<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DIGITAL COURIER INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
ALBERTA, CANADA 7311 NOT APPLICABLE
(PROVINCE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
8618 COMMERCE COURT
BURNABY, BRITISH COLUMBIA, CANADA V5A 4N6
(800) 909-7888
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ALLAN J. KOZAK
PRESIDENT AND CHIEF OPERATING OFFICER
8618 COMMERCE COURT
BURNABY, BRITISH COLUMBIA, CANADA V5A 4N6
(800) 909-7888
(NAME, ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA
CODE), OF AGENT FOR SERVICE)
----------------
COPIES TO:
GREGORY C. SMITH, ESQ. PETER C. KALBFLEISCH BARRY L. DASTIN, ESQ.
BRETT D. WHITE, ESQ. BLAKE, CASSELS & GRAYDON KAYE, SCHOLER, FIERMAN,
COOLEY GODWARD CASTRO SUITE 1700, HAYS & HANDLER, LLP
HUDDLESON & TATUM 1030 WEST GEORGIA STREET 1999 AVENUE OF THE STARS
FIVE PALO ALTO SQUARE VANCOUVER, BRITISH COLUMBIA SUITE 1600
3000 EL CAMINO REAL CANADA V6E 243 LOS ANGELES, CA
PALO ALTO, CA 94306 (604) 631-3377 90067-6048
(415) 843-5000 (310) 788-1000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares.......... 7,475,000 US$5.31 US$39,692,250 US$13,687
==============================================================================================
</TABLE>
(1) Includes 975,000 Common Shares to be sold by the Selling Shareholders upon
exercise of the Underwriters' over-allotment option.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(c) under the Securities Act. Based on the average
of the high and low selling price of the Common Shares on The Alberta
Stock Exchange on June 25, 1996, and as converted into US dollars based on
the Noon Buying Rate (as hereinafter defined).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM F-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
------------------------------- ----------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................. Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus............... Inside Front and Outside Back Cover
Pages; Enforceability of Civil
Liabilities; Additional Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed
Charges.......................... Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds.................... Use of Proceeds
5. Determination of Offering Price.... Prospectus Summary; Underwriting
6. Dilution........................... Dilution
7. Selling Security Holders........... Principal and Selling Shareholders
8. Plan of Distribution............... Outside Front and Inside Cover Page
of Prospectus; Underwriting
9. Description of Securities to be
Registered...................... Prospectus Summary; Dividend Policy;
Capitalization; Description of
Share Capital
10. Interests of Named Experts and
Counsel.......................... *
11. Information with Respect to the
Registrant....................... Exchange Rate Information; Prospectus
Summary; Risk Factors; The
Company; Use of Proceeds; Dividend
Policy; Capitalization; Dilution;
Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal and Selling Shareholders;
Description of Share Capital;
Certain Income Tax Considerations;
Governmental Regulation;
Underwriting; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................... *
</TABLE>
- --------
* Not Applicable.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
PROSPECTUS
6,500,000 SHARES
[LOGO]
DIGITAL COURIER INTERNATIONAL CORPORATION
COMMON SHARES
-----------
Of the 6,500,000 Common Shares offered hereby, 4,500,000 are being sold by
Digital Courier International Corporation ("Digital Courier" or the "Company")
and 2,000,000 are being sold by the Selling Shareholders. See "Principal and
Selling Shareholders." The Company will not receive any of the proceeds from
the sale of the shares by the Selling Shareholders. The Company's Common Shares
are listed on The Alberta Stock Exchange under the symbol "DIC." The Company
intends to apply to have its Common Shares quoted on the Nasdaq National Market
under the symbol "DCICF." On June 25, 1996, the reported closing price of the
Common Shares on The Alberta Stock Exchange was Cdn$7.25, or approximately
US$5.33 based on the Noon Buying Rate (as herein defined) on such date. See
"Price Range and Trading Volume of Common Shares." The public offering price
will be determined by negotiations among the Company, the Selling Shareholders
and the Underwriters. See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON SHARES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE UNDERWRITING PROCEEDS TO SELLING
TO PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... US$ US$ US$ US$
Total(3)........................ US$ US$ US$ US$
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the offering estimated at US$650,000 payable
by the Company.
(3) The Selling Shareholders have granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to 975,000
additional Common Shares for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Selling Shareholders will be
US$ , US$ , and US$ , respectively. See "Underwriting."
-----------
The Common Shares are offered by the Underwriters, when, as and if delivered
to and accepted by them, subject to their right to withdraw, cancel or reject
orders in whole or in part and subject to certain other conditions. It is
expected that delivery of the certificates representing the shares will be made
against payment on or about , 1996 at the office of Oppenheimer & Co.,
Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281.
-----------
OPPENHEIMER & CO., INC.
HANIFEN, IMHOFF INC.
CIBC WOOD GUNDY SECURITIES CORP.
RBC DOMINION SECURITIES CORPORATION
The date of this Prospectus is , 1996.
<PAGE>
[Graphic representation of the North American continent with computer
terminals representing various radio industry participants connected through
the Company's network.]
The Digital Courier network is North America's only currently operating two-
way digital audio network service connecting radio stations, duplication
companies, production studios and record companies. Through the Digital
Courier network, these entities can send and receive radio advertisements,
traffic instructions, short-form programming and music across North America in
as little as one hour. Digital Courier is also developing additional services
to provide advanced communication capabilities to advertising agencies, rep
companies and radio station groups.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR THE ALBERTA
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THIS PROSPECTUS DOES NOT QUALIFY THE COMMON SHARES OF THE COMPANY OFFERED
HEREBY FOR SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR
TERRITORY OF CANADA AND DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY ANY OF THESE SECURITIES IN CANADA. THE COMMON SHARES OF THE
COMPANY OFFERED HEREBY ARE BEING OFFERED FOR SALE IN CERTAIN PROVINCES OF
CANADA AND TO RESIDENTS THEREOF PURSUANT TO A SEPARATE PROSPECTUS FILED UNDER
THE SECURITIES LAWS OF SUCH JURISDICTIONS.
IT IS EXPECTED THAT DELIVERY OF THE COMMON SHARES OFFERED HEREBY WILL BE
MADE AGAINST PAYMENT THEREFOR ON OR ABOUT A DATE THAT MAY BE AFTER THE THIRD
BUSINESS DAY FOLLOWING THE DATE OF THIS PROSPECTUS (SUCH SETTLEMENT CYCLE
BEING HEREIN REFERRED TO AS "T+3"). PURCHASERS OF COMMON SHARES OFFERED HEREBY
SHOULD NOTE THAT THE ABILITY TO SETTLE SECONDARY MARKET TRADES OF THE COMMON
SHARES OFFERED HEREBY ON THE NASDAQ NATIONAL MARKET WILL BE AFFECTED BY A
SETTLEMENT PERIOD LONGER THAN T+3.
2
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a corporation incorporated under the laws of the province of
Alberta, Canada. All of the directors, controlling persons and officers of the
Company, and certain of the experts named herein, are residents of Canada, and
all or a substantial portion of their assets and a substantial portion of the
Company's assets are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States
upon the directors, controlling persons, officers and experts who are not
residents of the United States or to realize in the United States upon
judgments of courts of the United States predicated upon the civil liability
provisions of the federal securities laws of the United States. The Company
has been advised by Blake, Cassels & Graydon, its Canadian counsel, that there
is doubt as to the enforceability in Canada against the Company or against any
of its respective directors, controlling persons, officers or experts, who are
not residents of the United States, in original actions or in actions for
enforcement of judgments of United States courts, of liabilities predicated
solely upon the federal securities laws of the United States.
EXCHANGE RATE INFORMATION
The Company publishes its financial statements in Canadian dollars. In this
Prospectus, except where otherwise indicated, all dollar amounts are expressed
in Canadian dollars. References to "Cdn$" or "$" are to Canadian dollars and
references to "US$" are to United States dollars.
The following table sets forth, for each period indicated, the high and low
exchange rates for one Canadian dollar expressed in United States dollars, the
average of such exchange rates on the last day of each month during such
period, and the exchange rate at the end of such period, based upon the noon
buying rate in New York City for cable transfers in Canadian dollars, as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate"):
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED
MARCH 31, 1996
--------------
<S> <C>
High.......................................................... $0.7527
Low........................................................... 0.7235
Average....................................................... 0.7339
Period End.................................................... 0.7334
</TABLE>
On June 25, 1996, the Noon Buying Rate was Cdn$1.00 equals US$0.7353.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form F-1
under the Securities Act with respect to the Common Shares offered hereby (the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. Certain items are omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Shares offered hereby,
reference is made to the Registration Statement and the exhibits filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and, in each instance
where such contract or other document is an exhibit to the Registration
Statement, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement, and the exhibits thereto, may be inspected without charge at the
public reference facilities maintained by the Commission in Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Northwestern Atrium Center,
3
<PAGE>
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048, and copies of all or any
part of the Registration Statement may be obtained from such offices upon the
payment of the fees prescribed by the Commission. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the Commission's web site is http://www.sec.gov.
The Company intends to furnish to its shareholders annual reports containing
financial statements prepared in accordance with Canadian GAAP audited by an
independent public accounting firm with a reconciliation thereof to U.S. GAAP
and will make available copies of quarterly reports for each of the first
three quarters of each fiscal year containing interim unaudited financial
information.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the financial data appearing elsewhere in this
Prospectus. Unless otherwise noted, all references to "Digital Courier" or the
"Company" refer to the business, assets and technology acquired by the Company
on November 15, 1995, and, for all periods thereafter, both Digital Courier
International Corporation and its subsidiary, Digital Courier International
Inc. ("DCI").
Unless otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and reflects the 1-for-3
reverse stock split which occurred in May 1996. Unless otherwise noted,
financial data in this Prospectus are expressed in Canadian dollars and are
presented in accordance with generally accepted accounting principles in Canada
("Canadian GAAP"). See Note 11 of Company's Consolidated Financial Statements
for a description of the principal differences between Canadian GAAP and
generally accepted accounting principles in the United States ("U.S. GAAP").
THE COMPANY
Digital Courier International Corporation ("Digital Courier" or the
"Company") is a leading supplier of electronic distribution and communication
services for the radio broadcast industry in Canada and the United States.
Digital Courier's two-way network enables fast and reliable electronic
distribution of CD quality audio, text and data to organizations that
traditionally have relied upon tape and courier distribution services. Since
its Canadian roll-out in April 1995, the Digital Courier network has succeeded
in becoming the standard system for the electronic distribution of advertising
and short-form programming throughout Canada, with over 260 radio stations
connected to its network. In the United States, Digital Courier has gained
rapid industry acceptance since the introduction of its network in August 1995,
with more than 2,220 radio stations currently under contract and approximately
250 additional stations joining each month.
The Digital Courier network is a two-way network in which digital or analog
audio may be compressed and stored on customer computers and then sent to
multiple end-user locations. The Company designed its network with an open,
scalable architecture to facilitate the addition of new services. The Company's
principal technology was initially developed by BC TELECOM Inc. ("BC TELECOM"),
Canada's second largest telecommunications group. A number of the Company's
management team were involved with the development of the technology prior to
its acquisition by the Company in November 1995.
Current radio industry business processes are inefficient and prone to error:
distribution of spot advertising to individual radio stations is accomplished
predominately through physical delivery, which is time consuming and labor
intensive; and the current market for the buying and selling of radio
advertising time is supported by a paper based, inefficient and time consuming
method of transacting business. A majority of the work flow created by the
various participants in the radio industry is conducted by phone, mail, fax and
physical courier. The Company believes that its network is well positioned to
(i) streamline the flow of information in the radio broadcast industry by
exploiting recent technological developments that have made digital
communications, audio compression technologies and computing technology
practical and affordable for the industry and (ii) take advantage of the recent
enactment of the Telecommunications Act of 1996 (the "Telecommunications Act")
in the United States which has led to consolidation of the radio broadcast
groups into new larger organizations that are now faced with the challenge of
reducing costs and improving the efficiencies of their operations. According to
industry sources, there are approximately 10,000 radio stations in the United
States and 500 radio stations in Canada. Digital Courier has targeted the top-
rated 5,000 of these stations, as well as the largest suppliers of advertising
and services to such stations, for the installation of its network.
5
<PAGE>
Digital Courier recognized the opportunities created by the convergence of
compression technology, increased computing power and the emergence of nation-
wide digital telephone services (ISDN), and as a result began deployment of the
Company's two-way network. Distributors and programmers utilize the Digital
Courier network to send radio advertisements, traffic instructions and short-
form programming to radio stations participating in the network and thereby
eliminate the necessity of using a physical courier as well as take advantage
of the integrated confirmation, billing and other services afforded by the
network. The Company's network can be configured to provide virtual private
networks ("SubNets") for major distributors and content providers which
eliminates their need to invest capital in a proprietary network or use
networks owned by competing organizations. The Company intends to expand the
value-added services available through its existing network by developing
services for advertising agencies and rep companies (companies that represent
individual radio stations to national advertisers) that streamline the process
of buying/selling radio time and by facilitating the collection and
distribution of ratings information. The Company and The Arbitron Company
("Arbitron") are currently evaluating opportunities to jointly develop and
market such products. In addition, the Company believes its network will
provide expanding radio station groups with a low-cost solution for
centralizing management and operational functions.
The Company's objective is to become the leading supplier of integrated
communication services to the radio broadcast and advertising industries by
complementing its existing distribution services with a comprehensive
communications solution for distributors, radio station groups, advertising
agencies, rep companies, program syndicators, media companies and media buyers.
To achieve this objective, the Company has adopted the following strategies:
(i) continue the rapid expansion of its network to radio stations and other
industry participants; (ii) maintain a scaleable/open architecture for its
network to facilitate the addition of new services as they become available and
to provide the maximum benefit to its customers; (iii) leverage its installed
network through the development and provision of new value-added services; (iv)
position its network as an out-sourcer of services that enhance the
competitiveness of, rather than compete against, existing industry
participants; and (v) develop strategic alliances/relationships which increase
its ability to offer value-added services in a cost-effective manner.
THE OFFERING
<TABLE>
<S> <C>
Common Shares offered by the Company... 4,500,000 shares
Common Shares offered by the Selling 2,000,000 shares(1)
Shareholders..........................
Total Common Shares offered............ 6,500,000 shares
Common Shares to be outstanding after 16,990,115 shares(2)
this offering.........................
Estimated net proceeds to the Company.. US$21.7 million(3)
Use of proceeds by the Company......... To repurchase outstanding Preferred
Shares, repay existing equipment lease
obligations, purchase additional
computer and communication equipment,
acquire software licenses, develop new
products and services and provide for
working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market DCICF
symbol................................
Alberta Stock Exchange symbol.......... DIC
</TABLE>
- --------
(1) Excludes an additional 975,000 shares which will be sold by the Selling
Shareholders in the event the Underwriters exercise their over-allotment
option in full. See "Underwriting."
(2) Excludes 1,250,000 Common Shares issuable upon exercise of options
outstanding at June 30, 1996. See "Stock Options."
(3) Assuming an offering price of $US5.33 per Common Share and after deducting
the underwriting discount and estimated expenses of the offering payable by
the Company.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The consolidated statement of operations and deficit data set forth below for
the six-month period ended March 31, 1996 and the balance sheet data at March
31, 1996, have been derived from the Company's audited Consolidated Financial
Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
US$ EQUIVALENT
SIX MONTH SIX MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1996(1) 1996(2)
------------ --------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
DATA:
CANADIAN GAAP(3)
Revenue........................................... $ 508 US$ 373
Cost of sales..................................... 648 476
Other expenses.................................... 1,945 1,427
Other income...................................... 124 91
------ --------
Net loss.......................................... 1,962 1,439
====== ========
Net loss per share................................ $ 0.16 US$ 0.12
====== ========
Weighted average number of shares outstanding(4).. 12,317 12,317
U.S. GAAP(3)
Net loss(5)....................................... $4,022 US$2,952
====== ========
Net loss per share................................ $ 0.30 US$ 0.22
====== ========
Weighted average number of shares outstanding(4).. 13,302 13,302
OTHER DATA:
Total stations under contract at end of period
(US)............................................. 1,529
Total stations under contract at end of period
(Canada)......................................... 257
Total deliveries (US)(6).......................... 950
Total deliveries (Canada)(6)...................... 10,442
</TABLE>
<TABLE>
<CAPTION>
US$ EQUIVALENT
MARCH 31, 1996(1) MARCH 31, 1996(2)
--------------------- -----------------------
ACTUAL AS ADJUSTED(7) ACTUAL AS ADJUSTED(7)
------ -------------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
CANADIAN GAAP(3)
Cash and cash equivalents........ $3,209 $30,416 US$2,353 US$22,363
Working capital.................. 596 27,803 437 20,440
Total assets..................... 10,596 37,803 7,771 27,798
Shareholders' equity............. 5,303 32,260 3,889 23,717
U.S. GAAP(3)
Cash and cash equivalents........ $3,209 $30,416 US$2,353 US$ 22,363
Working capital.................. 596 27,803 437 20,440
Total assets..................... 8,846 36,053 6,488 26,510
Shareholders' equity............. 3,553 32,760 2,605 24,071
</TABLE>
7
<PAGE>
- --------
(1) Gives effect, as of November 15, 1995, to (i) the purchase by the Company
of certain assets and the assumption of certain liabilities of MPR Teltech
Ltd., which constituted substantially all of the assets of the Company as
of such date, and (ii) the acquisition of the Company by Kwikstar
Communications Ltd., which was accounted for as a reverse takeover and a
purchase. The Company had no material assets, liabilities or operating
results prior to such date. See "The Company" and Notes 2 and 3 to the
Company's Consolidated Financial Statements.
(2) Canadian dollar statement of operations and deficit amounts have been
translated into U.S. dollars using the average exchange rate for the
relevant period, and Canadian dollar balance sheet amounts have been
translated using the relevant period-end rate, as set forth in "Exchange
Rate Information." These translations are not necessarily representative of
the amounts that would have been reported if the Company historically
reported its financial statements in U.S. dollars. In addition, the
exchange rates utilized are not necessarily indicative of the rates in
effect at any other time.
(3) For a description of the principal differences between Canadian GAAP and
U.S. GAAP, see Note 11 of the Company's Consolidated Financial Statements.
(4) See Notes 8 and 11(c) to the Company's Consolidated Financial Statements.
(5) Includes the loss determined under Canadian GAAP of $1,962, plus expenses
relating to stock-based compensation of $2,409, less a reduction of
amortization of intellectual property of $250. See Note 11 of the Company's
Consolidated Financial Statements.
(6) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations."
(7) As adjusted to give effect to the issuance and sale of 4,500,000 Common
Shares offered by the Company hereby at an assumed public offering price of
US$5.33 (being an assumed price of $7.25 per Common Share, based on the
Noon Buying Rate on June 25, 1996), net of estimated underwriting discounts
and commissions and estimated expenses and the application of the net
proceeds from the offering to repurchase the outstanding Preferred Shares.
The Company has applied for registration of the trademarks "Digital Courier
International," "Digital Courier International & Design," "Capella," "Digital
Record Rep," and "Audio Exchange" in Canada and the United States. This
Prospectus also includes trademarks of companies other than the Company.
8
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors, as
well as all of the other information set forth in this Prospectus, in
evaluating an investment in the Common Shares offered hereby. This Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended. Discussions containing such forward-
looking statements may be found in the material set forth under "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," as well as in the Prospectus
generally. Actual events or results may differ materially from those discussed
in the forward-looking statements as a result of various factors, including
without limitation, the risk factors set forth below and the matters set forth
in the Prospectus generally.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; FUTURE OPERATING RESULTS
UNCERTAIN
The Company has a very limited operating history with which to evaluate its
business and future prospects. The Company began operations in November 1995,
has been unprofitable since its inception and expects to continue to generate
net losses over at least the next 18 months. As of March 31, 1996, the
Company's accumulated deficit was approximately $2.0 million. Moreover, the
Company is presently incurring substantial expenses associated with the
expansion of its network to radio stations and other industry participants and
with the expansion of its research and development related to the Company's
proposed services. The Company cannot accurately forecast its future sales and
operating results due to, among other things, its limited operating history.
Accordingly, although the Company has recently experienced significant growth,
such growth rates may not be sustainable and should not be used as an
indication of future sales growth, if any, or of future operating results. In
addition, the Company has not completed development of and does not intend to
commercially introduce many of its significant services until the latter half
of 1997. There can be no assurance that the Company's sales will grow or be
sustained in future periods, that the Company will successfully develop and
introduce its proposed services or that the Company will achieve or sustain
profitability in any future period. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results may vary significantly depending
on factors such as the volume of advertising in response to seasonal buying
patterns, the timing of the introduction by the Company of new services and
market acceptance or non-acceptance of such services, introduction of products
and services by competitors, pricing of existing products and services and of
future services by the Company and the Company's competitors, developments and
changes in the radio and advertising industries, announcements by key industry
participants, sales of the Company's technology products and revenue mix
between the Company's services and such products, expansion of the Company's
network into new radio stations and markets, loss of existing customers, the
timing of research and development and other expenses, telecommunications
transmission pricing changes, the timing of the Company's promotional efforts,
currency fluctuations, general economic factors and other factors. In any
period, the Company's revenues and expenses are subject to variation based on
changes in the volume and mix of product sales, deliveries performed and other
uses of its network during the period. Fluctuations in sales due to
seasonality may become more pronounced if the growth rate of the Company's
sales slows. The Company's expense levels are based, in part, on its
expectations of future revenues, which are difficult to predict. The Company's
expenses will increase significantly as the Company continues to expand its
services into additional radio stations and to increase its research,
development, marketing and other expenses, particularly with respect to the
development and introduction of the Company's proposed services. In addition,
the Company has historically operated with little or no backlog. The absence
of backlog increases the difficulty of predicting sales and operating results.
If sales levels for either the Company's existing products and services or
proposed services are below expectations of the Company, market analysts or
investors, or if the Company is unable to release its proposed services when
anticipated, the Company's quarterly and annual operating results will be
adversely affected, which would have a material adverse effect on the market
price of the Company's Common Shares. In any event, the Company's operating
results from time to time in future quarters may be below the expectations of
market analysts and investors, which also could have a material adverse effect
on the price of the Company's Common Shares. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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DEPENDENCE ON INTRODUCTION OF NEW SERVICES
The Company's future growth depends on its successful and timely
introduction of new services to advertising agencies, rep houses and station
groups and the adoption of such new services by the industry participants. The
Company presently anticipates that it will not recognize any material revenue
from its proposed radio station group and advertising agency services until
the second half of 1997, and the recognition of revenue then and thereafter is
subject to numerous risks and uncertainties, many of which are beyond the
control of the Company. Commercialization of the Company's proposed radio
station group and advertising agency services will require substantial
development. There can be no assurance that the Company will successfully
complete any such development on a timely basis, if at all, or that if such
development is completed, the Company's planned introduction of these services
will realize market acceptance or will meet the technical or other
requirements of potential customers.
DEPENDENCE ON DISTRIBUTION SERVICES
The Company's revenues to date have been derived principally from the sales
of the Company's compression technology and hardware products incorporating
this technology, and from utilization of the Company's network to deliver
radio advertising spots from advertising agencies, production studios and
duplicating companies to radio stations in Canada and, to a lesser extent, the
United States. The Company presently anticipates that sales from these
products and services will continue to account for a substantial portion of
the Company's revenues for some time, and that revenues from the delivery of
radio spots by the Company's customers will comprise an increasing portion of
the Company's revenues at least through the first half of 1997. A decline in
demand for, or average selling prices of, the Company's product sales or
network distribution services, whether as a result of competition from new
advertising media, new product introductions or price competition from
competitors, a shift in purchases by customers away from the Company's
products or services, technological change or otherwise, would have a material
adverse effect on the Company's business, financial condition and results of
operations. Additionally, the Company is dependent upon its relationship with
and continued support of the radio stations in which it has installed
communications equipment. In this regard, the radio industry is currently
experiencing significant consolidation as a result of the enactment of the
Telecommunications Act in the United States, among other things. Any decrease
in the number of radio stations and other industry participants utilizing the
Company's products or services, a consolidation of such stations into single
sites to be served by the Company, new management at such stations,
technological change, competition or otherwise could have a material adverse
effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON EMERGING MARKETS; ARBITRON
The market for the electronic delivery of digital audio transmissions by
advertising agencies, production studios and duplicating companies to radio
stations is relatively new and alternative technologies are rapidly evolving.
The Company must overcome buyer inertia regarding the choice of audio delivery
services. Therefore, it is difficult to predict the rate at which the market
for the electronic delivery of digital audio transmissions will grow, if at
all. If the market fails to grow, or grows more slowly than anticipated, the
Company's business, financial condition and results of operations will be
materially adversely affected. Even if the market does grow, there can be no
assurance that the Company's products and services will achieve commercial
success. Although the Company intends to conform its products and services to
meet existing and emerging standards or regulatory requirements in the market
for the electronic delivery of digital audio transmissions, there can be no
assurance that the Company will be able to do so in a timely fashion, or at
all.
The Company intends to provide additional communication services to
advertising agencies and radio station groups utilizing its established
network. The market for such services is unknown and the commercialization of
such services will require additional research and development and will
involve substantial investment of cash and Company resources. With respect to
the Company's proposed radio station group services, realization of the
potential efficiencies from these services will be dependent upon, among other
things, consolidation of radio
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stations into larger radio station groups and a determination by these new
radio station groups to utilize the Company's services. Radio station groups
may elect to develop or purchase their networking needs directly rather than
use the Company's services for monthly service fees. With respect to the
Company's proposed advertising agency services, adoption of these services
will require fundamental changes in the manner in which industry participants
conduct their business. While the Company believes the existing industry
participants will be motivated to reorganize their business to avail
themselves of potential benefits arising from the Company's proposed
advertising agency services, no assurance can be given as to the willingness
or ability of these industry participants to do so. In this regard, the
Company depends on the cooperation of various third parties that currently
provide software to advertising agencies, rep companies and radio stations in
the development of interfaces necessary to enable the transfer of information
between all parties. The Company intends to provide communication services to
advertising agencies and radio station groups for a monthly service fee. In
doing so, the Company will be required to price its services at a level that
is less than the cost that would be required by these entities to purchase and
provide communications internally and at a level that is compatible with their
profit structure. The Company anticipates that it will be required to achieve
significant market share in order to provide these services on a profitable
basis. There can be no assurance that the Company will be able to, among other
things, develop systems and provide services that will be attractive to the
intended customers in these markets, that such systems and services, if
developed, can be implemented or will obtain market acceptance, that the
Company will be able to enter into agreements and relationships with the key
industry participants and their software vendors necessary to develop, provide
and market such services in a timely manner, that the Company will be able to
provide its services at a price that is competitive, or that the market and
the industry will evolve in such a manner as to create demand for the
Company's proposed services. The occurrence or non-occurrence, as the case may
be, of any of these events could have a material adverse effect on the
Company's business, financial condition and results of operations.
The successful introduction and commercialization of the Company's proposed
advertising agency and radio station group services is dependent upon the
ability of the Company to establish and maintain relationships with key
industry participants such as Arbitron. Arbitron is a leading research firm
providing information services that measure and refine the local marketing
strategies of the electronic media and of their advertisers and advertising
agencies . While the Company and Arbitron have entered into substantive
discussions to consider the development of a joint venture to provide new
products and services in the radio industry, the Company and Arbitron have not
executed a binding agreement covering the discussion. If the Company does not
enter into such an agreement with Arbitron or otherwise fails to secure the
cooperation of Arbitron, the Company may be forced to delay or significantly
limit the scope of its proposed advertising agency and radio station group
services, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
The market sizes for the radio industry and the various products and
services referenced in this Prospectus are difficult to ascertain or project
with precision and, in any event, are subject to change due to a number of
factors such as new product or service introductions, technological advances,
changes in the industry and the participants in the industry, product and
service pricing, competition and government regulation. There can be no
assurance that the information for these markets will prove accurate, remain
constant, or, in any event, that the Company's existing or proposed products,
services and strategies will effectively address such markets and related
opportunities.
DEPENDENCE ON TECHNOLOGICAL DEVELOPMENTS; LICENSING OF TECHNOLOGY
The market for the distribution of digital audio communications is
characterized by rapidly changing technology. The Company's ability to remain
competitive and its future success will depend in significant part upon the
technological quality of its products and services relative to those of its
competitors and its ability both to develop new and enhanced products and
services and to introduce such products and services at competitive prices and
in a timely and cost-effective fashion. The Company's development efforts have
been focused on the areas of its basic advertising spot and short-form
programming distribution capability. The Company intends to significantly
increase its research and development efforts with respect to its network
communications capability,
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including its proposed radio station group and advertising agency services.
The Company currently is evaluating "bar-coding" technology, which enables
computer detection and verification of advertising air time. This technology
is fundamental to the automation of the affidavit process and forms a
necessary part of the Company's proposed advertising agency services. The
Company is aware of potential difficulties related to the incorporation of
this technology into the Company's services. If this technology does not prove
to be effective, the Company will be required to develop the technology
internally or license similar technology from another source, which could
substantially delay the commercialization of the proposed advertising agency
services and could have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition to its own research and development personnel, the Company
currently contracts with an independent vendor for a portion of its research
and development needs. This vendor in turn provides technological expertise to
the Company on an as-requested basis and not pursuant to a long-term contract
and employs a number of the engineers and consultants necessary to meet the
Company's requirements. The Company is dependent on this vendor for the timely
development of the Company's proposed services, and, as a result, the Company
may have substantially less control with respect to the development and the
timing of release of its proposed services than if it performed these research
and development functions internally. If the Company's vendor were unable or
unwilling to meet the Company's needs, the Company would be required to obtain
this development capability from another vendor or to hire and retain
additional employees to conduct these research and development functions
which, in either case, would result in a significant delay to the Company and
a loss of such vendor's expertise and familiarity with the Company's business
and technology.
The Company intends to license certain technology from independent third
parties related to its proposed advertising agency and radio station group
services and is currently in discussions with certain potential licensors. In
order to do so, the Company will be required to evaluate the software and
other technology developed by, and to negotiate and secure licenses from,
these parties. These parties may elect to license their technology to the
Company's competitors in lieu of or in addition to the Company. If the Company
were to successfully enter into these licensing arrangements, the Company
would still be required to further develop, integrate and test such technology
prior to the commercialization of the services incorporating it. No assurance
can be given as to the ability of the Company to enter into these licensing
arrangements on commercially reasonable terms, if at all, that the licensors
will not license their technology to competitors, or that the technology can
be effectively incorporated into the Company's services in a timely manner. If
the Company were unable to license the technology on acceptable terms, the
Company would be required to develop the technology internally, which could
result in the delay of introduction of the Company's proposed services and
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company, through
its vendors or otherwise, will be able to develop the technologies and
services proposed by the Company or required by the industry on a cost-
effective and timely basis, and the inability of the Company to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations.
COMPETITION
The Company currently provides communication services to the highly
competitive market for the distribution of audio advertising spots and short-
form programming to radio stations. The principal competitive factors
affecting this market are ease of use, price, audio quality, and timeliness
and accuracy of delivery. The Company's principal competitor in this market is
Digital Generation Systems, which operates primarily in the United States and
currently has a large established electronic network. Other competitors
include overnight couriers, such as Federal Express, which traditionally have
been the primary means for delivery of audio advertising spots and short-form
programming to radio stations. The Company may also compete with satellite
distribution providers such as Virtex.
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The Company also intends to compete in the market for providing electronic
work flow applications for advertising agencies and rep companies and
additional services to support inter-station communications between major
radio station groups. To the extent that the Company is successful in entering
new markets, it would expect to face competition from companies in related
communications markets and/or package delivery markets which could offer
products and services with functionality similar or superior to that offered
by the Company's products and services. The Company may also compete with
national data network providers that may sell their network services to the
Company's existing and proposed customers. In addition, telecommunications
providers and organizations such as AT&T, MCI, Microsoft and the Regional Bell
Operating Companies could enter the market as competitors with materially
lower electronic delivery transportation costs. Radio networks could also
become competitors by selling and transmitting advertisements as a complement
to their content programming.
Many of the Company's current and potential competitors in the markets for
audio transmissions have substantially greater financial, technical, marketing
and other resources and larger installed customer bases than the Company.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors based on these and other
factors. The Company expects that an increasingly competitive environment will
result in price reductions that could result in reduced profit margins and
loss of market share, which would have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
the market for the distribution of audio transmissions has become increasingly
concentrated in recent years as a result of acquisitions, which are likely to
permit many of the Company's competitors to devote significantly greater
resources to the development and marketing of new competitive products and
services. The Company expects that competition will increase substantially as
a result of these and other industry consolidations and alliances, as well as
the emergence of new competitors. There can be no assurance that the Company
will be able to compete successfully with new or existing competitors or that
competitive pressures faced by the Company will not materially and adversely
affect its business, financial condition and results of operations.
NEED TO MAINTAIN AND IMPROVE SERVICE QUALITY
The Company's business is dependent on the ability of its network to operate
continuously and to effect transmissions between and among customers on a
timely basis. Any failure to effect transmissions to broadcast stations within
the time periods requested by customers, whether or not within the control of
the Company, could result in an advertisement not being run and in the station
losing advertising air-time which it could have otherwise sold. Although the
Company disclaims any liability for lost air-time, radio stations could assert
claims for lost air-time and dissatisfied advertisers could refuse to make
further deliveries through the Company's network in the event of lost or late
transmissions, either of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the failure of the Company to provide its proposed services to
advertising agencies or radio station groups in a consistent and reliable
manner could cause such customers to decrease usage of the network or to
discontinue participation in the network completely, which also could have a
material adverse effect on the Company's business, financial condition and
results of operations. Although the Company maintains redundant computer
equipment in the event of malfunctions that may occur, all of the Company's
computer equipment is currently located in its network control center at its
corporate headquarters. Although the Company maintains insurance against
business interruption, there can be no assurance that such insurance will be
adequate to protect the Company from significant loss in these circumstances
or that a major catastrophe (such as an earthquake or other natural disaster)
would not result in a prolonged interruption of the Company's business. In
addition, the Company's ability to make deliveries to radio stations within
the time periods requested by customers depends on a number of factors, some
of which are outside of its control, including equipment failure, interruption
in services by telecommunications service providers, and the Company's
inability to maintain its installed base of communication servers that
comprise its communications network. The failure to effect transmissions on a
timely basis for whatever reason may cause advertisers to refuse to make
further distributions through the Company's network which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
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ABILITY TO MANAGE GROWTH
The Company has recently experienced a period of rapid growth that has
resulted in new and increased responsibilities for management personnel and
has placed and continues to place a significant strain on the Company's
management, operating and financial systems and resources. To accommodate this
recent growth and to compete effectively and manage future growth, if any, the
Company will be required to continue to implement and improve its operational,
financial and management information systems, procedures and controls on a
timely basis and to expand, train, motivate and manage its work force. There
can be no assurance that the Company's personnel, systems, procedures and
controls will be adequate to support the Company's existing and future
operations. Any failure to implement and improve the Company's operational,
financial and management systems or to expand, train, motivate or manage
employees could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continuing
contributions of, and on its ability to attract and retain, qualified
management, sales, operations, marketing and technical personnel. In this
regard, the Company is particularly dependent upon retaining the services of
Lynn Patterson, the Company's Chairman and Chief Executive Officer, and Allan
Kozak, the Company's President and Chief Operating Officer. The competition
for qualified personnel is intense and the loss of any of such persons, as
well as the failure to recruit additional key personnel in a timely manner,
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company does not maintain key man
life insurance on the lives of any of its key personnel. There can be no
assurance that the Company will be able to attract and retain qualified
management, sales and technical personnel necessary for the development of its
business, and the inability to do so could have a material adverse effect on
the Company's business, financial condition and results of operations.
DEPENDENCE ON CERTAIN SUPPLIERS
The Company relies on a single supplier for the manufacture, integration,
support and maintenance of its communications systems. In addition, the
Company relies on a single supplier for the manufacture of its hardware
products. These suppliers are only obligated to perform in accordance with the
terms of its arrangement upon the delivery by the Company of a noncancellable
purchase order. No assurance can be given as to the continued willingness or
ability of these suppliers to perform in accordance with the terms of the
arrangements. Any reduction or interruption in the supply of products and
services to the Company by either supplier would delay sales of such products
or the deployment of personal computers to radio stations and delay
maintenance and support to the Company's communications systems source.
Qualifying an alternate supplier could take a significant period of time and
may further reduce or interrupt service or sales and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company also contracts with an independent vendor to sign radio stations
to its network in the United States. If such vendor were to cease to perform
under its contract, the Company would be required to contract with another
such vendor or to retain additional sales and marketing personnel to perform
such services, which action would delay and decrease the rate of growth of the
Company's network, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company currently obtains its long distance telephone transmission
services through BC TEL, MCI and AT&T, although it has no long-term contracts
for long distance telephone access with such entities. Any material
interruption or cost increase in the supply of either local access or long
distance carrier service could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY CLAIMS OF
INFRINGEMENT
The Company considers its products, technology, trademarks, copyrights,
advertising, and promotion design and artwork to be of value and important to
its business. The Company relies on a combination of trade secret,
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copyright and trademark laws and nondisclosure and other arrangements to
protect its proprietary rights. Because the Company's business is
characterized by rapid technological change, the Company believes that factors
such as the technological and creative skills of its personnel, new computer
hardware, software and telecommunications developments, frequent hardware and
software enhancements, name recognition, and reliable customer service and
support may be more important to establishing and maintaining a leadership
position than the various legal protections of its technology. The Company
does not have any patents or patent applications pending. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy or obtain and use information that the Company regards as
proprietary. There can be no assurance that the steps taken by the Company to
protect its proprietary information will prevent misappropriation of such
information, and such steps may not preclude competitors from developing
confusingly similar brand names or promotional materials or developing
products and services similar to those of the Company. In addition, the laws
of some foreign countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States and Canada. There can be
no assurance that the Company will not receive future claims from third
parties asserting that the Company's products, technology, trademarks,
copyrights, advertising and promotion design and artwork infringe, or may
infringe, the proprietary rights of third parties. No assurance can be given
that any necessary licenses can be obtained or that, if obtainable, such
licenses can be obtained on commercially reasonable terms. Any such claims,
with or without merit, could be time-consuming, require the Company to enter
into royalty arrangements or result in costly litigation and diversion of
management personnel, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
BROAD DISCRETION AS TO USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Common
Shares offered by the Company hereby to repurchase outstanding Preferred
Shares, repay existing equipment lease obligations, purchase additional
computer and communication equipment, acquire software licenses, develop new
products and services and provide for working capital and general corporate
purposes. The Company, however, has not specified particular capital
expenditure projects. In addition, the Company from time to time evaluates the
acquisition of complementary businesses, products or technology. While the
Company presently has no understandings, commitments or agreements with
respect to such transactions, the Company may use a portion of the net
proceeds to acquire such businesses, products or technologies. The Company's
management will therefore have broad discretion with respect to the use of the
proceeds of this offering, and there can be no assurance that the Company will
be able to consummate acquisitions and identify and arrange projects that meet
the Company's requirements. See "Use of Proceeds."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company intends to continue making significant capital expenditures in
order to expand its network, and the Company anticipates incurring significant
and increasing expenses in connection with the development and
commercialization of its proposed services. Based upon current plans and
assumptions, the Company anticipates that the net proceeds of this offering,
together with its existing capital, cash from operations and projected
revenues, will be adequate to satisfy its capital requirements at least
through the next 18 months. Thereafter, the Company may require additional
funds. No assurance can be given as to the ability to raise additional funds
on favorable terms, if at all. If such funds are not available, the Company
could be required to reduce its research and development or sales and
marketing plans, which could have a material adverse effect on the Company's
business, financial condition and results of operations. In any event, the
issuance of additional securities necessary to raise such capital could result
in substantial dilution to investors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
CURRENCY FLUCTUATIONS
The Company anticipates that an increasing portion of its revenue may be
denominated in U.S. dollars or currencies other than Canadian dollars (the
currency in which the Company's financial statements are stated).
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The Company historically has recorded a majority of its expenses in Canadian
dollars. The Company does not engage in currency hedging activities to limit
the risks of exchange rate fluctuations. As a result, changes in the relative
value of the Canadian dollar to the U.S. dollar and other foreign currencies
will affect the Company's revenues and operating margins. The impact of future
exchange rate fluctuations between the Canadian dollar and the U.S. dollar or
other foreign currencies on revenues and operating margins cannot be
accurately predicted and could have a material adverse effect on the Company's
business, financial condition and results of operations.
CONCENTRATION OF STOCK OWNERSHIP; POTENTIAL ISSUANCE OF PREFERRED SHARES;
ANTI-TAKEOVER PROVISIONS
Upon completion of this offering, the two largest shareholders of the
Company and the present executive officers and directors of the Company
collectively will beneficially own approximately 43.4% of the Common Shares.
As a result, these shareholders will be able to control or significantly
influence all matters requiring shareholder approval, including the election
of directors and the approval of significant corporate transactions. Such
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company. See "Principal and Selling Shareholders." In
addition, the Company's Board of Directors has the authority to issue an
unlimited number of Common Shares and Preferred Shares and to determine the
price, rights, preferences, privileges and restrictions of such Preferred
Shares, including voting rights, without any further vote or action by the
Company's shareholders. Although the Company has no current plans to issue any
additional Preferred Shares, the rights of the holders of Common Shares would
be subject to, and may be adversely affected by, the rights of the holders of
any Preferred Shares that may be issued in the future. The issuance of
Preferred Shares could have the effect of delaying, deferring or preventing a
change in control of the Company. Furthermore, certain provisions of the
Company's Articles of Incorporation and Bylaws could have the effect of
delaying, deferring or preventing a change in control of the Company.
POSSIBLE VOLATILITY OF SHARE PRICE
The Common Shares are currently traded only on The Alberta Stock Exchange.
The volume of shares traded on this exchange is small and the trading history
is limited. See "Price Range and Trading Volume of Common Shares." Prior to
this offering, there has been no public market in the U.S. for the Company's
Common Shares, and there can be no assurance that an active trading market
will develop in the U.S. or be sustained after this offering in the U.S. or
Canada. The public offering price of the Common Shares offered hereby will be
determined through negotiations among the Company, the Selling Shareholders
and the representatives of the Underwriters and may not be indicative of
future market prices. The trading prices of the Company's Common Shares may be
subject to wide fluctuations in response to a number of factors, including
variations in operating results, changes in earnings estimates by the Company
or industry analysis, announcements of events such as litigation or
acquisitions, announcements of technological innovations or new products or
services by the Company or its competitors, as well as general economic,
political and market conditions. In addition, stock markets have experienced
extreme price and volume trading volatility in recent years. This volatility
has had a substantial effect on the market prices of securities of many high
technology companies for reasons frequently unrelated to the operating
performance of the specific companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Shares. See
"Underwriting."
SHARES ELIGIBLE FOR FUTURE RESALE
Sales of a substantial number of Common Shares into the public market
(whether on The Alberta Stock Exchange or on the Nasdaq National Market)
following this offering could adversely affect the market price of the Common
Shares. Upon completion of this offering, 16,990,115 Common Shares will be
outstanding, including the shares issued by the Company in connection with
this offering. Of the 12,490,115 Common Shares outstanding prior to the
issuance of the shares in this offering, 2,000,000 Common Shares are being
offered in this offering by the Selling Shareholders and, approximately
9,200,127 Common Shares are subject to lock-up agreements under which the
holders have agreed not to sell such Common Shares for a period of 180 days
following the date hereof. Oppenheimer & Co., Inc. may release such Common
Shares from the lock-up agreements in its sole discretion at any time and
without public announcement. Of the remaining shares, 793,055 Common Shares
are freely tradeable in the U.S. and in certain provinces of Canada and 48,061
Common Shares
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have been distributed to certain employees of the Company pursuant to the
Amended Performance Incentive Plan. The Common Shares distributed to employees
may be subject to resale restrictions depending upon the province in which
such employee resides. Pursuant to the Company's Amended Performance Incentive
Plan, 115,539 Common Shares are held in trust for the benefit of certain
employees and are subject to repurchase by the Company, of which 10,225 Common
Shares will be distributed thereafter to such employees from the trust each
quarter until March 1, 1999 and 3,706 of such Common Shares will be
distributed to such employees each quarter until November 1, 1999, subject to
employees continuing their employment with the Company. Such Common Shares
will be freely tradeable in the U.S. and in certain provinces of Canada, as
they are distributed, subject to the rules under Canadian securities
legislation relating to sales of securities from a control block, resale
restrictions which may be applicable under Canadian law depending upon the
province in which such employee resides and, in the case of affiliates of the
Company selling into the U.S. market, to the volume restrictions of Rule 144
under the Securities Act. In addition, 333,333 Common Shares are held in
escrow by Montreal Trust Company of Canada ("Montreal Trust") pursuant to an
Escrow Agreement among the Company, Montreal Trust and certain shareholders
dated October 31, 1994 (the "Escrow I Agreement"). One-third of the Common
Shares held in escrow pursuant to the Escrow I Agreement shall be released on
April 4, 1997 with the consent of the Chief of Securities Administration for
the Alberta Securities Commission Agency (the "Alberta Securities
Commission"), who will also then determine if one-third of the original shares
shall be released on each of April 4, 1998 and April 4, 1999. Once released,
such Common Shares will be freely tradeable in the U.S. and in certain
provinces of Canada, subject to the rules under Canadian securities
legislation relating to sales of securities from a control block, resale
restrictions under Canadian law which may apply where such Common Shares were
acquired pursuant to a prospectus exemption and, in the case of affiliates of
the Company selling into the U.S., to the volume restrictions of Rule 144
under the Securities Act.
Upon expiration of the lock-up period (or earlier with such consent),
5,184,685 Common Shares subject to the lock-up will also be available for sale
The Alberta Stock Exchange or sale into the U.S. public market, subject to the
rules under Canadian securities legislation relating to sales of securities
from a control block, resale restrictions under Canadian law which may apply
where such Common Shares were acquired pursuant to a prospectus exemption and,
in the case of affiliates of the Company selling into the U.S. market, to the
volume restrictions of Rule 144 under the Securities Act. In addition, 555,556
Common Shares will be still held in escrow pursuant to the Escrow I Agreement.
Also 3,034,886 Common Shares subject to the lock-up will be held in escrow by
Montreal Trust pursuant to the combined Automatic and Performance Escrow
Agreement between the Company, Montreal Trust, MPR Teltech Ltd. ("MPR") and
945 Investments Ltd. ("945") (the "Escrow II Agreement"). Pursuant to the
Escrow II Agreement, one-third of the Common Shares held in escrow by Montreal
Trust will be released from escrow on each of March 5, 1997, March 5, 1998 and
March 5, 1999 unless sooner released upon the attainment of certain
performance goals by the Company and the consent of the Alberta Securities
Commission. 203,647 Common Shares subject to lock-up agreements and
distributed to certain employees of the Company pursuant to the Amended
Performance Incentive Plan may be subject to resale restrictions depending
upon the province in which such employee resides. Finally, 221,353 Common
Shares subject to the lock-up will be held in trust for the benefit of certain
employees pursuant to the Company's Amended Performance Incentive Plan and be
subject to repurchase by the Company, of which 26,563 Common Shares will be
distributed to such employees from the trust each quarter until March 1, 1999,
subject to employees continuing their employment with the Company. Such Common
Shares will be freely tradeable in the U.S. and in certain provinces of
Canada, as they are distributed, subject to the rules under Canadian
securities legislation relating to sales of securities from a control block,
resale restrictions which may be applicable under Canadian law depending upon
the province in which such employee resides and, in the case of affiliates of
the Company selling into the U.S. market, to volume restrictions of Rule 144
under the Securities Act. There are no volume restrictions similar to those of
Rule 144 with respect to sale of the shares by affiliates or otherwise on The
Alberta Stock Exchange, and the market prices of the Common Shares in the U.S.
can be expected to be directly influenced by the trading price of the Common
Shares on The Alberta Stock Exchange. See "Shares Eligible for Future Sale"
and "Underwriting."
DILUTION
Assuming a public offering price of US$5.33 per Common Share, investors
participating in this offering will incur immediate, substantial dilution. To
the extent outstanding options to purchase the Company's Common Shares are
exercised, there will be further dilution. See "Dilution."
17
<PAGE>
THE COMPANY
Kwikstar Communications Ltd. ("Kwikstar") was incorporated in November 1993
under the laws of the Province of Alberta, Canada as 589392 Alberta Ltd., and
changed its name to Kwikstar Communications Ltd. in September 1994. Kwikstar
was formed for the purpose of identifying and evaluating properties or
businesses with a view towards acquisition or participation. Kwikstar's Common
Shares were listed and began trading on The Alberta Stock Exchange on February
7, 1995. Digital Courier International Inc. ("DCI") was incorporated in
November 1994 as a Canadian corporation and began separate operations on
November 15, 1995 when it purchased certain business assets and assumed
certain liabilities from MPR Teltech Ltd. ("MPR"). Prior to November 15, 1995,
DCI had no separate material assets or operating results. MPR is a wholly-
owned subsidiary of BC TELECOM, Canada's second largest telecommunications
group. On November 15, 1995, Kwikstar agreed to acquire DCI by issuing an
aggregate of 10,646,515 Common Shares and 2,000,000 Preferred Shares (after
giving effect to a 1-for-3 reverse split of its Common Shares) to the
shareholders of DCI in exchange for all of the outstanding shares of DCI. On
May 2, 1996, Kwikstar changed its name to Digital Courier International
Corporation ("DCC"). Kwikstar had no material operating results prior to
November 15, 1995 and only limited assets. The acquisition of DCI by the
Company was accounted for as a reverse takeover and a purchase. See "Certain
Transactions" and Notes 2 and 3 to the Company's Consolidated Financial
Statements.
Except as otherwise noted herein, all references to "Digital Courier" or the
"Company" refer to the business, assets and technology of MPR which were
acquired by the Company on November 15, 1995, and, for all periods thereafter,
both DCC (formerly Kwikstar), and DCI, its wholly-owned subsidiary. The
Company's principal executive offices are located at 8618 Commerce Court,
Burnaby, British Columbia, Canada V5A 4N6, and its telephone number is (800)
909-7888. The Company's registered office is 1800, 800 -- 5th Avenue S.W.,
Calgary, Alberta, Canada T2P 3T6.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,500,000 Common Shares
offered by the Company hereby are estimated to be US$21.7 million, based on an
assumed offering price of US$5.33 per share, after deduction of the
underwriting discount and estimated offering expenses payable by the Company.
The Company will not receive any of the proceeds from the sale of Common
Shares by the Selling Shareholders.
The Company intends to use the net proceeds from the sale of the Common
Shares offered by the Company hereby to repurchase all currently outstanding
Preferred Shares for approximately US$1.7 million, to repay existing equipment
lease obligations of approximately US$5.1 million, to purchase additional
computer and communication equipment, to acquire software licenses, to develop
new products and services, and to provide for working capital and general
corporate purposes. The Company, however, has not specified particular capital
expenditure projects. In addition, the Company from time to time evaluates the
acquisition of complementary businesses, products or technology. While the
Company presently has no understandings, commitments or agreements with
respect to such transactions, the Company may use a portion of the net
proceeds to acquire such businesses, products or technologies.
The Company believes that its available cash and cash equivalents, together
with the net proceeds of this offering will be sufficient to meet its capital
requirements at least through the next 18 months. Pending application of the
net proceeds as described above, the Company intends to invest the net
proceeds of the offering in short-term, interest-bearing, investment-grade
securities.
CIBC Wood Gundy Capital (SFC) Inc. ("CIBC Wood Gundy Capital"), which is an
affiliate of CIBC Wood Gundy Securities Inc. ("CIBC Wood Gundy Securities"),
one of the Underwriters, currently holds 4,000,000 Common Shares and as a
Selling Shareholder is selling 800,000 Common Shares offered pursuant to this
Prospectus (or 1,190,000 Common Shares if the Underwriters' over-allotment
option is exercised in full). CIBC Wood Gundy Capital and CIBC Wood Gundy
Securities are affiliated by virtue of being controlled by the same Canadian
chartered bank. Accordingly, the Company is a related issuer to CIBC Wood
Gundy Securities under applicable Canadian securities laws. Other than CIBC
Wood Gundy Securities' share of the underwriting commissions payable by the
Company, neither CIBC Wood Gundy Capital nor CIBC Wood Gundy Securities will
receive any portion of the proceeds from the sale of the Common Shares by the
Company. See "Principal and Selling Shareholders" and "Underwriting."
18
<PAGE>
PRICE RANGE AND TRADING VOLUME OF COMMON SHARES
Kwikstar's Common Shares began trading on The Alberta Stock Exchange under
the symbol "KCL" effective February 7, 1995 and began trading under the symbol
"DIC" effective May 2, 1996. The following table sets forth the trading volume
and range of the high and low sale prices for the Company's Common Shares for
the periods indicated from February 7, 1995 to June 25, 1996, as reported by
The Alberta Stock Exchange. Kwikstar agreed to acquire all of the issued and
outstanding shares of DCI on November 15, 1995.
Therefore, prices for the Company's Common Shares prior to that time reflect
the business of Kwikstar only. All prices and trading volumes have been
adjusted to give effect to the 1-for-3 reverse stock split which was effected
on May 2, 1996.
<TABLE>
<CAPTION>
HIGH LOW VOLUME
------- ----- -------
<S> <C> <C> <C>
CALENDAR 1995:
First Quarter (beginning Feb. 7, 1995).................. $ 1.08 $0.45 185,525
Second Quarter.......................................... 0.69 0.42 78,358
Third Quarter........................................... 0.45 1.86 186,334
Fourth Quarter.......................................... 7.50 1.50 609,774
CALENDAR 1996:
First Quarter........................................... $ 7.50 $5.10 148,161
April................................................... 9.60 6.30 89,917
May..................................................... 8.85 6.95 58,244
June 1 through June 25, 1996............................ 8.00 7.05 37,000
</TABLE>
On June 25, 1996, the closing sale price of the Company's Common Shares on
The Alberta Stock Exchange was $7.25 per share or US$5.33 based on the Noon
Buying Rate on such date.
As of June 15, 1996, there were no shareholders of record of the Company
having addresses in the United States.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its or any of its
share capital. The Company currently intends to reinvest its earnings, if any,
to finance the growth of its business, and does not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of the Board of Directors of the Company
and will depend upon the Company's financial condition, results of operations,
capital requirements and such other factors as the Board of Directors deems
relevant.
19
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company, in accordance with U.S. GAAP, as of March 31, 1996 (i) on an actual
basis, and (ii) as adjusted to reflect the sale by the Company of the
4,500,000 Common Shares offered hereby at an assumed price of US$5.33 and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
This information should be read in conjunction with the Company's audited
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
US$ EQUIVALENT
MARCH 31, 1996 MARCH 31, 1996(1)
------------------ --------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
------ ----------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt:
Capital lease obligations............. $ -- $ -- US$ -- US$ --
Preferred Shares, Series 1, without
par value: unlimited number
authorized; 2,000,000 issued and
outstanding; none issued and
outstanding as adjusted.............. 2,000 -- 1,467 --
Shareholders' equity:
Preferred Shares, without par value:
unlimited number authorized; Series
1, set forth above................... -- -- -- --
Common Shares, without par value:
unlimited number authorized;
12,395,960 issued and outstanding;
16,845,960 issued and outstanding as
adjusted (2)........................ 9,575 39,032 7,022 28,678
Deficit............................... 6,022 6,272 4,417 4,607
------ ------- -------- ---------
Total shareholders' equity............ 3,553 32,760 2,605 24,071
------ ------- -------- ---------
Total capitalization................. $5,553 $32,760 US$4,072 US$24,071
====== ======= ======== =========
</TABLE>
- --------
(1) Canadian dollar amounts have been translated into U.S. dollars using the
relevant period-end rate, as set forth in "Exchange Rate Information."
These translations are not necessarily representative of the amounts that
would have been reported if the Company historically reported its
financial statements in U.S. Dollars. In addition, the exchange rates
utilized are not necessarily indicative of the rates in effect at any
other time.
(2) Excludes 1,405,555 Common Shares issuable upon exercise of options
outstanding at March 31, 1996. See Note 8 of the Company's Consolidated
Financial Statements.
20
<PAGE>
DILUTION
The net tangible book value of the Company, in accordance with U.S. GAAP, as
of March 31, 1996 was $3.6 million or $0.29 per Common Share. Net tangible
book value per share represents the amount of the Company's net tangible
assets less total liabilities divided by the number of Common Shares
outstanding. Net tangible assets exclude deferred development costs, acquired
software products and goodwill, which for purposes of this calculation are
considered to be intangible assets. After giving effect to (1) the sale by the
Company of 4,500,000 Common Shares offered hereby at an assumed price of
US$5.33 per Common Share ($7.25 per Common Share, based on the Noon Buying
Rate on June 25, 1996), and (2) after deducting the underwriting discount and
estimated offering expenses payable by the Company, the pro forma net tangible
book value of the Company as of March 31, 1996 would have been $33.0 million,
or approximately $1.96 per Common Share. This represents an immediate increase
in pro forma net tangible book value of $1.67 per Common Share to existing
shareholders and an immediate dilution of $5.29 per Common Share (US$3.89 per
share based on the Noon Buying Rate on June 25, 1996) to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed offering price per Common Share......................... $7.25
Net tangible book value per Common Share at March 31, 1996...... 0.29
Increase per Common Share attributable to new investors......... 1.67
Pro forma net tangible book value per Common Share after this
offering....................................................... 1.96
-----
Dilution per Common Share to new investors...................... $5.29
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the difference between the number of Common Shares purchased from the Company,
the total consideration paid, and the average price per share paid by existing
shareholders and by the new investors, purchasing the Common Shares offered
hereby.
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders... 12,345,960 73.3% $ 7,265,080 18.2% $0.59
New investors........... 4,500,000 26.7 32,625,000 81.8% 7.25
---------- ----- ----------- -----
Total................... 16,845,960 100.0% $39,890,080 100.0%
</TABLE>
As of March 31, 1996, there were options outstanding to purchase a total of
1,405,555 Common Shares at a weighted average exercise price of $2.37 per
share, which are not included in the above computation. To the extent that any
of these options are exercised, there will be further dilution to the new
investors.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus. The consolidated
statement of operations data set forth below for the six-month period ended
March 31, 1996 and the balance sheet at March 31, 1996, have been derived from
the Company's audited Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus. Historical results are not necessarily
indicative of the results of operations which may be expected in the future
and operating results for the six month period ended March 31, 1996 are not
indicative of the results that may be expected for the entire year. See
"Exchange Rate Information" for historical exchange rate information.
<TABLE>
<CAPTION>
US$ EQUIVALENT
SIX MONTH SIX MONTH
PERIOD ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1996(1) 1996(2)
------------ --------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
CANADIAN GAAP(3)
Revenue........................................ $ 508 US$ 373
Cost of sales.................................. 648 476
------- ---------
Gross margin................................... (140) (103)
Other expenses:
Sales and marketing.......................... 503 369
Research and development..................... 505 371
General and administration................... 631 463
Depreciation and amortization................ 306 224
------- ---------
Total....................................... 1,945 1,427
Other income................................... 124 91
------- ---------
Net loss....................................... $ 1,962 US $1,439
======= =========
Net loss per share............................. $ 0.16 US$ 0.12
======= =========
Weighted average number of shares
outstanding(4)................................ 12,317 12,317
U.S. GAAP(3)
Net loss(5).................................... $ 4,022 US$ 2,952
======= =========
Net loss per share............................. $ 0.30 US$ 0.22
======= =========
Weighted average number of shares outstanding.. 13,302 13,302
</TABLE>
<TABLE>
<CAPTION>
US$ EQUIVALENT
MARCH 31, 1996(1) MARCH 31, 1996(2)
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
CANADIAN GAAP(3)
Cash and cash equivalents................ $ 3,209 US$2,353
Working capital.......................... 596 437
Total assets............................. 10,596 7,771
Shareholders' equity..................... 5,303 3,889
U.S. GAAP(3)
Cash and cash equivalents................ $ 3,209 US$2,353
Working capital.......................... 596 437
Total assets............................. 8,846 6,488
Shareholders' equity..................... 3,553 2,605
</TABLE>
22
<PAGE>
- --------
(1) Gives effect, as of November 15, 1995, to (i) the purchase by the Company
of certain assets and the assumption of certain liabilities of MPR, which
constituted substantially all of the assets of the Company as of such
date, and (ii) the acquisition of the Company by Kwikstar, which was
accounted for as a reverse takeover and a purchase. The Company had no
material assets, liabilities or operating results prior to such date. See
"The Company" and the Notes 2 and 3 to the Company's Consolidated
Financial Statements.
(2) Canadian dollar statement of loss and deficit amounts have been translated
into U.S. dollars using the average exchange rate for the relevant period,
and Canadian dollar balance sheet amounts have been translated using the
relevant period-end rate, as set forth in "Exchange Rate Information."
These translations are not necessarily representative of the amounts that
would have been reported if the Company historically reported its
financial statements in U.S. dollars. In addition, the exchange rates
utilized are not necessarily indicative of the rates in effect at any
other time.
(3) For a description of the principal differences between Canadian GAAP and
U.S. GAAP, see Note 11 of the Company's Consolidated Financial Statements.
(4) See Notes 8 and 11(c) to the Company's Consolidated Financial Statements.
(5) Includes the loss determined under Canadian GAAP of $1,962, plus expenses
relating to stock based compensation of $2,409, less a reduction of
amortization of intellectual property of $250.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Digital Courier International Corporation ("Digital Courier" or the
"Company") is a leading supplier of electronic distribution and communication
services for the radio broadcast industry in Canada and the United States.
Digital Courier's two-way network enables fast and reliable electronic
distribution of CD quality audio, text and data to organizations that
traditionally have relied upon tape and courier distribution services. Since
its Canadian roll-out in April 1995, the Digital Courier network has succeeded
in becoming the standard system for the electronic distribution of advertising
and short-form programming throughout Canada, with over 260 radio stations
connected to its network. In the United States, Digital Courier has gained
rapid industry acceptance since the introduction of its network in August
1995, with more than 2,220 radio stations currently under contract and
approximately 250 additional stations joining each month.
Digital Courier International Inc. ("DCI") was incorporated on November 24,
1994 and began operations on November 15, 1995 when it purchased certain
business assets and assumed certain liabilities from MPR Teltech Ltd. ("MPR").
MPR is a wholly-owned subsidiary of BC TELECOM Inc. ("BC TELECOM"), Canada's
second largest telecommunications group. Kwikstar Communication Ltd.
("Kwikstar") was incorporated in November 1993 under the laws of the Province
of Alberta, Canada. On November 15, 1995, Kwikstar agreed to acquire all of
the outstanding shares of DCI. The acquisition has been accounted for as a
reverse takeover and as a purchase. Accordingly, the operating results of
Kwikstar are included in the Consolidated Financial Statements of the Company
only from November 15, 1995. See Notes 2 and 3 of the Company's Consolidated
Financial Statements. Kwikstar had no material operating results prior to
November 15, 1995 and only limited assets. Kwikstar changed its name to
Digital Courier International Corporation ("DCC") in connection with the
acquisition of DCI. Prior to the Company's acquisition of certain components
of the business, assets and technology of MPR, DCI had no material operating
results. The business, assets and technology acquired by the Company were not
organized as a separate operating division of MPR and, therefore, no
comparison is presented between the six month period ended March 31, 1996 and
prior periods. See "The Company."
The Company maintains its accounting records and reports its results in
Canadian dollars in accordance with Canadian GAAP. There are significant
differences between Canadian GAAP and U.S. GAAP. Unless otherwise indicated,
all financial presentation in this Prospectus refers to the Company's Canadian
GAAP financial statements and operating results.
Under Canadian GAAP, the Company is not required to record the difference
between the option price and the fair market value on the date the option was
granted. Under U.S. GAAP, the Company is required to issue options at the fair
market value at the time of grant or to recognize compensation expense equal
to the difference between the fair market value at the time of grant and the
exercise price. Such expense is recognized ratably over the vesting period of
the options. As of March 31, 1996, the Company had granted options to purchase
1,405,555 Common Shares, which, under U.S. GAAP, requires the recognition of
compensation expense of approximately $6.1 million. Of this amount, the
Company recognized approximately $2.3 million of compensation expense as of
March 31, 1996, and will recognize approximately $635,000 of compensation
expense each quarter through September 30, 1997 as the options continue to
vest. No corresponding expense will be recognized under Canadian GAAP. See
Note 11 of the Company's Consolidated Financial Statements.
The Company has a very limited operating history with which to evaluate its
business and future prospects. The Company began operations in November 1995,
has been unprofitable since its inception and expects to continue to generate
net losses at least for the next 18 months. As of March 31, 1996, the
Company's accumulated deficit was approximately $2.0 million. Development and
commercialization of the Company's network involves substantial costs in
anticipation of subsequent revenues which may not be realized until the
network is widely deployed and utilized by its customers. See "Risk Factors--
Limited Operating History; Accumulated Deficit; Future Operating Results
Uncertain."
24
<PAGE>
RESULTS OF OPERATIONS
Revenue. The Company's revenues are primarily comprised of fees for audio
spot distribution and sales of the Company's compression technology, including
the Company's hardware products, and, to a lesser extent, product
installations, less, in certain instances, volume and promotional discounts.
Digital Courier charges for its distribution services on a per delivery basis.
The Company defines a "delivery" as the transmission of a piece or pieces of
audio content, generally a commercial or a set of commercials, to a radio
station based on a single order from a customer. Each order usually calls for
the delivery of the same audio spots to multiple radio stations, resulting in
multiple deliveries. The Company derives revenue from production studios and
duplication and distribution houses that consolidate and forward the
deliveries to radio stations. The Company recognizes revenue for each order on
the date audio or related information is transmitted to the destination. The
Company has developed a flexible billing system which enables it to take into
account factors such as time required for delivery, the length of the audio
files, and the distance between sites (local or national) to develop optimal
pricing for each customer. The Company provides distributors with a list price
and a volume discount based on their amount of network usage. The list price
for its services in the United States are US$40.00 for 1-hour delivery,
US$22.00 for same day delivery and US$15.00 for overnight delivery. Discounts
typically range from 10-40% depending on the network usage by a given client.
The Company's Capella cards incorporate the Company's compression technology
and are manufactured under contract for the Company and marketed by the
Company to OEMs. While historically sales of the Company's compression
technology, including the Capella cards, have constituted approximately half
of the Company's revenues, the Company believes that technology sales will
constitute a decreasing portion of its revenues in the future.
Revenues for the six months ended March 31, 1996 were $508,000. The Company
anticipates that its revenues will increase in proportion to the Company's
ability to continue to install its network at radio stations, particularly in
the U.S., and at distributors. The Company does not anticipate recognizing any
material revenue from its proposed radio station group and advertising agency
operations until the latter half of calendar 1997. Recognition of revenues at
such time and thereafter is subject to numerous risks and uncertainties. See
"Risk Factors--Dependence on Introduction of New Services," and "--Dependence
on Emerging Markets; Arbitron."
The Company derived approximately 70% of its revenues during the six months
ended March 31, 1996 from sales denominated in U.S. dollars, and the Company
anticipates that the percentage of its sales denominated in U.S. dollars will
increase in the future. Substantially all of the Company's expenses are
currently recognized in Canadian dollars. The Company does not engage in
hedging of its U.S. dollar denominated sales, which could subject the Company
to significant currency exposure. See "Risk Factors--Currency Fluctuations."
Cost of Sales. The Company's cost of sales is comprised primarily of
depreciation, long distance telephone, network access, hardware costs and
direct labor. Cost of sales for the six months ended March 31, 1996 were
$648,000. Depreciation and communications costs comprised the substantial
majority of these costs. The Company anticipates that its cost of sales will
increase substantially in future periods in absolute dollars but may decrease
as a percentage of revenues if the Company's fixed-cost component of cost of
sales is allocated across a larger revenue base. Long distance telephone costs
may decrease as a percentage of revenues in future periods to the extent that
the Company is able to negotiate volume discounts in the event that the
Company's delivery traffic increases.
Sales and Marketing Expenses. The Company's sales and marketing expenses are
comprised primarily of salaries and commissions. Sales and marketing expenses
for the six months ended March 31, 1996 were approximately $503,000. A
substantial portion of the Company's sales and marketing expenses were paid to
an independent vendor for its services provided in connection with the
introduction of the Company's network into new radio stations. The Company
anticipates that its sales and marketing expenses will increase substantially
in future periods in absolute dollars as the Company continues the expansion
of its network and distribution services in radio stations and as the Company
commences its proposed radio station group and advertising agency operations.
Research and Development Expenses. The Company's research and development
expenses are comprised primarily of salaries and amounts paid to an
independent vendor in connection with the design and development
25
<PAGE>
of the Company's network. Research and development expenses for the six months
ended March 31, 1996 were approximately $505,000. A substantial portion of the
Company's research and development expenses were paid to an independent
vendor, and the Company anticipates that it will continue retaining this
vendor at least through calendar 1997. The Company anticipates that its
research and development expenses will increase substantially in absolute
dollars in connection with the design and development of products and services
for the proposed radio station group and advertising agency operations.
General and Administrative Expenses. General and administrative expenses for
the six months ended March 31, 1996 were approximately $631,000. The Company
anticipates that its general and administrative expenses will increase in
absolute dollars in order to support the proposed expansion of the Company's
business.
Depreciation and Amortization Expenses. The Company's depreciation and
amortization expenses are comprised primarily of depreciation of the Company's
network. Depreciation and amortization expenses for the six months ended March
31, 1996, were approximately $528,000, of which $222,000 was included in the
cost of sales. The Company acquired $2.0 million of intellectual property from
MPR that has been recorded at MPR's carrying amount. This amount is amortized
under Canadian GAAP on a straight line basis over a three year period. Under
U.S. GAAP, this amount was expensed at the time of acquisition.
QUARTERLY RESULTS OF OPERATIONS
The following tables present the unaudited quarterly consolidated statements
of operations for the Company. The information and the operating data has been
prepared by the Company on a basis consistent with the Company's audited
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, that management considers necessary for a fair
presentation of the information for the periods presented. The operating
results for any quarter should not be relied on as indicative of the results
for any future period.
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED
----------------------
DECEMBER 31, MARCH 31,
1995(1) 1996
------------ ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
CANADIAN GAAP:
Revenue.............................................. $ 203 $ 305
Cost of sales........................................ 194 455
------- -------
Gross margin......................................... 9 (150)
Other expenses:
Sales and marketing................................. 173 330
Research and development............................ 171 334
General and administration.......................... 250 382
Depreciation and amortization....................... 101 204
------- -------
Total............................................ 695 1,071
Other income......................................... 35 90
------- -------
Net loss............................................. $ 651 $ 1,311
======= =======
Net loss per share................................... $ .05 $ .10
======= =======
Weighted average number of shares outstanding(2)..... 12,313 12,317
U.S. GAAP:
Net loss............................................. $ 568 $ 3,454
======= =======
Net loss per share................................... $ .05 $ .26
======= =======
Weighted average number of shares outstanding(2)..... 12,466 13,302
</TABLE>
26
<PAGE>
- --------
(1) Gives effect, as of November 15, 1995, to (i) the purchase by the Company
of certain assets and the assumption of certain liabilities of MPR, which
constituted substantially all of the assets of the Company as of such
date, and (ii) the acquisition of the Company by Kwikstar, which was
accounted for as a reverse takeover and a purchase. The Company had no
material assets, liabilities or operating results prior to such date. See
"The Company."
(2) See Note 8 of the Company's Consolidated Financial Statements.
The Company commenced operations on November 15, 1995. Operating results for
the period from September 30, 1995 through November 15, 1995 are not available
and are not included in the information for the three months ended December
31, 1995. Therefore, information for this quarter may not be indicative of the
operations for the Company for the entire quarter and may not be comparable to
subsequent quarters. See "The Company."
The Company's quarterly operating results may vary significantly depending
on a number of factors, many of which are beyond the Company's control. See
"Risk Factors--Fluctuations in Quarterly Results," "--Dependence on
Introduction of New Services," "--Dependence on Distribution Services" and "--
Dependence on Emerging Markets; Arbitron."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily from
proceeds from public and private offerings which provided net proceeds of
approximately $6.2 million, and with funds pursuant to the Company's equipment
leasing facility. At March 31, 1996, the Company's current sources of
liquidity included cash and cash equivalents of $3.2 million and $7.0 million
available pursuant to an equipment lease facility. The Company intends to
repay this facility with a portion of the net proceeds from this offering.
The Company's operating activities used $14,000 of cash for the six months
ended March 31, 1996. In addition, no property or equipment were acquired
through term lease agreements in the same six month period.
The Company currently has no significant capital commitments other than the
commitment to repurchase its outstanding Preferred Shares for $2.25 million
and the commitments under its equipment and operating leases. The Company
intends to continue making significant capital expenditures in order to expand
its network, and the Company anticipates incurring significant and increasing
expenses in connection with the development and commercialization of its
proposed services. Based upon current plans and assumptions, the Company
anticipates that the net proceeds of this offering, together with its existing
capital, cash from operations and projected revenues, will be adequate to
satisfy its capital requirements at least through the next 18 months.
Thereafter, the Company may require additional funds. No assurance can be
given as to the ability to raise additional funds on favorable terms, if at
all. If such funds are not available, the Company could be required to reduce
its research and development or sales and marketing plans, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. In any event, the issuance of additional securities
necessary to raise such capital could result in substantial dilution to
investors.
27
<PAGE>
BUSINESS
OVERVIEW
Digital Courier International Corporation ("Digital Courier" or the
"Company") is a leading supplier of electronic distribution and communication
services for the radio broadcast industry in Canada and the United States.
Digital Courier's two-way network enables fast and reliable electronic
distribution of CD quality audio, text and data to organizations that
traditionally have relied upon tape and courier distribution services. Since
its Canadian roll-out in April 1995, the Digital Courier network has succeeded
in becoming the standard system for the electronic distribution of advertising
and short-form programming throughout Canada, with over 260 radio stations
connected to its network. In the United States, Digital Courier has gained
rapid industry acceptance since the introduction of its network in August
1995, with more than 2,220 radio stations currently under contract and
approximately 250 additional stations joining each month.
The Digital Courier network is a two-way network in which digital or analog
audio may be compressed and stored on customer computers and then sent to
multiple end-user locations. The Company designed its network with an open,
scalable architecture to facilitate the addition of new services. The
Company's principal technology was initially developed by BC TELECOM Inc. ("BC
TELECOM"), Canada's second largest telecommunications group. A number of the
Company's management team were involved with the development of the technology
prior to its acquisition by the Company in November 1995.
INDUSTRY BACKGROUND
The North American radio industry is undergoing a period of rapid change.
The evolution of new technologies and the adoption of regulatory reform in the
passage of the Telecommunications Act in the United States is altering the
established business processes in the industry and offers the potential of
significantly enhanced efficiency and reduced costs.
Radio Advertising Industry
According to industry sources, there are approximately 10,000 radio stations
in the United States and approximately 500 radio stations in Canada. According
to industry sources, the total radio advertising revenue for the North
American market in 1995 was approximately US$12.0 billion. The Company
estimates that the market for the distribution services associated with such
advertising is approximately US$90.0 million, and that the potential market
for the advertising agency and radio station group services similar to those
proposed by the Company is substantially in excess of this amount. Radio
advertising can be separated into three major categories: national network,
national spot, and local and regional advertising, which, according to
industry sources, represent approximately 5%, 15% and 80%, respectively, of
the radio advertising market as defined by the number of advertising dollars
spent. According to industry sources, total advertising revenue for the North
American radio broadcast market has been increasing steadily over the past
several years, from US$10.1 billion in 1993 to US$11.2 billion in 1994 and
US$12.0 billion in 1995.
Of the advertising agencies in North America, approximately 1,500 place a
substantial portion of radio advertising. Advertising agencies and their
clients define the parameters of the advertising campaign, the targeted
audiences and the production of the advertisement. Advertising agencies place
advertising buys directly with the sales organizations within a radio station,
or with rep companies that represent the radio stations to the advertising
agencies. The two major rep companies that serve the radio broadcast
marketplace are The Interep Radio Store and Katz Media Corporation.
Production studios create the actual advertisements for the advertising
agencies. A number of organizations provide duplication and shipping services
on a national level to serve the large scale needs of the national advertiser,
whereas on the local and regional level the production studios generally
provide these services. These duplicating services often form a significant
part of a production studio's business. In addition, radio stations produce
and distribute a significant number of ads for their own use to serve local
advertisers.
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<PAGE>
The Telecommunications Act enacted in the United States in February of 1996
has significantly changed the ownership rules for radio stations, resulting in
a wave of radio station buying and consolidation in the industry. Since the
enactment of the Telecommunications Act, acquisitions totaling over $8.5
billion have occurred as the size of radio groups has grown dramatically. The
Company anticipates that several station groups will grow to beyond 100
stations before the end of 1996. These newly formed groups are looking for
different ways to manage and improve the efficiency of their operations.
The market sizes for the radio industry and the various products and
services referenced in this Prospectus are difficult to ascertain or project
with precision and in any event are subject to change due to a number of
factors. See "Risk Factors--Dependence on Emerging Markets; Arbitron."
Current Business Processes
The process of preparing audio tapes, sorting different versions and
physically transporting them to different radio stations so they can be played
at the proper times is time consuming and labor intensive. In the case of a
national spot advertising campaign, up to several hundred or more tapes need
to be created for distribution to radio stations, and distribution has been
largely accomplished by sending the tapes via courier service. There are a
number of organizations in North America that have developed large duplicating
facilities and trafficking systems to assist the advertising agencies in
distributing radio advertisements to radio stations. At the local and regional
level, the number of tape duplications required is lower than that required
for national spots, and the duplication and delivery services are often
provided by production studios that have produced radio advertisements for the
advertising agency. Radio stations produce a significant number of ads for
their own use to serve local advertisers. Often a radio station will produce a
radio advertisement and will accept responsibility for distributing this
advertisement to other radio stations in the local market. In this case, the
radio station performs the role of production studio, duplicating company and
courier. Although the duplicating companies, production studios and radio
stations are currently meeting the needs of advertisers for the distribution
of radio advertisements, the process is time consuming, expensive and must be
scheduled around the constraints of physical delivery via courier. Because
many of the production studios work evening hours, co-ordination with physical
delivery services is often difficult. At the radio station, delivery is
typically limited to the working hours of the station, which often results in
late deliveries or missed air times.
The current market for buying and selling of radio advertising time is also
inefficient. As the most common stand-alone software systems (research,
traffic/billing, music scheduling, etc.) used in the industry are not linked,
little exists in the way of truly integrated systems. The buy/sell process
typically involves multiple iterations of information exchanges between
advertising agencies, representative companies, radio stations and
distributors. This process involves the use of many different software systems
and is conducted by telephone, mail, fax and physical courier over a series of
days or weeks, during which period the total availability of advertising time
in the market is shifting. Due to delays in communications, by the time an
advertising agency places a buy, the available inventory has frequently
changed, and the radio station may or may not be able to air all
advertisements at the originally scheduled times. Following the airing of an
advertisement, the process of discovering discrepancies in air dates and
resolving "make goods" (re-airing of spots to satisfy the contract) or credits
may involve multiple rounds of negotiation between radio stations and
representative companies or advertisers. The entire process from a request for
advertising time to confirmation of airing and payment can often be lengthy.
Convergence of Technologies
Until the early 1990s, the radio industry operated much as it had for the
preceding twenty years. A major reason for the delay in the radio industry to
engage in electronic communications was the inability to send CD quality audio
files as well as data and text. It was not until the early 1990s that digital
signal processor chips and PCs with sufficient processing power and memory had
evolved sufficiently to meet these needs. To enable digital audio broadcast to
occur, a universal standard was required for audio compression and in late
1993, after many years of evaluation, the ISO MPEG Layer II algorithm was
recommended as the international standard for audio
29
<PAGE>
compression by the International Standards Organization. These advances
enabled radio stations to begin the transition from analog and tape-based
technology to digital audio storage and play systems. A final barrier to
achieving automation in distribution services for the radio industry was
removed in the fall of 1993 when telephone companies across North America
announced the introduction of ISDN (Integrated Services Digital Network)
digital communication services allowing the efficient flow of audio and data
between advertisers, production studios, rep companies and radio stations.
The industry's acceptance of new technologies, increases in computing power
and the deployment of digital communications, and the regulatory reform
embodied in the Telecommunications Act are fundamentally changing the radio
broadcast industry, providing the potential for decreased costs, increased
revenues and enhanced efficiencies.
THE DIGITAL COURIER SOLUTION
Digital Courier owns and operates a two-way communications network
incorporating value-added software solutions which facilitate electronic
communications between companies within the radio broadcast industry. The
network is designed to provide application interfaces to third party software
and hardware systems to increase efficiency and productivity of the business
processes within the industry. The Digital Courier network can be configured
to provide virtual private networks ("SubNets") for major distributors and
content providers which eliminates their need to invest capital in a
proprietary network or use networks owned by competing organizations. The
Company currently provides its communications services to distributors of
audio advertising and syndicated programming. The Company offers 1-hour, 4-
hour and overnight delivery throughout North America. In addition, the Company
intends to develop services to enable electronic work flow integration between
advertising agencies, rep companies and radio stations to facilitate the
buying and selling of radio time. Such services will be targeted at
streamlining current procedures within those entities that are labor intensive
and prone to error, as well as facilitating communications among such entities
and their current in-house systems. The Company also intends to develop
services to enable radio station groups to communicate with each other,
including e-mail capabilities, consolidation of sales and business information
and centralized production, programming, creative and traffic services. See
"--Products and Services."
STRATEGY
Digital Courier's objective is to become the leading supplier of integrated
communications services to the radio broadcast and advertising industries by
complementing its existing distribution services with a comprehensive
communications solution for distributors, radio station groups, advertising
agencies, rep companies, program syndicators, record companies and radio
buyers. To achieve this objective, the Company has adopted the following
strategies:
Continue Rapid Expansion of its Network. The Company is focused on
continuing the rapid deployment of its Digital Courier network. The Company
believes that as the number of participants on the network increases, the
more valuable and useful the network becomes to the Company's clients, and
therefore the easier it becomes to attract new clients. The Company's
efforts to date have resulted in the signing of approximately 2,500 radio
stations to its network. The Company's goal is to increase the size of its
network in order to achieve the critical mass it believes is required to
meet the needs of its clients.
Maintain a Scalable, Two-Way Network Open Architecture. Digital Courier
utilizes and intends to maintain advanced network management facilities,
two-way communications, and a scalable/open network architecture to adapt
new services as they become available and to provide maximum benefit to the
customers that it serves. Although the Company currently uses its own
dedicated telephone lines to provide secure network services, the network
architecture is designed to make the best use of other communications
systems such as the Internet if they prove to provide performance or cost
advantages. The Company's two-way capability provides communication and
distribution between all sites, and enables the network to capture local
and regional traffic in addition to the distribution of national spots.
This two-way capability is particularly useful on a local basis, which
comprises approximately 80% of the radio advertising market,
30
<PAGE>
for sending local or regional advertising or programming from station to
station within an individual market, or between stations under common
ownership. The Company believes that this strategy is especially
significant following passage of the Telecommunications Act, as large
station groups will be able to take advantage of the two-way, private,
secure communications provided by the Digital Courier network to increase
efficiency of intra-group communications.
Leverage its Installed Network thorough the Provision of Value-Added
Services. The Company intends to increase the revenue generated by its
installed network through the development and provision of new value-added
services for the radio industry. The Company has identified a number of
areas, including the buying/selling of radio time, the collection and
distribution of ratings information, the verification of actual advertising
air play and intra-group communications, in which the radio broadcast
industry has not taken advantage of advanced computer and communications
technologies. The Company intends to provide value-added electronic
communications solutions for such areas that result in superior, cost-
competitive services compared to existing methods of doing business.
Position its Network as an Outsourcer of Services which Enhance the
Competitiveness of Existing Industry Participants. The Company believes
that to continue to expand its network, it must position its network as an
outsourcer of value-added industry services to, rather than as a competitor
of, existing industry participants. To accomplish this, the Company
attempts to ensure that production studios and duplication companies
continue to maintain their competitive positions in their respective
industries, and the Company intends to make its new value-added services
available to all distributors, program syndicators, radio station groups,
advertising agencies and rep companies.
Develop Strategic Alliances and Relationships. The Company pursues
strategic alliances and relationships in order to enhance its ability to
provide value-added services in a cost-effective, timely manner. The
Company believes such relationships provide it with access to the
design/engineering skills and industry relationships of large, experienced
organizations and enhances its ability to provide its customers with
comprehensive solutions. See "--Strategic Alliances/Relationships."
PRODUCTS AND SERVICES
The following diagram illustrates the existing and proposed exchange of
information and data between radio stations, advertising agencies and rep
companies through the Company's network by providing an interface between
existing software systems. Services currently provided are designated by solid
connecting lines.
[diagram]
Distribution Services
Digital Courier's existing services are targeted at the distribution market
and provide major industry distributors, program syndicators, radio stations
and record companies with the capability to send their products rapidly via
electronic transmission. The Company believes that it has the only network
with fully operational two-way communications for the radio broadcast industry
that is complete with digital CD quality audio, data and messaging capability.
The Company's network currently serves approximately 1,680 radio stations,
with an additional 820 stations under contract awaiting installation and with
approximately 250 stations currently joining each month.
Customers of the Company enjoy private and secure two-way communications
delivery of audio, e-mail and text messaging and high quality ISO MPEG Layer
II audio compression and decoding. Organizations that utilize the Digital
Courier network have the option of distributing audio at any time of the day,
at their convenience. The Company offers 1-hour, 4-hour and overnight delivery
throughout North America. The Digital Courier network automatically provides
the sender with a confirmation of the status of their deliveries.
Digital Courier charges for its distribution services on a per transaction
basis. The Company has developed a flexible billing system which enables it to
take into account factors such as time required for delivery, the length of
the audio files, and the distance between sites (local or national) to develop
optimal pricing for each customer. The Company provides its customers with a
list price and a volume discount based on their amount of
31
<PAGE>
network usage. The list price for its services in the United States are
US$40.00 for 1-hour delivery, US$22.00 for same day delivery and US$15.00 for
overnight delivery. Volume discounts typically range from 10-40% depending on
the network usage by a given client. The Company normally charges for
syndicated programming on a per minute basis.
The Company licenses and sells its audio compression technology to third
parties. Most of these sales are based on the Company's Capella card, which is
a PC based circuit card complete with the encoding/decoding compression
technology. This product retails for approximately $2,500. Digital Courier
also licenses the software to third parties for direct integration into their
systems.
Radio Station Group Services
The interfaces that Digital Courier is developing to facilitate the
electronic work flow between third parties in the radio industry also can be
used to pass information between stations within a group. By configuring its
network to offer intra-group communications on SubNets, the Company believes
it will provide expanding radio groups with a low cost solution for
centralizing management and operating functions. Some of the benefits that may
be realized by a station group include inter-station communications and
consolidation or sharing of sales and business information, production,
programming, creative and traffic services. Future plans also make use of the
Digital Courier network to provide programming, play lists, etc. from a
central location, and even to operate a radio station remotely to the extent
allowed by the rules and regulations of the FCC. The Company believes that
such services should become more in demand as the radio broadcast industry
consolidates and large radio groups seek to reduce costs and improve the
efficiency of their operations. See "--Industry Background."
The Company currently intends to develop and provide the following services
to station groups:
. inter-group communications with audio, data and e-mail capability;
. interfaces with the common traffic, scheduling and hard disk storage
systems used in radio stations to facilitate electronic commerce for the
broadcast industry;
. software applications to facilitate the flow of sales and accounting
information between sites;
. sharing of production, programming and creative services; and
. real time syndication of programming from a station within the group to
one or more other stations within the group.
The Company plans to provide these services to radio stations and groups
based on monthly license fees and network usage charges.
Advertising Agency/Rep Company Services
Digital Courier plans to develop services to enable electronic work flow
integration between advertising agencies, rep companies and radio stations.
The Company has developed its network architecture to enable it to interface
with third party systems. In this way, the network can become the "digital
courier" to facilitate rapid exchange of information between and among the
various groups within the industry. The development of interfaces to third
party hardware and software systems will permit requests for quotations,
proposals, contracts, traffic and scheduling instructions and affidavits to be
conveniently transmitted over the network.
One of the most time consuming aspects of the current work flow for both the
advertising agencies and the radio stations is the comparison and verification
of actual air play to the contracted schedule. During the buying process,
radio stations deal with multiple advertising agencies that often request
quotes for the same available advertising inventory at the radio station. Once
an advertisement has been aired, the radio station is required to complete an
affidavit verifying the airing of the advertisement. The completion of the
affidavit for each advertisement by the radio station and the consolidation of
affidavits is time consuming and delays payment to the advertising agency and
radio stations. Digital Courier plans to license or develop a "barcoding"
technology which places an inaudible digital code into each advertisement.
This code can be detected, allowing the time consuming process of verification
of air times, affidavit generation and consolidation to be automated.
32
<PAGE>
The Company currently intends to develop and provide the following products
and services for advertising agencies and rep companies:
. software applications and network interfaces that facilitate electronic
commerce and the buying/selling process between advertising agencies,
rep companies and radio stations;
. software applications and network interfaces to facilitate electronic
invoicing between radio stations, advertising agencies and rep
companies; and
. network monitoring services for the live air monitoring of advertising
to increase timeliness and reduce costs associated with the current
manual affidavit process.
The Company plans to provide these services to advertising agencies and rep
companies on a license basis.
There can be no assurance that the Company will successfully complete the
development of any of its proposed services on a timely basis, if at all, or
that if such development is completed, that the Company's planned introduction
of these services will receive market acceptance or will meet the technical or
other requirements of the Company's intended customers. See "Risk Factors--
Dependence on Introduction of New Services" and "--Dependence on Emerging
Markets; Arbitron."
TECHNOLOGY
The Company has developed a proprietary source code used in its
implementation of the ISO MPEG Layer II technology. ISO MPEG Layer II is the
standard audio compression algorithm proposed for digital audio broadcast by
the International Standards Organization ("ISO"), and the Company's engineers
have developed a high level of expertise and knowledge as a result of their
participation in ISO with regard to the selection and testing of the various
algorithms on which this standard is based. As a result of this expertise, the
reproduced audio transmitted through the network maintains CD quality. In
addition, the Company is able to utilize higher levels of compression for
certain applications with minimal loss of quality, resulting in lower costs of
transmission. The Company implements the ISO MPEG Layer II compression
technology in its Capella card which is used throughout its network in each
communication server. The Company also licenses its compression technology to
third parties either directly or through the sale of Capella cards.
The ISO MPEG Layer II compression technology eliminates sounds that the
human ear cannot hear, along with other information that is not required to
reproduce the original signal with high fidelity. This compression technology
tends to work in opposition with "bar-coding" technologies, which insert audio
signals that the ear cannot detect. Thus, the use of compression technology
can result in erroneous removal of the desired bar-code. As higher rates of
compression are used, the likelihood of eliminating the bar-codes increases.
The Company believes that its ownership and understanding of the source code
implementations for the compression technology provide it with an advantage in
the successful merging of the bar-coding and compression technologies. The
insertion of the bar-codes is essential to automating the affidavit process by
allowing information relating to the advertisement and the time it was aired
to be electronically detected, collected and processed.
THE DIGITAL COURIER COMMUNICATIONS NETWORK
The following diagram illustrates the management of the network, the
existing and proposed organizations connected to the network, and the flow of
information through the network.
[Diagram]
Communications over the Digital Courier network are initiated directly by
the sender. The sender can input audio in analog or digital form complete with
traffic instructions or related messaging directly into a PC-based
communication server installed by the Company, select the address(es) and
initiate distribution to the requested sites. Alternatively, for clients that
have internal distribution systems, the Company can provide ODIS (Open
Distributor Interface System), which enables the communication server to be
controlled directly from the clients internal distribution management system.
This interface is typically used by major distribution companies, radio
networks and program syndicators. For organizations that routinely distribute
to the same list of receive sites, the communication server can "memorize" the
distribution lists to enable rapid distribution to the same list of
33
<PAGE>
sites. In addition, modification of such lists can be rapidly achieved. By
putting the distribution capability into the hands of the sender, the
distributing organization maintains complete privacy and knowledge of its
customers and the material distributed. The Company provides its clients with
their own virtual distribution network capability referred to as a Digital
Courier "SubNet." The two-way communications and SubNet features currently
enable station groups and related radio stations to share voice talent and to
exchange programming, advertisements and e-mail. Once a sender has selected
the destination sites, he can select the priority of service desired: 1-hour,
4-hour or overnight. The network has a built-in automatic confirmation
capability and sends a message back to the sender confirming delivery of the
content to the requested sites. If any of the information sent to a single
site has not been successfully delivered, the confirmation sent back to the
sender identifies the troubled site.
Digital Courier provides communication servers and required communications
lines to distributors and radio stations. The server consists of a 486 or
Pentium PC, communication card, audio card and cables. The communication
server contains application software to initiate directly the transfer of
audio or textual information, and the facilities to output a text message to a
printer or an audio file to the appropriate audio equipment. The Company
installs and maintains the communication server for a nominal fee and also
installs the required telephone lines. The communication server can be
interfaced with third party systems so that it can be controlled directly from
these systems.
The function of the network control center is to maintain the serviceability
of the network to its clients. When a client initiates a send, the package
containing the audio, text and data along with destination addresses is
transmitted to a communication server called a hub located at the network
control center and is queued for delivery to the end sites. The delivery of
the package to the end site is initiated automatically within the delivery
time requested. If the hub is unable to complete delivery to the end site, an
alarm condition is created and the Company's support staff "initiates
corrective action" to ensure delivery. In the event that delivery cannot be
made within the time requested, the customer support department calls the
customer to discuss alternative methods of delivery. The network is supported
on a twenty-four hour per day, seven day per week basis using the latest
network management and computer technology.
In addition to providing customer support, the staff in the network control
center provides additional network management services to its clients. As new
clients are signed to the network, revised distribution lists are sent to all
network sites and automatically updated. In a similar manner, the complete
network can be upgraded with new software features or updates from its
centralized facility.
When transactions on the network are completed, the details of the
transaction are automatically recorded and stored in a transaction log. On a
regular basis, the contents of the transaction log are forwarded from the
operating center to the Company's billing department. The billing department
utilizes a billing processor to automatically generate customer invoices which
provide the client with a detailed list of all transactions, the time of
delivery, priority of service and price. Billing is conducted on a per
transaction basis.
See "Risk Factors--Dependence on Technological Developments; Licensing of
Technology" and "--Need to Maintain and Improve Service Quality" and "--
Dependence on Proprietary Technology; Risk of Third Party Claims of
Infringement" for a discussion of certain risks related to the Company's
network and services.
STRATEGIC ALLIANCES AND RELATIONSHIPS
The Company and Arbitron have entered into substantive discussions to
consider the development of a joint venture that will provide new products and
services to advertising agencies, rep companies and radio station groups.
Arbitron is a leading research firm providing information services that
measure and refine the local marketing strategies of the electronic media and
of their advertisers and advertising agencies. The proposed joint venture
intends to utilize Arbitron's industry knowledge and relationships and Digital
Courier's communications expertise. There can be no assurances, however, that
the Company and Arbitron will enter into definitive
34
<PAGE>
agreements regarding the joint venture, or that if developed, it will be
successful. See "Risk Factors--Dependence on Emerging Markets; Arbitron."
The Company utilized SHL Systemhouse Inc. ("SHL"), a systems integration
subsidiary of MCI, to assist it in the design of its network to accommodate
planned applications. Digital Courier plans to make further use of SHL's
services to develop new applications for the radio broadcast and advertising
industries.
Digital Courier also has an agreement with Sidus Systems Inc. ("Sidus"),
Canada's largest manufacturer of PCs, for the manufacture, integration, support
and maintenance of its communication servers. Sidus manufactures the PCs,
integrates the communication and audio card, and loads the required software
into the system. Sidus provides a "just in time" manufacturing service for
Digital Courier which significantly reduces Digital Courier's manufacturing and
related costs. In addition, Digital Courier has a service contract with Sidus
for next day on-site repair anywhere in North America.
See "Risk Factors--Dependence on Certain Suppliers" for a discussion of
certain risks related to the Company's suppliers.
SALES/MARKETING AND CUSTOMER SERVICE
Sales
Digital Courier utilizes its internal sales force to sign distributors of
audio in Canada and the United States to its network. Digital Courier has
completed the installation of its network into a large majority of radio
stations in Canada, and primarily uses an independent vendor to sign radio
stations in the United States to its network. Digital Courier provides the
vendor with targeted lists of stations that correspond to the distribution
lists provided to the Company from its major senders. The vendor is compensated
on a base salary with incentives for meeting station sign-up milestones and
reports directly to the Vice President of Sales. The Company's internal sales
force manages distributors on an account basis.
Once stations and distributors are signed to the network, equipment is
configured, built and shipped to the site for installation. Training for radio
stations and small distributors is normally done via telephone, while on- site
assistance is provided to major distributors. The typical time from signing to
installation is three to four weeks.
Marketing
Digital Courier's marketing currently is targeted at providing major
distributors of audio and programming with the ability to distribute their
content electronically. The marketing department trains the distributors' sales
teams on the benefits and use of the Digital Courier network so that the sales
teams can sell the service to their advertising accounts. Digital Courier
promotes the Digital Courier network to advertising agencies by direct mail,
advertising and trade shows, and provides lists of authorized distributors to
advertisers so that they can select their choice of distributor. Utilizing this
approach, Digital Courier is able to significantly leverage its sales force by
having the sales forces of its distributors promote the Digital Courier
services to the advertising agencies.
Customer Service
The Company places significant importance on the need to complete every
transaction on time and to provide alternative possibilities for delivery in
the event of equipment failure. A team of 10 persons supports the network
operating center and provides immediate notification and problem resolution to
its customers. If a transmission is not successfully completed, an alarm is
sounded in the operation center. The operator who responds to the alarm
documents the problem and contacts the receive site to see if the problem is
easily rectified. If the problem is corrected, the operator re-sends the file.
If the problem cannot be corrected, the operator will immediately contact the
sender and provide options for the delivery of the file. If the file cannot be
successfully transmitted, Digital Courier will arrange for the physical
delivery to be completed by one of its large distributor customers.
All problems encountered in network operations are logged and reviewed with
engineering, quality assurance, and network operations to take corrective
action to ensure that the problem will not re-occur. Network statistics are
compiled and reviewed on a weekly basis with the senior management of the
Company.
35
<PAGE>
Digital Courier also provides training on all aspects of network electronic
distribution, communications and its value added software, as well as full 24
hour/7 days per week network support to enable these organizations to perform
their services whenever necessary.
The Company has a Quality Assurance Manager that reports directly to the
President and monitors customer satisfaction. Weekly meetings are held with
the entire executive staff to review the quality assurance program, and a
program of continuous improvement has been put in place. Quality objectives
are integral to the Company's business plan and form a part of the bonus
compensation plan for the complete organization. See "Risk Factors--Dependence
on Technological Developments; Licensing of Technology" and "--Need to
Maintain and Improve Service Quality" for a discussion of certain risks
related to the Company's sales, marketing and customer service.
NETWORK SERVICES DEVELOPMENT
Digital Courier has an internal development group of 17 persons. The
development group is split into a network architecture, application and
technology development. The Company stresses compliance to industry standards,
the use of available technology and products, and the use of expert resources
when required. The Company's Vice President, Engineering has 25 years
experience in the development of large enterprise networks.
Digital Courier has utilized the resources of SHL to develop a network
architecture and migration strategy to position the Digital Courier network to
accommodate future services. The network architecture has been developed to be
fault tolerant, allow scaleability, make appropriate use of operating systems,
minimize operating costs, and to maximize network management and reliability
data. Digital Courier intends to continue to utilize SHL as a key contractor
for future network design services. See "Risk Factors--Dependence on
Technological Development; Licensing of Technology."
COMPETITION
The Company currently provides communications services to the highly
competitive market for the distribution of audio advertising spots and short-
form programming to radio stations. The principal competitive factors
affecting this market are ease of use, price, audio quality, and timeliness
and accuracy of delivery. The Company's principal competitor in this market is
Digital Generation Systems which operates primarily in the United States and
currently has a large established electronic network. Other competitors
include overnight couriers, such as Federal Express, which traditionally have
been the primary means for delivery of audio advertising spots and short-form
programming to radio stations. The Company may also compete with satellite
distribution providers such as Virtex.
The Company also intends to compete in the market for providing electronic
work flow applications for advertising agencies and rep companies and
additional services to support inter-station communications between major
radio station groups. To the extent that the Company is successful in entering
new markets, it would expect to face competition from companies in related
communications markets and/or package delivery markets which could offer
products and services with functionality similar or superior to that offered
by the Company's products and services. The Company may also compete with
national data network providers that may sell their network services to the
Company's existing and proposed customers. In addition, telecommunications
providers and organizations such as AT&T, MCI, Microsoft and the Regional Bell
Operating Companies could enter the market as competitors with materially
lower electronic delivery transportation costs. Radio networks could also
become competitors by selling and transmitting advertisements as a complement
to their content programming.
Many of the Company's current and potential competitors in the markets for
audio transmissions have substantially greater financial, technical, marketing
and other resources and larger installed customer bases than the Company.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors based on these and other
factors. The Company expects that an increasingly competitive environment will
result in price reductions that could result in reduced profit margins and
loss of market share, which would have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
the market for the distribution of audio transmissions has become increasingly
concentrated in recent years as a result of acquisitions, which are likely to
permit many of the Company's
36
<PAGE>
competitors to devote significantly greater resources to the development and
marketing of new competitive products and services. The Company expects that
competition will increase substantially as a result of these and other
industry consolidations and alliances, as well as the emergence of new
competitors. There can be no assurance that the Company will be able to
compete successfully with new or existing competitors or that competitive
pressures faced by the Company will not materially and adversely affect its
business, financial condition and results of operations.
INTELLECTUAL PROPERTY AND PROPERTY RIGHTS
The Company considers its products, technology, trademarks, copyrights,
advertising, and promotion design and artwork to be of value and important to
its business. The Company relies on a combination of trade secret, copyright
and trademark laws and nondisclosure and other arrangements to protect its
proprietary rights. Because the Company's business is characterized by rapid
technological change, the Company believes that factors such as the
technological and creative skills of its personnel, new computer hardware,
software and telecommunications developments, frequent hardware and software
enhancements, name recognition, and reliable customer service and support may
be more important to establishing and maintaining a leadership position than
the various legal protections of its technology. The Company does not have any
patents or patent applications pending. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy or
obtain and use information that the Company regards as proprietary. There can
be no assurance that the steps taken by the Company to protect its proprietary
information will prevent misappropriation of such information, and such steps
may not preclude competitors from developing confusingly similar brand names
or promotional materials or developing products and services similar to those
of the Company. In addition, the laws of some foreign countries do not protect
the Company's proprietary rights to the same extent as do the laws of the
United States and Canada. There can be no assurance that the Company will not
receive future claims from third parties asserting that the Company's
products, technology, trademarks, copyrights, advertising and promotion design
and artwork infringe, or may infringe, the proprietary rights of third
parties. No assurance can be given that any necessary licenses can be obtained
or that, if obtainable, such licenses can be obtained on commercially
reasonable terms. Any such claims, with or without merit, could be time-
consuming, require the Company to enter into royalty arrangements or result in
costly litigation and diversion of management personnel, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
EMPLOYEES
The Company is comprised of five divisions (marketing, sales, network
operations, engineering and corporate administration) and employs a diverse
work-group of 40 employees. The Company's employees are not parties to any
union or collective bargaining contract. The Company believes that its
relationships with its employees are good. See "Risk Factors--Ability to
Manage Growth" and "-- Dependence on Key Personnel."
