EXECUTION COPY
VENTURES WEST 7 LIMITED PARTNERSHIP
VENTURES WEST 7 U.S. LIMITED PARTNERSHIP
▇▇▇▇▇▇ TRADING LTD.
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
SEDUN FAMILY TRUST
▇▇▇▇▇▇▇▇▇▇ FAMILY TRUST
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HYDROGENICS CORPORATION
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GREENLIGHT POWER TECHNOLOGIES, INC.
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PURCHASE AGREEMENT
FOR MAJOR INVESTORS
JANUARY 7, 2003
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▇▇▇▇▇, ▇▇▇▇▇▇ & Harcourt LLP
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▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION.................................................. 2
1.1 Definitions........................................................................... 2
1.2 Certain Rules of Interpretation....................................................... 14
1.3 Knowledge............................................................................. 16
1.4 Entire Agreement...................................................................... 16
1.5 Schedules and Exhibits................................................................ 16
ARTICLE 2 PURCHASE AND SALE............................................................................. 17
2.1 Action by Vendors and Purchaser....................................................... 17
2.2 Place of Closing...................................................................... 19
2.3 Tender................................................................................ 19
ARTICLE 3 PURCHASE PRICE................................................................................ 19
3.1 Purchase Price........................................................................ 19
3.2 Satisfaction of Purchase Price........................................................ 19
3.3 Escrowed Shares....................................................................... 21
3.4 Inventory Count....................................................................... 21
3.5 Delivery of Closing Date Financial Statement.......................................... 22
3.6 Adjustments........................................................................... 22
3.7 Objection to Closing Date Financial Statement......................................... 22
3.8 Delivery of Cash Consideration........................................................ 24
3.9 Delivery of Equity Portion of Purchase Price.......................................... 24
3.10 Delivery of Escrowed Shares........................................................... 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 25
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE VENDORS................................................. 25
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................... 25
ARTICLE 7 NON-WAIVER; SURVIVAL.......................................................................... 25
7.1 Non-Waiver............................................................................ 25
7.2 Nature and Survival................................................................... 26
ARTICLE 8 OTHER COVENANTS OF THE PARTIES................................................................ 26
8.1 Contractual Hold Periods.............................................................. 26
8.2 Closing Documentation................................................................. 31
8.3 Confidentiality....................................................................... 31
8.4 Preservation of Records............................................................... 33
8.5 Stub Period Returns................................................................... 33
8.6 Consent to Jurisdiction............................................................... 34
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TABLE OF CONTENTS
(CONTINUED)
PAGE
8.7 Securities Exemptions................................................................. 34
8.8 Withholding Tax....................................................................... 35
8.9 Continued Listing on TSX.............................................................. 38
8.10 Offer to Minor Vendors................................................................ 38
ARTICLE 9 INDEMNIFICATION............................................................................... 38
9.1 Indemnification by the Vendors........................................................ 38
9.2 Indemnification by the Purchaser...................................................... 39
9.3 Limitation Periods.................................................................... 39
9.4 Limitations on Indemnification Obligations............................................ 40
9.5 Indemnification Procedures for Third Party Claims..................................... 42
9.6 Tax Status of Indemnification Payments................................................ 43
9.7 Escrowed Shares....................................................................... 44
ARTICLE 10 GENERAL...................................................................................... 44
10.1 Public Notices........................................................................ 44
10.2 Expenses.............................................................................. 44
10.3 Notices............................................................................... 44
10.4 Interest Act Disclosure............................................................... 46
10.5 Assignment............................................................................ 46
10.6 Enurement............................................................................. 46
10.7 Amendment............................................................................. 46
10.8 Further Assurances.................................................................... 47
10.9 Independent Legal Advice.............................................................. 47
10.10 Attornment............................................................................ 47
10.11 Execution and Counterparts............................................................ 47
LIST OF SCHEDULES
SCHEDULE A LIST OF MAJOR VENDORS AND SECURITIES HELD
SCHEDULE A1 SECURITIES PURCHASED FOR CASH
SCHEDULE A2 SECURITIES PURCHASED FOR SHARES AND ESCROW
SCHEDULE 1.1 PERMITTED ENCUMBRANCES
SCHEDULE 3.2 FORM OF WARRANT
SCHEDULE 3.9 DIRECTION RE EQUITY PORTION OF THE PURCHASE PRICE
SCHEDULE 3.10 DIRECTION RE ESCROWED SHARES
SCHEDULE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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TABLE OF CONTENTS
(CONTINUED)
PAGE
EXHIBIT A DISCLOSURE SCHEDULE
EXHIBIT B DISCLOSURE DOCUMENTS
SCHEDULE 5 REPRESENTATIONS AND WARRANTIES OF THE VENDORS
SCHEDULE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SCHEDULE 8.1 FORM OF DECLARATION FOR REMOVAL OF U.S. LEGEND
SCHEDULE 10.3 NOTICES
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THIS PURCHASE AGREEMENT is made as of January 7, 2003
BETWEEN:
HYDROGENICS CORPORATION, a corporation governed by the laws of
Canada,
(the "Purchaser")
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GREENLIGHT POWER TECHNOLOGIES, INC., a corporation governed by
the laws of Canada
(the "Company")
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THE SHAREHOLDERS OF THE COMPANY, listed on Schedule A
(collectively the "Vendors").
RECITALS:
A. Each of the Vendors beneficially owns and controls such number of
securities of the Company as is set out opposite its name in Schedule
A.
B. Each of the Vendors has agreed to sell to the Purchaser and the
Purchaser has agreed to purchase from such Vendor all of the issued and
outstanding securities of the Company, owned by such Vendor, on the
terms and conditions of this Agreement.
THEREFORE, the parties agree as follows:
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ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS
(a) Whenever used in this Agreement, the following words and terms
have the meanings set out below:
"ACCOUNTS RECEIVABLE" means accounts receivable, bills receivable,
trade accounts, unbilled contracts, book debts and insurance claims
recorded as receivable in the Books and Records and any other amount
due to the Company including any refunds and rebates, and the benefit
of all security (including cash deposits), guarantees and other
collateral held by the Company as determined and calculated in
accordance with GAAP;
"ACCRUED LIABILITIES" means accrued liabilities of the Company
including accruals for vacation pay, customer rebates and allowances
for product returns as determined and calculated in accordance with
GAAP;
"AFFILIATE" of any Person means, at the time such determination is
being made, any other Person controlling, controlled by or under common
control with such first Person, in each case, whether directly or
indirectly, and "CONTROL" and any derivation thereof means the
possession, directly or indirectly, of the power to direct or
significantly influence the management and policies, business or
affairs of a Person whether through the ownership of voting securities
or otherwise;
"AGREEMENT" means this Purchase Agreement, including all schedules, and
all amendments or restatements, as permitted, and references to
"ARTICLE" or "SECTION" mean the specified Article or Section of this
Agreement;
"ARM'S LENGTH" has the meaning that it has for purposes of the Income
Tax Act (Canada);
"AUDITOR" means PricewaterhouseCoopers LLP, Chartered Accountants;
"BALANCE SHEET" means the unaudited balance sheet of the Company as at
September 30, 2002, forming part of the Financial Statements;
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"BENEFIT PLANS" means plans, arrangements, agreements, programs,
policies, practices or undertakings, whether oral or written, formal or
informal, funded or unfunded, registered or unregistered to which the
Company is a party or by which the Company is bound or under which the
Company has, or will have, any liability or contingent liability,
relating to:
(a) Pension Plans;
(b) plans in the nature of insurance plans, providing for
employment benefits relating to disability or wage or benefits
continuation during periods of absence from work (including,
short term disability, long term disability, workers
compensation and maternity and parental leave), and any and
all employment benefits relating to hospitalization,
healthcare, medical or dental treatments or expenses, life
insurance, accidental death and dismemberment insurance, death
or survivor's benefits and supplementary employment insurance,
in each case regardless of whether or not such benefits are
insured or self-insured; or
(c) plans in the nature of compensation plans, which means all
employment benefits relating to bonuses, incentive pay or
compensation, performance compensation, deferred compensation,
profit sharing or deferred profit sharing, share purchase,
share option, stock appreciation, phantom stock, vacation or
vacation pay, sick pay, severance or termination pay, employee
loans or separation from service benefits, or any other type
of arrangement providing for compensation or benefits
additional to base pay or salary;
with respect to any of its Employees or former employees (or any
spouses, dependants, survivors or beneficiaries of any such Employees
or former employees), directors or officers, individuals working on
contract with the Company or other individuals providing services to
any of them of a kind normally provided by employees or eligible
dependants of such Person excluding Statutory Plans;
"BOOKS AND RECORDS" means books and records of the Company (whether
held by the Company or the Vendors), including financial, corporate,
operations and sales books,
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books of account, sales and purchase records, lists of suppliers and
customers, formulae, business reports, plans and projections and all
other documents, surveys, plans, files, records, assessments,
correspondence, and other data and information, financial or otherwise,
including all data and information stored on computer-related or other
electronic media;
"BUSINESS DAY" means any day, other than a Saturday or Sunday, on which
the Royal Bank of Canada in Toronto, Ontario is open for commercial
banking business during normal banking hours;
"▇▇▇▇▇▇▇ OPTION" means the Option Agreement dated April 4, 2001 between
▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Trading Ltd.;
"▇▇▇▇▇▇▇ OPTION ASSIGNMENT AGREEMENT" means the Amendment and
Assignment of Option Agreement dated as of the date hereof in the form
attached as Schedule 2.1;
"CLAIMS" includes claims, demands, complaints, actions, suits, causes
of action, assessments or reassessments, charges, judgments, debts,
liabilities, expenses, costs, damages or losses, contingent or
