SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 23, 1999
CyPost Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction
of incorporation or organization)
98-0178674
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(IRS Employer
Identification No.)
101-260 West Esplanade
North Vancouver, British Columbia, Canada V7M 3G7
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(Address of Principal Executive Offices) (Zip Code)
(604) 904-4422
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Registrant's Telephone Number, Including Area Code
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 23, 1999, Cypost Corporation ("Cypost") executed a share purchase
agreement (the "Acquisition Agreement") with Robert Adams, Tami Allan and Beata
Adams to purchase all of the issued and outstanding shares of NetRover Inc. and
NetRover Office Inc., both incorporated under the Ontario Business Corporations
Act of Canada. The Acquisition Agreement is dated for reference and is
effective as of July 22, 1999. The total purchase price for all of the shares
of both companies was CDN$3,850,000 less certain liabilities existing at closing
of approximately CDN$850,000. Of the resulting total purchase price of
approximately CDN$3,000,000, CDN$1,900,000 was payable on closing in cash and
CDN$1,000,000 was payable by the issue and delivery to the vendors of a 146,000
common shares of Cypost valued at CDN$6.85 per share. The approximately
CDN$100,000 balance is payable, subject to certain adjustments, on December 4,
1999.
At closing the purchaser was required to lend the sum of CDN$1,000,000 to
NetRover Inc. to enable it to repay shareholders loans.
<PAGE>
The purchase consideration was established by negotiation. Funds for the
purchase of the two companies were acquired through an unsecured loan from Blue
Heron Ventures Fund, LtdThe loan bears interest at 8% per annum and is
convertible into common shares of Cypost at the rate of US$1.50 per share.
NetRover Inc. is an internet service provider and as such re-sells
telecommunications time primarily to residential subscribers in larger cities in
Ontario, Canada. Revenues of NetRover Inc. were approximately CDN$2,668,000 for
the fiscal year ended July 31, 1999. NetRover Office Inc. is in business of
hosting web pages. The revenues of NetRover Office Inc. were approximately
CDN$156,000 for the fiscal year ended December 31, 1998.
The assets of each acquired company are primarily its customer base and equity
in computer equipment leases.
The transactions contemplated by the Acquisition Agreement closed on October 4,
1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial States of Businesses Acquired
It is not practicable to provide financial statements of the acquired companies
prepared in accordance with the regulations on the date hereof. Accordingly, the
required financial statements will be filed as an amendment to this Current
Report on Form 8-K as soon as practicable, but not later than November 8, 1999
(60 days after this Current Report on Form 8-K must be filed).
(b) Pro Forma Financial Information
It is not practicable to provide the required pro forma financial statements on
the date hereof. Accordingly, the pro forma financial statements will be filed
as an amendment to this Current Report on Form 8-K as soon as practicable, but
not later than November 8, 1999 (60 days after this Current Report on Form 8-K
must be filed).
(c) Exhibits
A copy of the Acquisition Agreement is attached as an Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CyPost Corporation
(Registrant)
/s/ Robert Sendoh
Date: October 8, 1999 By: ---------------------
Robert Sendoh, Chairman
SHARE PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 23rd day of July, 1999
BETWEEN:
ROBERT ADAMS, Businessman, of 107 Bloomingdale Lane, Woodbridge, Ontario L4L
6X7,
BEATA ADAMS, Businesswoman, of 107 Bloomingdale Lane, Woodbridge, Ontario L4L
6X7,
TAMI ALLAN, Businesswoman, of 111 Arnold St, Chatham, Ontario N7L 2X7
(hereinafter called the "Vendors")
OF THE FIRST PART
AND:
CYPOST CORPORATION, a company incorporated pursuant to the laws of the State of
Delaware and having a postal address at 101-260 West Esplanade, North Vancouver,
BC, Canada V7M 3G7
hereinafter called the "Purchaser")
OF THE SECOND PART
WITNESSES THAT WHEREAS:
A. The Vendors are the registered and beneficial owners of or have the
rights to acquire all of the issued and outstanding shares of NetRover Inc. and
NetRover Office Inc. (the "Vendors' Shares"); and
B. The Vendors have agreed to sell to the Purchaser, and the Purchaser has
agreed to purchase, the Vendors' Shares;
THEREFORE in consideration of the premises and the mutual covenants and
agreements herein set forth, the parties hereto covenant and agree each with the
other as follows:
1. DEFINITIONS AND INTERPRETATION
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1.1 In this Agreement:
(a) "Accounts Payable" means all of the trade accounts and other debts and
accrued charges owed by the Companies as at the Statement Date (other than the
Permitted Liens), and which are enumerated and described in the Financial
Statements, together with those trade accounts reasonably incurred in the normal
and ordinary course of the Business between the Statement Date and the Closing
Date, whether the same are due or to become due at or after the Closing Date;
<PAGE>
(b) "Accounts Receivable" means all of the trade accounts, notes, and other
debts arising out of the operation of the Business owing to either of the
Companies as at the Closing Date, whether due or to become due as at or after
the Closing Date but does not include inter-Company amounts;
(c) "Accumulated Deficit" means the accumulated deficits of the Companies as
at the Closing Date;
(d) "Affiliates Loans" means:
(i) loan due from NetRover Inc. to Robert Adams as calculated at the
Statement Date with final adjustments to be made pursuant to the Closing Balance
Sheets;
(ii) loan due from NetRover Inc. to Ruby Adams in the principal amount of
Four Hundred Thousand Dollars ($400,000.00) plus accrued and unpaid interest as
at the Closing Date;
(iii) loan due from NetRover Inc. to Max Fantuz as calculated at the
Statement Date with final adjustments to be made pursuant to the Closing Balance
Sheets;
(e) "Business" means the businesses carried on by the Companies involving
the provision of Internet access and website hosting services;
(f) "Business Assets" means all of the real property, personal property,
choses in action, intangible or intellectual property and all other assets of
whatsoever nature owned or leased by the Companies or either of them as the
context requires, or in which either of the Companies has any right or interest
or the right to acquire an interest, including the Accounts Receivable, the
Contracts and the assets listed in Schedule A;
(g) "Closing" means the completion of the transactions contemplated hereby
in accordance with the terms hereof;
(h) "Closing Balance Sheets" means the balance sheets contained in the
reviewed financial statements of each of the Companies for the period ending
September 30, 1999 based on the audited financial statements of NetRover Inc. as
of July 31, 1999 and the reviewed financial statements of NetRover Office Inc.
