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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998
REGISTRATION NO. 000-23785
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
REGISTRATION STATEMENT
-----------------
Registration statement pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934
Commission File Number 000-23785
LASERMEDIA COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in Its Charter)
ONTARIO, CANADA
(Jurisdiction of Incorporation or Organization)
11 CHARLOTTE STREET, TORONTO, ONTARIO, M5V 2H5 (Address of
Principal Executive Office)
COPY TO:
JOHN H. HEUBERGER, ESQ.
RUDNICK & WOLFE
203 NORTH LASALLE STREET, SUITE 1800
CHICAGO, ILLINOIS 60601
(312) 368-4000
(312) 236-7516 (TELECOPIER)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None None
Securities registered or to be registered pursuant to Section12(g) of the Act:
COMMON STOCK
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section15(d)
of the Act:
NONE
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report.
NOT APPLICABLE
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
NOT APPLICABLE
Indicated by check mark which financial statement item the registrant
has elected to follow:
Item 17 Item 18
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TABLE OF CONTENTS
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EXCHANGE RATES OF THE CANADIAN DOLLAR........................................................................... 1
Item 1. BUSINESS............................................................................................... 2
Item 2. DESCRIPTION OF PROPERTY................................................................................ 22
Item 3. LEGAL PROCEEDINGS...................................................................................... 23
Item 4. CONTROL OF REGISTRANT.................................................................................. 24
Item 5. NATURE OF TRADING MARKET............................................................................... 25
Item 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS............................................................................. 26
Item 7. TAXATION............................................................................................... 27
Item 8. SELECTED FINANCIAL DATA................................................................................ 30
Item 9. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND OPERATING RESULTS FOR LASERMEDIA................................................................... 33
Item 10. DIRECTORS AND EXECUTIVE OFFICERS....................................................................... 37
Item 11. EXECUTIVE COMPENSATION................................................................................. 39
Item 12. OPTIONS TO PURCHASE SECURITIES......................................................................... 40
Item 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS......................................................... 43
Item 14. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED............................................................................................. 45
Items 15-17. NOT REQUIRED.................................................................................. 47
Item 18. FINANCIAL STATEMENTS...................................................................................F-1
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TABLE OF CONTENTS (CONT'D)
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Item 19(a). FINANCIAL STATEMENTS.......................................................................... 47
Item 19(b). EXHIBITS...................................................................................... 47
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This report on Form 20-F, including Item 1 ("Business") and Item 18
("Financial Statements"), contains forward looking statements regarding future
events or the future financial condition of Lasermedia Communications Corp. and
its subsidiaries (the "Company") that involve certain risks and uncertainties
discussed under "Risk Factors" below at pages 29-35. Actual events or the actual
future results of the Company may differ materially from any forward looking
statement due to such risks and uncertainties.
EXCHANGE RATES OF THE CANADIAN DOLLAR
Financial information in this registration statement is expressed in
Canadian dollars, unless otherwise noted. References to "CDN$" or "$" are to
Canadian dollars. The following table sets forth, for the periods indicated, the
high and low exchange rates, the average of the month-end exchange rates and the
period-end exchange rate of the Canadian dollar in exchange for the United
States dollars, based upon the inverse of exchange rates reported by the Federal
Reserve Bank of New York at the noon buying rates in New York City for cable
transfers payable in the Canadian dollars as certified for customs purposes. On
January 30, 1998 the noon buying rate was CDN$1.00 = U.S.$0.6870
Fiscal Year Ended Average High Low Close
12/31/97 $0.7223 0.7424 0.6991 0.6991
12/31/96 $0.7334 0.7557 0.7209 0.7297
12/31/95 $0.7285 0.7533 0.7009 0.7331
12/31/94 $0.7321 0.7591 0.7198 0.7198
12/31/93 $0.7751 0.8046 0.7439 0.7544
12/31/92 $0.8272 0.8757 0.7661 0.7865
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ITEM 1. BUSINESS
THE COMPANY
The Company, through its wholly owned subsidiaries, produces and
distributes multimedia interactive consumer software products in the
entertainment, home education and personal fitness categories. Its initial
products are CD-ROM computer programs for fitness training with a companion
Internet web site for instruction, program tracking and fitness trainer
feedback.
The Company was incorporated under the Corporations Act (Ontario,
Canada) on April 20, 1964 under the name Benvan Mines Limited. Its original
business was mineral exploration. On July 10, 1975 its name was changed to Howie
Controls (Canada) Limited. Under this name, the Company became involved in the
photographic film processing business. The name of the Company was changed on
December 9, 1982 to Benvan Holdings, Inc., and on December 27, 1991 to Osgoode
Holdings Inc. As both Benvan Holdings, Inc. and Osgoode Holdings Inc., the
Company operated as a holding company, although it did not carry on any active
business.
Also on June 27, 1997, the name of the Company was changed to
Lasermedia Communications Corp.; its stated capital was reduced; 818,981 common
shares were issued in settlement of outstanding debts in the amount of
CDN$204,745.29; a previously existing stock option plan was repealed and a new
incentive stock option plan for directors, officers, employees, advisors, and
consultants of the Company was adopted; and the Company was authorized to exceed
certain thresholds of the Rules of The Toronto Stock Exchange relating to share
compensation arrangements.
On June 27, 1997, the Company acquired all the issued and outstanding
securities of Lasermedia Inc. ("Lasermedia"). Lasermedia's principal business is
the production and distribution of multimedia interactive consumer software
products in the entertainment, home education and personal fitness categories.
In acquiring Lasermedia, the Company issued the following securities: 11,033,487
common shares, 600,000 Series A common share purchase warrants, 200,000 Series B
common share purchase warrants, 200,000 Series C common share purchase warrants,
100,000 Series D common share purchase warrants, 2,866,666 Series E common share
purchase warrants and 258,000 Series F common share purchase warrants. The
securities issued by the Company in exchange for the issued and outstanding
securities of Lasermedia were valued at CDN $8,300,000. The value of Lasermedia
was determined by an unaffiliated business valuation and litigation support
company. At the time of the acquisition, the President of Lasermedia, Erik
Schannen, owned 32.7% of Lasermedia's common shares. Mr. Schannen is currently
the President and a Director of the Company. Mr. Schannen had no
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business affiliation with the Company prior to the acquisition of Lasermedia.
Mr. Schannen co-founded Lasermedia in August 1994.
The Company has one other wholly owned subsidiary, Verisim, Inc.
("Verisim"), a software company which develops Internet software.
The headquarters and registered office of the Company is located at 11
Charlotte Street, Toronto, Ontario M5V 2H5. Its telephone number is (416)
977-2001. Inquiries should be directed to Brian Gibson, the Company's Chief
Operating Officer.
The registrar and co-transfer agent for the Company is Equity Transfer
Services Inc., 120 Adelaide Street West, Suite 420, Toronto, Ontario M5H 4C3,
Tel: (416) 361-0152. The other co-transfer agent is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, NY 10004; Tel: (212) 509-4000.
THE MARKET
The multimedia market originated in the early 1990's as products were
developed which combined graphics, sound and motion video for personal
computers. Computer manufacturers recognized the impact multimedia would have on
their business and developed hardware (faster CPU's, sound cards, speakers,
etc.) to accommodate this new communications medium. Currently, almost all
personal computers shipped have multimedia capabilities.
Management believes that CD-ROM technology is becoming the standard
media for presentation and delivery of information on computer programs, and is
generating significant market opportunities in both existing and new
applications. Management also believes that the Company is well placed to
exploit the current technology and new developments like DVD (Digital Versatile
Disc). DVDs have seven times the storage capacity of the current generation of
CD-ROMs, but no higher cost.
Lasermedia's "Active" line of products are targeted to adults between
the ages of 30 and 55. Management believes that middle-aged adults seek products
and services which will help them to remain youthful and improve quality of life
at work and at home. Management also believes that middle-aged adults will be
attracted to entertainment software programs that are challenging, stimulating
and that appear to be a 'good inves(TM)ent,' as an alternative to action packed,
reflex oriented games designed for 13-20 year olds.
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PRODUCTS
Current Products
The Active Library of Products
Lasermedia's library currently consists of three titles, Active
Trainer(TM), Active Abs(TM), and Active Body BLAST(TM) which are in the
personal fitness category. Active
Trainer(TM) entered the market in July 1995, and Active Abs(TM)
followed in May 1997. Active Blast(TM) was released to the market in December
1997.
Active Trainer(TM). Active Trainer(TM) is promoted as a personal
trainer in a box. The user works one-on-one with Mr. USA, Shane Minor, and
fitness expert, Liz West, to design a fitness program suited to the user by
selecting and programming from among the exercises offered on the CD-ROM. A
balance of aerobic, weight training, stretching, and nutritional guidelines are
accessible as part of the program. The user applies the program to set goals,
record progress, and observe the exercises. It is not necessary for the user to
run the program while he or she exercises. Active Trainer(TM) also provides
user oriented pep talks and directions. The suggested retail price of Active
Trainer(TM) is US$49.95.
The Active Trainer(TM) software is built using MacroMedia Director, a
multimedia application development framework. All Active Trainer(TM) data
structures, objects and methods are written in Lingo. The system is compatible
with Macintosh, Windows 3.1, and Windows 95. Active Trainer(TM) features the
following ten (10) modules:
- Shared: This module contains basic computer code and data
structures.
- Introduction: Active Trainer(TM) introduces the user to the
people and philosophy behind the fitness program using video
clips and animation.
- Gym: The gym is comprised of two screens: the Check-In and the
Gym. At the Check-In, the user signs in. The Gym is the main
menu, where the user chooses which areas to visit.
- Fitness Test: The test is comprised of a series of screens
designed to evaluate the user's health history, current
physical fitness and fitness goals. A fitness program and
weekly schedule is prepared based on this information.
- Stretching Area: The Stretching Area introduces the user to
the concepts of warming up and cooling down, and exhibits
stretching exercises.
- Weight Room: This area presents the user with a strength
training routine. This routine can be modified by the user. A
video based explanation of each exercise is complemented by
muscle anatomy and motivational information.
- Aerobics Studio: This area presents a comparative list of
cardiovascular exercises, and a guide to target heart rate,
and allows the user to design an aerobic exercise program.
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- Cafeteria: The cafeteria presents the user with a sample meal
plan. General nutrition information includes an overview of
food groups, the food pyramid, and vitamins. This section
offers recipes for healthy desserts.
- Glossary: The glossary contains a list of concepts used in
Active Trainer(TM), with a brief definition, and cross
references from throughout the program.
- Map: The map gives the user an overview of the structure of
the Active Trainer(TM) screens.
Active Abs(TM). Active Abs(TM) is similar to Active
Trainer(TM) in objectives, but with an added emphasis on abdominal
training. The suggested retail price of Active Abs(TM) is US$19.95.
The Active Abs(TM) software is built using MacroMedia
Director, a multimedia application development framework. All Active
Abs(TM) data structures, objects and methods are written in Lingo. The
system is compatible with Macintosh, Windows 3.1, and Windows 95.
Active Abs(TM) features the following five (5) modules:
- Shared: This module is very similar to Active Trainer(TM), as
the two programs share most of their object structures.
- Main: This is the main menu, similar to Active Trainer(TM)'s
Gym.
- Test: This is a shortened version of Active Trainer(TM)'s
Fitness Test.
- Learn: Learn is an informative quiz debunking the myths of
abdominal training.
- Build: Build is the heart of Active Abs(TM). A different
abdominal workout is designated for the user each day.
Alternatively, the user can design a custom workout by
assembling a sequence of clips from a list of about 35
exercises.
Active Body BLAST(TM). Active Body BLAST(TM) combines Active
Abs(TM) with a new program titled Active Legs & Buns(TM). Active
Legs & Buns(TM) is targeted towards a
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predominantly female audience, emphasizing equipment-free lower body
exercises. The suggested retail price of Active Body BLAST(TM) is
US$49.95.
The Active Legs & Buns(TM) software is built using MacroMedia
Director, a multimedia application development framework. All Active
Legs & Buns(TM) data structures, objects and methods are written in
Lingo. The system is compatible with Macintosh, Windows 3.1, and
Windows 95. Active Legs & Buns(TM) features the following modules:
- Shared: This module is very similar to Active Trainer(TM), as
the two programs share most of their object structures.
- Main: This is the main menu, similar to Active Trainer's(TM)
Gym.
- Test: This is a shortened version of Active Trainer's(TM)
Fitness Test.
- Learn: Learn is an informative quiz debunking the myths of
lower body training.
- Build: Build is the heart of Active Legs & Buns(TM). A
different lower body workout is designated for the user each
day. Alternatively, the user can design a custom workout by
assembling a sequence of clips from a list of about 35
exercises.
Hardware Requirements. A 486/66 or Pentium processor computer
is required to operate the Company's programs in Windows along with a
double speed CD-ROM, 4 megabytes of free RAM, 3 to 18 megabytes disk
space, a sound card and local bus/PCI video, 68040 or PowerPC Macintosh
with double speed CD-ROM, 4.5 megabytes of free RAM and 3 to 18
megabytes disk space. Stereo speakers and a printer are recommended.
Active Trainer(TM), Active Abs(TM), and Active Body BLAST(TM)
Development and Licensing. The fitness content of the Active
Trainer(TM) software program was written by Kevin Chaisson, an
independent consultant of the Company. Mr. Chaisson also assisted in
the final development and assists in developing upgrades for Active
Body BLAST(TM). Mr. Chaisson continues to be engaged by the Company as
a consultant pursuant to a Consulting Services Agreement dated
February 2, 1997. Under the Consulting Services Agreement, Mr.
Chaisson has assisted in the final development of Active Abs(TM) and
has agreed to assist in developing upgrades of Active Trainer(TM) and
Active Abs(TM). The Company pays Mr. Chaisson a royalty ranging from
1.5% to 2.5% of gross revenue from the sale of Active Trainer(TM) and
ranging from 1% to 3% of gross revenue from the sale of Active
Abs(TM). The Company issued 7,000 shares of common stock to Mr.
Chaisson and granted Mr. Chaisson an option to purchase an additional
5,000 shares of common stock upon the combination of the Company and
Lasermedia Either the Company or Mr.
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Chaisson can terminate the service obligations under the Consulting
Services Agreement (but not the royalties) on 30 days notice.
On June 27, 1997, Softech, an unaffiliated limited partnership
("Softech L.P."), purchased from Lasermedia, all of Lasermedia's
ownership rights to the Active Trainer(TM) family of software including
the interactive technologies developed by Lasermedia embodied therein
and subsequent modifications and improvements. The purchase price was
CDN$1,950,000. Concurrently, Softech L.P. engaged Lasermedia to
manufacture on behalf of, and purchase from, Softech L.P. products
derived from that software for resale, and Softech L.P. appointed
Lasermedia as the exclusive reseller of the Active Trainer(TM) line of
software and all related products and services for a period of ten
years. Lasermedia has the option to renew for one further consecutive
period of five years. Lasermedia has the right to use the Active
Trainer(TM) line of software for its own internal research and
development and to prepare derivative works and products. In exchange
for these rights, Lasermedia pays to Softech L.P. a royalty equal to
70% of the gross receipts from the sale of Active products minus
certain costs such as the cost of purchasing Active products from
Softech L.P., costs of goods sold (e.g. shipping, duties and taxes,
packaging, manufacturing), general administrative costs (e.g.
insurance, copyrights and patents, defense of copyrights and patents,
translations), advertising and marketing costs, and up to CDN$50,000
in employment costs. After Softech L.P. has been paid CDN$1,950,000,
Softech L.P.'s royalty rate declines to 30%. As of March 23, 1998,
Lasermedia has paid CDN$250,000 to Softech L.P. Lasermedia is
obligated to purchase a minimum of CDN$62,500 worth of Active product
units for each fiscal quarter in 1998. Lasermedia has not yet achieved
sales in excess of the minimum guarantee. The units are subject to
declining prices ranging from CDN$8.00 per unit for the first 100,000
units to CDN$3.25 per unit after 750,000 units have been purchased.
Softech L.P. is free to license to third parties the technology, which
Lasermedia believes can be useful in developing other interactive
computer products. Lasermedia entered into the sale and license-back
transaction with Softech L.P. to accelerate realization of value of
technology developed by the Lasermedia, which, because of
technological advances, could have limited long-term proprietary
value. The Company plans to engage in sale and license-back
transactions with other new software technology it develops. Proceeds
from the sale of software technology will be used to defray operating
expenses and to support research and development. Approximately $1
million of the CDN$1,950,000 received by Lasermedia from the sale of
the Active Trainer(TM) family of software was allocated to research
and development.
In connection with the sale and leaseback transaction,
Lasermedia issued to Softech L.P. a Series E Warrant to purchase
2,751,666 shares of Lasermedia's common stock at an exercise price of
CDN$0.75 per share. The Series E Warrant is scheduled to expire, unless
sooner exercised, in March 2002. Softech L.P. distributed the Series E
Warrant to its partners.
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ActiveTrainer.com
The Company has an Internet web site, ActiveTrainer.com, at
http://www.activetrainer.com. The web site provides bulletin board
service (BBS) for interacting with the Company's personal trainers. On
its web site, the Company publishes weekly articles on fitness and
nutrition. ActiveTrainer.com provides a shopping site for fitness
software, equipment and vitamin supplements. The Company's web site
also presents information about the Company and its future products.
Ancillary Multimedia Services
Lasermedia offers multimedia services to corporate clients.
These services include the development of customized multimedia
software, animation, and design and Internet web site development.
These services are complementary to Lasermedia's core software and
production activities. Lasermedia's ancillary multimedia services have
included the following specially manufactured titles:
Architectura, a CD-ROM magazine for AutoDesk Press, entailed
development of a quarterly magazine which provided the users
of AUTOCAD (engineering and architectural software) with news,
tips on using CAD software, and video interviews with industry
leaders. The first issue was included in all AutoDesk products
and Trade Shows, with an estimated first run of 50,000 units.
RxPlus, a floppy disk multimedia presentation that was
distributed in the June 1996 issue of Human Resources
Professional magazine to explain the impact of Ontario's Bill
C26 (the Omnibus Bill) on the future cost of prescription
drugs.
Product Development
Financing of Product Development
Active Trainer(TM) was financed through shareholder loans and
operating cash flow. Both Active Abs(TM) and Active Legs & Buns(TM)
were financed through the Company's cash flow from operations and
proceeds from the sale of the Active Trainer(TM) family of software to
Softech L.P.
Product Acquisition
The Company routinely evaluates companies and products for
acquisition. Of primary concern are those companies and software rights
which can advance existing
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Company projects. Recently, the Company purchased rights to certain
application computer software known as "Beat 2000 CD-ROM Software
Product", which Lasermedia currently markets as "Maestro TM "Maestro
TM is fully optimized for MMX TM technology, and can import and
create tracks for playback on PC, Mac, Unix and the Web. Sound
effects, a programmable virtual drum machine, volume and stereo
panning can all be laid down on 20 tracks with no time limits. Users
can create sounds for jazz, classical and rock music. This CD-ROM
product comes with a library of sound and premixed song files and
also features effects such as normalizing, panning, echo, timing and
pitch control. Individual tracks and songs can be displayed in seconds
or by frames.
By a consulting agreement dated September 24, 1997, the
Company retains the consulting services of Aludra Software Inc. in
connection with the development of computer software products. Aludra
Software Inc. holds options to purchase 20,000 shares.
Research and Development
The following products are being developed by Verisim, a
wholly owned subsidiary of the Company. As of March 31, 1998, revenue
had not yet been generated by Verisim with respect to the products it
is developing.
Project VR Management believes that this virtual realty
product will create its own market niche among home exercise equipment
owners. Active VR will enable the user to train and compete on exercise
bikes and treadmills through virtual reality courses and follow a
comprehensive training plan in the process. Users will select a course
for themselves or go online to compete head to head with others via the
Internet.
A professional version of VR will be bundled with exercise
equipment and a computer for gyms. Other products based on the VR
engine include a motorcycle racing game.
Currently VR is in the development phase. The first product
based on the technology is currently scheduled to be released during
the second fiscal quarter of 1998.
Epic Management believes that the most popular games are those
that involve real life opponents and allies, plots and strategies.
Verisim is developing a game engine to serve as the foundation for a
series of Internet based games. These games will be based on organic
territories that shift and grow with the players. Users will be able to
play with or against hundreds of other participants over the Internet.
Revenue is expected to be generated from subscriptions, advertising
placements, sponsorships, and licensing of the technology.
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Verisim's Epic technology has reached the stage of development
where independent sections are now working together. It is anticipated
that Verisim's Epic game will be introduced before the end of 1998.
Project Tracker This tracking and calendar software micro
manages the user's fitness and nutrition goals. It includes scheduling
of fitness activities, recording of results, tracking food intake with
a complete nutrition database, and charting progress. Tracker will work
as a stand alone product, in conjunction with the Active Trainer TM
products, or on the Internet.
Project Tracker is currently in the testing phase, with
release currently scheduled in the second fiscal quarter of 1998.
Project Green This golf teaching tool brings the expertise of
a golf pro to the user.Like Active Trainer TM and its list of exercises
and demos, Project Green features a list of video clips describing the
aspects of a golf game. The program also includes a golf game analysis
on any course the user builds, and a series of golf drills that the
user goes through to help improve his or her game.
Project Green is in the early development phase, and is
scheduled to enter the market during the third fiscal quarter of 1998.
Project Pacific Going beyond physical fitness and sports to
the realm of mind/body wellness, Project Pacific is a stress management
CD-ROM. This program is expected to give users the tools they need to
gain control of the everyday causes of stress. Topics covered include
goal setting, time management, handling disagreements, and achieving
goals. A stress test is planned to analyze the user's level of stress
and its sources, and to suggest areas of the program the user should
study first.
Project Pacific is in the planning phase, and is currently
scheduled to enter the market during the fourth fiscal quarter of 1998.
MANUFACTURING
Lasermedia's products are manufactured by unaffiliated third parties,
including Media Duplication Corp., Goldrich Printpak Inc., Legg Bros., Graphics
Limited, Accu-Measure Inc., American & Efird Canada Inc., 960180 Ontario Inc.
c.o.b. as Rite Printing and Brown Packaging. Lasermedia is not dependent upon a
single supplier or manufacturer of products.
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DISTRIBUTION
Active Trainer# was initially offered and sold through mail order
software catalogues and magazines. Since its introduction in July 1995 through
December 31, 1997, approximately 20,000 copies have been sold. Lasermedia
intends to continue to offer Active Trainer# and other Active products through
mail order software catalogues.
Lasermedia has embarked on an aggressive effort to develop a
comprehensive distribution network for its products. No single customer or group
of customers represents in excess of 10% of the Company's revenues. Lasermedia's
customers include Best Buy, CompUSA, American TV, Computer City, Hastings, Data
Vision, Egg Head, Fry's, J&R Computer World, Micro Center, Tiger Direct, Media
Play, Nationwide, R C S Computer Experience, T Zone and Electronic Boutique.
Lasermedia has distribution contracts with Micro Central, Merisel Americas,
Inc., Computer City, Micro Center and Simitar Entertainment Inc. Lasermedia
anticipates distribution contracts with Ingram Micro, Tech Data and Navarre.
ADVERTISING AND PROMOTION
In connection with the Company's advertising and promotion, CDN$50,000
per month has been allocated for each product line to best ensure product
awareness. This amount will vary from time to time to compensate the launch of
new products and up-grades.
Web Site
The Company gains exposure for its web addresses
(http://www.lasermedia.com and http://activetrainer.com) by prominently
displaying its web addresses on all new packaging, T- shirts, mailouts and
printed promotional material. In addition the Company continues to research the
most effective methods of drawing hits using the on-line search engines. These
search engines employ various criteria strategies including key works,
categories, phrases, daemons and Internet addresses to aid web users to locate
specific information.
The Company intends to continue to use its web site to market Active
Trainer#, collect customer profiles, develop awareness of the Company, and build
a stable of advertisers for its commercial Internet site. The Company intends to
add new products to the site as they are developed, with "Coming Soon" type
promotions announcing upcoming products. The Company also intends to promote its
products through selected Internet news groups. These news groups enable people
to go to a common Internet site to obtain the latest information on a subject of
particular interest. The Company intends to encourage employees to join news
groups to allow for "signature files" (information that automatically appears
with e-mail) which would include an on-line catch phrase about the Company's
products and where to get more information.
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Magazines and Catalogues
Magazines and catalogues, including Tiger Software (circulation 1.5
million), MacWarehouse and Computer Life, have been selected for their
wide circulation in both Canada and the United States. Lasermedia initially
tested Active Trainer TM sales through such magazines and catalogues. The
CD-ROM catalogues provided the least expensive, most efficient medium of
communication to a large, widely dispersed audience. Active Trainer TM has
consistently been in the top five sellers for Tiger Software. The Company
intends to continue to selectively place print media advertisements in
publications that attract readers within the Company's target market.
Trade Shows
The Company attended the Retail Vision trade show from March 31, 1998
to April 4, 1998 and anticipates attending the comparable autumn Retail Vision
trade show. In addition, the Company anticipates participating in the E3
Electronic Expo to be held in June 1998. The Company recently participated as an
exhibitor at The Fitness Show which was held in Atlanta from February 6-8, 1998.
COMPETITION
The interactive consumer software market is characterized by intense
competition and by rapidly changing technology, evolving industry standards and
frequent new product introductions. The Company's competitors range from small
companies with limited resources to large companies with substantially greater
financial, technical and marketing resources than those of the Company.
Management believes that potential new competitors, including large software and
hardware companies, media companies and film studios, are increasing their focus
on interactive entertainment and the home educational consumer software market.
Only a small percentage of products introduced in the consumer computer
software market achieve any degree of sustained market acceptance. The principal
competitive factors guiding the success of a particular consumer computer
software product include technological innovation, product features, ease of
use, perceived quality, reliability, brand recognition, marketing strategy,
selling price, access to distribution channels and retail space and availability
to the consumer of technical support for the product. The Company believes that
it competes effectively in these areas.
The Company is aware of the following CD-ROM fitness products:
Lifeform (Fitnesoft Inc.), which is a health and lifestyle
record keeping tool that does not offer fitness testing or
recommendations for an exercise program. It allows the user to
keep a record of medical history, nutritional intake and
exercise
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habits and then charts the user's progress. It does not offer
any multimedia content;
Multimedia Workout (Lifestyle Software Group) offers
recordkeeping features and video clips of weight training
exercises. It does not offer the interactive fitness test and
the video based personal training features of Active
TrainerTM;
The Mayo Clinic Sports Health & Fitness (IVI Publishing)
provides the user general guidelines for a fitness regimen,
but not a specific program, based on a video guided fitness
test similar to that in Active Trainer TM. The program also
presents articles on nutrition, exercise and sports. Video
content includes interview clips from ESPN and demonstrations
of some of the exercises; and,
BodyCraft (AlphaSport) presents a generic exercise program and
promoter protein supplement products offered by AlphaSport.
This product has been heavily promoted to "Give you rippling
abs in 30 days or don't pay".
The Company's share of the fitness and excercise software market is
approximately 18%, as determined by PC Data.
TRADEMARKS, LOGOS, AND TRADENAMES
The Company relies upon copyright, trade secret and contract law to
protect its proprietary technology in Canada, the United States and in
international markets. Such copyright protection prohibits the reproduction of
exact language and code of the Company's products and software programs but does
not effectively protect the Company against selective reproduction of certain
aspects of any product or program. The Company utilizes confidentiality and
non-competition provisions in its employee and consultant agreements as well as
with various third parties with whom it deals in order to restrict the use of
its proprietary technology. There are no assurances as to the extent to which
such agreements will be enforceable in all instances.
On June 9, 1997 the Company received a letter from Laser Media Inc. of
Los Angeles, California which requested that the Company cease and desist using
the domain name "Lasermedia" on the Internet. The Company offered to change its
domain name. However, Laser Media Inc. chose to institute a compliant procedure
with Network Solutions' Domain Name Dispute Policy ("Network Solutions").
Network Solutions, under the authority of the Depar(TM)ent of Defense, assigns
Internet domain names on a first-come, first-serve basis. If there is a
conflict, Network Solutions can suspend the use of the name. It has no authority
to impose any other legal remedy. The Company has offered a compromise to share
the "Lasermedia" domain name with differentiations and cross-references. Laser
Media, Inc. has declined this solution. The Company
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<PAGE> 17
intends to continue to seek an amicable compromise of this matter. The Company
has filed trademark applications in both the U.S. and Canada for "LaserMedia."
On June 27, 1997, Softech, an unaffiliated limited partnership
("Softech L.P."), purchased from Lasermedia, all of Lasermedia's ownership
rights to the Active Trainer TM family of software and subsequent modifications
and improvements. The purchase price was CDN$1,950,000. Concurrently, Softech
L.P. engaged Lasermedia to manufacture on behalf of, and purchase from, Softech
L.P. products derived from that software for resale, and Softech L.P. appointed
Lasermedia as the exclusive reseller of the Active Trainer TM line of software
and all related products and services for a period of ten years. Lasermedia has
the option to renew for one further consecutive period of five years. In
addition, Lasermedia has the right to use the Active Trainer TM line of
software for its own internal research and development and to prepare
derivative works and products. In exchange for these rights, Lasermedia pays to
Softech L.P. a royalty equal to 70% of the gross receipts from the sale of
Active products minus certain costs such as the cost of purchasing Active
products from Softech L.P., costs of goods sold (e.g. shipping, duties and
taxes, packaging, manufacturing), general administrative costs (e.g. insurance,
copyrights and patents, defense of copyrights and patents, translations),
advertising and marketing costs, and up to CDN$50,000 in employment costs.
After Softech L.P. has been paid CDN$1,950,000, Softech L.P.'s royalty rate
declines to 30%. As of March 23, 1998, Lasermedia has paid $250,000 to Softech
L.P. Lasermedia is obligated to purchase a minimum of CDN$62,500 worth of
Active product units for each fiscal quarter in 1998. Lasermedia has not yet
achieved sales in excess of the minimum guarantee. The units are subject to
declining prices ranging from CDN$8.00 per unit for the first 100,000 units to
CDN$3.25 per unit after 750,000 units have been purchased. Softech L.P. is free
to license to third parties the technology, which Lasermedia believes can be
useful in developing other interactive computer products. Lasermedia entered
into the sale and license-back transaction with Softech L.P. to accelerate
realization of value of technology developed by Lasermedia, which, because of
technological advances, could have limited long-term proprietary value. The
Company plans to engage in a number of sale and license-back transactions with
other new software technology it develops. Proceeds from the sale of software
technology will be used to defray operating expenses and to support research
and development. Approximately $1 million of the CDN$1,950,000 received by
Lasermedia from the sale of the Active Trainer TM family of software was
allocated to research and development.
In connection with the sale and leaseback transaction, Lasermedia
issued to Softech L.P. a Series E Warrant to purchase 2,751,666 shares of
Lasermedia's common stock at an exercise price of CDN$0.75 per share. The Series
E Warrant is scheduled to expire, unless sooner exercised, in March 2002.
Softech L.P. distributed the Series E Warrant to its partners.
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<PAGE> 18
GOVERNMENT REGULATION OF ENVIRONMENT
There are no significant rules or regulations in connection with
governmental regulation of the environment applicable to the Company that would
have a material effect on capital expenditures, earnings or its competitive
position.
EMPLOYEES
At December 31, 1997, the Company, including Lasermedia and Verisim
employed 36 employees of which five are in administration, 27 in product
development, one in product support and three in sales and marketing.
SEASONAL VARIATION
The Company has not experienced significant effects of seasonality to
date; however, the operating results of many software companies reflects
seasonal fluctuations. For example, many software companies earn their highest
revenue and profits in the calendar year-end holiday season and a seasonal low
in revenue and profits in the quarter ending in June. There can be no assurance
that the Company will not experience such trends in the future.
RISK FACTORS
The following are the principal risk factors regarding an inves(TM)ent
in the Company.
Limited History of Operations and Profitability
The Company has a limited operating history. The Company's prospects
must be considered in light of the risks, expenses, and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in a new and evolving market such as the production of multimedia
software. The Company experienced increased quarterly revenue over the five
fiscal quarters in the period ended December 31, 1996. However, such growth
rates may not be sustainable and is not indicative of future operating results.
There can be no assurance that any of the Company's business strategies will be
successful or that the Company's revenue growth will continue on an annual or
quarterly basis.
Reliance on Active Trainer(TM)
Revenue from Active Trainer(TM) accounted for approximately 80% of the
Company's total revenues during fiscal year 1996, and approximately 15% of
sales during fiscal year 1997. If Active Trainer(TM) fails to continue to sell
or if the Company fails to replace the Active Trainer(TM)
15
<PAGE> 19
product with additional products generating significant revenue, the Company's
business, operating results and financial conditions will be materially and
adversely affected.
License with Softech L.P.
On June 27, 1997, Softech L.P., an unaffiliated limited partnership,
purchased from Lasermedia, all of Lasermedia's ownership rights to the Active
Trainer(TM) family of software and subsequent modifications and improvements.
The purchase price was CDN$1,950,000. Concurrently, Softech L.P. engaged
Lasermedia to manufacture on behalf of, and purchase from, Softech L.P.
products derived from that software for resale, and Softech L.P. appointed
Lasermedia as the exclusive reseller of the Active Trainer(TM) line of software
and all related products and services for a period of ten years. Lasermedia has
the option to renew for one further consecutive period of five years. In
addition, Lasermedia has the right to use the Active Trainer(TM) line of
software for its own internal research and development and to prepare
derivative works and products. In exchange for these rights, Lasermedia pays to
Softech L.P. a royalty equal to 70% of the gross receipts from the sale of
Active products minus certain costs such as the cost of purchasing Active
products from Softech L.P., costs of goods sold (e.g. shipping, duties and
taxes, packaging, manufacturing), general administrative costs (e.g. insurance,
copyrights and patents, defense of copyrights and patents, translations),
advertising and marketing costs, and up to CDN$50,000 in employment costs.
After Softech L.P. has been paid CDN$1,950,000, Softech L.P.'s royalty rate
declines to 30%. As of March 23, 1998, Lasermedia had paid $250,000 to Softech
L.P. The long term success of the Company depends on the Company developing
additional products which generate significant revenue to dilute the percentage
of total revenue absorbed by the license with Softech L.P. There can be no
assurance that the Company will be able to develop such products.
Potential Fluctuations in Quarterly Operating Results
The Company expects that its future operating results will fluctuate
significantly as a result of numerous factors, including the demand for the
Company's products, the Company's ability to develop new products, research and
development activities, the timing of new product introductions and product
enhancements by the Company and its competitors, market acceptance of the
Company's new and enhanced products, the emergence of new industry standards,
the timing of customer orders, the mix of products sold, competition, the mix of
distribution channels employed, the evolving and unpredictable nature of the
markets for the Company's products and multimedia software, and general economic
conditions. The Company typically operates with a relatively small order
backlog. As a result, quarterly sales and operating results depend in part on
the volume and timing of orders received within the quarter. The Company has not
experienced significant effects of seasonality to date; however, the operating
results of many software companies reflects seasonable fluctuations, and there
can be no assurance that the Company will not experience such trends in the
future. As a result of the foregoing factors, the Company's operating results
and the Company's stock price may be subject to volatility.
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<PAGE> 20
Rapid Technology Change
The consumer software industry is undergoing rapid changes, including
evolving industry standards, frequent new product introduction, and changes in
consumer requirements and preferences. The Company's success will depend upon,
among other things, its ability to achieve and maintain technological and
quality leadership by anticipating and developing new products. To date, the
Company's product development efforts have been directed towards multimedia
PC's. While the Company expects that the installed base of multimedia PC's will
continue to grow at a rapid pace, it recognizes that consumer preference can
quickly shift to other platforms and formats. There can be no assurance that the
Company will be able to create software titles for other emerging hardware
platforms. There can be no assurance that the Company will respond effectively
to market or technological changes, or compete successfully in the future. If
the Company is unable to meet the challenge of a rapidly evolving software
industry in a timely manner, this inability could have a material adverse effect
on the Company's operations.
Risks Associated with New Product Development
and Timely Introduction of New and Enhanced Products
The Company's future success will depend to a substantial degree upon
its ability to enhance its existing products and to develop and introduce, on a
timely and cost-effective basis, new products and features that meet customer
demands and emerging and evolving industry standards. The Company budgets
amounts to expend for research and development based on planned product
introductions and enhancements; however, actual expenditures may significantly
differ from budgeted expenditures. Inherent in the product development process
is a number of risks. The development of new, technologically advanced
multimedia products is a complex and uncertain process requiring high levels of
innovation, as well as accurate anticipation of technological and market trends.
The introduction of new or enhanced products also requires the Company to manage
the transition from older products in order to avoid excessive levels of older
product inventories and ensure that adequate supplies of new products can be
delivered to meet customer demand. There can be no assurance that the Company
will successfully develop, introduce or manage the transition to new products.
The Company may experience delays in the introduction of its products due to
factors internal and external to the Company. Any delays in the introduction or
shipment of new or enhanced products or the inability of such products to gain
market acceptance could adversely affect the Company's operating results,
particularly on a quarterly basis.
Risks Associated with Development of Retail Distribution Channel
The Company distributes its products through distributors, major
computer and software retailers, consumer electronic stores, discount warehouse
stores and other specialty retailers. The Company often sells on a purchase
order basis, and there are often no minimum purchase obligations on behalf of
any distributor or retailer. Distribution and retailing companies in the
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<PAGE> 21
computer industry have from time to time experienced significant fluctuations in
their businesses, and there have been a number of business failures among these
entities. The insolvency or business failure of any significant distributor or
retailer of the Company's products could have a material adverse affect on the
Company's business, operating results and financial condition. Further, certain
mass-market retailers have established exclusive relationships under which such
retailers will buy customer software only from one or two intermediaries. In
such instances, because of the price or other terms imposed by such
intermediaries, the Company may be unable to market its products through such
retailers on the terms that the Company deems acceptable.
Retailers of the Company's products typically have a limited amount of
shelf space and promotional resources, and there is intense competition among
consumer software producers for adequate levels of shelf space and promotional
support for retailers. The Company expects that as the number of consumer
multimedia products increases this competition for shelf space and in-store
marketing attention will intensify. Due to increased competition for limited
shelf space, retailers and distributors are increasingly in a better position to
negotiate favorable terms of sale, including price discounts, price protection
and product return policies. Retailers often require multimedia publishers to
pay fees or provide other accommodations in exchange for shelf space. The
Company's products constitute a relatively small percentage of each retailer's
sales volume, and there can be no assurance that retailers will continue to
purchase the Company's products or provide the Company's products with adequate
shelf space and promotional support.
Competition
All aspects of the Company's business are highly competitive. Although
management believes that it has certain proprietary advantages over its
competitors, some competitors have greater financial, technical and marketing
resources, have established greater name recognition in the marketplace, and
have larger customer bases and distribution systems. There can be no assurance
that the Company will be able to compete successfully with its existing or new
competitors. The Company believes that its ability to compete successfully
depends upon a number of factors, including, market presence, access to capital,
the pricing policies of its competitors, and the timing of introductions of new
products by the Company and its competitors. There can be no assurances that the
Company will have the resources required to respond effectively to market or
technological changes or to compete successfully with current or future
competitors or that competitive pressures faced by the Company will not
materially and adversely affect its business, operating results and/or financial
position.
Risks Associated with Internet Distribution
While the number of businesses utilizing the Internet as a vehicle of
product marketing has grown rapidly, it is not known whether this market will
continue to develop such that sufficient demand for the Company's services will
emerge and become sustainable. Similarly, it is not known whether individuals
will utilize the Internet to any significant degree as a means of
18
<PAGE> 22
purchasing goods and services or effecting payment. The adoption of the Internet
for commerce, particularly by those individuals and enterprises that
historically have relied upon traditional means of commerce, will require a
broad acceptance of new methods of conducting business and exchanging
information. Moreover, the security and privacy concerns of existing and
potential users of the Company's services, as well as concerns related to
confidentiality, may inhibit the growth of Internet commerce generally. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as adequate
capacity, a reliable network backbone or timely development of complementary
products, such as high speed modems. There can be no assurance that commerce
over the Internet will become widespread or that a market for the Company's
products will emerge over this medium.
Risks Associated with International Expansion
A component of the Company's strategy is its planned expansion into
international markets. To date, the Company has no experience in marketing and
distributing its products internationally. There can be no assurance that the
Company will be able to successfully market, sell and deliver its products in
these markets. In addition, there are certain risks inherent in doing business
in international markets such as unexpected changes in regulatory requirements,
export restrictions, export controls, tariffs and other barriers, political
instability, fluctuations in currency exchange rates and potentially adverse tax
consequences, which could adversely impact the success of the Company's
international operations. There can be no assurance that one or more of such
factors will not have a material adverse effect on the Company's future
international operations and, consequently, on the Company's business, financial
condition or operating results.
In addition, while U.S. and Canadian copyright law, international
conventions and international treaties may provide meaningful protection against
unauthorized duplication of software, the laws of some foreign jurisdictions may
not protect proprietary rights to the same extent as the laws of Canada or the
United States. Software piracy has been, and can be expected to be, a persistent
problem for the software industry. Although to date the Company has not
experienced any of the foregoing factors to any significant extent, there can be
no assurance that these factors will not be experienced by the Company in the
future.
Proprietary Rights and Risk of Infringement
The Company relies on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary rights. The Company also believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements and name recognition are essential to establishing
and maintain a technological leadership position. The Company seeks to protect
its software, documentation and other written materials under trade secret and
copyright laws that afford only limited protection. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use
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<PAGE> 23
information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult, and while the Company
is unable to determine the extent to which piracy of its multimedia products
exists, piracy can be expected to be a persistent problem. The Company
distributes its multimedia products in the United States and Canada. There can
be no assurance that the Company will not distribute its multimedia products in
the future to countries where the enforcement of proprietary rights may be
uncertain.
The Company is not aware that its products are infringing any
proprietary rights of third parties. However, on June 9, 1997 the Company
received a letter from counsel to Laser Media Inc. ("LM") claiming that LM owns
a federal trademark registration for the mark "Lasermedia" and alleging that the
Company's use of the mark "Lasermedia" in its Internet domain name constitutes
an infringement of LM's trademark rights. LM is located in Los Angeles,
California. LM demands that the Company immediately cease using the name and
mark "Lasermedia". The Company has confirmed that LM owns federal trademark
registrations for the mark "Lasermedia" and for several other marks using the
term "Lasermedia". The Company responded to LM by offering to change its domain
name. However, LM has instituted a compliant procedure with Network Solutions.
Network Solutions, under the authority of the Depar(TM)ent of Defense, assigns
Internet domain names on a first-come, first-serve basis. If there is a
conflict, Network Solutions can suspend the use of the name. It has no authority
to impose any other legal remedy. The Company has offered a compromise to share
the "Lasermedia" domain name with differentiations and cross-references. LM has
declined this solution. The Company intends to continue to seek an amicable
compromise of this matter.The Company has filed trademark applications in both
the U.S. and Canada for "LaserMedia". There can be no assurance, however, that
third parties will not claim infringement by the Company of their intellectual
property rights. The Company expects that multimedia product developers will
increasingly be subject to infringement claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming to defend, result in costly litigation,
divert management's attention and resources, and cause product shipment delays.
In addition, such claims could require the Company to cease the manufacture, use
and sale of allegedly infringing products, and to incur significant costs and
expenses to develop non-infringing products or to obtain licenses. There can be
no assurance that the Company would be able to develop alternative products or
to obtain such licenses or, if a license were obtainable, that the terms would
be commercially acceptable to the Company. In the event of a successful claim of
product infringement against the Company and failure or inability of the Company
to license the infringed or similar technology, the Company's business,
operating results and financial condition would be materially adversely
affected.
Dependence on Key Personnel
The Company believes that its future success will depend in large part
upon the services of its President Erik Schannen. Mr. Schannen's employment
agreement with the Company is for
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<PAGE> 24
five year term which began June 27, 1997. At the end of this five year
term, Mr. Schannen has the option to renew the employment agreement for a
further term of five years upon the same terms and conditions. However, the
Company currently has no key-man insurance for Erik Schannen. There can be no
assurance that other persons of similar talent would be available to the Company
if Mr. Schannen was not available.
Management of Growth
The Company is currently experiencing rapid growth and expansion, which
has placed, and will continue to place, a significant strain on its
administrative, operational and financial resources, and increased demands on
its systems and controls. This growth has resulted in a continuing increase in
the level of responsibility for both existing and new management personnel. The
Company anticipates that its continued growth will require it to recruit, hire,
train and retain a substantial number of computer consultants, managers, and
sales and marketing personnel. The Company's ability to manage its growth
successfully will also require the Company to continue to expand and improve its
operating, management and financial systems and controls on a timely basis.
There can be no assurance that the Company will be able to manage this growth
effectively, and if unable, to do so, the Company's business, operating results
and financial condition will be materially adversely affected.
Manufacturing Risks
The Company's products are manufactured by unaffiliated third parties
in accordance with the Company's specifications. While the Company to date has
not experienced any material delays or interruptions in the manufacture of the
Company's products, there can be no assurance that such delays or interruptions
will not occur or, if any do occur, that they could be remediated without
further delay and without materially and adversely affecting the Company's
business, operating results or financial condition. Unanticipated delays in
receipt of shipments or price increases from any of the Company's contract
manufacturing sources could adversely affect the Company's business.
Product Liability
Although the Company has not experienced any product liability claims,
the sale and support of products by the Company entails the risk of such claims.
The Company currently maintains product liability insurance and is required to
maintain same according to its various distribution agreements. A successful
product liability claim brought against the Company could have a material
adverse effect upon the Company's business, operating results and financial
condition.
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Dividends
It is the current policy of the Company's board of directors to retain
any earnings to finance the operations and expansion of the Company's business.
The Company's loan agreement with Cune Management Inc. prohibits the declaration
or payment of cash dividends. Therefore, the payment of any cash dividends on
the common shares is unlikely in the foreseeable future.
Potential Volatility of Stock Price
The trading price of the common shares is likely to be highly volatile
and may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
developments with respect to the copyrights or proprietary rights, conditions
and trends in the multimedia industry, adoption of new accounting standards
affecting the multimedia industry, changes in financial estimates by securities
analysts, general market conditions and other factors. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stocks of technology companies. The Company's common shares are being traded on
the Canadian Dealer Network on the over-the-counter market. The public float is
approximately 3,000,000 common shares. Broad market fluctuations may materially
adversely affect the market price of the common shares.
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<PAGE> 26
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal product research and development, marketing,
sales, customer support, administrative, and warehousing activities are
conducted from an approximately 10,000 square feet facility located at 11
Charlotte Street, Toronto, Ontario, M5V 2H5. This facility is leased to the
Company by an unaffiliated third party for a term of five years expiring April
16, 2002.
Management believes that should it be needed, suitable additional space
will be available to accommodate expansion of the Company's operations on
commercially reasonable terms.
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<PAGE> 27
ITEM 3. LEGAL PROCEEDINGS
Trademark Claims
On June 9, 1997 the Company received a letter from Laser Media Inc.
("LM") of Los Angeles, California which requested that the Company cease and
desist using the domain name "Lasermedia" on the Internet. The Company offered
to change its domain name. However, LM chose to institute a compliant procedure
with Network Solutions ("Network Solutions"). Network Solutions, under the
authority of the Depar(TM)ent of Defense, assigns Internet domain names on a
first-come, first-serve basis. If there is a conflict, Network Solutions can
suspend the use of the name. It has no authority to impose any other legal
remedy. The Company has offered a compromise to share the "Lasermedia" domain
name with differentiations and cross-references. LM has declined this solution.
The Company intends to continue to seek an amicable compromise of this matter.
The Company has filed trademark applications in both the U.S. and Canada for
"LaserMedia."
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<PAGE> 28
ITEM 4. CONTROL OF REGISTRANT
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of January 29, 1998 by (i)
all stockholders known by the Company to be beneficial owners of more than 10%
of the outstanding common stock, and (ii) all executive officers and directors
of the Company as a group.
<TABLE>
<CAPTION>
IDENTITY OF SHARES
PERSON OR GROUP OWNED PERCENT
--------------- ------ -------
<S> <C> <C>
Schannen, Erik 3,500,000 26.9%
Lasermedia Communications
Corp., 11 Charlotte Street,
Toronto, Ontario M5V 2H5
All directors and officers 3,530,000 27.1%
as a group (4 persons)
</TABLE>
As far as known to the Company, the Company is not directly or
indirectly owned or controlled by another corporation or by any governmental
authority. The Company does not know of any arrangements which may at a
subsequent date result in a change in control of the Company.
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<PAGE> 29
ITEM 5. NATURE OF TRADING MARKET
Trading History; Dividends
On August 14, 1997 the common shares of the Company commenced trading
and quotation on the Canadian Dealing Network Inc. ("CDN"), the over-the-counter
market in Ontario. The common shares are quoted on CDN under the trading symbol
"LMCD". The common shares of the Company are not traded on any United States
market. The following table presents the low and high trading ranges and average
weekly trading volume of the common stock of the Company (in Canadian dollars)
during the third quarter and fourth quarter of fiscal 1997:
<TABLE>
<CAPTION>
FISCAL AVG. WEEKLY
QUARTER LOW HIGH VOLUME
------- --- ---- -----------
<S> <C> <C> <C>
August 14 - September 30, 1997 CDN$1.45 CDN$1.70 267,803
October 1 - December 31, 1997 CDN$0.80 CDN$1.75 187,105
January 1, 1998 - March 31, 1998 CDN$0.75 CDN$1.85 1,251,980
</TABLE>
The Company has paid no cash dividends on the common shares and does
not intend to do so in the foreseeable future. Rather, the Company intends to
retain its earnings, if any, to provide capital for product development and
Company growth.
