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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT
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Registration statement pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934
Commission file number __________________
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)
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
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None None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(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 [x]
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TABLE OF CONTENTS
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Section Page
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EXCHANGE RATES OF THE CANADIAN DOLLAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 4. CONTROL OF REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 5. NATURE OF TRADING MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITYHOLDERS . . . . . . . . . . . . . . . . 24
Item 7. TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 8. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 9. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING RESULTS FOR
LASERMEDIA INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Item 10. DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 12. OPTIONS TO PURCHASE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Item 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 42
Item 14. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED . . . . . . . . . . . . . . . . . . . . . 44
Items 15-17. NOT REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Item 18. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
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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 as 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
<TABLE>
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Fiscal Year Ended Average High Low Close
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<S> <C> <C> <C> <C>
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 Inc.'s principal business
is the production and distribution of multimedia interactive consumer software
products in the entertainment, home education and personal fitness categories.
The Company has one other wholly owned subsidiary, Verisim, Inc., which is a
software company specializing in 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.
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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.
The Company'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 investment,' as an
alternative to action packed, reflex oriented games designed for 13-20 year
olds.
PRODUCTS
Current Products
The Active Library of Products
The Company'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.
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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:
o Shared: This module contains basic computer code and data
structures.
o Introduction: Active Trainer(TM) introduces the user to the
people and philosophy behind the fitness program using video
clips and animation.
o 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.
o 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.
o Stretching Area: The Stretching Area introduces the user to
the concepts of warming up and cooling down, and exhibits
stretching exercises.
o 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.
o 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.
o 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.
o Glossary: The glossary contains a list of concepts used in
Active Trainer(TM), with a brief definition, and cross
references from throughout the program.
o 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.
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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:
o Shared: This module is very similar to Active Trainer(TM),
as the two programs share most of their object structures.
o Main: This is the main menu, similar to Active Trainer(TM)'s
Gym.
o Test: This is a shortened version of Active Trainer(TM)'s
Fitness Test.
o Learn: Learn is an informative quiz debunking the myths of
abdominal training.
o 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 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:
o Shared: This module is very similar to Active Trainer(TM),
as the two programs share most of their object structures.
o Main: This is the main menu, similar to Active Trainer's(TM)
Gym.
o Test: This is a shortened version of Active Trainer's(TM)
Fitness Test.
o Learn: Learn is an informative quiz debunking the myths of
lower body training.
o 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.
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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 Inc. Either the Company
or Mr. 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 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%.
Lasermedia is obligated to purchase a minimum of CDN$62,500 worth of
Active product units for each fiscal quarter in 1998. 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.
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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
The Company 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 the Company's core software and
production activities. The Company'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.
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 such as the 3D game engine and Verisim Inc. of
Ottawa discussed below under "Research and Development." Recently,
the Company purchased rights to certain application computer
software known as "Beat 2000 CD-ROM Software Product", which the
Company 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
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 slated to be released during the second
fiscal quarter 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 scheduled for the first half 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
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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 gives users the tools they need to
gain control of the everyday causes of stress. Topics covered
include goal setting, time management, handling disagreements, and
getting what you want. A stress test analyzes the user's level of
stress and its sources, and suggests areas of the program the user
should study first.
Project Pacific is in the planning phase, and is scheduled to
enter the market during the fourth fiscal quarter of 1998.
Epic Management believes that the most popular games are
those that involve real life opponents and allies, plots and
strategies. The Company's wholly-owned subsidiary, Verisim Inc., 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.
Revenues will come from subscriptions, advertising placements,
sponsorships, and licensing the technology.
At its current stage of development, this technology has
reached the stage where independent sections are now working
together. It is anticipated that revenue will be generated from
this family of products before the end of 1998.
MANUFACTURING
The Company'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. The Company is not
dependent upon a single supplier or manufacturer of products.
DISTRIBUTION
Active Trainer(TM) 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
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copies have been sold. The Company intends to continue to offer Active
Trainer(TM) and other Active products through mail order software catalogues.
The Company 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. The
Company'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. The Company has distribution contracts with Micro
Central, Merisel Americas, Inc., Computer City, Micro Center and Simitar
Entertainment Inc. The Company 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(TM), 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.
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. The Company initially tested
Active Trainer(TM) sales through such magazines
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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 anticipates attending the Retail Vision trade show from
March 31, 1998 to April 4, 1998 as well as 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 seven other CD-ROM computer software
programs that compete with Active Trainer in the area of exercise and fitness.
The Company does not believe any single competitive product dominates the
market.
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
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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.
The Company is currently preparing an application for the
registration of the trademark "LaserMedia" in association with computer
programs, namely interactive software on CD-ROMs for health and fitness and for
music and sound effect programs.
All intellectual property rights in connection with the Active
Trainer(TM) family software are owned by 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%. The long term success of the Company
depends on the Company developing additional products which generate
significant revenue. There can be no assurance that the Company will be able
to develop such products.
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 Inc. and
Verisim, Inc. employed 36 employees of which 5 in are administration, 27 in
product development, 1 in product support and 3 in sales and marketing.
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<PAGE> 16
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 investment
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) 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
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<PAGE> 17
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%. 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 Resident. 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.
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.