dated as at December 31, 1998, to be prepared in accordance with generally
accepted accounting principles by Duffy Allain and Rutten Chartered Accountants;
<PAGE>
(i) "Closing Date" means October 4, 1999;
(j) "Closing Liabilities" means an amount determined by subtracting from the
Accumulated Deficit appearing on the Closing Balance Sheet an amount equal to
44.2% times the non-capital loss carry forwards on the Closing Balance Sheet;
(k) "Companies" means NetRover Inc., a corporation incorporated under the
laws of the province of Ontario, and NetRover Office Inc., a corporation
incorporated under the laws of the province of Ontario, and "Company" refers to
either of them, as appropriate;
(l) "Consents" means the consents, waivers and approvals set forth in
Schedule B;
(m) "Contracts" means all of the commitments, agreements, contracts,
instruments, leases and other documents entered into by either of the Companies,
by which such Company is bound or to which such Company or the Business Assets
are subject (other than the Permitted Liens) and which are described in Schedule
C;
(n) "Deposit-Monetary" means the sum of One Hundred Thousand Dollars
($100,000.00) paid by the Purchaser to the Purchaser's Solicitors pursuant to
Section 4 hereof and all interest earned thereon;
(o) "Deposit-Shares" means One Hundred and Forty Six Thousand (146,000)
Common shares of the Purchaser issued from its treasury which are subject to the
trading restrictions referred to in Section 2.3 below, said shares having been
issued as of July 22, 1999;
(p) "Due Diligence Period" means the period commencing on July 22, 1999 and
ending on Execution Date;
(q) "Execution Date" means the date of signing of this Agreement;
(r) "Excluded Assets" are those assets described in Schedule N which
the Companies possess or have the use thereof but do not own but do not form
part of the Business Assets;
(s) "Financial Statements" means the audited balance sheet and audited
statement of profit and loss of NetRover Inc. as at its Statement Date and the
reviewed balance sheet and reviewed statement of profit and loss for NetRover
Office Inc. as at its Statement Date, copies of which are attached as Schedule
D;
<PAGE>
(t) "Indebtedness" means any and all advances, debts, duties, endorsements,
guarantees, liabilities, obligations, responsibilities and undertakings of a
person assumed, created, incurred or made, whether voluntary or involuntary,
however arising, whether due or not due, absolute, inchoate or contingent,
liquidated or unliquidated, determined or undetermined, direct or indirect,
express or implied, and whether such persons may be liable individually or
jointly with others;
(u) "Intellectual Property" means all copyrights, copyright registrations
and applications, trade names or brand names, business names, trade-marks,
trade-mark registrations and applications, service marks, service mark
registrations and applications, trade secrets, proprietary programming
information and know-how, patents and patent applications, and other patent
rights, processes, technology, software (in both source code and object code
format), documentation in relation to software, firmware and other intellectual
property, together with all rights under licences, registered user agreements,
technology transfer agreements, and other agreements or instruments relating to
any of the foregoing, owned by the Companies or otherwise used in connection
with the Business, including the intellectual property described on Schedule M;
(v) "Lenders" means the persons set out in section 1.1(d) above as owners of
the Affiliates Loans;
(w) "Lien" means any mortgage, debenture, charge, hypothecation, pledge,
lien, or other security interest or encumbrance of whatever kind or nature,
regardless of form and whether consensual or arising by laws, statutory or
otherwise that secures the payment of any Indebtedness or the performance of any
obligation or creates in favour of or grants to any person any proprietary
right;
(x) "Permitted Liens" means the liens described in Schedule E.
(y) "Prime Rate" means the commercial lending rate of interest, expressed as
an annual rate which the Toronto-Dominion Bank quotes in Toronto as a new
reference rate of interest from time to time (commonly known as "prime") for the
purpose of determining the rate of interest that it charges to its commercial
customers for loans in Canadian funds;
(z) "Purchase Price" means Three Million and Eight Hundred and Fifty
Thousand Dollars ($3,850,000.00) less the amount of the Closing Liabilities;
<PAGE>
(aa) "Purchaser's Solicitors" means Clark, Wilson, Barristers and
Solicitors;
(ab) "Statement Date" means the last day of the last completed fiscal year
of each of the Companies, being July 31, 1999 for NetRover Inc. and December 31,
1998 for NetRover Office Inc.;
(ac) "Vendors' Shares" has the meaning set out in Recital A above; and
(ad) "Vendors' Solicitor" means D.J. Buffone, Barrister and Solicitor;
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this share purchase agreement, including the preamble
and the Schedules hereto, as it may from time to time be supplemented or amended
and in effect;
(b) all references in this Agreement to a designated "Section" or other
subdivision or to a Schedule is to the designated Section or other subdivision
of, or Schedule to, this Agreement;
(c) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision or Schedule;
(d) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope, extent
or intent of this Agreement or any provision hereof;
(e) the singular of any term includes the plural, and vice versa; the use of
any term is equally applicable to any gender and, where applicable, a body
corporate; the word "or" is not exclusive; the word "including" means including
without limitation or prejudice to the generality of any description,
definition, term or phrase preceding that word, and the word "include" and its
derivatives will be construed accordingly; the expression "to the knowledge of"
or any similar expression as applied to a corporation or individual, refers to,
(A) in the case of an individual, the knowledge as at the relevant date that
such individual had or would have had had he exercised due diligence in making
enquiries in relation to the matter in question from all sources of information
likely to provide him with knowledge of same, and (B) in the case of a corporate
person, the knowledge (as aforementioned) of a director or officer thereof as at
the relevant date;
<PAGE>
(f) any accounting term not otherwise defined has the meanings assigned to
it in accordance with generally accepted accounting principles applicable in
Canada;
(g) except as otherwise provided, any dollar amount referred to in this
Agreement is in Canadian funds;
(h) any other term defined within the text of this Agreement has the meaning
so ascribed.
1.3 The following are the Schedules to this Agreement:
SCHEDULE DESCRIPTION
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A Business Assets
B Consents
C Contracts
D Financial Statements
E Permitted Liens
F Authorized and Issued Capital
G Directors and Officers
H Banking Arrangement
I Employee List
J Employee Benefit Plans
K Litigation
L Insurance
M Intellectual Property
N Excluded Assets
2. PURCHASE AND SALE
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2.1 Subject to the terms and conditions of this Agreement, at the Closing,
the Vendors will sell and transfer to the Purchaser, and the Purchaser will
purchase from the Vendors the Vendors' Shares.