The authorized capital of the Company consists of an unlimited number
of Common Shares and 2,000,000 voting preference shares. The number of
preference shares issuable by the Company at any one time is limited to 500,000.
The Company believes that approximately 99,500 common shares are owned
of record by 12 persons resident in the United States.
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ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS
There are no governmental laws, decrees or regulations in Canada that
restrict the export or import of capital, including, but not limited to, foreign
exchange controls, or that affect the remittance of dividends, interest or other
payments to nonresident holders of the Company's common stock, other than
withholding tax requirements. Any such remittances, however, are subject to
withholding tax.
There is no limitation imposed by Canadian law or by the Company's
bylaws or other constituent documents of the Company on the right of nonresident
or foreign owners to hold or vote shares of common stock, other than as provided
in the Inves(TM)ent Canada Act (Canada) (the "Inves(TM)ent Canada Act"). The
following summarizes the principal features of the Inves(TM)ent Canada Act.
The Inves(TM)ent Canada Act requires certain "non-Canadian" (as defined
in the Inves(TM)ent Canada Act) individuals, governments, corporations and
other entities who wish to acquire control of a "Canadian business" (as defined
in the Inves(TM)ent Canada Act) to file either a notification or an application
for review with the Director of Inves(TM)ents appointed under the Inves(TM)ent
Canada Act. The Inves(TM)ent Canada Act requires that in certain cases an
acquisition of control of a Canadian business by a "non-Canadian" must be
reviewed and approved by the Minister responsible for the Inves(TM)ent Canada
Act on the basis that the Minister is satisfied that the acquisition is "likely
to be of net benefit to Canada", having regard to criteria set forth in the
Inves(TM)ent Canada Act.
With respect to acquisitions of voting shares, only those acquisitions
of voting shares of a corporation that constitute acquisitions of control of
such corporation are reviewable under the Inves(TM)ent Canada Act. The
Inves(TM)ent Canada Act 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. Certain
reviewable acquisitions of control may not be implemented before being approved
by the Minister responsible for the Inves(TM)ent Canada Act. If the Minister
does not ultimately approve a reviewable acquisition which has been completed,
the non-Canadian person or entity may be required, among other things, to divest
itself of control of the acquired Canadian business. Failure to comply with the
review provisions of the Inves(TM)ent Canada Act could result in, among other
things, a court order directing the disposition of assets or shares.
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<PAGE> 31
ITEM 7. TAXATION
The following summary of the material Canadian federal income tax
considerations generally applicable in respect of the common shares reflects the
Company's opinion. The tax consequences to any particular holder of common
shares will vary according to the status of that holder as an individual, trust,
corporation or member of a partnership, the jurisdiction in which that holder is
subject to taxation, the place where that holder is resident and, generally,
according to that holder's particular circumstances. This summary is applicable
only to holders who are resident in the United States, have never been resident
in Canada, deal at arm's-length with the Company, hold their common shares as
capital property and who will not use or hold the common shares in carrying on
business in Canada. Special rules, which are not discussed in this summary, may
apply to a United States holder that is an issuer that carries on business in
Canada and elsewhere.
This summary is based upon the provisions of the Income Tax Act of
Canada and the regulations thereunder (collectively, the "Tax Act, or ITA") and
the Canada-United States Tax Convention as amended by the Protocols thereto (the
"Tax Convention") as at the date of the Registration Statement and the current
administrative practice of Revenue Canada, Customs, Excise and Taxation. This
summary does not take into account Canadian provincial income tax consequences.
This summary is not exhaustive of all possible income tax consequences.
It is not intended as legal or tax advice to any particular holder of common
stock and should not be so construed. Each holder should consult his or her own
tax advisor with respect to the income tax consequences applicable to such
holder in his or her own particular circumstances.
North American Free Trade Agreement (Canada)
The Inves(TM)ent Canada Act was amended with the North American Free
Trade Agreement (NAFTA) to provide for special review thresholds for Americans
(including "American-controlled "entities" as defined in the Inves(TM)ent Act).
Under the Inves(TM)ent Canada Act, as amended, an inves(TM)ent in the
Registrant's common shares by an American would be reviewable only if it was an
inves(TM)ent to acquire control of the Registrant and the value of the assets of
the Registrant was equal to or greater than a specified amount (the "Review
Threshold"), which increases in stages. The Review Threshold is currently
CDN$150 million and remains at CDN$150 million in constant 1992 dollars
(calculated as prescribed in the Inves(TM)ent Act) after 1992.
Disposition of Common Shares
If a non-resident were to dispose of common shares of the Company to
another Canadian corporation which deals or is deemed to deal on a non-arm's
length basis with the non-resident and which, immediately after the disposition,
is connected with the Company (i.e., which holds shares
28
<PAGE> 32
representing more than 10% of the voting power and more than 10% of the
market value of all issued and outstanding shares of the Company), the amount by
which the fair market value of any consideration (other than any shares of the
purchaser corporation) exceeds the paid-up capital of the common shares sold
will be deemed to be taxable as a dividend paid by the purchasing corporation,
either immediately or eventually by means of a deduction in computing the
paid-up capital of the purchasing corporation, and subject to withholding taxes
as described below.
Under the Tax Act, a gain from the sale of common shares by a
non-resident will not be subject to Canadian tax, provided the shareholder
(and/or persons who do not deal at arm's length with the shareholder) have not
held a "substantial interest" in the Company (25% or more of the shares of any
class of the Company's stock) at any time in the five years preceding the
disposition. Generally, the Tax Convention will exempt from Canadian taxation
any capital gain realized by a resident of the United States, provided that the
value of the common shares is not derived principally from real property
situated in Canada.
Dividend
In the case of any dividends paid to non-residents, the Canadian tax is
withheld by the Company, which remits only the net amount to the shareholder. By
virtue of Article X of the Tax Convention, the rate of tax on dividends paid to
residents of the United States is generally limited to 15% of the gross dividend
(or 5% in the case of certain corporate shareholders owning at least 10% of the
Company's voting shares pending ratification of the Protocol amending the
treaty; the Protocol has been ratified by the USA and is awaiting ratification
in Canada). In the absence of the Tax Convention provisions, the rate of
Canadian withholding tax imposed on non-residents is 25% of the gross dividend.
Stock dividends received by non-residents from the Company are taxable by Canada
as ordinary dividends and therefore the withholding tax rates will be
applicable.
Where a holder disposes of common shares to the Company (unless the
Company acquired the common shares in the open market in the manner in which
shares would normally be purchased by any member of the public), this will
result in a deemed dividend to the U.S. holder equal to the amount by which the
consideration paid by the Company exceeds the paid-up capital of such stock. The
amount of such dividend will be subject to withholding tax as described above.
Capital Gains
A non-resident of Canada is not subject to tax under the ITA in respect
of a capital gain realized upon the disposition of a share of a class that is
listed on a prescribed stock exchange unless the share represents "taxable
Canadian property" to the holder thereof. A common share of the Company will be
taxable Canadian property to a non-resident holder if, at any time, during the
period of five years immediately preceding the disposition, the non-resident
holder, persons with whom the non-resident holder did not deal at arm's length,
or the non-resident holder and persons with whom he/she did not deal at arm's
length owned 25% or more of the issued shares
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<PAGE> 33
of any class or series of the Company. In the case of a non-resident
holder to whom shares of the Company represent taxable Canadian property and who
is resident in the United States, no Canadian tax will be payable on a capital
gain realized on such shares by reason of the Tax Convention unless the value of
such shares is derived principally from real property situated in Canada or the
non-resident holder previously held the shares while resident in Canada. The
Company believes that the value of its common shares is not derived from real
property situated inside Canada.
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<PAGE> 34
ITEM 8. SELECTED FINANCIAL DATA
The following tables provide a summary of certain financial information
for fiscal years 1994 through 1996, and for the nine months ended September 30,
1997. The selected financial data set forth below as of December 31, 1996, 1995
and 1994 (audited), and September 30, 1997 and 1996 (unaudited) have been
derived from the Company's financial statements which were prepared in
accordance with generally accepted accounting principles in Canada ("Canadian
GAAP"), which are different in some respects from generally accepted accounting
principles in the United States ("U.S. GAAP"). See the reconciliation footnote
set forth in Note 8 to the Financial Statements appearing under Item 19 hereof.
The information presented should be read in conjunction with such Consolidated
Financial Statements and related Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
31
<PAGE> 35
LASERMEDIA COMMUNICATIONS CORP.
BALANCE SHEET DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
BALANCE SHEET COMBINED BALANCE SHEETS
(UNAUDITED)1 AS OF DECEMBER 31 2
AS OF SEPTEMBER 30, 1997 1996 1995
------------------------ ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT
Cash CDN$1,711,032 CDN$ 28,966 CDN$1,870
Accounts receivable 392,796 132,929 183,748
Allowance for uncollectable receivables -- -- --
Subscriptions receivable 14,900 -- --
Inventory 56,187 6,393 --
Prepaid expenses and sundry assets 75,415 -- 9,857
Due from related companies 489,188 -- --
Loans receivable -- -- 16,069
------------- ----------- -----------
2,739,518 168,288 211,544
CAPITAL ASSETS (Note 2) 568,149 115,011 90,920
PRODUCT DEVELOPMENT COSTS 414,609 288,269 181,405
GOODWILL 507,791 1 --
------------- ----------- -----------
TOTAL ASSETS CDN$4,230,067 CDN$571,569 CDN$483,869
============= =========== ===========
LIABILITIES
CURRENT
Bank loan CDN$195,833 CDN$ -- CDN$ --
Accounts payable and accrued liabilities 537,318 129,834 173,871
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- ----------- -----------
756,961 157,080 197,114
------------- ----------- -----------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- ----------- -----------
DEFERRED INCOME TAXES CDN$940,335 CDN$526,743 CDN$265,637
------------- ----------- -----------
CDN$104,000 CDN$ 72,000 CDN$ 45,400
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 6) -- -- --
Preferred Stock, no par value per share; 2,000,000
voting preferred shares authorized; no shares
issued and outstanding. 3
Common Stock, no par value per share; unlimited
shares of common stock authorized; 12,978,344
issued and outstanding.
PAID IN CAPITAL 3,036,403 99,296 2
RETAINED EARNINGS (DEFICIT) 253,329 (54,470) 218,230
------------- ----------- -----------
3,289,732 44,826 218,232
------------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY CDN$4,230,067 CDN$571,569 CDN$483,869
============= =========== ===========
</TABLE>
1. The unaudited statement of operations for the nine month period ended
September 30, 1997 give effect to a reverse takeover acquisition using the
purchase method of accounting. The consolidated financial statement
represents a continuation of the financial statements of the wholly-owned
subsidiary, Lasermedia. The only other subsidiary of the Company, Verisim,
has not as yet generated revenue.
2. The selected data as of and for the years ended December 31, 1996 and 1995
are derived from the audited financial statements of the Company. The
combined financial statements include Laserset Graphics Inc., which was
acquired by Lasermedia in the fourth quarter of 1997 and was subsequently
amalgamated on December 31, 1997. The figures for September 30, 1997 only
relate to Lasermedia, a subsidiary of the Company. The only other
subsidiary of the Company, Verisim, has not as yet generated revenue.
3. The number of preference shares that can be issued by the Company at any
one time is limited to 500,000.
32
<PAGE> 36
LASERMEDIA COMMUNICATIONS CORP.
STATEMENT OF OPERATIONS DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED) 1
AS OF COMBINED STATEMENTS OF OPERATIONS
SEPTEMBER 30 AS OF DECEMBER 31 2
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SALES CDN$2,285,325 CDN$287,366 CDN$659,617 CDN$583,048 CDN$481,462
COST OF SALES 269,532 202,280 449,181 323,009 217,649
---------- ----------- ----------- --------- ----------
GROSS MARGIN 2,015,793 85,086 210,436 260,039 263,813
---------- ----------- ----------- --------- ----------
EXPENSES
Selling costs 287,352 53,245 70,993 11,069 --
General and administrative3 1,192,385 93,549 214,664 110,963 129,852
Research and development 41,338 -- 69,402 28,918 --
---------- ----------- ----------- --------- ----------
1,521,075 146,794 355,059 150,950 129,852
---------- ----------- ----------- --------- ----------
Income (loss) before income taxes 494,718 (61,708) (144,623) 109,089 133,961
---------- ----------- ----------- --------- ----------
Provision for (recovery of) income
taxes
- current 127,000 -- (15,400) 9,600 5,800
- deferred 32,000 -- 26,600 18,400 27,000
- reduction due to application of
losses (82,800) -- -- -- --
---------- ----------- ----------- --------- ----------
76,200 -- 11,200 28,000 32,800
---------- ----------- ----------- --------- ----------
NET INCOME (LOSS) $ 418,518 $ (61,708) $ (155,823) $ 81,089 $ 101,161
========== =========== =========== ========= ==========
NUMBER OF SHARES ISSUED 12,978,344 7,000,000
========== ===========
BASIC EARNINGS (LOSS) PER SHARE CDN$0.04 CDN$(0.01)
</TABLE>
1 The unaudited statement of operations for the nine month period ended
September 30, 1997 and 1996 give effect to a reverse acquisition
transaction using the purchase method of accounting. These consolidated
financial statements represent a continuation of the financial statements
of the wholly-owned subsidiary, Lasermedia. The only other subsidiary of
the Company, Verisim, has not as yet generated revenue.
2 The selected data as of and for the years ended December 31, 1996, 1995
and 1994 are derived from the audited financial statements of the Company.
The combined financial statements include Laserset Graphics Inc., which
was acquired by Lasermedia in the fourth quarter of 1997 and was
subsequently amalgamated on December 31, 1997. The comparative figures for
September 30, 1997 and 1996 only relate to Lasermedia, a subsidiary of the
Company. The only other subsidiary of the Company, Verisim, has not as yet
generated revenue.
3 The Company issued 1,850,000 shares of common stock in lieu of consulting
services performed having a fair market value of C$462,500 which is
included in this figure.
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<PAGE> 37
ITEM 9. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND
OPERATING RESULTS FOR LASERMEDIA
Discussion of Operations
Nine Month Period Ended September 30, 1997
For the nine months ended September 30, 1997, the Company recognized
net income of CDN$494,718 compared to a net loss of CDN$61,708 for the nine
month period ended September 30, 1996. The increase in income is attributable to
the sale by the Company of its Active Trainer(TM) family of software to Softech
L.P. for CDN$1,950,000. Excluding this transaction, the Company would have
incurred a CDN$1,455,282 loss during the nine month period.
Product sales during the nine month period ended September 30, 1997
increased by approximately CDN$48,000 to CDN$335,325 from CDN$287,366 for the
comparable period of 1996. This increase is attributed to higher unit sales
which have resulted from enhanced product distribution. Costs of sales increased
approximately CDN$60,000 during the nine month period over the costs of sales
for the nine month period ended September 30, 1996. Thus, the gross margin on
product sales decreased during this nine month period by approximately
CDN$19,300, from CDN$85,086 in 1996 (29% of product sales) to $65,793 in 1997
(19.6% of product sales). The Company anticipates that at least until it has
paid to Softech L.P. the sum of CON$1,950,000, the obligation to purchase
products from and pay royalties to Softech L.P. will adversely impact the
Company's cost of sales and gross sales margin. In 1997, costs of sales
included CDN$76,000 of advertising costs, and payments to Softech L.P.
Currently, in excess of 90% of the Company's revenue is derived from
product sales in the U.S. The Company also sells products in Canada,
Australia, England and Italy. The sales in Australia, England and Italy are to
customers who pay cash on delivery.
The company's research and development expenditures are primarily to
develop on-line gaming through Verisim, to upgrade current products and
develop new products.
During the nine months ended September 30, 1997, the Company's staff
increased from 7 to 35 employees. This resulted in an increase of approximately
623% of office and general expenses over office and general expenses during the
nine months ended September 30, 1996. Consulting fees during the nine month
period included the value of shares of stock issued to consultants in the
formation of the Company. Sales and marketing fees increased approximately 440%
over sales and marketing fees during the nine months ended September 30, 1996,
as a result of advance payments to distributors, increased product distribution
and greater advertising and promotion costs.
Fiscal Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
For the year ended December 31, 1996, the Company had sales of
CDN$659,617 compared to sales of CDN$583,048 for the period ended December 31,
1995. This was an increase of 13%. This increase is attributable to higher unit
sales of Active Trainer(TM). Cost of sales for the period of CDN$449,181
increased by CDN$126,172 or 39% compared to CDN$323,009 due to increase in unit
sales and development costs. This resulted in gross margins declining from
44.5% of sales in fiscal year 1995 to 31.9% of sales in fiscal year 1996.
Expenses of CDN$355,059 increased by 135% (CDN$204,109) largely because of
increased wages and benefit costs, higher costs associated with expanded
participation in various trade shows, and higher office and general expenses.
During this period, the Company experienced a net loss of CDN$144,623
compared to a profit of CDN$109,089 for the period ended December 31, 1995.
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<PAGE> 38
Fiscal Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
For the year ended December 31, 1995, the Company had sales of
CDN$583,048 compared to sales of CDN$481,462 for the period ended December 31,
1994. This increase of 21% is attributable to the commencement of Active
Trainer(TM) sales. Cost of sales for the period of CDN$323,009 increased by
CDN$105,360 or 48% compared to CDN$217,649. Expenses of CDN$150,950 increased by
16% (CDN$21,098) largely because of higher professional fees, advertising and
promotion expenses and telephone costs. A lower bad debt experience (CDN$821
compared to CDN$20,657) was offset by higher amortization expenses (CDN$58,382
compared to CDN$29,884).
During this period, the Company experienced net income of CDN$109,089
compared to net income of CDN$133,961 for the period ended December 31, 1994.
Liquidity and Capital Resources
The Company's principal working capital needs are for the production,
carrying and marketing of products, developing and acquiring new products, and
maintaining and updating its Internet website. Through December 31, 1996, the
Company funded its operations with cash from operations, capital from stock
sales and advances from affiliates. During the nine months ended September 30,
1997, the Company funded its operations from product sales, sale of the Active
Trainer((TM)) family of software, capital from stock sales, and borrowings from
commercial sources.
As of September 30, 1997, the Company had net working capital of
CDN$2,027,144 of which CDN$1,711,032 was represented by cash. Working capital
was provided primarily from the sale of the Active Trainer(TM) family of
software to Softech L.P., an unaffiliated limited partnership, for
CDN$1,950,000. Working capital was also provided by product sales as well as
loans from the Ontario Film Development Corporation and another unrelated third
party. The loan from the Ontario Film Development Corporation is unsecured and
non-interest bearing. The loan had a $10,000 balance as of September 30, 1997.
The loan from another unrelated party is unsecured, bears interest at 7% per
annum, and is due on demand. The loan had a $7,500 balance as of September 30,
1997.
During the first quarter of 1997, the Company settled its CDN$40,000
debt to one of its shareholders, Cune Management Limited, a financial consulting
firm. The loan from Cune Management Limited was non-interest bearing and there
is no reconciling disclosure with respect to U.S. GAAP with regard to the
recognition of the fair value of interest expense since it is not material.
However, on September 18, 1997, the Company agreed to loan Cune Management Inc.,
from time to time, the principal sum, in the aggregate of up to CDN$250,000. The
loan bears interest at the rate of 12% per annum. Cune Management Inc. may repay
the loan from time to time in whole or in part without penalty, notice or bonus.
The loan is scheduled to mature on September 18, 1998. Cune Management Inc.
created a security interest in its shares of the Company's common stock for the
benefit of the Company as security for the loan. The Company entered into the
loan agreement with Cune Management Inc. for investment purposes. As of
January 29, 1998, Cune Management Inc. held 250,149 shares of the Company's
common stock
36
<PAGE> 39
as well as Warrants to purchase 150,000 shares of the Company, which are
exercisable at any time through March 31, 2002.
During the fourth quarter of 1996, the Company settled its CDN$251,786
debt to Laserset Graphics Inc., which was acquired by Lasermedia in the fourth
quarter of 1997 and was subsequently amalgamated on December 31, 1997.
The Company is in repayment under a loan agreement with the Bank of
Nova Scotia. The loan proceeds were used to finance leasehold improvements. The
loan bears interest at an annual rate equal to the bank's prime rate plus 2.5%,
is due on demand, and is secured by a general security agreement encumbering all
of the Company's assets. The loan balance was $195,000 as of September 30, 1997.
The Company is currently negotiating to obtain a $300,000 line of credit from
the Bank of Nova Scotia.
The Company expects to meet its short-term liquidity needs using its
cash resources, revenue from product sales, and borrowings. The Company believes
that these sources of cash will be sufficient to meet its operating needs for at
least 12 months. The Company may undertake one or more capital formation
transactions, including the public offering or private placement of shares of
capital stock, to meet its long-term product development and acquisition goals.
There can be no assurance that funds will be available to the Company in
sufficient amounts to finance the growth of the business.
The Company's products generally retail at approximately US$45.00 and
wholesale at US$30.00 with a cost to the Company of 7.00 (US$5.00) exclusive of
research and development costs and fees payable to Softech, L.P.
The Company believes that the technology it is developing has broad
uses beyond the Company's products and services. Accordingly, as an integral
part of its business, the Company intends to enter into license, royalty, use,
license/leaseback and similar transactions to enhance its revenue. The sale of
the Active Trainer(TM) family of software is the first of these types of
transactions that the Company hopes to undertake to realize upon the value of
its technology. Lasermedia is the exclusive reseller of the Active Trainer(TM)
family of software and pays a royalty to Softech L.P. equal to 70% of the gross
receipts from the sale of Active products minus certain costs such as the cost
of purchasing Active products from Softech L.P., costs of goods sold (e.g.
shipping, duties and taxes, packaging, manufacturing), general administrative
costs (e.g. insurance, copyrights and patents, defense of copyrights and
patents, translations), advertising and marketing costs, and up to CDN$50,000 in
employment costs. After Softech L.P. has been paid CDN$1,950,000, Softech L.P.'s
royalty rate declines to 30%. As of March 31, 1998, Lasermedia has paid $250,000
to Softech L.P. Lasermedia is obligated to purchase a minimum of CDN$62,500
worth of Active product units for each fiscal quarter in 1998. Lasermedia has
not yet achieved sales in excess of the minimum guarantee. The units are subject
to declining prices ranging from CDN$8.00 per unit for the first 100,000 units
to CDN$3.25 per unit after 750,000
37
<PAGE> 40
units have been purchased. Lasermedia entered into the sale and license-back
transaction with Softech L.P. to accelerate realization of value of technology
developed by Lasermedia, which, because of technological advances, could have
limited long term proprietary value. The Company plans to engage in a number of
sale and license-back transactions with other new software technology it
develops. Proceeds from the sale of software technology will be used to defray
operating expenses and to support research and development. Approximately $1
million of the CDN$1,950,000 received by Lasermedia from the sale of the Active
Trainer((TM)) family of software was allocated to research and development.
In connection with the sale and leaseback transaction, Lasermedia
issued to Softech L.P. a Series E Warrant to purchase 2,866,666 shares of
Lasermedia's common stock at an exercise price of CDN$0.75 per share. The Series
E Warrant is scheduled to expire, unless sooner exercised, in March 2002.
Softech L.P. distributed the Series E Warrant to its partners.
Year 2000
All of the Company's products, programs, services, and other computer
equipment are year 2000 compliant. The Company is completing a preliminary
assessment of year 2000 issues faced by its suppliers and major customers. Based
on a preliminary assessment, the Company does not believe that the year 2000
issue will have a material adverse effect on the Company's results of operations
and financial condition.
Foreign Currency Strategy
The Company has not adopted and does not intend to adopt, a strategy to
hedge against fluctuations in foreign currency. However, the Company does
reserve the right to implement such a strategy in the future. Currently in
excess of 90% of the Company's revenue is derived from sales in the U.S. The
Company's costs are generally paid in Canadian dollars. As the Canadian dollar
is depressed in comparison to the U.S. dollar, the Company's costs are lower
than if such costs were paid in U.S. dollars.
Inflation
The Company has not experienced any significant inflationary cost
increases during the past three fiscal years.
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<PAGE> 41
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE
<S> <C> <C>
Erik Schannen 30 President and Director
Brian Gibson 41 Chief Operating Officer, Chief
Financial Officer
Gordon Cowie 60 Director
Samuel Paul 64 Secretary and Director
</TABLE>
The Company's by-laws provide for a board consisting of five directors,
but allows board actions as long as there are at least three directors.
Vacancies on the board of directors may be filled by board action pending the
election of directors at an annual or special meeting of the stockholders. The
board of directors does not anticipate appointing new directors to fill the
vacancies on the board in the foreseeable future.
BUSINESS EXPERIENCE
Mr. Schannen co-founded and has been the President of Lasermedia since
1994. Mr. Schannen has been involved in the computer graphics and software field
for the past 12 years. Before founding Lasermedia, for seven years he was a
principal of Laserset Graphics Inc., a graphic design company which was acquired
by Lasermedia in the fourth quarter of 1997 and was subsequently amalgamated
into Lasermedia on December 31, 1997. Mr. Schannen has a comprehensive knowledge
of the industry, the technology and is able to program in several computer
languages. He is currently an active member of IMAT, the International
Multimedia Developers Association, and the Apple Multimedia Program; and is
teaching a program in CD- ROM Publishing and Development at the Learning Annex
(a major Toronto-based adult education facility).
Mr. Gibson has been the Chief Operating Officer and the Chief Financial
Officer of the Company since September 4, 1997. For more than five years before
joining the Company, he served as a co-founder and principal of Information
Systems Architects Inc., a software consulting firm. As Chief Operating Officer
(COO), Mr. Gibson is responsible for overseeing the management of the Company.
Mr. Gibson is also the Chief Financial Officer. He attained his Chartered
Accountancy designation with Coopers & Lybrand in 1982.
Mr. Cowie has been a director of the Company since December 5, 1997. He
has been a retired civil engineer since 1994. From 1990 to 1993, he was a
self-employed engineer and worked on a number of projects including providing
litigation support services, assisting in certain design aspects for industrial
buildings in Toronto and preparing plans for residential sub-divisions. He has
over 30 years experience in various engineering projects in Canada and Saudi
Arabia.
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<PAGE> 42
Mr. Paul has served as a director of the Company since February 14,
1997. He has served as the Chief Financial Officer of American Entertainment
Group Inc. since 1993. From 1962 to 1993, Mr. Paul served as a founding member
of the firm of Paul and Paul, Chartered Accountants, which specialized in
financial and consulting services to small and medium sized businesses.
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<PAGE> 43
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth certain summary information concerning
the compensation awarded to, earned by, or paid to Erik Schannen, an officer and
director of the company during fiscal 1996. Compensation was not paid to any
other director or officer during 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
NAME AND OTHER SECURITIES SHARES OR
PRINCIPAL ANNUAL UNDER RESTRICTED LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTION SHARE UNITS PAYOUTS COMPENSATION
-------- ---- ------ ----- ------------ ------ ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Erik Schannen 1996 $15,196 $ - $ 18,150 Nil Nil N/A Nil
President
</TABLE>
During fiscal 1996, no funds were set aside or accrued by the Company
to provide pension, retirement or similar benefits for directors or executive
officers.
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<PAGE> 44
ITEM 12. OPTIONS TO PURCHASE SECURITIES
1997 Stock Option Plan
On June 27, 1997, the Company adopted an equity incentive plan (the
"1997 Stock Option Plan"). Under the 1997 Stock Option Plan the Company may
grant stock options to directors, officers, key employees, consultants and
advisors to allow them to participate in the ownership and growth of the
Company. The Board of Directors has discretion, within the limits of the 1997
Stock Option Plan and subject to the approval of such regulatory authorities as
may have jurisdiction, to designate recipients, amounts, exercise prices and
other terms and conditions of the stock options. At no time shall the number of
shares reserved for issuance to any one person under the 1997 Stock Option Plan
or otherwise exceed five (5%) percent of the outstanding shares. There are
1,029,000 shares of common stock reserved for issuance under the Plan. To date,
4,750 common shares have been issued upon exercise of options granted under this
Plan.
Under the 1997 Stock Option Plan, the full purchase price payable under
the option shall be paid in cash upon the exercise thereof. Options may not be
granted for a period exceeding ten (10) years.
Under the 1997 Stock Option Plan, all options will terminate 30 days
following the termination of the optionee's employment or other relationship
with the Company. In the case of death or permanent and total disability of the
optionee, his or her options will terminate six months following the death or
permanent and total disability of the optionee.
In the event the common shares are exchanged for securities, cash or
other property of any other corporation or entity as the result of a
reorganization, merger or consolidation in which the Company is not the
surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the board of
directors of any successor corporation or entity may, in its discretion, as to
outstanding options: (a) accelerate the exercise date or dates of such options;
(b) upon written notice to the holders thereof, provided the options have
accelerated pursuant to item (a) above, terminate all such options prior to
consummation of the transaction unless exercised within a prescribed period; (c)
provide for payment of an amount equal to the excess of the market price of the
common stock over the option price of the option shares as of the date of the
transaction, in exchange for the surrender of the right to exercise such
options; or (d) provide for the assumption of such options, or the substitution
therefor of new options, by the successor corporation or entity. At February 2,
1998, a total of 37 persons held
42
<PAGE> 45
options to purchase 1,039,000 shares of the Company common stock at exercise
prices ranging from CDN$0.90 to CDN$2.00 per share.
Executive Option Holders
The following table lists options held by officers and directors of the
Company.
<TABLE>
<CAPTION>
Name of Options Exercise
Option Holder Position Outstanding Price
<S> <C> <C> <C>
Erik Schannen President 150,000 CDN $1.00
100,000 1.50
Brian Gibson Chief Operating Officer 170,000 CDN $0.90
Chief Financial Officer
Samuel Paul Director 10,000 CDN $1.50
Gordon Cowie Director 10,000 CDN $1.25
------
All executive
officers and
directors (4 persons) 440,000
=======
</TABLE>
Employee Stock Purchase Plan
On July 24, 1995 the Company established an Employee Stock Purchase
Plan to facilitate the purchase of shares of the Company by employees, through
payroll deductions, loans, guarantees or otherwise.
Warrants
Each Warrant entitles the holder, subject to the terms and conditions
set forth in the Warrant Certificate, to purchase from the Company one common
share of the Company at the applicable exercise price at any time on or before
March 31, 2002. The Company has six series of Warrants issued and outstanding,
all of which feature the same terms and conditions but have varying exercise
prices. All series of warrants were issued in connection with the acquisition of
Lasermedia to warrantholders of that company. A total of 2,931,468 shares of
common stock are reserved for issuance upon exercise of the Warrants. Through
January 15, 1998, 1,035,198 warrants have been exercised and 1,035,198 shares of
common stock have been issued in connection with the exercise thereof.
No fractional Shares shall be issued upon exercise of any Warrants and
no payments or adjus(TM)ents shall be made upon any exercise on account of any
cash dividends on the Shares issued upon such exercise. If any fractional
interest in the Shares would otherwise be deliverable upon the exercise of a
Warrant, the Company shall, in lieu of delivering the fractional share
43
<PAGE> 46
therefor, pay to the Warrantholder an amount in cash equal to the fair market
value of such fractional interest.
The class, number of shares issuable upon exercise and the exercise
price of the Warrants are subject to adjus(TM)ent in the event of a merger or
sale of the Company into new warrants of the surviving Company. If the Company
is unable to deliver Shares to the Warrantholder pursuant to the proper
exercise of a Warrant, the Company may satisfy such obligations to the
Warrantholder hereunder by paying to the Warrantholder in cash the difference
between the Exercise Price of all unexercised Warrants and the fair market
value of the Shares to which the Warrantholder would be entitled to upon
exercise of all unexercised Warrants. The Exercise Price of the Warrants is
subject to adjus(TM)ent if and when the Company issues shares of common stock
to its stockholders at a price less than the fair market value.
44
<PAGE> 47
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Share Purchase Agreements for Laserset Graphics Inc.
On October 16, 1997, Lasermedia, a subsidiary of the Company, acquired
Erik Schannen's 50% interest in Laserset Graphics Inc. through the purchase of
100 shares of capital stock for CDN$100,000. Laserset Graphics Inc. is engaged
in the business of computer design for industry. Mr. Schannen was the President,
CEO and a Director of Lasermedia and was a founder and President of Laserset
Graphics Inc. On November 19, 1997, Lasermedia acquired Cune Management's 50%
interest in Laserset Graphics Inc. through the purchase of 100 shares of capital
stock for CDN$100,000. Cune Management is currently a borrower of the Company
(see below). On December 31, 1997, Laserset Graphics Inc. amalgamated (merged)
into Lasermedia
Term Loan Agreement dated September 18, 1997
The Company agreed to loan Cune Management Inc., from time to time, the
principal sum, in the aggregate of up to CDN$250,000. The loan bears interest at
the rate of 12% per annum. Cune Management Inc. may repay the loan from time to
time in whole or in part without penalty, notice or bonus. The loan is scheduled
to mature on September 18, 1998. Cune Management Inc. created a security
interest in its shares of the Company's common stock for the benefit of the
Company as security for the loan.
Cune Management Inc. owns warrants to purchase 150,000 shares of the
Company, which are exercisable at any time through March 31, 2002. Cune
Management Inc. also holds 250,149 shares of the Company's common stock.
Acquisition of Lasermedia on June 27, 1997
The Company acquired all the issued and outstanding common shares and
common share purchase warrants of Lasermedia for a purchase price of
CDN$8,300,000. The purchase price was satisfied by the issuance of 11,033,487
common shares, 600,000 Series A common share purchase warrants, 200,000 Series B
common share purchase warrants, 200,000 Series C common share purchase warrants,
100,000 Series D common share purchase warrants, 2,866,666 Series E common share
purchase warrants and 258,000 Series F common share purchase warrants. Erik
Schannen, the President and a Director of the Company, owned 32.7% of the
Lasermedia shares acquired by the Company. The value of Lasermedia was
determined by an unaffiliated business valuation and litigation support company.
Acquisition of Verisim on May 23, 1997
Lasermedia, a subsidiary of the Company, acquired all of the shares of
capital stock of Verisim from all of its shareholders for a purchase price of
$300,000. The purchase price was satisfied by the issuance of 100,000 shares of
common stock of Lasermedia.
45
<PAGE> 48
ITEM 14. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company's authorized capital stock consists of (i) an unlimited
number of shares of common stock, no par value per share, of which 13,025,291
shares were issued and outstanding as of January 30, 1998, and (ii) 2,000,000
shares of preferred stock, of which no shares are currently issued and
outstanding.
Preference Shares
The Company is authorized to issue up to 2,000,000 shares of preference
stock. The preference shares, if issued, will be senior to the common shares in
liquidation, dissolution or winding-up of the Company. Pursuant to the
Certificate of Incorporation of the Company, the Company Board by resolution may
establish one or more series of preference stock having such number of shares,
designation, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as may be fixed by the Company Board without
any further stockholder approval. Such rights, preferences, privileges and
limitations as may be established could have the effect of impeding the
acquisition of control of the Company. There are no shares of preference stock
issued and outstanding.
Common Shares
Each Common Share is entitled to one vote on all matters presented to
the shareholders, is entitled to dividends as and when declared by the directors
of the Company and is entitled upon liquidation, dissolution or winding-up to a
pro rata share of the assets of the Company distributable to the holders of
common shares. The common shares carry no conversion or pre-emptive rights. The
Company is authorized to issue an unlimited number of common shares. At
January 30, 1998, there were 13,025,291 common shares, no par value per share,
issued and outstanding.
There are no restrictions on the repurchase or redemption of common
shares of the Company while there is any arrearage in the payment of dividends
or sinking fund installments.
Warrants
The Warrants entitle the holder, subject to the terms and conditions
set forth in the Warrant Certificate, to purchase from the Company in exchange
for each Warrant, one common share of the Company the applicable exercise price
at any time on or before March 31, 2002. The Company has six series of Warrants
issued and outstanding, all of which feature the same terms and conditions but
have varying exercise prices. All series of warrants were issued in connection
with the acquisition of Lasermedia to warrantholders of that company. A total of
2,931,468 shares of common stock are reserved for issuance. Through January 15,
1998, 1,035,198 warrants have been exercised and 1,035,198 shares of common
stock have been issued in connection with the exercise thereof.
46
<PAGE> 49
No fractional Shares shall be issued upon exercise of any Warrants and
no payments or adjus(TM)ents shall be made upon any exercise on account of any
cash dividends on the Shares issued upon such exercise. If any fractional
interest in the Shares would otherwise be deliverable upon the exercise of a
Warrant, the Company shall, in lieu of delivering the fractional share therefor,
pay to the Warrantholder an amount in cash equal to the fair market value of
such fractional interest.
The class, number of shares issuable upon exercise and the exercise
price of the Warrants are subject to adjus(TM)ent in the event of a merger or
sale of the Company into new warrants of the surviving Company. If the Company
is unable to deliver Shares to the Warrantholder pursuant to the proper
exercise of a Warrant, the Company may satisfy such obligations to the
Warrantholder hereunder by paying to the Warrantholder in cash the difference
between the exercise price of all unexercised Warrants and the fair market
value of the Shares to which the Warrantholder would be entitled to upon
exercise of all unexercised Warrants. The Exercise Price of the Warrants is
subject to adjus(TM)ent if and when the Company issues shares of common stock
to its stockholders at a price less than the fair market value.
47
<PAGE> 50
ITEMS 15-17. NOT REQUIRED
Items 15-16 are not required for registration statements. The Company
chose to provide the financial statements specified in Item 18 in lieu of Item
17.
48
<PAGE> 51
<TABLE>
<CAPTION>
ITEM 18. FINANCIAL STATEMENTS
PAGE NO.
--------
<S> <C>
Index to Financial Statements and Supplementary Data............................................................F-1
Reports of Independent Accountants..............................................................................F-2
Balance Sheets of the Company (Unaudited) as of
September 30, 1997 and (Audited) as of December 31, 1996 and 1995...............................................F-4
Statements of Operations of the Company (Unaudited) as of
September 30, 1997 and (Audited) for the Three Years Ended
December 31, 1996, 1995 and 1994................................................................................F-5
Statements of Cash Flows of the Company (Unaudited) as of September 30, 1997 and
(Audited) for the Three Years Ended
December 31, 1996, 1995 and 1994................................................................................F-6
Statements of Retained Earnings (Deficit) of the Company
(Audited) for the Three Years Ended (Unaudited) as of
September 30, 1997 and December 31, 1996, 1995 and 1994.........................................................F-7
Notes to Combined Financial Statements for Years Ended
December 31, 1996, 1995 and 1994................................................................................F-8
Supplemental Notes.............................................................................................F-14
Pro Forma Consolidated Balance Sheets as of January 1, 1997....................................................F-17
</TABLE>
F-1
<PAGE> 52
REPORTS OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Partners of LASERMEDIA INC., ET AL.
We have audited the combined balance sheets of LASERMEDIA INC. ET AL as
at December 31, 1996, 1995 and 1994 and the combined statements of operations,
retained earnings and changes in financial position for the years then ended.
These financial statements are the responsibility of the Company's management
(See Note 1). 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 combined financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1996, 1995 and 1994 and the results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles.
/s/ Silver Gold Glatt & Grossman
---------------------------------
Chartered Accountants
Toronto, Ontario
March 25, 1997
F-2
<PAGE> 53
REPORTS OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Partners of OSGOODE HOLDINGS INC.
We have reviewed, as to compilation only, the accompanying pro-forma
consolidated balance sheet of Lasermedia Communications Corp. as at January 1,
1997 prepared for inclusion in the Osgoode Holdings Inc.'s management
information circular dated May 23, 1997 relating to the offer by Osgoode
Holdings Inc. to acquire all of the common shares and warrants of Lasermedia
Inc., et al.
In our opinion, the pro-forma balance sheet has been properly compiled
to give effect to the proposed transactions and the assumptions described in
note 1 thereto.
/s/ Silver Gold Glatt & Grossman
-----------------------------------
Chartered Accountants
Toronto, Ontario
May 23, 1997
F-3
<PAGE> 54
LASERMEDIA COMMUNICATIONS CORP.
BALANCE SHEET DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
BALANCE SHEET COMBINED BALANCE SHEETS
(UNAUDITED)1 AS OF
AS OF DECEMBER 31(2)
SEPTEMBER 30, 1997 1996 1995
------------------ ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT
Cash CDN$1,711,032 CDN$ 28,966 CDN$1,870
Accounts receivable 392,796 132,929 183,748
Allowance for uncollectable receivables -- -- --
Subscriptions receivable 14,900 -- --
Inventory 56,187 6,393 --
Prepaid expenses and sundry assets 75,415 -- 9,857
Due from related companies 489,188 -- --
Loans receivable -- -- 16,069
------------- --------------- ---------------
2,739,518 168,288 211,544
CAPITAL ASSETS (Note 2) 568,149 115,011 90,920
PRODUCT DEVELOPMENT COSTS 414,609 288,269 181,405
GOODWILL 507,791 1 --
------------- --------------- ----------------
TOTAL ASSETS CDN$4,230,067 CDN$571,569 CDN$483,869
============= =========== ===========
LIABILITIES
CURRENT
Bank loan CDN$195,833 CDN$ -- CDN$ --
Accounts payable and accrued liabilities 537,318 129,834 173,871
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- -------------- ---------------
756,961 157,080 197,114
-------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- --------------- ----------------
DEFERRED INCOME TAXES CDN$940,335 CDN$526,743 CDN$265,637
----------- ----------- -----------
CDN$104,000 CDN$ 72,000 CDN$ 45,400
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 6) -- -- --
Preferred Stock, no par value per share; 2,000,000
voting preferred shares authorized; no shares
issued and outstanding. 3
Common Stock, no par value per share; unlimited
shares of common stock authorized; 12,978,344
issued and outstanding.
PAID IN CAPITAL 3,036,403 99,296 2
RETAINED EARNINGS (DEFICIT) 253,329 (54,470) 218,230
------- -------- -------
3,289,732 44,826 218,232
--------- ------ -------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY CDN$4,230,067 CDN$571,569 CDN$483,869
============= =========== ===========
</TABLE>
- --------
1. The unaudited statement of operations for the nine month period ended
September 30, 1997 give effect to a reverse takeover acquisition using the
purchase method of accounting. The consolidated financial statement
represents a continuation of the financial statements of the wholly-owned
subsidiary, Lasermedia. The only other subsidiary of the Company, Verisim,
has not as yet generated revenue.
2. The selected data as of and for the years ended December 31, 1996 and 1995
are derived from the audited financial statements of the Company. The
combined financial statements include Laserset Graphics Inc., which was
acquired by Lasermedia in the fourth quarter of 1997 and was subsequently
amalgamated on December 31, 1997. The figures for September 30, 1997 only
relate to Lasermedia, a subsidiary of the Company. The only other
subsidiary of the Company, Verisim, has not as yet generated revenue.
3. The number of preference shares that can be issued by the Company at any
one time is limited to 500,000.
F-4
<PAGE> 55
LASERMEDIA COMMUNICATIONS CORP.
STATEMENT OF OPERATIONS DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED)1 COMBINED STATEMENTS OF OPERATIONS
AS OF SEPTEMBER 30 AS OF DECEMBER 31(2)
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SALES CDN$2,285,325 CDN$287,366 CDN$659,617 CDN$583,048 CDN$481,462
COST OF SALES 269,532 202,280 449,181 323,009 217,649
------- ------- ------- ------- -------
GROSS MARGIN 2,015,793 85,086 210,436 260,039 263,813
--------- ------- ------- ------- -------
EXPENSES
Selling costs 287,352 53,245 70,993 11,069 --
General and administrative3 1,192,385 93,549 214,664 110,963 129,852
Research and development 41,338 -- 69,402 28,918 --
---------- --------- --------- --------- -------
1,521,075 146,794 355,059 150,950 129,852
--------- ------- ------- ------- -------
Income (loss) before income tax 494,718 (61,708) (144,623) 109,089 133,961
---------- ----------- ---------- --------- ---------
Provision for (recovery of) income
taxes
- current 127,000 -- (15,400) 9,600 5,800
- deferred 32,000 -- 26,600 18,400 27,000
- reduction due to application of
losses (82,800) -- -- -- --
-------- ------ ------- ------ ------
76,200 -- 11,200 28,000 32,800
------- ------ ------- ------ ------
NET INCOME (LOSS) $ 418,518 $ (61,708) $ (155,823) $ 81,089 $ 101,161
========== =========== ============ ========= ==========
NUMBER OF SHARES ISSUED 12,978,344 7,000,000
========== =========
BASIC EARNINGS (LOSS) PER SHARE CDN$0.04 CDN$(0.01)
</TABLE>
- --------
1 The unaudited statement of operations for the nine month period ended
September 30, 1997 and 1996 give effect to a reverse acquisition
transaction using the purchase method of accounting. These consolidated
financial statements represent a continuation of the financial statements
of the wholly-owned subsidiary, Lasermedia. The only other subsidiary of
the Company, Verisim, has not as yet generated revenue.
2 The selected data as of and for the years ended December 31, 1996, 1995
and 1994 are derived from the audited financial statements of the Company.
The combined financial statements include Laserset Graphics Inc., which
was acquired by Lasermedia in the fourth quarter of 1997 and was
subsequently amalgamated on December 31, 1997. The comparative figures for
September 30, 1997 and 1996 only relate to Lasermedia, a subsidiary of the
Company. The only other subsidiary of the Company, Verisim, has not as yet
generated revenue.
3 The Company issued 1,850,000 shares of common stock in lieu of consulting
services performed having a fair market value of C$462,500 which is
included in this figure.
F-5
<PAGE> 56
LASERMEDIA COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
CASH FLOWS (UNAUDITED)
AS OF COMBINED STATEMENTS OF CASH FLOWS
SEPTEMBER 30 AS OF DECEMBER 31
------------ ------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $418,518 $(61,708) $(155,823) $81,089 $101,161
Adjustment for non-cash items:
Deferred income taxes 32,000 - 26,600 18,400 27,000
Amortization 81,039 5,881 29,411 29,464 29,884
Amortization of product 41,338 -- 69,402 28,918 --
------ ------- ---------- --------- -------
development costs 572,895 (55,827) (30,410) 157,871 158,045
Changes in non-cash operating
assets and liabilities (22,670) 341,961 10,243 (8,833) 33,660
-------- ------- ---------- --------- -----------
CASH PROVIDED BY (EXPENDED IN)
OPERATING ACTIVITIES 595,565 286,134 (20,167) 149,038 191,705
------- ------- -------- ------- ------------
INVESTING ACTIVITIES
Goodwill (548,963) -- 1 -- --
Purchase of capital assets (563,584) (31,963) (53,501) (13,340) (25,165)
Expenditures on product
development costs (309,513) (89,513) (176,266) (99,471) (110,852)
--------- -------- --------- -------- -----------
CASH EXPENDED IN INVESTING ACTIVITIES (1,422,060) (121,476) (229,766) (112,811) (136,017)
----------- --------- --------- --------- -----------
FINANCING ACTIVITIES
Bank loans 281,517 -- -- -- --
Drawings -- -- (116,877) (42,323) (46,895)
Issue of capital stock 2,975,651 -- 99,294 -- 2
Advances to related companies (735,523) (166,001) -- -- --
Advances from related companies -- -- 291,786 -- --
Increase (decrease) in loan payable -- -- (13,243) 20,791 5,599
Decrease (increase) in loans receivable -- -- 16,069 (16,067) (2)
------------- ----------- -------- -------- ----------
CASH PROVIDED BY (EXPENDED IN)
FINANCING ACTIVITIES 2,521,645 (166,001) 277,029 (37,599) (52,494)
--------- --------- ------- -------- --------
NET CHANGE IN CASH 1,695,150 (1,343) 27,096 (1,372) 3,194
CASH, Beginning of period 15,882 535 1,870 3,242 48
---------- --------- ----- ----- ---------
CASH, End of period CDN$1,711,032 CDN$ (808) CDN$ 28,966 CDN$ 1,870 CDN$ 3,242
============= ============= ============ =========== ===========
</TABLE>
F-6
<PAGE> 57
LASERMEDIA COMMUNICATIONS CORP.
STATEMENT OF RETAINED EARNINGS (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
AS OF COMBINED STATEMENTS OF RETAINED EARNINGS
SEPTEMBER 30 AS OF DECEMBER 31
------------ -----------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS (DEFICIT),
BEGINNING OF PERIOD CDN$(165,189) CDN$(11,912) CDN$218,230 CDN$179,464 CDN$129,425
NET INCOME (LOSS) 418,518 (61,709) (155,823) 81,089 101,161
DRAWINGS -- -- (116,877) (42,323) (51,122)
----------- ------------ --------- -------- --------
RETAINED EARNINGS,
END OF PERIOD CDN$253,329 CDN$(73,621) CDN$54,470 CDN$218,230 CDN$179,464
=========== ============ ========== =========== ===========
</TABLE>
F-7
<PAGE> 58
LASERMEDIA COMMUNICATIONS CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. These combined statements of the Company are
prepared in accordance with generally accepted accounting principles (Canadian
GAAP) and include the accounts of Lasermedia, Inc., Laserset Graphics Inc. and
Laserset Graphics (a partnership) which as a group are referred to as the
"Company" in these financial statements. Laserset Graphics Inc. was
incorporated on June 4, 1996. The partnership's net assets were transferred
into Laserset Graphics Inc. on June 21, 1996. Laserset Graphics Inc. was
acquired by Lasermedia in the fourth quarter of 1997 and was subsequently
amalgamated on December 31, 1997.