In addition to its regular work force, Digital Courier contracts with 13
individuals for sales and installation support. The Company also has a service
contract with an independent vendor based in Dallas, Texas, who provides sales
services for signing up radio stations in the U.S. to the Digital Courier
network. This vendor has four employees. See "Risk Factors--Dependence on
Certain Suppliers."
FACILITIES
The Company currently leases premises located in Burnaby, British Columbia,
Canada. The lease provides for the occupancy of 9,300 square feet and expires
in December 1996. The Company believes that additional space will be available
to it as the need arises. The Company's computer equipment is located on
premises in a secure location. Digital Courier plans to install additional
equipment in secure communications facilities outside of its premises in
Canada and the United States to reduce operating costs and to achieve a higher
degree of network security and fault tolerance. See "Risk Factors--Need to
Maintain and Improve Service Quality."
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning each person who is
presently an executive officer, key employee or director of the Company. All
officers and directors hold their offices until their respective successors
are elected and qualified, or until their earlier resignation or removal.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS:
E. Lynn Patterson........ Chairman and Chief Executive Officer 51
Allan J. Kozak........... President and Chief Operating Officer 46
Edward D. Ford(1)........ Vice President, Finance, Chief Financial Officer
and Director 60
Remy D. Kozak............ Vice President, Marketing 30
Neil M. Johnson.......... Vice President, Engineering 41
Bruce D. Maxwell......... Vice President, Network Operations 56
R. Mark Burns............ Vice President, Sales 46
L. C. (Len) Fowler....... Corporate Secretary 52
Ian R. Bardsley(2)....... Director 47
Samuel L. Duboc(1)(2).... Director 34
James W. Peters(1)....... Director 45
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
E. Lynn Patterson, Vancouver, B.C., Canada, has served as Chairman and Chief
Executive Officer of the Company since March 1996. Prior to such time, Mr.
Patterson served in various management positions within the BC TELECOM group
of companies for 31 years, including President and Chief Operating Officer of
BC TEL, a wholly-owned subsidiary of BC TELECOM. Mr. Patterson is a director
and a member of the Human Resource and Compensation Committee of NAV CANADA, a
company which is privatizing the air traffic control system of Canada.
Allan J. Kozak, Maple Ridge, B.C., Canada, the founder of the Company, has
served as President and Chief Operating Officer of the Company since March
1996. Prior to such time, between 1982 and 1995 Mr. Kozak held various
management positions at MPR, including heading up the Digital Courier
development team of MPR.
Edward D. Ford, Whistler, B.C., Canada, has served as Vice President,
Finance and Chief Financial Officer of the Company since March 1996. Mr. Ford
served as President and Secretary of Kwikstar from inception to September 1994
and as a director of the Company from inception. A Chartered Accountant with
over 35 years business experience, Mr. Ford has served as President since 1986
of Enterprise Developments Inc., a merchant banking and venture capital
operations primarily involved in technology enterprises. Mr. Ford was a senior
partner at Ford Teleske and Company, an accounting firm, from 1970 to November
1992. Mr. Ford is a director of each of Kinesys Pharmaceutical Corporation, a
pharmaceutical company, and Terra West Industries Ltd., an exploration
company.
Remy D. Kozak, Vancouver, B.C., Canada, has served as Vice President,
Marketing of the Company since March 1996 and had been with the Digital
Courier development team of MPR since January 1994. From October 1992 to
February 1994, he led the marketing efforts of the Digital Products Division,
which focused on high speed Asynchronous Transfer Mode products. Mr. Kozak
received an MBA from the University of British Columbia in 1992, a diploma in
International Management studies from Hautes Etudes Commerciales of Paris in
1991 and a B.A.Sc. in Communications Engineering from Simon Fraser University
in 1988.
Neil M. Johnson, Coquitlam, B.C., Canada, has served as Vice President,
Engineering of the Company since June 1996. Previously, Mr. Johnson served as
Manager of Technology at SHL from July 1993 to May 1996. Prior to such time,
Mr. Johnson served in various positions with Digital Equipment of Canada from
1978 to 1993, most recently as a Technology Consultant.
38
<PAGE>
Bruce D. Maxwell, Vancouver, B.C., Canada, has served as Vice President,
Network Operations of the Company since March 1996 and has over 20 years
experience in information systems management. Prior to joining the Company,
Mr. Maxwell was employed at Glenayre Manufacturing Ltd., from October 1987 to
July 1994.
R. Mark Burns, Belcarra, B.C., Canada, has served as Vice President, Sales
of the Company since March 1996. Prior to that, Mr. Burns held various sales
management positions at MPR since May 1994. Mr. Burns was a freelance writer
and broadcaster from March 1993 to May 1994. From September 1991 to March
1993, Mr. Burns was employed by CHUM Ltd. as the morning anchor for CHQM FM in
Vancouver. From October 1990 to September 1991, Mr. Burns was employed by
Monarch Broadcasting as Director of News and Public Affairs for CKKL/CKST
Radio.
L.C. (Len) Fowler, White Rock, B.C., Canada, has served as Corporate
Secretary of the Company since March 1996. Prior to such time, Mr. Fowler
served as President, Secretary and as a director of Kwikstar from September
30, 1994 to November 15, 1995 and continued as a director of the Company
thereafter. Mr. Fowler has been Director and Secretary of E.E. Rand & Fowler
Ltd., an investment company, since 1989 and has been President and Director of
Rand & Fowler Inc., a real estate company, since inception.
Ian R. Bardsley, Port Coquitlam, B.C., Canada, has served as a director of
the Company since November 1995. Mr. Bardsley has served in various management
positions with MPR since 1984, most recently serving as President of MPR since
February 1996.
Samuel L. Duboc, Toronto, Ontario, Canada, has served as a director of the
Company since November 1995. Mr. Duboc has been an officer of CIBC Wood Gundy
Capital since January 1994 and a Managing Director of a Canadian chartered
bank since June 1995. Mr. Duboc previously served from April 1991 to January
1994 as Executive Vice President and Chief Operating Officer of Loyalty
Management Group Canada Inc., a marketing consulting company. From April 1990
to April 1991, Mr. Duboc was Executive Vice President of Holzman Incorporated,
a retail jewelry company.
James W. Peters, Burnaby, B.C., Canada, has been a director of the Company
since November 1995. Mr. Peters has served as Vice President of Corporate
Planning and Mergers & Acquisitions of BC TELECOM since September 1995. Mr.
Peters is a director of MPR, and previously served as Assistant Vice
President, Director of Mergers and Acquisitions of BC TEL from 1991 to
September, 1995.
SHAREHOLDERS AGREEMENT
Pursuant to a Shareholders Agreement dated April 4, 1996 among MPR, CIBC
Wood Gundy Capital and 945, MPR, CIBC Wood Gundy Capital and 945 agreed to
vote their Common Shares to elect two directors nominated by MPR, two
directors nominated by 945, one director nominated by CIBC Wood Gundy Capital,
and one outside director elected by a majority of the Board. Ian Bardsley and
James Peters are the nominees of MPR, Samuel Duboc is the nominee of CIBC Wood
Gundy Capital and Lynn Patterson and Edward Ford are the nominees of 945. The
shareholders agreed to amend the Bylaws to require a two-thirds majority and
unanimous approval for certain actions by the Board of Directors. In addition,
the shareholders agreed to use their best efforts to cause their nominees to
elect Lynn Patterson as Chairman and Chief Executive Officer of the Company
and Edward Ford as Vice President, Finance, and Chief Financial Officer of the
Company. This agreement terminates on date of listing of the Common Shares on
either The Toronto Stock Exchange or the Nasdaq National Market. In connection
with this offering, the Company is applying for listing on the Nasdaq National
Market.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The Company began its current operations after its acquisition of DCI on
November 15, 1995. Len Fowler, the Corporate Secretary of the Company, was the
President and Secretary of the Company until November 15, 1995. Mr. Fowler was
paid no compensation and received no stock options from the Company from its
39
<PAGE>
incorporation until the completion of the Company's fiscal year ending
September 30, 1995. No remuneration was paid and no stock options were granted
to any of the current directors of the Company, in their capacity as
directors, during the fiscal year ended September 30, 1995. No director or
executive officer of the Company was indebted to the Company during the fiscal
year ended September 30, 1995.
For the six months ended March 31, 1996, the Company's eleven executive
officers and directors received an aggregate of $215,939 in cash compensation.
Included in such amount is $69,425 paid to Lynn Patterson & Associates Inc., a
company wholly owned by Lynn Patterson, and distributed to certain executive
officers.
EMPLOYMENT CONTRACTS
The Company has entered into written employment contracts for the services
of each of Lynn Patterson, Chairman and Chief Executive Officer, and Allan
Kozak, President and Chief Operating Officer. Under the terms of these
employment contracts, Mr. Patterson and Mr. Kozak are entitled to receive an
annual salary of $ and $ , respectively, subject to annual review and to
participate in the Company's management bonus program. Under this program,
such officers are entitled to receive a cash incentive bonus equal to 30% of
their annual salary if the Company has positive cash flow in the last two
months of calendar 1996. Such employees are subject to confidentiality and
non-competition provisions. Such employment contracts may be terminated by the
Company for cause or on one year prior written notice without cause and may be
terminated by Mr. Patterson or Mr. Kozak, as the case be, on not less than
months prior written notice.
The services of each of Edward Ford, Vice President, Finance and Chief
Financial Officer, and Len Fowler, Corporate Secretary, are provided pursuant
to Management Agreements with Mr. Ford and Rand & Fowler Inc., respectively.
These Management Agreements are for a term of three years with automatic
renewal for successive one year terms unless prior notice is given by the
Company or by Mr. Ford or Rand & Fowler Inc., as the case may be. Under the
Management Agreements, Mr. Ford has agreed to provide his services and Rand &
Fowler Inc. has agreed to provide the services of Mr. Fowler for a minimum of
160 days per year for a per day amount of $450. This amount may be increased
to $550 per day after November 15, 1996 and to $650 per day after November 15,
1997 subject to positive cash flow and net income being generated by the
Company.
Other key employees of the Company are parties to written employment
agreements pursuant to which such employees have acknowledged the proprietary
nature of the Company's technology and agreed to keep the technology and
information relating thereto in confidence.
STOCK OPTIONS
1994 Incentive Stock Option Plan. In September 1994, the Board adopted the
1994 Incentive Stock Option Plan (the "1994 Plan") which was approved by the
shareholders in September 1994. The Board reserved ten percent (10%) of the
issued and outstanding Common Shares on a non-diluted basis for issuance under
the 1994 Plan. Such reservation increases or decreases as the number of issued
and outstanding Common Shares increases or decreases. The Board granted
options to purchase an aggregate of 1,405,555 Common Shares pursuant to the
1994 Plan, of which options to purchase an aggregate of 155,555 Common Shares
have been exercised and options to purchase an aggregate of 1,250,000 Common
Shares remain outstanding. The outstanding options under the 1994 Plan have a
term of five years from the date of grant. The Board has terminated the 1994
Plan and will not issue any further options under the 1994 Plan. On June 25,
1996 the Board adopted the 1996 Stock Option Plan for the purpose of granting
any future options to purchase Common Shares to directors, officers, employees
and consultants.
40
<PAGE>
There are currently outstanding options to purchase an aggregate of
1,250,000 Common Shares held by the executive officers and employees of the
Company. No directors of the Company who are not executive officers hold any
options. The following table sets forth details of such outstanding options:
<TABLE>
<CAPTION>
DESIGNATION NUMBER OF COMMON EXERCISE MARKET VALUE ON DATE
OF OPTIONEE SHARES UNDER OPTION PRICE EXPIRY DATE VESTING DATE OF GRANT
- ----------- ------------------- -------- ----------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Executive Officers
(4 persons)............ 362,316 $1.25 3/6/2001 3/6/96 $7.50
(2 persons)............ 26,000 $1.25 5/6/1999 3/6/97 $7.50
(4 persons)............ 191,167 $2.00 3/6/2001 3/6/97 $7.50
(4 persons)............ 191,167 $3.00 3/6/2001 9/30/97 $7.50
(4 persons)............ 190,402 $4.00 3/6/2001 9/30/97 $7.50
(4 persons)............ 185,450 $5.00 3/6/2001 9/30/97 $7.50
Employees
(30 persons)........... 103,500 $1.25 5/6/1999 3/6/97 $7.50
TOTAL:.................. 1,250,000
=========
</TABLE>
Each of the above options is not assignable or transferable and shall
terminate upon the expiration of one year following the death of the holder of
the option or 30 days following the date the holder of the option ceases to be
a director, officer or full time employee of the Company.
1996 Stock Option Plan. In June 1996, the Board adopted the 1996 Stock
Option Plan (the "Option Plan") and reserved shares for issuance under the
Option Plan that number of Common Shares equal to the lesser of (i) 500,000
Common Shares and (ii) that number of Common Shares which, taken together with
those Common Shares subject to issuance under any other employee related plan
of the Company including the 1994 Plan, equals 10% of the total Common Shares
issued and outstanding from time to time. The Option Plan provides for grants
of stock options to employees (including officers and employee directors) and
consultants of the Company. It is intended that the Option Plan will be
administered by the Compensation Committee, which determines recipients and
types of awards to be granted, including the exercise price, number of Common
Shares subject to the award, the earliest exercise date, the latest exercise
date and the percentage of Common Shares exerciseable in any given year.
The term of a stock option granted under the Option Plan generally may not
exceed 10 years. The exercise price of options granted under the Option Plan
is determined by the Board of Directors, but, cannot be less than 100% of the
closing market price of the Common Shares on the date of grant. No option may
be transferred by the optionee other than by will or the laws of descent or
distribution. An optionee whose relationship with the Company or any related
corporation ceases for any reason (other than by death or disability) may
exercise options in the 30 day period following such cessation (unless such
options terminate or expire sooner by their terms).
In the event of a merger or consolidation involving the Company in which the
Company is not the surviving corporation, reverse merger, or liquidation or
sale of substantially all of the assets of the Company, all outstanding awards
under the Option Plan shall either be assumed or substituted by the surviving
entity or such awards will continue in full force and effect. If the surviving
entity determines not to assume or substitute such awards, the time during
which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to the merger or consolidation.
The Option Plan is subject to shareholder and regulatory approval. As of
June 30, 1996, there were no outstanding options under the Option Plan. The
Option Plan will terminate on June 25, 2006, unless terminated sooner by the
Board of Directors.
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<PAGE>
Amended Performance Incentive Plan. In connection with its acquisition of
DCI, the Board adopted the Performance Incentive Plan in November 1995, which
was later amended in June, 1996 in order to retain and motivate the employees
of DCI. Pursuant to the Performance Plan, the Company sold the DCI employees
an aggregate of 600,000 Common Shares (the "Shares") at a purchase price of
$0.05 per share. The Shares were placed in trust to be distributed to each
employee quarterly. The trustee for the Amended Performance Incentive Plan is
Edward Ford, Vice President, Finance, and Chief Financial Officer and a
director of the Company. As trustee, Edward Ford is the registered shareholder
of the Shares and has the power to vote on all matters.
Pursuant to the terms of the Amended Performance Incentive Plan, the Company
has a right to repurchase the Shares which remain in the trust at $0.05 per
share if an employee's employment with the Company is terminated for any
reason. Such right of repurchase lapses as to 1/48 of the original number of
Shares for each employee each month. If the Company's right of repurchase has
lapsed as to certain Shares, but such Shares have not been distributed from
the trust when an employee's employment terminates, the Company may still
repurchase such Shares with the consent of the employee for the fair market
value of such shares at the end of the immediately preceding fiscal year. The
Company repurchased an aggregate of 11,400 Shares from certain employees. All
Shares repurchased by the Company shall be cancelled.
The first distribution of the Shares to employees will occur on June 30,
1996 when an aggregate of 198,583 Shares will be released to certain
employees. Each quarter thereafter, 36,788 Shares will be released to certain
employees through February 1, 1999, when 3,706 Common Shares will be released
to certain employees each quarter through October 1, 1999, when all of the
Shares will be completely distributed.
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<PAGE>
CERTAIN TRANSACTIONS
On November 15, 1995, DCI and MPR entered into the Technology Transfer and
Licensing Agreement (the "Technology Agreement") and the Asset Transfer
Agreement (the "Asset Agreement" and together with the Technology Agreement
the "Agreements") pursuant to which DCI acquired certain assets and
intellectual property rights and assumed certain liabilities of MPR in
exchange for an aggregate of 4,046,515 Common Shares of DCI and 2,000,000
Preferred Shares, Series 1 of DCI, each with a value of $1.00 per share.
Pursuant to the Technology Agreement, MPR transferred all of its ownership
rights in certain software copyrights, source code, hardware technical
information, third party licenses and trademarks to DCI in exchange for
3,338,578 Common Shares of DCI and 2,000,000 Preferred Shares, Series 1 of
DCI. DCI's rights to certain intellectual property rights were subject to a
license back to MPR and BC TEL for their existing activities. MPR also agreed
not to compete with DCI for two years. Pursuant to the Asset Agreement, MPR
transferred its ownership rights in certain equipment and contracts with
customers in exchange for 707,937 Common Shares of DCI. James Peters, a
director of the Company, is Vice President of Corporate Planning and Mergers &
Acquisitions of BC TELECOM, and Ian Bardsley, a director of the Company, is
President of MPR.
On November 15, 1995, DCI and MPR entered into Subscription Agreements with
each of CIBC Wood Gundy Capital and 945 pursuant to which DCI issued to such
investors an aggregate of 6,000,000 Common Shares for an aggregate of
$6,000,000. Pursuant to such agreements, DCI issued an aggregate of 4,000,000
Common Shares to CIBC Wood Gundy Capital for a purchase price of $1.25 per
share and issued 2,000,000 Common Shares to 945 for a purchase price of $0.50
per share. On November 15, 1995, Kwikstar entered into Share Purchase
Agreements with MPR, 945, CIBC Wood Gundy Capital and Ian Bardsley, as trustee
of the Amended Performance Incentive Plan, whereby such shareholders exchanged
all of the issued and outstanding Common Shares and Preferred Shares of DCI
for 10,646,515 Common Shares of Kwikstar and 2,000,000 Preferred Shares,
Series 1 of Kwikstar. James Peters, a director of the Company, is Vice
President of Corporate Planning and acquisitions of BC TELECOM and Ian
Bardsley, a director of the Company, is President of MPR. Samuel Duboc, a
director of the Company, is an officer of CIBC Wood Gundy Capital. Edward
Ford, Vice President, Finance, and Chief Financial Officer of the Company, was
an officer and sole shareholder of 945 at the time of such transaction. Upon
completion of this transaction, Kwikstar changed its name to Digital Courier
International Corporation.
On November 15, 1995, MPR entered into the Indemnity Sharing Agreement (the
"Indemnity Agreement") with DCI, CIBC Wood Gundy Capital, 945 and Kwikstar
(collectively, the "Indemnitees") whereby MPR agreed to indemnify the
Indemnitees up to an aggregate of $6,600,000 for any claim of loss relating to
a breach of representations and warranties made by MPR to the Indemnitees in
connection with the initial funding of DCI and the acquisition of DCI by the
Company. James Peters, a director of the Company, is Vice President of
Corporate Planning and Mergers & Acquisitions of BC TELECOM and Ian Bardsley,
a director of the Company, is President of MPR. Samuel Duboc, a director of
the Company, is an officer of CIBC Wood Gundy Capital. Edward Ford, Vice
President, Finance, and Chief Financial Officer of the Company, was an officer
and sole shareholder of 945 at the time of such transaction.
On November 15, 1995, the Company and MPR entered into the Support Services
Agreement pursuant to which the MPR agreed to provide DCI with certain
administrative services and manufacturing management services and DCI agreed
to provide technical support for certain of MPR's customers. The term of such
agreement is for two years or terminable upon notice by MPR. From November
1995 through March 1996, the Company acquired services worth $671,000 and
materials worth $1,237,000 pursuant to this agreement. The Support Services
Agreement was amended on May 1, 1996. James Peters, a director of the Company,
is Vice President of Corporate Planning and Mergers & Acquisitions of BC
TELECOM and Ian Bardsley, a director of the Company, is President of MPR.
On November 8, 1995, MPR transferred and assigned to DCI the premises which
MPR had leased pursuant to an October 15, 1994 amendment to the Lease
Agreement between 2725321 Canada, Inc. and MPR. The lease for the premises
assigned to DCI expires on December 31, 1996. The monthly rent for the
premises assigned to
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<PAGE>
DCI is $8,540. James Peters, a director of the Company, is Vice President of
Corporate Planning and Mergers & Acquisitions of BC Telecom and Ian Bardsley,
a director of the Company, is President of MPR.
On November 8, 1995, Kwikstar, DCI and Telecom Leasing Canada (TLC) Limited
("TLC"), a wholly-owned subsidiary of BC TEL Securities Inc., which is a
wholly-owned subsidiary of BC TELECOM, entered into a Master Leasing Agreement
to allow Kwikstar and DCI to finance the purchase of network equipment over
three years. Pursuant to this agreement, TLC has made a total of $10,000,000
available to Kwikstar and DCI to finance the purchase of network equipment.
James Peters, a director of the Company, is Vice President of Corporate
Planning and Mergers & Acquisitions of BC TELECOM and Ian Bardsley, a director
of the Company, is President of MPR.
In connection with its acquisition of DCI, the Company entered into a
Finders Fee Agreement with 667794 Alberta Ltd. ("Altaco") pursuant to which
the Company issued Altaco 77,223 Common Shares with a per share value of $0.66
in consideration for introducing the Company to DCI. E. Lynn Patterson,
Chairman and Chief Executive Officer of the Company, is President and sole
shareholder of Altaco.
The Company uses BC TEL, a wholly-owned subsidiary of BC TELECOM, as its
long distance telephone service provider. The Company paid BC TEL
approximately $106,000 for its long distance service in the first four months
of 1996. James Peters, a director of the Company, is Vice President of
Corporate Planning and Mergers & Acquisitions of BC TELECOM and Ian Bardsley,
a director of the Company, is President of MPR.
The Company has agreed to repurchase the 2,000,000 issued and outstanding
Preferred Shares, Series 1 held by MPR for $2.25 million with a portion of the
proceeds from this offering. James Peters, a director of the Company, is Vice
President of Corporate Planning and Mergers & Acquisitions of BC TELECOM and
Ian Bardsley, a director of the Company, is President of MPR.
The Company has entered into indemnification agreements with its directors
and certain executive officers.
44
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Shares as of June
30, 1996 and as adjusted to reflect the sale of 4,500,000 Common Shares
offered by the Company hereby, by (i) each executive officer and each director
of the Company and certain entities related to such persons, (ii) all
executive officers and directors as a group, (iii) each person who is known by
the Company to own beneficially five percent or more of the Company's Common
Shares ("5% Shareholders") and (iv) each Selling Shareholder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) NUMBER AFTER THE OFFERING(1)
--------------------------- OF -------------------------
NUMBER OF PERCENT OF SHARES NUMBER OF PERCENT OF
SHARES TOTAL OFFERED SHARES TOTAL
-------------- ------------ ------- ------------- -----------
<S> <C> <C> <C> <C>
Entities affiliated with BC TELECOM Inc.(2)........... 4,046,515 32.4% 800,000 3,246,515 19.1%
MPR Teltech Ltd.
James W. Peters
Ian R. Bardsley
8999 Nelson Way
Burnaby, British Columbia
V5A AB5, Canada
CIBC Wood Gundy Capital (SFC) Inc.(3)................. 4,000,000 32.0% 800,000 3,200,000 18.8%
Samuel L. Duboc
BCE Place
P.O. Box 500
161 Bay Street, 6th floor
Toronto, Ontario
MSJ 258, Canada
945 Investments Ltd.(4)............................... 2,000,000 16.0% --(4) -- *
James N. Morton
1750 750 West Pender Street
Vancouver, British Columbia
V6C 2T8, Canada
Oceanstar Capital Management Corporation(5)........... 1,300,000 10.4% 260,000 1,040,000 6.1%
Sixth Floor, Trade Winds Building
Bay Street, P.O. Bos N-8220
Nassau, Bahamas
Edward D. Ford(6)..................................... 616,373 4.9% -- 616,373 3.6%
RSV Enterprises Ltd.(7)............................... 411,111 3.3% 60,000 351,111 2.1%
1419 Main Street
North Vancouver, British Columbia
V7J 1C9, Canada
E. Lynn Patterson(8).................................. 315,495 2.5% -- 315,495 1.8%
Pacific Sea Treasures Ltd.(9)......................... 311,111 2.5% 40,000 271,111
6139 Trapp Ave.
Burnaby, British Columbia,
V3N 2V3, Canada 1.6%
Allan J. Kozak(10).................................... 282,500 3.8% -- 282,500 2.8%
L. C. (Len) Fowler(11)................................ 226,555 1.8% -- 226,555 1.3%
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) NUMBER AFTER THE OFFERING(1)
--------------------------- OF -------------------------
NUMBER OF PERCENT OF SHARES NUMBER OF PERCENT OF
SHARES TOTAL OFFERED SHARES TOTAL
-------------- ------------ --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Thomas F. Orr(12)....... 200,000 1.6% 40,000 160,000 *
62 Ann of Cleaves
Hampton Court, United
Kingdom
Bruce D. Maxwell(13).... 75,000 * -- 75,000 *
R. Mark Burns(13)....... 75,000 * -- 75,000 *
Remy D. Kozak(13)....... 75,000 * -- 75,000 *
James W. Peters(14)..... -- * -- -- *
Ian R. Bardsley(14)..... -- * -- -- *
Samuel L. Duboc(15)..... -- * -- -- *
Neil M. Johnson(16)..... 400 * -- 400 *
All executive officers
and directors as a
group
(11 persons)(17)....... 9,438,360 72.9% 1,600,000 7,838,360 45.2%
</TABLE>
- --------
* Represents less than 1% of the outstanding Common Shares.
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all
Common Shares shown as beneficially owned by them, subject to community
property laws where applicable. In accordance with the rules of the
Securities and Exchange Commission, each shareholder is deemed to
beneficially own any Common Shares subject to options, warrants or other
rights which are currently exercisable or which become exercisable within
60 days of June 30, 1996. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership. Percentages of ownership assume no exercise of the
Underwriters' over-allotment option to purchase up to an aggregate of
975,000 Common Shares from the Selling Shareholders. Does not include
2,000,000 Preferred Shares, Series 1 held by MPR. Percentages are based
on 12,490,115 Common Shares outstanding as of June 25, 1996 and
16,990,115 Common Shares outstanding after the completion of this
Offering.
(2) Excludes 2,000,000 Preferred Shares which the Company intends to purchase
at the closing of this offering. See "Use of Proceeds." Includes
4,046,515 Common Shares held by MPR. MPR is a wholly-owned subsidiary of
BC TELECOM. Anglo-Canadian Inc. owns 50.1% of BC TELECOM. Anglo-Canadian
Inc. is a wholly-owned subsidiary of GTE Corporation. Mr. Peters, a
director of the Company, is Vice President of Corporate Planning and
Mergers & Acquisitions of BC TELECOM. Mr. Bardsley is President of MPR.
Both Mr. Peters and Mr. Bardsley disclaim beneficial ownership of the
shares held by MPR except to the extent of each of their pecuniary
interests therein. Includes 2,034,886 of the Common Shares held by MPR
which are held in escrow pursuant to the Escrow II Agreement. The Common
Shares notes are held "of record and beneficially."
(3) CIBC Wood Gundy Capital is controlled by a Canadian chartered bank. Mr.
Duboc, a director of the Company, is an officer of CIBC Wood Gundy
Capital and is a Managing Director of such Canadian chartered bank. Mr.
Duboc disclaims beneficial ownership of the shares held by CIBC Wood
Gundy Capital except to the extent of his pecuniary interests therein.
The Common Shares noted are held "of record and beneficially."
(4) Includes an aggregate of 2,000,000 Common Shares held in trust for the
benefit of Oceanstar Capital Management Corporation, RSV Enterprises
Ltd., Thomas F. Orr and Pacific Sea Treasures Ltd. Includes 1,000,000
Common Shares held in trust by 945 which are held in escrow by Montreal
Trust pursuant to the terms of the Escrow II Agreement. Immediately prior
to the closing of this offering, the remaining 600,000 Common Shares held
in trust by 945 will be distributed to the beneficial owners of such
Common Shares pursuant to the terms of the 945 Trust Agreement dated June
20, 1996 (the "945 Trust"). The Common Shares noted are held "of record
and beneficially."
(5) All of the Common Shares held by Oceanstar Capital Management Corporation
("Oceanstar") are held in trust by 945. Includes 650,000 Common Shares
held in trust by 945 for Oceanstar which are held in escrow
46
<PAGE>
by Montreal Trust pursuant to the terms of Escrow II Agreement. The
remaining 390,000 Common shares held in trust by 945 will be distributed
to Oceanstar immediately prior to the closing of this offering pursuant to
the terms of the 945 Trust.
(6) Includes 81,633 Common Shares which may be acquired within 60 days
pursuant to outstanding options. Includes 111,112 Common Shares which are
held in escrow by Montreal Trust pursuant to the Escrow I Agreement. Also
includes 390,017 Common Shares which Mr. Ford holds in trust for the
benefit of certain employees of the Company pursuant to the terms of the
Amended Performance Incentive Plan. Mr. Ford disclaims beneficial
ownership of such shares.
(7) Includes 111,111 Common Shares held by Rory Vickery which are held in
escrow by Montreal Trust pursuant to the terms of the Escrow I Agreement.
Includes 300,000 Common Shares held by RSV Enterprises Ltd. ("RSV") which
are held in trust by 945. Includes 150,000 Common Shares held in trust by
945 for RSV which are held in escrow by Montreal Trust pursuant to the
terms of the Escrow II Agreement. Rory Vickery is president of RSV. The
remaining 140,000 Common Shares held in trust by 945 will be distributed
to RSV immediately prior to the closing of this offering pursuant to the
terms of the 945 Trust.
(8) Includes 96,050 Common Shares which may be acquired within 60 days
pursuant to outstanding options. Includes 77,223 Common Shares held by
Altaco of which Mr. Patterson is President and sole shareholder. Also
includes 111,111 Common Shares which are held in escrow by Montreal Trust
pursuant to the terms of the Escrow I Agreement. Includes 31,111 Common
Shares which are held by Erica Patterson, Mr. Patterson's wife.
(9) Includes 111,111 Common Shares which are held in escrow by Montreal Trust
pursuant to the terms of the Escrow I Agreement. Also includes 200,000
Common Shares which are held in trust by 945. Includes 100,000 Common
Shares held in trust by 945 for Pacific Sea Treasures Ltd. which are held
in escrow by Montreal Trust pursuant to the terms of Escrow II Agreement.
The remaining 60,000 Common Shares held in trust by 945 will be
distributed to Pacific Sea Treasures Ltd. immediately prior to the
closing of this offering pursuant to the terms of the 945 Trust.
(10) Includes 82,500 Common Shares which may be acquired within 60 days
pursuant to outstanding options. Also includes 129,167 Common Shares
which are held in trust by Edward Ford pursuant to the Amended
Performance Incentive Plan and which are subject to repurchase by the
Company.
(11) Includes 81,633 Common Shares which may be acquired within 60 days
pursuant to outstanding options. Includes 3,000 Common Shares held by
Kimberlee Fowler, Mr. Fowler's daughter. Mr. Fowler disclaims beneficial
ownership of such shares.
(12) Includes 200,000 Common Shares which are held in trust by 945. Includes
100,000 Common Shares held in trust by 945 for Thomas F. Orr which are
held in escrow by Montreal Trust pursuant to the terms of Escrow II
Agreement. The remaining 60,000 Common Shares held in trust by 945 will
be distributed to Mr. Orr immediately prior to the closing of this
offering pursuant to the terms of the 945 Trust.
(13) Includes 48,438 Common Shares which are held in trust by Edward Ford
pursuant to the terms of the Amended Performance Incentive Plan and which
are subject to repurchase by the Company.
(14) Excludes 4,046,515 Common Shares held by MPR, of which 800,000 Common
Shares are being sold in this offering, and 2,000,000 Preferred Shares,
Series 1 held by MPR. See footnote 2.
(15) Excludes 4,000,000 Common Shares held by CIBC Wood Gundy Capital, of
which 800,000 Common Shares are being sold in this offering. See footnote
3.
(16) Includes 400 Common Shares held by Shirley Johnson, Mr. Johnson's wife.
(17) Prior to this offering, includes an aggregate of 8,158,249 Common Shares
held by affiliates of the directors and executive officers of the Company
of which an aggregate of 2,034,886 Common Shares are held in escrow by
Montreal Trust pursuant to the terms of the Escrow II Agreement. Includes
an aggregate of 333,334 Common Shares held in escrow by Montreal Trust
pursuant to the terms of the Escrow I Agreement. Also includes an
aggregate of 341,816 Common Shares which may be acquired within 60 days
pursuant to outstanding options and an aggregate of 115,539 Common Shares
which are held in trust for certain employees by Edward Ford pursuant to
the terms of the Amended Performance Incentive Plan and which are subject
to repurchase by the Company. Following this offering, includes 6,557,834
Common Shares held by affiliates of the directors and executive officers
of the Company.
47
<PAGE>
DESCRIPTION OF SHARE CAPITAL
The authorized share capital of the Company consists of an unlimited number
of Common Shares and an unlimited number of Preferred Shares issuable in
series. As of June 30, 1996, 12,490,115 Common Shares will be issued and
outstanding and 2,000,000 Preferred Shares designated as Preferred Shares,
Series 1 will be issued and outstanding.
COMMON SHARES
The Common Shares entitle the holders thereof to one vote at meetings of the
shareholders of the Company, except meetings at which only the holders of
another class or series of shares are entitled to vote and, subject to the
prior rights of holders of any Preferred Shares, to receive any dividends
declared by the Board of Directors and the property of the Company upon
dissolution. The Common Shares carry no preemptive rights, conversion rights,
redemption provisions, sinking fund provisions or liability to further calls
or to assessment by the Company. There are no restrictions on the repurchase
or redemption of the Common Shares by the Company except under applicable
securities laws and to the extent any such repurchase or redemption would
render the Company insolvent.
PREFERRED SHARES
The Preferred Shares may be issued in one or more series and the directors
are authorized to fix the number of shares in each series and to determine the
designation, rights, privileges, restrictions and conditions attached to the
shares of such series. The Preferred Shares as a class are entitled to a
priority over the Common Shares with respect to the payment of dividends and
the distribution of assets upon liquidation of the Company. Although the
Company has no current plans to issue any additional Preferred Shares, the
rights of the holders of Common Shares would be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Shares that
may be issued in the future. Issuance of Preferred Shares could have the
effect of delaying, deferring or preventing a change in control of the
Company.
The directors have designated 2,000,000 Preferred Shares, Series 1 (the
"Series 1 Shares") as the first series of Preferred Shares. All of the Series
1 Shares issued and outstanding are held by MPR. The Company has agreed to
repurchase all of the Series 1 Shares from MPR for $2.25 million with a
portion of the proceeds from this offering. The holders of the Series 1 Shares
are not entitled to receive notice of, attend or vote at any meeting of the
shareholders of the Company except as required by law. No dividends may be
declared or paid at any time on the Series 1 Shares. In the event of the
liquidation of the Company or any other distribution of the assets of the
Company among its shareholders for the purpose of winding up its affairs, the
holders of the Series 1 Shares are entitled to receive the amount paid up
thereon before any amount is paid or any assets or property of the Company are
distributed to the holders of the Common Shares and any other shares ranking
junior to the Series 1 Shares. After such payment, the holders of Series 1
Shares are not entitled to share in any further distribution of the property
and assets of the Company. The Series 1 Shares were issued at a price of $1.00
per share and have a Redemption Price and Retraction Price of $1.00 per share.
On the 30th day following the end of each quarter of the Company's fiscal
year, the Company is obligated, subject to the provisions of the Business
Corporations Act (Alberta), to redeem Series 1 Shares having an aggregate
Redemption Price equal to 50% of the Gross Margin of the Company for such
financial quarter. Gross Margin is defined as the aggregate gross proceeds of
sale or license received by the Company arising from or relating to the MI-320
ISDN terminal adapter, the NDIS communications drivers and the Capella MPEG PC
Codec less the Company's costs to produce such products and technology
(excluding marketing and selling costs) all as determined by the Company's
auditor. In addition, the Company may, at its option, at any time redeem all
or any part of the Series 1 Shares then outstanding on 10 days prior written
notice to the holder of the Series 1 Shares to be redeemed. The Company shall
pay a Redemption Price of $1.00 per Series 1 Share in cash for such optional
redemptions unless the holder of the Series 1 Shares to be redeemed notifies
the Company in writing at least 5 days prior to the redemption date that such
holder wishes to receive Common Shares. In such event, such holder shall be
entitled to receive a number of Common Shares equal to one-half the number of
Series 1 Shares being redeemed and the Redemption Price in cash for the
remaining one half of the Series 1 Shares being redeemed.
48
<PAGE>
A holder of Series 1 Shares may, at any time after November 15, 1998, demand
by notice in writing to the Company that the Company redeem the whole or any
part of the Series 1 Shares held by such holder. In such event, the holder of
the Series 1 Shares to be redeemed is entitled, at its option, to receive a
number of Common Shares equal to the number of Series 1 Shares being redeemed
or to receive the aggregate Retraction Price for the Series 1 Shares being
redeemed, which amount is payable in twelve equal monthly installments
commencing on the last day of the first full month following the retraction
date.
ESCROW AGREEMENTS
Escrow Agreement (the "Escrow I Agreement")
The Escrow I Agreement is dated October 31, 1994 among Kwikstar, Montreal
Trust and Donida Investments Ltd., Pacific Sea Treasures Ltd., Edward D. Ford,
L.C. (Len) Fowler, Donald E. Snyder, David Sutherland, Rorie Vickery and John
Wolfe (the "Shareholders"). Pursuant to the Escrow I Agreement, the
Shareholders, who were the original investors of the Company, put an aggregate
of 888,889 Common Shares into escrow. The parties agreed that such shares
should not be sold or released from escrow without the consent of the Alberta
Securities Commission. One-third of the original number of shares were
released with the consent of the Alberta Commission on April 4, 1996. At April
4, 1997, the Alberta Securities Commission will determine whether one-third of
the original number of shares shall be released automatically on each of April
4, 1998 and April 4, 1999, respectively. All voting rights of such escrowed
shares have been retained by the Shareholders.
Combined Automatic and Performance Escrow Agreement (the "Escrow II
Agreement")
The Escrow II Agreement is dated April 1, 1996 among the Company, Montreal
Trust and MPR and 945. MPR and 945 agreed not to sell or have released from
escrow 2,034,886 and 1,000,000 Common Shares, respectively, without the
consent of The Alberta Stock Exchange. Pursuant to the Escrow II Agreement,
the Alberta Stock Exchange will agree to release the Common Shares for a
secondary offering by way of a prospectus filed in Canada provided that the
Company has reached the Financial Breakeven Level (as defined in the Escrow II
Agreement). One-third of the Common Shares held in escrow shall automatically
be released on each of March 5, 1997, March 5, 1998 and March 5, 1999. In
addition, one Common Share can be released earlier upon the consent of The
Alberta Stock Exchange for each $0.22 of cumulative Cash Flow (as defined in
the Escrow II Agreement). Consent of The Alberta Stock Exchange can only be
requested once per year. Voting rights were retained by the 945 and MPR.
CERTAIN RIGHTS OF SHAREHOLDERS
In accordance with the provisions of the Business Corporations Act
(Alberta), the amendment of certain rights of holders of a class of shares,
including the Common Shares, requires the approval of not less than two-thirds
of the votes cast by the holders of such shares voting at a special meeting of
such holders. In certain circumstances where the rights of Common Shares are
amended or adversely affected by an amendment to the Company's articles,
however, holders of Common Shares have the right under such Act to dissent
from such amendment and to require the Company to pay them the then fair value
of the Common Shares.
49
<PAGE>
TRANSFER AGENT, REGISTRAR AND AUDITOR
The Company's Transfer Agent and Registrar is Montreal Trust at its
principal office in Calgary, Alberta, Canada. The Company's auditors are KPMG
Peat Marwick Thorne, chartered accountants, 777 Dunsmuir Street, Vancouver,
British Columbia.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of Common Shares into the public market
(whether on The Alberta Stock Exchange or on the Nasdaq National Market)
following this offering could adversely affect the market price of the Common
Shares. Upon completion of this offering, 16,970,115 Common Shares will be
outstanding, including the shares issued by the Company in connection with
this offering. Of the 12,490,115 Common Shares outstanding prior to the
issuance of the shares in this offering, 2,000,000 Common Shares will be sold
in this offering by the Selling Shareholders and approximately 9,200,127
Common Shares are subject to lock-up agreements under which the holders have
agreed not to sell such Common Shares for a period of 180 days following the
date of this Prospectus. Oppenheimer & Co., Inc. may release such Common
Shares from the lock-up in its sole discretion at any time and without public
announcement. Of the remaining shares, 793,055 Common Shares are freely
tradeable in the U.S. and in certain provinces of Canada. An aggregate of
48,061 Common Shares have been distributed to certain employees of the Company
pursuant to the Amended Performance Incentive Plan. The Common Shares
distributed to employees may be subject to resale restrictions under Canadian
law depending upon the province in which such employee resides. Pursuant to
the Company's Amended Performance Incentive Plan, 115,539 Common Shares are
held in trust for the benefit of certain employees and are subject to
repurchase by the Company, of which 10,225 Common Shares will be distributed
to such employees from the trust each quarter until March 1, 1999 and 3,706
Common Shares will be distributed thereafter to such employees from the trust
each quarter until November 1, 1999, subject to employees continuing their
employment with the Company. Such Common Shares will be freely tradeable in
the U.S. and in certain provinces of Canada, as they are distributed, subject
to the rules under Canadian securities legislation relating to sales of
securities from a control block, resale restrictions which may be applicable
under Canadian law depending upon the province in which such employee resides
and, in the case of affiliates of the Company selling into the U.S. market, to
the volume restrictions of Rule 144 under the Securities Act. In addition,
333,333 Common Shares are held in escrow pursuant to the Escrow I Agreement.
One-third of such Common Shares shall be released on April 4, 1997 with the
consent of the Alberta Securities Commission, who will also then determine if
one-third of the original shares shall be released on each of April 4, 1998
and April 4, 1999. Once released, such Common Shares will be freely tradeable
in the U.S. and in certain provinces of Canada, subject to the rules under
Canadian securities legislation relating to sales of securities from a control
block, resale restrictions under Canadian law which may apply where such
Common Shares were acquired pursuant to a prospectus exemption and, in the
case of affiliates of the Company selling into the U.S., to the volume
restrictions of Rule 144 under the Securities Act.
Upon expiration of the lock-up period (or earlier with such consent),
5,184,685 shares subject to the lock-up will also be available for sale on The
Alberta Stock Exchange or sale into the U.S. public market, subject to the
rules under Canadian securities legislation relating to sales of securities
from a control block, resale restrictions under Canadian law which may apply
where such Common Shares were acquired pursuant to a prospectus exemption and,
in the case of affiliates of the Company selling into the U.S. market, to the
volume restrictions of Rule 144 under the Securities Act. In addition, 555,556
Common Shares will be still held in escrow pursuant to the Escrow I Agreement.
Also, 3,034,886 Common Shares subject to the lock-up will be held in escrow
pursuant to the Escrow II Agreement. Pursuant to the Escrow II Agreement, one-
third of the Common Shares held in escrow by Montreal Trust will be released
from escrow on each of March 5, 1997, March 5, 1998 and March 5, 1999 unless
otherwise sooner released upon the attainment of certain performance goals by
the Company and the consent of the Alberta Securities Commission. 203,647
Common Shares subject to lock-up agreements and distributed to certain
employees of the Company pursuant to the Amended Performance Incentive Plan
may be subject to resale restrictions depending upon the province in which
such employees resides. Finally, 221,353 Common Shares subject to the lock-up
will be held in trust for the benefit of certain employees pursuant to the
Company's Amended Performance Incentive Plan and be subject to repurchase by
the Company, of which 26,563 Common Shares will be
50
<PAGE>
distributed to such employees from the trust each quarter until March 1, 1999,
subect to employees continuing their employment with the Company. Such Common
Shares will be freely tradeable in the U.S. and in certain provinces of
Canada, as they are distributed, subject to the rules under Canadian
securities legislation relating to sales of securities from a control block,
resale restrictions which may be applicable under Canadian law depending upon
the province in which such employee resides and, in the case of affiliates of
the Company selling into the U.S. market, to volume restrictions of Rule 144
under the Securities Act. There are no volume restrictions with respect to
sale of the shares by affiliates or otherwise on The Alberta Stock Exchange,
and the market prices of the Common Shares in the U.S. can be expected to be
directly influenced by the trading price of the Common Shares on The Alberta
Stock Exchange. See "Shares Eligible for Future Sale" and "Underwriting."
RESALES BY AFFILIATES AND HOLDERS OF RESTRICTED SECURITIES; RULE 144
Resales by affiliates in the United States generally must be effected under
Rule 144. Under Rule 144 as currently in effect, any person who has
beneficially owned "restricted" Common Shares (i.e., Common Shares acquired
directly or indirectly from the Company or an Affiliate in a transaction or
chain of transactions not involving any public offering) for at least two
years is entitled to sell, within any three-month period, a number of such
shares (which number must include shares of other persons whose shares are
aggregated with such shares) not exceeding the greater of 1% of the then-
outstanding Common Shares or the average weekly trading volume of the Common
Shares on the Nasdaq National Market during the four calendar weeks preceding
such sale. Sales under Rule 144 are subject to certain restrictions relating
to the manner of sale, notice and the availability of current public
information about the Company. In addition, a person who has not been an
Affiliate of the Company at any time during the three months preceding a sale,
and who has beneficially owned shares for at least three years, would be
entitled to sell such Common Shares without regard to the foregoing volume
limitations, manner of sale provisions or notice or other requirements of Rule
144. Sales of Common Shares by an Affiliate of the Company (or by a person who
has been an Affiliate within the three months preceding the sale) are subject
to such volume limitations, manner of sale provisions and notice and other
requirements of Rule 144, regardless of the period of time that the Common
Shares are held by such Affiliate (and whether or not such Common Shares were
acquired not by way of public offering). Because the Company has not
previously been subject to the reporting requirements of the Securities
Exchange Act of 1934, sales under Rule 144 cannot take place prior to 90 days
after the date of this Prospectus. "Affiliates" of the Company include all
executive officers and directors of the Company and all other persons that
directly or indirectly, through one or more intermediaries, control, or are
controlled by, or are under common control with, the Company. Resales by
affiliates generally may be effected in Canada without the restrictions
imposed by Rule 144, including the volume limitations and public reporting
requirements, subject to the rules under Canadian securities legislation
relating to sales of securities from a control block and resales of securities
purchased under exemptions from prospectus requirements.
CERTAIN INCOME TAX CONSIDERATIONS
The following is a general summary of certain Canadian and U.S. federal
income tax consequences to U.S. Holders (who deal at arm's length with the
Company) of the purchase, ownership and disposition of Common Shares. For the
purposes of this discussion, a "U.S. Holder" means an individual citizen or
resident of the United States, a corporation organized under the laws of the
United States or of any political subdivision thereof, a partner in a
partnership only to the extent that the partnership's income is subject to
U.S. federal income tax, or an estate or trust the income of which is
includable in gross income for U.S. federal income tax purposes regardless of
its source and that, in each case, does not carry on business in Canada, has
not been at any time a resident of Canada for the purposes of the Income Tax
Act (Canada) (the "Canadian Tax Act") and is a resident of the United States
under the Canada-United States Income Tax Convention (1980) (the
"Convention").
This summary is of a general nature only and is not intended to be, and
should not be construed to be, legal or tax advice to any prospective investor
and no representation with respect to the tax consequences to any particular
investor is made. The summary does not address any aspect of any provincial,
state or local tax laws or the tax laws of jurisdictions outside the United
States or Canada or the tax considerations applicable to non-U.S. Holders.
Accordingly, prospective investors should consult with their own tax advisers
for advice with
51
<PAGE>
respect to the income tax consequences to them having regard to their own
particular circumstances, including any consequences of an investment in
Common Shares arising under any provincial, state or local tax laws or the tax
laws of jurisdictions outside the United States or Canada.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
This summary is based upon the current provisions of the Canadian Tax Act,
the regulations thereunder and proposed amendments thereto publicly announced
by the Department of Finance, Canada prior to the date hereof. It does not
otherwise take into account or anticipate any changes in law, whether by
legislative, governmental or judicial action.
The following summary applies only to U.S. Holders who hold their Common
Shares as capital property. In general, Common Shares will be considered
capital property of a holder where the holder is neither a trader nor dealer
in securities, does not hold the Common Shares in the course of carrying on a
business and is not engaged in an adventure in the nature of trade in respect
thereof. This summary does not apply to holders who are "financial
institutions" within the meaning of the mark-to-market rules contained in the
Canadian Tax Act.
Amounts in respect of Common Shares paid or credited or deemed to be paid or
credited as, on account or in lieu of payment of, or in satisfaction of,
dividends to a shareholder who is not a resident of Canada within the meaning
of the Canadian Tax Act will generally be subject to Canadian non-resident
withholding tax. Such withholding tax is levied at a basic rate of 25% which
may be reduced pursuant to the terms of an applicable tax treaty between
Canada and the country of residence of the non-resident. Under the Convention,
the rate of Canadian non-resident withholding tax on the gross amount of
dividends beneficially owned by a U.S. Holder is generally 15%. However, where
such beneficial owner is a company which owns at least 10% of the voting stock
of the Company, the rate of such withholding is 6% for 1996 and 5% thereafter.
A purchase of Common Shares by the Company (other than by a purchase in the
open market in the manner in which shares are normally purchased by a member
of the public) will give rise to a deemed dividend equal to the amount paid by
the Company on the purchase in excess of the paid-up capital of such shares,
determined in accordance with the Canadian Tax Act. Any such dividend deemed
to have been received by a person not resident in Canada will be subject to
non-resident withholding tax as described above. The amount of any such deemed
dividend will reduce the proceeds of disposition to a holder of Common Shares
for purposes of computing the amount of the holder's capital gain or loss
arising on the disposition.
A holder of Common Shares who is not a resident of Canada within the meaning
of the Canadian Tax Act will not be subject to tax under the Canadian Tax Act
in respect of any capital gain arising on a disposition of Common Shares
(including on a purchase by the Company) unless such shares constitute taxable
Canadian property of the holder for purposes of the Canadian Tax Act and such
holder is not entitled to relief under an applicable tax treaty. Common Shares
will generally not constitute taxable Canadian property of a U.S. Holder
unless such person has at any time during the five year period immediately
preceding the disposition of the Common Shares owned, either alone or together
with persons with whom he does not deal at arm's length, 25% or more of the
issued shares of any class of the capital stock of the Company. In any event,
under the Convention, gains derived by a U.S. Holder from the disposition of
Common Shares will generally not be subject to tax in Canada unless the value
of the Company's shares is derived principally from real or certain other
immoveable property situated in Canada.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
This summary is based on the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations promulgated thereunder and judicial and
administrative interpretations thereof, all as in effect on the date hereof
and all of which are subject to change thereby changing the U.S. federal
income tax considerations discussed below. This summary does not address all
aspects of U.S. federal income taxation that may be relevant to a particular
U.S. Holder based on such U.S. Holder's particular circumstances and does not
address foreign,
52
<PAGE>
state, local or other tax consequences. In particular, the following summary
does not address the tax treatment of U.S. Holders who are broker-dealers or
who own, actually or constructively, 10% or more of the Company's outstanding
voting shares, and other certain U.S. Holders (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions, S
corporations, mutual funds, small business investment companies, regulated
investment companies, and persons subject to the alternative minimum tax) who
may be subject to special rules not discussed below. This summary applies only
to U.S. Holders who hold Common Shares as capital assets within the meaning of
section 1221 of the Code, and does not cover all aspects of U.S. federal
taxation that may be relevant to a purchaser in light of his or her particular
circumstances. Furthermore, estate and gift tax consequences are not discussed
herein. No ruling from the IRS will be requested with respect to any of the
matters discussed herein.
Dividends. For U.S. federal income tax purposes, a U.S. Holder of Common
Shares generally will realize, to the extent of the Company's current and
accumulated earnings and profits (as determined for U.S. federal income tax
purposes), ordinary income (treated as foreign source dividend income) on the
receipt of cash dividends on the Common Shares equal to the U.S. dollar value
of such dividends on the date of receipt (based on the exchange rate on such
date) without reduction for any Canadian withholding tax. To the extent, if
any, that distributions made by the Company to a U.S. Holder of Common Shares
exceed the current and accumulated earnings and profits of the Company, such
distributions will be treated as a tax-free return of capital to the extent of
such U.S. Holder's adjusted basis for such Common Shares, and to the extent in
excess of adjusted basis, as capital gain, thus reducing the U.S. Holder's
adjusted tax basis in such Common Shares and increasing the amount of gain (or
reducing the amount of loss) which may be realized by such U.S. Holder upon a
sale or exchange of the Common Shares. The amount of any distribution which
exceeds the U.S. Holder's adjusted basis in the Common Shares will be long-
term capital gain if the U.S. Holder's holding period for such Common Shares
exceeds one year. Dividends paid on the Common Shares will not be eligible for
the dividends received deduction available in certain cases to U.S.
corporations. In the case of foreign currency received as a dividend that is
not converted by the recipient into U.S. dollars on the date of receipt, a
U.S. Holder will have a tax basis in the foreign currency equal to its U.S.
dollars value on the date of receipt. Any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including an
exchange for U.S. dollars, will be ordinary income or loss. Subject to certain
requirements and limitations imposed by the Code, a U.S. Holder may elect to
claim the Canadian tax withheld or paid with respect to dividends on the
Common Shares either as a deduction or as a foreign tax credit against the
U.S. federal income tax liability of such U.S. Holder. In general, a U.S.
Holder may utilize foreign tax credits only to the extent of its foreign
source income, which would include any dividends paid by the Company but
generally would not include any gain realized upon a disposition of Common
Shares. The requirements and limitations imposed by the Code with respect to
the foreign tax credit are complex and beyond the scope of this summary, and
consequently prospective purchasers of Common Shares should consult with their
own tax advisers to determine whether and to what extent they would be
entitled to such credit.
Sale or Exchange of Common Shares. For U.S. federal income tax purposes,
upon a sale or exchange of a Common Share, a U.S. Holder will recognize gain
or loss equal to the difference between the amount realized on such sale or
exchange and the tax basis of such Common Share. If a Common Share is held as
a capital asset, any such gain or loss will be capital gain or loss, and will
be long-term capital gain or loss if the U.S. Holder has held such Common
Share for more than one year at the time of the sale or exchange. The gain, if
any, will generally be U.S. source income. If the amount realized on such sale
is not denominated in U.S. dollars, the amount realized will be equal to the
U.S. dollar value thereof determined at the spot rate on the date of the sale
or exchange.
Backup Withholding. Under section 3406 of the Code and applicable U.S.
Treasury regulations, a non-corporate U.S. Holder of Common Shares may be
subject to backup withholding at the rate of 31% with respect to "reportable
payments," which include dividends paid on, or the proceeds of a sale,
exchange or redemption of, the Common Shares. The payor will be required to
deduct and withhold the prescribed amounts if (i) the payee fails to furnish a
taxpayer identification number ("TIN") to the payor in the manner required,
(ii) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (iii) there has been a "notified payee
53
<PAGE>
underreporting" described in section 3406(c) of the Code or (iv) there has
been a failure of the payee to certify under penalty of perjury that the payee
is not subject to withholding under section 3406(a)(1)(C) of the Code. As a
result, if any one of the events listed above occurs, the Company will be
required to withhold an amount equal to 31% from any dividend payment made
with respect to the Common Shares to a non-corporate U.S. Holder. Amounts paid
as backup withholding do not constitute an additional tax and will be credited
against the U.S. Holder's U.S. federal income tax liabilities, so long as the
required information is provided to the IRS. The Company will report to the
U.S. Holders of the Common Shares and to the IRS the amount of any "reportable
payments" for each calendar year and the amount of tax withheld, if any, with
respect to payment on those securities.
Passive Foreign Investment Company ("PFIC"). Shareholders of a PFIC must pay
an interest charge on the portion of any "excess distributions" of the PFIC
allocable to prior years, unless an election has been made by the shareholder
and the PFIC to treat the PFIC as a qualified electing fund ("QEF"). An excess
distribution includes (1) all gains from dispositions of PFIC stock, whether
actual or deemed, and whether or not the disposition would ordinarily be
subject to a nonrecognition provision of the Code, and (2) the amount by which
the current year's actual distributions exceed 125% of the average
distributions over the prior three years. The excess distributions are
allocated to prior years during which the corporation was a PFIC, are taxed at
the highest marginal rate in effect for such years and are subject to an
interest charge. If the shareholder has made an election to treat the PFIC as
a QEF, the shareholder generally will be treated as receiving an annual
distribution of its share of the PFIC's earnings and profits, classified as
either ordinary income or capital gain, depending on the underlying income of
the PFIC. A foreign corporation will be characterized as a PFIC if either (1)
75% or more of its gross income is passive; or (2) 50% or more of its assets
produce, or are held for the production of, passive income.
For both tests look-through rules apply such that (1) where a foreign
corporation directly or indirectly owns 25% or more (by value) of the stock of
another corporation (the subsidiary) the assets and income of the subsidiary
are treated as owned by the foreign corporation for purposes of determining
PFIC status; (2) dividends, interest, rents, and royalties received from
related persons and the assets to which such payments relate, are
characterized based upon the income of the related person; and (3) if a
foreign corporation owns at least 25% of the stock of a U.S. corporation then
any stock held by the U.S. corporation in a U.S. C corporation, which is not a
regulated investment company or a REIT, is treated as a nonpassive asset, and
the income from the stock is treated as nonpassive income, when attributed to
the foreign corporation for purposes of determining PFIC status.
The Company intends to conduct its business in the future in such a manner
that its income and assets will be such that it will continue not to
constitute a PFIC.
Controlled Foreign Corporation ("CFC"). If a U.S. person owns directly or
indirectly 10% or more of the voting power of all classes of stock entitled to
vote of a CFC, such person is taxed on the subpart F income (generally,
passive income (defined below), certain income from transactions with related
parties and certain income from shipping, oil and insurance activities) of
such corporation in the year in which it is earned. A CFC is a foreign
corporation more than 50% of the stock of which (by vote or value) is owned
directly or indirectly by U.S. persons who each own 10% or more of the voting
power of all classes entitled to vote. Passive income generally includes: (1)
interest (or income equivalent thereto), dividends, royalties, rents, and
annuities; (2) net gains from the sale or exchange of property which gives
rise to any of the above types of income or does not give rise to income; (3)
net gains from the sale or exchange of an interest in a partnership, trust or
REMIC; and (4) net gains from commodities or foreign currency transactions.
The Company is not a CFC and does not believe that it will become a CFC
after this offering.
Personal Holding Companies. A non-U.S. corporation may be classified as a
personal holding company (a "PHC") for U.S. federal income tax purposes if
both of the following two tests are satisfied: (i) if at any time during the
last half of the Company's taxable year, five or fewer individuals (without
regard to their citizenship
54
<PAGE>
or residency) own or are deemed to own (under certain attribution rules) more
than 50% of the stock of the corporation by value (the "PHC Ownership Test")
and (ii) such non-U.S. corporation receives 60% or more of its U.S. related
gross income, as specifically adjusted, from certain passive sources such as
dividends and royalty payments (the "PHC Income Test"). Such a corporation is
taxed (currently at a rate of 39.6%) on certain of its undistributed U.S.
source income (including certain types of foreign source income which are
effectively connected with the conduct of a U.S. trade or business) to the
extent amounts at least equal to such income are not distributed to
shareholders.
The Company does not believe that the PHC Ownership Test is currently
satisfied, nor that it will be satisfied after the Offering. While there can
be no assurance that the Company will fail to satisfy the PHC Income Test, the
Company does not believe that the PHC Income Test is currently satisfied, nor
that it will be satisfied after this offering.
Foreign Personal Holding Companies. A non-U.S. corporation will be
classified as a foreign personal holding company (a "FPHC") for U.S. federal
income tax purposes if both of the two following tests are satisfied: (i) five
or fewer individuals who are United States citizens or residents own or are
deemed to own (under certain attribution rules) more than 50% of all classes
of the corporation's stock measured by voting power or value and (ii) the
corporation receives at least 60% (50% in later years) of its gross income
(regardless of source), as specifically adjusted, from certain passive
sources. If such a corporation is classified as an FPHC, a portion of its
"undistributed foreign personal holding company income" (as defined for U.S.
federal income tax purposes) would be imputed to all of its shareholders who
are U.S. Holders on the last day of the corporation's taxable year, or, if
earlier, the last day on which it is classifiable as an FPHC. Such income
would be taxable as a dividend, even if no cash dividend is actually paid.
U.S. Holders who dispose of their shares prior to such date would not be
subject to tax under these rules.
The Company is not an FPHC and believes that it will not be classified as an
FPHC after this offering.
Foreign Investment Company ("FIC"). A shareholder of an FIC must treat as
ordinary income any gain on the sale of FIC stock to the extent of such
shareholder's ratable share of the FIC's earnings and profits, where such gain
would otherwise be long-term capital gain. An FIC is any foreign corporation
(1) registered under the Investment Company Act of 1940, or (2) engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities or any interest in securities or commodities during any year in
which 50% or more of its stock (by vote or value) is held, directly or
indirectly, by U.S. persons. The PFIC rules were enacted after the FIC rules,
but did not repeal the FIC provisions. However, the FIC rules do not apply to
the earnings and profits of a company for any taxable year beginning after
1986 if the company was a PFIC for that year. The Company is not an FIC and
believes that it will not be classified as an FIC after this offering.
GOVERNMENTAL REGULATION
Canada has no foreign exchange restrictions on the export or import of
capital, nor on the remittance of dividends, interest or other payment to non-
resident security holders. There are no foreign exchange controls other than
applicable withholding taxes.
There is no limitation imposed by Canadian law or by the articles or other
charter documents of the Company on the right of a non-resident to hold or
vote Common Shares or Preferred Shares of the Company with voting rights
(collectively, "Voting Shares"), other than as provided in the Investment
Canada Act (the "Investment Act"). The Investment Act requires certain "non-
Canadian" individuals, governments, corporations or other entities who wish to
acquire a "Canadian business" (as defined in the Investment Act) to file
either a notification or an application for review with the Director of
Investments, Department of Industry, Government of Canada. The Investment Act
requires that certain acquisitions of control of a Canadian business by a
"non-Canadian" must be reviewed and approved in advance by the Minister
responsible for the Investment Act on the basis that he is satisfied that the
acquisition is likely to be of benefit to Canada. The Investment Act
55
<PAGE>
provides detailed rules for the determination of whether control has been
acquired and, pursuant to those rules, the acquisition of one-third or more of
the voting shares of a corporation may, in some circumstances, be considered
to constitute an acquisition of control. Failure to comply with the Investment
Act could result in, among other things, an injunction or court order
directing disposition of the assets or shares.
The Competition Act (Canada) is a law of general application regulating
"mergers" (as defined in the Competition Act). A "merger" is defined in the
Competition Act to include the acquisition of control over a significant
interest in the whole or a part of a business of a person. Where the
Competition Tribunal established under the Competition Tribunal Act (Canada)
finds that a merger "prevents or lessens, or is likely to prevent or lessen,
competition substantially," it has the power to, among other things, prohibit
or dissolve the merger. The Competition Act also requires that persons
proposing certain transactions, before completing these transactions, notify
the Director of Investigation and Research appointed under the Competition Act
that the transactions are proposed and supply the Director with certain
information. In such situations, the Competition Act prescribes the time
periods following notification which must expire before the transactions may
proceed. In the case of the acquisition of voting shares of a corporation
which are publicly traded, the acquisition by a person of the voting shares
which would result in such person, together with its affiliates, owning 20
percent or less of the votes of all outstanding voting shares would not
require a notification to be made.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company, the Selling Shareholders and each of the Underwriters named below,
for whom Oppenheimer & Co., Inc., Hanifen, Imhoff Inc., CIBC Wood Gundy
Securities Inc. and RBC Dominion Securities Inc., are acting as
Representatives (the "Representatives"), each of the Underwriters named below
has severally agreed to purchase from the Company and the Selling
Shareholders, and the Company and the Selling Shareholders have agreed to sell
to the Underwriters, the Common Shares set forth opposite such Underwriter's
name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Oppenheimer & Co., Inc.............................................
Hanifen, Imhoff Inc................................................
CIBC Wood Gundy Securities Inc.....................................
RBC Dominion Securities Inc. ......................................
---------
Total............................................................ 6,500,000
=========
</TABLE>
Of such Common Shares, 4,500,000 shares are being sold by the Company and
2,000,000 shares are being sold by the Selling Shareholders.
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The obligations of the Underwriters
under the Underwriting Agreement may be terminated at their discretion on the
basis of their assessment of the state of the financial markets and may also
be terminated upon the occurrence of certain other stated events. The nature
of the Underwriters' obligations, however, is such that they are committed to
purchase all of the above Common Shares if any are purchased.
The offering is being made currently in the United States and in all the
provinces of Canada. The Underwriters propose to offer the Common Shares to
the public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of US$ per
share to certain dealers, of which a concession not in excess of US$ per
share may be reallowed to certain other brokers and dealers. After the
offering, the offering price, allowances, concessions, and other selling terms
may from time to time be changed by the Representatives. Purchasers will be
required to pay for the Common Shares in United States dollars. CIBC Wood
Gundy Securities Inc. and RBC Dominion Securities Inc. will offer Common
Shares for sale in the United States through their United States broker-dealer
affiliates. Neither Oppenheimer & Co., Inc. nor Hanifen, Imhoff Inc. will
offer Common Shares for sale in Canada.
The Underwriters have advised the Company that they do not intend to confirm
sales of Common Shares offered hereby to accounts over which they exercise
discretionary authority.
The Selling Shareholders have granted to the Underwriters an option,
exercisable for up to 30 days after the date of this Prospectus, to purchase
up to an aggregate of 975,000 additional Common Shares to cover over-
allotments, if any, at the public offering price less the underwriting
discounts set forth on the cover page of this Prospectus. If the Underwriters
exercise the over-allotment option, then each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of Common Shares to be purchased by
it, as shown on the above table bears to the 6,500,000 Common
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DIGITAL COURIER INTERNATIONAL CORPORATION:
Consolidated Financial Statements for the Six-Month Period Ended March
31, 1996
Report of KPMG Peat Marwick Thorne, Chartered Accountants............. F-2
Consolidated Balance Sheet............................................ F-3
Consolidated Statement of Operations and Deficit...................... F-4
Consolidated Statement of Changes in Financial Position............... F-5
Notes to Consolidated Financial Statements............................ F-6
KWIKSTAR COMMUNICATIONS LTD.
Financial Statements for the Years Ended September 30, 1994 and 1995
Report of Nemeth Thody Anderson, Chartered Accountants................ F-16
Balance Sheet......................................................... F-17
Statement of Operations............................................... F-18
Statement of Deficit.................................................. F-19
Statement of Changes in Financial Position............................ F-20
Notes to Financial Statements......................................... F-21
</TABLE>
F-1
<PAGE>
AUDITORS' REPORT
To the Board of Directors
Digital Courier International Corporation
We have audited the consolidated balance sheets of Digital Courier
International Corporation as at March 31, 1996 and September 30, 1995 and the
consolidated statements of operations and deficit, and changes in financial
position for the six month period ended March 31, 1996 and the period from
incorporation on November 24, 1994 to September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at March 31,
1996 and September 30, 1995 and the results of its operations and the changes
in its financial position for the six month period ended March 31, 1996 and
the period from incorporation on November 24, 1994 to September 30, 1995 in
accordance with generally accepted accounting principles in Canada.
Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the
United States. Application of accounting principles generally accepted in the
United States would have affected results of operations for the six month
period ended March 31, 1996, and shareholders' equity as of March 31, 1996, to
the extent summarized in Note 11 to the consolidated financial statements.
KPMG Peat Marwick Thorne
Chartered Accountants
Vancouver, Canada
June 14, 1996
F-2
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 3,209,195 $ 1
Accounts receivable................................ 261,885 --
GST receivable..................................... 201,487 --
Inventories........................................ 129,260 --
Promissory note receivable......................... 24,688 --
Prepaids........................................... 62,655 --
----------- ----
3,889,170 1
Capital assets (note 4).............................. 4,956,787 --
Intellectual property (note 5)....................... 1,750,000 --
----------- ----
$10,595,957 $ 1
=========== ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........... $ 2,074,757 $--
Payable to related party (note 6).................. 1,218,044 --
----------- ----
3,292,801 --
Preferred shares (note 7)............................ 2,000,000 --
Shareholders' equity:
Share capital (note 8)............................. 7,265,080 1
Deficit............................................ (1,961,924) --
----------- ----
5,303,156 1
Commitments (note 12)
Subsequent events (notes 8(b), 8(c) and 13)
----------- ----
$10,595,957 $ 1
=========== ====
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
____________________________ Director
____________________________ Director
F-3
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(EXPRESSED IN CANADIAN DOLLARS)
SIX MONTH PERIOD ENDED MARCH 31, 1996
<TABLE>
<S> <C>
Revenue............................................................. $ 507,666
Cost of sales....................................................... 648,399
----------
Gross margin........................................................ (140,733)
Expenses:
General and administration........................................ 631,275
Depreciation and amortization..................................... 305,566
Sales and marketing............................................... 502,936
Research and development.......................................... 505,487
----------
1,945,264
Loss before other income............................................ 2,085,997
Other income........................................................ 124,073
----------
Loss for the period, being deficit at end of period................. $1,961,924
==========
Loss per share (note 8(d)).......................................... $ 0.16
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
SIX MONTH PERIOD ENDED MARCH 31, 1996
<TABLE>
<S> <C>
Cash provided by (used in):
Operations:
Loss for the period............................................. $(1,961,924)
Items not involving cash:
Depreciation and amortization................................. 528,469
Changes in non-cash operating working capital
Increase in:
Accounts receivable......................................... (261,885)
GST receivable.............................................. (201,487)
Inventories................................................. (129,260)
Prepaids.................................................... (62,655)
Accounts payable and accrued liabilities.................... 2,074,757
-----------
(13,985)
Financing:
Increase in payable to related party............................ 1,218,044
Issue of common shares.......................................... 7,265,079
Issue of preferred shares....................................... 2,000,000
-----------
10,483,123
Investments:
Purchase of capital assets...................................... (5,235,255)
Purchase of intellectual property............................... (2,000,001)
Issue of promissory note........................................ (30,000)
Payment of promissory note...................................... 5,312
-----------
(7,259,944)
Increase in cash and cash equivalents............................. 3,209,194
Cash and cash equivalents, beginning of period.................... 1
-----------
Cash and cash equivalents, end of period.......................... $ 3,209,195
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN CANADIAN DOLLARS)
SIX MONTH PERIOD ENDED MARCH 31, 1996 AND THE PERIOD FROM INCORPORATION ON
NOVEMBER 24, 1994 TO SEPTEMBER 30, 1995
Digital Courier International Corporation ("DCC") was incorporated under the
Business Corporations Act (Alberta) on November 30, 1993 and acquired a
business on November 15, 1995, as described in note 2.
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Canada which, except as
disclosed in note 11, are also in accordance with those in the United States.
The consolidated financial statements as at and for the six month period
ended March 31, 1996, include the accounts of DCC and its wholly-owned
subsidiary Digital Courier International Inc. ("DCI") (together the
"Company"). All intercompany accounts and transactions have been eliminated.
Effective November 15, 1995, DCC completed the acquisition of 100% of the
outstanding Common Shares of DCI. As the former shareholders of DCI obtained
control of DCC through the exchange of their shares of DCI, the acquisition of
DCI has been accounted for as a reverse takeover. Consequently, the
consolidated statements of operations and deficit and changes in financial
position reflect the results of operations and changes in financial position
of DCI, the legal subsidiary, combined with those of DCC the legal parent, for
the period from November 16, 1995 to March 31, 1996, in accordance with
generally accepted accounting principles for reverse takeovers. DCI is
considered the continuing entity and consequently, the comparative figures are
those of DCI.
(b) Cash and cash equivalents:
Cash and cash equivalents include short-term investments with a maturity of
ninety days or less at the time of issue.
(c) Intellectual property:
Intellectual property is stated at cost and is amortized on a straight line
basis over the estimated useful life of the property being three years.
(d) Capital assets:
Capital assets are stated at cost. Depreciation and amortization is provided
on a straight-line basis over the estimated useful lives of the assets as
follows, commencing November 15, 1995:
<TABLE>
<S> <C>
Office equipment.................................................. 3 years
Computer equipment................................................ 3 years
Network costs..................................................... 3 years
Leasehold improvements............................................ 21 months
</TABLE>
(e) Inventories:
Raw materials inventories are stated at the lower of cost, on a first in,
first out basis, or replacement cost.
F-6
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(f) Translation of foreign currencies:
Revenue and expense items transacted in foreign currencies are reflected in
Canadian dollars at the rates prevailing at the time of the transaction.
Accounts payable and receivable in foreign currencies are reflected in the
financial statements in equivalent Canadian dollars at the rate of exchange
prevailing at the balance sheet date. Currency gains and losses are included
in loss for the period.
(g) Product development expenditures:
Development costs are charged against income in the year of expenditure
unless a development project meets the criteria under generally accepted
accounting principles for deferral and amortization. Amortization will be
provided on a straight-line basis over three years. The Company has expensed
all development costs to March 31, 1996.
All other expenditures for research, development and improvement of new and
existing products and services are expensed as incurred.
(h) Loss per share:
Loss per share has been calculated using the weighted average number of
Common Shares outstanding during the period and reflecting the three for one
consolidation of shares as at November 15, 1995 that occurred on May 2, 1996.
Fully diluted loss per share has not been presented as the effect on basic
loss per share would be anti-dilutive.
2. BUSINESS COMBINATION:
Effective November 15, 1995, DCC acquired all of the outstanding shares of
DCI. DCC issued 31,939,595 pre-consolidation Common Shares in consideration
for all of the issued and outstanding Common Shares of DCI on the basis of
three Common Shares of DCC for each Common Share of DCI.
The acquisition has been recorded at the estimated fair value of the
consideration given which, under reverse takeover accounting, is the fair
value of the total number of shares of DCI that would have had to be issued in
order to provide the same percentage of ownership of the combined company to
the shareholders of DCC as they have in the combined company as a result of
the reverse takeover.
The acquisition details are as follows:
<TABLE>
<S> <C>
Net assets acquired, at fair values:
Cash.......................................... $452,295
Working capital deficiency.................... (33,769)
Other assets.................................. 1,552
--------
$420,078
--------
Consideration given for net assets acquired
Common Shares issued........................... $420,078
========
</TABLE>
As the continuing entity is deemed to be DCI, share capital of DCC totalling
$485,000 has been eliminated as a result of accounting for this combination as
a reverse takeover.
The consolidated statements of operations and deficit and changes in
financial position reflect the results of operations and changes in financial
position of DCC, the legal parent, for the period from November 16, 1995 to
March 31, 1996 and for DCI the six month period ended March 31, 1996.
F-7
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under reverse takeover accounting principles and the purchase method of
accounting, the results of operations of DCC are included in the consolidated
financial statements of the Company only from the effective date of the
acquisition. The results of operations and changes in financial position of
DCC for the period from October 1, 1995, being the date following the most
recent audited balance sheet of DCC, to November 15, 1995, being immediately
prior to the effective date of the combination, are not material and have not
been presented.
As DCI is considered the continuing entity and commenced operations on
November 15, 1995, there are no comparative statements of operations and
changes in financial position.
3. BUSINESS ACQUISITION:
Effective November 15, 1995, DCI purchased certain business assets and
assumed certain liabilities of MPR Teltech Ltd. ("MPR").
<TABLE>
<S> <C>
Assets acquired, at carrying amounts to MPR:
Cash.......................................................... $ 250
Accounts receivable........................................... 94,318
Capital assets................................................ 1,274,188
Intellectual property (note 5)................................ 2,000,001
-----------
3,368,757
Assumption of current liabilities............................... (151,177)
-----------
Net assets acquired........................................... $ 3,217,580
===========
Consideration paid:
Assumption of payable to related party (note 6)............... $ 117,579
Issuance of Preferred Shares (note 7)......................... 2,000,000
Issuance of Common Shares (note 8)............................ 4,438,577
Related party transaction adjustment (note 5)................. (3,338,576)
-----------
$ 3,217,580
===========
</TABLE>
The exchange of the Common Shares for the assets is a non-monetary
transaction between related parties that does not result in the culmination of
the earnings process. Therefore, the assets are recorded in the Company at
their carrying amount to MPR. MPR had previously expensed all but $2,000,000
of the research costs relating to development of the intellectual property.
The related party transaction adjustment reduces the assigned value of the
technology acquired and the consideration paid to the carrying amount of the
intellectual property acquired.
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
<S> <C> <C> <C>
Office equipment............................ $ 5,717 $ 2,618 $ 3,099
Computer equipment.......................... 4,854,539 223,351 4,631,188
Network costs............................... 200,000 15,000 185,000
Leasehold improvements...................... 175,000 37,500 137,500
---------- -------- ----------
$5,235,256 $278,469 $4,956,787
========== ======== ==========
</TABLE>
F-8
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Computer equipment includes $1,293,876 of computers, parts and materials
that have not been put in use at network sites and therefore have not been
depreciated.
Subsequent to March 31, 1996, the Company executed a sale and lease back
arrangement relating to computer equipment (see note 13).
5. INTELLECTUAL PROPERTY:
DCI acquired certain software and hardware designs, copyrights, trademarks,
trade secrets, source code and third party licences from MPR. The intellectual
property was assigned a value in the Technology Transfer and Licencing
Agreement of $5,338,577 (the "Technology Transfer Fee"). The intellectual
property and Common Shares were each reduced by $3,338,576 resulting in the
Common Shares being valued at $1 and the intellectual property at $2,000,001.
<TABLE>
<S> <C>
Intellectual property acquired.................................. $ 5,338,577
Related party transaction adjustment (note 3)................... (3,338,576)
-----------
2,000,001
Less accumulated amortization................................... 250,001
-----------
$ 1,750,000
===========
</TABLE>
6. RELATED PARTY BALANCES AND TRANSACTIONS:
The amount payable to related party is for inventory and services acquired
from MPR in the ordinary course of business.
During the period, the Company acquired services of $671,000 and materials
of $1,237,000 from MPR.
DCI has agreed to provide certain technological support and assistance to
MPR for a period of two years commencing November 15, 1995. The credit terms
for these transactions are payment within 30 days of the receipt of the
invoice and any balance that remains outstanding after 30 days will be subject
to a finance charge of one per cent per month.
In addition, DCI has granted to MPR and its parent company the perpetual,
irrevocable, royalty free right to use, modify, and otherwise exploit the
technology acquired by the Company from MPR for specified purposes.
DCI acquired a business from MPR (note 3).
During the period, the Company was charged consulting expenses of $91,000 by
companies related by virtue of common directors.
7. PREFERRED SHARES:
(a) Authorized:
Unlimited Preferred Shares, no par value.
F-9
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) Issued and outstanding:
Series 1 non-voting, redeemable and retractable at $1 per share.
<TABLE>
<CAPTION>
NUMBER
OF SHARES AMOUNT
--------- ----------
<S> <C> <C>
Issued and outstanding in exchange for intellectual
property............................................ 2,000,000 $2,000,000
========= ==========
</TABLE>
(c) Redemption and retraction rights:
In the event of a liquidation or winding up of the Company, the holders of
the Preferred Shares, Series 1 are entitled to payment of the paid-up amount,
being $2,000,000, in advance of any amounts being paid to Common Shareholders.
The Company must redeem a portion of the Preferred Shares, Series 1, 30 days
following the end of each financial quarter that they remain outstanding. The
aggregate redemption amount of the portion to be redeemed equals 50% of the
Company's gross margin for the quarter, as defined in the preferred share
agreement.
The Company may at any time redeem any or all of the Preferred Shares for $1
per share in cash or, at the option of the shareholder, a number of Common
Shares equal to one-half the preferred shares being redeemed and the remaining
half in cash.
The holders of the Preferred Shares, Series 1 may, at any time after
November 15, 1998, demand by notice in writing that the Company redeem any or
all of the shares for $1 per share. Payment of the retraction price would be
made, solely at the option of the holder, by issuing one fully paid Common
Share of the Company for each preferred share redeemed or by paying cash, in
twelve equal monthly instalments.
8. SHARE CAPITAL:
(a) Authorized:
Unlimited Common Shares, no par value
F-10
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) Issued and outstanding:
On May 2, 1996, the Company received approval to consolidate its Common
Shares on the basis of three Common Shares outstanding before consolidation
into one Common Share after consolidation resulting in the issued and
outstanding shares being reduced from 37,037,880 to 12,345,960 shares.
A continuity of the Company's share capital, commencing with DCI from
incorporation on November 24, 1994, to November 15, 1995, being the effective
date of the reverse takeover, and giving effect to the share consolidation is
as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES AMOUNT
---------- ----------
<S> <C> <C>
DCI:
Balance at November 24, 1994 and September 30, 1995... 1 $ 1
Issued for:
Cash................................................ 6,600,000 6,030,000
Acquisition of business (note 3).................... 4,046,514 1,100,001
Share issue costs................................... -- (300,000)
---------- ----------
Balance at November 15, 1995 prior to the reverse
takeover (note 2).................................... 10,646,515 $6,830,002
========== ==========
Shares of DCC exchanged for issued and outstanding
shares of DCI (below)................................ 10,646,515 $ --
========== ==========
DCC:
Balance at November 30, 1993.......................... -- $ --
Issued for cash....................................... 888,889 200,000
---------- ----------
Balance at September 30, 1994......................... 888,889 200,000
Issued for cash....................................... 666,667 300,000
Share issue costs..................................... -- (30,000)
---------- ----------
1,555,556 470,000
Issued from October 1, 1995 to November 14, 1995 exer-
cise of agent's options for cash..................... 33,333 15,000
---------- ----------
1,588,889 485,000
Adjustments to record combination (reverse takeover):
Reduction in book value of DCC stated share capital
to that of DCI..................................... -- (64,922)
Shares of DCC issued to acquire shares of DCI
(above), recorded at fair value.................... 10,646,515 6,830,002
Finder's fee........................................ 77,223 --
---------- ----------
Balance at November 15, 1995 after business combina-
tion................................................. 12,312,627 7,250,080
Issued from November 16, 1995 to March 31, 1996:
Exercise of agent's options for cash................ 33,333 15,000
---------- ----------
12,345,960 $7,265,080
========== ==========
</TABLE>
(c) Share purchase options:
The Company has a stock option plan for employees including officers and
employee directors and consultants of the Company which provides for incentive
options. The Board of Directors determines the option price at the date of
grant but such option price cannot be less than the closing market value of
the Common Shares on the date of grant. The options generally expire five
years from the date of grant and are exercisable over the period stated in
each option.
F-11
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Share purchase options outstanding at March 31, 1996 after giving effect to
the share consolidation described in note 8(b), are as follows.
<TABLE>
<CAPTION>
PRICE NUMBER
VESTING DATE EXPIRY DATE PER SHARE OF SHARES
------------ ------------- --------- ---------
<S> <C> <C> <C>
March 6, 1996 March 6, 2001 $1.25 341,816
March 6, 1997 May 6, 1999 $1.25 129,500
March 6, 1997 March 6, 2001 $1.25 20,500
March 6, 1997 March 6, 2001 $2.00 191,167
March 6, 1997 March 6, 2001 $3.00 191,167
March 6, 1997 March 6, 2001 $4.00 95,201
March 6, 1997 March 6, 2001 $4.00 95,201
March 6, 1997 March 6, 2001 $5.00 185,448
---------
Total share purchase options 1,250,000
=========
</TABLE>
In addition, the Company had issued in 1994, 155,555 after share
consolidation, Director incentive stock options at $0.45 per share that would
have expired on October 31, 1999. The options were exercised on April 10,
1996.
(d) Loss per share:
Loss per share has been calculated based on the weighted average number of
shares outstanding after share consolidation being 12,317,006.
9. INCOME TAXES
To March 31, 1996, the Company has non-capital losses for Canadian income
tax purposes of approximately $1,700,000, which may be carried forward and
utilized to reduce future taxable income. The potential income tax benefits
related to these items have not been reflected in the accounts as there is no
virtual certainty that the benefits will be realized.
10. SEGMENTED INFORMATION:
All of the Company's activities are in one business segment, the operation
of a two way digital delivery system to the radio broadcast market.
Financial information by geographic segment is as follows:
<TABLE>
<CAPTION>
CANADA U.S. TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
March 31, 1996
Revenues.................................. $ 151,489 $ 356,176 $ 507,665
Operating income.......................... (249,920) 109,187 (140,733)
Unallocated costs:
General and administrative.............. 631,275
Depreciation and amortization........... 305,566
Sales and marketing..................... 502,936
Research and development................ 505,487
Other income............................ (124,073)
---------- ---------- -----------
Loss for the period......................... $ 1,961,924
========== ========== ===========
Identifiable assets......................... $7,994,231 $2,601,726 $10,595,957
========== ========== ===========
</TABLE>
F-12
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
As disclosed in note 1, these financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP")
which conform with those of the United States, except as described below.
(a) Income taxes:
Under the asset and liability method of United States Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), deferred income tax assets and
liabilities are measured using enacted tax rates for the future income tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases. There is no effect of adopting the provisions of SFAS 109 on the
Company's financial statements as the recognition criteria for deferred tax
assets has not been met.
(b) Accounting for stock based compensation:
In accordance with U.S. GAAP, under Accounting Principles Board 25 the
Company is required to report the compensation component of incentive stock
options issued to employees, management and directors where the exercise price
of the option is less than the fair market value of the stock at the date of
granting the stock option.
The total stock based compensation expense to be recognized for the stock
options granted on March 6, 1996 is approximately $6,115,000 based on a fair
value of the Common Shares, at the date of grant. Compensation is amortized to
income over the vesting period of the stock options. The compensation expense
will be included in income as follows:
<TABLE>
<S> <C>
Six months ended March 31, 1996.................................. $2,310,000
Six months ended September 30, 1996.............................. 1,270,000
----------
Year ended September 30, 1996.................................... 3,580,000
Year ended September 30, 1997.................................... 2,535,000
----------
$6,115,000
==========
</TABLE>
(c) Weighted average number of shares:
In accordance with Staff Accounting Bulletin No. 83, the weighted average
number of shares as determined under Canadian GAAP has been increased, using
the treasury stock approach, to determine the dilutive effect of Common Shares
and stock options issued one year prior to and at a price below the estimated
offering price.
The weighted average number of shares used in the calculation of loss per
share is 13,302,175.
(d) Research and development:
During the period, the Company acquired intellectual property with an
assigned value of $2,000,000 from MPR that has been recorded at MPR's carrying
amount. However, under SFAS No. 2, MPR would have been required to expense the
research and development as incurred. Accordingly, MPR's carrying amount would
be nil and the Company, under Staff Accounting Bulletin No. 48, would record
the intellectual property at nil.
As the Company has indicated its intention to repurchase the Preferred
Shares with the proceeds from the public offering, the full value of the
preferred shares is recorded as a liability at March 31, 1996 (note 13(c)).
If the financial statements had been prepared in conformity with U.S. GAAP,
the amortization and net loss for the period would decrease by $250,000, and
deficit would increase by $1,750,000.
F-13
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e) Summary of U.S. GAAP adjustments:
The following table sets forth the effect on the loss for the period and
loss per share:
For the six month period ended March 31, 1996:
<TABLE>
<S> <C>
Loss determined under Canadian GAAP.............................. $1,961,924
Expense relating to stock based compensation..................... 2,310,000
Reduction of amortization of intellectual property............... (250,000)
----------
Loss determined under U.S. GAAP.................................. $4,021,924
==========
Loss per share (see note 11(c)).................................. $ 0.30
==========
</TABLE>
The following table sets forth the effect on the balance sheet:
<TABLE>
<S> <C>
Total assets determined under Canadian GAAP..................... $10,595,957
Decrease in intellectual property............................... 1,750,000
-----------
Total assets determinated under U.S. GAAP....................... $ 8,845,957
===========
Shareholders' equity determined under Canadian GAAP............. $ 5,303,156
Additional paid in capital...................................... 6,115,000
Deferred compensation........................................... (3,805,000)
-----------
7,613,156
Increase in deficit under U.S. GAAP............................. (4,060,000)
-----------
Shareholders' equity determined under U.S. GAAP................. 3,553,156
Current liabilities............................................. 3,292,801
Preferred Shares................................................ 2,000,000
-----------
Liabilities and Shareholders' equity under U.S. GAAP............ $ 8,845,957
===========
</TABLE>
12. COMMITMENTS:
(a) Premises lease:
The Company has assumed an operating lease for office premises from MPR
commencing November 15, 1995. The lease has been amended and is effective
until December 31, 1996. The basic rent is $102,476 per annum.
(b) Lease credit facility:
The Company has entered into an agreement dated November 15, 1995 to lease
computer equipment with a combined value of up to $10 million for periods of
36 months. The obligation under the lease agreement is not to exceed $7
million. The monthly rental for the leases will be calculated by multiplying
the net equipment cost by a factor derived from the lesser of (i) the lessor's
cost of funds and profit margin, and (ii) a rate equal to the Royal Bank of
Canada 3 Year All in Receiving Swap Rate plus 5%, compounded monthly. As of
November 15, 1995 the Swap Rate is 6.98% and the corresponding factor is
0.03310.
The Company intends to account for the leases as capital leases (see note 13
(a)).
F-14
<PAGE>
DIGITAL COURIER INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS:
(a) Leases:
Subsequent to March 31, 1996, the Company financed $2,944,000 of its capital
assets by entering into a sale lease back arrangement. These assets were sold
to the leasing company for a gain of $43,000. This amount will be amortized
into income over the lease term. The assets will be depreciated over the lease
term of three years (see note 12(b)).
The future commitment for obligations under capital leases are estimated to
be as follows:
<TABLE>
<S> <C>
1997............................................................. $ 973,149
1998............................................................. 1,167,779
1999............................................................. 1,167,779
2000............................................................. 194,467
----------
3,503,174
Less interest at approximately 11%............................... 515,692
----------
$2,987,482
==========
</TABLE>
(b) Issue of shares:
On April 10, 1996, Directors' incentive stock options were exercised for
466,665 shares at $0.15.
(c) Share repurchase:
Subsequent to March 31, 1996 the Company repurchased an aggregate of 11,400
Common Shares from certain shareholders. All shares repurchased by the Company
shall be cancelled.
(d) Public offering:
Subsequent to March 31, 1996, the Board of Directors approved the issuance
of 4,500,000 Common Shares in a public offering in the U.S. and Canada
pursuant to an underwriting agreement to be entered into between the Company
and designated Underwriters.
The Board of Directors also approved the redemption of the 2,000,000
Preferred Shares outstanding for $2,250,000 cash from the proceeds of the
public offering.
F-15
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
AUDITORS' REPORT
To the Directors of
Kwikstar Communications Ltd.:
We have audited the balance sheets of Kwikstar Communications Ltd. as at
September 30, 1995 and 1994, and the statements of operations, deficit, and
changes in financial position for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at September 30, 1995 and
1994, and the results of its operations and changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles.
Nemeth Thody Anderson
Chartered Accountants
Vancouver, B.C.
November 15, 1995
F-16
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash (Note 1(b))........................................ $ 452,295 $ 199,975
Accounts receivable..................................... 2,808 --
--------- ---------
455,103 199,975
Capital Assets (Notes 1(c) and 2)......................... 527 --
Incorporation Costs....................................... 1,025 1,025
--------- ---------
456,655 201,000
========= =========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities................ 51,577 1,000
--------- ---------
SHAREHOLDERS' EQUITY
Share Capital (Note 3).................................... 470,000 200,000
Deficit................................................... (64,922) --
--------- ---------
405,078 200,000
--------- ---------
Subsequent event (Note 5)................................. 456,655 201,000
========= =========
</TABLE>
On behalf of the Board:
____________________________ Director
____________________________ Director
Refer to accompanying notes.
F-17
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994
------------ ------------
<S> <C> <C>
REVENUE
Interest............................................ $ 20,484 $ --
-------- -----
EXPENSES
Accounting and audit................................ 5,915 --
Advertising and promotion........................... 781 --
Amortization........................................ 59 --
Bank charges, interest and exchange................. 27 --
Consulting.......................................... 5,000 --
Legal............................................... 23,405 --
Licenses, permits, dues and subscriptions........... 20 --
Management fees (Note 4)............................ 36,000 --
Office expense, supplies and shareholder
information........................................ 2,445 --
Transfer agent...................................... 3,316 --
Travel.............................................. 5,728 --
Stock exchange...................................... 2,710 --
-------- -----
85,406 --
-------- -----
Net loss for the year............................... 64,922 --
-------- -----
Loss per share...................................... .0158 --
</TABLE>
Refer to accompanying notes.
F-18
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
STATEMENT OF DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994
------------ ------------
<S> <C> <C>
Deficit, beginning of year............................ $ -- $ --
Net loss for the year............................... (64,922) --
------- -----
Deficit, end of year.................................. (64,922) --
</TABLE>
F-19
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994
------------ ------------
<S> <C> <C>
Cash provided by (used in):
OPERATING ACTIVITIES
Net loss for the year............................... $(64,922) $ --
Item not involving cash: amortization............... 59 --
-------- -------
(64,863) --
-------- -------
Cash provided by changes in non-cash working capital
items
Accounts receivable............................... (2,808) --
Accounts payable.................................. 50,577 1,000
-------- -------
47,769 1,000
-------- -------
(17,094) 1,000
-------- -------
FINANCING ACTIVITY
Share capital issued................................ 270,000 200,000
-------- -------
INVESTING ACTIVITIES
Purchase of capital assets, net..................... (586) --
Incorporation costs................................. -- (1,025)
-------- -------
(586) (1,025)
-------- -------
INCREASE DURING THE YEAR............................ 252,320 199,975
Cash, beginning of year........................... 199,975 --
-------- -------
CASH, END OF YEAR................................. 452,295 199,975
======== =======
</TABLE>
Refer to accompanying notes.
F-20
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
To facilitate review of these financial statements, the significant
accounting policies followed by the Company are summarized below:
(a) Basis of presentation
These financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Canada, which, are also in
accordance, in all material respects, with those in the United States.
(b) Cash
Cash includes short-term investments with a maturity of ninety days or less
at the time of issue.
(c) Capital assets
Capital assets are recorded at cost, including betterment and renewals
subsequent to acquisition, less accumulated amortization. When assets are sold
or abandoned, the recorded cost and related accumulated amortization are
removed from the accounts and any gains or losses are included in the
determination of net earnings. Repairs and maintenance are recorded as an
expense as incurred.
Amortization is calculated at the following rate per annum:
Equipment--20% declining balance
Assets are amortized at one-half of the annual rate in the year of
acquisition. No amortization is taken in the year of disposal.
(d) Loss per share
Loss per share are calculated using the weighted average number of shares
outstanding during the year which amounted to 4,113,241 shares.
2. CAPITAL ASSETS
<TABLE>
<CAPTION>
1995 1994
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
---- ------------ -------- --------
<S> <C> <C> <C> <C>
Equipment................................... $586 $59 $527 --
---- --- ---- ----
</TABLE>
3. SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Authorized
Unlimited number of common shares without nominal or par
value.......................................................
Unlimited number of preferred shares without nominal or par
value.......................................................
Issued
4,666,666 Common shares (1994--2,666,666).................... 470,000 200,000
------- -------
</TABLE>
F-21
<PAGE>
KWIKSTAR COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS
3. SHARE CAPITAL (CONT'D)
(a) During the year, the Company issued 2,000,000 common shares at $0.15 for
cash (net of agent's commission of $30,000). The previously issued 2,666,666
shares are held in escrow and release of these shares shall not occur without
the written consent of the Chief of Securities Administration of the Alberta
Securities Commission.
(b) Options
<TABLE>
<CAPTION>
EXERCISE
PRICE PER
DESCRIPTION SHARE TYPE NO OF SHARES SHARE EXPIRY DATE
- ----------- ---------- ------------ --------- ----------------
<S> <C> <C> <C> <C>
Agent's option............. Common 200,000 $0.15 August 4, 1996
Directors' Incentive Stock
Options................... Common 466,665 $0.15 October 31, 1999
-------
666,665
-------
</TABLE>
4. RELATED PARTY TRANSACTIONS
Kwikstar has recorded management fees with a company sharing a common
director.
5. SUBSEQUENT EVENT
Effective November 15, 1995, the shareholders of Digital Courier
International Inc. ("DCI") agreed to exchange 100% of their common and
preferred shares for 31,939,545 common and 2,000,000 preferred shares of
Kwikstar. As part of the transaction, Kwikstar will issue 232,000 common
shares as a finders fee for the introduction of Kwikstar to DCI. Pursuant to
Alberta Securities Commission Policy 4.11 and Alberta Stock Exchange Circular
No. 7, the share exchange transaction will constitute a major transaction for
Kwikstar and, as such, is subject to shareholder and regulatory approval.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF
WHICH INFORMATION IS FURNISHED.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 5
Risk Factors............................................................. 9
The Company.............................................................. 18
Use of Proceeds.......................................................... 18
Price Range and Trading Volume of Common Shares.......................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 28
Management............................................................... 38
Certain Transactions..................................................... 43
Principal and Selling Shareholders....................................... 45
Description of Share Capital............................................. 48
Shares Eligible for Future Sale.......................................... 50
Certain Income Tax Considerations........................................ 51
Governmental Regulation.................................................. 55
Underwriting............................................................. 57
Legal Matters............................................................ 59
Experts.................................................................. 59
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON SHARES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,500,000 SHARES
[LOGO]
DIGITAL COURIER INTERNATIONAL CORPORATION
COMMON SHARES
---------------
PROSPECTUS
---------------
OPPENHEIMER & CO., INC.
HANIFEN, IMHOFF INC.
CIBC WOOD GUNDY SECURITIES CORP.
RBC DOMINION SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
United States Securities and Exchange Commission registra-
tion fee................................................... US$ 13,600
Canadian Securities Exchange Commission Fee................. 11,925
NASD filing fee............................................. 4,475
Nasdaq National Market fee.................................. 36,250
Alberta Stock Exchange fee.................................. 1,850
Blue Sky fees and expenses (including legal fees)........... 15,000
Printing and engraving expenses............................. 100,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 100,000
Transfer Agent and Registrar fees........................... 5,000
Miscellaneous............................................... 61,900
----------
Total..................................................... US$650,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Business Corporations Act (Alberta) the ("ABCA"), the Registrant
may indemnify a present or former director or officer or a person who acts or
acted at the Registrant's request as a director or officer of another
corporation of which the Registrant is or was a shareholder or creditor, and
his heirs and legal representatives, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of his position with the
Registrant or such other corporation and provided that the director or officer
acted honestly and in good faith with a view to the best interests of the
Registrant or such other corporation, and, in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty,
had reasonable grounds for believing that his conduct was lawful. Such
indemnification may be made in connection with a derivative action only with
court approval. A director or officer is entitled to indemnification from the
Registrant as a matter of right if he was substantially successful on the
merits and fulfilled the conditions set forth above.
In accordance with the ABCA, the By-laws of the Registrant indemnify a
director or officer, a former director or officer, or a person who acts or
acted at the Registrant's request as a director or officer of a corporation in
which the Registrant is or was a shareholder or creditor against all costs,
charges and expenses, including an amount paid to settle an action or satisfy
a judgment, reasonably incurred by him in respect of any civil, criminal or
administrative actions or proceedings to which he was made a party by reason
of being or having been a director or officer of the Registrant or other
corporation of which the Registrant is or was a shareholder or creditor if he
acted honestly and in good faith with a view to the best interests of the
Registrant; and, in the case of a criminal or administrative action or
proceeding that is enforced by monetary penalty, he had reasonable grounds in
believing that his conduct was lawful.
The Registrant has entered into indemnity agreements with each of its
current directors and certain of its officers to the maximum extent permitted
by the ABCA.
The form of Underwriting Agreement to be filed herewith as Exhibit 1.1
contains provisions by which the Underwriters agree to indemnify the
Registrant, each person who controls the Registrant within the meaning of the
Securities Act, and each officer and director of the Registrant, with respect
to information furnished by the Underwriters for use in this Registration
Statement.
Reference is made to Item 17 for the undertakings of the Registrant with
respect to indemnification for liabilities arising under the Securities Act.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information concerning sales made since inception of the
Company of securities which were not registered under the Securities Act.
Dollar amounts are expressed in Canadian currency. Shares amounts reflect the
1-for-3 reverse split of the Company's Common Shares effective May 2, 1996.
<TABLE>
<C> <C> <S> <C>
2/08/94 Edward D. Ford 1 Common Share $ 0.225
9/30/94 Eight investors, including 888,888 Common Shares $ 200,000
Leonard Fowler and Edward D.
Ford
1/19/95 Public 666,667 Common Shares $ 300,000
issued pursuant to the IPO
in Canada
11/3/95 One investor 33,333 Common Shares $ 33,333
pursuant to the exercise on
an option
3/13/96 One investor 33,333 Common Shares $ 33,333
pursuant to the exercise on
an option
4/04/96 MPR Teltech Ltd., CIBC Wood 10,046,515 Common Shares $9,026,700
Gundy Capital (SFC) Inc. and and 2,000,000 Preferred
945 Investments Ltd. Shares, Series 1 issued in
connection with the
acquisition of DCI
4/04/96 Employees of DCI, held in 600,000 Common Shares $ 376,000
trust by Ian Bardsley issued pursuant to the
Amended Performance
Incentive Plan in
connection with the
acquisition of DCI
4/04/96 E. Lynn Patterson 77,223 Common Shares issued $ 50,967
as a finders fee in
connection with the
acquisition of DCI
4/10/96 Three investors including 155,555 Common Shares $ 70,000
Leonard Fowler and Edward D. issued pursuant to the
Ford exercise of options
</TABLE>
The foregoing securities were not offered or sold in transactions involving
any public offering in the United States and, accordingly, were exempted from
registration.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
The following exhibits are attached hereto:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws Number 1.
4.1* Form of Common Share Certificate.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
4.2 Escrow Agreement among Kwikstar, Montreal Trust and Donida
Investments Ltd., Pacific Sea Treasures Ltd., Edward D. Ford,
Leonard Fowler, Donald E. Snyder, David Sutherland, Rorie Vickery
and John Wolfe dated October 31, 1994.
