APPLICATION SOFTWARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 22 day of December 1997 (the "Effective
Date").
BETWEEN:
[AGENT], an individual having a business address at
[AGENT'S ADDRESS], Fax [AGENT'S FAX] ("Agent"), as agent acting on behalf of
[PURCHASER 3] and [PURCHASER 4] as joint venturers (each with an undivided
50% interest), and with authority delegated to him to enter into this
Agreement;
OF THE FIRST PART AND
ALYA INTERNATIONAL, INC., a Delaware corporation, having a business
address at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax No.
(▇▇▇) ▇▇▇-▇▇▇▇ (hereinafter referred to as "Alya")
OF THE SECOND PART
WHEREAS:
1. Alya is the legal and beneficial owner of the Purchased Assets; and
2. The Agent as purchaser herein, is acting as agent on behalf of the Joint
Venturers, with all necessary authority delegated to him to enter into this
Agreement; and
3. Alya has agreed to sell and assign the Purchased Assets to Agent, as agent
on behalf of the Joint Venturers, for use in the Territory, and Agent has
agreed to purchase the Purchased Assets on behalf of the Joint Venturers on
the terms and conditions hereinafter set forth and contained.
NOW THEREFORE in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions shall have the following meanings:
a. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in Schedule A to this Agreement together with
Enhancements;
b. "Asset Valuation Report" means the software valuation dated as of December
22, 1997, prepared for Agent by [APPRAISER];
c. "Assigned Notes" means those promissory notes from [NOTEMAKER] with
outstanding principal balances of Cdn.$190,000 and Cdn.$57,000,
respectively, or an aggregate outstanding balance of approximately
Cdn.$247,000.
d. "Closing" has the meaning set out in Section 7.1;
e. "Closing Date" means December 22, 1997, or such other date as the parties
may agree;
f. "Confidential Information" of a party (the "Disclosing Party") shall mean
information of a confidential and proprietary nature relative to the
Disclosing Party or its business and other matters deemed confidential and
proprietary by the Disclosing Party, written notice of which is given to
the party receiving such information (the "Receiving Party"); provided
that the terms and subject matter of this Agreement and the Management
Agreement, including the Application Software and the Purchased Assets, are
deemed to be confidential without the need for written notice and shall at
all times remain confidential, notwithstanding the exception to
confidentiality noted in the next sentence. "Confidential Information" of
the Disclosing Party shall not include:
i. written information not clearly marked as confidential or oral
disclosures not subsequently confirmed in writing as confidential;
ii. information which the Receiving Party can demonstrate
A. was published or generally known in the industry at the time of
its disclosure by the Disclosing Party, or became published or
generally known in the industry without
breach of this Agreement by the Receiving Party;
B. was known to the Receiving Party at the time of disclosure by the
Disclosing Party, independently of the Disclosing Party and
without breach of an obligation of confidentiality to the
Disclosing Party;
C. is disclosed to the Receiving Party by a third party which had a
right to disclose such information and was not in breach of an
obligation of confidentiality to the Disclosing Party;
D. is independently developed by the Receiving Party without use,
directly or indirectly, of any Confidential Information of the
Disclosing Party; or
E. information required to be disclosed pursuant to applicable law,
regulation, judicial or administrative order, lawful subpoena or
enforceable discovery demand, provided the Receiving Party uses
commercially reasonable efforts to obtain confidential treatment
of such information and further provided that the Disclosing
Party receives prior written notice of any pending disclosure,
with sufficient time to protest disclosure or seek an adequate
protective order.
g. "Customers" means any person using or distributing the Security System in
the Territory;
h. "Documentation" has the meaning specified in Subsection v. of the
definition of Purchased Assets;
i. "Enhancement" means any improvement, revision or other modification made
to, or replacement of, the Application Software by Alya or any other
person, to be utilized in connection with providing the Security System,
including, without limitation, any improvement, revision or other
modification which is necessary:
i. to provide Customers with then current Application Software; or
ii. to maintain the Application Software and/or the Security System as a
state of the art or industry leading technology,
including, without limitation, the changes set out in Appendix A.1 to
Schedule A to the extent that the
manager pursuant to the Management Agreement, acting reasonably, continues
to believe that they are commercially reasonable in light of then current
market conditions and technical developments;
j. "Infringement Claims" has the meaning specified in Subsection 5.1.b.;
k. "Intellectual Property" has the meaning specified in Subsection iv. of the
definition of Purchased Assets";
l. "Joint Venturers" means [PURCHASER 3]and [PURCHASER 4], as joint venturers,
each with an undivided fifty percent (50%) interest in the Purchased
Assets.
m. "Letter of Representation" means a letter from Alya to [APPRAISER] in
substantially the form attached as Schedule B;
n. "Management Agreement" means the Management and Marketing Agreement to be
entered into by Joint Venturers and Alya on Closing for the management and
marketing of the Purchased Assets;
o. "Note" means the two 6.0% Secured Term Notes (one for each of the Joint
Venturers), each secured by a Joint Venturers' undivided 50% interest in
the Purchased Assets, in substantially the form attached as Schedule D;
p. "Originality Certificate" means the Officer's Certificate in the form
attached as Schedule C;
q. "Purchase Price" has the meaning specified in Section 2.1;
r. "Purchased Assets" means the right to exclusively own, utilize, modify and
develop the Application Software solely within the Territory and to
exclusively distribute, market and sell the Application Software as
incorporated in the Security System, solely within the Territory, and to
own and utilize all of Alya's property and rights necessary for the
operation of, or the realization of benefits from, the Application Software
solely within the Territory, including, without limitation:
i. all products associated with or derivatives of the Application
Software;
ii. the benefit of all agreements necessary for the operation of, or the
realization of the benefit from, the Application Software within the
Territory, including, without limitation, a perpetual, non-exclusive,
royalty free right to use, modify, develop, license and distribute
within the Territory the OPEN cortex platform software, as described
in Schedule F hereto, and any modification or revision thereto, solely
in connection with the Application Software and the Security Systems,
all service agreements and third party license agreements and all
marketing and product business plans;
iii. all inventions necessary for the ownership of, or realization of the
benefit from, the Application Software solely within the Territory,
including, without limitation, ideas, research, discoveries, designs,
systems, patterns, specifications, technology, know-how, formulae,
confidential information, data, computer software development tools,
operating systems, source code, object code, subroutines, algorithms,
methods and processes;
iv. all intellectual property rights necessary for the ownership of, or
realization of the benefit from, the Application Software solely
within the Territory, including, without limitation, patents,
trademarks, copyrights and trade secrets and applications for and the
right to apply for any intellectual property (the items listed in
paragraph (iii) and (iv) are hereinafter collectively referred to as
the "Intellectual Property"); and
v. copies of all records, documents (including, without limitation, user
documentation and source code listings), correspondence, notes and
rights related to the foregoing ("Documentation");
s. "Purchase Price" has the meaning set out in Section 2.1;
t. "Section" means any section, subsection, article, clause, subclause,
paragraph or subparagraph of this Agreement;
u. "Security Agent Agreement" means the Security Agent Agreement to be entered
into by Alya, Joint Venturers and Burnet, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, as security
agent, on the Closing, for the purpose of holding the Purchased Assets
pursuant to the terms thereof;
v. "Security System" means the building access control system developed by
Alya and known as the O.P.E.N.centrix-Open Platform for Essential Network,
which includes, without limitation, the Application Software, the firmware
containing the Application Software and the O.P.E.N.cortex platform
software; and
w. "Territory" means Canada.
1.2 INTERPRETATION
a. The terms "this Agreement", "hereof", "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or
other portion of this Agreement and include any agreement amending or
supplementing this Agreement. Unless something in the subject matter or
context is inconsistent therewith, reference herein to Sections and
Subsections are to Sections and Subsections of this Agreement.
b. Except as specifically stated in this Agreement, all references to currency
are to Canadian dollars.
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires.
d. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
1.3 SCHEDULES
The following schedules are incorporated into and made part of this
Agreement:
Schedule A - Application Software Specifications
Schedule B - Letter of Representation
Schedule C - Originality Certificate
Schedule D - Form of Note
Schedule E - Exceptions to the representations and warranties set out in
Article 4, if any.
Schedule F - Description of O.P.E.N.cortex platform
ARTICLE 2
AGREEMENT TO SELL, ASSIGN AND PURCHASE
2.1 Alya hereby sells, assigns and transfers all its right, title and interest
in the Purchased Assets to Agent on behalf of the Joint Venturers and Agent
on behalf of the Joint Venturers hereby purchases the entire right, title
and interest of Alya therein, as of the Effective
Date, at and for Three Million Canadian Dollars (Cdn.$3,000,000)(the
"Purchase Price") payable and allocated in accordance with Article 3
hereof.
2.2 The parties agree that the fair market value of the Purchased Assets is
equal to the Purchase Price and agree that this determination and the
allocation set out in Article 3 hereof is final and conclusive between
them.
ARTICLE 3
PURCHASE PRICE AND PAYMENT
3.1 The Purchase Price will be payable partly in cash and partly by execution
and delivery of the Note for the balance of the Purchase Price as follows:
a. Cdn.$285,000 on Closing, by wire transfer, by Agent on account of
[PURCHASER 4], and Cdn.$38,000 on Closing, by Wire transfer, by Agent on
account of [PURCHASER 3];
b. Cdn.$247,000 on Closing, by delivery of the Assigned Notes, duly endorsed
and payable to Alya or its designee; and
c. Cdn.$2,430,000 on Closing by execution and delivery of the Note.
3.2 Agent will deduct and remit any withholding tax required to be deducted
and remitted in connection with any payment made under Section 3.1.
3.3 Agent will not be responsible for any taxes, levies or other similar
assessments including, without limitation, sales or use taxes payable in
connection with the purchase and sale contemplated by this Agreement, if
any.
3.4 The Purchase Price shall be allocated:
a. As to the Application Software described in Schedule A to this Agreement,
the amount of Two Million Nine Hundred Ninety Nine Thousand Canadian
Dollars (Cdn.$2,999,000); and
b. As to the balance of the Purchased Assets, the amount of One Thousand
Canadian Dollars (Cdn.$1,000).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF ALYA
Alya hereby, undertakes, represents and warrants to Agent and each of
the Joint Venturers at the date hereof and at the Closing Date, and
acknowledges that Agent and each of the Joint Venturers is relying on such
undertakings, representations and warranties that:
a. Alya is a corporation (i) duly incorporated and organized, validly
subsisting and in good standing under the laws of the jurisdiction of its
incorporation; (ii) duly authorized, with necessary and sufficient permits
and licenses to enable it to own its properties and to carry on its
business as presently owned and carried on by it; and (iii) having the
power and authority and right to enter into this Agreement and each and
every agreement and document to be executed and delivered by it pursuant
hereto and to perform each of its obligations as therein and herein
contained;
b. Alya has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other documents
contemplated hereby;
c. this Agreement constitutes the legal, valid and binding obligation of Alya,
enforceable against it in accordance with its terms;
d. neither execution nor delivery of this Agreement and each and every other
agreement executed and delivered by Alya pursuant hereto nor the
fulfillment or compliance with any of the terms hereof or thereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, the articles and by-laws, as amended, of
Alya or any material agreement or instrument to which Alya is subject or
will require any consent or other action by any person or administrative or
governmental body;
e. Alya now has and on the Closing Date will have good and marketable title,
free and clear of any and all claims, liens, encumbrances, mortgages,
security interests and charges, licenses or rights of other persons
whatsoever to all of the Purchased Assets except as set out in Subsection
4.1 e. of Schedule E;
f. there are no agreements or contracts or other documents pertaining to the
acquisition or development of the
Purchased Assets except as set out in Subsection 4.1 f. of Schedule E,
copies of which have been delivered to Agent and its counsel;
g. the individuals involved in the development of the Application Software,
the Purchased Assets or any element thereof, are or were:
i. employees of Alya Systems, Inc. ("Alya Systems") who worked within the
scope of their employment to develop the Application Software, the
Purchased Assets, or any element thereof, and who executed a written
waiver of their moral rights in the copyright to the foregoing in
favor of Alya Systems; or
ii. independent contractors or employees of independent contractors.
Except as set forth in subsection 4.1g of Schedule E, each contractor
was subject to agreements assigning their interest, if any, in the
Application Software, Purchased Assets, or any element thereof to Alya
Systems and executed a written waiver of their moral rights in the
copyright to the foregoing in favor of Alya. Copies of ALYA System's
standard Employee Invention Assignment and Confidentiality Agreement
and Consultant Invention Assignment and Confidentiality Agreement are
attached to Schedule E;
h. the Application Software does not contain any third party software.
However, certain third party software is required to operate the
Application Software and Alya has licenses for such third party software
which allow Alya to market such software, directly or indirectly through
sublicensees, as part of the Application Software and Alya will maintain
such licenses in good standing for the benefit of the Joint Venturers.
None of the third party software is custom software developed specifically
for use with the Application Software. All of the third party software is
readily available in the open market and capable of being obtained by the
Agent in the event a license terminates, or if the particular software is
not capable of being obtained at such time, other software suitable for
substitution therefor is readily available in the open market and Alya will
modify, at its own cost and expense, the source code of the Application
Software, if necessary, to be compatible;
i. the Application Software was not derived from any third party's
pre-existing material except as set out in Subsection 4.1 i. of Schedule E;
j. Alya has not used or enforced or failed to use or enforce any Intellectual
Property rights or other rights associated with the Application Software or
Purchased Assets in any manner which could adversely affect the validity or
enforceability of the Intellectual Property;
k. there is not, and has not been, any infringement or violation of Alya's
rights in and to the Intellectual Property;
l. Alya has not received notice of any claim of adverse ownership, invalidity
or other opposition to or conflict with the Purchased Assets;
m. there are now no and at the Closing Date will be no action, claim or demand
or other proceedings pending or, to the best of its knowledge, threatened
against Alya before any court or administrative agency which could
materially adversely affect the financial condition or overall operations
of Alya or the Purchased Assets, nor any judgment, order or decree
enforceable against Alya which involves or may require the expenditure of
money as a condition to or a necessity for the right or ability of Joint
Venturers to conduct their businesses involving the Purchased Assets;
n. Alya has not entered into any agreement which would entitle any person to
any valid claim against Agent and/or either one or both of the Joint
Venturers for a broker's commission, finder's fee or any like payment in
respect of the purchase and sale of the Purchased Assets or any other
matters contemplated by this Agreement;
o. the Application Software has been developed in accordance with good
professional standards applicable in the computer software industry
including, without limitation, using modern flexible programming languages
and development tools and all computer code has been written to allow the
relevant Application Software to run efficiently and ensure year 2000
compliant operation;
p. the Application Software operates in accordance with the applicable
associated user Documentation;
q. none of the Purchased Assets has been disclosed to any third party except
under obligations of confidentiality, the benefit of which obligations are
hereby assigned to the Joint Venturers;
r. there are no licenses, agreements, approvals or consents required or
advisable to enable Alya to lawfully and properly market the Application
Software in the Territory and no such licenses, agreements, approvals or
consents will be required by Agent and/or any one or both of the Joint
Venturers;
s. Alya has not done anything so as to preclude Agent and/or any one or both
of the Joint Venturers from having full enjoyment and quiet possession of
the Purchased Assets, subject to the terms and conditions herein;
t. there are no outstanding options, agreements of purchase and sale or other
agreements or commitments obligating Alya to sell the Purchased Assets or
any of them, except pursuant to this Agreement;
u. there are no taxes, levies or other similar assessments including, without
limitation, sales, use or other taxes payable by Alya in connection with
the purchase and sale contemplated by this Agreement;
v. the Application Software is available for use;
w. the assumptions, referred to in the Asset Valuation Report, are true and
correct;
x. the Application Software is application software and is not system software
as the terms "application software" and "system software" are generally
used and understood in the computer industry;
y. all copyright, patent or trademark registrations or applications for
registration of the Application Software in any jurisdiction have been
disclosed to the Agent, including complete and accurate documentation
relating thereto; and if there are no such applications or registrations,
then Alya shall supply to the Agent, on closing, all relevant or necessary
information and documentation which will enable the Joint Venturers to make
such application for registration of patent, copyright or trademark as they
may determine;
z. Alya has not used or delivered and will not use or deliver, and has not
caused and will not cause the use or delivery of, the Purchased Assets, or
any one of them, in or into the Province of Ontario; and
aa. Alya is not a registrant for purposes of Division IX of the EXCISE TAX ACT
(Canada)
All of the representations, warranties and covenants contained in this
Agreement made and to be made by Alya will survive the Closing Date and
continue in full force and effect for the benefit of the Joint Venturers
until full payment of all amounts owing under the Note.
4.2 REPRESENTATIONS AND WARRANTIES OF AGENT
Agent undertakes, represents and warrants to Alya at the date hereof and
at the Closing Date, and acknowledges that Alya is relying on such
undertakings, representations and warranties, that Agent is acting as agent
on behalf of the Joint Venturers and is now and on the Closing Date will be
an individual who has the power, authority and right to enter into this
Agreement and each and every agreement to be executed and delivered by Agent
pursuant hereto and to perform each of his obligations therein and herein
contained to purchase the Purchased Assets in accordance with the terms of
this Agreement, provided that Alya acknowledges that all obligations of Agent
in this Agreement are made as agent on behalf of the Joint Venturers and not
in Agent's personal capacity and the actual conveyance documents relating to
the conveyance of the Purchased Assets pursuant to this Agreement shall be
entered into directly with the Joint Venturers, c/o the Agent's address, but
the Agent shall receive delivery of the deliverables described in subsection
7.3(b) herein, in the Province of Alberta.
The representations, warranties and covenants contained in this
Agreement and made and to be made by Agent will survive the Closing Date and
continue in full force and effect for the benefit of Alya while any money due
on the Note is outstanding.
ARTICLE 5
COVENANTS
5.1 ALYA'S ASSUMPTION OF LIABILITY AND INDEMNITY
Alya hereby covenants and agrees to be liable to Agent and each of the
Joint Venturers for and to indemnify and save Agent and each of the Joint
Venturers from and against, effective as and from the Closing Date, any
claims, demands, actions, causes of action, damages, losses, costs (including
legal costs of a solicitor on a full indemnity basis), liabilities or
expenses which may be made or brought against Agent and/or any one or both of
the Joint Venturers and which he or they may suffer or incur as a result of,
in respect of, or arising out of:
a. any non-fulfillment of or breach of any covenant, undertaking,
representation or warranty on the part of Alya, under this Agreement or any
document or instrument contemplated by this Agreement; and
b. subject to Section 5.2, infringement of any third party rights to the
Intellectual Property as a result of the use of the Intellectual Property
in accordance herewith on or after the Closing Date ("Infringement
Claims").
This provision shall survive closing and continue in full force and effect
until the parties mutually agree to the release thereof.
