Document:

Exhibit 10.5

 

INTRAWARE, INC.

 

DIRECTOR
OPTION AGREEMENT

 

 

Intraware, Inc.,
(the “Company”), has granted to                                                  
(the “Optionee”), an option to purchase a total of seven thousand five hundred
(7,500) shares of the Company’s Common Stock (the “Optioned Stock”), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Company’s 1998 Director Option Plan (the “Plan”)
adopted by the Company which is incorporated herein by reference.  The terms defined in the Plan shall have the
same defined meanings herein.

 

1.             Nature of the Option.  This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.

 

2.             Exercise Price.  The exercise price is $          
for each share of Common Stock.

 

3.             Exercise of Option.  This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as
follows:

 

(a)           Right to Exercise.

 

(i)            This Option shall become exercisable
in installments cumulatively with respect to one fourth (1/4) of the Optioned
Stock six months after the date of grant, and as to an additional one
twenty-fourth (1/24) of the Optioned Stock at the end of each month thereafter,
so that one hundred percent (100%) of the Optioned Stock shall be exercisable
four (4) years after the date of grant.

 

(ii)           This Option may not be exercised for
a fraction of a share.

 

(iii)          In the event of Optionee’s death,
disability or other termination of service as a Director, the exercisability of
the Option is governed by Section 8 of the Plan.

 

(b)           Method of Exercise.  This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised.  Such written notice, in the form attached
hereto as Exhibit A, shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.  The written notice shall be accompanied by
payment of the exercise price.

 

4.             Method of Payment.  Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:

 

(a)           cash;

 

 

(b)           check; or

 

(c)           surrender of other shares which
(x) in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six (6) months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; or

 

(d)           delivery of a properly executed
exercise notice together with such other documentation as the Company and the
broker, if applicable, shall require to effect an exercise of the Option and delivery
to the Company of the sale or loan proceeds required to pay the exercise price.

 

5.             Restrictions on Exercise.  This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed.  As a
condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any
applicable law or regulation.

 

6.             Non-Transferability of Option.  This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee.  The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the Optionee.

 

7.             Term of Option.  This Option may not be exercised more than
ten (10) years from the date of grant of this Option, and may be exercised
during such period only in accordance with the Plan and the terms of this
Option.

 

 

8.             Taxation Upon Exercise of Option.  Optionee understands that, upon exercise of
this Option, he or she will recognize income for tax purposes in an amount
equal to the excess of the then Fair Market Value of the Shares purchased over
the exercise price paid for such Shares. 
Since the Optionee is subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, under certain limited circumstances the
measurement and timing of such income (and the commencement of any capital gain
holding period) may be deferred, and the Optionee is advised to contact a tax
advisor concerning the application of Section 83 in general and the
availability a Section 83(b) election in particular in connection with the
exercise of the Option.  Upon a resale of
such Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.

 

INTRAWARE GRANT NO.:

 

DATE OF GRANT: 

 

	
   

  	
  INTRAWARE, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 

Optionee
acknowledges receipt of a copy of the Plan, a copy of which is attached hereto,
and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof.  Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under the Plan.

 

 

	
   

  	
  Dated: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Optionee

  	
   

  

 

 

 

EXHIBIT A

 

DIRECTOR
OPTION EXERCISE NOTICE

 

 

INTRAWARE, INC.

25 Orinda Way

Orinda, CA  94563

 

Attention:  Corporate Secretary

 

 

1.             Exercise of Option.  The undersigned (“Optionee”) hereby elects to
exercise Optionee’s option to purchase           
shares of the Common Stock (the “Shares”) of Intraware, Inc. (the “Company”)
under and pursuant to the Company’s 1998 Director Option Plan and the Director
Option Agreement dated                 
(the “Agreement”).

 

2.             Representations of Optionee.  Optionee acknowledges that Optionee has
received, read and understood the Agreement.

 

3.             Federal Restrictions on Transfer.  Optionee understands that the Shares must be
held indefinitely unless they are registered under the Securities Act of 1933,
as amended (the “1933 Act”), or unless an exemption from such registration is
available, and that the certificate(s) representing the Shares may bear a
legend to that effect.  Optionee
understands that the Company is under no obligation to register the Shares and
that an exemption may not be available or may not permit Optionee to transfer
Shares in the amounts or at the times proposed by Optionee.

 

4.             Tax Consequences.  Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee’s purchase or disposition of
the Shares.  Optionee represents that
Optionee has consulted with any tax consultant(s) Optionee deems advisable in
connection with the purchase or disposition of the Shares and that Optionee is
not relying on the Company for any tax advice.

 

5.             Delivery of Payment.  Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding
taxes required to be paid or withheld by the Company.

 

 

6.             Entire Agreement.  The Agreement is incorporated herein by
reference.  This Exercise Notice and the
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof. 
This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.

 

	
  Submitted by:

  	
   

  	
  Accepted by:

  
	
   

  	
   

  	
   

  
	
  OPTIONEE:

  	
   

  	
  INTRAWARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signed:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:Exhibit No. 10.1

 

AGREEMENT ENTERED INTO ON
JANUARY 10, 2005

 

	
  BETWEEN:

  	
   

  	
  PROGINET CORPORATION, a corporation duly
  incorporated according to the laws of the state of Delaware, having its
  principal place of business at 200 Garden
  City Plaza, Garden City, New York 11530, USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (“Proginet”)

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  BLOCKADE SYSTEMS CORP., a corporation duly
  incorporated according to the laws of Ontario, having its principal place of
  business at 2200 Yonge Street, Suite 1300 Toronto, Ontario, CANADA, M4S 2C6

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (“Blockade”)

  

 

1.                                                  PREAMBLE

 

1.1   WHEREAS
Proginet and Blockade have had discussions in connection with (a) the
assignment by Blockade of certain assets and licenses; and (b) the provision by
Blockade of certain other services to Proginet.

 

1.2   WHEREAS
Proginet and Blockade wish to enter into a definitive agreement with respect to
the subject matter hereof.

 

1.3     NOW, THEREFORE, THE
PARTIES AGREE AS FOLLOWS:

 

2.                                                  DEFINITIONS AND
INTERPRETATION

 

2.1   In this Agreement:

 

2.1.1                                    “Accounts” has
the meaning given it in Section 11.2.11;

 

2.1.2                                    “Affiliate”
means, in respect of any party hereto: (i) any Person in which such party has a
controlling interest or which has a controlling interest in such party; (ii)
any Person who has a controlling interest in any Person contemplated by
paragraph (i) of this Section 2.1.2; or (iii) any Person who is the partner of
such party, but only where such Person is acting on behalf of the partnership
of which they are both partners.  A
Person is deemed to have a controlling interest in another Person where:

 

2.1.2.1     either of those Persons, directly or
indirectly, beneficially owns or controls securities in the other that carry
(or would carry if any option or right of conversion attached to such
securities were exercised) more than fifty percent (50%) of the outstanding
voting rights, whether those rights exist under all circumstances or by reason
of the occurrence of an event that has occurred and is continuing, or

 

2.1.2.2     it possesses, directly or indirectly, the
power to direct or cause the direction of the management, operations or
policies of such other Person, whether through ownership of securities, by
contract or otherwise;

 

2.1.3                                    “Agreement” means this agreement, all schedules attached hereto and all
written amendments executed in accordance with Section 17.10 hereof;

 

2.1.4                                    “Assets” has the
meaning set forth in Section 3.1.1, 3.1.2 
3.1.3, 3.1.4 and 3.1.5.;

 

1

 

2.1.5                                    “Assignment” has
the meaning given it in Sections 3.1.1 through 3.1.5;

 

2.1.6                                    “Business Day” means a day, other than
a Saturday or Sunday, on which banks are open to transact business in New York
and Toronto, Ontario.

