SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ THE 16TH DAY OF OCTOBER, 1997
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a
body politic duly constituted according
to An Act respecting Societe Innovatech
du Grand Montreal, R.S.Q., ch. S-17.2,
having its head office and principal
place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as
"Innovatech")
PARTY OF THE FIRST PART
AND: INDUSTRIES DEVMA INC. , a body politic
and corporate, duly incorporated
according to the Companies Act (Quebec),
having its head office and principal
place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Devma")
PARTY OF THE SECOND PART
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q), a joint stock company,
duly incorporated according to the Act
establishing the Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q), having
its head office and principal place of
business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as "FSTQ")
PARTY OF THE THIRD PART
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AND: FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, limited partnership, a limited
partnership organized under the laws of
the Province of Quebec, herein
represented by Gestion du Fonds Regional
de Solidarite Ile de Montreal Inc., its
general partner, having its head office
and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "Fonds
Regional")
PARTY OF THE FOURTH PART
AND: COMPOSITECH LTD., a body corporate, duly
incorporated according to the laws of
the State of Delaware, having its head
office and principal place of business
in the Hamlet of Hauppauge, State of New
York,
(hereinafter referred to as the
"Corporation")
PARTY OF THE FIFTH PART
SECTION 1 - PREAMBLE
1.1 WHEREAS each of Innovatech, Devma, FSTQ and Fonds Regional wishes to
subscribe for Common Shares (as hereinafter defined), the whole at the price and
on the terms and conditions hereinafter set out in this Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
2.1 Definitions. In this Agreement:
2.1.1 "Actual Knowledge" - an individual will be deemed to have "Actual
Knowledge" of a particular fact or other matter if:
2.1.1.1 such individual is actually aware of such fact or other matter,
or
2.1.1.2 a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive review of the files, books and records of the
Corporation.
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A Person (other than an individual) will be deemed to have "Actual
Knowledge" of a particular fact or other matter if any individual who is
serving as an officer of such Person has, or at any time had, Actual
Knowledge of such fact or other matter;
2.1.2 "Agreement" means this Subscription Agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and refer
to this Agreement and not to any particular Section, subsection or other
subdivision; "Section", "subsection" or other subdivision of this
Agreement means and refers to the specified Section, subsection or other
subdivision of this Agreement;
2.1.3 "Annual Report" means the Corporation's Annual Report on Form 10-KSB
under the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1996;
2.1.4 "Applicable Law" means any domestic or foreign federal, state,
provincial, county, local, municipal and regional statute, law,
ordinance, rule, regulation, restriction, regulatory policy or
guideline, by-law (zoning or otherwise), principles of common law, civil
law or equity, as well as Permits, Orders, decrees and rules (having the
force of law), and any judgments or injunctions issued, prolongated,
approved or entered thereunder, in each case, to which the given party
is subject or bound or to which the given asset is subject;
2.1.5 "Assets" means all of the assets, rights and properties of the
Corporation, of whatsoever nature, kind or description, including
movable or immovable, real or personal, tangible or intangible;
2.1.6 "Balance Sheet Date" means December 31, 1996;
2.1.7 "Benefit Plans" means all pension, retirement, profit sharing, bonus,
savings, compensation, incentive, severance, stock option, stock
purchase, stock appreciation and other fringe benefit plans, programs,
arrangements or practices covering any or all past or present employees,
shareholders, directors or officers of the Corporation, other than group
insurance, medical, dental, hospitalization, disability or death benefit
plans;
2.1.8 "Books and Records" means all books of account, accounting records,
files, data and writings and other financial information; lists and
files of past, present and prospective customers and contacts,
purchasing and marketing records, personnel and payroll records; and all
data stored on computer support devices relating to any of the
aforementioned materials;
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Z2.1.9 "Budget and Projections" means the budget and projections of the
Corporation set forth in a writing dated the date hereof identified to
this paragraph 2.1.9;
2.1.10 "Business Day" means any day, other than a Saturday or Sunday or a day
on which the principal commercial banks in the State of New York are not
open for business during normal banking hours;
2.1.11 "Common Shares" means the shares of Common Stock as described in the
Articles of Incorporation of the Corporation, as amended and restated;
2.1.12 "Compositech Canada" means Lamines CTEK Inc.;
2.1.13 "Compositech Canada Shareholders Agreement" means the shareholders
agreement of even date herewith among the parties hereto and Compositech
Canada setting forth the terms and conditions which will govern the
relationship of the parties hereto as shareholders of Compositech
Canada;
2.1.14 "Contracts" means all agreements, obligations and undertakings of
whatsoever nature, kind or description;
2.1.15 "Devma Shares" has the meaning ascribed thereto in subsection 3.3;
2.1.16 "dollar", "dollars" and the sign "$" each mean, unless otherwise
indicated, lawful money of the United States;
2.1.17 "ERISA" shall have the meaning ascribed thereto in subsection 4.2.22.2;
2.1.18 "Encumbrances" means any encumbrance of any nature, kind or description
whatever and includes a security interest, mortgage, lien,
hypothecation, pledge, prior claim, assignment, charge, trust or deemed
trust (whether contractual, statutory or howsoever otherwise arising),
voting trust or pooling agreement with respect to securities, right of
first refusal, easement, servitude, restrictive covenant, encroachment
or other survey or title defect, any adverse claim or any other right,
option or claim of any Person of any nature, kind or description
whatever, or any covenant or other agreement, restriction or limitation
on transferability;
2.1.19 "Environment" means surface waters, ground water, drinking water supply,
land-surface, subsurface strata, air, both inside and outside of
buildings and structures, and plant and animal life;
2.1.20 "Environmental Law" means any Applicable Law relating to the pollution
or protection of the Environment;
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2.1.21 "Equipment" means all furnishings, fixtures, machinery, equipment,
tooling, spare parts, leasehold improvements, supplies, computer
hardware, telephone systems, signs and all other tangible property,
together with all related accessories and maintenance equipment,
including without limitation, the Manufacturing Equipment;
2.1.22 "Exchange Rights" means the rights granted to each Investor under the
Stock Exchange Agreement to exchange their shares in the capital stock
of Compositech Canada for Common Shares;
2.1.23 "FSTQ Shares" has the meaning ascribed thereto in subsection 3.4;
2.1.24 "Financial Statements" means the audited financial statements of the
Corporation for the fiscal year ended December 31, 1996, consisting of
the balance sheet, statements of operations, statements of shareholders'
equity and statements of cash flows of the Corporation as at or for the
period ended December 31, 1996, a copy of which is contained in the
Annual Report;
2.1.25 "Fonds Regional Shares" has the meaning ascribed thereto in subsection
3.5;
2.1.26 "Generally Accepted Accounting Principles" means generally accepted
accounting principles in the United States of America applicable as at
the date on which any calculation or determination is required to be
made in accordance with generally accepted accounting principles,
consistently applied since the incorporation of the Corporation,
including those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants, or any successor institute, and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as is approved by a significant
segment of the accounting profession in the United States of America;
2.1.27 "Governmental Body" means (i) any domestic or foreign national, federal,
provincial, state, county, local, municipal or other government or body,
(ii) any multinational, multilateral or international body, (iii) any
subdivision, agent, commission, board, instrumentality or authority of
any of the foregoing governments or bodies, (iv) any quasi-governmental
or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing governments
or bodies, or (v) any domestic, foreign, international, multilateral or
multinational judicial, quasi-judicial, arbitration or administrative
court, tribunal, commission, board or panel;
2.1.28 "Hazardous Substances" means any toxic substance or waste, pollutant,
contaminant, hazardous substance or waste, hazardous material, special
waste, industrial waste, petroleum-derived substance or waste, or any
constituent of any of same as such terms are regulated under or defined
by any Environmental Law;
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2.1.29 "including" and "includes" is to be deemed to be followed by the
statement "without limitation" and neither of such terms shall be
construed as limiting any word or statement which precedes it to the
specific or similar items or matters immediately following it;
2.1.30 "Information" has the meaning ascribed thereto in subparagraph
4.2.24.1;
2.1.31 "Innovatech Shares" shall have the meaning ascribed thereto in
subsection 3.2;
2.1.32 "Integral Circuit" means laminates with integral circuits or printed
circuit boards with integral circuits as described by the following
claims or parts of such claims set forth in Licensor's patents Nos.
4,943,334, 5,037,691 and 5,478,421:
(i) claims 70-73 of U.S. Patent 4,943,334;
(ii) claims 16 and 26-30 of U.S. Patent No. 4,943,334,
provided that the conductive surface is in the form of a series
of conductive line traces etched or formed between two or more
pads (hereinafter called a "circuit") and further provided that
the circuit is formed on the tooling and transferred to the
laminate or printed circuit board during the molding process;
(iii) claims 7, 8, 36, 37, 42 and 43 of U.S. Patent No.
5,037,691, provided that the metal or metallic coating is in the
form of a circuit; and
(iv) claims 4, 5, 8-11, 50, 64 and 73 of U.S. Patent No.