4.3 Combined Automatic and Performance Escrow Agreement among Kwikstar,
Montreal Trust, MPR and 945 dated April 1, 1996.
4.4 Indemnity Sharing Agreement among MPR, DCI, CIBC Wood Gundy Capital,
945 and Kwikstar dated November 15, 1995.
4.5 Shareholders Agreement among MPR, CIBC Wood Gundy Capital, and 945
dated April 4, 1996.
5.1 Opinion of Blake, Cassels & Graydon as to legality.
10.1 Agency Agreement among the Company, Yorkton Securities, Inc. and
Montreal Trust dated December 19, 1994.
10.2 Master (Equipment) Lease Agreement between TLC, Kwikstar, and DCI
dated September 8, 1995.
10.3 Partial Assignment of Lease and Lease Amending Agreement, each among
2725321 Canada Inc., MPR, and DCI dated November 8, 1995.
10.4 Technology Transfer and Licensing Agreement between DCI and MPR
dated November 15, 1995.
10.5 Asset Transfer Agreement between MPR and DCI dated November 15,
1995.
10.6 Subscription Agreements between DCI and each of CIBC Wood Gundy
Capital and 945 dated November 15, 1995.
10.7 Share Purchase Agreements between Kwikstar and each of CIBC Wood
Gundy Capital, MPR, 945 and Ian Bardsley, as trustee of the Amended
Performance Incentive Plan dated November 15, 1995.
10.8 Support Services Agreement between MPR and DCI dated November 15,
1995 and Amendment No. 1 dated May 1, 1996.
10.9 Master Product Purchase Agreement between DCI and Sidus Systems,
Inc. dated February 1, 1996.
10.10 Finders' Fee Agreement between the Company and Altaco dated April 4,
1996.
10.11 Amended Performance Incentive Plan.
10.12 1994 Incentive Stock Option Plan.
10.13* 1996 Stock Option Plan.
10.14* Form of Indemnity Agreement between the Company and its Officers and
Directors.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Blake, Cassels & Graydon (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick Thorne, Independent Accountants.
23.3 Consent of Nemeth Thody Anderson, Independent Accountants.
24.1 Power of Attorney (included on Page II-5).
</TABLE>
- --------
* To be filed by amendment.
B. FINANCIAL STATEMENT SCHEDULES
None.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective; and (2) for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that
contains a form of Prospectus shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM F-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BURNABY, PROVINCE OF BRITISH COLUMBIA, CANADA, ON
JUNE 28, 1996.
Digital Courier International
Corporation
/s/ E. Lynn Patterson
By: _________________________________
E. LYNN PATTERSON
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer or director of Digital
Courier International Corporation whose signature appears below constitutes
and appoints E. Lynn Patterson, Edward D. Ford and L. C. Fowler, and each of
them, with full power to act without the other, his true and lawful attorneys-
in-fact and agents, with full and several power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments and registration statements
filed pursuant to Rule 462), and supplements to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as they or he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY OR ON BEHALF OF THE FOLLOWING
PERSONS IN THE CAPACITIES.
SIGNATURE TITLE DATE
/s/ E. Lynn Patterson Chairman and Chief June 28, 1996
- ------------------------------------- Executive Officer
E. LYNN PATTERSON (Principal
Executive Officer)
/s/ Edward D. Ford Vice President, June 28, 1996
- ------------------------------------- Finance, Chief
EDWARD D. FORD Financial Officer
and Director
(Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Ian R. Bardsley Director June 28, 1996
- -------------------------------------
IAN R. BARDSLEY
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Samuel L. Duboc Director June 28, 1996
- -------------------------------------
SAMUEL L. DUBOC
/s/ James W. Peters Director June 28, 1996
- -------------------------------------
JAMES W. PETERS
II-6
<PAGE>
AUTHORIZED REPRESENTATIVE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
CERTIFIES THAT IT IS THE DULY AUTHORIZED UNITED STATES REPRESENTATIVE OF
DIGITAL COURIER INTERNATIONAL CORPORATION AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON BEHALF OF IT BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALO ALTO, CALIFORNIA JUNE 28, 1996.
(Authorized U.S. Representative)
Cooley Godward Castro Huddleson &
Tatum
/s/ Gregory C. Smith
By: _________________________________
Name: Gregory C. Smith
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Articles of Incorporation.
3.2 Bylaws Number 1.
4.1* Form of Common Share Certificate.
4.2 Escrow Agreement among Kwikstar, Montreal Trust and Donida Investments
Ltd., Pacific Sea Treasures Ltd., Edward D. Ford, Leonard Fowler,
Donald E. Snyder, David Sutherland, Rorie Vickery and John Wolfe dated
October 31, 1994.
4.3 Combined Automatic and Performance Escrow Agreement among Kwikstar,
Montreal Trust, MPR and 945 dated April 1, 1996.
4.4 Indemnity Sharing Agreement among MPR, DCI, CIBC Wood Gundy Capital,
945 and the Company dated November 15, 1995.
4.5 Shareholders Agreement among MPR, CIBC Wood Gundy Capital, and 945
dated April 4, 1996.
5.1 Opinion of Blake, Cassels & Graydon as to legality.
10.1 Agency Agreement among the Company, Yorkton Securities, Inc. and
Montreal Trust dated December 19, 1994.
10.2 Master (Equipment) Lease Agreement between TLC, Kwikstar, and DCI
dated September 8, 1995.
10.3 Partial Assignment of Lease and Lease Amending Agreement, each among
2725321 Canada Inc., MPR, and DCI dated November 8, 1995.
10.4 Technology Transfer and Licensing Agreement between DCI and MPR dated
November 15, 1995.
10.5 Asset Transfer Agreement between MPR and DCI dated November 15, 1995.
10.6 Subscription Agreements between DCI and each of CIBC Wood Gundy
Capital and 945 dated November 15, 1995.
10.7 Share Purchase Agreements between DCI and each of CIBC Wood Gundy
Capital, MPR, 945 and Ian Bardsley, as trustee of the Amended
Performance Incentive Plan dated November 15, 1995.
10.8 Support Services Agreement between MPR and DCI dated November 15, 1995
and Amendment No. 1 dated May 1, 1996.
10.9 Master Product Purchase Agreement between DCI and Sidus Systems, Inc.
dated February 1, 1996.
10.10 Finders' Fee Agreement between the Company and Altaco dated April 4,
1996.
10.11 Amended Performance Incentive Plan.
10.12 1994 Incentive Stock Option Plan.
10.13* 1996 Stock Option Plan.
10.14* Form of Indemnity Agreement between the Company and its Officers and
Directors.
21.1 Subsidiary of the Registrant.
23.1 Consent of Blake, Cassels & Graydon (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick Thorne, Independent Accountants.
23.3 Consent of Nemeth Thody Anderson, Independent Accountants.
24.1 Power of Attorney (included on Page II-5).
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
BUSINESS CORPORATIONS ACT
(SECTION 27 OR 171)
ALBERTA CONSUMER AND CORPORATE AFFAIRS
ARTICLES OF AMENDMENT
(FORM 4)
1. NAME OF CORPORATION 2. CORPORATE ACCESS NO.
------------------- --------------------
KWIKSTAR COMMUNICATIONS LTD. 20589392
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
------------------------------------------------------------------
1. Section 1 of the Articles of the Corporation shall, pursuant to
Section 167(1)(a) of the Business Corporations Act (Alberta), be
amended by changing the name of the Corporation from "Kwikstar
Communications Ltd." to
DIGITAL COURIER INTERNATIONAL CORPORATION
2. Section 2 of the Articles of the Corporation shall, pursuant to
Section 167(1)(f) of the Business Corporations Act (Alberta), be
amended by changing the number of the Corporation's issued and
outstanding Common Shares by consolidating the issued and outstanding
Common Shares of the Corporation on the basis that three Common Shares
outstanding before consolidation shall be consolidated into one (1)
Common Share after consolidation.
===============================================
DATE SIGNATURE TITLE
APRIL 4, 1996 /s/ E. Lynn Patterson
E. LYNN PATTERSON DIRECTOR
- -----------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
BUSINESS CORPORATIONS ACT
(SECTION 27 OR 171)
ALBERTA CONSUMER AND CORPORATE AFFAIRS
ARTICLES OF AMENDMENT
(FORM 4)
1. NAME OF CORPORATION 2. CORPORATE ACCESS NO.
------------------- --------------------
KWIKSTAR COMMUNICATIONS LTD. 20589392
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
------------------------------------------------------------------
Section 2 of the Articles of the Corporation shall, pursuant to
section 27 of the Business Corporations Act (Alberta), be amended by
creating a series of Preferred Shares, the first of such series to be
designated as Preferred Shares, Series 1, the said Preferred Shares,
Series 1 to consist of 2,000,000 shares and to have attached thereto
the rights, privileges, restrictions and conditions set out in
Schedule "A" attached hereto.
===================================================================
DATE SIGNATURE TITLE
MARCH 7, 1996 /s/ Edward D. Ford
DIRECTOR
- -------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
SCHEDULE "A"
PREFERRED SHARES, SERIES 1
--------------------------
The Preferred Shares, Series 1 (the "Series 1 Shares") shall have attached
thereto the following rights, privileges, restrictions and conditions, in
addition to those attached to the preferred shares as a class as set forth in
Section 2 to the Articles of the Corporation.
1. VOTING
------
Except as required by law, the holders of the Series 1 Shares shall not,
as such, be entitled to receive notice of, attend or vote at any meeting of the
shareholders of the Corporation.
2. DIVIDENDS
---------
No dividends shall be declared or paid at any time on the Series 1 Shares
and the holders of such shares shall not have any claim against the Corporation
for dividends of any kind.
3. LIQUIDATION, DISSOLUTION OR WINDING-UP
--------------------------------------
In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, the holders of the
Series 1 Shares shall be entitled to repayment of the amount paid up thereon,
the whole being paid before any amount shall be paid or any assets or property
of the Corporation shall be distributed to the holders of the common shares of
the Corporation and any other shares of the Corporation ranking junior to the
Series 1 Shares. After payment of such amounts, the holders of the Series 1
Shares shall not be entitled to share in any further distribution of the
property or assets of the Corporation.
4. ISSUE PRICE
-----------
The Series 1 Shares shall be issued only at and for a deemed price of $1.00
per share.
5. REDEMPTION AND RETRACTION
-------------------------
(a) Definitions
-----------
For the purposes of this Section:
(i) "Expiration Date" means November 15, 1998;
(ii) "Gross Margin" means the aggregate gross proceeds of sale or
license, arising from or relating to the MI-320 ISDN terminal
adapter, the NDIS
<PAGE>
communications drivers and the Capella MPEG PC Codec, less the
Corporation's costs to produce such products and technology, such
costs excluding all costs of marketing and selling such products
and technology, all to be determined by the Corporation's auditor
quarterly together with the calculation of the Corporation's
quarterly financial results;
(iii) "Redemption Price" means $1.00 per share; and
(iv) "Retraction Price" means $1.00 per share.
(b) Mandatory Redemption
--------------------
(i) The Corporation shall redeem, on the 30th day following the end of
each financial quarter during the Corporation's fiscal year in which
Series 1 Shares shall remain issued and outstanding (the "Mandatory
Redemption Date"), the number of Series 1 Shares which have an
aggregate Redemption Price equal to fifty percent (50%) of the Gross
Margin for such quarter.
(ii) On each Mandatory Redemption Date, the Corporation shall, subject to
the provisions of the Business Corporations Act (Alberta), pay or
cause to be paid the Redemption Price to or to the order of the holder
of the Series 1 Shares, as the case may be, to be redeemed upon
presentation and surrender at the registered office of the Corporation
of the respective certificates representing such shares.
Should the holders of the Series 1 Shares fail to present the
certificates for the Series 1 Shares to be redeemed on any Mandatory
Redemption Date, the Corporation shall have the right at any time
after the Mandatory Redemption Date to deposit the Redemption Price or
such part thereof as at the time of deposit has not been claimed by
the holder of the Series 1 Shares entitled thereto, to a special
account in any Canadian chartered bank or trust company, to be paid
without interest to or to the order of the holder of such Series 1
Shares called for redemption upon presentation and surrender of the
certificates representing the Series 1 Shares so redeemed. Any
interest on such deposit shall belong to the Corporation.
Such Series 1 Shares shall thereupon be and be deemed to be redeemed
and shall be cancelled and shall not be reissued. If a part only of
the shares represented by any certificate is redeemed, a new
certificate for the balance shall be issued at the expense of the
Corporation. The holder of the Series 1 Shares so redeemed shall cease
to exercise any of the rights of the holder in respect thereof unless
payment of the Redemption Price shall not be: made in accordance with
this Section, in which case the rights of such holder shall remain
unimpaired.
<PAGE>
(c) Optional Redemption
-------------------
(i) The Corporation may at its option at any time or from time to time, on
the giving of not less than 10 days prior written notice ("Redemption
Notice") to the holder of the Series 1 Shares, redeem for the
Redemption Price all or any part of the Series 1 Shares then
outstanding on the date fixed for redemption (the "Voluntary
Redemption Date"), all as specified in the Redemption Notice.
(ii) The Corporation shall redeem the Series 1 Shares referred to in the
Redemption Notice on the Voluntary Redemption Date (or before the
Redemption Date if agreed to by the holder of the Series 1 Shares).
The Corporation shall, after presentation and surrender at the
registered office of the Corporation of the certificate(s) for the
Series 1 Shares called for redemption, pay to the holder of the Series
1 Shares the Redemption Price in accordance with paragraph (iii)
below.
Such Series 1 Shares shall thereupon be and be deemed to be redeemed
and shall be cancelled and shall not be reissued. The holder of the
Series 1 Shares so redeemed shall cease to exercise any of the rights
of the holder in respect thereof unless payment of the Redemption
Price shall not be made in accordance with this subsection, in which
case the rights of such holder shall remain unimpaired.
Should the Redemption Price be paid in cash in accordance with
paragraph (iii) below,. and should the holder of the Series 1 Shares
fail to present the certificate(s) for the Series 1 Shares to be
redeemed on the Voluntary Redemption Date, the Corporation shall have
the right at any time thereafter to deposit the Redemption Price in
any Canadian chartered bank or trust company, in a special account for
the holder of such shares, and upon deposit being made, the Series 1
Shares in respect of which such deposit shall have been made shall be
deemed to be redeemed and the rights of the holder thereof shall be
limited to receiving without interest, the Redemption Price so
deposited upon presentation and surrender of the certificate
representing the Series 1 Shares so redeemed. Any interest on such
deposit shall belong to the Corporation.
(iii) Payment of the Redemption Price for any Series 1 Shares redeemed
under this paragraph (c) shall be made in cash unless the holder of
the Series 1 Shares notifies the Corporation in writing not less than
5 days prior to the Voluntary Redemption Date that it wishes to
receive common shares, in which case the Redemption Price shall be
paid by issuing to the holder of the Series 1 Shares the number of
common shares in the capital of the Corporation equal to the number of
the Series 1 Shares being redeemed, multiplied by one and one-half,
and by paying the Redemption Price in cash for the remaining one-half
of the Series 1 Shares being redeemed.
<PAGE>
All common shares issued upon a redemption of Series 1 Shares under
this paragraph (c) shall be fully paid and non-assessable.
(d) Retraction at Holder's Option
-----------------------------
(i) Should any Series 1 Shares remain issued and outstanding as at the
Expiration Date, the holder of such Series 1 Shares may, at any time
after the Expiration Date, demand by notice in writing (the
"Retraction Notice") to the Corporation that the Corporation redeem
the whole or from time to time any part of the Series 1 Shares held by
it by payment to it of the Retraction Price therefor.
(ii) If the holder of the Series 1 Shares desires the Corporation to redeem
its Series 1 Shares pursuant to this Section, it shall at least 30
days before the date specified for redemption give written notice
thereof to the Corporation at its registered office (the "Retraction
Notice"). Such notice shall set out the date on which redemption is to
take place (the "Retraction Date").
The Corporation shall, subject to the provisions of the Business
Corporations Act (Alberta), redeem the Series 1 Shares referred to in
the Retraction Notice on the Retraction Date (or before the Retraction
Date if agreed to by the holder of the Series 1 Shares). The
Corporation shall, after presentation and surrender at the registered
office of the Corporation of the certificate(s) for the Series 1
Shares called for redemption, pay to the holder of the Series 1 Shares
the Retraction Price in accordance with paragraph (iii) below. Such
Series 1 Shares shall thereupon be and be deemed to be redeemed and
shall be cancelled and shall not be reissued. The holder of the Series
1 Shares so redeemed shall cease to exercise any of the rights of the
holder in respect thereof unless payment of the Retraction Price shall
not be made in accordance with this Section, in which case the' rights
of such holder shall remain unimpaired.
Should the Retraction Price be paid in cash in accordance with
subparagraph (iii)(B) below, and should the holder of the Series 1
Shares fail to prevent the certificate(s) for the Series 1 Shares to
be redeemed on the Retraction Date, the Corporation shall have the
right at any time thereafter to deposit the Retraction Price in any
Canadian chartered bank or trust company, in a special account for the
holder of such shares, and upon deposit being made, the Series 1
Shares in respect of which such deposit shall have been made shall be
deemed to be redeemed and the rights of the holder thereof shall be
limited to receiving without interest, the Retraction Price so
deposited upon presentation and surrender of the certificate
representing the Series 1 Shares so redeemed. Any interest on such
deposit shall belong to the Corporation.
<PAGE>
(iii) Payment of the Retraction Price shall be made, solely at the option
of the holder of the Series 1 Shares, as specified in the Retraction
Notice, as follows:
(A) by issuing to the holder of the Series 1 Shares the number of
common shares in the capital of the Corporation equal to the
number of Series 1 Shares being redeemed multiplied by three; or
(B) by payment of the Retraction Price, in cash, to or to the order
of the holder of the Series 1 Shares.
Should the Retraction Price be paid in cash in accordance with
subparagraph (iii)(B) above, payment of the Retraction Price shall be
made by way of twelve (12) equal monthly installments payable by the
Corporation to the holder of the Series 1 Shares on or before the last
day of each month, commencing on the last day of the first full month
after the Retraction Date.
All common shares issued upon any retraction of Series 1 Shares in
accordance with this paragraph shall be fully paid and non-assessable.
6. ANTI-DILUTION
-------------
(a) In the event of any subdivision or reclassification of the common
shares or reconstruction, consolidation, amalgamation or merger of the
Corporation (other than a consolidation, amalgamation or merger which
does not result in a reclassification of the outstanding common shares
into other shares) (collectively an "Event") at any time while any of
the Series 1 Shares are outstanding:
(i) into a greater number and/or different class or classes of
shares, then in such an Event the holder of any Series 1 Shares
receiving common shares as payment for all or any part of the
Redemption Price or the Retraction Price at any time after such
Event shall be entitled to such additional number and/or
different class or classes of shares as would have resulted from
such Event if the Redemption Price or the Retraction Price had
been paid prior to the date of such Event; and
(ii) into a lesser number and/or different class or classes of shares,
then in such an Event the holder of any Series I Shares receiving
common shares as payment for all or any part of the Redemption
Price or the Retraction Price at any time after such Event shall
be entitled to such lesser number and/or different class or
classes of shares as would have resulted from such Event if the
Redemption Price or the Retraction Price had been paid prior to
the date of such Event.
(b) If the holder of any Series 1 Shares receives common shares as payment
for all or any part of the Redemption Price or the Retraction Price at
any time after the
<PAGE>
payment by the Corporation of any dividend on the common shares
payable in common shares of the Corporation or a dividend on the
common shares payable at the option of the holders thereof either in
common shares of the Corporation or in cash, such holder shall be
entitled to (subject to the prior written consent of The Alberta Stock
Exchange) to the number of common shares which the holder would have
been entitled to receive in payment of such Redemption Price or
Retraction Price, as the case may be, if such dividend had not been
paid and, in addition, to such additional number of common shares as
would have been payable on the common shares if such Redemption Price
or the Retraction Price, as the case may be, had been payable prior to
the record date for such dividend and if such holder had exercised any
such option so as to be entitled to common shares and not in cash;
(c) If an Event occurs, the Corporation shall provide 30 days prior
written notification of same to all holders of Series 1 Shares.
<PAGE>
BUSINESS CORPORATIONS ACT
(SECTION 27 OR 171)
ALBERTA CONSUMER AND CORPORATE AFFAIRS
ARTICLES OF AMENDMENT
(FORM 4)
1. NAME OF CORPORATION 2. CORPORATE ACCESS NO.
------------------- --------------------
KWIKSTAR COMMUNICATIONS LTD. 20589392
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
------------------------------------------------------------------
1. Section 3 of the Articles of the Corporation shall, pursuant to section
167(1)(1) of the Business Corporations Act (Alberta) (the "Act"), be
amended by removing therefrom the restrictions on share transfers as
contained therein and substituting therefor:
No restrictions
2. Section 4 of the Articles of the Corporation shall, pursuant to section
167(1)(k) of the Act, be amended by increasing the minimum number of
directors that the Corporation may have from one (1) to three (3), so that
the minimum and maximum number of directors that the Corporation may have
shall be:
Minimum - 3; maximum - 15
3. Section 6 of the Articles of the Corporation shall, in accordance with
section 167(1)(m) of the Act, be amended by removing therefrom the provisions
contained in paragraph A thereof.
==========================================================================
DATE SIGNATURE TITLE
OCTOBER 14, 1994 /s/ Don Snyder
DIRECTOR
- --------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
BUSINESS CORPORATIONS ACT
(SECTION 27 OR 171)
ALBERTA CONSUMER AND CORPORATE AFFAIRS
ARTICLES OF AMENDMENT
(FORM 4)
1. NAME OF CORPORATION 2. CORPORATE ACCESS NO.
------------------- --------------------
589392 ALBERTA LTD. 20589392
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
------------------------------------------------------------------
Section 1 of the Articles of the Corporation shall, pursuant to
section 167(3) of the Business Corporations Act (Alberta), be amended
by changing the name of the Corporation from 589392 ALBERTA LTD. to
KWIKSTAR COMMUNICATIONS LTD.
===================================================================
DATE SIGNATURE TITLE
SEPTEMBER 16, 1994 /s/ Edward D. Ford
EDWARD D. FORD DIRECTOR
- -------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
BUSINESS CORPORATIONS ACT
(SECTION 6)
ALBERTA CONSUMER AND CORPORATE AFFAIRS
ARTICLES OF INCORPORATION
(FORM 1)
1. NAME OF CORPORATION:
-------------------
589392 ALBERTA LTD.
------
2. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
--------------------------------------------------------------------
AUTHORIZED TO ISSUE:
-------------------
- An unlimited number of common shares without nominal or par value,
having attached thereto the rights, privileges, restrictions and
conditions set out in Schedule "A" attached hereto;
- An unlimited number of preferred shares without nominal or par value,
having attached thereto the rights, privileges, restrictions and
conditions set out in Schedule "B" attached hereto.
3. RESTRICTIONS ON SHARE TRANSFERS (IF ANY):
----------------------------------------
No transfer of shares shall occur or be registered unless and until the
directors have, by a resolution, approved the transfer and the directors
shall be under no obligation to give such approval or to give any reason
for withholding the same.
4. NUMBER, OR MINIMUM AND MAXIMUM NUMBER, OF DIRECTORS THAT THE CORPORATION
------------------------------------------------------------------------
MAY HAVE:
--------
Minimum - 1; Maximum - 15
5. IF THE CORPORATION IS RESTRICTED FROM CARRYING ON A CERTAIN BUSINESS, OR
------------------------------------------------------------------------
RESTRICTED TO CARRYING ON A CERTAIN BUSINESS, SPECIFY THE RESTRICTION(S):
------------------------------------------------------------------------
No restrictions
<PAGE>
6. OTHER RULES OR PROVISIONS (IF ANY):
----------------------------------
A. 1. The number of shareholders of the Corporation, exclusive of
(a) persons who are in its employment and are shareholders of
the Corporation, and
(b) persons who, having been formerly in the employment of the
Corporation, were, while in that employment, shareholders of
the Corporation and have continued to be shareholders of the
Corporation after termination of that employment, is limited
to not more than 50 persons; 2 or more persons who are the
joint registered owners of one or more shares being counted
as a single shareholder.
2. Any invitation to the public to subscribe for any securities of
the Corporation is prohibited.
B. The Corporation has a lien on the shares registered in the name of a
shareholder or his legal representative for a debt of that shareholder
to the Corporation. The Corporation may enforce such lien in
accordance with its By-laws.
C. The directors may, between annual general meetings, appoint one or
more additional directors of the Corporation to serve until the next
annual general meeting, but the number of additional directors shall
not at any time exceed 1/3 of the number of directors who held office
at the expiration of the last annual meeting of the Corporation.
D. Meetings of shareholders of the Corporation may be held outside
Alberta at any place within Canada or the United States of America as
the Board of Directors of the Corporation may determine.
- --------------------------------------------------------------------
7. DATE November 30, 1993
====================================================================
INCORPORATORS NAMES ADDRESS (including postal code) SIGNATURE
====================================================================
MICHELINE MARCYAN 1800, 800 5th Avenue S.W. /s/ M. Marcyan
Calgary, Alberta
T2P 3T6
- --------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY
CORPORATE ACCESS NO: INCORPORATION DATE:
<PAGE>
SCHEDULE "A"
------------
TO THE ARTICLES OF INCORPORATION OF
_____________________ ALBERTA LTD.
There shall be attached to the common shares, the following rights,
privileges, restrictions and conditions, namely:
1. The holders of common shares shall be entitled to receive notice of, and to
vote at every meeting of the shareholders of the Corporation and shall have one
(1) vote thereat for each such common share so held.
2. Subject to the rights, privileges, restrictions and conditions attached to
any preferred shares of the Corporation, the holders of common shares shall be
entitled to receive such dividend as the directors may from time to time, by
resolution, declare.
3. Subject to the rights, privileges, restrictions and conditions attached to
any preferred shares of the Corporation, in the event of liquidation,
dissolution or winding up of the Corporation or upon any distribution of the
assets of the Corporation among shareholders being made (other than by way of
dividend out of monies properly applicable to the payment of dividends) the
holders of common shares shall be entitled to share pro rata.
<PAGE>
SCHEDULE "B"
------------
TO THE ARTICLES OF INCORPORATION OF
_________________________ ALBERTA LTD.
There shall be attached to the preferred shares the following rights,
privileges, restrictions and conditions, namely:
1. The Directors of the Corporation may, from time to time, issue the
preferred shares in one or more series, each series to consist of such numbers
of shares as may before issuance thereof, be determined by the Directors.
2. The Directors of the Corporation may, by resolution (subject as hereinafter
provided) fix before issuance, the designation, rights, privileges, restrictions
and conditions to attach to the preferred shares of each series, including,
without limiting the generality of the foregoing, the rate, form, entitlement
and payment of preferential dividends, the redemption price, terms, procedures
and conditions of redemption, if any, voting rights and conversion rights (if
any) and any sinking fund, purchase fund or other provisions attaching to the
preferred shares of such series; and provided however, that no shares of any
series shall be issued until the Directors have filed Articles of Amendment with
the Registrar of Corporations, Province of Alberta, or such designated person in
any other jurisdiction in which the Corporation may be continued.
3. If any cumulative dividends or amounts payable on return of capital in
respect of a series of shares are not paid in full, the shares of all series
shall participate ratably in respect of accumulated dividends and return of
capital.
4. The preferred shares shall be entitled to preference over the common shares
of the Corporation and any other shares of the Corporation ranking junior to the
preferred shares with respect to the payment of dividends, if any, and in the
distribution of assets in the event of liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, or any other distribution of
the assets of the Corporation among its shareholders for the purpose of winding
up its affairs, and may also be given such other preferences over the common
shares of the Corporation and any other shares of the Corporation ranking junior
to the preferred shares as may be fixed by the resolution of the Directors of
the Corporation as to the respective series authorized to be issued.
5. The preferred shares of each series shall rank on a parity with the
preferred shares of every other series with respect to priority and payment of
dividends and in the distribution of assets in the event of liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
exclusive of any conversion rights that may affect the aforesaid.
<PAGE>
6. No dividends shall at any time be declared or paid on or set apart for
payment on any shares of the Corporation ranking junior to the preferred shares
unless all dividends, if any, up to and including the dividend payable for the
last completed period for which such dividend shall be payable on each series of
preferred shares then issued and outstanding shall have been declared and paid
or set apart for payment at the date of such declaration or payment or setting
apart for payment on such shares of the Corporation ranking junior to the
preferred shares nor shall the Corporation call for redemption or redeem or
purchase for cancellation or reduce or otherwise pay off any of the preferred
shares (less than the total amount then outstanding) or any shares of the
Corporation ranking junior to the preferred shares unless all dividends up to
and including the dividend payable, if any, for the last completed period for
which such dividends shall be payable on each series of the preferred shares
then issued and outstanding shall have been declared and paid or set apart for
payment at the date of such call for redemption, purchase, reduction or other
payment.
7. Preferred shares of any series may be purchased for cancellation or made
subject to redemption by the Corporation out of capital pursuant to the
provisions of the Business Corporations Act (Alberta), if the Directors so
provide in the resolution of the Board of Directors of the Corporation relating
to the issuance of such preferred shares, and upon such other terms and
conditions as may be specified in the designations, rights, privileges,
restrictions and conditions attaching to the preferred shares of such series as
set forth in the said resolution of the Board of Directors and the Articles of
Amendment of the Corporation relating to the issuance of such series.
8. The holders of the preferred shares shall not, as such, be entitled as of
right to subscribe for or purchase or receive any part of any issue of shares or
bonds, debentures or other securities of the Corporation now or hereafter
authorized.
9. No class of shares may be created or rights and privileges increased to
rank in parity or priority with the rights and privileges of the preferred
shares including, without limiting the generality of the foregoing, the rights
of the preferred shares to receive dividends or to return of capital, without
the approval of the holders of the preferred shares as required under the
Business Corporations Act (Alberta).
<PAGE>
EXHIBIT 3.2
BY-LAW NUMBER 1
---------------
A by-law relating generally to the transaction
of the business and affairs of the Corporation.
CONTENTS
--------
SECTION
- -------
ONE INTERPRETATION
TWO ADMINISTRATION
THREE BORROWING AND SECURITIES
FOUR DIRECTORS
FIVE COMMITTEES
SIX OFFICERS
SEVEN PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
EIGHT SHARES
NINE DIVIDENDS AND RIGHTS
TEN MEETINGS OF SHAREHOLDERS
ELEVEN DIVISIONS AND DEPARTMENTS
TWELVE INFORMATION AVAILABLE TO SHAREHOLDERS
THIRTEEN NOTICES
FOURTEEN EFFECTIVE DATE (AND REPEAL)
BE IT ENACTED as a by-law of 589392 ALBERTA LTD. (hereinafter called
the "Corporation") as follows:
<PAGE>
-2-
SECTION ONE
-----------
INTERPRETATION
--------------
1.01 DEFINITIONS. In the by-laws and all resolutions of the Corporation,
unless the context otherwise requires:
(a) "Act" means the Business Corporations Act (Alberta), and any statute
that may be substituted therefor, as from time to time amended;
(b) "appoint" includes "elect" and vice versa;
(c) "articles" means the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of
continuance, articles of reorganization, articles of arrangement,
articles of dissolution, articles of revival and includes an amendment
to any of them;
(d) "board" means the board of directors of the Corporation;
(e) "by-laws" means this by-law and all other by-laws of the Corporation
from time to time in force and effect;
(f) "Corporation" means a body corporate incorporated or continued under
the Act and not discontinued under the Act;
(g) "meeting of shareholders" means an annual meeting of shareholders and
a special meeting of shareholders;
(h) "non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Alberta) or the
Interpretation Act (Canada);
(i) "ordinary resolution" means a resolution
(i) passed by a majority of the votes cast by the shareholders who
voted in respect of that resolution, or
(ii) signed by all the shareholders entitled to vote on that
resolution;
(j) "recorded address" means, in the case of a shareholder, his address as
recorded in the Securities Register of the Corporation; and, in the
case of joint shareholders, the address appearing in the Securities
Register of the Corporation in respect of such joint holding or the
first address so appearing if there are more than one; and, in the
case of a director, officer, auditor or member of a committee of the
board, his latest address as recorded in the records of the
Corporation;
<PAGE>
-3-
(k) "resident Canadian" means an individual who is
(i) a Canadian citizen ordinarily resident in Canada,
(ii) a Canadian citizen not ordinarily resident in Canada who is a
member of a prescribed class of persons, or
(iii) a permanent resident within the meaning of the Immigration Act,
1976 (Canada) and ordinarily resident in Canada, except a
permanent resident who has been ordinarily resident in Canada
for more than 1 year after the time at which he first became
eligible to apply for Canadian citizenship;
(l) "signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by Clause
2.04 or by a resolution passed pursuant thereto;
(m) "special business" means all business transacted at a special meeting
of shareholders and all business transacted at an annual meeting of
shareholders, except consideration of the financial statements and
auditor's report, fixing the number of directors for the following
year, election of directors and reappointment of the incumbent
auditor;
(n) "special meeting of shareholders" means a meeting, other than an
annual meeting, of shareholders entitled to vote at an annual meeting
of shareholders, and includes a meeting of any class or classes of
shareholders acting separately from any other class or classes of
shareholders;
(o) "special resolution" means a resolution passed by a majority of not
less than 2/3 of the votes cast by the shareholders who voted in
respect of that resolution or signed by all the shareholders entitled
to vote on that resolution;
(p) "unanimous shareholder agreement" means
(i) a written agreement to which all the shareholders of a
corporation are or are deemed to be parties, whether or not any
other person is also a party, or
(ii) a written declaration by a person who is the beneficial owner of
all the issued shares of a corporation, that provides for any of
the matters enumerated in section 140(1) of the Act.
Save as aforesaid, words and expressions defined in the Act have the
same meanings when used herein; and words importing the singular number include
the plural and vice versa; words importing gender include the masculine,
feminine and neuter genders;
<PAGE>
-4-
and words importing persons include individuals, bodies corporate, partnerships,
trusts and unincorporated organizations.
SECTION TWO
-----------
ADMINISTRATION
--------------
2.01 REGISTERED OFFICE, RECORDS OFFICE AND ADDRESS FOR SERVICE. Until
changed in accordance with the Act, the registered office of the Corporation,
the designated records office (if separate from the registered office) of the
Corporation and the post office box (if any) designated as the address for
service upon the Corporation by mail shall initially be at the address or
addresses in Alberta specified in the notice thereof filed with the articles and
thereafter as the board may from time to time determine.
2.02 CORPORATE SEAL. The corporate seal of the Corporation shall be in the
form as determined by the board from time to time.
2.03 FINANCIAL YEAR. The financial year of the Corporation shall be
determined by the board from time to time.
2.04 EXECUTION OF INSTRUMENTS. Any officer or any director may sign
certificates and similar instruments (other than share certificates) on the
Corporation's behalf with respect to any factual matters relating to the
Corporation's business and affairs, including certificates certifying copies of
the articles, by-laws, resolutions and minutes of meetings of the Corporation.
Subject to the foregoing:
(a) Deeds, transfers, assignments, contracts, obligations, and other
instruments shall be signed on behalf of the Corporation by one or
more persons who hold the office of director, chairman of the board,
president, managing director, vice-president, secretary, treasurer,
assistant secretary or assistant treasurer or any other office created
by by-law or by resolution of the board. When there is only one
director and that director is the only officer of the Corporation,
deeds, transfers, assignments, contracts, obligations and other
instruments may be signed by that person alone, as director or
officer, on behalf of the Corporation;
(b) Security certificates (including share certificates) shall be signed
by at least one director or officer of the Corporation or by or on
behalf of a registrar, transfer agent or branch transfer agent of the
Corporation or by a trustee who certifies it in accordance with a
trust indenture. Any signatures required on a security certificate
(including share certificates) may be printed or otherwise
mechanically reproduced on it.
In addition, the board may from time to time direct the person or
persons by whom any particular instrument or class of instruments may or shall
be signed. Any signing officer or director may affix the corporate seal to any
instrument requiring the same.
<PAGE>
-5-
2.05 BANKING ARRANGEMENTS. The banking business of the Corporation
including, without limitation, the borrowing of money and the giving of security
therefor, shall be transacted with such banks, trust companies or other bodies
corporate or organizations as may from time to time be designated by or under
the authority of the board. Such banking business or any part thereof shall be
transacted under such agreements, instructions and delegations of powers as the
board may from time to time prescribe or authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officers of the
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the officers executing such proxies or arranging for the
issuance of voting certificates or such other evidence of the right to exercise
such voting rights. In addition, the board, or failing the board, the signing
officers of the Corporation, may from time to time direct the manner in which
and the person or persons by whom any particular voting rights or class of
voting rights may or shall be exercised.
SECTION THREE
-------------
BORROWING AND SECURITIES
------------------------
3.01 BORROWING POWER. Without limiting the borrowing powers of the
Corporation as set forth in the Act, but subject to the articles or any
unanimous shareholders agreement, the board may from time to time on behalf of
the Corporation, without authorization of the shareholders:
(a) borrow money upon the credit of the Corporation in such amounts and on
such terms as may be deemed expedient by obtaining loans or advances
or by way of overdraft or otherwise;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured for such sums and at such prices as may be deemed
expedient;
(c) to the extent permitted by the Act, give a guarantee on behalf of the
Corporation to secure performance of any present or future
indebtedness, liability or obligation of any person;
(d) to charge, mortgage, hypothecate, pledge or otherwise create a
security interest in all or any present and future property, real and
personal, immoveable and moveable, of the Corporation, including its
undertakings and rights, to secure any bonds, debentures, notes or
other evidences of indebtedness or guarantee or any other
indebtedness, liability or obligation of the Corporation, present or
future; and
<PAGE>
-6-
(e) delegate to a committee of the board, a director or an officer of the
Corporation all or any of the powers conferred aforesaid or by the Act
to such extent and in such manner as the directors may determine.
Nothing in this section limits or restricts the borrowing of money by
the Corporation on bills of exchange or promissory notes made, drawn, accepted
or endorsed by or on behalf of the Corporation.
3.02 DELEGATION. The board may from time to time delegate to such one or
more of the directors and officers of the Corporation as may be designated by
the board all or any of the powers conferred on the board by Clause 3.01 or by
the Act to such extent and in such manner as the board shall determine at the
time of each such delegation.
SECTION FOUR
------------
DIRECTORS
---------
4.01 NUMBER OF DIRECTORS AND QUORUM. Until changed in accordance with the
Act, the board shall consist of not fewer than the minimum number and not more
than the maximum number of directors provided in the articles. Subject to
Clause 4.08, the quorum for the transaction of business at any meeting of the
board shall consist of a majority of the Board of Directors of the Corporation
or such greater or lesser number of directors as the board may from time to time
determine. If a quorum is present at the opening of any meeting of directors,
the directors present may proceed with the business of the meeting
notwithstanding that a quorum is not present throughout the meeting. If a
quorum is not present at the opening of any meeting of directors, the directors
present may adjourn the meeting to a fixed time and place but may not
transact any other business other than as provided in these By-laws or in the
Act until a quorum is present.
4.02 QUALIFICATION. The following persons are disqualified from being a
director of the Corporation:
(a) anyone who is less than 18 years of age;
(b) anyone who
(i) is a dependent adult as defined in The Dependent Adults Act or
is the subject of a certificate of incapacity under that Act,
(ii) is a formal patient as defined in The Mental Health Act, 1972,
(iii) is the subject of an order under The Mentally Incapacitated
Persons Act appointing a committee of his person or estate or
both, or
<PAGE>
-7-
(iv) has been found to be a person of unsound mind by a court
elsewhere than in Alberta;
(c) a person who is not an individual;
(d) a person who has the status of bankrupt.
A director need not be a shareholder. At least half of the directors
shall be resident Canadians.
4.03 CONSENT TO ACT. A person who is elected or appointed a director is
not a director unless:
(a) he was present at the meeting when he was elected or appointed and did
not refuse to act as a director, or
(b) if he was not present at the meeting when he was elected or appointed,
he consented to act as a director in writing before his election or
appointment or within 10 days after it, or he has acted as a director
pursuant to the election or appointment.
4.04 ELECTION AND TERM. Shareholders of the Corporation shall, by ordinary
resolution at the first meeting of shareholders and at each succeeding annual
meeting at which an election of directors is required, elect directors to hold
office for a term expiring not later than the close of the annual meeting of
shareholders following the election. At each annual meeting of shareholders, all
directors whose term of office has expired or then expires shall retire but, if
qualified, shall be eligible for re-election. A director not elected for an
expressly stated term ceases to hold office at the close of the first annual
meeting of shareholders following his election. Notwithstanding the foregoing,
if directors are not elected at a meeting of shareholders, the incumbent
directors continue in office until their successors are elected. The number of
directors to be elected at any such meeting shall be the number of directors
whose term of office has expired or then expires unless the directors or the
shareholders otherwise determine. It is not necessary that all directors elected
at a meeting of shareholders hold office for the same term. If the articles so
provide, the directors may, between annual meetings of shareholders, appoint one
or more additional directors of the Corporation to serve until the next annual
meeting of shareholders, but the number of additional directors shall not at any
time exceed one-third of the number of directors who held office at the
expiration of the last annual meeting of the Corporation.
4.05 REMOVAL OF DIRECTORS. Subject to the Act, the shareholders may, by
ordinary resolution passed at a special meeting, remove any director from office
and the vacancy created by such removal may be filled at the meeting of the
shareholders at which the director was removed or, if not so filled, may be
filled by the directors.
<PAGE>
-8-
4.06 CEASING TO HOLD OFFICE. A director ceases to hold office when he
dies, when he is removed from office by the shareholders, when he ceases to be
qualified for election as a director, or when his written resignation is sent or
delivered to the Corporation, or if a time is specified in such resignation, at
the time so specified, whichever is later. Provided always that, subject to the
Act, the shareholders of the Corporation may by ordinary resolution at a special
meeting remove any director or directors from office.
4.07 VACANCIES. Subject to the Act, a quorum of the board may fill a
vacancy in the board. In the absence of a quorum of the board, the board shall
forthwith call a special meeting of the shareholders to fill the vacancy. If
the board fails to call such meeting or if there are no such directors then in
office, any shareholder may call the meeting.
4.08 ACTION BY THE BOARD. Subject to any unanimous shareholder agreement,
the board shall manage the business and affairs of the Corporation. Subject to
Clauses 4.09 and 4.10, the powers of the board may be exercised by a meeting at
which the quorum is present or by resolution in writing signed by all the
directors entitled to vote on that resolution at a meeting of the board. Where
there is a vacancy in the board, the remaining directors may exercise all the
powers of the board so long as a quorum remains in office. Where the
Corporation has only one director, that director may constitute a meeting.
4.09 CANADIAN REPRESENTATION. Subject to the Act, the board shall not
transact business at a meeting, other than filling a vacancy in the board,
unless at least one-half of the directors present are resident Canadians, except
where:
(a) a resident Canadian director who is unable to be present approves in
writing or by telephone or other communications facilities the
business transacted at the meeting; and
(b) the number of resident Canadian directors present at the meeting,
together with any resident Canadian director who gives his approval
under clause (a), totals at least half of the directors present at the
meeting.
4.10 PARTICIPATION BY TELEPHONE. A director may participate in a meeting
of the board or of a committee of the board by means of such telephone or other
communications facilities as permits all persons participating in the meeting to
hear each other, and a director participating in such a meeting by such means is
deemed to be present at the meeting.
4.11 PLACE OF MEETINGS. Subject to the Articles, meetings of the board may
be held at any place in or outside Canada.
4.12 CALLING OF MEETINGS. Meetings of the board shall be held from time to
time at such time and at such place as the board, the chairman of the board, the
managing director, the president or any two directors may determine. Provided
always that should more than one of the above named call a meeting at or for
substantially the same time there shall be
<PAGE>
-9-
held only one meeting and such meeting shall occur at the time and place
determined by, in order of priority, the board, the chairman or the president.
4.13 NOTICE OF MEETING. Notice of the time and place of each meeting of
the board shall be given in the manner provided in Clause 13.01 to each director
not less than forty-eight hours before the time when the meeting is to be held.
A notice of a meeting of directors need not specify the purpose of or the
business to be transacted at the meeting, except where the Act requires such
purpose or business to be specified, including any proposal to:
(a) submit to the shareholders any question or matter requiring approval
of the shareholders;
(b) fill a vacancy among the directors or in the office of auditor;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem, or otherwise acquire shares of the Corporation;
(f) pay a commission for the sale of shares;
(g) approve a management proxy circular;
(h) approve any annual financial statements; or
(i) adopt, amend or repeal by-laws.
A director may, in any manner, waive notice of or otherwise consent to
a meeting of the board; and attendance of a director at a meeting of directors
is a waiver of notice of the meeting, except when a director attends a meeting
for the express purpose of objecting to the transaction of business on the
grounds that the meeting is not lawfully called.
4.14 FIRST MEETING OF NEW BOARD. Provided a quorum of directors is
present, each newly elected board may, without notice, hold its first meeting
immediately following the meeting of shareholders at which such board is
elected.
4.15 ADJOURNED MEETING. Notice of an adjourned meeting of the board is not
required if the time and place of the adjourned meeting is announced at the
original meeting.
4.16 REGULAR MEETINGS. The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A
copy of any resolution of the board fixing the place and time of such regular
<PAGE>
-10-
meetings shall be sent to each director forthwith after being passed, but no
other notice shall be required for any such regular meeting except where the Act
requires the purpose thereof or the business to be transacted thereat to be
specified.
4.17 CHAIRMAN AND SECRETARY. The chairman of the board, or, in his
absence, the president, or in his absence, a vice-president shall be chairman of
any meeting of the board. If none of the said officers are present, the
directors present shall choose one of their number to be chairman. The
secretary of the Corporation shall act as secretary at any meeting of the board,
and if the secretary of the Corporation be absent, the chairman of the meeting
shall appoint a person, who need not be a director, to act as secretary of the
meeting.
4.18 CASTING VOTES. At all meetings of the board every question shall be
decided by a majority of the votes cast on the question. In case of an equality
of votes the chairman of the meeting shall not be entitled to a second or
casting vote.
4.19 CONFLICT OF INTEREST. A director or officer shall not be disqualified
by his office, or be required to vacate his office, by reason only that he is a
party to, or is a director or officer or has a material interest in any person
who is party to, a material contract or proposed material contract with the
Corporation or subsidiary thereof. Such a director or officer shall, however,
disclose the nature and extent of his interest in the contract at the time and
in the manner provided by the Act. Any such contract or proposed contract shall
be referred to the board or shareholders for approval even if such contract is
one that in the ordinary course of the Corporation's business would not require
approval by the board or shareholders. Subject to the provisions of the Act, a
director shall not by reason only of his office be accountable to the
Corporation or to its shareholders for any profit or gain realized from such a
contract or transaction, and such contract or transaction shall not be void or
voidable by reason only of the director's interest therein, provided that the
required declaration and disclosure of interest is properly made, the contract
or transaction is approved by the directors or shareholders, and it is fair and
reasonable to the Corporation at the time it was approved and, if required by
the Act, the director refrains from voting as a director on the contract or
transaction at the directors' meeting at which the contract is authorized or
approved by the directors, except attendance for the purpose of being counted in
the quorum.
4.20 REMUNERATION AND EXPENSES. The directors shall be paid such
remuneration for their services as the board may from time to time determine.
The directors shall also be entitled to be reimbursed for travelling and other
expenses properly incurred by them in attending meetings of the board or any
committee thereof. Nothing herein contained shall preclude any director from
serving the Corporation in any other capacity and receiving remuneration
therefor.
<PAGE>
-11-
SECTION FIVE
------------
COMMITTEES
----------
5.10 COMMITTEE OF DIRECTORS. The board may appoint a committee of
directors, however designated, or a managing director, who must be a resident
Canadian, and delegate to such committee or managing director any of the powers
of the board except those which, under the Act, a committee of directors or
managing director has no authority to exercise. At least half of the members of
such committee shall be resident Canadians. A committee may be comprised
of one director.
5.02 TRANSACTION OF BUSINESS. Subject to the provisions of these by-laws
relating to participation by telephone, the powers of a committee of directors
may be exercised by a meeting at which a quorum is present or by resolution in
writing signed by all the members of such committee who would have been entitled
to vote on that resolution at a meeting of the committee. Meetings of such
committee may be held at any place in or outside Canada and may be called by any
one member of the committee giving notice in accordance with the by-laws
governing the calling of directors' meetings.
5.03 PROCEDURE. Unless otherwise determined herein or by the board, each
committee shall have the power to fix its quorum at not less than a majority of
its members, to elect its chairman and to regulate its procedure.
SECTION SIX
-----------
OFFICERS
--------
6.01 APPOINTMENT OF OFFICERS. Subject to any unanimous shareholder
agreement, the board may from time to time appoint a chairman of the board, a
managing director (who shall be a resident Canadian), a president, one or more
vice-presidents, a secretary, a treasurer and such other officers as the board
may determine, including one or more assistants to any of the officers so
appointed. The board may specify the duties of and, in accordance with this
bylaw and subject to the provisions of the Act, delegate to such officers powers
to manage the business and affairs of the Corporation. Except for a managing
director and a chairman of the board, an officer may but need not be a director
and one person may hold more than one office. The president or such other
officer as the board may designate, shall be the chief executive officer of the
Corporation.
6.02 CHAIRMAN OF THE BOARD. The board may from time to time appoint a
chairman of the board who shall be a director. If appointed, the board may
assign to him any of the powers and duties that are by any provisions of this
by-law assigned to the managing director or to the president; and he shall,
subject to the provisions of the Act, have such other powers and duties
<PAGE>
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as the board may specify. He shall preside at all meetings of the shareholders
at which he is present. During the absence or disability of the chairman of the
board, his duties shall be performed and his powers exercised by the managing
director, if any, or by the president if there is no managing director.
6.03 MANAGING DIRECTOR. The board may from time to time appoint a managing
director who shall be a resident Canadian and a director. If appointed, he
shall have, subject to the authority of the board, general supervision of the
business and affairs of the Corporation; and he shall, subject to the provisions
of the Act, have such other powers and duties as the board may specify. During
the absence or disability of the president, or if no president has been
appointed, the managing director shall also have the powers and duties of that
office.
6.04 PRESIDENT. If appointed, the president shall, subject to the
discretion of the board, be the chief executive officer, and, subject to the
authority of the board, shall have general supervision of the business of the
Corporation; and he shall have such other powers and duties as the board may
specify. During the absence or disability of the managing director, or if no
managing director has been appointed, the president shall also have the powers
and duties of that office.
6.05 VICE-PRESIDENT. A vice-president, if appointed, shall have such
powers and duties as the board or the chief executive officer may specify.
6.06 SECRETARY. The secretary, if appointed, shall attend and be the
secretary of all meetings of the board, shareholders and committees of the board
and shall enter or cause to be entered in records kept for that purpose minutes
of all proceedings thereat; he shall give or cause to be given, as and when
instructed, all notices to shareholders, directors, officers, auditors and
members of committees of the board; he shall be the custodian of the stamp or
mechanical device generally used for affixing the corporate seal of the
Corporation and of all books, papers, records, documents and instruments
belonging to the Corporation, except when some other officer or agent has been
appointed for that purpose; and he shall have such other powers and duties as
the board or the chief executive officer may specify.
6.07 TREASURER. The treasurer, if appointed, shall keep proper accounting
records in compliance with the Act and shall be responsible for the deposit of
money, the safekeeping of securities and the disbursement of the funds of the
Corporation; he shall render to the board, whenever required, an account of all
his transactions as treasurer and of the financial position of the Corporation;
and he shall have such other powers and duties as the board or the chief
executive officer may specify.
6.08 POWERS AND DUTIES OF OTHER OFFICERS. The powers and duties of all
other officers shall be such as the terms of their engagement call for or as the
board or the chief executive officer may specify. Any of the powers and duties
of an officer to whom an assistant has been appointed may be exercised and
performed by such assistant, unless the board or the chief executive officer
otherwise directs.
<PAGE>
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6.09 VARIATION OF POWERS AND DUTIES. The board may from time to time and
subject to the provisions of the Act, vary, add to or limit the powers and
duties of any officer.
6.10 TERM OF OFFICE. The board, in its discretion, may remove any officer
of the Corporation, without prejudice to such officer's rights under any
employment contract. Otherwise each officer appointed by the board shall hold
office until his successor is appointed.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION. The terms of employment and the
remuneration of officers appointed by the board shall be settled by it from time
to time. The fact that any officer is a director or shareholder of the
Corporation shall not disqualify him from receiving such remuneration as an
officer as may be determined.
6.12 CONFLICT OF INTEREST. An officer shall disclose his interest in any
material contract or proposed material contract with the Corporation in
accordance with Clause 4.19.
6.13 AGENTS AND ATTORNEYS. The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or outside Canada with such
powers of management or otherwise (including the power to sub-delegate) as may
be thought fit.
6.14 FIDELITY BONDS. The board may require such officers, employees and
agents of the Corporation as the board deems advisable to furnish bonds for the
faithful discharge of their powers and duties, in such forms and with such
surety as the board may from time to time determine.
SECTION SEVEN
-------------
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
--------------------------------------------
7.01 LIMITATION OF LIABILITY. Every director and officer of the Corporation
in exercising his powers and discharging his duties shall act honestly and in
good faith with a view to the best interests of the Corporation and exercise the
care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. Subject to the foregoing, no director or officer
shall be liable for the acts, receipts, neglects or defaults of any other
director or officer or employee, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the Corporation
through the insufficiency or deficiency of title to any property acquired for or
on behalf of the Corporation, or for the insufficiency or deficiency of any
security in or upon which any of the moneys of the Corporation shall be
invested, or for any loss or damage arising from the bankruptcy, insolvency or
tortious acts of any person with whom any of the moneys, securities or effects
of the Corporation shall be deposited, or for any loss occasioned by any error
of judgment or oversight on his part, or for any other loss, damage or
misfortune whatsoever which shall happen in the execution of the duties
of his office or in relation thereto, unless the same are occasioned by his own
wilful neglect or default; provided
<PAGE>
-14-
that nothing herein shall relieve any director or officer from the duty to act
in accordance with the Act and the regulations thereunder or from liability for
any breach thereof.
No act or proceeding of any director or officer or the board shall be
deemed invalid or ineffective by reason of the subsequent ascertainment of any
irregularity in regard to such act or proceeding or the qualification of such
director or officer or board.
Directors may rely upon the accuracy of any statement or report
prepared by the Corporation's auditors, internal accountants or other
responsible officials and shall not be responsible or held liable for any loss
or damage resulting from the paying of any dividends or otherwise acting upon
such statement or report.
7.02 INDEMNITY. Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or officer,
or a person who acts or acted at the Corporation's request as a director or
officer of a body corporate of which the Corporation is or was a shareholder or
creditor (or a person who undertakes or has undertaken any liability on behalf
of the Corporation or any such body corporate) and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director or officer of
the Corporation or such body corporate, if:
(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
7.03 INSURANCE. Subject to the limitations contained in the Act, the
Corporation may purchase and maintain such insurance for the benefit of its
directors and officers as such against any liability incurred by him, as the
board may from time to time determine.
SECTION EIGHT
-------------
SHARES
------
8.01 ALLOTMENT AND ISSUE. The board may, from time to time, allot, or
grant options to purchase the whole or any part of the authorized and unissued
shares of the Corporation at such times and to such persons and for such
consideration as the board shall determine, provided that no share shall be
issued until it is fully paid as prescribed by the Act. Subject to the
articles, no holder of any class of share of the capital of the Corporation
shall be entitled as of right to subscribe for, purchase or receive any part of
any new or additional issue
<PAGE>
-15-
of shares of any class, whether now or hereafter authorized or any bonds,
debentures or other securities convertible into shares of any class.
8.02 COMMISSIONS. The board may from time to time authorize the
Corporation to pay a commission to any person in consideration of his purchasing
or agreeing to purchase shares of the Corporation, whether from the Corporation
or from any other person, or procuring or agreeing to procure purchasers for any
such shares.
8.03 SECURITIES REGISTER. The Corporation shall maintain a securities
register in which it records the securities issued by it in registered form,
showing with respect to each class or series of securities:
(a) the names, alphabetically arranged, and the latest known address of
each person who is or has been a security holder,
(b) the number of securities held by each security holder, and
(c) the date and particulars of the issue and transfer of each security.
The Corporation shall keep the information entered in the securities
register for the period of time prescribed in the regulations to the Act.
8.04 TRANSFER AGENTS AND REGISTRARS. The board may from time to time
appoint one or more trust companies registered under The Trust Companies Act
(Alberta) as its agent or agents to maintain the central securities register or
registers, and an agent or agents to maintain branch securities registers. Such
a person may be designated as transfer agent or registrar according to his
functions and one person may be appointed both registrar and transfer agent. The
board may at any time terminate such appointment.
8.05 REGISTRATION OF TRANSFER. Subject to the Act, no transfer of shares
shall be registered in a securities register except upon presentation of the
certificate representing such shares with a transfer endorsed thereon or
delivered therewith duly executed by the registered holder or by his attorney or
successor duly appointed, together with such reasonable assurance or evidence of
signature, identification and authority to transfer as the board may from time
to time prescribe, upon payment of all applicable taxes and any fees prescribed
by the board; upon compliance with such restrictions on transfer as are
authorized by the articles and upon satisfaction of any lien referred to in
Clause 8.06.
8.06 LIEN FOR INDEBTEDNESS. If the articles provide that the Corporation
shall have a lien on shares registered in the name of a shareholder indebted to
the Corporation, such lien may be enforced, subject to any other provision of
the articles and to any unanimous shareholder agreement, by the sale of the
shares thereby affected, or by the cancellation by the Corporation of the shares
thereby affected and the appropriate corresponding reduction of the stated
capital account for said shares, or by any other action, suit, remedy or
proceeding
<PAGE>
-16-
authorized or permitted by law or by equity and, pending such enforcement, may
refuse to register a transfer of the whole or any part of such shares.
8.07 NON-RECOGNITION OF TRUSTS. Subject to the provisions of the Act, the
Corporation shall treat as absolute owner of any share the person in whose name
the share is registered in the securities register as if that person had full
legal capacity and authority to exercise all rights of ownership irrespective of
any indication to the contrary through Knowledge or notice or description in the
Corporation's records or on the share certificate.
8.08 SHARE CERTIFICATES. Every holder of one or more shares of the
Corporation shall be entitled, at his option, to a share certificate, or to a
non-transferable written acknowledgement of his right to obtain a share
certificate, stating the name of the person to whom the certificate or
acknowledgment was issued, and the number and class or series of shares held by
him as shown on the securities register. Share certificates and acknowledgments
of a shareholder's right to a share certificate, shall, subject to the Act, be
in such form as the board shall from time to time approve. Any share
certificate shall be signed in accordance with Clause 2.04 and need not be under
the corporate seal; provided that, unless the board otherwise determines,
certificates representing shares in respect of which a transfer agent and/or
registrar has been appointed shall not be valid unless countersigned by or on
behalf of such transfer agent and/or registrar. The signature of one of the
signing officers or, in the case of share certificates which are not valid
unless countersigned by or on behalf of a transfer agent and/or registrar, the
signatures of both signing officers may be printed or mechanically reproduced in
facsimile upon share certificates and every such facsimile signature shall for
all purposes be deemed to be the signature of the officer whose signature it
reproduces and shall be binding upon the Corporation. A share certificate
executed as aforesaid shall be valid notwithstanding that one or both of the
officers whose facsimile signature appears thereon no longer holds office at the
date of issue of the certificate.
8.09 REPLACEMENT OF SHARE CERTIFICATES. The board or any officer or agent
designated by the board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that
has been mutilated or in substitution for a share certificate: claimed to have
been lost, destroyed or wrongfully taken on payment of such fee, not exceeding
the maximum amount prescribed in the regulations to the Act for a share
certificate issued in respect of a transfer, and on such terms as to indemnity,
reimbursement of expenses and evidence of loss and of title as the board may
from time to time prescribe, whether generally or in any particular case.
8.10 JOINT SHAREHOLDERS. If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons
may give effectual receipts for the certificates issued in respect thereof or
for any dividend, bonus, return of capital or other money payable or warrant
issuable in respect of such shares.
<PAGE>
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8.11 DECEASED SHAREHOLDERS. In the event of the death of a holder, or one
of the joint holders, of any share, the Corporation shall not be required to
make any entry in the register of shareholders in respect thereof except on
production of all such documents as may be required by law and upon compliance
with the reasonable requirements of the Corporation and its transfer agents.
SECTION NINE
------------
DIVIDENDS AND RIGHTS
--------------------
9.01 DIVIDENDS. Subject to the provisions of the Act, the board may, from
time to time, declare dividends payable to the shareholders according to their
respective rights and interest in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation.
9.02 DIVIDEND CHEQUES. A dividend payable in cash shall be paid by cheque
drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
been declared and mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs. In the case of
joint holders the cheque shall, unless such joint holders otherwise direct, be
made payable to the order of all such joint holders and mailed to them at their
recorded address. The mailing of such cheque as aforesaid, unless the same is
not paid on due presentation, shall satisfy and discharge the liability for the
dividend to the extent of the sum represented thereby plus the amount of any tax
which the Corporation is required to and does withhold.
9.03 NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as
to indemnity, reimbursement of expenses and evidence of non-receipt and of title
as the board may from time to time prescribe, whether generally or in any
particular case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS. The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of right to
subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
receive the right to subscribe for such securities, provided that if the
Corporation is a distributing corporation, notice of any such record date is
given, not less than 7 days before such record date, in the manner provided in
the Act. Where no record date is fixed in advance as aforesaid, the record date
for the determination of the persons entitled to receive payment of any dividend
or to receive the right to subscribe for securities of the Corporation shall be
at the close of business on the day on which the resolution relating to such
dividend or right to subscribe is passed by the board.
<PAGE>
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9.05 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six
years from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
SECTION TEN
-----------
MEETINGS OF SHAREHOLDERS
------------------------
10.01 ANNUAL MEETINGS. The annual meeting of shareholders shall be held at
such time in each year and, subject to the Act and to Clause 10.04, at such
place as the board, the chairman of the board, the managing director or the
president may from time to time determine, for the purpose of considering the
financial statements and reports required by the Act to be placed before the
annual meeting, electing directors, appointing auditors and for the transaction
of such other business as may properly be brought before the meeting.
10.02 SPECIAL MEETINGS. The board, the chairman of the board, the managing
director or the president shall have power to call a special meeting of
shareholders at any time.
10.03 SPECIAL BUSINESS. All business transacted at a special meeting of
shareholders and all business transacted at an annual meeting of shareholders,
except consideration of the financial statements and auditor's report, fixing
the number of directors for the following year, election of directors and
reappointment of the incumbent auditors, is deemed to be special business.
10.04 PLACE OF MEETINGS. Meetings of shareholders shall be held at the
registered office of the Corporation or elsewhere in the municipality in which
the registered office is situated or, if the board shall so determine, at some
other place in Alberta or, if all the shareholders entitled to vote at the
meeting so agree, at some place outside Alberta.
10.05 NOTICE OF MEETINGS. Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in Clause 13.01 not less than
21 days nor more than 50 days before the date of the meeting to each director,
to the auditor and to each shareholder who at the close of business on the
record date for notice is entered in the securities register as the holder of
one or more shares carrying the right to vote at the meeting. Notice of a
meeting of shareholders called for any purpose other than consideration of the
financial statements and auditor's report, election of directors and
reappointment of the incumbent auditor shall state the nature of such business
in sufficient detail to permit the shareholder to form a reasoned judgment
thereon and shall state the text of any special resolution to be submitted to
the meeting. A shareholder may in any manner waive notice of or otherwise
consent to a meeting of shareholders.
10.06 RECORD DATE FOR NOTICE. The board may fix in advance a date,
preceding the date of any meeting of shareholders by not more than 50 days and
not less than 21 days, as a record date for the determination of the
shareholders entitled to notice of the meeting, provided
<PAGE>
-19-
that if the Corporation is a distributing corporation, notice of any such record
date shall be given not less than 7 days before such record date in the manner
provided in the Act. If no such record date is so fixed, the record date for the
determination of the shareholders entitled to receive notice of the meeting
shall be at the close of business on the date immediately preceding the day on
which the notice is sent or, if no notice is sent, shall be the day on which the
meeting is held.
10.07 LIST OF SHAREHOLDERS ENTITLED TO NOTICE. If the Corporation has more
than 15 shareholders entitled to vote at a meeting of shareholders, the
Corporation shall prepare a list of shareholders entitled to receive notice of
the meeting, arranged in alphabetical order and showing the number of shares
held by each shareholder. If a record date for the meeting is fixed pursuant to
Clause 10.06, the shareholders listed shall be those registered at the close of
business on such record date. If no record date is fixed, the shareholders
listed shall be those registered at the close of business on the day immediately
preceding the day on which notice of the meeting is given, or where no such
notice is given, on the day on which the meeting is held. The list shall be
available for examination by any shareholder during usual business hours at the
records office of the Corporation or at the place where the central securities
register is maintained and at the meeting for which the list was prepared.
10.08 MEETINGS WITHOUT NOTICE. A meeting of shareholders may be held
without notice at any time and place permitted by the Act:
(a) if all the shareholders entitled to vote thereat are present in person
or represented by proxy or if those not present or represented by
proxy, waive notice of or otherwise consent to such meeting being
held, and
(b) if the auditors and the directors are present or waive notice of or
otherwise consent to such meeting being held;
so long as such shareholders, auditors or directors present are not attending
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called. At such a meeting any business
may be transacted which the Corporation at a meeting of shareholders may
transact. If the meeting is held at a place outside Alberta, shareholders not
present or represented by proxy, but who have waived notice of or otherwise
consented to such Meeting, shall also be deemed to have consented to the
meeting being held at such place.
10.09 CHAIRMAN AND SECRETARY. The chairman of any meeting of shareholders
shall be the chairman, or in his absence, the president, or in his absence, a
vice-president who is a shareholder. If no such officer is present within
fifteen minutes from the time fixed for holding the meeting, the persons present
and entitled to vote shall choose one of their number to be chairman. If the
secretary of the Corporation is absent, the chairman shall appoint some person,
who need not be a shareholder, to act as secretary of the meeting.
10.10 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors and auditors of
<PAGE>
-20-
the Corporation and others who, although not entitled to vote, are entitled or
required under any provision of the Act or the articles or by-laws to be present
at the meeting. Any other person may be admitted only on the invitation of the
chairman of the meeting or with the consent of the meeting.
10.11 QUORUM. A quorum for the transaction of business at any meeting of
shareholders shall be at least two persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxy or representative
for an absent shareholder so entitled and representing in the aggregate not less
than ten percent (10%) of the outstanding shares of the Corporation carrying
voting rights at the meeting. If a quorum is present at the opening of any
meeting of shareholders, the shareholders present or represented may proceed
with the business of the meeting notwithstanding that a quorum is not present
throughout the meeting. If a quorum is not present at the opening of any
meeting of shareholders, the shareholders present or represented may adjourn the
meeting to a fixed time and place but may not transact any other business other
than as provided in these By-laws or in the Act until a quorum is present.
10.12 RIGHT TO VOTE. Every person named in the list referred to in Clause
10.07 shall be entitled to vote the shares shown thereon opposite his name at
the meeting to which such list relates, except to the extent that:
(a) where the Corporation has fixed a record date in respect of such
meeting, such person has transferred any of his shares after such
record date or, where the Corporation has not fixed a record date in
respect of such meeting, such person has transferred any of his shares
after the date on which such list is prepared, and
(b) the transferee, having produced properly endorsed certificates
evidencing such shares or having otherwise established that he owns
such shares, has demanded not later than 10 days, before the meeting
that his name be included in such list.
In any such excepted case, the transferee shall be entitled to vote the
transferred shares at such meeting. If the Corporation is not required to
prepare a list under Clause 10.07, subject to the provisions of the Act and this
by-law as to proxies and representatives, at any meeting of shareholders, every
person shall be entitled to vote at the meeting who at the time is entered in
the securities register as the holder of one or more shares carrying the right
to vote at such meeting.
10.13 PROXIES AND REPRESENTATIVES. Every shareholder entitled to vote at a
meeting of shareholders may appoint a proxyholder, or one or more alternate
proxyholders, who need not be shareholders, to attend and act at the meeting in
the manner and to the extent authorized and with the authority conferred by the
proxy. A proxy shall be in writing executed by the shareholder or his attorney
and shall conform with the requirements of the Act. Alternatively, every such
shareholder which is a body corporate or association may authorize, by
resolution of its directors or governing body, an individual, who need not be a
shareholder, to represent it at a meeting of shareholders and such individual
may exercise on the shareholder's behalf all the powers it could exercise if it
were an individual shareholder. The authority of such
<PAGE>
-21-
an individual shall be established by depositing with the Corporation a
certified copy of such resolution, or in such other manner as may be
satisfactory to the secretary of the Corporation or the chairman of the meeting.
10.14 TIME FOR DEPOSIT OF PROXIES. The board may specify in a notice
calling a meeting of shareholders a time:, preceding the time of such meeting or
an adjournment thereof by not more than 48 hours, exclusive of non-business
days, before which proxies to be used at such meeting must be deposited. A
proxy shall be acted upon only if, prior to the time so specified, it shall have
been deposited with the Corporation or an agent thereof specified in such notice
or, if no such time is specified in such notice, it has been received by the
secretary of the Corporation or by the chairman of the meeting or any
adjournment thereof prior to the time of voting.
10.15 JOINT SHAREHOLDERS. If two or more persons hold shares jointly, any
one of them present in person or represented at a meeting of shareholders may,
in the absence of the other or others vote the shares; but if two or more of
those persons are present in person or represented and vote, they shall vote as
one on the shares jointly held by them.
10.16 VOTES TO GOVERN. At any meeting of shareholders every question shall,
unless otherwise required by the articles or by-laws or by law, be determined by
the majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a poll, the chairman of the meeting shall
not be entitled to a second or casting vote.
10.17 SHOW OF HANDS. Subject to the provisions of the Act, any question at
a meeting of shareholders shall be decided by a show of hands, unless a ballot
thereon is required or demanded as hereinafter provided. Upon a show of hands
every person who is present and entitled to vote shall have one vote. Whenever
a vote by a show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the chairman of the meeting
that the vote upon the question has been carried or carried by a particular
majority or not carried and an entry to that effect in the minutes of the
meeting shall be prima facie evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against any resolution or other
proceeding in respect of the said question, and the result of the vote so taken
shall be the decision of the shareholders upon the said question.
10.18 BALLOTS. On any question proposed for consideration at a meeting of
shareholders, any shareholder or proxyholder entitled to vote at the meeting may
require or demand a ballot, either before or on the declaration of the result of
any vote by show of hands. A ballot so required or demanded shall be taken in
such manner as the chairman shall direct. A requirement or demand for a ballot
may be withdrawn at any time prior to the taking of the ballot. If a ballot is
taken, each person present shall be entitled, in respect of the shares which he
is entitled to vote at the meeting upon the question, to that number of votes
provided by the Act or the articles, and the result of the ballot so taken shall
be the decision of the shareholders upon the said question.
<PAGE>
-22-
10.19 ADMISSION OR REJECTION OF A VOTE. In case of any dispute as to the
admission or rejection of a vote, the chairman shall determine the same and such
determination made in good faith shall be final and conclusive.
10.20 ADJOURNMENT. If a meeting of the shareholders is adjourned by one or
more adjournments for an aggregate of less than thirty days, it shall not be
necessary to give notice of the adjourned meeting, other than by announcement at
the time of an adjournment. If a meeting of shareholders is adjourned by one or
more adjournments for an aggregate of thirty days or more, notice of the
adjourned meeting shall be given as for an original meeting.
10.21 MEETINGS BY TELEPHONE. A shareholder or any other person entitled to
attend a meeting of shareholders may participate in the meeting by means of
telephone or other communication facilities that permit all persons
participating in the meeting to hear each other, and a person participating in
such a meeting by those means is deemed to be present at the meeting.
10.22 RESOLUTION IN WRITING. A resolution in writing signed by all the
shareholders entitled to vote on that resolution at a meeting of shareholders is
as valid as if it had been passed at a meeting of the shareholders.
10.23 ONLY ONE SHAREHOLDER. Where the Corporation has only one shareholder
or only one holder of any class or series of shares, the shareholder present in
person or by proxy constitutes a meeting.
SECTION ELEVEN
--------------
DIVISIONS AND DEPARTMENTS
-------------------------
11.01 CREATION AND CONSOLIDATION OF DIVISIONS. The board may cause the
business and operations of the Corporation or any part thereof to be divided or
to be segregated into one or more divisions upon such basis, including without
limitation, character or type of operation, geographical territory, product
manufactured or service rendered, as the board may consider appropriate in each
case. The board may also cause the business and operations of any such division
to be further divided into sub-units and the business and operations of any such
divisions or sub-units shall be consolidated upon such basis as the board may
consider appropriate in each case.
11.02 NAME OF DIVISION. Subject to law, any division or its sub-units may
be designated by such name as the board may from time to time determine and may
transact business, enter into contracts, sign cheques and other documents of any
kind and do all acts and things under such name. Any such contract, cheque or
document shall be binding upon the Corporation as if it had been entered into or
signed in the name of the Corporation.
<PAGE>
-23-
11.03 OFFICERS OF DIVISIONS. From time to time the board or, if authorized
by the board, the chief executive officer may appoint one or more officers for
any division, prescribe their powers and duties and settle their terms of
employment and remuneration. The board or, if authorized by the board, the
chief executive officer, may remove at its or his pleasure any officer so
appointed without prejudice to such officer's rights under any employment
contract. Officers of divisions or their subunits shall not, as such, be
officers of the Corporation.
SECTION TWELVE
--------------
INFORMATION AVAILABLE TO SHAREHOLDERS
-------------------------------------
12.01 Except as provided by the Act, no shareholder shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation's business which in the opinion of the directors would be
inexpedient in the interests of the Corporation to communicate to the public.
12.02 The directors may, from time to time, subject to the rights conferred
by the Act, determine whether and to what extent and at what time and place and
under what circumstances or regulations the documents, books and registers and
accounting records of the Corporation or any of them shall be open to inspection
of shareholders and no shareholder shall have any right to inspect any document
or book or register or accounting records of the Corporation except as conferred
by statute or authorized by the board of directors or by a resolution of the
shareholders.
SECTION THIRTEEN
----------------
NOTICES
-------
13.01 METHOD OF GIVING NOTICES. Any notice (which term includes any
communication or document) to be given (which term includes sent, delivered or
served) pursuant to the Act, the regulations thereunder, the articles, the
bylaws or otherwise to a shareholder, director, officer, auditor or member of a
committee of the board shall be sufficiently given if delivered personally to
the person to whom it is to be given or if delivered to his recorded address or
if mailed to him at his recorded address by prepaid ordinary or air mail or if
sent to him at his recorded address by any means of prepaid transmitted or
recorded communication. A notice so delivered shall be deemed to have been
given when it is delivered personally or to the recorded address as aforesaid; a
notice so mailed shall be deemed to have been given when deposited in a post
office or public letter box; and a notice so sent by any means of transmitted or
recorded communication shall be deemed to have been given when dispatched or
delivered to the appropriate communication company or agency or its
representative for dispatch. The secretary may change or cause to be changed the
recorded address of any shareholder, director, officer, auditor or member of a
committee of the board in accordance with any information believed by him to be
reliable.
<PAGE>
-24-
13.02 NOTICE TO JOINT SHAREHOLDERS. If two or more persons are registered as
joint holders of any share, any notice shall be addressed to all of such joint
holders but notice to one of such persons shall be sufficient notice to all of
them.
13.03 COMPUTATION OF TIME. In computing the date when notice must be given
under any provision requiring a specified number of days' notice of any meeting
or other event, the date of giving the notice shall be excluded and the date of
the meeting or other event shall be included.
13.04 UNDELIVERED NOTICES. If notices given to a shareholder pursuant to
Clause 13.01 are returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give any further notices to such
shareholder until he informs the Corporation in writing of his new address.
13.05 OMISSIONS AND ERRORS. The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of a committee of the
board or the non-receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate any action taken
at any meeting held pursuant to such notice or otherwise founded thereon.
13.06 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW. Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address being
entered on the securities register (whether such notice was given before or
after the happening of the event upon which be became so entitled) and prior to
his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.
13.07 WAIVER OF NOTICE. Any shareholder (or his duly appointed proxyholder),
director, officer, auditor or member of a committee of the board may at any time
waive any notice, or waive or abridge the time for any notice, required to be
given to him under any provision of the Act, the regulations thereunder, the
articles, the by-laws or otherwise and such waiver or abridgement shall cure any
default in the giving or in the time of such notice, as the case may be. Any
such waiver or abridgement shall be in writing except a waiver of notice of a
meeting of shareholders or of the board which may be given in any manner.
SECTION FOURTEEN
----------------
EFFECTIVE DATE (AND REPEAL)
---------------------------
14.01 EFFECTIVE DATE. This by-law shall come into force when made by the
board in accordance with the Act.
<PAGE>
-25-
14.02 REPEAL. All previous by-laws of the Corporation are repealed as of the
coming into force of this by-law. Such repeal shall not affect the previous
operation of any by-law so repealed or affect the validity of any act done or
right, privilege, obligation or liability acquired or incurred under, or the
validity of any contract or agreement made pursuant to, or the validity of any
articles (as defined in the Act) or predecessor charter documents of the
Corporation obtained pursuant to, any such by-law prior to its repeal. All
officers and persons acting under any by-law so repealed shall continue to act
as if appointed under the provisions of this by-law and all resolutions of the
shareholders or the board or a committee of the board with continuing effect
passed under any repealed bylaw shall continue to be good and valid except to
the extent inconsistent with this by-law and until amended or repealed.
MADE AND ADOPTED by the board of directors the 8th day of February,
1994.
/s/ Edward D. Ford
----------------------------------
President
/s/ Edward D. Ford
----------------------------------
Secretary
CONFIRMED by the shareholders in accordance with the Act the 8th day
of February, 1994.
/s/ Edward D. Ford
----------------------------------
Secretary
<PAGE>
EXHIBIT 4.2
SECURITIES ACT
ESCROW AGREEMENT
THIS AGREEMENT made effective this 31st day of October, 1994.
AMONG:
KWIKSTAR COMMUNICATIONS LTD., a body corporate, incorporated under the
provisions of the Business Corporations Act (Alberta)
(hereinafter called the "Issuer")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA, a body corporate, with offices in
the City of Calgary, in the Province of Alberta
(hereinafter called the "Trustee")
OF THE SECOND PART
- and -
DONIDA INVESTMENTS LTD., PACIFIC SEA TREASURES LTD., EDWARD D. FORD,
LEONARD FOWLER, DONALD E. SNYDER, DAVID SUTHERLAND, RORIE VICKERY AND
JOHN WOLFE
(hereinafter collectively referred to as the "Security Holders")
OF THE THIRD PART
WHEREAS in furtherance of complying with the requirements of the
Securities Act (Alberta) and Alberta Securities Commission Policy 4.11 ("Policy
4.11"), the Security Holders are desirous of depositing in escrow certain
securities in the Issuer owned or to be received by them; and
WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions hereof;
NOW THEREFORE this Agreement witnesseth that in consideration of the
sum of ONE DOLLAR ($1.00) paid by the parties to each other, receipt of this sum
being acknowledged by each of the parties, the Security Holders jointly and
severally covenant and agree with the Issuer and with the Trustee, and the
Issuer and the Trustee covenant and agree each with the other and with the
Security Holders jointly and severally as follows:
1. Where used in this Agreement, or in any amendment or supplement
hereto, unless the context otherwise requires, the words "Major Transaction",
"Related Parties", "Control Person" and "Private Placement" shall have the
meaning ascribed to them in Policy 4.11.
2. Each of the Security Holders hereby places and deposits in escrow with
the Trustee those of his securities in the Issuer which are represented by the
certificates described in Schedule "A" attached to this Agreement and the
Trustee hereby acknowledges receipt of those certificates. The Security Holders
agree to deliver promptly to the Trustee any replacement securities or
certificates, if and when issued or allotted, for deposit in escrow. Each of the
Security Holders hereby undertakes and agrees to deposit in escrow and to use
their best efforts to cause other Related Parties and Control Persons to deposit
in
<PAGE>
2
escrow, under an agreement in form and content similar to this Agreement any
securities of the Issuer:
(a) which a Control Person may acquire prior to the completion of a Major
Transaction;
(b) which Related Parties may acquire pursuant to:
(i) the offering of securities by the Issuer by a prospectus to be
filed with the Alberta Securities Commission Agency; or
(ii) the exercise, prior to the completion of a Major Transaction, of
any option granted to them by the Issuer.
3. The Parties hereby agree that the securities and the beneficial
ownership of or any interest in them and the certificates representing them
(including any replacement securities or certificates) shall not be sold,
assigned, hypothecated, alienated, released from escrow, transferred within
escrow or otherwise in any manner dealt with, without the written consent of the
Chief of Securities Administration for the Alberta Securities Commission Agency
(hereinafter referred to as the "Chief") given to the Trustee or except as may
be required by reason of the death or bankruptcy of any Security Holder, in
which cases the Trustee shall hold the said certificates subject to this
Agreement for whatever person or company shall be legally entitled to become the
registered owner thereof and shall provide the Chief with written notice of the
new registered owner, but the securities shall remain in escrow, subject to this
Agreement.
4. The securities deposited in escrow with the Trustee may be released
from escrow as to one-third of the original number of escrowed shares on the
first anniversary of the completion of the Major Transaction, other than a
Private Placement, upon the consent of the Chief. At the time of such
application, the Chief will determine whether the remaining escrowed shares will
be automatically released as to one-third of the original number of escrowed
shares on the second and third anniversaries of the completion of the Major
Transaction. A Private Placement shall not cause a release of the escrowed
securities.
5. The Security Holders direct the Trustee to retain their respective
securities and the certificates (including any replacement securities or
certificates) representing them and not to do or cause anything to be done to
release them from escrow or to allow any transfer, hypothecation or alienation
thereof without the written consent of the Chief. The Trustee accepts the
responsibilities placed on it by this Agreement and agrees to perform them in
accordance with the terms of this Agreement and the written consents, orders or
directions of the Chief.
6. If during the period in which any of the securities are retained in
escrow pursuant hereto, any dividend is received by the Trustee in respect of
the escrowed securities, any such dividend shall be promptly paid or transferred
to the respective Security Holders entitled thereto.
7. All voting rights attached to the escrowed securities shall at all
times be exercised by the respective registered owners thereof.
8. The Issuer and the Security Holders hereby jointly and severally agree
to and do hereby release and indemnify and save harmless the Trustee from and
against all claims, suits, demands, costs,
<PAGE>
3
damages and expenses which may be occasioned by reason of the Trustee's
compliance in good faith with the terms hereof.
9. The Issuer hereby acknowledges the terms and conditions of this
Agreement and agrees to take all reasonable steps to facilitate its performance
and to pay the Trustee's proper charges for its services as trustee of this
escrow.
10. If the Trustee should wish to resign, it shall give at least three (3)
months' notice to the Issuer which may, with the written consent of the Chief,
by writing appoint another Trustee in its place and such appointment shall be
binding on the Security Holders and the new Trustee shall assume and be bound by
the obligations of the Trustee hereunder.
11. The written consent of the Chief as to release from escrow of all or
part of the escrowed securities shall terminate this Agreement only with respect
to those securities so released. For greater certainty, this paragraph does not
apply to securities transferred within escrow.
12. This Agreement may be executed in several parts in the same form and
the parts so executed shall together form one original agreement, and the parts,
if more than one, shall be read together and construed as if all the signing
parties hereto had executed one copy of this Agreement.
13. Wherever the singular or masculine is used, the same shall be
construed to include the plural or feminine or neuter where the context so
requires.
14. This Agreement may be amended upon agreement of the Security Holders,
the Trustee and the Issuer and upon the written consent having been obtained
from the Chief.
15. This Agreement shall enure to the benefit of and be binding on the
parties to this Agreement and each of their heirs, executors, administrators,
successors and assigns.
IN WITNESS WHEREOF the Issuer and Trustee have caused their respective
corporate seals to be hereto affixed and the Security Holders hereto set their
respective hands and seals.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ Edward D. Ford
____________________________________
Per: /s/ L.C. Fowler
____________________________________
MONTREAL TRUST COMPANY OF CANADA
Per:
____________________________________
Per: /s/ J. Ripplinger
____________________________________
<PAGE>
4
SIGNED, SEALED AND DELIVERED by the respective Security Holders whose names
are subscribed in the right-hand column below in the presence of the respective
persons whose names are subscribed in the left-hand column.
DONIDA INVESTMENTS LTD.
Per: /s/ Donald Noseworthy
____________________________________
DONALD NOSEWORTHY
PACIFIC SEA TREASURES LTD.
Per: /s/ Wayne T. Naylor
____________________________________
WAYNE T. NAYLOR
/s/ Douglas E. Ford /s/ Edward D. Ford
____________________________ ____________________________________
Witness EDWARD D. FORD
/s/ Douglas E. Ford /s/ L.C. Fowler
____________________________ ____________________________________
Witness LEONARD FOWLER
/s/ Douglas E. Ford /s/ Donald E.Snyder
____________________________ ____________________________________
Witness DONALD E. SNYDER
/s/ Douglas E. Ford /s/ David Sutherland
____________________________ ____________________________________
Witness DAVID SUTHERLAND
/s/ Douglas E. Ford /s/ Rorie Vickery
____________________________ ____________________________________
Witness RORIE VICKERY
/s/ Douglas E. Ford /s/ John Wolfe
____________________________ ____________________________________
Witness JOHN WOLFE
<PAGE>
SCHEDULE "A"
TO AN AGREEMENT MADE EFFECTIVE THE ______ DAY OF OCTOBER, 1994, AND
MADE AMONG KWIKSTAR COMMUNICATIONS LTD., THEREIN CALLED THE "ISSUER",
MONTREAL TRUST COMPANY OF CANADA, THEREIN CALLED THE "TRUSTEE", AND
CERTAIN SECURITY HOLDERS OF THE ISSUER, THEREIN CALLED THE "SECURITY
HOLDERS"
<TABLE>
<CAPTION>
Number of Certificate Numbers
Name of Common Shares of Securities Signatures of
Security Holder Escrowed Escrowed Security Holders
- -------------------------- -------------- ------------------- ----------------
<S> <C> <C> <C>
Donida Investments Ltd. 333,333 _____ ________________
Pacific Sea Treasures Ltd. 333,333 _____ ________________
Edward D. Ford 333,335 _____ ________________
Leonard Fowler 333,333 _____ ________________
Donald E. Snyder 333,333 _____ ________________
David Sutherland 333,333 _____ ________________
Rorie Vickery 333,333 _____ ________________
John Wolfe 333,333 _____ ________________
</TABLE>
<PAGE>
EXHIBIT 4.3
FORM A AND C
ESCROW AGREEMENT
(Combined Automatic and Performance Escrow Agreement)
THIS AGREEMENT dated for reference the 1st day of April, 1996.
AMONG:
KWIKSTAR COMMUNICATION LTD., a body corporate incorporated under the
laws of the Province of Alberta, having its registered office in the
City of Calgary, in the Province of Alberta
(hereinafter called the "Issuer")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under
the laws of Canada, having an office in the City of Calgary, in the
Province of Alberta
(hereinafter called the "Trustee")
OF THE SECOND PART
- and -
MPR TELTECH LTD. AND 945 INVESTMENTS LTD. (hereinafter together called
the "Security Holders")
OF THE THIRD PART
WHEREAS the Security Holders and the Issuer entered into Agreements dated
for reference November 15, 1995 whereby the Security Holders agreed to sell
certain property (the "Property") to the Issuer, the consideration for the
Property being the allotment of securities in the Issuer to the Security
Holders, the Property and the number of securities to be held in escrow (the
"Escrowed Securities") and the name of the Security Holders presently owning or
about to receive the Escrowed Securities being respectively and more
particularly described in Schedule "A" attached to and forming part of this
Agreement.
AND WHEREAS in order to comply with the requirements of The Alberta Stock
Exchange, the Security Holders are desirous of depositing in escrow the Escrowed
Securities.
AND WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the sum
of One ($1.00) Dollar paid by the parties to each other, receipt of this sum
being
<PAGE>
2
acknowledged by each of the parties, the Security Holders covenant and
agree with the Issuer and with the Trustee, and the Issuer and the Trustee
covenant and agree each with the other and with the Security Holders, as
follows:
1. Where used in this Agreement, or in any amendment or supplement hereto,
unless the context otherwise requires, the following words and phrases
shall have the meaning ascribed to them below:
(a) "Cash Flow" means net income derived by DCI, adjusted for the
following add-backs:
(i) depreciation;
(ii) depletion;
(iii) deferred taxes; and
(iv) amortization;
provided that the net income derived by DCI and the above addbacks
shall be in the amounts shown on DCI's unconsolidated audited
financial statements or as verified by the Issuer's auditors, if not
shown on such financial statements.
(b) "DCI" means Digital Courier International Inc.
(c) "Financial Breakeven Level" shall occur on the first date on which the
cumulative (non-consolidated) net income for DCI minus the cumulative
(non-consolidated) net loss, plus cumulative depreciation,
amortization, interest and income taxes for the period from November
15, 1995 to the relevant time all as calculated in accordance with
generally accepted accounting principles, is greater than one dollar.
(d) "Major Transaction" means the acquisition of all the issued and
outstanding securities of DCI by the Issuer.
(e) "Related Party" means promoters, officers, directors, other insiders
of the Issuer and any associates or affiliates of the foregoing.
2. The Security Holders hereby place and deposit in escrow with the Trustee
the Escrowed Securities which are represented by the certificates described
in Schedule "A" and the Trustee hereby acknowledges receipt of those
certificates. The Security Holders agree to deposit in escrow any further
certificates representing securities in the Issuer which they may receive
as a stock dividend on the Escrowed Securities and to deliver to the
Trustee immediately on receipt thereof the certificates for any such
further securities and any replacement certificates which may at any time
be issued for the Escrowed Securities.
3. The parties hereto hereby agree that, subject to the provisions of
paragraph 6 herein, the Escrowed Securities and the beneficial ownership of
any or interest in them and the certificate representing them (including
any replacement securities or certificates) shall not be sold, assigned,
hypothecated, alienated, released from escrow, transferred within
<PAGE>
3
escrow, or otherwise in any manner dealt with, without the written consent
of The Alberta Stock Exchange (hereinafter referred to as the "Exchange")
given to the Trustee, or except as may be required by reason of the death
or bankruptcy of the Security Holders, in which case the Trustee shall hold
the said certificates subject to this Agreement, for whatever person, or
company shall be legally entitled to become the registered owner thereof.
Notwithstanding the foregoing or any other provisions of this agreement,
the Exchange will consent to the release from escrow of the number of
Escrowed Securities required to complete a secondary offering of one or
both of the Security Holders by way of prospectus filed in any jurisdiction
in Canada, provided that DCI shall have first reached the Financial
Breakeven Level.
4. The Security Holders direct the Trustee to retain the Escrowed Securities
and the certificates (including any replacement securities or certificates)
representing them and not to do or cause anything to be done to release
them from escrow or to allow any transfer, hypothecation or alienation
thereof, without the written consent of the Exchange. The Trustee accepts
the responsibilities placed on it by the Agreement and agrees to perform
them in accordance with the terms of this Agreement and the written
consents, orders or directions of the Exchange.
5. If one or more of the Security Holders apply to the Exchange for a consent
for a transfer within escrow they shall, before applying, give reasonable
notice in writing of their intention to the Issuer and the Trustee.
6. The Exchange will:
(a) allow for the automatic release from escrow of the Escrowed Securities
as to one-third thereof on each of the first, second and third
anniversaries of March 5, 1996; and
(b) notwithstanding paragraph 6(a), consent to the release from escrow of
one share for each $0.22 of cumulative Cash Flow of DCI.
Any release from escrow under this paragraph 6(a) shall be automatic and
shall not require any further authorization from the Exchange. Any release
from escrow under this paragraph 6(b) shall be made pursuant to a written
application on behalf of the Issuer or the Security Holders, which
application shall be accompanied by evidence of the Cash Flow in a form
satisfactory to the Exchange. Application for release under this paragraph
6(b) may only be made once per year and may only relate to Cash Flow in the
preceding fiscal year or the fiscal years of the Issuer since the last
release from escrow under this paragraph 6(b) of this Agreement, whichever
is greater. All Escrowed Securities released from escrow shall, unless
otherwise directed by the Exchange, be released pro-rata to the Security
Holders in accordance with the holding as set out on Schedule "A".
7. A release from escrow of all or part of the Escrowed Securities shall
terminate this Agreement only in respect to those Escrowed Securities so
released. For greater certainty this paragraph does not apply to Escrowed
Securities transferred within escrow. Upon release of all of the Escrowed
Securities, this Agreement shall be terminated.
<PAGE>
4
8. The Security Holders shall, if a dividend is declared while any Escrowed
Securities are held in escrow under this Agreement, renounce and release
any right to receive payment of the dividend on the Escrowed Securities
then held in escrow.
9. (a) In the event that the Issuer has lost, alienated or has not
obtained a good or marketable title to, or has abandoned or
discontinued development of, any or all of the Property which was or
formed part of the consideration for which the Escrowed Securities
were issued, or that any or all of the Property has become of little
or no value, the Issuer shall declare the occurrence of that event,
with full particulars thereof, to the Exchange by a resolution of its
directors.
(b) The Security Holders agree with the Issuer and the Trustee that in the
event of any such loss, alienation, failure to acquire title, or of
such abandonment or discontinuance of development or diminution of
value, the Escrowed Securities then held in escrow shall not be
cancelled or released from escrow, in whole or in part, except with
the consent of the Exchange.
(c) The Exchange may, in its sole discretion, having regard to the number
and value of the securities issued for the Property, the value of the
Property as ultimately established and such other circumstances as it
may consider relevant, determine the number of Escrowed Securities to
be cancelled or released and shall communicate its decision in writing
to the Trustee. If the Exchange determines that less than all the
Escrowed Securities then held in escrow shall be cancelled or
released, the Escrowed Securities to be cancelled or released shall be
taken rateably from the Escrowed Securities held by each of the
Security Holders, unless the Exchange otherwise directs or the
Security Holders, with the consent of the Exchange, otherwise agree in
writing.
(d) On receipt by the Trustee of a determination to cancel, the Security
Holders shall tender the required number of Escrowed Securities to the
Issuer by way of gift for cancellation and, the Issuer shall thereupon
take the necessary action, by way of reduction of capital or
otherwise, to cancel them, and the certificates for those Escrowed
Securities shall be delivered up for cancellation by the Issuer's
transfer agent.
(e) The Security Holders undertake and agree to vote and cause to be voted
their Escrowed Securities in a manner consistent with the terms,
conditions and intent of this Agreement in relation to the aforesaid
gifting back of Escrowed Securities for cancellation.
10. All voting rights attached to the Escrowed Securities shall at all times be
exercised by the respective registered owners thereof.
11. The Issuer and the Security Holders hereby agree to and do hereby release
and indemnify and save harmless the Trustee from and against all claims,
suits, demands, costs, damages and expenses which may be occasioned by
reason of the Trustee's compliance in good faith with the terms hereof.
<PAGE>
5
12. The Issuer hereby acknowledges the terms and conditions of this Agreement
and agrees to take all reasonable steps to facilitate its performance and
to pay the Trustee's proper charges for its services as trustee of this
escrow.
13. If the Trustee should wish to resign, it shall give at least 3 months
notice to the Issuer which may, with the written consent of the Exchange,
by writing appoint another Trustee in its place and such appointment shall
be binding on the Security Holders and the new trustee shall assume and be
bound by the obligations of the Trustee hereunder.
14. The covenants of the Security Holders with the Issuer in this Agreement are
made with the Issuer both in its own right and as trustee for the holders
from time to time of free Escrowed Securities in the Issuer, and may be
enforced not only by the Issuer but also by any holder of free securities.
15. This Agreement may be executed in several parts of the same form and the
parts as so executed shall together constitute one original Agreement, and
the parts, if more than one, shall be read together and construed as if all
the signing parties hereto had executed one copy of this Agreement.
16. Wherever the singular or masculine is used, the same shall be construed to
include the plural or feminine or neuter where the context so requires.
17. This Agreement shall enure to the benefit of and be binding on the parties
to this Agreement and each of their heirs, executors, administrators,
successors and assigns.
18. If the policy of the Exchange relating to escrow requirements changes
within three months of the date hereof, the Exchange will consider an
application by the Security Holders to vary the escrow requirements set out
herein such that the Escrowed Securities under this agreement be held in
escrow on terms in accordance with the new rules.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first written above.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s L.C. Fowler
___________________________________
Per:
___________________________________
MONTREAL TRUST COMPANY OF CANADA
Per: /s/ Montreal Trust of Canada
___________________________________
Per:
___________________________________
<PAGE>
6
MPR TELTECH LTD.
Per: /s/ I.R. Bardsley
___________________________________
Per: /s/ James W. Peters
___________________________________
945 INVESTMENTS LTD.
Per: /s/ Douglas E. Ford
___________________________________
Per:
___________________________________
<PAGE>
SCHEDULE "A"
To an Agreement dated the 1st day of April, 1996 and made among
Kwikstar Communications Ltd. therein called the "Issuer", Montreal
Trust Company of Canada therein called the "Trustee" and a Security
Holders of the Issuer, therein called the "Security Holders".
<TABLE>
<CAPTION>
Number of Certificate
Name of Type Securities Number of
Security Holders of Securities Escrowed Securities Escrowed
- ----------------------- ------------- ---------- -------------------
<S> <C> <C> <C>
MPR Teltech Ltd. Common Shares 6,104,658
________________
945 Investments Ltd. Common Shares 3,000,000
--------- ________________
TOTAL 9,104,658
=========
</TABLE>
DESCRIPTION OF PROPERTY
-----------------------
4,046,515 common shares in the capital of DCI owned by MPR Teltech Ltd. and
2,000,000 common shares in the capital of DCI owned by 945 Investments Ltd.
<PAGE>
EXHIBIT 4.4
INDEMNITY SHARING AGREEMENT
---------------------------
Dated the 15th day of November, 1995.
AMONG:
MPR TELTECH LTD., a corporation incorporated under the laws of Canada
having an office at 8999 Nelson Way,
Burnaby, British Columbia, V5A 4B5
(hereinafter called "MPR")
AND:
DIGITAL COURIER INTERNATIONAL LTD., a corporation incorporated under
the laws of Canada having an office at 8618 Commerce Court, Burnaby,
British Columbia, V5A 4N6
(hereinafter called "DCI")
AND:
CIBC WOOD GUNDY CAPITAL (SFC) INC., a corporation incorporated under
the laws of Ontario having an office at BCE Place,
P.O. Box 500, 161 Bay Street, Toronto, Ontario, M5J 2S8
(hereinafter called "CWG")
AND:
945 INVESTMENTS LIMITED, a corporation incorporated under the laws of
British Columbia having an office at Suite 106 - 1008 Beach Avenue,
Vancouver, British Columbia, V6E 1T7
(hereinafter called "945")
AND:
KWIKSTAR COMMUNICATIONS LTD., a corporation incorporated under the
laws of Alberta having an office at Suite 106 - 1008 Beach Avenue,
Vancouver, British Columbia, V6E 1T7
(hereinafter called "Kwikstar")
<PAGE>
-2-
WHEREAS MPR has entered into the Principal Agreements (as defined
herein) with the other parties hereto relating to (i) the transfer of certain of
its assets to DCI, (ii) the subscription by CWG and 945 for common shares in
DCI, and (iii) the exchange of the shares in DCI owned by MPR for shares of
Kwikstar;
AND WHEREAS in the Principal Agreements MPR made certain
representations and warranties and provided certain covenants to the other
parties hereto;
AND WHEREAS the parties wish to enter into this Agreement to provide
for (i) the indemnification of DCI, CWG, 945 and Kwikstar in the event of Claims
arising from the breach by MPR of the representations, warranties and covenants
contained in the Principal Agreements, (ii) limits on the aggregate liability
which MPR may have for such Claims, (iii) the allocation as between the parties
of amounts received from MPR in connection with such Claims, and (iii) the
manner in which such Claims are to be prosecuted;
NOW THEREFORE in consideration of the mutual covenants hereinafter
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
-----------
In this Agreement, unless the context otherwise requires:
(a) "Asset Transfer Agreement" means the agreement dated the 15th day of
November, 1995 between MPR and DCI pursuant to which MPR transferred
certain assets to DCI;
(b) "Claim" means any claim, loss, cost, expense, liability, fine,
penalty, interest, payment and/or damage directly or indirectly
incurred by or asserted against any one or more of the Indemnitees
relating to, arising out of, resulting from or in any way connected
with any breach of, or any incorrectness in, any of the
representations and warranties made by MPR to such Indemnitee or
Indemnitees under the Principal Agreements or any other agreement or
instrument executed or delivered pursuant to the Principal Agreements
or any breach by MPR of any covenant made by MPR to such Indemnitee or
Indemnitees under the Principal Agreements or any other agreement or
instrument delivered pursuant to the Principal Agreement whether based
in tort, contract or any other cause of action;
(c) "Claimant" with respect to any Claim means those Indemnitees who are
seeking indemnification from MPR for such Claim in accordance with the
provisions of this Agreement;
<PAGE>
-3-
(d) "CWG Subscription Agreement" means the Subscription Agreements dated
the 15th day of November, 1995 between CWG, 945 and MPR pursuant to
which CWG subscribed for shares of DCI;
(e) "945 Subscription Agreement" means the Subscription Agreements dated
the 15th day of November, 1995 between CWG, 945 and MPR pursuant to
which 945 subscribed for shares of DCI;
(f) "Indemnitees" means DCI, CWG, 945 and Kwikstar and their respective
directors, officers and employees and "Indemnitees" means any one of
them;
(g) "Kwikstar Agreement" means the Share Purchase Agreement dated the 15th
day of November, 1995 between MPR and Kwikstar relating to the
purchase of MPR's shares in Kwikstar in exchange for shares in
Kwikstar;
(h) "Principal Agreements" means the Asset Transfer Agreement, the CWG
Subscription Agreement, the 945 Subscription Agreement, the Kwikstar
Agreement and the Technology Transfer and Licensing Agreement;
(i) "Subscription Agreements" means the CWG Subscription Agreement and the
945 Subscription Agreement;
(j) "Technology Transfer and Licensing Agreement" means the agreement
dated the 15th day of November, 1995 between MPR and DCI pursuant to
which MPR transferred certain technology and other assets to DCI.
2. INDEMNIFICATION
---------------
(a) MPR agrees to indemnify and hold each of the Indemnitees harmless from
and against any and all Claims provided that (i) the aggregate
liability of MPR with respect to Claims made by all or any of the
Indemnitees shall not exceed the amount of $6,600,000 plus any
reasonable costs and expenses (including counsel and other
professional fees) incurred by the Indemnitees in enforcing their
rights against MPR with respect to such Claims.
