<PAGE> 1
EXHIBIT 10.1
SETTLEMENT AGREEMENT
1. Parties.
1.1 This Settlement Agreement (this "Agreement") is made and entered into
on September 5, 2000 (the "Effective Date"), at Toronto, Ontario, Canada,
between Infotopia, Inc. ("Infotopia"), a Nevada corporation, and Thomson
Kernaghan & Co. Limited ("Thomson Kernaghan"), an Ontario corporation.
2. Recitals.
2.1 This Agreement is made with reference to the following facts and
circumstances:
(a) National Boston Medical, Inc. ("National Boston") granted Thomson
Kernaghan certain royalties (the "Thomson Kernaghan Royalties") under the terms
of (i) a Convertible Note dated August 19, 1999, in the principal amount of
$1,700,000, executed by National Boston as maker in favor of Thomson Kernaghan
as payee, and (ii) a Promissory Note dated January 21, 2000, in the principal
amount of $550,000, executed by National Boston as maker in favor of Thomson
Kernaghan as payee.
(b) Thomson Kernaghan has made a claim against Infotopia and its
officers and directors (the "Thomson Kernaghan Royalties Claim") alleging that
Infotopia has appropriated royalty payments due Thomson Kernaghan pursuant to
the Thomson Kernaghan Royalties.
(c) Infotopia and Thomson Kernaghan desire to settle the Thomson
Kernaghan Royalties Claim on the terms and subject to the conditions set forth
in this Agreement.
3. Settlement of Claim for Appropriation of Certain Royalties
3.1 In order to settle the Thomson Kernaghan Royalties Claim:
(a) Infotopia hereby agrees to (i) issue and deliver 6,500,000 shares
of authorized and unissued common stock ("Common Stock") of Infotopia (the
"Settlement Shares") to Thomson Kernaghan, and (ii) to register Thomson
Kernaghan's resale of the Settlement Shares under the Securities Act of 1933, as
amended (the "Securities Act"); and Thomson Kernaghan agrees to accept the
Settlement Shares in settlement of the Thomson Kernaghan Royalties Claim, on the
terms and subject to the provisions of this Agreement.
(b) Infotopia hereby agrees to (i) issue, sell and deliver 12,750,000
shares of Common Stock (the "Purchased Shares") to Thomson Kernaghan, for an
aggregate purchase price of $1,767,500 (the "Purchase Price") for all 12,750,000
shares, and (ii) to register Thomson Kernaghan's resale of the Purchased Shares
under the Securities Act; and Thomson Kernaghan agrees to purchase the Purchased
Shares, on the terms and subject to the conditions of this Agreement.
1
<PAGE> 2
(c) Infotopia hereby agrees to (i) issue, sell and deliver to Thomson
Kernaghan a warrant (the "Warrant") to purchase 1,000,000 shares of Common Stock
(the "Warrant Shares") at a price per share of $.138, and (ii) to register
Thomson Kernaghan's resale of the Warrant Shares under the Securities Act. The
Warrant shall (i) be exerciseable at any time, in whole or in part, (ii) expire
not earlier than two years from the date that it is issued, and (iii) contain a
"cashless exercise" provision.
3.2. Thomson Kernaghan shall pay the Purchase Price to Infotopia in
installments, as follows:
(a) $800,000 upon delivery of the Settlement Shares and the Purchased
Shares, in escrow as provided in section 4 below.
(b) $717,500 upon the effectiveness of the Registration Statement
defined in Section 5 below, in escrow as provided in section 4 below.
(c) $250,000 to be payable immediately upon closing to Infotopia.
4. Escrow
4.1. Infotopia agrees that the Purchase Price shall be paid and applied in
the following order and priority:
(a) First, to the payment of the creditors of National Boston, other
than (i) Thomson Kernaghan, (ii) Oxford Capital, (iii) Donald F. Mintmire, (iv)
Noreen Wilson, and (v) National Boston's directors and officers, (vi) Dragons
Forever (David Woo)
(b) Then the balance, if any, to Infotopia.
4.2. In order to establish a procedure for the payment of the Purchase
Price as set forth above, within five days from the Effective Date, Infotopia
and Thomson Kernaghan shall enter into an escrow agreement (the "Escrow
Agreement") with John M. Mann as escrow holder (the "Escrow Holder"), and
Thomson Kernaghan shall deposit the Purchase Price with the Escrow Holder, as
the installments thereof become due, the Escrow Agreement shall set forth the
names of each creditor and the amounts to be paid. After creditors are paid all
proceeds are advanced directly to Infotopia.
