughout the Interim Period as if such
representations and warranties were continuously made throughout such
period;
(h) keep in full force and effect all licenses and governmental approvals
required in the conduct of the Business;
(i) provide the Sellers promptly with such interim financial statements and
any other financial reports as are customarily produced by the Buyer as
and when they are available;
(j) not incur any other indebtedness, obligations or liabilities out of the
ordinary course of business without the prior written approval of the
Sellers;
(k) not sell, agree to sell or otherwise dispose of any of the Buyer's
assets (other than operating supplies consumed in the ordinary course of
business);
(l) pay, satisfy and discharge its obligations and liabilities in the
ordinary course of business;
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(m) not incur any capital expenditures out of the ordinary course of
business without the prior written approval of the Sellers;
(n) attempt to retain the services of all directors and officers;
(o) not declare, pay or authorize any dividends or other distributions on
any shares in the capital of the Buyer or declare any bonuses to any
person not at Arm's Length with the Buyer, except as set out in this
Buyer's Employment and Consulting Agreements Schedule , pay or authorize
the repayment of any moneys owing from FutureLink Alberta to FutureLink
Colorado or any person not at Arm's-Length with the Sellers except
pursuant to the terms of any obligations to such persons;
(p) keep in full force and effect all insurance set out in the Buyer's
Insurance Schedule; and
(q) promptly advise the Sellers in writing of any material adverse change in
the condition, financial or otherwise, of the Buyer, the Assets or the
Business. (r) The Buyer covenants and agrees that it will either amend
its current registration statement filed with the SEC to include the
FutureLink Shares or the shares issuable upon exercise of the conversion
right referred to in subsection 2.04(c) or file a new registration
statement covering the FutureLink Shares or the shares issuable upon
exercise of the conversion right referred to in subsection 2.04(c) and
use its best efforts to cause a registration statement to be declared
effective by the U.S. Securities and Exchange Commission as soon as
possible, in any event, not later than the effective date of the
registration statement covering the debenture and common stock issued to
Thomson Kernaghan & Co. Ltd. The Buyer agrees to use its reasonable
commercial efforts to secure the approval for the OTCBB trading on the
NASDAQ Exchange of the shares of FutureLink Colorado and the shares
issuable upon exercise of the conversion right referred to in subsection
2.04(c).
4.03 COVENANTS CONCERNING CONFIDENTIALITY. The parties hereto acknowledge that
in order to facilitate the completion of the transactions contemplated herein
that each will be afforded access to and be entrusted with Confidential
Information that is not a matter of public record and has not been disclosed to
any person who does not owe a duty of non-disclosure to the other pursuant to a
written or oral agreement, at common law or under the terms of applicable
legislation. The parties hereto acknowledges that the Confidential Information
is proprietary and confidential and disclosure thereof to competitors of the
other or to the general public would be detrimental to the best interests of the
other and could cause irreparable harm to the business of the such party. The
parties therefore agrees that they will not, except for the benefit of and with
the written consent of the other, their successors or assigns, prior to the
completion of the transactions contemplated herein or at any time, if the
transactions contemplated herein are not completed for any reason whatsoever:
(a) disclose or divulge any Confidential Information to any person,
unless that person is also bound by a duty of confidentiality;
or
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(b) use, directly or indirectly, any Confidential Information for
any purpose other than to complete its due diligence in
connection with the transactions contemplated herein, or
disclose or use for any purpose other than that set out above,
knowledge of the private affairs of the others business and in
particular shall not solicit or attempt to solicit any client,
customer, supplier or employee of the other away from the other;
unless such party can establish beyond any reasonable doubt that the
Confidential Information:
(c) was previously known to the disclosing party, as evidenced by
written records, which the Buyer can prove predate this
Agreement or any letters of understanding leading to this
agreement; or
(d) hereafter, and prior to disclosure or use as set out above,
becomes generally known to the public through no act or omission
of the disclosing party.
4.04 COVENANTS ON CLOSING.
(a) To the extent that such are within the Sellers' power and control, the
Sellers covenant that at the Time of Closing they will satisfy, or cause
to be satisfied, the conditions precedent to the obligations of the
Buyer set out in subsections 5.01(e),(f),(g),(i),(k),(l) and (p) of this
Agreement.
(b) To the extent that such are within the Buyer's power and control, the
Buyer covenants that at the Time of Closing it will satisfy, or cause to
be satisfied, all conditions precedent to the obligations of the Sellers
set out in subsections 5.02(b),(e) and (f) this Agreement.
4.05 POST-CLOSING COVENANTS.
(a) The Sellers agrees that, subsequent to the Time of Closing, they will:
(i) at the request and expense of the Buyer, execute and deliver
such additional conveyances, transfers and other assurances as,
in the opinion of the Buyer's Counsel, are reasonably required
to carry out the intent of this Agreement and to transfer the
Purchased Shares to the Buyer;
(ii) take all steps reasonably required by the Buyer to assist the
Buyer in retaining the goodwill of the Corporation and the
Business and in particular to retain all employees in the
Employee Schedule unless the Buyer requests otherwise;
(iii) perform all of their obligations to be performed under this
Agreement after the Time of Closing.
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(iv) not make any sale, transfer or other disposition of the
FutureLink Shares or such other shares issued in accordance with
subsection 2.04 (c) in violation of the Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or the
rules and regulations of the Securities and Exchange Commission
(the "Commission") promulgated thereunder.
(v) The Sellers will cause a "distributor" as defined in Regulation
S to send to any broker/dealer or other person receiving a
commission on the sale of the FutureLink Shares or such other
shares issued pursuant subsection 2.04(c), a confirmation or
other notice stating that the transferee is subject to the same
restrictions on transfer to U.S. Persons or for the account of
or benefit of U.S. Persons during the Distribution Compliance
Period as provided herein. Further, any transferee of the
FutureLink Shares or such other shares issued pursuant
subsection 2.04(c) during the Distribution Compliance Period
will have to enter into an agreement with the Buyer covering the
matters set forth herein.
