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SECURITIES PURCHASE AGREEMENT Exhibit 10.31
This Securities Purchase Agreement (the "AGREEMENT") is made and entered into on
the 27th day of March, 1998 among CONTINENTAL HOLDINGS LTD., an Alberta
corporation ("CONTINENTAL") ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ AND ▇▇▇ ▇. SELF (individually, each a "SECURITYHOLDER", and
collectively, the "SECURITYHOLDERS"), being the owners of all of the issued and
outstanding shares of capital stock of Continental and VENTURE SEISMIC LTD., an
Alberta corporation (the "BUYER").
The Securityholders collectively own all of the issued and outstanding shares of
capital stock of Continental (the "SHARES"), with each Securityholder owning the
number and type of Shares set forth opposite such Securityholder's name in
column A of Exhibit A hereto. The Buyer desires to purchase from the
Securityholders, and the Securityholders desire to sell to the Buyer, all of the
Shares in accordance with the provisions of this Agreement. References in this
Agreement to "SECTION A" refer to a section in Appendix A hereto.
NOW THEREFORE, intending to be legally bound hereby, the parties hereto agree as
follows:
1.1 SALE AND PURCHASE OF THE SHARES. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
defined in Section 2(a) hereof), each Securityholder shall sell to the Buyer and
the Buyer shall purchase from each Securityholder the following:
(a) all of those Class "B" Shares owned by such Securityholder in
exchange for the aggregate share purchase price (the "SHARE
CONSIDERATION") allocated among and payable to each individual
Securityholder by issuing on the Closing Date an aggregate of
2,080,000 fully paid and non-assessable common shares in the
capital of the Buyer (the "VENTURE STOCK"), issuable to each
Securityholder in accordance with that number of the Venture
Stock set forth after such Securityholder's name in column B
of Exhibit A registered in the respective names of the
Securityholders and bearing the legend set forth in A.1.5(g)
of Appendix A; and
(b) all of those Class "C", Series I Shares owned by such
Securityholder in exchange for the aggregate cash purchase
price of $1,500,000.00 (U.S.) (the "CASH CONSIDERATION"),
allocated among and payable to each individual Securityholder
in such amounts or percentages as set forth after such
Securityholder's name in columns C, D and E of Exhibit A,
payable as follows:
(i) $500,000.00 (U.S.) on the Closing Date; and
(ii) $1,000,000.00 (U.S.) on or before January 1, 1999
with simple interest to accrue and be payable on such
amount at the prime rate of the Main Downtown Branch
of the Royal Bank of Canada in Calgary, Alberta, plus
1.0%, such interest to be due and payable on the
outstanding principal amount from the Closing Date up
to and including the date upon which such amount,
together with all interest payable thereon in
accordance with this sub-paragraph 1.1(b)(ii), is
paid in full to the Securityholders, all to be
evidenced by promissory notes to be delivered by the
Buyer to the Securityholders on the Closing Date, in
negotiable form and in the form and content
reasonably satisfactory to the Securityholders, in
such principal
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amounts with respect to each Securityholder as is set forth after such
Securityholder's name in column E of Exhibit A,
such Class "B" Shares and Class "C" Shares together representing 100% of the
issued and outstanding Shares of Continental as of the Closing Date (the Share
Consideration and the Cash Consideration hereinafter collectively called the
"PURCHASE PRICE" for the Shares).
1.2 METHOD OF PAYMENT OF CASH CONSIDERATION. The Cash Consideration, when paid
by the Buyer to the Securityholders, shall be paid by way of trust cheques drawn
from the trust account of Burstall ▇▇▇▇, ▇▇▇▇▇▇▇ legal counsel for the Buyer, or
bank drafts drawn from the Buyer's account with Alberta Treasury Branches
("ATB").
2. CLOSING.
(a) The closing (the "CLOSING") of the sale and purchase of the
Shares described in Section 1.1 hereof shall take place at the
offices of the Buyer's Alberta solicitors, Burstall Ward,
commencing at 10:00 a.m., local time, on the third (3rd)
business day after satisfaction or waiver of all closing
conditions specified in Sections 8 and 9 or at such other date
as the parties hereto agree, with the date on which the
Closing takes place being referred to herein as the "CLOSING
DATE". Notwithstanding anything herein contained, the parties
agree that in the event the transactions contemplated by this
Agreement are not completed on or before August 31, 1998, the
parties shall be released from all obligations under this
Agreement, other than those pursuant to Section 5 and Section
8.1.
(b) At the Closing, each Securityholder shall deliver to the
Buyer, free and clear of all security interests, pledges,
liens, transfer and stamp tax obligations, encumbrances,
claims and other charges thereon of every kind, the
certificates for the Shares to be sold by such Securityholder
in negotiable form, duly endorsed in blank, or with separate
stock transfer powers attached thereto and signed in blank,
representing in the aggregate all of the issued and
outstanding Shares of Continental, in exchange for delivery by
the Buyer of the following documents to the Securityholders on
Closing:
(i) Burstall Ward trust cheque or ATB bank draft in the
amount of $500,000.00 (U.S.), made payable to ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, in trust for the
Securityholders;
(ii) the promissory notes, duly executed, sealed and
delivered by the Buyer, which are referred to in
sub-paragraph 1.1(b)(ii) above; and
(iii) share certificates for the Venture Stock, duly issued
from the Buyer's capital stock, free and clear of all
security interests, pledges, liens, transfer and
stamp tax obligations, encumbrances, claims and other
charges thereon of every kind and nature whatsoever,
and issued to the individual Securityholders as
specified in sub-paragraph 1.1(a) of this Agreement.
(c) At the Closing, the Securityholders shall make available to
the Buyer the written resignations of all the directors and
officers of Continental effective as of the Closing Date
except for such directors and officers as the Buyer shall
designate in writing, and shall
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cause to be made available to the Buyer and any continuing
directors and officers of Continental (the "POST-CLOSING
CONTINENTAL DIRECTORS AND OFFICERS") all minute books, stock
record books, books of account, corporate seals, leases,
contracts, agreements, securities, bank, checking and money
market accounts, other investments, deposits, customer and
subscriber lists, files and other documents, instruments and
papers belonging to Continental and shall cause full
possession and control of all of the assets and properties of
every kind and nature, tangible and intangible, of Continental
and of all other things and matters pertaining to the
operation of the business of Continental to be transferred and
delivered to the post-Closing Continental directors and
officers. At the Closing, the Securityholders shall also
deliver to the Buyer, and the Buyer shall deliver to the
Securityholders, the agreements, certificates and other
instruments and documents referred to in Sections 8 and 9
hereof, respectively.
(d) After the Closing, the Buyer shall make all agreements,
documents, information and other items referred to in Section
2(c) hereof available to the Securityholders for inspection,
in each case upon reasonable prior notice to the Buyer, during
normal business hours, at no expense to the Buyer and only for
a proper purpose, including without limitation the use thereof
in connection with (i) the indemnification and other
obligations of the Securityholders hereunder and (ii) the
payment of any liability to any third party which is owed by
any Securityholder.
3. PRE-CLOSING BALANCE SHEET ADJUSTMENTS.
(a) The Buyer acknowledges the declaration by Continental,
effective December 31, 1997, of a bonus of up to $1,000,000.00
(Cdn.) in the aggregate payable to the Securityholders, and
the redemption and cancellation of its outstanding 748 Class
"C", Series II Shares from the Securityholders for up to an
aggregate of $748,239.00 (Cdn.) (collectively, the "BONUS
TRANSACTIONS"). Continental shall pay for such redemptions on
or before the earlier of (i) June 25, 1998, or (ii) the
Closing Date. Each of the Securityholders hereby agree to the
terms and conditions of the redemption, including the
consideration payable to each in exchange for the 748 Class
"C", Series II Shares described herein.
(b) Continental shall pay the entire $1,000,000.00 (Cdn.) bonus
portion of the Bonus Transactions to the Securityholders, as
declared, on or before the earlier of (i) the Closing Date or
(ii) June 25, 1998, after payment of which there shall be no
outstanding loans, notes, payables or other indebtedness owed
by Continental to the Securityholders, either individually or
in the aggregate, except pursuant to the Employment Agreements
(as defined in Section 8.5).
4. EXAMINATION OF BUSINESS AND ASSETS.
(a) For the purpose of allowing the Buyer to analyze the business
and affairs of Continental to determine if there are any facts
relating to the Shares or to the business of Continental
which, if known to the Buyer, would cause the Buyer to elect
not to proceed with the purchase of the Shares, all
information relative to the Shares, the business of
Continental and the assets of Continental shall be open to
inspection by the Buyer, the Buyer's financial advisors and
the Buyer's solicitors, Burstall Ward, and Bachner, Tally,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP at any reasonable time up to and
including the date hereof, as the Buyer may deem
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reasonably necessary or advisable in order to ensure that each
of the representations, warranties, covenants and agreements
of the Securityholders and Continental herein contained shall
be true and correct on the Closing Date (the "BUYER'S DUE
DILIGENCE").
(b) For the purpose of allowing the Securityholders to analyze the
business and affairs of the Buyer to determine if there are
any facts relating to the Venture Stock or to the business of
the Buyer which, if known to the Securityholders or to any one
of the Securityholders, would cause any one of such
Securityholders to elect not to proceed with the purchase and
sale of the Shares, all information in the possession of the
Buyer, subject to any confidentiality provisions, or as
otherwise may be limited by regulatory authorities or the
rules and regulations of the Securities and Exchange
Commission (the "S.E.C.") or the Nasdaq Stock Market
("NASDAQ") relative to the Venture Stock, to the listing of
the Venture Stock for trading on Nasdaq, to the regulatory
filings of the Buyer, to the publicly filed financial
statements of the Buyer, to the business and affairs of the
Buyer and to the assets of the Buyer, shall be open to
inspection by any one of the Securityholders, the financial
advisors of any one of the Securityholders, and to the
solicitors of the Securityholders, at any reasonable time up
to and including the date hereof, as any one of the
Securityholders may deem reasonably necessary or advisable in
order to ensure that each of the representations, warranties,
covenants and agreements of the Buyer contained in this
Agreement shall be true and correct on the Closing Date (the
"SECURITYHOLDERS' DUE DILIGENCE").
(c) For the purpose of allowing the Buyer, Continental and the
Securityholders to monitor compliance by each of Continental,
the Securityholders and the Buyer with their respective
covenants, representations and warranties made herein up to
and including the Closing Date, each of Continental, the
Securityholders and the Buyer shall continue to have access to
the information and materials described in Section 4(a) and
(b) for such purpose.
5. CONFIDENTIALITY. Between the date of this Agreement and the Closing Date,
each of the Buyer, Continental and the Securityholders shall and shall cause
their respective affiliates and officers and directors, and shall use reasonable
efforts to cause all their other respective employees, auditors, attorneys,
consultants, advisors and agents, to treat as confidential and hold in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, and after prior
written notice to the other party, all confidential information of the
Securityholders and Continental, or the Buyer, as the case may be, furnished to
the Buyer by the Securityholders and Continental or to the Securityholders and
Continental by the Buyer, as the case may be, or any of their respective
representatives in connection with the Contemplated Transactions (as defined in
Section 8.11) and will not release or disclose such confidential information to
any other person, except their respective auditors, attorneys, financial
advisors and other consultants, agents and advisors in connection with the
consummation of the Contemplated Transactions, except as may be required by the
rules of the Alberta Securities Commission, the S.E.C. or Nasdaq, including
without limitation, the issuance of a press release and the filing of a report
on Form 8-K by the Buyer upon execution of this Agreement. If the Closing does
not occur (i) such confidence shall be maintained by the Securityholders and
Continental, or the Buyer, as the case may be, and each party shall cause its
officers and directors and affiliates and shall use reasonable efforts to cause
such other persons to maintain such confidence, except to the extent such
information comes into the public domain (other than as a result of an action by
such party, its officers, directors or such other persons in contravention of
this Agreement), (ii) each party shall and shall cause its officers and
directors and affiliates and shall use reasonable efforts to cause such other
persons to refrain from using any of such
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confidential information except in connection with the Agreement, and (iii) upon
the request of any party, the other party shall promptly return to the
requesting party any written materials remaining in its possession, which
materials it has received from the requesting party, or their respective
representatives.
6. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL AND THE SECURITYHOLDERS. Each
Securityholder represents and warrants as of the date hereof, and as of the
Closing Date to the Buyer as set forth in Section A.1 of Appendix A hereto and
Continental and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ Self represents and warrants as
of the date hereof, and as of the Closing Date to the Buyer as set forth in
Section A.2 of Appendix A hereto, which Sections are incorporated in this
Section 6 by reference and are deemed to be a part of this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants as of the date hereof, and as of the Closing Date, to the
Securityholders and to each of them as set forth in Section A.3 of Appendix A
hereto, which Section is incorporated in this Section 7 by reference and is
deemed to be a part of this Agreement.
8. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS. Except for the obligations
of the Buyer contained in Section 5 and Section 8.1 of this Agreement, all
obligations of the Buyer under this Agreement are subject to the fulfilment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
8.1 BUYER LOAN. The Buyer shall, upon execution hereof, forthwith advance to
Continental $4,000,000.00 (U.S.) pursuant to the credit agreement between the
Buyer, as lender, and Continental, as borrower, in substantially the form of
Exhibit B attached hereto (the "CREDIT AGREEMENT"), to be secured with a
security interest in certain of the assets of Continental pursuant to the
security agreement to be granted by Continental pursuant to the Credit Agreement
in substantially the form annexed hereto as Exhibit C (the "SECURITY
AGREEMENT"), subject to a priority agreement with Royal Bank of Canada, if
necessary, with the funds advanced pursuant to the Credit Agreement to be used
solely to assist with the equipping of a marine seismic vessel described as the
"Pacific Titan".
8.2 APPROVAL OF DUE DILIGENCE. The Buyer shall have received the requisite
approval from its board of directors of the Contemplated Transactions and of the
Due Diligence.
8.3 AUDITED FINANCIAL STATEMENTS OF THE COMPANY. Continental shall have provided
such audited financial statements for such periods, in such form as may be
required by the applicable regulatory authorities in connection with the
consummation of the Contemplated Transactions, together with any other audited
financial statements (as necessary) of Continental up to and including the
Closing Date as may be required by the applicable regulatory authorities, with
all costs of all such audits and financial statements to be paid by Continental.
