-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GIafNd6pmQkqehiB/NUvQvItYjMDCf/4Lpo9cfeR+i3aNyWuOTlBXquDM8z1vnfy Hi4kcLiCvAHOWA4MAWDE8g== /in/edgar/work/0000950147-00-500154/0000950147-00-500154.txt : 20001121 0000950147-00-500154.hdr.sgml : 20001121 ACCESSION NUMBER: 0000950147-00-500154 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLPOWER CORP CENTRAL INDEX KEY: 0001068618 STANDARD INDUSTRIAL CLASSIFICATION: [2800 ] IRS NUMBER: 870384678 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-29780 FILM NUMBER: 773093 BUSINESS ADDRESS: STREET 1: 7309 EAST STETSON DRIVE STREET 2: STE 102 CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 6029476366 MAIL ADDRESS: STREET 1: 7309 EAST STETSON DR STREET 2: STE 102 CITY: SCOTTSDALE STATE: AZ ZIP: 85251 10QSB 1 e5773.txt QUARTERLY REPORT FOR THE QTR ENDED 09/30/2000 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-QSB -------------------- (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from _____________ to _______________ -------------------- Commission File Number 001-14439 -------------------- SOLPOWER CORPORATION (Exact Name of Small Business Issuer as Specified in its Charter) Nevada 87-0384678 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 7309 East Stetson Drive, Suite 102 Scottsdale, Arizona 85251 (Address of Principal Executive Offices) (480) 947-6366 (Issuer's Telephone Number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of each of the issuer's classes of common equity was 28,250,691 shares of common stock, par value $.01, as of September 30, 2000. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] ================================================================================ SOLPOWER CORPORATION INDEX TO FORM 10-QSB FILING FOR THE QUARTER ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS PART I FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements................................................ 2 Balance Sheet September 30, 2000 (unaudited) and March 31, 2000.................... 2 Statements of Operations For the Three and Six Months Ended September 30, 2000 (unaudited) and 1999 (unaudited)................................................. 3 Statement of Stockholders' Equity For the Six Months Ended September 30, 2000 (unaudited).............. 4 Statements of Cash Flows For the Six Months Ended September 30, 2000 (unaudited) and 1999 (unaudited)................................................. 5 Notes to the Financial Statements...................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................... 8 PART II OTHER INFORMATION Item 2. Changes in Securities............................................... 9 Item 6. Exhibits and Reports on Form 8-K.................................... 9 SIGNATURES.................................................................. 10 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SOLPOWER CORPORATION CONSOLIDATED BALANCE SHEETS
September 30, March 31, 2000 2000 (Unaudited) (Audited) ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 184,355 $ 34,299 Accounts receivable 130,924 79,726 Receivable from related party 15,362 -- Tax credit receivable 17,787 -- Prepaid expenses 68,340 -- Inventory 498,593 21,624 ----------- ----------- Total Current Assets 915,361 135,649 ----------- ----------- Property & Equipment, net 700,661 377,762 ----------- ----------- Other Assets: Marketing licenses, net 2,388,333 2,558,333 Goodwill, net 373,656 -- ----------- ----------- 2,761,989 2,558,333 ----------- ----------- $ 4,378,011 $ 3,071,744 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Bank overdraft $ 156,781 $ -- Loans payable to related parties 226,390 130,390 Accounts payable - trade 457,457 330,093 - related parties 155,249 107,118 Accrued expenses 133,243 309,929 Customer deposits 68,991 -- ----------- ----------- Total Current Liabilities 1,198,111 877,530 Long-Term Liabilities: Loans payable to related parties, less current portion 1,415,299 212,114 Loan payable - bank 127,846 -- Deferred income taxes 14,366 -- ----------- ----------- Total Liabilities 2,755,622 1,089,644 ----------- ----------- Minority Interest in Subsidiary 134,344 -- ----------- ----------- Commitments and Contingencies Stockholders' Equity: Preferred stock; $0.001 par value, 5,000,000 shares authorized; issued and outstanding, none -- -- Common stock; $0.01 par value, 30,000,000 shares authorized; issued and outstanding 28,250,691 and 27,316,066, respectively 282,507 273,161 Additional paid in capital 9,196,292 8,741,730 Accumulated deficit (7,990,754) (7,032,791) ----------- ----------- 1,488,045 1,982,100 ----------- ----------- $ 4,378,011 $ 3,071,744 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2 SOLPOWER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended September 30, September 30, ------------------------------ ------------------------------ 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Revenues: Sales - fuel additive $ 78,093 $ 47,818 $ 199,432 $ 73,257 Sales - refrigerant 113,650 -- 113,650 -- ------------ ------------ ------------ ------------ 191,743 47,818 313,082 73,257 ------------ ------------ ------------ ------------ Cost of Sales: Fuel additive 77,188 76,669 169,722 209,634 Refrigerant 75,405 -- 75,405 -- ------------ ------------ ------------ ------------ 152,593 76,669 245,127 209,634 ------------ ------------ ------------ ------------ Gross Profit (Loss) 39,150 (28,851) 67,955 (136,377) Operating Expenses: General and administrative 490,354 755,687 878,108 1,091,615 ------------ ------------ ------------ ------------ Loss from Operations (451,204) (784,538) (810,153) (1,227,992) ------------ ------------ ------------ ------------ Other Income (Expense): Interest income 124 -- 357 -- Foreign currency transaction gain 7,533 -- 15,327 -- Settlement costs -- -- (60,000) -- Interest expense (88,493) -- (103,843) (140) ------------ ------------ ------------ ------------ Total Other Income (Expense) (80,836) -- (148,159) (140) ------------ ------------ ------------ ------------ Net Loss Before Minority Interest and Provision for Income Taxes (532,040) (784,538) (958,312) (1,228,132) Minority Interest 349 -- 349 -- Provision for Income Taxes -- -- -- -- ------------ ------------ ------------ ------------ Net Loss $ (531,691) $ (784,538) $ (957,963) $ (1,228,132) ============ ============ ============ ============ Basic Loss Per Share $ (0.02) $ (0.03) $ (0.03) $ (0.05) ============ ============ ============ ============ Weighted Average Number of Shares Outstanding 27,841,321 23,456,560 27,582,588 23,456,560 ============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 3 SOLPOWER CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
Additional Common Stock Paid In Accumulated Shares Amount Capital Deficit Total ------ ------ ------- ------- ----- Balance, March 31, 2000 (audited) 27,316,066 $273,161 $8,741,730 $(7,032,791) $ 1,982,100 Issuance of common stock for license terminations, interest and property 784,625 7,846 306,004 -- 313,850 Issuance of common stock pursuant to employment agreements 150,000 1,500 68,558 -- 70,058 Issuance of warrants pursuant to debt agreements -- -- 80,000 -- 80,000 Loss for the six months ended September 30, 2000 (unaudited) -- -- -- (957,963) (957,963) ---------- -------- ---------- ----------- ----------- Balance, September 30, 2000 (unaudited) 28,250,691 $282,507 $9,196,292 $(7,990,754) $ 1,488,045 ========== ======== ========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 4 SOLPOWER CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended September 30, ------------------------------ 2000 1999 ----------- ----------- Cash Flows From Operating Activities: Net loss $ (957,963) $(1,228,132) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 226,622 100,486 Non-cash transactions 428,908 11,250 Changes in operating assets and liabilities: Accounts receivable - trade 93,881 (13,814) Receivable from related party (15,362) -- Tax credit receivable 246 -- Prepaid expenses (36,871) -- Inventory 103 20,146 License fee receivable -- 2,400,000 Bank overdraft 96,558 -- Accounts payable - trade (184,461) (38,585) - related party 48,131 -- Accrued expenses (230,573) 134,893 Customer deposits (82,785) -- Minority interest in subsidiary (349) -- Deferred revenue -- (2,400,000) Deferred income taxes (35) -- ----------- ----------- Net Cash Used by Operating Activities (613,950) (1,013,756) ----------- ----------- Cash Flows from Investing Activities: Capital expenditures (92,582) (16,107) Cash acquired with acquisition 72,819 -- Investment in subsidiary (508,350) -- ----------- ----------- Net Cash Used by Investing Activities (528,113) (16,107) ----------- ----------- Cash Flows From Financing Activities: Advances from related parties 1,317,450 (354,061) Payment on capital lease obligation -- (2,398) Proceeds from convertible notes payable -- 1,500,000 Payments on note payable bank (7,066) -- Payments to related parties (18,265) -- ----------- ----------- Net Cash Provided by Financing Activities 1,292,119 1,143,541 ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents 150,056 113,678 Cash and Cash Equivalents, Beginning of Period 34,299 2,228 ----------- ----------- Cash and Cash Equivalents, End of Period $ 184,355 $ 115,906 =========== ===========
(Continued) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 5 SOLPOWER CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) 2000 1999 ---- ---- SUPPLEMENTAL INFORMATION: Cash Paid for: Interest $ 1,179 $ -- Non-cash Investing and Financing: Issuance of shares of common stock for conversion of debt $203,500 $ -- Issuance of shares of common stock for settlement costs $ 75,350 $ -- Issuance of shares of common stock for equipment $ 35,000 $ -- Issuance of shares of common stock pursuant to employment agreements $ 70,058 $ -- Issuance of warrants pursuant to debt agreements $ 80,000 $ -- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 6 SOLPOWER CORPORATION NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDING SEPTEMBER 30, 2000 NOTE 1 - BASIS OF PREPARATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. These statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended March 31, 2001. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and footnotes thereto for the year ended March 31, 2000 included in the Company's report on form 10-KSB. NOTE 2 - REAL ESTATE LEASE On August 14, 2000, the Company entered into a lease for 1,364 feet of office space for its executive offices in Scottsdale, Arizona. The lease expires in June 30, 2001 and has a minimum monthly rental obligation of approximately $2,100. NOTE 3 - CONVERTIBLE PROMISSORY NOTE On September 18, 2000, the Company issued a $250,000 Convertible Promissory Note to Dominion Capital Pty Ltd. The note matures on September 18, 2001, is convertible into common shares of the Company at the lesser of the market price on the date conversion notice is given to the Company or $0.40 per share for the amount of principal outstanding at conversion. The note bears interest at 8% percent per annum payable quarterly in arrears. NOTE 4 - ACQUISITION OF PROTOCOL RESOURCE MANAGEMENT INC. On August 30, 2000, the Company acquired 50% of the outstanding stock of Protocol Resource Management, Inc., a private Ontario corporation with offices in Aurora, Ontario, Canada. PICO Holdings, In., a NASDAQ listed California corporation, acquired the remaining 50% interest in Protocol under the same agreement. Protocol and the Company were previously engaged in a joint venture for the manufacture and distribution of SP34E(TM) through Solpower Canada Inc., an Ontario corporation, owned equally by Protocol and the Company. The amount paid for the acquisition was $1,500,000 (CAN) $1,016,700 (US) in the form of $1,000,000 (CAN) $677,800 (US) cash at closing, of which half was paid by the Company and half by PICO Holdings, Inc., and promissory notes due on the second and third anniversaries of the closing date. The promissory notes were issued by PICO. Solpower issued a note in the amount of $250,000 (CAN) $173,974 (US) to PICO which represented one-half of the amount of the note issued by PICO Holdings Inc. in the Protocol acquisition. In the event that the annual average EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) of Protocol for the first two years following closing is not at least $250,000 (CAN) $173,974 (US), the amount of the second anniversary payment will be reduced based on a formula. In the event that the annual EBITDA of Protocol for third year following closing is not at least $250,000 (CAN) $173,974 (US), the amount of the third anniversary payment will also be subject to reduction based on a formula. 7 The funds used by the Company to complete its portion of acquisition were provided in the form of two working capital loans from PICO in the aggregate amount of US$669,450. The shares of Protocol held by the Company as a result of the acquisition secure the loans. The Company granted PICO a warrant to purchase 1,000,000 shares of its common stock at $0.43 (110% of the market price on the date funds were advanced). The term of the promissory note is for three years, with interest at LIBOR plus 2% payable semi-annually. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 1999 Revenues for the six months ended September 30, 2000 were $313,082 as compared to $73,257 for the six months ended September 30, 1999. This 327% increase in revenues resulted primarily from improved Soltron sales in several expanding regional markets and the inclusion of the Protocol's refrigerant sales of $113,650 for the month of September 2000. General and administrative costs were $878,108 for the six months ended September 30, 2000 compared to $1,091,615 for the six months ended September 30, 1999. The 20% decrease in costs were due to a decrease in expenses associated with administration and a reduction in other non-recurring expenses associated with a reorganization of operations. We experienced a net loss of $957,963 for the six-month period ended September 30, 2000 as compared with $1,228,132 for the six-month period ended September 30, 1999. The 22% decrease was due to increased sales and a reduction in marketing and administrative personnel and other reorganization efficiencies. This decrease would have been greater except for the commencement of amortization of intangible assets in the amount of $120,000 and a non-cash item classified as interest expense resulting from the Black-Scholes option pricing model applied to the warrant issued to PICO Holdings, Inc. in the amount of $80,000. THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenues for the three months ended September 30, 2000 were $191,743 as compared to $47,818 for the three months ended September 30, 1999. This 301% increase in revenues resulted primarily from improved Soltron sales in several expanding regional markets and the inclusion of the Protocol refrigerant sales of $113,650 for the month of September 2000. General and administrative costs were $490,354 for the three months ended September 30, 2000 compared to $755,687 for the three month period ended September 30, 1999. The 35% decrease in costs were due to a decrease in expenses associated with administration and a reduction of other non-recurring expenses associated with a reorganization of operations. We experienced a net loss of $531,691 for the three months ended September 30, 2000 as compared with $784,538 for the three months ended September 30, 1999. The 32% decrease was due to increased sales and a reduction in marketing and administrative personnel and other reorganization efficiencies. This decrease would have been greater except for the commencement of amortization of intangible assets in the amount of $120,000 and a non-cash item classified as interest expense resulting from the Black-Scholes option pricing model applied to the warrant issued to PICO Holdings, Inc. in the amount of $80,000. 8 LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, we had cash and cash equivalents, net of bank overdrafts, of $27,574 as compared to $34,299 as of March 31, 2000. Cash utilized in operations was $613,950 for the six months ending September 30, 2000 as compared to $1,013,756 for the same period in 1999. We utilized $528,113 cash in investing activities for the six months ended September 30, 2000, a significant increase over the cash used in investment activities in the amount of $16,107 for the six months ended September 30, 2000. The primary use of cash in investing activities related to our acquisition of Protocol. We generated $1,292,119 cash from net financing activities in the six months ending September 30, 2000, primarily due to advances from related parties. This compares to $1,143,541 of cash generated from net financing activities during the period ended September 30, 1999, the major component of which resulted from the placement of a $1,500,000 convertible note. We anticipate future liquidity needs for product production and operations will be met through increased product sales supplemented by equity and debt financings primarily from our major shareholder, Dominion Capital Pty Ltd. PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On August 23, 2000, we issued a warrant to PICO Holdings, Inc. to purchase 1,000,000 shares of our common stock at $0.43 per share. This price equals 110% of the market price of the shares of the date of issuance of the warrant. The warrant was issued in conjunction with a working capital loan in the amount of $500,000 we received from PICO Holdings. The proceeds of the loan were partially used for the purchase of our 50% interest in Protocol Resource Management, Inc. We also issued a note in the amount of $250,000 (CAN) $173,947 (US) as additional consideration for the Protocol acquisition. The warrant was issued in reliance on the exemption from registration of the security provided by section 4(2) of the Securities Act. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 10.23 Share Purchase Agreement dated August 21, 2000 among Solpower and Pico Holdings, Inc. ("Pico") and James W. Flowers, Patricia G. Flowers and Florcor, Inc. 10.24 Shareholders Agreement dated August 28, 2000 among Protocol Resource Management, Inc., Pico and Solpower 10.25 Nonnegotiable Secured Promissory Note in the principal amount of $500,000 dated August 28, 2000 issued by Solpower to Pico 10.26 Nonnegotiable Secured Promissory Note in the principal amount of $250,000 dated August 28, 2000 issued by Solpower to Pico 10.27 Warrant dated August 28, 2000 issued by Solpower to Pico 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K One Form 8-K was filed during the three months ended September 30, 2000. The Form 8-K reported the acquisition of Protocol. 9 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed by the undersigned, thereunto duly authorized. SOLPOWER CORPORATION (Registrant) Dated: November 17, 2000 By /s/ James H. Hirst ----------------------------- James H. Hirst Chief Executive Officer 10 EX-10.23 2 ex10_23.txt SHARE PURCHASE AGREEMENT Exhibit 10.23 SHARE PURCHASE AGREEMENT AMONG SOLPOWER CORPORATION AND PICO HOLDINGS, INC. AND JAMES W. FLOWERS, PATRICIA G. FLOWERS AND FLORCOR, INC. AUGUST 21, 2000 TABLE OF CONTENTS 1. Definitions...............................................................1 2. Purchase and Sale of Protocol Shares......................................4 (a) Basic Transaction....................................................4 (b) Preliminary Purchase Price...........................................4 (c) The Closing..........................................................4 (d) Deliveries at the Closing............................................4 (e) Adjustment to Preliminary Purchase Price.............................5 (f) Employment Matters...................................................6 3. Representations and Warranties Concerning the Transaction.................6 (a) Representations and Warranties of the Sellers........................6 (b) Representations and Warranties of the Buyers.........................8 4. Representations and Warranties Concerning Protocol and Its Subsidiaries...9 (a) Organization, Qualification, and Corporate Power.....................9 (b) Capitalization.......................................................9 (c) Noncontravention.....................................................9 (d) Brokers' Fees.......................................................10 (e) Title to Tangible Assets............................................10 (f) Financial Statements................................................10 (g) Events Subsequent to Most Recent Fiscal Year End....................10 (h) Undisclosed Liabilities.............................................12 (i) Legal Compliance....................................................12 (j) Tax Matters.........................................................12 (k) Real Property.......................................................13 (l) Intellectual Property...............................................13 (m) Tangible Assets.....................................................15 (n) Inventory...........................................................15 (o) Contracts...........................................................15 (p) Notes and Accounts Receivable.......................................16 (q) Powers of Attorney..................................................16 (r) Insurance...........................................................16 (s) Litigation..........................................................17 (t) Product Warranty....................................................17 (u) Product Liability...................................................18 (v) Employees...........................................................18 (w) Employee Benefits...................................................18 (x) Guaranties..........................................................18 (y) Environmental, Health, and Safety Matters...........................18 (z) Certain Business Relationships with Protocol and Its Subsidiaries...18 5. Pre-Closing Covenants....................................................18 (a) General.............................................................18 (b) Notices and Consents................................................18 -i- (c) Operation of Business...............................................19 (d) Preservation of Business............................................19 (e) Full Access.........................................................19 (f) Notice of Developments..............................................19 (g) Exclusivity.........................................................19 6. Conditions to Obligation to Close........................................20 (a) Conditions to Obligation of the Buyers..............................20 (b) Conditions to Obligation of the Sellers.............................21 7. Remedies for Breaches of This Agreement..................................21 (a) Survival of Representations and Warranties..........................21 (b) Indemnification Provisions for Benefit of the Buyers................22 (c) Indemnification Provisions for Benefit of the Sellers...............22 (d) Matters Involving Third Parties.....................................22 (e) Determination of Adverse Consequences...............................23 (f) Set-Off Against the Buyers Notes....................................23 (g) Limitations on Indemnifications.....................................23 (h) Other Indemnification Provisions....................................24 8. Tax Matters..............................................................24 (a) Tax Periods Ending on or Before the Closing Date....................24 (b) Cooperation on Tax Matters..........................................25 (c) Tax Sharing Agreements..............................................25 (d) Certain Taxes.......................................................25 9. Termination..............................................................25 (a) Termination of Agreement............................................25 (b) Effect of Termination...............................................26 10. Miscellaneous............................................................26 (a) Nature of Certain Obligations.......................................26 (b) Press Releases and Public Announcements.............................26 (c) No Third-Party Beneficiaries........................................27 (d) Entire Agreement....................................................27 (e) Succession and Assignment...........................................27 (f) Counterparts........................................................27 (g) Headings............................................................27 (h) Notices.............................................................27 (i) Governing Law.......................................................28 (j) Amendments and Waivers..............................................28 (k) Severability........................................................28 (l) Expenses............................................................29 (m) Construction........................................................29 (n) Incorporation of Exhibits, Annexes, and Schedules...................29 -ii- Exhibit A - Protocol Shareholders Exhibit B1 - Form of Buyers Notes Exhibit B2 - Form of Buyers Notes Exhibit C - Historical Financial Statements Exhibit D - Employment Agreement Disclosure Schedule by Protocol -iii- SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT ("AGREEMENT") is entered into as of August ___, 2000, by and among Solpower Corporation, a Nevada corporation ("SOLPOWER") and Pico Holdings, Inc., a California corporation, or its designee ("PICO") (collectively, the "BUYERS"), and James W. Flowers ("Flowers"), Patricia G. Flowers, and Florcor, Inc., an Ontario corporation ("Florcor") (collectively, the "SELLERS"). The Buyers and the Sellers are referred to collectively herein as the "PARTIES." The Sellers in the aggregate own all of the outstanding capital stock of Protocol Resource Management, Inc., an Ontario corporation ( "Protocol"). This Agreement contemplates a transaction in which the Buyers will purchase from the Sellers, and the Sellers will sell to the Buyers, all of the outstanding capital stock of Protocol in return for cash and the Buyers Notes. The Sellers shall have a right to allocate among themselves, as they elect, the payment of the Purchase Price (as hereinafter defined) for the capital stock. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. DEFINITIONS. "ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes (as hereinafter defined), liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "ADJUSTED EBITDA" means EBITDA calculated as defined herein and then increased for services provided to the Buyers, including, but not limited to, management fees, intercompany charges, and further adjustments to a level of full recovery of production costs for SP34E and other products and services sold to, or performed for the Buyers from time to time. Included in the calculations of the full recovery of production costs shall be a reasonable allocation of the portion of salaries for management personnel involved in the production and delivery of the products, all as calculated and agreed within 60 days from the close of any quarter, with any disputes to be referred to the auditors acting for Protocol for arbitration "AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "AFFILIATED GROUP" means any affiliated group within the meaning of Code ss.1504(a) or any similar group defined under a similar provision of state, local or foreign law. -1- "BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence. "BUYERS" has the meaning set forth in the preface above. "BUYERS NOTES" has the meaning set forth in ss.2(b) below. "CLOSING" has the meaning set forth in ss.2(c) below. "CLOSING DATE" has the meaning set forth in ss.2(c) below. "CODE" means the Internal Revenue Code of 1986, as amended. "CONFIDENTIAL INFORMATION" means any information concerning the businesses and affairs of Protocol that is not already generally available to the public(including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals). "DISCLOSURE SCHEDULE" has the meaning set forth in Sections 3(a) and 4 below. "EBIT" means, in respect of Protocol, for any fiscal period, net income (or net loss) PLUS the sum of (a) net interest expense, (b) income-tax expense, (c) extraordinary losses included in net income and (d) losses on the sale of assets other than inventory sold in the ordinary course of business, LESS the sum of (a) extraordinary gains included in net income and (b) gains on the sale of assets other than inventory sold in the ordinary course of business, in each case determined in accordance with GAAP for such period. "EBITDA" means, in respect of Protocol, for any fiscal period, EBIT PLUS the sum of (a) depreciation expense, (b) amortization expense and (c) noncash charges, LESS noncash gains, in each case determined in accordance with GAAP for such period. "EMPLOYEE BENEFIT PLAN" means any employee pension or benefit plan whether or not the same is qualified under the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA") or comparable Canadian provisions and any other employee benefit plan, program or arrangement of any kind. "FINANCIAL STATEMENT" has the meaning set forth in ss.4(g) below. "GAAP" means Canadian generally accepted accounting principles as in effect from time to time as described and promulgated by the Canadian Institute of Chartered Accountants. "INDEMNIFIED PARTY" has the meaning set forth in ss.7(d) below. -2- "INDEMNIFYING PARTY" has the meaning set forth in ss.7(d) below. "INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and all Confidential Information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). "KNOWLEDGE" means actual current knowledge after reasonable investigation. "ORDINARY COURSE OF BUSINESS" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "PARTY" has the meaning set forth in the preface above. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "PRELIMINARY PURCHASE PRICE" has the meaning set forth in ss.2(b) below. "PROTOCOL" has the meaning set forth in the preface above. "PROTOCOL SHARE" means any share of the Common Stock of Protocol. "PURCHASE PRICE" has the meaning set forth in ss.2(e) below. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money liens and liens securing rental payments under capital lease arrangements, (d) any other lien imposed under any applicable statute, law or regulation and (e) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. -3- "SELLERS" has the meaning set forth in the preface above. "TAX" or "TAXES" means any federal, provincial, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "TAX RETURN" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "THIRD PARTY CLAIM" has the meaning set forth in ss.7(d) below. 2. PURCHASE AND SALE OF PROTOCOL SHARES. (a) BASIC TRANSACTION. On and subject to the terms and conditions of this Agreement, the Buyers agree to purchase from each of the Sellers, and each of the Sellers agrees to sell to the Buyers, all of his or its Protocol Shares for the consideration specified below in this ss.2. The holdings of Protocol Shares by the Sellers is set forth on Exhibit A to this Agreement. All references to currency herein refer to Canadian Dollars. (b) PRELIMINARY PURCHASE PRICE. The Buyers agree to pay to the Sellers One Million Five Hundred Thousand Dollars ($1,500,000.00) (the "PRELIMINARY PURCHASE PRICE") by delivery of (i) their promissory notes (the "BUYERS NOTES") in the forms of Exhibit B1 and B2 attached hereto in the aggregate principal amount of Five Hundred Thousand Dollars ($500,000.00) and (ii) cash in the amount of One Million Thousand Dollars ($1,000,000.00) payable by certified cheque, bank draft or wire transfer. The Preliminary Purchase Price and the Buyers Notes shall be allocated among the Sellers, as they elect, whether or not in proportion to their respective holdings of Protocol Shares and is set forth on Exhibit A to this Agreement. To the extent applicable, the Preliminary Purchase Price will be subject to post-Closing adjustment as set forth below in this ss.2. (c) THE CLOSING. The closing of the transactions contemplated by this Agreement (the "CLOSING") shall take place at the offices of Wilson, Vukelich, Barristers & Solicitors in Markham, Ontario, Canada commencing at 9:00 a.m. local time at such date as the Buyers and the Sellers may mutually determine (the "CLOSING DATE"); PROVIDED, HOWEVER, that the Closing Date shall be no later than August 30, 2000. (d) DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will deliver to the Buyers the various certificates, instruments, and documents referred to in ss.6(a) below, (ii) the Buyers will deliver to the Sellers the various certificates, instruments, and documents referred to in ss.6(b) below, (iii) -4- each of the Sellers will deliver to the Buyers stock certificates representing all of his or its Protocol Shares, endorsed in blank or accompanied by duly executed assignment documents, and (iv) one or more of the Buyers will deliver to each of the Sellers the consideration specified in ss.2(b) above. (e) ADJUSTMENT TO PRELIMINARY PURCHASE PRICE. The Preliminary Purchase Price shall be adjusted as follows: (i) DISPUTE RESOLUTION. If, in the determination of the Second Anniversary Actual EBITDA and the Third Anniversary Actual EBITDA (as such terms are hereinafter defined), the Buyer and the Sellers fail to reach agreement on the manner of calculation of such Second Anniversary Actual EBITDA and/or Third Anniversary Actual EBITDA within a period of five (5) business days following the delivery of the calculation of same, any disagreement, conflict or dispute relating thereto shall be referred to an independent auditor (the "Auditor") mutually selected by the Buyers and the Sellers hereto which Auditor shall make any adjustments or resolve any disputes, differences or controversies with respect to the calculations or finalization of the Adjusted EBITDA for the relevant period. If the parties fail to mutually select such Auditor, any Party may apply to a court of competent jurisdiction in the Province of Ontario for purposes of having such court appoint such Auditor. The costs of the Auditor shall be paid as determined by such Auditor and the Auditor shall be required to resolve any such dispute as soon as possible, but in no event later than fifteen (15) business days following the date such dispute was first mutually deferred to such Auditor. (ii) SECOND ANNIVERSARY CALCULATIONS. As soon as possible but, in any event, not later than sixty (60) calendar days after the second (2nd) anniversary of the Closing Date, the Buyers will prepare and deliver to the Sellers a calculation of Protocol's Adjusted EBITDA for each of the immediate preceding two (2) years (the "SECOND ANNIVERSARY ACTUAL EBITDA"). If the average of the two (2) years of the Second Anniversary Actual EBIDTA (the "SECOND ANNIVERSARY AVERAGE EBITDA") is not at least Two Hundred Fifty Thousand ($250,000), then the Preliminary Purchase Price shall be reduced by an amount equal to one hundred percent (100%) of the difference between Two Hundred Fifty Thousand Dollars ($250,000) and the Second Anniversary Average EBITDA and the principal amount outstanding under the Buyers Notes shall be reduced, pro rata to the principal outstanding on each of the Buyers Notes, by one hundred percent (100%) of the difference, if any, between Two