5,478,421, provided that the metal or conductive surface is in
the form of a circuit and further provided that the circuit is
formed on the tooling and transferred to the laminate or printed
circuit board during the molding process;
2.1.33 "Intellectual Property Rights" means, collectively:
2.1.33.1 all intellectual property rights of whatsoever
nature, kind or description including:
2.1.33.1.1 all trade marks, service marks, trade ▇▇▇▇ and
service ▇▇▇▇ registrations, trade ▇▇▇▇ and
service ▇▇▇▇ applications, rights under
registered user agreements, trade names and
other trade ▇▇▇▇ and service ▇▇▇▇ rights,
2.1.33.1.2 all copyrights, industrial designs and
registrations thereof and applications
therefor,
2.1.33.1.3 all inventions, patents, patent applications
and patent rights (including any patents
issuing on such applications or rights),
2.1.33.1.4 all licenses, sub-licenses and franchises,
2.1.33.1.5 all Trade Secrets and proprietary and
confidential information,
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2.1.33.1.6 all computer software and rights related
thereto,
2.1.33.1.7 all renewals, modifications, developments and
extensions of any of the items listed in
subsections 2.1.33.1.1 through 2.1.33.1.6
(inclusively) hereof; and
2.1.33.2 all patterns, plans, designs, research data, other
proprietary know-how, processes, drawings, technology,
inventions, formulae, specifications, performance data,
quality control information, unpatented blue prints, flow
sheets, equipment and parts lists, instructions, manuals,
records and procedures, and all licenses, agreements and
other contracts and commitments relating to any of the
foregoing;
2.1.34 "Investors" means Innovatech, Devma, FSTQ and Fonds Regional
collectively and "Investor" means either of them;
2.1.35 "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
2.1.35.1 such individual is actually aware of such fact or
other matter, or
2.1.35.2 a prudent individual could be expected to
discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any
individual who is serving, as an officer of such Person
has, or at any time had, Knowledge of such fact or other
matter;
2.1.36 "License Agreement" means that certain technology licensing agreement
entered into between the Corporation and Compositech Canada on the
date hereof by which the Corporation licenses and/or sub-licenses to
Compositech Canada the Intellectual Property and Technology (as such
terms are defined in the License Agreement);
2.1.37 "Manufacturing Equipment" means all machinery and equipment developed
or used by the Corporation in order to manufacture Products;
2.1.38 "Material Applicable Laws" means the Applicable Laws which are
material to the business or operations of the Corporation. Without
limiting the generality of the foregoing, an Applicable Law will be
deemed to be a Material Applicable Law if a breach thereof or
non-compliance therewith would have a material adverse effect on the
financial position of the Corporation;
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2.1.39 "Material Assets" means the Assets which are, individually or in the
aggregate, material to the business or operations of the Corporation;
2.1.40 "Material Contracts" means the Contracts which are, individually or
in the aggregate, material to the business or operations of the
Corporation, including, without limitation, those Contracts which are
required to be listed in any Annual Report required to be filed on
Form 10-KSB under the Securities Exchange Act of 1934 and by Item 601
of Regulation S-B under the Securities Exchange Act of 1934, as
amended. Without limiting the generality of the foregoing, a Contract
will be deemed to be a Material Contract if a breach or default
thereunder would have a material adverse effect on the financial
position of the Corporation;
2.1.41 "Material Permits" means the Permits which are material to the
business or operations of the Corporation. Without limiting the
generality of the foregoing, a Permit will be deemed to be a Material
Permit if a breach or default in respect thereof or the failure to
obtain or maintain such a Permit would have a material adverse effect
of the financial position of the Corporation;
2.1.42 "Multi Layer Printed Circuit Boards" means the circuit boards defined
in one or more of claims 18-26 and 63-68 of U.S. Patent No. 5,037,691
or the circuit boards produced using the process described in any of
the claims of U.S. Patents Nos. 5,376,326 and 5,512,224;
2.1.43 "Maximum Indemnification Amount" has the meaning ascribed thereto in
paragraph 6.11.4;
2.1.44 "Order" means any order (draft or otherwise), judgment, injunction,
decree, award or writ of any Governmental Body;
2.1.45 "ordinary course of business" means an action taken by a Person that
is:
2.1.45.1 consistent with the past practices of such Person
and is taken in the ordinary course of the normal
day-to-day operations of such Person,
2.1.45.2 not required to be authorized by the board of
directors of such Person (or by any Person or group of
Persons exercising similar authority) and is not required
to be specifically authorized by the parent company (if
any) of such Person, and
2.1.45.3 similar in nature and magnitude to actions
customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons
exercising similar authority), in the ordinary course of
the normal
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day-to-day operations of other Persons that are in the
same line of business as such Person;
2.1.46 "Permit" means any license, permit, certificate, authorization,
approval, right, privilege, consent, concession or franchise issued,
granted, conferred or otherwise created by a Governmental Body;
2.1.47 "Person" means an individual, corporation, company, partnership,
trust, unincorporated association, entity with judicial personality,
Governmental Body; and pronouns when they refer to a Person have a
similarly extended meaning;
2.1.48 "Premises" means the real property, together with all buildings,
structures, fixtures and improvements thereon, covered by the Real
Property Lease;
2.1.49 "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of interest for
commercial demand loans made in US dollars and commonly known as such
bank's prime rate, as adjusted from time to time, on the basis of the
Prime Rate in effect on the first day of each month;
2.1.50 "Principal Intellectual Property Rights" has the meaning ascribed
thereto in subparagraph 4.2.24.2;
2.1.51 "Products" means laminates for printed wiring boards and all other
uses developed and/or manufactured by the Corporation, provided,
however, that Multi Layer Printed Circuit Boards and Integral
Circuits shall not be deemed Products;
2.1.52 "Proxy Statement" means the proxy statement filed by the Corporation
pursuant to Regulation 14A on May 15, 1997;
2.1.53 "Purchased Securities" means the Innovatech Shares, the Devma Shares,
the FSTQ Shares and the Fonds Regional Shares;
2.1.54 "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the Environment;
2.1.55 "Real Property Lease" means the existing tenancy agreement, as
amended, between the Corporation, as tenant, and Ricefield Number 6,
as landlord, covering the Premises, a copy of which is contained in
Exhibit 10.1 and 10.1.1 of the Registration Statement, the rights of
Ricefield Number 6 in the Real Property Lease having been assigned to
Reckson Operating Partnership, L.P. on December 5, 1996;
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2.1.56 "Registration Statement" means the Corporation's registration statement
No. 333-3564-NY on Form SB-2 under the Securities Act, declared
effective on July 2, 1996 and all exhibits annexed thereto;
2.1.57 "Remedial Action" means all actions, whether voluntary or involuntary,
necessary to comply with applicable Environmental Laws in order to i)
clean up, remove, treat, cover or in any other manner adjust Hazardous
Substances in the Environment or ii) perform remedial studies,
investigations, restoration and post-remedial studies, investigations
or monitoring on, about or in any of the Premises;
2.1.58 "Securities Act" means the Securities Act of 1933 (United States), as
amended from time to time;
2.1.59 "Share Adjustment" means (i) any subdivision, redivision or change of
the outstanding Common Shares into a greater number of Common Shares or
(ii) any reduction, combination or consolidation of the outstanding
Common Shares into a smaller number of Common Shares;
2.1.60 "Stock Exchange Agreement" means the stock exchange agreement of even
date among the Investors and the Corporation, providing inter alia for
the exchange by the Investors of the shares of the capital stock of
Compositech Canada held by them for Common Shares;
2.1.61 "Subscription Agreement in Compositech Canada" means the subscription
agreement of even date among the Investors and Compositech Canada
setting forth the rights and obligations of each of the Investors with
respect to its subscription for shares in the capital stock of
Compositech Canada;
2.1.62 "Tax Returns" means all reports, returns or other information, or any
amendment thereof, required to be filed in connection with any Taxes;
2.1.63 "Taxes" means all taxes, foreign or domestic, whether federal, state,
provincial, county, local, municipal or otherwise (including income,
profit, corporation, business, excise, sales, goods and services,
value-added, franchise, withholding, capital, transfer, stamp,
unemployment compensation, payroll, property, and duties), whether or
not measured in whole or in part by net income, and including interest
and penalties with respect thereto;
2.1.64 "Trade Secrets" means information and data which: (a) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other Persons who can
obtain economic value from its disclosure or use; and (b) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
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2.2 Gender. Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular number
only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this Agreement
or any other provision of this Agreement which is, or becomes, illegal, invalid
or unenforceable shall be severed therefrom and shall be ineffective to the
extent of such illegality, invalidity or unenforceability and shall not affect
or impair the remaining provisions hereof, which provisions shall be severed
from an illegal or unenforceable Section, subsection or other subdivision of
this Agreement or any other provisions of this Agreement.
2.5 Entire Agreement. This Agreement together with any other instruments to be
delivered pursuant hereto, including without limitation, a writing of the
Corporation dated the date hereof, containing certain documents and information
which are specifically identified to particular sections of this Agreement,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations,
and discussions, whether oral or written, among any or all of the parties.
2.6 Amendments. No amendment of this Agreement shall be binding unless otherwise
expressly provided in an instrument duly executed by each of the parties hereto.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of any of
the provisions of this Agreement shall be deemed to constitute a waiver of any
other provisions (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided in an instrument duly
executed by the parties.
2.8 Delays. When calculating the period of time within which or following which
any act is to be done or step taken pursuant to this Agreement, the day which is
the reference day in calculating such period shall be excluded. If the day on
which such delay expires is not a Business Day, then the delay shall be extended
to the next succeeding Business Day.
2.9 Preamble. The preamble hereof shall form an integral part of this Agreement.
2.10 Governing Law. This Agreement shall be governed in all respects by the laws
of the State of New York as they are applied to agreements entered into in New
York between New York residents and performed entirely within New York.
2.11 Currency. Unless otherwise specified, all statements of or references to
dollar amounts in this Agreement are of or to the lawful currency of the United
States.
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SECTION 3 - SUBSCRIPTIONS FOR SHARES
3.1 Investors' Subscription. Each Investor hereby subscribes for the number of
Common Shares of the Corporation's share capital set forth hereinafter at the
aggregate subscription price set forth hereinafter. The Corporation hereby
accepts the subscription of each Investor for their Common Shares, subject to
the terms and conditions contained herein.
