U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-24723
URBANA.CA, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0393257
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 682-8445
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 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) been subject to such filing
requirements for the past 90 days. Yes X No
As of March 31, 2000, the Registrant had 22,038,283 shares
of common stock issued and outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 2000 AND MARCH 31, 1999 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH
31, 2000 AND MARCH 31, 1999 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND MARCH 31, 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
PART II
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 17
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURE 18
PART I.
ITEM 1. FINANCAL STATEMENTS.
URBANA.CA, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
March 31 December 31
2000 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 285,953 $ 535
Accounts receivable 42,538 -
Prepaid expenses and deposits 106,571 7,667
435,062 8,202
DUE FROM RELATED PARTIES (Note 6) - 64,037
FURNITURE AND EQUIPMENT, net of
Depreciation 140,717 -
GOODWILL, net of amortization (Note 3) 3,453,705 -
$ 4,029,484 $ 72,239
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
Liabilities $ 247,765 $ 144,187
LOANS PAYABLE (Note 4) 1,284,162 60,000
DUE TO RELATED PARTIES (Note 6) 24,547 -
COMMITMENTS AND CONTINGENCIES
(Notes 1 and 9)
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 5) Authorized
Common stock, $0.0001 par value,
70,000,000 shares Preferred stock
$0.001 par value, 10,000,000 shares
Issued and outstanding
11,588,283 (1999 - 11,082,318)
shares of common stock 11,588 11,082
Additional paid-in capital 1,301,133 1,132,549
Exchangeable shares (Note 5) 3,226,500 -
Deficit accumulated during
development stage (2,054,844) (1,277,309)
Accumulated other comprehensive income (11,367) 1,730
2,473,010 (131,948)
$ 4,029,484 $ 72,239
The accompanying notes are an integral part of these interim
consolidated financial statements
URBANA.CA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Three February 23
Months Months 1992
Ended Ended (inception)
March 31 March 31 to March 31
2000 1999 2000
EXPENSES
Consulting and management $ 249,926 $ - $ 468,211
Depreciation and amortization 187,734 1,007 193,873
Development costs 55,648 - 55,648
Engineering costs - - 274,170
Interest expense 19,618 74 29,254
Office and general 137,449 177,693 397,333
Professional fees 71,458 3,702 152,557
Transfer agent and filing fees - 4,953 22,903
Rent 11,598 6,502 64,679
Salaries 44,104 - 127,808
Write-off of interest in
mineral property - - 15,000
Write-off of Graphite
processing joint venture - - 253,408
NET LOSS FOR THE PERIOD 777,535 193,931 2,054,844
BASIC NET LOSS PER SHARE 0.07 0.02
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 11,419,635 10,196,350
The accompanying notes are an integral part of these interim
consolidated financial statements
URBANA.CA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Three February 23
Months Months 1993
Ended Ended (Inception)
March 31 March 31 to
2000 1999 March 31 2000
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss for the period (777,535) (193,931) (2,054,844)
Adjustments to reconcile net
loss to net cash from
operating activities:
- depreciation and amortization 187,734 1,007 193,873
- imputed interest on long term
debt - - 9,000
- organization costs - - (308)
- - loss on disposal of furniture
- - and equipment - - 3,620
- write-off of interest in mineral
property - - 15,000
- write-off of investment in
graphite processing joint venture - - 253,408
- - net changes in non-cash
- - working capital 22,776 18,787 388,768
CASH USED IN OPERATING
ACTIVITIES (567,025) (174,137) (1,191,483)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of furniture and
Equipment (124,322) - (135,745)
Proceeds from sale of furniture
and equipment - - 1,972
Acquisitions of subsidiaries net
of cash acquired (Note 3) (75,602) - (75,602)
Investment in graphite processing
joint venture - - (37,463)
Purchase of other assets - - (4,500)
CASH USED IN INVESTING
ACTIVITIES (199,924) - (251,338)
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances to related parties (158,698) - (136,467)
Payments on agreement payable - - (70,000)
Loan advances 1,224,162 - 1,284,162
Issuance of common stock - 173,502 662,446
CASH FROM FINANCING ACTIVITIES 1,065,464 173,502 1,740,141
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (13,097) - (11,367)
INCREASE (DECREASE) IN CASH 285,418 (635) 285,953
CASH, BEGINNING OF PERIOD 535 713 -
CASH, END OF PERIOD 285,953 78 285,953
Non-cash activities: Refer to Notes 3 and 5.
The accompanying notes are an integral part of these interim
consolidated financial statements
URBANA.CA, INC.
(A development stage company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was organized on February 23, 1993 under the laws of
the State of Delaware as PLR, Inc. On October 3, 1997, it
changed its name to Integrated Carbonics Corp. and on October 30,
1997, changed its jurisdiction of incorporation to Nevada. On
April 15, 1999 a wholly-owned subsidiary company, U.R.B.A.
Holdings Inc. ("URBA") (formerly ICC Integrated Carbonics
(Canada) Corp.), was incorporated under the laws of British
Columbia to facilitate acquisitions in Canada.
During January, 2000, the Company entered into agreements to
acquire, through URBA, 100% of the outstanding shares of
Urbana.ca Enterprises Corp. ("Urbana Enterprises"), E-Bill Direct
Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"), which
are in the business of developing and marketing internet based
products and services through the distribution of set top boxes.
The consolidated financial statements have been prepared on the
basis of a going concern which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. The Company is a development stage enterprise and as
such has no revenue and is incurring substantial costs in
connection with the development of its business and requires
additional working capital to fund ongoing losses from
operations. The ability of the Company to continue as a going
concern is dependent on its ability to obtain additional
financing and ultimately to attain profitable operations.
During April, 2000 the Company entered into an Agency agreement
with Groome Capital.com Inc. ("Groome") whereby Groome will use
its best efforts to raise up to $25,000,000 by way of a private
placement of special warrants at a price of $1.25 per special
warrant. (Refer to Note 10)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are expressed in US dollars and have
been prepared in accordance with accounting principles generally
accepted in the United States.
Principles of Consolidation
The financial statements include the accounts of the Company and
its wholly-owned subsidiaries U.R.B.A. Holdings Inc. and Urbana
Enterprises Corp. Urbana Enterprises Corp. was formed effective
March 10, 2000, when Urbana Enterprises, Enersphere and E-Bill
were amalgamated under the statutory laws of the Province of
Ontario. All significant intercompany balances and transactions
are eliminated on consolidation.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Goodwill
The company amortizes goodwill on a straight-line basis over five
years.
Foreign Currency Translation
The financial statements are presented in United States dollars.
In accordance with Statement of Financial Accounting Standards
No. 52, "Foreign Currency Translation", foreign denominated
monetary assets and liabilities are translated to their United
States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the period.
Related translation adjustments are reported as a separate
component of stockholders' equity, whereas gains or losses
resulting from foreign currency transactions are included in
results of operations.
Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period.
Dilutive earnings per share reflects the potential dilution of
securities that could share in the earnings of the Company.
Because the Company does not have any potentially dilutive
securities, the accompanying presentation is only of basic loss
per share.
Stock-based Compensation
The Company accounts for stock-based compensation using the
intrinsic value based method in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No.25"). APB No. 25 requires that compensation
cost be recorded for the excess, if any, of the quoted market
price of the common stock over the exercise price at the date the
options are granted. In addition, as required by SFAS No. 123,
the company provides pro-forma disclosure of the impact of
applying the fair value method of SFAS No. 123.
NOTE 3 - ACQUISITIONS
Urbana Enterprises
By agreement dated January 4, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of
Urbana Enterprises, a company engaged in distribution of Linux
based set top boxes which are used as an alternative method of
delivering internet content. Urbana Enterprises was incorporated
November 18, 1998 in the province of British Columbia.
In consideration for the acquisition, URBA issued 3,000,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. A holder of an exchangeable
share may, at any time, require URBA to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the Company. URBA may satisfy the
resulting obligation in cash or in Company shares at its option.
Pursuant to the terms of the agreement, the Company issued
3,000,000 common shares in trust to be held under the terms of a
trust agreement executed January 4, 2000 until such time as the
exchangeable shares are exchanged by their holders or all
remaining exchangeable shares are cancelled.
In anticipation of this acquisition, two shareholders of Urbana
Enterprises, each holding a 36.75% interest in Urbana
Enterprises, became directors of the Company effective July 21,
1999 and, subsequent to the acquisition, entered into five year
management contracts for an aggregate of Cdn$120,000 in year 1
and for amounts to be negotiated for years 2 through 5. In
addition, the Company has also agreed to grant a total of 400,000
stock options to these individuals pursuant to the Stock Option
Plan implemented in 1999.
This business combination has been accounted for using the
purchase method of accounting. The purchase price has been
allocated as follows:
Assets acquired at fair value:
Current assets $ 17,716
Capital assets 7,387
Goodwill 1,093,102
1,118,205
Liabilities assumed at fair value:
Accounts payable (87,474)
Due to related parties (130,731)
Purchase price 3,000,000 shares at
$0.30 per share $ 900,000
Urbana Enterprises had net losses totaling $193,171 for the
period from May 1, 1999 (inception) to the date of acquisition.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $54,655 has
been recorded in the current period.
E-Bill
By agreement dated January 10, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of E-
Bill, a company engaged in designing, developing and providing
electronic presentment and payment services to the business
community. E-Bill was incorporated May 27, 1999 in the province
of Ontario.
In consideration for the acquisition, URBA issued 2,950,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. A holder of an exchangeable
share may, at any time, require URBA to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the Company. URBA may satisfy the
resulting obligation in cash or in Company shares at its option.
Pursuant to the terms of the agreement, the Company issued
2,950,000 common shares in trust to be held under the terms of a
trust agreement executed January 10, 2000 until such time as the
exchangeable shares are exchanged by their holders or all
remaining exchangeable shares are cancelled.
E-Bill had losses totaling $16,214 for the period from May 27,
1999 (inception) to the date of acquisition.
Subsequent to the acquisition, the Company signed three year
management contracts with the two principals of E-Bill in the
aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and
Cdn$120,000 in year 3. In addition, the Company has also agreed
to grant a total of 200,000 stock options to these individuals
pursuant to the Stock Option Plan implemented in 1999.
This business combination has been accounted for using the
purchase method of accounting. The purchase price has been
allocated as follows:
Assets acquired at fair value:
Current assets $ 9
Capital assets 4,646
Goodwill 812,645
817,300
Liabilities assumed at fair value:
Accounts payable (4,021)
Due to related parties (16,779)
Purchase price 2,950,000 shares at
$0.27 per share 796,500
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $40,632 has
been recorded in the current period.
Enersphere
By agreement dated January 9, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of
Enersphere, a content company that utilizes set top boxes as
their medium to deliver internet and intranet-based services to
customers. Enersphere was incorporated September 28, 1999 in the
province of Ontario.
In consideration for the acquisition, URBA paid $84,828 and
issued 4,500,000 non-voting exchangeable shares. The holders of
these shares have been granted votes in the Company on a basis of
one vote for each exchangeable share of URBA held. A holder of an
exchangeable share may, at any time, require URBA to repurchase
the exchangeable share for an amount equal to the then current
market value of a common share of the Company. URBA may satisfy
the resulting obligation in cash or in Company shares at its
option.
Pursuant to the terms of the agreement, the Company issued
4,500,000 common shares in trust to be held under the terms of a
trust agreement executed January 9, 2000 until such time as the
exchangeable shares are exchanged by their holders or all
remaining exchangeable shares are cancelled.
Enersphere had net losses totaling $114,917 for the period from
September 28, 1999 (inception) to the date of acquisition.
Subsequent to the acquisition, the Company signed two year
management contracts with the two principals of Enersphere in the
aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In
addition, the Company has also agreed to grant a total of 200,000
stock options to these individuals pursuant to the Stock Option
Plan implemented in 1999.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $86,486 has
been recorded in the current period.
This business combination has been accounted for using the
purchase method of accounting. The purchase price has been
allocated as follows:
Assets acquired at fair value:
Current assets $ 3,540
Capital assets 10,324
Goodwill 1,729,731
1,743,595
Liabilities assumed at fair value:
Accounts payable (28,995)
Due to related parties (99,772)
Purchase price $84,828 and
4,500,000 shares at $0.34 per share $ 1,614,828
NOTE 4 - LOANS PAYABLE
The Company has outstanding loans totaling $1,284,162 which bear
interest at an annual rate of 8%. These loans were due and
payable on March 15, 2000. The Company did not repay these loans
and as a result has offered the lenders the right to convert the
principal amount of the loan into units of the Company at a price
of $0.57 per unit. Each unit is comprised of one common share of
the Company and one-half share purchase warrant. Each whole share
purchase warrant entitles the holder to purchase an additional
common share of the Company at a price of $5.00 per share. This
offer is to be made by way of a prospectus that is being
conducted in Ontario, Quebec and British Columbia, Canada.
NOTE 5 - CAPITAL STOCK
During the quarter ended March 31, 2000 the following shares were
issued:
Common shares
The Company settled $40,000 due to a relative of a director by
the issuance of 100,000 restricted shares of common stock at a
price of $0.40 per share.
The Company settled a total of $99,900 of accounts payable by the
issuance of 333,000 restricted shares of common stock at a price
of $0.30 per share.
The Company settled $9,190 of accounts payable by the issuance of
22,975 restricted shares of common stock at a price of $0.40 per
share.
The Company issued 50,000 restricted shares of common stock, at a
price of $0.40 per share, as a retainer pursuant to a media
relations contract dated December 15, 1999.
Refer to Notes 3 and 10.
Exchangeable shares
The Company's subsidiary, URBA, issued a total of 10,450,000
exchangeable shares as consideration for the acquisitions of
Urbana Enterprises, E-Bill and Enersphere as described in Note 3.
The holders of these shares have been granted votes in the
Company on a basis of one vote for each exchangeable share of
URBA held and may, at any time, require URBA to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the Company.
NOTE 6 - RELATED PARTY TRANSACTIONS
All amounts due to and from related parties are unsecured, non-
interest bearing, and have no specific terms of repayment.
Refer to Notes 3 and 5.
NOTE 7 - STOCK-BASED COMPENSATION
The Company has adopted a Stock Option Plan which will provide
options to purchase up to 2,000,000 common shares of the Company
for its employees, officers and directors. The options that will
be granted pursuant to the Stock Option Plan are exercisable at a
price of $0.50 which is equal to the fair value of the common
shares at the time of adoption of the plan.
As at March 31, 2000, no stock-based compensation cost has been
recorded for any period and no stock options have been issued
under this plan.
NOTE 8 - INCOME TAXES
The Company has net operating loss carryforwards which result in
deferred tax assets. The realization of the benefits from these
deferred tax assets appears uncertain due to the Company's limited
operating history and continuing losses. Accordingly, no benefit
has been recorded for deferred tax assets.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS
No. 107. Disclosures about Fair Value of Financial Instruments.
The estimated fair value amounts have been determined by the
Company, using available market information and appropriate
valuation methodologies. The fair value of financial instruments
classified as current assets or liabilities including cash and
cash equivalents and notes and accounts payable approximate
carrying value due to the short-term maturity of the instruments.
Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something
other than a date. Although the change in date has occurred, it
is not possible to conclude that all aspects of the Year 2000
issue that may affect the Company, including those related to
customers, suppliers, or other third parties, have been fully
resolved.
NOTE 10 - SUBSEQUENT EVENTS
Financing Agreement
The Company entered into an Agency agreement effective April 10,
2000 with Groome Capital.com Inc. whereby the Company and Groome
will engage in a best efforts offering of up to 20,000,000
Special Warrants at a price of $1.25 per Special Warrant. Each
Special Warrant is convertible into one common share and one-half
share purchase warrant exercisable for a period of two years at a
price of $5.00 per whole share purchase warrant. Groome will
receive an Agent's Fee equal to 8% of the total amount raised
(reduced to 4% for investors on the President's List). In
addition, Groome has been granted non-assignable warrants to
acquire, without payment of additional consideration, 1 year
Compensation Options providing the right to purchase, at $1.25
per unit, a number of units equal to 10% of the number of Special
Warrants sold under this offering. To date the Company has
received subscriptions for 847,989 units with total proceeds of
$1,060,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
During the quarter the Company continued with its program to
develop Urbana.ca, Inc. ("Urbana") (formerly Integrated Carbonics
Corp.) into an operating company.
For the three months ended March 31, 2000, Urbana had a net loss
of $777,535 or $0.07 cents per share. This loss compares with a
loss of $193,931 or $0.02 cents per share for the corresponding
three-month period ended March 31, 1999.
During the quarter, a wholly-owned subsidiary company, changed
its name from ICC Integrated Carbonics (Canada) Corp. to U.R.B.A.
Holdings Inc. ("URBA").
During the quarter the Company acquired through URBA all of the
outstanding shares of three Canadian companies which are in the
business of developing and marketing internet based products and
services through the distribution of set top boxes. The
companies acquired were Urbana.ca Enterprises Corp. ("Urbana
Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com,
Inc. ("Enersphere"). On March 10, 2000 these companies were
amalgamated under the statutory laws of the province of Ontario
to form Urbana Enterprises Corp.
Urbana Enterprises
Urbana Enterprises was incorporated November 18, 1998 in the
province of British Columbia. Urbana Enterprises is engaged in
the distribution of Linux based set top boxes used as an
alternative method of delivering Internet content. From
inception (second quarter in 1999) to the date of acquisition,
losses totaled $193,171. Comparative pro forma financial
information is therefore not available in this quarter.
In consideration of the acquisition, URBA issued 3,000,000 non-
voting exchangeable shares. The holders of these shares have
been granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. The holder of these shares at
any time may require URBA to repurchase the shares at the then
current market value of the common shares. At its option, URBA
may satisfy this obligation in cash or in Company shares. Any
exchangeable share not exchanged within 25 years is to be
cancelled.
The terms of the acquisition agreement required the Company to
issue 3,000,000 common shares to ensure URBA has sufficient
shares of the Company to satisfy its repurchase obligations. The
common shares are held under a trust agreement until such time as
the exchangeable shares are exchanged or cancelled. In
connection with the acquisition, the Company signed five-year
management contracts with the two principals The Company agreed
to grant a total of 400,000 stock options to these individuals.
The business combination has been accounted for using the
purchase method of accounting. The 3,000,000 shares issued on
acquisition have been valued at $0.30 per share for a purchase
price of $900,000. Goodwill arising on this acquisition is being
amortized on a straight-line basis over 5 years with amortization
of $54,655 recorded during the quarter.
E-Bill
E-Bill was incorporated May 27, 1999 in the province of Ontario.
E-Bill is engaged in designing, developing and providing
electronic presentment and payment services to the business
community. From inception (second quarter in 1999) to the date
of acquisition, losses totaled $16,214. Comparative pro-forma
financial information for 1999 is therefore not available in this
quarter.
In consideration of the acquisition, URBA issued 2,950,000 non-
voting exchangeable shares. The holders of these shares have
been granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. The holder of these shares at
any time may require URBA to repurchase the shares at the then
current market value of the common shares. At its option, URBA
may satisfy this obligation in cash or in Company shares. Any
exchangeable share not exchanged within 25 years is to be cancelled.
The terms of the acquisition agreement required the Company to
issue 2,950,000 common shares to ensure URBA has sufficient
shares of the Company to satisfy its repurchase obligations. The
common shares are held under a trust agreement until such time as
the exchangeable shares are exchanged or cancelled. In
connection with the acquisition, the Company signed three-year
management contracts with the two principals. The Company agreed
to grant a total of 200,000 stock options to these individuals.
The business combination has been accounted for using the
purchase method of accounting. The 2,950,000 shares issued on
the acquisition have been valued at $0.27 per share for a
purchase price of $796,500. Goodwill arising on this acquisition
is being amortized on a straight-line basis over 5 years with
amortization of $40,632 recorded during the quarter.
Enersphere
Enersphere was incorporated September 28, 1999 in the province of
Ontario. Enersphere is a content company that utilizes set top
boxes as their medium to deliver internet and intranet-based
services to customers. From inception (third quarter in 1999) to
the date of acquisition, losses totaled $114,917. Comparative
pro-forma financial information for 1999 is therefore not
available in this quarter.
In consideration of the acquisition, URBA paid $84,828 cash and
issued 4,500,000 non-voting exchangeable shares. The holders of
these shares have been granted votes in the Company on a basis of
one vote for each exchangeable share of URBA held. The holder of
these shares at any time may require URBA to repurchase the
shares at the then current market value of the common shares. At
its option, URBA may satisfy this obligation in cash or in
Company shares. Any exchangeable share not exchanged within 25
years is to be cancelled
The terms of the acquisition agreement required the Company to
issue 4,500,000 common shares to ensure URBA has sufficient
shares of the Company to satisfy its repurchase obligations. The
common shares are held under a trust agreement until such time as
the exchangeable shares are exchanged or cancelled. In
connection with the acquisition, the Company signed two-year
management contracts with the two principals. The Company agreed
to grant a total of 200,000 stock options to these individuals.
The business combination has been accounted for using the
purchase method of accounting. The 4,500,000 shares issued on
the acquisition have been valued at $0.34 per share for a
purchase price of $1,614,828, including the cash payment.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years with amortization of $86,486
recorded during the quarter.
Liquidity and Capital Resources
Urbana is a development stage enterprise. The Company has no
revenue and is continuing to incur substantial costs in
connection with pursuing the development of its business. The
Company's continued existence is dependent on its ability to
obtain sufficient financing to meet its financial needs.
At March 31, 2000 the Company had working capital of $187,297.
This compares with a working capital deficiency of $135,985 at
March 31, 1999.
During the quarter the Company settled debts of $40,000 due to a
relative of a director of the Company by the issuance of 100,000
restricted shares at $0.40 per share. The Company settled a
total of $99,900 of accounts payable by the issuance of 333,000
restricted shares at $0.30 per share and $9,190 of accounts
payable by the issuance of 22,975 restricted shares at $0.40 per
share. The Company issued 50,000 restricted shares at $0.40 per
share as a retainer on a media relations contract. As
consideration for the acquisition of the three subsidiaries
during the quarter, URBA issued a total of 10,450,000
exchangeable shares.
During the quarter the Company received loans of $1,224,162 for
total loans of $1,284,162. These loans bear interest at an
annual rate of 8% and were due and payable on March 15, 2000.
The Company did not repay these loans and as a result has offered
the lenders the right to convert the principal into units of the
Company at a price of $0.57 per unit. Each unit is comprised of
one common share of the Company and one-half share purchase
warrant. Each whole share purchase warrant entitles the holder
to purchase an additional share at a price of $5.00 per share.
This offer is to be made by way of a prospectus that is being
conducted in Ontario, Quebec and British Columbia in Canada.
Subsequent to the quarter, the Company entered into an Agency
agreement with Groome Capital.com Inc. ("Groome") whereby the
Company and Groome will engage in a best efforts offering of up
to 20,000,000 Special Warrants at a price of $1.25 per Special
Warrant. Each Special Warrant is convertible into one share and
one-half share purchase warrant exercisable for a period of two
years at a price of $5.00 per whole share purchase warrant.
Groome will receive an Agent's Fee equal to 8% of the total
amount raised (reduced to 4% for investors on the President's
List). Groome has also been granted non-assignable warrants to
acquire, without payment, one year Compensation Options which
provide the right to purchase, at $1.25 per unit, a number of
units equal to 10% of the number of Special Warrants sold under
this offering. To date the Company has received subscriptions
for 847,989 units with total proceeds of $1,060,000.
The Company intends to use the proceeds from the financing to
fund operating deficits, research and development, joint venture
agreements, acquisitions and working capital.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on March 31, 2000.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Registrant's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Rule 175 of
the Securities Act of 1933, as amended, and Rule 3b-6 of the
Securities Act of 1934, as amended, including statements
regarding, among other items, the Registrant's business
strategies, continued growth in the Registrant's markets,
projections, and anticipated trends in the Registrant's business
and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Registrant's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Registrant's
control. The Registrant cautions that these statements are
further qualified by important factors that could cause actual
results to differ materially from those in the forward looking
statements, including, among others, the following: reduced or
lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Registrant disclaims any
intent or obligation to update "forward looking statements."
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
In January, 2000, the Registrant formally completed the
acquisition of one British Columbia corporation (Urbana.ca
Enterprises Corporation) and two Ontario corporations
(Enersphere.com, Inc. and E-Bill Direct, Inc.) (collectively,
"Acquired Entities"). These acquisitions were completed with the
execution of a Share Exchange and Share Purchase Agreement with
each company wherein the shareholders of each Acquired Entity
received Exchangeable Non-Voting shares in the capital of URBA
Holdings Inc. that are exchangeable on a one-for-one basis to
restricted common shares in the capital of the Registrant (see
Exhibits 10.6, 10.7, and 10.8 to this Form 10-QSB). The
aggregate consideration paid for the Acquired Entities was
10,450,000 common shares of the Registrant (after conversion)
plus $84,828 CDN in cash payments to Enersphere.com, Inc. All
consideration is paid in full.
In January, 2000, Urbana.ca Enterprises Corp. entered into an
Exclusivity Agreement with Eagle Wireless International, Inc. of
League City, Texas (see Exhibit 10.9 to this Form 10-QSB). Within
the terms of this Agreement, Eagle has agreed to manufacture and
sell Set-Top Boxes to the Registrant and granted exclusive right
to the Registrant to sell Eagle Manufactured STBs in Canada in
return for certain volume p/purchases by the Registrant over a 24
month period. The Registrant also entered into a License
Agreement with USA Video of Mystic, Connecticut wherein certain
compression technology developed by USA Video will be embedded in
STBs manufactured by Eagle and sold by the Registrant.
In March 2000, the Registrant undertook the merger of the three
Acquired Entities into Urbana Enterprises Corp., an Ontario
registered corporation wholly owned by the Registrant (see
Exhibit 2.2 to this Form 10-QSB). The resulting corporate
structure has the Registrant, which operates as a financing and
holding Registrant for its two wholly owned subsidiaries: (a)
URBA Holdings Inc. a non-operating subsidiary which facilitated
the acquisition of the subsidiaries; and (b) Urbana Enterprises
Corp., an Ontario registered corporation which is the operating,
wholly owned subsidiary company established to execute the
business plan of the Registrant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. The following report on Form 8-K were
filed during the first quarter of the fiscal year covered by this
Form 10-QSB, as follows:
A Form 8-K was filed on March 30, 2000 which reflected the
following: (1) Effective on January 26, 2000, the independent
accountant who was previously engaged as the principal accountant
to audit the Registrant's financial statements, Kurt D. Saliger,
C.P.A., resigned; and (b) effective on January 27, 2000, the firm
of LaBonte & Co. was engaged to serve as the new principal
accountant to audit the Registrant's financial statements.
(b) Exhibits. Exhibits included or incorporated by reference herein:
See Exhibit Index.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Urbana.ca, Inc.
Dated: May 15, 2000 By: /s/ Jason Cassis
Jason Cassis, Chief Executive Officer
EXHIBIT INDEX
Exhibit Description
No.
2.1 Articles of Merger of Foreign Corporation into Integrated
Carbonics Corp. (incorporated by reference to Exhibit 2 to the
Registration Statement on Form 10-SB/A filed on December 17,
1998).
2.2 Amalgation Agreement between Urbana.ca Enterprises Corp.,
Enersphere.com, Inc., and E-Bill Direct Inc., dated March 3, 2000
(see below).
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form 10-SB/A filed
on December 17, 1998.
3.2 Certificate of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.2 of the Form 10-QSB
filed on November 15, 1999).
3.3 Bylaws (incorporated by reference to Exhibit 3.2 of the
Registration Statement on Form 10-SB/A filed on December 17, 1999).
4 Integrated Carbonics Corp. 1999 Stock Option Plan
(incorporated by reference to Exhibit 4 to the Form 10-QSB filed
on November 15, 1999).
10.1 Agreement between PLR, Inc. and Da-Jung Resource Corp.,
dated September 22, 1997 and PLR, Inc. (incorporated by reference
to Exhibit 10.1 of the Registration Statement on Form 10-SB/A
filed on December 17, 1998).
10.2 Agreement between Integrated Carbonics Corp. and Da-Jung
Resource Corp., dated October 7, 1997 (incorporated by reference
to Exhibit 10.2 of the Registration Statement on Form 10-SB/A
filed on December 17, 1998).
10.3 Agreement on Establishment of Sino Equity Joint Venture,
China-Canada Liumao Graphite Products Co. Ltd., dated September 9,
1997 (incorporated by reference to Exhibit 10.3 of the
Registration Statement on Form 10-SB/A filed on December 17, 1998).
10.4 Equity Joint Venture Agreement between Integrated Carbonics
Corp. and Liumao Graphite Mine, dated November 10, 1997
(incorporated by reference to Exhibit 10.4 of the Registration
Statement on Form 10-SB/A filed on December 17, 1998).
10.5 Cooperative Joint Venture Agreement between Da-Jung Resource
Corp. and Heilongjiang Geological and Mining Technology
Development Corp., dated September 9, 1997 (incorporated by
reference to Exhibit 10.5 of the Registration Statement on Form
10-SB/A filed on December 17, 1998).
10.6 Share Exchange and Share Purchase Agreement between the
Registrant, ICC Integrated Carbonics (Canada) Corp., and
Enersphere.com, Inc., dated December 1, 1999 (see below).
10.7 Share Exchange and Share Purchase Agreement between the
Registrant, ICC Integrated Carbonics (Canada) Corp., and
Urbana.ca Enterprises Corp., dated January 4, 2000 (see below).
10.8 Share Exchange and Share Purchase Agreement between the
Registrant, ICC Integrated Carbonics (Canada) Corp., and E-Bill
Direct, Inc., dated January 10, 2000 (see below).
10.9 Exclusivity Agreement between Urbana.ca Enterprises Corp.
and Eagle Wireless International, Inc., dated January 17, 2000.
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Form 10-KSB filed on March 31, 2000).
27 Financial Data Schedule (see below).
THIS AMALGAMATION AGREEMENT entered into this 3rd day of March, 2000. PRIVATE
BETWEEN:
E-Bill Direct Inc.