8.4 SHAREHOLDER APPROVAL. The Buyer shall have received the requisite approval
from its shareholders of the Contemplated Transactions in accordance with
applicable law.
8.5 EMPLOYMENT AGREEMENTS. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ ▇. Self shall have
executed and delivered employment agreements (the "EMPLOYMENT AGREEMENTS") with
Continental providing for a 3 year employment term, which will include
appropriate non-competition provisions, in the form annexed hereto as Exhibit D.
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8.6 REGULATORY, CONTRACTUAL APPROVALS. The Buyer, Continental and each of the
Securityholders shall have obtained all third party consents and approvals and
all applicable governmental, regulatory, stock exchange, shareholder and
contractual approvals necessary in connection with the execution, delivery and
performance of this Agreement and to complete the Contemplated Transactions,
including, without limitation, those consents set forth on Schedule A.2.14
(regarding Continental) and Schedule A.3.5 (regarding the Buyer).
8.7 RELEASES. The Securityholders shall have executed and delivered releases in
favour of Continental in their capacities as directors, officers, shareholders
and employees of Continental, in such form as reasonably required by the Buyer
and as reasonably acceptable to the Securityholders.
8.8 THIRD PARTY CONSENTS AND APPROVALS. The Securityholders and Continental
shall have obtained all third party consents or approvals required by
Continental or by the Securityholders in order to complete the Contemplated
Transactions.
8.9 APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions, proceedings,
resolutions, instruments and documents (including those required to complete the
Bonus Transactions) required to carry out this Agreement or incidental hereto
and all other related legal matters shall have been approved on or before the
Closing Date by Burstall Ward, counsel for the Buyer, in the exercise of their
reasonable judgment. The Securityholders shall also have delivered to the Buyer
on or before the Closing Date such other documents, instruments, certifications
and further assurances as such counsel for the Buyer may reasonably require, as
more particularly described in the draft form of closing agenda attached hereto
and marked Exhibit E, with such additional documents to be added thereto as
mutually agreed to by the parties prior to the Closing Date, acting in a
commercially reasonable manner for transactions similar to the Completed
Transactions (the "CLOSING AGENDA").
8.10 LEGAL OPINIONS. The Buyer shall have received the opinions of ▇▇▇▇▇▇
▇▇▇▇▇▇, Barristers and Solicitors, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Barristers and Solicitors, counsel to Continental and to the Securityholders,
dated the Closing Date and addressed to the Buyer, in form and content agreed to
on or before Closing, acting in a commercially reasonable manner for
transactions similar to the Contemplated Transactions.
8.11 NO INJUNCTION. There shall not be in effect any injunction, order or decree
of a court of competent jurisdiction that prohibits or delays consummation of
the transactions contemplated by this Agreement (the "CONTEMPLATED
TRANSACTIONS"), or that will require any divestiture by the Buyer as a result of
the Buyer's acquisition of the Shares.
8.12 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The representations and
warranties of Continental and the Securityholders set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement, and as of the Closing Date with the same effect as though made on the
Closing Date, (b) the Securityholders and Continental shall have performed and
complied in all material respects with the agreements, covenants and conditions
contained in this Agreement required by this Agreement to be performed or
complied with by them prior to or at the Closing, and (c) the Buyer shall have
received a certificate to the foregoing effect signed by the Chief Executive
Officer and Chief Financial Officer of Continental and by the Securityholders.
8.13 LITIGATION. There shall not have been instituted any (a) investigation or
other inquiry by any domestic or foreign national, state, multi-state or
municipal or other local government, any subdivision,
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agency, commission or authority thereof, or any quasi-governmental or private
body exercising any regulatory or taxing authority thereunder (each, a
"GOVERNMENTAL BODY"), (b) action, suit, proceeding, claim, demand, citation,
summons, subpoena or inquiry of any kind or nature whatsoever, civil, criminal,
regulatory or otherwise, at law or equity (each, a "PROCEEDING"), by any
Governmental Body or by any other person or entity and, at what would otherwise
have been the Closing Date, remain pending to delay, restrain or prohibit the
Contemplated Transactions or to seek any divestiture or to revoke or suspend any
consent, waiver, registration, certificate, approval, grant, franchise,
concession, permit, license, exception or authorization of, or declaration or
filing with, or notice or report to, (i) any Governmental Body and (ii) any
other person required or obtained in connection with the Contemplated
Transactions (collectively, the "APPROVALS") by reason of any or all of the
Contemplated Transactions; nor shall any Governmental Body have notified any of
the parties hereto or any of their respective affiliates that consummation of
any part of the Contemplated Transactions would constitute a violation of any
law or that it intends to commence a Proceeding to restrain or prohibit any part
of the Contemplated Transactions or to require such divestiture, revocation or
suspension; unless, in either such case, such Governmental Body or other person
shall have withdrawn such notice and abandoned such Proceeding.
8.14 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact, condition, change,
development or effect shall have occurred, exist or come to exist since the date
of this Agreement that, individually or in the aggregate, has constituted or
resulted in, or could reasonably be expected to constitute or result in, in the
reasonable judgment of an experienced, prudent business person (a) a reduction
in the value of the business of Continental, or (b) a decision not to consummate
the Contemplated Transactions on the terms and conditions set forth in this
Agreement (a "MATERIAL ADVERSE EFFECT").
8.15 PAYMENT OF SECURITYHOLDER TRANSACTION EXPENSES. Continental shall have
paid, or made all necessary arrangements with respect to payment of, all costs,
liabilities and expenses incurred by or for the benefit of Continental and the
Securityholders (including without limitation all legal and accounting fees and
expenses) in connection with the negotiation and execution of this Agreement and
the consummation of the Contemplated Transactions, in each case at no cost or
obligation to the Buyer following the Closing; and Continental and the
Securityholders shall have provided the Buyer with evidence reasonably
satisfactory to the Buyer of such payments or other arrangements.
8.16 PROCEEDINGS SATISFACTORY. All certificates, opinions and other documents to
be delivered by the Securityholders and Continental and all other matters to be
accomplished by the Securityholders or Continental prior to or at the Closing
shall be satisfactory in the reasonable judgment of the Buyer and its counsel.
8.17 CANCELLATION OF INDEBTEDNESS TO SECURITYHOLDERS. Except for reimbursement
for expenses and payments due under the Employment Agreements (the "PERMITTED
INDEBTEDNESS"), on the Closing Date (a) the Securityholders shall have cancelled
any notes payable by Continental to the Securityholders as of the Closing Date;
and (b) any indebtedness owed by Continental to the Securityholders as of the
Closing Date shall, without further consideration, have been repaid, discharged
or contributed to the capital of Continental, which payment, contribution or
discharge shall be evidenced in a form reasonably satisfactory to the Buyer.
Except for the Permitted Indebtedness, as of the Closing Date, there shall be no
outstanding notes, loans, payables or other indebtedness owed by Continental to
any of the Securityholders.
9. CONDITIONS PRECEDENT TO THE SECURITYHOLDERS' OBLIGATIONS. Except for the
obligations of Continental and the Securityholders contained in Sections 5 and
8.1 of this Agreement, all the obligations of the Securityholders under this
Agreement are subject to the fulfilment or satisfaction, prior to or at the
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Closing, of each of the following conditions precedent:
9.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The representations and
warranties of the Buyer set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement, and as of the Closing
Date with the same effect as though made on the Closing Date, (b) the Buyer
shall have performed and complied in all material respects with all agreements,
covenants and conditions contained in this Agreement required by this Agreement
to be performed or complied with by the Buyer prior to or at the Closing, and
(c) the Securityholders shall have received a certificate to the foregoing
effect signed by the Chief Executive Officer and Chief Financial Officer of the
Buyer.
9.2 EMPLOYMENT AGREEMENTS. Continental shall have executed and delivered the
Employment Agreements and the Employment Agreements shall be in full force and
effect, unamended.
9.3 NOMINEE DIRECTOR. The Securityholders shall provide the name of one nominee
director of the Buyer on behalf of the Securityholders acceptable to the Buyer
and the Buyer shall use its best efforts to nominate such nominee director to
stand for election as a director of the Buyer at the special meeting of the
Shareholders of the Buyer to be held prior to the Closing Date; provided that
the nomination of such director shall be conditional upon receipt of the
requisite shareholder approval necessary for the Contemplated Transactions and
the election of such director shall be subject to the Closing of the
Contemplated Transactions.
9.4 CREDIT AGREEMENT, SECURITY AGREEMENT. The Credit Agreement shall have been
duly executed and delivered by the parties thereto on the date hereof, and the
Buyer, contemporaneously therewith, shall have advanced the funds contemplated
by the Credit Agreement for the purposes specified therein.
9.5 APPROVAL OF SECURITYHOLDERS' COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents (including those required to
complete the Bonus Transactions) required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
counsel for the Securityholders, in the exercise of their reasonable judgment.
The Buyer shall also have delivered to the Securityholders such other documents,
instruments, certifications and further assurances as such counsel for the
Securityholders may reasonably require, as more particularly described in the
Closing Agenda.
9.6 DIRECTOR AND SHAREHOLDER APPROVALS.
(a) Continental shall have received the approval of its board of
directors and the unanimous approval of all of its
shareholders, both to the Agreement and to the Contemplated
Transactions, and certified copies of the resolutions
containing these approvals shall be delivered by Continental
to the Securityholders and the Buyer on the Closing Date.
(b) The Buyer shall have received the required approval of its
board of directors and of its shareholders, both to the
Agreement and to the Contemplated Transactions, and certified
copies of the resolutions or minutes containing these
approvals shall be delivered by the Buyer to the
Securityholders on the Closing Date.
9.7 RELEASES. On the Closing Date, Continental shall have executed and delivered
to each of the Securityholders a general release in favour of each such
Securityholder in his or her, as the case may be, respective capacity as a
director, officer, employee and independent contractor of Continental, in such
form
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as mutually acceptable to the parties.
9.8 DIRECTORS' APPROVAL - EMPLOYMENT AGREEMENTS - CONTEMPLATED TRANSACTIONS.
(a) Continental, by way of written resolution made effective March
1, 1998 shall have received the approval of its board of
directors and the unanimous approval of its shareholders to
the Employment Agreements and certified copies of the
resolutions containing these approvals shall be delivered by
Continental to ▇▇▇ Self and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ on the Closing
Date.
(b) Continental, by way of written resolution shall have received
the approval of its board of directors and the unanimous
approval of its shareholders to the Contemplated Transactions,
and certified copies of the resolutions containing these
approvals shall be delivered by Continental to the
Securityholders on the Closing Date.
9.9 THIRD PARTY CONSENTS AND APPROVALS. The Buyer shall have obtained all third
party consents and approvals necessary in connection with the execution,
delivery and performance of this Agreement and as required by the Buyer in order
to complete the Contemplated Transactions, including without limitation, those
set forth on Schedule A.3.5. hereof and all applicable and required
governmental, legal, regulatory, stock exchange and contractual approvals.
9.10 APPROVAL OF DUE DILIGENCE. The Securityholders shall have approved the
results of the Securityholders' Due Diligence.
9.11 REGULATORY, CONTRACTUAL APPROVALS. The Buyer, Continental and each of the
Securityholders shall have obtained all third party consents and approvals and
all applicable governmental, regulatory, stock exchange, shareholder and
contractual approvals necessary in connection with the execution, delivery and
performance of this Agreement and to properly complete the Contemplated
Transactions, including, without limitation, those consents set forth in
Schedule A.2.14 (regarding Continental) and Schedule A.3.5 (regarding the
Buyer).
9.12 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact, condition, change,
development or effect shall have occurred, exist or come to exist since the date
of this Agreement that, individually or in the aggregate, has constituted or
resulted in, or could reasonably be expected to constitute or result in, in the
reasonable judgment of an experienced, prudent business person (a) a reduction
in the value of the business of the Buyer, or (b) a decision not to consummate
the Contemplated Transactions on the terms and conditions set forth in this
Agreement (a "VENTURE MATERIAL ADVERSE EFFECT").
9.13 PROCEEDINGS SATISFACTORY. All certificates, opinions and other documents to
be delivered by the Buyer and all other matters to be accomplished by the Buyer
prior to or at the Closing shall be satisfactory in the reasonable judgment of
the Securityholders, Continental and their counsel.
9.14 ADDITIONAL CLOSING DOCUMENTS. The Buyer shall provide to the
Securityholders on the Closing Date the following:
(a) a certified copy of the directors' resolution of the Buyer,
approving the Agreement and all transactions contemplated by
the Agreement, including without limitation the approval and
due authorization of the issuance and delivery of the Venture
Stock to the Securityholders on the Closing Date, and
authorizing and directing the execution and delivery of the
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Agreement by the Buyer, together with all other documents
required pursuant to the Closing Agenda;
(b) the legal opinion of Burstall Ward addressed to the
Securityholders, made effective as of the Closing Date, in
form and content as agreed to on or before the Closing, acting
in a commercially reasonable manner for transactions similar
to the Contemplated Transactions, confirming that the
Agreement and all of the Contemplated Transactions have been
duly approved by the Buyer's shareholders and the Buyer's
board of directors, that the Venture Stock has been duly and
properly issued by the Buyer, from treasury, as fully paid and
non-assessable shares, and, to the best of their knowledge,
information and belief, having made reasonable and adequate
inquiry in that regard, is free and clear of all security
interests, pledges, liens, transfer and stamp tax obligations,
encumbrances, claims and other charges thereon of every kind
and nature whatsoever, and further, confirming that the
Agreement and all of the Contemplated Transactions, including,
without limitation, the issuance of the Venture Stock to the
Securityholders has been made and done in compliance with all
applicable corporate and securities laws, regulations, and
policies, including without limitation the rules, regulations
and policies of the Alberta Securities Commission, and that
the required Form 20 has been duly filed with the Alberta
Securities Commission and to the best of their knowledge,
information and belief, having made reasonable inquiry in that
regard, and in reliance upon an opinion of Bachner, Tally,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP and (A) assuming (i) the accuracy of
the representations and warranties provided by the
Securityholders in this Agreement and (ii) that the Buyer has
complied in all material respects with the requirements of
section 4(2) of the Act, the offer and sale of the Venture
Stock by the Buyer is exempt from registration under the Act;
and (B) under the federal securities laws of the United States
as currently in effect, and assuming the accuracy of the
representations and warranties made by the Securityholders in
this Agreement, except to the extent that the Venture Stock
issued to the Securityholders constitute "restricted
securities" as such term is defined under Rule 144 of the Act,
or that any of the Securityholders may be deemed an
"affiliate" of the Buyer, as such term is defined under Rule
144 of the Act, as of the date of issuance, the Venture Stock
will have no prohibition on transfer; and
(c) a true copy of the written verification from Nasdaq referred
to in Section 13.7, if obtainable.