===============================================================================
Investor Number of Common Shares Aggregate Price
-------------------------------------------------------------------------------
Innovatech 533,095 $ 3,749,992.96562 Cdn
-------------------------------------------------------------------------------
Devma 533,095 $ 3,749,992.96562 Cdn
-------------------------------------------------------------------------------
FSTQ 1 $ 7.03438 Cdn
-------------------------------------------------------------------------------
Fonds Regional 1 $ 7.03438 Cdn
===============================================================================
3.2 Payment and Issue of Innovatech Shares. Innovatech hereby agrees to remit to
the Corporation on the date hereof the aggregate subscription price set forth in
subsection 3.1 vis-a-vis Innovatech for the number of Common Shares set forth
vis-a-vis Innovatech (the "Innovatech Shares"), and the Corporation shall, upon
receipt of such aggregate subscription price, issue the Innovatech Shares to
Innovatech and deliver share certificates representing same.
3.3 Payment and Issue of Devma Shares. Devma hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set forth in
subsection 3.1 vis-a-vis Devma for the number of Common Shares set forth
vis-a-vis Devma (the "Devma Shares"), and the Corporation shall, upon receipt of
such aggregate subscription price, issue the Devma Shares to Devma and deliver
share certificates representing same.
3.4 Payment and Issue of FSTQ Shares. FSTQ hereby agrees to remit to the
Corporation on the date hereof the aggregate subscription price set forth in
subsection 3.1 vis-a-vis FSTQ for the number of Common Shares set forth
vis-a-vis FSTQ (the "FSTQ Shares"), and the Corporation shall, upon receipt of
such aggregate subscription price, issue the FSTQ Shares to FSTQ and deliver
share certificates representing same.
3.5 Payment and Issue of Fonds Regional Shares. Fonds Regional hereby agrees to
remit to the Corporation on the date hereof the aggregate subscription price set
forth in subsection 3.1 vis-a-vis Fonds Regional for the number of Common Shares
set forth vis-a-vis Fonds Regional (the "Fonds Regional Shares"), and the
Corporation shall, upon receipt of such aggregate subscription price, issue the
Fonds Regional Shares to Fonds Regional and deliver share certificates
representing same.
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3.6 Subscription by the Corporation for Class "B" common shares of Compositech
Canada. The Corporation hereby acknowledges and confirms that it is a condition
precedent to the subscriptions by the Investors for the Purchased Securities
hereunder that the aggregate subscription prices paid by the Investors to the
Corporation be used exclusively and in their entirety by the Corporation to
subscribe for Class "B" common shares of Compositech Canada in the manner
provided for in the subscription agreement dated the date hereof between the
Corporation and Compositech Canada, and the Corporation hereby directs the
Investors to remit the aggregate subscription prices for the Purchased
Securities directly to Compositech Canada for such purpose.
SECTION 4 - REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
4.1 Representations, Warranties and Acknowledgements of the Investors. Each
Investor (with respect to itself, and not with respect to the other Investors)
hereby represents and warrants, severally and not jointly, to the Corporation
and to the other Investors, and acknowledges and confirms that the Corporation
and the other Investors, are relying upon such representations and warranties in
connection herewith and would not have entered into this Agreement without such
representations and warranties:
4.1.1 such Investor is duly incorporated, constituted or formed, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or under the laws pursuant to which it was constituted or
formed;
4.1.2 such Investor has the necessary corporate power and authority to
execute this Agreement and to perform its obligations hereunder. The
execution of this Agreement by such Investor and the performance by
such Investor of its obligations hereunder have been duly authorized by
all necessary action on its part and do not require any action or
consent of, any registration with, or notification to any Person, or
any action or consent under any laws of the Province of Quebec or of
Canada to which such Investor is subject;
4.1.3 the execution of this Agreement, the consummation of the transactions
contemplated herein, the performance by such Investor of its
obligations hereunder and the compliance by it with this Agreement do
not:
4.1.3.1 violate, contravene or breach, or constitute a default under,
the constating documents, law or by-laws of such Investor;
4.1.3.2 violate, contravene or breach, or constitute a default under
any contract, agreement, indenture, instruments, or commitment to which
such Investor may be a party, or its properties may be subject, or by
which it is bound or affected; or
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4.1.3.3 violate, contravene or breach any laws to which such Investor
is subject;
4.1.4 neither such Investor nor any of its respective shareholders,
directors, officers, employees or agents has employed or incurred any
liability to any broker, finder or agent for any brokerage fees,
finder's fees, commissions or other amounts with respect to this
Agreement or any of the transactions contemplated hereby;
4.1.5 such Investor is acquiring the Purchased Securities as provided in this
Agreement for investment for its own account (or for the account of any
of the other Investors), and not with the view to, or for resale in
connection with, any distribution thereof;
4.1.6 such Investor is an "accredited investor" within the meaning of Rule
501 under the Securities Act;
4.1.7 each Investor hereby makes the following acknowledgements:
4.1.7.1 it understands that the acquisition of Purchased Securities as
provided in this Agreement has not been registered or qualified under
the Securities Act or under any applicable U.S. state securities laws,
but is being extended to such Investor pursuant to a specific exemption
from the registration provisions of the Securities Act and such laws,
the availability of which depends upon, among other things, the bona
fide nature of its investment intent and the accuracy of the
representations set forth in paragraph 4.1.5;
4.1.7.2 it understands that the Purchased Securities acquired pursuant
to this Agreement must be held by it indefinitely unless a subsequent
disposition thereof is registered and/or qualified under the Securities
Act and applicable U.S. state securities laws or, in the opinion of
such Investor's counsel reasonably satisfactory to the Corporation,
exempt from such registration and/or qualification;
4.1.8 it understands that the certificates representing its Purchased
Securities will bear a legend containing the restrictions referred to
in subparagraph 4.1.7.2.
4.2 Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants as follows to each of the Investors and acknowledges and
confirms that the Investors are relying upon such representations and warranties
in connection herewith and would not have entered into this Agreement without
such representations and warranties:
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4.2.1 1933 Act Representation. The offer, issuance and sale of the Purchased
Securities hereunder is exempt from the registration and prospectus
delivery requirements of the Securities Act;
4.2.2 "Blue Sky" Law Compliance. The Corporation has made all filings and
taken all actions necessary to comply with all "blue sky" laws with
regard to the sale of the Purchased Securities as contemplated by this
Agreement;
4.2.3 Corporate Organization and Authority. The Corporation is duly
incorporated and organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation. The Corporation is
registered, licensed or otherwise qualified as an out of state or
foreign corporation in good standing in any jurisdiction where not to
be so registered, licensed or otherwise qualified and in good standing
would have a material adverse affect on the business, the operations or
Assets of the Corporation. The Corporation is registered, licensed or
otherwise qualified to do business in the State of New York. The
execution and delivery of this Agreement and the performance of the
transactions contemplated hereby will not, with or without the giving
of notice and/or the passage of time, or both (i) violate any provision
of Applicable Law, or require any consent, approval or authorization
of, or any declaration, filing or registration with or notice to, any
third party, Governmental Body or otherwise, (ii) result in the loss of
any right under or conflict with or result in a default of any
provision or termination of or accelerate the date of performance of
any obligation under any Material Contract to which the Corporation may
be a party or by which the Corporation or any of its Material Assets
may be bound, or (iii) conflict with or result in a default of any
provision or termination of any of the corporate documents or by-laws
of the Corporation. This Agreement constitutes a valid and binding
obligation of the Corporation enforceable against it in accordance with
its terms, subject to laws of general application affecting creditors'
rights and the exercise of judicial discretion in accordance with
general equitable principles;
4.2.4 Corporate Documents. Exhibit 3.1 of the Annual Report and Exhibit 3.3
of the Registration Statement contain true and complete copies of the
corporate documents, including the authorized capital stock of the
Corporation and by- laws, respectively, of the Corporation, neither of
which has been amended and there is no application pending for the
amendment of any of same. The minute books and corporate records of the
Corporation, which have been made available to the Investor's
solicitors for review prior to the date hereof, have been maintained in
accordance with the Applicable Law and contain true and complete
records of all the by-laws of the Corporation and all meetings and
consents in lieu of meetings of the board of directors of the
Corporation and its shareholders, and accurately and completely reflect
all matters referred to in
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such minutes and consents. All resolutions contained in such records
have been duly passed and all such meetings have been duly called and
held. The share certificate books and the registers of shareholders,
directors and transfers of the Corporation are complete and accurate;
4.2.5 Issued Shares. Immediately before giving effect to this Agreement and
the Stock Exchange Agreement, the only issued and outstanding shares in
the capital stock of the Corporation (and rights, options and warrants
to acquire same) are as set out in a writing dated the date hereof
identified to this paragraph. All such shares are validly issued, fully
paid and non-assessable and all shares to be issued pursuant to this
Agreement, upon receipt by the Corporation of the consideration in
respect of such shares, will be validly issued, fully paid and
non-assessable. There are no other outstanding shares, warrants,
rights, options, securities convertible into shares of the capital
stock of the Corporation or any other agreements or rights to purchase
or subscribe for any shares of the capital stock of the Corporation or
convert any obligation or shares into any shares of the capital stock
of the Corporation and the Corporation has not agreed to issue or sell
any shares of its capital stock or any securities of any kind except as
set out in this Agreement and the Stock Exchange Agreement;
4.2.6 Subsidiaries. The Corporation has no subsidiary nor owns any equity or
other interest in any corporation, partnership, joint venture or other
entity;
4.2.7 Power and Authority. The Corporation has the requisite corporate power,
authority and capacity to carry on its business and to own and operate
its Assets.