 

2.1.7                                    “Claimant”
has the meaning given to it in Section 12.3;

 

2.1.8                                    “Confidential Information” has the meaning given
to it in Section 10.3 hereof;

 

2.1.9                                    “Customers”
means those customers of the Software listed on Schedule 2.1.9;

 

2.1.10                              “Defaulting Party”
has the meaning given it in Section 13.3;

 

2.1.11                              “Deferred Revenue Amount”
means monies collected by or on behalf of Blockade prior to the Effective Date
for obligations to be performed after the Effective Date by the licensor under
the Customer Agreements.  Such monies
will be prorated for the month based upon a thirty (30) day month;

 

2.1.12                              “Effective
Date” means January 10, 2005;

 

2.1.13                              “Escrow Agreement”
has the meaning given in Section 9 hereof;

 

2.1.14                              “Escrow Fund”
has the meaning given it in the Escrow Agreement (Schedule 9);

 

2.1.15                              “GAAP”
means generally accepted accounting principles in Canada, from time to time,
applied on a consistent basis with prior periods;

 

2.1.16                              “Governmental
Entity” means any foreign, Canadian federal and provincial, United States federal,
state, county, municipal or other local jurisdiction, political entity, body,
organization, subdivision or branch, legislative or executive agency or
department or other regulatory service, authority or agency; whether it be
Canadian, American or Foreign;

 

2.1.17                              “Indemnifying Party”
has the meaning given it Section 12.3;

 

2.1.18                              “Intellectual Property Rights” means: (i) any and all proprietary rights
provided under: (a) patent law; (b) copyright law; (c) trade-mark law; (d)
design patent or industrial design law; or (e) any other statutory provision or
common law principle applicable to this Agreement, including trade secret law,
which may provide a right in either: (A) ideas, formulae, algorithms, concepts,
inventions or know-how generally; or (B) the expression or use of such ideas,
formulae, algorithms, concepts, inventions or know-how; and (ii) any and all
applications, registrations, licenses, sub-licenses, franchises, agreements or
any other evidence of a right in any of the foregoing;

 

2.1.19                              “Customer Agreements”
means all agreements between Blockade and Customers relating to the Software,
including,  without limitation, license,
maintenance and support agreements in each case to the extent identified on
Schedule 2.1.9;

 

2.1.20                              “Customer Software”
means the software, source code and documentation listed on Schedule 2.1.20(a)
and (b);

 

2.1.21                              “Legal Requirement”
means all applicable foreign, Canadian Federal and provincial, United States
federal, state, county, municipal or other local criminal, civil or common
laws, statutes, ordinances, judgments, orders, codes, rules, regulations, permits,
policies, guidance documents, judgments, decrees, injunctions, or agreement of
any Governmental Entity;

 

2.1.22                              “Liens” has the meaning given it in Section 3.1;

 

2

 

2.1.23                              “Losses” has the
meaning given it in Section 12.1;

 

2.1.24                              “Maintenance Revenues”
means monies collected and earned from Customers who have chosen and contracted
to accept maintenance services relating to the Software.  For purposes of this Agreement, “Maintenance
Revenue” will be calculated on a full calendar month basis and determined on
the Effective Date;

 

2.1.25                              “Person” is to
be broadly interpreted and includes, without limitation, an individual, body
corporate, partnership, limited liability company, joint venture, trust, association,
unincorporated organization, any governmental body, agency or authority or any
other entity recognized by applicable law;

 

2.1.26                              “Professional Services Revenues” means monies collected and earned from
Customers for services related to training and implementation of the Software

 

2.1.27                              “Proginet Indemnified Party”
has the meaning given it in Section 12.2;

 

2.1.28                              “Representatives”
means, in respect of either party to this Agreement, its directors, employees,
accountants, and other authorized agents and representatives;

 

2.1.29                              “Receiving Party”
has the meaning given it in Section 12.1;

 

2.1.30                              “Software” means
the Customer Software and all improvements, enhancements and additions and
including, but not limited to, any Intellectual Property based on the Customer
Software;

 

2.1.31                              “Software Revenues” means monies collected and earned from
Customers for Software for which they have contracted to license the use of the
Software, excluding “Maintenance Revenues” per Canadian GAAP.

 

2.1.32                              “Source Code Escrow
Agreement” has the meaning given it in Section 11.2.10;

 

2.1.33                              “Standard Customer Software
License Agreement” means the license agreement attached hereto as
Schedule 2.1.33;

 

2.1.34                              “Blockade Indemnified Party”
has the meaning given it in Section 12.1;

 

2.1.35                              “Transfers” has
the meaning given it in Section 3.1.1; and

 

2.1.36                              “Transition Plan” means the transition plan attached hereto as
Schedule 2.1.36.

 

2.1.37                              “Vasco Token Revenues” revenues derived from sales of VASCO Tokens.

 

2.1.38                              “ETA” means Part IX of the Excise Tax Act (Canada),
as amended from time to time.

 

2.1.39                              “GST” means the goods and services tax as levied under the ETA.

 

2.1.40                              “RSTA” means the Retail Tax Act (Ontario),
as amended from time to time.

 

2.2                           If any action is
required to be taken pursuant to this Agreement on or by a specified date which
is not a Business Day, such action shall be valid if taken on or by the next
succeeding Business Day.

 

2.3                           In this Agreement, a
period of days shall be deemed to begin on the first day after the event which
began the period and to end at 5:00 p.m. (New York City time) on the last day
of the period.

 

3

 

However,
if the last day of the period is not a Business Day, the period shall terminate
at 5:00
p.m. (New York City time) on the next Business Day.

 

2.4       The
following Schedules are incorporated into and form a part of this Agreement:

 

	
  Schedule 2.1.9

  	
   

  	
  • List of
  Customers of the Software; List of Customers with Maintenance Support as of
  the Effective Date

  
	
  Schedule
  2.1.20

  	
   

  	
  •
  Software to be Acquired

  
	
  Schedule
  2.1.33

  	
   

  	
  •
  Standard Software License Agreement

  
	
  Schedule
  2.1.36

  	
   

  	
  •-
  Transition Plan

  
	
  Schedule 3.1.4

  	
   

  	
  • Distributor Agreement(s)

  
	
  Schedule 3.1.5

  	
   

  	
  • Other Assets Acquired

  
	
   

  	
   

  	
   

  
	
  Schedule 3.1.6

  	
   

  	
  • Operating Leases and Security Interests
  to be Assumed

  
	
  Schedule 3.1.7

  	
   

  	
  • Vasco Agreement

  
	
  Schedule 3.1.8

  	
   

  	
  • RSA Agreement

  
	
   

  	
   

  	
   

  
	
  Schedule
  3.3

  	
   

  	
  •
  Joint Customer Notice

  
	
  Schedule 3.11

  	
   

  	
  • Accounts Prospects List

  
	
  Schedule 4.1

  	
   

  	
  • List of Staff to be Considered

  
	
   

  	
   

  	
   

  
	
  Schedule
  5.1.1

  	
   

  	
  • Maintenance Revenues Adjusted

  
	
  Schedule 5.1.2

  	
   

  	
  • Software Revenues Adjusted

  
	
  Schedule 5.1.3

  	
   

  	
  • Vasco Token Revenues Adjusted

  
	
  Schedule 5.1.4

  	
   

  	
  • Professional Services Revenues Adjusted

  
	
  Schedule 5.3.2

  	
   

  	
  • Disputed Accounts

  
	
  Schedule 5.10

  	
   

  	
  • Purchase Price Allocation

  
	
  Schedule
  6.5.2

  	
   

  	
  •Annual Maintenance Revenue ; Deferred Revenue Amount(s)

  
	
  Schedule
  6.6

  	
   

  	
  • Form of Security Agreement

  
	
  Schedule 8.3

  	
   

  	
  • Facility Use

  
	
  Schedule 9

  	
   

  	
  • Form of Escrow Agreement

  
	
  Schedule
  10.4

  	
   

  	
  • Joint Press Release

  
	
  Schedule 11.2.1

  	
   

  	
  • List of Patents and Trademarks

  
	
  Schedule
  11.2.2

  	
   

  	
  • Exceptions to Ownership of Software

  
	
  Schedule
  11.2.7

  	
   

  	
  • Certain Customer Agreements

  
	
  Schedule 11.2.8

  	
   

  	
  • Outstanding Commitments of Blockade

  
	
  Schedule 11.2.10

  	
   

  	
  • Software Escrow Agreement

  
	
  Schedule 11.2.11

  	
   

  	
  • Defaults; Consents

  
	
  Schedule15.1

  	
   

  	
  • Blockade Deliverables

  
	
  Schedule 16.1.1

  	
   

  	
  • Customer Relation Program

  

 

 

3.                                                  ASSIGNMENT OF SOFTWARE,
CUSTOMERS AND OTHER AGREEMENTS

 

3.1.1                                    Blockade hereby sells, assigns, conveys,
transfers and sets over unto (“Transfers”)
Proginet free and clear of any and all liens, claims, charges, security
interests or encumbrances of any kind whatsoever, except for those listed in
Schedule 3.1.6  (collectively, “Liens”):

 

3.1.2                                    all of Blockade’s rights, title and interest in
and to, and all of Blockade’s obligations and liabilities under the Customer
Agreements, any goodwill associated with such Customer Agreements, and all
books (limited to all excerpts therefrom relating to the Customer Agreements),
records, documentation and collateral material relating thereto;

 

4

 

3.1.3                                    all of Blockade’s rights, title and interest in
and to the Software and all books (limited to all excerpts therefrom relating
to the Software) records, documentation, and collateral material relating
thereto;

 

3.1.4                                    all of Blockade’s rights, title and interest in
and to any and all Distributor Agreements, records, documentation, and
collateral material relating thereto; as set forth in Schedule 3.1.4;.