10. INDEMNIFICATION.
10.1 INDIVIDUAL INDEMNIFICATION BY THE SECURITYHOLDERS AND CONTINENTAL.
(a) From and after the Closing, each Securityholder shall
reimburse, indemnify and hold harmless the Buyer and its
affiliates (including, without limitation, Continental) (each
such person and its successors and assigns is referred to
herein as a "BUYER INDEMNIFIED PARTY") against and in respect
of any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered,
sustained, incurred or required to be paid by any Buyer
Indemnified Party because of or that result from, relate to or
arise out of the untruth, inaccuracy or breach of, any
representation or warranty of such Securityholder in whole or
in part contained in Section A.1 of this Agreement and any and
all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and
other expenses (including without limitation reasonable legal
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 10.1.
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(b) Each Securityholder and Continental shall indemnify and hold
harmless the Buyer and each person, if any, who controls the
Buyer within the meaning of the Act (as defined) against any
losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to,
all reasonable costs of defense and investigation and all
attorneys' fees), to which the Buyer or such controlling
person may become subject, under the Act or otherwise, and
will reimburse, as incurred, the Buyer and such controlling
persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing
as a third party witness in connection with any losses,
claims, damages or liabilities, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Proxy
Statement (as defined in Section 13.6) or any amendment or
supplement thereto, but only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with
written information furnished to the Buyer by or on behalf of
such Securityholder or Continental, as the case may be,
specifically for use in the preparation of the Proxy Statement
or any such amendment or supplement thereof. This indemnity
will be in addition to any liability which the Securityholders
and Continental may otherwise have.
10.2 SEVERAL INDEMNIFICATION BY ▇▇▇▇▇ AND SELF. From and after the Closing, each
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ ▇. Self shall reimburse, indemnify any Buyer
Indemnified Party against and in respect of fifty percent (50%) of:
(a) any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered,
sustained, incurred or required to be paid by any Buyer
Indemnified Party because of or that result from, relate to or
arise out of:
(i) the untruth, inaccuracy or breach of, or the failure
to fulfil, any representation, warranty (other than a
representation or warranty contained in Section A.1
of this Agreement), agreement, covenant or statement
of any Securityholder contained in this Agreement or
in any certificate or other writing furnished to the
Buyer by or on behalf of any Securityholder or
Continental in connection herewith;
(ii) any claim by any former shareholder of Continental
involving the Contemplated Transactions or any prior
transaction involving any shares of capital stock of
Continental or any predecessor corporation
(including, without limitation, claims relating to
any and all decisions and determinations made with
respect to amounts or allocations of purchase price
or other consideration) and not already provided for
in the Financials (as defined in Section A.2.4); or
(iii) any liability or obligation relating to or arising
out of the business, operations or assets of
Continental or the actions or omissions of
Continental's directors, officers, shareholders,
employees or agents; and prior to the Closing Date
and not already provided for in the Financials (as
defined in Section A.2.4), including without
limitation any liability or obligation relating to,
and any claim which arises out of or is based upon,
(1) negligence, (2) strict liability, (3) any
Environmental Claim (as defined in Section A.2.19
hereof) or which otherwise relates to, or involves a
claim,
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liability or obligation which arises out of or is
based upon, any Environmental Law (as defined in
Section A.2.19 hereof) to the extent that such
liability or obligation relates to or arises out of,
in whole or in part, any activity occurring,
condition existing, omission to act or other matter
existing prior to the Closing Date, (4) any other
statute, rule or regulation or (5) any express or
implied representation, warranty, agreement or
guarantee made by or on behalf of Continental, or any
liability or obligation which is imposed on
Continental or any successor corporation by operation
of law, in connection with any product designed,
used, rented, sold, manufactured, shipped or
installed by or on behalf of Continental, or for any
service performed by or on behalf of Continental,
including without limitation any acts, omissions,
workmanship or material performed or sold by
Continental, in any case prior to the Closing Date
and irrespective of the date that any claim, suit or
other cause of action related to any of the foregoing
is filed or otherwise instituted against Continental
or any successor corporation (with all references to
Continental in this Section 10.2(a)(iii) also deemed
to be references to any predecessor in business of
Continental); provided, however, that the foregoing
shall not apply to liabilities and obligations of
Continental described in Section A.2.7(a) hereof; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including without
limitation reasonable legal fees and expenses) incident to any
of the foregoing or to the enforcement of this Section 10.2.
10.3 INDEMNIFICATION BY THE BUYER.
(a) From and after the Closing, the Buyer shall reimburse,
indemnify and hold harmless each Securityholder (each such
person and his or her heirs, administrators, personal
representatives and assigns is referred to herein as a
"SECURITYHOLDER INDEMNIFIED PARTY") against and in respect of:
(i) any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses
suffered, sustained, incurred or required to be paid
by such Securityholder Indemnified Party because of
or that result from, relate to or arise out of:
A. the untruth, inaccuracy or breach of, or the
failure to fulfil, any representation,
warranty, agreement, covenant or statement
of the Buyer contained in this Agreement or
in any certificate or other writing
furnished to the Securityholders by or on
behalf of the Buyer in connection herewith;
or
B. any liability or obligation relating to or
arising out of the business, operations or
assets of Continental conducted after the
Closing Date or the actions or omissions of
Continental's directors, officers,
shareholders, employees or agents after the
Closing Date (other than the
Securityholders) including, without
limitation, any liability or obligation
relating to, and any claim which arises out
of or is based upon, (i) negligence, (ii)
strict
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liability, (ii) any Environmental Claim (as
defined in Section A.2.19 hereof) or which
otherwise relates to, or involves a claim,
liability or obligation which arises out of
or is based upon, any Environmental Law (as
defined in Section A.2.19 hereof) to the
extent that such liability or obligation
relates to or arises out of, in whole or in
part, any activity occurring, condition
existing, omission to act or other matter
existing subsequent to the Closing Date
(iii) any other statute, rule or regulation
or (iv) any express or implied
representation, warranty, agreement or
guarantee made or on behalf of Continental,
or any liability or obligation which is
imposed on Continental or any successor
corporation by operation of law, in
connection with any product designed, used,
rented, sold, manufactured, shipped or
installed by or on behalf of Continental, or
for any service performed by or on behalf of
Continental, including, without limitation,
any acts, omissions, workmanship or material
performed or sold by Continental, in any
case subsequent to the Closing Date and
irrespective of the date that any claim,
suit or other cause of action related to any
of the foregoing is filed or otherwise
instituted against Continental or any
successor corporation (with all references
to Continental in this Section 10.3(a)(B)
also deemed to be references to any
predecessor in business of Continental); and
(ii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including
without limitation reasonable legal fees and
expenses) incident to any of the foregoing or to the
enforcement of this Section 10.3.
(b) The Buyer shall indemnify and hold harmless the
Securityholders and Continental, each of its directors, and
each person, if any, who controls Continental within the
meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the
Securityholders and Continental or any such director, nominee,
officer or controlling person may become subject, under the
Act or otherwise, and will reimburse, as incurred, the
Securityholders, Continental and such controlling persons for
any legal or other expenses reasonably incurred in connection
with investigating, defending against or appearing as a third
party witness in connection with any losses, claims, damages
or liabilities, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Proxy
Statement, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in the Proxy Statement or any
amendment or supplement thereto other than in reliance upon
and in conformity with written information furnished by the
Securityholders and Continental to the Buyer specifically for
use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Buyer may otherwise
have.
10.4 LIMITATIONS ON LIABILITY.
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(a) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereof, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ ▇. Self shall not be
liable to any Buyer Indemnified Party under Section 10.2 for
any misrepresentation or breach of warranty until the
aggregate amount for which they would otherwise (but for this
provision) be liable to any or all Buyer Indemnified Parties
for all such misrepresentations and breaches of warranty
exceeds in the aggregate the sum (the "DEDUCTIBLE") of
$25,000.00.
(b) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereto, the indemnification liability of each of ▇▇▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇ Self to any Buyer Indemnified Party under
Section 10.2 for any misrepresentation or breach of warranty
shall be limited to fifty percent (50%) of any claim or demand
made thereunder.
(c) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereto, the indemnification liability of each
Securityholder to any Buyer Indemnified Party under Section
10.2 for any misrepresentation or breach of warranty shall be
limited to the percentage of any claim or demand made
thereunder equal to the percentage set forth after such
Securityholder's name in column C on Exhibit A.
(d) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claim arising under or with respect to Section 11(b) hereof,
the Buyer shall not be liable to any Securityholder
Indemnified Party under Section 10.3 hereof for any
misrepresentation or breach of warranty until the aggregate
amount for which it would otherwise (but for this provision)
be liable to any or all Securityholder Indemnified Parties for
all such misrepresentations and breaches of warranty exceeds
in the aggregate the Deductible.
10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in Section
10.6 hereof, the representations and warranties given or made by the
Securityholders or the Buyer in this Agreement or in any certificate or other
writing furnished in connection herewith shall survive the Closing for a period
of two years after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (a) all representations and warranties
relating to Taxes and Tax Returns (each as defined in Section A.2.10 hereof) and
to Environmental Claims (as defined in Section A.2.19 hereof) shall survive the
Closing for the period of the applicable statutes of limitation plus any
extensions, (b) all representations and warranties set forth in Sections A.1 and
11(a) hereof shall survive the Closing without limitation and (c) any
representation or warranty as to which a claim shall have been asserted during
the survival period shall continue in effect with respect to such claim until
such claim shall have been finally resolved or settled. Notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations and warranties of the other party or parties set
forth herein.
10.6 EXCEPTIONS TO LIMITATIONS. Nothing herein shall be deemed to limit or
restrict in any manner any rights or remedies which any Buyer Indemnified Party
has, or might have, at law, in equity or otherwise, against the Securityholders,
or which any Securityholder Indemnified Party has, or might have, at law, in
equity or otherwise, against the Buyer, based on any willful misrepresentation,
willful breach of warranty or
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willful failure to fulfil any agreement or covenant.
10.7 PAYMENT OF INDEMNIFICATION OBLIGATIONS. In the event that any
Securityholder or the Buyer is required to make any payment under this Section
10, such party shall promptly pay the Buyer Indemnified Party or the
Securityholder Indemnified Party, as the case may be, the amount of such
indemnity obligation. If there should be a dispute as to such amount, such
Securityholder or the Buyer, as the case may be, shall nevertheless pay when due
such portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately determined
as properly payable under this Section 10 and the portion, if any, theretofore
paid shall bear interest for the period from the date the amount was demanded by
the Buyer Indemnified Party or the Securityholder Indemnified Party, as the case
may be, until payment in full, payable on demand, at the fluctuating rate per
annum which at all times shall be 1.0 percentage point in excess of the rate
which is publicly announced from time to time by The Royal Bank of Canada as its
"PRIME RATE".
10.8 INDEMNIFICATION PROCEDURE. All claims for indemnification under this
Section 10 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party (the
"INDEMNIFYING PARTY") would be liable to any Buyer Indemnified
Party or Securityholder Indemnified Party (in either case, the
"INDEMNIFIED PARTY") hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party
shall take immediate steps to notify the Indemnifying Party of
such claim or demand, specifying the nature of such claim or
demand in as much detail as possible and the amount or the
estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such
claim or demand), together with all documentation required by
the Indemnifying Party and which the Indemnified Party has the
power to obtain or is able to obtain, and detailing such claim
or demand sufficiently to permit a decision regarding
indemnification to be made by the Indemnifying Party
(collectively called the "CLAIM NOTICE"). The Indemnifying
Party shall have 20 days from the receipt of the Claim Notice
(the "NOTICE PERIOD") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the
Indemnifying Party's liability to the Indemnified Party
hereunder with respect to such claim or demand and (ii) if the
Indemnifying Party does not dispute such liability, whether or
not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend against such
claim or demand, provided that the Indemnified Party is hereby
authorized (but not obligated) prior to and during the Notice
Period to file any motion, answer or other pleading which the
Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests. In the event that
the Indemnifying Party notifies the Indemnified Party within
the Notice Period that the Indemnifying Party does not dispute
the Indemnifying Party's obligation to indemnify hereunder and
desires to defend the Indemnified Party against such claim or
demand and except as hereinafter provided, the Indemnifying
Party shall have the right to defend by appropriate
proceedings, which proceedings shall be promptly settled or
prosecuted by the Indemnifying Party to a final conclusion. If
the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party
may do so at the Indemnified Party's sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified
Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any
rights against the Indemnifying Party, may defend against any
such claim in the Indemnified
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Party's sole discretion and, if it is ultimately determined
that the Indemnifying Party is responsible therefor under this
Section 10, then the Indemnified Party shall be entitled to
recover from the Indemnifying Party the amount of any judgment
and, subject to Section 10.8(c) hereof, all indemnifiable
costs and expenses of the Indemnified Party with respect
thereto, including without limitation interest as provided in
Section 10.7 hereof.
(b) If the Indemnified Party elects to defend any such claim or
demand or the Indemnifying Party elects not to defend such
claim or demand, then the Indemnified Party covenants to
diligently defend any such claim or demand to the full extent
an experienced, prudent businessperson would in the
circumstances. The Indemnified Party shall, prior to entering
into any settlement of any such claim or demand, provide the
Indemnifying Party with full particulars of such proposed
settlement and obtain in writing the approval of such
Indemnifying Party to such settlement, such approval to not be
unreasonably withheld. The Indemnified Party shall have the
right to control the defense of any such claim or demand and
the amount of any judgment and, subject to Section 10.8(c)
hereof, the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the
Indemnifying Party hereunder. If the Indemnified Party should
elect to exercise such right, the Indemnifying Party shall be
consulted by the Indemnified Party on an ongoing basis with
respect to all material issues related to the defense of such
claim or demand, and have the right to participate in, but not
control, the defense of such claim or demand at the sole cost
and expense of the Indemnifying Party.