otherwise, including loss of value, professional fees, including fees
of legal counsel on a solicitor and his or her own client basis, and
all costs incurred in investigating or pursuing any of the foregoing or
any proceeding relating to any of the foregoing;
"CLOSING" means the completion of the sale to and purchase by the
Purchaser of the Purchased Securities under this Agreement;
"CLOSING DATE" means the date this Agreement is entered into;
"CLOSING DATE FINANCIAL STATEMENT" means the balance sheet of the
Company as at December 31, 2002 and the accompanying statements of
operations, retained earnings (deficit) and cash flows for the year
then ended, prepared using the Purchaser's Completed Contract Method of
Revenue Recognition, and showing all of the assets and liabilities of
the Company, and shall also include a statement of the Closing Net
Assets, together with an unqualified opinion of the Auditor to the
effect that the Closing Date Financial Statement has been prepared in
accordance with a disclosed basis of accounting
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(substantially in accordance with GAAP except for the change in revenue
recognition policy from percentage of completion to Purchaser's
Completed Contract Method of Revenue Recognition) and presents fairly
in all material respects the assets and liabilities of the Company;
"CLOSING NET ASSETS" means an amount equal to the total assets less
total liabilities derived from the balance sheet prepared as part of
the Closing Date Financial Statement (provided that such calculation
shall exclude the Company's Transaction Expenses);
"CLOSING REVENUE" means the total revenue amount reflected on the
statements of operations prepared as part of the Closing Date Financial
Statement;
"CLOSING TIME" means 11:59 p.m. (Vancouver time), on the Closing Date
or such other time on such date as the Parties may agree in writing as
the time at which the Closing shall take place;
"COLLECTIVE AGREEMENTS" means collective agreements and related
documents including benefit agreements, letters of understanding,
letters of intent and other written communications with bargaining
agents or unions by which the Company is bound or which impose any
obligations upon the Company or set out the understanding of the
parties with respect to the meaning of any provisions of such
collective agreements;
"COMPANY'S TRANSACTION EXPENSES" means all of the Company's legal,
accounting and investment banking expenses incurred in connection with
the transactions contemplated by this Agreement and the Company's
current proposed financing;
"CONFIDENTIALITY AGREEMENT" has the meaning given in Section 8.3;
"CONTRACTS" means contracts, licences, leases, agreements, commitments,
entitlements or engagements to which the Company is a party or by which
it is bound or under which the Company has, or will have, any liability
or contingent liability, and includes any quotation, order or tender
for any contract which remains open for acceptance and any warranty,
guarantee or commitment (express or implied);
"▇▇▇▇ OPTION" means the Option Agreement dated April 4, 2001 between
▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ Trading Ltd.;
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"▇▇▇▇ OPTION ASSIGNMENT AGREEMENT" means the Amendment and Assignment
of Option Agreement dated as of the date hereof in the form attached as
Schedule 2.1;
"DISCLOSURE DOCUMENTS" means the documents provided by the Company to
the Purchaser which are listed in Exhibit B to Schedule 4;
"DISCLOSURE SCHEDULE" means Exhibit A to Schedule 4;
"EFFECTIVE DATE" means January 7, 2003 or such other date as the
parties may agree in writing;
"EFFECTIVE TIME" means 11:59 p.m. (Vancouver Time) on the Effective
Date;
"EMPLOYEES" means those individuals employed or retained by the Company
on a full-time, part-time or temporary basis, including those employees
on disability leave, parental leave or other absence;
"EMPLOYMENT CONTRACTS" means Contracts, whether oral or written,
relating to an Employee, including any communication or practice
relating to an Employee which imposes any obligation on the Company;
"ENCUMBRANCES" means pledges, liens, charges, security interests,
leases, title retention agreements, mortgages, restrictions,
developments or similar agreements, easements, rights-of-way, title
defects, options or adverse claims or encumbrances of any kind or
character whatsoever;
"ENVIRONMENT" means the environment or natural environment as defined
in any Environmental Laws and includes air, surface water, ground
water, land surface, soil, subsurface strata, any sewer system and the
environment in the workplace;
"ENVIRONMENTAL APPROVALS" means approvals, permits, certificates,
licences, authorizations, consents, agreements, instructions,
directions, registrations or approvals issued, granted, conferred or
required by a Governmental Authority pursuant to an Environmental Law
with respect to the operations, business or assets of the Company and
includes any sewer surcharge agreements;
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"ENVIRONMENTAL LAWS" means those Laws relating to the Environment,
product liability, or employee or public health or safety, and includes
any Laws relating to the storage, generation, use, handling,
manufacture, processing, labelling, advertising, sale, display,
transportation, treatment, reuse, recycling, Release and disposal of
Hazardous Substances;
"EQUIPMENT CONTRACTS" means motor vehicle leases, equipment leases,
leases of computer hardware and computer systems, conditional sales
contracts, title retention agreements and other similar agreements
relating to equipment used by the Company;
"ESCROW AGREEMENT" means the escrow agreement, dated as of the date
hereof, between the Vendors, the Purchaser and the Escrow Agent;
"ESCROW AGENT" has the meaning ascribed thereto in the Escrow
Agreement;
"ESCROWED SHARES" means the 970,061 Hydrogenics Shares to be deposited
with the Escrow Agent pursuant to Section 3.2;
"FINANCIAL STATEMENTS" means the audited balance sheet of the Company
as at August 31, 2001 and the related audited financial statements of
operations and retained earnings (deficit) and cash flow for the year
then ended and the audited balance sheet as at December 31, 2001 and
the related audited financial statements of operations and retained
earnings (deficit) and cash flow for the four months then ended and all
notes thereto as reported upon by KPMG LLP; and an unaudited balance
sheet of the Company as at September 30, 2002 and the related unaudited
statements of operations and retained earnings (deficit) and cash flow
for the nine months then ended;
"FIXED ASSETS" means fixed assets, machinery, equipment including
computer hardware and telecommunications equipment, fixtures,
furniture, furnishings, vehicles, material handling equipment,
implements, parts, tools, jigs, dies, molds, patterns and tooling, or
spare parts owned or used or held (including assets under capital
leases) by the Company, including any which are in storage or in
transit, and other tangible property and facilities used by the Company
whether located in or on the premises of the Company or elsewhere,
including the assets listed and described in the Disclosure Documents;
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"GAAP" means generally accepted accounting principles as defined by the
Accounting Standards Board of the Canadian Institute of Chartered
Accountants in the Handbook of the Canadian Institute of Chartered
Accountants as they exist on the date of this Agreement;
"GOVERNMENTAL AUTHORITY" means any (i) multinational, federal,
provincial, state, municipal, local or other government, governmental
or public department, central bank, court, tribunal, dispute
settlement panel or body or other law, rule or regulation-making
entity, commission, board, bureau, Crown corporation, agency or
instrumentality, domestic or foreign, (ii) any subdivision or authority
of any of the foregoing, or (iii) any quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority under
or for the account of any of the above;
"GOVERNMENTAL AUTHORIZATIONS" means authorizations, approvals,
including Environmental Approvals, orders, certificates, consents,
directives, notices, licences, permits, variances, registrations or
similar rights issued to or required by the Company by or from any
Governmental Authority;
"HAZARDOUS SUBSTANCES" means any pollutants, contaminants, wastes of
any nature, hazardous substances, hazardous materials, toxic
substances, prohibited substances, dangerous substances or dangerous
goods as defined, judicially interpreted or identified in any
Environmental Laws including any asbestos, asbestos-containing
materials, mould, microbial organisms or substances related thereto;
"HYDROGENICS SHARES" means common shares in the capital of the
Purchaser;
"INDEPENDENT AUDITOR" means Ernst & Young LLP or such other independent
auditing firm as the Parties may otherwise agree;
"INFORMATION TECHNOLOGY" means all computer hardware, software in
source code and object code form (including documentation, interfaces
and development tools), websites for the Company, databases,
telecommunications equipment and facilities and other information
technology systems owned, used or held by the Company;
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"INTELLECTUAL PROPERTY" means intellectual property rights, whether
registered or not, owned, used or held by the Company, including:
(a) inventions, pending patent applications (including
divisionals, reissues, renewals, re-examinations,
continuations, continuations-in-part and extensions) and
issued patents, including those inventions, pending patent
applications and issued patents listed and described in the
Disclosure Documents;
(b) trade-marks, trade-names, brands, trade dress, business names
and other indicia of origin, including those listed and
described in the Disclosure Documents;
(c) copyrights, including those copyright registrations and
applications listed and described in the Disclosure Documents;
(d) industrial designs and similar rights, including those
registrations and applications listed and described in the
Disclosure Documents; and
(e) integrated circuit topographies and similar rights, including
those registrations and applications listed and described in
the Disclosure Documents;
"INVENTORIES" means inventories of every kind and nature and
wheresoever situate of the Company including inventories of raw
materials, work-in-progress, finished goods and by-products, spare
parts, operating supplies and packaging materials and net of reasonable
provisions, provided that raw materials and supplies are valued at the
lower of cost, determined on a first-in first-out basis, or market,
market is defined as replacement cost and finished goods and
work-in-progress are recorded at the lower of cost and net realizable
value;
"KEY EXECUTIVES" means ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (together with
the ▇▇▇▇▇▇▇▇▇▇ Family Trust), ▇▇▇▇▇ ▇▇▇▇▇ (together with the Sedun
Family Trust), ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇;
"LAWS" means applicable laws (including common law), statutes, by-laws,
rules, regulations, orders, ordinances, protocols, codes, guidelines,
treaties, policies, notices,
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directions, decrees, judgments, awards or requirements, in each case of
any Governmental Authority;
"LEASED REAL PROPERTY" means premises which are used by the Company
which are leased, subleased, licensed or otherwise occupied by the
Company and the interest of the Company in all plants, buildings,
structures, fixtures, erections, improvements, easements,
rights-of-way, spur tracks and other appurtenances situate on or
forming part of such premises;
"MATERIAL ADVERSE EFFECT" in respect of the Purchaser shall mean any
material adverse effect on the condition (financial or otherwise),
earnings, business, prospects or properties of the Purchaser whether or
not arising from transactions in the ordinary course of business;
"MATERIAL CONTRACT" means any Contract (i) involving aggregate payments
to or by the Company in excess of $25,000, (ii) involving rights or
obligations of the Company that may reasonably extend beyond one year,
(iii) which is outside the ordinary course of business, (iv) which does
not or cannot be terminated without penalty on less than three months'
notice, (v) which restricts in any way the business or activities of
the Company, or (vi) which, if terminated without the consent of the
Company, would have a significant adverse effect on the Company;
"NOTICE" has the meaning given in Section 10.3;
"OCCUPATIONAL HEALTH AND SAFETY LAWS" means all Laws relating in full
or in part to the protection of employee or worker health and safety;