5.2 INDEMNIFICATION PROCEDURE
Upon the occurrence of an event giving rise to indemnification hereunder
as a result of a claim, action or cause of action made or brought against
Agent and/or any one or both of the Joint Venturers, (i) prompt notice shall
be given to Alya of such events, (ii) Alya's attorneys shall be permitted to
handle and control the defense of such claims, at Alya's expense, and (iii)
Alya shall receive reasonable cooperation in the defense thereof. Alya
agrees to assume the defense of such claims, demands, actions or causes of
action. Agent and/or any one or both of the Joint Venturers may, at his own
expense, participate in such defense, provided however, that, as Alya has
agreed herein to assume the defense of such claims, such participation
expenses shall not become part of the indemnification claim. There shall be
no settlements, whether agreed to in court or out of court, without the prior
written consent of Alya and the Joint Venturers, except that Alya may settle
a claim without the consent of the Joint Venturers if (i) the settlement is
purely monetary, (ii) Alya hereunder admits in writing its liability to Agent
and/or any one or both of the Joint Venturers hereunder, and (iii)
concurrently with such settlement, Alya pays the full amount owed thereunder.
Notwithstanding the foregoing, in the event Alya does not assume the defense
of any such claim or litigation in accordance with the terms hereof within
the earlier of (i) thirty (30) days following written notice of such claim or
litigation from Agent and/or any one or both of the Joint Venturers or (ii)
the due date for response to any complaint filed, then Agent and/or any one
or both of the Joint Venturers may defend against such claim or litigation in
such manner as it may deem appropriate, including, but not limited to,
settling such claim or litigation, after giving notice of the same to Alya,
on such terms as Agent and/or any one or both of the Joint Venturers may deem
appropriate. In any action by Agent and/or any one or both of the Joint
Venturers seking indemnification from Alya in accordance with the provisions
hereof, Alya shall not be entitled to object to the manner in which Agent
and/or any one or both of the Joint Venturers has defended such claim or the
amount of or nature of any such settlement.
5.3 COVENANT NOT TO COMPETE
Agent acknowledges on behalf of the Joint Venturers that the Purchased Assets
have a territorial limitation, and Agent covenants on behalf of the Joint
Venturers that it will only market, distribute and sell the Application
Software within the Territory. Alya covenants and agrees that it shall not
market, distribute and/or sell the Application Software within the Territory,
(or knowingly market, distribute and/or sell the Application software to any
person who intends to use it in the Territory) except as contemplated in the
Management Agreement. Alya retains the exclusive rights to use, modify,
market, distribute and sell the Application Software, the Enhancements and
the Intellectual Property in all regions of the world, other than the
Territory. Nothing herein precludes Alya from selling the O.P.E.N.cortex
platform and associated hardware as a stand-alone development platform
worldwide.
5.4 OTHER COVENANTS
Alya (and with respect to Section 5.4 d. only, Alya and Agent, on behalf
of the Joint Venturers) covenants and agrees as follows:
a. until the Closing Date, Alya will not sell, license or otherwise dispose of
any of the Purchased Assets or any part thereof or interest therein, or
agree to do so, or enter into any negotiations with a view to any of the
foregoing, without the prior approval of Agent;
b. Alya will make available to Agent and the Joint Venturers for due diligence
investigations, all information, documents and agreements pertaining to the
development, acquisition and marketing of the Application Software,
including, without limitation, computer code and related documentation,
marketing and product business plans and the full cooperation of Alya
management;
c. Alya will complete the Originality Certificate and deliver it to the Joint
Venturers and their counsel on or before Closing;
d. each Receiving Party that receives Confidential Information from the
Disclosing Party shall maintain such Confidential Information in
confidence, shall not reveal the same to any third party (other than its
employees, advisors, consultants and agents on a need to know basis in
connection with the Receiving Party's performance under this Agreement or
the Management Agreement) and shall not use such Confidential Information,
directly or indirectly, for any purpose other than as required for due
diligence investigations
and in the performance of this Agreement or the Management Agreement; and
e. Alya will acquire, at its expense and in the Joint Venturers' names,
licenses for any third party software comprising part of the Purchased
Assets not assignable or assigned by Alya to the Joint Venturers.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO AGENT'S OBLIGATIONS
The obligations of Agent assumed on behalf of the Joint Venturers
hereunder will be subject to the satisfaction or compliance with, at or
before Closing, of each of the following conditions precedent (each of which
is hereby acknowledged to be included for the exclusive benefit of Agent and
may be waived in writing in whole or in part):
a. the execution and delivery of all of the closing deliveries identified in
Section 7.3;
b. Subject to Agent's and the Joint Venturers' reliance on Alya's
representation and warranty set out in subsection 4.1(r) herein, all legal
and regulatory approvals and consents, whether from shareholders,
governmental authorities or other third parties necessary to the completion
of the transactions contemplated by the terms of this Agreement have been
obtained;
c. there will have been no material adverse change, financial or otherwise, in
Alya or the Purchased Assets;
d. Alya will have performed or complied with, in all respects, all of its
undertakings, covenants and agreements hereunder to be performed or
complied with; and
e. the representations and warranties of Alya contained in Section 4.1 will be
true and correct on Closing.
6.2 CONDITIONS TO ALYA'S OBLIGATIONS
The obligations of Alya hereunder will be subject to the satisfaction or
compliance with, at or before Closing, of each of the following conditions
precedent (each of which is hereby acknowledged to be included for the
exclusive benefit of Alya and may be waived in writing in whole or in part):
a. delivery of the Purchase Price, and the execution and delivery of all
closing deliveries identified in Section 7.4;
b. Agent will have performed or complied with, in all respects, all of its
undertakings, covenants and
agreements hereunder to be performed or complied with; and
c. the representations and warranties of Agent contained in Section 4.2 will
be true and correct on Closing.
ARTICLE 7
CLOSING
7.1 CLOSING DATE
The transaction of purchase and sale contemplated by this Agreement will
be completed at or about 3:00 P.M. on the Closing Date at the offices of the
Joint Venturers' Solicitors ("Closing").
7.2 SURVIVAL
This Agreement and its component parts will not merge upon Closing or on
execution, delivery or registration of any documents executed, delivered or
registered pursuant to this Agreement or otherwise, but will survive Closing.
7.3 ALYA'S CLOSING DELIVERIES
a. At the Closing, Alya will duly execute and deliver or cause to be
executed and delivered to the Joint Venturers the following:
i. a ▇▇▇▇ of sale assigning the Purchased Assets to the Joint Venturers;
ii. the Management Agreement;
iii. the Originality Certificate;
iv. the Letter of Representation;
v. the Security Agent Agreement;
vi. a certified copy of the resolutions of the directors of Alya
authorizing the transactions;
vii. such other agreements and documents as Agent may reasonably request
to give effect to the terms and conditions of this Agreement; and
viii. a copy of all patent, trademark and copyright registrations in
respect of the Application Software; and
ix. a copy of all authors' assignments of copyright, patent and trademark
and waivers of moral rights in the Application Software.
b. At the Closing, Alya will deliver or cause to be delivered into the
Province of Alberta, an electronic copy of the Application Software,
including, without limitation, a copy of all Documentation, each of which
shall be delivered to Agent or his designee by electronic transfer. Alya
covenants and agrees that it will not deliver or cause to be delivered any
copies of the Application Software or the Documentation into the Province
of Ontario.
7.4 AGENT'S CLOSING DELIVERIES
At Closing, Agent will execute and deliver or cause to be executed and
delivered the following:
a. wire transfer, bank draft or solicitor's trust cheque for the cash amount
of the Purchase Price payable on Closing pursuant to Section 3.1, subject
to any withholding tax payable in connection with such payment;
b. the Assigned Notes, each duly endorsed in favor of Alya or Alya's designee;
c. the Note;
d. the Management Agreement;
e. the Security Agent Agreement; and
f. such other agreements and documents as Alya may reasonably request to give
effect to the terms and conditions of this Agreement.
7.5 DELIVERY TO SECURITY AGENT
Agent hereby directs Alya to electronically deliver to the Security
Agent all of the deliverables described in subsection 7.3(b) herein, on
Closing and as security for the obligations under the Note, which the
Security Agent will hold secure in accordance with the terms of the Security
Agent Agreement; provided that to the extent that the Security Agent is
holding anything other than source code for the Application Software, the
Security Agent will release such materials and information, upon request, to
either the Agent or the Joint Venturers.
ARTICLE 8
GENERAL
8.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, such provision shall be construed so as to most
closely reflect the original intent of the parties, but still be enforceable,
and the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired thereby. The
invalidity, illegality or unenforceability of any provision or part thereof
contained in this Agreement in any jurisdiction will not affect or impair
such provision or part thereof or any other provisions of this Agreement in
any other jurisdiction.
8.2 FURTHER ASSURANCES
Each of the parties will, at any time and from time to time at the
request of the other, execute and deliver any and all such further
instruments or assurances as may be necessary or desirable to give effect to
the terms and conditions of this Agreement.
8.3 COUNTERPART AND FACSIMILE EXECUTION
This Agreement, and any and all ancillary documents contemplated herein,
may be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Agreement and will be binding on the parties
as if they had originally signed one copy of this Agreement.
8.4 ASSIGNMENT
Agent and/or any one or both of the Joint Venturers may assign any part
of its interest in this Agreement or the Purchased Assets, except that any
assignment to any person who is carrying on business immediately prior to
such assignment that is in direct competition with Alya, requires the prior
written consent of Alya. Such assignment shall be effected by:
a. giving written notice of the name and address of the assignee; and
b. by delivering to Alya a written undertaking of the assignee, acknowledging
receipt of a copy of this Agreement and agreeing to be bound by the terms
and conditions of this Agreement.
Alya may not assign this Agreement, without the prior written consent of
Agent given on behalf of the Joint Venturers, except that Alya may assign
this Agreement in whole, but not in part, and only with an assignment of all
of its rights and obligations under the Note and the Security Agent
Agreement, to (i) any corporation, partnership or other entity which is
controlled by, controlling or under common control with, Alya; or (ii) a
Agent of all or substantially all the assets of Alya, or any person or entity
into which Alya is merged or consolidated by:
a. giving written notice of the name and address of the assignee; and
b. by delivering to Agent a written undertaking of the assignee, acknowledging
receipt of a copy of this Agreement and agreeing to be bound by the terms
and conditions of this Agreement.
8.5 BINDING EFFECT
This Agreement and all of these provisions will adhere to the benefit of
the parties and to the benefit of the Joint Venturers as the principals of
the Agent, and their respective successors and permitted assigns, and will be
binding upon the parties and upon the Joint Venturers, as principles of the
Agent, and their respective successors and permitted assigns. The
expressions "Alya" and "Agent" and "Joint Venturers", as used herein will
include Alya's and Agent's and Joint Venturers' permitted assigns wherever
immediate or derivative, respectively.
Alya herein acknowledges and agrees that all benefits accruing to or
obligations of the Agent are not personal to the Agent, but are made for the
benefit (or obligation) of and on behalf of the Joint Venturers.
8.6 ARBITRATION OF DISPUTES
Any dispute arising between the parties under this Agreement will be
settled by initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot
resolve the dispute within 30 days of escalation of the dispute to such
level, then the parties agree that such dispute shall be settled by final
and binding arbitration in Calgary, Alberta, before a single arbitrator
mutually acceptable to Owner and Manager, in accordance with arbitration
legislation of Alberta then existing, except as otherwise specifically
provided herein. The arbitrator shall apply the laws of the Province of
Alberta and the laws of Canada for the purposes of construing and enforcing
this Agreement and any dispute arising hereunder. The arbitration award
shall be specifically enforceable; judgment upon any arbitration award may be
entered in any court with personal jurisdiction over the parties and subject
matter of the disputes. Unless otherwise determined by the arbitrator, all
expenses in connection with such arbitration will be divided equally between
the parties, with the exception of expenses of counsel, witnesses and
employees of the parties which will be borne by the parties incurring them.
Notwithstanding anything to the contrary herein, either party will always be
entitled to seek preliminary or provisional remedies or release (including
attachments and preliminary injunctions) from any court of competent
jurisdiction.
8.7 AMENDMENT
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise.
8.8 TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
8.9 COSTS
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in this transaction.
8.10 CONFIDENTIALITY
Each of the parties will treat this Agreement and all information
relating to this Agreement and the transactions contemplated by this
Agreement confidentially and no public disclosure by any party will be made
without the prior approval of the other, not to be unreasonably withheld,
except (i) to employees, advisors, consultants and agents on a need to know
basis in connection with performance under this Agreement or the Management
Agreement, or (ii) as legally required by a party to satisfy disclosure
obligations to shareholders and regulators, and in the latter case,
simultaneous notice of such disclosure will be given to the other party.
8.11 ENTIRE AGREEMENT
This Agreement, the Management Agreement, the Security Agent Agreement,
the Note and the exhibits and schedules referenced in each of the foregoing
constitute the entire Agreement among the parties and supersedes all
proposals, letters of intent, representations or agreements, oral or written,
among them relating to the subject matter hereof.
8.12 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein (regardless of either jurisdiction's or any other
jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising in
connection herewith, shall be arbitrated or litigated in Calgary, Alberta,
Canada, and each party hereby waives any right it may have to assert the
doctrine of Forum Non Conveniens or to object to venue. The parties each
hereby stipulate that the courts located in Calgary, Alberta, shall have
personal jurisdiction and venue over each party for the purpose of litigating
any such dispute, controversy or proceeding arising out of or related to this
Agreement.
8.13 NOTICES
Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given by
personal delivery, international overnight courier service, or by facsimile
(subject to confirmation of receipt), addressed to the respective party at
the applicable address set forth above, or to any party at such other
addresses as shall be specified in writing by such party to the other parties
in accordance with the terms and conditions of this Section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or two (2) business days following deposit with any international overnight
courier service, or upon confirmation of receipt if sent by facsimile
transmission.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day first above written.
ALYA: ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
---------------------------------
Milan Carnogursky, President
------------------------------------
(Print Name and Title)
AGENT:
/s/ [AGENT]
------------------------------------
[AGENT] as agent for [PURCHASER 3]
and [PURCHASER 4] and not in his
personal capacity.
MANAGEMENT AND MARKETING AGREEMENT
THIS AGREEMENT made as of December 22, 1997.
BETWEEN:
[PURCHASER 3], with an address at [PURCHASER 3'S ADDRESS], Fax: [PURCHASER
3'S FAX], & [PURCHASER 4], with an address at [PURCHASER 4'S ADDRESS], Fax:
[PURCHASER 4'S FAX], both individuals, as joint venturers (each with an
undivided 50% interest) (hereinafter collectively referred to as "Joint
Venturers" and individually referred to as "Joint Venturer");
OF THE FIRST PART AND
ALYA INTERNATIONAL, INC., a California corporation, having a business
address at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax: (650)
▇▇▇-▇▇▇▇ (hereinafter referred to as "Manager");
OF THE SECOND PART
WHEREAS:
A. Joint Venturers have acquired or developed and own all of the right, title
and interest to use, distribute and sell the Assets in the Territory; and
B Whereas Joint Venturers have appointed [AGENT], as agent, to act on their
behalf (and with all necessary authority designated to him) to hold the
Assets in the Province of Alberta, including all Documentation and
Enhancements and any other material relating thereto, and Joint Venturers
wish to ensure that the Assets are neither delivered into nor used in the
Province of Ontario at any time;
C. Joint Venturers have agreed to contribute their interests in the Assets for
the purpose of carrying on two separate and distinct businesses for the
management, marketing, distribution and sale of the Assets in the
Territory, one (for the account of [PURCHASER 3]) to be carried on in the
Eastern Territory and the other (for the account of [PURCHASER 4]) to be
carried on in the Western Territory;
D. [PURCHASER 3] wishes to appoint Manager, as his exclusive agent, to manage,
market, distribute and sell
the Security System in the Eastern Territory on the terms and conditions
set out in this Agreement; and
E. [PURCHASER 4] wishes to appoint Manager, as his exclusive agent, to manage,
market, distribute and sell the Security System in the Western Territory on
the terms and conditions set out in this Agreement.
NOW THEREFORE in consideration of the entitlements to receive certain
cash distributions under this Agreement, and the covenants, agreements and
premises herein contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions will have the following meanings:
a. "Agent" means [AGENT], an individual residing in the Province of Alberta;
b. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in Schedule A to the Application Software Purchase
Agreement together with Enhancements;
c. "Application Software Purchase Agreement" means the application software
purchase agreement made as of December 22, 1997, between Agent and Manager;
d. "Assets" means "Purchased Assets" as that term is defined in the
Application Software Purchase Agreement;
e. "Confidential Information" of a party (the "Disclosing Party") shall mean
information of a confidential and proprietary nature relative to the
Disclosing Party or its business and other matters deemed confidential and
proprietary by the Disclosing Party, written notice of which is given to
the party receiving such information (the "Receiving Party"); provided
that the terms and subject matter of this Agreement and the Application
Software Purchase Agreement, including the Application Software, the
Security System and the Purchased Assets, are deemed to be confidential
without the need for written notice and shall at all times remain
confidential, notwithstanding the exception to confidentiality noted in the
next sentence.