With respect to the partnership, Laserset Graphics, these combined
financial statements reflect only the assets, liabilities, revenues and expenses
of the partnership and do not include any other assets, liabilities, revenues or
expenses of the partners or the liability for taxes on earnings of the partners.
No provision has been made for salaries or for interest on invested capital.
INVENTORY. Inventory is valued at the lower of cost or net realizable
value with cost being determined on a first-in, first-out basis.
CAPITAL ASSETS. The Company records capital assets at historical cost
and annually provides for amortization. Amortization rates are calculated to
write off the assets over their estimated useful life as follows:
Equipment 30% declining balance
Computer hardware 30% of declining balance
Automobile 30% of declining balance
Furniture and fixtures 20% of declining balance
Computer software 100% straight-line
Leasehold improvements straight-line over 5 years
PRODUCT DEVELOPMENT COSTS. Product development costs are capitalized
until the associated products reach commercial production. These costs will be
amortized over three years on a straight line basis once commercial production
has commenced.
F-8
<PAGE> 59
2. CAPITAL ASSETS
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------- ----------------- -----------------
ACCUMULATED NET BOOK NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C>
Equipment $ 90,098 $ 18,394 $ 71,704 $ 82,170 $ 92,643
Computer hardware 45,261 6,789 38,472 -- --
Automobile 3,817 1,145 2,672 3,817 5,453
Furniture and 2,664 501 2,163 2,350 2,709
fixtures
Computer software 1,446 1,446 -- 1,447 3,588
Leasehold 1,136 1,136 -- 1,136 2,651
---------
improvements
$144,422 $ 29,411 $115,011 $ 90,920 $107,044
--------
</TABLE>
3. LOAN PAYABLE
The loan from P.H. Pedrette is unsecured, bears interest at 7% per
annum and is due on demand.
F-9
<PAGE> 60
4. LONG TERM DEBT
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Bank term loan #1 - repayable in monthly installments $ 7,516 $12,270 $16,908
of $396 on account of principal plus interest at prime
plus 1.75% per annum. The loan is secured by a
general security agreement.
Bank term loan #2 - repayable in monthly installments 3,467 6,067 8,667
of $216 on account of principal plus interest at prime
plus 2.5% per annum. The loan is secured by specific
equipment.
Bank term loan #3 - repayable in monthly installments 890 3,029 --
of $178 on account of principal plus interest at prime
plus 3% per annum. The loan is secured by specific
equipment.
Ontario Film Development Corporation - is unsecured, 11,250 15,000 --
------ ------ -------
non-interest bearing and is repayable in monthly
principal payments of $750 for the period August 1,
1996 to March 1, 1998
23,123 36,366 25,575
Less: current portion 17,246 13,243 7,237
------ ------ -----
$ 5,877 $23,123 $18,338
-------
</TABLE>
F-10
<PAGE> 61
5. DUE TO RELATED COMPANIES
The advance of CDN$40,000 from one of the shareholders, Cune Management
Limited, is non-interest bearing, unsecured, with no fixed term of repayment.
The advances from a related company of CDN$251,786 are non-interest bearing,
unsecured, with no fixed terms of repayment.
6. CAPITAL STOCK
AUTHORIZED
Unlimited Common shares
ISSUED 1996 1995 1994
400 Common Shares
(1995 - 200, 1994 - 200) CDN$ 99,296 CDN$ 2 CDN$ 2
=========== ========= ========
On June 21, 1996, Laserset Graphics, Inc. purchased the net assets of Laserset
Graphics (a partnership) for CDN$99,294 by issuing 200 common shares to the
Partners.
7. INCOME TAXES
The Company follows the deferral method of applying the tax allocation
basis of accounting for income taxes. Under this method, timing differences
between the period when income and expenses are reported for tax purposes and
the period when they are recorded in the accounts result in provisions for
deferred taxes.
At December 31, 1996, the Company had non-capital losses for income tax
purposes of approximately CDN$94,500 available to offset future taxable income.
The potential tax benefits have not been reflected in these financial
statements. These losses will expire as follows:
2002 CDN$ 12,000
2003 CDN$ 82,500
CDN$ 94,500
F-11
<PAGE> 62
8. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
These financial statements have been prepared in accordance with
generally accepted accounting principles in Canada ("Canadian GAAP") which, in
the case of these financial statements, conform in all material respects with
those in the United States ("U.S. GAAP"), except as follows:
(A) Adjus(TM)ents to Earnings
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS COMBINED STATEMENTS
(UNAUDITED) OF OPERATIONS
AS OF AS OF
SEPTEMBER 30 DECEMBER 31
------------ -----------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income (Loss) in accordance with
Canadian GAAP $ 418,518 $ (61,708) $ (155,823) $ 81,089 $ 101,161
Less: product development costs1 (net of
taxes)2 94,340 -- 80,264 52,153 83,852
------- ---------- ------ ------ ------
Net income (Loss) in accordance
with U.S. GAAP $ 324,178 $ (61,708) $ (236,087) $ 28,936 $ 17,309
======= ======== ========= ====== ======
Weighted average number of common
shares under U.S. GAAP3 10,345,766 7,000,000 7,000,000 7,000,000 7,000,000
Primary earnings (loss) per share
in accordance with U.S. GAAP3 $ NIL $ 0.01 $ 0.03 $ NIL $ NIL
=== ==== ==== === ===
</TABLE>
- --------
1. Product development costs, which are capitalized under Canadian GAAP, are
expensed under U.S. GAAP.
2. Under U.S. GAAP, in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), Accounting for Income Taxes, Income
taxes are accounted for using the liability method. Under the liability
method, deferred tax assets and liabilities are recognized for temporary
differences between the financial statement carrying amounts and the tax
basis amounts of the respective assets and liabilities at the enacted tax
rates. Such differences arise from the differences in the timing of income
and expense recognition. Under Canadian GAAP, income taxes are accounted
for using the deferral method whereby the differences between the tax and
accounting basis of the Company's assets and liabilities are measured at
the tax rate in effect when the difference arises. In addition, deferred
tax assets are recognized for loss carryforwards if it is virtually
certain that the benefit will be realized.
3. Under U.S. GAAP, the primary earnings (loss) per share are based on the
weighted average aggregate umber of common shares and their equivalents
outstanding during each year, using the "treasury stock method" for the
outstanding stock options.
F-12
<PAGE> 63
(B) Adjustments to Assets, Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS COMBINED STATEMENTS
(UNAUDITED) OF OPERATIONS
AS OF AS OF
SEPTEMBER 30 DECEMBER 31
------------ -----------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
(i) Total Assets in accordance with
Canadian GAAP $4,230,067 N/A $571,569 $483,869 N/A
Less: Deferred product
development costs 414,609 288,269 181,405
Deferred stock compensation 278,500 N/A -- -- N/A
costs1
Total Assets in accordance
with U.S. GAAP $4,094,008 $283,300 $302,464
========== ======== ========
(ii)Total liabilities in accordance with
Canadian GAAP $ 940,335 N/A $526,743 $265,637 N/A
Less: Deferred income taxes2 104,000 72,000 45,400
Increase in capital stock due to
deferred stock compensation
costs1 278,550 N/A -- -- (N/A
---------- ---------- --------
Total liabilities in accordance with
U.S. GAAP $ 836,335 $ 454,743 $220,237
========== ========== ========
(iii) Total shareholders' equity in
accordance with Canadian GAAP $3,289,732 N/A $ 44,826 $218,232 N/A
Less: Product development costs3
(net of taxes)2 310,609 216,259 136,005
---------- ---------- --------
Total shareholders' equity in
accordance with U.S. GAAP $2,979,123 $ (171,433) $ 82,227
========== ========== ========
</TABLE>
(C) Adjus(TM)ents to Cash Flows
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS COMBINED STATEMENTS
(UNAUDITED) OF OPERATIONS
AS OF AS OF
SEPTEMBER 30 DECEMBER 31
------------ ------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash provided by operating activities
in accordance with Canadian GAAP $595,565 $ 286,134 $ (20,167) $ 149,038 $ 191,705
Less: product development costs3
(net of taxes)2 94,340 -- 80,264 52,153 83,852
--------- ----------- ----------- ---------- ----------
Cash provided by operating activities
in accordance with U.S. GAAP $501,225 $ 288,134 $ (100,431) $ 96,885 $ 107,853
======== =========== =========== ========== ==========
</TABLE>
- --------
1. Under U.S. GAAP, in accordance with Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), Accounting for Stock Based Compensation,
the Company is required to either disclose or recognize stock based
compensation costs using the fair market value method. Under Canadian
GAAP, the fair market value of stock based compensation costs, using
either the intrinsic or fair value methods, is not recognized or disclosed
in the financial statement.
2. Under U.S. GAAP, in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), Accounting for Income Taxes, Income
taxes are accounted for using the liability method. Under the liability
method, deferred tax assets and liabilities are recognized for temporary
differences between the financial statement carrying amounts and the tax
basis amounts of the respective assets and liabilities at the enacted tax
rates. Such differences arise from the differences in the timing of income
and expense recognition. Under Canadian GAAP, income taxes are accounted
for using the deferral method whereby the differences between the tax and
accounting basis of the Company's assets and liabilities are measured at
the tax rate in effect when the difference arises. In addition, deferred
tax assets are recognized for loss carryforwards if it is virtually
certain that the benefit will be realized.
3. Product development costs, which are capitalized under Canadian GAAP, are
expensed under U.S. GAAP.
F-13
<PAGE> 64
9. SUPPLEMENTAL NOTES
(A) Earnings (Loss) Per Share
The basic earnings (loss) per share have been calculated using the
weighted average aggregate number of common shares outstanding during the year.
<TABLE>
As of As of As of
9/30/97 9/30/96 12/31/96 12/31/95 12/31/94
--------- --------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
Weighted average number of 9,959,280 7,000,000 7,000,000 7,000,000 7,000,000
common shares outstanding
Basic earnings (loss) per share $ 0.04 $ (0.01) $ (0.02) $ 0.01 $ 0.01
</TABLE>
The weighted average number of common shares for the periods ending 1994 - 1996
reflect the conversion of 200 common shares that were outstanding throughout
these periods into 7,000,000 common shares on March 26, 1997.
(B) Changes in Non-Cash Operating Assets and Liabilities
<TABLE>
As of As of As of
9/30/97 9/30/96 12/31/96 12/31/95 13/31/94
--------- --------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
(Increase) decrease in accounts $ (259,867) $ 161,692 $ 50,819 $ (106,293) $ (78,455)
receivable
(Increase) decrease in subscriptions (14,900) - - - -
receivable
(Increase) decrease in inventory (47,794) - (6,393) - -
(Increase) decrease in prepaid (75,415) - 9,857 (29,009) (2,000)
expenses and sundry assets
Increase (decrease) in accounts payable
and accrued liabilities 376,446 180,269 (28,640) 94,717 106,515
---------- ---------- -------- ---------- ---------
$ (21,530) $ 341,961 $25,643 $ (18,433) $ 27,860
=========== ========== ======= =========== =========
</TABLE>
No income taxes were paid during the periods represented, and the amount of
cash interest is not presented since it is immaterial.
F-14
<PAGE> 65
(C) Loans Due From Related Companies (Status as of September 30, 1997)
<TABLE>
<CAPTION>
<S> <C>
Advances to related companies are summarized as Sept. 30, 1997
follows: --------------
Advances to R.T. Equity Inc. are non-interest $ 50,125
bearing, unsecured and due on demand
Advances to Laserset Graphics Inc. are non-interest 189,063
bearing, unsecured and due on demand
Advance to Cune Management Inc. bears interest at
12% per annum, secured by a pledge of shares of
the company and is due on September 18, 1998 $ 250,000
--------
Total 489,188
========
</TABLE>
(D) Loan Agreement with Bank of Nova Scotia
The Company is in repayment under a loan agreement with the Bank of
Nova Scotia. The loan proceeds were used to finance leasehold improvements. The
loan bears interest at an annual rate equal to the bank's prime rate plus 2.5%,
is due on demand, and is secured by a general security encumbering enhancing the
assets of the Company. The loan balance was $195,000 as of September 30,1997.
(E) Stock Option Plans
The Company has approved a stock option plan (the "Plan") for
directors, officers, employees, consultants and advisors of Lasermedia
Communications Corp., its subsidiaries and affiliates. The purpose of the plan
is to attract, retain and motivate management and staff by providing them with
the opportunity, through share options, to acquire a proprietary interest in the
company and to benefit from its growth. The Plan provides that the number of
common shares under option at any one time will not exceed 2,000,000 shares. No
single individual may hold options in respect of more than 5% of the issued and
outstanding common shares.
Stock options outstanding as at September 30, 1997 are exercisable as
follows:
<TABLE>
<CAPTION>
DATE OF GRANT NUMBER OF STOCK EXERCISE OPTION
OPTIONS ISSUED PRICE EXPIRATION DATE
<S> <C> <C> <C>
July 17, 1997 392,000 $ 1.00 July 16, 1999
July 17, 1997 50,000 $ 1.25 July 16, 1999
July 17, 1997 353,000 $ 1.50 July 16, 2000
July 17, 1997 63,000 $ 1.75 July 16, 2000
August 13, 1997 4,000 $ 1.25 August 12, 1999
August 13, 1997 4,000 $ 1.25 August 12, 2000
September 24, 1997 10,000 $ 1.60 September 24, 1999
</TABLE>
F-15
<PAGE> 66
<TABLE>
<S> <C> <C> <C>
September 24, 1997 10,000 * September 24, 1999
886,000
</TABLE>
* market price on March 24, 1998
F-16
<PAGE> 67
LASERMEDIA COMMUNICATIONS CORP.
SCHEDULE FOR PROFORMA BALANCE SHEET
JANUARY 1, 1997
<TABLE>
<CAPTION>
LASERMEDIA OSGOODE PRO-FORMA PROFORMA
INC. HOLDINGS ENTRIES BALANCE
INC. DR CR SHEET
<S> <C> <C> <C> <C> <C>
Cash CDN$28,966 CDN$ (4) CDN$4,875,00 CDN$4,903,966
Accounts receivable 132,929 132,929
Inventory 6,393 6,393
Capital Assets 115,011 115,011
Product Development Costs 288,269 288,269
Goodwill 1 (3) 305,784 305,785
Accounts payable & accrued (129,834) (218,965)(2) 218,965 (129,834)
liabilities
Loan payable (10,000) (10,000)
Current portion of long term (17,246) (17,246)
debt
Long Term Debt (5,877) (5,877)
Due To Related Companies (291,786) (291,786)
Capital Stock (99,296) (624,401)(1) 624,400(4) (4,875,000) (5,280,081)
(2) (305,784)
Retained Earnings (17,530) 843,366 (1) (624,400) (17,529)
(2) (218,965)
TOTAL CDN$0 CDN$0 CDN$6,024,149 CDN$(6,024,149 ) CDN$0
</TABLE>
NOTE:
(1) to record reduction of stated capital per resolution
(2) to eliminate Accounts Payable
(3) to record goodwill re: share per share exchange and debt settlement
agreement
(4) to record proceeds from private placement issue
F-17
<PAGE> 68
LASERMEDIA COMMUNICATIONS CORP.
RECONCILIATION TO U.S. GAAP
ITEM 19(A). FINANCIAL STATEMENTS AND EXHIBITS
For a list of all financial statements filed as part of this registration
statement please see Index to Financial Statements and Supplementary Data under
Item 18.
ITEM 19(B). EXHIBITS
EXHIBIT NO. DESCRIPTION
1(a) Articles of Incorporation
1(b) Bylaws
2(a) Specimen Common Stock Certificate
2(b) Form of Warrant
2(c)(1) 1997 Stock Option Plan
3(a)(1) Share Exchange Agreement dated April 7, 1997 by and between
Osgoode Holdings, Inc. and Lasermedia Inc.
3(a)(2) Consulting Services Agreement dated February 2, 1997 by and
between Lasermedia and Kevin Chaisson
3(a)(3) Consulting Agreement dated September 24, 1997 by and between
Lasermedia and Aludra Software Inc.
3(b)(1) Software Purchase Agreement dated June 27, 1997 by and between
Lasermedia and Softech L.P.
3(b)(2) Supply and Reseller Agreement dated June 27, 1997 by and between
Lasermedia and Softech L.P.
3(c)(1) Stock Option Agreements dated July 17, 1997 by and between
Lasermedia Communications Corp. and Brian Gibson
47
<PAGE> 69
3(c)(2) Stock Option Agreement dated July 17, 1997 by and between
Lasermedia Communications Corp. and Samuel Paul
3(c)(3) Stock Option Agreement dated July 17, 1997 by and between
Lasermedia Communications Corp. and Erik Schannen
3(c)(4) Stock Option Agreement dated December 8, 1997 by and between
Lasermedia Communications Corp. and Gordon Cowie
3(d)(1) Term Loan Agreement dated September 18, 1997 by and between Cune
Management, Inc. (Borrower) and Lasermedia Communications Corp.
(Lender)
3(d)(2) Pledge and Security Agreement dated September 18, 1997 by and
between Cune Management, Inc. (Borrower) and Lasermedia
Communications Corp. (Lender)
48
<PAGE> 70
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, Lasermedia Communications Corp. certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Lasermedia Communications Corp.
11 Charlotte Street
Toronto, Ontario M5V 2H5
Canada
Date: April 10, 1998 /s/ Robert Brian Gibson
-----------------------
Robert Brian Gibson
Chief Operating Officer,
Chief Financial Officer
49
<PAGE> 71
LASERMEDIA COMMUNICATIONS CORP.
RECONCILIATION TO U.S. GAAP
ITEM 19(A). FINANCIAL STATEMENTS AND EXHIBITS
For a list of all financial statements filed as part of this registration
statement please see Index to Financial Statements and Supplementary Data under
Item 18.
ITEM 19(B). EXHIBITS
EXHIBIT NO. DESCRIPTION
1(a) Articles of Incorporation
1(b) Bylaws
2(a) Specimen Common Stock Certificate
2(b) Form of Warrant
2(c)(1) 1997 Stock Option Plan
3(a)(1) Share Exchange Agreement dated April 7, 1997 by and between
Osgoode Holdings, Inc. and Lasermedia Inc.
3(a)(2) Consulting Services Agreement dated February 2, 1997 by and
between Lasermedia and Kevin Chaisson
3(a)(3) Consulting Agreement dated September 24, 1997 by and between
Lasermedia and Aludra Software Inc.
3(b)(1) Software Purchase Agreement dated June 27, 1997 by and between
Lasermedia and Softech L.P.
3(b)(2) Supply and Reseller Agreement dated June 27, 1997 by and between
Lasermedia and Softech L.P.
3(b)(3) Financial Statements of Softech L.P.
3(c)(1) Stock Option Agreements dated July 17, 1997 by and between
Lasermedia Communications Corp. and Brian Gibson
47
<PAGE> 72
3(c)(2) Stock Option Agreement dated July 17, 1997 by and between
Lasermedia Communications Corp. and Samuel Paul
3(c)(3) Stock Option Agreement dated July 17, 1997 by and between
Lasermedia Communications Corp. and Erik Schannen
3(c)(4) Stock Option Agreement dated December 8, 1997 by and between
Lasermedia Communications Corp. and Gordon Cowie
3(d)(1) Term Loan Agreement dated September 18, 1997 by and between Cune
Management, Inc. (Borrower) and Lasermedia Communications Corp.
(Lender)
3(d)(2) Pledge and Security Agreement dated September 18, 1997 by and
between Cune Management, Inc. (Borrower) and Lasermedia
Communications Corp. (Lender)
<PAGE> 1
EXHIBIT 1(A)
ARTICLES OF INCORPORATION
1(a)-1
<PAGE> 2
PROVINCE OF ONTARIO
BY THE HONOURABLE
JOHN YAREMKO,
PROVINCIAL SECRETARY AND MINISTER OF CITIZENSHIP
TO ALL TO WHOM THESE PRESENTS SHALL COME
G R E E T I N G
WHEREAS, The Corporations Act provides that with the exceptions therein
contained the Lieutenant Governor may in his discretion, by Letters Patent,
issue a Charter to any number of persons, not fewer than three, of twenty-one or
more years of age, who apply therefor, constituting them and any others who
become shareholders or members of the corporation thereby created a corporation
for any of the objects to which the authority of the Legislature extends;
AND WHEREAS, by the said Act it is further provided that the Provincial
Secretary may in his discretion and under the Seal of his office have, use,
exercise and enjoy any power, right or authority conferred by the said act on
the Lieutenant Governor;
AND WHEREAS, by their Application in that behalf the persons herein named
have applied for the issue of a Charter constituting them a corporation for the
due carrying out of the undertaking hereinafter set forth;
AND WHEREAS, it has been made to appear that the said persons have complied
with the conditions precedent to the issue of the desired Charter and that the
said undertaking is within the scope of the said Act;
AND WHEREAS, by The Depar(TM)ent of the Provincial Secretary and
Citizenship Act, 1960-61 it is provided that the Provincial Secretary and
Minister of Citizenship may exercise the powers that were conferred on the
Provincial Secretary at the time the said Act came into force;
NOW THEREFORE KNOW YE, that under the authority of the hereinbefore in part
recited Acts I DO BY THESE LETTERS PATENT issue a Charter to the Persons
hereinafter named that is to say: William Russell Miller, Mining Executive, John
Montgomery Bolton and Murray Clifford Dillon, Solicitors, all of the City of
Toronto, in the County of York and Province of Ontario, George Benedict, of the
Township of North York, in the said County of York, Business Executives and
Russell Edwin Vance, of the Township of Scarborough, in the said County of York,
Depar(TM)ent Supervisor; constituting to them and any others who become
shareholders of the Company hereby created a company under the name of
1(a)-2
<PAGE> 3
BENVAN MINES LIMITED
for the following objects, that is to say:
(a) TO acquire, own, lease, prospect for, open, explore, develop, work,
improve, maintain and manage mines and mineral lands and deposits, and to dig
for, raise, crush, wash, [smelt], [decay], analyze, reduce, amalgamate, refine,
pipe, convey and otherwise treat ores, metals and minerals, whether belonging to
the Company or not, and to render the same [unrebeatable] and to sell or
otherwise dispose of the same or any part thereof or interest therein; and
(b) TO take, acquire and hold as consideration for ores, metals or minerals
sold or otherwise disposed of or for goods supplied or for work done by contract
or otherwise, shares, debentures or other securities of or in any other company
having objects similar, in whole or in part, to those of the Company hereby
incorporated and to sell and otherwise dispose of the same;
THE AUTHORIZED CAPITAL of the Company to be Five Million dollars
($5,000,000) divided into Five Million (5,000,000) shares with a par value of
One Dollar ($1.00) each;
THE HEAD OFFICE of the Company to be [located] in the Municipality of
Metropolitan Toronto, in the said County of York; and
THE FIRST DIRECTORS of the Company to be William Russell Miller, George
Benedict, Russell Edwin Vanoe, John Montgomrey Bolton and Murray Clifford
Dillon, herein before mentioned;
AND IT IS HEREBY ORDAINED AND DECLARED that the said Company shall be
subject to Part IV of The Corporations Act;
AND IT IS HEREBY FURTHER ORDAINED AND DECLARED:
(1) THAT except where the shares are listed on a recognized stock exchange,
the directors may refuse to permit the registration of a transfer of fully-paid
shares registered in the name of a shareholder who is indebted to the Company;
(2) THAT it shall not be necessary for a majority of the board of directors
of the Company to constitute a quorum, but the quorum shall be two-fifths (2/5)
of the board of directors;
(3) THAT every shareholder of the Company entitled to vote at an election
of directors has the right to cast thereat a number of votes equal to the number
of votes attached to the shares held by him multiplied by the number of
directors to be elected, and he may cast all such votes in favour of one (1)
candidate or distribute them among the candidates in such manner as he sees fit,
and that, where he has voted for more than one (1) candidate without specifying
the distribution of his votes among such candidates, he shall be deemed to have
divided his votes equally among the candidates for whom he voted;
1(a)-3
<PAGE> 4
(4) THAT the shareholders of the Company may, by a resolution passed by at
least two-thirds (2/3) of the votes cast at a general meeting of which notice
specifying the intention to pass such resolution has been given, remove any
director before the expiration of his term of office, and may, by a majority of
the votes cast at that meeting, elect any person in his stead for the remainder
of his term, but that no director shall be removed where the votes cast against
the resolution for his removal would, if cumulatively voted at in election of
the full board of directors, be sufficient to elect one (1) or more directors;
and
(5) THAT the Company may pay commissions to persons in consideration of
their subscribing or agreeing to subscribe, whether absolutely or conditionally,
for shares in the Company, or procuring or agreeing to procure subscriptions
whether absolute or conditional for such shares, but no such commission shall
exceed twenty-five percent (25%) of the amount of the subscription.
GIVEN under my hand and Seal of office at the City of Toronto in the said
Province of Ontario this twentieth day of April in the year of Our Lord one
thousand nine hundred and sixty-four.
John Yaremko
Provincial Secretary and
Minister of Citizenship
1(a)-4
<PAGE> 5
CERTIFICATE OF AMENDMENT OF ARTICLES
THIS IS TO CERTIFY THAT
HOWIE CONTROLS (CANADA) LIMITED
(FORMERLY BENVAN MINES LIMITED)
INCORPORATED OR AMALGAMATED ON APRIL 20, 1964
HAS UNDER SECTION 190 OF THE BUSINESS CORPORATIONS
ACT DELIVERED THE ATTACHED ARTICLES OF AMENDMENT
THESE ARTICLES OF AMENDMENT ARE EFFECTIVE
July 10, 1975
File Number:
132323 ---------------------
Controller of Records
Companies Division
Ministry of Consumer and
Commercial Relations
1(a)-5
<PAGE> 6
ARTICLES OF AMENDMENT
OF
BENVAN MINES LIMITED
- --------------------------------------------------------------------------------
(NAME OF CORPORATION)
INCORPORATED ON April 20th, 1964.
---------------------------------------------------------
(DATE OF INCORPORATION)
1. THE FOLLOWING IS A CERTIFIED COPY OF THE RESOLUTION AMENDING THE
ARTICLES OF THE CORPORATION:
"RESOLVED as a Special Resolution that the Articles of the
Corporation are hereby amended to:
1. (a) change the name of the Corporation to Howie Controls
(Canada) Limited, or such other name as may be acceptable to the
Minister;
(b) delete the reference in the Corporation's Articles to
Part IV of The Corporations Act (Ontario);
(c) delete the existing objects of the Corporation and replace
them with the following objects clause: "To acquire, own and to
carry on the business of and to manufacture, produce, adapt,
prepare, import, export, buy, sell and otherwise deal in, goods,
wares, materials, articles and merchandise of every nature and
kind whatsoever, and, without limiting the generality of the
foregoing, to manufacture, fabricate, construct, erect and
maintain heating, ventilating, air-conditioning and refrigeration
machinery, equipment and controls and generally carry on a
wholesale, retail, manufacturing and sales business in the
aforesaid goods, wares and merchandise";
(d) change and redesignate the 1,700,005 issued and the
3,299,995 unissued shares of the Corporation with a par value of
$1 each into 1,700,005 issued and 3,299,995 unissued common shares
without par value;
(e) decrease the capital of the Corporation by the cancellation
of 607,505 issued common shares donated to the Corporation and the
cancellation of 5 authorized but unissued common shares, resulting
in 1,092,500 issued common shares outstanding and 3,299,990
authorized but unissued common shares;
1(a)-6
<PAGE> 7
(f) consolidate the 1,092,500 issued common shares and the
3,299,990 authorized but unissued common shares into 109,250
issued common shares and 329,999 authorized but unissued shares;
(g) increase the capital of the Corporation by creating
1,560,751 authorized but unissued common shares ranking on a
parity with the existing 109,250 issued common shares and the
329,999 authorized but unissued common shares, provided however,
that the aggregate consideration for the issue of the said
2,000,000 common shares without par value shall not exceed in
amount or value the sum of $2,000,000 or such greater amount as
the board of directors of the Corporation by resolution
determines, provided that such resolution shall not be effective
until a certified copy thereof has been filed with the minister,
all prescribed fees have been paid and the Minister has so
certified;
(h) enable the Corporation, from time to time, to purchase any
of its issued common shares;
(i) reduce the capital attributed to the issued common shares
without par value of the Corporation after giving effect to the
foregoing, from $235,005 to $1.
2. The directors and officers be and they are hereby authorized to
do, sign, and execute all things, deeds and documents necessary or
desirable for the due carrying out of the foregoing."
2. THE AMENDMENT HAS BEEN DULY AUTHORIZED AS REQUIRED BY SUBSECTIONS 2, 3
AND 4 (AS APPLICABLE) OF SECTION 189 OF THE BUSINESS CORPORATIONS ACT.
3. THE RESOLUTION AUTHORIZING THE AMENDMENT WAS CONFIRMED BY THE
SHAREHOLDERS OF THE CORPORATION ON MAY 30, 1975.
1(a)-7
<PAGE> 8
4. THESE ARTICLES ARE EXECUTED IN DUPLICATE FOR DELIVERY TO THE MINISTER.
CERTIFIED BENVAN MINES LIMITED
-------------------------------------
(NAME OF CORPORATION)
By:
----------------------------------
(SIGNATURE) President (DESCRIPTION
OF OFFICE)
(CORPORATE SEAL)
----------------------------------
(SIGNATURE) Secretary (DESCRIPTION
OF OFFICE)
1(a)-8
<PAGE> 9
ARTICLES OF AMENDMENT
1. THE NAME OF THE CORPORATION IS:
Howie Controls (Canada) Limited
2. DATE OF INCORPORATION/ - 20 April, 1964
-----------------------------
(DAY, MONTH AND YEAR)
3. THE FOLLOWING IS A CERTIFIED COPY OF THE RESOLUTION AMENDING THE ARTICLES
OF THE CORPORATION:
(a) that the name of the Corporation be changed to "Benvan Holdings Inc."
(b) that the authorized capital of the Corporation be expanded to consist
of 20,000,000 common shares without par value and 2,000,000 voting special
preference shares each with a par value of 1/10th of 1 cent and having the
following rights, restrictions and limitations:
(i) The special shares with a par value of 1/10ths of 1 cents
each shall be designated as redeemable, voting, non-participating
shares with a par value of 1/10th of 1 cent each (hereinafter called
the "Preference Shares").
(ii) No dividends at any time shall be declared, set aside or paid
on the Preference Shares.
(iii) In the event of the liquidation, dissolution or
winding-up of the Corporation or other distribution of assets or
property of the Corporation among shareholders for the purpose of
winding up its affairs the holders of the Preference Shares shall
be entitled to receive from the assets and property of the
Corporation a sum equivalent to the aggregate par value of the
Preference Shares held by them respectively before any amount
shall be paid or any property or assets of the Corporation
distributed to the holders of any common shares or shares of any
other class ranking junior to the Preference Shares. After payment
to the holders of the Preference Shares of the amount so payable
to them as above provided they shall not be entitled to share in
any further distribution of the assets or property of the
Corporation.
(iv) The Preference Shares shall be redeemable in
accordance with the provisions set forth in Clause V TM hereof,
on payment for each share to be redeemed of the par value thereof.
(v) The Corporation may not redeem the Preference Shares
or any of them prior to the expiration of five years from the
respective dates of issuance thereof, without the prior
1(a)-9
<PAGE> 10
consent of the holders of the Preference Shares to be redeemed.
The Corporation shall redeem the then outstanding Preference
Shares five years from the respective dates of issue of the
Preference Shares.
(vi) In the case of redemption of Preference Shares, the
Corporation shall at least thirty (30) days before the date
specified for redemption mail to each person who at the date of
mailing is a registered holder of Preference Shares to be redeemed
a notice in writing of the intention of the Corporation to redeem
such Preference Shares. Such notice shall be mailed by letter,
postage prepaid, addressed to each such shareholder at his address
as it appears on the records of the Corporation or in the event of
the address of any such shareholder not so appearing then to the
last known address of such shareholder; provided, however, that
accidental failure to given any such notice to one (1) or more of
such shareholders shall not affect the validity of such
redemption. Such notice shall set out the redemption price and the
date on which redemption is to take place and if part only of the
shares held by the person to whom it is addressed is to be
redeemed the number thereof so to be redeemed. On or after the
date so specified for redemption, the Corporation shall pay or
cause to be paid to or to the order of the registered holders of
the Preference Shares to be redeemed the redemption price thereof
on presentation and surrender at the head office of the
Corporation or any other place designated in such notice of the
certificates representing the Preference Shares called for
redemption. If a part only of the shares represented by any
certificate be redeemed a new certificate for the balance shall be
issued at the expense of the Corporation. From and after the date
specified for redemption in any such notice the holders thereof
shall not be entitled to exercise any of the rights of
shareholders in respect thereof unless payment of the redemption
price shall not be made upon presentation of certificates in
accordance with the foregoing provisions, in which case the rights
of the shareholders shall remain unaffected. The Corporation shall
have the right at any time after the mailing of notice of its
intention to redeem any Preference Shares to deposit the
redemption price of the shares so called for redemption or of such
of the said shares represented by certificates as have not at the
date of such deposit been surrendered by the holders thereof in
connection with such redemption to a special account in any
chartered bank or any trust company in Canada, named in such
notice, to be paid without interest to or to the order of the
respective holders of such Preference Shares called for redemption
upon presentation and surrender to such bank or trust company of
the certificates representing the same, and upon such deposit
being made or upon the date specified for redemption in such
notice, whichever is the later, the Preference Shares in respect
whereof such deposit shall have been made shall be redeemed and
the rights of the holders thereof after such deposit or such
redemption date, as the case may be, shall be limited to receiving
without interest their proportionate part of the total redemption
price so deposited against presentation and surrender of the said
certificates held by them respectively.
(vii) The Corporation may at any time or times purchase
for cancellation all or any part of the Preference Shares
outstanding from time to time from the holders thereof, at a price
not exceeding the par value thereof, with the consent of the
holders thereof.
1(a)-10
<PAGE> 11
(viii) The holders of the Preference Shares shall be entitled to
receive notice of and attend all meetings of shareholders of the
Corporation and shall have one (1) vote for each Preference Share held
at all meetings of the Shareholders of the Corporation.
(ix) No shareholder shall be entitled to sell, assign, transfer,
or otherwise dispose of any Preference Share or Shares without both
(a) the previous express sanction of the directors of the Corporation
expressed by a resolution passed at a meeting of the board of directors
of the Corporation or consented to by an instrument or instruments in
writing signed by a majority of the directors; and (b) the prior
written consent of the Ontario Securities Commission.
(x) The number of Preference Shares issuable by the Corporation at
any time shall be limited such that at no time shall more than 500,000
Preference Shares be issued and outstanding.
4. THE AMENDMENT HAS BEEN DULY AUTHORIZED AS REQUIRED BY SUBSECTIONS 2, 3
AND 4 (AS APPLICABLE) OF SECTION 189 OF THE BUSINESS CORPORATIONS ACT.
5. THE RESOLUTION AUTHORIZING THE AMENDMENT WAS CONFIRMED BY THE
SHAREHOLDERS OF THE CORPORATION ON November 29, 1982.
6. THESE ARTICLES ARE EXECUTED IN DUPLICATE FOR DELIVERY TO THE MINISTER.
CERTIFIED
HOWIE CONTROLS (CANADA) LIMITED
--------------------------------
(NAME OF CORPORATION)
By:
---------------------------------------
(CORPORATE SEAL) (SIGNATURE) (DESCRIPTION OF OFFICE)
1(a)-11
<PAGE> 12
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
1. The present name of the corporation is: Denomination sociale actuelle de
la compagnie:
B E N V A N H O L D I N G S I N C.
2. The name of the corporation is Nouvelle denomination sociale de
changed to (if applicable): la compagnie (s il y a lieu):
O S G O O D E H O L D I N G S I N C.
3. Date of incorporation/ amalgamation: Date de la constitution ou de la
fusion:
20 April, 1964
- --------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation Les statuts de la compagnie sont
are amended as follows: modifies de la facon suivante:
BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The Articles of the Corporation are hereby amended to consolidate the
common shares of the Corporation on the basis of ten (10) pre-consolidation
common shares for one (1) post-consolidation common share;
2. The Articles of the Corporation are hereby amended to change the name
of the Corporation to "Benvan Capital Inc." or to such other name as the
directors of the Corporation and the Ministry of Consumer and Commercial may
approve;
3. The Articles of the Corporation are hereby amended to increase the
authorized capital of the Corporation to an unlimited number of common shares;
1(a)-12
<PAGE> 13
4. The directors and proper officers of the Corporation are hereby
authorized to take all such steps and execute and deliver for and on behalf of
the Corporation Articles of Amendment together with all such documents as they
deem necessary or desirable to give effect to the foregoing; and
5. The directors are hereby authorized to either amend or revoke this
Special Resolution without further approval of the shareholders at any time
prior to the endorsement by the Director of the certificate of amendment of
articles contemplated herein in accordance with the provisions of the Business
Corporations Act, 1982 (Ontario.)
5. The amendment has been duly authorized as required by Sections 167 and
169 (as applicable) of the Business Corporations Act. La modification a ete
dument autorisee conformement a l article 167 et, s il y a lieu, a l article 169
de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on Les actionnaires ou
les administrateurs (le cas echeant) de la compagnie ont approuve la resolution
autorisant la modification
3 December, 1991
- --------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents statuts sont signes en
double exemplaire.
BENVAN HOLDINGS INC.
--------------------------------------
(NAME OF CORPORATION)
(DENOMINATION SOCIALE DE LA COMPAGNIE)
<PAGE> 14
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
1. The name of the corporation Denomination sociale de la societe:
is:
Osgoode HOLDINGS INC.
2. The name of the corporation is Nouvelle denomination sociale de la
changed to (if applicable): societe (s il y a lieu):
LASERMEDIA
COMMUNICATIONS CORP.
3. Date of incorporation/ amalgamation: Date de la constitution ou de la
fusion:
1964/APRIL/20
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
4. The articles of the corporation are Les statuts de la societe sont
amended as follows: modifies de la facon suivante.
The name of the Corporation is hereby changed to LASERMEDIA COMMUNICATIONS CORP.
1(a)-14
<PAGE> 15
5. The amendment has been duly authorized as required by Sections 168 & 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement aux articles 168 et 170
(selon le cas) de la Loi sur les societes par actions.
6. The resolution authorizing the amendment was approved by the
shareholders/ directors (as applicable) of the corporation on
Les actionnaires ou les administrateurs (selon le cas) de la societe ont
approuve la resolution autorisant la modification le
1997/JUNE/27
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
These articles are signed in duplicate. Les presents status sont signes en
double exemplaire.
Osgoode HOLDINGS, INC.
-----------------------------------
(Name of Corporation)
(Denomination sociale de la
societe
SECRETARY
By:/Par:
--------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
1(a)-15
<PAGE> 1
EXHIBIT 1(B)
BYLAWS
1(b)-1
<PAGE> 2
BY-LAW No. 1
A by-law relating generally to the
transaction of the business arid affairs of
HOWIE CONTROLS (CANADA) LIMITED
BE IT ENACTED and it is hereby enacted as a by-law of
HOWIE CONTROLS (CANADA) LIMITED
(hereinafter called the "Corporation") as follows:
HEAD OFFICE
1. The directors may from time to time by resolution fix the location of
the head office of the Corporation within the place in Ontario designated as
such by the articles of the Corporation or by special by-law of the Corporation.
SEAL
2. The Corporation shall have a seal which shall be adopted and may be
changed by resolution of the directors.
MEETING OF SHAREHOLDERS
3. ANNUAL MEETING. The annual meeting of the shareholders shall be held,
subject to the provisions of paragraph 20 hereof, at such place within Ontario
or at such place outside of Ontario designated by the articles of the
Corporation, at such time and on such day in each year as the board, or the
president, or a vice-president who is a director may from time to time by
resolution determine, for the purpose of hearing and receiving the reports and
statements required by The Business Corporations Act to be read and laid before
the Corporation at an annual meeting, electing directors, appointing, if
1(b)-2
<PAGE> 3
necessary, the auditor and fixing or authorizing the board to fix his
remuneration and for the transaction of such other business as may properly be
brought before the meeting.
4. GENERAL MEETINGS. The board or the president or a vice-president who is
a director shall have power at any time to call a general meeting of the
shareholders of the Corporation to be held at such time and at such place within
Ontario or at such place outside of Ontario designated by articles of the
Corporation as may be determined by the board or the person calling the meeting.
The phrase "meeting of shareholders" wherever it occurs in this by-law shall
mean and include an annual meeting of shareholders and a general meeting of
shareholders and shall also include a meeting of any class or classes of
shareholders.
5. NOTICES. No public notice or advertisement of any meeting of
shareholders shall be required, but notice of the time and place of each such
meeting shall be given not less than 2 days before the day on which the meeting
is to be held to the auditor, if any, of the Corporation to the directors of the
Corporation and to each shareholder of record at the close of business on the
day prior to the day on which the notice is given who is entered on the books of
the Corporation as the holder of one or more shares carrying the right to vote
at the meeting. Notice of a general meeting of shareholders shall state the
general nature of the business which is to be transacted. A meeting of
shareholders may be held at any time without notice if all the shareholders
entitled to vote thereat are present or represented by proxy or those not so
present or represented by proxy have waived notice, the directors are present or
have waived notice, and if the auditor, if any, is present or has waived such
notice, and at such meeting any business may be transacted which the Corporation
at an annual or general meeting of the shareholders may transact.
1(b)-3
<PAGE> 4
6. REPORTS TO SHAREHOLDERS. Subject to the provisions of The Business
Corporation Act, a copy of the financial statement and a copy of the auditor's
report shall be furnished to every shareholder on demand.
7. PERSONS ENTITLED TO BE PRESENT. The only person entitled to attend a
meeting of shareholders shall be those entitled to vote thereat and the auditor,
if any, of the Corporation and others who although not entitled to vote are
entitled or required under any provision of The Business Corporations Act or
by-laws of the Corporation 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.
8. QUORUM. Two persons present in person and each entitled to vote thereat
shall constitute a quorum for the transaction of business at any meeting of
shareholders.
9. RIGHT TO VOTE. At each meeting of shareholders every shareholder shall
be entitled to vote who is, subject to paragraph 62, entered on the books of the
Corporation as the holder of one or more shares carrying the right to vote at
such meeting; save that, if the share or shares in question have been mortgaged
or hypothecated, the person who mortgaged or hypothecated such share or shares
(or his proxy) may nevertheless represent the shares at meetings and vote in
respect thereof unless in the instrument creating the mortgage or hypothec he
has expressly empowered the holder of such mortgage or hypothecat to vote
thereon, in which case such holder (or his proxy) may attend meetings and vote
in respect of such shares upon filing with the secretary of the meeting
sufficient proof of the terms of such instrument.
10. REPRESENTATIVES. An executor, administrator, committee of a mentally
incompetent person, guardian or trustee and where a Corporation is such
executor, administrator, committee, guardian or
1(b)-4
<PAGE> 5
trustee of a testator, intestate, mentally incompetent person, ward
or cestui que trust, any person duly appointed a proxy for such corporation,
upon filing with the secretary of the meeting sufficient proof of his
appointment, shall represent the shares in his or its hands at all meetings of
the shareholders of the Corporation and may vote accordingly as a shareholder in
the same manner and to the same extent as the shareholder of record. If there be
more than one executor, administrator, committee, guardian or trustee, the
provisions of clause 12 shall apply.
11. PROXIES. Every shareholder, including a corporate shareholder, entitled
to vote at meetings of shareholders may by instrument in writing appoint a
proxy, who need not be a shareholder, to attend and act at the meeting in the
same manner, to the same extent and with the same power as if the shareholder
were present at the meeting in the manner, to the extent and with the power
conferred by the proxy. The instrument appointing a proxy shall be in writing
under the hand of the appointer or his attorney, authorized in writing, or if
the appointer is a corporation, under the corporate seal or under the hand of an
officer or attorney so authorized, and shall cease to be valid after the
expiration of one year from that date thereof. The instrument appointing a proxy
may be in such form as the directors may from time to time prescribe or in such
other form as the chairman of the meeting may accept as sufficient, and shall be
deposited with the secretary of the meeting before any vote is cast under its
authority, or at such earlier time and in such manner as the board may prescribe
in accordance with The Business Corporations Act.
12. JOINT SHAREHOLDERS. If shares are held jointly by two or more persons,
any one of them present or represented by proxy at a meeting of the shareholders
of the Corporation, may, in the absence
1(b)-5
<PAGE> 6
of the other or others vote thereon, but if more than one of them are present or
represented by proxy they shall vote together as one on the shares jointly held
by them.
13. SCRUTINEERS. At each meeting of shareholders one or more scrutineers
may be appointed by a resolution of the meeting or by the chairman with the
consent of the meeting to serve at the meeting.
Such scrutineers need not be shareholders of the Corporation.
14. VOTES TO GOVERN. At all meetings of shareholders every question shall,
unless otherwise required by the articles or by-laws of the Corporation or by
law, be decided by the majority of the votes duly cast on the question.
15. SHOW OF HANDS. At all meetings of shareholders every question shall be
decided by a show of hands unless a poll thereon be required by the chairman or
be demanded by any shareholder present in person or represented by proxy and
entitled to vote. Upon a show of hands every shareholder present in person and
entitled to vote shall have one vote, but the shareholder represented by proxy
shall have no vote. After a show of hands has been taken upon any question the
chairman may require or any shareholder present in person or represented by
proxy and entitled to vote may demand a poll thereon. Whenever a vote by show of
hands shall have been taken upon a question, unless a poll thereon be 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 proceeding at 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 Corporation in annual or
1(b)-6
<PAGE> 7
general meeting, as the case may be, upon the question. A demand for a poll may
be withdrawn at any time prior to the taking of the poll.
16. POLLS. If a poll be required by the chairman of the meeting or be duly
demanded by any shareholder and the demand be not withdrawn, a poll upon the
question shall be taken in such manner as the chairman of the meeting shall
direct. Upon a poll each shareholder who is present in person or represented by
proxy shall be entitled to one vote for each share in respect of which he is
entitled to vote at the meeting and the result of the poll shall be the decision
of the Corporation in annual or general meeting, as the case may be upon the
question.
17. CASTING VOTE. In case of an equality of votes at any meeting of
shareholders, either upon a show of hands or upon a poll, the chairman of the
meeting shall be entitled to a second or casting vote.
18. ADJOURNMENT. The chairman at a meeting of shareholders may, with the
consent of the meeting and subject to such conditions as the meeting may decide,
adjourn the meeting from time to time and from place to place.
19. TRANSACTION OF BUSINESS BY SIGNATURE. Resolutions may be consented to
at any time by the signatures of all the shareholders of the Corporation
entitled to vote at a meeting of shareholders and such resolutions are as valid
and effective as if passed at a meeting of the shareholders duly called,
constituted and held for that purpose. By-laws or resolutions passed by the
directors of the Corporation may at any time, in lieu of confirmation at a
general meeting of shareholders, be confirmed in writing by all the shareholders
entitled to vote at such meeting.
1(b)-7
<PAGE> 8
20. ONE SHAREHOLDER. Where the Corporation has only one shareholder, all
business which the Corporation may transact at an annual or general meeting of
shareholders shall be transacted in the manner provided for in paragraph 19
hereof.
DIRECTORS
21. POWERS OF DIRECTORS. The affairs of the Corporation shall be managed or
the management shall be supervised by its board of directors. Until changed by
special by-law or amending articles the number of the directors of the
Corporation shall be 5 and, unless the provisions of paragraph 40 apply 3 shall
constitute a quorum for the transaction of business at any meeting of the
directors. Notwithstanding vacancies, the remaining directors may exercise all
the powers of the board so long as a quorum of the board remains in office.
22. QUALIFICATIONS. Each director shall be eighteen or more years of age
and no undischarged bankrupt or mentally incompetent persons shall be a
director. If a director becomes bankrupt or a mentally incompetent person, he
thereupon shall cease to be a director.
22A. RESIDENT CANADIANS. A majority of the directors shall be resident
Canadians and no business shall be transacted by the Board of Directors unless a
majority of the directors present are resident Canadians. Provided that the
provisions of that paragraph shall not apply if the Corporation is a
non-resident corporation.
23. ELECTION AND TERM. Directors shall be elected yearly to hold office
until the next annual meeting of shareholders and until their successors shall
have been duly elected. The whole board shall be elected at each annual meeting,
and all the directors then in office shall retire, but, if qualified, are
1(b)-8
<PAGE> 9
eligible for re-election. The election may be by a show of hands or by
resolution of the shareholders unless a ballot be demanded by any shareholder.
24. REMOVAL OF DIRECTORS. The shareholders may, by resolution passed by a
majority of the votes cast at a general meeting of shareholders of which notice
specifying the intention to pass such resolution has been given, remove any
director before the expiration of his term of office and may, by a majority of
the votes cast at that meeting, elect any person in his stead for the remainder
of his term.