(b) MPR shall have no obligation to any Indemnitee in respect of any Claim
notice of which is given to MPR more than three (3) years following
the date hereof.
(c) If an Indemnitee becomes aware of a Claim in respect of which
indemnification is provided pursuant to this Section 2, such
Indemnitee shall promptly give written notice of the Claim to MPR
provided that only one notice is required in connection with each
Claim regardless of the number of Indemnitees making such Claim. Such
notice shall specify whether the Claim arises as a result of a claim
<PAGE>
-4-
by a person against such Indemnitee (a "Third Party Claim") or whether
the Claim does not so arise (a "Direct Claim"), and shall also specify
with reasonable particularity (to the extent that the information is
available): (i) the factual basis for the Claim; and (ii) the amount
of the Claim, if known. If, through the fault of the Indemnitee, MPR
does not receive notice of any Claim in time effectively to contest
the determination of any liability susceptible of being contested, MPR
shall be entitled to set off against the amount claimed by the
Indemnitee the amount of any losses incurred by MPR resulting from the
Indemnitee's failure to give notice on a timely basis.
(d) In the case of a Direct Claim, MPR shall have 30 days from receipt of
notice of the Claim within which to make such investigation of the
Claim as it considers necessary or desirable. For the purpose of such
investigation, the Indemnitee shall make available to MPR the
information relied upon by the Indemnitee to substantiate the Claim,
together with all such other information as MPR may reasonably
request. If both parties agree at or before the expiration of such 30
day period (or any mutually agreed upon extension thereof) to the
validity and amount of such Claim, MPR shall immediately pay to the
Indemnitee or Indemnitees, as the case may be, the full agreed upon
amount of the Claim, failing which the matter shall be referred to
binding arbitration in such manner as the parties may agree or shall
be determined by a court of competent jurisdiction.
(e) In the case of a Third Party Claim, MPR shall have the right, at its
expense, to participate in or assume control of the negotiation,
settlement or defence of the Claim and, in such event, MPR shall
reimburse the Indemnitees for all of the Indemnitee's out-of-pocket
expenses as a result of such participation or assumption. If MPR
elects to assume such control, the Indemnitee shall have the right to
participate in the negotiation, settlement or defence of such Third
Party Claim and to retain counsel to act on its behalf, provided that
the fees and disbursements of such counsel shall not be paid by MPR
unless MPR consents to the retention of such counsel or unless the
named parties to any action or proceeding include both MPR and the
Indemnitee and representation of both MPR and the Indemnitee by the
same counsel would be inappropriate due to the actual or potential
differing interests between them (such as the availability of
different defences). If MPR, having elected to assume such control,
thereafter fails to defend the Third Party Claim within a reasonable
time, the Indemnitee shall be entitled to assume such control and MPR
shall be bound by the results obtained by the Indemnitee with respect
to the Third Party Claim.
(f) If MPR fails to assume control of the defence of any Third Party
Claim, the Indemnitee or Indemnitees subject to such Third Party Claim
shall have the exclusive right to contest, settle or pay the amount
claimed. Whether or not
<PAGE>
-5-
MPR assumes control of the negotiation, settlement or defence of any
Third Party Claim, MPR shall not settle any Third Party Claim without
the written consent of the Indemnitee, which consent shall not be
unreasonably withheld or delayed; provided, however, that the
liability of MPR shall be limited to the proposed settlement amount if
any such consent is not obtained for any reason.
(g) The amount of any Claim submitted or as damages or by way of
indemnification shall bear interest from and including the date MPR is
required to make payment in respect thereof at the prime rate of
interest charged from time to time by Canadian Imperial Bank of
Commerce plus two percent (2%) per annum calculated from and including
such date to but excluding the date reimbursement of such Claim by MPR
is made, and the amount of such interest shall be deemed to be part of
such Claim.
(h) MPR acknowledges that each of CWG and 945 have agreed to sell the
shares in DCI beneficially owned by them to Kwikstar in exchange for
shares of Kwikstar. MPR agrees that its obligations under section 2
hereof to indemnify CWG and 945 for breach of the representations and
warranties and the covenants contained in the Subscription Agreements
shall not be terminated by such sale and that a Claim by CWG and 945
may relate to a diminution in value of the Kwikstar shares owned by
them.
3. PRIORITY OF INDEMNIFICATION RIGHTS
----------------------------------
In the event that one or more of the Indemnitees assert a Claim
against MPR and as a result of the limit on MPR's aggregate liability as set
forth in section 2 hereof, MPR is not obligated to pay an amount of money
sufficient to satisfy all of such Claim then any amount paid by MPR on account
of such Claim shall, unless the Indemnitees otherwise agree in writing, be paid
in the following priority:
(a) if each of DCI, CWG, 945 and Kwikstar are Claimants, then:
(i) firstly to CWG and 945 pro rata in the proportions of five (5)
to one (1) until such time as the Claim made by one of CWG or
945 is satisfied;
(ii) secondly to satisfy any remaining Claim of CWG or 945; and
(iii) thirdly to DCI and Kwikstar pro rata having regard to the
amount of their respective Claims until such Claims are
satisfied;
(b) if one or both of DCI and Kwikstar and only one of CWG or 945 are
Claimants, then:
<PAGE>
-6-
(i) firstly to satisfy the Claim of CWG or 945, as the case may be;
and
(ii) secondly to satisfy the Claim of DCI or Kwikstar if only one of
them is a Claimant or, if both are Claimants, to DCI and Kwikstar
pro rata having regard to the amount of their respective Claims
until such Claims are satisfied;
(c) if only CWG and 945 are Claimants, then:
(i) firstly to CWG and 945 pro rata in the proportions of five (5) to
one (1) until such time as the Claim made by one of CWG or 945 is
satisfied; and
(ii) secondly to satisfy any remaining Claim of CWG or 945; and
(d) if only DCI and Kwikstar are Claimants, then:
(i) to DCI and Kwikstar pro rata having regard to the amount of their
respective Claims until such Claims are satisfied;
(e) if only one of DCI, CWG, 945 or Kwikstar is a Claimant, then:
(i) to satisfy the Claim of such Claimant.
4. PURSUIT OF CLAIMS
-----------------
The parties hereto agree that:
(a) it is intended that any Claim made or suit brought against MPR by any
one or more of the Indemnitees in connection with any particular
breach by MPR of the representations and warranties or covenants of
MPR under the Principal Agreements shall be brought jointly by all of
the Indemnitees who wish and are entitled to pursue such Claim. Any
Indemnitee which proposes to make a Claim against MPR (the "Notifying
Indemnitee") agrees that it will provide to each other Indemnitee a
copy of the notice of Claim given to MPR under section 2 which notice
shall specify the particular breach on which its Claim is based (the
"Specified Breach"). Each of the other Indemnitees shall have 30 days
following receipt of such notice to determine if it is entitled to and
wishes to join with the Notifying Indemnitee in making such Claim
against MPR in connection with the Specified Breach. If one or more of
the other Indemnitees advise the Notifying Indemnitee within such 30
day period that it wishes to join in the making of such Claim, such
Claim shall be made or any suit relating to such Claim brought jointly
by the Notifying Indemnitee and such responding Indemnitees. If an
Indemnitee does not advise the Notifying Indemnitee that it wishes to
join in such
<PAGE>
-7-
Claim it may not thereafter make a separate Claim against MPR in
respect of the Specified Breach provided that nothing herein shall
prevent such Indemnitee from subsequently being added as a party
plaintiff to any suit which is brought by the Notifying Indemnitee in
connection with such Claim; and
(b) MPR agrees that it will not raise any objection to any Claim being
brought jointly by one or more of the Indemnitees. If the court
orders that any Claim must be brought separately by one or more of the
Indemnitees, nothing in this Agreement will limit the right of DCI,
CWG, 945 or Kwikstar to bringing separate suit with respect to such
Claim.
5. CONDUCT OF CLAIM
----------------
The Indemnitees agree as between themselves that:
(a) the costs of making any Claim against MPR shall be borne jointly by
the Claimants provided that nothing herein shall in any way limit the
liability of MPR under section 2 hereof for costs and expenses
incurred by the Claimants in enforcing their rights against MPR; and
(b) subject to section 2 hereof, the Claimants shall jointly decide on the
appointment of counsel and the conduct of any proceedings for such
Claim provided that in default of agreement such matter shall be
submitted to binding arbitration before a single arbitrator in
accordance with the provisions of the Commercial Arbitration Act
(British Columbia).
6. CLAIMS UNRELATED TO PRINCIPAL AGREEMENT
---------------------------------------
Nothing in this Agreement in any way limits the liability of MPR for
or limits the rights of any of CWG, 945, DCI or Kwikstar to make a claim or
commence an action against MPR for any matter which is not based upon a breach
of the representations and warranties or breach of the covenants contained in
the Principal Agreements.
7. GENERAL PROVISIONS
------------------
(a) All notices, requests, demands or other communications required or
permitted to be given hereunder shall be in writing and shall be
deemed to be sufficiently given if hand delivered or sent by telecopy,
<PAGE>
-8-
if to MPR, addressed to:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, B.C.
V5A 4B5
Attention: Ian Bardsley, Vice President,
Business Systems and Applications, and
Peter Inman, Vice-President and
Chief Financial Officer
Facsimile: (604) 293-6161
and if to DCI, addressed to:
Digital Courier International Inc.
8618 Commerce Court
Burnaby, BC
V5A 4N6
Attention: Chief Executive Officer
Facsimile: (604) 473-5835
if to CWG, addressed to:
CIBC Wood Gundy Capital (SFC) Inc.
BCE Place
P.O. Box 500
161 Bay Street
Toronto, Ontario
M5J 2S8
Attention: Sam Duboc
Facsimile: (416) 594-8037
<PAGE>
-9-
if to 945, addressed to:
945 Investments Limited
Suite 106 - 1008 Beach Avenue
Vancouver, BC
V6E 1T7
Attention: The President
Facsimile: (604) 685-2533
if to Kwikstar, addressed to:
Kwikstar Communications Inc.
Suite 106 - 1008 Beach Avenue
Vancouver, BC
V6E 1T7
Attention: The President
Facsimile: (604) 685-2533
Any notice or other communications so given or made shall be
conclusively deemed to have been given and received at the time of
delivery, if delivered, and when transmitted if sent by telecopy
during normal business hours on a business day or on the next business
day following transmission, if sent by telecopy other than during
normal business hours on a business day.
(b) Time shall be of the essence of this Agreement.
(c) If any of the provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability will not
affect any other provision of this Agreement and this Agreement will
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
(d) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
a binding Agreement when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
(e) This Agreement will be governed by and construed in accordance with
the laws of the Province of British Columbia and the federal laws of
Canada applicable
<PAGE>
-10-
<PAGE>
EXHIBIT 4.5
KWIKSTAR COMMUNICATIONS LTD. SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT is made as of April 4, 1996.
AMONG:
MPR TELTECH LTD.
(hereinafter referred to as "MPR")
OF THE FIRST PART
AND:
CIBC WOOD GUNDY CAPITAL (SFC) INC.
(hereinafter referred to as "CWG")
OF THE SECOND PART
AND:
945 INVESTMENTS LTD.
(hereinafter referred to as "945")
OF THE THIRD PART
WHEREAS:
A. MPR, CWG and 945 are each major shareholders in the Corporation; and
B. The parties wish to enter into this Shareholders' Agreement to secure
continuity of management and policy of the business and affairs of the
Corporation.
<PAGE>
-2-
THIS AGREEMENT WITNESSES that the parties agree as follows:
ARTICLE 1
INTERPRETATION
--------------
1.1 DEFINITIONS. The following words shall have the following meanings in
this Agreement:
(a) "ACT" means the Alberta Business Corporations Act, S.A. 1981, c. B-15,
as amended from time to time and any successor legislation;
(b) "AFFILIATE" means:
(i) with respect to a natural person, the spouse of such person, any
corporation that is directly or indirectly controlled by such
person and any corporation that employs such person as a
director, officer or employee; and
(ii) with respect to a corporation an affiliate of such corporation
within the meaning of "affiliated" under Section 2(1) of the Act;
(c) "AGREEMENT" means this Agreement, its schedules and exhibits, and any
amendments or modifications to this Agreement; references to Sections
are to Sections in this Agreement;
(d) "ARTICLES" means the Articles of Incorporation of the Corporation,
including all amendments and restatements thereto;
(e) "BUSINESS DAY" means any day other than Saturday, Sunday or any
statutory holiday in either of the Provinces of British Columbia,
Alberta, or Ontario, Canada.
(f) "COMMON SHARES" means the common shares of any series in the capital
of the Corporation, as set forth in the Articles;
(g) "CONTROL" of any entity by any Person shall be deemed to exist if such
entity would be deemed to be controlled directly or indirectly by such
Person or Persons pursuant to the terms of the Act;
(h) "CORPORATION" means Kwikstar Communications Ltd.;
(i) "DCI" means Digital Courier International Inc.;
<PAGE>
-3-
(j) "DIRECTORS" means the directors from time to time of the Corporation;
(k) "DISABILITY" means the mental or physical state of an individual such
that:
(i) the Directors, other than such individual, determine that such
individual has been unable, due to mental or physical
disability or similar cause, to fulfil his or her obligations
as an employee, officer or director of the Corporation either
for any consecutive 6 month period or for any period of eight
months (whether or not consecutive) in any consecutive twelve
month period;
(ii) if such individual is a Director, such individual would be
disqualified under the Act from acting as a Director; or
(iii) a court has declared such individual to be mentally incompetent
or incapable of managing his or her affairs;
(l) "EQUITY SECURITY" has the meaning ascribed thereto in Part 13 of the
Securities Act (Alberta) and also means any right to convert into,
exchange for, or subscribe for any equity security directly or
indirectly;
(m) "FISCAL YEAR END" means September 30 in each year, and "Fiscal Year"
means the period starting the day after a Fiscal Year End and ending
on the next Fiscal Year End;
(n) "OUTSIDE DIRECTOR" means a natural person who is not:
(i) an officer or employee of the Corporation or any of its
Affiliates;
(ii) a Shareholder; or
(iii) a shareholder, director, officer or employee of a Shareholder
or of any of its Affiliates;
(o) "PERFORMANCE INCENTIVE PLAN" means the performance incentive plan
established by DCI pursuant to which employees of DCI hold a
beneficial interest in Common Shares of the Corporation;
(p) "PERSON" means any individual, partnership, corporation, trust,
trustee, executor, administrator or other legal personal
representatives;
(q) "PREFERRED SHARES" means the Preferred Shares, Series 1, in the
capital of the Corporation, as described in the Articles;
<PAGE>
-4-
(r) "PRINCIPAL OFFICERS" means the Corporation's Chairman and Chief
Executive Officer and Vice President of Finance, which shall be E. Lynn
Patterson and Edward Ford on the date of this Agreement and such other
principal officers of the Corporation as the Board of Directors of the
Corporation may from time to time determine for purposes of this
Agreement;
(s) "SHAREHOLDERS" means MPR, CWG and 945 collectively, and "Shareholder"
means any of MPR, CWG, and 945;
(t) "SHARES" means the Common Shares and the Preferred Shares and includes
(1) any securities into which such Shares may be converted or which
result from a consolidation, subdivision, reclassification or
redesignation of the Shares, (2) any securities received as a dividend
or distribution, or on the exercise of any option, warrant or other
similar right, (3) any securities received as a result of an
amalgamation, consolidation, arrangement, merger, or other
reorganization of the Corporation and (4) any instrument of the
Corporation that is convertible into or exercisable for Shares; and
(u) "SPECIAL PERIOD" means any period or periods of time commencing on any
of the following dates:
(i) December 31, 1996, in the event that DCI shall service less
than 1,200 radio stations by such date; and
(ii) December 31, 1997, in the event that DCI shall have had non-
consolidated pre-tax losses in 1996 of $2,000,000 or greater
(excluding amortization of deferred costs at DCI's start-up and
financing charges) and shall have had any (non-consolidated)
pre-tax loss or losses in 1997, all as determined in accordance
with generally accepted accounting principles;
provided that any Special Period shall terminate upon the achievement
by DCI of pre-tax profits in any two consecutive quarters after the
commencement of such Special Period, such termination to be effective
as of the first day of the next succeeding quarter.
1.2 PERIOD TERMINATING ON A NON-BUSINESS DAY. In the event that a period
of time permitted under this Agreement to take any action shall terminate on a
day other than a Business Day, then such period shall be extended to the next
following Business Day.
<PAGE>
-5-
ARTICLE 2
BUSINESS AND AFFAIRS OF THE CORPORATION
---------------------------------------
2.1 VOTING GENERALLY. Each of the Shareholders covenants and agrees at
all times to vote its Common Shares and use its best efforts and take all such
steps as may be reasonably required so as to cause the Corporation to act in the
manner contemplated by the provisions of this Agreement and to implement fully
the provisions of this Agreement and to the extent permitted by law, cause the
Board of Directors of the Corporation to so act.
2.2 CONSTITUTION OF BOARD OF DIRECTORS. Subject to Article 3 and Section
2.4, the Shareholders shall vote their Common Shares to elect two Directors as
nominated by MPR, two Directors as nominated by 945, one Director as nominated
by CWG and one Outside Director, who shall be nominated by majority resolution
of the other five nominees, provided that the size of the Board of Directors
shall not exceed six Directors.
2.3 REPLACEMENT AND REMOVAL OF DIRECTORS. If a Director (a "Retiring
Director") ceases to be a Director for any reason, other than pursuant to
Section 2.4, including Disability, the Shareholders shall use their best efforts
to cause their nominee Director(s) to vote to fill the resulting vacancy as soon
as reasonably possible, by electing a nominee of the party that originally
nominated that Retiring Director. Each Shareholder shall vote their Common
Shares for removal of a Director if proposed by the party who nominated such
Director. Each Shareholder shall vote their Common Shares against removal of a
Director unless the removal has been approved in writing by the party who
nominated such Director.
2.4 REDUCED BOARD REPRESENTATION. Notwithstanding Section 2.2, in the
event that any Shareholder's holdings of Common Shares shall be reduced so that
such Shareholder shall own:
(a) less than 15% of the Common Shares, but not less than 10% of the
Common Shares, such Shareholder shall only be entitled to nominate one
Director for election to the Board of Directors pursuant to this
Agreement; or
(b) less than 10% of the Common Shares, such Shareholder shall not be
entitled to nominate any Directors for election to the Board of
Directors pursuant to this Agreement.
Upon the occurrence of either of the events set out in subsections (a) and (b)
above, any Shareholder may request, and each Shareholder agrees to vote for, the
removal of the number of the Directors nominated by the Shareholder referred to
in such subsections that is required to reduce the number of nominees of such
Shareholder on the Board of Directors of the Corporation to the representation
set out in such subsections. In the event that Directors shall be removed
pursuant to this Section, such Directors shall not be replaced, and the size of
the Board of Directors and the entitlement of the Shareholder referred to in
subsections (a) and (b)
<PAGE>
-6-
above to nominate Directors pursuant to this Agreement shall be permanently
reduced by the number of Directors so removed and the Shareholders shall vote to
pass all resolutions necessary to give effect to this Section 2.4.
2.5 BY-LAWS GOVERN. Unless otherwise provided herein the conduct of the
business of the Corporation shall be governed in accordance with the By-laws of
the Corporation as amended from time to time.
2.6 QUORUM. The following provisions shall apply with respect to the
following matters:
(a) The Shareholders shall vote their Common Shares, and use their best
efforts to cause their nominee Directors to vote, to amend the By-laws
of the Corporation to provide that:
(i) a quorum required for the transaction of business, at a meeting
of the Board of Directors or any committee of the Board of
Directors, shall be at least three; and
(ii) where a quorum is not present within one hour of the time of
the meeting or ceases to be present at a duly called meeting or
adjourned meeting of the Board of Directors or any committee
thereof, or such meeting is adjourned as set out in the
preceding sentence, then such meeting shall be deemed to be
adjourned or further adjourned, for two weeks, to reconvene at
the same time and place; and
(b) Any meeting of the Board of Directors or any committee of the Board of
Directors shall require the attendance of at least one of the
Directors nominated by MPR, one of the Directors nominated by 945 and
one of the Directors nominated by CWG and where such Directors are not
present at any meeting the Shareholders shall use their best efforts
to cause their nominee Directors to vote to adjourn such meeting in
the manner set out above. Any adjourned or further adjourned meeting
of the Board of Directors or any committee of the Board of Directors
shall require the attendance of at least two Directors, nominated by
at least two of the three Shareholders, and where such Directors are
not present at any such meeting, the Shareholders shall use their best
efforts to cause their nominee Directors to vote to further adjourn
such meeting.
2.7 SPECIAL APPROVALS BY BOARD. The Shareholders shall vote their Common
Shares, and use their best efforts to cause their nominee Directors to vote, to
amend the By-laws of the Corporation to provide that, in addition to any other
approval that may be required at law or pursuant to the Articles, By-laws or
resolutions of the Corporation, the affirmative approval by
<PAGE>
-7-
express resolution of a 2/3 majority of the Directors shall be required for any
decision in respect of any of the following matters:
(a) any matter where the Corporation shall borrow any funds, or enter into
any capital lease;
(b) the issuance of any Equity Securities or any form of debt securities,
including any grant of options or sale of Shares pursuant to an
incentive plan of any kind and the terms applicable to such options
and/or incentive plans and any material amendment to a previously
granted option or right under an incentive plan but excluding any
issuance of Common Shares to MPR pursuant to any conversion of
Preferred Shares arising out of any redemption or retraction of the
Preferred Shares;
(c) any material change in the nature of the Corporation's business or the
entering into of any material contract other than in the ordinary
course of business;
(d) any amendment, alteration, variation in, addition to or any attempt to
repeal or restate the Articles or the By-laws of the Corporation;
(e) any amalgamation, arrangement, consolidation, merger or
reorganization, statutory or otherwise, or any transaction or scheme
outside the ordinary course of business, including the sale of all or
substantially all of the assets of the Corporation;
(f) any proceedings with respect to the winding-up, dissolution and/or
liquidation of the Corporation; and
(g) any redemption, repurchase, retraction or purchase for cancellation of
any Shares, excluding any redemption or redemptions of Preferred
Shares by the Corporation, any exercise by MPR of its right of
retraction of the Preferred Shares, and any repurchase of Common
Shares pursuant to the Performance Incentive Plan.
(h) approval of the annual operating budget plans established for the
Corporation in respect of any Fiscal Year;
(i) any capital or other expenditures that deviate from the annual
operating budget in respect of any Fiscal Year; and
(j) any matter dealing with a greater than 10% increase in annual
compensation payable to any Director, officer or employee of the
Corporation earning in excess of $100,000 per annum, including,
without limitation, salaried employees, contract employees and the
Principal Officers.
<PAGE>
-8-
No committee of Directors shall have authority to approve any matter set out in
this Section 2.7.
2.8 UNANIMOUS APPROVALS BY BOARD. The Shareholders shall vote their
Common Shares, and use their best efforts to cause their nominee Directors to
vote, to amend the By-laws of the Corporation to provide that, in addition to
any other approval that may be required at law or pursuant to the Articles, By-
laws or resolutions of the Corporation, any decision in respect of the payment
of any dividends or the making of any other distributions to shareholders of the
Corporation, except for any redemption of Preferred Shares by the Corporation or
any exercise by MPR of its right of retraction of the Preferred Shares, shall,
in each case, require the affirmative approval, by express resolution, of all of
the Directors. No committee of Directors shall have authority to approve any
matter set out in this Section 2.8.
2.9 DURATION OF EFFECTIVENESS OF BY-LAW AMENDMENTS. The amendments to the
By-Laws of the Corporation set out in Sections 2.6, 2.7 and 2.8 shall be
effective until the termination of this Agreement.
2.10 CWG APPROVALS. MPR and 945 will each use their best efforts to cause
their nominee Directors to vote to ensure that no resolutions will be passed
pursuant to subsections 2.7(a) to (g) without the affirmative vote of the
Director nominated by CWG.
2.11 COMMITTEES. If the Directors of the Corporation shall appoint any
committees of Directors, the Shareholders will use their best efforts to cause
their nominee Directors to vote such that one Director nominated by each of MPR,
CWG and 945 shall be appointed to each such committee.
2.12 MANAGEMENT. Immediately after the date of this Agreement, the
Principal Officers will continue to serve in such capacity, although this
obligation will not constitute an employment commitment or contract for any such
officer. The Shareholders will use their best efforts to cause their nominee
Director(s) to vote such that:
(a) the term of office of the Principal Officers and any other officers
appointed by the Board of Directors shall be one year, commencing on
the date of appointment of such officers; and
(b) the Board of Directors of the Corporation shall annually vote on the
election of the Principal Officers and any additional officers as it
may from time to time appoint, such election to be decided by majority
vote.
<PAGE>
-9-
ARTICLE 3
SPECIAL PERIODS
---------------
3.1 APPLICATION OF ARTICLE 3. Section 2.2 shall not apply during Special
Periods. In addition, during any Special Period, the Shareholders shall use
their best efforts to cause their nominee Director(s) to vote to adjourn any
meeting of the Board of Directors or any committee of Directors unless at least
four Directors are in attendance at such meeting.
3.2 CHANGE IN DIRECTORS. During a Special Period, CWG may require the
Directors nominated by 945 and the Outside Director nominated by the other
Directors to resign and failing such resignations, the Shareholders shall vote
their Common Shares to remove such Directors. In such event, the Shareholders
shall vote their Common Shares for the election of replacement Directors
nominated by CWG.
3.3 SHAREHOLDERS' MEETING. A meeting for the purposes of nominating
replacement Directors under Section 3.2 and voting under Section 3.3 may be
called by CWG in accordance with the Act, the Corporation's By-laws, the
Securities Act (Alberta) and all other applicable laws.
3.4 SPECIAL VOTING PROVISION. Upon request by CWG, each Shareholder shall
vote its Shares, at any special or ordinary meeting of the shareholders of the
Corporation, in favour of any special resolution proposed by CWG to sell, lease
or exchange all or substantially all of the property of the Corporation.
ARTICLE 4
REMEDIES FOR DEFAULT
--------------------
4.1 REMEDIES. Each Shareholder acknowledges and agrees that damages may
not be an adequate remedy for any breach of this Agreement. If a Shareholder
breaches its obligations under this Agreement, the other Shareholders will have
all rights and remedies available at law or in equity, may bring any proceedings
in law or equity to remedy the breach(es), and may seek orders for specific
performance, an injunction or any other equitable remedy.
ARTICLE 5
GENERAL PROVISIONS
------------------
5.1 ARTICLES OF THE CORPORATION. Each of the parties to this Agreement
shall take all such actions necessary to amend or alter the Articles or By-laws
of the Corporation to the extent necessary to make them consistent with the
provisions of this Agreement.
5.2 TERM. This Agreement shall continue in force until the earlier of:
<PAGE>
-10-
(a) the date of listing of the Common Shares on either The Toronto Stock
Exchange or the NASDAQ National Market; and
(b) November 15, 1998.
5.3 TERMINATION NOT TO AFFECT RIGHTS OR OBLIGATIONS. A termination of
this Agreement shall not affect or prejudice any rights or obligations which
have accrued or arisen under this Agreement prior to the time of termination and
such rights and obligations shall survive the termination of this Agreement.
5.4 NOTICES. Any notice or other writing required or permitted to be
given hereunder or for the purpose hereof to any of the Shareholders shall be
sufficiently given if delivered personally, or if sent by prepaid courier or if
transmitted by facsimile to such party:
(a) in the case of a notice to MPR, at:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, British Columbia
V5A 4B5
Facsimile No.: (604) 293-6161
Attention: Ian Bardsley, President
-----------------------------------
with a copy to:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
P.O. Box 10026
Pacific Centre South
Vancouver, British Columbia
V7Y 1B3
Facsimile No.: (604) 661-9349
Attention: R. Hector MacKay-Dunn
---------------------------------
<PAGE>
-11-
(b) in the case of notice to CWG, at:
CIBC Wood Gundy Capital (SFC) Inc.
c/o CIBC Wood Gundy Capital Inc.
BCE Place
P.O. Box 500, 161 Bay Street
Toronto, Ontario
M5J 2S8
Facsimile: (416) 594-8037
Attention: Sam Duboc
---------------------
(c) in the case of a notice to 945, at:
945 Investments Ltd.
Suite 106 - 1008 Beach Avenue
Vancouver, British Columbia
V6E 1T7
Facsimile No.: (604) 685-2533
Attention: Ed Ford and Len Fowler
----------------------------------
5.5 TIME OF ESSENCE. Time shall be of the essence hereof.
5.6 FURTHER ASSURANCES. Each of the Shareholders, and any Person who
shall acquire any Common Shares or other Equity Securities of the Corporation
and who agrees to be bound by the terms of this Agreement, shall use all
reasonable efforts to take all such steps, execute all such documents and do all
such acts and things as may be reasonably within its power, including voting
those Common Shares held by such Shareholder or Person (where such Shareholder
or Person has the right to vote pursuant to this Agreement), to implement to
their full extent the provisions of this Agreement and to cause the Corporation
to act in the manner contemplated by this Agreement.
5.7 SEVERABILITY. In the event that any provision of this Agreement is
deemed to be unenforceable, illegal, void or voidable, this Agreement shall
continue in full force and effect without such provision and the parties shall
take further actions and make additional arrangements to carry out the intended
transactions contemplated herein.
5.8 NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any Person.
5.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
<PAGE>
-12-
5.10 ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supersedes and preempts any prior understandings, agreements or
representations by or among the parties or any other shareholder, written or
oral, which may have related to the subject matter hereof in any way.
5.11 GOVERNING LAW. The laws of the Province of British Columbia and the
federal laws of Canada applicable therein shall govern all issues and questions
concerning the relative rights of the Shareholders and the construction,
validity, interpretation and enforceability of this Agreement.
5.12 AMENDMENTS AND WAIVERS. Any amendment, modification or termination of
any provision of this Agreement or consent to any departure by any party
therefrom may be made only by agreement of each of the parties hereto in
writing. The waiver, express or implied, by any party hereto of any right
hereunder or of any failure to perform, or breach hereof, by any other party
hereto shall neither constitute nor be deemed to constitute a waiver of any
other right hereunder or of any claims or remedies available under applicable
laws in respect of any other failure to perform, or breach hereof, by any party
hereto, whether of a similar or dissimilar nature thereto.
5.13 ASSIGNABILITY. Each of CWG and 945 acknowledge that they have been
advised by MPR that Control of MPR may change during the term of this Agreement
and agree that such a change of Control of MPR shall not constitute an
assignment hereunder or affect this Agreement in any way. Except for the
foregoing, this Agreement and the rights and obligations under this Agreement
are not assignable. This Agreement shall bind and benefit any successor, heir,
executor or permitted assignee of the parties.
5.14 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, whether by law or in
equity, upon such party and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
<PAGE>
-13-
5.15 COUNTERPARTS. This Agreement may be signed in one or more
counterparts, which together shall constitute one instrument. Delivery of
counterparts may be effected by facsimile transmission thereof.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
date first above written.
MPR TELTECH LTD. CIBC WOOD GUNDY CAPITAL (SFC) INC.
/s/ I. R. Bardsley /s/ Samuel Duboc
By: _____________________________ By: _____________________________
/s/ James W. Peters
By: _____________________________ By: _____________________________
945 INVESTMENTS LTD.
/s/ Douglas E. Ford
By: _____________________________
By: _____________________________
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BLAKE, CASSELS & GRAYDON]
Barristers & Solicitors
Patent & Trade-mark Agents
Suite 1700, 1030 West Georgia Street
Vancouver, British Columbia
V6E 2Y3
Office: (604)631-3300
Facsimile: (604)631-3309
Our Reference: 92065/2
June 28, 1996
Digital Courier International Corporation
8618 Commerce Court
Burnaby, British Columbia
Canada V5A 4N6
Dear Sirs:
RE: REGISTRATION STATEMENT OF FORM F-1
DATED JUNE 28, 1996
You have requested our opinion with respect to certain matters in
connection with the filing by Digital Courier International Corporation (the
"Company") of a Registration Statement on Form F-1 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
relating to an offering by the Company of 4,500,000 common shares in the capital
of the Company (the "Treasury Shares") and by certain Selling Shareholders of
2,000,000 common shares in the capital of the Company, which may be increased to
2,950,000 common shares in the event of full exercise of an over allotment
option granted by the Selling Shareholders (the "Secondary Shares"), (the
Treasury Shares and the Secondary Shares are, collectively, the "Offered
Shares").
In connection with this opinion, we have examined and relied upon the
Registration Statement, the Company's Articles of Incorporation and By-laws and
the originals or copies certified to our satisfaction, of such records,
documents, certificates, memoranda and other instruments as in our judgement are
necessary or appropriate to enable us to render the opinion expressed below.
We have assumed that prior to the issue and sale by the Company of the
Treasury Shares and the sale by the Selling Shareholders of the Secondary
Shares, the Board of Directors of the Company and the Selling Shareholders will
approve the final terms of the issue and sale of the Treasury Shares and the
sale of the Secondary Shares, respectively.
<PAGE>
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Offered Shares, when issued and sold or sold, as the case may
be, in accordance with the Registration Statement will be validly issued, fully
paid and non-assessable shares in the capital of the Company.
We consent to the reference to our name under the caption "Legal
Matters" in the Prospectus included in the Registration Statement and to the
filing of this opinion as an exhibit to the Registration Statement.
Yours very truly,
/s/ Blake, Cassels & Graydon
<PAGE>
EXHIBIT 10.1
AGENCY AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 19th day of December, 1994
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a corporation incorporated under
the laws of the Province of Alberta, with an office in the City
of Vancouver, in the Province of British Columbia;
(the "Corporation")
- and -
YORKTON SECURITIES INC., a corporation incorporated under the
laws of the Province of Ontario, with an office in the City of
Calgary, in the Province of Alberta
(the "Agent")
- and -
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated
under the laws of Canada, with an office in the City of Calgary,
in the Province of Alberta
(the "Trustee")
WHEREAS:
A. the Corporation is or will become a distributing corporation
incorporated under the laws of the Province of Alberta; and
<PAGE>
Page 2
B. the Corporation wishes to raise funds for the purposes described in
the Prospectus in the amount of $300,000 by the sale of 2,000,000 Common Shares
of the Corporation to the Purchasers; and
C. the Corporation has agreed to file a Prospectus in accordance with the
securities legislation in the Province of Alberta in order to qualify for
distribution 2,000,000 Common Shares and the Agent's option to acquire up to
200,000 Common Shares upon exercise of the Option; and
D. the Corporation has agreed to retain the Agent as its exclusive agent
to solicit subscriptions for the Common Shares offered pursuant to the
Prospectus and the Agent has agreed to act in such capacity upon the terms and
conditions hereinafter set out; and
E. the Trustee has agreed to act as trustee of all subscription funds on
behalf of the Corporation subject to the terms and conditions hereof;
NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
--------------
1.1 For the purposes of this Agreement, including the recitals and any
amendment hereto, the following words and phrases shall have the following
meanings:
(a) "Agreement" means this agreement and the schedules hereto;
(b) "Closing" means the completion of the transactions herein
contemplated on the Closing Date as herein provided;
<PAGE>
Page 3
(c) "Closing Date" means a date that is 90 days from the date of
issuance of a receipt for the Prospectus by the Commission or
such earlier date as may be determined by the Corporation and the
Agent or such other time as may be authorized by the Chief and
may be agreed to by the Corporation and the Agent;
(d) "Chief" means the Chief of Securities Administration of the
Commission;
(e) "Commission" means the Agency of the Alberta Securities
Commission;
(f) "Common Shares" means fully paid and non-assessable common shares
of the Corporation;
(g) "Offering" means the offer by the Corporation to sell Common
Shares as contemplated by the Prospectus and this Agreement;
(h) "Option" means the sole, exclusive, irrevocable and non-
transferable option to purchase 200,000 Common Shares, at a price
of $0.15 per Common Share, granted by the Corporation to the
Agent in accordance with paragraph 3.3;
(i) "Option Price" means the price per Common Share set forth in
subparagraph 1.1 (h) above;
(j) "Preliminary Prospectus" means the preliminary prospectus of the
Corporation dated October 20, 1994 duly filed with the
Commission;
(k) "Prospectus" means the prospectus of the Corporation, approved,
signed and certified in accordance with the Securities Act
(Alberta) and relating to the offering and distribution of the
Common Shares in the Qualifying Jurisdiction by the Corporation;
<PAGE>
Page 4
(l) "Purchaser" means those subscribers whose offers to purchase
Common Shares are accepted by the Agent;
(m) "Qualifying Jurisdiction" means the Province of Alberta;
(n) "Securities Legislation" means the applicable securities
legislation, policies, notices and orders of the Qualifying
Jurisdiction;
(o) "Subscription Funds" means the funds received in respect of
subscriptions for Common Shares pursuant to and in accordance
with the terms of the Prospectus and this Agreement;
(p) "Time of Closing" means 10:00 a.m. Calgary time on the Closing
Date or such other time on the Closing Date as the Corporation
and the Agent may agree;
(q) "Total Subscription" means subscriptions received and accepted
which aggregate the amount of $300,000.
1.2 For the purposes of this Agreement, all references to "Dollars" or "$"
shall mean Canadian funds, unless otherwise specified.
1.3 The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only arid shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
1.4 Words importing the singular number only shall include the plural and
vice versa and words importing the masculine gender shall include the feminine
and neuter genders and words importing persons shall include companies,
corporations, partnerships, syndicates, trusts and any number or aggregate of
persons.
<PAGE>
Page 5
ARTICLE II
APPOINTMENT OF AGENT
--------------------
2.1 Subject to the terms hereof, the Agent is hereby appointed by the
Corporation as, and the Agent hereby agrees to act as, the sole and exclusive
agent of the Corporation to solicit Purchasers of the Common Shares pursuant to
the Offering provided however, that the Agent may retain as sub-agents other
registered securities dealers and may receive subscriptions from such securities
dealers. The Agent will use its best efforts to solicit subscriptions for Common
Shares pursuant to the Offering at the price set forth in the Prospectus. The
Agent shall act as agent only and shall be under no obligation to purchase any
of the Common Shares.
2.2 The Agent shall secure from each proposed Purchaser of Common Shares
hereunder such certificates, documents and forms as may be required by the
Securities Legislation and such questionnaires, undertakings and other material
as may, in the opinion of the Agent, be required by The Alberta Stock Exchange.
ARTICLE III
AGENT'S FEES
------------
3.1 In consideration of the Agent agreeing to act as agent for the
Offering, the Corporation agrees to pay to the Agent at the Time of Closing,
upon due completion of the sale of the Common Shares offered pursuant to the
Offering, a fee equal to ten (10%) per cent of the aggregate principal amount of
Common Shares sold provided however, that no commission shall be payable unless
the Corporation receives the Total Subscription. The Agent's fees shall be paid
by the Corporation to the Agent by certified cheque or in such other manner as
is satisfactory to the Agent.
3.2 If the Agent retains sub-agents or receives subscriptions from sub-
agents, the Agent, in its sole discretion, shall pay them a fee as may be agreed
among them, but in no event shall the Corporation be required to pay a fee in
excess of 10% of the Total Subscription.
<PAGE>
Page 6
3.3 Notwithstanding the fact that the Agent is not obligated to purchase
any Common Shares under the Prospectus, and on the express condition precedent
that Closing occurs, the Corporation hereby agrees to grant to the Agent, at the
Closing, the Option subject to the further terms and conditions in the option
agreement appended hereto as Schedule "A" (the "Option Agreement"). The
Corporation and the Agent intend that the Option be qualified under and be
distributed pursuant to the Prospectus.
ARTICLE IV
SUBSCRIPTIONS
-------------
4.1 The Corporation will, subject to the provisions of Section 4.3 hereof:
(a) at such time as the Total Subscription has been received and
accepted by the Agent; or
(b) at 10:00 a.m. Calgary time on the Closing Date;
whichever shall first occur, close the subscription books and
thereafter shall not receive any further' subscriptions for Common
Shares.
4.2 Residents of the Qualifying Jurisdiction may subscribe for Common
Shares by delivering to the Agent on or prior to the Closing Date:
(a) payment of the aggregate subscription price in respect of the
Common Shares subscribed for;
(b) the appropriate offer to purchase Common Shares together with
such certificates, documents and forms as, in the opinion of the
Agent, may be required; and
<PAGE>
Page 7
(c) appropriate delivery and registration instructions in respect of
the Common Shares subscribed for.
4.3 Subscription Funds received by the Agent shall be delivered by the
Agent as soon as practicable after receipt, and in any event prior to the Time
of Closing, to the Trustee to be held by the Trustee in trust for the Purchasers
pursuant to the terms of this Agreement, and shall be dealt with by the Trustee
as provided in Article V hereof.
ARTICLE V
THE TRUSTEE
-----------
5.1 The Trustee is hereby appointed as escrow agent and custodian for the
receipt and holding of any and all Subscription Funds in accordance with section
4.3 and the Trustee, by its execution and delivery of this Agreement, accepts
such appointment.
5.2 The Trustee shall receive, tabulate, hold and account for all
Subscription Funds received by it.
5.3 The Trustee may accept Subscription Funds in the form of cash,
certified cheque or bank draft or in other form acceptable to the Trustee.
5.4 The Trustee shall hold Subscription Funds, in an interest bearing
account, until the Time of Closing at which time such funds shall be released in
accordance with the provisions of Article VII.
5.5 Prior to requesting a release of Subscription Funds, the Corporation
shall deliver to the Trustee a Certificate of the Corporation and the Agent
jointly confirming acceptance by the Corporation and the Agent of the Total
Subscription.
<PAGE>
Page 8
ARTICLE VI
INDEMNITY OF TRUSTEE
--------------------
6.1 The Corporation shall indemnify and save harmless the Trustee against
and from all costs which may be incurred by the Trustee in performance of its
duties hereunder; provided, however, that all Subscription Funds, while in the
custody of the Trustee, shall be and shall remain at the sole risk and
responsibility of the Trustee. The Trustee shall be liable to the Corporation
for any loss related to the Subscription Funds or any interest thereon while in
the custody of the Trustee.
6.2 Without limiting any protection or indemnity of the Trustee under any
other provisions hereof, or otherwise at law, the Corporation hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements, including legal or advisor fees and disbursements, of
whatever kind and nature, which may at any time be imposed on, incurred by or
ascertained against the Trustee in connection with the performance of its duties
and obligations hereunder, other than such liabilities, losses, damages,
penalties, claims, actions, suits, costs, expenses and disbursements arising by
reason of the negligence or willful misconduct of the Trustee. This provision
shall survive the resignation or removal of the Trustee, or the termination of
this Agreement.
6.3 The Trustee may, in relation to the trusts herein created, act on the
opinion or advice or information obtained from any lawyer or other expert,
whether retained by the Trustee, the Corporation or the Agent, or otherwise, but
shall not be bound to act upon such opinion, advice or information and shall not
be held responsible for any loss occasioned for so acting or not so acting, as
the case may be, except where such loss results from the gross negligence or
gross misconduct of the Trustee. The Trustee may employ such assistants as may
be necessary to properly discharge its duties and may pay any reasonable moneys
required for any legal or other advice as aforesaid.
<PAGE>
Page 9
6.4 In respect of the discharge of any of its duties set forth hereunder,
the Trustee shall be entitled to rely upon a certificate signed by the President
of the Corporation.
ARTICLE VII
RELEASE OF SUBSCRIPTION FUNDS
-----------------------------
7.1 The Trustee shall not at any time deliver any Subscription Funds
received by it to the Corporation until it shall have received each of the
following:
(a) the Certificate referred to in Section 5.5 hereof;
(b) a written request from the Corporation requesting the delivery of
Subscription Funds;
(c) a written instruction from the Agent instructing the Trustee to
deliver the Subscription Funds to the Corporation; and
(d) a certificate signed by the Agent, to the effect that the Total
Subscription for the Common Shares from not less than 300
boardlot (as defined in the rules of The Alberta Stock Exchange)
subscribers have been received.
7.2 Upon receiving the documentation referred to in Section 7.1 hereof,
subject to Sections 7.4 and 12.1 hereof, the Trustee shall forthwith deliver to
the Corporation all Subscription Funds held by it pursuant to this Agreement,
together with all interest earned thereon.
7.3 If the Trustee has not received the documentation referred to in
Section 7.1 hereof at or prior to the Time of Closing, the Trustee shall,
promptly thereafter, remit by ordinary mail and in any case not later than 30
days from the Time of Closing, to each subscriber whose
<PAGE>
Page 10
Subscription Funds are held by the Trustee, his Subscription Funds, without
interest or deduction.
7.4 If the subscription of any subscriber delivered to the Agent is for
any reason rejected (in whole or in part) by the Corporation, the Subscription
Funds in respect of such rejected subscription shall be forthwith returned to
such subscriber without interest or deduction.
7.5 All interest which shall have accrued with respect to the Subscription
Funds held pursuant to section 5.4 hereof shall be paid to the Corporation.
ARTICLE VIII
TRUSTEE FEE
-----------
8.1 The Corporation will pay to the Trustee for its services as Trustee
hereunder the remuneration mutually agreed to by the Corporation and the Trustee
and, in addition, the Trustee, upon presentation of its accounting and
supporting invoices therefor, shall be reimbursed for all reasonable
disbursements and out-of-pocket costs incurred by it in the furtherance of its
duties hereunder, including, without limiting the generality of the foregoing,
any reasonable costs and disbursements incurred pursuant to section 5.1 hereof.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
-------------------------------------------------
The Corporation represents and warrants to the Agent and the Trustee,
and hereby acknowledges that the Agent and Trustee are relying on such
representations and warranties in entering into this Agreement that:
9.1 The Corporation has been duly incorporated and organized and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all the requisite corporate powers and capacity to carry
on its business as now conducted and as presently
<PAGE>
Page 11
proposed to be conducted and to own, lease and conduct operations upon its
proposed properties and assets;
9.2 The Corporation is conducting its business in compliance with all
applicable laws, rules and regulations in the jurisdictions in which its
business is carried on;
9.3 The authorized capital of the Corporation consists of the share capital
as disclosed in the Prospectus, and such number of Common Shares is issued and
outstanding as is disclosed in the Prospectus and all of the issued and
outstanding Common Shares of the Corporation have been duly issued and are fully
paid and non-assessable and no person, from or corporation has any agreement or
option, or right or privilege, whether preemptive or contractual, capable of
becoming an agreement, including convertible securities, for the purchase,
subscription or issuance of any unissued shares or other securities of the
Corporation except as disclosed in the Prospectus;
9.4 There is to the knowledge of the Corporation, no action, proceeding or
investigation pending or threatened against the Corporation or any of its
subsidiaries before or by any federal, provincial, state, municipal, county or
other governmental department, commission, board or agency, domestic or foreign,
which may result in any material adverse change in the business or in the
condition, financial or otherwise, of the Corporation, or which questions the
validity of any action taken or to be taken by the Corporation pursuant to or in
connection with this Agreement or as contemplated by the Prospectus, or which
questions in any aspect material to their respective businesses the authority of
any party, or of any authority or jurisdiction which has purported to grant the
same, to grant concessions, permits, rights, claims, leases or other similar
interests referred to in the Prospectus;
9.5 The audited financial statements of the Corporation included in the
Prospectus present fairly the financial position of the Corporation at the date
indicated and there has not been any material adverse change in such position
since such date;
<PAGE>
Page 12
9.6 Except as disclosed herein or in the Prospectus, there is no person, firm
or corporation acting or purporting to act for the Corporation entitled to any
brokerage or finder's fee in connection with any of the transactions
contemplated hereunder;
9.7 The Corporation is not in violation of, and the execution and delivery by
the Corporation of this Agreement will not result in any breach or violation of,
or be in conflict with, or constitute a default, to any material extent, under
any term or provision of the constating documents of the Corporation or any
shareholders' or directors' resolutions of the Corporation, or any agreement to
which the Corporation is a party or by which the Corporation or any of its
property is bound, and this Agreement has been duly authorized, executed and
delivered by the Corporation;
9.8 No approval, authorization, consent or other order of any governmental
authority is required in connection with the execution and delivery or with the
performance by the Corporation of this Agreement except requisite filings with
the Commission and The Alberta Stock Exchange if the same are required;
9.9 None of the directors or senior officers of the Corporation, any holder
of more than 10% of its outstanding Common Shares, or any associate or affiliate
of any of the foregoing persons or companies as such terms are defined in the
Securities Act (Alberta) has, or has had any material interest, direct or
indirect, in any continuing or existing material transaction or has any material
interest, direct or indirect, in any proposed material transaction which, as the
case may be, is material to or will materially affect the Corporation, except as
stated in the Prospectus;
9.10 No securities commission or other governmental authority has issued any
order preventing or suspending the use of the Prospectus;
9.11 All statements, facts, data, information and material made, furnished or
provided from time to time by the Corporation to the Agent relating to the
Corporation and the Purchasers are true and correct, all material facts relating
to the Corporation have been fully disclosed to
<PAGE>
Page 13
the Agent and such statements, facts, data, information and material did not and
do not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make any statement or fact contained therein
not misleading in light of the circumstances in which it was made;
9.12 The directors and senior officers of the Corporation have reviewed and
duly approved the Prospectus and have authorized its distribution by the Agent
to Purchasers of the Common Shares hereunder;
9.13 None of the statements or facts contained in the Prospectus is false or
misleading in any way and there has been no omission to state any material fact
therein necessary in order to make any statement contained therein not
misleading in light of the circumstances in which it was made;
9.14 The Prospectus complies with the requirements of the Securities
Legislation of the Qualifying Jurisdiction so as to permit its use in the
solicitation of subscriptions for Common Shares from the public in the
Qualifying Jurisdiction;
9.15 The Trustee, at its principal offices in the City of Calgary, has been
appointed transfer agent and registrar for the Common Shares of the Corporation;
and
9.16 The aforesaid representations and warranties are true as of the date
hereof and shall be true as of the Time of Closing.
ARTICLE X
COVENANTS OF THE CORPORATION
----------------------------
10.1 The Corporation will use its best efforts to take or cause to be taken
all steps and proceedings that may be necessary under the Securities
Legislation, including but not limited to the filing of the Prospectus and the
obtaining of a receipt therefor from the Commission, to qualify the Common
Shares for sale to the public resident in the Qualifying Jurisdiction through
<PAGE>
Page 14
the Agent and registrants who have complied with the Securities Legislation, by
not later than seven days
<PAGE>
Page 15
after the date of the issuance of a receipt for the Prospectus or such later
date or dates as may be agreed to between the Agent and the Corporation in
writing.
10.2 The Corporation shall promptly notify the Agent in writing of full
particulars of any material change, actual, anticipated or threatened, during
the period of distribution to the public of the Common Shares pursuant to the
Offering:
(a) in the business or affairs of the Corporation, or
(b) in any material fact contained or referred to in the Prospectus
or in any material supplemental thereto supplied by the
Corporation, which is of such a nature as to render the
Prospectus or material supplemental thereto, misleading or untrue
and the Corporation shall file under the applicable Securities
]Legislation, with all possible dispatch, and in any event within
any statutory limitation therefor, such new or correcting
information, amendments and other documents as the circumstances
may require. The Corporation shall further provide the Agent with
such copies of such information, amendments or other documents as
the Agent may reasonably require.
10.3 The Corporation shall in good faith discuss with the Agent any change
in circumstances which is of a nature that there is reasonable doubt as to
whether notice in writing need be given to the Agent pursuant to paragraph 10.2
10.4 The Corporation covenants with the Agent that it will advise the Agent
promptly of any request of the Commission, The Alberta Stock Exchange or other
regulatory body for any amendment to the Prospectus or for any additional
information, or the issuance by the Commission, The Alberta Stock Exchange or
any other regulatory body of any cease trading order or suspension order
relating to the Common Shares or of the institution of any such proceedings. The
Corporation covenants to use its best efforts to prevent the issuance of any
<PAGE>
Page 16
such cease trading order or suspension order and, if issued, to obtain the
withdrawal thereof as soon as possible.
10.5 The Corporation from time to time at its expense shall deliver to the
Agent, at the direction of the Agent, as many commercial copies of the
Prospectus (and in the event of an amendment, of such amended Prospectus) as it
may reasonably request, and any such delivery shall constitute the consent of
the Corporation to the use thereof in connection with the Offering.
10.6 The Corporation covenants and agrees to protect, indemnify and save
harmless the Agent and its directors, officers and employees from and against
all losses, claims, damages, liabilities, costs or expenses (other than loss of
profits), in any way caused, sustained or incurred by reason of or resulting
directly from:
(a) any statement or information contained in or omitted from the
Preliminary Prospectus, the Prospectus, any amended Prospectus
and additional or ancillary material, information, evidence,
return, report, application, statement, table or document that
may be filed, or be required to be filed, in connection with the
Offering by the Corporation under the Securities Legislation,
except information relating solely to the Agent, which, at the
time and in light of the circumstances under which it was made,
is false or misleading with respect to any material fact or which
omits to state any material fact, the omission of which makes the
statement false or misleading;
(b) any breach of the representations, warranties and covenants of
the Corporation contained herein;
(c) any prohibition or restriction of trading in the Common Shares of
the Corporation, or any prohibition affecting the distribution of
the Common Shares which may be ordered by any one or more
competent authorities
<PAGE>
Page 17
if such prohibition is based on any statement or omission made by
the Corporation in the Prospectus;
(d) any subscriber effectively rescinding his contract with the
Corporation pursuant to a right of rescission under which a
subscriber may rescind a contract on the grounds that the
Prospectus (or any amendment) contains an untrue statement of a
material fact or omits to state a material fact;
(e) the Prospectus failing to comply with the requirements of the
Securities Legislation in the Qualifying Jurisdiction so as to
permit the lawful sale of Common Shares or by reason of the
Corporation having failed to take or cause to be taken such steps
or proceedings as were necessary to permit the lawful sale of
Common Shares as contemplated by the Prospectus and as
contemplated hereby; and
(f) any formal inquiry or investigation, whether prior to or
subsequent to Closing, into the affairs, records or accounts of
the Corporation or into holdings of Common Shares or securities
of the Corporation or transactions in Common Shares or securities
of the Corporation, which is commenced or contemplated by the
Commission or The Alberta Stock Exchange.
10.7 The Corporation will take all necessary action to register the
Corporation in a timely manner, whenever the business or property of the
Corporation make such registration necessary.
10.8 The Corporation will take all necessary action to complete its
application for listing of the Common Shares on The Alberta Stock Exchange, with
all reasonable diligence after the Closing.
<PAGE>
Page 18
ARTICLE XI
COVENANTS OF THE AGENT
----------------------
11.1 The Agent hereby covenants, subject to the conditions contained in
Article XII hereof, to use its best efforts to solicit subscriptions for Common
Shares offered pursuant to the Offering in the Qualifying Jurisdiction.
11.2 The Agent hereby covenants and agrees that it will not solicit
subscriptions for Common Shares except in compliance with applicable law and the
terms and conditions set forth in the Prospectus and this Agreement and hereby
indemnifies the Corporation and agrees to save the Corporation harmless from and
against any and all losses, damages, liabilities, costs, expenses, claims or
suits caused by or arising out of the Agent's gross misconduct which gives rise
to a breach of the covenants in this section 11.2.
11.3 The Agent will deliver to each Purchaser a copy of the Prospectus.
ARTICLE XII
CONDITIONS OF THE AGENT'S OBLIGATIONS
-------------------------------------
12.1 The obligations of the Agent contained in this Agreement may be
terminated by the Agent in the event that prior to the Time of Closing:
(a) any order operating to restrict, prevent or cease trading in the
Common Shares of the Corporation is made pursuant to the
Securities Legislation;
(b) there is any breach or non-performance of any of the covenants of
the Corporation herein contained that has not been rectified
remedied or waived;
<PAGE>
Page 19
(c) any adverse change, in the sole opinion of the Agent, occurs in
or to the state of the financial markets generally, or
specifically relating to the Corporation, its business, assets or
undertaking;
(d) any competent authority commences or gives notice that it intends
to commence any formal inquiry or investigation in relation to
the Corporation, its affairs, records or accounts or any of the
directors or officers of the Corporation, or into any holdings or
transactions in the Common Shares of the Corporation other than
for a reason relating solely to the conduct of the Agent;
(e) any new or amended Prospectus discloses information which, in the
Agent's opinion, results at any time prior to the Closing in the
Purchasers of a material amount of the Common Shams exercising
their rights under applicable legislation to withdraw from or
rescind their purchase thereof;
or
(f) there is any amendment to Securities Legislation which, in the
Agent's opinion, will impose any limitations or restrictions on
the exercise of the Option or on the subsequent trading of shares
which are acquired, or which may be acquired by, the Agent under
the Option.
12.2 Any termination of any of the obligations of the Agent hereunder
pursuant to the provisions hereof shall be effected by notice to the
Corporation. Notwithstanding the giving of any notice of termination hereunder,
the provisions of section 10.6 and all rights of action in connection therewith
shall survive for a period of two years following such termination and the fees
and expenses agreed to be aid by the Corporation, referred to in Article XIV,
incurred up to the time of the giving of such notice shall be paid by the
Corporation. The rights of the Agent so to terminate this Agreement are in
addition to such remedies as it may have in respect
<PAGE>
Page 20
of any default, misrepresentation, act or failure to act of the Corporation in
respect of any of the transactions contemplated in this Agreement.
ARTICLE XIII
THE CLOSING
-----------
13.1 Subject to the terms and conditions hereof, the Closing shall take place
at the Time of Closing at the offices of the Agent, or such other location as
the Agent may direct.
13.2 At the Time of Closing, the Corporation shall deliver to the Agent an
officer's certificate, in form and substance satisfactory to counsel for the
Agent, signed by the President of the Corporation, dated the Closing Date,
addressed to the Agent to the effect that, after a reasonable investigation:
(a) the representations and warranties contained in Article IX hereof
are true and correct at and as at the Time of Closing, after
giving effect to the transactions contemplated by the Prospectus;
(b) the Corporation has complied with all covenants and satisfied all
the conditions contained herein on its part to be performed or
satisfied at or prior to the Closing Date;
(c) such officer has carefully examined the Prospectus and since the
respective dates as of which information is given in the
Prospectus, except as set forth in and contemplated by the
Prospectus, the Corporation has not incurred any liabilities or
obligations, direct or contingent, which, when considered in
respect of its business, are material;
(d) there has been no material adverse change in the assets,
financial position or business of the Corporation and the
Corporation has not entered into a transaction of a nature
material to the Corporation;
<PAGE>
Page 21
(e) there has occurred no event required to be set forth in an
amended Prospectus which has not so been set forth;
(f) no event of material default under any agreement or instrument
pursuant to which indebtedness of the Corporation has been issued
has occurred and no event which with the giving of notice or the
passage of time or both would constitute an event of material
default under any such agreement or instrument has occurred and
is continuing; and
(g) the Corporation holds all requisite licenses, registrations,
qualifications, permits and consents necessary for carrying on
its business as presently carried on and all such licenses,
registrations, qualifications, permits and consents are valid and
subsisting and in good standing.
13.3 At the Time of Closing, the Agent shall receive a favorable legal
opinion, addressed to the Agent, from counsel to the Corporation, to the effect
that:
(a) the Corporation has been duly incorporated and organized and is
validly existing under the laws of the Province of Alberta, and
is not in default of its obligations under the Business
Corporations Act (Alberta) and has all requisite corporate power
and capacity to carry on its business as now conducted and as
proposed in the Prospectus to be conducted and to own, lease and
conduct operations upon its properties and assets as described in
the Prospectus and in the places where such properties and assets
are now owned, leased or operated and to perform its obligations
hereunder;
(b) the authorized and outstanding capital of the Corporation is as
disclosed in the Prospectus;
<PAGE>
Page 22
(c) the form of the definitive certificates representing the Common
Shares of the Corporation has been approved and adopted by the
directors of the Corporation and conform to the requirements of
applicable law;
(d) The Alberta Stock Exchange has conditionally accepted notice of
the issuance of the Common Shares offered pursuant to the
Offering and has conditionally approved the listing of such
Common Shares of the Corporation on such exchange;
(e) this Agreement has been duly authorized by all necessary
corporate action by the Corporation and has been duly executed
and delivered by the Corporation;
(f) the execution and delivery by the Corporation of this Agreement
and the performance by the Corporation of its obligations
hereunder will not result in any material breach or violation of,
or be in conflict with, or constitute a material default under,
any term or provision of the constating documents or any
shareholders' or directors' resolutions of the Corporation of
which counsel is aware, or any agreement of which counsel is
aware and to which the Corporation is a party or by which the
Corporation is bound;
(g) the Trustee at its principal offices in the City of Calgary has
been duly appointed the transfer agent and registrar for the
Common Shares of the Corporation;
(h) all necessary documents have been filed and proceedings taken
under the Securities Legislation to qualify the distribution of
the Option to the Agent and the distribution of the Common Shares
to the public in the Qualifying Jurisdiction; and
<PAGE>
Page 23
(i) all necessary corporate action has been taken by the Corporation
to authorize the issue of 200,000 additional Common Shares in the
event the Agent should exercise the Option to acquire such
additional Common Shares pursuant to the Option granted to the
Agent under the provisions of the Option Agreement and the
additional Common Shares of the Corporation issuable upon the
exercise of such Option, when issued and sold in accordance with
the terms of the Option Agreement, will be validly issued as
fully paid and non-assessable.
In giving the foregoing opinions counsel for the Corporation may rely
upon opinions of local counsel, acceptable to the Agent, as to the laws of
jurisdictions other than the Province of Alberta, if any, and as to matters of
fact not within their knowledge, upon certificates as to such facts, signed, in
the case of the Corporation, by the President or a director of the Corporation.
13.4 At the Time of Closing, the Corporation shall direct the Trustee, as
the registrar and transfer agent for the Common Shares, to issue the Common
Shares in accordance with the instructions of the Agent.
13.5 At the Time of Closing, the Corporation shall deliver to the Agent
payment of the Agent's fee in the form satisfactory to the Agent as provided for
in Article III hereof and payment of its expenses, including expenses of the
Agent's legal counsel as provided for in Article XIV hereof or the balance owed
in respect of such expenses if a prepayment toward expenses has been made in
respect thereof.
ARTICLE XIV
EXPENSES OF THE ISSUE
---------------------
14.1 Notwithstanding any termination of this Agreement or the cancellation of
its obligations by the Agent pursuant to Article XII hereof and, except as
otherwise indicated
<PAGE>
Page 24
herein, the costs and expenses of or incidental to the creation, issue and
offering of the Common Shares including, without limitation, the fees and
expenses of counsel for the Corporation and counsel for the Agent, all other
reasonable expenses incurred by the Agent in connection with the Offering, the
cost of printing and delivering the definitive certificates for the Common
Shares, the fees and disbursements of the transfer agent, the cost of preparing,
printing and delivering the Prospectuses and the associated fees prescribed by
the Securities Legislation in connection with the Offering shall be paid by the
Corporation whether or not the Offering is completed as contemplated.
ARTICLE XV
NOTICES
-------
15.1 Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given or made when delivered at the
addresses of the relevant party set forth below or such other address as a party
may stipulate in writing:
(a) to the Corporation at:
#106, 1008 Beach Avenue
Vancouver, B.C.
V6E 1T7
Attention: President
with a copy to:
1800, 800 - 5th Avenue, S.W.
Calgary, Alberta
T2P 3T6
Attention: Janice Pasay
(b) to the Agent at:
Suite 4400, 400 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Manager
<PAGE>
Page 25
with a copy to:
Ogilvie and Company
1600, 407 - 2nd Street, S.W.
Calgary, Alberta
T2P 2Y3
Attention: Derrick R. Armstrong
(c) to the Trustee at:
411 - 8th Avenue, S.W.
Calgary, Alberta
T2P 3E7
Attention: Stock Transfer Department
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 The Corporation will supply to the Agent copies of all financial and
other information given by the Corporation to its public shareholders or to any
stock exchange at the time when such information is so given for a period of two
years following Closing.
16.2 Time shall be of the essence with respect to the terms and conditions
of this Agreement.
16.3 All warranties, representations, covenants, indemnifications and
agreements herein contained or contained in certificates or documents submitted
pursuant to or in connection with the transactions herein along with all rights
of action in connection therewith shall survive the Closing of the purchase by
subscribers of Common Shares and shall continue in full force and effect for a
period of two years following the Closing Date for the benefit of the Agent and
for the benefit of the Corporation.
<PAGE>
Page 26
16.4 The contract created under this Agreement and the rights of the
parties hereunder shall be governed by and construed and enforced in accordance
with the laws of the Province of Alberta. Each of the parties hereto irrevocably
attorns to the jurisdiction of the courts of the Province of Alberta.
16.5 All the terms and provisions of this Agreement shall be binding upon,
shall enure to the benefit of, and shall be enforceable by and against the
parties hereto and their respective successors and assigns, but shall not be
assignable, before or after the Time of Closing, without the written consent of
the other parties hereto.
<PAGE>
Page 27
IN WITNESS WHEREOF the parties hereto have executed this Agreement
effective the day and year first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ Edward D. Ford
_________________________________
Per:
_________________________________
YORKTON SECURITIES INC.
Per: /s/ Alan Frame
_________________________________
Per:
_________________________________
MONTREAL TRUST COMPANY OF CANADA
Per:
_________________________________
Per: /s/ J. Ripplinger
_________________________________
<PAGE>
SCHEDULE "A"
SHARE OPTION AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ___ day of ________, 1994.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a corporation incorporated under
the laws of the Province of Alberta, with an office in the City
of Vancouver, in the Province of British Columbia;
(the "Corporation")
- and -
YORKTON SECURITIES INC., a corporation incorporated under the
laws of the Province of Ontario, with an office in the City of
Calgary, in the Province of Alberta
(the "Agent")
WHEREAS the Corporation has agreed pursuant to an Agency Agreement
dated the 19th day of December, 1994 among the Corporation, Montreal Trust
Company of Canada and the Agent, (the "Agency Agreement") to grant the Agent an
option to purchase 200,000 common shares in the capital stock of the Corporation
in consideration of the Agent's services performed under the Agency Agreement;
NOW THEREFORE in consideration of the premises, mutual covenants and
agreements herein contained, this agreement witnesses and it is understood and
agreed by and between the parties hereto as follows:
<PAGE>
Page 2
1. GRANT OF OPTION
---------------
Subject to the provisions hereinafter contained, the Corporation
hereby grants to the Agent an irrevocable non-transferable option (the "Option")
to purchase 200,000 common shares (the "Optioned Shares") in the capital stock
of the Corporation, as presently constituted, at a price of fifteen ($0.15)
cents per share.
2. TERM OF OPTION
--------------
The Agent may exercise the Option on or before 4:30 p.m., Calgary time
on the date that is 18 months front the day the issued and outstanding common
shares in the capital of the Corporation are listed and posted for trading on
The Alberta Stock Exchange (the "Expiry Time"), after which time all rights
granted hereunder shall terminate.
3. MANNER OF EXERCISE
------------------
The Agent may exercise the Option in whole or in part, at any time and
from time to time, on or prior to the Expiry Time, by notice in writing given
by the Agent to the Corporation at its address for notice set out in the Agency
Agreement, specifying the number of Optioned Shares in respect of which it is
exercised and accompanied by payment in cash or certified cheque for the
purchase price of all of the Optioned Shares specified in such notice,
calculated in accordance with Section 1 hereof.
4. SHARE CERTIFICATES
------------------
Upon exercise of the Option, the Corporation shall cause the transfer
agent and registrar of the Corporation to deliver to the Agent, or as the Agent
may otherwise in writing direct in the notice of exercise of option, within
seven (7) days following the receipt by the Corporation of payment for the
number of Optioned Shares so exercised, a
<PAGE>
Page 3
certificate or certificates representing in the aggregate the number of
Optioned Shares for which payment has been received by the Corporation.
5. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE
---------------------------------------
The Agent shall have no rights whatsoever as a shareholder (including
any rights to receive dividends or other distribution to shareholders or to vote
at a general meeting of shareholders of the Corporation, except as provided in
paragraph 8 hereof) other than in respect to shares in respect of which the
Agent shall have exercised its right to purchase hereunder and which the Agent
shall have actually taken up and paid for.
6. NON-TRANSFERABLE
----------------
The rights conferred upon the Agent hereunder shall be non-
transferable and non-tradeable.
7. NO FRACTIONAL COMMON SHARES
---------------------------
No fractional Option Shares will be issued on exercise of this Option,
or any compensation made for such fractional Option Shares, if any.
8. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON SHARES
-----------------------------------------------
In the event, at any time or from time to time, of a subdivision,
consolidation or reclassification of the share capital of the Corporation, the
payment of stock dividends by the Corporation or other relevant changes in the
capital of the Corporation prior to the exercise by the Agent, in full, of the
Option in respect of all of the shares granted herein, the Option with respect
to any Option Shares which have not been purchased hereunder at the time of any
such change to the capital of the Corporation shall be proportionately adjusted
so that the Agent shall from time to time, upon the exercise of the Option, be
entitled to receive the number of shares of the Corporation it would have held
following
<PAGE>
Page 4
such change in the capital of the Corporation if the Agent had purchased the
shares and had held such shares immediately prior to such change in the capital
of the Corporation.
9. MERGER, AMALGAMATION OR SALE
----------------------------
If, during the term of the Option, the Corporation shall become merged
or amalgamated in or with any other corporation or shall sell the whole or
substantially the whole of its assets and undertaking for shares or securities
of another corporation, the Corporation will make provision that, upon the
exercise of the Option during its unexpired period after the effective date of
such merger, amalgamation or sale, the Agent shall receive such number of shares
of the continuing or successor corporation in such merger or amalgamation or of
the securities or shares of the purchasing corporation as it would have received
as a result of such merger, amalgamation or sale if the Agent had purchased
shares of the Corporation immediately prior thereto for the same consideration
paid on the exercise of this option and had held such shares on the effective
date of such merger, amalgamation or sale. Upon such provision being made, the
obligation of the Corporation to the Agent in respect of its shares then
remaining subject to this option shall terminate and be at an end.
10. RESERVATION OF SHARES
---------------------
The Corporation shall at all times, during the term of this Agreement,
reserve and keep available a sufficient number of unissued common shares to
satisfy the requirements hereof.
11. ENTIRE AGREEMENT
----------------
This Agreement supersedes all other agreements, documents, writings
and verbal understandings among the parties relating to the subject matter
hereof and represents the entire agreement between the parties relating to the
subject matter hereof.
<PAGE>
Page 5
12. ENUREMENT
---------
Except as otherwise: set forth herein, this Agreement shall be binding
upon and enure to the benefit of the respective successors and assigns of the
Agent and of the Corporation.
13. TIME
----
Time shall be of the essence of this Agreement.
<PAGE>
Page 6
IN WITNESS WHEREOF the parties hereto have hereunto executed and
delivered this Agreement as of the day and year first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per:
_________________________________
Per:
_________________________________
YORKTON SECURITIES INC.
Per:
_________________________________
Per:
_________________________________
<PAGE>
EXHIBIT 10.2
Telecom TELECOM LEASING CANADA (TLC)LIMITED
Leasing SUITE 700 - 5945 KATHLEEN AVENUE
Canada BURNABY, B.C V5H4L5
PHONE (604) 439-5800 FAX (604) 439 5802
October 3, 1995
Kwikstar Communications Ltd.
and Digital Courier International Inc.
# 106-1008 Beach Avenue
Vancouver, B.C.
V6E 1T7
Dear Sirs:
COMMITMENT TO LEASE
-------------------
We are pleased to confirm that we are prepared to acquire for the purpose of
leasing to you the assets (the "Equipment") hereinafter described on the terms
and conditions hereinafter set forth.
1. Condition Precedent
-------------------
This lease credit facility is subject to the sum of $6 million being paid
to Digital Courier International Inc. ("DCI") for subscription of shares of
DCI, and 6 million shares of DCI having been issued to 945 Investments
Limited and one or more other investors pursuant to executed Subscription
Agreements, all in accordance with Section 8 of the Letter of Intent of
September 15, 1995, to MPR Teltech (the "Letter of Intent") a copy of which
is attached as Schedule C to the proposed Leasing Agreement.
2. Equipment
---------
Computer terminals and hubs forming a communications network for the North
American radio broadcast industry.
3. Net Equipment Cost
------------------
The net cost of acquisition of the Equipment (the "Net Equipment Cost") to
us shall not exceed the sum of $10,000,000, subject to the net amount
outstanding at any one time under all leases between us and you not
exceeding $7,000,000.
<PAGE>
4. Payment of Net Equipment Cost
------------------------------
The Equipment shall be purchased by us as required by you and approved by
us, provided you are not in default, prior to December 31, 1998.
5. Leasing Schedule
----------------
The leasing of Equipment purchased in each calendar month shall be
evidenced by the execution of a Leasing Schedule as required by the
proposed Leasing Agreement.
6. Lease Term
----------
The Equipment shall be leased for a term of 36 months commencing on the
first day of the month following the month in which we make the partial
payment of Net Equipment Cost (the "Commencement Date of Term").
7. Interim Rental
--------------
Notwithstanding Section 8.2 of the proposed Leasing Agreement, an Interim
Rental shall be calculated for each partial payment of the Net Equipment
Cost paid out prior to each respective Commencement Date of Term by
prorating the Monthly Rental applicable to such partial payment for the
number of days from and including the day on which payment is made to but
excluding the respective Commencement Date of Term.
8. Monthly Rental
--------------
The Monthly Rental for each partial payment of Net Equipment Cost, plus
applicable taxes, shall be payable at the beginning of each month following
the month in which each such partial payment is made, and shall be a sum
equal to the Net Equipment Cost of same multiplied by a factor to be
derived from the lesser of (a) our cost of funds and profit margin, or (b)
a rate equal to the Royal Bank of Canada 3 Year All In Receiving Swap Rate
plus 5.0%, compounded monthly, on the date such partial payment is made.
The parties agree that at the date of this Commitment to Lease letter, the
said Swap Rate is 6.98% and the corresponding factor is 0.03310.
Notwithstanding the foregoing and subject to the said Swap Rate not
exceeding 7.25% on the date such partial payment is made, for partial
payments made prior to January 1, 1996, the Monthly Rental shall be a sum
equal to such partial payments multiplied by the factor 0.032663.
9. First Rental
------------
On the date of signing this Commitment to Lease letter, you shall pay us a
sum of $50,000 which shall be applied to the first Monthly Rentals due on
the partial payment next following disbursement of $8,000,000 of Net
Equipment Cost. If such amount is not disbursed during the term of this
present lease credit facility, you hereby agree to forfeit the said sum as
liquidated damages and not as a penalty.
<PAGE>
10. Purchase Option
---------------
Subject to all your obligations having been met with regard to each Leasing
Schedule, you shall have the option to purchase the Equipment subject to
such Leasing Schedule for 10% of Net Equipment Cost after 36 Monthly
Rentals shall have been paid, which represents the parties' estimate of
fair market value at that time.
11. Security
--------
As security for the payment of the Monthly Rentals as provided in this
Commitment to Lease letter, you shall assign to us all your accounts
receivable in such form of assignment acceptable to our legal counsel. We
recognize that normal commercial banking arrangements shall be required by
you at some future date, and we agree to consider a request for some form
of security sharing at that time. 'We agree to act reasonably. All costs
and expenses of any nature whatsoever incurred by us with respect to
considering and/or accommodating such request shall be for your account and
shall be paid by you promptly on demand.
12. Covenants
---------
You agree to comply with the covenants set forth in Schedule B to be
attached to the proposed Leasing Agreement.
13. Insurance
---------
You shall provide public liability and property damage insurance coverage
in respect of the Equipment with limits of not less than $3,000,000. You
shall also insure the Equipment to its full insurable value against all
insurable risks and perils consistent with reasonable practice for
equipment of such general classification. Such insurance shall take effect
on the date on which we assume responsibility for the Equipment or any part
thereof.
14. Documentation and Legal Fees
----------------------------
All documents, agreements or writings, including without restriction a
Leasing Agreement, shall contain such terms and conditions as we may
reasonably require to evidence the lease transaction and security therefor.
In the event you request changes in the terms and conditions of our
standard Leasing Agreement or any other documents needed to evidence this
transaction which require us to engage counsel to consider and/or negotiate
the details of such changes, then all legal fees, disbursements and taxes
thus incurred by us shall be for your sole account and shall be paid
promptly by you, including all legal fees, disbursements and taxes incurred
by us on and after October 12, 1995, and before this Commitment to Lease
letter is executed by the parties.
<PAGE>
All fees and costs of registration of any filings or financing statements
in any jurisdiction where the Equipment is or is to be located shall be for
your sole account and shall be paid forthwith by you upon receipt of an
invoice therefor from us.
15. Net Net Lease
-------------
The Equipment shall be leased by you from us on a net net basis. Any
costs, claims, demands or other liabilities of any nature whatsoever
connected with or arising out of the use, operation, possession or
ownership of the Equipment shall be for your account with the intent and to
the effect that we shall receive throughout the lease term the full amount
of the Aggregate Rental.
16. Joint and Several Liability
---------------------------
You acknowledge and agree that you shall be jointly and severally liable
for all the terms and conditions required to be observed or performed by
you under this Commitment to Lease letter, the said Leasing Agreement and
all Leasing Schedules relating to such Leasing Agreement.
17. General Conditions
------------------
You shall personally choose and select the Equipment and we shall not, in
any respect, be liable or responsible for the quality, adequacy or
suitability of the Equipment or for any warranty claims for the
maintenance, repair or satisfactory operation of the Equipment. We hereby
convey to you the warranty resulting from the sale entered into with the
supplier(s) or, if such warranty is not assignable, we shall hold the same
in trust for you.
We shall not become obligated to purchase the Equipment or any part thereof
until the Leasing Agreement and all other documents required shall have
been executed between the parties, and the Condition Precedent in Section 1
of this Commitment to Lease letter shall have been satisfied.
You may not assign, cede or otherwise dispose of your rights under this
Commitment to Lease letter and no amendments hereto shall be binding on
either party unless the same is agreed to in writing.
This present Commitment to Lease letter, even when accepted by you, shall
not constitute a lease of the Equipment but only an agreement on our part
to purchase and an agreement on your pan, provided you are not in default,
to lease the Equipment on the terms and conditions set forth herein and in
the above described Leasing Agreement, the lease of the Equipment to be
evidenced solely by the execution between us of Leasing Schedules
pertaining thereto as required by the Leasing Agreement.
The terms used in this present Commitment to Lease letter shall have the
respective meanings defined in the said Leasing Agreement.
<PAGE>
We have the right to terminate this lease credit facility at any time upon
30 days prior written notice. In the event of termination not caused by
any action or fault on your part, the First Rental shall be returned to you
if it has not been applied to Monthly Rentals pursuant to Section 9 of this
Commitment to Lease letter.
This present Commitment to Lease letter is open for acceptance by you until
November 15, 1995, or such later date as may be agreed by the parties.
If the foregoing is acceptable to you, please so indicate by signing the form of
acceptance below and returning this letter to us with your cheque for $50,000.
Thank you for this opportunity to be of assistance to you.
Yours truly,
/s/ J. R. Dinsdale
J.R. Dinsdale
President
ACCEPTANCE
We jointly and severally agree to lease the above described Equipment on the
above terms and conditions.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ L. C. Fowler
---------------------------------------
Name: L. C. Fowler
--------------------------------------
Title: President
-------------------------------------
Date: November 15, 1995
--------------------------------------
DIGITAL COURIER INTERNATIONAL INC.
Per: /s/ I. R. Bardsley
--------------------------------------
Name: Ian R. Bardsley
-------------------------------------
Title: Chairman
------------------------------------
Date: November 15, 1995
-------------------------------------
<PAGE>
MASTER LEASING AGREEMENT
This Leasing Agreement made as of the 8th day of November 1995 between:
between:
Telecom Leasing Canada (TLC) Limited (Lessor)
and:
Kwikstar Communications Ltd. (Lessee)
and
Digital Courier International Inc. (Lessee)
<PAGE>
INDEX
<TABLE>
<CAPTION>
Identifying Section Heading Page
Number
<C> <S> <C>
4 Acceptance............................... 2
27 Agency................................... 5
20 Alterations.............................. 4
40 Assignment and Sub-Letting............... 7
36 Authorized Representatives............... 7
43 Corporate Waiver......................... 7
58 Currency................................. 8
2 Definitions.............................. 1
37 Delivery at Termination.................. 7
21 Depreciation Class....................... 4
3 Direction to Purchase.................... 2
52 Effective Date........................... 8
33 Enforcement of Warranties................ 6
53 Entire Transaction....................... 8
13 Exclusion of Warranties.................. 3
1 Extent of Leasing Agreement.............. 1
41 Forbearance and Indulgence............... 7
56 Further Assurances....................... 8
32 Indemnification.......................... 6
15 Inspection............................... 3
16 Insurance................................ 4
59 Language................................. 8
19 Laws and Regulations..................... 4
5 Leasing Schedules........................ 2
25 Lessee's Events of Default............... 5
29 Lessee's Remedies........................ 6
28 Lessor's Option to Terminate............. 6
26 Lessor's Remedies on Default............. 5
12 Licence.................................. 3
18 Liens.................................... 4
44 Limitation of Civil Rights
- Saskatchewan........................... 7
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
46 Location Equipment....................... 8
22 Loss of Equipment........................ 5
14 Maintenance.............................. 3
42 Merger and Amalgamations................. 7
55 No Merger in Judgment.................... 8
39 Notices.................................. 7
48 Offset................................... 8
30 Option to Purchase....................... 6
35 Overdue Payment.......................... 6
10 Ownership................................ 3
34 Patent Infringement...................... 6
6 Payment of
Net Equipment Cost....................... 2
11 Personal Property........................ 3
57 Proper Law............................... 8
47 Records.................................. 8
49 Remedies Cumulative...................... 8
24 Remedies on Repudiation.................. 5
31 Remedying Defaults....................... 6
9 Rent Payment............................. 3
8 Rental................................... 2
23 Repudiation.............................. 5
51 Section Headings......................... 8
54 Severability............................. 8
45 Successors and Assigns................... 7
17 Taxes.................................... 4
7 Term..................................... 2
38 Terminal Disposition..................... 7
50 Time..................................... 8
</TABLE>
<PAGE>
Master Leasing Agreement
This Leasing Agreement made as of the 8th day of November 1995 between:
TELECOM LEASING CANADA (TLC) LIMITED, a Company incorporated under the laws of
Canada, having its Head Office in the city of Burnaby, in the province of
British Columbia, which mailing address is Suite 700 5945 Kathleen Avenue,
Bunaby, B.C V5H 4L5 (hereinafter called Lessor ")
and KWIKSTAR COMMUNICATIONS LTD., a Company incorporated under the Laws of
Alberts having its Registered Office in the city of Calgary, in the province of
Alberta, which mailing address is 1800- a00 5 Avenue SW, Calgary, Alberta 3T66
(hereinafter called "Lessee"")
and
DIGITAL COURIER INTERNATIONAL, INC., a Company incorporated under the laws of
Canada, having its Head, Office in, the city of Burnaby, which mailing address
is 8999 Nelson Way, Burnaby, B.C. V5A 4B5 (hereinafter called Lessee
Whereas
1. Lessor and Lessee have agreed that, from time to time, Lessee
shall have the right and option to request Lessor to purchase
equipment required for use in Lessee's operations; and
2. Forthwith upon the purchase of such equipment by Lessor, Lessee
shall lease the same from Lessor, the whole in accord with the
terms and conditions of this Leasing Agreement.
Now therefore this agreement witnesseth:
1. Extent of Leasing Agreement
1.1 This Leasing Agreement shall apply to any equipment which Lessor
shall agree to purchase and to lease to Lessee on the terms and conditions
hereinafter set forth, the whole subject to any limitations or conditions set
forth in commitment letters with respect to such equipment which may. from time
to time, be forwarded by Lessor to Lessee and be accepted by Lessee within the
delays set forth in such commitment letters.
1.2 The terms, conditions and limitations set forth in any such
commitment letters shall survive with respect to the equipment described
therein, the execution of this Leasing Agreement, any Leasing Schedule or other
agreements relating hereto and thereto.
2. Definitions
2.1 For the purpose of this Leasing Agreement and Leasing Schedules
hereto:
<PAGE>
(a) "Adverse Claim" shall mean any lien, privilege, charge,
attachment, seizure, sequestration, distress, levy or encumbrance
of any nature or kind whatsoever .
(b) "Aggregate Rental" shall mean with respect to the Equipment
described in the relevant Leasing Schedule, the total rental
required to be paid by lessee to Lessor for the entire duration
of the term thereof pertaining thereto.
(c) "Bond" shall mean a guarantee, suretyship, bond or other
indemnification satisfactory to Lessor, provided by a Person
acceptable to Lessor, in such form, for such amount and on such
terms and conditions as Lessor may at any time or from time to
time reasonably require for purposes of this Leasing
Agreement, any Leasing Schedule or other agreements relating
hereto or thereto.
(d) "Cost of Disposition": with respect to the sale, leasing or other
disposition of the Equipment by Lessor pursuant to the powers
conferred on Lessor hereunder, shall mean all costs,
disbursements, commissions and other expenses, which Lessor may
incur, pay or be or become liable for, in the course of or in
connection with, recovering possession of, dismantling,
removing, transporting, repairing, reconditioning, selling,
leasing, otherwise disposing of, delivering, reassembling, or
reinstalling the Equipment.
(e) "Date of Loss" shall mean the actual date of Loss of Equipment.
(f) "Depreciation Class" shall mean that Class established by
Regulations presently or hereafter enacted pursuant to the
Federal and Provincial (where applicable) Income Tax Act(s),
stated in Item 7 of each Leasing Schedule permitting Lessor to
claim Capital Cost Allowance in respect of the Equipment for
income tax purposes at the rate stated in item 7 of each Leasing
Schedule either on the reducing balance or the straight line
basis, as the case may be, stated in item 7 of the relevant
Leasing Schedule.
(g) "Equipment" shall mean the Equipment which Lessor shall purchase
and lease to Lessee pursuant to the terms and conditions of this
Lease and when or where required in the context or circumstances,
individual items thereof.
(h) "Lease" shall mean this Leasing Agreement and any Leasing
Schedule.
(i) "Leasing Schedule" shall mean a document to be completed by
Lessor and executed by Lessee in, or substantially in, the form
set forth in Schedule "A" hereto annexed and initialled by the
parties hereto for identification.
(j) "Loss of Equipment" shall mean:
<PAGE>
(i) a total loss, or constructive total loss in the opinion of
Lessor, of the Equipment through damage, destruction or
otherwise, or
(ii) the absolute and unconditional expropriation or
confiscation of the Equipment by any government or other
authority, "de facto" or "de jure," or
(iii) any other compulsory taking or use of the Equipment by any
government or other authority, "de facto" or "de jure," for
continuous and uninterrupted period of the lesser of 180
days or such other period of time as Lessor and Lessee may
mutually agree upon in writing.
(k) "Net Equipment Cost" shall mean the total of all amounts required
to be expended or other liabilities to be incurred by Lessor in
order to make the Equipment in all respects ready for use by
Lessee at the location and for the purpose intended by Lessee.
including, without limitation, the Supplier's invoiced price, all
sales, excise, customs and other taxes or levies required to be
paid and cost of transportation, installation, assembly and
related expenses.
(l) "Obligation" shall mean an, obligation to pay when due any money
which may at any time or from time to time hereafter be or become
owing by Lessee to Lessor and the obligation to perform duly and
faithfully, according to their terms, any and all covenants,
agreements, undertakings and promises on the part of Lessee in
favour of Lessor, whether such covenants, agreements,
undertakings and promises, or any of them, now exist or are
hereby hereafter brought into existence.
(m) "Overdue Payment" shall mean and include any monthly instalment
of rental, any other sum, moneys or payment due and owing by
Lessee hereunder and any and all sums disbursed by Lessor
pursuant to the Section of this Lease entitled "Remedying
Defaults" which are not paid as and when required hereunder or
any combination thereof.
(n) "Person" shall mean a natural person. a corporation, firm
partnership.
(o) "Proceeds of Loss" shall mean the proceeds of insurance or any
indemnity, award or other moneys payable in respect of the Loss
of Equipment.
(p) "Purchase Price" shall mean with respect to:
(i) the option to purchase dates stated in Item 4 of the
relevant Leasing Schedule, the corresponding sum stated
therein; and
(ii) the option to purchase the Equipment exercisable by Lessee
on, but not before or after, the expiry date of the term
thereof pertaining thereto or any renewal thereof, the
market value of the Equipment, for the time being, as
mutually agreed upon between Lessor and
<PAGE>
Lessee, or, in the absence of such agreement, as determined
by a qualified professional appraiser mutually selected by
Lessor and Lessee or as selected by Lessor in the event the
parties cannot agree on an appraiser.
(q) "Relevant Period" shall mean the then current twelve month period
shown in Item 5 of the respective Leasing Schedule, reckoning
from the commencement date of the term shown therein.
(r) "Settlement Date"shall mean a date falling within 180 days of the
Date of Loss on which Lessee shall pay to Lessor the Settlement
Value of the Equipment.
(s) "Settlement Value" shall mean, if the Settlement Date is the
first day of a Relevant Period, a sum determined by multiplying
the corresponding percentage rate for such Relevant Period as set
forth in Item 5 of the Leasing Schedule by the Net Equipment Cost
of the Equipment lost, and if the Settlement Date is other than
the first day of the Relevant Period, the Settlement Value
determined as aforesaid, prorated as follows:
(i) by determining the difference between the Settlement Value
determined as aforesaid and the Settlement Value similarly
determined for the first day of the next following Relevant
Period, and
(ii) by deducting from the Settlement Value determined as
aforesaid the percentage of such difference which the
portion of such Relevant Period expired to the Settlement
Date bears to the full Relevant Period.
(t) "Supplier" shall mean any manufacturer, supplier, vendor of, or
dealer in, the Equipment or any other Person from whom Lessor
shall purchase or otherwise acquire the Equipment.
(u) "Warranties" shall mean all conditions, warranties, guarantees,
representations, service contracts, contracts to stuck spare
parts or other agreements of any nature whatsoever, oral or
written, express or implied, legal, statutory, conventional
collateral or other, in respect of, or which shall in any manner
apply to, any Equipment.
2.2 "This Lease", "hereto", "herein", "hereof', "hereby",
"hereunder", and similar expressions refer to this Lease and not to any
particular section, paragraph, sub-paragraph or other portion thereof. All of
the provisions of this Lease are to be construed as covenants as though the
words importing such covenants were used in each separate clause, paragraph or
sub-paragraph hereof.
<PAGE>
2.3 Any terms herein defined in the singular number shall have a
corresponding meaning when used in the plural.
2.4 Any act or deed required to be observed, performed or done
hereunder falling on a Saturday, Sunday or other statutory holiday shall be
observed, performed or doric on the business day next following but any delay
here, by granted shall not extend to relieve either party from the due
performance and fulfilment of its obligations hereunder.
3. Direction to Purchase
3.1 Upon receipt from Lessor of a commitment letter, Lessee may, at
its option, accept the same within the delay therein provided and return the
accepted duplicate copy thereof to Lessor.
3.2 Lessee may then direct Lessor to purchase the Equipment by notice
to Lessor specifying the Supplier, stating the purchase price of, and describing
the Equipment and giving such further information as may be required.
3.3 Upon receipt by Lessor of the accepted commitment letter and of
such notice, and providing Lessee is not then in default under any Obligation,
Lessor shall immediately order from the Supplier specified in such notice, the
Equipment described therein.
4. Acceptance
4.1 Upon delivery by the Supplier to lessee of the Equipment, Lessee
shall accept the Equipment, which acceptance will not be unreasonably withheld
or delayed.
5. Leasing Schedules
5.1 Upon receipt from the Supplier of an invoice for the Equipment so
ordered and delivered, Lessor shall prepare and deliver to Lessee, in
duplicate, a Leasing Schedule, duly signed by an authorized representative of
Lessor.
5.2 Lessee shall promptly sign such Leasing Schedule by an authorized
representative and return one signed duplicate thereof to Lessor.
5.3 The return of the signed Leasing Schedule by Lessee to Lessor
shall, as between Lessor and Lessee, constitute acceptance and conclusive proof
that Lessee has inspected and acknowledged that the Equipment is in good
condition and repair, and shall preclude Lessee from asserting thereafter
against Lessor any claim, demand or action based upon the selection of the
Equipment or its condition, durability or suitability for any particular use
intended by Lessee.
5.4 Each Leasing Schedule shall constitute a separate lease of the
Equipment described therein from Lessor to Lessee on the terms and conditions
provided herein and in such
<PAGE>
Leasing Schedule. In the event of a conflict between the terms hereof and of a
Leasing Schedule, the terms of the Leasing Schedule shall govern.
6. Payment of Net Equipment Cost
6.1 Lessor shall pay the Net Equipment Cost of the Equipment on or
before the due date for such payment.
7. Term
7.1 Forthwith upon delivery to Lessee, the Equipment shall be subject
to all the terms and conditions of this Lease and shall be leased by Lessee from
Lessor for a term of the duration stated in the relevant Leasing Schedule
commencing upon the commencement date of the term and terminating upon the
termination date of the term stated in such Leasing Schedule.
8. Rental
8.1 The Aggregate Rental to be paid with respect to the Equipment
shall be set forth in the relevant Leasing Schedule. The Aggregate Rental shall
be payable in advance in consecutive instalments each in the amount set forth in
the Leasing Schedule, commencing on the commencement date of the term set forth
in such Leasing Schedule and thereafter on the first day of each month.during
the term hereof pertaining thereto.
8.2 If payment by Lessor of the Net Equipment Cost of the Equipment
occurs on the first day of any month, the first monthly instalment of rental
shall fall due and be paid on the day of such payment. If payment of the Net
Equipment Cost occurs on any day other than the first day of any month, the
first monthly instalment of rental shall fall due and be paid on the first day
of the next succeeding month and on that date, in addition to the first monthly
instalment of rental, Lessee shall pay an interim rental with respect to the
portion of the relevant month commencing on the date of payment of the Net
Equipment Cost and ending on the last day of such month, determined by
multiplying the Net Equipment Cost of the Equipment by the interim rental factor
stated in the relevant Leasing Schedule and by multiplying the result thereof by
the number of days from and including the date of such payment to but excluding
the first day of the month next following.
8.3 Lessor shall notify Lessee of the date of payment of the Net
Equipment Cost for the Equipment and submit to Lessee such other information
concerning the purchase of the Equipment as may be reasonably requested by
Lessee and shall submit copies of all invoices received by Lessor from any
Supplier of the Equipment.
<PAGE>
9. Rent Payment
9.1 The monthly rental instalments shall be paid at the office
of Lessor at the address set out on page 1 of this Leasing Agreement, or at such
other place in Canada as Lessor may from time to time designate by notice.
10. Ownership
10.1 Title to, ownership of, and property in, the Equipment shall at
all times be and remain solely and exclusively in Lessor subject only to the
rights of Lessee to use the same pursuant to the terms, conditions and
provisions of this Lease, and to purchase the same in pursuance of any option
granted in any relevant Leasing Schedule or agreement relevant thereto.
11. Personal Property
11.1 During the term of any Leasing Schedule, the Equipment leased
thereby shall be and remain moveable, personal or chattel property.
Notwithstanding any purpose for which the Equipment may be used or that it may
become in any manner affixed or attached to or imbedded in or permanently rested
upon land or any structure thereon, it shall remain subject to the rights of
Lessor hereunder as fully as it was before being or becoming so used, affixed,
imbedded or rested.
11.2 Lessee agrees to obtain a waiver, if required by and in a form
satisfactory to Lessor, from any landlord, mortgagee, hypothecary creditor or
other encumbrancer of Lessee's premises where the Equipment is situated. If,
notwithstanding the intention of the parties and the provisions of this Section,
any person acquires or claims to have acquired any rights in any Equipment
paramount to the rights of Lessor by reason of such Equipment being affixed to
real property, and such person seeks to interfere with the continued quiet
enjoyment of the Equipment by Lessee as contemplated by this Lease, Lessee shall
promptly notify Lessor in writing of such fact and shall seek diligently to
remove the basis for any such interference. Unless the basis for such
interference is waived or removed to the satisfaction of Lessor within 30 days
from the date it is asserted, Lessee, upon written request from Lessor, shall
within 30 days after such request pay to Lessor an amount equal to the
Settlement Value of the Equipment. Upon such payment the Lease of such Equipment
shall terminate and all of Lessor's title to and rights in such Equipment (if
any) shall become the property of Lessee.
11.3 Lessee shall be liable for any damage done or caused to any real
estate, building or structure by the removal of the Equipment.
12. License
12.1 In respect of any Equipment which is, or at any time or from time
to time may be, located on, or in, lands and premises owned by Lessee and which
Equipment is, or is deemed to be, a fixture or fixtures, Lessee:
(a) agrees that Lessor may at any time and from time to time, upon
<PAGE>
becoming entitled to possession of the Equipment under lease, enter upon the
said lands and premises with all such forces as may be reasonably required, and
dismantle, detach and remove such Equipment; and
(b) agrees that Lessor. shall not be liable for any damage done to the
said lands or premises by, or in the course of, such dismantling, detaching or
removing, save only such damage as may be caused by the gross negligence or
wilful act of Lessor or its agents or servants; and
(c) hereby grants to Lessor a license, irrevocable during the term of
the relevant Leasing Schedule and for such length of time thereafter as may be
reasonably required to effect such dismantling, detaching and removing, to enter
upon the said lands and premises in the manner and for the purposes aforesaid;
and
(d) agrees that Lessor may, at its election, register, by way of
caveat or otherwise, against the said lands and premises to give notice of its
right of access for the purposes aforesaid.
12.2 Lessee agrees that any sale, conveyance, lease, mortgage, charge,
hypothecation, transfer, assignment or other disposition or alienation of
Lessee's interest in the lands and premises referred to in Paragraph 12.1 of
this Section shall be made expressly subject to the terms, conditions and
provisions of this Section 12 and that Lessee will cause the Person to which
such sale, conveyance, lease, mortgage, charge,hypothecation, transfer,
assignment or other disposition or alienation as aforesaid may be made, to agree
to and be bound by the terms conditions and provisions of this Section 12 to the
same extent effect as if such Person were Lessee.
12.3 If the lands and premises referred to in Paragraph 12.1 of this
Section 12 are subject co any right or interest of any nature whatsoever in
favour of any Person, other than Lessee, Lessee shall, upon notice from Lessor,
procure from every such Person by a writing in form and content satisfactory to
Lessor:
(a) a waiver and renunciation in favour of Lessor of any lien,
charge, encumbrance, privilege, hypothec, or right of
distress, seizure or attachment, which any such Person may
at any time or from time to time have, upon or in respect of
the Equipment referred to in Paragraph 12.1 of this Section
12; and
(b) an agreement by which such Person grants to, and confers
upon, Lessor the same rights, privileges, benefits and
license as are intended to be granted to, and conferred
upon, Lessor by Lessee under Paragraph 12.1 of this Section
12.
13. Exclusion of Warranties
13.1 Lessee acknowledges that the Equipment will be personally chosen
and
<PAGE>
selected by Lessee and that it will be of a make, size, design and capacity
desired by Lessee for the purposes intended by Lessee.
13.2 Lessor does not make or give any representations or warranties,
express or implied, as to the Equipment, its condition, durability or
suitability for any particular use intended by Lessee and Lessee hereby confirms
that Lessor has not given any such representations or warranties.
13.3 Lessor shall not be liable to Lessee for any loss, cost, damage
or expense of any kind or nature caused, directly or indirectly, by the
Equipment or the use or maintenance thereof, or by any interruption of service
or loss of use thereof, or for any loss of business or damage whatsoever and
howsoever caused.
14. Maintenance
14.1 Lessee shall, at its sole expense:
(a) maintain the Equipment in good operating condition and
repair (ordinary wear and tear excepted); and
(b) comply in all respects with all recommendations, or
requirements of the Supplier regarding the Equipment or any
part or component thereof or accessory thereto, as may be
necessary to preserve all Warranties by such Supplier; and
(c) repair and replace any damage to the Equipment caused by the
operation or use thereof by Lessee, its officers, employees
and servants or by others; and
(d) replace any components, including power plants, as may
become necessary or, in the reasonable opinion of Lessee,
desirable for the proper use and operation of the Equipment.
14.2 All replacement parts which may, in the course of maintaining the
Equipment in good operating condition and repair, at any time and from time to
time, during the term of each Lease, be made to, or placed in or upon, the
Equipment thereby leased, shall be free and clear of all Adverse Claims.
14.3 All replacement parts, of whatever kind or nature, made to, or
placed in or upon the Equipment, shall belong to, and become the property of,
Lessor and shall be subject to all the terms and conditions of this Lease.
15. Inspection
15.1 The representatives of Lessor shall have the right to inspect the
Equipment at any reasonable time upon reasonable notice to Lessee, and Lessee
shall afford all reasonable
<PAGE>
facilities required by such representatives for the purpose of such inspection.
15.2 Any misuse, fault of erection or installation, want of
maintenance or repair of the Equipment which shall be disclosed by such
inspection shall, forthwith upon notice from Lessor, be discontinued, made good,
serviced or repaired, as the case may be.
16. Insurance
16.1 As and from the earlier of the date upon which Lessor acquires
ownership of, or title to, the Equipment or the date oft which Lessor assumes
risk, responsibility and liability therefor, and thereafter throughout the term
of each Lease, Lessee shall, at its sole expense:
(a) place and maintain physical damage insurance on the
Equipment, in amounts satisfactory to Lessor, consistent
with Lessee's normal and usual practice for insuring
equipment of the same general classification. Said physical
damage insurance shall specifically state by its wording or
by endorsement that it:
(i) includes Lessor (as owner) as a named insured,
(ii) includes a Loss Payable Clause in favour of Lessor,
and
(iii) includes a Waiver of Subrogation Clause in favour of
LesSor;
(b) place and maintain general liability insurance, or
automobile liability insurance in the case of leased
licensed motor vehicles, with limits of liability
satisfactory to Lessor for injury to or death of any one or
more persons or damage to properties. Said general liability
insurance shall specifically state by its wording or by
endorsement that it:
(i) extends to cover the liabilities assumed by Lessee
under this Lease arising out of the use or possession
of the Equipment,
(ii) includes Lessor as a named insured, and
(iii) includes a cross liability provision that the policy
shall insure each person, firm or corporation insured
thereunder in the same manner and to the same extent
as if a separate policy had been issued to each, but
the inclusion therein of more than one insured shall
not operate to increase the limits of the insurers'
liability.
Said automobile liability insurance shall:
(i) include Lessor (as owner) as named insured, and
(ii) include a "Permission to Rent or Lease Endorsement"
in favour of the Lessee.
16.2 All policies of insurance shall cover and protect Lessor and
Lessee as their
<PAGE>
respective interests may appear and shall contain such endorsements as may, from
time to time, be reasonably required by Lessor and without in any way limiting
the generality of the foregoing shall contain endorsements providing that:
(a) thirty (30) days prior written notice shall be given the
Lessor in the event the policy is materially altered or
cancelled,
(b) the insurance provided shall be primary and shall not be
contributory with any other insurance carried by Lessor,
(c) Lessor's interest as a named insured under such policies
shall not be invalidated or otherwise adversely affected by
any act or omission, negligent or otherwise, of Lessee or
its agents, servants or employees, and
(d) Lessor shall not be responsible for payment of any premiums
or insurance coverage required to be placed and maintains by
Lessee by the terms of this Section 16.