(b) The Buyer agrees that, subsequent to the Time of Closing, it will, at
the request of and expense of the Sellers, execute and deliver such
additional conveyances, transfers and other assurances as, in the
opinion of the Seller's Counsel, are reasonably required to carry out
the intent of this Agreement and to use its best efforts to have its
registration statement declared effective by the U.S. Securities and
Exchange Commission no later than the effective date of the registration
statement covering the debentures and common stock issued to Thomson
Kernaghan & Co. Ltd and to provide to the Sellers at the request
therefor by the Sellers such information that it may request regarding
the status of its registration with the SEC;
The Buyer agrees to use its reasonable commercial efforts to meet all of
its obligations under the terms of its convertible debenture financing
with Thomson Kernaghan & Co. Ltd. so that the funds, or so much thereof
as may be required, will be released to pay the promissory notes
attached hereto in the Promissory Notes Schedule within 90 days of the
Closing Date.
The Buyer agrees to use its reasonable commercial efforts to become a
reporting issuer in the United States by no later than December 1, 1998.
ARTICLE 5.00 - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
5.01 CONDITIONS PRECEDENT. The obligations of the Buyer under this Agreement are
subject to the fulfilment, at or before the Time of Closing, of the following
conditions. All of the following conditions have been included for the sole
benefit of the Buyer and each is a condition of the closing of the transactions
provided for in this Agreement. Any of the following conditions may be waived by
the Buyer, in whole or in part, at or at any time prior to the Time of Closing,
provided that no such waiver shall constitute a waiver by the Buyer of any of
its other rights or remedies in connection
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with any other condition or conditions, and any waiver will only be binding upon
the Buyer if made by the Buyer in writing:
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Sellers contained in this
Agreement are true and correct in all respects at the Time of Closing
with the same effect as though such representations and warranties had
been made at and as of such time and there has been compliance by the
Sellers with, and no breach by the Sellers of, any of its covenants in
this Agreement.
(b) No Changes in Operations. During the Interim Period, there has been no
material adverse change in the Assets or in the Business or in the
affairs, liabilities, or condition (financial or otherwise), or
prospects of the Corporation or the Business, or other event or
development which would, in the sole discretion of the Buyer, affect the
decision of a prudent purchaser in similar circumstances to complete the
purchase of the Purchased Shares. In the event that the Sellers do not
prevent the Corporation from entering into or terminating any material
contracts with a value of over One Hundred Thousand Dollars ($100,000)
without the consent of FutureLink during the interim period, such
entering into or termination of contracts will be deemed to be a
material adverse change.
(c) Retention of Key Contracts. The Buyer shall be satisfied that
arrangements have been made to ensure the continued employment of all
employees in the Employee Schedule and the continued relationship with
all agents, suppliers, subcontractors and customers who the Buyer, in
its sole discretion, acting reasonably, determines to be essential for
the continued operation of the Business.
(d) No Undisclosed Material Liabilities. No material liabilities of the
Corporation, being liabilities in aggregate of more than One Hundred
Thousand Dollars ($100,000), contingent or otherwise shall exist which
have not been recorded on the Financial Statements of the Corporation
nor shall there be any actions, causes of action, suits, damages,
judgments, claims or demands pending, threatened or otherwise against
the Corporation which have not been disclosed to the Buyer in writing
prior to the date hereof. This clause will not apply if, after the
determination of such unrecorded liabilities and the satisfaction of the
Buyer with the quantification of such, the Sellers agree to a decrease
in the Purchase Price by an amount equivalent to such unrecorded
liabilities.
(e) Employment Contract with Don Bialik. Don shall have entered into an
employment agreement for a term of three (3) years with the Buyer in the
form attached hereto in the Employment Contract with Don Bialik Schedule
agreeing to act as President and a director of the Buyer and FutureLink
Alberta and such agreement shall include a first year annual salary of
One Hundred and Eighty Thousand Dollars ($180,000), a performance based
bonus of up to Thirty-six Thousand Dollars ($36,000), options to
purchase approximately 250,000 common shares of the Buyer and which will
contain a non-competition and non-solicitation covenant during the term
thereof and for two (2) years thereafter notwithstanding the reason
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for termination of such employment agreement. Compensation for the
second and third year of the term shall be as set by the board of
directors but shall not be less than the first year compensation
formula.
(f) Officer's Declaration of the Corporation. The Buyer shall have received
a statutory declaration of a senior executive officer of the Corporation
that:
(i) there are not any applications or filings outstanding which
would in any way alter the constating documents or corporate
status of the Corporation;
(ii) no resolutions or by-laws have been passed, enacted, consented
to or adopted by the directors or the shareholders of the
Corporation, except those contained in the minute books of such
corporation;
(iii) there is no unanimous shareholders' agreement in place which
restricts, in whole or in part, the powers of the directors of
the Corporation to manage or supervise the management of the
Business and affairs of the Corporation;
(iv) the persons listed as directors of the Corporation on such
declaration are all of the directors of the Corporation and the
persons listed as officers of the Corporation on such
declaration are all of the officers of the Corporation, and hold
the offices set out opposite their respective names on the
declaration; and
(v) such persons have no knowledge of any action, suit or proceeding
by any governmental body or authority, or by any private third
party, seeking to restrain the transactions contemplated by this
Agreement or its consummation which has been threatened or
instituted against the Corporation and remains pending at the
Time of Closing.
(g) Declaration of the Sellers. The Buyer shall have received a statutory
declaration of the Sellers that:
(i) all representations and warranties of the Sellers contained in
this Agreement are true and correct at the Time of Closing as
though then made;
(ii) there has been compliance with each of the covenants and
obligations on the part of the Sellers required to be complied
with at or before the Time of Closing; and
(iii) the sale of the Purchased Shares has been authorized by all
necessary actions including all necessary shareholders'
authorizations and any required consents of the trustees of the
Trust.
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(h) Restraint of Transactions. No order of any court of competent
jurisdiction is effective restraining the transactions contemplated by
this Agreement.