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<PAGE> 18
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
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,
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<PAGE> 19
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
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.
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<PAGE> 20
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
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. 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
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<PAGE> 21
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 a 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.
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<PAGE> 22
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.
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. These broad market fluctuations may materially
adversely affect the market price of the common shares.
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<PAGE> 23
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> 24
ITEM 3. LEGAL PROCEEDINGS
Trademark Claims
The Company received a letter dated June 9, 1997 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 intends to respond to LM by denying any infringement and denying any
possibility of damage to LM. The Company has two web sites: activetrainer.com
and lasermedia.com.
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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>
CDS & Co. 5,353,360 41.1%
85 Richmond Street West
Toronto, Ontario M5H 2C9
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> 26
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
</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.
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ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITYHOLDERS
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 Investment Canada Act (Canada) (the "Investment Canada
Act"). The following summarizes the principal features of the Investment
Canada Act.
The Investment Canada Act requires certain "non-Canadian" (as
defined in the Investment Canada Act) individuals, governments, corporations
and other entities who wish to acquire control of a "Canadian business" (as
defined in the Investment Canada Act) to file either a notification or an
application for review with the Director of Investments appointed under the
Investment Canada Act. The Investment 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 Investment 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
Investment 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 Investment Canada Act.
The Investment 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 Investment 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 Investment Canada Act could result
in, among other things, a court order directing the disposition of assets or
shares.
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<PAGE> 28
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 Investment 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 Investment Act).
Under the Investment Canada Act, as amended, an investment in the Registrant's
common shares by an American would be reviewable only if it was an investment
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
$CDN150 million and remains at CDN$150 million in constant 1992 dollars
(calculated as prescribed in the Investment 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
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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
26
<PAGE> 30
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.
27
<PAGE> 31
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".
28
<PAGE> 32
LASERMEDIA COMMUNICATIONS CORP.
BALANCE SHEET DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
BALANCE SHEET
(UNAUDITED)(1) COMBINED BALANCE SHEETS
FOR THE NINE MONTHS FOR THE YEARS ENDED(2)
ENDED ------------------------------
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
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)(3) 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 493,118 129,834 158,471
liabilities
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- ------------- -------------
712,761 157,080 181,714
------------- ------------- -------------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- ------------- -------------
CDN$792,135 CDN$454,743 CDN$204,837
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 6)
Preferred Stock, no par value per -- -- --
share; 2,000,000(4)
voting preferred shares
authorized; no shares issued
and outstanding.
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) 401,529 17,530 279,030
------------- ------------- -------------
3,437,932 116,826 279,032
------------- ------------- -------------
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. These consolidated financial statements
represent a continuation of the financial statements of the wholly-owned
subsidiary, Lasermedia Inc.
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 Inc. in the fourth quarter of 1997 and was
subsequently amalgamated on December 31, 1997. The figures for September
30, 1997 only relate to Lasermedia Inc., a subsidiary of the Company.
3. See "Notes to Combined Financial Statements for Years Ended December 31,
1996, 1995 and 1994" under Item 18 hereof.
4. The number of preference shares that can be issued by the Company at any one
time is limited to 500,000.
29
<PAGE> 33
RECONCILED BALANCE SHEET DATA (U.S. GAAP)(1)
<TABLE>
<CAPTION>
BALANCE SHEET
(UNAUDITED) COMBINED BALANCE SHEETS
FOR THE NINE MONTHS FOR THE YEARS ENDED
ENDED ----------------------------
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
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
GOODWILL 507,791 1 --
------------- ------------- -------------
TOTAL ASSETS CDN$3,815,458 CDN$283,300 CDN$302,464
============= ============= =============
LIABILITIES
CURRENT
Bank loan CDN$195,833 CDN$ -- CDN$ --
Accounts payable and accrued 493,118 129,834 158,471
liabilities
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- ------------- -------------
712,761 157,080 181,714
------------- ------------- -------------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- ------------- -------------
CDN$792,135 CDN$454,743 CDN$204,837
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.
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) (13,080) (270,739) (97,625)
------------- ------------- -------------
3,025,323 (171,433) (97,627)
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY CDN$3,815,458 CDN$283,300 CDN$302,464
============= ============= =============
</TABLE>
- - - - -----------------------------------
1. The financial information is stated here giving the effect of a
reconciliation to U.S. GAAP from Canadian GAAP, which are the accounting
principles under which the Company's primary financial statements are
presented.