"OWNED REAL PROPERTY" means real property, owned or purported to be
owned in fee simple, by the Company or real property, other than Leased
Real Property, in which the Company has an interest, including all
plants, buildings, structures, fixtures, erections, improvements,
easements, rights-of-way, spur tracks and other appurtenances situate
on or forming part of such real property;
"PARTIES" means the Vendors and the Purchaser collectively, and "PARTY"
means any one of them;
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"PENSION PLANS" means all benefits relating to retirement or retirement
savings including pension plans, pensions or supplemental pensions,
"registered retirement savings plans" (as defined in the Income Tax Act
(Canada)), "registered pension plans" (as defined in the Income Tax Act
(Canada)) and "retirement compensation arrangements" (as defined in the
Income Tax Act (Canada));
"PERMITTED ENCUMBRANCES" means the Encumbrances listed in Schedule 1.1;
"PERSON" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Governmental
Authority, and where the context requires any of the foregoing when
they are acting as trustee, executor, administrator or other legal
representative;
"PERSONAL INFORMATION" means any information in the possession of the
Company about an identifiable individual other than the name, title or
business address or telephone number of an Employee;
"PROPORTIONATE SHARE" means in respect of each of the Vendors the
percentage set out opposite the name of such Vendor in Schedule A;
"PURCHASE PRICE" has the meaning given in Section 3.1;
"PURCHASED SECURITIES" means all of the shares, warrants and options in
the capital of the Company owned by the Vendors and which are as listed
in Schedule A and the ▇▇▇▇▇▇▇ Option and the ▇▇▇▇ Option;
"PURCHASER'S FINANCIAL STATEMENTS" means the audited balance sheet of
the Purchaser for the fiscal year ending December 31, 2001 and the
accompanying statements of income, retained earnings and changes in
financial position for the year then ended and all notes thereto as
reported upon by PricewaterhouseCoopers LLP; and the unaudited interim
financial statements of the Company for the nine month period ending
September 30, 2002;
"PURCHASER'S COMPLETED CONTRACT METHOD OF REVENUE RECOGNITION" means
the recognition of revenue related to the sale of fuel cell test
stations and other related
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systems employed by the Purchaser whereby revenue is recognized when
goods are delivered, title passes to the customer and collection is
reasonably assured provided that in situations where customer
acceptance is considered to be substantive to the transaction, revenue
is recognized only after such acceptance has been received from the
customer;
"REAL PROPERTY" means the Owned Real Property and the Leased Real
Property;
"REAL PROPERTY LEASES" means those agreements to lease, leases,
subleases or licences or other agreements or rights pursuant to which
the Company uses or occupies the Leased Real Property;
"RELEASE" has the meaning prescribed in any Environmental Laws and
includes any sudden, intermittent or gradual release, spill, leak,
pumping, addition, pouring, emission, emptying, discharge, injection,
escape, leaching, disposal, dumping, deposit, spraying, burial,
abandonment, incineration, seepage, placement or introduction, whether
accidental or intentional;
"REMEDIAL ORDER" means any administrative complaint, direction, order
or sanction issued, filed, imposed or threatened by any Governmental
Authority pursuant to any Environmental Laws and includes any order
requiring investigation, assessment or remediation of any site or
Hazardous Substance, or requiring that any Release or any other
activity be reduced, modified or eliminated or requiring any form of
payment or co-operation be provided to any Governmental Authority;
"SEC" means the United States Securities and Exchange Commission;
"SECURITIES HOLDERS" means the holders of any of the outstanding
securities of the Company;
"SHAREHOLDERS AGREEMENT" means the Company's shareholders agreement
dated April 4, 2001;
"STATUTORY PLANS" means statutory Benefit Plans which the Company is
required to comply with, including the Canada Pension Plan and plans
administered pursuant to applicable health tax, workers' compensation
and unemployment insurance legislation;
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"SUBSIDIARIES" means corporations in which the Company has a
controlling interest as defined in the Canada Business Corporations
Act;
"TAX RETURNS" includes all returns, reports, declarations, elections,
notices, filings, forms, statements and other documents (whether in
tangible, electronic or other form) and including any amendments,
schedules, attachments, supplements, appendices and exhibits thereto,
made, prepared, filed or required to be made, prepared or filed by Law
in respect of Taxes;
"TAXES" includes any taxes, duties, fees, premiums, assessments,
imposts, levies and other charges of any kind whatsoever imposed by any
Governmental Authority, including all interest, penalties, fines,
additions to tax or other additional amounts imposed by any
Governmental Authority in respect thereof, and including those levied
on, or measured by, or referred to as, income, gross receipts, profits,
capital, transfer, land transfer, sales, goods and services, harmonized
sales, use, value-added, excise, stamp, withholding, business,
franchising, property, development, occupancy, employer health,
payroll, employment, health, social services, education and social
security taxes, all surtaxes, all customs duties and import and export
taxes, countervail and anti-dumping, all licence, franchise and
registration fees and all employment insurance, health insurance and
Canada, Quebec and other government pension plan premiums or
contributions;
"TECHNICAL INFORMATION" means all know-how and related technical
knowledge owned, used or held by the Company including:
(a) trade secrets, confidential information and other proprietary
know-how;
(b) public information and non-proprietary know-how;
(c) information of a scientific, technical, financial or business
nature regardless of its form;
(d) uniform resource locators, domain names, telephone, telecopy
and email addresses, and UPC consumer packaging codes; and
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(e) documented research, forecasts, studies, marketing plans,
budgets, market data, developmental, demonstration or
engineering work, information that can be used to define a
design or process or procure, produce, support or operate
material and equipment, methods of production and procedures,
all formulas and designs and drawings, blueprints, patterns,
plans, flow charts, parts lists, manuals and records,
specifications, and test data;
"TECHNOLOGY" means all Intellectual Property, Technical Information and
Information Technology;
"TRANSFER AGENT" means CIBC Mellon Trust Company in its capacity as
Canadian registrar and transfer agent of the Purchaser;
"UNION PLANS" means Benefit Plans which are or are required to be
established and maintained pursuant to a Collective Agreement and which
are not maintained or administered by the Company;
"U.S. SECURITIES ACT" means the United States Securities Act of 1933,
as amended;
"VENTURES WEST" means collectively Ventures West 7 Limited Partnership
and VW7US;
"VW7US" means Ventures West 7 U.S. Limited Partnership; and
"WARRANT(S)" means the warrant to acquire Hydrogenics Shares for
nominal consideration on or before January 10, 2003 in the form
attached as Schedule 3.2.
1.2 CERTAIN RULES OF INTERPRETATION
In this Agreement:
(a) CONSENT - Whenever a provision of this Agreement requires an
approval or consent to be given by a Party and such approval
or consent is not delivered within the applicable time limit,
then, unless otherwise specified, the Party whose consent or
approval is required shall be conclusively deemed to have
withheld its approval or consent.
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(b) CURRENCY - Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
(c) GOVERNING LAW - This Agreement is a contract made under and
shall be governed by and construed in accordance with the laws
of the Province of Ontario and the federal laws of Canada
applicable in the Province of Ontario.
(d) HEADINGS - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
(e) INCLUDING - Where the word "including" or "includes" is used
in this Agreement, it means "including (or includes) without
limitation".
(f) NO STRICT CONSTRUCTION - The language used in this Agreement
is the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied
against any Party.
(g) NUMBER AND GENDER - Unless the context otherwise requires,
words importing the singular include the plural and vice versa
and words importing gender include all genders.
(h) SEVERABILITY - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall,
as to such jurisdiction, be ineffective only to the extent of
such restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement and
without affecting the validity or enforceability of such
provision in any other jurisdiction or without affecting its
application to other Parties or circumstances.
(i) STATUTORY REFERENCES - A reference to a statute includes all
regulations made pursuant to such statute and, unless
otherwise specified, the provisions of any
- 16 -
statute or regulation which amends, supplements or supersedes
any such statute or any such regulation.
(j) TIME - Time is of the essence in the performance of the
Parties' respective obligations.
(k) TIME PERIODS - Unless otherwise specified, time periods within
or following which any payment is to be made or act is to be
done shall be calculated by excluding the day on which the
period commences and including the day on which the period
ends and by extending the period to the next Business Day
following if the last day of the period is not a Business Day.
1.3 KNOWLEDGE
Any reference to the knowledge of any Party means to the knowledge, information
and belief of such Party after reviewing all relevant records of the Party and
making due inquiries regarding the relevant matter of all relevant directors,
officers and employees of the Party.
1.4 ENTIRE AGREEMENT
This Agreement and the agreements and other documents required to be delivered
pursuant to this Agreement, constitute the entire agreement between the Parties
and set out all the covenants, promises, warranties, representations,
conditions, understandings and agreements between the Parties pertaining to the
subject matter of this Agreement and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written. There are
no covenants, promises, warranties, representations, conditions, understandings
or other agreements, oral or written, express, implied or collateral between the
Parties in connection with the subject matter of this Agreement except as
specifically set forth in this Agreement and any document required to be
delivered pursuant to this Agreement.
1.5 SCHEDULES AND EXHIBITS
The schedules and exhibits to this Agreement, as listed below, are an integral
part of this Agreement:
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SCHEDULE DESCRIPTION
Schedule A List of Major Investors and Securities Held
Schedule A1 Securities Purchased for Cash
Schedule A2 Securities Purchased for Shares and Escrow
Schedule 1.1 Permitted Encumbrances
Schedule 2.1 Form of Option Amendment and Assignment Agreement
Schedule 3.2 Form of Warrant
Schedule 3.9 Direction Re: Equity Portion of the Purchase Price
Schedule 3.10 Direction Re: Escrowed Shares
Schedule 4 Representations and Warranties of the Company
Exhibit A Disclosure Schedule
Exhibit B Disclosure Documents
Schedule 5 Representations and Warranties of the Vendors
Schedule 6 Representations and Warranties of the Purchaser
Schedule 8.1 Form of Declaration For Removal of U.S. Legend
Schedule 10.3 Notices
ARTICLE 2
PURCHASE AND SALE
2.1 ACTION BY VENDORS AND PURCHASER
Subject to the provisions of this Agreement, with effect as of and from the date
hereof:
(a) Purchase and Sale of Purchased Securities - each of the
Vendors hereby sells and the Purchaser hereby purchases:
(i) the Purchased Securities set out on Schedule A1 for
the consideration provided for in Section 3.2(a);
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(ii) the Purchased Securities set out on Schedule A2 for
the consideration provided for in Section 3.2(b);
(iii) in the case of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇, the
▇▇▇▇▇▇▇ Option and ▇▇▇▇ ▇▇▇▇▇▇, respectively, for the
consideration provided in Section 3.2(c); and
(iv) in the case of ▇▇▇▇▇▇ Trading Ltd., the Purchased
Securities set out in Schedule A4 for the
consideration provided in Section 3.2(d) pursuant to
the exercise by the Purchaser of the ▇▇▇▇▇▇▇ Option
and ▇▇▇▇ Option.