(i) Agreements and Consents. All consents of any persons, which are
necessary to be obtained by the Buyer, the Corporation or the Sellers
for the consummation of the transactions contemplated by this Agreement
and for the continuance of all contracts, agreements, licenses, permits
and authorizations material to the Business and operations of the
Corporation have been obtained by the Buyer, the Corporation or the
Sellers as the case may be at the Sellers's sole cost and expense,
except for any such Buyer consents, and shall have been delivered to the
Buyer at, or before, the Time of Closing.
(j) TAP Consulting Ltd. Litigation. The Sellers shall have obtained and
delivered to the buyer on or before the Time of Closing, at their
expense, a release from TAP Consulting Ltd. of any and all claims for
debts, liabilities, damages, or any amount claimed to be owing to TAP
Consulting Ltd. by SysGold or RMC or failing such shall deliver an
indemnity to the Buyer with respect to such in a form satisfactory to
the Buyer's Counsel. There shall, at the Time of Closing, be no new
claims from TAP Consulting Ltd.
(k) Opinion Letter of Sellers's Counsel. The Buyer and the Buyer's Counsel
have received from the Sellers's Counsel an opinion, dated the Closing
Date, in the form attached in the Seller's Counsel Opinion Letter
Schedule. In giving such opinion, the Sellers's Counsel may rely, as to
matters of fact, upon certificates of senior executive officers of the
Corporation and a certificate of an official of the jurisdiction
governing the status of the Corporation as to the corporate status of
the Corporation, provided that the Sellers's Counsel state that they
believe that they are justified in relying upon such certificate and
deliver copies of all certificates relied upon to the Buyer and the
Buyer's Counsel prior to, or at, the Time of Closing. Sellers' Counsel
shall also deliver an opinion prior to closing to the Buyer with respect
to the relevant date of valuation in an oppression remedy case and
verifying that the proper date for calculation of a purchase price in
the case referred to in section 5.01(j) was the date of commencement of
the action; and Sellers' Counsel shall conduct a reasonable review of
Canadian authorities and report on such authorities if any which deal
with the status of a shareholder following commencement of an oppression
action under the Alberta Business Corporations Act.
(l) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Sellers to the Buyer pursuant
to this Agreement, the Sellers have delivered to the Buyer, at or before
the Time of Closing, the following:
(i) certificates representing the Purchased Shares registered in the
name of the Sellers duly endorsed for transfer to the Buyer;
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(ii) the resignation of each of the directors and officers of the
Corporation except Don and a release from each of such persons
in the form of the release set out in the Release Schedule; and
(iii) all other indemnities, agreements, instruments, consents and
documentation as are required in the opinion of Buyer's Counsel
to complete the transactions as contemplated herein.
(m) Release of Encumbrances. Except for security granted to CIBC with
respect to a line of credit in the amount of Five Hundred Thousand
Dollars ($500,000) (the "Permitted Encumbrance"), all encumbrances,
other than as permitted by the Buyer with respect to the Corporation,
with respect to the Purchased Shares and the Corporation shall have been
released and discharged on or before the Closing Date, or the Sellers
shall provide satisfactory evidence that the amount required to obtain
such releases and discharges, as stated in writing by the holder of the
encumbrance, has been paid to such holder or directed from the proceeds
of closing to be paid to such holder and the holder has given an
undertaking in writing to release and discharge the Sellers from such
encumbrance.
(n) Financing. The Buyer shall have obtained financing for the transactions
contemplated herein either pursuant to the terms set out in the
Debenture Schedule or similar terms satisfactory to the Buyer and all
conditions of such financing set by the financing party shall have been
met.
(o) SysGold Inc. - The Sellers shall have caused SysGold Inc., a wholly
owned subsidiary of SysGold, to wind up its business and assets into
SysGold at the cost of the Sellers.
(p) Consents of Encumbrancers. The Sellers shall have obtained, at their
expense, the consent to the transactions contemplated herein from the
CIBC, if required by the terms of the Permitted Encumbrance.
(q) Interim Transactions. The Buyer must be satisfied that the transactions
contemplated in Article 7.00 do not cause any adverse tax consequences
to the Buyer, RMC or SysGold which would not have occurred had the Buyer
purchased the shares of SysGold directly from RMC. The Buyers and the
Sellers shall have agreed on the concept and the structure of the
Permitted Transactions including all ancillary documentation. This
clause will not apply if, after the determination of such adverse
consequences, the Sellers agree to cause RMC to sell its shares of
SysGold to the Buyer on the same terms and conditions, mutatis mutandis,
as contained herein or if the Sellers agree to a reduction in that part
of the Purchase Price set out in Section 2.02 (a) by an amount equal to
such adverse tax consequences as determined by the Buyer's Accountant.
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(r) Schedules. The Buyer must be satisfied, acting reasonably, with all
information and supporting documentation provided with respect to all
schedules whether attached on the date hereof or hereafter.
5.02 RESULT OF FAILURE TO SATISFY CONDITION PRECEDENT. If any of the foregoing
conditions precedent to the obligations of the Buyer have not been satisfied at
the Time of Closing, and have not be waived by the Buyer at, or at any time
prior to, the Time of Closing, the Buyer may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Sellers or the Sellers's Counsel and, in
such event, all parties shall be released from their obligations under
this Agreement except as set out in Section 4.03 and Article 8.00; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any rights or remedies the buyer may
have in connection with any misrepresentation or breach of warranty or
covenant herein.
ARTICLE 6.00- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
6.01 CONDITIONS PRECEDENT. The obligations of the Sellers under this Agreement
are subject to the fulfilment, at or before the Time of Closing, of the
following conditions. All of the following conditions have been included for the
sole benefit of the Sellers and each is a condition of the closing of the
transactions provided for in this Agreement. Any of the following conditions may
be waived by the Sellers, in whole or in part, at or at any time prior to the
Time of Closing, by a waiver in writing signed by the Sellers, provided that no
such waiver shall constitute a waiver by the Sellers of any of his rights or
remedies in connection with any other condition or conditions, and any waiver
will only be binding upon the Sellers if made in writing by the Sellers.
(a) No Misrepresentations or Breach of Covenants and Warranties. All of the
representations and warranties of the Buyer contained in this Agreement
are true and correct in all respects at the Time of Closing with the
same effect as though such representations and warranties had been made
at and as of such time and there has been compliance by the Buyer with,
and no breach by the Buyer of, any of its covenants in this Agreement.