(c) Notwithstanding any other provisions of Section 10 of this
Agreement, the Indemnifying Party's obligation to indemnify
the Indemnified Party with respect to the reasonable costs and
expenses incurred by the Indemnified Party in defending any
particular claim or demand, is subject to the following
qualifications and limitations:
(i) all such costs and expenses must be reasonable given
the nature and extent of such claim or demand ; and
given the nature and extent of the relevant defense,
(ii) prior to retaining any professional services in
connection with the defense of such claim or demand,
the Indemnified Party shall first advise the
Indemnifying Party of the need for such professional
services, shall consult with the Indemnifying Party
regarding the identity and the expected fees of the
professional to be retained and shall, to the extent
possible, acting reasonably, come to a mutual
agreement with the Indemnifying Party regarding the
professional to be retained, and
(iii) all such costs and expenses incurred with respect to
the provision of legal services shall be subject to
taxation.
(d) In the event the Indemnified Party should have a claim against
the Indemnifying Party hereunder which does not involve a
claim or demand being asserted against or sought to be
collected by a third party, the Indemnified Party shall take
immediate steps to send a Claim Notice with respect to such
claim to the Indemnifying Party.
(e) Subject to the provisions of Sections 10.8(b) and 10.8(c)
hereof, the Indemnified Party's failure to give immediate
notice to the Indemnifying Party of any actual, threatened or
possible claim or demand which may give rise to a right of
indemnification hereunder shall
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not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely
prejudiced the Indemnifying Party.
11. NO BROKERS' OR FINDERS' FEES.
(a) Each of the Securityholders represents and warrants that all
discussions, activities and negotiations relative to this
Agreement have been carried on by such Securityholder directly
without the intervention of any person who may be entitled to,
or has claimed entitlement to, any brokerage or finder's fee
or other commission in respect hereof or the consummation of
the Completed Transactions, irrespective of the validity of
such claim, other than as disclosed in the December 8, 1997
letter from Canaccord Capital Corporation to the Buyer, and
each Securityholder agrees to indemnify and hold harmless the
Buyer Indemnified Parties against any and all claims, losses,
liabilities and expenses (including without limitation
reasonable legal fees and expenses) which may be incurred or
paid by the Buyer as a result of such Securityholder's
dealings, arrangements or agreements with any such person
contrary to the representation and warranty contained in this
sub-paragraph 11(a).
(b) The Buyer represents and warrants that all discussions,
activities and negotiations relative to this Agreement have
been carried on by the Buyer and its affiliates directly
without the intervention of any person who may be entitled to,
or has claimed entitlement to, any brokerage or finder's fee
or other commission in respect hereof or the consummation of
the Contemplated Transactions, irrespective of the validity of
such claim, other than as disclosed in the December 8, 1997
letter from Canaccord Capital Corporation to the Buyer and the
Buyer agrees to indemnify and hold harmless each
Securityholder against any and all claims, losses, liabilities
and expenses (including without limitation reasonable legal
fees and expenses) which may be incurred or paid by such
Securityholder as a result of the Buyer's or any of the
Buyer's affiliates' or associates' dealings, arrangements or
agreements with any such person contrary to the representation
and warranty contained in this sub-paragraph 11(b).
12. COVENANT NOT TO COMPETE.
(a) From the date of this Agreement until the third anniversary of
the Closing, each of the Securityholders agrees that he or
she, as the case may be, will not, anywhere in North America,
unless acting for the Buyer or its affiliates (including
without limitation Continental) or in accordance with the
Buyer's prior written consent, (i) (directly or indirectly)
own, manage, operate, join, control, finance or participate in
the ownership, management, operation, control or financing of,
or be connected as an officer, director, employee, principal,
agent, representative, consultant, investor, owner, partner,
manager, joint venturer or otherwise with, or permit his name
to be used by or in connection with, any business or
enterprise engaged anywhere in North America by Continental on
the Closing Date or during the three-year non-compete period
stated above or at the time of its termination, (ii) call on
or solicit any person who or which during such non-compete
period is a customer of Continental with respect to any
business covered by clause (i) above or (iii) solicit the
employment of any person who during such non-compete period is
employed by Continental on a full or part-time basis.
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(b) The restriction provided in Section 12(a) above shall not be
construed to prohibit the ownership by the Securityholders (as
a group) of not more than 5% of any class of securities of any
corporation (other than the Buyer) which is engaged in any of
the foregoing businesses, having a class of securities
registered pursuant to the Securities Act (Alberta), or which
are publicly traded on a recognized securities exchange,
provided that such ownership represents a passive investment
and that neither the Securityholders nor any group of persons
including the Securityholders in any way, either directly or
indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other any exercising
his or her rights as a shareholder, or seeks to do any of the
forgoing.
(c) Each of the Securityholders acknowledges that (i) the
provisions of this Section 12 are reasonable and necessary to
protect the legitimate interests of the Buyer and its
affiliates (including, without limitation, Continental), (ii)
any violation of this Section 12 will result in irreparable
injury to the Buyer and its affiliates (including, without
limitation, Continental) and that damages at law would not be
reasonable or adequate compensation to the Buyer and its
affiliates (including, without limitation Continental,) for a
violation of this Section 12 and (iii) the Buyer and its
affiliates (including, without limitation, Continental) shall
be entitled to have the provisions of this Section 12
specifically enforced by preliminary and permanent injunctive
relief without the necessity of proving actual damages and
without posting bond or other security as well as to an
equitable accounting from the violating Securityholder of all
earnings, profits and other benefits arising out of any
violation of this Section 12 by such Securityholder, including
without limitation estimated future earnings related to any
such violation by such Securityholder. In the event that the
provisions of this Section 12 should ever be deemed or held by
a court of competent jurisdiction to exceed the time,
geographic, product or any other limitations permitted by
applicable law, then such provisions shall be deemed reformed
to the maximum permitted by applicable law.
(d) The Buyer and each of the Securityholders intend to and do
hereby confer jurisdiction to enforce the covenants set forth
in this Section 12 upon the courts of any jurisdiction within
the geographical scope of such covenants. In addition to
Section 15.8 hereof and not in limitation thereof, if the
courts of any one or more of such jurisdictions hold such
covenants unenforceable in whole or in part, it is the
intention of the Buyer and each covenanting Securityholder
that such determination not bar or in any way adversely affect
the right of the Buyer and its affiliates (including without
limitation Continental) to equitable relief and remedies
hereunder in courts of any other jurisdiction as to breaches
or violations of this Section 12 only, such covenants being,
for this purpose, severable into diverse and independent
covenants.
13. FURTHER AGREEMENTS OF THE PARTIES.
13.1 CONDUCT OF BUSINESS OF CONTINENTAL. Except as expressly permitted by or
contemplated by this Agreement, the Credit Agreement, the Employment Agreements
and except as otherwise agreed to or required in connection with the leasing,
outfitting and operation of the "Pacific Titan" in an aggregate amount not to
exceed $12,000,000.00 (U.S.) (hereinafter collectively called the "EXTRAORDINARY
EXPENDITURES") between the date of this Agreement and the Closing Date,
Continental shall conduct its business only in the ordinary course in
substantially the same manner as heretofore conducted, and use all its
reasonable efforts to preserve intact its present business organization, and to
preserve the goodwill of
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persons having business relations with Continental. Without limiting the
generality of the foregoing, except as otherwise expressly permitted or
contemplated in this Agreement, and except for the Extraordinary Expenditures,
between the date of this Agreement and the Closing Date, Continental shall pay
accounts payable and pay and perform other obligations of the business of
Continental when they become due and payable in the ordinary course of business
consistent with prior practice, or when required to be performed, as the case
may be, and shall not:
(a) amend its articles or certificate of incorporation or by-laws;
(b) declare or pay any dividend or make any other payment or
distribution in respect of its capital stock, other than the
Bonus Transactions;
(c) purchase, redeem, issue, sell or otherwise acquire or dispose
of, either directly or indirectly, any of its capital stock,
or reclassify, split or otherwise change any of its capital
stock or grant or enter into any options, warrants, puts or
calls or other rights to purchase, sell or convert any
obligation into any of, its capital stock, other than the
Bonus Transactions;
(d) organize any subsidiary or acquire any capital stock or other
equity securities of any person or any equity or ownership
interest in any business;
(e) borrow any funds or incur, assume or acquire any obligation or
liability (whether fixed, accrued, contingent or otherwise,
whether due or to become due) or in the aggregate amount of
more than $25,000.00 except for current liabilities incurred
in the ordinary course of business in connection with the
purchase of goods or services consistent with prior practice;
(f) utilize its existing credit facility with Royal Bank of Canada
other than in the ordinary course of business and other than
to effect payment in accordance with Section 3(b) of the
$1,000,000.00 (Cdn.) bonus;
(g) enter into any commitment letter, offer to finance or loan
agreement regarding the leasing, outfitting or operation of
the "Pacific Titan" with any of Export Development
Corporation, Northstar Trade Finance Inc. or their respective
agents or affiliates without the prior express written consent
of the Buyer (collectively, the "EDC FINANCING");
(h) pay, discharge or satisfy any encumbrance (other than an
encumbrance then required to be paid, discharged or
satisfied), claim, liability or obligation (whether fixed,
accrued, contingent or otherwise, whether due or to become
due), except for payment, discharge or satisfaction for cash
of a claim, liability or obligation that is a current
liability either shown on the most recent financial statement
of Continental provided to Buyer, or incurred since the date
of such financial statement in the ordinary course of business
consistent with prior practice;
(i) make or grant any material increase in the compensation
(whether salary, commission, bonus, benefits (retirement,
severance or other) or other direct or indirect remuneration)
of any employees of Continental, or enter into any employment
contract with any employee of Continental other than the
Employment Agreements;
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(j) sell, assign, transfer, convey, lease, pledge, encumber or
otherwise dispose of any of its assets or properties (real or
personal, tangible or intangible) or any other material right,
other than in the ordinary course of business;
(k) enter into any instrument which would constitute a material
lease or contract or enter into any material amendment,
supplement or waiver in respect of any material lease or
contract;
(l) incur any severance pay obligation by reason of this Agreement
or the Contemplated Transactions;
(m) grant or extend any power of attorney other than in the
ordinary course of business which does not affect a material
part of Continental's business or act as guarantor, surety,
co-signer, endorser, co-maker, indemnitor, or otherwise in
respect of the obligation of any person other than through
endorsements of negotiable instrument in the ordinary course
of business;
(n) cancel or compromise any material debt or claim, or waive or
release any material right, other than adjustments in the
ordinary course of business for goods or services sold and
received which, in the aggregate, are not material;
(o) make any capital expenditures or capital additions or
improvements in excess of an aggregate of $25,000.00, other
than pursuant to capital expenditure commitments disclosed on
any Schedule hereto or not required to be disclosed thereon;
(p) enter into or amend any collective bargaining or union
contract or agreement;
(q) institute or settle any Proceeding;
(r) incur any tax liability other than in the ordinary course of
business;
(s) in any other manner, modify, change or otherwise alter in a
material way the fundamental nature of the business of
Continental as presently conducted; or
(t) agree or otherwise commit, whether in writing or otherwise, to
do, or take any action or omit to take any action that would
result in, any of the foregoing, without the prior express
written consent of the Buyer.
13.2 FURTHER ASSURANCES. Following the Closing, the Securityholders, Continental
and the Buyer shall, and shall cause each of their affiliates to, from time to
time, execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by the other party, to confirm and assure the rights and
obligations provided for in this Agreement and render effective the consummation
of the Contemplated Transactions.
13.3 TAX MATTERS.
(a) Between the date of this Agreement and the Closing Date,
Continental shall (i) file on a timely basis all tax returns
required to be filed by or with respect to Continental within
such time period and pay all taxes shown to be due thereon;
provided that A. all such tax returns
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will be true, correct, and complete when filed by Continental
and B. submit each of such tax returns to the Buyer for the
Buyer's review and approval prior to filing, and (ii) shall
not make or cause to be made any election, or file any tax
return or amended tax return reflecting any position, that
could result in adverse tax consequences to the Buyer or to
Continental for any period, except for elections made in
accordance with historical practices of Continental.
(b) Each of the Buyer, Continental and the Securityholders will
provide the other parties with such assistance as may
reasonable be requested by any of them in connection with the
preparation of any tax return, any audit or other examination
by any taxing authority, any Proceedings relating to liability
for taxes, or any other claim arising under this Agreement,
and each will retain and provide the others with any of their
respective records or information that may be relevant to any
such tax return, audit or examination, Proceeding or claim.
Such assistance shall include making employees available on a
mutually convenient basis to provide additional information
and explanation of any material provided hereunder and shall
include providing copies of any relevant tax returns and
supporting work schedules.
13.4 EXCLUSIVITY. From the date hereof until the earlier of the Closing Date or
the date of termination of this Agreement pursuant to Section 14 hereof, neither
any of the Securityholders nor Continental shall (i) solicit, initiate or
encourage the submission of inquiries, proposals or offers from any person
relating to A. any business combination with Continental or B. the sale of a
material portion of the assets and/or capital stock of Continental (a
"TRANSACTION"), (ii) enter into or participate in any negotiations, nor initiate
any discussions or continue any discussions initiated by others, regarding any
Transaction, or furnish to any other person any information with respect to the
assets or business of Continental for the purposes of pursuing a possible
Transaction with any other party, or (iii) otherwise participate in, assist,
facilitate, or encourage any effort or attempt by any other person to do any of
the foregoing. Neither the Securityholders nor Continental shall authorize their
investment bankers or other advisors to violate the provisions of this paragraph
and shall use reasonable efforts to prevent their investment bankers or other
advisors from violating the provisions of this paragraph.