(b) PAYMENT OF PURCHASE PRICE - the Purchaser shall pay the
Purchase Price to the Vendors as provided in Sections 3.2,
3.3, 3.6 and 3.7.
(c) TRANSFER AND DELIVERY OF THE PURCHASED SECURITIES - each of
the Vendors shall transfer and deliver to the Purchaser
certificates representing the Purchased Securities held by
such Vendor duly endorsed in blank for transfer, or
accompanied by irrevocable security transfer powers of
attorney duly executed in blank or such other instrument of
transfer as may be required by the Purchaser, in each case by
the holder of record, and the Company shall take such steps as
shall be necessary to enter the Purchaser or its nominee(s)
upon the books of the Company as the holder of the Purchased
Securities held by such Vendor and to issue one or more
certificates to the Purchaser or its nominee(s) representing
the Purchased Securities held by each Vendor as appropriate;
and
(d) OTHER DOCUMENTS - each of the Vendors, the Company and the
Purchaser shall deliver such other documents as may be
reasonably necessary to complete the transactions provided for
in this Agreement.
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2.2 PLACE OF CLOSING
The Closing shall take place at the Closing Time at the offices of Blake,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP located at ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, or at such other place as may be agreed
upon by the Vendors and the Purchaser.
2.3 TENDER
Any tender of documents or money under this Agreement may be made upon the
Parties or their respective counsel and money may be tendered by official bank
draft drawn upon a Canadian chartered bank or by negotiable cheque payable in
Canadian funds and certified by a Canadian chartered bank or trust company or,
with the consent of the Party entitled to payment, by wire transfer of
immediately available funds to the account specified by that Party.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE
The aggregate amount payable by the Purchaser for the Purchased Securities (the
"Purchase Price") shall be the amount of $30,716,301.59, subject to adjustment
as provided for in Section 3.6 and Section 9.6.
3.2 SATISFACTION OF PURCHASE PRICE
The Purchaser shall satisfy the Purchase Price as follows:
(a) in order to purchase the securities listed on Schedule A1, by
delivery of the following:
(i) the cash consideration set out opposite the name of
each Vendor in Schedule A1;
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(ii) the delivery to the Escrow Agent of the Escrowed
Shares in respect of each Vendor being the number of
Escrowed Shares set out opposite the name of each
Vendor in Schedule A1; and
(iii) the delivery to each of the Vendors of the equity
portion of the Purchase Price for the securities
listed on Schedule A1 (less the Escrowed Shares
delivered to the Escrow Agent pursuant to Section
3.2(a)(ii) above) being that number of Hydrogenics
Shares set out opposite the name of such Vendor on
Schedule A1;
(b) in order to purchase the securities listed on Schedule A2, by
delivery of the following:
(i) the delivery to the Escrow Agent of the Escrowed
Shares in respect of each Vendor being the number of
Escrowed Shares set out opposite the name of each
Vendor in Schedule A2;
(ii) the execution and delivery by the Purchaser of a
Warrant in the form attached as Schedule 3.2 in
respect of the securities listed as options or
warrants on Schedule A2;
(iii) the delivery to each of the Vendors of the equity
portion of the Purchase Price for the securities
listed on Schedule A2 (less the Escrowed Shares
delivered to the Escrow Agent pursuant to Section
3.2(b)(i) above) being that number of Hydrogenics
Shares set out opposite the name of such Vendor on
Schedule A2;
(c) in order to purchase each of the ▇▇▇▇▇▇▇ Option and the ▇▇▇▇
Option, by delivery to each of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ of
the following:
(i) the cash consideration set out opposite his name on
Schedule A3; and
- 21 -
(ii) the number of Hydrogenics Shares set forth opposite
his name on Schedule A3; and
(d) in order to exercise the ▇▇▇▇▇▇▇ Option and the ▇▇▇▇ Option
and purchase the securities listed on Schedule A4, by delivery
to ▇▇▇▇▇▇ Trading Ltd. of the following:
(i) the cash consideration set out on Schedule A4; and
(ii) the number of Hydrogenics Shares set forth on
Schedule A4;
and in connection with each purchase and sale provided for in this Section 3.2,
the parties acknowledge and agree that each transaction is to be carried out (to
the extent possible) in accordance with subsection 85(1) or subsection 85(2) of
the Income Tax Act (Canada) and the Purchaser agrees in respect of each
transaction that it will elect pursuant to subsection 85(1) or subsection 85(2)
of the Income Tax Act (Canada) in the prescribed form and within the time
referred to in subsection 85(6) of the Income Tax Act (Canada), at an elected
amount to be determined by the Vendor.
3.3 ESCROWED SHARES
The Escrowed Shares shall be held by the Escrow Agent as security for the
satisfaction, performance and observance by the Vendors of their several
obligations, duties and liabilities under this Agreement in accordance with the
terms of the Escrow Agreement.
3.4 INVENTORY COUNT
As soon as reasonably practicable following December 31, 2002, the Purchaser
shall count and value the Inventories as of such time. The results of the
inventory count shall be used in the preparation of the Closing Date Financial
Statement.
- 22 -
3.5 DELIVERY OF CLOSING DATE FINANCIAL STATEMENT
As soon as reasonably practicable after the Closing Date and in any event not
later than 45 days thereafter, the Company shall prepare in good faith and
deliver to the Vendors and the Purchaser the Closing Date Financial Statement
including a statement of the Closing Net Assets and shall cause the Auditor to
prepare and provide its audit report thereon. A draft of the Closing Date
Financial Statement shall be provided for review and discussion as soon as it is
available and in any event no later than 30 days after the Closing Date. The
Parties shall cooperate fully in the preparation of the Closing Date Financial
Statement.
3.6 ADJUSTMENTS
Unless an Objection Notice is delivered pursuant to Section 3.7, on the 31st day
after delivery by the Purchaser to the Vendors of the Closing Date Financial
Statement the following adjustments shall occur:
(a) if the Closing Net Assets are less than $843,000, then such
aggregate number of Escrowed Shares as have a value equal to
the amount of the difference shall be released to the
Purchaser in accordance with the terms of the Escrow
Agreement.
(b) if the Closing Revenue is less than $5,865,000, then such
aggregate number of Escrowed Shares as have a value equal to
the amount of the difference shall be released to the
Purchaser in accordance with the terms of the Escrow
Agreement.
For the purposes of the foregoing, each Escrowed Share released to the Purchaser
shall be valued in accordance with the terms of the Escrow Agreement.
3.7 OBJECTION TO CLOSING DATE FINANCIAL STATEMENT
(a) DELIVERY OF OBJECTION NOTICE - In the event that any of the
Vendors objects in good faith to any item of the Closing Date
Financial Statement, such Vendor shall so advise the Purchaser
by delivery to the Purchaser and the Escrow Agent of a written
notice (the "Objection Notice") within 30 days after the
delivery to the Vendors of the Closing Date Financial
Statement. The Objection Notice shall set
- 23 -
out the reasons for the Vendor's objection as well as the
amount in dispute and reasonable details of the calculation of
such amount. If an Objection Notice is delivered pursuant to
this Section 3.7 the adjustment referred to in Section 3.6
shall not be made except in accordance with Section 3.7.
(b) RESOLUTION OF DISPUTES - The Purchaser, the Company and the
Auditor shall give the Vendors and their accountants full
access to the Books and Records and work papers of the
Purchaser, the Company and the Auditor used in the preparation
of the Closing Date Financial Statement and shall have
reasonable access to speak to the appropriate representative
of each of the Purchaser, the Company and the Auditor to
enable each Vendor to exercise its rights under this Section.
The Vendors and the Purchaser shall attempt to resolve all of
the items in dispute set out in any Objection Notice within 30
days of receipt of the Objection Notice by the Purchaser and
the Purchaser shall instruct the Auditor to attempt to assist
in that resolution. Any items in dispute not resolved within
such 30 day period shall be referred as soon as possible
thereafter by the Vendors and the Purchaser to the Independent
Auditor. The Independent Auditor shall act as expert and not
as arbitrator and shall be required to determine the items in
dispute that have been referred to it as soon as reasonably
practicable but in any event not later than 30 days after the
date of acceptance of the engagement by the Independent
Auditor of the dispute to it. In making its determination, the
Independent Auditor will only consider the issues in dispute
placed before it. The Vendors and the Purchaser shall provide
or make available, and shall cause the Auditor to provide or
make available, all documents and information as are
reasonably required by the Independent Auditor to make its
determination. The determination of the Independent Auditor
shall be final and binding on the Parties and the Closing Date
Financial Statement shall be (or not be) adjusted in
accordance with such determination.
(c) AUDIT EXPENSES - The fees and expenses of the Auditor in
acting in accordance with this ARTICLE 3 shall be paid by the
Purchaser. The fees and expenses of the Independent Auditor in
acting in accordance with this ARTICLE 3 shall be
- 24 -
paid by the Vendor or Vendors who delivered the Objection
Notice, unless the Independent Auditor disagrees with the
Auditor such that there are changes to the Closing Date
Financial Statements that result in an aggregate change to the
adjustments pursuant to Section 3.6 of greater than 5% of the
total thereof, in which case the Purchaser shall pay such fees
and expenses.
(d) PAYMENT IN ACCORDANCE WITH DETERMINATION - Within five (5)
days after resolution, by agreement of the Parties, of the
dispute which was the subject of the Objection Notice or,
failing such resolution, within five (5) days after the final
determination of the Independent Auditor, the Purchaser may
make a claim against the Escrowed Shares in accordance with
the Escrow Agreement in an amount as agreed to or as
determined by the Independent Auditor.
3.8 DELIVERY OF CASH CONSIDERATION
The aggregate cash consideration payable to the Vendors as contemplated in
Section 3.2 shall be paid by way of wire transfer by the Purchaser on Closing to
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in trust for the Vendors.
3.9 DELIVERY OF EQUITY PORTION OF PURCHASE PRICE
The delivery of the equity portion of the Purchase Price contemplated in Section
3.2 shall be made on Closing by way of direction from the Purchaser to the
Transfer Agent substantially in the form attached as Schedule 3.9 directing the
Transfer Agent to prepare share certificates with applicable legends for
delivery to ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in trust for the Vendors.
3.10 DELIVERY OF ESCROWED SHARES
The delivery of the Escrowed Shares shall be by way of direction from the
Purchaser to the Transfer Agent substantially in the form attached as Schedule
3.10 directing the Transfer Agent to prepare share certificates in the name of
the Escrow Agent representing the aggregate Escrowed Shares for delivery to the
Escrow Agent.