"Confidential Information" of the Disclosing Party shall not include:
i. written information not clearly marked as confidential or oral
disclosures not subsequently confirmed in writing as confidential;
ii. information which the Receiving Party can demonstrate
A. was published or generally known in the industry at the time of
its disclosure by the Disclosing Party, or became published or
generally known in the industry without breach of this Agreement
by the Receiving Party;
B. was known to the Receiving Party at the time of disclosure by the
Disclosing Party, independently of the Disclosing Party and
without breach of an obligation of confidentiality to the
Disclosing Party;
C. is disclosed to the Receiving Party by a third party which had a
right to disclose such information and was not in breach of an
obligation of confidentiality to the Disclosing Party;
D. is independently developed by the Receiving Party without use,
directly or indirectly, of any Confidential Information of the
Disclosing Party; or
E. information required to be disclosed pursuant to applicable law,
regulation, judicial or administrative order, lawful subpoena or
enforceable discovery demand, provided the Receiving Party uses
commercially reasonable efforts to obtain confidential treatment
of such information and further provided that the Disclosing
Party receives prior written notice of any pending disclosure,
with sufficient time to protest disclosure or seek an adequate
protective order.
f. "Customer" means any person using or distributing the Security System in
the Territory;
g. "Documentation" has the meaning set out in Subsection v. of the definition
of "Purchased Assets" as defined in the Application Software Purchase
Agreement;
h. "Eastern Expenses" has the meaning specified in Subsection 3.2 c.;
i. "Eastern Gross Sales" has the meaning specified in Subsection 3.2 c.;
j. "Eastern Management Fee" has the meaning specified in Subsection 3.2.c;
k. "Eastern Net Revenue" has the meaning specified in Subsection 3.2 c.;
l. "Eastern Net Sales" has the meaning specified in Subsection 3.2 c.;
m. "Eastern Overhead and Administrative Costs" has the meaning specified in
Subsection 3.2 c.;
n. "Enhancement" means any improvement, revision or other modification made
to, or replacement of, the Assets by Manager, or any employee or
subcontractor of Manager, to be utilized in connection with providing the
Security System, including, without limitation, any improvement, revision
or other modification which is necessary:
i. to provide Customers with the then current Security System; or
ii. to maintain the Application Software and/or the Security System as a
state of the art or industry leading technology,
including, without limitation, the changes set out in Appendix A.1 to
Schedule A of the Application Software Purchase Agreement, to the extent
that Manager continues to believe they are commercially reasonable in light
of then current market conditions and technical developments;
o. "Intellectual Property" has the meaning specified in Subsection iv. of the
definition of "Purchased Assets" as defined in the Application Software
Purchase Agreement;
p. "Manager" means Alya International, Inc. and its permitted assigns in its
capacity as the agent for the Joint Venturers and manager of the Assets
appointed by the Joint Venturers under this Agreement;
q. "Note" or "Notes" means the [PURCHASER 3] Note and/or the [PURCHASER 4]
Note, individually or collectively, as applicable.
r. "[PURCHASER 4]" means [PURCHASER 4], utilizing a business address at
[ADDITIONAL PURCHASER 3 & 4 ADDRESS],
s. "[PURCHASER 4] Interest Amount" means an amount equal to the annual
interest payable under the [PURCHASER 4] Note;
t. "[PURCHASER 4] Note" means the 6.0% Secured Term Note, executed and
delivered by [PURCHASER 4] and secured by [PURCHASER 4]'s interest in the
Assets, in substantially the form as attached to the Application Software
Purchase Agreement dated as of the date hereof and issued in connection
with the purchase of the Assets;
u. "[PURCHASER 4] Return" has the meaning specified in Subsection 3.2.c;
v. "Security Agent" means [SECURITY AGENT], the security agent under the
Security Agent Agreement;
w. "Security Agent Agreement" means the security agent agreement made as of
December 22, 1997, among each of the Joint Venturers, Manager and Security
Agent;
x. "Security System" means the building access control system developed by
Manager and known as the O.P.E.N.centrix - Open Platform for Essential
Networks, which includes, without limitation, the Application Software, the
firmware containing the Application Software, and the O.P.E.N.cortex
platform software;
y. "Territory" means Canada, and "Western Territory" means the geographic
region within the Territory comprised of the provinces as set forth in
SCHEDULE A, and "Eastern Territory" means the geographic region within the
Territory comprised of the provinces as set forth on SCHEDULE A; and
z. "[PURCHASER 3]" means [PURCHASER 3], utilizing a business address at
[ADDITIONAL PURCHASER 3 & 4 ADDRESS],
aa. "[PURCHASER 3] Interest Amount" means an amount equal to the annual
interest payable under the [PURCHASER 3] Note;
bb. "[PURCHASER 3] Note" means the 6.0% Secured Term Note, executed and
delivered by [PURCHASER 3] and secured by [PURCHASER 3]'s interest in the
Assets, in substantially the form as attached to the Application Software
Purchase Agreement dated as of the date hereof and issued in connection
with the purchase of the Assets;
cc. "[PURCHASER 3] Return" has the meaning specified in Subsection 3.1.c;
dd. "Western Expenses" has the meaning specified in Subsection 3.1 c.;
ee. "Western Gross Sales" has the meaning specified in Subsection 3.1 c.;
ff. "Western Management Fee" has the meaning specified in Subsection 3.1.c;
gg. "Western Net Revenue" has the meaning specified in Subsection 3.1 c.;
hh. "Western Net Sales" has the meaning specified in Subsection 3.1 c.;
ii. "Western Overhead and Administrative Costs" has the meaning specified in
Subsection 3.1 c.;
jj. "year" means a fiscal year ending September 30.
1.2 INTERPRETATION
a. The terms "this Agreement", "hereof", "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or
other portion of this Agreement and include any agreement amending or
supplemental to this Agreement. Unless something in the subject matter or
context is inconsistent therewith, reference herein to Sections and
Subsections are to Sections and Subsections of this Agreement;
b. Except as specifically stated in this Agreement, all references to currency
are to United States of America dollars. Any currency conversion required
or contemplated by this Agreement with respect to Canadian and United
States of America currency will be based on the rate published by the Bank
of Canada as the noon spot rate of exchange applicable for such currencies
on the business day immediately before the date of conversion;
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires and the provisions hereof.
d. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
ARTICLE 2
MANAGEMENT SERVICES
2.1 APPOINTMENT OF AGENT/MANAGER
a. [PURCHASER 3] hereby appoints Manager as his sole and exclusive agent for
the purpose of managing the marketing, distribution, sale, Enhancement and
support of the Security System within the Eastern Territory, subject to the
terms and conditions of this Agreement, and Manager hereby accepts such
appointment.
b. [PURCHASER 4] hereby appoints Manager as his sole and exclusive agent for
the purpose of managing the marketing, distribution, sale, Enhancement and
support of the Security System within the Western Territory, subject to the
terms and conditions of this Agreement, and Manager hereby accepts such
appointment.
2.2 MANAGEMENT DUTIES
a. Manager will, in good faith, observe and perform the following obligations
in respect of the marketing, distribution, sale, Enhancement and support,
within each of the Western Territory and the Eastern Territory (hereinafter
sometimes collectively referred to as the "Territory"), of the Security
System in a good and workmanlike manner, utilizing its capable management
and technical expertise:
i. MARKETING, DISTRIBUTION AND SALE. Manager will be responsible for the
marketing, distribution and sale of the Security System, within each
of the Western Territory and the Eastern Territory, including, without
limitation, developing marketing materials, organizing product
demonstrations, establishing distribution channels, pricing, promotion
and sale of the Security System. Manager will use commercially
reasonable efforts to maximize sales of the Security System within
each of the Western Territory and the Eastern Territory. Manager will
be responsible for developing and negotiating the contracts required
to sell the Security System to Customers within each of the Western
Territory and the Eastern Territory, and Manager will use best efforts
to ensure that such contracts will not give rise to gross revenue that
is rent, royalty or leasing revenue. Each of the Joint Venturers will
be entitled to receive copies of and to comment on standard form sales
and support service contracts and Manager shall address all such
comments with the relevant Joint Venturer and take into account all of
such Joint Venturer's directions and instructions forming a part of
such comments. All such contracts will contain provisions of
confidentiality acceptable to each of the Joint Venturers. In
addition, Manager will have responsibility for the billing and
collection of fees and payments from Customers and for the payment of
fees to each of the Joint Venturers. Manager shall comply with all
applicable laws and regulations and obtain all appropriate government
approvals pertaining to the sale, distribution and advertising of the
Security System and of goods and services utilizing the trademark
"O.P.E.N.centrix";
Each of the Joint Venturers will be entitled to conduct an inspection
of the management of the marketing, distribution, sale, Enhancement
and support of the Security System within his relevant Territory at
any time during regular business hours upon reasonable notice to
Manager. Notwithstanding any other provision in this Agreement,
Manager will take into account any and all commercially reasonable
directions and/or specifications given by a Joint Venturer pertaining
to the marketing, distribution, sale, Enhancement and support of the
Security System within such Joint Venturer's Territory, which Manager
may receive from such Joint Venturer from time to time in writing.
Manager will ensure that the Assets are not, delivered into or used in
the Province of Ontario or any other jurisdiction which may assess
sales or use tax in respect of the Assets, save and except that such
prohibition shall not prevent Manager from selling the Security System
(and any portion of the Assets integrated therein) at retail sale to
Customers;
ii. SUPPORT, TRAINING AND CONSULTING. Manager will have complete
responsibility for delivery and installation of the Security System
within each of the Western Territory and the Eastern Territory.
Manager will provide all support services for Customers including
telephone and on-site support. Manager will also provide all required
training and consulting support;
iii. MAINTENANCE AND ENHANCEMENTS. All maintenance necessary to correct
any errors in the Assets found by any Customer will be provided by
Manager pursuant to the terms of its support services agreements.
Manager will prepare and provide all Enhancements to Agent in the
Province of Alberta; and
iv. With respect to any third party software required to operate the
Security System, Alya has licenses for such third party software which
allow Alya to market such software, directly or indirectly through
sublicensees, in conjunction with the Security System and will
maintain such licenses in good standing for the benefit of each of the
Joint Venturers.
b. In addition to the duties referred to in Subsection 2.2 a., Manager will,
in good faith and in satisfaction of its fiduciary duty to each Joint
Venturer, do the following:
i. REVIEWS. Manager will review and report to each Joint Venturer or its
duly appointed agent on Manager's performance under this Agreement on
a quarterly basis. Such review and report for [PURCHASER 3] shall
pertain to the Eastern Territory, and such review and report for
[PURCHASER 4] shall pertain to the Western Territory. Such reviews
will be scheduled by mutual agreement of the relevant parties;
ii. COMPUTER CODE. Upon request, Manager will deliver computer code (in
object code and source code form) together with all related
documentation and development tools necessary or desirable to enable
the Application Software and all Enhancements to operate properly to
Agent in the Province of Alberta, on an annual basis, within thirty
(30) days of the end of each calendar year. Manager will assist Agent
in verifying that the computer code delivered to Agent is fully
functional Application Software and Enhancements; and
iii. CONFLICT OF INTEREST. Manager acknowledges and agrees that it is
acting in a fiduciary capacity as agent of each Joint Venturer, it
will act in
good faith and in the best interests of each Joint Venturer, and will
conduct itself as such in all dealings on behalf of each Joint
Venturer and in connection with the performance of its obligations
under this Agreement. In particular, Manager will avoid conflicts of
interest between itself and [PURCHASER 3] in connection with the
business of marketing, distribution, sale and support of the Security
System in the Eastern Territory, and will avoid conflicts of interest
between itself and [PURCHASER 4] in connection with the business of
marketing, distribution, sale and support of the Security System in
the Western Territory.
2.3 INSURANCE
a. Without in any way limiting the liability of Manager under this Agreement,
Manager will be responsible to maintain and keep in force during the term
of this Agreement the following insurance coverage:
i. automobile liability insurance on all vehicles used in connection with
this Agreement. In respect of such vehicles not owned by Manager, it
will maintain and keep in force as aforesaid non-owned automobile
liability insurance protecting its liability including that assumed
under this Agreement. The limits of such insurance will be at least;
for bodily injury (including passenger hazard) and property damages,
one million dollars ($1,000,000.00) inclusive for any one accident;
ii. comprehensive general liability insurance (including liability under
this Agreement) with inclusive limits of not less than two million
dollars ($2,000,000.00) for bodily injury and property damage;
iii. employer's liability insurance with limits of not less than one
million dollars ($1,000,000.00) for each employee where Workers'
Compensation does not exist; and
iv. unless otherwise directed by a Joint Venturer, in writing, insurance
covering loss of or damage to all machinery, tools, equipment,
supplies and structures owned by Manager and/or rented or leased from
a third party or parties and used by Manager or its sub-contractors in
performing its obligations under this Agreement.
b. The above insurance policies will not be changed in any manner which could
affect the interests of either Joint
Venturer without thirty (30) days' prior written notice by registered mail
to such Joint Venturer.
c. For greater certainty, the parties agree and understand that the
obligations of Manager, as set forth in this Section 2.3, may be fulfilled
if Manager's existing insurance policy satisfies the requirements of this
Section.
d. Manager will supply each Joint Venturer with certificates evidencing the
above insurance forthwith following execution of this Agreement. Any
insurance carried by Manager will name Joint Venturers as additional
insured and loss payees and will contain a waiver of subrogation in favor
of Joint Venturers.
ARTICLE 3
ALLOCATION AND DISTRIBUTION OF FEES
3.1 DISTRIBUTION OF FEES FROM WESTERN TERRITORY
a. Manager will distribute to [PURCHASER 4], annually, the Western Net
Revenues for the second, third and fourth quarters of the preceding year
and for the first quarter of the current year in the following order of
priority:
i. to pay the [PURCHASER 4] Interest Amount, plus any other accrued and
unpaid interest on the [PURCHASER 4] Note; and
ii. to pay the [PURCHASER 4] Return, including any cumulative amount of
the [PURCHASER 4] Return not paid in prior years.
b. Thereafter, Manager will distribute to [PURCHASER 4], annually, the Western
Net Revenue for the second, third and fourth quarters of the preceding year
and for the first quarter of the current year less the amounts set forth in
Section 3.1.a., payable in the year in the following order of priority:
i. 45% to [PURCHASER 4], for payment against the principal sum
outstanding from time to time under the [PURCHASER 4] Note and in
accordance with the [PURCHASER 4] Note; and
ii. 55% to [PURCHASER 4] for retention by [PURCHASER 4]; and
c. For the purposes of this Agreement the following terms have the following
meanings:
i. "Western Management Fee" means an annual marketing and management fee
payable to Manager by [PURCHASER 4] and calculated at the end of each
year pursuant to the following formula:
Formula:
Western Management Fee =
(WN - WI - WU/.55 -Cdn.$50,000) X .45,
[but not less than zero]
Where,
WN = Western Net Revenues, calculated without reference to Paragraph E
of the definition for Western Expenses;
WI = the [PURCHASER 4] Interest Amount in such year, plus any other
accrued and unpaid interest on the [PURCHASER 4] Note;
WU = the outstanding principal on the [PURCHASER 4] Note at the end of
such year;
ii. "Western Expenses" means the following cumulative costs and fees to
the extent not previously recouped by Manager in accordance herewith:
A. the cost of goods sold in the Western Territory relating to the
Application Software, including without limitation, costs of
material, manufacturing, quality assurance and testing, costs of
third party licenses, but excluding any costs of goods sold
relating to the hardware incorporated in the Security System;
B. direct costs of marketing, distributing and selling the Security
System in the Western Territory including without limitation, any
costs of acquiring access, assets and/or expertise to channels of
trade to market and distribute the Security System in the Western
Territory;
C. the pro rata share of the cost of Enhancements in a year,
determined by multiplying the cost of Enhancements in such year
by a fraction, the numerator of which is the Western Net Sales in
such year and the denominator of which is the gross amount paid
to Alya in such year for the purchase,
installation and support of the Security System in the United
States and Canada, less normal course of business selling credits
for discounts and rebates in such year and less return
adjustments for which a refund has been paid or credited to the
customer to the extent of the payment or credit in such year;
D. Western Overhead and Administrative Costs; and
E. Western Management Fee.
iii. "Western Gross Sales" means gross amounts paid by Customers in the
Western Territory, in a year, to purchase, install, and receive
support for the Security System less the price of the hardware
incorporated therein, applying Manager's standard prices charged to
similar customers, as in effect from time to time;
iv. "Western Net Revenue" means Western Net Sales less Western Expenses;
v. "Western Net Sales" means Western Gross Sales less:
A. normal course of business selling credits for discounts or
rebates to Customers in the Western Territory for the year; and
B. returns or adjustments for the Security System for which a refund
has been paid or credited to a Customer in the Western Territory,
or any distributor or other reseller in the Western Territory, to
the extent of the payment or credit in the year;
vi. "Western Overhead and Administrative Costs" means the overhead and
administrative costs of Manager to manage and market the Security
System in the Western Territory, for a year, determined by multiplying
Manager's total overhead and administrative costs for marketing and
managing the Security System in the United States and Canada in such
year by a fraction, the numerator of which is the Western Net Sales
for such year and the denominator of which is the aggregate gross
amount paid to Alya in such year, for the purchase, installation and
support of the Security System in the United States and Canada, less
normal course of business selling credits for discounts and rebates in
such year and less return adjustments for which a refund has been paid
or
credited to the customer, to the extent of the payment or credit in
such year; and
vii. "[PURCHASER 4]'s Return" means an annual cumulative preferential
return to [PURCHASER 4] of Fifty Thousand Canadian Dollars
(Cdn.$50,000) (prorated for any partial year);
3.2 DISTRIBUTION OF FEES FROM EASTERN TERRITORY
a. Manager will distribute, annually, the Eastern Net Revenues for the second,
third and fourth quarters of the preceding year and for the first quarter
of the current year in the following order of priority:
i. to pay the [PURCHASER 3] Interest Amount, plus any other accrued and
unpaid interest on the [PURCHASER 3] Note; and
ii. to pay the [PURCHASER 3] Return, including any cumulative amount of
the [PURCHASER 3] Return not paid in prior years.
b. Thereafter, Manager will distribute, annually, the Eastern Net Revenue for
the second, third and fourth quarters of the preceding year and for the
first quarter of the current year less the amounts set forth in Section
3.2.a., payable in the year in the following order of priority:
i. 45% to [PURCHASER 3], for payment against the principal sum
outstanding from time to time under the [PURCHASER 3] Note and in
accordance with the [PURCHASER 3] Note; and
ii. 55% to [PURCHASER 3] for retention by [PURCHASER 3]; and
c. For the purposes of this Agreement the following terms have the following
meanings:
i. "Eastern Management Fee" means an annual marketing and management fee
payable to Manager by [PURCHASER 3] and calculated at the end of each
year pursuant to the following formula:
Formula:
Eastern Management Fee =
(EN - EI - EU/.55 -Cdn.$50,000) X .45,
[but not less than zero]
Where,
EN = Eastern Net Revenues, calculated without reference to Paragraph E
of the definition for Eastern Expenses;
EI = the [PURCHASER 3] Interest Amount in such year, plus any other
accrued and unpaid interest on the [PURCHASER 3] Note;
EU = the outstanding principal on the [PURCHASER 3] Note at the end of
such year;
ii. "Eastern Expenses" means the following cumulative costs and fees to
the extent not previously recouped by Manager in accordance herewith:
A. the cost of goods sold in the Eastern Territory relating to the
Application Software, including without limitation, costs of
material, manufacturing, quality assurance and testing, costs of
third party licenses, but excluding any costs of goods sold
relating to the hardware incorporated in the Security System;
B. direct costs of marketing, distributing and selling the Security
System in the Eastern Territory including without limitation, any
costs of acquiring access, assets and/or expertise to channels of
trade to market and distribute the Security System in the Eastern
Territory;
C. the pro rata share of the cost of Enhancements in a year,
determined by multiplying the cost of Enhancements in such year
by a fraction, the numerator of which is the Eastern Net Sales in
such year and the denominator of which is the gross amount paid
to Alya in such year for the purchase, installation and support
of the Security System in the United States and Canada, less
normal course of business selling credits for discounts and
rebates in such year and less return adjustments for which a
refund has been paid or credited to the customer to the extent of
the payment or credit in such year;
D. Eastern Overhead and Administrative Costs; and
E. Eastern Management Fee.
iii. "Eastern Gross Sales" means gross amounts paid by Customers in the
Eastern Territory, in a year, to purchase, install, and receive
support for the Security System less the price of the hardware
incorporated therein, applying Manager's standard prices charged to
similar customers, as in effect from time to time;
iv. "Eastern Net Revenue" means Eastern Net Sales less Eastern Expenses;
v. "Eastern Net Sales" means Eastern Gross Sales less:
A. normal course of business selling credits for discounts or
rebates to Customers in the Eastern Territory for the year; and
B. returns or adjustments for the Security System for which a refund
has been paid or credited to a Customer in the Eastern Territory,
or any distributor or other reseller in the Eastern Territory, to
the extent of the payment or credit in the year;
vi. "Eastern Overhead and Administrative Costs" means the overhead and
administrative costs of Manager to manage and market the Security
System in the Eastern Territory, for a year, determined by multiplying
Manager's total overhead and administrative costs for marketing and
managing the Security System in the United States and Canada in such
year by a fraction, the numerator of which is the Eastern Net Sales
for such year and the denominator of which is the aggregate gross
amount paid to Alya in such year, for the purchase, installation and
support of the Security System in the United States and Canada, less
normal course of business selling credits for discounts and rebates in
such year and less return adjustments for which a refund has been paid
or credited to the customer, to the extent of the payment or credit in
such year; and
vii. "[PURCHASER 3]'s Return" means an annual cumulative preferential
return to Owner of Fifty Thousand Canadian Dollars (Cdn.$50,000)
(prorated for any partial year);
3.3 DETERMINATION OF FEES AND CALCULATIONS
a. Notwithstanding anything else contained in this Agreement, in no event,
without the prior written consent of the applicable Joint Venturer, will
fees or other amounts for the Security System within such Joint Venturer's
Territory:
i. be set below competitive prices prevailing in the market for similar
products or services as determined by Manager acting in the best
interests of such Joint Venturer; or
ii. be discounted for any other consideration granted to Manager, its
affiliates or associates that is not provided to such Joint Venturer;
and
b. All amounts to be determined for the purposes of the calculations required
pursuant to this Article 3 will be determined in accordance with United
States generally accepted accounting principles consistently applied from
year to year and consistently applied between the Security System sold by
Manager hereunder and the other services sold by Manager outside the scope
of this Agreement.