Hundred Fifty Thousand Dollars ($250,000) and the Second Anniversary Average EBITDA. (iii) THIRD ANNIVERSARY CALCULATIONS. On the third anniversary of the Closing Date, the Buyers will prepare and deliver to the Sellers a calculation of Protocol's Adjusted EBITDA for the immediately preceding one (1) year period (the "THIRD ANNIVERSARY ACTUAL EBITDA"). If the Third Anniversary Actual EBITDA is not equal to or greater than Two Hundred Fifty Thousand Dollars ($250,000.00) (the "THIRD ANNIVERSARY PROTOCOL EBITDA"), then the Preliminary Purchase Price and the principal amounts due under the remaining Buyers Notes shall be reduced, pro rata to the principal outstanding on each of the Buyers Notes, by an amount equal to one hundred percent (100%) of the difference, if any, between the Third Anniversary Protocol EBITDA and the Third Anniversary Actual EBITDA. -5- (iv) SCHEDULE FOR CALCULATIONS. Notwithstanding any other provision contained herein, the calculation of the Second Anniversary Actual EBITDA and the Third Anniversary Actual EBITDA shall be completed as soon as possible but, in any event, not later than sixty (60) calendar days of the respective second and third anniversary dates of the Closing Date and the amounts due under the Buyers Notes (after reflecting any such adjustments under this Section) shall be paid forthwith, but in any event, not later than thirty (30) calendar days of the completion of the calculations of such amounts. The calculations shall be provided to the holder(s) of the Buyers Notes for their information. The Preliminary Purchase Price as so adjusted by this Section 2 is referred to herein as the "Purchase Price." (f) EMPLOYMENT MATTERS. Concurrently with the Closing, Flowers and Protocol shall enter into an Employment Agreement (and all schedules thereto) in the form attached as Exhibit D. In addition to any other provisions of this Agreement or any of the schedules or exhibits attached hereto, the parties agree that the holders of the Buyers Notes shall have the right to immediately accelerate the Buyers Notes issued to them and receive full payment thereunder without any adjustment thereunder within 30 calendar days of any termination by Protocol of Flowers' employment with Protocol, except that, in the event that such employment is terminated for cause under applicable laws, then the Buyers shall be entitled to recalculate the Adjusted EBIDTA under ss.ss.2(e)(ii) and (iii) above if the termination occurs on or after the second anniversary of the Closing Date, or to independently recalculate the Adjusted EBIDTA if the termination occurs prior to the second anniversary of the Closing Date (in either case, the "Recalculated Termination EBIDTA Payment") and to reduce the amount of the Buyers Notes, pro rata, to the Recalculated Termination EBIDTA Payment. The Recalculated EBIDTA Payment shall be made as specified in the Employment Agreement or in the schedules thereto and shall be paid to the Buyers Notes holders within thirty (30) calendar days of any termination Additionally, Pico and Solpower jointly and severally irrevocably guarantee any termination compensation or benefits payable to Flowers under the terms of the Employment Agreement. 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION. (a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Except as qualified by the Disclosure Schedule, each of the Sellers represents and warrants to each of the Buyers that the statements contained in this ss.3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss.3(a)) with respect to himself or itself. (i) ORGANIZATION OF FLORCOR. Florcor is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) AUTHORIZATION OF TRANSACTION. Each of the Sellers has full power and authority (including, in the case of Florcor, full corporate power and authority) to execute and deliver this Agreement and to perform his or its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Sellers, enforceable in accordance with its terms and conditions, subject to limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and to the extent that equitable remedies such as specific performance and injunction -6- are in the discretion of the court from which they are sought (collectively, the "Enforceability Qualifications"). The Sellers need not give any notice to, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. Each of the Sellers represents and warrants that the allocation of the Purchase Price, as set forth on Exhibit A, has been agreed to by such Seller and that each of the Sellers waives any claims with respect to such allocation, even if such allocation and receipt of the Purchase Price is not in proportion to the ownership of the capital stock by such Seller. (iii) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any material constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Sellers are subject or, if the case of Florcor, any provision of its charter or bylaws or, to the knowledge of the Sellers, conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Sellers are a party or by which he or it is bound or to which any of his or its assets is subject. (iv) BROKERS' FEES. None of the Sellers has any obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyers could become liable or obligated. (v) INVESTMENT. Each of the Sellers (A) understands that the Buyers Notes have not been, and will not be, registered under the Securities Act, or under any U.S. state or Canadian provincial securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Buyers Notes solely for his or its own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Buyers and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Buyers Notes and (E) is able to bear the economic risk and lack of liquidity inherent in holding the Buyers Notes. (vi) PROTOCOL SHARES. The Sellers each hold of record and owns beneficially the number of Protocol Shares set forth next to his or its name in Exhibit A, free and clear of any restrictions on transfer (other than prescribed by Protocol's articles of incorporation (as amended) or any Security Interests. None of the Sellers is a party to any option, warrant, purchase right, or other contract or commitment that could require the Sellers to sell, transfer, or otherwise dispose of any capital stock of Protocol (other than under this Agreement). None of the Sellers is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of Protocol. -7- (b) REPRESENTATIONS AND WARRANTIES OF THE BUYERS. Each of the Buyers represents and warrants to each of the Sellers that the statements contained in this ss.3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss.3(b)). (i) ORGANIZATION OF THE BUYERS. Each of the Buyers is a corporation, duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) AUTHORIZATION OF TRANSACTION. Each of the Buyers has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of each of the Buyers, and the Buyers Notes constitute valid and legal binding obligations of Pico, in each case, enforceable in accordance with its terms and conditions, subject to the Enforceability Qualifications. (iii) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyers are subject or any provision of its charter or bylaws or conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyers are a party or by which it is bound or to which any of its assets is subject. (iv) BROKERS' FEES. None of the Buyers has any obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Sellers could become liable or obligated. (v) INVESTMENT. Neither of the Buyers is acquiring the Protocol Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. Each of the Buyers (A) understands that the Protocol Shares have not been, and will not be, registered under the Securities Act, or under any U.S. state or Canadian provincial securities laws, and are being offered and sold in reliance upon federal, state and provincial exemptions for transactions not involving any public offering, (B) is acquiring the Protocol Shares solely for his or its own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Protocol and the Sellers and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Protocol Shares and (E) is able to bear the economic risk and lack of liquidity inherent in holding the Protocol Shares. (vi) NO LITIGATION. Neither of the Buyers is a party to any claims, litigation, administrative proceeding or other actions or, to their knowledge, threatened proceedings or actions which have been brought or may be brought which might, if adversely determined, preclude the Buyers from completing this transaction as set forth in this Agreement. -8- 4. REPRESENTATIONS AND WARRANTIES CONCERNING PROTOCOL. Each of the Sellers represents and warrants to each of the Buyers that the statements contained in this ss.4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss.4), except as set forth in the disclosure schedule delivered by the Sellers to the Buyers on the date hereof (the "DISCLOSURE SCHEDULE"). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in detail. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this ss.4. The Sellers shall be expressly permitted to amend, modify and/or update the Disclosure Schedule at all times prior to the Closing Time. (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Protocol is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Protocol has full corporate power and authority and all material licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. ss.4(a) of the Disclosure Schedule lists the directors and officers of Protocol . The Sellers have delivered to the Buyers correct and complete copies of the charter and bylaws of Protocol (as amended to date). The minute books (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of Protocol is materially correct and complete. Protocol is not in default under or in violation of any provision of its charter or bylaws. (b) CAPITALIZATION. The entire authorized capital stock of Protocol consists of an unlimited number of Protocol Shares, of which 1,000Protocol Shares are issued and outstanding. All of the issued and outstanding Protocol Shares have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record by the respective Sellers as set forth in ss.4(b) of the Disclosure Schedule. There are no outstanding nor authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Protocol to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to Protocol. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of Protocol. (c) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any material constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of Protocol and its Subsidiaries is subject or any provision of the charter or bylaws of any of Protocol and its Subsidiaries or (ii) to the knowledge of the Sellers, conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Protocol is a party or by which it is bound or to -9- which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). Prior to completion of the transactions contemplated herein, Protocol does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement. (d) BROKERS' FEES. Protocol has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (e) TITLE TO TANGIBLE ASSETS. Protocol has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it, located on its premises, or shown on its Most Recent Financial Statements or acquired after the date thereof, free and clear of all Security Interests, except for properties and assets disposed of in the Ordinary Course of Business since the date of its Most Recent Financial Statements. (f) FINANCIAL STATEMENTS. Attached hereto as Exhibit C are the following financial statements (collectively the "FINANCIAL STATEMENTS"): (i) unaudited balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended January 31, 2000, 1999 and 1998 (the "MOST RECENT FISCAL YEAR END") for Protocol; and (ii) unaudited balance sheets and statements of income, changes in stockholders' equity, and cash flow (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the five (5) months ended June 30, 2000 (the "MOST RECENT FISCAL MONTH END") for Protocol. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly , the financial condition of Protocol as of such dates and the results of operations of Protocol for such periods, are correct and complete and are consistent with the books and records of Protocol. (g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations or results of operations of Protocol. Without limiting the generality of the foregoing, since that date: (i) Protocol has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business; (ii) Protocol has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) either involving more than $10,000 or outside the Ordinary Course of Business; (iii) Protocol has not accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $10,000 to which Protocol is a party or by which it is bound; (iv) Protocol has not imposed any Security Interest upon any of its assets, tangible or intangible other than the bank facility readjustments, details of which have been provided to the Buyer or outside the Ordinary Course of Business; -10- (v) Protocol has not made any capital expenditure (or series of related capital expenditures) either involving more than $20,000 or outside the Ordinary Course of Business; (vi) Protocol has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $10,000 or outside the Ordinary Course of Business; (vii) Protocol has not issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease outside the Ordinary Course of Business; (viii) Protocol has not delayed or postponed the payment of accounts payable and other liabilities outside the Ordinary Course of Business; (ix) Protocol has not cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) either involving more than $10,000 or outside the Ordinary Course of Business; (x) Protocol has not granted any license or sublicense of any rights under or with respect to any Intellectual Property; (xi) There has been no change made or authorized in the charter or bylaws of Protocol; (xii) Protocol has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xiii) Protocol has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock, except in connection with the transactions contemplated hereunder and as disclosed to the Buyers; (xiv) Protocol has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xv) Protocol has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the Ordinary Course of Business; (xvi) Protocol has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement outside the Ordinary Course of Business; -11- (xvii) Protocol has not granted any increase in the base compensation of any of its directors, officers, and employees outside the Ordinary Course of Business; (xviii) Protocol has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan) outside the Ordinary Course of Business; (xix) Protocol has not made any other change in employment terms for any of its directors, officers, and employees outside the Ordinary Course of Business; (xx) Protocol has not made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business; and (xxi) there has not been any other occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving Protocol which would have a material adverse consequence on any of the above. (h) UNDISCLOSED LIABILITIES. To the knowledge of the Sellers and except as disclosed in writing to the Buyers, Protocol has no material liability (and, to the knowledge of the Sellers, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against Protocol or any of them giving rise to any liability), except for (i) liabilities set forth on the face of the Most Recent Financial Statements (or in any of the notes thereto) and (ii) liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by, to the knowledge of the Sellers, any breach of contract, breach of warranty, tort, infringement, or violation of law). (i) LEGAL COMPLIANCE. Protocol has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, provincial, and local governments (and all agencies thereof) in all material aspects, and, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against Protocol alleging any failure so to comply. (j) TAX MATTERS. (i) FILINGS. Protocol has filed all Tax Returns required to be filed as of the date hereof. All Taxes currently payable by Protocol (whether or not shown on any Tax Return) have been paid. Protocol currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by any authority in any jurisdiction where Protocol does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of any of Protocol that arose in connection with any failure (or alleged failure) to pay any Tax. -12- (ii) WITHHOLDING. Protocol has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (iii) RESERVES. The unpaid Taxes of Protocol (A) did not, as of the Most Recent Fiscal Year End, exceed the reserve for Tax liability set forth on the face of the Most Recent Financial Statements (or in any of the notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Protocol in filing its Tax Returns. (k) REAL PROPERTY. Section 4(l)(i) of the Disclosure Schedule lists and describes briefly all real property that Protocol owns or leases and any mortgages, claims or other restrictions on the same and sets forth the terms of all leases. (l) INTELLECTUAL PROPERTY. (i) OWNERSHIP. Protocol owns or has the right to use, pursuant to license, sublicense, agreement, or permission, all Intellectual Property necessary for the operation of its businesses as presently conducted. Each item of Intellectual Property owned or used by Protocol immediately prior to the Closing hereunder will be owned or available for use by Protocol on identical terms and conditions immediately subsequent to the Closing hereunder. Protocol has taken all necessary and desirable action to maintain and protect each item of Intellectual Property that it