- 25 -
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser the matters as
provided in Schedule 4 hereto and acknowledges that the Purchaser is relying on
such representations and warranties in connection with entering into this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Each of the Vendors hereby represents and warrants to the Purchaser the matters
as provided in Schedule 5 hereto and acknowledges that the Purchaser is relying
on such representations and warranties in connection with entering into this
Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Vendors the matters provided
in Schedule 6 hereto and acknowledges that the Vendors are relying on such
representations and warranties in connection with entering into this Agreement.
ARTICLE 7
NON-WAIVER; SURVIVAL
7.1 NON-WAIVER
No investigations made by or on behalf of the Purchaser at any time shall have
the effect of waiving, diminishing the scope or otherwise affecting any
representation or warranty made by the Vendors in or pursuant to this Agreement.
No waiver of any condition or other provisions, in whole or in part, shall
constitute a waiver of any other condition or provision (whether or not similar)
nor shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
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7.2 NATURE AND SURVIVAL
(a) Subject to subsection (b), all representations, warranties and
covenants contained in this Agreement on the part of each of
the Parties shall survive the Closing, the execution and
delivery under this Agreement of any share or security
transfer instruments or other documents of title to any of the
Purchased Securities and the payment of the consideration for
the Purchased Securities.
(b) Representations and warranties of the Vendors, relating to
"Right to Sell" set out in Section 2 of Schedule 5, and the
representation and warranty of the Purchaser relating to the
valid issuance of the Hydrogenics Shares set out in Section
2(b) of Schedule 6 shall survive indefinitely. Representations
and warranties of the Company shall survive until the
expiration of the period for the Purchaser to bring any claims
for indemnity as set out in Section 9.3. All other
representations and warranties shall only survive for a period
of 24 months from the Closing Date. If no claim shall have
been made under this Agreement against a Party for any
incorrectness in or breach of any representation or warranty
made in this Agreement prior to the expiry of these survival
periods, such Party shall have no further liability under this
Agreement with respect to such representation or warranty.
(c) Notwithstanding the limitations set out in subsection (b), any
Claim which is based on title to the Purchased Securities,
intentional misrepresentation or fraud may be brought at any
time.
ARTICLE 8
OTHER COVENANTS OF THE PARTIES
8.1 CONTRACTUAL HOLD PERIODS
(a) Subject to paragraph (b) below, none of the Vendors shall,
directly or indirectly, sell any of the Hydrogenics Shares,
except as follows:
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(i) each Vendor may sell up to 50% of the Hydrogenics
Shares issued to such Vendor following the expiry of
a period of 12 months from the Effective Date; and
(ii) each Vendor may sell the remaining 50% of the
Hydrogenics Shares issued to such Vendor following
the expiry of 18 months from the Effective Date.
(b) The Vendors may also sell the Hydrogenics Shares as follows:
(i) after the expiry of four months from the Effective
Date, each of ▇▇▇▇▇▇ Trading Ltd. and Ventures West
may each sell on the TSX up to 40,000 Hydrogenics
Shares in any 30 day period provided that such
Hydrogenics Shares are sold in blocks of not less
than 10,000 shares at a price that is greater than or
equal to 100% of the closing price of Hydrogenics
Shares on the TSX on the trading day prior to such
sale;
(ii) after the expiry of four months from the Effective
Date, the Key Executives in the aggregate may sell on
the TSX up to 40,000 Hydrogenics Shares in any 30 day
period provided that such Hydrogenics Shares are sold
in blocks of not less than 8,000 shares at a price
that is greater than or equal to 100% of the closing
price of Hydrogenics Shares on the TSX on the trading
day prior to such sale; and
(iii) ▇▇▇▇▇▇ Trading Ltd. and Ventures West may sell
Hydrogenics Shares in excess of the limitations set
out in (ii) above with the prior written consent of
the Purchaser, such approval not to be unreasonably
withheld, and the Purchaser shall make commercially
reasonable efforts to respond in a timely way to all
such requests;
in which case any Hydrogenics Shares sold shall be equally
divided and sold from the Hydrogenics Shares subject to the 12
and 18 month hold periods set forth in clauses 8.1 (a)(i) and
(ii).
- 28 -
(c) The Vendors understand and acknowledge that upon the original
issuance thereof, and until such time as the same is no longer
required under applicable requirements of the U.S. Securities
Act or applicable state securities laws, certificates
representing Hydrogenics Shares acquired by each of them
pursuant to this Agreement, the Warrants, the ▇▇▇▇▇▇▇ Option
or the ▇▇▇▇ Option, as the case may be, and all certificates
issued in exchange therefor or in substitution thereof, shall
bear a legend substantially in the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE.
THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR
THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN
COMPLIANCE WITH RULE 144 OR RULE 144A UNDER THE SECURITIES
ACT, IF AVAILABLE, OR (D) IN COMPLIANCE WITH ANOTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PROVIDED THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN CANADA. PROVIDED THAT THE COMPANY IS A "FOREIGN
ISSUER" WITHIN THE MEANING OF REGULATION S AT THE TIME OF
SALE, A
- 29 -
NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL
CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM CIBC MELLON
TRUST COMPANY UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO CIBC MELLON
TRUST COMPANY AND THE COMPANY, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.";
provided, that if the securities are being sold in compliance
with Rule 904 of Regulation S, and provided that the Purchaser
is a "foreign issuer" within the meaning of Regulation S at
the time of sale, the legend may be removed by providing a
declaration to the registrar and transfer agent for such
securities, as set forth in Schedule 8.1 hereto (or as the
Purchaser may prescribe from time to time); and provided,
further that, if any such securities are being sold under Rule
144 or Rule 144A under the U.S. Securities Act, the legend may
be removed by delivery to the registrar and transfer agent of
the securities of an opinion of counsel of recognized standing
reasonably satisfactory to the Purchaser, that such legend is
no longer required under applicable requirements of the U.S.
Securities Act or applicable state securities laws;
The Purchaser shall remove, and/or cause the transfer agent
for the security to which the written declaration or opinion
referred to in the legend above relates to remove, the legend
where such written declaration or opinion is delivered to it
or the transfer agent. The Purchaser and the transfer agent
shall be entitled to rely on the representations and warranty
in the written declaration that Rule 904 of Regulation S is
being appropriately relied upon.
(d) The Vendors also understand and acknowledge that upon the
original issuance thereof, and until such time as the same is
no longer required under applicable requirements of applicable
securities laws, certificates representing Hydrogenics
- 30 -
Shares acquired by such Vendors pursuant to this Agreement,
the Warrants, the ▇▇▇▇▇▇▇ Option or the ▇▇▇▇ Option, as the
case may be, and all certificates issued in exchange therefor
or in substitution thereof, shall bear a legend substantially
in the following form:
"UNLESS PERMITTED UNDER APPLICABLE CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE
SECURITIES BEFORE MAY 8, 2003."
(e) Each of the Vendors understands and acknowledges that upon the
original issuance thereof, and until such time as the same is
no longer required under applicable requirements of applicable
securities laws, certificates representing 50% of the
Hydrogenics Shares acquired by such Vendors pursuant to this
Agreement, the Warrants, the ▇▇▇▇▇▇▇ Option or the ▇▇▇▇
Option, as the case may be, and all certificates issued in
exchange therefor or in substitution thereof, shall bear a
legend substantially in the following form:
"PURSUANT TO AN AGREEMENT MADE AS OF JANUARY 7, 2003 BETWEEN
HYDROGENICS CORPORATION AND THE HOLDER HEREOF (THE
"AGREEMENT"), THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE SOLD BY THE HOLDER HEREOF PRIOR TO JANUARY 7, 2004
EXCEPT AS OTHERWISE PERMITTED UNDER THE AGREEMENT."
(f) Each of the Vendors understands and acknowledges that upon the
original issuance thereof, and until such time as the same is
no longer required under of applicable securities laws,
certificates representing 50% of the Hydrogenics Shares
acquired by such Vendors pursuant to this Agreement, the
Warrants, the ▇▇▇▇▇▇▇ Option or the ▇▇▇▇ Option, as the case
may be, and all certificates issued in exchange therefor or in
substitution thereof, shall bear a legend substantially in the
following form:
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"PURSUANT TO AN AGREEMENT MADE AS OF JANUARY 7, 2003 BETWEEN
HYDROGENICS CORPORATION AND THE HOLDER HEREOF (THE
"AGREEMENT"), THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE SOLD BY THE HOLDER HEREOF PRIOR TO JULY 7, 2004
EXCEPT AS OTHERWISE PERMITTED UNDER THE AGREEMENT."
(g) Upon expiry of the contractual hold periods described above,
the Hydrogenics Shares issued to the Vendors will be freely
tradeable in Canada.
(h) The Purchaser shall make commercially reasonable efforts to
respond in a timely way, and shall make all commercially
reasonably efforts as are in its control to cause the Transfer
Agent of the Hydrogenics Shares to respond in a timely way, to
any request to remove from a share certificate either of the
legends described in (e) or (f) to facilitate any sale of
Hydrogenics Shares pursuant to (a) or (b).
8.2 CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion of the sale
and purchase of the Purchased Securities under this Agreement and all actions
and proceedings taken on or prior to the Closing in connection with the
performance by the Parties of their respective obligations under this Agreement,
substantially as set forth in the Closing Agenda, or other evidence as may be
reasonably requested in order to establish the consummation of the transactions
contemplated by this Agreement and the taking of all corporate proceedings in
connection with such transactions shall be provided at the Closing Time.
8.3 CONFIDENTIALITY
(a) After the Closing, each Vendor shall keep confidential all
Personal Information it disclosed to the Purchaser and all
information relating to the Company, except information (other
than Personal Information) which:
(i) is part of the public domain;
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(ii) becomes part of the public domain other than as a
result of a breach of these provisions by the
Vendors;
(iii) was received in good faith after Closing from an
independent Person who was lawfully in possession of
such information free of any obligation of
confidence;
(iv) is released from the provisions of this Agreement by
the written authorization of Purchaser;
(v) is required to be disclosed by any Laws or
Governmental Authority;
(vi) is disclosed in connection with any litigation
between the Parties;
(vii) is disclosed by the Party in connection with
establishing any defence to any Claim; or
(viii) is disclosed by Ventures West to any of its limited
partners.