(hereinafter referred to as "E-Bill")
OF THE FIRST PART
- - and -
Enersphere.com Inc.
(hereinafter referred to as "Enersphere")
OF THE SECOND PART
- - and -
Urbana.ca Enterprises Corp.
(hereinafter referred to as "Urbana")
OF THE THIRD PART
WHEREAS:
A. E-Bill was incorporated under the Business Corporations Act
(Ontario) (the "Act") by Articles of Incorporation dated the 27th
day of May, 1999.
B. Enersphere was incorporated under the Act by Articles of
Incorporation dated the 28th day of September, 1999.
C. Urbana. was incorporated under the Company Act (British
Columbia) by Articles of Incorporation dated the 18th day of
November, 1998, and continued under the Act by Articles of
Continuance dated the 3rd day of March, 2000.
D. Urbana, Enersphere and E-Bill acting under the authority
contained in the Act have agreed to amalgamate on the terms and
conditions set out below;
E. Urbana, Enersphere and E-Bill have each made full disclosure
to the others of all their respective assets and liabilities.
F. It is desirable that the said amalgamation should be
effected;
NOW THEREFORE the parties have agreed as follows:
1. In this Agreement the expression "Amalgamated Corporation"
means the Corporation continuing from the amalgamation of E-Bill,
Enersphere and Urbana, the parties to this Agreement.
2. E-Bill, Enersphere and Urbana do hereby agree to amalgamate
under the provisions of Section 183 of the Act and to continue as
one corporation on and subject to the terms and conditions set
out below.
3. The name of the amalgamated Corporation shall be:
URBANA ENTERPRISES CORP.
4. The registered office of the amalgamated Corporation shall
be at the City of Cambridge, in the Province of Ontario.
5. The Amalgamated Corporation is authorized to issue an
unlimited number of shares of a class designated as Common Shares.
6. The right to issue, allot or transfer its shares shall be
restricted in that no share or shares of the Amalgamated
Corporation shall be issued, allotted or transferred without either:
(a) the approval of the Board of Directors evidenced by
Resolution of the Board of Directors or by an instrument or
instruments in writing signed by a majority of the members of the
Board of Directors; or
(b) approval of the holders of at least 51% of the shares
having full voting rights for the time being outstanding,
evidenced by a Resolution passed at a meeting of the holders of
such outstanding shares, or by an instrument or instruments in
writing signed by the holders of at least 51% of such outstanding
shares.
No allotment or issue of the Amalgamated Corporation's
securities shall be made pursuant to any invitation to the public
to subscribe for such securities.
7. The minimum number of directors of the Amalgamated
Corporation shall be one (1) and the maximum number of directors
shall be ten (10).
8. There shall be no restrictions on the business which the
Amalgamated Corporation is authorized to carry on.
9. (a) The number of shareholders of the Amalgamated
Corporation, exclusive of persons who are in its employment and
exclusive of persons who, having been formerly in the employment
of the Amalgamated Corporation, were, while in the employment,
and have continued after the termination of that employment, to
be shareholders of the Amalgamated Corporation, is limited to not
more than fifty, two or more persons who are the joint registered
owners of one or more shares being counted as one shareholder.
(b) Any invitation to the public to subscribe for
securities of the Amalgamated Corporation is prohibited.
(c) The directors may, and they are hereby authorized from
time to time when they deem it expedient:
(i) borrow money upon the credit of the Amalgamated Corporation;
(ii) issue bonds, debentures, notes or other securities
of the Amalgamated Corporation and pledge or sell the same for
such prices or other consideration as may be deemed expedient;
(iii) notwithstanding the provisions of the Civil Code of Quebec or
any other law, hypothecate, mortgage, pledge and charge, cede and transfer
the property, undertaking and assets, real or personal, moveable or
immoveable, present or future, of the Amalgamated Corporation, to secure
any such bonds, debentures, notes and securities or give any guarantee(s)
or give part only of such guarantee for such purposes and constitute the
hypothec, mortgage or pledge or charge or cession, and transfer
any of the above mentioned by trust deed in accordance with
section 23 and 24 of the Special Corporate Powers Act, (Quebec),
or any successor thereto, or in any other manner.
(iv) hypothecate or mortgage the immoveable property of
the Amalgamated Corporation or pledge or otherwise affect the
moveable property, or give all such guarantees to secure the
payment of loans made otherwise than by the issue of debentures,
as well as the payment or performance of any other debt, contract
or obligations of the Amalgamated Corporation;
(v) exercise generally all or any of the rights or
powers which the Amalgamated Corporation itself may exercise
under its charter and the laws governing it; and
(vi) delegate in and by any resolution or by-law to any
officers or directors all or any of the powers hereby conferred
upon the directors.
Nothing contained herein shall limit or restrict the
borrowing of money by the Amalgamated Corporation on bills of
exchange or promissory notes made, drawn, accepted or endorsed by
or on behalf of the Amalgamated Corporation or to affect, alter
or restrict any power or authority conferred upon the directors
by any other by-laws or resolutions of the Amalgamated
Corporation.
(d) The Amalgamated Corporation may, at any time and from
time to time, purchase for cancellation or otherwise acquire any
of its issued shares of any class or any of its warrants pursuant
to the provisions of the Act at the lowest price and on the most
favourable terms which, in the opinion of the board of directors
of the Amalgamated Corporation, such shares or warrants are
obtainable.
10. The first directors of the Amalgamated Corporation shall be
the persons whose names and addresses are set out below, who
shall hold office until the first annual meeting of the
Amalgamated Corporation or until their successors are elected or
appointed:
Name Address
David M. Groves 2523 Robinson Street
Mississauga, Ontario
L5C 2P2
Jason I. Cassis 1276 Shaver Road
Ancaster, Ontario
L9G 3L1
The directors shall subsequently be elected each year at
either a general meeting or the annual meeting of the
shareholders by a majority of the votes cast at the meeting. The
management and supervision of the business and affairs of the
Amalgamated Corporation shall be under the control of the board
of directors from time to time, subject to the provisions of the
Act.
11. The authorized shares of E-Bill, Enersphere and Urbana shall
be converted into authorized and issued shares of the Amalgamated
Corporation as follows:
(a) the 2,950,000 issued and outstanding common shares in
the capital of E-Bill shall be converted into 2,950,000 common
shares in the capital of the Amalgamated Corporation at the rate
of one (1) common share of E-Bill being converted into one (1)
common share of the Amalgamated Corporation;
(b) the 2,123,000 issued and outstanding common shares in
the capital of Enersphere shall be converted into 2,123,000
common shares in the capital of the Amalgamated Corporation at
the rate of one (1) common share of Enersphere being converted
into one (1) common share of the Amalgamated Corporation; and
(c) the 10,000,000 issued and outstanding common shares in
the capital of Urbana shall be converted into 10,000,000 common
shares in the capital of the Amalgamated Corporation at the rate
of one (1) common share of Urbana being converted into one (1)
common share of the Amalgamated Corporation.
After the issue of a Certificate of Amalgamation giving
effect to the amalgamation contemplated by this Agreement, the
shareholders of E-Bill, Enersphere and Urbana shall, at the
request of the Amalgamated Corporation, surrender the
certificates representing shares held by them in E-Bill,
Enersphere and Urbana and, in return, shall be entitled to
receive certificates representing shares of the Amalgamated
Corporation on the basis set out above.
12. The by-laws of E-Bill shall, to the extent not inconsistent
with this Agreement, be the by-laws of the Amalgamated
Corporation, until repealed, amended, altered or added to.
13. E-Bill shall contribute to the Amalgamated Corporation all
of its property and its assets subject to all its liabilities.
14. Enersphere shall contribute to the Amalgamated Corporation
all of its property and its assets subject to all its
liabilities.
15. Urbana shall contribute to the Amalgamated Corporation all
of its property and its assets subject to all its liabilities.
16. The Amalgamated Corporation shall possess all the property,
assets, rights, privileges and franchises and shall be subject to
all the contracts, liabilities, debts and obligations of E-Bill,
Enersphere and Urbana.
17. No action or proceeding by or against E-Bill, Enersphere and
Urbana shall abate or be affected by the amalgamation, but for
all purposes of the action or proceeding, the names of the
Amalgamated Corporation shall be substituted in the action or
proceeding in place of E-Bill, Enersphere and Urbana as the case
may be.
18. On the shareholders of E-Bill, Enersphere and Urbana
respectively approving this agreement in accordance with the
provisions of the Act, the parties to this agreement shall
complete and send Articles of Amalgamation prescribed form to the
Director, Corporations Branch, Ministry of Consumer and
Commercial Relations , providing for the amalgamation of E-Bill,
Enersphere and Urbana on and subject to the terms and conditions
of this agreement.
19. This agreement may be terminated without cause or reason by
the board of directors of any of E-Bill, Enersphere and Urbana,
despite the approval of this agreement or by the shareholders of
E-Bill, Enersphere and Urbana, at any time before the issue of a
Certificate of Amalgamation under the Act.
IN WITNESS WHEREOF this Agreement has been duly executed by
the Parties to as witnessed by the signatures of their proper
offices in that behalf
E-BILL DIRECT INC.
Per: /s/ David Groves
President & Secretary - David Groves
ENERSPHERE.COM INC.
Per: /s/ Rick Whittaker
President - Rick Whittaker
Per: /s/ John Cullen
Secretary - John Cullen
URBANA.CA ENTERPRISES CORP.
Per: /s/ Jason Cassis
President - Jason Cassis
Per: /s/ Greg Alexanian
Secretary - Greg Alexanian
THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for
reference the 1st day of December, 1999.
AMONG:
URBANA.CA INC., a corporation incorporated under the laws of the
State of Nevada,
(the "Parent")
AND:
ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation
incorporated under the laws of the Province of British Columbia,
(the "Purchaser")
AND:
ENERSPHERE.COM INC., a corporation incorporated under the
laws of the Province of Ontario
(the "Corporation")
AND:
ALL OF THE SHAREHOLDERS OF THE CORPORATIONS as more particularly
described on Schedule "A" attached hereto,
(Individually a "Shareholder" and collectively the "Shareholders");
WHEREAS:
A. The Corporation is an Internet based provider of comprehensive
financial information and consumer products;
B. The Shareholders own all of the issued and outstanding shares
of the Corporation (the "Corporation Shares");
C. The Parent owns all of the issued and outstanding shares in
the capital stock of the Purchaser;
D. The Purchaser desired to purchase all of the Corporation
Shares and the Shareholders desire to sell all of the Corporation
Shares to the Purchaser on the terms and conditions hereinafter
set forth and, on October 1, 1999, entered into a letter of
intent to purchase all of the issued and outstanding shares of
The Corporation and, on <>, 1999, entered into a letter of intent
to purchase all of the issued and outstanding shares of Urbana
(BC) (collectively, the "Letter of Intent");
E. The Letter of Intent called for the parties thereto to enter
into formal share purchase and exchange agreements;
F. The respective boards of directors of the Purchaser, Parent
and Corporation each deem it advisable and in the best interests
of their respective shareholders to combine their respective
businesses by the Purchaser acquiring all of the shares in the
capital stock of the Corporation pursuant to the terms of this
Agreement; and
G. The respective boards of directors of the Purchaser, Parent
and Corporation have approved and adopted this Agreement as a
plan of reorganization under section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and as a transfer
of shares pursuant to section 85 of the Income Tax Act (Canada)
(the "Tax Act").
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of
the foregoing premises, the mutual representations, warranties,
covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such other Person.
"Agreement" means this Share Exchange and Share Purchase
Agreement by and among the Purchaser, Parent, Corporation and
Shareholders.
"Applicable Law" means, with respect to any Person, any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement, all as in effect as of the
Closing, of any Governmental Authority applicable to such Person
or any of its Affiliates or any of their respective properties,
assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or
any of its Affiliates).
"Associate" means with respect to any Person (a) any other Person
of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of
any class of equity securities issued by such other Person, (b)
any trust or other estate in which such Person has a ten percent
(10%) or more beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, and (c) any
relative or spouse of such Person, or any relative of such spouse
who has the same home as such Person or who is a director or
officer of such Person or any Affiliate thereof.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Toronto, Ontario are authorized
or required by law to close.
"Buying Group" means the Purchaser and the Parent.
"Buying Group Business" means the business as heretofore or
currently conducted by the Buying Group.
"Buying Group Contracts" means all contracts, agreements,
options, leases, licences, sales and purchase orders, commitments
and other instruments of any kind, whether written or oral, to which
either the Purchaser or the Parent is a party on the Closing Date.
"Corporation Balance Sheet" means the balance sheet of the
Corporation dated November 30, 1999.
"Corporation Business" means the business as heretofore or
currently conducted by the Corporation.
"Corporation Contracts" means all contracts, agreements, options,
leases, licences, sales and purchase orders, commitments and
other instruments of any kind, whether written or oral, to which
the Corporation, or any Shareholder on behalf of the Corporation,
is a party on the Closing Date.
"Corporation Premises" means those premises that have been
occupied or used, or are occupied or used, by the Corporation in
connection with the Corporation Business.
"Exchange and Voting Agreement" means the agreement in
substantially the form set out in Schedule "B" hereto to be
entered into by the Parent, Purchaser and Trustee.
"Exchangeable Non-Voting Shares" means those 4,500,000 Class "A"
exchangeable, non-voting, participating common shares without par
value in the capital stock of the Purchaser, having those rights
and terms set forth in the Exchange and Voting Agreement and the
Exchangeable Share Provisions, which will be issued to the
Shareholders in consideration for the purchase and sale of the
Corporation Shares.
"Exchangeable Share Provisions" means those rights, restrictions,
terms and provisions pertaining to the Exchangeable Non-Voting
Shares, as set forth in Schedule "F" hereto, and as summarized in
section 5.03 hereof.
"Governmental Authority" means any United States (whether
federal, territorial, state, municipal or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign government, governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or
other subdivision, department or branch of any of the foregoing.
"GST" means all goods and services taxes, sales taxes levied by
the federal government of Canada, value added taxes or multi-
stage taxes and all provincial sales taxes integrated with such
federal taxes, assessed, rated or charged upon the Corporation.
"Interim Period" means the period from and including the date of
this Agreement to and including the Closing Date.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured,
joint or several, due or to become due, vested or unvested,
determined, determinable or otherwise and whether or not the same
is required to be accrued on the financial statements of such
Person.
"Lien" means, with respect to any asset, any mortgage,
assignment, trust or deemed trust (whether contractual, statutory
or otherwise arising), title defect or objection, lien, pledge,
charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such assets.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of
operations, assets, Liabilities, reserves or any other aspect of
a party to this Agreement or to its business that results in a
material adverse effect on, or a material adverse change in, any
such aspect of the party or to its business.
"Parent's Balance Sheet" means the balance sheet of the Parent
dated September 30, 1999.
"Parent Common Shares" means 4,500,000 common shares in the
capital of the Parent to be issued to the Trustee pursuant to
paragraph 2.05 hereof, in consideration of subscription proceeds
from the Trustee of $0.0001 per share, having those rights and
terms as set forth in the Exchange and Voting Agreement.
"Person" includes an individual, body corporate, partnership,
company, unincorporated syndicate or organization, trust,
Trustee, executor, administrator and other legal representative.
"SEC" means the United States Securities and Exchange Commission.
"Stock Option Plan" means the stock option plan of the Parent
which plan is more particularly described in Schedule "H"
attached hereto.
"Subsidiary" means, with respect to any Person, (i) any
corporation as to which more than 10% of the outstanding shares
having ordinary voting rights or power (and excluding shares
having voting rights only upon the occurrence of a contingency
unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by
such Person and/or by one or more of such Person's Subsidiaries,
and (ii) any partnership, joint venture or other similar
relationship between such Person (or any Subsidiary thereof) and
any other Person (whether pursuant to a written agreement or
otherwise).
"Support Agreement" means that agreement between the Parent and
the Purchaser, in the form attached hereto as Schedule "G"
hereto, whereby the Parent agrees to make certain payments and
deliveries to enable the Purchaser to comply with the
Exchangeable Share Provisions.
"Tax" means all taxes imposed of any nature including any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial or local) or foreign
income tax, alternative or add-on minimum tax, profits or excess
profits tax, franchise tax, gross income, adjusted gross income
or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax),
capital tax, real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding
or back up withholding tax, value added tax, GST, severance tax,
prohibited tax, premiums tax, occupation tax, customs and import
duties, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Authority
responsible for the imposition of any such tax or in respect of
or pursuant to any United States (whether federal, territorial,
state or local), Canadian (whether federal, territorial,
provincial or local) or other Applicable Law.
"Tax Return" means all returns, reports, forms or other
information required to be filed with respect to any Tax.
"Trustee" means the Trustee or successor Trustee designated under
the Exchange and Voting Agreement attached hereto as Schedule "B".
"33 Act" means the United States Securities Act of 1933 and all
amendments thereto.
"34 Act" means the United States Securities Act of 1934 and all
amendments thereto.
1.02 Currency Used. All references herein to dollars or the
use of the symbol "$" shall be deemed to refer to United States
dollars unless such reference is prefaced by "CDN" in which case
the reference will be to Canadian dollars.
1.03 Canadian Generally Accepted Accounting Principles. Where the
Canadian Institute of Chartered Accountants or any successor
thereto includes a statement in its handbook or any successor
thereto on a method or alternative methods of accounting or on a
standard or standards of auditing, such statement shall be
regarded as the only generally accepted accounting principle or
principles or generally accepted auditing standard or standards
("Canadian GAAP") applicable to the circumstances that it covers,
and references herein to "generally accepted accounting
principles" shall be interpreted accordingly. All accounting and
financial terms used herein with respect to the Corporation,
unless specifically provided to the contrary, shall be
interpreted and applied in accordance with Canadian GAAP.
1.04 American Generally Accepted Accounting Principles. Where the
American Institute of Certified Public Accountants or any
successor thereto includes a statement in its handbook or any
successor thereto on a method or alternative methods of
accounting or on a standard or standards of auditing, such
statement shall be regarded as the only generally accepted
accounting principle or principles or generally accepted auditing
standard or standards ("American GAAP") applicable to the
circumstances that it covers, and references herein to "generally
accepted accounting principles" shall be interpreted accordingly.
All accounting and financial terms used herein with respect to
the Parent, unless specifically provided to the contrary, shall
be interpreted and applied in accordance with American GAAP.
ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION
2.01 Purchase of Corporation Shares. On the terms and subject to
the conditions set forth herein, the Shareholders hereby agree to
sell, transfer, convey, assign and deliver to the Purchaser, free
and clear of all Corporation Share Encumbrances (as defined in
paragraph 3.01.1), and the Purchaser hereby agrees to purchase,
acquire and accept from the Shareholders, all of the Corporation
Shares held by the Shareholders. At Closing, the Shareholders
will deliver to the Purchaser certificates evidencing all of the
Corporation Shares duly endorsed for transfer and such other
instruments as have been reasonably requested by the Purchaser to
transfer full legal and beneficial ownership of the Corporation
Shares to the Purchaser, free and clear of all Corporation Share
Encumbrances and the Corporation agree to enter the Purchaser or
the Purchaser's nominee on the books of the Corporation as the
holder of the Corporation Shares and to issue one or more
replacement share certificates representing the Corporation
Shares to the Purchaser or the Purchaser's nominee. The
Purchaser shall pay the Purchase Price for the Corporation Shares
in accordance with the terms of Sections 2.02 of this Agreement.
2.02 Purchase Price for Corporation Shares. The aggregate
purchase price to be paid to the Shareholders by the Purchaser
for the Corporation Shares (the "Purchase Price") will be:
(a) 4,500,000 Exchangeable Non-Voting Shares, each
Exchangeable Non-Voting Share exchangeable for a Parent Common
Share on the terms and conditions contained herein; and
(b) those sums totalling CDN$123,000 (the "Purchase Price
Cash Portion") and set forth in Schedule "I" hereto.
The Purchase Price Cash Portion shall be paid at and after
Closing as set forth in Schedule "I".
2.03 Subscription of Parent Common Shares and Optioned Securities.
The Parent agrees to grant:
(a) to each Shareholder, such number of voting rights in
the Parent as is equivalent to the number of Exchangeable Non-
Voting Shares held by each Shareholder, as if each Shareholder
held an equivalent number of Parent Common Shares, and, subject
to the remaining terms of this Agreement, which voting rights
will be exercisable by the Shareholders through their holding
Exchangeable Non-Voting Shares in accordance with the Exchange
and Voting Agreement;
(b) to each Shareholder, the rights to exchange their
Exchangeable Non-Voting Shares for Parent Common Shares, such
rights to be exercised in accordance with the terms of the
Exchange and Voting Agreement;
(c) to Rick Whittaker and John Cullen, Shareholders who are
shareholders of The Corporation, incentive stock options
providing for the purchase of 100,000 Parent Common Shares,
exercisable until June 7, 2001 at an exercise price of $0.50
under the terms of the stock option plan attached hereto as
Schedule "H". In the event that some or all of these incentive
stock options are unexercised on June 7, 2001, the Parent agrees
to grant to each of Rick Whittaker and to John Cullen that number
of incentive stock options which is equal to 100,000 less that
number of incentive stock options they personally exercised on
such terms and conditions as may be permitted under the Parent's
stock option plan effective on June 7, 2001 (or later) and under
applicable laws, statutes and regulations.
To ensure that the Parent has sufficient common shares available
to issue in exchange for Exchangeable Non-Voting Shares, and as
security for its covenant to do so, the Parent agrees to issue
the Parent Common Shares to the Trustee, at or shortly following
Closing, at the purchase price of $0.0001 per share; such Parent
Common Shares to be held in accordance with the Exchange and
Voting Agreement.
2.04 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of
the Parent in Ontario, Canada, on such date as the parties hereto
may mutually agree in writing (the "Closing Date").
2.05 Payment of Purchase Price. At Closing the Purchaser
will deliver to the Shareholders certificates representing the
Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting
Shares to be issued as fully paid and non-assessable, and
registered in the names of the Shareholders and in the
denominations set forth in Schedule "A" to the Exchange and
Voting Agreement. On or shortly following the Closing, the
Parent will issue the Parent Common Shares to the Trustee, such
Parent Common Shares to be issued as fully paid and non-
assessable, and registered in the name of the Trustee in such
denominations as the Trustee may request. At Closing the
Purchaser will also deliver promissory notes (the "Promissory
Notes"), in a form acceptable to the Shareholders and the
Purchaser evidencing the Purchaser's obligation to pay the
Purchase Price Cash Portion. The Promissory Notes shall be
guaranteed by the Corporation and shall be secured by the
Corporation's assets.
2.06 Reversion for Non-Payment of Purchase Price.
Notwithstanding anything else in this Agreement, in the event
that the Purchaser fails to make any of the Purchase Price
payments as outlined in Schedule "I" hereto or in the event that
the Purchaser fails to make any of the Loans as detailed in
paragraph 7.04 then, unless otherwise agreed to in writing by the
Shareholders, the Parent and the Purchaser:
(a) the Shareholders will, within six (6) months of the Default
Date, return to the Purchaser any portion of the Purchase Price
Cash Portion previously paid to them and will agree in writing to
gift back to the treasury of the Purchaser their Exchangeable
Non-Voting Shares;
(b) upon receipt of repayment of the Purchase Price Cash Portion
previously paid to the Shareholders, the Purchaser shall
transfer, for consideration of Cdn $1.00, all shares of the
Corporation back to the Shareholders from whom they were
purchased; and
(c) all Loans made by the Purchaser or the Parent to the
Corporation shall become due and payable on a date (the "Default
Date") being six months from a default on the payment of the
purchase price or a failure to advance a Loan where no extension
has been granted by the Shareholders.
ARTICLE III: REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, each
Shareholder, as to himself, herself or itself and as to such of
the Corporation Shares owned by him, her or it (and not as to any
other Shareholder or to any of the Corporation Shares owned by
any other Shareholder) represents and warrants to the Buying
Group as follows and confirms that the Purchaser and the Parent
are relying upon the accuracy of each of such representations and
warranties in connection with the purchase of the Corporation
Shares and the completion of the transactions set out herein:
3.01 Representations Regarding the Corporation Shares.
3.01.1 Each Shareholder has good and marketable title to his
or her respective holdings in the Corporation Shares, free and
clear of any and all covenants, conditions, restrictions, voting
trust arrangements, rights of first refusal, options, Liens and
adverse claims and rights whatsoever (collectively, the
"Corporation Share Encumbrances"), and on the Closing Date, the
Shareholders will deliver to the Purchaser, good and marketable
title to the Corporation Shares free and clear of any and all
Corporation Share Encumbrances;
3.01.2 Each Shareholder has the full right, power and
authority to enter into this Agreement and each Shareholder has
the full right, power and authority to transfer, convey and sell
to the Purchaser at the Closing his or her respective holdings of
the Corporation Shares sold to the Purchaser by the Shareholders
hereunder, and upon consummation of the purchase, the Purchaser
will acquire from the Shareholders good and marketable title to
the Corporation Shares sold to the Purchaser by the Shareholders,
free and clear of all Corporation Share Encumbrances; and
3.01.3 No Shareholder is a party to, subject to or bound by
any agreement, judgment, order, writ, prohibition, injunction or
decree of any court or other Governmental Authority that would
prevent the execution or delivery to the Purchaser of this
Agreement by any Shareholder, the transfer, conveyance and sale
of the Corporation Shares sold by Shareholder to the Purchaser
pursuant to the terms hereof, or the consummation of the
transactions under this Agreement in accordance with the terms of
this Agreement.
3.02 Authorization. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided
for herein, by each Shareholder are within the respective powers
of each Shareholder and have been duly authorized by all
necessary action on the part of each Shareholder, respectively.
This Agreement has been duly and validly executed by each
Shareholder and constitutes a legal, valid and binding agreement
upon each Shareholder, respectively, enforceable against each
Shareholder in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity or family law.
3.03 Non-Contravention. The execution, delivery and performance
of this Agreement, and the consummation of the transactions
provided for herein, by each Shareholder, do not (a) contravene
or conflict with or constitute a material violation of any
provision of any Applicable Law binding upon or applicable to any
Shareholder or the Corporation Shares or (b) result in the
creation or imposition of any Lien.
3.04 Residency. Each Shareholder is a resident of Canada as
defined in the Income Tax Act (Canada).
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, the
Corporation represent and warrant to the Buying Group as follows:
4.01 Existence and Power. The Corporation is a corporation duly
incorporated, organized and validly existing under the laws of
the Province of Ontario and has all corporate power and all
governmental licences, authorizations, permits, consents and
approvals required to carry on the business of The Corporation as
now conducted and to own and operate business of The Corporation
as now owned and operated. The Corporation is not required to be
qualified to conduct business in any jurisdiction where the
failure to be so qualified, whether individually or in the
aggregate, would have a Material Adverse Effect. No proceedings
have been taken or authorized by The Corporation or any
Shareholder or, to the knowledge of The Corporation, by any other
Person, with respect to the bankruptcy, insolvency, liquidation,
dissolution or winding-up of The Corporation or with respect to
any amalgamation, merger, consolidation, arrangement or
reorganization relating to The Corporation.
4.02 Authorization. The execution, delivery and performance by
the Corporation of this Agreement and the consummation thereby of
the transactions provided for herein are within the Corporations
powers and have been duly authorized by all necessary action on
its part. This Agreement has been duly and validly executed by
the Corporation and constitutes a legal, valid and binding
agreement of the Corporation enforceable against it in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and subject to general
principles of equity.
4.03 Capital Stock.
4.03.1 The authorized capital stock of the Corporation
consists solely of the share capital described in Schedule "A"
hereto (the "Corporation Shares").
4.03.2 All such issued and outstanding Corporation Shares have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Corporation
Shares represent all of the issued and outstanding shares of the
Corporation. The Corporation do not hold any of the issued and
outstanding Corporation Shares in the treasury of the
Corporation, and there are not outstanding (i) any options,
warrants, rights of first refusal or other rights to purchase any
shares of the Corporation except as disclosed in Schedule "C"
hereto, (ii) any securities convertible into or exchangeable for
such shares or (iii) any other commitments of any kind for the
issuance of additional shares of the Corporation or options,
warrants or other securities of the Corporation.
4.04 Subsidiaries. The Corporation have no Subsidiaries.
4.05 Governmental Authorization. The execution, delivery and
performance by the Corporation of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement or which would normally be expected to be required
as part of the transactions contemplated by this Agreement.
4.06 Non-Contravention. The execution, delivery and performance
of this Agreement by the Corporation, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the articles or bylaws of the
Corporation; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Corporation, the Corporation Business
or the Corporation Shares and would not, individually or in the
aggregate, have a Material Adverse Effect; (c) constitute a
default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to
which the Corporation are entitled, under any Corporation
Contract to which the Corporation are a party or any permit or
similar authorization relating to the Corporation, the
Corporation Business or the Corporation Shares by which the
Corporation, the Corporation Business or the Corporation Shares
may be bound or affected; or (d) result in the creation or
imposition of any Lien.
4.07 Financial Statements: Undisclosed Liabilities.
4.07.1 Attached hereto as Schedule "C" are true and complete
copies of the Corporation Balance Sheets as of November 30, 1999
(collectively, the "Corporation Financials").
4.07.2 The Corporation Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Corporation in accordance with Canadian GAAP and present fairly
the financial position, results of operations and statements of
changes in the Corporations financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
Liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to the
Corporation Contracts and commitments for the sale of goods or
the provision of services by the Corporation, contain and reflect
adequate reserves for all reasonably anticipated material losses
and costs and expenses in excess of expected receipts.
4.07.3 To the best of the knowledge of the Corporation, there
are no Liabilities of the Corporation other than: (i) any
Liabilities accrued as Liabilities on the Corporation Balance
Sheet; (ii) Liabilities incurred since the date of the
Corporation Balance Sheet that do not, and could not,
individually or in the aggregate have a Material Adverse Effect;
and (iii) other Liabilities disclosed in this Agreement or in any
schedules attached hereto.