16.3 Lessee shall supply Lessor with certified copies of insurance
policies or other evidence satisfactory to Lessor evidencing the foregoing
coverage so long as any Lease remains in force and effect.
16.4 Lessee shall, at its own expense, have the complete duty and
responsibility to make all proofs of loss and take all other steps necessary to
effect recovery from insurers under any insurance carried pursuant to the
provisions of this Section 16. If Lessee shall fail to or refuse to make all
proofs of loss and take all steps necessary to effect recovery from insurers
Lessor shall be entitled, at the cost of Lessee, to make such proofs and to take
all other steps necessary to effect such recovery. If Lessee makes proofs of
loss and takes all other steps necessary to effect such recovery, Lessor shall
sign all papers and take all other actions reasonably requested by Lessee in
order to effect such recovery, including abandonment of the Equipment to
insurers.
16.5 In the event of the occurrence of damage to the Equipment not
amounting to Loss of Equipment and in the event that Lessee shall elect by
notice to Lessor to repair the Equipment so damaged and provided Lessee is not
in default under any Obligation, the proceeds of any insurance coverage shall be
held by Lessor and disbursed to Lessee when the Equipment is repaired, provided
Lessee shall not then be in default in the due performance and observance of and
has committed no act in breach of any Obligation hereunder.
16.6 Effecting or obtaining insurance pursuant to this Section 16
shall' not excuse or relieve Lessee from the due observance and fulfilment of
any of its Obligations hereunder or under any Lease.
17. Taxes
17.1 Lessee shall duly and punctually pay all sales taxes, license
fees, business
<PAGE>
taxes, levies and assessments of every nature and kind whatsoever which be or
become payable at any time or from time to time upon, or in respect of, the
Equipment, this Lease, Leasing Schedules, monthly rental instalments, or any
other payments made hereunder, save only income taxes payable by Lessor.
18. Liens
18.1 Lessee shall keep the Equipment free and clear of any and all
Adverse Claims subject to the right of Lessee to contest with all due dispatch
any such Adverse Claims upon providing, at the option of Lessor, a Bond or other
satisfactory indemnification in respect of any loss, cost or damage which might
be sustained or incurred by Lessor or for which Lessor might be or become liable
for as a result of, or by reason of, any such Adverse Claim or the contestation
thereof by Lessee.
19. Laws and Regulations
19.1 Lessee shall, at its sole expense, comply with all laws and
regulations made by competent authority relating to the use, operation or
possession of the Equipment or the ownership thereof by Lessor.
20. Alterations
20.1 Lessee may make any alterations, additions or improvements to
the Equipment, provided that:
(a) such alterations, additions or improvements shall not
materially decrease the value of the Equipment nor interfere
with, or frustrate the intended use of, the Equipment; and
(b) all such alterations, additions or improvements shall, at
all times, be free and clear of all Adverse Claims; and
(c) the making of any such alterations, additions or
improvements shall not subject the Equipment to any Adverse
Claim.
20.2 All such alterations, additions or improvements of whatever kind
or nature made by Lessee to the Equipment shall be at Lessee's expense and shall
belong to and become the property of Lessor and be subject to all the terms,
conditions and provisions of the Lease thereof.
20.3 Lessee, at its expense, will transfer to Lessor title to and
ownership of any such alteration, addition or improvement free and clear of all
Adverse Claims and will do and perform all such acts, matters and things as
Lessor may reasonably require to vest such title and ownership in Lessor.
20.4 Upon the expiration, by effluxion of time and not otherwise, of
the term of each Lease, provided Lessee is not then in default in the due
observance and performance of, and has committed no act in breach of, any
Obligation, Lessee may, at its expense, remove any such
<PAGE>
alterations, additions or improvements which it has made to the Equipment
thereby leased, provided that any such removal may be made by Lessee without
damage to such Equipment and upon any such removal Lessee shall, at its expense,
restore the Equipment to its original state and condition, reasonable wear and
tear excepted.
20.5 At the written request of Lessee, Lessor will transfer and convey
to Lessee title to, and ownership of, any alterations, additions or improvements
which have been removed by Lessee pursuant to the provisions of the preceding
Paragraph 20.4 of this Section.
21. Depreciation Class
21.1 Lessee represents, warrants and covenants with respect to each
Lease that:
(a) on the commencement date of the term of such Lease, the
Equipment described therein is included in the Depreciation
Class; and
(b) it shall not, by an act of commission or omission, effect
any change in the nature or the intended use and purpose of
the Equipment which could or would directly result in the
Equipment being included in any other Depreciation Class or
to be depreciable on the reducing balance or the straight
line balance, as the case may be, of capital cost at a rate
less than that stated in item 7 of each Leasing Schedule.
22. Loss of Equipment
22.1 On the occurrence of Loss of Equipment, Lessee shall:
(a) within ninety (90) days of the Date of Loss, give Lessor
written notice of the Settlement Date;
(b) on the Settlement Date, pay to Lessor the Settlement Value
of the Equipment in exchange for a Bill of Sale from Lessor
to Lessee selling and conveying, subject to the rights of
any underwriters or other persons therein, all its right,
title, and interest in and to the Equipment and any claim
for Proceeds of Loss thereof; whereupon the Lease shall
terminate with respect to such Equipment, and no further
rental shall be payable thereafter with respect to such
Equipment.
22.2 The Bill of Sale from Lessor to Lessee shall contain no
warranties on the part of Lessor except that Lessor shall warrant that it has
not done any act or created any security interest in the Equipment which would
adversely affect its title thereto.
22.3 All Federal and Provincial sales or transfer taxes, license fees
and similar
<PAGE>
assessments connected with the transfer of title to and of ownership of the
Equipment to Lessee shall be paid by Lessee.
23. Repudiation
23.1 If:
(a) any Overdue Payment amounting to a sum exceeding two (2)
monthly instalments of rent hereunder, any part of which has
been due and unpaid for two (2) months or more, and remains
owing and unpaid for one (1) month after notice by Lessor to
Lessee requiring payment thereof; or
(b) Lessee parts with possession of the Equipment; or
(c) Lessee creates or permits to arise any Adverse Claim
contrary to the provisions hereof and which Adverse Claim
Lessee is unable to discharge pursuant to the provisions
hereof;
then and in any such case it shall be conclusively presumed and
deemed that Lessee has repudiated this Leasing Agreement.
24. Remedies on Repudiation
24.1 If Lessee repudiates, or is, by reason of the provisions
hereof.or otherwise, presumed or deemed to have repudiated this Lease, Lessor
shall be entitled:
(a) to take possession of the Equipment hereby or thereby leased
without demand or notice, wherever the same may be located,
without any court order or-other process of law, Lessee
hereby waiving any and all damages occasioned by such taking
of possession, and sell, lease or otherwise dispose of such
Equipment for such consideration and upon such terms and
conditions as Lessor may reasonably deem fit; and
(b) by notice to Lessee to declare liquidated damages to be
payable, which liquidated damages shall be calculated as
follows, namely:
(i) by calculating the entire amount of the then unpaid
monthly instalments of rental for the remainder of the
term of each Lease, each such monthly instalment of
rental to be subject to a discount equal to interest at
the rate of five percent (5%) per annum on each monthly
instalment of rental calculated and compounded monthly
over the period commencing on the earlier of the date
of the aforesaid notice or the date of taking
possession of the Equipment and ending on the date on
which such monthly instalments of rental would have
become due and payable under the terms of each Lease;
and
<PAGE>
(ii) by adding to the sum calculated according to Sub-
paragraph (i), any Overdue Payment; and
(iii) by deducting from the sum calculated according to Sub
paragraph (it) the net proceeds of the sale, leasing
or other disposition of the Equipment after deduction
of Costs of Disposition:
and shall be conclusively deemed to be a genuine pre-
estimate by the parties hereto of the damage suffered by
Lessor in the circumstances, and not a penalty; and
(c) to proceed forthwith to the recovery of the said liquidated
damages together with interest thereon at the rate of
eighteen percent (18%) per annum calculated and compounded
monthly, computed from
the date of notice referred to in Paragraph 24.1 (b) hereof
until paid, and together with all other moneys payable by
Lessee hereunder.
25. Lessee's Events of Default
25.1 The following shall, for the purpose of this Lease, be events of
default by Lessee:
(a) if Lessee defaults in any Obligation of it hereunder, and if
any such default shall continue for thirty (30) days after
Lessor shall have given written notice thereof to Lessee; or
(b) if Lessee shall make any assignment for the general benefit
of creditors or be adjudged bankrupt within the meaning of
the Bankruptcy Act of Canada or any amending. or replacing
legislation; or
(c) if Lessee ceases or threatens to cede to carry on business
or makes or proposes to make any sale of the whole or a
substantial portion of its assets in bulk, or out of the
usual course of its business; or
(d) if any proposal is made or petition filed by Lessee under
any law having for its purpose the extension of time for
payment, composition or compromise of the liabilities of
Lessee; or
(e) if any resolution is passed for, or judgement or order given
by any court of competent jurisdiction ordering, the
winding-up or other liquidation of Lessee; or
(f) if a petition or other application is made for a receiving
order, or for the winding-up, of Lessee unless and for so
long as Lessee shall be contesting such petition or other
application in good faith; or
(g) if any execution, sequestration or any other similar process
of any court of competent jurisdiction becomes and remains
enforceable against, or if a distress or analogous process
is levied upon, the
<PAGE>
property of Lessee or on any part thereof, save for any such
process which is contested by Lessee in good faith and
Lessee provides, at the option of Lessor, a Bond or other
satisfactory indemnification in respect of any loss, cost or
damage, which may be sustained by Lessor by reason of such
execution, sequestration or other similar process or the
contestation thereof by Lessee; or
(h) if Lessee defaults under any other agreement it may then
have with Lessor; or
(i) if any receiver, administrator or manager of the
property, assets or undertaking of Lessee is appointed
pursuant to the terms of any Trust Deed, Trust Indenture,
Debenture or similar instrument or by or under any judgment
or order of any court, or
(j) if the Equipment is seized under legal process, confiscated,
sequestrated or attached or if distress is levied
thereon; or
(k) if any insurance placed or maintained pursuant to the
terms of any Lease shall lapse or be cancelled and shall not
have been replaced by another policy or policies
satisfactory to Lessor.
26. Lessor's Remedies on Default
26.1 Upon the happening of an event of default under the Section
hereof entitled "Lessee's Events of Default", Lessor shall be entitled to take
possession of the Equipment without demand or notice, wherever the same may be
located, without any court order or other process of law, Lessee hereby waiving
any and all damages occasioned by such taking of possession, and sell, lease or
otherwise dispose of the Equipment for such consideration and upon such terms
and conditions as Lessor may reasonably deem fit, the whole without prejudice to
Lessor's other rights and recourses at law or in equity.
27. Agency
27.1 If Lessee repudiates, or is, by reason of the provisions hereof
or otherwise, presumed or deemed to have repudiated any Lease, or upon the
happening of any event of default under the Section hereof entitled "Lessee's
Events of Default" Lessor may, at its option, in the name of and as the
irrevocably appointed agent and attorney for Lessee, without terminating or
being deemed to have terminated any such Lease, take possession of the
Equipment, proceed to lease the Equipment to any other person on such terms and
conditions, for such rental and for such as Lessor may reasonably deem fit, and
to receive such rental and hold the same and apply the same against the
instalments of rent or any Overdue Payment from time to time payable by Lessee
hereunder.
<PAGE>
28. Lessor's Option to Terminate
28.1 Lessee agrees that neither this Leasing Agreement nor any Leasing
Schedule, nor any interest therein or in any Equipment, shall be assignable or
transferable by operation of law and it is agreed and covenanted by and between
the parties hereto that if any event of default as defined in Section 25 hereof
shall occur or happen, then and in any such event this Leasing Agreement and any
and all Leasing Schedules shall, at the option of the Lessor to be exercised by
notice hereunder, immediately end and terminate and no such Leasing Agreement
and Leasing Schedule or any interest therein shall be an asset of Lessee after
the exercise of the said option; provided that no such termination shall
terminate or affect any right or remedy which shall have arisen under any Lease
prior to such termination.
29. Lessee's Remedies
29.1 If any of the following events of default shall occur or happen
namely:
(a) if Lessor shall fail to observe and perform its obligations
under any Lease; or
(b) if Lessor shall commit any act in breach of any Lease, then
provided that such event of default shall not have been
remedied within thirty (30) days after notice thereof to
Lessor and if Lessee is, by reason of the occurrence or
happening of such event of default, denied peaceable and
quiet enjoyment of the Equipment and the benefits of any
Lease, Lessee may exercise the following remedy:
(i) terminate the Lease with respect to which such event of
default has occurred or happened and is continuing; and
(ii) prior to termination, purchase the Equipment leased to
Lessee under such Lease, for a purchase price' equal to
the Settlement Value, for the time being, thereof.
29.2 Upon any purchase by Lessee pursuant to the provision of this
Section, Lessee shall accept the Equipment in whatever condition or location it
may be on the date of purchase and agrees that any expenses of delivery and
removal of the Equipment shall be borne and paid by Lessee. The sale by Lessor
shall be without any Warranties on the part of Lessor, affecting or relating to
the Equipment, Lessor's title thereto, or to the sale thereof, all Warranties
being expressly excluded.
30. Option to Purchase
30.1 Provided Lessee shall not be in default under any Obligation,
Lessor hereby grants to Lessee an option to purchase whatever title Lessor may
have to the Equipment for the Purchase Price and at the time or times set forth
in Item 4 of the relevant Leasing Schedule.
30.2 Such option to purchase may be exercised by Lessee by giving to
Lessor
<PAGE>
notice of Lessee's intention to exercise such option, at least thirty (30)'days
prior to the date of intended purchase, describing the Equipment with respect to
which such option is being exercised.
30.3 The intended purchase and sale shall be concluded on a date
specified in the said notice falling on or after, but not before, the option to
purchase date stated in Item 4 of the relevant Leasing Schedule .but in any
event not later than the expiry date of the Lease term pertaining to the
Equipment being purchased.
30.4 Upon the exercise of such option, there shall be a binding
agreement for the sale and purchase of the Equipment described in the said
notice on the terms and conditions provided herein. The Purchase Price shall be
paid to Lessor at the time of the conclusion of such sale.
30.5 Upon any such purchase, Lessor shall transfer the Equipment so
purchased free and clear of all liens, charges and encumbrances created by
Lessor or arising out of any act or omission of Lessor and thereupon this Lease
shall terminate with respect to the Equipment so purchased.
30.6 Lessee shall bear the cost of any Provincial or Federal taxes,
license or registration fees or other assessments or charges imposed on, or
connected with, the transfer of title to and ownership of the Equipment.
31. Remedying Defaults
31.1 If Lessee shall fail to perform or comply with any of the terms
hereof, Lessor in its discretion may do all such acts and make all such
disbursements as may be necessary to cure such default and an disbursements so
made shall be payable by Lessee on demand.
32. Indemnification
32.1 Lessee will indemnify Lessor and save Lessor harmless from and
against all loss, costs, charges, expenses, liabilities, claims, demands,
penalties and damages of every nature and kind whatsoever sustained or suffered
by Lessor, or for which the Lessor may be or become liable, and caused by,
resulting from, occasioned by or in any way connected with:
(a) the execution of the Leasing Agreement or any Leasing
Schedule by Lessor or the purchase or ownership by Lessor of
the Equipment pursuant to the terms hereof; or
(b) the non-acceptance by Lessee or the failure, refusal or
neglect of Lessee to accept the Equipment pursuant to the
terms of the Section hereof entitled "Acceptance"; or
(c) the moving, delivery, maintenance, repair, use, operation or
possession of the Equipment by Lessee or the ownership
thereof by Lessor;
unless caused by the act or neglect of Lessor, its servants
<PAGE>
or agents.
33. Enforcement of Warranties
33.1 Lessor hereby assigns expressly to Lessee the Warranties
resulting from the sale entered into with the Supplier and irrevocably
constitutes and appoints Lessee, or the person designated by Lessee, its agent
and attorney in fact, for and in Lessor's own name and behalf, to make and
enforce from time to time at Lessee's sole cost and expense, whatever claim or
claims Lessor may have against any Supplier of the Equipment under any
Warranties, express or implied, in respect thereto. Lessee shall obtain from the
Supplier of the Equipment its acceptance without reserve of such conveyance of
Warranties.
33.2 Lessor may, at Lessee's expense and request, agree to join with
Lessee in any claim, action, suit or proceeding arising out of, or connected
with the Lease, any Leasing Schedule hereto or the Equipment, or to assign to
Lessee, Lessor's right to do so, the whole upon the option of Lessor.
Notwithstanding the foregoing, Lessee shall be entitled, except in the Province
of Quebec, to use the name of Lessor, with the Lessor's written consent, in any
such claim, action, suit or proceeding. If the Lessor agrees to join Lessee in
any such claim, action, suit or proceeding Lessee shall indemnify and save
harmless Lessor from any and all loss, costs, damages or expenses arising
therefrom.
33.3 In all circumstances relating to any such claim, action, suit or
proceeding, Lessor shall cooperate fully with Lessee and shall furnish promptly
to Lessee all relevant documents or copies thereof and other assistance within
Lessors knowledge, possession or control and which are reasonably required in
connection with such claim, action, suit or proceeding.
33.4 Any amounts of money or money's worth recovered by Lessor shall
be held for Lessee's account and shall be paid to it forthwith.
34. Patent Infringement
34.l Lessee shall defend and hold Lessor free and harmless from any
cost, loss or damage assessed against Lessor in any suit, proceeding or
otherwise so far as the same is based on any claim that the use or operation of
the Equipment by Lessee shall infringe any patent.
34.2 Settlement of any suit or proceeding instituted against Lessor or
Lessee may include modification of the Equipment to avoid infringement or, with
the written consent of Lessor, replacement of the Equipment with non-infringing
equipment.
34.3 If any action, suit or proceeding be instituted against Lessor
based on any claim that the use, operation or ownership of the Equipment shall
infringe on any patent, Lessee may defend the same and the provisions of Section
33 hereof shall apply mutatis mutandis to any such defense.
<PAGE>
35. Overdue Payment
35.1 Any Overdue Payment shall bear interest at the rate of eighteen
per cent (18%) per annum calculated and compounded monthly whether before or
after judgement, from the date it is due until paid.
36. Authorized Representatives
36.1 For the purpose of the Leasing Schedules hereto:
(a) any officer of Lessee who holds office by appointment of, or
any other person who is appointed by, the Board of Directors
of lessee; and
(b) The President, a Director, a Vice-President holding office
in Lessor, or any other person duly authorized by lessor;
shall be an authorized representative of Lessee and
lessor respectively.
36.2 Lessor and Lessee may designate from time to time by notice to
the other any other person or persons who thereafter shall be an authorized
representative or representatives for the purposes of leasing Schedules hereto.
37. Delivery at Termination
37.1 If so requested by notice from Lessor, and subject to the
provisions of Sections 22, 29 and 30 hereof, Lessee shall on the expiration or
sooner termination of the Lease of the Equipment, surrender the Equipment to
Lessor at a place in Canada designated by lessor in good order and repair,
ordinary wear and tear excepted.
37.2 In the event that without the consent of Lessor, Lessee
remains in the possession of or uses the Equipment after the expiration of the
term of the Lease pertaining thereto, all ,the provisions of the Lease shall
apply thereto unless and until the same has been surrendered pursuant to the
terms of this Section, or Lessor has relieved Lessee from its obligations under
the Lease with respect to the Equipment. Nothing in this Section shall have the
effect of extending or renewing the term of any such Lease.
38. Terminal Disposition
38.1 Subject to the provisions of Section 37 hereof, Lessee undertakes
and agrees, if Lessor shall, by notice to Lessee, so request at the expiration
of the term of any Lease, to dispose of the Equipment thereby leased (other than
any Equipment as may have been previously purchased by Lessee), at Lessee's
expense, in such manner as Lessor may by notice direct and as may be prudent so
as to avert any dangerous use thereof or damage or injury to persons or
property.
39. Notices
<PAGE>
39.1 Any notice required to be given hereunder shall be in writing and
may be personally delivered or may be forwarded by registered mail. If any such
notice is so mailed it shall be deemed to have been given by the sender and
received by the party hereto m whom it has been addressed forty-eight (48) hours
after the due mailing thereof by prepaid registered mail addressed as follows:
If to Lessor: c/o The address set out on page 1
of this Leasing Agreement
Attention: The President
If to lessee: c/o The address set out on page of this leasing Agreement
Attention: The Secretary
Any person to whom a notice is required to be addressed may from time to tame
give notice of any change of address and in such event the foregoing addresses
shall be deemed to have been changed accordingly.
40. Assignment and Sub-Letting
40.1 Lessee will not assign any Lease or sub-let the Equipment without
the prior consent in writing of Lessor, such consent not to be unreasonably
withheld. Nothing in this Section shall prevent Lessee from making an assignment
or sub-letting to any company which controls Lessee or which Lessee may control,
provided that Lessee shall promptly notify Lessor of such subletting and furnish
the name and address of the sub-lessee and new location of the equipment. No
assignment or sub-letting of any Lease shall relieve the Lessee of its
Obligations hereunder nor shall any subletting be for a term which extends
beyond the expiration of the term of the Lease.
41. Forbearance and Indulgence
41.1 Forbearance and indulgence by either of the parties hereto in any
instance shall not constitute a general waiver of the covenant or condition to
which the same may apply.
42. Merger and Amalgamations
42.1 In addition to the events specified in Section 25 hereof there
shall be an event of default if the Lessee enters into any transaction whereby
all or substantially all of its undertaking, property and assets would become
the property of any other Person whether by way of reorganization, amalgamation.
merger, transfer, sale or otherwise
(a) such other Person is acceptable to Lessor; and
(b) such other Person shall execute, prior to, or
contemporaneously with, the consummation of such
transaction, such instruments as are satisfactory to Lessor
and in the opinion of its solicitors necessary
<PAGE>
or advisable to evidence the assumption by such other Person
of the due and punctual payment of all moneys expressed to
be payable by Lessee under the terms, conditions and
provisions hereof or of all Leases and the covenant of such
other Person to pay the same and its agreement' to observe
and perform all the covenants and obligations of Lessee
hereunder or under all
Unless expressly relieved by Lessor in writing, Lessee shall be
and remain liable for the due performance and observance of all
obligations on its part to be observed and performed hereunder
and under each Lease.
42.2 Nothing in this Section 42 shall prevent Lessee, when not in
default in the due performance and observance of any Obligation, from
mortgaging, pledging or charging its undertaking:
(a) by way of security for indebtedness of Lessee to any
Canadian chartered bank or banks; or
(b) under any trust deed or similar instrument to secure debt
obligations of Lessee, subject always, however, to the
terms, conditions and provisions of this Leasing Agreement
and each leasing Schedule.
43. Corporate Waiver
43.1 Lessee waives to the extent permitted all of the rights, benefits
and protection given by the Personal Property Security Act of the Province of
British Columbia.
43.2 To the extent permitted by law, the Lessee hereby waives all its
rights, benefits or protection given to it by Sections 47, 49 and 50 of The Law
of Property Act and the Seizure Act of the Province of Alberta, insofar as they
extend to or relate to any Lease or other security collateral thereto. The
Lessee hereby acknowledges that seizure or repossession of the Equipment
referred to in any Lease shall not, by implication of law, extinguish the
Lessee's indebtedness under any such Lease or other collateral security. The
Lessee hereby confers upon the Lessor the right to recover from the lessee by
action on covenant for payment contained in any Lease or in any other security
collateral thereto the full rental payable under such Lease and all other money
from time to time due thereunder or under any other collateral security,
notwithstanding any seizure or repossession.
44. Limitation of Civil Rights-Saskatchewan
44.1 Lessee covenants and agrees with lessor that The Limitation of
Civil Rights Act of the Province of Saskatchewan shall have no application to:
(a) any Lease;
(b) any mortgage, charge or other security for the payment of
money
<PAGE>
made, given or created by any Lease or any agreement or
instrument collateral hereto;
(c) any agreement or instrument renewing or extending or
collateral to any mortgage, charge or security referred to
or mentioned in sub-paragraph (b) of this Section 44; or
(d) the rights, powers or remedies of Lessor under any Lease or
under any mortgage, charge, other security, agreement or
instrument referred to or mentioned in sub-paragraphs (b) or
(c) of this Section 44.
45. Successors and Assigns
45.1 Any Lease shall enure to the benefit of, and be binding upon
Lessor and Lessee, their successors and permitted assigns and the sub-lessees of
Lessee. Lessor shall be at liberty to assign or sub-let its rights under any
Lease and without restricting the generality of the foregoing may assign,
transfer, mortgage, charge, pledge, hypothecate, be considered as an aid to
interpretation hereof, or otherwise encumber for security purposes its rights
hereunder and any assignee, transferee, mortgagee, charger. pledgee, or similar
person having acquired similar rights hereunder, shall be unrestricted in the
disposal of such rights.
46. Location of Equipment
46.1 Lessee shall not part with Possession of the Equipment nor remove
the same from the territorial limits of Canada.
46.2 Lessee declares that the Equipment will be located at the Place
of Use disclosed in the relevant Leasing Schedule.
46.3 On the occasion of each permanent change in the Place of Use,
Lessee will promptly give to Lessor notice of the new Place of Use, which notice
shall be given not later than fifteen (15) days after the change.
47. Records
47.1 Lessee shall maintain throughout the term hereof Pertaining to
the Equipment at its office located at the address stated in Section 39 hereof a
record:
(a) describing each item of Equipment, the Net Equipment Cost
thereof, all changes, replacements, modifications and
alterations thereto and the cost thereof; and
(b) in the case of any Equipment assigned or sub-let pursuant to
Section 40, names and addresses of any and all assignees and
sub-lessees of the Equipment, the duration of the term of
the respective sub-leases, the amount of the monthly rental
and the description of the location for the time being, of
any Equipment so assigned or sub-let.
<PAGE>
47.2 The record described in the immediately preceding paragraph of
this Section 47 shall be available at Lessee's office located at the address set
forth in Section 39 hereof, to Lessor, its representatives or agents for
inspection, at any reasonable time, upon reasonable notice, to Lessee and upon
making any such inspection Lessor, its representatives or agents may make such
extractions from such records as to them may seem fit or necessary.
48. Offset
48.1 Lessee hereby waives any and all existing and future claims and
offsets against any rental instalment or other payment due to Lessor hereunder
and agrees to pay the rent and other amounts due hereunder regardless of any
offset or claim which may be asserted by Lessee or on its behalf.
49. Remedies Cumulative
49.1 All rights and remedies of Lessor hereunder are ,cumulative and
not alternative and may be exercised by Lessor separately or together, in any
order, sequence of combination.
50. Time
50.1 Time is and shall be in all respects of the essence of any Lease.
5l. Section Headings
51.1 Section headings appearing in this Leasing Agreement and Leasing
Schedule are for convenience of reference only and are not to be considered as
an aid to interpretation hereof.
52. Effective Date
52.l Notwithstanding the actual date of execution hereof. this Leasing
Agreement shall have force and effect and shall bind the patties hereto as and
from the date first hereinabove written.
53. Entire Transaction
53.l This Leasing Agreement and Leasing Schedules represent the entire
transaction between the parties hereto relating to the subject matter.
53.2 No agreement purporting to amend or modify this Leasing Agreement
or any Lease or any document, paper or writing relating hereto or thereto, or
connected herewith or therewith, shall be valid and binding upon the parties
hereto unless in writing and signed and accepted in writing by both parties
hereto.
54. Severability
54.l Any term, condition or provision of this Leasing Agreement or of
any Lease
<PAGE>
which is, or shall be deemed to be, void, prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be severable herefrom or therefrom,
be ineffective to the extent of such avoidance, prohibition or unenforceability
without in any way invalidating the remaining terms, conditions and provisions
hereof or of any Lease, and any such avoidance, prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such term,
condition or provision in any other jurisdiction.
55. No Merger in Judgment
55.1 The taking of any judgment hereunder or under any Lease shall not
operate as a merger of any term, condition or provision hereof or thereof.
56. Further Assurances
56.1 Lessee shall give further assurances and do, execute and perform
all such acts, deeds, documents and things as may be requisite to enable Lessor
to have the full benefit of all tights and remedies intended to be reserved or
created hereby.
57. Proper Law
57.1 This Leasing Agreement and each Leasing Schedule hereto shall be
governed, construed and enforced in accordance with the laws of the Province of
British Columbia.
58. Currency
58.1 All sums payable by Lessee to Lessor under this Leasing Agreement
or any Leasing Schedule hereto shall be paid in Canadian dollars.
59. Language
59.1 This Lease has been drawn up in the English language at the
request of both parties.
Le present content de location a ete redige en langue anglaise a la demande des
deux parties.
In witness whereof the parties hereto have executed this Leasing Agreement on
the 15th day of November 1995 over the hands of their proper signing
officers duly authorized in that behalf:
<PAGE>
Telecom Leasing Canada (TLC) Limited Kwikstar Communications Ltd.
- ------------------------------------ ----------------------------
per /s/ J. R. Dinnsdale per /s/ L. C. Fowler
- ------------------------------------ ---------------------
Digital Courier International, Inc.
-----------------------------------
per
/s/ Ian R. Bardsley
-----------------------------------
<PAGE>
Schedule B to Master Leasing Agreement dated November 8, 1995, between Telecom
Leasing Canada (TLC) Limited as Lessor and Kwikstar Communications Ltd. as
Lessee and Digital Courier International Inc. as Lessee.
The following terms and conditions are attached to and form a part of the above
referenced Leasing Agreement:
Location of Equipment
- ---------------------
Section 46.1 shall be replaced by the words "Lessee shall not pan
with possession of the Equipment without the written consent of
Lessor, which consent may be withdrawn by Lessor at any time, nor
remove the Equipment from the territorial limits of Canada and
the United States of America".
Joint and Several Liability
- ---------------------------
The undernoted Lessees do hereby acknowledge and agree that they
are and shall be jointly and severally liable for all the terms
and conditions required to be observed and performed by them or
either of them under this Leasing Agreement and all Leasing
Schedules and other documents relating to this Leasing Agreement.
Covenants of Lessee
- -------------------
1. Failure of Lessee to perform or otherwise comply with any of the
following covenants shall be considered an event of default and
shall give Lessor cause to terminate, restrict or change the
terms of any remaining lease credit facility in addition to any
other remedies of Lessor under this Leasing Agreement.
2. Lessee covenants and agrees that at all times while this Leasing
Agreement remains in effect Lessee shall:
(a) with respect to Digital Courier International Inc. and any
successor operating company including without limitation
Kwikstar Communications Ltd., maintain its share capital in
excess of $9 million and its total shareholders' equity in
excess of $7 million (using generally accepted accounting
principles and auditing standards applied on a consistent
basis) immediately following
<PAGE>
completion of the subscription of shares as contemplated by
Section 8 of the Letter of Intent of September 25, 1995
issued by Lessee to MPR Teltech Ltd, a copy ,of which is
attached as Schedule C to this Leasing Agreement;
(b) maintain current assets in excess of current liabilities
(using generally accepted accounting principles and auditing
standards applied on a consistent basis);
(c) not, without the prior written consent of Lessor:
(i) declare or pay any dividends which would reduce its
total shareholders' equity (using generally accepted
accounting principles and auditing standards applied
on a consistent basis) below an amount equal to one
and one half(1.5) times the sum of Lessee's net lease
obligations to Lessor as determined by Lessor;
(ii) purchase or redeem its shares or otherwise reduce its
capital other than as anticipated in the Letter of
Intent;
(iii) become guarantor of any obligation;
(iv) become an endorser in respect of any obligation or
otherwise become liable upon any note or other
obligation; or
(v) incur any further debt obligations other than usual
and reasonable trade debt, or debt to a bank for a
reasonable operating loan facility in the sole
opinion of Lessor;
(d) notify Lessor promptly of:
(i) any dividend(s) approved for payment by Lessee;
(ii) the details of any acquisition of assets exceeding a
cost of $100,000 other than through Lessor's lease
credit facility; and
(iii) the details of any claims or litigation affecting
Lessee;
<PAGE>
(e) deliver to Lessor from time to time promptly:
(i) all monthly financial statements prepared by or for
Lessee regarding Lessee's business, within 15 days
following the end of each fiscal month; and
(ii) quarterly and audited annual statements and reports
made available to shareholders, within 60 and 120
days respectively following the end of each fiscal
quarter and year; and
(f) permit Lessor and its representatives, at all reasonable
times and with reasonable notice, access to all Lessee's
property, assets and undertakings and to all its books of
account and record.,; for the purpose of confirming
compliance with the provisions of the Leasing Agreement and
render all assistance necessary for such confirmation of
compliance.
<PAGE>
Signed by the parties this 8th day of November, 1995.
Lessor: /s/ J. R. Dinnsdale Lessee: /s/ L. C. Fowler
Telecom Leasing Canada (TLC) Limited Kwikstar Communications Ltd.
Lessee: /s/ Ian R. Bardsley
Digital Courier International Inc.
<PAGE>
GENERAL ASSIGNMENT OF BOOK ACCOUNTS
1. FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the
undersigned Debtors jointly and severally hereby assign transfer and grant
to TELECOM LEASING CANADA (TLC) LIMITED, a British Columbia company having
an office at Suite 700 - 5945 Kathleen Avenue, Burnaby, British Columbia,
V5H 4L5, (hereinafter called the "Lessor") a continuing and specific
security interest in all debts, proceeds, accounts, claims, money and
choses in action which now are or which may at any time hereafter be due or
owing to or owned by the undersigned and also all deeds, documents,
writings, papers and books relating to or being records of goods of their
proceeds, or by which goods or their proceeds are or may hereafter be
secured, evidenced, acknowledged or made payable including Documents of
Title, (and remaining debt instruments) Chattel Paper, Securities and
Instruments, and all contractual rights and insurance claims relating to
collateral (hereinafter called the "Collateral").
2. The undersigned agree that the Collateral shall be held by the Lessor as a
general and continuing collateral security for the payment of all
obligations, indebtedness and liabilities, present or future, direct or
indirect, absolute or contingent, mattered or not, of the undersigned to
the Lessor, wheresoever and howsoever incurred, and any ultimate unpaid
balance thereof, and as a first and prior claim upon the Collateral.
3. The undersigned covenant at all times to notify the Lessor in writing
promptly of any change in the information contained herein relating to the
undersigned (including the name and location of the chief executive
offices, sole places of business or residences. as the case may be, of the
undersigned) and of any material default by any person in payment or other
performance of obligations to the undersigned with respect to any of the
Collateral.
4. So long as this assignment remains in effect, the undersigned covenant not
to sell or further assign or encumber the Collateral without the prior
written consent of the Lessor. The undersigned represent and warrant that
the Collateral is genuine and owned by the undersigned free of all security
interests or other encumbrances.
5. The undersigned shall be permitted to collect and receive all moneys in
respect of the Collateral as and when it becomes due on behalf of and as
trustee for the Lessor unless and until there shall be a default by the
undersigned under any of this agreement, the Commitment to Lease letter
between the parties dated October 3, 1995, and any Leasing Agreement and
any Leasing Schedule between the Lessor and any of the undersigned. Subject
to the foregoing sentence, the Lessor may collect, realize, sell or
otherwise deal with the Collateral or any part thereof in such manner, upon
such terms and conditions and at such time or tunes, whether before or
after default, as may seem to it advisable and
<PAGE>
without notice to the undersigned. All moneys collected or received by the
undersigned in respect of the Collateral shall be received as trustee for
the Lessor, and shall be forthwith paid over to the Lessor by the
undersigned.
6. The Lessor shall not be bound to do, observe or perform or see to the
observance or performance by the undersigned of any obligations or
covenants imposed upon the undersigned nor shall/he Lessor be obliged to
preserve rights against other persons in respect of any Securities or
Records in its possession.
7. The Lessor may apply the amounts collected or received by it on account of
such parts of the indebtedness and liabilities of the undersigned to the
Lessor as to the Lessor seems best or hold the same in a separate
collateral account for such time as it may see fit and then apply the same
as aforesaid, the whole without prejudice to its claim for any deficiency.
8. The Lessor may compound, compromise, grant extensions of time and other
indulgences, take and give up securities, accept compositions, grant
releases and discharges and otherwise deal with the debtors of the
undersigned, the undersigned and others, and with the collateral and other
securities as the Lessor may see fit, without prejudice to the liability of
the undersigned or the Lessor's fight to hold and realize this security.
9. The Lessor shall not be liable or accountable for any failure to collect,
realize or obtain payment of the Collateral or any part thereof and the
Lessor shall not be bound to institute proceedings for the purpose of
collecting, realizing or obtaining payment of the same or for the purpose
of preserving any rights of the Lessor, the undersigned or any other
person, firm or corporation in respect of the same, and the Lessor shall
not be responsible for any loss or damage which may occur in consequence of
the negligence of any officer, agent or solicitor employed in the
collection or realization thereof.
10. The Lessor may charge, on its own behalf and also pay to others reasonable
sums for expenses incurred and for services rendered (expressly including
legal advices and services) in or in connection with collecting, realizing
and/or obtaining payment of the Collateral or any part thereof and may add
the amount of such sums to the indebtedness of the undersigned.
11. So long as this assignment remains in effect, the undersigned covenant and
agree to deliver to the Lessor from time to time promptly upon request any
Documents of Title (and remaining debt instruments), Instruments,
Securities and Chattel Papers constituting, representing or relating to the
Collateral; all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and other writings
relating to the Collateral for the purpose of inspecting, auditing or
copying the same; all
<PAGE>
financial statements prepared by or for the undersigned regarding the
undersigned's businesses; all policies and certificates of insurance
relating to the Collateral, and such information concerning the collateral,
the undersigned, the undersigned's businesses and affairs as the Lessor may
reasonably request.
12. The undersigned shall from time to time forthwith on the Lessor's request
do, make and execute all such financing statements, further assignments,
documents, acts, matters and things as may be required by the Lessor of or
with respect to the Collateral or any part thereof or as may be required to
give effect to these presents, and the undersigned hereby constitute and
appoint the President for the time being of the Lessor the true and lawful
attorney of the undersigned irrevocable with full power of substitution to
do, make and execute all such statements, assignments, documents, acts,
matters or things with the right to use the name of the undersigned
whenever and wherever it may be deemed necessary or expedient.
13. This agreement shall be a continuing agreement in every respect, and shall
be binding upon the heirs, executors, administrators, successors and
assigns of the parties hereto. No remedy for the enforcement of the rights
of the Lessor hereunder shall be exclusive of or dependent on any other
such remedy, but any one or more of such remedies may from time to time be
exercised independently or in combination. The security interest created or
provide for by this agreement is intended to attach when this agreement is
signed by the undersigned and delivered to the Lessor. The undersigned
acknowledge and confirm that there has been no agreement between the Lessor
and the undersigned to postpone the time for attachment of the security
interest hereby attached.
14. Nothing in this assignment contained shall or shall be deemed to restrict
the rights and remedies at law or in equity or under any applicable
personal property security legislation or otherwise, of the Lessor against
the undersigned and the Collateral, it being hereby agreed by lite
undersigned that the Lessor has and shall have all such rights and remedies
as if' the same were herein at length set forth and by this reference the
same are incorporated in and form a pan hereof.
15. Should the undersigned be entitled to a release or discharge or amendment
to any financing statement reentered by the Lessor relating to this
assignment, then the undersigned will pay to the Lessor all costs, charges,
expenses and lawyer's fees and disbursements (as between a solicitor and
his own client on a full indemnity basis) incurred by the Lessor in
connection with such release, discharge or amendment.
16. For greater certainty it is declared that any and all future loans,
advances or other value which the Lessor may in its discretion make or
extend to or for the account of the undersigned shall be secured by this
agreement. If more that one person executes this
<PAGE>
agreement their obligations hereunder shall be joint and several.
17. This assignment shall be governed by and construed in accordance with the
law of the jurisdiction where it ]has been executed by the undersigned, as
the same may from time to time be in effect, including, where applicable,
the Personal Property Security Act.
18. The undersigned hereby acknowledge receiving a copy of this assignment and
waive all rights to receive from the Lessor a copy of any financing
statement, financing change statement or verification statement filed or
issued at any time in respect of this assignment.
The full, true and correct legal names and addresses of Debtors are hereby
declared by Debtors to be as follows:
NAME OF DEBTOR: Kwikstar Communications Ltd.
ADDRESS: #106 - 1008 Beach Avenue, Vancouver, B.C. V6E 1T7
NAME OF DEBTOR: Digital Courier International Inc.
ADDRESS: 8999 Nelson Way, Burnaby, B.C. V5A 4B5
IN WITNESS WHEREOF, the undersigned Debtors have executed this General
Assignment of Book Accounts this 15th day of November, 1995.
Kwikstar Communications Ltd. Digital Courier International Inc.
By: /s/ L. C. Fowler By: /s/ Ian R. Bardsley
---------------------------- ------------------------------
Print Name: L. C. Fowler Print Name: Ian R. Bardsley
-------------------- ----------------------
Title: President Title: Chairman
------------------------- ---------------------------
<PAGE>
SCHEDULE A
as Lessee, the Equipment hereinafter described, in consideration of
the rental and for the term hereinafter set forth, the whole pursuant to and
subject to the terms and conditions set forth in that certain Leasing Agreement
entered into between Lessor and Lessee as of the day of , 19 .
1. EQUIPMENT Quantity Make and Description Model Number Serial Number
-------- -------------------- ------------ -------------
- ------------------------------------------------------------------------------
2. TERM Term months
______ ________________________________ ________________________
Commencement Date of Term
______ ________________________________ ________________________
Termination Date of Term
______ ________________________________ ________________________
_______________________________________________________________________________
3. RENTAL Aggregate Rental
______ ________________________________ $_______________________
Monthly Rental Instalment
______ ________________________________ $_______________________
Provincial Sales Taxes, if any, at
current rate on date hereof
______ ________________________________ $_______________________
Total Monthly Rental Instalment
______ ________________________________ $_______________________
Interim Rental Factor
<PAGE>
______ ________________________________ $_______________________
- --------------------------------------------------------------------------------
4. OPTION TO PURCHASE Option to Purchase Date Purchase Price
______ ________________________________ _______________________
- --------------------------------------------------------------------------------
5. SETTLEMENT VALUE Twelve Month
Period
Percentage of Net
Equipment Cost
- --------------------------------------------------------------------------------
6. PLACE OF USE
---------------------------------------------------------
- --------
- --------------------------------------------------------------------------------
7. DEPRECIATION Class Number Capital Cost Straight Reducing
Allowance Line Balance
____________ Rate _______ [ ] [ ]
- --------------------------------------------------------------------------------
The parties hereto have each executed this Leasing Schedule
on the respective dates set forth below and this Leasing
Schedule shall be deemed to have been executed on the later
of such dates.
Lessee Name
_______________________________ ___________
________________________________________________________________________________
Initialled for
Identification: This is Schedule "A" referred to in Paragraph 2.1(i) of the
Section entitled "Definitions" of the Leasing Agreement
entered into between Telecom Leasing Canada (TLC) Limited as
Lessor and Kwikstar Communications Ltd. as Lessee and
Digital Courier International, Inc. as Lessee as of the ____
day of ______________, 1995
<PAGE>
<PAGE>
Exhibit 10.3
IMPERIAL SQUARE LAKE CITY
-------------------------
BURNABY, BRITISH COLUMBIA
PARTIAL ASSIGNMENT OF LEASE
---------------------------
THIS AGREEMENT dated for reference November 8, 1995
AMONG:
2725321 CANADA INC.
-------------------
(the "Landlord")
OF THE FIRST PART
AND:
MPR TELTECH LTD.
----------------
("MPR")
OF THE SECOND PART
AND:
DIGITAL COURIER INTERNATIONAL INC.
----------------------------------
("DCI")
-------
OF THE THIRD PART
WHEREAS:
A. By way of lease dated for reference December 1, 1993 (the "Original
Lease"), the Landlord demised and let unto MPR those certain premises comprising
Units 8634 through 8654, inclusive, Commerce Court, Burnaby, British Columbia
having an area of approximately 21,854 square feet (the "Original Premises"),
upon the further terms and conditions set forth in the Original Lease;
B. By way of lease amending agreement dated for reference May 15, 1994 (the
"First Amendment") the Original Lease was amended by, inter alia, expanding the
Original Premises to include Units 8626, 8630 and 8632 Commerce Court, Burnaby,
British Columbia having an aggregate area of approximately 5,688 square feet
(the "First Amendment Premises"), upon the further terms and conditions set
forth in the First Amendment;
C. By way of lease amending agreement dated for reference October 15, 1994
(the "Second Amendment") the Original Lease was further amended by, inter alia,
further expanding the Original Premises to include Units 8612 to 8618,
inclusive, Commerce Court, Burnaby, British Columbia having an aggregate area of
approximately 9,316 square feet (the "Second Amendment Premises"), upon the
further terms and conditions set forth in the Second Amendment;
<PAGE>
Page 2
D. MPR desires to transfer and assign all of its right, title and interest in
and to the Second Amendment Premises to DCI together with the unexpired term of
the Original Lease appurtenant thereto (excluding any renewal options), and DCI
desires to take an assignment thereof from MPR; and
E. The Landlord has agreed to consent to such and assignment upon the further
terms and conditions hereinafter set out.
WITNESS that for valuable consideration (the receipt and sufficiency of which is
hereby acknowledged by each of the parties hereto) the parties hereto covenant
and agree each with the other as follows:
1. RECITALS.
The recitals set out above are true and correct in substance and in fact.
2. DEFINITIONS.
All capitalized terms used in this Agreement and not defined herein shall have
the meaning set forth in the Original Lease.
3. FURTHER DEFINITIONS.
As used herein:
(a) "DCI PREMISES" shall mean the Second Amendment Premises, being that
portion of the Building outlined in green on Schedule "A" hereto;
(b) "EFFECTIVE DATE" shall mean November 15, 1995;
(c) "ENTIRE PREMISES" means the DCI Premises together with the MPR
Premises;
(d) "LEASE" means the Original Lease as amended by the First Amendment and
the Second Amendment;
(e) "LEASE MODIFICATION AGREEMENTS" means the modifications of the Lease
with respect to the DCI Premises and with respect to the MPR Premises
as described in paragraph 9 hereof, and "LEASE MODIFICATION AGREEMENT"
means either such agreement;
<PAGE>
Page 3
(f) "MPR PREMISES" shall mean the Original Premises together with the
First Amendment Premises, being that portion of the Building outlined
in red on Schedule "A" hereto; and
(g) "TENANT COVENANTS" means all of the obligations of MPR as set out in
the Lease or established by law and, without limiting the generality
of the foregoing, includes the obligation to pay Rent thereunder and
all other obligations of MPR pursuant thereto whether characterized as
covenants, conditions, provisos, representations, warranties,
undertakings or otherwise.
4. PARTIAL ASSIGNMENT OF LEASE
Effective the Effective Date MPR transfers and assigns unto DCI, and DCI accepts
an assignment from MPR of, all of MPR's right, title and interest in and to the
DCI Premises, together with the unexpired portion of the term of the Lease
appurtenant thereto, save as hereinafter set out.
5. CONSENT TO ASSIGNMENT
Conditional upon the parties entering into the Lease Modification Agreements,
effective the Effective Date the Landlord consents to the assignment described
in paragraph 4, above, provided such consent shall in no manner release or
relieve MPR from its obligation to perform fully all of the Tenant Covenants in
respect of the DCI Premises to the end of thie intial Term of the Existing
Lease, and further provided such consent shall not be deemed to be a consent to,
nor waiver of the requirement for the Landlord's consent to, any further
assignment of the Lease or any interest therein or subletting of the Entire
Premises or any part thereof.
6. ASSUMPTION BY DCI
From and after the Effective Date, DCI assumes all of the Tenant Covenants under
the Lease with respect to the DCI Premises, and covenants and agrees with the
Landlord that it will well and truly observe and perform all of the Tenant's
Covenants with respect to the DCI Premises throughout the balance of the Term of
the Lease. Without limiting the generality of the foregoing, DCI covenants and
agrees to be bound by the terms and provisions of the Lease with respect to the
DCI Premises in the same manner as though DCI were the tenant named therein with
respect thereto.
7. COVENANTS OF MPR
MPR hereby covenants with DCI that notwithstanding any act of MPR:
(a) the Lease is good, valid and subsisting;
<PAGE>
Page 4
(b) the Rent reserved thereby to the Landlord shall have been paid in full
to the Effective Date; and
(c) the Tenant Covenants with respect thereto shall have been duly
performed by MPR to the Effective Date.
8. LIMITATION
Notwithstanding the partial assignment set out in paragraph 4 hereof, the
parties acknowledge and agree that the following specific provisions of the
Lease shall not apply with respect to the DCI Premises:
(a) no portion of the Deposit referred to in paragraph 3.05 of the
Original Lease as increased pursuant to paragraph 2.03 of the First
Amendment shall be assigned to DCI or be applicable to the DCI
Premises, it being understood and agreed that the entire Deposit shall
be applicable solely to the MPR Premises;
(b) the right to assign or sublet to an Affiliate contained in the first
four lines of paragraph 8.00 of the Original Lease shall not be
assigned to DCI, nor shall the same apply with respect to the DCI
Premises;
(c) the rights to the ground station antenna contained in paragraph 12.07
of the Lease, which was added by way of paragraph 2.05 of the First
Amendment, shall not be assigned to DCI, nor shall the same apply with
respect to the DCI Premises;
(d) the provisions of Schedule "F" to the Original Lease shall not be
assigned to DCI, nor shall the same apply with respect to the DCI
Premises, provided that the provisions of the offer to lease for the
DCI Premises made by MPR October 5, 1994 and accepted by the Landlord
October 6, 1994 and attached to the Second Amendment shall be
substituted therefor; and
(e) the provisions of Schedule "G" of the Original Lease shall not be
assigned to DCI, nor shall the same apply with respect to the DCI
Premises.
9. LEASE MODIFICATION AGREEMENTS
Each of MPR and DCI covenant and agree with the Landlord to execute and deliver
a Lease Modification Agreement in a form to be prepared by the Landlord,
modifying the Lease with respect to the MPR Premises and the DCI Premises,
respectively, in accordance with the terms of this Agreement. In addition, the
parties confirm and acknowledge that the Lease Modification Agreement pertaining
to the DCI Premises shall modify the Lease to substantially correspond to the
terms of the Second Amendment, plus the additional modifications described in
paragraph 8, above, and that the Lease Modification Agreement pertaining to the
MPR Premises shall modify
<PAGE>
Page 5
the Lease to substantially correspond to the terms of the Original Lease as
modified by the First Amendment only.
10. SCHEDULES
The following schedules are attached hereto and form part of this Agreement:
Schedule "A" Plan of the Building, with the MPR Premises outlined in red
and the DCI Premises outlined in green
Schedule "B" Copy of Original Lease, omitting schedules A1, F and G
thereof
Schedule "C" Copy of Second Amendment
11. BINDING EFFECT
The provisions of this Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first set out above.
2725321 CANADA INC.
Per: c/s
----------------------------------
Authorized Signatory
Per:
----------------------------------
Authorized Signatory
MPR TELTECH LTD.
Per: c/s
----------------------------------
Authorized Signatory
Per:
----------------------------------
Authorized Signatory
<PAGE>
Page 6
DIGITAL COURIER INTERNATIONAL INC.
Per: c/s
----------------------------------
Authorized Signatory
Per:
----------------------------------
Authorized Signatory
<PAGE>
SCHEDULE "A"
[attach a plan with the MPR Premises outlined in red
and the DCI Premises outlined in green]
<PAGE>
SCHEDULE "B"
[attach copy of Original Lease, except for schedules F and G thereof]
<PAGE>
SCHEDULE "C"
[attach copy of Second Amendment]
<PAGE>
2725321 CANADA INC.
AND
DIGITAL COURIER INTERNATIONAL INC.
AND
MPR TELTECH LTD.
--------------------------------------------------------------------
LEASE AMENDING AGREEMENT
--------------------------------------------------------------------
Units 8612 to 8618 Commerce Court
Imperial Square Lake City
Burnaby, British Columbia
<PAGE>
IMPERIAL SQUARE LAKE CITY
-------------------------
BURNABY, BRITISH COLUMBIA
LEASE AMENDING AGREEMENT
------------------------
THIS AGREEMENT dated for reference November 8, 1995
AMONG:
2725321 CANADA INC.
-------------------
(the "Landlord")
OF THE FIRST PART
AND:
DIGITAL COURIER INTERNATIONAL INC.
----------------------------------
(the "Tenant")
OF THE SECOND PART
AND:
MPR TELTECH LTD.
----------------
("MPR")
OF THE THIRD PART
WHEREAS:
A. By way of lease dated for reference December 1, 1993 (the "Original
Lease"), the Landlord demised and let unto MPR those certain premises comprising
Units 8634 through 8654, inclusive, Commerce Court, Burnaby, British Columbia
having an area of approximately 21,854 square feet (the "Original Premises"),
upon the further terms and conditions set forth in the Original Lease;
B. By way of lease amending agreement dated for reference May 15, 1994 (the
"First Amendment") the Original Lease was amended by, inter alia, expanding the
Original Premises to include Units 8626, 8630 and 8632 Commerce Court, Burnaby,
British Columbia having an aggregate area of approximately 5,688 square feet
(the "First Amendment Premises"), upon the further terms and conditions set
forth in the First Amendment;
<PAGE>
Page 2
C. By way of lease amending agreement dated for reference October 15, 1994
(the "Second Amendment") the Original Lease was further amended by, inter alia,
further expanding the Original Premises to include Units 8612 to 8618,
inclusive, Commerce Court, Burnaby, British Columbia having an aggregate area of
approximately 9,316 square feet (the "Second Amendment Premises"), upon the
further terms and conditions set forth in the Second Amendment;
D. By way of partial assignment of lease dated for reference November 8, 1995
(the "Partial Assignment") MPR agreed to transfer and assign all of its right,
title and interest in and to the Second Amendment Premises to the Tenant
together with the unexpired term of the Original Lease appurtenant thereto
(excluding any renewal options), which assignment was consented to by the
Landlord upon the terms and conditions set out in the Partial Assignment;
E. One of the conditions of the Landlord's consent to the Partial Assignment
was that the Tenant execute and deliver to the Landlord this Agreement.
WITNESS that for valuable consideration (the receipt and sufficiency of which is
hereby acknowledged by each of the parties hereto) the parties hereto covenant
and agree each with the other as follows:
1. RECITALS.
The recitals set out above are true and correct in substance and in fact.
2. DEFINITIONS.
All capitalized terms used in this Agreement and not defined herein shall have
the meaning set forth in the Original Lease.
3. FURTHER DEFINITIONS.
As used herein:
(a) "EFFECTIVE DATE" shall mean November 15, 1995;
(b) "LEASE" means all of the right, title and interest in and to the
Second Amendment Premises together with the unexpired portion of the
initial Term of the Original Lease appurtenant thereto which was
assigned to the Tenant pursuant to the provisions of the Partial
Assignment, which Lease shall be on the same terms as the Original
Lease save as amended hereby;
<PAGE>
Page 3
(c) "MPR PREMISES" shall mean the Original Premises together with the
First Amendment Premises, being that portion of the Building outlined
in red on Schedule "A" hereto; and
(d) "TENANT PREMISES" shall mean the Second Amendment Premises, being
that portion of the Building outlined in green on Schedule "A"
hereto.
4. AMENDMENT AND RESTATEMENT OF LEASE
The Landlord and the Tenant confirm and acknowledge that the Tenant Premises are
leased to the Tenant on the same terms and conditions as set out in the Original
Lease, subject however to the following amendments:
(a) All references to MPR shall be deemed to be references to the Tenant
herein.
(b) The Term described in Section 2.01 shall be that period of time
commencing on the Effective Date and terminating on December 31, 1996.
(c) Section 2.04 shall be deleted.
(d) The Basic Rent described in Section 3.00 shall be $102,476 per annum
($8,539.67 per month), being $11.00 per square foot of the Area of the
Demised Premises.
(e) Section 3.06 shall be deleted.
(f) Section 4.10 shall be replaced by paragraph 4.01 of the Second
Amendment to read as follows:
"The Tenant may at the Tenant's expense affix one sign on the
front and one sign on the rear of the Demised Premises in
accordance with the existing design criteria for the Development
and will remove the same at the Tenant's expense at the
expiration or earlier termination of the Term."
(g) The first four lines of Section 8.00 of the Original Lease, being the
words:
"Except in the case of an assignment or subletting to an
"Affiliate" (as that word is defined in the Company Act (British
Columbia)) of the Tenant or B.C. Telecom Inc. (which assigning or
subletting will not require the approval of the Landlord),"
shall be deleted.
<PAGE>
Page 4
(h) Section 11.00 shall be replaced with the following:
"11.00 Notices
----- -------
Any notice, advice, document or writing required or contemplated
by any provision hereof shall be given in writing and if to the
Landlord, either delivered personally or transmitted by facsimile
to an officer of the Landlord's agent, PPM Real Estate Managers
(Canada) Limited or mailed by prepaid mail addressed to the
Landlord care of PPM Real Estate Managers (Canada) Limited at the
following address:
PPM Real Estate Managers (Canada) Limited
440 - 1090 West Georgia Street
Vancouver, British Columbia
V6E 3V7
(facsimile number: (604) 682-5425)
with a copy to:
PPM Real Estate Managers (Canada) Limited
300, 141 Adelaide Street West
Toronto, Ontario
M5H 3L9
(facsimile number: (416) 362-1431)
Attention: Senior Vice-President
---------------------------------
and if to the Tenant, either delivered personally to the Tenant
(or to an officer of the Tenant, if a corporation) or mailed by
prepaid mail addressed to the Tenant at the Demised Premises.
Every such notice, advice, document or writing shall be deemed to
have been given when delivered personally, upon the usual
confirmation of transmission and receipt if sent by facsimile, or
if mailed as aforesaid, upon the fifth day after being mailed
save and except in the event of a labour dispute or other
disruption affecting postal service occurring within five days of
the date of mailing in which event notice will not be deemed to
have been received until actually received. Either the Landlord
or the Tenant may from time to time by notice in writing to the
other designate another address as the address to which notices
are to be mailed to it, or specify with greater particularity the
address and persons to which such notices are to be mailed and
may require that copies of notices be sent to an agent designated
by it."
<PAGE>
Page 5
(i) The following will be added as new Section 12.08:
"12.08 Parking
----- -------
The Landlord will provide to the Tenant a total of 29 designated
parking stalls to be used in association with and during the time
the Tenant leases the Demised Premises and, having regard to the
existing commitments to other tenants, the Landlord will attempt
to allocate as many of those parking stalls as possible bordering
on the exterior walls and in front of or at the rear of the
Demised Premises or on either side thereof."
(j) The Demised Premises described in Schedule "A" shall be the Tenant
Premises as described herein, it being agreed that the sketch plan
attached to Schedule "A" shall be replaced with the plan attached as
Schedule "A" to this Agreement, identifying the Demised Premises in
green.
(k) The Area of the Demised Premises described in Schedule "A" shall be
deemed to be 9,316 square feet.
(l) Schedule "F" shall be deemed to be replaced with a copy of the offer
to lease pertaining to the Second Amendment Premises, a copy of which
was attached as Schedule "C" to the Second Amendment, and "G"shall be
deleted.
The parties further acknowledge and agree that the term "Lease" as used herein
shall mean the Original Lease as so amended.
5. CONSENT AND ACKNOWLEDGEMENT OF MPR
MPR consents to the amendments to the provisions of the Original Lease as
applicable to the Tenant Premises as set out above, and confirms and
acknowledges to the Landlord that such amendments shall in no way relieve or
release MPR from its continued liability to the Landlord for the due and proper
performance by the Tenant of all of the terms, covenants and conditions of the
Lease for the balance of the Term thereof.
6. AFFIRMATION OF LEASE
Except as specifically amended herein, all of the terms and conditions of the
Lease are hereby affirmed by the parties hereto. The provisions of this
Agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
<PAGE>
Page 6
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first set out above.
2725321 CANADA INC.
Per: c/s
---------------------------------
Authorized Signatory
Per:
---------------------------------
Authorized Signatory
DIGITAL COURIER INTERNATIONAL INC.
Per: c/s
---------------------------------
Authorized Signatory
Per:
---------------------------------
Authorized Signatory
MPR TELTECH LTD.
Per: c/s
---------------------------------
Authorized Signatory
Per:
---------------------------------
Authorized Signatory
<PAGE>
EXHIBIT 10.4
NOVEMBER 15, 1995
TECHNOLOGY TRANSFER AND LICENSING AGREEMENT
THIS AGREEMENT made and entered into on the 15th day of November, 1995
BETWEEN:
DIGITAL COURIER INTERNATIONAL INC., a corporation duly incorporated
under the laws of Canada and having an office at 8618 Commerce Court,
Burnaby, British Columbia
(hereinafter called "DCI")
OF THE FIRST PART
AND:
MPR TELTECH LTD., a corporation duly incorporated under the laws of
Canada and having its executive offices at 8999 Nelson Way, Burnaby,
British Columbia
(hereinafter called "MPR")
OF THE SECOND PART
WHEREAS DCI is a wholly owned subsidiary of MPR;
WHEREAS, MPR has agreed to sell and DCI has agreed to buy certain software and
hardware designs as they exist on the date of execution of this Agreement, and
MPR and BC TEL shall receive a license back to use the software and hardware
designs for certain specified purposes; and
WHEREAS the parties hereto wish to record in a single agreement their full
arrangement in respect of the software and hardware designs;
NOW THEREFORE this Agreement witnesseth that in consideration of the mutual
premises hereinafter set forth, the parties agree as follows:
<PAGE>
1 INTERPRETATION.
1.1 DEFINITIONS. In and for the purpose of this Agreement:
1.1.1 "AFFILIATE" means:
.1 with respect to a natural person, the spouse of such person,
any corporation that is directly or indirectly controlled by
such person and any corporation that employs such person as a
director, officer or employee; and
.2 with respect to a corporation an affiliate of such corporation
within the meaning of "affiliated" under Section 2(2) of the
Canada Business Corporations Act;
1.1.2 "ASSETS" means all of the right, title and interest in and to the:
.1 the Software Copyright;
.2 Hardware Technical Information;
.3 Trademarks; and
.4 Third Party Licenses;
all as same exist as at the Execution Date;
1.1.3 "BC TEL" means BC TEL, a Canadian company with an address at 3777
Kingsway, Burnaby, British Columbia;
1.1.4 "CLAIM" shall have the meaning ascribed thereto in subsection 1(b)
of the Indemnity Sharing Agreement, provided, for the purposes of
this Agreement, that any such Claim shall only arise pursuant to
this Agreement;
1.1.5 "COMMON SHARES" means common shares in DCI;
1.1.6 "ENCUMBRANCE" means any of a mortgage, pledge, hypothecation, lien,
covenant, condition, lease, licence, assignment, option, Claim or
any other title defect, encumbrance or charge whatsoever, whether or
not registered or registerable;
1.1.7 "EXECUTION DATE" means the date of execution of this Agreement;
1.1.8 "EXISTING PURPOSES" has the meaning set out in Schedule 1.1.7;
2
<PAGE>
1.1.9 "HARDWARE TECHNICAL INFORMATION" means that information of MPR,
including drawings, tooling, test programs and manufacturing
information related to the hardware identified in Schedule 1.1.15,
but shall not include (except for approved supplier's lists,
specifications and inspection documentation) that information which
relates to parts, components, subassemblies and assemblies
commercially available from OEM suppliers, or that which relates to
building and plants generally;
1.1.10 "INDEMNITEES" means, in respect of a Person, that Person's
employees, directors and officers;
1.1.11 "INDEMNITY SHARING AGREEMENT" means the agreement of that title
dated as of the date hereof among MPR, DCI, 945 Investments Ltd.,
CIBC Wood Gundy Capital (SFC) Inc. and Kwikstar Communications Ltd.;
1.1.12 "LICENCES" shall mean those sub-licences entered into by MPR as of
the Execution Date;
1.1.13 "PERSON" means an individual, corporation, body corporate,
partnership, joint venture, association, trust or unincorporated
organization or any trustee, executor, administrator or other legal
representative;
1.1.14 "PREFERENCE SHARES" means the Preferred Shares Series 1 in DCI;
1.1.15 "SHARE EXCHANGE AGREEMENTS" means those Agreements between Kwikstar
and the holders of the common shares of DCI pursuant to which
Kwikstar will acquire all of the outstanding common shares of DCI
from the holders of common shares of DCI in exchange for common
shares of Kwikstar;
1.1.16 "SOFTWARE" shall mean the programs and hardware technical
information proprietary to MPR described in Schedule 1.1.15;
1.1.17 "SOFTWARE COPYRIGHT" means all right, title and interest, including
copyright, in and to the Software and the Source Code;
1.1.18 "SOURCE CODE" means the human readable embodiment of the computer
code associated with the Software, whether contained on paper,
magnetic medium, electronic impulse or other form of media;
1.1.19 "THIRD PARTY LICENSES" means the licenses granted to MPR by third
parties described in Schedule 1.1.18 which are to be assigned to
DCI;
1.1.20 "THIRD PARTY SOFTWARE" shall mean those programs or elements of
programs that are not proprietary to MPR used in conjunction with
the Software;
3
<PAGE>
1.1.21 "TRADE SECRETS" means all trade secrets and other industrial or
intellectual property pertaining to the Software and or the Hardware
Technical Information, and all documents, records, correspondence
and other information pertaining thereto, including the Source Code;
1.1.22 "TRADEMARKS" means those trademarks and the applications therefor
listed in Schedule 1.1.21; and
1.1.23 "WAVE PRODUCT" means computer and communication hardware, firmware
and software for use in broadband transmission networks to manage
and deliver enhanced multi-media transmission services, whether sold
in association with the trademark WAVE or any trademark used in
substitution for WAVE;
2 PURCHASE OF ASSETS.
2.1 PURCHASE AND SALE. Relying upon the representations and warranties of MPR
set forth herein, and subject to the conditions herein, DCI agrees to purchase
from MPR and MPR agrees to sell to DCI, on the Execution Date, the Assets,
subject to Section 6.2, free and clear of all Encumbrances, for the Purchase
Price, to be paid at the time, and in the manner, set out in Section 2.2.
2.2 PAYMENT OF THE PURCHASE PRICE. DCI shall pay to MPR the sum of
$5,338,577.30 (the "Technology Transfer Fee"), by issuing to MPR, no later than
the Execution Date, 2,000,000 Preference Shares and 3,338,577.30 Common Shares,
which shares represent the Technology Transfer Fee.
3 TECHNOLOGY TRANSFER.
3.1 DELIVERY OF ASSETS. Upon the Execution Date, and as may be reasonably
requested thereafter, MPR shall co-operate with DCI so that DCI shall be placed
in actual possession and operating control of the Assets in accordance with all
of the terms of this Agreement.
3.2 INITIAL TECHNOLOGY TRANSFER. The initial technology transfer will take
place forthwith upon this Agreement coming into effect by means of MPR providing
DCI with information and related materials in the form of documents or otherwise
reflecting the present state of the Assets to the extent permitted by MPR's
existing obligations of confidentiality (hereinafter the "Technology Transfer
Documents").
3.3 TECHNOLOGY TRANSFER DOCUMENTS. The Technology Transfer Documents shall be
copies of all documents, materials and information used in association with or
pertaining to the Assets in the possession or control of MPR to the extent
permitted by MPR's existing obligations of confidentiality.
4
<PAGE>
3.4 FURTHER OBLIGATIONS. Forthwith following the Execution Date, MPR and DCI
shall meet to determine and agree upon a schedule according to which MPR will
furnish any additional support requested by DCI in writing to permit DCI to
exploit the Assets and the charges for such support.
3.5 REIMBURSEMENT OF COSTS. DCI shall pay to MPR within thirty (30) days of
invoicing the agreed charges for any additional support provided pursuant to
Section 3.4. Upon request by DCI, MPR will provide supporting documentation in
respect of such charges.
4 REPRESENTATIONS AND WARRANTIES OF MPR.
4.1 REPRESENTATIONS AND WARRANTIES. To induce DCI to enter into and to
complete the transactions contemplated by this Agreement, MPR represents and
warrants to DCI, as warranties and representations that are true as of the
Execution Date, that:
4.1.1 ALL NECESSARY CORPORATE ACTION TAKEN BY MPR: all necessary corporate
action on the part of the directors and shareholders of MPR will
have been taken to authorize and approve the execution, delivery and
performance of this Agreement;
4.1.2 TITLE TO THE ASSETS: MPR is the owner of the Assets and, upon
execution of this Agreement, DCI will have good, valid and
marketable title to the Assets free and clear of all Encumbrances
and rights of creditors under applicable bulk sales, bankruptcy or
insolvency legislation or any trustee appointed thereunder;
4.1.3 SOFTWARE ORIGINAL: the Software is original work not copied wholly
or substantially from any other work or material, and no rights in
the Software have been granted to or acquired by any other Person;
4.1.4 SOURCE CODE A TRADE SECRET: the Source Code is a trade secret of MPR
and there has been no disclosure of the Source Code except to
employees and contractors of MPR on a need-to-know basis for the
purpose of performing duties in the course of their employment, and
to customers of MPR pursuant to valid license agreements between MPR
and such customers;
4.1.5 NO OTHER COPIES OF SOURCE CODE: except for the Source Code delivered
by MPR to DCI on execution of this Agreement, the copies of the
Source Code retained by MPR, and the copies of the Source Code
delivered to Persons pursuant to Licenses with or sublicenses from
MPR and the license to BC TEL contemplated in Section 11, there are
no other copies of the Source Code in existence;
5
<PAGE>
4.1.6 NO BREACHES OF THE THIRD PARTY LICENSES: MPR is not in default of
the Third Party Licenses and has not exploited the property of the
Institute referred to in Section 6.2 except to the extent same is
incorporated into software which is used in conjunction with the
Software;
4.1.7 NO INFRINGEMENT BY THIRD PARTIES: except as disclosed in this
Agreement, MPR is not aware of any activities or conduct of any
third party that would constitute infringement of any intellectual
property or proprietary rights respecting the Assets; and
4.1.8 NO NOTICE OF CLAIM: MPR has not received any notice, claim or threat
of any claim that the manufacture, use or sale of products
incorporating or using the Assets infringe the rights of any third
party.
5 LIMITATIONS ON WARRANTIES OF MPR.
5.1 SPECIFIC EXCLUSION OF OTHER WARRANTIES. THE WARRANTIES SET OUT IN SECTION
4.1 ARE IN LIEU OF ALL OTHER WARRANTIES, AND THERE ARE NO OTHER WARRANTIES,
REPRESENTATIONS, CONDITIONS, OR GUARANTEES OF ANY KIND WHATSOEVER, EITHER
EXPRESS OR IMPLIED BY LAW OR CUSTOM MADE BY MPR TO DCI.
6 REPRESENTATIONS AND WARRANTIES OF DCI.
6.1 REPRESENTATIONS AND WARRANTIES OF DCI. DCI represents and warrants to MPR
that all necessary corporate action on the part of the directors and
shareholders of DCI has been taken to authorize and approve the execution,
delivery and performance of this Agreement and the performance by DCI of its
obligations hereunder and this Agreement has been duly executed and delivered
by, and constitutes a valid and binding obligation of DCI enforceable in
accordance with its terms.
6.2 THIRD PARTY LICENSES. The Third Party Licenses are assigned by MPR to DCI
to the extent of MPR's right to so assign same, and DCI shall take whatever
actions it deems necessary to confirm the assignment of same to DCI and DCI's
rights pursuant to such agreements. The Agreement between MPR and Institut for
Rundfunktechnik Gmbh (the "Institut") referred to in Schedule 1.1.18 has not
been finalized. DCI shall use reasonable commercial efforts to execute an
agreement with the Institut on the terms disclosed in the correspondence
referred to in Schedule 1.1.18 (the "Correspondence"), which will not result in
any liability on the part of MPR. DCI shall forthwith comply with the request
in the Correspondence to deliver object code for the 56002 implementation of the
acoustic cancellation software and the correspondent documentation. MPR will
make no use of and retain no copies of any materials supplied by the Institute
in respect of the Correspondence.
6
<PAGE>
7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All covenants,
agreements, representations and warranties made by MPR and DCI hereunder or
pursuant hereto shall survive from the execution of this Agreement, in the case
of MPR, for the period referenced in the Indemnity Sharing Agreement and, in the
case of DCI, for the period of three years.
8 MPR'S ADDITIONAL COVENANTS.
8.1 MPR'S NON-COMPETE. Except as otherwise expressly provided in writing
between the parties, in consideration of the benefits granted to MPR by DCI, MPR
covenants for a period of two years from the Execution Date that MPR will not:
8.1.1 provide engineering services directly to Digital Generation Systems,
Virtex Services or any entity whose primary business involves the
electronic distribution of advertisements and content to radio
stations; and
8.1.2 directly or indirectly, either alone or in conjunction with any
person, whether as principal, agent, shareholder or investor, engage
in, have an interest in or permit MPR's name to be used in
connection with any business which is directly competitive with the
business of DCI as that business existed as at the date hereof.
9 CONVEYANCE AND FURTHER ASSURANCES.
9.1 SPECIFIC CONVEYANCE OF SOFTWARE COPYRIGHT. On the execution of this
Agreement, MPR shall deliver to DCI a duly executed assignment for the Software
Copyright in the form set out as Schedule 9.1. The License set out in Section
11 of this Agreement shall exist notwithstanding the absolute assignment of
rights contained in the assignment contained in this Agreement.
9.2 SPECIFIC CONVEYANCE OF TRADEMARKS. On the execution of this Agreement, MPR
shall deliver to DCI duly executed assignments of the Trademarks in the form set
out as Schedule 9.2.
9.3 FURTHER ASSURANCES. Each of MPR and DCI shall nevertheless from time to
time on or after the execution of this Agreement execute and deliver all such
conveyances, transfers, assignments and other instruments in writing and further
assurances as may be reasonably within its power in order to give effect to the
provisions hereof, including the completion of any permitted assignment by MPR
pursuant to Section 12.3 of this Agreement.
7
<PAGE>
10 INDEMNITY.
10.1 MPR'S INDEMNITY. MPR covenants and agrees to indemnify and save harmless
DCI and DCI's Indemnitees of and from all Claims whatsoever arising, directly or
indirectly, out of, under, pursuant to or as a result of:
10.1.1 MPR's federal, provincial, sales, excise, income, corporate or any
other taxes of MPR outstanding at the time of the execution of this
Agreement;
10.1.2 any Claim arising, directly or indirectly, out of, under, pursuant
to or as a result of any matter existing or thing done prior to the
Execution Date;
10.1.3 any misrepresentation or the inaccuracy of or any omission from any
representation or warranty of MPR, or the breach of any covenant
made by MPR, in this Agreement, or in any document delivered
pursuant to the Agreement; and
10.1.4 any infringement or alleged infringement or any faulty or allegedly
faulty Assets used by MPR pursuant to the license set out in Section
11.
10.2 DCI'S INDEMNITY. DCI covenants and agrees to indemnify and save harmless
MPR and MPR's Indemnitees from all Claims whatsoever arising, directly or
indirectly, out of, under, pursuant to or as a result of:
10.2.1 any misrepresentation or the inaccuracy of or any omission from any
representation or warranty of DCI, or the breach of any covenant
made by DCI, in this Agreement, or in any document delivered
pursuant to this Agreement; and
10.2.2 any act or failure to act of DCI as the assignee of the Third Party
Licenses validly assigned to DCI, and any and all of the
exploitation by DCI of any software or other materials of the
Institut and any exploitation by MPR of same as described in Section
4.1.6 before the Execution Date.
10.3 INDEMNITY SHARING AGREEMENT. Notwithstanding anything else in this
Agreement, the obligation of MPR to indemnify DCI and DCI's Indemnitees for
Claims is subject to the provisions of the Indemnity Sharing Agreement.
11 LICENSE BACK TO MPR.
11.1 LICENSE. DCI hereby grants back the perpetual, irrevocable, royalty free
right:
11.1.1 to MPR to use, modify and otherwise exploit the Assets identified in
Schedule 1.1.15 for its Existing Purposes;
8
<PAGE>
11.1.2 to BC TEL to use, modify and otherwise exploit the Assets identified
in Schedule 1.1.15 for its Existing Purposes; and
11.1.3 such licenses shall be non-transferrable except as provided in
Section 11.6 below.
11.2 CONFIDENTIALITY. Subject to the following paragraph, MPR shall hold
information regarding the Assets in confidence for DCI and shall not, at any
time, without the prior written consent of DCI, reproduce the Assets, except as
is absolutely necessary for the use, modification and exploitation thereof in
accordance with the terms of this Agreement, and shall not divulge same to any
Person other than its sub-licensees who are bound by an obligation of confidence
and its employees with a need to know.
11.3 THIRD PARTY ACCESS. MPR shall have the right to permit its suppliers
("Authorized Third Parties") to have access to the Assets to support MPR's
businesses, provided that such access to the Assets by Authorized Third Parties
is related solely to MPR's purchase of services from Authorized Third Parties
that MPR would otherwise perform for itself. MPR shall be responsible for any
damage caused by an Authorized Third Party's use (or abuse) of the Assets in any
manner except as permitted hereunder. MPR shall use best efforts, including
taking legal action, if required, to ensure that each Authorized Third Party
ceases to use the Assets, and ceases to have access to the Assets, upon such
Authorized Third Party ceasing to have commercial dealings with MPR, and MPR
shall ensure that all Authorized Third Parties cease to use the Assets, and to
have access to the Assets, upon MPR ceasing to have the right to use the Assets.
MPR shall cause its Authorized Third Parties to enter into agreements for the
protection of the confidentiality of the Assets no less stringent than set out
for MPR in this Agreement.
11.4 NO OBLIGATION. DCI shall have no obligation hereunder to perform, and
shall have no liability in respect of, the support, updating or maintenance of
any Assets used by MPR and/or BC TEL. However, DCI is prepared to enter into
support, updating or maintenance arrangements with MPR and/or BC TEL in respect
of the Assets, subject to negotiation of applicable terms and conditions, such
terms and conditions to be as favourable as those offered to DCI's most favoured
customers for similar kinds and quantities of service.
11.5 BC TEL LICENSE FORMALITIES. BC TEL may exercise its rights granted under
this Section 11 by notifying DCI of its intention to exercise such rights and
its agreement to be bound with DCI by the terms of Section 11 of this Agreement
as if BC TEL had signed this Agreement as MPR.
11.6 ASSIGNMENT OF LICENSE. Notwithstanding Section 12.3, each of MPR and BC TEL
may assign their respective rights to use, modify or exploit any part of the
Assets to any other Person upon the acquisition by such Person of substantially
all of the assets of the assigning party relating to the business carried on by
the assigning party respecting such element of the Assets, provided that the
assignee agrees to be bound with DCI by the terms of Section 11 of this
Agreement as if the assignee had signed this Agreement in the place and stead of
MPR .
9
<PAGE>
12 GENERAL PROVISIONS.
12.1 FORCE MAJEURE. No party shall be in default or liable for any loss or
damage resulting from delays in performance or from failure to perform or comply
with terms of this Agreement due to any causes beyond its reasonable control,
which causes include, but are not limited to: Acts of God or the public enemy;
riots and insurrections, war, accidents, fire, strikes and other labour
difficulties (whether or not such party is in a position to concede to such
demands), embargoes, judicial action; lack of or inability to obtain export
permits or approvals, necessary labour, materials, energy, components or
machinery; acts of civil or military authorities.
12.2 NOTICES. Any and all notices or other information to be given by one of
the parties to another shall be in writing and shall be deemed sufficiently
given when forwarded by prepaid, registered or certified first class air mail or
by facsimile transmission or hand delivery to the other party at the following
address:
if to DCI: Digital Courier International Inc.
8618 Commerce Court,
Burnaby, BC, V5A 4N6
Attention: Chief Executive Officer
-----------------------------------
if to MPR: MPR Teltech
8999 Nelson Way,
Burnaby, BC, V5A 4B5
Attention: Vice-President Business Systems and Applications;
----------
Vice-President and Chief Financial Officer
and such notices shall be deemed to have been received fifteen (15) business
days after mailing if forwarded by mail, and the following business day if
forwarded by facsimile transmission or hand. The aforementioned address of
either Party may be changed at any time by giving fifteen (15) business days
prior notice to the other Party in accordance with the foregoing. In the event
of a generally-prevailing labour dispute or other situation which will delay or
impede the giving of notice by any such means, in either the country of origin
or of destination, the notice shall be given by such specified mode as will be
most reliable and expeditious and least affected by such dispute or situation.
12.3 NO ASSIGNMENT. Except as set out in Section 11.6, this Agreement shall not
be assigned or transferred by any Party except with the written consent of the
other. DCI acknowledges and agrees that it has been advised by MPR that control
of MPR may change during the term of this Agreement and agree that such a change
of control shall not constitute an assignment hereunder or affect this Agreement
in any way. Control of any entity by any person shall be deemed to exist if such
entity would be deemed to be controlled directly or indirectly by such person or
persons pursuant to the terms of the Canada Business Corporations Act.
Notwithstanding any other term of this Agreement, MPR may assign its rights
under this Agreement to any Affiliate,
10
<PAGE>
including an Affiliate with which it amalgamates, merges or consolidates or
enters into a similar reorganization, or into which it is wound up as part of a
bona fide reorganization, provided that the Affiliate or successor corporation
agrees to be bound by this Agreement in addition to MPR and with its rights and
obligations as if such Affiliate or successor corporation were an original
signatory hereto. In addition, MPR may assign its rights pursuant to this
Agreement to any other Person upon the acquisition by such Person of all or
substantially all of the assets of MPR, provided that such assignee agrees to be
bound with DCI by the terms of this Agreement as if the assignee had signed this
Agreement in the place and stead of MPR. In connection with any permitted
assignment of this Agreement, MPR may assign such provisions of the Indemnity
Sharing Agreement as relate to this Agreement.
12.4 NO INTERFERENCE WITH THIRD PARTY OBLIGATIONS. Nothing in this Agreement
shall be construed as requiring MPR to disclose any of the Assets or to grant
rights under licenses, or to render any technical assistance, which would
violate any confidentiality undertakings which they have towards third persons
or which would violate any present or future law or decree of any government or
governmental office or agency and nothing contained herein shall require the
disclosure of any the Assets which would increase or impose any obligations on
MPR with respect to third parties. MPR represents that it is not under any
confidentiality obligations which would materially affect the grants of rights
set forth herein.
12.5 NO WAIVER. The failure of any party to give notice to another party of the
breach or non-fulfilment of any term, clause, provision or condition of this
Agreement shall not constitute a waiver thereof, nor shall the waiver of any
breach or non-fulfilment of any term, clause, provision or condition of this
Agreement constitute a waiver of any other breach or non-fulfilment of that or
any other term, clause, provision or condition of this Agreement.
12.6 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties in respect of the Assets and supersedes and
cancels all previous negotiations, agreements, commitments and writings in
respect to the subject matter hereof. No party hereto shall be bound by any
term, clause, provision or condition save as expressly provided in this
Agreement or as duly set forth on or subsequent to the date hereof in writing,
signed by duly authorized officers of the relevant parties.
12.7 INDEPENDENT CONTRACTORS. Nothing in this Agreement shall be construed as
establishing or implying any partnership between the parties, and nothing in
this Agreement shall be deemed to constitute any of the parties as the agent of
another party or authorize any party to incur any expenses on behalf of another
party or to commit another party in any way whatsoever, without obtaining the
other party's prior written consent.
11
<PAGE>
12.8 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the laws of the Province of British Columbia and the parties attorn
to the jurisdiction of the courts of such province.
IN WITNESS WHEREOF, the Parties hereto have signed and executed this Agreement
on the date first above mentioned.
DIGITAL COURIER INTERNATIONAL INC.
by its authorized signatory:
Per: /s/ I.R. Bardsley
_________________________________
Name: Ian Bardsley
Title: Chairman
MPR TELTECH LTD.
by its authorized signatory:
Per: /s/ I.R. Bardsley
__________________________________
Name: Ian Bardsley
Title: Vice-President Business Systems and Applications
Per: /s/ Peter Inman
__________________________________
Name: Peter Inman
Title: Vice-President and Chief Financial Officer
12
<PAGE>
SCHEDULE 1.1.7 - EXISTING PURPOSES
"Existing Purposes" means:
1. with respect to BC TEL, the right to use the Assets for audio
conferencing purposes;
2. with respect to MPR:
2.1 the rights to maintain the Licenses already granted before the
Execution Date to any other Person, which Licenses are listed
below;
2.2 with respect to the OB-100 Store and Forward Switching Hub
Software and the MI-320 ISDN Terminal Adaptor and NDIS
Communication Driver Software, use for real estate information
software products; and
2.3 with respect to the Capella MPEG PC Codec Card Software and
Hardware Technical Information, use in association with the WAVE
Product.
The following existing Licenses have been granted by MPR prior to the Execution
Date:
1. the Agreement between MPR and Royal LePage dated January 1, 1992;
2. the Agreement between MPR and IBM dated February 28, 1992;
3. the Agreement between MPR and PRI dated July 4, 1994; and
4. the Agreement between MPR and Scientific Atlanta dated May 25, 1995.
13
<PAGE>
SCHEDULE 1.1.15 - DESCRIPTION OF SOFTWARE AND HARDWARE
INTELLECTUAL PROPERTY RIGHTS:
<TABLE>
<CAPTION>
ITEM RIGHTS
<S> <C>
OB-100 Store and Forward switching hub software . ownership, subject to licence
back to MPR and BC TEL
for Existing Purposes
DCI Billing system software . ownership
DCI Network management system software . ownership
DCI PC application software . ownership
DCI Audio-on-Demand Demo Prototype software . ownership
MI-320 ISDN terminal adapter Hardware . ownership, subject to licence back to MPR and BC TEL for
Technical Information and NDIS communications Existing Purposes
driver software
Capella MPEG PC Codec Card software . ownership, subject to licence back to MPR and BC TEL
and Hardware Technical Information for Existing Purposes
</TABLE>
14
<PAGE>
SCHEDULE 1.1.18 - THIRD PARTY LICENSES
1. Software License Agreement between MPR and Q900 Software, doing business as
Telenetworks, of 5 Keller Street, Petaluma, CA.
2. Agreement between MPR and Institut fur Rundfunktechnik Gmbh formed by the
correspondence dated 16.10.95, June 6, 1995 and 24.5/95.
15
<PAGE>
SCHEDULE 1.1.21 - TRADEMARKS
<TABLE>
<CAPTION>
Trade-mark Country Apn. No. Wares/Services
- -------------------------- ------------- ---------- -----------------------
<S> <C> <C> <C>
DIGITAL COURIER CANADA 757,046 Providing the delivery of audio and video programming,
INTERNATIONAL advertisements, news recordings and information via a
telecommunications network
DIGITAL COURIER UNITED STATES 74/537,235 Telecommunications services, namely electronic transmission of audio
INTERNATIONAL and video programming, advertising, news recordings, and information
DIGITAL COURIER CANADA 760,312 Providing the delivery of audio and video programming,
INTERNATIONAL advertisements, news recordings and information via a
& design telecommunications network
DIGITAL COURIER UNITED STATES 74/557,267 Telecommunications services, namely electronic transmission of audio
INTERNATIONAL and video programming, advertising, news recordings, and information
& design
CAPELLA CANADA 775,086 Encoder and decoder which converts an analog audio signal
into a digital bit stream, compresses the audio signal, and
decompresses the audio signal
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPELLA UNITED STATES 74/633,799 Encoder and decoder which converts an analog audio signal
into a digital bit stream, compresses
the audio signal, and decompresses the audio signal
DIGITAL RECORD CANADA 781,332 wares: computer software for sampling and downloading new music
REP -----
releases for the radio broadcast industry from an on-
line server using the telephone network
services: providing sampling and downloading of new
--------
music releases for the radio broadcast industry from an on-
line server using the telephone network
DIGITAL RECORD UNITED STATES 74/668,886 wares: computer software for sampling and downloading new
REP -----
music release for the radio broadcast industry from an on-
line server using the telephone network
services: providing sampling and downloading of new music releases for
-------
the radio broadcast industry from an on-line server using the
telephone network
AUDIO CANADA 781,334 wares: computer software for sampling and downloading new
EXCHANGE music releases, record chart ratings information, voice
talent, sound effects libraries, and other
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
broadcast audio material for the radio broadcast industr from an on-
line server using the telephone network services: providing sampling
and downloading of new music releases,
--------
record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
AUDIO UNITED STATES 74/668,884 wares: computer software for sampling and downloading new music
EXCHANGE -----
releases, record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
services: providing sampling and downloading of new music releases,
--------
record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
</TABLE>
3
<PAGE>
SCHEDULE 9.1 - ASSIGNMENT OF COPYRIGHT
ASSIGNMENT OF COPYRIGHT
THIS AGREEMENT made and entered into as of the . day of ., 1995
BETWEEN:
DIGITAL COURIER INTERNATIONAL INC., a corporation duly incorporated
under the laws of Canada and having an office at 8999 Nelson Way,
Burnaby, British Columbia
(hereinafter called the "Assignee")
OF THE FIRST PART
AND:
MPR TELTECH LTD., a corporation duly incorporated under the laws of
Canada and having its executive offices at 8999 Nelson Way, Burnaby,
British Columbia
(hereinafter called the "Assignor")
OF THE SECOND PART
WHEREAS the Assignor has prepared, written, created or developed certain
software programs, as set out in Attachment 1 hereto (hereinafter called the
"Software");
AND WHEREAS the Assignor desires to transfer entire ownership of the copyright
in the Software to the Assignee;
NOW THEREFORE in consideration of $1 and other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the Assignor and
the Assignee agree as follows:
1. The Assignor hereby sells, assigns and transfers to the Assignee the entire
right, title, interest, ownership and all subsidiary rights in and to the
Software throughout the world, including, without limitation, the copyright
thereto and the right to secure copyright registration therein.
2. The Assignor hereby acknowledges and agrees that, as between the Assignor
and the Assignee, Assignee owns the entire right, title and interest in the
Software, including
1
<PAGE>
the right to reproduce, prepare derivative works based on the Software,
distribute for sale, to perform publicly and to display the Software.
3. This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective lawful successors and permitted
assigns.
4. This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the parties hereto shall
attorn to the jurisdiction of the courts of such province.
DATED as of this . day of ., 1995.
DIGITAL COURIER INTERNATIONAL INC.
by its authorized signatory:
Per: _____________________________
Name:
Title:
MPR TELTECH LTD.
by its authorized signatory:
Per: _____________________________
Name:
Title:
Per: _____________________________
Name:
Title:
2
<PAGE>
ATTACHMENT 1
TO ASSIGNMENT OF COPYRIGHT
OB-100 Switching Hub Software
DCI Billing system software
DCI Network management system software
DCI PC Application Software
Capella/MI-300/DSPC/DDPB
- ------------------------
- - MPEG encode and decode firmware
- - Capella/MI-300/DDPB controllers and audio utilities firmware
- - AudioCap Application program
- - MIMPG Windows Audio DLL
- - DSIIC DSP56K Debug Monitor and Flash Programming Utilities
- - Capella production test software
- - G.722/G.711 firmware
- - Audition firmware
MI-320
- ------
- - NDIS Media Access Card Driver
- - MI-3X0 Driver
- - MI-3X0 Firmware
- - ComMon MI-320 Test Application
- - Flash Programming Utilities
- - MI-320 test software
Other Items
- -----------
- - Audio on Demand Application
- - Audition Application
Hardware
- --------
Circuit Card design and manufacturing information for:
- - Capella
- - Capella V.35 daughter board
- - MI320
- - MI320 U Interface board
<PAGE>
SCHEDULE 9.2 - ASSIGNMENT OF TRADEMARKS
This Assignment is made the ____ day of __________________, 199_,
BETWEEN MPR TELTECH LTD. (hereinafter called the "Assignor"), whose principal
office or place of business is 8999 Nelson Way, Burnaby, British Columbia,
Canada, AND DIGITAL COURIER INTERNATIONAL INC. (hereinafter called the
"Assignee"), whose principal office or place of business is 8999 Nelson Way,
Burnaby, British Columbia, Canada.
In consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration paid to it by the Assignee, the receipt and sufficiency
of which is hereby acknowledged, the Assignor as full beneficial owner hereby
sells, assigns, and transfers unto the Assignee all of its right, title,
interest in and to the following unregistered trade-marks:
TRADE-MARK APN. NO.
- ---------------------------------- --------
DIGITAL COURIER INTERNATIONAL 757,046
DIGITAL COURIER INTERNATIONAL & 760,312
DESIGN
CAPELLA 775,086
DIGITAL RECORD REP 781,332
AUDIO EXCHANGE 781,334
together with the benefit of any use of the trade-marks by the Assignor, and the
goodwill of the business relating to the said trade-marks and to the wares or
services associated with them, to hold unto the Assignee absolutely.
IN WITNESS WHEREOF the parties have executed these presents on the
date first above written.
MPR TELTECH LTD.
by: _____________________________
signature of representative
its: _____________________________
office held by representative
1
<PAGE>
DIGITAL COURIER INTERNATIONAL
INC.
by: _____________________________
signature of representative
its: _____________________________
office held by representative
2
<PAGE>
U.S. TRADEMARK ASSIGNMENT
-------------------------
THIS ASSIGNMENT effective the ____ day of __________________, 199_,
from MPR TELTECH LTD., a corporation organized and existing under the laws of
Canada and having its principal place of business at 8999 Nelson Way, Burnaby,
British Columbia, Canada, (hereinafter referred to as "ASSIGNOR") to DIGITAL
COURIER INTERNATIONAL INC., a corporation organized and existing under the laws
of Canada and having its principal place of business at 8999 Nelson Way,
Burnaby, British Columbia, Canada (hereinafter referred to as "ASSIGNEE"),
WITNESSETH:
WHEREAS ASSIGNOR has adopted and is the owner of the marks set forth
in the United States trademark applications listed on Schedule A;
WHEREAS ASSIGNEE has acquired certain assets of ASSIGNOR relating to
software and hardware designs, including the marks relating to that business,
together with the goodwill of the business with which said marks are used;
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby acknowledged, ASSIGNOR
does hereby sell, assign and transfer unto ASSIGNEE all right, title and
interest in and to the trademarks listed on Schedule A used by ASSIGNOR in
connection with software and hardware and including the applications for
registration thereof, the right to recover for past infringement thereof, and
all goodwill of the business in connection with which said trademarks are used
and which is appurtenant thereto, and which is symbolized by said trademarks.
MPR TELTECH LTD.
_____________________________
3
<PAGE>
SCHEDULE A
UNITED STATES TRADEMARK APPLICATIONS
TRADEMARK SERIAL NO.
- ----------------------------------------- ----------
DIGITAL COURIER INTERNATIONAL 74/537,235
DIGITAL COURIER INTERNATIONAL & DESIGN 74/557,267
CAPELLA 74,633,799
DIGITAL RECORD REP 74,668,886
AUDIO EXCHANGE 74/668,884
4
<PAGE>
EXHIBIT 10.5
ASSET TRANSFER AGREEMENT
------------------------
THIS AGREEMENT is made as of the 15th day of November, 1995
BETWEEN:
MPR TELTECH LTD., a corporation incorporated under the laws of Canada
----------------
(hereinafter called the "Vendor")
OF THE FIRST PART
AND:
DIGITAL COURIER INTERNATIONAL INC., a corporation incorporated under
the laws of Canada
(hereinafter called the "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Vendor is the owner of certain assets and equipment, as more
particularly described herein, that are used by the Purchaser in its business
and operations; and
B. The Purchaser wishes to purchase, and the Vendor wishes to sell, the
assets and equipment that are owned by the Vendor and used by the Purchaser in
its business and operations, upon the terms and conditions herein set forth.
NOW THEREFORE in consideration of the covenants herein contained, the
parties agree as follows:
ARTICLE 1
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Definitions. In this Agreement (including the recitals, this Article and
-----------
each Schedule), unless there is something in the subject matter or context
inconsistent therewith or unless otherwise expressly provided, the following
words and expressions shall have the following meanings:
(a) "Affiliate" means:
<PAGE>
-2-
(i) with respect to a natural person, the spouse of such person, any
corporation that is directly or indirectly controlled by such
person and any corporation that employs such person as a
director, officer or employee; and
(ii) with respect to a corporation an affiliate of such corporation
within the meaning of "affiliated" under Section 2(2) of the
Canada Business Corporations Act;
--------------------------------
(b) "Assets" means the furniture, office furnishings, equipment and
Contracts, all as detailed in Schedule A;
(c) "Books and Records" means copies of all books, records, files,
documents and other written information relating to the Assets in the
possession of the Vendor, its representatives and agents, including
title and contracts files, operating and maintenance manuals and
expense records;
(d) "Claim" has the meaning ascribed thereto in subsection 1(b) of the
Indemnity Sharing Agreement, provided, for the purpose of this
Agreement, that any such Claim shall only arise pursuant to this
Agreement;
(e) "Closing" means the completion of the sale to and the purchase by the
Purchaser of the Assets in accordance with Article 8;
(f) "Closing Time" and "Closing Date" mean the time and day determined
pursuant to Section 8.1;
(g) "Contracts" means the contracts and other arrangements described in
Schedule A;
(h) "Encumbrance" means a security interest, adverse claim (including
right of first purchase, option, first refusal or pre-emption),
burden, charge or other interest attaching to the Assets and created
by, through or under the Vendor;
(i) "Indemnity Sharing Agreement" means a certain agreement to be entered
into among the Vendor, the Purchaser, Kwikstar Communications Ltd. and
CIBC Wood Gundy Capital (SFC) Inc.;
(j) "person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature;
and
(k) "Purchase Price" means the amount to be paid by the Purchaser to the
Vendor in consideration for the Purchased Assets as set out in Section
2.2.
1.2 Interpretation. For purposes of this Agreement, except as otherwise
--------------
expressly provided:
<PAGE>
-3-
(a) "this Agreement" means this agreement, including the Schedules hereto,
and any agreement, document or instrument entered into, made or
delivered pursuant to the terms hereof, as any of them may from time
to time be supplemented or amended and in effect;
(b) all references in this Agreement to a designated "Article", "Section",
"Subsection" or other subdivision or to a Schedule are to the
designated Article, Section, Subsection or other subdivision of, or
Schedule to, this Agreement;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision or
Schedule;
(d) the headings in this Agreement are for convenience only and do not
form a part of this Agreement and are not intended to interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof;
(e) unless expressed to be in some other currency, all references to
currency refer to lawful money of Canada;
(f) any reference to a corporate entity includes and is also a reference
to any corporate entity that is a successor to such entity; and
(g) words importing the masculine gender include the feminine or neuter
gender and words in the singular include the plural and vice versa.
1.3 Schedules. Schedule A - Assets is attached to and incorporated as
---------
part of this Agreement.
ARTICLE 2
---------
PURCHASE AND SALE
-----------------
2.1 Purchase and Sale. Upon the terms and subject to the conditions herein
-----------------
contained, the Vendor shall sell and convey the Assets to the Purchaser and the
Purchaser shall purchase and receive the Assets from the Vendor.
2.2 Purchase Price. In full consideration for the purchase by the Purchaser of
--------------
the Assets the Purchaser shall pay to the Vendor the sum of $707,937.
2.3 Manner of Payment. The Purchaser shall issue to the Vendor 707,937 common
-----------------
shares in the capital of the Purchaser, in full satisfaction of the Purchase
Price.
<PAGE>
-4-
2.4 Payment of Taxes on Sale and Transfer. The Purchaser shall be responsible
-------------------------------------
for and shall pay when due all transfer taxes, sales taxes, social services
taxes, goods and services taxes or similar taxes and any registration fees
payable in respect of the sale and transfer of the Assets to the Purchaser.
2.5 Accounts Receivable. The Vendor shall provide commercially reasonable
-------------------
assistance to the Purchaser with respect to the collection from others by the
Purchaser of any accounts receivable which relate to the Assets and which
accrued prior to the Closing. If the Vendor receives payment of any such
accounts receivable such payment shall be received in trust for the Purchaser
and shall forthwith be paid by the Vendor to the Purchaser. The Vendor shall
provide the Purchaser with reasonable details of any payment received by the
Vendor and paid over to the Purchaser pursuant to this Section, and, if
reasonably requested by the Purchaser, a full accounting of all such payments
received by the Vendor.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
--------------------------------------------
3.1 Representations and Warranties. To induce the Purchaser to enter into and
------------------------------
to complete the transactions contemplated by this Agreement, the Vendor
represents and warrants to the Purchaser, as warranties and representations that
are true at the date hereof and at the Closing Time as if such warranties and
representations were made at such time, that:
(a) the Vendor is, and at the Closing Time shall continue to be, a
corporation duly organized and validly existing under the laws of
Canada and extra-provincially registered under the laws of British
Columbia;
(b) the Vendor has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations under this
Agreement;
(c) the consummation by the Vendor of the transactions contemplated herein
will not violate, nor be in conflict with, any provision of any
agreement or instrument to which the Vendor is a party or by which the
Vendor is bound or any judgment, decree, order, law, statute, rule or
regulation applicable to the Vendor;
(d) the Vendor owns and possesses and has a good and marketable title to
the Assets and the Vendor's interest in the Assets is now, and will be
at the Closing Time, free and clear of all Encumbrances;
(e) subject to the covenants, conditions and stipulations in the
Contracts, the Purchaser may enter into and upon, hold and enjoy the
Assets for the residue of their respective terms and all renewals or
extensions thereof for the Purchaser's own use and benefit without any
interruption of or by the Vendor or any other person claiming by,
through or under the Vendor;
<PAGE>
-5-
(f) this Agreement has been duly executed and delivered by the Vendor and
all other documents executed and delivered by the Vendor pursuant
hereto shall have been duly executed and delivered by the Vendor; this
Agreement does, and such other documents will, constitute legal, valid
and binding obligations of the Vendor enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, preference,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and to the discretion of courts with respect to
equitable or discretionary remedies and defences;
(g) to the best of the Vendor's information, there are no claims,
proceedings, actions or lawsuits in existence, threatened or asserted
against or with respect to the Assets which would have a material
adverse effect on the Assets or the value thereof;
(h) to the best of the Vendor's knowledge, no party is in default of any
obligation under any of the Contracts in any material respect;
(i) the Vendor is not a non-resident of Canada within the meaning of
section 116 of the Income Tax Act (Canada);
--------------
(j) all ad valorem, property, production and similar taxes and assessments
based on or measured by the ownership or operation of the Assets or
the receipt of proceeds therefrom payable by the Vendor to the Closing
Time and for all prior years have been properly paid and discharged or
will be paid by the Vendor;
(k) there are no material agreements in respect of the Assets to which the
Vendor is a party, except the Contracts; and
(l) the transfer of Assets to the Purchaser hereunder has been authorized
and approved by the Board of Directors of the Vendor;
(m) the Vendor's goods and services tax registration number is 103678892.