(b) Officer's Declaration. The Sellers shall have received a statutory
declaration of a senior executive officer of the Buyer that:
(i) all representations and warranties of the Buyer contained in
this Agreement are true and correct at the Time of Closing as
though then made;
(ii) there has been compliance with each of the covenants and
obligations on the part of the Buyer required to be complied
with at or before the Time of Closing;
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(iii) the purchase of the Purchased Shares has been authorized by all
necessary actions including actions of the directors and
shareholders of the Buyer and any required actions with the U.S.
securities regulators; and
(iv) such person has no knowledge of any action, suit or proceeding
by any governmental body or authority, or by any private third
party, seeking to restrain the transactions contemplated by this
Agreement or its consummation which has been threatened or
instituted against the Buyer and remains pending at the Time of
Closing.
(c) Restraint of Transactions. No order of any court of competent
jurisdiction is effective restraining the transactions contemplated by
this Agreement.
(d) Agreements and Consents. All consents of any persons, which are
necessary to be obtained by the Buyer for the consummation of the
transactions contemplated by this Agreement have been obtained by the
Buyer at its sole cost and expense, and all consents of any persons
which are necessary to be obtained by the Sellers or the Corporation for
the consummation of the transaction contemplated by this Agreement and
for the continuance of all contracts, agreements, licenses, permits and
authorizations material to the Business and operations of the
Corporation have been obtained, provided that the Sellers uses their
best efforts to obtain all such consents.
(e) Additional Closing Deliveries. In addition to any other instruments and
documents required to be delivered by the Buyer to the Sellers pursuant
to this Agreement, the Buyer has delivered to the Sellers, at or before
the Time of Closing, the following:
(i) an opinion from the Buyer's U.S. counsel satisfactory to the
Sellers and Sellers' Counsel with respect to resale restrictions
affecting the FutureLink Shares pursuant to any U.S. securities
laws;
(ii) an opinion from the Buyer's U.S. Counsel as to the number of
options which can be issued by the Buyer and the rights of the
board of directors to issue further options subject to
ratification by the shareholders of the Buyer;
The Sellers shall further be satisfied that the FutureLink Shares are
not subject to any hold period pursuant to the Securities Act (Alberta),
or that the hold period, if any, is identical and runs concurrently with
the hold period prescribed by the US Securities Act, 1933.
(f) Opinion Letter of Counsel for Buyer. The Sellers and the Sellers'
Counsel have received from the Buyer's Counsel an opinion, dated the
Closing Date, in the form set out in the Buyer's Counsel's Opinion
Letter. In giving such opinion the Buyer's Counsel may rely, as to
matters of fact, upon certificates of senior executive officers of the
Corporation and a certificate of an official of the jurisdiction
governing the status of the Buyer as to the corporate status of the
Buyer, provided that the Buyer's Counsel state that they believe that
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they are justified in relying upon such certificate and deliver copies
of all certificates relied upon to the Sellers and the Sellers's Counsel
prior to, or at, the Time of Closing. Buyer's Counsel may also rely upon
the opinions of other counsel in each jurisdiction relevant to the
transactions contemplated herein.
(g) Evidence of Financing. The Buyer shall have provided the Sellers with
the confirmation of available financing in an amount of not less than
Five Million ($5,000,000.00) Dollars U.S. prior to the Time of Closing
and at the Time of Closing shall provide an executed copy of an
irrevocable subscription agreement to the Sellers with respect to such
financing. The Sellers, acting reasonably, shall be satisfied with the
terms of such subscription agreement.
(h) Release of Guarantee. Don shall have obtained a release of his personal
guarantee of the line of credit of the Corporation with CIBC.
(i) Closing Funds. The Buyer shall have delivered to the Sellers a certified
cheque or bank draft in an amount not less than Three Million
($3,000,000.00) Dollars together with a share certificate to the Sellers
for the FutureLink Shares or the convertible shares referred to in
subsection 2.04(c).
(j) Registration Statement. The Buyer shall have provided to the Sellers a
copy of the registration statement (both in respect of becoming a
reporting issuer and for the registration of the FutureLink Shares or
the shares issuable upon exercise of the conversion rights referred to
in subsection 2.04(c)) filed with the SEC and the Sellers acting
reasonably shall be satisfied that such statement will be declared
effective by the SEC as soon as possible, in any event not more than
ninety (90) days after the Closing Date. The Sellers, acting reasonably
shall be satisfied that the FutureLink Shares or the shares issuable
upon exercise of the conversion rights referred to in subsection 2.04(c)
have been or will within 90 days be approved for trading on the OTCBB.
(k) Schedules. The Seller must be satisfied, acting reasonably, with all
information and supporting documentation provided with respect to all
schedules whether attached on the date hereof or hereafter.
(l) The Seller shall be satisfied as to the tax effect resulting from the
sale.
6.02 RESULT OF FAILURE TO SATISFY CONDITION PRECEDENT. If any of the foregoing
conditions precedent to the obligations of the Sellers have not been satisfied
at the Time of Closing, and have not been waived by the Sellers at, or at any
time prior to, the Time of Closing, the Sellers may:
(a) refuse to complete the transactions contemplated in this Agreement by
giving written notice to the Buyer or the Buyer's Counsel and, in such
event, all parties shall be released from their obligations under this
Agreement except as set out in section 4.03 and Article 8.00; or
(b) complete the transactions provided for in this Agreement, it being
expressly understood and agreed that the completion of such transactions
shall not constitute a waiver of any of the
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Sellers's rights or remedies in connection with any misrepresentation or breach
of warranty or covenant herein.