4.2.8 Powers of Attorney. No Person holds any general or special power of
attorney from the Corporation;
4.2.9 Financial Statements. The Financial Statements and the interim
financial statements of the Corporation dated June 30, 1997, a copy of
which is contained in Form 10-QSB for the quarterly period ended June
30, 1997:
4.2.9.1 have been prepared in accordance with Generally Accepted
Accounting Principles,
4.2.9.2 are true and complete in all material respects,
4.2.9.3 present fairly the assets and liabilities of the Corporation
and present fairly the financial condition and the results of the
operations of the Corporation, as at the dates thereof and for the
periods covered thereby,
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4.2.9.4 present fairly proper accruals, as at the dates thereof and for
the periods covered thereby, including accruals of amounts and other
remuneration arrangements for employees of the Corporation (including
management fees and employee incentives), which though not payable
until a time after the end of the relevant period, are attributable to
activities undertaken during that period,
4.2.9.5 contain or reflect adequate reserves for all liabilities and
obligations of the Corporation as at the dates thereof.
No information has become available to the Corporation that would
render the Financial Statements or the interim financial statements of
the Corporation dated June 30, 1997 not fairly stated;
4.2.10 Undisclosed Liabilities of the Corporation. The Corporation has no
liabilities of any kind except liabilities disclosed or provided for in
the Financial Statements and liabilities incurred in the ordinary
course of business since the Balance Sheet Date which are not, in the
aggregate, material and adverse to its business, or to its financial
condition or results of operations and do not constitute a violation,
contravention or breach of any covenant, agreement or obligation
contained in this Agreement or constitute a breach of any
representation or warranty made in or pursuant to this Agreement;
4.2.11 Subsequent Activities of the Corporation. Except as disclosed in a
writing dated the date hereof identified to this paragraph, since the
Balance Sheet Date, there has not occurred any change in the condition,
financial or otherwise, or prospects of the Corporation other than
changes occurring in the ordinary course of business which changes,
individually or in the aggregate, have not materially adversely
affected its business, financial condition, results of operations or
prospects; without limiting the generality of the foregoing, since the
Balance Sheet Date, the Corporation has not, directly or indirectly:
4.2.11.1 declared or paid any dividend on its capital stock or
redeemed, purchased or otherwise acquired any shares of its capital
stock, or otherwise reduced its paid up capital or altered its capital
stock,
4.2.11.2 entered into any Contract outside the ordinary course of
business,
4.2.11.3 increased the salary, benefits, bonuses or other compensation
of its officers, directors or employees, except in the ordinary course
of business or adopted any Benefit Plan,
4.2.11.4 sold, leased, mortgaged, hypothecated, pledged or otherwise
subjected any of its Material Assets to any Encumbrance,
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4.2.11.5 settled any liability, claim, dispute, proceedings, suit or
appeal pending against it or any of its Material Assets,
4.2.11.6 suffered any extraordinary loss,
4.2.11.7 purchased or leased, or made any commitment to purchase or
lease, any Assets, except for purchases of Equipment and supplies in
the ordinary course of business,
4.2.11.8 made any change in personnel practices, except in the ordinary
course of business,
4.2.11.9 cancelled or released any debts or claims,
4.2.11.10 made any change in its accounting principles, policies or
practices as heretofore applied, including the basis upon which its
assets and liabilities are recorded on its books, its earnings are
ascertained or the methods or rates of depreciation or amortization
employed,
4.2.11.11 reimbursed any loans or advances made to the Corporation by
any shareholder, director or officer of the Corporation,
4.2.11.12 violated any provision of any Material Contract to which it
is a party or by which it or any of its Material Assets may be bound,
or
4.2.11.13 agreed to do any of the things described in subsections
4.2.11.1 through 4.2.11.12, inclusively, hereof;
4.2.12 Title to Assets. Except as disclosed in a writing dated the date hereof
and identified to this paragraph, the Corporation is the legal and
beneficial owner of, has good and marketable title to and possesses all
its Assets free and clear of any Encumbrances;
4.2.13 Equipment. The Corporation owns or leases all Equipment necessary to
conduct its business as presently conducted, all of which is located at
the Premises. All of the Equipment (i) is in good working order and
operating condition and has been regularly serviced and properly
maintained and (ii) is adequate and sufficient for the continuing
conduct of the business of the Corporation as now conducted. There are
no outstanding work orders relating to any of the Equipment which have
been received from or required by any applicable Governmental Body;
4.2.14 Assets. All the Assets owned or used by the Corporation are located at
the Premises, except as disclosed in a writing dated the date hereof
and identified to this paragraph.
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4.2.15 Litigation. Except as disclosed in a writing dated the date hereof and
identified to this paragraph, there is no existing or, to the
Corporation's Knowledge, threatened claim, demand, suit, action, cause
of action, dispute, proceeding, litigation, investigation, grievance,
arbitration, governmental proceeding or other proceeding, including
appeals and applications for review, in progress against, by, affecting
or relating to the Corporation and/or any of its Assets. There is no
state of facts, to the Corporation's Knowledge, which could provide a
valid basis for any of the foregoing. There is not at present
outstanding against, affecting or relating to the Corporation and/or
its Assets any Order which adversely affects the Corporation in any way
or that in any way relates to this Agreement or the transactions
contemplated hereby;
4.2.16 Insurance. The Corporation has such policies of insurance, issued by
responsible insurers, as are usually carried by persons engaged in
business activities similar to the business activities of the
Corporation, which includes all risk property insurance, public product
liability insurance and general liability insurance, workers
compensation insurance, fire insurance, directors' liability insurance
and business interruption insurance. True and complete copies of the
most recent inspection reports, if any, received from insurance
underwriters as to the condition of the Assets and the Corporation's
business have been delivered to the Investors. The Corporation is not
in default with respect to any of the provisions contained in any such
insurance policy. For any current claim that has not been settled or
finally determined, the Corporation has not failed to give any notice
or present any claim under any such insurance policy in a due and
timely fashion such that the insurer would be entitled to terminate
coverage or deny liability on any such claim. All such policies of
insurance are in full force and effect. Except as disclosed in a
writing dated the date hereof and identified to this paragraph, there
have been no liability or other claims against the Corporation;
4.2.17 Real Property Lease and Premises
4.2.17.1 The Real Property Lease, is the only lease, offer to lease,
sublease, license or other agreement under which the Corporation uses
or occupies or has the right to use or occupy, now or in the future,
any immovable or real property or any buildings, structures, fixtures
or improvements thereon,
4.2.17.2 all of the land, buildings, structures and improvements
currently used by the Corporation in the conduct of its business are
included in the Real Property Lease,
4.2.17.3 the Corporation has not entered into any sublease, license or
other agreement granting to any Person any right to the possession,
use, occupancy or enjoyment of the Premises or any portion thereof,
4.2.17.4 there are no work orders of any applicable Governmental Body
outstanding against the Premises and the Corporation has not received
any
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deficiency notices, requests or written or oral advice of any breach of
Applicable Law in respect of the foregoing which could, if not
corrected, become such a work order or could require performance of
work or expenditure of money to correct. The Premises are in compliance
with the requirements of all insurance companies who have policies
covering the Premises,
4.2.17.5 all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and
other similar systems serving the Premises are in working order and
operating condition. The continued existence, use, occupancy and
operation of each such line and system is not dependent on the granting
of any Permit, exception, approval or variance, and
4.2.17.6 all Material Permits, as well as all approvals and
authorizations from all insurance companies and fire rating
organizations, required to have been issued to the Corporation to
enable the Premises to be lawfully occupied and used by the Corporation
for all of the purposes for which it is currently occupied and used
have been lawfully issued and are in full force and effect and no
action by the Corporation is required in order that such certificates,
permits, licenses, approvals and authorizations will remain valid
following the completion of the transactions contemplated hereby;
4.2.18 Place of Business. The Corporation carries on business at the Premises
and has no other place of business;
4.2.19 Environmental Matters. Without limiting the generality of subsection
4.2.15 or 4.2.26 hereof:
4.2.19.1 the operations of, and the use of the Premises and Equipment
by the Corporation are now and have been in compliance, in all material
respects, with applicable Environmental Law, and the operations of and
use of the Premises by any predecessor in interest of the Corporation
or any present or prior owner, lessee or occupant of the Premises have,
to the Knowledge of the Corporation, been in compliance, in all
material respects, with applicable Environmental Law,
4.2.19.2 Except as set forth in a writing dated the date hereof and
identified to this subparagraph, the Corporation has obtained and holds
all Material Permits required under applicable Environmental Law for
the conduct of its operations and all such Material Permits are valid
and in full force and effect. All documentation in connection with
obtaining the Permit referred to in such writing has been filed with
the appropriate authority or Governmental Body. The Corporation has not
received any notice amending, revoking or replacing any Material
Permits or requiring the issuance of any additional Permits. The
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Corporation has filed in a timely manner all reports, notifications and
plans required pursuant to any such Material Permits,
4.2.19.3 there has been no material Release by the Corporation (or to
the Knowledge of the Corporation by any predecessor in interest of the
Corporation or any present or prior owner, lessee or occupant of the
Premises), of Hazardous Substances in, under or on the Premises and the
Premises are free of any material contamination by the Corporation (or
to the Knowledge of the Corporation by any predecessor in interest of
the Corporation or any present or prior owner, lessee or occupant of
the Premises) of the Environment by Hazardous Substances therein or
thereon,
4.2.19.4 the Corporation has not received, nor is it likely to receive
as a result of the consummation of the transactions contemplated
hereby, any notification pursuant to applicable Environmental Law that
any of its current or past operations (or to the Knowledge of the
Corporation those of any predecessor in interest of the Corporation or
any present or prior owner, lessee or occupant of the Premises) or any
by-product thereof or of the Premises, is or may be implicated in or
subject to any proceeding, investigation, claim, lawsuit, order,
agreement or evaluation by any Person as to whether i) any Remedial
Action is or may be needed to respond to a Release or threatened
Release of a Hazardous Substance into the Environment; ii) any recovery
is sought from the Corporation or its directors, officers or other
executives for any liability, damage or loss, or any action, suit or
proceeding commenced against the Corporation, related to or arising
from the current or past operations of the Corporation or the operation
of the Premises; or iii) the Corporation is or may be a potentially
responsible party for a Remedial Action, pursuant to applicable
Environmental Law, and
4.2.19.5 to the Knowledge of the Corporation there is no basis for any
action, suit, claim, penalty, fine, investigation or proceeding with
respect to any obligation of the Corporation to remediate conditions
pursuant to applicable Environmental Law or any other potential source
of liability for the Corporation or its directors, officers or other
executives under applicable Environmental Law in connection with any
Release of Hazardous Substance by the Corporation (or any predecessor
in interest of the Corporation or any present or prior owner, lessee or
occupant of the Premises);
4.2.20 Books and Records. The Books and Records of the Corporation are true
and complete in all material respects;
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4.2.21 Employees and Labour Relations.