4.08 Absence of Certain Changes. Since December 1, 1999, the
Corporation Business has been conducted in the ordinary course,
and there has not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Corporation or in the Corporation Business that
has had, or which the Corporation, after reasonable inquiry,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Corporation
that has had, or which the Corporation may, after reasonable
inquiry, expect to have, a Material Adverse Effect such that the
total Liabilities of the Corporation would exceed CDN $162,001 or
(ii) any incurrence, assumption or guarantee of any indebtedness
for borrowed money by the Corporation in connection with the
Corporation Business or otherwise;
(c) any (i) payments by the Corporation in respect of any
indebtedness of the Corporation for borrowed money or in
satisfaction of any Liabilities of the Corporation related to the
Corporation Business, other than in the ordinary course of
business or the guarantee by the Corporation of any of the
indebtedness of any other Person or (ii) creation, assumption or
sufferance of (whether by action or omission) the existence of
any Lien on any assets reflected on the Corporation's Balance
Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Corporation, or any waiver, amendment,
termination or cancellation of any of the Corporation Contracts
by the Corporation, or any relinquishment of any rights
thereunder by the Corporation or of any other right or debt owed
to the Corporation, other than, in each such case, actions taken
in the ordinary course of business consistent with past practice;
(e) any grant of any severance, continuation or termination
pay to any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (ii) entering
into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with
any director, officer, stockholder or employee of the Corporation
or any Affiliate of the Corporation, (iii) increase in benefits
payable or potentially payable under any severance, continuation
or termination pay policies or employment agreements with any
director, officer, stockholder or employee of the Corporation or
any Affiliate of the Corporation, (iv) increase in compensation,
bonus or other benefits payable or potentially payable to
directors, officers, stockholders or employees of the Corporation
or any Affiliate of the Corporation other than in the normal
course of business, (v) change in the terms of any bonus,
pension, insurance, health or other benefit plan of the
Corporation or (vi) representation of the Corporation to any
employee or former employee of the Corporation that the Purchaser
promised to continue any Corporation benefit plan after the
Closing Date,
(f) any change by the Corporation in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Corporation to any officer, director,
stockholder or Affiliate of the Corporation or any of their
respective Affiliates or Associates; or
(h) any (i) material single capital expenditure or
commitment, or any group of related capital expenditures or
commitments, or (ii) sale, assignment, transfer, lease or other
disposition of or agreement to sell, assign, transfer, lease or
otherwise dispose of any asset or property other than in the
ordinary course of business.
4.09 Properties; Corporation Material Leases; Tangible Assets.
4.09.1 The Corporation does not own any real property.
4.09.2 The Corporation hold, title to each of its properties
and assets free and clear of all Liens, adverse claims,
easements, rights of way, servitudes, zoning or building
restrictions or any other rights of others or other adverse
interests of any kind, including leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements (collectively,
"Corporation Encumbrances").
4.09.3 All tangible properties and assets reflected on the
Corporation Balance Sheet are in all material respects fit for
the purposes for which they are used and are in good operating
condition and repair and are adequate for the uses to which they
are put, and no material properties or assets necessary for the
conduct of the Corporation Business in substantially the same
manner as the Corporation Business has heretofore been conducted
are in need of replacement, maintenance or repair except for
routine replacement, maintenance and repair.
4.10 Affiliates. Other than as disclosed herein, there are no
Corporation Contracts which have been entered into within the
past five years or are currently in force and effect between the
Corporation and any Shareholder, or any Affiliate or Associate of
any Shareholder. The Corporation is not indebted to any Shareholder.
4.11 Litigation. There are no material proceedings pending or,
to the knowledge of the Corporation, threatened against or
affecting the Corporation or the Corporation Business or that
seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement and (ii) there is no existing
order, judgment or decree of any Governmental Authority naming
the Corporation as an affected party which has not been paid or
discharged in full.
4.12 Material Contracts. To the knowledge of the Corporation,
all Corporation Contracts are legal, valid and binding
obligations of the Corporation and each other Person who is a
party thereto, enforceable against the Corporation and each such
Person in accordance with their terms, and none are subject to
any material default thereunder.
4.13 Required Consents. There are no governmental or other
registrations, filings, applications, notices, transfers,
consents, approvals, orders, qualifications or waivers required
under Applicable Law or otherwise required to be obtained or made
with any Governmental Authority to be obtained by the Corporation
or any Shareholder by virtue of the execution and delivery of
this Agreement and the consummation of the transactions provided
for herein for any reason; nor are there any Corporation
Contracts with respect to which the consent of the other party or
parties thereto must be obtained by the Corporation or any
Shareholder by virtue of the execution and delivery of this
Agreement and the consummation of the transactions provided for
herein (the "Required Consents").
4.14 Corporation Intellectual Property.
4.14.1 Schedule "E" sets forth a complete and correct list of
each patent, patent application and invention, trademark,
tradename, trademark or tradename registration or application,
copyright or copyright registration or application for copyright
registration, and each licence or licensing agreement, for any of
the foregoing relating to the Corporation Business as conducted
by the Corporation or held by the Corporation (the "Corporation's
Intellectual Property Rights"). The Corporation's Intellectual
Property Rights also include any trade secrets that are material
to the conduct of the Corporation Business in the manner that the
Corporation Business has heretofore been conducted.
4.14.2 The Corporation has not, during the three years
preceding the date of this Agreement, been a party to any
proceeding, nor to the knowledge of the Corporation, is any
proceeding threatened, as to which there is a reasonable
possibility of a determination adverse to the Corporation,
involving a claim of infringement by any Person (including any
Governmental Authority) of any of the Corporation's Intellectual
Property Rights. None of the Corporation Intellectual Property
Right are subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the
Corporation or restricting the licensing thereof by the
Corporation to any Person.
4.14.3 To the knowledge of the Corporation, the Corporation
either owns the entire right, title and interest in, to and
under, or has acquired an exclusive licence to use, any and all
patents, trademarks, trade names, brand names and copyrights that
are material to the conduct of the Corporation Business in the
manner that the Corporation Business has heretofore been
conducted. The Corporation's Intellectual Property Rights are in
full force and effect and have not been used or enforced or
failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the
Corporation's Intellectual Property Rights. All registrations and
filings necessary to preserve the rights of the Corporation in
and to the Corporation's Intellectual Property Rights have been
made.
4.15 Tax Matters.
4.15.1 The Corporation has prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. To the
best of the Corporation's knowledge, each such Tax Return was
correct and complete.
4.15.2 The Corporation has paid all Taxes due and payable by
them and have paid all assessments and reassessments they have
received in respect of Taxes. The Corporation have paid all Tax
installments due and payable by them as at November 30, 1999,
save and except as disclosed in Schedule "C" hereto.
4.15.3 The Corporation has withheld from each payment made to
any of its present or former employees, officers and directors,
and to all persons who are non-residents of Canada for the
purposes of the Income Tax Act (Canada) all amounts required by
Applicable Law and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority.
The Corporation has remitted all Canada Pension Plan
contributions, employment insurance premiums, employer health
taxes and other Taxes payable by them in respect of their
employees and have remitted such amounts to the proper
Governmental Authority within the time required by Applicable
Law. The Corporation has charged, collected and remitted on a
timely basis all Taxes as required by Applicable Law on any sale,
supply or delivery whatsoever, made by the Corporation.
4.15.4 The Corporation Business is the only business ever
conducted by the Corporation. The non-capital losses (as defined
in the Tax Act and any applicable provincial taxing statute) were
incurred by the Corporation only in carrying on the Corporation
Business. The Corporation is not prevented by virtue of any
amalgamation or dissolution from carrying back against income
earned by it prior to the Closing Date, any losses incurred by it
after the Closing Date.
4.15.5 The Corporation has paid all Taxes imposed by
applicable legislation in the provinces of British Columbia and
Ontario on the acquisition of its tangible personal property as
defined in applicable legislation in the province of Ontario, and
none of its tangible personal property has been transferred at
any time on a tax-exempt basis under applicable legislation of
the Province of Ontario or any predecessor legislation thereof.
The foregoing is accurate, mutatis mutandis, with respect to all
sales or transfer Taxes imposed under comparable legislation of
other provinces.
4.16 Securities Legislation. The Corporation is a private issuer
within the meaning of the Securities Act (Ontario) and the sale
of the Corporation Shares by the Shareholders to the Purchaser is
made in compliance with the exempt takeover-bid provisions of
this Act or such other exemption as may be available to it and
the Shareholder.
4.17 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Purchaser by or on behalf of the Corporation with respect to the
Corporation (including the Corporation Business and the results
of operations, financial condition and prospects of the
Corporation) for use in connection with this Agreement or the
transactions contemplated by this Agreement is true and complete
in all material respects and does not, to the best of the
knowledge of the Corporation after conducting an inquiry which a
reasonably prudent person would make under the circumstances,
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to the
Corporation that has not been disclosed to the Purchaser by the
Corporation in writing that has had a Material Adverse Effect on
or, so far as the Corporation can now foresee, could be
reasonably likely to have a Material Adverse Effect on, the
Corporation (including the Corporation Business and the results
of operations, financial condition or prospects of the
Corporation).
ARTICLE V: REPRESENTATIONS AND WARRANTIES
OF THE BUYING GROUP
As an inducement to the Corporation and each Shareholder to enter
into this Agreement and to consummate the transactions provided
for herein, the Purchaser and the Parent, jointly and severally,
represent and warrant to the Corporation and to each Shareholder
and confirms that the Corporation and each Shareholder are
relying upon the accuracy of each of such representations and
warranties in connection with the purchase of the Corporation
Shares and the completion of the transactions set out herein:
5.01 Existence and Power. Each of the Purchaser and the Parent
is a corporation duly incorporated, organized and validly
existing under the laws of its incorporating jurisdiction (being
the Province of British Columbia for the Purchaser and the State
of Nevada for the Parent) and each has all corporate power and
all governmental licences, authorizations, permits, consents and
approvals required to carry on the Buying Group Business as now
conducted and to own and operate their respective businesses as
now owned and operated. The Purchaser and the Parent are not
required to be qualified to conduct business in any jurisdiction
where the failure to be so qualified, whether individually or in
the aggregate, would have a Material Adverse Effect. No
proceedings have been taken or authorized by the Purchaser or the
Parent or, to the knowledge of the Purchaser or the Parent, by
any other Person, with respect to the bankruptcy, insolvency,
liquidation, dissolution or winding-up of the Purchaser or the
Parent or with respect to any amalgamation, merger,
consolidation, arrangement or reorganization relating to the
Purchaser or the Parent.
5.02 Authorization. The execution, delivery and performance by
each of the Purchaser and the Parent of this Agreement and the
consummation thereby of the transactions provided for herein are
within the powers of the Purchaser and the Parent and have been
duly authorized by all necessary action on their part. This
Agreement has been duly and validly executed by each of the
Purchaser and the Parent and constitutes a legal, valid and
binding agreement of the Purchaser and the Parent enforceable
against them in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity.
5.03 Capital Stock of the Purchaser.
5.03.1 The authorized capital stock of the Purchaser consists
of 100,000,000 common shares of no par value of which one common
share is issued and outstanding on the date hereof to and
50,000,000 Exchangeable Non-Voting Shares with no par value of
which no shares are issued and outstanding. Each Exchangeable
Non-Voting Share shall:
(a) be non-voting as to matters concerning the Purchaser
(such that all voting shares of the Purchaser will be and remain
held by the Parent); however, as stated above in paragraph 2.03,
the holder of Exchangeable Non-Voting Shares will be entitled to
voting rights in the Parent as is equivalent to the number of
Exchangeable Non-Voting Shares held by each Shareholder as if
each Shareholder held an equivalent number of Parent Common
Shares;
(b) entitle the holder thereof (the "Holder") to dividend
rights equal, after conversion into Canadian dollars based on the
Canadian/U.S. exchange rate in effect on the record date thereof,
to the per share dividend rights of Parent Common Shares;
(c) entitle the Holder, on a liquidation of the Purchaser,
to receive in exchange for each Exchangeable Non-Voting Share one
Parent Common Shares for a period ending on the twenty-fifth
anniversary of the Closing Date; and
(d) entitle the Holder, at his or her election from time to
time for a period ending on the twenty-fifth anniversary of the
Closing Date, upon 30 days' written notice given by such Holder
to the Purchaser, to require the Purchaser to redeem any or all
Exchangeable Non-Voting Shares and to exchange therefor, on a
share for share basis, Parent Common Shares (the "Right of
Retraction"),
5.03.2 The Parent and the Purchaser shall be entitled to
deduct and withhold from the consideration otherwise payable to
any Holder of Exchangeable Non-Voting Shares, including any
dividend payments in respect of the Exchangeable Non-Voting
Shares, such amount as the Parent or the Purchaser is required or
permitted to deduct and withhold with respect to such payment
under the United States Internal Revenue Code, the Income Tax Act
(Canada) or any provision of state, provincial, local or foreign
tax law. The Parent and the Purchaser shall not initially
withhold any United States Tax on dividends paid on the
Exchangeable Non-Voting Shares. However, if any United States
taxing authority determines that the Parent or the Purchaser is
liable for United States withholding Tax on dividends paid to the
Holders on the Exchangeable Non-Voting Shares, the Purchaser
shall be entitled to reduce the amount of any future dividends to
be paid to the Holders by such withholding obligation. To the
extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the
Holder of Exchangeable Non-Voting Shares in respect of which such
deduction and withholding was made; provided, however, that such
withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a Holder
exceeds the cash portion of the consideration otherwise payable
to the Holders, the Parent upon at least ten (10) days' prior
written notice to such Holder, is hereby authorized to sell or
otherwise dispose of at fair market value such portion of such
non-cash consideration otherwise payable to the Holder as is
necessary to provide sufficient funds to the Parent in order to
enable it to comply with such deduction or withholding
requirement and the Parent shall give an accounting to the Holder
with respect thereof and any balance of such proceeds of sale.
5.03.3 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Purchaser, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or options, warrants or other securities of the Purchaser.
5.04 Capital Stock of the Parent.
5.04.1 The authorized capital stock of the Parent consists
solely of 70,000,000 common shares with no par value ("Parent
Common Shares") of which 10,031,350 Parent Common Shares are
issued and outstanding on the date hereof.
5.04.2 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Parent from treasury, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Parent or
options, warrants or other securities of the Parent which
materially vary from those disclosed in the financial statements
of the Parent attached hereto as Schedule "D".
5.05 General Provisions of the Capital of the Purchaser and the
Parent.
5.05.1 All of the issued and outstanding shares in the
respective capital stocks of the Purchaser and the Parent have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Purchaser does
not hold any of the issued and outstanding shares in the treasury
of the Purchaser or the Parent, the Parent does not hold any of
the issued and outstanding shares in the treasury of the Parent
and there are not outstanding (i) any options, warrants, rights
of first refusal or other rights to purchase any shares of the
Purchaser or the Parent, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or Parent or options, warrants or other securities of the
Purchaser or Parent other than as disclosed in Article 5.03.1
herein.
5.05.2 All of the Exchangeable Non-Voting Shares and the
Parent Common Shares which will be issued hereunder will be
fully paid and non-assessable, subject to such terms and
provisions as set forth in the Exchange and Voting Agreement, and
the Purchaser's articles of incorporation and the Parent's
Directors Resolutions relating to the issuance of the Parent
Common Shares, as applicable, and all such shares will be issued
free and clear of all Liens, charges, encumbrances and trading
restrictions other than as may be imposed by Applicable Law.
5.06 Subsidiaries. The Purchaser has no Subsidiaries and
the only Subsidiary of the Parent is the Purchaser.
5.07 Governmental Authorization. The execution, delivery and
performance by the Buying Group of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement.
5.08 Non-Contravention. The execution, delivery and performance
of this Agreement by the Buying Group, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the respective articles or bylaws of
the Buying Group; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Buying Group, the Buying Group Business
or the outstanding shares in their respective capital stocks and
would not, individually or in the aggregate have a Material
Adverse Effect; (c) constitute a default under or give rise to
any right of termination, cancellation or acceleration of, or to
a loss of any benefit to which the Purchaser or the Parent are
entitled, under any Buying Group Contract to which the Purchaser
or the Parent is a party or any Permit or similar authorization
relating to the Purchaser or Parent, the Buying Group Business or
the outstanding shares in their respective capital stocks may be
bound or affected; or (d) result in the creation or imposition of
any Lien.
5.09 Financial Statements: Undisclosed Liabilities.
5.09.1 Attached hereto as Schedule "D" are true and complete
copies of the Parent's Balance Sheet, prepared on a consolidated
basis, as of September 30, 1999 and the related statements of
income and retained earnings and changes of financial position,
prepared on a consolidated basis, for the year ended December 31,
1998 (collectively, the "Parent's Financials").
5.09.2 The Parent's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Parent in accordance with American GAAP and present fairly the
financial position, results of operations and statements of
changes in the Parent's financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to Buying
Group Contracts and commitments for the sale of goods or the
provision of services by the Parent, contain and reflect adequate
reserves for all reasonably anticipated material losses and costs
and expenses in excess of expected receipts.
5.09.3 To the best of the knowledge of the Buying Group, there
are no Liabilities of the Buying Group other than: (i) any
Liabilities accrued as Liabilities on the Parent's Balance Sheet;
(ii) Liabilities incurred since the date of the Parent's Balance
Sheet that do not, and could not, individually or in the
aggregate have a Material Adverse Effect; (iii) other Liabilities
disclosed in this Agreement or in any schedules attached hereto;
(iv) the Tax on reserves; and (v) debts, liabilities and
obligations of the Purchaser (other than intercorporate loans
between Parent and Purchaser) totaling not more than Cdn $2,000.
5.10 Absence of Certain Changes. Since December 1, 1999, the
Buying Group Business has been conducted in the ordinary course,
and, after having made reasonable inquiry, they believe there has
not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Purchaser or the Parent or in the Buying Group
Business that has had, or which the Purchaser or the Parent,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Purchaser or
the Parent that has had, or which the Purchaser or the Parent
expect to have, a Material Adverse Effect or (ii) any incurrence,
assumption or guarantee of any indebtedness for borrowed money by
the Purchaser or the Parent in connection with the Buying Group
Business or otherwise;
(c) any (i) payments by the Purchaser or Parent in respect
of any indebtedness of the Purchaser or Parent for borrowed money
or in satisfaction of any Liabilities of the Purchaser or Parent
related to the Buying Group Business, other than in the ordinary
course of business or the guarantee by the Purchaser or the
Parent of any of the indebtedness of any other Person or (ii)
creation, assumption or sufferance of (whether by action or
omission) the existence of any Lien on any assets reflected on
the Parent's Balance Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Buying Group, any waiver, amendment,
termination or cancellation of any Contract by the Buying Group,
or any relinquishment of any rights thereunder by the Buying
Group or of any other right or debt owed to the Buying Group,
other than, in each such case, actions taken in the ordinary
course of business consistent with past practice;
(e) any (i) grant of any severance, continuation or
termination pay to any director, officer, stockholder or employee
of the Buying Group or any Affiliate of the Buying Group, (ii)
entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing
agreement) with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iii)
increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or employment
agreements with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iv)
increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, stockholders or
employees of the Buying Group or any Affiliate of the Buying
Group, (v) change in the terms of any bonus, pension, insurance,
health or other benefit plan of the Buying Group or (vi)
representation of the Buying Group to any employee or former
employee of the Buying Group that the Buying Group promised to
continue any benefit plan after the Closing Date,
(f) any change by the Buying Group in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Buying Group to any of their respective
officers, directors, stockholders or Affiliates of the Buying
Group or any of their respective Affiliates or Associates; and
(h) any (i) single capital expenditure or commitment, or
any group of related capital expenditures or commitments by
either the Purchaser or the Parent or (ii) sale, assignment,
transfer, lease or other disposition of or agreement to sell,
assign, transfer, lease or otherwise dispose of any asset or
property by either of the Purchaser or the Parent other than in
the ordinary course of business.
5.11 Properties; Material Leases; Tangible Assets. Neither the
Purchaser nor the Parent own or lease any real property or
material assets.
5.12 Affiliates. There are no undisclosed material contracts of
which the Shareholders are unaware between either the Parent or
Purchaser and any of its shareholders, or any Affiliate or
Associate of any of its shareholders. There is no undisclosed
material indebtedness of which the Shareholders are unaware of
either the Parent or the Purchaser to any of its shareholders, or
to any Affiliate or Associate of any of its shareholders.
5.13 Litigation. There is no proceeding pending or, to the
knowledge of the Buying Group, threatened against or affecting
the Buying Group or the Buying Group Business or that seeks to
prevent, enjoin, alter or delay the transactions contemplated by
this Agreement, and there is no existing order, judgment or
decree of any Governmental Authority naming either the Purchaser
or the Parent as an affected party which has not been paid or
discharged in full.
5.14 Material Contracts. The Buying Group is not party to any
Buying Group Contract other than as specified herein.
5.15 Compliance with Applicable Laws. The operation of the Buying
Group Business (i) has not violated or infringed, except for
violations or infringements that have been cured and the prior
existence of which could not, individually or in the aggregate,
reasonably be expected to have an adverse effect on either the
Purchaser or the Parent and (ii) does not in any material respect
violate or infringe any Applicable Law, the terms of any Permit
or any order, writ, injunction or decree of any Governmental
Authority including but not limited to, the 33 Act, the 34 Act,
the Rules and Regulations of the SEC, or the Securities Laws and
Regulations of any state. The Parent is not an investment company
as defined in, or otherwise subject to regulation under, the
Investment Company Act of 1940. The Parent is required to file
reports pursuant to Section 12(g) of the 34 Act and is now, and
as of the Closing Date will be, current in its filings. The
Parent's Form 10-K Annual Reports have been filed with certified
financial statements, in compliance with SEC Regulations.
5.16 Buying Group Employment Agreement; and Employee Benefits.
5.16.1 There are no employment, consulting, severance pay,
continuation pay, termination pay, indemnification agreements,
collective agreements, employee benefit plans or other similar
agreements of any nature whatsoever affecting either the
Purchaser or the Parent save those to which a company listed on
the OTCBB would, in the ordinary course of its business, be party
to.
5.16.2 The Buying Group and its Affiliates have complied and
are currently complying, in respect of all employees of the
Buying Group and its Affiliates, with all Applicable Laws
respecting employment and employment practices and the protection
of the health and safety of employees, except for such instances
which do not materially affect the interests of the Shareholders
under this Agreement.
5.17 Intellectual Property. The Buying Group has no interest in
any patent, patent application and invention, trademark, trade
name, trademark or trade name registration or application,
copyright or copyright registration or application for copyright
registration.
5.18 Tax Matters.
5.18.1 Except as disclosed in the Parent's Financials, the
Purchaser and the Parent have prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such
Tax Return was correct and complete.
5.18.2 The Purchaser is not a registrant for the purposes of
the goods and services tax provided for under the Tax Act.
5.18.3 The Purchaser is a taxable Canadian Corporation, as
that term is defined in the Tax Act.
5.18.4 The Purchaser has paid all applicable sales and retail
taxes in the Province of British Columbia, and none of its
tangible personal property has been transferred at any time on a
tax-exempt basis under applicable legislation in the Province of
British Columbia. The foregoing is accurate, mutatis mutandis,
with respect to all sales or transfer Taxes imposed under
comparable legislation of other provinces.
5.18.5 The Purchaser has never acquired or had the use of any
of its assets from a Person (a "Related Person") with whom the
Purchaser was not dealing at arm's length, within the meaning of
the Tax Act. The Purchaser has never disposed of any asset to a
Related Person for proceeds less than the fair market value of
that asset. The Purchaser is not a party to or bound by any
agreement with, is not indebted to, and no amount is owing to the
Purchaser by any Related Person, not dealing at arm's length,
within the meaning of the Tax Act, with the Purchaser.
5.18.6 For the purposes of the Tax Act the Purchaser and the
Shareholders hereby covenant and agree to elect jointly under
Subsection 85(1) or 85.1 of the Tax Act, by completing and filing
with the Department of National Revenue the prescribed form T2057
within the prescribed time for the purposes of the Tax Act with
respect to the sale by the Shareholders to the Purchaser of the
Corporation Shares and further agree to transfer the Corporation
Shares at an agreed amount equal to the adjusted cost base of the
Corporation Shares to the Shareholders for purposes of the Tax
Act or such greater amount determined by the Shareholders (the
"Elected Amount").
5.18.7 If at any time after the Closing Date the Shareholders
determine that either:
(a) it is necessary or desirable to change the Elected
Amount; or
(b) the Tax Act deems the Elected Amount to be an amount
which is different than the amount agreed upon between the
Shareholder and the Purchaser, then the Shareholder and the Purchaser
shall do all things reasonably necessary to reflect such change including,
for example, filing an amended election pursuant to subsection 85(1)
or 85.1 of the Tax Act.
5.19 Issuance of Shares.
5.19.1 The issuance of the Parent Common Shares by the Parent,
and the terms and provisions of the Parent Common Shares, will
not violate any provisions of the Parent's articles or bylaws or
any Applicable Law, nor will the voting rights attached to the
Parent Common Shares derogate from any rights under Applicable
Law.
5.19.2 The issuance of the Exchangeable Non-Voting Shares by
the Purchaser, and the terms and provisions of the Exchangeable
Non-Voting Shares, will not violate any provisions of the
Purchaser's articles or bylaws or any Applicable Law.
5.20 Continuing NASD Status. The Parent warrants that the
National Association of Securities Dealers has cleared the Parent
for quotation of its common shares, including the Parent Common
Shares, on the over-the-counter bulletin board in the United
States, which will continue after the Closing.
5.21 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Shareholders by or on behalf of the Buying Group with respect to
each of the Purchaser and the Parent (including the Buying Group
Business and the respective results of operations, financial
condition and prospects of the Purchaser and the Parent) for use
in connection with this Agreement or the transactions
contemplated by this Agreement is true and complete in all
material respects and does not, to the best of the knowledge of
the Purchaser and the Parent after conducting an inquiry which a
reasonably prudent person would make under the circumstances,
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to the
Purchaser or the Parent that has not been disclosed to the
Shareholders by the Buying Group in writing that has had a
Material Adverse Effect on or, so far as the Buying Group can now
foresee, could be reasonably likely to have a Material Adverse
Effect on the Buying Group (including the Buying Group Business
and the respective results of operations, financial condition or
prospects of the Buying Group).
ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS
6.01 Conduct of the Business. During the Interim Period, other
than with the express written approval of the Purchaser, the
Corporation shall conduct the Corporation Business in the
ordinary course consistent with past practice and shall use its
best efforts to preserve intact the organization, relationships
with third parties and goodwill of the Corporation and keep
available the services of the present officers, employees, agents
and other personnel of the Corporation Business.
6.01.1 Without limiting in any way the importance of the
foregoing, during the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall not, and
each Shareholder shall not cause the Corporation to:
(a) adopt any material change in any method of accounting
or accounting practice used by the Corporation other than by
reason of a concurrent change in generally accepted accounting
principles;
(b) amend its articles or bylaws;
(c) sell, mortgage, pledge or otherwise dispose of any
substantial assets or properties of the Corporation;
(d) declare, set aside or pay any management fee or
dividend or make any other distribution with respect to the
capital stock of the Corporation or otherwise make a distribution
or payment to any Shareholder;
(e) amalgamate, merge or consolidate with or agree to
amalgamate, merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise
acquire, any Corporation, partnership or other business
organization or division thereof;
(f) authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any
securities or obligations convertible into shares of its capital
stock of any class or commit to doing any of the foregoing;
(g) split, combine or reclassify any shares of the capital
stock of any class of the Corporation or redeem or otherwise
acquire, directly or indirectly, any shares of such capital
stock;
(h) incur or agree to incur any debt or guarantee any debt
for borrowed money, including any debt to any Shareholder, or to
any Affiliate or Associate of any Shareholder, except debt
incurred in the ordinary course of business consistent with past
practice;
(i) make any loan, advance or capital contribution to or
investment in any person other than loans, advances and capital
contributions to or investments in joint ventures or other
similar arrangements in which the Corporation has an equity
interest in the ordinary course of business and travel advances
made in the ordinary course of business by the Corporation to its
employees to meet business expenses expected to be incurred by
such employees;
(j) enter into any settlement with respect to any
Proceeding or consent to any order, decree or judgment relating
to or arising out of any such Proceeding;
(k) take any action to terminate, dismiss or cause the
retirement of any key employee of the Corporation;
(l) fail in any material respect to comply with any
Applicable Laws; or
(m) make, or make any commitments for, capital or
contractual expenditure exceeding $5,000 for any individual
commitment or $100,000 for all such commitments taken in the
aggregate.
6.01.2 During the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall:
(a) file all Canadian, United States, foreign, federal,
state, provincial and local Tax Returns required to be filed and
make timely payment of all applicable Taxes when due;
(b) promptly notify the Purchaser in writing of any action
or circumstance that results in, or could reasonably be expected
to result in, a Material Adverse Effect or the occurrence of any
breach by the Corporation or any Shareholder of any
representation or warranty, or any covenant or agreement
contained in this Agreement; and
(c) promptly notify the Purchaser in writing of the
commencement of any proceeding or the threat thereof by or
against the Corporation or any Shareholder.
6.02 Completion of Schedule "I" payments before conversion of
Exchangeable Shares. The Shareholders covenant and agree that
they shall not, prior to completion by the Parent and the
Purchaser of all payments and obligations under Schedule "I",
attempt to exchange any of their Exchangeable Non-Voting Shares
for Parent Common Shares.
6.03 Maintenance of Corporation Insurance Policies. During the
Interim Period, the Corporation shall not take or fail to take
any action if such action or inaction would adversely affect the
applicability of any insurance in effect on the date hereof that
covers all or any material part of the assets of the Corporation
or the Business.
6.04 Tax Election. In accordance with the Letter of Intent,
the Corporation shall not file an election pursuant to subsection
256(9) of the Income Tax Act (Canada) or any equivalent
provincial provision.