ARTICLE 4
---------
COVENANTS OF THE VENDOR
-----------------------
4.1 Satisfaction of Conditions. The Vendor shall fulfil or satisfy with all
--------------------------
due diligence all of the conditions referred to in Section 7.1 and Section 8.2,
to the extent that fulfilment or satisfaction is within the control of the
Vendor, and the Vendor shall use reasonable commercial efforts to cause the
fulfilment or satisfaction of the conditions referred to in Section 7.1 and
Section 8.2, to the extent that such fulfilment or satisfaction is not within
the control of the Vendor.
<PAGE>
-6-
4.2 Availability of Documents. The Vendor shall make available to the
-------------------------
Purchaser and its authorized representatives, during the period prior to
Closing, all agreements affecting the Assets and title documents in respect of
the Assets as are in its possession, for such inspection as the Purchaser may
reasonably require.
4.3 Maintenance of Assets. Until Closing, the Vendor shall, to the extent that
---------------------
the nature of its business permits, and subject to all agreements applicable to
the Assets:
(a) maintain the Assets in a proper and prudent manner;
(b) pay or cause to be paid all costs and expenses relating to the Assets;
(c) perform and comply with all covenants and conditions contained in the
Contracts; and
(d) conduct or cause to be conducted, in accordance with generally
accepted industry practices, such activities relative to the Assets as
can reasonably be regarded as being in the ordinary course of business
for the Vendor.
4.4 Contracts Requiring Consent. Where the consent of a third party is
---------------------------
required to permit the transfer or assignment to the Purchaser of the Vendor's
interest in any of the Contracts, the assignment of those agreements and rights
in respect of which the required consent has not been received on or before the
Closing Time will not be effective until the applicable consent has been
received, and such agreement or right will be held by the Vendor following the
Closing in trust for the benefit and use of the Purchaser. The Vendor, both
before and after Closing, shall cooperate with the Purchaser in order to obtain
any such required consents. After Closing, the Vendor shall only make use of
such agreements and rights in accordance with the directions of the Purchaser,
provided such directions do not conflict with the terms of such Contracts.
4.5 Insurance. The Assets shall be at the risk of the Vendor from the date
---------
hereof until the completion of Closing. The Vendor shall maintain all policies
of insurance, binders, endorsements and riders now in effect or renewals thereof
related to the Assets in full force and effect, at its expense, until the
completion of Closing. No insurance binders, endorsements or riders are provided
with respect to any Contracts. In the event that any physical loss or damage to
the Assets occurs between the date hereof and the completion of Closing, and the
Purchaser elects to proceed with the Closing notwithstanding Section 7.1(c), the
Vendor shall, at the Closing, assign to the Purchaser any right on the part of
the Vendor to receive insurance proceeds in respect of such physical loss or
damage. The Purchaser shall have no other recourse against the Vendor in respect
of any such loss or damage.
<PAGE>
-7-
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
5.1 Representations and Warranties. The Purchaser hereby represents and
------------------------------
warrants to the Vendor that:
(a) the Purchaser is, and at the Closing Time shall continue to be, a
corporation duly organized and validly existing under the laws of
Canada and extra-provincially registered under the laws of British
Columbia;
(b) the Purchaser has all requisite corporate power and authority to enter
into this Agreement and to purchase and pay for the Assets on the
terms described herein and to perform its other obligations under this
Agreement;
(c) the consummation by the Purchaser of the transactions contemplated by
this Agreement will not violate, nor be in conflict with, the
provisions of any agreement or instrument to which the Purchaser is a
party or by which the Purchaser is bound, or any judgment, decree,
order, law, statute, rule or regulation applicable to the Purchaser;
(d) this Agreement has been duly executed and delivered by the Purchaser
and all documents required hereunder to be executed and delivered by
the Purchaser shall have been duly executed and delivered. This
Agreement does, and all such other documents will, constitute legal,
valid and binding obligations of the Purchaser enforceable in
accordance with their respective terms, subject to bankruptcy,
insolvency, preference, reorganization, moratorium and other similar
laws affecting creditors' rights generally and the discretion of
courts with respect to equitable or discretionary remedies and
defences; and
(e) the transfer of Assets to the Purchaser and the issuance of the shares
to the Vendor hereunder has been authorized and approved by the Board
of Directors of the Purchaser.
(f) The Purchaser's goods and services tax registration number is
R140155268.
ARTICLE 6
---------
COVENANTS OF THE PURCHASER
--------------------------
6.1 Satisfaction of Conditions. The Purchaser shall fulfil or satisfy with all
--------------------------
due diligence all of the conditions referred to in Section 7.2 and Section 8.3,
to the extent that the fulfilment or satisfaction thereof is within the control
of the Purchaser, and the Purchaser shall use reasonable commercial efforts to
cause the conditions referred to in Section 7.2 and Section 8.3 to be
<PAGE>
-8-
fulfilled or satisfied, to the extent that the fulfilment or satisfaction
thereof is not within the control of the Purchaser.
ARTICLE 7
---------
CONDITIONS TO CLOSING
---------------------
7.1 Conditions for Purchaser's Benefit. The obligations of the Purchaser under
----------------------------------
this Agreement shall be subject to the satisfaction at or prior to the Closing
Time of the following conditions (each of which is for the exclusive benefit of
the Purchaser and may be waived by the Purchaser):
(a) all representations and warranties of the Vendor contained in this
Agreement shall be true in all material respects at and as of the
Closing Time and the Vendor shall have performed and satisfied in all
material respects all covenants and agreements required by this
Agreement to be performed and satisfied by the Vendor at or prior to
the Closing Time;
(b) the Purchaser shall have received a certificate of a senior officer of
the Vendor dated the Closing Date, in form reasonably satisfactory to
the Purchaser, to the effect that the conditions specified in
paragraph (a) above have been satisfied;
(c) no material adverse change in the physical condition of the Assets
shall have occurred from the date of this Agreement to the Closing
Time;
7.2 Conditions for Vendor's Benefit. The obligations of the Vendor under this
-------------------------------
Agreement shall be subject to the satisfaction at or prior to the Closing Time
of the following conditions (each of which is for the exclusive benefit of the
Vendor and may be waived by the Vendor):
(a) all representations and warranties of the Purchaser contained in this
Agreement shall be true in all material respects at and as of the
Closing Time and the Purchaser shall have performed and satisfied in
all material respects all covenants and agreements required by this
Agreement to be performed and satisfied by the Purchaser at or prior
to the Closing Time;
(b) the Vendor shall have received a certificate of a senior officer of
the Purchaser dated the Closing Date, in form reasonably satisfactory
to the Vendor, to the effect that the conditions specified in
paragraph (a) have been satisfied;
7.3 Non-Fulfilment of Conditions. If any of the conditions referred to in
----------------------------
Sections 7.1 or 7.2 shall not be fully satisfied at or before the Closing Time,
then the party for whose benefit such condition has been included in this
Agreement may, at its option, either:
(a) complete the transactions contemplated by this Agreement, in which
event such party shall be deemed to have waived such condition; or
<PAGE>
-9-
(b) elect not to complete the transactions contemplated by this Agreement.
7.4 No Prejudice to Other Rights. No waiver by either party of the conditions
----------------------------
set forth in Sections 7.1 or 7.2 in whole or in part shall in any way prejudice
or limit the rights and remedies of either party to claim or recover damages and
compensation from the other party in respect of any inaccuracy in any
representation or warranty that is not the subject of the waiver, or in respect
of any breach or non-performance of any covenant or agreement of the other party
contained in this Agreement that is not the subject of such waiver. No election
by either party not to complete the transactions contemplated by this Agreement
as a result of any breach or non-performance by the other party of any covenant
or agreement contained in this Agreement, which breach or non-performance has
resulted in a condition set forth in Section 7.1 or Section 7.2 failing to be
satisfied at or before the Closing Time, shall in any way prejudice or limit the
rights of the party electing not to complete in respect of such breach or non-
performance by the other party.
ARTICLE 8
---------
CLOSING
-------
8.1 Time and Place of Closing. The Closing shall take place at the offices of
-------------------------
the Vendor at 8999 Nelson Way, Burnaby, British Columbia, commencing at 10:00
a.m. on the 15th day of November, 1995, or at such other time and place as the
parties may agree.
8.2 Vendor's Obligations on Closing. At the Closing, the Vendor shall deliver
-------------------------------
to the Purchaser:
(a) a certificate of a senior officer of the Vendor pursuant to Section
7.1(b);
(b) the prescribed form electing to have section 167 of the Excise Tax Act
(Canada) apply to the transfer of the Assets, executed on behalf of
the Vendor; and
(c) such notices and directions to any third parties having an interest in
the Assets as may be reasonably required by the Purchaser to notify
such third parties of the Purchaser's acquisition.
8.3 Purchaser's Obligations on Closing. At the Closing, the Purchaser shall
----------------------------------
deliver to the Vendor:
(a) a share certificate endorsed in the name of the Vendor and duly
executed by the Purchaser, for the number of shares of the Purchaser
set out in Section 2.3;
(b) a certificate of a senior officer of the Purchaser pursuant to Section
7.2(b); and
<PAGE>
-10-
(c) the prescribed form electing to have section 167 of the Excise Tax Act
(Canada) apply to the transfer of the Assets, executed on behalf of
the Purchaser.
ARTICLE 9
---------
POST-CLOSING COVENANTS
----------------------
9.1 Delivery of Books and Records. The Vendor shall, as soon as practicable
-----------------------------
after the Closing Date, deliver to the Purchaser copies of the Books and
Records.
9.2 Signage. After Closing, the Purchaser shall remove any signs which
-------
indicate the Vendor's ownership or operation of the Assets.
ARTICLE 10
----------
LIABILITY AND INDEMNIFICATION
-----------------------------
10.1 Survival of Representations and Covenants of the Vendor. With the
-------------------------------------------------------
exception of those covenants of the Vendor which are to be performed after the
Closing (which shall survive until one year after the conclusion of the period
during which this Agreement requires such covenants to be performed), each
representation, warranty, covenant and agreement of the Vendor contained herein
shall survive the execution and delivery of this Agreement and the Closing, and
shall expire on the date provided in the Indemnity Sharing Agreement and shall
be subject to the terms and conditions set out in the Indemnity Sharing
Agreement.
10.2 Liability of the Vendor. Notwithstanding anything else in this Agreement,
-----------------------
the obligation of the Vendor to indemnify the Purchaser is subject to the terms
of and as set out in the Indemnity Sharing Agreement.
ARTICLE 11
----------
GENERAL
-------
11.1 Invalidity of Provisions. In the event that any particular provision or
------------------------
provisions of this Agreement is or are determined to be invalid, illegal or
unenforceable in any respect, then the particular provision or provisions shall
be deemed to be severed from the remainder of this Agreement and the validity,
legality or enforceability of the remaining provisions contained in this
Agreement shall not in any way be affected or impaired, unless as a result of
any such determination this Agreement would fail in its essential purpose.
11.2 Waiver. No failure on the part of either party to exercise any right or
------
remedy in respect of this Agreement shall operate as a waiver thereof, unless it
is in writing and signed by such party. Unless expressly provided for therein,
such waiver shall not limit or affect the rights of the party with respect to
any other or subsequent breach of the same or any other provision. No
<PAGE>
-11-
single or partial exercise of any right or remedy in respect of this Agreement
shall preclude any other or further exercise thereof or the exercise of any
right or remedy at law or in equity or by statute or otherwise conferred.
11.3 Further Assurances. At Closing and thereafter as may be necessary or
------------------
desirable, and without further consideration, each of the parties shall execute,
acknowledge and deliver such other documents and shall take or refrain from
taking such action as the other party may reasonably require to evidence, carry
out and give full effect to the terms, conditions, intent and meaning of this
Agreement, to assure the completion of the transactions contemplated hereby, and
to complete any permitted assignment by any party pursuant to Section 11.9 of
this Agreement.
11.4 Notices. Any notice, direction or other instrument required or permitted
-------
to be given hereunder shall be in writing and may be given by facsimile
transmission or by delivery, addressed as follows:
The Vendor: MPR Teltech Ltd.
8999 Nelson Way
Burnaby, British Columbia
V5A 4B5
Attention: Ian Bardsley, Vice-President Business
Systems and Applications and Peter Inman, Vice-
President and Chief Financial Officer
Facsimile No.: 293-6161
The Purchaser: Digital Courier International Inc.
8618 Commerce Court
Burnaby, British Columbia
V5A 4N6
Attention: Chief Executive Officer
Facsimile No.: 473-5835
Either of the parties may from time to time change its address for service
herein by giving written notice to the other party. Any notice may be served by
personal service upon a party or by facsimile to the number for notice
hereunder. Any notice given by service upon a party and any notice given by
facsimile shall respectively be deemed to be given to and received by the
addressee on the day (except Saturdays, Sundays, and statutory holidays) of
service or the day of receipt.
11.5 Conflict in Terms. Wherever any provision of any Schedule to this
-----------------
Agreement conflicts with any provision in the body of this Agreement,
<PAGE>
-12-
the provisions of the body of this Agreement shall prevail. All documents
executed and delivered pursuant to this Agreement are subordinate to the
provisions of this Agreement and, except as otherwise expressly provided, the
provisions of this Agreement shall govern and prevail in the event of a conflict
between the provisions of any such document and the provisions of this
Agreement.
11.6 Governing Law. The validity and interpretation of this Agreement and the
-------------
legal relations of the parties shall be governed by and construed in accordance
with the laws in force from time to time in the Province of British Columbia,
and the Courts of the Province of British Columbia and appellate courts
therefrom shall have exclusive jurisdiction to determine all matters in dispute
hereunder and the parties hereby attorn to the jurisdiction of such Courts.
11.7 Time of Essence. Time shall be of the essence in this Agreement.
---------------
11.8 Entire Agreement. This Agreement, including the Schedules thereto, states
----------------
and comprises the entire agreement between the parties and shall supersede and
replace any and all prior agreements between the parties relating to the sale
and purchase of the Assets and may be amended only by written instrument signed
by all parties.
11.9 Assignment. This Agreement and the rights and obligations under this
----------
Agreement are not assignable, except as set out below. Any party which is a
body corporate may assign its rights under this Agreement to any Affiliate,
including an Affiliate with which it amalgamates, merges or consolidates or
enters into a similar reorganization, or into which it is wound up as part of a
bona fide reorganization, provided that the Affiliate or successor corporation
agrees to be bound by this Agreement in addition to the original party and with
its rights and obligations as if such Affiliate or successor corporation were an
original signatory hereto. In addition, the Vendor may assign its rights under
this Agreement to any other person, upon the acquisition by such other person of
all or substantially all the assets of the Vendor, provided that such assignee
agrees to be bound with the Purchaser by the terms of this Agreement as if the
assignee had signed this Agreement in the place and stead of the Vendor. In
connection with any permitted assignment of this Agreement, MPR may assign such
provisions of the Indemnity Sharing Agreement as relate to this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
MPR TELTECH LTD.
By: /s/ I.R. Bardsley
__________________________________
By: /s/ Peter Inman
__________________________________
<PAGE>
-13-
DIGITAL COURIER INTERNATIONAL INC.
By: /s/ I.R. Bardsley
__________________________________
By: /s/ Peter Inman
__________________________________
<PAGE>
SCHEDULE A
LIST OF ASSETS
--------------
<TABLE>
<CAPTION>
1. FURNITURE
------------
<C> <S> <C>
P.O. IDENTIFIER SUPPLIER DESCRIPTION
48241 Syncor Hutch
48460 Syncor Electrical components - DCI control centre
48045 Syncor Electrical components - DCI control centre
47022 Syncor Task lighting - DCI control centre
46372 Syncor SMED furniture - DCI control centre
45952-1* Syncor Global Viero - manager offices
[Asset Tag
54716-00]
</TABLE>
* capital
<PAGE>
<TABLE>
<CAPTION>
P.O. SUPPLIER DESCRIPTION
IDENTIFIER
<C> <S> <C>
46261 Albrite Table/desk lamps
46679 Apco Graphics Signage holders/inserts
46444 Arpac Storage Shelving-shipping area
46247 Brooks Corning Reception seating/table
46298 Datafile Control centre shelving/surfaces
46967 Florenco Plants & pots
45964-1 Furniture King Printer stands
45929 Furniture King 8 Bookcases
46591-1* Jordans SDT flooring
46381* 3M Canada SDT flooring
46620* McIvers 2 fridges
46489 Murphy's Coat hooks
</TABLE>
* These are under project #917003-005
<PAGE>
<TABLE>
<CAPTION>
P.O. SUPPLIER DESCRIPTION
IDENTIFIER
<S> <C> <C>
48368 Heritage Rail pedestals for drawers
48147 Heritage 2 drawer lateral filing cabinet
47929 Heritage Custom printer cart
47342 Heritage Magazine stand & bookcase
47115 Heritage Magazine stand - engineering area of DCI
47087 Heritage Steelcase cabinets
46969 Heritage Steelcase cabinets
46659 Heritage Boardroom, end tables, magazine stand
46405 Heritage Sofa & armchair
46156 Heritage DCI lab furniture & mail paperflow
46027 Heritage Egan cabinets, meeting table, lunchroom tables
45943 Heritage Manager & meeting room guest chairs, cabinets,
lunch room chairs, side chairs
45809 Heritage Manager & demo room, reception, desk chairs
45808* Heritage Steelcase components for workstations
[Asset Tag
54722-00 FR]
</TABLE>
* capital
<PAGE>
INSERT ARRANGEMENT OF FURNITURE SCHEDULE HERE
<PAGE>
3. CONTRACTS
---------
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-06 Airdate Traffic Services Ltd. M. Burns 950302 960302 DCI Services Agreement
SALE 950119-07 Airwaves Sound Design Ltd. R. Kozak 950110 970109 DCI Services Agreement
SALE 950731-02 Altantic Records A. Kozak 950727 960727 DCI Services Agreement
SALE 950419-05 Audio House, Inc. (KOME) R. Kozak 950418 960418 DCI Services Agreement
SALE 950517-03 Audioimage Productions, Inc. A. Kozak 950515 960515 DCI Services Agreement
SALE 950328-04 Balsa Broadcasting Corporation A. Kozak 950321 960321 DCI Services Agreement
SALE 950330-06 Bell Sound Studios A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-10 Blackburn Radio Inc. (CFPL) M. Burns 950307 960307 DCI Services Agreement
SALE 950313-16 CFFX/CFMK-FM Radio M. Burns 950302 960302 DCI Services Agreement
SALE 950330-05 CFHK Radio Ltd. A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-18 CFRA/CKKL-FM M. Burns 950228 960228 DCI Services Agreement
SALE 950313-21 CFRB/CKFM (MIK 99.9) M. Burns 950310 960310 DCI Services Agreement
SALE 950228-05 CFRN CFBR FM M. Burns 950222 960222 DCI Services Agreement
SALE 950313-19 CHED/CKNG division of Western Radio Group Ltd. M. Burns 960308 960308 DCI Services Agreement
SALE 950313-22 CHEZ-FM Inc. M. Burns 950310 960310 DCI Services Agreement
SALE 950313-071 CHUC Radio M. Burns 950307 960307 DCI Services Agreement
SALE 950119-05 CHUM Ltd. (CFUN/CHQM FM) R. Kozak 950102 970101 DCI Services Agreement
SALE 950119-04 CHUM Ltd. (CJOH/C100) R. Kozak 941220 961220 DCI Services Agreement
SALE 950601-05 CITE-FM A. Kozak 950529 960529 DCI Services Agreement
SALE 950313-12 CJEZ FM M. Burns 950301 960301 DCI Services Agreement
SALE 950420-02 CJMC A. Kozak 950418 960418 DCI Services Agreement
SALE 950330-04 CKIS-CHOM FM (CHUM Quebec) A. Kozak 950323 960323 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-17 CKKQ-FM M. Burns 950301 960301 DCI Services Agreement
SALE 950228-04 CKLG CFOX Radio M. Burns 950220 960220 DCI Services Agreement
SALE 950313-11 CKRY-FM M. Burns 950311 960311 DCI Services Agreement
SALE 950313-05 CKSL AM/CIQM FM M. Burns 950302 960302 DCI Services Agreement
SALE 950313-20 Commercial Recording Studios Inc. R. Kozak 950308 960308 DCI Services Agreement
SALE 950119-08 Dick & Rogers Sound Studio Ltd. R. Kozak 950110 970109 DCI Services Agreement
SALE 950313-13 Fraser Valley Radio Group M. Burns 950301 960301 DCI Services Agreement
SALE 950609-02 Heritage Wisconsin Broadcasting Corporation A. Kozak 950601 960601 DCI Services Agreement
SALE 950119-06 Jim Pattison Industries Ltd. (CJJR FM) R. Kozak 950102 970101 DCI Services Agreement
SALE 950510-04 KFI-AM A. Kozak 950501 960501 DCI Services Agreement
SALE 950330-03 KROQ-FM A. Kozak 950323 960323 DCI Services Agreement
SALE 950609-05 KRPM-FM A. Kozak 950601 960601 DCI Services Agreement
SALE 950420-01 LBJ Broadcasting A. Kozak 950418 960418 DCI Services Agreement
SALE 950130-03 Manta Eastern Sound Ltd. A. Kozak 950123 960131 DCI Services Agreement
SALE 950228-02 Metromedia CMR Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950228-03 Mount Royal Broadcasting Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950130-06 Newcap Broadcasting Ltd. (CFRQ-FM) A. Kozak 950125 960125 DCI Services Agreement
SALE 950313-15 Panfor Dubbing Ltd. M. Burns 950301 960301 DCI Services Agreement
SALE 950328-03 Q107 FM - AM640 Radio A. Kozak 950315 960315 DCI Services Agreement
SALE 950119-03 Reel Time Recorders Ltd. R. Kozak 941221 961221 DCI Services Agreement
SALE 950328-02 ROCK 95 FM A. Kozak 950313 980313 DCI Services Agreement
SALE 950405-02 Shaw Radio Ltd. A. Kozak 950330 960330 DCI Services Agreement
SALE 950130-04 Sounds Interchange Ltd. A. Kozak 950123 960123 DCI Services Agreement
SALE 950313-14 South Fraser Broadcasting A. Kozak 950301 960301 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALE 940819-01 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
SALE 940819-07 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
SALE 9501230-05 Sun Radio Limited (CIEZ FM) A. Kozak 950125 960125 DCI Services Agreement
SALE 950123-03 Telemedia Communications Ontario, Inc. (CJCL Radio) R. Kozak 941221 951221 DCI Services Agreement
SALE 950609-03 WBBF Inc. A. Kozak 950601 960601 DCI Services Agreement
SALE 950609-04 WIL/WRTH/KIHT A. Kozak 950601 960601 DCI Services Agreement
LICENSE 950109-01 Danmarks Radio 950101 Source Code Software
License Agreement for
Audition (TM)
</TABLE>
<PAGE>
4. LIST OF TEST EQUIPMENT
----------------------
<TABLE>
<CAPTION>
ASSET TAG # DESCRIPTION
- --------------------------------------------------------------------------
<C> <S>
423520 Pulse Generator 8011
432260 Digital Multimeter
523000 Tascam #112 cassette recorder
524370 Digital Oscilloscope 2430A
525310 DAT Recorder
526710 Logic Analyzer
528630 Tektronix 2440 Oscilloscope
528620 Audio Analyzer
529390 BRIU
529370 ASU 200-6
529380 BRIU
531160 500 m/s Digital Oscilloscope
531700 SCSI Bus Analyzer/Emulator
531940 PLD Design Tools & Programmer
534430 Fluke Multimeter 87
534420 88 pin ALLPRO Upgrade for MACH 130
534410 STDRD Capture MDLE: SC-4400-LP 4050
533900 TEKELEC CHAMELEON 20-1 with ISDN
536310 Basic Rate Interface Unit for TELEO
536540 SLM Meter Type 2230
539930 Protocol Analyzer
536311 ASK 200 REL 10 UPGRADE
536262 PRIU upgrade (X2)
541190 Management Console
5459100 ISDN Protocol Analyzer
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 10.6
SUBSCRIPTION AGREEMENT
TO: Digital Courier International Inc.
8618 Commerce Court
Burnaby, BC V5A 4N6
AND TO: MPR Teltech Ltd.
8999 Nelson Way
Burnaby, BC V5A 4B5
1. SUBSCRIPTION
------------
Subject to the terms and conditions hereinafter contained the
undersigned (the "Purchaser") hereby subscribes for and agrees to purchase from
Digital Courier International Inc. (the "Company") 4,000,000 common shares (the
"Shares") of the Company at a price of $1.25 per Share for aggregate
subscription proceeds of $5,000,000 (the "Purchase Price").
By its execution and acceptance of this Subscription Agreement the
Company agrees, subject to the terms and conditions hereof, to issue 4,000,000
Shares to the Purchaser.
2. DEFINITIONS
-----------
As used in this agreement, unless the context otherwise requires:
(a) "AFFILIATE" means:
(i) with respect to a natural person, the spouse of such person, any
corporation that is directly or indirectly controlled by such
person and any corporation that employs such person as a
director, officer or employee; and
(ii) with respect to a corporation an affiliate of such corporation
within the meaning of "affiliated" under Section 2(2) of the
Canada Business Corporations Act;
(b) "ASSET TRANSFER AGREEMENT" means the agreement to be entered into
between MPR and the Company, to be dated the Closing Date, pursuant to
which MPR will transfer title to certain assets used in the Company's
business to the Company;
(c) "ASSIGNMENT OF LEASE" means the assignment of lease agreement to be
dated the Closing Date between MPR and the Company in respect of
premises located at Imperial Square, Burnaby, British Columbia;
<PAGE>
-2-
(d) "BALANCE SHEET" means the balance sheet of the Company as at October
31, 1995 and the notes thereto;
(e) "CLAIM" has the meaning ascribed thereto in subsection 1(b) of the
Indemnity Sharing Agreement, provided, for the purpose of this
Agreement, that any such Claim shall only arise pursuant to this
Agreement;
(f) "CLOSING" means the completion of the issue and sale by the Company
and the purchase by the Purchaser of the Shares hereunder;
(g) "CLOSING DATE" means November 15, 1995 or such other date as the
Company and the Purchaser may agree;
(h) "CLOSING TIME" means 9:00 a.m. (Vancouver time) on the Closing Date or
such other time on the Closing Date as the Company and the Purchaser
may agree;
(i) "DCI SHAREHOLDERS' AGREEMENT" means the shareholders' agreement to be
entered into immediately after the Closing between the Company, the
Purchaser, 945 and MPR;
(j) "INDEMNITY SHARING AGREEMENT" means the agreement of that title made
as of the date hereof among the Company, the Purchaser, 945, MPR and
Kwikstar;
(k) "KWIKSTAR" means Kwikstar Communications Ltd.;
(l) "LEASE FINANCING AGREEMENT" means the lease financing agreement to be
entered into between the Company and TLC, pursuant to which the
Company will lease up to $10,000,000 worth of equipment to support the
operation of its business;
(m) "MATERIAL CHANGE" means, in respect of the Company, any change in the
business, operations, assets, liabilities, ownership or capital of the
Company that would reasonably be expected to have a significant effect
on the market price or value of the Shares, and includes a decision to
implement such a change made by the board of directors of the Company
or by senior management of the Company who believe that confirmation
of that decision by the board of directors is probable;
(n) "MATERIAL FACT" means any fact that significantly affects or would
reasonably be expected to have a significant effect on the market
price or value of the Shares;
(o) "MPR" means MPR Teltech Ltd.;
<PAGE>
-3-
(p) "PERFORMANCE INCENTIVE PLAN" means the performance incentive plan to
be entered into prior to Closing, by the Company, providing for the
issuance of 600,000 common shares of the Company to its employees;
(q) "PREFERRED SHARES" means the convertible redeemable Preferred Shares,
Series One, of the Company;
(r) "SHARE PURCHASE AGREEMENTS" means the share purchase agreements to be
entered into, at the time of the Closing, between Kwikstar and all of
the shareholders of the Company, pursuant to which Kwikstar will agree
to acquire, subject to the conditions contained therein, all of the
outstanding shares of the Company in exchange for shares of Kwikstar.
Such share exchange agreements will contain such representations,
warranties, covenants and conditions as are appropriate for a
transaction of the type contemplated by such share exchange
agreements;
(s) "SUPPORT SERVICES AGREEMENT" means the support services agreement to
be dated the Closing Date, between MPR and the Company, pursuant to
which MPR will provide manufacturing management and various other
services to the Company and the Company will provide various services
to MPR;
(t) "TECHNOLOGY TRANSFER AND LICENSING AGREEMENT" means the technology
transfer and licensing agreement to be dated the Closing Date between
MPR and the Company pursuant to which MPR will transfer certain of its
proprietary materials, technologies and rights, including patents,
trademarks, software code, etc. to the Company;
(u) "TLC" means Telecom Leasing Canada;
(v) "945" means 945 Investments Ltd.; and
(w) "945 SUBSCRIPTION" means the subscription agreement between the
Company and 945 pursuant to which 2,000,000 common shares of the
Company will be issued for aggregate subscription proceeds of
$1,000,000.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MPR
-----------------------------------------------------
Each of the Company and MPR jointly and severally represents and
warrants to the Purchaser (all of which representations and warranties shall
survive Closing) that:
(a) no person holds any securities convertible into or has any agreement
or option or right or privilege capable of becoming an agreement for
the purchase of any unissued shares of the Company except:
<PAGE>
-4-
(i) the 600,000 Shares to be issued to a trustee, the beneficial
interest in which shall be held by employees of the Company,
pursuant to the Performance Incentive Plan;
(ii) the 2,000,000 Shares which may be issued pursuant to the 945
Subscription; and
(iii) for the issue of 4,046,514 Shares and 2,000,000 Preferred
Shares to MPR pursuant to the terms of the Asset Transfer
Agreement and the Technology Transfer and Licensing Agreement;
(b) the Company has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to issue the 4,000,000 Shares to be issued to the Purchaser on
Closing;
(c) the Company is a corporation duly incorporated under the laws of
Canada and is a valid and subsisting corporation under the Canada
Business Corporations Act. The Company does not have the status of
"reporting issuer" in any jurisdiction in Canada, and there is no
published market for any securities of the Company. The Company owns
no subsidiaries;
(d) the authorized capital of the Company consists of an unlimited number
of shares without par value and an unlimited number of preferred
shares without par value, of which, as of the Closing Date and after
giving effect to the issue of Shares pursuant to the Performance
Incentive Plan, pursuant to the 945 Subscription and to the Purchaser
contemplated herein, 10,646,515 Shares and 2,000,000 Preferred Shares
will be issued and outstanding as fully paid and non-assessable, as
set forth on Schedule D hereto, and no other securities of the Company
will be issued or outstanding. Except for the 600,000 Shares that may
be issued to employees pursuant to the Performance Incentive Plan, no
person, firm or corporation has any agreement, option or right to
acquire or capable of becoming an agreement for the purchase or
acquisition of any of the unissued share capital of the Company;
(e) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Company or MPR, as the case may
be, is aware of, threatened against or relating to the Company or
affecting the Company's properties or business and which, if
determined adversely to the Company, might materially and adversely
affect the properties, business, future prospects or the financial
condition of the Company, or the right of the Company to use, produce
or sell its property and assets in whole or in part. There is not
presently outstanding against the Company any judgment, decree,
injunction, rule or order of any
<PAGE>
-5-
court, governmental department, commission, agency, instrumentality or
arbitrator;
(f) the Company is a taxable Canadian corporation and the Company is not
liable for any material Canadian federal, provincial, municipal or
local taxes, assessments, withholding taxes, employee or other
remittances, or other imposts or penalties due and unpaid at the date
hereof in respect of its income, employees, business or property, or
for the payment of any tax instalment due in respect of its current
taxation year (but not including taxes accruing due) or any previous
taxation years, and no such taxes, assessments, imposts, remittances
or penalties are required to be reserved against. The Company is not
in default in filing any returns or reports covering any federal,
provincial, municipal or local taxes, assessments or other imposts in
respect of its income, business or property;
(g) the Company has been conducting its business in the ordinary course in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Company is duly licensed, registered and
qualified in each jurisdiction in which it owns or leases property or
carries on business to enable its business to be carried on as now
conducted and its property and assets to be owned, leased and
operated. All such licenses, registrations and qualifications are in
good standing;
(h) the Company is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject or
which may apply to it;
(i) the Company has not experienced nor is the Company or MPR, as the case
may be, aware of any occurrence or event which has had, or might
reasonably be expected to have, a materially adverse effect on the
Company's business;
(j) the entering into and performance of this Subscription Agreement will
not be in violation of:
(i) the constating documents of the Company;
(ii) any agreement to which the Company is a party, will not give
any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Company, and will not
result in the creation of imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Company or the assets of the Company;
or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Company is bound;
<PAGE>
-6-
(k) the entering into and the performance of this Agreement will not be in
violation of any law, rule, or regulation of any governmental or
regulatory body having jurisdiction over the Company;
(l) the corporate records and minute books of the Company contain complete
and accurate minutes (duly signed by the Chairman and/or Secretary of
the appropriate meeting) of all meetings of the directors and
shareholders since its date of incorporation, together with the full
text of all resolutions of directors and shareholders passed in lieu
of such meetings, duly signed by all directors and shareholders;
(m) neither MPR nor the Company have incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees in respect of
the transactions contemplated by this Subscription Agreement except a
certain fee payable to Nesbitt Burns, as set out in the Balance Sheet.
(n) the Balance Sheet is true and correct and presents fairly the
financial position of the Company as at such date and has been
prepared in accordance with generally accepted accounting standards;
(o) the Company has no material liabilities, contingent or otherwise,
except trade payables, payroll, governmental sales taxes, an amount
payable to MPR, not to exceed $125,000, an amount payable to Nesbitt
Burns Inc. of $175,000.00, legal and audit fees and the Company has
not guaranteed or indemnified, or agreed to guarantee or indemnify,
any debt, liability or other obligation of any person, firm, or body
corporate;
(p) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from the Company of any of its assets other than in the
ordinary course of business;
(q) the Company has no directors, officers or senior employees to which it
pays remuneration and there are no written agreements or written
contracts for the employment of any such individuals, and there are no
contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any such individuals,
other than as disclosed in Schedule "A" hereto;
(r) Schedule "B" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Company is a party and unless otherwise indicated in Schedule "B",
each contract, agreement or commitment is in full force and effect and
the Company is not in default under any material terms of such
contracts, agreements or commitments;
<PAGE>
-7-
(s) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Company under any of the material provisions
contained in any contract, commitment or agreement listed on Schedule
"B";
(t) the representations and warranties contained in Section 4.1 of the
Technology Transfer and Licensing Agreement are true and correct and
the Purchaser shall have the benefit thereof;
(u) neither the Company nor MPR has information or knowledge of any fact
not communicated to the Purchaser and, relating to the business of the
Company which, if known to the Purchaser, might reasonably be expected
to deter the Purchaser from entering into this Subscription Agreement
or from completion of the transactions contemplated by this
Subscription Agreement provided that no representation or warranty is
given with respect to any information or knowledge of any such fact by
Allan J. Kozak; and
(v) the information and documentation listed in Schedule "C" provided to
the Purchaser by MPR or the Company in connection with this
subscription for Shares or regarding the Company was true and correct
in all material respects as of its date or as of the date provided (if
not dated), and did not, as of its date or as of the date provided, as
the case may be, contain any misrepresentation (as defined in the
Securities Act (British Columbia) provided that no representation or
warranty is given with respect to the accuracy of any sales, financial
or other projections included in such information and documentation
except a representation and warranty that such sales, financial or
other projections were prepared in accordance with normal business
practises.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser hereby represents and warrants to the Company and MPR
(all of which representations and warranties shall survive Closing) that:
(a) by virtue of its net worth and investment experience, it is able to
evaluate the prospective investment on the basis of information
respecting the investment provided by the Company and supplemented by
other sources available to the Purchaser;
(b) it is a resident of Canada;
(c) its offer to subscribe for 4,000,000 shares as herein set out is
irrevocable, subject to the conditions contained herein, and has not
been induced by any warranties or representations with regard to the
present or future value of the Shares except as expressly set forth
herein;
<PAGE>
-8-
(d) it is aware and has been advised that there is no market for the
Shares and that the Company is without substantial assets;
(e) it is aware that if it is resident in a jurisdiction other than
British Columbia, any Shares issued to it upon acceptance of its
subscription may be subject to restrictions on resale imposed under
the laws of such jurisdiction;
(f) it is purchasing the Shares as principal (as defined in all applicable
securities laws) for its own account, and not for the benefit of any
other person;
(g) it is purchasing the Shares for investment only and not with a view to
immediate resale or distribution;
(h) the Purchaser was not incorporated or created solely to permit
purchases without a prospectus under section 55(2)(4) of the
Securities Act (British Columbia) or similar prospectus exemptions
available under other securities legislation;
(i) it is aware that the Company is not a reporting company and is a
private issuer under British Columbia laws and the Shares to be issued
to it upon acceptance of this subscription will be issued as an exempt
trade; and
(j) the purchase of the Shares does not and will not conflict with, and
does not and will not result in breach of, any of the terms of the
Purchaser's constating documents or any agreement or instrument which
the Purchaser is a party or by which it is bound; and
(k) it has obtained all necessary authorizations and has all requisite
corporate power and authority to enter into this Subscription
Agreement and to subscribe for the Shares.
5. COVENANTS OF THE COMPANY
------------------------
The Company will:
(a) not incur any indebtedness for borrowed money or issue or sell any
Shares or securities convertible into or exchangeable for Shares
(except those securities referred to in paragraph 3(a) hereof) without
the prior written consent of the Purchaser;
(b) ensure that at the Closing Time the amount of its trade receivables
(as determined by its auditors) will not be less than the amount of
its trade payables (as determined by its auditors); and
<PAGE>
-9-
(c) not issue any options, warrants or other securities which gives the
right to purchase, are convertible into or are exchangeable for Shares
at an exercise, conversion or exchange price of less than $1.25 per
share.
6. CONDITIONS OF THE PURCHASER
---------------------------
The Purchaser's obligations to complete the purchase of Shares
contemplated hereby shall be conditional upon the fulfilment (or waiver by the
Purchaser at its sole discretion) at or before the Closing of the following
conditions, which conditions the Company covenants to exercise all reasonable
commercial efforts to fulfil or cause to be fulfilled at or prior to the
Closing:
(a) each of the representations and warranties of the Company and MPR
contained in this Subscription Agreement shall be true and correct in
all material respects at the Closing Time as though made at the
Closing Time;
(b) the Company shall have fulfilled and/or complied with all covenants
and agreements herein contained to be performed or caused to be
performed by it at or before the Closing Time;
(c) all steps will have been taken to elect or appoint one nominee of the
Purchaser to the board of directors of the Company pursuant to the DCI
Shareholders Agreement;
(d) the execution and delivery of all agreements required to be entered
into shall have been duly authorized by all necessary corporate
action;
(e) the Purchaser shall be satisfied, in its sole discretion, with the
results of its review of the financial condition, business properties,
titles, assets and affairs of both the Company and Kwikstar;
(f) the Company shall have obtained employment agreements in a form
acceptable to the Purchaser from those employees of the Company set
out in Schedule A, not less than five days prior to the Closing Date;
(g) the share conditions attaching to the Preferred Shares shall be
satisfactory in form and substance to the Purchaser;
(h) there shall have been no material adverse change in the business or
affairs of the Company since September 15, 1995;
(i) the transfer of assets to DCI by MPR pursuant to the Asset Transfer
Agreement shall have been completed;
<PAGE>
-10-
(j) the Purchaser shall have received certificates addressed to it dated
as of the Closing Date signed by the Chief Financial Officer or such
other officers as the Purchaser may accept, of the Company and MPR,
certifying for and on behalf of the Company and MPR respectively that,
except as otherwise disclosed in writing to the Purchaser, the
representations and warranties of the Company and MPR, as the case may
be, are true as of the Closing Time; and
(k) the Purchaser shall have received an opinion from counsel to DCI in
form and substance satisfactory to the Purchaser.
7. CONDITIONS OF THE COMPANY
-------------------------
The Company's obligations to issue the Shares to the Purchaser as
contemplated hereby shall be conditional upon the fulfilment (or waiver by the
Company at its sole discretion) at or before the Closing of the following
conditions, which conditions the Purchaser covenants to exercise all reasonable
commercial efforts to fulfil or cause to be fulfilled at or prior to the
Closing:
(a) each of the representations of the Purchaser contained in this
Subscription Agreement shall be true and correct in all material
respects at the Closing Time;
(b) each of the Company and MPR shall have received a certificate
addressed to it dated as of the Closing Date, signed by an officer of
the Purchaser, certifying for and on behalf of the Purchaser that
except as has been generally disclosed at the date thereof or
otherwise disclosed in writing to the Company or MPR, as the case may
be, the representations and warranties of the Purchaser are true as of
the Closing Time; and
(c) the Company shall have received full payment of the Purchase Price.
8. MUTUAL CONDITIONS OF THE PURCHASER AND THE COMPANY
--------------------------------------------------
The obligations of the parties hereunder shall be conditional upon the
fulfilment, at or before the Closing, of the following mutual conditions, which
conditions the parties each covenant to exercise all reasonable commercial
efforts to fulfil or cause to be fulfilled at or prior to the Closing:
(a) the Company and TLC shall have entered into the Lease Financing
Agreement in a form mutually acceptable to the Purchaser and the
Company;
(b) MPR and the Company shall have entered into the Technology Transfer
and Licensing Agreement, the Asset Transfer Agreement, the Assignment
of Lease and the Support Services Agreement, each in a form mutually
acceptable to the Purchaser and the Company;
<PAGE>
-11-
(c) the Company shall have established the Performance Incentive Plan in a
form mutually acceptable to the Purchaser and the Company;
(d) MPR, the Purchaser and the members of the 945 Group shall have entered
into the DCI Shareholders' Agreement in a form mutually acceptable to
the Purchaser and the Company;
(e) the 945 Subscription shall be completed and the Company shall have
received aggregate subscription proceeds of $1 million pursuant
thereto; and
(f) all of the shareholders of the Company (including MPR, the Purchaser
and the members of the 945 Group) shall have entered into or shall
contemporaneously enter into a Share Exchange Agreement with Kwikstar
in each case in a form mutually acceptable to the Purchaser and the
Company.
9. INDEMNITY SHARING AGREEMENT
---------------------------
Notwithstanding anything else in this Agreement, any obligation of MPR
to indemnify the Purchaser for any Claim shall be subject to the provisions of
the Indemnity Sharing Agreement.
10. DELIVERY AND PAYMENT
--------------------
Subject to acceptance of this Subscription Agreement by the Company
and fulfilment or waiver of all conditions in favour of the Purchaser and the
mutual conditions, the Closing will occur at the offices of Farris, Vaughan,
Wills and Murphy, 2600 - 700 West Georgia Street, Vancouver, B.C., at the
Closing Time on the Closing Date.
11. GENERAL
-------
This Agreement is governed by the laws of British Columbia.
This Agreement may be executed in two or more counterparts which when
taken together shall constitute one agreement. Delivery of counterparts may be
effected by facsimile transmission thereof.
This Agreement and the rights and obligations under this Agreement are
not assignable, except as set out below. Any party which is a body corporate
may assign its rights under this Agreement to any Affiliate, including an
Affiliate with which it amalgamates, merges or consolidates or enters into a
similar reorganization, or into which it is wound up as part of a bona fide
reorganization, provided that the Affiliate or successor corporation agrees to
be bound by this Agreement in addition to the original party as if such
Affiliate or successor corporation were an original signatory hereto. In
connection with any permitted assignment of
<PAGE>
-12-
this Agreement, MPR may assign such provisions of the Indemnity Sharing
Agreement as relate to this Agreement.
Time is of the essence of this Agreement.
At Closing and thereafter as may be necessary or desirable, and
without further consideration, each of the parties shall execute, acknowledge
and deliver such other documents and shall take or refrain from taking such
action as the other party may reasonably require to evidence, carry out and give
full effect to the terms, conditions, intent and meaning of this Agreement, to
assure the completion of the transactions contemplated hereby, and to complete
any permitted assignment by any party pursuant to this Section.
Any notice or communication to be given hereunder may be given by
delivering it at the addresses hereinafter set forth or by sending the same by
facsimile to the parties at those addresses. Any notice so delivered will be
deemed to have been received on the date delivered. Any facsimile notice will
be deemed to have been received on transmission if the date thereof is a
business day and, if not, on the next business day following transmission.
Mailing and facsimile addresses of the parties for the purposes hereof shall be
as follows:
(a) if to the Purchaser:
CIBC Wood Gundy Capital (SFC) Inc.
CIBC Wood Gundy Capital
BCE Place
P.O. Box 500
161 Bay Street
Toronto, ON, M5J 2S8
Facsimile: (416) 594-8037
Attention: Sam Duboc
---------------------
(b) if to the Company:
Digital Courier International Inc.
8618 Commerce Court
Burnaby, BC, V5A 4N6
Attention: Chief Executive Officer
---------- -----------------------
<PAGE>
-13-
(c) if to MPR:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, BC, V5A 4B5
Facsimile: 293-6161
Attention: Ian Bardsley, Vice President Business Systems and
----------
Applications and Peter Inman, Vice President and Chief
Financial Officer
In witness whereof the Purchaser has executed this agreement as of the
15th day of November, 1995.
CIBC WOOD GUNDY CAPITAL
(SFC) INC.
By: /s/ Sam Duboc
-------------------------------
Title:
The undersigned accept this Subscription Agreement on the terms and conditions
set out herein this 15th day of November, 1995.
DIGITAL COURIER INTERNATIONAL INC.
By: /s/ I. R. Bardsley
-------------------------------
Title: Chairman
MPR TELTECH LTD.
By: /s/ I. R. Bardsley
-------------------------------
Title: Vice-President
Business Systems and
Applications
/s/ Peter Inman
-------------------------------
Title: Vice-President and
Chief Financial Officer
<PAGE>
SCHEDULE A
Mark Burns Director of Sales
Eric Chong Director of Engineering
Neil Gunn Director of Technology
Al Kozak General Manager
Remy Kozak Director of Products and Marketing
Bruce Maxwell Director of Network Operations
<PAGE>
SCHEDULE B
LIST OF MATERIAL CONTRACTS
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-06 Airdate Traffic Services Ltd. M. Burns 950302 960302 DCI Services Agreement
SALE 950119-07 Airwaves Sound Design Ltd. R. Kozak 950110 970109 DCI Services Agreement
SALE 950731-02 Atlantic Records A. Kozak 950727 960727 DCI Services Agreement
SALE 950419-05 Audio House, Inc. (KOME) R. Kozak 950418 960418 DCI Services Agreement
SALE 950517-03 Audioimage Productions, Inc. A. Kozak 950515 960515 DCI Services Agreement
SALE 950328-04 Balsa Broadcasting A. Kozak 950321 960321 DCI Services Agreement
Corporation
SALE 950330-06 Bell Sound Studios A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-10 Blackburn Radio Inc. (CFPL) M. Burns 950307 960307 DCI Services Agreement
SALE 950313-16 CFFX/CFMK-FM Radio M. Burns 950302 960302 DCI Services Agreement
SALE 950330-05 CFHK Radio Ltd. A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-18 CFRA/CKKL-FM M. Burns 950228 960228 DCI Services Agreement
SALE 950313-21 CFRB/CKFM (MIK 99.9) M. Burns 950310 960310 DCI Services Agreement
SALE 950228-05 CFRN CFBR FM M.Burns 950222 960222 DCI Services Agreement
SALE 950313-19 CHED/CKNG division of M. Burns 950308 960308 DCI Services Agreement
Western Radio Group Ltd.
SALE 950313-22 CHEZ-FM Inc. M. Burns 950310 960310 DCI Services Agreement
SALE 950313-071 CHUC Radio M. Burns 950307 960307 DCI Services Agreement
SALE 950119-05 CHUM Ltd. (CFUN/CHQM FM) R. Kozak 950102 970101 DCI Services Agreement
SALE 950119-04 CHUM Ltd. (CJOH/C100) R. Kozak 941220 961220 DCI Services Agreement
SALE 950601-05 CITE-FM A. Kozak 950529 960529 DCI Services Agreement
SALE 950313-12 CJEZ FM M. Burns 950301 960301 DCI Services Agreement
SALE 950420-02 CJMC A. Kozak 950418 960418 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 950330-04 CKIS-CHOM FM (CHUM Quebec) A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-17 CKKQ-FM M. Burns 950301 960301 DCI Services Agreement
SALE 950228-04 CKLG CFOX Radio M. Burns 950220 960220 DCI Services Agreement
SALE 950313-11 CKRY-FM M. Burns 950311 960311 DCI Services Agreement
SALE 950313-05 CKSL AM/CIQM FM M. Burns 950302 960302 DCI Services Agreement
SALE 950313-20 Commercial Recording Studios R. Kozak 950308 960308 DCI Services Agreement
SALE 950119-08 Dick & Rogers Sound Studio R. Kozak 950110 970109 DCI Services Agreement
Ltd.
SALE 950313-13 Fraser Valley Radio Group M. Burns 950301 960301 DCI Services Agreement
SALE 950609-02 Heritage Wisconsin A. Kozak 950601 960601 DCI Services Agreement
Broadcasting Corporation
SALE 950119-06 Jim Pattison Industries Ltd. R. Kozak 950102 970101 DCI Services Agreement
(CJJR FM)
SALE 950510-04 KFI-AM A. Kozak 950501 960501 DCI Services Agreement
SALE 950330-03 KROQ-FM A. Kozak 950323 960323 DCI Services Agreement
SALE 950609-05 KRPM-FM A. Kozak 950601 960601 DCI Services Agreement
SALE 950420-01 LBJ Broadcasting A. Kozak 950418 960418 DCI Services Agreement
SALE 950130-03 Manta Eastern Sound Ltd. A. Kozak 950123 960131 DCI Services Agreement
SALE 950228-02 Metromedia CMR Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950228-03 Mount Royal Broadcasting Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950130-06 Newcap Broadcasting Ltd. A. Kozak 950125 960125 DCI Services Agreement
(CFRQ-FM)
SALE 950313-15 Panfor Dubbing Ltd. M. Burns 950301 960301 DCI Services Agreement
SALE 950328-03 Q107 FM - AM640 Radio A. Kozak 950315 960315 DCI Services Agreement
SALE 950119-03 Reel Time Recorders Ltd. R. Kozak 941221 961221 DCI Services Agreement
SALE 950328-02 ROCK 95 FM A. Kozak 950313 980313 DCI Services Agreement
SALE 950405-02 Shaw Radio Ltd. A. Kozak 950330 960330 DCI Services Agreement
SALE 950130-04 Sounds Interchange Ltd. A. Kozak 950123 960123 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-14 South Fraser Broadcasting A. Kozak 950301 960301 DCI Services Agreement
SALE 940819-01 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
SALE 940819-07 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
SALE 9501230-05 Sun Radio Limited (CIEZ FM) A. Kozak 950125 960125 DCI Services Agreement
SALE 950123-03 Telemedia Communications R. Kozak 941221 951221 DCI Services Agreement
Ontario, Inc. (CJCL Radio)
SALE 950609-03 WBBF Inc. A. Kozak 950601 960601 DCI Services Agreement
SALE 950609-04 WIL/WRTH/KIHT A. Kozak 950601 960601 DCI Services Agreement
LICENSE 950109-01 Danmarks Radio 950101 Source Code Software
License Agreement for
Audition (TM)
</TABLE>
<PAGE>
SCHEDULE C
DIGITAL COURIER INTERNATIONAL
SCHEDULE OF REPRESENTATIONS AND WARRANTIES
1. Historical financial and operating results of Digital Courier International
incorporated in business plan model prepared by DCI and Nesbitt Burns in
connection with the offering.
2. Nesbitt Burns Confidential Information Memorandum dated April, 1995.
3. Commissioned sites in Canada (116) and US (183) as at October 30, 1995
dated November 7, 1995.
4. Orders in progress excluding commissioned sites in Canada (15) and US (316)
as at October 30, 1995 dated November 7, 1995.
5. Monthly traffic for October, 1995 by destination, dated November 7, 1995.
Total for month is 2496.
6. Management meeting minutes for November 6, 1995.
7. Letter of Intent dated September 25, 1995 signed by Enterprise Developments
Inc., Kwikstar Communications Ltd. and MPR Teltech Ltd. and all schedules
attached thereto.
8. Testimonials of customers of DCI sent to CIBC Wood Gundy Capital on
September 14, 1995.
9. US Account status dated September 13, 1995.
10. US sender account status report dated September 18, 1995.
11. Digital Courier International U.S. Services Agreement with Mediatech
Incorporated sent September 14, 1995 including Mediatech's distribution
volume by station.
<PAGE>
SUBSCRIPTION AGREEMENT
TO: Digital Courier International Inc.
8618 Commerce Court
Burnaby, BC V5A 4N6
AND TO: MPR Teltech Ltd.
8999 Nelson Way
Burnaby, BC V5A 4B5
1. SUBSCRIPTION
------------
Subject to the terms and conditions hereinafter contained the
undersigned (the "Purchaser") hereby subscribes for and agrees to purchase from
Digital Courier International Inc. (the "Company") 2,000,000 common shares (the
"Shares") of the Company at a price of $0.50 per Share for aggregate
subscription proceeds of $1,000,000 (the "Purchase Price").
By its execution and acceptance of this Subscription Agreement the
Company agrees, subject to the terms and conditions hereof, to issue 2,000,000
Shares to the Purchaser.
2. DEFINITIONS
-----------
As used in this agreement, unless the context otherwise requires:
(a) "AFFILIATE" means:
(i) with respect to a natural person, the spouse of such person, any
corporation that is directly or indirectly controlled by such
person and any corporation that employs such person as a
director, officer or employee; and
(ii) with respect to a corporation an affiliate of such corporation
within the meaning of "affiliated" under Section 2(2) of the
Canada Business Corporations Act;
(b) "ASSET TRANSFER AGREEMENT" means the agreement to be entered into
between MPR and the Company, to be dated the Closing Date, pursuant to
which MPR will transfer title to certain assets used in the Company's
business to the Company;
(c) "ASSIGNMENT OF LEASE" means the assignment of lease agreement to be
dated the Closing Date between MPR and the Company in respect of
premises located at Imperial Square, Burnaby, British Columbia;
<PAGE>
-2-
(d) "BALANCE SHEET" means the balance sheet of the Company as at October
31, 1995 and the notes thereto;
(e) "CLAIM" has the meaning ascribed thereto in subsection 1(b) of the
Indemnity Sharing Agreement, provided, for the purpose of this
Agreement, that any such Claim shall only arise pursuant to this
Agreement;
(f) "CLOSING" means the completion of the issue and sale by the Company
and the purchase by the Purchaser of the Shares hereunder;
(g) "CLOSING DATE" means November 15, 1995 or such other date as the
Company and the Purchaser may agree;
(h) "CLOSING TIME" means 9:00 a.m. (Vancouver time) on the Closing Date or
such other time on the Closing Date as the Company and the Purchaser
may agree;
(i) "DCI SHAREHOLDERS' AGREEMENT" means the shareholders' agreement to be
entered into immediately after the Closing between the Company, the
Purchaser, 945 and MPR;
(j) "INDEMNITY SHARING AGREEMENT" means the agreement of that title made
as of the date hereof among the Company, the Purchaser, 945, MPR and
Kwikstar;
(k) "KWIKSTAR" means Kwikstar Communications Ltd.;
(l) "LEASE FINANCING AGREEMENT" means the lease financing agreement to be
entered into between the Company and TLC, pursuant to which the
Company will lease up to $10,000,000 worth of equipment to support the
operation of its business;
(m) "MATERIAL CHANGE" means, in respect of the Company, any change in the
business, operations, assets, liabilities, ownership or capital of the
Company that would reasonably be expected to have a significant effect
on the market price or value of the Shares, and includes a decision to
implement such a change made by the board of directors of the Company
or by senior management of the Company who believe that confirmation
of that decision by the board of directors is probable;
(n) "MATERIAL FACT" means any fact that significantly affects or would
reasonably be expected to have a significant effect on the market
price or value of the Shares;
(o) "MPR" means MPR Teltech Ltd.;
<PAGE>
-3-
(p) "PERFORMANCE INCENTIVE PLAN" means the performance incentive plan to
be entered into prior to Closing, by the Company, providing for the
issuance of 600,000 common shares of the Company to its employees;
(q) "PREFERRED SHARES" means the convertible redeemable Preferred Shares,
Series One, of the Company;
(r) "SHARE PURCHASE AGREEMENTS" means the share purchase agreements to be
entered into, at the time of the Closing, between Kwikstar and all of
the shareholders of the Company, pursuant to which Kwikstar will agree
to acquire, subject to the conditions contained therein, all of the
outstanding shares of the Company in exchange for shares of Kwikstar.
Such share exchange agreements will contain such representations,
warranties, covenants and conditions as are appropriate for a
transaction of the type contemplated by such share exchange
agreements;
(s) "SUPPORT SERVICES AGREEMENT" means the support services agreement to
be dated the Closing Date, between MPR and the Company, pursuant to
which MPR will provide manufacturing management and various other
services to the Company and the Company will provide various services
to MPR;
(t) "TECHNOLOGY TRANSFER AND LICENSING AGREEMENT" means the technology
transfer and licensing agreement to be dated the Closing Date between
MPR and the Company pursuant to which MPR will transfer certain of its
proprietary materials, technologies and rights, including patents,
trademarks, software code, etc. to the Company;
(u) "TLC" means Telecom Leasing Canada;
(v) "945" means 945 Investments Ltd.; and
(w) "945 SUBSCRIPTION" means the subscription agreement between the
Company and 945 pursuant to which 2,000,000 common shares of the
Company will be issued for aggregate subscription proceeds of
$1,000,000.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MPR
-----------------------------------------------------
Each of the Company and MPR jointly and severally represents and
warrants to the Purchaser (all of which representations and warranties shall
survive Closing) that:
(a) no person holds any securities convertible into or has any agreement
or option or right or privilege capable of becoming an agreement for
the purchase of any unissued shares of the Company except:
<PAGE>
-4-
(i) the 600,000 Shares to be issued to a trustee, the beneficial
interest in which shall be held by employees of the Company,
pursuant to the Performance Incentive Plan;
(ii) the 2,000,000 Shares which may be issued pursuant to the 945
Subscription; and
(iii) for the issue of 4,046,514 Shares and 2,000,000 Preferred
Shares to MPR pursuant to the terms of the Asset Transfer
Agreement and the Technology Transfer and Licensing Agreement;
(b) the Company has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to issue the 4,000,000 Shares to be issued to the Purchaser on
Closing;
(c) the Company is a corporation duly incorporated under the laws of
Canada and is a valid and subsisting corporation under the Canada
Business Corporations Act. The Company does not have the status of
"reporting issuer" in any jurisdiction in Canada, and there is no
published market for any securities of the Company. The Company owns
no subsidiaries;
(d) the authorized capital of the Company consists of an unlimited number
of shares without par value and an unlimited number of preferred
shares without par value, of which, as of the Closing Date and after
giving effect to the issue of Shares pursuant to the Performance
Incentive Plan, pursuant to the 945 Subscription and to the Purchaser
contemplated herein, 10,646,515 Shares and 2,000,000 Preferred Shares
will be issued and outstanding as fully paid and non-assessable, as
set forth on Schedule D hereto, and no other securities of the Company
will be issued or outstanding. Except for the 600,000 Shares that may
be issued to employees pursuant to the Performance Incentive Plan, no
person, firm or corporation has any agreement, option or right to
acquire or capable of becoming an agreement for the purchase or
acquisition of any of the unissued share capital of the Company;
(e) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Company or MPR, as the case may
be, is aware of, threatened against or relating to the Company or
affecting the Company's properties or business and which, if
determined adversely to the Company, might materially and adversely
affect the properties, business, future prospects or the financial
condition of the Company, or the right of the Company to use, produce
or sell its property and assets in whole or in part. There is not
presently outstanding against the Company any judgment, decree,
injunction, rule or order of any
<PAGE>
-5-
court, governmental department, commission, agency, instrumentality or
arbitrator;
(f) the Company is a taxable Canadian corporation and the Company is not
liable for any material Canadian federal, provincial, municipal or
local taxes, assessments, withholding taxes, employee or other
remittances, or other imposts or penalties due and unpaid at the date
hereof in respect of its income, employees, business or property, or
for the payment of any tax instalment due in respect of its current
taxation year (but not including taxes accruing due) or any previous
taxation years, and no such taxes, assessments, imposts, remittances
or penalties are required to be reserved against. The Company is not
in default in filing any returns or reports covering any federal,
provincial, municipal or local taxes, assessments or other imposts in
respect of its income, business or property;
(g) the Company has been conducting its business in the ordinary course in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Company is duly licensed, registered and
qualified in each jurisdiction in which it owns or leases property or
carries on business to enable its business to be carried on as now
conducted and its property and assets to be owned, leased and
operated. All such licenses, registrations and qualifications are in
good standing;
(h) the Company is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject or
which may apply to it;
(i) the Company has not experienced nor is the Company or MPR, as the case
may be, aware of any occurrence or event which has had, or might
reasonably be expected to have, a materially adverse effect on the
Company's business;
(j) the entering into and performance of this Subscription Agreement will
not be in violation of:
(i) the constating documents of the Company;
(ii) any agreement to which the Company is a party, will not give
any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Company, and will not
result in the creation of imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Company or the assets of the Company;
or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Company is bound;
<PAGE>
-6-
(k) the entering into and the performance of this Agreement will not be in
violation of any law, rule, or regulation of any governmental or
regulatory body having jurisdiction over the Company;
(l) the corporate records and minute books of the Company contain complete
and accurate minutes (duly signed by the Chairman and/or Secretary of
the appropriate meeting) of all meetings of the directors and
shareholders since its date of incorporation, together with the full
text of all resolutions of directors and shareholders passed in lieu
of such meetings, duly signed by all directors and shareholders;
(m) neither MPR nor the Company have incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees in respect of
the transactions contemplated by this Subscription Agreement except a
certain fee payable to Nesbitt Burns, as set out in the Balance Sheet.
(n) the Balance Sheet is true and correct and presents fairly the
financial position of the Company as at such date and has been
prepared in accordance with generally accepted accounting standards;
(o) the Company has no material liabilities, contingent or otherwise,
except trade payables, payroll, governmental sales taxes, an amount
payable to MPR, not to exceed $125,000, an amount payable to Nesbitt
Burns Inc. of $175,000.00, legal and audit fees and the Company has
not guaranteed or indemnified, or agreed to guarantee or indemnify,
any debt, liability or other obligation of any person, firm, or body
corporate;
(p) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from the Company of any of its assets other than in the
ordinary course of business;
(q) the Company has no directors, officers or senior employees to which it
pays remuneration and there are no written agreements or written
contracts for the employment of any such individuals, and there are no
contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any such individuals,
other than as disclosed in Schedule "A" hereto;
(r) Schedule "B" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Company is a party and unless otherwise indicated in Schedule "B",
each contract, agreement or commitment is in full force and effect and
the Company is not in default under any material terms of such
contracts, agreements or commitments;
<PAGE>
-7-
(s) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Company under any of the material provisions
contained in any contract, commitment or agreement listed on Schedule
"B";
(t) the representations and warranties contained in Section 4.1 of the
Technology Transfer and Licensing Agreement are true and correct and
the Purchaser shall have the benefit thereof;
(u) neither the Company nor MPR has information or knowledge of any fact
not communicated to the Purchaser and, relating to the business of the
Company which, if known to the Purchaser, might reasonably be expected
to deter the Purchaser from entering into this Subscription Agreement
or from completion of the transactions contemplated by this
Subscription Agreement provided that no representation or warranty is
given with respect to any information or knowledge of any such fact by
Allan J. Kozak; and
(v) the information and documentation listed in Schedule "C" provided to
the Purchaser by MPR or the Company in connection with this
subscription for Shares or regarding the Company was true and correct
in all material respects as of its date or as of the date provided (if
not dated), and did not, as of its date or as of the date provided, as
the case may be, contain any misrepresentation (as defined in the
Securities Act (British Columbia) provided that no representation or
warranty is given with respect to the accuracy of any sales, financial
or other projections included in such information and documentation
except a representation and warranty that such sales, financial or
other projections were prepared in accordance with normal business
practises.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser hereby represents and warrants to the Company and MPR
(all of which representations and warranties shall survive Closing) that:
(a) by virtue of its net worth and investment experience, it is able to
evaluate the prospective investment on the basis of information
respecting the investment provided by the Company and supplemented by
other sources available to the Purchaser;
(b) it is a resident of Canada;
(c) its offer to subscribe for 2,000,000 shares as herein set out is
irrevocable, subject to the conditions contained herein, and has not
been induced by any warranties or representations with regard to the
present or future value of the Shares except as expressly set forth
herein;
<PAGE>
-8-
(d) it is aware and has been advised that there is no market for the
Shares and that the Company is without substantial assets;
(e) it is aware that if it is resident in a jurisdiction other than
British Columbia, any Shares issued to it upon acceptance of its
subscription may be subject to restrictions on resale imposed under
the laws of such jurisdiction;
(f) it is purchasing the Shares as principal (as defined in all applicable
securities laws) for its own account, and not for the benefit of any
other person;
(g) it is purchasing the Shares for investment only and not with a view to
immediate resale or distribution;
(h) the Purchaser was not incorporated or created solely to permit
purchases without a prospectus under section 55(2)(4) of the
Securities Act (British Columbia) or similar prospectus exemptions
available under other securities legislation;
(i) it is aware that the Company is not a reporting company and is a
private issuer under British Columbia laws and the Shares to be issued
to it upon acceptance of this subscription will be issued as an exempt
trade; and
(j) the purchase of the Shares does not and will not conflict with, and
does not and will not result in breach of, any of the terms of the
Purchaser's constating documents or any agreement or instrument which
the Purchaser is a party or by which it is bound; and
(k) it has obtained all necessary authorizations and has all requisite
corporate power and authority to enter into this Subscription
Agreement and to subscribe for the Shares.
5. COVENANTS OF THE COMPANY
------------------------
The Company will:
(a) not incur any indebtedness for borrowed money or issue or sell any
Shares or securities convertible into or exchangeable for Shares
(except those securities referred to in paragraph 3(a) hereof) without
the prior written consent of the Purchaser;
(b) ensure that at the Closing Time the amount of its trade receivables
(as determined by its auditors) will not be less than the amount of
its trade payables (as determined by its auditors); and
<PAGE>
-9-
(c) not issue any options, warrants or other securities which gives the
right to purchase, are convertible into or are exchangeable for Shares
at an exercise, conversion or exchange price of less than $1.25 per
share.
6. CONDITIONS OF THE PURCHASER
---------------------------
The Purchaser's obligations to complete the purchase of Shares
contemplated hereby shall be conditional upon the fulfilment (or waiver by the
Purchaser at its sole discretion) at or before the Closing of the following
conditions, which conditions the Company covenants to exercise all reasonable
commercial efforts to fulfil or cause to be fulfilled at or prior to the
Closing:
(a) each of the representations and warranties of the Company and MPR
contained in this Subscription Agreement shall be true and correct in
all material respects at the Closing Time as though made at the
Closing Time;
(b) the Company shall have fulfilled and/or complied with all covenants
and agreements herein contained to be performed or caused to be
performed by it at or before the Closing Time;
(c) all steps will have been taken to elect or appoint one nominee of the
Purchaser to the board of directors of the Company pursuant to the DCI
Shareholders Agreement;
(d) the execution and delivery of all agreements required to be entered
into shall have been duly authorized by all necessary corporate
action;
(e) the Purchaser shall be satisfied, in its sole discretion, with the
results of its review of the financial condition, business properties,
titles, assets and affairs of both the Company and Kwikstar;
(f) the Company shall have obtained employment agreements in a form
acceptable to the Purchaser from those employees of the Company set
out in Schedule A, not less than five days prior to the Closing Date;
(g) the share conditions attaching to the Preferred Shares shall be
satisfactory in form and substance to the Purchaser;
(h) there shall have been no material adverse change in the business or
affairs of the Company since September 15, 1995;
(i) the transfer of assets to DCI by MPR pursuant to the Asset Transfer
Agreement shall have been completed;
<PAGE>
-10-
(j) the Purchaser shall have received certificates addressed to it dated
as of the Closing Date signed by the Chief Financial Officer or such
other officers as the Purchaser may accept, of the Company and MPR,
certifying for and on behalf of the Company and MPR respectively that,
except as otherwise disclosed in writing to the Purchaser, the
representations and warranties of the Company and MPR, as the case may
be, are true as of the Closing Time; and
(k) the Purchaser shall have received an opinion from counsel to DCI in
form and substance satisfactory to the Purchaser.
7. CONDITIONS OF THE COMPANY
-------------------------
The Company's obligations to issue the Shares to the Purchaser as
contemplated hereby shall be conditional upon the fulfilment (or waiver by the
Company at its sole discretion) at or before the Closing of the following
conditions, which conditions the Purchaser covenants to exercise all reasonable
commercial efforts to fulfil or cause to be fulfilled at or prior to the
Closing:
(a) each of the representations of the Purchaser contained in this
Subscription Agreement shall be true and correct in all material
respects at the Closing Time;
(b) each of the Company and MPR shall have received a certificate
addressed to it dated as of the Closing Date, signed by an officer of
the Purchaser, certifying for and on behalf of the Purchaser that
except as has been generally disclosed at the date thereof or
otherwise disclosed in writing to the Company or MPR, as the case may
be, the representations and warranties of the Purchaser are true as of
the Closing Time; and
(c) the Company shall have received full payment of the Purchase Price.
8. MUTUAL CONDITIONS OF THE PURCHASER AND THE COMPANY
--------------------------------------------------
The obligations of the parties hereunder shall be conditional upon the
fulfilment, at or before the Closing, of the following mutual conditions, which
conditions the parties each covenant to exercise all reasonable commercial
efforts to fulfil or cause to be fulfilled at or prior to the Closing:
(a) the Company and TLC shall have entered into the Lease Financing
Agreement in a form mutually acceptable to the Purchaser and the
Company;
(b) MPR and the Company shall have entered into the Technology Transfer
and Licensing Agreement, the Asset Transfer Agreement, the Assignment
of Lease and the Support Services Agreement, each in a form mutually
acceptable to the Purchaser and the Company;
<PAGE>
-11-
(c) the Company shall have established the Performance Incentive Plan in a
form mutually acceptable to the Purchaser and the Company;
(d) MPR, the Purchaser and the members of the 945 Group shall have entered
into the DCI Shareholders' Agreement in a form mutually acceptable to
the Purchaser and the Company;
(e) the 945 Subscription shall be completed and the Company shall have
received aggregate subscription proceeds of $1 million pursuant
thereto; and
(f) all of the shareholders of the Company (including MPR, the Purchaser
and the members of the 945 Group) shall have entered into or shall
contemporaneously enter into a Share Exchange Agreement with Kwikstar
in each case in a form mutually acceptable to the Purchaser and the
Company.
9. INDEMNITY SHARING AGREEMENT
---------------------------
Notwithstanding anything else in this Agreement, any obligation of MPR
to indemnify the Purchaser for any Claim shall be subject to the provisions of
the Indemnity Sharing Agreement.
10. DELIVERY AND PAYMENT
--------------------
Subject to acceptance of this Subscription Agreement by the Company
and fulfilment or waiver of all conditions in favour of the Purchaser and the
mutual conditions, the Closing will occur at the offices of Farris, Vaughan,
Wills and Murphy, 2600 - 700 West Georgia Street, Vancouver, B.C., at the
Closing Time on the Closing Date.
11. GENERAL
-------
This Agreement is governed by the laws of British Columbia.
This Agreement may be executed in two or more counterparts which when
taken together shall constitute one agreement. Delivery of counterparts may be
effected by facsimile transmission thereof. This Agreement and the rights and
obligations under this Agreement are not assignable, except as set out below.
Any party which is a body corporate may assign its rights under this Agreement
to any Affiliate, including an Affiliate with which it amalgamates, merges or
consolidates or enters into a similar reorganization, or into which it is wound
up as part of a bona fide reorganization, provided that the Affiliate or
successor corporation agrees to be bound by this Agreement in addition to the
original party as if such Affiliate or successor corporation were an original
signatory hereto. In connection with any permitted assignment of
<PAGE>
-12-
this Agreement, MPR may assign such provisions of the Indemnity Sharing
Agreement as relate to this Agreement.
Time is of the essence of this Agreement.
At Closing and thereafter as may be necessary or desirable, and
without further consideration, each of the parties shall execute, acknowledge
and deliver such other documents and shall take or refrain from taking such
action as the other party may reasonably require to evidence, carry out and give
full effect to the terms, conditions, intent and meaning of this Agreement, to
assure the completion of the transactions contemplated hereby, and to complete
any permitted assignment by any party pursuant to this Section.
Any notice or communication to be given hereunder may be given by
delivering it at the addresses hereinafter set forth or by sending the same by
facsimile to the parties at those addresses. Any notice so delivered will be
deemed to have been received on the date delivered. Any facsimile notice will
be deemed to have been received on transmission if the date thereof is a
business day and, if not, on the next business day following transmission.
Mailing and facsimile addresses of the parties for the purposes hereof shall be
as follows:
(a) if to the Purchaser:
945 Investments Ltd.
Suite 106 - 1008 Beach Avenue
Vancouver, B.C.
V6E 1T7
Attention: Ed Ford and Len Fowler
----------------------------------
(b) if to the Company:
Digital Courier International Inc.
8618 Commerce Court
Burnaby, BC, V5A 4N6
Attention: Chief Executive Officer
---------- -----------------------
(c) if to MPR:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, BC, V5A 4B5
Facsimile: 293-6161
Attention: Ian Bardsley, Vice President Business Systems and
----------
Applications and Peter Inman, Vice President and Chief
Financial Officer
<PAGE>
-13-
In witness whereof the Purchaser has executed this agreement as of the
15th day of November, 1995.
945 INVESTMENTS LTD.
By: /s/ Edward D. Ford
-------------------------------
Title:
The undersigned accept this Subscription Agreement on the terms and conditions
set out herein this 15th day of November, 1995.
DIGITAL COURIER INTERNATIONAL INC.
By: /s/ I. R. Bardsley
-------------------------------
Title: Chairman
MPR TELTECH LTD.
By: /s/ I. R. Bardsley
-------------------------------
Title: Vice President Business
Systems and Appllications
/s/ Peter Inman
-------------------------------
Title: Vice President and
Chief Financial Officer
<PAGE>
SCHEDULE A
Mark Burns Director of Sales
Eric Chong Director of Engineering
Neil Gunn Director of Technology
Al Kozak General Manager
Remy Kozak Director of Products and Marketing
Bruce Maxwell Director of Network Operations
<PAGE>
SCHEDULE B
LIST OF MATERIAL CONTRACTS
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-06 Airdate Traffic Services Ltd. M. Burns 950302 960302 DCI Services Agreement
SALE 950119-07 Airwaves Sound Design Ltd. R. Kozak 950110 970109 DCI Services Agreement
SALE 950731-02 Atlantic Records A. Kozak 950727 960727 DCI Services Agreement
SALE 950419-05 Audio House, Inc. (KOME) R. Kozak 950418 960418 DCI Services Agreement
SALE 950517-03 Audioimage Productions, Inc. A. Kozak 950515 960515 DCI Services Agreement
SALE 950328-04 Balsa Broadcasting A. Kozak 950321 960321 DCI Services Agreement
Corporation
SALE 950330-06 Bell Sound Studios A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-10 Blackburn Radio Inc. (CFPL) M. Burns 950307 960307 DCI Services Agreement
SALE 950313-16 CFFX/CFMK-FM Radio M. Burns 950302 960302 DCI Services Agreement
SALE 950330-05 CFHK Radio Ltd. A. Kozak 950323 960323 DCI Services Agreement
SALE 950313-18 CFRA/CKKL-FM M. Burns 950228 960228 DCI Services Agreement
SALE 950313-21 CFRB/CKFM (MIK 99.9) M. Burns 950310 960310 DCI Services Agreement
SALE 950228-05 CFRN CFBR FM M. Burns 950222 960222 DCI Services Agreement
SALE 950313-19 CHED/CKNG division of M. Burns 950308 960308 DCI Services Agreement
Western Radio Group Ltd.
SALE 950313-22 CHEZ-FM Inc. M. Burns 950310 960310 DCI Services Agreement
SALE 950313-071 CHUC Radio M. Burns 950307 960307 DCI Services Agreement
SALE 950119-05 CHUM Ltd. (CFUN/CHQM FM) R. Kozak 950102 970101 DCI Services Agreement
SALE 950119-04 CHUM Ltd. (CJOH/C100) R. Kozak 941220 961220 DCI Services Agreement
SALE 950601-05 CITE-FM A. Kozak 950529 960529 DCI Services Agreement
SALE 950313-12 CJEZ FM M. Burns 950301 960301 DCI Services Agreement
SALE 950420-02 CJMC A. Kozak 950418 960418 DCI Services Agreement
SALE 950330-04 CKIS-CHOM FM (CHUM Quebec) A. Kozak 950323 960323 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 950313-17 CKKQ-FM M. Burns 950301 960301 DCI Services Agreement
SALE 950228-04 CKLG CFOX Radio M. Burns 950220 960220 DCI Services Agreement
SALE 950313-11 CKRY-FM M. Burns 950311 960311 DCI Services Agreement
SALE 950313-05 CKSL AM/CIQM FM M. Burns 950302 960302 DCI Services Agreement
SALE 950313-20 Commercial Recording Studios R. Kozak 950308 960308 DCI Services Agreement
Inc.
SALE 950119-08 Dick & Rogers Sound Studio R. Kozak 950110 970109 DCI Services Agreement
Ltd.
SALE 950313-13 Fraser Valley Radio Group M. Burns 950301 960301 DCI Services Agreement
SALE 950609-02 Heritage Wisconsin A. Kozak 950601 960601 DCI Services Agreement
Broadcasting Corporation
SALE 950119-06 Jim Pattison Industries Ltd. R. Kozak 950102 970101 DCI Services Agreement
(CJJR FM)
SALE 950510-04 KFI-AM A. Kozak 950501 960501 DCI Services Agreement
SALE 950330-03 KROQ-FM A. Kozak 950323 960323 DCI Services Agreement
SALE 950609-05 KRPM-FM A. Kozak 950601 960601 DCI Services Agreement
SALE 950420-01 LBJ Broadcasting A. Kozak 950418 960418 DCI Services Agreement
SALE 950130-03 Manta Eastern Sound Ltd. A. Kozak 950123 960131 DCI Services Agreement
SALE 950228-02 Metromedia CMR Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950228-03 Mount Royal Broadcasting Inc. M. Burns 950227 960227 DCI Services Agreement
SALE 950130-06 Newcap Broadcasting Ltd. A. Kozak 950125 960125 DCI Services Agreement
(CFRQ-FM)
SALE 950313-15 Panfor Dubbing Ltd. M. Burns 950301 960301 DCI Services Agreement
SALE 950328-03 Q107 FM - AM640 Radio A. Kozak 950315 960315 DCI Services Agreement
SALE 950119-03 Reel Time Recorders Ltd. R. Kozak 941221 961221 DCI Services Agreement
SALE 950328-02 ROCK 95 FM A. Kozak 950313 980313 DCI Services Agreement
SALE 950405-02 Shaw Radio Ltd. A. Kozak 950330 960330 DCI Services Agreement
SALE 950130-04 Sounds Interchange Ltd. A. Kozak 950123 960123 DCI Services Agreement
SALE 950313-14 South Fraser Broadcasting A. Kozak 950301 960301 DCI Services Agreement
SALE 940819-01 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACT SERIAL START FINISH
TYPE NUMBER COMPANY NAME PRIME DATE DATE DESCRIPTION
<S> <C> <C> <C> <C> <C> <C>
SALE 940819-07 Standard Radio Inc. R. Kozak 940901 941130 DCI Services Agreement
SALE 9501230-05 Sun Radio Limited (CIEZ FM) A. Kozak 950125 960125 DCI Services Agreement
SALE 950123-03 Telemedia Communications R. Kozak 941221 951221 DCI Services Agreement
Ontario, Inc. (CJCL Radio)
SALE 950609-03 WBBF Inc. A. Kozak 950601 960601 DCI Services Agreement
SALE 950609-04 WIL/WRTH/KIHT A. Kozak 950601 960601 DCI Services Agreement
LICENSE 950109-01 Danmarks Radio 950101 Source Code Software
License Agreement for
Audition (TM)
</TABLE>
<PAGE>
SCHEDULE C
DIGITAL COURIER INTERNATIONAL
SCHEDULE OF REPRESENTATIONS AND WARRANTIES
1. Historical financial and operating results of Digital Courier International
incorporated in business plan model prepared by DCI and Nesbitt Burns in
connection with the offering.
2. Nesbitt Burns Confidential Information Memorandum dated April, 1995.
3. Commissioned sites in Canada (116) and US (183) as at October 30, 1995
dated November 7, 1995.
4. Orders in progress excluding commissioned sites in Canada (15) and US (316)
as at October 30, 1995 dated November 7, 1995.
5. Monthly traffic for October, 1995 by destination, dated November 7, 1995.
Total for month is 2496.
6. Management meeting minutes for November 6, 1995.
7. Letter of Intent dated September 25, 1995 signed by Enterprise Developments
Inc., Kwikstar Communications Ltd. and MPR Teltech Ltd. and all schedules
attached thereto.
8. Testimonials of customers of DCI sent to CIBC Wood Gundy Capital on
September 14, 1995.
9. US Account status dated September 13, 1995.
10. US sender account status report dated September 18, 1995.
11. Digital Courier International U.S. Services Agreement with Mediatech
Incorporated sent September 14, 1995 including Mediatech's distribution
volume by station.
<PAGE>
EXHIBIT 10.7
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT dated for reference the 15th day of November, 1995.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a body corporate incorporated under the
laws of the Province of Alberta and having its head office in the City
of Vancouver, in the Province of British Columbia (herein referred to
as the "Purchaser")
OF THE FIRST PART
- and -
MPR TELTECH LTD., a body corporate having its head office in the City
of Burnaby, in the Province of British Columbia (herein referred to as
the "Vendor")
OF THE SECOND PART
WHEREAS:
A. The Purchaser was incorporated under the provisions of the Business
Corporations Act (Alberta) and is a public company with its common shares
listed and posted for trading on The Alberta Stock Exchange;
B. The Vendor is the legal and beneficial owner of 4,046,515 common shares and
2,000,000 preferred shares, series 1 (the "DCI Shares") in the capital of
Digital Courier International Inc. ("DCI"); and
C. The Vendor has agreed to sell and the Purchaser has agreed to purchase the
DCI Shares on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
premises, covenants, agreements and warranties hereinafter set forth, it is
hereby agreed as follows:
1. DEFINITIONS
-----------
1.1 In this Agreement, unless there is something in the subject or context
inconsistent therewith, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and the expressions following shall have the
following meanings, respectively:
<PAGE>
2
"AFFILIATE" means:
(i) with respect to a natural person, the spouse of such person, any
corporation that is directly or indirectly controlled by such person
and any corporation that employs such person as a director, officer or
employee; and
(ii) with respect to a corporation, an affiliate of such corporation, as
defined in section 2 of the Securities Act (Alberta);
"AGREEMENT", "this Agreement", "herein", "hereby", "hereof", "hereunder"
and similar expressions mean or refer to this Share Purchase Agreement and
any amendments hereto.
"ASE" means The Alberta Stock Exchange.
"ASE NON ESCROWED SHARES" means the Kwikstar Shares issued pursuant to
Section 3.1 hereof not required to be held in escrow by the ASE.
"CLAIM" has the meaning ascribed thereto in Subsection 1(b) of the
Indemnity Sharing Agreement, provided, for the purposes of this Agreement,
that any such Claim shall only arise pursuant to this Agreement;
"CLOSING" has the meaning ascribed thereto in Section 9.1 hereof.
"CLOSING DATE" has the meaning ascribed thereto in Section 9.1 hereof.
"DCI" means Digital Courier International Inc.
"DCI SHARES" means 4,046,515 common shares and 2,000,000 preferred shares,
series 1 in the capital of DCI legally and beneficially owned by the
Vendor.
"INDEMNITY SHARING AGREEMENT" means the agreement of that title made as of
the date hereof among the Vendor, DCI, CIBC Wood Gundy Capital (SFC) Inc.,
945 Investments Limited and the Purchaser;
"KWIKSTAR SHARES" means 12,139,545 common shares and 2,000,000 preferred
shares, Series 1 in the capital of the Purchaser to be issued to the Vendor
pursuant to Section 3.1 of this Agreement. The 2,000,000 preferred shares,
Series 1 of the Purchaser shall have the rights and restrictions set out in
Schedule "A" hereto.
"MAJOR TRANSACTION" has the meaning ascribed thereto by the Policies.
"POLICIES" means Alberta Securities Commission Policy 4.11 and Circular No.
7 contained in The Alberta Stock Exchange Policies and Procedures Manual.
"PURCHASER" means Kwikstar Communications Ltd.
"VENDOR" means MPR Teltech Ltd.
<PAGE>
3
2. SALE AND PURCHASE
-----------------
2.1 The Vendor hereby agrees to sell and the Purchaser hereby agrees to
purchase, effective the Closing Date, the DCI Shares on the terms and conditions
herein contained.
3. CONSIDERATION
-------------
3.1 The parties hereto agree that the purchase price for the DCI Shares shall
be the issuance from the treasury of the Purchaser of the Kwikstar Shares duly
registered in the name of the Vendor, or as the Vendor may direct the Purchaser
in writing, all such shares to be issued as fully paid and non-assessable common
shares.
3.2 In the event the ASE requires any of the Kwikstar Shares to be held in
escrow, the Vendor agrees to enter into an escrow agreement in a form
satisfactory to the ASE.
3.3 In addition, the Vendor acknowledges that the Kwikstar Shares are being
issued pursuant to exemptions from registration and prospectus requirements of
applicable securities legislation, and that the Vendor may not be able to resell
the Kwikstar Shares except in accordance with limited exemptions under
applicable securities legislation. Since the Purchaser is not currently a
"reporting issuer" in the Province of British Columbia, until the Purchaser
becomes a reporting issuer, the resale restrictions for the Kwikstar Shares may
be for an indefinite period. Notwithstanding the foregoing, the Purchaser shall
use all reasonable efforts to become a reporting issuer in the Province of
British Columbia no later than April 30, 1996.
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
4.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents, warrants and covenants with the Purchaser as
follows:
(a) the Vendor is the legal and beneficial owner of the DCI Shares and the
DCI Shares are fully paid and non-assessable, and free of any liens,
claims, charges, security interests or encumbrances of any kind
whatsoever. The DCI Shares represent all of the securities of DCI
owned by the Vendor and the Vendor does not have any agreement, option
or right to purchase or acquire, or capable of becoming an agreement
for the purchase or acquisition of any additional securities of DCI;
(b) the Vendor has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to transfer the legal and beneficial title and ownership of the DCI
Shares to the Purchaser;
(c) except as provided in this Agreement, no person, firm or corporation
other than the Purchaser has any agreement, option or right to
purchase or acquire, or capable of becoming an agreement for the
purchase or acquisition of the DCI Shares;
(d) the Vendor is resident in Canada within the meaning of the Income Tax
Act (Canada);
<PAGE>
4
(e) DCI is a corporation duly incorporated and is a valid and subsisting
corporation under the Canada Business Corporations Act. DCI does not
have the status of "reporting issuer" in any jurisdiction in Canada,
and there is no published market for any securities of DCI. DCI owns
no subsidiaries;
(f) the authorized capital of DCI consists of an unlimited number of
common shares and an unlimited number of preferred shares, without par
value, of which, as of the Closing Date, 10,646,515 common shares will
be issued and outstanding as fully paid and non-assessable common
shares, and 2,000,000 preferred shares, Series 1 will be issued and
outstanding as fully paid and non-assessable preferred shares, and no
other securities of DCI will be issued or outstanding. Except as
disclosed herein, no person, firm or corporation has any agreement,
option or right to acquire or capable of becoming an agreement for the
purchase or acquisition of any of the unissued share capital of DCI;
(g) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Vendor is aware threatened,
against or relating to DCI, or affecting DCI's properties or business
which if determined adversely to DCI might materially and adversely
affect the properties, business, future prospectus or the financial
condition of DCI, or the right of or DCI to use, produce or sell its
property and assets in whole or in part. There is not presently
outstanding against DCI any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator;
(h) DCI is a taxable Canadian corporation and DCI is not liable for any
material Canadian federal, provincial, municipal or local taxes,
assessments, withholding taxes, employee or other remittances, or
other imposts or penalties due and unpaid at the date hereof in
respect of its income, employees, business or property, or for the
payment of any tax instalment due in respect of its current taxation
year (but not including taxes accruing due) or any previous taxation
years, and no such taxes, assessments, imposts, remittances or
penalties are required to be reserved against. DCI is not in default
in filing any returns or reports covering any federal, provincial,
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
(i) DCI has been conducting its business in the ordinary course in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. DCI is duly licensed, registered and
qualified in each jurisdiction in which it owns or leases property or
carries on business to enable its business to be carried on as now
conducted and its property and assets to be owned, leased and
operated. All such licenses, registrations and qualifications are in
good standing;
(j) DCI is not in breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which may apply
to it;
<PAGE>
5
(k) DCI has not experienced nor is the Vendor aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse effect on DCI's business;
(l) the entering into and performance of this Agreement will not be in
violation of:
(i) the constating documents of DCI; or
(ii) any agreement to which DCI is a party and will not give any
person or company any right to terminate or cancel any
agreement or any right enjoyed by DCI, and will not result in
the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever in favour of a third party
upon or against DCI or the assets of DCI; or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which DCI is bound.
(m) the entering into and the performance of this Agreement will not be in
violation of any law, rule or regulation of any governmental or
regulatory body having jurisdiction over DCI;
(n) the corporate records and minute books of DCI contain complete and
accurate minutes (duly signed by the Chairman and/or Secretary of the
appropriate meeting) of all meetings of the directors and shareholders
since its date of incorporation, together with the full text of all
resolutions of directors and shareholders passed in lieu of such
meetings, duly signed by all directors and shareholders;
(o) the Vendor and DCI have not incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees in respect of
the transactions contemplated by this Agreement, except for a certain
fee payable to Nesbitt Burns Inc., as set out in the DCI Balance Sheet
(as defined below);
(p) the balance sheet of DCI for the period ending October 31, 1995, and
the notes thereto are true and correct and present fairly the
financial position of DCI as at such date, and have been prepared in
accordance with generally accepted accounting standards (the "DCI
Balance Sheet");
(q) DCI has no material liabilities, contingent or otherwise, except for
trade payables and a liability in the amount of $175,000 to Nesbitt
Burns Inc., and DCI has not guaranteed or indemnified, or agreed to
guarantee or indemnify, any debt, liability or other obligation of any
person, firm, or body corporate;
(r) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from DCI of any of its assets other than in the ordinary
course of business;
<PAGE>
6
(s) DCI has no directors, officers or senior employees to which it pays
remuneration and there are no written agreements or written contracts
for the employment of any of such individuals and there are no
contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any of such individuals
other than as disclosed in Schedule "B" hereto;
(t) Schedule "C" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Vendor is a party and unless otherwise indicated in Schedule "C", each
contract, agreement or commitment is in full force and effect and the
Vendor is not in default under any material terms of such contracts,
agreements or commitments; and
(u) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Vendor under any of the material provisions
contained in any such contract, commitment or agreement listed on
Schedule "C".
4.2 INDEMNITY SHARING AGREEMENT. Notwithstanding anything else in this
---------------------------
Agreement, any obligation of the Vendor to indemnify the Purchaser for any Claim
shall be subject to the provisions of the Indemnity Sharing Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
5.1 In order to induce the Vendor to enter into and consummate this Agreement,
the Purchaser represents, warrants and covenants with the Vendor as follows:
(a) the Purchaser is a corporation duly incorporated under the laws of the
Province of Alberta and is a valid and subsisting corporation under
the Business Corporations Act (Alberta) and the Purchaser has the
requisite power, capacity and authority to enter into this Agreement
on the terms and conditions herein set forth. The Purchaser owns no
subsidiaries;
(b) the Purchaser is a "reporting issuer" as that term is defined in the
Securities Act (Alberta) and the issued and outstanding common shares
of the Purchaser are listed and posted for trading on the ASE;
(c) the authorized capital of the Purchaser consists of an unlimited
number of common shares and an unlimited number of preferred shares,
of which 4,766,666 common shares are issued and outstanding and no
other shares are issued or outstanding. The Purchaser has reserved ten
percent (10%) of its issued and outstanding common shares under a
directors and management stock option plan, and options to acquire
466,665 common shares at $0.15 per share are outstanding, and the
Purchaser has reserved an additional 4,000,000 common shares at $0.22
per common share for options to be granted after the completion of the
Major Transaction. After the completion of the acquisition of all of
the issued and outstanding shares of DCI, the fully diluted
capitalization of the Purchaser shall be as set out in Schedule "E";
<PAGE>
7
(d) upon completion of the acquisition of the DCI Shares pursuant to the
terms of this Agreement, the Kwikstar Shares will be issued as fully
paid and non-assessable common shares;
(e) except pursuant to or as disclosed in this Agreement or agreements
with the other holders of securities of DCI, or an agreement or
agreements with E.L. Patterson or his nominee with respect to a
finder's fee, no person, firm or corporation has any agreement, option
or right to acquire or capable of becoming an agreement for the
purchase or acquisition of any of the unissued share capital of the
Purchaser;
(f) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Purchaser is aware threatened,
against or relating to the Purchaser or affecting its properties or
business which if determined adversely to the Purchaser might
materially and adversely affect the properties, business, future
prospectus or the financial condition of the Purchaser, or the right
of the Purchaser to use, produce or sell its property and assets in
whole or in part. There is not presently outstanding against the
Purchaser any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator;
(g) the Purchaser is a taxable Canadian corporation not liable for any
material federal, provincial, municipal or local taxes, assessments,
withholding taxes, employee or other remittances, or other imposts or
penalties due and unpaid at the date hereof in respect of its income,
employees, business or property, or for the payment of any tax
instalment due in respect of its current taxation year (but not
including taxes accruing due) or any previous taxation years, and no
such taxes, assessments, imposts, remittances or penalties are
required to be reserved against. The Purchaser is not in default in
filing any returns or reports covering any federal, provincial,
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
(h) the Purchaser has been conducting its business in the ordinary course
in compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Purchaser is duly licensed, registered
and qualified in each jurisdiction in which it owns or leases property
or carries on business to enable its business to be carried on as now
conduced and its property and assets to be owned, leased and operated.
All such licences, registrations and qualifications are in good
standing;
(i) the Purchaser is not in breach of any laws, ordinances, statutes,
regulations, bylaws, orders or decrees to which it is subject or which
may apply to it;
(j) the Purchaser has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse effect on its business;
<PAGE>
8
(k) the entering into and performance of this Agreement will not be in
violation of:
(i) the constating documents of the Purchaser; or
(ii) any agreement to which the Purchaser is a party and will not
give any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Purchaser, and will not
result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Purchaser or the assets of the
Purchaser; or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Purchaser is bound;
(l) the entering into and the performance of this Agreement, subject to
the approval of the ASE and compliance with the Policies, will not be
in violation of any law, rule or regulation of any governmental or
regulatory body having jurisdiction over the Purchaser;
(m) the corporate records and minute books of the Purchaser contain
complete and accurate minutes (duly signed by the Chairman and/or
Secretary of the appropriate meeting) of all meetings of the directors
and shareholders since its date of incorporation, together with the
full text of all resolutions of directors and shareholders passed in
lieu of such meetings, duly signed by all directors and shareholders;
(n) except as disclosed in Section 5.1(e), the Purchaser has not incurred
any obligation or liability, contingent or otherwise, for broker's or
finder's fees in respect of the transactions contemplated by this
Agreement;
(o) the audited financial statements of the Purchaser for the period
ending September 30, 1994, and the notes thereto and the unaudited
interim financial statements for the nine months ending June 30, 1995,
are true and correct and present fairly the financial position of the
Purchaser as at such dates and the results of its operations and
changes in financial position for the respective periods indicated in
the said statements, and have been prepared in accordance with
generally accepted accounting standards applied on a basis consistent
with that of prior periods (the "Kwikstar Financial Statements");
(p) the Purchaser has no material liabilities, contingent or otherwise,
except those set out in the Kwikstar Financial Statements, and the
Purchaser has not guaranteed or indemnified, or agreed to guarantee or
indemnify, any debt, liability or other obligation of any person,
firm, or body corporate;
(q) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an
<PAGE>
9
agreement for the purchase, exchange, transfer or other disposition
from the Purchaser of any of its assets other than in the ordinary
course of business;
(r) the Purchaser has no directors, officers or senior employees to which
it pays remuneration and there are no written agreements or written
contracts for the employment of any of such individuals and there are
no contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any of such individuals,
other than an agreement with Enterprise Developments Inc. to provide
management services;
(s) Schedule "D" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Purchaser is a party and unless otherwise indicated in Schedule "D",
each contract, agreement or commitment is in full force and effect and
the Purchaser is not in default under any material terms of such
contracts, agreements or commitments;
(t) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Purchaser under any of the material
provisions contained in any such contract, commitment or agreement
listed on Schedule "D"; and
(u) the Purchaser shall provide the Vendor and CIBC Wood Gundy Capital
(SFC) Inc. with an opportunity to review and approve the proxy
solicitation material for the meeting of the shareholders of the
Purchaser to be held to approve the Major Transaction, such approval
not to be unreasonably withheld.
5.2 Except as otherwise stated, all representations, warranties, and covenants
by the Purchaser contained in this Agreement shall be true as at the date
hereof. Notwithstanding any investigation or inquires made by the Vendor prior
to Closing or the waiver of any conditions by the Vendor, the representations,
warranties, and covenants of the Purchaser shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full force and effect for the period of three (3) years following
the date hereof. In the event that any of the said representations and
warranties are found to be incorrect or there is a breach of any covenant of the
Purchaser which results in any loss or damage sustained by the Vendor, then the
Purchaser shall reimburse the amount of such loss or damage to the Vendor.
6. CONDITIONS PRECEDENT FOR PURCHASER AND VENDOR
---------------------------------------------
6.1 All obligations of the Purchaser and Vendor under the Agreement are subject
to the fulfilment, prior to or at Closing, of each of the following conditions:
(a) the approval of this transaction by the ASE;
(b) the approval of this transaction as a Major Transaction by the
shareholders of the Purchaser as required by the Policies, which
approval shall be obtained at a meeting of the shareholders of the
Purchaser to be held as soon as reasonably possible, but in no event
later than April 30, 1996;
<PAGE>
10
(c) the concurrent closing of the acquisition by the Purchaser of all the
outstanding securities of DCI not owned by the Vendor or the
Purchaser;
(d) 945 Investments Limited and CIBC Wood Gundy Capital (SFC) Inc. and
others entering into subscriptions agreements in a form satisfactory
to the Purchaser and Vendor for the issue of 6,000,000 DCI securities
for aggregate gross proceeds of $6,000,000;
(e) DCI and Telecom Leasing Canada, or such other party as may be agreed,
entering into a Capital Lease Agreement satisfactory to the Vendor and
the Purchaser;
(f) the Purchaser establishing a performance incentive plan for the
employees of DCI on the same terms and conditions as the DCI
performance incentive plan pursuant to which employees of DCI hold
beneficial interests in 600,000 common shares of DCI;
(g) such employees of DCI as the Purchaser and Vendor agree shall enter
into Employment Agreements with DCI on terms and conditions
satisfactory to the Purchaser and Vendor, acting reasonably;
(h) two directors nominated by the Vendor, two directors nominated by 945
Investments Limited, one director nominated by CIBC Wood Gundy Capital
(SFC) Inc. and one outside director being elected as directors of the
Purchaser at the meeting of shareholders of the Purchaser to approve
the Major Transaction, provided that size of the board of directors of
the Purchaser shall not exceed six; and
(i) the Purchaser will change its name to a name including the words
"Digital Courier International" as soon as reasonably possible after
the meeting of shareholders of the Purchaser to approve the Major
Transaction.
6.2 The conditions set out in Section 6.1 hereof are inserted for the
benefit of both the Purchaser and the Vendor and may be waived jointly by them
in whole or in part. Such waiver will only be effective if in writing.
7. CONDITIONS PRECEDENT FOR PURCHASER
----------------------------------
7.1 All obligations of the Purchaser under the Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Vendor set forth in this
Agreement shall be true and correct as of the date of this Agreement;
<PAGE>
11
(b) the covenants of the Vendor set forth in this Agreement shall have
been complied with;
(c) the Vendor shall cause to be delivered to the Purchaser an opinion
dated as at the Closing Date from legal counsel for the Vendor and DCI
in a form satisfactory to the Purchaser and its counsel, acting
reasonably;
(d) the Vendor will have executed the escrow agreement contemplated by
Section 3.2 hereof;
(e) the Vendor and DCI shall have entered into:
(i) a Technology Transfer and Licensing Agreement;
(ii) a Support Services Agreement; and
(iii) an Asset Transfer Agreement,
on terms that are satisfactory to the Purchaser, acting reasonably;
(f) the Vendor and DCI shall have entered into an agreement whereby the
unexpired term of the lease between 2725321 Canada Inc. and the
Vendor, dated for reference December 1, 1993, as amended, is assigned
to DCI;
(g) the Vendor will have provided to the Purchaser the share certificates
representing the DCI Shares, duly endorsed for transfer to the
Purchaser, plus a certified copy of a resolution of the directors of
DCI approving such transfer; and
(h) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of DCI.
7.2 The conditions set out in Section 7.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived by it in whole or in part. Such
waiver will only be effective if in writing.
8. CONDITIONS PRECEDENT FOR THE VENDOR
-----------------------------------
8.1 All obligations of the Vendor under this Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Purchaser set forth in this
Agreement shall be true and correct as of the date of this Agreement
and shall be true and correct as of the Closing Date as if made by the
Purchaser again at that time, and the Purchaser shall deliver at
Closing a certificate of a senior officer to such effect dated on the
Closing Date, which certificate shall include a statement that the
Purchaser will have at Closing no liabilities except those set out in
the Kwikstar Financial Statements or incurred pursuant to the Major
Transaction;
<PAGE>
12
(b) the covenants of the Purchaser set forth in this Agreement shall have
been complied with;
(c) the Purchaser shall cause to be delivered at Closing to the Vendor an
opinion dated as at the Closing Date from legal counsel for the
Purchaser in a form satisfactory to the Vendor and its counsel, acting
reasonably;
(d) upon issue, the Kwikstar Shares shall be validly issued and
outstanding as fully paid and non-assessable shares in the capital of
the Purchaser;
(e) upon issue of the Kwikstar Shares, the ASE will have approved the
listing of the common shares comprising the Kwikstar Shares on such
exchange, subject to the fulfilment of any conditions the ASE may deem
appropriate and applicable;
(f) the Kwikstar Shares shall be issued and the Purchaser shall have
provided to the Vendor share certificates representing the ASE Non
Escrowed Shares;
(g) the number of ASE Non Escrowed Shares will be acceptable to the
Vendor, acting reasonably;
(h) the Vendor will hold at least 32.4% of the outstanding common shares
of the Purchaser on a fully diluted basis;
(i) the Vendor, 945 Investments Limited and CIBC Wood Gundy Capital (SFC)
Inc. will have entered into a shareholder agreement in a form
satisfactory to the Vendor, acting reasonably; and
(j) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of the
Purchaser.