 

 

3.1.5                                    all of Blockade’s equipment (other Assets)
related to and necessary to support the day-to-day operations of the acquired
assets on an as-is, where-is basis,

 

(a)                                  Computer hardware, networks, office equipment,
etc. as listed in Schedule 3.1.5a

 

(b)                                 Blockade internally developed software as listed
in Schedule 3.1.5b

 

(c)                                  Third party software as listed in Schedule
3.1.5c, for which licenses or rights to utilize this software will be
transferred to Proginet from Blockade.

 

(the foregoing sale, assignment, conveyance and
transfer is sometimes herein, collectively, referred to as the “Assignment”, and each of the assets and properties set forth
in Sections 3.1.1, 3.1.2, 3.1.3,  3.1.4,
3.1.5, 3.1.7, and 3.1.8 are collectively herein referred to as the “Assets”);.

 

3.1.5.1       Blockade
will not transfer the following assets:

 

• cash and any marketable securities

 

• accounts receivables (except as provided for
herein in Section 7)

 

• tax and any scientific research credits

 

• pre-paid deposits paid by Blockade

 

 

3.1.6                                    Blockade hereby agrees to assign and Proginet
agrees to accept the lease obligations as set forth on Schedule 3.1.6

 

 

(Note: Schedule 3.1.6 needs to also list out the
security interests of the equipment vendors that        Proginet will need to assume for the transferred assets);

 

3.1.7                                    All of Blockade’s rights, title and interest in
and to the VASCO Agreement, records, documentation and collateral material
related thereto, as set for in the Schedule 3.1.7.;

 

3.1.8                                    All of Blockade’s rights, title and interest in
and to the RSA Agreement, records, documentation, and collateral material
related thereto, as set forth in Schedule 3.1.8.

 

3.2                           Proginet hereby accepts the Assignment, assumes
and agrees to observe and perform all of the duties, obligations, terms, provisions
and covenants and to pay and discharge all of the liabilities of Blockade to be
observed, performed, paid or discharged from and after the Effective Date under
the Agreement, including the Customer Agreements, Distributor Agreements, Lease
Obligations for those leases assumed herein, Vasco Reseller Agreement,

 

5

 

as specifically provided
for in this Agreement.  Blockade agrees
to compensate Proginet for all obligation specified in Section 11.2.8 that have
a value due specified.

 

3.3                           Subject to the performance in full of Blockade’s
obligations under Sections 3.1, 3.2 and 3.4, the parties will forward to each
Customer via Certified Mail, the joint notice in the form attached hereto as
Schedule 3.3 confirming the Assignment, to be sent out within two (2) days of
the Effective Date of this Agreement.

 

3.4   Notwithstanding anything to the contrary
contained in this Agreement, to the extent the sale, assignment, transfer or
conveyance to Proginet of Blockade’s right, title and interest in and to the
Customer Agreements would result in a breach of said Customer Agreements or
would require any third-party consents which shall not have been obtained prior
to the sixtieth (60th) day following the Effective Date (after Blockade’s
commercially reasonable efforts to obtain them), this Agreement shall not
constitute a sale, assignment, transfer or conveyance thereof. If consents are
not obtained from Customers who have Customer Agreements and from whom
Maintenance Revenues were collected as of the Effective Date, as listed in
Schedule 6.5.2, Blockade shall use commercially reasonable efforts to cooperate
with Proginet in obtaining any commercially reasonable and lawful arrangements
designed to provide to Proginet the full benefits of use of the respective
Customer Agreements and the Software and, provided that Proginet receives such
benefit of use thereof, Proginet shall satisfy all contractual obligations, if
any, corresponding thereto.  Once such
consents are obtained, Blockade shall promptly assign, transfer, convey and
deliver such Customer Agreements and Software to Proginet for no additional
consideration.  To the extent that any
such Customer Agreements and Software cannot be transferred or the full
benefits of use of any such Customer Agreements and Software cannot be provided
to Proginet following the Effective Date, then Proginet and Blockade shall
enter into such arrangements for no additional consideration from Proginet
(including sublicensing, subleasing or subcontracting to the extent permitted)
to provide Proginet the economic (taking into account tax costs and benefits)
and operational equivalent of obtaining such consents.

 

3.5                     Notwithstanding Section 3.4, Blockade will use commercially
reasonable efforts to obtain consents from Customers where such are required in
accordance with the terms of the Customer Agreements.  Proginet shall not be required to pay any
amounts in connection with obtaining such consents.

 

3.6   Proginet acknowledges that Blockade has not
given any promises or warranties to the effect that any of the Customers will
renew their Customer Agreements or will remain as customers of Proginet.  Except as set forth on Schedule 15.1,
Blockade acknowledges that it does not know of any fact after due diligence
that indicates that any of the Customers will not renew their Customer
Agreement or will not remain customers of Proginet.

 

3.7   Proginet will invoice its customers on a
diligent basis from the Effective Date for the performance of maintenance obligations
under the Customer Agreements and will use its best efforts to collect
Maintenance Revenues.

 

3.8   Proginet shall accept the Transfer of each
agreement that exists as of the Effective Date between any distributor of
Blockade, to the extent such agreements relate to the Software.

 

3.9   Blockade hereby agrees to terminate the
Source Code Escrow Agreement promptly (and in any event within 10 days) after
the date hereof.

 

3.10 Proginet hereby agrees that until payment in
full of all amounts under Section 5.1, it shall not amend the Customer
Agreements to materially diminish the value of such Customer Agreements.

 

6

 

3.11 Blockade represents that the Prospects List
presented as Schedule 3.11 is a current, complete and reasonable representation
of customer prospects currently considering licensing software, purchasing
tokens, or professional services from Blockade.

 

4.                                                  STAFFING

 

4.1   At the time of the transaction, Blockade will
transition to Proginet six (6) employees. Blockade will not provide severance
for transitioned employees.  See Schedule
4.1(a) for list of employees to be considered for positions at Proginet.  Until the six employees are hired by
Proginet, Proginet will deposit $75,000 Canadian with the Escrow Agent, to be
released by Escrow agent to Proginet upon Proginet’s providing copies of signed
acceptance letters from six Blockade employees who have been hired.

 

4.2   The employees to be offered employment by
Proginet must meet all requirements for employment at Proginet, however,
Blockade is not responsible for ensuring that these requirements are met.  Benefits available to existing Proginet
employees will be made available to such new employees.  All previous benefits provided by Blockade
will expire upon their last day of employment at Blockade, or the Effective
Date, including benefits related to the Blockade Stock Option Plan or any other
benefits.  Blockade is responsible to
satisfy all its obligations to such prior employees and is responsible for
compliance with all Canadian law in their treatment of such employees.

 

4.3   Proginet will allow employees hired who had
been employed by Blockade, to compile information for the filing and submission
of the 2004 SRED claims, as necessary. 
The actual filing of all forms must be done by Blockade.  All such work related to such filing must be
performed prior to June 30, 2005.

 

4.4   Apart from the commitments set out in this
Section 4, Proginet shall have no responsibilities for or obligations to any
other Blockade employees.  Blockade shall
have sole responsibility for satisfying all termination obligations to its
employees in accordance with Ontario law.

 

5.                                                  CONSIDERATION

 

Proginet, in consideration of the Assignment by
Blockade, the performance by Blockade of each of its undertakings hereunder or
in connection herewith including, the Transition Plan (Specified in Schedule
2.1.36) and the Customer Relations Plan (Specified in Schedule 16.1.1), agrees
to pay the “Purchase Price” to Blockade (or to a third party as directed by
Blockade) pursuant to Section 6 the amount as specified herein.