ARTICLE VII: COVENANTS OF THE BUYING GROUP
7.01 Appointment of Director. At Closing, the following person(s)
will be appointed a director of the Parent:
Name Position
Rick Whittaker Director
7.02 Execution of Management Agreements. At Closing, The
Corporation shall execute the following 2 year term management
agreements:
(a) with Rick Whittaker ("Whittaker"), a management agreement
whereby Whittaker shall receive a salary of CDN $35,000 for the
first six months of the agreements' two year term, CDN $45,000
for the second six months of the two year term and CDN $125,000
for the remaining 12 months of the two year term, in exchange for
a minimum of 40 hours per week as President of The Corporation;
and
(b) with John Cullen ("Cullen"), a management agreement whereby
Cullen shall receive a salary of CDN $35,000 for the first six
months of the agreement's two year term, CDN $45,000 for the
second six months of the two year term and CDN $125,000 for the
remaining 12 months of the two year term, in exchange for a
minimum of 40 hours per week as an employee of The Corporation.
The agreements in (a) and (b) above shall stipulate that
Whittaker and Cullen each receive a CDN $500.00 monthly car
allowance for the agreements' term.
7.03 Conduct of Business. During the Interim Period, the Buying
Group will conduct the Buying Group Business in the ordinary
course consistent with past practice and shall use its best
efforts to preserve intact the organization, relationships with
third parties and goodwill of the Buying Group and keep available
the services of the present officers, directors, employees,
agents and other personnel of the Buying Group Business; and
without limiting in any way the importance of the foregoing, the
Buying Group shall not undertake any of those matters referred to
in sections 6.01.1 and 6.01.2, and all such clauses thereof shall
apply mutatis mutandis to the Buying Group. In the event that a
Material Adverse Effect occurs, the Buying Group shall notify the
Corporation of it within one business day.
7.04 Loans. The Buying Group will cause to be made, in
accordance with Schedule "I" hereto, those loans (the "Loans")
set out here, which are intended to permit the Corporation to
meet outstanding debts, liabilities and obligations of it to
certain parties.
7.05 Priority. Notwithstanding any term of the Purchaser's
bylaws, memorandum and articles to the contrary, the terms and
provisions of this Agreement and the Exchange and Voting
Agreement shall prevail such that the directors of the Purchaser
will only authorize the exchange of the Exchangeable Non-Voting
Shares for shares in the Parent Common Shares in accordance with
the terms of the Exchange and Voting Agreement.
7.06 Nothing in Paragraph 6.01.2 shall read to prohibit the
Purchaser or the Parent from negotiating and completing
transactions involving the acquisition of other subsidiaries
including E-Bill Inc.
ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES
8.01 Further Assurances. Each party hereto agrees to execute and
deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably
necessary or desirable (including obtaining all required
consents) in order to evidence the consummation or implementation
of the transactions provided for under this Agreement.
8.02 Certain Filings. The parties hereto shall cooperate with
one another in determining whether any action by or in respect
of, or filing with, any Governmental Authority is required or
reasonably appropriate, or any action, consent, approval or
waiver from any party to any Contract is required or reasonably
appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the
terms and conditions of this Agreement, in taking such actions or
making any such filings, the parties hereto shall furnish
information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
8.03 Registration. All parties acknowledge and agree that the
Parent is a reporting issuer in the United States, and all of the
Parent Common Shares have been registered under the 33 Act; and
all parties further acknowledge and agree that neither the Parent
nor the Purchaser is a reporting issuer in any province of
Canada, and the Exchangeable Non-Voting Shares and Parent Common
Shares will be subject to such resale restrictions as imposed by
the Applicable Law of the jurisdiction in which a Shareholder is
resident.
ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING
9.01 Conditions to Obligation of the Buying Group. The obligations
of the Buying Group to consummate the Closing are subject to the
completion of due diligence of the Corporation on the part of the Buying
Group and to the Buying Group's satisfaction on or before December 20,
1999 and are further subject to the satisfaction of each of the following
conditions:
(a) (i) the Corporation and each Shareholder shall have
performed and satisfied each of their respective obligations
hereunder required to be performed and satisfied by them on or
prior to the Closing Date, (ii) each of the representations and
warranties of the Corporation and each Shareholder contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing, and
(iii) the Buying Group shall have received certificates signed by
each Shareholder and a duly authorized executive officer of the
Corporation to the foregoing effect and to the effect that the
conditions specified within this Section 9.01(a) have been
satisfied.
(b) ll Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) after
the Closing that would be materially burdensome upon the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) or
their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses,
as of the date hereof, would be reasonably expected to be
conducted after the Closing Date. All such approvals shall be in
effect, and no proceedings shall have been instituted or
threatened by any Governmental Authority or other person with
respect thereto as to which there is a material risk of a
determination that would terminate the effectiveness of, or
otherwise materially and adversely modify the terms of, any such
approval; all applicable waiting periods with respect to such
approvals shall have expired; and all conditions and requirements
prescribed by Applicable Law or by such approvals to be satisfied
on or prior to the Closing Date shall have been satisfied to the
extent necessary such that all such approvals are, and will
remain, in full force and effect assuming continued compliance
with the terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
The operation of the Corporation Business shall not have violated
or infringed, or be in violation or infringement of any
Applicable Law or any order, writ, injunction or decree of any
Governmental Authority, where such violations and infringements,
individually or in aggregate, have resulted in, or could
reasonably be expected to result in a Material Adverse Effect.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Corporation or the Corporation Business,
including any damage, destruction or other casualty loss
affecting the Corporation or the Corporation Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Corporation.
9.02 Conditions to Obligations of the Shareholders. The
obligations of each Shareholder to consummate the Closing are
subject completion of reasonable due diligence investigations of
the Buying Group to be completed on or before December 20, 1999
and are further subject to the satisfaction of each of the
following conditions:
(a) (i) the Buying Group shall have performed and satisfied
each of its obligations hereunder required to be performed and
satisfied by it on or prior to the Closing Date; and (ii) each of
the representations and warranties of the Buying Group contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing.
(b) All Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to any
Shareholder (or any of their respective Affiliates or Associates)
after the Closing that would be materially burdensome upon any
such Person. All such approvals shall be in effect, and no
Proceedings shall have been instituted or threatened by any
Governmental Authority with respect thereto as to which there is
a material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify
the terms of, any such approval. All applicable waiting periods
shall have expired, and all conditions and requirements such
approvals to be satisfied on or prior to the Closing extent
necessary such that all such approvals are, and will remain, in
full force and effect assuming continued compliance with the
terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
No temporary restraining order, preliminary or permanent
injunction, cease and desist order or other order issued by any
court of competent jurisdiction or any competent Governmental
Authority or any other legal restraint or prohibition preventing
the transfer and exchange contemplated hereby or the consummation
of the Closing, or imposing Damages in respect thereto, shall be
in effect, and there shall be no pending actions or proceedings
by any Governmental Authority (or determinations by any
Governmental Authority) or by any other Person challenging or
seeking to materially restrict or prohibit the transfer and
exchange contemplated hereby or the consummation of the Closing.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Buying Group or the Buying Group Business,
including any damage, destruction or other casualty loss
affecting the Buying Group or the Buying Group Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Buying Group.
(e) Since the date hereof, there shall not have been any:
(i) material change in the capital structure of either the
Purchaser or the Parent, other than as to effect the creation or
issuance of the Exchangeable Non-Voting Shares or the Parent
Common Shares as contemplated herein, or to effect the rights,
restrictions, privileges and terms of the Exchangeable Non-Voting
Shares or Parent Common Shares in accordance with the terms
hereof; or
(ii) any actions, investigations, inquiries or
proceedings commenced or continued against either the Parent or
the Purchaser, or their respective officers, directors,
promoters, representatives, agents or their respective businesses
by any securities regulatory authority, tribunal or body having
jurisdiction.
(f) The Parent's Board of Directors, by proper and
sufficient vote, shall have approved this Agreement, the Exchange
and Voting Agreement and the Support Agreement, and the
transactions contemplated hereby and the issuance of the Parent
Common Shares hereunder.
(g) The Parent and the Purchaser will have entered into the
Exchange and Voting Agreement and the Support Agreement.
ARTICLE X: INDEMNIFICATION
10.01 Agreement to Indemnify.
10.01.1 Each of the Purchaser and the Parent, and their
respective Affiliates, Associates, officers, directors,
shareholders, representatives and agents (collectively, the
"Purchaser Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by each
Shareholder in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by such Shareholder, provided, however,
that each Shareholder shall have no obligation to indemnify the
Purchaser Indemnitees with respect to damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by any other Shareholder and further a
Shareholder shall have no such obligation to indemnify a
Purchaser Indemnitee hereunder unless, and to the extent, the
aggregate of all damages incurred by the Purchaser Indemnities
for all items covered by this Section 10.01(1) shall exceed
$1,000 in the aggregate.
10.01.2 Each of the Purchaser Indemnitees shall be indemnified
and held harmless to the extent set forth in this Article X by
the Corporation in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made in this Agreement by the Corporation.
10.01.3 Each Shareholder and their respective Affiliates and
Associates and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively,
the "Shareholder Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by the
Purchaser and Parent in respect of any and all damages incurred
by any Shareholder Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made by the Parent or the Purchaser in this
Agreement.
10.02 Survival of Representation, Warranties and Covenants.
Except as hereinafter provided in this Section 10.02, all
representations, warranties, covenants, agreements and
obligations of each Indemnifying Party contained herein and all
claims of any Purchaser Indemnitee or Shareholder Indemnitee in
respect of any breach of any representation, warranty, covenant,
agreement or obligation of any Indemnifying Party contained in
this Agreement, shall survive the Closing and shall expire two
years following the Closing Date.
ARTICLE XI: MISCELLANEOUS
11.01 Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given (i) if personally delivered, when so delivered,
(ii) if mailed, two Business Days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid and addressed to the intended recipient as set forth
below, (iii) if given by facsimile or telecopier, once such
notice or other communication is transmitted to the facsimile or
telecopier number specified below and the appropriate answer back
or telephonic confirmation is received, provided that such notice
or other communication is promptly thereafter mailed in
accordance with the provisions of clause (ii) above or (iv) if
sent through an overnight delivery service in circumstances under
which such service guarantees next day delivery, the day
following being so sent:
If to the Corporation: 98 Willow Street, Waterloo, Ontario, N2J 1W2
If to the Purchaser: 804-750 W. Pender Street, Vancouver, B.C., V6C 2T8
If to the Parent: 19 Concession Street, Cambridge, Ontario, N1R 2G6
If to a Shareholder: John Cullen
98 Willow Street, Waterloo, Ontario, N2J 1W2
Rick Whittaker
481 Huron Street, New Hamburg, Ontario, N0B 2G0
Doris Cullen
98 Willow Street, Waterloo, Ontario, N2J 1W2
Barbara Schwartzentruber
481 Huron Street, New Hamburg, Ontario, N0B 2G0
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary
mail or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
11.02 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by all parties hereto,
or in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No waiver by a party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent occurrence. No failure or delay by a
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
11.03 Expenses. All costs and expenses incurred in
connection with this Agreement and enclosing and carrying out the
transactions provided for herein shall be paid by the party
incurring such cost or expense. This Section shall survive the
Closing and the termination of this Agreement.
11.04 Successors and Assigns. This Agreement shall be
binding upon and enure to the benefit, of the parties hereto and
their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns. No party
hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be
unreasonably withheld.
11.05 Governing Law. This Agreement shall be governed by,
and interpreted and enforced in accordance with, the laws in
force in the Province of Ontario and the laws of Canada
applicable therein (excluding any conflict of laws rule or
principle that might refer such interpretation to the laws of
another jurisdiction). Each party irrevocably submits to the
jurisdiction of the courts of British Columbia with respect to
any matter arising hereunder or related hereto.
11.06 Counterparts; Effectiveness. This Agreement and the
documents relating to the transactions contemplated by this
Agreement may be signed in any number of counterparts and the
signatures delivered by facsimile, each of which shall be deemed
to be an original, with the same effect as if the signatures
thereto were upon the same instrument and delivered in person.
This Agreement and such documents shall become effective when
each party thereto shall have received a counterpart thereof
signed by the other parties thereto. In the case of execution
and delivery by facsimile by any party, that party shall
forthwith deliver a manually executed original to each of the
other parties.
11.07 Entire Agreement. This Agreement (including the
Schedules referred to herein, which are hereby incorporated by
reference) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter
of this Agreement including, without limiting the generality of
the foregoing, the Letter of Intent. Neither this Agreement nor
any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
11.08 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the
construction or interpretation hereof. All references to an
Article or Section include all subparts thereof.
11.09 Severability. If any provision of this Agreement, or
the application thereof to any Person, place or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such
provisions as applied to other Persons, places and circumstances
shall remain in full force and effect only if, after excluding
the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated
hereby in substantially the same manner as originally set forth
at the later of the date this Agreement was executed or last
amended.
11.10 Construction. The parties hereto intend that each
representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party
has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or
covenant.
11.11 Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it
shall be deemed to mean "include, without limitation" or
"including without limitation", as the case may be, and the
language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
11.12 Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
11.13 Third Party Beneficiaries. Other than Indemnitees
under Article X hereof who are not parties to this Agreement, no
provision of this Agreement shall create any third party
beneficiary rights in any Person, including any employee or
former employee of the Corporation or any Affiliate or Associate
thereof (including any beneficiary or dependent thereof).
11.14 Transmission by Facsimile. The parties hereto agree
that this Agreement may be transmitted by facsimile or such
similar device and that the reproduction of signatures by
facsimile or such similar device will be treated as binding as if
originals and each party hereto undertakes to provide each and
every other party hereto with a copy of the Agreement bearing
original signatures forthwith upon demand.
11.15 Fees and Commissions. No broker, finder or other person
or entity is entitled to any fee or commission from the Buying
Group or the Corporation for services rendered on behalf of the
Buying Group or the Corporation in connection with the
transactions contemplated by this Agreement.
11.16 Maitland & Company. The parties hereto acknowledge and
agree that Maitland & Company acts only for the Parent in the
preparation and negotiation of this Agreement. The parties
hereto further acknowledge and agree that:
(a) they have been advised to seek independent legal advice
regarding this Agreement,
(b) Maitland & Company has provided no tax advice with
respect to this Agreement and hereby has advised the parties
hereto to seek tax advice respecting their respective tax
obligations; and
(c) Maitland & Company has not provided legal advice to any
of the Shareholders with respect to U.S. securities laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of
the day and year first above written.
URBANA.CA INC.
Per: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
ICC INTEGRATED CARBONICS (CANADA) CORP.
Per: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
ENERSPHERE.COM INC.
Per: /s/ Rick Whittaker
Rick Whittaker, Authorized Signatory
SHAREHOLDERS
/s/ Rick Whittaker
Rick Whittaker
/s/ Barbara Schwartzentruber
Barbara Schwartzentruber
/s/ John Cullen
John Cullen
/s/ Doris Cullen
Doris Cullen
THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for
reference the 4th day of January, 2000.
AMONG:
URBANA.CA INC., a corporation incorporated under the laws of the
State of Nevada,
(the "Parent")
AND:
ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation
incorporated under the laws of the Province of British Columbia,
(the "Purchaser")
AND:
URBANA.CA ENTERPRISES CORP., a corporation incorporated
under the laws of the Province of British Columbia
(the "Corporation")
AND:
ALL OF THE SHAREHOLDERS OF THE CORPORATION as more particularly
described on Schedule "A" attached hereto,
(Individually a "Shareholder" and collectively the "Shareholders");
WHEREAS:
A. The Corporation is a company which distributes Set Top Boxes
to its customers;
B. The Shareholders own all of the issued and outstanding
shares of the Corporation (the "Corporation Shares");
C. The Parent owns all of the issued and outstanding shares in
the capital stock of the Purchaser;
D. The Purchaser desired to purchase all of the Corporation
Shares and the Shareholders desire to sell all of the Corporation
Shares to the Purchaser on the terms and conditions hereinafter
set forth;
E. The respective boards of directors of the Purchaser, Parent
and Corporation each deem it advisable and in the best interests
of their respective shareholders to combine their respective
businesses by the Purchaser acquiring all of the shares in the
capital stock of the Corporation pursuant to the terms of this
Agreement; and
F. The respective boards of directors of the Purchaser, Parent
and Corporation have approved and adopted this Agreement as a
plan of reorganization under section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and as a transfer
of shares pursuant to section 85 of the Income Tax Act (Canada)
(the "Tax Act").
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of
the foregoing premises, the mutual representations, warranties,
covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such other Person.
"Agreement" means this Share Exchange and Share Purchase
Agreement by and among the Purchaser, Parent, Corporation and
Shareholders.
"Applicable Law" means, with respect to any Person, any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement, all as in effect as of the
Closing, of any Governmental Authority applicable to such Person
or any of its Affiliates or any of their respective properties,
assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or
any of its Affiliates).
"Associate" means with respect to any Person (a) any other Person
of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of
any class of equity securities issued by such other Person, (b)
any trust or other estate in which such Person has a ten percent
(10%) or more beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, and (c) any
relative or spouse of such Person, or any relative of such spouse
who has the same home as such Person or who is a director or
officer of such Person or any Affiliate thereof.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Toronto, Ontario are authorized
or required by law to close.
"Buying Group" means the Purchaser and the Parent.
"Buying Group Business" means the business as heretofore or
currently conducted by the Buying Group.
"Buying Group Contracts" means all contracts, agreements,
options, leases, licences, sales and purchase orders, commitments
and other instruments of any kind, whether written or oral, to
which either the Purchaser or the Parent is a party on the
Closing Date.
"Corporation Balance Sheet" means the balance sheet of the
Corporation dated November 30, 1999.
"Corporation Business" means the business as heretofore or
currently conducted by the Corporation.
"Corporation Contracts" means all contracts, agreements, options,
leases, licences, sales and purchase orders, commitments and
other instruments of any kind, whether written or oral, to which
the Corporation, or any Shareholder on behalf of the Corporation,
is a party on the Closing Date.
"Corporation Premises" means those premises that have been
occupied or used, or are occupied or used, by the Corporation in
connection with the Corporation Business.
"Exchange and Voting Agreement" means the agreement in
substantially the form set out in Schedule "B" hereto to be
entered into by the Parent, Purchaser and Trustee.
"Exchangeable Non-Voting Shares" means those 3,000,000 Class "A"
exchangeable, non-voting, participating common shares without par
value in the capital stock of the Purchaser, having those rights
and terms set forth in the Exchange and Voting Agreement and the
Exchangeable Share Provisions, which will be issued to the
Shareholders in consideration for the purchase and sale of the
Corporation Shares.
"Exchangeable Share Provisions" means those rights, restrictions,
terms and provisions pertaining to the Exchangeable Non-Voting
Shares, as set forth in Schedule "F" hereto, and as summarized in
section 5.03 hereof.
"Governmental Authority" means any United States (whether
federal, territorial, state, municipal or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign government, governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or
other subdivision, department or branch of any of the foregoing.
"GST" means all goods and services taxes, sales taxes levied by
the federal government of Canada, value added taxes or multi-
stage taxes and all provincial sales taxes integrated with such
federal taxes, assessed, rated or charged upon the Corporation.
"Interim Period" means the period from and including the date of
this Agreement to and including the Closing Date.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured,
joint or several, due or to become due, vested or unvested,
determined, determinable or otherwise and whether or not the same
is required to be accrued on the financial statements of such
Person.
"Lien" means, with respect to any asset, any mortgage,
assignment, trust or deemed trust (whether contractual, statutory
or otherwise arising), title defect or objection, lien, pledge,
charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such assets.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of
operations, assets, Liabilities, reserves or any other aspect of
a party to this Agreement or to its business that results in a
material adverse effect on, or a material adverse change in, any
such aspect of the party or to its business.
"Parent's Balance Sheet" means the balance sheet of the Parent
dated September 30, 1999.
"Parent Common Shares" means 3,000,000 common shares in the
capital of the Parent to be issued to the Trustee pursuant to
paragraph 2.05 hereof, in consideration of subscription proceeds
from the Trustee of $0.0001 per share, having those rights and
terms as set forth in the Exchange and Voting Agreement.
"Person" includes an individual, body corporate, partnership,
company, unincorporated syndicate or organization, trust,
Trustee, executor, administrator and other legal representative.
"SEC" means the United States Securities and Exchange Commission.
"Stock Option Plan" means the stock option plan of the Parent
which plan is more particularly described in Schedule "H"
attached hereto.
"Subsidiary" means, with respect to any Person, (i) any
corporation as to which more than 10% of the outstanding shares
having ordinary voting rights or power (and excluding shares
having voting rights only upon the occurrence of a contingency
unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by
such Person and/or by one or more of such Person's Subsidiaries,
and (ii) any partnership, joint venture or other similar
relationship between such Person (or any Subsidiary thereof) and
any other Person (whether pursuant to a written agreement or
otherwise).
"Support Agreement" means that agreement between the Parent and
the Purchaser, in the form attached hereto as Schedule "G"
hereto, whereby the Parent agrees to make certain payments and
deliveries to enable the Purchaser to comply with the
Exchangeable Share Provisions.
"Tax" means all taxes imposed of any nature including any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial or local) or foreign
income tax, alternative or add-on minimum tax, profits or excess
profits tax, franchise tax, gross income, adjusted gross income
or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax),
capital tax, real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding
or back up withholding tax, value added tax, GST, severance tax,
prohibited tax, premiums tax, occupation tax, customs and import
duties, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Authority
responsible for the imposition of any such tax or in respect of
or pursuant to any United States (whether federal, territorial,
state or local), Canadian (whether federal, territorial,
provincial or local) or other Applicable Law.
"Tax Return" means all returns, reports, forms or other
information required to be filed with respect to any Tax.
"Trustee" means the Trustee or successor Trustee designated under
the Exchange and Voting Agreement attached hereto as Schedule
"B".
"33 Act" means the United States Securities Act of 1933 and all
amendments thereto.
"34 Act" means the United States Securities Act of 1934 and all
amendments thereto.
1.02 Currency Used. All references herein to dollars or the
use of the symbol "$" shall be deemed to refer to United States
dollars unless such reference is prefaced by "CDN" in which case
the reference will be to Canadian dollars.
1.03 Canadian Generally Accepted Accounting Principles. Where the
Canadian Institute of Chartered Accountants or any successor
thereto includes a statement in its handbook or any successor
thereto on a method or alternative methods of accounting or on a
standard or standards of auditing, such statement shall be
regarded as the only generally accepted accounting principle or
principles or generally accepted auditing standard or standards
("Canadian GAAP") applicable to the circumstances that it covers,
and references herein to "generally accepted accounting
principles" shall be interpreted accordingly. All accounting and
financial terms used herein with respect to the Corporation,
unless specifically provided to the contrary, shall be
interpreted and applied in accordance with Canadian GAAP.
1.04 American Generally Accepted Accounting Principles. Where the
American Institute of Certified Public Accountants or any
successor thereto includes a statement in its handbook or any
successor thereto on a method or alternative methods of
accounting or on a standard or standards of auditing, such
statement shall be regarded as the only generally accepted
accounting principle or principles or generally accepted auditing
standard or standards ("American GAAP") applicable to the
circumstances that it covers, and references herein to "generally
accepted accounting principles" shall be interpreted accordingly.
All accounting and financial terms used herein with respect to
the Parent, unless specifically provided to the contrary, shall
be interpreted and applied in accordance with American GAAP.
ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION
2.01 Purchase of Corporation Shares. On the terms and subject to
the conditions set forth herein, the Shareholders hereby agree to
sell, transfer, convey, assign and deliver to the Purchaser, free
and clear of all Corporation Share Encumbrances (as defined in
paragraph 3.01.1), and the Purchaser hereby agrees to purchase,
acquire and accept from the Shareholders, all of the Corporation
Shares held by the Shareholders. At Closing, the Shareholders
will deliver to the Purchaser certificates evidencing all of the
Corporation Shares duly endorsed for transfer and such other
instruments as have been reasonably requested by the Purchaser to
transfer full legal and beneficial ownership of the Corporation
Shares to the Purchaser, free and clear of all Corporation Share
Encumbrances and the Corporation agree to enter the Purchaser or
the Purchaser's nominee on the books of the Corporation as the
holder of the Corporation Shares and to issue one or more
replacement share certificates representing the Corporation
Shares to the Purchaser or the Purchaser's nominee. The
Purchaser shall pay the Purchase Price for the Corporation Shares
in accordance with the terms of Sections 2.02 of this Agreement.
2.02 Purchase Price for Corporation Shares. The aggregate
purchase price to be paid by the Purchaser for the Corporation
Shares (the "Purchase Price") will be 3,000,000 Exchangeable Non-
Voting Shares, each Exchangeable Non-Voting Share exchangeable
for a Parent Common Share on the terms and conditions contained
herein.
2.03 Subscription of Parent Common Shares and Optioned
Securities. The Parent agrees to grant:
(a) to each Shareholder, such number of voting rights in
the Parent as is equivalent to the number of Exchangeable Non-
Voting Shares held by each Shareholder, as if each Shareholder
held an equivalent number of Parent Common Shares, and, subject
to the remaining terms of this Agreement, which voting rights
will be exercisable by the Shareholders through their holding
Exchangeable Non-Voting Shares in accordance with the Exchange
and Voting Agreement; and
(b) to each Shareholder, the rights to exchange their
Exchangeable Non-Voting Shares for Parent Common Shares, such
rights to be exercised in accordance with the terms of the
Exchange and Voting Agreement.
To ensure that the Parent has sufficient common shares available
to issue in exchange for Exchangeable Non-Voting Shares, and as
security for its covenant to do so, the Parent agrees to issue
the Parent Common Shares to the Trustee, at or shortly following
Closing, at the purchase price of $0.0001 per share; such Parent
Common Shares to be held in accordance with the Exchange and
Voting Agreement.
2.04 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of
the Parent in Ontario, Canada, on such date as the parties hereto
may mutually agree in writing (the "Closing Date").
2.05 Payment of Purchase Price. At Closing the Purchaser
will deliver to the Shareholders certificates representing the
Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting
Shares to be issued as fully paid and non-assessable, and
registered in the names of the Shareholders and in the
denominations set forth in Schedule "A" to the Exchange and
Voting Agreement. On or shortly following the Closing, the
Parent will issue the Parent Common Shares to the Trustee, such
Parent Common Shares to be issued as fully paid and non-
assessable, and registered in the name of the Trustee in such
denominations as the Trustee may request. At Closing the
Purchaser will also deliver promissory notes (the "Promissory
Notes"), in a form acceptable to the Shareholders and the
Purchaser evidencing the Purchaser's obligation to pay the
Purchase Price Cash Portion. The Promissory Notes shall be
guaranteed by the Corporation and shall be secured by the
Corporation's assets.
ARTICLE III: REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, each
Shareholder, as to himself, herself or itself and as to such of
the Corporation Shares owned by him, her or it (and not as to any
other Shareholder or to any of the Corporation Shares owned by
any other Shareholder) represents and warrants to the Buying
Group as follows and confirms that the Purchaser and the Parent
are relying upon the accuracy of each of such representations and
warranties in connection with the purchase of the Corporation
Shares and the completion of the transactions set out herein:
3.01 Representations Regarding the Corporation Shares.
3.01.1 Each Shareholder has good and marketable title to his
or her respective holdings in the Corporation Shares, free and
clear of any and all covenants, conditions, restrictions, voting
trust arrangements, rights of first refusal, options, Liens and
adverse claims and rights whatsoever (collectively, the
"Corporation Share Encumbrances"), and on the Closing Date, the
Shareholders will deliver to the Purchaser, good and marketable
title to the Corporation Shares free and clear of any and all
Corporation Share Encumbrances;
3.01.2 Each Shareholder has the full right, power and
authority to enter into this Agreement and each Shareholder has
the full right, power and authority to transfer, convey and sell
to the Purchaser at the Closing his or her respective holdings of
the Corporation Shares sold to the Purchaser by the Shareholders
hereunder, and upon consummation of the purchase, the Purchaser
will acquire from the Shareholders good and marketable title to
the Corporation Shares sold to the Purchaser by the Shareholders,
free and clear of all Corporation Share Encumbrances; and
3.01.3 No Shareholder is a party to, subject to or bound by
any agreement, judgment, order, writ, prohibition, injunction or
decree of any court or other Governmental Authority that would
prevent the execution or delivery to the Purchaser of this
Agreement by any Shareholder, the transfer, conveyance and sale
of the Corporation Shares sold by Shareholder to the Purchaser
pursuant to the terms hereof, or the consummation of the
transactions under this Agreement in accordance with the terms of
this Agreement.
3.02 Authorization. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided
for herein, by each Shareholder are within the respective powers
of each Shareholder and have been duly authorized by all
necessary action on the part of each Shareholder, respectively.
This Agreement has been duly and validly executed by each
Shareholder and constitutes a legal, valid and binding agreement
upon each Shareholder, respectively, enforceable against each
Shareholder in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity or family law.
3.03 Non-Contravention. The execution, delivery and performance
of this Agreement, and the consummation of the transactions
provided for herein, by each Shareholder, do not (a) contravene
or conflict with or constitute a material violation of any
provision of any Applicable Law binding upon or applicable to any
Shareholder or the Corporation Shares or (b) result in the
creation or imposition of any Lien.
3.04 Residency. Each Shareholder is a resident of Canada as
defined in the Income Tax Act
(Canada).
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, the
Corporation represent and warrant to the Buying Group as follows:
4.01 Existence and Power. The Corporation is a corporation duly
incorporated, organized and validly existing under the laws of
the Province of British Columbia and has all corporate power and
all governmental licences, authorizations, permits, consents and
approvals required to carry on the business of The Corporation as
now conducted and to own and operate business of The Corporation
as now owned and operated. The Corporation is not required to be
qualified to conduct business in any jurisdiction where the
failure to be so qualified, whether individually or in the
aggregate, would have a Material Adverse Effect. No proceedings
have been taken or authorized by The Corporation or any
Shareholder or, to the knowledge of The Corporation, by any other
Person, with respect to the bankruptcy, insolvency, liquidation,
dissolution or winding-up of The Corporation or with respect to
any amalgamation, merger, consolidation, arrangement or
reorganization relating to The Corporation.