3.4 TIMING AND PAYMENT OF DISTRIBUTIONS
Amounts payable to each Joint Venturer for a year pursuant to Sections 3.1
and 3.2 will be paid within 60 days following each calendar year end.
3.5 SET OFF
Manager will have the right to set off amounts payable by Manager to a
Joint Venturer under this Agreement against amounts payable to Manager by such
Joint Venturer under the Joint Venturer's Note except that Manager will have no
right of set off and will pay the following amounts to such Joint Venturer
without regard to the equities between Manager or its affiliates and such Joint
Venturer:
i. amounts payable to such Joint Venturer pursuant to Subsections 3.1
a.ii. and 3.1 b. ii. or 3.2 a.ii. and 3.2 b. ii., as applicable, for
his retention; and
ii. amounts payable by such Joint Venturer as sales taxes or goods and
services taxes, which amounts will be remitted forthwith upon their
being due, by Manager to the appropriate authorities on behalf of such
Joint Venturer.
3.6 REPORTS
a. Manager will give each Joint Venturer, on a confidential basis, annual
reports within 90 days following the end of each fiscal year, setting forth
the details in respect of all sales and support of the Security System in
such Joint Venturer's Territory during such year, including the name and
address of all Customers, the amount and type of all fees and other amounts
payable to date, potential Customers and projected revenues in the
Territory. Manager will give each Joint Venturer, on a confidential basis,
quarterly reports within forty-five (45) days following the end of each
fiscal quarter, which quarterly reports shall set forth Gross Sales and Net
Sales received by Manager from Customers in the Territory for the
immediately preceding quarter.
b. In addition, Manager will give each Joint Venturer, on a confidential
basis, within 90 days following the end of each calendar year for the
second, third and fourth quarters of the preceding year and for the first
quarter of the current year, the detailed calculations necessary to
establish Gross Sales, Net Sales, Expenses, Overhead and Administrative
Costs and Net Revenues including, without limitation, the component parts
thereof, annually, with respect to such Joint Venturer's Territory.
3.7 FINANCIAL STATEMENTS
Manager will provide to each Joint Venturer the following financial
statements, for the business pertaining to the Security System within such Joint
Venturer's Territory, annually, within 90 days following the end of each fiscal
year of Manager:
i. the annual reports referred to in Section 3.6;
ii. an audited income statement; and
iii. an audited balance sheet.
3.8 BOOKS AND RECORDS
Manager will keep and maintain complete and accurate books and records
related to the business of selling the Security System in each of the Western
Territory and the Eastern Territory, separate and apart from the books and
records maintained for its own sales or other business. These will include
records of all sales and support of the Security System in each Territory, all
costs of providing the Security System and the appropriate fees accruing and
collected. These books and records will be maintained according to U.S.
generally accepted accounting principles and practices respecting all matters
pertinent to this
Agreement. Each Joint Venturer will have the right, at his own expense, to
audit the books and records of Manager pertaining to marketing the Security
System in such Joint Venturer's Territory, and the performance of its other
obligations hereunder, once in respect of each year. For this purpose, each
Joint Venturer or its nominee will have, during normal business hours, access
to and the right to copy and remove copies of all books and accounting
records relating to the calculation of fees accrued and collected from the
sale of the Security System in such Joint Venturer's Territory. All
information obtained by such Joint Venturer or its nominee will be subject to
the confidentiality obligations of this Agreement.
3.9 TAXES
a. Manager will charge and collect from Customers any and all taxes of any
type that are imposed on the use, sale or support of the Security System in
the Territory by Manager by any federal, provincial, local or any other
taxing authority in which the Security System is sold and Manager will pay
and duly remit on a timely basis to the appropriate taxation authority the
tax so charged and collected;
b. Manager is responsible to withhold and remit on a timely basis the amount
of any income, sales or any other tax imposed on the Management Fee or any
other amount paid or credited to the Manager hereunder by any federal,
provincial, local or any other taxation authority in any country regardless
of whether the obligation to withhold and remit such amount is on the Joint
Venturers;
c. Subject to subsection 3.9(b) hereof, the Joint Venturers and Manager are
required to pay their respective taxes of any type imposed on them for fees
paid or credited to a Joint Venturer or Manager hereunder; and
d. Manager will prepare or provide each Joint Venturer with any and all
information or other documentation on a timely basis required by each Joint
Venturer to enable such Joint Venturer to prepare any return required to be
filed by it with any taxing authority in connection with an amount withheld
or payable in accordance with this Agreement or alternately, the Manager
shall prepare and file such a return on the Joint Venturer's behalf in the
name of such Joint Venturer within the time required to file such return
and shall provide a copy thereof to such Joint Venturer.
ARTICLE 4
GRANT OF RIGHTS
4.1 In consideration of the [PURCHASER 3] Return and the [PURCHASER 4]
Return and other good and valuable consideration (the receipt and sufficiency of
which is acknowledged by each of the Joint Venturers), each of the Joint
Venturers hereby grants Manager, during the term of this Agreement and subject
to the restrictions imposed in this Agreement, an exclusive Territory-wide right
to use, modify, market, distribute and sell the Application Software, the
Intellectual Property and the Documentation in the Territory, but only with
products or services that are not competitive with the Security System.
4.2 The Joint Venturers shall own (each as to an undivided 50% interest)
all right, title and interest in and to any Enhancements within the Territory.
Manager shall retain the exclusive right to use, market, distribute and sell, in
all regions of the world other than the Territory, any Enhancement. Any
modification to the Application Software which does not constitute an
Enhancement will be owned by Manager. Any modification to the Intellectual
Property or the Documentation that does not relate to an Enhancement will be
owned by Manager.
4.3 During the term of this Agreement, neither Manager nor any of its
affiliates or associates will, directly or indirectly, market, distribute or
sell any product or service within the Territory, which product or service
directly or indirectly competes with the Security System. Nothing precludes
Manager from selling the O.P.E.N.cortex platform and associated hardware as a
stand-alone development platform.
4.4 Manager will have, upon termination of this Agreement with respect to
[PURCHASER 3] in the circumstances described below, an exclusive, Eastern
Territory-wide paid up right to use market, promote, distribute and sell the
Application Software in accordance with Section 4.1, which right for greater
certainty shall only pertain to products or services that are not competitive
with the Security System:
a. upon termination of this Agreement with respect to [PURCHASER 3] pursuant
to Subsection 5.4, if Manager is not then in default of this Agreement; or
b. upon termination of this Agreement with respect to [PURCHASER 3], pursuant
to Section 5.3, if Manager pays [PURCHASER 3], an amount calculated as the
difference between Four Hundred Thousand Canadian Dollars (Cdn.
$400,000) and the amount of [PURCHASER 3]'s Return credited to [PURCHASER
3] to the date of termination.
4.5 Manager will have, upon termination of this Agreement with respect
to [PURCHASER 4] in the circumstances described below, an exclusive, Western
Territory-wide, paid up right to use, market, promote, distribute and sell
the Application Software in accordance with Section 4.1, which right for
greater certainty shall only pertain to products or services that are not
competitive with the Security System:
a. upon termination of this Agreement with respect to [PURCHASER 4] pursuant
to Subsection 5.4, if Manager is not then in default of this Agreement; or
b. upon termination of this Agreement with respect to [PURCHASER 4], pursuant
to Section 5.3, if Manager pays [PURCHASER 4], an amount calculated as the
difference between Four Hundred Thousand Canadian Dollars (Cdn. $400,000)
and the amount of [PURCHASER 4]'s Return credited to [PURCHASER 4] to the
date of termination.
4.6 PROTECTION OF PROPRIETARY RIGHTS
Each party hereto shall promptly notify the other party in writing of
any infringement by a third party of a patent, copyright or trademark or
misappropriation of any trade secret relating to the Assets within the
Territory. In the case of an infringement, misappropriation or other action
described herein, Manager is hereby authorized to, but shall not be required
to, institute an action against the infringer, misappropriator or other third
party, and to defend or prosecute such action in whatever manner deemed
appropriate by Manager, in its sole discretion. If Manager elects not to
commence such an action, then either Joint Venturer may, but shall not be
required to, institute such an action, at his own expense. Each Joint
Venturer shall cooperate with and generally assist Manager in taking any
action authorized hereunder. This provision shall survive any termination or
expiration of this Agreement, to the extent Manager retains any license to
the Application Software.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM
This Agreement will be for an initial term expiring December 22, 2007,
(the "initial term") and may be extended, for two additional two year terms,
each term expiring on the
respective second anniversary date of the beginning of such term.
5.2 AUTOMATIC EXTENSION
The initial term or any extension term of this Agreement will be
automatically extended to the next extension term without notice or election
by Manager. Manager may, during any extension term, terminate this Agreement
as to the Western Territory and/or the Eastern Territory on 90 days notice
given to each affected Joint Venturer.
5.3 TERMINATION
Each Joint Venturer may, during the initial term or any extension term,
terminate this Agreement as to his Territory as follows:
a. upon 10 days written notice by such Joint Venturer to Manager of a breach
of any of Manager's obligations to pay such Joint Venturer under this
Agreement, subject to Section 3.5, if such breach has not been remedied;
b. upon 30 days written notice by such Joint Venturer to Manager of a material
breach by Manager (other than a failure to pay referred to in Subsection
5.3 a.) of this Agreement if such breach is not remedied within the 30 day
notice period, or if steps are not being taken by Manager within the 30
days notice period which can reasonably be expected to remedy such breach
within 60 days of the date of the notice; or
c. forthwith upon written notice to Manager, in the case of the petitioning
into bankruptcy of Manager, the appointment of a receiver or the
liquidation of the business and affairs of Manager or the commencement of
or ordering of the winding-up of the business and affairs of Manager.
5.4 TERMINATION BY NON-RENEWAL
Either Joint Venturer may, at the end of the initial term or during any
extension term, terminate this Agreement with respect to such Joint Venturer
and his Territory upon 90 days notice given to Manager and upon payment of
all outstanding principal and accrued and unpaid interest under the Note.
5.5 RIGHTS AND DUTIES ON TERMINATION
Should the Agreement terminate with respect to any Joint Venturer and his
respective Territory pursuant to this Article 5, Manager will:
a. provide each Joint Venturer with respect to whom this Agreement has
terminated with copies of any additional Enhancements not yet delivered to
Agent in the Province of Alberta or deposited into escrow;
b. forthwith give the Security Agent under the Security Agent Agreement notice
to release all deposited source code and other materials to Agent in the
Province of Alberta to hold in trust for the Joint Venturer with respect to
whom this Agreement has terminated and refrain from objecting to the
release of the source code and other materials by the Security Agent;
c. cease marketing, distributing and selling the Security System in any
Territory for which this Agreement has terminated and, subject to Section
4.4 and 4.5, the rights of the Manager under Section 4.1 shall also
terminate;
d. pay all accrued fees to each Joint Venturer with respect to whom this
Agreement has terminated (subject to Manager's right to set-off amounts
owed to Manager by such Joint Venturer in accordance with Section 3.5) and
provide a full accounting to such Joint Venturer for fees payable to such
Joint Venturer under this Agreement; and
e. within 90 days of the termination date, provide to each Joint Venturer with
respect to whom this Agreement has terminated, a final report setting forth
the details in respect of all sales and support of the Security System in
the applicable Territory during the period from the end of the last year to
the termination date including the amount and type of all fees and other
amounts payable to date, potential Customer and projected revenues, and all
other information necessary and relevant to marketing and supporting the
Security System, including without limitation, the names and addresses of
Customers of the Security System.
5.6 SURVIVING OBLIGATIONS
Section 5.5 and Articles 6, 7, 8, 9, 10 and 11 will survive the termination
of this Agreement.
ARTICLE 6
OWNERSHIP OF TECHNOLOGY
6.1 OWNERSHIP OF ASSETS
Manager acknowledges that the Joint Venturers collectively own all right,
title and interest in and to the
Assets and the Enhancements in the Territory, including without limitation
all intellectual property rights therein.
ARTICLE 7
LIABILITY
7.1 INDEMNIFICATION BY MANAGER
Manager will be liable to each Joint Venturer for and indemnify and hold
each Joint Venturer harmless from any and all claims, losses, liabilities,
costs, taxes (including penalties and interest thereon), expenses (including
reasonable legal costs of a solicitor) and damages which may arise pursuant
to this Agreement, including without limitation, misrepresentations made by
Manager, improper installation of, improper support of, improper use of or
infringement of any third party right by, the Assets (whether in negligence
or otherwise), failure to comply with Sections 2.2, 2.3 and 3.9 herein or any
other material breach of this Agreement.
7.2 INDEMNIFICATION PROCEDURE
Upon the occurrence of an event giving rise to indemnification hereunder
as a result of a claim, action or cause of action made or brought against the
Joint Venturers or either of them, the Joint Venturers shall (i) give prompt
notice to Manager of such events, (ii) permit Manager's attorneys to handle
and control the defense of such claims, at Manager's expense, and (iii) shall
reasonably cooperate in the defense thereof. Manager agrees herein to assume
the defense of all such claims, demands, actions or causes of action. Either
Joint Venturer may, at his own expense, participate in such defense, provided
however, that, as Manager has agreed herein to assume the defense of such
claims, such participation expenses shall not become part of the
indemnification claim. There shall be no settlements, whether agreed to in
court or out of court, without the prior written consent of Manager and any
Joint Venturer affected thereby, except that Manager may settle a claim
without the consent of a Joint Venturer affected thereby if (i) the
settlement is purely monetary, (ii) Manager hereunder admits in writing its
liability to such Joint Venturer hereunder, and (iii) concurrently with such
settlement, Manager pays the full amount owed thereunder. Notwithstanding
the foregoing, in the event Manager does not assume the defense of any such
claim or litigation in accordance with the terms hereof within the earlier of
(i) thirty (30) days following written notice from a Joint Venturer or (ii)
the due date for response to any complaint filed, then such Joint Venturer
may defend against such claim or litigation in such manner as it may deem
appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to
Manager, on such terms as such Joint Venturer may deem appropriate. In any
action by a Joint Venturer seeking indemnification from Manager in accordance
with the provisions hereof, Manager shall not be entitled to object to the
manner in which such Joint Venturer defended such caim or the amount of or
nature of any such settlement.
7.3 LIMITATION OF LIABILITY
Except with respect to Manager's indemnification obligations relating to
third party claims as set forth in Section 7.1 hereof or a breach of the
confidentiality provisions in Section 8 herein, none of the parties shall be
liable for any indirect, incidental, special or consequential damages
including, without limitation, damages for loss of data, loss of business or
failure to realize expected profits or savings or other economic or
commercial loss of any kind or loss of use of the Application Software or the
Assets or costs of substituted technology or services, whether under any
theory of contract (even in the nature of a breach of a condition or a
fundamental term or a fundamental breach), tort (including negligence or
misrepresentation), strict liability or any other legal or equitable theory,
even if such party has been advised of the possibility thereof, all of which
liability is hereby expressly waived by each party.
ARTICLE 8
CONFIDENTIALITY AND NON-DISCLOSURE
8.1 Each party that receives Confidential Information shall maintain
such Confidential Information in confidence, shall not reveal the same to any
third party (other than its employees, advisors, consultants and agents on a
need to know basis in connection with the receiving party's performance under
this Agreement or the Agreement) and shall not use such Confidential
Information, directly or indirectly, for any purpose other than as required
in the performance of this Agreement or the Application Software Purchase
Agreement.
8.2 All memoranda, notes, records, reports, papers and any other
documents and all copies thereof about any party's business in any way
obtained by any other party pursuant to this Agreement will be the disclosing
party's property and will be returned promptly to the disclosing party upon
termination of this Agreement or at any time upon request. Notwithstanding
the foregoing, all memoranda, notes, records, reports, papers and other
documents which constitute the Assets shall be owned by the Joint Venturers.
8.3 Each of the parties (the "Indemnifying Party") agrees to indemnify
the other (the "Indemnified Party") for
all damages, costs, and expenses (including court costs and reasonable legal
fees) incurred by the Indemnified Party as a result of a failure of the
Indemnifying Party to comply with its obligations under this Article 8.
ARTICLE 9
RIGHT OF FIRST REFUSAL
In the event that either Joint Venturer desires to transfer all or any
part of his interest in the Assets (the "Transferred Interest"), except to
persons acting on his behalf as agents (or as required by operation of law or
other involuntary transfer to do so), such Joint Venturer shall first offer
the Transferred Interest to Manager in accordance with the following
provisions:
a. Such Joint Venturer shall deliver a written notice (the "Notice") to
Manager, stating i. Joint Venturer's bona fide intention to transfer the
Transferred Interest; ii. the purchase price and terms of payment for which
such Joint Venturer proposes to transfer the Transferred Interest; and iii.
the name and address of the proposed transferee;
b. Within sixty (60) days after receipt of the Notice, Manager shall have the
right, but not the obligation, to elect to purchase the Transferred
Interest upon the price and terms of payment designated in the Notice, by
delivering written notice to such Joint Venturer of such election (the
"Election Notice"). If the Notice provides for the payment of non-cash
consideration, Manager may elect to pay the consideration in cash equal to
the good faith estimate of the present fair market value of the non-cash
consideration offered;
c. If Manager elects to purchase or obtain the Transferred Interest designated
in the Notice, then the closing of such purchase shall occur on a date
mutually agreeable or (if the parties cannot agree) on a date within sixty
(60) days after delivery of the Election Notice, and each of the selling
Joint Venturers and Manager shall execute such documents and instruments
and make such deliveries as may be reasonably required to consummate such
purchase and sale; and
d. If Manager elects not to purchase or acquire the Transferred Interest, then
such selling Joint Venturer may transfer the Transferred Interest to the
transferee proposed in the Notice, provided that such transfer: i. is
completed within sixty (60) days after the expiration of Manager's right to
elect to purchase the Transferred Interest, ii. is made on terms no less
favorable to such Joint Venturer than as designated in the Notice, and iii.
complies with all of the terms and
conditions of this Agreement, the Application Software Purchase Agreement
and the Note. If the Transferred Interest is not so transferred, such Joint
Venturer must give notice in accordance with this Section prior to any
other or subsequent transfer of the Transferred Interest.