 

5.1    Fixed Compensation

 

5.1.1                                    The amount equal to 1.2 times the “Maintenance
Revenues” produced in fiscal year 2004 (ended September 30, 2004) as adjusted
and presented on Schedule 5.1.1.

 

5.1.2                                    The amount equal to 1.5 times the “Software
Revenues” for new licenses produced in fiscal year 2004 (ended September 30,
2004) as adjusted and presented on Schedule 5.1.2.

 

5.1.3        The amount equal to 0.5 times the net
income derived from “Vasco Tokens Revenues”(minus Cost of Goods Sold) produced
in fiscal 2004 (ended September 30, 2004) as adjusted and presented on Schedule
5.1.3.

 

5.1.4        The amount equal to 0.5 times the
Professional Services Revenues earned in fiscal year 2004 (ended September 30,
2004) as adjusted and presented on Schedule 5.1.4.

 

7

 

5.1.5        The fixed purchase price in 5.1 is
increased by $60,000  as Additional
Consideration.

 

5.1.6        The Purchase Price value is calculated
to be the sum based upon 5.1.1, 5.1.2, 5.1.3 5.1.4, 5.1.5, 6.5.2 and 11.2.8
calculated as follows

 

	
  Schedules

  	
   

  	
  Variable

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Canadian
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Payment Due

  	
   

  	
  =

  	
   

  	
  P

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  5.1.1:

  	
   

  	
  “Maintenance Revenues”

  	
   

  	
  =

  	
   

  	
  a

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  5.1.2:

  	
   

  	
  “ Software Revenues”

  	
   

  	
  =

  	
   

  	
  b

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  5.1.3:

  	
   

  	
  “Vasco Token Revenues”

  	
   

  	
  =

  	
   

  	
  c

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  5.1.4:

  	
   

  	
  “Professional Services Revenues”

  	
   

  	
  =

  	
   

  	
  d

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Additional Consideration”

  	
   

  	
  =

  	
   

  	
  s

  	
   

  	
  =

  	
   

  	
  $

  	
  60,000

  	
   

  
	
  6.5.2:

  	
   

  	
  “Deferred Revenues”

  	
   

  	
  =

  	
   

  	
  e

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  11.2.8:

  	
   

  	
  “Outstanding Commitment”

  	
   

  	
  =

  	
   

  	
  f

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
  5.3.2

  	
   

  	
  Disputed Accounts

  	
   

  	
  =

  	
   

  	
  g

  	
   

  	
  =

  	
   

  	
  $

  	
  215,000

  	
   

  

 

Payment due at close to Blockade is
calculated as follows: 

P = 1.2a + 1.5b +.5c + .5d + s - e -f + g

 

P = 1.2 ($1,965,779) + 1.5 ($549,221) + .5 ($186,106) +.5($234,206)+
($60,000) - ($(835,463)) - ($28,612) + $215,000 = $2,803,849

 

5.2   Incentive Compensation

 

For purposes of calculation and auditability of
the incentive compensation, the periods covered in Sections 5.2.1, 5.2.2 and
5.2.3 will be based upon 12 month periods beginning February 1, 2005.

 

5.2.1        “Software Revenues” greater than
$1,011,000 each year (12 month period) will earn an incentive of 30% of the
excess in revenue for each 12 month period for the next three years from the
Effective Date, up to a maximum payment of $1,200,000 in aggregate.

 

5.2.2         “Maintenance Revenues” greater than
$2,159,000 each year (12 month period) will earn an incentive of 20% of excess
revenue for each 12 month period for the next three years from the Effective
Date, up to a maximum payment of $650,000 in aggregate.

 

5.2.3        The net income on “Vasco Token Revenues”
(minus COGS) will be split 50/50 between Proginet and Blockade for two years
after the Effective Date.  Payment for
Vasco Token Revenues will be paid annually per the terms specified in Section
6.

 

5.3   Additional Compensation

 

5.3.1        Additional compensation will be provided
to Blockade upon John Deere renewing the Annual Maintenance contract with
Proginet, effective October 12, 2005, provided that the Annual Maintenance
contract revenue amount exceeds $85,000 U.S. 
Proginet will compensate Blockade on any maintenance monies billed to
John Deere and collected in excess of the $85,000 U.S. up to an
additional amount of $35,000 U.S. 
Proginet will compensate Blockade at 1.2 times the amount if such excess
is collected by January 10, 2006.

 

8

 

5.3.2         Proginet will provide additional
compensation to Blockade within 60 days of the Effective Date for Disputed
Accounts, if additional compensation is determined to be due per the terms of
this Section 5.3.2.

 

There are three Disputed
Accounts,  as identified on Schedule
5.3.2.

 

 

For Disputed Accounts
included on Schedule 5.3.2 Blockade and Proginet will have their respective
auditors evaluate these transactions to determine if they can be recognized as
Software Revenue and/or Maintenance Revenue for Blockade’s fiscal year ended
September 30, 2004.

 

If both audit firms
agree on the treatment, then their decision is final.  If both parties disagree then the value of
the transaction will be reduced by 50%. 
All such monies, if any, will then result in an adjustment to the
purchase price per the formula in Section 5.

 

5.4   Within thirty (30) days following the 12
month period subsequent to the Effective Date and for a subsequent two twelve
month periods, , Proginet shall furnish Blockade with a statement for each such
period, disclosing all Revenues derived from the Software
during such period certified by an officer of Proginet.  Such revenues shall be segregated for each of
Software Sales, Maintenance Revenues, VASCO Token Revenues (minus COGS)and
Professional Services Revenues related to the Software.

 

5.5   Blockade will provide space to Proginet per
the terms of Section 8.3 herein. 
Proginet will compensate Blockade at a fixed cost of $3,000 (Canadian)
per month.

 

5.6   Subject to the terms and conditions set forth
herein all amounts which become due to Blockade pursuant to the terms hereof
shall bear interest from their respective due date at an annual rate of
interest equal to twelve percent (12%), if not paid within 15 days of due date.

 

5.7   Proginet shall keep accurate and complete
books and records relating to the Assignment in order that the amounts payable
hereunder may be accurately determined and the statements furnished by Proginet
hereunder verified.  Such books and
records shall be made available to Blockade no more than three (3) times during
the three (3) years period immediately following the Effective Date upon
reasonable notice and at reasonable times during such period for inspection
and/ or audit by any duly authorized representatives of Blockade.  Whenever any such inspection and/or audits
discloses an understatement, in excess of ten percent (10%), of the payments
due by Proginet hereunder, all reasonable expenses in connection with such
inspection and/or audit shall be paid by Proginet to Blockade on demand.  In addition, Proginet shall immediately pay
to Blockade all amounts due and unpaid hereunder in the event of any
understatement, together with interest thereon at the rate set forth in Section
5.6 hereof, without prejudice to any rights which Blockade may have in the
circumstances.  Within ninety (90) days
after the end of the first anniversary of the Effective Date, Proginet shall
submit to Blockade a detailed statement prepared by Proginet at Proginet’s cost
(and, if reasonably requested by Blockade, confirmed by Proginet’s independent
public accountants) certifying the Revenues specified in Section 5.2, for such
calendar year.

 

5.8   Blockade’s receipt of any statement furnished pursuant
hereto or its acceptance of any sum paid hereunder shall not constitute a
waiver of either party’s obligations or either party’s rights hereunder or at
law.

 

5.9   Blockade acknowledges that Blockade Systems Corporation has
utilized the services of Converge Capital Inc. (Converge) 60 StateStreet, Suite
700, Boston, MA  02109 and Mr. Jim Stone
CEO and Managing Partner at 617-371-2930 as an agent/broker in facilitating the
transition contemplated by this agreement. 
Blockade further acknowledges that it is fully responsible for all fees,
expenses and any other forms of compensation to Converge for their efforts in
facilitating this transaction.

 

9

 

5.10 Within 60 days after the Effective Date,
Blockade and Proginet shall cooperate in the preparation of an allocation of
the purchase consideration (and all other capitalized costs) among the Assets
acquired hereunder in accordance with U.S. Internal Revenue Code §1060 and the
U.S. Department of Treasury regulations thereunder (and any similar provision
of state, local or foreign law, as appropriate).  Blockade and Proginet and their affiliates
shall report, act and file tax returns (including, but not limited to U.S. Internal
Revenue Service Form 8594) in all respects and for all purposes consistent with
such allocation.. Neither Blockade nor Proginet shall take any position
(whether in audits, tax returns or otherwise) which is inconsistent with such
allocation unless required to do so by applicable law. Costs shall be borne by
Proginet and Blockade for their respected costs.