4.02 Authorization. The execution, delivery and performance by
the Corporation of this Agreement and the consummation thereby of
the transactions provided for herein are within the Corporations
powers and have been duly authorized by all necessary action on
its part. This Agreement has been duly and validly executed by
the Corporation and constitutes a legal, valid and binding
agreement of the Corporation enforceable against it in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and subject to general
principles of equity.
4.03 Capital Stock.
4.03.1 The authorized capital stock of the Corporation
consists solely of the share capital described in Schedule "A"
hereto (the "Corporation Shares").
4.03.2 All such issued and outstanding Corporation Shares have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Corporation
Shares represent all of the issued and outstanding shares of the
Corporation. The Corporation do not hold any of the issued and
outstanding Corporation Shares in the treasury of the
Corporation, and there are not outstanding (i) any options,
warrants, rights of first refusal or other rights to purchase any
shares of the Corporation except as disclosed in Schedule "C"
hereto, (ii) any securities convertible into or exchangeable for
such shares or (iii) any other commitments of any kind for the
issuance of additional shares of the Corporation or options,
warrants or other securities of the Corporation.
4.04 Subsidiaries. The Corporation has no Subsidiaries.
4.05 Governmental Authorization. The execution, delivery and
performance by the Corporation of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement or which would normally be expected to be required
as part of the transactions contemplated by this Agreement.
4.06 Non-Contravention. The execution, delivery and performance
of this Agreement by the Corporation, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the articles or bylaws of the
Corporation; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Corporation, the Corporation Business
or the Corporation Shares and would not, individually or in the
aggregate, have a Material Adverse Effect; (c) constitute a
default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to
which the Corporation are entitled, under any Corporation
Contract to which the Corporation are a party or any permit or
similar authorization relating to the Corporation, the
Corporation Business or the Corporation Shares by which the
Corporation, the Corporation Business or the Corporation Shares
may be bound or affected; or (d) result in the creation or
imposition of any Lien.
4.07 Financial Statements: Undisclosed Liabilities.
4.07.1 Attached hereto as Schedule "C" are true and complete
copies of the Corporation Balance Sheets as of November 30, 1999
and other financial information believed to be material by the
Corporation (collectively, the "Corporation Financials").
4.07.2 The Corporation Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Corporation in accordance with Canadian GAAP and present fairly
the financial position, results of operations and statements of
changes in the Corporations financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
Liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to the
Corporation Contracts and commitments for the sale of goods or
the provision of services by the Corporation, contain and reflect
adequate reserves for all reasonably anticipated material losses
and costs and expenses in excess of expected receipts.
4.07.3 To the best of the knowledge of the Corporation, there
are no Liabilities of the Corporation other than: (i) any
Liabilities accrued as Liabilities on the Corporation Balance
Sheet; (ii) Liabilities incurred since the date of the
Corporation Balance Sheet that do not, and could not,
individually or in the aggregate have a Material Adverse Effect;
and (iii) other Liabilities disclosed in this Agreement or in any
schedules attached hereto.
4.08 Absence of Certain Changes. Since January 4, 2000, the
Corporation Business has been conducted in the ordinary course,
and there has not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Corporation or in the Corporation Business that
has had, or which the Corporation, after reasonable inquiry,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Corporation
that has had, or which the Corporation may, after reasonable
inquiry, expect to have, a Material Adverse Effect such that the
total Liabilities of the Corporation would exceed CDN $15,000 or
(ii) any incurrence, assumption or guarantee of any indebtedness
for borrowed money by the Corporation in connection with the
Corporation Business or otherwise;
(c) any (i) payments by the Corporation in respect of any
indebtedness of the Corporation for borrowed money or in
satisfaction of any Liabilities of the Corporation related to the
Corporation Business, other than in the ordinary course of
business or the guarantee by the Corporation of any of the
indebtedness of any other Person or (ii) creation, assumption or
sufferance of (whether by action or omission) the existence of
any Lien on any assets reflected on the Corporation's Balance
Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Corporation, or any waiver, amendment,
termination or cancellation of any of the Corporation Contracts
by the Corporation, or any relinquishment of any rights
thereunder by the Corporation or of any other right or debt owed
to the Corporation, other than, in each such case, actions taken
in the ordinary course of business consistent with past practice;
(e) any grant of any severance, continuation or termination
pay to any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (ii) entering
into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with
any director, officer, stockholder or employee of the Corporation
or any Affiliate of the Corporation, (iii) increase in benefits
payable or potentially payable under any severance, continuation
or termination pay policies or employment agreements with any
director, officer, stockholder or employee of the Corporation or
any Affiliate of the Corporation, (iv) increase in compensation,
bonus or other benefits payable or potentially payable to
directors, officers, stockholders or employees of the Corporation
or any Affiliate of the Corporation other than in the normal
course of business, (v) change in the terms of any bonus,
pension, insurance, health or other benefit plan of the
Corporation or (vi) representation of the Corporation to any
employee or former employee of the Corporation that the Purchaser
promised to continue any Corporation benefit plan after the
Closing Date,
(f) any change by the Corporation in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Corporation to any officer, director,
stockholder or Affiliate of the Corporation or any of their
respective Affiliates or Associates; or
(h) any (i) material single capital expenditure or
commitment, or any group of related capital expenditures or
commitments, or (ii) sale, assignment, transfer, lease or other
disposition of or agreement to sell, assign, transfer, lease or
otherwise dispose of any asset or property other than in the
ordinary course of business.
4.09 Properties; Corporation Material Leases; Tangible Assets.
4.09.1 The Corporation does not own any real property.
4.09.2 The Corporation hold, title to each of its properties
and assets free and clear of all Liens, adverse claims,
easements, rights of way, servitudes, zoning or building
restrictions or any other rights of others or other adverse
interests of any kind, including leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements (collectively,
"Corporation Encumbrances").
4.09.3 All tangible properties and assets reflected on the
Corporation Balance Sheet are in all material respects fit for
the purposes for which they are used and are in good operating
condition and repair and are adequate for the uses to which they
are put, and no material properties or assets necessary for the
conduct of the Corporation Business in substantially the same
manner as the Corporation Business has heretofore been conducted
are in need of replacement, maintenance or repair except for
routine replacement, maintenance and repair.
4.10 Affiliates. Other than as disclosed herein, there are no
material undisclosed Corporation Contracts which have been
entered into within the past five years or are currently in force
and effect between the Corporation and any Shareholder, or any
Affiliate or Associate of any Shareholder. The Corporation is
not materially indebted to any Shareholder.
4.11 Litigation. There are no material proceedings pending or,
to the knowledge of the Corporation, threatened against or
affecting the Corporation or the Corporation Business or that
seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement and (ii) there is no existing
order, judgment or decree of any Governmental Authority naming
the Corporation as an affected party which has not been paid or
discharged in full.
4.12 Material Contracts. All Corporation Contracts are legal,
valid and binding obligations of the Corporation and each other
Person who is a party thereto, enforceable against the
Corporation and each such Person in accordance with their terms,
and none are subject to any material default thereunder.
4.13 Required Consents. There are no governmental or other
registrations, filings, applications, notices, transfers,
consents, approvals, orders, qualifications or waivers required
under Applicable Law or otherwise required to be obtained or made
with any Governmental Authority to be obtained by the Corporation
or any Shareholder by virtue of the execution and delivery of
this Agreement and the consummation of the transactions provided
for herein for any reason; nor are there any Corporation
Contracts with respect to which the consent of the other party or
parties thereto must be obtained by the Corporation or any
Shareholder by virtue of the execution and delivery of this
Agreement and the consummation of the transactions provided for
herein (the "Required Consents").
4.14 Corporation Intellectual Property.
4.14.1 Schedule "E" sets forth a complete and correct list of
each patent, patent application and invention, trademark,
tradename, trademark or tradename registration or application,
copyright or copyright registration or application for copyright
registration, and each licence or licensing agreement, for any of
the foregoing relating to the Corporation Business as conducted
by the Corporation or held by the Corporation (the "Corporation's
Intellectual Property Rights"). The Corporation's Intellectual
Property Rights also include any trade secrets that are material
to the conduct of the Corporation Business in the manner that the
Corporation Business has heretofore been conducted.
4.14.2 The Corporation has not, during the three years
preceding the date of this Agreement, been a party to any
proceeding, nor to the knowledge of the Corporation, is any
proceeding threatened, as to which there is a reasonable
possibility of a determination adverse to the Corporation,
involving a claim of infringement by any Person (including any
Governmental Authority) of any of the Corporation's Intellectual
Property Rights. None of the Corporation Intellectual Property
Right are subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the
Corporation or restricting the licensing thereof by the
Corporation to any Person. The Corporation has no knowledge that
would cause such Person to believe that the use of the
Corporation's Intellectual Property Rights or the conduct of the
Corporation Business conflicts with, infringes upon or violates
any patent, patent licence, patent application, trademark,
tradename, trademark or tradename registration, copyright,
copyright registration, service mark, brand mark or brand name or
any pending application relating thereto, or any trade secret,
know-how, programs or processes, or any similar rights, of any
Person.
4.14.3 To the knowledge of the Corporation, the Corporation
either owns the entire right, title and interest in, to and
under, or has acquired an exclusive licence to use, any and all
patents, trademarks, trade names, brand names and copyrights that
are material to the conduct of the Corporation Business in the
manner that the Corporation Business has heretofore been
conducted. The Corporation's Intellectual Property Rights are in
full force and effect and have not been used or enforced or
failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the
Corporation's Intellectual Property Rights. All registrations and
filings necessary to preserve the rights of the Corporation in
and to the Corporation's Intellectual Property Rights have been
made.
4.15 Tax Matters.
4.15.1 The Corporation has prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such
Tax Return was correct and complete.
4.15.2 The Corporation has paid all Taxes due and payable by
them and have paid all assessments and reassessments they have
received in respect of Taxes. The Corporation have paid all Tax
installments due and payable by them as at November 30, 1999,
save and except as disclosed in Schedule "C" hereto.
4.15.3 The Corporation has withheld from each payment made to
any of its present or former employees, officers and directors,
and to all persons who are non-residents of Canada for the
purposes of the Income Tax Act (Canada) all amounts required by
Applicable Law and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority.
The Corporation has remitted all Canada Pension Plan
contributions, employment insurance premiums, employer health
taxes and other Taxes payable by them in respect of their
employees and have remitted such amounts to the proper
Governmental Authority within the time required by Applicable
Law. The Corporation has charged, collected and remitted on a
timely basis all Taxes as required by Applicable Law on any sale,
supply or delivery whatsoever, made by the Corporation.
4.15.4 The Corporation Business is the only business ever
conducted by the Corporation. The non-capital losses (as defined
in the Tax Act and any applicable provincial taxing statute) were
incurred by the Corporation only in carrying on the Corporation
Business. The Corporation is not prevented by virtue of any
amalgamation or dissolution from carrying back against income
earned by it prior to the Closing Date, any losses incurred by it
after the Closing Date.
4.15.5 The Corporation has paid all Taxes imposed by
applicable legislation in the provinces of British Columbia and
Ontario on the acquisition of its tangible personal property as
defined in applicable legislation in the province of Ontario, and
none of its tangible personal property has been transferred at
any time on a tax-exempt basis under applicable legislation of
the Province of Ontario or any predecessor legislation thereof.
The foregoing is accurate, mutatis mutandis, with respect to all
sales or transfer Taxes imposed under comparable legislation of
other provinces.
4.16 Securities Legislation. The Corporation is a private issuer
within the meaning of the Securities Act (Ontario) and the sale
of the Corporation Shares by the Shareholders to the Purchaser is
made in compliance with the exempt takeover-bid provisions of
this Act or such other exemption as may be available to it and
the Shareholder.
4.17 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Purchaser by or on behalf of the Corporation with respect to the
Corporation (including the Corporation Business and the results
of operations, financial condition and prospects of the
Corporation) for use in connection with this Agreement or the
transactions contemplated by this Agreement is true and complete
in all material respects and does not, to the best of the
knowledge of the Corporation after conducting an inquiry which a
reasonably prudent person would make under the circumstances,
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to the
Corporation that has not been disclosed to the Purchaser by the
Corporation in writing that has had a Material Adverse Effect on
or, so far as the Corporation can now foresee, could be
reasonably likely to have a Material Adverse Effect on, the
Corporation (including the Corporation Business and the results
of operations, financial condition or prospects of the
Corporation).
ARTICLE V: REPRESENTATIONS AND WARRANTIES
OF THE BUYING GROUP
As an inducement to the Corporation and each Shareholder to enter
into this Agreement and to consummate the transactions provided
for herein, the Purchaser and the Parent, jointly and severally,
represent and warrant to the Corporation and each Shareholder
that:
5.01 Existence and Power. Each of the Purchaser and the Parent
is a corporation duly incorporated, organized and validly
existing under the laws of its incorporating jurisdiction (being
the Province of British Columbia for the Purchaser and the State
of Nevada for the Parent) and each has all corporate power and
all governmental licences, authorizations, permits, consents and
approvals required to carry on the Buying Group Business as now
conducted and to own and operate their respective businesses as
now owned and operated. The Purchaser and the Parent are not
required to be qualified to conduct business in any jurisdiction
where the failure to be so qualified, whether individually or in
the aggregate, would have a Material Adverse Effect. No
proceedings have been taken or authorized by the Purchaser or the
Parent or, to the knowledge of the Purchaser or the Parent, by
any other Person, with respect to the bankruptcy, insolvency,
liquidation, dissolution or winding-up of the Purchaser or the
Parent or with respect to any amalgamation, merger,
consolidation, arrangement or reorganization relating to the
Purchaser or the Parent.
5.02 Authorization. The execution, delivery and performance by
each of the Purchaser and the Parent of this Agreement and the
consummation thereby of the transactions provided for herein are
within the powers of the Purchaser and the Parent and have been
duly authorized by all necessary action on their part. This
Agreement has been duly and validly executed by each of the
Purchaser and the Parent and constitutes a legal, valid and
binding agreement of the Purchaser and the Parent enforceable
against them in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity.
5.03 Capital Stock of the Purchaser.
5.03.1 The authorized capital stock of the Purchaser consists
of 100,000,000 common shares of no par value of which one common
share is issued and outstanding on the date hereof to and
50,000,000 Exchangeable Non-Voting Shares with no par value of
which no shares are issued and outstanding. Each Exchangeable
Non-Voting Share shall:
(a) be non-voting as to matters concerning the Purchaser
(such that all voting shares of the Purchaser will be and remain
held by the Parent); however, as stated above in paragraph 2.03,
the holder of Exchangeable Non-Voting Shares will be entitled to
voting rights in the Parent as is equivalent to the number of
Exchangeable Non-Voting Shares held by each Shareholder as if
each Shareholder held an equivalent number of Parent Common
Shares;
(b) entitle the holder thereof (the "Holder") to dividend
rights equal, after conversion into Canadian dollars based on the
Canadian/U.S. exchange rate in effect on the record date thereof,
to the per share dividend rights of Parent Common Shares;
(c) entitle the Holder, on a liquidation of the Purchaser,
to receive in exchange for each Exchangeable Non-Voting Share one
Parent Common Shares for a period ending on the twenty-fifth
anniversary of the Closing Date; and
(d) entitle the Holder, at his or her election from time to
time for a period ending on the twenty-fifth anniversary of the
Closing Date, upon 30 days' written notice given by such Holder
to the Purchaser, to require the Purchaser to redeem any or all
Exchangeable Non-Voting Shares and to exchange therefor, on a
share for share basis, Parent Common Shares (the "Right of
Retraction"),
5.03.2 The Parent and the Purchaser shall be entitled to
deduct and withhold from the consideration otherwise payable to
any Holder of Exchangeable Non-Voting Shares, including any
dividend payments in respect of the Exchangeable Non-Voting
Shares, such amount as the Parent or the Purchaser is required or
permitted to deduct and withhold with respect to such payment
under the United States Internal Revenue Code, the Income Tax Act
(Canada) or any provision of state, provincial, local or foreign
tax law. The Parent and the Purchaser shall not initially
withhold any United States Tax on dividends paid on the
Exchangeable Non-Voting Shares. However, if any United States
taxing authority determines that the Parent or the Purchaser is
liable for United States withholding Tax on dividends paid to the
Holders on the Exchangeable Non-Voting Shares, the Purchaser
shall be entitled to reduce the amount of any future dividends to
be paid to the Holders by such withholding obligation. To the
extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the
Holder of Exchangeable Non-Voting Shares in respect of which such
deduction and withholding was made; provided, however, that such
withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a Holder
exceeds the cash portion of the consideration otherwise payable
to the Holders, the Parent upon at least ten (10) days' prior
written notice to such Holder, is hereby authorized to sell or
otherwise dispose of at fair market value such portion of such
non-cash consideration otherwise payable to the Holder as is
necessary to provide sufficient funds to the Parent in order to
enable it to comply with such deduction or withholding
requirement and the Parent shall give an accounting to the Holder
with respect thereof and any balance of such proceeds of sale.
5.03.3 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Purchaser, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or options, warrants or other securities of the Purchaser.
5.04 Capital Stock of the Parent.
5.04.1 The authorized capital stock of the Parent consists
solely of 70,000,000 common shares with no par value ("Parent
Common Shares")
5.04.2 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Parent from treasury, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Parent or
options, warrants or other securities of the Parent which
materially vary from those disclosed in the financial statements
of the Parent attached hereto as Schedule "D".
5.05 General Provisions of the Capital of the Purchaser and the
Parent.
5.05.1 All of the issued and outstanding shares in the
respective capital stocks of the Purchaser and the Parent have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Purchaser does
not hold any of the issued and outstanding shares in the treasury
of the Purchaser or the Parent, the Parent does not hold any of
the issued and outstanding shares in the treasury of the Parent
and there are not outstanding (i) any options, warrants, rights
of first refusal or other rights to purchase any shares of the
Purchaser or the Parent, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or Parent or options, warrants or other securities of the
Purchaser or Parent other than as disclosed in Article 5.03.1
herein.
5.05.2 All of the Exchangeable Non-Voting Shares and the
Parent Common Shares which will be issued hereunder will be
fully paid and non-assessable, subject to such terms and
provisions as set forth in the Exchange and Voting Agreement, and
the Purchaser's articles of incorporation and the Parent's
Directors Resolutions relating to the issuance of the Parent
Common Shares, as applicable, and all such shares will be issued
free and clear of all Liens, charges, encumbrances and trading
restrictions other than as may be imposed by Applicable Law.
5.06 Subsidiaries. The Purchaser has no Subsidiaries and
the only Subsidiary of the Parent is the Purchaser.
5.07 Governmental Authorization. The execution, delivery and
performance by the Buying Group of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement.
5.08 Non-Contravention. The execution, delivery and performance
of this Agreement by the Buying Group, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the respective articles or bylaws of
the Buying Group; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Buying Group, the Buying Group Business
or the outstanding shares in their respective capital stocks and
would not, individually or in the aggregate have a Material
Adverse Effect; (c) constitute a default under or give rise to
any right of termination, cancellation or acceleration of, or to
a loss of any benefit to which the Purchaser or the Parent are
entitled, under any Buying Group Contract to which the Purchaser
or the Parent is a party or any Permit or similar authorization
relating to the Purchaser or Parent, the Buying Group Business or
the outstanding shares in their respective capital stocks may be
bound or affected; or (d) result in the creation or imposition of
any Lien.
5.09 Financial Statements: Undisclosed Liabilities.
5.09.1 Attached hereto as Schedule "D" are true and complete
copies of the Parent's Balance Sheet, prepared on a consolidated
basis, as of September 30, 1999 and the related statements of
income and retained earnings and changes of financial position,
prepared on a consolidated basis, for the year ended December 31,
1998 (collectively, the "Parent's Financials").
5.09.2 The Parent's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Parent in accordance with American GAAP and present fairly the
financial position, results of operations and statements of
changes in the Parent's financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to Buying
Group Contracts and commitments for the sale of goods or the
provision of services by the Parent, contain and reflect adequate
reserves for all reasonably anticipated material losses and costs
and expenses in excess of expected receipts.
5.09.3 To the best of the knowledge of the Buying Group, there
are no Liabilities of the Buying Group other than: (i) any
Liabilities accrued as Liabilities on the Parent's Balance Sheet;
(ii) Liabilities incurred since the date of the Parent's Balance
Sheet that do not, and could not, individually or in the
aggregate have a Material Adverse Effect; (iii) other Liabilities
disclosed in this Agreement or in any schedules attached hereto;
and (iv) the Tax on reserves.
5.10 Absence of Certain Changes. Since January 4, 2000, the
Buying Group Business has been conducted in the ordinary course,
and there has not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Purchaser or the Parent or in the Buying Group
Business that has had, or which the Purchaser or the Parent,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Purchaser or
the Parent that has had, or which the Purchaser or the Parent
expect to have, a Material Adverse Effect or (ii) any incurrence,
assumption or guarantee of any indebtedness for borrowed money by
the Purchaser or the Parent in connection with the Buying Group
Business or otherwise;
(c) any (i) payments by the Purchaser or Parent in respect
of any indebtedness of the Purchaser or Parent for borrowed money
or in satisfaction of any Liabilities of the Purchaser or Parent
related to the Buying Group Business, other than in the ordinary
course of business or the guarantee by the Purchaser or the
Parent of any of the indebtedness of any other Person or (ii)
creation, assumption or sufferance of (whether by action or
omission) the existence of any Lien on any assets reflected on
the Parent's Balance Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Buying Group, any waiver, amendment,
termination or cancellation of any Contract by the Buying Group,
or any relinquishment of any rights thereunder by the Buying
Group or of any other right or debt owed to the Buying Group,
other than, in each such case, actions taken in the ordinary
course of business consistent with past practice;
(e) any (i) grant of any severance, continuation or
termination pay to any director, officer, stockholder or employee
of the Buying Group or any Affiliate of the Buying Group, (ii)
entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing
agreement) with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iii)
increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or employment
agreements with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iv)
increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, stockholders or
employees of the Buying Group or any Affiliate of the Buying
Group, (v) change in the terms of any bonus, pension, insurance,
health or other benefit plan of the Buying Group or (vi)
representation of the Buying Group to any employee or former
employee of the Buying Group that the Buying Group promised to
continue any benefit plan after the Closing Date,
(f) any change by the Buying Group in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Buying Group to any of their respective
officers, directors, stockholders or Affiliates of the Buying
Group or any of their respective Affiliates or Associates; and
(h) any (i) material single capital expenditure or
commitment, or any group of related capital expenditures or
commitments by either the Purchaser or the Parent or (ii)
material sale, assignment, transfer, lease or other disposition
of or agreement to sell, assign, transfer, lease or otherwise
dispose of any asset or property by either of the Purchaser or
the Parent other than in the ordinary course of business.
5.11 Properties; Material Leases; Tangible Assets. Neither the
Purchaser nor the Parent own or lease any real property or
material assets.
5.12 Affiliates. There are no contracts between either the
Parent or Purchaser and any of its shareholders, or any Affiliate
or Associate of any of its shareholders. There is no
indebtedness of either the Parent or the Purchaser to any of its
shareholders, or to any Affiliate or Associate of any of its
shareholders.
5.13 Litigation. There is no proceeding pending or, to the
knowledge of the Buying Group, threatened against or affecting
the Buying Group or the Buying Group Business or that seeks to
prevent, enjoin, alter or delay the transactions contemplated by
this Agreement, and there is no existing order, judgment or
decree of any Governmental Authority naming either the Purchaser
or the Parent as an affected party which has not been paid or
discharged in full.
5.14 Material Contracts. The Buying Group is not party to any
Buying Group Contract other than as specified herein.
5.15 Compliance with Applicable Laws. The operation of the Buying
Group Business (i) has not violated or infringed, except for
violations or infringements that have been cured and the prior
existence of which could not, individually or in the aggregate,
reasonably be expected to have an adverse effect on either the
Purchaser or the Parent and (ii) does not in any material respect
violate or infringe any Applicable Law, the terms of any Permit
or any order, writ, injunction or decree of any Governmental
Authority including but not limited to, the 33 Act, the 34 Act,
the Rules and Regulations of the SEC, or the Securities Laws and
Regulations of any state. The Parent is not an investment company
as defined in, or otherwise subject to regulation under, the
Investment Company Act of 1940. The Parent is required to file
reports pursuant to Section 12(g) of the 34 Act and is now, and
as of the Closing Date will be, current in its filings. The
Parent's Form 10-K Annual Reports have been filed with certified
financial statements, in compliance with SEC Regulations.
5.16 Buying Group Employment Agreement; and Employee Benefits.
5.16.1 There are no employment, consulting, severance pay,
continuation pay, termination pay, indemnification agreements,
collective agreements, employee benefit plans or other similar
agreements of any nature whatsoever affecting either the
Purchaser or the Parent save those to which a company listed on
the OTCBB would, in the ordinary course of its business, be party
to.
5.16.2 The Buying Group and its Affiliates have complied and
are currently complying, in respect of all employees of the
Buying Group and its Affiliates, with all Applicable Laws
respecting employment and employment practices and the protection
of the health and safety of employees, except for such instances
which are not, in the aggregate, material.
5.17 Intellectual Property. The Buying Group has no interest in
any patent, patent application and invention, trademark, trade
name, trademark or trade name registration or application,
copyright or copyright registration or application for copyright
registration.
5.18 Tax Matters.
5.18.1 Except as disclosed in the Parent's Financials, the
Purchaser and the Parent have prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such
Tax Return was correct and complete.
5.18.2 The Purchaser is not a registrant for the purposes of
the goods and services tax provided for under the Tax Act.
5.18.3 The Purchaser is a taxable Canadian Corporation, as
that term is defined in the Tax Act.
5.18.4 The Purchaser has paid all applicable sales and retail
taxes in the Province of British Columbia, and none of its
tangible personal property has been transferred at any time on a
tax-exempt basis under applicable legislation in the Province of
British Columbia. The foregoing is accurate, mutatis mutandis,
with respect to all sales or transfer Taxes imposed under
comparable legislation of other provinces.
5.18.5 The Purchaser has never acquired or had the use of any
of its assets from a Person (a "Related Person") with whom the
Purchaser was not dealing at arm's length, within the meaning of
the Tax Act. The Purchaser has never disposed of any asset to a
Related Person for proceeds less than the fair market value of
that asset. The Purchaser is not a party to or bound by any
agreement with, is not indebted to, and no amount is owing to the
Purchaser by any Related Person, not dealing at arm's length,
within the meaning of the Tax Act, with the Purchaser.
5.18.6 For the purposes of the Tax Act the Purchaser and the
Shareholders hereby covenant and agree to elect jointly under
Subsection 85(1) of the Tax Act, by completing and filing with
the Department of National Revenue the prescribed form T2057
within the prescribed time for the purposes of the Tax Act with
respect to the sale by the Shareholders to the Purchaser of the
Corporation Shares and further agree to transfer the Corporation
Shares at an agreed amount equal to the adjusted cost base of the
Corporation Shares to the Shareholders for purposes of the Tax
Act or such greater amount determined by the Shareholders (the
"Elected Amount").
5.18.7 If at any time after the Closing Date the Shareholders
determine that either:
(a) it is necessary or desirable to change the Elected
Amount; or
(b) the Tax Act deems the Elected Amount to be an amount
which is different than the amount agreed upon between the
Shareholder and the Purchaser, then the Shareholder and the Purchaser
shall do all things reasonably necessary to reflect such change including,
for example, filing an amended election pursuant to subsection 85(1)
of the Tax Act.
5.19 Issuance of Shares.
5.19.1 The issuance of the Parent Common Shares by the Parent,
and the terms and provisions of the Parent Common Shares, will
not violate any provisions of the Parent's articles or bylaws or
any Applicable Law, nor will the voting rights attached to the
Parent Common Shares derogate from any rights under Applicable
Law.
5.19.2 The issuance of the Exchangeable Non-Voting Shares by
the Purchaser, and the terms and provisions of the Exchangeable
Non-Voting Shares, will not violate any provisions of the
Purchaser's articles or bylaws or any Applicable Law.
5.20 Continuing NASD Status. The Parent warrants that the
National Association of Securities Dealers has cleared the Parent
for quotation of its common shares, including the Parent Common
Shares, on the over-the-counter bulletin board in the United
States, which will continue after the Closing.
5.21 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Shareholders by or on behalf of the Buying Group with respect to
each of the Purchaser and the Parent (including the Buying Group
Business and the respective results of operations, financial
condition and prospects of the Purchaser and the Parent) for use
in connection with this Agreement or the transactions
contemplated by this Agreement is true and complete in all
material respects and does not, to the best of the knowledge of
each Shareholder after conducting an inquiry which a reasonably
prudent person would make under the circumstances, omit to state
any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. There is no fact known to the Purchaser or
the Parent or any Shareholder that has not been disclosed to the
Shareholders by the Buying Group in writing that has had a
Material Adverse Effect on or, so far as the Buying Group can now
foresee, could be reasonably likely to have a Material Adverse
Effect on the Buying Group (including the Buying Group Business
and the respective results of operations, financial condition or
prospects of the Buying Group).
ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS
6.01 Conduct of the Business. During the Interim Period, other
than with the express written approval of the Purchaser, the
Corporation shall conduct the Corporation Business in the
ordinary course consistent with past practice and shall use its
best efforts to preserve intact the organization, relationships
with third parties and goodwill of the Corporation and keep
available the services of the present officers, employees, agents
and other personnel of the Corporation Business.