30
<PAGE> 34
STATEMENT OF OPERATIONS DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED)(1)
FOR THE NINE MONTHS COMBINED STATEMENTS OF OPERATIONS
ENDED SEPTEMBER 30 FOR THE YEARS ENDED DECEMBER 31(2)
------------------------ -----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ------------ ----------- -----------
<S> <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
Wages and Benefits -- -- 53,735 -- --
Trade shows -- -- 41,683 2,244 --
Rent -- -- 31,193 24,074 20,945
Management fees -- -- 20,351 -- --
Office and general 628,618 86,918 16,735 8,887 4,997
Consulting fees(3) 482,728 750 14,510 3,109 2,140
Advertising and promotion -- -- 11,348 8,477 --
Telephone -- -- 11,287 10,117 6,289
Meals and entertainment -- -- 10,930 348 --
Repairs and maintenance -- -- 10,862 9,555 13,547
Professional fees -- -- 9,430 12,340 6,200
Automobile -- -- 8,808 5,349 11,418
Sales and Marketing fees 287,352 53,245 7,032 -- --
Insurance -- -- 5,866 6,018 4,591
Interest and bank charges -- -- 2,476 1,229 9,184
Bad debts -- -- -- 821 20,657
Amortization of product
development costs 41,338 -- 69,402 28,918 --
Amortization of goodwill 41,172 --
Amortization of capital assets 39,867 5,881 29,411 29,464 29,884
----------- ----------- ------------ ----------- -----------
1,521,075 146,794 355,059 150,950 129,852
----------- ----------- ------------ ----------- -----------
NET INCOME (LOSS) CDN$494,718 CDN$(61,708) CDN$(144,623) CDN$109,089 CDN$133,961
=========== =========== ============ =========== ===========
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 Inc.
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 Inc. 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 Inc., a subsidiary of the Company.
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.
31
<PAGE> 35
RECONCILED STATEMENT OF OPERATIONS DATA (U.S. GAAP)(1)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED) COMBINED STATEMENTS OF OPERATIONS
FOR THE FOR THE YEARS ENDED DECEMBER 31
NINE MONTHS ENDED ---------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994
----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
SALES CDN$2,285,325 CDN$659,617 CDN$583,048 CDN$481,462
COST OF SALES 269,532 449,181 323,009 217,649
------------- ------------ ----------- -----------
GROSS MARGIN 2,015,793 210,436 260,039 263,813
------------- ------------ ----------- -----------
EXPENSES
Wages and Benefits -- 53,735 -- --
Trade shows -- 41,683 2,244 --
Rent -- 31,193 24,074 20,945
Management fees -- 20,351 -- --
Office and general 628,618 16,735 8,887 4,997
Consulting fees 482,728 14,510 3,109 2,140
Advertising and promotion -- 11,348 8,477 --
Telephone -- 11,287 10,117 6,289
Meals and entertainment -- 10,930 348 --
Repairs and maintenance -- 10,862 9,555 13,547
Professional fees -- 9,430 12,340 6,200
Automobile -- 8,808 5,349 11,418
Sales and Marketing fees 287,352 7,032 -- --
Insurance -- 5,866 6,018 4,591
Interest and bank charges -- 2,476 1,229 9,184
Bad debts -- -- 821 20,657
Product development costs 167,678 176,266 99,471 110,852
Amortization of goodwill 41,172
Amortization of capital assets 39,867 29,411 29,464 29,884
------------- ------------ ----------- -----------
1,647,415 461,923 221,503 240,704
------------- ------------ ----------- -----------
NET INCOME (LOSS) CDN$368,378 CDN$(251,487) CDN$38,536 CDN$23,109
============= ============= =========== ===========
NUMBER OF SHARES 17,123,999
=============
BASIC EARNINGS (LOSS) PER SHARE CDN$0.02
</TABLE>
- - - - -----------------------------------
1. The financial information is stated here giving the effect of a
reconciliation to U.S. GAAP from Canadian GAAP, which are the
accounting principles under which the Company's primary financial
statements are presented.
32
<PAGE> 36
ITEM 9. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND OPERATING
RESULTS FOR LASERMEDIA INC.
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 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. In 1996, costs of
sales were prorated over the fiscal year, rather than accounted for by quarter.
In 1997, costs of sales included CDN$76,000 of advertising costs.
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. 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.
33
<PAGE> 37
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.
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 from 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 fourth quarter of 1996, the Company settled its CDN$40,000
debt to one of its shareholders, Cune Management Limited, a financial
consulting firm. 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
34
<PAGE> 38
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 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 Inc. 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 balance was $195,000 as of September 30, 1997. The Company is
currently negotiating to have a $300,000 line of credit by March 31, 1998.
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 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.
Inflation
The Company has not experienced any significant inflationary cost
increases during the past three fiscal years.
35
<PAGE> 39
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 Inc.
since 1994. Mr. Schannen has been involved in the computer graphics and
software field for the past 12 years. Before founding Lasermedia Inc., for
seven years he was a principal of Laserset Graphics Inc., a graphic design
company that is now a subsidiary of the Company. 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
36
<PAGE> 40
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.
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.
37
<PAGE> 41
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.
38
<PAGE> 42
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
39
<PAGE> 43
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 four executive
officers and
directors 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 Inc. 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.
40
<PAGE> 44
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 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 adjustment 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 adjustment if and when the Company issues shares of common stock to
its stockholders at a price less than the fair market value.
41
<PAGE> 45
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Share Purchase Agreements for Laserset Graphics Inc.
On October 16, 1997, Lasermedia Inc., 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 Inc. and was a founder and
President of Laserset Graphics Inc. On November 19, 1997, Lasermedia Inc.
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. merged with Lasermedia Inc.
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 Inc. on June 27, 1997
The Company acquired all the issued and outstanding common shares and
common share purchase warrants of Lasermedia Inc. 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 shares acquired by the Company.
42
<PAGE> 46
Sale and License Back Arrangement with Softech L.P., June 27, 1997
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%. Lasermedia is obligated to purchase a minimum of $62,500
worth of Active product units for each fiscal quarter in 1998. 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.