4.2.21.1 The Annual Report and Proxy Statement, contain a true and
complete list of the employees of the Corporation who are officers,
directors and/or shareholders of the Corporation detailing total
remuneration and position held. All officers and employees of the
Corporation received compensation from the Corporation solely in
consideration of services performed on its behalf. The compensation of
all officers and employees of the Corporation was paid entirely by the
Corporation,
4.2.21.2 Exhibits 10.24, 10.25 and 10.26 of the Registration Statement
and the writing dated the date hereof and identified to this paragraph
contain true and complete copies of all employment agreements of senior
management to which the Corporation is a party. Without limiting the
generality of subsection 4.2.23 hereof and except as disclosed in the
writing dated the date hereof and identified to this paragraph, there
is no employment or similar agreement to which the Corporation is a
party providing for a specified notice of termination or fixed term of
employment or requiring any deferred compensation or benefits to be
paid or provided following such termination, except as provided in such
employment agreements of senior management. To the Knowledge of the
Corporation, none of the officers, directors or other key employees of
the Corporation has any present intention to terminate his employment.
There is no director, officer or employee of the Corporation who cannot
be dismissed upon such notice as is required by Applicable Law. The
Corporation and all employees are in material compliance with the terms
and conditions of their employment agreements and each such agreement
is in compliance with Applicable Laws,
4.2.21.3 without limiting the generality of subsection 4.2.26 hereof,
the Corporation is in compliance with all Material Applicable Law
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and human and civil rights,
4.2.21.4 without limiting the generality of subsection 4.2.23 hereof,
the Corporation is not bound by or subject to any collective bargaining
agreement or collective bargaining obligation or selection of a
collective bargaining representative for employees (or any ongoing
organizing activity), order of any or other labour board,
administration or Governmental Body,
4.2.21.5 without limiting the generality of subsection 4.2.15 hereof,
there are no labour disruptions pending or threatened against the
Corporation and the Corporation is not involved in any controversy with
any of its employees except in the ordinary course of business, and
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4.2.21.6 without limiting the generality of subsection 4.2.15 hereof,
there has never been and there is not presently pending or existing any
strike, slowdown, picketing, work stoppage, labour arbitration or
proceeding in respect of any grievance of any employee or other labour
dispute against, affecting or threatened against the Corporation, and
there is no fact, condition or circumstance which could provide the
basis therefor. No application for the certification of a collective
bargaining unit has been instituted or is pending or threatened;
4.2.22 Benefit Plans.
4.2.22.1 Exhibits 10.22 and 10.23 of the Registration Statement and
Exhibit 1 of the Proxy Statement contain true and complete copies of
all Benefit Plans maintained or contributed to by the Corporation or
from which the employees of the Corporation benefit,
4.2.22.2 Except as disclosed in a writing dated the date hereof and
identified to this paragraph, the Corporation has not at any time
contributed to (or been obligated to contribute to) any plan subject to
Title IV or Part I of Title I of the United States Employee Retirement
Income Security Act, 1974, as amended ("ERISA"). The Corporation is in
compliance with ERISA, the United States Internal Revenue Code of 1986,
as amended, and the regulations thereunder. Without limiting the
generality of subsection 4.2.26 hereof, each of the Benefit Plans
listed in such exhibits has been maintained in compliance with its
terms and all requirements prescribed by Applicable Law, are in good
standing under all Applicable Law, and without limiting the generality
of subsection 4.2.23 hereof, there are no outstanding defaults or
violations by the Corporation of any obligation required to be
performed by it in connection with any Benefit Plan.
4.2.22.3 no promises or commitments have been made by the Corporation
to amend any Benefit Plan or to provide increased benefits thereunder
or to establish any Benefit Plan;
4.2.23 Material Contracts. The exhibits to the Registration Statement, the
Annual Report and the Corporation's registration statement No.
333-32241 on Form S-3 under the Securities Act filed on July 28, 1997
contain true and complete copies of all Material Contracts to which the
Corporation is a party or by which it or its Material Assets may be
bound. The Corporation is not in violation of or in default with
respect to and no event has occurred which, with lapse of time or
action by a third party, or both, could result in violation of or a
default with respect to any of the Material Contracts contained in such
exhibits. Each of the Material Contracts contained in such exhibits is
in full force and effect and valid, binding and enforceable in
accordance with its terms and, to the
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Knowledge of the Corporation, all parties to such Material Contracts
(other than the Corporation) are in compliance with their obligations
thereunder. Neither of the Corporation and, to the Knowledge of the
Corporation, none of the parties to such Material Contracts (other than
the Corporation) intends to terminate its obligations under any of such
Material Contracts;
4.2.24 Intellectual Property
4.2.24.1 All information and representations (collectively the
"Information") given and made to the Investors by the Corporation
herein or in a writing dated the date hereof and identified to this
subparagraph, relating to the Principal Intellectual Property Rights
(as hereinafter defined), the Manufacturing Equipment and the Products
are complete and true, and all Information relates only to the
Principal Intellectual Property Rights, the Manufacturing Equipment and
the Products and not to any other Intellectual Property Rights of, or
equipment or products manufactured by, the Corporation or any other
Person.
4.2.24.2 A true and complete list and copy of all Intellectual Property
Rights of the Corporation except those specified in paragraphs
2.1.33.1.5 and 2.1.33.2 and a true and complete list and copy in all
material respects of the Intellectual Property Rights of the
Corporation specified in paragraphs 2.1.33.1.5 and 2.1.33.2 related to,
used in or useful for the research, development, manufacture, sale,
lease, license and service of the Manufacturing Equipment and the
Products and used in or useful for the conduct of its business are set
forth in a writing dated the date hereof and identified to this
subparagraph (the "Principal Intellectual Property Rights"), none of
the applications and registrations in respect of which has been opposed
or held unenforceable (except as set forth in a writing dated the date
hereof and identified to this subparagraph) and each of which is in
full force and effect. In addition, a true and complete list and copy
of all Intellectual Property Rights of the Corporation (other than the
Principal Intellectual Property Rights) are set forth in a writing
dated the date hereof and identified to this subparagraph. Except as
disclosed in a writing dated the date hereof and identified to this
paragraph, the Corporation is the absolute owner of the applications
and registrations in respect of the Principal Intellectual Property
Rights. Except as set forth in such writing and for commonly available
business software not material for the development and manufacturing of
Products or Manufacturing Equipment, to the Actual Knowledge of the
Corporation, the Corporation is the absolute owner of and has the right
to exclude others from using the Principal Intellectual Property
Rights, and the Corporation has the right to use and license the
Principal Intellectual Property Rights, without making any payment to
any Person or granting rights to any Person in exchange. The
Corporation's patents and trademarks, as listed and explained in such
writing, have been duly registered with, filed in or issued by, as the
case may be, such Governmental Bodies as is indicated in such writing
and, except as otherwise set forth in such writing, such registrations,
filing and issuances remain in full force and effect. The Principal
Intellectual Property Rights cover the technology used to develop and
manufacture the Products and
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the Manufacturing Equipment. The Principal Intellectual Property Rights
are sufficient for the lawful conduct, ownership and operation of the
Corporation's business and to enable the research, development,
manufacture, use, sale, lease, license and service of the Products and
the Manufacturing Equipment as represented in the Information and to
the Actual Knowledge of the Corporation, there are no Intellectual
Property Rights of any Person which impair or prevent the development,
manufacture, use, sale, lease, license and service of the Products and
the Manufacturing Equipment, now existing or under development by the
Corporation. The Corporation has, to its Actual Knowledge, the
unabridged right to bring actions for the infringement of all of its
Principal Intellectual Property Rights,
4.2.24.3 without limiting the generality of subsection 4.2.3 hereof,
the execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated thereby will not breach,
violate or conflict with any instrument or agreement governing any of
the Principal Intellectual Property Rights, and will not cause the
forfeiture or termination or give rise to a right of forfeiture or
termination of the Principal Intellectual Property Rights or in any way
impair the right of the Corporation to use, sell, license or dispose of
or to bring any action for the infringement of any of the Principal
Intellectual Property Rights or portion thereof,
4.2.24.4 to the Knowledge of the Corporation, none of the Principal
Intellectual Property Rights have been unlawfully derived, in part or
in whole, from the Intellectual Property Rights of any other Person.