6.01.1 Without limiting in any way the importance of the
foregoing, during the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall not, and
each Shareholder shall not cause the Corporation to:
(a) adopt any material change in any method of accounting
or accounting practice used by the Corporation other than by
reason of a concurrent change in generally accepted accounting
principles;
(b) amend its articles or bylaws;
(c) sell, mortgage, pledge or otherwise dispose of any
substantial assets or properties of the Corporation;
(d) declare, set aside or pay any management fee or
dividend or make any other distribution with respect to the
capital stock of the Corporation or otherwise make a distribution
or payment to any Shareholder;
(e) amalgamate, merge or consolidate with or agree to
amalgamate, merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise
acquire, any Corporation, partnership or other business
organization or division thereof;
(f) authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any
securities or obligations convertible into shares of its capital
stock of any class or commit to doing any of the foregoing;
(g) split, combine or reclassify any shares of the capital
stock of any class of the Corporation or redeem or otherwise
acquire, directly or indirectly, any shares of such capital
stock;
(h) incur or agree to incur any debt or guarantee any debt
for borrowed money, including any debt to any Shareholder, or to
any Affiliate or Associate of any Shareholder, except debt
incurred in the ordinary course of business consistent with past
practice;
(i) make any loan, advance or capital contribution to or
investment in any person other than loans, advances and capital
contributions to or investments in joint ventures or other
similar arrangements in which the Corporation has an equity
interest in the ordinary course of business and travel advances
made in the ordinary course of business by the Corporation to its
employees to meet business expenses expected to be incurred by
such employees;
(j) enter into any settlement with respect to any
Proceeding or consent to any order, decree or judgment relating
to or arising out of any such Proceeding;
(k) take any action to terminate, dismiss or cause the
retirement of any key employee of the Corporation;
(l) fail in any material respect to comply with any
Applicable Laws; or
(m) make, or make any commitments for, capital or
contractual expenditure exceeding $5,000 for any individual
commitment or $100,000 for all such commitments taken in the
aggregate.
6.01.2 Nothing in this Agreement, and specifically in
Paragraph 6.01.2, shall be read to prohibit the Purchaser or the
Parent from negotiating and completing transactions involving the
acquisition of other subsidiaries including Enersphere Inc. or E-
Bill Direct Inc..
6.01.3 During the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall:
(a) file all Canadian, United States, foreign, federal,
state, provincial and local Tax Returns required to be filed and
make timely payment of all applicable Taxes when due;
(b) promptly notify the Purchaser in writing of any action
or circumstance that results in, or could reasonably be expected
to result in, a Material Adverse Effect or the occurrence of any
breach by the Corporation or any Shareholder of any
representation or warranty, or any covenant or agreement
contained in this Agreement; and
(c) promptly notify the Purchaser in writing of the
commencement of any proceeding or the threat thereof by or
against the Corporation or any Shareholder.
6.02 Maintenance of Corporation Insurance Policies. On and after
the Closing Date, the Corporation shall not take or fail to take
any action if such action or inaction would adversely affect the
applicability of any insurance in effect on the date hereof that
covers all or any material part of the assets of the Corporation
or the Business.
6.03 Tax Election. In accordance with the Letter of Intent,
the Corporation shall not file an election pursuant to subsection
256(9) of the Income Tax Act (Canada) or any equivalent
provincial provision.
ARTICLE VII: COVENANTS OF THE BUYING GROUP
7.01 Conduct of Business. During the Interim Period, the Buying
Group will conduct the Buying Group Business in the ordinary
course consistent with past practice and shall use its best
efforts to preserve intact the organization, relationships with
third parties and goodwill of the Buying Group and keep available
the services of the present officers, directors, employees,
agents and other personnel of the Buying Group Business; and
without limiting in any way the importance of the foregoing, the
Buying Group shall not undertake any of those matters referred to
in sections 6.01.1 and 6.01.2, and all such clauses thereof shall
apply mutatis mutandis to the Buying Group.
7.02 Priority. Notwithstanding any term of the Purchaser's
bylaws, memorandum and articles to the contrary, the terms and
provisions of this Agreement and the Exchange and Voting
Agreement shall prevail such that the directors of the Purchaser
will only authorize the exchange of the Exchangeable Non-Voting
Shares for shares in the Parent Common Shares in accordance with
the terms of the Exchange and Voting Agreement.
ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES
8.01 Further Assurances. Each party hereto agrees to execute and
deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably
necessary or desirable (including obtaining all required
consents) in order to evidence the consummation or implementation
of the transactions provided for under this Agreement.
8.02 Certain Filings. The parties hereto shall cooperate with
one another in determining whether any action by or in respect
of, or filing with, any Governmental Authority is required or
reasonably appropriate, or any action, consent, approval or
waiver from any party to any Contract is required or reasonably
appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the
terms and conditions of this Agreement, in taking such actions or
making any such filings, the parties hereto shall furnish
information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
8.03 Registration. All parties acknowledge and agree that the
Parent is a reporting issuer in the United States, and all of the
Parent Common Shares have been registered under the 33 Act; and
all parties further acknowledge and agree that neither the Parent
nor the Purchaser is a reporting issuer in any province of
Canada, and the Exchangeable Non-Voting Shares and Parent Common
Shares will be subject to such resale restrictions as imposed by
the Applicable Law of the jurisdiction in which a Shareholder is
resident.
ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING
9.01 Conditions to Obligation of the Buying Group. The
obligations of the Buying Group to consummate the Closing are
subject to the completion of due diligence of the Corporation on
the part of the Buying Group and to the Buying Group's
satisfaction on or before December 20, 1999 and are further
subject to the satisfaction of each of the following conditions:
(a) (i) the Corporation and each Shareholder shall have
performed and satisfied each of their respective obligations
hereunder required to be performed and satisfied by them on or
prior to the Closing Date, (ii) each of the representations and
warranties of the Corporation and each Shareholder contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing, and
(iii) the Buying Group shall have received certificates signed by
each Shareholder and a duly authorized executive officer of the
Corporation to the foregoing effect and to the effect that the
conditions specified within this Section 9.01(a) have been
satisfied.
(b) All Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) after
the Closing that would be materially burdensome upon the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) or
their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses,
as of the date hereof, would be reasonably expected to be
conducted after the Closing Date. All such approvals shall be in
effect, and no proceedings shall have been instituted or
threatened by any Governmental Authority or other person with
respect thereto as to which there is a material risk of a
determination that would terminate the effectiveness of, or
otherwise materially and adversely modify the terms of, any such
approval; all applicable waiting periods with respect to such
approvals shall have expired; and all conditions and requirements
prescribed by Applicable Law or by such approvals to be satisfied
on or prior to the Closing Date shall have been satisfied to the
extent necessary such that all such approvals are, and will
remain, in full force and effect assuming continued compliance
with the terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
The operation of the Corporation Business shall not have violated
or infringed, or be in violation or infringement of any
Applicable Law or any order, writ, injunction or decree of any
Governmental Authority, where such violations and infringements,
individually or in aggregate, have resulted in, or could
reasonably be expected to result in a Material Adverse Effect.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Corporation or the Corporation Business,
including any damage, destruction or other casualty loss
affecting the Corporation or the Corporation Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Corporation.
9.02 Conditions to Obligations of the Shareholders. The
obligations of each Shareholder to consummate the Closing are
subject completion of reasonable due diligence investigations of
the Buying Group to be completed on or before December 20, 1999
and are further subject to the satisfaction of each of the
following conditions:
(a) (i) the Buying Group shall have performed and satisfied
each of its obligations hereunder required to be performed and
satisfied by it on or prior to the Closing Date; and (ii) each of
the representations and warranties of the Buying Group contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing.
(b) All Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to any
Shareholder (or any of their respective Affiliates or Associates)
after the Closing that would be materially burdensome upon any
such Person. All such approvals shall be in effect, and no
Proceedings shall have been instituted or threatened by any
Governmental Authority with respect thereto as to which there is
a material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify
the terms of, any such approval. All applicable waiting periods
shall have expired, and all conditions and requirements such
approvals to be satisfied on or prior to the Closing extent
necessary such that all such approvals are, and will remain, in
full force and effect assuming continued compliance with the
terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
No temporary restraining order, preliminary or permanent
injunction, cease and desist order or other order issued by any
court of competent jurisdiction or any competent Governmental
Authority or any other legal restraint or prohibition preventing
the transfer and exchange contemplated hereby or the consummation
of the Closing, or imposing Damages in respect thereto, shall be
in effect, and there shall be no pending actions or proceedings
by any Governmental Authority (or determinations by any
Governmental Authority) or by any other Person challenging or
seeking to materially restrict or prohibit the transfer and
exchange contemplated hereby or the consummation of the Closing.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Buying Group or the Buying Group Business,
including any damage, destruction or other casualty loss
affecting the Buying Group or the Buying Group Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Buying Group.
(e) Since the date hereof, there shall not have been any:
(i) material change in the capital structure of either the
Purchaser or the Parent, other than as to effect the creation or
issuance of the Exchangeable Non-Voting Shares or the Parent
Common Shares as contemplated herein, or to effect the rights,
restrictions, privileges and terms of the Exchangeable Non-Voting
Shares or Parent Common Shares in accordance with the terms
hereof; or
(ii) any actions, investigations, inquiries or
proceedings commenced or continued against either the Parent or
the Purchaser, or their respective officers, directors,
promoters, representatives, agents or their respective businesses
by any securities regulatory authority, tribunal or body having
jurisdiction.
(f) The Parent's Board of Directors, by proper and
sufficient vote, shall have approved this Agreement, the Exchange
and Voting Agreement and the Support Agreement, and the
transactions contemplated hereby and the issuance of the Parent
Common Shares hereunder.
(g) The Parent and the Purchaser will have entered into the
Exchange and Voting Agreement and the Support Agreement.
ARTICLE X: INDEMNIFICATION
10.01 Agreement to Indemnify.
10.01.1 Each of the Purchaser and the Parent, and their
respective Affiliates, Associates, officers, directors,
shareholders, representatives and agents (collectively, the
"Purchaser Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by each
Shareholder in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by such Shareholder, provided, however,
that each Shareholder shall have no obligation to indemnify the
Purchaser Indemnitees with respect to damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by any other Shareholder and further a
Shareholder shall have no such obligation to indemnify a
Purchaser Indemnitee hereunder unless, and to the extent, the
aggregate of all damages incurred by the Purchaser Indemnities
for all items covered by this Section 10.01(1) shall exceed
$1,000 in the aggregate.
10.01.2 Each of the Purchaser Indemnitees shall be indemnified
and held harmless to the extent set forth in this Article X by
the Corporation in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made in this Agreement by the Corporation.
10.01.3 Each Shareholder and their respective Affiliates and
Associates and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively,
the "Shareholder Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by the
Purchaser and Parent in respect of any and all damages incurred
by any Shareholder Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made by the Parent or the Purchaser in this
Agreement.
10.02 Survival of Representation, Warranties and Covenants.
Except as hereinafter provided in this Section 10.02, all
representations, warranties, covenants, agreements and
obligations of each Indemnifying Party contained herein and all
claims of any Purchaser Indemnitee or Shareholder Indemnitee in
respect of any breach of any representation, warranty, covenant,
agreement or obligation of any Indemnifying Party contained in
this Agreement, shall survive the Closing and shall expire one
year following the Closing Date.
ARTICLE XI: MISCELLANEOUS
11.01 Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given (i) if personally delivered, when so delivered,
(ii) if mailed, two Business Days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid and addressed to the intended recipient as set forth
below, (iii) if given by facsimile or telecopier, once such
notice or other communication is transmitted to the facsimile or
telecopier number specified below and the appropriate answer back
or telephonic confirmation is received, provided that such notice
or other communication is promptly thereafter mailed in
accordance with the provisions of clause (ii) above or (iv) if
sent through an overnight delivery service in circumstances under
which such service guarantees next day delivery, the day
following being so sent:
If to the Corporation: 19 Concession Street, Cambridge, Ontario, N1R 2G6
If to the Purchaser: 804-750 W. Pender Street
Vancouver, B.C., V6C 2T8
If to the Parent: 19 Concession Street
Cambridge, Ontario, N1R 2G6
If to a Shareholder: at the last address for the
Shareholder on the member registers of
the Corporation.
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary
mail or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
11.02 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by all parties hereto,
or in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No waiver by a party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent occurrence. No failure or delay by a
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
11.03 Expenses. All costs and expenses incurred in
connection with this Agreement and enclosing and carrying out the
transactions provided for herein shall be paid by the party
incurring such cost or expense. This Section shall survive the
Closing and the termination of this Agreement.
11.04 Successors and Assigns. This Agreement shall be
binding upon and enure to the benefit, of the parties hereto and
their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns. No party
hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be
unreasonably withheld.
11.05 Governing Law. This Agreement shall be governed by,
and interpreted and enforced in accordance with, the laws in
force in the Province of Ontario and the laws of Canada
applicable therein (excluding any conflict of laws rule or
principle that might refer such interpretation to the laws of
another jurisdiction). Each party irrevocably submits to the
jurisdiction of the courts of British Columbia with respect to
any matter arising hereunder or related hereto.
11.06 Counterparts; Effectiveness. This Agreement and the
documents relating to the transactions contemplated by this
Agreement may be signed in any number of counterparts and the
signatures delivered by facsimile, each of which shall be deemed
to be an original, with the same effect as if the signatures
thereto were upon the same instrument and delivered in person.
This Agreement and such documents shall become effective when
each party thereto shall have received a counterpart thereof
signed by the other parties thereto. In the case of execution
and delivery by facsimile by any party, that party shall
forthwith deliver a manually executed original to each of the
other parties.
11.07 Entire Agreement. This Agreement (including the
Schedules referred to herein, which are hereby incorporated by
reference) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter
of this Agreement including, without limiting the generality of
the foregoing, the Letter of Intent. Neither this Agreement nor
any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
11.08 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the
construction or interpretation hereof. All references to an
Article or Section include all subparts thereof.
11.09 Severability. If any provision of this Agreement, or
the application thereof to any Person, place or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such
provisions as applied to other Persons, places and circumstances
shall remain in full force and effect only if, after excluding
the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated
hereby in substantially the same manner as originally set forth
at the later of the date this Agreement was executed or last
amended.
11.10 Construction. The parties hereto intend that each
representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party
has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or
covenant.
11.11 Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it
shall be deemed to mean "include, without limitation" or
"including without limitation", as the case may be, and the
language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
11.12 Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
11.13 Third Party Beneficiaries. Other than Indemnitees
under Article X hereof who are not parties to this Agreement, no
provision of this Agreement shall create any third party
beneficiary rights in any Person, including any employee or
former employee of the Corporation or any Affiliate or Associate
thereof (including any beneficiary or dependent thereof).
11.14 Transmission by Facsimile. The parties hereto agree
that this Agreement may be transmitted by facsimile or such
similar device and that the reproduction of signatures by
facsimile or such similar device will be treated as binding as if
originals and each party hereto undertakes to provide each and
every other party hereto with a copy of the Agreement bearing
original signatures forthwith upon demand.
11.15 Fees and Commissions. No broker, finder or other person
or entity is entitled to any fee or commission from the Buying
Group or the Corporation for services rendered on behalf of the
Buying Group or the Corporation in connection with the
transactions contemplated by this Agreement.
11.16 Maitland & Company. The parties hereto acknowledge and
agree that Maitland & Company acts only for the Parent in the
preparation and negotiation of this Agreement. The parties
hereto further acknowledge and agree that:
(a) they have been advised to seek independent legal advice
regarding this Agreement,
(b) Maitland & Company has provided no tax advice with
respect to this Agreement and hereby has advised the parties
hereto to seek tax advice respecting their respective tax
obligations; and
(c) Maitland & Company has not provided legal advice to any
of the Shareholders with respect to U.S. securities laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of
the day and year first above written.
URBANA.CA INC.
By: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
ICC INTEGRATED CARBONICS (CANADA) CORP.
By: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
URBANA.CA ENTERPRISES CORP.
By: /s/ Jason Cassis
Jason Cassis, Authorized Signatory
SHAREHOLDERS
/s/ Jason Cassis
Jason Cassis
/s/ Greg Alexanian
Greg Alexanian
/s/ Lorna Seaton
Lorna Seaton
/s/ William J. Little
William J. Little
Stonewall Capital Corp.
By: /s/ Christopher D. Farber
Christopher D. Farber, Authorized Signatory
THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for
reference the 10th day of January, 2000.
AMONG:
URBANA.CA INC., a corporation incorporated under the laws of the
State of Nevada,
(the "Parent")
AND:
ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation
incorporated under the laws of the Province of British Columbia,
(the "Purchaser")
AND:
E-BILL DIRECT INC., a corporation incorporated under the
laws of the Province of Ontario
(the "Corporation")
AND:
ALL OF THE SHAREHOLDERS OF THE CORPORATIONS as more particularly
described on Schedule "A" attached hereto,
(Individually a "Shareholder" and collectively the "Shareholders");
WHEREAS:
A. The Corporation is a company which provides Rich content
electronic bill presentment services to its clients;
B. The Shareholders own all of the issued and outstanding
shares of the Corporation (the "Corporation Shares");
C. The Parent owns all of the issued and outstanding shares in
the capital stock of the Purchaser;
D. The Purchaser desired to purchase all of the Corporation
Shares and the Shareholders desire to sell all of the Corporation
Shares to the Purchaser on the terms and conditions hereinafter
set forth;
E. The respective boards of directors of the Purchaser, Parent
and Corporation each deem it advisable and in the best interests
of their respective shareholders to combine their respective
businesses by the Purchaser acquiring all of the shares in the
capital stock of the Corporation pursuant to the terms of this
Agreement; and
F. The respective boards of directors of the Purchaser, Parent
and Corporation have approved and adopted this Agreement as a
plan of reorganization under section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and as a transfer
of shares pursuant to section 85 of the Income Tax Act (Canada)
(the "Tax Act").
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of
the foregoing premises, the mutual representations, warranties,
covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such other Person.
"Agreement" means this Share Exchange and Share Purchase
Agreement by and among the Purchaser, Parent, Corporation and
Shareholders.
"Applicable Law" means, with respect to any Person, any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement, all as in effect as of the
Closing, of any Governmental Authority applicable to such Person
or any of its Affiliates or any of their respective properties,
assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or
any of its Affiliates).
"Associate" means with respect to any Person (a) any other Person
of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of
any class of equity securities issued by such other Person, (b)
any trust or other estate in which such Person has a ten percent
(10%) or more beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, and (c) any
relative or spouse of such Person, or any relative of such spouse
who has the same home as such Person or who is a director or
officer of such Person or any Affiliate thereof.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Toronto, Ontario are authorized
or required by law to close.
"Buying Group" means the Purchaser and the Parent.
"Buying Group Business" means the business as heretofore or
currently conducted by the Buying Group.
"Buying Group Contracts" means all contracts, agreements,
options, leases, licences, sales and purchase orders, commitments
and other instruments of any kind, whether written or oral, to
which either the Purchaser or the Parent is a party on the
Closing Date.
"Corporation Balance Sheet" means the balance sheet of the
Corporation dated November 30, 1999.
"Corporation Business" means the business as heretofore or
currently conducted by the Corporation.
"Corporation Contracts" means all contracts, agreements, options,
leases, licences, sales and purchase orders, commitments and
other instruments of any kind, whether written or oral, to which
the Corporation, or any Shareholder on behalf of the Corporation,
is a party on the Closing Date.
"Corporation Premises" means those premises that have been
occupied or used, or are occupied or used, by the Corporation in
connection with the Corporation Business.
"Exchange and Voting Agreement" means the agreement in
substantially the form set out in Schedule "B" hereto to be
entered into by the Parent, Purchaser and Trustee.
"Exchangeable Non-Voting Shares" means those 2,950,000 Class "A"
exchangeable, non-voting, participating common shares without par
value in the capital stock of the Purchaser, having those rights
and terms set forth in the Exchange and Voting Agreement and the
Exchangeable Share Provisions, which will be issued to the
Shareholders in consideration for the purchase and sale of the
Corporation Shares.
"Exchangeable Share Provisions" means those rights, restrictions,
terms and provisions pertaining to the Exchangeable Non-Voting
Shares, as set forth in Schedule "F" hereto, and as summarized in
section 5.03 hereof.
"Governmental Authority" means any United States (whether
federal, territorial, state, municipal or local), Canadian
(whether federal, territorial, provincial, municipal or local) or
foreign government, governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or
other subdivision, department or branch of any of the foregoing.
"GST" means all goods and services taxes, sales taxes levied by
the federal government of Canada, value added taxes or multi-
stage taxes and all provincial sales taxes integrated with such
federal taxes, assessed, rated or charged upon the Corporation.
"Interim Period" means the period from and including the date of
this Agreement to and including the Closing Date.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured,
joint or several, due or to become due, vested or unvested,
determined, determinable or otherwise and whether or not the same
is required to be accrued on the financial statements of such
Person.
"Lien" means, with respect to any asset, any mortgage,
assignment, trust or deemed trust (whether contractual, statutory
or otherwise arising), title defect or objection, lien, pledge,
charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such assets.
"Material Adverse Effect" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of
operations, assets, Liabilities, reserves or any other aspect of
a party to this Agreement or to its business that results in a
material adverse effect on, or a material adverse change in, any
such aspect of the party or to its business.
"Parent's Balance Sheet" means the balance sheet of the Parent
dated September 30, 1999.
"Parent Common Shares" means 2,950,000 common shares in the
capital of the Parent to be issued to the Trustee pursuant to
paragraph 2.05 hereof, in consideration of subscription proceeds
from the Trustee of $0.0001 per share, having those rights and
terms as set forth in the Exchange and Voting Agreement.
"Person" includes an individual, body corporate, partnership,
company, unincorporated syndicate or organization, trust,
Trustee, executor, administrator and other legal representative.
"SEC" means the United States Securities and Exchange Commission.
"Stock Option Plan" means the stock option plan of the Parent
which plan is more particularly described in Schedule "H"
attached hereto.
"Subsidiary" means, with respect to any Person, (i) any
corporation as to which more than 10% of the outstanding shares
having ordinary voting rights or power (and excluding shares
having voting rights only upon the occurrence of a contingency
unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by
such Person and/or by one or more of such Person's Subsidiaries,
and (ii) any partnership, joint venture or other similar
relationship between such Person (or any Subsidiary thereof) and
any other Person (whether pursuant to a written agreement or
otherwise).
"Support Agreement" means that agreement between the Parent and
the Purchaser, in the form attached hereto as Schedule "G"
hereto, whereby the Parent agrees to make certain payments and
deliveries to enable the Purchaser to comply with the
Exchangeable Share Provisions.
"Tax" means all taxes imposed of any nature including any United
States (whether federal, territorial, state or local), Canadian
(whether federal, territorial, provincial or local) or foreign
income tax, alternative or add-on minimum tax, profits or excess
profits tax, franchise tax, gross income, adjusted gross income
or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax),
capital tax, real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding
or back up withholding tax, value added tax, GST, severance tax,
prohibited tax, premiums tax, occupation tax, customs and import
duties, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Authority
responsible for the imposition of any such tax or in respect of
or pursuant to any United States (whether federal, territorial,
state or local), Canadian (whether federal, territorial,
provincial or local) or other Applicable Law.
"Tax Return" means all returns, reports, forms or other
information required to be filed with respect to any Tax.
"Trustee" means the Trustee or successor Trustee designated under
the Exchange and Voting Agreement attached hereto as Schedule
"B".
"33 Act" means the United States Securities Act of 1933 and all
amendments thereto.
"34 Act" means the United States Securities Act of 1934 and all
amendments thereto.
1.02 Currency Used. All references herein to dollars or the
use of the symbol "$" shall be deemed to refer to United States
dollars unless such reference is prefaced by "CDN" in which case
the reference will be to Canadian dollars.
1.03 Canadian Generally Accepted Accounting Principles. Where the
Canadian Institute of Chartered Accountants or any successor
thereto includes a statement in its handbook or any successor
thereto on a method or alternative methods of accounting or on a
standard or standards of auditing, such statement shall be
regarded as the only generally accepted accounting principle or
principles or generally accepted auditing standard or standards
("Canadian GAAP") applicable to the circumstances that it covers,
and references herein to "generally accepted accounting
principles" shall be interpreted accordingly. All accounting and
financial terms used herein with respect to the Corporation,
unless specifically provided to the contrary, shall be
interpreted and applied in accordance with Canadian GAAP.
1.04 American Generally Accepted Accounting Principles. Where the
American Institute of Certified Public Accountants or any
successor thereto includes a statement in its handbook or any
successor thereto on a method or alternative methods of
accounting or on a standard or standards of auditing, such
statement shall be regarded as the only generally accepted
accounting principle or principles or generally accepted auditing
standard or standards ("American GAAP") applicable to the
circumstances that it covers, and references herein to "generally
accepted accounting principles" shall be interpreted accordingly.
All accounting and financial terms used herein with respect to
the Parent, unless specifically provided to the contrary, shall
be interpreted and applied in accordance with American GAAP.
ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION
2.01 Purchase of Corporation Shares. On the terms and subject to
the conditions set forth herein, the Shareholders hereby agree to
sell, transfer, convey, assign and deliver to the Purchaser, free
and clear of all Corporation Share Encumbrances (as defined in
paragraph 3.01.1), and the Purchaser hereby agrees to purchase,
acquire and accept from the Shareholders, all of the Corporation
Shares held by the Shareholders. At Closing, the Shareholders
will deliver to the Purchaser certificates evidencing all of the
Corporation Shares duly endorsed for transfer and such other
instruments as have been reasonably requested by the Purchaser to
transfer full legal and beneficial ownership of the Corporation
Shares to the Purchaser, free and clear of all Corporation Share
Encumbrances and the Corporation agree to enter the Purchaser or
the Purchaser's nominee on the books of the Corporation as the
holder of the Corporation Shares and to issue one or more
replacement share certificates representing the Corporation
Shares to the Purchaser or the Purchaser's nominee. The
Purchaser shall pay the Purchase Price for the Corporation Shares
in accordance with the terms of Sections 2.02 of this Agreement.
2.02 Purchase Price for Corporation Shares. The aggregate
purchase price to be paid by the Purchaser for the Corporation
Shares (the "Purchase Price") will be 2,950,000 Exchangeable Non-
Voting Shares, each Exchangeable Non-Voting Share exchangeable
for a Parent Common Share on the terms and conditions contained
herein.
2.03 Subscription of Parent Common Shares and Optioned
Securities. The Parent agrees to grant:
(a) to each Shareholder, such number of voting rights in
the Parent as is equivalent to the number of Exchangeable Non-
Voting Shares held by each Shareholder, as if each Shareholder
held an equivalent number of Parent Common Shares, and, subject
to the remaining terms of this Agreement, which voting rights
will be exercisable by the Shareholders through their holding
Exchangeable Non-Voting Shares in accordance with the Exchange
and Voting Agreement; and
(b) to each Shareholder, the rights to exchange their
Exchangeable Non-Voting Shares for Parent Common Shares, such
rights to be exercised in accordance with the terms of the
Exchange and Voting Agreement.
To ensure that the Parent has sufficient common shares available
to issue in exchange for Exchangeable Non-Voting Shares, and as
security for its covenant to do so, the Parent agrees to issue
the Parent Common Shares to the Trustee, at or shortly following
Closing, at the purchase price of $0.0001 per share; such Parent
Common Shares to be held in accordance with the Exchange and
Voting Agreement.
2.04 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of
the Parent in Ontario, Canada, on such date as the parties hereto
may mutually agree in writing (the "Closing Date").
2.05 Payment of Purchase Price. At Closing the Purchaser
will deliver to the Shareholders certificates representing the
Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting
Shares to be issued as fully paid and non-assessable, and
registered in the names of the Shareholders and in the
denominations set forth in Schedule "A" to the Exchange and
Voting Agreement. On or shortly following the Closing, the
Parent will issue the Parent Common Shares to the Trustee, such
Parent Common Shares to be issued as fully paid and non-
assessable, and registered in the name of the Trustee in such
denominations as the Trustee may request.
ARTICLE III: REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, each
Shareholder, as to himself, herself or itself and as to such of
the Corporation Shares owned by him, her or it (and not as to any
other Shareholder or to any of the Corporation Shares owned by
any other Shareholder) represents and warrants to the Buying
Group as follows and confirms that the Purchaser and the Parent
are relying upon the accuracy of each of such representations and
warranties in connection with the purchase of the Corporation
Shares and the completion of the transactions set out herein:
3.01 Representations Regarding the Corporation Shares.
3.01.1 Each Shareholder has good and marketable title to his
or her respective holdings in the Corporation Shares, free and
clear of any and all covenants, conditions, restrictions, voting
trust arrangements, rights of first refusal, options, Liens and
adverse claims and rights whatsoever (collectively, the
"Corporation Share Encumbrances"), and on the Closing Date, the
Shareholders will deliver to the Purchaser, good and marketable
title to the Corporation Shares free and clear of any and all
Corporation Share Encumbrances;
3.01.2 Each Shareholder has the full right, power and
authority to enter into this Agreement and each Shareholder has
the full right, power and authority to transfer, convey and sell
to the Purchaser at the Closing his or her respective holdings of
the Corporation Shares sold to the Purchaser by the Shareholders
hereunder, and upon consummation of the purchase, the Purchaser
will acquire from the Shareholders good and marketable title to
the Corporation Shares sold to the Purchaser by the Shareholders,
free and clear of all Corporation Share Encumbrances; and
3.01.3 No Shareholder is a party to, subject to or bound by
any agreement, judgment, order, writ, prohibition, injunction or
decree of any court or other Governmental Authority that would
prevent the execution or delivery to the Purchaser of this
Agreement by any Shareholder, the transfer, conveyance and sale
of the Corporation Shares sold by Shareholder to the Purchaser
pursuant to the terms hereof, or the consummation of the
transactions under this Agreement in accordance with the terms of
this Agreement.
3.02 Authorization. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided
for herein, by each Shareholder are within the respective powers
of each Shareholder and have been duly authorized by all
necessary action on the part of each Shareholder, respectively.
This Agreement has been duly and validly executed by each
Shareholder and constitutes a legal, valid and binding agreement
upon each Shareholder, respectively, enforceable against each
Shareholder in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity or family law.
3.03 Non-Contravention. The execution, delivery and performance
of this Agreement, and the consummation of the transactions
provided for herein, by each Shareholder, do not (a) contravene
or conflict with or constitute a material violation of any
provision of any Applicable Law binding upon or applicable to any
Shareholder or the Corporation Shares or (b) result in the
creation or imposition of any Lien.
3.04 Residency. Each Shareholder is a resident of Canada as
defined in the Income Tax Act
(Canada).