5. Registration
5.1. On or before October 5, 2000 (the "Filing Deadline"), Infotopia agrees
to file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act on Form
S-3, if eligible, otherwise on Form SB-2, covering the resale of the Settlement
Shares, the Purchased Shares and the Warrant Shares (collectively, the
"Registrable Securities") by Thomson Kernaghan or any subsequent holder, and
shall use its best efforts to cause the Registration Statement to be declared
effective by December 5, 2000 (the "Effectiveness Deadline"). Infotopia shall
cause the Registration Statement to remain continuously effective until all of
the Registrable Securities have been resold pursuant to the Registration
Statement, or until all of the Registrable Securities are eligible for resale
pursuant to SEC Rule 144(k).
2
<PAGE> 3
5.2. If Infotopia has not filed the Registration Statement by the Filing
Deadline, then Infotopia shall issue and deliver to Thomson Kernaghan, as
liquidated damages, 5,000,000 shares of Common Stock.
5.3. If the Registration Statement is not effective by the Effectiveness
Deadline, then Infotopia shall issue and deliver to Thomson Kernaghan, as
liquidated damages, 2,500,000 shares of Common Stock. If the Registration
Statement is not effective by January 15, 2001, then Infotopia shall issue and
deliver to Thomson Kernaghan, as liquidated damages, an additional 2,500,000
shares of Common Stock. Such liquidated damages shall not be prorated. Infotopia
shall file an additional registration statement for the resale of any shares
that Thomson Kernaghan shall be entitled to receive under this paragraph 5.3.
5.4. Thomson Kernaghan agrees that in any trading day it will not sell, in
market transactions pursuant to the Registration Statement, an aggregate of
Registrable Securities in excess of 10% of that day's trading volume for the
Common Stock. If TK sells in excess of 10% of the trading volume they will incur
a penalty of $1,000,000 per day of infraction.
6. Representations and Warranties
6.1. Infotopia represents and warrants to Thomson Kernaghan that:
(a) The execution and performance of this Agreement has been duly
authorized by all necessary corporate authority.
(b) This Agreement is its binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by the
application of bankruptcy, insolvency or other laws affecting creditors' rights
generally, or by general principles of equity.
(c) The Registrable Securities and any other shares of Common Stock
issuable to Thomson Kernaghan under this Agreement will be duly authorized,
validly issued, and when paid for will be fully paid and nonassessable.
(d) It has not offered any of the Registrable Securities in the
United States or to a U.S. Person (as defined by SEC Regulation S), it has
complied with all the requirements of SEC Regulation S to be complied with by it
in offering and selling the Registrable Securities to Thomson Kernaghan, and the
offer and sale of the Registrable Securities to Thomson Kernaghan are exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof and SEC Regulation S.
6.2. Thomson Kernaghan represents and warrants to Infotopia that:
(a) The execution and performance of this Agreement has been duly
authorized by all necessary corporate authority.
(b) This Agreement is its binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by the
application of bankruptcy, insolvency or other laws affecting creditors' rights
generally, or by general principles of equity.
3
<PAGE> 4
(c) It is not a U.S. Person, it has complied with all the
requirements of SEC Regulation S to be complied with by it in purchasing the
Registrable Securities.
7. Releases
7.1. Infotopia, for itself and its officers, directors, shareholders and
successors in interest, hereby releases Thomson Kernaghan and its officers,
directors, shareholders and successors in interest, from any claim of any
nature arising prior to the Effective Date out of or related to the Thomson
Kernaghan Royalties Claim.
7.2. Thomson Kernaghan, for itself and its officers, directors,
shareholders and successors in interest, (i) hereby releases Infotopia, and its
officers, directors, shareholders and successors in interest, from any claim of
any nature arising prior to the Effective Date out of or related to the Thomson
Kernaghan Royalties Claim; and (ii) agrees not to seek to recover from
Infotopia, or any of its officers, directors, shareholders or successors in
interest, any of the assets that were the subject of National Boston's grant of
the Thomson Kernaghan Royalties. The release and agreement not to seek recovery
of assets contained in this paragraph 7.2 are subject to and conditioned upon
the Registration Statement covering the Registrable Securities being effective
on or before the Registration Deadline.
8. Jurisdiction and Venue
8.1. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario, Canada; provided, however, that if any
provision of this Agreement is unenforceable under Ontario law, but is
enforceable under the laws of the State of Massachusetts, then Massachusetts
law shall govern the construction and enforcement of that provision. The courts
of the Province of Ontario, Canada, shall have jurisdiction and venue for the
adjudication of any civil action between or among any of them arising out of or
relating to this Agreement. The parties hereby irrevocably consent to such
jurisdiction and venue, and hereby irrevocably waive any claim of forum non
conveniens or right to change such venue.
INFOTOPIA, INC.
By /s/ Daniel J. Hoyng Witness /s/ Victor Bianchi
--------------------------- ------------------
Daniel J. Hoyng, CEO Victor Bianchi
THOMSON KERNAGHAN & CO. LIMITED
By /s/ Mark E. Valentine
---------------------------
Mark E. Valentine, Chairman
4