13.5 RETRIEVAL OF CONFIDENTIAL INFORMATION. At the Closing, the Securityholders
and Continental shall deliver to the Buyer a list of all persons (other than
directors, officers, employees, legal advisors and accountants of Continental)
who received confidential information concerning Continental and copies of all
confidentiality agreements entered into by such persons in connection with the
solicitation of prospective acquirors of Continental. Following the Closing, the
Securityholders and Continental shall, with respect to confidential information
given to such persons pursuant to or in connection with confidentiality
agreements that do not run directly to Continental, authorize the Buyer to
retrieve or cause its agents to retrieve all such confidential information from
such persons. The Securityholders and Continental shall provide their full
cooperation in connection with the foregoing. In addition the Securityholders
and Continental shall assign to the Buyer all rights of the Securityholders and
Continental, if any, to enforce the confidentiality agreements entered into by
such persons.
13.6 REGULATORY COMPLIANCE. The Securityholders shall, and shall cause
Continental to, fully cooperate, and take all such actions as may be requested,
with respect to any and all requirements to facilitate the preparation and
filing of the proxy statement (the "PROXY STATEMENT"), or any other documents,
required to be filed by Buyer with the S.E.C. in connection with the
solicitation of the approval of the shareholders of the Buyer of the
Contemplated Transactions, or as otherwise necessary in connection with
22
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the Contemplated Transactions, including, without limitation, furnishing the
Buyer with any information concerning Continental and its Securityholders, the
preparation of its audited financial statements by Ernst & Young, Chartered
Accountants, for the three years ended December 31, 1997, and for such other
periods as otherwise may be requested by the S.E.C., assistance with respect to
Buyer's preparation of pro forma financial statements and unaudited interim
financial statement information, preparation of amendments and/or responses to
comments from the S.E.C. in relation to any of the foregoing and other matters
incidental to the Contemplated Transactions. Whenever an event occurs which
should be set forth in an amendment to the Proxy Statement or otherwise
disclosed by Continental or any of the Securityholders on the Schedules hereto,
or by the Buyer in any filing required to made by it pursuant to the rules and
regulations of the S.E.C., Continental or the Securityholders, as the case may
be, shall promptly inform the Buyer and will cooperate with the Buyer in
preparing such amendment or filing. With respect to the preparation of the Proxy
Statement, Continental shall be responsible for all costs incurred in connection
with the preparation of its audited and unaudited financial statements as
necessary for the preparation of the Proxy Statement in accordance with the
applicable rules and regulations of the S.E.C. and the Buyer shall be
responsible, and shall reimburse Continental or the Securityholders, as the case
may be, for all other costs incurred in connection with the preparation of the
Proxy Statement, including, without limitation, the preparation of pro forma
financial statements.
13.7 NASDAQ LISTING. Prior to the Closing Date, the Buyer shall prepare and file
with the Nasdaq Stock Market, or such other exchange or market upon which the
Buyer's shares are then primarily listed for trading, a notification of listing
(the "NASDAQ LISTING") of the additional shares of Venture Stock to be issued to
the Securityholders pursuant to the terms hereof, and to the extent obtainable
and prior to the Closing Date, shall obtain written verification of such
listing. For a period equal to the lesser of (i) five years from the Closing
Date or (ii) after an aggregate of 95% of the Venture Stock being acquired by
the Securityholders pursuant to the terms hereof have been transferred or
otherwise disposed of by the Securityholders, the Buyer shall use its best
efforts to maintain the listing of its securities on Nasdaq, or such other
exchange or market as the securities of the Buyer may then be listed for
trading.
13.8 RULE 144 REPORTING AND ALBERTA COMPLIANCE. For a period equal to the lesser
of (i) five years from the Closing Date or (ii) after an aggregate of 95% of the
Venture Stock being acquired by the Securityholders pursuant to the terms hereof
have been transferred or otherwise disposed of by the Securityholders, the Buyer
agrees to:
(a) Make and keep available adequate current public information
regarding the Buyer as such is understood and defined in Rule
144 under the Securities Act;
(b) Comply in all material respects with the reporting
requirements of the Exchange Act applicable to it;
(c) Use its best efforts to otherwise comply with the provisions
of Rule 144 as then in effect and which may be applicable to
it; and
(d) Use its best efforts to comply with the rules and regulations
of the Securities Act (Alberta) in all material respects (the
"ALBERTA ACT").
13.9 REMOVAL OF LEGENDS AND TRANSFER RESTRICTIONS. The legend endorsed on each
certificate for the Venture Stock pursuant to Section A.1.5(g) shall be removed
and the Buyer shall issue a certificate without such legend to the
Securityholders and will instruct the Buyer's transfer agent to remove any
stop-transfer
23
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instructions to the extent that (i) the Venture Stock issued to such
Securityholder is registered for resale under the Act and a prospectus meeting
the requirements of section 10 of the Act is available, (ii) there is available
an exemption from registration under the Act and, if the Buyer reasonably
requests, the Securityholder (or a valid transferee) provides to the Buyer an
opinion of counsel for the Securityholder (or such transferee) reasonably
satisfactory to the Buyer, or a no-action letter or interpretive opinion of the
staff of the SEC to the effect that a public sale, transfer or assignment of
such Venture Stock may be made without registration under the Act or (iii) Rule
144 (k) under the Act is applicable to such Venture Stock and the applicable
conditions have been met, and the Buyer receives an opinion of counsel of such
Securityholders to such effect. Notwithstanding the previous sentence, the
legend endorsed on each certificate for the Venture Stock pursuant to Section
A.1.5(g) shall be removed and the Buyer shall issue a certificate without such
legend to the Securityholder or a valid transferee, two years after the Closing
Date, provided however, that the holding period as set forth in Rule 144(k)
under the Act, and as calculated in accordance with the provisions of Rule
144(d) under the Act, has been met by either the Securityholder or a valid
transferee, and the Buyer receives a representation letter from such
Securityholder to such effect.
13.10 NOMINEE DIRECTOR OF THE BUYER. The Buyer agrees to use its best efforts to
ensure that a nominee selected by the Securityholders, collectively, is included
on the board of directors' list of nominee directors for each of the next three
annual shareholder meetings of the Buyer.
14. TERMINATION
14.1 TERMINATION PROCEDURES. This Agreement may be terminated before the Closing
Date only as follows:
(a) by written agreement of the Securityholders, Continental and
the Buyer at any time;
(b) by the Buyer, by notice to the Securityholders and
Continental, if satisfaction of any of the conditions to the
Buyer's obligations set forth in Section 8 becomes impossible
and such condition has not been waived by the Securityholders
and Continental; or
(c) by the Securityholders, by notice to the Buyer, if
satisfaction of any of the conditions to the Securityholders'
obligations set forth in Section 9 becomes impossible and such
condition has not been waived by the Buyer.
14.2 EFFECT OF TERMINATION. In the event that this Agreement is terminated
pursuant to Section 14, this Agreement shall terminate without any liability or
further obligation of any party to another, except for the obligations of the
Buyer, Continental and the Securityholders under Sections 5 and 8.1.
15. MISCELLANEOUS.
15.1 ACCOUNTS RECEIVABLE. In the event that all accounts receivable of
Continental as of January 1, 1998 are not collected in full within 90 days after
the Closing, then at the request of the Buyer the Securityholders shall become
obligated to pay the Buyer or Continental, as specified by the Buyer, an amount
equal to the accounts receivable not so collected, less an allowance for
doubtful accounts equal to $25,000.00. Upon receipt of such payment Continental
shall assign to the Securityholders all of its rights with respect to such
uncollected accounts receivable.
15.2 EXPENSES. Except as otherwise indicated in this Agreement, the Buyer and
Continental shall pay
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their own expenses incidental to the preparation hereof and, through the
Closing, the carrying out of the provisions hereof and the consummation of the
transactions contemplated hereby. The Buyer and Continental shall pay their own
expenses incidental to the carrying out of the provisions hereof after the
Closing. Continental shall pay all expenses of the Securityholders, and each of
them, incidental to the preparation hereof, and, through the Closing, the
carrying out of the provisions hereof and the consummation of the transactions
contemplated hereby, including without limitation, the Securityholders' legal
fees and expenses, and incidental to the carrying out of the provisions hereof
after the Closing.
15.3 CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. This Agreement shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
15.4 ASSIGNMENT AND BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon and enure to the benefit of and be enforceable
by the heirs, administrators, personal representatives and successors of the
parties hereto. This Agreement shall be non-assignable and non-transferable
without the prior written consent of all parties.
15.5 WAIVER. Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
15.6 PUBLICITY. Between the date of this Agreement and the Closing Date, except
to the extent required by law, neither the Buyer nor any of the Securityholders
nor Continental shall, and none of them shall permit any affiliate to, issue any
press release or public announcement of any kind concerning, or otherwise
publicly disclose, the Contemplated Transactions without the consent of the
other; and in the event any such public announcement, release or disclosure is
required by law, the parties will consult prior to the making thereof and use
their best efforts to agree upon a mutually satisfactory text; provided that the
Securityholders hereby acknowledge that upon execution of this Agreement, the
Buyer shall prepare and issue a press release and file a report on Form 8-K, the
form and substance of which shall be reviewed by Continental, but be
satisfactory to the Buyer and its counsel.
15.7 NOTICES. Any notice, request, claim, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given if delivered personally or sent by telecopier or other
telecommunications, by registered or certified mail, postage prepaid, or by
recognized courier service, as follows:
If to the Buyer, to:
Venture Seismic Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
With a required copy to:
Burstall Ward
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Barristers & Solicitors
3100, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and to:
Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
If to the Securityholders, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇. Self
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Barristers & Solicitors
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Q.C.
If to Continental to:
Continental Holdings Ltd.
210, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, President
With a required copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Barristers & Solicitors
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Q.C.
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered or telecopied, or if
mailed, on the seventh calendar day following the date of mailing, and if given
by any other means shall be deemed given only when actually received by the
addressees.
15.8 ALBERTA LAW TO GOVERN; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
Province of Alberta. Each of the Buyer and the Securityholders irrevocably and
unconditionally (a) agrees that any suit, action or other legal proceeding
(collectively, "SUIT") instituted by the Securityholders and arising out of this
Agreement shall be brought and adjudicated only in the Province of Alberta, (b)
agrees that any Suit instituted by the Buyer arising out of this Agreement shall
be brought and adjudicated only in the Province of Alberta, and (c) waives and
agrees not to assert by way of motion, as a defense or otherwise in any such
Suit, any claim that it, he or she is not subject to the jurisdiction of the
above courts, that such Suit is brought in an inconvenient forum or that the
venue of such Suit is improper.
15.9 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Section 10 hereof, the other Buyer Indemnified
Parties and Securityholder Indemnified Parties, and their heirs, administrators,
personal representatives, successors and assigns, and they shall not be
construed as conferring any rights on any other persons.
15.10 HEADINGS; GENDER; PERSON; SECURITYHOLDERS; DOLLARS; $. All section
headings contained in this Agreement are for convenience of reference only, do
not form a part of this Agreement and shall not affect in any way the meaning or
interpretation hereof. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. Any reference to a "PERSON" herein shall include an
individual, firm, corporation, partnership, trust, governmental authority or
body, association, unincorporated organization or any other entity. Any
reference to an "AFFILIATE" or an "AFFILIATED
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CORPORATION" herein shall have the meaning ascribed to such terms in the
Business Corporations Act (Alberta), as amended from time to time, except as
otherwise provided for herein. Any reference to "DOLLARS" or "$" shall refer to
dollars of the United States of America.
15.11 TAX TREATMENT.
(a) The Buyer makes no representations regarding the tax
consequences to the Securityholders of the transactions
contemplated by this Agreement. The Securityholders
acknowledge that they have been advised of the tax
consequences of the transactions contemplated by this
Agreement by their own tax advisers, and that they are relying
on their tax advisers in determining their respective tax
consequences in connection with the transactions contemplated
in this Agreement.
(b) None of Continental or any Securityholder makes any
representation regarding the tax consequences to the Buyer of
the transactions contemplated by this Agreement. The Buyer
acknowledges that it has been advised of the tax consequences
of the transactions contemplated by this Agreement by its own
tax advisers, and that it is relying on its tax advisers in
determining its tax consequences in connection with the
transactions contemplated in this Agreement.
15.12 EXHIBITS; APPENDIX; SCHEDULES.
(a) Appendix A hereto and the Schedules referred to herein and
therein are intended to be and hereby are specifically made a
part of this Agreement.
(b) The following Exhibits are intended to be and hereby are
specifically made a part of this Agreement:
Exhibits
A - Allocation of Shares, Venture Stock, Cash Consideration
B - Form of Credit Agreement
C - Form of Security Agreement to the Buyer
D - Form of Employment Agreement
E - Form of Closing Agenda
15.13 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.
15.14 COUNTERPARTS; TELECOPIER EXECUTION. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts. Execution and delivery of
counterparts of this Agreement by telecopier by any party shall be binding on
all parties to
28
-28-
this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement on the
date first written.
VENTURE SEISMIC LTD.
Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
THE SECURITYHOLDERS
/s/ ▇. ▇. ▇▇▇▇▇▇▇▇ /s/ ▇.▇. ▇▇▇▇▇
------------------ --------------------
WITNESS ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇. ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------ --------------------
WITNESS ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇. ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------ --------------------
WITNESS ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(signatures continued on page 29)
29
-29-
(signatures continued from page 28)
/s/ ▇.▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------- ---------------------
WITNESS ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇. ▇. ▇▇▇▇▇▇▇▇ /s/ R.D. Self
----------------- ---------------------
WITNESS ▇▇▇ SELF
CONTINENTAL HOLDINGS LTD.