ARTICLE 10
ARBITRATION
10.1 ARBITRATION OF DISPUTES
Any dispute arising between the parties under this Agreement will be
settled by initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot
resolve the dispute within 30 days of escalation of the dispute to such
level, then the parties agree that such dispute shall be settled by final
and binding arbitration in Calgary, Alberta, before a single arbitrator
mutually acceptable to each participating Joint Venturer and Manager, in
accordance with the arbitration legislation in Alberta then existing, except
as otherwise specifically provided herein. The arbitrator shall apply the
laws of the province of Alberta and the laws of Canada for the purposes of
construing and enforcing this Agreement and any dispute arising hereunder.
The arbitration award shall be specifically enforceable; judgment upon any
arbitration award may be entered in any court with personal jurisdiction over
the parties and subject matter of the disputes. Unless otherwise determined
by the arbitrator, all expenses in connection with such arbitration will be
divided equally between the parties, with the exception of expenses of
counsel, witnesses and employees of the parties which will be borne by the
parties incurring them. Notwithstanding anything to the contrary herein,
either party will always be entitled to seek preliminary or provisional
remedies or release (including attachments and preliminary injunctions) from
any court of competent jurisdiction.
ARTICLE 11
GENERAL
11.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, such provision shall be construed so as to most
closely reflect the original intent of the parties, but still be enforceable,
and the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired thereby. The
invalidity, illegality or unenforceability of any provision or part
thereof contained in this Agreement in any jurisdiction will not affect or
impair such provision or part thereof or any other provisions of this
Agreement in any other jurisdiction.
11.2 FURTHER ASSURANCES
The parties will, at any time and from time to time at the request of
the other, execute and deliver any and all such further instruments or
assurances as may be necessary or desirable to give effect to the terms and
conditions of this Agreement.
11.3 COUNTERPART AND FACSIMILE EXECUTION
This Agreement, and any and all ancillary documents contemplated herein,
may be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Agreement and will be binding on the parties
as if they had originally signed one copy of this Agreement.
11.4 ASSIGNMENT
a. Subject to Article 9, either Joint Venturer may assign all or any part of
its interest in this Agreement or the Assets, provided however, that any
assignment to any person who is carrying on a business immediately prior to
such assignment that is in direct competition with Manager, shall require
the prior written consent of Manager. Any assignment shall be effected by:
i. giving written notice of the name and address of the assignee; and
ii. by delivering to Manager a written undertaking of the assignee,
acknowledging receipt of a copy of this Agreement and agreeing to be
bound by the terms and conditions of this Agreement; and
b. Manager may not assign this Agreement, without the prior written consent of
each Joint Venturer, except that Manager may assign this Agreement in
whole, but not in part, and only with an assignment of all of its rights
and obligations under the Note and the Security Agent Agreement, to (i) any
corporation, partnership or other entity which is controlled by,
controlling or under common control with, Manager; or (ii) a purchaser of
all or substantially all the assets of Manager, or any person or entity
into which Manager is merged or consolidated by:
i. by giving written notice of the name and address of the assignee; and
ii. by delivering to each Joint Venturer a written undertaking of the
assignee acknowledging receipt of a copy of this Agreement and
agreeing to be bound by the terms and conditions of this Agreement.
11.5 BINDING EFFECT
This Agreement and all of its provisions will enure to the benefit of
the parties and their respective successors and permitted assigns, and will
be binding upon the parties and their respective successors and permitted
assigns. The expressions the "Manager", "Joint Venturer" and "Joint
Venturers" as used herein will include Manager's and Joint Venturers'
permitted assigns whether immediate or derivative, respectively.
11.6 RELATIONSHIP OF THE PARTIES
This Agreement does not constitute a joint venture between the Joint
Venturers on one hand and the Manager on the other hand, or such other
business arrangement and any agreement between the parties as to joint
business activities will be set forth in subsequent written agreements. The
Joint Venturers are joint venturers of each other, but otherwise each party
is acting immediately and not as partner or joint venturer with the other
parties for any purpose. Except as provided in this Agreement, none of the
parties will have any right, power or authority to act or to create any
obligations, express or implied, on behalf of the other parties hereto.
11.7 TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
11.8 AMENDMENT
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise.
11.9 COSTS
Each party hereto will bear its-own legal, accounting and other costs
relating to all matters involved in this transaction.
11.10 CONFIDENTIALITY
The parties will treat this Agreement and all information relating to
this Agreement and the transactions contemplated by this Agreement
confidentially and no public disclosure by either party will be made without
the prior approval of the other, not to be unreasonably withheld, except (i)
to employees, advisors, consultants and agents on a need to know basis in
connection with performance under this Agreement or the Application Software
Purchase Agreement, or (ii) as legally required by a party to satisfy
disclosure obligations to shareholders and regulators, in which case
simultaneous notice of such disclosure will be given to the other party.
11.11 ENTIRE AGREEMENT
This Agreement, the Application Software Purchase Agreement, the Note,
the Security Agent Agreement and the exhibits and schedules referred to in
each of the foregoing, constitute the entire Agreement among the parties and
SUPERSEDE all proposals, letters of intent, oral or written, and all other
communications among them relating to the subject matter hereof.
11.12 EQUITABLE REMEDIES
The parties acknowledge that money damages would not be a sufficient
remedy for certain violations of the terms of this Agreement and,
accordingly, either party will be entitled to specific performance and
injunctive relief as remedies for such violations of the Agreement by the
other party. These remedies will not be exclusive remedies but will, in
addition to all other remedies, be available to such party, at law or equity.
11.13 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein (regardless of either jurisdiction's or any other
jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising in
connection herewith, shall be arbitrated or litigated in Calgary, Alberta,
Canada, and each party hereby waives any right it may have to assert the
doctrine of Forum Non Conveniens or to object to venue. The parties each
hereby stipulate that the courts located in Calgary, Alberta, shall have
personal jurisdiction and venue over each party for the purpose of litigating
any such dispute, controversy or proceeding arising out of or related to this
Agreement.
11.14 NOTICES
Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given
personal delivery, international overnight courier service, or by facsimile
(subject of confirmation of receipt), addressed to the respective party at
the applicable address set forth above, or to any party at such other
addresses as shall be specified in writing by such party to the other parties
in accordance with the terms and conditions of this Section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or two (2) business days following deposit with any international overnight
courier service, or upon confirmation of receipt if sent by facsimile
transmission.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed by their duly authorized representatives as of the date first above
written.
ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
-----------------------------------
Milan Carnogursky, President
-----------------------------------
(Print Name and Title)
/s/ [PURCHASER 3]
-----------------------------------
[PURCHASER 3]
/s/ [PURCHASER 4]
-----------------------------------
[PURCHASER 4]
SCHEDULE A TO THE MANAGEMENT AND MARKETING AGREEMENT
WESTERN TERRITORY:
1. British Columbia
2. Manitoba
3. Saskacchewan
4. Quebec
EASTERN TERRITORY:
1. Alberta
2. Ontario
3. New Brunswick
4. Nova Scotia
5. ▇▇▇▇▇ ▇▇▇▇▇▇ Island
6. Newfoundland
7. Northwest Territories
8. Yukon
[PURCHASER 4]
6% SECURED TERM NOTE
IN FAVOR OF
ALYA INTERNATIONAL, INC.
6% SECURED TERM NOTE MADE AS OF DECEMBER 22, 1997.
PRINCIPAL SUM: CDN.$1,215,000
---------------------
Due Date: December 22, 2007,
subject to Section 1.1.c.
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Note, unless the context otherwise requires:
a. "Application Software Purchase Agreement" means the application software
purchase agreement made as of December 22, 1997, between [AGENT] as agent
on behalf of [PURCHASER 3] and [PURCHASER 4] as joint venturers (each with
an undivided 50% interest) and the Holder;
b. "Due Date" shall be December 22, 2007, provided that any renewal or
extension of the Management and Marketing Agreement shall automatically
extend the Due Date for the same period, and subject to acceleration
pursuant to Section 5.4 of the Management and Marketing Agreement;
c. "Default" means any event which after notice or lapse of time or both,
would constitute an Event of Default;
d. "Event of Default" means any of the events specified in Section 8.1;
e. "Holder" means Alya International, Inc. or its permitted assignees;
f. "Interest Amount" means the amount equal to the annual interest payable
under this Note;
g. "Management and Marketing Agreement" means the management and marketing
agreement dated December 22, 1997, among Alya International Inc.,
[PURCHASER 3] and [PURCHASER 4];
h. "Note" means this 6% Secured Term Note as originally executed, or as
amended or supplemented as herein provided;
i. "Person" includes any individual, firm, corporation, company, joint
venture, partnership, association, trust or unincorporated body of persons;
j. "Principal Sum" has the meaning specified above;
k. "Sale Proceeds" has the meaning specified in Section 8.4(b);
l. "Product Proceeds" means the amounts paid or credited to [PURCHASER 4]
under the Management and Marketing Agreement which are allocated to pay the
accrued interest and principal sum outstanding under the Note.
m. "Security Agent Agreement" means the Security Agent Agreement entered into
by [PURCHASER 4], the Holder and Burnet, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, as security
agent, on the date hereof for the purpose of holding the Purchased Assets
pursuant to the terms hereof; and
n. "Purchased Assets" means the Purchased Assets, as defined in the
Application Software Purchase Agreement;
o. "[PURCHASER 4]" means [PURCHASER 4] and his permitted assignees;
p. "year" means a calendar year, ending December 31.
1.2 INTERPRETATION
a. The terms "this Note", "hereof" "thereunder" and similar expressions refer
to this Note and not to any particular Section, Subsection or other portion
of this Note and include any agreement amending or supplementing this Note.
Unless something in the subject matter or context is inconsistent
therewith, reference herein to Sections and Subsections are to Sections and
Subsections of this Note;
b. Except as specifically stated in this Agreement, all references to currency
are to Canadian dollars. Any currency conversion required or contemplated
by this Agreement with respect to Canadian and United States of America
currency will be based on the rate published by the Bank of Canada as the
noon spot rate of exchange applicable for such currencies on the business
day immediately before the date of conversion;
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Note the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where
the fact or context so requires and the provisions hereof; and
d. Headings are inserted in the Note for convenience of reference only and are
not intended to affect the Note's interpretation.
ARTICLE 2
PROMISE TO PAY
2.1 [PURCHASER 4], for value received, and in consideration of these
premises hereby acknowledges himself indebted to the Holder and promises and
covenants with the Holder, subject to Section 8.3, to pay to the Holder:
a. the Principal Sum outstanding from time to time;
b. interest on the Principal Sum outstanding from time to time, such interest
to be calculated, payable and paid as set forth in Section 3.2; and
c. all other moneys which may be owing by [PURCHASER 4] to the Holder pursuant
to this Note, subject to the terms and conditions of this Note.
ARTICLE 3
PAYMENT OF PRINCIPAL AND INTEREST
3.1 PRINCIPAL
a. The Principal Sum outstanding will be paid in full on the Due Date; and
b. Prepayment of the Principal Sum outstanding, from time to time for each
year will be made annually, within sixty (60) days of receipt of Product
Proceeds for the year, if the amount of Product Proceeds received for such
year exceeds the amount of accrued and unpaid interest as at the end of
such year. The amount of the annual prepayment, if any, against the
Principal Sum outstanding from time to time will be equal to the difference
between the Product Proceeds received for the year and the amount of
accrued and unpaid interest as at the end of such year.
3.2 INTEREST
a. Interest on the Principal Sum outstanding from time to time pursuant to
this Note will accrue from the date hereof up to and including the date of
payment at the rate of 6% per annum calculated, but not compounded, yearly,
and not in advance;
b. Interest accrued and unpaid at the Due Date will be paid on the Due Date;
c. Interest accrued and unpaid at the end of each year, will be paid annually
within thirty (30) days of receipt by [PURCHASER 4] of Product Proceeds for
the year, to the extent of the Product Proceeds, if any;
d. Accrued interest, if any, that is not paid in any year will continue to
accrue and be outstanding until paid but will not be added to the Principal
Sum payable under this Note and will not bear interest; and
e. The covenant of [PURCHASER 4] to pay interest at the rate provided herein
will not merge in any judgment in respect of any obligation of [PURCHASER
4] hereunder and such judgment will bear interest as aforesaid and be
payable in the same manner.
3.3 PRINCIPAL AND INTEREST ACCELERATION
Notwithstanding Section 3.2 c., but subject to the limitation of liability
set forth in sections 8.3 and 8.4, upon the occurrence of a Management Agreement
Termination Event, the outstanding Principal Sum and accrued and unpaid interest
at the Management Agreement Termination Date will be repaid within 30 days of
the Management Agreement Termination Date.
For the purposes of Section 3.3, the following terms have the meanings set
out below:
"Management Agreement Termination Date" means the date of the occurrence of
a Management Agreement Termination Event; and
"Management Agreement Termination Event" means the termination of the
Management and Marketing Agreement, with respect to the Eastern Territory,
pursuant to Article 5 of the Management and Marketing Agreement.
ARTICLE 4
ASSIGNMENT
4.1 ASSIGNMENT OF PRODUCT PROCEEDS
[PURCHASER 4] hereby assigns the Product Proceeds to the Holder as security
for payment of [PURCHASER 4]'s obligations to the Holder under this Note.
The provisions of this Section 4.1 and the rights of the Holder hereunder
will, notwithstanding any other provisions of this Note, wholly terminate on the
earlier of the date upon which this Note is retired or the indebtedness
hereunder is extinguished.
ARTICLE 5
SECURITY
5.1 SECURITY FOR THE NOTE
In consideration for the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
[PURCHASER 4], and the due payment of all principal and interest on this Note
from time to time outstanding and on all other monies from time to time owing
on the security hereof and to secure the due performance by [PURCHASER 4] of
obligations herein contained, [PURCHASER 4] does hereby grant, assign,
mortgage, pledge, charge, hypothecate and create a security interest in, to
and in favor of the Holder in an undivided fifty percent (50%) interest in
the Purchased Assets provided that the charge hereby created will in no way
hinder or prevent [PURCHASER 4] at any time and from time to time (until an
Event of Default occurs pursuant to Article 8 hereof and the Holder will have
determined to enforce the same) from managing, developing, utilizing or
dealing with all or any part of the subject matter of the said charge in the
ordinary course of his business and for the purpose of carrying on or
extending the same or from entering into the Management and Marketing
Agreement; provided further that during any period in which there is any
outstanding principal or any accrued and unpaid interest on this Note,
[PURCHASER 4] will not, and [PURCHASER 4] hereby covenants that he will not,
without the prior written consent of the Holder, sell or transfer all or any
part of his undivided fifty percent (50%) interest in the Purchased Assets,
or make, give, create, assume or allow to subsist any mortgage, pledge,
hypothecation, lien, charge, encumbrance, assignment or other security,
whether fixed or floating, upon the Purchased Assets or any part thereof.
TO HAVE AND TO HOLD such assets and interests and all rights hereby
conferred unto the Holder, its successors and assigns forever, but in trust
nevertheless, for the uses and purposes and with the powers and authorities
subject to the terms and conditions mentioned and set forth in this Note.
5.2 FURTHER ASSURANCES
[PURCHASER 4] will forthwith, and from time to time at his sole cost and
expense, execute and do or cause to be executed and done all deeds, documents
and things which, in the reasonable opinion of the Holder, are necessary or
advisable for giving the Holder (so far as may be possible under the local
laws of the places where the Purchased Assets are situated) a valid mortgage,
pledge, charge and hypothecation of the nature herein specified upon the
Purchased Assets to secure payment of monies intended to be secured by this
Note, and for better assuring, mortgaging, pledging, charging, assigning,
hypothecating and confirming unto the Holder the Purchased Assets, and for
conferring upon the Holder such power of sale and other powers over the
Purchased Assets as are hereby expressed to be conferred.
5.3 DEFEASANCE
The Holder will at the written request and sole cost and expense of
[PURCHASER 4] cancel and discharge the lien of this Note and execute and
deliver to [PURCHASER 4] such deeds or other instruments as will be requisite
to discharge the lien hereof and to reconvey to [PURCHASER 4] any part of the
Purchased Assets subject to the lien of this Note and to release [PURCHASER 4]
from the covenants herein contained and upon delivery of such written request
to the Holder, rights hereby granted will cease, terminate and be void,
provided that [PURCHASER 4] will have satisfied the payment of all principal
monies, and interests due or to become due on this Note.
5.4 POSSESSION AND USE OF PURCHASED ASSETS
Until an Event of Default occurs pursuant to Article 8 hereof and the
Holder will have determined to enforce the same pursuant to the provisions of
this Note, [PURCHASER 4] will, subject however to the express terms hereof,
be suffered and permitted to possess, manage, develop, operate and enjoy the
Purchased Assets, and freely to control the conduct of his business and to
take and use any income, rents, issues and profits thereof in the same
manner, to the same extent and with the same effect, except as provided
herein, as if this Note had not been made.
5.5 ESCROW
Notwithstanding Section 5.4 hereof the source code version of the
Application Software, as defined in the Application Software Purchase
Agreement, will be held by the Security Agent pursuant to the terms and
conditions of the Security Agent Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 [Purchaser 4]'S REPRESENTATIONS AND WARRANTIES
[PURCHASER 4] hereby represents and warrants to the Holder for the benefit
of the Holder as follows:
a. [PURCHASER 4] has the requisite power and authority to execute and deliver
this Note, to consummate the transactions contemplated hereby and to duly
observe and perform all his covenants and obligations herein set forth;
b. the execution and delivery of this Note does not and will not conflict with
or result in a breach of or violate any of the terms, conditions or
provisions of any terms, conditions or provisions of any law, judgment,
order, injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which [PURCHASER 4] is
subject or constitute or result in a default under any agreement, contract
or commitment to which [PURCHASER 4] is a party;
c. the execution and delivery of this Note will not constitute an event of
default or an event which, with the giving of notice or lapse of time or
both, would constitute an event of default, under any agreement, contract,
indenture or other instrument relating to any indebtedness (whether for
borrowed money or otherwise) of [PURCHASER 4] which would give any party to
any such agreement, contract, indenture or other instrument the right to
accelerate maturity for the payment of any monies under any such agreement,
contract, indenture or other instrument; and
d. no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by [PURCHASER 4] with any such governmental
authority, regulatory body or court is required in order for [PURCHASER 4]:
i. to incur the obligations expressed to be incurred by [PURCHASER 4] in
or pursuant to this Note;
ii. to execute and deliver all documents and instruments to be delivered
by [PURCHASER 4] pursuant to this Note;
iii. to duly perform and observe the terms and provisions of this Note; and
iv. to render this Note legal, valid, binding and enforceable against
[PURCHASER 4] in accordance with its terms.