(b) At all times, each of the Vendors and the Purchaser shall keep
confidential all information disclosed to it, or to a third
party in connection with this transaction, by or on behalf of
the other Party relating to the other Party, except
information which:
(i) is part of the public domain;
(ii) becomes part of the public domain other than as a
result of breach of these provisions;
(iii) can be demonstrated to have been known or available
to them before receipt of such information from the
other Party or independently developed by them;
- 33 -
(iv) was received in good faith from an independent
Person, who was lawfully in possession of such
information free of any obligation of confidence;
(v) is required to be disclosed by any Laws or
Governmental Authority;
(vi) is disclosed in connection with any litigation
between the Parties;
(vii) is disclosed by the Party in connection with
establishing any defence to any Claim; or
(viii) is disclosed by Ventures West to any of its limited
partners.
8.4 PRESERVATION OF RECORDS
The Purchaser shall take all reasonable steps to preserve and keep the records
of the Company delivered to it in connection with the completion of the
transactions contemplated by this Agreement for a period of seven (7) years from
the Closing Date, or for any longer period as may be required by any Laws or
Governmental Authority, and shall make such records available to the Vendors as
may be reasonably required by them in connection with a Claim by any Person,
including the Purchaser against the Vendors relating to this Agreement or the
transactions contemplated herein. The Vendors acknowledge that the Purchaser
shall not be liable to the Vendors in the event of any accidental destruction of
such records, caused otherwise than by the gross negligence of the Purchaser.
8.5 STUB PERIOD RETURNS
The Purchaser shall cause the Company to duly and timely make or prepare all Tax
Returns required to be made or prepared by it and to duly and timely file all
Tax Returns required to be filed by it for any period which ends on or before
the Closing Date and for which Tax Returns have not been filed as of such date.
The Purchaser shall cause the Company to make the election referred to in
subsection 256(9) of the Income Tax Act (Canada), and comparable provisions of
applicable provincial legislation, and to file such election(s) for the
Company's taxation year(s) ending immediately before the Closing Time. The
Purchaser shall also cause the Company to duly and timely make or prepare all
Tax Returns required to be made or prepared by it and to
- 34 -
duly and timely file all Tax Returns required to be filed by it for periods
beginning before and ending after the Closing Date. The Vendors and the
Purchaser shall co-operate fully with each other and make available to each
other in a timely fashion such data and other information as may reasonably be
required for the preparation of any Tax Return of the Company for a period
ending on, prior to or including the Closing Date and shall preserve such data
and other information until the expiration of any applicable limitation period
under any applicable law with respect to Taxes.
8.6 CONSENT TO JURISDICTION
(a) Each of the Parties irrevocably attorns and submits to the
jurisdiction of any Ontario court sitting in Toronto in any
action or proceeding arising out of or related to this
Agreement and irrevocably agrees that all claims in respect of
any such action or proceeding may be heard and determined in
such Ontario court. Each of the Parties irrevocably waives, to
the fullest extent it may effectively do so, the defence of an
inconvenient forum to the maintenance of such action or
proceeding. A final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by
law.
(b) Nothing in this section shall affect the right of the Parties
to bring any action or proceeding against the other Parties or
its property in the courts of any other jurisdiction.
8.7 SECURITIES EXEMPTIONS
Each Vendor acknowledges and agrees that no prospectus has been prepared or
filed by the Purchaser with any securities commission or similar authority in
connection with the delivery of the Hydrogenics Shares in consideration for the
Purchased Securities and that such delivery is conditional upon the transaction
not being subject to, or being exempt from, the prospectus filing requirements
of all applicable securities legislation relating to the sale of such
Hydrogenics Shares. As a result, each Vendor acknowledges that it may be
restricted from using most of the civil remedies available under applicable
securities laws and that the Purchaser may be relieved
- 35 -
from certain obligations that would otherwise apply if a prospectus was provided
under applicable securities laws in connection with the delivery of the
Hydrogenics Shares. Each Vendor shall be solely responsible (and the Purchaser
will in no way be responsible) for compliance with all relevant securities
legislation, regulations and policies concerning any resale of the Hydrogenics
Shares.
8.8 WITHHOLDING TAX
(a) VW7US shall take reasonable steps to obtain and deliver to the
Purchaser a certificate issued by the Minister of National
Revenue under subsection 116(2) or 116(4) of the Income Tax
Act (Canada).
(b) If a certificate is delivered to the Purchaser on or before
the Closing Date, the Purchaser shall be entitled to withhold
from the portion of the Purchase Price payable to VW7US 25% of
the amount (the "Deficiency Amount"), if any, by which such
portion of the Purchase Price exceeds the certificate limit as
defined in subsection 116(2) of the Income Tax Act (Canada)
and fixed by the Minister of National Revenue in such
certificate. The Purchaser shall withhold first from cash
otherwise payable to VW7US and then from Hydrogenics Shares as
to the balance thereof.
(c) If a certificate is not delivered on or before the Closing
Date, the Purchaser shall be entitled to withhold 50% of the
portion of the Purchase Price otherwise payable to VW7US. The
Purchaser shall withhold first from cash otherwise payable to
VW7US and then from Hydrogenics Shares as to the balance
thereof.
(d) If the Purchaser has withheld any amount under the provisions
of paragraphs (b) or (c) above and VW7US delivers to the
Purchaser, after the Closing Date and within 25 days after the
end of the month in which the Closing Date occurs, or such
later date as is consented to in writing by the Canada Customs
and Revenue Agency, such written consent being referred to
herein as a "Comfort Letter", a certificate issued by the
Minister of National Revenue under subsection 116(2) or 116(4)
of the Income Tax Act (Canada), with a certificate limit or
proceeds of
- 36 -
disposition fixed thereon equal to or greater than such
portion of the Purchase Price payable to VW7US, then the
Purchaser shall pay or release forthwith to VW7US any amount
that the Purchaser has withheld and the amount so paid or
released shall be credited to the Purchaser as payment on
account of the Purchase Price.
(e) If the Purchaser has withheld any amount under the provisions
of paragraphs (b) or (c) above and no certificate or Comfort
Letter has been delivered to the Purchaser by VW7US in
accordance with the provisions of paragraph (d) above, then
VW7US shall pay in Canadian dollars to the Purchaser on the
25th day after the end of the month in which the Closing Date
occurs an amount equal to 25% of the Deficiency Amount or the
Purchase Price, as applicable, less any cash proceeds withheld
by the Purchaser. The Purchaser shall forthwith release to
VW7US the Hydrogenics Shares withheld under this Section 8.8
which payment shall be credited to the Purchaser as payment on
account of the portion of the Purchase Price payable to VW7US
and pay the cash withheld and the cash received to the
Receiver General not later than the 30th day after the end of
the month in which the Closing occurs on account of the
Purchaser's liability pursuant to subsection 116(5) of the
Income Tax Act (Canada) and the withheld cash so paid to the
Receiver General shall be credited to the Purchaser as payment
on account of the portion of the Purchase Price payable to
VW7US.
(f) If the Purchaser has withheld any amount under the provisions
of paragraphs (b) or (c) above, a Comfort Letter has been
provided and no certificate has been delivered to the
Purchaser by VW7US in accordance with the provisions of
paragraph (d) above prior to the expiry of such Comfort
Letter, then VW7US shall pay in Canadian dollars to the
Purchaser on the expiry date of such Comfort Letter an amount
equal to 25% of the Deficiency Amount or the Purchase Price,
as applicable, less any cash proceeds withheld by the
Purchaser. The Purchaser shall forthwith release to VW7US the
Hydrogenics Shares withheld under this Section 8.8 which
payment shall be credited to the Purchaser as payment on
account of the portion of the Purchase Price payable to VW7US
and pay the cash
- 37 -
withheld and the cash received to the Receiver General not
later than the date required by such Comfort Letter (or by a
letter revoking or terminating such Comfort Letter) on account
of the Purchaser's liability pursuant to subsection 116(5) of
the Income Tax Act (Canada) and the withheld cash so paid to
the Receiver General shall be credited to the Purchaser as
payment on account of the portion of the Purchase Price
payable to VW7US.
(g) If VW7US has not made the payment required pursuant to the
provisions of paragraphs (e) or (f) above, the Purchaser may,
at its option, on behalf of VW7US, liquidate any Hydrogenics
Shares withheld in accordance with this Section 8.8 at the
expense of VW7US (to the extent such expense is reasonable) in
order to make any of the payments to the Receiver General
described in this Section 8.8, provided that (i) the Purchaser
may liquidate Hydrogenics Shares withheld by it only to the
extent that the cash withheld by it is insufficient to make
any of the payments to the Receiver General described in this
section, (ii) the Purchaser shall use reasonable efforts to
obtain a reasonable arm's length price for such Hydrogenics
Shares and (iii) VW7US will indemnify the Purchaser for any
shortfall in the event the proceeds from liquidation are
insufficient to make required payments to the Receiver
General. Any net liquidation proceeds shall be deemed to be
withheld cash for purposes of paragraph (e) or (f) above.
(h) All amounts and Hydrogenics Shares withheld by the Purchaser
in accordance with this clause shall be paid to and held by
▇▇▇▇▇, ▇▇▇▇▇▇ & Harcourt LLP, in trust, and any cash portion
thereof shall be invested in such manner as VW7US shall from
time to time direct in writing until paid to VW7US or the
Receiver General in accordance with this Section 8.8 All
interest earned on any amounts held by ▇▇▇▇▇, ▇▇▇▇▇▇ &
Harcourt LLP shall be for the account of VW7US. ▇▇▇▇▇, ▇▇▇▇▇▇
& Harcourt LLP shall be entitled to withhold from interest
earned on such amounts any and all amounts required to be
withheld and remitted from such interest by any Law and to
remit same to the appropriate Governmental Authority. All
interest earned, other than amounts required to be withheld
and
- 38 -
remitted from such interest by any Law, shall be paid to VW7US
concurrently with the payment of any other amounts to VW7US or
the Receiver General.
8.9 CONTINUED LISTING ON TSX
The Purchaser covenants and agrees with the Vendors that, until such time as all
of the Hydrogenics Shares issued to the Vendors hereunder are freely-tradeable
in the United States and the Purchaser, at its own cost and expense, has caused
the removal of the legend set forth in Section 8.1(c) from Hydrogenics Shares,
as applicable, the Purchaser shall take all commercially reasonable steps under
its control to ensure Hydrogenics Shares will remain listed on the Toronto Stock
Exchange. Notwithstanding the foregoing, this covenant shall no longer apply in
the event that a Person acquires by any means more than 90% of the issued and
outstanding Hydrogenics Shares. For greater certainty, the foregoing shall not
require the Purchaser to pay for the removal of a legend set forth in Section
8.1(c) from Hydrogenics Shares if such removal is required by the Vendor under
Section 8.1(c).