Per: /s/ ▇. ▇. ▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Per: /s/ R. D. Self
-----------------------
Name: ▇▇▇ ▇. Self
Title: Vice-President, Geophysical Operations
30
APPENDIX A
REPRESENTATIONS AND WARRANTIES
A.1 INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS. Each
Securityholder hereby represents and warrants to the Buyer as follows:
A.1.1 SHARE OWNERSHIP; AUTHORITY. Such Securityholder is the lawful owner of
record and beneficially of the number of Shares set beside such Securityholder's
name in column A of Exhibit A hereto, free and clear of all security interests,
pledges, liens, encumbrances, claims and other charges and restrictions thereon
of every kind, including without limitation any agreements, subscriptions,
options, warrants, calls, commitments or rights (contingent or otherwise) of any
character granting to any person any interest in or right to acquire from such
Securityholder at any time, or upon the happening of any stated event, any
Shares owned by such Securityholder. Such Securityholder has full right, power
and authority to execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by such Securityholder. This Agreement
constitutes the legal, valid and binding obligation of such Securityholder
enforceable against such Securityholder in accordance with its terms; except as
the same may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies, and (c) the
extent to which the enforceability of the indemnification provisions contained
in this Agreement may be limited by applicable laws.
A.1.2 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution, delivery and
performance hereof by such Securityholder will (a) not contravene or violate any
material provision of any law, rule or regulation currently in effect to which
such Securityholder is subject or (b) will such execution, delivery or
performance violate, be in conflict with in any material respect or result in
the breach (with or without the giving of notice or lapse of time, or both) of
any material term, condition or provision of, or require the consent of any
other party to, any material contract, commitment, agreement, lease, license,
permit, authorization, document or other understanding, oral or written, to or
by which such Securityholder is a party or otherwise bound or affected, except
for such violations which would not either individually or in the aggregate have
a Material Adverse Effect. No authorization, approval or consent, and no
registration or filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery and performance
hereof by such Securityholder, except for those consents, approvals,
authorizations, declarations, filings or registrations the failure of which to
obtain or make individually or in the aggregate would not have a Material
Adverse Effect.
A.1.3 NO CLAIMS AGAINST CONTINENTAL. As of the Closing Date, such Securityholder
shall have no claim, either accrued, absolute, contingent or otherwise, fixed or
unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured or unsecured,
against Continental for any reason and, in the case of a Securityholder who is
an employee, for wages and benefits owing in the ordinary course of business of
Continental up to and including the Closing Date, other than the Permitted
Indebtedness.
A.1.4 CANADIAN RESIDENTS. Such Securityholder is a resident of Canada within the
meaning of the ITA (as defined in Section A.2.7(b)).
A.1.5 THE VENTURE STOCK, RESTRICTIONS ON TRANSFER, INVESTMENT REPRESENTATIONS.
Such Securityholder acknowledges that, to the best of his or her knowledge,
information and belief, having made due inquiry, the execution of this Agreement
by such Securityholder and the delivery to such Securityholder of a portion of
the Venture Stock has been or will be made in reliance upon, and is conditioned
on, the following representations, warranties, acknowledgments and covenants of
such Securityholder:
31
APPENDIX A-2
(a) Such Securityholder has such knowledge and experience in
financial, tax and business matters that he or she is fully
capable of evaluating the relative risks and merits of the
obligations incurred under this Agreement and making an
informed decision with respect hereto and has been afforded
the opportunity during the course of negotiating the
Contemplated Transactions to ask questions and secure such
information from the Buyer and its officers and directors as
it deems necessary to evaluate the merits of entering into
this Agreement. Such Securityholder is familiar with the
business, operations, assets, properties, prospects and
financial condition of the Buyer.
(b) Such Securityholder acknowledges a thorough familiarity
with, and an understanding of, the definition of "ACCREDITED
INVESTOR" as defined in Rule 501(a) of Regulation D, as such
Rule is currently in effect and represents and warrants that
such Securityholder is an accredited investor within the
meaning of such definition.
(c) Such Securityholder acknowledges that he or she, as the case
may be, has not received from the Buyer or any person acting
on the Buyer's behalf any general solicitation or public
media advertisements.
(d) Such Securityholder acknowledges that the Venture Stock to
be received by such Securityholder under this Agreement will
not have been registered under the Securities Act of 1933,
as amended (the "ACT"), nor qualified under a prospectus
filed under the Securities Act (Alberta) nor has the Venture
Stock been registered under the securities or "BLUE SKY"
laws of any of the United States or Canada or of any other
jurisdictions and will be "RESTRICTED SECURITIES" as defined
in Rule 144 under the Act, the provisions of which are known
to it.
(e) Such Securityholder represents and warrants to the Buyer
that the Venture Stock is being acquired for investment and
not with a view to, or for resale in connection with, the
distribution thereof, and understands that the effect of
such representation and warranty is that the Venture Stock
must be held by such Securityholder unless and until
subsequently registered under the Act and applicable state
and provincial securities laws, or unless an exemption from
such registration or prospectus requirement is available at
the time of any proposed sale or other transfer. Such
Securityholder understands that Rule 144 under the Act
requires, among other conditions, a holding period prior to
the resale of the Venture Stock without having to satisfy
the registration requirements under the Act, and that there
can be no assurance that Rule 144 will be available or that
the conditions of such Rule will be satisfied so as to allow
any proposed sale. Each Securityholder understands that any
sales made in reliance upon Rule 144 may only be made in
accordance with the terms and conditions thereof.
(f) Such Securityholder agrees not to sell, pledge, hypothecate
or otherwise transfer any of the Venture Stock received by
him or her under this Agreement except or unless: (i) there
is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is
made in accordance with such registration statement; or (ii)
such Securityholder shall have notified the Buyer of the
proposed disposition and shall have furnished the Buyer with
a detailed statement of the circumstances surrounding the
proposed disposition, and, if reasonably requested by the
Buyer, such Securityholder shall
32
APPENDIX A-3
have furnished the Buyer with an opinion of counsel,
reasonably satisfactory to the Buyer, that such disposition
will not require registration of such the Venture Stock
under the Act.
(g) The certificates representing the Venture Stock to be issued
pursuant hereto will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED AS OF
MARCH 27, 1998, WITH VENTURE SEISMIC LTD. SUCH SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS AND MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
OR PROVINCIAL SECURITIES LAWS OR AN EXEMPTION THEREFROM.
Each Securityholder also understands that the Buyer will instruct its
transfer agent to place a stop transfer notation in its records with
respect to the certificates representing the Venture Stock.
(h) DISCLOSURE MATERIALS. Each Securityholder represents and
warrants to the Buyer that he or it has received and had
full opportunity, prior to the execution of this Agreement
to review thoroughly (along with counsel, accountants or
other advisers) a copy of each of the following documents:
(i) the Buyer's report on Form 10-K for the year ended
September 30, 1997; (ii) the Buyer's proxy statement and
annual report to stockholders distributed in connection with
its March 19, 1998 annual meeting of stockholders; and (iii)
the Buyer's reports on Form 10-Q for the period ended
December 31, 1997 (collectively, the "VENTURE DISCLOSURE
DOCUMENTS").
(i) ACCESS TO INFORMATION. Each Securityholder represents,
warrants and acknowledges that such Securityholder, and the
attorneys, accountants, representatives and agents of such
Securityholder, have had a reasonable time prior to the
execution hereof and completion of the transactions
contemplated hereby, to ask questions and receive answers
concerning the business and operations of the Buyer and to
obtain any additional information necessary to make a fully
informed decision with respect to the execution of this
Agreement, and the investment in the Venture Stock effected
hereby.
Nothing contained herein shall restrict the Securityholders from selling,
pledging or otherwise transferring the Venture Stock acquired by each of them
pursuant to an exemption from registration under the Act and the Alberta Act at
any time provided such sale, pledge or transfer is otherwise consummated in
accordance with the terms and provisions of this Agreement, the provisions of
the Act, the Alberta Act and other applicable laws, rules or regulations.
A.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF CONTINENTAL AND CERTAIN OF THE
SECURITYHOLDERS. Continental and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇ Self hereby
severally represents and warrants to the Buyer that, to the best of its or his,
as the case may be, knowledge, information and belief, having made due inquiry,
as follows:
33
APPENDIX A-4
A.2.1 CORPORATE EXISTENCE. Continental is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta, and it
has all requisite power and authority and all necessary licenses, permits and
authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith, except for licenses, permits and authorizations, the absence of which
would not individually or in the aggregate result in a Material Adverse Effect.
Continental is qualified as a foreign corporation authorized to do business and
is in good standing in each jurisdiction in which such qualification is
required, all of which jurisdictions are listed on Schedule A.2.1 hereto.
A.2.2 CAPITALIZATION. The total authorized capital stock of Continental consists
of an unlimited number of Class "A" voting shares (none of which are
outstanding), an unlimited number of Class "B" voting shares and an unlimited
number of Class "C" shares issuable in series, of which the following shares are
issued and outstanding (all such issued and outstanding shares have been
previously defined as the "SHARES"):
CERTIFICATE NO. NAME NUMBER OF SHARES
--------------- ---- ----------------
B-15 ▇▇▇▇▇▇ ▇▇▇▇▇ 220.8916 Class "B"
B-16 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 20.0811 Class "B"
B-17 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 20.0811 Class "B"
B-18 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 20.0811 Class "B"
B-19 ▇▇▇ Self 220.8916 Class "B"
C-5 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 236.72 Class "C", Series I
C-6 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 21.52 Class "C", Series I
C-7 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 21.52 Class "C", Series I
C-8 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 21.52 Class "C", Series I
C-9 ▇▇▇ Self 236.72 Class "C", Series I
All of the Shares have been duly authorized and validly issued, are fully paid
and non-assessable, were not issued or transferred in violation of the terms of
any agreement or other understanding binding upon Continental and were issued
and transferred in compliance with all applicable charter documents of
Continental and all applicable federal, provincial, state and foreign securities
laws, rules and regulations. There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire from
Continental any shares of, or any securities convertible into, the capital stock
of Continental. There are, and have been, no preemptive rights with respect to
the issuance of the Shares or any other capital shares of Continental.
A.2.3 SUBSIDIARIES; NO INTEREST IN OTHER ENTITIES.
Continental owns no shares of any corporation and has no other ownership or
other investment interest, either of record, beneficially or equitably, in any
association, partnership, joint venture or legal entity, except
34
APPENDIX A-5
for bank, checking and money market accounts and other cash equivalent
investments and except as described on Schedule A.2.3, with such investments as
described on Schedule A.2.3 to be disposed of prior to the Closing Date.
A.2.4 FINANCIAL STATEMENTS. The Securityholders have delivered to the Buyer
prior to the date hereof (a) the balance sheets of Continental as of December
31, 1995 and 1996 and the related statements of operations, shareholders' equity
and cash flows for the 12-month periods then ended, reported on without
qualification by ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., chartered accountants, and (b) the
balance sheet of Continental as of September 30, 1997 (the "SEPTEMBER 1997
BALANCE SHEET") and the related statements of operations, shareholders' equity
and cash flows for the periods then ended as reviewed by Ernst & Young,
chartered accountants (the foregoing financial statements, collectively, the
"FINANCIALS"). Such financial statements (including without limitation all
notes, comments, schedules and supplemental data contained in or annexed to such
statements), correct and complete copies of all of which have been provided to
the Buyer, are accurate, complete and in accordance with the books and records
of Continental and present fairly the consolidated financial position and assets
and liabilities of Continental as of their respective dates and the results of
their consolidated operations for the periods then ended, in conformity with
generally accepted accounting principles applied on a consistent basis.
A.2.5 ACCOUNTS RECEIVABLE. All accounts receivable of Continental (a) are valid
and genuine, (b) arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions, (c) are not subject to
valid defenses, set-offs or counterclaims other than normal returns and
allowances and (d) were generated only in the ordinary course of business.
A.2.6 INVENTORY AND REVENUE PRODUCING EQUIPMENT. All inventory and revenue
producing equipment of Continental reflected on the September 1997 Balance
Sheet, and all inventory and revenue producing equipment owned by Continental as
of the date hereof, was acquired and has been maintained in accordance with the
regular business practices of Continental, consists of items of a quality and
quantity useable, saleable or rentable in the ordinary course of their
businesses consistent with past practice, and is valued in conformity with
generally accepted accounting principles applied on a consistent basis; no
significant amount of such inventory or revenue producing equipment is obsolete,
other than the anticipated replacement of all cable and related computer
instrumentation on the marine seismic vessel "Calgary" to be completed within
one year of the Closing Date.
A.2.7 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Continental is not liable for or subject to any liability
except for:
(i) the Extraordinary Expenditures, obligations under the
Employment Agreements and the Bonus Transactions;
(ii) those liabilities and obligations adequately and
specifically disclosed on the September 1997 Balance
Sheet and not heretofore paid or discharged;
(iii) those liabilities and obligations arising in the
ordinary course of its business consistent with past
practice under any contract, commitment or agreement
specifically disclosed on any Schedule to this
Appendix A or not required to be disclosed thereon
because of the term or amount involved or otherwise;
and
35
APPENDIX A-6
(iv) those liabilities and obligations incurred,
consistent with its past practice, in the ordinary
course of its business and either not required to be
shown on the September 1997 Balance Sheet or arising
since September 30, 1997, which liabilities and
obligations in the aggregate are of a character and
magnitude consistent with its past practice.
For purposes of this Section A.2.7, Sections 10.1 and 10.2 hereof, the term
"LIABILITIES" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent or
otherwise, fixed or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated,
secured or unsecured.
(b) Except as provided in Section A.2.18 hereof, Continental does
not provide or maintain, and is not required under applicable
law to provide or maintain, for its employees any pension,
retirement, profit-sharing or other plan or policy for the
benefit of employees which is required to comply with, and,
except as required under the Employment Agreements and as
incurred on an ongoing basis in connection with Continental's
current employees, Continental has no liabilities with respect
to themselves or any other person under, the federal Employees
Retirement Income Security Act of 1974 ("ERISA"), the Income
Tax Act (Canada) (the "ITA"), the Employment Insurance Act
(Canada) or the Canada Pension Plan Act (Canada). Furthermore,
other than the Bonus Transactions, Continental has no
liability for any dividends or distributions to any
Securityholder and since September 30, 1997 has not paid or
delivered or become committed to pay or deliver any dividend,
or made or become committed to make any distribution or
payment, to any shareholder in respect of its capital shares
or redeemed, purchased or otherwise acquired any of its
capital shares.