25. VACANCIES. Vacancies on the board may be filled for the remainder of
its term of office by qualified persons, either by the shareholders at a general
meeting called for the purpose or, by the remaining directors if constituting a
quorum; otherwise such vacancies shall be filled at the next meeting of the
shareholders at which directors for that ensuing year are elected. If the number
of directors is increased a vacancy or vacancies in the board to the number of
the authorized increase shall only be filled by the shareholders at a general
meeting called for that purpose.
26. CONSENT OF DIRECTORS. No directors shall be elected or appointed to
hold office at a meeting of shareholders or, where a vacancy exists on the
board, by the remaining directors unless such person was present at the meeting
when he was elected or appointed and did not refuse at the meeting to act as a
director or where 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 ten (10) days thereafter.
27. CALLING OF MEETINGS. Meetings of the board shall be held from time to
time at such place, at such time and on such day as the president or a
vice-president who is a director or any two directors may determine, and the
secretary shall call meetings when directed or authorized by the president or by
a vice-president who is a director or by any two directors. Notice of every
meeting so called shall be given to
1(b)-9
<PAGE> 10
each director not less than forty-eight (48) hours (excluding any part of a
Saturday or a holiday as defined by the Interpretation Act of Canada for the
time being in force) before the time when the meeting is to be held, and such
notice shall specify the general nature of any business to be transacted, save
that no notice of a meeting shall be necessary if all the directors are present
or if those absent have waived notice of or have otherwise signified their
consent to the holding of such meeting.
28. REGULAR MEETINGS. The board may appoint a day or days in any month or
months for regular meetings at a place and hour to be named. A copy of any
resolution of the board fixing the place and time of regular meetings of the
board shall be sent to each director forthwith after being passed, but no other
notice shall be required for any such regular meeting.
29. FIRST MEETING OF NEW BOARD. Each newly elected board may without notice
hold its first meeting for the purpose of organization and the election and
appointment of officers immediately following the meeting of shareholders at
which such board was elected, provided a quorum of directors be present.
30. PLACE OF MEETING. Meetings of the board may be held at the head office
of the Corporation or at any other place within or outside of Ontario. In any
financial year of the corporation, however, a majority of the meetings of the
Board of Directors shall be held at a place within Canada unless the Corporation
is a non-resident corporation.
30A. MEETINGS BY TELEPHONE. With the unanimous consent of all the
directors, any director may participate in a meeting of the Board of Directors
by means of conference telephone or other communication equipment by means of
which all persons participating in the meeting can hear each other and a
director participating in a meeting pursuant to the provisions of this paragraph
shall be deemed to
1(b)-10
<PAGE> 11
be present in person at that meeting. If a majority of the
directors participating in a meeting held pursuant to the provisions of this
paragraph are then in Canada, the meeting shall be deemed to have been held in
Canada.
31. VOTES TO GOVERN. At all meetings of the board every question shall be
decided by a majority of the votes cast on the question; and in case of an
equality of votes the chairman of the meeting shall be entitled to a second or
casting vote.
32. REMUNERATION OF DIRECTORS. That Directors of the Corporation shall be
paid such remuneration as may from time to time be authorized by-law duly
enacted in accordance with the applicable provisions of The Business
Corporations Act. Any remuneration so payable to a director who is also an
officer or employment of the Corporation or who is counsel or solicitor to the
Corporation or otherwise serves it in a professional capacity shall be in
addition to his salary as such officer or to his professional fees as the case
may be. The directors shall also be paid such sums in respect of their out of
pocket expenses incurred in attending board, committee or shareholders meetings
or otherwise in respect of the performance by them of their duties as the board
may from time to time determine.
33. INTEREST OF DIRECTORS IN CONTRACTS. Provided that the provisions of
paragraph 34 have been complied with, no director shall be disqualified by his
office from contracting with the Corporation nor shall any contract or
arrangement entered into by or on behalf of the Corporation with any director or
in which any director is in any way interested be liable to voided nor shall any
director so contracting or being so interested be liable to account to the
Corporation for any profit realized by any such contract or arrangement by
reason of such director holding that office or of the fiduciary relationship
hereby established.
1(b)-11
<PAGE> 12
34. DECLARATION OF INTEREST. It shall be the duty, however, of every
director of the Corporation who is in any way, whether directly or indirectly,
interested in a contract or arrangement with the Corporation to declare the
nature and extent of such interest to the extent, in the manner and at the time
required by the applicable provisions of The Business Corporations Act for the
time being in force and to refrain from voting in respect of the contract or
arrangement or proposed contract or arrangement if and when prohibited by The
Business Corporations Act.
35. PROTECTION OF DIRECTORS AND OFFICERS. No director or officer of the
Corporation shall be liable for the acts, receipts, neglects or defaults of any
other director or officer, or for joining in any real receipts or other act for
conformity, or for any loss or expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired by order of the
board 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 that bankruptcy,
insolvency or tortious act 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 whatever which shall happen in the execution of the duties of his
office or in relation thereto unless in or as a result of any action, suit or
proceeding he is adjudged to be in breach of any duty or responsibility imposed
upon him under The Business Corporations Act or under any other statute.
36. INDEMNITY OF DIRECTORS AND OFFICERS. Every director or officer of the
Corporation and his heirs, executors and administrators, and estate and effects,
respectively shall, from time to time and at
1(b)-12
<PAGE> 13
all times, be indemnified and saved harmless, subject to the provisions of The
Business Corporations Act, out of the funds of the Corporation, from and
against;
(a) any liability and all costs, charges and expenses that he sustains
or incurs in respect of any action, suit or proceeding that is proposed or
commenced against him for or in respect of anything done or permitted by
him in respect of the execution of the duties of his office; and
(b) all other costs, charges and expenses that he sustains or incurs in
respect of the affairs of the Corporation;
provided that no director or officer of the Corporation shall be indemnified by
it in respect of any liability, costs, charges or expenses that he sustains or
incurs in or about any action, suit or other proceeding as a result of which he
is abjudged to be in breach of any duty or responsibility imposed upon him under
The Business Corporations Act or under any other statute unless, in an action
brought against him in his capacity as director or officer, he has achieved
complete or substantial success as a defendant.
37. INSURANCE FOR DIRECTORS AND OFFICERS. The board may purchase and
maintain insurance for the benefit of a director or officer of the Corporation
against liabilities, costs, charges and expenses sustained or incurred by such
director or officer in respect of the execution of the duties of his office or
in respect of the affairs of the Corporation, except insurance against a
liability, cost, charge or expense sustained or incurred as a result of a
contravention by such director or officer of section 144 of The Business
Corporations Act.
38. LOANS TO SHAREHOLDERS. The directors of the Corporation may from
time to time:
(a) make loans to bona fide full-time employees of the Corporation,
whether or not they are shareholders or directors, with a view to enabling
them to purchase dwelling houses for their own
1(b)-13
<PAGE> 14
occupation, and may take from such employees mortgages or other securities
for the repayment of such loan; or
(b) provide, in accordance with a scheme for the time being in force,
money by way of loan for the purchase by trustees of fully paid shares of
the Corporation, to be held by or for the benefit of bona fide employees of
the Corporation, whether or not they are shareholders or directors; or
(c) make loans to bona fide employees of the Corporation other than
directors, whether or not they are shareholders, with a view to enabling
them to purchase fully paid shares of the Corporation to be held by them by
way of beneficial ownership; or
(d) if it is not offering its securities to the public, give directly
or indirectly by means of a loan, guarantee, the provision of security or
otherwise, financial assistance to any of its shareholders or directors
with a view to enabling them to purchase issued shares of the Corporation.
39. TRANSACTION OF BUSINESS BY SIGNATURE. By-laws or resolutions may be
consented to at any time by the signatures of all the directors of the
Corporation and such by-laws or resolutions are as valid and effective as if
passed at a meeting of the directors duly called, constituted and held for that
purpose.
40. ONE DIRECTOR. Where the Corporation has only one director, the affairs
of the Corporation shall be managed or the management shall be supervised by
such director and all business which may be transacted at a meeting of the board
of directors shall be transacted by such director in the manner provided for in
paragraph 39 hereof.
OFFICERS
41. ELECTED OFFICER. At the first meeting of the board after each election
of directors the board shall elect from among its members a president. The prior
incumbent, if a member of the board, shall
1(b)-14
<PAGE> 15
continue to hold office until the election at such meeting and, in default of
such election, shall continue to hold office after such meeting. In case the
office of president becomes vacant at any time, such vacancy may be filled by
the board from among its members.
42. APPOINTED OR ELECTED OFFICERS. At the first meeting of the board after
each election of directors, the board shall appoint or elect a secretary, and
may appoint or elect one or more vice-presidents, a general manager, a
treasurer, and such other officers as the board may determine including one or
more assistants to any of the officers appointed or elected. The officers so
appointed or elected may but need not be members of the board. One person may
hold more than one office, and if the same person holds both the office of
secretary and the office of treasurer, he may be known as secretary-treasurer.
43. TERM OF OFFICE AND REMUNERATION. In the absence of written agreement to
the contrary the board may remove at its pleasure any officer of the
Corporation. Each prior officer shall continue to hold office until the
appointment of officers at such meeting and, in default of the appointment of
officers at such meeting, shall continue to hold office after such meeting. The
terms of employment and remuneration of the president and other officers elected
or appointed by it shall be settled from time to time by the board.
44. PRESIDENT. The president shall, when present, preside at all meetings
of the shareholders and of the board and shall be charged with the general
supervision of the business and affairs of the Corporation. Except when the
board has appointed a general manager or managing director, the president shall
also have the powers and be charged with the duties of that office.
1(b)-15
<PAGE> 16
45. VICE-PRESIDENT. During the absence or inability of the president his
duties may be performed and his powers may be exercised by the vice-president,
or if there are more than one, by the vice-presidents in order of seniority (as
determined by the board) save that no vice-president shall preside at a meeting
of the board or at a meeting of shareholders who is not qualified to attend the
meeting as a director, as the case may be. If a vice-president exercises any
such duty or power, the absence or inability of the president shall be presumed
with reference thereto. A vice-president shall also perform such duties and
exercise such powers as the president may from time to time delegate to him or
the board may prescribe.
46. GENERAL MANAGER. The general manager, if one be appointed, shall have
the general management and direction, subject to the authority of the board and
the supervision of the president, of the Corporation's business and affairs and
the power to appoint and remove any and all officers, employees and agents of
the Corporation not elected or appointed directly by the board and to settle the
terms of their employment and remuneration. If and so long as the general
manager is a director he may but need not be known as the managing director.
47. SECRETARY. The secretary shall give, or cause to be given, all notices
required to bc given to shareholders, directors, auditors and members of
committees; he shall attend all meetings of the directors and all of the
shareholders and shall enter or cause to be in books kept for that purpose
minutes of all proceedings at such meetings; 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 other instruments
belonging to the Corporation; and he shall perform such other duties as may from
time to time be prescribed by the board.
1(b)-16
<PAGE> 17
48. TREASURER. The treasurer shall keep full and accurate books of account
in which shall be recorded all receipts and disbursements of the Corporation
and, under the direction of the board, shall control the deposit of money, the
safekeeping of securities and the disbursement of the funds of the Corporation;
he shall render to the board at the meetings thereof, or whenever required of
him an account of all his transactions as treasurer and of the financial
position of the Corporation; and he shall perform such other duties as may from
time to time be prescribed by the board.
49. OTHER OFFICERS. The duties of all other officers of the Corporation
shall be such as the terms of their engagement call for or the board requires of
them. 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
otherwise directs.
50. VARIATION OF DUTIES. From time to time the board may vary, add to or
limit the powers and duties of any officer or officers.
51. AGENTS AND ATTORNEYS. The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or out of Ontario with such
powers of management or otherwise (including the power to sub-delegate ) as may
be thought fit.
52. 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 duties, in such form and with such surety as the
board may from time to time prescribe.
BANKING ARRANGEMENTS, CONTRACTS, ETC.
53. BANKING ARRANGEMENTS. The banking business of the Corporation, or any
part thereof, shall be transacted with such bank, trust company or other firm or
corporation carrying on a banking business
1(b)-17
<PAGE> 18
as the board may designate, appoint or authorize from time to time by resolution
and all such banking business or any part thereof, shall be transacted on the
Corporation's behalf by such one or more officers and/or other persons as the
board may designate, direct or authorize from time to time by resolution and to
the extent therein provided, including, but without restricting the generality
of the foregoing, the operation of the Corporation's accounts; the making,
signing, drawing, accepting, endorsing, negotiating, lodging, depositing, or
transferring of any cheques, promissory notes, drafts, acceptances, bills of
exchange and orders for the payment of money; the giving of receipts for and
orders relating to any property of the Corporation; the execution of any
agreement relating to any banking business and defining the rights and powers of
the parties thereto; and the authorizing of any officer of such banker to do any
act or thing on the Corporation's behalf to facilitate such banking business.
54. EXECUTION OF INSTRUMENTS. Deeds, transfers, assignments, contracts and
obligations on behalf of the Corporation may be signed by President and
Secretary and the corporate seal shall be affixed to such instruments as require
the same.
Notwithstanding any provision to the contrary contained in the by-laws of
the Corporation, the board may at any time and from time to time direct the
manner in which and the person or persons by whom any particular deed, transfer,
contract or obligation or any class of deeds, transfers, contracts or
obligations of the Corporation may or shall be signed.
SHARES
55. ALLOTMENT. The board may from time to time allot or grant options to
purchase the whole or any part of the authorized and unissued shares in the
capital stock of the Corporation, including any shares
1(b)-18
<PAGE> 19
created by the amending articles increasing or otherwise varying the capital
stock of the Corporation, to such person or persons or class of persons as the
board shall by resolution determine.
56. PAYMENT OF COMMISSIONS. The board may pay commission to persons in
consideration of their subscribing or agreeing to subscribe, whether absolutely
or conditionally, for shares in the capital stock of the (corporation, or
procuring or agreeing to procure subscriptions, whether absolute or conditional
for such shares, but no such commission shall exceed twenty-five percent of the
amount of the subscription, except where the business of the Corporation is that
of a relining, gas or oil corporation or, where at least seventy-five (75%)
percent of the assets of the Corporation are of a wasting character.
57. SHARE CERTIFICATES. Every shareholder shall be entitled, without
payment, to a share certificate stating the number and class of shares held by
him as shown by the books of the Corporation. Share certificates shall be in
such form or forms as the board shall from time to time approve. Unless
otherwise ordered by the board, they shall be signed by the president or a
vice-president and by the secretary or an assistant secretary and need not be
under the corporate seal; provided that certificates representing shares in
respect of which a transfer agent and registrar (which term shall include a
branch transfer agent and registrar) have been appointed shall not be valid
unless countersigned by or on behalf of such transfer agent and registrar. If
authorized by resolution of the board, the corporate seal of the Corporation and
the signature of one of the signing officers, or in the case of share
certificates representing shares in respect of which a transfer agent and
registrar have been appointed, the signatures of both signing officers, may be
printed, engraved, lithographed, or otherwise 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 valid notwithstanding that one or both of the
1(b)-19
<PAGE> 20
officers whose signature (whether manual or facsimile) appears thereon no longer
holds office at the date of issue or delivery of the certificate.
58. REPLACEMENT OF SHARE CERTIFICATES. The board may by resolution
prescribe, either generally or in a particular case, reasonable conditions upon
which a new share certificate may be issued in lieu of and upon cancellation of
the share certificate which has become mutilated or in substitution for a
certificate which has been lost, stolen or destroyed.
59. TRANSFER AGENT AND REGISTRAR. The directors may from time to time by
resolution appoint or remove a transfer agent and a registrar (who may, but need
not be the same individual or corporation) and one or more branch transfer
agents and registrars (who may, but need not be the same individual or
corporation) for the shares in the capital stock of the Corporation and may
provide for the transfer of shares in one or more places and may provide that
shares will be interchangeably transferable or otherwise.
60. TRANSFER OF SHARES. Transfers of shares in the capital stock of the
Corporation shall be registerable on the register of transfers or on one of the
branch registers of transfers (if any) kept by or for the Corporation in respect
thereof, upon surrender of the certificate representing such shares properly
endorsed subject to the provisions of The Business Corporations Act and subject
to the restrictions on transfer as set forth in the articles of the Corporation.
61. REFUSAL TO REGISTER TRANSFER. The board may refuse to permit to
registration of a transfer of shares in the capital stock of the Corporation
registered in the name of a shareholder who is indebted to the Corporation
unless such shares are listed on a recognized stock exchange.
1(b)-20
<PAGE> 21
62. CLOSING REGISTER. The board may by resolution close the register of
transfers and the branch register or registers of transfers, if any, for a
period of time not exceeding forty-eight hours exclusive of Saturdays and
holidays (as defined by the Interpretation Act of Canada for the Little being in
force) immediately preceding any meeting of the shareholders.
63. RECORD DATE. The board may fix in advance a date preceding by not more
than fourteen (14) 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 shares in
the capital stock or securities of the Corporation as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such shares or securities, as the case may
be, and in every case only such persons as shall be shareholders of record at
the close of business on the date so fixed shall be entitled to received payment
of such dividend or to exercise the right to subscribe for such shares or
securities and to receive the warrant or other evidence in respect of such
right, as the case may be, notwithstanding the transfer of any shares after any
such record date fixed as aforesaid.
64. JOINT SHAREHOLDERS. If two or more persons are registered as joint
holders of any share, any one of such persons may give effectual receipts for
the certificate issued in respect thereof and for any dividend, bonus, return of
capital or other money payable or warrant issuable in respect of such share.
FINANCIAL
65. FINANCIAL YEAR. Unless otherwise determined by resolution of the board,
the first fiscal year of the Corporation shall terminate on the ___ day of
_______________, 19___, and thereafter the fiscal year of the Corporation shall
terminate on the ____ day of ______________ in each year.
1(b)-21
<PAGE> 22
66. DIVIDENDS. The board may from time to time declare dividends payable to
the shareholders according to their respective rights and interests in the
Corporation. 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 in respect of which it has been declared and mailed by
ordinary mail, postage prepaid, to such registered holder at his last address
appearing on the books of the Corporation. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct, be made payable to the
order of all of such joint holders and if more than one address appears on the
books of the Corporation in respect of such joint holding the cheque shall be
mailed to the first address so appearing. The mailing of such cheque as
aforesaid shall satisfy and discharge all liability for the dividend to the
extent of the sum represented thereby, unless such cheque be not paid at par on
due presentation. In the event of non-receipt of any cheques for dividend by the
person to whom it is so sent as aforesaid, the Corporation on proof of such
non-receipt and upon satisfactory indemnity being given to it, shall issue to
such person a replacement cheque for a like amount.
67. PURCHASE OF BUSINESS AS OF PAST DATE. Where any business is bought by
the Corporation as from a past date (whether such date be before or after the
incorporation of the Corporation) upon terms that the Corporation shall as from
that date take the profits and bear the losses of the business, such profits or
losses as the case may be shall, at the discretion of the directors, be credited
or debited wholly or in part to revenue account, and in that case the amount so
credited or debited shall, for the purpose of ascertaining the fund available
for dividend, be treated as a profit or loss arising from the business of the
Corporation.
NOTICES
1(b)-22
<PAGE> 23
68. METHOD OF GIVING. Any notice, communication or other document to be
given by the Corporation to a shareholder, director, officer, or auditor of the
Corporation under any provision of the articles or by-laws shall be sufficiently
given if delivered personally to the person to whom it is to be given or if
delivered to his last address as recorded in the books of the Corporation or if
mailed by prepaid ordinary or air mail in a sealed envelope addressed to him at
his last address as recorded in the books of the Corporation or if sent by any
means of wire or wireless or any other form of transmitted or recorded
communication. The secretary may change the address on the books of the
Corporation of any shareholder in accordance with any information believed by
him to be reliable. A notice, communication or document so delivered shall be
deemed to have been given when it is delivered personally or at the address
aforesaid; and a notice, communication or document so mailed shall be deemed to
have been given when deposited in a post office or public letter box; and a
notice sent by any means of wire or wireless or any other form of transmitted or
recorded communication shall be deemed to have been given when delivered to the
appropriate communication company or agency or its representative for dispatch.
69. COMPUTATION OF TIME. In computing the date when notice must be given
under any provision of the articles or by-laws requiring a specific number of
days' notice of any meeting or other event, the date of giving the notice and
the date of the meeting or other event shall be excluded.
70. OMISSIONS AND ERRORS. The accidental omission to give any notice to any
shareholder, director, officer, or auditor, or the non-receipt of any notice by
any shareholder, director, officer, or auditor or any error in any notice not
effecting the substance thereof shall not invalidate any action taken at any
meeting held pursuant to such notice or otherwise founded thereon.
1(b)-23
<PAGE> 24
71. NOTICE TO JOINT SHAREHOLDERS. All notices with respect to any shares
registered in more than one name may if more than one address appears on the
books of the Corporation in respect of such joint holding, be given to such
joint shareholders at the first address so appearing, and notice so given shall
be sufficient notice to all the holders of such shares.
72. PERSONS ENTITLED BY DEATH OR OPERATION OF LAW. Every person who by
operation of law, transfer, death of a shareholder or by any other means
whatsoever, shall become entitled to any share or shares, shall be bound by
every notice in respect of such share or shares which shall have been duly given
to the person from whom he derives his title to such share or shares, previously
to his name and address being entered on the books of the Corporation (whether
it be before or after the happening of the event upon which he became so
entitled).
73. WAIVER OF NOTICE. Any shareholder (or his duly appointed proxy),
director, officer or auditor may waive any notice required to be given under any
provision of articles or by-laws of the Corporation or of The Business
Corporations Act, and such waiver, whether given before or after the meeting or
other event of which notice is required to be given, shall cure any default in
giving such notice.
74. INTERPRETATION. In this by-law and all other by-laws of the
Corporation, words importing the singular number only shall include the plural
and vice-versa; words importing the masculine gender shall include the feminine
and neuter genders; words importing persons shall include companies,
corporations, partnerships and any number or aggregate of persons; "board" shall
mean the board of directors of the Corporation; "resident Canadian" means a
Canadian citizen who is ordinarily resident in Canada; "articles" shall include
amending articles and any restatement of articles; "non-resident corporation"
means a corporation that is not deemed to be resident in Canada under paragraph
(c) of subsection (4) of
1(b)-24
<PAGE> 25
section 250 of line Income Tax Act (Canada); "The Business Corporations Act"
shall mean The Business Corporations Act, (Ontario) as amended from time to time
or any Act that may hereafter be substituted therefore.
PASSED the 24th day of June, 1982.
WITNESS the corporate seal of the Corporation.
___________________________
President
___________________________
Secretary
1(b)-25
<PAGE> 26
The undersigned, being all the directors of the Corporation, hereby sign,
pursuant to the provisions of The Business Corporations Act, the foregoing
by-law as By-law No. 1 of the by-laws of the said Corporation.
DATED the 24th day of June, 1982.
___________________________
___________________________
___________________________
The undersigned, being all the shareholders of the Corporation, hereby
confirm, pursuant to the provisions of The Business Corporations Act, the
foregoing By-law No. 1 of the by-laws of the said Corporation signed by all the
directors of the said Corporation as a by-law thereof pursuant to the provisions
of the said Act on the 24th day of June, 1982.
___________________________
___________________________
___________________________
1(b)-26
<PAGE> 27
BY-LAW NO. 2
A by-law respecting the borrowing of money, the issuing of debt obligations
and the securing of liabilities by HOWIE CONTROLS (CANADA) LIMITED BE IT
ENACTED as a by-law of
HOWIE CONTROLS (CANADA) LIMITED hereinafter referred to as the
"Corporation") as follows:
The directors of the Corporation may from time to time:
(a) borrow money on the credit of the Corporation;
(b) issue, sell or pledge debt obligations (including bonds,
debentures, debenture stock or other like liabilities) of the Corporation
but no invitation shall be extended to the public to subscribe for any such
debt obligations;
(c) charge, mortgage, hypothecate or pledge all or any currently
owned or subsequently acquired real or personal, movable or immovable
property of the Corporation, including book debts, rights, powers,
franchises and undertaking, to secure any debt obligations or any money
borrowed, or other debt or liability of the Corporation;
(d) delegate the powers conferred on the directors under this
by-law to such officers of the Corporation and to such extent and in such
manner as the directors shall determine.
PASSED the 24th day of June, 1982.
WITNESS the corporate seal of the Corporation.
___________________________
President
___________________________
Secretary
1(b)-27
<PAGE> 28
The undersigned, being all the directors of the Corporation, hereby sign,
pursuant to the provisions of The Business Corporations Act, the foregoing
by-law as By-law No. 2 of the by-laws of the said Corporation.
DATED the 24th day of June, 1982.
___________________________
___________________________
___________________________
The undersigned, being all the shareholders of the Corporation, hereby
confirm, pursuant to the provisions of The Business Corporations Act, the
foregoing By-law No. 2 of the by-laws of the said Corporation signed by all the
directors of the said Corporation as a by-law thereof pursuant to the provisions
of the said Act on the 24th day of June, 1982.
___________________________
___________________________
___________________________
1(b)-28
<PAGE> 1
EXHIBIT 2(A)
SPECIMEN COMMON STOCK CERTIFICATE
2(a)-1
<PAGE> 2
NO. 00000 SHARES
LASERMEDIA COMMUNICATIONS CORP.
INCORPORATED UNDER THE LAWS OF THE PROVINCE OF ONTARIO
THIS CERTIFIES THAT CUSIP 517938 10 6
is the registered holder of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES IN THE CAPITAL STOCK OF
LASERMEDIA COMMUNICATIONS CORP.
transferable only on the books of the Corporation by the registered holder in
person or by duly authorized Attorney on surrender of this Certificate properly
endorsed.
This Certificate is not valid until
countersigned and registered by the
Transfer Agent and
Registrar of the Corporation.
IN WITNESS WHEREOF the Corporation
has caused this Certificate to be
signed by its
duly authorized officers.
DATED
COUNTERSIGNED AND REGISTERED
EQUITY TRANSFER SERVICES INC., TORONTO
TRANSFER AGENT AND REGISTRAR
PRESIDENT SECRETARY By:______________________
AUTHORIZED OFFICER
2(a)-2
<PAGE> 3
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE TRANSFERABLE AT THE PRINCIPAL
OFFICE OF EQUITY TRANSFER SERVICES INC, IN TORONTO
2(a)-3
<PAGE> 1
EXHIBIT 2(B)
FORM OF WARRANT
2(b)-1
<PAGE> 2
SERIES _______ WARRANT CERTIFICATE
LASERMEDIA COMMUNICATIONS CORP.
Series _____ Warrant to Subscribe for
_______________ Common Shares
THIS CERTIFIES that, for value received,
________________________________, (the "WARRANTHOLDER"), is the registered
holder of __________ warrants (the "WARRANTS") which entitle the holder, subject
to the terms and conditions set forth in this Warrant Certificate, to purchase
from Lasermedia Communications Corp. (the "COMPANY") in exchange for each
Warrant, one common share of the Company (the "SHARE") at a price of $__________
per Share (the "EXERCISE PRICE") at any time up to 5:00 p.m., Toronto time, on
March 31, 2002 the ("TIME OF EXPIRY"). The number of Shares which the
Warrantholder is entitled to acquire upon exercise of the Warrantholder's
Warrants are subject to adjustment as hereinafter provided.
1. EXERCISE OF WARRANTS.
(a) ELECTION TO PURCHASE. The rights evidenced by this
certificate may be exercised by the Warrantholder in whole or in part
and in accordance with the provisions hereof by delivery of a
Subscription Form in substantially the form attached hereto as Schedule
"A", properly completed and executed for the number of Shares specified
in the Subscription Form at the principal office of the Company at 401
Richmond Street West, Suite 123, Toronto, Ontario, M5V 1X3, Attention:
President or such other address in Canada as may be notified in writing
by the Company (the "COMPANY OFFICE"). In the event that the rights
evidenced by this certificate are exercised in part, the Company shall,
contemporaneously with the issuance of the Shares issuable on the
exercise of the Warrants so exercised, issue to the Warrantholder a
Warrant Certificate, dated as of the date thereof, on identical terms
in respect of that number of Shares in respect of which the
Warrantholder has not exercised the rights evidenced by this
certificate.
(b) EXERCISE. The Company shall, on the date it receives a
duly executed Subscription Form and the Exercise Price for the number
of Shares specified in the executed Subscription Form (the "EXERCISE
DATE"), issue that number of Shares specified in executed Subscription
Form. The Shares shall be issued as fully paid and non-assessable
common shares in the capital of the Company.
(c) SHARE CERTIFICATES. As promptly as practicable after the
Exercise Date, the Company shall issue and deliver to the
Warrantholder, registered in such name or names as the Warrantholder
may direct or if no such direction has been given, in the name of the
Warrantholder, a certificate or certificates for the number of Shares
specified in the Subscription Form. To the extent permitted by law,
such exercise shall be deemed to have been effected as of the close of
business on the Exercise Date, and at such time the rights
2(b)-2
<PAGE> 3
of the Warrantholder with respect to the number of Warrants which have
been exercised as such shall cease, and the person or persons in whose
name or names any certificate or certificates for Shares shall then be
issuable upon such exercise shall be deemed to have become the holder
or holders of record of the Shares represented thereby.
(d) FRACTIONAL SHARES. No fractional Shares shall be issued
upon exercise of any Warrants and no payments or adjustments shall be
made upon any exercise on account of any cash dividends on the Shares
issued upon such exercise. If any fractional interest in the Shares
would, except for the provisions of the first sentence of this Section
l(d), be deliverable upon the exercise of a Warrant, the Company shall,
in lieu of delivering the fractional share therefor' pay to the
Warrantholder an amount in cash equal to the Fair Market Value (as
hereinafter defined) of such fractional interest.
(e) CORPORATE CHANGES.
(i) Subject to paragraph 1(e)(ii) hereof, if the
Company shall be a party to any reorganization, merger,
dissolution or sale of all or substantially all of its assets,
whether or not the Company is the surviving entity, the number
of Warrants evidenced by this Certificate shall be adjusted so
as to apply to the securities to which the holder of that
number of Shares of the Company subject to the unexercised
Warrants would have been entitled by reason of such
reorganization, merger, dissolution or sale of all or
substantially all of its assets (the "EVENT"), and the
Exercise Price shall be adjusted to be the amount determined
by multiplying the Exercise Price in effect immediately prior
to the Event by the number of Shares subject to the
unexercised Warrants immediately prior to the change or
reclassification, and dividing the product thereof by the
number of Shares to which the holder of that number of Shares
subject to the unexercised Warrants would have been entitled
to by reason of such Event.
(ii) If the Company is unable to deliver Shares to
the Warrantholder pursuant to the proper exercise of a
Warrant, the Company may satisfy such obligations to the
Warrantholder hereunder by paying to the Warrantholder in cash
the difference between the Exercise Price of all unexercised
Warrants granted hereunder and the Fair Market Value of the
Shares to which the Warrantholder would be entitled to upon
exercise of all unexercised Warrants. Adjustments under this
subparagraph (e) or (subject to subparagraph (n)) any
determinations as to the fair Market Value of any Shares shall
be made by the board of directors of the Company, or any
committee thereof specifically designated by the board of
directors to be responsible therefor, and any reasonable
determination made by such board or committee thereof shall be
binding and conclusive, subject only to any disputes being
resolved by the Company's auditors, whose determination shall
be binding and conclusive.
2(b)-3
<PAGE> 4
(f) SUBDIVISION OR CONSOLIDATION OF SHARES.
(i) In the event the Company shall subdivide its
outstanding common shares into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the
outstanding common shares of the Company shall be consolidated
into a smaller number of shares, the Exercise Price in effect
immediately prior to such consolidation shall be
proportionately increased.
(ii) Upon each adjustment of the Exercise Price as
provided in paragraph 1(f)(i) above, the Warrantholder shall
thereafter be entitled to acquire, at the Exercise Price
resulting from such adjustment, the number of Shares
(calculated to the nearest tenth of a Share) obtained by
multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Shares which may be acquired
hereunder immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such
adjustment.
(g) CHANGE OR RECLASSIFICATION OF SHARES. In the event the
Company shall change or reclassify its outstanding common shares into a
different class of securities, the rights evidenced by the Warrants
shall be adjusted as follows so as to apply to the successor class of
securities:
(i) the number of the successor class of securities
which the Warrantholder shall be entitled to acquire shall be
that number of the successor class of securities which a
holder of that number of Shares subject to the unexercised
Warrants immediately prior to the change or reclassification
would have been entitled to by reason of such change or
reclassification; and
(ii) the Exercise Price shall be determined by
multiplying the Exercise Price in effect immediately prior to
the change or reclassification by the number of Shares subject
to the unexercised Warrants immediately prior to the change or
reclassification, and dividing the product thereof by the
number of Shares determined in paragraph 1(g)(i) hereof.
(h) OFFERING TO SHAREHOLDERS. If and whenever at any time
prior to the Time of Expiry, the Company shall fix a record date or if
a date of entitlement to receive is otherwise established any such date
being hereinafter referred to in this paragraph 1(h) as the "record
date") for the issuance of rights, options or warrants to all or
substantially all the holders of the outstanding common shares of the
Company entitling them, for a period which shall not expire not more
than 45 days after such record date, to subscribe for or purchase
common shares of the Company or securities convertible into or
exchangeable for common shares of the Company at a price per share or,
as the case may be, having a
2(b)-4
<PAGE> 5
conversion or exchange price per share less than 95% of the Fair Market
Value (as hereinafter defined) on such record date, the Exercise Price
shall be adjusted immediately after such record date so that it shall
equal the price determined by multiplying the Exercise Price in effect
on such record date by a fraction of which the numerator shall be the
total number of common shares outstanding on such record date plus a
number equal to the number arrived at by dividing the aggregate
subscription or purchase price of the total number of additional common
shares offered for subscription or purchase or, as the case may be, the
aggregate conversion or exchange price of the convertible or
exchangeable securities so offered by the Fair Market Value, and of
which the denominator shall be the total number of common shares
outstanding on such record date plus the total number of additional
common shares so offered (or into which the convertible or exchangeable
securities so offered are convertible or exchangeable), common shares
owned by or held for the account of the Company shall be deemed not to
be outstanding for the purpose of any such computation; such adjustment
shall be made successively whenever such a record date is fixed; to the
extent that any rights or warrants are not so issued or any such rights
or warrants are not exercised prior to the expiration thereof, the
Exercise Price shall then be readjusted to the Exercise Price which
would then be in effect if such record date had not been fixed or to
the Exercise Price which would then be in effect based upon the number
of common shares or conversion or exchange rights contained in
convertible or exchangeable securities actually issued upon the
exercise of such rights or warrants, as the case may be.
(i) CARRY OVER OF ADJUSTMENTS. No adjustment of the Exercise
Price shall be made if the amount of such adjustment shall be less than
1% of the Exercise Price in effect immediately prior to the event
giving rise to the adjustment, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least 1% of the Exercise Price.
(j) NOTICE OF ADJUSTMENT. Upon any adjustment of the number of
Shares and upon any adjustment of the Exercise Price, then and in each
such case the Company shall give 10 days' prior written notice thereof
to the Warrantholder, which notice shall state the Exercise Price and
the number of Shares or other securities subject to the unexercised
Warrants resulting from such adjustment, and shall set forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based. Upon the request of the Warrantholder there
shall be transmitted promptly to the Warrantholder a statement of the
firm of independent chartered accountants retained to audit the
financial statements of the Company to the effect that such firm
concurs in the Company's calculation of the change.
2(b)-5
<PAGE> 6
(k) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon its
common shares payable in Shares;
(ii) the Company shall offer for subscription pro
rata to the holders of its common shares any additional shares
of any class or other rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation, amalgamation or merger of the Company with, or
sale of all or substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give to the
Warrantholder (A) at least 10 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger,
amalgamation, sale, dissolution, liquidation or winding-up and (B) in
the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, at least 10 days'
prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (A) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of common shares shall be entitled
thereto, and such notice in accordance with the foregoing clause (B)
shall also specify the date on which the holders of common shares shall
be entitled to exchange their common shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation, or
winding-up, as the case may be.
(l) SHARES TO BE RESERVED. The Company will at all times keep
available, and reserve if necessary under Canadian laws, out of its
authorized common shares, solely for the purpose of issue upon the
exercise of the Warrants, such number of Shares as shall then be
issuable upon the exercise of the Warrants. The Company covenants and
agrees that all Shares which shall be so issuable will, upon issuance,
be duly authorized and issued as fully paid and non-assessable. The
Company will take all such actions as may be necessary to ensure that
all such Shares may be so issued without violation of any applicable
requirements of any exchange upon which the common shares of the
Company may be listed or in respect of which the common shares are
qualified for unlisted trading privileges. The Company will take all
such actions as are within its power to ensure that all such Shares may
be so issued without violation of any applicable law.
2(b)-6
<PAGE> 7
(m) ISSUE TAX. The issuance of certificates for Shares upon
the exercise of Warrants shall be made without charge to the
Warrantholder for any issuance tax in respect thereto, provided that
the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Warrantholder.
(n) FAIR MARKET VALUE. For the purposes of any computation
hereunder, the "Fair Market Value" at any date shall be the weighted
average sale price per share for the common shares of the Company for
20 consecutive trading days immediately before such date on any
exchange upon which the common shares of the Company may be listed or
in respect of which the common shares are qualified for unlisted
trading privileges, or if the shares in respect of which a
determination of Fair Market Value is being made are not listed on any
stock exchange or qualified for unlisted trading privileges, the Fair
Market Value shall be determined by the directors, which determination
shall be conclusive. The weighted average price shall be determined by
dividing the aggregate sale price of all such shares sold on the said
exchange during the said 20 consecutive trading days by the total
number of such shares so sold.
2. REPLACEMENT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant Certificate and, if
requested by the Company, upon delivery of a bond of indemnity satisfactory to
the Company (or, in the case of mutilation upon surrender of this Warrant
Certificate), the Company will issued to the Warrantholder a replacement
certificate (containing the same terms and conditions as this Warrant
Certificate.
3. EXPIRY DATE. The Warrants shall expire and all rights to purchase
Shares hereunder shall cease and become null and void at 5:00 p.m. Toronto time
on the Time of Expiry.
4. INABILITY TO DELIVER SHARES. If for any reason, other than the
failure or default of the Warrantholder, the Company is unable to issue and
deliver the Shares or other securities as contemplated herein to the
Warrantholder upon the proper exercise by the Warrantholder of the right to
purchase any of the Shares covered by this Warrant Certificate, the Company may
pay, at its option and in complete satisfaction of its obligations hereunder, to
the Warrantholder, in case, an amount equal to the difference between the
Exercise Price and the Fair Market Value of such Shares or other securities on
the Exercise Date.
5. GOVERNING LAW. The laws of the Province of Ontario and the laws of
Canada applicable therein shall govern the Warrants.
6. SUCCESSORS. This Warrant Certificate shall enure to the benefit of
and shall be binding upon the Warrantholder and the Company and their respective
successors and assigns.
2(b)-7
<PAGE> 8
IN WITNESS WHEREOF the Company has caused this warrant Certificate to
be signed by its duly authorized officers and its corporate seal affixed hereto.
DATED as of _______________________, 1997.
LASERMEDIA COMMUNICATIONS
CORP.
Per:
-----------------------------------
2(b)-8
<PAGE> 9
SCHEDULE A
SUBSCRIPTION FORM
TO: LASERMEDIA COMMUNICATIONS CORP. (the "COMPANY")
The undersigned holder (the "HOLDER") of the attached Warrant hereby
subscribes for Common Shares (the "COMMON SHARES") of Lasermedia Communications
Corp. (the "COMPANY") (or such number of Common Shares and/or other securities
and/or property to which such subscription entitles the Holder in lieu thereof
or addition thereto under the provisions of the Warrant) pursuant to the terms
of the Warrant at the Exercise Price (as defined in the Warrant) per share on
the terms specified in the Warrant and encloses herewith cash or a bank draft,
certified cheque or money order payable to the order of the Company in payment
therefor.
The undersigned irrevocably hereby directs that the Common Shares be
issued and delivered as follows:
DATED this day of , 199__.
-----------------------------------
(Signature)
-----------------------------------
(Name - please print)
-----------------------------------
(Address)
-----------------------------------
(Social Insurance Number if an individual)
2(b)-9
<PAGE> 1
EXHIBIT 2(C)(1)
1997 STOCK OPTION PLAN
2(c)(1)-1
<PAGE> 2
LASERMEDIA COMMUNICATIONS CORP. - 1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan") is to
attract and retain the services of directors, officers, employees, consultants
and advisors of Lasermedia Communications Corp. its subsidiaries and affiliates
(the "Optionees") who are primarily responsible for the management and
profitable growth of its business and to advance the interests of the
Corporation by granting options (the "Options") enabling them to acquire common
shares (the "Shares") of the Corporation as an additional incentive for superior
performance by such persons, on the terms and conditions set forth in this Plan
and any stock option agreements entered into between the Corporation and the
Optionees in accordance with the Plan.
2. ELIGIBILITY. Options may be granted under the Plan to directors,
officers, or to a personal holding corporation controlled by such persons,
employees, consultants and advisors of the Corporation, whether or not they are
full or part time employees of the Corporation; provided, however, that options
may be conditionally granted to persons who are prospective directors, officers
or employees of, or consultants or advisors to, the Corporation, but no such
grant shall become? by its terms, effective earlier than the date as of which
the board of directors approves the grant or the date as of which the Optionee
becomes a director, officer or employee of, or a consultant or advisor to (as
the case may be), the Corporation.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board") who shall have full authority to
interpret the Plan and to make such rules and regulations and establish such
procedures as they deem appropriate for the administration of the Plan. A
decision of the majority of persons comprising the Board in respect of any
matter hereunder shall be binding and conclusive for all purposes and upon all
persons. The Board is authorized and directed to do all things and execute and
deliver all instruments, undertakings and applications as they in their absolute
discretion consider necessary for the implementation of the Plan.
4. SHARES SUBJECT TO THE PLAN. The total number of shares which are
reserved and set aside for issuance under this Plan, and under all other
management options outstanding and employee stock purchase plans, if any, shall
not in the aggregate exceed 2,000,000 common shares. All shares issued pursuant
to the exercise of options granted or deemed to be granted under the Plan will
be so issued as fully paid common shares. The maximum number of common shares
which are reserved and set aside for issuance under this Plan may be
subsequently increased by further votes of shareholders of the Corporation.
5. PARTICIPATION. Options shall be granted under the Plan only to
directors or officers or their personal holding corporation or to employees,
consultants and advisors of the Corporation as shall be designated from time to
time by the Board and shall be subject to the approval of such regulatory
authorities as may have jurisdiction. Approval of the Plan also constitutes
shareholders
2(c)(1)-2
<PAGE> 3
approval of options that may be granted under the Plan to directors or senior
officers of the Corporation or to their personal holding corporation.
6. OPTION AGREEMENTS. Each option shall be evidenced by a written
agreement (an "Option Agreement"), containing such terms and conditions, not
inconsistent with the Plan, as the Board of Directors may, in its discretion,
determine. Each Option Agreement shall be executed on behalf of the Corporation
and the Optionee. Option Agreements may differ among Optionees.
7. TERMS AND CONDITIONS OF OPTIONS. The terms and conditions of each
option granted under the Plan shall include the following, as well as such other
provisions, not inconsistent with the Plan as may be deemed advisable by the
Board:
(a) NUMBER OF SHARES. The number of shares subject to option.
At no time shall the number of shares reserved for issuance to any one
person pursuant to options granted under the Plan or otherwise, exceed
five (5%) percent of the outstanding shares at any one time.
(b) OPTION PRICE. The option price of any shares in respect of
which an option may be granted under the Plan shall be fixed by the
Board but shall be not less than the Market Price of the shares at the
time the option is granted, or such lesser price as may be permitted
pursuant to the rules of any regulatory authority having jurisdiction
over the shares issued which rules may include provisions for certain
discounts in respect to the option price. For the purpose of this
paragraph, the "Market Price" shall be deemed to be the closing market
price of the shares as quoted for a published market on the day prior
to the date the option is granted? or if not so traded, the average
between the closing bid and ask prices thereof as reported for that
day.
(c) PAYMENT. The full purchase price payable under the option
shall be paid in cash or certified funds upon the exercise thereof. A
holder of an option shall have none of the rights of a shareholder
until the shares are issued.
(d) TERM OF OPTION. Options may be granted under this Plan
over a period not exceeding ten (10) years. Each option shall be
subject to earlier termination as provided in subparagraph (f) of this
paragraph 7.
(e) EXERCISE OF OPTION. Subject to the provisions contained in
subparagraph (f) of this paragraph 7, no option may be exercised unless
the Optionee is then a director, senior officer, officer, employee,
consultant and advisor of the Corporation. This Plan shall not confer
upon the Optionee any right with respect to continuation of employment
by the Corporation. Absence on leave approved by an officer of the
Corporation authorized to give such approval shall not be considered an
interruption of employment for any purpose of the Plan. Subject to the
provisions of the Plan, an option may be exercised
2(c)(1)-3
<PAGE> 4
from time to time by delivery to the Corporation of written notice of
exercise specifying the number of shares with respect to which the
option is being exercised and accompanied by payment in full of the
purchase price of the shares then being purchased.
(f) TERMINATION OF OPTIONS. Any option granted pursuant
hereto, to the extent not validly exercised, will terminate on the date
of expiration specified in the option agreement, being not more than
ten (10) years after the date upon which the option was granted.
(g) Non-transferability of Stock Option. No option shall be
transferable, except to a personal holding corporation of the Optionee,
by the Optionee other than by will or the laws of descent and
distribution and such option shall be exercisable during the lifetime
of the Optionee.
(h) Applicable Laws or Regulations. The Corporation's
obligation to sell and deliver shares under each option is subject to
such compliance by the Corporation and any Optionee as the Corporation
deems necessary or advisable with all laws, rules and regulations of
Canada and any provinces and/or territories thereof applying to the
authorization, issuance, listing or sale of securities and is also
subject to the acceptance for listing of the shares which may be issued
upon the exercise thereof by each stock exchange upon which shares of
the Corporation are then listed for trading.
8. TERMINATION OF EMPLOYMENT, DISABILITY AND DEATH. Unless the Option
Agreement provides otherwise, all options will terminate thirty (30) days
following (i) the termination by the Corporation, with or without cause, of the
Optionee's employment or other relationship with the Corporation, or (ii) the
termination by the Optionee of any such relationship with the Corporation. In
the case of death or permanent and total disability of the Optionee, all options
will terminate six (6) months following the death or permanent and total
disability of the Optionee, unless the Option Agreement provides otherwise. Such
period or periods shall be set forth in the Option Agreement evidencing such
option.
9. ADJUSTMENTS IN SHARES SUBJECT TO THE PLAN. The aggregate number and
kind of shares available under the Plan and the exercise price thereof shall be
appropriately adjusted in the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, rights
offering or any other change in the corporate structure or shares of the
Corporation. In any of such events, the Board of Directors may determine the
adjustments to be made in the number and kind of shares covered by options
theretofore granted or to be granted and in the option price.
10. AMENDMENT AND TERMINATION OF PLAN. Subject to the approval of the
Toronto Stock Exchange or other regulatory authorities having jurisdiction, the
Board may from time to time amend or revise the terms of the Plan or may
terminate the Plan at any time provided
2(c)(1)-4
<PAGE> 5
however that no such action shall, without the consent of the Optionee, in any
manner adversely affect his rights under any option theretofore granted under
the Plan.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Corporation is
not the surviving corporation, the dissolution or liquidation of the
Corporation, or the sale of all or substantially all the assets of the
Corporation, the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options: (a) accelerate the exercise date
or dates of such options pursuant to section 7(e); (b) upon written notice to
the holders thereof, provided the options have been accelerated pursuant to item
(a) above, terminate all such options prior to consummation of the transaction
unless exercised within a prescribed period; (c) provide for payment of an
amount equal to the excess of the Market Price, as determined by the Board or
such board of directors of any successor corporation or entity, over the Option
Price of such shares as of the date of the transaction, in exchange for the
surrender of the right to exercise such options; or (d) provide for the
assumption of such options, or the substitution therefor of new options, by the
successor corporation or entity.
12. ADDITIONAL RESTRICTIONS. Unless an ordinary resolution of
disinterested shareholders of the Corporation provides otherwise, the number of
options which may be granted under the Plan, together with any other share
compensation arrangements of the Corporation, is subject to the following
additional restrictions provided for in the rules of The Toronto Stock Exchange
governing stock options and stock purchase plans:
(a) at no time shall the number of shares reserved for
issuance pursuant to stock options granted to insiders exceed 10% of
the outstanding issue;
(b) at no time shall insiders be issued, within a one-year
period, a number of shares exceeding 10% of the outstanding issue; and
(c) at no time shall any one insider and such insider's
associates be issued, within a one-year period, a number of shares
exceeding 5% of the outstanding issue.
The above restrictions of paragraph 12 shall be of no force or effect to the
Plan, upon resolution of disinterested shareholders permitting the Corporation
to exceed the above-specified thresholds.
13. EFFECTIVE DATE AND DURATION OF PLAN. Subject to regulatory
compliance, the Plan shall come into full force and effect from the date of
shareholder approval hereof, and options may be granted immediately thereafter.
The Plan shall remain in full force and effect thereafter from year to year
until amended or terminated and for so long thereafter as options remain
outstanding in favour of any optionee.