owns or uses. (ii) NO PRIOR INFRINGEMENT. To the knowledge of the Sellers, Protocol has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and none of the Sellers has ever received any written charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that Protocol must license or refrain from using any Intellectual Property rights of any third party). To the Knowledge of any of the Sellers, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of Protocol. (iii) SCHEDULE OF INTELLECTUAL PROPERTY. Section 4(m)(iii) of the Disclosure Schedule identifies each patent or registration which has been issued to Protocol with respect to any of its Intellectual Property, identifies each pending patent application or application for registration which Protocol has made with respect to any of its Intellectual Property, and identifies each license, agreement, or other permission which Protocol has granted to any third party with respect to any of its Intellectual Property (together with any exceptions). The Sellers have delivered to the Buyers correct and complete copies of all such patents, registrations, applications, licenses, agreements, and permissions (as amended to date) and have made available to the Buyers correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. ss.4(m)(iii) of the Disclosure Schedule also identifies each trade name or unregistered trademark used by Protocol in -13- connection with its businesses. With respect to each item of Intellectual Property required to be identified in ss.4(m)(iii) of the Disclosure Schedule: (A) Protocol possess all right, title, and interest in and to the item, free and clear of any Security Interest, license, or other restriction; (B) The item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (C) No action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or is threatened which challenges the legality, validity, enforceability, use, or ownership of the item; and (D) Protocol has not agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item. (iv) THIRD PARTY INTERESTS. Section 4(m)(iv) of the Disclosure Schedule identifies each material item of Intellectual Property that any third party owns and that Protocol uses pursuant to license, sublicense, agreement, or permission. The Sellers have delivered to the Buyers correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each item of Intellectual Property required to be identified in ss.4(m)(iv) of the Disclosure Schedule: (A) The license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect, subject to the Enforceability Qualifications; (B) No party to the license, sublicense, agreement, or permission is in material breach or default, and no event has occurred which with notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (C) No party to the license, sublicense, agreement, or permission has repudiated any provision thereof; (D) With respect to each sublicense, the representations and warranties set forth in subsections (A) through (C) above are true and correct with respect to the underlying license; (E) The underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (F) No action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or is threatened which challenges the legality, validity, or enforceability of the underlying item of Intellectual Property; and -14- (G) Protocol has not granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. (v) NO FUTURE INFRINGEMENTS. To the Knowledge of any of the Sellers, Protocol will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties as a result of the continued operation of its businesses as presently conducted. (vi) None of the Sellers has any Knowledge of any new products, inventions, procedures, or methods of manufacturing or processing that any competitors or other third parties have developed which reasonably could be expected to supersede or make obsolete any product or process of any of Protocol. (m) TANGIBLE ASSETS. Protocol owns or leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of its businesses as presently conducted. Each such tangible asset is free from material defects , has been maintained in the Ordinary Course of Business, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it presently is used. (n) INVENTORY. The inventory of Protocol consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which are merchantable and fit for the purpose for which they were procured or manufactured, and none of which is slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown as set forth on the face of the Most Recent Financial Statements (or in any of the notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Protocol . (o) CONTRACTS. The Disclosure Schedule lists the following contracts and other agreements to which Protocol is a party: (i) Any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of $9,000 per annum; (ii) Any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year; (iii) Any agreement concerning a partnership or joint venture; (iv) Any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $10,000 or under which it has imposed a Security Interest on any of its assets, tangible or intangible; -15- (v) Any agreement concerning confidentiality or non-competition matters; (vi) Any agreement with any of the Sellers; (vii) Any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees; (viii) Any collective bargaining agreement; (ix) Any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $16,000 or providing severance benefits; (x) Any agreement under which it has advanced or loaned any amount to any of its directors, officers, and employees outside the Ordinary Course of Business; (xi) Any agreement under which the consequences of a default or termination could have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of f Protocol ; or (xii) Any other agreement (or group of related agreements) the performance of which involves consideration in excess of $50,000 . The Sellers have delivered to the Buyers a correct and complete copy of each written agreement listed in ss.4(p) of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in the above Disclosure Schedule. With respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect, subject to the Enforceability Qualifications; (B) no party is in material breach or default, and no event has occurred which with notice or lapse of time would constitute a material breach or default, or permit termination, modification, or acceleration, under the agreement; and (C) no party has repudiated any provision of such agreement. (p) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of Protocol are reflected properly on its books and records, and are valid, current and collectible receivables, subject to reserves for bad debts set forth on the face of the Most Recent Financial Statements (or in any of the notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Protocol. (q) POWERS OF ATTORNEY. There are no outstanding powers of attorney executed on behalf of Protocol. (r) INSURANCE. Section 4(s) of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and -16- bond and surety arrangements) to which Protocol has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past three (3) years: (i) The name, address, and telephone number of the agent; (ii) The name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) The policy number and the period of coverage; and (iv) The scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage. With respect to each such insurance policy: (A) to the knowledge of the Sellers, neither Protocol nor any other party to the policy is in material breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a material breach or default, or permit termination, modification, or acceleration, under the policy; and (B) to the knowledge of the Sellers, no party to the policy has repudiated any provision thereof (s) LITIGATION. Section 4(t) of the Disclosure Schedule sets forth each instance in which Protocol (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is, to the knowledge of the Sellers, threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. None of the actions, suits, proceedings, hearings, and investigations set forth in ss.4(t) of the Disclosure Schedule could result in any adverse change in the business, financial condition, operations, results of operations or future prospects of Protocol. To the knowledge of the Sellers, no action, suit, proceeding, hearing, or investigation is currently threatened against Protocol. (t) PRODUCT WARRANTY. To the knowledge of the Sellers, each product manufactured, sold, leased, or delivered by Protocol has been in conformity with all applicable contractual commitments and all express and implied warranties, and Protocol has no liability (and there is no Basis for any present or future material action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against Protocol giving rise to any liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the Most Recent Financial Statements (or in any of the notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Protocol. No product manufactured by Protocol is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease. Section 4(u) of the Disclosure Schedule includes copies of the standard terms and conditions of sale or lease for Protocol . -17- (u) PRODUCT LIABILITY. To the knowledge of the Sellers, Protocol has no liability (and there is no Basis for any present or future material action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against Protocol giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by Protocol. (v) EMPLOYEES. To the Knowledge of the Sellers, no executive, key employee, or group of employees has any plans to terminate employment with Protocol. Protocol is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes or committed any unfair labor practice. To the knowledge of the Sellers, no organizational effort is presently being made or threatened by or on behalf of any labor union with respect to employees of Protocol. (w) EMPLOYEE BENEFITS. Section 4(x) of the Disclosure Schedule lists each Employee Benefit Plan that Protocol maintains, to which Protocol contributes or has any obligation to contribute, or with respect to which Protocol has any liability or potential liability. (x) GUARANTIES. Protocol is not a guarantor or otherwise liable for any liability or obligation (including indebtedness) of any other Person. (y) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Protocol and its Affiliates have complied with and are in compliance with all environmental, health, and safety requirements applicable to Protocol and its operations. (z) CERTAIN BUSINESS RELATIONSHIPS WITH PROTOCOL AND ITS SUBSIDIARIES. Except as set forth on the Disclosure Schedules, none of the Sellers or their Affiliates has been involved in any business arrangement or relationship with Protocol within the past 12 months, and none of the Sellers or their Affiliates owns any asset, tangible or intangible, which is used in the business of Protocol. 5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) GENERAL. Each of the Parties will use his or its best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in ss.6 below). (b) NOTICES AND CONSENTS. The Sellers will cause Protocol to give any notices to third parties, and will cause Protocol to use its best efforts to obtain any third party consents, that the Buyer may request in connection with the matters referred to in ss.4(c) above. Each of the Parties, including the Sellers, will cause Protocol to give any notices to, make any filings with, and us its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in ss.3(a)(iii), ss.3(b)(iii), and ss.4(c) above. -18- (c) OPERATION OF BUSINESS. The Sellers will not cause or permit Protocol to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business except with the consent of the Buyers, acting reasonably. Without limiting the generality of the foregoing and except as contemplated under Section 6(b) hereunder, the Sellers will not cause or permit Protocol to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, or (ii) otherwise engage in any practice, take any action, or enter into any transaction of the nature described in ss.4(g) above. (d) PRESERVATION OF BUSINESS. The Sellers will use commercially reasonable efforts to cause Protocol to keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees. (e) FULL ACCESS AND CONFIDENTIALITY MATTERS. Each of the Sellers will permit, and the Sellers will cause Protocol to permit, representatives of the Buyers to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of Protocol , to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to Protocol . If the transactions contemplated hereunder are not completed for any reason, the Buyers agree to keep strictly confidential all information received by them from the Sellers and/or Protocol concerning Protocol's business and operations and shall not disclose such information to any third party without the prior written consent of the Sellers. Upon any such termination of this Agreement and at the request of the Sellers, the Buyers will either return or destroy (and certify destruction of) all such confidential information. This confidentiality obligation of the Buyers in favour of the Sellers and Protocol shall expressly survive the termination of this Agreement. (f) NOTICE OF DEVELOPMENTS. The Sellers will give prompt written notice to the Buyers of any material adverse development causing a breach of any of the representations and warranties in ss.4 above. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of his or its own representations and warranties in ss.3 above. No disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. (g) EXCLUSIVITY. None of the Sellers will (and the Sellers will not cause or permit Protocol to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets, of Protocol (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. None of the Sellers will vote their Protocol Shares in favor of any such acquisition structured as a merger, consolidation, or share exchange. The Sellers will notify the Buyers immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. Upon the termination of this Agreement for any reason, the exclusivity obligations of the Sellers under this paragraph shall also terminate and shall not survive such termination. -19- 6. CONDITIONS TO OBLIGATION TO CLOSE. (a) CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of the Buyers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) The representations and warranties of the Sellers set forth in ss.3(a) and ss.4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) The Sellers shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) Protocol and its Affiliates shall have procured all of the third party consents specified in ss.5(b) above. (iv) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Buyers to own the Protocol Shares and to control Protocol, or (D) affect adversely the right of Protocol to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (v) The Sellers shall have delivered to the Buyers a certificate to the effect that each of the conditions specified above in ss.6(a)(i)-(iv) is satisfied in all respects; (vi) The Parties and Protocol, shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in ss.3(a)(ii), ss.3(b)(ii), and ss.4(c) above; (vii) The Buyers shall have received the resignations, effective as of the Closing, of each director and officer of Protocol other than those whom the Buyers shall have specified in writing at least three (3) business days prior to the Closing; and (viii) All actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyers, acting reasonably. The Buyers may waive any condition specified in this ss.6(a) if they execute a written statement so stating at or prior to the Closing. -20- (b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) The representations and warranties of the Buyers set forth in ss.3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) The Buyers shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) The Buyers shall have delivered to the Sellers a certificate to the effect that each of the conditions specified above in ss.6(b)(i)-(iii) is satisfied in all respects; (iv) All actions to be taken by the Buyers in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers, acting reasonably; (v) Protocol and Flowers shall have executed and delivered to each other the employment letter (the "Employment Agreement") in the form set forth in Exhibit D hereto; (vi) Solpower shall have executed and delivered to ""Flowers the Employment Agreement and all relevant documents referenced therein; (vii) Protocol shall have distributed as dividends the aggregate sum of $100,000.00 to the Sellers and Florcor shall have repaid in full the aggregate amount of $40,500.00 loan reflected on Protocol's books and records as due to Protocol from Florcor (viii) If applicable, Protocol shall have transferred to Flowers all relevant life insurance polic(ies) owned by Protocol on the life of Flowers. The Sellers may waive any condition specified in this ss.6(b) if they execute a written statement so stating at or prior to the Closing. 