 

Blockade and Proginet agree that the Allocation
of purchase price shall be as indicated on Schedule 5.10.  Both parties agree that they will use such
allocation for their compliance with all applicable regulations.

 

5.11  Proginet hall be liable for and shall pay all
taxes properly payable by it in connection with the transfer, assignment and
sale of Assets.

 

GST Election. Proginet and Blockade agree to jointly elect under Section
167(1) of the ETA that no tax be payable pursuant to the GST legislation with
respect to the sale under this Agreement. 
Proginet and Blockade further agree to make such election in prescribed
form containing the prescribed information pursuant to the GST legislation.  Proginet will file the joint election with
the retun required to be filed by Proginet under the GST election for its
reporting period in which the sale is made in compliance with the requirements
of the GST legislation.

 

Retail Sales Tax. Proginet and Blockade agree that the sale of the
Assets is a sales outside of the ordinary course of Blockade’s business, that
Blockade is not a “vendor” as that term is defined in the RSTA and, as a
result, Blockade is not required to levy, collect or remit Ontario retail sales
tax on the sale of any portion of the Assets. 
Proginet acknowledges its obligation to self-assess and remit any
Ontario retail sales tax that may be payable under the RSTA in respect of the
transfer, assignment and sales of the Assets.

 

6.                                                  PAYMENT TERMS - Proginet
will make payment to Blockade in Canadian dollars for the purchase price as
follows:

 

6.1   Payment 1: Upon execution of the agreement, a
payment of 80% of the amount calculated in Section 5.1.6 (Canadian) will be
made to Blockade, with the remaining 20% to be placed into an Escrow Account,
with Escrow Agent, pursuant to Section 9 hereof.

 

6.2   Payment 2: After 60 days from the Effective
Date, a reconciliation will be completed for all responsibilities and
obligation of both parties.  Proginet
will direct the Escrow Agent to remit all monies due to Blockade per the Escrow
Agreement (Schedule 9) within fifteen (15) days of this reconciliation.

 

6.3   Payments 3: thru 5: At the end of each of the
next three 12 month periods from the transaction date, Proginet will make
incentive payments to Blockade per paragraphs 5.2.1, 5.2.2 and 5.2.3, within 30
days of each 12 month period.

 

6.4   If Blockade qualifies for predetermined
incentive payments and such payments are not paid by Proginet within the 30-day
period, unpaid incentive compensation will earn interest at a compound annual
rate of 12%.

 

6.5   The amount payable under in Sections 5.1.1,
5.1.2, 5.1.3, 5.1.4, and 5.1.5 will be partially satisfied as follows:

 

10

 

6.5.1                                    Subject to Section 5.1, a portion of the Escrow
Funds will be used to satisfy the payment due under Section 6.2.  .

 

6.5.2                  The amounts payable under Sections  5.1 and as calculated in Section 5.1.6 will
be reduced by the Deferred Revenue Amount. 
The Deferred Revenue Amount will be calculated on the Effective Date and
included on Schedule 6.5.2 attached hereto.

 

6.6   Each of Proginet and Blockade hereby agrees
to execute and deliver concurrently herewith a security agreement in substantially
the form of Schedule 6.6 attached hereto.

 

7.                                                  ADJUSTMENTS

 

7.1   As of the Effective Date hereof:

 

7.1.1                                    Blockade shall remit to Proginet within ten (10)
days of its receipt thereof, monies collected by or on behalf of Blockade after
the Effective Date relating to Customer Agreement “Maintenance Revenues”
invoices issued to Customers and Distributors by Blockade prior to the
Effective Date (the “Blockade Post Closing
Collections”); provided that the Blockade Post Closing
Collections shall be reduced by an amount equal to Blockade’s earned
maintenance (prior to the Effective Date) of the annual maintenance amount
defined in the applicable Customer Agreement.

 

7.1.2                                    Proginet shall remit to Blockade within ten (10)
days of its receipt hereof, monies collected by or on behalf of Proginet after
the Effective Date relating to Customer Agreement invoices issued to Customers
and Distributors by Blockade prior to the Effective Date (the “Proginet Post Closing Collections “); provided that
the Proginet Post Closing Collections shall be reduced by an amount equal to
Maintenance Revenues not earned by Blockade prior to the Effective Date of the
annual maintenance amount defined in the applicable Customer Agreement.

 

8.                TRANSITION PLAN

 

8.1           The assignment of the Software shall
be undertaken in accordance with this Agreement, the Transition Plan and
Schedule 2.1.38.

 

8.2     Proginet
as of the Effective Date will invoice Customers and all future users of the
Software (and all its derivatives and modified or improved versions) directly,
and become solely responsible for matters related to billings including, but
not limited to, invoicing and collections.

 

8.3     Blockade
will make available space at its existing facility to accommodate a staff of
six with all office equipment and other capabilities and resources as specified
on Schedule 8.3. Proginet will provide services identified in the Transition
Plan at no cost to Blockade.

 

9.             ESCROW             For
purposes of offset to any other monies due to Proginet from the reconciliation
and for indemnifying Proginet from any breach by Blockade of its
representations, warranties, or coverents contained in this agreement $(CDN)
$635,770 or (U.S) $514,624 of the purchase considerations shall be delivered to
Moses & Singer LLP as escrow agent such amount to be held pursuant to the
terms of an Escrow Agreement in substantially the form of Schedule 9 attached
hereto by and among Proginet, Blockade and the Escrow Agent (the “Escrow Agreement”).

 

Blockade agrees to
provide all PPSA (Personal Property Security Act) forms for all liens against
assets being transferred in this transaction. 
Proginet reserves the right to authorize the use of any Escrow Funds to
offset any bona fide liens/liabilities not satisfied by Blockade within the 30
days after the “Effective Date” and accordingly reduce future remittance that
would be due.

 

11

 

10.           NON-COMPETE; NON SOLICITATION

 

10.1   Neither
party shall disclose or use, and each of the parties shall cause its Representatives
not to disclose or use, during the term of this Agreement and for a period of
three (3) years following termination of this Agreement, any Confidential
Information (as defined below) furnished, or be furnished, to it (the “Receiving Party”) or its Representatives by the other party
(the “Disclosing Party”) or its
Representatives in connection herewith at any time or in any manner other than
in connection with the transactions contemplated by this Agreement except as
required by public companies disclosure requirements, and except to their
respective lenders, investors, accountants, counsel, and advisors on a need to
know basis.  Without limiting the
generality of the foregoing, the Receiving Party undertakes that it shall not
use, provide, furnish, disclose or permit the use, provision, furnishing or
disclosure of any part of the Confidential Information except as permitted
hereunder, and further agrees that:

 

10.1.1          the Confidential Information shall be
disclosed to only those Representatives of the Receiving Party who require
access to same for the purposes permitted hereunder and who have a “need to
know” same in furtherance of such purposes. 
In connection therewith, the Receiving Party shall apprise all of its
Representatives of the obligations contained herein prior to the disclosure to
them of any part of the Confidential Information; and

 

10.1.2                it shall take reasonable steps, at least substantially
equivalent to the steps it takes to protect its own proprietary information, to preserve the secrecy and confidentiality of
the Confidential Information.

 

10.2    
Notwithstanding Section 10.1.1, in the event that the Receiving Party or
any of its Representatives are required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process, or otherwise by law) to make any
disclosure of the Confidential Information, the Receiving Party will provide
Disclosing Party with prompt written notice so that the Disclosing Party may
seek a protective order or other appropriate remedy or waive compliance with
the provisions of this Agreement.  If, in
the absence of a protective order or other remedy or the receipt of a waiver by
the Disclosing Party, the Receiving Party or its Representatives are
nonetheless, in the written opinion of counsel, legally compelled to make a
disclosure of any of the Confidential Information, the Receiving Party or its
Representatives may, without liability hereunder, disclose only that portion of
the Confidential Information which such counsel advises the Receiving Party or
its Representatives is legally required to be disclosed.  Notwithstanding anything to the contrary
contained herein, Proginet shall not be required to hold as confidential any
Confidential Information relating to the Assets.