2(c)(1)-5
<PAGE> 6
14. REPEAL. Upon this Plan coming into effect the Employee Incentive
Stock Option Plan of the Corporation approved on July 20, 1994 is repealed
provided that such repeal shall not affect the previous operation of such plan
so repealed or affect the validity of any act done or right, privilege,
obligation or liability acquired or incurred under the validity of any agreement
made pursuant to any such plan prior to its repeal.
2(c)(1)-6
<PAGE> 1
EXHIBIT 3(A)(1)
SHARE EXCHANGE AGREEMENT
3(a)(1)-1
<PAGE> 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT dated April 7, 1997 is made
B E T W E E N:
OSGOODE HOLDINGS, INC.,
a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as "Osgoode")
OF THE FIRST PART
-and-
LASERMEDIA, INC.,
a corporation incorporated under the laws
of the province of Ontario
(hereinafter referred to as "Lasermedia")
OF THE SECOND PART
WHEREAS Osgoode desires to purchase from the Lasermedia Shareholders
and the Lasermedia Shareholders desire to sell to Osgoode the Lasermedia Shares;
AND WHEREAS Osgoode and the Lasermedia Shareholders desire to effect
the purchase and sale of the Lasermedia Shares pursuant to the Share Exchange in
accordance with the terms and conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT, in consideration of the mutual
covenants hereinafter contained and provided for and other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by
the Parties), the Parties agree as follows:
ARTICLE I
INTERPRETATION
3(a)(1)-2
<PAGE> 3
1.1 DEFINITIONS. In this Agreement, unless the context otherwise requires, the
terms set forth in Schedule 1.1 shall have the meanings set forth therein.
1.2 ENTIRE AGREEMENT. This Agreement together with the agreements and other
documents to be delivered pursuant to this Agreement, constitute the entire
agreement between the Parties pertaining to the Share Exchange and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
or written, including, without limitation, the Merger Agreement dated April 7,
1997 between Osgoode and Lasermedia and there are no warranties, representations
and other agreements between the Parties in connection with the subject matter
hereof except as specifically set forth in this Agreement or any other agreement
or document to be delivered pursuant to this Agreement.
1.3 EXTENDED MEANINGS. In this Agreement, words importing the singular number
include the plural and vice versa; words importing the masculine gender include
the feminine and neuter genders.
1.4 HEADINGS. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.5 REFERENCES. References to an article, section, subsection, paragraph,
schedule or exhibit shall be construed as references to an article, section,
subsection, paragraph, schedule or exhibit to this Agreement, unless the context
otherwise requires.
1.6 GOVERNING LAW. This Agreement shall be governed and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable in
that Province.
1.7 CURRENCY. Unless otherwise specified, the word "dollar", or the symbol "$"
refers to Canadian currency.
1.8 SCHEDULES. The following is a list of schedules attached to and incorporated
into this Agreement by reference and deemed as part of this Agreement.
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C> <C>
1.1 Definitions
1.11 Shareholders of Lasermedia
2.2 Share Exchange
5.1 Osgoode Financial Statements
</TABLE>
ARTICLE II
SHARE EXCHANGE
3(a)(1)-3
<PAGE> 4
2.1 AGREEMENT TO PURCHASE. Upon the terms and subject to the conditions
contained in this Agreement, the Lasermedia Shareholders shall sell and Osgoode
shall purchase, as of and with effect from the opening of business on the
Closing Date, the Lasermedia Shares.
2.2 SHARE EXCHANGE. The purchase and sale of the Lasermedia Shares shall be
effected by the issue of Osgoode Shares to the Lasermedia Shareholders, pursuant
to the prospectus and registration exemptions contained in paragraphs 72(1)(j)
and 35(l)(16) of the Securities Act (Ontario), in exchange for the Lasermedia
Securities as set forth in Schedule 2.2 (the "Share Exchange").
2.3 VALUATION. Osgoode and the Lasermedia Shareholders have established, for the
purpose of this Agreement, that the Lasermedia Shares and the Osgoode Shares
have the respective value of $8,300,000, subject to a complete valuation report
including audited financial statements supplied by Lasermedia to the management
of Osgoode for approval.
2.4 NO SOLICITATION, ETC. Lasermedia and its subsidiaries will not, directly or
indirectly, through any officer, director, investment broker, agent or
otherwise, make, solicit, initiate or encourage inquiries from or submission or
proposals or offers from any person, corporation, partnership or other business
organization whatsoever (including any of its officers or employees) relating to
any liquidation, dissolution, recapitalization, merger, amalgamation,
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in (including the Lasermedia Shares), Lasermedia or any of its
subsidiaries or other similar transaction or business combination involving
Lasermedia or any of its subsidiaries, or participate in any discussions or
negotiations regarding, or furnish to any other person any information with
respect to, otherwise co-operate in any way with, or assist or participate in,
or facilitate or encourage, any effort or attempt to by any other person to seek
any of the foregoing; provided, however, that the foregoing shall not prevent
the board of directors of Lasermedia or Lasermedia from responding to any bona
fide offer, proposal or inquiry made by a third party in relation to the
foregoing (including, without limitation, furnishing such third party
information of the type provided to Osgoode or where, in the opinion of the
board of directors acting in good faith, on the basis of written opinion of its
outside counsel, a failure to so respond would be inconsistent with its
fiduciary obligations under applicable law. Lasermedia shall promptly notify
Osgoode of any proposal or offer, or any inquiry or contact with any person with
respect thereto, has been or is made and shall promptly provide Osgoode with
such information regarding such proposal, inquiry or contact as Osgoode may
request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RE: THE LASERMEDIA SHAREHOLDERS
3.1 REPRESENTATIONS AND WARRANTIES OF THE LASERMEDIA SHAREHOLDERS. Lasermedia
represents and warrants to Osgoode as follows and acknowledges that Osgoode is
relying on these representations and warranties in connection with the
completion of the Share Exchange:
3(a)(1)-4
<PAGE> 5
(a) CAPACITY TO OWN LASERMEDIA SHARES - The Lasermedia
Shareholders have all necessary power, authority and capacity
to own the Lasermedia Shares.
(b) CAPACITY TO ENTER AGREEMENT - The Lasermedia Shareholders have full
power, right and authority to enter into this Agreement and to perform
their obligations under it.
(c) ABSENCE OF CONFLICT - The Lasermedia Shareholders are not a party
to, bound or affected by any agreement which would be violated,
breached or terminated by, or which would result in creation or
imposition of any encumbrance upon any of the Lasermedia Shares as a
consequence of the execution and delivery of this Agreement or the
consummation of the transactions contemplated in this Agreement.
(d) TITLE TO LASERMEDIA SHARES - The Lasermedia Shareholders are the
legal and beneficial owners of the Lasermedia Shares, as set forth in
Schedule "2.2", with good and marketable title, free and clear of any
Encumbrances.
(e) NO BANKRUPTCY - No proceedings have been taken or authorized by any
Lasermedia Shareholder or by any other person in respect of the
bankruptcy, insolvency, liquidation, dissolution or winding up as
applicable, of any Lasermedia Shareholder.
(f) NO OPTION - No Person, other than Osgoode under this Agreement, has
any agreement or any right capable of becoming an agreement or option
for the purchase from the Lasermedia Shareholders of any of the
Lasermedia Shares.
(g) DISCLOSURE - The representations and warranties of the Lasermedia
Shareholders in this Agreement are true, correct and do not contain any
untrue or misleading statement of a material fact or omit to state a
material fact necessary to make such representations and warranties not
misleading to Osgoode.
(h) NON-VIOLATION - The entering into of this Agreement and the
consummation of transactions contemplated herein do not and will not
conflict with, or result in a breach of, or constitute a default under
the terms or conditions or any constating document of Lasermedia, any
by-laws, any court or administrative order or process, any agreement or
instrument to which Lasermedia is party or by which it is bound.
ARTICLE IV
ADDITIONAL REPRESENTATION AND WARRANTIES OF LASERMEDIA
4.1 REPRESENTATIONS AND WARRANTIES OF LASERMEDIA. Lasermedia represents and
warrants to Osgoode as follows and acknowledges that Osgoode is relying on these
representations and warranties in connection with the Share Exchange:
3(a)(1)-5
<PAGE> 6
(a) DUE INCORPORATION. Lasermedia is a corporation duly incorporated
and validly existing under the laws of the Province of Ontario.
(b) CAPACITY TO ENTER AGREEMENT. Lasermedia has full corporate power
and authority to enter into this Agreement and to perform its
obligations under it.
(c) DUE AUTHORIZATION. The executing and delivery of this Agreement and
the consummation of the transactions contemplated under it have been
duly authorized by all necessary corporation action on the part of
Lasermedia.
(d) BINDING OBLIGATION. This Agreement has been duly executed and
delivered by Lasermedia and constitutes a valid and binding obligation
of it.
(e) ABSENCE OF CONFLICT. Lasermedia is not a party to, bound or
affected by any agreement which would be violated, breached or
terminated by, or which would result in the creation or imposition of
any Encumbrance upon any of the Lasermedia Shares as a consequence of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated in this Agreement.
(f) REGULATORY APPROVALS. Except for Shareholder Approval and
Regulatory Approval, no governmental or regulatory authorization,
approval, order, consent or filing is required on the part of
Lasermedia, in connection with the execution, delivery and performance
of this Agreement and the performance of Lasermedia's obligations under
this Agreement.
(g) NO BANKRUPTCY. No proceedings have been taken, are pending or
authorized by Lasermedia or by any person in respect of the bankruptcy,
insolvency, liquidation, dissolution or winding up of Lasermedia.
(h) AUTHORIZED AND ISSUED CAPITAL. As of the Closing Date, the
authorized capital of Lasermedia shall consist of an unlimited number
of common shares, of which not more than 13,500,000 common shares shall
be currently outstanding as fully paid and non-assessable shares of
Lasermedia. There shall also be issued and outstanding not more than
600,000 Series A common share purchase warrants, 200,000 Series B
common share purchase warrants, 200,000 Series C common share purchase
warrants, 100,000 Series D common share purchase warrants, 2,866,666
Series E common share purchase warrants and 258,000 Series F common
share purchase warrants. As of the Closing Date, there shall be no
other option or other right of any kind in existence, authorized or
agreed to which could result in any further shares or other securities
of Lasermedia being allotted or issued or becoming outstanding.
3(a)(1)-6
<PAGE> 7
(i) MINUTE BOOKS. The minute books of Lasermedia contain accurate and
complete minutes of all meetings and resolutions of the directors and
the shareholders of Lasermedia held or passed by signature in writing,
respectively, since the date of its incorporation. All such meetings
have been duly called and held. Lasermedia share certificate books and
share registers are complete and accurate.
(j) LASERMEDIA'S CAPACITY AND POWER. Lasermedia has full corporate
right, power and authority to own or lease its assets as now owned or
leased and to carry on the Lasermedia Business.
(k) BUSINESS. The only business carried on by Lasermedia is the
Lasermedia Business.
(l) LASERMEDIA PRO FORMA FINANCIAL STATEMENT. Lasermedia will provide
to the management of Osgoode, Pro Forma Financial Statements subject to
the acceptance of the management of Osgoode and:
(i) to the knowledge of the management of Lasermedia,
have been prepared in accordance with Canadian
generally accepted accounting principles applied on a
consistent basis throughout the periods indicated;
and
(ii) fairly and accurately present, subject to immaterial
variation, the financial position, assets and
liabilities (whether absolute, contingent, accrued or
otherwise) of Lasermedia on the dates thereof and the
financial results of Lasermedia for the periods
referred to in the Lasermedia Financial Statements.
(m) NO GUARANTEES ETC. Lasermedia is not a party to or bound by any
agreement of guarantee, indemnification, assumption or endorsement or
any like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any Person.
(n) RECORDS.
(i) The Lasermedia Records are true and correct and
present fairly and disclose in all material respects
the actual results of the Lasermedia Business.
(ii) To the best of the knowledge of the officers and
directors of Lasermedia, all material financial
transactions of Lasermedia have been accurately
recorded in the Lasermedia Records. The Lasermedia
Records (of a financial nature) have been prepared in
accordance with Canadian generally accepted
accounting principles consistently applied.
3(a)(1)-7
<PAGE> 8
(iii) The files, documentation and information in writing
provided by Lasermedia to Osgoode in connection with
the negotiation and completion of the transactions
contemplated in this Agreement are true and correct
in all material respects.
(o) BUSINESS AGREEMENTS.
(i) The Lasermedia normal course of business agreements
are the only material agreements relating to the
Lasermedia Business.
(ii) The Lasermedia normal course of business agreements
are in full force and effect unamended and under no
threat of cancellation by any party thereto.
No party is in material breach under any of the
Lasermedia normal course of business agreements.
(p) LITIGATION. To the best of the knowledge of the officers and
directors of Lasermedia there are no judgments, decrees, injunctions,
ruling or orders of any court, Governmental Authority or arbitration,
or any actions, suits, grievances or proceedings, (whether or not on
behalf of Lasermedia) are pending or threatened or involving
Lasermedia, or the Lasermedia Business which may materially adversely
affect the Lasermedia Business or Lasermedia's assets.
(q) SECURITIES DOCUMENTS. The Osgoode Information Circular (to the
extent that it sets forth facts or information about Lasermedia) does
not contain any untrue statement of a material fact or omit to state a
material fact that is required to be stated or omit to state a material
fact that is necessary to be stated in order to make a statement
contained in those documents not misleading in light of the
circumstances in which it was made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF OSGOODE
5.1 REPRESENTATIONS AND WARRANTIES OF OSGOODE.
Osgoode hereby represents and warrants to Lasermedia as follows and
acknowledges that Lasermedia is relying on those representations and warranties
in connection with the Share Exchange:
(a) DUE INCORPORATION. Osgoode is a corporation duly incorporated and
validly existing under the laws of the Province of Ontario.
3(a)(1)-8
<PAGE> 9
(b) CAPACITY TO ENTER AGREEMENT. Osgoode has full power, right and
authority to enter into this Agreement and to perform the obligations
under it.
(c) DUE CORPORATE AUTHORIZATION. The execution and delivery of this
Agreement and the consummation of the transactions contemplated under
it have been duly authorized by all necessary corporate action on the
part of Osgoode.
(d) BINDING OBLIGATION. This Agreement has been duly executed and
delivered by Osgoode and constitutes a valid and binding obligation of
Osgoode.
(e) ABSENCE OF CONFLICT. Osgoode is not a party to, bound or affected
by or subject to any agreement which would be violated, breached or
terminated by, or which would result in the creation or imposition of
any Encumbrance upon any of the Osgoode Shares as a consequence of, the
execution and delivery of this Agreement or the consummation of the
transactions contemplated in this Agreement.
(f) REGULATORY APPROVALS. Except for Shareholders Approval and
Regulatory Approval, no governmental or regulatory authorization
approval, order, consent or filing is required on the part of Osgoode,
in connection with the execution, delivery and performance of this
Agreement and the performance of Osgoode's obligations under this
Agreement.
(g) NO BANKRUPTCY. No proceedings have been taken, are pending or
authorized by Osgoode or by any other person in respect to the
bankruptcy, insolvency, liquidation, dissolution or winding up of
Osgoode.
(h) AUTHORIZED AND ISSUED CAPITAL. On the date of this Agreement, the
authorized capital of Osgoode consists of an unlimited number of common
shares and 2,000,000 preference shares, of which 125,830 common shares
are issued and outstanding.
Effective immediately after the Closing, the Osgoode Shares held by the
current shareholders of Osgoode shall be duly and validly issued and outstanding
as fully paid and non-assessable shares of Osgoode and shall represent
approximately 1.0% of the issued and outstanding common shares.
Except for the provisions of a debt repurchase agreement between
Osgoode and FMF Investment Group S.A. dated April 1, 1997, there is no option or
other right of any kind in existence, authorized or agreed to which could result
in any further shares or the securities of Osgoode being allotted or issued or
becoming outstanding.
(i) MINUTE BOOKS. The minute books of Osgoode contain accurate and
complete minutes of all meetings and resolutions of the directors and
the shareholders of Osgoode
3(a)(1)-9
<PAGE> 10
held or passed by signature in writing, respectively, since the date
of its incorporation. All such meetings have been duly called and held.
(j) NO SUBSIDIARIES. Osgoode does not own any shares in or securities
of any corporate body.
(k) REPORTING ISSUER. Osgoode is and has been for a period of at least
1 year, a reporting issuer as defined in the Securities Act (Ontario)
and is currently on the list of defaulting reporting issuers maintained
by the OSC. Osgoode is the subject of a cease trading order imposed
by the OSC.
(l) COMPLIANCE WITH LAWS. Except where failure to comply will not have
a material adverse effect on Osgoode, Osgoode is in compliance with all
applicable laws, rules, regulations, notices, approvals and orders of
Canada and the Province of Ontario.
(m) ABSENCE OF MATERIAL CHANGES. Since December 31, 1996:
(i) no changes have been made in the accounting methods,
practices or policies followed by Osgoode;
(ii) Osgoode has not increased, incurred or guaranteed any
debt, obligation, or liability (whether absolute or
contingent and whether or not currently due and
payable);
(iii) there has been no damage, destruction or loss, labor
trouble, or other event, development or condition of
any character (whether or not covered by insurance)
which adversely affects, or, may adversely affect,
the properties or prospects of Osgoode; and
(iv) Osgoode has not paid any amount or dividend, or
otherwise made any distribution or the payment of any
kind or nature whatsoever to any non-arm's length
Person.
(n) OSGOODE FINANCIAL STATEMENTS. The Osgoode Financial Statements
attached hereto as Schedule 5.1:
(i) have been prepared in accordance with Canadian
generally accepted accounting principles; and
(ii) fairly and accurately present the financial position,
assets and liabilities (whether absolute, contingent,
accrued or otherwise) of Osgoode on the
3(a)(1)-10
<PAGE> 11
dates thereof, the financial results of Osgoode for
the periods referred to in the Osgoode Financial
Statements.
(o) NO GUARANTEES ETC. Osgoode is not a party to or bound by any
agreement of guarantee, indemnification, assumption or endorsement or
any like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any Person.
(p) TITLE TO AND CONDITION OF ASSET. As of the date hereof, Osgoode has
no tangible assets of any kind.
(q) RECORDS.
(i) All material financial transactions of Osgoode have
been accurately recorded in the Osgoode Records. The
Osgoode Records (of a financial nature) have been
prepared in accordance with Canadian generally
accepted accounting principles consistently applied.
(ii) The files, documentation and information in writing
provided by Osgoode to Lasermedia Shareholders in
connection with the negotiation and completion of the
transactions contemplated in this Agreement are true
and correct in all material respects.
(r) EMPLOYEES. At present, Osgoode does not employ or engage any
employees.
(s) LITIGATION. There are no judgments, decrees, injunctions, ruling or
orders of any court, Governmental Authority or arbitration, or any
actions, suits, grievances or proceedings (whether or not on behalf of
Osgoode) pending or threatened or involving Osgoode which may
materially adversely affect Osgoode's assets.
(t) DISCLOSURE. The representations and warranties of Osgoode in this
Agreement are true, complete and correct and do not contain any untrue
or misleading statement of a material fact or omit to state a material
fact necessary to make such representations and warranties not
misleading to Lasermedia Shareholders.
ARTICLE VI
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 Subject to Section 6.2, all representations and warranties contained in this
Agreement on the part of each of the parties shall survive the Closing for a
period of (1) one year from the Closing Date, after which time, if no claim
shall have been made against a Party with respect to
3(a)(1)-11
<PAGE> 12
any incorrectness or in breach of any representation or warranty, that
Party shall have no further liability under this Agreement with respect to
the representation or warranty.
6.2 The representations, warranties, covenants and indemnities of the
Parties relating to the tax liability of Osgoode and Lasermedia shall:
(a) unless resulting from any misrepresentation made or fraud committed
in filing a return or supplying information for the purposes of the
Income Tax Act (Canada), applicable provincial corporation tax
legislation or any other legislation imposing tax on Osgoode and
Lasermedia, terminate at the expiration of the last of the limitation
periods contained in the Income Tax Act (Canada), applicable provincial
corporation tax legislation or any other legislation imposing tax on
Osgoode and Lasermedia, subsequent to the expiration of which an
assessment, or other form of recognized document assessing liability
for its year ended immediately prior to the Closing Date; and
(b) if based upon misrepresentation made or fraud committed in filing a
return or in supplying information for the purpose of the Income Tax
Act (Canada), applicable provincial corporation tax legislation or any
other legislation imposing tax on Osgoode and Lasermedia, survive
without limit as to time.
6.3 All statements contained in any certificate or any instrument delivered
by or on behalf of a Party pursuant to or in connection with the transactions
contemplated by this Agreement shall be deemed to be made by such Party under
this Agreement.
ARTICLE VII
COVENANTS
7.1 CONDUCT OF LASERMEDIA BUSINESS PRIOR TO CLOSING. During the Interim
Period, Lasermedia shall:
(a) CONDUCT BUSINESS IN ORDINARY COURSE. Except as otherwise
contemplated or permitted by this Agreement, conduct the Lasermedia
business diligently and prudently and shall not, without the prior
written consent of Osgoode, enter into any contracts, agreements,
commitments or leases, or undertake any activity (including allotment
or issuance of any further shares or securities of Lasermedia) except
in the ordinary course of the Lasermedia business;
(b) CONTINUE INSURANCE. Continue in full force all existing insurance
policies;
(c) COMPLY WITH LAWS. Comply with all laws applicable to the
Lasermedia Business;
3(a)(1)-12
<PAGE> 13
(d) MAINTAIN PERMITS. Apply for, maintain in good standing and renew
all permits, licenses, registrations and permits necessary to enable it
to carry on the Lasermedia Business as now conducted; and
(e) DISTRIBUTIONS. Not pay any amount or dividend or otherwise make any
distribution to its shareholders or any non-arm's length Person out of
the normal course.
7.2 CONDUCT OF OSGOODE PRIOR TO CLOSING. During the Interim Period,
Osgoode shall:
(a) AGREEMENTS. Not enter into any contracts, agreements,
communications or leases or undertake any activity (including the
allotment or issuance of further shares or securities of Osgoode);
(b) NO BUSINESS. Not carry on any business;
(c) COMPLY WITH LAWS. Comply with all laws applicable to Osgoode; and
(d) DISTRIBUTIONS. Not pay any amount or dividend or otherwise make any
distribution to its shareholders or any non-arm's length Person.
7.3 ACCESS FOR INVESTIGATION.
(a) Osgoode and Lasermedia shall permit the other Party and its
Authorized Representatives, until the Closing Date, to have reasonable
access during normal business hours to their respective premises and
their respective Records to enable confirmation of the accuracy of the
Records and the matters represented and warranted in Articles III, IV
and V.
Until the Closing Date and, in the event the termination of this
Agreement without the completion of the transactions contemplated
hereby, each of the Parties shall thereafter, subject to subsection
7.3(b), use its best efforts to keep confidential and not use for its
own purpose (other than as contemplated by this Agreement) any
information obtained from any other Party with respect to the other
Party's affairs. If this Agreement is terminated, all documents,
working papers and other written material obtained by the Party from
the other party in connection with this Agreement and not previously
made public (and all copies thereof) shall be returned to the other
Party promptly after such termination.
(b) The obligation of each of the Parties under subsection 7.3(a) to
keep confidential and not use any information shall not apply to
information which:
(i) becomes generally available to the public other than
as a result of a disclosure by the Party or its
representative in violation of this Agreement;
3(a)(1)-13
<PAGE> 14
(ii) was available to the Party on a non-confidential
basis prior to its disclosure by the other party or
their representatives;
(iii) becomes available to the party on a non-confidential
basis from a source other than the Party or its
representatives, provided that such source is not
bound by a confidential agreement with the other
Party; or
(iv) the Party is required by law to disclose.
7.4 CLOSING DOCUMENTS. The Ancillary Agreements and the Conveyance Documents
shall be executed and delivered by the Parties thereto at the Closing time.
7.5 CORPORATE PROCEEDINGS. On or before the Closing Date, each Party (which is a
corporation) shall provide to the other Parties certified copies of all
necessary proceedings and resolutions, corporate or otherwise, and all other
necessary actions, corporate or otherwise, authorizing the execution and
delivery of this Agreement and the matters contemplated in it.
7.6 ACTIONS TO SATISFY CLOSING CONDITIONS. Each Party shall take all such
actions as are within its power to control, and shall use its best efforts to
cause other actions to be taken which are not within its power to control, so as
to ensure compliance with any conditions set forth in this Agreement which are
for the benefit of itself or any other Party.
7.7 OSGOODE CORPORATE PROCEEDINGS. Osgoode shall use its best effort to
obtain or effect prior to the Closing Date the following:
(i) the Shareholder Approval;
(ii) the approval of the shareholders of Osgoode of the
Osgoode Stock Option Plan; and
(iii) the approval of the shareholders of Osgoode to change
the corporate name of Osgoode to Lasermedia
Communications Corp. or such other name as the board
of directors of the Corporation may decide.
ARTICLE VIII
CONDITIONS OF CLOSING
8.1 CONDITIONS FOR OSGOODE BENEFIT.
Osgoode shall not be obliged to complete the Share Exchange unless, on
the Closing Date, each of the following conditions shall have been satisfied:
3(a)(1)-14
<PAGE> 15
(a) ACCURACY OF REPRESENTATIONS. The representations and warranties of
the Lasermedia Shareholders set forth in section 3.1 and 4.1 shall be
true and correct at the Closing, except as those representations and
warranties may be affected by the occurrence of events or transactions
expressly contemplated and permitted by this Agreement, including,
without limitation, those in the ordinary course of business;
(b) PERFORMANCE OF OBLIGATIONS. Lasermedia and the Lasermedia
Shareholders shall have performed all of the obligations hereunder to
be performed by them at or prior to the Closing. Lasermedia and the
Lasermedia Shareholders shall not be in breach of any agreement on its
part contained herein;
(c) DELIVERIES. Lasermedia and the Lasermedia Shareholders shall have
delivered or caused to be delivered to Osgoode the Conveyance
Documents, and shall deliver up to Osgoode possession of the Lasermedia
Shares, free and clear of any Encumbrances;
(d) SHAREHOLDER APPROVAL AND REGULATORY APPROVAL. The Shareholder
Approval and Regulatory Approval shall have been obtained or given, as
the case may be, on or before the Closing Time;
(e) COMPLETION OF INVESTIGATIONS. The investigations and assessments
contemplated in Section 7.3 shall have been completed and Osgoode shall
be satisfied with the result of such investigations and assessments
including, without limitation, the accuracy of the Records and matters
represented and warranted in Articles III and IV; and
(f) CONSENTS, AUTHORIZATIONS AND REGISTRATIONS. All consents,
approvals, orders and authorizations of, from or notifications to any
persons or Governmental Authorities required in connection with the
completion of any of the transactions contemplated by this Agreement,
the execution of this Agreement, the Closing or the performance of any
of the terms and conditions of this Agreement shall have been obtained
on or before the Closing Date.
There shall be no injunction or order issued preventing, and no pending
or threatened claim, action, litigation or proceeding, judicial or
administrative, or investigation against any Party by any Governmental Authority
or Person for the purpose of enjoining or preventing the consummation of this
Agreement, or otherwise claiming that this Agreement or the consummation thereof
is improper or would give rise to proceedings under any statue or rule of law.
(g) NO LOSS. During the Interim Period, there has been no material
damage to the assets of Lasermedia or the Lasermedia Business by fire
or other peril, whether or not such damage is covered by insurance;
3(a)(1)-15
<PAGE> 16
(h) NO MATERIAL CHANGES. There shall have been no material adverse
changes in the Lasermedia Business, assets or financial condition of
Lasermedia during the Interim Period. For the purposes of this
subsection, the term "material adverse change" shall mean any change in
the assets, liabilities or financial condition of Lasermedia or the
Lasermedia Business that may:
(i) involve material reduction, damage, risk to or
destruction of the assets, whether or not the change
is covered by insurance; or
(ii) will result in a material reduction in the gross
sales or net profits before the taxes of Lasermedia
(whether or not the change occurred in the ordinary
course of business).
(i) CONFIDENTIALITY AGREEMENTS. Lasermedia shall have used all
reasonable best efforts to enter into confidentiality and intellectual
property transfer agreements, in form satisfactory to Osgoode, with
each of its employees involved in the development of intellectual
property rights of Lasermedia and having access to confidential
information of Lasermedia;
(j) OUTSTANDING CAPITAL. At the Closing Date there shall be no more
than 13,500,000 Lasermedia Common Shares, 600,000 Series A Warrants,
200,000 Series B Warrants, 200,000 Series C Warrants, 100,000 Series D
Warrants, 2,866,666 Series E Warrants and 258,000 Series F Warrants of
Lasermedia issued and outstanding, and there shall be no other
outstanding options, rights or warrants entitling the holders to
acquire Lasermedia Common Shares or any securities convertible into or
exchangeable for Lasermedia Common Shares;
(k) MATERIAL ADVERSE EFFECT. There shall not exist or have occurred any
fact, event or circumstance which constitutes or will result in a
material adverse effect on the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of
Lasermedia which was not publicly disclosed at the date of the
announcement of the Share Exchange;
(l) EXTRAORDINARY ACTS. Without the prior written consent of Osgoode,
Lasermedia shall not have:
(i) declared or paid any dividends or distributed any of
its properties or assets to shareholders;
(ii) entered into any contract, other than in the ordinary
course of business;
(iii) amended its articles or by-laws; or
(iv) engaged in any business enterprise or other activity
different from that carried on as of the date hereof.
3(a)(1)-16
<PAGE> 17
(m) FULFILLMENT OF CONDITIONS. The fulfillment or waiver of all of
the conditions set forth in Section 8.1 hereof;
(n) ACTIONS AND PROCEEDINGS. No act, action, suit or proceeding shall
have been threatened or taken before or by any domestic or foreign
court or tribunal or governmental agency or other regulatory authority
or administrative agency or commission by any elected or appointed
public official or private person (including, without limitation, any
individual, corporation, firm, group or other entity) in Canada or else
where, whether or not having the force of law;
(o) ISSUANCE AND REPURCHASE OF SHARES. Lasermedia will not have issued
or acquired or committed itself to acquire any share in its capital;
(p) OTHER ACTIONS. Osgoode shall have determined in its sole judgment
that (since the announcement by Osgoode of its intention to acquire
Lasermedia) Lasermedia has not taken or proposed to take any action, or
publicly disclosed that it intends to take any action, and Osgoode
shall not have otherwise learned of any previous action taken by
Lasermedia which had not been publicly disclosed prior to the
announcement by Osgoode of its intention to make the Share Exchange,
which, in the sole judgment of Osgoode, might make it inadvisable for
Osgoode to proceed with the Share Exchange, or that would be materially
adverse to the business of Lasermedia or to the value of the Lasermedia
Shares to Osgoode; including, without limiting the generality of the
foregoing, any action with respect to any agreement, proposal, offer or
understanding relating to any material sale, disposition or other
dealing with any of the assets or contracts of Lasermedia, any issue of
shares, options or other securities of Lasermedia to any person other
than a wholly-owned subsidiary of Lasermedia, any material acquisition
from a third party of assets or securities by Lasermedia, or
amalgamation, statutory arrangement, capital reorganization, merger,
business combination or similar transaction involving Lasermedia, or
any material capital expenditure by Lasermedia not in the ordinary
course of business;
(q) BUSINESS CONDITIONS. There shall not exist or have occurred, and
Osgoode shall not have otherwise learned of any previous occurrence
which had not been publicly disclosed prior to the announcement by
Osgoode of its intention to make the Share Exchange, any change (or any
condition, event or development involving a prospective change) in the
business, operation, assets, capitalization, financial condition,
licenses, permits, rights, privileges or liabilities whether
contractual or otherwise, of Lasermedia which, in the sole judgment of
Osgoode, is or would be materially adverse to the business of
Lasermedia;
(r) IMPAIRED RIGHTS; BREACHES OF COVENANTS. Osgoode shall have
determined in its sole judgment that: (i) no material right, franchise
or license of Lasermedia has been or may be impaired (which impairment
has not been cured or waived) or otherwise adversely
3(a)(1)-17
<PAGE> 18
affected, whether as a result of the making of the Share Exchange or
otherwise which might make it inadvisable for Osgoode to proceed with
the Share, and (ii) no covenant, term or condition of any instruments
or agreements of Lasermedia exists which might make it inadvisable for
Osgoode to proceed with the Share Exchange (including without
limitation, any default, acceleration or other adverse event that may
ensue as a result of the Share Exchange);
(s) FORCE MAJEURE. There shall not have occurred, developed or come
into effect or existence any event, action, state, condition or major
financial occurrence of national or international consequence or any
law, regulation, action, government regulation, enquiry or other
occurrence of any nature whatsoever which, in the sole judgment of
Osgoode, materially adversely affects or involves, or may materially
adversely affect or involve, the financial markets in Canada or
elsewhere generally, or the financial condition, business, operations,
assets, affairs or prospects of Lasermedia to Osgoode.
If any one or more of the following conditions shall not have been
fulfilled on or before the Closing Date, Osgoode may terminate this Agreement by
notice in writing to the other Parties in which event Osgoode shall be released
from all obligations under this Agreement and (unless Osgoode can show that the
condition relied upon could reasonably have been performed by the other parties)
the other Parties shall also be released from all obligations hereunder;
provided, however, that Osgoode shall be entitled to waive compliance with any
one or more of such conditions in whole or in part if it shall see fit to do so,
without prejudice to its rights of termination in the event of the
non-fulfillment of any other condition in whole or in part.
8.2 CONDITIONS FOR THE BENEFIT OF THE LASERMEDIA SHAREHOLDERS. The Lasermedia
Shareholders shall not be obliged to complete the Share Exchange unless, on the
Closing Date, each of the following conditions shall have been satisfied:
(a) ACCURACY OF REPRESENTATIONS. The representations and warranties of
Osgoode set forth in Section 5.1 shall be true and correct at the
Closing, except as those representations and warranties may be affected
by the occurrence of events or transactions expressly contemplated and
permitted by this Agreement and the Lasermedia Shareholders shall have
received a certificate from Osgoode confirming the foregoing.
(b) PERFORMANCE OF OBLIGATIONS. Osgoode shall have performed all of the
obligations hereunder to be performed by it at or prior to the Closing
and Osgoode shall not be in breach of any agreement on its part
contained herein.
(c) DELIVERIES. Osgoode shall have delivered or caused to be delivered
to Lasermedia Shareholders possession of the Osgoode Shares, free and
clear of any Encumbrances.
3(a)(1)-18
<PAGE> 19
(d) SHAREHOLDERS APPROVAL AND REGULATORY APPROVAL. The Shareholders
Approval, the matters contemplated in Section 7.7 and the Regulatory
Approval shall have been obtained, completed or given, as the case may
be, on or before the Closing Time.
(e) COMPLETION OF INVESTIGATIONS. The investigations and assessments
contemplated in Section 7.3 shall have been completed and the
Lasermedia Shareholders shall be satisfied with the results of such
investigations and assessments including, without limitation, the
accuracy of the Records and matters represented and warranted in
Article 5.
(f) CONSENTS, AUTHORIZATIONS AND REGISTRATIONS. All consents,
approvals, orders and authorizations of, from or notifications to any
Persons or Governmental Authorities required in connection with the
completion of any of the transactions contemplated by this Agreement,
the execution of this Agreement, the Closing or the performance of any
of the terms and conditions of this Agreement shall have been obtained
on or before the Closing Date.
There shall be no injunction or order issued preventing, and no pending
or threatened claim, action, litigation or proceeding, judicial or
administrative, or investigation against any Party by any Governmental Authority
or Person for the purpose of enjoining or preventing the consummation of this
agreement, or otherwise claiming that this Agreement or the consummation thereof
is improper or would give rise to proceedings under any statute or rule of law.
(g) NO LOSS. During the Interim Period, there has been no material
damage to the assets of Osgoode by fire or other peril, whether or not
such damage is covered by insurance.
(h) NO MATERIAL CHANGES. There shall have been, in the reasonable
opinion of Lasermedia, no material adverse changes in the assets or
financial condition of Osgoode during the Interim Period. For the
purposes of this subsection, the term "material adverse change" shall
mean any change in the assets, liabilities or financial condition of
Osgoode that may, in the reasonable opinion of Osgoode involve material
reduction, damage, risk to or destruction of the assets whether or not
the change is covered by insurance.
(i) OSGOODE FINANCIAL STATEMENTS. Osgoode shall make available to
Lasermedia unaudited interim financial statements for the period ending
March 31, 1997.
(j) REMOVAL OF CEASE TRADE ORDER. Osgoode will ensure that as of the
Closing Date, Osgoode shall be a "reporting issuer" in good standing
under the provisions of the Securities Act (Ontario) and Regulations
thereto and shall be up-to-date with all filings and mailings required
by the Business Corporations Act (Ontario) and the Canadian Dealing
Network and to this end, Osgoode shall make an application to the
Ontario Securities Commission ("OSC") to remove the cease trade order
issued June 10, 1987, to file the
3(a)(1)-19
<PAGE> 20
December 31, 1996 year end audited financial statements, the quarterly
statements as of March 31, 1997 together with such other disclosure as
may be required by the OSC.
If any one or more of the foregoing conditions shall not have been
fulfilled on or before the Closing Date, Lasermedia may terminate this Agreement
by notice in writing to Osgoode in which event Lasermedia shall be released from
all obligations under this Agreement and (unless Lasermedia can show that the
condition relied upon could reasonably have been performed by Osgoode) Osgoode
shall also be released from all obligations hereunder; provided, however, that
Lasermedia shall be entitled to waive compliance with any one or more of such
conditions in whole or in part if it shall see fit to do so, without prejudice
to its rights to termination in the event of the non-fulfillment of any other
condition in whole or in part.
ARTICLE IX
INDEMNIFICATION
9.1 MUTUAL INDEMNIFICATIONS FOR BREACHES OF WARRANTY, ETC. Subject to Section
9.3, Osgoode hereby covenants and agrees with Lasermedia and Lasermedia hereby
covenants and agrees with Osgoode (the parties covenanting and agreeing to
indemnify another party under this Article 9 are hereinafter individually
referred to as "Indemnifying Party" and the parties that are being indemnified
by another Party under this Article 9 are hereinafter individually referred to
as the "Indemnified Party") to indemnify and save harmless the Indemnified
Party, effective as and from the Closing Time, from and against any Claims which
may be made or brought against the Indemnified Party and/or which it may suffer
or incur as a result of, or arising out of any non-fulfillment of any covenant
or agreement on the part of the Indemnifying Party under this Agreement or any
Ancillary Agreement or any incorrectness in or breach of any representation or
warranty of the Indemnifying Party contained in this Agreement or any Ancillary
Agreement.
9.2 UNDISCLOSED LIABILITIES INDEMNITY. Notwithstanding Section 9.1 and without
limiting the generality of Section 9.1:
(a) Lasermedia shall indemnify Osgoode from all Claims arising from
liabilities or obligations to Persons that arise from the act or
failure to act of Lasermedia prior to the Closing Date that are not
disclosed to Osgoode pursuant to Article 4; and
(b) Osgoode shall indemnify Lasermedia from all Claims arising from
liabilities or obligations to Persons that arise from the act or
failure to act of Osgoode prior to the Closing Date that are not
disclosed to Lasermedia pursuant to Article 5.
9.3 LIMITATION ON MUTUAL INDEMNIFICATION. The indemnification obligations of
each of the Parties pursuant to Section 9.1 and 9.2 shall be subject to the
following:
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<PAGE> 21
(a) the applicable limitation mentioned in Article 6 respecting the
survival of the representations and warranties of the Parties;
(b) the indemnity obligations under Section 9.2 shall survive for a
period of 5 years from the Closing Date;
(c) there shall be no limit as to amount in respect of breaches of the
representations and warranties of the Parties other than as
specifically limited by the provisions of the section; and
(d) an Indemnifying Party shall not be required to indemnify an
Indemnified Party until the aggregate Claims sustained by the
Indemnified Party exceeds a value of $5,000, in which case the
Indemnifying Party shall be obligated to the Indemnified Party for all
Claims without limit as to amount.
9.4 PROCEDURE FOR INDEMNIFICATION. The following provisions shall apply to any
Claims for which an Indemnifying Party may be obligated to indemnify an
Indemnified Party pursuant to this Agreement:
(a) upon receipt from a third party by the Indemnified Party of notice
of a Claim or the Indemnified Party becoming aware of a Claim in
respect of which the Indemnified Party proposes to demand
indemnification from the Indemnifying Party, the Indemnified Party
shall give notice to that effect to the Indemnifying Party with
reasonable promptness, provided that failure to give such notice shall
not relieve an Indemnifying Party from any liability it may have to the
Indemnified Party except to the extent that the Indemnifying Party is
prejudiced thereby;
(b) in the case of Claims arising from third parties, the Indemnifying
Party shall have the right by notice to the Indemnifying Party not
later than 300 days after receipt of the notice described in paragraph
(1) above to assume the control of the defense, compromise or
settlement of the Claims, provided that such assumption shall, by its
terms, be without costs to the Indemnified Party and the Indemnifying
Party shall at the Indemnifying Party's request furnish it with
reasonable security against any costs or other liabilities to which it
may be or become exposed by reason of such defense, compromise or
settlement;
(c) upon the assumption of control by the Indemnifying Party as
aforesaid, the Indemnifying Party shall diligently proceed with the
defense, compromise or settlement of the Claims at its sole expense,
including employment of counsel reasonably satisfactory to the
Indemnified Party and, in connection therewith, the Indemnified Party
shall co-operate fully, but at the expense of the Indemnifying Party,
to make available to the Indemnifying Party all pertinent information
and witnesses under the Indemnified Party's control, make such
assignments and take such other steps as in the opinion of the counsel
for the
3(a)(1)-21
<PAGE> 22
Indemnifying Party are necessary to enable the Indemnifying
Party to conduct such defense; provided always that the Indemnified
Party shall be entitled to reasonable security from the Indemnifying
Party for the expense, costs of other liabilities to which it may be or
may become exposed by reason of such co-operation;
(d) the final determination of any such Claims arising from third
parties, including all related costs and expenses, will be binding and
conclusive upon the Parties as to the validity or invalidity, as the
case may be of such Claims against the Indemnifying Party hereunder;
(e) should the Indemnifying Party fail to give notice to the
Indemnified Party as provided in paragraph (b) above, the Indemnified
Party shall be entitled to make such settlement of the Claims as in its
sole discretion may appear advisable, and such settlement or any other
final determination of the Claims shall be binding upon the
Indemnifying Party.
ARTICLE X
CLOSING ARRANGEMENTS
10.1 CLOSING. The Closing shall take place at the offices of Silver Gold Glatt &
Grosman, Chartered Accountants, 45 St. Clair Avenue West, Suite 200, Toronto,
Ontario, Canada at the Closing Time on the Closing Date.
10.2 CLOSING PROCEDURES. At the Closing Time:
(a) Osgoode shall issue and deliver to the Lasermedia Shareholders
possession of the Osgoode Shares;
(b) the Lasermedia Shareholders shall deliver up to Osgoode the
Lasermedia Shares; and
(c) the Parties shall take or shall have taken, as the case may be, the
other actions contemplated to be taken by them at or before the Closing
contemplated in this Agreement.
10.3 NO BROKER. Each of the Parties represents and warrants to the other that
all negotiations relating to this Agreement and the transactions contemplated by
this Agreement shall have been carried on between them directly, without the
intervention of any other party in such manner as to give rise to any valid
claim against any of the Parties for a brokerage commission, finder's fee or
other like payment.
10.4 NON-WAIVER. No investigations made by or on behalf of Osgoode and
Lasermedia at any time shall have the effect of waiving or diminishing the scope
of or otherwise affecting any
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<PAGE> 23
representation, warranty or indemnity made by or imposed upon the Parties
pursuant to this Agreement.
ARTICLE XI
GENERAL
11.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual agreement of the Parties;
(b) by the Parties if:
(i) the Share Exchange shall not have been completed by
May 31, 1997 (or such other date, if any, as the
Parties shall have agreed in writing), if the
failure to complete such purchase and sale on or
before such date is not caused by any breach of this
Agreement by the Party electing to terminate; or
(ii) the Share Exchange would violate any non-appealable
final order, decree or judgment of any court or
governmental body having competent jurisdiction.
If this Agreement is terminated by a Party under Subsection 11.1(1), such
termination shall be without liability of either Party to the other parties, or
to any of their shareholders, directors, officers, employees, agents,
consultants or representatives provided that if such termination shall result
from the willful failure of the Party to fulfill a condition to the performance
of the other Parties or to perform a covenant of this agreement or from a
willful breach by the party to this Agreement, the Party shall be fully liable
for any and all damages, costs and expenses (including, but not limited to,
reasonable counsel fees and disbursements) sustained or incurred by the other
Parties.
11.2 EXPENSES. Except as otherwise specified herein, all costs and expenses
(including the fees and disbursements of accountants and legal counsel) incurred
in connection with this Agreement and completion of the transactions
contemplated by this Agreement shall be paid by the Party incurring those
expenses.
11.3 TIME OF ESSENCE. Time shall be of the essence in all respects of this
Agreement.
11.4 NOTICES. Any notice or other communication which is required or permitted
to be given or made by one Party to the others hereunder shall be in writing and
shall be either:
3(a)(1)-23
<PAGE> 24
(a) personally delivered to such Parties; or
(b) sent by facsimile.
Any notice shall be sent to the intended recipient at its address as follows:
(i) to Osgoode at:
Suite 700
100 King Street West
Toronto, Ontario M5X 1C7
Facsimile No.: (416) 368-7805
(ii) to Lasermedia at:
401 Richmond Street West
Suite 123
Toronto, Ontario M5V 1X3
Facsimile No.: (416) 977-7353
or at such other address as any Party may from time to time advise the others by
notice in writing. Any notice given by personal delivery shall be deemed to be
received on the date of delivery. Any notice sent by facsimile or similar method
of recorded communication shall be deemed to have been received on the next
Business Day following the date of its transmission.
11.5 FURTHER ASSURANCES. The Parties shall with reasonable diligence do all
things and provide all reasonable assurances as may be required to complete the
transactions contemplated by this Agreement, and each Party shall provide such
further documents or instruments required by any other Party as may be
reasonably necessary or desirable to give effect to this Agreement and carry out
its provisions, whether before or after the Closing.
11.6 PUBLIC NOTICE. All public notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by the Parties and no Party shall act unilaterally in
this regard without the prior written approval of the other Parties, such
approval not to be unreasonably withheld.
11.7 AMENDMENT AND WAIVER. No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party to be
bound. No waiver of any of the Provisions of this Agreement shall constitute a
waiver of any other provision (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
3(a)(1)-24
<PAGE> 25
11.8 ASSIGNMENT. This Agreement and the rights or obligations hereunder or
thereunder are not assignable by any Party without the prior written consent of
the other Parties, which consent shall not be unreasonably withheld. This
Agreement shall enure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns.
11.9 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof. Any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11.10 COUNTERPARTS. This Agreement may be executed by the Parties in one or more
counterparts, each of which when so executed and delivered shall be an original
and such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF this agreement has been executed by the Parties each
as of the day and year first before written.
Dated as of the 7th day of April, 1997.
OSGOODE HOLDINGS INC.
By:
------------------------
Samuel Paul
LASERMEDIA INC.
By:
------------------------
Erik Schannen
By:
------------------------
Kevin Doherty
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<PAGE> 26
SCHEDULE 1.1
DEFINITIONS
"Accounts Receivables" means any and all accounts receivable and other amounts
due, owing or accruing due.
"Affiliate and Associate" means an "affiliate" and "associate", respectively, as
those terms are defined in the Business Corporation Act (Ontario), as amended on
the date hereof.
"Agreement" means the Agreement and any instrument supplement or ancillary to
it.
"Ancillary Agreements" means all documents, agreements, certificates and
instruments to be executed or delivered by any Person under this Agreement
including the Conveyance Documents.
"Authorized Representatives" means employees, agents, counsel, accountants and
other representatives.
"Business Day" means any day other than a Saturday, Sunday or statutory holiday
in the Province of Ontario.
"Capital Expenditures" means expenditures which, in accordance with Canadian
generally accepted accounting principles consistently applied, are chargeable to
capital or fixed assets accounts and includes expenditures in connection with
the acquisition by, purchase, erection or construction of lands, fixed assets,
plant, machinery and/or equipment, whether fixed or moveable.
"CDN" means the Canadian Dealing Network Inc., a trading, reporting and
quotation system for over-the-counter trading in Ontario.
"Claims" means claims, demands, actions, causes of action, damages, losses,
costs, fines, penalties, interest, liabilities and expenses, including, without
limitation, reasonable legal fees.
"Closing" means the completion of the Share Exchange pursuant to this Agreement.
"Closing Date" means May 31, 1997 or such other later date as may be agreed to
by the Parties.
"Closing Time" means 11:00 a.m. (Toronto time) on the Closing Date or such other
time on the Closing Date as may be agreed to by the Parties.
"Conveyance Documents" means all bills of sale, assignments, instruments of
transfer, assurances, consents and other documents as shall be necessary to
effectively transfer to Osgoode the Lasermedia Shares.
<PAGE> 27
"Encumbrances" means any mortgage, charge, pledge, hypothecate, lien,
encumbrance, restriction, option, right of others or security interest of any
kind.
"Governmental Authorities" means any applicable Canadian or non-Canadian
federal, provincial and municipal agency, ministry, crown corporation,
department, inspector and official.