ARTICLE 7.00 - PRIOR TRANSACTIONS
7.01 INTERIM PERIOD TRANSACTIONS. During the Interim Period, the Sellers and the
Corporation shall be permitted to complete a reorganization of the Corporation
which may, subject to the consent of the Buyer, be similar to the reorganization
outlined in the Permitted Transactions Schedule or in any amended form which
will permit the Sellers to reduce their taxes otherwise payable as a result of
the transactions contemplated by this Agreement subject to the consent of the
Buyer. The Sellers shall only be permitted to complete the transactions in the
Permitted Transactions Schedule if the condition in subsection 5.01(r) has been
complied with. The Sellers agree that they shall pay any costs associated with
the planning of, giving effect to or resulting from any of the transactions set
out in the Permitted Transactions Schedule or any amendment thereto whether such
costs are on the account of the Buyer, the Seller or the Corporation except that
the Buyers shall be responsible for costs associated only with respect to the
creation of any shares of RMC which are exchangeable for FutureLink Shares. The
parties hereto agree to execute all such further documents and agreements, give
such further assurances and undertake such further action as may be necessary to
give effect thereto.
The Buyer shall be permitted, during the Interim Period, to provide a take-over
bid circular to the shareholders of FutureLink Alberta, other than the Buyer,
offering to purchase all of their shares in FutureLink Alberta.
ARTICLE 8.00 - BREAK-UP FEE AND DEPOSIT
8.01 BREAK-UP FEE. The parties hereto acknowledge that the other will be
expending resources and time and will be foregoing other potential transactions
during the Interim Period. The parties hereto have agreed that a fee (the
"Break-up Fee") shall be paid by the Sellers to the Buyer in the event that the
Sellers, RMC or SysGold directly or indirectly:
(a) accept any offer or enter into any agreement with any other party
with respect to any sale or other disposition of the Purchased Shares,
Business or Assets prior to the Time of Closing; or
(b) solicit, initiate, entertain or encourage enquiries, submissions,
discussions, proposals or offers from any other person for the sale or
other disposition of the Purchased Shares, Business or Assets prior to
the Time of Closing.
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The Break-up Fee payable by the Sellers shall be One Hundred Thousand Dollars
($100,000) and in the event that such is payable, the Deposit shall also be
returned to the Buyer without interest or deduction.
8.02 DEPOSIT NON-REFUNDABLE. In the event that the Buyer decides not to proceed
with the transactions contemplated herein, the Deposit shall not be refundable
to the Buyer unless the Buyer decides not to proceed based on the non-fulfilment
of the conditions set out in subsections 5.01(b),(d), (j), (r) or if the Sellers
are not able to deliver or cause to be delivered all of the Purchased Shares or
all of the outstanding shares of SysGold at the Time of Closing.
8.03 SELLER TERMINATION OF THE AGREEMENT. Notwithstanding section 8.02, the
Deposit shall be returned to the Buyer without interest or deduction in the
event that the Sellers discover material liabilities (contingent or otherwise)
of the Buyer which are less than One Hundred Thousand Dollars ($100,000) other
than those recorded on the FutureLink Financial Statements Schedule or as
disclosed in section 3.02(dd) and other than liabilities incurred in the
ordinary course since the date of the financial statements. The Sellers agree to
act in good faith in determining such material liabilities.
8.04 NOTIFICATION OF TERMINATION. If any party decides not to proceed with the
Proposed transaction, such party shall provide the other party with written
notice setting forth the reasons that the other party is not so proceeding. If
the Deposit is refundable to the Buyer, it shall be paid by the Seller within
forty-eight (48) hours of the Buyer advising the Seller in writing that it does
not wish to proceed and the basis for not proceeding in the case of section 8.02
or the Sellers advising the Buyers that they do not wish to proceed in the case
of section 8.03.
ARTICLE 9.00 - RISK OF LOSS
9.01 RISK OF TOTAL LOSS. If, at or before the Time of Closing, all or
substantially all of the Assets are destroyed or damaged by fire, or any other
casualty, or are expropriated or otherwise seized by governmental or other
lawful authority, the Sellers shall immediately advise the Buyer in writing and
the Buyer shall have the option, exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, provided
that the Purchase Price shall be reduced by an amount equal to the
replacement cost of the Assets destroyed, damaged, expropriated or
seized minus the amount of all insurance proceeds and other compensation
payable to the Corporation in connection with, or as a result of, such
destruction, damage, expropriation or seizure; or
(b) to refuse to complete the transaction contemplated herein by notice to
the Sellers and, in such event, all parties hereto shall be released
from all obligations hereunder except the obligations of such party to
maintain the confidentiality of Confidential Information obtained in the
course of the negotiation of this Agreement and the due diligence
leading up to the Time of Closing.
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9.02 RISK OF PARTIAL LOSS. If, at or before the Time of Closing, a material part
of the Assets, but less than all or substantially all of the Assets, are
destroyed or damaged by fire, or any other casualty, or are expropriated or
otherwise seized by governmental or other lawful authority, the Sellers shall
immediately advise the Buyer in writing and the Buyer shall have the option,
exercisable by notice in writing:
(a) to complete the transactions provided for in this Agreement, without
reduction of the Purchase Price provided that the amount of all
insurance proceeds and other compensation payable to the Corporation in
connection with, or as a result of, such destruction, damage,
expropriation or seizure is paid to the Corporation; or
(b) to refuse to complete the transaction contemplated herein by notice to
the Sellers and, in such event, all parties hereto shall be released
from all obligations hereunder except the obligations of such party to
maintain the confidentiality of Confidential Information obtained in the
course of the negotiation of this Agreement and the due diligence
leading up to the Time of Closing.
ARTICLE 10.00 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.01 SURVIVAL OF THE SELLERS'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Sellers contained in this
Agreement shall, unless otherwise expressly provided in this Agreement, survive
the closing of the transactions provided for in this Agreement and,
notwithstanding such closing and notwithstanding any investigations made by or
on behalf of the Buyer, shall continue in full force and effect:
(a) with respect to those representations and warranties relating to Taxes,
for so long as the Corporation may be assessed or reassessed, or any
action or proceeding may be brought against the Corporation in
connection with Taxes;
(b) with respect to all representations and warranties with respect to the
Sellers' title to the Purchased Shares and the Corporation's title to
the Assets, for five (5) years; and
(c) with respect to all other representations and warranties of the Sellers,
for a period of two (2) years after the Time of Closing.