 

10.3   For
purposes of this Agreement, “Confidential Information”
means any and all material and information of a Disclosing Party or any of its
Affiliates which has or will come into the possession or knowledge of the
Receiving Party or any of its Affiliates in connection with or as a result of
entering into this Agreement including information concerning the Disclosing
Party’s past, present and future customers, suppliers, technology, and
business. For the purposes of this definition, “information” and “material”
includes know-how, data, patents, copyrights, trade secrets, processes,
techniques, programs, designs, formulae, marketing, advertising, financial,
commercial, sales or programming materials, written materials, compositions,
drawings, diagrams, computer programs, studies, work in progress, visual
demonstrations, ideas, concepts, and other data, in oral, written, graphic,
electronic, or any other form or medium whatsoever.  Notwithstanding the foregoing, “Confidential
Information” does not include the following information:

 

10.3.1      information which is in the public domain
when it is received by or becomes known to the Receiving Party or which
subsequently enters the public domain through no fault of the Receiving Party
(but only after it enters the public domain);

 

12

 

10.3.2      information which is already known to the
Receiving Party at the time of its disclosure to the Receiving Party by the
Disclosing Party and is not known by the Receiving Party to be the subject of
an obligation of confidence of any kind;

 

10.3.3      information which is independently
developed by the Receiving Party without any use of or reference to the
Confidential Information of the Disclosing Party and which such independent
development can be established by evidence that would be acceptable to a court
of competent jurisdiction; and

 

10.3.4      information which is received by the
Receiving Party in good faith without an obligation of confidence of any kind
from a third party who the Receiving Party had no reason to believe was not
lawfully in possession of such information free of any obligation of confidence
of any kind, but only until the Receiving Party subsequently comes to have reason
to believe that such information was subject to an obligation of confidence of
any kind when originally received.

 

10.4   Each party
will submit to the other party, for its prior written approval, which will not
be unreasonably withheld or delayed, any press release or any other public
statement regarding the transactions contemplated hereunder; provided, however,
that any disclosure required pursuant to the U.S. securities laws shall not be
subject to the provisions of this Section 10.4. 
The parties will co-operate
to circulate, a press release announcing the relationship described herein
within 48 hours of the execution of this Agreement by both parties, as set
forth on Schedule 10.4.

 

10.5  
DELETED

 

10.6   Until
the second anniversary of the Effective Date, Blockade, shall not, directly or
indirectly, for itself or for any other person, firm, corporation, partnership,
association or other entity, employ or engage as an independent contractor or
attempt to employ or so engage or solicit for employment or such engagement or
enter into any contractual arrangement with any employee or former employee or
independent contractor of Proginet (including, without limitation the Blockade
employees who are being transferred to Proginet).  The provisions of this section shall not
apply to any former employee or independent contractor of Proginet if 12 months
have elapsed since the last date such former employee or independent contractor
was so employed or engaged by Proginet. 

 

10.7   Until
the second anniversary of the Effective Date, Blockade, shall not (i) directly
or indirectly, engage in, have any interest in or engage in any transaction
with, any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner
agent, security holder, creditor, consultant or otherwise) that directly or
indirectly engages in the business conducted by Blockade prior to the Effective
Date (or any aspect thereof), or any business comparable or competitive with
such business in Canada; provided, however, that nothing contained herein shall
be deemed to prevent or restrict Blockade, from owning up to 1% of the shares
of any class of capital stock of any corporation whose shares are listed on a
national securities exchange or are regularly traded in the over-the-counter
market so long as Blockade does not , (i) actively participate or engage in the
conduct of the business of any such other corporation, or (ii) directly or
indirectly, solicit business from any person or entity that was a Customer of
Blockade at any time prior to the Effective Date. 

 

10.8   The
parties recognize and agree that if for any reason any of the provisions of
Section 10 are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury would be caused
for which money damages would not be an adequate remedy.  Accordingly, each party agrees that, in
addition to any other available remedies, each other party shall be entitled to
an injunction restraining any violation of the provisions of Section 10.  In the event that any action should be
brought in equity to enforce the provisions of Section 10, no party will
allege, and each party hereby waives the defense, that there is an adequate
remedy at law.

 

13

 

11.          REPRESENTATIONS, WARRANTIES AND COVENANTS

 

11.1   Each
party represents and warrants to the other party that:

 

11.1.1      such party has the full corporate right,
power and authority to enter into this Agreement, and to perform the acts
required of it hereunder;

 

11.1.2      the execution of this Agreement by such
party, and the performance by such party of its obligations and duties
hereunder, do not and will not violate any agreement, instrument or other document
to which such party is a party or by which it is otherwise bound;

 

11.1.3      when executed and delivered by such party,
this Agreement will constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms and all
necessary corporate action has been taken to effect the same;

 

11.1.4      there are no pending or threatened claims,
proceedings or suits against such party which, if adversely determined, would
have a material adverse effect on the other party’s ability to carry out its
obligations or to grant its rights under the Agreement;

 

11.1.5      it is not relying on nor does it make any
representations, warranties or agreements relating to the subject matter hereof
not expressly provided for in this Agreement;

 

11.1.6      it possess all authorizations, approvals,
consents, licenses, permits, certificates or other rights and permissions
necessary to effect the assignment hereunder including, without limitation,
with respect to securities matters, if applicable; and Blockade has obtained
all necessary shareholder approval in connection with the transactions
contemplated hereby, Blockade will provide a certified resolution of the Board
of Directors authorizing this transaction.

 

11.1.7      its
execution and delivery of this Agreement and the performance by it of its
obligations hereunder will not contravene, breach or result in any default
under any Legal Requirement.

 

11.1.8      Other than respect to fees payable by Blockade to Converge
Capital, neither party has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which they could become liable or obligated.

 

11.2   Blockade
further represents and warrants and covenants to Proginet that,11.2. 0.1 Except
for the specific representations and warranties listed below, all Assets being
transferred to Proginet under this Agreement are being transferred on an as-is,
where-is basis. All of the Assets being transferred to Proginet pursuant to
this Agreement are located in the province of Ontario, Canada.  Blockade has good and marketable title to, or
a valid leasehold interest in, or otherwise have the right to use, the
properties and assets used by it, free and clear of all Liens.  Without limiting the generality of the
foregoing, Blockade has good and marketable title to all of the Assets acquired
hereunder, free and clear of any Liens or restriction on transfer, except for
assets listed in Schedule 3.1.6. 
Blockade is not in default of any of its current lease obligations and
will continue to meet all such lease obligations.

 

11.2.1       Schedule 11.2.1 contains a complete and
correct list of all Intellectual Property including without limitation,
applications for and/or registrations relating to the Software including,
without limitation, all US and Foreign patents, trademarks, applications to
register Trademarks, internet domain names and registered U.S. Copyrights owned
by Blockade
and have been properly maintained and renewed in accordance with all applicable
provisions of all Legal Requirements. Blockade herein agrees to the transfer of
all Trademarks and other intellectual property included on Schedule 11.2.1.

 

11.2.2      Except as set forth on Schedule 11.2.2,
Blockade is the sole legal and beneficial owner of all rights, title and
interest in and to the Software fee and clear of any Liens.  Blockade’s rights in and to the Software are
freely assignable by it including the right to create derivative works.  As of the date of this Agreement except as
set forth in Schedule 11.2.2, Blockade is under no obligation to pay any
royalty,

 

14

 

license
fee or other similar consideration to any third party or to obtain any approval
or consent for use of the Software.  None
of the Software owned by Blockade is subject to any outstanding judgment,
order, decree, or injunction issued by a court of competent jurisdiction or
settlement agreement; no compliant, action, suit, proceeding, or hearing, is
pending or no charge, investigation, claim or demand, is threatened, which
challenges the legality, validity, enforceability, or ownership of any of the
Software owned by Blockade;

 

11.2.3       Blockade does not know any reason why
Proginet would not be able to continue to own, use, license or sub-license the
Software without infringing any enforceable intellectual property rights of any
third party;

 

11.2.4      No Assets constituting Intellectual
Property Rights, (i) infringes any Assets constituting Intellectual Property
Rights or other proprietary right of any person or would give rise to an
obligation to render an accounting to any person as a result of co-authorship
or convention or (ii) otherwise violates any applicable law or regulation.  Blockade has received no written notice of
any adversely held Intellectual Property Rights alleging or threatening to
assert that Blockade’s use of the Software infringes upon or is in conflict
with any Intellectual Property Rights or other proprietary rights of any third
party.  Blockade has no knowledge of any
substantial basis for any charge, claim, suit or action asserting any such
infringement or asserting that Blockade does not have the legal right to use
the Software;

 

11.2.5      Blockade has used reasonable efforts to
diligently protect its rights in the Software, and there have been no acts or
omissions by Blockade, the result of which would be to materially compromise
the rights of Blockade to apply for or enforce appropriate legal protection for
the Software.  No former employees or
independent contractors of Blockade have any claim or right to any of the
Software necessary for the lawful conduct of Blockade’s business as now
conducted.