7. REMEDIES FOR BREACHES OF THIS AGREEMENT. (a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided below, all of the representations and warranties of the Sellers and the Buyers contained in this Agreement shall survive the Closing hereunder for a period of two (2) years (even if the Sellers or the Buyers, as the case may be, knew or had reason to know of any misrepresentation or breach of warranty or covenant at the time of Closing). Notwithstanding the foregoing, (a) the Sellers' representations and warranties set forth in Section 3(a)(vi) shall survive without limitation and (b) the Sellers' representations and warranties set forth in Section 4(j) shall survive until the expiry of the applicable limitation period provided under the applicable taxing legislation. -21- (b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYERS. In the event the Sellers breach any of their representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to ss.7(a) above, provided that any of the Buyers makes a written claim for indemnification against the Sellers pursuant to ss.11(h) below within such survival period, then Flowers solely agrees to indemnify, subject to all limitations contained herein, each of the Buyers from and against any Adverse Consequences the Buyers may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyers may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, or caused by the breach (or the alleged breach) of such Sellers' representations, warranties and/or covenants contained herein. (c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. In the event the Buyers breach any of their representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to ss.7(a) above, provided that any of the Sellers makes a written claim for indemnification against the Buyers pursuant to ss.11(h) below within such survival period, then the Buyers agree to indemnify each of the Sellers from and against the entirety of any Adverse Consequences the Sellers may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Sellers may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). (d) MATTERS INVOLVING THIRD PARTIES. (i) If any third party shall notify any Party (the "INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give rise to a claim for indemnification against any other Party (the "INDEMNIFYING PARTY") under this ss.7, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within fifteen (15) days after the Indemnified Party has given written notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. -22- (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with ss.7(d)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement or compromise with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement or compromise with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (iv) In the event any of the conditions in ss.7(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this ss.7. (e) DETERMINATION OF ADVERSE CONSEQUENCES. All indemnification payments under this ss.7 by Flowers shall reduce the Purchase Price dollar for dollar, which such reduction shall be applied proportionately to the Purchase Price received by each of the Sellers. (f) SET-OFF AGAINST THE BUYERS NOTES. Notwithstanding that only Flowers shall be liable to indemnify the Buyers in the manner contemplated hereunder, to the extent that the Buyers are entitled to any Adverse Consequences hereunder, each of the Sellers agrees that the Buyers shall have the right, subject to the terms of this paragraph, to set-off, as against the Buyers Notes any claim for indemnification against Flowers hereunder, provided that either (a) Flowers shall have consented in writing to any such set-off or (b) the amount of any such indemnification claim has been determined in a final judgment of a court of competent jurisdiction after all appeal rights have expired. Any such set-off shall reduce the principal amount then outstanding under such Buyers Notes to the extent of such set-off. (g) LIMITATIONS ON INDEMNIFICATION. Either or both Buyers shall make no claims for indemnification against Flowers under this Agreement until the aggregate of any Adverse Consequences suffered, individually or collectively, by such Buyers, as the case may be, exceeds $75,000.00. Upon reaching such amount, such Buyer or Buyers, as the case may be, shall be entitled to indemnification from Flowers for all such amounts exceeding such $75,000.00. Notwithstanding any other provision to the contrary contained in this Agreement or in any certificate or instrument delivered hereunder, the Buyers, whether individually or collectively, shall not be entitled to claim indemnification from Flowers for -23- any amounts in excess of One Million Dollars ($1,000,000.00). Any indemnification to which either or both Buyers shall be entitled to hereunder shall be reduced by (a) any tax benefits accruing to any of the Buyers, directly or indirectly, as a result of such indemnity and (b) any proceeds of any insurance policy payable in respect of the matter relating to such indemnification. No Party shall be entitled to any indemnification of matters related, directly or indirectly, to such Party's fraud, bad faith, gross negligence or misconduct. (h) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy (including without limitation any such remedy arising under environmental, health, and safety requirements) any Party may have with respect to Protocol, or the transactions contemplated by this Agreement. The parties hereto confirm that, notwithstanding any other provision contained herein or in any document delivered hereunder, neither Protocol nor the Buyers shall have any claims for any Adverse Consequences or otherwise against any of the Sellers other than Flowers and that all limitations and restrictions applicable to any claims for indemnfication by the Buyers from Flowers under this Section (including, without limitation, Section 7(a) and 7(g) shall equally limit or restrict any claims for any Adverse Consequences or otherwise made by either the Buyers or Protocol against Flowers under this Section 7(h). Each of the Sellers hereby agrees that he or it will not make any claim for indemnification against Protocol by reason of the fact that he or it was a former director, former officer, former employee, or former agent of Protocol (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Buyers against such Sellers (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable law, or otherwise). The parties confirm that the foregoing shall not apply to restrict or limit the right of Flowers to maintain any claim against Protocol following the Closing Date as a current director, officer and/or employee of Protocol. 8. TAX MATTERS. The following provisions shall govern the allocation of responsibility as between the Buyers and Flowers for certain tax matters following the Closing Date: (a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The Buyers shall prepare or cause to be prepared and file or cause to be filed following the Closing Date all Tax Returns for Protocol for all periods ending on or prior to the Closing Date. The Buyers shall permit Protocol to review and comment on each such Tax Return described in the preceding sentence prior to filing of same. Flowers shall reimburse the Buyers for any Taxes of Protocol with respect to such periods within sixty (60) calendar days after payment by the Buyers or Protocol of such Taxes to the extent such Taxes are not reflected in the reserve for Tax liabilities (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) shown on the face of the Most Recent Financial Statements. Flowers shall have no obligation to reimburse the Buyers and/or Protocol, as the case may be, in respect of any tax liabilities as the result of any re-filing by Buyers, at their election, of previous years' tax returns. -24- (b) COOPERATION ON TAX MATTERS. (i) The Buyers, Protocol and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other Parties, in connection with the filing of Tax Returns pursuant to this Section and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees of Protocol available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Protocol and the Sellers agree (A) to retain all books and records with respect to Tax matters pertinent to Protocol relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by the Buyers or the Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so reasonably requests, Protocol or the Sellers, as the case may be, shall allow the other party to take possession of such books and records. (ii) The Buyers and the Sellers further agree, upon request, to use their reasonable best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby). (iii) The Buyers and the Sellers further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder. (c) TAX SHARING AGREEMENTS. All tax sharing agreements or similar agreements with respect to or involving Protocol shall be terminated as of the Closing Date and, after the Closing Date, Protocol shall not be bound thereby or have any liability thereunder. (d) CERTAIN TAXES. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement eligible against the Sellers in connection with the disposition of their Protocol Shares shall be paid by the Sellers when due, and the Sellers will, at their own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable law, the Buyers will, and will cause its affiliates to, join in the execution of any such Tax Returns and other documentation. 9. TERMINATION. (a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this Agreement as provided below: -25- (i) The Buyers and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) The Buyers may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event any of the Sellers (subject to the right of the Sellers to update the Disclosure Schedule prior to Closing) has breached any material representation, warranty, or covenant contained in this Agreement in any material respect and the Buyers has notified the Sellers of such breach, and the breach has continued without cure for a period of thirty (30) calendar days after the notice of such breach or (B) if the Closing shall not have occurred on or before September 30, 2000, by reason of the failure of any condition precedent under ss.6(a) hereof (unless the failure results primarily from the Buyers breach of any representation, warranty, or covenant contained in this Agreement); and (iii) The Sellers may terminate this Agreement by giving written notice to the Buyers at any time prior to the Closing (A) in the event the Buyers have breached any material representation, warranty, or covenant contained in this Agreement in any material respect and any of the Sellers has notified the Buyers of such breach, and the breach has continued without cure for a period of thirty (30) calendar days after the notice of such breach or (B) if the Closing shall not have occurred on or before September 30, 2000, by reason of the failure of any condition precedent under ss.6(b) hereof (unless the failure results primarily from any of the Sellers breach of any representation, warranty, or covenant contained in this Agreement). (b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant to ss.9(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party except that the Buyers' confidentiality obligations set forth in Section 5(d) above shall survive the termination of this Agreement. 10. MISCELLANEOUS. (a) NATURE OF CERTAIN OBLIGATIONS. (i) COVENANTS. The covenants of each of the Sellers in ss.2(a) above concerning the sale of his or its Protocol Shares to the Buyers and the representations and warranties of each of the Sellers in ss.3(a) above concerning the transaction are several obligations. (ii) OTHER MATTERS. The remainder of the representations, warranties, and covenants in this Agreement are joint and several obligations. This means that each Sellers will be responsible to the extent provided in ss.7 above, and subject to the limitations contained herein, for any Adverse Consequences the Buyers may suffer as a result of any breach thereof. (b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the Buyers and the Sellers; PROVIDED, HOWEVER, that any Party may make, after providing written notice and -26- disclosure to the other parties of the form of such public announcement, any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). (c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (d) ENTIRE AGREEMENT. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof, including, without limitation, all letters of intent or memoranda of understanding executed by the parties hereto prior to the date hereof. (e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Buyers and the Sellers, PROVIDED, HOWEVER, that the Buyers may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyers nonetheless shall remain responsible for the performance of all of its obligations hereunder). (f) COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (g) HEADINGS. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (h) NOTICES. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Sellers: c/o Protocol Resource Management Inc. 330 Industrial Parkway South Aurora, Ontario, Canada L4G 3V7 Attn: James W. Flowers -27- Copy to: Wilson, Vukelich Barristers & Solicitors 60 Columbia Way, Ste. 710 Markham, Ontario, Canada L3R 0C9 Attention: Jordan Dolgin If to Solpower: Solpower Corporation Pico Holdings, Inc. 7309 East Stetson Drive 875 Prospect Street Suite 102 Suite 301 Scottsdale, AZ 85251 La Jolla, CA 92037 Attn: Mr. Mark Robinson Attn: Peter Wood Copy to: Brand Farrar & Buxbuam LLP 515 South Flower Street Suite 3500 Los Angeles, CA 90071 Attn: Margaret G. Graf Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (i) GOVERNING LAW . This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.. (j) AMENDMENTS AND WAIVERS. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyers and the Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. -28- (l) EXPENSES. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. (m) CONSTRUCTION. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. (n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made an integral part hereof. ***** -29- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the date first above written. "BUYERS" SOLPOWER CORPORATION, a Nevada corporation By: /s/ Mark S. Robinson ------------------------------ Title: President & CEO PICO HOLDINGS, INC., a California corporation By: /s/ John R. Hart ------------------------------- Title: CEO "SELLERS" /s/ James W. Flowers - ---------------------------------- JAMES W. FLOWERS /s/ Patricia G. Flowers - ---------------------------------- PATRICIA G. FLOWERS FLORCOR INC., an Ontario corporation By: /s/ James W. Flowers ------------------------------ Title: President -30- EX-10.24 3 ex10_24.txt SHAREHOLDERS AGREEMENT Exhibit 10.24 SHAREHOLDERS AGREEMENT Protocol Resource Management Inc. August 28, 2000 Shareholders Agreement SHAREHOLDERS AGREEMENT ("Agreement"), dated August __, 2000 , among Protocol Resource Management, Inc. a Ontario corporation (the "Company"), Pico Holdings, Inc. a Delaware corporation or its nominee ("Pico") and Solpower Corporation, a Nevada corporation ("Solpower") and any other persons or entities which become parties to this Agreement and each of their respective Permitted Transferees or Involuntary Transferees, who become Shareholders, as the case may be, are referred to herein, collectively, as the "Shareholders". RECITALS WHEREAS, pursuant to a Share Purchase Agreement dated even date herewith, Pico and Solpower have acquired all of the outstanding common shares, each with a par value of $0.01 per share ("Shares"), which Shares are the only capital shares of the Company, and plan to pursue the business of the Company and have reached certain understandings with respect to the ownership, voting and transfer of the Shares of the Company and have agreed to enter into a Shareholders' Agreement to provide for certain rights and obligations of the Shareholders to each other and to the Company in respect to the governance of the Company and the issuance, transfer or disposition of the Shares of the Company; and WHEREAS, the Shareholders believe it to be in their best interests and in the best interests of the Company that they enter into this Agreement providing for such rights and restrictions with respect to the ownership, transfer and voting of Shares and governance of the Company. NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree as follows: 1. RESTRICTIONS ON TRANSFER OF SHARES. 1.1 GENERAL RESTRICTION ON TRANSFER. Prior to the closing of an underwritten public offering ("IPO") pursuant to an effective registration statement (a "Registration") under the Securities Act of 1933, as amended (the "Act"), that covers together with any prior effective Registrations: (i) not less than 40% of the outstanding Shares of the Company on a fully diluted basis; and (ii) Shares that, after the closing of such IPO, will be traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market (but excluding the OTCBB) no Shares now or hereafter owned by any Shareholder or any Permitted Transferee or any Involuntary Transferee or any interest therein may, directly or indirectly, be sold, assigned, mortgaged, transferred, pledged, hypothecated or otherwise disposed of or transferred (hereinafter collectively referred to as "Transfers" or "Transferred") except pursuant to this Agreement. 