All employees of, and consultants to, the Corporation have entered into
agreements with the Corporation pursuant to which all Intellectual
Property Rights developed by them in the course of and pursuant to
their relationship with the Corporation belong solely, without any
restrictions or obligations whatsoever, to the Corporation, and all
such agreements are included in the Material Contracts. The Corporation
has entered into confidentiality and non-disclosure agreements with all
employees of the Corporation or consultants, third party developers or
any other Persons with access to or knowledge of the Principal
Intellectual Property Rights, other than with Persons who are obligated
by law to maintain such information in confidence and attorneys and
accountants who have ethical obligations to maintain such information
in confidence. The Corporation has to its Knowledge taken all
reasonable and practical steps sufficient to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, all of
the information and data forming part of the Corporation's Trade
Secrets. To the Knowledge of the Corporation, the essential information
and data required to develop and manufacture the Manufacturing
Equipment and the Products are Trade Secrets of the Corporation,
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4.2.24.5 none of the development, manufacture, marketing, license, sale
or use of any product or service currently licensed or sold by the
Corporation or currently under development or proposed to be developed
by the Corporation, to the Knowledge of the Corporation, violates or
will violate any Contract with any Person or, to the Actual Knowledge
of the Corporation, infringes or will infringe any Intellectual
Property Rights of any Person. Except as set forth in a writing
identified to this subparagraph, there are no pending or to the
Knowledge of the Corporation, threatened proceedings, litigation or
other adverse claims affecting, or with respect to, any part of the
Principal Intellectual Property Rights and, except as set forth in such
writing, to the Knowledge of the Corporation, no Person is infringing
any Principal Intellectual Property Right,
4.2.24.6 except as set forth in such writing identified to this
paragraph and except for the license granted pursuant to the License
Agreement, no license or sub-license has been granted or other Contract
has been entered into with respect to any of the Principal Intellectual
Property Rights. The Corporation has not conducted business under any
name other than its current corporate name;
4.2.24.7 the license that will be granted to Compositech Canada by the
Corporation on the date hereof pursuant to the License Agreement shall
be validly granted and enforceable against the Corporation;
4.2.25 Related Transactions. Except as set forth in the Financial Statements,
and except for current unpaid salaries, the Corporation has no
indebtedness to any of its shareholders, directors, officers or
employees, past or present, or to any Person not dealing at
arm's-length with any of such Persons; and no shareholder, director,
officer or employee, past or present, of the Corporation or any Person
not dealing at arm's-length with any of such Persons has any
indebtedness to the Corporation;
4.2.26 Compliance with Applicable Law. The Corporation has conducted and is
conducting its business in compliance with all Material Applicable
Laws, and the Corporation is not in breach of any Material Applicable
Law, including any securities law;
4.2.27 Qualifications. The Corporation has not been required to suspend
operations of its business or been liable for a fine or penalty as a
result of the operation of its business. The Corporation has all
Material Permits necessary for the conduct of its business and such
Material Permits are validly issued, in full
force and effect and the Corporation is in compliance therewith, and
none of such Material Permits will be affected by the transactions
contemplated hereby;
4.2.28 Absence of Guarantees. Without limiting the generality of subsection
4.2.23 hereof and except for commitments disclosed in the Financial
Statements, the Corporation is not a party to or bound by any comfort
letter, understanding or agreement of guarantee,
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indemnification, assumption or endorsement or any like commitment with
respect to the liabilities (whether accrued, absolute, contingent or
otherwise) or obligations of any Person;
4.2.29 Tax Matters.
4.2.29.1 Tax Returns required by Applicable Law to be filed by, or with
respect to the activities of the Corporation with applicable
Governmental Bodies have been properly and timely filed with the
appropriate Governmental Bodies and all such Tax Returns are true and
complete and all Taxes shown to be due on such Tax Returns have been
paid,
4.2.29.2 with respect to the Corporation: i) there are no unpaid Taxes
now due and no deficiency for Taxes has been assessed by any applicable
Governmental Body, ii) no audit of any Tax Return is in progress or
pending or threatened, and iii) no waiver of any statute of limitations
has been given or is in effect with respect to the assessment of any
Taxes,
4.2.29.3 all Taxes shown on all Tax Returns for which the Corporation
is liable have been paid or accrued and adequately reserved on its
Books and Records and financial statements (including the Financial
Statements) of the Corporation. The Corporation is not taxed as an "S
corporation" (within the meaning of Section 1361(a) of the United
States Internal Revenue Code of 1986, as amended),
4.2.29.4 none of the Tax Returns of the Corporation have ever been
examined or audited by any taxing Governmental Body at any time, except
as provided in subparagraph 4.2.29.2 hereof,
4.2.29.5 the Corporation has never entered into any closing or similar
agreement with any taxing Governmental Body,
4.2.29.6 in each jurisdiction in which the Corporation is paying or has
paid sales tax, sales tax audits have been conducted and completed
through June 30, 1994,
4.2.29.7 copies of all deficiencies, assessments and notices from all
taxing Governmental Bodies, if any, have been delivered to the
Investors,
4.2.29.8 the Corporation was not a member of an entity required to file
a federal partnership Tax Return that is expected to have taxable
income for any taxable period beginning prior to the date hereof that
is in excess of cash distributions of such income to be made after the
date hereof,
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4.2.29.9 the Corporation has not adopted a plan of complete liquidation
and no consent has been filed on behalf of any of them pursuant to
Section 341(f) of the United States Internal Revenue Code of 1986, as
amended, or any predecessor provision,
4.2.29.10 the Corporation has not taken any action not in the ordinary
course of business that would have the effect of deferring any Tax
liability from any taxable period ending prior to the date hereof,
4.2.29.11 without limiting the generality of the foregoing, the
Corporation has collected all sales, goods and services and use taxes
required to be collected and has remitted same on a timely basis to the
appropriate Governmental Body, or has been furnished properly completed
exemption certificates for all exempt transactions. The Corporation has
in its possession all Books and Records, including supporting
documents, required by Applicable Law regarding the collection and
payment of all sales, goods and services and use taxes required to be
collected and paid over and regarding all exempt transactions for all
periods open under the applicable statutes of limitations as of the
date hereof, and the Corporation has maintained all such Books and
Records, including supporting documents, in the manner required by
applicable sales, goods and services and use tax statutes and
regulations,
4.2.29.12 the Corporation has withheld from each payment made to each
of its past and present shareholders, agents, employees, officers and
directors all deductions required to be made therefrom and has paid
same to the proper Governmental Body;
4.2.30 Accounts Receivable and Payable. A true and complete (i) trade accounts
receivable listing of the Corporation as of June 30, 1997, and (ii)
accounts payable listing of the Corporation as of August 21, 1997 are
set forth in a writing dated the date hereof and identified to this
paragraph. The accounts receivable of the Corporation reflected on the
Financial Statements and those created after the Balance Sheet Date,
are genuine and bona fide receivables which arose in the ordinary
course of business, and net of reserves (which reserves are adequate
and determined in accordance with Generally Accepted Accounting
Principles, consistently applied) are collectible in full when due
without any discount, set-off or counterclaim;
4.2.31 No Broker. Without limiting the generality of subsection 4.2.23 hereof
and except as set forth in a writing dated the date hereof and
identified to this paragraph, none of the directors of the Corporation
or the Corporation has employed, nor is any of them subject to any
claim of, any broker, finder, consultant or other intermediary in
connection with any of the transactions contemplated by this Agreement;
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4.2.32 Accuracy of Information.
4.2.32.1 The Corporation has made or caused to be made reasonable
inquiry with respect to each covenant, agreement, obligation,
representation and warranty of the Corporation contained in this
Agreement and any other document or certificate referred to herein or
furnished by the Corporation to the Investors pursuant thereto, and
none of the aforesaid covenants, agreements, obligations,
representations, warranties or documents or certificates contains any
untrue statement of a material fact or omits to state a material fact
necessary to make such covenant, agreement, obligation, representation,
warranty or other document or certificate not misleading, and
4.2.32.2 to its Knowledge, there is no fact, condition or circumstance
which (i) materially adversely or in the future may (so far as the
Corporation can now reasonably foresee) materially adversely affect the
business, operations, properties, prospects, or condition of the
Corporation or the ability of the Corporation to perform its covenants,
agreements and obligations under this Agreement or (ii) relates to the
business of the Corporation and might reasonably be expected to deter
an Investor from entering into this Agreement or any other agreements
entered into between the Investors and the Corporation on the date
hereof;
4.2.33 Budget and Projections. The information contained in the Budget and
Projections was prepared in good faith and represents the Corporation's
reasonable estimates.
SECTION 5- SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 Survival. Notwithstanding any investigation conducted prior or subsequent to
the date hereof, the parties shall be entitled to rely upon the representations
and warranties set forth herein and all representations and warranties made by,
and all covenants, obligations and agreements of, the parties, under or pursuant
to this Agreement or any other document or certificate delivered in connection
therewith shall survive the date hereof.