"Interim Period" means the period commencing on the date of this Agreement and
ending immediately before the opening of business on the Closing Date.
"OSC" means the Ontario Securities Commission.
"Parties" means the parties to the Agreement and "Party" means any one of them.
"Permits" means authorizations, registrations, permits, approvals or licenses
that can be issued or granted by Governmental Authorities.
"Person" means an individual, body corporate, partnership, trustee, trust,
unincorporated association, executor, administrator or legal representative.
"Records" means the Lasermedia Records and Osgoode Records.
"Regulatory Approval" means the approvals and consents of the applicable
regulatory authorities and CDN which are required to complete the Share
Exchange.
"Share Exchange" has the meaning attributed to it in Section 2.2
"Share Approval" means approval by the holders of the common shares in Osgoode
in respect to the Share Exchange.
"Lasermedia Business" means Lasermedia's Business of the production, acquisition
and publication of multimedia software on CD-ROM and the Internet.
"Lasermedia Business Agreements" means the business agreements undertaken in the
normal course of business.
"Lasermedia Financial Statements" means the financial statements of Lasermedia
attached as Schedule 4.1.
"Lasermedia Leased Premises" means the leased premises used by Lasermedia to
carry on the Lasermedia Business.
3(a)(1)-2
<PAGE> 28
"Lasermedia Records" means Lasermedia's books, records, files, including
business and financial records, documentation and information, whether in
writing or stored in any retrieval system or data base.
"Lasermedia Shareholders" means the registered shareholders and warrantholders,
respectively, as of the Closing Date.
"Lasermedia Shares" means up to Thirteen Million Five Hundred Thousand
(13,500,000) common shares of Lasermedia; Six Hundred Thousand (600,000) Series
A common share purchase warrants; Two Hundred Thousand (200,000) Series B common
share purchase warrants, Two Hundred Thousand (200,000) Series C common share
purchase warrants; One Hundred Thousand (100,000) Series D common shares; Two
Million, Eight Hundred and Sixty-Six Thousand Six Hundred and Sixty-Six
(2,866,666) Series E common share purchase warrants; and Two Hundred and
Fifty-Eight Thousand (258,000) Series F common share purchase warrants.
"Osgoode Financial Statements" means the financial statements of Osgoode
attached on Schedule 5.1.
"Osgoode Information Circular" means the management information circular of
Osgoode to be used at the annual and special meeting of the shareholders of the
Corporation relating to, amongst other things, the Share Exchange.
"Osgoode Records" means Osgoode books, records, files including business and
financial records, documentation and information, whether in writing or stored
in any retrieval system or data base.
"Osgoode Stock Option Plan" means the stock option plan granted by Osgoode in
favor of certain officers, directors and key employees effective on the day
after the closing in a form mutually acceptable to Osgoode and Lasermedia.
3(a)(1)-3
<PAGE> 1
EXHIBIT 3(A)(2)
CONSULTING SERVICES AGREEMENT
DATED FEBRUARY 2, 1997 BY AND BETWEEN LASERMEDIA AND KEVIN CHAISSON
3(a)(2)-1
<PAGE> 2
CONSULTING SERVICES AGREEMENT
THIS AGREEMENT is made as of the 2nd day of February, 1997 between
LASER MEDIA INC., a corporation incorporated under the laws of the Province of
Ontario (the "Corporation") and KEVIN CHAISSON, of San Diego, California, U.S.A.
(the "Consultant").
R E C I T A L S:
A. The Corporation requires the expertise and advice of the Consultant
to carry out certain development, marketing and sales work as more fully
described in this Agreement.
B. The Corporation and the Consultant wish to set out the terms and
conditions pursuant to which the Corporation shall engage the services of the
Consultant and the Consultant shall provide such services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
1. DEFINITIONS. In this Agreement:
"ACTIVE ABS" means that certain interactive fitness CD-Rom developed by
the Corporation, and all photography, publications, videos, software,
electronic, cable and satellite media, Internet/World Wide Web
exposure, promotional/advertising materials and any and all other
items, materials and things relating thereto, whether now or
hereinafter in existence;
"ACTIVE TRAINER" means that certain interactive fitness CD-Rom
developed by the Corporation, and all photography, publications,
videos, software, electronic, cable and satellite media, Internet/World
Wide Web exposure, promotional/advertising materials and any and all
other items, materials and things relating thereto, whether now or
hereinafter in existence;
"BUSINESS DAY" means any day, other than Saturday, Sunday or any
statutory holiday in the Province of Ontario;
"CAUSE" means:
(a) breach of this Agreement by the Consultant; or
3(a)(2)-2
<PAGE> 3
(b) a circumstance which, if the Consultant were an employee
of the Corporation, would entitle the Corporation to terminate the
employment of the Consultant for cause under the laws of Ontario;
"CONFIDENTIAL INFORMATION" means all confidential or proprietary
information, intellectual property (including trade secrets), customer
and client lists, customer and client information, and confidential
facts relating to the business and affairs of the Corporation and its
Subsidiaries, Active Trainer, Active Abs, and the Web Site;
"CORPORATION" includes the Subsidiaries of the Corporation unless the
context otherwise requires;
"SUBSIDIARIES" means subsidiaries within the meaning of the Business
Corporations Act (Ontario) as the same may be amended from time to time
and any successor legislation thereto;
"TERM" means the period from the effective date of this Agreement,
being January 21, 1997, to January 21, 2002, subject to earlier
termination in accordance with sections 13 and 14, respectively; and
"WEB SITE" means that certain World Wide Web Active Trainer web site
developed by the Corporation relating to health and fitness matters.
2. ENGAGEMENT BY THE CORPORATION. The Corporation engages the
Consultant for the Term to render the following services:
(a) In connection with Active Trainer:
(i) To assist in the transition and transfer of all
knowledge, information and materials concerning Active Trainer
gained or held by the Consultant as a result of the
Consultant's work and interaction with the Corporation and/or
Active Trainer prior to the date of this Agreement, including
without limitation any and all knowledge and information
relating to the development, marketing and sales of Active
Trainer;
(ii) To assist the Corporation in the Corporation's
negotiations with individuals involved in Active Trainer, as
requested by the Corporation; and
(iii) To assist in promotional work and support as
requested by the Corporation;
(b) In connection with Active Abs:
3(a)(2)-3
<PAGE> 4
(i) To assist in the transition and transfer of all
}knowledge, information and materials concerning Active Abs
gained or held by the Consultant as a result of the
Consultant's work and interaction with the Corporation and/or
Active Abs prior to the date of this Agreement, including
without limitation any and all knowledge and information
relating to the development, marketing and sales of Active
Abs;
(ii) To assist in the final stages of the development
of Active Abs as requested by the Corporation;
(iii) To assist in promotional work and support as
requested by the Corporation; and
(iv) To assist with development, marketing and sales
of upgraded versions of Active Abs;
(c) In connection with the Web Site, to develop further the
existing Web Site to include the sale of vitamins, supplements, sports
clothing and other sports, health and fitness related products, in
accordance with section 12 of this Agreement;
and to perform such other duties as the Consultant shall reasonably be directed
to perform by the Corporation and to report to the Corporation details of the
Consultant's activities on behalf of the Corporation as requested by the
Corporation.
3. ACCEPTANCE OF ENGAGEMENT BY THE CONSULTANT
The Consultant accepts the engagement and agrees to render the services
and perform the duties described in section 2. In the performance by the
Consultant of the services and duties under this Agreement, the Consultant shall
act honestly and in good faith with a view to the best interests of the
Corporation.
4. COMPENSATION
(a) All prior arrangements for compensation, royalties,
commissions and other forms of consideration to be paid by the
Corporation to the Consultant shall be deemed null and void from and
after the date of this Agreement; provided, however, that the
Corporation agrees to pay the Consultant the amount of Two Thousand
U.S. Dollars (US $2,000) or unpaid compensation due for the month of
December 1996;
(b) The Corporation agrees to pay to the Consultant on a
quarterly basis royalties with respect to Active Trainer in the amount
of one and one-half percent (1.5%) of the gross revenues actually
received by the Corporation on the sale of the first 100,000
3(a)(2)-4
<PAGE> 5
units (i.e., copies) of the interactive CD-Rom entitled "Active
Trainer" (including any upgrade version sales and private label sales
of the "Active Trainer" CD-Rom) less returns;
(c) The Corporation agrees to pay to the Consultant on a
quarterly basis royalties with respect to Active Trainer in the amount
of two and one-half percent (2.5%) of the gross revenues actually
received by the Corporation on the sale of units (i.e., copies) of the
interactive CD-Rom entitled "Active Trainer" in excess of the first
100,000 units (including any upgrade version sales and private label
sales of the "Active Trainer" CD-Rom) less returns;
(d) The Corporation agrees to pay to the Consultant on a
quarterly basis royalties with respect to Active Abs in the amount of
one percent (1%) of the gross revenues actually received by the
Corporation on the sale of any units in excess of 30,001 and up to
50,000 units (i.e., copies) of the interactive CD-Rom entitled "Active
Abs" (including any upgrade version sales and private label sales of
the "Active Abs" CD-Rom) less returns. The parties hereto acknowledge
that no royalty shall be paid to the Consultant on the sale of less
than 30,001 units;
(e) The Corporation agrees to pay to the Consultant on a
quarterly basis royalties with respect to Active Abs in the amount of
two percent (2%) of the gross revenues actually received by the
Corporation on the sale of an aggregate 50,001 to 100,000 units (i.e.,
copies) of the interactive CD-Rom entitled "Active Abs" (including any
upgrade version sales and private label sales of the "Active Abs"
CD-Rom) less returns;
(f) The Corporation agrees to pay to the Consultant on a
quarterly basis royalties with respect to Active Abs in the amount of
three percent (3%) of the gross revenues actually received by the
Corporation on the sale of units (i.e., copies) of the interactive
CD-Rom entitled "Active Abs" in excess of 100,000 units (including any
upgrade version sales and private label sales of the "Active Abs"
CD-Rom) less returns;
(g) For the purposes of this section 4 and section 12(d)
hereof, gross revenues shall not include any amounts received by the
Corporation in respect of sales tax, excise or similar taxes, customs
duty or freight, transportation or insurance costs paid or allowed by
the Corporation;
(h) The foregoing royalty payments shall be paid to the
Consultant on a quarterly basis such that payments shall occur on April
30, July 31, October 31 and January 31 of each year, for the respective
preceding quarter; such payments shall be accompanied by a quarterly
statement of royalties earned;
3(a)(2)-5
<PAGE> 6
(i) Within ten (10) days of the date of this Agreement, the
Corporation shall pay the Consultant the amount of Six Thousand Dollars
($6,000);
(j) The Corporation shall pay to the Consultant an agreed upon
fee for time spent by the Consultant in the provision of services to be
performed by the Consultant pursuant to section 2(a)(iii) of this
Agreement, such fee to be paid within thirty (30) days after receipt by
the Corporation of an account therefor from the Consultant;
(k) The Corporation shall pay to the Consultant an agreed upon
fee for time spent by the Consultant in the provision of services to be
performed by the Consultant pursuant to section 2(b)(iii) of this
Agreement, such fee to be paid within thirty (30) days after receipt by
the Corporation of an account therefor from the Consultant;
(l) The Corporation shall pay to the Consultant a fee in an
amount to be agreed to by the Corporation and the Consultant, for time
spent by the Consultant in the provision of services to be performed by
the Consultant pursuant to section 2(b)(iv) of this Agreement, such fee
to be paid within thirty (30) days after receipt by the Corporation of
an account therefor from the Consultant;
(m) Accounts rendered by the Consultant pursuant to the
foregoing sections 4(j), 4(k) and 4(1) shall indicate the number of
hours covered by the particular account and shall describe, with
reasonable particularity, the services performed by the Consultant
during the period covered by the account. The Consultant shall not
render accounts more frequently than once per calendar month;
(n) In the event that Lasermedia becomes a publicly traded
company (i.e., an offering corporation within the meaning of the
Business Corporations Act (Ontario)), the Corporation agrees to issue
the Consultant Seven Thousand (7,000) shares of the common capital
stock of Lasermedia, the offering corporation, within ninety (90) days
after Lasermedia becoming an offering corporation; and
(o) In the event that Lasermedia becomes an offering
corporation as described in section 4(n) hereof, the Consultant shall
have the option from time to time during the five (5) year period from
and after the date that Lasermedia becomes an offering corporation, to
purchase up to Five Thousand (5,000) shares of the common capital stock
of Lasermedia, the offering corporation, per year (the "Option"), at
the same price and in accordance with the same terms and conditions as
then being offered to management personnel of the Corporation. The
Option may be exercised once a year by written notice from the
Consultant to the Corporation prior to the expiration of said year. The
Option shall expire on the earlier to occur of (i) two (2) years after
a termination of this Agreement for any reason whatsoever, and (ii) the
death of the Consultant.
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<PAGE> 7
5. EXPENSES
The Corporation shall pay or reimburse the Consultant for all
reasonable expenses pre-approved by the Corporation in writing, actually
incurred or paid by the Consultant during the Term in the performance of the
Consultant's services under this Agreement, upon presentation of expense
statements or receipts or such other supporting documentation as the Corporation
may reasonably require, provided however that no such payment shall be made for
any taxes for which the Consultant is entitled to a credit or refund.
6. NO USE OF CONFIDENTIAL INFORMATION
During and at all times after the Term, the Consultant shall hold in
confidence and keep confidential all Confidential Information and shall not use
for the benefit of the Consultant or others (except in connection with the
business and affairs of the Corporation in the course of providing services
hereunder) any Confidential Information and shall not disclose any Confidential
Information to any person except in the course of providing services hereunder
to a person who is employed by the Corporation or with the Corporation's prior
consent. The foregoing prohibition shall not apply to any Confidential
Information if:
(a) the Confidential Information is available to the public or
in the public domain at the time of such disclosure or use, without
breach of this Agreement;
(b) disclosure is required to be made by any law,
regulation, governmental body or authority or by court order; or
(c) disclosure is made to a court which is determining the
rights of the parties under this Agreement.
The Consultant acknowledges and agrees that the obligations under this
section are to remain in effect in perpetuity. The Consultant further
acknowledges that the obligations contained in this section are not in
substitution for any obligations which the Consultant may now or hereafter owe
to the Corporation and which exist apart from this section and do not replace
any rights of the Corporation with respect to any such obligations.
7. REMEDIES
The Consultant acknowledges that a breach or threatened breach by the
Consultant of the provisions of section 6 will result in the Corporation and its
shareholders suffering irreparable harm which cannot be calculated or fully or
adequately compensated by recovery of damages alone. Accordingly, the Consultant
agrees that the Corporation shall be entitled to interim and permanent
injunctive relief, specific performance and other equitable remedies, in
addition to any other relief to which the Corporation may become entitled.
3(a)(2)-7
<PAGE> 8
8. PROPERTY OF THE CORPORATION
(a) All memoranda, notes, lists, records and other documents
(and all copies thereof), including, without limitation, all such items
stored in computer memories, on microfiche, on discs or on tapes or by
any other means, made or compiled by or on behalf of the Consultant or
made available to the Consultant in the performance of the services
hereunder at any time during the Term (whether by the Corporation or
any other person) concerning the business or affairs of the Corporation
are and shall be the property of the Corporation, and shall be
delivered to the Corporation by the Consultant promptly upon the
termination of this Agreement, or at any other time on request of the
Corporation;
(b) The Consultant acknowledges that during the term of this
Agreement, the Consultant will create literary and/or artistic works,
products, trademarks and ideas (collectively, the "Proprietary Work")
in which copyright, trademark and patent rights may subsist. The
Consultant agrees to assign and does hereby assign to the Corporation
all of his right, title and interest in and to such Proprietary Work,
including, without limitation, the right to seek and obtain copyright,
trademark, patent and other protection thereof in Canada, the United
States and all other countries. Original works of authorship fixed in
any tangible form, prepared by the Consultant individually or jointly
with others, within the scope of the work performed under this
Agreement, shall be deemed a "work made for hire" under the copyright
laws and shall be owned by the Corporation; and
(c) The Consultant agrees promptly and fully to assist, as
requested by and at the sole expense of the Corporation, in the
preparation, filing, and prosecution of any copyright, trademark,
patent or other applications on the Proprietary Work in any and all
countries selected by the Corporation to enable any such application to
be prosecuted under the direction of the Corporation and to insure that
any copyrights, trademarks, patents, or other forms of protection
therein will issue to the Corporation. Such assistance includes
cooperating with solicitors and attorneys and other representatives of
the Corporation, executing all lawful papers, taking all lawful oaths,
and doing all lawful acts, including giving testimony, in connection
with such applications and any divisions, continuations, reissues,
reexaminations, or renewals thereof.
9. NO CONFLICTS OF INTEREST/NON-COMPETITION
(a) The Consultant shall not engage in any business or other
transaction or have any financial or other personal interest which is
both (i) incompatible with the performance by the Consultant of the
duties under this Agreement in the manner contemplated by this
Agreement, and (ii) detrimental to the business of the Corporation; and
(b) The Consultant shall not for a period of six (6) months
following the termination of this Agreement, design, develop, market,
distribute, deliver, promote, sell,
3(a)(2)-8
<PAGE> 9
license, lease, or provide consulting or customer maintenance services
in connection with any CD-Rom based product that is in competition with
the Corporation.
10. NATURE OF RELATIONSHIP
The parties acknowledge and agree as follows:
(a) the relationship of the Consultant to the Corporation
is that of independent contractor;
(b) the Consultant is not an employee or agent of the
Corporation;
(c) the Corporation and the Consultant are not partners
or joint venturers with each other;
(d) nothing herein shall be construed so as
(i) to make the Corporation and the Consultant
partners or joint venturers;
(ii) to make the Consultant an employee or agent
of the Corporation; or
(iii) to impose any liability as partner, joint
venturer, employer or employee or principal or agent on the
Corporation or the Consultant, as the case may be.
11. NO AUTHORITY TO BIND THE CORPORATION
Without limiting the provisions of section 10, the Consultant shall
have no authority to act, or to hold the Consultant out, as agent of the
Corporation or to bind the Corporation to perform any obligations to any third
party, without the prior written consent of the Corporation, and the Consultant
shall so inform all third parties with whom the Consultant deals in the
performance of the services hereunder. The Consultant shall not use the name of
the Corporation or any of its Subsidiaries in any advertisement or promotional
or marketing, material or, without the use of any such name, suggest or imply in
any such material that the Consultant has a relationship with the Corporation or
any of its Subsidiaries.
12. WEB SITE
In connection with the Web Site, the parties hereto agree as follows:
3(a)(2)-8
<PAGE> 10
(a) The Consultant may operate within the Web Site, at no cost
to the Corporation, a question and answer format column, addressing
questions relating to health and fitness to which the Consultant is
qualified to answer. The Corporation may cancel the Consultant's column
without prior notice to the Consultant in the event that
the Corporation believes that the answers being provided by the
Consultant are inaccurate, unprofessional or inappropriate, or the
column is otherwise unacceptable to the Corporation;
(b) The Consultant shall expand the existing Web Site to
include the sale of vitamins, supplements, sports clothing and other
sports, health and fitness related products (collectively, the
"Products"). The Consultant agrees to diligently research and select
the Suppliers and Products to be sold through the Web Site, striving to
offer better quality Products at reasonable prices, which may be
distributed and delivered to the consumer cost effectively. In no event
may the sale of any of the Products jeopardize or otherwise negatively
impact any of the Corporation's clients or customers;
(c) All Products must be pre-approved in writing by the
Corporation prior to their inclusion in the Web Site. The Corporation
reserves the right to remove any or all of the Products from the Web
Site without prior notice to the Consultant. The Corporation reserves
the right to terminate the sale of Products on the Web Site without
prior notice to the Consultant;
(d) During the term of this Agreement and until the date that
is the earlier to occur of (i) three (3) years after an early
termination of this Agreement and (ii) January 21, 2002, the Consultant
shall receive fifty percent (50%) of the profits (i.e., gross revenues
less all expenses incurred) specifically realized by the Corporation
from the sale of the Products (other than from the sale of any and all
CD-Rom based products, which CD-Rom based products shall be excluded
from the profit sharing calculation). In addition, The Corporation
shall remit a quarterly commission payment to the Consultant;
(e) The ordering and payment of the Products shall be
processed through the Corporation's head office;
(f) In no event shall the Consultant release to third parties
any information concerning the customers of the Products; and
(g) In the event of an early termination of this Agreement,
the Consultant shall cease all of his work under sections 12(a) and
12(b), except to the extent that the Corporation, in its sole
discretion, requests that the Consultant continue with any or all of
his work under sections 12(a) and l9(b).
3(a)(2)-10
<PAGE> 11
13. TERMINATION BY THE CORPORATION
This Agreement may be terminated by the Corporation:
(a) for Cause, without notice; or
(b) for any reason, on 30 days' notice to the Consultant.
The Consultant acknowledges that, on any termination of this Agreement
by the Corporation, the Consultant shall be entitled to receive further royalty
payments pursuant to section 4(b), 4(c), 4(d), 4(e) and 4(f), but shall not be
entitled to any payment for other consideration pursuant to section 4, loss of
office or other similar compensation. The parties hereto acknowledge that
section 4(n) of this Agreement shall survive any termination of this Agreement.
14. TERMINATION BY THE CONSULTANT
This Agreement may be terminated by the Consultant for any reason on 30
days' notice to the Corporation, in which event the Consultant shall be entitled
to receive further royalty payments pursuant to section 4(b), 4(c), 4(d), 4(e)
and 4(f), but shall not be entitled to any payment for other consideration
pursuant to section 4, loss of office or other similar compensation.
15. INDEMNIFICATION
Lasermedia shall indemnify the Consultant and the heirs and legal
representatives of the Consultant against all costs, charges and expenses,
including all amounts paid to settle an action or satisfy a judgment, reasonably
incurred by the Consultant in respect of any civil, criminal or administrative
action or proceeding to which the Consultant is a party by reason of being or
having been engaged by the Corporation under this Agreement, other than an
action (including, without limitation, an action in contract or tort) by the
Corporation as a result of a breach or alleged breach by the Consultant of this
Agreement or of any duty owed by the Consultant to the Corporation, if:
(a) the Consultant 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, the Consultant had
reasonable grounds for believing that the conduct of the Consultant was
lawful.
3(a)(2)-11
<PAGE> 12
16. NOTICE
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be given by prepaid first-class mail, by
facsimile or other means of electronic communication or by delivery as hereafter
provided. Any such notice or other communication, if mailed by prepaid
first-class mail, shall be deemed to have been received on the fourth Business
Day after the post-marked date thereof, or if sent by facsimile or other means
of electronic communication, shall be deemed to have been received on the
Business Day following the sending, or if delivered by hand shall be deemed to
have been received at the tinge it is delivered to the applicable address noted
below either to the individual designated below or to an individual at such
address having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address shall also be governed by this section.
Notices and other communications shall be addressed as follows:
(a) if to the Consultant:
4654 Constance Drive
San Diego, California 92115 U.S.A.
Telecopier number: 619-281-7930
(b) if to the Corporation:
401 Richmond Street West
Suite 123
Toronto, Ontario
M5V 1X3 Canada
Attention: Erik Schannen
Telecopier number: 416-977-7353
17. ASSIGNMENT
This Agreement shall not be assignable by the Corporation or by the
Consultant.
18. HEADINGS
The inclusion of headings in this Agreement is for convenience of
reference only and shall not affect the construction or interpretation hereof.
3(a)(2)-12
<PAGE> 13
19. INVALIDITY OF PROVISIONS
Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
20. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter of this Agreement. There are no warranties,
representations or agreements between the parties in connection with such
subject matter except as specifically set forth or referred to in this
Agreement. No reliance is placed on any representation, opinion, advice or
assertion of fact made by any party hereto or its directors, officers and agents
to any other party hereto or its directors, officers and agents, except to the
extent that the same has been reduced to writing and included as a term of this
Agreement. Accordingly, there shall be no liability, either in tort or in
contract, assessed in relation to any such representation, opinion, advice or
assertion of fact, except to the extent aforesaid. Notwithstanding the
foregoing, that certain Lasermedia Author's Release executed by the Consultant
on October 12, 1994, is still in full force and effect, save and except the
Participant's Remuneration provisions set forth in Schedule "A" attached
thereto, which shall be deemed null and void.
21. WAIVER, AMENDMENT
Except as expressly provided in this Agreement, no amendment or waiver
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any provision of this Agreement shall constitute a
waiver of any other provision nor shall any waiver of any provision of this
Agreement constitute a continuing waiver unless otherwise expressly provided.
22. CURRENCY
Except as expressly provided in this Agreement, all amounts in this
Agreement are stated and shall be paid in Canadian currency.
23. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
3(a)(2)-13
<PAGE> 14
24. COUNTERPARTS
This Agreement may be signed in counterparts and each of such
counterparts shall constitute an original document and such counterparts, taken
together, shall constitute one and the same instrument.
25. FUTURE MATTERS
The Corporation agrees that to the extent that the Corporation
introduces new lines of Active Trainer products during the term of this
Agreement, the Corporation will consider utilizing the Consultant's services
prior to engaging the services of other third parties.
IN WITNESS WHEREOF, the Corporation and the Consultant have executed
this Agreement.
LASERMEDIA
By:
---------------------------
Erik Schannen, President
WITNESS:
- ----------------------------------- ------------------------------
KEVIN CHAISSON
3(a)(2)-14
<PAGE> 1
EXHIBIT 3(A)(3)
CONSULTING AGREEMENT DATED SEPTEMBER 24, 1997
BY AND BETWEEN LASERMEDIA AND ALUDRA SOFTWARE INC.
3(a)(3)-1
<PAGE> 2
CONSULTING AGREEMENT
THIS AGREEMENT made in duplicate this 24th day of September, 1997
between Aludra Software Inc. (the "CONSULTANT") and Lasermedia (the "CLIENT").
In consideration that the Consultant and the Client hereby covenant and
agree, each with the other, as follows:
1. SERVICES RETAINED.
1.1 DESCRIPTION. The Client retains the professional services
of the Consultant to perform certain tasks, to be determined from time
to time, in connection with the development of computer software
products
1.2 MODIFICATIONS. Any modifications to the present agreement
and its effect on the fees and other terms and conditions shall be
described in Schedule "A" hereto which shall form part of the present
agreement. Any modification shall be approved in writing by the Client
prior to its inception and execution.
2. INDEPENDENT CONTRACTOR.
2.1 Nothing contained in this agreement and the relationship
created between the parties hereby shall, directly or indirectly,
constitute the Consultant as agent or servant of the Client and
further, nothing herein shall operate or be construed to relieve the
Consultant of any duties or obligations imposed upon it as an
independent contractor.
2.2 Furthermore, the Consultant hereby agrees that any
authorized representative of the Client shall at all reasonable times
have access to the plan and premises where the work being performed
under this agreement is located and may make any tests or inspection of
all working papers, materials and other work-in-progress as the
authorized representative shall see fit to perform.
3. FEES AND EXPENSES. Consultant services will be invoiced on a monthly
basis to the Client and payable the Client upon receipt of the invoice. Expenses
and costs incurred by the Consultant in the execution of this agreement shall be
preauthorized by the Client, invoiced at cost and supported by the usual
documentation.
4. PERSONNEL. The Consultant shall execute this agreement on a best
effort basis. The Consultant shall provide the services of qualified personnel
of its choice. The Consultant retains the right to appoint and to replace such
personnel at the Consultant's discretion.
3(a)(3)-2
<PAGE> 3
7. SECURITY. The Consultant agrees that its personnel, when using the
Client's premises, will comply with all security regulations in force at those
premises.
8. PROFESSIONAL RESPONSIBILITY. The parties agree that the professional
responsibility of the Consultant under this agreement shall be limited to direct
and actual money damages effectively incurred by the Client; the liability of
the Consultant hereunder shall not in the aggregate exceed the total fees paid
to the Consultant for services rendered under this agreement, regardless of the
number of claims.
In no event shall the Consultant be liable for special, direct or
consequential damages or both, even if the Consultant has been notified of the
possibility of these damages being incurred. The Client waives any claim and
recourse against the Consultant in these instances.
The Client further agrees that the Consultant will not be liable for
any loss of profits nor for any claim against the Client made by any third
party. The Client waives any claim and recourse against the Consultant in these
instances.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to all matters herein contained, and its
execution has not been induced by, nor do any of the parties hereto rely upon or
regard as material, any representations or writings whatsoever not incorporated
herein and made a part hereof. This Agreement shall not be amended, altered or
qualified except by an instrument in writing, signed by all the parties hereto
and any amendments, alterations or qualifications hereof shall not be binding
upon or affect the rights of any party who has not given its consent in writing.
10. HEADINGS. The division of this Agreement into sections and the use
of headings are for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
11. SEVERABILITY. In the event that any of the provisions herein
contained shall be held unenforceable or declared invalid for any reason
whatsoever, such enforceability or invalidity shall not affect the
enforceability or validity of the remaining provisions of this Agreement and
such unenforceable or invalid portion shall be severable from the remainder of
the Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada in
force therein and any court of competent jurisdiction in Ontario shall have
jurisdiction to adjudicate any matter arising out of this Agreement.
13. NOTICES. All notices, requests, demands or communications made
pursuant to the terms hereof or required or permitted to be given by one party
to another shall be given in writing
3(a)(3)-3
<PAGE> 4
by personal delivery or by registered mail, postage prepaid or by
electronic means of communication, addressed to such other party or delivered to
such other party as follows:
to the Client at: Lasermedia
11 Charlotte Street
Toronto, Ontario M5V 2H5
Attention: Chief Financial Officer
Facsimile: (416) 977-7353
to the Consultant at: Aludra Software Inc.
3701 Chesswood Avenue, Suite 215
Downsview, Ontario M3J 2P6
Facsimile: (416) 638-3252
or at such other address or electronic communication number as may be given by
any of them to the other from time to time and such notices, requests, demands
or other communications shall be deemed to have been received when delivered,
or, if mailed, three (3) business days following the date of mailing thereof,
provided that if any such notice, request, demand or other communication shall
have been mailed and regular mail service shall be interrupted by strikes or
other irregularities, such notices, requests, demands or other communications
shall be deemed to have been received three (3) business days after the day
following the resumption of normal service and if given by electronic
communication, on the day of transmittal thereof if given during the normal
business hours of the recipient and on the business day during which such normal
business hours next occur if not given during such hours on any day. If the
party giving any demand, notice or other communication knows or ought reasonably
to know of any difficulties with the postal system which might affect the
delivery of mail, any such demand, notice or other communication shall not be
mailed but shall be given by personal delivery or by electronic communication.
14. TIME OF THE ESSENCE. Time shall be of the essence.
15. FURTHER ASSURANCES. The parties agree to sign such other
instruments, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement.
16. SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.
17. NON-WAIVER. No waiver by any party of any breach by any other party
of any of its covenants, obligations and agreements hereunder shall be a waiver
of any subsequent breach of any other covenant, obligation or agreement, nor
shall any forbearance to seek a remedy for any breach by a waiver of any rights
and remedies with respect to such or any subsequent breach.
3(a)(3)-4
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date and year first above written.
SIGNED, SEALED AND DELIVERED )
in the presence of )
ALUDRA SOFTWARE INC.
Per:
---------------------------------
Authorized Signing Officer
LASERMEDIA
Per:
---------------------------------
Authorized Signing Officer
3(a)(3)-5
<PAGE> 6
SCHEDULE "A"
3(a)(3)-6
<PAGE> 1
EXHIBIT 3(B)(1)
SOFTWARE PURCHASE AGREEMENT DATED JUNE 27,
1997 BY AND BETWEEN LASERMEDIA AND SOFTECH L.P.
3(b)(1)-1
<PAGE> 2
SOFTWARE PURCHASE AGREEMENT
THIS SOFTWARE PURCHASE AGREEMENT dated the 27th day of June, 1997
between LASERMEDIA, a corporation incorporated under the laws of Ontario (the
"Vendor") and SOFTECH, an Ontario limited partnership, by its general partner,
1234191 Ontario Inc. (the "General Partner"), a corporation incorporated under
the laws of Ontario (the "Partnership").
BACKGROUND:
1. The Vendor owns certain application computer software known as the
"ACTIVE TRAINER" family of software and also related intellectual property
rights.
2. The Partnership wishes to purchase from the Vendor a 100% undivided
interest in such software and intellectual property rights and to market the
same worldwide.
NOW, THEREFORE in consideration of the premises and the respective
covenants herein contained and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following capitalized terms are defined as follows:
"Business Day" means a day other than Saturday, Sunday or
statutory holiday in Ontario;
"Closing Date" means the latest of (a) June 27, 1997, (b) the
date on which all conditions in favour of the parties hereto are
satisfied or waived and (c) the date on which Osgoode Holdings Inc.
completes its acquisition of the Vendor as contemplated in the Osgoode
Circular (provided that Closing shall occur immediately prior to
completion of such acquisition), or such other date as the parties
hereto may agree in writing;
"Closing" means the completion of the sale by the Vendor and
the purchase by the Partnership of a 100% undivided interest in the
Purchased Assets and the completion of all other transactions
contemplated by this Agreement and the Letter Agreement that are to
occur contemporaneously therewith;
3(b)(1)-2
<PAGE> 3
"Code" means the whole or any part of or any combination of
the Object Code and Source Code and, upon their creation, Modifications
and Enhancements;
"Copyright" means the exclusive right to do and authorize
others to do any and all things restricted by copyright or similar laws
of application in any and all jurisdictions in relation to the use,
copying, translation, distribution or publication of the Software or
Derivative Work;
"Derivative Work" means a work that is based upon the Software
such as a revision, modification, translation, abridgment,
condensation, expansion or any other form in which the Software may be
recast, transformed or adapted and that if prepared without
authorization of the owner of the Copyright in such pre-existing work,
would constitute a Copyright infringement. For purposes hereof, a
Derivative Work shall also include any compilation that incorporates
such a pre-existing work;
"Development Documentation" means any devices, programming or
documentation, including compilers, "workbenches", development tools
(e.g. flow charts, schematics, statements of principles of operations,
architecture standards and any other specifications that are used to
create or that comprise the Code), runtime libraries and higher-level
(or "proprietary") languages used by the Vendor for the development,
maintenance, modification and implementation of the Program;
"Encumbrance" means, in respect of property of any kind
(including intangible property of any kind whatsoever), any encumbrance
of any kind whatsoever, including a security interest, mortgage, lien,
pledge, assignment, charge, trust or deemed trust (whether contractual,
statutory or otherwise arising), any restriction, royalty or obligation
to pay a royalty or any other right or claim of others of any kind
whatever affecting the property and any restrictive covenant or other
agreement, restriction or limitation (registered or unregistered) on
the use of the property and, with respect to any share, warrant, option
or other security of an issuer, including any hold or escrow period
(whether contractual, statutory, regulatory or otherwise arising) or
other restriction on the sale or resale of such security or any
security into which such security is convertible or exchangeable; and
"Encumber" as a verb has a corresponding meaning;
"Enhancements" means all modifications, additions,
enhancements or substitutions made to the Program, other than
Modifications, that accomplish performance, structural or functional
improvements thereto, whether such enhancements accomplish incidental
or substantial redesign or replacement of any parts of the Program;
"Force Majeure" means any of the following: acts of God,
earthquakes, tidal waves, hurricanes, landslides, storms, windstorms,
lightning, floods, explosions, fires, vandalism, wars (whether declared
or not), armed conflicts (whether internal or
3(b)(1)-3
<PAGE> 4
international), riots, insurrections, rebellions, civil
commotions, sabotage, blockages, attoembargoes, epidemics, partial or
entire failure of utilities owned and operated by governmental bodies,
lockouts, strikes, other labour disturbances (whether legal or
illegal), labour shortages, failure of common or private carriers to
deliver anything within the required time, or any other similar event
or cause beyond the control of the party claiming the benefit of this
clause and which that party could not reasonably have protected itself
against, provided however that lack of funds or credit shall not
constitute an event of force majeure;
"GST" means the goods and services tax levied pursuant to the
Excise Tax Act (Canada) and all provincial sales taxes integrated with
such federal taxes, assessed, rated or charged upon the Partnership or
payable by the Partnership in respect of the purchase and sale of the
Purchased Assets;
"Intellectual Property Rights" means all rights to use, copy,
reproduce, sell, license, enhance, merge, transcribe, adapt or
distribute by any means and for any purpose the Software including any
and all proprietary rights provided under patent law, copyright law or
any other statutory provision or common law principles applicable to
the Software which may provide a right in either ideas, formulae,
algorithms, concepts, inventions or know-how generally, including trade
secret law or the expression or use thereof;
"Letter Agreement" means the letter agreement dated April 8,
1997 between the Partnership and Lasermedia;
"Modifications" means modifications, updates or revisions to
the Program or User Documentation that correct errors, support new
releases of operating systems or support new models of input-output
devices with which the Program is designed to operate;
"Object Code" means the binary or machine-readable version or
form of the computer programming code generated by compilation or
interpretation of the Source Code to execute the Program;
"Osgoode Circular" means the Notice of Meeting and Management
Information Circular dated May 23, 1997 of Osgoode Holdings Inc. which,
among other things, seeks shareholder approval of the acquisition of
the Vendor by Osgoode Holdings Inc.;
"Person" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, any government or any
agency or instrumentality thereof or any other entity;
"Program" means the computer software program giving rise to
and embodied in the software known as "ACTIVE TRAINER" and more
particularly described in
3(b)(1)-4
<PAGE> 5
Schedule "A" hereto, together with all other computer software programs
developed from time to time using the Software and all Modifications
and Enhancements thereto;
"Public Domain Software" means computer software, and
documentation for such software, developed by parties other than the
Vendor but in respect of which the Vendor has and after Closing the
Partnership will have the unrestricted right to incorporate into the
Code and the User Documentation without royalty or other charge or
obligation of any kind;
"Purchase Price" means the purchase price for the Purchased
Assets referred to in section 5.1;
"Purchased Assets" means the whole or any part of or any
combination of the Software and Intellectual Property Rights
(excluding, for greater certainty, any trade marks owned or used by the
Vendor);
"Software" means the whole or any part of or any combination
of the Code, Derivative Work, the User Documentation and the
Development Documentation;
"Source Code" means the human readable version or form of the
Program written, in part, in the "Lingo" computer language, including
all comments and procedural code, and implemented for MacIntosh (Apple
Mac OS) and Microsoft Windows;
"Specifications" means the description and specifications,
technical and functional, for the Software set out in Schedule "A"
hereto;
"Supply and Reseller Agreement" means the Supply and Reseller
Agreement between the Partnership and the Vendor relating to the
exploitation of the Software dated of even date hereof, as amended from
time to time;
"User Documentation" means all written materials developed for
use by end users of the Program, including user guides, manuals,
application and data files and specifications and shall include, at the
time of their creation, all modifications thereto. User Documentation
shall also include the application, data and document files necessary
to produce the Development Documentation and all modifications thereto.
1.2 INTERPRETATION. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) "this Agreement" means this software purchase agreement
(including the Schedules hereto) as it may from time to time be
supplemented or amended by one or more agreements entered into pursuant
to the applicable provisions hereof;
3(b)(1)-5
<PAGE> 6
(b) all references in this Agreement to designated "Articles",
"sections" and other subdivisions are to the designated Articles,
sections and other subdivisions of 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 or other subdivision;
(d) the headings are for convenience only and do not form a
part of this Agreement nor are they intended to interpret, define or
limit the scope, extent or intent of this Agreement or any provision
hereof;
(e) words importing the masculine gender include the feminine
or neuter gender and words in the singular include the plural and vice
versa; and
(f) the word "including" shall be deemed to be followed by the
words "without limitation".
1.3 SCHEDULES. The following schedule forms an integral part of this
Agreement.
Schedule "A" - Program Description and Specifications
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 The Vendor hereby represents and warrants to the Partnership and
acknowledges that the Partnership is relying on such representations and
warranties in entering into this Agreement:
(a) The Vendor is a corporation validly existing and not
dissolved under the laws of Ontario with the corporate power and
authority to conduct its business and to own its assets and is duly
qualified or licensed to do business in all jurisdictions in which it
carries on business.
(b) The Vendor has the power and authority to execute, deliver
and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions
contemplated hereby, has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the transactions
contemplated hereby.
3(b)(1)-6
<PAGE> 7
(c) This Agreement has been duly executed and delivered by the
Vendor and constitutes a valid and binding obligation of the Vendor
enforceable against it in accordance with its terms.
(d) Neither the execution nor delivery of this Agreement nor
the compliance by the Vendor with any or all of the terms of this
Agreement conflicts with or will conflict with or results in or will
result in any breach of or constitutes a default under any of the
provisions of the constating documents of the Vendor or any agreement
or instruments to which it is a party or by which it or any of its
property and assets are bound or results or will result in the creation
or imposition of any Encumbrance upon the Purchased Assets or is in
contravention of any applicable law.
(e) There is no legal action pending or threatened by any
Person against the Vendor or relating to the Purchased Assets and no
adverse claim has ever been, or is currently being, threatened against
the Vendor or the Purchased Assets or any of them and there is no claim
by any Person that any of the Intellectual Property Rights is or may be
invalid or unenforceable or non-distinctive of the Vendor or owned by
any Person other than the Vendor.
(f) The Software, with the exception of any Public Domain
Software, is an original work, as that term is used in the law of
Copyright, and the only authors of the Software and every portion
thereof, with the exception of any Public Domain Software, are or were
Erik Schannen and Kevin Chaisson, Erik Schannen having been an employee
of Vendor during the development of the Software and Kevin Chaisson
having at all times developed the Software under contract with the
Vendor and, therefore, all of the right, title and interest in their
work was at all times owned by the Vendor. Each of the authors of the
Software has waived his moral rights in the Software in favour of the
Vendor and its successors and assigns.
(g) Each of the artists and other individuals involved in the
creation of the Program has assigned to the Vendor all of his right,
title and interest in and to any work created by such person and
embodied in the Program and waived any moral rights in respect of same
in favour of the Vendor, its successors and assigns and the Vendor is
entitled to assign the benefit of any such rights and waivers to the
Partnership free and clear of any Encumbrance or cost to the
Partnership.
(h) No portion of the Software uses, copies or comprises the
work of any Person in a manner that infringes on, and the use thereof
and the commercial exploitation of the Intellectual Property Rights
does not infringe on, any rights of any Person including any rights in
the structure, sequence or organization of any third party work and no
royalty or other consideration is due to any Person arising out of the
creation, copying, use or distribution of the Purchased Assets.
3(b)(1)-7
<PAGE> 8
(i) The Vendor has not in any manner whatsoever granted,
transferred, licensed or assigned or permitted to be granted,
transferred, licensed or assigned any right or interest of any kind
whatsoever in the Purchased Assets to any Person (other than the
Partnership) and the Vendor has not otherwise Encumbered the Purchased
Assets.
(j) There are no contracts, agreements, licenses or other
commitments or arrangements in effect with respect to or which would
permit the manufacture, marketing, distribution, licensing, promotion,
maintenance or support of the Software by any Person, except the Supply
and Reseller Agreement.
(k) The Vendor is the owner of all right, title and interest
in each of the Purchased Assets, free and clear of all Encumbrances. On
Closing, the Partnership shall obtain the right, title and interest in
each of the Purchased Assets, free and clear of all Encumbrances, and
such rights shall be sufficient to allow the Partnership to carry out
the business of using, duplicating, manufacturing, selling, marketing,
distributing, licensing, promoting, maintaining or supporting the
Software in the manner contemplated hereunder and in the Supply and
Reseller Agreement or any other agreement referred to herein.
(l) The Source Code provided in accordance with the terms of
this Agreement is complete and when compiled, produces the then current
production version of the Object Code.
(m) Schedule "A" contains a substantially complete and
accurate (i) description of the Program (including a list of software
modules and related tools), (ii) set of Specifications, (iii) list of
Development Documentation, (iv) list of User Documentation and (v) list
of Public Domain Software.
(n) The Source Code, User Documentation and Development
Documentation, in the form delivered to the Partnership:
(i) are reasonably understandable and usable by
trained and experienced computer programming personnel who are
generally familiar with the computer languages referred to in
the definition of "Source Code";
(ii) do not involve any proprietary languages or
programming components that such personnel could not
reasonably be expected to understand, using the Development
Documentation, which contains sufficient commentary to enable
such personnel to understand and use such languages or
components; and
(iii) include all of the devices, programming and
documentation necessary for the maintenance and support of the
Software by the Partnership, except for devices, programming
and documentation commercially available to the
3(b)(1)-8
<PAGE> 9
Partnership on reasonable terms through readily known sources
not affiliated with or otherwise related to the Vendor.
(o) Each of the Code, User Documentation and Development
Documentation to be delivered by the Vendor hereunder has been prepared
in a workmanlike manner and with professional diligence and skill and
the Code:
(i) will function efficiently on the machines and
with operating systems for which they are designed, as
described in the User Documentation and the Specifications;
(ii) is free from design errors, defects,
deficiencies, malfunctions, bugs or other flaws which would
render it unfit for the purposes intended;
(iii) does not contain any back door, time bomb,
drop-dead device or other software routine designed to disable
the Programs automatically, with the passage of time or under
the positive control of any person other than the Partnership;
(iv) is free from any "viruses"; and
(v) will be "Year 2000 Complaint" in that it will
provide the following functions:
(A) handle date information before, during
and after January 1, 2000, including accepting date
input, providing date output and performing
calculations on dates or portions of dates;
(B) function accurately and without
interruption before, during and after January 1,
2000, without any change in operations associated
with the advent of the new century;
(C) respond to two-digit year-date input in
a way that resolves the ambiguity as to century in a
disclosed, defined and predetermined manner; and
(D) store and provide output of date
information in ways that are unambiguous as to
century and which account for leap years.
(p) The Software operates and performs in all material
respects in accordance with the Specifications and the Specifications
completely and accurately describe the Software.
3(b)(1)-9
<PAGE> 10
(q) The Code, User Documentation and Development Documentation
are substantially complete and accurate and will be adequate to enable
the Partnership to make full use of the latest version of the Software
on and after the Closing.
(r) The Vendor developed the Purchased Assets for use
exclusively in a commercial enterprise and has filed all required
returns and paid all GST and other sales taxes eligible on or in
respect of its development of the Purchased Assets.
(s) There are no retail sales taxes or goods and services
taxes due or accruing due in connection with the acquisition, use,
license or sale of the Software.
(t) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required or desirable for the sale of the Purchased Assets by the
Vendor to the Partnership pursuant to this Agreement.
(u) The Software is substantially complete in a commercially
saleable form and is currently in commercial use.
(v) The Software is in all material respects program code that
instructs the computer to carry out specific applications relating to
the processing or management of data and is not program code designed
to enable application programs to be run or to co-ordinate the
operation of the computer's hardware and components.
(w) The Vendor's principal business and source of gross
revenues in its current fiscal year has been the sale of software and
related products and services.
(x) The Vendor is registered under the Excise Tax Act (Canada)
for purposes of goods and services tax as number 897876470RT.
2.2 All representations and warranties of the Vendor contained in this
Agreement shall survive the Closing.
2.3 The Partnership hereby represents and warrants to the Vendor and
acknowledges that the Vendor is relying on such representations and warranties
in entering into this Agreement:
(a) The General Partner is a corporation validly existing and
not dissolved under the laws of the Province of Ontario with the
corporate power and authority to conduct its business and to own its
assets and is duly qualified or licensed to do business in that
jurisdiction.
(b) The General Partner has been duly appointed as a general
partner of the Partnership and the General Partner has the power and
authority to execute and deliver,
3(b)(1)-10
<PAGE> 11
on behalf of the Partnership, this Agreement and other agreements and
instruments to be executed and delivered by it in connection with the
transactions contemplated hereby, has taken all necessary corporate
action in such capacity to authorize the execution and delivery of this
Agreement and such other agreements and instruments and the
consummation of the transactions contemplated hereby.
(c) This Agreement constitutes a valid and binding obligation
of the Partnership enforceable against it in accordance with its terms.
(d) Neither the execution nor delivery of this Agreement, nor
compliance with the terms of the Agreement conflicts with or will
conflict with, or results or will result in any breach of, or
constitutes a default under, any of the provisions of the constating
documents of the Partnership or any agreement or instrument to which it
is a party or by which any of its property or assets are bound.
(e) The Partnership is not a "non-Canadian" as such term is
defined in the Investment Canada Act (Canada).
2.4 The representations and warranties of the Partnership contained in
section 2.3 shall survive the Closing.
ARTICLE 3
SALE
3.1 In consideration of the payment of the purchase price as set out in
Article 5, the Partnership hereby agrees to purchase, and the Vendor hereby
agrees to sell, assign and transfer to the Partnership, on Closing, subject to
the terms hereof, a 100% undivided interest in and to the Purchased Assets.
3.2 Effective on Closing, the Partnership, its successors and assigns
shall have and enjoy such perpetual, royalty-free, irrevocable and exclusive
immunity from suit by the Vendor or any Person affiliated or otherwise related
thereto under any patents or any other intellectual property rights owned or
licensable by the Vendor or any Person affiliated or otherwise related thereto
at any time as may be necessary for the Partnership to exercise any and all
incidents of ownership of the Purchased Assets and any other rights and licenses
acquired or granted under this Agreement.