ARTICLE 7
COVENANTS OF [PURCHASER 4]
[PURCHASER 4] hereby covenants and agrees with the Holder for the benefit
of the Holder as follows:
7.1 TO PAY PRINCIPAL AND INTEREST
[PURCHASER 4] will duly and punctually pay or cause to be paid to the
Holder the Principal Sum and accrued interest thereon and all other moneys from
time to time owing hereunder, on the dates, at the places, in the moneys and in
the manner mentioned herein.
7.2 TO CARRY ON BUSINESS
[PURCHASER 4] will carry on and conduct his business involving the
Purchased Assets in a proper and efficient manner; and at all reasonable
times he will furnish or cause to be furnished to the Holder or its duly
authorized agent or attorney such information relating to the business of
[PURCHASER 4]involving the Purchased Assets as the Holder may reasonably
require.
ARTICLE 8
DEFAULT
8.1 EVENTS OF DEFAULT
If any one or more of the following events has occurred and is continuing:
a. the non-payment when due of the Principal Sum, accrued interest thereon and
any other amounts due under this Note;
b. the breach by [PURCHASER 4] of any material provision of this Note;
c. any representation or warranty made by [PURCHASER 4] herein or in any
financial statements, reports or other documents supplied to the Holder by
[PURCHASER 4] hereunder is false, incorrect or inaccurate in any materially
adverse respect; or
d. If proceedings for bankruptcy or receivership are commenced, unless such
proceedings are being actively and diligently contested by [PURCHASER 4] in
good faith;
provided that [PURCHASER 4] will not have remedied such default within thirty
(30) days (ten (10) days in the case of a monetary default) following receipt by
[PURCHASER 4] from the Holder of notice of the default, the Holder may, by
written notice declare the Principal Sum and accrued interest thereon and any
other amounts payable to it under this Note to be immediately due and payable
without further presentation, notice or demand and [PURCHASER 4] will
immediately pay to the Holder all indebtedness of [PURCHASER 4] owing to it
pursuant to this Note.
8.2 REMEDIES
If an Event of Default has occurred and is continuing and [PURCHASER 4] has
failed forthwith to pay the amounts owing hereunder, or remedy any breach of any
of his obligations secured by this Note as herein outlined, the Holder shall
have all of the rights and remedies of a secured party under the California
Uniform Commercial Code or other applicable California law then in effect.
Without limiting the generality of the foregoing, the Holder, in addition to any
other rights and remedies it may have, in its own name will be entitled and
empowered to sell the Purchased Assets as provided in Section 8.4 below, as well
as institute action or proceeding at law or in equity for the collection of the
sums so due and unpaid and may prosecute any such action or proceedings to
judgment or final decree, and may enforce any such judgment or final decree
against [PURCHASER 4] or other obligor upon this Note and collect in the manner
provided by law out of the Purchased Assets, as provided for in this Note
wherever situated the monies adjudged or decreed to be payable.
8.3 LIMITED RECOURSE
Notwithstanding anything else contained in this Note, the Holder covenants
and agrees with [PURCHASER 4] that all of its recourse rights, powers and
remedies for payment of any obligations of [PURCHASER 4] to the Holder under
this Note is limited to the Product Proceeds and the Sale Proceeds which will be
applied in the following order of priority:
a. to pay interest due and payable under this Note;
b. to pay the Principal Sum outstanding from time to time; and
c. to pay any other amounts owing by [PURCHASER 4] to the Holder under this
Note.
8.4 SALE OF PURCHASED ASSETS
a. If an Event of Default has occurred and is continuing as provided in
Section 8.2 hereof or the indebtedness created hereby either with respect
to principal or interest remains in whole or in part unpaid as of the Due
Date, the Holder will be entitled and empowered to dispose of the Purchased
Assets or any part thereof: i. at public sale, which public sale may be
conducted at the location designated by the Holder for cash or on credit
and on such terms as the Holder may in its sole discretion, elect after
giving at least five days notice of the time and place of sale in the
manner provided by law, or ii. at private sale upon like notice for cash or
on credit and on such other terms as the Holder may in its sole discretion
elect;
b. The proceeds of the sale ("Sale Proceeds") of the Purchased Assets will be
allocated as follows:
i. to reimburse the Holder (to a maximum of 20% of the gross proceeds of
sale), for all costs and expenses incurred as the result of an Event
of Default and in connection with re-possession, storing, advertising,
marketing and selling the Purchased Assets including, without
limitation, reasonable attorneys' fees and costs;
ii. to the Holder as a reduction of amounts owing by [PURCHASER 4] under
this Note allocated firstly as to interest and the remainder as to
principal; and
iii. the balance to [PURCHASER 4];
c. Any balance owing by [PURCHASER 4] under this Note after the allocation of
the Sale Proceeds will be forgiven by the Holder and [PURCHASER 4] will
have no further liability under this Note; and
d. This Note is non-negotiable. The Holder will have no right or recourse
against any legal person in respect of the covenants contained in this Note
other than, subject to Section 8.3, [PURCHASER 4], and his assigns but only
severally and not jointly and only to the extent of each person's interest
in the Purchased Assets.
8.5 LIMITATION OF LIABILITY
Notwithstanding anything contained in this Note, [PURCHASER 4] will not
have any obligation to pay the Principal Sum outstanding from time to time under
the Note if the Management and Marketing Agreement is terminated as a result of
the occurrence of an event described in Section 5.3 thereof.
ARTICLE 9
WAIVER
9.1 Either the Holder or [PURCHASER 4] may waive any breach of any of the
provisions contained in this Note or any default by the other person in the
observance or performance of any covenant, condition or obligation required to
be observed or performed by such person under the terms of this Note, provided
any such waiver shall only be effective upon the delivery of written notice by
the waiving party. No waiver, consent, act or omission by the Holder or
[PURCHASER 4] will extend to or be taken in any manner whatsoever to affect any
subsequent breach or default or the rights resulting therefrom and no waiver or
consent by the Holder or [PURCHASER 4] will be binding unless it is in writing.
The inspection or approval by the Holder or [PURCHASER 4] of any document or
matter or thing done by the other will not be deemed to be a warranty or holding
out of the adequacy, effectiveness, validity, or binding effect of such
document, matter or thing or a waiver of the obligations of the other.
ARTICLE 10
TIME OF THE ESSENCE
10.1 Time will be of the essence of this Note.
ARTICLE 11
NOTICES
11.1 Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given
personal delivery, international overnight courier service, or by facsimile
(subject of confirmation of receipt), addressed to the respective party at the
applicable address set forth above, or to any party at such other addresses as
shall be specified in writing by such party to the other parties in accordance
with the terms and conditions of this Section. All notices, requests or
communications shall be deemed effective upon personal delivery, or two (2)
business days following deposit with any international overnight courier
service, or upon confirmation of receipt if sent by facsimile transmission.
ARTICLE 12
GENERAL
12.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, such provision shall be construed so as to most closely
reflect the original intent of the parties, but still be enforceable, and the
validity, legality or enforceability of such remaining provisions or parts
thereof will not in any way be affected or impaired thereby. The invalidity,
illegality or unenforceability of any provision or part thereof contained in
this Agreement in any jurisdiction will not affect or impair such provision or
part thereof or any other provisions of this Agreement in any other
jurisdiction.
12.2 FURTHER ASSURANCES
[PURCHASER 4] and the Holder will, at any time and from time to time at the
request of the other, execute and deliver any and all such
further instruments or assurances as may be necessary or desirable to give
effect to the terms and conditions of this Note.
12.3 COUNTERPART EXECUTION
This Note, and any and all ancillary documents contemplated herein, may
be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Note and will be binding on [PURCHASER 4]
and the Holder as if they had originally signed one copy of this Note.
12.4 ASSIGNMENT
[PURCHASER 4] may assign all or any part of its interest in Purchased
Assets, except that any assignment to any person who is carrying on a
business immediately prior to such assignment that is in direct competition
with Holder, shall require the prior written consent of the Holder. An
assignment shall be effected by:
a. by giving written notice of the names and addresses of the assignees; and
b. by delivering to the Holder a written undertaking of the assignees
acknowledging receipt of a copy of the Note and agreeing to be bound by the
terms and conditions of the Note.
The Holder may assign this Note in whole, but not in part, and only with an
assignment of all of its rights and obligations under, and as permitted by, the
Management and Marketing Agreement by giving [PURCHASER 4] written notice of the
name and address of the assignee.
12.5 BINDING EFFECT
This Note and all of its provisions will enure to the benefit of the Holder
and [PURCHASER 4] and will be binding upon the Holder and [PURCHASER 4]. The
expressions the "Holder" and the "[PURCHASER 4]" as used herein will include the
Holder's and [PURCHASER 4]'s assigns, whether immediate or derivative,
respectively.
12.6 AMENDMENT
This Note may be altered or amended in any of its provisions when any such
changes are reduced to writing and signed by the parties hereto but not
otherwise.
12.7 COSTS
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in the preparation, delivery and enforcement of
this Note.
12.8 REMEDIES NOT EXCLUSIVE
No right or remedy herein is exclusive of any other right or remedy.
Each and every right and remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or
in equity, and may be exercised from time to time as often as deemed
expedient, separately or concurrently.
12.9 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of California (regardless of that jurisdiction or any
other jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising in connection
herewith, shall be arbitrated or litigated in the state and federal courts
located in the State of California, and each party hereby waives any right it
may have to assert the doctrine of Forum Non Conveniens or to object to venue.
The parties each hereby stipulate that the state and federal courts located in
the County of Santa ▇▇▇▇▇, State of California, shall have personal jurisdiction
and venue over each party for the purpose of litigating any such dispute,
controversy or proceeding arising out of or related to this Agreement.
IN WITNESS WHEREOF [PURCHASER 4] and the Holder have duly executed these
presents under the hands of their proper officers in that behalf.
[PURCHASER 4]: /s/ [PURCHASER 4]
-----------------------------------------
[PURCHASER 4]
HOLDER: ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
------------------------------------
Milan Carnogursky
President, Chairman and
Chief Executive Officer
[PURCHASER 3]
6% SECURED TERM NOTE
IN FAVOR OF
ALYA INTERNATIONAL, INC.
6% SECURED TERM NOTE MADE AS OF DECEMBER 22, 1997.
PRINCIPAL SUM: CDN.$1,215,000
----------------------
Due Date: December 22, 2007,
subject to Section 1.1.c.
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Note, unless the context otherwise requires:
a. "Application Software Purchase Agreement" means the application software
purchase agreement made as of December 22, 1997, between [AGENT] as agent
on behalf of [PURCHASER 3] and [PURCHASER 4]as joint venturers (each with
an undivided 50% interest) and the Holder;
b. "Due Date" shall be December 22, 2007, provided that any renewal or
extension of the Management and Marketing Agreement shall automatically
extend the Due Date for the same period, and subject to acceleration
pursuant to Section 5.4 of the Management and Marketing Agreement;
c. "Default" means any event which after notice or lapse of time or both,
would constitute an Event of Default;
d. "Event of Default" means any of the events specified in Section 8.1;
e. "Holder" means Alya International, Inc. or its permitted assignees;
f. "Interest Amount" means the amount equal to the annual interest payable
under this Note;
g. "Management and Marketing Agreement" means the management and marketing
agreement dated December 22, 1997, among Alya International Inc.,
[PURCHASER 3] and [PURCHASER 4];
h. "Note" means this 6% Secured Term Note as originally executed, or as
amended or supplemented as herein provided;
i. "Person" includes any individual, firm, corporation, company, joint
venture, partnership, association, trust or unincorporated body of persons;
j. "Principal Sum" has the meaning specified above;
k. "Sale Proceeds" has the meaning specified in Section 8.4(b);
l. "Product Proceeds" means the amounts paid or credited to [PURCHASER 3]
under the Management and Marketing Agreement which are allocated to pay the
accrued interest and principal sum outstanding under the Note.
m. "Security Agent Agreement" means the Security Agent Agreement entered into
by [PURCHASER 3], the Holder and Burnet, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, as security
agent, on the date hereof for the purpose of holding the Purchased Assets
pursuant to the terms hereof; and
n. "Purchased Assets" means the Purchased Assets, as defined in the
Application Software Purchase Agreement;
o. "[PURCHASER 3]" means [PURCHASER 3] and his permitted assignees;
p. "year" means a calendar year, ending December 31.
1.2 INTERPRETATION
a. The terms "this Note", "hereof" "thereunder" and similar expressions refer
to this Note and not to any particular Section, Subsection or other portion
of this Note and include any agreement amending or supplementing this Note.
Unless something in the subject matter or context is inconsistent
therewith, reference herein to Sections and Subsections are to Sections and
Subsections of this Note;
b. Except as specifically stated in this Agreement, all references to currency
are to Canadian dollars. Any currency conversion required or contemplated
by this Agreement with respect to Canadian and United States of America
currency will be based on the rate published by the Bank of Canada as the
noon spot rate of exchange applicable for such currencies on the business
day immediately before the date of conversion;
c. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Note the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where
the fact or context so requires and the provisions hereof; and
d. Headings are inserted in the Note for convenience of reference only and are
not intended to affect the Note's interpretation.
ARTICLE 2
PROMISE TO PAY
2.1 [PURCHASER 3], for value received, and in consideration of these
premises hereby acknowledges himself indebted to the Holder and promises and
covenants with the Holder, subject to Section 8.3, to pay to the Holder:
a. the Principal Sum outstanding from time to time;
b. interest on the Principal Sum outstanding from time to time, such interest
to be calculated, payable and paid as set forth in Section 3.2; and
c. all other moneys which may be owing by [PURCHASER 3] to the Holder pursuant
to this Note, subject to the terms and conditions of this Note.
ARTICLE 3
PAYMENT OF PRINCIPAL AND INTEREST
3.1 PRINCIPAL
a. The Principal Sum outstanding will be paid in full on the Due Date; and
b. Prepayment of the Principal Sum outstanding, from time to time for each
year will be made annually, within sixty (60) days of receipt of Product
Proceeds for the year, if the amount of Product Proceeds received for such
year exceeds the amount of accrued and unpaid interest as at the end of
such year. The amount of the annual prepayment, if any, against the
Principal Sum outstanding from time to time will be equal to the difference
between the Product Proceeds received for the year and the amount of
accrued and unpaid interest as at the end of such year.
3.2 INTEREST
a. Interest on the Principal Sum outstanding from time to time pursuant to
this Note will accrue from the date hereof up to and including the date of
payment at the rate of 6% per annum calculated, but not compounded, yearly,
and not in advance;
b. Interest accrued and unpaid at the Due Date will be paid on the Due Date;
c. Interest accrued and unpaid at the end of each year, will be paid annually
within thirty (30) days of receipt by [PURCHASER 3] of Product Proceeds for
the year, to the extent of the Product Proceeds, if any;
d. Accrued interest, if any, that is not paid in any year will continue to
accrue and be outstanding until paid but will not be added to the Principal
Sum payable under this Note and will not bear interest; and
e. The covenant of [PURCHASER 3] to pay interest at the rate provided herein
will not merge in any judgment in respect of any obligation of [PURCHASER
3] hereunder and such judgment will bear interest as aforesaid and be
payable in the same manner.
3.3 PRINCIPAL AND INTEREST ACCELERATION
Notwithstanding Section 3.2 c., but subject to the limitation of liability
set forth in sections 8.3 and 8.4, upon the occurrence of a Management Agreement
Termination Event, the outstanding Principal Sum and accrued and unpaid interest
at the Management Agreement Termination Date will be repaid within 30 days of
the Management Agreement Termination Date.
For the purposes of Section 3.3, the following terms have the meanings set
out below:
"Management Agreement Termination Date" means the date of the occurrence of
a Management Agreement Termination Event; and
"Management Agreement Termination Event" means the termination of the
Management and Marketing Agreement, with respect to the Eastern Territory,
pursuant to Article 5 of the Management and Marketing Agreement.
ARTICLE 4
ASSIGNMENT
4.1 ASSIGNMENT OF PRODUCT PROCEEDS
[PURCHASER 3] hereby assigns the Product Proceeds to the Holder as security
for payment of [PURCHASER 3]'s obligations to the Holder under this Note.
The provisions of this Section 4.1 and the rights of the Holder hereunder
will, notwithstanding any other provisions of this Note, wholly terminate on the
earlier of the date upon which this Note is retired or the indebtedness
hereunder is extinguished.
ARTICLE 5
SECURITY
5.1 SECURITY FOR THE NOTE
In consideration for the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
[PURCHASER 3], and the due payment of all principal and interest on this Note
from time to time outstanding and on all other monies from time to time owing
on the security hereof and to secure the due performance by [PURCHASER 3] of
obligations herein contained, [PURCHASER 3] does hereby grant, assign,
mortgage, pledge, charge, hypothecate and create a security interest in, to
and in favor of the Holder in an undivided fifty percent (50%) interest in
the Purchased Assets provided that the charge hereby created will in no way
hinder or prevent [PURCHASER 3] at any time and from time to time (until an
Event of Default occurs pursuant to Article 8 hereof and the Holder will have
determined to enforce the same) from managing, developing, utilizing or
dealing with all or any part of the subject matter of the said charge in the
ordinary course of his business and for the purpose of carrying on or
extending the same or from entering into the Management and Marketing
Agreement; provided further that during any period in which there is any
outstanding principal or any accrued and unpaid interest on this Note,
[PURCHASER 3] will not, and [PURCHASER 3] hereby covenants that he will not,
without the prior written consent of the Holder, sell or transfer all or any
part of his undivided fifty percent
(50%) interest in the Purchased Assets, or make, give, create, assume or
allow to subsist any mortgage, pledge, hypothecation, lien, charge,
encumbrance, assignment or other security, whether fixed or floating, upon
the Purchased Assets or any part thereof.
TO HAVE AND TO HOLD such assets and interests and all rights hereby
conferred unto the Holder, its successors and assigns forever, but in trust
nevertheless, for the uses and purposes and with the powers and authorities
subject to the terms and conditions mentioned and set forth in this Note.
5.2 FURTHER ASSURANCES
[PURCHASER 3] will forthwith, and from time to time at his sole cost and
expense, execute and do or cause to be executed and done all deeds, documents
and things which, in the reasonable opinion of the Holder, are necessary or
advisable for giving the Holder (so far as may be possible under the local
laws of the places where the Purchased Assets are situated) a valid mortgage,
pledge, charge and hypothecation of the nature herein specified upon the
Purchased Assets to secure payment of monies intended to be secured by this
Note, and for better assuring, mortgaging, pledging, charging, assigning,
hypothecating and confirming unto the Holder the Purchased Assets, and for
conferring upon the Holder such power of sale and other powers over the
Purchased Assets as are hereby expressed to be conferred.