SECTION 6 - INDEMNIFICATION
6.1 Definitions. As used in this Section :
6.1.1 "Additional Indemnity" means the additional indemnity payable to the
Indemnified Party pursuant to subsection 6.5 hereof and calculated in
accordance with such subsection;
6.1.2 "Claim" means any act, omission or state of facts and any demand,
action, suit, proceeding, investigation, arbitration, trial, claim,
assessment, judgment,
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settlement or compromise relating thereto which may give rise to a
right to indemnification under subsection 6.2 or 6.3 hereof;
6.1.3 "Direct Claim" means any Claim by an Indemnified Party against an
Indemnifying Party which does not result from a Third Party Claim;
6.1.4 "Indemnifying Party" means any party obligated to provide
indemnification under this Agreement;
6.1.5 "Indemnified Party" means any party entitled to indemnification under
this Agreement;
6.1.6 "Indemnity Payment" means the aggregate amount of each Loss and
Additional Indemnity required to be paid pursuant to subsection 6.2 or
the amount of each Loss required to be paid pursuant to subsection 6.3
hereof;
6.1.7 "Loss" means any and all loss (including diminution in value),
liability, damage (excluding punitive, exemplary, consequential,
indirect and incidental damage), cost, expense, charge, fine, penalty
or assessment (after taking into account any tax benefit actually
received), resulting from or arising out of any Claim, including the
costs and expenses of any action, suit, proceeding, demand, assessment,
judgment, settlement or compromise relating thereto and all interest,
damages, fines and penalties and reasonable attorneys', accountants'
and experts' fees and expenses incurred in connection therewith;
6.1.8 "Proportion" means a fraction, the numerator of which is the number of
Common Shares owned by the Indemnified Party and the denominator of
which shall be the total of the Common Shares issued and outstanding;
and
6.1.9 "Third Party Claim" means any Claim asserted against an Indemnified
Party by any Person who is not a party to this Agreement.
6.2 Indemnification by the Corporation. The Corporation hereby agrees to
indemnify and save and hold harmless each Investor from and against any Loss
suffered or incurred, directly or indirectly, by such Investor as a result of,
arising out of or relating to:
6.2.1 any violation, contravention or breach of any covenant, agreement or
obligation of the Corporation under or pursuant to this Agreement or
any other document or certificate delivered to such Investor by or on
behalf of the Corporation in connection therewith, as well as any Claim
by any Person containing allegations which, if true, would constitute
such an event; and
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6.2.2 any incorrectness in, or breach of, any representation or warranty made
by the Corporation in this Agreement, or made or to be made in any
other document or certificate delivered or to be delivered to such
Investor by or on behalf of the Corporation in connection therewith, as
well as any Claim by any Person containing allegations which, if true,
would constitute such an event.
6.3 Indemnification by Investors. Each Investor hereby agrees to, severally and
not jointly with other Investors, each Investor having made the representations
and warranties with respect to itself only, indemnify and save and hold harmless
the Corporation from and against any Loss suffered or incurred, directly or
indirectly, by it as a result of, arising out of or relating to:
6.3.1 any violation, contravention or breach of any covenant, agreement or
obligation of such Investor under or pursuant to this Agreement or any
other document or certificate delivered to the Corporation by or on
behalf of such Investor in connection therewith, as well as any Claim
by any Person containing allegations which, if true, would constitute
such an event; and
6.3.2 any incorrectness in, or breach of, any representation or warranty made
by such Investor in this Agreement, or made or to be made in any other
document or certificate delivered or to be delivered to the Corporation
by or on behalf of such Investor in connection therewith, as well as
any Claim by any Person containing allegations which, if true, would
constitute such an event.
6.4 Payment and Interest. The Indemnifying Party shall reimburse, on demand, to
the Indemnified Party the amount of each Loss suffered or incurred by the
Indemnified Party and, in the event that subsection 6.5 applies, shall pay, on
demand, to the Indemnified Party the amount of the Additional Indemnity, the
whole as of the date that the Indemnified Party incurs such Loss, together with
interest on such amount(s) from the aforesaid date until payment in full at a
rate per annum equal to the Prime Rate, plus two (2) percentage points. Interest
shall be calculated and payable monthly on the last day of each month during
which any amount in respect of any Loss, and/or any Additional Indemnity if
applicable, remained unpaid, both before and after an arbitration award and/or
judgment, with interest on overdue interest calculated and payable at the same
rate. The interest payable in any month shall be calculated on the average
amount of all amounts in respect of any Loss, and/or any Additional Indemnity if
applicable, that remained unpaid at any time during such month. This amount
shall be calculated by i) multiplying any amount in respect of each Loss that
remained unpaid at any time during such month by the number of days that amount
remained unpaid during such month and ii) dividing the aggregate of all such
products by the number of days in such month. If such Claim is subsequently
determined not to have been valid, the Indemnified Party shall reimburse the
Indemnifying Party for the amount so paid together with interest at the Prime
Rate per annum, plus two (2) percentage points, calculated and payable monthly
as provided previously in this subsection, from the month such payment was made
by the Indemnifying Party to the month in which the Indemnified Party repaid
such amount.
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6.5 Additional Indemnity. If the Corporation is the Indemnifying Party, in
addition to the reimbursement to the Indemnified Party of the amount of each
Loss suffered or incurred by the Indemnified Party as provided in subsection 6.4
hereof, the Indemnifying Party shall pay, on demand, to the Indemnified Party
the Additional Indemnity, the whole as provided in subsection 6.4 hereof. The
Additional Indemnity shall be calculated in accordance with the following
formula:
00 (n+1)
AI = (SUM) x y
n = 0
where: AI = Additional Indemnity
x = Loss
y = Proportion
n = 0, 1, 2, 3, 4 ...
Example: if Loss = $200,000
Proportion = 150,000 = 15 %
---------
1,000,000
AI = (200,000 X 15%) + (200,000 X 15% X 15%) + (200,000 X 15% X 15% X 15%) ...
AI = $30,000 + $4,500 + $675 + $101.25 + $15.19 + $2.28 + $0.34 + $0.05 + $0.008
The Additional Indemnity payable to the Indemnified Party is an amount of
$35,294.12
6.6 Notification. Promptly upon obtaining knowledge thereof, the Indemnified
Party shall notify the Indemnifying Party of each Claim which the Indemnified
Party has determined has given or could give rise to indemnification under this
Section 6, describing such Claim in reasonable detail. In circumstances where
the Indemnifying Party is notified of such Claim but not promptly, the
Indemnifying Party shall not be relieved from any duty to indemnify and save and
hold harmless which otherwise might exist with respect to such Claim unless (and
only to that extent) the omission to notify promptly materially prejudices the
ability of the Indemnifying Party to exercise its right to defend provided in
this Section 6.
6.7 Defense of Third Party Claims. The Indemnifying Party shall have the right,
after receipt of the Indemnified Party's notice under subsection 6.6 hereof with
respect to a Third Party Claim and upon giving written notice to the Indemnified
Party within ten (10) Business Days of such receipt, and subject to the rights
of any insurer or other third party having potential liability therefor, to
defend the Third Party Claim at its own cost and expense with counsel of its own
selection, provided that:
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6.7.1 the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
6.7.2 the Third Party Claim seeks only monetary damages and does not seek any
injunctive or other relief against the Indemnified Party;
6.7.3 the Indemnifying Party unconditionally acknowledges in writing its
obligation to indemnify and save and hold the Indemnified Party
harmless with respect to the Third Party Claim, if it is found that
such obligation exists; and
6.7.4 legal counsel chosen by the Indemnifying Party is satisfactory to the
Indemnified Party, acting reasonably.
6.8 Settlement of a Third Party Claim. The Indemnifying Party shall not be
permitted to compromise and settle or to cause a compromise and settlement of
any Third Party Claim, without the prior written consent of the Indemnified
Party, unless:
6.8.1 the terms of the compromise and settlement require only the payment of
money and do not require the Indemnified Party to admit any wrongdoing
or take or refrain from taking any action;
6.8.2 the Indemnifying Party delivers to the Indemnified Party a letter of
credit, surety bond or similar security in form and substance
satisfactory to the Indemnified Party, acting reasonably, in the amount
of such compromise and settlement (including interest and costs, if
any, payable pursuant thereto) as security for the payment thereof;
6.8.3 the Indemnified Party receives, as part of the compromise and
settlement, a legally binding and enforceable unconditional
satisfaction and release, which is in form and substance satisfactory
to the Indemnified Party, acting reasonably; and
6.8.4 the Third Party Claim and any claim or liability of the Indemnified
Party with respect to such Third Party Claim is being fully satisfied
because of the compromise and settlement and the Indemnified Party is
being released from any and all obligations or liabilities it may have
with respect to the Third Party Claim.
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6.9 Waiver of Right to Defend Third Party Claims. If the Indemnifying Party
fails:
6.9.1 within fifteen (15) Business Days from receipt of the notice of a Third
Party Claim to give notice of its intention to defend the Third Party
Claim in accordance with subsection 6.7 hereof, or
6.9.2 to comply at any time with any of subsections 6.7.1 through 6.7.4
(inclusively) hereof,
then the Indemnifying Party shall be deemed to have waived its right to defend
the Third Party Claim and the Indemnified Party shall have the right (but not
the obligation) to undertake the defense of the Third Party Claim and compromise
and settle the Third Party Claim on behalf, for the account and at the risk and
expense of the Indemnifying Party.
6.10 Direct Claims. If the Indemnifying Party fails to respond in writing to any
written notice of a Direct Claim given by the Indemnified Party pursuant to
subsection 6.6 hereof, and fails to make an Indemnity Payment to the Indemnified
Party within ten (10) Business Days thereof, the Indemnifying Party shall be
deemed to have rejected such Direct Claim, in which event the Indemnified Party
shall be free to pursue such rights, recourses and remedies as may be available
to it.