1.2 PERMITTED TRANSFEREES. (a) SCOPE OF TRANSFER. Subject to subsection (c) of this Section 1.2, a Shareholder may Transfer any Shares or an interest therein or its rights to subscribe for the same with the prior written consent of the Company's Board of Directors (the "Board"), which consent shall not be unreasonably withheld to, (x) a corporation or other entity which is controlled by, under common control with, or which controls the Shareholders or the equity holders of which are only such Shareholder or other equity owners of the Shareholder or which is a 1 successor by merger, consolidation or reorganization to the Shareholder or (y) to one or more Shareholders ("Permitted Transferees"). In addition to the foregoing, any transferee of a Shareholder described above may Transfer Shares back to such Shareholder or to another Permitted Transferee of such Shareholder. (b) SECURITY AGREEMENTS. Subject to subsection (c) of this Section 1.2, a Shareholder, with the prior written consent of the Board, consent shall not be unreasonably withheld, may pledge any or all Shares now or hereafter owned by it or grant a security interest therein to secure indebtedness of the Shareholder owing to the Company or a bank or other financial institution, so long as such indebtedness was incurred either (x) for the purpose of paying all or part of the purchase price of such Shares (or the shares for which such Shares were exchanged) or (y) for the purpose of refinancing indebtedness incurred for such purpose, provided, however, that any transferee pursuant to this subsection (b) shall acquire only a security interest in such Shares entitling such transferee to the proceeds from any sale of such Shares made in compliance with the terms of this Agreement and not title to such Shares or any other rights incident thereto. The pledge agreements, hypothecation agreements or other related financing agreements of any Shareholder shall be subject to and acknowledge the rights of the Company and the other Shareholders set forth herein. (c) AGREEMENTS TO BE BOUND. Any Transfer of Shares made pursuant to subsection (a) or (b) of this Section 1.2 to a Permitted Transferee shall be permitted and shall be effective only if such Permitted Transferee shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to the Joinder to Shareholders Agreement annexed hereto or pursuant to a similar instrument of assumption reasonably satisfactory to the Company. 2. FAIR MARKET VALUE. For the purposes of this Agreement, the "Fair Market Value" of any Share being purchased by or sold to the Company or for which a value needs to be set hereunder shall be the fair market value of the entire equity interest of the Shares of the Company taken as a whole, divided by the number of outstanding Shares, all calculated on a fully diluted basis including any outstanding warrants and options then exercisable currently or within 60 days without additional premiums for control or discounts for minority interests or restrictions on transfer or issuance, and shall be determined as of the date which is the end of the most recently completed fiscal quarter or such other date as the Company may determine. Fair Market Value shall be determined by a nationally recognized valuation firm selected by the Company. The selection of such firm and the date of the determination shall be reasonably acceptable to each Shareholder. 3. SALES TO THIRD PARTIES. 3.1 GENERAL. A Shareholder may not sell all or any portion of the Shares except as otherwise permitted under this Section 3. 3.2 RIGHT OF FIRST REFUSAL. (a) NOTICE OF PROPOSED TRANSACTION. If a Shareholder (the "Selling Shareholder") shall have received a bona fide offer or offers from a third party or parties to purchase all of that person's Shares, then prior to selling such Shares to such third party or parties such Selling Shareholder 2 shall deliver to the Company and each other Shareholder (the "Non-Selling Shareholders") a notice (the "Sale Notice") signed by such Selling Shareholder setting forth: (i) the name of the third party or parties; (ii) the number of Shares subject to the offer (the "Offered Shares"); (iii) the prospective purchase price per Share; (iv) all material terms and conditions contained in the offer of the third party or parties; (v) the Selling Shareholder's offer (irrevocable by its terms for 30 days following receipt) to sell to the Non-Selling Shareholders all or part of the Shares covered by the offer of the third party or parties, for a purchase price per Share, and on other terms and conditions, not less favorable to the Non-Selling Shareholders than those contained in the offer of the third party or parties (an "Offer"); (vi) the number of Shares each Non-Selling Shareholder shall be entitled to purchase from the Selling Shareholder pursuant to the Right of First Refusal set forth in this Section; and (vii) closing arrangements and a closing date (not less than 45 nor more than 60 days following the date of such letter) for any purchase and sale that may be effected by the Non-Selling Shareholders pursuant to this Section 3. (b) RIGHTS OF NON-SELLING SHAREHOLDERS. Each Non-Selling Shareholder shall, within 15 days after receipt of the Sale Notice from the Selling Shareholder, have the right to elect to purchase that number of Shares which is equal to the product of the Offered Shares and the fraction determined by dividing the number of Shares, all calculated on a fully diluted basis including any outstanding warrants and options then exercisable currently or within 60 days, then owned by such Non-Selling Shareholder by the aggregate number of Shares owned by all of the Non-Selling Shareholders, (the "Right of First Refusal"). Each Non-Selling Shareholder shall have a period of 15 days after receipt of the Sale Notice from the Selling Shareholder, to give the Selling Shareholder and the Company written notice of his intention to exercise the Right of First Refusal. The Selling Shareholder shall notify each Non-Selling Shareholder whether any Non-Selling Shareholder failed to exercise the Right of First Refusal and the number of Shares that are still available. (c) ALLOCATION OF UNEXERCISED RIGHTS. If any Non-Selling Shareholder elects not to exercise the Right of First Refusal, then the Non-Selling Shareholders who have elected to exercise the Right of First Refusal (the "Electing Shareholders") shall be entitled, within 10 days after receipt of notice from the Selling Shareholder of the number of Shares that any Non-Selling 3 Shareholders have elected not to purchase (the "Reoffered Shares"), to purchase all or any of the Reoffered Shares, provided that, if the Electing Shareholders in the aggregate elect to purchase more Shares than the number of Reoffered Shares, the Reoffered Shares shall be allocated pro rata among the Electing Shareholders who have exercised this right to purchase Reoffered Shares in proportion to the number of Shares owned by them prior to the Offer. (d) EFFECTING SALES. If, upon the expiration of 30 days following receipt by the Non-Selling Shareholders of the Sale Notice described in Section 3.2(a), the Non-Selling Shareholders have not exercised (in whole or in part), the Right of First Refusal contained herein, the Selling Shareholder may sell to such third party or parties all of the Shares covered by the Offer which the Non-Selling Shareholders have not agreed to purchase, for the purchase price and on the other terms and conditions contained in the Offer. If the Non-Selling Shareholders shall accept such Offer, the closing of the purchase and sale pursuant to such acceptance shall take place as set forth in the Sale Notice. 3.3 AGREEMENTS TO BE BOUND. Notwithstanding anything contained in this Section 3, any sale to a third party or any Involuntary Transfer (as defined in Section 3.4) to an Involuntary Transferee (as defined in Section 3.4) shall be permitted under the terms of this Agreement only if such third party or Involuntary Transferee, as the case may be, shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to the Joinder to Shareholders Agreement attached hereto or another instrument of assumption reasonably satisfactory to the Company. 3.4 INVOLUNTARY TRANSFERS. In the case of any transfer of title or beneficial ownership of Shares upon default, foreclosure, forfeit, court order, or otherwise than by a voluntary decision on the part of a Shareholder (an "Involuntary Transfer"), the Company shall have the right but not the obligation to purchase such Shares pursuant to this Section 3.4. Upon the Involuntary Transfer of any Shares, such Shareholder shall promptly (but in no event later than 10 days after such Involuntary Transfer) furnish written notice (the "Involuntary Transfer Notice") to the Company indicating that the Involuntary Transfer has occurred, specifying the name of the person to whom such Shares have been transferred (the "Involuntary Transferee"), giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer. Upon the receipt of the Involuntary Transfer Notice, and for 90 days thereafter, the Company shall have the right, but not the obligation, to purchase, and the Involuntary Transferee shall have the obligation to sell, all (but not less than all) of the Shares acquired by the Involuntary Transferee for a purchase price equal to the Fair Market Value of such Shares on the date of transfer to the Involuntary Transferee. The Company's right to purchase pursuant to this Section 3.4 shall be assignable in whole or in part to any one or more Shareholders with such rights to be accorded and exercised in accordance with Section 3.2. In the event that neither the Company nor the other Shareholders exercise their rights, then the Involuntary Transferee may elect to remain a Shareholder or seek a third party offer under Section 3.2 and in accordance with the procedures therein. Any Transfer under this Section 3.4, and the payments of cash or other consideration, under Section 3.5 or otherwise, shall be implemented and closed within 180 days of the date of the Transfer Notice. 3.5 TERM OF PAYMENT FOR INVOLUNTARY TRANSFERS. If the Company exercises its rights pursuant to Section 3.4, the Company may elect to pay the purchase price to be determined pursuant to Section 2 hereof in cash at closing 4 or in installments. The Company shall state in its written notice under Section 3.4 whether it elects to pay in cash in full or in installments, and if in installments, the specific terms of such installments within the requirements set forth in this Section 3.5. If the Company fails to state in such written notice its election to pay in cash in full or in installments, the Company shall be deemed to have elected to pay in installments with fifty percent (50%) of the Fair Market Value to be paid as a down payment and the balance of the Fair Market Value to be evidenced by a promissory note of the Company in the principal amount of the unpaid balance of the Fair Market Value and payable in at least five (5) but not more than ten (10) equal semi-annual installments of principal and interest, with interest thereon at the rate of ten percent (10%) per annum. Such promissory note shall provide for the acceleration of the due dates thereof in the event of default in any principal or interest payment, and shall allow the Company to prepay all or any part of the promissory note at any time or from time to time without penalty. In the event that the Shares are acquired by a Shareholder under Section 3.4 then the Fair Market Value shall be due in cash unless the Involuntary Transferee, in his, her or its sole discretion, elects to accept payment on the same terms available to the Company in this Section 3.5 or on other terms agreed to by the parties, but in all events, subject to this Agreement including the limitations on the Security Agreement set forth in Section 1.2(b). 4. OPTIONAL PARTICIPATION IN SALES OF COMMON STOCK ("TAG ALONG RIGHTS"). (a) REQUIREMENT OF PARTICIPATION. If any one or more of the Shareholders (a "Seller") shall at any time desire to Transfer Shares to a third party other than a Permitted Transferee, in a privately negotiated transaction and such Shares (together with the aggregate number of Shares of theretofore Transferred by such Shareholders, excluding Transfers to Permitted Transferees) equal more than 50% of the outstanding Shares on a fully diluted basis, all calculated on a fully diluted basis including any outstanding warrants and options then exercisable currently or within 60 days, measured as of the latest date on which such Shareholder may deliver or cause to be delivered the Transfer Notice referred to in Section 4(c), then each Shareholder shall be entitled, subject to Section 4(e), to participate pro rata in such Transfer at the same price and on the same terms and conditions applicable to the Seller. (b) AMOUNT. Each Shareholder shall have the right to Transfer in a transfer subject to this Section 4 up to a percentage of the number of Shares owned by such Shareholder equal to the percentage derived by dividing the aggregate number of Shares specified in the Transfer Notice delivered pursuant to Section 4(c) by the aggregate number of Shares then owned by Seller. (c) TRANSFER NOTICE. The Seller shall deliver or cause to be delivered to each Shareholder a written notice (a "Transfer Notice") of a proposed Transfer subject to this Section 4 no later than 30 days prior to the proposed closing thereof. Such notice shall make reference to the Shareholders' rights hereunder and shall describe in reasonable detail (i) the aggregate number of Shares to be Transferred by the Seller if none of the other Shareholders participate, (ii) the aggregate number of Shares then owned by the Seller, (iii) the person or entity to whom or which such Shares are proposed to be Transferred, (iv) the terms and conditions of the Transfer, including the consideration to be paid therefor, (v) the maximum percentage of the Shares to include in the Transfer and (vi) the proposed date, time and location of the closing of the Transfer. 5 (d) PARTICIPATION NOTICE. Each Shareholder shall exercise its right to participate in a Transfer of Shares pursuant to this Section 4 by delivering to the Seller a written notice (a "Participation Notice") stating its election to do so and specifying the number of Shares, which shall not exceed the number of Shares determined for such Shareholder pursuant to Section 4(b)) held by him, her or it to be Transferred no later than 15 days after receipt of the Transfer Notice. Failure to provide a Participation Notice within such 15-day period shall be deemed to constitute an election by such Shareholder not to exercise its rights pursuant to this Section 4, and the Seller shall have 60 days following the expiration of such 15-day period in which to Transfer the number of Shares equal to the difference between the number set forth in the Transfer Notice pursuant to Section 4(c)(i) and the aggregate number of Shares as to which the Seller has received a Participation Notice, on terms not more favorable to the Seller than those set forth in the Transfer Notice. Each Shareholder who has so elected pursuant to a Participation Notice shall thereupon be required to deliver at such closing the certificate or certificates representing all (or such lesser number determined pursuant to Section 4(b)) of the Shares held by him, her or it, duly endorsed for transfer, and shall be entitled to receive the net proceeds allocable to the Transfer thereof, after deduction of such Shareholder's proportionate obligations for the reasonable expenses of Transfer, which obligations shall not exceed an amount proportionate to the amount of such expenses allocated to the Seller. If, at the end of the 60-day period following the expiration of such 15-day period, the Seller has not completed the Transfer of Shares, the Seller may not later sell the Shares pursuant to this Section 4 without again fully complying with the provisions of this Section 4. (e) EXCEPTIONS. The obligation and rights of the Shareholders pursuant to this Section 4 shall not apply to any Transfer by a Seller of Shares (i) pursuant to a distribution to the public (whether pursuant to a registered public offering, Rule 144 or otherwise) or (ii) to a third party that is not a Permitted Transferee in a transaction in which the number of Shares Transferred does not exceed (together with the aggregate number of Shares theretofore Transferred in the then current fiscal year by the Seller, excluding Transfers to Permitted Transferees) 5% of the then outstanding Shares; provided, however, that such sales of 5% or less of the outstanding Shares shall be aggregated with previous sales to determine whether the 50% threshold set forth in Section 4(a) has been met, notwithstanding that such sales may, after such threshold has been met, be made without giving rise to "tag-along rights" under this Section 4(a) after such threshold has been met, to the extent permitted in this sentence. (f) If the provisions of both Section 3 and Section 4 are applicable to the same transaction, each Shareholder shall be entitled to make its elections under Section 3 or Section 4 and any Shares sold pursuant to this Section 4 shall also be subject to the provisions of Section 3. 5. CORPORATE ACTIONS. 5.1 ELECTION OF DIRECTORS AND OFFICERS. Pico and Solpower and their respective Permitted Transferees or Involuntary Transferees further agree in their capacity as Shareholders of the Company to cast their votes in such a manner so as to set the Board of Directors initially at four (4) directors and to elect two (2) directors designated by Pico and two (2) directors designated by Solpower (or their respective successors as a result of any Involuntary Transferees or Permitted Transferees) as members of the Board of the Company. The Shareholders and the directors elected or designated during the term of this 6 Agreement further agree, to the extent permitted, to take such action as is necessary to cause the persons so designated to be re-elected as Directors and to cause such nominees to be elected and re-elected as directors. To the extent the size of the Board of Directors is modified, the Shareholders also agree to maintain the Board at 50% representation for each of Pico and Solpower for their successor Shareholders, unless the Board otherwise determines by unanimous vote. 5.2 ADDITIONAL DIRECTORS. Pico and Solpower agree that any persons elected as directors of the Company shall be required to agree to require all Shareholders to be bound by this Agreement and to agree personally to the provisions of Section 5 of this Agreement prior to the date of their election and whether or not such person becomes a Shareholder subject to this Agreement. 6. APPLICATION OF AGREEMENT TO NEW SHAREHOLDERS AND SHARE CERTIFICATE LEGEND. 