5.3 DEFEASANCE
The Holder will at the written request and sole cost and expense of
[PURCHASER 3] cancel and discharge the lien of this Note and execute and
deliver to [PURCHASER 3] such deeds or other instruments as will be requisite
to discharge the lien hereof and to reconvey to [PURCHASER 3] any part of the
Purchased Assets subject to the lien of this Note and to release [PURCHASER 3]
from the covenants herein contained and upon delivery of such written request
to the Holder, rights hereby granted will cease, terminate and be void,
provided that [PURCHASER 3] will have satisfied the payment of all principal
monies, and interests due or to become due on this Note.
5.4 POSSESSION AND USE OF PURCHASED ASSETS
Until an Event of Default occurs pursuant to Article 8 hereof and the
Holder will have determined to enforce the same pursuant to the provisions of
this Note, [PURCHASER 3] will, subject however to the express terms hereof, be
suffered and permitted to possess, manage, develop, operate and enjoy the
Purchased Assets, and freely to control the conduct of his business and to take
and use any income, rents, issues and profits thereof in the same manner, to the
same extent and with the same effect, except as provided herein, as if this Note
had not been made.
5.5 ESCROW
Notwithstanding Section 5.4 hereof the source code version of the
Application Software, as defined in the Application Software Purchase Agreement,
will be held by the Security Agent pursuant to the terms and conditions of the
Security Agent Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 [Purchaser 3]'S REPRESENTATIONS AND WARRANTIES
[PURCHASER 3] hereby represents and warrants to the Holder for the benefit
of the Holder as follows:
a. [PURCHASER 3] has the requisite power and authority to execute and deliver
this Note, to consummate the transactions contemplated hereby and to duly
observe and perform all his covenants and obligations herein set forth;
b. the execution and delivery of this Note does not and will not conflict with
or result in a breach of or violate any of the terms, conditions or
provisions of any terms, conditions or provisions of any law, judgment,
order, injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which [PURCHASER 3] is
subject or constitute or result in a default under any agreement, contract
or commitment to which [PURCHASER 3] is a party;
c. the execution and delivery of this Note will not constitute an event of
default or an event which, with the giving of notice or lapse of time or
both, would constitute an event of default, under any agreement, contract,
indenture or other instrument relating to any indebtedness (whether for
borrowed money or otherwise) of [PURCHASER 3] which would give any party to
any such agreement, contract, indenture or other instrument the right to
accelerate maturity for the payment of any monies under any such agreement,
contract, indenture or other instrument; and
d. no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by [PURCHASER 3] with any such governmental
authority, regulatory body or court is required in order for [PURCHASER 3]:
i. to incur the obligations expressed to be incurred by [PURCHASER 3] in
or pursuant to this Note;
ii. to execute and deliver all documents and instruments to be delivered
by [PURCHASER 3] pursuant to this Note;
iii. to duly perform and observe the terms and provisions of this Note; and
iv. to render this Note legal, valid, binding and enforceable against
[PURCHASER 3] in accordance with its terms.
ARTICLE 7
COVENANTS OF [Purchaser 3]
[PURCHASER 3] hereby covenants and agrees with the Holder for the benefit
of the Holder as follows:
7.1 TO PAY PRINCIPAL AND INTEREST
[PURCHASER 3] will duly and punctually pay or cause to be paid to the
Holder the Principal Sum and accrued interest thereon and all other moneys from
time to time owing hereunder, on the dates, at the places, in the moneys and in
the manner mentioned herein.
7.2 TO CARRY ON BUSINESS
[PURCHASER 3] will carry on and conduct his business involving the
Purchased Assets in a proper and efficient manner; and at all reasonable times
he will furnish or cause to be furnished to the Holder or its duly authorized
agent or attorney such information relating to the business of [PURCHASER 3]
involving the Purchased Assets as the Holder may reasonably require.
ARTICLE 8
DEFAULT
8.1 EVENTS OF DEFAULT
If any one or more of the following events has occurred and is continuing:
a. the non-payment when due of the Principal Sum, accrued interest thereon and
any other amounts due under this Note;
b. the breach by [PURCHASER 3] of any material provision of this Note;
c. any representation or warranty made by [PURCHASER 3] herein or in any
financial statements, reports or other documents supplied to the Holder by
[PURCHASER 3] hereunder is false, incorrect or inaccurate in any materially
adverse respect; or
d. If proceedings for bankruptcy or receivership are commenced, unless such
proceedings are being actively and diligently contested by [PURCHASER 3] in
good faith;
provided that [PURCHASER 3] will not have remedied such default within thirty
(30) days (ten (10) days in the case of a monetary default) following receipt by
[PURCHASER 3] from the Holder of
notice of the default, the Holder may, by written notice declare the
Principal Sum and accrued interest thereon and any other amounts payable to
it under this Note to be immediately due and payable without further
presentation, notice or demand and [PURCHASER 3] will immediately pay to the
Holder all indebtedness of [PURCHASER 3] owing to it pursuant to this Note.
8.2 REMEDIES
If an Event of Default has occurred and is continuing and [PURCHASER 3]
has failed forthwith to pay the amounts owing hereunder, or remedy any breach
of any of his obligations secured by this Note as herein outlined, the Holder
shall have all of the rights and remedies of a secured party under the
California Uniform Commercial Code or other applicable California law then in
effect. Without limiting the generality of the foregoing, the Holder, in
addition to any other rights and remedies it may have, in its own name will
be entitled and empowered to sell the Purchased Assets as provided in Section
8.4 below, as well as institute action or proceeding at law or in equity for
the collection of the sums so due and unpaid and may prosecute any such
action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against [PURCHASER 3] or other obligor upon this
Note and collect in the manner provided by law out of the Purchased Assets,
as provided for in this Note wherever situated the monies adjudged or decreed
to be payable.
8.3 LIMITED RECOURSE
Notwithstanding anything else contained in this Note, the Holder
covenants and agrees with [PURCHASER 3] that all of its recourse rights,
powers and remedies for payment of any obligations of [PURCHASER 3] to the
Holder under this Note is limited to the Product Proceeds and the Sale
Proceeds which will be applied in the following order of priority:
a. to pay interest due and payable under this Note;
b. to pay the Principal Sum outstanding from time to time; and
c. to pay any other amounts owing by [PURCHASER 3] to the Holder under this
Note.
8.4 SALE OF PURCHASED ASSETS
a. If an Event of Default has occurred and is continuing as provided in
Section 8.2 hereof or the indebtedness created hereby either with respect
to principal or interest remains in whole or in part unpaid as of the Due
Date, the Holder will be entitled and empowered to dispose of the Purchased
Assets or any part thereof: i. at public sale, which public sale may be
conducted at the location designated by the Holder for cash or on credit
and on such terms as the Holder may in its sole discretion, elect after
giving at least five days notice of the time and place of sale in the
manner provided by law, or ii. at private sale upon like notice for cash or
on credit and on such other terms as the Holder may in its sole discretion
elect;
b. The proceeds of the sale ("Sale Proceeds") of the Purchased Assets will be
allocated as follows:
i. to reimburse the Holder (to a maximum of 20% of the gross proceeds of
sale), for all costs and expenses incurred as the result of an Event
of Default and in connection with re-possession, storing, advertising,
marketing and selling the Purchased Assets including, without
limitation, reasonable attorneys' fees and costs;
ii. to the Holder as a reduction of amounts owing by [PURCHASER 3] under
this Note allocated firstly as to interest and the remainder as to
principal; and
iii. the balance to [PURCHASER 3];
c. Any balance owing by [PURCHASER 3] under this Note after the allocation of
the Sale Proceeds will be forgiven by the Holder and [PURCHASER 3] will
have no further liability under this Note; and
d. This Note is non-negotiable. The Holder will have no right or recourse
against any legal person in respect of the covenants contained in this Note
other than, subject to Section
8.3, [PURCHASER 3], and his assigns but only severally and not jointly and
only to the extent of each person's interest in the Purchased Assets.
8.5 LIMITATION OF LIABILITY
Notwithstanding anything contained in this Note, [PURCHASER 3] will not
have any obligation to pay the Principal Sum outstanding from time to time under
the Note if the Management and Marketing Agreement is terminated as a result of
the occurrence of an event described in Section 5.3 thereof.
ARTICLE 9
WAIVER
9.1 Either the Holder or [PURCHASER 3] may waive any breach of any of the
provisions contained in this Note or any default by the other person in the
observance or performance of any covenant, condition or obligation required to
be observed or performed by such person under the terms of this Note, provided
any such waiver shall only be effective upon the delivery of written notice by
the waiving party. No waiver, consent, act or omission by the Holder or
[PURCHASER 3] will extend to or be taken in any manner whatsoever to affect any
subsequent breach or default or the rights resulting therefrom and no waiver or
consent by the Holder or [PURCHASER 3] will be binding unless it is in writing.
The inspection or approval by the Holder or [PURCHASER 3] of any document or
matter or thing done by the other will not be deemed to be a warranty or holding
out of the adequacy, effectiveness, validity, or binding effect of such
document, matter or thing or a waiver of the obligations of the other.
ARTICLE 10
TIME OF THE ESSENCE
10.1 Time will be of the essence of this Note.
ARTICLE 11
NOTICES
11.1 Except as expressly provided herein, all notices, requests or other
communications required hereunder shall be in writing and shall be given
personal delivery, international overnight courier service, or by facsimile
(subject of confirmation of receipt), addressed to the respective party at the
applicable address set forth above, or to any party at such other addresses as
shall be specified in writing by such party to the other parties in accordance
with the terms and conditions of this Section. All notices, requests or
communications shall be deemed effective upon personal delivery, or two (2)
business days following deposit with any international overnight courier
service, or upon confirmation of receipt if sent by facsimile transmission.
ARTICLE 12
GENERAL
12.1 VALIDITY
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, such provision shall be construed so as to most closely
reflect the original intent of the parties, but still be enforceable, and the
validity, legality or enforceability of such remaining provisions or parts
thereof will not in any way be affected or impaired thereby. The invalidity,
illegality or unenforceability of any provision or part thereof contained in
this Agreement in any jurisdiction will not affect or impair such provision or
part thereof or any other provisions of this Agreement in any other
jurisdiction.
12.2 FURTHER ASSURANCES
[PURCHASER 3] and the Holder will, at any time and from time to time at the
request of the other, execute and deliver any and all such further instruments
or assurances as may be necessary or desirable to give effect to the terms and
conditions of this Note.
12.3 COUNTERPART EXECUTION
This Note, and any and all ancillary documents contemplated herein, may
be executed in one or more counterparts and may be executed by facsimile
signatures and all such counterparts and facsimile signatures taken together
will constitute one and the same Note and will be binding on [PURCHASER 3]
and the Holder as if they had originally signed one copy of this Note.
12.4 ASSIGNMENT
[PURCHASER 3] may assign all or any part of its interest in Purchased
Assets, except that any assignment to any person who is carrying on a
business immediately prior to such assignment that is in direct competition
with Holder, shall require the prior written consent of the Holder. An
assignment shall be effected by:
a. by giving written notice of the names and addresses of the assignees; and
b. by delivering to the Holder a written undertaking of the assignees
acknowledging receipt of a copy of the Note and agreeing to be bound by the
terms and conditions of the Note.
The Holder may assign this Note in whole, but not in part, and only with an
assignment of all of its rights and obligations under, and as permitted by, the
Management and Marketing Agreement by giving [PURCHASER 3] written notice of the
name and address of the assignee.
12.5 BINDING EFFECT
This Note and all of its provisions will enure to the benefit of the Holder
and [PURCHASER 3] and will be binding upon the Holder and [PURCHASER 3]. The
expressions the "Holder" and the "[PURCHASER 3]" as used herein will include the
Holder's and [PURCHASER 3]'s assigns, whether immediate or derivative,
respectively.
12.6 AMENDMENT
This Note may be altered or amended in any of its provisions when any such
changes are reduced to writing and signed by the parties hereto but not
otherwise.
12.7 COSTS
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in the preparation, delivery and enforcement of
this Note.
12.8 REMEDIES NOT EXCLUSIVE
No right or remedy herein is exclusive of any other right or remedy. Each
and every right and remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity,
and may be exercised from time to time as often as deemed expedient, separately
or concurrently.
12.9 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of California (regardless of that jurisdiction or any
other jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising in connection
herewith, shall be arbitrated or litigated in the state and federal courts
located in the State of California, and each party hereby waives any right it
may have to assert the doctrine of Forum Non Conveniens or to object to venue.
The parties each hereby stipulate that the state and federal courts located in
the County of Santa ▇▇▇▇▇, State of California, shall have personal jurisdiction
and venue over each party for the purpose of litigating any such dispute,
controversy or proceeding arising out of or related to this Agreement.
IN WITNESS WHEREOF [PURCHASER 3] and the Holder have duly executed these
presents under the hands of their proper officers in that behalf.
[PURCHASER 3]: /s/ [PURCHASER 3]
---------------------------------
[PURCHASER 3]
HOLDER: ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
----------------------------
Milan Carnogursky
President, Chairman and
Chief Executive Officer
SECURITY AGENT AGREEMENT
THIS AGREEMENT made as of this 22nd day of December, 1997, is by and
AMONG:
[SECURITY AGENT], having a business address at [SECURITY AGENT'S
ADDRESS], Fax: [SECURITY AGENT'S FAX] ("Security Agent")
OF THE FIRST PART;
- and -
[Purchaser 3] ("[PURCHASER 3]") and [PURCHASER 4] ("[PURCHASER
4]"), both individuals, as joint venturers (each with an
undivided 50% interest) utilizing a business address at
[PURCHASER 3'S AND PURCHASER 4'S JOINT ADDRESS], Fax: [PURCHASER
3'S AND PURCHASER 4'S JOINT FAX] (hereinafter collectively
referred to as "Joint Venturers" and individually as "Joint
Venturer")
OF THE SECOND PART;
- and -
ALYA INTERNATIONAL, INC., a corporation incorporated pursuant to
the laws of Delaware having a business address at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇
("Alya")
OF THE THIRD PART.
WHEREAS:
A. Pursuant to that certain Application Software Purchase Agreement, dated
December 22, 1997, by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual acting as
agent on behalf of the Joint Venturers, (the "Agent") and Alya (the
"Purchase Agreement"), Agent (as agent on behalf of the Joint Venturers)
purchased the Purchased Assets, as more particularly described in the
Purchase Agreement;
B. The Purchase Agreement provided that Agent (as agent on behalf of the Joint
Venturers) would purchase and acquire the Purchased Assets for cash and the
Note (as defined in section 1.1(n) of the Purchase Agreement) (the "Note")
deliverable at closing;
C. The Note, as defined, is comprised of two secured term notes (the
"[PURCHASER 3] Note" and the "[PURCHASER 4] Note"), each secured by an
undivided 50% interest in the Purchased Assets;
D. Pursuant to the terms of the [PURCHASER 3] Note, [PURCHASER 3] granted a
security interest in his undivided 50% interest in the Purchased Assets to Alya
as a means of securing performance of his obligations under the [PURCHASER 3]
Note; and pursuant to the terms of the [PURCHASER 4] Note, [PURCHASER 4] granted
a security interest in his undivided 50% interest in the Purchased Assets to
Alya as a means of securing performance of his obligations under the [PURCHASER
4] Note;
E. In connection with the [PURCHASER 3] Note and the [PURCHASER 4] Note, the
parties hereto have agreed to establish and maintain this Security Agent
Agreement; and
F. This Security Agent Agreement provides, INTER ALIA, that the Joint
Venturers shall deliver, or cause to be delivered, to the Security Agent
the source code version of the Application Software, and that the Security
Agent shall hold the source code version of the Application Software
subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
terms, conditions and covenants contained herein, the Joint Venturers, the
Security Agent and Alya hereby agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
Except as otherwise set forth herein, capitalized terms shall have the
meanings ascribed to them in the Purchase Agreement:
(a) "MANAGEMENT AGREEMENT" means the Management and Marketing Agreement
made as of December 22, 1997, between the Joint Venturers and Alya;
(b) "NOTE" means the two 6.0% Secured Term Notes (one issued by each of
the Joint Venturers), dated December 22, 1997, each secured by a Joint
Venturer's undivided 50% interest in the Purchased Assets; and
"[PURCHASER 3] Note" means such Note issued by [PURCHASER 3], and
"[PURCHASER 4] Note" means such Note issued by [PURCHASER 4];
(c) "PURCHASE AGREEMENT" means the Application Software Purchase Agreement
made as of December 22, 1997, between Agent (as agent on behalf of the
Joint Venturers) and Alya;
(d) "RELEASE NOTICE" means a notice to the Security Agent in the form
attached as Schedule "A" to this Agreement; and
(e) "SOFTWARE" means the source code for the Application Software.
1.2 INTERPRETATION
(a) The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular Section,
Subsection or other portion of this Agreement and include any
agreement amending or supplemental to this Agreement. Unless
something in the subject matter or context is inconsistent therewith,
reference herein to Sections and Subsections are to Sections and
Subsections of this Agreement;
(b) Except as specifically stated in this Agreement, all references to
currency are to Canadian dollars. Any currency conversion required or
contemplated by this Agreement with respect to Canadian and United
States of America currency will be based on the rate published by the
Bank of Canada as the noon spot rate of exchange applicable for such
currencies on the business day immediately before the date of
conversion; and
(c) Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the
singular, plural, masculine, feminine, neuter, body politic or body
corporate where the fact or context so requires and the provisions
hereof and all covenants herein will be construed to be joint and
several when applicable to more than one party.
ARTICLE 2
DEPOSIT OF SECURITY
2.1 ORIGINAL DEPOSIT
Concurrently with the Closing, the Joint Venturers shall deliver, or
cause to be delivered, to the Security Agent, the Software as security for the
Joint Venturers' obligations to Alya under the Note. Alya shall examine the
Software as delivered, and certify the completeness and accuracy of the Software
in a letter, the form and content of which is acceptable to the Joint Venturers,
forwarding the same to the Security Agent with a copy to the Joint Venturers.
2.2 SUBSEQUENT DEPOSITS
Alya shall deliver or cause to be delivered to the Security Agent the
source code for any Enhancements to the Software annually in accordance with the
Management Agreement as security for the Joint Venturers' obligations to Alya
under the Note. Alya, at the time of delivering source code for Enhancements to
the Security Agent, shall certify the completeness and accuracy of the Software
in a letter, the form and content of which is acceptable to the Joint Venturers,
forwarding the same to the Security Agent with a copy to the Joint Venturers.
2.3 RETENTION OF SECURITY
The Security Agent shall hold the Software and shall release the same
upon the terms and conditions provided in this Agreement.
ARTICLE 3
RELEASE OR RETURN OF SECURITY BY SECURITY AGENT
3.1 DELIVERY TO THE JOINT VENTURERS
The Security Agent shall deliver all Software which has been deposited
with the Security Agent to the Joint Venturers upon the occurrence of either of
the following events:
(a) Alya and the Joint Venturers deliver a Release Note, executed by each
of Alya and the Joint Venturers, to the Security Agent; or
(b) Subject to compliance with Section 3.2 hereof, the Security Agent has
received from the Joint Venturers each of the following items:
(i) notice that (x) the Management Agreement has been terminated
or (y) that all outstanding principal and accrued interest
under the Note has been paid;
(ii) written demand that all Software deposited with the Security
Agent be delivered to the Joint Venturers;
(iii) a certified or cashier's cheque payable to the Security Agent
in an amount equal to any amounts owing to the Security Agent
pursuant to this Agreement; and
(iv) specific instructions from the Joint Venturers for delivery of
the Software.