6.11 De Minimis, Deductible and Maximum Payment. Notwithstanding anything
contained herein:
6.11.1 the Investors shall not be entitled to indemnification arising under
subsection 6.2.2 hereof unless the aggregate of all amounts payable by
the Corporation in connection with its indemnification obligations
thereunder exceeds ten thousand dollars ($10,000);
6.11.2 the Corporation shall not be entitled to indemnification arising under
subsection 6.3.2 hereof unless the aggregate of all amounts payable by
the Investors in connection with their indemnification obligations
thereunder exceeds ten thousand dollars ($10,000);
6.11.3 the amounts payable by the Indemnifying Parties to the Indemnified
Parties in connection with their indemnification obligations pursuant
to subsection 6.2.2 or 6.3.2, as the case may be, are subject to a
cumulative deductible of one hundred thousand dollars ($100,000). For
purposes of clarity and without limiting the foregoing, the Indemnified
Parties shall not be entitled to any payment unless the aggregate of
all the amounts which should have been paid by the Indemnifying Parties
to the Indemnified Parties in connection with their indemnification
obligations pursuant to subsection 6.2.2 or 6.3.2, as the case may be,
is greater than one hundred thousand dollars ($100,000);
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6.11.4 the aggregate amount payable by the Corporation to an Investor in
connection with the indemnification obligations pursuant to subsection
6.2 shall be limited to the aggregate of the following amounts (the
"Maximum Indemnification Amount") (i) the aggregate subscription price
paid by such Investor for all of its Common Shares pursuant to this
Agreement; (ii) the aggregate subscription price paid by such Investor
for all of its shares in the capital stock of Compositech Canada
pursuant to the Subscription Agreement in Compositech Canada; (iii) the
aggregate subscription price paid by such Investor for all other shares
subscribed for in the capital stock of Compositech Canada; (iv) the
aggregate purchase price paid by such Investor for all shares in the
capital stock of Compositech Canada purchased from the Corporation; (v)
the aggregate amount loaned to Compositech Canada by such Investor;
(vi) the aggregate amount paid by such Investor in connection with any
guarantees furnished by it on behalf of Compositech Canada and (vii)
all other costs and expenses incurred by such Investor in connection
with the matters described in items (i) through (vi) above. In the
event of a transfer by any Investor to (a) another Investor, (b) a
Permitted Transferee (as defined in the Compositech Canada Shareholders
Agreement) of such Investor, (c) a Governmental Body of or controlled
by the Government of Quebec or (d) a limited partnership controlled by
such Investor or by any Governmental Body of or controlled by the
Government of Quebec or of which such Investor or any Governmental Body
of or controlled by the Government of Quebec holds the majority of the
limited partnership units, of any of the shares contemplated in items
(i) through (iv) above and/or any of the indebtedness contemplated in
items (v) and (vi) above, the Maximum Indemnification Amount in
connection with such transferee shall be increased by the portion of
the selling Investor's Maximum Indemnification Amount corresponding to
the transferred shares and/or indebtedness and the Maximum
Indemnification Amount of such selling Investor shall be reduced
accordingly.
6.12 Right of Offset. Without in any way limiting the terms of this Section 6,
each party shall have the right to offset against all amounts payable from time
to time by it to any other party, howsoever arising, including under this
Agreement, any amount owing by such other party pursuant to the indemnification
obligations contained in this Agreement to the party intending to offset.
6.13 Cumulative Rights. The rights, recourses and remedies provided to an
Indemnified Party under this Section 6 are cumulative with any other right,
recourse and remedy such Indemnified Party may have or may hereafter acquire
under Applicable Law, and any right, recourse or remedy of such Indemnified
Party may be asserted completely against the Indemnifying Party, without regard
to the rights, recourses or remedies the Indemnified Party may have against any
other Person.
6.14 Representations and Warranties included in Subscription Agreement in
Compositech Canada. The Corporation hereby agrees and confirms that the
representations and warranties made by it in this Agreement apply in favour of
the Investors as if made in the Subscription Agreement in Compositech Canada.
The Corporation hereby acknowledges and
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confirms that the Investors are relying upon such representations and warranties
in connection with the Subscription Agreement in Compositech Canada and would
not have entered into the Subscription Agreement in Compositech Canada without
such representations and warranties. Without in any way limiting the terms of
this Section 6, the Corporation hereby agrees and confirms that any Loss
suffered or incurred, directly or indirectly, by the Investors, in connection
with their investments in Compositech Canada pursuant to the Subscription
Agreement in Compositech Canada or otherwise shall be considered as a Loss for
the purposes hereof.
SECTION 7 - COVENANTS OF THE CORPORATION
7.1 The Corporation hereby covenants and agrees that for as long as an Investor
owns any Common Shares, it shall:
7.1.1 provide all financial information about the Corporation to such
Investor in the same manner and on the same terms as provided to its
other shareholders;
7.1.2 pay and discharge all Taxes, when due, unless the Corporation is
contesting the payment of such Taxes in good faith;
7.1.3 keep its Equipment (and those of any of its subsidiaries) in good
repair, working order and condition and keep its Assets properly
insured;
7.1.4 keep and maintain Books and Records which are complete and accurate in
all material respects, and keep and maintain complete and accurate Tax
Returns;
7.1.5 comply with all Material Applicable Laws;
7.1.6 properly maintain and protect its corporate existence and Intellectual
Property Rights; and
7.1.7 ensure that all its employees are bound by confidentiality agreements
adequate to protect the Corporation's confidential information.
7.2 The Corporation hereby covenants and agrees that for as long as the
Investors or one or more of the Investors own at least 710,794 Common Shares in
the aggregate, it shall, at all reasonable times, allow such Investors to visit
any of the Corporation's facilities, inspect the Corporation's Books and Records
and the Assets located in such facilities and discuss with its officers the
affairs and finances of the Corporation. The number of Common Shares specified
above shall be adjusted to take into account changes to the Common Shares
occurring from time to time from the date hereof. Such number of Common Shares
(or any security or other property or rights such Common Shares may have become)
shall be adjusted to take into account any Share Adjustment or Capital
Reorganization (as such term is defined in the Stock Exchange Agreement)
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and the adjustments provided for herein are cumulative and shall be made
successively whenever an event referred to in this subsection 7.2 occurs.
7.3 The Corporation hereby covenants and agrees to forthwith take all necessary
action to list the Purchased Securities, to the extent not already listed, on
the Nasdaq Small Cap Market and on such other securities exchange or
over-the-counter market where the Corporation's Common Shares are listed.
SECTION 8 - GENERAL PROVISIONS
8.1 Further Documents. Each party upon the request of the others, shall do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably necessary or
desirable to effect complete consummation of the transactions contemplated by
this Agreement.
8.2 Default Interest. Subject to the provisions of subsection 6.4 hereof, if any
party fails to pay any other party any amounts due hereunder within ten (10)
days of the due date, the party owing such money shall pay to the party owed
such money, from the date such amount was due, interest at the Prime Rate, plus
two (2) percentage points, compounded monthly and payable on demand.
8.3 Successors and Assigns. This Agreement and the provisions hereof shall enure
to the benefit of and be binding upon the parties and their respective
successors and permitted assigns. Notwithstanding any provision of this
Agreement, the representations and warranties of the Corporation set forth in
subsection 4.2 hereof and the covenants of the Corporation set forth in Section
7 hereof shall not benefit any purchaser of any Purchased Securities, except if
the purchaser is (i) already an Investor; (ii) a Permitted Transferee (as
defined in the Compositech Canada Shareholders Agreement) of an Investor; (iii)
a Governmental Body of or controlled by the Government of Quebec; or (iv) a
limited partnership controlled by an Investor or by any Governmental Body of or
controlled by the Government of Quebec or of which an Investor or any
Governmental Body of or controlled by the Government of Quebec holds the
majority of the limited partnership units.
8.4 Arbitration. All disputes or controversies between the parties in respect of
the validity, interpretation or performance of the provisions of this Agreement
shall be definitively dealt with using the rules of conciliation and arbitration
of the International Chamber of Commerce, by one or more arbitrators appointed
in accordance with said rules, and to the exclusion of any courts, except for
injunctive relief and any provisional remedy, including seizure before judgment
or attachment, which may be obtained from any court or tribunal having
jurisdiction. Any arbitration proceeding required pursuant to the terms thereof
shall take place in New York, New York and shall be conducted in both the
English and French language. The cost of the arbitration shall be borne in the
manner provided for in the arbitration award.
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8.5 Expenses. The parties hereto hereby acknowledge and confirm that all legal
fees and expenses incurred by the Investors in connection with this Agreement,
the Subscription Agreement in Compositech Canada and all other agreements
entered into among the Investors, the Corporation and/or Compositech Canada on
the date hereof shall be borne by the Investors and that all legal fees and
expenses incurred by the Corporation in connection with this Agreement, the
subscription by it for shares of Compositech Canada and all other agreements
entered into among the Corporation, the Investors and/or Compositech Canada on
the date hereof shall be borne by the Corporation.
8.6 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:
if to Devma: INDUSTRIES DEVMA INC.
▇▇▇, ▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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if to FSTQ: FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q.)
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Vice President, Legal Affairs
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Senior Vice President, Investments
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Fonds Regional: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL,
limited partnership
▇▇▇, ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Managing Director
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Corporation: COMPOSITECH LTD.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ▇.▇.▇.
Attention: the President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy
in all cases to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ Blvd. West
Suite 1400
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy
in all cases to: ▇▇▇▇▇▇▇, LEISURE, ▇▇▇▇▇▇ & IRVINE
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
8.7 Time of the essence. Time shall be of the essence in this Agreement.
8.8 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
8.9 Language. The parties hereto state their express wish that this Agreement as
well as all documentation contemplated hereby or pertaining hereto or to be
executed in connection herewith be drawn up in the English language; les parties
expriment leur ▇▇▇▇▇ explicite a l'effet que cette convention de meme que tous
documents envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient rediges en anglais.
- 41 -
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
INDUSTRIES DEVMA INC.
Per:
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Per:
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SOCIETE INNOVATECH DU GRAND MONTREAL
Per:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per:
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FONDS REGIONAL DE SOLIDARITE DE MONTREAL, limited partnership,
by its general partner, Gestion du Fonds Regional de Solidarite Ile de Montreal
Inc.
Per:
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
COMPOSITECH LTD.
Per: /s/▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