8.2 The foregoing conditions in this Section 8 are inserted for the exclusive
benefit of the Vendor and may be waived by it in whole or in part. Such waiver
will only be effective if in writing.
9. CLOSING
-------
9.1 The transactions contemplated by this Agreement shall be closed at Farris,
Vaughan, Wills & Murphy or such other place and such date as may be agreed upon
by the parties hereto, but in any event not later than April 30, 1996, which
date is referred to herein as the "Date of Closing" and "Closing Date" and which
time is referred to herein as "Closing" and "Time of Closing".
10. COVENANTS RE: CLOSING
---------------------
10.1 Each of the parties hereto covenants and agrees with the other party hereto
to use all reasonable efforts to take or refrain from taking all actions with
the intent that the closing conditions herein shall be
<PAGE>
13
satisfied, the representations and warranties herein made by it shall be true
and correct and all covenants and agreements herein made by it shall have been
performed, including, without limitation, that:
(a) the Purchaser or DCI shall not, without the written consent of the
parties to this Agreement:
(i) issue any securities, including debt, except as contemplated
herein;
(ii) declare or pay any dividends or distribute any of its
properties or assets to shareholders;
(iii) enter into any contract, other than in the ordinary course of
business;
(iv) alter or amend its articles or by-laws;
(v) engage in any business enterprise or other activity different
from that carried on as of the date hereof; or
(vi) enter into any negotiations, agreements or undertakings with
respect to the sale of any assets or properties, outside the
ordinary course of business; and
(b) the Purchaser or the Vendor shall not, without the written consent of
the other, enter into any negotiations, agreements or undertakings
with respect to the sale of DCI, any assets of DCI or the DCI Shares.
10.2 The Purchaser and the Vendor covenant that they will make all reasonable
efforts to close the transactions contemplated by this agreement no later than
April 30, 1996.
11. TERMINATION
-----------
11.1 In the event that this Agreement is terminated pursuant to Sections 6, 7 or
8 hereof, each party hereto shall be released from all obligations hereunder and
each party hereto shall take all reasonable action to return each of the other
parties hereto to the position relative to which such party occupied prior to
the execution hereof, it being understood that each party hereto will each bear
all costs incurred by it prior to such termination.
12. FURTHER ASSURANCES
------------------
12.1 At Closing and thereafter as may be necessary or desirable, and without
further consideration, the parties hereto shall execute, acknowledge and deliver
such other instruments and shall take such other action as may be necessary to
carry out their respective obligations under this Agreement.
<PAGE>
14
13. CONSTRUCTION
------------
13.1 This Agreement shall be, in all respects, subject to and interpreted,
construed and enforced in accordance with the laws in effect in the Province of
Alberta. Each party hereto accepts the jurisdiction of the Courts of the
Province of Alberta and attorns to their jurisdiction.
14. NOTICES
-------
14.1 All notices, requests, and demands hereunder shall be in writing and shall
be deemed to have been duly given if delivered by hand or by telecommunication
as follows:
(a) to the Purchaser:
Kwikstar Communications Ltd.
106 - 1008 Beach Avenue
Vancouver, British Columbia, V6E 1T7
Attention: Mr. L. C. Fowler
----------------------------
Fax: (604) 685-2533
with a copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 - 5th Avenue S. W.
Calgary, Alberta, T2P 3T6
Attention: Mr. V. E. Dale Burstall
-----------------------------------
Fax: (403) 266-6016
(b) to the Vendor:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, British Columbia, V5A 4B5
Attention: Mr. Ian Bardsley
----------------------------
Vice President of Business Systems and Applications
and to:
Attention: Mr. Peter Inman
---------------------------
Vice President and Chief Financial Officer
Fax: (604) 293-6161
<PAGE>
15
with a copy to:
Farris, Vaughan, Wills & Murphy
Barristers & Solicitors
26th Floor, 700 West Georgia Street
Vancouver, British Columbia, V7Y 1B3
Attention: Mr. R. Hector Mackay-Dunn
-------------------------------------
Fax: (604) 661-9349
or to such other address as may be given in writing by the Vendor or the
Purchaser, and all notices, requests, and demands hereunder shall be deemed to
have been received, if delivered, on the date of delivery and if transmitted, on
the date of the transmission.
15. ASSIGNMENT
----------
15.1 This Agreement shall not be assigned without the written consent of the
other party hereto, and such consent may be arbitrarily withheld.
15.2 This Agreement shall enure to the benefit of and shall be binding upon the
Vendor and its respective successors and permitted assigns and the Purchaser and
its respective successors and permitted assigns.
15.3 In addition, the Purchaser acknowledges that it has been advised by the
Vendor that the control person (as defined by the Securities Act (Alberta)) of
the Vendor may change during the term of this agreement and agrees such change
shall not constitute an amendment of this agreement or affect this agreement in
any way.
15.4 Notwithstanding Section 15.1, the Vendor may assign its rights under this
Agreement to any Affiliate, including an Affiliate with which it amalgamates,
merges or consolidates or enters into a similar reorganization or into which it
is wound up as part of a bona fide reorganization, or to any other person upon
the acquisition by such person of all or substantially all of the assets of the
Vendor (the "Assignee"); provided that the Assignee agrees to be bound by this
Agreement in place of the Vendor and with its rights and obligations as if the
Assignee were an original signatory hereto, except in the case of an assignment
to an Affiliate, in which case the Vendor shall also continue to be bound by
this Agreement.
16. COSTS
-----
16.1 The parties hereto agree that each party will pay for their respective
costs incurred pursuant to this Agreement and the transactions contemplated
herein if this transaction is not closed. If this transaction is closed, the
Purchaser will pay all reasonable costs of DCI incurred pursuant to this
Agreement and the transactions contemplated herein.
<PAGE>
16
17. GENERAL
-------
17.1 Time shall be of the essence of this Agreement.
17.2 This Agreement may be executed in separate counterparts, and all such
executed counterparts when taken together shall constitute one Agreement.
17.3 The terms and provisions herein contained constitute the entire agreement
between the parties and shall supersede all previous oral or written
communications.
IN WITNESS WHEREOF the parties hereto have executed this Agreement to be
effective as of the date first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ Edward D. Ford
___________________________________
Per:
___________________________________
MPR TELTECH LTD.
Per: /s/ I.R. Bardsley
___________________________________
Per: /s/ Peter Inman
___________________________________
<PAGE>
SCHEDULE "A"
PREFERRED SHARES, SERIES 1
--------------------------
The Preferred Shares, Series 1 (the "Series 1 Shares") shall have attached
thereto the following rights, privileges, restrictions and conditions, in
addition to those attached to the preferred shares as a class as set forth in
Section 2 to the Articles of the Corporation.
1. VOTING
------
Except as required by law, the holders of the Series 1 Shares shall not, as
such, be entitled to receive notice of, attend or vote at any meeting of the
shareholders of the Corporation.
2. DIVIDENDS
---------
No dividends shall be declared or paid at any time on the Series 1 Shares
and the holders of such shares shall not have any claim against the Corporation
for dividends of any kind.
3. LIQUIDATION, DISSOLUTION OR WINDING-UP
--------------------------------------
In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, the holders of the
Series 1 Shares shall be entitled to repayment of the amount paid up thereon,
the whole being paid before any amount shall be paid or any assets or property
of the Corporation shall be distributed to the holders of the common shares of
the Corporation and any other shares of the Corporation ranking junior to the
Series 1 Shares. After payment of such amounts, the holders of the Series 1
Shares shall not be entitled to share in any further distribution of the
property or assets of the Corporation.
4. ISSUE PRICE
-----------
The Series 1 Shares shall be issued only at and for a deemed price of $1.00
per share.
5. REDEMPTION AND RETRACTION
-------------------------
(a) Definitions
-----------
For the purposes of this Section:
(i) "Expiration Date" means the date that is three years after the
date of issuance of the Series 1 Shares;
(ii) "Gross Margin" means the aggregate gross proceeds of sale or
licence, arising from or relating to the MI-320 ISDN terminal
adapter, the NDIS communications drivers and the Capella MPEG
PC Codec, less the
<PAGE>
2
Corporation's costs to produce such products and technology,
such costs excluding all costs of marketing and selling such
products and technology, all to be determined by the
Corporation's auditor quarterly together with the calculation
of the Corporation's quarterly financial results;
(iii) "Redemption Price" means $1.00 per share; and
(iv) "Retraction Price" means $1.00 per share.
(b) Mandatory Redemption
--------------------
(i) The Corporation shall redeem, on the 30th day following the end
of each financial quarter during the Corporation's fiscal year in
which Series 1 Shares shall remain issued and outstanding (the
"Mandatory Redemption Date"), the number of Series 1 Shares which
have an aggregate Redemption Price equal to fifty percent (50%)
of the Gross Margin for such quarter.
(ii) On each Mandatory Redemption Date, the Corporation shall, subject
to the provisions of the Business Corporations Act (Alberta), pay
or cause to be paid the Redemption Price to or to the order of
the holder of the Series 1 Shares, as the case may be, to be
redeemed upon presentation and surrender at the registered office
of the Corporation of the respective certificates representing
such shares.
Should the holders of the Series 1 Shares fail to present the
certificates for the Series 1 Shares to be redeemed on any
Mandatory Redemption Date, the Corporation shall have the right
at any time after the Mandatory Redemption Date to deposit the
Redemption Price or such part thereof as at the time of deposit
has not been claimed by the holder of the Series 1 Share entitled
thereto, to a special account in any Canadian chartered bank or
trust company, to be paid without interest to or to the order of
the holder of such Series 1 Shares called for redemption upon
presentation and surrender of the certificates representing the
Series 1 Shares so redeemed. Any interest on such deposit shall
belong to the Corporation.
Such Series 1 Shares shall thereupon be and be deemed to be
redeemed and shall be cancelled and shall not be reissued. If a
part only of the shares represented by any certificate is
redeemed, a new certificate for the balance shall be issued at
the expense of the Corporation. The holder of the Series 1
Shares so redeemed shall cease to exercise any of the rights of
the holder in respect thereof unless payment of the Redemption
Price shall not be made in accordance with this Section, in which
case the rights of such holder shall remain unimpaired.
<PAGE>
3
(c) Optional Redemption
-------------------
(i) The Corporation may at its option at any time or from time to
time, on the giving of not less than 10 days prior written notice
("Redemption Notice") to the holder of the Series 1 Shares,
redeem for the Redemption Price all or any part of the Series 1
Shares then outstanding on the date fixed for redemption (the
"Voluntary Redemption Date"), all as specified in the Redemption
Notice.
(ii) The Corporation shall redeem the Series 1 Shares referred to in
the Redemption Notice in the Voluntary Redemption Date (or before
the Redemption Date if agreed to by the holder of the Series 1
Shares). The Corporation shall, after presentation and surrender
at the registered office of the Corporation of the certificate(s)
for the Series 1 Shares called for redemption, pay to the holder
of the Series 1 Shares the Redemption Price in accordance with
paragraph (iii) below.
Such Series 1 Shares shall thereupon be and be deemed to be
redeemed and shall be cancelled and shall not be reissued. The
holder of the Series 1 Shares so redeemed shall cease to exercise
any of the rights of the holder in respect thereof unless payment
of the Redemption Price shall not be made in accordance with this
subsection, in which case the rights of such holder shall remain
unimpaired.
Should the Redemption Price be paid in cash in accordance with
paragraph (iii) below, and should the holder of the Series 1
Shares fail to present the certificate(s) for the Series 1 Shares
to be redeemed on the Voluntary Redemption Date, the Corporation
shall have the right at any time thereafter to deposit the
Redemption Price in any Canadian chartered bank or trust company,
in a special account for the holder of such shares, and upon
deposit being made, the Series 1 Shares in respect of which such
deposit shall have been made shall be deemed to be redeemed and
the rights of the holder thereof shall be limited to receiving
without interest, the Redemption Price so deposited upon
presentation and surrender of the certificate representing the
Series 1 Shares so redeemed. Any interest on such deposit shall
belong to the Corporation.
(iii) Payment of the Redemption Price for any Series 1 Shares
redeemed under this paragraph (c) shall be made in cash unless
the holder of the Series 1 Shares notifies the Corporation in
writing not less than 5 days prior to the Voluntary Redemption
Date that it wishes to receive common shares, in which case the
Redemption Price shall be paid by issuing to the holder of the
Series 1 Shares the number of common shares in the capital of
the
<PAGE>
4
Corporation equal to one-half of the number of the Series 1
Shares being redeemed and by paying the Redemption Price in cash
for the remaining one-half of the Series 1 Shares being redeemed.
All common shares issued upon a redemption of Series 1 Shares
under this paragraph (c) shall be fully paid and non-assessable.
(d) Retraction at Holder's Option
-----------------------------
(i) Should any Series 1 Shares remain issued and outstanding as at
the Expiration Date, the holder of such Series 1 Shares may, at
any time after the Expiration Date, demand by notice in writing
(the "Retraction Notice") to the Corporation that the Corporation
redeem the whole or from time to time any part of the Series 1
Shares held by it by payment to it of the Retraction Price
therefor.
(ii) If the holder of the Series 1 Shares desires the Corporation to
redeem its Series 1 Shares pursuant to this Section, it shall at
least 30 days before the date specified for redemption give
written notice thereof to the Corporation at its registered
office (the "Retraction Notice"). Such notice shall set out the
date on which redemption is to take place (the "Retraction
Date").
The Corporation shall, subject to the provisions of the Business
Corporations Act (Alberta), redeem the Series 1 Shares referred
to in the Retraction Notice on the Retraction Date (or before the
Retraction Date if agreed to by the holder of the Series 1
Shares). The Corporation shall, after presentation and surrender
at the registered office of the Corporation of the certificate(s)
for the Series 1 Shares called for redemption, pay to the holder
of the Series 1 Shares the Retraction Price in accordance with
paragraph (iii) below. Such Series 1 Shares shall thereupon be
and be deemed to be redeemed and shall be cancelled and shall not
be reissued. The holder of the Series 1 Shares so redeemed shall
cease to exercise any of the rights of the holder in respect
thereof unless payment of the Retraction Price shall not be made
in accordance with this Section, in which case the rights of such
holder shall remain unimpaired.
Should the Retraction Price be paid in cash in accordance with
subparagraph (iii)(B) below, and should the holder of the Series
1 Shares fail to present the certificate(s) for the Series 1
Shares to be redeemed on the Retraction Date, the Corporation
shall have the right at any time thereafter to deposit the
Retraction Price in any Canadian chartered bank or trust company,
in a special account for the holder of such shares, and upon
deposit being made, the Series 1 Shares in respect of which such
deposit shall have been made
<PAGE>
5
shall be deemed to be redeemed and the rights of the holder
thereof shall be limited to receiving without interest, the
Retraction Price so deposited upon presentation and surrender of
the certificate representing the Series 1 Shares so redeemed. Any
interest on such deposit shall belong to the Corporation.
(iii) Payment of the Retraction Price shall be made, solely at the
option of the holder of the Series 1 Shares, as specified in the
Retraction Notice, as follows:
(A) by issuing to the holder of the Series 1 Shares the number
of common shares in the capital of the Corporation equal to
the number of Series 1 Shares being redeemed; or
(B) by payment of the Retraction Price, in cash, to or to the
order of the holder of the Series 1 Shares.
Should the Retraction Price be paid in cash in accordance with
subparagraph (iii)(B) above, payment of the Retraction Price
shall be made by way of twelve (12) equal monthly instalments
payable by the Corporation to the holder of the Series 1 Shares
on or before the last day of each month, commencing on the last
day of the first full month after the Retraction Date.
All common shares issued upon any retraction of Series 1 Shares
in accordance with this paragraph shall be fully paid and non-
assessable.
<PAGE>
SCHEDULE "B"
Mark Burns Director of Sales
Eric Chong Director of Engineering
Neil Gunn Director of Technology
Al Kozak General Manager
Remy Kozak Director of Products and Marketing
Bruce Maxwell Director of Network Operations
<PAGE>
SCHEDULE "C"
None
<PAGE>
SCHEDULE "D"
MATERIAL CONTRACTS OF PURCHASER
-------------------------------
1. Management Services Agreement between the Purchaser and Enterprise
Developments Inc. ("Enterprise") pursuant to which Enterprises has agreed
to provide management, secretarial and other office services to the
Purchaser for a fee of $3,000 per month.
2. Escrow Agreement dated October 31, 1994 among the Purchaser, Montreal Trust
Company of Canada and certain shareholders of the Purchaser.
3. Stock Option Agreements between the Purchaser and its directors and
officers.
4. An Agency Agreement dated December 19, 1994 among the Purchaser, Yorkton
Securities Inc. (the "Agent") and Montreal Trust Company of Canada (the
"Agency Agreement"). Pursuant to the Agency Agreement, the Purchaser
appointed the Agent as its agent to offer for distribution on a best
efforts basis 2,000,000 common shares of the Purchaser at $0.15 per common
share, subject to the terms and conditions contained in the Agency
Agreement. The closing of the distribution occurred on January 19, 1995.
The Agent received a commission of $30,000 and in addition was reimbursed
for its legal fees incurred pursuant to the distribution in the amount of
$4,637.21. The Purchaser also granted the Agent an option to purchase
200,000 common shares at $0.15 per common share.
5. A Stock Option Agreement dated January 19, 1995 between Yorkton Securities
Inc. and the Purchaser.
6. Finders Fee Agreement between the Purchaser and E.L. Patterson or his
nominee.
<PAGE>
SCHEDULE "E"
<PAGE>
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT dated for reference the 15th day of November, 1995.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a body corporate incorporated under the
laws of the Province of Alberta and having its head office in the City
of Vancouver, in the Province of British Columbia (herein referred to
as the "Purchaser")
OF THE FIRST PART
- and -
CIBC WOOD GUNDY CAPITAL (SFC) INC., a body corporate having its office
in the City of Toronto, in the Province of Ontario (herein referred to
as the "Vendor")
OF THE SECOND PART
WHEREAS:
A. The Purchaser was incorporated under the provisions of the Business
Corporations Act (Alberta) and is a public company with its common shares
listed and posted for trading on The Alberta Stock Exchange;
B. The Vendor is the legal and beneficial owner of 4,000,000 common shares
(the "DCI Shares") in the capital of Digital Courier International Inc.
("DCI"); and
C. The Vendor has agreed to sell and the Purchaser has agreed to purchase the
DCI Shares on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
premises, covenants, agreements and warranties hereinafter set forth, it is
hereby agreed as follows:
1. DEFINITIONS
-----------
1.1 In this Agreement, unless there is something in the subject or context
inconsistent therewith, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and the expressions following shall have the
following meanings, respectively:
"AGREEMENT", "this Agreement", "herein", "hereby", "hereof", "hereunder"
and similar expressions mean or refer to this Share Purchase Agreement and
any amendments hereto.
<PAGE>
2
"ASE" means The Alberta Stock Exchange.
"ASE NON ESCROWED SHARES" means the Kwikstar Shares issued pursuant to
Section 3.1 hereof not required to be held in escrow by the ASE.
"CLOSING" has the meaning ascribed thereto in Section 9.1 hereof.
"CLOSING DATE" has the meaning ascribed thereto in Section 9.1 hereof.
"DCI" means Digital Courier International Inc.
"DCI SHARES" means 4,000,000 common shares in the capital of DCI legally
and beneficially owned by the Vendor.
"KWIKSTAR SHARES" means 12,000,000 common shares in the capital of the
Purchaser to be issued to the Vendor pursuant to Section 3.1 of this
Agreement.
"MAJOR TRANSACTION" has the meaning ascribed thereto by the Policies.
"POLICIES" means Alberta Securities Commission Policy 4.11 and Circular No.
7 contained in The Alberta Stock Exchange Policies and Procedures Manual.
"PURCHASER" means Kwikstar Communications Ltd.
"VENDOR" means CIBC Wood Gundy Capital (SFC) Inc.
2. SALE AND PURCHASE
-----------------
2.1 The Vendor hereby agrees to sell and the Purchaser hereby agrees to
purchase, effective the Closing Date, the DCI Shares on the terms and conditions
herein contained.
3. CONSIDERATION
-------------
3.1 The parties hereto agree that the purchase price for the DCI Shares shall
be paid by the issuance from the treasury of the Purchaser of the Kwikstar
Shares duly registered in the name of the Vendor, or as the Vendor may direct
the Purchaser in writing, all such shares to be issued as fully paid and non-
assessable common shares.
3.2 In addition, the Vendor acknowledges that the Kwikstar Shares are being
issued pursuant to exemptions from registration and prospectus requirements of
applicable securities legislation, and that the Vendor may not be able to resell
the Kwikstar Shares except in accordance with limited exemptions under
applicable securities legislation. Since the Purchaser is not currently a
"reporting issuer" in the Province of British Columbia, until the Purchaser
becomes a reporting issuer, the resale restrictions for the Kwikstar Shares may
be for an indefinite period. Notwithstanding the foregoing, the Purchaser shall
use all reasonable efforts to become a reporting issuer in the Province of
British Columbia no later than April 30, 1996.
<PAGE>
3
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
4.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents, warrants and covenants with the Purchaser as
follows:
(a) the Vendor is the legal and beneficial owner of the DCI Shares and the
DCI Shares are fully paid and non-assessable, and free of any liens,
claims, charges, security interests or encumbrances of any kind
whatsoever. The DCI Shares represent all of the securities of DCI
owned by the Vendor and the Vendor does not have any agreement, option
or right to purchase or acquire, or capable of becoming an agreement
for the purchase or acquisition of any additional securities of DCI;
(b) the Vendor has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to transfer the legal and beneficial title and ownership of the DCI
Shares to the Purchaser;
(c) except as provided in this Agreement, no person, firm or corporation
other than the Purchaser has any agreement, option or right to
purchase or acquire, or capable of becoming an agreement for the
purchase or acquisition of the DCI Shares; and
(d) the Vendor is resident in Canada within the meaning of the Income Tax
Act (Canada).
4.2 Except as otherwise stated, all representations, warranties, and covenants
by the Vendor contained in this Agreement shall be true as at the date hereof.
Notwithstanding any investigations or inquiries made by the Purchaser prior to
Closing or the waiver of any condition by the Purchaser, the representations,
warranties, and covenants of the Vendor shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full force and effect for the period of three (3) years following
the date hereof. In the event that any of the said representations and
warranties are found to be incorrect or there is a breach of any covenant of the
Vendor which results in any loss or damage sustained directly or indirectly by
the Purchaser, then the Vendor shall reimburse the amount of such loss or damage
to the Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
5.1 In order to induce the Vendor to enter into and consummate this Agreement,
the Purchaser represents, warrants and covenants with the Vendor as follows:
(a) the Purchaser is a corporation duly incorporated under the laws of the
Province of Alberta and is a valid and subsisting corporation under
the Business Corporations Act (Alberta) and the Purchaser has the
requisite power, capacity and authority to enter into this Agreement
on the terms and conditions herein set forth. The Purchaser owns no
subsidiaries;
<PAGE>
4
(b) the Purchaser is a "reporting issuer" as that term is defined in the
Securities Act (Alberta) and the issued and outstanding common shares
of the Purchaser are listed and posted for trading on the ASE;
(c) the authorized capital of the Purchaser consists of an unlimited
number of common shares and an unlimited number of preferred shares,
of which 4,766,666 common shares are issued and outstanding and no
other shares are issued or outstanding. The Purchaser has reserved
ten percent (10%) of its issued and outstanding common shares under a
directors and management stock option plan, and options to acquire
466,665 common shares at $0.15 per share are outstanding, and the
Purchaser has reserved an additional 4,000,000 common shares at $0.22
per common share for options to be granted after the completion of the
Major Transaction. After the completion of the acquisition of all of
the issued and outstanding shares of DCI, the fully diluted
capitalization of the Purchaser shall be as set out in Schedule "A";
(d) upon completion of the acquisition of the DCI Shares pursuant to the
terms of this Agreement, the Kwikstar Shares will be issued as fully
paid and non-assessable common shares;
(e) except pursuant to or as disclosed in this Agreement or agreements
with the other holders of securities of DCI, or an agreement or
agreements with E.L. Patterson with respect to a finder's fee, no
person, firm or corporation has any agreement, option or right to
acquire or capable of becoming an agreement for the purchase or
acquisition of any of the unissued share capital of the Purchaser;
(f) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Purchaser is aware threatened,
against or relating to the Purchaser or affecting its properties or
business which if determined adversely to the Purchaser might
materially and adversely affect the properties, business, future
prospectus or the financial condition of the Purchaser, or the right
of the Purchaser to use, produce or sell its property and assets in
whole or in part. There is not presently outstanding against the
Purchaser any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator;
(g) the Purchaser is a taxable Canadian corporation not liable for any
material federal, provincial, municipal or local taxes, assessments,
withholding taxes, employee or other remittances, or other imposts or
penalties due and unpaid at the date hereof in respect of its income,
employees, business or property, or for the payment of any tax
instalment due in respect of its current taxation year (but not
including taxes accruing due) or any previous taxation years, and no
such taxes, assessments, imposts, remittances or penalties are
required to be reserved against. The Purchaser is not in default in
filing any returns or reports covering any federal, provincial,
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
<PAGE>
5
(h) the Purchaser has been conducting its business in the ordinary course
in compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Purchaser is duly licensed, registered
and qualified in each jurisdiction in which it owns or leases property
or carries on business to enable its business to be carried on as now
conduced and its property and assets to be owned, leased and operated.
All such licences, registrations and qualifications are in good
standing;
(i) the Purchaser is not in breach of any laws, ordinances, statutes,
regulations, bylaws, orders or decrees to which it is subject or which
may apply to it;
(j) the Purchaser has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse effect on its business;
(k) the entering into and performance of this Agreement will not be in
violation of:
(i) the constating documents of the Purchaser; or
(ii) any agreement to which the Purchaser is a party and will not
give any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Purchaser, and will not
result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Purchaser or the assets of the
Purchaser; or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Purchaser is bound;
(l) the entering into and the performance of this Agreement, subject to
the approval of the ASE and compliance with the Policies, will not be
in violation of any law, rule or regulation of any governmental or
regulatory body having jurisdiction over the Purchaser;
(m) the corporate records and minute books of the Purchaser contain
complete and accurate minutes (duly signed by the Chairman and/or
Secretary of the appropriate meeting) of all meetings of the directors
and shareholders since its date of incorporation, together with the
full text of all resolutions of directors and shareholders passed in
lieu of such meetings, duly signed by all directors and shareholders;
(n) except as disclosed in Section 5.1(e), the Purchaser has not incurred
any obligation or liability, contingent or otherwise, for broker's or
finder's fees in respect of the transactions contemplated by this
Agreement;
<PAGE>
6
(o) the audited financial statements of the Purchaser for the period
ending September 30, 1994, and the notes thereto and the unaudited
interim financial statements for the nine months ending June 30, 1995,
are true and correct and present fairly the financial position of the
Purchaser as at such dates and the results of its operations and
changes in financial position for the respective periods indicated in
the said statements, and have been prepared in accordance with
generally accepted accounting standards applied on a basis consistent
with that of prior periods (the "Kwikstar Financial Statements");
(p) the Purchaser has no material liabilities, contingent or otherwise,
except those set out in the Kwikstar Financial Statements, and the
Purchaser has not guaranteed or indemnified, or agreed to guarantee or
indemnify, any debt, liability or other obligation of any person,
firm, or body corporate;
(q) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from the Purchaser of any of its assets other than in the
ordinary course of business;
(r) the Purchaser has no directors, officers or senior employees to which
it pays remuneration and there are no written agreements or written
contracts for the employment of any of such individuals and there are
no contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any of such individuals,
other than an agreement with Enterprise Developments Inc. to provide
management services;
(s) Schedule "B" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Purchaser is a party and unless otherwise indicated in Schedule "B",
each contract, agreement or commitment is in full force and effect and
the Purchaser is not in default under any material terms of such
contracts, agreements or commitments;
(t) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Purchaser under any of the material
provisions contained in any such contract, commitment or agreement
listed on Schedule "B"; and
(u) the Purchaser shall provide the Vendor and MPR Teltech Ltd. with an
opportunity to review and approve the proxy solicitation material for
the meeting of the shareholders of the Purchaser to be held to approve
the Major Transaction, such approval not to be unreasonably withheld.
5.2 Except as otherwise stated, all representations, warranties, and covenants
by the Purchaser contained in this Agreement shall be true as at the date
hereof. Notwithstanding any investigation or inquires made by the Vendor prior
to Closing or the waiver of any conditions by the Vendor, the representations,
warranties, and covenants of the Purchaser shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full
<PAGE>
7
force and effect for the period of three (3) years following
the date hereof. In the event that any of the said representations and
warranties are found to be incorrect or there is a breach of any covenant of the
Purchaser which results in any loss or damage sustained by the Vendor, then the
Purchaser shall reimburse the amount of such loss or damage to the Vendor.
6. CONDITIONS PRECEDENT FOR PURCHASER AND VENDOR
---------------------------------------------
6.1 All obligations of the Purchaser and Vendor under the Agreement are subject
to the fulfilment, prior to or at Closing, of each of the following conditions:
(a) the approval of this transaction by the ASE;
(b) the approval of this transaction as a Major Transaction by the
shareholders of the Purchaser as required by the Policies, which
approval shall be obtained at a meeting of the shareholders of the
Purchaser to be held as soon as reasonably possible, but in no event
later than March 31, 1996;
(c) the concurrent closing of the acquisition by the Purchaser of all the
outstanding securities of DCI not owned by the Vendor or the
Purchaser;
(d) the Vendor, 945 Investments Limited and others entering into
subscriptions agreements in a form satisfactory to the Purchaser and
Vendor for the issue of 6,000,000 DCI securities for aggregate gross
proceeds of $6,000,000;
(e) DCI and Telecom Leasing Canada, or such other party as may be agreed,
entering into a Capital Lease Agreement satisfactory to the Vendor and
the Purchaser;
(f) the Purchaser establishing a performance incentive plan for the
employees of DCI on the same terms and conditions as the DCI
performance incentive plan pursuant to which employees of DCI hold
beneficial interests in 600,000 common shares of DCI;
(g) such employees of DCI as the Purchaser and Vendor agree shall enter
into Employment Agreements with DCI on terms and conditions
satisfactory to the Purchaser and Vendor, acting reasonably;
(h) two directors nominated by MPR Teltech Limited, two directors
nominated by 945 Investments Limited, one director nominated by the
Vendor and one outside director being elected as directors of the
Purchaser at the meeting of shareholders of the Purchaser to approve
the Major Transaction, provided that size of the board of directors of
the Purchaser shall not exceed six; and
(i) the Purchaser will change its name to a name including the words
"Digital Courier International" as soon as reasonably possible after
the meeting of shareholders of the Purchaser to approve the Major
Transaction.
<PAGE>
8
6.2 The conditions set out in Section 6.1 hereof are inserted for the
benefit of both the Purchaser and the Vendor and may be waived jointly by them
in whole or in part. Such waiver will only be effective if in writing.
7. CONDITIONS PRECEDENT FOR PURCHASER
----------------------------------
7.1 All obligations of the Purchaser under the Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Vendor set forth in this
Agreement shall be true and correct as of the date of this Agreement
and shall be true and correct as of the Closing Date as if made by the
Vendor again at that time, and the Vendor shall deliver at Closing a
certificate of the Vendor to such effect dated on the Closing Date;
(b) the covenants of the Vendor set forth in this Agreement shall have
been complied with;
(c) the Vendor shall cause to be delivered to the Purchaser an opinion
dated as at the Closing Date from legal counsel for the Vendor in a
form satisfactory to the Purchaser and its counsel, acting reasonably;
(d) the Vendor will have provided to the Purchaser the share certificates
representing the DCI Shares, duly endorsed for transfer to the
Purchaser, plus a certified copy of a resolution of the directors of
DCI approving such transfer; and
(e) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of DCI.
7.2 The conditions set out in Section 7.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived by it in whole or in part. Such
waiver will only be effective if in writing.
8. CONDITIONS PRECEDENT FOR THE VENDOR
-----------------------------------
8.1 All obligations of the Vendor under this Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Purchaser set forth in this
Agreement shall be true and correct as of the date of this Agreement
and shall be true and correct as of the Closing Date as if made by the
Purchaser again at that time, and the Purchaser shall deliver at
Closing a certificate of a senior officer to such effect dated on the
Closing Date, which certificate shall include a statement that the
Purchaser will have at Closing no liabilities except those set out in
the Kwikstar Financial Statements or incurred pursuant to the Major
Transaction;
<PAGE>
9
(b) the covenants of the Purchaser set forth in this Agreement shall have
been complied with;
(c) the Purchaser shall cause to be delivered at Closing to the Vendor an
opinion dated as at the Closing Date from legal counsel for the
Purchaser in a form satisfactory to the Vendor and its counsel, acting
reasonably;
(d) upon issue, the Kwikstar Shares shall be validly issued and
outstanding as fully paid and non-assessable shares in the capital of
the Purchaser;
(e) upon issue of the Kwikstar Shares, the ASE will have approved the
listing of the common shares comprising the Kwikstar Shares on such
exchange, subject to the fulfilment of any conditions the ASE may deem
appropriate and applicable;
(f) the Kwikstar Shares shall be issued and the Purchaser shall have
provided to the Vendor share certificates representing the ASE Non
Escrowed Shares;
(g) the Vendor, MPR Teltech Ltd. and 945 Investments Limited will have
entered into a shareholder agreement in a form satisfactory to the
Vendor, acting reasonably; and
(h) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of the
Purchaser.
8.2 The foregoing conditions in this Section 8 are inserted for the exclusive
benefit of the Vendor and may be waived by it in whole or in part. Such waiver
will only be effective if in writing.
9. CLOSING
-------
9.1 The transactions contemplated by this Agreement shall be closed at Farris,
Vaughan, Wills & Murphy or such other place and such date as may be agreed upon
by the parties hereto, but in any event not later than April 30, 1996, which
date is referred to herein as the "Date of Closing" and "Closing Date" and which
time is referred to herein as "Closing" and "Time of Closing".
10. COVENANTS RE: CLOSING
---------------------
10.1 Each of the parties hereto covenants and agrees with the other party hereto
to use all reasonable efforts to take or refrain from taking all actions with
the intent that the closing conditions herein shall be satisfied, the
representations and warranties herein made by it shall be true and correct and
all covenants and agreements herein made by it shall have been performed,
including, without limitation, that:
(a) the Purchaser or DCI shall not, without the written consent of the
parties to this Agreement:
<PAGE>
10
(i) issue any securities, including debt, except as contemplated
herein;
(ii) declare or pay any dividends or distribute any of its
properties or assets to shareholders;
(iii) enter into any contract, other than in the ordinary course of
business;
(iv) alter or amend its articles or by-laws;
(v) engage in any business enterprise or other activity different
from that carried on as of the date hereof; or
(vi) enter into any negotiations, agreements or undertakings with
respect to the sale of any assets or properties, outside the
ordinary course of business; and
(b) the Purchaser or the Vendor shall not, without the written consent of
the other, enter into any negotiations, agreements or undertakings
with respect to the sale of DCI, any assets of DCI or the DCI Shares.
10.2 The Purchaser and the Vendor covenant that they will make all reasonable
efforts to close the transactions contemplated by this agreement no later than
April 30, 1995.
11. TERMINATION
-----------
11.1 In the event that this Agreement is terminated pursuant to Sections 6, 7 or
8 hereof, each party hereto shall be released from all obligations hereunder and
each party hereto shall take all reasonable action to return each of the other
parties hereto to the position relative to which such party occupied prior to
the execution hereof, it being understood that each party hereto will each bear
all costs incurred by it prior to such termination.
12. FURTHER ASSURANCES
------------------
12.1 At Closing and thereafter as may be necessary or desirable, and without
further consideration, the parties hereto shall execute, acknowledge and deliver
such other instruments and shall take such other action as may be necessary to
carry out their respective obligations under this Agreement.
13. CONSTRUCTION
------------
13.1 This Agreement shall be, in all respects, subject to and interpreted,
construed and enforced in accordance with the laws in effect in the Province of
Alberta. Each party hereto accepts the jurisdiction of the Courts of the
Province of Alberta and attorns to their jurisdiction.
<PAGE>
11
14. NOTICES
-------
14.1 All notices, requests, and demands hereunder shall be in writing and shall
be deemed to have been duly given if delivered by hand or by telecommunication
as follows:
(a) to the Purchaser:
Kwikstar Communications Ltd.
106 - 1008 Beach Avenue
Vancouver, B. C., V6E 1T7
Attention: Mr. L. C. Fowler
----------------------------
Fax: (604) 685-2533
with a copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 - 5th Avenue S. W.
Calgary, Alberta, T2P 3T6
Attention: Mr. V. E. Dale Burstall
-----------------------------------
Fax: (403) 266-6016
(b) to the Vendor:
CIBC Wood Gundy Capital (SFC) Inc.
BCE Place, P. O. Box 500
161 Bay Street
Toronto, Ontario, M5J 2S8
Attention: Mr. Sam Duboc
-------------------------
Fax: (416) 594-8037
with a copy to:
Blake, Cassels & Graydon
Barristers & Solicitors
1700 - 1030 West Georgia Street
Vancouver, B. C., V6E 2Y3
Attention: Peter Kalbfleisch
-----------------------------
Fax: (604) 631-3309
<PAGE>
12
or to such other address as may be given in writing by the Vendor or the
Purchaser, and all notices, requests, and demands hereunder shall be deemed to
have been received, if delivered, on the date of delivery and if transmitted, on
the date of the transmission.
15. ASSIGNMENT
----------
15.1 This Agreement shall not be assigned without the written consent of the
other party hereto, and such consent may be arbitrarily withheld.
15.2 This Agreement shall enure to the benefit of and shall be binding upon the
Vendor and its respective successors and permitted assigns and the Purchaser and
its respective successors and permitted assigns.
16. COSTS
-----
16.1 The parties hereto agree that each party will pay for their respective
costs incurred pursuant to this Agreement and the transactions contemplated
herein if this transaction is not closed. If this transaction is closed, the
Purchaser will pay all reasonable costs of DCI incurred pursuant to this
Agreement and the transactions contemplated herein.
17. GENERAL
-------
17.1 Time shall be of the essence of this Agreement.
17.2 This Agreement may be executed in separate counterparts, and all such
executed counterparts when taken together shall constitute one Agreement.
17.3 The terms and provisions herein contained constitute the entire agreement
between the parties and shall supersede all previous oral or written
communications.
IN WITNESS WHEREOF the parties hereto have executed this Agreement to be
effective as of the date first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ L.C. Fowler
_____________________________________
Per:
_____________________________________
CIBC WOOD GUNDY CAPITAL (SFC) INC.
Per: /s/ Sam Duboc
_____________________________________
Per:
_____________________________________
<PAGE>
SCHEDULE "A"
<PAGE>
SCHEDULE "B"
MATERIAL CONTRACTS OF PURCHASER
-------------------------------
1. Management Services Agreement between the Purchaser and Enterprise
Developments Inc. ("Enterprise") pursuant to which Enterprises has agreed
to provide management, secretarial and other office services to the
Purchaser for a fee of $3,000 per month.
2. Escrow Agreement dated October 31, 1994 among the Purchaser, Montreal Trust
Company of Canada and certain shareholders of the Purchaser.
3. Stock Option Agreements between the Purchaser and its directors and
officers.
4. An Agency Agreement dated December 19, 1994 among the Purchaser, Yorkton
Securities Inc. (the "Agent") and Montreal Trust Company of Canada (the
"Agency Agreement"). Pursuant to the Agency Agreement, the Purchaser
appointed the Agent as its agent to offer for distribution on a best
efforts basis 2,000,000 common shares of the Purchaser at $0.15 per common
share, subject to the terms and conditions contained in the Agency
Agreement. The closing of the distribution occurred on January 19, 1995.
The Agent received a commission of $30,000 and in addition was reimbursed
for its legal fees incurred pursuant to the distribution in the amount of
$4,637.21. The Purchaser also granted the Agent an option to purchase
200,000 common shares at $0.15 per common share.
5. A Stock Option Agreement dated January 19, 1995 between Yorkton Securities
Inc. and the Purchaser.
6. Finders Fee Agreement between the Purchaser and E.L. Patterson or his
nominee.
<PAGE>
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT dated for reference the 15th day of November, 1995.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a body corporate incorporated under the
laws of the Province of Alberta and having its head office in the City
of Vancouver, in the Province of British Columbia (herein referred to
as the "Purchaser")
OF THE FIRST PART
- and -
945 INVESTMENTS LIMITED, a body corporate having its office in the
City of Vancouver, in the Province of British Columbia (herein
referred to as the "Vendor")
OF THE SECOND PART
WHEREAS:
A. The Purchaser was incorporated under the provisions of the Business
Corporations Act (Alberta) and is a public company with its common shares
listed and posted for trading on The Alberta Stock Exchange;
B. The Vendor is the legal and beneficial owner of 2,000,000 common shares
(the "DCI Shares") in the capital of Digital Courier International Inc.
("DCI"); and
C. The Vendor has agreed to sell and the Purchaser has agreed to purchase the
DCI Shares on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
premises, covenants, agreements and warranties hereinafter set forth, it is
hereby agreed as follows:
1. DEFINITIONS
-----------
1.1 In this Agreement, unless there is something in the subject or context
inconsistent therewith, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and the expressions following shall have the
following meanings, respectively:
"AGREEMENT", "this Agreement", "herein", "hereby", "hereof", "hereunder"
and similar expressions mean or refer to this Share Purchase Agreement and
any amendments hereto.
<PAGE>
2
"ASE" means The Alberta Stock Exchange.
"ASE NON ESCROWED SHARES" means the Kwikstar Shares issued pursuant to
Section 3.1 hereof not required to be held in escrow by the ASE.
"CLOSING" has the meaning ascribed thereto in Section 9.1 hereof.
"CLOSING DATE" has the meaning ascribed thereto in Section 9.1 hereof.
"DCI" means Digital Courier International Inc.
"DCI SHARES" means 2,000,000 common shares in the capital of DCI legally
and beneficially owned by the Vendor.
"KWIKSTAR SHARES" means 6,000,000 common shares in the capital of the
Purchaser to be issued to the Vendor pursuant to Section 3.1 of this
Agreement.
"MAJOR TRANSACTION" has the meaning ascribed thereto by the Policies.
"POLICIES" means Alberta Securities Commission Policy 4.11 and Circular No.
7 contained in The Alberta Stock Exchange Policies and Procedures Manual.
"PURCHASER" means Kwikstar Communications Ltd.
"VENDOR" means 945 Investments Limited.
2. SALE AND PURCHASE
-----------------
2.1 The Vendor hereby agrees to sell and the Purchaser hereby agrees to
purchase, effective the Closing Date, the DCI Shares on the terms and conditions
herein contained.
3. CONSIDERATION
-------------
3.1 The parties hereto agree that the purchase price for the DCI Shares shall
be paid by the issuance from the treasury of the Purchaser of the Kwikstar
Shares duly registered in the name of the Vendor, or as the Vendor may direct
the Purchaser in writing, all such shares to be issued as fully paid and non-
assessable common shares.
3.2 In the event the ASE requires any of the Kwikstar Shares to be held in
escrow, the Vendor agrees to enter into an escrow agreement in a form
satisfactory to the ASE.
3.3 In addition, the Vendor acknowledges that the Kwikstar Shares are being
issued pursuant to exemptions from registration and prospectus requirements of
applicable securities legislation, and that the Vendor may not be able to resell
the Kwikstar Shares except in accordance with limited exemptions under
applicable securities legislation. Since the Purchaser is not currently a
"reporting issuer" in the Province of British Columbia, until the Purchaser
becomes a reporting issuer, the resale restrictions for the Kwikstar Shares may
be for an indefinite period.
<PAGE>
3
Notwithstanding the foregoing, the Purchaser shall use all reasonable efforts to
become a reporting issuer in the Province of British Columbia no later than
April 30, 1996.
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
4.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents, warrants and covenants with the Purchaser as
follows:
(a) the Vendor is the legal and beneficial owner of the DCI Shares and the
DCI Shares are fully paid and non-assessable, and free of any liens,
claims, charges, security interests or encumbrances of any kind
whatsoever. The DCI Shares represent all of the securities of DCI
owned by the Vendor and the Vendor does not have any agreement, option
or right to purchase or acquire, or capable of becoming an agreement
for the purchase or acquisition of any additional securities of DCI;
(b) the Vendor has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to transfer the legal and beneficial title and ownership of the DCI
Shares to the Purchaser;
(c) except as provided in this Agreement, no person, firm or corporation
other than the Purchaser has any agreement, option or right to
purchase or acquire, or capable of becoming an agreement for the
purchase or acquisition of the DCI Shares; and
(d) the Vendor is resident in Canada within the meaning of the Income Tax
Act (Canada).
4.2 Except as otherwise stated, all representations, warranties, and covenants
by the Vendor contained in this Agreement shall be true as at the date hereof.
Notwithstanding any investigations or inquiries made by the Purchaser prior to
Closing or the waiver of any condition by the Purchaser, the representations,
warranties, and covenants of the Vendor shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full force and effect for the period of three (3) years following
the date hereof. In the event that any of the said representations and
warranties are found to be incorrect or there is a breach of any covenant of the
Vendor which results in any loss or damage sustained directly or indirectly by
the Purchaser, then the Vendor shall reimburse the amount of such loss or damage
to the Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
5.1 In order to induce the Vendor to enter into and consummate this Agreement,
the Purchaser represents, warrants and covenants with the Vendor as follows:
(a) the Purchaser is a corporation duly incorporated under the laws of the
Province of Alberta and is a valid and subsisting corporation under
the Business Corporations Act (Alberta) and the Purchaser has the
requisite power, capacity and
<PAGE>
4
authority to enter into this Agreement on the terms and conditions
herein set forth. The Purchaser owns no subsidiaries;
(b) the Purchaser is a "reporting issuer" as that term is defined in the
Securities Act (Alberta) and the issued and outstanding common shares
of the Purchaser are listed and posted for trading on the ASE;
(c) the authorized capital of the Purchaser consists of an unlimited
number of common shares and an unlimited number of preferred shares,
of which 4,766,666 common shares are issued and outstanding and no
other shares are issued or outstanding. The Purchaser has reserved
ten percent (10%) of its issued and outstanding common shares under a
directors and management stock option plan, and options to acquire
466,665 common shares at $0.15 per share are outstanding, and the
Purchaser has reserved an additional 4,000,000 common shares at $0.22
per common share for options to be granted after the completion of the
Major Transaction. After the completion of the acquisition of all of
the issued and outstanding shares of DCI, the fully diluted
capitalization of the Purchaser shall be as set out in Schedule "A";
(d) upon completion of the acquisition of the DCI Shares pursuant to the
terms of this Agreement, the Kwikstar Shares will be issued as fully
paid and non-assessable common shares;
(e) except pursuant to or as disclosed in this Agreement or agreements
with the other holders of securities of DCI, or an agreement or
agreements with E.L. Patterson with respect to a finder's fee, no
person, firm or corporation has any agreement, option or right to
acquire or capable of becoming an agreement for the purchase or
acquisition of any of the unissued share capital of the Purchaser;
(f) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Purchaser is aware threatened,
against or relating to the Purchaser or affecting its properties or
business which if determined adversely to the Purchaser might
materially and adversely affect the properties, business, future
prospectus or the financial condition of the Purchaser, or the right
of the Purchaser to use, produce or sell its property and assets in
whole or in part. There is not presently outstanding against the
Purchaser any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator;
(g) the Purchaser is a taxable Canadian corporation not liable for any
material federal, provincial, municipal or local taxes, assessments,
withholding taxes, employee or other remittances, or other imposts or
penalties due and unpaid at the date hereof in respect of its income,
employees, business or property, or for the payment of any tax
instalment due in respect of its current taxation year (but not
including taxes accruing due) or any previous taxation years, and no
such taxes, assessments, imposts, remittances or penalties are
required to be reserved against. The
<PAGE>
5
Purchaser is not in default in filing any returns or reports
covering any federal, provincial, municipal or local taxes,
assessments or other imposts in respect of its income, business or
property;
(h) the Purchaser has been conducting its business in the ordinary course
in compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Purchaser is duly licensed, registered
and qualified in each jurisdiction in which it owns or leases property
or carries on business to enable its business to be carried on as now
conduced and its property and assets to be owned, leased and operated.
All such licences, registrations and qualifications are in good
standing;
(i) the Purchaser is not in breach of any laws, ordinances, statutes,
regulations, bylaws, orders or decrees to which it is subject or which
may apply to it;
(j) the Purchaser has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse effect on its business;
(k) the entering into and performance of this Agreement will not be in
violation of:
(i) the constating documents of the Purchaser; or
(ii) any agreement to which the Purchaser is a party and will not
give any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Purchaser, and will not
result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Purchaser or the assets of the
Purchaser; or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Purchaser is bound;
(l) the entering into and the performance of this Agreement, subject to
the approval of the ASE and compliance with the Policies, will not be
in violation of any law, rule or regulation of any governmental or
regulatory body having jurisdiction over the Purchaser;
(m) the corporate records and minute books of the Purchaser contain
complete and accurate minutes (duly signed by the Chairman and/or
Secretary of the appropriate meeting) of all meetings of the directors
and shareholders since its date of incorporation, together with the
full text of all resolutions of directors and shareholders passed in
lieu of such meetings, duly signed by all directors and shareholders;
<PAGE>
6
(n) except as disclosed in Section 5.1(e), the Purchaser has not incurred
any obligation or liability, contingent or otherwise, for broker's or
finder's fees in respect of the transactions contemplated by this
Agreement;
(o) the audited financial statements of the Purchaser for the period
ending September 30, 1994, and the notes thereto and the unaudited
interim financial statements for the nine months ending June 30, 1995,
are true and correct and present fairly the financial position of the
Purchaser as at such dates and the results of its operations and
changes in financial position for the respective periods indicated in
the said statements, and have been prepared in accordance with
generally accepted accounting standards applied on a basis consistent
with that of prior periods (the "Kwikstar Financial Statements");
(p) the Purchaser has no material liabilities, contingent or otherwise,
except those set out in the Kwikstar Financial Statements, and the
Purchaser has not guaranteed or indemnified, or agreed to guarantee or
indemnify, any debt, liability or other obligation of any person,
firm, or body corporate;
(q) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from the Purchaser of any of its assets other than in the
ordinary course of business;
(r) the Purchaser has no directors, officers or senior employees to which
it pays remuneration and there are no written agreements or written
contracts for the employment of any of such individuals and there are
no contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any of such individuals,
other than an agreement with Enterprise Developments Inc. to provide
management services;
(s) Schedule "B" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Purchaser is a party and unless otherwise indicated in Schedule "B",
each contract, agreement or commitment is in full force and effect and
the Purchaser is not in default under any material terms of such
contracts, agreements or commitments;
(t) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Purchaser under any of the material
provisions contained in any such contract, commitment or agreement
listed on Schedule "B"; and
(u) the Purchaser shall provide the Vendor with an opportunity to review
and approve the proxy solicitation material for the meeting of the
shareholders of the Purchaser to be held to approve the Major
Transaction, such approval not to be unreasonably withheld.
<PAGE>
7
5.2 Except as otherwise stated, all representations, warranties, and covenants
by the Purchaser contained in this Agreement shall be true as at the date
hereof. Notwithstanding any investigation or inquires made by the Vendor prior
to Closing or the waiver of any conditions by the Vendor, the representations,
warranties, and covenants of the Purchaser shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full force and effect for the period of three (3) years following
the date hereof. In the event that any of the said representations and
warranties are found to be incorrect or there is a breach of any covenant of the
Purchaser which results in any loss or damage sustained by the Vendor, then the
Purchaser shall reimburse the amount of such loss or damage to the Vendor.
6. CONDITIONS PRECEDENT FOR PURCHASER AND VENDOR
---------------------------------------------
6.1 All obligations of the Purchaser and Vendor under the Agreement are subject
to the fulfilment, prior to or at Closing, of each of the following conditions:
(a) the approval of this transaction by the ASE;
(b) the approval of this transaction as a Major Transaction by the
shareholders of the Purchaser as required by the Policies, which
approval shall be obtained at a meeting of the shareholders of the
Purchaser to be held as soon as reasonably possible, but in no event
later than March 31, 1996;
(c) the concurrent closing of the acquisition by the Purchaser of all the
outstanding securities of DCI not owned by the Vendor or the
Purchaser;
(d) the Vendor, CIBC Wood Gundy Capital (SFC) Inc. and others entering
into subscriptions agreements in a form satisfactory to the Purchaser
and Vendor for the issue of 6,000,000 DCI securities for aggregate
gross proceeds of $6,000,000;
(e) DCI and Telecom Leasing Canada, or such other party as may be agreed,
entering into a Capital Lease Agreement satisfactory to the Vendor and
the Purchaser;
(f) the Purchaser establishing a performance incentive plan for the
employees of DCI on the same terms and conditions as the DCI
performance incentive plan pursuant to which employees of DCI hold
beneficial interests in 600,000 common shares of DCI;
(g) such employees of DCI as the Purchaser and Vendor agree shall enter
into Employment Agreements with DCI on terms and conditions
satisfactory to the Purchaser and Vendor, acting reasonably;
(h) two directors nominated by MPR Teltech Limited, two directors
nominated by the Vendor, one director nominated by CIBC Wood Gundy
Capital (SFC) Inc. and one outside director being elected as directors
of the Purchaser at the meeting of shareholders of the Purchaser to
approve the Major Transaction, provided that size of the board of
directors of the Purchaser shall not exceed six; and
<PAGE>
8
(i) the Purchaser will change its name to a name including the words
"Digital Courier International" as soon as reasonably possible after
the meeting of shareholders of the Purchaser to approve the Major
Transaction.
6.2 The conditions set out in Section 6.1 hereof are inserted for the
benefit of both the Purchaser and the Vendor and may be waived jointly by them
in whole or in part. Such waiver will only be effective if in writing.
7. CONDITIONS PRECEDENT FOR PURCHASER
----------------------------------
7.1 All obligations of the Purchaser under the Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Vendor set forth in this
Agreement shall be true and correct as of the date of this Agreement
and shall be true and correct as of the Closing Date as if made by the
Vendor again at that time, and the Vendor shall deliver at Closing a
certificate of the Vendor to such effect dated on the Closing Date;
(b) the covenants of the Vendor set forth in this Agreement shall have
been complied with;
(c) the Vendor shall cause to be delivered to the Purchaser an opinion
dated as at the Closing Date from legal counsel for the Vendor in a
form satisfactory to the Purchaser and its counsel, acting reasonably;
(d) the Vendor will have executed the escrow agreement contemplated by
Section 3.2 hereof;
(e) the Vendor will have provided to the Purchaser the share certificates
representing the DCI Shares, duly endorsed for transfer to the
Purchaser, plus a certified copy of a resolution of the directors of
DCI approving such transfer; and
(f) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of DCI.
7.2 The conditions set out in Section 7.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived by it in whole or in part. Such
waiver will only be effective if in writing.
8. CONDITIONS PRECEDENT FOR THE VENDOR
-----------------------------------
8.1 All obligations of the Vendor under this Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Purchaser set forth in this
Agreement shall be true and
<PAGE>
9
correct as of the date of this Agreement and shall be true and correct
as of the Closing Date as if made by the Purchaser again at that time,
and the Purchaser shall deliver at Closing a certificate of a senior
officer to such effect dated on the Closing Date, which certificate
shall include a statement that the Purchaser will have at Closing no
liabilities except those set out in the Kwikstar Financial Statements
or incurred pursuant to the Major Transaction;
(b) the covenants of the Purchaser set forth in this Agreement shall have
been complied with;
(c) the Purchaser shall cause to be delivered at Closing to the Vendor an
opinion dated as at the Closing Date from legal counsel for the
Purchaser in a form satisfactory to the Vendor and its counsel, acting
reasonably;
(d) upon issue, the Kwikstar Shares shall be validly issued and
outstanding as fully paid and non-assessable shares in the capital of
the Purchaser;
(e) upon issue of the Kwikstar Shares, the ASE will have approved the
listing of the common shares comprising the Kwikstar Shares on such
exchange, subject to the fulfilment of any conditions the ASE may deem
appropriate and applicable;
(f) the Kwikstar Shares shall be issued and the Purchaser shall have
provided to the Vendor share certificates representing the ASE Non
Escrowed Shares;
(g) the number of ASE Non Escrowed Shares will be acceptable to the
Vendor, acting reasonably;
(h) the Vendor, MPR Teltech Ltd. and CIBC Wood Gundy Capital (SFC) Inc.
will have entered into a shareholder agreement in a form satisfactory
to the Vendor, acting reasonably; and
(i) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of the
Purchaser.
8.2 The foregoing conditions in this Section 8 are inserted for the exclusive
benefit of the Vendor and may be waived by it in whole or in part. Such waiver
will only be effective if in writing.
9. CLOSING
-------
9.1 The transactions contemplated by this Agreement shall be closed at Farris,
Vaughan, Wills & Murphy or such other place and such date as may be agreed upon
by the parties hereto, but in any event not later than April 30, 1996, which
date is referred to herein as the "Date of Closing" and "Closing Date" and which
time is referred to herein as "Closing" and "Time of Closing".
<PAGE>
10
10. COVENANTS RE: CLOSING
---------------------
10.1 Each of the parties hereto covenants and agrees with the other party hereto
to use all reasonable efforts to take or refrain from taking all actions with
the intent that the closing conditions herein shall be satisfied, the
representations and warranties herein made by it shall be true and correct and
all covenants and agreements herein made by it shall have been performed,
including, without limitation, that:
(a) the Purchaser or DCI shall not, without the written consent of the
parties to this Agreement:
(i) issue any securities, including debt, except as contemplated
herein;
(ii) declare or pay any dividends or distribute any of its
properties or assets to shareholders;
(iii) enter into any contract, other than in the ordinary course of
business;
(iv) alter or amend its articles or by-laws;
(v) engage in any business enterprise or other activity different
from that carried on as of the date hereof; or
(vi) enter into any negotiations, agreements or undertakings with
respect to the sale of any assets or properties, outside the
ordinary course of business; and
(b) the Purchaser or the Vendor shall not, without the written consent of
the other, enter into any negotiations, agreements or undertakings
with respect to the sale of DCI, any assets of DCI or the DCI Shares.
10.2 The Purchaser and the Vendor covenant that they will make all reasonable
efforts to close the transactions contemplated by this agreement no later than
March 31, 1995.
11. TERMINATION
-----------
11.1 In the event that this Agreement is terminated pursuant to Sections 6, 7 or
8 hereof, each party hereto shall be released from all obligations hereunder and
each party hereto shall take all reasonable action to return each of the other
parties hereto to the position relative to which such party occupied prior to
the execution hereof, it being understood that each party hereto will each bear
all costs incurred by it prior to such termination.
12. FURTHER ASSURANCES
------------------
12.1 At Closing and thereafter as may be necessary or desirable, and without
further consideration, the parties hereto shall execute, acknowledge and deliver
such other instruments
<PAGE>
11
and shall take such other action as may be necessary to carry out their
respective obligations under this Agreement.
13. CONSTRUCTION
------------
13.1 This Agreement shall be, in all respects, subject to and interpreted,
construed and enforced in accordance with the laws in effect in the Province of
Alberta. Each party hereto accepts the jurisdiction of the Courts of the
Province of Alberta and attorns to their jurisdiction.
14. NOTICES
-------
14.1 All notices, requests, and demands hereunder shall be in writing and shall
be deemed to have been duly given if delivered by hand or by telecommunication
as follows:
(a) to the Purchaser:
Kwikstar Communications Ltd.
106 - 1008 Beach Avenue
Vancouver, British Columbia, V6E 1T7
Attention: Mr. L. C. Fowler
----------------------------
Fax: (604) 685-2533
with a copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 - 5th Avenue S. W.
Calgary, Alberta, T2P 3T6
Attention: Mr. V. E. Dale Burstall
-----------------------------------
Fax: (403) 266-6016
(b) to the Vendor:
945 Investments Limited
106 - 1008 Beach Avenue
Vancouver, British Columbia, V6E 1T7
Attention: Mr. L. C. Fowler
----------------------------
Fax: (604) 685-2533
<PAGE>
12
with a copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 - 5th Avenue S. W.
Calgary, Alberta
T2P 3T6
Attention: Mr. V. E. Dale Burstall
-----------------------------------
Fax: (403) 266-6016
or to such other address as may be given in writing by the Vendor or the
Purchaser, and all notices, requests, and demands hereunder shall be deemed to
have been received, if delivered, on the date of delivery and if transmitted, on
the date of the transmission.
15. ASSIGNMENT
----------
15.1 This Agreement shall not be assigned without the written consent of the
other party hereto, and such consent may be arbitrarily withheld.
15.2 This Agreement shall enure to the benefit of and shall be binding upon the
Vendor and its respective successors and permitted assigns and the Purchaser and
its respective successors and permitted assigns.
16. COSTS
-----
16.1 The parties hereto agree that each party will pay for their respective
costs incurred pursuant to this Agreement and the transactions contemplated
herein if this transaction is not closed. If this transaction is closed, the
Purchaser will pay all reasonable costs of DCI incurred pursuant to this
Agreement and the transactions contemplated herein.
17. GENERAL
-------
17.1 Time shall be of the essence of this Agreement.
17.2 This Agreement may be executed in separate counterparts, and all such
executed counterparts when taken together shall constitute one Agreement.
<PAGE>
13
17.3 The terms and provisions herein contained constitute the entire agreement
between the parties and shall supersede all previous oral or written
communications.
IN WITNESS WHEREOF the parties hereto have executed this Agreement to be
effective as of the date first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per: /s/ L.C. Fowler
__________________________________
Per:
__________________________________
945 INVESTMENTS LIMITED
Per: /s/ Edward D. Ford
__________________________________
Per:
__________________________________
<PAGE>
SCHEDULE "A"
<PAGE>
SCHEDULE "B"
MATERIAL CONTRACTS OF PURCHASER
-------------------------------
1. Management Services Agreement between the Purchaser and Enterprise
Developments Inc. ("Enterprise") pursuant to which Enterprises has agreed
to provide management, secretarial and other office services to the
Purchaser for a fee of $3,000 per month.
2. Escrow Agreement dated October 31, 1994 among the Purchaser, Montreal Trust
Company of Canada and certain shareholders of the Purchaser.
3. Stock Option Agreements between the Purchaser and its directors and
officers.
4. An Agency Agreement dated December 19, 1994 among the Purchaser, Yorkton
Securities Inc. (the "Agent") and Montreal Trust Company of Canada (the
"Agency Agreement"). Pursuant to the Agency Agreement, the Purchaser
appointed the Agent as its agent to offer for distribution on a best
efforts basis 2,000,000 common shares of the Purchaser at $0.15 per common
share, subject to the terms and conditions contained in the Agency
Agreement. The closing of the distribution occurred on January 19, 1995.
The Agent received a commission of $30,000 and in addition was reimbursed
for its legal fees incurred pursuant to the distribution in the amount of
$4,637.21. The Purchaser also granted the Agent an option to purchase
200,000 common shares at $0.15 per common share.
5. A Stock Option Agreement dated January 19, 1995 between Yorkton Securities
Inc. and the Purchaser.
6. Finders Fee Agreement between the Purchaser and E.L. Patterson or his
nominee.
<PAGE>
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT dated for reference the 15th day of November, 1995.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a body corporate incorporated under the
laws of the Province of Alberta and having its head office in the City
of Vancouver, in the Province of British Columbia (herein referred
to as the "Purchaser")
OF THE FIRST PART
- and -
IAN R. BARDSLEY, an individual of Port Coquitlam, in the Province of
British Columbia in his capacity as Trustee of the Performance
Incentive Plan of Digital Courier International Inc. (herein referred
to as the "Vendor")
OF THE SECOND PART
WHEREAS:
A. The Purchaser was incorporated under the provisions of the Business
Corporations Act (Alberta) and is a public company with its common shares
listed and posted for trading on The Alberta Stock Exchange;
B. The Vendor is the registered owner of 600,000 common shares and (the "DCI
Shares") in the capital of Digital Courier International Inc. ("DCI")
issued pursuant to the Performance Incentive Plan of DCI (the "Plan");
and
C. The Vendor has agreed to sell and the Purchaser has agreed to purchase the
DCI Shares on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
premises, covenants, agreements and warranties hereinafter set forth, it is
hereby agreed as follows:
1. DEFINITIONS
-----------
1.1 In this Agreement, unless there is something in the subject or context
inconsistent therewith, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and the expressions following shall have the
following meanings, respectively:
"AGREEMENT", "this Agreement", "herein", "hereby", "hereof", "hereunder"
and similar expressions mean or refer to this Share Purchase Agreement and
any amendments hereto.
"ASE" means The Alberta Stock Exchange.
<PAGE>
2
"ASE NON ESCROWED SHARES" means the Kwikstar Shares issued pursuant to
Section 3.1 hereof not required to be held in escrow by the ASE.
"CLOSING" has the meaning ascribed thereto in Section 9.1 hereof.
"CLOSING DATE" has the meaning ascribed thereto in Section 9.1 hereof.
"DCI" means Digital Courier International Inc.
"DCI SHARES" means 600,000 common shares in the capital of DCI legally
owned by the Vendor.
"KWIKSTAR SHARES" means 1,800,000 common shares in the capital of the
Purchaser to be issued to the Vendor pursuant to Section 3.1 of this
Agreement.
"MAJOR TRANSACTION" has the meaning ascribed thereto by the Policies.
"POLICIES" means Alberta Securities Commission Policy 4.11 and Circular No.
7 contained in The Alberta Stock Exchange Policies and Procedures Manual.
"PURCHASER" means Kwikstar Communications Ltd.
"VENDOR" means Ian R. Bardsley in his capacity as Trustee of the
Performance Incentive Plan of Digital Courier International Inc.
2. SALE AND PURCHASE
-----------------
2.1 The Vendor hereby agrees to sell and the Purchaser hereby agrees to
purchase, effective the Closing Date, the DCI Shares on the terms and conditions
herein contained.
3. CONSIDERATION
-------------
3.1 The parties hereto agree that the purchase price for the DCI Shares shall
be paid by the issuance from the treasury of the Purchaser of the Kwikstar
Shares duly registered in the name of the Vendor, or as the Vendor may direct
the Purchaser in writing, all such shares to be issued as fully paid and non-
assessable common shares.
3.2 In addition, the Vendor acknowledges that the Kwikstar Shares are being
issued pursuant to exemptions from registration and prospectus requirements of
applicable securities legislation, and that the Vendor may not be able to resell
the Kwikstar Shares except in accordance with limited exemptions under
applicable securities legislation. Since the Purchaser is not currently a
"reporting issuer" in the Province of British Columbia, until the Purchaser
becomes a reporting issuer, the resale restrictions for the Kwikstar Shares may
be for an indefinite period. Notwithstanding the foregoing, the Purchaser shall
use all reasonable efforts to become a reporting issuer in the Province of
British Columbia no later than April 30, 1996.
<PAGE>
3
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
4.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents, warrants and covenants with the Purchaser as
follows:
(a) the Vendor is the legal owner of the DCI Shares and the DCI Shares are
fully paid and non-assessable, and free of any liens, claims, charges,
security interests or encumbrances of any kind whatsoever. The DCI
Shares represent all of the securities of DCI owned by the Vendor and
the Vendor does not have any agreement, option or right to purchase or
acquire, or capable of becoming an agreement for the purchase or
acquisition of any additional securities of DCI;
(b) the Vendor has the requisite power, capacity and authority to enter
into this Agreement on the terms and conditions herein set forth and
to transfer the legal and beneficial title and ownership of the DCI
Shares to the Purchaser;
(c) except as provided in this Agreement, no person, firm or corporation
other than the Purchaser has any agreement, option or right to
purchase or acquire, or capable of becoming an agreement for the
purchase or acquisition of the DCI Shares; and
(d) the Vendor is resident in Canada within the meaning of the Income Tax
Act (Canada).
4.2 Subject to Section 13.2 and except as otherwise stated, all
representations, warranties, and covenants by the Vendor contained in this
Agreement shall be true as at the date hereof. Notwithstanding any
investigations or inquiries made by the Purchaser prior to Closing or the waiver
of any condition by the Purchaser, the representations, warranties, and
covenants of the Vendor shall survive the Closing Date and notwithstanding the
Closing of the purchase and sale herein provided for, shall continue in full
force and effect for the period of three (3) years following the date hereof. In
the event that any of the said representations and warranties are found to be
incorrect or there is a breach of any covenant of the Vendor which results in
any loss or damage sustained directly or indirectly by the Purchaser, then the
Vendor shall reimburse the amount of such loss or damage to the Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
5.1 In order to induce the Vendor to enter into and consummate this Agreement,
the Purchaser represents, warrants and covenants with the Vendor as follows:
(a) the Purchaser is a corporation duly incorporated under the laws of the
Province of Alberta and is a valid and subsisting corporation under
the Business Corporations Act (Alberta) and the Purchaser has the
requisite power, capacity and authority to enter into this Agreement
on the terms and conditions herein set forth. The Purchaser owns no
subsidiaries;
<PAGE>
4
(b) the Purchaser is a "reporting issuer" as that term is defined in the
Securities Act (Alberta) and the issued and outstanding common shares
of the Purchaser are listed and posted for trading on the ASE;
(c) the authorized capital of the Purchaser consists of an unlimited
number of common shares and an unlimited number of preferred shares,
of which 4,766,666 common shares are issued and outstanding and no
other shares are issued or outstanding. The Purchaser has reserved
ten percent (10%) of its issued and outstanding common shares under a
directors and management stock option plan, and options to acquire
466,665 common shares at $0.15 per share are outstanding, and the
Purchaser has reserved an additional 4,000,000 common shares at $0.22
per common share for options to be granted after the completion of the
Major Transaction. After the completion of the acquisition of all of
the issued and outstanding shares of DCI, the fully diluted
capitalization of the Purchaser shall be as set out in Schedule "A";
(d) upon completion of the acquisition of the DCI Shares pursuant to the
terms of this Agreement, the Kwikstar Shares will be issued as fully
paid and non-assessable common shares;
(e) except pursuant to or as disclosed in this Agreement or agreements
with the other holders of securities of DCI, or an agreement or
agreements with E.L. Patterson with respect to a finder's fee, no
person, firm or corporation has any agreement, option or right to
acquire or capable of becoming an agreement for the purchase or
acquisition of any of the unissued share capital of the Purchaser;
(f) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and application for review,
in progress, pending or, as far as the Purchaser is aware threatened,
against or relating to the Purchaser or affecting its properties or
business which if determined adversely to the Purchaser might
materially and adversely affect the properties, business, future
prospectus or the financial condition of the Purchaser, or the right
of the Purchaser to use, produce or sell its property and assets in
whole or in part. There is not presently outstanding against the
Purchaser any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator;
(g) the Purchaser is a taxable Canadian corporation not liable for any
material federal, provincial, municipal or local taxes, assessments,
withholding taxes, employee or other remittances, or other imposts or
penalties due and unpaid at the date hereof in respect of its income,
employees, business or property, or for the payment of any tax
instalment due in respect of its current taxation year (but not
including taxes accruing due) or any previous taxation years, and no
such taxes, assessments, imposts, remittances or penalties are
required to be reserved against. The Purchaser is not in default in
filing any returns or reports covering any federal, provincial,
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
<PAGE>
5
(h) the Purchaser has been conducting its business in the ordinary course
in compliance with all applicable laws, rules and regulations of each
jurisdiction in which it carries on business and is not in breach of
any such laws, rules and regulations where a breach would have a
material adverse affect. The Purchaser is duly licensed, registered and
qualified in each jurisdiction in which it owns or leases property or
carries on business to enable its business to be carried on as now
conduced and its property and assets to be owned, leased and operated.
All such licences, registrations and qualifications are in good
standing;
(i) the Purchaser is not in breach of any laws, ordinances, statutes,
regulations, bylaws, orders or decrees to which it is subject or which
may apply to it;
(j) the Purchaser has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse effect on its business;
(k) the entering into and performance of this Agreement will not be in
violation of:
(i) the constating documents of the Purchaser; or
(ii) any agreement to which the Purchaser is a party and will not
give any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Purchaser, and will not
result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Purchaser or the assets of the
Purchaser; or
(iii) any statute, regulation, by-law, order, judgment, or decree by
which the Purchaser is bound;
(l) the entering into and the performance of this Agreement, subject to
the approval of the ASE and compliance with the Policies, will not be
in violation of any law, rule or regulation of any governmental or
regulatory body having jurisdiction over the Purchaser;
(m) the corporate records and minute books of the Purchaser contain
complete and accurate minutes (duly signed by the Chairman and/or
Secretary of the appropriate meeting) of all meetings of the directors
and shareholders since its date of incorporation, together with the
full text of all resolutions of directors and shareholders passed in
lieu of such meetings, duly signed by all directors and shareholders;
(n) except as disclosed in Section 5.1(e), the Purchaser has not incurred
any obligation or liability, contingent or otherwise, for broker's or
finder's fees in respect of the transactions contemplated by this
Agreement;
<PAGE>
6
(o) the audited financial statements of the Purchaser for the period
ending September 30, 1994, and the notes thereto and the unaudited
interim financial statements for the nine months ending June 30, 1995,
are true and correct and present fairly the financial position of the
Purchaser as at such dates and the results of its operations and
changes in financial position for the respective periods indicated in
the said statements, and have been prepared in accordance with
generally accepted accounting standards applied on a basis consistent
with that of prior periods (the "Kwikstar Financial Statements");
(p) the Purchaser has no material liabilities, contingent or otherwise,
except those set out in the Kwikstar Financial Statements, and the
Purchaser has not guaranteed or indemnified, or agreed to guarantee or
indemnify, any debt, liability or other obligation of any person,
firm, or body corporate;
(q) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment or any right or privilege capable
of becoming an agreement for the purchase, exchange, transfer or other
disposition from the Purchaser of any of its assets other than in the
ordinary course of business;
(r) the Purchaser has no directors, officers or senior employees to which
it pays remuneration and there are no written agreements or written
contracts for the employment of any of such individuals and there are
no contracts, agreements, or engagements, either written or verbal
providing for a fixed period of employment of any of such individuals,
other than an agreement with Enterprise Developments Inc. to provide
management services;
(s) Schedule "B" contains a reference to all material contracts,
agreements and commitments (whether written or oral), to which the
Purchaser is a party and unless otherwise indicated in Schedule "B",
each contract, agreement or commitment is in full force and effect and
the Purchaser is not in default under any material terms of such
contracts, agreements or commitments;
(t) there will not exist on the Closing Date any state of facts which
after notice or lapse of time, or both, will constitute a default or
breach on the part of the Purchaser under any of the material
provisions contained in any such contract, commitment or agreement
listed on Schedule "B"; and
(u) the Purchaser shall provide the Vendor with an opportunity to review
and approve the proxy solicitation material for the meeting of the
shareholders of the Purchaser to be held to approve the Major
Transaction, such approval not to be unreasonably withheld.
5.2 Except as otherwise stated, all representations, warranties, and covenants
by the Purchaser contained in this Agreement shall be true as at the date
hereof. Notwithstanding any investigation or inquires made by the Vendor prior
to Closing or the waiver of any conditions by the Vendor, the representations,
warranties, and covenants of the Purchaser shall survive the Closing Date and
notwithstanding the Closing of the purchase and sale herein provided for, shall
continue in full
<PAGE>
7
force and effect for the period of three (3) years following the date hereof. In
the event that any of the said representations and warranties are found to be
incorrect or there is a breach of any covenant of the Purchaser which results in
any loss or damage sustained by the Vendor, then the Purchaser shall reimburse
the amount of such loss or damage to the Vendor.
6. CONDITIONS PRECEDENT FOR PURCHASER AND VENDOR
---------------------------------------------
6.1 All obligations of the Purchaser and Vendor under the Agreement are subject
to the fulfilment, prior to or at Closing, of each of the following conditions:
(a) the approval of this transaction by the ASE;
(b) the approval of this transaction as a Major Transaction by the
shareholders of the Purchaser as required by the Policies, which
approval shall be obtained at a meeting of the shareholders of the
Purchaser to be held as soon as reasonably possible, but in no event
later than April 30, 1996;
(c) the concurrent closing of the acquisition by the Purchaser of all the
outstanding securities of DCI not owned by the Vendor or the
Purchaser;
(d) 945 Investments Limited, CIBC Wood Gundy Capital (SFC) Inc. and others
entering into subscriptions agreements in a form satisfactory to the
Purchaser and Vendor for the issue of 6,000,000 DCI securities for
aggregate gross proceeds of $6,000,000;
(e) DCI and Telecom Leasing Canada, or such other party as may be agreed,
entering into a Capital Lease Agreement satisfactory to the Vendor and
the Purchaser;
(f) the Purchaser establishing a performance incentive plan for the
employees of DCI on the same terms and conditions as the DCI
performance incentive plan pursuant to which employees of DCI hold
beneficial interests in 600,000 common shares of DCI;
(g) such employees of DCI as the Purchaser and Vendor agree shall enter
into Employment Agreements with DCI on terms and conditions
satisfactory to the Purchaser and Vendor, acting reasonably;
(h) two directors nominated by MPR Teltech Limited, two directors
nominated by 945 Investments Limited, one director nominated by CIBC
Wood Gundy Capital (SFC) Inc. and one outside director being elected
as directors of the Purchaser at the meeting of shareholders of the
Purchaser to approve the Major Transaction, provided that size of the
board of directors of the Purchaser shall not exceed six; and
(i) the Purchaser will change its name to a name including the words
"Digital Courier International" as soon as reasonably possible after
the meeting of shareholders of the Purchaser to approve the Major
Transaction.
<PAGE>
8
6.2 The conditions set out in Section 6.1 hereof are inserted for the
benefit of both the Purchaser and the Vendor and may be waived jointly by them
in whole or in part. Such waiver will only be effective if in writing.
7. CONDITIONS PRECEDENT FOR PURCHASER
----------------------------------
7.1 All obligations of the Purchaser under the Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Vendor set forth in this
Agreement shall be true and correct as of the date of this Agreement;
(b) the covenants of the Vendor set forth in this Agreement shall have
been complied with;
(c) the Vendor shall cause to be delivered to the Purchaser an opinion
dated as at the Closing Date from legal counsel for the Vendor in a
form satisfactory to the Purchaser and its counsel, acting reasonably;
(d) the Vendor will have provided to the Purchaser the share certificates
representing the DCI Shares, duly endorsed for transfer to the
Purchaser, plus a certified copy of a resolution of the directors of
DCI approving such transfer; and
(e) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of DCI.
7.2 The conditions set out in Section 7.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived by it in whole or in part. Such
waiver will only be effective if in writing.
8. CONDITIONS PRECEDENT FOR THE VENDOR
-----------------------------------
8.1 All obligations of the Vendor under this Agreement are subject to the
fulfilment, prior to or at Closing, of each of the following conditions:
(a) the representations and warranties of the Purchaser set forth in this
Agreement shall be true and correct as of the date of this Agreement
and shall be true and correct as of the Closing Date as if made by the
Purchaser again at that time, and the Purchaser shall deliver at
Closing a certificate of a senior officer to such effect dated on the
Closing Date, which certificate shall include a statement that the
Purchaser will have at Closing no liabilities except those set out in
the Kwikstar Financial Statements or incurred pursuant to the Major
Transaction;
<PAGE>
9
(b) the covenants of the Purchaser set forth in this Agreement shall have
been complied with;
(c) the Purchaser shall cause to be delivered at Closing to the Vendor an
opinion dated as at the Closing Date from legal counsel for the
Purchaser in a form satisfactory to the Vendor and its counsel, acting
reasonably;
(d) upon issue, the Kwikstar Shares shall be validly issued and
outstanding as fully paid and non-assessable shares in the capital of
the Purchaser;
(e) upon issue of the Kwikstar Shares, the ASE will have approved the
listing of the common shares comprising the Kwikstar Shares on such
exchange, subject to the fulfilment of any conditions the ASE may deem
appropriate and applicable;
(f) the Kwikstar Shares shall be issued and the Purchaser shall have
provided to the Vendor share certificates representing the ASE Non
Escrowed Shares;
(g) 945 Investments Limited, MPR Teltech Ltd. and CIBC Wood Gundy Capital
(SFC) Inc. will have entered into a shareholder agreement in a form
satisfactory to the Vendor, acting reasonably; and
(h) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of the
Purchaser.
8.2 The foregoing conditions in this Section 8 are inserted for the exclusive
benefit of the Vendor and may be waived by it in whole or in part. Such waiver
will only be effective if in writing.
9. CLOSING
-------
9.1 The transactions contemplated by this Agreement shall be closed at Farris,
Vaughan, Wills & Murphy or such other place and such date as may be agreed upon
by the parties hereto, but in any event not later than April 30, 1996, which
date is referred to herein as the "Date of Closing" and "Closing Date" and which
time is referred to herein as "Closing" and "Time of Closing".
10. COVENANTS RE: CLOSING
---------------------
10.1 Each of the parties hereto covenants and agrees with the other party hereto
to use all reasonable efforts to take or refrain from taking all actions with
the intent that the closing conditions herein shall be satisfied, the
representations and warranties herein made by it shall be true and correct and
all covenants and agreements herein made by it shall have been performed,
including, without limitation, that:
(a) the Purchaser or DCI shall not, without the written consent of the
parties to this Agreement:
<PAGE>
10
(i) issue any securities, including debt, except as contemplated
herein;
(ii) declare or pay any dividends or distribute any of its
properties or assets to shareholders;
(iii) enter into any contract, other than in the ordinary course of
business;
(iv) alter or amend its articles or by-laws;
(v) engage in any business enterprise or other activity different
from that carried on as of the date hereof; or
(vi) enter into any negotiations, agreements or undertakings with
respect to the sale of any assets or properties, outside the
ordinary course of business; and
(b) the Purchaser or the Vendor shall not, without the written consent of
the other, enter into any negotiations, agreements or undertakings
with respect to the sale of DCI, any assets of DCI or the DCI Shares.
10.2 The Purchaser and the Vendor covenant that they will make all reasonable
efforts to close the transactions contemplated by this agreement no later than
April 30, 1996.
11. TERMINATION
-----------
11.1 In the event that this Agreement is terminated pursuant to Sections 6, 7 or
8 hereof, each party hereto shall be released from all obligations hereunder and
each party hereto shall take all reasonable action to return each of the other
parties hereto to the position relative to which such party occupied prior to
the execution hereof, it being understood that each party hereto will each bear
all costs incurred by it prior to such termination.
12. FURTHER ASSURANCES
------------------
12.1 At Closing and thereafter as may be necessary or desirable, and without
further consideration, the parties hereto shall execute, acknowledge and deliver
such other instruments and shall take such other action as may be necessary to
carry out their respective obligations under this Agreement.
13. CONSTRUCTION
------------
13.1 This Agreement shall be, in all respects, subject to and interpreted,
construed and enforced in accordance with the laws in effect in the Province of
Alberta. Each party hereto accepts the jurisdiction of the Courts of the
Province of Alberta and attorns to their jurisdiction.
13.2 The Purchaser acknowledges that the Vendor is entering into this Agreement
in his capacity as trustee of the Plan and without personal liability and
recourse against the Vendor hereunder may only be made against the assets of the
Plan and for greater certainty the Vendor's liability shall be limited, prior to
closing, to the DCI Shares, and, subsequent to closing, the Kwikstar shares
received in exchange for such DCI Shares.
<PAGE>
11
14. NOTICES
-------
14.1 All notices, requests, and demands hereunder shall be in writing and shall
be deemed to have been duly given if delivered by hand or by telecommunication
as follows:
(a) to the Purchaser:
Kwikstar Communications Ltd.
106 - 1008 Beach Avenue
Vancouver, British Columbia, V6E 1T7
Attention: Mr. L. C. Fowler
----------------------------
Fax: (604) 685-2533
with a copy to:
Burstall Ward
Barristers & Solicitors
1800, 800 - 5th Avenue S. W.
Calgary, Alberta, T2P 3T6
Attention: Mr. V. E. Dale Burstall
-----------------------------------
Fax: (403) 266-6016
(b) to the Vendor:
Mr. Ian R. Bardsley
8999 Nelson Way
Burnaby, B.C., V5A 4B5
Fax: (604) 293-6161
with a copy to:
Farris, Vaughan, Wills & Murpny
Barristers & Solicitors
26th Flr., 700 West Georgia Street
Vancouver, B.C., V7Y 1B3
Attention: Mr. R. Hector Mackay-Dunn
-------------------------------------
Fax: (604) 661-9349
<PAGE>
12
or to such other address as may be given in writing by the Vendor or the
Purchaser, and all notices, requests, and demands hereunder shall be deemed to
have been received, if delivered, on the date of delivery and if transmitted, on
the date of the transmission.
15. ASSIGNMENT
----------
15.1 This Agreement shall not be assigned without the written consent of the
other party hereto, and such consent may be arbitrarily withheld. The
appointment by DCI of a new Trustee under the Plan shall not be deemed to be an
assignment.
15.2 This Agreement shall enure to the benefit of and shall be binding upon the
Vendor and its respective successors and permitted assigns and the Purchaser and
its respective successors and permitted assigns.
16. COSTS
-----
16.1 The parties hereto agree that each party will pay for their respective
costs incurred pursuant to this Agreement and the transactions contemplated
herein if this transaction is not closed. If this transaction is closed, the
Purchaser will pay all reasonable costs of DCI incurred pursuant to this
Agreement and the transactions contemplated herein.
17. GENERAL
-------
17.1 Time shall be of the essence of this Agreement.
17.2 This Agreement may be executed in separate counterparts, and all such
executed counterparts when taken together shall constitute one Agreement.
17.3 The terms and provisions herein contained constitute the entire agreement
between the parties and shall supersede all previous oral or written
communications.
IN WITNESS WHEREOF the parties hereto have executed this Agreement to be
effective as of the date first above written.
KWIKSTAR COMMUNICATIONS LTD.
Per:/s/ Edward D. Ford
-------------------------------------
Per:
-------------------------------------
/s/ I.R. Bardsley
- ------------------------------ -------------------------------------
Witness IAN R. BARDSLEY
<PAGE>
SCHEDULE "A"
DIGITAL COURIER INTERNATIONAL
CAPITALIZATION SCHEDULE
Common Share Exchange Ratio 3.0
<TABLE>
<CAPTION>
COMMON SHARE CAPITALIZATION
- ---------------------------
Price
Shares per Shares
Investor $ Invested Rec'd DCI Rec'd in Rec'd
Group in DCI in DCI Share Kwikstar in Kwikstar
<S> <C> <C> <C> <C> <C>
CIBC Wood Gundy Capital (SFC) $ 5,000,000 4,000,000 $ 1.25 $ - 12,000,000
945 Investments Ltd. $ 1,000,000 2,000,000 $ 0.50 $ - 6,000,000
MPR Teltech Ltd. $ 4,365,037 4,046,515 $ 1.06 $ - 12,139,545
DCI Management $ - 600,000 $ - $ - 1,800,000
Kwikstar
Original Inventories $ - - $ 199,999.95 2,666,666
Public Inventories $ - - $ 300,000.00 2,000,000
Management Options $ - - $ 69,999.75 465,665
Organization Fee--L. Patterson $ - - $ 50,967.18 231,669
Agent's Option $ - - $ 30,000.00 200,000
------------- -----------
$ 650,966.88 37,504,545
DCI Mgt. Incentive Options $ - - $5,208,964.58 4,167,172
----------- ------------- ----------
$10,365,037 $5,859,931.46 41,671,717
PREFERRED SHARE CAPITALIZATION
- ------------------------------
Pref. Price
Shares per Prefs.
$ Invested Rec'd DCI $ Invested Rec'd
in DCI in DCI Pref. in Kwikstar in Kwikstar
MPR Teltech Series 1 $ 2,000,000 2,000,000 $ 1.00 2,000,000
</TABLE>
<TABLE>
<CAPTION>
COMMON SHARE CAPITALIZATION
- ---------------------------
Price Ownership
per of Kwikstar
Investor Kwikstar ----------------
Group Share Basic P.D.
<S> <C> <C> <C>
CIBC Wood Gundy Capital (SFC) 32.0% 28.8%
945 Investments Ltd. 16.0% 14.4%
MPR Teltech Ltd. 32.4% 29.1%
DCI Management 4.8% 4.3%
Kwikstar
Original Inventories $0.075 7.1% 6.4%
Public Inventories $ 0.15 5.3% 4.8%
Management Options $ 0.15 1.2% 1.1%
Organization Fee--L. Patterson $ 0.22 0.6% 0.6%
Agent's Option $ 0.15 0.5% 0.5%
DCI Mgt. Incentive Options $ 1.25 10.0%
------ ------
100.0% 100.0%
PREFERRED SHARE CAPITALIZATION
- ------------------------------
Price
per
Kwikstar % of
Pref. Prefs. o/s
MPR Teltech Series 1 $ 1.00 100.0%
</TABLE>
<PAGE>
SCHEDULE "B"
MATERIAL CONTRACTS OF PURCHASER
-------------------------------
1. Management Services Agreement between the Purchaser and Enterprise
Developments Inc. ("Enterprise") pursuant to which Enterprises has agreed
to provide management, secretarial and other office services to the
Purchaser for a fee of $3,000 per month.
2. Escrow Agreement dated October 31, 1994 among the Purchaser, Montreal Trust
Company of Canada and certain shareholders of the Purchaser.
3. Stock Option Agreements between the Purchaser and its directors and
officers.
4. An Agency Agreement dated December 19, 1994 among the Purchaser, Yorkton
Securities Inc. (the "Agent") and Montreal Trust Company of Canada (the
"Agency Agreement"). Pursuant to the Agency Agreement, the Purchaser
appointed the Agent as its agent to offer for distribution on a best
efforts basis 2,000,000 common shares of the Purchaser at $0.15 per common
share, subject to the terms and conditions contained in the Agency
Agreement. The closing of the distribution occurred on January 19, 1995.
The Agent received a commission of $30,000 and in addition was reimbursed
for its legal fees incurred pursuant to the distribution in the amount of
$4,637.21. The Purchaser also granted the Agent an option to purchase
200,000 common shares at $0.15 per common share.
5. A Stock Option Agreement dated January 19, 1995 between Yorkton Securities
Inc. and the Purchaser.
6. Finders Fee Agreement between the Purchaser and E.L. Patterson or his
nominee.
<PAGE>
EXHIBIT 10.8
SUPPORT SERVICES AGREEMENT
THIS AGREEMENT is dated as of the 15th day of November, 1995
BETWEEN:
MPR Teltech Ltd., 8999 Nelson Way, Burnaby, British Columbia, Canada,
V5A 4B5
("MPR Teltech")
AND:
Digital Courier International Inc., 8618 Commerce Court, Burnaby,
British Columbia, Canada, V5A 4N6
("DCI")
WHEREAS:
A. DCI was formerly a wholly-owned subsidiary of MPR Teltech;
B. MPR Teltech has agreed to provide certain administrative and other
services and certain manufacturing management services to DCI; and
C. DCI has agreed to provide certain technological support and assistance
to MPR Teltech.
NOW THEREFORE, this Agreement witnesses that in consideration of the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
ARTICLE 1
TERM
----
1.1 Term. This Agreement shall have a term of two years, commencing on
----
the date first above written and expiring two years after such date.
1.2 Early Termination for Breach. In the event that a party shall breach
----------------------------
any material position of this Agreement, the other party may deliver written
notice of termination to that party and if that party has not remedied such
breach within 30 days after delivery of such notice, the other party may at its
option terminate this Agreement by notice to such effect to the party in breach.
<PAGE>
-2-
1.3 Early Termination for Convenience. At any time, on 90 days prior
---------------------------------
written notice for MPR Services, or 120 days prior written notice for
Manufacturing Management Services (both as defined herein), MPR Teltech may
discontinue any or all of the MPR Services or Manufacturing Management Services
offered to DCI under Article 2 of this Agreement.
ARTICLE 2
MPR TELTECH SERVICES
--------------------
2.1 Nature of Services Available. MPR Teltech will provide to DCI such of
----------------------------
the services described in Exhibit "A" attached hereto (the "MPR Services") as
DCI may from time to time request, in accordance with Section 2.2, at the rates
or prices set forth in Schedule 1 to Exhibit A, which rates and prices shall be
subject to change by MPR Teltech as of March 1 of each year during the term of
this Agreement.
2.2 Purchase Orders. DCI will issue a written purchase order to MPR
---------------
Teltech in respect of any MPR Services that DCI shall request. DCI may issue
blanket purchase orders, as appropriate.
2.3 Manufacturing Management Services. MPR Teltech will provide
---------------------------------
production and manufacturing management services ("Manufacturing Management
Services") to DCI in accordance with the terms and conditions set forth in and
at prices to be calculated in accordance with Exhibit "B". In the event that
any term or condition in Exhibit "B" is inconsistent or in conflict with the
terms and conditions of the main body of this Agreement, the terms and
conditions in Exhibit "B" will govern to the extent of the inconsistency or
conflict.
ARTICLE 3
DCI SERVICES
------------
3.1 Nature of DCI Services. DCI shall provide to MPR Teltech such of the
----------------------
technological support and assistance services set out in Exhibit "C" attached
hereto (the "DCI Services") as MPR Teltech may from time to time request, in
accordance with Section 3.2, at the rates or prices set forth in Schedule 1 to
Exhibit "C".
3.2 Purchase Order. MPR Teltech will issue a written purchase order to
--------------
DCI in respect of any DCI Services that MPR Teltech shall request. MPR Teltech
may issue blanket purchase orders.
<PAGE>
-3-
ARTICLE 4
COMPENSATION FOR SERVICES
-------------------------
4.1 Invoices. MPR Teltech shall invoice DCI for all MPR Services and
--------
Production Management Services rendered pursuant to this Agreement, after each
month during the term. DCI shall invoice MPR Teltech for all DCI Services
rendered pursuant to this Agreement, after each month during the term.
4.2 Payment. DCI shall pay to MPR Teltech the full amount of each invoice
-------
delivered to it by MPR Teltech, within 30 days after the date of each invoice,
and any balance that remains outstanding after such 30 days will be subject to a
finance charge of one percent per month MPR Teltech shall pay to DCI the full
amount of each invoice delivered by it by DCI, within 30 days after the date of
each invoice and any balance that remains outstanding after 30 months will be
subject to a finance charge of one percent per month.
4.3 Taxes. DCI shall pay all applicable local, provincial and federal
-----
taxes imposed on the MPR Services and the Production Management Services and MPR
Teltech shall pay all applicable local, provincial and federal taxes imposed on
the DCI Services.
4.4 Errors. If an error is discovered by either party in any invoice
------
delivered pursuant to Section 4.1, such invoice shall be adjusted within 30 days
after the date of discovery of such error.
ARTICLE 5
CONFIDENTIALITY
---------------
5.1 Confidential Information. The parties recognize and acknowledge that
------------------------
in connection with the MPR Services, the Manufacturing Management Services and
the DCI Services, DCI may disclose to MPR Teltech, and MPR Teltech may disclose
to DCI, proprietary or confidential technical and/or business information in
written, graphic, oral or other tangible or intangible forms ("Confidential
Information"). In order to protect such Confidential Information from improper
use or disclosure, the parties agree as follows:
(a) Access to such information shall be strictly limited to authorized
employees of MPR Teltech or DCI, as applicable, who have a need to
know the information in order for such entity to exercise its rights
or perform its duties under this Agreement;
(b) MPR Teltech or DCI, as applicable, will exercise the same level of
care to prevent disclosure or unauthorized use of information
disclosed hereunder as the receiving party exercises to protect its
own information of a similar nature; and
<PAGE>
-4-
(c) MPR Teltech or DCI, as applicable, will use information disclosed to
DCI or MPR Teltech, as applicable, only for the purpose of exercising
its respective rights or performing its respective duties under this
Agreement and for such other purposes as may be expressly agreed upon
between the parties in writing, or as required by law.
5.2 Confidentiality Term. The obligation of confidentiality with respect
--------------------
to information disclosed by or to MPR Teltech or DCI, as applicable, pursuant to
this Agreement shall survive the expiration or other termination of this
Agreement.
5.3 Exception. The respective obligations of MPR Teltech and DCI pursuant
---------
to Section 5.1 will not apply to any of the Confidential Information that was
available to the public or known by such party at the time of disclosure of such
Confidential Information and shall cease to apply to any Confidential
Information that becomes available to the public, other than as a result of any
breach of confidentiality hereunder, or becomes known to either party from a
third party not under any obligation of confidentiality to either of the
parties.
ARTICLE 6
FORCE MAJEURE
-------------
6.1 Force Majeure. If performance of this Agreement or any obligation
-------------
hereunder is prevented or interfered with by reason of any act of God, fires,
floods, explosions, wars, strikes, slowdowns, picketing, or other industrial
disturbances, sabotage, blockade, insurrection, riot, epidemic, landslide,
lightning, earthquake, storm, washout, arrest, restraints of rulers and peoples,
civil disturbances, breakages or accidents to machinery, the inability to obtain
materials or equipment, the inability to obtain or the withdrawal or termination
of permits, orders, licences, certificates or other authorizations, and the
order or direction of any court, board or governmental or regulatory authority
having jurisdiction, or any other circumstance beyond the reasonable control of
the party affected, but excluding any lack of funds or financing, lack of
credit, or other financial reasons, (provided that strikes, lockouts and other
industrial disturbances shall be deemed not to be within the control of the
affected party) the party affected, upon giving prompt notice to the other
party, will be excused from such performance on a day-to-day basis to the extent
of such prevention or interference, and the other party will likewise be excused
performance of its obligations on a day-to-day basis until the prevention or
interference has ceased; provided, however, that the party so affected will use
reasonable efforts to avoid or remove such causes of nonperformance and both
parties will proceed when such causes are removed.
<PAGE>
-5-
ARTICLE 7
MISCELLANEOUS
-------------
7.1 Assignment. DCI shall not assign or transfer this Agreement or any of
----------
its rights or obligations hereunder without the prior written consent of MPR
Teltech, such consent to be in MPR Teltech's sole discretion and MPR Teltech
shall not assign or transfer this Agreement or any of its rights and obligations
hereunder without the prior written consent of DCI, such consent to be in DCI's
sole discretion. Notwithstanding the foregoing, any party which is a body
corporate may assign its rights under this Agreement to any affiliated
corporation within the the meaning of "affiliated" under Section 2(2) of the
Canada Business Corporations Act (hereinafter called an "Affiliate") including
an Affiliate with which it amalgamates, merges or consolidates or enters into a
similar reorganization, or into which it is wound up as part of a bona fide
reorganization, provided that the Affiliate or successor corporation agrees to
be bound by this Agreement in addition to the original party and with its rights
and obligations as if such Affiliate or successor corporation were an original
signatory hereto. In addition, MPR may assign its rights under this Agreement
to any other person, upon the acquisition by such other person of all or
substantially all the assets of MPR, provided that such assignee agrees to be
bound with DCI by the terms of this Agreement in the place and stead of MPR. In
addition, DCI acknowledges that it has been advised by MPR that Control (as
defined below) of MPR may change during the term of this Agreement and agrees
that such a change of Control of MPR shall not constitute an assignment of this
Agreement or affect this Agreement in any way. Control of any entity by any
person shall be deemed to exist if such entity would be deemed to be controlled
directly or indirectly by such person or persons pursuant to the terms of the
Canada Business Corporations Act.
7.2 Notices. Any notice to the parties required or permitted under this
-------
Agreement will be deemed to have been received on the date of actual delivery,
if delivered personally to the recipient or by facsimile, on the date receipt is
acknowledged in writing by the recipient if delivered by regular mail, or on the
date stated on the receipt if delivered by certified or registered mail or by an
overnight courier service. For purposes of this Agreement, notices to the
parties will be delivered to the addresses indicated below unless a written
notice of change of address, given in accordance with the requirements of this
Section 6.2, is provided to the other party by the party whose address has
changed.
Notices to MPR Teltech will be sent to:
MPR Teltech Ltd.
8999 Nelson Way
Burnaby, B.C.
V5A 4B5
Attention: Ian Bardsley, Vice President Business Systems and Applications and
Peter Inman, Vice President and Chief Financial Officer
<PAGE>
-6-
Notices to DCI will be sent to:
Digital Courier International Inc.
8618 Commerce Court
Burnaby, B.C.
V5A 4N6
Attention: Chief Executive Officer
7.3 Amendment; Waiver; Exclusivity. This Agreement shall not be amended
------------------------------
or modified except by a written instrument duly executed by each of MPR Teltech
and DCI, and will not be amended, modified or supplemented by a course of
dealing between the parties. No waiver by either party of any breach or default
of any of the covenants or agreements herein contained will be deemed a waiver
of any subsequent breach or default. No right or remedy herein conferred upon
either party is exclusive of any other right or remedy herein or by law or in
equity provided or permitted.
7.4 Headings. The headings in this Agreement are inserted for convenience
--------
only and are in no way intended to define or limit the scope or meaning of this
Agreement or any of the provisions hereof.
7.5 Choice of Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the Province of British Columbia, and the parties
hereby attorn to the jurisdiction of the courts of the Province of British
Columbia.
7.6 Dispute Resolution. All disputes arising out of or in connection with
------------------
this Agreement will be referred first to senior management of the parties for
amicable resolution. All disputes that cannot be resolved, except those arising
out of or relating to Confidential Information and any disputes over one party's
failure to submit to the dispute resolution process as provided herein, will be
referred to and finally resolved by arbitration. The dispute will be referred
to the International Commercial Arbitration Centre in Vancouver, British
Columbia; will be conducted by a single arbitrator, unless otherwise agreed by
the parties; will be administered under the rules of such International
Commercial Arbitration Centre, and will be conducted in Vancouver, British
Columbia. The prevailing party in any arbitration or legal action arising out
of or related to this Agreement will be entitled, in addition to any other
rights and remedies it may have, to reimbursement for its expenses incurred in
such arbitration or action, including court costs and reasonable legal fees.
7.7 Enurement. This Agreement will be binding upon and enure to the
---------
benefit of the parties hereto and their respective successors, heirs, executors,
administrators and permitted assigns.
7.8 Further Documents. The Parties will execute any further agreements
-----------------
provide such further documents or other assurances, carry out any further act or
deed, or give all
<PAGE>
-7-
consents and information within this Agreement or as may reasonably be required
to fulfil or achieve the purposes of this Agreement.
7.9 Facsimile and Counterparts. This Agreement may be executed in one or
--------------------------
more counterparts, and each such counterpart will be considered to be a part of
one and the same document. The parties may exchange executed copies of this
Agreement by facsimile transmission (with original signature copies to be
exchanged as soon as practicable thereafter), and this Agreement will be
effective and enforceable by each party when it has executed the facsimile copy
and has received a facsimile copy executed by the other party.
7.10 Entire Agreement. This Agreement sets forth the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MPR TELTECH LTD.
Per: /s/ I.R. Bardsley
______________________________
Authorized Signatory
Per: /s/ Peter Inman
______________________________
Authorized Signatory
DIGITAL COURIER INTERNATIONAL INC.