6.1 AGREEMENTS TO BE BOUND. In addition to the provisions of Section 3.3, any transferee of Shares and any holder of additional Shares ("New Shares") issued by the Company shall be required to accept all the terms and conditions of this Agreement before the transfer of any Shares or the issuance or transfer of New Shares and shall agree in writing to be bound thereby pursuant to the Joinder to Shareholders Agreement attached hereto or another instrument of assumption reasonably satisfactory to the Company. 6.2 SHARE CERTIFICATE LEGENDS. A copy of this Agreement shall be filed with the Secretary of the Company and kept with the records of the Company. Each certificate representing Shares or New Shares owned by the Shareholders shall bear upon its face the following legends: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN A SHAREHOLDERS' AGREEMENT DATED AUGUST ___, 2000, AS AMENDED FROM TIME TO TIME, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST." "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR UNDER STATE SECURITIES LAWS, AS APPLICABLE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPROPRIATE QUALIFICATIONS UNDER ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS, SUCH LAWS AS WELL AS THE SHAREHOLDERS AGREEMENT, DATED AS OF MARCH 15, 1997, AS AMENDED FROM TIME TO TIME." In addition, certificates representing Shares or New Shares owned by residents of California shall bear the following legend: 7 "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES." All Shareholders shall be bound by the requirements of such legends to the extent that such legends are applicable. Upon a registration of any Shares or New Shares, the certificate representing the registered securities shall be replaced, at the expense of the Company, with certificates not bearing any legend, to the extent a legend is no longer required. 7. GENERAL PROVISIONS. 7.1 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by a written agreement executed by the Company, Pico, Solpower, and any other Shareholders who have become parties hereto. 7.2 ASSIGNMENT. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. In the case of Permitted Transferees, third parties and Involuntary Transferees, such Permitted Transferees, third parties or Involuntary Transferees, as the case may be, shall be deemed the Shareholder hereunder for purposes of obtaining the benefits or enforcing the rights of such Shareholder hereunder, provided that no Permitted Transferee, third party or Involuntary Transferee, as the case may be, shall derive any rights under this Agreement unless and until such Permitted Transferee, third party or Involuntary Transferee, as the case may be, has delivered to the Company a valid undertaking to become, and becomes, bound by the terms of this Agreement to which the transferring Shareholder is subject. 7.3 TERMINATION. Any party to, or person who is subject to, this Agreement which ceases to own Shares or any interest therein shall cease to be a party to, or person who is subject to, this Agreement and thereafter shall have no rights or obligations hereunder. 7.4 RECAPITALIZATIONS, EXCHANGES, ETC. AFFECTING THE SHARES. Except as otherwise provided herein, the provisions of this Agreement shall apply to the full extent set forth herein with respect to (a) the Shares and (b) any and all New Shares and any other shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution for the Shares of, by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Except as otherwise provided herein, this Agreement is not intended to confer upon any person, except for the parties hereto, any right or remedies hereunder. 7.5 FURTHER ASSURANCES. Each party hereto or person subject hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other part hereto or person subject hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transaction contemplated hereby. 8 7.6 GOVERNING LAW. This Agreement and the rights and obligations of the parties hereunder and the persons subject hereto shall be governed by, and construe and interpreted in accordance with, the laws of the State of California, without giving effect to the choice of law principles thereof. 7.7 INVALIDITY OF PROVISION. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 7.8 NOTICES. All notices and other communications hereunder shall be in writing and, unless otherwise provided herein, shall be deemed duly given if delivered personally or by telecopy or mailed by registered or certified mail (return receipt requested) or by Federal Express or other similar courier service to the parties at the following addresses or (at such other address for the party as shall be specified by like notice): (a) If to Solpower: Solpower Corporation 7309 East Stetson Drive Suite 102 Scottsdale, AZ 85251 Attn: Chief Executive Officer With a copy to: Brand Farrar & Buxbaum, LLP 515 S. Flower Street, Suite 3500 Los Angeles, CA 90071-2201 Attn: Margaret G. Graf If to Pico: Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Attn: Peter Wood Telecopier: 858-456-6172 With a copy to: General Counsel Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Telecopier: 858-456-6172 9 If to the Company Protocol Resource Management Inc. 330 Industrial Parkway South Aurora, Ontario, Canada L4G 3V7 Attn: James W. Flowers With a copy to: Wilson, Vukelich Barristers & Solicitors 60 Columbia Way, Ste. 710 Markham, Ontario, Canada L3R 0C9 Attention: Jordan Dolgin (b) if to any other Shareholder, as listed in the joinder of the Shareholder hereto or, if not so listed, to such Shareholder at the address reflected in the stock records of the Company, or as such Shareholder shall designate to the Company in writing. 7.9 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 7.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the Shares, other than those expressly set forth or referred to herein. 7.11 INJUNCTIVE RELIEF. The Shares cannot readily be purchased or sold in the open market, and for that reason, among others, the Company and the Shareholders will be irreparably damaged in the event this Agreement is not specifically enforced. Each of the parties therefore agrees that in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which the Company or the Shareholders may have. 7.12 FEES AND EXPENSES. Each party shall be responsible for its own expenses and fees including attorneys' fees and expenses. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an allege dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement each party may seek to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled, as may be ordered in connection with such proceeding. 10 7.13 TERM. This initial term of Agreement shall terminate upon the earlier to occur of (a) an IPO as described in Section 1, and (b) ___________, 2005, provided, however, if an IPO has not occurred prior to ____________, 2005, this Agreement shall be automatically extended for the longer of the period allowed under the laws of the state in which the Company is then incorporated or shall be renewed automatically year to year thereafter until terminated by mutual agreement of the parties to the Agreement. IN WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto on the date opposite such party's signature hereto, and shall be effective as of the date first above written. SOLPOWER CORPORATION Date: August 28, 2000 By: /s/ Mark Robinson ----------------- ------------------------------------ Name: Mark Robinson Title: President and Chief Executive Officer PICO HOLDINGS, INC. Date: August 28, 200 By: /s/ John R. Hart ----------------- ----------------------------------- Name: John R. Hart Title: CEO 11 EXHIBIT A JOINDER TO SHAREHOLDERS AGREEMENT OF PROTOCOL RESOURCE MANAGEMENT, INC. By affixing a signature hereto, the undersigned, as a Shareholder of Protocol Resource Management, Inc. ("Company"), hereby joins in the execution of the Shareholders Agreement dated _______________, 2000, executed by the Company and its Shareholders, as amended to the date hereof. Upon acceptance of this Joinder by the Company, the undersigned shall be a party to said Shareholder Agreement. The execution of this Joinder shall be a counterpart execution of the said Shareholders Agreement, and the undersigned agrees to be bound by all the terms thereof as though he were an original party thereto. IN WITNESS WHEREOF, the undersigned has executed this Joinder as of _____________. - -------------------------------- ---------------- Signature of Shareholder Number of Shares ACCEPTANCE The foregoing Joinder is hereby accepted by the Company as of ______________. By: ------------------------------------ Title: Spousal Waiver ____________________ [Name of Spouse] hereby waives and releases any and all equitable or legal claims and rights, actual, inchoate or contingent which [he] [she] may acquire with respect to the disposition, voting or control of the Shares subject to this Agreement, except as set forth in the Shareholders Agreement, dated as of _______________, 2000, as amended through the date of this Spousal Waiver. I acknowledge that I have read the Shareholders Agreement and that I know its contents, including the fact that my spouse has agreed to limit the ownership, sale and transfer of the Shares of Protocol Resource Management, Inc. and the disposition of the proceeds of any such sale which, as a result, applies to any community interest I may have or acquire in the Shares. Date: ----------------- ---------------------------------------- [Signature of Spouse] ---------------------------------------- [Print name] Address: ---------------------------------------- ---------------------------------------- ---------------------------------------- EX-10.25 4 ex10_25.txt $500,000 PROMISSORY NOTE Exhibit 10.25 NONNEGOTIABLE SECURED PROMISSORY NOTE $500,000 United States Issued: August 28, 2000 Principal Amount Maturity Date: August 28, 2003 FOR VALUE RECEIVED, Solpower Corporation., a Nevada corporation ("Maker"), hereby promises to pay to Pico Holdings, Inc., a Delaware corporation (the "Payee"), the principal amount ("Principal Amount") of Five Hundred Thousand Dollars ($500,000) together with interest thereon calculated in U.S. dollars at the rate published in the WALL STREET JOURNAL under the caption "Money Rates, London Interbank Offered Rates (Libor)" for notes maturing six (6) calendar months after issuance plus two percent (2%) ("Interest"), according to the following terms and conditions. This instrument is not negotiable or assignable by Payee except to a Permitted Transferee as defined below. All references to currency herein refer to United States Dollars. 1. INTEREST AND PAYMENT SCHEDULE. All accrued Interest shall be payable on each anniversary of the date hereof. All unpaid portions of the Principal Amount and accrued and unpaid Interest remaining on this Note shall be due and payable on August 28, 2003 (the "Maturity Date"). Commencing from the date of this Note and unless sooner discharged in accordance with Section 2 below, simple Interest on this Note shall accrue on the unpaid Principal Amount. The Principal Amount and Interest payable hereunder shall be paid in lawful money of the United States to Payee at such place as Payee may designate in writing. 2. PREPAYMENT. The Maker shall be entitled at any time to prepay any or all of the Principal Amount and accrued and unpaid Interest owed hereunder without penalty upon thirty (30) days written notice to Payee. Any prepayment shall be credited first to accrued Interest and then to the aggregate unpaid Principal Amount. Interest shall thereupon cease to accrue upon the Principal Amount so paid. 3. DEFAULT. For purposes of this Note, a "Default" shall be deemed to have occurred upon any of the following events: (a) A failure by Maker to pay any principal or interest owing under this Note when due on the Maturity Date which shall not have been cured within thirty (30) days of receipt of a notice from Payee specifying the alleged Default or failure; or (b) Maker shall make an assignment for the benefit of creditors, or if a receiver of Maker's property shall be appointed, or if a petition in bankruptcy or for the reorganization under any Chapter of any United States Federal or State Bankruptcy Act or other similar proceeding under law for relief 1 of debtors shall be filed by or against Maker, or if any lien of attachment, execution, lien, or claim of lien be placed against all or any portion of the assets of the Maker and is not cleared from the record or reasonably bonded against within ninety (90) days after it has been filed. Provided, however, that no delay or omission on the part of Payee in exercising any right hereunder shall operate as a waiver of such right or of any right under this Note. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. Except as set forth in this Section 3, Maker hereby expressly waives any presentment, demand, protest, notice of protest or other notice of any kind and hereby expressly waives and covenants not to assert any appraisement, stay, extension, redemption or similar laws, now or at any time hereafter enforce, which might delay, prevent or otherwise impede the enforcement of this Note. 4. COLLATERAL. The obligations under this Note are secured by the delivery by Maker to Payee of all of the Common Shares of Protocol Resource Management Inc. ("Pledged Stock") held by Maker ("Pledgor") pursuant to a separate Stock Pledge Agreement dated as of the same date as the date of this Note. 5. REMEDIES. Upon the occurrence of a Default and unless such Default shall have been cured in accordance with the terms of this Note, the Payee may declare the entire unpaid Principal Amount, and all Interest accrued thereon, immediately due and payable and shall be entitled to exercise upon and to own the Pledged Stock in addition to any other remedies it may have a right to assert with respect to this Note. The rights and remedies available to Payee with respect to the Pledged Stock under this Note shall be cumulative and in addition to any other rights or remedies that Payee may be entitled to pursue at law or in equity. The exercise of one or more of such rights or remedies shall not impair Payee's right to exercise any other right or remedy at law or in equity. Notwithstanding the occurrence of a Default or the Payee's exercise of any of its rights or remedies hereunder, until such time as Payee receives payment in full of all amounts due hereunder, Interest will continue to accrue on the Principal Amount at the Interest rate charged hereunder. 6. ASSIGNMENT. The rights and obligations of the parties hereunder shall not be assignable by either party without the consent of the other except Payee may assign its rights to a Permitted Transferee. For purposes hereof a Permitted Transferee, shall be a corporation, partnership or other entity, which is a successor by merger, reorganization, consolidation or similar corporate transaction or in the case of the dissolution or liquidation of the Payee, the successor to the Payee or the previous Permitted Transferee the same by will, the laws of intestate succession or the corporate laws of the state of California. To the extent such assignments are allowed, the provisions of this Note shall be binding upon and inure to the benefit of the parties hereto and their respective designees, heirs, legal representatives, successors and assigns, to the extent provided herein. 7. COSTS. Maker shall pay, on demand, any and all costs and expenses, including reasonable attorneys' fees, incurred by Payee in connection with a Default and the collection of any portion of the Principal Amount and Interest accrued thereon. 8. OFFSET. The amounts due under this Note are not subject to reduction or offset for any claims of Maker or its successors or assigns against Payee or any third party. 2 9. NO CONTINUING WAIVER. The waiver of a Default shall not constitute a continuing waiver or a waiver of any subsequent Default. Maker hereby waives presentment, demand, dishonor and notice of nonpayment. 10. NOTICE. All notices, requests, consents and other communications which may be desired or required hereunder shall be in writing, and shall be deemed to have been duly given on the date of delivery if delivered in person to the party named below, or three (3) days after mailing if deposited in the United States mail, first class, registered or certified mail, return receipt requested, with postage prepaid, addressed as follows: If to Maker: Solpower Corporation 7309 East Stetson Drive Suite 102 Scottsdale, AZ 85251 Attention: Mr. Mark Robinson Telecopier: 480-947-6324 With a copy to: Brand Farrar & Buxbaum LLP 515 South Flower Street, Suite 3500 Los Angeles, CA 90071 Attention: Margaret G. Graf Telecopier: 213-426-6222 If to Payee: Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Attn: Peter Wood Telecopier: 858-456-6172 With a copy to: General Counsel Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Telecopier: 858-456-6172 11. SEVERABILITY. If any provision of this Note or the application thereof to any person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Note and the application of any such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 12. INTERPRETATION OF DOCUMENT. The parties hereto acknowledge and agree that this Note has been negotiated arms length and between parties equally sophisticated and knowledgeable in the matters dealt with in this Note. Each 3 party has had access to counsel of their selection. Accordingly, any rule of law, court decision or other legal precedent that would require interpretation of any ambiguities in this Note against the party that has drafted it is not applicable and is waived. 