Acquisition of Verisim, Inc. on May 23, 1997
Lasermedia Inc., a subsidiary of the Company, acquired all of the
shares of capital stock of Verisim, Inc. 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 Inc.
43
<PAGE> 47
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 Inc. 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.
44
<PAGE> 48
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 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 adjustment 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 adjustment if and when the Company issues shares of common stock to
its stockholders at a price less than the fair market value.
45
<PAGE> 49
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.
46
<PAGE> 50
ITEM 18. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
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-3
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-4
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-5
Statements of Stockholders' Equity (Deficit) of the Company
(Audited) for the Three Years Ended (Unaudited) as of
September 30, 1997 and December 31, 1996, 1995 and 1994 . . . . . . . . F-6
Notes to Combined Financial Statements for Years Ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . F-7
Reconciled Balance Sheet Data (U.S. GAAP) . . . . . . . . . . . . . . . F-12
Reconciled Statement of Operations Data (U.S. GAAP) . . . . . . . . . . F-13
</TABLE>
F-1
<PAGE> 51
REPORTS OF INDEPENDENT ACCOUNTANTS
CONSENT OF AUDITORS
TO: Securities Exchange Commission
Washington, D.C. 20549
Dear Sirs:
LASERMEDIA COMMUNICATIONS CORP. (THE "CORPORATION")
We refer to Form 20-F Registration Statement dated February 2, 1998
relating to the common stock of the Corporation.
We consent to the use, in the Registration Statement, of our report
dated March 25, 1997 and January 29, 1998 as to Note 8 therein, to the
shareholders and Partners of Lasermedia Inc., et al. on the following financial
statements:
Combined balance sheets as at December 31, 1996, 1995 and 1994; and
Combined statements of operations and combined statements of changes in
financial position for each of the years ended December 31, 1996, 1995
and 1994.
We further consent to the use in the Registration Statement of our
compilation report dated May 23, 1997 on the pro forma consolidated balance
sheet of the Corporation as at January 1, 1997.
Yours truly,
/s/ SILVER GOLD GLATT & GROSMAN
Chartered Accountants
Toronto, Canada
February 2, 1998
F-2
<PAGE> 52
LASERMEDIA COMMUNICATIONS CORP.
BALANCE SHEET DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
BALANCE SHEET
(UNAUDITED)(1) COMBINED BALANCE SHEETS
FOR THE NINE MONTHS FOR THE YEARS ENDED(2)
ENDED -----------------------------
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
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)(3) 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 493,118 129,834 158,471
liabilities
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- ------------ -----------
712,761 157,080 181,714
------------- ------------ -----------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- ------------ -----------
CDN$792,135 CDN$454,743 CDN$204,837
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 6)
Preferred Stock, no par value per -- -- --
share; 2,000,000(4) voting preferred
shares authorized; no shares
issued and outstanding.
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) 401,529 17,530 279,030
------------- ------------ -----------
3,437,932 116,826 279,032
------------- ------------ -----------
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. These consolidated financial statements
represent a continuation of the financial statements of the wholly-owned
subsidiary, Lasermedia Inc.
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 Inc. in the fourth quarter of 1997 and was
subsequently amalgamated on December 31, 1997. The figures for September 30,
1997 only relate to Lasermedia Inc., a subsidiary of the Company.
3. See "Notes to Combined Financial Statements for Years Ended December 31,
1996, 1995 and 1994" under Item 18 hereof.
4. The number of preference shares that can be issued by the Company at any one
time is limited to 500,000.
F-3
<PAGE> 53
LASERMEDIA COMMUNICATIONS CORP.
STATEMENT OF OPERATIONS DATA (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED)(1)
FOR THE NINE MONTHS COMBINED STATEMENTS OF OPERATIONS
ENDED SEPTEMBER 30 FOR THE YEARS ENDED 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
Wages and Benefits -- -- 53,735 -- --
Trade shows -- -- 41,683 2,244 --
Rent -- -- 31,193 24,074 20,945
Management fees -- -- 20,351 -- --
Office and general 628,618 86,918 16,735 8,887 4,997
Consulting fees(3) 482,728 750 14,510 3,109 2,140
Advertising and promotion -- -- 11,348 8,477 --
Telephone -- -- 11,287 10,117 6,289
Meals and entertainment -- -- 10,930 348 --
Repairs and maintenance -- -- 10,862 9,555 13,547
Professional fees -- -- 9,430 12,340 6,200
Automobile -- -- 8,808 5,349 11,418
Sales and Marketing fees 287,352 53,245 7,032 -- --
Insurance -- -- 5,866 6,018 4,591
Interest and bank charges -- -- 2,476 1,229 9,184
Bad debts -- -- -- 821 20,657
Amortization of product
development costs 41,338 -- 69,402 28,918 --
Amortization of goodwill 41,172 --
Amortization of capital assets 39,867 5,881 29,411 29,464 29,884
------------- ----------- ------------ ----------- -----------
1,521,075 146,794 355,059 150,950 129,852
------------- ----------- ------------ ----------- -----------
Net Income (Loss) CDN$494,718 CDN$(61,708) CDN$(144,623) CDN$109,089 CDN$133,961
============= =========== ============ =========== ===========
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 Inc.