A.2.8 EXISTING CONDITION. Except as disclosed on Schedule A.2.8 hereto, since
September 30, 1997, Continental has not:
(a) sold, assigned or transferred any of their assets or
properties except in the ordinary course of their businesses
consistent with past practice;
(b) created, incurred, assumed or guaranteed any indebtedness for
money borrowed or incurred any other liabilities exceeding
$25,000.00 in the aggregate except for current liabilities
incurred consistent with past practice;
(c) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting
their businesses, operations, assets, properties or prospects
or (ii) of any item carried on Continental's consolidated
books of account at more than $25,000.00;
(d) suffered any material adverse change in their businesses,
operations, assets, properties, prospects or condition
(financial or otherwise);
(e) made any capital expenditure or capital addition or betterment
except for such as may be involved in the ordinary repair,
maintenance and replacement of their assets;
(f) materially increased the salaries or other compensation of, or
made any material advance
36
APPENDIX A-7
(excluding advances for ordinary and necessary business
expenses) or loan to, any of their directors, officers or
employees, or to any Securityholder, or made any material
increase in, or any material addition to, other benefits to
which any of their directors, officers or employees or any
Securityholder may be entitled and as consistent with past
practice; or
(g) entered into any material transaction other than in the
ordinary course of their businesses consistent with past
practice.
Except as disclosed on Schedule A.2.8 hereto, since September 30, 1997,
Continental has not made or suffered any amendment to or termination of any
material contract or commitment (including without limitation all international
contracts and commitments) to which they are or were a party or by which they or
any of their properties are or were bound.
A.2.9 ASSETS AND PROPERTIES.
(a) Continental owns outright and has good, valid and marketable
title to all of its properties and assets, real, personal and
mixed, including without limitation all of the properties and
assets reflected on the September 1997 Balance Sheet and those
acquired since September 30, 1997 (except in each case for
properties and assets sold or otherwise disposed of since
September 30, 1997, in the ordinary course of their businesses
consistent with past practice), free and clear of all
mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of
title of any nature whatsoever, except liens for current taxes
not yet due and payable and items disclosed on Schedule A.2.9
hereto. All leases, licenses, permits and authorizations in
any manner related to the assets, properties or business of
Continental and all other instruments, documents and
agreements pursuant to which Continental has obtained the
right to use any real or personal property are in good
standing, valid and effective in accordance with their
respective terms, and there is not under any of such leases,
licenses, permits, authorizations, instruments, documents or
agreements any existing default or event which with the giving
of notice or lapse of time, or both, would constitute a
default.
(b) All facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of
tangible personal property owned or used by Continental are in
good operating condition and repair, subject to normal wear
and maintenance, are useable in the regular and ordinary
course of their businesses and conform to all applicable laws,
ordinances, codes, rules and regulations relating thereto and
to the construction, use, operation and maintenance thereof.
A.2.10 TAXES AND TAX RETURNS AND REPORTS. With respect to Continental (referred
to in this Section A.2.10 as the "COMPANY"), (a) all reports, returns,
statements (including without limitation estimated reports, returns or
statements), and other similar filings required to be filed on or before the
Closing Date by the Company (the "TAX RETURNS") with respect to any Taxes (as
defined in this Section A.2.10) have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns correctly reflect the liability
of the Company for Taxes for the periods, properties or events covered thereby,
(b) all Taxes payable with respect to the Tax Returns, and all Taxes accruable
with respect to events occurring prior to the Closing Date, whether disputed or
not, and whether or not shown on any Tax Return, will have been paid in full
prior to the Closing Date, or an adequate accrual in accordance with generally
accepted accounting principles is provided with respect
37
APPENDIX A-8
thereto on the Closing Balance Sheet, (c) no deficiency in respect of any Taxes
which has been assessed against the Company remains unpaid and neither
Continental nor such Securityholder has knowledge of any unassessed Tax
deficiencies or of any audits or investigations pending or threatened against
any Company with respect to any Taxes, (d) there is in effect no extension for
the filing of any Tax Return and the Company has not extended or waived the
application of any statute of limitations of any jurisdiction regarding the
assessment or collection of any Tax, (e) no claim has ever been made by any Tax
authority in a jurisdiction in which the Company does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction, (f) there are no
statutory liens for Taxes upon any asset of the Company except for statutory
liens for current Taxes not yet due, (g) no issues have been raised in any
examination by any Tax authority with respect to the Company which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined, (h) the Company is not
a party to any Tax allocation or sharing agreement or otherwise under any
obligation to indemnify any person with respect to any Taxes, A. the Company is
not a party to any joint venture, partnership or other arrangement that is
treated as a partnership for income tax purposes, (j) there are no accounting
method changes or proposed accounting method changes of the Company that could
give rise to an adjustment under the ITA or under section 481 of the Internal
Revenue Code of 1986, as amended (the "CODE"), for periods after the Closing
Date, (k) there are no requests for rulings in respect of any Tax pending
between the Company and any Taxing authority, (l) since the date of its
ownership by the Securityholders, the Company has not been a member of any
affiliated group and (m) the Company has timely made all deposits required by
law to be made with respect to employees' withholding and other employment
taxes.
For purposes of this Agreement, "TAXES" means any taxes, duties, assessments,
fees, levies or similar governmental charges, together with any interest,
penalties and additions to tax, imposed by any taxing authority, wherever
located (i.e. whether federal, provincial, state, local, municipal or foreign),
including without limitation all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment,, workers'
compensation, excise, severance, property, windfall profits, value added, ad
valorem, occupation or any other similar governmental charge or imposition.
A.2.11 BOOKS OF ACCOUNT. The books of account of Continental reflect all of its
items of income and expense, and all of their assets and liabilities required to
be reflected therein, in accordance with generally accepted accounting
principles.
A.2.12 LEGAL PROCEEDINGS; ETC. Except as disclosed on Schedule A.2.12, there are
no disputes, claims, actions, suits or proceedings (including without limitation
local zoning or building ordinance proceedings), arbitrations or investigations,
either administrative or judicial, pending or, to the knowledge of Continental
or such Securityholder, threatened or contemplated, by or against or affecting
Continental or its assets or business, before or by any court or governmental or
regulatory official, body or authority, or before an arbitrator of any kind.
Neither Continental nor such Securityholder has any knowledge of any condition
or state of facts or the occurrence of any event that might reasonably form the
basis of any claim, liability or litigation against Continental. Continental is
not a party to or otherwise bound or affected by the provisions of any judgment,
order, writ, injunction or decree of any court, arbitrator or governmental or
regulatory official, body or authority.
A.2.13 COMPLIANCE WITH LAW. Continental has complied in all material respects
with each, and is not in violation of the material provisions of any law, rule
or regulation currently in effect to which it or its business is, or its
operations, assets or properties are subject and has not in any material respect
failed to obtain or adhere to the requirements of any material license, permit
or other authorization necessary to the
38
APPENDIX A-9
ownership of its assets and properties or to the conduct of its business, except
where such failure would not result either individually or in the aggregate in a
Material Adverse Effect.
A.2.14 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. Except as disclosed on
Schedule A.2.14, the execution, delivery and performance hereof by the
Securityholders will (a) not contravene or violate any material provision of any
law, rule or regulation currently in effect to which Continental is subject, (b)
any judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Continental or (c) the charter documents of Continental; nor will such
execution, delivery or performance violate, be in conflict with in any material
respect or result in the breach (with or without the giving of notice or lapse
of time, or both) of any material term, condition or provision of, or require
the consent which has not been obtained of any other party to, any material
contract, commitment, agreement, lease, license, permit, authorization, document
or other understanding, oral or written, to or by which Continental is a party
or otherwise bound or affected or by which any of the assets or properties of
Continental may be bound or affected, except for such violations which would not
either individually or in the aggregate have a Material Adverse Effect. Except
as disclosed on Schedule A.2.14, no authorization, approval or consent, and no
registration or filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery and performance
hereof by Continental, except for those consents, approvals, authorizations,
declarations, filings or registrations the failure of which to obtain or make
individually or in the aggregate would not have a Material Adverse Effect.
A.2.15 INSURANCE. Schedule A.2.15 contains a true and complete description of
the insurance coverage in effect now or at any time during the past five years
with respect to Continental and its business and properties, together with a
description of all insurance claims in any one case in excess of $25,000.00 made
by Continental during the past five years. Continental has at all times during
the past five years maintained insurance coverage substantially similar to the
insurance coverage currently in effect. There is no default under any such
current coverage, nor has there been any failure to give any notice or present
any claim under any such coverage in a timely fashion or in the manner or detail
required by the policy or binder. There are no outstanding unpaid premiums, and
there are no provisions in any insurance coverage of Continental for retroactive
or retrospective premium adjustments. No notice of cancellation or non-renewal
with respect to, or disallowance of any claim under, any such coverage has been
received by Continental. All products liability and general liability insurance
policies maintained by Continental are and historically have been occurrence
policies and not claims made policies. There are no outstanding performance
bonds or other surety arrangements covering or issued for the benefit of
Continental or its business or as to which Continental has or may incur any
liability, other than for the outfitting of the "Pacific Titan".
A.2.16 CONTRACTS AND COMMITMENTS. Except as listed and described on Schedule
A.2.16 hereto or, in the case of benefit plans and arrangements, Schedule A.2.18
hereto, Continental is not a party to or otherwise bound or affected by any
written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for
the employment of any person, including without limitation any
consultant;
(b) agreement, contract, commitment or arrangement with any labour
union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or
payment for, supplies or
39
APPENDIX A-10
products, or for the performance of services by a third party,
involving in any one case $25,000.00 or more;
(d) agreement, contract or commitment to sell or supply products
or to perform services, involving in any one case $25,000.00
or more;
(e) agreement, contract or commitment not otherwise listed on
Schedule A.2.16 hereto and continuing over a period of more
than six months from the date hereof or exceeding $25,000.00
in value;
(f) representative or sales agency agreement, contract or
commitment;
(g) real property sale agreements wherein Continental is the
vendor or purchaser, real property lease agreements wherein
Continental is the lessor or the lessee and all chattel lease
agreements wherein Continental is the lessor or the lessee;
(h) note, debenture, bond, conditional sale agreement, equipment
trust agreement, letter of credit agreement, loan agreement or
other agreement or contract, commitment or arrangement for the
borrowing or lending of money (including without limitation
loans to or from officers, directors, any Securityholder or
any member of any of their immediate families), agreement,
contract, commitment or arrangement for a line of credit or
guarantee, indemnity, pledge or undertaking in any manner
whatsoever of the indebtedness of any other person;
(i) contracts involving or related to acquisitions, mergers, sales
or dispositions in excess of $25,000.00;
(j) agreement, contract or commitment for any charitable or
political contribution;
(k) agreement, contract or commitment for any capital expenditure
in excess of $25,000.00;
(l) agreement, contract or commitment limiting or restraining it
from engaging or competing in any lines of business with any
person, nor is any officer or employee of Continental subject
to any such agreement;
(m) license, franchise, distributorship or other similar
agreement, contract or commitment, including without
limitation those which relate in whole or in part to any
patent, trademark, trade name, service ▇▇▇▇ or copyright or to
any ideas, technical assistance or other know-how of or used
by Continental; or
(n) material agreement, contract or commitment not made in the
ordinary course of business.
Except as may be disclosed on Schedule A.2.16 hereto, each of the agreements,
contracts, commitments, arrangements, leases and other instruments, documents
and undertakings listed on Schedule A.2.16 hereto is valid and enforceable in
accordance with its terms, and the parties thereto are in compliance with the
provisions thereof, no party is in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained therein,
and no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder; furthermore, except as may
40
APPENDIX A-11
be disclosed on Schedule A.2.16 hereto, no such agreement, contract, commitment,
arrangement, lease or other instrument, document or undertaking, in the
reasonable opinion of Continental or any Securityholder, contains any
contractual requirement with which there is a reasonable likelihood Continental
or any other party thereto will be unable to comply.
A.2.17 ADDITIONAL INFORMATION. Schedule A.2.17 hereto contains, to the extent
not described in some other Schedule hereto, accurate lists and summary
descriptions of the following:
(a) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property
owned or leased by Continental, specifying which are owned and
which are leased and, with respect to leased property,
specifying the identity of the lessor, the rental rate and the
unexpired term of the lease, and also specifying serial
numbers (where appropriate) and location;
(b) all real property and interests in real property owned, leased
or otherwise held by Continental specifying which are owned
and which are leased and, with respect to leased property,
specifying the identity of the lessor, the rental rate and the
unexpired term of the lease;
(c) the names of all present directors of Continental;
(d) the names and current annual salary or hourly rates of all
present officers and employees of Continental together with a
statement of the full amount of any bonuses, profit sharing or
other remuneration paid to each such person and to any
director during the current or the last fiscal year or payable
to each such person in the future and the basis therefor;
(e) the names and addresses of each bank and other financial
institution or fund in which Continental maintains an account
(whether checking, savings, money market or otherwise), lock
box or safe deposit box, and the account numbers and names of
persons having signing authority or other access with respect
thereto;
(f) a listing and description of all cash equivalent items held by
Continental;
(g) a list of all of licenses, permits and authorizations of
Continental;
(h) the names of all persons authorized to borrow money or incur
or guarantee indebtedness on behalf of Continental;
(i) the names of all persons holding powers of attorney from
Continental and a summary statement of the terms thereof; and
(j) a listing of all current liabilities of Continental in excess
of $25,000.00.
A.2.18 BENEFIT PLANS AND ARRANGEMENTS.
(a) Schedule A.2.18 hereto lists all employee benefit plans,
funds, policies, arrangements, practices, customs and
understandings or programs, whether or not they are or are
intended to be (i) covered or qualified under the ITA, the
Code, ERISA or any other applicable law,
▇▇
▇▇▇▇▇▇▇▇ ▇-▇▇
(▇▇) ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇, (▇▇▇) funded or unfunded or (iv)
generally available to any or all employees (or former
employees) of Continental (and/or their beneficiaries or
dependents), which were or are established, contributed to or
maintained by Continental, including without limitation
welfare, fringe benefit, pension, profit sharing, retirement,
stock purchase, stock option, stock bonus, disability or wage
continuation, sick pay or vacation pay, supplemental
unemployment, severance or deferred compensation plans (the
"PLANS"). For purposes of this Section A.2.18, the term
"CONTINENTAL" shall include any corporation which is a member
of a controlled group of corporations (as defined in section
414(b) of the Code) which includes Continental, any trade or
business (whether or not incorporated) which is under common
control (as defined in section 414(c) of Code) with
Continental, any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined
in section 414(m) of the Code) which includes Continental and
any other entity required to be aggregated with Continental
pursuant to the regulations issued under section 414(o) of the
Code.