10.02 SURVIVAL OF THE BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Buyer contained in this
Agreement shall survive the closing of the transactions provided for in this
Agreement and, notwithstanding such closing and notwithstanding any
investigations made by or on behalf of the Sellers, shall, unless otherwise
expressly provided in this Agreement, continue in full force and effect:
(a) with respect to those representations and warranties relating to Taxes,
for so long as the Corporation may be assessed or reassessed, or any
action or proceeding may be brought against the Corporation in
connection with Taxes; and
(b) with respect to all other representations and warranties of the Sellers,
for a period of two (2) for a period of two (2) years after the Time of
Closing.
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ARTICLE 11.00 - INDEMNIFICATION BY SELLERS
11.01 SCOPE OF INDEMNIFICATION. In the event that the transactions provided for
in this Agreement are completed and it is subsequently determined that the
Corporation or the Buyer or any agent, employee, affiliate, successor or nominee
of the Corporation or the Buyer, or any of the officers, directors,
shareholders, subsidiaries, affiliates, employees and agents of any of the
aforesaid (collectively the "Indemnified Parties") has or is subject to any
loss, damage, liability, deficiency, claim, cost, recovery, expense (including
interest, penalties and reasonable legal fees), assessment or re-assessment
(collectively the "Claims") arising out of or from, the incorrectness, failure,
non-compliance or other breach of any representation, warranty or covenant made
by the Sellers pursuant to this Agreement, notwithstanding any investigations
made by the Buyer or its representatives, and including any accounts receivables
of the Corporation existing as of the Time of Closing which have not been
collected within 120 days from the Time of Closing, the Sellers unconditionally
agree to indemnify and save harmless the Indemnified Parties for the amount of
such Claims and accounts receivables. The obligation of the Sellers to indemnify
the Indemnified Parties pursuant to the foregoing is limited, in the case of
accounts receivables of the Corporation, to the amount of accounts receivable
which have not been collected in full within 120 days of the Closing Date and
which, in the aggregate, exceed fifteen percent (15%) of the aggregate amount
(before deduction of any reserve or allowance for doubtful accounts) of all
accounts receivable of the Corporation on the Closing Date. The Sellers shall
further indemnify the Buyer with respect to any Claims arising from SysGold Inc.
not complying with the Excise Tax Act. Any claim against the Sellers under this
section shall be in writing and shall be made within one hundred and twenty
(120) days of the date on which such representation or warranty ceases to
survive according to the provisions of this Agreement.
The Indemnified Parties shall forthwith notify the Sellers of any liability or
claim for which the Sellers may be liable hereunder promptly after the
Indemnified Parties receive notice thereof and the Sellers shall have the right
to participate in any negotiations with respect thereto. The Sellers shall at
all times have the right, at its joint sole expense, to dispute and contest any
liability to, or claim asserted by, any person other than the Indemnified
Parties for which the Sellers may be liable hereunder, provided that the Sellers
first admits to the Buyer that if there is a liability in respect of such claim,
the Sellers is responsible for such liability. The Indemnified Parties shall,
and shall cause the Corporation to, fully co-operate with the Sellers and its
counsel in any proceedings with respect to any such liability.
11.02 LITIGATION. The Sellers hereby, irrevocably and unconditionally, agrees to
indemnify and save harmless each of the Indemnified Parties from and against any
and all Claims incurred in connection with existing, pending and threatened
litigation and in particular, without limiting the foregoing, shall indemnify
and save harmless the Indemnified Parties from any Claims from TAP Consulting
Ltd. The Sellers agrees to defend diligently such litigation through counsel to
be agreed upon by both the Buyer and the Sellers, and to advise and keep the
Buyer informed of all material developments relating thereto and that they will
not settle or otherwise compromise any such action without the consent of the
Buyer.
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11.03 SET OFF AND SIMILAR RIGHTS OF THE BUYER. In the event that the Sellers
fail to make any payment required to be made pursuant to this Agreement,
including without limitation, payments required pursuant to the indemnification
provisions of this Article, then the Buyer shall be entitled, in addition to any
other remedies in this Agreement, or at law or in equity, to set off the amount
of such payment against any other amount which may be or become due from the
Buyer or the Corporation to the Sellers, however arising, notwithstanding that
such indebtedness might have arisen from a different transaction.
11.04 REIMBURSEMENT. If any claim is made by any of the Indemnified Parties
under this Article and such claim is shown to be wrongfully made, then the
Indemnified Party to whom payment had been made under this Article shall
reimburse the Sellers for the amount paid by the Sellers or by the Buyer on the
Sellers's behalf on account of such claim.
ARTICLE 12.00 - INDEMNIFICATION BY BUYERS
12.01 SCOPE OF INDEMNIFICATION. In the event that the transactions provided for
in this Agreement are completed and it is subsequently determined that the
Sellers or any agent, employee, affiliate, successor or nominee of the Sellers
(collectively the "Indemnified Parties") has or is subject to any loss, damage,
liability, deficiency, claim, cost, recovery, expense (including interest,
penalties and reasonable legal fees), assessment or re-assessment (collectively
the "Claims") arising out of or from, the incorrectness, failure, non-compliance
or other breach of any representation, warranty or covenant made by the Buyer
pursuant to this Agreement, notwithstanding any investigations made by the
Sellers or its representatives, the Buyer unconditionally agree to indemnify and
save harmless the Indemnified Parties for the amount of such Claims.
The Indemnified Parties shall forthwith notify the Buyer of any liability or
claim for which the Buyer may be liable hereunder promptly after the Indemnified
Parties receive notice thereof and the Buyer shall have the right to participate
in any negotiations with respect thereto. The Buyer shall at all times have the
right, at its joint sole expense, to dispute and contest any liability to, or
claim asserted by, any person other than the Indemnified Parties for which the
Buyer may be liable hereunder, provided that the Buyer first admits to the
Sellers that if there is a liability in respect of such claim, the Buyer is
responsible for such liability.
ARTICLE 13.00 - GENERAL MATTERS
13.01 PUBLIC ANNOUNCEMENT. The parties to this Agreement agree that a public
announcement of this Agreement and the transactions herein contemplated shall be
made upon execution of this Agreement in a form and at a time agreed to by the
parties hereto prior to execution of this agreement except that it shall be done
on a basis so as not to violate any securities regulations or laws. The parties
agree that the Purchase price shall not be made public unless required by such
securities laws.