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 Inc. 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 Inc., a subsidiary of
the Company.
3 The Company issued 1,850,000 shares of common stock in lieu of consulting
services performed having a low market value of C$462,500 which is included
in this figure.
F-4
<PAGE> 54
LASERMEDIA COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF
CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS COMBINED STATEMENTS OF CASH FLOWS
ENDED SEPTEMBER 30 FOR THE YEARS ENDED DECEMBER 31
---------------------------- -------------------------------------------
1997 1996 1996 1995 1994
------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) CDN$494,718 CDN$(61,708) CDN$(144,623) CDN$109,089 CDN$133,961
Adjustment for non-cash items:
Amortization 81,039 5,881 29,411 29,464 29,884
Amortization of product 41,338 -- 69,402 28,918 --
------------- ------------ ------------ ----------- -----------
development costs 617,095 (55,827) (45,810) 167,471 163,845
Changes in non-cash operating
assets and liabilities (21,530) 341,961 25,643 (18,433) 27,860
------------- ------------ ------------ ----------- -----------
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-5
<PAGE> 55
LASERMEDIA COMMUNICATIONS CORP.
STATEMENT OF RETAINED EARNINGS (CANADIAN GAAP)
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
FOR THE COMBINED STATEMENTS OF RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30 FOR THE YEARS ENDED DECEMBER 31
------------------------------ --------------------------------------------
1997 1996 1996 1995 1994
----------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS (DEFICIT), CDN$(93,189) CDN$(11,912) CDN$279,030 CDN$212,264 CDN$129,425
BEGINNING OF PERIOD
NET INCOME (LOSS) 494,718 (61,709) (144,623) 109,089 133,961
DRAWINGS -- -- (116,877) (42,323) (51,122)
----------- ------------ ---------- ----------- -----------
RETAINED EARNINGS,
END OF PERIOD CDN$401,529 CDN$(73,621) CDN$17,530 CDN$279,030 CDN$212,264
=========== ============ ========== =========== ===========
</TABLE>
F-6
<PAGE> 56
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 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 Inc.
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:
<TABLE>
<S> <C>
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
</TABLE>
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-7
<PAGE> 57
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 fixtures 2,664 501 2,163 2,350 2,709
Computer software 1,446 1,446 -- 1,447 3,588
Leasehold improvements 1,136 1,136 -- 1,136 2,651
---------- ---------- ---------- ---------- ----------
$ 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-8
<PAGE> 58
4. LONG TERM DEBT
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Bank term loan #1 - repayable in monthly installments of $396 on $ 7,516 $12,270 $16,908
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 of $216 on 3,467 6,067 8,667
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 of $178 on 890 3,029 --
account of principal plus interest at prime plus 3% per annum.
The loan is secured by specific equipment.
Ontario Film Development Corporation - is unsecured, non-
interest bearing and is repayable in monthly principal payments
of $750 for the period August 1, 1996 to March 1, 1998 11,250 15,000 --
------- ------- -------
23,123 36,366 25,575
Less: current portion 17,246 13,243 7,237
------- ------- -------
$ 5,877 $23,123 $18,338
------- ------- -------
</TABLE>
F-9
<PAGE> 59
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$251,786 are non-interest
bearing, unsecured, with no fixed terms of repayment.
6. CAPITAL STOCK
AUTHORIZED
Unlimited Common shares
<TABLE>
<CAPTION>
ISSUED 1996 1995 1994
<S> <C> <C> <C> <C>
400 Common Shares
(1995 - 200, 1994 - 200) CDN$ 99,296 CDN$ 2 CDN$ 2
=========== ========= ========
</TABLE>
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
At December 31, 1996, the Company had non-capital losses for income
tax purposes of approximately CDN$94,500 available to offset future taxable
income. The potential tax benefits have not been reflected in these financial
statements. These losses will expire as follows:
<TABLE>
<S> <C>
2002 CDN$ 12,000
2003 CDN$ 82,500
-----------
CDN$ 94,500
===========
</TABLE>
F-10
<PAGE> 60
8. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
Differences in GAAP between the two countries have produced balance
sheets which differ due to the accounting treatment of deferred development
costs.
These Canadian GAAP financial statements reflect the deferral of
development costs which are amortized once commercial production has commenced.
United States GAAP financial statements require that development costs
be expensed as incurred.