3.2 PROCEDURE FOR DELIVERY TO THE JOINT VENTURERS
(a) If the provisions of Section 3.1(b) are met, the Security Agent shall,
within five (5) days following receipt of all of the items specified
in Section 3.1(b), send by overnight courier to Alya a copy of all
such documents received by Security Agent pursuant to Section 3.1(b).
Alya shall have twenty (20) days from the date that the Security Agent
shall have delivered the documents to Alya to send to the Security
Agent written notice of its objection to the release of all the
Software and to request that the issue of the Joint Venturers'
entitlement to the Software be submitted to arbitration in accordance
with the provisions of this Agreement;
(b) If Alya shall request arbitration, the matter shall be submitted to
and settled by arbitration in accordance with Section 10 hereof; and
(c) If within twenty (20) days following the delivery of the items
specified in Section 3.1(b) to Alya, the Security Agent has not
received written notice of Alya's objection to the release of the
Software and its request for arbitration, then the Security Agent
shall release the Software to the Joint Venturers in accordance with
the instructions specified in Section 3.1(b)(iv).
3.3 DELIVERY TO ALYA
The Security Agent shall deliver all Software which has been deposited
with the Security Agent to Alya upon the occurrence of either of the following
events:
(a) The Joint Venturers and Alya deliver a Release Notice executed by each
of the Joint Venturers and Alya to Security Agent; or
(b) Subject to compliance with Section 3.4 hereof, the Security Agent has
received from Alya each of the following items:
(i) written notification that the Joint Venturers are in breach of
the Note;
(ii) a written demand that all Software deposited with the Security
Agent be delivered by Alya;
(iii) a certified or cashier's cheque payable to the Security Agent
in an amount equal to any amounts owning to the Security Agent
pursuant to this Agreement; and
(iv) specific instructions from Alya for delivery of the software.
3.4 PROCEDURE FOR DELIVERY TO ALYA
(a) If the provisions of Section 3.3(b) are met, the Security Agent
shall,within five days following receipt of all of the items specified
in Section 3.3(b), send by overnight courier to the Joint Venturers a
copy of all such documents received by Security Agent pursuant to
Section 3.3(b). The Joint Venturers shall have twenty (20) days from
the date the Security Agent shall have delivered the documents to the
Joint Venturers to send to the Security Agent written notice of its
objection to the release of all the Software and to request that the
issue of Alya's entitlement to the Software be submitted to
arbitration in accordance with the provisions of this Agreement;
(b) If the Joint Venturers shall request arbitration, the matter shall be
submitted to and settled by arbitration in accordance with Section 10
hereof; and
(c) If within twenty (20) days following delivery of the items specified
in Section 3.3(b) to the Joint Venturers, the Security Agent has not
received written notice of the Joint Venturers's objection to the
release of the Software and its request for arbitration, then the
Security Agent shall release the Software to Alya in accordance with
the instructions specified in Section 3.3(b)(iv).
ARTICLE 4
OWNERSHIP OF PURCHASED ASSETS
4.1 ACKNOWLEDGEMENT
The Security Agent, Alya and the Joint Venturers each hereby
recognize and acknowledge that the Joint Venturers own all right, title and
interest in and to the Purchased Assets (each as to an undivided 50%
interest), subject only to the security interests created pursuant to the
Note in favour of
Alya, and the license granted to Alya pursuant to Section 4 of the Mangement
Agreement, and that the Security Agent holds the Purchased Assets as agent
for the Joint Venturers until delivery in accordance with this Agreement.
ARTICLE 5
DUTIES AND RESPONSIBILITIES OF THE SECURITY AGENT
5.1 DUTIES
The Security Agent shall not be bound in any way by an agreement or
contract between the Joint Venturers and Alya (whether or not the Security
Agent has knowledge thereof), and the Security Agent's only duties and
responsibilities shall be to hold the Software it receives and to deliver
same in accordance with the terms of this Agreement. The Security Agent
shall have no duties except those which are expressly set forth herein and it
shall not be bound by any waiver, modification, amendment, termination or
rescission of this Agreement unless received by it in writing and signed by
Alya and the Joint Venturers and, if its duties are affected, unless it shall
have given its prior written consent thereto.
5.2 AUTHORITY TO ACT
The Security Agent has the absolute authority to accept or act upon
each executed Release Notice received pursuant to this Agreement, without any
obligation of inquiry as to the validity, authenticity or accuracy thereof.
Should it be necessary for the Security Agent to accept or act upon any
instructions, directions, documents or instruments signed or issued by or on
behalf of any corporation, partnership, fiduciary or individual, it shall not
be necessary for the Security Agent to inquire into the authority of the
signer(s). The Security Agent shall be protected in acting upon any notice,
request, waiver, consent, receipt, statutory declaration or other paper or
document furnished to it, signed by any of the parties hereto, not only as to
its due execution and validity and effectiveness of its provisions but also
as to the truth and accuracy of any information therein contained. Unless
otherwise directed in a writing mutually executed by Alya and the Joint
Venturers and delivered to the Security Agent not less than five business
days prior to the applicable scheduled Software delivery, the Security Agent
is hereby authorized to make deliveries pursuant hereto by the commercial
courier, which the Security Agent, in its sole discretion, selects. The
Security Agent shall not be liable in any manner for the acts, omissions,
delays or failures to deliver by any such selected commercial couriers.
5.3 AMENDMENT, RESIGNATION AND/OR TERMINATION
This Agreement may be altered or amended only with the consent of each
of Alya, the Joint Venturers and Security Agent. The Security Agent may resign
as Security Agent at any time upon 30 days' prior written notice to the Joint
Venturers and Alya. The Joint Venturers and Alya may remove the Security Agent
as security agent at any time upon 30 days' prior written notice to the Security
Agent. In the event of resignation or termination of the Security Agent, Alya
and the Joint Venturers shall attempt to mutually agree upon the selection of a
new security agent. In the event that they are unable to agree, the new
security agent shall be another firm of barristers and solicitors authorized to
practice law in Canada or an independent, qualified trust or escrow company
or organization, located in the Province of Alberta, selected by the Joint
Venturers. From the date the Security Agent receives notice of termination
or gives notice of resignation and until a successor Security Agent shall
have been appointed and shall have accepted such appointment, the Security
Agent's only duty shall be to hold any deposited software then in the
Security Agent's possession in accordance with the provisions of this
Agreement (but without regard to any notices, requests, instructions or
demands received by the Security Agent from any party hereto after the
Security Agent's notice of resignation shall have been given or notice of
termination shall be received). Upon the appointment of, and acceptance by, a
successor Security Agent, the former Security Agent shall deliver to the
successor Security Agent any Software and other documents or instruments
relating thereto then in its possession.
5.4 NO ACTION REQUIRED
In the event that any of the notices and/or Software or other
documents or instruments to be delivered pursuant to the terms hereof are not
delivered to the Security Agent, Security Agent shall have no duty whatsoever
to take any action with respect to procurement of the same. The Security
Agent shall have no obligation or responsibility to verify that any Software
or other documents or instruments delivered hereunder are the Enhancements or
other documents required to be delivered by Alya pursuant to the Purchase
Agreement or the Management Agreement. The Security Agent may, however,
allow such verification to be obtained at, or within a reasonable time of,
such delivery by a qualified employee or agent of any one of the Joint
Venturers and may permit such employee or agent reasonable access to such
Software, document or other instrument for the purposes of making such
verification. For the purpose of this paragraph, the parties agree that such
Software, document or other instrument may be initially delivered to such
employee or agent for the sole purpose of making such verification followed
by immediate delivery of the Security Agent.
5.5 EXPENSE REIMBURSEMENT
In addition to the indemnification obligations set forth herein,
Alya and the Joint Venturers each hereby jointly and severally agrees to
reimburse Security Agent for all expenses incurred in connection with
performing and carrying out its responsibilities hereunder, including without
limitation, legal and professional fees and expenses.
5.6 SECURITY AGENT FEES
The fees and reasonable expenses of the Security Agent shall be
shared equally by the Joint Venturers on the one hand and Alya on the other
hand. Such fees shall include:
(a) for each year, or portion thereof, that the Security Agent
holds the Software, an amount of $100.00 payable at the
beginning of the year; and
(b) any additional amount mutually agreed to by the parties.
ARTICLE 6
DISCLAIMER OF LIABILITY
6.1 Except for fraud or intentional misconduct, Security Agent shall
not be liable to Alya, the Joint Venturers or any other party claiming
beneficiary status under this Agreement for any act, or failure to act, by
Security Agent in connection with this Agreement. Security Agent will not be
liable for special, indirect, incidental or consequential damages hereunder.
ARTICLE 7
INDEMNITY AND LIABILITY
7.1 The Joint Venturers, Alya and any party claiming beneficiary status
under this Agreement hereby, jointly and severally, agree to indemnify and
hold harmless and be liable to Security Agent and each of its partners,
employees and agents, absolutely and forever, and from and against any and
all claims, actions, damages, suits, liabilities, obligations, costs, fees,
charges, and any other expenses whatsoever, including legal and professional
fees and expenses, that may be asserted against or incurred by Security Agent
or any of its employees or agents, with respect to the performance of its
duties under this Agreement.
ARTICLE 8
DISPUTES AND INTERPLEADER
8.1 In the event of any dispute between the Joint Venturers and Alya or
any third party claiming beneficiary status under this Agreement, Security
Agent may submit this matter to any court of competent jurisdiction in an
interpleader or similar action. Any and all costs incurred by Security Agent
in connection therewith shall be borne by the party seeking a copy of the
Software deposited with Security Agent. Without limiting the generality of
the foregoing, if Security Agent shall be uncertain as to its duties or
rights hereunder, shall receive any notice, advice, schedule, report,
certificate, direction or other document from any person or entity with
respect to the Software, that in the opinion of the Security Agent, in its
sole discretion, is in conflict with any provisions of this Agreement, or
shall be advised that a dispute has arisen with respect to the ownership or
right of possession of the Software or any part thereof, Security Agent shall
be entitled, without liability to anyone, to refrain from taking any action
other than to exercise best efforts to keep safe the Software until Security
Agent shall be directed otherwise in writing by an order, decree, or judgment
of a court of competent jurisdiction that is then finally affirmed on appeal
or that by the lapse of time or otherwise is no longer subject to appeal; but
Security Agent shall be under no duty to institute or defend any such
proceeding.
ARTICLE 9
NOTICES
9.1 All notices and other communications hereunder or in connection
herewith shall be in writing and shall be given by personal delivery,
international overnight courier service, facsimile or by Canadian (or U.S., as
applicable) mail, certified or registered, postage prepaid, return receipt
requested, to the respective party at the address set forth below, or to any
party at such other
addresses as shall be specified in writing by such party to the other parties
in accordance with the terms and conditions of this section. All notices,
requests or communications shall be deemed effective upon personal delivery,
or five (5) days following deposit in the Canadian (or U.S., as applicable)
mail, or upon the next business day after sending by facsimile or two (2)
business days following deposit with any international overnight courier
service.
If to Alya to: Alya International, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to any one of the Joint Venturers to them at:
[PURCHASER 3'S AND PURCHASER 4'S JOINT ADDRESS]
Fax No. [PURCHASER 3'S AND
PURCHASER 4'S JOINT FAX]
If to Security Agent to: [SECURITY AGENT]
[SECURITY AGENT'S ADDRESS]
Attention: [SECURITY AGENT EMPLOYEE]
Fax No: [SECURITY AGENT FAX]
ARTICLE 10
ARBITRATION
10.1 Any dispute arising among the parties under this Agreement will be
settled by initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot
resolve the dispute within 30 days of escalation of the dispute to such
level, then the parties agree that such dispute shall be settled by final and
binding arbitration in Calgary, Alberta, before a single arbitrator mutually
acceptable to the parties involved in the dispute, in accordance with
arbitration legislation in the Province of Alberta then existing, except as
otherwise specifically provided herein. The arbitrator shall apply the laws
of the Province of Alberta and the laws of Canada for the purposes of
construing and enforcing this Agreement and any dispute arising hereunder.
The arbitration award shall be specifically enforceable; judgment upon any
arbitration award may be entered in any court with personal jurisdiction over
the parties and subject matter of the disputes. Unless otherwise determined
by the arbitrator, all expenses in connection with such arbitration will be
divided equally between the parties involved in the dispute (provided that if
both of the Joint Venturers are involved in the dispute then they shall be
collectively considered one party for the purposes of the division of
expenses), with the exception of expenses of counsel, witnesses and employees
of the parties which will be borne by the parties incurring them.
Notwithstanding
anything to the contrary herein, each party will always be entitled to seek
preliminary or provisional remedies or release (including attachments and
preliminary injunctions) from any court of competent jurisdiction.
ARTICLE 11
NO WAIVER OR RIGHTS
11.1 The delay or failure of any party to enforce at any time any
provision of this Agreement shall in no way be considered a waiver of any
such provision, or any other provision, of this Agreement. No waiver of, or
delay or failure to enforce any provision of this Agreement shall in any way
be considered a continuing waiver or be construed as a subsequent waiver or
any such provision, or any other provision of this Agreement. No waiver or
modification of this Agreement shall be binding unless it is in writing
signed by the parties hereto.
ARTICLE 12
BINDING EFFECT; ASSIGNMENT
12.1 This Agreement shall be binding upon, and enure to the benefit of,
all the parties hereto and their respective successors, legal representatives
and assigns permitted under the Purchase Agreement. Each of the parties
hereto acknowledges and accepts that any assignee permitted under the
Purchase Agreement, which assignee has agreed to abide by and be bound by all
the applicable conditions set forth in each of the Purchase Agreement, the
Management Agreement and the Note, shall constitute an intended third party
beneficiary under this Agreement, and be entitled to all the rights of an
intended third party beneficiary. The parties will amend this Agreement to
include such persons, if requested to do so by the Joint Venturers or Alya,
and in any event the Joint Venturers and Alya will notify the Security Agent
of the name of any assignee.
ARTICLE 13
AUDIT RIGHTS
13.1 During the term of this Agreement, the Joint Venturers shall have
the right, upon not less than ten days prior written notice to Alya, to
examine all of the items which have been deposited with, and are being held
by, the Security Agent, pursuant to the terms and conditions of this
Agreement, for the purpose of ascertaining the completeness and accuracy of
the deposited items.
ARTICLE 14
GENERAL
14.1 VALIDITY
If any one or more of the provisions or parts thereof contained in
this Agreement should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, such provision shall be construed so as to most
closely reflect the original intent of the parties, but still be enforceable,
and the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired thereby. The
invalidity, illegality or unenforceability of any provision or part thereof
contained in this Agreement in any jurisdiction will not affect or impair
such provision or part thereof or any other provisions of this Agreement in
any other jurisdiction.
14.2 FURTHER ASSURANCES
Each of the parties will, at any time and from time to time at the
request of the other parties, execute and deliver any and all such further
instruments or assurances as may be necessary or desirable to give effect to
the terms and conditions of this Agreement.
14.3 COUNTERPART AND FACSIMILE EXECUTION
This Agreement, and any and all ancillary documents contemplated
herein, may be executed in one or more counterparts and may be executed by
facsimile signatures and all such counterparts and facsimile signatures taken
together will constitute one and the same Agreement and will be binding on
the parties as if they had originally signed one copy of this Agreement.
14.4 TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
14.5 COSTS
Except as specifically provided in this Agreement, each party
hereto will bear its own legal, accounting and other costs relating to all
matters involved in this transaction.
14.6 CONFIDENTIALITY
The parties will treat this Agreement and all information relating
to this Agreement and the transactions contemplated by this Agreement
confidentially and no public disclosure by either party will be made without
the prior approval of the other, not to be unreasonably withheld, except as
legally required by a party to satisfy disclosure obligations to shareholders
and regulators, in which case simultaneous notice of such disclosure will be
given to the other party.
14.7 ENTIRE AGREEMENT
This agreement constitutes the entire Agreement among the parties
and supersedes all proposals, oral or written, and all other communications
among them relating to the subject matter hereof.
14.8 JURISDICTION, VENUE AND GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein (regardless of either jurisdiction's or any other
jurisdiction's choice of law principles). To the extent permitted by law,
the parties hereto agree that all actions or proceedings arising in
connection herewith, shall be arbitrated or litigated in Calgary, Alberta,
Canada, and each party hereby waives any right it may have to assert the
doctrine of Forum Non Conveniens or to object to venue. The parties each
hereby stipulate that the courts located in Calgary, Alberta, shall have
personal jurisdiction and venue over each party for the purpose of litigating
any such dispute, controversy or proceeding arising out of or related to this
Agreement.
14.9 NO CONFLICT
Alya and the Joint Venturers each acknowledge that (a) the Security
Agent or its partners, employees, agents or associates have provided counsel
to the Joint Venturers in connection with the transactions contemplated by
the Purchase Agreement; (b) the duties of the Security Agent hereunder are
purely mechanical; and (c) the Security Agent is acting hereunder for the
convenience of Alya and the Joint Venturers and shall not be impeachable or
accountable
because of any conflicting or potentially conflicting duty to the Joint
Venturers or any advice provided to them.
IN WITNESS WHEREOF the undersigned have executed this Security
Agreement as of the date first set forth above.
ALYA: ALYA INTERNATIONAL, INC.
By: /s/ Milan Carnogursky
---------------------------------------
---------------------------------------
Milan Carnogursky
President, Chairman & CEO
THE JOINT VENTURERS: /s/ [PURCHASER 3]
---------------------------------------
[PURCHASER 3]
/s/ [PURCHASER 4]
---------------------------------------
[PURCHASER 4]
SECURITY AGENT: [SECURITY AGENT]
By: /s/ [SECURITY AGENT'S OFFICER]
---------------------------------------
---------------------------------------
(Print name and Title)
SCHEDULE A
RELEASE NOTICE
[SECURITY AGENT]
[SECURITY AGENT'S ADDRESS]
Dear Sirs:
RE: SECURITY AGENT AGREEMENT
This Release Notice is being delivered pursuant to the Security Agent
Agreement, dated December 22, 1997 ("Security Agent Agreement"), among
[PURCHASER 3] and [PURCHASER 4] as joint venturers, each with an undivided
50% interest, ("The Joint Venturers"), Alya International, Inc. ("Alya") and
[SECURITY AGENT]("Security Agent'). Except as otherwise set forth herein,
capitalized terms shall have the meanings ascribed to them in the Security
Agent Agreement.
Security Agent is hereby authorized and directed to deliver all the Software
and all documents, instruments and other items delivered to it by the Joint
Venturers or Alya in its capacity as Security Agent to [____________________].
Dated: ALYA INTERNATIONAL, INC.
By:
---------------------------------------
---------------------------------------
Milan Carnogursky
President, Chairman & CEO
Dated:
---------------------------------------
[PURCHASER 3]
Dated:
---------------------------------------
[PURCHASER 4]