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13.02 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, THE BUYER DOES NOT
HAVE TO AND WILL NOT RECOGNIZE AND WILL TREAT AS NULL AND VOID ANY ATTEMPT TO
TRANSFER THE FUTURELINK SHARES OR SUCH OTHER SHARES ISSUED PURSUANT SUBSECTION
2.04(E) MADE IN VIOLATION OF THE PROVISIONS OF THIS AGREEMENT.
13.03 NOTICES. All notices, requests, demands or other communications required
or desired to be given or made by one party to another shall be given in writing
by personal delivery or prepaid registered mail or by facsimile transmission or
other means of instantaneous transmission in regular commercial usage at such
time, verified by a transmission report, as follows:
(a) to the Sellers: 3911 Crestview Road S.W.
Calgary, Alberta
T2T 2L5
with a copy to: Howard, Mackie
1000 Canterra Tower
400 Third Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Jeff Vallis
(b) to the Buyer: FutureLink Distribution Corp
No. 550, 603 - 7 Avenue SW
Calgary, Alberta
T2P 2T5
Attention: Raghu Kilambi
with a copy to: Morrison, Brown, Sosnovitch
1 Toronto Street
Suite 910
Toronto, Ontario
M5C 2V6
Attention: Kevin Gallagher
or at such other address as may be given by any of them to the others. Any
notice or other communication so given or made shall be conclusively deemed to
have been given and received when delivered personally, if delivered personally,
or when transmitted, if given by facsimile transmission, provided that if it is
delivered or transmitted on a day which is not a Business Day then
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the notice or communication shall be deemed to have been given and received on
the next Business Day following such date, or on the fifth (5th) Business Day
following the date of mailing, if mailed by prepaid registered mail, except in
the event of disruption of mail services in which event any notice shall be
delivered personally or by facsimile transmission.
13.04 EXPENSES. The expenses incurred by each of the parties in connection with
the negotiation of this Agreement and the completion of the transactions
provided for in this Agreement, including, except as otherwise provided in this
Agreement, the fees of their respective accountants and solicitors in connection
with such transactions, shall be borne by such party.
13.05 TIME OF THE ESSENCE. Time is of the essence of this Agreement and every
part of this Agreement and no extension or variation of this Agreement shall
operate as a waiver of this provision. Notwithstanding such, the parties hereto
agree that where the fulfilment of any condition relies on the action of a third
party, that such reasonable extensions as are necessary to ensure the fulfilment
of such conditions shall be granted by the parties hereto, it being understood
that Closing shall take place, in any event, not later than the 20th day of
October, 1998.
13.06 GOVERNING LAW. This Agreement and any of the agreements required to be
executed pursuant to the provisions of this Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the Province of Alberta and of Canada applicable thereto and the
parties submit to the jurisdiction of the courts of the Province of Alberta.
13.07 SEVERABILITY. If any of the provisions contained in this Agreement are,
for any reason, held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained in this Agreement unless the deletion of such provision or provisions
would result in such a material change as to cause the completion of the
transactions contemplated in this Agreement to be unreasonable.
13.08 FURTHER ASSURANCES. The parties covenant and agree to execute such further
and other documents and undertake such other actions as may be reasonably
required to give effect to the terms and intent of the transactions contemplated
in this Agreement.
13.09 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each of the
parties and delivered to each of the other parties.
13.10 ENUREMENT. This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective heirs, administrators, executors,
successors and permitted assigns, provided that the rights of any party hereto
may not be assigned without the prior written consent of all other parties
hereto.
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13.11 TIME PERIODS. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date which is the reference day in calculating such period shall be
excluded.
13.12 LANGUAGE OF AGREEMENT. It is the express wish of the parties that this
document and any related documents be drawn up and executed in English. Les
parties aux presentes ont expressement demande que ce document et tous les
documents s'y rattachant soient rediges et signes en anglais.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the date first above written.
FUTURELINK DISTRIBUTION CORP.
(Colorado)
Per: /s/ Raghu Kilambi - A.S.O.
--------------------------------
Raghu Kilambi - A.S.O.
)
)
) /s/ DONALD A. BIALIK
- -------------------------------- ) ------------------------------------
Witness ) DONALD A. BIALIK
)
)
) /s/ OLIVIA B. BIALIK
- -------------------------------- ) ------------------------------------
Witness ) OLIVIA B. BIALIK
------------------------------------
BIALIK FAMILY TRUST
Per: /s/ DONALD A. BIALIK
--------------------------------
- Trustee
Per: /s/ OLIVIA B. BIALIK
--------------------------------
- Trustee
RIVERVIEW MANAGEMENT CORPORATION
Per: /s/ DONALD A. BIALIK
--------------------------------
A.S.O.
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SYSGOLD LTD
Per: /s/ DONALD A. BIALIK
--------------------------------
A.S.O.
FUTURELINK DISTRIBUTION CORP.
(Alberta)
Per: /s/ Raghu Kilambi
--------------------------------
Raghu Kilambi -A.S.O.