3(b)(1)-11
<PAGE> 12
ARTICLE 4
COVENANTS
4.1 The Vendor covenants with the Partnership that from the date hereof
until Closing the Vendor shall:
(a) preserve, protect and continuously update and maintain the
Software in "state of the art" and commercially saleable form;
(b) carry on its business in the ordinary course and in
compliance with all applicable laws;
(c) not suffer or permit any Encumbrance to attach to or
affect the Purchased Assets;
(d) not enter into any transaction which could cause any
representation or warranty of the Vendor contained herein to be
incorrect on the Closing or constitute a breach of any covenant or
agreement of the Vendor contained herein;
(e) cooperate with the Partnership and take all such actions
as may be necessary to register Copyright to the Software; and
(f) permit the Partnership and its representatives to have
free and unrestricted access during business hours to the Software and
all other information with respect to the business of the Vendor as the
Partnership shall from time to time reasonably request and permit the
Partnership to make copies of same.
ARTICLE 5
PURCHASE PRICE
5.1 The purchase price for a 100% undivided interest in the Purchased
Assets shall be $1,950,000 (the "Purchase Price").
5.2 The Purchase Price shall be payable and paid by the Partnership by
way of cash or certified cheque as to $950,000 on the first Business Day
following the day that the shares of the Vendor, or if the Vendor is then a
wholly-owned subsidiary of a company listed on the Canadian Dealing Network
("CDN"), the shares of such parent company (the shares of the Vendor and the
shares of such parent company, as applicable, being referred to hereafter as the
"Shares") are first quoted for trading on CDN, and the balance on September 15,
1997, provided that the Partnership
3(b)(1)-12
<PAGE> 13
may defer payment of such balance until January 15, 1998 if either (a) on
September 14, 1997 the closing price (or average of the closing bid and ask
prices if there were no trades on such date) of the Shares is less than $1.50 or
(b) the average 30 day closing price (including only such days on which there
was a closing price) of such Shares on CDN for the 30 day period ended September
14, 1997 is less than $1.50.
5.3 The parties hereby agree to take all such actions and to execute
all such further documents and assurances, including an amended and restated
software purchase agreement containing substantially the same terms as provided
herein, as may be reasonably requested by any party in order to give full effect
to the provisions hereof or to reflect or consolidate the documentation
delivered hereunder. The Partnership shall be responsible for the preparation of
all such documentation, whether prepared at the request of the Partnership or
the Vendor.
5.4 On Closing, the Vendor will advance an amount equal to the GST
exigible on the sale of the Purchased Assets to the Partnership, without
interest, and will remit the GST so exigible as and when required to be remitted
by the Vendor, which advance shall be payable by the Partnership to the Vendor
when and to the extent that the Partnership receives the proceeds of the input
tax credit relating thereto.
5.5 Vendor shall use its best efforts to ensure that the Shares are
quoted on CDN prior to September 15, 1997. If at any time after September 15,
1997 the Shares have not been quoted on CDN, the Partnership may, at its sole
option, sell the Software to the Vendor for an amount equal to the Purchase
Price, which amount shall be paid in full by way of set off of the Partnership's
obligations under section 5.2, and in such event this Agreement shall be
terminated forthwith without further action or formality. In the event of such
termination, the parties shall promptly do all such acts and execute all such
documents as shall be necessary in connection therewith.
ARTICLE 6
INDEMNIFICATION
6.1 The Vendor shall indemnify and save the Partnership, the General
Partner, its directors, officers, agents, employees, licensees, successors and
assigns and limited partners of the Partnership (each an "Indemnified Person")
harmless from all losses, costs, claims, damages, demands (other than indirect
or consequential losses), actions and causes of action which it may incur,
suffer or become liable for as a result of or in connection with:
(a) any claim that all or any part of the Purchased Assets
infringe any patent, Copyright, trade secret, trade mark or other
intellectual property right of any Person; or
3(b)(1)-13
<PAGE> 14
(b) any claim arising pursuant to bulk sales legislation,
retail sales tax legislation, the Excise Tax Act (Canada) or other
similar legislation.
ARTICLE 7
CLOSING
7.1 The Partnership shall be obliged to complete the purchase of the
Purchased Assets only on the Closing Date and only if each of the following
conditions precedent have been satisfied in full or waived in writing by the
Partnership prior thereto:
(a) all of the representations and warranties of the Vendor
herein are true and correct as if made at and as of the Closing Date;
(b) the Partnership shall have been satisfied, in its sole
discretion as to the results of its investigations of the Purchased
Assets, the Vendor and the Vendor's business, properties and assets and
such other matters relating to the transactions contemplated herein as
the Partnership deems advisable;
(c) prior to the Closing, the Vendor shall have observed or
performed in all respects all of the obligations, covenants and
agreements to be observed or performed by it before the Closing;
(d) the shareholders of Osgoode Holdings Inc. ("Osgoode")
shall have approved the acquisition of the Vendor by Osgoode as
described in the Osgoode Circular and Osgoode shall have filed a
complete application and such supporting materials as are necessary to
obtain quotation for the common shares of Osgoode on CDN;
(e) the Vendor shall have provided the Partnership with a
complete copy of the Source Code and other software programs needed to
execute the Software, together with Specifications acceptable to the
Partnership, acting reasonably;
(f) no material adverse change shall have occurred since
January 1, 1997 with respect to the condition or prospects of the
Vendor or its businesses;
(g) all documentation relating to the purchase and sale of the
Purchased Assets and all actions and proceedings taken on or prior to
the Closing in connection with the performance by the Vendor of its
obligations under this Agreement and the Letter Agreement, including
execution and delivery of the Supply and Reseller Agreement and
delivery of share purchase warrants of the Vendor to the Partnership
and General Partner (exercisable into common shares of the Vendor)
pursuant to separate agreements and other
3(b)(1)-14
<PAGE> 15
deliveries contemplated in the Letter Agreement, shall be
satisfactory to the Partnership and its counsel and the Partnership
shall have received copies of all documentation or other evidence as it
may reasonably request (including legal opinions as to all relevant
matters, certificates from the Vendor and a statutory declaration from
one or more principals of the Vendor), in all cases in form and
substance satisfactory to the Partnership and its counsel; and
(h) the Partnership shall have received evidence satisfactory
to it in its sole discretion that Osgoode Holdings Inc. will complete
its acquisition of the Vendor as contemplated in the Osgoode Circular
and, in connection therewith, issue, in the same number and on the same
terms, share purchase warrants to the Partnership and General Partner
in exchange for the share purchase warrants of the Vendor described in
paragraph (g) above, such replacement share purchase warrants to be
immediately exercisable by the Partnership and General Partner into
common shares of Osgoode Holdings Inc. and such common shares to be
issued free of any Encumbrance (other than any Encumbrance which may be
agreed to by the Partnership and General Partner in writing).
7.2 The Vendor shall be obliged to complete the sale of the Purchased
Assets on the Closing Date and only if each of the following conditions
precedent have been satisfied in full or waived in writing by the Vendor at or
before the Closing:
(a) all of the representations and warranties of the
Partnership herein shall be true and correct on the Closing Date in all
respects as if made at and as of the Closing Date;
(b) prior to the Closing, the Partnership shall have observed
or performed in all respects all of the obligations, covenants and
agreements to be observed or performed by it before the Closing;
(c) the shareholders of Osgoode Holdings Inc. shall have
approved the acquisition of the Vendor by Osgoode Holdings Inc. as
described in the Circular; and
(d) all documentation relating to the sale and purchase of the
Purchased Assets and all actions and proceedings taken on or prior to
the Closing in connection with the performance by the Partnership of
its obligations under this Agreement, including execution and delivery
of the Supply and Reseller Agreement, shall be satisfactory to the
Vendor and its counsel and the Vendor shall have received copies of all
documentation or other evidence as it may reasonably request in form as
to certification and otherwise and in substance satisfactory to the
Vendor and its counsel.
3(b)(1)-15
<PAGE> 16
ARTICLE 8
GENERAL
8.1 This Agreement may be executed in any number of counterparts with
the same effect as if all parties had signed the same document. All counterparts
will be construed together and will constitute one and the same agreement. This
Agreement may be executed by the parties and transmitted by facsimile
transmission and if so executed and transmitted this Agreement will be for all
purposes as effective as if the parties had delivered an executed original
Agreement.
8.2 Except as expressly provided otherwise in this Agreement, dates and
times by which a party is required to render performance under this Agreement or
any schedule hereto shall be postponed automatically to the extent and for the
period of time that such party prevented from meeting them by reason of any
Force Majeure, provided the party prevented from rendering performance notifies
the other party immediately and in reasonable detail of the commencement and
nature of such Force Majeure and the probable consequences thereof. The benefit
of this section shall not apply to the performance of an obligation which is 60
or more days in default.
8.3 The parties hereto will execute such other and further documents
and assurances or cause same to be executed and delivered in order to give full
effect to the provisions of this Agreement.
8.4 No interpretation, change, termination or waiver of any of the
provisions hereof will be binding upon the parties unless in writing signed by
the duly authorized officers of the parties. No modification, waiver,
termination, rescission, discharge or cancellation of this Agreement will affect
the right of any party to enforce any claim or right hereunder, whether or not
liquidated, which accrued prior to the date of such modification, waiver,
termination, rescission, discharge or cancellation.
8.5 The Vendor shall not, directly, indirectly or contingently, sell,
assign or transfer, convey or Encumber this Agreement or any right or interest
herein or hereunder (including, for greater certainty, the Vendor's right to
receive the payments set forth in section 5.2), or suffer or permit any such
assignment, transfer or encumbrance to occur either voluntarily or by operation
of law unless the written consent of the Partnership is first had and obtained,
such consent not to be unreasonably withheld.
8.6 Any notice, direction or other instrument required or permitted to
be given under this Agreement will be in writing and may be given by delivering
same or mailing same by registered mail or sending same by electronic facsimile
or other similar form of communication to the addresses for the parties set out
below:
3(b)(1)-16
<PAGE> 17
if to the Vendor at: 401 Richmond Street West
Suite 123
Toronto, Ontario
M5V 1X3
Attention: Erik Schannen
Fax No.: (416) 977-7353
if to the
Partnership, at: 2 Carlton Street
Suite 610
Toronto, Ontario
M5B 1J3
Attention: David Sanderson
Fax No.: (416) 977-6453
with a copy to: FaskenCampbell Godfrey
Toronto-Dominion Centre
Suite 3600, Bank Tower
Toronto, Ontario
M5K 1N6
Attention: Allan G. Beach
Fax No.: (416) 364-7813
Any notice, direction or instrument aforesaid will if delivered, be deemed to
have been given or made at the time of delivery and, if mailed by registered
mail in Canada and properly addressed, be deemed to have been given or made on
the third day following the day on which it was so mailed (provided that should
there be, at the time of mailing or between the time of mailing and the actual
receipt of the notice, a mail strike, slowdown or other labour dispute which
might affect the delivery of such notice by the mails, then such notice will be
only effective if actually delivered) and, if sent by electronic facsimile or
other similar form of communication during normal business hours, be deemed to
have been given or made on the day on which it was sent. Any party may be given
written notice of change of address in the same manner, in which event such
notice will thereafter be given to it as above provided at such changed address.
8.7 If any part of this Agreement, for any reason will be declared
invalid, such decision will not affect the validity of any remaining portion
which will remain in full force and effect as if this Agreement had been
executed with the invalid portion eliminated.
8.8 Nothing herein shall be construed to create a partnership, joint
venture, or agency relationship between the parties hereto. No party shall have
the authority to enter into agreements of any kind on behalf of any other party
or otherwise to bind or obligate any other party in any manner to any Person.
3(b)(1)-17
<PAGE> 18
8.9 Time is of the essence of this Agreement and of every provision
thereof.
8.10 This Agreement together with the Supply and Reseller Agreement and
other agreements executed on Closing will be the complete and exclusive
statement of the agreement of the parties relating to the subject matter hereof
and supersede all agreements (oral or written), understandings, representations,
conditions, warranties, covenants and other communications between the parties
relating hereto, including the Letter Agreement (except to the extent referred
to herein). This Agreement may be amended only by a subsequent writing that
specifically refers to this Agreement and is signed by both parties and no other
act, document, usage or custom shall be deemed to amend this Agreement.
8.11 No waiver by the Vendor or the Partnership of any default in
performance on the part of the other party of any breach or a series of
breaches, will constitute a waiver of any subsequent breach or default or a
waiver of the terms of this Agreement.
8.12 This Agreement shall be governed by, construed and enforced in
accordance with the laws of the Province of Ontario. For the purpose of all
legal proceedings, this Agreement shall be deemed to have been executed and
performed in the Province of Ontario and the courts of the Province of Ontario
shall have exclusive jurisdiction to entertain any action arising under or in
respect of this Agreement. Each of the parties hereto hereby attorns to the
exclusive jurisdiction of the courts of the Province of Ontario.
8.13 This Agreement shall ensure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
3(b)(1)-18
<PAGE> 19
TO WITNESS THEIR AGREEMENT the parties hereto have duly executed this
Agreement under seal on the date first above written.
LASERMEDIA, a corporation
By:
------------------------
Name:
------------------
Its:
-------------------
SOFTECH, by its general
partner, 1234191 Ontario
Inc.
By:
------------------------
Name:
------------------
Its:
-------------------
3(b)(1)-19
<PAGE> 20
SCHEDULE A
1. DESCRIPTION OF THE PROGRAM. The Active Trainer software is built
using MacroMedia Director, a multimedia application development framework. The
programming language built into Director is called Lingo, and all Active Trainer
data structures, objects and methods are written in Lingo. The choice of this
development framework was based on the flexibility of this system, as
applications written in it will be compatible with Macintosh, Windows 3.1,
Windows 95, OS/2 and the World Wide Web.
ACTIVE TRAINER IS COMPRISED OF THE FOLLOWING MODULES:
Shared: This module contains global object declarations, including
Navigation, user and Fitness Test.
Introduction: Here Active Trainer introduces the user to the people and
philosophy behind the fitness program using video clips and animation.
Gym: The gym is comprised of two screens: the Check-in and the Gym. At
the check-in the user selects his or her name from a list of members. The Gym
functions as the main menu, where the user chooses which area to visit next.
Fitness Test: The test is comprised of a series of screens designed to
evaluate the user's health history, current physical fitness and fitness goals.
A fitness program and weekly schedule is prepared based on this information.
Stretching Area: This Stretching Area introduces the user to the
concepts of warming up and cooling down, and specifically describes many of the
most effective stretches.
Weight Room: This area presents the user a strength training routine.
This routine can be modified by the user. A video based explanation of each
exercise is complemented by muscle anatomy and motivational information.
Aerobics Studio: The following screens can be found in this area:
Weekly cardiovascular exercise program, comparative list of exercises, and a
guide to target heart rate.
Cafeteria: The cafeteria presents the user with a sample meal plan.
General nutrition information includes an overview of good groups, the food
pyramid, and vitamins. This section is rounded out with a selection of recipes
for healthy desserts.
Glossary: The glossary contains a list of concepts used in Active
Trainer, with a brief definition, and cross references from throughout the
program.
3(b)(1)-20
<PAGE> 21
Map: The map gives the user an overview of the structure of the Active
Trainer screens, showing what areas have been covered and what is still to be
visited.
ACTIVE ABS IS COMPRISED OF THE FOLLOWING:
Shared: This module is very similar to Active Trainer, as the two
programs share most of their object structures.
Main: This is the main menu, similar to Active Trainer's Gym.
Test: This is a shortened version of Active Trainer's Fitness Test.
Learn: Learn is a fun and informative quiz debunking the myths of
abdominal training.
Build: Build is the heart of Active Abs. A different video AB workout
is designed for the user each day. Optionally the user can design a custom
workout by assembling a sequence of clips from a list of about 35 exercises.
LaserMedia has obtained a license to ship QuickTime and QuickTime for
Windows with the software, as well as the MacroMedia runtimes.
2. DOCUMENTATION AND ADDITIONAL INFORMATION. The main documentation
required to enable installation and use of the products are the instructions are
printed as the insert which is contained in the plastic container housing the
CD-ROM. There are pages outlining:
a. Tips and Tricks (for using the program);
b. Windows 3.1 Installation;
c. Windows 95 Installation;
d. Windows Troubleshooting;
e. Mac Troubleshooting;
f. Mac Installation; and
g. Description of the Fitness Test, Wight Room, Aerobics
Studio and Cafeteria modules.
Additional information is contained on the cardboard shipping box which
contains the CD ROM, measuring tape and fat calipers which forms the complete
package as follows:
3(b)(1)-21
<PAGE> 22
a. a 486/33 or Pentium computer is required to operate the
program in Windows along with a double speed CD ROM, 4Mb of free RAM, 3
to 18Mb disk space, sound card and local bus/PCI video or a 68040 or
PowerPC Macintosh with doubles speed CD-ROM, 4.5 Mb of free RAM and 3
to 18 Mb of disk space (stereo speakers and a printer are recommended);
b. Information on product features including the ability to:
- point to any button or screen area for instant help;
- click on any underlined word for a definition and
hypertext cross- references;
- use the Map to see where you are and to jump to a
specific screen;
- print out an extensive fitness analysis, and your
monthly or daily program;
- store multiple user profiles;
- take a new test to chart your progress and to update
your program;
- drag and drop exercises to customize your workout;
- watch videos in quarter or full screen mode; and
- select your camera angles for exercise
demonstration.
3(b)(1)-22
<PAGE> 1
EXHIBIT 3(B)(2)
SUPPLY AND RESELLER AGREEMENT DATED JUNE 27, 1997
BY AND BETWEEN LASERMEDIA AND SOFTECH
3(b)(2)-1
<PAGE> 2
SUPPLY AND RESELLER AGREEMENT
THIS SUPPLY AND RESELLER AGREEMENT dated the 27th day of June, 1997
between SOFTECH, an Ontario limited partnership, by its general partner, 1234191
Ontario Inc. (the "Owner") and LASERMEDIA, a corporation incorporated under the
laws of Ontario (the"Reseller").
WHEREAS, the Owner owns a 100% undivided interest in certain
application software known as the "ACTIVE TRAINER" family of software; and
WHEREAS, the Reseller wishes to manufacture on behalf of and purchase
from the Owner from time to time copies of certain products derived from that
software for resale.
NOW THEREFORE, in consideration of the premises and the respective
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS. In this Agreement each of the following terms has the
meaning set out below:
"DERIVATIVE WORK" means a work which is based on the Software,
such as a revision, enhancement, modification, translation, abridgment,
condensation, expansion, or any other form in which the underlying work
of the Software may be recast, transformed or adapted and which, if
prepared without authorization of the owner of the copyright in such
underlying work, would constitute a copyright infringement. For
purposes hereof, a Derivative Work shall also include any compilation
that incorporates such underlying work;
"DISTRIBUTION EXPENSES" has the meaning ascribed in section
4.3;
"ENHANCEMENTS" means all modifications, additions,
enhancements or substitutions made to the Software, other than
Modifications, that accomplish performance, structural or functional
improvements thereto, whether such enhancements accomplish incidental
or substantial redesign or replacement of any parts of the Software;
"GROSS RECEIPTS" means all amounts actually received or
receivable by the Reseller or any Related Person from the use, sale,
distribution or other exploitation of the Products
3(b)(2)-2
<PAGE> 3
in the Territory together with any interest earned thereon, but shall
not include returns, advances or deposits until earned or forfeited;
"INTELLECTUAL PROPERTY RIGHTS" means all rights to use, copy,
reproduce, sell, license, enhance, merge, transcribe, adapt or
distribute by any means and for any purpose the Software including any
and all proprietary rights provided under patent law, copyright law or
any other statutory provision or common law principles applicable to
the Software which may provide a right in either ideas, formulae,
algorithms, concepts, inventions or know-how generally, including trade
secret law or the expression or use thereof;
"MODIFICATIONS" means modifications, updates or revisions to
the Software that correct errors, support new releases of operating
systems or support new models of input-output devices with which the
Software is designed to operate;
"NET CASH FLOW" for any period means Gross Receipts less
Distribution Expenses for that period;
"PERSON" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, any government or any
agency or instrumentality thereof or any other entity;
"PRODUCTS" means the "Active Trainer", "Active Abs", "Active
Home Fitness" and CD ROMs as well as each of those other products and
all maintenance, support, training, updating, customization,
developmental and other services used or offered by the Reseller prior
to the date hereof together with those products and other services in
any media whatever which will from time to time thereafter be developed
on behalf of the Owner by the Reseller or any Related Person utilizing
or relating to in any manner the whole or any part of the Software;
"RELATED PERSON" means any Person not acting at arm's length
(within the meaning of the Income Tax Act (Canada)) to, or any
director, officer, shareholder or affiliate or associate (within the
meaning of the Securities Act (Ontario)) of, the Reseller or any
director, officer or shareholder thereof or any Person otherwise
related thereto;
"SOFTWARE" means the "Software" as defined by, and as acquired
by the Owner pursuant to the software purchase agreement dated of even
date hereof between the Reseller and the Owner, and includes any
Derivative Works, Enhancements and Modifications made or developed by
the Reseller or any Related Person hereunder;
"TERM" means the period contemplated by section 8.1;
"TERMINATING EVENT" has the meaning ascribed thereto in
section 8.2; and
3(b)(2)-3
<PAGE> 4
"TERRITORY" means the world.
1.2 INVALIDITY. If any of the provisions contained in this
Agreement are found by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein shall not be in any way affected or
impaired thereby.
1.3 HEADINGS. Headings contained herein are included solely for
convenience, are not intended to be full or accurate descriptions of the content
thereof and shall not be considered part of this Agreement. All references in
this Agreement to designated "Articles", "sections" and other subdivisions are
to the designated Articles, sections and other subdivisions of this Agreement.
1.4 NUMBER AND GENDER. In this Agreement, words importing the
singular include the plural and vice versa and words importing gender include
all genders.
1.5 ENTIRE AGREEMENT. This Agreement (read in conjunction with the
software purchase agreement dated of even date hereof between the Reseller and
the Owner) constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties and there are no warranties, representations or other agreements between
the parties in connection with the subject matter hereof except as specifically
set forth herein or therein. No supplement to, modification or waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions (whether or
not similar) nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
1.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein and shall be treated, in all respects, as an Ontario
contract. Each party hereto irrevocably attorns to and submits to the
non-exclusive jurisdiction of the Courts of Ontario with respect to any matter
arising hereunder or related hereto.
1.7 DIRECTIONS. For the purpose of granting any consent or right
of approval of the Owner contemplated hereunder, the Owner hereby authorizes,
and the Reseller shall be entitled to rely upon without further enquiry or
formality the written direction of the general partner of the Owner from time to
time.
3(b)(2)-4
<PAGE> 5
ARTICLE II
GRANT OF RIGHTS
2.1 GRANT OF RIGHTS. Subject to the terms and conditions
hereinafter provided, the Owner hereby appoints the Reseller the exclusive
reseller of the Products in the Territory and grants to the Reseller the
personal, non-transferable, exclusive right and privilege:
(a) to purchase copies of the Products for resale;
(b) to make copies of the Products on behalf of the Owner
for purchase hereunder by Reseller for resale;
(c) to make and use copies of the Software in object code
format for demonstrating and supporting the Derivative Works and the
Products;
(d) to grant the rights referred to in (a),(b) and (c) to
sub-distributors, provided that prior written notice of the same is
provided to the Owner together with a copy of the subdistribution
agreement; and
(e) to use the Software for its own internal research and
development and to prepare Derivative Works thereof and Products.
2.2 EXCLUSIVITY. The Owner shall not, directly or indirectly
(including authorizing other Persons), promote, sell or otherwise license or
dispose of any of the Products in the Territory except through the Reseller in
accordance with the terms of this Agreement. The Reseller shall use all
reasonable efforts to prohibit any Person from using (other than end users),
promoting, selling, licensing or otherwise disposing of any of the Products in
the Territory. The Reseller shall promptly provide the Owner with written notice
of any such activity of which it becomes aware and the parties shall co-operate
to end such prohibited activity.
2.3 BEST EFFORTS OF THE RESELLER. The Reseller accepts the rights
herein granted to it and agrees to distribute the Products and use its best
efforts, consistent with good business judgment, to obtain as wide, complete,
efficient and profitable a distribution of the Products throughout the Territory
as may be commercially possible.
2.4 SALES, MARKETING AND DISTRIBUTION. Subject to the provisions
of this Agreement, the determination of sales, marketing and distribution
strategies and selling prices for the Products within the Territory during the
Term shall be the primary responsibility of the Reseller. The ReSeller agrees to
report to the Owner upon marketing conditions affecting the sale or distribution
of the Products within the Territory and agrees to keep the Owner apprised of
its marketing efforts, including written reports on a quarterly basis (or such
other less frequent basis as the
3(b)(2)-5
<PAGE> 6
Owner may reasonably request) in such form as may be reasonably requested by the
Owner from time to time.
2.5 COVENANT OF ETHICAL CONDUCT. The Reseller shall:
(a) not knowingly employ illegal or unethical practices
in promoting the Products or providing its services hereunder;
(b) act at all times in a manner intended to preserve and
enhance the goodwill of the Products, the Product Trade Marks and the
reputation of the Owner as a provider of quality products; and
(c) otherwise promote the Products in accordance with the laws
applicable to the various jurisdictions where the Products are to be
marketed hereunder.
ARTICLE III
PRICE AND PAYMENT
3.1 PRODUCT PRICE. The initial Product Prices shall be those set
out on Schedule "A" hereto as from time to time amended or supplemented by
agreement of the parties. The price to be paid for Products sold by the Owner to
the Reseller shall be that Schedule "A" price in effect on the date on which the
Reseller first confirms a purchase order for or ships the Product for use or
resale by a subdistributor or authorized reseller.
3.2 TAXES. Any taxes or duties imposed by any laws of any country,
province, state, municipality or other lawful authority which the Owner may pay
or be required to pay or reimburse to others by reason of the manufacture,
importation, ownership, use or sale of any Products will be either added to the
price as a separate item or included in the price, as the law may require or as
the Owner may otherwise determine.
3.3 TERMS AND TITLE. The Reseller shall pay in full force the
purchase price for all Products purchased by Reseller hereunder in any calendar
quarter within 30 days of the end of such quarter in the currency of the country
where the Products are shipped unless otherwise agreed by the Owner. Payment
shall not be deemed made until received by the Owner, at which time title to the
Products shall pass.
3(b)(2)-6
<PAGE> 7
3.4 GUARANTEED MINIMUM. The Reseller hereby guarantees that the
aggregate amounts payable and paid under section 3.1 for each of the following
periods shall equal or exceed the amounts indicated opposite those periods:
the date hereof through January 15, 1998 $250,000
January 1, 1998 through March 31, 1998 $62,500
April 1, 1998 through June 30, 1998 $62,500
July 1, 1998 through September 30, 1998 $62,500
October 1, 1998 through December 31, 1998 $62,500
ARTICLE IV
ACCOUNTING
4.1 STATEMENT. The Reseller shall deliver to-the Owner within 30
days after the end of each calendar quarter, commencing with the quarter ended
June 30, 1997, a statement in such reasonable detail and form as may be required
by the Owner, certified by the senior financial officer of the Reseller and
reflecting all purchases and sales of all Products for that quarter, together
with a calculation of Gross Receipts, Distribution Expenses and Net Cash Flow
for that quarter. Any statement shall be deemed to be accurate in all material
respects if a notice of dispute is not given by the Owner within eighteen months
after the end of the fiscal year of the Reseller in which such quarter ended.
4.2 ALLOCATION OF NET CASH FLOW. In addition to the purchase price
for all Products payable pursuant to Article 3, the Reseller shall pay to the
Owner, and each statement referred to in section 4.1 shall be accompanied by
payment by the Reseller to or to the written order of the Owner, the amount, if
any, by which 70% of the Net Cash Flow for that period, if any, exceeds the
aggregate purchase price payable under Article 3 for that period,, provided that
commencing with the beginning of the calendar quarter next following the
calendar quarter in which all amounts paid to the Owner under section 3.1 or 4.2
hereof exceed in the aggregate $1,950,000, the above reference to 70% shall be
read as 30%.
4.3 DISTRIBUTION EXPENSES. In calculating "Net Cash Flow" for any
period the Reseller shall be entitled to deduct from Gross Receipts in that
period the following third-party costs, expenses and charges properly incurred
and paid or payable by the Reseller in that period in the Territory in
connection with the performance of its obligations hereunder, to the extent the
same are reasonable, are not paid or payable by the Reseller to Related Parties
and are expressly contemplated by an operating budget approved by, or otherwise
agreed to in writing by, the Owner (collectively the "Distribution Expenses"):
(a) all taxes, imposts, duties, tariffs and governmental
fees of any nature, however denominated or characterized, imposed by
any taxing authority, directly or
3(b)(2)-7
<PAGE> 8
indirectly, on any receipts (irrespective of character or origin)
derived from the resale, distribution or other exploitation of the
Products;
(b) costs incurred in connection with the collection of
any portion of Gross Receipts, including reasonable fees of attorneys
and auditors;
(c) costs directly incurred in the manufacture,
preparation, duplication or delivery of the Products including the
following:
(i) costs of manufacture of the Products,
including laboratory, labor and materials;
(ii) transportation, shipping, packing, delivery
and inspection charges on all Products or other materials;
(d) costs directly incurred in marketing, advertising
and exploiting the Products including, but not limited to, advertising
and independent advertising agents' commissions and attending sales
markets;
(e) the following costs directly incurred in connection
with the distribution of the Products:
(i) the cost of all rights required to permit the
distribution or other use of the Products, including fees for
use of any copyrighted legal text, patented equipment or
processes and any re-use fees and costs advanced by the
Reseller in respect of the production of the Products;
(ii) costs for insurance coverage for any and all
risks of loss with respect to the Products and any components
thereof, including errors and omissions insurance and loss or
damage to the Products and physical material insurance;
(iii) costs and expenses of registering copyright
and patents in the Software and Products for the benefit of
the Owner and its assigns and the extension and renewal
thereof and other similar protection, wherever and whenever
incurred;
(iv) costs incurred in protecting the copyright
and patents in the Products for the benefit of the Owner and
its assigns and preventing any infringement of copyright or
patent rights or violation of rights in and to the Products
or any elements thereof;
3(b)(2)-8
<PAGE> 9
(v) (v) costs incurred by reason of claims
asserted by third parties which arise from the duplication,
distribution, sale or use of the Products; and
(vi) costs incurred in respect of the versioning
or translation of the Products, including all costs related
to the production, distribution and exploitation of foreign
language versions of the Products; and
(f) the lesser of $50,000 per annum and 50% of the
aggregate cost in any year of all full time employees of the Reseller
obligated to spend 100% of their time in marketing and not less than
50% of their time in 1997 and 1998 (or 25% in each year thereafter) in
marketing the Products specifically.
4.4 TAXES. The Reseller shall pay all duties and taxes imposed as
a result of the existence or operation of this Agreement, including but not
limited to goods and services tax, sales tax, import or export duty or tax and
any tax which the Reseller is required to withhold or deduct from payment to the
Owner, but excluding any tax imposed upon the Owner with respect to its income.
4.5 AUDIT. The Owner shall have the right through its accredited
auditing representatives to examine or audit from time to time, upon reasonable
prior notice during normal business hours at the Reseller's premises and not
more than six times in any twelvemonth period, all records kept pursuant to this
Agreement by the Reseller and such other records and accounts as may under
recognized accounting practices contain information bearing upon the amounts
payable to the Owner under this Agreement and senior officers of the Reseller
agree to meet with the Owner at such times to discuss the business of the
Reseller. Prompt adjustment shall be made by the proper party to compensate for
any errors or omissions disclosed by such examination or audit. Neither such
right to examine and audit nor the right to receive such adjustment shall be
affected by any statement to the contrary unless such statement appears in a
letter or other document, signed by the party having such right and delivered to
the other party, expressly waiving such right. The cost of such examination or
audit shall be paid by the Owner, provided that such cost shall be paid by the
Reseller if such examination or audit discloses that the Reseller has
understated the amount payable to the Owner under this Agreement by more than
4%.
4.6 INTEREST ON OVERDUE AMOUNTS. All overdue amounts hereunder
shall bear interest at 2.5% per annum plus the prime rate established from time
to time by the Reseller's bank for Canadian dollar loans to its customers in
Canada, calculated daily and payable monthly,-both before and after demand,
default and judgment, with interest an Overdue interest at the same rate and
calculated as aforesaid.
3(b)(2)-9
<PAGE> 10
ARTICLE V
COPYRIGHT
5.1 COPYRIGHT. The Reseller hereby assigns all right, title and
interest in the Intellectual Property Rights in all Modifications, Enhancements
and Derivative Works developed by the Reseller as authorized under this
Agreement to the Owner and acknowledges and agrees that the Software (including
any such Modifications, Enhancements and Derivative Works) is and shall at all
times remain the exclusive property of the Owner and that no rights, title or
ownership interest of any kind whatsoever in the Intellectual Property Rights
therein, or any portion of same, shall remain with or pass to the Reseller. The
Reseller agrees to sign, or to cause its employees or any others who are given
access to the Software (other than the Owner's employees and contractors) to
sign, such documentation as may be requested by the Owner to confirm such
assignment and ownership.
5.2 COPYRIGHT NOTICE. The Reseller agrees to place properly on all
Products the proper copyright notice required under the Universal Copyright
Convention and all other applicable conventions in order to accord the Products
the maximum international copyright protection possible. The Reseller shall
cause to be marked on or included in all copies of the Products and Software
made by the Reseller the following copyright notice: "Copyright 1995. Softech,
an Ontario limited partnership. All rights reserved." or such other copyright
notice as may from time to time be required by the Owner and shall, at the
Owner's request, deliver to the Owner copies of all print media advertising and
transcripts of advertising in other media placed by or on behalf of the Reseller
in which reference is made to the Products, Software or the Owner. The Reseller
shall not dispute or contest directly or indirectly at any time during or after
the Term, in any manner, the validity, enforceability or ownership of the
copyright in the Products or Software.
5.3 REGISTRATION. The Reseller shall take such steps as the Owner
may deem advisable to protect the Reseller's rights and those of the Owner and
to register the copyright in the Products in any country or other jurisdiction
within the Territory required by the Owner, and for such purpose, the Reseller
is appointed the attorney-in-fact of the Owner (the Owner acknowledges that such
appointment is coupled with an interest and is irrevocable during the Term).
5.4 LITIGATION. Each party shall immediately report to the other
party any infringement or unauthorized use of or challenge to any rights in the
Software or the Products of which it becomes aware and the parties shall
co-operate in determining whether any action shall be taken. At the request of
the Reseller, the Owner shall be entitled, but not obliged, to take all
reasonable actions required to protect and maintain the value of the copyright
or the Products, including initiating criminal prosecutions, lawsuits or
administrative actions for infringement or other unauthorized use. In the event
that the Owner is unable or unwilling to promptly take reasonable efforts, upon
written notice to the Owner, the Reseller is hereby
authorized by the Owner to immediately take such actions on its own behalf and
on behalf of the Owner as it may consider
3(b)(2)-10
<PAGE> 11
necessary or advisable for that purpose. Each party may in its sole discretion
assume the defence of any action or proceedings of any kind brought against
either party which relate to its use of the copyright, the Software or the
Products. Each party shall assist and co-operate fully with the other in the
proof and enforcement of the other party's rights.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 ENFORCEMENT. The Reseller shall use its best efforts to
monitor and enforce all subdistribution agreements. The Owner may, in the name
of the Reseller, maintain or participate by way of joinder or otherwise in any
action or proceeding against a customer or subdistributor in respect of an
alleged breach of that party's obligations under any such agreement which the
Owner, in its sole discretion, may deem necessary or desirable in connection
therewith. In such event, the Owner shall have complete carriage and control of
any such action or proceeding, including the commencement, prosecution,
discontinuance and settlement thereof and the Reseller shall render all such
assistance to the Owner as the Owner may reasonably require.
6.2 SUPPORT. The Reseller shall provide support and maintenance to
subdistributors and customers with respect to the Products furnished by the
Reseller. The Reseller shall upon request provide the Owner with information
concerning the support and maintenance provided and consult with the Owner with
a view to keeping such support at a level and a standard sufficient to protect
the reputation of the Owner, the Products and the Software. The Reseller shall
promptly report to the Owner all errors and deficiencies in the Products or
Software discovered by the Reseller or reported by customers to the Reseller.
The Reseller shall provide all training and documentation required by customers.
The Owner has no obligation to provide any support, maintenance, training or
documentation to customers of the Reseller.
6.3 MAINTENANCE OF SOFTWARE. During the Term, the Reseller shall:
(a) update and maintain the Software in commercially
saleable or useable form, with upgrades to be made no less frequently
than the most frequent period for updates generally available to end
users of any competing or similar software products, with copyright in
the Software to arise in the name of and be the sole property of the
Owner; and
(b) immediately transfer to the Owner all copyright and
other Intellectual Property Rights in such Modifications, Enhancements
and Derivative Products and deliver to the Owner the related source
code written in the same or a compatible computer language to the
computer language currently used for the Software together with the
related documentation written in the English language and electronic
document files therefor.
3(b)(2)-11
<PAGE> 12
6.4 CONFIDENTIALITY. Each party hereto covenants that it shall
keep confidential any confidential information relating to the other party's
business, finances, marketing and technology, including any source code version
of the Software or any Derivative Products (the "Confidential Information") to
which it obtains access and that it shall take all reasonable precautions to
protect such Confidential Information of the other party or any part thereof
from any use, disclosure or copying except as expressly authorized by this
Agreement. The Reseller shall implement such procedures as the Owner may
reasonably require from time to time to improve the security of the Software.
The Reseller shall keep in strict confidence and shall not at any time use or
disclose, except as required by law or to perform its obligations hereunder, the
Software or the terms and conditions of this Agreement or any agreement or
document contemplated herein or related hereto. Confidential Information of a
party shall not include information which is or becomes available to the public
through no fault of the other party or which is disclosed to the other party by
a third party who had lawfully obtained such information and without a breach of
the third party's confidentiality obligations.
6.5 PROPERTY. The Reseller acknowledges that the Software and all
related information and documentation are the property of the Owner~d?/or third
parties from whom the Owner has acquired certain rights under license. The
Reseller shall not make any use of any such confidential information except as
authorized herein and shall not copy same except as necessary for such
authorized use.
6.6 INDEMNITY. The Reseller shall indemnify and save harmless the
Owner, its successors, assigns and representatives and their directors,
officers, employees and representatives (each an "Indemnified Party") from and
against any and all claims, demands, actions, causes of action, liabilities,
damages, costs or expenses (other than indirect or consequential losses and
damages) awarded against or incurred or suffered by an Indemnified Party arising
out of any default under, or violation, contravention or breach of, any
representation, warranty, covenant or agreement of the Reseller hereunder, or
out of any action or proceeding commenced or maintained by any third party in
respect of any acts or omissions of the Reseller in developing, marketing or
distributing the Products. The Reseller shall co-operate fully with the
Indemnified Party and render all assistance as may be reasonably required by the
Indemnified Party in its defence of any such action or proceeding.
6.7 INSURANCE. The Reseller shall obtain and maintain insurance of
such nature, including, in particular, product liability insurance, against such
perils and in such amounts as is commercially reasonable in the circumstances,
the cost of such insurance to be a Distribution Expense. The Reseller shall
place such insurance with insurers acceptable to the Owner. No such policy shall
be changed without the consent of the Owner and such policy shall provide that
it shall not be cancelable for any reason except on thirty days' prior written
notice by the insurer to the Owner.
3(b)(2)-12
<PAGE> 13
6.8 ADDITIONAL SOFTWARE. For a period of 24 months after the date
hereof, the Owner shall have the first and last right of refusal to purchase any
other software written or created by or for the Reseller or any Related Person
on terms (other than price and the timing of payment thereof), including the
right to subscribe for share purchase warrants of a publicly traded company,
similar to those applicable to the acquisition of the Software by the Owner from
the Reseller.
ARTICLE VII
WARRANTIES
7.1 OWNER'S AUTHORITY. The Owner warrants that it has the right to
grant to the Reseller the rights granted herein with respect to the Software.
The Owner shall pay resulting damages and costs finally awarded and the cost of
any settlement in respect of any claim based on a breach of the foregoing
warranty provided that upon receiving notice of such a claim the Reseller shall
promptly give full particulars thereof to the Owner and, upon written
acknowledgement of the applicability of the above indemnity, the Owner shall
have sole control of the defence of such claim and all related settlement
negotiations. The foregoing indemnity shall not apply if (i) the claim could not
have been successfully made in respect of the most recently supplied release of
the Software, or (ii) the claim is based upon the use of the Products or
Software in a manner not authorized by the Owner or on modifications to the
Products or Software not authorized by the Owner or upon the Products developed
by the Reseller on behalf of the Owner. The aforesaid obligation of the Owner to
pay damages and costs shall be the Owner's sole and exclusive liability to the
Reseller or any third party with respect to the said warranty whether on account
of damages (even if the Owner has been advised of the possibility of such
damages) or otherwise.
7.2 DISCLAIMER. The Reseller acknowledges that the Owner does not
represent or warrant that (i) the functions contained in the Software shall
operate in the combinations which may be selected by any customer or shall meet
any customer requirements, (ii) the operation of the Software shall be error
free, (iii) the operation of the Software shall not be interrupted by reason of
defect therein or by reason of fault on the part of the Owner or (iv) the
Software is fit for any particular purpose. DISTRIBUTOR EXPRESSLY WAIVES ALL
WARRANTIES OR CONDITIONS NOT SPECIFICALLY SET FORTH IN THIS AGREEMENT INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABLE QUALITY AND
FITNESS FOR A PARTICULAR PURPOSE AND THOSE ARISING BY STATUTE OR OTHERWISE IN
LAW OR FROM A COURSE OF DEALING OR USAGE OF TRADE.
7.3 CUSTOMER WARRANTY. The form and substance of all warranties to
be provided by the Reseller to subdistributors or customers shall be subject to
the prior written approval of the Owner, acting reasonably.
3(b)(2)-13
<PAGE> 14
ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 TERM. The term of the rights granted in this Agreement shall
commence on the date hereof and terminate ten years thereafter, but shall be
renewable for one further consecutive period of five years at the Reseller's
sole option, provided that the Reseller gives written notice of its desire to
extend the term not less than 180 days prior to the expiry of the initial Term
and is not then or on the date of renewal in default hereunder.
8.2 EVENTS OF TERMINATION. Each of the following events shall, at
the option of the Owner and without prejudicing any other rights it may have,
constitute a Terminating Event:
(a) if the Reseller becomes insolvent or unable to pay
its debts as they become due or ceases to pay its debts as they become
due in the ordinary course of business, or makes or commits or
threatens to make or commit any act of bankruptcy or any assignment
for the benefit of its creditors, or is liquidated or dissolved, or
any proceedings are commenced against the Reseller under any debtor's
relief law or law of similar application or under any agreement and
such proceedings have not been vacated or set aside within sixty days,
or if a receiver is appointed for the Reseller or any of its assets;
(b) if the Reseller fails to pay to the Owner when due
any payment hereunder;
(c) if the Reseller fails to use all reasonable efforts
to exploit the Products within the Territory; or
(d) if there is any breach of or default under section
2.5 or 6.7 of this Agreement by the Reseller not remedied within
fifteen days of the Owner giving notice thereof to the Reseller.
8.3 EFFECT ON TERMINATION. On the occasion of a Terminating Event
or expiry of this Agreement, without prejudice to any other rights the Owner may
have, the Owner may by notice in writing to the Reseller terminate this
Agreement, and upon such notice (i) the Reseller's rights to use the Software
and to furnish Products to customers and to make copies of the Software and
Products shall immediately terminate, (ii) the Owner's obligations hereunder, if
any, shall immediately terminate, (iii) the Reseller shall pay within ten days
thereof all amounts which have accrued to the Owner, (iv) the Reseller shall
immediately deliver to the Owner the master copy of the Software furnished by
the Owner and all other copies of the Software then in the possession of or
under the control of the Reseller, together with all unsold Products and shall
deliver a certificate of a senior officer of the Reseller attesting that all
such copies of the Software and Products have been returned to the Owner, (v)
the Reseller shall provide the Owner with a complete list of the names and
3(b)(2)-14
<PAGE> 15
addresses of all subdistributors who have entered into subdistribution
agreements with the Reseller since the Effective Date, together with a true copy
of all subdistribution agreements, (vi) the Owner shall be assigned the
trademarks used from time to time by the Reseller in connection with the
Software or the Products and, in this regard, the Reseller hereby appoints the
Owner, effective on the Termination Date or the date of expiry of this
Agreement, as applicable, as its true and lawful attorney and agent, with full
power and authority in its name, place and stead, to prepare, execute and
deliver all instruments and agreements necessary for the assignment of such
trade marks and, until such assignment shall have been completed, the Owner
shall have and is hereby granted a perpetual, royalty free, exclusive right to
use, reproduce and license the use of all such trademarks, and (vii) the Owner
may, at its option, purchase all unsold Product inventories at the Reseller's
cost, failing which the Reseller shall be entitled to sell such inventories
during a further 90 day period at a price no less than such cost, in each case.
8.4 LOSS OF EXCLUSIVITY. In addition to the foregoing right to
terminate and notwithstanding section 2.2, upon the occurrence of any
Terminating Event the Owner may at any time thereafter by notice in writing to
Reseller elect to terminate the Reseller's exclusive right to distribute the
Products and thereafter, directly or indirectly, promote, sell, license or
otherwise dispose of any of the Products or grant to any Person or Persons other
than the Reseller any or all of the rights and privileges contemplated by
section 2.1 hereof.
8.5 SURVIVAL OF RIGHTS. Notwithstanding the termination or expiry
of this Agreement, all subdistribution rights granted by the Reseller to parties
other than Related Persons prior to such termination or expiry and all
obligations of confidentiality and non-competition imposed hereby shall continue
in full force and effect subject to their terms.
8.6 LIMITED REMEDIES. Except as contemplated by section 8.2, this
Agreement may not be terminated for any reason whatsoever prior to the
expiration of the initial Term or any further Term, as applicable.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 NON-SOLICITATION. Both parties agree that while this Agreement
remains in effect, and for a period of six months thereafter, neither party
shall directly or indirectly solicit, hire or otherwise retain any employee of
the other party or enter into or attempt to enter into any form of business
arrangement with an employee of the other party, if such employee has had
contact with such other party as a result of the negotiation or performance of
this Agreement.
9.2 RELATIONSHIP. The Reseller shall buy and sell Products in its
own name, for its own account and at its own risk and expense. This Agreement
does not and shall not be construed to
3(b)(2)-15
<PAGE> 16
create any partnership whatsoever as between the Owner and the Reseller and the
Reseller shall not, by reason of any provision herein contained, be deemed to be
the partner of the Owner nor to have the ability, right or authority to assume
or create, in writing or otherwise, any obligation of any kind, express or
implied, in the name of the Owner save as herein specifically set out.
9.3 FORCE MAJEURE. Neither party shall be liable for failure to
perform its obligations hereunder for causes beyond its reasonable control and
without the fault or negligence of such party provided that such party shall use
all reasonable efforts within its control in attempting to remove the cause.
Such causes shall include but not be limited to strikes and labor disputes, acts
of God or government, acts of war, riots or epidemics. In the event that any
such causes should continue for a period of twelve months, the other party shall
have the right to terminate this Agreement by giving notice to the other party,
and such notice shall be deemed to be a Terminating Event.
9.4 ASSIGNMENT. Neither this Agreement nor any of the rights
granted by the Owner to the Reseller hereunder may be assigned without the prior
written consent of the Owner, which consent shall not be unreasonably withheld.
This Agreement may not be assigned by the Owner without the prior written
consent of the Reseller, which consent shall not be unreasonably withheld,
provided that this Agreement may be assigned to any Person, without the prior
written consent of the Reseller, if either (a) such Person (i) is not acting at
arm's length (within the meaning of the Income Tax Act (Canada)) to the general
partner of the Owner or (ii) is a Person any of the directors or officers of
which was either a director or officer of the general partner of the Owner
immediately prior to the assignment, or (b) such Person agrees to be bound by
the provisions hereof in the place of the Owner.
9.5 NOTICE. Any notice, report, remittance, consent or any
instrument required or permitted to be given or made pursuant hereto shall be in
writing and may be given by sending the same by electronic facsimile, prepaid
registered mail, or by delivering the same,
if addressed to the Reseller, at: 401 Richmond Street West
Suite 123
Toronto, Ontario M5V 1X3
Attention: Erik Schannen
Fax No.: (416) 977-7353
and if to the Owner, at: c/o 1234191 Ontario Inc.
Suite 610
2 Carlton Street
Toronto, Ontario M5B 1J3
Attention: David Sanderson
Fax No.: (416) 977-6453
3(b)(2)-16
<PAGE> 17
with a copy to: Fasken Campbell Godfrey
Toronto-Dominion Centre
Suite 3600, Bank Tower
Toronto, Ontario M5K 1N6
Attention: Allan G. Beach
Fax No.: (416) 364-7813
Any such instrument, if delivered or sent by electronic facsimile,
shall be deemed to have been given or received on the day on which it was
successfully delivered or so sent and, if mailed, shall be deemed to have been
given or received on the fourth business day following the day on which it is
mailed or on such later date as is reasonable in the event of an interruption of
postal services. The address at which notice may be given to a party may be
changed by the giving of notice of such change by that party to the other party
as provided for in this section.
9.6 ENUREMENT. This Agreement shall enure to the benefit of and be
binding upon each of the parties hereto and their respective successors and
permitted assigns.