Per: /s/ I.R. Bardsley
______________________________
Authorized Signatory
Per: /s/ Peter Inman
______________________________
Authorized Signatory
<PAGE>
EXHIBIT "A"
MPR SERVICES
The MPR Services shall include the following:
1. Administrative services relating to management, operations, policies and
personnel;
2. Financial, accounting and treasury services, including the formulation of
financial programs, cash and securities management, general ledger
accounting, cost accounting, plant accounting, inventory accounting,
payroll accounting, purchase order related voucher processing and other
accounts payable functions, tax filings and compliance, capital structure
planning, administrative support for loans, review of indentures, debt
covenant compliance, dividend planning and declarations, administration of
corporate credit card program, support for restructurings, mergers and
divestitures, financing activities for leased assets, preparation of
budgets, preparation of financial and other reports for executive,
operational, and investor use, and preparation of reports and other data
required to comply with requirements, rules and regulations of governmental
authorities;
3. Information management services, including planning, developing, testing,
implementing, executing, maintaining, and providing access to data bases
and application systems, mainframe processing, professional services,
related data processing type activities, sales of and support for hardware,
sales and licensing of software, LAN administration and electronic
messaging services;
4. Legal and contract services, including negotiation, preparation and review
of contracts, prosecution, management and coordination of litigation,
provision of legal advice concerning legislation, regulation, employment
law, patents, trademarks and other matters and risk management;
5. Human resources services, including preparing policies and practices,
performing job evaluations, wage and salary administration and management
incentive compensation support and reporting, recruitment and employment,
training and development, performance appraisals, evaluation and selection
of management employees for promotion, administration of employee services
and benefits, benefits, employment equity services, management-employee
relations and development, implementation and administration of employee
database systems;
6. Public relations services, including government and industry relations,
advertising, providing bill inserts, new releases, employee bulletins and
associated printing services and graphics and community relations;
<PAGE>
- 2 -
7. Customer billing and collection services, including establishment,
servicing and billing of customer accounts and collection and investigation
of customer accounts (which includes collecting revenues, reporting
receipts and administering collection treatment), handling customer
payments, refunds, and deposits through centralized mail remittance, bill
and final account collection, bill inquiry, customer problem resolution,
collection and journalization of billing data including write-offs and
adjustments, and account and table maintenance;
8. Procurement services, including analyzing and evaluating vendors' products,
selecting appropriate vendors, negotiating supply contracts, placing
purchase orders, expediting and controlling orders placed for materials,
developing standards for materials purchased, administering vendor or user
claims, and safeguarding or warehousing materials until issuance; and
9. Land and building services, including leasing of office space, land and
equipment, janitorial, maintenance, safety and security services, building
administration, insurance activities for land, building and support assets,
and administration of sales of land and buildings.
<PAGE>
SCHEDULE 1 TO EXHIBIT A
FEES FOR MPR SERVICES
<TABLE>
<CAPTION>
PER HOUR DISCOVERY PARK MONTHLY
COMMERCE COURT MONTHLY OR ITEM (FORMERLY B23) CHARGE
<S> <C> <C> <C> <C> <C>
OFFICE SERVICES Coffee @ $17.50 each x 24 $ 420.00 Coffee @ $17.50 $ 87.50
each x 5
Cafeteria Management @ $4.40 each $ 33.60 Cafeteria Management @ $ 7.00
x 24 $1.40 each x 5
Use of fax, copiers, paper @ $42.25 $1,014.00 Use of fax, copiers, $ 211.25
each x 24 paper
@ $42.25 each x 5
Shipping - actuals plus 15% will be Shipping - actuals plus
billed 15% will be billed
Internal mail/fax delivery @ $28.60 $ 686.40 Internal mail/fax $ 143.00
each x 24 delivery
@ $28.60 each x 5
Colour copies - each as needed $ 1.25 Colour copies - each as
needed
BUILDING SERVICES Building Services @ rates below plus 15%
Utilities $1,200.00 Rent @ $253.70 x 5 $1,268.50
Heating, Ventilation and Air $ 270.00 Furniture @ $48.13 each $ 240.65
Conditioning Maintenance x 5
Plant Care $ 100.00 General Filing @ $4.61 $ 23.05
each x 5
Dayman Services $ 200.00
Office Cleaning $ 870.00
Lease of 32 Telephone sets and use $ 700.00 Lease of 5 telephone sets $ 100.00
of 35 lines @ $20.00 each and use of 5 lines @
$20.00 each
Calling Card - actual usage + 15% Calling Card - actual
usage + 15%
Long Distance - actual usage + 15% Long Distance - actual
usage + 15%
PURCHASING Purchasing Services $ 200.00
HUMAN RESOURCES Junior $ 50.00
Senior $ 90.00
PRODUCTION Production Shop $ 63.25
MANAGEMENT Subcontractor $ 60.00
COMPUTER SERVICES PC Lease Charges @ $270/month x $6,480.00 PC Lease Charges @ $1,350.00
24 $270.00 x 5
Network - servers @ $115/month x 1 $ 115.00 Network Servers x 115 $ 115.00
month x 1
Network - PC @ $115/month x 24 $2,760.00 Network PC's @ $115.00 $ 575.00
month x 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PER HOUR DISCOVERY PARK MONTHLY
COMMERCE COURT MONTHLY OR ITEM (FORMERLY B23) CHARGE
<S> <C> <C> <C> <C> <C>
Shared use charges - actual at Shared use charges -
rates actual at rates set out
set out below below
CPU prime time @ $.28 per second CPU prime time @ $.28
per second
CPU non prime time @ $.011 per CPU prime time @ $.011
second per second
Disk usage @ $.00006 Kbyte per day Disk usage @ $.00006
Kbyte per day
Printing @ $.11 per page Printing @ $.11 per page
Framemaker $ 20.00
LEGAL SERVICES Professional Legal Services $125.00 /hr.
Patent & Trademark Administrator $50.00 /hr.
Services
Per NDA Agreement $100.00
Per Professional Services Agreement $250.00
Outside Legal Services Actuals
ENGINEERING SERVICES Actual labour rate x 2.8 x 1.15
(B23)
</TABLE>
THE FEES SET OUT HEREIN SHALL BE EFFECTIVE UNTIL FEBRUARY 29, 1996.
<PAGE>
EXHIBIT "B"
MANUFACTURING MANAGEMENT SERVICES
TERMS AND CONDITIONS
1. Supply of Goods and Services
----------------------------
Goods and Services will be provided in accordance with the MPR/DCI OEM
Services Plan numbered M67/DCISP/95-24, a copy of which document has been
provided to DCI and which is incorporated by reference into this Agreement.
Capitalized terms not defined in this Exhibit "B" shall have the meanings
ascribed thereto in such MPR/DCI OEM Services Plan.
2. Price List
----------
MPR Teltech will provide a Price List numbered M67/DCIPL to DCI, which
price list may be updated periodically but no more frequently than once
every 30 days. Pricing for Goods shall include all direct and indirect
production labour, expenses and services.
3. Inventory
---------
Recognizing lead times required to meet DCI's requirements for Goods, from
time to time, DCI will issue to MPR Teltech a Letter of Inventory
Obligation. This letter will direct MPR Manufacturing Management to build
inventory to best manage existing stock levels and sales forecasts and will
obligate DCI to pay the costs of the building and stocking of Goods by
Subcontractor and for proprietary materials ordered by MPR Teltech.
DCI and MPR Manufacturing Management will jointly monitor inventory,
shipping forecasts and current manufacturing lead times in order to
maintain sufficient stock to meet sales forecasts. Stock will be
transferred to Subcontractor for assembly into finished DCI labelled
terminals. Goods will be stocked by Subcontractor. Subcontractor will use
Goods from inventory and provide custom software configuration services in
response to DCI client specific orders as received from DCI via MPR
Manufacturing Management.
4. Product Release Order ("PRO") Procedure
---------------------------------------
DCI will issue one (1) PRO per terminal ordered. Each PRO will specify the
terminal configuration, DCI client information to be loaded into the
terminal and shipping instructions. When multiple terminals are ordered for
the same DCI client, DCI will issue one (1) PRO for each terminal. The PRO
number will provide detailed tracking of terminals with respect to the
terminal's internal component serial numbers for customs, warranty
replacement and repair services, configuration management and
<PAGE>
compatibility/upgrade purposes. MPR Teltech and DCI will use the DCI PRO
number for all purchasing and billing purposes.
5. Subcontractor
-------------
MPR Teltech represents that it has entered into an agreement with Sidus
Systems Inc. (MPR agreement number MPR-F21-A1028 (94/10)) to provide goods
and services related to the terminals including manufacturing, assembly of
the terminal and other value added services from Sidus Systems Inc.'s
Toronto factory and account representation from Sidus Systems Inc.'s
Vancouver office.
<PAGE>
EXHIBIT "C"
DCI SERVICES
The DCI Services shall include the following:
1. If required by MPR Teltech, technological support and assistance with
respect to the customized L2 Blue-based Codec product supplied by MPR Teltech to
the Solicitor General of Canada, pursuant to the contract dated April 12, 1994,
Contract Number J450-3-0023, including, if required by MPR Teltech,
technological support and assistance to dispose of, transfer or sell such
product.
2. Technological support and assistance with respect to the L2 Blue Code
product jointly owned by MPR Teltech and Phillips Sound and Vision of the
Netherlands, pursuant to a Cooperation Agreement dated August 8, 1994,
including, if required by MPR Teltech, technological support and assistance to
dispose of, transfer or sell such product.
3. Technological support and assistance with respect to the customized
MPEG technology licensed by MPR Teltech to Scientific Atlanta, pursuant to a
Development and License Agreement dated May 25, 1995.
4. Technological support and assistance with respect to a Software
License Agreement and a Distribution and Manufacturing Agreement between MPR
Teltech and Primary Rate Incorporated dated July 4, 1994.
5. The lease to MPR Teltech of the office space at 8612 and 8618 Commerce
Court, Burnaby, British Columbia, that is currently occupied by the MPR Teltech
business unit known as WAVE.
<PAGE>
SCHEDULE 1 TO EXHIBIT C
DCI SERVICES TO MPR TELTECH
<TABLE>
<CAPTION>
DCI SERVICES FEE
<S> <C>
Rent per month - WAVE Group $4,005.00
Engineering services - actual labour rate x 2.8 x 1.15
</TABLE>
<PAGE>
SCHEDULE 1.1.21 - TRADEMARKS
<TABLE>
<CAPTION>
Trade-mark Country Apn. No. Wares/Services
- -------------------------- ------------- ---------- -----------------------
<S> <C> <C> <C>
DIGITAL COURIER CANADA 757,046 Providing the delivery of audio and video programming,
INTERNATIONAL advertisements, news recordings and information via a
telecommunications network
DIGITAL COURIER UNITED STATES 74/537,235 Telecommunications services, namely electronic transmission of audio
INTERNATIONAL and video programming, advertising, news recordings, and information
DIGITAL COURIER CANADA 760,312 Providing the delivery of audio and video programming,
INTERNATIONAL advertisements, news recordings and information via a
& design telecommunications network
DIGITAL COURIER UNITED STATES 74/557,267 Telecommunications services, namely electronic transmission of audio
INTERNATIONAL and video programming, advertising, news recordings, and information
& design
CAPELLA CANADA 775,086 Encoder and decoder which converts an analog audio signal
into a digital bit stream, compresses the audio signal, and
decompresses the audio signal
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPELLA UNITED STATES 74/633,799 Encoder and decoder which converts an analog audio signal
into a digital bit stream, compresses
the audio signal, and decompresses the audio signal
DIGITAL RECORD CANADA 781,332 wares: computer software for sampling and downloading new music
REP -----
releases for the radio broadcast industry from an on-
line server using the telephone network
services: providing sampling and downloading of new
--------
music releases for the radio broadcast industry from an on-
line server using the telephone network
DIGITAL RECORD UNITED STATES 74/668,886 wares: computer software for sampling and downloading new
REP -----
music release for the radio broadcast industry from an on-
line server using the telephone network
services: providing sampling and downloading of new music releases for
-------
the radio broadcast industry from an on-line server using the
telephone network
AUDIO CANADA 781,334 wares: computer software for sampling and downloading new
EXCHANGE music releases, record chart ratings information, voice
talent, sound effects libraries, and other broadcast audio
material for the radio broadcast industry
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
from an on-line server using the telephone network
services: providing sampling and downloading of new music releases,
--------
record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
AUDIO UNITED STATES 74/668,884 wares: computer software for sampling and downloading new music
EXCHANGE -----
releases, record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
services: providing sampling and downloading of new music releases,
--------
record chart ratings information, voice talent, sound effects
libraries, and other broadcast audio material for the radio
broadcast industry from an on-line server using the telephone network
</TABLE>
3
<PAGE>
SCHEDULE 9.1 - ASSIGNMENT OF COPYRIGHT
ASSIGNMENT OF COPYRIGHT
THIS AGREEMENT made and entered into as of the . day of ., 1995
BETWEEN:
DIGITAL COURIER INTERNATIONAL INC., a corporation duly incorporated
under the laws of Canada and having an office at 8999 Nelson Way,
Burnaby, British Columbia
(hereinafter called the "Assignee")
OF THE FIRST PART
AND:
MPR TELTECH LTD., a corporation duly incorporated under the laws of
Canada and having its executive offices at 8999 Nelson Way, Burnaby,
British Columbia
(hereinafter called the "Assignor")
OF THE SECOND PART
WHEREAS the Assignor has prepared, written, created or developed certain
software programs, as set out in Attachment 1 hereto (hereinafter called the
"Software");
AND WHEREAS the Assignor desires to transfer entire ownership of the copyright
in the Software to the Assignee;
NOW THEREFORE in consideration of $1 and other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the Assignor and
the Assignee agree as follows:
1. The Assignor hereby sells, assigns and transfers to the Assignee the entire
right, title, interest, ownership and all subsidiary rights in and to the
Software throughout the world, including, without limitation, the copyright
thereto and the right to secure copyright registration therein.
2. The Assignor hereby acknowledges and agrees that, as between the Assignor
and the Assignee, Assignee owns the entire right, title and interest in the
Software, including the right to reproduce, prepare derivative works based
on the Software, distribute for sale, to perform publicly and to display
the Software.
1
<PAGE>
3. This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective lawful successors and permitted
assigns.
4. This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the parties hereto shall
attorn to the jurisdiction of the courts of such province.
DATED as of this . day of ., 1995.
DIGITAL COURIER INTERNATIONAL INC.
by its authorized signatory:
Per: _____________________________
Name:
Title:
MPR TELTECH LTD.
by its authorized signatory:
Per: _____________________________
Name:
Title:
Per: _____________________________
Name:
Title:
2
<PAGE>
ATTACHMENT 1
TO ASSIGNMENT OF COPYRIGHT
OB-100 Switching Hub Software
DCI Billing system software
DCI Network management system software
DCI PC Application Software
Capella/MI-300/DSPC/DDPB
- ------------------------
- - MPEG encode and decode firmware
- - Capella/MI-300/DDPB controllers and audio utilities firmware
- - AudioCap Application program
- - MIMPG Windows Audio DLL
- - DSIIC DSP56K Debug Monitor and Flash Programming Utilities
- - Capella production test software
- - G.722/G.711 firmware
- - Audition firmware
MI-320
- ------
- - NDIS Media Access Card Driver
- - MI-3X0 Driver
- - MI-3X0 Firmware
- - ComMon MI-320 Test Application
- - Flash Programming Utilities
- - MI-320 test software
Other Items
- -----------
- - Audio on Demand Application
- - Audition Application
Hardware
- --------
Circuit Card design and manufacturing information for:
- - Capella
- - Capella V.35 daughter board
- - MI320
- - MI320 U Interface board
<PAGE>
SCHEDULE 9.2 - ASSIGNMENT OF TRADEMARKS
This Assignment is made the ____ day of __________________, 199_,
BETWEEN MPR TELTECH LTD. (hereinafter called the "Assignor"), whose principal
office or place of business is 8999 Nelson Way, Burnaby, British Columbia,
Canada, AND DIGITAL COURIER INTERNATIONAL INC. (hereinafter called the
"Assignee"), whose principal office or place of business is 8999 Nelson Way,
Burnaby, British Columbia, Canada.
In consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration paid to it by the Assignee, the receipt and sufficiency
of which is hereby acknowledged, the Assignor as full beneficial owner hereby
sells, assigns, and transfers unto the Assignee all of its right, title,
interest in and to the following unregistered trade-marks:
TRADE-MARK APN. NO.
- ---------------------------------- --------
DIGITAL COURIER INTERNATIONAL 757,046
DIGITAL COURIER INTERNATIONAL & 760,312
DESIGN
CAPELLA 775,086
DIGITAL RECORD REP 781,332
AUDIO EXCHANGE 781,334
together with the benefit of any use of the trade-marks by the Assignor, and the
goodwill of the business relating to the said trade-marks and to the wares or
services associated with them, to hold unto the Assignee absolutely.
IN WITNESS WHEREOF the parties have executed these presents on the
date first above written.
MPR TELTECH LTD.
by: _____________________________
signature of representative
its: _____________________________
office held by representative
1
<PAGE>
DIGITAL COURIER INTERNATIONAL
INC.
by: _____________________________
signature of representative
its: _____________________________
office held by representative
2
<PAGE>
U.S. TRADEMARK ASSIGNMENT
-------------------------
THIS ASSIGNMENT effective the ____ day of __________________, 199_,
from MPR TELTECH LTD., a corporation organized and existing under the laws of
Canada and having its principal place of business at 8999 Nelson Way, Burnaby,
British Columbia, Canada, (hereinafter referred to as "ASSIGNOR") to DIGITAL
COURIER INTERNATIONAL INC., a corporation organized and existing under the laws
of Canada and having its principal place of business at 8999 Nelson Way,
Burnaby, British Columbia, Canada (hereinafter referred to as "ASSIGNEE"),
WITNESSETH:
WHEREAS ASSIGNOR has adopted and is the owner of the marks set forth
in the United States trademark applications listed on Schedule A;
WHEREAS ASSIGNEE has acquired certain assets of ASSIGNOR relating to
software and hardware designs, including the marks relating to that business,
together with the goodwill of the business with which said marks are used;
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby acknowledged, ASSIGNOR
does hereby sell, assign and transfer unto ASSIGNEE all right, title and
interest in and to the trademarks listed on Schedule A used by ASSIGNOR in
connection with software and hardware and including the applications for
registration thereof, the right to recover for past infringement thereof, and
all goodwill of the business in connection with which said trademarks are used
and which is appurtenant thereto, and which is symbolized by said trademarks.
MPR TELTECH LTD.
_____________________________
3
<PAGE>
SCHEDULE A
UNITED STATES TRADEMARK APPLICATIONS
TRADEMARK SERIAL NO.
- ----------------------------------------- ----------
DIGITAL COURIER INTERNATIONAL 74/537,235
DIGITAL COURIER INTERNATIONAL & DESIGN 74/557,267
CAPELLA 74,633,799
DIGITAL RECORD REP 74,668,886
AUDIO EXCHANGE 74/668,884
4
<PAGE>
AMENDMENT NO.1
TO
SUPPORT SERVICES AGREEMENT
This Amending Agreement is dated effective as of the 1st day of May, 1996.
Between: MPR TELTECH LTD., 8999 Nelson Way, Burnaby, British Columbia V5A 4B5
("MPR TELTECH")
And: DIGITAL COURIER INTERNATIONAL INC., 8618 Commerce Court, Burnaby BC
V5A 4N6 ("DCI")
WHEREAS MPR Teltech and DCI entered into the Support Services Agreement dated
November 15, 1995 for the provision of office, building, administrative and
other services by MPR Teltech for DCI, and such agreement required the amendment
of Schedule I to Exhibit A,
AND WHEREAS DCI wishes to use six (6) MPR Teltech workstations at 8618 Commerce
Court, on a short-term basis in 1996, and MPR Teltech has agreed to such use in
accordance with the terms and conditions of the Support Services Agreement as
amended herein,
THEREFORE FOR GOOD AND VALUABLE CONSIDERATION THE PARTIES AGREE AS FOLLOWS:
1. AMENDMENTS
1.1 EXHIBIT "A", MPR SERVICES shall be amended as follows:
1.1.1 Insert Section 10 as follows:
"10. Building services may also include short-term use of
specified MPR Teltech facilities, on mutually agreed upon
conditions.
10.1 Workstation Space. MPR Teltech workstation space may
be available on an AS-IS basis. Each workstation will
include a desk and chair, cubicle dividers, and a
telephone and computer network service (individually, a
'"Workstation"), on the following conditions:
(a) use of a 'Workstation will be on month-to-month
commitment basis, subject to termination on weeks
notice in writing from either party to the other;
(b) DCI will pay MPR Teltech the amount specified in
Schedule 1 to Exhibit A, attached, such amount
will include utilities, property taxes, insurance,
maintenance and cleaning services, and local
telephone service;
(c) DCI will only use Workstations for office and
commercial computer business functions, by
designated DCI employees who are authorized by MPR
Teltech, and will strictly adhere to MPR Teltech
facilities rules and policies; security access
will be granted in accordance with those policies,
for access to the Workstations on week-days,
except holidays, from 6 am to 12:00 midnight;
DCI's use of Workstations will be for
25
<PAGE>
reasonable, professional conduct and will not
create an annoyance or nuisance, or damage
property or disturb others in the premises;
(d) DCI acknowledges that it will have access to a
highly secure and confidential business
environment, and undertakes to strictly restrict
the access and movement of its employees to the
Workstations and support areas, and that its
employees will conduct themselves in utmost good
faith;
(e) use of Workstations by DCI does not include rights
to reception or administrative support, to
computers, or to parking:
(f) DCI holds harmless MPR Teltech for the conduct or
omissions of its employees and all persons with
access to the Workstations due to DCI's rights
under this Agreement, and indemnifies MPR Teltech
for all such conduct or omissions, and for DCI's
obligations under this Agreement: and
(g) DCI will not remove any MPR Teltech or third-party
goods or chattels from or forming part of the
Workstations or premises, and will leave the
Workstations in a clean and tidy condition.
1.2 SCHEDULE 1 TO EXHIBIT "A", FEES FOR MPR SERVICES shall be amended as
follows:
1.2.1 Delete Schedule 1 Exhibit "A" and replace with that attached
hereto
1.2.2 Insert a new SCHEDULE 2 TO EXHIBIT "A", "WORKSTATIONS", as per
the attached plan indicating the six Workstations which are the
subject of this Amendment.
2. All other terms and conditions of the agreement remain unchanged,
applicable and in force.
IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AMENDING AGREEMENT AS OF THE
DATE FIRST ABOVE WRITTEN:
MPR TELTECH LTD. DIGITAL COURIER INC.
By: /s/ I.R. Bardsley By: /s/ L.C. Fowler
______________________ ______________________
Signature Signature
Ian Bardsley Len C. Fowler
- -------------------------- -----------------------------
Print Name Print Name
President Secretary
- -------------------------- -----------------------------
Title Title
26
<PAGE>
SCHEDULE 1 TO EXHIBIT A
FEES FOR MPR TELTECH SERVICES
AT COMMERCE COURT, BURNABY
<TABLE>
<CAPTION>
DESCRIPTION OF SERVICE UNIT UNIT COST
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. OFFICE SERVICES
1.1 Coffee service/supplies per user $17.50/month
1.2 Cafeteria management per person $4.40/month
1.3 Facsimile and photocopier use and per person $42.50/month
supplies; internal mail delivery
1.4 Colour copies per page $ 1.25
1.5 Shipping, couriers, & external mail per package cost plus 15%
2. BUILDING SERVICES
2.1 Night and Holiday Security service $1,625.00/month
2.2 Day-person $200.00/month
2.3 Rental of telephone sets and telephone line per line $25.00/month
and switch access
2.4 Calling card and long-distance charges cost plus 14%
(telephone, modem and fax)
2.5 Workstation per workstation cubicle $120.00/month
2.6 Building Service
2.6.1 Electrian per person $30.00/hour
2.6.2 Space Planning Services per person $25.00/hour
2.6.3 General Facilities Administration per person $20.00/hour
3. PURCHASING SERVICES/CONSULTING $52.00/hour
4. HUMAN RESOURCES CONSULTING $90.00/hour
5. MANAGEMENT CONSULTING $60.00/hour
6. LEGAL SERVICES
6.1 Legal Counsel $150.00/hour
</TABLE>
- --------------------------------
NOTES:
1. "per user" means individuals use of MPR Teltech's coffee services [04/96
estimated at less than 10]
"per person" means DCI officers, employees, contractors and consultants
[04/96 estimated at 40]
"per line" means committed lines on telecommunications switch [04/96
estimated at 62]
2. All services are in accordance with MPR Teltech policies, rules and standard
conditions of service.
3. Unit costs are in effect until February 28, 1997
27
<PAGE>
<TABLE>
<S> <C> <C>
6.2 Contracts Professional $100.00/hour
6.3 Administrative $50.00/hour
6.4 Per Non-Disclosure Agreement $ 100.00
6.5 Per Professional Services Agreement $ 250.00
6.6 Outside Legal Services Actuals
7. ENGINEERING SERVICES/CONSULTING Lobour rate x 2.8 plus 15%
8. PRODUCTION SERVICES/SHOP $63.25/hour
9. COMPUTER SERVICES
9.1 PC Lease charges per PC $270.00/month
9.2 Network connection service per connected device $115.00/month
to MPR network
9.3 Use charges
9.3.1 CPU time (prime) per second $ 000.028
9.3.2 CPU time (non-prime-time) per second $ 000.0135
9.3.3 Hard-disc storage per kbyte/day $000.00006
9.3.4 Printers per page $ 000.11
</TABLE>
- --------------------------------
NOTES:
1. "per user" means individuals use of MPR Teltech's coffee services [04/96
estimated at less than 10]
"per person" means DCI officers, employees, contractors and consultants
[04/96 estimated at 40]
"per line" means committed lines on telecommunications switch [04/96
estimated at 62]
2. All services are in accordance with MPR Teltech policies, rules and standard
conditions of service.
3. Unit costs are in effect until February 28, 1997
28
<PAGE>
SCHEDULE 2 TO EXHIBIT A
WORKSTATION CUBICLES
DESIGNATED MPR TELTECH BUILDING SERVICE FOR USE BY DCI
AT MPR TELTECH, COMMERCE COURT, BURNABY PREMISES
Note:
Rights of access to and use of these Workstations will pass to DCI as of
May 1, 1996, and payment obligations for such Workstations by DCI will
commence as of May 1, 1996, in accordance with Amendment No. 1 to the
Support Services Agreement.
Plan of spaces:
[Map of Workspace Cubicle Plans appears here]
29
<PAGE>
EXHIBIT 10.9
Agreement Between
- --------------------------------------------------------------------------------
DIGITAL COURIER INTERNATIONAL INC. (DCI)
8618 Commerce Court
Burnaby, British Columbia
CANADA, V5A 4N6
TEL: (604) 293-5142
FAX: (604) 473-5835
And
- --------------------------------------------------------------------------------
SIDUS SYSTEMS INC. (SIDUS)
66 Leek Crescent
Richmond Hill, Ontario
L4B 1J7
TEL: (905) 882-1600
FAX: (905) 882-2430
Term
- --------------------------------------------------------------------------------
Effective Date: 1st Day of February, 1996
Title
- --------------------------------------------------------------------------------
Master Product Purchase Agreement
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND ACRONYMS........................................ 1
2. SCOPE........................................................... 3
3. GRANT OF LICENSE................................................ 3
4. AUTHORIZED REPRESENTATIVES...................................... 3
5. PRICE........................................................... 4
6. ORDERS.......................................................... 4
7. DELIVERABLES.................................................... 5
8. RECORDS......................................................... 5
9. SHIPPING........................................................ 5
10. SIDUS' OBLIGATIONS.............................................. 5
11. COMPLIANCE WITH LAWS AND REGULATIONS............................ 6
12. PROTECTION OF CONFIDENTIAL INFORMATION.......................... 6
13. WARRANTIES...................................................... 7
14. CONDUCT OF THE WORK............................................. 8
15. CHANGES AND CANCELLATIONS....................................... 9
16. ASSIGNMENT AND SUBCONTRACTING................................... 9
17. TERMINATION..................................................... 10
18. EXCUSABLE DELAY................................................. 11
19. TITLE........................................................... 11
20. INDUSTRIAL AND INTELLECTUAL PROPERTY............................ 12
i
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
21. INDEMNIFICATION................................................. 12
22. INDEMNITY AGAINST THIRD-PARTY CLAIMS............................ 12
23. QUALITY CONTROL, INSPECTION AND ACCEPTANCE...................... 13
24. PUBLICITY....................................................... 13
25. PAYMENTS AND INVOICES........................................... 13
26. TAXES AND DUTIES................................................ 14
27. PACKING......................................................... 14
28. RISK OF LOSS AND DAMAGE......................................... 15
29. IMPORT/EXPORT DOCUMENTATION INDEMNIFICATION..................... 15
30. SITE VISITS..................................................... 15
31. SECURITY........................................................ 15
32. GENERAL......................................................... 15
33. ENTIRE AGREEMENT................................................ 18
EXHIBIT A -- DESCRIPTION OF GOODS AND SERVICES..................
EXHIBIT B -- PRICE SCHEDULE.....................................
EXHIBIT C -- STANDARD QUALITY PROVISIONS........................
EXHIBIT D -- SALES FORECAST SCHEDULE............................
<PAGE>
MASTER PRODUCT PURCHASE AGREEMENT
THIS MASTER PRODUCT PURCHASE AGREEMENT ("Agreement") is made, in duplicate, this
1st day of February, 1996 by and between DIGITAL COURIER INTERNATIONAL, INC.
(referred to herein as "DCI" and/or buyer, a corporation organized and
subsisting under the laws of Canada, having principle offices at 8618 Commerce
Court, Burnaby, British Columbia, Canada V5A 4N6, and SIDUS SYSTEMS INC.
(referred to herein as "SIDUS" and/or "Seller"), a corporation having its
principle office at 66 Leek Crescent, Richmond Hill, Ontario, Canada L4B 1J7.
WHEREAS:
A. SIDUS Systems Inc. previously entered into a Master Product Agreement No.
MPR-F21-A1028(94/10) with MPR Teltech Ltd. for the provision of products
and services to DCI and its clients;
B. It is anticipated that the referenced Agreement No. MPR-F21-A1028(94/10)
will be terminated under a separate agreement by the parties involved;
C. DCI desires to purchase Products and Services in accordance with the
Description of Products and Services attached hereto as Exhibit "A"; and
D. SIDUS desires to supply the Products and Services to DCI;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the terms and
premises hereinafter set forth, the parties agree a.,; follows:
1. DEFINITIONS AND ACRONYMS
1.1 Definitions
The following terms are defined:
"Agreement" means this document signed by the Parties and consists of
these Articles of Agreement and the Exhibits listed in Article 32.13
and all documents referenced therein.
"Cables" means DCI proprietary communications and audio interface
cable assemblies.
"Cards" means DCI proprietary MI320 Communications printed circuit
board assembly and the Capella Audio Compression printed circuit board
assembly.
1
<PAGE>
"Customer" means DCI's client.
"Delivery" means the shipment of the Product to DCI's Customer.
"Documents" means DCI proprietary documents intended for use by DCI
clients, DCI technical documents used for the fabrication and testing
of product, or other documents used in support of this Agreement.
"Material" refers non-specifically to related products.
"Parties" means Buyer and Seller.
"Product(s)" refers to hardware, software, technical documents, and
peripheral equipment elements.
"Proprietary" means DCI proprietary hardware and software entities.
"Purchase Order" is a document originated by DCI which authorizes
Sidus to prebuild DCI terminals.
"Services" refers to the tasks and efforts carded out by SIDUS for
DCI.
"Terminal" means the complete assembly of equipment provided by SIDUS,
equipment provided by DCI and any other peripheral equipment which
then constitutes a fully functional DCI machine.
"Work" means the whole of the activities, services, materials,
hardware, equipment, software matters and things required to be done,
delivered or performed by SIDUS in accordance with terms of the
Agreement.
"Drawing" means an image document or file which defines the physical
parameters of an object, in this case, the Terminal and its related
subassemblies.
"Product Release Order" means a form document supplied to SIDUS by DCI
which instructs SIDUS to release, configure and ship product from
SIDUS inventory to DCI clients.
"Specification" means a text document or file which defines the
pertinent parameters of a product or process. A drawing is also a
form of a specification.
2
<PAGE>
1.2 ACRONYMS
"OEM" means Original Equipment Manufacturer which refers to SIDUS
Systems Inc. and DCI.
"PC or Personal Computer" mean an item which consist of the equipment
listed in Exhibit A, Table 1.
"CPU" means Central Processing Unit and describes the equipment per
Exhibit A, Table 1.
2. SCOPE
This Agreement sets forth the terms and conditions for the purchase by DCI
and the sale by SIDUS of the Products and Services described in Exhibits
"A" and "B", respectively, attached hereto and forming part of this
Agreement.
3. GRANT OF LICENSE
To the extent that the Product contains embedded software (the "Software"),
SIDUS grants to DCI a non-exclusive license to use the Software embedded in
the Product and to sublicense the use of the Software to DCI's Customers.
4. AUTHORIZED REPRESENTATIVES
4.1 DCI AUTHORIZED REPRESENTATIVE. The DCI authorized representatives
are:
a) Operations
Bruce Maxwell, V.P. Network Operations
b) Engineering
Neil Gunn, V.P. Engineering
The DCI authorized representatives may appoint as their authorized
agent for day to day business, a production coordinator. SIDUS will
be advised of this person and any changes to this position.
4.2 SIDUS AUTHORIZED REPRESENTATIVE. The SIDUS authorized
representatives, doing business at a regional office of SIDUS located
in Vancouver, B.C. at #1-8765 Ash Street. V6P 6T3, is:
a) David Oberman
Executive Account Manager
3
<PAGE>
5. PRICE
5.1 Prices for the provision of Products and Services will be set forth in
a published price list to be generated by SIDUS and delivered to DCI.
This price list may be updated from time to time (but not any more
frequently than every 30 days) and the latest dated price list will be
the then-current price list. Goods ordered from the then-current
price list during the time the price was in effect will be paid for at
that price.
Prices will be reviewed on a thirty (30) day basis.
5.2 DCI shall provide all of its proprietary products and purchased
terminating equipment to SIDUS at no cost to SIDUS.
5.3 F.O.B. The prices referenced in Exhibit B and set forth in the
published price lists are FOB SIDUS' Toronto warehouse, located at 66
Leek Crescent, Richmond Hill, Ontario.
5.4 PRICE REVIEW. The Parties recognize that the prices of personal
computer products change quickly in the market place, and that the
pricing for services will require a period of time to stabilize the
definition and level of effort involved. Therefore, variances in the
billings will be acceptable provided that prior approval has been
obtained from DCI.
Variances against the prices may be billed by SIDUS after having given
notice to DCI by written statements supporting the variance and
following DCI's acceptance of the variance.
Due to rapidly changing PC system hardware and software, Sidus may
recommend configuration changes which will enhance performance, extend
useful life or defer mandated upgrades due to obsolescence. Pricing
will not be inflated due to these recommendations.
6. ORDERS
6.1 FORECASTS. DCI shall provide sales forecasts on a timely basis to
SIDUS for the purpose of managing product and stock inventory. The
forecast of sales objectives, as of January 1996, is attached hereto
as Exhibit D, Sales Forecast Schedule.
6.2 INVENTORY ORDERS. DCI shall provide Purchase Orders to SIDUS for the
purpose of building complete terminals for inventory purposes.
Inventory will be drawn down per Article 6.3, Order Process.
4
<PAGE>
6.3 ORDER PROCESS. DCI shall provide a Product Release Order to SIDUS
which will initiate final test, package bundling and shipping
operations for a complete Terminal for shipment to a specific
customer.
7. DELIVERABLES
7.1 FROM DCI TO SIDUS. DCI will deliver to SIDUS those items described
in Exhibit A, Article 4.
From SIDUS to DCI. SIDUS will deliver to DCI the products and
services described in Exhibit A, Article 5.
8. RECORDS
8.1 SIDUS will provide records in accordance with the requirements of
Exhibit A, Article 3.5.
8.2 The records identified in Exhibit A, Article 3.5, are to be made
available by SIDUS to DCI within three (3) days of written request by
DCI.
9. SHIPPING
9.1 SIDUS shall ship assembled, tested, configured, and bundled Terminals
on behalf of DCI in accordance with the Product Release Order and as
described in Exhibit A, Article 3.3.
9.2 DCI shall specify the carrier of choice.
9.3 DCI shall specify or provide an example of export documentation for
SIDUS to follow in the preparation of export shipments.
9.4 With respect to third party billing, SIDUS shall arrange, but DCI
shall be responsible for the payment of the direct costs of shipping,
insurance, brokerage, duties, taxes or other levies assessed in
shipping terminals to DCI clients.
9.5 DCI shall pay for the costs of transporting and delivering materials
furnished by DCI to and from SIDUS.
10. SIDUS' OBLIGATIONS
10.1 In accordance with the provisions of this Agreement, SIDUS shall carry
out the Work described in Exhibit A and provide to DCI the Products
detailed in Exhibit B.
5
<PAGE>
10.2 SIDUS represents and warrants that the delivered Work shall meet the
manufacturers' performance requirements.
10.3 SIDUS shall carry out the Work diligently and provide efficient
supervision and inspection thereof so as to ensure that the Work will
be of good workmanlike quality in design, material and workmanship
according to industry standards and the requirements of this
Agreement.
10.4 SIDUS shall provide written notification and proposed replacement
hardware to DCI for evaluation within 60 days of forecasted inventory
depletion.
11. COMPLIANCE WITH LAWS AND REGULATIONS
SIDUS warrants that it has been duly authorized to operate and to do
business in the jurisdiction in which the Work is to be performed; that it
has obtained, at no cost to DCI, all necessary and required licenses and
permits in connection with this Agreement, and that it will comply fully
with all pertinent laws, decrees, regulations and labour standards of such
country or countries during the performance of this Agreement.
12. PROTECTION OF CONFIDENTIAL INFORMATION
12.1 CONFIDENTIAL INFORMATION. This shall mean that information of either
party (the "Discloser") which is disclosed to the other party (the
"Recipient") by reason of the parties' relationship hereunder, either
directly or indirectly in any written or recorded form, orally
(notwithstanding Section 12.3) or by drawings or inspection of parts
or equipment, and including but not limited to information, knowledge
or data of an intellectual, technical, scientific, commercial or
industrial nature relating to the subject matter hereof, or of a
financial, cost, pricing or marketing nature relating to the business
operations of the disclosing party.
12.2 DISCLOSURE/REPRODUCTION. The Recipient shall receive and maintain all
Confidential Information that is disclosed to it by the Discloser in
strictest confidence and to disclose same only to those persons to
whom it is essential for the purpose of this Agreement and the other
transactions contemplated hereby, and for no other purpose. The
Recipient will not duplicate or reproduce the Confidential Information
of the other without first obtaining written consent. The Recipient
will take all appropriate action to ensure that those persons to whom
Confidential Information has been disclosed comply with such
confidentiality and non-disclosure obligations hereunder.
12.3 EXCEPTION. Recipient shall not be liable for disclosure of any
Confidential Information if the same (a) was in the public domain at
the time it was disclosed, or comes into the public domain, without
breach of this Agreement;, (b) was
6
<PAGE>
known to Recipient prior to its disclosure; (c) is disclosed with
prior written approval of the Discloser;, (d) was independently
developed by Recipient; (e) is disclosed pursuant to Agreement of a
court of competent jurisdiction; or (f) becomes known to Recipient, on
a non-confidential basis, from a source other than the Discloser
without breach of this Agreement by Recipient; provided that such
exclusion shall in no way affect or impair the Discloser's rights
under any patent, copyright, semi-conductor protection or other
intellectual property laws.
12.4 IDENTIFICATION OF CONFIDENTIAL INFORMATION. The Discloser will
clearly identify its own Confidential Information that is written or
is otherwise in a tangible form by attaching or affixing thereto an
appropriate stamp, legend or marking. Where a Discloser discloses
Confidential Information orally, the Discloser will, within ten (10)
business days following the time of disclosure, confirm in writing to
the Recipient that such information is confidential.
12.5 OWNERSHIP OF CONFIDENTIAL INFORMATION. All Confidential Information
disclosed hereunder, and all originals, duplicates, reproductions and
copies of Confidential Information, except as otherwise provided
herein, shall be and remain the property of the Discloser.
13. WARRANTIES
13.1 SIDUS warrants that it has the right to grant the license granted by
this Agreement to DCI and that the license to and use by the user of
the Software will in no way constitute an infringement or other
violation of any copyright, trade secret, patent or other proprietary
right of any third party.
13.2 SIDUS warrants that the standards of all workmanship and material will
be consistent with the established and generally accepted standards
for Work of the type covered by this Agreement, in full conformity
with the specifications, drawings, or samples, if any, and free from
defects in material and workmanship under proper assembly, use and
maintenance.
13.3 SIDUS shall provide a three (3) year warranty on its equipment and
workmanship and for three years on parts and labour from the time of
shipment of the complete Terminal from the Toronto site to DCI's
designated customer. The three year on-site warranty shall be valid
for any geographical location within North America and will have no
dependency, exclusion or restriction on any DCI end user or customer.
13.4 SIDUS shall provide warranty services in accordance with Exhibit A,
Article 3.4.
7
<PAGE>
13.5 In addition to other remedies which may be available at law or in
equity, DCI, at its option, may return to SIDUS any nonconforming or
defective Work while under warranty and SIDUS shall either correct or
replace the Work, all at SIDUS' risk and expense.
13.6 SIDUS warrants that it has the power and authority to execute and
perform this Agreement.
13.7 The Parties acknowledge that the Terminals provided under the Master
Product Agreement No. MPR-F21-A1028(94/10) dated the 21st day of
December 1994 between MPR Teltech Ltd. and SIDUS Systems Inc. were
delivered to DCI or DCI's Customers. Notwithstanding the termination
or expiration of the agreement between MPR Teltech Ltd. and SIDUS,
all warranties provided thereunder shall survive termination or
expiration. For administrative convenience, such warranties shall be
administered as if the same had been granted pursuant to this
Agreement."
14. CONDUCT OF THE WORK
14.1 SIDUS shall carry out the Work in full conformity with all the
requirements of this Agreement.
14.2 SIDUS shall ensure that all materials used or incorporated into the
Work delivered to DCI resulting from this Agreement shall be new and
unused, except as otherwise agreed to by DCI.
14.3 To the extent factory tests are required by the Agreement, SIDUS shall
keep and maintain proper and adequate inspection, test and related
records which shall be available for inspection by DCI, and shall
allow copies thereof to be made and extracts taken therefrom, and
shall furnish all information that DCI may require. All records
referred to in this section 14.3 shall be kept intact and available by
SIDUS until the expiration of three years from the date of final
acceptance of the Product or until settlement by negotiation or
adjudication of all disputes, disagreements or proceedings between the
Parties, whichever is the later.
14.4 This provision shall be in addition to and not in lieu of Article 2.3
"Quality Control, Inspection and Acceptance".
14.5 SIDUS shall provide a credit to DCI of four (4) times the SIDUS hourly
shop rate, as per Exhibit B, Item 10, for each system that SIDUS does
not correctly configure for, and/or ship to, a DCI Customer in
accordance with the related Product Release Order supplied by DCI.
8
<PAGE>
15. CHANGES AND CANCELLATIONS
15.1 Sales forecasts, as proposed in Exhibit D, may experience variances
which could affect the volume of product to be shipped and the level
of effort required in support of that shipping.
15.2 Notification of change or cancellation of an order will be
communicated immediately to the SIDUS authorized representative by
DCI.
15.3 Order cancellation will normally result in a re-stocking of the goods.
Billing for re-configuration or re-stocking will be in accordance with
Exhibit B, Article 9.
15.4 Order Cancellation or Termination of this Agreement will be managed in
accordance with Article 17, Termination, and will include Sections
15.3 through 15.8 of Article 15 being invoked.
15.5 Excess DCI Proprietary Product will be returned to DCI, shipped
collect, with no other charges to be payable by DCI.
15.6 Excess SIDUS product not altered or configured for shipment, will be
returned to SIDUS' stock at no charge to DCI.
15.7 Excess SIDUS product, altered or configured for shipment, and DCI
materials normally supplied by SIDUS, will be delivered to DCI collect
and billed in accordance with the restocking charges referenced in
Exhibit B, to be negotiated by the parties on a case-by-case basis.
15.8 Cancellation of orders will be not be subject to any further charges.
DCI may, at any time, by a written amendment, make changes in
drawings, designs or specifications. If any such change causes an
increase or decrease in the price of the work or in the time required
for its performance, SIDUS shah promptly notify DCI thereof and assert
its claim for adjustment within twenty (20) days after the change is
ordered, and an equitable adjustment shall be made.
15.9 Changes initiated by SIDUS shall not be binding upon DCI except when
specifically confirmed in writing by DCI, which written confirmation
expressly states that it constitutes an amendment or change to this
Agreement.
16. ASSIGNMENT AND SUBCONTRACTING
16.1 Neither this Agreement nor any interest herein nor claim hereunder may
be assigned or delegated by SIDUS; nor may all or substantially all of
this Agreement be further subcontracted by SIDUS without the prior
written consent
9
<PAGE>
of DCI. Such consent, however, shall not be deemed to relieve SIDUS
of its obligations to comply fully with the requirements of this
Agreement.
16.2 Notwithstanding such assignment, no classified or other Confidential
Information shall be furnished to the assignee or any other third
party except upon prior written approval of DCI.
16.3 Notwithstanding the foregoing, DCI may assign this Agreement to a
third party at any time without the prior approval of SIDUS.
17. TERMINATION
17.1 FOR CONVENIENCE. The Agreement may be terminated by DCI at any time
in whole or part by delivery of a notice of termination to SIDUS. In
the event of such notice being given, SIDUS shall stop all work
forthwith and comply with any directions with regard to the Work which
may be given by DCI. SIDUS shall submit an account to DCI within one
(1) month from the effective date of termination in the form
prescribed by DCI. DCI hereby agrees to pay SIDUS a fair and
reasonable price for all Products purchased and/or Work undertaken
up to the time of termination. Such agreed prices taken together with
any sums paid or due or becoming due to SIDUS under the order shall
not exceed the total value of the Purchase Orders issued up to the
date of termination and no amount will be allowed for anticipated
profit for performance not rendered.
17.2 FOR DEFAULT. DCI may terminate this Agreement for default in whole or
in part if:
(a) SIDUS fails to deliver the supplies or to perform the services
specified in this Agreement within the time set forth in the
Agreement;
(b) SIDUS fails to make progress so as to endanger performance;
(c) SIDUS becomes insolvent, falls to pay its debts as they become
due, or makes or proposes to make an assignment for the benefit
of creditors; or
(d) SIDUS fails to perform any other provision of this Agreement.
DCI may, at its option, require SIDUS to transfer title to any
completed Work at the specified Agreement price or uncompleted Work,
tooling, drawings, information or material at an equitable price. DCI
shall have such additional remedies for default as may be available at
law or in equity whether or not it terminates this Agreement.
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17.3 In the event of either termination for default or convenience, SIDUS
shall use its best efforts to reduce cost incurrence on terminated
Work and, to the extent or part not terminated, shall diligently
continue performance of the Work not terminated in accordance with the
terms of this Agreement.
17.4 In the event of termination, SIDUS shall return to DCI, within one (1)
month of termination, all specifications and tangible Confidential
Information disclosed to SIDUS by DCI.
18. EXCUSABLE DELAY
18.1 Neither of the parties shall be in default for any failure or delay in
performance hereunder when such failure or delay is the result of a
force majeure, which is hereby defined as any event which is beyond
their reasonable control and without their fault or negligence. Such
events may include, but are not restricted to:
(a) acts of God;
(b) acts of government in its sovereign capacity;
(c) strikes, lockouts or other industrial disputes;
(d) transportation breakdowns or freight embargoes;
(e) riots, civil commotion, war or war-like operations, sabotage.
18.2 SIDUS shall duly verify the beginning and duration of such events by
documents certified or confirmed by a cognizant government authority
or other evidence acceptable to DCI. These documents or other
evidence shall clearly show the nature of the event, its beginning and
end.
18.3 To the extent such delay is unavoidable, the date of delivery or of
performance may be extended at DCI's option for a period equal to the
duration of the delay, but SIDUS shall not be entitled to any extra
compensation for such delay.
18.4 The portion of this Agreement affected by such failure or delay or the
Agreement in whole may also be terminated at DCI's option. If such
termination occurs, it shall be deemed a termination for convenience
subject to the provisions of the Article 17.1, Termination.
19. TITLE
19.1 SIDUS shall retain title to its equipment until modified, assembled,
tested, bundled for shipment and shipped to DCI's Customer.
19.2 Title to each Product shall pass to DCI upon payment of SIDUS'
invoice.
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20. INDUSTRIAL AND INTELLECTUAL PROPERTY
SIDUS shall obtain, at its own expense, all necessary releases and licenses
with respect to all technical data supplied under this Agreement and:
(a) when required, shall provide evidence to DCI of those licenses and
releases; and
(b) shall indemnify and save harmless DCI and its Customer in the event a
license, release or waiver is not obtained and any claim is made
against DCI and/or its Customer.
21. INDEMNIFICATION
21.1 SIDUS warrants that its Products are free and clear of infringement of
any patent, copyright, trademark or other proprietary right of any
other person.
21.2 SIDUS shall, at its own expense, defend or settle, if required by DCI
or its Customer, any claim made or any action or suit brought against
DCI or its Customer charging such infringement.
21.3 SIDUS shall indemnify and save DCI or its Customer harmless from any
loss, damage or expense directly attributable to any suit, action or
claim which is commenced or made alleging any such infringement in
respect of the carrying out of the Agreement, or in respect of the use
of or disposed by or for DCI or its Customer of anything furnished
hereunder.
21.4 While any claim is pending against SIDUS or DCI or its Customer with
respect to infringement, DCI may withhold payment of any sum otherwise
required to be paid hereunder.
21.5 In the event that a Product in any suit is held to constitute
infringement and its use or sale is enjoined, SIDUS shall, at its own
expense, procure for DCI and/or its Customer the right to use or sell
the Product; or substitute an equivalent, but non-infringing Product
acceptable to DCI and/or its Customer and extend this patent indemnity
thereto; or, subject to the approval of DCI and/or its Customer remove
said item and refund the purchase price and any costs incurred by DCI
for transportation and installation thereof.
22. INDEMNITY AGAINST THIRD-PARTY CLAIMS
SIDUS shall indemnify and hold harmless DCI and DCI's Customer, from and
against all liabilities, suits, claims, losses, damages and expenses
(including reasonable expenses of investigation and reasonable attorney's
fees and costs finally awarded or made in
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settlement or compromise) incurred or suffered by any such indemnified
person or entity relating to or resulting from any damage to property, and
injuries, including death, to any such indemnified person or entity caused
by any gross negligent act or omission or willful misconduct of SIDUS and
SIDUS' suppliers and any of their respective directors, officers, employees
or agents in connection with the Work under this Agreement.
23. QUALITY CONTROL, INSPECTION AND ACCEPTANCE
The following sections from Exhibit C, Standard Quality Provisions,
attached hereto shall apply to and form part of this Agreement:
Q.A.2 ISO 9002 Requirements
Q.A.5 Sellers Quality Plan
Q.A.11 First Article Inspection
Q.A.14 Inspection/Test Data
Q.A.15 Electrostatic Sensitive Devices
Q.A.16 Certification of Compliance
Q.A.17 Supplier Defective Material
24. PUBLICITY
SIDUS shall not, without prior written approval of DCI, publicize this
Agreement or any of SIDUS' performance hereunder, disclose any details in
connection with said performance to third parties, or use DCI's name in
connection with SIDUS' publicity.
25. PAYMENTS AND INVOICES
25.1 DCI shall pay SIDUS, for satisfactory performance of the Work and upon
acceptance of the Deliverables, the amount set forth in accordance
with the SIDUS then-current price list in effect at the time of order
placement.
25.2 Payment by DCI shall be made following shipment by SIDUS of Terminals
from its Toronto warehouse to DCI's customer and following
presentation of invoices and such other documentation as DCI may
reasonably require, and of which prior notice has been furnished.
25.3 The invoices are due net thirty (30) days, calculated from the date
the invoice is received.
25.4 DCI shall have the right to recover from SIDUS the price of any
nonconforming Work returned to SIDUS under the terns of this
Agreement.
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25.5 Unless otherwise specified in the payment terms of this Agreement,
payments will be made in Canadian Funds.
25.6 SIDUS will submit invoices to "Digital Courier International, Inc.,
Accounts Payable", at the address set forth above, for the Work
delivered by SIDUS. Each invoice will show the following:
(a) DCI Product Release Order Number;
(b) Equipment List, specifying quantity, description, cost and serial
number;
(c) Services Summary specifying services and cost;
(d) The dates the Products were delivered;
(e) The Customer to whom the Products were delivered;
(f) The place where payment is to be remitted; and the
(g) SIDUS Invoice Number.
26. TAXES AND DUTIES
Except as may be otherwise provided in the order, the prices are exclusive
of all taxes, assessments, fees, licenses, customs charges and duties and
other mandatory governmental charges imposed on SIDUS, its suppliers and
their employees in the performance of the work. If SIDUS has included in
the price any such charges in excess of the requirements of the applicable
laws or regulations, the price of this order shall be correspondingly
reduced.
27. PACKING
27.1 The Products which SIDUS has agreed to provide under this Agreement
shall be suitably packed by SIDUS in accordance with the terms and
conditions of this Agreement and in such a manner as shall reasonably
assure the transportation of the said Products undamaged to their
destination, it being understood and agreed that there shall be no
additional charge for packing the said Products, unless otherwise
specifically provided in the Agreement.
27.2 All Terminal equipment will be marked with DCI logos and labels in
accordance with supplied artworks and placed in accordance with
supplied drawings or instructions.
27.3 All packaging containers will be marked with DCI logos in accordance
with supplied artworks and placed in accordance with supplied drawings
or instructions.
27.4 and labelling services shall be provided in accordance with Exhibit A,
Section 3.3.
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28. RISK OF LOSS AND DAMAGE
All risks whatsoever, including risk of loss of or damage to the Products
(including material supplied by DCI) or to any third parties or their
property, shall be upon SIDUS until the Product is shipped by SIDUS to
DCI's specified customer.
29. IMPORT/EXPORT DOCUMENTATION INDEMNIFICATION
To the extent items furnished hereunder are to be exported, SIDUS warrants
that all import/export documentation, including but not limited to all
copies of packing sheets, invoices (commercial and customs), and special
customs documentation, are accurate and correspond to the actual Product
shipped.
29.1 Upon notification by DCI of a violation, SIDUS shall immediately
provide DCI with assistance and documentation to rectify SIDUS's
errors and settle matters related thereto with the customs
authorities.
30. SITE VISITS
30.1 DCI shall be granted reasonable access to the SIDUS site for business,
testing and audit purposes related to this Work.
30.2 DCI shall give notice to SIDUS by telephone of intent to visit and the
reason for the visit.
30.3 DCI and SIDUS may pre-arrange for other specified regular visits in
support of the Work being conducted under this Agreement.
31. SECURITY
SIDUS shall demonstrate to DCI that the DCI product, consisting of all
SIDUS, DCI and other manufactured and procured material which is destined
for DCI shipment, is segregated and secured in SIDUS' warehouse.
31.1 Notice of any damage to or loss of any materials must be stated within
three (3) days of the detection of such loss to DCI.
32. GENERAL
32.1 FACSIMILE AND COUNTERPARTS
This Agreement may be executed in one or more counterparts, and each
such counterpart shall be considered to be a part of one and the same
document. The parties agree for the sake of expediency to the
exchange of executed copies of this
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Agreement by facsimile transmission (with original signature copies to
be exchanged as soon as practicable thereafter), and this Agreement
shall be effective and enforceable by a party when it has received a
facsimile copy executed by the other party.
32.2 WAIVER OF UNITED NATIONS CONTRACTS CONVENTION
The parties hereby expressly disclaim the application of the United
Nations Conventions on Contracts for the International Sale of Goods
for all purposes under this Agreement.
32.3 INDEPENDENT CONTRACTORS
DCI and SIDUS are independent contractors and neither party will act
as the legal agent of the other or otherwise cause the other to incur
liability in any manner whatsoever.
32.4 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the
parties and their respective heirs, executors, administrators,
successors and permitted assigns.
32.5 LAW / DISPUTES
32.5.1 Irrespective of the place of performance of any work
hereunder, DCI and SIDUS agree that this Agreement was entered
into in the Province of British Columbia (Canada) and shall be
construed and interpreted according to the laws of British
Columbia without resort to the Province's conflict of laws
rules.
32.5.2 Pending final resolution of any dispute under this Agreement,
SIDUS shall proceed diligently with the performance of this
Agreement in accordance with DCI's decision or direction
concerning the subject matter of such dispute.
32.6 ARBITRATION
Where a dispute arises out of or in connection with this Agreement the
parties agree to seek an amicable settlement of that dispute in
accordance with discussions and negotiations between the Authorized
Representatives and senior management of the parties acting
reasonably. Failing resolution thereof, all disputes arising out of
or in connection with this Agreement or in respect of any defined
legal relationship associated therewith or derived therefrom shall be
referred to and finally resolved by arbitration under the rules of the
British Columbia International Commercial Arbitration Centre, and in
connection therewith: (a) the appointing authority shall be the
British Columbia International Commercial Arbitration Centre; (b) the
arbitration will be conducted by a single arbitrator unless the
parties agree otherwise; (c) the case shall be
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administered by the British Columbia International Commercial
Arbitration Centre in accordance with its "Procedures for Cases under
the BCICAC Rules"; and (d) the place of arbitration shall be
Vancouver, British Columbia, Canada. The prevailing party in any
arbitration or legal action arising out of or related to this
Agreement shall be entitled, in addition to any other rights and
remedies it may have, to reimbursement for its expenses incurred in
such arbitration or action, including court costs and reasonable
attorney's fees.
32.7 NOTICE
All notices, demands, or requests required or permitted hereunder,
except for payments in accordance with Article 25, Payments and
Invoices, shall be deemed properly given when sent in writing to the
designated Authorized Representative of the other party by:
(a) registered letter;
(b) receipted commercial courier; or
(c) electronically :receipted facsimile transmission acknowledged in
like manner by the recipient at the following addresses or to
such other address as either party may, by written notice,
designate to the other.
To SIDUS: David Oberman
SIDUS Systems Inc.
#1 - 8765 Ash Street
Vancouver, British Columbia
Canada, V6P 6T3
Tel: (604) 322-1711 Fax: (604) 322-1722
To DCI: Bruce Maxwell, V.P., Network Operations
Digital Courier International Inc.
8618 Commerce Court
Burnaby, British Columbia
Canada, VSA 4N6
Tel: (604) 293-5142 Fax: (604) 473 5835
32.8 PRECEDENCE OF DOCUMENTS
Conflicting provisions hereof, if any, shall prevail in the following
descending order of precedence:
(a) this Agreement;
(b) DCI's Specifications attached or incorporated by reference; and
(c) SIDUS' Specifications attached or incorporated by reference.
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32.9 SEVERABILITY
If any provision of this Agreement is judged unenforceable by a court
of competent jurisdiction for any reason whatsoever, the
unenforceability shall not affect the enforceability of the remaining
provisions of this Agreement and the unenforceable or invalid
provision shall be severable from the remainder of this Agreement.
32.10 SURVIVING TERMS
The rights and obligations set out in Article 12, Protection of
Confidential Information, and in Articles 3, 13, 15, 17, 19, 20, 21,
22, 23, 29 and 32, shall last indefinitely regardless of termination
of this Agreement or any portion of this Agreement, or for such
shorter period of time as a court of competent jurisdiction deems
reasonable.
32.11 WAIVER
No provision of this Agreement be deemed to be waived unless such
waiver is in writing and issued by a duly authorized representative of
such party. Any waiver of any default by any party hereto in the
observance or of the performance of any part of this Agreement shall
not extend to or be taken in any manner to affect any other default.
32.12 RIGHTS AND REMEDIES OF DCI
The rights and remedies of DCI set forth herein shall be in addition
to any other rights and remedies provided in law or equity.
32.13 EXHIBITS
The list of Exit-bits contained in this Agreement is a.s follows:
Exhibit A: Description of Goods and Services
Exhibit B: Price Schedule
Exhibit C: Standard Quality Provisions
Exhibit D: Sales Forecast Schedule
33. ENTIRE AGREEMENT
This Agreement and the attachments and documents incorporated herein
constitute the complete and exclusive statement of the re.tins and
conditions of this Agreement between DCI and SIDUS and supersedes all prior
representations, understanding and communications relating hereto, whether
written or oral unless they are incorporated by reference in the Agreement.
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IN WITNESS HEREOF, the parties have caused their duly authorized representatives
to execute this Agreement on the day and year first above written.
DIGITAL COURIER INTERNATIONAL, INC. SIDUS SYSTEMS, INC.
By: /s/ Al Kozak By: /s/ Milan Muzar
------------------------------- --------------------------------
Signature Signature
Al Kozak Milan Muzar
- ---------------------------------- ----------------------------------
Print Name Print Name
President Executive V.P.
- ---------------------------------- ----------------------------------
Title Title
March 9, 1996 April 11, 1996
- ---------------------------------- ----------------------------------
Date Date
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EXHIBIT A
DESCRIPTION OF PRODUCTS AND SERVICES
1. OVERVIEW
DCI will manufacture and supply DCI proprietary circuit boards, custom
cables, documentation and software and will buy PC platforms and related
network terminating equipment.
DCI will contract with SIDUS Systems Inc. by issuing purchase orders, on an
"as and when requested" basis, to buy the PC platforms and to buy services
for the assembly of proprietary cards into the PC platforms, testing,
debug, repair and integration of those platforms, packaging of completed
products for shipping, stocking of the finished products, shipping to DCI
clients, and the support for DCI field repair and warranty services.
2. REQUIREMENT/DEFINITION OF PRODUCT
SIDUS shall supply the personal computer equipment in accordance with
DCI's Purchase Specification # 505-30105-01.
3. DEFINITION OF SERVICE
DCI shall require the following services to be performed by SIDUS and on
site at the SIDUS Toronto facilities.
3.1 INTEGRATION SERVICES:
a) to install DCI proprietary circuit boards, known as the MI320 and
Capella cards, into the PC;
b) to install custom software onto the PC hard drive as supplied by
DCI;
c) to provide and apply custom logos and labels specifying warranty,
service/repair telephone number and system identification (serial
number and DCI asset number);
d) connect the CPU to the keyboard and mouse;
e) to boot-up the composite system;
f) to perform integration testing of the system in accordance with
DCI test procedures;
g) to configure systems in accordance with DCI's Product Release
Order and committed turn-around times;
h) to debug and repair non-functional systems. DCI will be
responsible for the repair of non-functional proprietary cards;
i) to ensure that all systems are 100% tested, burned in for 48
hours, and QA documented;
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j) to allocate a unique system number and attach a label to the CPU;
k) to place manufactured, tested systems into SIDUS inventory; and
l) optionally, to test the printer, if ordered.
3.2 INVENTORY SERVICES:
a) to maintain stock of the custom PC product in accordance with
sales forecasts provided by DCI; and
b) to warehouse finished products and keep them ready for shipment.
3.3 SHIPPING SERVICES:
a) to configure the terminal equipment per client sales order which
is provided by DCI;
b) to unpack, configure and repack SW56 or ISDN terminal adaptor
equipment as required;
c) to provide packaging in custom DCI containers suitable for
domestic and international shipments;
d) to repack system, mouse, keyboard, cables and DCI documentation
into DCI containers;
e) to prepare shipping documents as directed or pre-arranged by DCI;
f) to arrange shipping services and to provide DCI with freight bill
numbers on individual shipments to enable DCI to manage cross
border transactions;
g) to ship directly from inventory to DCI client with a two day (48
hours) lead time as measured from receipt of DCI's Product
Release Order to the courier pickup deadline at SIDUS - it is
incumbent upon DCI providing the 48 hour lead time; and
h) SIDUS to obtain, and maintain on site, necessary equipment and
materials to expeditiously ship orders via the specified carrier.
3.4 WARRANTY SERVICES:
a) SIDUS shall provide next day delivery of all SIDUS and DCI
proprietary part(s) to the DCI customer location for all problems
reported by the DCI service centre;
b) spares will be stocked in and shipped from Vancouver and Toronto;
c) a SIDUS service representative will arrive at the DCI customer
location by the next working day for all problems reported by the
DCI Service Centre;
d) a spare monitor will be located at the SIDUS offices in the
United States to ensure delivery of the replacement monitor by
next day;
e) shipment costs for the replacement DCI proprietary product will
be charged to DCI and a SIDUS representative will replace the DCI
proprietary product at the DCI Customer location at no charge
under the SIDUS warranty service; and
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f) SIDUS will advise the DCI Service Centre within 4 working hours
from the time a problem is closed.
3.5 RECORDS SERVICES:
a) to provide DCI with the Asset Number and relevant Serial Numbers
for each machine;
b) to maintain complete shipping records;
c) to maintain complete warranty and repair records;
d) to maintain complete equipment configuration records per client;
e) to maintain complete license records; and
f) to provide a stock status spreadsheet of the Sidus inventory for
the purposes of DCI coordinating inventory requirements with
stock, sales forecasts, re-order points and production lead
times, as reasonable on demand.
4. DCI DELIVERABLES TO SIDUS:
DCI will ship all proprietary materials to SIDUS in accordance with sales
forecasts, as amended from time to time:
a) DCI software package;
b) MI320 and Capella proprietary cards;
c) Terminal Adaptor Equipment for SW 56 or ISDN interconnects.;
d) custom cable assemblies for audio I/O and ISDN or SW56
transmission ports;
e) card and System test documentation, fixtures, software and
support information;
f) test and Communication Lines - ISDN, SW56, for SIDUS test and
access to DCI;
g) DCI Manuals ready for shipping;
h) client detail for platform configuration per order;
i) equipment lists and shipping instructions per order,
j) technical resource for training of subcontractor personnel;
k) manufacturing Documentation for the interconnecting and
peripheral cables;
l) artworks for equipment logos, service labels, DCI asset numbers
and shipping containers;
m) certain custom labels;
n) incoming inspection diagnostic procedures for SIDUS execution;
o) installation instructions and/or drawings for the proprietary
cards;
p) terminal assembly drawings; and
q) integration test procedures.
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5. SIDUS' DELIVERABLES TO DCI
The deliverables ("Deliverables") shall consist of the Product defined in
Article 2 and the Services as defined in Article 3 of Exhibit A, as amended
from time to time.
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EXHIBIT A
TABLE 1
ITEM STATUS DESCRIPTION
- --------------------------------------------------------------
1 Basic Mini Wide Tower Case
2 Basic 220 Watt Power Supply
3 Basic Micronics JX30WB Motherboard
4 Basic Intel 486DX4-100 CPU
5 Basic 2 x 4 megabyte SIMMS
6 Basic 256k Cache
7 Basic Bali 32VLBP Video Assembly
8 Basic 2 Serial Port/ 1 Parallel Port
9 Basic Epson 3.5 inch Floppy Drive @ 1.44 megabyte
10 Basic Seagate ST51080A 1Gb Hard Drive
11 Basic Keytronics KT2000 Keyboard
12 Basic Microsoft OEM Serial Mouse
13 Basic MS - DOS V6.2
14 Basic MS - Windows for WorkGroups V3.11
15 Basic Users Manuals
16 Basic Magnavox 14 inch SVGA Video Monitor
- --------------------------------------------------------------
Due to rapidly changing PC system hardware and software, the supplier may
recommend configuration changes which will enhance performance, extend
useful life or defer mandated upgrades due to obsolescence. Pricing will
not be inflated due to these recommendations.
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EXHIBIT B
PRICING SCHEDULE
<TABLE>
<CAPTION>
ITEM
NO. DESCRIPTION PRICE
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
1. PERSONAL COMPUTER EQUIPMENT - BASIC Per current price list
To provide the basic product per Exhibit A, Article 2
2. PERSONAL COMPUTER EQUIPMENT - OPTIONAL Per current price list
To provide optional product per Purchase Order from
DCI
3. SYSTEM INTEGRATION SERVICES Per current price list
To provide the basic services listed in Exhibit A, Articles
3.1 and 3.2.
To provide optional services as per Exhibit A, Article
3.1 (k).
Prices are per item
4. PACKAGING AND LABELLING Included in 3 above
To provide the materials and services listed in Exhibit A,
Articles 3.1 and 3.3
5. INVENTORY SERVICES Included in 3 above
To provide the materials and services listed in Exhibit A,
Article 3.2
6. SHIPPING SERVICES Actual Cost Incurred
To provide shipping services listed in Exhibit A, Article
3.3
7. WARRANTY SERVICES Included in 3 above
To provide the materials and services listed in Exhibit A,
Article 3.4.
8. RECORDS SERVICES Included in 3 above
To provide the materials and services listed in Exhibit A,
Article 3.5.
9. RESTOCKING CHARGES As negotiated
To restock or reconfigure terminals due to change orders
or cancellations.
10. SIDUS SHOP RATE Per current price list
To provide unspecified effort, pre-authorized by DCI.
11. REGULATORY APPROVALS Per current price list
To provide regulatory testing and agency filing services.
- ----------------------------------------------------------------------------------------------
</TABLE>
All prices are FOB, SIDUS' Toronto warehouse.
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EXHIBIT C
STANDARD QUALITY PROVISIONS
OF DIGITAL COURIER INTERNATIONAL INC. (DCI)
The following provisions, with their terms and conditions, become an integral
part of the Purchase Order to the extent specified in the Purchase Order, and
become a supplement to the existing terms and conditions of the Purchase Order.
Compliance with the provisions in no way relieves the seller of furnishing
acceptable supplies or services as specified in the purchase documents.
Q.A.1 ISO 9001 REQUIREMENTS
For this item, the seller shall comply with the design/development, productions,
installation and service requirements of ISO 9001 or an equivalent standard as
approved by DCI.
The Seller's Quality Control System and manufacturing process may be subject to
audit by CDI Quality Representative during the manufacture of the item(s)
ordered. DCI will provide written notification of the intention to conduct an
audit.
Q.A.2. ISO 9002 REQUIREMENTS
For this item, the seller shall comply with the production, installation and
service requirements of ISSO 9002 or an equivalent standard as approved by DCI.
The Seller's Quality Control System and manufacturing process may be subject to
audit by DCI Quality Representative during the manufacture of the item(s)
ordered. DCI will provide written notification of the intention to conduct an
audit.
Q.A.3. ISO 9003 REQUIREMENTS
For this item, the seller shall comply with the final inspection and testing
requirements of ISO 9003 or and equivalent standard as approved by DCI. The
Seller's Inspection and Testing Program may be subject to audit by DCI Quality
Representative during the inspection/testing of the item(s) ordered. DCI will
provide written notification of the intention to conduct an audit.
Q.A.4 ISO 900-3 SOFTWARE QUALITY REQUIREMENTS
For this item, the seller shall comply with the software development, supply and
maintenance requirements of ISO 9000-3 or an equivalent standard as approved by
DCI.
The seller's Software Quality Program may be subject to audit by DCI Quality
Representative during the development of the item(s) ordered. DCI will provide
written notification of the intention to conduct an audit.
Q.A.5 SELLER'S QUALITY PLAN
The Seller shall submit to DCI two weeks prior to commencement of work, a
Quality Plan describing the design controls, production flow, special processes,
inspection and test points used in the manufacture of the items described in the
Purchase Order. DCI will provide written comments to the Seller if any changes
to the Quality Plan are required prior to commencement of work.
Q.A.6 QUALIFIED PARTS LIST (Q.P.L.) CERTIFICATION
This item shall be produced by a currently approved Q.P.L. manufacturer. Each
shipment of this item shall include a certificate indicating the name of the
manufacturer and the current Q.P.L number.
Q.A.7. RIGID PRINTED WIRING BOARD DESIGN
This item shall meet the design requirements of MIL-STD-275 or IPC-D-275.
Q.A.8. RIGID PRINTED WIRING BOARD MANUFACTURE
The items shall also meet the acceptability requirements of MIL-P-55110 or IPC-
RB-276.
The items shall also meet the acceptability requirements of CLASS 2 boards as
detailed in IPC-A-6000.
Continuity and Internal Shorts Testing shall meet the requirements of IPC-TM-650
and the test results submitted with each shipment.
Items requiring repair shall be limited to a maximum of 5% of the order and
repairs shall be carried out according to the IPC-R-700 guidelines.
Q.A.9 REQUIREMENTS FOR SOLDERED ELECTRICAL AND ELECTRONIC ASSEMBLIES
The items shall meet the requirements of MIL-STD-2000 or IPC(J-STD-001).
Q.A.10 ACCEPTABILITY OF PRINTED BOARD ASSEMBLIES
The items shall meet Martin Marietta Workmanship Standards or IPC-A-610A
workmanship requirements.
Q.A.11 FIRST ARTICLE INSPECTION
The first item produced for delivery on this order is subject to First Article
Acceptance by DCI, prior to further production. If this first piece fails to
meet the drawing/specification and Purchase Order requirements, a new first
piece is required for approval. Acceptance of this article shall not constitute
acceptance of subsequent items.
Q.A.12 DCI SOURCE INSPECTION
This item is subject to DCI inspection and test at the point of manufacture.
This may include inspection of the products and audit of the Seller's systems,
procedures and facilities. The Seller shall furnish at no extra cost, the
necessary facilities and equipment to perform tests, at the point of
manufacture, to demonstrate conformance to the purchase order and any reference
documents. The seller shall provide a minimum 10 day notification to DCI prior
to shipment.
Q.A.13 CUSTOMER SOURCE INSPECTION
Inspection by DCI's customer is required prior to shipment from the Seller's
plant. Upon receipt of this order, the seller is to notify the DCI's customer
representative who normally services the seller's plant, so that appropriate
planning for this inspection can be accomplished. Evidence of inspection by
DCI's customer will be shown on the shipping documents.
Q.A.14 INSPECTION/TEST DATA
Inspection measurements and/or electrical test results shall be included with
each shipment of this item. Evidence of inspection/test acceptance by the
seller's Quality departments shall be provided.
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Q.A.15 ELECTROSTATIC SENSITIVE DEVICES
All ESD sensitive devices shall be packaged in protective static shielding
material to preclude damage to electrostatic discharge. Packaging shall be
clearly marked to indicate that contents are subject to damage by electrostatic
discharge. Evidence of an effective ESD program for handling, packaging and
storing such devices shall be made available to DCI, on request.
Q.A.16 CERTIFICATION OF COMPLIANCE
A Certificate of Compliance is required with each shipment. The certificate
must be signed by a duty authorized officer or Quality Control representative of
the seller and shall read substantially as follows "Materials and processes used
to produce the component(s), part(s), item(s) and assemble(s) delivered or
services performed on this order, conform to all purchases order requirements,
reference documents and specifications. Data supporting this claim shall be on
file and available for review by DCI.
Q.A.17 SUPPLIER DEFECTIVE MATERIAL
Items which do not conform to applicable drawings and mechanical or electrical
specifications shall not be delivered without written approval from the DCI
Quality Department.
Q.A.18 EQUIPMENT CALIBRATION STATUS
A calibration certificate shall accompany this item indicating that is
calibration is traceable to National or International standards. The test
results of the items calibrated shall also accompany the item.
27
<PAGE>
EXHIBIT D
SALES FORECAST SCHEDULE
The calendarized figures are the proposed monthly sales/shipping objectives.
The forecast is subject to review and change
MONTH/YEAR QUANTITY
------------------------
Jan/96 100
Feb/96 300
Mar/96 300
Apr/96 240
May/96 240
Jun/96 240
Jul/96 240
Aug/96 240
Sep/96 200
Oct/96 200
Nov/96 75
Dec/96 50
Total 2,425
------------------------
<PAGE>
EXHIBIT 10.10
FINDERS' FEE AGREEMENT
THIS AGREEMENT dated April 4th, 1996.
BETWEEN:
KWIKSTAR COMMUNICATIONS LTD., a body corporate with an office in the
City of Vancouver, in the Province of British Columbia (herein called
the "Corporation")
OF THE FIRST PART
- and -
667794 ALBERTA LTD., a body corporate with an office in the City of
Edmonton, in the Province of Alberta (herein called "Altaco")
OF THE SECOND PART
WHEREAS the Corporation is a junior capital pool company for the purposes
of Alberta Securities Commission Policy 4.11 and Circular No. 7 of The Alberta
Stock Exchange Policies and Procedure Manual (collectively, the "Policy"); and
WHEREAS the Corporation must complete a Major Transaction as prescribed by
the Policy; and
WHEREAS Lynn Patterson introduced the Corporation to Digital Courier
International Inc. ("DCI"), and the Corporation intends to use the acquisition
of DCI as its Major Transaction, and the Corporation agreed to issue to Lynn
Patterson or his designated nominee common shares in the capital of the
Corporation as consideration therefor on the terms and conditions hereinafter
set forth;
WHEREAS Lynn Patterson has designated Altaco his nominee and Altaco has
agreed to accept the common shares of Kwikstar upon the terms set forth herein;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and the mutual covenants of the parties hereinafter provided, the
parties hereto agree as follows:
1. (a) In compliance with the Corporation's previous commitment and as
consideration in full for introducing the Corporation to DCI, the
Corporation shall issue to Altaco as a finder's fee and Altaco shall
accept as a finder's fee 231,669 common shares in the capital of the
Corporation (the "Shares") at an issue price of $0.22 per Share;
(b) The Shares shall be issued as fully paid and non-assessable common
shares in the capital of the Corporation.
<PAGE>
2
2. The obligation of the Corporation to issue the Shares pursuant to this
Agreement is subject to the fulfilment of each of the following conditions:
(a) the approval of this transaction, the transactions contemplated by the
Share Purchase Agreements (as defined in the Information Circular of
the Corporation dated January 30, 1996) by the Alberta Securities
Commission (the "ASC"), The Alberta Stock Exchange and any other
relevant governmental or regulatory authority or agency; and
(b) the closing of the Share Purchase Agreements (as defined in the
Information Circular of the Corporation dated January 30, 1996).
3. Altaco acknowledges that the Shares are being issued pursuant to exemptions
from registration and prospectus requirements of applicable securities
legislation, and that Altaco may not resell the Shares except in accordance with
limited exemptions under applicable securities legislation.
4. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Alberta.
5. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
6. This Agreement constitutes the entire agreement between the parties and
there are no statements, representations, warranties, undertakings or
agreements, written or oral, express or implied between the Parties hereto
except as herein set forth.
7. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement and the execution and delivery of
counterparts of this Agreement by telecopier by any party shall be binding upon
the parties hereto.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first above written.
KWIKSTAR COMMUNICATIONS LTD. 667794 ALBERTA LTD.
Per: /s/ Douglas E. Ford Per: /s/ Lynn Patterson
------------------------------ ------------------------------
Lynn Patterson, President
Per:
------------------------------
<PAGE>
EXHIBIT 10.11
AMENDED PERFORMANCE INCENTIVE PLAN
DIGITAL COURIER INTERNATIONAL INC.
ARTICLE 1
PURPOSE OF PLAN AND EFFECTIVE DATE
----------------------------------
1.1 PURPOSE. The purpose of the Plan is to assist the Corporation in
attracting, retaining and motivating the Employees and to closely align the
personal interests of such Employees with those of the shareholders of the
Corporation and of Kwikstar, by providing such Employees with the opportunity to
acquire the Participation Shares.
1.2 SHARE EXCHANGE. The Trustee entered into a share exchange agreement
dated for reference November 15, 1995 with Kwikstar pursuant to which the
Trustee agreed to exchange, in accordance with section 3.3(d) of the Plan,
600,000 common shares in the capital of the Corporation held by Employees under
the Plan for 1,800,000 common shares (prior to the consolidation of such common
shares that was approved by the shareholders of Kwikstar at a meeting held on
March 5, 1996) in the capital of Kwikstar which common shares will be held by
the Trustee pursuant to the terms of the Plan.
1.3 EFFECTIVE DATE. The Plan shall be effective upon its adoption by the
Board of Directors.
ARTICLE 2
INTERPRETATION AND DEFINITIONS
------------------------------
2.1 DEFINITIONS. In this Plan, and in Schedule A hereto, unless the
context otherwise requires, the following terms shall have the following
meanings:
(a) "ALLOCATION SCHEDULES" means the allocation schedules attached hereto;
(b) "BOARD OF DIRECTORS" means the board of directors of the Corporation;
(c) "CONDITIONS OF DISTRIBUTION" shall have the meaning ascribed thereto
in Section 3.10;
(d) "CORPORATION" means Digital Courier International Inc.;
(e) "DISTRIBUTING CORPORATION" shall have the meaning ascribed thereto in
subsection 126(1) of the Canada Business Corporations Act;
(f) "EMPLOYEE" means one of the employees of the Corporation listed on any
of the Allocation Schedules;
(g) "FAIR MARKET VALUE" means, with reference to any Vested Participation
Shares, the fair market value of such Vested Participation Shares at
the end of the
<PAGE>
-2-
Corporation's immediately preceding fiscal year, as approved by a
professional business valuator taking into account the earnings,
assets, liabilities and projected earnings of the Corporation and all
such other matters as a professional business valuator would consider
in determining the value of shares, provided that no discount shall be
made for minority interests or any other restrictions contained in the
Plan;
(h) "KWIKSTAR" means Kwikstar Communications Ltd.;
(i) "PARTICIPATION SHARE" means, from time to time, one common share
without par value in the capital stock of the Corporation or such
number of shares in the capital of Kwikstar into which such share may
be exchanged, being held upon trust pursuant to this Plan, together
with all income and accretions thereon pursuant to Section 3.4, to be
distributed to Employees from time to time as equity participation
shares;
(j) "PLAN" means the amended performance incentive plan described herein;
(k) "PLAN ADMINISTRATOR" means the person or persons designated by the
Board of Directors as the Corporation's plan administrator, being
responsible for administration of the Plan, and such successor or
successors thereto as shall be designated from time to time by the
Board of Directors;
(l) "TRUST FUND" shall have the meaning ascribed thereto in Section 3.1;
(m) "TRUSTEE" means the Plan Administrator; and
(n) "VESTED PARTICIPATION SHARES" means, from time to time, with reference
to the Participation Shares to which each Employee is beneficially
entitled hereunder, the portion of such Participation Shares from
which the repurchase rights of the Corporation have been removed,
pursuant to paragraph 3 of either Schedule A or Schedule B hereto, as
the case may be.
2.2 SCHEDULES. The following schedules are attached to and form an
integral part of the Plan:
Schedule A - February Allocation Schedule
Schedule B - October Allocation Schedule
<PAGE>
-3-
ARTICLE 3
TRUST FUND AND TRUSTEE
----------------------
3.1 TRUST FUND. The Trustee hereby accepts the trusts hereof and agrees to
hold the Participation Shares, together with any income, dividends,
distributions, monies, securities or other property, options, rights or
interests whatsoever to which a holder of the Participation Shares may become
entitled, whether through distribution, exchange, conversion or otherwise, and
any other contributions of money or other property to the trust which the
Corporation or Kwikstar may make and the Trustee may accept (all hereinafter
referred to as the "Trust Fund") upon the trusts of this Plan.
3.2 TRUSTEE AS REGISTERED SHAREHOLDER. The Trustee shall be entitled to
be registered as the shareholder of the Participation Shares, or as the legal
owner of any other property comprising part of the Trust Fund, and to call for
the physical custody of share certificates or any other instrument of ownership
evidencing title to any asset comprising the Trust Fund.
3.3 POWERS OF TRUSTEE. The Trustee may with respect to the Participation
Shares and any other property comprising the Trust Fund:
(a) vote upon or in respect of any resolution of the shareholders or
members of any corporation, association, trust or other organization
in which the Trustee shall, from time to time, hold an interest
pursuant hereto;
(b) give proxies or powers of attorney with or without power of
substitution for voting or acting on behalf of the Trustee as owner of
any such property;
(c) consent to and join in any reorganization, plan, readjustment,
amalgamation or consolidation of the capital of the Corporation, or
Kwikstar, as applicable, and authorize the sale of any undertaking or
assets of any corporation in respect of which the Trustee may hold
stock, shares or other securities;
(d) consent to and join in any exchange of the shares of the Corporation,
or Kwikstar, as applicable, including the Participation Shares, for
shares of any other corporation;
(e) generally act in respect of any shares, securities, bonds, notes or
other evidence of interest or obligation comprising any part of the
Trust Fund as if such property was not trust property, but always for
the benefit of the Trust Fund.
3.4 INCOME. The Trustee shall accumulate and add to the capital of the
Trust Fund any income or other accretion to or on the Trust Fund which may arise
from time to time. Where any such income or accretion is identifiable and
attributable to Participation Shares beneficially allocated pursuant to an
Allocation Schedule to a particular Employee, the Trustee shall allocate
<PAGE>
-4-
such income or accretion to such Participation Shares. The Trustee may in other
cases allocate such income or accretions equally to all Participation Shares.
3.5 ALLOCATION SCHEDULES. Prior to issuance of any Participation Shares
to the Trustee, the Corporation shall deliver to the Trustee an allocation
schedule in respect of such Participation Shares. The Allocation Schedules
shall describe the schedule of distribution of such Participation Shares and the
Employees who shall be beneficially entitled to distribution of the
Participation Shares.
3.6 AMENDMENT OF ALLOCATION SCHEDULES. An Allocation Schedule, once
delivered to the Trustee, shall be irrevocable by the Corporation, and shall
form part of the trusts hereof, but any Allocation Schedule may be varied or
amended by the mutual direction of the Corporation and the Employee or Employees
beneficially entitled to the Participation Shares affected by such variation or
amendment to such Allocation Schedule.
3.7 DISTRIBUTIONS. The Trustee shall distribute the capital and income of
the Trust Fund as follows:
(a) Vested Participation Shares shall from time to time be distributed to
the Employee or Employees entitled to distribution, according to any
of the Allocation Schedules, provided the Conditions of Distribution
have been fully satisfied and performed, and evidence of satisfaction
of the Conditions of Distribution shall be the certificate of the
Corporation, executed by an officer of the Corporation, duly
authorized by the Board of Directors of the Corporation;
(b) where the employment with the Corporation of any Employee beneficially
entitled to Participation Shares pursuant to the Allocation Schedules
shall terminate for any reason whatsoever prior to distribution of all
of the Participation Shares to which such Employee is beneficially
entitled:
(i) the Corporation, in its option, shall repurchase the
Participation Shares allocated to that Employee that have not yet
been distributed pursuant to the foregoing subsection (a), other
than undistributed Vested Participation Shares, upon payment by
the Corporation of the sum of $0.05 per repurchased Participation
Share to the Trustee in trust for such Employee, and the Trustee
shall promptly deliver such payment to such Employee and
distribute such repurchased Participation Shares to or to the
order of the Corporation; and
(ii) provided that the Corporation is not a Distributing Corporation,
and the Vested Participation Shares are not shares in the capital
of Kwikstar, the Corporation may, subject to the agreement of
such Employee, repurchase any Vested Participation Shares of that
Employee, upon payment by the
<PAGE>
-5-
Corporation of the sum of the Fair Market Value per repurchased
Vested Participation Share, to the Trustee in trust for such
Employee, and the Trustee shall promptly deliver such payment to
such Employee and distribute such repurchased Vested
Participation Shares to or to the order of the Corporation; and
(c) any other capital or income of the Trust Fund shall be distributed in
such manner and upon such terms as the Corporation may by written
instrument appoint, or in default of appointment, to the Corporation
on the day prior to the day of expiration of any perpetuity period
which may otherwise determine the trusts hereof.
3.8 REPURCHASE BY THE CORPORATION. At any time that the Corporation shall
be entitled to repurchase any Participation Shares hereunder, the Corporation
shall exercise such rights, as they relate to shares in the capital of Kwikstar,
for and on behalf of Kwikstar. All Participation Shares that are shares in the
capital of Kwikstar and are repurchased by the Corporation shall be surrendered
by the Corporation to Kwikstar by way of gift for cancellation.
3.9 ENTITLEMENT. No person or corporation shall become entitled to any
interest, vested or contingent, legal or beneficial, in or to any property
comprising the Trust Fund, except in strict accordance with the terms of this
Plan.
3.10 CONDITIONS OF DISTRIBUTION. The Conditions of Distribution of
Participation Shares to an Employee, in accordance with an Allocation Schedule,
shall be as follows:
(a) the Employee shall first have entered into any Shareholders' Agreement
which may at the time of distribution govern or apply to the ownership
of Participation Shares;
(b) the Employee shall have provided such release, receipt or other
assurance to the Trustee, concerning the satisfaction of the Employee
to the distribution to which the Employee may be entitled according to
an Allocation Schedule, as the Trustee may reasonably require; and
(c) where an Allocation Schedule includes performance criteria or other
conditions for distribution beyond employment at the date of
distribution, the Employee shall have fully satisfied all such
criteria or conditions.
3.11 ADDITIONAL POWERS OF TRUST. The Trustee shall have the following
powers in addition to any powers which may otherwise be conferred by statute or
operation of law:
(a) to sell or convert any part of the Trust Fund not being Participation
Shares, whether for cash or credit, or part cash and part credit, as
the Trustee may in its discretion consider advisable;
<PAGE>
-6-
(b) to invest ready monies and other property of the Trust Fund not being
Participation Shares in such investments as the Trustee may in its
discretion consider advisable, without being limited to such
investments as may otherwise be authorized by law for investment by
trustees;
(c) in furtherance of the trusts hereof to retain and employ accountants,
solicitors, brokers, bankers, or agents, whose reasonable and proper
fees and charges shall be a proper expense of the Trustee;
(d) to determine the payment or prepayment of any income or other tax
liability or levy, and to make any allocation, designation,
determination, or election in connection therewith, or to undertake
any other action in the Trustee's discretion required in connection
with the Trust Fund and such matters; and
(e) to appropriate any part of the Trust Fund in specie or in money in
satisfaction of any interest in distribution of the Trust Fund, as the
Trustee may consider advisable.
3.12 COSTS OF TRUST. Any costs or expenses reasonably and properly
incurred by the Trustee in connection with the Trust Fund shall be for the
account of the Corporation, on such terms as the Trustee and the Corporation may
from time to time agree. The Trustee shall not be entitled to any fees or
expenses or other indemnity from the Trust Fund, whether otherwise provided by
statute or by operation of law.
3.13 TRUSTEE NOT LIABLE. The Trustee shall not be liable for any act or
omission or loss occasioned to the Trust Fund, provided the Trustee shall have
acted in good faith, and excepting any loss caused through the Trustee's own
dishonesty, gross negligence or breach of trust.
3.14 CORPORATION TO APPROVE ACCOUNTS. The Corporation shall be empowered
to approve the accounts of the Trustee from time to time on behalf of all
persons interested in the trusts hereof.
3.15 SUBSTITUTION OF TRUSTEE. The Corporation shall be empowered, by
delivery of thirty days notice in writing to the Trustee for the time being, to
call for the retirement of the Trustee and the substitution of a successor
Trustee, who shall be the Plan Administrator at the time of such retirement.
Upon such successor Trustee accepting the trusts hereof the retiring Trustee
shall forthwith seek any required approval of or passing of its accounts,
execute all required transfers, deeds or other instruments, make all required
deliveries of the Trust Fund and any documents or records pertaining to the
Trust Fund, and undertake all such acts as may be required to vest the Trust
Fund in the successor Trustee, following which the retiring Trustee shall be
fully discharged from the trusts hereof.
<PAGE>
-7-
ARTICLE 4
GENERAL
-------
4.1 AMENDMENT. The Corporation shall have the power to modify, vary or
amend the terms of this Plan, provided any amendment affecting the rights,
obligations or duties of the Trustee shall be subject to the prior consent in
writing by the Trustee, and provided further that any amendment shall not in any
manner diminish, reduce, vary or extinguish the beneficial interest, whether
vested or contingent, of any Employee named on an Allocation Schedule and
entitled or prospectively entitled to an interest in the Trust Fund, without the
prior consent in writing by any such Employee or person so affected.
4.2 INTERPRETATION. In the event of a dispute or any ambiguity as to the
interpretation of this Plan or an Allocation Schedule, the decision of the
Corporation shall be binding on the Trustee, the Employees and the Corporation.
4.3 GOVERNING LAW. This Plan shall be governed by the laws of the
Province of British Columbia.
4.4 SECTIONS AND HEADINGS. The division of the Plan into sections and the
insertion of headings is for convenience of reference only and shall not affect
the construction or interpretation of the Plan.
4.5 EXTENDED MEANINGS. Where the context so requires, words importing the
singular number include the plural and vice-versa, and words importing the
masculine gender include the feminine and neuter genders.
Dated the 15th day of November, 1995.
DIGITAL COURIER INTERNATIONAL INC.
Per: /s/ L.C. Fowler
----------------------
<PAGE>
SCHEDULE "A"
FEBRUARY ALLOCATION SCHEDULE
----------------------------
To: The Trustee, Performance Incentive Plan
From: Digital Courier International Inc.
1. DELIVERY TO TRUSTEE. As of the date shown below, the following
Participation Shares are hereby delivered to you to hold the same according to
and upon the trusts set out in the Plan:
531,800 Common Shares of the Corporation
2. ALLOCATION OF BENEFICIAL INTEREST. The beneficial interest in the
number of Participation Shares set forth opposite the name of each Employee set
forth below shall be allocated to such Employee, in consideration of the payment
by such Employee to the Corporation of the sum of $0.05 per Participation Share.
Unless the Corporation shall become a Distributing Corporation, or such
Participation Shares are shares in the capital of Kwikstar, no Participation
Shares whatsoever shall be distributed hereunder to any of the Employees set out
below.
3. REMOVAL OF REPURCHASE RIGHTS. The right of the Corporation to
repurchase Participation Shares pursuant to paragraph 3.7(b)(i) of the Plan, in
respect of each Employee, shall be removed at the rate of 1/48 of the original
number of Participation Shares to which such Employee is beneficially entitled
per calendar month, such removal to commence as of February 1, 1995. The
effective date of each monthly removal of repurchase rights shall be the first
day of the month following the end of each such month. The repurchase rights of
the Corporation pursuant to paragraph 3.7(b)(i) shall be fully removed from all
Participation Shares of each Employee beneficially entitled to such
Participation Shares hereunder on March 1, 1999.
4. DISTRIBUTION. If the Corporation shall become a Distributing
Corporation, or if the Vested Participation Shares are shares in the capital of
Kwikstar, all Vested Participation Shares to which each Employee is beneficially
entitled shall be distributed to such Employees at the end of each financial
quarter of the Corporation's fiscal year, subject to and upon the terms and
conditions set out in the Plan, as follows:
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEE NAME SHARES DISTRIBUTION DATE
<S> <C> <C>
Al Kozak 200,000 Quarterly
Bruce Maxwell 75,000 Quarterly
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEE NAME SHARES DISTRIBUTION DATE
<S> <C> <C>
Mark Burns 75,000 Quarterly
Remy Kozak 75,000 Quarterly
Eric Chong 26,000 Quarterly
Russ Williams 10,000 Quarterly
Kai Laurinol 5,000 Quarterly
Richard Wong 9,000 Quarterly
Curtis Siemans 5,000 Quarterly
Paul Seto 7,000 Quarterly
Sandra Acham 2,800 Quarterly
Tracey Beschell 7,000 Quarterly
Abe Hefter 9,000 Quarterly
Linda Kouchnir 2,500 Quarterly
Paula Foulkard 4,000 Quarterly
Robert Price 7,000 Quarterly
Jackson Lee 5,500 Quarterly
Nick Jalsevac 7,000 Quarterly
</TABLE>
Upon delivery to the Trustee this Allocation Schedule shall comprise
part of and be incorporated with the terms of the Plan.
DATED the 15th day of November, 1995.
DIGITAL COURIER
INTERNATIONAL
INC.
Per: /s/ L.C. Fowler
-----------------------
<PAGE>
SCHEDULE "B"
OCTOBER ALLOCATION SCHEDULE
---------------------------
To: The Trustee, Performance Incentive Plan
From: Digital Courier International Inc.
1. DELIVERY TO TRUSTEE. As of the date shown below, the following
Participation Shares are hereby delivered to you to hold the same according to
and upon the trusts set out in the Plan:
68,200 Common Shares of the Corporation
2. ALLOCATION OF BENEFICIAL INTEREST. The beneficial interest in the
number of Participation Shares set forth opposite the name of each Employee set
forth below shall be allocated to such Employee, in consideration of the payment
by such Employee to the Corporation of the sum of $0.05 per Participation Share.
Unless the Corporation shall become a Distributing Corporation, or the
Participation Shares are shares in the capital of Kwikstar, no Participation
Shares whatsoever shall be distributed hereunder to any of the Employees set out
below.
3. REMOVAL OF REPURCHASE RIGHTS. The right of the Corporation to
repurchase Participation Shares pursuant to paragraph 3.7(b)(i) of the Plan, in
respect of each Employee, shall be removed at the rate of 1/48 of the original
number of Participation Shares to which such Employee is beneficially entitled
per calendar month, such removal to commence as of October 1, 1995. No such
repurchase rights shall be removed until April 1, 1996, on which date the
Corporation's repurchase rights shall be removed from 6/48 of such original
number of Participation Shares. The effective date of each subsequent monthly
removal of repurchase rights shall be the first day of the month following the
end of each such month. The repurchase rights of the Corporation pursuant to
paragraph 3.7(b)(i) shall be fully removed from all Participation Shares of each
Employee beneficially entitled to such Participation Shares hereunder on
November 1, 1999.
4. DISTRIBUTION. If the Corporation shall become a Distributing
Corporation, or if the Vested Participation Shares are shares in the capital of
Kwikstar, all Vested Participation Shares to which each Employee is beneficially
entitled shall be distributed to such Employees at the end of each financial
quarter of the Corporation's fiscal year, subject to and upon the terms and
conditions set out in the Plan, as follows:
<PAGE>
-2-
<TABLE>
<CAPTION>
Number
Employee Name of Distribution Date
Shares
<S> <C> <C>
Neil Gunn 25,000 Quarterly
Tim Woinoski 10,000 Quarterly
Jag Gill 7,000 Quarterly
Willington Wong 4,600 Quarterly
Jason Lesparance 5,500 Quarterly
Richard Fortier 4,300 Quarterly
Lori Davies 2,500 Quarterly
Curtis Albrecht 4,300 Quarterly
Doug MacDonald 5,000 Quarterly
</TABLE>
Upon delivery to the Trustee this Allocation Schedule shall comprise
part of and be incorporated with the terms of the Plan.
DATED the 15th day of November, 1995.
DIGITAL COURIER INTERNATIONAL INC.
Per: /s/ L.C. Fowler
----------------------------
<PAGE>
EXHIBIT 10.12
KWIKSTAR COMMUNICATIONS LTD.
1994 INCENTIVE STOCK OPTION PLAN
1. The directors may from time to time, in their discretion, grant to
directors, officers, employees and other key personnel of the Corporation or any
of its subsidiaries, in connection with their employment or position, an option
to purchase common shares in the capital of the Corporation. Subject to the
limitations contained herein, the directors are authorized to provide for the
grant and exercise of options on such terms (which may vary as between options)
as they shall determine. All decisions and interpretations made by the
directors shall be binding and conclusive on the Corporation and on all persons
eligible to participate in this Plan. No option shall be granted to any person
except upon recommendation of the directors. A person to whom an option is
granted hereunder is hereinafter referred to as an "option holder".
2. The purchase price of any common shares in respect of which an option
may be granted under this Plan shall be such price as shall be fixed by the
directors, subject to the limitations imposed by a stock exchange on which the
Corporation may list its common shares for trading and any other regulatory
authority having jurisdiction in such matters (the "Relevant Regulatory
Authority").
3. The common shares subject to each option shall become purchasable at
such time or times as may be determined by the directors. Each option shall by
its terms not be exercisable after the expiration of five (5) years from the
date it is granted and may expire on such earlier date or dates as may be fixed
by the directors. Any common shares not purchased prior to the expiration of an
option granted hereunder may thereafter be reallocated in accordance with the
provisions of this Plan.
4. In the event an option holder shall go on an approved leave of
absence, the directors may make such provision respecting continuance of the
option as they may deem equitable, except that in no event shall any option be
exercisable after the date specified in it for expiration. In making such
equitable provisions for an option holder on leave of absence, the relationship
between such person and the Corporation shall be treated as continuing for the
purposes of this Plan.
5. Any option granted under this Plan shall be non-assignable and non-
transferable by the option holder and shall be exercisable during the option
holder's lifetime only by the option holder. The directors may make such
arrangements as they deem advisable for the exercise of an option by an option
holder who has ceased to be a director, officer or employee of the Corporation,
or by the estate or heirs of the option holder, subject to the limitations
imposed by the Relevant Regulatory Authority.
6. No option holder shall have any of the rights of a shareholder in
respect to common shares under an option until such common shares shall have
been paid for in full and issued by the Corporation.
<PAGE>
-2-
7. The number of common shares reserved for options under this Plan shall
equal ten percent (10%) of the issued and outstanding common shares of the
Corporation on a non-diluted basis, and such reservation shall increase or
decrease as the number of issued and outstanding common shares of the
Corporation changes. The aggregate number of common shares reserved for
issuance to any one (1) individual shall not exceed five percent (5%) of the
issued and outstanding common shares of the Corporation.
8. In the event the Corporation is reorganized, amalgamated, merged with
or consolidated into another corporation, or in the event there is a change in
control of the Corporation, the directors may make such arrangements as they
shall deem appropriate for the exercise of outstanding options or continuance of
outstanding options.
9. A written agreement shall be entered into between the Corporation and
each option holder hereunder, which agreement shall set out the option price and
the terms and conditions on which the option may be exercised, all in accordance
with the provisions of this Plan. The agreement shall be in such form as the
directors may from time to time approve.
10. The directors may at any time, without further action by the
shareholders, subject to the requirements of the Relevant Regulatory Authority,
amend this Plan or any option granted hereunder in such respects as it may
consider advisable or terminate this Plan. The directors may not, however,
without the consent of an option holder, alter or impair any of the rights or
obligations under an option theretofore granted.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Digital Courier International Inc., a Canadian corporation.
<PAGE>
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
We consent to the use of our audit report dated June 14, 1996 on the
consolidated balance sheets of Digital Courier International Corporation as at
March 31, 1996 and September 30, 1995, and the consolidated statements of
operations and deficit and changes in financial position for the six month
period ended March 31, 1996 and for the period from the date of incorporation on
November 24, 1994 to September 30, 1995 and the related supplemental note
entitled "Reconciliation with United States Generally Accepted Accounting
Principles", which is included herein and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG Peat Marwick Thorne
Chartered Accountants
Vancouver, Canada
June 27, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form F-1 (File
No. - ) of our report dated November 15, 1995, on our audit of the
financial statements of Digital Courier International Corporation. We also
consent to the reference to our firm under the caption "Experts."
Nemeth Thody Anderson
Chartered Accountants
Vancouver, British Columbia
June 28, 1996