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BUYER'S DIRECTORS AND OFFICERS SCHEDULES
FUTURELINK DISTRIBUTION CORP. (ALBERTA)
Name Address Position
- ---- ------- --------
Cameron Chell 306-20 Street N.W. Chairman of the Board,
Calgary, Alberta President & CEO
Raghu Kilambi 286 Briar Hill Avenue Director, CFO,
Toronto, Ontario VP-Corporate Finance,
M4R 1J2 Corporate Secretary
Robert Kubbernus 300 Waterstone Crescent Director
Airdrie, Alberta
T4B 1H4
Bryson Farrill 305 Old Oaks Road Director
Fairfield, CT
U.S.A. 06432
Linda M. Murray 302-1711-11 Street S.W. Assistant Corporate
Calgary, Alberta Secretary
T2T 3L7
Philip R. Ladouceur 119 Valley Ridge Green NW Director
Calgary, Alberta
T3B 5L5
FUTURELINK DISTRIBUTION CORP. (COLORADO)
Name Address Position
- ---- ------- --------
Cameron Chell 306-20 Street N.W. Chairman of the Board,
Calgary, Alberta President & CEO
Raghu Kilambi 286 Briar Hill Avenue Director, CFO,
Toronto, Ontario VP-Corporate Finance,
M4R 1J2 Corporate Secretary
Robert Kubbernus 300 Waterstone Crescent Director
Airdrie, Alberta
T4B 1H4
64
Name Address Position
- ---- ------- --------
Bryson Farrill 305 Old Oaks Road Director
Fairfield, CT
U.S.A. 06432
Linda M. Murray 302-1711-11 Street S.W. Assistant Corporate
Calgary, Alberta Secretary
T2T 3L7
Robert H. Kohn One Arbor Lane Director
Pebble Beach, CA
U.S.A. 93953
Philip R. Ladouceur 119 Valley Ridge Green NW Director
Calgary, Alberta
T3B 5L5
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PROMISSORY NOTES SCHEDULE
CDN$685,000 August, 1998
FOR VALUE RECEIVED THE UNDERSIGNED PROMISES TO PAY to at 3911 Crestview
Road S.W., Calgary Alberta, T2T 2L5, in ninety (90) days from the date hereof
the principal sum of Six Hundred and Eighty-five Thousand Dollars ($685,000) in
lawful money of Canada together with interest on all amounts of the said
principal sum remaining unpaid hereunder from time to time from the date hereof
until paid, both before and after default, at a rate per annum equal to Seven
Percent (7%). Such interest shall be calculated and compounded monthly and shall
be paid at the same time as the principal amount is paid.
THE UNDERSIGNED FURTHER AGREES TO PAY all costs and expenses
(including without limitation, lawyer fees as between a solicitor and his own
client on a full indemnity basis) incurred by it in enforcing payment in the
event of default hereunder, together with interest as aforesaid on all such
costs until paid by the undersigned.
Presentment, demand, protest and notice of dishonour and non-payment
are hereby waived by the undersigned.
The undersigned shall be entitled to prepay any or all of the
indebtedness evidenced by this promissory note without notice, bonus or penalty.
This promissory note shall be governed by and construed in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein.
DATED the day of , 19 .
SIGNED, SEALED AND DELIVERED ) FUTURELINK DISTRIBUTION CORP
)
)
) per:_______________________c/s
) Authorized Signing Officer
THIS IS A FORM OF NOTE ONLY AND THE ISSUE OF MORE THAN ONE NOTE MAY BE REQUIRED
BASED ON THE ALLOCATION OF THE PURCHASE PRICE
66
RELEASE SCHEDULE
WHEREAS (hereinafter referred to as the "Releasor") has acted as a
director/officer/employee of RMC/SysGold Inc./SysGold Ltd.(the "Corporation");
AND WHEREAS the controlling shareholder of the Corporation has agreed
to allow for a change of control and has agreed to cause directors and officers
appointed by it to resign;
In consideration of the payment by the Corporation to the undersigned
of the sum of Ten Dollars ($10.00) and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the
undersigned), the undersigned hereby remise, release and forever discharge the
Corporation its directors, officers, employees and shareholders (the
"Releasees") of and from all actions, causes of action, suits, debts, dues,
covenants, accounts, contracts, rights, damages, costs, judgments, expenses,
claims or demands which the undersigned may now have, whether in law or in
equity, against the Releasees including those arising out of or relating to the
Agreements.
The undersigned further covenants and agrees not to make any claim,
demand or to maintain or to bring, or take any steps for the bringing of, any
proceeding against any person, firm, corporation or other entity who/which might
claim damages from the Releasees, and/or contribution and indemnity, and/or
other relief under the common law and/or any other statute of this or any other
jurisdiction or otherwise from the Releasees.
The provisions hereof shall enure to the benefit of the successors and
assigns of the Releasors and shall be binding upon the heirs, executors,
administrators, legal personal representatives and assigns of the undersigned.
IN WITNESS WHEREOF the undersigned have signed these presents this day
of August, 1998.
SIGNED, SEALED AND DELIVERED
in the presence of )
)
)
- ------------------------------------ )
Witness )
)
67
BUYER'S OPTIONS AND CALLS SCHEDULE
Vesting
Grant # Name of Optionee Total # of Shares Type of Option Amount Vest Date Expiration Date
- ------- ---------------- ----------------- -------------- ------- --------- ---------------
1 Cameron Chell 500,000 Nonqualified 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
2 Raghunath Kilambi 500,000 Nonqualified 250,000 29-Jun-98 29-Jun-01
250,000 29-Jun-99 29-Jun-01
3 Gayle Howard 175,000 Nonqualified 87,500 29-Jun-98 29-Jun-01
87,500 29-Jun-99 29-Jun-01
4 James Brecht 100,000 Nonqualified 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
5 Dave Bolink 100,000 Nonqualified 50,000 29-Dec-98 29-Jun-01
50,000 29-Jun-99 29-Jun-01
6 Linda M. Murray 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
7 Jason Cornick 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
8 Jeff Doepker 50,000 Nonqualified 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
9 Scott Lambert 75,000 Nonqualified 25,000 29-Jun-98 29-Jun-01
25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
10 Marjorie Martin 50,000 Nonqualified 25,000 29-Dec-98 29-Jun-01
25,000 29-Jun-99 29-Jun-01
11 Connie Turnbull 30,000 Nonqualified 15,000 29-Dec-98 29-Jun-01
15,000 29-Jun-99 29-Jun-01
12 Bryson Farrill 250,000 Nonqualified 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
13 Robert H. Kohn 200,000 Nonqualified 100,000 29-Jun-98 29-Jun-01
100,000 29-Jun-99 29-Jun-01
14 Robert Kubbernus 250,000 Nonqualified 125,000 29-Jun-98 29-Jun-01
125,000 29-Jun-99 29-Jun-01
15 Phillip Ladouceur 500,000 Nonqualified 250,000 Upon signing 16-Jul-98
agreement
with FLNK
250,000 One year 16-Jul-99
anniversary from
signing date
2,930,000