2.2 The Purchase Price will be paid as follows:
(a) the Purchaser shall pay the Deposit-Monetary by certified cheque to
Purchaser's Solicitors, within three (3) days of the Execution Date with
irrevocable directions to the Purchaser's Solicitors to pay, in accordance with
section 4.1 Below, the Deposit-Monetary to the Vendors at Closing as a part of
the cash sum due under section 2.2(b) below;
<PAGE>
(b) on the Closing Date, the Purchaser shall pay One Million Nine Hundred
Thousand Dollars ($1,900,000.00) of the Purchase Price by certified cheque;
(c) the Purchaser shall pay One Million Dollars ($1,000,000.00) of the
Purchase Price by the delivery to the Vendors of the Deposit-Shares;
(d) on that date which is two (2) calendar months from the Closing Date, the
Purchaser shall pay by certified cheque in an amount equal to One Hundred
Thousand Dollars ($100,000.00) and any appropriate adjustments; and
2.3 On Closing, Purchaser will loan to Netrover Inc. One Million Dollars
($1,000,000.00) and will cause Netrover Inc. to pay the same in repayment of the
Affiliate Loans. Any monies required in excess of One Million Dollars required
to fully discharge the Affiliate Loans will be repaid personally by the Vendors
jointly and severally on closing.
2.4 The Vendors acknowledge that the Purchaser is a United States based
corporation and that the Deposit-Shares shall be subject to a one year hold
period from the Closing Date and other requirements of applicable securities
laws. The certificate for the same shall bear the legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.";
In addition, the Purchaser is not a reporting issuer in Ontario and sales in
Ontario of Common shares of the Purchaser are not permitted until 18 months
after the Purchaser becomes a reporting issuer in Ontario.
3. CLOSING AND ADJUSTMENTS
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3.1 The Closing will take place at 10:00 a.m. local time, on the Closing
Date at the offices of the Vendors' Solicitors, or at such other place, date and
time, as the parties agree upon.
3.2 The Vendors will cause each of the Companies to prepare and deliver to
the Purchaser on November 30, 1999, the Closing Balance Sheets.
<PAGE>
4. DEPOSITS
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4.1 The Purchaser's Solicitors will place the Deposit-Monetary in an
interest bearing account and deal with it as follows:
(a) the Deposit-Monetary will be paid to the Vendor on the Closing if the
Vendor is ready, willing and able to complete the sale of the Vendors' Shares in
accordance with the terms hereof and all of the conditions set forth in Section
11.1 have been satisfied or waived, and:
(i) if the purchase and sale contemplated hereby is completed, then the
Deposit-Monetary will be applied to the credit of the Purchaser toward the
Purchase Price; or
(ii) if the purchase and sale contemplated hereby is not completed, then the
Deposit-Monetary will be paid to the Vendor as liquidated damages; and
(b) the Deposit-Monetary will be paid to the Purchaser if either:
(i) the conditions set forth in Section 11.1 have not been satisfied or
waived and the Purchaser elects not to complete; or
(ii) the Vendor is not ready, willing, and able to complete the sale of the
Vendors' Shares in accordance with the terms hereof at the Closing and the
Purchaser elects not to complete;
(c) each of the Vendors will relinquish and release all of his or her rights
to the Deposit-Shares or any part thereof, as liquidated damages in the event
that either:
(i) the conditions set forth in Section 11.1 have not been satisfied or
waived and the Purchaser elects not to complete; or
(ii) the Vendor is not ready, willing, and able to complete the sale of the
Vendors' Shares in accordance with the terms hereof at the Closing and the
Purchaser elects not to complete.
4.2 All interest which accrues on the Deposit-Monetary up to October 4, 1999
shall be paid to the Purchaser.
<PAGE>
5. VENDORS' WARRANTIES AND REPRESENTATIONS
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5.1 The Vendors jointly and severally warrant and represent to the
Purchaser, with the intent that the Purchaser will rely thereon in entering into
this Agreement and in concluding the purchase and sale contemplated herein,
that:
(a) the Vendors' Shares represent all of the issued and outstanding shares
of the Companies;
(b) the Vendors are or will be on the Closing Date, the registered
holders and beneficial owners of the Vendors' Shares, free and clear of all
Liens and the Vendors have no interest, legal or beneficial, direct or indirect,
in any shares of, or the assets or business of, the Companies other than the
Vendors' Shares and the Vendors' interest, to the extent applicable, in the
Affiliates Loans;
(c) none of the Lenders have assigned or encumbered any of their right,
title and interest in and to the Affiliates Loans and the Lenders are entitled
to receive all payments on the same;
(d) the particulars in Section 1.1(d) are a full, complete and accurate
description of the Affiliates Loans, and the Affiliates Loans are in good
standing and NetRover Inc. has no right of set off relating thereto;
(e) the Vendors have the power and capacity and good and sufficient right
and authority to enter into this Agreement on the terms and conditions herein
set forth and will on the Closing Date have the rights to transfer the legal and
beneficial title and ownership of the Vendors' Shares to the Purchaser; and
(f) the Vendors are not non-residents of Canada within the meaning of
Section 116 of the Income Tax Act, R.S.C. 1985, Chapter 1 (5th Supp.) as amended
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(the "Income Tax Act").
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5.2 The Vendors warrant and represent to the Purchaser with respect to each
Company, with the intent that the Purchaser will rely thereon in entering into
this Agreement and in concluding the purchase and sale contemplated herein,
that:
(a) the authorized and issued capital of the Company is as described in
Schedule F;
(b) no person has any agreement, right, option or privilege, consensual or
arising by law, present or future, contingent or absolute, or capable of
becoming an agreement, right or option:
<PAGE>
(i) to require the Company to issue any further or other shares in its
capital or any other security convertible or exchangeable into shares in its
capital or to convert or exchange any securities into or for shares in the
capital of the Company;
(ii) for the issue or allotment of any of the authorized but unissued shares
in the capital of the Company;
(iii) to require the Company to purchase, redeem or otherwise acquire any of
the issued and outstanding shares in the capital of the Company;
(iv) to purchase or otherwise acquire any shares in the capital of the
Company; or
(v) which is capable of becoming an agreement for the acquisition of any of
the Business Assets.