(b) With respect to any such Plans, Continental has made all
contributions thereto which it has accrued on its financial
statements and other books and records as a liability and
Continental has delivered or made available to the Buyer true,
accurate and complete copies of (i) all documents governing
such Plans, and all amendments thereto, (ii) all reports filed
by Continental or Plan officials with respect to such Plans
with the United States Department of Labour, the Internal
Revenue Service (the "IRS") and any other federal, provincial
or state regulatory agency, (iii) all summary plan
descriptions, notices and other reporting and disclosure
material furnished to participants in any of such Plans, (iv)
all actuarial, accounting and financial reports prepared with
respect to any of such Plans and (v) all currently effective
IRS ruling or determination letters on any of such Plans.
(c) The Plans and provisions thereof, the trusts created thereby,
and the operation of the Plans are (and have at all times
been) in compliance with and conform (and at all times have
conformed) to the applicable provisions of the ITA, the Code,
ERISA, other applicable statutes and governmental rules and
regulations.
(d) There is no action, claim or demand of any kind (other than
routine claims for benefits) which has been brought or, to the
knowledge of Continental or any Securityholder threatened,
against any Plan or the assets thereof, or against any
fiduciary of any such Plan.
(e) No Plan is, and Continental does not have any liability,
actual or contingent, with respect to any plan that is (i) a
defined benefit pension plan subject to Title IV of ERISA,
(ii) a multi-employer pension plan, as that term is defined in
sections 4001(a)(e) and 3(37) of ERISA, (iii) a plan providing
life, health or medical benefits to retired employees or (iv)
a self-insured welfare benefit plan.
(f) With respect to any Plan that is an employee welfare benefit
plan (within the meaning of section 3(1) of ERISA) (a "WELFARE
PLAN"), (i) each Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in
compliance with all applicable requirements pertaining to such
deductions and (ii) any Plan that is a group health plan
(within the meaning of section 5000(b)(1) of the Code)
complies, and in each and every case has complied, with all of
the requirements of section 4980B of the Code, ERISA, Title
XXII of the Public Health Service Act and the applicable
provisions of the
42
APPENDIX A-13
Social Security Act.
(g) The Buyer has not made any commitment regarding the
continuation of any Plan maintained by Continental after the
Closing Date and the Buyer will be free, in its sole
discretion, to cause Continental to amend, cancel, terminate
or otherwise modify in any and all respects any such Plan.
A.2.19 ENVIRONMENTAL MATTERS. In addition to the representations and warranties
in Section A.2.13 hereof and not in limitation thereof, (a) no releases of
Hazardous Materials (as defined in this Section A.2.19) have occurred at or from
any property which is the subject of this transaction or which was otherwise
owned or used at any time by Continental or any of its predecessors for
management of Hazardous Materials, (b) there are no past, pending, or threatened
Environmental Claims (as defined in this Section A.2.19) against Continental,
(c) there are no leaking underground storage tanks owned by Continental, or
located at any facility owned or operated by Continental and (d) there are no
facts, circumstances, or conditions that could reasonably be expected to
restrict, under any Environmental Law or Environmental Permit (each as defined
in this Section A.2.19) in effect prior to or at the Closing Date, the
ownership, occupancy, use or transferability of any property owned, operated or
leased by Continental. As used in this Section A.2.19:
(i) "ENVIRONMENTAL CLAIMS" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices,
violations or proceedings related to any applicable
Environmental Law or any Environmental Permit brought, issued
or asserted by: (A) a governmental authority for compliance,
damages, penalties, removal, response, remedial or other
action pursuant to any applicable Environmental Law or (B) a
third party seeking damages for personal injury or property
damage resulting from the release of a Hazardous Material at,
to or from any facility of Continental, including without
limitation Continental employees seeking damages for exposure
to Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" means all federal, provincial, state and
local laws, statutes, ordinances, codes, rules and regulations
related to protection of the environment or the handling, use,
generation, treatment, storage, transportation or disposal of
Hazardous Materials;
(iii) "ENVIRONMENTAL PERMIT" means all permits, licenses, approvals,
authorizations or consents required by any governmental
authority under any applicable Environmental Law and includes
any and all orders, consent orders or binding agreements
issued or entered into by a governmental authority under any
applicable Environmental Law; and
(iv) "HAZARDOUS MATERIAL" means any hazardous or toxic substance,
material or waste which is regulated as of the Closing Date by
any federal, provincial, state or local governmental authority
under any Environmental Law now or hereafter effective,
including, without limitation, any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, or any
constituent of any such substance or waste.
A.2.20 INTELLECTUAL PROPERTY.
43
APPENDIX A-14
(a) The patents, patent applications, trademarks, trademark
applications, trade names and trade name applications and
licenses in respect thereof as set forth in Schedule A.2.20
hereto annexed are:
(i) the only ones necessary so as to enable Continental
to carry on its business as presently conducted; and
(ii) to the knowledge of the Securityholders, Continental
is entitled to use the same and the Securityholders
are not aware of any other person using the same in
the Province of Alberta or in any other jurisdiction
where Continental carries on business.
(b) Continental owns or licenses or otherwise has the right to use
all material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, trade
names, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights that are
necessary for the operations of its assets and business,
without infringement upon or conflict with the rights of any
other person with respect thereto, including, without
limitation, all trade names associated with any private label
brands of Continental. To the best knowledge of the
Securityholders, no slogan or other advertising, device,
product, process, method, substance, part or component or
other material now employed, or now contemplated by be
employed, by Continental infringes upon or conflicts with any
rights owned by any other person, and no claim or litigation
regarding any of the foregoing is pending or threatened. No
patent, invention, device, application, principle and no
statute, law, rule, regulation, standard or code involving the
intellectual property is pending or, to the knowledge of the
Securityholders, proposed, except where the consequences in
the aggregate have no material adverse effect on Continental
or its business.
A.2.21 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, to or in any third person to acquire any of the
assets or properties of Continental or any interest therein, except for those
contracts entered into in the ordinary course of business consistent with past
practice for the sale of Continental's products and services.
A.2.22 SCHEDULES; DELIVERY OF DOCUMENTS; CORPORATE RECORDS. The Securityholders
have delivered or made available to the Buyer the originals or true and complete
copies of all documents, including without limitation all amendments,
supplements or modifications thereof or waivers currently in effect thereunder,
referred to on the Schedules hereto or otherwise material to the representations
and warranties in this Agreement and have also delivered to the Buyer copies of
the constating documents of Continental and all amendments thereto and the
By-Laws, as amended, of Continental. The minute and stock record books of
Continental, which have been made available to the Buyer for its inspection,
contain complete and correct copies of all charter documents and the records of
all meetings and consents in lieu of meeting of the Boards of Directors (and any
committees thereof) and voting shareholders of Continental since the dates of
their incorporation.
A.3 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and
warrants to each of the Securityholders that, to the best of its knowledge,
information and belief, having made due
44
APPENDIX A-15
inquiry, as follows:
A.3.1 REPORTING ISSUER STATUS. The Buyer is a "reporting issuer" in the Province
of Alberta as that term is defined in the Securities Act (Alberta) and the
common shares of the Buyer are listed and posted for trading on Nasdaq. The
Buyer is not in default of any requirement of the Securities Act (Alberta) or
its regulations which would have a Venture Material Adverse Effect. The Buyer
has not received any notice of default with respect to any material rule of
Nasdaq applicable to the maintenance of its listing thereon. The Venture Stock
is part of a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Buyer
is subject to Section 13 or 15(d) of the Exchange Act. Since March 1, 1997, the
Buyer has complied in all material respects with the reporting requirements of
the Exchange Act.
A.3.2 AUTHORIZED CAPITAL. The authorized capital of the Buyer consists of an
unlimited number of common shares, of which 4,634,584 common shares are issued
and outstanding as of the date hereof. The following warrants and options to
acquire common shares of the Buyer are issued and outstanding as of the date
hereof:
WARRANTS & OPTIONS OUTSTANDING: NUMBER EXERCISE PRICE
------------------------------- ------ --------------
1) Underwriter option 140,000 $8.25
2) Underwriter warrants 140,000 $7.00
3) Investor relations warrants 100,000 $5.25
4) Stock options 384,500 $3.38 to $ 5.88
(208,500 vested)
Other than as set forth above, there are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire from
Buyer any shares of, or any securities convertible into, the capital stock of
Buyer. There are no preemptive rights with respect to the issuance of the
Venture Stock or any other capital shares of Buyer.
A.3.3 CORPORATE EXISTENCE. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta and the
Buyer has all requisite power and authority and all necessary licenses, permits
and authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith, except for licenses, permits and authorizations, the absence of which
would not individually or in the aggregate result in a Venture Material Adverse
Effect. The Buyer is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required.
A.3.4 CORPORATE POWER AND AUTHORIZATION. The Buyer has the requisite corporate
power and authority to execute, deliver and perform this Agreement and the
Contemplated Transactions. The execution, delivery and performance hereof by the
Buyer has been duly authorized and approved by all necessary corporate action,
other than receipt of requisite shareholder approval. This Agreement is a legal,
valid and binding obligation of the Buyer and is enforceable against the Buyer
in accordance with its terms; except as the same may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) laws
relating to the availability of specific
45
APPENDIX A-16
performance, injunctive relief or other equitable remedies, and (c) the extent
to which the enforceability of the indemnification provisions contained in this
Agreement may be limited by applicable laws.
A.3.5 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. Except as disclosed on
Schedule A.3.5, the execution, delivery and performance hereof by the Buyer will
(a) not contravene or violate any material provision of any law, rule or
regulation currently in effect to which the Buyer is subject, including without
limitation, the rules and regulations of the Alberta Securities Commission, the
S.E.C. or Nasdaq, or (b) the Certificate of Incorporation or By-Laws of the
Buyer; nor will such execution, delivery or performance violate, be in conflict
with in any material respect or result in the breach (with or without the giving
of notice or lapse of time, or both) of any material term, condition or
provision of, or require the consent which has not been obtained of any other
party to, any material contract, commitment or agreement, oral or written, to or
by which the Buyer is a party or otherwise bound or affected or by which any of
the Buyer's assets or properties may be bound or affected, except for such
violations which would not either individually or in the aggregate have a
Venture Material Adverse Effect. Except as disclosed on Schedule A.3.5, no
authorization, approval or consent, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance hereof by the Buyer, except for
those consents, approvals, authorizations, declarations, filings or
registrations the failure of which to obtain or make individually or in the
aggregate would not have a Venture Material Adverse Effect.
A.3.6 VENTURE STOCK. Assuming the accuracy of the representations and warranties
of the Securityholders provided in this Agreement, the offer and sale of the
Venture Stock by the Buyer is exempt from the registration requirements of the
Act pursuant to section 4(2) thereof. The Venture Stock, when issued from
treasury to the Securityholders, will be issued free and clear of all security
interests, pledges, liens, encumbrances, claims and other charges and
restrictions thereon of every kind and nature whatsoever, including without
limitation any agreements, subscriptions, options, warrants, calls, commitments
or rights (contingent or otherwise) of any character granting to any person any
interest in or right to acquire from such Securityholders at any time, or upon
the happening of any stated event, any of the Venture Stock to be issued to such
Securityholders, excepting only the restrictions on the Venture Stock under
governing security and regulatory laws, regulations and policies. Nothing
contained herein shall restrict the Securityholders from selling, pledging or
otherwise transferring the Venture Stock acquired by each of them pursuant to an
exemption from registration under the Act and the Alberta Act at any time
provided such sale, pledge or transfer is otherwise consummated in accordance
with the terms and provisions of this Agreement, the provisions of the Act, the
Alberta Act and other applicable laws, rules or regulations.
A.3.7 CANADIAN RESIDENT. The Buyer is a Canadian corporation within the meaning
of the ITA.
A.3.8 COMPLIANCE WITH LAWS. The Buyer has complied in all material respects with
each, and is not in violation of the material provisions of any law, rule or
regulation currently in effect to which it or its business is, or its
operations, assets, securities or properties are subject, including, without
limitation, the rules and regulations of the Alberta Securities Commission, the
S.E.C. or Nasdaq, and has not in any material respect failed to obtain or adhere
to the requirements of any material license, permit or other authorization
necessary to the ownership of its assets and properties or to the conduct of its
business, except where such failure would not result either individually or in
the aggregate in a Venture Material Adverse Effect.
A.3.9 CANACCORD CAPITAL CORPORATION INDEMNITY. The Buyer covenants and agrees
except as otherwise agreed to by the Securityholders, on behalf of Continental,
or by Continental, or except as may be
46
APPENDIX A-17
determined by an appropriate court of law or other governing body, that none of
the Securityholders shall be responsible for or liable for any fees, costs or
expenses payable by Continental or by the Buyer to Canaccord Capital Corporation
for any matters referred to in Canaccord Capital Corporation's letter dated
December 8, 1997 or in connection with this Agreement or the Contemplated
Transactions as referred to in Section 11.
A.3.10 NO JUDGMENTS. The Buyer is not a party to or otherwise bound or affected
by the provisions of any judgment, order, writ, injunction or decree of any
Court, arbitrator or governmental or regulatory official, body or authority,
except for those which would not result either individually or in the aggregate
in a Venture Material Adverse Effect.
A.3.11 VENTURE DISCLOSURE DOCUMENTS. The Venture Disclosure Documents were
prepared in all material respects in accordance with the requirements of
applicable law in effect as of the respective dates of preparation and
accurately describe, in all material respects as of their respective dates, the
business then conducted by the Buyer.
A.3.12 NO RESTRICTIONS ON VENTURE STOCK. Except to the extent that the Venture
Stock issued to the Securityholders constitutes "restricted stock" as such term
is defined under Rule 144 of the Act, or that any of the Securityholders may be
deemed an "affiliate" of the Buyer, as such term is defined under Rule 144 of
the Act, as of the date of issuance, the Venture Stock will have no prohibition
on transfer.