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
As an inducement to the Buying Group to enter into this Agreement
and to consummate the transactions provided for herein, the
Corporation represent and warrant to the Buying Group as follows:
4.01 Existence and Power. The Corporation is a corporation duly
incorporated, organized and validly existing under the laws of
the Province of Ontario and has all corporate power and all
governmental licences, authorizations, permits, consents and
approvals required to carry on the business of The Corporation as
now conducted and to own and operate business of The Corporation
as now owned and operated. The Corporation is not required to be
qualified to conduct business in any jurisdiction where the
failure to be so qualified, whether individually or in the
aggregate, would have a Material Adverse Effect. No proceedings
have been taken or authorized by The Corporation or any
Shareholder or, to the knowledge of The Corporation, by any other
Person, with respect to the bankruptcy, insolvency, liquidation,
dissolution or winding-up of The Corporation or with respect to
any amalgamation, merger, consolidation, arrangement or
reorganization relating to The Corporation.
4.02 Authorization. The execution, delivery and performance by
the Corporation of this Agreement and the consummation thereby of
the transactions provided for herein are within the Corporations
powers and have been duly authorized by all necessary action on
its part. This Agreement has been duly and validly executed by
the Corporation and constitutes a legal, valid and binding
agreement of the Corporation enforceable against it in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and subject to general
principles of equity.
4.03 Capital Stock.
4.03.1 The authorized capital stock of the Corporation
consists solely of the share capital described in Schedule "A"
hereto (the "Corporation Shares").
4.03.2 All such issued and outstanding Corporation Shares have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Corporation
Shares represent all of the issued and outstanding shares of the
Corporation. The Corporation do not hold any of the issued and
outstanding Corporation Shares in the treasury of the
Corporation, and there are not outstanding (i) any options,
warrants, rights of first refusal or other rights to purchase any
shares of the Corporation except as disclosed in Schedule "C"
hereto, (ii) any securities convertible into or exchangeable for
such shares or (iii) any other commitments of any kind for the
issuance of additional shares of the Corporation or options,
warrants or other securities of the Corporation.
4.04 Subsidiaries. The Corporation has no Subsidiaries.
4.05 Governmental Authorization. The execution, delivery and
performance by the Corporation of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement or which would normally be expected to be required
as part of the transactions contemplated by this Agreement.
4.06 Non-Contravention. The execution, delivery and performance
of this Agreement by the Corporation, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the articles or bylaws of the
Corporation; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Corporation, the Corporation Business
or the Corporation Shares and would not, individually or in the
aggregate, have a Material Adverse Effect; (c) constitute a
default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to
which the Corporation are entitled, under any Corporation
Contract to which the Corporation are a party or any permit or
similar authorization relating to the Corporation, the
Corporation Business or the Corporation Shares by which the
Corporation, the Corporation Business or the Corporation Shares
may be bound or affected; or (d) result in the creation or
imposition of any Lien.
4.07 Financial Statements: Undisclosed Liabilities.
4.07.1 Attached hereto as Schedule "C" are true and complete
copies of the Corporation Balance Sheets as of November 30, 1999
and other financial information believed to be material by the
Corporation (collectively, the "Corporation Financials").
4.07.2 The Corporation Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Corporation in accordance with Canadian GAAP and present fairly
the financial position, results of operations and statements of
changes in the Corporations financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
Liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to the
Corporation Contracts and commitments for the sale of goods or
the provision of services by the Corporation, contain and reflect
adequate reserves for all reasonably anticipated material losses
and costs and expenses in excess of expected receipts.
4.07.3 To the best of the knowledge of the Corporation, there
are no Liabilities of the Corporation other than: (i) any
Liabilities accrued as Liabilities on the Corporation Balance
Sheet; (ii) Liabilities incurred since the date of the
Corporation Balance Sheet that do not, and could not,
individually or in the aggregate have a Material Adverse Effect;
and (iii) other Liabilities disclosed in this Agreement or in any
schedules attached hereto.
4.08 Absence of Certain Changes. Since December 2, 1999, the
Corporation Business has been conducted in the ordinary course,
and there has not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Corporation or in the Corporation Business that
has had, or which the Corporation, after reasonable inquiry,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Corporation
that has had, or which the Corporation may, after reasonable
inquiry, expect to have, a Material Adverse Effect such that the
total Liabilities of the Corporation would exceed CDN $5,000 or
(ii) any incurrence, assumption or guarantee of any indebtedness
for borrowed money by the Corporation in connection with the
Corporation Business or otherwise;
(c) any (i) payments by the Corporation in respect of any
indebtedness of the Corporation for borrowed money or in
satisfaction of any Liabilities of the Corporation related to the
Corporation Business, other than in the ordinary course of
business or the guarantee by the Corporation of any of the
indebtedness of any other Person or (ii) creation, assumption or
sufferance of (whether by action or omission) the existence of
any Lien on any assets reflected on the Corporation's Balance
Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Corporation, or any waiver, amendment,
termination or cancellation of any of the Corporation Contracts
by the Corporation, or any relinquishment of any rights
thereunder by the Corporation or of any other right or debt owed
to the Corporation, other than, in each such case, actions taken
in the ordinary course of business consistent with past practice;
(e) any grant of any severance, continuation or termination
pay to any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (ii) entering
into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with
any director, officer, stockholder or employee of the Corporation
or any Affiliate of the Corporation, (iii) increase in benefits
payable or potentially payable under any severance, continuation
or termination pay policies or employment agreements with any
director, officer, stockholder or employee of the Corporation or
any Affiliate of the Corporation, (iv) increase in compensation,
bonus or other benefits payable or potentially payable to
directors, officers, stockholders or employees of the Corporation
or any Affiliate of the Corporation other than in the normal
course of business, (v) change in the terms of any bonus,
pension, insurance, health or other benefit plan of the
Corporation or (vi) representation of the Corporation to any
employee or former employee of the Corporation that the Purchaser
promised to continue any Corporation benefit plan after the
Closing Date,
(f) any change by the Corporation in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Corporation to any officer, director,
stockholder or Affiliate of the Corporation or any of their
respective Affiliates or Associates; or
(h) any (i) material single capital expenditure or
commitment, or any group of related capital expenditures or
commitments, or (ii) sale, assignment, transfer, lease or other
disposition of or agreement to sell, assign, transfer, lease or
otherwise dispose of any asset or property other than in the
ordinary course of business.
4.09 Properties; Corporation Material Leases; Tangible Assets.
4.09.1 The Corporation does not own any real property.
4.09.2 The Corporation hold, title to each of its properties
and assets free and clear of all Liens, adverse claims,
easements, rights of way, servitudes, zoning or building
restrictions or any other rights of others or other adverse
interests of any kind, including leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements (collectively,
"Corporation Encumbrances").
4.09.3 All tangible properties and assets reflected on the
Corporation Balance Sheet are in all material respects fit for
the purposes for which they are used and are in good operating
condition and repair and are adequate for the uses to which they
are put, and no material properties or assets necessary for the
conduct of the Corporation Business in substantially the same
manner as the Corporation Business has heretofore been conducted
are in need of replacement, maintenance or repair except for
routine replacement, maintenance and repair.
4.10 Affiliates. Other than as disclosed herein, there are no
material undisclosed Corporation Contracts which have been
entered into within the past five years or are currently in force
and effect between the Corporation and any Shareholder, or any
Affiliate or Associate of any Shareholder. The Corporation is
not materially indebted to any Shareholder.
4.11 Litigation. There are no material proceedings pending or,
to the knowledge of the Corporation, threatened against or
affecting the Corporation or the Corporation Business or that
seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement and (ii) there is no existing
order, judgment or decree of any Governmental Authority naming
the Corporation as an affected party which has not been paid or
discharged in full.
4.12 Material Contracts. All Corporation Contracts are legal,
valid and binding obligations of the Corporation and each other
Person who is a party thereto, enforceable against the
Corporation and each such Person in accordance with their terms,
and none are subject to any material default thereunder.
4.13 Required Consents. There are no governmental or other
registrations, filings, applications, notices, transfers,
consents, approvals, orders, qualifications or waivers required
under Applicable Law or otherwise required to be obtained or made
with any Governmental Authority to be obtained by the Corporation
or any Shareholder by virtue of the execution and delivery of
this Agreement and the consummation of the transactions provided
for herein for any reason; nor are there any Corporation
Contracts with respect to which the consent of the other party or
parties thereto must be obtained by the Corporation or any
Shareholder by virtue of the execution and delivery of this
Agreement and the consummation of the transactions provided for
herein (the "Required Consents").
4.14 Corporation Intellectual Property.
4.14.1 Schedule "E" sets forth a complete and correct list of
each patent, patent application and invention, trademark,
tradename, trademark or tradename registration or application,
copyright or copyright registration or application for copyright
registration, and each licence or licensing agreement, for any of
the foregoing relating to the Corporation Business as conducted
by the Corporation or held by the Corporation (the "Corporation's
Intellectual Property Rights"). The Corporation's Intellectual
Property Rights also include any trade secrets that are material
to the conduct of the Corporation Business in the manner that the
Corporation Business has heretofore been conducted.
4.14.2 The Corporation has not, during the three years
preceding the date of this Agreement, been a party to any
proceeding, nor to the knowledge of the Corporation, is any
proceeding threatened, as to which there is a reasonable
possibility of a determination adverse to the Corporation,
involving a claim of infringement by any Person (including any
Governmental Authority) of any of the Corporation's Intellectual
Property Rights. None of the Corporation Intellectual Property
Right are subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the
Corporation or restricting the licensing thereof by the
Corporation to any Person. The Corporation has no knowledge that
would cause such Person to believe that the use of the
Corporation's Intellectual Property Rights or the conduct of the
Corporation Business conflicts with, infringes upon or violates
any patent, patent licence, patent application, trademark,
tradename, trademark or tradename registration, copyright,
copyright registration, service mark, brand mark or brand name or
any pending application relating thereto, or any trade secret,
know-how, programs or processes, or any similar rights, of any
Person.
4.14.3 To the knowledge of the Corporation, the Corporation
either owns the entire right, title and interest in, to and
under, or has acquired an exclusive licence to use, any and all
patents, trademarks, trade names, brand names and copyrights that
are material to the conduct of the Corporation Business in the
manner that the Corporation Business has heretofore been
conducted. The Corporation's Intellectual Property Rights are in
full force and effect and have not been used or enforced or
failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the
Corporation's Intellectual Property Rights. All registrations and
filings necessary to preserve the rights of the Corporation in
and to the Corporation's Intellectual Property Rights have been
made.
4.15 Tax Matters.
4.15.1 The Corporation has prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such
Tax Return was correct and complete.
4.15.2 The Corporation has paid all Taxes due and payable by
them and have paid all assessments and reassessments they have
received in respect of Taxes. The Corporation have paid all Tax
installments due and payable by them as at November 30, 1999,
save and except as disclosed in Schedule "C" hereto.
4.15.3 The Corporation has withheld from each payment made to
any of its present or former employees, officers and directors,
and to all persons who are non-residents of Canada for the
purposes of the Income Tax Act (Canada) all amounts required by
Applicable Law and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority.
The Corporation has remitted all Canada Pension Plan
contributions, employment insurance premiums, employer health
taxes and other Taxes payable by them in respect of their
employees and have remitted such amounts to the proper
Governmental Authority within the time required by Applicable
Law. The Corporation has charged, collected and remitted on a
timely basis all Taxes as required by Applicable Law on any sale,
supply or delivery whatsoever, made by the Corporation.
4.15.4 The Corporation Business is the only business ever
conducted by the Corporation. The non-capital losses (as defined
in the Tax Act and any applicable provincial taxing statute) were
incurred by the Corporation only in carrying on the Corporation
Business. The Corporation is not prevented by virtue of any
amalgamation or dissolution from carrying back against income
earned by it prior to the Closing Date, any losses incurred by it
after the Closing Date.
4.15.5 The Corporation has paid all Taxes imposed by
applicable legislation in the provinces of British Columbia and
Ontario on the acquisition of its tangible personal property as
defined in applicable legislation in the province of Ontario, and
none of its tangible personal property has been transferred at
any time on a tax-exempt basis under applicable legislation of
the Province of Ontario or any predecessor legislation thereof.
The foregoing is accurate, mutatis mutandis, with respect to all
sales or transfer Taxes imposed under comparable legislation of
other provinces.
4.16 Securities Legislation. The Corporation is a private issuer
within the meaning of the Securities Act (Ontario) and the sale
of the Corporation Shares by the Shareholders to the Purchaser is
made in compliance with the exempt takeover-bid provisions of
this Act or such other exemption as may be available to it and
the Shareholder.
4.17 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Purchaser by or on behalf of the Corporation with respect to the
Corporation (including the Corporation Business and the results
of operations, financial condition and prospects of the
Corporation) for use in connection with this Agreement or the
transactions contemplated by this Agreement is true and complete
in all material respects and does not, to the best of the
knowledge of the Corporation after conducting an inquiry which a
reasonably prudent person would make under the circumstances,
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to the
Corporation that has not been disclosed to the Purchaser by the
Corporation in writing that has had a Material Adverse Effect on
or, so far as the Corporation can now foresee, could be
reasonably likely to have a Material Adverse Effect on, the
Corporation (including the Corporation Business and the results
of operations, financial condition or prospects of the
Corporation).
ARTICLE V: REPRESENTATIONS AND WARRANTIES
OF THE BUYING GROUP
As an inducement to the Corporation and each Shareholder to enter
into this Agreement and to consummate the transactions provided
for herein, the Purchaser and the Parent, jointly and severally,
represent and warrant to the Corporation and each Shareholder
that:
5.01 Existence and Power. Each of the Purchaser and the Parent
is a corporation duly incorporated, organized and validly
existing under the laws of its incorporating jurisdiction (being
the Province of British Columbia for the Purchaser and the State
of Nevada for the Parent) and each has all corporate power and
all governmental licences, authorizations, permits, consents and
approvals required to carry on the Buying Group Business as now
conducted and to own and operate their respective businesses as
now owned and operated. The Purchaser and the Parent are not
required to be qualified to conduct business in any jurisdiction
where the failure to be so qualified, whether individually or in
the aggregate, would have a Material Adverse Effect. No
proceedings have been taken or authorized by the Purchaser or the
Parent or, to the knowledge of the Purchaser or the Parent, by
any other Person, with respect to the bankruptcy, insolvency,
liquidation, dissolution or winding-up of the Purchaser or the
Parent or with respect to any amalgamation, merger,
consolidation, arrangement or reorganization relating to the
Purchaser or the Parent.
5.02 Authorization. The execution, delivery and performance by
each of the Purchaser and the Parent of this Agreement and the
consummation thereby of the transactions provided for herein are
within the powers of the Purchaser and the Parent and have been
duly authorized by all necessary action on their part. This
Agreement has been duly and validly executed by each of the
Purchaser and the Parent and constitutes a legal, valid and
binding agreement of the Purchaser and the Parent enforceable
against them in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
subject to general principles of equity.
5.03 Capital Stock of the Purchaser.
5.03.1 The authorized capital stock of the Purchaser consists
of 100,000,000 common shares of no par value of which one common
share is issued and outstanding on the date hereof to and
50,000,000 Exchangeable Non-Voting Shares with no par value of
which no shares are issued and outstanding. Each Exchangeable
Non-Voting Share shall:
(a) be non-voting as to matters concerning the Purchaser
(such that all voting shares of the Purchaser will be and remain
held by the Parent); however, as stated above in paragraph 2.03,
the holder of Exchangeable Non-Voting Shares will be entitled to
voting rights in the Parent as is equivalent to the number of
Exchangeable Non-Voting Shares held by each Shareholder as if
each Shareholder held an equivalent number of Parent Common
Shares;
(b) entitle the holder thereof (the "Holder") to dividend
rights equal, after conversion into Canadian dollars based on the
Canadian/U.S. exchange rate in effect on the record date thereof,
to the per share dividend rights of Parent Common Shares;
(c) entitle the Holder, on a liquidation of the Purchaser,
to receive in exchange for each Exchangeable Non-Voting Share one
Parent Common Shares for a period ending on the twenty-fifth
anniversary of the Closing Date; and
(d) entitle the Holder, at his or her election from time to
time for a period ending on the twenty-fifth anniversary of the
Closing Date, upon 30 days' written notice given by such Holder
to the Purchaser, to require the Purchaser to redeem any or all
Exchangeable Non-Voting Shares and to exchange therefor, on a
share for share basis, Parent Common Shares (the "Right of
Retraction"),
5.03.2 The Parent and the Purchaser shall be entitled to
deduct and withhold from the consideration otherwise payable to
any Holder of Exchangeable Non-Voting Shares, including any
dividend payments in respect of the Exchangeable Non-Voting
Shares, such amount as the Parent or the Purchaser is required or
permitted to deduct and withhold with respect to such payment
under the United States Internal Revenue Code, the Income Tax Act
(Canada) or any provision of state, provincial, local or foreign
tax law. The Parent and the Purchaser shall not initially
withhold any United States Tax on dividends paid on the
Exchangeable Non-Voting Shares. However, if any United States
taxing authority determines that the Parent or the Purchaser is
liable for United States withholding Tax on dividends paid to the
Holders on the Exchangeable Non-Voting Shares, the Purchaser
shall be entitled to reduce the amount of any future dividends to
be paid to the Holders by such withholding obligation. To the
extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the
Holder of Exchangeable Non-Voting Shares in respect of which such
deduction and withholding was made; provided, however, that such
withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a Holder
exceeds the cash portion of the consideration otherwise payable
to the Holders, the Parent upon at least ten (10) days' prior
written notice to such Holder, is hereby authorized to sell or
otherwise dispose of at fair market value such portion of such
non-cash consideration otherwise payable to the Holder as is
necessary to provide sufficient funds to the Parent in order to
enable it to comply with such deduction or withholding
requirement and the Parent shall give an accounting to the Holder
with respect thereof and any balance of such proceeds of sale.
5.03.3 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Purchaser, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or options, warrants or other securities of the Purchaser.
5.04 Capital Stock of the Parent.
5.04.1 The authorized capital stock of the Parent consists
solely of 70,000,000 common shares with no par value ("Parent
Common Shares") of which 10,031,350 Parent Common Shares are
issued and outstanding on the date hereof.
5.04.2 There are not outstanding (i) any options, warrants,
rights of first refusal or other rights to purchase any shares of
the Parent from treasury, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Parent or
options, warrants or other securities of the Parent which
materially vary from those disclosed in the financial statements
of the Parent attached hereto as Schedule "D".
5.05 General Provisions of the Capital of the Purchaser and the
Parent.
5.05.1 All of the issued and outstanding shares in the
respective capital stocks of the Purchaser and the Parent have
been duly and validly authorized and issued and are validly
outstanding, fully paid and non-assessable. The Purchaser does
not hold any of the issued and outstanding shares in the treasury
of the Purchaser or the Parent, the Parent does not hold any of
the issued and outstanding shares in the treasury of the Parent
and there are not outstanding (i) any options, warrants, rights
of first refusal or other rights to purchase any shares of the
Purchaser or the Parent, (ii) any securities convertible into or
exchangeable for such shares or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser
or Parent or options, warrants or other securities of the
Purchaser or Parent other than as disclosed in Article 5.03.1
herein.
5.05.2 All of the Exchangeable Non-Voting Shares and the
Parent Common Shares which will be issued hereunder will be
fully paid and non-assessable, subject to such terms and
provisions as set forth in the Exchange and Voting Agreement, and
the Purchaser's articles of incorporation and the Parent's
Directors Resolutions relating to the issuance of the Parent
Common Shares, as applicable, and all such shares will be issued
free and clear of all Liens, charges, encumbrances and trading
restrictions other than as may be imposed by Applicable Law.
5.06 Subsidiaries. The Purchaser has no Subsidiaries and
the only Subsidiary of the Parent is the Purchaser.
5.07 Governmental Authorization. The execution, delivery and
performance by the Buying Group of this Agreement requires no
action by, consent or approval of, or filing with, any
Governmental Authority other than as expressly referred to in
this Agreement.
5.08 Non-Contravention. The execution, delivery and performance
of this Agreement by the Buying Group, and the consummation by it
of the transactions provided for herein, do not and will not (a)
contravene or conflict with the respective articles or bylaws of
the Buying Group; (b) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding
upon or applicable to the Buying Group, the Buying Group Business
or the outstanding shares in their respective capital stocks and
would not, individually or in the aggregate have a Material
Adverse Effect; (c) constitute a default under or give rise to
any right of termination, cancellation or acceleration of, or to
a loss of any benefit to which the Purchaser or the Parent are
entitled, under any Buying Group Contract to which the Purchaser
or the Parent is a party or any Permit or similar authorization
relating to the Purchaser or Parent, the Buying Group Business or
the outstanding shares in their respective capital stocks may be
bound or affected; or (d) result in the creation or imposition of
any Lien.
5.09 Financial Statements: Undisclosed Liabilities.
5.09.1 Attached hereto as Schedule "D" are true and complete
copies of the Parent's Balance Sheet, prepared on a consolidated
basis, as of September 30, 1999 and the related statements of
income and retained earnings and changes of financial position,
prepared on a consolidated basis, for the year ended December 31,
1998 (collectively, the "Parent's Financials").
5.09.2 The Parent's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the
Parent in accordance with American GAAP and present fairly the
financial position, results of operations and statements of
changes in the Parent's financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all
necessary adjustments and accruals for a fair presentation of its
financial position and the results of its operations for the
periods covered by said financial statements; (iii) contain and
reflect adequate provisions for all reasonably anticipated
liabilities (including Taxes) with respect to the periods then
ended and all prior periods; and (iv) with respect to Buying
Group Contracts and commitments for the sale of goods or the
provision of services by the Parent, contain and reflect adequate
reserves for all reasonably anticipated material losses and costs
and expenses in excess of expected receipts.
5.09.3 To the best of the knowledge of the Buying Group, there
are no Liabilities of the Buying Group other than: (i) any
Liabilities accrued as Liabilities on the Parent's Balance Sheet;
(ii) Liabilities incurred since the date of the Parent's Balance
Sheet that do not, and could not, individually or in the
aggregate have a Material Adverse Effect; (iii) other Liabilities
disclosed in this Agreement or in any schedules attached hereto;
and (iv) the Tax on reserves.
5.10 Absence of Certain Changes. Since December 2, 1999, the
Buying Group Business has been conducted in the ordinary course,
and there has not been:
(a) any event, occurrence, state of circumstances, or facts
or change in the Purchaser or the Parent or in the Buying Group
Business that has had, or which the Purchaser or the Parent,
expect to have, either individually or in the aggregate, a
Material Adverse Effect;
(b) (i) any change in any Liabilities of the Purchaser or
the Parent that has had, or which the Purchaser or the Parent
expect to have, a Material Adverse Effect or (ii) any incurrence,
assumption or guarantee of any indebtedness for borrowed money by
the Purchaser or the Parent in connection with the Buying Group
Business or otherwise;
(c) any (i) payments by the Purchaser or Parent in respect
of any indebtedness of the Purchaser or Parent for borrowed money
or in satisfaction of any Liabilities of the Purchaser or Parent
related to the Buying Group Business, other than in the ordinary
course of business or the guarantee by the Purchaser or the
Parent of any of the indebtedness of any other Person or (ii)
creation, assumption or sufferance of (whether by action or
omission) the existence of any Lien on any assets reflected on
the Parent's Balance Sheet;
(d) any transaction or commitment made, or any Contract
entered into, by the Buying Group, any waiver, amendment,
termination or cancellation of any Contract by the Buying Group,
or any relinquishment of any rights thereunder by the Buying
Group or of any other right or debt owed to the Buying Group,
other than, in each such case, actions taken in the ordinary
course of business consistent with past practice;
(e) any (i) grant of any severance, continuation or
termination pay to any director, officer, stockholder or employee
of the Buying Group or any Affiliate of the Buying Group, (ii)
entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing
agreement) with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iii)
increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or employment
agreements with any director, officer, stockholder or employee of
the Buying Group or any Affiliate of the Buying Group, (iv)
increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, stockholders or
employees of the Buying Group or any Affiliate of the Buying
Group, (v) change in the terms of any bonus, pension, insurance,
health or other benefit plan of the Buying Group or (vi)
representation of the Buying Group to any employee or former
employee of the Buying Group that the Buying Group promised to
continue any benefit plan after the Closing Date,
(f) any change by the Buying Group in its accounting
principles, methods or practices or in the manner it keeps its
books and records;
(g) any distribution, dividend, bonus, management fee or
other payment by the Buying Group to any of their respective
officers, directors, stockholders or Affiliates of the Buying
Group or any of their respective Affiliates or Associates; and
(h) any (i) material single capital expenditure or
commitment, or any group of related capital expenditures or
commitments by either the Purchaser or the Parent or (ii)
material sale, assignment, transfer, lease or other disposition
of or agreement to sell, assign, transfer, lease or otherwise
dispose of any asset or property by either of the Purchaser or
the Parent other than in the ordinary course of business.
5.11 Properties; Material Leases; Tangible Assets. Neither the
Purchaser nor the Parent own or lease any real property or
material assets.
5.12 Affiliates. There are no contracts between either the
Parent or Purchaser and any of its shareholders, or any Affiliate
or Associate of any of its shareholders. There is no
indebtedness of either the Parent or the Purchaser to any of its
shareholders, or to any Affiliate or Associate of any of its
shareholders.
5.13 Litigation. There is no proceeding pending or, to the
knowledge of the Buying Group, threatened against or affecting
the Buying Group or the Buying Group Business or that seeks to
prevent, enjoin, alter or delay the transactions contemplated by
this Agreement, and there is no existing order, judgment or
decree of any Governmental Authority naming either the Purchaser
or the Parent as an affected party which has not been paid or
discharged in full.
5.14 Material Contracts. The Buying Group is not party to any
Buying Group Contract other than as specified herein.
5.15 Compliance with Applicable Laws. The operation of the Buying
Group Business (i) has not violated or infringed, except for
violations or infringements that have been cured and the prior
existence of which could not, individually or in the aggregate,
reasonably be expected to have an adverse effect on either the
Purchaser or the Parent and (ii) does not in any material respect
violate or infringe any Applicable Law, the terms of any Permit
or any order, writ, injunction or decree of any Governmental
Authority including but not limited to, the 33 Act, the 34 Act,
the Rules and Regulations of the SEC, or the Securities Laws and
Regulations of any state. The Parent is not an investment company
as defined in, or otherwise subject to regulation under, the
Investment Company Act of 1940. The Parent is required to file
reports pursuant to Section 12(g) of the 34 Act and is now, and
as of the Closing Date will be, current in its filings. The
Parent's Form 10-K Annual Reports have been filed with certified
financial statements, in compliance with SEC Regulations.
5.16 Buying Group Employment Agreement; and Employee Benefits.
5.16.1 There are no employment, consulting, severance pay,
continuation pay, termination pay, indemnification agreements,
collective agreements, employee benefit plans or other similar
agreements of any nature whatsoever affecting either the
Purchaser or the Parent save those to which a company listed on
the OTCBB would, in the ordinary course of its business, be party
to.
5.16.2 The Buying Group and its Affiliates have complied and
are currently complying, in respect of all employees of the
Buying Group and its Affiliates, with all Applicable Laws
respecting employment and employment practices and the protection
of the health and safety of employees, except for such instances
which are not, in the aggregate, material.
5.17 Intellectual Property. The Buying Group has no interest in
any patent, patent application and invention, trademark, trade
name, trademark or trade name registration or application,
copyright or copyright registration or application for copyright
registration.
5.18 Tax Matters.
5.18.1 Except as disclosed in the Parent's Financials, the
Purchaser and the Parent have prepared and filed all Tax Returns
on time with all appropriate Governmental Authorities which were
required to be filed on or prior to the Closing Date. Each such
Tax Return was correct and complete.
5.18.2 The Purchaser is not a registrant for the purposes of
the goods and services tax provided for under the Tax Act.
5.18.3 The Purchaser is a taxable Canadian Corporation, as
that term is defined in the Tax Act.
5.18.4 The Purchaser has paid all applicable sales and retail
taxes in the Province of British Columbia, and none of its
tangible personal property has been transferred at any time on a
tax-exempt basis under applicable legislation in the Province of
British Columbia. The foregoing is accurate, mutatis mutandis,
with respect to all sales or transfer Taxes imposed under
comparable legislation of other provinces.
5.18.5 The Purchaser has never acquired or had the use of any
of its assets from a Person (a "Related Person") with whom the
Purchaser was not dealing at arm's length, within the meaning of
the Tax Act. The Purchaser has never disposed of any asset to a
Related Person for proceeds less than the fair market value of
that asset. The Purchaser is not a party to or bound by any
agreement with, is not indebted to, and no amount is owing to the
Purchaser by any Related Person, not dealing at arm's length,
within the meaning of the Tax Act, with the Purchaser.
5.18.6 For the purposes of the Tax Act the Purchaser and the
Shareholders hereby covenant and agree to elect jointly under
Subsection 85 of the Tax Act, by completing and filing with the
Department of National Revenue the prescribed form T2057 within
the prescribed time for the purposes of the Tax Act with respect
to the sale by the Shareholders to the Purchaser of the
Corporation Shares and further agree to transfer the Corporation
Shares at an agreed amount equal to the adjusted cost base of the
Corporation Shares to the Shareholders for purposes of the Tax
Act or such greater amount determined by the Shareholders (the
"Elected Amount").
5.18.7 If at any time after the Closing Date the Shareholders
determine that either:
(a) it is necessary or desirable to change the Elected
Amount; or
(b) the Tax Act deems the Elected Amount to be an amount
which is different than the amount agreed upon between the
Shareholder and the Purchaser,then the Shareholder and the Purchaser
shall do all things reasonably necessary to reflect such change including,
for example, filing an amended election pursuant to subsection 85 of
the Tax Act.
5.19 Issuance of Shares.
5.19.1 The issuance of the Parent Common Shares by the Parent,
and the terms and provisions of the Parent Common Shares, will
not violate any provisions of the Parent's articles or bylaws or
any Applicable Law, nor will the voting rights attached to the
Parent Common Shares derogate from any rights under Applicable
Law.