(c) the Company is duly incorporated, validly existing and in good standing
under the laws of the province of Ontario and is and always has been, since the
date of its incorporation, a "private company" as that term is defined in the
Securities Act (Ontario);
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(d) the directors and officers of the Company are identified in Schedule G;
(e) all alterations to the Bylaws and the Articles of Incorporation of each
of the Companies since its incorporation, have been duly approved by the
shareholders of the Company and registered with the Corporations Branch of the
Ministry of Consumer and Commercial Relations of the province of Ontario;
(f) the Company now is and has since its incorporation been a "Canadian
controlled private corporation" within the meaning of the Income Tax Act
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(Canada);
(g) the Company carries on the Business in the Province of Ontario does not
carry on any business in any other province or territory of Canada or in any
other country and does not carry on any business other than the Business;
(h) the Company has the power, authority and capacity to carry on the
Business as presently conducted by it;
(i) the Company has the power, authority and capacity to own and use all of
the Business Assets;
<PAGE>
(j) the Company owns and possesses all right, title and interest in, and has
good and marketable title to and possession of, all the Business Assets free and
clear of all Liens (with the exceptions of the Permitted Liens, those Business
Assets subject to the leases included in the Material Contracts and the Excluded
Assets) and neither the Vendors nor the Company has received notice from any
third party claiming an interest in and to the Business Assets other than an
interest which constitutes a Permitted Liens, and neither the Vendors nor the
Company has any reason to believe any such claim may be made;
(k) the Company has no bank, trust, savings, chequing or other accounts or
deposits, safety deposit boxes or other depositaries except as set out in
Schedule H, which Schedule is a true and complete list showing the name of each
bank, trust company or similar financial institution in which the Company has
accounts, deposits or safety deposit boxes and the names of all persons
authorized to draw thereon or have access thereto;
(l) the Company does not own, possess or use any asset other than the
Business Assets and does not have any interest in the assets or business of any
other person, with the exception of the Excluded Assets;
(m) the Company holds all licences and permits required for the conduct in
the ordinary course of the Business and for the uses to which the Business
Assets have been or may be put and all such licences and permits are in good
standing and the conduct and uses of the same by the Company is in compliance
with all laws, zoning and other bylaws, building and other restrictions, rules,
regulations and ordinances applicable to the Company, the Business or the
Business Assets, and neither the execution and delivery of this Agreement nor
the completion of the purchase and sale hereby contemplated will give any person
the right to terminate or cancel the said licences or permits or affect such
compliance;
(n) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms hereof
does not and will not:
(i) conflict with or result in a breach of or violate any of the terms,
conditions, or provisions of the ByLaws or Articles of Incorporation of the
Company;
(ii) conflict with or result in a breach of or violate any of the terms,
conditions or provisions of any law, judgment, order, injunction, decree,
regulation or ruling of any court or governmental authority, domestic or
foreign, to which the Company or the Vendor is subject or constitute or result
in a default under any agreement, contract or commitment to which the Company or
the Vendor is a party;
<PAGE>
(iii) subject to obtaining the Consents, give to any person any remedy,
cause of action, right of termination, cancellation or acceleration in or with
respect to any agreement, contract, or commitment to which the Company is a
party including the Contracts and the Permitted Liens;
(iv) give to any government or governmental authority of Canada or any
Province of Canada or any regional district, district or municipality or any
subdivision thereof, including any governmental department, commission, bureau,
board, or administrative agency any right of termination, cancellation, or
suspension of, or constitute a breach of or result in a default under any
permit, license, control, or authority issued to the Company and which is
necessary or desirable in connection with the conduct and operation of the
Business and the ownership, leasing or use of the Business Assets; or
(v) subject to obtaining the Consents, constitute a default by the Company
or an event which, with the giving of notice or lapse of time or both, might
constitute an event of default or non-observance under any agreement, contract,
indenture or other instrument relating to any Indebtedness of the Company which
would give any person the right to accelerate the maturity for the payment of
any amount payable under that agreement, contract, indenture, or other
instrument including the Contracts and the Permitted Liens;
(o) the Financial Statements were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior
reporting periods, are true and correct in every material respect and present
fairly and accurately the financial condition and position of the Company as at
the Statement Date and the results of the operations of the Company;
(p) the provisions for doubtful accounts receivable of the Company as
recorded in the Financial Statements are, and collections since the Statement
Date have proven them to be, adequate;
(q) the Accounts Receivable of the Company are bona fide, good and
collectable without set-off or counterclaim save and except as described in
Schedule A;
<PAGE>
(r) there is no Indebtedness of the Company which is not disclosed or
reflected in the Financial Statements except Accounts Payable;
(s) the Company has been assessed for federal and provincial income tax for
all years to and including fiscal year 1998, and the Company has withheld and
remitted to Revenue Canada or other applicable tax collecting authority except
those items listed and accrued in the Company's financial statement all amounts
required to be remitted to Revenue Canada or other tax collecting authority
respecting payments to employees or to non-residents, or otherwise and has paid
all instalments of corporate taxes due and payable;
(t) all tax returns and reports of the Company required by law to be filed
prior to the Execution Date (including all federal and provincial income tax
returns, Workers' Compensation Board returns, and corporation capital tax
returns) have been filed and are true, complete and correct, and all taxes and
other government charges (including all income, excise, sales, business and
property taxes and other rates, charges, assessment, levies, duties, taxes,
contributions, fees and licenses) have been accrued in the Financial Statements;
(u) adequate provision has been made for taxes payable by the Company for
which tax returns are not yet required to be filed and there are no agreements,
waivers or other arrangements providing for an extension of time with respect to
the filing of any tax return by or payment of any tax, governmental charge or
deficiency by the Company, and to the knowledge of the Vendors, the Company and
their officers, directors or employees there are no contingent tax liabilities
or any grounds which would prompt a re-assessment, including aggressive
treatment of income and expenses in filing earlier tax returns;
(v) the Company has made all elections required to be made under the Income
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Tax Act of Canada or other tax legislations in connection with any distributions
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by the Company and all such elections were true and correct and in the
prescribed forms and were made within the prescribed time periods;
(w) the Company has not prior to the Execution Date:
(i) made any election under Section 85 of the Income Tax Act of Canada with
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respect to the acquisition or disposition of any property;
<PAGE>
(ii) made any election under Section 83 or 196 of the Income Tax Act of
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Canada with respect to payment out of the capital dividend account or life
insurance capital dividend account of the Company;
(iii) acquired or had the use of any property from a person with whom the
Company was not dealing at arm's length, with the exception of Excluded Assets;
(iv) disposed of anything to a person with whom the Company was not dealing
at arm's length for proceeds less than or greater than the fair market value
thereof; or
(v) discontinued carrying on any business in respect of which non-capital
losses were incurred;