13. GOVERNING LAW AND VENUE. This Note and the rights and obligations of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of California, without giving effect to the choice of law principles thereof. Each party agrees that any proceeding relating to this Note shall be brought in a state court in Los Angeles County and each party consents to personal jurisdiction in any such action brought in any such court. SOLPOWER CORPORATION, a Nevada corporation By: /s/ Mark Robinson ------------------------------------ Name: Mark Robinson Title: President and Chief Executive Officer 4 EX-10.26 5 ex10_26.txt $250,000 PROMISSORY NOTE Exhibit 10.26 NONNEGOTIABLE PROMISSORY NOTE $250,000 Cdn. Issued: August ___, 2000 Principal Amount Maturity Date: August ___, 2003 FOR VALUE RECEIVED, Solpower Corporation, a Nevada corporation, or its designee ("Maker"), hereby promises to pay to Pico Holdings, Inc., a Delaware corporation ("Payee"), the principal amount ("Principal Amount") of Two Hundred Fifty Thousand Dollars (Cdn.$250,000) according to the following terms and conditions. This instrument is not negotiable or assignable by Payee except to a Permitted Transferee as defined below. All references to currency herein refer to Canadian Dollars. 1. PAYMENT SCHEDULE. All unpaid portions of the Principal Amount of this Note shall be due and payable on August ___, 2003 (the "Maturity Date"). 2. ADJUSTMENT AND PREPAYMENT. (a) To the extent that the purchase price set forth in the Share Purchase Agreement dated August 21, 2000 among the Maker, the Payee, James W. Flowers, Patricia G. Flowers, Florcor, Inc. and Protocol Resources Management Inc., an Ontario corporation, is reduced pursuant to Section 2(e) of such Share Purchase Agreement or otherwise, the Principal Amount of this Note shall be reduced by the same amount ("Adjustment") and such Adjustment shall be treated as a prepayment of this Note as set forth in Section 2(b) below. (b) The Maker shall be entitled at any time to prepay any or all of the Principal Amount without penalty upon thirty (30) days written notice to Payee. Any prepayment shall be credited first to the aggregate unpaid Principal Amount and any Adjustment in the Principal Amount of the Note pursuant to Section 2(a) shall be treated as a prepayment on the date that the Adjustment was made. 3. DEFAULT. For purposes of this Note, a "Default" shall be deemed to have occurred upon any of the following events: (a) A failure by Maker to pay any Principal Amount owing under this Note when due on the Maturity Date; (b) A failure by Payee to effect the Adjustment in accordance with Section 2; or 1 (c) Maker shall make an assignment for the benefit of creditors, or if a receiver of Maker's property shall be appointed, or if a petition in bankruptcy or for the reorganization under any Chapter of any Federal or State Bankruptcy Act or other similar proceeding under law for relief of debtors shall be filed by or against Maker, or if any lien of attachment, execution, lien, or claim of lien be placed against all or any portion of the assets of the Maker and is not cleared from the record or reasonably bonded against within ninety (90) days after it has been filed; unless (d) Any such failure or action by Maker under Sections 3(a) and (b) shall not have been cured within thirty (30) days of receipt of a notice from Payee specifying the alleged Default or failure; and (e) Provided, however, that no delay or omission on the part of Payee in exercising any right hereunder shall operate as a waiver of such right or of any right under this Note. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. Except as set forth in this Section 3, Maker hereby expressly waives any presentment, demand, protest, notice of protest or other notice of any kind and hereby expressly waives and covenants not to assert any appraisement, stay, extension, redemption or similar laws, now or at any time hereafter enforce, which might delay, prevent or otherwise impede the enforcement of this Note. 4. ASSIGNMENT. The rights and obligations of the parties hereunder shall not be assignable by either party without the consent of the other except Payee may assign its rights to a Permitted Transferee. For purposes hereof a Permitted Transferee, shall be a corporation, partnership or other entity, which is a successor by will, or other testamentary or non-testamentary transfer to a trust for the benefit of the individual transferring Payee or by merger, reorganization, consolidation or similar corporate transaction involving any of the Payees or in the case of the dissolution or liquidation of a non-individual Payee, the successor to the Payee or the previous Permitted Transferee pursuant to the corporate laws of the state of the formation of the transferring entity. To the extent such assignments are allowed, the provisions of this Note shall be binding upon and inure to the benefit of the parties hereto and their respective designees, heirs, legal representatives, successors and assigns, to the extent provided herein. 5. COSTS. Maker shall pay, on demand, any and all costs and expenses, including reasonable attorneys' fees, incurred by Payees in connection with a Default and the collection of any portion of the Principal Amount and Interest accrued thereon. 6. OFFSET. The amounts due under this Note are not subject to reduction or offset for any claims of Maker or its successors or assigns against any of the Payees or any third party. 7. NO CONTINUING WAIVER. The waiver of a Default shall not constitute a continuing waiver or a waiver of any subsequent Default. Maker hereby waives presentment, demand, dishonor and notice of nonpayment. 2 8. NOTICE. All notices, requests, consents and other communications which may be desired or required hereunder shall be in writing, and shall be deemed to have been duly given on the date of delivery if delivered in person to the party named below, or three (3) days after mailing if deposited in the United States mail, first class, registered or certified mail, return receipt requested, with postage prepaid, addressed as follows: Payee: Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Attn: Peter Wood Telecopier: 858-456-6172 With a copy to: General Counsel Pico Holdings, Inc. 875 Prospect Street Suite 301 La Jolla, CA 92037 Telecopier: 858-456-6172 If to Maker: Solpower Corporation 7309 East Stetson Drive Suite 102 Scottsdale, AZ 85251 Attn: Mr. Mark Robinson Telecopier: 602-947-6324 With a copy to: Brand Farrar & Buxbaum LLP 515 South Flower Street Suite 3500 Los Angeles, CA 90071 Attn: Margaret G. Graf Telecopier: 213-426-6222 10. SEVERABILITY. If any provision of this Note or the application thereof to any person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Note and the application of any such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 11. INTERPRETATION OF DOCUMENT. The parties hereto acknowledge and agree that this Note has been negotiated arms length and between parties equally sophisticated and knowledgeable in the matters dealt with in this Note. Each party has had access to counsel of their selection. Accordingly, any rule of law, court decision or other legal precedent that would require interpretation of any ambiguities in this Note against the party that has drafted it is not applicable and is waived. 3 12. GOVERNING LAW AND VENUE. This Note and the rights and obligations of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Nevada, without giving effect to the choice of law principles thereof. SOLPOWER CORPORATION, a Nevada corporation By: /s/ Mark Robinson ------------------------------------ Name: Mark Robinson Title: President and Chief Executive Officer 4 EX-10.27 6 ex10_27.txt SHARE PURCHASE WARRANT Exhibit 10.27 NEITHER THIS WARRANT NOR THE SHARES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY JURISDICTION. NONE OF SUCH SECURITIES MAY BE SOLD, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. SOLPOWER CORPORATION, a Nevada corporation Share Purchase Warrant Number ____________ Right to Purchase: 1,000,000 Common Shares, Date of Issuance: August 28, 2000 $0.01 par value 1. WARRANT. For value received, Pico Holdings, Inc., a California corporation ("Registered Owner") is entitled, on or before August 28, 2003 or an earlier date applicable in paragraph 4 below ("Expiration Date") but not thereafter, to exercise the Warrant purchase up to One Million (1,000,000) non-assessable Shares, $0.01 par value ("Shares"), of Solpower Corporation, a Nevada corporation (the "Company"), from the Company for a purchase price equal to forty-three cents ($0.43) per Share, being an amount equal to 110% of the closing price of the shares on the date of issuance of this Warrant and which purchase price is subject to adjustment as provided for herein, (the "Exercise Price"). 2. EXERCISE. 2.1. EXERCISE PERIOD. The purchase rights represented by this Warrant are exercisable at the option of the Registered Owner in whole at any time, or in part from time to time, prior to the Expiration Date, provided that such purchase rights shall not be exercisable with respect to a fraction of a Share. The Company will not close its books for the transfer of this Warrant or of any Shares issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. 2.2. EXERCISE PROCEDURE. (a) This Warrant will be deemed to have been exercised upon the date of surrender (the "Exercise Date") of this Warrant to the Company together with a completed and duly executed subscription in the form attached hereto, and cash payment of the purchase price for each of the Shares purchased in immediately available U. S. federal funds in the amount of the Purchase Price . Page 1 (b) Certificate representing the Shares so purchased shall be delivered to the Registered Owner within ten days following the Exercise Date. (c) Shares issuable upon the exercise of this Warrant will be deemed to have been issued to the Registered Owner on the Exercise Date, and the Registered Owner will be deemed for all purposes to have become the record holder of such Shares on the Exercise Date. (d) The Company covenants and agrees that all shares to be delivered upon the exercise of this Warrant will, upon delivery, be free from all taxes, liens, and charges with respect to the purchase thereof hereunder. 3. ADJUSTMENT. 3.1. SUBDIVISION OR COMBINATION OF SHARES AND SHARE DIVIDENDS. In the event that the Company shall at any time after the Date of Issuance issue any Shares or any rights to purchase Shares as a dividend upon its Shares or issue any Shares in subdivision of outstanding Shares by reclassification or otherwise or combine outstanding Shares by reclassification or otherwise, then in each of said events ("Adjustment Events"), the Exercise Price which would apply if purchase rights hereunder were being exercised immediately prior to such action by the Company shall be adjusted by multiplying it by a fraction, the numerator of which shall be the number of Shares outstanding immediately prior to such dividend, subdivision or combination and the denominator of which shall be the number of Shares outstanding immediately after such dividend, subdivision or combination, and in such case the number of Shares which would be purchasable hereunder if purchase rights hereunder were being exercised immediately prior to such action by the Company shall be adjusted by multiplying it by a fraction which is the reciprocal of the fraction by which the Exercise Price shall be adjusted. 3.2. NOTICE OF ADJUSTMENT. Immediately upon any adjustment of the Exercise Price or increase or decrease in the number of Shares purchasable upon exercise of this Warrant, the Company will send written notice thereof to the Registered Owner, stating the adjusted Exercise Price, the increased or decreased number of Shares purchasable upon exercise of this Warrant and the calculation for such adjustment and increase or decrease. When appropriate, such notice may be given in advance and included as part of any notice required to be given pursuant to Section 4 below. 3.3 DISCRETION. Notwithstanding the provisions of this Section 3, on the occurrence of any Adjustment Events, the Company shall have the sole and exclusive power to make other adjustments as it considers necessary or desirable with respect to the Warrants so long as such adjustment is not adverse to the Registered Owner's interests hereunder. 4. PRIOR NOTICE OF CERTAIN EVENTS. In case at any time any of the following (collectively "Capital Event") shall occur: (a) the Company shall pay any dividend upon its Shares or make any distribution to the holders of its Shares (including dividends or distributions payable in Shares); Page 2 (b) there shall be any reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation or a sale or deposition of all or substantially all its assets; (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; or (d) the Company shall undertake an underwritten initial public offering of its Shares, and the underwriter or underwriting group shall require the acceleration of the exercise date of the Warrant, then, in each of said cases, the Company shall give prior written notice to the Registered Owner of the date on which (i) the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place or (iii) the Company shall undertake an initial public offering, as the case may be. Such notice shall also specify the date as of which the holders of distribution or subscription rights or shall be entitled to exchange their Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Such written notice shall be given at least twenty days prior to the action in question and not less than twenty days prior to the record date or the date on which the Company's transfer books are closed in respect thereto. To the extent that the Registered Owner does not, within the period specified, exercise this Warrant, this Warrant shall lapse. 5. RESTRICTIONS ON TRANSFERS. 5.1. TRANSFER RESTRICTIONS. Neither this Warrant nor any rights hereunder are transferable by the Registered Owner hereof, except with the prior written consent of the Company. The Company may deem and treat the Registered Owner of this Warrant at any time as the absolute owner hereof for all purposes. 5.2. RESTRICTIVE LEGEND. The Registered Owner of this Warrant acknowledges that neither this Warrant nor the Shares for which this Warrant is exercisable have been registered under the Securities Act of 1933, as amended, ("1933 Act") or qualified under the securities laws of California or of any other State or jurisdiction. The undersigned agrees not to sell, pledge, hypothecate, transfer or otherwise dispose of this Warrant or any Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Shares under the 1933 Act (or any similar statute then in effect) or (ii) an opinion of counsel satisfactory to the Company to the effect that such registration is not required. 6. NO FURTHER RIGHTS. This Warrant shall not entitle the Registered Owner to any voting rights or other rights as a shareholder of the Company, or to any other rights whatsoever except the rights herein expressed, and no dividends shall be payable or accrue in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until or unless, and except to the extent that, this Warrant shall be exercised. Page 3 7. RESERVATION OF SHARES. The Company agrees at all times to reserve and hold available for issuance a sufficient number of authorized but unissued Shares as will be sufficient to permit the exercise in full of this Warrant, and upon such issuance all such Shares will be validly issued, fully paid and nonassessable and not in violation of the preemptive rights of any person. 8. GENERAL. 8.1. NOTICES. Any notices required to be sent to the Registered Owner will be delivered to the address of such Registered Owner shown on the books of the Company. All notices referred to herein will be delivered in person or sent by first class mail, postage prepaid, and will be deemed to have been given when so delivered or sent. 8.2. ASSIGNMENT. This Warrant shall be binding upon and inure to the benefit of both parties hereto and their respective successors and assigns. If any provision of this Warrant shall be held to be invalid or unenforceable, in whole or in part, neither the validity nor the enforceability of the remainder hereof shall in any way be affected. 8.3. HEADINGS. The headings in this Agreement are included only for convenience and shall not affect the meaning or interpretation of this Agreement. The words "herein" and "hereof" and other words of similar import refer to this Agreement as a whole and not to any particular part of this Agreement. The word "including" as used herein shall not be construed so as to exclude any other thing not referred to or described. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer. SOLPOWER CORPORATION By: /s/ Mark S. Robinson ------------------------------------ Name: Mark S. Robinson Title: President and CEO Page 4 FORM OF SUBSCRIPTION (To be signed only upon exercise of Warrant) TO: SOLPOWER CORPORATION The undersigned, the Registered Owner of the within Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, __________________ Common Shares $0.01 par value of Solpower Corporation and herewith makes Payment by delivery of cash or other immediately available federal funds of $___________. If such Common Shares shall not be all of the Shares purchasable hereunder, a new Warrant of like tenor for the balance of the Common Shares purchasable hereunder shall be delivered to the undersigned. Dated: ------------------------------ ---------------------------------------- ---------------------------------------- Page 5 EX-27 7 fds.xfd FINANCIAL DATA SCHEDULE
5 6-MOS Apr-01-2000 Mar-31-2001 Sep-30-2000 184,355 0 130,924 0 498,593 915,361 0 0 4,378,011 1,198,111 0 0 0 282,507 9,196,292 4,378,011 313,082 313,082 245,127 1,123,235 60,000 0 103,843 (958,312) 0 (957,963) 0 0 0 (957,963) 0.03 0.03
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