9.7 TIME OF ESSENCE. Time is of the essence hereof.
TO WITNESS THEIR AGREEMENT the parties hereto have duly executed this
Agreement under seal on the date first above written.
SOFTECH, by its
general partner,
1234191 Ontario
Inc.
By:
-----------------------
LASERMEDIA
By:
-------------------------
3(b)(2)-17
<PAGE> 18
SCHEDULE "A"
PRODUCT PRICING
SOFTECH/LASERMEDIA RESELLER AGREEMENT
<TABLE>
<S><C>
) first 100,000 @ $8.00 per unit
) next 100,000 @ $6.50 per unit
Active Trainer ) next 100,000 @ $5.00 per unit
Active Abs ) next 200,000 @ $4.00 per unit
Active Home Fitness ) next 250,000 @ $3.50 per unit
) thereafter @ $3.25 per unit
all other Products utilizing a one-time aggregate price of $12,500 per title
the Software, including private plus, in the event of any event of default by
label titles (e.g. Xerox) Lasermedia, an amount of $5.00 per unit on
all units sold thereafter, irrespective of remedy
</TABLE>
3(b)(2)-18
<PAGE> 1
EXHIBIT 3(C)(1)
STOCK OPTION AGREEMENTS DATED JULY 17, 1997
BY AND BETWEEN LASERMEDIA COMMUNICATIONS CORP. AND BRIAN GIBSON
3(c)(1)-1
<PAGE> 2
LASERMEDIA COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT - BRIAN GIBSON
Lasermedia Communications Corp., an Ontario corporation (the "Company")
has granted to Brian Gibson (the "Optionee"), an Option to purchase a total of
seventy thousand (70,000) common shares (the "Shares"), at the price determined
as provided herein, all upon the terms and conditions hereof.
1. GRANT OF THE OPTION. The Grant of the option (this "Option")
is subject in all respects to the terms, definitions and provisions of the 1997
Stock Option Plan (the "Plan") adopted by the Company, which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
2. EXERCISE PRICE. The exercise price is One Dollar and Fifty
Cents in the lawful currency of Canada ($1.50) for each common share, which
price is not less than 100% of the fair market value per Share on the date of
grant, subject to all applicable discounts as permitted by the Rules of The
Toronto Stock Exchange.
3. EXERCISE OF OPTION. In accordance with the terms of the Plan,
this Option shall be exercisable during its term in accordance with the
provisions of Section 7 of the Plan as follows;
(a) Right to Exercise
(i) This Option shall be exercisable to the extent of
25% 15 months from the date of the Grant.
(ii) This Option shall be exercisable to the extent of
25% 18 months from the date of the Grant.
(iii) This Option shall be exercisable to the extent of
25% 21 months from the date of the Grant.
(iv) This Option shall be exercisable to the extent of
25% 24 months from the date of the Grant.
(v) This Option may not be exercised for a fraction of a
share.
(vi) In the event of the Optionee's termination of
service, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash,
certified cheque or stock certificates (in negotiable form) representing common
shares of the Company having a fair market value equal to the exercise price of
the Shares with respect to which the Option is being exercised.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
provincial securities or other law or regulation. As a condition to the exercise
of this Option, the Company may require the Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. TERMINATION OF STATUS AS AN EMPLOYEE. If the Optionee ceases to serve
as an employee, he may, but only within thirty (30) days after the date he
ceased to be an Employee of the Company, exercise this Option to the extent that
he was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise this option at the date of such
termination, or if he does not exercise this Option within the time specified
herein, the Option shall terminate.
3(c)(1)-2
<PAGE> 3
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, if the Optionee is unable to continue as an Employee of the Company as a
result of his total and permanent disability he may, but only within twelve (12)
months from the date of termination, exercise his Option to the extent he was
entitled to exercise it at the date of such termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of the Optionee:
(a) during the term of this Option and while an Employee of the
Company and having been in continuous status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's wholly owned personal
holding company, the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
twelve (12) months after the date of death; or
(b) within thirty (30) days after the termination of the
Optionee's continuous status as an Employee, the Option may be exercised, at any
time within three (3) months following the date of death, by the Optionee's
personal holding company, the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
9. REPRESENTATIONS OF OPTIONEE. The Optionee hereby confirms and
represents that:
(i) he is an Employee of the Company, or any of its subsidiaries
or its affiliates;
(ii) he has no outstanding incentive stock options to purchase
shares of the Company.
10. ADJUSTMENTS IN SHARES. If prior to the exercise of the Option at any
time or from time to time, there shall be any reorganization of the capital
stock of the Company by way of stock split, consolidation, subdivision, merger,
amalgamation or otherwise or payment of any stock dividends, then there shall
automatically be an adjustment in either or both of the number of Shares of the
Company which may be purchased pursuant hereto or the price at which such Shares
may be purchased by corresponding amounts, so that the Optionee's rights
hereunder shall thereafter be as reasonably as possible equivalent to the rights
originally granted to the Optionee. The Board of Directors of the Company shall
have the sole and exclusive power to make the adjustments as it considers
necessary and desirable.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Company is not
the surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the Board of
Directors or the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options (a) accelerate the exercise date or
dates of such options, (b) upon written notice to the holders thereof, provided
the options have been accelerated pursuant to paragraph (a) above, terminate all
such options prior to consummation of the transaction unless exercised within a
prescribed period, (c) provide for payment of an amount equal to the excess of
the fair market value, as determined by the Board of Directors or such board,
over the Option Price of such shares as of the date of the transaction, in
exchange for the surrender of the right to exercise such options, or (d) provide
for the assumption of such options, or the substitution therefor of new options,
by the successor corporation or entity.
12. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner except (i) to a personal holding company wholly owned by the
Optionee, or (ii) by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by him or such personal
holding company. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
13. TERM OF OPTION. This Option may not be exercised more than three years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
DATE OF GRANT: July 17, 1997
LASERMEDIA COMMUNICATIONS
CORP.
Per:
-----------------------------
President
3(c)(1)-3
<PAGE> 4
The Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors upon any questions arising under the Plan.
Dated: , 1997
--------------------------
------------------------------
Brian Gibson
3(c)(1)-4
<PAGE> 5
LASERMEDIA COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT - BRIAN GIBSON
Lasermedia Communications Corp., an Ontario corporation (the "Company")
has granted to Brian Gibson (the "Optionee"), an Option to purchase a total of
fifty thousand (50,000) common shares (the "Shares"), at the price determined as
provided herein, all upon the terms and conditions hereof.
1. GRANT OF THE OPTION. The Grant of the option (this "Option") is subject
in all respects to the terms, definitions and provisions of the 1997 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings
herein.
2. EXERCISE PRICE. The exercise price is One Dollar in the lawful currency
of Canada ($1.00) for each common share, which price is not less than 100% of
the fair market value per Share on the date of grant, subject to all applicable
discounts as permitted by the Rules of The Toronto Stock Exchange.
3. EXERCISE OF OPTION. In accordance with the terms of the Plan, this
Option shall be exercisable during its term in accordance with the provisions of
Section 7 of the Plan as follows;
(a) Right to Exercise
(i) This Option shall be exercisable to the extent of
25% 3 months from the date of the Grant.
(ii) This Option shall be exercisable to the extent of
25% 6 months from the date of the Grant.
(iii) This Option shall be exercisable to the extent of
25% 9 months from the date of the Grant.
(iv) This Option shall be exercisable to the extent of
25% 12 months from the date of the Grant.
(v) This Option may not be exercised for a fraction of a
share.
(vi) In the event of the Optionee's termination of
service, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash,
certified cheque or stock certificates (in negotiable form) representing common
shares of the Company having a fair market value equal to the exercise price of
the shares with respect to which the Option is being exercised.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
provincial securities or other law or regulation. As a condition to the exercise
of this Option, the Company may require the Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. TERMINATION OF STATUS AS AN EMPLOYEE. If the Optionee ceases to serve
as an employee, he may, but only within thirty (30) days after the date he
ceased to be an Employee of the Company, exercise this Option to the extent that
he was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise this option at the date of such
termination, or if he does not exercise this Option within the time specified
herein, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, if the Optionee is unable to continue as an Employee of the Company as a
result of his total and permanent disability he may, but only within twelve (12)
months from the date of
3(c)(1)-5
<PAGE> 6
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination, or if she does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
8. DEATH OF OPTIONEE. In the event of the death of the Optionee:
(a) during the term of this Option and while an Employee of the
Company and having been in continuous status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's wholly owned personal
holding company, the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
twelve (12) months after the date of death; or
(b) within thirty (30) days after the termination of the
Optionee's continuous status as an Employee, the Option may be exercised, at any
time within three (3) months following the date of death, by the Optionee's
personal holding company, the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
9. REPRESENTATIONS OF OPTIONEE. The Optionee hereby confirms and
represents that:
(i) he is an Employee of the Company, or any of its subsidiaries
or its affiliates;
(ii) he has no outstanding incentive stock options to purchase
shares of the Company.
10. ADJUSTMENTS IN SHARES. If prior to the exercise of the Option at any
time or from time to time, there shall be any reorganization of the capital
stock of the Company by way of stock split, consolidation, subdivision, merger,
amalgamation or otherwise or payment of any stock dividends, then there shall
automatically be an adjustment in either or both of the number of Shares of the
Company which may be purchased pursuant hereto or the price at which such Shares
may be purchased by corresponding amounts, so that the Optionee's rights
hereunder shall thereafter be as reasonably as possible equivalent to the rights
originally granted to the Optionee. The Board of Directors of the Company shall
have the sole and exclusive power to make the adjustments as it considers
necessary and desirable.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Company is not
the surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the Board of
Directors or the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options (a) accelerate the exercise date or
dates of such options, (b) upon written notice to the holders thereof, provided
the options have been accelerated pursuant to paragraph (a) above, terminate all
such options prior to consummation of the transaction unless exercised within a
prescribed period, (c) provide for payment of an amount equal to the excess of
the fair market value, as determined by the Board of Directors or such board,
over the Option Price of such shares as of the date of the transaction, in
exchange for the surrender of the right to exercise such options, or (d) provide
for the assumption of such options, or the substitution therefor of new options,
by the successor corporation or entity.
12. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner except (i) to a personal holding company wholly owned by the
Optionee, or (ii) by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by him or such personal
holding company. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3(c)(1)-6
<PAGE> 7
13. TERM OF OPTION. This Option may not be exercised more than two years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
DATE OF GRANT: July 17, 1997
LASERMEDIA COMMUNICATIONS
CORP.
Per:
---------------------------
President
The Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors upon any questions arising under the Plan.
Dated: , 1997
---------------------------
------------------------------
Brian Gibson
3(c)(1)-7
<PAGE> 1
EXHIBIT 3(C)(2)
STOCK OPTION AGREEMENT DATED JULY 17, 1997
BY AND BETWEEN LASERMEDIA COMMUNICATIONS CORP. AND SAMUEL PAUL
3(c)(2)-1
<PAGE> 2
LASERMEDIA COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT - SAMUEL PAUL
Lasermedia Communications Corp., an Ontario corporation (the "Company")
has granted to Samuel Paul (the "Optionee"), an Option to purchase a total of
ten thousand (10,000) common shares (the "Shares"), at the price determined as
provided herein, all upon the terms and conditions hereof.
1. GRANT OF THE OPTION. The Grant of the option (this "Option") is subject
in all respects to the terms, definitions and provisions of the 1997 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings
herein.
2. EXERCISE PRICE. The exercise price is One Dollar and Fifty Cents in the
lawful currency of Canada ($1.50) for each common share, which price is not less
than 100% of the fair market value per Share on the date of grant, subject to
all applicable discounts as permitted by the Rules of The Toronto Stock
Exchange.
3. EXERCISE OF OPTION. In accordance with the terms of the Plan, this
Option shall be exercisable during its term in accordance with the provisions of
Section 7 of the Plan as follows;
(a) Right to Exercise
(i) This Option shall be exercisable to the extent of
25% 3 months from the date of the Grant.
(ii) This Option shall be exercisable to the extent of
25% 6 months from the date of the Grant.
(iii) This Option shall be exercisable to the extent of
25% 9 months from the date of the Grant.
(iv) This Option shall be exercisable to the extent of
25% 12 months from the date of the Grant.
(v) This Option may not be exercised for a fraction of a
share.
(vi) In the event of the Optionee's termination of
service, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash,
certified cheque or stock certificates (in negotiable form) representing common
shares of the Company having a fair market value equal to the exercise price of
the shares with respect to which the Option is being exercised.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
provincial securities or other law or regulation. As a condition to the exercise
of this Option, the Company may require the Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. TERMINATION OF STATUS AS A DIRECTOR. If the Optionee ceases to serve as
a Director, he may, but only within thirty (30) days after the date he ceased to
be a Director of the Company, exercise this Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise this option at the date of such termination, or if
he does not exercise this Option within the time specified herein, the Option
shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, if the Optionee is unable to continue as a Director of the Company as a
result of his total and permanent disability he may, but only within twelve (12)
months from the date of
3(c)(2)-2
<PAGE> 3
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
8. DEATH OF OPTIONEE. In the event of the death of the Optionee:
(a) during the term of this Option and while a Director of the
Company and having been in continuous status as a Director since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's wholly-owned personal
holding company, the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
twelve (12) months after the date of death; or
(b) within thirty (30) days after the termination of the
Optionee's continuous status as a Director, the Option may be exercised, at any
time within three (3) months following the date of death, by the Optionee's
personal holding company, the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
9. REPRESENTATIONS OF OPTIONEE. The Optionee hereby confirms and
represents that:
(i) he is a Director of the Company, or any of its subsidiaries or
its affiliates;
(ii) he has no outstanding incentive stock options to purchase
shares of the Company.
10. ADJUSTMENTS IN SHARES. If prior to the exercise of the Option at any
time or from time to time, there shall be any reorganization of the capital
stock of the Company by way of stock split, consolidation, subdivision, merger,
amalgamation or otherwise or payment of any stock dividends, then there shall
automatically be an adjustment in either or both of the number of Shares of the
Company which may be purchased pursuant hereto or the price at which such Shares
may be purchased by corresponding amounts, so that the Optionee's rights
hereunder shall thereafter be as reasonably as possible equivalent to the rights
originally granted to the Optionee. The Board of Directors of the Company shall
have the sole and exclusive power to make the adjustments as it considers
necessary and desirable.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Company is not
the surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the Board of
Directors or the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options (a) accelerate the exercise date or
dates of such options, (b) upon written notice to the holders thereof, provided
the options have been accelerated pursuant to paragraph (a) above, terminate all
such options prior to consummation of the transaction unless exercised within a
prescribed period, (c) provide for payment of an amount equal to the excess of
the fair market value, as determined by the Board of Directors or such board,
over the Option Price of such shares as of the date of the transaction, in
exchange for the surrender of the right to exercise such options, or (d) provide
for the assumption of such options, or the substitution therefor of new options,
by the successor corporation or entity.
12. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner except (i) to a personal holding company wholly owned by the
Optionee, or (ii) by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by him or such personal
holding company. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3(c)(2)-3
<PAGE> 4
13. TERM OF OPTION. This Option may not be exercised more than three years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
DATE OF GRANT: July 17, 1997
LASERMEDIA COMMUNICATIONS
CORP.
Per:
----------------------------
President
The Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors upon any questions arising under the Plan.
Dated: , 1997
-----------------------
------------------------------
Samuel Paul
3(c)(2)-4
<PAGE> 1
EXHIBIT 3(C)(3)
STOCK OPTION AGREEMENT DATED JULY 17, 1997
BY AND BETWEEN LASERMEDIA COMMUNICATIONS CORP. AND ERIK SCHANNEN
3(c)(3)-1
<PAGE> 2
LASERMEDIA COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT - ERIK SCHANNEN
Lasermedia Communications Corp., an Ontario corporation (the "Company")
has granted to Erik Schannen (the "Optionee"), an Option to purchase a total of
one hundred and fifty thousand (150,000) common shares (the "Shares"), at the
price determined as provided herein, all upon the terms and conditions hereof.
1. GRANT OF THE OPTION. The Grant of the option (this "Option") is subject
in all respects to the terms, definitions and provisions of the 1997 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings
herein.
2. EXERCISE PRICE. The exercise price is One Dollar in the lawful currency
of Canada ($1.00) for each common share, which price is not less than 100% of
the fair market value per Share on the date of grant, subject to all applicable
discounts as permitted by the Rules of The Toronto Stock Exchange.
3. EXERCISE OF OPTION. In accordance with the terms of the Plan, this
Option shall be exercisable during its term in accordance with the provisions of
Section 7 of the Plan as follows;
(a) Right to Exercise
(i) This Option shall be exercisable to the extent of
25% 3 months from the date of the Grant.
(ii) This Option shall be exercisable to the extent of
25% 6 months from the date of the Grant.
(iii) This Option shall be exercisable to the extent of
25% 9 months from the date of the Grant.
(iv) This Option shall be exercisable to the extent of
25% 12 months from the date of the Grant.
(v) This Option may not be exercised for a fraction of a
share.
(vi) In the event of the Optionee's termination of
service, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash,
certified cheque or stock certificates (in negotiable form) representing common
shares of the Company having a fair market value equal to the exercise price of
the shares with respect to which the Option is being exercised.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
provincial securities or other law or regulation. As a condition to the exercise
of this Option, the Company may require the Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. TERMINATION OF STATUS AS AN EMPLOYEE. If the Optionee ceases to serve
as an employee, he may, but only within thirty (30) days after the date he
ceased to be an Employee of the Company, exercise this Option to the extent that
he was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise this option at the date of such
termination, or if he does not exercise this Option within the time specified
herein, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, if the Optionee is unable to continue as an Employee of the Company as a
result of his total and permanent disability he may, but only within twelve (12)
months from the date of
3(c)(3)-2
<PAGE> 3
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
8. DEATH OF OPTIONEE. In the event of the death of the Optionee:
(a) during the term of this Option and while an Employee of the
Company and having been in continuous status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's wholly owned personal
holding company, the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
twelve (12) months after the date of death; or
(b) within thirty (30) days after the termination of the
Optionee's continuous status as an Employee, the Option may be exercised, at any
time within three (3) months following the date of death, by the Optionee's
personal holding company, the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
9. REPRESENTATIONS OF OPTIONEE. The Optionee hereby confirms and
represents that:
(i) he is an Employee of the Company, or any of its subsidiaries
or its affiliates;
(ii) he has no outstanding incentive stock options to purchase
shares of the Company.
10. ADJUSTMENTS IN SHARES. If prior to the exercise of the Option at any
time or from time to time, there shall be any reorganization of the capital
stock of the Company by way of stock split, consolidation, subdivision, merger,
amalgamation or otherwise or payment of any stock dividends, then there shall
automatically be an adjustment in either or both of the number of Shares of the
Company which may be purchased pursuant hereto or the price at which such Shares
may be purchased by corresponding amounts, so that the Optionee's rights
hereunder shall thereafter be as reasonably as possible equivalent to the rights
originally granted to the Optionee. The Board of Directors of the Company shall
have the sole and exclusive power to make the adjustments as it considers
necessary and desirable.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Company is not
the surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the Board of
Directors or the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options (a) accelerate the exercise date or
dates of such options, (b) upon written notice to the holders thereof, provided
the options have been accelerated pursuant to paragraph (a) above, terminate all
such options prior to consummation of the transaction unless exercised within a
prescribed period, (c) provide for payment of an amount equal to the excess of
the fair market value, as determined by the Board of Directors or such board,
over the Option Price of such shares as of the date of the transaction, in
exchange for the surrender of the right to exercise such options, or (d) provide
for the assumption of such options, or the substitution therefor of new options,
by the successor corporation or entity.
12. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner except (i) to a personal holding company wholly owned by the
Optionee, or (ii) by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by him or such personal
holding company. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
3(c)(3)-3
<PAGE> 4
13. TERM OF OPTION. This Option may not be exercised more than two years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
DATE OF GRANT: July 17, 1997
LASERMEDIA COMMUNICATIONS
CORP.
Per:
----------------------------
President
The Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors upon any questions arising under the Plan.
Dated: , 1997
---------------------------
----------------------------------
Erik Schannen
3(c)(3)-4
<PAGE> 1
EXHIBIT 3(C)(4)
STOCK OPTION AGREEMENT DATED DECEMBER 8, 1997
BY AND BETWEEN LASERMEDIA COMMUNIATIONS CORP. AND GORDON COWIE
3(c)(4)-1
<PAGE> 2
LASERMEDIA COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT
Lasermedia Communications Corp., an Ontario corporation (the "Company")
has granted to Gordon Cowle (the "Optionee"), an Option to purchase a total of
ten thousand (10,000) common shares (the "Shares"), at the price determined as
provided herein, all upon the terms and conditions hereof.
1. GRANT OF THE OPTION. The Grant of the option (this "Option") is subject
in all respects to the terms, definitions and provisions of the 1997 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings
herein.
2. EXERCISE PRICE. The exercise price is One Dollar and Twenty-Five Cents
in the lawful currency of Canada ($1.25) for each common share, which price is
not less than 100% of the fair market value per Share on the date of grant,
subject to all applicable discounts as permitted by the Rules of The Toronto
Stock Exchange.
3. EXERCISE OF OPTION. In accordance with the terms of the Plan, this
Option shall be exercisable during its term in accordance with the provisions of
Section 7 of the Plan as follows:
(a) Right to Exercise
(i) This Option shall be exercisable to the extent of
25% 3 months from the date of the Grant.
(ii) This Option shall be exercisable to the extent of
25% 6 months from the date of the Grant.
(iii) This Option shall be exercisable to the extent of
25% 9 months from the date of the Grant.
(iv) This Option shall be exercisable to the extent of
25% 12 months from the date of the Grant.
(v) This Option may not be exercised for a fraction of a
share.
(vi) In the event of the Optionee's termination of
service, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash,
certified cheque or stock certificates (in negotiable form) representing common
shares of the Company having a fair market value equal to the exercise price of
the shares with respect to which the Option is being exercised.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
provincial securities or other law or regulation. As a condition to the exercise
of this Option, the Company may require the Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. TERMINATION OF STATUS AS A DIRECTOR. If the Optionee ceases to serve as
a Director, he may, but only within thirty (30) days after the date he ceased to
be a Director of the Company, exercise this Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise this option at the date of such termination, or if
he does not exercise this Option within the time specified herein, the Option
shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, if the Optionee is unable to continue as a Director of the Company as a
result of his total and permanent disability he may, but only within twelve (12)
months from the date of
3(c)(4)-2
<PAGE> 3
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
8. DEATH OF OPTIONEE. In the event of the death of the Optionee:
(a) during the term of this Option and while a Director of the
Company and having been in continuous status as a Director since the date of
grant of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's wholly-owned personal
holding company, the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
twelve (12) months after the date of death; or
(b) within thirty (30) days after the termination of the
Optionee's continuous status as a Director, the Option may be exercised, at any
time within three (3) months following the date of death, by the Optionee's
personal holding company, the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
9. REPRESENTATIONS OF OPTIONEE. The Optionee hereby confirms and
represents that:
(i) he is a Director of the Company, or any of its subsidiaries or
its affiliates;
(ii) he has no outstanding incentive stock options to purchase
shares of the Company.
10. ADJUSTMENTS IN SHARES. If prior to the exercise of the Option at any
time or from time to time, there shall be any reorganization of the capital
stock of the Company by way of stock split, consolidation, subdivision, merger,
amalgamation or otherwise or payment of any stock dividends, then there shall
automatically be an adjustment in either or both of the number of Shares of the
Company which may be purchased pursuant hereto or the price at which such Shares
may be purchased by corresponding amounts, so that the Optionee's rights
hereunder shall thereafter be as reasonably as possible equivalent to the rights
originally granted to the Optionee. The Board of Directors of the Company shall
have the sole and exclusive power to make the adjustments as it considers
necessary and desirable.
11. CORPORATE TRANSACTIONS. In the event the Shares are exchanged for
securities, cash or other property of any other corporation or entity as the
result of a reorganization, merger or consolidation in which the Company is not
the surviving corporation, the dissolution or liquidation of the Company, or the
sale of all or substantially all the assets of the Company, the Board of
Directors or the board of directors of any successor corporation or entity may,
in its discretion, as to outstanding options (a) accelerate the exercise date or
dates of such options, (b) upon written notice to the holders thereof, provided
the options have been accelerated pursuant to paragraph (a) above, terminate all
such options prior to consummation of the transaction unless exercised within a
prescribed period, (c) provide for payment of an amount equal to the excess of
the fair market value, as determined by the Board of Directors or such board,
over the Option Price of such shares as of the date of the transaction, in
exchange for the surrender of the right to exercise such options, or (d) provide
for the assumption of such options, or the substitution thereof of new options,
by the successor corporation or entity.
12. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner except (i) to a personal holding company wholly owned by the
Optionee, or (ii) by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee only by him or such personal
holding company. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
13. TERM OF OPTION. This Option may not be exercised more than three years
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
DATE OF GRANT: December 8, 1997
LASERMEDIA COMMUNICATIONS
CORP.
Per:
-------------------------------
President
3(c)(4)-3
<PAGE> 4
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is annexed hereto, and represents that she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board of Directors
upon any questions arising under the Plan.
Dated: , 1997
----------------------
-------------------------
Gordon Cowie
3(c)(4)-4
<PAGE> 1
EXHIBIT 3(D)(1)
TERM LOAN AGREEMENT DATED SEPTEMBER 18, 1997
BY AND BETWEEN CUNE MANAGEMENT, INC. (BORROWER)
AND LASERMEDIA COMMUNICATIONS CORP. (LENDER)
3(d)(1)-1
<PAGE> 2
TERM LOAN AGREEMENT
THIS LOAN AGREEMENT made as of the 18th day of September 1997 between
CUNE MANAGEMENT INC., a company incorporated under the laws of the Province of
Ontario (hereinafter the "Borrower") and LASERMEDIA COMMUNICATIONS CORP., a
company incorporated under the laws of the Province of Ontario (hereinafter the
"Lender").
Principal amount: up to $250,000
Interest rate: 12% per annum
WHEREAS the Lender wishes to provide financial assistance to the
Borrower by advancing the Loan, as defined herein; and
WHEREAS the parties wish to enter into this Agreement in order to
formally set out their respective responsibilities and obligations;
NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the
premises, the mutual covenants set out herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby irrevocably
acknowledged by each party hereto, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. Whenever used in this Agreement, unless there is
something in the subject matter or context inconsistent therewith, the following
words and terms shall have the respective meanings ascribed to them as follows:
(a) "Advance" means advances of the Loan by the Lender to the Borrower,
from time to time, pursuant to this Agreement;
(b) "Agreement" means this loan agreement and all schedules attached
thereto, as the same may be amended from time to time with the written consent
of all parties;
(c) "Business" means the business presently and heretofore carried on
by the Borrower;
(d) "Closing" means the closing of the Advances of the Loan by the
Lender to the Borrower as contemplated hereunder, to take place on such dates
and times as the parties hereto may agree;
(e) "Conditions Precedent" has the meaning assigned to that term in
Section 4.5;
(f) "Event of Default" has the meaning assigned to that term in Section
4.7;
(g) "Loan" means the principal amount of up to Two Hundred and Fifty
Thousand Dollars ($250,000.00) to be advanced by the Lender to the Borrower from
time to time as contemplated hereunder together with any accrued and unpaid
interest thereon;
(h) "Maturity Date" means September 18, 1998, or such other date as the
parties may mutually agree; and
(i) "Promissory Note" has the meaning assigned to that term in Section
4.5(a)(i).
3(d)(1)-2
<PAGE> 3
1.2 SCHEDULES. The following are the Schedules to this Agreement, each
of which is incorporated in this Agreement by reference and deemed to be part
thereof:
SCHEDULE DESCRIPTION
-------- -----------
A Form of Promissory Note
B Security and Pledge Agreement
1.3 CURRENCY. All statements of or reference to dollar amounts in this
Agreement shall mean lawful money of Canada, unless otherwise specified.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 BORROWER. The Borrower represents and warrants to the Lender as
follows and acknowledges that the Lender is relying on these representations and
warranties in connection with their performance pursuant to this Agreement:
2.2 (a) ORGANIZATION AND GOOD STANDING OF THE BORROWER. The
Borrower is duly incorporated and organized, validly existing and is up
to date in all of the corporate filings and registrations required
under the laws of Ontario;
(b) CORPORATE POWER AND AUTHORITY. The Borrower has all
necessary corporate power, authority and capacity to own and lease its
property and assets and to execute and deliver this Agreement and all
other documents contemplated hereby, and to carry out its obligations
hereunder;
(c) LITIGATION. There is no suit, action, litigation,
arbitration proceeding or governmental proceeding, including appeals
and applications for review, in progress, pending or threatened against
or relating to the Borrower or affecting its property or business which
might affect the property, business, future prospects or financial
condition of the Borrower and there is not presently outstanding
against the Borrower any judgement, decree, injunction, rule or order
of any court, governmental department, commission, agency,
instrumentality or arbitrator;
(d) COMPLIANCE WITH LAWS. The Borrower and its directors
and officers have complied with the requirements of all applicable
laws, decrees, regulations or similar enactments and orders of any
judicial, administrative, governmental or other authority or arbitrator
as same pertain to the Borrower; and
(e) AGREEMENT BINDING. This Agreement and each of the
documents contemplated hereby constitute legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms.
ARTICLE 3
COVENANTS
3.1 COVENANTS OF THE BORROWER. The Borrower covenants and agrees that
as of and from the date hereof and until the date the Loan is repaid in full:
(a) CONDUCT OF BUSINESS. The business of the Borrower
will be conducted only in the ordinary course;
(b) DIVIDENDS ETC. No dividend or other distribution or
payment will be declared, set aside, paid or made on or in respect of
shares of the capital stock of the Borrower and the Borrower will not
directly or indirectly redeem, retire, purchase or otherwise acquire
any of such stock;
(c) UTILIZATION OF PROCEEDS. The proceeds of the Loan
will be utilized in the business of the Borrower;
(d) PAYMENT UNDER LOAN. The Borrower will punctually pay
the principal and the interest on the Loan when due;
3(d)(1)-3
<PAGE> 4
(e) PRESERVATION OF CORPORATE EXISTENCE ETC. The
Borrower will preserve and maintain its corporate existence, licenses,
rights, franchises and privileges in the jurisdiction of its
incorporation and will obtain all authorizations, consents, approvals,
orders, licenses, exemptions from registrations or qualifications from
any court, governmental department, public body, authority, commission,
board, bureau, agency or instrumentality that are necessary or
materially valuable in the operation of the Business;
(f) INSURANCE. The Borrower will maintain in force with
reputable insurers, coverage against risks of loss of or damage to its
properties, assets and business, of such type and in such amounts as is
customary in the case of companies of established reputation engaged in
the same or similar businesses;
(g) TAXES ETC. The Borrower will pay and discharge all
taxes, licenses and other fees, when due, except only such as are being
contested in good faith by appropriate proceedings but only if the
effect of such proceedings are to postpone the liability to pay such
tax and suitable reserves against such taxes are established and
maintained;
(h) LITIGATION. The Borrower will notify the Lender
promptly in the event that any material litigation is commenced or
contemplated against the Borrower or if any default occurs or is
anticipated under this Agreement;
(i) COMPLIANCE WITH LAWS. The Borrower will comply with
the requirements of all applicable laws, decrees, regulations or
similar enactments and orders of any judicial, administrative,
governmental or other authority or arbitrator; and
(j) NO SECURITY INTEREST EXCEPT TO A CHARTERED BANK. The
Borrower will not create or allow any of its subsidiaries to create or
permit any mortgage, charge, lien or other security interest in any or
all of its assets, whether on loans to the Borrower or otherwise,
except by way of a first fixed and floating charge (hereinafter the
"Fixed and Floating Charge") to and in favour of a Canadian chartered
bank by way of a general security agreement, should the Borrower be
able to arrange such a loan from a Canadian chartered bank during the
term of this Loan (the "Bank Security").
ARTICLE 4
LOAN TO THE BORROWER
4.1 LOAN. Relying on the representations, warranties and covenants
set forth herein and subject to the other provisions of this Agreement, the
Lender agrees to Advance to the Borrower, from time to time, by way of the Loan,
the principal sum, in the aggregate of up to Two Hundred and Fifty Thousand
Dollars ($250,000.00).
4.2 INTEREST. The Loan will bear interest at an annual rate of
interest equal to twelve percent (12%) per annum, calculated annually from the
date of each Advance and payable both before and aider default, maturity and
judgment.
4.3 REPAYMENT. The Loan shall be repayable on or before the
Maturity Date.
4.4 PREPAYMENT. The Borrower may prepay the Loan from time to time
in whole or in part without penalty, notice or bonus.
4.5 CONDITIONS PRECEDENT. The Lender's obligation to advance the
Loan is subject to the satisfaction of the following conditions precedent (the
"Conditions Precedent") at the time of any Advance (each of which is hereby
acknowledged to be inserted for the exclusive benefit of the Lender and may be
waived by it in whole or in part):
(a) The following documents, duly executed, shall have
been delivered to the Lender:
(i) grid promissory note (the "Promissory Note")
issued by the Borrower in favour of the Lender substantially
in the form of the promissory note attached hereto as Schedule
A.
(ii) pledge and security agreement (the "Pledge
and Security Agreement") substantially in the form attached
hereto as Schedule B.
(b) All of the representations and warranties of the
Borrower set forth in Article 11 hereof shall be in all material
respects true and correct, on and as of the time of Closing and all
covenants to have been performed or satisfied at or before the Closing
shall have been so performed or satisfied.
3(d)(1)-4
<PAGE> 5
4.6 PROMISSORY NOTE. The debts, liabilities and obligations of the
Borrower to the Lender arising pursuant to or in connection with the Loan shall
be evidenced by the Promissory Note substantially in the form as attached hereto
as Schedule A. The Borrower shall, and is hereby unconditionally and absolutely
authorized and directed by the Lender to, record on the Promissory Note, all
Advances and payments hereunder. Such notations, in the absence of manifest
mathematical error, shall be prima facie evidence of such Advances and payments,
but failure to record a transaction will not affect its validity.
4.7 ESCALATION OF PAYMENT DATE OF THE LOAN. If any of the
following events or circumstances ("Events of Default") occur, the Lender may,
at its option, declare the Loan immediately due and payable and declare the
unutilized portion (if any) of the Loan to be terminated (in which case the
Lender shall not be required to make any further Advances), and take such other
actions as may be permitted at law or in equity, namely:
(a) if the Borrower fails to pay any amount of principal
or interest on the Loan when due;
(b) if any representation or warranty contained in or
provided for by this Agreement shall be found false or incorrect or
lacking in any material facts so as to make it materially misleading;
(c) if the Borrower defaults in the performance of any
term, condition or covenant contained in this Agreement, in the
Promissory Note, or in any other document or agreement delivered in
connection with the transactions contemplated by this Agreement and has
not remedied same within fifteen (15) days after the Lender has given
written notice to the Borrower of such default;
(d) if the Borrower shall take any voluntary action in
respect of liquidation, bankruptcy or winding-up or an assignment for
benefit of creditors under the laws of any applicable jurisdiction or
shall otherwise become insolvent; or
(e) if the Borrower sells, leases or exchanges all or
substantially all of its property other than in the ordinary course of
business.
4.8 PRESENTMENT, ETC. The Borrower hereby waives presentment and
demand for payment, protest and notice of protest and non-payment and agrees
that its liability on this note shall not be affected by any renewal or
extension in the time for payment hereof or by any indulgences and hereby
consents to any and all renewals, extensions or indulgences. Any waiver of
rights by the Lender hereunder must be in writing and the failure of the Lender
to exercise any of its rights hereunder in any specific instance shall not
constitute a waiver thereof in any other instance.
4.9 CONSENT TO BANK SECURITY. The Lender hereby consents to the
creation of the Bank Security, from time to time, as provided for in Section
3.1(j).
ARTICLE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each statement of
fact contained in this Agreement or in any document or certificate given under
this Agreement or any Schedule hereto be any of the parties hereto shall be
deemed a representation and warranty herein. All covenants, agreements,
representations and warranties of the parties hereto contained in this
Agreement, or contained in any document or certificate given under this
Agreement, shall be true at and as of the time of the Closing and shall survive
the Closing and shall continue in full force and effect for the benefit of the
parties hereto.
ARTICLE 6
SECURITY
6.1 SECURITY AGREEMENT. The Borrower shall furnish, execute and
deliver to the Lender in form and substance satisfactory to the Lender the
pledge and security agreement in the form attached hereto as Schedule B.
3(d)(1)-5
<PAGE> 6
ARTICLE 7
GENERAL
7.1 TIME OF ESSENCE. Time shall be of the essence of this
Agreement.
7.2 APPLICABLE LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the Province of Ontario. The parties
hereto hereby irrevocably attorn to the exclusive jurisdiction of the courts of
Ontario and acknowledge the competence, convenience and propriety; of such venue
and agree to be bound by any judgement thereof and not to seek and hereby waive
any review of its merits by the courts of any other jurisdiction.
7.3 NOTICES. Any notice or other communication required or
permitted to be given to a party hereunder or for the purposes hereof shall be
in writing and shall be sufficiently given if delivered personally to the party,
or if sent by prepaid registered mail, courier, telex or telecopier, addressed
to the party:
(a) in case of notice to the Borrower as follows:
Cune Management, Inc.
45 St. Clair Avenue West
Suite 200
Toronto, Ontario
M4V IK6
Telephone: (416) 967-4779
Telecopier: (416) 967-5788
(b) in case of notice to the Lender as follows:
Lasermedia Communications Corp.
11 Charlotte Street
Toronto, Ontario M5V 2H5
Attention: Chief Financial Officer
Telephone: (416) 977-2001
Telecopier: (416) 977-7353
or at such other address as the party to whom such notice or other communication
is to be given shall have last notified the party given the same in the manner
provided in this Section. Any notice or other communication mailed as aforesaid
shall be deemed to have been given and received on the tenth (10th) business day
next following the date of its mailing. Any notice or other communication
delivered personally or sent by courier to a party hereto shall be deemed to
have been given and received on the day it is received, provided that if such
day is not a business day then the notice or other communication shall be deemed
to have been given and received on the business day next following such day. Any
notice or other communication sent by telex or telecopier shall be deemed to
have been given and received on the day it was sent if such day was a business
day in the place of receipt, provided that if it was not a business day in such
place, it shall be deemed to have been given and received the next following
business day. In the event of a threatened or actual postal disruption, all
notices or other communications shall be delivered personally or sent by
courier, telex or telecopier.
7.4 HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation hereof.
7.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
undertakings, oral or written' by and between any of the parties hereto with
respect to the subject matter hereof.
7.6 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts each of which when so executed and delivered
shall be an original' but all such counterparts shall together constitute one
and the same instrument.
7.7 ASSIGNMENT. This Agreement shall not be assigned by either
party without the prior written consent of the other party.
7.8 SUCCESSORS. This Agreement shall enure to the benefit of and
be binding on the successors and permitted assigns of the respective parties
hereto.
3(d)(1)-6
<PAGE> 7
7.9 NON-WAIVER. The various rights, remedies, options and
elections of the parties hereto contained in this Agreement are cumulative and
the failure of any party to enforce strict performance by another park of its
obligations to be performed hereunder, or to exercise any option or election or
to have recourse to any remedy shall not be construed or deemed to be a waiver
or relinquishment for the future by the said party of any such condition,
covenant, option, election or remedy but shall continue in full force and
effect.
7.10 FURTHER ASSURANCES. The parties hereto undertake to sign and
complete all such deeds, documents, resolutions, minutes and other instruments
and to do all acts as are necessary to give full effect to this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto duly executed this
Agreement on the date first above written.
CUNE MANAGEMENT INC.
By:
------------------------------
Name:
------------------------
Title:
-----------------------
LASERMEDIA COMMUNICATIONS CORP.
By:
------------------------------
Name:
------------------------
Title:
-----------------------
3(d)(1)-7
<PAGE> 8
GRID ATTACHED TO PROMISSORY NOTE
DATED AS OF THE 18TH DAY OF SEPTEMBER, 1997
MADE BY LASERMEDIA COMMUNICATIONS CORP. IN FAVOUR OF
CUNE MANAGEMENT INC.
<TABLE>
<CAPTION>
==============================================================================================================
PRINCIPAL AMOUNT OF AMOUNT OF PRINCIPAL UNPAID PRINCIPAL
NO. DATE ADVANCE REPAID BALANCE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
==============================================================================================================
</TABLE>
The aggregate unpaid principal amount shown on this grid shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this promissory
note. The failure to record the date and amount of any loan on this grid shall
not, however, limit or otherwise affect the obligations of Cune Management Inc.
under the Loan Agreement or under this Note to repay the principal amount of the
loan made to Cune Management Inc. by Lasermedia Communications Corp., together
with all interest accrued and unpaid thereon.
3(d)(1)-8
<PAGE> 9
SCHEDULE "B"
3(d)(1)-9
<PAGE> 1
EXHIBIT 3(D)(2)
PLEDGE AND SECURITY AGREEMENT DATED SEPTEMBER 18, 1997
BY AND BETWEEN CUNE MANAGEMENT, INC. (BORROWER) AND
LASERMEDIA COMMUNICATIONS CORP. (LENDER)
3(d)(2)-1
<PAGE> 2
PLEDGE AND SECURITY AGREEMENT
THIS AGREEMENT made this 18th day of September, 1997, between CUNE
MANAGEMENT, INC., a company incorporated under the laws of the Province of
Ontario (hereinafter called the "Borrower") and LASERMEDIA COMMUNICATIONS CORP.,
a company incorporated under the laws of the Province of Ontario (hereinafter
called the "Lender").
WHEREAS the Borrower is the owner common shares in the capital of
Lasermedia Communications Corp. (the "Corporation") as described in Schedule "A"
hereto (the "Shares"); and
WHEREAS the Borrower has agreed to create a security interest in the
Shares in favor of the Lender to secure the payment and fulfillment of the debts
liabilities and obligations of the Borrower to the Lender pursuant to the terms
of a loan agreement dated the 18th day of September, 1997 between the Borrower
and the Lender (the "Loan Agreement");
NOW, THEREFORE this Agreement witnesses as follows:
1. PLEDGE. The Borrower assigns, transfers, pledges,
hypothecates, charges and creates a security interest in the Shares and any
renewals thereof, substitutions therefore and proceeds thereof and all interest,
dividends (including stock dividends and dividends consisting of securities),
income and revenue therefrom (collectively, the "Collateral") to and in favor of
the Lender as general and continuing collateral security for the payment and
fulfillment of all debts, liabilities and obligations of the Borrower to the
Lender (the "Indebtedness") pursuant to the Loan Agreement.
2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lender that:
(a) it is the beneficial owner of the Shares and it has
good right and authority to create the security interest in favor of
the Lender as herein provided, and that the Collateral is free and
clear of any other lien, mortgage, pledge, charge, encumbrance or
security interest of any nature or kind whatsoever; and
(b) it has full power, authority and legal right to
pledge all the Shares pursuant to this Agreement;
(c) this Agreement constitutes a legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, subject to applicable bankruptcy, insolvency
and other laws affecting the enforcement of creditors' rights generally
and subject to the fact that equitable remedies may only be granted in
the discretion of a court of competent jurisdiction;
(d) no consent of any other party (including, without
limitation, creditors of the Borrower) and no consent, license, permit,
approval or authorization of, exemption by registration or filing with
any governmental authority, domestic or foreign, is required to be
obtained by the Borrower in connection with the execution, delivery or
performance of this Agreement;
(e) the execution, delivery and performance of this
Agreement by the Borrower will not violate any provisions of any
applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or
foreign, or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Borrower is a party
or which purports to be binding upon the Borrower; and
(f) the pledge, assignment and delivery of the Shares
pursuant to this Agreement creates a valid first priority lien on and a
first perfected security in the Shares, subject to no prior pledge,
lien, mortgage, hypothecation, security interest, charge, option or
encumbrance (other than statutory liens which may rank prior to the
lien and security interest created hereby) nor to any agreement
purporting to grant to any third party a security interest in the
property or assets of the Borrower that would include the Shares.
The Borrower covenants and agrees that it will defend the Lender's
right, title and security interest in and to the Shares and the proceeds thereof
against the claims and demands of all persons whomsoever; and covenants and
agrees that it will have like title to and right to pledge any other property at
any time hereafter pledged to the Lender hereunder and will likewise defend the
Lender's right thereto and security interest therein.
3. LENDER'S RIGHTS AND POWERS. In the event of the Borrower's
failure to pay or otherwise satisfy the Indebtedness, the Lender, or any nominee
or nominees thereof may:
(a) exercise all voting and other rights attached to the
Shares and receive all dividends, interest, and other moneys payable in
respect of the Shares:
3(d)(2)-2
<PAGE> 3
(b) subject to compliance with the Personal Property
Security Act (Ontario), sell at public or private sale or otherwise
realize upon all or any of the Shares for such price in money or other
consideration as the Lender may deem best, the whole without
advertisement or notice to the Borrower; and/or
(c) exercise all rights and remedies of a secured party
under the Personal Property Security Act (Ontario).
4. REGISTRATION OF SHARES. The Lender shall be entitled to cause
the Shares to be transferred into the name of any nominee or nominees designated
by it and to be registered in such name or names on the books of the
Corporation.
5. RENEWALS AND EXTENSIONS. The Lender may grant time, renewals,
extensions, indulgences, releases and discharges to, take securities (which word
as used herein includes guarantees) from and give the same and any or all
existing securities up, abstain from taking securities from or from perfecting
securities of, cease or refrain from giving credit or making loans or advances
to, accept compositions from and otherwise deal with, the Borrower, the
Corporation and others and with all securities as the Lender may see fit, and
may apply all monies at any time received from the Borrower or others or from
securities upon such part of the Indebtedness as the Lender may see fit, and may
apply all monies at any time received from the Borrower or others or from
securities upon such part of the Indebtedness as the Lender deems best and
change any such application in whole or in part from time to time as the Lender
may see fit, the whole without in any way limiting or lessening the liability of
the Borrower hereunder and no loss of or in respect of any securities received
by the Lender from the Borrower, the Corporation or others, whether occasioned
by the fault of the Lender or otherwise, shall in any limit or lessen the
liability of the Borrower hereunder.
6. RECOURSE. The Lender shall not be bound to exhaust his
recourse against the Corporation or others or any securities it may at any time
hold before being entitled to exercise its rights hereunder.
7. CORPORATE CHANGES. This agreement shall not be affected by any
change in the name of the Corporation, by any change whatsoever in the objects,
capital structure or constitution of the Corporation or by the Corporation's
business being amalgamated with another corporation, but shall notwithstanding
the happening of any such event continue to apply to all the Indebtedness. All
payments received by the Lender from the Borrower or from others shall be
regarded for all purposes as payments in gross without any right on the part of
the Borrower to claim a reduction of his liability hereunder and the Borrower
shall have no right to be subrogated to any rights of the Lender until the
Lender shall have received payment in full of the Indebtedness.
8. ADDITIONAL SECURITY. The security provided for herein is in
addition to and not in substitution for any other security now or hereafter held
by the Lender and shall not operate as a merger of any simple contract debt, or
suspend the fulfillment or affect the rights, remedies or powers of the Lender
in respect of any present or future debts, liabilities or obligations of the
Borrower to the Lender or any securities held by the Lender for the fulfillment
thereof:
9. LENDER ABSOLVED. The Lender is hereby released from all
responsibility for any depreciation in or loss of value of the Collateral.
10. SUBDIVISION, CONSOLIDATION. ETC. If at any time or from time
to time
(a) the Shares are subdivided, consolidated, changed,
converted or reclassified, or
(b) the Corporation is reorganized or amalgamated with
another corporation or any other event occurs which results in the
substitution or exchange of the Shares for, or the conversion of the
Shares into, other shares or other securities.
then, in any such event, the other shares or other securities resulting
therefrom shall constitute the Shares for the purposes of this Agreement.
11. FURTHER ASSURANCES. The Borrower will execute and deliver such
further and other documents, and will do or cause to be done all such acts and
things, as may be necessary or desirable to give full effect to this agreement.
12. HEADINGS. The headings contained in this agreement are for
convenience of reference only and in no way affect the interpretation of this
agreement.
13. GOVERNING LAW. This agreement shall be governed by the laws of
the Province of Ontario and the laws of Canada applicable therein and shall be
treated in all respects as an Ontario contract.
14. ATTACHMENT. The security interest created hereby is intended
to attach when this agreement is signed by the Borrower and delivered to the
Lender. The Borrower acknowledges receipt of a copy of this agreement.
3(d)(2)-3
<PAGE> 4
15. BENEFIT OF AGREEMENT. This agreement shall enure to the
benefit of and be binding upon the Borrower and the Lender and their respective
successors and assigns.
16. COUNTERPARTS. This agreement may be executed by parties hereto
in separate counterparts each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
IN WITNESS WHEREOF the parties have executed this agreement as of the
day and year first above written.
CUNE MANAGEMENT, INC.
By:
-------------------------------
Name:
-------------------------
Title:
------------------------
LASERMEDIA COMMUNICATIONS CORP.
By:
-------------------------------
Name:
-------------------------
Title:
------------------------
3(d)(2)-4
<PAGE> 5
SCHEDULE A
PLEDGED SECURITIES
NUMBER AND
CERTIFICATE NUMBER NAME OF ISSUER TYPE OF SECURITY
A-1
<PAGE> 6
A-2