8.10 OFFER TO MINOR VENDORS
The Purchaser covenants and agrees that as soon as practicable after closing it
will make an offer to all securityholders of the Company to purchase their
securities on substantially the same terms set forth herein.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE VENDORS
Subject to the limitations as to amount set out below, each of the Vendors shall
indemnify and save harmless the Purchaser, its directors, officers, agents,
employees and shareholders (in this Section collectively referred to as the
"Indemnified Parties") on an after-Tax basis, from and against all Claims which
may be made or brought against the Indemnified Parties, or which they may suffer
or incur, directly or indirectly as a result of or in connection with:
- 39 -
(a) any incorrectness or breach of any representation or warranty
of the Company contained in this Agreement;
(b) any non-fulfilment of any covenant or agreement on the part of
such Vendor under this Agreement; or
(c) any incorrectness in or breach of any representation or
warranty of such Vendor contained in this Agreement.
9.2 INDEMNIFICATION BY THE PURCHASER
The Purchaser shall indemnify and save harmless the Vendors, their directors,
officers, employees, agents (in this section collectively referred to as the
"Indemnified Parties"), on an after-Tax basis, from and against all Claims which
may be made or brought against the Indemnified Parties, or which they may suffer
or incur, directly or indirectly as a result of or in connection with:
(a) any non-fulfilment of any covenant or agreement on the part of
the Purchaser under this Agreement;
(b) any incorrectness in or breach of any representation or
warranty of the Purchaser contained in this Agreement.
9.3 LIMITATION PERIODS
The obligation of indemnification set out in Section 9.1 above shall apply only
to Claims brought by the Purchaser as follows:
(a) Claims made pursuant to Section 9.1(a) may be brought:
(i) at any time in respect of Claims based on
representations or warranties of the Company relating
to Environmental matters set out in Section 31 of
Schedule 4 or Competition Act Assets and Revenues in
Section 10 of Schedule 4;
- 40 -
(ii) within 90 days after the relevant authorities shall
no longer be entitled to assess liability against the
Company in respect of Claims based on representations
or warranties of the Company relating to or impacted
by Tax matters, including those set out in Section 40
of Schedule 4 arising in or in respect of a
particular period ending on, before or including the
Effective Date; or
(iii) within 24 months of the Closing Date in respect of
any other Claims based on representations or
warranties of the Company.
(b) Claims made pursuant to Sections 9.1(b) or 9.1(c) above shall
be subject to the limitations contained in Section 7.2
respecting the survival of the representations and warranties.
(c) Claims made pursuant to Section 9.2 shall be subject to the
limitations contained in Section 7.2 respecting the survival
of the representations and warranties.
9.4 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS
(a) In respect of Claims made by the Purchaser pursuant to Section
9.1(a):
(i) the liability of each of the Vendors in relation to
any such Claim shall extend only to such Vendor's
Proportionate Share of the aggregate liability under
such Claim;
(ii) the aggregate liability of each of the Vendors for
all Claims under Section 9.1(a) shall not exceed an
amount equal to such Vendor's Proportionate Share of
20% of the Purchase Price; and
(iii) none of the Vendors shall be required to pay any
amount in respect of any such Claims until the
aggregate amount of all such Claims against Vendors
exceeds $100,000 and, subject to the limitations set
out in (i) and (ii) above, upon the aggregate amount
of such Claims against Vendors
- 41 -
exceeding $100,000 each of the Vendors shall be
required to pay the full amount or the full amount of
their Proportionate Share, as applicable, in respect
of all of such Claims.
(b) The aggregate liability of each of the Vendors for all Claims
pursuant to Section 9.1 shall not exceed such Vendor's
Proportionate Share of the Purchase Price.
(c) The aggregate liability of the Purchaser to each of the
Vendors for all Claims pursuant to Section 9.2 shall not
exceed such Vendor's Proportionate Share of the Purchase
Price.
(d) The limitations provided under Section 9.4(a) shall not apply
to any Claims based on intentional misrepresentation or fraud
except that:
(i) the liability of Ventures West for any Claim based on
intentional misrepresentation or fraud of the Company
shall not exceed their Proportionate Share of 20% of
the Purchase Price except to the extent they were
aware or had knowledge of such intentional
misrepresentation or fraud; and
(ii) Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇'▇ liability for
any Claim based on intentional misrepresentation or
fraud of the Company shall not exceed his
Proportionate Share of 20% of the Purchase Price
unless he was aware or had knowledge of such
intentional misrepresentation or fraud or it relates
to matters which occurred while he was employed by
the Company.
(e) The Purchaser's sole recourse for Claims made pursuant to
Section 9.1(a) against each Vendor shall be limited to the
Escrowed Shares owned by such Vendor while such Escrowed
Shares are held by the Escrow Agent. For further
clarification, the Purchaser may not seek any recourse against
any of the consideration paid to such Vendor other than the
Escrowed Shares while such
- 42 -
Escrowed Shares are held by the Escrow Agent nor any other
assets of the Vendor;
(f) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇▇▇ Family Trust shall be
jointly and severally liable for all Claims made against
either of them pursuant to Section 9.1;
(g) ▇▇▇▇▇ ▇▇▇▇▇ and the Sedun Family Trust shall be jointly and
severally liable for all Claims made against either of them
pursuant to Section 9.1.
9.5 INDEMNIFICATION PROCEDURES FOR THIRD PARTY CLAIMS
(a) In the case of Claims made by a third party with respect to
which indemnification is sought, the Party seeking
indemnification (in this Section, the "Indemnified Party")
shall give prompt notice, and in any event within 20 days, to
the other Party (in this Section, the "Indemnifying Party") of
any such Claims made upon it. If the Indemnifying Party fails
to give such notice, such failure shall not preclude the
Indemnified Party from obtaining such indemnification but its
right to indemnification may be reduced to the extent that
such delay prejudiced the defence of the Claim or increased
the amount of liability or cost of defense and provided that
no claim for indemnity in respect of the breach of any
representation or warranty contained in this Agreement may be
made unless notice of such Claim has been given prior to the
expiry of the survival period applicable to such
representation and warranty pursuant to Section 7.2.
(b) The Indemnifying Party shall have the right, by notice to the
Indemnified Party given not later than 30 days after receipt
of the notice described in subsection (a), to assume the
control of the defence, compromise or settlement of the Claim,
provided that such assumption shall, by its terms, be without
cost to the Indemnified Party and provided the Indemnifying
Party acknowledges in writing its obligation to indemnify the
Indemnified Party in accordance with the terms contained in
this Section in respect of that Claim.
- 43 -
(c) Upon the assumption of control of any Claim by the
Indemnifying Party as set out in subsection (b), the
Indemnifying Party shall diligently proceed with the defence,
compromise or settlement of the Claim at its sole expense,
including if necessary, employment of counsel reasonably
satisfactory to the Indemnified Party and, in connection
therewith, the Indemnified Party shall co-operate fully, but
at the expense of the Indemnifying Party with respect to any
out-of-pocket expenses incurred, to make available to the
Indemnifying Party all pertinent information and witnesses
under the Indemnified Party's control, make such assignments
and take such other steps as in the opinion of counsel for the
Indemnifying Party are reasonably necessary to enable the
Indemnifying Party to conduct such defence. The Indemnified
Party shall also have the right to participate in the
negotiation, settlement or defence of any Claim at its own
expense.
(d) The final determination of any Claim pursuant to this Section,
including all related costs and expenses, shall be binding and
conclusive upon the Parties as to the validity or invalidity,
as the case may be, of such Claim against the Indemnifying
Party.
(e) If the Indemnifying Party does not assume control of a Claim
as permitted in subsection (b), the Indemnified Party shall be
entitled to make such settlement of the Claim as in its sole
discretion may appear advisable, and such settlement or any
other final determination of the Claim shall be binding upon
the Indemnifying Party.
9.6 TAX STATUS OF INDEMNIFICATION PAYMENTS
Any payment made by the Vendors as an Indemnifying Party pursuant to this
ARTICLE 9 shall constitute a reduction of the Purchase Price and any payment
made by the Purchaser as an Indemnifying Party pursuant to this ARTICLE 9 shall
constitute an increase in the Purchase Price. In either case, each of the
Vendors and the Purchaser shall, within a reasonable time of payment and receipt
of such payment, as applicable, and in any event within two (2) months of
- 44 -
such payment, request all amendments to its current or past Tax Returns as may
be necessary to reflect the foregoing.
9.7 ESCROWED SHARES
For so long as the Escrowed Shares remain in escrow, upon notice to the Vendors
of any Claim pursuant to Section 9.1 the Purchaser may make a claim against the
Escrowed Shares in accordance with the Escrow Agreement. Subject to Section
9.4(e), neither the exercise nor failure to exercise such right shall constitute
an election of remedies or limit the remedies available to the Purchaser in the
enforcement of its rights under this Agreement.
ARTICLE 10
GENERAL
10.1 PUBLIC NOTICES
The Parties shall jointly plan and co-ordinate any public notices, press
releases, and any other publicity concerning the transactions contemplated by
this Agreement and no Party shall act in this regard without the prior approval
of the other, such approval not to be unreasonably withheld unless such
disclosure is required to meet timely disclosure obligations of any Party under
applicable Laws and stock exchange rules in circumstances where prior
consultation with the other Party is not practicable and a copy of such
disclosure is provided to the other Party.
10.2 EXPENSES
Except as otherwise provided in this Agreement, each Party shall pay all costs
and expenses (including the fees and disbursements of legal counsel and other
advisers) it incurs in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated by this Agreement,
except that the Purchaser shall pay, or cause the Company to pay, the Company's
Transaction Expenses, up to an aggregate maximum amount of $700,000.
10.3 NOTICES
Any notice, consent or approval required or permitted to be given in connection
with this Agreement (in this Section referred to as a "NOTICE") shall be in
writing and shall be sufficiently
- 45 -
given if delivered (whether in person, by courier service or other personal
method of delivery), or if transmitted by facsimile:
(a) in the case of a Notice to the Vendors at the address set out
for each Vendor in Schedule 10.3:
(b) in the case of a Notice to the Purchaser at:
Hydrogenics Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇, ▇▇▇▇▇▇ & Harcourt LLP
Box ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) in the case of Notice to the Company:
Greenlight Power Technologies, Inc.