(x) with respect to GST:
(i) the Company is registered for GST purposes under the Excise Tax Act
--------------
(Canada), Part IX;
(ii) the Company does not have any deferred obligation or liability under
any Section of the Excise Tax Act (Canada) except as described in the Financial
--------------
Statements in Schedule D hereof;
(iii) the Company has not, prior to the Execution Date:
(1) acquired or had the use of any property from a person with whom it was
not dealing at arm's length which may give rise to liability to pay GST; or
(2) disposed of anything to a person with whom the Company was not dealing
at arm's length for proceeds less than the fair market value thereof, which may
give rise to liability to pay GST;
(iv) except as disclosed in the Financial Statements, as of the Execution
Date, the Company has remitted to Revenue Canada Customs, Excise and Taxation
when required by law to do so all amounts collected by it on account of GST;
(y) relying upon the Purchaser's representations and warranties with respect
to the Investment Canada Act and the Competition Act as set forth in Section 6.1
--------------------- ---------------
hereof, no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by the Vendors or the Company with any such governmental
authority, regulatory body or court is required in order for the Vendors to
complete the contemplated purchase and sale, to duly perform and observe the
terms and provisions of this Agreement, and to render this Agreement legal,
valid, binding and enforceable in accordance with its terms;
<PAGE>
(z) the Vendors do not have any specific information relating to the Company
which is not generally known or which has not been disclosed to the Purchaser
and which if known could reasonably be expected to have a materially adverse
effect on the value of the Vendors' Shares;
(aa) the Business and the Business Assets comply with all applicable laws,
judgments, decrees, orders, injunctions, rules, statutes and regulations of all
courts, arbitrators or governmental authorities, including all environmental,
health and safety statutes and regulations;
(ab) all material transactions of the Company has been promptly and properly
recorded or filed in or with its respective books and records, and the minute
book of the Company contains all records required to be kept at the "registered
office" of the Company, as defined in the Business Corporations Act (Ontario);
-------------------------
(ac) with respect to the Company's Intellectual Property:
(i) Schedule N contains a complete and accurate list of all:
(1) patents and patent applications;
(2) trade-names, trade-marks and service marks;
(3) trade-mark applications and service mark applications;
(4) registered copyrights and copyright applications;
(5) Internet domain name registrations,
owned, used, made or applied for by the Company setting out, in detail, the
relevant dates, reference numbers and jurisdictions of each;
(ii) the Company has not licensed any of its Intellectual Property to any
third party;
(iii) the Company has not granted any rights of distribution of licences for
any of its Intellectual Property or the technology represented thereby that are
not revocable by the Company upon reasonable notice not to exceed three (3)
months;
<PAGE>
(iv) except that the Company's trade-mark application is pending and not
fully processed to the Company's knowledge and the Vendors' knowledge, there is
no state of facts which casts doubt on the validity or enforceability of the
Intellectual Property;
(v) the use or licensing of any Intellectual Property will not infringe the
industrial, commercial or intellectual property rights of any other person;
(vi) except as disclosed in Schedule K to the Company's knowledge and the
Vendors' knowledge, there are no existing or threatened legal proceedings,
claims, or allegations (formal or informal), or any basis for such proceedings,
claims or allegations, in respect of the Company's use or ownership of any
Intellectual Property;
(vii) Schedule C contains a list of each Contract (and amendments thereto)
that comprise or relate to the Intellectual Property, including all development
agreements, consulting agreements, maintenance agreements, source code escrow
agreements, licence agreements and distribution agreements relating thereto;
(viii) no claim for release of technology has been made pursuant to any
source code escrow agreement or other technology escrow agreement by any third
party;
(ix) the Company is not in default of any of its obligations as licensee
under any technology licence pursuant to which it is a licensee;
(x) the Company is not in default of any of its obligations as distributor
under any technology distribution agreement;
(xi) neither the entering into of this Agreement nor the completion of the
transactions contemplated hereby constitute or will constitute a breach of any
agreement in respect of Intellectual Property; and
(xii) no past or present employee, consultant or contractor of the Company
has any right, title, or interest in or to any of any Intellectual Property, all
such employees, consultants and contractors have assigned and waived in writing
their rights (including moral rights) in and to the Intellectual Property, and
all of the present employees of the Company have executed and delivered to the
Company confidentiality and non-competition agreements in relation to any
information or data of the Company obtained in the course of his or her
employment or other arrangement with the Company, copies of which agreements
have been provided to the Purchaser prior to the Closing Date.
<PAGE>
(ad) the Company is in full compliance with the rules and regulations of the
applicable top level domain managers, including the domain managers of the .ca,
.com, .net, .gov, and .org top level domains, to maintain its domain name
registrations. To the Company's knowledge, there is currently no libellous,
scandalous or illegal content in any of the databases maintained by the Company
in respect of which any complaint has been received by the Company from any
member of the public or from any government or authority or from any top level
domain manager;
(ae) the Company has in effect contingency plans and technologies for each
of the following possible occurrences:
(i) failure of any of the major systems of the Business to function in
accordance with specifications due to the year 2000; and
(ii) failure of any data processing hardware and software, communications
hardware and software, hardware and software storing and/or controlling
databases or any other component of any data processing or communications device
or system used in the Business;
(af) the Company has not experienced nor, to the knowledge of the Company or
the Vendors, has there been any occurrence or event which has had, or might
reasonably be expected to have, a materially adverse effect on the Business or
the result of its operations;
(ag) the Company is not, nor is any employer which is associated, related to
or otherwise connected to the Company, a party to any collective agreement
relating to the Business with any union, association of employees or bargaining
agent, and no part of the Business, or any associated, related or otherwise
connected business or the Company, is bound by any such collective agreement or
has been certified as a unit appropriate for collective bargaining and there are
no proceedings under the Labour Relations Act (Ontario) or any similar
----------------------
legislation or applications for certification which are or could result in an
obligation of or be binding upon the Vendor or any employer which is associated,
related to or otherwise connected to the Vendor and there are no circumstances
under which the provisions of the Labour Relations Act (Ontario) can apply to
--------------------
the transactions contemplated by this agreement;
<PAGE>
(ah) the name of each present employee of the Company, the duration of the
employment of each such employee with the Company and the remuneration and
benefit obligations of the Company in respect of each such employee is
accurately set out in Schedule I; and any bonuses payable in the calendar year
1999 will be paid proportionately among the parties depending on when the
Closing Date is relative to the calendar year;
(ai) the Vendor has not received notice of any complaints filed by any of
the Company's employees against the Company and is not aware of any facts or
circumstances that may give rise to any complaints claiming that the Company has
violated the Employment Standards Act (Ontario), the Human Rights Act (Ontario)
------------------------ ----------------
(or any applicable employee or human rights or similar legislation in other
jurisdictions which the Business is conducted) or any complaints or proceedings
of any kind involving the Vendor. All levies, assessments and penalties made
against the Company pursuant to the Worker's Compensation Act (Ontario) have
-------------------------
been paid by the Vendor and the Vendor has not been reassessed under any such
legislation;