The statement of changes in financial position, if prepared under
United States GAAP, would differ as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income (Loss) $(251,487) $ 38,536 $ 23,109
Amortization of product development costs -- -- --
</TABLE>
RECONCILIATION OF INCOME (LOSS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
NET INCOME (LOSS) as reported under Canadian GAAP $(144,623) $109,089 $133,961
LESS: product development costs 106,864 70,553 110,852
--------- -------- --------
NET INCOME (LOSS) as reported under United States GAAP $(251,487) $ 38,536 $ 23,109
========= ======== ========
</TABLE>
F-11
<PAGE> 61
RECONCILED BALANCE SHEET DATA (U.S. GAAP)1
<TABLE>
<CAPTION>
BALANCE SHEET
(UNAUDITED) COMBINED BALANCE SHEETS
FOR THE NINE FOR THE YEARS ENDED
MONTHS ENDED -------------------------
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
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
GOODWILL 507,791 1 --
------------- ----------- -----------
TOTAL ASSETS CDN$3,815,458 CDN$283,300 CDN$302,464
============= =========== ===========
LIABILITIES
CURRENT
Bank loan CDN$195,833 CDN$ -- CDN$ --
Accounts payable and accrued liabilities 493,118 129,834 158,471
Loan payable (Note 3) 17,500 10,000 10,000
Current portion of long term debt 6,310 17,246 13,243
------------- ----------- -----------
712,761 157,080 181,714
------------- ----------- -----------
LONG TERM DEBT (Note 4) 79,374 5,877 23,123
DUE TO RELATED COMPANIES (Note 5) -- 291,786 --
------------- ----------- -----------
CDN$792,135 CDN$454,743 CDN$204,837
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.
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) (13,080) (270,739) (97,625)
------------- ----------- -----------
3,025,323 (171,433) (97,627)
------------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY CDN$3,815,458 CDN$283,300 CDN$302,464
============= =========== ===========
</TABLE>
- - - - ------------------------
1. The financial information is stated here giving the effect of a
reconciliation to U.S. GAAP from Canadian GAAP, which are the accounting
principles under which the Company's primary financial statements are
presented.
F-12
<PAGE> 62
RECONCILED STATEMENT OF OPERATIONS DATA (U.S. GAAP)(1)
<TABLE>
<CAPTION>
STATEMENTS OF
OPERATIONS (UNAUDITED) COMBINED STATEMENTS OF OPERATIONS
FOR THE FOR THE YEARS ENDED DECEMBER 31
NINE MONTHS ENDED -------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994
---------------------- ---- ---- ----
<S> <C> <C> <C> <C>
SALES CDN$2,285,325 CDN$659,617 CDN$583,048 CDN$481,462
COST OF SALES 269,532 449,181 323,009 217,649
-------- -------- --------
GROSS MARGIN 2,015,793 210,436 260,039 263,813
----------
EXPENSES
Wages and Benefits -- 53,735 -- --
Trade shows -- 41,683 2,244 --
Rent -- 31,193 24,074 20,945
Management fees -- 20,351 -- --
Office and general 628,618 16,735 8,887 4,997
Consulting fees 482,728 14,510 3,109 2,140
Advertising and promotion -- 11,348 8,477 --
Telephone -- 11,287 10,117 6,289
Meals and entertainment -- 10,930 348 --
Repairs and maintenance -- 10,862 9,555 13,547
Professional fees -- 9,430 12,340 6,200
Automobile -- 8,808 5,349 11,418
Sales and Marketing fees 287,352 7,032 -- --
Insurance -- 5,866 6,018 4,591
Interest and bank charges -- 2,476 1,229 9,184
Bad debts -- -- 821 20,657
Product development costs 167,678 176,266 99,471 110,852
Amortization of goodwill 41,172
Amortization of capital assets 39,867 29,411 29,464 29,884
-------- -------- --------
1,647,415 461,923 221,503 240,704
NET INCOME (Loss) CDN$368,378 CDN$(251,487) CDN$38,536 CDN$23,109
NUMBER OF SHARES 17,123,999
BASIC EARNINGS (LOSS) PER SHARE CDN$ 0.02
</TABLE>
- - - - ----------------------------
1. The financial information is stated here giving the effect of a
reconciliation to U.S. GAAP from Canadian GAAP, which are the accounting
principles under which the Company's primary financial statements are
presented.
F-13
<PAGE> 63
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) 1997 Stock Option Plan
3(a)(1) Consulting Services Agreement dated February 2, 1997 by and
between Lasermedia Inc. and Kevin Chaisson
3(a)(2) Consulting Agreement dated September 24, 1997 by and between
Lasermedia Inc. and Aludra Software Inc.
3(b)(1) Software Purchase Agreement dated June 27, 1997 by and between
Lasermedia Inc. and Softech L.P.
3(b)(2) Supply and Reseller Agreement dated June 27, 1997 by and
between Lasermedia Inc. and Softech L.P.
3(c)(1) Stock Option Agreements dated July 17, 1997 by and between
Lasermedia Communications Corp. and Brian Gibson
3(c)(2) Stock Option Agreement dated July 17, 1997 by and between
Lasermedia Communications Corp. and Samuel Paul
<PAGE> 64
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)
4(a) Consent of Auditors
<PAGE> 65
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: February ____, 1998
-----------------------------------
Robert Brian Gibson
Chief Operating Officer,
Chief Financial Officer
<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
GREETING
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 Department 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 Montgomrey 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, Department 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
1(a)-3
<PAGE> 4
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;
(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(a)-6
<PAGE> 7
1,092,500 issued common shares outstanding and
3,299,990 authorized but unissued common shares;
(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/AMALGAMATION - 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 1c. and having the following rights, restrictions and
limitations:
(i) The special shares with a par value of
1/10ths of 1c. each shall be designated as redeemable, voting,
non-participating shares with a par value of 1/10th of 1c.
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 hereof,
on payment for each share to be redeemed of the par value
thereof.
1(a)-9
<PAGE> 10
(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 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
1(a)-10
<PAGE> 11
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.