Unit C-▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Suite 2600, Three Bentall Centre
Box 49314
Vancouver, British Columbia V7X 1L3
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
- 46 -
Any Notice delivered or transmitted to a Party as provided above shall be deemed
to have been given and received on the day it is delivered or transmitted,
provided that it is delivered or transmitted on a Business Day prior to 5:00
p.m. local time in the place of delivery or receipt. However, if the Notice is
delivered or transmitted after 5:00 p.m. local time or if such day is not a
Business Day then the Notice shall be deemed to have been given and received on
the next Business Day.
Any Party may, from time to time, change its address by giving Notice to the
other Parties in accordance with the provisions of this Section.
10.4 INTEREST ACT DISCLOSURE
For purposes of disclosure under the Interest Act (Canada), the equivalent
yearly rate of interest for any rate of interest calculated under this Agreement
on any basis other than a full calendar year, may be determined by multiplying
such rate by a fraction the numerator of which is the number of days in the
calendar year and the denominator of which is the number of days comprising such
other basis.
10.5 ASSIGNMENT
No party may assign this Agreement or any rights or obligations under this
Agreement without the prior written consent of each of the other Parties.
10.6 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective successors (including any successor by reason of amalgamation
of any Party), executors, administrators and permitted assigns.
10.7 AMENDMENT
No amendment, supplement, modification or waiver or termination of this
Agreement and, unless otherwise specified, no consent or approval by any Party,
shall be binding unless executed in writing by the Party to be bound thereby.
- 47 -
10.8 FURTHER ASSURANCES
The Parties shall, with reasonable diligence, do all such things and provide all
such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by any other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out its
provisions, whether before or after the Closing.
10.9 INDEPENDENT LEGAL ADVICE
Each Vendor acknowledges and agrees that ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP is acting
solely as counsel to the Company and is not counsel to, nor has it or will it
give any advice to, such Vendor with respect to this Agreement or the
transactions contemplated by this Agreement. Such Vendor also acknowledges and
agrees that the Company has recommended that the Vendor obtain independent legal
advice with respect to this Agreement and the transactions contemplated by this
Agreement.
10.10 ATTORNMENT
For the purpose of all legal proceedings this Agreement will be deemed to have
been performed in the Province of Ontario and the courts of the Province of
Ontario will have jurisdiction to entertain any action arising under this
Agreement. Each of the parties hereby attorns to the jurisdiction of the courts
of the Province of Ontario.
10.11 EXECUTION AND COUNTERPARTS
This Agreement may be executed by the Parties in counterparts and may be
executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
[REMAINDER OF ▇▇▇▇ LEFT INTENTIONALLY BLANK]
- 48 -
IN WITNESS OF WHICH the Parties have executed this Agreement.
GREENLIGHT POWER TECHNOLOGIES, INC.
By: _________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
HYDROGENICS CORPORATION
By: _________________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice-President, Corporate Affairs
and Corporate Secretary
VENTURES WEST 7 LIMITED PARTNERSHIP
BY ITS GENERAL PARTNER VENTURES WEST 7
MANAGEMENT LTD.
By: _________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: _________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice-President
VENTURES WEST 7 U.S. LIMITED
PARTNERSHIP BY ITS MANAGER VENTURES WEST 7
MANAGEMENT (INTERNATIONAL) INC.
By: _________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: _________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice-President
- 49 -
▇▇▇▇▇▇ TRADING LTD.
By:__________________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President
SIGNED, SEALED & DELIVERED
In the presence of:
___________________________________ ________________________________________
Witness ▇▇▇▇▇ ▇▇▇▇▇▇
SIGNED, SEALED & DELIVERED
In the presence of:
___________________________________ ________________________________________
Witness ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
SIGNED, SEALED & DELIVERED
In the presence of:
___________________________________ ________________________________________
Witness ▇▇▇▇▇ ▇▇▇▇▇
SIGNED, SEALED & DELIVERED
In the presence of:
___________________________________ ________________________________________
Witness ▇▇▇▇▇ ▇▇▇▇▇▇▇
SIGNED, SEALED & DELIVERED
In the presence of:
___________________________________ ________________________________________
Witness ▇▇▇▇▇ ▇▇▇▇
SEDUN FAMILY TRUST
By: ____________________________________
▇▇▇▇▇ ▇▇▇▇▇
By: ____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
- 50 -
▇▇▇▇▇▇▇▇▇▇ FAMILY TRUST
By: ____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By: ____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
SCHEDULE A
LIST OF MAJOR VENDORS AND SECURITIES HELD
-------------------------------------------------------------------------------------------------------------
Vendor Purchased Securities * Purchase Price Proportionate Share
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 642,646 Shares $ 2,542,364.89 8.2780%
350,000 Options
▇▇▇▇▇▇▇ Option
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ 642,646 Shares $ 2,542,364.89 8.2780%
350,000 Options
▇▇▇▇ Option
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 2,242,392 Shares $ 5,003,840.66 16.2901%
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 1,203,497 Shares $ 2,685,571.08 8.7429%
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 1,203,497 Shares $ 2,685,571.08 8.7429%
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇ Family Trust 1,038,895 Shares $ 2,318,268.38 7.5472%
-------------------------------------------------------------------------------------------------------------
Sedun Family Trust 1,038,895 Shares $ 2,318,268.38 7.5472%
-------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Trading Ltd. 1,400,300 Shares $ 1,770,104.28 5.7626%
-------------------------------------------------------------------------------------------------------------
Ventures West 7 Limited 3,193,446 Shares $ 8,074,810.71 26.2877%
Partnership 798,361 Series 1 Warrants
798,361 Series 2 Warrants
-------------------------------------------------------------------------------------------------------------
Ventures West 306,554 Shares $ 775,137.24 2.5235%
7 U.S. Limited Partnership 76,639 Series 1 Warrants
76,639 Series 2 Warrants
-------------------------------------------------------------------------------------------------------------
Total 12,912,768 Shares $30,716,301.59 100%
700,000 Options
875,000 Series 1 Warrants
875,000 Series 2 Warrants
-------------------------------------------------------------------------------------------------------------
* "Shares" means common shares in the capital of the Company;
"Options" means options granted pursuant to the employee stock option
plan of the Company;
"Series 1 Warrants" means warrants, expiring April 4, 2005, exercisable
for common shares of the Company at an exercise price of $2.00 per
share; and
"Series 2 Warrants" means warrants, expiring April 4, 2005, exercisable
for common shares of the Company at an exercise price of $4.00 per
share.
SCHEDULE A1
SECURITIES PURCHASED FOR CASH, ESCROWED SHARES AND SHARES
--------------------------------------------------------------------------------------------------
PURCHASED ESCROWED HYDROGENICS
VENDOR SECURITIES CASH SHARES SHARES
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 162,804 Options $ 200,488.47 Nil Nil
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ 162,804 Options $ 200,488.47 ▇▇▇ ▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 2,199,900 Shares $ 538,875.22 158,024 Shares 496,190 Shares
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 1,161,005 Shares $ 289,214.60 84,812 Shares 259,730 Shares
--------------------------------------------------------------------------------------------------
The ▇▇▇▇▇▇▇▇▇▇ Family 1,038,895 shares $ 249,659.42 73,212 Shares 236,460 Shares
Trust
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 1,161,005 Shares $ 289,214.60 84,812 Shares 259,730 Shares
--------------------------------------------------------------------------------------------------
The Sedun Family Trust 1,038,895 Shares $ 249,659.42 73,212 Shares 236,460 Shares
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Trading Ltd. 300,300 Shares $ 72,169.42 55,900 Shares 33,612 Shares
--------------------------------------------------------------------------------------------------
Ventures West 7 Limited 3,193,446 Shares $ 869,595.71 255,006 Shares 823,619 Shares
Partnership
798,361 Series 1
Warrants
798,361 Series 2
Warrants
--------------------------------------------------------------------------------------------------
Ventures West 7 U.S. 306,554 Shares $ 83,476.68 24,479 Shares 79,063 Shares
Limited Partnership
76,639 Series 1
Warrants
76,639 Series 2
Warrants
--------------------------------------------------------------------------------------------------
TOTAL 325,608 OPTIONS $3,042,842.01 809,457 SHARES 2,424,864 SHARES
10,400,000 SHARES
875,000 SERIES 1
WARRANTS
875,000 SERIES 2
WARRANTS
--------------------------------------------------------------------------------------------------
SCHEDULE A2
SECURITIES PURCHASED FOR WARRANTS, ESCROWED SHARES AND SHARES
---------------------------------------------------------------------------------------------------------
PURCHASED ESCROWED HYDROGENICS
VENDOR SECURITIES WARRANTS SHARES SHARES
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 187,196 Options Warrant exercisable Nil Nil
for 34,509 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 642,646 Shares Nil 80,302 Shares 134,376 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ 187,196 Options Warrant exercisable Nil Nil
for 34,509 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ 642,646 Shares Nil 80,302 Shares 134,376 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 42,492 ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ 14,194 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 42,492 ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ 14,194 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 42,492 Shares ▇▇▇ ▇▇▇ 14,194 Shares
---------------------------------------------------------------------------------------------------------
TOTAL 1,412,768 SHARES WARRANTS EXERCISABLE 160,604 SHARES 311,334 SHARES
FOR 69,018 SHARES
374,392 OPTIONS
---------------------------------------------------------------------------------------------------------
SCHEDULE A3
SECURITIES PURCHASED FOR CASH, ESCROWED SHARES AND SHARES
---------------------------------------------------------------------------------------------------------
PURCHASED ESCROWED HYDROGENICS
VENDOR SECURITIES CASH SHARES SHARES
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Contract $ 72,940.94 Nil 90,474 Shares
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Contract $ 72,940.94 Nil 90,474 Shares
---------------------------------------------------------------------------------------------------------
TOTAL ▇▇▇▇▇▇ CONTRACTS $145,881.88 NIL 180,948 SHARES
---------------------------------------------------------------------------------------------------------
SCHEDULE A4
SECURITIES PURCHASED FOR CASH, ESCROWED SHARES AND SHARES
---------------------------------------------------------------------------------------------------------
PURCHASED ESCROWED HYDROGENICS
VENDOR SECURITIES CASH SHARES SHARES
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Trading Ltd. 1,100,000 Shares $118,462.22 Nil 146,936 Shares
purchased under
▇▇▇▇▇▇ Contract
---------------------------------------------------------------------------------------------------------
TOTAL 1,100,000 SHARES $118,462.22 NIL 146,936 SHARES
---------------------------------------------------------------------------------------------------------