 

11.2.6      Blockade expressly agrees to execute,
acknowledge and deliver, such documents and other instruments as may be
requested by Proginet acting reasonably at Proginet’s cost to evidence or
effectuate the sale, assignment, transfer, conveyance and delivery of all
right, title and interest to the Software of Proginet.

 

11.2.7      Schedule 11.2.7 discloses a correct and
complete list of the top twenty revenue producing Customer Agreements entered
into by Blockade.  Proginet acknowledges
that it has reviewed the agreements and is satisfied with the terms of these
agreements.

 

11.2.8      Except as disclosed in Schedule 11.2.8,
there are no outstanding commitments of Blockade whereby Blockade has made
prior commitments to deliver software or services which remain unfulfilled as
of the Effective Date, as part of any Customer Agreement. These do not include
the provision of ongoing maintenance services for which Maintenance Revenues
are collected.

 

11.2.9 Each of the insurance policies (including correct and complete
copies of certificates of insurance relating thereto) owned by Blockade or its
affiliates relating to the Assets including, without limitation, errors and
omissions policies remains in full force and effect, all premiums due
thereunder as of the Effective Date have been paid in full and no claim has
been made under any of such policies.

 

11.2.10 Attached hereto as Schedule 11.2.10 is a correct and complete
copy of the Agreement between Blockade and their software escrow agent (DSI
)relating to the escrow of the Customer Software source code (the “Source Code Escrow  Agreement”).  The consummation of the transactions
contemplated by this Agreement do not violate any provisions of such
agreement.  As of the date hereof, no
Person has made any claim relating to or arising out of such agreement with
respect to the Customer Software source code.

 

11.2.11 Attached hereto as Schedule 6.5.2 is a correct and complete
list of the deferred revenue balance of each customer as of Effective Date as
well as other customer information including but not limited to, the customer’s
effective maintenance period, the last billed amount in original currency and
the respective amounts owed by such customers. 
There is no contest, claim or set-off by any obligor of any of the

 

15

 

outstanding accounts receivable relating to the Customer Agreements
(the “Accounts”) relating to the amount or
validity of such Accounts, except as specified on Schedule 11.2.11.

 

11.2.12   
Proginet waives compliance with the Ontario Bulk Sales Act in respect of
this transaction.  Blockade shall cause
all of its creditors, including a release of liability by all investors to be
paid on or before the Effective Date and will provide evidence satisfactory to
Proginet of the same. Except as set forth in Schedule 11.2.11, (i) there is
not, and to the best knowledge of Blockade there has not been, claimed or
alleged by any Person with respect to any Customer Agreement, any existing
default, or event that with notice or lapse of time or both would constitute a
default or event of default, on the part of either Blockade or, to the best
knowledge of Blockade, on the part of any other party thereto and (ii) no
consent, approval, authorization or waiver from or notice to, any Governmental
Entity or other Person is required in order to maintain in full force and effect
any of the Customer Agreements, other than such consents, approvals,
authorizations and waivers that are listed on Schedule 11.2.11 and have been
obtained and are unconditional and in full force and effect and such notices
that have been duly given, and copies of such consents, approvals,
authorizations, waivers and notices have been delivered to Proginet.

 

11.2.13
No representation or warranty of Blockade contained in this Agreement, and no
statement contained in any certificate or schedule furnished or to be furnished
by or on behalf of Blockade to Proginet or any of its Representatives pursuant
hereto (including the Schedules hereto), contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact necessary,
in the light of the circumstances under which it was or will be made, in order
to make the statement herein or there in, taken as a whole, not misleading.

 

11.3   Proginet
further represents and warrants to Blockade that it has (and it shall utilize)
the required skills, expertise, experience and resources required to carry out
its obligations pursuant to this Agreement, and within the timeframe required.

 

12.          INDEMNIFICATION AND LIMITATION OF LIABILITY

 

12.1   Proginet
agrees to indemnify, defend and hold Blockade and its Representatives
(collectively, the “Blockade Indemnified
Parties”) harmless from and against any and all claims, demands,
liabilities, damages, losses (including diminution in value), costs and
expenses (including the cost of settlement, reasonable legal and accounting
fees and any other expenses for investigating or defending any action, suit or
other proceeding, actual or threatened) (collectively, the “Losses”) arising out of or in connection with:

 

12.1.1      the failure by Proginet to perform any of
its obligations hereunder or any breach of any representation or warranty made
by Proginet hereunder or in respect of any claim made based upon facts alleged
which, if true, would constitute such a breach;

 

12.1.2      any claim arising from events occurring
after the Effective Date by any Customer and relating to or arising out of the
Software or the other Assets, except for any claim made by a Customer
related solely to the assignment by Blockade to Proginet in accordance with
this Agreement of the Customer Agreement to which such Customer is a party;

 

12.1.3      any action, suit or other proceeding, or
other compromise, settlement or judgment, relating to any of the foregoing
matters with respect to which any of the Blockade Indemnified Parties is
entitled to indemnification under Section 12.1.1 or Section 12.1.2; provided in
each case that such Blockade Indemnified Party gives prompt notice thereof to
Proginet, allows Proginet to defend, compromise or settle same and gives
Proginet all available information, reasonable assistance and authority to
enable Proginet to do so.

 

12.2         Representations made in this agreement
by Blockade will survive for a period of 1 year following the Effective Date.
Blockade agrees to indemnify, defend and hold Proginet and its Representatives
(collectively, the “Proginet Indemnified
Parties”) harmless from and against any and all claims, demands,
liabilities, damages, losses (including diminution in value), costs and
expenses (including the

 

16

 

cost of settlement,
reasonable legal and accounting fees and any other expenses for investigating
or defending any action, suit or other proceeding, actual or threatened)
(collectively, the “Losses”)
arising out of or in connection with:

 

12.2.1 the failure by
Blockade to perform any of its obligations hereunder or any breach of any
representation or warranty made by Blockade hereunder or in respect of any
claim made based upon facts alleged which, if true, would constitute such a breach;

 

12.2.2      any claim arising from events occurring on
or prior to the Effective Date by any Customer or other Person relating to or
arising out of the Software or other Assets, except for any claim made
by a Customer related solely to the assignment by Blockade to Proginet in
accordance with this Agreement of the Customer Agreement to which such Customer
is a party.

 

12.2.3      any action, suit or other proceeding, or
other compromise, settlement or judgment, relating to any of the foregoing
matters with respect to which any of the Proginet Indemnified Parties is
entitled to indemnification under Sections 12.2.1 or 12.2.2; provided
that in connection therewith such Blockade Indemnified Party gives prompt
written notice thereof to Proginet, allows Proginet to defend, compromise or
settle same and gives Proginet all available information, reasonable assistance
and authority to enable Proginet to do so.

 

12.3   If
any action, suit or other proceeding is brought against the Blockade
Indemnified Parties or Proginet Indemnified Parties (a “Claimant”)
in respect of which indemnification may be sought from Proginet or Blockade,
respectively, pursuant to the provisions of this Section 12 (an “Indemnifying Party”), Claimant shall promptly notify the
Indemnifying Party in writing, specifying the nature of the action, suit or
other proceeding and the total monetary amount and/or other relief sought
thereby. Claimant shall cooperate with the Indemnifying Party, at the
Indemnifying Party’s expense, in all reasonable respects in connection with the
defense of such action, suit or other proceeding.  The Indemnifying Party may, upon written
notice thereof to Claimant, undertake to conduct all proceedings or
negotiations in connection therewith, assume the defence thereof and, if it so
undertakes, it shall also take all such other required steps or proceedings to
settle or defend any such action, suit or other proceeding, including the
retaining of counsel reasonably satisfactory to Claimant and the payment of all
expenses relating thereto.  However,
Claimant shall have the right, at its own expense, to retain separate counsel
and participate in the defense thereof. The indemnifying party should not be
permitted to settle or compromise any action suit or proceeding under Section
12 without the consent of Claimant.