(aj) there are no pension, profit sharing, incentive, bonus, group insurance
or similar plans or other compensation plans affecting the Company other than
those described in Schedule J and the Company has no unfunded or unpaid
liability in respect of any such plan;
(ak) except for existing oral and written employment agreements with the
individuals listed in schedule I, the Company does not have any contract,
agreement, undertaking or arrangement, whether oral, written or implied, which
cannot be terminated on not more than one month's notice and the Company have no
outstanding agreement, contract or commitment (whether written or oral)
whatsoever relating to or affecting the conduct of the Business or any of the
Business Assets or for the purchase, sale or lease of any of the Business Assets
other than the Contracts and the Permitted Liens;
(al) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Vendor threatened against or affecting the Company at law or in equity or before
or by any court or federal, provincial, state, municipal or other governmental
authority, department, commission, board, tribunal, bureau or agency and the
Company is not a party to or threatened with any litigation, with the exception
of the matters described in Schedule K;
<PAGE>
(am) the Company:
(i) is not in breach of any of the terms, covenants, conditions, or
provisions of, is not in default under, and has not done or omitted to do
anything which, with the giving of notice or lapse of time or both, would
constitute a breach of or a default under any Contract;
(ii) is not in violation of nor is any present use by the Company of any
Business Assets in violation of or contravention of any applicable law, statute,
order, rule or regulation of Canada or any Province of Canada or any regional
district, district or municipality or any subdivision thereof; and
(iii) is not in breach or default under any judgment, injunction or other
order or aware of any judicial, administration, governmental, or other authority
or arbitrator by which the Company is bound or to which the Company or any
Business Assets are subject;
and the Company has not received notice that any default, breach, or violation
is being alleged;
(an) the Company has not guaranteed, or agreed to guarantee, any
Indebtedness or other obligation of any person except as described in the
Financial Statements;
(ao) reasonable wear and tear excepted, the Business Assets are in good
working order and in a functional state of repair and to the knowledge of the
Vendors, there are no latent defects; and
(ap) since the applicable Statement Date:
(i) no dividends of any kind or other distribution on any shares of the
Company has been declared or paid by the Company;
(ii) there has been no material adverse change in the financial condition or
position of the Company and no damage, loss or destruction materially affecting
the Business Assets or the right, capacity, or ability of the Company to carry
on the Business, except for those changes contemplated in the UUNET contract
dated June 30, 1999;
(iii) the Company has not increased the pay of or paid or agreed to pay any
pension, bonus, share of profits or other similar benefit to or for the benefit
of any agent, employee, director, or officer of the Company, except increases in
the normal course of business to employees other than officers and directors;
<PAGE>
(iv) the Company has conducted the Business in the usual and normal manner
and has maintained the Business Assets in as good condition as prevailed prior
to the Statement Date and has made all necessary repairs and replacements
thereto;
(v) the Company has not waived or surrendered any right of material value.
6. PURCHASER'S WARRANTIES AND REPRESENTATIONS
---------------------------------------------
6.1 The Purchaser warrants and represents to the Vendors, with the intent
that the Vendors will rely thereon in entering into this Agreement and in
concluding the purchase and sale contemplated herein that:
(a) the Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the power,
authority and capacity to enter into this Agreement and to carry out its terms;
(b) the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby has been duly and validly authorized by all
necessary corporate action on the part of the Purchaser, and this Agreement
constitutes a legal, valid and binding obligation of the Purchaser in accordance
with its terms except as limited by laws of general application affecting the
rights of creditors;
(c) the assets and gross revenues of the Purchaser and its affiliates are
such that the transactions contemplated herein are exempted from the provisions
of Part IX of the Competition Act and of Part IV of the Investment Canada Act.
--------------- ---------------------
7. COVENANTS
---------
7.1 Between the Execution Date and the Closing, the Vendor:
(a) will cause the Company to afford to the Purchaser and its authorized
representatives access during normal business hours to all properties, books,
contracts, commitments, records of the Company and furnish such copies
(certified if requested) thereof and other information as the Purchaser may
reasonably request, and to permit the Purchaser and its authorized
representatives to make such audit of the books of account of the Company and
physical verification of the Business Assets as the Purchaser may reasonably see
fit;
<PAGE>
(b) will diligently take all reasonable steps to obtain, prior to the
Closing, all consents and approvals required to complete the transactions
contemplated herein in accordance with the terms and conditions hereof including
the Consents;
(c) will cause the Company to maintain insurance coverage of the scope and
in the amounts presently held as more particularly set out in Schedule L;
(d) will cause the Company to conduct their respective businesses and
affairs diligently and only in the ordinary course, and preserve and maintain
the goodwill of the Company, the Business Assets and the Business;
(e) will not permit either of the Company to make or agree to make any
payment to any director, officer, employee or agent of either of the Company
except in the ordinary course of business and at the regular rates of salary and
commission for such person or as reasonable reimbursement for expenses incurred
by such person in connection with either of the Company.
8. NON-MERGER
----------
8.1 The representations, warranties, covenants and agreements of the Vendors
contained herein and those contained in the documents and instruments delivered
pursuant hereto will be true at and as of the Closing as though made at the
Closing and will survive the Closing Date for a period ending 15 months after
Closing, and notwithstanding the completion of the transactions herein
contemplated, the waiver of any condition contained herein (unless such waiver
expressly releases the Vendors of such representation, warranty, covenant or
agreement), or any investigation by the Purchaser, the same will remain in full
force and effect for the said same 15 month period after Closing.
8.2 The representations, warranties, covenants and agreements of the
Purchaser contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Closing as though made
at the Closing and will survive the Closing Date, and notwithstanding the
completion of the transactions herein contemplated, the waiver of any condition
contained herein (unless such waiver expressly releases the Purchaser of such
representation, warranty, covenant or agreement), or any investigation by the
Vendors, the same will remain in full force and effect.
<PAGE>
9. DUE DILIGENCE
--------------
9.1 The Vendors will, during the period Due Diligence Period, provide or
cause the Company to provide the Purchaser and its representatives with access
to, and will permit the Purchaser and its representatives to make such
investigations of the operations, properties, assets and records of the Company
and of its financial and legal condition as the Purchaser deems necessary or
advisable for the Purchaser to assess the value thereof and to familiarize
itself with same. The Vendors will cause the Company to sign such consents as
may be requested by the Purchaser in order for the Purchaser to conduct due
diligence searches at the relevant regulatory or statutory offices and will
permit the Purchaser and its representatives to have access to the premises
leased by the Company and the other assets of the Company at reasonable times so
as no to disrupt the routine daily affairs of the Company, and will produce for
inspection and provide copies to the Purchaser of:
(a) all of the Company material contracts, leases or real or personal
property, permits, licences, title documents, title opinions, insurance
policies, pension plans, information relating to employees, information relating
to customer lists, documents relating to indebtedness and credit facilities,
documents relating to legal or administrative proceedings and other documents of
or in possession of the Company or relating to their business and operations;
and
(b) the record books for the Company and all other corporate documents of
the Company.