(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.
-----------------
1(a)-11
<PAGE> 12
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)-12
<PAGE> 13
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C> <C>
1. The present name of the Denomination sociale actuelle de la compagnie:
corporation is:
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 la compagnie
changed to (if applicable): (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/ Date de la constitution ou de la fusion:
amalgamation:
20 April, 1964
- - - - ------------------------------------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation Les statuts de la compagnie sont modifies de la
are amended as follows: facon suivante:
</TABLE>
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)-13
<PAGE> 14
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.)
<TABLE>
<S> <C>
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by Sections 167 and 169 (as conformement a l'article 167 et, s'il y a lieu, a
applicable) of the Business Corporations Act. l'article 169 de la Loi sur les compagnies.
6. The resolution authorizing the Les actionnaires ou les administrateurs (le cas
amendment was approved by the echeant) de la compagnie ont approuve la
shareholders/directors (as applicable) of the resolution autorisant la modification
corporation on
3 December, 1991
- - - - --------------------------------------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents statuts sont signes en double
exemplaire.
</TABLE>
BENVAN HOLDINGS INC.
------------------------------
(NAME OF CORPORATION)
(DENOMINATION SOCIALE DE LA COMPAGNIE)
<PAGE> 15
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C>
1. The name of the corporation is: Denomination sociale de la societe:
OSGOODE HOLDINGS INC.
2. The name of the corporation is Nouvelle denomination sociale de la societe (s'il
changed to (if applicable): y a lieu):
LASERMEDIA COMMUNICATIONS CORP.
3. Date of incorporation/ Date de la constitution ou de la fusion:
amalgamation:
1964/APRIL/20
- - - - --------------------------------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
4. The articles of the corporation Les statuts de la societe sont modifies de la
are amended as follows: facon suivante.
</TABLE>
The name of the Corporation is hereby changed to LASERMEDIA COMMUNICATIONS CORP.
1(a)-15
<PAGE> 16
<TABLE>
<S> <C>
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by Sections 168 & 170 (as conformement aux articles 168 et 170 (selon le
applicable) of the Business Corporations Act. cas) de la Loi sur les societes par actions.
6. The resolution authorizing the Les actionnaires ou les administrateurs (selon le
amendment was approved by the shareholders/ cas) de la societe ont approuve la resolution
directors (as applicable) of the corporation on 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.
</TABLE>
OSGOOD HOLDINGS, INC.
---------------------------------------------
(Name of Corporation)
(Denomination sociale de la societe)
SECRETARY
By:/Par:
-------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
1(a)-16
<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
necessary, the auditor and fixing or authorizing the board to fix
1(b)-2
<PAGE> 3
his renumeration 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
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be transacted which the Corporation at an annual or general meeting of the
shareholders may transact.
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
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(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 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
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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 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
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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 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
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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.
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.
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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 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
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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 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.
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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 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 renumeration 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
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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.
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
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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 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
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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
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
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(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 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
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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 RENUMERATION. 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 renumeration 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.
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
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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 renumeration. 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.
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
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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 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,
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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 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.
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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
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the 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.
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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
1(b)-22
<PAGE> 23
thereafter the fiscal year of the Corporation shall terminate on the ____ day
of ______________ in each year.
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
1(b)-23
<PAGE> 24
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
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.
1(b)-24
<PAGE> 25
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.
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.
1(b)-25
<PAGE> 26
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 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)-26
<PAGE> 27
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)-27
<PAGE> 28
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)-28
<PAGE> 29
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)-29
<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 issue 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)
1997 STOCK OPTION PLAN
2(c)-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)-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)-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)-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)-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)-6
<PAGE> 1
EXHIBIT 3(a)(1)
CONSULTING SERVICES AGREEMENT
DATED FEBRUARY 2, 1997 BY AND BETWEEN LASERMEDIA INC. AND KEVIN CHAISSON
3(a)(1)-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)(1)-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)(1)-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)(1)-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)(1)-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 Inc. 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 Inc., the offering corporation, within
ninety (90) days after LaserMedia Inc. becoming an offering
corporation; and
(o) In the event that LaserMedia Inc. 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 Inc. becomes an offering
corporation, to purchase up to Five Thousand (5,000) shares of the
common capital stock of LaserMedia Inc., 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.
3(a)(1)-6
<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)(1)-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)(1)-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)(1)-9
<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).
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<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 Inc. 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)(1)-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)(1)-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 Inc. 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)(1)-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 INC.
By:
-----------------------------------
Erik Schannen, President
WITNESS:
- - - - -------------------------------- --------------------------------------
KEVIN CHAISSON
3(a)(1)-14
<PAGE> 1
EXHIBIT 3(a)(2)
CONSULTING AGREEMENT DATED SEPTEMBER 24, 1997
BY AND BETWEEN LASERMEDIA INC. AND ALUDRA SOFTWARE INC.
3(a)(2)-1
<PAGE> 2
CONSULTING AGREEMENT
THIS AGREEMENT made in duplicate this 24th day of September, 1997
between Aludra Software Inc. (the "CONSULTANT") and LaserMedia Inc. (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)(2)-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)(2)-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 Inc.
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)(2)-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 INC.