 

12.4   Except
as expressly set forth in Section 11 hereof, neither party makes, and each
party specifically disclaims, any representation, warranty or conditions of any
kind, express or implied, statutory or otherwise (including, without
limitation, any implied warranties of merchantability quality or fitness for a
particular purpose).

 

12.5   Under
no circumstances shall either party be liable to the other party or any other
Person for any indirect, special, punitive, consequential or incidental damages
of any kind whatsoever (including, without limitation, lost or anticipated
revenues or profits) arising from any claim relating directly or indirectly to
this Agreement, whether such claim is based on contract or tort or otherwise,
even if an authorised Representative is advised of the likelihood or
possibility of same.

 

12.6   In
no event shall Blockade be liable to Proginet for any damages or claims in
excess of the aggregate amounts paid to Blockade under this Agreement.

 

17

 

13.          TERMINATION DELETED

 

14.          EFFECT OF TERMINATION DELETED

 

15.          DELIVERABLES

 

15.1   Blockade
hereby provides to Proginet all the items listed on Schedule 15.1, in addition
to other asset transfers as provided for in this Agreement.

 

15.2   Blockade
will, to the best of its abilities make available the historical books and
records of Blockade to Proginet upon written requests.  Such requests will be responded to within ten
business days of such requests.

 

16.          SPECIAL CONSIDERATIONS

 

16.1   The
Parties agree to co-operate to:

 

16.1.1      effectively manage relationships with
Customers and Prospects in accordance with the Customer Relation Program
attached hereto as Schedule 16.1.1; and

 

16.1.2      manage existing distributor relationships,
including joint conference calls with distributors, and providing copies of all
distributor agreements.

 

17.          MISCELLANEOUS PROVISIONS

 

17.1   The
preamble hereto shall form an integral part hereof.

 

17.2   This
is an Agreement between separate entities and neither of them is the agent or
servant of or possesses the power to obligate the other.  This Agreement shall not be construed so as
to constitute Proginet and Blockade partners, Representatives or joint venturers
or so as to create any other form of legal association which imposes liability
upon either party for the acts or omissions of the other party.  Neither party shall have any right, power or
authority to enter into any agreement for or on behalf of or incur any
obligation or liability of, or to otherwise bind, the other party.

 

17.3   Failure
by either party to take action against the other shall not affect its right to
require full performance of this Agreement at any time thereafter.  The waiver by either party of the breach of
any provision of this Agreement by the other shall not operate or be construed
as a waiver of any subsequent breach by such party.

 

17.4   All
rights, remedies and recourses set forth herein for the benefit of either party
shall be in addition and without prejudice to all of the rights, remedies and
recourses available to such party.

 

17.5   Should
any term, covenant or condition of this Agreement or the application thereof to
any Person or circumstance be invalid or unenforceable, the remainder of this
Agreement, or the application of such term, covenant or condition to Persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant and condition of this
Agreement shall be valid and enforced to the fullest extent permitted by law.

 

17.6   Any notice,
demand or request required or permitted to be given hereunder shall be in
writing and shall be deemed effective on the delivery date if delivered (i)
personally to the party to whom it is directed, or (ii) by electronic mail
(facsimile or e-mail), with electronic confirmation of receipt to the
sender;  (b) three (3) Business Days
after having been mailed by prepaid, registered or certified mail, return
receipt requested, to the addressee as follows:

 

18

 

If to Proginet, to the attention of the President and Chief Executive Officer at the
physical address of Proginet set forth at the commencement of this Agreement or via
facsimile to 0(516) 535-3601 or by electronic mail to kevink@proginet.com;

 

With a copy to Moses & Singer LLP  1301
Avenue of the Americas, New York, NY  10019 Attention: James Alterbaum,
Esq., or via facsimile to (212) 554-7700; or by electronic mail to
JAlterbaum@MOSESSINGER.COM.

 

If to Blockade, to the attention of the President at the physical
address of Blockade set forth at the commencement of this Agreement or via
facsimile to (416) 440-1401 or by electronic mail.

 

With a copy to Blockade’s attorney’s Attention Karyn Bradley Esq. at
416-862-5430 Gowling,
Lafleur, Henderson.   Either party may
change its physical or electronic address for the purposes of this Agreement by
giving written notice thereof to the other party in accordance with this
provision. 

 

17.7   This
Agreement sets forth the entire agreement and understanding between the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements (including, without limitation, the Letter of Intent),
discussions, negotiations, understandings, representations, warranties and
courses of conduct and dealing between the parties relating to the subject
matter hereof and.  Neither party shall
be bound by any conditions, definitions, representations or warranties with
respect to the subject matter hereof other than those contained herein or
hereafter set forth in writing duly executed by the parties.  To the extent there is any inconsistency
between the provisions of the main body of this Agreement and any schedule or other
document annexed or incorporated by reference hereto, the terms of the main
body of the Agreement shall govern.

 

17.8   All
monetary amounts stated herein refer to the lawful currency of Canada unless
specified differently and all payments (or credits) hereunder shall be made in
currency of Canadian Currency.

 

17.9   The
parties agree to perform such acts and execute and deliver such documents as
may be necessary or desirable from time to time in order to give full effect to
the provisions hereof.

 

17.10 No
change, amendment or modification of any provision of this Agreement shall be
valid unless set forth in a written instrument agreed to in writing by both
parties.

 

17.11 Neither
party shall be entitled to assign, transfer or otherwise encumber any of its
rights or obligations hereunder without the prior written consent of the other
party which consent shall not be unreasonably withheld.  Subject to the foregoing, this Agreement
shall be binding upon and enure to the benefit of the parties hereto and their
respective successors and permitted assigns.

 

17.12 This
Agreement may be executed in any number of counterparts and by way of facsimile
transmission.  Each executed counterpart
shall be deemed to be an original.  All
executed counterparts taken together will constitute one agreement.

 

17.13 This
Agreement shall be governed by, construed and enforced in accordance with the
laws of the State of New York (except for conflicts or choice of laws
principles) applicable to agreements made and to be performed entirely in that
State.

 

17.14                 In
the event that any dispute arises under this Agreement between the parties
other than with respect to an action under Section 10.6, the parties first
agree to negotiate in good faith for a period of thirty (30) days in an attempt
to resolve such dispute.  If such dispute
is not resolved within that period, the parties agree to seek arbitration in
New York, New York as their sole and exclusive remedy for monetary relief under
the rules promulgated by the American Arbitration Association (the “AAA”), as amended from time to time.  Any party to this Agreement may commence an
arbitration by the service of a written notice requesting arbitration upon the
other affected parties, which notice shall summarize the dispute to be arbitrated.  Any such arbitration shall be held before one
(1) arbitrator who shall be mutually selected by both parties. In the event the
parties are unable to select an arbitrator within ten (10) days of such written
notice requesting arbitration, the arbitrator shall be selected by the AAA in
accordance with its then applicable rules. 
The non-prevailing party to any such arbitration shall pay all costs and
expenses of

 

19

 

such arbitration including all reasonable costs
and expenses of attorneys and experts incurred by the prevailing party (which
shall be the party that obtains substantially all of the relief sought by such
party whether by settlement, compromise or rendering of an award).  Any award rendered in any such arbitration
proceeding shall be non-appealable, and final and binding upon the parties (and
any attempted appeal shall be void and of no effect), and judgment thereon may
be entered by any court of competent jurisdiction and application may be made
to such court for judicial acceptance of any award and an order of enforcement,
as the case may be.  The parties each
consent to any personal jurisdiction necessary to subject themselves and each
of them to such arbitration and such award and such judgment and such order of
enforcement.

 

17.15 To
the extent Proginet shall have complied with the provisions of Section 17.14,
Proginet shall have the right to set-off against sums otherwise payable by
Proginet under this Agreement, the amount of any and all Losses suffered or
incurred by any Proginet Indemnified Party for which Blockade shall become
liable to Proginet under this Agreement.

 

20

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first

Herein above mentioned.

 

	
  PROGINET CORPORATION

  	
   

  	
  BLOCKADE SYSTEMS CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   Kevin M. Kelly /s/

  	
   

  	
  By:

  	
   Joe Mossa /s/

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   Kevin M. Kelly

  	
   

  	
  Name:

  	
   Joe Mossa

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   President & CEO

  	
   

  	
  Title:

  	
   CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  

 

21

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