5.19.2 The issuance of the Exchangeable Non-Voting Shares by
the Purchaser, and the terms and provisions of the Exchangeable
Non-Voting Shares, will not violate any provisions of the
Purchaser's articles or bylaws or any Applicable Law.
5.20 Continuing NASD Status. The Parent warrants that the
National Association of Securities Dealers has cleared the Parent
for quotation of its common shares, including the Parent Common
Shares, on the over-the-counter bulletin board in the United
States, which will continue after the Closing.
5.21 Full Disclosure. The information contained in the
documents, certificates and written statements (including this
Agreement and the schedules and exhibits hereto) furnished to the
Shareholders by or on behalf of the Buying Group with respect to
each of the Purchaser and the Parent (including the Buying Group
Business and the respective results of operations, financial
condition and prospects of the Purchaser and the Parent) for use
in connection with this Agreement or the transactions
contemplated by this Agreement is true and complete in all
material respects and does not, to the best of the knowledge of
each Shareholder after conducting an inquiry which a reasonably
prudent person would make under the circumstances, omit to state
any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. There is no fact known to the Purchaser or
the Parent or any Shareholder that has not been disclosed to the
Shareholders by the Buying Group in writing that has had a
Material Adverse Effect on or, so far as the Buying Group can now
foresee, could be reasonably likely to have a Material Adverse
Effect on the Buying Group (including the Buying Group Business
and the respective results of operations, financial condition or
prospects of the Buying Group).
ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS
6.01 Conduct of the Business. During the Interim Period, other
than with the express written approval of the Purchaser, the
Corporation shall conduct the Corporation Business in the
ordinary course consistent with past practice and shall use its
best efforts to preserve intact the organization, relationships
with third parties and goodwill of the Corporation and keep
available the services of the present officers, employees, agents
and other personnel of the Corporation Business.
6.01.1 Without limiting in any way the importance of the
foregoing, during the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall not, and
each Shareholder shall not cause the Corporation to:
(a) adopt any material change in any method of accounting
or accounting practice used by the Corporation other than by
reason of a concurrent change in generally accepted accounting
principles;
(b) amend its articles or bylaws;
(c) sell, mortgage, pledge or otherwise dispose of any
substantial assets or properties of the Corporation;
(d) declare, set aside or pay any management fee or
dividend or make any other distribution with respect to the
capital stock of the Corporation or otherwise make a distribution
or payment to any Shareholder;
(e) amalgamate, merge or consolidate with or agree to
amalgamate, merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise
acquire, any Corporation, partnership or other business
organization or division thereof;
(f) authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any
securities or obligations convertible into shares of its capital
stock of any class or commit to doing any of the foregoing;
(g) split, combine or reclassify any shares of the capital
stock of any class of the Corporation or redeem or otherwise
acquire, directly or indirectly, any shares of such capital
stock;
(h) incur or agree to incur any debt or guarantee any debt
for borrowed money, including any debt to any Shareholder, or to
any Affiliate or Associate of any Shareholder, except debt
incurred in the ordinary course of business consistent with past
practice;
(i) make any loan, advance or capital contribution to or
investment in any person other than loans, advances and capital
contributions to or investments in joint ventures or other
similar arrangements in which the Corporation has an equity
interest in the ordinary course of business and travel advances
made in the ordinary course of business by the Corporation to its
employees to meet business expenses expected to be incurred by
such employees;
(j) enter into any settlement with respect to any
Proceeding or consent to any order, decree or judgment relating
to or arising out of any such Proceeding;
(k) take any action to terminate, dismiss or cause the
retirement of any key employee of the Corporation;
(l) fail in any material respect to comply with any
Applicable Laws; or
(m) make, or make any commitments for, capital or
contractual expenditure exceeding $5,000 for any individual
commitment or $100,000 for all such commitments taken in the
aggregate.
6.01.2 Nothing in this Agreement, and specifically in
Paragraph 6.01.2, shall be read to prohibit the Purchaser or the
Parent from negotiating and completing transactions involving the
acquisition of other subsidiaries including Enersphere Inc. or
Urbana.ca Enterprises Inc.
6.01.3 During the Interim Period, other than with the express
written approval of the Purchaser, the Corporation shall:
(a) file all Canadian, United States, foreign, federal,
state, provincial and local Tax Returns required to be filed and
make timely payment of all applicable Taxes when due;
(b) promptly notify the Purchaser in writing of any action
or circumstance that results in, or could reasonably be expected
to result in, a Material Adverse Effect or the occurrence of any
breach by the Corporation or any Shareholder of any
representation or warranty, or any covenant or agreement
contained in this Agreement; and
(c) promptly notify the Purchaser in writing of the
commencement of any proceeding or the threat thereof by or
against the Corporation or any Shareholder.
6.02 Maintenance of Corporation Insurance Policies. On and after
the Closing Date, the Corporation shall not take or fail to take
any action if such action or inaction would adversely affect the
applicability of any insurance in effect on the date hereof that
covers all or any material part of the assets of the Corporation
or the Business.
6.03 Tax Election. In accordance with the Letter of Intent,
the Corporation shall not file an election pursuant to subsection
256(9) of the Income Tax Act (Canada) or any equivalent
provincial provision.
ARTICLE VII: COVENANTS OF THE BUYING GROUP
7.01 Appointment of Director. At Closing, the following person(s)
will be appointed a director of the Parent:
Name Position
David Groves Director
7.02 Execution of Management Agreements. At Closing, The
Corporation shall execute the following 3 year term management
agreements:
(a) with David Groves ("David"), a management agreement whereby
David shall receive a salary of CDN $60,000 for the agreements'
first year, CDN$80,000, for the Agreement's second year term and
CDN$120,000 for the third year term in exchange for a minimum of
40 hours per week as President of the Corporation; and
(b) with Henry Tyler ("Henry"), a management agreement whereby
Henry shall receive a salary of CDN $60,000 for the agreement's
first year and CDN$80,000 for the agreement's second year in
exchange for a minimum of 40 hours per week as an employee of the
Corporation.
7.03 Conduct of Business. During the Interim Period, the Buying
Group will conduct the Buying Group Business in the ordinary
course consistent with past practice and shall use its best
efforts to preserve intact the organization, relationships with
third parties and goodwill of the Buying Group and keep available
the services of the present officers, directors, employees,
agents and other personnel of the Buying Group Business; and
without limiting in any way the importance of the foregoing, the
Buying Group shall not undertake any of those matters referred to
in sections 6.01.1 and 6.01.2, and all such clauses thereof shall
apply mutatis mutandis to the Buying Group.
7.04 Priority. Notwithstanding any term of the Purchaser's
bylaws, memorandum and articles to the contrary, the terms and
provisions of this Agreement and the Exchange and Voting
Agreement shall prevail such that the directors of the Purchaser
will only authorize the exchange of the Exchangeable Non-Voting
Shares for shares in the Parent Common Shares in accordance with
the terms of the Exchange and Voting Agreement.
ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES
8.01 Further Assurances. Each party hereto agrees to execute and
deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably
necessary or desirable (including obtaining all required
consents) in order to evidence the consummation or implementation
of the transactions provided for under this Agreement.
8.02 Certain Filings. The parties hereto shall cooperate with
one another in determining whether any action by or in respect
of, or filing with, any Governmental Authority is required or
reasonably appropriate, or any action, consent, approval or
waiver from any party to any Contract is required or reasonably
appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the
terms and conditions of this Agreement, in taking such actions or
making any such filings, the parties hereto shall furnish
information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
8.03 Registration. All parties acknowledge and agree that the
Parent is a reporting issuer in the United States, and all of the
Parent Common Shares have been registered under the 33 Act; and
all parties further acknowledge and agree that neither the Parent
nor the Purchaser is a reporting issuer in any province of
Canada, and the Exchangeable Non-Voting Shares and Parent Common
Shares will be subject to such resale restrictions as imposed by
the Applicable Law of the jurisdiction in which a Shareholder is
resident.
ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING
9.01 Conditions to Obligation of the Buying Group. The
obligations of the Buying Group to consummate the Closing are
subject to the completion of due diligence of the Corporation on
the part of the Buying Group and to the Buying Group's
satisfaction on or before December 20, 1999 and are further
subject to the satisfaction of each of the following conditions:
(a) (i) the Corporation and each Shareholder shall have
performed and satisfied each of their respective obligations
hereunder required to be performed and satisfied by them on or
prior to the Closing Date, (ii) each of the representations and
warranties of the Corporation and each Shareholder contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing, and
(iii) the Buying Group shall have received certificates signed by
each Shareholder and a duly authorized executive officer of the
Corporation to the foregoing effect and to the effect that the
conditions specified within this Section 9.01(a) have been
satisfied.
(b) All Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) after
the Closing that would be materially burdensome upon the
Corporation, the Corporation Business, the Corporation Shares or
the Buying Group (or any of its Affiliates or Associates) or
their respective businesses substantially as such businesses have
been conducted prior to the Closing Date or as said businesses,
as of the date hereof, would be reasonably expected to be
conducted after the Closing Date. All such approvals shall be in
effect, and no proceedings shall have been instituted or
threatened by any Governmental Authority or other person with
respect thereto as to which there is a material risk of a
determination that would terminate the effectiveness of, or
otherwise materially and adversely modify the terms of, any such
approval; all applicable waiting periods with respect to such
approvals shall have expired; and all conditions and requirements
prescribed by Applicable Law or by such approvals to be satisfied
on or prior to the Closing Date shall have been satisfied to the
extent necessary such that all such approvals are, and will
remain, in full force and effect assuming continued compliance
with the terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
The operation of the Corporation Business shall not have violated
or infringed, or be in violation or infringement of any
Applicable Law or any order, writ, injunction or decree of any
Governmental Authority, where such violations and infringements,
individually or in aggregate, have resulted in, or could
reasonably be expected to result in a Material Adverse Effect.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Corporation or the Corporation Business,
including any damage, destruction or other casualty loss
affecting the Corporation or the Corporation Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Corporation.
9.02 Conditions to Obligations of the Shareholders. The
obligations of each Shareholder to consummate the Closing are
subject completion of reasonable due diligence investigations of
the Buying Group to be completed on or before December 20, 1999
and are further subject to the satisfaction of each of the
following conditions:
(a) (i) the Buying Group shall have performed and satisfied
each of its obligations hereunder required to be performed and
satisfied by it on or prior to the Closing Date; and (ii) each of
the representations and warranties of the Buying Group contained
herein shall have been true and correct and contained no
misstatement or omission that would make any such representation
or warranty misleading when made and shall be true and correct
and contain no misstatement or omission that would make any such
representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing.
(b) All Required Consents for the transactions contemplated
by this Agreement shall have been obtained without the imposition
of any conditions that are or would become applicable to any
Shareholder (or any of their respective Affiliates or Associates)
after the Closing that would be materially burdensome upon any
such Person. All such approvals shall be in effect, and no
Proceedings shall have been instituted or threatened by any
Governmental Authority with respect thereto as to which there is
a material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify
the terms of, any such approval. All applicable waiting periods
shall have expired, and all conditions and requirements such
approvals to be satisfied on or prior to the Closing extent
necessary such that all such approvals are, and will remain, in
full force and effect assuming continued compliance with the
terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law.
No temporary restraining order, preliminary or permanent
injunction, cease and desist order or other order issued by any
court of competent jurisdiction or any competent Governmental
Authority or any other legal restraint or prohibition preventing
the transfer and exchange contemplated hereby or the consummation
of the Closing, or imposing Damages in respect thereto, shall be
in effect, and there shall be no pending actions or proceedings
by any Governmental Authority (or determinations by any
Governmental Authority) or by any other Person challenging or
seeking to materially restrict or prohibit the transfer and
exchange contemplated hereby or the consummation of the Closing.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts
or change in the Buying Group or the Buying Group Business,
including any damage, destruction or other casualty loss
affecting the Buying Group or the Buying Group Business that has
had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states
of circumstances or facts or changes, a Material Adverse Effect
on the Buying Group.
(e) Since the date hereof, there shall not have been any:
(i) material change in the capital structure of either the
Purchaser or the Parent, other than as to effect the creation or
issuance of the Exchangeable Non-Voting Shares or the Parent
Common Shares as contemplated herein, or to effect the rights,
restrictions, privileges and terms of the Exchangeable Non-Voting
Shares or Parent Common Shares in accordance with the terms
hereof; or
(ii) any actions, investigations, inquiries or
proceedings commenced or continued against either the Parent or
the Purchaser, or their respective officers, directors,
promoters, representatives, agents or their respective businesses
by any securities regulatory authority, tribunal or body having
jurisdiction.
(f) The Parent's Board of Directors, by proper and
sufficient vote, shall have approved this Agreement, the Exchange
and Voting Agreement and the Support Agreement, and the
transactions contemplated hereby and the issuance of the Parent
Common Shares hereunder.
(g) The Parent and the Purchaser will have entered into the
Exchange and Voting Agreement and the Support Agreement.
ARTICLE X: INDEMNIFICATION
10.01 Agreement to Indemnify.
10.01.1 Each of the Purchaser and the Parent, and their
respective Affiliates, Associates, officers, directors,
shareholders, representatives and agents (collectively, the
"Purchaser Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by each
Shareholder in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by such Shareholder, provided, however,
that each Shareholder shall have no obligation to indemnify the
Purchaser Indemnitees with respect to damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation or warranty
made in this Agreement by any other Shareholder and further a
Shareholder shall have no such obligation to indemnify a
Purchaser Indemnitee hereunder unless, and to the extent, the
aggregate of all damages incurred by the Purchaser Indemnities
for all items covered by this Section 10.01(1) shall exceed
$1,000 in the aggregate.
10.01.2 Each of the Purchaser Indemnitees shall be indemnified
and held harmless to the extent set forth in this Article X by
the Corporation in respect of any and all damages incurred by any
Purchaser Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made in this Agreement by the Corporation.
10.01.3 Each Shareholder and their respective Affiliates and
Associates and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively,
the "Shareholder Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Article X by the
Purchaser and Parent in respect of any and all damages incurred
by any Shareholder Indemnitee as a result of any inaccuracy or
misrepresentation in or breach of any representation, warranty,
covenant or agreement made by the Parent or the Purchaser in this
Agreement.
10.02 Survival of Representation, Warranties and Covenants.
Except as hereinafter provided in this Section 10.02, all
representations, warranties, covenants, agreements and
obligations of each Indemnifying Party contained herein and all
claims of any Purchaser Indemnitee or Shareholder Indemnitee in
respect of any breach of any representation, warranty, covenant,
agreement or obligation of any Indemnifying Party contained in
this Agreement, shall survive the Closing and shall expire one
year following the Closing Date.
ARTICLE XI: MISCELLANEOUS
11.01 Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given (i) if personally delivered, when so delivered,
(ii) if mailed, two Business Days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid and addressed to the intended recipient as set forth
below, (iii) if given by facsimile or telecopier, once such
notice or other communication is transmitted to the facsimile or
telecopier number specified below and the appropriate answer back
or telephonic confirmation is received, provided that such notice
or other communication is promptly thereafter mailed in
accordance with the provisions of clause (ii) above or (iv) if
sent through an overnight delivery service in circumstances under
which such service guarantees next day delivery, the day
following being so sent:
If to the Corporation: 2523 Robinson Street
Mississauga, Ontario, L5C 2P2
If to the Purchaser: 804-750 W. Pender Street
Vancouver, B.C., V6C 2T8
If to the Parent: 19 Concession Street
Cambridge, Ontario, N1R 2G6
If to a Shareholder: at the last address for the
Shareholder on the member registers of
the Corporation.
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary
mail or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
11.02 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by all parties hereto,
or in the case of a waiver, by the party against whom the waiver
is to be effective.
(b) No waiver by a party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent occurrence. No failure or delay by a
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
11.03 Expenses. All costs and expenses incurred in
connection with this Agreement and enclosing and carrying out the
transactions provided for herein shall be paid by the party
incurring such cost or expense. This Section shall survive the
Closing and the termination of this Agreement.
11.04 Successors and Assigns. This Agreement shall be
binding upon and enure to the benefit, of the parties hereto and
their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns. No party
hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be
unreasonably withheld.
11.05 Governing Law. This Agreement shall be governed by,
and interpreted and enforced in accordance with, the laws in
force in the Province of Ontario and the laws of Canada
applicable therein (excluding any conflict of laws rule or
principle that might refer such interpretation to the laws of
another jurisdiction). Each party irrevocably submits to the
jurisdiction of the courts of British Columbia with respect to
any matter arising hereunder or related hereto.
11.06 Counterparts; Effectiveness. This Agreement and the
documents relating to the transactions contemplated by this
Agreement may be signed in any number of counterparts and the
signatures delivered by facsimile, each of which shall be deemed
to be an original, with the same effect as if the signatures
thereto were upon the same instrument and delivered in person.
This Agreement and such documents shall become effective when
each party thereto shall have received a counterpart thereof
signed by the other parties thereto. In the case of execution
and delivery by facsimile by any party, that party shall
forthwith deliver a manually executed original to each of the
other parties.
11.07 Entire Agreement. This Agreement (including the
Schedules referred to herein, which are hereby incorporated by
reference) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter
of this Agreement including, without limiting the generality of
the foregoing, the Letter of Intent. Neither this Agreement nor
any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
11.08 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the
construction or interpretation hereof. All references to an
Article or Section include all subparts thereof.
11.09 Severability. If any provision of this Agreement, or
the application thereof to any Person, place or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such
provisions as applied to other Persons, places and circumstances
shall remain in full force and effect only if, after excluding
the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated
hereby in substantially the same manner as originally set forth
at the later of the date this Agreement was executed or last
amended.
11.10 Construction. The parties hereto intend that each
representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party
has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or
covenant.
11.11 Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it
shall be deemed to mean "include, without limitation" or
"including without limitation", as the case may be, and the
language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
11.12 Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
11.13 Third Party Beneficiaries. Other than Indemnitees
under Article X hereof who are not parties to this Agreement, no
provision of this Agreement shall create any third party
beneficiary rights in any Person, including any employee or
former employee of the Corporation or any Affiliate or Associate
thereof (including any beneficiary or dependent thereof).
11.14 Transmission by Facsimile. The parties hereto agree
that this Agreement may be transmitted by facsimile or such
similar device and that the reproduction of signatures by
facsimile or such similar device will be treated as binding as if
originals and each party hereto undertakes to provide each and
every other party hereto with a copy of the Agreement bearing
original signatures forthwith upon demand.
11.15 Fees and Commissions. No broker, finder or other person
or entity is entitled to any fee or commission from the Buying
Group or the Corporation for services rendered on behalf of the
Buying Group or the Corporation in connection with the
transactions contemplated by this Agreement.
11.16 Maitland & Company. The parties hereto acknowledge and
agree that Maitland & Company acts only for the Parent in the
preparation and negotiation of this Agreement. The parties
hereto further acknowledge and agree that:
(a) they have been advised to seek independent legal advice
regarding this Agreement,
(b) Maitland & Company has provided no tax advice with
respect to this Agreement and hereby has advised the parties
hereto to seek tax advice respecting their respective tax
obligations; and
(c) Maitland & Company has not provided legal advice to any
of the Shareholders with respect to U.S. securities laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of
the day and year first above written.
URBANA.CA INC.
Per: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
ICC INTEGRATED CARBONICS (CANADA) CORP.
Per: /s/ Robert Tyson
Robert Tyson, Authorized Signatory
E-BILL DIRECT INC.
Per: /s/ David Groves
David Groves, Authorized Signatory
SHAREHOLDERS
/s/ David Groves
David Groves
/s/ Henry Tyler
Henry Tyler
Rockrimmon Investment Corporation
Per: /s/ John Groves
John Groves, Authorized Signatory
Questech Corporation
Per: /s/ John Groves
John Groves, Authorized Signatory
EXCLUSIVITY AGREEMENT
This contract (hereinafter called the "Formal Contract) is
executed this 17th day of January, 2000 between Eagle Wireless
International, Inc, a Texas corporation having an office at 101
Courageous Drive, League City, TX, 77573, USA, (hereinafter
called "Manufacturer") and Urbana.ca Enterprises Corp., a British
Columbia Corporation having an office at 19 Concession Street,
Cambridge ON, N1R2G6 (hereinafter called "Customer"). This Formal
Contract replaces and supersedes any and all prior agreements,
written and oral, between Manufacturer and Customer except that
certain purchase order STB001 dated December 13, 1999 whose terms
and order quantities are Incorporated within this agreement.
WHEREAS, Manufacturer is a manufacturer, distributor and marketer
of Set-Top-Box and other communication products and services;
WHEREAS, Customer has initiated a business that requires the use
of certain .Set-Top-Box products and other products and services
that Manufacturer provides and is prepared to begin the use,
distribution and marketing of these products;
WHEREAS, Manufacturer and Customer (hereinafter called the
"Parties') executed a Purchase Order for certain Set-Top-Box
products on December 13, 1999 (hereinafter called the "Initial
Purchase Order") to enter into an exclusive relationship whereby
Customer will exclusively use, distribute, and market the
Set-Top-Box products of Manufacturer throughout marketing
territory of Customer in return for being awarded the exclusive
distribution rights to Manufacturers Set-Top-Box product for
Canada.
WHEREAS, The parties agreed in the Initial Purchase Order to
fully formalize their relationship through the execution of a
Formal Contract that is approved by the respective management of
each company.
NOW THEREFORE, in consideration of the mutual covenants and
undertakings set out herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to as follows:
Section I - Definitions
1.1 PRODUCT means any and all existing and future Set-Top-Box
like devices owned, designed or licensed by Manufacturer that can
be used as a computer, Internet gateway, digital video or audio
disc player or other- similar multimedia personal device.
1.2 AFFILIATE of a party means any legal entity whose majority
or controlling ownership interest representing the right to vote
for or manage the affairs of the entity is, during the term of
this Contract, owned or controlled (but only so long as such
ownership or control exists), directly or indirectly, by that
party, or any legal entity that possesses, directly or
indirectly, such a majority or controlling ownership interest in
a party hereto.
1.3 SEMI-EXCLUSIVE means that conveyed rights are equally shared
by the grantee and the grantor with neither party having
authority to transfer, assign or otherwise sublicense the rights
to a third party without the express written consent of the other
party.
1.4 FINANCING PERIOD means the date that a release of product is
requested by Customer in writing until date Manufacturer receives
liquidity of funds to pay for the products delivered to Customer.
1.5 MANUFACTURED COST means the- cost of direct and indirect
materials attributed in accordance with US GAAP to the
manufacture of the Product, manufacturing labor and overhead,
software, royalty license, all other fees, collateral materials,
shipping materials, warranty reserve, insurance, and
manufacturing financing charges.
1.6 CUSTOMER BASE COST means the Manufactured Cost multiplied by
a factor of 110%.
1.7 SALES PRICE means the final collected sales price to the
distribution source system integrator, or retail customer,
1.8 PROFIT means the difference between the Sales Price and the
Customer Cost Floor.
1.9 FINANCE CHARGE means an interest rate of 16% per annum
compounded monthly that will accrue on amounts not paid by an
established due date.
Section 2 - Grants
2.1 For the term of this Contract, Manufacturer grants to
Customer and Affiliates of Customer a Canadian exclusive and a U.
S. non-exclusive, indivisible license to sell, distribute, and
have third parties distribute the Product provided the minimum
quantities are being maintained on a continuing semi-annual
basis, and a worldwide exclusive virtual content driven local
based portal communities based on the Urbana/Guelph Project.. The
basis for the exclusivity is a average quantity of 500,000
Set-Top-Box units bought and paid for or $US-125M of paid for
business to Manufacturer over a period of twenty one months from
the start of this agreement.
For greater clarity to maintain its Canadian Exclusive and U.S.
Non-Exclusive rights, Customer must order, take delivery, and pay
for an average of 166,666 Set-Top-Box Units at a Customer Bass
Cost determined by section 4.1 in each of the first 3 seven month
periods following the execution of this contract.
2.2 Customer grants to Manufacturer the exclusive right to
provide all of its Set-Top-Box requirements for a period of three
years after December 13, 1999 without regard to the location of
the product usage or type of application. This grant is being
provided In return for certain custom design commitments by
Manufacturer to Customer; and the cost control and profit sharing
agreements between Customer and Manufacturer detailed in Section
4. 1.
Section 3 - Purchase Orders
Customer and Manufacturer will jointly establish a sales
committee to establish the configuration, delivery schedule, and
associated pricing impacts for the various versions of the
Product before final commitments by Customer to any of Customer's
clients to receive final conformations of orders for any orders
that are non-standard to Manufacturers product line. Manufacturer
will be responsible for the determination of ail final pricing
for standard and non-standard orders.
3.1 Manufacturer will provide Customer with a written
conformation of all purchase orders and formal purchase order
releases within three days of the receipt of such orders.
Manufacturer reserves the sole right to accept or reject any
purchase order. Purchase orders must be in writing to
Manufacturer at least sixty-days in advance of the scheduled
shipment date. Once issued, purchase orders may not be canceled
without penalty. Purchase orders on custom configurations may not
be canceled without paying for all work in process plus a 10%
penalty. No penalty shall be assessed if future orders within 90
days utilize the work In process and Customer pays Manufacturer
for any and all additional manufacturing and manufacturing
financing costs associated with the delay.
3.2 Completed purchase orders will be invoiced by Manufacturer
to Customer at the Customer Base Cost plus freight and handling
FOB Singapore. Invoices will be payable Net 30 for domestic or
Canadian shipments, after credit approval by Manufacturer and
Manufacturer's production finance sources, and prepaid for
International shipments. Invoiced amounts that remain unpaid
more than thirty days will be subject to a finance charge of 16%
per annum compounded monthly. Manufacturer will be the final
authority regarding all credit matters.
Section 4 - Profit Sharing
4.1 Both Manufacturer and Customer recognize the importance of
obtaining market share during the initial introduction of the
Set-Top-Box product line into the sales and marketing territories
of Customer. In recognition of this fact Manufacturer agrees to
develop new Set-Top-Box configurations and models required by
Customer volume applications and to sell these models to Customer
at actual Manufactured Cost plus 10%. This Cost will become the
Customer Base Cost, Customer may sell to the end user or
integrator at his independent SALES
4.2 PRICE and may establish his own PROFIT. Both parties agree
that the final product must be priced to the end user
competitively with other makes and models available and on a
feature by feature basis. At some time after market share is
achieved Manufacturer reserves the right to increase the Customer
Cost Floor in order to recover product development costs and to
increase profit margins.
Section 5 -Warranty Provisions
5.1 Manufacturer will provide all warranty service for the
United States and Canada from its contract facility in Houston
Texas, Other warranty provisions will be made for sales outside
of these locations. Manufacturer will provide technical support
for training, installation, or system integration to large
accounts of Customer if requested at standard industry rates.
Manufacturer will indemnify Customer against any and all warranty
costs damages and liabilities attributed to the failure of its
Set-Top-Box unless such costs, damages and liabilities result
from installation, misuse or other items specifically excluded
from the warranty.
Section 6 - Miscellaneous Provisions
6.1 The term of this contract shall be three years from the date
of this contract.
6.2 Customers and related relationships and agreements remain
the property of the respective parties to this Contract. Both
parties acknowledge that there may arise instances of common
customers and agree that these situations will be handled in a
businesslike fashion on a case by case basis.
6.3 Should Customer have an opportunity to sell or merge the
majority interest in its business to a third-party investor then
any such new investor must abide with the terms and conditions of
this contract or negotiate changes to the Contract that will
provide protection to Manufacturer.
6.4 Customer and Manufacturer agree that any disputes arising
under this Contract will be settled by arbitration in accordance
with the rules of the American Arbitration Association in the
location of the party not requesting arbitration.
6.5 This Contract shall be construed under and in accordance
with the laws of the State of Texas and obligations of the
parties created hereunder are enforceable in Harris County,
Texas.
6.6 Should any part or portion of this Contract be invalid, the
balance of the provision shall remain unaffected and shall be
enforceable.
6.7 This Contract shall (save and except for the Purchase Order
dated December 13, 1999) constitute the entire agreement between
Manufacturer and Customer. Any amendments hereto shall be done
only in writing signed by both parties. No oral agreements will
be recognized, All purchase orders issued under this contract
must be in conformance with this Contract.
6.8 Notices given under this Contract by either party must be
given in writing and may be effected by certified mail, postage
prepaid with return receipt requested. Mailed notices shall be
addressed to the address of the party as it appears below. Mailed
notices shall be deemed communicated seven days after the
postmark date of the mailing. FAX copies will be sent at the same
time as the mailed copies.
The contact address for Customer is:
President, Urbana.ca Enterprises Corp.
19 Concession Street
Cambridge Ontario, N1R2G6
The contact address for Manufacturer is:
President, Eagle Wireless International, Inc.
101 Courageous Drive
League City, Texas 77573
6.9 This agreement may not be assigned or transferred by
Customer without the express written consent of Manufacturer. In
the event written authority to assign or transfer the obligations
and benefits of this agreement are granted then all terms and
provisions of this agreement shall inure to the benefit of, and
be binding on, said assignee and successor interest of Customer.
6.10 This agreement shall be executed in two counterparts, each
party to retain an original.
Both parties agree to provide at their own expense the other with
audited financial on an annual basis.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed by their duly authorized representative:
EAGLE WIRELESS INTERNATIONAL, INC.
By: /s/ Dr. Dean Cubley
Dr. Dean Cubley, President
URBANA.CA ENTERPRISES CORP.
By: /s/ Jason Cassis
Jason Cassis, President
<TABLE> <S> <C>
<S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE
REGISTRANT'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 285,953
<SECURITIES> 0
<RECEIVABLES> 42,538
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 435,062
<PP&E> 140,717
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,029,484
<CURRENT-LIABILITIES> 247,765
<BONDS> 0
0
0
<COMMON> 11,588
<OTHER-SE> 2,473,010
<TOTAL-LIABILITY-AND-EQUITY> 4,029,484
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 757,917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,618
<INCOME-PRETAX> (777,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (777,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (777,535)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