Per:
------------------------------------
Authorized Signing Officer
3(a)(2)-5
<PAGE> 6
SCHEDULE "A"
3(a)(2)-6
<PAGE> 1
EXHIBIT 3(b)(1)
SOFTWARE PURCHASE AGREEMENT DATED JUNE 27, 1997
BY AND BETWEEN LASERMEDIA INC. 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 INC., 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, embargoes, 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 Inc.;
"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 INC., 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, Weight 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 INC. 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 INC., 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:
<TABLE>
<S> <C> <C>
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
</TABLE>
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) 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 INC.
By:
---------------------------------
3(b)(2)-17
<PAGE> 18
SCHEDULE "A"
PRODUCT PRICING
SOFTECH/LASERMEDIA RESELLER AGREEMENT
) 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
the Software, including private title plus, in the event of any event of
label titles (e.g. Xerox) default by Lasermedia, an amount of $5.00
per unit on all units sold thereafter,
irrespective of remedy
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.
3(c)(1)-2
<PAGE> 3
(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 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.
3(c)(1)-3
<PAGE> 4
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
3(c)(1)-4
<PAGE> 5
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
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)-5
<PAGE> 6
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.
3(c)(1)-6
<PAGE> 7
(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 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
3(c)(1)-7
<PAGE> 8
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.
3(c)(1)-8
<PAGE> 9
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)-9
<PAGE> 10
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)-10
<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.
3(c)(2)-2
<PAGE> 3
(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 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
3(c)(2)-3
<PAGE> 4
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.
3(c)(2)-4
<PAGE> 5
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)-5
<PAGE> 6
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)-6
<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.
3(c)(3)-2
<PAGE> 3
(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 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
3(c)(3)-3
<PAGE> 4
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.
3(c)(3)-4
<PAGE> 5
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)-5
<PAGE> 6
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)-6
<PAGE> 1
EXHIBIT 3(c)(4)
STOCK OPTION AGREEMENT DATED DECEMBER 8, 1997
BY AND BETWEEN LASERMEDIA COMMUNICATIONS 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 Cowie (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.
3(c)(4)-2
<PAGE> 3
(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 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
3(c)(4)-3
<PAGE> 4
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.
3(c)(4)-4
<PAGE> 5
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
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)-5
<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;
3(d)(1)-2
<PAGE> 3
(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).
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:
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
-------- -----------
<S> <C>
A Form of Promissory Note
B Security and Pledge Agreement
</TABLE>
1.3 CURRENCY. All statements of or reference to dollar amounts in
this Agreement shall mean lawful money of Canada, unless otherwise specified.
3(d)(1)-3
<PAGE> 4
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:
3(d)(1)-4
<PAGE> 5
(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;
(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
3(d)(1)-5
<PAGE> 6
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
3(d)(1)-6
<PAGE> 7
of Closing and all covenants to have been performed or satisfied at or
before the Closing shall have been so performed or satisfied.
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
3(d)(1)-7
<PAGE> 8
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.
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.
3(d)(1)-8
<PAGE> 9
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.
3(d)(1)-9
<PAGE> 10
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.
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.
3(d)(1)-10
<PAGE> 11
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)-11
<PAGE> 12
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>
==================================================================================================================================
PRINCIPAL AMOUNT AMOUNT OF UNPAID PRINCIPAL
NO. DATE OF ADVANCE PRINCIPAL REPAID BALANCE NOTATION MADE BY
<S> <C> <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)-12
<PAGE> 13
SCHEDULE "B"
3(d)(1)-13
<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'
3(d)(2)-2
<PAGE> 3
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:
(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).
3(d)(2)-3
<PAGE> 4
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.
3(d)(2)-4
<PAGE> 5
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.
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.
3(d)(2)-5
<PAGE> 6
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)-6
<PAGE> 7
SCHEDULE A
PLEDGED SECURITIES
<TABLE>
<CAPTION>
Number and
Certificate Number Name of Issuer Type of Security
<S> <C> <C>
</TABLE>
A-1
<PAGE> 1
EXHIBIT 4(a)
CONSENT OF AUDITORS
4(a)-1
<PAGE> 2
REPORTS OF INDEPENDENT ACCOUNTANTS
CONSENT OF AUDITORS
TO: Securities Exchange Commission
Washington, D.C. 20549
Dear Sirs:
LASERMEDIA COMMUNICATIONS CORP. (THE "CORPORATION")
We refer to Form 20-F Registration Statement dated February 2, 1998
relating to the common stock of the Corporation.
We consent to the use, in the Registration Statement, of our report
dated March 25, 1997 and January 29, 1998 as to Note 8 therein, to the
shareholders and Partners of Lasermedia Inc., et al. on the following financial
statements:
Combined balance sheets as at December 31, 1996, 1995 and 1994; and
Combined statements of operations and combined statements of changes
in financial position for each of the years ended December 31, 1996,
1995 and 1994.
We further consent to the use in the Registration Statement of our
compilation report dated May 23, 1997 on the pro forma consolidated balance
sheet of the Corporation as at January 1, 1997.
Yours truly,
/s/ SILVER GOLD GLATT & GROSMAN
Chartered Accountants
Toronto, Canada
February 2, 1998
4(a)-2