10. CONFIDENTIALITY
---------------
10.1 Each party agrees that all information provided to it by another party
(collectively "Confidential Information") shall be held in complete confidence
by it and by its advisors and representatives and shall not, without the prior
written consent of that other party, be disclosed to any other person, nor used
for any other purpose, other than in connection with the evaluation, negotiation
and finalization of the transactions contemplated herein. However, a party's
obligation does not apply to Confidential Information:
(a) which is generally available to third parties (unless available as a
result of a breach of this Agreement);
(b) which is lawfully in the possession of a party and which was not
acquired directly or indirectly from another party; or
(c) the disclosure of which is required by any applicable law or by any
supervisory or regulatory body to whose rules a party is subject.
<PAGE>
11. CONDITIONS PRECEDENT
---------------------
11.1 For each company, the obligations of the Purchaser to consummate the
transactions herein contemplated are subject to the fulfilment of each of the
following conditions at the times stipulated:
(a) the representations and warranties of the Vendors contained herein are
true and correct in all respects at and as of the Closing except as may be in
writing disclosed to and approved by the Purchaser;
(b) all covenants, agreements and obligations hereunder on the part of the
Vendors to be performed or complied with at or prior to the Closing, including
the Vendors' obligation to deliver the documents and instruments herein provided
for, have been performed and complied with at and as of the Closing;
(c) between the Execution Date and the Closing, the Company has not
experienced any event, circumstance or condition or have taken any action or
become subject to any action of any character adversely affecting either of the
Company or the Business or as would materially reduce the value of either of the
Company, the Business or the Vendors' Shares to the Purchaser;
(d) the Business Assets have suffered no material adverse damage or change
since the Execution Date and prior to the Closing which, in the sole opinion of
the Purchaser, will materially and adversely affect the Business Assets, the
Business or the Company's operations, prospects or earnings;
(e) on or before the Closing Date, no federal, provincial, regional or
municipal government of any country applicable to the Business or any agency
thereof will have enacted any statute or regulation, announced any policy or
taken any action that will materially and adversely affect the Business or the
Business Assets or the right of the Purchaser to the full enjoyment thereof;
(f) the Purchaser is satisfied in its sole discretion as to the state of the
Business Assets and the operations of each Company after completion of its
investigation thereof during the Due Diligence Period;
(g) the Vendors Robert Adams and Tami Allan have entered into employment
contracts with the Purchaser on terms satisfactory to them and to Purchaser,
which in any case will require neither Robert Adams nor Tami Allan to be a
director of, or to carry the title of "officer", of the Companies and the
Purchaser; and
<PAGE>
(h) based on:
(i) the most recent financial statements of the Company;
(ii) the write downs of the book value of the Company's equipment; and
(iii) the operating losses incurred up to the Closing Date,
the parties have calculated that the Closing Liabilities will approximate Eight
Hundred and Fifty Thousand Dollars ($850,000.00).
11.2 The conditions set forth in Section 11.1 are for the exclusive benefit
of the Purchaser and may be waived by the Purchaser in writing in whole or in
part at any time.
11.3 The obligations of the Vendors to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following conditions
at the times stipulated, that:
(a) the representations and warranties of the Purchaser contained herein are
true and correct in all material respects at and as of the Closing except as may
be in writing disclosed to and approved by the Vendor; and
(b) all covenants, agreements and obligations hereunder on the part of the
Purchaser to be performed or complied with at or prior to the Closing, including
in particular the Purchaser's obligations to deliver the documents and
instruments herein provided for, have been performed and complied with as at the
Closing.
11.4 The conditions set forth in Section 11.3 are for the exclusive benefit
of the Vendors and may be waived by the Vendors in whole or in part at any time.
12. TRANSACTIONS OF THE VENDORS AT THE CLOSING
------------------------------------------------
12.1 At the Closing, the Vendors will execute and deliver or cause to be
executed and delivered all documents, instruments, resolutions and share
certificates as are necessary to effectively transfer and assign the Vendors'
Shares to the Purchaser, free and clear of all Liens, including (for each
company, as applicable):
(a) a Closing Agenda in the form reasonably satisfactory to the Purchaser's
Solicitors;
(b) certified copies of resolutions of the directors of the Company
authorizing the transfer of the Vendors' Shares and the registration of the
Vendors' Shares in the name of the Purchaser and authorizing the issue of new
share certificates representing the Vendors' Shares in the name of the
Purchaser;
<PAGE>
(c) evidence in a form satisfactory to the Purchaser's Solicitors that the
Vendors have acquired all the legal and beneficial right, title and interest in
all shares of the Company not owned by the Vendors on the Execution Date;
(d) share certificates representing the Vendors' Shares in the name of the
Vendors, duly endorsed for transfer to the Purchaser;
(e) duly issued share certificates in the name of the Purchaser representing
the Vendors' Shares;
(f) resignations in writing of any of the directors and officers and signing
officers of the Company;
(g) all corporate records and books of account of the Company including,
minute books, share register books, share certificate books and annual reports;
(h) the corporate seal of each of the Companies;
(i) employment contracts for Tami Allan and Robert Adams, and restrictive
covenant agreement in a form mutually acceptable to the them and the Purchaser;
(j) releases, in form and substance satisfactory to the Purchaser, acting
reasonably, executed by the Vendors in favour of the Company releasing the
Company from any and all manner of actions, causes of action, suits,
proceedings, debts, dues, profits, expenses, contracts, damages, claims, demands
and liabilities whatsoever, in law or equity, which the Vendors ever had, now
has, or may have against either of the Company for or by reason of any matter,
cause or thing whatsoever done or omitted to be done by the Company up to the
Closing other than in respect of obligations of the Company to the Vendors
arising in respect of:
(i) earned but unpaid salary and unpaid benefits for the then current pay
period;
(ii) his unpaid portion of the Affiliates Loans; and
(iii) any obligations pursuant to indemnities granted to the Vendors by a
Company in connection with their acts as directors of the Company provided that
such indemnities shall be ineffective in respect of any act or omission which
would constitute a default or breach pursuant to this Agreement or which render
any representation or warranty given hereunder untrue or inaccurate;
<PAGE>
(k) the Consents;
(l) a Closing Warranty and Certificate from the Vendors confirming that the
conditions to be satisfied by the Vendors, unless waived, set out in Section
11.1 have been satisfied at the Closing and that all representations and
warranties of the Vendors contained in this Agreement are true at and as of the
Closing;
(m) an opinion of the Vendors' Solicitors addressed to the Purchaser and the
Purchaser's Solicitors in a form reasonably satisfactory to the Purchaser's
solicitors;
(n) a statutory declaration or affidavit in a form satisfactory to the
Purchaser's Solicitors, confirming that the Vendors are residents of Canada; and
(o) all such other documents and instruments as the Purchaser's Solicitors
may reasonably require.
13. TRANSACTIONS OF THE PURCHASER AT THE CLOSING
--------------------------------------------------
13.1 The Purchaser will deliver the following at the Closing:
(a) a certified cheque in the amount of Two Million, Nine Hundred Thousand
Dollars ($2,900,000.00) to Vendors' Solicitors, which sum also includes payment
of the Affiliates Loans; and
(b) the Deposit-Shares duly endorsed in the Vendors' names as follows:
Beata Adams 73,000 shares
Robert Adams 24,820 shares
Tami Allan 48,180 shares.
14. POST CLOSING AGREEMENTS
-------------------------
14.1 The Vendors jointly and severally will indemnify and hold harmless the
Purchaser from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant on the
part of the Vendors under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to the Purchaser hereunder;
<PAGE>
(b) any and all losses, damages or deficiencies resulting from any
Indebtedness of either Company existing as of the Closing Date save and except
the unpaid portions of the Affiliates Loans, Accounts Payable and Permitted
Liens and regular payments pursuant to the Contracts; and
(c) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses incidental to any of the foregoing
whose cause existed as of the Closing Date.
and the Purchaser is hereby authorized to settle such claims and make any
payment in relation thereto as the Purchaser reasonably sees fit after
consulting and reasonably inquiring of Vendors, and all moneys so paid or any
losses, costs or expenses so incurred by the Purchaser will constitute
indebtedness of the Vendors to the Purchaser hereunder. The Purchaser will be
entitled to set off against sums owed by the Purchaser to the Vendors hereunder
or under any documents delivered hereunder, any amounts owed by the Vendors to
the Purchaser hereunder until the sums owed by the Vendors to the Purchaser
hereunder are completely set off.
14.2 The Vendors will provide reasonable assistance in preparing and filing
all financial statements, tax returns, and other documents required by law in
respect of any government charges or in respect of any domestic or foreign
federal, provincial, municipal, state, territorial or other taxing statute for
fiscal periods of the Company ending for tax purposes on or before the time of
Closing.
14.3 The Purchaser shall cause the Company to use commercially reasonable
efforts to collect the Accounts Receivables. All Accounts Receivables which
have not been paid within three (3) months of the Closing Date shall be
purchased by the Vendors at their net book value as set forth in the Closing
Balance Sheet. The Purchaser or the appropriate Company may set off the amount
outstanding or such uncollectible receivables from amounts due to the Vendors
under their employment contracts. The Purchaser shall cause the appropriate
Company to assign all purchased receivables to the Vendors and shall cooperate
with the Vendors in the collection of such receivables.
15. TIME OF THE ESSENCE
----------------------
15.1 Time is of the essence of this Agreement.
16. FURTHER ASSURANCES
-------------------
16.1 The parties will execute and deliver all such further documents and
instruments and do all such acts and things as may be reasonably necessary or
requisite to carry out the full intent and meaning of this Agreement and to
effect the transactions contemplated by this Agreement.
<PAGE>
17. SUCCESSORS AND ASSIGNS
------------------------
17.1 This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the other parties.
18. COUNTERPARTS
------------
18.1 This Agreement may be executed in several counterparts and by fax
transmission, each of which will be deemed to be an original and all of which
will together constitute one and the same instrument.
19. NOTICE
------
19.1 Any notice required or permitted to be given under this Agreement will
be validly given if in writing and delivered or sent by pre-paid registered
mail, to the following addresses:
(a) If to the Vendor:
#105-93 Skyway Avenue
Etobicoke, Ontario M9W 6N6
with a copy to the Vendors' Solicitors as follows:
D. J. Buffone
Barrister & Solicitor
2810 Matheson Blvd. East, Suite 200
Mississauga, Ontario L4W 4X7
(b) If to the Purchaser:
101-260 West Esplanade,
North Vancouver, BC V7M 3G7
with a copy to the Purchaser's Solicitors as follows:
Clark, Wilson
Barristers and Solicitors
#800 - 885 West Georgia Street
Vancouver, BC V6C 3H1
Attention: Chris Pollard
or to such other address as any party may specify in writing to the other
parties.
<PAGE>
19.2 Any notice delivered on a business day will be deemed conclusively to
have been effectively given on the date notice was delivered.
19.3 Any notice sent by prepaid registered mail will be deemed conclusively
to have been effectively given on the third business day after posting; but if
at the time of posting or between the time of posting and the third business day
thereafter there is a labour disturbance affecting postal service, then the
notice will not be effectively given until actually delivered.
20. AGENTS
------
20.1 The Vendors covenant to the Purchaser that the compensation due to any
agent or other intermediary engaged by the Vendors in connection with the
purchase and sale herein contemplated, will be their sole responsibility and
will indemnify and hold harmless Purchaser from any liabilities related to such
agent or intermediary.
21. ENTIRE AGREEMENT
-----------------
21.1 This Agreement contains the sole and entire agreement between the
parties and any modifications must be in writing and signed by each party. The
parties will in good faith investigate and negotiate the most tax effective
method of carrying out the intentions of this Agreement.
22. CURRENCY
--------
22.1 All references to monies herein are to Canadian currency.
23. TENDER
------
23.1 Tender may be made upon the Vendors or Purchaser or upon the Vendors'
Solicitors or Purchaser's Solicitors and money may be tendered by cheque
certified by a chartered bank.
24. PROPER LAW
-----------
24.1 This Agreement will be governed by and construed in accordance with the
province of the laws of Ontario and the parties will attorn to the Courts
thereof.
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed and
delivered this ____ day of October, 1999.
<PAGE>
SIGNED, SEALED AND DELIVERED )
by ROBERT ADAMS in the )
presence of: )
) /S/ Robert Adams
- --------------------------------) ----------------
Name ) ROBERT ADAMS
)
- ------------------------------- )
Address )
)
- ------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED )
by BEATA ADAMS in the )
presence of: )
) /S/ Beata Adams
- --------------------------------) ----------------
Name ) BEATA ADAMS
)
- ------------------------------- )
Address )
)
- ------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED )
by TAMI ALLAN in the )
presence of: )
) /S/ Tami Allan
- --------------------------------) ----------------
Name ) TAMI ALLAN
)
- ------------------------------- )
Address )
)
- ------------------------------- )
Occupation )
<PAGE>
THE CORPORATE SEAL OF CYPOST )
CORPORATION was hereunto affixed)
in the presence of )
)
/S/ Steve Berry
- --------------------------------)
STEVE BERRY, PRESIDENT
